THE SECRETARY FOR JUSTICE v. WONG DAK SUN AND OTHERS

CAAR 10/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

APPLICATION FOR REVIEW NO. 10 OF 1999

(ON APPEAL FROM DCCC 450 OF 1998)

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J U D G M E N T

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Stuart-Moore Ag CJHC (giving the judgment of the Court):

Introduction

1. This is an application made on behalf of the Secretary for Justice (the Applicant) for a review of the sentences imposed on 15 November 1999 in the District Court by Judge Wright on the three Respondents (defendants). Leave was granted by the Chief Judge on 4 December 1999, for the purposes of this application, under the terms of section 81A of the Criminal Procedure Ordinance, Cap. 221.

2. It is convenient to refer to the defendants as D3, D5 and D6 in order to achieve uniformity with the way in which they were addressed in the District Court. Put shortly, this review is concerned with the propriety of the suspension of the sentences of imprisonment which the judge imposed on D3, D5 and D6.

The charges

3. It is unnecessary to refer to the facts in any great detail. Suffice it to say that all the defendants faced joint charges relating to the making, for sale or hire, between 21 April 1997 and 20 September 1997 of infringing copies of copyright works without the copyright owner's licence, contrary to section 118(1)(a) of the Copyright Ordinance, Cap. 528 ("the Ordinance") (charges 1 to 4). The fifth joint charge against them related to the possession on 20 September 1997, for the purposes of trade or business, of infringing copies of copyright works with a view to selling them, contrary to section 118(1)(d) of the Ordinance (charge 6). The last and most serious offence, also alleged jointly against the defendants, was the possession on 20 September 1997 of articles used for the making of infringing copies of copyright works for sale, contrary to section 118(8) of the Ordinance (charge 8).

4. The total quantity of infringing copies involved in charges 1 to 4, which can properly be regarded as one offence, amounted to 18,350 discs. Charge 6 related to a further 24,330 infringing copies. The judge commented that although this was a large number, an even greater significance lay in "the diversity of the titles involved". There were no less than fifty different titles involved in the infringing copies.

5. Charge 8 was concerned with the possession of equipment to make the infringing copies and consisted of 3 compact disc production lines, 23 stampers which were the master copies of copyright works, 39 silk screen printing machines and 18 negative films.

Issue at trial

6. All of these items were discovered by Customs and Excise officers when they raided D1's premises at Rooms 901-903, Hilder Centre, 2 Sung Ping Street, Hunghom, on 20 September 1997. D3 claimed in evidence during the trial that he had authorisations to make the copies, in pursuance of a defence under section 118(3) and that he had no knowledge and no reason to believe, in relation to charges 1 to 4 and charge 6, that the copies in question were infringing copies. None of the other defendants gave evidence. The judge, however, disbelieved this defence. More specifically, he found that the relevant paperwork relating to the so-called authorisations was bogus, and he described these particular documents as nothing other than a "paper chase intended to deceive".

Mitigation

7. The mitigation which appears to have led the judge to suspend all the sentences had laid emphasis, no doubt having been argued by counsel with very great skill, on the delay in bringing the case on for trial and on the range of penalties which the courts were imposing at the time of the commission of these offences in 1997. In addition to these factors, the defendants were all of previous good character and they and their company were largely in business to make genuine copies of optical discs, namely compact discs and video compact discs.

Sentences imposed

8. The judge sentenced D3 to twenty-four months' imprisonment on charges 1 to 4 and 6 and to thirty months' imprisonment on charge 8. He ordered that all of those sentences should run concurrently. In addition, he ordered that the sentences should be suspended for two years.

9. It is immediately apparent that by oversight on the part of the judge, he had imposed a sentence on charge 8 which was contrary to law. Where a suspended prison sentence is imposed, the maximum length of the sentence under section 109B of the Criminal Procedure Ordinance, Cap. 221, cannot exceed two years. We shall return to this aspect of the sentence later, but we find ourselves yet again having to say that it is quite remarkable that neither counsel for the prosecution nor Senior Counsel for the defence (neither of whom appear in these proceedings) made any attempt, consistent with their duty, to correct the judge's error.

