ATTORNEY GENERAL v. HUI LAN TAI

Headnote

Forfeiture - Caps. 60 & 109 - administrative law - notice not served on owner of goods - whether notice requirement mandatory or directory.

IN THE HIGH COURT OF HONG KONG

APPELLATE JURISDICTION

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JUDGMENT

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1. On 6th December 1989, Mr. M.D. Hill the Principal Magistrate at Western refused to make a Forfeiture Order in respect of 8,267,400 cigarettes valued at just under HK$3 million, and he further ordered their return to the Respondent.

2. The Attorney General being dissatisfied with that Ruling has asked Mr. Hill to state a case for the opinion of the High Court. I heard argument in this matter on the 7th August 1990.

3. The point in issue, shorn of legal niceties is whether under the two relevant Ordinances, the provisions that notice of forfeiture be served on the owners are mandatory or directory. In other words whether failure to serve the appropriate notice renders the forfeiture proceedings invalid. I also have to consider whether this defect, if it exists, is cureable.

4. It can thus be seen that the crucial dates were as follows:

THE STATUTORY PROVISIONS

5. It is common ground that the Commissioner did not serve the Respondent within 21 days of seizure with a notice under either ordinance of the seizure of the cigarettes as liable to forfeiture.

6. Mr. Wong, who appears for the Attorney General, makes two basic points as to this. Firstly, he says that the words, "who to his knowledge were at tile time of the seizure the owner" are wide enough to cover the notices served on D1 and D2. He argues that the Commissioner did not really know the position and that prima facie the carrier is the owner for this purpose. He said D1 & D2 did not say who the owners were. The Commissioner is not under any duty to attempt to discover the true owner.

7. I unhesitatingly reject this argument. The Commissioner knew as from the 31st August 1989 that the Respondent claimed to be, and was later held by the magistrate to be, the owner of these cigarettes. I find it incredible that the Commissioner failed, nevertheless, to serve the notices on the Respondent. I cannot hold that notices served upon D1 and D2 are in some way good notices under the section so far as the Respondent is concerned.

8. There may well be cases where the Commissioner is in real doubt as to the ownership of a cargo. I am not saying that notices on the carriers may not be good notices under section 48(3) in some circumstances. I do not have to decide that point in this case stated. However, there is a very simple provision contained in sections 48 (5) and 27(4) which provide for substituted service where a subsection (3) notice cannot be served. That is the obvious procedure to use if the identity of the owner is not known. I should perhaps add that no explanation was given to me nor to the Magistrate as to why the simple expedient of serving the section 48(3) and 27(4) notices on the Respondent were not carried out.

9. In due course, I will have to come back to the crucial issue as to whether or not the requirement to give notice of seizure is a mandatory provision or a directory provision. Before doing that it may be helpful to see the way in which Mr. Wong put the case for the Attorney General.

10. Mr. Wong pointed out that section 48(6) enables "any person" claiming that any goods seized as liable to forfeiture should not be so forfeited shall within one month of the date of notice of seizure give notice of claim to the Commissioner. He submits that as any person is entitled to make this claim it is not limited to the person who was served with the section 48(3) notice. He then referred me to section 48 (9) and pointed out the essential ingredients of that section. Firstly, the claimant has to have a proprietary interest in the goods. Secondly, the person making the application has to be the claimant as opposed to the person served with the section 48 (3) notice. Further, there has to be an application to a Magistrate and fourthly, goods have to be shown to be liable to forfeiture. He makes the point that this subsection does not say that the Magistrate has to be satisried that a subsection (3) notice has been served. He goes on to submit that the Respondent in this case has sufferer no prejudice whatsoever. He found out almost immediately that his goods were seized, he told the Commissioner of Customs and Excise that he laid claim to the goods and although the subsection (3) notice was not served on him he was able to make the application before the Magistrate and thus he has nothing to complain about.

11. As I am stating a case which involves a point of law it is very important for me to lay down the correct principles, as I see them, rather than approach the case on tile special facts involved in it. It is perfectly true to say that this Respondent was able to appear before the Magistrate and had the Magistrate not dismissed the application for forfeiture in limine he would have been able to address the Magistrate on the merits. However, in other cases, if a notice under section 48(3) is not served on somebody whom the Commissioner knows or believes to be the owner, there is a danger that that person will not get an opportunity to contest the matter in the Magistrates court. It is all very well for Mr. Wong to point out that in subsection (6) the reference to any person is wider than reference to the person served with the notice but the fact remains that the court must examine with scrupulous care a submission that the notice provisions can be ignored by the Commissioner yet he can still maintain the forfeiture.

