HKSAR v. LAM CHUI HA

HCMA111/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.111 OF 2006

(ON APPEAL FROM KCCC 7161 OF 2005)

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REASONS  FOR  JUDGMENT

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1. The appellant was convicted on her own plea of one charge of ‘possessing for sale or for any purpose of trade or manufacture goods to which a forged trademark was applied’ contrary to sections 9(2) and 18(1) of the Trade Descriptions Ordinance (Cap 362).  She was sentenced to 4 months’ imprisonment.  She appeals against that sentence.

The facts

2. It was 15 August 2005.  Customs officers on disguise were at a ground floor shop in Chung King Mansion in Tsim Sha Tsui.  One of them enquired about the price of a piece of sportswear on display and was told by a woman shop attendant that it was about $100, but that an order of 200 or more would have to be placed before there could be any purchase.  The officers revealed their identity, arrested the woman, and searched and found from the shop 18 pairs of socks, 60 caps, 10 pairs of slippers, 21 vests, 12 T-shirts, 59 pairs of pants, 16 jackets and 4 pairs of shoes each bearing the forged trademark of “NIKE”, “addidas”, “LV”, “Fendi” or “PUMA” (Exhibits P1-23).

3. Nine days later, the appellant turned up at the Customs Office.  She identified Exhibits P1-23 as goods from her shop.  Under caution, she stated that the nature of the business of the shop was “as an agent to receive and place orders to manufacturers of garments”.  She admitted that “the seized counterfeit merchandize was only samples”, that “these samples were provided by a mainland seller to attract potential buyers to place orders” and that she would “not receive any money” but “ask the buyer to contact the seller in Guangzhou directly”.

Mitigation

4. The appellant is aged 39 and married.  She has two previous convictions for ‘theft’ and one for ‘dangerous driving’.  She only started the shop in July 2005.  It sold 90% jeans.  In fact, she owned her own trademark for jeans in the Mainland.  They were mainly for export.  They brought a monthly net profit of between $15,000 and $16,000.

5. Regarding the counterfeit goods in question, it was no sooner than her shop had opened that a mainlander named Wong approached her for cooperation.  It was agreed that Wong would provide the appellant with goods for display plus a box of his name cards to introduce to customers.  In return, the appellant would get a 2% commission for every successful referral.  The actual goods seized were display items and had a total value of $8,452.

6. Reference was also made to the poor health of the appellant’s aged parents who since the matter went before the magistrate had passed away.

Reasons for sentence

7. These are the magistrate’s written reasons :

“19. This Court has considered the facts in this case and the Counsel’s submission.  The charge of this kind is prevalent.  Also, selling goods to which a forged trade mark was applied would seriously damage the reputation of Hong Kong as a business centre.  In the case of Lam Chi Wah [1999] 4 HKC 343, the Court of Appeal pointed out that deterrent sentence should be imposed for the charge of this kind.

20.  According to the authority, unless there are exceptional circumstances, the wholesaler of these goods should face immediate custodial sentence.  (See Lam Chi Wah [1999] 4 HKC 343, Yeung Tin Chi HCMA 970/2002 and Melwani Manish Vashdev HCMA 228/2003).

21.  This Court understands that the Defendant she did not receive any money from the customers who place orders.  However, she was responsible for attracting customers and receiving orders.  The manufacturer was in the Mainland China.  Without the participation of the Defendant, the manufacturer could not sell the goods to which a forged trade mark was applied in Hong Kong.  In addition, according to the facts admitted by the Defendant, each customer had to place an order of at least 200 numbers of sportswear.  The role of the Defendant is as a wholesaler.

22.  Counsel pointed out that the Defendant voluntarily provided further information to the Customs.  This Court does not agree.  According to the facts of this case, the Defendant refused to disclose the price of the goods and the mode of delivery.  Counsel pointed out that the Defendant had to take care of her mother.  However according to the report, the Defendant’s mother had been admitted to hospital for four months.  In hospital, there were medical personnel taking care of patients.  The Defendant pointed out that her three sisters had to take care of their own families, and were not able to take care of their mother.  The majority of people who have family in Hong Kong can take care of their parents.  The contention of the Defendant is ridiculous.

23.  Counsel pointed out that the Defendant’s father was seriously ill, asking the Court to give sentence on humanitarian ground.  In the case of Lam Chi Wah, the defendant’s father was near to death; and passed away right after the sentence.  The Court of Appeal pointed out that such ground could not give non custodial sentence.

24.   This Court agrees that that the quantity of goods involved in this case was not large.  However, these goods were only samples.  The quantity of sportswear in each order was at least 200.  In other words, in every order, the Defendant assisted at least hundreds pieces of goods.

25.   After considering the above factors and the family background of the Defendant, this Court took six months as starting point.  The Defendant pleaded guilty, and can be given the greatest discount.  Therefore, the term is reduced to four months imprisonment.”

