WONG HON SUN v. HKSAR

FACC No. 1 of 2009

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 1 OF 2009 (CRIMINAL)

(ON APPEAL FROM HCMA NO. 608 OF 2007)

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J U D G M E N T

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Chief Justice Li:

1.  I agree with the judgment of Sir Anthony Mason NPJ.

Mr Justice Bokhary PJ :

Question of law

2.  Leave to bring this appeal was granted in regard to the law governing the proof of serious allegations in forfeiture proceedings.  A driver was convicted of attempting to export unmanifested cargo.  Forfeiture of the cargo was sought against an unconvicted owner.  It was alleged that he had been complicit in the attempt.  What is the standard to which, and the approach on which, such complicity must be proved?  This question of law is now before the Court, having arisen in the following circumstances.

Circumstances

3.  The cargo concerned consisted of 42 slabs of silver.  On 7 October 2006 customs officers discovered the silver slabs hidden in the driver’s compartment of a container lorry about to leave Hong Kong and enter the Mainland.  The silver slabs were not recorded in a manifest.  So they constituted unmanifested cargo within the meaning of the Import and Export Ordinance, Cap.60.  They were seized.  And the driver was charged with attempting to export unmanifested cargo, namely the silver slabs, contrary to s.18(1)(b) of that Ordinance and s.159G of the Crimes Ordinances, Cap.200.  On 28 November 2006 he appeared before the Magistrate’s Court, pleaded guilty and was sentenced to one year’s imprisonment.  So much for the driver of the lorry.  What about the owner of the silver slabs? 

4.  He had purchased the silver slabs for $1,644,167 on 5 October 2006, which was two days before they were seized.  Being articles seized by the Customs and Excise Service in connexion with the contravention of a provision of the Import and Export Ordinance, the silver slabs were, by virtue of s.27(1)(a) of that Ordinance, liable to forfeiture.  The Commissioner of Customs and Excise chose not to restore the silver slabs to the owner.  And the owner then served notice of his claim to the silver slabs on the Commissioner.  Following receipt of that notice of claim, the Commissioner then applied to the Magistrate’s Court for the forfeiture of the silver slabs.  Consequently a summons was then issued by a magistrate requiring the owner to appear before the Magistrate’s Court on the hearing of the application for forfeiture.

5.  On 6 June 2007 the Magistrate’s Court (Ms Ada Yim) ordered the forfeiture of the silver slabs.  The magistrate’s reasons for so ordering are set out in the statement of findings which she prepared.  The owner appealed to the High Court against the forfeiture order made by the magistrate.  On 7 August 2008 the High Court (Nguyen J) gave judgment affirming the forfeiture order.  With leave granted by the Appeal Committee, the owner now appeals to this Court against the High Court’s judgment affirming the forfeiture order.

6.  It was by a letter dated 12 October 2006 from his solicitors to the Commissioner that the owner laid claim to the silver slabs.  On 17 October 2006 the owner was interviewed under caution by the Customs and Excise Service.  In the witness-box at the forfeiture hearing, he adopted the record of his interview as part of his testimony.  So his testimony consisted of his oral evidence and what he said during his interview.  It is submitted on the owner’s behalf that his right to silence was violated by the fact of his being interviewed and the fact of his having gone into the witness-box.  But this submission must fail.  The owner was accompanied by a lawyer at his interview, and he was legally represented at the forfeiture hearing.  Having been cautioned – and therefore told of his right to silence – he chose to be interviewed.  And it was his choice to go into the witness-box.  None of his choices were otherwise than free.

7.  The Commissioner alleged that the owner was complicit in the attempt to export the silver slabs as unmanifested cargo.  Although complicity is by no means a precondition to the discretion to forfeit, it is on the basis of complicity that forfeiture was sought in the present case.  Denying complicity, the gist of the owner’s testimony was that he had relied on someone to find a transportation company that would complete the requisite customs procedures and then deliver the silver slabs to the Mainland.

8.  In a searching but fair manner, the magistrate subjected the owner’s testimony to close analysis.  She began by pointing out in her statement of findings that there were discrepancies between the account which the owner gave when interviewed and the account which he gave in the witness-box.  One of the discrepancies was this.  At his interview the owner said that he had brought the silver slabs for investment in order to sell them when the price of silver rose.  But in the witness-box he said that he had brought the silver slabs because he had a customer who wanted $1.6 million worth of silver.  The magistrate then proceeded to note a number of oddities in the owner’s testimony.  And she ended by noting in effect that it involved his entrusting valuable cargo to persons of whom he knew little or nothing and doing so without taking out insurance on the cargo.

9.  After analysing in considerable detail what the owner said at his interview and what he said in the witness-box, the magistrate, who enjoyed the advantage of receiving the whole of the evidence in the application at first hand, rejected his exculpatory testimony.  She concluded that “the only reasonable” inference was that he had been complicit in the attempt to export the silver slabs as unmanifested cargo. 

