WONG CHI YIN ANDY AND OTHERS v. COMMISSIONER OF CUSTOMS AND EXCISE

1998 HCAL No. 104

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

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J U D G M E N T

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Introduction

1. The Sino Centre in Nathan Road is said to be notorious as an outlet for the sale of counterfeit compact discs. Towards the end of 1997, it became the target of high profile patrols by officers of the Customs and Excise Department. That is said to have resulted in retailers changing their business and cashing in on the popularity of Japanese compact discs. There are now said to be many retailers in the Sino Centre who are selling counterfeit video compact discs ("VCDs") and counterfeit digital video discs ("DVDs") of television programmes and other works from Japan.

2. On 10th September 1998, officers of the Customs and Excise Department raided 26 shops in the Sino Centre. Many thousands of VCDs and DVDs which were believed to be infringing copies were seized. So too were televisions, disc players and other equipment. The three Applicants were among the retailers whose shops were raided. In this application for judicial review, they contend that the Customs and Excise Department has exceeded the wide powers given to it to combat the war against copyright privacy.

The statutory framework

3. Section 118 of the Copyright Ordinance (Cap. 528)("the Ordinance") creates a variety of criminal offences relating to the possession and sale of infringing copies of copyright works without the licence of the copyright owners. Section 122 gives certain powers of search and seizure to officers of the Customs and Excise Department who are investigating the commission of such offences. Thus, section 122(1) empowers such an officer to

"seize, remove and detain ...

(i) any article which appears to him to be an infringing copy of a copyright work ... [and]

(ii) anything which appears to him to be ..., or to be likely to be ..., evidence of an offence under this Part."

Both sections 118 and 122 are in Part II of the Ordinance. Those were the powers under which the seizure of the VCDs, the DVDs and the equipment on 10th September was authorised, and under which they have subsequently been detained.

4. The Ordinance provides that any article seized or detained under section 122 is liable to forfeiture (section 131(1)). However, the owner of the article can, by notice to the Commissioner of Customs and Excise ("the Commissioner"), claim that the article is not liable to forfeiture (section 131(5)). The Applicants' solicitors purported to give such a notice to the Commissioner on 7th October, though it is unclear on whose behalf that notice was issued. However, the notice meant that the Commissioner then had a reasonable time to consider the matter. After that, he had either to return the VCDs, the DVDs and the equipment to those of the Applicants to whom the notice related, or to apply to the court for their forfeiture (section 133(1)).

The seized articles

5. 11,125 VCDs and 81 DVDs were seized from the shops operated by the three Applicants. They have all been examined. 6,120 of the VCDs and 58 of the DVDs have been found to be discs of Japanese television series. The remaining 5,005 VCDs and 23 DVDs are not discs of television series. They consist of plays and films, cartoons and sound recordings. There is no direct evidence that the plays, films, cartoons and sound recordings are Japanese, but since the Customs and Excise Department are attempting to find out whether they are infringing copies from the copyright owners in Japan, I infer that they are. There is no evidence, though, that the plays, films, cartoons and sound recordings were television programmes, in the sense that they were made for television.

6. The other articles which were seized come into a variety of categories. First, they include electronic items on which the VCDs and DVDs could be played, watched and listened to, i.e. television sets, VCD and DVD players, amplifiers, speakers and receivers. Secondly, they include items used for display, i.e. racks and glass plates. Thirdly, in the case of two of the Applicants, cash was seized. One of them was asked about the money when he was interviewed. He said that it represented the day's takings. Finally, there are other items which do not fall into any of these categories, i.e. empty boxes and a fax machine.

Subsequent proceedings

7. Criminal charges. The 1st Applicant has now been charged with offering for sale infringing copies of copyright works for the purpose of trade or business without the licence of the copyright owners, contrary to section 118(1)(e)(ii) of the Ordinance. The 3rd Applicant has now been charged with possessing infringing copies of copyright works for the purpose of trade or business without the licence of the copyright owners with a view to committing an act of copyright infringement, contrary to section 118(1)(d) of the Ordinance. The only reason why the 2nd Applicant has not yet been charged is because up to now the Customs and Excise Department claims not to have been able to locate him.

