HKSAR v. Tjon Kenneth Lie Sin and Another

HCMA 492/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO 492 OF 2011

(ON APPEAL FROM ESCC NO 5248 OF 2010 &
ESS NO 44056 OF 2010)

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J U D G M E N T

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1.Appellant 1 (“A1”) was charged with “possession for sale or for any purpose of trade or manufacture goods to which a forged trade mark was applied”, contrary to section 9(2) as read with section 18(1) of the Trade Description Ordinance, Cap 362. Appellant 2 (“A2”) was charged with the same offence. As the two cases arose out of the same incident they were tried together.

2.They were convicted of the charge after trial.  A1 was sentenced to three months imprisonment suspended for 18 months and A2 was fined $35,000.  The appellants appeal against their convictions and sentences.

Evidence of the prosecution

3.Most of the evidence of the prosecution was not in dispute and took the form of admitted facts under section 65C of the Criminal Procedure Ordinance, Cap 221.  Details are as follows:

(a)  At about 1550 hours on 4 August 2010, Customs Officers disguised as customers and one of them brought a pair of boots bearing “UGG Australia” trademark from a saleslady at A2 located at Flat 1016, 10/F, Horizon Plaza, 2 Lee Wing Street, Ap Lei Chau, Hong Kong.

(b)  At the time of sale A1, the sole director of A2, was present and admitted to be the “boss” of A2.  On being arrested and cautioned by a customs officer he further admitted that the suspected counterfeit “UGG Australia” boots found in A2 belonged to him and were for sale.  A post‑record of the arrest and what A1 said under caution were admitted into evidence on the basis that the answers were given by A1 voluntarily.

(c)  A2 was searched and 12 pairs of boots bearing “UGG Australia” trademark together with some other items were seized.

(d)  The trademark “UGG Australia” is registered under the Trade Marks Ordinance, Cap 559 and the relevant Trademark Certificate was admitted into evidence.

(e)  A1 voluntarily attended an interview and the record of interview was admitted into evidence.

(f)  On 18 March 2011, A1, through his legal representative, provided the names of Ricky Siu and Owen Industrial Company to the Customs and Excise Department and it was confirmed after investigations that Ricky Siu (Siu Chi Wai) was the sole proprietor of Owen Industrial Company which commenced business on 1 August 2009 and ceased business on 31 March 2010.

4.The prosecution called two witnesses.  The first one who was a Customs Officer gave evidence about a sketch and some photographs and confirmed where the exhibits including the boots were found.

5.The second prosecution witness (“PW2”) was the Finance Director of Deckers Asia Pacific limited, which was wholly owned by Deckers Outdoors Corporation, the registered owner of the “UGG Australia” trademark. The defence challenged her expertise regarding the authenticity of the “UGG Australia” boots.  The magistrate dealt with this issue first.

6.PW2 joined the company in 2009.  Her duties included financial and operational matters.  There were only three staff members in the company and she had plenty of opportunity to familiarise herself with the product.  She had visited some factories in China to see how the boots were made.  She would attend two sales meetings in the USA each year during which new products and new anti‑counterfeit features would be introduced.  Her company was provided with samples of each style of the boots. She was in constant contact with the brand manager who provided her with updated information on both genuine and counterfeit goods.

7.After hearing the evidence and submissions the magistrate accepted her expertise and gave leave for her to testify as an expert.

8.On 15 October 2010, PW2 examined the 13 pairs of boots, ie the pair of boots bought and the 12 pairs of boots seized by the Customs Officers, and concluded that they were all counterfeit goods.

9.According to PW2 prior to April 2011, Lane Crawford was the only authorised distributor of part of the “UGG Australia” line of products in Hong Kong and she had never heard of Owen Industrial Company.

Defence case

10.A1 was the managing director of A2 which was owned by a company owned by A1.  A2 started business in 2007, selling furniture and luxurious bedding.

11.About December 2009, a man called Ricky Siu (“Siu”) came to A2’s showroom and introduced himself as the sales agent of “UGG Australia” boots, presenting a name card in the company name of Owen Industrial Company with address and telephone number.  A web site “UGG.lifestyle.com” were also printed on the card.  He told A1 that “UGG’ was an upcoming brand with no retailers in Hong Kong and asked if A1 was interested in selling them.  He also produced some kind of certificate but A1 paid no attention to its contents.