Civil character of forfeiture proceedings

10.  Having regard to some of the submissions made on the owner’s behalf as to the nature of forfeiture, it is appropriate to indicate awareness of how the “forfeiture” entry in Jowitt’s Dictionary of English Law, 2nd ed. (1977) begins.  It begins (in vol.1 at p.815) with the statement that forfeiture “is where a person loses some property, right, privilege or benefit in consequence of having done or omitted to do a certain act”.  But that does no more than provide a broad idea of what forfeiture generally connotes.

11.  Without denying that forfeiture can be a heavy or even ruinous blow to an owner, it has to be said at once that forfeiture proceedings are not proceedings of a criminal character.  In Air Canada v. United Kingdom (1995) 20 EHRR 150 the European Court of Human Rights held that forfeiture proceedings are civil.  And this Court recognised that in Koon Wing Yee v. Insider Dealing Tribunal (2008) 11 HKCFAR 170 at p.193C-E.  Forfeiture proceedings have been described as a process in rem against the thing sought to be forfeited.  Such proceedings may result in property being (i) restored to the owner unconditionally, (ii) restored to him subject to conditions or (iii) forfeited to the state.  They affect the property rights of owners.  Indeed they may bring such rights to an end.  So it is important to bear in mind that such rights are constitutionally safeguarded under the Basic Law. 

12.  The facts of the Air Canada case and what the European Court of Human Rights decided in that case were summarised by Sir Anthony Mason NPJ in Koon’s case at p.193C-E where, in a judgment with which the other members of the Court agreed, he said of the Air Canada case that

“an aircraft was seized and forfeited by the British customs authority under a statutory power on the ground that a large quantity of cannabis, a prohibited drug, was found on the aircraft.  The aircraft was handed back on the payment by the owner operator of the aircraft of a fine of 50,000 pounds imposed administratively.  The Strasbourg Court held that what happened did not involve the determination of a criminal charge and was civil.  The administrative procedure was civil in character, being a process in rem against any vehicle used in smuggling.  The assertion that the aircraft carried cannabis into the United Kingdom was not contested.”

13.  In Koon’s case the Court declared s.23(1)(c) of the Securities (Insider Dealing) Ordinance, Cap.395, invalid.  That provision, as Sir Anthony Mason NPJ pointed out at p.191D-E, laid down a penalty for insider dealing which was comparable to a fine and had a punitive and deterrent purpose.  By declaring it invalid, the Court divested the insider dealing proceedings of the criminal character which they would otherwise have had.  Thus were preserved the disqualification, disgorgement and costs orders which the Insider Dealing Tribunal had made.  Those orders had been made on the basis of the tribunal’s findings of insider dealing.  But those findings were reached without applying the criminal standard of proof and on evidence which included compulsorily obtained evidence.  So those findings could not have stood if the insider dealing proceedings had not been divested of their criminal character by the declaration of invalidity made against s.23(1)(c) and the setting aside of the penalty imposed thereunder.

14.  Another decision of the European Court of Human Rights to be mentioned is AGOSI v. United Kingdom (1987) 9 EHRR 1.  The applicant in that case had sold and delivered 1,500 Krügerrands under a contract of sale which provided that ownership would remain with the seller until full payment had been received.  As it turned out, the cheque tendered in payment was dishonoured.  The buyers were convicted of attempting to smuggle the coins into the United Kingdom, where the import of gold coins was illegal.  Her Majesty’s Customs and Excise seized the coins.  And, after judicial proceedings, the coins were declared forfeit.  By a majority, the European Court of Human Rights held (at p.18) that none of the proceedings complained of by the seller could be considered to have been concerned with the determination of a criminal charge against it.

15.  Counsel for the owner cited Attorney General v. F Gardiner Esq., Permanent Magistrate [1987] HKLR 22 in which Macdougall J (as Macdougall VP then was), giving the judgment of the Full Bench of the High Court, said (at p.28F) that forfeiture proceedings are “quasi-criminal in nature”.  While that statement cannot stand, what the case actually decided can be supported.  The decision was that even though not a party to proceedings in which a magistrate refused a forfeiture order, the Attorney General had a right, by virtue of s.105 of the Magistrates Ordinance, Cap.227, to apply for a case to be stated by the magistrate.  And it can be supported on the basis that the position is covered by s.105 for the simple reason that the making or refusal of a forfeiture order is “connected with an offence” within the meaning of the section.

16.  For the sake of completeness, it should be pointed out that proceedings for the confiscation of the proceeds of crime are not of a criminal character either.  The Court of Appeal so held in R v. Ko Chi-yuen  [1994] 2 HKCLR 65.  That case concerned the rebuttable assumptions which s.4(2) and (3) of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap.405, permitted a court to make for the purpose of determining whether the defendant has benefited from drug trafficking and, if he has, of assessing the value of his proceeds of drug trafficking.

