HKSAR v. Best Success Holding Ltd

DCCC1052/2002, 47/2003 & 340/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NOS. 1052 OF 2002, 47 & 340 OF 2003

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Coram : Her Honour Judge Yuen in Court

Date of Hearing : 30^th October 2004

Date of Ruling : 30^th October 2004

Date of Handing Down Reasons for Ruling : 20^th January 2005

Reasons for Ruling on Application for Confiscation Order

1.This is a forfeiture application lodged by the prosecutions under section 132 of the Copyright Ordinance Cap 528 for the forfeiture of 6 production lines belonging to the 1^st Defendant after the 1^st Defendant had been convicted of 8 copyright offences under section 118 of Cap 528 in respect of the production of 30,757 infringing copies of video compact discs, involving 5 films: “ Digimon Adventure”, “Doraemon”, “101 Dalmatians”, “Lady and the Tramp” and “Blue Cat 3000 Questions”.

2.After convicting the 1^st Defendant I have imposed a total fine of HK$1.981 millions for the 8 charges of which the 1^st Defendant was found guilty of.

3.There is no dispute between prosecutions and the defence about the legal principles to be applied in forfeiture proceedings:-

(a)	S.132 of Cap 528 confers a discretion upon the court to decide whether to order forfeiture of articles used in the making of infringing copies of work.  The options available are :-
	(i)	to grant an order for forfeiture,
	(ii)	to deliver the articles to the person who appears to the court be the owner of the copyright owner, or
	(iii)	to dispose in such other way as the court may think fit.
(b)	The judicial discretion must be exercised fairly, not arbitrarily nor lackadaisically. (R v Wong Shiu-lun [1992] 2 HKC 555, 557)
(c)	In AG v So Lo-kam [1986] HKLR 564, per de Basto J,
	(i)	The purpose for which the forfeiture provisions were enacted was to enforce the Ordinance and to serve as a deterrent against its contravention, that is, that forfeiture provisions are penal and deterrent in nature.
	(ii)	The court must not make an order, the result of which would be to frustrate the object of the legislation or to impair its effectiveness.
	(iii)	Once the prescribed conditions are established, the Crown is not obliged to prove an additional fact of guilt or negligence.
	(iv)	Once the prescribed conditions are fulfilled, an order for forfeiture should be made unless some good reason is shown by the claimant, on the balance of probabilities, as to why a forfeiture order should not be made.
	(v)	Good faith, or innocence based on ignorance, does not entitle the claimant to have the article, vessel or vehicle restored to him.
	(vi)	The sentence passed on a claimant in the prior criminal proceedings is irrelevant.
	(vii)	Considerable financial loss, even for a claimant not of substantial wealth, is a hardship but not an undue hardship.
	(viii)	The mere fact that forfeiture would cause undue hardship on a claimant does not, of itself, mean that a forfeiture order should be refused.
(d)	In R v Buddo (1982) 4 Cr App R(S) 268 at page 270 it was suggested that an order of forfeiture adds greatly to the severity of the sentence imposed upon the accused.
	It was suggested that the value of the property to be forfeited and the likely financial and other effects on the accused of making a forfeiture order are material matters which the court should take account of before ordering forfeiture (see R v Highbury Corner Stipendiary Magistrate ex p Di Matteo (1990) 12 Cr App R(S) 594, at 598.
	In a situation where the accused is guilty of an offence, and had exposed himself to the risk of forfeiture of property, he cannot rely upon his own deliberate criminal conduct to form the basis of a finding of undue hardship such as to enable him to resist an order.  The mere fact that the forfeiture will cause undue hardship to the owner does not, of itself, resolve the matter in his favour. R v Ngai Wai MA-750/85.
(e)	The court should also consider the likelihood of the property being used for the commission of yet further offences if forfeiture is not ordered R v Shiu Cho-kee [1986] HKLR 207 at 209.

4.Counsel on behalf of the 1^st Defendant urged upon the refusal of a forfeiture order for the following reasons:-

(a)	Though it was accepted that the 6 production lines had been used for the production of infringing VCDs, it could be seen the 1st Defendant had a good trading record in the past.
(b)	A substantial portion of the 1st Defendant’s business was to carry out the legitimate manufacturing of optical discs.
(c)	The imposition of a significant financial penalty is of sufficient deterrence to the 1st Defendant.
(d)	Profits made from the infringing activities were not substantial.
(e)	The 1st Defendant is currently in a parlous financial condition.
(f)	Customs Officers had, after the seizure of the machines, permitted the 1st Defendant to make alteration to the machines.  Alterations had been made to the machines in December 2003.
(g)	Since the alteration of the production lines, the 1st Defendant only produced blank VCDs with the use of the 6 production lines.
(h)	The granting of the forfeiture order would have the effect of closing down the 1st Defendant’s business, resulting in 32 employees going into unemployment.
(i)	An order for the payment of a financial sum in lieu of forfeiture would have served the society better as prosecution would likely have simply destroyed the machines after an order for forfeiture was granted.

5.Defence proposed the payment of a further sum of HK$1.3 millions for the return of the 6 production lines.  Prosecution accepted the payment of a financial sum in lieu of an outright forfeiture order would be equitable in the circumstances.

6.I do grant the following orders:

(i)	Items 9 to 16 to be returned to the 1st Defendant;
(ii)	Items 23 to 28 to be forfeited to the Government, unless
	(a)	the 1st Defendant made full payment of the fine; and
	(b)	the payment of a sum of HK$1.3 millions to the Government on or before 1 February 2005.

Mr. William Tam, Senior Government Counsel for Prosecution.

Mr. Ian Lloyd instructed by Messrs. Peter Cheung & Co. for the 1^st Defendant.