KEENING INDUSTRIAL LIMITED and Another v. R.

1993, No.653
(Criminal)

IN THE COURT OF APPEAL

(On Appeal from District Court Criminal Case No.1279 of 1992)

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J U D G M E N T

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Stuart-Moore J. (giving the judgment of the Court) :

1. These appellants were each convicted of three charges brought under the Trade Descriptions Ordinance, Cap.362. They now appeal against those convictions recorded on the 14th October 1993 by Deputy Judge Morley sitting in the District Court. Each of the three charges laid against the 1st appellant were mirrored in three separate and identical charges against the 2nd appellant, and the three pairs of charges against the 1st and 2nd appellants respectively can be summarised as follows :

The 1st and 3rd charges alleged that on the 24th August 1992, certain garments to which a false trade description, namely, "Made in Taiwan" was applied, were imported to Hong Kong, contrary to s.12(1). These goods were referred to in the evidence as "the second container".

2. The 5th and 6th charges related to what was termed "the first container" and alleged the possession on the 25th August 1992 of a quantity of garments for the purpose of trade to which the false trade description "Made in Taiwan" was applied, contrary to s.7(1)(b).

3. The final pair of charges numbered 2 and 4 related to both containers and alleged an attempt, on or about the 24th August 1992, to export all the garments referred to in the other charges to which the same false trade description was applied, contrary to s.12(1) of the Trade Descriptions Ordinance and to s.81 of the Interpretation and General Clauses Ordinance, Cap.1.

Background

4. The appellant company is incorporated in Hong Kong under the Companies Ordinance. The 2nd appellant, in addition to being a director of Keening Industrial Limited, is the managing director of Yue Ruey Enterprise Corporation of Taiwan (the Taiwanese company) and the chairman of Yu Rui Clothes Limited of Chao Zhou in China (The Chinese company).

5. In June 1992, the Taiwanese company accepted an order from a German company for the manufacture of garments worth approximately US$192,000. The 2nd appellant arranged for the clothes to be manufactured by the Chinese company from raw materials which were sent by the Taiwanese company in boxes marked "Made in Taiwan". In due course, a contract dated 30th June 1992 was drawn up between the Chinese company as seller of the clothing and the 1st appellant as the buyer. This was done to circumvent the problems of direct trade between Taiwan and China, and with the intention that after the goods had arrived in Hong Kong they would be exported to Germany.

6. On the 11th August 1992, Easyway Air Freight Limited (Easyway), a company based in Hong Kong, received a transmission by fax from the Chinese company which was an order to arrange transportation of this consignment of clothing from China into Hong Kong for re-export to Germany. Easyway holds an exemption certificate and is exempted from applying for import and export licences when goods are imported to or exported from Hong Kong. On 18th August 1992, Easyway received confirmation of the order from an unidentified caller on behalf of the Taiwanese company as a result of which the order was accepted. On the 23rd August 1992, the first container relating to the order was collected and taken, without incident, through Lok Ma Chau Check Point to Sealand Cargo Godown at Kwai Chung to await export to Germany. On 24th August 1992 the second container was stopped at the checkpoint by Customs & Excise officers. The garments from China were in boxes clearly labelled on the outside "Made in Taiwan" for which no certificate of origin for the goods was produced to the officers. This action led to the discovery of the first container. It was quickly realised that the boxes in that container also displayed an identical false description. Photographs were taken of some of the boxes showing in large clear markings and using the same size of print and design for each of the words printed in a long vertical column the following : Mayer Sport, Bremen, Style No., Order No., Colour, Size, Quantity, C/No., Made in Taiwan. The garments themselves and the bags in which they were wrapped gave no indication of where the goods had been manufactured.

7. When the 2nd appellant gave evidence during the trial, he testified that the Taiwanese company had "transferred" the order to Keening Industrial Limited, the 1st appellant, and with it the benefit from the contract for the sale of the garments. Evidence of this was provided in the form of a confirmation of order as between the Chinese company and the Hong Kong company. This was entirely in accordance also with the 2nd appellant's account given in an interview under caution to an officer of the Trading Standards Investigation Bureau. Payment for these goods by the German company was to be made under a letter of credit issued by the United World Chinese Commercial Bank in Taiwan which stipulated F.o.b. terms, and that shipment from Hong Kong to Bremen should be not later than August 30th, 1992.

Charges 1 and 3 : Importing

8. Turning now to the first pair of charges, Nos.1 and 3 on the charge sheet which related to the importation of the second container, s.12(1) and (3) of the Trade Descriptions Ordinance provide :

12.(1) ........, no person shall import or export any goods to which a false trade description ... is applied.

