HKSAR v. LEE TO NEI

HCMA 403/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 403 OF 2010

(ON APPEAL FROM KTCC 6963 OF 2009)

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J U D G M E N T

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1.  The Appellant was convicted after trial of one charge of possession for sale or for any purpose of trade or manufacture goods to which a forged trade mark was applied, contrary to section 9(2) and section 18(1) of the Trade Descriptions Ordinance, Cap. 362. He was sentenced to 6 months’ imprisonment. He appealed against both conviction and sentence.

Evidence of the prosecution

2.  PW1, Custom Officer 97183, said he bought a bottle of Chinese herbal medicine (Exh. P1) from the Appellant.  The Appellant had taken Exh. P1 from a display cabinet, which can be seen in Exh. P8 photograph 4.  PW2 testified that he had seized all 26 bottles of herbal medicine, subject matter of the charge, from the same shop in the display cabinet.

3.  The defence did not object to PW1 producing his post record (Exh. P10).  In Exh. P10, PW1 had recorded that he entered the shop, and had asked the Appellant for the herbal pill by name, and the Appellant had taken a box of the pill from the display cabinet, and given it to PW1, and said that it was $15.  And in answer to PW1’s question as to who is the person in charge of the shop, the Appellant said he was.  After the Appellant was cautioned for selling counterfeit goods, the Appellant had replied, “the medicine had been sold for many years.  I have never heard that they are counterfeit.”  The Appellant had, also, further said that the purchase of this medicine was done by the company called Pacific Pharmaco Ltd, which is also the owner of the shop.

4.  The Appellant was later interviewed, and the record of interview was produced as Exh. P11.  In this record of interview, the Appellant admitted that he was a salesman working for this shop, the Pacific Pharmaco Ltd, and he had been working in the company for 18 years.  As far as he knows there are three directors of the company.  He could not remember where the counterfeit goods were obtained from, nor the person responsible for buying this batch of counterfeit goods.  When asked what precautionary measures he had taken to prevent the sale of counterfeit goods, the Appellant had replied, “I have taken (such measures): I will ask the outdoor salespersons of wholesalers whether the goods are imported goods from authorized distributors.  (If) the salespersons says, “there is no problem with the goods, then it’ll be okay.””

5.  PW3, Mr Chai, head of the Quality Examination Department of Lanzhou Foci Pharmaceutical Co., gave evidence about the counterfeit nature of the seized product with reference to samples of genuine product which was produced as Exhibits P1A, P3A, P4A and P5A.  The learned Magistrate dealt with examples of the discrepancy in characteristic between the genuine product, and the counterfeit one at paragraph 9 of his Statement of Findings, and I do not need to specifically refer to them.  However, of particular note is that Mr Chai confirmed that Hong Kong Foci Pharmaceutical Co Ltd was the only authorized distributors of the genuine product, and he had never heard of Chinese Pharmaceutical (International) Ltd and Man Tak Pharmacy.

Evidence for the Defence

6.  The Appellant testified that he was the one responsible in the shop for serving customers.  He said that on the material day when PW1 asked for the product, he actually did not know where it was, and he had asked a colleague for it, as he did not, at that time, know anything about Man Shan product including where the company had bought them.  He explained that when PW1 asked him who was in charge, he thought he was being asked who was in charge of serving him, and he had not meant to say that he was in charge of the pharmacy.  In fact, he said that it was a Mr Liu Kwok-keung, who was in charge of pharmacy that day, but he had gone out to have a meal when PW1 arrived at the shop.

7.  The Appellant maintained that he did not know that the goods were counterfeit goods because he had never seen them before.  He had always believed that all the Chinese herbal medicine product in the pharmacy were genuine as they were bought from reputable and big companies.  Subsequent to his arrest, the Appellant had produced an invoice (Exh. D1) from the Chinese Pharmaceutical (International) Ltd for the purchase of Exh. P1, P2 and P4 which were the counterfeit goods seized by the Customs and Excise.  The Appellant also produced an invoice from the Man Tak Pharmacy (Exh. D3) to account for the purchase of Exh. P5, part of the counterfeit goods, but the Appellant explained the receipt for Exh. P3 could not be found.

