HKSAR v. LAI WING HUNG AND OTHERS

HCMA1111/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO. 1111 OF 2005

(ON APPEAL FROM KCCC 13684 OF 2004)

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J U D G M E N T

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1. This is an appeal against conviction by all appellants and against sentence also by the 1^st, 2^nd, 3^rd and 5^th appellants.  The 1^st, 2^nd, 3^rd and 4^th appellants were convicted after trial in Kowloon City Magistracy of an offence of supplying goods to which a false trade description was applied, contrary to section 7(1)(a)(ii) of the Trade Descriptions Ordinance, Cap. 362 (“the Ordinance”).  The goods comprised 6,500 car radios.  The 5^th and 6^th appellants were convicted after trial of attempting to export the same goods to Egypt, contrary to section 12(1) of the Ordinance and section 159G of the Crimes Ordinance, Cap. 200.

2. The evidence before the magistrate was that the 5^th appellant was the marketing director of the 6^th appellant which was an import/export company operating in Hong Kong.  The 6^th appellant had received an order from an Egyptian company for the shipment of the car radios which were to be labelled “Pionear”.  The 5^th appellant then contacted the 4^th appellant which was a company which manufactured and supplied such goods and ordered the radios.  The 4^th appellant was a family company run by the 1^st appellant where the 2^nd appellant (who was the 1^st appellant’s brother) and the 3^rd appellant (who was the 1^st appellant’s son) worked and were executive directors.

3. The false trade description, the subject of the charges, was the word “Pionear” which was placed upon the car radios.  The prosecution had alleged at trial that while that description of the goods may not have been false, it was misleading in that it, pursuant to paragraph (b) of the definition of “false trade description” in section 2 of the Ordinance was likely to be taken for an indication the goods were manufactured by the Japanese electronics manufacturer “Pioneer”. 

4. It is convenient to set out that legislation and other provisions of the Ordinance relevant to this judgment :

(a)      section 2 :

“‘false trade description’ (虛假商品說明) means —

…

(b)  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’ as would be false to a material degree;

…

‘trade description’ (商品說明) means an indication, direct or indirect, and by whatever means given, of any of the following matters with respect to any goods or parts of goods, that is to say —

…

(i) person by whom manufactured, produced, processed or reconditioned;

…”

(b)     section 7(1)(a)(ii) :

“supplies or offers to supply any goods to which a false trade description is applied;”

(c)     section 12(1) :

“Subject to section 13, no person shall import or export any goods to which a false trade description or forged trade mark is applied.”

(d)     section 9(1)(b) :

“falsely applies to any goods any trade mark or any mark so nearly resembling a trade mark as to be calculated to deceive;”

5. The history of the case is as follows.

6. A pre-trial review was held before the principal magistrate of Kowloon City Magistracy on 14 December 2004.  The matter was set down for trial before a different magistrate Mr McNair on 22 March 2005.  The trial proceeded on that day.  The appellants appeared in person.  The magistrate reserved his verdict to 9 March 2005.  

7. On that day, the magistrate delivered an oral verdict in which all the appellants were acquitted of all charges.

8. On 25 July 2005 the prosecution made an application for review of the magistrate’s verdict pursuant to section 104(1) of the Magistrates Ordinance, Cap. 227.  The appellants again appeared in person.

9. The magistrate reserved judgment to 31 August 2005 when he found in favour of the prosecution, reversed his earlier verdict and convicted the appellants.

10. There were various grounds of appeal advanced on behalf of the appellants by Mr Bernard Chung, for the 1^st to 4^th appellants, and by Ms Corinne Remedios, for the 5^th and 6^th appellants, and each adopts the arguments of the other on behalf of their clients.  But for the purposes of this judgment I need refer to only one broadly common ground, which can be conveniently expressed as follows.

11. The appellants complain that the magistrate’s reversal of their earlier acquittal was in error because the reason he gave was without any proper basis.  Following from that ground the appellants made a number of related complaints.  Before dealing with those complaints the magistrate’s findings should be set out in some detail.

12. In his oral reasons given at the time of acquitting the appellants on 9 May 2005, the magistrate had said this :

“… I’ve considered all the evidence, both for and against the defendants.  They have each testified.  The court when assessing the evidence and the nature of the offending logo or word ‘Pionear’, … must have put itself in the position of the ordinary shopper.  I have considered all the pertinent cases, and the burden remains of course on the prosecution throughout.

… having looked at all the evidence as a whole, having examined the offending exhibits … I am not persuaded that there was an infringement here.

Very briefly, these are the reasons why, and I mean no insult to the creators, artists and manufacturers.   The offending articles Pionear, … are cheap and nasty products.  They are tinny, garishly packaged and clearly not an original Pioneer Japanese product.  The fonts Pioneer are completely different, there’s absolutely no coordination or similarity other than the use of the actual alphabets.  And I am not persuaded beyond any reasonable doubt that a reasonable shopper would be deceived by this.  So, I find that the use of the word ‘Pionear’, … is not proven beyond reasonable doubt to be an infringement of the trademark, and is not proven to be a false trademark.  And by way of comment, I am not persuaded that even in a civil passing off action by the owner of that trademark would — could there be a guaranteed success.  So, I find all the defendants not guilty.”

13. I note that in those reasons the magistrate appeared, from the language he used, to be approaching the case as if the charges the appellants faced related to trademark offences rather than the false trade descriptions offences with which they were actually charged.

