Chandiramani Bhagwan Kanayalal v. The Commissioner of the Customs and Excise Department

HCAL002580/2000

HCAL 2580/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
NO. 2580 OF 2000

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Coram: Hon Hartmann J in Court

Date of Hearing: 9 March 2001

Date of Judgment: 9 March 2001

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J U D G M E N T

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1. In this matter, the Applicant seeks by way of judicial review to quash a decision of the Respondent, the Commissioner of Customs and Excise, in terms of which, on or about 15 July 2000, a consignment of goods earlier seized by the Commissioner was declared forfeit.

2. A number of grounds have been canvassed during the hearing. However, as I understand it, Mr Mughal, appearing for the Applicant, has now reduced his challenges to two. First, that the Commissioner made a fundamental error of law in not serving a notice of seizure in terms of section 27 of the Import and Export Ordinance, Chapter 60, and, second, that in purporting to follow the provisions of section 27 of the Ordinance, the Commissioner's officers were guilty of a number of material procedural improprieties as a result of which their actions were arbitrary and unfair.

The background

3. The Applicant is the director of an import and export company known as Santori (HK) Limited and at all material times was acting as the agent for a certain Mr Law who resides in the Philippines. Under the instructions of Mr Law, the Applicant obtained various goods - more particularly watches, watch parts, mobile telephones and the like - for shipment to him. The goods were packed and delivered to Federal Express, a courier service.

4. I am told that the Philippines imposes high import duties on watches and mobile telephones. In order to avoid such duties, Mr Law persuaded the Applicant not to state the true nature of the goods on the Hong Kong shipping documents but rather to give to them a more general description of 'spare metal parts'. Presumably, goods of this description escape high duty.

5. On 22 May of last year, when the goods were in the care of Federal Express, they were examined at the airport by customs officers. The box in which they were contained was opened and the discovery was made that the goods had not been correctly described.

6. At that time, the officers were suspicious that the goods were forgeries - what we call on a day-to-day basis 'fakes' - or that perhaps they had been stolen. As a result, an inquiry was made with the police to see if they had any such goods listed as stolen and experts were summoned to examine the watches. The experts declared the watches to be genuine. The police had no record of the items being stolen.

7. On 23 May, at a time when these investigations were taking place, the Applicant telephoned the Customs Department as he had been informed by Mr Law in the Philippines that the goods had not yet arrived. The Applicant was then apparently told that the goods had been detained as it was suspected that they were 'fakes'.

8. Four days later, on 27 May, the Applicant was interviewed by customs officers. It was a lengthy interview. The Applicant accepted fully that there had been an incorrect description in the manifest documents, and explained that the purpose had been to avoid customs duty in the Philippines. Seemingly, at about the end of the interview, he was told that the goods would be detained pending further investigation. This was on the basis that they remained suspected forgeries.

9. During the course of the interview, the Applicant was taken to inspect the watches, mobile telephones and other items and, at the end of the day, he was given certain receipts which identified the goods being held and stated that they were being held pending further investigations.

10. At this juncture, it should be said that, although the experts had assured the customs officers that the watches were not forgeries, one of the experts, a representative of Tag Heuer, was of the view that having regard to the large quantity of Tag Heuer watches in the consignment and the fact that Tag Heuer had no record of them, there was the possibility that the goods had been stolen, or if not stolen had come from some 'abnormal' source. I take this to mean perhaps that the goods had been imported by way of a parallel import.

11. The Applicant alleges that part of the procedural impropriety of which the Commissioner is guilty is the fact that he was not told - as agent for the owner - that there was evidence already available that the watches were genuine and that, in addition, there was no evidence from the police that the property had not been recorded as stolen.

12. However, I can identify no obligation on the part of an investigating authority to keep a person accused (or suspected) of a criminal offence advised of the progress of its investigations. Indeed, I can readily see that if there was such an obligation, it may well act to undermine the smooth progress of investigations. Nor, with respect, is an investigating authority obliged to accept as conclusive initial evidence that comes to hand. For example, the fact that the Hong Kong police had no record of the watches being stolen does not exclude the realistic possibility that they might have been stolen outside of this jurisdiction but shipped through it.

