THE QUEEN v. LI TAT

IN THE COURT OF APPEAL

MA No.1065 of 1991
(Criminal)

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J U D G M E N T

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Bewley, J.:

1. This is the judgment of the Court.

2. The appellant was convicted on 9th October 1991 by Miss Carlye Chu in Tuen Mun Magistrate’s Court on two summonses, which alleged that on or about 21st December 1989 he exported a total of 6696 ladies’ shirts to West Germany otherwise than under and in accordance with a licence, contrary to regulation 4 of the Import and Export (General) Regulations Cap.60. The appeal against conviction has been referred to this court under the provisions of section 118(1)(a) of the Magistrates Ordinance Cap.227.

3. The following facts were admitted pursuant to section 65C of the Criminal Procedure Ordinance Cap.221

“The defendant is the proprietor of Bright Garment Company at Unit B and D, 8th Floor, Gee Hing Chang Industrial Building, 16 Cheung Yee Street, Kowloon.

Under the existing textile agreement between Hong Kong and the European Economic Community (EEC), exports of the majority of textiles from Hong Kong to West Germany (a member state of EEC) are subject to quantitative limits. The export control is administered by the Trade Department in the form of licensing arrangements against valid export quota. Hong Kong quota can only be utilized to cover the exports of textile products of Hong Kong origin.

On 4th October 1989, the Trade Department received two applications for Export Licence (Textiles) Form 5 numbered HKDE9-2611792 and HKDE9-2611793 covering a total of 7,440 pieces of ladies’ 100% cotton knitted T-shirt like garment for export to West Germany. The defendant made declarations in the said two export licences. The licences were issued on the basis of the declarations. Shipment of the goods was effected on 31st December 1989 with only 6,696 pieces of the said goods exported.”

4. In both licence applications the appellant’s company Bright Garment Company was stated to be the exporter and Filper Knitting Factory was stated to be the manufacturer. Condition 2 of the licence reads :

“Goods covered by this licence must be of Hong Kong origin. Goods claiming Hong Kong origin must have undergone principal processes in Hong Kong. These are processes which permanently and substantially change the nature, shape, form, and utility of the raw materials used, as laid down by the Director of Trade in certificate of origin circulars.”

The manager of Filper Knitting Factory declared that the goods were of Hong Kong origin in accordance with Condition 2. The appellant declared that the particulars in the application were true.

5. On 9th August 1990 a Customs Officer visited Bright Garment Company and interviewed the appellant who then made a cautioned statement in which he admitted that Filper Knitting Factory had told him that the goods had been manufactured by a sub-contractor in China. This cautioned statement was challenged at trial on the grounds that it was made as a result of threats and inducements but was admitted after voir dire proceedings.

6. The appellant gave evidence again on the general issue. He said that he delegated the placing of the order with Filper Knitting Factory to the supervisor of one of his sales teams. He did not know that the goods were manufactured outside Hong Kong. He had never seen the copies of packing lists issued by the factory in China until they were shown to him by a Customs Officer who found them during a search of the appellant’s company. He believed that the goods were made in Hong Kong because it was stipulated in the contract with Filper Knitting Factory that they should be of Hong Kong origin. He had approved payment for the goods in accordance with invoices received from Filper Trading Company (emphasis supplied), which he admitted had no apparent connection with the manufacture of the goods. He admitted giving false answers in his cautioned statement but said that they were suggested by the interviewer.

7. The magistrate found that the packing lists were properly made exhibits on the general issue, as well as on the voir dire, but accepted that the contents were hearsay. She found that the invoices were properly produced as documents received by the appellant’s company but that their contents were also hearsay. Likewise she found that the appellant’s admission in his cautioned statement was hearsay. There was therefore no admissible evidence as to the place of origin of the goods. If they were not of Hong Kong origin there was a breach of Condition 2 and the export of the goods was not in accordance with the licence.

8. The magistrate was satisfied that the matter was governed by section 94A of the Criminal Procedure Ordinance which provides :-

“(1)    It shall not be necessary in an indictment, charge, complaint or information alleging an offence to negative any exception or exemption from or qualification to the operation of the law creating the offence.

(2)     For the avoidance of doubt it is hereby declared that in criminal proceedings-

(a)      it is not necessary for the prosecution to negative by evidence any matter to which this subsection applies; and

(b)     the burden of proving the same lies on the person seeking to avail himself thereof.

(3)     This section applies to criminal proceedings in the District Court or a magistrate’s court.

(4)     The matters to which subsection (2) applies are any licence, permit, certificate, authorization, permission, lawful or reasonable authority, purpose, cause or excuse, exception, exemption, qualification or other similar matter.”

