HKSAR v. WINNERS LASER PRODUCTION LTD. AND OTHERS

CACC 620/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 620 OF 1999

(ON APPEAL FROM DCCC 450 OF 1998)

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J U D G M E N T

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Stuart-Moore Ag. CJHC (giving the judgment of the Court):

Introduction

1. On 27 October 1999, the Applicants (D1, D3 D5 and D6 respectively) were convicted of various offences in breach of the Copyright Ordinance, Cap. 528 ("the Ordinance") following a 14 day trial in the District Court before Judge Wright. They sought leave to appeal against their convictions. At the conclusion of the legal argument, we declined to give leave and we now provide the reasons for our decision.

The charges

2. The six charges on which they were convicted were common to all the Applicants.

3. Charges 1 to 4 were brought under section 118(1)(a) which alleged that they had, between 21 April 1997 and 20 September 1997, made infringing copies of copyright works for sale or hire without the licence of the copyright owner. For all practical purposes, these four charges can be regarded as a single offence as the only difference between them lies in the titles of the sound recordings shown in the Particulars.

4. Additionally, they were convicted of two other offences in contravention of section 118 of the Ordinance, brought under subsections (1)(d) and (8) respectively.

5. In brief, the charge (charge 6) relating to the offence contrary to section 118(1)(d) alleged that, on 20 September 1997, the Applicants were in possession for the purpose of trade or business of infringing copies of copyright works with a view to selling them. These were again infringing copies of sound recordings but in two cases there were infringing copies of films.

6. The section 118(8) offence (charge 8) alleged that, on 20 September 1997, the Applicants were in possession of articles used for making infringing copies of copyright works for sale.

7. The charge sheet contained other charges on which the Applicants were acquitted. Two co-defendants, Best Talent International Investment Ltd (D2) and D3's wife, Huang Wei (D4) were acquitted altogether.

8. The charges arose out of a visit Customs and Excise officers made to D1's premises situated at 901, Hilder Centre in Hung Hom on 20 September 1997. These officers found production lines for the manufacture of video compact discs (VCDs) and compact discs (CDs). Some of the discs, representing a small proportion out of the total number of discs which were found, were suspected to be "pirated discs" or, to use the more formal wording in the charges, copies which infringed the rights of the copyright owners or their licensees. Charges 1 to 4 related to a total of 18,350 discs, charge 6 related to 24,330 discs and charge 8 related to the possession of production lines, stampers, silk-screen printing machines and negatives.

Preliminary application

9. At the commencement of the proceedings on 22 August 2000, Mr Ching Y. Wong, SC, representing all the Applicants, made a somewhat strange submission that the court should first consider the application (CAAR 10/1999) made on behalf of the Secretary for Justice for a review of the sentences imposed upon the Applicants for these offences.

10. The issue to be determined in the review was whether the suspended sentences imposed on all the Applicants except D1 (the company) were wrong in principle and/or manifestly inadequate. Mr Wong stated that if the court was to decide not to interfere with the sentences passed by the trial judge, he was instructed by the Applicants that the applications for leave to appeal against their convictions would not be pursued.

11. It would have been wholly wrong for the court to have proceeded upon this basis and the application was immediately rejected. The review of sentence could only take place if the convictions had been properly reached in the first place. We then proceeded with the applications for leave to appeal against conviction.

Prosecution's case

12. On 20 September 1997, Customs and Excise officers raided D1's premises at Rooms 901-903, Hilder Centre, 2 Sung Ping Street, Hung Hom, where they found all the items to which reference is made in the charges. After a protracted investigation to establish that the sound recordings and films referred to in charges 1 to 4 and charge 6 were infringing copies, unchallenged evidence in the form of affidavits was in due course placed before the trial court to establish this fact. The items in charge 8 were used to make the infringing copies, one of which was in current production.

Defence and issue at trial

13. The charges brought under section 118(1)(a) and (d) of the Ordinance related to offences of strict liability, subject to the Applicants being able to prove under the terms of section 118(3) that they did not know and had no reason to believe that the copies in question were infringing copies of copyright works. The charge under section 118(8) required the prosecution to establish that the Applicants had the articles in their possession knowing or having reason to believe that they were used, or were to be used, to make infringing copies of copyright works for sale or hire or for use for the purpose of trade or business.

14. D3 was the only applicant to give evidence but it was his evidence in relation to the statutory defence under section 118(3) which was relied on by all the Applicants. He was a director and shareholder of D1 and was effectively in charge or, as the judge rightly described him, "the controlling force" of the premises at the Hilder Centre. He had been engaged in making films for a number of years but in 1997, D1 was set up for the purpose of making VCDs. He was then given the opportunity of producing VCDs and CDs on behalf of "Wing Tat Trading Company". He was concerned about copyright and, with this in mind, he obtained "Letters of Entrustment" from companies in the Mainland which purported to hold copyright in the articles to be produced. These alleged "authorisations" as they were termed, were produced by the defence at trial. D3 also spoke to Lam Kan-fai (DW1), a solicitor in Hong Kong and, on DW1's advice, to another lawyer in Shenzhen (DW2), to satisfy himself that these authorisations were valid. D3 stated that the Customs and Excise officers were shown the authorisations for all the items which they had suspected were infringing copies.

