CHANDIRAMANI BHAGWAN KANAYALAL v. THE COMMISSIONER OF THE CUSTOMS AND EXCISE DEPARTMENT

CACV 566/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 566 OF 2001

(ON APPEAL FROM HCAL NO. 2580 OF 2000)

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J U D G M E N T

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Hon Rogers VP:

1. This is an appeal from a judgment of Hartmann J given on 9 March 2001. The application before the judge was an application for an order of certiorari to quash the decisions of the Commissioner of Customs and Excise contained in letters dated 16 and 28 August 2000.

Background

2. The application relates to various watches, watch parts and mobile phones which were contained in 14 carton boxes. The value of the goods was said to be some HK$739,930.

3. On 22 May 2000, the applicant packed 14 carton boxes with various watches, watch parts and mobile phones and parts thereof and delivered them to a courier for dispatch to K S Law in the Philippines.

4. That evening officers of the Customs and Excise Department conducted a routine examination of items at the airport and detained the 14 carton boxes at the Asia Airfreight Terminal. The following day the applicant inquired of the courier company as to the whereabouts of the boxes because he had been informed that they had not arrived at their destination. He was told that the goods had been detained and was advised to telephone Inspector Lau of the Customs and Excise Department. When he did so Inspector Lau told him to attend an interview at the department offices on 27 May.

5. On 25 May, persons, whom Inspector Lau described as being representatives of the owners of the trademarks "Citizen" and "Tag Heuer", examined the watches and watch parts. They confirmed that the watches and watch parts were not counterfeit and the marks thereon were genuine. It is to be noted that on the following day, the after sales manager of Tag Heuer sent a fax to the Customs and Excise Department confirming that the goods were genuine but went on to say:

"Since the quantity is large and we have no record regarding such shipment, we have reason to believe that the examined goods are stolen shipment or obtained from an illegal abnormal source."

He requested the Custom and Excise Department to find out details of that source and the intended destination.

6. The following day, Inspector Lau was informed by the Commissioner of Police that there was no record of the items in question being either lost or stolen. On the same day, the applicant duly attended Inspector Lau's office and was interviewed. He made a written statement. Amongst other things he said that he was the agent for the shipper K S Law. He admitted receiving the watches and packing them. He specifically said that the goods in question belonged to K S Law.

7. On the basis of the applicant's statement Inspector Lau formed the opinion that the description of the goods had been deliberately false in order to avoid high duty payable on watches in the Philippines. In his affirmation, Inspector Lau stated that he believed the applicant had committed an offence under the Import and Export Ordinance, Cap. 60. That offence was clearly an offence under section 18A of the Ordinance. The basic facts were outlined at the beginning of the statement:

"As the cargo found were inconsistent of the goods description 'metal spare parts' declared in export documents, the goods were detained."

Inspector Lau said that he then seized the goods. He gave the applicant four documents entitled "Receipt for Things detained or seized". On the backs of those documents were notices stating that any person who claimed the seized goods were not liable to forfeiture should give notice in writing to the Commissioner within 30 days claiming that the seized things are not liable to forfeiture.

8. On 29 May, K S Law sent a fax to Inspector Lau. That fax was headed with the same file number and other indicia as the applicant's statement. The fax confirmed that the applicant was K S Law's agent. It went on to state that there was nothing wrong with the description of the goods in the airway bill. The fax concluded by saying that K S Law would not be coming to Hong Kong because he was busy. An offer was made to give any further assistance should it be required.

9. On 16 June 2000, a notice was exhibited on the notice board at the Customs and Excise Offices in Harbour Building. Mr Cheng Ngai-man, an assistant superintendent of the Customs and Excise Department, stated in his affirmation that it was believed that the goods were stolen. It is noteworthy, however, that no indication is given as to why it was thought that the goods were stolen. Apart from the fax from Tag Heuer, there was no reason to believe that they were stolen. It is further of significance that no notice was served on anybody thought to be the owner under section 27(3B) of the Ordinance.

