Secretary for Justice v. Wingkason Brothers Co. Ltd.
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HCA003137/1990 HCA 3137/1990 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 3137 OF 1990 ____________
____________ Coram: Deputy High Court Judge Gill in Court Date of Hearing: 18 February 2002 Date of Judgment: 22 February 2002 _______________ J U D G M E N T _______________ 1.This is a claim brought by the plaintiff for and on behalf of the Commissioner of Customs and Excise (C&E) for the recovery of duty assessed and due under the Dutiable Commodities Ordinance (DCO). History 2.The defendant is a company incorporated in Hong Kong. At the material time it was the licensee of a licensed warehouse in Quarry Bay for the storage of cosmetics and similar commodities. By document dated 16 May 1987 the defendant and the Nanyang Commercial Bank Limited entered into a bond in the sum of $15,000.00 in favour of C&E to comply with the DCO and meet all duty assessed on dutiable commodities stored in the warehouse. 3.At the material time there was incorporated in Hong Kong a company called Double Household Products Manufacture Limited (Double Household). Double Household and the defendant share the same shareholders and directors. 4.Between June 1986 and August 1988 Double Household sold a quantity of hair setting lotion in bulk form to the defendant. Duty was payable on the sales which was assessed and paid by Double Household. The defendant then carried out the following process, designed to convert the lotion into hair setting mousse for local sale:
5.This activity attracted the attention of C&E because following the sales the defendant failed to ensure compliance with the DCO; in particular there was no assessment and payment of duty on the finished product. C&E laid charges against the defendant. The defendant pleaded not guilty and the case came on for trial in Western Magistracy in July 1999. The facts were substantially agreed including that if duty was found to be payable it amounted to $1,110,790.90. The case turned on whether in undertaking the process described above the defendant was manufacturing the product or merely repacking it. The magistrate found that the process amounted to manufacturing and convicted the defendant. His decision was upheld on appeal by the Court of Appeal. 6.Following the decisions first in the Magistrates Court and then the Court of Appeal C&E made demand for the duty payable, reassessed at $1,129,593.95. The defendant declined to pay. As a result of that default C&E forfeited the warehouse bond of $15,000.00 and issued a writ. The Proceedings 7.The plaintiff's writ was filed on 16 May 1990 suing for the assessed duty, interest thereon and costs. The amount representing the duty was subsequently amended as a result of a further reassessment made pursuant to a certificate that issued under section 32(3) DCO to $1,132,794.82. 8.The defendant filed a defence professionally drafted. Subsequently it discharged its solicitors and replaced the defence with a document entitled self-defence which incorporated a counterclaim prepared by an officer of the defendant Miss So Yip Ying (Miss So). At trial Miss So represented the defendant with leave. Prior to the hearing she sought to replace the counterclaim with an amended one. No point was taken by Mr Reyes SC representing the plaintiff as to the informal approach adopted. 9.Essentially the defence pleaded was that the assessment and demand for duty should have been carried out at the time of manufacture and sale on the open market, namely, between June 1986 and August 1988, but was not. The sales having long since been concluded and the defendant having disposed of the stock without providing in the price for the recovery of duty should not now be held accountable and liable after the event. In the counterclaim it sues for recovery of the forfeited warehouse bond of $15,000.00, legal costs incurred and, under the head quantum meruit, $50 million. 10.During the hearing Mr Reyes indicated he had instructions to invite the court, if it found for the plaintiff, to allow a credit for the forfeited warehouse bond. He also asked that the interest claimed be calculated at prime plus 1% from the date of the writ to judgment. The Trial 11.Neither side called evidence; indeed there was no material dispute of fact. The Court of Appeal had confirmed that the defendant's process converting the bulk setting lotion into mousse amounted to manufacturing. This was not contested nor could it have been. Furthermore there was no dispute as to the quantum of sale of the finished product nor the amount of duty assessed were it to be payable. What was at issue was whether the duty was payable. This boils down to an interpretation of those terms of the DCO which were current during the period of manufacture. The DCO 12.Section 17(3) states in part :
Section 26(1) states in part:
Section 4 is not applicable. Section 26A is relevant as to sub-section 2A which states:
Section 32 states in part:
And regulation 10 of the Dutiable Commodities Regulations states in part:
13.A reading of the above statutory provisions makes it clear that once duty is assessed in compliance with the procedures provided for the same becomes a debt recoverable by the Secretary for Justice on behalf of C&E. It is no defence to an action brought to recover the debt that the assessment and subsequent demand post-dated the sale of the dutiable commodity concerned. The burden is on the merchant to comply with the provisions of the DCO or otherwise risk prosecution and, if the commodity has already been disposed of, a backdated assessment and demand. The Result 14.The defendant has no defence to the plaintiff's claim which must succeed for the full amount, less credit for the forfeited $15,000.00 together with interest at prime plus 1% from the date of the writ to this date; thereafter at the judgment rate. The counterclaim is dismissed. 15.Costs taxed if not agreed are to the plaintiff. (This part of the order shall be nisi at first instance).
Representation: Mr A T Reyes, SC instructed by the Department of Justice Defendant in person (represented by Miss Y Y So) |