HKSAR v. T.S. LINES LTD

HCMA898/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO. 898 OF 2006

(ON APPEAL FROM KCS 9428 OF 2006)

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JUDGMENT

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1. On 17 August 2006, the appellant T.S. Lines Limited (I will hereinafter call as “the Appellant Company”) was convicted of an offence of “attempting to import goods to which a false trade description was applicable”.  The magistrate fined the appellant $80,000.

2. The appellant appealed on several grounds, one of which was in summary, that the magistrate erred in holding that the appellant was not entitled to rely on the statutory defence provided by section 12(2)(a) of the Trade Descriptions Ordinance, Cap.362 (“the Ordinance”).

3. The appeal came on before me for hearing on 12 December 2006 when I adjourned the hearing pending the outcome of the appeal in HKMA144/2006 of HKSAR v. Kong Hing Agency Ltd (I will hereinafter call this the “Kong Hing Appeal”).

4. On 7 December 2007, the Court of Appeal consisting of the Chief Judge, Tang VP and Yeung JA handed down the Reasons for Judgment in the Kong Hing Appeal, allowing the appeal and setting aside the conviction.

5. The Department of Justice acting for the respondent HKSAR in this Appeal very fairly in correspondence conceded that having regard to the law clearly set out by the Court of Appeal in the Kong Hing Appeal, this appeal of the Appellant Company must be allowed and the conviction be set aside.

6. I have been supplied by Mr Hayson Tse, counsel for the respondent with a very helpful written submission.  In addition, Mr Tse has also assisted me today and I am much indebted to Mr Tse and also to Mr Colin Wring for the appellant.  This has made my task much simpler.  I accept their submissions and make the order accordingly that the appeal succeeds.

7. The appeal succeeds on one ground only, namely, that the statutory defence of reasonable diligence ought to have been held to succeed as it did in the almost identical case of the Kong Hing Appeal.

8. Out of courtesy to the magistrate, I will briefly amplify why in this almost identical case (as that in the Kong Hing Appeal) of a shipping agent convicted of the offence, the appeal should be allowed.

9. Section 12(2)(a) of the Ordinance provides :

“	(2)	Any person who imports or exports any goods contrary to subsection (1) commits an offence unless he proves that—
		(a)	he did not know, had no reason to suspect and could not with reasonable diligence have found out that the goods are goods to which a false trade description or forged trade mark is applied ...”

10. In paragraphs 16, 17 and 18 of the Kong Hing Appeal judgment, the Chief Judge said this :

“	16.	... There are three elements of this defence that have to be made out (as far as an accused is concerned, on the balance of probabilities) : -
		(1)	The importer or exporter must have no actual knowledge that the relevant goods bore a false trade description or a forged trademark;
		(2)	The importer or exporter must have no reason to suspect either; and
		(3)	The importer or exporter could not with reasonable diligence have found out that the goods had a false trade description or forged trademark.
	17.	All three elements must be made out before the defence is available.  It is therefore not enough for an importer or exporter simply to demonstrate that there was no actual knowledge or suspicion on his or her part.  It must also be shown that with the exercise of reasonable diligence, any false trade description or forgery could not have been discovered.  It is this third element that often causes the most difficulty in application in practice.
	18.	The following observations can be made regarding this third element : -
		(1)	It is important to bear in mind that the requirement is to demonstrate ‘reasonable diligence’, not ‘due diligence’ or ‘all due diligence’.  The use of the word ‘reasonable’ connotes an objective test and requires the court to examine just what could reasonably have been expected of the importer or exporter in the circumstances to find out about the description or trademark of the goods.  The inquiries is therefore : what could the importer or exporter have been reasonably expected to have done in the circumstances?
		(2)	It is this objective test that is relevant rather than what an importer or exporter in any given case has actually done.  Conceptually, what an importer or exporter has actually done will not assist him if he could or ought reasonably have done more; equally, even if nothing has been done, an accused may escape liability where the exercise of reasonable diligence would not have resulted in the discovery of the use of false trade descriptions or forged trademarks.  The test is subjective only in that one must of course look at the particular circumstances of the accused.
		(3)	We have found of great assistance the analysis of this statutory provision by Stock J (now Stock JA) in R v Mulitex (Exports) Ltd [1996] 4 HKC 422.  There, the court was concerned with the reasonable diligence defence in the context of a Hong Kong buyer of goods (toothbrushes) from the Mainland.  The goods contained a false description of having been manufactured in Thailand when they were not.  We agree with the following statement of principle at 430I-431A : -
			‘	… it is ‘not the doing of everything possible, but the doing of that which, under ordinary circumstances, and having regard to expense and difficulty, can reasonably be required.’ ... As I commented in R v Chan Kim Fai (MA 982/93, unreported), what are reasonable steps, and what is reasonable diligence will vary with the facts and with the legislative context in which those words appear.’
		In Mulitex, 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), that obligation was appropriate.”

11. After stating the law on the defence of reasonable diligence, the Court of Appeal then went on to consider at paragraph 22 of the judgment the application of such law to the fact involving a shipping agent who has no actual knowledge or suspicion that the containers carrying the goods bore or might bear a forged trade description or forged trademark.

12. The facts of the Kong Hing Appeal involving a shipping agent in Hong Kong are in the relevant respects similar to the facts of this case involving a shipping agent in Hong Kong.

13. The magistrate was in error (in fairness, as all magistrates in Hong Kong prior to the Kong Hing Appeal) when he took the view that the statutory defence of reasonable diligence under section 12(2)(a) was not available to the Appellant Company (see paragraphs 14, 15 and 16 of the Reasons for Verdict).

14. Applying the law set out in the Kong Hing Appeal, the statutory defence ought to have succeeded.  Accordingly the appellant’s appeal succeeds and the conviction should be allowed on that ground.

15. The order of this court now is that :

(1)	the conviction be set aside;
(2)	the sentence be quashed;
(3)	the fine of $80,000 be returned to the Appellant Company; and
(4)	costs (to be taxed if not agreed) of and incidental to the appeal and the trial below to the Appellant Company.