TSANG KOON AH FOR FAN WING LUNG v. THE QUEEN

Import and Export Ordinance - forfeiture of unmanifested cargo - civil proceedings - depending on facts forfeiture may be mandatory or discretionary - wide range of smuggling offences with varying degrees of seriousness - where discretionary onus on claimant - matters relevant to exercise of discretion - Sections 17, 18, 27(5), 28(6),(7) Import and Export Ordinance Cap.60, Regulation 4 Import and Export (Registration) Regulations.

Evidence - formalities prescribed for powers of attorney - requirements for due execution of statutory declarations - whether hearsay provisions of Evidence Ordinance generally apply to civil proceedings in Magistrate's Courts - Sections 2(2), 3 Powers of Attorney Ordinance, Cap.31;Section 14 Oaths and Declarations Ordinance Cap.11; Sections 2, 46, 47 Evidence Ordinance; Order 38 Rules 20-44 R.S.C.: Section 34 Import and Export Ordinance Cap.69.

Held: 1. forfeiture discretionary; 2. unmanifested articles were non prohibited, non-licensable, non dutiable; 3. power of attorney duly executed; 4. Hearsay provisions of Evidence Ordinance do not generally apply to civil proceedings in Magistrates Court but may apply in terms of Section. 34(2) Import and Export Ordinance; 5. Declaration admissible; 6. Appellant established good reason why unmanifested articles should not be forfeited; 6. Appeal upheld; order for forfeiture quashed.

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

Magistracy Appeal No.211 of 1985

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BETWEEN

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JUDGMENT

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1. On 25th January 1985 an order was made in the Magistrate's Court pursuant to Section 28 of the Import and Export Ordinance, Cap.60 that certain silver earlier seized from Mr. Fan Wing Lung be forfeited to the Crown. From that order for forfeiture Mr. Tsang Koon Wah as the lawful attorney of Mr. Fan Wing Lung has appealed.

2. The undisputed facts were that on 9th June 1984 Mr. Fan Wing Lung, entered Hong Kong territorial waters on board a fishing vessel registered in the People's Republic of China as the Luk Fung 29003, in possession of approximately 399.86 kilogrammes of silver. The silver, intended to be imported into Hong Kong, was not recorded in a manifest as required by section 17.

3. The silver was seized by officers of the Customs and Excise Department and Mr. Fan was subsequently charged with importing unmanifested cargo contrary to Section 18(1)(a). Mr. Fan pleaded guilty, admitted the facts and on 11th June 1984 was sentenced to 3 months imprisonment. He was a seaman by occupation being the holder of Seaman Card No.13987. That sentence has now expired. I was informed by Counsel for the appellant, from the Bar, that Mr. Fan was deported back to China before the expiration of that sentence but the Crown did not acknowledge that position.

4. On 14th June 1984 Inspector Ng of the Customs and Excise  Department caused to be served on Mr. Fan's solicitors a notice of seizure, under Section 27(3) claiming that the silver was liable to forfeiture. The solicitors on 25th June 1984 in compliance with the time limits and other requirements of Section 27(5) gave notice in writing to the Commissioner of Customs and Excise on behalf of Mr. Fan that he claimed that the silver was not liable to forfeiture. The Commissioner thereupon applied by summons to the Magistrate's Court for the determination of the disputed forfeiture issue.

5. The summons for determination came before the learned Magistrate on 28th November 1984. Counsel for the appellant informed the Court that he was in China and obtained an adjournment to 18th January 1985 in order that instructions could be obtained. On 18th January 1985 the Crown obtained an adjournment to 25th January 1985 on the ground that they had only just been handed a statutory declaration and power of attorney signed by Mr. Fan relevant to the forfeiture issue.

6. Both documents were in fact signed by Mr. Fan on 14th June 1984 which was the day of his conviction. The statutory declaration alleged that the silver comprised articles assigned to Mr. Fan by fellow clansmen; that the articles were relics and heirlooms kept since before the Sino Japanese war; that the government of the People's Republic of China had now lifted former restrictions on the export of silver to enable relics to be disposed of in a more liberal way; that the clansmen had requested him to take the articles to Hong Kong for sale subject to him remitting the cash proceeds to the various clansmen's families in China. The declaration also stated that Mr. Fan had arranged to meet his uncle Mr. Tsang Koon, a resident of Hong Kong who would arrange for the sale of the articles and remit the proceeds to Mr. Fan on his return to China and the latter would then distribute the proceeds among the clansmen. On delivery of the silver to Mr. Tsang Koon he would pay Mr. Fan $2,000 by way of advance payment.

7. The contents of the statutory declaration did not wholly correspond with the admitted facts on the criminal charge under Section 18(1)(a) which stated that Mr. Fan had agreed to bring the silver to a Mr. Chau in Hong Kong and on delivery was to receive payment of $2,000. The power of attorney recited that it was granted by Mr. Fan, ordinarily resident in China but then detained by the Correctional Services Department, to Mr. Tsang Koon Ah resident in Hong Kong. The express power granted was for Mr. Tsang to act on behalf of Mr. Fan in all matters relating to the claim for the return from the Customs and Excise Department of the 399.86 kilogrammes of silver.