17.  It was argued on behalf of the defendant in that case that those assumptions were inconsistent with the presumption of innocence guaranteed by art.11(1) of the Bill of Rights and had been repealed by reason of such inconsistency.  That argument was rejected.  The Court of Appeal said this (at p.68) :

“            What we have here are assumptions designed to make convicted and sentenced drug traffickers disgorge their ill-gotten gains.  When a prison term in default is fixed, that is not to punish him for benefiting from drug trafficking.  It is to enforce the court’s order for payment.

            A person against whom a confiscation order is sought is not charged with benefiting from drug trafficking.  There is no such offence known to the law.

            Article 11(1) does not extend to confiscation proceedings such as these.

            But if it did, then the s.4(2) and (3) assumptions would be justifiable exceptions to the normal principle that that the prosecution must prove the defendant’s guilt beyond reasonable doubt.

            The assumptions are not ones which the court must make.  They are ones which the court ‘may’ make.

            Powers given to the courts are of course to be exercised rationally and realistically.  The assumptions are only to be made when (as in the present case) it is rational and realistic to make them in the context of the facts duly established.

            And giving the courts power to make assumptions such as these when it is rational and realistic to do so is proportionate to the grave danger to society of leaving drug traffickers rich and to that extent powerful even when behind bars.”

18.  In McIntosh v. Lord Advocate [2003] 1 AC 1078 the Privy Council, to which Ko’s case was cited, came to a similar conclusion for similar reasons.  McIntosh’s case was an appeal from Scotland on a devolution issue.  Reversing the decision of the High Court of Justiciary, the Privy Council held that the rebuttable assumptions which s.3(2) of the Proceeds of Crime (Scotland) Act 1995 permitted a court to make were not incompatible with the presumption of innocence accorded by art.6(2) of the European Convention for Human Rights.  Their Lordships reasons may be taken from the headnote where this appears at p.1078E-G :

“Held, allowing the appeal, that the presumption of innocence guaranteed by article 6(2) applied only to persons ‘charged with a criminal offence’; that although a person against whom an application for a confiscation order was made faced a financial penalty (with a custodial penalty in default of payment) it was a penalty imposed for the offence of which he had already been convicted and involved no accusation of, or inquiry into, any other offence; that, therefore, in relation to the application for a confiscation order made against him the respondent was not a person entitled to rely on the presumption of innocence guaranteed by article 6(2); that, further, on the assumption that article 6(2) did apply to an application for a confiscation order following conviction, it was not unreasonable or oppressive to call on a proven drug trafficker to proffer an explanation for any significant discrepancy which could be established between his property and expenditure on the one hand and his known sources of income on the other; and that, accordingly, the assumptions which a court was entitled to make pursuant to section 3(2) of the 1995 Act were not incompatible with the presumption of innocence under article 6(2).”

Of course the owner in the present case has not been convicted of anything, and there is no assumption, presumption or the like against him.

Discretion to forfeit

19.  Forfeiture used to be mandatory in that it had been provided by s.17 of the Importation and Exportation Ordinance, Cap. 50, that in any application by the Director of Commerce and Industry for the condemnation of any article, vessel or vehicle, “if the magistrate finds that the article, vessel or vehicle was at the time of seizure liable to forfeiture he shall condemn it as forfeited”.  The Importation and Exportation Ordinance was repealed by the Import and Export Ordinance 1970 (Ord. No. 67/70) which came into operation of on 1 January 1972.  It introduced a discretionary regime.  Today the position is as follows.  The Commissioner is empowered by s.27(2) of the Import and export Ordinance to restore any seized article, vessel or vehicle to the owner.  But if he choose not to restore the same and seeks forfeiture instead, then he must apply to a court for forfeiture.  And in such an application, forfeiture is discretionary except in respect of any article prescribed in Schedules 1, 2 and 3 to the Import and Export (Strategic Commodities) Regulations.  Where any article so prescribed is concerned, forfeiture is mandatory.  One sees that from s.28(6) of the Import and Export Ordinance and Schedule 1 to that Ordinance.  In s.28(6) the word “shall” is used.  Otherwise than in respect of any article so prescribed, forfeiture is discretionary.  One sees that from s.28(7) where the word “may” is used.

20.  In R v. CEC Finance Ltd [1993] 2 HKCLR 134 – concerning an application for the forfeiture of a light goods vehicle which, while on hire purchase, was used for the purpose of smuggling – the Court of Appeal said (at p.138) that :

“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.”

Having said in that passage that the discretion is unfettered, the Court of Appeal went on to explain (at p.138) that “[o]f course even such a discretion must be exercised judicially [and] to further the objects of the statute concerned”.  As to such objects, Kaplan J was right when he said R v. Kam Shek Kwong [1994] 1 HKC 681 at p.685E-F that :

“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.”