10. It is also to be noted that the Citizen and Tag Heuer watches and parts listed in that notice were identified as bearing forged trademarks. Two points can be made in respect of this. In the first place there was clearly no justification for any statement that the Citizen or Tag Heuer trademarks were forged. The Customs and Excise Department had been informed on behalf of the trademark owners that the marks were not forged. Moreover, if the trademarks had been forged the goods would have been liable to be seized and destroyed, whether stolen or not. There would have been no purpose in advertising for persons to come forward and make a claim for the goods since they could not have been returned.

11. On 15 July 2000, the applicant was charged with sending unmanifested cargo relating to this shipment. On 20 July, the solicitors for the applicant wrote to the Commissioner of Customs and Excise in respect of the forthcoming prosecution of the applicant. At the conclusion of the letter it was stated that the goods were not liable to forfeiture and that the solicitors were under instructions to make application to the magistrate at the hearing. On 1 August the applicant pleaded guilty to the charge. He was fined $10,000. No application for forfeiture was made to the magistrate by the prosecution under section 28 nor, apparently, was any application made to the magistrate for return of the goods.

12. Immediately after the trial, on 1 August 2000 the applicant's solicitors wrote to the Customs and Excise Department asking for the return of the goods. On 7 August, the Customs and Excise Department wrote saying that since the goods had been seized on 27 May 2000 and no notice of any claim had been received from the applicant within 30 days the claim was outdated. The solicitors repeated their request by a letter of 14 August and on 16 August the Commissioner wrote back repeating the same point but continued that since a notice had been posted in accordance of section 27(4) of the Ordinance the goods were forfeited on 15 July 2000. It might be noted here that, of course, goods cannot be forfeited twice. The Commissioner's stance was maintained, however, in a subsequent letter 28 August 2000.

13. A number of points were taken in the court below but, in my view, it is important to ascertain whether or not a notice has been given in terms of section 27(5). If no notice was given then under section 27(6) the goods were forfeited after the relevant period has expired, namely, 30 days beginning from the date of the seizure or the date on which a notice has been served.

14. For convenience I set out section 27(5) of the Ordinance:

" (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 describe 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. (Replaced 62 of 1993 s. 8)"

It will be noted that section 27(5) applies to articles which are liable to forfeiture under sub-section (1) and to the giving of notice in writing claiming that the articles are not liable to forfeiture. In the circumstances of this case it is clear that the Customs and Excise Department considered that the goods were liable to forfeiture by reason of the misdescription of the goods in the export documents. It was for that reason that the goods were seized on 27 May (alternatively possibly on 22 May).

15. Section 27(5) specifically relates to the owner or the authorised agent of the owner of the article or person who is in possession of the article at the time of seizure or a person who has a legal or equitable interest in the article making such a claim.

16. It is quite clear that the applicant was the authorised agent of the owner of the article. On page 7 of the applicant's written statement of the 27 May, Inspector Lau addressed the applicant as having declared he was the agent of Mr K S Law, and on page 8 he asked the applicant to confirm that the owner was Mr K S Law. In any event it would appear that it was Inspector Lau's position that the goods were not seized until 27 May in the presence of the applicant, who might well be said to have had some right of possession by reason of having delivered the goods to the couriers. Indeed, as mentioned below, the applicant might be said to have some equitable interest in the goods. The written statement made by the applicant on 27 May clearly bears his address in Hong Kong. The fax received on 29 May from K S Law referred to the precise file number and divisions/units/team identified on the applicant's written statement dated 27 May. The fax confirms that the applicant was K S Law's agent. The sentence contained in the fax:

"In fact, there is no inconsistency of the goods and the description in the airway bill in the Philippines we call watch parts as metal parts."

can only be directed to the allegation of inconsistency of the description of the goods. That was the basis upon which the goods were seized. The only point of that sentence is that it was being contended that the articles were not liable to forfeiture.

