Lim Kopi Pte Ltd v Public Prosecutor

Chao Hick Tin JA:

[1] This was an appeal against the sentence imposed by the District Court in Ministry of Manpower (MOM) Summons No. 1804 - 1807/2009 and 1810 - 11/2009. The appellant, an incorporated company, had pleaded guilty to six charges for making false declarations to the Ministry of Manpower (MOM) in connection with its application for work passes for foreign workers under s 22(1)(d) of the Employment of Foreign Manpower Act (Cap 91A, 1997 Rev Ed)(“the Act”). The appellant was sentenced to a fine of $10,000 for each of these offences (collectively referred hereafter as “the offences”), making a total fine of $60,000. Seven other similar charges under s 22(1)(d) of the Act were also taken into consideration for the purposes of sentencing. The court ordered the appellant to pay $20,000 of the fine forthwith, with the balance of $40,000 in instalments of $10,000 per month beginning 1 June 2009 and thereafter on or before the 1 of each subsequent month.

[2] The appellant was untraced and had a clean record. The appellant was run by its sole shareholder and director, one Lim Chek Chee (“Lim”) and Lim had earlier also been charged for the same offences as the appellant under s 22(1)(d) of the Act. Lim was sentenced to two months imprisonment per charge, with three of the six charges running concurrently for a total imprisonment term of six months. The written grounds of the District Judge in relation to the present appeal could be found in Public Prosecutor v Lim Kopi Holdings Pte Ltd [2009] SGDC 209 (“the GD”).

[3] Section 22(1)(d) of the Act provides as follows:

[4] After hearing the submissions of the appellant’s counsel and the respondent, I reduced the fine imposed for each of the offences from $10,000 to $3,000, making a total fine of $18,000. I also ordered that the excess amount of fine already paid pursuant to the sentence of the District Court be refunded to the appellant. I now give the reasons for my decision.

[5] The appellant, Lim Kopi Holdings Pte Ltd, was in the business of operating coffee shops in Ang Mo Kio. Because the appellant and Lim were both inexperienced in running coffee shops, they hired one Patrick Boo (“Patrick”), whose company – Starworld Agency – advised the appellant and Lim in their coffee shop business. For the period between March 2008 to August 2008, the Central Provident Fund (CPF) Board records showed that the appellant was making CPF contributions in respect of some thirty local workers. I should explain here that the MOM determines the number of foreign workers a company is entitled to hire based on the size of the company’s local workforce. Despite what were on the CPF records, more than half of the contributions made were fictitious. These bogus hires were in fact family members and relatives of Lim, who had agreed to let the appellant use their names as part of the scheme to inflate the number of local workers hired by the appellant so that the latter would be permitted to hire more foreign workers. In the two weeks from 24 June 2008 to 1 July 2008, the appellant made several applications for work passes to hire six foreign workers as kitchen assistants in its coffee shop. In so doing, it made the following declarations in its application forms to MOM (see GD at [3]):

[6] The reason why an applicant was required to make such declarations was explained by Ms Kwa Chin Bee, prosecutor from the MOM who informed the District Court that “CPF accounts are crucial in the MOM’s process of determining foreign worker entitlements… [and because] it is difficult to examine each and every employment relationships, the Ministry places heavy reliance on the accuracy of the CPF records in its work permit approval process” . It is therefore an offence under s 22(1)(d) of the Act to furnish false or misleading information in relation to such an application. It was undisputed that MOM would not have approved the appellant’s application for work passes for the foreign workers had it known that those bogus local workers in respect of whom CPF contributions were made were in fact never employed by the appellant.

[7] The District Judge, in his GD, emphasised the need to deter offences committed against public institutions and, by committing the six offences, the appellant had “frustrated the Government’s efforts to effectively regulate and monitor the recruitment of foreign labour in Singapore” (GD at [11]). In his view, the approval process was an important “mechanism put in place by MOM in order to regulate the influx of foreign workers whilst protecting equal opportunities for local workers to secure employment”, and because the appellant had intentionally deceived MOM, a substantial fine of $10,000 per charge was warranted (see GD at [11] and [12]). I should add that the District Judge had merely summarised the mitigating factors tendered by the counsel for the appellant, without discussing them, or indicating whether he accepted them (see GD at [6]).

