HKSAR v. TAN SAY SENG

HCMA 431/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MAGISTRACY APPEAL NO. 431 OF 1999

(ON APPEAL FROM SPCC 3634/1998)

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J U D G M E N T

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Beeson J (giving the judgment of the Court):

1. The Appellant was convicted after trial in the Magistracy on a single count of importing, other than for his private or domestic use, 10,000 video compact discs (VCDs) which infringed copyright. The offence was contrary to section 118 (1)(b) and section 119(1) of the Copyright Ordinance, Cap. 528. He appealed against that conviction.

2. The appeal was referred to this court because the judge below having heard the appeal in part, considered that a point of law arose which the Court of Appeal should rule on and that, as a matter of convenience, the whole appeal should be dealt with by this court. After considering the case transcript, the arguments advanced at the appeal and having heard counsels' submissions at this hearing we are of the view that no important point of law arises in this case. We deprecate the waste of listing time and the additional costs this hearing has occasioned the Appellant and the Respondent. We acknowledged that the fault did not lie with the parties and to avoid further wasted time and costs we heard the appeal.

Facts

3. The evidence was not challenged. The Appellant was the general manager of a Hong Kong company, Summit, which manufactured VCDs. It received, from its associated company in Singapore, 75 boxes of VCDs manufactured there at the Appellant's request.

4. Customs and Excise officers searched the consignment on its arrival in Hong Kong and discovered 25 boxes containing 10,000 infringing copies. Copyright in the works belonged to Polygram, which had not authorised the Appellant to manufacture or distribute the work in Hong Kong, nor authorized any entity to release the work in Hong Kong.

5. The International Federation of Phonographic Industry (IFPI) deals with copyright matters for sound recordings in Hong Kong. In 1997 IFPI set up a system whereby optical disc plants, on receiving orders for sound recordings, could check whether those placing orders had permission of the copyright owners to manufacture, or whether they should make further enquiries.

6. Enquiries to IFPI were checked against a data base of copyright holders. The procedure was simple. A fax or letter was sent to IFPI and a reply given one or two days later. Between 24 December 1997 and 21 January 1998 the Appellant enquired of IFPI about copyright for a number of recordings, but made no enquiry about copyright in the offending discs.

7. Summit had an agent for orders received in Mainland China, Valentine Music Productions (VMP). Mr Su Kung-hung (DW2) of that company was responsible for obtaining, in China, the Certificate of Licence to Copy, issued by the Press and Publication Administration (PPA), reportedly the official authority in China dealing with copyright matters.

8. To obtain such a Certificate the publisher had to submit:

(a) the licence agreement showing copyright granted by the owner;

(b) the CDR, which was a high quality master copy of the relevant works;

(c) the film of the cover design for the disc; and

(d) the manufacturing agreement between the publisher and the manufacturer.

9. If the PPA was satisfied with the documents it issued a Certificate which permitted the plant to produce copies lawfully. When handling orders from China, Summit needed a Certificate for each order.

10. In December 1997 VMP reported an order from a new customer. The Appellant asked for the Certificate; the CDR; the film and the manufacturing contract. He received those items together with a confirmation letter, apparently from the authorized publisher and being satisfied with them accepted the order. Subsequently Summit's Singapore associate fulfilled the order. The Appellant made no copyright enquiry other than to obtain the Certificate from the PPA.

11. It transpired that the Certificate on which Summit relied was not genuine. Although said to be printed on the appropriate official form the copyright approval was false.

12. The Appellant relied at trial on the statutory defence in Section 118(3) of the Ordinance which states:

"It is a defence for the person charged with an offence under subsection(1) to prove that he did not know and had no reason to believe that the copy in question was an infringing copy of the copyright work."

13. Section 118(6) showed how the Appellant could satisfy the court that he had no reason to believe that the copy was an infringing copy - the first requirement was to show whether the Appellant had made reasonable enquiries sufficient to satisfy himself that the copy was not an infringing one. Section 118(7) sets out various factors that could be taken into account in deciding whether section 118(6) had been satisfied.