12.After talking to his friends and family A1 considered that there was potential in selling the boots and he asked Siu to bring a sample for further discussion.

13.When Siu came A1 asked how to tell if the product was genuine.  Siu told him there was a sun‑shaped pattern at the sole of the boot.  Siu even went through the official website of “UGG Australia” which contained similar information.  After comparing the sample brought by Siu with the information on the Website A1 thought that the boots were genuine and agreed to place an order with Siu in January 2010.

14.The first order of about 15 pairs of boots arrived around the end of January 2010.  A1 and A2’s saleslady checked them to confirm that they were genuine.  Thereafter, A1 delegated the purchase and inspection of further products from Siu to the saleslady.

15.Around July 2010 Siu told A1 that he was no longer an agent of “UGG” and A1 should purchase the boots from the factory directly.  A1 told Siu to contact A2’s saleslady directly.  A1 said A2’s staff would inspect all the boots ordered on arrival. A1 did not know that they were counterfeit goods and would not have agreed to purchase them if he had known about it.

16.A1 agreed that he knew nothing about Siu, Siu’s company and “UGG”.  He had not been to Siu’s company and the factory manufacturing the boots and had not asked Siu details about them.  He did nothing to approach “UGG” to indicate his interest in becoming its official retailer and made no enquiries from the factory about the authenticity of the boots despite A2’s saleslady finding a problem with the quality of a couple of pairs of boots which were replaced by Siu without question.

17.He did not ask to see the certificate presented by Siu or a copy of it even when he decided to place an order for the boots and relied solely on the words of Siu who was a stranger to him.

The reasoning of the magistrate in convicting A1 and A2

18.The magistrate accepted the evidence of PW1 and PW2 but rejected the evidence of A1.  She found the 13 pairs of boots to be counterfeit products and was of the conclusion that the appellants knew that they were counterfeit products.  On this basis she convicted the appellants.

19.The magistrate added that even if she was to accept the evidence of A1 regarding how he came to sell these boots, she was of the view that the appellants had not shown on an evidential basis that the commission of the offence was due to a cause beyond their control and they had taken all reasonable precautions and exercised all due diligence to avoid the commission of the offence, or that they did not know, had no reason to suspect and could not with reasonable diligence have ascertained that the trademark had been falsely applied.

Grounds of appeal

20.In respect of the appeal against conviction the appellants submit that the convictions are unsafe and unsatisfactory for two main reasons:

(a)  the magistrate relied on information which she privately obtained from UGG Australia’s official website (“the Website”) and with such extraneous material challenged the defence case and cross‑examined the appellants upon it; and

(b)  the magistrate erred in ruling that PW2 was entitled to give evidence as an expert, or alternatively having done so erred in giving any weight to such evidence. 

Relying on information from the Website

21.The appellants complain that the magistrate was throughout the trial privately assessing the Website and commenting on its contents when the prosecution did not adduce any evidence from the Website.  The magistrate had indeed accessed the Website privately as evidenced in the following exchanges between the magistrate and the defence counsel in the transcript (Appeal Bundle page 148S to page 149F):

“COURT: Actually, before we start I’d better tell you something.

MR LAU: Yes.

COURT: You can do it over the lunch hour, if possible. You know that there is a website for UGG Australia?

MR LAU: Yes

COURT: Yes, well you can ask questions which will be answered within 24 hours.

MR LAU: Yes. Thank you.

COURT: Yes. I suggest you look at that, with a list of authorised retailers, concept stores.

MR LAU:  Thank you, your Worship.”

22.The appellants also quote this part of the transcript in their written submission, although it makes a mistake that this took place before the cross‑examination of PW2.  It actually took place before the cross‑examination of PW1.  In the examination‑in‑chief of PW1 nothing was mentioned about the Website.  From the way the magistrate raised the matter it was obvious that it was not part of the case of the prosecution and was something brought up by the magistrate as a result of her own investigations.

23.In the examination‑in‑chief of PW2 the prosecutor asked the witness a question about the Website being available on the internet and whether one could make enquiries about the genuineness of the boots through the Website.  PW2 answered there was a section on the Website teaching customers how to identify genuine boots and counterfeit boots and that the Website was regularly updated.  She, however, did not give any detail of what was taught on the Website.

