The Queen v. Cec Finance Ltd

Magistracy Appeal
No. 451 of 1992

HEADNOTE

Forfeiture order under s. 28(7) of the Import and Export Ordinance, Cap. 60.

The Court of Appeal held: “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.”

Decision of the Full Court in A.G. v. Chin Chack-wing [1961] HKLR 479 overruled.

IN THE COURT OF APPEAL

Magistracy Appeal
No. 451 of 1992

BETWEEN

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Coram : Silke V.P., Bokhary J.A. & Mortimer, J.

Date of hearing : April 1, 1993

Date of handing down of judgment : April 20, 1993

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J U D G M E N T

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Bokhary J.A.:

1. This is the judgment of the court in this appeal against a forfeiture order made by a magistrate, which appeal was reserved by the High Court for the consideration of this Court.

2. The order was made on April 28, last year by P.J. Line, Esq. sitting in the Magistrate’s Court at Eastern.

3. What was forfeited by that order was a light goods vehicle.

4. The vehicle was the subject-matter of a hire purchase agreement dated June 29, 1991, between the appellant finance company as owner and a Mr Tsui Wai Shing as hirer.

5. Both are blameless. Their misfortune is that Mr Tsui was in partnership with someone who turned out to be a rogue, one Pang Ying Wah.

6. The partnership, which was carried on under the style of “Pronto Transportation Co.”, conducted a transportation business.

7. Pang got involved in smuggling. And he used the vehicle for that illegal purpose. What he did (in the language of the section under which he was eventually charged and convicted, namely, s. 35A(1)(c) of the Import and Export Ordinance, Cap. 60) was this. Knowingly, he assisted another person with the carrying of articles the carriage of which was restricted under regulations made under the Ordinance, doing so with intent to assist that person to evade such restriction.

8. We pause here to indicate that all references to sections in this judgment will be to those of the Ordinance just mentioned.

9. Continuing, the articles carried were television sets. And they were carried in the vehicle.

10. Things went wrong for the smugglers. They were caught. And the television sets and the vehicle were seized by the Customs and Excise Service.

11. Accordingly, the vehicle was rendered liable to forfeiture under s. 27(1)(b) as a “vehicle so seized and which has been used in connection with ... the contravention of any provision of this Ordinance.”

12. Forfeiture proceedings under Part VI of the Ordinance were  commenced in respect of the vehicle.

13. The Commissioner of Customs and Excise sought forfeiture. The appellant finance company, as claimant, sought delivery.

14. Where the article liable to forfeiture under the Ordinance is a strategic commodity, the magistrate must order forfeiture. It is mandatory (the word “shall” being used in the relevant provision, s. 28(6)). But where, as in the present case, the article liable to forfeiture under the Ordinance is not a strategic commodity, the magistrate has a discretion as to whether or not to order forfeiture. It is discretionary (the word “may” being used in the relevant provision, s. 28(7)).

15. The discretion is unfettered in that the factors to be taken into account in exercising it are not specified in the. Ordinance.

16. And yet, the learned Magistrate proceeded on this basis. First, in cases such as these there is “a head on conflict … between the interests of the community, endeavouring to make life more difficult for smugglers, and the owners of the vehicle to whom no fault could be ascribed.”  Secondly, that the law has “resolved the conflict in favour of forfeiture to the detriment of the hire purchase company”.

17. That approach, the learned Magistrate felt, was imposed upon him by the decision of the Full Court in A.G.  v. Chin Chack-wing [1961] HKLR 479 (where the discretion concerned was also unfettered by the statute by which it was conferred).

18. Mr Richard Mills-Owens Q.C. for the finance company invites us to overrule that decision. That is a course open to us in this Court, the successor and superior of that Court, while paying due respect to any such decision.

19. In the 1961 case, a motor car was liable to forfeiture under the provisions of the Dutiable Commodities Ordinance, Cap. 109, because it had been found carrying a dutiable commodity, tobacco, on which duty was due but had not been paid. The magistrate in that case declined to exercise his discretion to forfeit the car. He declined to do so because the finance company who owned it and the individual who had it on hire purchase were both innocent, the car having been loaned by the hirer to a rogue who used it for carrying the tobacco without the knowledge of the owner or hirer. On appeal by way of case stated, the Full Court reversed the magistrate and directed forfeiture.

20. Delivering the judgment of the court (consisting of himself and Reece J.) Hogan C.J. said this (at pp. 489-491):

“We have, on the one side, the interest of the community as represented by the State, endeavouring to prevent breaches of the law and to stop smuggling, by seizing those instruments of transportation which are used in the course of, or for the purpose of, committing offences against the law. On the other hand, we have the natural reluctance to deprive an owner of his property if no fault or error can be laid at his door. The difficulty in the present instance flows from the fact that whilst the Finance Company is, in a sense, free from fault or error, this is an innocence resting on ignorance of what is happening to its own property. The Company has chosen, and chosen quite deliberately, to relinquish effective day to day control over property in which it claims the ultimate ownership, and has participated in setting in motion a train of events which has ended in the misuse of the car. True, the Company did not foresee that end but the possibility of such an outcome must have been foreseen and, whilst maintaining legal ownership, the Company took no effective steps to prevent it. If the Company’s ownership was ineffective to prevent misuse of the car, should it suffice to preclude forfeiture?

