Determination of the Amount of Occupation by taking Advantage of Duties

The employee of a clothing company smuggled a batch of clothing with a cost of RMB 1 million out of the company’s warehouse, and sold it to a third party at an extremely low price of RMB 200,000. Later then, the company reported to the police, and claimed that the employee should compensate a loss of RMB 1.5 million (including sales profit). How to determine the amount of occupation by taking advantage of duties? Shall the amount be equal to the cost, or sales price, or illegal gains?

Because the nature of the occupation by taking advantage of duties is similar to theft, the provisions related to theft are always quoted.

“Interpretation of the Supreme People’s Court on Issues concerning the Application of Law in the Trial of Cases Involving Theft” (Fa Shi [1998] No.4) stipulates: “… 1. For the sale commodities, the amount of damages shall be calculated at the median price of the retail price; if the retail price is determined by the government, then the amount shall be calculated accordingly; if the retail price is guiding by the government, then the amount shall be calculated at the highest price of the guidance; 2. For the manufacture products, if it is a finished product, the amount shall be calculated refer to 1; if it is a semi-finished product, the amount shall be converted according to the amount of the finished product; 3. For the row material owned by a unit or the means of living owned by a citizen, normally the amount shall be calculated according to the purchase price, but if the market price is higher than the purchase price at the time of crime, the amount shall be calculated at the medium price of the market price. …” In view of this, the sales price shall be applied in principle. However, this regulation was repealed in 2013 by the “Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues concerning the Application of Law in the Handling of Criminal Cases of Theft” (Fa Shi [2013] No.8).

 According to Article 4 of Fa Shi [2013] No.8, “The amount of theft shall be determined according to the following methods: (1) if there is a valid price certificate for the stolen property, such certificate could be applied; if it is lack of the such certificate, or it is obviously unreasonable to determine the price based on such certificate, then the price of the stolen property shall be appraised by the appraisal agency. ……”

In practice, the price certificate is rare, and the appraisal has been applied in many cases. The main basis for the appraisal is the “Standards of Practice for Asset Appraisals—-Asset Appraisal Approaches”, in which it has listed 3 methods, which are the market approach, the income approach and the cost approach. This rule has also set out the precondition for the application of each approach. However, for individual cases, it is still uncertain on the selection of appraisal approach. In addition, in many relevant cases, the items have been consumed or sold, so the appraisal agency could not conduct appraisal on physical objects. As a result, in many cases, the courts had adopted the illegal gains as the basis for conviction, for example, (2018) Xiang 01 XinZhong No.990 and so on.

It is worth noting that there are still several courts held the similar opinion with Fa Shi [1998] No.4. For example, in case (2009) Xi Xin Er Zhong No.92, published in Issue 4 of the “Selected Cases of the People’s Court”(2010), the key judgment point is that the perpetrator changed the preferential measures of the internet café by taking advantage of his own duty with the purpose of illegal possession. The perpetrator had spent very little money in exchange for a large amount of money, which had brought a huge loss to the internet café, and such behavior constituted the crime of occupation. The amount of occupation should be calculated according to the actual loss of the internet café instead of the illegal gains. This point has also been adopted in the civil compensation case later then. There is another example, in the case “Sun Wei v.s Nantiong Baichuan Flour Co., Lt., Disputes on Improper Gains”, published in Issue 7 of the “Gazette of the Supreme People’s Court”, the court points out that the illegal gains determined by a criminal judgment is not equal to the loss, the loss should not be determined simply based on the amount of the illegal gains. The standards of proof for criminal cases and civil cases are different, so the higher standards of proof for criminal cases should not be applied in civil cases.

Therefore, the victim shall prepare evidence on the reasonableness of the price, by which the victim could persuade the court to apply the reasonable sales price on the determination of the damage of the amount of occupation by taking advantage of duties.