(3) This section shall not apply to any goods in transit.

Section 2 of the Ordinance interprets the phrase "goods in transit" as meaning goods which :

(a) are brought into Hong Kong solely for the purpose of taking them out of Hong Kong; and

(b) remain at all times in or on the vessel, aircraft or vehicle in or on which they are brought into Hong Kong.

The circumstances which were agreed at trial could not more clearly indicate that these goods fell fairly and squarely at the time of seizure into (a) above. There is not the slightest doubt that the goods were brought into Hong Kong for the purpose of taking them out of Hong Kong, that is exporting them to Germany within days of their arrival into Hong Kong. The wording of s.2(a) specifically permits us to look at the purpose for which the goods were brought into Hong Kong. It is, however, common ground that at all times the goods remained on the vehicle that had brought them to Hong Kong. The removal of the goods from the vehicle by customs officers in the course of their duties obviously does not affect the position or their lawful conduct would be creating the very offence laid against the appellants.

9. The learned Deputy Judge in his reasons for verdict found that the second container was to be taken from Hong Kong by ship and that accordingly, it was an irresistible inference that the container would have to be removed from the lorry for that purpose. We agree that this must be so. But subsection (b) is not worded "will remain" or "are intended to remain" in or on the vehicle, and it is not for us to extend the meaning of the Ordinance by supplying words which fill a gap that may inadvertently have been created in the drafting of this piece of legislation. In Fisher v. Bell [1961]1 QB 394, Lord Parker C.J. said this at p.400 :

"I am mindful of the strong words of Lord Simonds in Magor and St. Mellons Rural District Council v. Newport Corporation. In that case one of the Lords Justices in the Court of Appeal had, in effect, said that the court having discovered the supposed intention of Parliament must proceed to fill in the gaps -- what the Legislature has not written the court must write -- and in answer to that contention Lord Simonds in his speech said : 'It appears to me to be a naked usurpation of the legislative function under the thin disguise of interpretation.' "

10. Accordingly, on this aspect, we find that the learned Deputy Judge misdirected himself upon the meaning of "goods in transit". The charges of importing, contrary to s.12 would have applied to the first container which was taken off the vehicle that brought it into Hong Kong. It was then put into storage pending export, but as Mr Kripas frankly observes and concedes, he failed to have a charge of importing in relation to the first container included by amendment at the District Court, even though difficulties over the second container, where importation was alleged, had been expected. It seems to us that an importer of goods, where those goods have been stopped at a check point in circumstances such as these, cannot be guilty of the full offence of importing under s.12 because inevitably the goods will have "at all times" remained in or on the vehicle. The law, as it stands, requires that the offence is only committed once the goods are taken off the vehicle, as, for example, when they are stored prior to shipment. We have considered the possible alternative of substituting a conviction for attempting to import, but this is a matter we shall deal with later on in the wider context of attempt.

Charges 5 and 6 : Possession

11. Turning now to the 5th and 6th charges, s.7(1)(b) of the Trade Descriptions Ordinance reads as follows :

7. (1) Subject to the provisions of this Ordinance, any person who -

(b) has in his possession for sale or for any purpose of trade or manufacture any goods to which a false trade description is applied, commits an offence.

Mr Kripas, on this aspect, made on behalf of the respondent the rather curious concession that the conviction on charge 6 against the 2nd appellant could not stand. We are quite unable to see how the respondent has felt able to draw a distinction between the two appellants when the whole basis of the charges brought against the 2nd appellant is s.20 of the Trade Descriptions Ordinance. This provides :

20. Where a body corporate is convicted of an offence under this Ordinance, every person who, at the time of the commission of the offence, was a director, ... shall be deemed to be guilty of that offence unless he proves that the offence was committed without his knowledge, or that he exercised all due diligence to prevent the commission of the offence.

12. It has rightly been said that the 2nd appellant was a "hands-on" director who was fully acquainted with the terms of the contract and instrumental in its performance. The issue before the learned Deputy Judge had been whether or not the appellants were in constructive possession of the first container whilst it was in storage at the Sealand Godown. It seems to us that while the contract existed between the Chinese company and the 1st appellant as seller and buyer of these goods respectively, it is not a matter of any significance that it was an unidentified person on behalf of the Taiwanese company in that close-knit group of companies who telephoned Easyway to arrange transportation of the goods to Hong Kong. Easyway accepted the order and sub-contracted Sun Tung Fat (Man Kwong) Transportation Company to carry the two containers involved in the order. In our judgment, when the goods went from China in the possession of the sub-contracted carrier, they were being carried by agents acting on behalf of the 1st appellant with the full knowledge of the 2nd appellant.