14. But subsequently in his Statement of Findings when explaining his reasons for initially acquitting the appellants he said :

“In considering the evidence at first instance, I found that the products were obviously distinctly different than Ex.D1 (which was a genuine Pioneer car radio produced in evidence) in terms of packaging, quality, build, weight and appearance.  They were (and continue to be in my view) clearly cheap and nasty products, tinny and garishly packaged.  The products do not appear to be of good quality.  The product did not bear any false trade descriptions and could not likely be confused with an equivalent ‘Pioneer’ creation.  … I found that no reasonable Hong Kong shopper would be confused or deceived by the trade description ‘Pionear’ as it is applied to the product when looked at as a whole, i.e. the product itself, the logo (including the font, shape and presentation), packaging and quality; such confusion on these facts is inconceivable.  I acquitted the defendants.”

15. When giving his oral grounds for reversing his decision on 31 August he said, after referring to the cases of Divisional Trading Officer v. Kingsley Clothing Ltd [1989] RPC 695 and R. v. Tam Sho Lam (1988) 2 HKLR 586 :

“Bearing in mind the test in Tam, an objective test, the court must ask itself if in the eyes of the ordinary shopper it is likely that the defendants’ Pionear could be taken as evidence that the goods were manufactured by Pioneer.  

The answer to that question, posed objectively, I have concluded is ‘Yes’.  I do find that the defendants’ Pionear is a false trade description in terms of the definition section of the relevant ordinance.  Having previously found that the defendants had not met the evidentiary burden of due diligence or lack of knowledge, I find that all the elements of the offences have been proven beyond a reasonable doubt, and I do review myself, vacate the acquittals, and convict each defendant accordingly on each charge.”

16. In his Statement of Findings, the magistrate gave reasons for reversing his original verdict as follows :

“The prosecution challenged my verdict from a number of standpoints.  The only point of any persuasive merit was that an ‘objective test’ (as set out by Bewley J. in the case of R v Tam Sho Lam [1988] 2 HKLR 586) should be used in determining whether or not the ‘anticipated market’ was likely to be misled.  Unable to assess the mind-set of the ‘low-end’ Egyptian product consumer, after applying that test to a Hong Kong purchaser, I found that, from an objective assessment, the products were misleading by the use of the trade description ‘Pionear’.  I found the prosecution had proven its case beyond a reasonable doubt, and upon review, convicted the defendants.”

17. Firstly, I accept that in using language applicable to trade mark offences rather than trade description offences in his oral reasons for acquitting the appellants on 9 May 2005 the magistrate demonstrated that he may have misapprehended that the 1^st to 4^th appellants were charged under another section of the Ordinance relating to trade mark offences (i.e. section 9(2)) rather than the section under which they were charged relating to false trade descriptions (i.e. section 7(1)) and therefore may have applied the test applicable to false trade mark offences i.e. of the false trade mark being “calculated to deceive” rather than that applicable to offences relating to false trade descriptions, i.e. whether there is a misleading trade description which is false to a material degree.  The distinction between trade description offences and trade mark offences was crucial also to the case against the 5^th and 6^th appellants pursuant to the provisions of section 12(1).

18. Mr Ma, for the respondent, suggested the magistrate’s possible error was a good reason for him to have reversed his verdict upon review.  But I must say I have some hesitation in accepting that such a fundamental error, if it occurred, could fairly be cured by a review of verdict pursuant to section 104(1) of the Ordinance, particularly where that reversal was to substitute a verdict of conviction for one of acquittal.  That possible error was not in any event the reason given by the magistrate for his reversal of verdict.  By his findings as set out above, he suggested that he had simply omitted to apply the proper objective test as to whether the trade description was misleading when earlier acquitting the appellants, and that when that error had been pointed out to him on review and he applied the correct test he concluded that the appellants should be convicted. He does not refer at any stage in the reasons he gave for reversing his verdict to his earlier use of terminology consistent with him believing he was dealing with charges relating to an infringing trade mark.

19. It could be argued that any such error did not prejudice the appellants because it operated in their favour and resulted in their acquittal.  Nevertheless, in my view, there is a real possibility that the magistrate, throughout the evidence before him, misapprehended the prosecution case as being one concerned with breach of trademark, rather than of false trade description.  There is, therefore, possible a more fundamental error than him simply failing to appreciate that the correct test was objective in nature.

20. But beyond this, and perhaps more importantly, I agree with the submissions of Ms Remedios (which were adopted by Mr Chung) that the magistrate had in reality applied no different test upon review than had been applied by him in his original findings resulting in the acquittal of the appellants.

21. Without repeating those findings it is plain from the magistrate’s references to the necessity of the court, in assessing the evidence, “putting itself in the position of the ordinary shopper” and to “no reasonable shopper being deceived” by the use of the word Pionear as given in his oral reasons and Statement of Findings, that he was in fact applying an objective test at the time of acquitting the appellants.  It is difficult to see therefore how any application of an objective test upon review could have led to the reversal of the original verdict of acquittal.  I note also that in Tam Sho Lam, the case referred to by the magistrate in reversing his ruling upon review, Bewley J proposed no particular test.  He simply supported the magistrate’s common sense conclusion in that case that a trade description was misleading if the public would be misled by it.

22. Further I agree with Ms Remedios’ argument that in any event the magistrate’s findings of fact remained the same and were such as to render any conviction unsafe whatever form of test was applied.  Those findings of fact were that no reasonable shopper would be deceived into taking the “Pionear” product as being that of “Pioneer” (from the oral reasons for verdict given on 9 May 2005); and that any such confusion was “inconceivable” (from the Statement of Findings excerpted above).  It is difficult to see how the application of an objective test could have allowed the magistrate to come to his radically different final finding of fact that the use of the word “Pionear” was misleading.

23. For these reasons the convictions of the appellants upon review was unsafe.  Their convictions are quashed and their sentences are set aside.