14. It was submitted on behalf of the Appellant that he had done all he could reasonably be expected to do to check the copyright position by obtaining the Certificate. He said he was entitled to rely on the Certificate without doing anything else because it had been carefully checked by the PPA as to its founding material. According to him and to other witnesses the Certificate appeared to be in the usual form. No suspicions were aroused by various blanks left on the form relating to:

(i) The date approval was granted by the PPA

(ii) The date of delivery

(iii) The date of signing by the publisher's authorized signatory

(iv) The identity number and telephone number of the authorized signatory

(v) The date the publisher's chop was affixed

The witnesses claimed such omissions were common and did not invalidate the Certificate.

15. There were four grounds of appeal relied on by the Appellant.

Ground 1

16. The first was that the test for each limb of the statutory defence under section 118(3) was subjective rather than, as the Magistrate treated it, requiring a subjective test for the first limb "did not know" and an objective test for the second limb "had no reason to believe". The Appellant submitted that the defence was to be read conjunctively, that it was a single, not an alternative, defence and that the question the Magistrate should have asked himself was "did the accused have knowledge or reason to believe?"

17. The Magistrate accepted that the Appellant did not have knowledge that the copies were infringing copies and required the defence to show, on an objective standard, that the copyright enquiries the Appellant made were adequate, confined as they were to the obtaining of a Certificate from the PPA.

18. In stating the test the Magistrate relied on the case of R. v. Chan Shing-kau Mag. App. 1234 of 1990 (unreported) wherein the test for a similar provision was stated by Wong J, as he then was, to be an objective test.

19. A similar two-limbed statutory defence, albeit the more onerous one of due diligence, in section 18(2) of the Import and Export Ordinance, Cap. 60, was examined by Stock J in The Queen v. Chan Kim-fai Mag. App. 982 of 1993 (unreported). He endorsed the objective test adopted by that Magistrate in his Statement of Findings:

"In my view reasonable diligence does not mean the doing of everything possible, like the thorough search by the Customs Officers. That standard would be too high; but it must mean such diligence as an ordinarily prudent and diligent man would exercise under the circumstances of his case."

20. Here the Magistrate correctly applied an objective test to the second limb of the statutory defence. Having accepted that the Appellant had no knowledge that the copies infringed copyright provisions, he had then to consider whether, on the balance of probabilities, the Appellant had shown further that he had no reason to believe that the copies were infringing copies.

21. In deciding that, the Magistrate had to look at what enquiries the Appellant made and assess whether on an objective standard he had done that which in the circumstances reasonably could be required of him. He found the Appellant's enquiries in all the circumstances of the case to be insufficient.

22. There is no basis on which we can fault his application of the test and this ground of appeal fails.

Ground 2

23. The second ground set out various errors allegedly made by the Magistrate in determining whether the Appellant had proved the statutory defence under Section 118(3). These "errors" related overall to the view the Magistrate had taken of the Certificate obtained from the PPA.

24. The Appellant argued that even on an objective test any reasonable man in the Appellant's position would have accepted the Certificate as genuine, despite its missing details and that the Magistrate wrongly expected the Appellant to make enquiries in Hong Kong.

25. This, according to Mr Ching, SC, who appeared on behalf of the Appellant, "is to completely disregard the regulated system, the prescribed system governing the issuance of PPA certificates in China. It would not be just or fair to disregard all this evidence in the evaluation of the statutory defence. When one deals with a country where the system is communist and everything is regulated by the State Authorities, there are no further enquiries to make once the certificate is issued. The reasonable man would accept a certificate issued by a state authority. He would not begin to make further enquiries."

26. This is to place far too high a value on a certificate which however necessary, useful and reliable it might be in China, cannot be of similar status in Hong Kong because of its inherent weaknesses.

27. It is necessary first to state the obvious; these Certificates are documents produced in the Mainland to govern Mainland practices relating to the copying of goods. They may offer all necessary protection to those who rely on them in respect of goods copied on the Mainland, but they cannot offer the same protection so far as Hong Kong legal requirements are concerned.

