HKSAR v. CHAN SAI TAK AND ANOTHER

HCMA269/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.269 OF 1998

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J U D G M E N T

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1. This is an appeal against the order of Mr James Lee who, sitting at Eastern Magistracy, on 19th January 1998, ordered certain goods to be forfeited. The goods which were ordered to be confiscated consisted of 1,000 cartons of compressor worth $860,000 and 1,000 pieces of what have been described as radiator motor fan worth $90,000, making a total of $950,000.

2. The matter had arisen in this way. On 1st December 1997, a defendant by the name of Chan York Hon pleaded guilty before the same Mr Lee to a charge of attempting to export unmanifested cargo. The cargo which was attempted to be exported without a manifest is the same cargo which is the subject matter of forfeiture. Subsequent to the conviction, the two Appellants gave notice to the Customs & Excise Department ("C&E") under s.27(5) of the Import & Export Ordinance, Cap.60 ("the Ordinance"). After receipt of that notice, the Commissioner of C&E applied to the Eastern Magistracy under s.28(1) for an order of forfeiture of the said goods. The matter was set down for hearing and came up before Mr Lee on 19th January 1998.

3. At the forfeiture hearing, the Claimants were represented by Counsel, and the C&E Department was represented by its representative. The representative of C&E started the proceedings by informing the Magistrate that the items in question had been seized in accordance with the Ordinance on 18th June 1997. There was then a discussion about the two Claimants and their claim that they were the owners of the goods. The representative of C&E said in open court that the Prosecution not only did not contest the ownership of the goods by the two Claimants, but also accepted that fact, and said to the Court that if the Claimants were able to give reasons that the goods did not deserve to be confiscated, then the Prosecution would not object to the release of the goods to the two Claimants.

4. The learned Magistrate clarified in open court and ascertained from the Prosecution that they had no objection to the claims by the two Appellants that they were the owners of the goods, and the Prosecution confirmed that that was so.

5. Subsequently in the proceedings it was mentioned at least twice by Counsel for the Claimants that the Prosecution did not contest the ownership claim, and indeed at one stage it was said by Counsel that may be the prosecution and the defence can agree it under s.65C (of Cap.221). It was after Counsel for the Claimants mentioned that the Prosecution and the Defence could agree ownership under s.65C, that the learned Magistrate ascertained from the prosecution that they had no objection to the ownership claim.

6. Counsel for the Claimants then called the 1st Claimant to give evidence and he was Mr Chan Sai Tak. Mr Chan's evidence was to the effect that the 2nd Claimant's company of which he was a Director, ordered the goods from Singapore and resold them to a buyer in China. The buyer was called Chan Wai Tak and he told the sellers to contact the Defendant, Chan York Hon to make the transportation arrangements. Mr Chan Sai Tak gave evidence that he did contact Chan York Hon and asked him to arrange for the goods to be transported to China and even reminded him that he should declare the goods to the C&E Department. He also gave evidence that after the goods were seized by the C&E Department, the buyer, Chan Wai Tak, refused to pay for the goods and rescinded the contract of sale. Chan Wai Tak had paid the deposit of $100,000 but was prepared to have that deposit forfeited by the sellers.

7. The 1st Claimant was cross-examined by the C&E representative but there was nothing of any significance which was elicited.

8. After the case for the Claimants was closed, the learned Magistrate said that he wanted to have a look at the file pertaining to the convicted Defendant. Prior to that, the representative of the C&E Department had produced nothing to the learned Magistrate by way of documents to try and show that the goods in question were in fact liable to forfeiture.

9. At the hearing of this appeal I was told by Mr Hui, appearing for the Respondent, that the reason for that appeared to have been because the Department of Justice and the C&E Department had agreed with the then Chief Magistrate that where there was an application for forfeiture, if at all possible, the application should be placed before the said Magistrate who dealt with the defendant who had contravened the provisions of the Ordinance. That was the extent of the agreement and there was no agreement as regards how the C&E Department should attempt to prove that a provision or provisions of the Ordinance had been contravened which led to the application for forfeiture.