12. Turning to section 27, Cap. 60. one notices that it starts off in mandatory terms in that there shall be a forfeiture of articles referred to. Under subsection (3) of section 27, the Commissioner has to serve notice of seizure upon the Owner of the article. It is to be noted that the terminology is different to that contained in section 48 which refers to "any person who to his knowledge was at the time of the seizure the owner or owners". Although in one of the cases cited Bewley J. expressed the opinion that subsection (3) of section 27 contains some missing words, namely the same words as I have just quoted from section 48, he may not have been referred to the definition of "owner" set out in section 2 of Cap. 60. "Owner" is there defined as meaning, other than for the purposes of part VI (in which section 27 is contained), "In respect to an article, any person being or holding himself out to be the owner importer, exporter consignee, agent or person in possession of or beneficially interested in or having any control of or power of disposition over the article."

13. Subsection (4) of section 27 provides for the notice which has to be served to be deemed to be duly served if it is delivered to the person on whom it is to be served or if sent by registered post to the address of a person known to the Commissioner, or where it cannot be served by substituted service by exhibiting it at the Customs and Excise Department. Subsection 5 provides where a notice has been served in respect of any article seized under this Ordinance, any person who is the owner or who was in possession of the article may give notice in writing to the Commissioner to claim that the article is not liable to forfeiture. Mr. Wong points out that a person who was in possession of the article can make an application out that the person who was is possession is not within subsection (3) because on no basis could they be called the owner of the article. The reason why he points this out is to show that some persons may make an application that goods be not forfeited even though they were not served with the notice. This is in order to limit the importance of the notice provisions and so persuade me that I should treat them as directory rather than mandatory. The submission in essense amounted to this. The notices served were good notices. He relies upon the fact that in any event the Respondent was able to appear even though he was not served. Alternatively, if the notices were not properly served then such failure was not fatal to the application for forreiture. He invites me to answer the four questions posed by the Magistrate in the negative. He did refer me to a number of authorities that I must confess I did not fine very helpful because what I am concerned with is a pure question of construction of the two statutory provisions and no decision cited to me is precisely in point.   

14. Mr. Ramanathan put in a very useful written skeleton of argument. His first submission was that where a statute carries the word "shall" it is generally to be considered peremptory unless there are other reasons which indicate the contrary. His second proposition was that where the statute provides for jurisdiction and procedure in relation to matters involving infliction of penalties, or affecting rights of individuals, they should be construed strictly. He relied on a passage in Maxwell's Interpretation of Statutes 12th edition p. 245 and also from pp. 247 to 249 of Professor Wade's Administrative Law. His third proposition was where the statute lays down the manner or form in which a particular power is to be exercised but does not state what the legal consequences are if there is a failure to observe the procedure, the courts have to assess and decide whether the relevant criteria is directory or mandatory. Again, he relied upon the same pages in Wade and also at pp. 142 -146 of De Smith's Judicial Review of Administrative Action.

15. He laid great emphasis on a decision of the House of Lords in London and Clydeside Estates Ltd. v. Aberdeen District Council (1980) 1 W.L.R. 182, a decision which was followed by the Hong Kong Court of Appeal recently in Asia Dyeing Co. Ltd. v. The Authority (1990) 1 H.K.L.R. 263.

16. In London and Clydeside Estates Ltd. v. Aberdeen District Council (1980) 1 W.L.R. 182 the Land Compensation Act enabled a person whose interest in land was proposed to be acquired by an authority to apply to the Local Planning Authority for a certificate of alternative development. The time prescribed for the issue of the certificate was two months. It was provided that in the certificate the authority "shall include a statement in writing of the rights of appeal to the Secretary of State given under Section 6 and this order". The Appellants applied for a certificate and when it was issued it did not mention the right of appeal. The Appellants having appealed more than one month after the date of the certificate, its appeal was rejected as incompetent.

