VIVA MAGNETICS LTD. AND OTHERS v. SECRETARY FOR JUSTICE

HCAL 3369/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
NO. 3369 OF 2001

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J U D G M E N T

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Introduction

1. In this application for judicial review, the applicants, who face criminal proceedings in the District Court, seek by way of an order of certiorari to quash a ruling made against them in the course of those proceedings. They seek to quash the ruling on the basis that it is wrong in law.

2. In July and December 2000, the applicants (together with a fourth accused) were charged with various offences contrary to section 118(4)(a) as read with section with 119(2) of the Copyright Ordinance, Cap. 528 ('the Ordinance'). Section 118(4)(a) of the Ordinance provides that -

"(4) A person commits an offence if he -

(a) makes

...

an article specifically designed or adapted for making copies of a particular copyright work which article is used or intended to be used to make infringing copies of the copyright work for sale or hire or for use for the purpose of, in the course of, or in connection with, any trade or business.

3. A prosecution under section 118(4) is subject, however, to the limitations prescribed by section 120A of the Ordinance. Section 120A - the meaning of which lies at the heart of this application - reads :

"No prosecution for an offence under this Ordinance shall be commenced after the expiration of 3 years from the date of commission of the offence or 1 year from the date of discovery of the offence by the prosecutor, whichever is the earlier." [my emphasis]

4. In broad sweep, what has been alleged against the applicants is that they have made or aided and abetted in the making of a number of master compact discs (stampers, as they are called) which contain copyright material - music, video games and the like - and that these stampers, from which many hundreds of compact discs may be produced, were intended to be used not for legitimate purposes but for the making of compact discs which infringed copyright, such discs to be disposed of commercially; that is, by way of trade or business. The allegations arose out of the following history.

5. In February 1999, in Anchorage, Alaska, the United States Customs searched a parcel that was en route by post to the city of Cuidad Del Este in Paraguay. The parcel contained a number of stampers and an equal number of documents called stamper reports. The reports, which contained technical information, bore the name of the first applicant; that is, the company, Viva Magnetics.

6. Following this seizure, in June 1999 the authorities in Paraguay raided a factory in Cuidad Del Este and discovered that it was a production plant for infringing compact discs. Thereafter, the authorities allowed investigators of the international music industry to have access to the factory. These included representatives of the International Federation of the Phonographic Industry ('the IFPI').

7. The Hong Kong Customs and Excise Department were advised of what had occurred in Anchorage and Cuidad Del Este. In July, August and September 1999 representatives of the IFPI met with officers of the Department. In August and September the IFPI representatives, professional investigators experienced in copyright matters, supplied detailed reports to those officers. In the second of those reports the first applicant was identified by name together with the fact that it was known to have 'stamper manufacturing capabilities' at its Wong Chuk Hang premises. The report further name the second applicant as its Chief Executive Officer.

8. Although detailed reports were made, the stampers themselves were not delivered to the Department until later. It appears that one stamper was delivered in November 1999 (after which the Department opened a formal investigation file) while the balance were delivered in May 2000.

9. In late December 1999, after delivery of the first stamper, the Department executed a search warrant at the premises of the first applicant, a further search being conducted in June 2000 after the delivery of the balance of the stampers.

10. As to the speed of prosecution, the evidence indicates that the representatives of the IFPI were dissatisfied. There was some thinly veiled acrimonious correspondence.

11. In July 2000 the first charges were laid. In December 2000 the balance of the charges were laid. All the charges concerned stampers that were seized either in Anchorage or Cuidad Del Este and later delivered to Hong Kong. It was alleged that the applicants (together with a fourth accused) made those stampers in Hong Kong, their purpose being to forward them to the factory in Cuidad Del Este where they would be used to manufacture infringing copies.

12. When the criminal proceedings came before the District Court, it was contended on behalf of the applicants that, with the exception of one offence alleged against the first and second applicants, the prosecution of the remaining offences had been commenced more than one year after their discovery by the prosecuting authority, the Customs and Excise Department, and, as such, were time-barred in terms of section 120A of the Ordinance.