8. Forfeiture proceedings. Forfeiture proceedings under section 133(1) of the Ordinance were commenced on 4th February in the North Kowloon Magistracy against the 1st and 3rd Applicants. Although it is said that the Commissioner should have issued forfeiture proceedings against them earlier, no relief is sought in respect of that delay in view of the fact that the forfeiture proceedings have now been issued against them. No forfeiture proceedings, though, have been commenced against the 2nd Applicant. That is because the Customs and Excise Department did not read the Applicants' solicitors' letter of 7th October as applying to him. That was entirely correct. The letter did not name the persons on whose behalf it was written. It simply identified the articles seized and detained by reference to the numbers on the receipts which were issued. Among the receipts identified by number in the letter were the receipts issued to the 1st and 3rd Applicants, but not the receipts issued to the 2nd Applicant. It follows that since no notice had been given to the Commissioner on behalf of the 2nd Applicant pursuant to section 131(5) of the Ordinance, the Commissioner has not been under a duty to decide whether to issue forfeiture proceedings or to return the articles seized to him.

The legality of the seizure of the VCDs and the DVDs

9. The VCDs and DVDs were seized pursuant to section 122(1) of the Ordinance. They are said to have appeared to the officers who authorised their seizure (a) to be infringing copies (section 122(1)(b)(i)), and (b) to be likely to be evidence of an offence under Part II of the Ordinance (section 122(1)(b)(ii)). The meaning of the words "appears to him to be ... likely to be ... evidence of an offence" in section 122(1)(b)(ii) was discussed in Tung Hing Technology Investment Ltd. v. The Commissioner of Customs and Excise (HCAL 95/98). Articles were held to have appeared to be likely to be evidence of an offence if the officers believed that they were likely to be relied on as evidence in proceedings for an offence under Part II of the Ordinance to prove that such an offence had been committed. What was also argued was that there had to be some foundation for that belief. Counsel for the Commissioner did not feel able to dispute that proposition. The Court agreed, though it went on to say that

"... the threshold which has to be overcome is much lower than that the belief has to be reasonable. That is apparent from the structure of section 122(1). Section 122(1)(a) expressly requires the suspicion to be reasonable before premises may be entered or vessels and aircraft may be boarded or vehicles may be stopped for the purposes of searching them. The requirement of reasonableness in section 122(1)(b) is conspicuous by its absence."

10. In the present case, the officers who authorised the seizure of the VCDs and the DVDs authorised their seizure under section 122(1)(b)(i) as well. It is to be noted that the words "likely to be" are not in section 122(1)(b)(i). Therefore, for articles to be held to have appeared to them to be infringing copies, they must have believed them to be infringing copies. Again, the question arises as to whether there has to be some foundation for that belief. On this occasion, it was argued by Mr. Adrian Huggins S.C. for the Commissioner that the Court cannot "interfere" with the decision to seize articles under section 122(1)(b)(i)

"unless there is (a) evidence of bad faith or (b) evidence which leads the Court to the finding that it simply cannot believe the deponent's sworn statement that it appeared to him that the [articles] were infringing [copies]."

This argument, when analysed, is tantamount to saying that, provided that the belief is genuinely held, there is no need for there to be any foundation for that belief at all. That is not to say that the argument is a bad one. It was developed in a note prepared by Mr. Huggins, the material parts of which read as follows:

"... the legislature ... appreciated that ... officers could not be expected to carry out an examination and objective analysis on the spot of every single disc or other item which might be infringing. His belief that they were infringing might be based for example on information provided before he entered the premises. That information might turn out to be mistaken or less than reliable. But the legislation provides for a framework in which anyone claiming that the items seized were not infringing or otherwise liable to forfeiture might serve a statutory notice under section 131 which would trigger an obligation on the Commissioner under section 133 to bring forfeiture proceedings in which the Court would be able to examine the reasons why the Commissioner still claimed a right to detain the articles seized. Indeed it is to be inferred from the wording and framework of [the] Ordinance that it was not intended that claimants should be able to short circuit the provisions relating to forfeiture proceedings by making applications for delivery up of the items seized in Judicial Review proceedings.