24.In answer to a question put by the magistrate of whether a shop could find out from the Website if somebody offering to sell boots to the shop was selling genuine goods, PW2 said:

“ There’s a section on the website what we call a store locator and you can search by country. But, of course, in the course of conducting business in Hong Kong; when we are promoting our products; when we are in discussion with distributors; or the contract was just signed, there is some time gap, then we can’t update….”

25.It was obvious that the magistrate did not consider her question answered and went on to ask:

“Look, Madam, I’ve looked in your website in quite a lot of detail, okay. They are all – they are either concept stores, authorised retailers and authorised online retailers. I’m talking about someone offering to sell me goods on a – for example – on a wholesale basis. How can I find out? I note that there is a customer service which will give me a reply of any inquiries within 24 hours. There’s also a live help.”

26.PW2 answered that she was not very sure about this area.

27.The appellants cite the case of R v Thompson [2011] 1 WLR 200 regarding jurors making their own research on the internet which might affect the decision of the jury, whether consciously or subconsciously.  The case concluded that as the prosecution and defence would not know what consideration might have entered into the deliberations of the jury and would therefore not be able to address arguments about it, this would represent a departure from the basic principle that a defendant be tried on the evidence admitted and heard by the jury in court.

28.This court has no quarrel about this principle.  Indeed, this principle and the case of Thompson are considered in the Specimen Directions in Jury Trials published by the Judicial Studies Board:

“ In addition, you must not obtain information elsewhere (for example, on the Internet) about the case in general or about other matters that are raised during the trial. The reason for this is that if you were, unknown to the prosecution and defence, to conduct your own research or investigation, they would not be in a position to comment on or otherwise deal with it and that would not be fair.

…

The dangers of internet research and the advisability of a warning to jury members not to conduct their own internet research is the subject of discussion in Thompson & Ors v R [2010] EWCA Crim 1623 at paras 11 and 12 in particular.  The precise form of words used by the judge is a matter for him but the sense of the message is indicated in the passage above.  What is important is that reference to research should include reference to the internet and that what is said to the jury about not conducting its own research, whether on the internet or otherwise, is said in terms that make it clear that it is a direction and not a mere suggestion or polite request.”

29.The decision of Thompson was cited with approval by Macrae J in HKSAR v Kissel (Stay: Media) [2011] 3 HKLRD 1:

“41. It is at this juncture I should say something about the internet and any researches which jurors might be tempted to make during the currency of any trial (or retrial), particularly where there has been extensive publicity attaching to the case. The Court of Appeal in England in R v Thompson and others (2010) EWCA 1623 has very recently reviewed (at para. 12) the guidance which needs to be given to jurors in this area:

‘ Jurors need to understand that although the internet is part of their daily lives, the case must not be researched there, or discussed there (for example, on social networking sites), any more than it can be researched with, or discussed amongst friends or family, and for the same reason. The reason is easy for jurors to understand. Research of this kind may affect their decision, whether consciously or unconsciously, yet at the same time, neither side at trial will know what consideration might be entering into their deliberations and will therefore not be able to address arguments about it. This would represent a departure from the basic principle which requires that the defendant be tried on the evidence admitted and heard by them in court. Again, we do not purport to lay down a standard form of words; the sense of the message is familiar to all judges. What matters is that it should be explicitly related to the use of the internet. We recommend a direction in which the principle is explained not in terms which imply that the judge is making a polite request, but that he is giving an order necessary for the fair conduct of the trial. Such a direction will naturally fall to be given at the outset of the trial, in the same way as the direction as to collective responsibility addressed earlier in this judgment.’

…”

30.A magistrate is both the judge of the law and facts.  Being a judge of the facts the magistrate is actually performing the function of a jury and therefore should not conduct his own research into matters relating to the issues of the case and should most certainly not to rely on the findings of such research. The appellants rely on the case of HKSAR v Sherlock,HCMA 73/2009 which concerned a magistrate in an indecent assault conducting research on the internet about homosexuality when the defendant claimed that he was a homosexual having no interest in female body.  They cite the following passage of McMahon J to argue that what the magistrate did in the present case amounts to material irregularity:

“32. A tribunal of fact should not do its own research into a matter which has a bearing on its findings. It should most certainly not act upon the results of any such research; to do so would normally, and in the circumstances of this case did, amount to a material irregularity.”