28. There are obvious drawbacks and dangers in relying on such certificates. Details of their issue and purpose is known only through witnesses who wish to rely on them. No cogent, independent, evidence establishes the alleged rigour underlying enquiries and checks said to be made by the PPA.

29. The application form asks the applicant to state who holds the copyright. Whether the PPA conducts independent checks to confirm the putative copyright holder is as stated by an applicant is a matter of surmise. No authoritative evidence was led on this aspect, nor was there independent evidence of the purpose for which the PPA views certificates, or what procedures, if any, it follows to check other information in the application.

30. The only form of the Certificate produced in court was a photocopy, allegedly of the original which had been returned to the PPA. Assuming, for the purposes of this appeal, the original to be the same as the photocopy, the absence of relevant information linking the Certificate with a particular order suggests that its chief purpose may be to ensure that material copied meets censorship requirements.

31. That was suggested also by the omission of certain identifying details, making it impossible to know, for example, when the approval was granted; whether, when approval was given, the person named was still the copyright owner or licensee; whether at the time of signing, the authorized signatory of the publisher was still so authorized. The absence of such information makes the Certificate useless for the purposes for which the Appellant says that someone in his position, and, ultimately, the court should be able to rely on it.

32. Further, the omission of the date of delivery, makes the Certificate too general for it to be connected reliably with any particular order. The Magistrate made this point when he referred (B165) to this Certificate being so vague that it could be re-used many times as long as each order did not exceed 10,000 copies.

33. The Magistrate considered the case of Infabrics & Others v. Jaytex Ltd (1980) 1 Ch. 282 at 295 in which Buckley LJ set out the scope of the duty:

"it is ... incumbent upon anyone who proposed to make use of any artistic work in a way which might infringe copyright, if it subsisted in the work, to make such enquires and investigations as he reasonably can to satisfy himself that the work is free of copyright. No doubt every case must depend upon its own particular facts, but if no adequate inquiries or investigations are made, it must, it seems to me, be difficult to suppose that the person proposing to use the work has no grounds for suspecting that it maybe subject to copyright."

34. Following Buckley LJ's comments, the Magistrate's view was that the Appellant should have made enquiries in Hong Kong particularly as the initial plan was to manufacture the VCDs here.

35. The Magistrate also considered, on the basis of R. v. Mulitex (Exports) Limited (1996) 4 HKC 422, that the Appellant should have been on guard because the customer had not dealt with Summit before.

36. The Appellant had access to the IFPI database in Hong Kong and had consulted it before without difficulty. It cannot be regarded as too onerous to expect the reasonable man to have made enquiries in Hong Kong. The Magistrate did not accept that the Certificate afforded conclusive proof of a licence to make copies and found that the Appellant had failed to carry out "the reasonable enquiries incumbent upon him under section 118(6)(a)(b) and (c). We agree with the Magistrate.

Ground 3

37. The Appellant's main argument under ground three was whether he was subject to what he submitted were new requirements laid down in HKSAR v. Mega Laser Products (HK) Ltd & Ors [1999] 3 HKC 161 or whether, as was contended on his behalf, it was sufficient for him, making enquiries as he did in the period before Mega Laser was decided, to rely on what he believed the position to be when the case of Megabyte Magnetic Industrial Co. Ltd & Anor [1996] 3 HKC 340 was decided.

38. The Appellant interpreted Megabyte as authority for saying that it was not necessary to make copyright enquiries in Hong Kong as long as sufficient enquiries had been made. In Megabyte enquiries were made only in Belgium and reliance was placed on what was referred to as a 'copyright authority letter'. It was contended that similarly, by obtaining the Certificate, the Appellant had made sufficient enquiries.

39. It was submitted that while it is not clear whether Mega Laser requires a person to make enquiries in Hong Kong as a precondition to reliance on the statutory defence, that the court should not so hold.

40. In our view there is no difference between the two cases. Each makes it clear that the Infabrics considerations, as adopted in R. v. Ng Kwan Pui [1988] HKC 724, prevail. Each case must be considered according to its particular facts and, depending on those facts, enquiries and investigation that can be regarded as sufficient must be made.