17. In my view, it does not strain the construction of section 27(5) to interpret it as enabling the notice in writing to be contained in two separate documents. It is quite clear that the combination of the applicant's written statement of 27 May claiming to be the agent of Mr K S Law and stating that the description of the goods was made on instructions and Mr K S Law's fax of 29 May taken together constituted notice in writing that the goods were not liable to forfeiture. The fax supplemented the initial notice in writing made by the agent. It has to be remembered that the person penalised in respect of the offence relating to the goods has been the applicant.

18. In my view, the proper course for the Commissioner to have taken would have been for an application to have been made to the magistrate on 1 August for forfeiture of the goods. The magistrate could then have dealt with the matter as part of the proceedings on that date.

19. Turning to the relief sought on this application, on the basis which has been outlined, the Commissioner's stance that the goods were forfeited was, in my view, wrong. A claim, albeit proved wrong, had been made that the articles were not liable to forfeiture. The provisions of section 27(5) having been put into operation there was no automatic forfeiture under section 27(6). The applicant is, therefore, in my view, entitled to an order for certiorari to quash the decisions of the Commissioner of 16 and 28 August and to a corresponding declaration.

20. The applicant also asked for an order for the release of the goods and the return of them. If the Commissioner cannot establish a basis for forfeiture of the goods, they would have to be released. However, it would appear that the appropriate course would be to give the Commissioner an opportunity to make whatever application he might be advised to make under the provisions of section 28 of the Ordinance, or otherwise, for an order for forfeiture. Under section 28, such applications can be made either to the Magistrate Court, the District Court or the Court of First Instance. In the circumstances, it would be appropriate that an order were made for the release of the articles, unless an application is made for forfeiture of the goods within 21 days from the date of the order herein.

21. At the hearing, Mr Kwok on behalf of the Commissioner raised a point which had not been raised below, in a respondent's notice or even in a skeleton argument. It was said that because the applicant was merely the authorised agent and not the owner of the goods he could not apply for release of the goods to himself. In my view, this argument is wrong. Section 27(5) envisages that a claim that the goods are not liable for forfeiture can be made by the authorised agent. On the basis that it was the authorised agent who made such a claim, if that claim is ignored I see no reason why the authorised agent should not take proceedings to correct any decision based on ignoring the claim which had been made. Furthermore, it is in my view arguable that the authorised agent has some interest of the articles. He is liable to his principle for taking all proper steps to ship the goods and, indeed, to make sure that he is in no way responsible for the seizure of the goods or for their loss. In those circumstances, it appears to me that he has a sufficient interest in the goods to bring these proceedings and to seek the orders sought.

Hon Le Pichon JA:

22. I agree with the judgment of the Vice-President and wish to add a few observations of my own. The facts are as set out in the Vice-President's judgment and I do not propose to repeat them here.

23. In issue is whether a consignment of watches, watch parts and mobile phones ("the goods") of a value in the region of $800,000 had already been forfeited to the Government pursuant to the provisions of section 27(6) of the Import and Export Ordinance, Cap. 60 or whether, in order to forfeit the same, the Commissioner has to make a forfeiture application under section 28 and obtain a forfeiture order from the court. The court hearing a forfeiture application is not bound to order forfeiture: it has a discretion (save in a few specific situations which do not arise in this case) to order forfeiture or to order that the goods be delivered to the claimant whether conditionally or otherwise or to dispose of the same in any way it thinks fit. In this connection, it should be noted that the goods in question have been found to be genuine by the manufacturers. No question of their being forgeries arise and whilst it has been suggested that they might be stolen goods, there is no evidence to support the allegation. To the contrary, the Commissioner of the Police has no record of the goods being either lost or stolen.