[8] Counsel for the appellant argued that the District Judge had failed to consider the mitigating factors in this case, resulting in the court imposing a deterrent sentence which was manifestly excessive and not commensurate with the moral culpability of the appellant. The salient mitigating factors relied on by the appellant could be summarised in the following manner. First, because the appellant and Lim were in essence the “same entity”, the court should not in such a circumstance impose deterrent sentence twice over. Second, the appellant also argued that the actions of the appellant were not motivated by profit and a reduction of sentence was warranted as there were no victims in the present case and no financial loss was caused. Third, the hiring of fictitious local workers was essentially the idea of Patrick and not the appellant or Lim. The appellant had therefore committed the offence out of misguided trust in Patrick.

[9] The respondent’s case was, in broad strokes, identical to the one presented by Ms Kwa Chin Bee before the District Judge below (see [6] above). The respondent urged this court to take a stiff stand towards the appellant as the principle of deterrence was a “dominant consideration” in sentencing when deception of a public body was involved. In reply to the appellant’s case, the respondent made the following arguments. First, even if the appellant and Lim were “the same entity”, s 20 of the Act provides for the equal punishment of companies and persons alike for offences under the Act and the appellant was therefore not being punished twice by the fines imposed on it. Second, it was said that contrary to the appellant’s argument that it did not profit from the offences, the scheme to make false CPF contributions to fictitious local workers stemmed from “Lim’s concern that the coffee shop be a viable business”.Accordingly, “it was wholly inaccurate to argue that the appellant had not intended to profit from the offences”. Rather, the profit “was the continuing financial viability of the coffee shop business venture” and the “gain” was the appellant’s hiring of the six foreign workers. It was also irrelevant that there were no victims or financial loss caused. This was because the very raison d’être of s 22(1)(d) of the Act was to “regulate and monitor the recruitment of foreign labour in Singapore” and the presence of victims or financial losses were not therefore preconditions to an infringement of s 22(1)(d). Third, the respondent rejected as without merits the appellant’s argument that it had committed the offences under influence by Patrick because “it would have been clear to Lim that such a course of action was illegal or at [the] least, improper” (emphasis added).

[10] This case throws up an interesting issue of how corporate offenders should be sentenced when the person managing the company has also been dealt with for the same, or substantially the same, infringements. Before we go further, I should add that at no time should it be doubted that an offence under s 22(1)(d) of the Act is a serious one, which ought to be dealt with swiftly and sternly by the courts. Deterrence is therefore without dispute an important consideration for such offences; otherwise the very object of such a law would be flagrantly undermined. This much was clear from the second reading of the Employment of Foreign Workers (Amendment) Bill (see Singapore Parliamentary Debates, Official Report (22 May 2007) vol 83 at col 928 per the then Minister for Manpower, Dr Ng Eng Hen (“Dr Ng”)). Notably, Dr Ng emphasised that offences of deception warrant stiffer penalties to “maintain the equilibrium” between the economic advantages of having access to foreign manpower and other social objectives such as enabling locals to compete for jobs with foreign workers (id, at col 928):

[11] Any deception of public institutions which frustrates the aims of the Act cannot be condoned and the District Judge was certainly justified to state that for such an offence a deterrent sentence is warranted, and expected by society (see GD at [11] where the District Judge relied on the cases of Dong Guitian v Public Prosecutor [2004] SGHC 92 and Lim Mong Hong v Public Prosecutor [2003] 3 SLR 88). However, it is also a trite principle, as well as an important precept of sentencing law, that “deterrence must always be tempered by proportionality in relation to the severity of the offence committed as well as by the moral and legal culpability of the offender” (Tan Kay Beng v Public Prosecutor [2006] 4 SLR 10 at [31]; emphasis added). How then could this best be achieved, where a corporate offender was a small family business and the person behind it was also being dealt with by the law? Before proceeding further, I should state that deterrence is without doubt a concept applicable to companies, in the same way as it is applicable to individual offenders. This is because companies are often engaged in the taking of calculated risk, and the only means by which companies can therefore be deterred from engaging in wrongful conduct (companies being legal entities may not be sentenced to imprisonment), would be to ensure that the right forms of financial disincentives are applied. Thus, the following was observed by the New South Wales Law Reform Commission in Sentencing Corporate Offenders (Issues Paper No. 20, November 2001) (“New South Wales Law Reform Commission Report”) at para 3.2:

[12] Although deterrence may be a predominant sentencing aim for offences under the Act, especially where there is a deception of public institutions such as in the present case, this does not necessarily mean that other sentencing objectives cannot also apply to corporate offenders in an appropriate case where the facts so warranted. In each case, it is useful to bear in mind that “any judge who comes to sentence…ought to have…four classical principles [viz, rehabilitation, deterrence, retribution, and prevention] in mind and to apply them to the facts of the case to see which of them has the greatest importance in the case with which he is dealing” (Public Prosecutor v Kwong Kok Hing [2008] 2 SLR 684 at [17], citing R v Sargeant (1974) 60 Cr App R 74 at [77]). Still, the court must temper the objective of deterrence, with the specific moral and legal culpability of the offender. In this regard, it would be apposite to revisit the words of Chan Sek Keong CJ in Luong Thi Trang Hoang Kathleen v Public Prosecutor [2009] SGHC 250 (“Kathleen Luong”) at [25]:

[13] The following words of the Australian High Court in the case of Veen v R (No 2) (1988) 164 CLR 465 at 476, though basic, are useful reminders and indicate yet again that sentencing is fact-sensitive and depends on the object behind the law in question:

[14] In the recent decision of Auston International Group v Public Prosecutor [2008] 1 SLR 882 (“AIG”), Lee Seiu Kin J noted that three factors were particularly relevant in deciding the quantum of fine to be imposed on a corporate offender. The three factors are (i) the degree of contravention of the statute (“the first factor”); (ii) the intention or motivation of the offender (“the second factor”); and (iii) the steps taken by the company upon discovery of the breach or the degree of remorse shown by the offender (“the third factor”) (see AIG at [13] to [18]). I have no doubt that Lee J did not mean to suggest that this list was in any sense exhaustive. I could envisage another three other factors which would also provide useful guidance to any court faced with the task of determining what a fair quantum of fine should be for a corporate offender. But before identifying the additional three factors, it would be expedient to examine how the facts of the present case stood up to the three factors set out in AIG.

[15] In this case, although the degree of contravention of the Act was fairly extensive, there being six charges and a further seven taken into account by the lower court, the first factor was mitigated by the second and third AIG factors. To fully appreciate the interplay between the three factors in the instant case, it would be necessary and useful to first understand the working relationship vis-à-vis the appellant, Lim and Patrick. The plea of leniency made by Lim after he was arrested was instructive for this purpose:

[16] This plea of leniency offered several insights into the present matter. First, it clearly showed that the appellant and Lim were remorseful after the incident; Lim’s prompt cooperation with MOM and subsequent plea of guilt was a reflection of this. Second, it demonstrated that the appellant and Lim, who were novices in the coffee shop business, were both not entirely comfortable with the false employment scheme, so much so that by September 2008, they replaced the bogus local hires with workers actually employed by the company. This concern also prompted the appellant to seek a written declaration from Starworld Agency, stating that the latter was not receiving any illegal rebates for the hiring of foreign workers. The written declaration and letter of understanding dated 14 July 2008 reads as follows:

[17] While the Prosecution had correctly submitted that it was no excuse (as far as the commission of the offences were concerned) for the appellant to claim that it had entered into the scheme on the behest of Patrick as the appellant should have known – at the very least – that something improper was involved (see [9] above), this did not necessarily equal to the appellant having the blatant intention to defraud MOM. This was evident from the Appellant’s discomfort with the employment scheme, and its concern that Starworld Agency might be taking illegal rebates. In this regard, it must be borne in mind that Starworld Agency was a consultant hired by the appellant and in relying on its advice, I do not think that it could fairly be said that the appellant had deliberately hatched this scheme with the purpose of undermining the object of the Act or defrauding MOM. Reverting to the second and third AIG factors, there was in the present case an absence of a brazen intention to deceive MOM and, instead, there was a clear display of remorse on both the part of both Lim and the appellant as soon as investigations begun into the matter. Therefore, in my view, it would not be right to apply the principle of deterrence simpliciter, without making the necessary adjustment in the light of these mitigating circumstances.

[18] At this juncture, it would be appropriate to discuss the further factors, referred to in [14] above, that may be relevant to the sentencing of a corporate offender. A fourth factor relevant to our case was the fact that the appellant was essentially the alter ego of Lim, since the latter was the former’s sole shareholder and director. In these circumstances, it could be said that punishing the appellant with a substantial fine would be tantamount to penalizing Lim in extenso. Put in another way, deterrence should not be imposed twice, when the company was solely owned and managed by one individual. While s 20 of the Act, as cited by the respondent, states that a company is equally punishable as an individual for an offence under the Act, this related only to liability, and the quantum of fine or the level of sentence imposed was a matter to be decided separately. In cases involving closely held companies – such as the one before us – the subject of deterrence should rightly be the managers themselves and it is incumbent on the courts to ensure that the totality principle is not breached where the company and manager are in fact one and the same. A similar concern was noted in the New South Wales Law Reform Commission Report at para15.2:

In the present case, the directing mind and will behind the appellant was indisputably Lim, who had already been given a deterrent sentence when he was given a custodial sentence of six months for the same offences. While it could not be denied that the appellant was also guilty of the same offences as Lim, to impose a deterrent fine on the appellant for exactly the same offences for which a deterrent sentence was already imposed on Lim, was to effectively impose double deterrent sentences for the same offences, thus rendering the fine imposed on the appellant manifestly excessive. In such circumstances where the company was effectively the alter ego of its controllers, there was no justification to impose double deterrent sentences. The object of the Act would be sufficiently achieved if a deterrent sentence was already imposed on the person controlling the company.