8. The learned Magistrate ordered that the silver be forfeited to the Crown. In his Statement of Findings the order of the reasons for forfeiting the silver were that the appellant failed to satisfy him that he was entitled to make a claim under Section 27(5); no other person appeared entitled to make such a claim; the silver was liable to forfeiture; the appellant did not come before the Court with clean hands; looking at the matter as a whole it was not appropriate that the silver be returned to the appellant.

9. Turning to the last reason first, I would record that while no oral evidence was called on the summons the learned Magistrate had before him a certified true copy of the prior Section 18(1)(a) criminal proceedings which had in fact been heard before another Magistrate. The evidence of the prior proceedings was properly before the learned Magistrate for Section 28(8) provides that on hearing the forfeiture application a certified copy of the record of the prior criminal proceedings, including the decision of the Court, shall be admissible evidence.

10. The record of those prior proceedings established that when the vessel on which Mr. Fan was on board was intercepted the silver was concealed inside a fuel tank on the starboard side of the vessel. There was no manifest for the silver in the possession of Mr. Fan or otherwise on board the vessel. The prosecution had informed the trial Court that Mr. Fan had been co-operative. In addition, I was informed from the Bar that it was undisputed that on 20th June 1984 the appellant had caused to be filed an import declaration in respect of all the silver seized in full compliance with Regulation 4 of the Import and Export (Registration) Regulations which includes the following provisions:

11. I accept that so far as the Regulation 4 requirement is concerned the appellant by filing that declaration 11 days after the importation of the silver, did so within the 14 day statutory time limitation.

12. Before going on to consider in more detail the basis of the learned Magistrate's forfeiture order it may be helpful to consider the powers vested in a Magistrate in forfeiture proceedings under the rather involved provisions of Section 28. While Section 28 is the section which generally empowers a magistrate to make orders for forfeiture it makes a clear dichotomy between two mutually exclusive categories of cases:

13. The first important issue to determine in applications under Section 28 is therefore whether the application falls into the first category where forfeiture is mandatory or whether it is in the second category where forfeiture is discretionary. Mandatory forfeiture arises where the articles are among those listed in the Schedule to the Ordinance or were the claimant was neither the owner nor in possession of the disputed articles. At present the scheduled articles are those prescribed in the Import and Export (Strategic Commodities) Regulations. Silver is not included in those regulations so forfeiture was not mandatory under that head.

14. The only other head where forfeiture is mandatory, arises where the claimant is not a person entitled to make a claim under Section. 27(5) and no other entitled person makes a claim before the magistrates Section 27(5) provides:

15. Counsel for the appellant was content to submit that Mr Fan was in terms of the Crown's Section 18(1)(a) criminal prosecution, in possession of the silver so no question of mandatory forfeiture arose. On that submission this was a Section 28(7) and not a Section 28(6) situation. Accordingly the learned Magistrate had a discretion whether to order forfeiture and could do so after judicially exercising that discretion. Crown Counsel, on the appeal, conceded that this was a Section 28(7) situation and forfeiture was discretionary.

16. The agreement between Counsel on appeal that forfeiture was discretionary does not unfortunately dispose of this issue. For the learned Magistrate's first two reasons were that he was satisfied that no persons including the appellant appeared before him entitled to claim under Section 27(5). If the learned Magistrate had solely disposed of the application on the basis of those findings he would have been faced with a mandatory forfeiture situation. However, the learned Magistrate made an erroneous finding of jurisdictional facts. If he were right, then forfeiture would have been mandatory and the instant appeal could quickly be dismissed. If the Statement of Findings had not gone beyond the first three reasons, which are consistent with the learned Magistrate approaching the application on a mandatory basis, the appeal might nearly as quickly have been upheld on the basis of the jurisdictional fact error.

17. However, the difficulty is that the fourth and fifth reasons traverse the factual merits of the application which, in the case of mandatory forfeiture, would have been irrelevant. After consideration I am of the opinion that the learned Magistrate never applied his mind to the mandatory - discretionary distinction within Section 28 but believed that he possessed a discretion. In exercising that discretion he then took into account matters which were relevant to the exercise of that discretion but also matters which instead were facts which would have deprived him of that discretion and transformed the application into a case of mandatory forfeiture. I hold that in substance, if not in form, he did purport by exercising a discretion to deal with the application on the proper basis that Section 28(7) applied.

18. Before reaching that conclusion I have considered, in the light of the Crown's vigorous objection to the admissibility of the power of attorney and the statutory declaration whether the Magistrate may have deliberately arrived at his conclusion that there were no claimants under Section 27(5), after rejecting the power of attorney. There is no finding on that issue. Crown Counsel submitted that the power of attorney was inadmissible on the ground that it failed to comply with two requirements of the Powers of Attorney Ordinance Cap. 31. First, it was submitted that as the power of attorney was executed by an illiterate person by mark and thumbprint, Section 2(2) required two witnesses but only one witness attested the instant document. Secondly, the copy produced was not authenticated by a solicitor's certificate as required by Section 3.

