HKSAR v. TALISGAIN LTD AND ANOTHER

HCMA285/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.285 OF 2006

(ON APPEAL FROM SUMMONS NOS. ESS 36061-36069/2004,
SUMMONS NOS. ESS 36070-36078/2004 AND
KCS 10684-10686/2005)

---------------------

----------------------

--------------------------

J U D G M E N T

--------------------------

1. The 1^st appellant was convicted after trial of eight counts of “exporting prohibited articles not under and in accordance with an export licence” contrary to sections 6D(1) and 6D(3) of the Import and Export Ordinance, Cap.60 [summonses ESS 36061 to 36068] and one count of “failing to comply with the requirement made by an authorized officer to furnish information” contrary to section 26(1)(b) of the same [summons ESS 36069].  The 2^nd appellant was convicted in the same trial of five counts of “furnishing false or misleading information” contrary to section 36(1)(d) of Cap.60 [summonses ESS 36070 to 36073 and KCS 10686] and seven counts of “exporting prohibited articles not under and in accordance with an export licence” again contrary to sections 6D(1) and 6D(3) of the same [summonses ESS 36074 to 36078 and KCS 10684 to 10685].  The appellants were sentenced to the respective fines of $340,000 and $725,000.  They now appeal against their convictions.

BACKGROUND

2. Under the Import and Export Ordinance, textile products are prohibited articles the export of which must be under and in accordance with a valid licence issued by the Trade and Industry Department (“TID”). 

3. Moreover, under the provisions of the WTO Agreement on Textiles and Clothing, the export of a wide range of Hong Kong textile products to the United States (“US”) and European Union (“EU”) countries were, at the material time, subject to quantitative restrictions. 

4. As part of the Government's system to ensure compliance with such restrictions, local manufacturers producing garments for export to the US and EU were required to lodge with the TID production notifications (“PN's”) for validation within three working days prior to the commencement of the assembly work of a consignment.

5. Validated PN's could then be used by the exporters to support their applications for export licences to export to the US. 

6. For EU countries, the consignment must, in addition to a PN, be covered by a valid certificate of Hong Kong origin (“CHKO”) issued by the TID upon joint application by an exporter and a manufacturer.     

PARTIES

7. The 1^st appellant was a garment exporter.

8. The 2^nd appellant was a director of the 1^st appellant and an authorized signatory registered with TID for applying for licences and certificates.

9. The 2^nd appellant was also the proprietor of Bright-Star Trading Company which was also a garment exporter.

ALLEGATIONS

Re:  3HK154696, 3HK155348, 3HK155663 & 3HK161806

10. Summonses ESS 36061 to 36064 against the 1^st appellant and ESS 36070 to 36073 against the 2^nd appellant concern four export licences (3HK154696, 3HK155348, 3HK155663 and 3HK161806) exporting a total of 1,601.33 dozens of shorts and jackets to the US.

11. These export licences were taken out by the 1^st appellant with the 2^nd appellant as signatory.

12. As it turned out, the shorts and jackets were not covered by any validated PN.  Instead, the PN's quoted and relied on by the appellants were a sham in that the products referred to therein were but a very small number of completely different garments.  Hence the “exporting” charges against the 1^st appellant and “false information” charges against the 2^nd appellant

Re:  HKIT4-4300416, HKIT4-4400058, HKIT4-4400059 & KIT4-4400060

13. Summonses ESS36065 to 36068, another four “exporting” charges, concern the 1^st appellant's taking out an equal number of export licences (HKIT4-4300416, HKIT4-4400058, HKIT4-4400059 and HKIT4-4400060) exporting a total of 8,058 pieces of shirts and shorts to Italy when no valid CHKO had ever been issued in their favour.

14. ESS36069, a charge of “failing to comply with requirement”, concern the 1^st appellant's failure to provide the Customs & Excise Department with records and/or documents in respect of the four export licences for investigation.

