Case Document

100%Judiciary

[English Translation – 英譯本]

HCMA 407/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 407 OF 2013

(ON APPEAL FROM STS NO. 3478 to 3481 OF 2013)

________________

BETWEEN
	HKSAR	Respondent
	AND
	SANMU LOGISTICS CO. LTD. （三木物流有限公司）	1^st Appellant
	TING-E LOGISTICS LTD. （天一國際物流（香港）有限公司）	2^nd Appellant

_____________

Coram: Deputy High Court Judge Woo

Date of Hearing: 17 September 2013

Date of Judgment: 17 September 2013

Date of Handing Down the Reasons for Judgment: 25 September 2013

REASONS FOR JUDGMENT

Introduction

1.Having heard the appeal on 17 September 2013, I allowed the appeal, set aside the original sentence and imposed the following penalties instead: a fine of $4,000 for the first summons [STS 3478/2013], a fine of $4,000 for the second summons [STS 3479/2013], a fine of $35,000 for the third summons [STS 3480/2013] and a fine of $4,000 for the fourth summons [STS 3481/2013]. I adjourned the case to todayfor handing down the reasons for judgment.

Background

2.This case involved four summonses and two batches of goods. The 1^st appellant was facing the first three summonses while the 2^nd appellant was facing the remaining one. Both appellants pleaded guilty to the charges, namely, exporting goods defined by the Import and Export (Strategic Commodities) Regulations as strategic commodities without a licence, contrary to section 6A(2) of the Import and Export Ordinance, Cap. 60 of the Laws of Hong Kong. The case was heard on 8 May 2013 before Merinda Chow, a magistrate, who imposed the following fines. Both appellants now appeal against sentence.

Summons No.	Value of goods involved	Profits involved	Fines imposed by the Magistrate
(1)STS 3478/2013 against the 1^st appellant	(1)Strategic Commodities 5,000 pieces of integrated circuits: $42,900	$2,145	(1)$13,000 [i.e. slightly higher than 30% of the value of goods or 6 times of the profits]
(2)STS 3479/2013 against the 1^st appellant	(2)Strategic Commodities 5,000 pieces of integrated circuits: $42,900	$2,145	(2)$13,000 [i.e. slightly higher than 30% of the value of goods or 6 times of the profits]
(3)STS 3480/2013 against the 1^st appellant	(3)Strategic Commodities 9,000 pieces of modules: $442,260	$22,113	(3)The 1^st appellant was fined $100,000 [i.e. slightly higher than 22.6% of the value of goods or 4.5 times of the profits]
(4)STS 3481/2013 against the 2^nd appellant	(4) same as (3): $442,260	$1,100 Freight charge	(4)The 2^nd appellant was also fined $100,000 [i.e. slightly higher than 22.6% of the value of goods or 90 times of the profits]

3.The first batch of goods was 10,000 pieces of integrated circuits. It was marked in the importer’s invoice “Part by controlled”, and the importer did provide the 1^st appellant with the import licence of that batch of integrated circuits. Therefore, the 1^st appellant had already known that batch of goods came from Singapore and was controlled by the licence. The 1^st appellant exported the goods on two occasions, 5,000 pieces each, and the value of goods was $42,900. Since the 1^st appellant did not notice the remarks in the importer’s invoice, nor did they check the control status of the said product with the Trade and Industry Department, therefore no licence was obtained for that batch of goods. As a result, exporting the goods without a licence was contrary to section 6A (2) of the Import and Export Ordinance and the Import and Export (Strategic Commodities) Regulations, Cap. 60.

4.The second batch of goods was the 9,000 pieces of modules. The 1^st appellant did produce two export licences of that batch of goods to the 2^nd appellant on 5 August 2011, namely, one day before the export of the goods. However, those two licences had expired on 3 August 2011 and 4 August 2011 respectively. The 2^nd appellant obtained from the 1^st appellant the 9,000 pieces of modules and the two expired licences on 5 August 2011. They then arranged a truck to export the said batch of modules from Hong Kong to the Mainland on 6 August 2011. In this context, the said modules were exported without a licence, and it was also contrary to section 6A (2) of the Import and Export Ordinance, Cap. 60. The value of this batch of goods was $442,260.

Grounds of appeal and discussion

5.The appellants criticized the trial magistrate for having erroneously considered there were cases which served as the sentencing guidelines indicating that in respect of the amount of the fine, a starting point of 30% of the value of goods should be adopted. The starting point of 25% to 30% of the value of goods adopted by the trial magistrate was manifestly excessive.

6.Before me, the parties agreed that the court had to take into account the facts and circumstances of each individual case when determining the amount of the fine.