13. As for the Applicant himself, on or about 15 July 2000 he was charged with assisting in the export of unmanifested cargo. When the formal charging took place he was accompanied by his solicitor and was apparently told that the goods were still being held pending further investigation.

14. Before this date, on or about 16 June 2000, a notice was posted by the Commissioner in a public place listing the items seized and asking any person interested in the seized items to come forward. This notice was posted pursuant to section 27(3B) of the Ordinance, that sub-section reading.

"Notwithstanding anything in subsection (3A)(a), where the Commissioner believes that the article, vessel or vehicle is a stolen article, vessel or vehicle, he shall serve notice of the seizure within the period specified in subsection (3), on a person whom he believed at the time of, or immediately after, seizure, to be an owner of the article, vessel or vehicle."

15. In respect of goods believed to be stolen, the Commissioner may discharge the obligation to serve notice of seizure on the true owner in the various ways set out in sub-section (4) which reads:

"A notice given under subsection (3) or (3B) shall be deemed to have been duly served if -

(a) it is delivered to the person on whom it is to be served;

(b) it is sent by registered post addressed to such person at the place of residence or business of such person, if any, known to the Commissioner; or

(c) where it cannot be served in accordance with paragraph (a) or (b), the notice is exhibited at the Customs and Excise Department, in a place to which the public have access, for a period of not less than 7 days commencing within 30 days from the date of the seizure of the article, vessel or vehicle."

16. Not knowing who the true owner may be if the goods were, in fact, stolen, the Commissioner served notice in accordance with sub-section (4)(c). What is strange, however, is that the goods were detailed (in the main) as being 'forgeries'. This was despite the expert opinion of those called in to examine the goods. As a result, it would appear that, if the goods were stolen, that incorrect description would deter the true owner from coming forward. Mr Mughal has complained that this is further evidence of the arbitrary and perverse manner in which the Commissioner's officers have dealt with this matter. I agree that the notice could have been better worded. The incorrect description of the goods may (perhaps) leave the Commissioner open to a claim from a third party. But I do not see what prejudice the posting of the notice in that form can have had on the Applicant or Mr Law.

17. At the beginning of August 2000, the Applicant appeared in the Tsuen Wan Magistrates Court and pleaded guilty to the offence of assisting in the export of unmanifested cargo. He was fined $10,000.00.

18. However, prior to that, and in preparation for the court case, the solicitors representing the Applicant had sent a letter to the Commissioner asking for copies of the papers to be used in the intended criminal prosecution. This letter dated 20 July 2000, concluded by saying:

"Further please be informed that the seized things are not liable to forfeiture, and we are instructed to make an application in this regard to the learned Magistrate, which we will do on the date of hearing."

19. There was no response to this letter although it appears that the brief facts, prosecution witness statements and the like were duly handed to the Applicant's solicitors so that they were in their possession when the court case took place. Mr Mughal has complained that the Commissioner should have replied to the letter of 20 July 2000 and that this failure to do so compounds the procedural irregularities already evidence in this matter. With respect, I cannot see why there was any need for a reply.

20. First, a request had been made for documents to enable the solicitors to prepare for the hearing. These documents were supplied. Second, the statement which I have quoted above was just that; it was a statement not a request. The statement said: "Please be informed that the items are not liable to seizure." It then said that an application would be made in respect of seizure at the Magistrates' court. I cannot see that such a statement of intent required any sort of answer. If there was to be an answer, it would amount to little more than an acknowledgement of the fact that an application was going to be made. As it turns out, no application was made to the Magistrate.

21. However, when inquiries were made by the solicitors after the Magistrates' Court hearing concerning the seized goods, a letter was then received from the Commissioner. This letter, dated 7 August 2000, read:

"The subject lot of goods was seized on 27 May 2000 by our Department. However, we have not received any notice of claim from your client within 30 days, beginning on the date of the seizure as stipulated in section 27(5) of the Import and Export Ordinance, Cap. 60. Thus I regret to inform you that your present claim is outdated."

