THE QUEEN v. GAINHENG LTD

Mag. App.
1989, No. 1100
(Criminal)

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H E A D N O T E

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Application for export licence - false particulars.

Application of Marvels guidelines "Grave Feature" absent - reduction in fine from 40% of value of goods guideline justified.

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

MAGISTRACY CRIMINAL APPEAL NO. 1100 OF 1989

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J U D G M E N T

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1. This is an appeal against sentence imposed after the appellant pleaded guilty to one charge of making a false statement in an application for an export licence. At the hearing before the Magistrate, Mr K.J. Townsley, Mr Takehashi, a principal shareholder and director of the appellant appeared and entered a plea of guilty. He had very little to say in mitigation and unfortunately did not refer the Magistrate to the statement which he had given to the Customs and Excise Department detailing the reasons why the false application had been made. The Magistrate, using the guidelines laid down in the Attorney General v. Marvel Clothing Co. Ltd. (1984) HKLR 839 imposed a fine $ 200,000 being just under 40% of the value of the goods referred to in the licence application.

2. The appellant then instructed solicitors to apply for a review. The Magistrate refused this application and the appellant appealed.

3. In imposing sentence, the Magistrate had before him a brief statement of facts and almost no background information from Mr Takehashi. I had before me all the information which should have been advanced to the Magistrate and no doubt would have if the application for a review had been granted.

4. The appellant company is wholly-owned by Mr Takehashi and his wife. The company operates from the same premises and uses the same staff as another company Star Kids Limited in which Mr Takehasi owns 50% of the shares. The application for the export licence was signed by Miss Chiu who works for both companies. The export licence application requires the company supplying the quota to perform at least four of six stated functions. The appellant which purchased and supplied the quota for the transaction performed three of these functions but it was its assoicated company, Star Kids Ltd., which performed another two, namely the contract with the manufacturer for the manufacture of the goods and the payment to the manufacturer for those goods. The appellant submits that this was done for administrative convenience only and that there was nothing sinister in the transaction. Miss Chiu who signed the export licence declaration believed the two companies, working as they do in concert, could be treated as one entity. There is certainly nothing in the agreed facts to suggest that the transaction was organised for anything other than the reasons advanced.

5. In the Marvel case the "grave feature" was the fact that the goods were certified as having been made in Hong Kong whereas they had been manufactured in China. This grave feature is absent in the present case and the Crown conceded that such absence justifies a reduction from the 40% Marvel guideline. The penalty to be imposed depends on the facts in each case and should be a sum which ensures that the company derives no benefit from the transaction and imposes an additional penalty which reflects the company's culpability (see R. v. Dutton Trading Ltd. & Another [1988] HKLR 565).

6. Having regard to the importance of the quota system to Hong Kong, it is a serious offence to supply incorrect details in export licence application forms. However, in this particular case the culpability of the appellant was not in the very serious category and this should be reflected in the amount of the fine. It is an agreed fact that the appellant's profit from the transaction was $60,000. I consider a figure representing 20% of the value of the goods as the appropriate fine to be imposed. The appeal is therefore allowed and the fine is reduced to $116,688.00.