15. DW1 and DW2 gave evidence which to some extent supported various aspects of D3's account. In large measure, the judge rejected the evidence given by D3.

Grounds of appeal

16. Although three substantive grounds of appeal were advanced by Mr Wong, none of which clearly emerged from the perfected grounds of appeal or skeleton argument, his main contention was that the judge had erred in coming to the conclusion that D3 had failed to make reasonable inquiries about copyright and had failed to discharge the burden upon him of proving that he did not know and had no reason to believe that the copies in question were infringing copies of copyright works. He submitted that if the judge was wrong in his approach to this evidence, all the Applicants were entitled to be acquitted.

17. Secondly, he contended that there was no sufficient evidence given at trial to show that D5 was involved with VCDs or CDs at all. He submitted that the evidence merely connected D5 to the making of DVDs, none of which featured amongst the infringing copies in the charges.

18. Finally, in respect of D6, Mr Wong submitted that D6 was entitled to rely on the instructions given to him by D3 who was his "boss".

Judge's findings

19. In the Reasons for Verdict, the judge gave a most careful review of the evidence when deciding that D3's testimony was unworthy of belief. In particular, the judge utterly rejected D3's evidence that each time he was shown a disc which the Customs and Excise suspected was an infringing copy, he provided them with a written authorisation for the copy in question to be made. D3's evidence was described as evasive, cunning and dishonest.

20. By contrast, the judge found the evidence of the Customs and Excise officers who visited the premises in the Hilder Centre, whose search extended into a second day, could be relied upon. Importantly, when D3 had been asked about the disc which was currently on the production line, he had replied that no authorisation existed for it. None of the Customs and Excise officers gave evidence of having seen any authorisation for any of the infringing discs while present at the search. However, most significantly, they had found a number of blank authorisations (P97). On this aspect of the case, the judge concluded:

"I am entirely satisfied that the Third Accused did not show or offer to show the authorisations to any Customs and Excise officer in the premises at any stage. Customs and Excise were conducting a search specifically for items which infringed copyright and, as has been repeatedly pointed out, only seized a very small proportion of the overall numbers of discs on those premises but nine boxes of documents: the suggestion that they would have refused to consider or even refused to look at (depending on whose version one follows) vital documents borders on the absurd. I am equally satisfied that the documents were not in Hilder Centre at the time when Customs and Excise were there."

21. The judge also made findings relating to the two lawyers (DW1 and DW2) called on behalf of the defence which had a bearing on this crucial aspect of D3's case. DW1 was present at the Hilder Centre when it was being searched by Customs and Excise officers. His evidence contradicted D3's account of having shown authorisations for each of the suspected infringing copies, although he did state that he had "flicked through" the authorisations during the time he had been in the Hilder Centre. DW1 also gave evidence about other meetings with D3 prior to the raid. In this regard, the judge found that:

"(D3) deliberately sought to create the impression that he had formally consulted Lam (DW1) in regard to steps he should take to verify copyright. It transpired that those enquiries were merely part of general conversations at social gatherings. These were casual discussions, not formal consultations at all."

22. In a somewhat charitable appraisal of the evidence of DW1, the judge stated that the "circumspect method of dealing with (his) testimony" was to say that he did not accept it.

23. The Shenzhen lawyer (DW2) gave evidence which the judge summarised in the following way:

"DW2 was a lawyer from Shenzhen whose firm had been consulted by (D3) in regard to the verification of authenticity of 'Letters of Entrustment' apparently issued by various bodies: these are the first annexure to the various certificates issued by DW2's office.

It is noteworthy that his evidence is that this was the only document which, in each instance, he was given: he was not shown documents relating to any subsequent purported licensing of copyright rights despite the fact that copies of those subsequent documents now appear annexed to his certificate - the implication being that they too were clothed with such respectability as the certificate afforded. In this regard his evidence directly conflicts with that of (D3) who says he showed him all the subsequent documents.

His evidence is quite clear that (D3) sought, and he provided, advice on the manufacture of duplicate discs in the Mainland - he says that he was not concerned about where the discs would be made or distributed."

24. The judge also summarised in his findings the evidence given by PW70, the Deputy Director of the International Federation of the Phonographic Industry (IFPI) which has maintained an office in Hong Kong since 1980. The IFPI has a copyright database which is open for third parties who are anxious to make checks on copyright. Records are kept of such inquiries and none had been made in respect of D3's company (D1). However, IFPI had written to D1 inviting the company to send representatives to a meeting. An undated reply was sent by D5.

