THE QUEEN v. NGAI WAI

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO. 750 OF 1985

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BETWEEN

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JUDGMENT

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1. In this case the crew of a Taiwanese fishing boat pleaded guilty and were convicted of attempting to export 1,188 video cassette records without an export licence in breach of the Import and Export Ordinance (Cap. 60). Thereafter the Commissioner of Customs and Excise applied for the forfeiture of the recorders under section 27 of that Ordinance. Under section 28 of the Ordinance, the recorders are in the particular circumstances subject to discretionary as opposed to mandatory forfeiture.

2. The Appellant as owner then applied for the release to him of the recorders. The magistrate, following a hearing, refused and in the exercise of his discretion ordered the goods to be forfeited. From that order the Appellant now appeals.

3. It is common ground that the forfeiture provisions are for the purpose of enforcing the Ordinance by serving as a deterrent against its contravention and in the absence of good reason to the contrary, are to be used when the prescribed conditions arise; and that the onus of establishing good reason lies upon the Appellant. (Attorney General v. CHIN Chack-wing (1961) HKLR 479 and Director of Immigration v. CHU Shiu-fat (1980) HKLR 780)

4. The essential question I therefore have to decide is whether there is good reason why forfeiture should not be ordered. While it is not to be expected that the courts would attempt comprehensively to define good reason, there appears to be very little guidance on that matter. But in the relevant context of Director of Immigration v. CHU Shiu-fat, Macdougall J. held that where there is a complete absence of fault on the part of the owner, the magistrate should on the type of application there concerned, exercise his discretion in the owner's favour, but that it did not follow that where there was fault on the part of the owner, the court must necessarily order forfeiture; that the mere fact that forfeiture would cause undue hardship to the owner does not of itself resolve the matter in his favour; and that the purpose of the forfeiture provisions should be borne in mind and an order should not be made the result of which would frustrate the object of the legislation or impair its effectiveness. I would adopt those views.

5. To turn then to the facts in this case, the Appellant purchased 1,190 video cassette recorders from a supplier in Hong Kong at the wholesale price of $1,655,200. Of that price only $400,000 was paid by the Appellant leaving the balance to be paid. The recorders operate on 110 volts and can be used in Taiwan or the United States, but not in Hong Kong or the Peoples' Republic of China. On the evidence it must be accepted that they were intended for Taiwan. There is no restriction upon their export from Hong Kong other than a requirement under the Import and Export (General) Regulations for an export licence, which is readily available, and would involve the relatively insignificant duty of $8,000. Such an export licence was not procured although the goods were manifested as also required by the legislation. On the evidence it must in addition be accepted that there were no restrictions upon the import of the recorders into Taiwan.

6. The goods were delivered to the Appellant in Hong Kong, then taken to Tap Mun and thence loaded onto the fishing boat bound for Taiwan from which they were seized. On the face of it, that appears to be a strange way of getting this valuable cargo to Taiwan and it made an understandably unfavourable impression upon the magistrate. He observed in his judgment that no explanation was forthcoming for what he termed this clandestine operation. But equally no suggestion of any skuduggery has emerged from the evidence or been suggested by the prosecution. Quite simply it all seems rather suspicious, but the suspicions have not led to anything, and cannot therefore be used against the Appellant. Furthermore as Mr. Keane submits for the Appellant, it may well be that that was a cheap way of shipping the goods.

7. So when all is said and done it emerges that this was essentially a technical offence. There is no suggestion of smuggling, or that trading relations or generally the comity of nations would be affected in any way. It does not seem credible that the whole operation was mounted merely to evade the relatively insignificant duty of $8,000. Even if it were, in that sole context, a penalty of some $1.6 million would be wholly disproportionate.

8. But what of the object of the legislation. It is not entirely clear to me what this is. The control of the export of strategic commodities, which do not include video cassette recorders, are dealt with by other  provisions requiring mandatory forfeiture. Besides, it is common ground that export licences are freely available for video cassette recorders. Perhaps in the present context, the object is to maintain comprehensive statistics. But whatever the object, I do not consider it would be frustrated if forfeiture were not ordered. On the contrary a penalty of a fraction of the value of the goods would in the circumstances of this case secure the object of the legislation. That could be effected under section 28(7)(b)(ii) of the Ordinance, which in providing the option of returning the goods to the owner upon any condition, seems specifically designed for just such a purpose.

9. But the question remains, is there good reason for not ordering forfeiture? I consider that forfeiture constitutes so grossly disproportionate a penalty in the particular circumstances of this essentially technical offence, that that of itself must constitute good reason for not ordering it. I remain of that view notwithstanding Mr. Jenkyn Jones' submission that return of the goods upon condition that the owner pays part of their value, would place a premium upon and encourage the unlicensed expert of consignments of very large value. Whether or not that would be so, which I doubt, the amounts to be paid could be set to provide an effective deterrent. In this regard, at the hearing before the magistrate, an offer was made, which was renewed at the appeal, to pay 20% of the value of the goods. However I consider that 25% of their value would be more appropriate and would clearly secure the objects of the legislation in the present circumstances.

10. I accordingly set aside the order made by the learned magistrate and order the goods to be delivered to the Appellant on condition that he first pays to the Commissioner of Customs and Exise on behalf of the Crown the sum of $413,800 before the 1st October 1985; should he fail to do so the goods will be forfeited.