10. In any case, in the instant appeal, nothing was produced by the Prosecution and the Magistrate, of his own volition, had to call for the file relating to the convicted Defendant Chan York Hon. After the file was obtained, the learned Magistrate read the brief facts of the case and read his own notes of what had been said in mitigation. Because Counsel appearing at the forfeiture proceedings was not the same lawyer who appeared for the convicted Defendant Chan York Hon, the learned Magistrate arranged for the audio recording of the proceedings against Chan York Hon to be played in Court in the forfeiture proceedings. This was done in open court. However, the learned Magistrate still had to rely on the brief facts of the case as against Chan York Hon which was one of the documents which he retrieved from the Court file. This has caused Mr Macrae, appearing for the Appellant, to submit, as one of his grounds of appeal, that there was a material irregularity in the conduct of the proceedings inasmuch as no certified true copy of the proceedings in respect of Chan York Hon's trial was properly admitted in accordance with s.28(8)(a) of the Ordinance. That section says that upon the hearing of an application for forfeiture, a certified true copy of the record of the proceedings including the decision of the Court in any proceedings in respect of the contravention of any provision of the Ordinance, shall be admissible in evidence. The section does not provide for any other modes of proof of contravention of the Ordinance.

11. Mr Hui, appearing for the Respondent, has submitted that the playing of the audio recording tape was admissible before the Magistrate in the forfeiture proceedings because this was real evidence of what was said at the trial of Chan York Hon. I do not agree. Section 28(8)(a) of the Ordinance clearly needs to be amended to allow for audio recording tapes under the DARTS system installed in the Magistracies to be admissible in forfeiture proceedings. If the section is amended, then in future, Magistrates hearing forfeiture applications can do as Mr Lee did in this case, namely, listen to the original audio tape recording. Alternatively, the certified true copy of the transcript of the original proceedings can be obtained by the C&E Department and produced before the Magistrate hearing the forfeiture application.

12. In the instant appeal, the learned Magistrate had listened to the tape and had read the summary of the facts as against Chan York Hon. Neither method is mentioned in s.28(8)(a) as evidence which is admissible in law.

13. In my judgment, that ground alone is sufficient to render the proceedings before the learned Magistrate invalid to the extent that the contravention of the Ordinance had not been proved. Clearly on an application by the Commissioner of C&E for forfeiture, the Commissioner has to prove a contravention of the provisions of the Ordinance before the Court can even consider forfeiture. It is only after the Commissioner has proved the contravention that the goods become liable to forfeiture. If the contravention of the Ordinance is proved, then it is up to the Claimant to prove that he is a person who is or would be entitled to make a claim.

14. If the Court is satisfied that the article is liable to forfeiture, but the Claimant fails to prove that he is entitled to claim, and no other person appears before the Court to make such a claim, then under s.28(6), it is mandatory on the Court to order the goods to be forfeited. However, under s.28(7), if the article is liable to forfeiture and the Claimant proves that he is a person who is entitled to make a claim, then the Court can do one of three things :-

1. forfeit the goods to the Government;

2. deliver the goods to the Claimant subject to any condition; or

3. dispose of the goods in such manner and subject to any condition specified.

15. What that means in practice is that the Claimant has a legal burden to prove that he is or would have been entitled to make a claim under s.27(5). Under s.27(5), the Claimant has to prove that he is either the owner, or the authorised agent of the owner, or a person who was in possession of the article, or a person who has a legal or equitable interest in the article. That is all that a claimant has to prove to sustain his claim for the return of the goods. However, in my judgment, he does have the evidential burden to try and satisfy the Court that he is an innocent party and is not a party to the wrong-doing which led to the contravention of a provision of the Ordinance. If the claimant can discharge that evidential burden, then obviously it makes it much easier for the Court, hearing the forfeiture application, to rule in the claimant's favour. That approach is, in my view, consistent with what has been decided earlier on in cases involving applications for forfeiture.

16. In R v. CEC Finance Ltd [1993] 2 HKCLR 134 at 138, Bokhary, J.A. said :-

".... The discretion to order forfeiture being unfettered, the question whether or not to so order is to be approached from a neutral starting point, with both parties on a level playing field, so to speak, and each with the onus of proving on a balance of probabilities any fact which he or it asserts if that fact is not admitted by the opposite party. That is how the question is to be approached. And it is to be answered by reference to what is just in all the circumstances as the magistrate finds such circumstances proved or admitted."

Then in R. v. Kam Shek-kwong [1994] 1 HKC 681, Kaplan J. said at 685:

" In CEC Finance, it was made clear that the discretion is unfettered and thus there can be no basis for a predisposition against... any innocent owner. However, it seems to me that there has to be something in the facts of the case involving an innocent owner which can justify the exercise of this discretion and the making of a draconian order depriving the rightful owner of his property. A discretion was given to the courts. The legislation does not impose forfeiture in all cases as it could have done. Forfeiture of items belonging to those involved in a crime and used in a crime is one thing and can be seen as part of society's determination to be ruthless with criminals. Forfeiture of the property belonging to wholly innocent parties is quite another thing and the discretion to exercise that power should be exercised judicially and with great care."