13. A direction was given that this issue - one which went to jurisdiction - should be determined as a preliminary issue. In October 2001, after a three-day hearing (during which a great many documentary exhibits were placed into evidence and prosecution witnesses were called to testify), the judge, Deputy District Court Judge Mackintosh, ruled that of the offences in question only one was time-barred in terms of section 120A, that being a charge brought against the third applicant. He ordered that the applicants be tried in respect of all the remaining charges.

14. The applicants contend that this ruling in respect of the remaining charges is wrong in law. They therefore seek an order of certiorari to quash that ruling and the orders made under it. If the order of certiorari is made, the applicants further seek :

(i) a declaration that all the charges which are the subject of the order of certiorari are time-barred and that the District Court has no jurisdiction to deal with them, or alternatively;

(ii) the normal consequential order, namely, that the matter be remitted to the District Court for a fresh determination in accordance with law.

The central issue for determination by this Court

15. In his ruling of 2 November 2001, the judge in the District Court succinctly described the issues that lay for determination by him at that time in the following terms :

"The prosecution contend that all the charges have been properly brought within the time limit of one year from the discovery of the offences by the prosecutor. It is on the meaning of this phrase "discovery of the offence by the prosecutor" and how it is to be applied to the facts in this case that this application has turned.

16. Flowing from this, and in light of the applicants' challenge, the first and essential issue to be determined by this Court may be summarized in the following question : 'Was the judge in the District Court correct in law in his interpretation of the phrase 'discovery of the offence by the prosecutor' as that phrase is used in section 120A of the Ordinance?'

The appropriateness of the judicial review

17. Before moving to consider what I have described as 'the first and essential issue' in this judgment, something briefly must be said of an issue which was of some importance at the time leave to apply for judicial review was made pursuant to O. 53, r. 3 of the Rules of the High Court but which at the substantive hearing was accepted not to be so. That issue concerned the appropriateness (in this case) of proceeding by way of judicial review.

18. When leave was first sought, one of my concerns was the often difficult question of whether it was appropriate for the applicants to attempt to seek relief by way of judicial review rather than by way of appeal. The problem had been defined by myself in Chow Shun Chiu v HKSAR HCAL 763/2001 (unreported) in the following terms :

"The long-established supervisory jurisdiction of this court will, of course, be used when the need arises to ensure the integrity of proceedings in the magistrates courts; that is, when matters go to the fundamental legality of the process, where, for example, it is alleged that the courts are acting without jurisdiction, that an abuse of power is being perpetrated or that the proceedings constitute a breach of natural justice... [But] it would be wrong, I believe, for this Court, in practice, to allow itself to become a collateral court of appeal to which recourse may be had by obtaining in each instance a stay of proceedings. That would add to delay, add to costs, result in a proliferation of proceedings and rather than ensuring the integrity of the criminal process would go towards undermining it."

19. At the hearing in which leave to apply for judicial review was sought, having heard extensive submissions on the subject, I was satisfied that the issue of the appropriateness of judicial review was fit for further consideration at the substantive hearing. Leave was therefore granted. However, at the substantive hearing the matter was not further pursued, at least not in any depth. This arose because Mr Turnbull, lead counsel for the respondent, accepted that this was a proper case for judicial review. In light of that concession, and in light of the fact that what was challenged was the correctness of a ruling as to law made in respect of a preliminary issue which, if ruled in favour of the applicants, could well avert the need for a lengthy and costly trial, I proceeded on the basis that proceedings by way of judicial review were appropriate. In reaching that decision, I also took note of the fact that the English courts have entertained judicial review applications when the circumstances of the case and the issues of law arising from them were essentially similar. See, for example, R v S toke-on-Trent Magistrates Court ex parte Leaf United Kingdom Ltd (unreported, QBD, 6 November 1997).

The meaning and intent of section 120A

20. It is the duty of prosecuting authorities, so far as is practicable, to proceed with the prosecution of cases expeditiously. Inordinate delay brings our system of criminal justice into disrepute. Justice delayed may, in a host of ways, for both the prosecution and the accused, result in justice denied. The principle, I believe, is well recognized in the common law. See, for example, R v Clerk to the Medway Justices, ex parte DHSS (unreported, QBD, 11 June 1986) in which Woolf LJ said (at page 8) :

"If justice is delayed, it can result in justice being denied. While the courts of course will taken into account the practical difficulties in the case of a large department, such as the applicant Department in this case, and the lack of resources which may exist in relation to a large number of cases that have to be handled, there is an obligation, which I am sure the Department would wish to fulfil, to conduct criminal investigations and prosecutions as expeditiously as practicable."

