HKSAR v. Lam Sau Chung

HCMA000552/1998

HCMA552/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.552 OF 1998

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Coram : Hon Nguyen, J. in Court

Date of hearing : 4 September 1998

Date of handing down judgment : 30 September 1998

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J U D G M E N T

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1. On 3rd May 1997, a team of Customs and Excise Officers boarded a boat in Hong Kong territorial waters and the captain of the boat was asked where the destination of the boat was and the answer given was it was going to Haung Pao, China. The captain was asked if he had a manifest and he said he had, and produced the manifest. The manifest stated that the six containers under one particular Bill of Lading contained "motor vehicle body (including the driver compartment)". A search by the Customs party of two of the containers revealed that there were motor vehicles inside them. When the captain was asked if he had an export licence, he said he did not. The boat was then directed to go to a cargo handling place in Tsuen Wan where the six containers in question were opened up and its contents taken out. The contents were :

(1) 25 left-hand -drive vehicles;

(2) 6 right-hand-drive vehicles;

(3) 50 chain blocks;

(4) 41 front hoods;

(5) 11 mattresses;

(6) 1 rear hood.

2. On 2nd April 1998, the Commissioner of Customs and Excise applied to the Magistrate's Court at Eastern for the above-mentioned goods to be forfeited under s.27(1) of the Import and Export Ordinance, Cap.60. The said goods had been claimed by the Claimant who is the present Appellant. On 22nd May 1998, Mr Tong Man, sitting at Eastern Magistracy, heard the application for forfeiture and after hearing evidence called by the Customs and Excise and the evidence of the Appellant himself, ordered that the six items listed in the application be forfeited to the government unconditionally. It is against that order that the Appellant is now appealing.

3. The Appellant had been arrested by the Customs and Excise Department and was charged with three offences, one of attempting to export unmanifested cargo, one of attempting to export prohibited articles and the third offence of furnishing false information to a member of the Customs and Excise. However, the prosecution offered no evidence against the Appellant in respect of those charges and on the same day preferred nine charges of giving false information to a member of the Customs and Excise. Two months later, the prosecution again offered no evidence in respect of all those nine charges and the charges were dismissed.

4. Mr Ching Y. Wong, S.C., who appeared for the Appellant has advanced two grounds of appeal. The first ground reads as follows :

"1.1 The learned Magistrate erred in his oral judgment in finding that

'the shipping of the cars involved in this case is an elaborated smuggling operation, and it is very likely that the defendant is a guilty party in the operation.'

in that he wrongly found that the Appellant was a guilty party to a smuggling operation or alternatively, wrongly failed to take into consideration the evidence that the Appellant had been found 'Not Guilty' of 12 offences and in particular, the offences of 'Attempting to export unmanifested cargo' and 'Attempting to export prohibited articles'.

1.2 The learned Magistrate wrongly relied upon his finding that the Appellant was a guilty party to a smuggling operation to find that the Appellant had not satisfactorily proved to him on the balance of probabilities that he had no knowledge of the shipping of the articles.

2. There was a material irregularity during the trial in that the learned Magistrate erred in ordering unconditional forfeiture to the Government of the HKSAR without hearing submissions on behalf of the Appellant."

5. In support of the first ground, Mr Wong relied on the case of R v. CEC Finance Limited [1993] 2 HKCLR 134 where Bokhary JA said at 138 :

".... The discretion to order forfeiture being unfettered, the question whether or not to so order is to be approached from a neutral starting point, with both parties on a level playing field, so to speak, and each with the onus of proving on a balance of probabilities any fact which he or it asserts if that fact is not admitted by the opposite party. That is how the question is to be approached. And it is to be answered by reference to what is just in all the circumstances as the magistrate finds such circumstances proved or admitted."

Mr Wong submitted that since both parties to the proceedings bear the onus of proving its respective case, it is tantamount to civil proceedings - the applicant's case being the Statement of Claim and what forfeiture order it seeks, the 'quantum of damages'. Therefore, the applicant (The Customs and Excise Department) must not only prove that the article seized was liable to forfeiture but also that it should be forfeited. Further, it is submitted that if it is the applicant's contention that the article was to be forfeited unconditionally, it must also support such contention with evidence.

6. Mr Simon Tam, appearing for the Respondent, submitted that under s.28 of the Import and Export Ordinance, Cap.60, the Commissioner of Customs and Excise is bound to apply to a Magistrate for the forfeiture of the articles in question when a Notice of Claim is given under s.27(5), as it was in this case. Mr Tam submitted that after application is made to the Magistrate for the forfeiture, the Commissioner is under no duty to produce evidence to show that the goods should be forfeited and the Commissioner need not adduce evidence to support the application for unconditional forfeiture. Under s.28(6), the Magistrate when hearing an application for forfeiture shall order that the article be forfeited in the case where a person who appears fails to satisfy the Court that he was or would have been entitled to make a claim, and no other person appears before the Court and satisfies it that he was or would have been entitled to make such claim, and the Court is satisfied that the article is liable to forfeiture. Under s.28(7), upon the hearing of the application for forfeiture in any case other than a case referred to above in s.28(6), a Court may, if it is satisfied that the person is or would have been entitled to make a claim, and that the article in question is liable to forfeiture, make one of three orders :

1. the article be forfeited;

2. the article be delivered to the claimant subject to any condition which the Court may specify; or

3. the article be disposed of in such manner and subject to any such conditions as it may specify in the order.