The Court's supervisory jurisdiction in this regard is limited to cases in which the Commissioner fails in his [duty] to bring forfeiture proceedings and thereby thwarts the statutory framework and possibly to those rare and wholly exceptional cases in which an applicant for [judicial review] can produce (a) evidence of bad faith or (b) evidence which leads the Court to the finding that it simply cannot believe the deponent's sworn statement that it appeared to him that the discs were infringing."

11. I see the force of this argument, and if the proper construction of section 122(1)(b)(i) was decisive to the case, I may have been attracted by it. However, for reasons which will become apparent, I propose to assume, but without deciding, that for the seizure of the VCDs and the DVDs to be lawful, the officers who authorised their seizure must have had some foundation for their belief that they were infringing copies.

12. On that issue, the evidence is that, shortly before the raid on 10th September, two delegations representing Japanese broadcasting interests had visited Hong Kong. While in Hong Kong, they had bought some Japanese VCDs. They were told that these VCDs, as opposed to the works which were on them, had been produced in Taiwan. They confirmed that no-one in Taiwan nor anywhere else in the world had been authorised or licensed to release Japanese television programmes in VCD format, and they added that "all VCDs in the market were infringing". In addition, the evidence is that members of one of the delegations had even been to the Sino Centre, and had confirmed to officers of the Customs and Excise Department that all VCDs and DVDs of Japanese television series sold there were infringing copies.

13. Mr. Toby Jenkyn-Jones for the Applicants submitted that the officers who authorised the seizure of the VCDs and the DVDs had to have believed that all of the VCDs and DVDs which were seized were infringing copies. The seizure of all the VCDs and DVDs would not be lawful if the officers' belief that they were infringing copies related to only some of the VCDs and DVDs, and if the officers could not form the belief that all of the VCDs and DVDs were infringing copies until they had all been examined. There is an echo of an argument along these lines in a case which has been cited to me on other occasions when I have had to consider the extent of the Commissioner's powers under the Ordinance, namely Reynolds v. Commissioner of Police of the Metropolis [1985] 1 QB 881. Three propositions were stated by Slade L.J. at p.896C-E:

"(1) No matter how convenient this course may seem to be, a police officer acting under a search warrant under the Forgery Act 1913 is not entitled, without the consent of the owner, indiscriminately to remove from the premises each and every file, book, bundle or document he can lay his hands on, even if only for the purpose of temporary sorting. Before doing so, he must have regard to the nature and contents of the item in question.

(2) However, provided that he acts reasonably in so doing, he is entitled to remove from the premises files, books, bundles or documents which at the time of removal he reasonably believes contain (i) forged material, or (ii) material which might be of evidential value, as showing that the owner is implicated in some other crime.

(3) Any necessary sorting process in relation to all items removed (e.g. those contained in files and bundles) should be carried out with reasonable expedition and those of them which are not found to fall within either of the two relevant categories should then be returned reasonably promptly to the owner."

14. No doubt the time will come when it will be necessary to analyse properly the true limits on the Commissioner's powers of seizure under section 122(1) in those cases where vast numbers of infringing articles are found and where a long time is needed to check what they are. However, this is not that case, because I have concluded that the information which the Customs and Excise Department received from the visiting delegations provided some foundation for the belief of the officers who authorised their seizure that all the VCDs and DVDs which were seized were Japanese television programmes, and were therefore infringing copies, even if some of the VCDs and DVDs later turned out not to be television programmes at all.

