YUEN WAI KIN v. HKSAR

FAMC No. 52 of 2005

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION 

MISCELLANEOUS PROCEEDINGS NO. 52 OF 2005 (Criminal)

(ON APPLICATION FOR LEAVE TO APPEAL FROM

CACC No. 350 of 2002)

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FAMC No. 77 of 2005

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION  

MISCELLANEOUS PROCEEDINGS NO. 77 OF 2005 (Criminal)

(ON APPLICATION FOR LEAVE TO APPEAL FROM
CACC No. 350 of 2002)

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Between:

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D E T E R M I N A T I O N

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Mr Justice Ribeiro PJ:

1.  These two applications for leave to appeal were heard together by the Appeal Committee on 10 January 2006.  The applicant Mr Ho, in FAMC 77/2005 was represented by Ms Corinne Remedios (who did not appear in any of the previous proceedings).  Mr Yuen, the applicant in FAMC 52/2005 was unrepresented but adopted all the arguments Ms Remedios made on Mr Ho’s behalf.  Mr William Tam (who also did not appear in any of the previous proceedings) appeared for the HKSAR in each case.  At the conclusion of the hearing, we dismissed the applications with reasons to be given later.  We now provide those reasons.

2.  This case arises out of two raids conducted by the Customs and Excise Department (“C&E”) in August 1998 on factories allegedly engaged in pirating films.  Some 90,000 VCDs and several items of manufacturing equipment were seized.  Copyright in the films concerned was owned by companies in the Warner Brothers group (collectively “Warner”).  Two other films, whose copyright was owned by a company called New Line were also involved, but they have since fallen out of the picture and do not require any further discussion.

Proceedings below

3.  The proceedings have had a rather sorry history involving a re-trial and two visits to the Court of Appeal.  At the first trial, the applicants were both acquitted by H H Judge Wright (DCCC 626/1999, 15 March 2000).  However, on a case stated, a re-trial was ordered by the Court of Appeal (CACC 269/2000, Stuart-Moore VP, Mayo VP and Stock JA, 22 February 2002).  This was the first appeal in this case and we shall refer to the first Court of Appeal judgment as “CA1”.

4.  At the re-trial, Deputy Judge Mackintosh convicted both applicants on all counts (for offences under the Copyright Ordinance involving manufacture and possession of infringing copies and manufacturing equipment).  By its decision of 14 June 2004 (“CA2”), the Court of Appeal (CACC 350/2002, Woo VP, Yeung JA and Lunn J) allowed the appeal on the first charge but upheld the remaining convictions (except in relation to the New Line films).

First ground: Abuse of process and permanent stay of the prosecution

5.  In her written submissions Ms Remedios advanced various grounds for leave to appeal to the Court.  However, it emerged in argument that they constituted in substance only two grounds.  The first involves the contention that the re-trial should not have proceeded as it constituted an abuse of the court’s process.

6.  It was common ground that by an agreement dated 1 July 1996, Warner had appointed a Taiwan corporation, KPS Retail Stores Ltd (“KPS”), its distributor with the right to manufacture, distribute, advertise and sell VCDs in Taiwan and Hong Kong.  KPS had an affiliate called Deltamac (Taiwan) Co Ltd (“Deltamac”).  The applicants’ defence throughout has been that Deltamac had, with the actual or ostensible authority of Warner, entered into an agreement authorizing Wah Lee Multimedia Co Ltd (“Wah Lee”) to exercise similar rights in Hong Kong; and that Wah Lee had in turn subcontracted the manufacturing work to Metronic Multimedia HK Ltd (“Metronic”) which had itself instructed Maytronic Industrial Co Ltd (“Maytronic”) to undertake some or all of the manufacturing.  Wah Lee, Metronic and Maytronic are all Hong Kong companies and were associated with each other.  The applicants were variously directors, shareholders and/or employees of those companies. 

7.  In the case stated one question raised was as to whether the Judge was wrong “in concluding there was a relationship of principal and agent between [Warner] and [Deltamac]”.  

8.  The Court of Appeal held in CA1 that he was indeed wrong in his conclusion, this having contributed to their decision to order a re-trial.  However, the court reached that conclusion in ignorance of  a letter dated 30 June 1999 which acknowledged that Warner had known and approved of KPS authorizing Deltamac to act as its sub-distributor for both Taiwan and Hong Kong and, furthermore, that after KPS went into liquidation, Warner had allowed that company to take over as distributor for those territories, even though Deltamac’s position had not been formalized.  Moreoever, the Court of Appeal reached that decision without having been referred to a statement given by Ms Molly Kellogg, a Warner employee, to the C&E confirming Deltamac’s status as Warner’s distributor or sub-distributor in Hong Kong.

