HKSAR v. SETHI RAJINDER PAL SINGH

HCMA1032/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.1032 OF 2005

(ON APPEAL FROM TWS 8817-18 OF 2005)

---------------------

----------------------

-------------------------

J U D G M E N T

-------------------------

1. The appellant was convicted after trial of two summonses of ‘attempting to export goods to which a forged trademark was applied’, contrary to section 12(1) and (2) as read with section 18(1) of the Trade Description Ordinance (Cap.362) and section 159G of the Crimes Ordinance (Cap.200).  He was sentenced to the fines of $8,400 and $8,200 respectively.  He appeals against the convictions.

Background

2. These are how the summonses read : 

(1)     TWS8817

“[The appellant] trading as World-Wide Travels, on the 3^rd day of December 2004, at module 4H, 4/F, ST1, HACTL, Hong Kong International Airport, Chek Lap Kok, NT, Hong Kong, attempted to export goods, namely, (1) 45 nos. of mobile hand-free, (2) 45 nos. of charger, (3) 130 nos. of mobile phone battery, (4) 520 nos. of mobile phone battery, (5) 160 nos. of mobile phone battery, (6) 20 nos. of charger, (7) 20 nos. of mobile phone battery, (8) 460 nos. of mobile phone battery, (9) 100 nos. of mobile charger, (10) 80 nos. of mobile phone battery and (11) 440 nos. of mobile phone battery, to each of which a forged trade mark namely, (1) to (3) ‘Samsung’, (4) ‘Siemens’, (5) ‘Motorola’, (6) to (7) ‘Samsung’, (8) ‘Siemens’, (9) to (10) ‘Motorola’ and (11) ‘Nokia’, was applied.”   

(2)     TWS8818

“[The appellant] trading as World-Wide Travels, on the 3^rd day of December 2004, at G/F, ST1, HACTL, Hong Kong International Airport, Chek Lap Kok, NT, Hong Kong, attempted to export goods, namely, 640 nos. of mobile phone case, to each of which a forged trade mark, namely, ‘Siemens’, was applied.”   

3. They arose from a random inspection by Customs & Excise officers of eight cartons of declared “mobile accessories” (destination Kenya) in which two were found to contain the infringing items in TWS8817 and 41 cartons of declared “mobile accessories” (destination Bulgaria) in which one was found to contain the infringing items in TWS8818.  The estimated value of the former was HK$20,200 and the latter, HK$6,400.

4. Subsequent enquiries revealed that a company called World-Wide Travels had arranged for their export.  In his records of interview, the appellant who was a partner of that company admitted involvement in making those arrangements.

The prosecution’s case

5. Much if not the whole of the prosecution’s case was admitted by way of section 65C of the Criminal Procedure Ordinance (Cap.221).  In addition, a number of statements were put before the court under section 65B.  Amongst them was one from Mak Ka Wing on Nokia products and another one from Choy Pik Shan on Samsung’s.  On request, two experts (PW1 from Motorola Asia Pacific Ltd and PW2 from Siemens) were tendered for cross-examination.  

The defence case

6. Quoting from the magistrate’s Statement of Findings : 

“6.   The main issue in this case related to whether the defendant could prove, on the balance of possibilities, the statutory defences set out under Sections 12(2) and 26(1) Trade Descriptions Ordinance … 

7.    The defendant’s defence was basically that he had been a forwarding agent with his father for over 20 years in Hong Kong working from their premises in Chung King Mansions, Tsim Sha Tsui. In his business he dealt with over 100 customers a day, some of whom brought goods to him for shipment. Of these goods brought for shipment, half were shipped abroad and a number of these shipments were for resale abroad. A majority of these shipping customers stayed in Chung King Mansion, which was a low priced guesthouse. Sunny, was a man with whom the defendant had dealt with 1-2 times previously and the defendant had experienced no problems with Sunny’s earlier shipments. He was Indian, and was not a Hong Kong resident. The defendant said it was normal not to include more details of the shipping customer (like Sunny) in the documents other than his guesthouse address in Hong Kong.

8.    In relation to the shipment to Kenya, 4 packages containing 8 cartons were brought to his office by Sunny, (2 packages on the 1^St December and 2 packages on 2^nd December 2004 according to the defendant’s record of interview) and he had been told by Sunny these were shipments of mobile (phone) accessories.  The defendant had opened two cartons in each of the two packages and had taken out random items to check if they were mobile accessories and not dangerous goods. He did not see anything during his inspection that caused him to believe the goods were other than genuine, and he believed the goods were genuine. Details were then taken from Sunny for the shipment abroad and the necessary shipping documents were then completed. The agent then shipped the goods on the defendant’s company’s behalf.

9.    In relation to the 41 cartons for shipment to Bulgaria, Sunny had told the defendant, when delivering the cartons on 26^th November 2004, that they were a consignment of mobile (phone) accessories. Therefore the defendant randomly checked inside 5-6 of the cartons and took items out to see if the contents were as Sunny had described them and to make sure they were not dangerous goods. He said he did not notice anything that caused him to have any concern about the shipment and he did not see anything that caused him to believe the goods were other than genuine, and he believed the goods were genuine. He then took details for the shipment and then prepared the shipping documents. The agent then shipped the goods on his company’s behalf.”