21.  The move from a mandatory regime to a discretionary one was an enlightened development, and there is no reason to regard it as having been made grudgingly.  It freed the law from a harsh history.  And it is obviously remedial, as indeed s.19 of the Interpretation and General Clauses Ordinance, Cap.1, deems it to be.  Care must be taken not to read into reforming legislation anything that would render it only partially remedial.  It is also to be borne in mind that, as it is put in Bennion on Statutory Interpretation, 5th ed. (2008) at p.846, “[t]he presumption against imposition of a statutory detriment to a person’s property or other economic interests without clear words is an aspect of the general principle against doubtful penalisation”.  Although it preceded the Basic Law, the move away from a harsh regime sits well with our constitution.  Article 105 of the Basic Law provides that “[t]he Hong Kong Special Administrative Region shall, in accordance with law, protect the right of individuals and legal persons to the acquisition, use, disposal and inheritance of property and their right to compensation for lawful deprivation of their property”.  In the Air Canada case the European Court of Human Rights said (at p.173) that “an interference must achieve a ‘fair balance’ between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights”.  There must a level playing field, for to the extent that the playing field is slanted in favour of the state, property rights are unprotected.

22.  Moreover such a slant would violate the “equal protection” clause of art.22 of the Bill of Rights entrenched by art.39 of the Basic Law.  Article 6 of the Basic Law provides that “[t]he Hong Kong Special Administrative Region shall protect the right of private ownership of property in accordance with law”.  That would not be the position if a judicial discretion whether not to forfeit were saddled with an onus placed on the property owner.  There is nothing in the letter or spirit of the legislation out of which to create such an onus.  That goods are liable to forfeiture means no more than that the discretion arises.  It says nothing as to how the discretion is to be exercised.  The discretion must be exercised even-handedly.  By virtue of art.10 of the Bill of Rights entrenched by art.39 of the Basic Law, the right to a “fair” hearing before an “impartial” tribunal is not confined to the determination of criminal charges.  It extends to the determination of “rights and obligations in a suit at law” and therefore covers forfeiture proceedings.  To impose a slanted discretion on a court would be to deprive it of impartiality.  The courts cannot countenance anything less than even-handedness, for nothing less would be constitutional.  Anything less would be discriminatory.  That the inequality would favour the state over the subject would only make it worse.

Burden of proof

23.  So there is that discretion whether or not to forfeit.  What about the ascertainment of the factual foundation on which to exercise this discretion?  Such factual foundation is to be ascertained on the basis that is normal in judicial proceedings, namely that he who asserts must prove.  It is put thus in Sir James Fitzjames Stephen’s Digest of the Law of Evidence,12th ed (Revised) (1948) at p.125 : “Whoever in the course of a judicial proceeding first asserts that a fact exists or does not exist, must prove the existence or non-existence of such fact”.  In Abrath v. North Eastern Railway Co. (1883) 11 QBD 440 at p.457, Bowen LJ (as Lord Bowen then was) put it thus : “Wherever a person asserts affirmatively as part of his case that a certain state of facts is present or is absent … that is an averment which he is bound to prove positively”.  Those statements by Sir James Fitzjames Stephen and Bowen LJ are of course to be understood as being subject to the proposition that self-evident assertions do not require proof.  As Lord Dunedin said in the course of delivering the advice of the Privy Council in Robins v. National Trust Co. Ltd [1927] AC 515 at p.520 the “[o]nus is always on a person who asserts a proposition of fact which is not self-evident”. (Emphasis supplied.) 

24.  In the AGOSI case the European Court of Human Rights held that the scope of judicial review under English law was sufficient to protect property owners.  And in the Air Canada case they said (at p.174) that the airline company could have instituted judicial review proceedings and that, if it had done so, “the courts could have examined any disputed questions of fact”.  As the European Court of Human Rights would undoubtedly have been fully aware, judicial review proceedings are conducted on the basis of the normal rule that he who asserts must prove.

25.  To reverse that rule by construction against an unconvicted owner would be to go further than the law has gone by express provision against convicted drug traffickers.  And even in the latter situation, McIntosh’s case illustrates how carefully and modestly that was done.  At pp 1095F-1096B Lord Bingham of Cornhill said :

“The confiscation order procedure can only be initiated if the accused is convicted of a drug trafficking offence.  The court is therefore dealing with a proven drug trafficker.  It is then incumbent on the prosecutor to prove, as best he can, the property held by the accused and his expenditure over the chosen period up to six years, including any implicative gifts relied on.  … It is only if a significant discrepancy is shown between the property and expenditure of the accused on the one hand and his known sources of income on the other that the court will think it right to make the section 3(2) assumptions, and unless the accounting details reveal such a discrepancy the prosecutor will not in practice apply for an order.  It would be an obviously futile exercise to seek an order where the assets and expenditure of the accused are fully explained by his known sources of legitimate income.  If a significant discrepancy is shown, and in the first instance it is for the prosecutor to show it, I do not for my part think it unreasonable or oppressive to call on the accused to proffer an explanation.  He must know the source of his assets and what he has been living on.”