Magistrate’s findings

8.  The learned Magistrate found that the goods seized were counterfeit goods, and that the Appellant was in possessions of the counterfeit goods, as he was not just the salesman, but was one of four registered shareholders of Pacific Pharmaco Ltd, holding one fifth of the authorized share capital (see Exh. P9 and P6).  He also took into account the Appellant’s answer in Exh. P10, that he was in charge of the shop at the material time.

9.  I see from Exh. P10 at page 7 that the officer’s question to the Appellant was: “而家呢度邊個負責?”and the Appellant’s replied was noted as “而家呢度係我負責”。

10.  The learned Magistrate concluded that the prosecution had proved all the elements of the charge beyond a reasonable doubt, and went on to consider the statutory defence under section 26(4) which read:

“In any proceedings for an offence under section 9(2), it shall be a defence for the person charged to prove that he did not know, had no reason to suspect and could not with reasonable diligence have ascertained, that a forged trade mark had been applied to the goods or that a trade mark or mark so nearly resembling a trade mark as to be calculated to deceive had falsely been applied to the goods.”

The learned Magistrate, after reviewing the relevant law, said the Defence had failed to prove on a balance of probabilities that the Appellant had no reason to suspect and could not with reasonable diligence have ascertained, that a forged trade mark had been applied to the goods, and thus convicted the Appellant.

11.  In considering sentence, the learned Magistrate noted that this was a very serious offence, and an immediate custodial sentence was appropriate, and referred to the case of HKSAR v Chan Yau Fat, HCMA 157/2008. The learned Magistrate observed that although the case of Chan Yau Fat involved prescription drugs, in his view, it was a distinction without a difference because the herbal pills in the present case were taken for heart and kidney complaints, although the Government Chemist did point out that there was nothing harmful in the pill.

12.  The learned Magistrate took into account that the Appellant had three previous convictions in 1990 and 1994 for improper storage of Part I Poisons and selling Poisons without the supervision of a registered pharmacist and without prescription.  He gave credit to the Appellant that his last conviction was in 1994.  In all the circumstances the learned Magistrate sentenced the Appellant to 6 months’ imprisonment.

Grounds of Appeal

13.  Mr Lok, SC submitted two grounds of appeal against conviction which are as follows:

Ground 1

(1)    The learned trial magistrate erred in law when he came to the view that the Appellant bears a persuasive burden of proof (the standard of proof on a balance of probabilities) when the Appellant sought to raise the statutory defence under section 26(4) of the Trade Description Ordinance Cap 362.  It is important at this stage to look at the wording of section 26(4) of the Trade Description Ordinance which provides:

“In any proceedings for an offence of section 9(2) it shall be a defence for the person charged to prove that he did not know, had no reason to suspect and could not with reasonable diligence have ascertained, that a forged trade mark had been applied to the goods or that a trademark or mark so nearly resembling a trademark as to be calculated to deceive had falsely been applied to the goods.”

14.  Mr Lok, SC submitted that the learned trial Magistrate was wrong to rely on the case of HKSAR v Kwong Hing Agency Ltd[2008] HKLRD 461 to say that the Appellant must prove on a balance of probabilities to satisfy the court as to the statutory defence.

15.  Mr Lok, SC pointed out that the learned Magistrate was wrong as the Appellant only needs to bear an evidential burden, and he seeks support for his argument from a line of CFA authorities, including HKSAR v Hung Chan Wa, FACC 1/2006; Chiu Wing Nam, Dick v HKSAR, FACC 10/2006 and HKSAR v Ng Po On, FACC 6/2007.

16.  In Hung Chan Wa’s case, the CFA was dealing with the constitutionality of section 47(1) and (2) of the Dangerous Drugs Ordinance, which are presumptions relating to legal possession and knowledge.  Their Lordships concluded that the persuasive burdens in section 47(1) and (2):

“… derogated from the presumption of innocence and consequently from the right to a fair trial, as protected by the Basic Law and the Hong Kong Bill of Rights (the BOR).”

Their Lordships also went on to say that the persuasive burden imposed by section 47(1) and (2) were disproportionate and that an evidential onus would be:

“… a sufficient means of achieving the legitimate objective ….”