19. I reject these objections as to formality for the reasons advanced .by Counsel for the appellant. First, Section 2(2) requiring two and not merely one witness, does not apply where a grantor personally signs whether by signature mark or thumbprint. It only applies where the grantor does not personally sign, by whatever means, but directs a third person in the presence of the grantor to sign on behalf of the grantor. This situation arises not where a grantor is merely illiterate but where a literate or illiterate grantor because of injury, illness or otherwise, is physically unable personally to sign. As to the second objection I accept that the original power of attorney was produced at the hearing before the learned Magistrate and remains on the Court's file which is now before me. No certificate of authentication was required.

20. The position therefore is that Mr. Fan was in possession of the silver when it was seized and is therefore a person entitled to claim under Section 27(5). I note that Section 27(5)(a) expressly permits an owner to claim or do so by his authorised agent. There is no such express provision in Section 27(5)(b) permitting the authorised agent of the person who was in possession to claim in his name. However, that difference does not procedurally affect the present claim. The summons issued by the Crown names Mr. Fan as the claimant and the hearing before the learned Magistrate proceeded on that basis. The present appeal is brought by Mr. Fan. The fact that the appellant's solicitors have in the entituling of the notice of appeal expressly referred to the appellant being "Tsang Foon Ah for Fan Wing Lung" was no doubt a pleading alternative available to them. However, the appeal could have been brought solely in the name of Mr. Fan and there was no necessity to refer to his attorney. Although I appreciate that in the conduct of the appeal and afterwards, if it became necessary for the attorney to prove his status there might be incidental practical advantages from having the attorney's name set out as a matter of record in the title to the appeal. Whichever of these pleading alternatives had been adopted I hold that Mr. Fan as claimant was properly before the learned Magistrate on the forfeiture application and is properly before this Court as the substantive appellant on the present appeal.

21. The subsequent grounds of appeal all relate to the relevant considerations which the learned Magistrate ought to have considered in the exercise of his discretion. Counsel for the appellant referred to the observation in the statement of findings that the appellant had attempted to 'smuggle' the silver into Hong Kong and evade the provisions of the Import and Export Ordinance. 'Smuggling", it was submitted, is an emotive word although it is defined in Section 2 of the Ordinance. However, it is a wide term which deals with any contravention of the Ordinance.

22. Counsel for the appellant submitted that the range of contraventions was wide. They might be divided into three categories of decreasing seriousness and the degree of seriousness was relevant to the issue of forfeiture. First, there were articles referred to in the Schedule. Secondly, there were non-scheduled articles for which import licences were required under the Import and Export (General) Regulations. Thirdly, there were non-scheduled articles for which import licences were not necessary. The law provided that where scheduled articles were imported forfeiture was mandatory where there was a claimant under Section 27(5) forfeiture for the second and third categories was discretionary. However, it was submitted that a Court might properly exercise its discretion to forfeit more often in the second category, where import licences are required than in the third category where no import licences are required.

23. Silver, Counsel for the appellant, pointed out, fell within the third of these categories. It was not a scheduled article. It did not require an import licence. During the criminal proceedings in the Magistrate's Court it was never suggested that it was unlawful to export silver from China and all the evidence on that issue set, out in the statutory declaration was to the contrary. The statement in R. v. Chan Kam-bor. Cr.App.R. 239/81, approved by the Court of Appeal in Attorney General v. So Ma-por (1981) HKIR 696, 698, that in determining penalties for convictions on exporting unmanifested cargo substantial weight was to be given to maintaining the smooth relationship existing between China and Hong Kong was not, it was submitted, a relevant consideration on this appeal. For there was no evidence that the export from China of silver was illegal. The import of the silver to Hong Kong was not only not prohibited but did not require an import licence. This position may be contrasted with the obligation to obtain a licence for the import of textiles which was very relevant to Hong Kong maintaining its good trading relationship with other countries.

24. I was referred by the appellant to the recent judgment in Attornty-General. v. Lau Shui Cr. App. No.757/84 which bore some factual resemblance to the present facts. The appellant entered Hong Kong from China by sea when the vessel he was travelling on was boarded by officers of a Customs and Excise patrol launch. These officers found 436.45 kilogrammes of silver in 22 bags concealed in a hidden compartment. The appellant admitted ownership and stated that he obtained the silver from his grandfather in China and had concealed it on board in case the vessel was robbed by pirates. He further stated that he intended to declare the silver when the vessel arrived at the Western entrance to Hong Kong harbour. In support of that statement he produced to the Customs and Excise officers immediately the silver was discovered, two copies of an Import Declaration under Regulation 4. He was asked if he had a manifest but did not reply. Under Section 15 it is an offence for a master of a vessel and other persons named therein on entering Hong Kong to fail to furnish on request a manifest in respect of cargo being imported. A passenger who is importing unmanifested cargo is not one of the persons liable under Section 15 but may be prosecuted under Section 18 for importing unmanifested cargo. The trial Magistrate, on a charge under Section 18, held that the import declaration constituted a manifest and that the silver was therefore not unmanifested. The appellant was acquitted. The Crown appealed by way of case stated. The appeal was dismissed; the magistrate's ruling that the declaration constituted a manifest was upheld.