10. D5 was sentenced to concurrent terms of twelve months' imprisonment on charges 1 to 4 and 6 and eighteen months' imprisonment on charge 8. All of these sentences were ordered to run concurrently and they were suspended for two years.

11. D6 received concurrent sentences of eighteen months' imprisonment on the first four charges and charge 6, and a further concurrent term of twenty-four months' imprisonment on charge 8. Again, these sentences were ordered to be suspended for two years.

12. The judge made orders for the payment of costs in the sums of $70,000 against D3 and $35,000 against both D5 and D6, which would have been a small fraction of the prosecution's costs, bearing in mind that we understand the trial lasted 14 days.

13. The company for whom all the defendants worked in one capacity or another was known as Winners Laser Production Limited (D1). D1 was convicted on the same charges as these defendants and was fined a total of $953,000. There is no application in relation to D1. Two other co-defendants (D2 and D4) were acquitted.

Applicant's submission

14. It was submitted by Mr Zervos, on the Applicant's behalf, that whilst the judge had plainly considered the sentencing authorities relating to copyright offences, he nevertheless departed from the effect of those authorities when he decided to suspend the sentences on D3, D5 and D6. Mr Zervos submitted that the sentences did not reflect the gravity of these offences in that the suspensions were made without any real justification because there were no exceptional circumstances to warrant this course being taken. It was his contention, leaving aside the suspended sentence of thirty months imposed on D3 which he accepted was in excess of the judge's powers, that the sentences were manifestly inadequate and/or wrong in principle.

Reply on defendants' behalf

15. On behalf of the defendants, Mr Ching Y. Wong, SC, submitted that whilst the Court of Appeal has provided guidelines to be applied for certain offences in respect of section 118 of the Ordinance committed after 8 September 1999 when judgment was given in HKSAR v Choi Sai-lok and Another (1999) 4 HKC 334, there were no guidelines in effect at the time when these offences were committed some two years earlier. Indeed, as Mr Wong pointed out, the Court of Appeal in The Queen v Li Wan-kei and Another, CACC 13/1997 (unreported), had expressly refused to provide guidelines. In this respect, Mortimer JA (as he then was) said at p. 4 of the judgment given on 29 May 1997:

"(The Respondent) has invited the court to lay down some guidelines for this type of offence. We are not prepared to do that. Indeed it would be inappropriate - certainly at this stage. The circumstances of offences and offenders obviously vary widely. Judges in the District Court for the more serious offences will build up their experience dealing with these matters. They will take account of their experience to pass appropriate sentences."

16. Returning for a moment to Choi Sai-lok's case (above), the Court of Appeal (at p. 336G), in tracing the history of the relevant statutory provisions relating to copyright, stated that prior to May 1995, breaches were normally dealt with by fine. Whether that be right or not, the maximum fine was increased in May 1995 from $1,000 to $25,000 on first conviction, and to $50,000 for a second or subsequent conviction in respect of each infringing copy, and from twelve months' imprisonment to two years' imprisonment in respect of a first conviction, and to four years in respect of a second or subsequent conviction. The maximum sentences were again increased in June 1997 when the distinction between first and subsequent offences was removed and offences relating to the possession of articles used or intended to be used to make infringing copies became punishable by fines of up to $500,000 and imprisonment for eight years. However, before this increase, custodial sentences with immediate effect were, as a general rule, being imposed for offences covered by section 118 of the Ordinance. Again, we can turn to Choi Sai-lok at p. 341 where Keith JA, giving the judgment of the court, said:

"What must be stated is that an assertion by a defendant that he is a mere employee in the business will not warrant the suspension of an otherwise appropriate sentence of imprisonment. In this context, it is well to heed the wise words of Leonard J. in Ng Wai Ching [HCMA 1309/1996 (unreported, 20 December 1996)]:

'The typical case is one where a young man with no previous convictions is employed to sell the goods from a small shop for a salary. When arrested and charged he pleads guilty and says that he had not been employed there for long. The employers are not brought to justice despite claims in mitigation that the salesman gave as much information as he could to investigators..... It is very unfortunate that, despite their efforts the Customs and Excise appear to have been unable so far to catch the big fish of the trade and can only bring the minnows before the courts. Without their salesmen, however, the big fish cannot operate and so the salesmen must be deterred. Experience has shown that they are not deterred by fines, so that resort needs to be had to custodial sentences, even where the offender is a young person with a clear record.'

That is a clear echo of the thinking behind the sentencing, for example, of couriers in the narcotics trade.

For these reasons, we have concluded that in suspending the sentences of imprisonment which he imposed on the respondents, the judge was wrong in principle. There were no exceptional circumstances which justified the course which the judge took."

17. Mr Wong also made the point that so far as charges 1 to 4 were concerned, those offences were alleged to have been committed between 21 April 1997 and 20 September 1997, which were dates falling either side of the legislative changes which occurred on 27 June 1997. He submitted, therefore, that the most favourable view of the evidence ought to be taken when considering whether the defendants had made the infringing copies before or after 27 June 1997. This argument cannot, however, even if there was substance to it, apply to the two remaining charges committed in September 1997.

Judge's approach to sentencing

18. The sentencing judge was aware of the general approach taken by the Court of Appeal to sentencing offenders who have committed offences under section 118(1)(d). This is because the judgment in Choi Sai-lok (above) is cited in his Reasons for Verdict. The judge rightly felt that the observations made by the court in that case in respect of offences under section 118(1)(d) were equally applicable to offences under section 118(1)(a) and (8). It was stated in the passage we have cited from Choi Sai-lok that, unless there were exceptional circumstances, immediate custodial sentences should be imposed for offences of this kind. The reasons are dealt with in some detail in the judgment and there is no need for this court to repeat them. However, the judge in the present case was obviously familiar with the principles which emerged from Choi Sai-lok which in many respects had already been established from cases of this nature before the decision in Choi Sai-lok.

19. The judge stated that he found the circumstances in the present case justified suspending the sentences. It is right that we should set out what he had to say when passing sentence:

"I recognise that these offences were committed in September 1997 very shortly after the escalation of the penalties and that there has been a substantial delay in this matter coming to trial. That delay lies at the door of the prosecution and not of the Accused who, as a result, have had the matter hanging over them for some two years. However, it is apparent that the penalties were increased precisely because they were not having the desired deterrent effect - and, it must be said, this despite the fact that immediate custodial sentences were being handed down already even to persons much lower on the chain of distribution.

There was substantial and widespread media publicity concerning copyright matters at that time. I also bear in mind, especially insofar as it reflects on the Third Accused (D3), that he had been involved in an allied industry, that of film production, for some four years preceding these offences. He, in particular, simply could not have been oblivious to the concept of copyright and the consequences that flow from it.

The point has been made that the proportion of infringing disks was small in comparison to the quantity of disks in Hilder Centre when the premises were visited by Customs and Excise officers. I take that point but note that it did not seem to be of consequence in Wu Wei Cheng (CACC 173/1999).

It does appear, however, that the business, in the general sense of the word, conducted by (D3) through (D1) and others was in other respects a legitimate and not insubstantial one and that the incidence of infringing disks was relatively tiny. It is perhaps of greater significance that there is nothing before me to show or that would justify me in drawing the inference that the production lines were acquired or established for the particular purpose of producing infringing copies.

In addition I have to accept that some, albeit cursory, enquiries were made by (D3) for I did not disbelieve (DW1) and (DW2) when they said that (D3) had had conversations with them - albeit that (D3) sought to magnify the nature and scope of the conversations.