13. In the course of argument, we were referred to s.20 of the Sale of Goods Ordinance, Cap.26 and in particular, to Rule 5(2) thereunder. Section 20 provides :

20. Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in goods is to pass to the buyer -

Rule 5(2) Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.

14. We were also referred to Wardar's (Import and Export) Co. Ltd. v. W. Norwood and Sons, Limited [1968]2 AER 602. In that case as in the present case, when the carrier took possession of the goods, the carrier became the agent of the buyer and, for present purposes, the buyer at the stage when the goods were in Hong Kong was the 1st appellant. It is clearly of fundamental importance to decide on whose behalf the carrier was acting in the present case and we are driven to the conclusion upon the facts of this case and well established principles of law where the agency of a carrier is concerned that both of these appellants were in constructive possession of the garments until such time as they were placed on board the ship bound for Germany. The carrier had been acting for them in keeping the goods in the first container in a place of safe custody until such time as they could be taken to the ship when property in the goods would pass to the German buyer. For this reason we are not impressed by the submission that as the goods were kept at a godown by the carriers, possession on the part of either or both of the appellants effectively ceased. This is so despite clause 2 of the Conditions of Exemption of the Trans-shipment Cargo Exemption Scheme as they applied to Easyway which reads :

"(2) That physical custody of the Trans-shipment Cargo remains with the person registered under the Scheme at all times while the trans-shipment cargo is in Hong Kong and that no further processing or substitution of the trans-shipment cargo takes place in Hong Kong."

The fact that no further processing or substitution may take place does not, in our judgment, take away constructive possession on the part of both appellants of the goods while Easyway were acting as their agents.

15. Clearly, the sensible charge to cover these goods was one of importing, contrary to s.12, because the missing ingredient in charges 1 and 3 was present in charges 5 and 6. The container had been removed from the vehicle and was awaiting shipment to Germany as the parties to the contract had always intended.

16. Again, there is nothing to indicate that the carrier from China to Hong Kong was to act as the German buyer's agent. On the contrary, the carrier acted for the Hong Kong buyer and until the goods reached the ship that would take them to Germany, the clear intention of the parties was that appropriation by the German buyer would only occur when the goods had been put on board the ship.

Charges 2 and 4 : Attempting to export

17. The charges of attempting to export the goods from both containers alleged in charges 2 and 4 were concerned with whether or not the evidence in the trial had established sufficiently proximate acts to amount to an attempt or alternatively whether, as the appellants have argued, the acts which were admittedly designed to achieve an exportation to Germany were merely preparatory. The respondent's argument which ran counter to its arguments regarding possession in charges 5 and 6, is that the goods in both containers were in the hands of innocent agents of the appellants and that everything they could have done towards the exportation of these goods, had been done when the goods were transferred in China to the carrier. The intention was, they argued, accompanied by sufficiently proximate acts to amount to the attempt charged against each appellant. For the reasons given already, however, the appellants retained constructive possession of these goods and it is quite clear to us that to hold that there was an attempt to export at the time when the carriers took physical possession of the goods in China is to offend the principles laid down in Davey v. Lee [1967]51 CAR 303 which were adopted and applied in R. v. Chan Kwong & Another [1987] HKLR 756. In the latter case, a number of persons had made a plan to cheat and in preparation for the arrival of their intended victim, they were present in a room with articles intended for the cheat, when police arrested them. Yang V.-P. , as he then was, made reference at page 759 to a passage from Lord Parker C.J.'s judgment in Davey v. Lee at page 305 (above) :

"What amounts to an attempt has been described variously in the authorities, and for my part I prefer to adopt the definition given in Stephen's Digest of Criminal Law (5th ed.) article 50 : 'An attempt to commit a crime is an act done with intent to commit that crime, and forming part of a series of acts which would constitute its actual commission if it were not interrupted'. As a general statement, that seems to me to be right, though it does not help to define the point of time at which the series of acts begins. That, as Stephen said, depended upon the facts of each case. A helpful definition is given in paragraph 4104 in the current (36th) edition of Archbold's Criminal Pleading, where it is stated 'It is submitted that the actus reus necessary to constitute an attempt is complete if the prisoner does an act which is a step towards the commission of the specific crime, which is immediately and not merely remotely connected with the commission of it, and the doing of which cannot reasonably be regarded as having any other purpose than the commission of the specific crime.' ".