25. Relying on that authority the appellant submitted that the same prescribed import declaration, duly filed by the appellant under Regulation 4, was given insufficient regard by the learned Magistrate, before he exercised his discretion to forfeit. However, the facts in the two cases were very different. In Attorney General v. Lau Shui the appellant was already in possession of the import declaration when his vessel was boarded on entering in Hong Kong waters. The declaration was produced at that early stage to the boarding officers. In the instant appeal the appellant was not in possession of any import declaration or any other document, which was in substance a manifest, when his vessel was boarded. The import declaration was only completed and filed after his arrival and arrest in Hong Kong. In these very different circumstances I hold that the filing of the import declaration subsequently was not a material matter for the learned Magistrate to take into account in exercising his discretion. It was open to him to take the time and other circumstances surrounding the completion and filing of the declaration into account but it would have been entirely proper if he had given the declaration little or no weight. As Counsel for the Crown submitted if the declaration filed subsequently was to be given the same effect as being in possession of the appellant when the vessel was boarded then he should not have pleaded guilty or been convicted of the Section 18(1)(a) offence.

26. Both parties were agreed that in Section 28 proceedings the onus is on the claimant to satisfy the magistrate that the articles, liable to forfeiture, should not be forfeited. The first reported decision affirming that this is the position, although the legislation was then in a different form, was Lam Wah v. The Crown (1952) HKLR 91. Later the Full Court in Attorney General v. Chin.Chack-wing (1961) HKLR 479, considered similar forfeiture provisions in the Dutiable Commodities Ordinance, Cap.109, and held that in the absence of good reasons to the contrary a Magistrate should in the exercise of his discretion order forfeiture where the other statutory conditions were established. In particular where those conditions were established and the article was liable to forfeiture the Crown were not obliged to prove additional requirements of guilt or negligence before that discretion could be exercised against a claimant. Good faith or innocence resting on ignorance did not entitle the claimant to have the articles restored to him. These authorities established that the onus is clearly on the appellant.

27. In considering the evidence which might properly have been considered by the learned Magistrate before exercising his discretion there was disagreement between the parties. They accepted that in terms of Section 28(8) the record of the Section 18(1)(a) proceedings were properly before the learned Magistrate on the Section 28 application. However, the Crown submitted that the statutory declaration tendered in those latter proceedings and referred to in the Statement of Findings was inadmissible before the learned Magistrate and should not be considered on a review of the exercise of his discretion The Crown's attack on the declaration went not only to admissibility but as to form and practice.

28. As to form it was submitted that it failed to comply with Section 14 of the Oaths and Declarations Ordinance, Cap.11 which requires that where the declarant, as here, is unfamiliar with the English language the jurat should be in the extended form prescribed in Part II of the First Schedule and the interpreter should also make the separate declaration prescribed in part III of that Schedule. In fact the jurat was in common simple form and there was no declaration by the interpreter who after witnessing the declaration, merely went on to sign a separate endorsement that the declaration had been "Interpreted by" him. Further it had been taken and interpreted by a solicitor in the employ of the appellant's solicitors. Crown Counsel submitted that it was contrary to practice, in contentious litigation, for a declaration to be used when not taken by an independent solicitor or other person.

29. Counsel for the appellant would not concede that the declaration was defective but pointed out that the document was not tendered in terms of the Oaths and Declarations Ordinance nor was it only admissible under that Ordinance. The declaration was tendered before the learned Magistrate in compliance with Section 47 of the Evidence Ordinance, Cap.8, and, it was submitted, documents admissible thereunder, were not limited to declarations complying with the formalities prescribed by the Oaths and Affirmations Ordinance. As to the practice point, it was submitted that even if Crown Counsel's statement of principle was followed in Hong Kong, the document was neither an affidavit or affirmation filed in any contentious proceedings but simply a document sought to be tendered under the Evidence Ordinance.

30. I accept Counsel for the appellant's submission on the latter practice point. Whether the declaration was admissible under Section 47 depends on the nature of Section 28 proceedings. The relaxation of the hearsay rule under Section 47 only applies to civil proceedings. The appellant asserts that Section 28 proceedings are civil proceedings. The Crown asserts they are only quasi-civil proceedings. Counsel for the appellant cited Attorney General v. Merca (1968) HKLR 704 where Huggins J., held at page 709:

"I do not, however, agree with the view of the learned Magistrate that the forfeiture proceeding is a criminal proceedings (see Ho Shing v. Reg. (1967) HKLR 63, 65); it is a civil proceeding and the degree of proof required to establish the appellant's claim is that applicable in civil proceedings.