26.  What it comes to may be put like this.  Forfeiture proceedings under the Import and Export Ordinance are judicial proceedings brought by the Commissioner when he chooses not to restore any seized article, vessel or vehicle to the owner and chooses instead to seek forfeiture.  The normal approach in judicial proceedings is that unless the fact asserted is self-evident, each side has the burden of establishing any assertion, whether affirmative or negative, that it makes but the other side disputes.  That is the approach to follow when ascertaining the factual foundation on which to exercise a judicial discretion whether or not to forfeit.

27.  If in any given forfeiture application by the Commissioner he chooses to do no more than rely on the bare facts which render the article, vessel or vehicle in question liable to forfeiture, he is free to adopt that course.  And the court hearing the application will then exercise its discretion whether or not to forfeit simply on those bare facts.  But if the Commissioner seeks to strengthen his case for an exercise of discretion in his favour by alleging matters beyond those bare facts, then he must prove them.  As for a person who puts himself forward as the owner, he must of course prove his status as an owner unless it is accepted.  If he chooses to rely simply on that status, the court will exercise its discretion simply on that basis.  But if he chooses to strengthen his opposition to forfeiture by asserting disputed facts beyond that status, then he must prove them.  So if he says, for example, that he took certain precautions, then he must prove that he had taken those precautions.  And, to give another example, if he says that he would suffer hardship if forfeiture were ordered, then he must prove that he would suffer that hardship in the event of forfeiture.

28.  One of the questions raised in the course of the hearing of this appeal is what the position would be on the following suppositions.  Suppose the Commissioner does no more than inform the court hearing the forfeiture application of what was seized and the circumstances of the seizure.  And suppose the owner’s status of owner is proved or admitted but he does not even point to, let alone attempt to prove, anything beyond that status of his.  In those circumstances, the court would proceed to exercise its discretion on what it has to go on.  If what little has been put before the court discloses any mater in the owner’s favour, the court will naturally take such matter into account for what it is worth.  Otherwise the court will deal with the application for forfeiture on the basis that the article, vessel or vehicle in question is liable to forfeiture and that no circumstances suggesting that forfeiture would be unjust has been pointed to by the owner who would presumably be aware of any such circumstances if they existed.  In such a situation – which admittedly is not the one in the present case or any past case which we were shown – it is to be expected that forfeiture would normally be ordered.  There is nothing unorthodox about a court acceding to an application in that sort of way.  As Sir John Nicholl, sitting in the Court of Arches, said in Rees v. Rees (1821) 3 Phillim. 387 at p.391, “[w]here the party himself has the benefit of being heard on his own statements, he should set forth everything fully, or the Court will take the statement to his disadvantage”.

Standard of proof

29.  The burden of proof having been dealt with, it is now time to address the standard of proof.  It is true, as appears from cases like Re Bramblevale Ltd [1970] Ch 128, that contempt of court, even of the kind called “civil contempt”, must be proved beyond reasonable doubt.  But that is because contempt, including the “civil” kind, is punishable by a fine or even committal to prison.  Contempt proceedings are therefore in that highly material respect wholly different in character from forfeiture proceedings which are a process in rem against the thing sought to be forfeited. 

30.  There are other exceptions to the rule that the requirement of proof beyond reasonable doubt applies only to proving the commission of a crime.  As one sees from the decision of the House of Lords in R (McCann) v. Manchester Crown Court [2003] 1 AC 787, the making of anti-social behaviour orders is such an exception.  But that is because breach of an anti-social behaviour order is punishable by imprisonment. 

31.  Another such exception was mentioned in the High Court of Australia by Hayne J (with whom Gleeson CJ and McHugh J agreed) in Chief Executive Officer of Customs v. Labrador Liquor Wholesale Pty Ltd  (2003) 216 CLR 161.  There are, His Honour said at pp 198-199, “proceedings with both civil and criminal characteristics : for example, proceedings for a civil penalty under companies and trade practices legislation.  The purposes of those proceedings include purposes of deterrence, and the consequences can be large and punishing”.  That was said in the context of proceedings in which convictions for customs offences were sought.  And (at p.205) Hayne J said that “[i]f no conviction is sought, but other relief is (as, for example, a declaration that the defendant contravened identified provisions of the relevant Act coupled with orders for payment of monetary penalties), it must be strongly arguable that, in proceedings conducted according to civil procedures, proof to the civil standard will suffice”.