17.  Mr Lok, SC pointed out that their Lordships in Hung Chan Wa and Ng Po On considered that imposing a persuasive burden on the Defendant in a criminal trial derogates from the vital principle of presumption of innocence, and that the prosecution had to provide compelling reasons why a reverse persuasive burden is necessary and why an evidential burden does not suffice. In the case of Ng Po On where the Appellant was convicted under the Prevention of Bribery Ordinance (Cap. 201) under section 14(4) of Cap. 201:

“… any person on whom [a s. 14(1)] notice has been served, who, without reasonable excuse, neglects or fails so to comply shall be guilty of an offence…”

and under section 24 of the same Ordinance, it said:

“…under this Ordinance, the burden of proving a defence of … reasonable excuse shall lie upon the accused.”

The Court of Final Appeal held that although the reverse onus under section 14(4) satisfied the rationality test: it however failed to satisfy the proportionality test. Therefore the persuasive burden encroached on the presumption of innocence and section 24 could be treated as imposing a merely evidential burden.

18.  Mr Lok submitted that the present offence before this court is a serious one and the court must take into account the severity of the potential punishment which in this case is a maximum term of 5 years’ imprisonment, in deciding whether imposing a persuasive burden is necessary.  He said the learned Magistrate was wrong in relying on HKSAR v Kong Hing Agency Ltd [2008] HKLRD 461 as the cases of Hung Chan Wa and Ng Po On were not cited before the Court of Appeal in that case.

19.  On behalf of the Respondent, Mr Law submitted that both Hung Chan Wa and Ng Po On were case and offence specific, and not to be read as establishing the principle that all “burden” provisions are constitutionally invalid and to be read down.  Hung Chan Wa was a case dealing with drug trafficking and Ng Po On was a case dealing with a bribery offence, and the presumptions though passing the rationality test failed on the proportionality test.  In both cases, the Court of Final Appeal recognized that the effect of imposing a persuasive burden on the Defendant would:

“expose the Defendant to the risk of being convicted even though there is a reasonable doubt as to his guilt.”

20.  Mr Law very helpfully submitted that it is useful to look at some English authorities relating to the sale of counterfeit goods.  In R v S [2003] 1 Cr App R 602, the Court of Appeal in England was dealing with a case under the Trade Marks Act of 1994 and section 92 of that Act provided:

“(5) It is a defence for a person charged with an offence under this section to show that he believed on reasonable grounds that the use of the sign in the manner in which it was used, or was to be used, was not an infringement of the registered trade mark.”

The Appellant in that case was a trader who sold clothing bearing well‑known brand names.  The Appellant did not dispute that the garments were counterfeit, but said that at the time he was offering them for sale he had thought they were genuine.  He was charged with two offences of unauthorized use of a trademark, which was contrary to section 92(1)(c) of the 1994 Act.  The Court of Appeal held that:

“(1) The provisions of the Trade Marks Act were designed to protect not only proprietors of registered trade marks but also consumers.

(2) The subject matter of s. 92(5) was liable to be peculiarly within the knowledge of the accused. While it is true that knowledge, belief and intent can, in a sense, be said to be peculiarly within the knowledge of an accused in most criminal cases, but in this consumer protection context, in particular, the point is of considerable weight.

(3) An effective and workable regime in this context could not depend on proof by the prosecution in every case of a trader’s absence of belief on reasonable grounds that the goods were genuine or that no registered trade mark existed; or on a rebuttal of an assertion by a trader that he was unaware of the registration or that he did not realized that he was selling counterfeit goods.

(4) Whilst an offence under s. 92 is potentially a serious offence and in a bad case will in practice involve serious dishonesty, it is in the nature of a regulatory offence, (cp the observations of Lord Clyde in Lambert at paragraph 154: p258 A‑D). Moreover, the moral of obloquy involved will normally be likely to be rather less than in what has been styled “truly criminal” cases.

(5) It must not be overlooked that important matters have to be proved by the prosecution beyond reasonable doubt before any liability can attach to the accused. These are the elements of s. 92(1)…. It is only if these matters are proved…that the potential defence under s. 92(5) arises.

(6) S. 92 provides for a sentence of 10 years’ imprisonment (with or without a fine)…..But we do not think it unprincipled also to have regard to the reality of the matter: which is that most cases under s. 92 are brought in the magistrates’ court....