7. In my judgment, therefore, it is not the law that the applicant has to prove that the articles should be forfeited and that if the applicant seeks unconditional forfeiture, it has to support such contention with evidence. The only obligation on the applicant is that he has to prove that the articles in question are liable to forfeiture. The claimant of the articles has to prove that he is a person who is or would have been entitled to make a claim under s.27(5) in respect of the seized article. The Court hearing the application can then make one of the three orders mentioned in s.28(7).

8. In R. v. Kam Shek-kwong [1994] 1 HKC 681, Kaplan J. said at 685:

" In CEC Finance, it was made clear that the discretion is unfettered and thus there can be no basis for a predisposition against... any innocent owner. However, it seems to me that there has to be something in the facts of the case involving an innocent owner which can justify the exercise of this discretion and the making of a draconian order depriving the rightful owner of his property. A discretion was given to the courts. The legislation does not impose forfeiture in all cases as it could have done. Forfeiture of items belonging to those involved in a crime and used in a crime is one thing and can be seen as part of society's determination to be ruthless with criminals. Forfeiture of the property belonging to wholly innocent parties is quite another thing and the discretion to exercise that power should be exercised judicially and with great care."

9. In R. v. Shum Wah-wah & Anr. Mag. App. 419 of 1995, Gall J. said at p.2:

".... I also accept that where a party is innocent, the goods of that party would be unlikely to be forfeited. It is necessarily, therefore, for the learned magistrate to consider firstly on the evidence before him whether he is satisfied that the party is wholly innocent or whether on the balance of probabilities, there may be some complicity by that party in the offence which leads to the forfeiture."

10. Mr Wong's complaint is really that the learned Magistrate had said in his Reasons for Decision that some charges were initially preferred against the claimant but were all dropped before the trial actually commenced. Mr Wong submits that the learned Magistrate should not have regarded the offering of no evidence as something less than verdicts of 'not guilty' being returned against the Appellant.

11. I find that that criticism of the learned Magistrate is not justified because when the Magistrate said "dropped before the trial actually commenced", he was saying really that the Prosecution had offered no evidence against the Appellant. Following the offering of no evidence, it was then a formality that the charges would have been dismissed and the Appellant formally found not guilty. There was, therefore, no trial into the merits of the matter and the verdicts of 'not guilty' were not returned after due consideration of the evidence by the trial Magistrate. That being the case, it is quite wrong for the Appellant to say that the learned Magistrate was bound by the acquittals and was not entitled to side-step them by making findings of his own on the culpability of the Appellant to smuggling activities in respect of the articles. That last written submission by the Appellant was modified slightly by Mr Wong in open court when he said that "the Magistrate was bound to consider the fact that the claimant was acquitted". As I said earlier, the Appellant had not been acquitted on the merits and the verdicts of guilty were formalities following the Prosecution's offering of no evidence.

12. Even if there had been verdicts of not guilty after a trial and after a consideration of the evidence, another Magistrate hearing an application for forfeiture is not bound or precluded by those verdicts to order forfeiture. Section 27(1) of Cap.60 says

" There shall be liable to forfeiture any article which has been seized by a member of the Customs and Excise Service in connection with the contravention of any provision of this ordinance, whether or not any person has been convicted of an offence in respect of such contravention."

13. In addition, Wong J. in R. v. Cheung Tai-yau & Anr. MA414/1992 said :

" In my judgment, this subsection [s.27(1)(a)] is wide enough and clearly intended to cover not only situations where no one has been charged or convicted but also where a person has been acquitted like [the first claimant] in this case."

14. It is further submitted by Mr Wong that it is clear from the written Reasons and particularly from the oral judgment, that the learned Magistrate relied solely upon his own findings that the Appellant had been a guilty party in the operation of smuggling the items to reject the Appellant's evidence that he was an "innocent owner". It is submitted that that being the situation, the learned Magistrate's finding that the Appellant had failed to satisfy him on the balance of probabilities that he was an innocent owner was wrongly made and is unsustainable.

15. It is further submitted that since the Appellant had been found not guilty of any smuggling charges, the learned Magistrate was legally bound to accept those verdicts and make the finding that the Appellant was an innocent owner, irrespective of what his opinion of the evidence was.

16. I do not agree with those submissions. As I pointed out earlier, the formal verdicts of 'Not Guilty' should not, and could not, have affected the learned Magistrate's assessment of the Appellant's evidence in the proceedings before him. In the forfeiture application, the Appellant gave evidence and in my judgment the learned Magistrate was quite entitled to say that on the balance of probabilities, he was not satisfied that the claimant had proved that he had no knowledge of the shipment in the present case.