25. There were other features of the case which adversely reflected on D3. Amongst these, the judge was able to point out that the fame of the artists alone was a fact that could not have escaped attention and would have immediately raised "the spectre of copyright". Whilst this aspect will have reflected on all of the Applicants, the judge noted in regard to D3 in particular that he had acquired knowledge about copyright issues from his previous experiences in the film industry.

26. In the light of all these features of the evidence against D3, it is small wonder that the judge rejected his defence. The judge concluded by saying:

"In respect of (charges 1-4 and 6), the issue remains as to whether the Accused, or any of them, have proved, on a balance of probabilities, that he did not know and had no reason to believe that these were infringing copies. For the reasons I have given (D3) has conspicuously failed to do so. I am satisfied that the documentation on which (D3) relies is bogus and nothing other than a paper chase intended to deceive - and that (D3) appreciated this to be so even if DW2 did not.

However, even if I were wrong in regard to (D3's) knowledge of the falsity of the documents I am still satisfied that he has failed to discharge the onus upon him. The mere reference to a solicitor during social occasions and enquiries made in the Mainland go no way towards making reasonable enquiries in regard to the copyright position in Hong Kong. To say, for example, that he did not purchase copies of the discs locally to see what appeared on them because the solicitor did not suggest he do so is nonsensical. The reality of the situation is that he simply spoke to a solicitor in Hong Kong to ask what he should do but then did nothing whatsoever in Hong Kong to establish the copyright position here."

27. The judge went on to say, in relation to charge 8:

"Charge 8 relates to possession of the equipment necessary to have made the discs. The offence under section 118(8) requires the prosecution to prove that the Accused did not know and had no reason to believe that copyright existed in the content of the discs: there is no onus on the Accused. Clearly that equipment had been used to produce infringing copies. It follows from what I have already said in regard to the evidence that I am satisfied that the prosecution has discharged the onus upon it in respect of this Charge."

28. With this background to the findings in D3's case, we can take D5 and D6's cases very shortly. Neither of them, as we have already said, gave evidence.

29. D5 was shown on various letterheads to have been the general manager of D1 and, as the judge found, he had adopted the contents of various letters bearing those letterheads which included his office fax line, by signing as general manager. These documents, as the judge pointed out, related to the expansion of D1's field of activities into the production of DVDs. Additionally, there was other, more general, correspondence relating to the management of D1's business affairs which was signed by D5. This included the reply to IFPI with which we have already dealt.

30. D5 was also the general manager of a related company known as Winners Workshop Limited in Stanley Street, Central, where his fax line was situated. The judge found it was clear that he had purported to be general manager of D1 as contemplated by section 125(1) of the Ordinance which provides:

"125. Liability of persons other than principal offender

(1) Where a body corporate commits an offence under this Ordinance in respect of any act which is shown to have been committed with the consent or connivance of, or to be attributable to any act on the part of, any director, manager, secretary or other similar officer of the body corporate or any person purporting to act in any such capacity he, as well as the body corporate, commits the offence."

31. The judge also contrasted D5's title within the company (D1) to D6's title which merely described him as "manager".

32. The judge concluded that the irresistible inference was that D5 was the general manager of D1 and that:

".... as such, he would have been involved in the daily activities of the company and its production. The photographs (P69) show that the scale of business and the premises were modest in size."

33. We were also given the advantage of seeing the photographs and it was immediately apparent, in a case which was all about the production of discs of one sort or another, that no valid criticism could be made of the inference drawn by the judge.

34. D6's position was equally clear. The judge summarised his position at D1 as the manager. He had been present at the time of the raid and he identified himself as such to the Customs and Excise officers when they saw him at his desk. Later, when his desk was searched, a bundle of documents entitled "Certificate of Entrustment" and "Declaration for Copyright Holder" was found. These documents were made out in favour of D1 and were signed and chopped by Wing Tat Trading Company Limited. The significant aspect to these documents, as the judge observed, was that they had in all other respects been left incomplete.

35. The remainder of the evidence against D6 was summarised by the judge in these terms:

"(D6) made a reasonably full statement to Customs and Excise at the time of their visit to Hilder Centre. He clearly says that his position with (D1) is that of manager and that he arranges the production of discs based upon instructions given to him by (D3). There can be no doubt as to his participation in the manufacturing process. Even (D3) says that he simply told (D6) about the authorities and put them into a file. The truth of the matter is contained in his statement where (D6) says he simply did what he was told by (D3). He implies in his statement (especially answer 7) that he was shown an authorisation letter in respect of every disc which he produces. I do not believe that. It simply does not ring true.

It will be borne in mind that the signed Wing Tat documents were found in a drawer of his desk."

36. The evidence was overwhelming against all the Applicants and the judge's findings have not in any sense been faulted.

37. Accordingly, for the reasons we have given, all the applications were dismissed at the conclusion of the hearing on 22 August, 2000.