31. Crown Counsel has directed my attention to Section 34 of the Import and Export Ordinance which deals with the onus of proof in relation to certain matters in both criminal proceedings and in forfeiture proceedings brought under the Ordinance. Proof of matters set out in that Section is expressly placed on the defendant in any criminal proceedings and on the claimant in forfeiture proceedings. Section 34(2) goes on to provide that for the purposes of Section 34, the provisions of Part IV of the Evidence Ordinance which includes Section 47, shall apply to proceedings under the Ordinance as if they were civil proceedings. The Crown's argument is that if the forfeiture proceedings were civil proceedings then it would be unnecessary for Section 34(2) to provide that Part IV applies to them as if they were civil proceedings.

32. I reject the Crown's submission on the nature of the proceedings. I respectfully share the view expressed in Attorney, General v. Merca that the forfeiture applications are civil proceedings. The explanation of Section 34(2) is that Section 34(9) refers to both "criminal proceedings" and by contrast to "forfeiture proceedings." Clearly, the express contrasting reference to the latter indicates that they are not criminal proceedings. The difficulty facing the draftsman was to provide for the civil hearsay provisions of part IV, which prima facie already applied to the forfeiture proceedings, to extend to the criminal proceedings. This was simply achieved by deeming all proceedings under the Ordinance, which included the criminal proceedings, for the purpose of Section 34, to be civil proceedings. The provision also has implications for Magistrate's Court proceedings.

33. Counsel or the appellant submitted that the declaration is admissible under Section 47 of the Evidence Ordinance and that while the learned Magistrate did not expressly so admit the declaration, he did consider the declaration's contents which were admissible under that Section. Counsel then went on to refer to the Rules of the Supreme Court Order 38 Rules 20 et seq., and assumed that they applied in the Magistrate's Court. Crown Counsel did not question their application to Magistrate's Court civil proceedings but earlier based his objection to admissibility on the Oaths and Declarations Ordinance.

34. Although the application of Section 47 to the Magistrate's Court was not argued, it has caused me some concern. Section 47 is contained in Part IV of the Evidence Ordinance which was enacted to permit hearsay evidence in civil proceedings subject to the conditions therein set out. The Ordinance is generally applicable to the Magistrate's Court. The definition of 'court in Section 2 includes every magistrate. Section 47 itself contains minimal conditions but provides that the admissibility of hearsay statements, of which oral evidence by the maker would have admissible, is to be subject to the section 'and to rules." In practice the Section can only be operated in conjunction with those rules. No rules were directly promulgated as subsidiary legislation under the Ordinance. What happened was that Rules of the Supreme Court Order 38 was extended to include the necessary hearsay rules, which now appear under that Order as Rules 20 to 44. Those rules clearly apply to civil proceedings in the Supreme Court. In addition they also apply to the District Court in terms of Rule 9 of the District Court Civil Procedure (General) Rules, Cap.336 and in the Lands Tribunal by virtue of Section 10 of the Lands Tribunal Ordinance, Cap.17.

35. However, there is no express provision in the Magistrate's Ordinance applying them to civil proceedings in that Court. In practice the Magistrate's Court deals principally with criminal., matters. Forfeiture proceedings and proceedings under the Fixed Penalty (Traffic Contraventions) Ordinance, Cap.237 are among, the few examples of its limited civil jurisdiction. There are no express general provisions in the Magistrate's Ordinance or else here relating to the procedure to be followed in its civil proceedings. The only express reference to be found in the principal Ordinance is Section 67, which provides that for enforcing civil debts, the Magistrate has a discretion to admit proof of the means of a defaulter in such manner as he may think just. This liberal provision is not surprising, for it might be anticipated that the procedural requirements for civil matters in the Magistrate's Court, would be more informal than those which apply in higher courts.

36. What is also clear is that the proof of those matters on which the onus is placed on a claimant under Section 34(1) of the Import and Export Ordinance, may be discharged in whole or in part by recourse to the hearsay provisions of Part IV of the Evidence Ordinance. For Section 34(2) provides that for the purposes of that section, Part IV shall apply. So to the extent that the declaration is relevant to proof of matters contained in Section 34(1), then Section 47 and the other sections of Part IV do apply in the Magistrate's Court. Those parts of the declaration which refer to from where the silver was exported and that it was lawfully placed in the vessel, were admissible under Section 47, subject to compliance with its provisions.

37. Whether other matters in the declaration such as the statement that the silver, long owned, by clansmen, was being taken with their permission for sale in Hong Kong subject to the cash proceeds being remitted back to China, is admissible in terms of Section 34(1)(b)(iv) is less clear. If Part IV generally applied to civil proceedings in the Magistrate's Court it would not be necessary to consider that distinction. I will therefore go on to consider whether Part IV does apply generally. If the provisions of Order 38 Rules 20 et seq., formed part of the subsidiary legislation to the Evidence Ordinance then in view of the Section 2 definition of "Court" including magistrates, the issue might have been clearer. The fact that the hearsay rules have alternatively been included as part of the Rules of the Supreme Court creates difficulties.