31.The appellants, however, choose not to quote the part of judgment which dealt with the effect of the material irregularity in that case, which read:

“33. Nevertheless on the basis of the principles expressed in Chou Shih Bin I am satisfied that I can arrive at my own findings in this case and that the magistrate’s error of law in this regard, or indeed in any other regard, does not in any event matter.”

32.The authority referred to is HKSAR v Chou Shih Bin [2005] 8 HKCFAR 70 in which it was held by the Court of Final Appeal that appeals from magistrates’ convictions were dealt with by the Court of First Instance as re‑hearings.  The conclusion of McMahon J was that despite the material irregularity of the magistrate he was still entitled to look at the evidence of the case before him to arrive at his own findings of the case.  He eventually allowed the appeal not on the material irregularity but on evidence, because he found there was a possibility that the victim had misunderstood what had happened and had believed the defendant had indecently assaulted her when he had in fact come into contact with her drunkenly and accidentally.

33.This court therefore has to look into the circumstances surrounding the access to the Website and the use of the information obtained thereby by the magistrate.  The principle that jurors as well as a magistrate in performing the function of a jury should not conduct their own research on the internet into matters relating to the issue of the case is beyond dispute.  The main objection to such conduct in the words of Thompson is that “neither side at trial will know what consideration might be entering into their deliberations and will therefore not be able to address arguments about it”.  This, however, did not happen in the present case because the magistrate during the course of the trial made known to the parties that she had accessed the Website and invited the parties to do the same.  The question of what information the magistrate had gathered from the Website theoretically did not exist because the parties, if chose to do so, should be able to find out by accessing the Website.

34.The matter, however, does not stop here.  In our adversarial system a magistrate should not only remain impartial throughout the trial but should also be seen to be so.  The magistrate in accessing the Website on her own was no doubt tantamount to carrying out investigations herself.  This would gravely undermine her impartiality or at least her appearance to be impartial.  This was particularly serious in the present case because, as pointed out above, the Website was not part of the case of the prosecution and was something new.

35.During the examination-in-chief of PW2 the magistrate talked about the customer service on the Website that the company would give a reply of any enquiries within 24 hours.  The following exchanges between the magistrate and the prosecutor further supported the observation that the Website was something new brought about by the magistrate:

“COURT: Well, if someone could try? Since we’re not going to finish today and maybe someone can try during the adjournment?

MS LAI: Yes, then I have to make arrangement for the notebook.

COURT: Well, it says, “we will reply within 24 hours?” We may not get it today, but if you need an adjournment to deal with this since it’s something new that has arisen.”

36.The magistrate also made use of the information on the Website to ask PW2 questions.  As pointed out above she asked PW2 questions about whether a shop could find out from the Website if somebody offering to sell boots to the shop was selling genuine goods and about the “24‑hour reply customer service”.

37.In the examination‑in‑chief of PW2 the prosecutor only asked her questions about the Website being accessible on the internet and whether one could make enquiry about the genuineness of the boots through the Website.  She did not ask PW2 any details about the information on the Website.  After she was given some time by the magistrate to consider whether she should access the Website before winding up the examination‑in‑chief of PW2 she decided not to do so and finished off by asking PW2 the questions of whether she had accessed the Website personally and whether she had done so in August 2010 (Appeal Bundle page 164G to page 165H).  It was obvious that the prosecutor did not intend to bring out the information on the Website as part of the prosecution case.

38.Despite the stance adopted by the prosecution, the magistrate, in the cross‑examination of A1, made use of the information she learnt from the website to contradict A1.  An example occurred when A1 said that he had tried to determine genuine boots from the fake ones by the information on the Website.  The magistrate said:

“COURT: Well, I’m sorry, I’ve seen the website too. There is very little information about how to tell whether a – the difference between the genuine and the fake one. It gives you very little – it doesn’t tell you any of the feature to look for.”

39.In the re‑examination of A1 the defence counsel asked A1 matters relating to whether he had sent a mail through or via the website.  A1 in reply queried if there was anything on the Website one could reply.  Before he could finish answering the question the magistrate said there was.  The exchanges between A1 and the magistrate and the defence counsel were as follows (Appeal Bundle page 202S to page 203B):

“MR LAU: At a very early stage, during cross-examination, you were asked, ‘Did you send mail to – through the website or via the website?’ You answered, you did not send the mail via the website. Do you remember?