17. At p. 186 Lord Hailsham L.C. said:

"was this requirement, which has the authority of Parliament behind it mandatory or was it in some sense directory only? I have no doubt that it was mandatory, and the failure to include this information was fatal to the certificate. In the course of argument counsel for the respondents candidly conceded that the only purpose of the requirement was to inform the Applicant of his rights of appeal, including the time limit within which they should be exercised. The present Appellants aver that they were misled by this defect and it was as a result of this their appeal was out of time. The averment has never been put to the proof and one of the Respondents alternative arguments was that, in the event of otherwise total failure the Appellant should be put to the proof of this. But in my view this argument is without foundation. The validity of the certificate itself is in question and if, as I believe, the requirement is mandatory, the certificate falls independently of whether the Appellants were in fact misled. I find it impossible to accept that the requirement by instrument of statutory force designed for the very purpose of compelling a public authority to inform the subject of his legal rights can be treated as simply regulatory if the requirement is not complied with."

18. At p. 187 Lord Hailsham said this;

"The certificate was vitiated in the sense that it failed to comply with the mandatory requirements. But the subject could not safely disregard it as not having been issued. Had it done so, he might well have fallen into the very trap of losing his right to complain of the vitiated factor which has caught other subjects in the reported decisions, and, in my view, he as not only wise but bound to seek the decree of reduction or some other appropriate remedy striking down the offending certificate."

19. At p. 188 Lord Hailsham said this:

"More persuasive, in some ways, was the argument for the respondents that it was an odd sort of statute which first provided that the applicant should look at the Act in order to ascertain his right under s. 25.... to make an application and then, if no certificate were forthcoming, look at s. 26(4) of the Act and the order in order to note and exercise his right of appeal, but, as regards a purported certificate failing to apprise him of his rights of appeal (which by that time one would have supposed him to know) that he should be in the position to rely on the invalidity of the certificate in a way he now seeks to do. That there is a certain paradox in this I do not deny. But I do not think we are entitled to play fast and loose with statutory requirements designed to inform the subject as to his legal rights against the authority possessed of compulsory powers. There would be an even greater paradox in allowing an acquiring or planning authority first to flout such a requirement and then be heard to say that its non compliance had no effect on the validity of its legal documents. I do not think that prescriptions for the benefit of the subject are so to be disregarded."

20. At p. 189 Lord Halsham said this;

"When Parliament lays down a statutory requirement for the exercise of legal authority it expects its authority to be obeyed down to the minutest details. But what the courts have to decide in a particular case is the legal consequence of non-compliance on the rights of the subject view in the light of a concrete state of facts and a continuing chain of events. It nay be that what the courts are faced with is not so much a stark choice of alternatives but a spectrum of possibilities in which one compartment or description fades gradually into another. At one end of this spectrum there may be cases in which a fundamental obligation may have been so outrageously and flagrantly ignored or defied that the subject may safely ignore what has been done and treat it as having no legal consequences upon himself. In such a case if the defrauding authority seeks to rely on his action it may be that the subject is entitled to use the defect in procedure simply as a shield or defence without having taken any positive action of his own. At the other end of the spectrum, the defect in procedure may be so nugatory or trivial that the authority can safely proceed without remedial action, confident that if the subject is so misguided as to rely on the fault, the courts will decline to listen to his complaint."

21. Lord Fraser had this to say at p. 194;

"Counsel for the Respondents argued that there were 3 reasons why the inclusion of a statement of rights of appeal to the Secretary of State was not mandatory. The first was that the notice was not a great assistance to the applicant, because the receipt of the certificate would not be the first he knew of the matter. He must have applied for the certificate, and therefore he must already have read the order of 1959. I agree that he must have read the order, but in my opinion that does not mean that a statement of these rights of appeal, even if it is only a reminder of what he had already read, is not of value to him."

22. On the question of prejudice which was in the forefront of Mr. Wong's argument before me, Lord Fraser said this at P. 195;

"The validity of a certificate is not in my opinion dependent on whether the Appellants were actually prejudiced by it or not."