24. Sections 27 and 28 fall within Part VI of the Ordinance which relates to "forfeiture". The statutory framework may be summarised as follows. Any article seized by Customs and Excise in connection with any contravention of the Ordinance whether or not any person is convicted in relation thereto is liable to forfeiture (subsection (1)). Such articles may, at the discretion of the Commissioner, be restored to the owner or his authorised agent within 30 days of the seizure (subsection (2)). There are involved provisions relating to notice: (subsections (3)(3A)(3B) and (4)). The Commissioner is required to give notice of the seizure within 30 days to the person known or (in the case where the article is believed to be stolen) believed to be an owner of the seized article at the time of, or immediately after, seizure. Notice is dispensed with if either (i) the seizure took place in the presence of the owner or his agent or the person whose offence or suspected offence gave rise to the seizure unless the goods were believed to be stolen or (ii) the owner did not have a permanent address in Hong Kong at the time of seizure. Those provisions were plainly designed to ensure that an owner of the seized article would have notice of its seizure except cases where the owner does not have a permanent Hong Kong address.

25. Then comes subsection 5 which reads as follows:

"(5) If an article ... is liable to forfeiture under subsection (1), the owner or the authorized agent of the owner of the article ... or a person who was in possession of the article ... at the time of seizure, or a person who has a legal or equitable interest in the article ... 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 ... is not liable to forfeiture and of his full name and address for service in Hong Kong. (Replaced 62 of 1993 s. 8)"

Where a claimant does not have a permanent address in Hong Kong the notice is a nullity unless it nominates a solicitor to act in the forfeiture proceedings and includes his name and address (subsections (5A) and (5B)). A notice of claim may be withdrawn at any time (subsection (5D)). The seized article would automatically be forfeited at the expiration of the appropriate period specified in subsection (5) if no notice of claim pursuant to that subsection has been given in writing (subsection (6)). Section 28 then deals with the effect of the filing of a notice of claim pursuant to section 27(5). In practical terms, it means that the goods cannot be forfeited without a court order. So if the Commissioner wishes to forfeit the goods he must apply to a magistrate, the District Court or the Court of First Instance for an order for forfeiture. As noted above, the court is not bound to make a forfeiture order save in specific situations which are not material for present purposes.

26. I have dwelt at some length with the context in which section 27(5) appears because, as will become apparent, that is relevant to the approach to be adopted in construing the section, the true interpretation of which lies at the heart of this appeal. As a preliminary matter, although the notice provisions in section 27(3)(3B) and (4) do not specify what is to be contained in the "notice of seizure", in view of the scheme of sections 27 and 28, the point of the notice must be that the recipient would be alerted not only to the automatic forfeiture provision but also to the steps that need to be taken if the automatic forfeiture provision is not to be triggered. Thus, the standard form of notice issued by the Customs and Excise Department pursuant to section 27(4), in pertinent part, reads as follows:

"Any person claiming the above mentioned things may within 30 days. ... give notice in writing with a full name and address for correspondence in Hong Kong to the Commissioner of Customs and Excise claiming that the above mentioned things are not liable to forfeiture."

The explanatory notes make it plain that the making of the claim would not lead to an automatic return of the seized articles. That would depend on the outcome of the court application. The notes also emphasise that if no notice of claim is given within the stipulated period, the seized articles would be forfeited to the Government. The standard form of notice printed on the back of the "Receipt for Things Detained or Seized" issued by the Customs and Excise Department is to similar effect. It reads:

"Any person claiming the seized things under the Import and Export Ordinance or the Dutiable Commodities Ordinance shall, within 30 days beginning on the date of seizure, give notice in writing to the Commissioner of Customs and Excise claiming that the seized things is/are not liable to forfeiture and of his full name and address for service of a summons in Hong Kong. If no notice of claim has been given to the Commissioner of Customs and Excise within the stipulated period of time, the seized things shall be forfeited to the Government."