In R. v. Shum Wah-wah & Anr. Mag. App. 419 of 1995, Gall J. said at p.2:

".... I also accept that where a party is innocent, the goods of that party would be unlikely to be forfeited. It is necessarily, therefore, for the learned magistrate to consider firstly on the evidence before him whether he is satisfied that the party is wholly innocent or whether on the balance of probabilities, there may be some complicity by that party in the offence which leads to the forfeiture."

17. In the instant appeal, despite the agreement between the parties that the Claimants were the owners of the goods - indeed, it can be said that it was admitted by the prosecution that the Claimants were the owners of the goods - the learned Magistrate took it upon himself to question the ownership of the goods by the Claimants. He questioned the ownership of the goods because having referred to the Statement of Facts against Chan York Hon, he saw in it the following sentence :-

"Under caution, the Defendant stated the following on the officer's notebook while he was apprehended :-

(a) The goods inside the container 4052237 belonged to him."

The goods in that container included the goods, the subject matter of the forfeiture application. That statement in the Statement of Facts was partly erroneous and gave the learned Magistrate the wrong impression that the Defendant, Chan York Hon, in fact said that the goods which are the subject matter of the present proceedings in fact belonged to him. What was contained in the officer's notebook was not before the learned Magistrate, but, for the purposes of this appeal, has been obtained by the Appellants and placed before me. What the Defendant said to the officer was :-

"One of the containers i.e. 4052237 among the above-mentioned shipment is mine. I personally loaded the container and consigned the goods."

18. Another matter which gave the learned Magistrate cause to doubt the veracity of the 1st Claimant's evidence is the apparent discrepancy that whereas the 1st Claimant had said he contacted Chan York Hon and saw him and spoke to him, Chan York Hon himself in the facts of the case and in mitigation had apparently said that he did not know the owner of the merchandise. What Chan York Hon meant when he said that he did not know the owner of the goods was that he did not know whether the middleman who had asked him to arrange for the transportation, Chan Wai Tak, was in fact the owner of the goods, or whether Chan Wai Tak was acting for other people, who were the owners of the goods. Chan York Hon quite clearly did not mean to say that he did not know the 1st Claimant, Mr Chan Sai Tak, who was the owner of the goods before he sold them to Chan Wai Tak. These two matters caused the learned Magistrate, when giving his extemporary Reasons in Court ordering forfeiture, to say the following :-

"Therefore, the Applicant, I feel he was unable, in the aspect of 'balance of probabilities', to see which side is more believable, to prove that he should get back those goods. Therefore, under such circumstances, I say that these goods should be confiscated."

In his Reasons for Decision, the learned Magistrate also said that having applied the standard of a balance of probabilities, he was unable to make any finding in favour of the two Appellants. He said :-

"They could have summoned/called the original smuggler to testify, to clarify the discrepancies between their testimony and the original admitted facts, but they have not done so. As the two appellants also admitted, they bear the burden of proving their case on a balance of probabilities, in order to make me believe and accept their version. Having considered all the matters, I ruled that the two appellants has failed to discharge this burden."

19. That is the subject matter of grounds 1 and 2 advanced by Mr Macrae, namely, that the learned Magistrate misdirected himself as to both fact and law and failed to make proper findings on the evidence before him. Also that since the learned Magistrate's understanding and evaluation of the Appellants' evidence, and the evidence generally was plainly erroneous, his discretion to order forfeiture miscarried.

20. I agree with those submissions. The learned Magistrate unfortunately was led into error by a misstatement in the Statement of Facts as against Chan York Hon. Secondly, he had approached the matter legally incorrectly. As I said earlier on, the only legal burden upon the Claimants is to prove that they are the owners of the goods or people who are entitled to make the claim. Whether they are innocent of any wrong-doing is really a matter of their trying to prove it as an evidential burden. Therefore, it was wrong of the learned Magistrate to say that they had a burden, on the balance of probabilities, to prove that they should get the goods back.

21. The appeal should be allowed on the first ground of there being a material irregularity. But for the further grounds which I have explained above, that the discretion to order forfeiture was flawed, I rule that I am entitled to look at the application afresh. Looking at the evidence afresh, I find that the aspect for ownership was proved and it was admitted by the prosecution. I also find that there was nothing in the evidence to show that these two Claimants had any part in or in any way can be connected with the wrong-doing perpetrated by Chan York Hon.

22. For these reasons, the appeal is allowed and the forfeiture order is quashed. I order that the goods be returned immediately to the Claimants unconditionally. I also order that the costs of this appeal, which are not to include the costs of the hearing before the learned Magistrate, be paid to the two Appellants, and these costs if not agreed between the parties should be taxed before a Master.