32.  Forfeiture proceedings being truly civil in character, each side must prove its assertions on a balance of probabilities.  And that is all that needs to be said where the issues are of carelessness, hardship and other things of that nature.  But there are situations in which it is necessary to have it in mind that, as was said in Solicitor (24/07) v. Law Society of Hong Kong (2008) 11 HKCFAR 117 at p.167D :

“The more serious the act or omission alleged, the more inherently improbable must it be regarded.  And the more inherently improbable it is regarded, the more compelling will be the evidence needed to prove it on a preponderance of probability.”

33.  That particular statement was made in regard to the standard to which a disciplinary charge has to be proved, but the approach involved is one of general application to serious allegations.  As noted in Solicitor (24/07) at pp 146B-149C, the principle is traceable to many judicial pronouncements.  Of these the most famous are those of Dixon J (as Dixon CJ then was) in Briginshaw v. Briginshaw (1938) 60 CLR 336 at p.362 and Lord Nicholls of Birkenhead in Re H [1996] AC 563 at p.586D-G.  The allegation in Briginshaw v. Briginshaw was of adultery, and the allegation in Re H was of sexual abuse of minors.

34.  As noted in Solicitor (24/07) at p.149D-150B, the approach had been applied by this Court in three cases prior to that one.  Thus it had been applied in :

(i) Aktieselskabet Dansk Skibsfinansiering v. Brothers  (2000) 3 HKCFAR 70 at p.78F-G (per Lord Hoffmann NPJ) to an allegation of fraud; in

(ii) HKSAR v. Lee Ming Tee (No.2) (2003) 6 HKCFAR 336 at p.362C-D (per Sir Anthony Mason NPJ) to an allegation that senior officers of the Securities and Futures Commission had deliberately and improperly terminated an investigation into a person’s conduct in a share placement; and in

(iii) Nina Kung v. Wong Din Shin (2005) 8 HKCFAR 387 at pp 441F-G (per Mr Justice Ribeiro PJ), at p.521H (per Mr Justice Litton NPJ), at p.545G-I (per Sir Noel Power NPJ) and at p.560I (per Lord Scott of Foscote NPJ) to an allegation of forgery.  Mr Justice Chan PJ, who presided, applied the approach by dealing very carefully and thoroughly indeed with the handwriting evidence.

After Solicitor (24/07), the approach was applied by this Court to an allegation of insider dealing in Koon’s case at pp 202C-H, 206E-H and 210B. 

35.  The same approach was recently applied to disciplinary proceedings by the Supreme Court of New Zealand in Z v. Dental Complaints Assessment Committee [2009] 1 NZLR 1.  Mr Justice McGrath’s judgment (which gives the reasons of Blanchard and Tipping JJ as well as his own) provides a valuable examination of the authorities from a number of jurisdictions.  At p.44 he notes the approach’s application in Australia (citing Forbes on Justice in Tribunals, 2nd ed. (2006) at paras 12.21-23), Canada (citing Stetler v. Ontario Flue-Cured Tobacco Growers’ Marketing Board (2005) 76 OR (3d) 321) and Hong Kong (citing Solicitor 24/07).

36.  For the sake of convenience, this approach may be referred to as “the commensurate evidence approach”, for its essence is that the strength of the evidence needed to prove a serious allegation on a preponderance of probability must be commensurate with the seriousness of the allegation.  In the context of forfeiture proceedings, one situation of the kind in which such an approach is obviously appropriate is the situation in the present case.  Where a driver has been convicted of attempting to export unmanifested cargo and forfeiture of the cargo is sought against an unconvicted owner who is alleged to have been complicit in the attempt, such complicity is to be proved on a preponderance of probability but on the basis of the commensurate evidence approach.  In other words, proof of such complicity requires evidence strong enough to overcome the inherent improbability of such serious conduct and therefore prove it on a preponderance of probability. 

37.  Even when the civil standard involves the requirement of evidence of a strength commensurate with the seriousness of the allegation to be proved, the difference between the criminal and the civil standards of proof “is no mere matter of words”.  That was said by the High Court Australia in Rejfek v. McElroy (1965) 112 CLR 517 at p.521, adopted in Solicitor (24/07) at p.153D-154C and repeated in Koon’s case at p.206E-H.  One illustration of the practical difference involved is this.  If complicity is alleged against an owner in forfeiture proceedings, the rejection of his evidence of any fact that he asserts in seeking to meet that allegation will leave that evidence without effect.  In criminal proceedings, however, an accused person’s exculpatory evidence has effect not only if it is believed but even if the most that can be said for it is that it might be true.  In Liberato v. R (1985) 159 CLR 507 Brennan J (as Brennan CJ then was) said at p.515 that “[t]he jury must be told that, even if they do not positively believe the evidence for the defence, they cannot find an issue against the accused contrary to that evidence if that evidence gives rise to a reasonable doubt as to that issue”.  That statement was cited by this Court in Sze Kwan Lung v. HKSAR (2004) 7 HKCFAR 475 at p.487A where it is said that “[w]hether by one form of words or another and whether in one way or another, that message must be conveyed to the jury”.