Yang V.-P. at p.763 went on to refer to the decision in Haughton v. Smith [1974]58 CAR 198 which was a case concerned with the handling of stolen goods. Police officers had stopped a vehicle on which they discovered a quantity of stolen goods but in due course they allowed the vehicle to continue its journey with two police officers on board in order to detect the identity of other handlers in the chain. After a time, S was arrested with others after arranging for the future disposal of the goods which the House of Lords held were no longer stolen goods. They had, by the intervention of the police, been returned to lawful custody by virtue of s.24(3) of the Theft Act 1968 and though S may have intended to handle the stolen goods, his intention by itself was not sufficient. Lord Hailsham at p.207 said :

"I derive the following propositions relevant to the present appeal -

(1) There is a distinction between the intention to commit a crime and an attempt to commit it. Thus, in this case, the respondent intended to commit a crime under s.22 of the Theft Act 1968. But this dishonest intention does not amount to an attempt. This distinction has not always been observed in the discussion of cases on the law affecting attempts.

(2) In addition to the intention, or mens rea, there must be an overt act of such a kind that it is intended to form and does form part of a series of acts which would constitute the actual commission of the offence if it were not interrupted. In the present case the series of acts would never have constituted and in fact did not constitute an actual commission of the offence, because at the time of the handling the goods were no longer stolen goods.

(3) The act relied on as constituting the attempt must not be an act merely preparatory to commit the completed offence, but must bear a relationship to the completion of the offence referred to in R. v. Eagleton as being 'proximate' to the completion of the offence and in Davey v. Lee as being 'immediately and not merely remotely connected' with the completed offence."

Yang V.-P. in R. v. Chan Kwong at p.763 with reference to this passage said -

"Having examined the authorities, it seems to us as Glanville Williams suggested, there is not a 'last act' test as such, and Eagleton may be regarded as illustration of the principle enunciated in Davey v. Lee : vide Lord Hailsham's proposition (3) in Haughton v. Smith.

Whether there be one test or two -- and we are inclined to the view that there is but one test, namely that laid down in Davey v. Lee -- the applicants in the present case had not by their conduct come within the definition of an attempt on the date of the charge, 21st May. One may test the facts of this case by considering an example given by Smith and Hogan (at p.260). X, intending to commit murder, buys a gun and ammunition, does target practice, studies the habits of his intended victim, reconnoitres a suitable place to lie in ambush, puts on a disguise and sets out to take up his position. These are all acts of preparation but could scarcely be described as attempted murder. X takes up his position, loads the gun, sees his victim approaching, raises the gun, takes aim, puts his finger on the trigger and squeezes it. He has now certainly committed attempted murder; but he might have desisted or been interrupted at any one of the stages described."

18. The respondent's argument in the instant case has been that the trigger, as it were, was squeezed when the goods in both containers were loaded onto the carrier's vehicles in China.

19. We disagree with that proposition. The contents of the first container remained in the appellants' constructive possession whilst they were in Hong Kong. When they were brought through the checkpoint it was an act which went immediately towards the importation into Hong Kong which was later achieved when, at the godown, the first container was off-loaded. However, on the particular facts of this case, where it was agreed that the sole purpose of the goods being brought to the godown in the container, and there unloaded, was for exportation to Germany, we have been driven to the conclusion that at that stage, with the loading of the container and the goods onto the ship being all that remained to be done by the carrier and agent for the 1st appellant with the knowledge of the 2nd appellant, these were sufficiently proximate acts, coupled with the admitted intention to export, to amount to an attempt to export the goods. There was no more that the appellants had to do having left these arrangements to the carriers.

20. So far as the second container is concerned, the position is quite different. The goods were never 'imported' in the legal sense, and whilst the act of coming through the checkpoint was relevant to importation it was, so far as exportation to Germany was concerned, only a preparatory act. The goods in the second container, once they were seized by the Authorities were no longer capable of being imported. Without importation there could not, on the facts before us, be an exportation and accordingly the charge so far as it relates to attempting to export the goods from the second container must fail.

21. Having dealt with attempt in relation to charges 2 and 4, we need to consider next whether or not a conviction for attempted importation should replace the full offence in charges 1 and 3.

22. The situation in Haughton v. Smith was very different to the instant case. There, the activity that was alleged to be criminal occurred at a time when the Police, by their own actions, had restored the stolen goods to lawful custody before the alleged attempt to handle those goods. It was held that there could not be an attempt to handle stolen goods thereafter because it would not have been possible to commit the full offence now that they were no longer "stolen". But in the present case, what was done by the innocent agents of the 1st appellant was, before the Authorities interrupted the journey, to bring a vehicle into Hong Kong with the clearest objectives in mind. The learned Deputy Judge was not speculating as Mr Chong has submitted when coming to the conclusion that this second container, like the first, was to be taken from the vehicle at the godown to await shipment to Germany. The appellants' whole objective was to export both containers together. If there had not been an interruption to the course of its journey, we have no doubt that this is what would have occurred. In our judgment there could be no clearer evidence of an intention to commit the full offence in accordance with Lord Hailsham's first proposition in Haughton v. Smith (above). As to the second and third propositions, we take the view that the overt act of causing the vehicle to be brought through the checkpoint was "immediately and not merely remotely connected" to the completed offence. The carriers had been given instructions as to what was required, and they were being left to carry them out. The appellants' role was complete. They had done all that they could do to commit the completed offence.