15. Mr. Jenkyn-Jones also relied on the evidence before me relating to copyright ownership in Japan. That evidence showed that it is very difficult to identify in whom copyright ownership in Japanese television programmes vests. In those circumstances, it cannot be said that there could be a foundation for the belief that the VCDs and DVDs are infringing copies. I reject that argument. The fact that it is difficult to identify who copyright ownership vests in does not mean that copyright does not subsist in the VCDs and DVDs at all. Since it is not suggested that copyright does not subsist in them, the fact that it may be difficult to identify the copyright owners does not affect the question whether they are infringing copies. To be fair to Mr. Jenkyn-Jones, when that point was put to him in the course of argument, he did not press the matter.

16. Since I have concluded that the seizure of the VCDs and DVDs was lawful under section 122(1)(b)(i), it is unnecessary for me to consider whether their seizure was also lawful under section 122(1)(b)(ii).

The legality of the detention of the VCDs and DVDs

17. The VCDs and the DVDS are being detained pursuant to section 122(1) of the Ordinance. They are said still to appear to the officers who are authorising their detention (a) to be infringing copies (section 122(1)(b)(i)), and (b) to be likely to be evidence of an offence under Part II of the Ordinance (section 122(1)(b)(ii)). For the reasons given in the Tung Hing Technology case, if the Applicants are to be granted any relief for their unlawful detention, the Court must be satisfied of two things:

(i) The VCDs and DVDs must not have appeared to the officers authorising their detention on 10th December 1998 (when the Originating Motion was filed) to be infringing copies or to be likely to be evidence of an offence.

(ii) The VCDs and DVDs must not appear to the officers now to be infringing copies or to be likely to be evidence of an offence.

18. There can be no doubt whatever that there is some foundation for the belief that the 6,120 VCDs and 58 DVDs which feature Japanese television series are infringing copies. The evidence, as I have said, is that the information from one of the delegations was that VCDs and DVDs of Japanese television series must be infringing. The evidence relating to the other 5,005 VCDs and 23 DVDs is not so clear. As I have said, although I can infer that the plays, films, cartoons and sound recordings featured on them were made in Japan, there is no evidence they were made for television, i.e. no evidence that they are television programmes. No reliance can therefore be placed on the information from the delegations of Japanese broadcasting interests, because if the plays, films, cartoons and sound recordings on these discs were not made for television, the delegations cannot say whether they are infringing copies. The current position is that the Customs and Excise Department are trying to find out who the copyright owners of the plays, films, cartoons and sound recordings featured on these VCDs and DVDs are, so as to find out whether they have authorised or licensed anyone to produce them in VCD or DVD format. It is said that that process will take another 2 to 3 months.

19. Although there is no information, therefore, from copyright owners as to whether these 5,005 VCDs and 23 DVDs are infringing copies, there is, in my view, some foundation for the belief that they are. The 5,005 VCDs and the 23 DVDs were seized along with large numbers of VCDs and DVDs which almost certainly are infringing copies. By itself, that would not, I think, be enough to provide some foundation for the belief that these 5,005 VCDs and 23 DVDs are infringing copies. But what is important is that the circumstances in which the Applicants admitted that they acquired the VCDs and DVDs strongly suggest that they are infringing. Thus, the 1st Applicant said that he bought the VCDs from "roadside vendors in Taiwan" for $13 each. The 3rd Applicant said that he bought the VCDs for $10 each from a man called Ah Sun who would bring them to his shop. Commonsense tells us that VCDs acquired in those circumstances are unlikely to be non-infringing copies.