Re:  3HK158867, 3HK161483, 3HK161484, 3HK162972, 3HK164469, 3HK185889 & 3HK185898

15. Summonses ESS36074 to 36078 and KCS10684 to 10685, all of them “exporting” charges, concern the 2^nd appellant's exporting through seven licences (3HK158867, 3HK161483, 3HK161484, 3HK162972, 3HK164469, 3HK185889 and 3HK185898) 1,784.24 dozens of jackets and coats to the US while trading as Bright-Star Trading Company and when the products were not covered by any validated PN but by ones that were for a much smaller number of different garments.

16. KCS10686, a “false information” charge, concerns his producing a photocopy of an unrelated PN to the Customs & Excise Department then investigating into two of the seven export licences in question.

THE PROSECUTION CASE

17. The bulk of the prosecution case was mounted by way of agreed facts.  For export licences 3HK154696, 3HK155348, 3HK155663 and 3HK161806, see in the main paragraphs 10 and 32 of the Admitted Facts.  For HKIT4-4300416, HKIT4-4400058, HKIT4-4400059 and HKIT4-4400060, paragraphs 33, 48, 50, 51 and 52.  For 3HK158867, 3HK161483, 3HK161484, 3HK162972, 3HK164469, 3HK185889 and 3HK185898, see paragraphs 12, 32 and 53.

THE DEFENCE CASE

18. Neither of the appellants gave evidence.  Nor did they call any witnesses.

19. Quoting from the magistrate's Statement of Findings :

“17. The Defence argument was that both the 1^st. and 2^nd. Appellants were merely exporters and they had no burden on them to check the authenticity of the Production Notifications and Certificates of Hong Kong Origin given to them by others.  Applications for Certificates of Hong Kong Origin were in fact made by the manufacturers and exporters jointly.

18.  They also argued that it was against Article 11 of the Bill of Rights and also against their constitutional rights to require them to check the validity of the Production Notifications and Certificates of Hong Kong Origin before they submit them to the authority to support their applications for Export Licences.

19.  The Appellants also disputed that the goods under the said Licences had been exported.  This was so despite the admissions made in the Admitted Facts (Par. 18 & 48) that the goods in the said Licences had been exported.  I had looked carefully at the shipping documents and the manifest documents.  I was satisfied beyond reasonable doubt that the said goods had been exported to the U.S.A. and to Italy in the European Union as in accordance with the said Export Licences.”

THE MAGISTRATE'S FINDINGS

20. In the end, the magistrate convicted the appellants of all charges.  These are his reasons : 

“20.   I found that defence arguments to be devoid of any merits.  It was held in The Queen v. Li Tat (Magistracy Appeal No. 1065 of 1991) that the burden of proof on the Appellant to show on a balance of probabilities that the goods were made in Hong Kong under Regulation 4 of the Import & Export Ordinance, Cap. 60, was not inconsistent with the Bill of Rights and it was held that ‘it is reasonable that the exporter should bear the burden of proving that he has complied with the terms of his licence.  The regulation would be completely emasculated if the accused was right.  The Crown had no prospect whatsoever of proving the articles were not of Hong Kong origin.  The textile trade was important to Hong Kong.  The quota system was necessary to ensure fair play to all exporters and to maintain quality standards.  The burden on a bona fide exporter is a comparatively light one'.  I drew analogy to this precedent case in The Queen v. Li Tat that the burden is on the Appellants to ensure that their applications for Export Licences to export garments to U.S.A. and to a European Union country were covered by validated Production Notifications and/or valid Certificates of Hong Kong Origin, and this burden is a comparatively light one.  In our present cases, the descriptions of the goods and the quantities of the goods in the Production Notifications and the Certificates of Hong Kong Origin did not even tally with the goods sought to be exported in the applications for Export Licences.

…

22.   In Summonses ESS 36061/04,  ESS 36062/04, ESS 36063/04, and ESS 36064/04, the 1^st. Appellant had exported the goods particularized in the said summonses without a validated Production Notification.