Was complicity proved ?

38.  It is submitted on behalf of the owner in the present case that his complicity had to be proved beyond reasonable doubt, alternatively, on the commensurate evidence approach.  For the reasons given above, that primary submission is wrong and that alternative submission is right.

39.  In contending that the magistrate had adopted an approach less stringent than the commensurate evidence approach, counsel for the owner points to the passage in magistrate’s statement of findings where she says that she reminded herself that the standard of proof in the application was proof on a balance of probabilities.  That statement by the magistrate is an accurate statement as far as it goes.  As pointed out in Solicitor (24/07) at p.145G, only two standards of proof are known to our law, one being proof beyond reasonable doubt and the other being proof on a preponderance of probability.  And, as has already been pointed out, the standard of proof in forfeiture proceedings is not proof beyond reasonable doubt.  However, in cases of serious allegations like the present it is at least good practice to make some reference, whether by one form of words or another, to the commensurate evidence approach.  It is true that the magistrate made no express statement as to the inherent improbability of conduct so serious as the complicity alleged against the owner.  Nor, it is also true, did she make any express statement as to the strength of the evidence needed to overcome such improbability.  But the matter does not end there. 

40.  As the magistrate noted in her statement of findings, “all the evidence produced by [the Commissioner] was agreed to”.  The issue therefore was not as to the accuracy of the evidence put forward by the Commissioner but as to its effect.  And as to what she concluded on the whole of the evidence, the magistrate said, it will be remembered, that “the only reasonable inference” was that the owner had been complicit in the attempt to export the silver slabs as unmanifested cargo.  No leave has been granted to the owner for an appeal to this Court on the facts.  And as to the law, the “only reasonable inference” criterion is the classic criterion of proof beyond reasonable doubt upon circumstantial evidence. That is clear from what was said by this Court (i) at pp 219B-221C and 226I-227D in the rape and indecent assault case of Tang Kwok Wah v. HKSAR (2002) 5 HKCFAR 209 and (ii) at p.481G in Sze Kwan Lung’s case where the charges were of the arson and homicide.

41.  No witness came forward to give direct evidence of complicity on the owner’s part.  The Commissioner’s case against the owner on the issue of complicity was purely circumstantial.  It was (to adopt the language used by Alderson B in Hodge’s Case (1838) 2 Lewin 227 at p.228) “made up of circumstances entirely”.  It would have been sufficient for the magistrate to speak of the circumstantial evidence being strong enough to make complicity the probable inference despite its seriousness.  As it happens, however, the magistrate went further and said that complicity was the only reasonable inference.   Since “only reasonable inference” criterion suffices even for proof beyond reasonable doubt and since the greater includes the lesser, it certainly suffices for proof on the commensurate evidence approach.  Complicity was therefore adequately found by the magistrate to have been proved in the present case.  And that finding amply justified, to put it mildly, the exercise of discretion by which she ordered forfeiture of the silver slabs.

Conclusion

42.  For the foregoing reasons, I would dismiss this appeal with no order as to costs (the parties having told the Court that they agree that the appellant should be awarded costs if the appeal is allowed but that there should be no order as to costs if the appeal is dismissed).

Mr Justice Chan PJ :

43.  I agree with the judgment of Sir Anthony Mason NPJ.

Mr Justice Ribeiro PJ :

44.  I agree with the judgment of Sir Anthony Mason NPJ.

Sir Anthony Mason NPJ :

Introduction

45.  The principal question in this appeal is whether proceedings for an order for forfeiture of 42 silver bricks worth HK$1,644,167 under s.28 of the Import and Export Ordinance, Cap. 60 (“the IEO”) against the appellant who claimed to be an innocent owner of the silver fell within art.11(1) of the Hong Kong Bill of Rights Ordinance, Cap. 383 (“the BOR”).  The bricks were seized by customs officers as they were in course of being illegally exported across the Hong Kong – Mainland border in contravention of the IEO.

46.  The appellant’s case is that an affirmative answer to the principal question would necessarily result in the setting aside of the order for forfeiture of the silver, which was made by the Magistrate in the proceedings, because the Magistrate failed to apply the presumption of innocence and the criminal standard of proof which are mandated by art.11(1).  The Magistrate made the order for forfeiture because she refused to exercise her discretion to order the goods to be delivered to the appellant, on the ground that the appellant was not an innocent owner of the silver.

47.  Apart from the principal question, other questions arise concerning the burden and standard of proof.  These questions turn on the meaning and effect of ss 27 and 28 of the IEO. 