The magistrate said that “under and in accordance with” must be read conjunctively. Her conclusion was that section 94A cast on the appellant the burden of proving not only that he had a licence to export the goods but that the exporting was done in accordance with the licence.

9. The magistrate did not believe the appellant’s evidence. In particular she found that his approval of payment on the Filper Trading Company invoices cast doubt on his assertion that he believed the goods were manufactured by Filper Knitting Company in Hong Kong. However the appellant’s belief was irrelevant as the onus was on him to prove on the balance of probabilities that the goods were of Hong Kong origin. In the absence of such proof she convicted the appellant on both summonses.

10. It was not brought to the attention of the magistrate that section 34 of the ordinance deals specifically with the burden of proof in proceedings under the ordinance thus :-

11. (1)     In any proceedings under this Ordinance the onus of proving-

(a)      the place-

(i)      from which an article has been imported; or

(ii)      to which an article is intended to be exported; or

(b)     that an article-

(i)      has been imported in accordance with the terms of a licence;

(ii)      is intended to be exported in accordance with the terms of a licence;

(iii)     has been imported for the sole purpose of exporting the article;

(iv)     has been lawfully placed in or on any vessel, aircraft or vehicle for the purpose, of exporting the article;

(v)     has been lawfully removed from any vessel, aircraft or vehicle in or on which it was imported;

(vi)     has been lawfully delivered to or placed in any premises or place after it has been imported; or

(vii)    has been recorded in the manifest of the vessel, aircraft or vehicle in or on which it has been imported or is intended to be exported,

shall lie upon the defendant in any such criminal proceedings and the claimant in any forfeiture proceedings.

(2)     For the purposes of this section, the provisions of Part IV of the Evidence Ordinance (Cap. 8) (which relates to the admissibility of hearsay evidence in civil proceedings) shall apply as if proceedings under this Ordinance were civil proceedings.

12. Sub-section (1) provides that the onus of proving that the importation of an article is in accordance with the terms of a licence shall lie upon the defendant but is silent in respect of proof of the exportation of an article. Mr McCoy, who appears for the appellant, submits that the casting on the defendant of the burden of proving that an article is intended to be exported in accordance with the terms of a licence is a clear indication that a defendant should not have to bear the burden of proving the actual exportation of the article. He submitted that there is a lacuna in section 34 that is probably the result of the draftsman’s oversight, but that it can only be cured by legislative amendment.

13. Moreover he submits that the regulations, as secondary legislation, cannot impose any greater burden than that imposed by the ordinance. If regulation 4(1) is interpreted as the magistrate interpreted it, it is ultra vires the ordinance and void by virtue of section 28(b) of the Interpretation and General Clauses Ordinance Cap.1 which provides :-

“No subsidiary legislation shall be inconsistent with the provisions of any Ordinance;”

14. In support of this proposition Mr McCoy cites R v. Customs and Excise Commissioners [1986] 2 AER 164. Under section 93(2) of the statute regulations could be made “imposing requirements on the occupier of a warehouse or the proprietors of goods in a warehouse to keep and preserve records relating to his business as such an occupier or proprietor.” Regulation 8(1) and (3) purported to give the Commissioner power to inspect, “all records relating to (the proprietor’s) business”. It was held that the regulation was ultra vires section 93(2) because (per Mustill LJ) the powers in regulation 8 did not merely fill in details or provide machinery for implementing the specific powers referred to in section 93(2) but instead created a new and radically more extensive set of powers, or (per McNeill J) regulation 8 was a wholly unwarranted arrogation of powers which were in no sense incidental or supplemental to the statutory powers.

15. Mr Bailey, for the respondent, does not accept that any issue such as that which arose in that case arises here. He points out that section 31(1)(b) specifically gives power to make regulations prohibiting the import and export of any article except under and in accordance with the terms and conditions of a licence. We agree with him that the case cited was concerned only with the question as to whether the regulation was ultra vires the regulation making power conferred by the Act, not whether the regulation conflicted with some other provision of the Act.

16. As to Mr McCoy’s submission concerning section 34, Mr Bailey argues that there is a reason for the failure to cast the burden of proof on an exporter. Clearly it is a deliberate omission. He submits that an exporter is in a different category to other persons who may be in possession of articles that are intended for export and who may be visited with sanctions under the ordinance. He points, in particular, to importers, persons charged with offences under section 14A(4) and 35A(1)(a)(d) and (f), and claimants in forfeiture proceedings under Part VI. Such persons receive the benefit of section 34(2), which provides that the more relaxed civil rules admitting hearsay evidence shall apply for the purposes of section 34. This is because they may not have access to the documentation or other evidence that is only available in some place outside Hong Kong, whereas a person charged with an offence under regulation 4 necessarily has available to him in Hong Kong the evidence that the goods in question were manufactured in Hong Kong, if in fact they were so manufactured. It is therefore reasonable that the latter may only avail himself of the stricter provisions of section 22 of the Evidence Ordinance relating to the admission of business records in criminal proceedings.