[19] A fifth factor relevant here was the fact that the appellant was essentially a small family business with little resources. In sentencing a corporate offender, the quantum of fine imposed should not be oppressively such that it vastly exceeds the financial capacity of the company to pay. The fine specified under s 22(1)(d) of the Act is that it should not exceed $15,000 for each charge but when cumulatively added upon, the final quantum payable could become prohibitive for small companies culpable of multiple breaches of the Act. Courts should be slow to impose a manifestly excessive fine, replete with the consequences of running the company aground or out of business. A similar concern was also duly noted by Lee J in the AIG case when he said that it was “not clear…how imposing a severe punishment on the company would deter individuals who manage companies [and] the courts must be careful not to impose overly onerous conditions on the corporate world simply to ensure compliance with regulatory provisions in a situation where the law can effectively be applied to deter individuals from committing such acts” (AIG at [19]; emphasis added). Thus, the corporate offender’s ability to pay is a relevant consideration to be balanced against the need for deterrence and the aims of the other sentencing objectives (see Chia Kah Boon v Public Prosecutor [1999] 4 SLR 72). A similar thought was expressed by Scott Baker J in R v F. Howe and Son (Engineers) Ltd [1999] 2 Cr. App. R. (S.) 37, a case where the English Court of Appeal had to sentence a company for the infringement of environmental statutes (at 42 and 43):

[21] Yet another relevant factor – which I would hasten to add was not one which was applicable in this case but which I thought I should make known nonetheless – would be the consideration of the community of interests which may be affected if a prohibitive fine is imposed on a company. These diverse interests belonging to shareholders, employees and creditors (when the company is in winding up) are relevant considerations particularly in the case of a large corporation, where the criminal conduct is attributable only to a select few managers or controlling minds. In these circumstances, imposing a hefty fine would only pass on the burden of the fine to these other innocent parties, and in an appropriate case, courts should exercise care in the weighing and balancing of this community of interests.

[22] At this juncture, I will address one other argument raised by the appellant, namely, that the offending acts were not motivated by profit and that there were neither victims nor the causation of financial loss in the present case (see [8] above). There were two limbs in this argument. In my opinion, both these limbs were without merits and I could not accept them as valid mitigating factors. While the absence of personal gain may be a legitimate mitigating factor and even that is of “very little weight” (see Lai Oei Mui Jenny v Public Prosecutor [1993] SGHC 157 at [3]), it was clear, as the respondent had rightly pointed out, that the financial gain here was the wage differentials saved by the appellant from hiring the foreign workers (see [9] above). As for the argument premised on the absence of victims or financial loss, I would like to make two points in response to it. First, it is a trite principle of sentencing law that in some cases, intangible damage may be even more reprehensible and the absence of actual harm was of little relevance or importance. It may be noted that in Public Prosecutor v Ng Tai Tee Janet [2001] 1 SLR 343 the court stated (at [28]):

Second, regulatory Acts are very often enacted to promote or advance social policies and it is imperative that their provisions should be strictly complied with in order to ensure that those policies would not be thwarted. In this case, the Act serves an important public policy of maintaining the equilibrium between the comparative advantages of having access to foreign manpower and other social objectives such as enabling locals to compete for jobs with foreign workers (see [10] above). Bearing in mind the public interests involved, I could not place any weight on the fact that no tangible loss or financial damage was caused. It cannot be emphasised enough that the courts take a stern view of any public deception of government bodies and an appropriate deterrent sentence must be imposed whenever an employer seeks to undermine the objectives of the Act, subject of course, in each instance, to the careful consideration of the legal and moral culpabilities of the offender: see Kathleen Luong at [12] above.

[23] For all the above reasons, the District Judge should have taken into account the mitigating circumstances of this case, in particular the second and third AIG factors, as well as the additional factors I have examined above (see [18] to [20]). In the result, I agreed with counsel for the appellant that a fine of $10,000 for each charge, for a total fine of $60,000 was manifestly excessive. I accordingly reduced the fine to $3,000 per charge, for a total fine of $18,000. I also ordered that the balance amount of fine paid be refunded to the appellant.