 (7)    ….Mr Swift stressed what he said were the enormous (if not, in some cases, insuperable) obstacles for trading standard departments if the burden imposed by s. 92(5) on the accused was to be treated as only an evidential one.  We agree that it would not necessarily take that much for an issue to be raised by a defendant in this context.  It might be capable of being raised, for example, by an assertion in interview that he believed the goods were genuine, because they looked it or because they had come from a supplier whom he believed reputable.  The issue once sufficiently raised, it would be for the Crown to prove beyond reasonable doubt the negative of an absence of belief, and the more elusive negative of an absence of reasonable grounds for such belief. This would be likely to give rise to potentially considerable practical difficulties at trial, including but not limited to a potential need to obtain the co-operation of witnesses concerned in the supply chain.  Fewer investigations in consequence would be undertaken; fewer prosecutions would result; and the interests of the economy, of innocent consumers and of legitimate businesses would suffer….”

21.  Their Lordships having considered all the above matters decided that the imposition of a reverse legal burden on the accused by section 92(5) was “necessary, justified and proportionate.”

22.  In R v Johnstone [2003] 1 WLR 1736, the House of Lords also considered the issue of a reverse burden under section 92(5) of the Trade Marks Act.  Lord Nicholls of Birkenhead, at page 1748 of the judgment, considered at length the burden of proof under section 92(5).  He recognized that there are conflicting decisions of the Court of Appeal.  Lord Nicholls noted that in the present appeal before him, the Court of Appeal had, having regard to the presumption of innocence in Article 6(2) of the European Convention on Human Rights, said that the burden cast on an accused is an evidentiary one. However, in the case of R v S (supra), the Court of Appeal in that case reached a contrary conclusion, therefore Lord Nicholls considered that the House should not leave the law in this state and Lord Nicholls proceeded to express his views on the matter.  Lord Nicholls concluded the reverse legal burden under section 92(5) imposed on the accused was justified, and was not incompatible with the presumption of innocence after considering the following factors:

“52. ….

(1) Counterfeiting is fraudulent trading. It is a serious contemporary problem. It has adverse economic effects on genuine trade. It also has adverse effects on consumers, in terms of quality of goods, and sometimes, on the health or safety of consumers….Protection of consumers and honest manufacturers and traders from counterfeiting is an important policy consideration.

(2) The offences created by s. 92 have rightly been described as offences of “near absolute liability”. The prosecution is not required to prove intent to infringe a registered trade mark.

(3) The offences attract a serious level of punishment: a maximum penalty on indictment of an unlimited fine on imprisonment for up to 10 years of both, ….

(4) Those who trade in brand products are aware of the need to be on guard against counterfeit goods. They are aware of the need to deal with reputable suppliers and keep records and of the risks they take if they do not.

(5) The section 92(5) defence relates to facts within the accused person’s own knowledge: his state of mind, and the reasons why he held the belief in question. His sources of supply are known to him.

(6) Conversely, by and large it is to be expected that those who supply traders with counterfeit products, if traceable at all by outside investigators, are unlikely to be co-operative. So, in practice, if the prosecution must prove that a trader acted dishonestly, fewer investigations will be undertaken and fewer prosecutions will take place.

53. In my view factors (4) and (6) constituted compelling reasons why the section 92(5) defence should place a persuasive burden on the accused person. Taking all the factors mentioned above into account, these reasons justified a loss of protection which will be suffered by the individual. Given the importance and difficulties of combating counterfeiting, and given the comparative ease with which an accused can raise an issue about the honestly, overall it is fairly reasonable to require a trader, should need arise, to prove on the balance of probabilities that he honestly and reasonably believed the goods were genuine.

54.    For these reasons, which are substantially the same as those given by Rose LJ in R v S (trade mark defence) [2003] 1 Cr App R 602, I consider the persuasive burden placed on the accused person by the section 92(5) defence is compatible with Article 6(2)…..”

Lord Nicholls’s views were adopted by all their Lordships sitting on this appeal.