In relinquishing control of the vehicle on hire-purchase terms to an individual who has been described as the registered owner, the Company was, in effect, creating, and disposing of, merchantable rights designed to attract those desirous of having virtually unrestricted use of a motor car without paying the full price for it beforehand. Here is the crux of the conflict within the provisions of section 16. The latter contemplates that persons owning and controlling valuable assets, like cars, will not let them be used in contravention of the Ordinance, because of the financial loss that will flow from forfeiture, but, when ownership and control are divorced, the diminution in his financial status necessarily diminishes the deterrent effect of section 16 on the person in control. Should the consequent loss then fall on the community, through the less effective enforcement of its laws, or on the entity which has chosen to place the control of the vehicle in hands that are less interested or less responsible than its own?

An agreement for hire-purchase is a legitimate business transaction but it is not necessarily one that should be allowed to obstruct or hinder the enforcement of the fiscal laws of the Colony. It is a transaction which involves a measure of risk, and those who take the risk must face the consequences. The law with which we are now primarily concerned, section 16 of the Dutiable Commodities Ordinance, was designed, not to facilitate hire-purchase transactions, but to make more effective the provisions for levying duty. When some measure of conflict arises between the two, it seems reasonable to subordinate the progress of hire-purchase to the prevention of smuggling, and to use the powers conferred by the section in furtherance of the aims and objects of the Ordinance in which it appears.

It has been argued that there can be no deterrent to an innocent mind; but section 16 may properly be used not only to deter the deliberate use of vehicles by their owners in contravention of the Ordinance, but also to restrict the creation by these owners of conditions which are likely to facilitate, or are capable of facilitating, the use of such vehicles, by the less innocently minded, for the purpose of contravening the Ordinance. A distinction can be drawn between the second respondent and the owner whose car is stolen: the loss of control by the latter is involuntary.

The forfeiture provisions of this section were put into the Ordinance for the purpose of enforcing it and serving as a deterrent against its contravention. They were put there to be used when the prescribed conditions arose, unless some good reason is shown to the contrary. The facts disclosed on the case stated in the present instance would not, in our opinion, justify a refusal to use them.

We think that not only was it open to the magistrate to order forfeiture, but that he should have ordered it, and, in pursuance of the powers conferred by s. 117 of the Magistrates Ordinance, we hereby order that Motor Car No. AC 239 shall be forfeited.”

21. That, in our judgment, is going too far. It was an over-reaction to the view taken by the magistrate in that case, who had gone too far the other way when he said in the stated case that “since [he] found as a fact that the Finance Co. was not negligent and was blameless in the matter, [he] was of opinion that it would be contrary to the principles of Criminal Law to impose a penalty on them.”

22. The Legislature could have provided that forfeiture orders cannot be made to the detriment of blameless hire purchase companies. On the other hand, it could have provided that hire purchase arrangements are to be ignored where forfeiture orders are concerned. But it did neither. Instead it gave the magistrate an unfettered discretion.

23. Of course, even such a discretion must be exercised judicially. And it should be exercised to further the objects of the statute concerned. That object, as the Ordinance’s long title tells us, is to regulate and control the import of articles into, and the export of articles from, Hong Kong. And that involves combating smuggling - in a reasonable manner of course.

24. There can be no doubt that their access to vehicles on hire purchase is of advantage to smugglers or would-be smugglers. So there can be no warrant for implying an immunity from forfeiture for finance companies. At one stage in the course of his address, Mr Mills-Owens seemed to be arguing for such an immunity. But in due course, he made it clear that he was not going that far. What he did submit is that, the discretion being unfettered, there is no justification for approaching the question of fortfeiture with a predisposition to decide against finance companies. We agree: for that approach would fetter an unfettered discretion. And, quite clearly, that was the approach of the Full Court in A.G. v. Chin Chack-wing (supra) and of the learned Magistrate in this case following that one (as he was, until now, bound to do).

25. We overrule the Full Court's decision in that case. And we set aside the learned Magistrate's decision in this one, remitting the matter to him with our opinion thereon for him to consider the question of a forfeiture order afresh in accordance with such opinion and with the benefit of such further evidence and arguments which the parties may adduce and advance. Our opinion on the point is this. 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.

26. We allow the appeal to that extent. As to the costs of this appeal we make an order nisi in favour of the finance company.

Mr Richard Mills-Owens Q.C. & H.Y. Wong (instructed by Oldham, Li & Nie) for the appellant finance company

T.H. Casewell (of the Attorney General’s Chambers) for the respondent Commissioner of Customs and Excise