Whilst these notices were attempts to bring home to the recipient the effect of section 27(6) and what needed to be done to forestall it, the adequacy or otherwise of the notices is another matter. I express no view as to that since it is not a question that presently arises. I would merely observe that neither notice addressed the special provision (i.e. subsection (5A)) which applies where an owner does not have a permanent address in Hong Kong.

27. Certain features of this statutory framework call for comment. The legislature could have provided for automatic forfeiture of goods seized in connection with the contravention of any provision of the Ordinance without more: it did not. Rather, (apart from conferring on the Commissioner a discretion to return the seized goods within the 30 day period,) it required the Commissioner to give notice of the seizure to an owner unless such owner does not have a permanent address in Hong Kong at the time of seizure. The nature of the notice to be given to the owner (considered above) goes some way to counterbalancing the draconian consequence of section 27(6) which is confiscatory in nature, depriving a person of his property whether or not good cause for so doing exists. There is also the fact that the effect of a valid notice under section 27(5) is limited: it merely levels the playing field. The question of forfeiture would then fall to be adjudicated by the court which in exercising its discretion will undoubtedly pay regard to the merits of the case. Finally, it is worth noting that there is no provision for relief from forfeiture under section 27(6). Having regard to these matters, fairness requires that one should not construe section 27(5) in an overly restrictive and legalistic manner. In my view, what is called for is a common sense and liberal approach. The court should lean towards upholding a section 27(5) notice rather than striking it down.

28. With those matters in mind, I now turn to consider whether section 27(5) had been complied with. First, I find nothing in section 27(5) which mandates that the notice of claim must be contained in a single document. I see no reason in principle why the requisite notice of claim cannot be contained in more than one document. Second, there is no prescribed form although it has to be in writing. If the substance of what is stated, viewed objectively, amounts to denying that any valid ground for seizure existed, that is but another way of saying that the goods are not subject to forfeiture. In my view, it can constitute requisite 'notice' for the purpose of section 27(5): there is no requirement that such 'notice' must be explicit. Whether or not notice is made out is a question of fact that must depend on the circumstances of the particular case.

29. The applicant was informed by the customs inspector at the outset of the interview that the goods had been detained because:

"the cargo found were inconsistent of (sic) the goods description 'metal spare parts' declared in export documents."

The applicant, claiming to be the agent of Mr Law, gave an explanation concerning the description of the goods and further stated that he was simply carrying out his principal's instructions. The letter of 29 May from the principal expanded upon the explanation given by the applicant at the interview, contending that there was no inconsistency between the goods and their description. The caption to the letter of 29 May, containing as it did the specific file references appearing on the applicant's written statement, made it plain that it was referable to, and had to be read in conjunction with, the applicant's written statement. Juxtaposing the applicant's written statement with the letter of 29 May, the only reasonable inference is that the letter was supplementing the explanation given by the applicant in his written statement. The explanation given, if correct, would destroy the basis upon which the goods had been seized. In other words, it was in substance an assertion that the goods were not liable to forfeiture. In these circumstances, I agree with the Vice-President that viewing the matter broadly, the written statement coupled with the letter is capable of satisfying section 27(5).

30. Such a construction, whilst beneficial to the applicant, does not prejudice the Government inasmuch as it does not affect the Government's right to make a forfeiture application under section 28. Indeed, it is somewhat surprising that the Government chose to eschew what appeared to be the most natural and convenient course which would have been the making of a forfeiture application pursuant to section 28(2A) at the conclusion of the criminal proceedings against the applicant.

Hon Burrell J (dissenting):

31. The basis upon which Rogers VP and Le Pichon JA have allowed this appeal concerns the construction of section 27(5) of the Import and Export Ordinance, Cap. 60. The point was not argued at first instance before Hartmann J.