23.  Finally, it behoves us to briefly mention the case of HKSAR v Kong Hing Agency Ltd [2008] 2 HKLRD 461, as it was the case referred to by the learned Magistrate.  This was a case where the Appellant was charged with attempting to import water dispensers bearing a false trade description contrary to section 12(1) of the Trade Description Ordinance, Cap. 362.  The Court of Appeal, in considering the statutory defence of reasonable diligence under section 12(2)(a) of the Ordinance, was of the view that the defence is to be proved by the accused on a balance of probabilities.  There did not appear to have been any argument at all as to whether the persuasive burden was in contravention of the presumption of innocence.

24.  Having considered the case of Hung Chan Wa, I agree with Mr Law’s submissions that the Court of Final Appeal was dealing specifically with the presumptions under section 47 of the Dangerous Drug Ordinance, Cap. 134. Specifically, the Court of Final Appeal was concerned about the fact that once the prosecution proved that the Defendant was in physical possession of a container or key to a container containing a dangerous drug, then a presumption arose which cast on the Defendant the burden of proving that he did not have possession of such a drug or that he was unaware of the presence of such a drug.  Therefore, the danger arises that the Defendant may be convicted because he failed to prove on a balance of probabilities that he had possession or that he was unaware he had such a drug in his possession, “yet the evidence may be such as to generate a reasonable doubt that he had possession or that he had knowledge that what he possessed was a dangerous drug” (see p644 E‑G).  Similarly, in Ng Po On’s case, their Lordships’ minds were exercised by the fact that by imposing a persuasive burden under section 14(1) and ss (24), it would encroach on the presumption of innocence because it did not satisfy the proportionality test.  Their Lordships (at page 112H) identified the issue in that case where the Defendant:

“… accepts that he has not complied with the notice but suggested that he has a reasonable excuse for his failure to comply. The question is whether the tribunal of fact should judge that excuse on the basis that the Defendant must be acquitted if there is a reasonable doubt whether his excuse is both reasonable and true; or whether he should be convicted notwithstanding the existence of the reasonable doubt so long as the tribunal is not satisfied that his story is more likely than not to be true.”

The Lordship went on to note that section 14(4) was not itself a corruption offence, but an ancillary offence in promoting the effectiveness of the special class of investigation conferred by the Ordinance. And therefore, the persuasive burden in that case did not satisfy the proportionality test and that section 24 in conjunction with section 14(4) of the Ordinance merely imposed an evidential burden on the defence.

25.  As we can see from a reading of the cases of Hung Chan Wa and Ng Po On, their Lordships were concerned with the relevant offences under the Dangerous Drugs Ordinance and the Bribery Ordinance and were not dealing with a general principle that all statutory defences should be read down as imposing only an evidential burden.  Mr Law pointed out the principle enunciated in those two cases are case specific.  Having looked at the cases cited by Mr Law from England, I agree with the House of Lords in R v Johnstone that given the “importance and difficulty of combating counterfeiting, and given the comparative ease with which an accused can raise an issue about his honesty, overall it is fair and reasonable to require a trader, should need arise, to prove on the balance of probabilities that he honesty and reasonable believed the goods were genuine”.

26.  I do not agree with Mr Lok, SC’s submission that the case of Kong Hing Agency Ltd appears not to be in line with the CFA authorities, because the relevant cases were not cited before the Court of Appeal.  In fact, a reading of the Kong Hing case would indicate that the point whether the burden is evidentiary or persuasive, was not raised by either party and the Court of Appeal had accepted that the burden was a persuasive one, which is in line with the English authorities.  For the above reasons, I conclude that the learned Magistrate was not wrong in deciding that the Appellant bears the burden of proof under section 26(4) on a balance of probabilities.

27.  In this case, the Appellant relied on the fact that he did not know that the bottles of Chinese medicine had forged trade marks because they were bought from reputable company.  This was exactly the scenario envisaged by Lord Nicholls of Birkenhead in the Johnstone case as stated above.  He had noted that those who traded in branded products should be aware of the need be on guard against counterfeit goods.  Apart from being aware of the need to deal with reputable suppliers and keep records and the risks they took if they did not, the defence relies on facts “within the accused person’s own knowledge: his state of mind, and the reasons why he held the belief in question.  His sources of supply are known to him.”  That is why the statutory defence in this case fulfill both the rationality and proportionality test, and the learned Magistrate was not wrong when he ruled that the Appellant bore the burden of proof on a balance of probabilities.