17. We believe that there is force in this argument. It accounts for the omission from section 34(1)(b) of a provision specifically requiring that a defendant prove that an article was exported in accordance with the terms of a licence.

18. An exporter of textiles, unlike an importer, has the necessary proof to hand. Not only does he know the identity of the manufacturer, but he and the manufacturer have made a declaration to that effect. He is in a position to call the manufacturer to give evidence and to produce invoices and packing lists. If necessary he may invoke section 22 of the Evidence Ordinance.

19. Where the exporter will be in difficulties in this respect is where the declared manufacturer is not the true manufacturer. If the true manufacturer is not a Hong Kong manufacturer it will be impossible for the exporter to prove that the articles were made in Hong Kong. But in those circumstances the exporter has made a false declaration and no injustice will have been done. We are satisfied that Mr Bailey’s explanation for the omission of the exporter from section 34 is the correct one. Regulation 4 as interpreted by the magistrate is not therefore inconsistent with the ordinance.

20. Mr McCoy further submitted that if, as we have decided, regulation 4 is not inconsistent with section 34, any requirement by that regulation that the defendant prove that the articles were manufactured in accordance with the licence is inconsistent with the Bill of Rights Ordinance Cap.383 of which the following provisions are relevant:-

21. Article 11(1):-

“Everyone charged with a criminal offence shall have the right to be presumed innocent until proved guilty according to law.”

“All pre-existing legislation that does not admit of a construction consistent with this Ordinance is, to the extent of the inconsistency, repealed.”

He submits that the Crown’s construction of regulation 4 is inconsistent with the ordinance but that if his interpretation is correct the regulation is “saved”. He concedes, however, that the burden of proving that the exported articles were the subject of a licence rests on the person charged. It is the requirement that such person prove that the articles were manufactured in accordance with the licence that offends Article 11(1).

22. In AG v. Lee Kwong-kut and others, Privy Council Appeal Nos.59 and 60 of 1992 Lord Woolf said at p.12 :-

“There are situations where it is clearly sensible and reasonable that deviations should be allowed from the strict applications of the principle that the prosecution must prove the defendant’s guilt beyond reasonable doubt. Take an obvious example in the case of an offence involving the performance of some act without a licence. Common sense dictates that the prosecution should not be required to shoulder the virtually impossible task of establishing that a defendant has not a licence when it is a matter of comparative simplicity for a defendant to establish that he has a licence. The position is the same with regard to insanity, which was one of the exceptions identified by Lord Sankey in the passage of Woolmington v. D.P.P. which has already been cited. The other qualification which Lord Sankey made as to statutory exceptions clearly has to be qualified when giving effect to a provision similar to Article 11(1).

Some exceptions will be justifiable, others will not. Whether they are justifiable will in the end depend upon whether it remains primarily the responsibility of the prosecution to prove the guilt of an accused to the required standard and whether the exception is reasonably imposed, notwithstanding the importance of maintaining the principle which Article 11(1) enshrines. The less significant the departure from the normal principle, the simpler it will be to justify an exception. If the prosecution retains responsibility for proving the essential ingredients of the offence, the less likely it is that an exception will be regarded as unacceptable. In deciding what are the essential ingredients, the language of the relevant statutory provision will be important. However what will be decisive will be the substance and reality of the language creating the offence rather than its form. If the exception requires certain matters to be presumed until the contrary is shown, then it will be difficult to justify that presumption unless, as was pointed out by the United States Supreme Court in Leary v. United States (1969) 23 L.Ed. 2d 57, 82 ‘it can at least be said with substantial assurance that the presumed fact is more likely than not to flow from the proved fact on which it is made to depend.’”

23. He said later at p.16 :-

“Notwithstanding this, it is their Lordships’ opinion that, in applying the Hong Kong Bill, it is not necessary, at least in the vast majority of cases, to follow the somewhat complex process now established in Canada in order to assess whether an exception to the general rule that the burden of proof should rest upon the prosecution throughout a trial is justified. Normally, by examining the substance of the statutory provision which is alleged to have been repealed by the Hong Kong Bill, it will be possible to come to a firm conclusion as to whether the provision has been repealed or not without too much difficulty and without going through the Canadian process of reasoning. The application of a test along the lines suggested by Lawton L.A. in Edwards in the manner already indicated will often be all that is required. The court can ask itself whether, under the provision in question, the prosecution is required to prove the important elements of the offence; while the defendant is reasonably given the burden of establishing a proviso or an exemption or the like of the type indicated by Lawton L.J. If this is the situation Article 11(1) is not contravened.”

