THE QUEEN v. TAM SHO LAM

Mag. App.
No. 272 of 1988

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H E A D N O T E

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False trade description evidence from which reasonable prospective purchaser likely to be misled - conclusion of magistrate not manifestly wrong.

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

MAGISTRACY CRIMINAL APPEAL NO. 272 OF 1983

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J U D G M E N T

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1. The appellant was convicted on two summonses of applying a false trade description to 3,450  ladies dresses and importing the same, contrary to sections 7(1)(a) (i) and 12(l) respectively of the Trade Descriptions Ordinance, Cap. 362.

2. The trade description was on the dress labels, which contained the words "Giggles London". The first word of the logo was in large red lettering, whereas 'London' was in small black print on top and to the right.

3. The appellant owns a small trading company in Tsuen Wan. He does not understand English. In June 1986, his firm entered into an agreement with the English patent holder, Carrogold Ltd., under which he was authorised to use the logo on garments to be sold in Hong Kong.

4. The appellant placed an order for a quantity of dresses to be manufactured in a factory in China. He himself took the labels to China, where they were attached to the dresses. On importation into Hong Kong in November, 1986, they were seized by the Customs. There was no mark on the garments to indicate they had been made in China.

5. The market value of the consignment is admitted to be $53,000 and the appellant anticipated a profit of $2,000.

6. Under section 2(1) of the Trade Desoriptions Ordinance, a 'false trade description' means, inter alias, "a trade description which, though not false, is misleading, that is to say, likely to be taken for such an indication of any of the matters specified in the definition of 'trade description' or, as such an indication, would be false to a material degree".

7. One of the matters specified in the definition of 'trade description' in the same section is 'place or date of manufacture, production, processing or reconditioning'

8. The prosecution case was that the label was likely to be taken for an indication that the dresses were made in London and was thereby misleading and a false trade description accordingly.

9. It is highly relevant that the dresses are of poor quality, shoddily made and expected to sell for only $11-12 and also that the anticipated market was Filipina maids, whose knowledge and judgment concerning the origin of such garments may be less than that of the other English-speaking inhabitants of the territory. The test as to whether they were likely to be so misled is an objective one.

10. The evidence in support of the prosecution case was admitted under section 65C of the Criminal Procedure Ordinances, Cap. 221. The appellant gave evidence and produced a letter and two telexes from Carrogold.

11. The Crown relied on A. G. v. Ikeda international (H.K.) Ltd.⁽¹⁾ in that case Takane Japan' was held to be a false trade description. I agree with Mr Sakhrani, for the appellant, as did the magistrate, that Ikeda can be distinguished from the present case, on the basic that, in that case, the issue was whether clock movements had undergone treatment or processing in China to such an extent that they could be said to have been manufactured in China. The significance of the expression "Takane Japan" was not considered.

12. The appellant gave contradictory evidence as to his purpose in using these labels. In chief he said it was in order to attract purchasers in the local market in cross-examination he denied that. The magistrate found him to be inconsistent and evasive.

13. The magistrate has written a comprehensive and helpful Statement of Findings.

14. That the appellant had permission from Carrogold to use the label was, in the magistrate's opinion, irrelevant. She also discounted the the fact that Carrogold itself had never been prosecutes in England.

15. Her conclusion was :-

"Adopting a common sense approach. I found 'Giggles, LONDON' a false trade description in that it, though not a trade description, was likely to be taken for an indication of the place of manufacture and as such an indication, it was false to a material degree as it was not disputed that the ladies' dresses were wholly made in China. In arriving at the finding, I did not need the assistance of expert evidence or evidence of a member of the public that he would be misled."

16. Mr Sakhrani complains that she has not said why she formed this opinion of the label. He submits that it is not enough simply to reject the defence case; the prosecution should lead evidence, from which the magistrate can infer that a reasonable prospective purchaser eras likely to be misled.

17. Mr. Sakhrani relies on Donnelly v. Rowlands⁽²⁾ in which Lord Parker, C.J. said at page 12:-

"If there had been a finding supported by evidence that members of the public had been misled ............ then there would be some grounds for saying there was a false trade description."

18. In Williamson v. Tierney⁽³⁾ the magistrate found that the term. English lever" was a false trade description, on the basis of evidence to that effect rather than as a matter of law. It was held on appeal that the court could not interfere with his decision.