23. At p. 201 Lord Keith dealt with the word 'shall'. He said this;

"The word 'shall' used in article (3) is normally to be interpreted as connoting a mandatory provision meaning that what is thereby enjoined is not merely desired to be done but must be done. In many instances failure to obtemper a mandatory provision has the consequence that the proceedings with which the failure is connected are rendered invalid. But that is not necessarily so. ...... I have no doubt that in the present case the provision under consideration is intended to be mandatory and of a such character that failure to comply with it rendered the certificate invalid. Where Parliment, albeit through subordinate legislation, has enacted that the person is to be informed of the rights of appeal conferred upon him by statute in relation to a particular subject matter whereby his rights may be very materially affected it will not do to say that failure to comply with the enactment has no legal result whatever. The matter is of great importance and as been shown to have been so regarded by Parliament. Failure to comply may deprive the person concerned of his rights of appeal with no opportunity of rectifying the situation."

24. I was also referred to a decision of the Hong Kong Court of Appeal in Asia Dyeing v. the Authority (1990) 1 H.K.L.R. 263 where the court had to consider whether a failure to comply with Section 9 of the Air Pollution Control Ordinance, Cap. 311 vitiated the notification. The Court or Appeal adopted an interpretation or Section 9 that was consistent with the underlying intent of the legislation and concluded that the requirement was directory and not mandatory. Clough, J.A. giving the Judgment of the court referred to Lord Hailsham's speech in London v. Clydeside. Clough, J.A. went on to state that the real issue in the case was whether the relevant requirement in Section 9 was mandatory or directory. He said;

"where, as in the present case the legislature has proposed a procedural requirement upon an authority as to the manner in which it is to perform its duty but has not provided what will be the legal consequence of non-compliance the court is left to formulate and apply its own criteria when determining the effect of non-compliance."

25. He then cited Lord Penzance in Howard v. Bodington (1877) 2 P.D. 203 at 211, where he said;

"I believe, as far as any rule is concerned, you cannot safely go further than that in each case you must look to the subject matter, consider the importance of the provision that has been disregarded, and the relation of that provision to the general object intended to be secured by the Act; and upon a review of the case in that aspect decide whether the matter is what is called imperative or only directory."

26. Having reviewed the same passages in Wade and De Smith as cited to me, and having considered the legislation in detail the court concluded that the requirement of Section 9 was directory and not mandatory. That case was concerned with very different statutory provisions and is in no way binding on me as to its conclusion but, of course, I rely upon the principles there set out in assisting me to come to a conclusion in the case before me.

27. I find the above very powerful expressions of opinion of great assistance in the present case. In my judgment, the provision that notice should be served on the owner of goods the subject matter of forfeiture is of crucial significance. I cannot believe that when the legislature enacted this provision they contemplated the possibility that an innocent citizen's property (in this case worth HK$3 million) would be put at risk without strict compliance with a notice provision. As I have said the legislature gives two possible courses of action to the Commissioner. Either he serves the owner or, if he does not know the identity of the owner, he can utilise the substituted service provisions contained in both sections under consideration. What in my judgment he cannot do is what he did in this case, namely, knowing the identity of the owner serve the carrier and not serve the owner.

28. As it happens the Respondent was able to find out what was going on and he was able to serve a notice on the Commissioner. However, the fortuitous fact that in this case the Respondent was able to appear at the hearing in December 1989 does not mean that the Commissioner is entitled to disregard statutory provisions enacted for the protection of individuals who in some cases may be innocent. I am considering a matter of statutory construction and I cannot construe the statute as being directory only because of the facts of this case. It is said that no prejudice will be caused. In my opinion, prejudice is irrelevant just as it was in the London of Clydeside case. I have to bear in mind that there may be cases where notice will not have been given to the owner or the owner may not have been able to make his application in time or at all. Bearing in mind that substantial property rights can be in issue it seems to me obvious that these provisions are mandatory and not directory. I would ask myself the question, "What is this particular provision designed to achieve." In my judgment it is designed to achieve notification to an owner as to what has happened, namely, that his property has been seized and is at risk of being forfeited and that he has an opportunity to come forward and persuade a Magistrate that his property should not be forfeited in whole or in part. When one looks at this section in that way I have no doubt at all that the notice requirements are mandatory. A failure to serve the notice thus renders the subsequent forfeiture proceedings of no effect. The proceedings for forfeiture, in my judgment, are flawed in such a way that nothing that happened thereafter could cure the defect.