22. The forfeiture of goods in terms of section 27 of the Ordinance had apparently been effective from 15 July 2000, five days before the letter from the Applicant's solicitors stating that the goods were not liable to seizure was despatched.

23. In setting out the background, it remains only to emphasise three points.

24. First, the Applicant has never claimed to be the owner of the goods. At all times he was acting as an agent. The owner of the goods was Mr Law who at all material times was outside of Hong Kong.

25. Second, there is no evidence to suggest that Mr Law had any permanent residential or commercial address in Hong Kong. He was only to be contacted care of the Applicant.

26. Third, that on 20 July 2000, the Applicant's solicitors had written to the Commissioner stating that the goods were not liable for seizure. That I accept amounted to a claim for the return of the goods but, as I have just indicated, the goods had (five days earlier) already been declared forfeit.

A consideration of section 27

27. Section 27(1) of the Ordinance states that there shall be liable to forfeiture any article which has been seized by Customs in connection with any contravention of the Ordinance, whether or not any person has, in fact, been convicted of such offence. It is not disputed that, in this case, there was a contravention of the Ordinance and that accordingly the goods were liable to forfeiture.

28. However, if the Commissioner is to order any goods forfeit, the Ordinance directs that certain procedures must first be followed. In this regard, sections 27(3) and (3A) read:

"(3) The Commissioner shall, subject to subsection (3A) and not later than 30 days beginning on the date of the seizure of an article, vessel or vehicle, serve notice of the seizure on a person who was to the knowledge of the Commissioner at the time of, or immediately after, seizure, an owner of the article, vessel or vehicle.

(3A) Subsection (3) shall not apply -

(a) if the article, vessel or vehicle was seized in the presence of -

(i) an owner, or an employee or agent of the owner, of the article, vessel or vehicle;

(ii) the person whose offence or suspected offence gave rise to the seizure; or

(iii) in the case of a vessel or vehicle, the master or person in charge; or

(b) in relation to an owner who does not have a permanent address in Hong Kong at the time of seizure."

29. Section 27(3) imposes on the Commissioner an obligation to serve notice of seizure. This must be done within 30 days of seizure. However, section 27(3A) provides that subsection 3 shall not apply in certain circumstances; namely, that there shall be no obligation on the part of the Commissioner to serve the notice of seizure if the goods took place in the presence of an owner or any employee or agent of an owner or if the goods were seized in the presence of the person whose offence gave rise to the seizure; in this case, the Applicant. It should also be noted that, in terms of sub-section (3A)(b), the Commissioner is relieved of the responsibility if it relates to 'an owner' who does not have a permanent address in Hong Kong at the time of the seizure.

30. It is accepted that no notice was served in terms of section 27(3). It is, however, the Applicant's claim that notice should have been served and that the failure to do so renders the later decision made by the Commissioner to forfeit the goods liable to be quashed. It is the Applicant's case that the goods were 'seized' when the box containing them was opened by customs officers at the airport on 22 May 2000. At that time, of course, the Applicant was not present; indeed, he was in total ignorance of the seizure taking place.

31. It is, as I apprehend it, the Respondent's case that on 22 May 2000 the goods were merely inspected and then detained. There was no seizure on that date. Seizure only took place on 27 May when the Applicant was shown the goods and was given a receipt in respect of them. In the alternative, it is the Respondent's contention that seizure is a continuing state of affairs and that, as the goods were clearly identified and held in the presence of the Applicant on 27 May that was the date when a seizure took place, this time in the presence of the Applicant; he being the person whose offence had given rise to the seizure.

The meaning of 'seizure'

32. If a person wishes to contest the forfeiture of goods, that person must do so within a prescribed period. A failure to do so within that period means that the goods will be 'forfeited forthwith'. The prescribed period is one of 30 days and the manner in which those 30 days are tolled is set out in section 27(5):

"If an article vessel or vehicle is liable to forfeiture under subsection (1), the owner or the authorized agent of the owner of the article, vessel or vehicle or a person who was in possession of the article, vessel or vehicle at the time of seizure, or a person who has a legal or equitable interest in the article, vessel or vehicle, may within 30 days beginning -

(a) on the date of the seizure; or

(b) where notice under subsection (3) or (3B) is -

(i) served by delivery to the person to be served, on the date of service;

(ii) sent by registered post, 2 days after the date of posting; or

(iii) exhibited as described in subsection (4)(c), on the first day it is so exhibited,

give notice in writing to the Commissioner claiming that the article, vessel or vehicle is not liable to forfeiture and of his full name and address for service in Hong Kong."