21. In my judgment, in bringing section 120A of the Ordinance into law, the legislature has given effect to the principle that I have outlined. It has done so by ensuring that suspected offences under the Ordinance are both expeditiously investigated and prosecuted. That is why there can be no prosecution of an offence under the Ordinance later than one year "from the date of discovery of the offence by the prosecutor". In this regard, so that it may be read in whole, section 120A bears repeating :

"No prosecution for an offence under this Ordinance shall be commenced after the expiration of 3 years from the date of commission of the offence or 1 year from the date of discovery of the offence by the prosecutor, whichever is the earlier." [my emphasis]

22. The question, of course, is what is meant by the phrase "discovery of the offence by the prosecutor"? To my knowledge that phrase, as it appears in section 120A, has not been the subject of consideration by our courts. The phrase itself, however, and similar phrases have been used by law draftsmen in a number of different statutory instruments in a number of jurisdictions and in that broader context have come under scrutiny.

23. In the United Kingdom, section 19 of the Trade Descriptions Act 1968 contains essentially the same phrase - "no prosecution for an offence under this Act shall be commenced after the expiration of three years from the commission of the offence or one year from its discovery by the prosecutor, whichever is the earlier" - and, within the context of that legislation, has been the subject of judicial scrutiny on a number of occasions.

24. In the unreported decision of Brooks v Club Continental Ltd (QBD, 13 October 1981), McNeil J gave a definition of the phrase which has been widely cited in later cases. In respect of the word 'discovery', he said :

"I think it is sufficient for the purposes of this case, to say that the word "discovery" means no more in this context than that all the facts material to found the relevant charge under the Act were disclosed to the appropriate officer. The word "discovery" here does not import any investigation by the officer. It is simply his knowledge, from disclosure to him in some way, of the material facts which would found the offence."

25. As McNeil J recognized, the word 'discovery' does no more than define a state of knowledge. The discovery of an offence takes place when the prosecutor for the first time becomes aware of it. Discovery may therefore be active or passive or a combination of both. In so far as it is an act, it is the act of finding or being made aware of an offence.

26. The manner in which the required state of knowledge is reached is not relevant to the definition. The prosecutor may reach his state of knowledge on a purely passive basis, that is, by being informed of events or he may reach it on an active basis, that is, by seeking out information.

27. In the later decision of R v Beaconsfield Justices, ex parte Johnson and Sons (1985) 149 JP 535, it was confirmed that the discovery of an offence occurs when the prosecutor has knowledge of it, that is, knowledge of the relevant and material facts that found the offence, even if investigations are still required to obtain evidence of those facts in an admissible form. Stuart-Smith J said in this regard :

"In my judgment, there is a difference between the information and facts which are known to the prosecuting authority and admissible evidence to support those facts and to prove that the offence has been committed."

He concluded :

"The Act itself provides a year from the discovery of the offence within which the proceedings can be taken, and it is in that year that the authority must take steps to obtain admissible evidence to prove the offence charged."

28. A decision which the District Court judge mentioned in his ruling, and to an extent which he relied upon, is that of R v Stoke-on-Trent Magistrates Court ex parte Leaf United Kingdom Ltd (supra). In his reference to that authority the judge commented :

"... the court held that it was proper for a prosecutor, despite the fact that he had much earlier received a complaint about the product and had obtained an analyst's report on it, to go on to purchase another similar bar of chocolate and have it analysed again before time began to run. Smith J said this at the end of her judgment :

"In a case of this kind, where the actual constituents of the product are a material element in the case which must be proved, it cannot be said, in my judgment, that the prosecutor has knowledge, in the sense of reliable information about the facts, until he receives the relevant analysis's certificate. Thus it cannot be said, in my view, that the prosecutor in this case had discovered the offence until that date."

