R. v. ALLTEX INDUSTRIAL CO. LTD.

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.1233 OF 1996

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J U D G M E N T

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1. The appellant was convicted on its own plea of 20 summonses in respect of the supply of false or misleading particulars in respect of applications for an export licence relating to a total of 250,000 cotton woven unfilled comforter shells to be exported from Hong Kong.

2. The appellant was approached in June 1994 by a company name Pac-Fung Feather Company Limited ("Pac-Fung"). That company had received orders from the United States for the supply of goods which were subject to the export applications but was unable to fill that order by its own production. Due to its mismanagement, it had been barred from participating in 1994 quota system for the first three months of 1994. That debarment prevented Pac-Fung from meeting its orders from the United States but the company still wish to take advantage of the orders it had received.

3. Pac-Fung then approached the appellant herein, which is an export company, and entered into an agreement with the appellant for the supply of the goods. The appellant sub-contracted the manufacture of the goods to a second company called Hop Lee Garment factory. That garment factory was unable to fill the order and entered into an agreement with Pac-Fung to do the actual manufacture. Export licences were sought by the appellant showing the appellant to be the exporter and Hop Lee Garment Factory to be the manufacturer. When it became apparent to the appellant that the real manufacturer was Pac-Fung, the appellant was assured by a Mr Leung, the Shipping Manager of Pac-Fung, that he had consulted the Certificate of Origin Section of Trade Department on 30^th June 1994 and had been assured that in the circumstances of this shipment, no alteration to the applications need be made.

4. In arriving at his decision as to penalty in this matter, the learned Magistrate had before him the authorities which settle the law. In particular, he was referred, as am I, to R.v. Dutton Trading Ltd & Anor [1988]2 HKLR 565 where Rhind J. said :

"The penalty to be imposed depends on the facts in each case and should be a sum which ensures the company derives no benefit from the transaction and imposes an additional penalty which reflects the company's culpability".

5. With respect I adopt that proposition as a true statement of the law. That proposition divides the penalty in the case such as this into two parts. Firstly, a stripping of the benefit from the defendant, and secondly the imposition of what amounts to a penalty as a punishment for the action taken by the defendant.

6. In this case, it is not disputed that the maximum sum which could have been made by way of benefit from this transaction in the hands of the appellant was the sum of $100,000. That is to be contrasted with the profit that was to be made by Pac-Fung which was the sum of $645,961 after tax. The figure of $100,000 in the hands of the appellant of course is a gross figure before the deduction of tax or any other sums of money.

7. As to the second part of the proposition set out in R.v. Dutton it is necessary to look at the nature of involvement of the appellant. I have been referred to the case of R.v. Pac-Fung Feather Co. Ltd. MA 1232/1996 where my brother Leong sets out his reasons for allowing the appeal against sentence of Pac-Fung and reducing the fine imposed upon that company from $1,200,000 to $1,000,000.

8. The role of Pac-Fung was that of a trader in the goods to be exported and the manufacturer of them. They had direct orders from the United States of America and they were to manufacture the goods and to sell them overseas. The appellant herein was no more than a name on an invoice at the end of the day. They had no orders from overseas; they had no interest in the contract between Pac-Fung and the purchaser in America. Their level of culpability must be on a far lower basis than that of Pac-Fung.

9. It seems to me that the appropriate penalty in this matter was firstly a sum of $100,000 to remove from the appellant the maximum benefit that it could have made; secondly to reflect a difference in position between the appellant and Pac-Fung and that of Hop Lee who was fined the sum of $120,000, an appropriate penalty to reflect the culpability of the appellant is the sum of $50,000. The appeal is allowed to the extent that the sentence is reduced to a sum of $150,000.