A: Yes.

MR LAU: So I want to ask you do you have any—anything to say that you didn’t do so through the website?

A: First of all, was there anything on the website which you could reply to? I did not…

COURT: Yes, it’s not in what have printed from the – but when I just looked, yes, there is. Oh, actually it is. Counterfeit website look up, enter. You can enter the name of the company to find whether it’s counterfeit.

A: I did not see that part when I was on the website.

COURT: Well, there’s a part where you can contact them, ‘contact us’.

MR LAU: Did you aware of that part during your visit to the website at that time but not now. I’m not talking about now. I’m talking about 2009 and 2010?

A:  I did not.  I did not know about, I did not see that on the website.”

40.The respondent argues that what the magistrate had done was not improper or prejudicial and was to make sure that the appellants were not deprived of a fair hearing.  In the view of the court, when the prosecution made it clear that it was not going to make use of the information on the Website to form part of the prosecution’s case it certainly was unfair for the magistrate to make use of the information she had learnt by accessing the Website herself to ask A1 questions, let aside to contradict him.

41.In the Statement of Findings the magistrate also relied on extraneous information she obtained from the Website.  This included the information of “UGG Australia” having huge flagship stores all over the world and the appellants having no reason not to contact “UGG” to ensure that A2’s name was listed as an official retailer.  All these coupled with the magistrate making investigations herself by conducting research on the internet and introducing the Website into the trial were in the view of the court material irregularity which cannot be cured.

42.The court is sure that the magistrate was only laboured under a keen desire to help and to have a better understanding of the case and did not mean to be biased or unfair. Unfortunately, what she had done had resulted in justice not being seen to be done.

43.The first ground of appeal succeeds and this court considers that only this ground alone is sufficient to overturn the convictions of A1 and A2.

Expert status of PW2

44.The appellants complain that the magistrate erred in ruling that PW2 was entitled to give evidence as an expert witness, and having done so, erred in giving weight to such evidence.  In view of the conclusion of the court in the first ground of appeal it is considered not necessary to go into detail about this complain. The court, however, finds this ground of appeal unsubstantiated.

45.The magistrate analysed the evidence very carefully before she gave leave for PW2 to testify as an expert witness and gave full reasons in the Statement of Findings:

“ When PW2 joined the company, there was only a staff of 3 (including PW2). Although she received no formal training from the company or sat any examination, PW2 had plenty of opportunity to familiarize herself with the product because of small size of the team. This included visiting some (but not all) factories in China to see how the boots were made. There were also 2 sales meetings in United States each year. PW2 and authorized agents would attend these meetings each year. New products and new anti-counterfeit features for the forthcoming season would be introduced at these meetings. Samples of the boots would be displayed at the meetings. Samples of the boots would be displayed at the meetings. PW2’s company would also have a sample of each style of the boots manufactured. PW2 was also in constant contact with the brand protection manager who provided her with updated information on both genuine and counterfeit goods. She was also responsible for dealing with the Customs and Excise Department in respect of counterfeit cases since 2009. As a result, she was very familiar with ‘UGG Australia’ products.”

46.The magistrate was also of the view that expertise could be attained through daily experience and study.  The court cannot see how the reasoning and conclusion of the magistrate can be faulted.

47.The magistrate carefully considered the evidence of PW2.  As pointed out by her although PW2 did not refer to each and every boot in court to specify the defects found in each sample she gave evidence about the defects in general and found at least two defects in each exhibit.  On the strength of such evidence she found all the 13 pairs of boots to be counterfeit products.  In the view of the court the conclusion of the magistrate is sound and correct and is supported by evidence.

48.The second ground of appeal fails.

Conclusion

49.The appeal against convictions of A1 and A2 is allowed and the sentences are quashed.

50.It is, therefore, not necessary to deal with the appeal against sentences by A1 and A2.

Mr Chan Lap Yan, Winston, SPP of the Department of Justice, for the respondent

Mr M Delaney, instructed by Benny Kong & Yeung, for the 1^st and 2^nd appellants