19. In Kingeton-upon-Thames v. FW Woolworth & Co. Ltd.⁽⁴⁾, it was held that evidence of trade practice was admissible to decide the issue, where the description was not unequivocally false.

20. I agree that evidence of trade practice, and indeed that of prospective purchasers, would have been admissible. I also agree that the magistrate must base her decision on evidence. Here, however, there was evidence, namely that the dress itself,  its price and prospective market, together with that of the label.  As counsel for the Crown points out, it is a simple item and there is no need for the prosecution to call evidence to resolve technical complexities, as in the cases cited by Mr Sakhrani.

21. Counsel complains that the magistrate has failed to examine the label adequately, or to make allowances for the fact that the word "London" does not stand out. At page 6 of her Statement of Findings she specifically notes that "London" was in black and much smaller in size than 'Giggles'". There is no substance in this criticism.

22. I am satisfied there was sufficient evidence before the magistrate on which to base her decision. I a am also satisfied she applied the correct test.  it was open to the magistrate to come to the conclusion that the label was misleading. She has not erred in law and I cannot say her decision was manifestly wrong. For these reasons the appeal against conviction  is dismissed.

23. The appellant fined $10,000 on each summons. Mr. Sakhrani's mitigation before the magistrate was based on Chan Hon-yuen v. R.⁽⁵⁾ in Which Jones. J. held that it was not wrong in principle to calculate fines for this offence on a ratio of 2½ : 1 of gross profit. In this he was following the ratio suggested by the Full Court in Popular Machinery Co. Ltd. v. R.⁽⁶⁾.

24. In her Reasons for Sentence the magistrate bases her calculation on R. v. Tele Art Limit⁽⁷⁾, a case of importing watches bearing the false trade description "Swiss". Roberts C. J. cited A. G. v. Eagles Eye H. K. Ltd.⁽⁸⁾, in which the Court of Appeal laid down a guideline of 40% of the value of the goods, holding that substantial fines were necesssary, because of the damage that a false trade description might cause to Hong Kong's relationship with a major trading partner. The court doubted whether it was right: to place such emphasis on the question of profit. Cons J. (as he then was) said at p. 843 "prosecutions of this kind are not brought to discourage dishonest investment. They are brought to protect the international reputation of Hong Kong". That case concerned the evasion of the prohibitionhy the United States Government on the importation of cotton corduroy goods from China by applying a "Made in Hong Kong" label.

25. In Tele-Art Roberts C J. took the view that "purchasers in Hong Kong should be protected from buying articles which are, by reason of the false description, not what they are paying for". He did not think it necessary to try and devise a separate tariff for this kind of offence and applied the Eagles Eye guideline.

26. In R. v. Lam Veng-chan (Imprint Co. Ltd.)⁽⁹⁾ in which Judgment was delivered less than two weeks after Tele-Art, the same judge, without citing that case, imposed fines for breach of the Export (Certificate of Origin and Commonwealth Preference Certificates) Regulations on the basis of a 2½ : 1 profit ratio. The maximum fine under those regulations is $100,000, whereas that under the Trade Descriptions Ordinance and under the Import and Export Ordinance is $500,000. Roberts C. J. took this into account.

27. The magistrate cannot be criticised for adopting the approach in Tele-Art. Nor only is it more consistent with recent authority, it gives a more realistic result.

The profit criterion would have produced a fine of $5,000, which would have been an inadequate penalty for these offences.

28. The magistrate did not accept that the appellant had no intention to mislead. She says she took into account the appellant's clear record and ability to pay a fine. She does not say whether she gave credit for the other matters urged in mitigation, namely that no one was in fact deceived, the small percentage of the population that night have been deceived and that there was no damage to Hong Kong's trade reputation. Having imposed a straight 40% of $53,000, presumably she did not do so.

29. Hevertheless, 40% is only a guideline. The total fine is about right in relation to the offences and the size of the consignment. I am not prepared to interfere with the magistrate's discretion. The appeal against sentence is also dismissed.

(1) Mag. App. No. 87/86

(2) [1971] 1 All E.R. 9

(3) [1900] 17 T.L.R. 424

(4) [1968] 1 Q.B. 802

(5) C.A. 810/82

(6) C.A. No. 950/71 (See now 1987 H.K.L.R. 835)

(7) C.A. 1121/86

(8) [1987] H.K.L.R. 839

(9) Mag. App. 1109/86