23. Having reached these findings on the principal matters which have been raised in this appeal, there remain two important aspects finally to consider.

24. Mr Chong submits that whilst there is an apparent false description on each of the boxes, in the circumstances of this case the words "Made in Taiwan" do not amount to a false trade description. Section 2 of the Ordinance means, so far as it applies to this appeal : 'a trade description which is false to a material degree'. He rightly points out that a certificate of origin was produced in the District Court proceedings showing that the goods originated in China which would provide a contradiction to what appeared on the boxes. Furthermore, the German buyers had inspected the goods in the course of manufacture and were fully aware that the garments were being made in China. In addition, there was an explanation for the markings on the boxes because, as the Deputy Judge accepted in the trial, some of the boxes appeared to be second-hand when they were inspected which could have meant that they were the very boxes in which the raw materials were packaged when they were sent from Taiwan.

25. Despite these features in the evidence, we cannot fault the learned Deputy Judge's reasons for finding that there was a material false trade description. He found, and we agree, that the fact that the German buyer would not have been misled is immaterial. The intention was not to deceive the buyer. By s.6(1)(b) of the Trade Descriptions Ordinance -

(1) A person applies a trade description ... to goods if he -

(b) places the goods in, on or with anything which the trade description ... has been affixed or annexed to, marked on or incorporated with, or places any such thing with the goods.

Whilst it is true that a genuine certificate of origin existed for these goods and was produced by the Defence at the trial, the certificate is not attached in any way to the goods and where, for example, there are two containers on different dates to go through a checkpoint, it cannot be in two places at the same time. Ultimately, Customs in Germany would have needed the certificate in order to make the customary checks into import quotas. We do not need to speculate about the substance of Mr Kripas' submission that, if this certificate of origin had been produced, it would inevitably have prevented clearance of these boxes marked in such a contradictory fashion. It suffices for us to say that the boxes were marked in a way that would lead to a clear understanding that the garments were made in Taiwan and that such a description was both false and material. We were referred to a number of cases including Kingston-upon-Thames Corporation v. F.W. Woolworth & Co. [1968]1 AER 401 where the facts are very different and are easily and obviously distinguishable from the present case. In the former case the trade description was not unequivocally false whereas in the present circumstances it was.

26. The last grounds of appeal were concerned with the appellants' defence under s.12(2)(a) and the 2nd appellant's additional defence under s.26(3). Section 12(2)(a) provides :

Any person who imports or exports any goods contrary to subsection (1) commits an offence unless he proves that -

(1) he did not know and had no reason to suspect and could not with reasonable diligence have found out that the goods are goods to which a false trade description or forged trade mark is applied.

Section 26(3) provides that :

In any proceedings for an offence under s.7(1)(a)(ii) or (b) it shall be a defence for the person charged to prove that he did not know, had no reason to suspect and could not with reasonable diligence have ascertained, that the goods did not conform to the description or that the description had been applied to the goods.

The appellants complain that there are no specific findings recorded in the reasons for verdict which relate to these defences. But the learned Deputy Judge found as a fact, after careful consideration of the evidence including a number of glaring lies told by the 2nd appellant, that the "reasonable diligence" defence failed. This defence was made almost impossible from the start when the 2nd appellant admitted that there had been no inspection of the goods after the German buyers had carried out their own inspection on the 13th August 1992 and that they had not been inspected after arrival in Hong Kong through negligence. The appellants had tried to argue in the District Court that new boxes for the garments had been ordered in China and that inadvertently the boxes used to supply the raw materials had been used to package the end product. It is not surprising that these legal defences, both of which were referred to by the learned Deputy Judge, failed. We can see no reason to interfere with his findings on this aspect of the appeal.

27. Accordingly, so far as charges 1 and 3 are concerned, the convictions for the full offence of importing will be replaced by convictions for attempting to import these goods under the powers conferred on us by s.13(4) of the Supreme Court Ordinance, Cap.4 and s.81 of the Interpretation and General Clauses Ordinance, Cap.1. The convictions on charges 2 and 4 stand, but only in respect of the clothing in the first container. In all other respects these appeals are dismissed.