The magistrate’s findings

7. In the end, the appellant was found guilty of both summonses.

8. On the issue of whether some or all of the infringing items were readily detectable as such, this is what the magistrate said : 

“5.   PW1 … PW2 … Mak Ka-wing … Choy Pik-shan … were all experts and were able to identify infringements of their own company products. The defence did not dispute their expertise. I accepted their findings, and I found for Nokia products expertise was a necessity in order to determine if a battery was an infringing item.  I found expertise was not a necessity for being able to detect infringing Samsung products …

…

10.  I found from PW1’s evidence that battery heliogram labels on Motorola batteries were relatively easy for the public to check in two ways, firstly by using a commonly available ultra violet light and comparing the labels with an original heliogram battery label, and secondly by comparing battery label textures.  For better battery label counterfeits, I found expertise would be required. I found there were press articles issued by Motorola upon how to tell counterfeit Motorola products from time to time. I also found with regard to other Motorola products, expertise would be necessary for detecting an infringement, and for Motorola battery charging units, the unit I found had to be opened first and the wiring examined before it could be seen whether it was an infringing product.  I found from PW2’s evidence that all the relevant Siemens company products needed expertise in order to determine whether they were infringements, and I found the public would be unable to tell by simple looking and comparing.”

9. As regards the appellant’s defence generally, he said : 

“11. … I believed he was telling the truth. … I accepted that he did not know the items found in each shipment were infringing copies, but I did not accept that he had no reason to suspect the goods in each shipment might be infringements and I did not accept he had carried out reasonable diligence and had thereby not found out that they were infringing copies.  I also found that whilst he had relied upon the information given to him by Sunny, and the goods had been shipped due to the act of Sunny in delivering them to his company for shipment, I did not find that he had taken all reasonable precautions and exercised all due diligence to avoid the commission of the offence by his company in which he was the admitted active partner involved in the transactions.

12.  I found that the defendant had accepted the cartons on each occasion from Sunny without making any enquiries of his full name, his address and his contact details, and I found he knew nothing about Sunny’s background. I further found he knew Sunny stayed in a low cost guesthouse each time he came to Hong Kong and he knew Sunny was dealing in low cost items.  I found the defendant also knew these types of items in the shipments were frequently copied and sold illegally in Hong Kong and I found the defendant had not made any enquiries as to the source of the items to be shipped after inspecting them; neither did he seek any very basic documentation to confirm their source and the legality of their source.  I found the number of infringing items found in each shipment was not insignificant.

13.  I was aware that both the ‘reasonable diligence’ test and the ‘all reasonable precautions and exercised all due diligence’ test were not ones of perfection, but they both required the defendant to make enquiries which were reasonable with regard to the size of the shipment, the extent of his involvement in the transaction (ie. as manufacturer, purchaser, shipper, forwarder etc.) and the defendant’s extent of handling the goods in his operation (ie. the length of time he held the goods and whether he stored them, his profit on the transaction etc.).  I found the defendant had not carried out any basic enquiries relating to whether the goods were infringements, but had purely relied on his own visual sightings of them in circumstances when he admitted he was not expert in infringing products and when he admitted the possibility of infringement was in his mind and he knew infringements could be good replicas of the originals. I did not find the fact that he did not need to inspect documents and obtain full details of the consignor for exporting purposes absolved him from the need to do so in order to meet the obligations imposed by law on him.

14.  I found the defendant had therefore failed to prove each of the statutory defences (ie: S.12(2) and S.26 (1) Trade Descriptions Ordinance) on the balance of probabilities and I found the prosecution had disproved the same beyond reasonable doubt.”

Grounds of appeal

10. Counsel for the appellant has advanced four grounds.

11. Ground 1 complains that the following findings of fact were not supported by evidence: (a) expertise was not a necessity for detecting infringing Samsung products [para.5 of Statement of Findings]; (b) Chung King Mansion was a low priced guesthouse [para.4]; (c) when the appellant opened a particular carton for checking, he would only randomly check some of its content [para.8 and 9]; (d) the heliogram labels of Motorola batteries were easy to check by checking their labels [para.10]; (e) the number of infringing items in each shipment was not insignificant [para.12]. 

12. For (a), I have read Ms Choy’s statement.  She could tell the Samsung products were counterfeit by their colour, material and logo.  This suggests nothing more than a vision comparison with the genuine articles.  She said she came to her conclusion “after careful examination” obviously to pre-empt any suggestion that her task was perfunctorily performed.  That is all. 

13. For (b), the complaint about Chung King Mansions is that it is not a low-price guesthouse, but a building in which there are many such guesthouses.  This simply does not have any relevance to the case.

14. For (e), I take it that what the magistrate meant was, as opposed to percentage, the absolute number of infringing items in each consignment was not small.  This is not wrong. 