9.  The court records that it had “sought to find out how the judge had been able to come to [his] conclusion” but had received no satisfactory answer (CA1 §47).  Plainly, counsel then instructed were at fault in failing to bring either the 30^th June letter or the relevant part of Ms Kellogg’s statement to the court’s attention.   

10.  The Court of Appeal in CA1 had therefore overturned the Judge’s finding that Deltamac was an authorized agent on a factually erroneous basis.  This was seized upon at the re-trial.  It was argued that the prosecution had been responsible for that erroneous ruling so that continuing with the re-trial was an abuse of process requiring the proceedings to be permanently stayed.  Deputy Judge Mackintosh rejected that argument as did the Court of Appeal in CA2.  We are asked to grant leave on the basis that it was a substantial and grave injustice not to stay the re-trial as an abuse.

11.  We do not consider this point to be reasonably arguable.  Such an argument should have been made before the Court of Appeal with a view to re-opening its order for re-trial or to seeking leave to appeal to the Court of Final Appeal.  It was not open to the judge to decline to implement the order for a re-trial on the basis of some alleged error in the way the Court of Appeal had arrived at its decision.

12.  But we do not in any case think it a good point.  It is portrayed as an abuse of process by the prosecution but defence counsel must equally share the blame for the Court of Appeal being misled.  Moreover, it is not at all clear that avoidance of that error would inevitably have led to confirmation of the acquittal rather to a re-trial.  Certainly, the Court of Appeal in CA1 considered there to be separate questions, particularly concerning the applicants’ good faith in relation to the purported exercise of authority by Deltamac, which had not been adequately investigated by Judge Wright, leading to its order for a re-trial. 

13.  In any event, at the re-trial, the basis for finding that Deltamac was Warner’s distributor or sub-distributor was made clear to all concerned. 

Second ground: Failure of the prosecution to negate consent

14.  As her second ground, Ms Remedios submitted that in drawing the inference that the prosecution had proved the absence of consent by the copyright owner to the applicants’ manufacture of the VCDs (and therefore that the VCDs were infringing copies), the judge at the re-trial had so substantially departed from established norms as to constitute a substantial and grave injustice to the applicants.

15.  The defendants did not give evidence.  They put the prosecution to proof that the VCDs were infringing copies.  They also relied on documents seized during the raids and on statements given by them to the C&E as establishing that they were duly licensed to manufacture the VCDs or, if not, that they believed that they were so licensed and had no reason to believe that the copies were infringements. 

16.  In Tse Mui Chun v HKSAR (2003) 6 HKCFAR 601 at 610, the Court stated:

“In the present case, the prosecution took it upon itself to prove that the copyright owners of the works in question had not consented to the appellant making copies of the works i.e. she had not been granted a licence.  ......  We have no doubt that the prosecution was correct in shouldering that burden.  The absence of a licence by the copyright owner is an express, and therefore essential, ingredient in a s.118(1) offence.  The making of ‘infringing copies’ is an express and essential ingredient in both s.118(1) and s.118(4) offences.  An ‘infringing’ copy is a copy made without the consent of the copyright owner.  The absence of the requisite consent is not an ‘exception or exemption from or qualification to the operation of the law creating the offence’ (see s.94A(1) of the Criminal Procedure Ordinance).  It is an ingredient of the offence itself.  It must therefore be established by the prosecution.” (§13, per Bokhary PJ and Lord Scott of Foscote NPJ)

17.  Accordingly, the prosecution clearly had the burden of proving that the VCDs were infringing copies and therefore, the burden of proving the absence of Warner’s consent (given via Deltamac) for manufacture of the VCDs by the Hong Kong entities.  Ms Remedios submits (i) that at the re-trial, the judge failed properly to appreciate that the prosecution had left a gaping hole in their case on such absence of consent; and (ii) that this was not addressed in the Court of Appeal which had proceeded on an erroneous basis, believing that it was admitted that the discs were infringing copies.

18.  The applicants pointed to two documents as authorizing their manufacture of the VCDs.  The first was referred to at the second trial as “Exhibit 15(b)”, being a photocopy of a document purporting to be on Deltamac notepaper but itself bearing original impressions of seals which purport to be those of Deltamac and of Mr Russell Yeh, a Deltamac director based in Hong Kong.  The second was “Exhibit 15(c)” which purported to be an agreement between Deltamac and Wah Lee relating to production of the VCDs also bearing what purport to be impressions of Deltamac and Russell Yeh seals.  We shall refer to these documents together as “the purported authorities”.

