HKSAR v. Liu Lixiang

HCMA 95/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO 95 OF 2016

(ON APPEAL FROM FLMP 56 OF 2015)

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J U D G M E N T

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1.This is an appeal against an order for forfeiture of goods made on 21 January 2016 by Mr Raymond KF Wong sitting at Fanling Magistrates' Court. The appellant claims to be the unconvicted owner of the goods in question.

The law

2.Part VI of the Import and Export Ordinance, Cap 60 ("the Ordinance") deals with forfeiture.  It acts as a deterrent to serious illegal activity and protects the revenue.  The Commissioner for Customs and Excise ("the Commissioner") is empowered under section 27(1) of the Ordinance to seek forfeiture of any article seized in contravention of any provision of the Ordinance.  That section and section 28 prescribe the procedure to be adopted where forfeiture proceedings are to take place.

3.Section 28(6) reads:

"Upon the hearing of an application under subsection (1) a court shall order that the article, vessel or vehicle, as the case may be, be forfeited to the Government-

(a) in the case where-

(i) the person who appears before the court fails to satisfy the court that he was, or would have been, entitled to make a claim under section 27(5)[1] in respect of the seized article, vessel or vehicle; and

(ii) no other person appears before the court and satisfies it that he was, or would have been, entitled to make such claim; and

(iii) the court is satisfied that the article, vessel or vehicle is liable to forfeiture ..."

4.Section 28(7) reads:

"Upon the hearing of the application under subsection (1), in any case other than a case referred to in subsection (6)(a) or (b) a court may, if it is satisfied-

(a) that a person is, or would have been, entitled to make a claim under section 27(5) in respect of the seized article, vessel or vehicle; and

(b) that the article (not being such an article as is referred to in Schedule 1), vessel or vehicle is liable to forfeiture,

order that the article, vessel or vehicle-

(i) be forfeited to the Government;

(ii) be delivered to the claimant subject to any condition which it may specify in the order; or

(iii) be disposed of in such manner and subject to any such condition as it may specify in the order."

5.The purpose of section 28(7) is to provide a discretionary regime for the benefit of an innocent owner.  According to R v CEC Finance Ltd [1993] 2 HKCLR 134 the discretion to order forfeiture is unfettered.  The question of whether or not to order forfeiture is to be approached from a neutral starting point, with both parties on a level playing field.  Each party with the onus of proving on a balance of probabilities any fact which he asserts.  The discretion to exercise the power of forfeiture over property belonging to wholly innocent parties must be exercised judicially and with great care: R v Kam Shek Kwong[1994] 1 HKC 681.

6.Proceedings for forfeiture are civil in nature: Wong Hon Sun v HKSAR [2009] 12 HKCFAR 877, Air Canada v United Kingdom (1995) 20 EHRR 150, Koon Wing Yee v Insider Dealing Tribunal (2008) 11 HKCFAR 170.

7.On a hearing under section 28(7) the Commissioner bears the onus of establishing that the seized article is liable to forfeiture, in other words that the statutory pre-conditions have been met: HKSAR v Ngoma Juma Shabani [2015] 5 HKLRD 57; Wong Hon Sun para 65 supra.  As for the factual foundation upon which a magistrate must decide the claim, it is for the Commissioner to show on a balance of probabilities that the goods fall to be forfeited ie is there a prima facie connection between the goods and the commission of a relevant offence.  It is for the Commissioner to decide in what manner and upon what evidence he wishes to base that claim.  Once the court finds that the Goods fall to be forfeited then it is for the unconvicted claimant to make out a case for an exercise of discretion to prove her ownership of the property to the same standard.  Once ownership has been established, it is for the claimant to persuade the court on a balance of probabilities that they should not be forfeited and should be returned to the claimant.  

The underlying proceedings

8.In FLCC 5507 of 2014, two defendants, Ye Minchang and Lou Linghui, were charged that on the 12 August 2014 they knowingly assisted in the carrying of cargo namely 568 'Apple' iPhone 5 mobile phones, 300 'Apple' iPad minis, 170 sets of 'Apple' iPhone 5 with accessories and 430 sets of 'Apple' iPhone 5s with accessories ("the Goods") with intent to assist another person to export the said cargo without a manifest contrary to section 18A(1)(b) of the Ordinance.  They pleaded guilty to this offence on 6 November 2014 and were convicted and sentenced accordingly.

9.By reason of their conviction and the summary of facts to which they pleaded, there was no issue that the Goods were prima facie liable to forfeiture under section 27 of the Ordinance.  Mr Allan, on behalf of the appellant, has accepted that is the case.  Section 28 deals with the determination of an application for forfeiture.