15. It is more problematic with (c) and (d).

16. As pointed out by counsel, the appellant did say he “basically went down to the bottom … and checked that it all conformed to the description” in the Bulgarian shipment.  He also said he opened the cartons and “[went] through the contents” in the Kenyan one.  He did not, of course, open all the cartons.  He selected some — at random.  For those he opened, however, he did go through their contents thoroughly.  That was his evidence.    

17. Regarding the heliogram of Motorola batteries, it is again pointed out by counsel that a mark would show up under the ultraviolet light was something not known to the public.  PW1 stated so in his evidence.  It begs the question therefore why someone in the appellant’s position would think of resorting to that supposedly commonplace equipment during his inspections.  I should add that when the appellant made his inspections, he did have it in mind to see if there were infringing articles.  The other intention was to ensure that there were no dangerous goods.  This he said in cross-examination without further challenge.    

18. Either way, there were other products whose authenticity the magistrate accepted readily as requiring expert knowledge to determine.  The Nokia and Siemens items all fell into this category, as well as the good counterfeits of batteries and other products under Motorola [para.5 and 10 of Statement of Findings].  They did not stop the magistrate from coming to his conclusions.  It would therefore appear that what influenced the magistrate most was the appellant’s failure to do the things as per paragraphs 11 to 13 of the Statement of Findings.  The fact that there were products (the Samsung ones, for example) whose counterfeit nature was allegedly apparent to the untrained eyes simply added to his culpability.

19. Ground 2 alleges that the magistrate had erred in his assessment of what, in the circumstances, amounted to “reasonable diligence”.

20. It is repeated that the appellant had thoroughly gone through the contents of each of the cartons that he had randomly selected to open.  According to unchallenged evidence, these cartons constituted 14% (6 out of 41) and 50% (4 out of 8) respectively of the total number of cartons under the Bulgarian and Kenyan consignments.  It is contended that whatever else the appellant might have done about ascertaining the identity of “Sunny” and the source of the mobile and mobile accessories, it would not have established that the goods concerned were counterfeit.  R. v.Chan Kim-fai CACC982/1993 is relied on where it was said that, “If … the taking of all reasonable steps would nevertheless have rendered the inquirer none the wiser, the defence [one similar to section 12(2), Cap.362] is made out.”

21. Having had some agonizing thoughts over this, I am persuaded that there is force in counsel’s argument.

22. It does strike me that when compared to many defendants in like cases, the appellant’s checking of the consignments was, at least in terms of the number of cartons opened, extensive.  I find it unthinkable that to stay on the right side of the law, he should have ready samples of all popular brand-name commercial items like phones, watches and clothing — for that is the only way how anyone can detect a counterfeit, by comparison, assuming that no expertise is required in the process.    

23. I have more difficulty with the appellant’s casualness with “Sunny” and the “basic documentation”.  I would expect someone in his line of business to have been more prudent.  The magistrate was also not wrong that he was dealing with mainly lower-end customers but I doubt whether that in itself can be said to be suspicion-giving. 

24. Anyway, the question is : what if the appellant had asked for more proof?  And I am not even suggesting that he would be given any false documents, though bogus invoices were easily available.  They just have to be written out.  But taking the Bulgarian consignment as an example, where only one out of 41 cartons was found to contain infringing items, one wonders whether the data shown in any “basic documentation” would be so revealing that the appellant would immediately be alerted.  

25. To gainsay this, the prosecution have argued that one will not know unless one finds out.  But this cannot be the correct approach.  The case of Chan Kim-fai (ibid) has made it clear that notwithstanding a defendant’s failure to do everything reasonable in the circumstances, the court will nevertheless have to consider, for his benefit, the outcome that would have been had he taken those steps.  This is what Stock J (as he then was) said :

“      What the magistrate has done … is to ask whether in fact reasonable diligence was exercised by the appellant, and to discard the question what such diligence might, in the circumstances, have disclosed.  In other words, he has said that it matters not for the purpose of [the reasonable diligence defence] that a diligent inquiry would not have revealed the true nature of the cargo.  What matters is that the owner of the vehicle did nothing and took no precautions …

       …

       It seems clear to me that in saying that it is irrelevant that reasonable diligence would have made no difference, the magistrate has misstated the law, for if in the circumstances of a particular case the taking of all reasonable steps would nevertheless have rendered the inquirer none the wiser, the defence is made out.”

26. Admittedly, the Chan case arose from a different ordinance, but the rendering of the defence that Stock J referred to is almost exactly the same as that under section 12(2) of the Trade Description Ordinance which makes it a defence if the defendant :

“… did not know, had no reason to suspect and could not with reasonable diligence have found out that the goods are goods to which a false trade description or forged trade mark is applied.” 

27. Ground 3 concerns the defence under section 26(1) of the Trade Description Ordinance.  Ground 4 contends that the convictions are unsafe and unsatisfactory.  In the light of the abovementioned, there is no longer any need to deal with them.

Judgment  

28. The appeal is allowed.  The convictions are quashed and the sentences set aside.