HKSAR v. TANG TAK CO LTD

[English Translation – 英譯本]
HCMA 148/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 148 OF 2005

(ON APPEAL FROM KCCC NOS. 6785-6805 OF 2004)

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BETWEEN

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JUDGMENT

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Background

1. The Appellant was faced with 21 summonses, each alleging that the Appellant exported prohibited articles to specified countries otherwise than under and in accordance with an export licence, contrary to sections 6D(1) and 6D(3) of the Import and Export Ordinance, Cap. 60 of the Laws of Hong Kong.

2. The Appellant was convicted after trial on all counts and was sentenced to a fine of $12,000 for each offence.  The Appellant now appeals against conviction.

Facts

3. In his Statement of Findings, the Magistrate set out in great detail the prosecution case and the defence case.  The relevant passages are reproduced below.

Prosecution case

2.         The prosecution case is that, according to the relevant procedures, apart from the Trade and Industry Department, the Government has authorized 5 institutions, including the Hong Kong General Chamber of Commerce, to issue valid Certificates of Origin.  At the time of the offence, the Defendant company, by 21 transactions, exported textile products which were not accompanied by valid Certificates of Hong Kong Origin, to countries of the European Union (France and Spain).  PW1, one Mr Lam, is an officer of the Trade and Industry Department.  He explained the procedure and certain details for applying for Export Licences, including the fact that it is not necessary to produce a Certificate of Origin when making the application but a valid Certificate of Origin is needed for delivering the goods.  PW2, one Ms Wong, is an Investigating Officer of the Customs & Excise Department and was responsible for investigating the Defendant company in relation to the Certificates of Origins in the first 12 summons.  Since September 2003, Ms Wong had visited the Defendant company on many occasions, requesting it to produce the relevant Certificates of Origin for inspection, but to no avail.  It was not until 7 September 2004 when the Customs Prosecution Unit received 13 documents by fax, 12 of which were the Certificates of Origin in relation to the cases Ms Wong was investigating.  On 8 September, Ms Wong called one Ms Lui of the Defendant company, asking whether she had faxed those documents to Customs and requesting her to provide the originals of the documents.  In the end, however, Ms Lui did not positively reply to the question of whether she had faxed those documents.  Finally, Customs handed over those faxed documents to the Hong Kong General Chamber of Commerce, which had allegedly issued those documents, for verification, and they were all proved to have been forged.  PW3, one Mr Chan, is a Senior Manager of the Hong Kong General Chamber of Commerce.  The defence showed 21 Certificates of Origin to Mr Chan (Exhibit D1(1-21)) and he confirmed that they were false documents, although they looked very much like genuine documents at first glance.

3.         According to the agreed facts, on 3 September 2003 when the Customs Officers visited the Defendant company to investigate the case relating to the first 12 Certificates of Origin, the staff claimed that Mr Wong Tai Wai David, who signed the relevant applications for Export Licences, was not in the office, and an appointment was made for the next investigation to be conducted on 19 September.  On 19 September when the Customs Officers visited the Defendant company again, Mr Wong was unable to produce the 12 relevant Certificates of Origin.

Defence case

4.         The defence called one witness, Mr Wong Tai Wai David.  He is a director of the Defendant company and his main duties are to look for manufacturers after receiving orders from overseas buyers, and the Defendant company will then export the manufactured products.  The 21 transactions in question involved two manufacturers, namely:

(1)        Income Garment Factory, which was involved in the first 12 summonses; and

(2)        Shing Kei Garment Factory, which was involved in the remaining 9 summonses.