38. However, having considered all these matters, I am satisfied, on a different ground, that Part IV does not generally apply to proceedings in the Magistrate's Court. The decisive factor leading to this conclusion is Legal Notice 154 of 1970 published in the 'Hong Kong Government Gazette' on 23rd October 1970. This was the notice under which those sections which now form Part IV, came into operation with effect from 1st December 1970. Clause 2 of that order limits their application to civil proceedings, other than bankruptcy, in the Supreme Court and District Court and certain other tribunals. The Magistrate's Court is not included. I therefore hold that Part IV does not generally apply to civil proceedings in the Magistrate's Court.

39. Considering the contents of the declaration, after having held that Part IV does not generally apply, I further hold that the whole of the declaration is nevertheless admissible under Section 34 I recognise that the relevance of parts of the declaration do enter grey areas in relation to the matters listed in Section 34(1). However, I consider that the factual allegations in the declaration are so intertwined, that it is impractical to separate the clearly relevant matters from the less relevant matters. I therefore conclude that the whole of the declaration inadmissible subject to compliance with the conditions imposed by Part IV. Was the declaration admitted in compliance with those conditions?

40. In summary the scheme of Part IV is to allow hearsay evidence, subject to the twofold safeguard of a notice and counter-notice, being served by one party on the other. No notices were served in the Section 28 proceedings before the learned Magistrate. However, Rule 29 confers on the Court a residual discretion to admit a statement notwithstanding non-compliance with the formalities required by the rules. As to the exercise of that discretion (1985) 1 'The Supreme Court Practice' 591 notes:

"The principle underlying the rule is that non-compliance with the procedural requirements of the rules should not by itself result in the exclusion of material hearsay evidence which is otherwise admissible, but the Court should have power, if it thinks it just to do so, to allow such statements to be given in evidence. The rule is remedial in intent and operation, and the overriding discretion under the rule is designed to enable the Court to do what is just in the particular circumstances of the case."

41. In considering whether the learned Magistrate properly admitted the declaration, I am satisfied that the Crown suffered no material prejudice on account of the non-service of a hearsay notice by the appellant. For after a copy of the declaration was served on the Crown, the learned Magistrate granted an adjournment, on the Crown's application, from 18th to 25th January 1985 to enable the Crown to have more time to consider the declaration. At the resumed hearing one of the objections made by the Crown to admissibility was the fact that the declarant was not available for cross-examination. My attention, on appeal, was drawn by Counsel for the appellant, to Rule 25 under which one of the recognised reasons for not calling a witness and using Part IV was that the witness was beyond the seas.

42. There was a dispute of fact which I have already referred to whether the appellant was outside Hong Kong. The evidence is that the appellant is ordinarily resident in China but is a seaman by occupation. On entering Hong Kong on 9th June 1984 he was arrested and later sentenced to 3 months imprisonment which term has now expired. Counsel for the appellant informs me, from the Bar, that before his release he was deported bath to China. The Crown declined to admit that was the position. The statements from the Bar do not therefore assist. On reviewing the evidence I find it is more probable than not that the appellant was outside Hong Kong at the time of the Section 28 proceedings.

43. From the record of the Section 28 proceedings it is tolerably clear that the application of Part IV, the conditions which have to be complied with thereunder and the discretion to excuse non-compliance, were not raised by Counsel nor considered by the learned Magistrate. However, the learned Magistrate had granted the adjournment to the Crown and had evidence that it was more probable than not that the appellant was outside Hong Kong. As to the latter factor it is material that where the maker of a statement is beyond the seas, if the conditions of Part IV are complied with, that statement may be adduced by a party as of right. This position was considered by the Court of Appeal in Piermay Shipping Co. SA v. Chester (1978) 1 All E.R. 1233, where it was held that if the notice requirements are complied with the Court has no discretion and the statement is admissible as of right. The Court of Appeal further held that it is not necessary for a party as to show that unsuccessful efforts have been made to procure the maker to appear and give oral evidence at the trial.

44. Now I appreciate that the learned Magistrate probably never addressed his mind to these admissibility issues. As notices where not served Rule 25 is also not strictly applicable. However, the time given to the Crown by the adjournment and the fact that there was evidence which established that it was more probable than not that the appellant was outside Hong Kong, were very relevant to the exercise of the Section 29 discretion. I am satisfied that if the learned Magistrate had applied his mind to the part IV provisions, before admitting the declaration, he had proper grounds to admit. I accordingly hold that the declaration was properly admitted and that the whole of its contents were matters which the learned Magistrate was entitled to consider.

45. I turn now to review the exercise of the learned Magistrate's discretion to forfeit on the basis of the evidence he received. That evidence represented the record of the Section 18(1)(a) criminal proceedings and the contents of the power of attorney and the declaration. The evidence established that the appellant imported unmanifested cargo into Hong Kong and that when he entered Hong Kong the cargo was concealed in fuel tanks. Unlike the position in Attorney General v. Lau Shui where the appellant explained that the concealment of an even larger amount of silver was to protect it from pirates, the present appellant gave no explanation why his silver was concealed. Any findings on why the silver was concealed must be a matter of inference.