29. As the District Court judge acknowledged, this again was a case which was determined on its facts. However, it would be wrong to view the ratio of Stoke-on-Trent Magistrates as in any way altering the principles set down in Beaconsfield Justices : namely, that there is a distinction between facts which are known to the prosecutor and admissible evidence to support those facts. The principles set down in Beaconsfield Justices were specifically approved in Stoke-on-Trent Magistrates and a close reading of the judgment reveals that they were, when applied to the facts of the case, in no way compromised.

30. But while there must be a distinction between facts known to the prosecutor and evidence to support those facts, for facts to be known to the prosecutor they must nevertheless be :

(a) sufficiently extensive to include the essential elements of the offence alleged, including the identity of the offender (or the means readily to obtain that identity) and

(b) credible, in the sense of being facts upon which reliance can be placed.

31. In respect of that first element, I do not see how the prosecutor can know of an offence unless he knows of facts which, if proved, would constitute that offence. By way of illustration, to know that a person is dead is not to discover an offence of murder. In R v Bexley Justices ex parte Barratt Homes Ltd (unreported, QBD, 11 December 1987), Schiemann LJ, again looking to the meaning of section 19 of the Trades Description Act 1968, stated what, in my judgment, must accord with the logic of the matter :

"It is common ground that the prosecution will, in due course, first need to prove that Barratt made the statement alleged in the information; second, that it was false and misleading; third, that it related to the description of property; fourth, that it was in the course of property development business; and fifth, that that statement was made by Barratt or one of their employees.

...

As it seems to me, the issue that the magistrates had to decide was, at the least, the first date when the prosecutor knew that someone was alleging the existence of the primary facts which are set out in the summons. For my part, I have some doubt as to what precisely may be involved in discovery in some cases. It is common ground that the prosecutor need not have personal knowledge of all the matters. I would have thought that, so long as the prosecutor knows that each of these matters is being alleged, this is enough." [my emphasis]

32. In respect of the second element to which I have referred in para. 27; namely, that the facts must be credible, I do not see how a prosecutor can know of an offence unless he can place some reliance on the facts which have come to his knowledge. If it was otherwise, a prosecutor would be bound to investigate every allegation of an offence received no matter how lacking in substance or credibility. That could not have been the intention of the legislature. As was said in R v Stoke-on-Trent Magistrates Court :

"In a case of this kind, where the actual constituents of the product are a material element in the case which must be proved, it cannot be said, in my judgment, that the prosecutor has knowledge, in the sense of reliable information about the facts, until he receives the relevant analyst's certificate." [my emphasis]

33. During the course of submissions, two Hong Kong cases were referred to me : R v Yau Hing Ping [1992] HKLR 188 and SFC v Chiu Su Ming Jason [2000] 3 HKC 425, both magistracy appeals. But, as the District Court judge commented in his ruling, both cases concentrate on their own facts and are of very limited assistance in seeking applicable principles.

34. One authority, however, which has been of assistance is that of Russell v Wirihana (1986) 2 FRNZ 461, a decision of the High Court in Auckland, New Zealand. The provision scrutinized in that case is section 128 of the New Zealand Social Security Act which requires that prosecutions be commenced within 12 months of the facts alleged in the charge being brought to the knowledge of the prosecuting authority. Thorp J held that time did not necessarily run from receipt of an allegation of the commission of an offence simpliciter, but will generally run from the time when an officer has sufficient information of the likelihood of the commission of an offence to justify an investigation. Thorp J, in seeking to define the test in a practical way, capable of everyday enforcement, explained his reasoning in the following terms :

"Much more attractive was Mr Dillon's alternative submission that time should run "when the officer knows there is something he should investigate". That standard accords reasonably with the pragmatic approach of the High Court of Australia in Vines v Djordjevitch, and its view that proof of circumstances from which a reasonable man would infer the fact in question should normally create the presumption of knowledge, though one capable of rebuttal.

Any lesser requirement would render the protection of the statutory limitation of little practical significance, and tend to leave the effective determination of the time limit within the discretion of the department, a result which cannot have been intended. Any more rigid requirement would mean that the department would be bound to investigate every allegation received, no matter how little supported either by identification of the maker so that his credibility could be established, or by verifiable detail.[my emphasis]

35. If the purpose of section 120A is to ensure, in so far as is practicable, that suspected offences be investigated expeditiously, it cannot, in my view, be permissible for a prosecutor not to seek obvious and readily ascertainable information for the purposes of artificially extending the time limit.