10.On 28 August 2014, 深圳市世達手機電器貿易有限公司 ("Claimant 1"), a mainland company made a claim to the goods within the statutory claim period.  By a letter of 11 November 2014, Ms Liu Lixiang ("Claimant 2") also made a claim for the Goods.  This claim was outside of the statutory time period.

11.By a letter of 18 November 2014, the solicitors representing Claimant 1, Cheung & Liu Solicitors, notified the court that they no longer acted for the Claimant.  Despite their best efforts Customs and Excise Department were unable to make contact with Claimant 1.  By the date of the forfeiture hearing in May 2015, it was assumed that Claimant 1 was not pursuing its claim.  In accordance with section 27(4) the magistrate satisfied himself that Claimant 1 had been properly served and had not attended and therefore went ahead with the forfeiture proceedings at which Claimant 2 attended at the invitation of the Commissioner despite her claim having been made out of time.  Claimant 2 was an unconvicted purported owner of the Goods.  The forfeiture hearing took place on 19 May 2015, 29 July 2015, 13 January 2016 and 21 January 2016.

The background facts

12.At 02:00 a.m. on 12 August 2014 police officers found the Goods abandoned at the Border Fence Zone 211, Lin Ma Hang Road, Ta Kwu Ling.  D1 was found hiding some 30 metres away and D2 was arrested some time later at the same point.  Both made admissions upon arrest to the effect that a third party had asked them to carry the unmanifested goods over the border to China.  They were charged inter alia under section 18A(1)(b) of the Ordinance.  The other matters are not relevant to this hearing.

The forfeiture proceedings

13.The appellant did not give evidence.  She adduced three documents through the Admitted Facts (Exhibit A2) and called two witnesses of fact to prove ownership, CW1 and 2.  The three invoices C1-3, purported to show that she had purchased goods from three separate companies on 6 and 11 August 2014.  The goods within the invoices were generically described and not identified by serial number but the quantity fitted exactly the amounts of Goods recovered.

14.CW1 gave evidence to support invoice C2.  He said he had been paid for the goods in question and that the Claimant had collected them.  His evidence was accepted by the magistrate and he found that the goods which were the subject of C2 belonged to the appellant.  This covered 100 Apple iPhone 5s 16GB in grey.

15.CW2 was called to support invoice C1, which purported to cover 500 Apple iPhones of various types as well as 300 Apple iPad minis.  The magistrate did not accept his evidence which, in any event, was very limited in scope as he had never met the appellant, had not seen C1 before and was simply employed as a warehouse keeper for the company in question, which was no longer in operation.

16.As for invoice C3, which purported to cover 568 Apple iPhone 5 16GB, no one was called to support its veracity.  The magistrate noted in his Statement of Findings that both C1 and C3 bore no letter head and were printed on ordinary paper; they bore a similar format and wording; there was no signature in the recipient box and the name of the purchaser was "劉女士" (Madam Liu) in Chinese characters.  He was not satisfied on a balance of probabilities that the Goods under consideration by the court were the property of the appellant by reason of those two invoices.  He said he had "a serious doubt as to the genuineness of C1 and C3 and also the credibility of CW2".  As a result, the appellant had only succeeded in proving that she owned 100 Apple iPhones 5s 16GB Space Grey, model number A1528 under invoice C2.

Grounds of Appeal

17.Claimant 2 lodged her appeal against the forfeiture order on 2 February 2016.  The Grounds of Appeal dated 8 March 2016 contain four grounds.

Ground 1

1. The Learned Trial Magistrate erred in Law and Fact and/or failed and/or omitted to consider properly or at all, in his Brief Statement of Findings dated 19 February 2016 , the vital concession made by the prosecution at the trial hearing on 13 January 2016, that the prosecution had agreed:

(i) There was no link between the appellant/claimant (the true owner of the items forfeited namely the items 1-9) and the defendants in the criminal case.

(ii) There was no evidence to prove and the prosecution had accepted and/or agreed the appellant claimant had anything to do with the defendants in the criminal case.

Ground 2

2. In his Statement of Findings, the learned trial magistrate erred in law and fact in that he failed and/or omitted and/or mention in his Statement of Findings this vital aforesaid concession and the learned magistrate omitted thereby, to give any or any and/or sufficient weight to this fact conceded to by the prosecution in his findings and the fact there was no evidence of any complicity by the claimant/appellant in respect of the criminal case.  Further, it had never been alleged by the prosecution that the appellant/claimant had been complicit, a key factor which the learned trial magistrate omitted also to consider in his brief statement of findings.

