HKSAR v. WINNER COSMOS LTD

HCMA 960/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO. 960 OF 2008

(ON APPEAL FROM TWS10645 OF 2008)

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J U D G M E N T

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1.  The appellant company failed to file annual return as required by the law and through its representative, pleaded guilty before a magistrate and was ordered to pay a total fine of $4,800, i.e. $3,000 (principal fine for private companies) + (60 (days in default) x $30 (daily fine)).  The appellant company now appeals against that sentence. 

2.  Mr Lo Chi Ho, representative of the appellant company, advanced the following grounds of appeal : 

“… the Company would like to express its disgust at the greediness and indecency of the Hong Kong Government and the Companies Registry to impose outrageous (i.e. almost 17 times of the original filing fee) late filing penalty on small companies without even bother to send ANY notice or reminder to file the annual return.  The Company noted that the authorities are not permitted to impose such outrageous penalties even in tax cases involving fraud.

The Company further noted that it has always punctually paid the business registration fees and the rates and government rent because the Inland Revenue Department has the decency and efficiency to send a payment notice or reminder to every company/applicable land owner in Hong Kong reminding them to renew their respective business registrations and/or pay the applicable rates and government rent.”

3.  Mr Lo also condemned the “greedy, outrageous, inefficient, lazy and indecent practices of the Hong Kong Government and the Companies Registry” and requested the court to recommend the legislators to amend the relevant laws and to order a refund of the “immorally and indecently obtained” penalty.  Mr Lo further told me this morning that the Companies Registry already charged him a higher filing fee at $1,740 and so the fine of $4,800 on top of that was simply exorbitant and disproportionate.  He further drew to my attention the following mitigating factors, namely, that it was the very first time the appellant company defaulted in filing its annual return; and that there was no material change in circumstances since the last filing so no one was misled and it was just a victimless omission. 

4.  Counsel for the respondent relied on the case of HKSAR v. The K2 Limited, HCMA1002/2005,wherein a total fine of $4,560 was approved on appeal.  In that case the principal fine was adjudged to be $3,000 with a daily fine of $30 (52 days in default).  Counsel also submitted that all other grounds advanced by the appellant company had no bearing on the ultimate sentence at all. 

5.  Under section 109(4) of the Companies Ordinance (“the Ordinance”), Cap. 32 :

“If a company fails to comply with this section …, the company and every officer of the company who is in default shall be liable to a fine, and, for continued default, to a daily default fine.”

6.  Contravention of the above section attracts a fine at Level 5 which is a maximum of $50,000; and a maximum daily default fine of $700.

7.  I have sighted a summary of penalties provided by the respondent which sets out the range of fines and daily default fines at the magistracies.  The principal fine ranges from $2,000 to $12,000 whilst the daily default fine ranges from $10 to $100.  It is clear that the fines imposed in the present case are within range. 

8.  Mr Lo complained that the exorbitant fines together with the higher filing fee equal 62 times the original filing fees.  Similar line of argument was advanced in the case of The K2 Limited, supra, and has already been dealt with in that judgment :

“A factor that is not to be ignored is this, that the cost of prosecuting companies like this who fail, for whatever reason to meet their obligation, is $5,598.  There is a provision in section 352 of the Companies Ordinance that allows the fines levied for the offences like this to go to defraying the actual costs of the prosecution.  Of course, here, it would be immediately appreciated that the fine of $4,560 is less than the cost to the taxpayer of actually bringing the prosecution.”  (per Deputy High Court Judge Line)

9.  The total fine in this being $4,800 could in no way be described as exorbitant.  It is a clear case that the appellant company failed to meet its obligation required by the law which caused the Companies Registry to take out prosecution.  In doing so cost of $5,428 has been incurred which could not be totally covered by the fines.  Fines imposed under the Twelfth Schedule should not be confused with the annual registration fee, which, under the Eighth Schedule of the Ordinance, has specially prescribed a fee of $1,740 for annual returns to be delivered more than three months after but within six months after the anniversary of incorporation. 

10.  Mr Lo submitted that whilst other government departments could send out reminders, none such was ever sent by the Companies Registry.  He told me that the court could take such breach of duty on the part of the Companies Registry into account when considering the appropriate level of fines.  This argument is totally misconceived.  We are not talking about payment notice here.  What we are dealing with is a filing of annual returns.  Whilst the appellant company’s representative is free to express his personal opinion or grievance, such serves no useful grounds to cause me to depart from the fines so imposed by the magistrate.  This appeal is dismissed and I affirm the sentence is imposed.