32. After the goods were detained at the airport the applicant was notified of the procedure to be followed should he or the owner wish to claim that the goods were not liable to forfeiture. The procedure was on the reverse of the document given to him at the time entitled "Receipt for Things detained or seized". It says, in English and Chinese :

"Any person claiming the seized things under the Import and Export Ordinance or the Dutiable Commodities Ordinance shall, within 30 days beginning on the date of seizure, give notice in writing to the Commissioner of Customs and Excise claiming that the seized things is/are not liable to forfeiture and of his full name and address for service of a summons in Hong Kong. If no notice of claim has been given to the Commissioner of Customs and Excise within the stipulated period of time, the seized things shall be forfeited to the Government."

33. In short, it informs the applicant of the provisions of section 27(5).

34. The important parts of section 27(5) which fall for consideration in this case are :

" (5) If an article ... is liable to forfeiture ... the owner or the authorized agent ... may within 30 days beginning-

(a) on the date of the seizure ...

(b) ...

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

35. If a claimant does not have a permanent address in Hong Kong section 27(5A) applies. That subsection states that such a person may nominate a qualified Hong Kong solicitor to accept service on his behalf.

36. In this case there can be no question of the owner from the Philippines making a valid claim because section 27(5A) was not complied with. The only question is did the authorized agent make a valid claim? The two documents which fall for consideration in answer to this question are :

(i) the agent's signed statement to the investigating officer on 27 May and

(ii) the fax from the owner in the Philippines dated 29 May.

37. The applicants' statement is a signed record of interview between himself and Mr S.Y. Lau, a Customs and Excise investigating officer, with the aid of an interpreter. The high water mark of its contents is an admission that he was the owner's agent in Hong Kong, that he packaged the goods and arranged the documentation for export and that he had declared the goods to be "metal spare parts" on the owner's instructions so as to avoid duty in the Philippines.

38. Taken on its own I do not think this constitutes a claim within the meaning of section 27(5). This being the case, then as at 27 May no claim had been made by the agent.

39. The fax from the owner, received on 29 May reads :

"In fact, there is no inconsistency of the goods and the description in the airway bill in the Philippines we call watch parts as metal parts."

(The intended meaning of this sentence is made clearer if a "full stop" is inserted after the word "bill".)

40. Taken on its own this does not constitute a claim because section 27(5A) has not been complied with.

41. The question now arises, can the fax which is not a valid claim, be used as a makeweight to supplement the agent's statement so as to convert what was an invalid claim into a valid one by the agent.

42. For two reasons I think it cannot. Firstly I am uncomfortable with the notion that two invalid claims can add up to make a valid claim. Secondly, I cannot accept the argument that words from the overseas owner can be put in the mouth of the agent so as to create a valid claim by him which he had patently not made two days earlier.

43. Cap.60 as a whole provides for :

"... the regulation and control of the import of articles into Hong Kong, the export of articles from Hong Kong, the handling and carriage of articles within Hong Kong which have been imported into Hong Kong or which may be exported from Hong Kong, and any matter incidental to or connected with the foregoing."

44. Part VI deals with forfeiture. Part VI provides a complex list of procedures to be followed. Section 27(5) is one of those procedures. Although it is not necessary for me to decide whether the owner's fax on its own, would qualify as a claim under section 27(5) (because section 27(5A) was not complied with) I think it arguable that the words "in the Philippines we call watch parts as metal parts" would not satisfy the requirements. Apart from the fact that the actual description was "metal spare parts" not "metal parts" (as referred to on the May 29 fax) it seems to me, in any event, to fall short of a level of procedural formality envisaged by the words "a notice in writing to the commissioner ...".

45. In my judgment no valid notice of claim was made. I therefore, with some reluctance, feel unable to agree with the conclusions reached by Rogers VP and Le Pichon JA on the construction of section 27(5). This is the only issue upon which I disagree.

Hon Rogers VP:

46. The appeal will be allowed accordingly. There will be an order of certiorari. There will be an order for the release of the goods the subject of this application unless within 21 days of the order herein application is made by the Commissioner for seizure of the goods under section 28 of the Import and Export Ordinance.