HKSAR v. NG KA YU

[English Translation – 英譯本]
HCMA 462/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO 462 OF 2014

(ON APPEAL FROM KTCC 3100/2014)

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REASONS FOR JUDGMENT

1. The appellant was charged with one count of selling goods to which a forged trade mark was applied, contrary to s 9(2), read together with s 18(1), of the Trade Descriptions Ordinance, Cap 362. The appellant pleaded guilty, following which she was convicted in Kwun Tong Magistrates’ Court before Principal Magistrate Mr. Ernest Lin. She was sentenced to imprisonment for 2 months, suspended for 2 years, and was also fined $10,000. The Principal Magistrate also made an order for confiscation of her mobile phone. She appealed the sentences.

2. At the conclusion of the hearing, I allowed the appeal in part and set aside the 2-month custodial sentence and the 2-year suspension thereof. The fine of $10,000 and the order for confiscation of her mobile phone were upheld. I now give reasons for my decisions.

The Prosecution case

3. In March 2014, a Customs officer posing as an ordinary citizen reached an agreement on the Internet with a person bearing the Internet name of “synaptic-nerve” for the purchase from that person of two “Adidas” pants at a price of $220. They also agreed to meet up at the concourse of Lam Tin MTR Station on 17 March 2014 to complete the transaction. That day, upon completion of the transaction, the appellant was arrested. The “Adidas” marks attached to the goods in question were subsequently confirmed to be forged trade marks. The appellant admitted under caution that she had purchased the two pants on the Taobao website at RMB¥38 each with intent to resell them on the Internet at a much higher price. She used her mobile phone to operate her Internet auction activities, communicate with buyers and arrange for the delivery of goods. She bought the relevant goods on the Taobao website only after she received orders from buyers, and therefore she did not keep any stock.

Background of the appellant and mitigation

4. The appellant is a student aged 20 and has a clear record. Her father is a construction site worker and her mother a housewife. The appellant depends on her family for financial support and committed the current offence because she did not want to use her family members’ money. She requested the court not to confiscate her mobile phone.

Reasons for sentence

5. The Principal Magistrate gave the following reasons for sentence:

“9. The quantity and value of the goods involved in the present charge are not significant. However, the present case has a special feature, namely in respect of the defendant’s modus operandi. The defendant first made offers for sale of goods on the Internet and only after she received purchase orders from buyers did she purchase those goods on the Internet. This was therefore a business which required no capital. Anyone who can operate a computer is in a position to commit the offence using the same mode of operation, stripping others of the fruits of research and development at a very low cost as well as risk.

10. Internet offences of this sort are extremely rampant. Although the prosecution did not provide any prosecution statistics at the time of sentencing, my experience at Court No. 1 of the Kwun Tong Law Courts tells me that every week there are at least more than 10 prosecutions for similar offences. Anyone who possesses basic skills in using a computer can notice a myriad of well-known merchandise auctioned and sold at incredible prices on Internet auction sites. I hereby take judicial notice not only that this kind of criminal activities are lucrative, yielding significant profits at a minimal operating cost, but also that law enforcement agencies have to deploy considerable resources and manpower to detect and investigate those activities and make arrests. It follows that the sentencing court should adopt the principle of deterrence, so that the general public will be aware that, although these activities can generate significant profits at a limited cost and also involve low risks, these activities entail substantial criminal liability and, upon prosecution, will lead to serious consequences.

11. The Court of Appeal has rarely dealt with these offences which mainly involve activities on the Internet, and no clear sentencing guidelines have been laid down for these offences. Having taken into account all the above factors, I am of the view that the sentence to be passed must be such as to make the community and the Defendant acutely aware that while it is easy to commit these offences, they do entail grave consequences. I therefore adopt a starting point of 3 months’ imprisonment for each charge, reduced to two months on account of her guilty plea. In light of the fact that the sentencing considerations for these offences have not been canvassed by courts of the same level or by the Court of Appeal, and taking into account the defendant’s young age and clear record, I order that the sentence be suspended for 2 years.

12. Moreover, I also consider it necessary to impose pecuniary liability on the defendant for her offence, by making her disgorge multiples of the amount of illegal proceeds that she obtained. Accordingly, I impose a fine of $10,000 on the defendant for the offence. This order is intended to convey a clear warning message to the defendant and other heedless imitators that their financial losses at the end of the day, the financial loss suffered by those who hold the false hope of obtaining illegal proceeds easily will far exceed the profits they may make.”

Grounds of appeal

6. The appellant, who was unrepresented on appeal, submitted that she committed the offence in straitened family circumstances. She was a student with no income and depended on her parents for her living expenses, and her younger sister was under disability (with spinal and internal organ problems as well as difficulty in walking). She submitted that a fine of $10,000 was hefty for her. She had paid the fine but hoped to have part of the money returned to her. She stressed that after the offence she had come to know that what she had done was tortuous. She agreed that a deterrent sentence was warranted, and submitted that the deterrent effect of the sentence on her would not be lost even if part of the fine was returned to her.

7. The appellant did not take issue with the confiscation of her mobile phone. She submitted that a fine of $10,000 and the confiscation of her mobile phone were very severe punishments already. She sought to have the custodial sentence set aside.