33. If there is a failure to give notice within the prescribed time, section 27(6) provides:

"If, on the date of expiration of the appropriate period of time specified in subsection (5) for the giving of a notice of claim, under that subsection, no such notice has been given in writing to the Commissioner the article, vessel or vehicle shall be forfeited forthwith to the Crown."

34. What, of course, is plain is that for the purposes of forfeiture (or contesting forfeiture) the date of seizure of the goods is critical. In terms of section 27(5)(a), the prescribed time runs from the date of seizure and even if a notice is required to be served in terms of section 27(3) or (3B), the time within which that notice must be served is also calculated from the date of seizure. In short, the date of seizure - that identifiable moment in time - sets the stop watch at zero and the times prescribed in section 27 are counted from then.

35. The Ordinance, however, does not define seizure. That being so, it must be given its ordinary meaning. The New Shorter Oxford Dictionary (1993 edition) speaks of the word 'seize' as meaning to 'take possession of forcibly' or to 'capture' or 'to take possession of by warrant or legal right'. That being so, it seems to me that when customs officers, in the exercise of their legal rights under the Ordinance, take possession of an item with the intent to exercise some form of continuing dominion over it then an act of seizure takes place. Of course, what, in each case constitutes an act of seizure, will be a question of fact.

36. My understanding of the meaning of seizure is, I believe, supported by the dicta of Edmund Davies J in Lloyds And Scottish Finance Ltd. v. Modern Cars and Caravans [1996] 1 QB 764 (at page 776) in which the issue was whether a caravan had properly been seized in execution:

"I turn to the first issue - namely, did Allison (the sheriff's officer) seize the caravan in execution before the sale by Wood? Seizure vel non is a question of fact, turning upon the circumstances of each particular case, but certain guiding principles have been evolved over the years, and these are conveniently summarised in Halsbury's Laws of England, 3rd ed. (1956), Vol. 16, p. 55, in this way - and I am reading from the volume:

"For an act of the sheriff or his bailiff to constitute a seizure of goods, it is not necessary that there should be any physical contact with the goods seized; nor does such contact necessarily amount to seizure. An entry upon the premises on which the goods are situate, together with an intimation of an intention to seize the goods, will amount to a valid seizure, even where the premises are extensive and the property seized widely scattered, but some act must be done sufficient to intimate to the judgment debtor or his servants that a seizure has been made, and it is not sufficient to enter upon the premises and demand the debt. Any act which, if not done with the authority of the court, would amount to a trespass to goods, will constitute a seizure of them when done under the writ."

In the light of the authorities cited in support of this passage, I hold that on April 14 there was a seizure by the sheriff's officer of the caravan and its contents as against the judgment debtor. He did not merely demand payment of the debt ... but, having entered and told the debtor that he had come to levy execution and read out his warrant, he handed him the written intimation already referred to."

37. This dicta was approved in the Federal Court of Australia (sitting at first instance) in the 1986 authority of O'Neil v. Wratten and others [1986] 65 ALR 451 (at page 457).

38. The available authorities make it clear that there must be some act of dominion which is such that there can be no doubt in the mind of a reasonable observer that seizure has taken place. In my view, there could have been no doubt in the mind of a reasonable observer that on 22 May 2000 - when customs officers took possession of the goods intended to be shipped to Mr Law, inspected them, prevented them from being air freighted out of Hong Kong and arranged for their subsequent inspection by experts to see if they were genuine or forgeries - that an act of seizure took place. If, on 22 May, the officers had not been acting under lawful authority they would have committed an act of trespass. I am therefore satisfied that seizure of the goods took place on 22 May 2000; to employ the terms of the Ordinance, that was the date of seizure. There was no seizure on 27 May. There may perhaps have been an indication to the Applicant that the goods were remaining under seizure, but it goes no further than that.

