LO YU SHING t/a HANG LEE TRADING HONG v. COMMISSIONER OF CUSTOMS AND EXCISE

1997 A.L. No. 98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMINISTRATIVE LAW LIST

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J U D G M E N T

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The facts

1. On the evening of 20th September, premises in Kowloon were raided by officers of the Customs and Excise Department. It was believed that infringing copies of video compact discs were being produced there. They found large quantities of video compact discs on the premises. It was believed that they were infringing copies because they had no identification sources or distributors' logos on them. That belief was confirmed a little later by a representative of the Motion Picture Association who was called to the premises. He expressed the view that those of the video compact discs which bore the Walt Disney title (about 40% of all the video compact discs there) were infringing copies. The video compact discs were seized, and a number of them have since then been removed from the premises.

2. This application for judicial review relates to a compact disc production plant which was also on the premises. It was believed that the plant had been used to produce the seized video compact discs. If the seized video compact discs had been infringing copies, their production would have been an offence under the Copyright Ordinance (Ord. 92 of 1997) ("the Ordinance"). Accordingly, it was decided to exercise the powers conferred by section 122(1)(b)(ii) of the Ordinance, which permits the seizure, removal or detention of anything which appears to be likely to be evidence of an offence under the Ordinance. The plant was therefore seized.

3. In addition, it was decided to remove the plant from the premises. If it had been left there, it would have remained in the control of the persons who were suspected of using it to commit criminal offences, and there was the danger that it would be used to produce more infringing copies of video compact discs. However, the plant was not removed on that occasion: it needed to be dismantled by experts.

4. Over the next few days, representations were made to the Commissioner of Customs and Excise requesting that the plant be not removed. Eventually, though, the Commissioner decided that the plant should be removed, and on 9th October officers from the Customs and Excise Department came to the premises with contractors and began to dismantle the plant. That prompted the Applicant (who owns the plant) to apply for an injunction to restrain the Commissioner from removing the plant for the time being. That afternoon, Barnett, J. ordered the dismantling of the plant to be stayed pending the determination of an application for leave to apply for judicial review of the Commissioner's decision to remove the plant.

5. The application for leave to apply for judicial review was heard by Barnett, J. on 20th October. The Applicant's case was that the video compact discs found at the premises were not infringing copies, because proper authorisations to produce the video compact discs had been obtained from the copyright holders. Barnett, J. took the view that the Ordinance itself identified the procedure by which the question of whether the plant should be seized and detained should be decided. In effect, the Ordinance provided that any article seized or detained under section 122 was liable to forfeiture (section 131(1)). However, the owner of the article could, by notice to the Commissioner, claim that the article was not liable to forfeiture (section 131(5)). The Commissioner would have a reasonable time to consider the matter, but after that he could either return the article to the claimant or apply to the court for its forfeiture (section 133(1)). Barnett, J. therefore made no order on the application for leave to apply for judicial review on various undertakings which the Applicant and the Commissioner gave. The Applicant undertook to give the Commissioner notice under section 131(5) within 48 hours of his claim that the plant was not liable to forfeiture. For his part, the Commissioner undertook to apply, on receipt of the notice under section 131(5), to the Court of First Instance under section 133(1) for the forfeiture of the plant.

6. Although that part of Barnett J.'s order addressed the underlying dispute between the Applicant and the Commissioner as to whether the plant should be forfeited, it did not deal with their immediate concern - which was whether the plant could remain on the premises for the time being, or whether the Commissioner could dismantle and remove it. That issue was covered by other undertakings which were incorporated in Barnett J.'s order. For the present, I confine myself to describing what the undertakings were, because I shall have to return to what Barnett J. was intending to achieve. The undertakings were

(i) an undertaking by the Applicant not to use the plant, and

(ii) an undertaking by the Commissioner to give the Applicant two working days' notice in writing of his intention to dismantle or remove the plant.

7. The next relevant date is 22nd October. On that date, the Applicant's solicitors gave the Commissioner notice under section 131(5) that the plant was not liable to forfeiture. For his part, the Commissioner gave the Applicant's solicitors notice that the Customs and Excise Department would dismantle and remove the plant on 25th October. That latter notice prompted the Applicant to apply again for an injunction to restrain the Commissioner from dismantling and removing the plant. That application was heard by Le Pichon J. on 23rd October, and she made an order similar to that made by Barnett J. on 9th October. Leave to apply for judicial review of the Commissioner's decision of 22nd October to dismantle and remove the plant on 25th October was granted by Barnett J. on 6th November. The hearing before me today is the hearing of that application for judicial review. I should add that as yet, contrary to the undertaking giving to Barnett J., no application has been made by the Commissioner to the Court of First Instance, pursuant to section 133(1), for the forfeiture of the plant - despite the Commissioner's undertaking to do so on receipt of the Applicant's notice under section 131(5).

The intended effect of the order of 20th October.

8. Against this background, I return to Barnett J.'s order of 20th October, and in particular to that part of his order which addressed the question whether the plant could remain on the premises for the time being. It is now, I think, common ground between Mr. Gerard McCoy S.C. for the Applicant and Mr. Philip Dykes S.C. for the Commissioner that what Barnett, J. had in mind was that the plant could remain on the premises until

(a) the jurisdiction of the Court of First Instance was invoked by the Commissioner under section 133(1) to determine whether the plant should be forfeited, and

(b) an application could be made in those proceedings for an injunction to restrain the Commissioner from dismantling and removing the plant until the outcome of those proceedings was known.