36. How then, as a consideration of the authorities to which I have referred, is the phrase - "1 year from the date of discovery of the offence by the prosecutor" - to be interpreted? In my judgment, the following core principles may be distilled :

(i) the legislative purpose of section 120A is to ensure that suspected offences under the Ordinance are both expeditiously investigated and prosecuted.

(ii) 'Discovery', as that term is used in the section, does no more than define a state of knowledge. In so far as it may be described as an act, it is the act of finding or being made aware of an offence. The manner of discovery is therefore not relevant to a definition of the word 'discovery'; it may be active, passive or a combination of both.

(iii) As to the state of knowledge that constitutes 'discovery' in terms of section 120A, it must, viewed objectively, be knowledge of facts upon which reliance may be placed and which cover the essential elements of the offence, including the identity of the offender.

(iv) 'Discovery' of facts upon which reliance may be placed and which cover the essential elements of an offence is to be distinguished, however, from 'discovery' of admissible evidence to support those facts. Section 120A provides a year from 'discovery' of the facts founding an offence to obtain admissible evidence to prove them.

Was the ruling correct in law?

37. In my judgment, in his ruling the judge in the District Court failed to distinguish between discovery by the Customs and Excise Department of credible facts which, if proved, would constitute an offence under the Ordinance and discovery of the evidence to support those facts. To that extent, in my view, his ruling was wrong in law.

38. In para. 25 of his ruling the judge said :

"In late July 1999, and from September onwards, Hong Kong Customs and Excise Department received complaints. They were detailed in nature and at times (when the complainants felt that no sufficient action was being taken) they were vociferous. But the fact of such vociferous complaints from one party, i.e., one side, did not mean that the Customs and Excise (the prosecutor) had immediately to act against the other side; or that it should have regarded itself, or be regarded, as having "discovered" an offence. The Customs and Excise Department has a public function to perform but it also has to refrain from acting in an arbitrary manner towards Hong Kong citizens simply on the basis of a complaint from overseas, no matter how detailed the complaint or how respectable its source. The defendants were entitled to protection from search and arrest until such point as the Customs and Excise could say that within the jurisdiction of Hong Kong, there was material [the physical stampers] which it could use."

39. As the judge recognized, the Department received complaints (that is, information alleging the commission of offences under the Ordinance) which were detailed in nature. Indeed, the evidence produced at the hearing indicated that detailed reports compiled by professional investigators were supplied to the Department. As the judge further recognized, the complaints came from respectable sources; the information supplied was therefore information upon which reliance could be placed. He went on to say, however, that there had been no discovery of an offence by the Department at that time and that such discovery only took place when the Department received into its custody the stampers upon which the later charges were to be based. But why were they first needed here in thong Kong? I cannot see that they were, not at least - to employ the approach of Thorp J in Russell v Wirihana - to enable the Department to be in possession of information sufficient to justify an investigation.

40. Much of the relevant information contained on the stampers had already been passed to the Department and any outstanding information, it was accepted during the course of submissions before me, could be obtained in the form of a request. There is nothing to suggest that the stampers needed to be subject to scientific analysis in order to reveal data which had not already been passed to the Department or was readily ascertainable upon request. In the circumstances, I am afraid I can only read the passage which I have cited in one way : that, because the information had been received from outside the jurisdiction, to avoid possibly acting in an 'arbitrary manner', the Department first needed the physical evidence of the stampers to support what was alleged. But, as Stuart-Smith J said in Beaconsfield Justices, there is a difference between facts known to the prosecutor and evidence to support those facts.

41. The judge continued in his ruling :

"It may be that circumstances could arise where material outside the jurisdiction could be used to discover an offence - for example if it were capable of easy inspection in Shenzhen. But here, the stampers had been seized in Alaska and in Paraguay. The stampers themselves, and their contents (in the sense of their infringing nature, and their link to the Viva premises in Hong Kong) were absolutely crucial. The actual constituents of the stampers were essential to the complaint and the Customs and Excise Department was entitled to have that material in their possession."