Ground 3

3. The learned trial magistrate erred in law in that in his Statement of Findings in exercising his discretion, the learned trial magistrate did not exercise his discretion in an even handed way. The learned trial magistrate wrongly after considering all of the evidence in his statement of findings stated he had serious doubt as to the genuineness of invoices 1 and 3 and also the credibility of CW2, when the prosecution had never claimed or suggested invoices C1 and C3 were false and/or fake nor that the claimant's witness CW2 was a liar.  Further, the learned trial magistrate wrongly and in an unevenhanded manner made findings of fact at paragraphs 10 and 11 of his statement of findings as to invoices C1 and C3 against the appellant which was inconsistent with his finding in respect of invoice C2 that he was satisfied that the goods in respect of invoice C2 belonged to the appellant/claimant.

Ground 4

4. The learned trial magistrate erred in law in his approach to the evidence and analysis of the appellant's claim in that the learned magistrate wrongly adopted a procedure more akin to criminal proceedings and failed to consider properly or at all that forfeiture proceedings are truly civil in character and that the discretion of forfeiture of property belonging to a wholly innocent party is a power that should be exercised judicially and with great care.  The learned trial magistrate thereby failed and/or omitted to consider that all the invoices had Madam Liu's name on them, prima facie there was clear evidence, these were real and genuine invoices for the goods in question, that these appeared to be real invoices from real suppliers and that the appellant/claimant herself was an innocent victim in this case.

Grounds 1& 2

18.Grounds 1 and 2 are in similar terms.  They complain that the magistrate made no mention of the oral concession by the prosecution that there was no evidence to link Claimant 2 to the defendants in FLCC 5507/2014 and therefore must have failed to consider it.  In addition, it points out that there was in any event no such evidence before the court.  In his written skeleton, Mr Allan submits that given that concession and the lack of evidence linking the appellant to the defendants, no adverse inference could be drawn to suggest that the appellant was in fact complicit.  He goes further and suggests that where the judge is considering forfeiture of property belonging to wholly innocent parties his power of forfeiture should be exercised judicially and with great care.

19.This ground, with respect, misses the point.  The test is not simply whether the Claimant is innocent of the underlying criminal offence but also whether she in anyway "facilitated either by design or negligence the contravention which has resulted in the article becoming liable to forfeiture": per Sir Anthony Mason NPJ para 66 of Wong Hon Sun v HKSAR [2009] 12 HKCFAR 877.  This was specifically relied upon by the magistrate at paragraph 14 of his Statement of Findings.

20.As to the complaint that the magistrate did not act "judicially and with great care", the magistrate noted:

"14. It is held in Dah Sing Bank that in order to avoid forfeiture, the owner must show evidence to support an exercise of the discretion to order delivery of the articles to him under section 28(7) of the Import and Export Ordinance and prove on the balance of probability that he had not in any way participate in or facilitated, either by design or negligence, the contravention which had resulted in the article becoming liable to forfeiture.

15. In the present case, there was no evidence whatsoever as to how the claimant dealt with the goods in question and how come those goods were found at the scene resulting [in] the commission of the offence. I found that the claimant had failed to establish on balance of probability in accordance with Dah Sing Bank[2] and Wong Hon-sun[3]."

Without any evidence in support of the contention that the Claimant did not facilitate the commission of the offence, the burden placed upon the Claimant had not been satisfied nor was there any material from which the magistrate could draw such an inference in her favour from the remainder of the evidence before him as he had unequivocally rejected C1, C3 and CW2.

Ground 3

21.Under Ground 3, the appellant argues that the magistrate wrongly rejected CW2 and C1 and 3 and that such a finding was inconsistent with his acceptance of C2 produced by CW1.  The magistrate gave full reasons for why he rejected the evidence of CW2 and in consequence of that, why he rejected C1. He was right to do so.  C3 was adduced before the court through the back door having been made the subject of an admitted fact in respect of enquiries made as to its derivation.  It should never have been before the court.  All three invoices were documentary hearsay and no one was brought to court to speak to the truth of the contents of C1 and C3.  CW2 could not speak to the truth of the contents of C1 as the magistrate explained.  The magistrate was right to reject it.  The fact that he accepted the evidence of CW2 and the document he sought to produce is testimony to the fact that the magistrate exercised his discretion in a proper manner.