46. This is not a case like Attorney General v. Chin Chack-wing where the Full Court accepted the magistrate's findings that the claimant was neither unaware of any criminal act nor negligent. I remind myself that even where those factors are established a claimant is not necessarily entitled to recover the articles but it remains a matter of discretion. In particular it is on the claimant to establish good reason why the articles should not be forfeited. However, the wide discretion which remains vested in the magistrate was highlighted in Director of Immigration v. Chu Shiu-fat (1980) HKLR 780 where similar principles were considered in relation to the forfeiture of a motor vehicle under the Immigration Ordinance, Cap. 48. After a detailed examination of the Full Court's judgment in Attorney General v. Chin Chack-wing, Macdougall J., at page 783 observed in relation to that judgment:

"It seems to me to be implicit in the Court's reasoning that where there is a complete absence of fault by the claimant the magistrate should exercise his discretion in the claimant's favour and order that the vehicle be delivered to him.

 

        I do not think, however, that it follows from this that where there is fault on the part of the claimant the court must necessarily order forfeiture. If good reason is shown as to why forfeiture should not be ordered, the magistrate may properly refuse to make such an order. Nevertheless, in the exercise of his discretion, he must bear in mind the purpose of the forfeiture provisions and not make an order the result of which would be to frustrate the object of the legislation is to impair its effectiveness."

47. I was also referred to a trilogy of cases where it was suggested that a claimant must establish undue hardship before a magistrate should exercise his discretion by ordering the return of the articles R. v. Hui Yen Cr. App. No.91/81; R. v. Chan Kin-kwan Cr.App. No. 652/83; Attorney General v. Cheng Ma-choi Mag.App. No.20/85. The first of those cases was really decided or the basis that as the claimant had not established ownership it was not open for the magistrate to consider any question of hardship or other submission in favour of the claimant. As to the others undue hardship was not established and the articles were forfeited. However, in view of the Full Court's judgment, the better approach to those cases is that neither undue hardship nor any other good reason was established to justify the magistrate exercising his discretion in favour of the claimants. For 'undue hardship' is not a statutory requirement. The statutory discretion must be exercised judicially and as the onus is on the claimant he must establish, to use the terminology of the Full Court, 'good reason'' for it to be exercised in his favour. But undue hardship is not an exclusive reason. It may be the most common ground on which a magistrate may order the return of articles liable to forfeiture but there may also be other grounds.

48. Counsel for the appellant also referred to the learned Magistrate's reference in his Statement of Findings to the applicant not having clean hands and having snuggled silver into Hong Kong. Those references, it was submitted, did not fully particularise the matters the learned magistrate had in mind. Counsel for the appellant submitted that there was no evidence which entitled the learned Magistrate to give weight to what the Court of Appeal in Attorney-General v. So Ma-por referred to as the damage which is likely to be done to Hong Kong's relationship with other territories by smuggling activities. In that case the Court of Appeal was concerned with the export of unmanifested cargo to China for which, in addition, an export licence was required. In the instant appeal it was submitted it had been established to the contrary that no import licence was necessary and there was no evidence that the export of silver from China was illegal.

49. I was also referred to the fact that the Court of Appeal had held that in determining sentence for Section 18 criminal proceedings, the magistrate must wholly disregard the possibility of subsequent forfeiture proceedings and the loss a defendant might suffer thereunder. Counsel for the appellant accepted of course, that important, statement of principle but submitted that the converse was not true. It was submitted that if, as here, subsequent forfeiture proceedings did eventuate, then in those proceedings the magistrate was entitled to take into account the sentence imposed in those criminal proceedings before exercising his discretion in the forfeiture proceedings.

50. Counsel for the drown disputed that position. The Crown submitted that not only was the law well settled that in the criminal proceedings the possibility of forfeiture proceedings was irrelevant but so was the corollary that in forfeiture proceedings the sentence imposed in prior criminal proceedings was equally irrelevant. In support of that submission I was referred to the appeal by way of case stated on the forfeiture in Attorney General v. Cheng Ma-choi where the Court of Appeal's judgment in Attorney General v. So Mar Por was considered. After considering the Court of Appeal's decision, the judgment, in referring to the fine in the prior criminal proceedings, stated:

"... there is no doubt that the $10,000 fine is irrelevant so far as the forfeiture proceedings are concerned."

51. Counsel for the appellant reminded me that the Court of Appeal had not considered or commented on that reverse situation. In addition it was pointed out that only the Crown appeared on the case stated in Attorney General v. Cheng Ma-choi so that court did not have the advantage of any contrary argument. It was submitted that while in many forfeiture applications the sentence imposed in the prior criminal proceedings will not be a major factor it is in every application among the relevant factors that must be taken into account.

52. Assuming without deciding, that in forfeiture proceedings the sentence in the prior criminal proceedings may be taken into account before the discretion whether to forfeit is exercised, I find that the sentence of 3 months imprisonment would not have   materially affected the decision of court charged with determining the forfeiture application. The sentence imposed was unexceptional. If it is relevant, I am satisfied that in the present case it would not strengthen any claim for the return of the articles seized.

53. In the result I find that the learned Magistrate exercised his discretion but without a clear understanding of the twofold forfeiture provisions under Section 28. In exercising his discretion he also made an erroneous finding of law and fact when he concluded, as his first reason for ordering forfeiture that the appellant was not entitled to claim the return of the articles under Section 27(5).