In 2001, upon introduction by another person in the industry, Mr Wong met Mr Chan Cheung of Income Garment Factory.  In the first half of 2002, the Defendant company received a lot of urgent overseas orders.  Income Garment Factory was instructed to manufacture the products and it completed the tasks competently.  Before the incident, the Defendant company and Income Garment Factory had over 10 transactions which were all completed smoothly with no complaints having been received on customs clearance.  The goods relating to the first 12 summonses were manufactured by Income Garment Factory upon the Defendant’s instructions between July and August 2002.  The normal practice of the Defendant company was that, before sending out the order, the company would first send its Production Manager Mr Yeung (now deceased) to conduct an on-site inspection to ensure that the requirements were met.  According to the Production Manager’s report, the scale of Income Garment Factory satisfied the requirements.  Besides, the company would also take follow-up action by conducting on-site inspections and testing, which included: a preliminary inspection by the Production Manager when the cloth-cutting process commenced; a mid-term testing by the Production Manager during the ensuing production process; and a final testing before production was completed.  The Production Manager would give an oral and written report after each inspection.  The defence submitted Exhibit D2(1-15), which were written reports on the goods in question prepared by the Manager Mr Yeung.  Between end of 2002 and early 2003, the company received orders and planned to instruct Income Garment Factory to manufacture the goods, but Mr Chan Cheung of Income Garment Factory mentioned that the company would close down and suggested that the orders be passed on to Shing Kei Garment Factory instead.  Before making a decision, the Defendant company also sent the Production Manager to inspect Shing Kei Garment Factory and the result was satisfactory.  In the end, the Defendant company instructed Shing Kei Garment Factory to manufacture the remaining 9 lots of goods in question.  The inspection of the production process was similar to that for Income Garment Factory, including on-site inspections and the submission of reports by the Production Manager at regular intervals etc.  The defence submitted Exhibit D3(1-9), which were written inspection reports prepared by the Manager Mr Yeung.  Mr Wong pointed out that, prior to delivery of the 21 lots of goods, Income Garment Factory and Shing Kei Garment Factory had respectively provided the Defendant company with copies of the Certificates of Origin for all the finished products (Exhibit D1(1-21)), and he had never thought they were false documents.  Mr Wong stated that, in his many years of experience, he has inspected over a hundred Certificates of Origin, and he knows about these Certificates.  Judging from his experience, the copies of the Certificate of Origins sent by the other parties did not appear to have any problem or cause for suspicion.  After inspection, he passed the documents to Ms Lee, the then Shipment Officer, for filing.  Later, Ms Lee resigned and the job was taken over by Ms Lui.  The 21 lots of goods were all delivered to the overseas buyer as planned, the buyer had made payment, and the Defendant company had paid to Income Garment Factory and Shing Kei Garment Factory.  Everything had run smoothly and there was nothing unusual, nor had any complaint been received.  He first knew about the problem in September 2003 when the Customs Officers visited the company.  At that time, the company did not give the Customs Officers copies of the Certificates of Origin provided by Income Garment Factory and Shing Kei Garment Factory, because those documents could not be located for the following main reasons:

(1)        Ms Lee, who used to be responsible for the filing of documents, had already left the company, and Ms Lui, who had just taken over the job, did not know about the relevant documents and where they were filed;

(2)        the relevant files had been stored away and time was needed to retrieve them;

(3)        initially, not much effort was made in locating the documents.  It was only when the summonses were received that the company deployed all available resources to look for them.

Mr Wong also stated that, upon knowing about the matter, he had tried to contact Mr Chan Cheung but to no avail.  Under cross-examination, Mr Wong pointed out that in September 2003, when the Customs looked into the Certificates of Origin for the first 12 lots of goods, the relevant documents found included the agreements for the transactions and other relevant documents, but the copies of the Certificates of Origin provided by the manufacturers and certain other documents could not be found.

Grounds of appeal

4. Mr Wan, Counsel for the Appellant, submitted that the Appellant does not dispute that the relevant offence is a strict liability offence.  The Appellant relied on the defence as stated in AG v. Fong Chin Yue & Others [1995] 1 HKC 21, namely, that the Appellant had good and sufficient reasons to believe it had already complied with the legal requirements.  The main ground of appeal put forward by Mr Wan is that the Magistrate adopted an incorrect standard of proof in assessing whether the Appellant had satisfied the requirements for establishing the Fong Chin Yue defence.  The Appellant argued that, although the Magistrate stated in his judgment that he had applied the standard of “balance of probabilities”, he had in fact not applied that standard.

5. Mr Wan referred to the following main points from the evidence of the Appellant company’s representative Mr Wong:

(a)             The Appellant company and Income Garment Factory had been close business partners for some time, during which nothing untoward or against the law had happened.  The Appellant company therefore had complete confidence in Income Garment Factory in handling these matters.

(b)            Before sending out the orders, the Appellant had sent its Production Manager to the factory for inspection so as to ensure that the goods satisfied the requirements.

(c)            During the production stage, the Appellant company sent its Production Manager to the factory three times to test the goods and submit written reports, i.e. Exhibit D2(1-15).

(d)            The defence witness had personally inspected the relevant Certificates of Origin, i.e. Exhibit D1(1-12), and he had never thought that they were false documents.

(e)             PW2 Mr Chan, who is Senior Manager of the Hong Kong General Chamber of Commerce, also took the view that Exhibit D1(1-12) looked very similar to, and could virtually be passed off as, genuine documents.