24. The test favoured by Lord Woolf was formulated by Lawton L.J., giving the judgment of the Court of Appeal in R v. Edwards [1975] QB 27, when he said at p.39 :-

“ ... this line of authority establishes that over the centuries the common law, as a result of experience and the need to ensure that justice is done both to the community and to defendants, has evolved an exception to the fundamental rule of our criminal law that the prosecution must prove every element of the offence charged. This exception, like so much else in the common law, was hammered out on the anvil of pleading. It is limited to offences arising under enactments which prohibit the doing of an act save in specified circumstances or by persons of specified classes or with specified qualifications or with the licence or permission of specified authorities. Whenever the prosecution seeks to rely on this exception, the court must construe the enactment under which the charge is laid. If the true construction is that the enactment prohibits the doing of acts, subject to provisoes, exemptions and the like, then the prosecution can rely upon the exception.”

25. The final authority to which we need refer is R v. Hunt [1987] AC 352. Citing Nimmo v. Alexander Cowan and Sons Ltd. [1968] AC 107, in which the House of Lords divided three to two on the construction of section 29(1) of the 1961 Factories Act, Lord Griffiths said at p.374 :-

“However, their lordships were in agreement that if the linguistic construction of the statute did not clearly indicate upon whom the burden should lie the court should look to other considerations to determine the intention of Parliament such as the mischief at which the Act was aimed and practical considerations affecting the burden of proof and, in particular, the ease or difficulty that the respective parties would encounter in discharging the burden. I regard this last consideration as one of great importance for surely Parliament can never lightly be taken to have intended to impose an onerous duty on a defendant to prove his innocence in a criminal case, and a court should be very slow to draw any such inference from the language of a statute.

When all the cases are analysed, those in which the courts have held that the burden lies on the defendant are cases in which the burden can be easily discharged.”

26. After citing two authorities which demonstrate that fact, Lord Griffiths continued :-

“In Reg. v. Edwards [1975] Q.B. 27, 39-40 the Court of Appeal expressed their conclusion in the form of an exception to what they said was the fundamental rule of our criminal law that the prosecution must prove every element of the offence charged. They said that the exception

‘is limited to  offences arising underenactments which prohibit the doing of an act save in specified circumstances or by personsof specified classes or with specified qualifications, or with the licence orpermission of specified authorities.’

I have little doubt that the occasions upon which a statute will be construed as imposing a burden of proof upon a defendant which do not fall within this formulation are likely to be exceedingly rare. But I find it difficult to fit Nimmo v. Alexander Cowan & Sons Ltd. [1968] AC 107 into this formula, and I would prefer to adopt the formula as an excellent guide to construction rather than as an exception to a rule. In the final analysis each case must turn upon the construction of the particular legislation to determine whether the defence is an exception within the meaning of section 101 of the Act of 1980 which the Court of Appeal rightly decided reflects the rule for trials on indictment. With this one qualification I regard Reg v. Edwards as rightly decided.”

27. A significant feature of this appeal is that, as Mr Bailey correctly points out, the regulation will be completely emasculated if Mr McCoy is right. The Crown has no prospect whatsoever of proving that such articles were not of Hong Kong origin. This is a critical consideration in the light of the importance to Hong Kong of the textile trade. The quota system is necessary to ensure fair play to all exporters and to maintain quality standards. If therules are broken, the sufferer is the community. This is something that we are entitled to take into account.

28. Notwithstanding that proof of exportation will in most cases be a formality, that is an important element of the offence. In our judgment the decision turns on the degree of difficulty faced by an exporter who is attempting to prove that the goods are of Hong Kong origin. This has been considered already in relation to the ultra vires question. We are satisfied that the burden, in the case of a bona fide exporter, is a comparatively light one. The fact that, in the case of a non bona fide exporter, it will be impossible to discharge is, for the reason stated, irrelevant. The regulation prohibits the export of the articles unless the exporter complies with the terms of his licence. We think that it is reasonable that the exporter should bear the burden of proving that he has done so.

29. As we are persuaded that the proper construction of regulation 4 read with section 94A of the Criminal Procedure Ordinance is that the burden of proving both elements is on the defendant, we do not find it necessary to consider Mr Bailey’s submission that the terms “under” and “in accordance with” are synonymous.

30. The appeal is therefore dismissed.