54. I have considered whether I should return the application to the Magistrate's Court for it to be disposed of in accordance with the proper law. However, the whole of the evidence on the application was in documentary form, so this Court is in as good a position as the lower Court, to make a final order on the application. Under Section 119(d) of the Magistrates Ordinance this Court also has the same powers in dealing with the application as the lower Court. I therefore do not propose to return the matter to the Magistrate's Court.

55. In exercising the judicial discretion under Section 28(7) I approach the facts in accordance with the principles set out by the Full Court in relation to the similar circumstances which arose in Attorney General v. Chin Chack-wing. The onus therefore rests on the appellant, to show good reason why the silver should not be forfeited.

56. Turning to the facts I also do so in accordance with the Full Court's direction that I should bear in mind the purpose of this part of the Ordinance which is to prevent breaches of the law and stop smuggling. I remind myself of the very wide statutory definition of smuggling and the three categories which Counsel for the appellant earlier advanced. I accept that in this case the articles imported were neither prohibited scheduled articles nor articles for which an import licence was necessary.

57. In addition the articles seized were not liable to duty under the Dutiable Commodities Ordinance, Cap.109. So there was no attempt by the appellant or any other person concerned with the importing of the silver, to defraud the revenue which of course' would have been a very much more serious situation. That was in fact the more serious factual situation which faced the Full Court in Attorney Generalw v. Chin Chack-wing where the forfeited vehicle carried tobacco for which the offenders attempted to evade payment of duty.

58. On the instant appeal the factual and legal position is to the contrary. The silver articles seized were non-prohibited, non-licensable, non-dutiable. There was no attempt to defraud the-revenue. These are all factors to be considered in assessing the seriousness   of the claimant's unlawful act. Where the revenue has not been defrauded that is not by itself aground to refuse forfeiture but it is one of the circumstances which may properly be considered. The lawful reality is that articles of silver may freely be imported into Hong Kong without restriction, subject to being included in a manifest on entering Hong Kong and being included in an import declaration filed within 14 days thereafter under Regulation 4.

59. So far as preserving Hong Kong's relationship with other countries is concerned I accept that there is no evidence from which I may infer nor any basis on which I may take judicial notice, that the export of silver from China was unlawful. If there had been evidence that the export of silver from China was illegal or that the export of this particular silver infringed the laws of the People's Republic of China, that would have been very relevant evidence, adverse to the appellant. The Crown adduced no evidence on this issue. As commonly occurs in Section 28 applications the Crown was content to rely on the record or the Section 18(1)(a) proceedings. That record was silent on this issue. The only additional evidence was the declaration tendered by the appellant which, if of a general nature on this issue, tended to negate illegality.

60. In view of the onus placed on a claimant, the Crown may in many forfeiture applications, successfully rely on the record of the Section 18(1)(a) proceedings and elect not to adduce any further evidence. However, when evidence relevant to the forfeiture application and favourable to the Crown, has not been adduced in the earlier proceedings, it may often be desirable for that evidence to be adduced in the Section 28 proceedings. Forfeiture applications are invariably consequential to criminal proceedings and it may be that in the past they have not always been given the importance they deserve. As the onus is on the claimant once a conviction is obtained I recognise that a forfeiture application in practice is invariably thereafter considerably simplified. But Section 28 proceedings remain important and at least when the Magistrate is invested with a discretion, should never be regarded as perfunctory.

61. The remaining relevant circumstances in the present appeal were that the evidence indicated that the silver was imported on behalf of clansmen who had owned the silver for many years and now wished to realise it for cash to be remitted back to them. In some cases of unmanifested articles of this kind, the person charged with possession denies ownership or the Hong Kong intended recipient cannot be found, disappears or denies knowledge. That common position has not arisen in this case. On the other hand, the unmanifested silver when found was concealed in a fuel tank. That makes the circumstances highly suspicious. Unfortunately, there is no evidence from any quarter as to why it was so concealed. The only evidence is that after it was found the appellant was co-operative. The evidence is open to the inference that the silver was concealed to avoid detection either on leaving China or on arriving in Hong Kong. However, that is not the only available inference and in the absence of any evidence it is dangerous to speculate when other more innocent inferences are not entirely excluded. I am mindful that in Attorney General v. Lau Shui an explanation for concealing similar silver was to preserve it from pirates.

62. I am mindful too, that if a discretion is to be exercised judicially it must be exercised on the evidence. When I review the whole of the evidence in the light of the principles and facts I have adverted to I have reached the conclusion and so find that the appellant has established good reason why the silver should not be forfeited to the Crown. The appeal is upheld. The order for forfeiture is quashed. I order that the silver seized be returned to the appellant Mr. Fan Wing-lung. I would record that subject to the power of attorney to Mr. Tsang Koon Ah not being revoked, he may give a full and proper receipt for the silver on behalf of Mr. Fan Wing-lung.

63. I am obliged to both Counsel for the clear and helpful submissions on the complex issues raised on this appeal.