41. In Megabyte Gall J, after considering enquiries made by that appellant, had this to say at p. 344:

"In my view he was entitled in the particular circumstances of this case to accept, in the absence of any circumstance that ought to have made him wary, a letter which on the face of it represents that the Belgian company had the right to licence the copying of the material and took responsibility for the intellectual and property and copyright matters." (Emphasis supplied)

"Given the enquiries made by the appellants, the undertakings received from the company in Belgium and the acceptance of those undertakings by another company in the business, the company in Shenzhen, which company was a joint venture with a large European company which itself produces music compact discs I am satisfied that the appellants had established on the balance that they did not know and by their endeavours had no reason to believe that the material infringed copyright."

42. In Mega Laser the Court of Appeal confirmed the correct approach to the duty by a person in the Appellant's position was, as in Ng Kwan Pui, to recognise that each case depended on its own particular facts and that it was necessary to make adequate enquiries or investigations according to those facts. The need to ensure compliance with Hong Kong law derived in Mega Laser from the fact that the manufacturing was to be done in Hong Kong. The only enquiry made in Mega Laser was about the position in Taiwan, which, commonsense would indicate, was likely to be different from that in Hong Kong and of little help in ensuring compliance with Hong Kong law.

43. Mega Laser is not authority for the proposition that in all cases an enquiry into Hong Kong law will be necessary, but does suggest what should be obvious to any bona fide manufacturer, that enquiries into copyright should be sensibly addressed and a logical train of investigation followed. Clearly if manufacturing is to take place in Hong Kong, a prudent conductor of adequate enquiries and investigation would check the Hong Kong position.

44. The Magistrate in the instant case reviewed the facts and concluded that obtaining the Certificate did not constitute adequate enquiries particularly because the Certificate was incomplete. In our view even if the information on the Certificate had been completed and was correct, to quote Mayo JA in Mega Laser (p. 168D-E):

"No satisfactory reason was given...as to why the inquiries which appear to have been made in Taiwan should have assisted the applicants in complying with the law in Hong Kong."

None of the witnesses explained why, or how, the Certificate, regardless of its necessity for manufacture in China, could have assisted the Appellant clarify the Hong Kong position on copyright, or why it had not been possible to conduct checks in Hong Kong.

45. There is no merit in this ground.

Ground 4

46. The last ground of appeal concerned an apparent difference between the oral reasons for verdict given by the Magistrate at the end of the trial and his more detailed Statement of Facts written some time later.

47. In referring to the evidence of DW3, Mr Chow Ming, in his oral reasons the Magistrate said: "Mr Chow Ming did not impress me as an honest or reliable witness" and then went on to discuss the unreliability of the Certificate.

48. In his Statement of Findings (B166) he wrote:

"In fact I could accept the evidence of all the witnesses whether called by the prosecution or the defence. However I could not agree with their evidence that on the face of the Certificate D1 alone, it afforded conclusive proof of a licence to make copies."

49. Counsel for the Appellant submitted that these were diametrically different findings and that the Appellant should be given the benefit of the version more advantageous to him. It was suggested that the Magistrate's "change of heart" about Mr Chow Ming's evidence must raise a doubt whether the conviction was a correct.

50. There is nothing in this point. Infelicitously phrased as his oral comment might be, all that the Magistrate was saying, in either case, is that no one could rely on the Certificate given its shortcomings. There is no difference in the assessment he was making of the evidence, which concerns the status of the Certificate. We dismiss this ground of appeal also.

51. However, the fact that this ground of appeal could be advanced at all does provide Magistrates with a salutary warning of the difficulties that can be caused by delivering an ex tempore judgment at the end of the trial and a later Statement of Findings which appears to, or does actually, differ from the original. If a Magistrate perceives that the findings in a case need to be more detailed because of complex evidence or case law, the wiser course is to reserve judgment for an appropriate time to enable those findings to be put into orderly form and written down if necessary.

52. The Appellant's appeal against conviction is dismissed.