39. The goods therefore were not seized in the presence of the Applicant. They were seized at a time when he was ignorant of the seizure. Nor were the goods seized in the presence of an owner, or an employee or agent of an owner. On that basis, said Mr Mughal, the Commissioner was obliged to serve notice of the seizure in terms of section 27(3), an act which he neglected to carry out.

40. But section 22(3) only obliges the Commissioner to serve a notice of seizure on a person who was, to his knowledge, at the time of seizure or immediately thereafter, 'an owner' of the seized goods. Section 2 of the Ordinance defines an owner in very broad terms to include any person who holds himself out to be an owner, importer, exporter, consignee or agent. That definition, however, is not applicable to Part VI of the Ordinance and the provisions for forfeiture of seized goods (particularly section 27) fall under Part VI. That being so, the word 'owner' must be given its ordinary meaning and as such, in the present case will not apply to the Applicant. It will apply only to Mr Law.

41. But Mr Law, at all relevant times, was living outside of Hong Kong. That being so, section 27(3A)(b) applies and it is to the effect that the Commissioner shall be under no obligation to serve a notice of seizure upon an owner when that owner 'does not have a permanent address in Hong Kong at the time of seizure'. The critical date therefore is 22 May 2000. In my judgment, the 'permanent address' must be given its ordinary meaning; namely, a settled residential or business address in Hong Kong. But it has not in any way been suggested that Mr Law on 22 May 2000 had a settled residential or business address in Hong Kong.

42. That being the case, the failure to serve a notice on either the Applicant himself (the agent) or on Mr Law (the owner) was not unlawful. In my view, the Commissioner would have been entitled to use 22 May 2000 as the date from which the prescribed period of 30 days began to toll. In fact, a date almost a month later was chosen. There was therefore no prejudice to the Applicant. It is accepted that no claim in terms of section 27(5) was made by or on behalf of the Applicant within either the original or extended prescribed period. The goods therefore fell lawfully due for forfeiture.

43. This brings me to the second ground of challenge; namely, that the actions of the Commissioner's officers were arbitrary, unfair and amounted either to an abuse of power or to the existence of such procedural irregularities that the decision to forfeit should be quashed. What I must ask myself therefore is whether there has been any unfairness or a mistake in procedure which has caused real prejudice to the Applicant.

44. Having regard to my interpretation of the meaning and effect of section 27 of the Ordinance, I am unable to find any breach of natural justice or abuse of power or procedural irregularity on the part of the Commissioner.

45. I accept that the Applicant was not informed that the goods had been checked by experts and found not to be forgeries. But, as I have said, investigations at that time were on-going and I see no reason why the Commissioner's officers had to confide in the Applicant as to their progress.

46. As for the misdescription of the goods on the public notice, I have already dealt with that matter. I fail to see how it could prejudice the Applicant nor has any argument been propounded as to actual prejudice.

47. I have also dealt with the alleged failure of the Commissioner to reply to a letter from the Applicant's solicitors. In my view, no reply was due.

48. It must be stressed that the Applicant, upon a reading of the Ordinance, would have been aware that, once goods were detained pending investigation, there was a danger that they may be forfeited. This is apparent from section 27(1) which says that they will be liable to forfeiture if they are seized in connection with any contravention of the ordinance. The Applicant has freely admitted a contravention of the Ordinance; namely, assisting in the unmanifested export of goods. The fact, therefore, that the exact nature of pending investigations was either misdescribed or not fully described to the Applicant, in my view does not take the matter any further. The Applicant was obliged to seek non-forfeiture of the seized goods within a time prescribed by statute. He failed to do so.

49. Accordingly, this application for judicial review must be dismissed. Costs are awarded to the Respondent, to be taxed if not agreed.

Representation:

Mr Hanif Mohamed Mughal, instructed by Jal N Karbhari & Co., for the Applicant

Miss Yasmin Mahomed, SGC of Department of Justice, for the Respondent

Remarks:
Appeal by the Applicant to the Court of Appeal. Appeal allowed. Please refer to the Appeal Judgment CACV000566/2001.