I have been apprised of the personal circumstances of each of the Accused. There is nothing exceptional in any of them. Inevitably a sentence causes hardship which, in many cases, extends beyond the convicted person himself. Those consequences could be avoided by refraining from committing the offence in the first place.

I am told that (D5) has now set up a business in Shanghai. I am also told that the business or businesses operated by (D3) has continued to manufacture disks since its production lines were returned to it shortly after their seizure and that it has done so without further infringement. That would not usually be of much relevance but I think it is a factor which I should take into account in the light of the delay in this matter coming to trial.

It is probably also correct that neither (D5) nor (D6) received any direct financial benefit from the production of the infringing copies.

In the circumstances I am prepared to accept, perhaps over-generously, that there is justification for suspending the terms of imprisonment without offending the principles laid down by the Court of Appeal and without in any way detracting from the seriousness of the offences."

Criticisms of judge's approach

20. It seems to this court that the judge had not exaggerated the position when he stated himself as having been over-generous. These were very serious offences which had been hotly contested over a large number of days in the District Court. The offenders were not small-time salesmen of pirated discs such as the magistrates courts see day in and day out. Such offenders are often sentenced to serve immediate terms in custody, whether or not they have good character, and regardless of their age. Furthermore, they were being sent to prison in 1997 when these offences were committed for precisely the reasons, cited earlier, which Leonard J had given in Ng Wai Ching.

21. These defendants were not small-time offenders. They were engaged in the production of infringing discs. If they are not to be sent to prison immediately, it offends every principle of fairness and justice that small-time offenders are to be immediately incarcerated.

22. The courts have over and over again stated in recent times that, unless there are unusual or exceptional circumstances which can justify a departure from an immediate prison sentence, a suspended sentence should not be imposed. In this respect, we were not impressed by the reason given by the judge that cursory inquiries about copyright had been made by D3 with two lawyers (DW1 and DW2). In his Reasons for Verdict, the judge had made it quite plain that these were in no sense serious discussions.

23. When placing importance on the delay in the prosecution of these offences, the judge may have noticed from the judgment in Choi Sai-lok (at p. 341) that the Court of Appeal expressly recognised the special difficulties involved in prosecuting copyright cases. This had earlier led Mortimer JA (as he then was) to observe in The Queen v Li Wan-kei, CACC 13/1997 (unreported), that an intention to plead guilty "at the very outset which avoids all the elaborate preparation and expense for trial", was a factor which should be reflected in sentence. In other words, those who plead guilty at an early stage, or express the intention to do so which is later carried through, can expect additional credit for saving the time which is occupied in difficult investigations into copyright cases.

24. Of course a delay of two years would have provided considerable mitigation for defendants wishing to plead guilty at an early stage but who were denied the opportunity to have their cases dealt with at that stage because of the not guilty pleas of others. However, this was not the situation here. All the defendants fought the case as they were perfectly entitled to do, but they were entitled at most to minimal benefit arising from the delay when it has long been recognised that cases of this nature take a considerable time to prepare. The prosecution was put to proof in full on every aspect of their case. If the defendants had pleaded guilty, in the face of the overwhelming evidence against them, then this case would have been disposed of far earlier than it was. The delay was very much the fault of the defendants by forcing the prosecution to prove that the alleged infringing copies were in fact breaches of copyright. They were fully entitled to take this approach, but the delay was of their making.

25. Whilst the judge paid heed to the differing roles of the defendants, he does seem, with the greatest respect, to have lost sight of the fact that all of them had responsible positions in the company (D1). D3 was a director and shareholder of D1 and he was effectively the man in charge. D5 was the general manager and D6 was a manager with a "hands-on" role to play. This oversight on the part of the judge may perhaps have been because he fell into the trap of comparing the relatively small quantity of infringing copies (albeit relating to fifty different titles) against the much larger quantity of legitimate discs.