6. Mr Wan submitted that the prosecution was unable to adduce any evidence to rebut the five points above, and that the point about inspection of the goods was also supported by documentary evidence.  The prosecution had not challenged the authenticity of the inspection reports, nor had the Magistrate ruled that those reports were forged.

7. Mr Wan complained that the Magistrate had merely narrated Mr Wong’s testimony in detail without making any analysis of the evidence.  Mr Wan argued that, although it was not necessary for the Magistrate to set out his thought processes in making the analysis, he should not have dismissed such detailed evidence of Mr Wong by saying, in just a few sentences, that the evidence was unreasonable and incredible.  Furthermore, the Magistrate had not stated clearly which part(s) of the Appellant’s testimony he considered unreasonable and incredible.

8. Mr Wan submitted that, had the Magistrate fairly considered Mr Wong’s evidence, he would have agreed that there was nothing unreasonable about the evidence.  Mr Wong’s evidence was generally about acts which a person engaged in the relevant trade would do.  In addition, the evidence was supported by documents, and the prosecution had not provided any substantive evidence in rebuttal.  Had the Magistrate indeed assessed Mr Wong’s evidence on “a balance of probabilities”, he should have accepted the evidence.

9. Mr Wan contended that Mr Wong’s evidence showed the Appellant company had sent its Production Manager to the factory three times to inspect the goods, and any reasonable exporter should have taken the same measures to ensure that his goods satisfied the buyer’s requirements.  The Appellant has also adduced the relevant reports as evidence.   In fact, the relevant goods which were exported did satisfy the requirements of the overseas buyer.  The prosecution had not adduced any evidence to rebut any of the above points.

10. Mr Wan submitted that the Magistrate had, without giving a proper reason, arrived at a conclusion which was inconsistent with the weight of evidence.  The relevant conviction was therefore unsafe.  Mr Wan cited the case of R v. Ma Kwai Chong [1968] HKLR 654 in support of his argument.

11. Mr Wan took issue with the Magistrate’s rejection of Mr Wong’s evidence by reason of his being evasive in testifying.  He submitted that Mr Wong’s evidence was very detailed and that Mr Wong had provided reasonable explanations in response to the prosecution’s queries.  Mr Wan further submitted that the Magistrate should not have relied on Mr Wong’s demeanour when giving evidence as a basis of evaluating the credibility of his evidence.  Instead, the Magistrate should have focused on the inherent reasonableness or otherwise of the evidence.  The case of R v. Ng Wing Ming [1994] 2 HKC 464 was cited in this respect.

12. For the above reasons, Mr Wan submitted that the Appellant’s conviction was unsafe.

The Respondent’s reply

13. Ms Lam, Counsel for the Respondent, replied that the Magistrate had not applied a wrong standard in assessing whether the Appellant had established the Fong Chin Yue defence.  She submitted that the Magistrate was a professional adjudicator of facts.  The Magistrate had clearly stated that he was applying the standard of “balance of probabilities” in considering the defence, and this was also mentioned in his Statement of Findings.  Ms Lam submitted that there was nothing in the Statement of Findings which showed that the Magistrate had applied another standard.  She contended that the Magistrate’s ruling against the Appellant was not in itself a reason for saying that the Magistrate had erred.

14. Ms Lam submitted that the exhibits enumerated by Mr Wan had all been referred to and adduced before the Magistrate.  At trial, Counsel for the Appellant had in his closing submissions stated the facts and made detailed submissions on the Fong Chin Yue defence.  Ms Lam argued that, under such circumstances, the Appellant had no reason for saying that the Magistrate, being a professional, had not sufficiently or appropriately considered the Appellant’s case and the standard of proof.  Ms Lam considered that the Magistrate was entitled to observe and consider the witnesses’ demeanour and behaviour when giving evidence; as long as the Magistrate did not rely solely on a witness’s demeanour in determining whether the witness was veracious and reliable, the Magistrate could not be said to have erred.  Citing the case of HKSAR v. Chun Wo Construction and Engineering Co. Ltd HCMA 251/2003, Ms Lam submitted that, as an adjudicator of fact at trial, the Magistrate would as a rule observe the demeanour of the witnesses when giving evidence, but the Magistrate had not rejected the defence evidence on the sole basis of his observations.

15. Ms Lam submitted that the Magistrate had given examples in support of his finding that the evidence of the defence witness was unreasonable and incredible.  Ms Lam submitted that the Magistrate had not erred in law and the conviction was not unsafe.

The Magistrate’s findings

16. In his Statement of Findings, after setting out the prosecution and defence case, the Magistrate ruled that PW1, PW2 and PW3 were veracious and reliable witnesses who had stated the truth, and hence he accepted their evidence and accorded much weight to it.