42. I am not sure what was meant by the phrase 'the actual constituents of the stampers were essential'. As I have said, it was not necessary to submit them to scientific analysis to obtain essential information from them and Mr Turnbull, for the respondent, conceded that relevant information contained on them not already in the possession of the Department (for example identification numbers) could have been obtained upon request. The physical presence of the stampers were not therefore necessary to 'discover' the offences even if they were necessary to prove those offences at trial.

43. The judge, however, continued by stating :

"This is not to confuse the issue of investigation with discovery. Discovery of an offence does not occur at the moment of complaint even if the complaint appears to be well founded. It occurs when the prosecutor has, in the circumstances of the particular case, had disclosed to him all the facts material to found the charges."

44. That is correct. 'Discovery' takes place when the prosecutor has knowledge of facts which cover the essential elements of an offence and that state of knowledge may, depending on the circumstances, only be reached over a period of time not necessarily at the time when a complaint is first made. But in the present case that statement of the law begs the question : 'what 'facts' material to the charges were to be obtained from physical possession of the stampers that had not already been divulged or could not, upon request, have been obtained?' From the evidence, there were none.

45. The judge concluded his ruling by saying :

"If I am wrong in my conclusions about the date of the delivery of the stampers as being the appropriate date, then I say this : the complexity of this matter and the jurisdictional aspects of it justified the Customs and Excise in taking time to consider the position and study the material before they determined that an offence had been disclosed which was justifiable in Hong Kong. Disclosure in complex cases must involve time for consideration after complaint and before discovery. There is no date which can be identified of the conclusion of the consideration until the 29 December, when the raid took place. That raid elicited material which disclosed the existence of a justifiable offence. The offences now charged were disclosed at that point - if I am wrong in saying that they were disclosed when the stampers were delivered."

46. It is true, that a prosecutor cannot have knowledge of an offence until information supplied to him has been comprehended. That may take time, especially when voluminous material is delivered. But as the judge had earlier recognized in his ruling, the burden of proving that charges have been brought within the period of time allowed by section 120A rests on the prosecution and it is evident from the passage cited that the prosecution failed to demonstrate how much time was required for that purpose. In the result, with the prosecution having failed to discharge its evidential burden, the judge was forced to seek a date that was identifiable but otherwise, with respect, in the context of the evidence, was somewhat arbitrary. I find it difficult logically to classify the raid as the conclusion of the process of consideration of the evidential material put before the Department. The execution of the search warrant can only have come after consideration of the material in order to find evidence in support of allegations already digested. In short, there is no evidence that the raid legitimately was part of the process of 'discovery' as opposed to the seeking of evidence to support what, in terms of section 120A, had already been discovered.

47. In all the circumstances, for the reasons outlined, I am satisfied that the ruling was wrong in law and, as such, must be quashed.

Consideration of consequential orders

48. With the ruling quashed, the applicants seek an order declaring that all the charges in issue are time-barred and therefore no longer the subject of criminal prosecution. It is said that the court is entitled to take this course on the basis that, on a proper view of the law as read with the facts, no reasonable tribunal could arrive at any other decision.

49. Despite the persuasive arguments raised in support of the application, I do not believe I am in a position to accede to it. Factually, matters are not simple. What has been sought does not flow inevitably from my findings of law so that to remit the matter back would be a sterile exercise. Indeed, in determining the issue, I have found myself weighing and evaluating the evidence placed before me in a manner which, I believe, goes beyond what is permitted by a court of review. It is not for me to usurp what is properly the responsibility of the District Court.

50. I am also concerned that, by deciding matters 'on paper' at this time, I may be pre-empting the giving of new and relevant evidence if and when the matters in contention are considered again by the District Court.

51. Accordingly, I will order that the matter be remitted to the District Court to decide the preliminary issue in accordance with law.

52. My orders

(1) That an order of certiorari is granted, removing the ruling of the District Court into the Court of First Instance and quashing that ruling together with the orders made under it.

(2) That the matter be remitted to the District Court for determination in accordance with law.

(3) That costs be awarded to applicants.