7.I have listed out the sentencing authorities referred to by the parties in the following table in chronological order for easier reference:

Cases	Value of goods	Profit	Fine (%)	Remarks
Popular Machinery Co Ltd v R. Crim App 950/71	5 counts of false export declaration concerning the value of goods, the genuine value of goods for the first count was $13,029, understated by $8,329	The net profit amounted to $2,000 in total for 5 counts	$1,000 for each count, a total of $5,000 for 5 counts	The Court of Appeal considered that the fine, which was 2.5 times of the profit, imposed by the magistrate was by no means excessive.
AG v Marvel (sic) Clothings Co Ltd & AG v Eagle’s Eye (Hong Kong) Ltd CAAR 7/1984	Exporting garment [5 counts of false country of origin], the value of goods was not stated in the judgment, but could be estimated to be around $487,000	Loss	$16,000 for each count, a total of $80,000 for 5 counts	The appellant gave false information of goods regarding the country of origin when applying for export licences. The Court of Appeal, in order to protect the international reputation of Hong Kong, suggested a figure of 40% of the value of goods as the guideline. (The view of the Court of Appeal that) the larger the size of the transaction, the larger the amount of fine (was so reflected). Also, a defendant should not be allowed to profit from his crime.
AG v Chan Kin Yam [1986] HKLR 115	Strategic commodities, namely, 15 sets of computer. The total value was about $2,000,000	The profit was $100,000	A fine of $175,000 [representing about 8.75% of the total value of goods] – no deliberate deception in this case	The Court of Appeal, referring to and affirming the guidelines suggested in Marvel (sic) case, said that they were applicable upon strategic commodities in principle and a defendant should not be allowed to profit from his crime.
R v Mak Shui Cho & Son Ltd [1987] HKLR 882	The value of the strategic commodities was $10,998,000	The freight charge was US$810 and the profit was only US$65	A fine of $50,000 [less than 0.46% of the value of goods], [one-tenth of the maximum fine allowed by law]	The appellant was a forwarding agent who arranged the onward delivery of 3 sealed containers. It was marked in the Bill of Lading the goods were power supplies and normal import/export licence was available. The appellant had no idea at all the goods all along kept inside the sealed containers were in fact strategic commodities.
HKSAR v Lui Siu Cham HCMA 120/1998	Strategic commodities, the total value was $7,800,000		A fine of $250,000 [representing about 3.2% of the value of goods]. On appeal, the fine was reduced to $200,000 [2.56%]	An obvious mitigating factor: the appellant disclosed the offence to the authorities voluntarily.
HKSAR v Harvest Fair International Limited HCMA 979/2002	10 summonses, strategic commodities, the total value was about $5,900,000		A fine of $50,000 for each summons was imposed, the total amount of fine was $500,000 [representing about 8.47% of the value of goods]	Michael Wong J considered a fine represented 8.5% of the value of goods was appropriate.
HKSAR v Choi Chung Hon (transliteration) HCMA 1029/2008	(1)-(5) forging 5 sets of Certificate of Origin for garment, the total value of goods was about $470,000; (6) importing garment not under and in accordance with an import licence, the value (of the goods) was about $370,000		In respect of the 5 counts of forging (Certificate of Origin), a fine of $35,274 each was imposed; a fine of $20,000 was imposed for the sixth count	Maggie Poon J pointed out it was suggested in cases after Marvel (sic) case that a fine of 30% of the value of the goods was appropriate for defendants who pleaded guilty.
HKSAR v Murata Company Limited HCMA 67/2013	Strategic commodities, namely, 46,000 pieces of computer components, the value was $2,389,019		A fine of $200,000 [representing about 8.37% of the value of goods]. It was reduced to $80,000 [representing about 3.3% of the value of goods]	Fung J referred to the above cases regarding the sentence of strategic commodities in detail, and considered the appellant, who always complied with the law, made a belated report immediately after the mistake was found and strengthened the system after the incident. The appellant did not knowingly break the law, it was due to the goods being rejected and returned. There were indeed mitigating factors, and therefore the fine was reduced to $80,000. It was mentioned in paragraph 20 “if the facts of the case do not involve deception and false declaration, then the guidelines in Marvel (sic) case would not be applicable”.

8.The respondent was of the view that all the appeal cases referred to showed that the amount of the fine ranged from 0.5% to 8.5% of the value of goods, and the values involved were all large ones, which varied from $2,000,000 to $10,000,000. The respondent considered that the “40% guideline” was not applicable to cases involving a large value of goods because a fine in the amount representing 40% of the value of those goods would have already exceeded the maximum penalty stipulated by the law. In other words, when the value of goods amounted to $1,250,000 or more, the “40% guideline” would not be applicable. That explained why 8.5% of the value of goods was applied in the abovementioned cases, it was because the values of goods involved were relatively substantial.

9.In this case, the first batch of goods constituted the first two charges, and the value of goods involved was $42,900 for each charge. The respondent was of the view that the “40% guideline” was applicable. The trial magistrate had already considered the fact that the appellant committed the offences negligently and carelessly, and in fact she had already exercised her discretion by applying 30% of the value of goods [not 40% suggested by the guideline] to calculate the amount of the fine. The respondent’s view was that a fine of $13,000 for each summons was not manifestly excessive.