17. The evidence by the claimant was that he was the owner of the 31 vehicles in question and had bought them from various sources in Hong Kong, expending about $3 millions odd dollars on them. He had bought the vehicles on behalf of customers in China and he was intending to send those vehicles to his customers. He had applied to the Customs and Excise Department for permission to dismantle the 25 left-hand-drive vehicles and his evidence was that the application was successful. He submitted a number of forms to the Department, one in respect each vehicle and received permission from the Department. However, no written documentation was produced by the Appellant to support that contention. In any case, he said that after the 25 vehicles were dismantled, they, together with the six right-hand-drive vehicles were put into six containers under his own supervision, at his own work place, somewhere in the New Territories. The six containers were then placed in a container depot and he was making inquiries, through his staff, with a shipping company that he regularly used to find out when the shipping company would have space on board a boat for those six containers to be shipped to China. He said that the documents in respect of those six containers had been delivered to the shipping company by the tractor company, which presumably was the company which delivered the six containers to the container depot. He was asked whether he could explain why the six containers were on board the vessel which was stopped by the Customs Officers and he said he could not. He said that on that day he was in Zhuhai in China, taking part in a motor race and his company was closed during the period when he was not in Hong Kong. This is even though he had staff working for him. He was asked if he had any idea how the six containers got from the container depot onto the vessel, and he said he did not know. He was asked if he gave anyone authority to remove the six containers, and he said no. He was asked if he gave anyone authority to ship the containers, and he said no.

18. The six containers had inside them the 25 left-hand-drive vehicles, the wheels and tires and hoods of which had been removed. However, the hoods and the tires and the wheels were all found in the containers and when the Customs Officers put the wheels and tires back onto the vehicles concerned and started the engine with the ignition keys which were inside the vehicles, about 20 of those vehicles could be started. It was found by the learned Magistrate, and accepted by Mr Wong, that there had been contraventions of the Import and Export Ordinance in that the articles concerned were unmanifested and the attempt to ship the vehicles without an export licence was in breach of s.6D of the Ordinance. It was accepted by Mr Wong that even though some parts of the vehicles had been dismantled, they still constituted "vehicles" within the meaning of the Ordinance.

19. In my judgment, in the light of the evidence given by the Appellant, it was hardly surprising that the learned Magistrate rejected his evidence. The shipping company in question was a shipping company that the Appellant regularly used. It was inconceivable that the shipping company would have taken steps to have the six containers removed from the container depot and placed on board the boat which, when stopped by the Customs party, was bound for China. In addition, the Appellant was the sole owner of these vehicles and was the only person who could have benefited from any successful attempt to have them transported into China without complying with the legal requirements of Hong Kong and of China. In my judgment, that being the case, it was also inconceivable that any other person would have authorized the shipping company, or anyone else, to have those six containers placed on board that vessel. The evidence by the claimant that he had no idea how those containers got onto the boat is difficult to accept even on a balance of probabilities, and as I said the learned Magistrate was quite entitled to reject that evidence.

20. Ground 2 advanced by Mr Wong is really that the learned Magistrate never permitted Counsel for the Appellant to make submissions on which of the three orders under s.28 (7) ought to have been made before proceeding to ordering unconditional forfeiture of the articles to the HKSAR. It is said that this constituted a material irregularity and was in breach of natural justice for the order to have been made without affording the Appellant any opportunity to make submissions.

21. With respect to Counsel, I do not really see how that submission can be made. The Appellant was represented by another Counsel at the forfeiture hearing and this was Counsel of some 20 years' standing. Not only that, but at the end of the evidence, Counsel did make submissions to the learned Magistrate and it was Counsel's decision not to make the alternative submission that if the Magistrate should find against the Appellant, then there should be only partial forfeiture and not complete forfeiture.

22. At the hearing before me, Mr Wong submitted that the degree of culpability found by the Court would determine the percentage of goods which ought to be confiscated. I agree with that proposition, but based upon the Magistrate's finding that the Appellant was a party to the smuggling operation, which the Magistrate found was an elaborate smuggling operation, it was open to the Magistrate to order complete and unconditional forfeiture of all the articles. I do not see any reason how the Magistrate can be faulted for that. The Appellant was the sole owner of all these goods. If any benefit were to be derived from any smuggling attempt, the whole of that benefit would go to the Appellant. The learned Magistrate had found that there was an elaborate smuggling operation and the Appellant was a guilty party in that operation. In the light of that finding, the order to forfeit all the articles is, in my judgment, entirely proper.

23. For the reasons which I have given, the appeal is dismissed.

Representation:

Mr Simon Tam, S.G.C., for Director of Public Prosecutions

Mr Ching Y. Wong, S.C. leading Mr Herbert Au-Yeung, inst'd by M/s C.K. Mok & Co., for the Appellant