17. As for the defence witness, the Magistrate noted that the Defendant company did not have previous records of being prosecuted, and he assessed the evidence in its most favourable light.  He concluded that the defence witness had not stated the truth and that his evidence was unreasonable and incredible.  For example, when the Appellant could not find the documents, and knowing the address of Ms Lee who had left the company, he had never made enquiries with her; furthermore, it was very unreasonable that the Appellant had to spend quite some time locating the documents.  The Magistrate also noticed that the witness was evasive when his evidence was challenged by the prosecution.  The Magistrate stressed that, even if he did not accept the defence evidence, he would not then proceed to convict the Appellant, and that the burden and standard of proof remained unchanged.

18. After careful consideration, the Magistrate accepted the facts of the case as described by PW1 to PW3 and rejected the evidence of the defence witness.

Judgment

19. The Magistrate was well aware that the Appellant was relying on the defence stated in Fong Chin Yue and that the defence merely had to prove “on a balance of probabilities” that the Appellant company had good and sufficient reasons to believe it had complied with the legal requirements.  I cannot find any reason for holding that the Magistrate, as a professional adjudicator of facts, had erred in this fundamental principle.

20. It is true that Mr Wong’s evidence was very detailed and, in comparison, the Magistrate’s assessment of the evidence seemed a shade too brief.  On such issues as whether the Appellant and Income Garment Factory had been business partners for some time and whether the Appellant company had sent the then Production Manager (who is now deceased) to inspect the goods, the Magistrate had not given clear findings of fact.  On the face of it, when the Magistrate said he did not accept the Appellant’s evidence, he was rejecting the evidence in its entirety.  Under such circumstances, what was the position of the inspection reports which had been adduced before the Magistrate?  Was he not satisfied that there had been an inspection procedure?

21. I do appreciate that there is no need for a Magistrate to set out his thought processes and analysis in full.  However, when faced with such detailed evidence from the Appellant, there was a genuine need for the Magistrate to set out in some detail which parts of the evidence he did not accept and the reasons for not accepting them.

22. As the appeal is conducted by way of re-hearing (see HKSAR v. Chou Shih Bin, FACC 11/2004), it is open to me to consider the evidence as adduced before the Magistrate.

23. Being an exporter of goods, the Appellant should be well aware that goods to be exported to France and Spain must be accompanied by valid Certificates of Hong Kong Origin, and that the relevant manufacturing processes must take place in Hong Kong in order to satisfy the requirements for applying for a Certificate of Hong Kong Origin.  As the Appellant chose to engage another company as the manufacturer, it was under a duty to ensure that the manufacturer manufactured the relevant goods in Hong Kong in compliance with the requirements for applying for a Certificate of Hong Kong Origin.

24. The Appellant’s evidence indicated that a Manager (who is now deceased) had visited the relevant manufacturer three times for inspections: the first time was before production (when the cloth-cutting process commenced); the second time was half way through the production process (mid-term testing); the third time was after production (final testing).  The evidence before the Magistrate indicated that the tests were conducted by the Appellant for the purpose not of verifying whether the goods were made in Hong Kong, but of verifying whether they satisfied the buyer’s requirements.

25. I do not think it is possible for an exporter such as the Appellant to make a list of all the steps that have to be taken, and the extent to which they have to be taken, before the exporter can say that he has reasonable and sufficient grounds for believing that it has complied with the law.  There is a great difference in production costs between garments made in Hong Kong and garments made in Mainland China.  Even if the Appellant had seen the materials being cut before the manufacturer started production, this does not necessarily mean that the Appellant had reasons to believe that the manufacturer would manufacture the goods in Hong Kong – this is because the cut materials could still be sent to the Mainland for production.  As for the mid-term testing of the semi-finished products, there is no evidence in the present case on what happened during the test.  According to the evidence, the Appellant sent an officer to the manufacturer for the purpose of testing whether the semi-finished products satisfied the buyer’s requirements, and not whether those products were being produced in the manufacturer’s factory.  The post-production testing was also to ensure that the quality of the goods satisfied the buyer’s requirements.  There is no evidence in the present case to indicate the Appellant company had sent an officer to the manufacturer’s factory to watch the manufacturer carry out any of the production process.

26. In these circumstances, the evidence before the Magistrate does not reveal any ground for the Appellant’s belief that it had complied with the legal requirements.  In addition, the Magistrate’s ruling was based on the subsequent unreasonable acts of the Appellant.  I therefore hold that the Magistrate’s verdict is not unsafe.  The appeal is dismissed accordingly.