If Barnett, J. did not have that in mind, he would not have been addressing the issue which was of immediate concern to the parties: where should the plant remain for the time being? The fact that it should remain where it was until the jurisdiction of the Court of First Instance had been invoked in forfeiture proceedings was borne out by what leading counsel for the Applicant told Barnett J., namely that it would be appropriate for an order prohibiting the Commissioner from dismantling and removing the plant to be made in the forfeiture proceedings. Barnett J. was clearly of the view that the Applicant should not be able to use the plant pending the application for an injunction in the forfeiture proceedings. That was why he required the Applicant to undertake that he would not use the plant. That also explains why Barnett J. required the Commissioner to undertake to give notice of his intention to dismantle and remove the plant. It was to protect the Commissioner in the event of the Applicant breaking his undertaking and continuing to use the plant. It may be, as Mr. Dykes suggested, that Barnett J. thought that the forfeiture proceedings would be initiated sooner than would in fact be the case having regard to the Commissioner's power under section 133(1) to have a reasonable period after the receipt of the notice under section 131(5) to consider the matter, but the fact remains that what Barnett J. had in mind was that the plant should remain on the premises for the time being.

9. I should add that grounds existed to justify Barnett J.'s conclusion that the plant should remain on the premises for the time being. The plant was a very expensive piece of equipment. It had required trained technicians from Germany to install it. It had to be kept in controlled conditions, at a specified temperature, within a defined humidity range, and in a dust-free environment which Mr. McCoy has described as more pure than an operating theatre. The risk of serious damage to it, if it was dismantled and removed by contractors unfamiliar with it, was considerable. If appropriate, stringent conditions could be imposed on the Applicant to ensure that it was not used for the time being, and officers from the Customs and Excise Department could be granted permission to inspect the machine, without notice to the Applicant and at random times, to check that it was not being used. Having said all that, though, I have not addressed at all whether, but for Barnett, J.'s order, it was Wednesbury unreasonable for the Commissioner to decide on 22nd October to dismantle and remove the plant.

Conclusion

10. I believe that I should give effect to what Barnett J. intended to achieve. Since he was in effect holding that the plant should remain on the premises until the initiation of the forfeiture proceedings unless it was used in the meantime, he was not permitting the Commissioner to be able, within a couple of days of the order, to dismantle and remove the plant when there was no suggestion that it had been used since the order, in the absence of an application to the court by the Commissioner under section 133(1) for the forfeiture of the plant. If I had to apply a label to the ground on which I quash the Commissioner's decision of 22nd October to dismantle and remove the plant, I would do so on the ground that the decision was Wednesbury unreasonable, because, although not expressly prohibited by Barnett, J.'s order, it was contrary to what Barnett, J. had thought should happen. For these reasons, therefore, I make an order of certiorari quashing the Commissioner's decision of 22nd October to dismantle and remove the plant.

11. In the absence of any undertaking from the Commissioner as to the future, I propose to make an order of prohibition, prohibiting the Commissioner from dismantling and removing the plant until the initiation of forfeiture proceedings by the Commissioner under section 133(1), and until an interlocutory injunction can be sought in those proceedings, unless the plant is used in the meantime. In a similar case, Best Talent International Investment Ltd. v. The Commissioner of Customs and Excise (HCAL 97/97), Findlay, J. imposed conditions " that seek to pay reasonable regard to the public interest in preserving the equipment, but avoid the very real disastrous consequences to the applicants". I propose to adopt the same course. The conditions which I have in mind, other than those which I have mentioned, are

(i) the Applicant will not use the plant until further order,

(ii) the Applicant will not remove the plant from the premises, and will maintain it in good order and condition,

(iii) the Applicant will not dispose of the plant, or encumber it in any way in favour of third parties, and

(iv) the Applicant will allow officers from the Customs and Excise Department access to the premises, and permit them to inspect the plant at such times as the Commissioner wishes, without the need for the Commissioner to give prior notice.

As did Findlay J., I leave it to the good sense of the parties to work out the details of these conditions, and I give the parties liberty to restore this application if agreement cannot be reached.

12. In conclusion, I should add two things. First, if the application for an injunction to restrain the Commissioner from dismantling or removing the plant until the outcome of the forfeiture proceedings is granted in the forfeiture proceedings, the court will have to address the question whether, between then and the outcome of the forfeiture proceedings, the Applicant should be able to use the plant. That is an issue of crucial importance to the Applicant, but it does not arise on this application. Secondly, it will be necessary for the Commissioner to initiate the forfeiture proceedings quickly, because delay in doing so only lengthens the period during which the Applicant cannot use the plant for the time being. In that context, it is to be noted that the Commissioner enjoys an extensive immunity from liability by virtue of section 190 of the Ordinance. Mr. McCoy told me that if the Commissioner does not initiate forfeiture proceedings quickly, an application will be made for leave to apply for an order of mandamus requiring him to do so.

(Brian Keith)

Judge of the Court of First Instance