Ground 2

28.  Mr Lok, SC submitted that the learned trial Judge had erred in finding that the Appellant failed to discharge his duty to prove to the required standard that he did undertake reasonable due diligence in finding out whether the goods in question bore genuine trade mark.

29.  The learned Magistrate had found as a fact that the Appellant did not know and has no reason to suspect that these were counterfeit goods.  So the only issue before the learned Magistrate was whether the Appellant could not with reasonable diligence had discovered that a forged trade mark had been applied to the goods.

30.  Mr Lok, SC submitted that the learned Magistrate had erred in relying on the R v Mulitex [Exports] Ltd [1996] 4 HKC 422, where it says that for a trial Judge to find that there was reasonable diligence must require positive action on the part of the Appellant.  Mr Lok, SC submitted that this case had been distinguished by the Court of Appeal in Kong Hing Agency Ltd in para where Ma JA (now Ma CJ) at page 470, para 18 said:

“In R v Mulitex (Exports) Ltd, the Court found that there was a positive duty on buyers of goods in Hong Kong to take steps to ensure that goods were genuine. In the present case, the Magistrate interpreted what was said as being of universal application, namely that it was incumbent on all persons coming into contact with goods to check that they were not false. With respect, all that Stock J was doing was to hold that in the circumstances of the case before him (dealing with a buyer of goods from the Mainland), the obligation was appropriate.”

In paragraph 22(4) of the judgment, at page 471:

“…The state of knowledge of the Appellant (see paragraph 14 above) would not indicate there were any suspicious features at all to put it on alert. This being the case, there was nothing in the normal course of its duties that would have required the Appellant to make further inquiries or take some other action in relation to the goods.”

31.  Mr Lok, SC submitted that the Chinese medicine in this case were bought from reputable companies, or so the Appellant believed, and invoices were produced from the Pharmaceutical (International) Ltd and Man Tak Pharmacy to account for the purchase of some of these medicine.  Therefore, Mr Lok submitted, the learned Magistrate was wrong to require “positive action” in order for the Appellant to discharge his duty since Ma JA (now Ma CJ) had specifically said Stock J (now Stock JA) was only dealing with the circumstances of the case before him.

32.  In HKSAR v Kong Hing Agency Ltd, the Defendant was a shipping agent who was convicted of attempting to import goods bearing a false trade description.  These were cartons of water dispensers bearing the false trade description that they were “Made in Korea”.  As the Defendant was a shipping agent responsible for arranging the carriage of goods by sea, he was not concerned with the goods themselves.  The Defendant was only contractually responsible for arranging the carriage of goods by sea, but was not responsible for “stuffing”, inspecting or supervising the goods at loading and the Defendant was not aware of the false trade description.  The Defendant was convicted after trial as his defence of reasonable diligence was rejected.  The Court of Appeal allowed the appeal and held:

“(1) For the reasonable diligence defence to apply, it was not enough for an importer or exporter to show on the balance of probabilities that it had no actual knowledge or reason to suspect that the relevant goods bore a false trade description or forged trademark. An accused must also demonstrate that it could not with “reasonable diligence” (not “due diligence” or “all due diligence”) have discovered any false trade description or forgery. This was an objective test and required an examination of what the importer or exporter could have been reasonably expected to have done in the circumstances, not what an importer or exporter in any given case had actually done. The test was subjective only in that one must look at the particular circumstances of the accused (R v Mulitex (Exports) Ltd [1996] 4 HKC 422 approved). (See paras. 17‑18).

(2)    Here, the reasonable diligence defence was a valid defence.  A shipping agent’s duties normally did not concern the goods themselves at all.  The shipping agent was not concerned with what the goods were, their quality or the identity of the consignor or consignee. On the other hand, if a typical shipping agent knew or suspected that the goods carried might bear a false trade description or trademark, it would be reasonably expected to make further inquiries or take further action….Here, D’s state of knowledge would not have put it on alert …Accordingly, given D’s normal duties, it had not been required to make further inquiries or to take some other action in relation to the goods and the defence succeeded. (See para. 22)”

33.  Thus, it can be seen that the particular position of the Defendant in Kong Hing Agency Ltd was distinguished from the Defendant in the case of Mulitex. And their Lordships in Kong Hing Agency approved the test as laid down by Stock J (now Stock JA) in Multiex, but went on to say that it did not apply to the circumstances of the case before them.