20. I appreciate that these admissions related only to VCDs, not to DVDs. I also appreciate that no distinction was drawn between those VCDs which related to Japanese television series and those which did not. I also appreciate that no admissions relating to the circumstances in which the VCDs were acquired were made by the 2nd Applicant. I also appreciate that these admissions may be held to be inadmissible at the Applicants' trial in view of the fact that the Applicants deny ever having made the admissions alleged and they allege that they were forced to sign the records of interviews in which the admissions were recorded. However, in the light of the admissions alleged to have been made, I find that there is some foundation for the belief of the officers authorising the detention of these VCDs and DVDs that they are infringing copies. Indeed, I find that there has been some foundation for that belief ever since the VCDs and DVDs were first seized.

21. Since I have concluded that the detention of all the VCDs and DVDs is, and has been, lawful under section 122(1)(b)(i), it is unnecessary for me to consider whether their detention is, or has been, lawful under section 122(1)(b)(ii).

The legality of the seizure and detention of the other articles

22. The other articles were seized and detained pursuant to section 122(1)(b)(ii) only. They are said to have appeared at the time of their seizure, and to have continued to appear since then, to the officers who authorised their seizure and who continue to authorise their detention to be likely to be evidence of an offence under Part II of the Ordinance, i.e. likely to be relied on as evidence in proceedings for an offence under Part II of the Ordinance to prove that such an offence has been committed.

23. I deal first with the electronic items on which the VCDs and DVDs could be played, watched and listened to. It is an offence under Part II of the Ordinance to exhibit in public an infringing copy of a copyright work for the purpose of trade or business without the licence of the copyright owner: see section 118(1)(e)(iii) of the Ordinance. If the Applicants were charged with such an offence, the equipment which they used to play the infringing copies on would be likely to be relied on as evidence in such proceedings. I appreciate that none of the Applicants have in fact been charged with such an offence, but that is not a pre-requisite for the legality of the seizure and subsequent detention of the articles in question.

24. Secondly, there are the items on which the VCDs and DVDs could be displayed, i.e. the racks and glass plates. It is an offence under Part II of the Ordinance to expose for sale or hire an infringing copy of a copyright work for the purpose of trade or business without the licence of the copyright owner: see section 118(1)(e)(ii) of the Ordinance. If the Applicants were charged with such an offence, the equipment which they used to display the infringing copies on would be likely to be relied on as evidence in such proceedings. Again, I appreciate that none of the Applicants have in fact been charged with such an offence, but that is not, as I have said, a pre-requisite for the legality of the seizure and subsequent detention of the articles in question.

25. Thirdly, there is the cash found in the shops. It is an offence under Part II of the Ordinance to sell an infringing copy of a copyright work for the purpose of trade or business without the licence of the copyright owner: see section 118(1)(e)(i) of the Ordinance. If the Applicants were charged with such an offence, the cash which represented their takings would be likely to be relied on as evidence in such proceedings. Again, I appreciate that none of the Applicants have in fact been charged with such an offence, but for the reasons I have given that does not matter.

26. Finally, I turn to the other articles which do not come within these categories, i.e. the empty boxes and the fax machine. At present, I do not see how they can be said to have appeared, or to appear now, to be likely to be relied on as evidence of an offence under Part II of the Ordinance to prove that such an offence had been committed. But the Commissioner has not filed any evidence relating to these items. Technically, he was not obliged to do so, because prior to an amendment to the Notice of Application which I granted in the course of the hearing, there was no claim for an order of mandamus requiring the Commissioner to return these articles (or any of the articles, not even the VCDs or the DVDs for that matter) to the Applicants. The Commissioner now wishes to consider whether to file evidence relating to the empty boxes and the fax machine. I suspect, though, that this judgment will be regarded by the parties as determining all the principal issues which divide them, and that agreement will be reached on whether the empty boxes and the fax machine should be returned. I therefore propose simply to give the parties liberty to restore the Motion if agreement is not reached for the purpose of the Court determining whether the Commissioner should be required to return these items to the Applicants.