The respondent’s reply

8. Miss Mickey Fung, Senior Public Prosecutor, for the respondent very appropriately drew my attention to the High Court case of HKSAR v Man Hoi Kei, HCMA 327 of 2014, 15 July 2014.

9. The circumstances of that case are similar to those of the present case. The defendant in that case sold two pairs of “Sennheiser” earphones, at $140 per pair, on an Internet auction website to Customs officers posing as ordinary citizens. The defendant was arrested after the completion of the transaction. Later, Customs officers found two other pairs of earphones of the same brand at the defendant’s residence. The trade marks on all four pairs of earphones were forged. The defendant admitted under caution that he bought all the earphones on Taobao.com at RMB¥45 per pair and then resold them on the Internet at higher prices. The magistrate sentenced the defendant to 4 months’ imprisonment for each of the two offences, suspended for 2 years, and ordered that the sentences were to run concurrently. The defendant was also fined $10,000 for each of the two offences, totalling $20,000.

10. On appeal, Anthea Pang J considered the cases of Secretary for Justice v Lam Chi Wah [1999] 4 HKC 343 and HKSAR v Collamar Eliza Turla, HCMA 1027 of 2008 and then said:

“8. The goods involved in the present case are four pairs of earphones to which a forged trade mark has been applied, with a total value of HK$560. The appellant also pleaded guilty to the charges and is a first offender. In light of the overall circumstances of the case and the appellant’s background, a fine of $10,000 imposed on him for each offence is, in my view, an adequate reflection of his culpability in the present case and also a sufficient warning to those who are minded to commit similar offences. I shall therefore set aside the suspended sentence of 4 months’ imprisonment imposed by the magistrate for each offence.

9. I also wish to point out the following. The magistrate stated that the present case is an instance of Internet crimes which, in his experience, are rampant and yielding significant profits out of a with small capital, that law enforcement agencies have to deploy considerable resources and manpower to detect and investigate those activities and make arrests, and that, therefore, a deterrent sentence has to be passed so that the general public will be aware that these offences entail substantial criminal liability and serious consequences. However, on the facts of the present case, while the appellant sold the goods in question on Internet auction sites, he still had to personally deliver the goods to undercover Customs officers. Moreover, the present case involves only four pairs of earphones. In other words, the Summary of Facts do not show that the appellant was involved in using the Internet platform to sell large quantities of contravening goods as a wholesaler in a systematic and organized manner. For this reason, although the appellant offered goods for sale on the Internet instead of selling goods at a stall, the appellant should, in light of the quantity of goods in question and the admitted facts, still be categorized as a stall owner.

10. In my view, therefore, as mentioned above, a fine of $10,000 imposed on this defendant in respect of each offence adequately reflects his culpability and exerts a deterrent effect.”

11. The respondent submitted that the modus operandi in the present case was more sophisticated and complicated than that in Man Hoi Kei. First, the appellant in the present case used the platform of Instagram to solicit business. Generally, Instagram is a social networking platform for publishing photographs, and while there are instances of solicitation of business on Instagram, they are not as common as on websites such as Yahoo! Auction or eBay. Secondly, the appellant in the present case did not keep any stock at her residence – she admittedly purchased the goods on the Taobao website only after she received purchase orders. As a result, Customs officers were unable to find any contravening goods upon search of the appellant’s residence, thereby substantially reducing the risk of the appellant being prosecuted. For these reasons, the respondent submitted that Man Hoi Kei was less serious than the present case.

My views

12. I agree with the Respondent that the facts of the present case are similar to those of Man Hoi Kei but disagree that the present case is more serious than Man Hoi Kei. In my view, whether the platform was Instagram or something else, the modus operandi still involved the use of the Internet as the platform. By purchasing the goods in question on Taobao.com only after receiving purchase orders, the appellant was able to “make profits with no capital”. The fact that she did not keep any stock at home is not an aggravating factor. Furthermore, she had to personally deliver the goods to buyers and what she did had not “substantially reduced the risk”. I respectfully agree with the observations made by Pang J in Man Hoi Kei.

13. Moreover, in Secretary for Justice v Lam Chi Wah [1991] 4 HKC at 350 G-H, the Court of Appeal pointed out that:

“For hawkers and small traders of counterfeit goods, heavy fines which need not necessarily be linked to the value of the goods may have to be imposed in future. The purpose of such fines would be to deliver the message that this type of crime does not pay. Whatever profits they may make out of selling counterfeit goods will be stripped from them by heavy fines. For a repeat offender, an immediate custodial sentence may have to be seriously considered. On the other hand, for wholesalers, they would have to face prison terms unless there are special circumstances. We would hasten to add that financial difficulties and a clear record would be unlikely to be regarded as special circumstances.”

14. The appellant, aged 20, is a first offender. Taking into account the value of the goods in question and the appellant’s modus operandi, I consider that a fine of $10,000 sufficiently reflects her culpability and serves as deterrence.  In the circumstances of the present case, a custodial sentence, even if suspended, would have been too severe.

Decision

15. For the above reasons, I have set aside the custodial sentence.