23.    In Summonses, ESS 36065/04, ESS 36066/04, ESS 36067/04 and ES 36068/04, the 1^st. Appellant had exported the goods particularized in these summonses to Italy without a valid Certificate of Hong Kong Origin.

24.    Defence had the burden on a balance of probabilities to show when they made the declarations in the Export Licence applications, they genuinely had reasonable grounds to believe that the goods to be exported were covered by validated Production Notifications and/or valid Certificate of Hong Kong Origin.  Any certificate bearing different descriptions and quantity of goods were obviously not validated or valid certificates to support the applications for Export Licences.

25.    The 1^st. Appellant had not shown any defence at all and these 8 Summonses were therefore proved beyond reasonable doubt against the 1^st. Appellant.  I therefore found the 1^st. Appellant guilty on these 8 summonses.

26.    I also found that 1^st. Appellant had failed to respond and co-operate with a Trade Controls Officer under the Import & Export Ordinance, Cap. 60, when he failed to comply with requirement to produce the documents related to Export Licence HKIT4-4400058 and Export Licence HKIT 4-4300416.  These documents, listed in Par. 13 herein, were important documents solely in the possession of the 1^st. Appellant, and after 2 reminders to produce these documents, the 1^st. Appellant responded to the Trade Controls Officer by saying that it had lost these documents.  I did not find any truth in this statement that these important documents had been lost.  I had no doubt at all that the 1^st. Appellant had chosen not to comply with the Notice to produce these documents.  I therefore also find the 1^st. Appellant guilty on Summons ES 36069/2004.

27.    The 2^nd. Appellant in Summons ESS 36070/04, ESS 36071/04, ESS 36072/04 and ESS 36073/04 had also exported the goods particularized in the Export Licences to USA without validated Production Notifications.  He signed the applications for these Export Licences as a director of the 1^st. Appellant.

28.    The 2^nd. Appellant trading as Bright Star Trading Company had also on divers dates between April to June 2003 exported goods as particularized in ESS 36074/04, ESS 36075/04, ESS 36076/04, ESS 36077/04, ESS 36078/04, KCS 10684/05 and KCS 10685/05 to the U.S.A. without the cover of validated Production Notifications.  The 2^nd. Appellant made similar applications for all these Export Licences and declared that all these applications were supported by validated Production Notifications.  There were in fact no validated Production Notifications for any of these applications.

29.    The 2^nd. Appellant in making these declarations must satisfy himself that he had the correct and valid Production Notifications.  He had the duty to exercise due care and diligence.  This is not a heavy or unreasonable burden on an exporter.  The Customs & Excise Department carried out random checks and these enquiries and checks were usually done after the Export Licences had been issued and the goods exported.

30.    The Defence had the burden on a balance of probabilities to show that when he made the declarations in the Export Licence applications, he genuinely had reasonable grounds to believe that the goods to be exported were covered by validated Production Notifications.  Any certificate bearing different descriptions and quantity of goods were obviously not validated or valid certificates that could possibly be used to support the applications for Export Licences.

31.    The 2^nd. Appellant had not shown any defence at all and these 11 Summonses had been proved beyond reasonable doubt against him.  I therefore found the 2^nd. Appellant guilty on these 11 summonses.

32.    The 2^nd. Appellant had also failed to produce a validated Production Notification required by a Trade Controls Officer under the Import & Export Ordinance, Cap. 60.  He produced a Production Notification that was not related to Export Licences 3HK 185889 and 3HK 185898 (Exh. P18 & P19).  It would be obvious to the 2^nd. Appellant from reading the document itself that the Production Notification was not a validated Production Notification which could be used to support his application for an Export Licence.  I therefore also found the 2^nd. Appellant guilty on Summons KCS10686/2005 for furnishing false or misleading information to the Trade Controls Officer.”