22.Once a prima facie case had been established, the appellant had the burden to persuade the magistrate on a balance of probabilities that the order for forfeiture sought by the prosecution should not be made and that the articles should be delivered up to her[4]. That burden was placed upon the appellant regardless of the stance taken by the prosecution in cross examination save for any oral or written admitted facts.  There were no such admitted facts in respect of the documents.  The only admitted facts before the court were adduced as a result of an agreement between the parties that Customs and Excise officers had attended at the premises of the various companies and had found no one relating to the three companies present.  It was clear from the court transcript that these admitted facts were agreed to save the Commissioner calling the two officers in question and to save court time.  It was by this means that the invoices were adduced before the court via the back door for it is clear that the prosecution never intended that they should be accepted by the court as genuine.  If that had been the case then there would have been no necessity for a hearing and an order for forfeiture would never have been made.  It was for the magistrate to decide independently of the stance taken by the prosecution whether he accepted the evidence (if there was any) or not.  He did not.

Ground 4

23.So far as I can discern, Ground 4 complains that the magistrate applied the wrong test to the proceedings and that he did not exercise his discretion judicially or with due care.  As has been rehearsed above, the burden fell upon the appellant to show why an order for forfeiture should not be made.  C1 and C3 were documentary hearsay and prima facie inadmissible as to the truth of their contents.  Something more was required to overcome the first hurdle as to ownership.  Absent the suppliers of the Goods giving evidence, the claimant, as the purported owner of the Goods, could have done so and claim that she had purchased the Goods in question.  She could explain why the invoices were not signed so as to show her actually having received the Goods.  The appellant chose not to give evidence.  She chose to call evidence as to ownership which was accepted in part and disbelieved in part.  There was no evidence at all on the issue of whether the appellant had ensured that she had in no way facilitated the commission of this offence.  The burden being on the appellant, she had wholly failed to discharge it.  Taking everything into account, including the evidence adduced on behalf of the appellant, the magistrate was entitled to find that this was the case.  He had not been assisted one iota to find otherwise by the claimant.

24.There was never any question that the magistrate had confused the nature of the proceedings. He made the burden and standard of proof clear.  Given that he was aware of the civil nature of the proceedings, he was right to expect the Claimant to be prepared to support her case by giving evidence.  The facts which could have assisted both her and the court were well within her knowledge.

The magistrate's determination

25.Having found a prima facie case for forfeiture and ownership in 100 iPhones by the appellant, the next question to be determined was whether the appellant had proven on a balance of probabilities that the magistrate should exercise his discretion and not order forfeiture of those 100 iPhones and should order delivery up of them to her.  Following Wong Hon Sun supra and HKSAR v Dah Sing Bank Ltd [2015] 1 HKLRD 932, the appellant had the onus to prove that she had not in any way participated in or facilitated, either by design or negligence, the contravention which had resulted in the article becoming liable to forfeiture.  In this case that meant that she had not participated in the attempt to export unmanifested cargo into China and that she had not facilitated that export in any way by reason of her conduct.  A number of issues inter alia might easily have been put forward by the appellant to advance her case in this respect eg

(i) What, if any, report for the loss of the items had been made to the police?

(ii) If a report was made, when was it made?

(iii) Were the Goods, the value of which was over HK$4,000,000 insured?

(iv) Through whom were they insured and was any claim made under the insurance?

(v) When and in what circumstances did the appellant learn of the loss of her Goods?

(vi) Why did the appellant leave it until 11 November 2014 to write to the Commissioner giving him notice of her claim against the Goods?

(vii) When were the Goods received by the appellant and how were they secured?

(viii) Where is proof of payment for the Goods?

(ix) What was the nature of the appellant's business?

(x) She was from the Mainland, what were her intentions in respect of the Goods?

(xi) How was that to be effected?

(xii) Did she have a license to export them legitimately?

26.Unfortunately, despite being advised of her position, the appellant chose not to give evidence in the proceedings and, as the most obvious person to be able to provide evidence in the nature of the suggestions above, disadvantaged herself considerably by not doing so.  The magistrate rightly pointed out that he had no evidence upon which to exercise a discretion not to forfeit.  A bare assertion as to ownership without more is not sufficient to satisfy the burden upon a claimant in forfeiture proceedings that they have not in any way facilitated the underlying crime.

Conclusion

27.The magistrate was right to reject the evidence in connection with C1 and C3.  As a result there was no evidence before the court as to the ownership of the Goods referred to therein.  Having found that the appellant owned the Goods referred to under C2, the burden was upon the appellant to show why the court should not exercise its discretion to forfeit the items and she singly failed to do that.  The appellant was provided with an opportunity to give evidence before this court and declined to do so.  Accordingly, there is still no evidence before the court to satisfy it to exercise the discretion in her favour and the appeal fails accordingly.  The costs of the appeal will be borne by the appellant to be taxed if not agreed.

Mr Prakash L Daryanani, SPP of Department of Justice, for the respondent

Mr William Allan, instructed by Kent Tam & Co, for the appellant