Grounds of appeal

8. Counsel for the appellant has advanced three specific grounds and one general one that the sentence is manifestly excessive and wrong in principle.

9. I will deal with the specific grounds in seriatim.

10. Ground 1 :

“In passing a sentence of 4 months’ imprisonment to the appellant, the magistrate erred in principle in that she sentenced the appellant on the basis that her role was same as that of a wholesaler.”

11. The remark that gave rise to this criticism is to be found in paragraph 21 of the magistrate’s Reasons for Sentence.

12. It is argued that this conclusion of the magistrate is against the weight of the admitted facts, as well as some of the unchallenged points made in mitigation.

13. The magistrate is also said to have disregarded the case of HKSAR v. Melwani Manish Vashdev, HCMA 228/2003 where the distinction was drawn between “wholesalers” on the one hand, and  “brokers” and “go-betweens” on the other.

14. It is submitted that if Malwani (who had tried to get orders from the internet for five months and had shown undercover officers catalogues and required them to pay a 30% deposit) was considered a mere “broker”, the appellant cannot in the circumstances of the present case be described as anything more.

15. In my judgment, there is nothing to this ground.

16. “Wholesalers” were first mentioned in SJ v. Lam Chi-wah [1999] 4 HKC 343, to be distinguished from “hawkers” and “small traders”, the absolute end-of-the-line operators in the counterfeit business who, according to the Lam case, are the only group to be dealt with relatively forbearingly, provided they are first offenders, and yet with a steep fine.  For the rest, robust treatment is to be expected.  That this is so is clear from what the Court of Appeal said at p 350 of the judgment :

“While we do not think that this is an appropriate case to set any guidelines, we would take this opportunity to give a serious warning to potential offenders of such offences.  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 … For a repeated offender, an immediate custodial 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 should hasten to add that financial difficulties and a clear record would be unlikely to be regarded as special circumstances.”

17. As regards the case of Melwani (ibid), the following is what this Court said about the defendant (who had physical possession of only three counterfeit items, and who had not had a single successful sale, and who was having the undercover officers as his first customers, notwithstanding his marketing attempts on the internet) :

“Whilst I have some reservations as to whether the appellant could be properly described as a ‘wholesaler’, the fact remains that as a broker or a trader, he is a rather substantial one; and the scale of his operation is closer to that of a wholesaler than a street hawker.  Having considered the circumstances of the case I am of the view that a term of imprisonment is inevitable.  Neither a fine nor a community service order is an appropriate alternative.”

18. It seems clear therefore that there is jurisprudence to support the magistrate’s approach to sentencing, whether or not she had categorized the appellant correctly as a “wholesaler”.

19. I should add that in the present case, a minimum of 200 items must be placed on every purchase.  It is unrealistic to suggest that the target customers were end-users.  It is moreover one of the appellant’s admissions that “when she received an order, she would pass it to … Wong to manufacture”.  This should explain why the magistrate took a dim view of the appellant’s role in the entire set-up.

20. In all the circumstances, I am satisfied that an immediate custodial sentence should be imposed in this case, there being no special circumstances to compel a different conclusion.

21. Ground 2 :

“The magistrate erred in failing to consider sufficiently that the scale of the illicit business in general and by comparison to the legitimate clothing displayed and on sale in the appellant’s shop could only be said to be a small ‘side-line’ business along the legitimate business.”

22. The short point here is that 90% of the goods for sale in the shop were jeans, and there is no evidence as to the number and size of any order actually placed through this newly opened establishment.

23. In my judgment, this cannot help the appellant either.  Had it been the shop’s major purpose to promote the counterfeit items, a lengthier sentence would have been justified.  The same applies if there were evidence of past deals.

24. If it provides any guidance, the defendant in the Melwani case (ibid) also ran his illicit business as a “side-line”. 

25. Ground 3 :

“Alternatively, even if it was held that the conduct of the appellant should merit a prison term, in all the circumstances the appellant’s sentence should have either been suspended or substantially lower than that imposed.”

26. In Lam Chi-wah (ibid), the defendant had 14,000 pieces of counterfeit goods for sale.  The total value of those goods amounted to $498,930.  The defendant himself had four previous convictions all of which were similar.  Yet the Court of Appeal took the view that a starting point of 12 months would be appropriate.  By comparison, the sentence in this case (4 months from a starting point of half a year) must be excessive – or so it is contended.

27. In my view, a simple comparison of the kind suggested is unhelpful.  Keeping an existing stock was unnecessary for the appellant.  That was not her mode of operation which, if successfully followed, would mean big sales at perhaps lower risks.  In any event, the appellant’s sentence is already lighter than that in the Lam case by half.  I do not think there can be any complaint. 

Judgment

28. The appeal is dismissed.