THE APPEAL

21. Counsel for the appellants have filed four specific grounds (Grounds 1 to 4) and one general one that the convictions were unsafe and unsatisfactory (Ground 5).

22. Ground 1 concerns Summons ESS36069 (see paragraph 14 above).  It is complained that the magistrate in saying (a) he did not find any truth in the 1^st appellant's statement that the documents were lost and (b) he had no doubt that the 1^st appellant had chosen not to comply with the notice to produce those documents (see paragraph 26 of the Statement of Findings), the magistrate had (a) contradicted an agreed fact and (b) failed to provide any reasons for his conclusion.

23. I am satisfied that there is nothing to this ground.

24. The agreed fact referred to by counsel appears at paragraph 52 of the Admitted Facts.  It reads :

“D1 has not submitted the required documents to the CED for examination as at to-date and D1 is still in operation.  D1 alleged the documents had been lost.”

25. The emphasis here is on the word “alleged”.  The prosecution had never accepted that the documents were really lost.  The magistrate in saying he disbelieved the 1^st appellant had therefore not contradicted any agreed fact.

26. It is also incorrect to say that the magistrate had not provided reasons for disbelieving the 1^st appellant.  He had said the documents were “important” in paragraph 26 of the Statement of Findings, and if one looks at paragraph 50 of the Admitted Facts, these documents were in fact significant, comprising such things as purchase orders, payment records, shipping documents, airway bills, invoices and the corresponding CHKO's etc.  It is unthinkable that they could be “lost” in the time frame in question.

27. Ground 2 concerns all the “exporting” charges pinpointing the lack of validated PN's.  It is complained that the magistrate had not given sufficient weight to the fact that it was the manufacturers' duty to lodge the PN's and that the exporters had to obtain the manufacturers' consent to make any enquiry about the PN's.

28. I do not think there is anything to this ground either.

29. As pointed out by the magistrate, there were in fact five PN's used to support the eleven export licences (3HK154696, 3HK155348, 3HK155663, 3HK161806, 3HK158867, 3HK161483, 3HK161484, 3HK162972, 3HK164469, 3HK185889 and 3HK185898) taken out by the 1^st and 2^nd appellants respectively.  This is what he said of them in the Statement of Findings :

“9.   It was also an admitted fact that the 5 Production Notifications from TurboPower International Company, i.e. Exh P11, P12, P20, P21 and P22, used by the Appellants to support the applications for the 11 Export Licences were not validated Production Notifications which could be used for these 11 applications.  It was in fact a complete sham as these 5 Production Notifications only covered 57 dozens of various knitted garments for export to the U.S.A. whereas the 11 Export Licences obtained by the 2 Appellants covered a total of 3,385.57 dozens of various knitted garments. (see: Par. 24 of the Admitted Facts – P150).  TurboPower International Company had never lodged any other Production Notification application with the TID between 25/2/2005 to 1/7/2005.”

30. The simple point here is that as exporters, the appellants could not have missed the glaring differences between what the PN's covered and what they were exporting.  After all, they were the party responsible for taking out the export licences.

31. Ground 3 concerns all the “exporting” charges.  It is complained that the magistrate had placed “too heavy and/or onerous a burden on the appellants” or, alternatively, failed to give “any or any proper and/or adequate direction and/or failed to consider properly or at all whether the prosecution had proved the necessary mens rea and/or any dishonesty and/or any or any deceitful culpability on the part of the two appellants who at all material times were bona fide exporters”.

32. In my judgment, the magistrate is guilty of none such things.

33. In my judgment, the real question in this case is the one posed in paragraph 20 of the Statement of Findings and the magistrate's conclusions are all well supported by evidence.

34. Ground 4 alleges that in placing the “burden of proof” on the appellants, there was a breach of Articles 11 and 22 of the Bill of Rights Ordinance.

35. I do not think so.  In my judgment, the analogy that the magistrate drew from the Queen v. Li Tat (ibid) is a correct one.

Judgment

36. The appeal is dismissed.