Chan Hon-yuen v. The Queen

CACC000810/1982

Sentence - Trade Descriptions Ordinance Cap. 362 and Protection of Non-Government Certificates of Origin Ordinance Cap. 324 - commercial misrepresentation - ratio of 2½: 1 on gross profit neither excessive nor wrong in principle - appeal dismissed.

BETWEEN

Coram: Jones, J.

Date: 22 September 1982

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JUDGMENT

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PRELIMINARY

1. This is an appeal against sentence.

2. On the 16th July 1982 the appellant pleaded guilty to four offences, one contrary to Section 7(1)(b) and one contrary to Section 7(1)(a)(i) of the Trade Descriptions Ordinance Cap. 362, and two contrary to Section 7(2)(a) of the Protection of Non-Government Certificates of Origin Ordinance Cap. 324.

AGREED FACTS

3. The appellant is the proprietor of Pak Lok Knitting Garment Factory which is registered with the Trade Industry and Customs Department for Certification of Origin purposes.

4. The factory lodged an application for a Certificate of Origin with the Indian Chamber of Commerce on the 20th February 1982 for the export of 2,000 dozen ladies' brassieres to the Middle East. The declaration in support of the application stated that the sewing work had been done in Hong Kong.

5. On the 24th February, 1982 an inspector from the Chamber inspected the goods and found that some of them were labelled "Made in China". In view of the discrepancy the application was refused.

6. Officers from the Trade Industry and Customs Department visited the factory on the 4th March 1982 when they discovered several workers cutting off the labels marked "Made in Hong Kong" from a quantity of ladies' brassieres and relabelling them as "Made in China". 1,400 dozen ladies' brassieres with labels marked "Made in China" were seized for further investigation. It was later ascertained that the goods had been manufactured in the appellant's factory and formed part of the goods declared in the application for the Certificate of Origin.

7. The goods had been relabelled in order to export them under a re-export licence when the application to obtain a Certificate of Origin from the Indian Chamber of Commerce had been refused. Amongst the 2,000 dozen brassieres declared or the application 400 dozen were sewn in China. Further enquiries revealed that the appellant's factory had also submitted an application to the Hong Kong General Chamber of Commerce on the 20th February, 1982 for a Certificate of Origin to export 800 dozen brassieres sewn in China to the Middle East. The application declared that the sewing work had been done in the appellant's factory. The particulars of the two applications are summarised as follows:-

8. The appellant's factory has a capital of $700,000. The turnover in 1981 was about $3,000,000 for which year a loss of approximately $200,000 was claimed.

9. The total value of the goods in question was $81,400 and a gross profit of $8,000 was anticipated.

CHARGES

10. The particulars of the four offences were as follows:-

11. The appellant was fined $2,000 on the first summons, $5,000 on the second summons, $6,000 on the third summons and $14,000 on the fourth summons. No appeal lies in respect of the first summons, but the appellant appeals against the sentences on the other summonses on the grounds that the fines were too severe.

12. The maximum sentence on summary conviction under Section 7(1)(a)(i) of the Trade Descriptions Ordinance is a fine of $100,000 and 2 years' imprisonment and under Section 7(2)(a) of the Protection of Non-Government Certificates of Origin Ordinance is a fine of $50,000 and to imprisonment for 1 year.

CONCLUSIONS

13. The learned magistrate dealt with the case as one of commercial misrepresentation which it clearly was.

14. In his careful Statement of Findings the learned magistrate cited Ho Shiu-sun v. The Queen⁽¹⁾ and Yeung Hoi-yu v. The Queen⁽²⁾ , which were appeals relating to false trade description offences contrary to the Merchandise Marks Ordinance Cap. 41. In the course of his judgment Yang J. said:-

'Trade being the life blood of Hong Kong, any conduct which damages our commercial reputation must be stopped. More especially, our reputation and image abroad must be resolutely protected, so that the confidence of our trading partners in all parts of the world, built up by our industry and integrity over many years, must not be permitted to be undermined by the dishonest few. However, we must recognize that there are different degrees of dishonesty.'

15. He also referred to Chan Kam Bor and others v. The Queen⁽³⁾ which concerned a charge of attempting to export unmanifested cargo contrary to Section 18(1)(b) of the Import and Export Ordinance Cap. 60 and a charge of attempting to export prohibited articles without a licence contrary to Regulation 4(1) of the Import and Export (General) Regulations where O'Connor J. said:-

'In passing sentence for an offence of facts of this nature, regard may be had to our relationships with other jurisdictionsin the area and some regard should be paid to the comity of nations. In the case of The Queen v. Hau Sang 1963 H.K.L.R. page 881 the Court said 'it is appropriate when deciding on the sentence to have regard to the damaging effect the breach of the law may have on our external relations, which in their turn can have domestic repercussions.'

16. It was submitted in mitigation that the appellant committed the offences as he had contractual obligations to fulfil. However, this in no way minimises the seriousness of the offences which amounted to a deliberate deception of the authorities. The seriousness was in fact aggravated when the appellant's workers were found relabelling the brassieres on the 4th March 1982 following the discovery of his earlier fraudulent conduct by the Indian Chamber on the 24th February 1982.

17. The learned magistrate based the penalty imposed on the third and fourth summonses, by adopting a ratio of 2½: 1 on the gross profit of $8,000 and made an apportionment to each summons. In respect of the first and second summonses he assessed the gross profit at $3,500 and doubled this amount to reflect the overall penalty which he apportioned between the two summonses. In his reasons the learned magistrate said:-

In assessing penalty I kept in mind that the goods referred to in charges 1 and 2 were in some way related to the goods referred to in charges 3 and 4. The ratio of total penalty on all 4 charges to gross profit is approximately 3.4 : 1 which is well within the ratio of 5 : 1 even after allowing for the fact that charges 1 and 2 warrant an additional penalty outside such ratio of 5 : 1. I still bear in mind I used gross profit on the charges and not net profit, hence the lower ratio.

18. On the matter of penalty Pickering J. said in Popular Machinery Co. Ltd. v. The Queen⁽⁴⁾:-

Few cases are identical and the penalty in each has to be decided on the merits of the case having regard to the circumstances of both the offence and the offender. Whilst therefore we refrain from attempting to lay down any mathematical formula or rule of thumb for the assessment of penalties in cases involving commercial misrepresentation, we are constrained to observe that in a case where the Court is fully satisfied that the profits derived from such a misrepresentation have been accurately disclosed to the Court, there is merit in assessing the penalty to be imposed by reference to that figure of profit. In the present case the ratio of penalty to disclosed net profit was 2½ : 1 and we are of the opinion that such a ratio is by no means excessive. Indeed in Criminal Appeal No. 411 of 1971 the appeal judge, though regarding the ratio of 8½ : 1 adopted by the learned magistrate in that case as excessive and allowing the appeal against sentence, substituted fines which bore the ratio 5 : 1.

19. The adoption of a ratio to a disclosed net profit is a useful guideline in assessing the amount of penalty. However, each case must depend on its own individual circumstances. The Court has to determine what is the appropriate fine having regard to the seriousness of the offence including any aggravating features that may be present and the circumstances of the accused.

20. No grounds have been shown in this case that the fines were either manifestly excessive or wrong in principle.

21. The appeal against sentence is therefore dismissed.

(1)    C.A. 120/79

(2)    C.A. 121/79

(3)    C.A. 239/81

(4)    C.A. 950/71

Representation:

Mr. David Wong (Wong, Hui & Souza) for Appellant.

Mr. Kenny (Legal Department) for Respondent.