29. Mr. Wong referred me to a decision of Mayo J. in HUI Yau v. The Queen (C.A. 91 of 1981; 10th April 1981 unreported) where the learned Judge said, "a preliminary point had been taken to the effect that the Magistrate had not been seized of the matter when he heard the application because it had not been proved that the provisions of Section 27 (3) & (4) of Cap. 60 had been complied with. These are, of course, notice provisions. The learned judge dismissed the point as being without merit because the point had not been raised before the Magistrate. The applicant had proceeded with the application and "he cannot now be heard to argue that the application was defective due to absence of proof that the director complied with the statutory requirements preliminary to the application."

30. In that case, it was absence of proof of compliance that was being raised. In the case before me I have it proven that the notice was not served on the owner and the point was raised in the court below, hence, this case stated. I do not take Mayo J. as saying that if there was proof of a breach of Section 27(3) then this could be waived. In my judgment, if I am correct in concluding that these provisions are mandatory, there can be no question of waiver at all. This case was a very different case and gives no support to Mr. Wong's contentions.

31. Mr. Wong relied upon the fact that the forfeiture provision was for the purpose of enforcing the Ordinance, serving as a deterrent against its contravention (see A.G. v. Chin Chak (1961) H.K.L.R. 479). That point does hot assist him at all. As this is the purpose behind the forfeiture provision it could be said that it underscores the mandatory nature of the notice provisions. Other cases were cited to me which went to the exercise of my discretion, into which I need not go, as I am satisfied that there is a fundamental defect in the procedure which defeats the application for forfeiture at the very first hurdle.

32. Mr. Wong relied heavily on another decision of Mayo J. in LAM Hang v. Commissioner of Customs and Excise (M.P.153 of 1990 - l6th February 1990 unreported). In that case the applicant sought an order of certiorari or alternatively a declaration to quash a notice of intention to make a Forfeiture Order by the Commissioner. The applicant who claimed to be the owners of the goods in question complained that he had not been served with a notice under Section 27(3) of Cap. 60. It was also clear that the alternative procedure set out in Section 27(4) had also not been complied with. A notice had been served on the person who was driving the lorry when it was stopped containing the offending items. In a cautioned statement he had said that he was not the owner. He served no counter notice and so the goods were forfeited. The applicant lived in China. When he heard nothing about these goods, for which he had paid, he made inquiries and discovered that they had been seized by the Commissioner. The Commissioner apparently did not believe the statement of the driver when he said he was not the owner of the goods. Mayo J. held that the proported notice served on the driver was not good service and "that at least there had been a procedural irregularity"; he went on to consider what relief, if any, should be given to the applicant. In so considering, he concluded that the irregularity was not a serious one, and he relied on the fact that the Commissioner could have easily relied upon the alternative procedure in Section 27 (4) and, that if he the done so it would have been highly improbable that any notice exhibited in accordance with that subsection would have come to the notice of the applicant or his friends. He then conclude that the applicant had suffered no detriment. He then went on to consider the question of remedy and expressed some doubt about the very existence of the applicant himself but concluded he must have been aware of seizure of the goods shortly after it occurred. Having already concluded the irregularity was not serious and that the evidence in support was  not credible he refused to grant any relief in the exercise of his discretion.

33. I regret that I am unable to agree with Mayo J. that the failure to serve a notice on the owner under Section 27(3) was not a serious procedural irregularity. Merely because there is an alternative procedure which the Commissioner could have utilized, does not, in my judgment detract from the seriousness of the original failure. I believe that the legislature expected this provision to be fulfilled to the letter and, merely because in cases where tire owner was not known to the Commissioner an alternative procedure was laid down so as not to frustrate the purpose behind the Ordinance, this does not make the requirement to serve the owner when he is known any less important. Mayo J.'s conclusion that the applicant would have suffered no detriment is not in my judgment a sufficient answer to the breach, as the passages I have cited from London and Clydeside amply demonstrate.

34. It is necessary to point out, however, that Mayo J. was dealing with an application for the discretionary remedy of judicial review whereas I am being asked to answer certain legal questions. Furthermore, there is ho suggestion in that case that Mayo J. was given the benefit of the various authorities or materials cited to me. I do not, therefore, consider that Mayo J. was attempting to answer the very questions posed to me. However, if his judgment is to be taken as indicating that these provisions are not mandatory then I respectfully and diffidently disagree.

35. I now turn to answer the questions posed in the case stated.