34.  In the present case, the Appellant was not only a salesman but a part owner of the company he had worked at the frontline of the company for 18 years, and should be familiar with the company’s stock.  According to PW1 when he went in to ask for this particular medication, the Appellant had immediately provided it to him.  Therefore, the Appellant in this case was in a different position to that of the Appellant in Kong Hing Agency Ltd.  The learned Magistrate was, therefore, correct to apply the principle in Mulitex to the statutory defence under section 26(4).  The learned Magistrate was right when he held that he was not satisfied that the Appellant had been reasonably diligent because a simple enquiry to the Hong Kong Foci Pharmaceutical Co Ltd which was the only authorized distributor of Man Shan product in Hong Kong would have alerted him to the fact that the 26 bottles found in his shop bore a forged trade mark.  Therefore, I also find that the second ground of appeal fails.

35.  In the circumstances, the appeal against conviction is dismissed.

Appeal against sentence

36.  Mr Lok, SC complained that the sentence of 6 months’ imprisonment was manifestly excessive in the circumstances.  He submitted that in this case, the Appellant only had 26 bottles of these herbal pills, and they were found to be harmless.  Whilst I agree the objective of the offence is really to protect members of the public from ingesting counterfeit goods.  I agree with the learned Magistrate that “the pills were Chinese herbal medicine and not prescription drugs was a distinction without a difference, in particular considering the pills were taken for the heart and kidney.”

37.  Mr Lok, SC submitted that this is a case where the Defendant had failed only in being reasonably diligent.  The learned Magistrate had accepted that he did not know and did not suspect that these were counterfeit goods. Furthermore, these tablets were found to be harmless to human beings.

38.  I agree with the principle in HKSAR v Chan Yau Fat, HCMA 157/2008 where it was laid down that for offences of this kind an immediate sentence of imprisonment was appropriate and necessary both to deter those who are tempted to indulge in the trading of counterfeit medication and also to protect our society from counterfeit medication.

39.  In the case of Chan Yau Fat, HCMA 157/2008 that case involved 130 tablets of Viagra which is a prescription drug and the Defendant knew that the drugs were counterfeit.  The Defendant in that case was sentenced to 6 months’ imprisonment reduced to 4 months because of his plea.  Line DHCJ (as he then was) whilst recognizing that 4 months’ imprisonment was correct.  He further reduced it by another month because it was the Defendant’s first conviction and the drugs would have the effect that the purchasers intended and was not injurious to health.

40.  In a similar case in HKSAR v Chung Chun Ming HCMA 665/2009, the Defendant had pleaded guilty to a similar offence and the drugs involved were 30 tablets of Viagra and 20 calcium injection shots.  The Defendant in that case also had knowledge that the drugs were counterfeit and he was sentenced to 3 months imprisonment.

41.  Mr Lok, SC also submitted that in the case of The Queen v Hui Man Sang, HCMA 549/1996.  The Appellant, who faced 3 charges of possession for the purpose of manufacturing goods to which a forged trade mark is applied, and the goods included 26,400 bottles of counterfeit pills had his sentence of 6 months’ imprisonment suspended for a period of 2 years because Wong J took into account his clear record, his plea of guilty, his ready co-operation with Custom officers and the fact that the pills do not contain toxic circumstances.

42.  It is a well-known fact that since 1996, the problem with counterfeit medicine has been on the rise.  The court has to impose an immediate custodial sentences on convicted Defendants unless there were exceptional circumstances that warrant a suspended sentence.  I do take into account the low number of counterfeit goods, namely 26 bottles and the fact that it has been found to be harmless for human consumption.  I also take into account the fact that he had only been found to have been guilty because he had failed to exercise reasonable diligence rather than that he knew that the goods were counterfeit.  In the circumstances, the sentence of 6 months’ imprisonment is manifestly excessive.

43.  Taking into consideration all the facts in this case and the background of the Appellant, I consider that an appropriate sentence will be one of 8 weeks’ imprisonment.  The appeal against sentence is allowed.  The sentence of 6 months is set aside and the Appellant is sentenced to 8 weeks’ imprisonment.