19.  With the aim of negating the consent which was given on the face of these documents, the prosecution called Ms Kellogg who testified that Warner had not authorized Deltamac to appoint the Hong Kong entities as sub-distributors and that, so far as she was aware, Deltamac had not made any such appointment.  Obviously, she could not definitively exclude such appointment by Deltamac.  The prosecution also called Mr Russell Yeh who stated that he had not authorized application of his seal on the purported authorities.  However, he acknowledged that a seal bearing his name was kept by Deltamac in Taiwan in the custody of its general manager, a Mr Chester Chan, who was able to use the seal without first obtaining his permission.  This, Ms Remedios argued, showed that the prosecution had failed to eliminate the very real possibility that Mr Chan had affixed the seal on the purported authorities on behalf of Deltamac acting within its actual or ostensible authority as Warner’s agent and had therefore failed to negative consent given via Deltamac for such manufacture by the Hong Kong entities.

20.  This error, Ms Remedios submits, was not cured in the Court of Appeal, in CA2.  Unfortunately, that court was again misled by a regrettable procedural laxity at the trial.  It assumed that it was not in issue that the VCDs in question were infringing copies.  It did so on what was an apparently sound basis:  By a s 65C statement signed by all counsel concerned, the parties mutually stipulated inter alia as follows:

2.  It is accepted and admitted that the exhibit seized and described in Exhibit P14(a) included the articles, are infringing copies of copyright works, namely films referred to in Charges 1 to 4.  

3.  It is accepted and admitted that the exhibits seized and described in Exhibit P14(b) are the infringing copies of copyright works, namely films referred to in Charge 5.

21.  Notwithstanding the unequivocal nature of these admissions, counsel orally told the court at the re-trial that it was not in fact admitted that the works were infringing copies as opposed to allegedly infringing copies.  But the s 65C statement was not amended apparently because counsel then instructed for the prosecution resisted the suggestion of an amendment.  The true position was therefore not brought to the Court of Appeal’s notice and, in consequence, it took the s 65C statement at face value and failed to address what is said to be the gap in the prosecution’s case on the absence of consent.

22.  Notwithstanding the able submissions of Ms Remedios in this context and the undoubted fact that the Court of Appeal had unfortunately been led into error by a failure to amend the formal admissions, we are not persuaded that the judge’s inference that there was no consent was unjustified or a relevant departure from established norms.

23.  The judge was fully alive to the requirement for the prosecution to show that the VCDs were infringing copies and that their manufacture was not licensed (§28).  He pointed out that the characteristics of the copies may be such as to indicate the absence of a licence (§32).  In the present case, the evidence of witnesses who had examined the VCDs seized was that the discs bore no studio or distributor logo, contained no SID code and were of a very low quality, with different colour printing.  The stampers also bore no SID code, no authorised distributor logo and no copyright warning (§§36-39).  On the basis of this evidence, the judge inferred, as he was entitled to, that the discs “had the hallmarks of infringing copies” (§43).

24.  Secondly, he found that Exhibit 15(b), the document purporting to be an authorization by Deltamac to Wah Lee to manufacture and sell VCDs and DVDs in Hong Kong was “bogus” (§59) which we take to mean false or a forgery.  The affixing of original impressions of seals to a photocopy of purported Deltamac notepaper rather than on the notepaper itself was unexplained.  Moreover, he accepted Mr Russell Yeh’s evidence that on genuine notepaper the Deltamac logo was situated in the middle at the top of the page and not to the left as on the photocopy.  The criticism that the judge had failed to give sufficient importance to the possible intervention of Chester Chan is therefore less than crucial.  On the judge’s finding that the document was “bogus”, it was not to be regarded as a document made on behalf of Deltamac at all (whether or not any insider, such as Mr Chan, was involved in its production). 

25.  There was in our view ample evidence to justify inferring the absence of consent.  The Court of Appeal did not discuss this evidence because it had been misled into thinking that there was a conclusive formal admission that the VCDs were infringing copies.  However, if it had not made that error, we can see no basis upon which it could have faulted the judge’s inference founded on the evidence.  Accordingly, we are not satisfied that any arguable case for a substantial and grave injustice is made out and the applications must be dismissed.