26. The defendants had to be sentenced for the discs which were in breach of copyright and for the materials which they had in their possession to make infringing copies. Looked at in another way, the defendants' business was essentially respectable and lawful, but they were using their honest front to mask their unlawful sideline. This made the defendants extremely hard to catch and it may also have contributed towards making the allegations more difficult to prove. They had even invented a whole series of so called "authorisations" which were intended to cover their tracks after the event.

27. Whether or not the judge appreciated it, generally custodial offences with immediate effect were being imposed for offences of this kind by September 1997. Again, we need to cite a passage from Choi Sai-lok at p. 340, which was concerned with offences committed in 1998, where the court said:

"We do not know what cases were cited to the judge, though one of them was undoubtedly Li Wan Kei. A total of eight cases have been referred to us by Mr. Kevin Zervos for the Secretary for Justice in his helpful skeleton argument. All of them resulted in custodial sentences of immediate effect being imposed, though that does not mean that there have not been other cases in which non-custodial sentences or suspended terms of imprisonment have been imposed. Half of the cases cited by Mr. Zervos related to offences committed before the enactment of the new Copyright Ordinance, and the other half related to offences committed since then. Some of them concerned the proprietors of retail outlets of varying sizes, while others concerned young men who worked at such outlets as salesmen. One of the defendants ran a warehouse at which the proprietors of various retail outlets kept their stocks so that they did not have to have pirated compact discs in their shops. None of these cases concerned storemen, packers or delivery men. In almost all the cases, the defendants had pleaded guilty, and apart from two young offenders who were ordered to be detained in a detention centre, the sentences of imprisonment ranged from 6 months' to 16 months'."

28. This passage also serves to illustrate one other very important point of principle in sentencing, to which we referred earlier, which has to be borne in mind in cases of this nature. When relatively well-to-do defendants appear in court and are treated, as these defendants were, in a way which has allowed them their liberty, others such as the small-time salesmen in retail stores will understandably feel aggrieved when, having themselves been sent immediately to prison, they then hear that managers and even bosses of the companies responsible for making the discs they have been selling are not receiving immediate custodial sentences. Such disparity has to be avoided.

Conclusion

29. Sentences of imprisonment were plainly appropriate for these offences and there has been no argument to the contrary. We are satisfied that no good reason was put before the judge which could justify the suspension of any of the sentences he imposed. These sentences in themselves were by any standards low, even for offences committed in 1997, aside from the fact that the judge then ordered them to be suspended. We are satisfied that the sentences ought to have been given immediate effect.

30. Accordingly, we shall allow the application. We propose to quash the orders suspending the sentences. The orders we propose to make take into account that this is a review of sentence and that our decision will result in the defendants now having to serve terms of imprisonment which were previously suspended. It is solely on this account that we propose to reduce the starting points taken by the judge by about a quarter.

31. D3 initially received an overall sentence of thirty months unlawfully suspended for two years. Obviously this sentence could not have been upheld if it had remained suspended. However, in itself it was a lenient sentence for a man in D3's position who had been found guilty of these offences and, in particular, having been convicted on charge 8. D3 will go to prison on charges 1 to 4 and charge 6 for eighteen months and on charge 8 for twenty-two months. All of these sentences are to run concurrently, making twenty-two months in all.

32. D5 initially received an overall sentence of eighteen months. He will go to prison on charges 1 to 4 and 6 for nine months and on charge 8 for thirteen months. All of these sentences are to run concurrently, making thirteen months in all.

33. D6, who initially received an overall sentence of twenty-four months, will go to prison on charges 1 to 4 and 6 for thirteen months and on charge 8 for eighteen months. All these sentences are to run concurrently, making eighteen months in all.

34. We should add that these sentences, for offences of this gravity, should not be regarded for the future as providing any kind of guideline. Plainly, in the light of what we have already said, sentences higher than the starting points adopted by the judge for offences of this nature would be upheld by this court.

35. The costs orders which were made will stand.