10.The value of the second batch of goods, which constituted the latter two charges, was $442,260. The respondent was of the view that the “40% guideline” was applicable. The trial magistrate had already known that the profit made by the 1^st appellant was 5% of the value of goods and the 2^nd appellant had accepted $1,100 as the freight charge. The export licences applied for previously had by the material time expired for 1 to 2 days already. However, the 1^st appellant still handed them to the 2^nd appellant for them to deliver that batch of goods to the Mainland. The respondent suggested it appeared that someone was trying to muddle through with them, but the 2^nd appellant said it was only out of negligence and carelessness. Obviously, the trial magistrate had considered and accepted this point, and exercised her discretion by applying 25% of the value of goods to calculate the amount of the fine. The respondent indicated that a fine of $100,000 was within the spirit of the law and not manifestly excessive.

11.Mr. Raymond Fong who represented the two appellants submitted that the trial magistrate should not have adopted 25% to 30% of the value of goods as the starting point, which was manifestly excessive. The magistrate also did not take into account the profits gained by the appellants respectively as the sentencing consideration.

12.Mr. Fong argued that based on the facts of the case, the fines imposed upon the 1^st appellant and the 2^nd appellant should be much lesser than 8.5% of the value of goods. Furthermore, the fines imposed upon the 1^st appellant and the 2^nd appellant in respect of the latter two charges should be materially different.

13.The respondent submitted:

“All the appeal cases referred to showed that the amount of the fine ranged from 0.5% to 8.5 of the value of goods, and the values involved were all large ones, which varied from $2,000,000 to $10,000,000. The respondent considered that the “40% guideline” was not applicable to cases involving large value of goods because a fine in the amount representing 40% of the value of goods had already exceeded the maximum penalty stipulated by the law. In other words, when the value of goods amounted to $1,250,000 or more, the “40% guideline” would not be applicable. That explained why 8.5% [of the value of goods] was applied in the abovementioned cases, it was because the values of goods involved were relatively substantial.”

14.I disagree with this submission made by the respondent, namely that, the reason why the court applied 8.5% of the value of goods to arrive at the amount of the fine was due to the relatively substantial value of goods involved. I am of the view that a substantial value of goods may have some minor effect on the range of fine only because the court cannot impose a fine higher than the maximum penalty stipulated by the law. Otherwise it would be illogical and unreasonable when a larger value of goods leads to a greater impact on the international reputation of Hong Kong but attracts a lower range of fine. I consider that the most crucial sentencing factor would depend on whether the defendant had perpetrated any acts of deception or false declaration, or acted in disregard of the law or broke the law knowingly. The court would take a rigorous sentencing approach if there were such acts. But if the defendant enters a guilty plea, then 30% of the value of goods would be applied to calculate the amount of the fine [see the above table for HKSAR v Choi Chung Hon (transliteration), HCMA 1029/2008 (27 February 2009, unreported)].

15.I agree with the explanation given by Fung J in HKSAR v Murata Company Limited HCMA 67/2013 [28 June 2013, unreported] on the sentencing authorities, “if the facts of the case do not involve deception and false declaration, then the guidelines in Marvel(sic)would not be applicable”. Of course, the trial magistrate of this case could not have referred to Murata Company Limited because its judgment was delivered only after the sentence of this case had been passed. On the other hand, it is also clearly stated in Chan Kin Yam that the sentencing court has to make sure a defendant cannot be allowed to profit from the crime, and that there should also be an added penalty apart from a removal of profit.

16.Based on the facts of the case admitted by both the appellants, it was obvious that the 1^st appellant committed the offences in the two groups of charges because staff member/members assigned to do the job were either not suitable for handling matters concerning application for import and export licences or negligent and careless. It was reflected from the facts that the 1^st appellant did apply for the export licences for the second batch of goods but only exported the goods after the export licences expired. The 2^nd appellant, who delivered the goods for the 1^st appellant without checking clearly as to whether the export licences submitted by the 1^st appellant were valid or not, was also negligent and careless. I am of the view that the 1^st appellant’s negligence or fault in the first group of charges is more serious than the 1^st appellant’s in the second group of charges; and the 2^nd appellant’s negligence or fault is less serious than the 1^st appellant’s in the second group of charges. Both appellants committed the offences without involving acts of false declaration, deception, disregard of the law or breaking the law knowingly, and they frankly pleaded guilty. Therefore, I consider the following would be the appropriate sentence:

Summons No.	Value of goods involved	Profit involved	Appropriate amount of fine
(1)STS 3478/2013 The 1^st appellant	$42,900	$2,145	$4,000 [slightly lower than 10% of the value of goods and 2 times of the profit]
(2)STS 3479/2013 The 1^st appellant	$42,900	$2,145	$4,000 [slightly lower than 10% of the value of goods and 2 times of the profit]
(3)STS 3480/2013 The 1^st appellant	$442,260	$22,113	$35,000 [slightly lower than 8% of the value of goods and 1.6 times of the profit]
(4)STS 3481/2013 The 2^nd appellant	$442,260	$1,100 Freight charge	$4,000 [about 0.9% of the value of goods and slightly higher than 3.6 times of the profit]