A hidden agenda

27. The Applicants contend that in carrying out the raid, the Customs and Excise Department had its own agenda. It wanted to close down all the outlets in the Sino Centre which were selling VCDs and DVDs. The plan was to seize all the VCDs and DVDs which were found there, irrespective of what the VCDs and DVDs purported to be, and irrespective of what they were believed to be. It was, so it is said, never intended to return any of the articles which were seized, and the aim was to prevent the retailers in the Sino Centre from trading altogether. Extravagant forms of relief were sought in the Notice of Application, including a declaration that this "policy" was unlawful.

28. I was initially troubled by the relevance of these allegations. If the seizure or detention of the articles could not be justified under section 122(1), the Applicants would be entitled to have the articles returned to them, and their case would not be advanced by allegations about the Department's policy. If the seizure or detention of the articles could be justified under section 122(1), their seizure or detention would be lawful despite the allegations about the Department's policy. I mentioned this concern to Mr. Jenkyn-Jones early in his submissions. At that stage, he argued that the only relevance of the allegations about the Department's policy was that the allegations went to whether the officers who authorised the seizure and detention of the articles in fact believed that the VCDs and DVDs were infringing copies.

29. I cannot go along with that argument for two reasons. First, the evidence before me is that the officers who authorised the seizure and detention of the VCDs and DVDs did so because they believed them to be infringing. If it is said that that evidence is untrue, that issue can only be resolved by cross-examination of the deponents. No application for cross-examination was made. In those circumstances, I have no alternative but to treat what is stated to be their belief as correct. Secondly, for the purpose of testing the argument, let us assume that the allegations relating to the Department's policy are true. Even if the VCDs and the DVDs were going to be seized and detained come what may, it does not follow that when they were seized, and ever since they have been detained, the officers who authorised their seizure and detention did not believe that they were infringing copies.

30. However, towards the end of his submissions, Mr. Jenkyn-Jones sought to rely on the allegations about the Department's policy for another purpose. He contended that if the allegations were true, they demonstrated that the powers of entry and search, seizure and detention conferred by section 122 were being exercised for a collateral purpose, and that rendered unlawful what might otherwise have amounted to the lawful seizure and detention of the articles. I do not think that there is a sufficient evidential foundation for that argument. The fact that all the Applicants' VCDs and DVDs were seized and detained is just as consistent with the belief that they were infringing copies as it is with the desire to close down the Applicants' businesses. I have not discerned any other facts in the Notice of Application (which incidentally have not been verified on affirmation) or in the Applicants' affirmations which suggest that the seizure and detention of the VCDs and DVDs was driven by unlawful policy considerations rather than by a legitimate belief that they are infringing copies.

The burden of proof

31. Finally, it is said that the correspondence shows that the Commissioner has turned the burden of proof upside down. That is based on the Commissioner's response to the letter of 7th October from the Applicants' solicitors which purported to be the notice of claim under section 131(5). The Commissioner's letter was dated 30th October, and the material parts of it read:

"I would like to draw your attention to section 133(12)(a) and section 133(13) of the Copyright Ordinance which provide that the claimant of the seized articles had to satisfy the court of his entitlement of claim as well as the genuineness of the articles seized. In this connection, I shall be grateful if you would provide us with information on your legal or equitable interest in the seized articles and evidence that the articles are not infringing copies, hence not liable to forfeiture."

It is said that this letter shows that when deciding whether to return the seized articles to the Applicants, the Commissioner required the Applicants to prove that they were not infringing copies, when it was for the Commissioner to show that they were.

32. This argument is misconceived. The Commissioner's comments were made in the context of the forfeiture proceedings which he was obliged to commence if he chose not to return the articles to the Applicants. He was accurately setting out where the burden of proof lay in such proceedings. Having seized and detained the VCDs and the DVDs, his officers had formed the belief that they were infringing copies. The Commissioner was merely inviting the Applicants' solicitors to lay before him any information which might make his officers change their minds.

Conclusion

33. For all these reasons, this application for judicial review must be dismissed, save that there will be liberty to the parties to restore the Motion in the limited circumstances to which I have referred.