The history of the matter

48.  The silver was found by customs officers hidden in the driver’s compartment of a lorry at the Hong Kong – Mainland border.  The silver was not recorded in a manifest and was seized as unmanisfested cargo within the meaning of the IEO.  The driver of the lorry was subsequently convicted of the offence of attempting to export unmanifested cargo contrary to s.18(1)(b) of the IEO and s.159G of the Crimes Ordinance, Cap. 200, and sentenced to one year’s imprisonment.

49.  By virtue of s.27(1)(a) of the IEO, the silver, having been seized by a member of the Customs and Excise Service in connection with the contravention of the IEO, was “liable to forfeiture”, whether or not any person was convicted of an offence in respect of the contravention.  Having decided not to restore the silver to the owner under s.27(2), the Commissioner, as he was required to do by s.27(3), served notice of the seizure on the appellant as a person who was, to the knowledge of the Commissioner, the owner of the silver.  The appellant then gave notice to the Commissioner under s.27(5) claiming that the silver was not liable to forfeiture.  The Commissioner thereupon applied to the Magistrate’s Court for the forfeiture of the silver, as he was obliged to do under s.28(1).  As prescribed by s.28(2), a Magistrate issued a summons requiring the appellant to appear before the Magistrate’s Court on the hearing of the Commissioner’s application for forfeiture.

50.  The Magistrate who heard the proceedings considered the evidence which consisted of the appellant’s oral evidence and his record of interview by the Customs and Excise Service (which was adopted by the appellant in his oral evidence) and a statement made by Mr Kong Wai Ming, the person initially engaged by the appellant to transport the silver.  The Magistrate found that the appellant failed to prove on a balance of probabilities any good reason for return or conditional return of the silver.    

51.  In reaching this conclusion, the Magistrate formed an adverse opinion of the appellant’s evidence.  She found that the appellant and Kong Wai Ming had discussed how they would “fabricate” an explanation to Customs and Excise.  The Magistrate also noted the conflicting accounts given by the appellant of his connection with the transport of the silver to the Mainland in order to distance himself from the smuggling and found that the matters stated in the records of interview of the appellant and Kong Wai Ming were not credible.  In these circumstances, the Magistrate said :

“22. Find that the only reasonable inference was that the Claimant [appellant] ‘clearly knew how the silver bricks were to be exported out of Hong Kong to his intended destination [in the Mainland]’.  … find that the Claimant knew that the silver bricks were being smuggled into the Mainland, and agreed to such conduct.  Find that the Claimant was not only negligent.  Find that the Claimant was not an innocent owner of the goods.”

52.  Neither at the hearing before the Magistrate nor before, did the Commissioner or his counsel contend that the appellant was complicit in the relevant contravention of the IEO connected with the export of the silver.  The Commissioner’s counsel, according to the record of proceedings before the Magistrate, made no opening submission and no submission at the close of the evidence.  He did conduct, however, a searching cross-examination of the appellant, exposing the weaknesses in his version of events without expressly suggesting that he was complicit in the contravention of the IEO.

53.  The Court of First Instance (Nguyen J) dismissed an appeal by the appellant from the Magistrate’s order.

54.  The Appeal Committee granted leave to appeal in relation to the burden and standard of proof governing the question of an owner’s complicity in the contravention that led to the silver becoming liable to forfeiture.

The statutory provisions

55.  Part VI of the IEO, which deals with “FORFEITURE”, begins with s.27(1) which provides as follows:

“27. Seized articles, etc. liable to forfeiture

(1) There shall be liable to forfeiture –

(a) any article which has been seized by a member of the Customs and Excise Service or an authorized officer in connexion with the contravention of any provision of this Ordinance;

(b) any vessel not exceeding 250 gross tons and any vehicle so seized and which has been used in connexion with, or is the subject of, the contravention of any provision of this Ordinance,

whether or not any person has been convicted of an offence in respect of such contravention.”

56.  The succeeding sub-sections in s.27 and sub-sections (1) to (5) of s.28 prescribe the procedure to be followed in bringing a matter concerning seized articles and vessels and vehicles before a court or magistrate and related matters.  In so far as that procedure is relevant, it has already been summarized in the account of the history of this matter (see para.49 above).

57.  Sub-sections 28(6)(a) and (7) set out the court’s powers and duties on the hearing of the Commissioner’s application after a summons has been served on the claimant.  Section 28(6)(a) provides that upon the hearing of an application under subsection (1) a court shall order that the article be forfeited to the Government if the person who is before the court fails to satisfy the court that he is entitled to make a claim in respect of the seized article, no other person satisfies the court that he is so entitled and the court is satisfied that the article is liable to forfeiture.

58.  The critical provision which applied in the present case is s.28(7).  It provides:

“(7) Upon the hearing of the application under subsection (1), in any case other than a case referred to in subsection (6)(a) or (b) a court may, if it is satisfied –

(a) that a person is, or would have been, entitled to make a claim under section 27(5) in respect of the seized article, vessel or vehicle; and

(b) that the article (not being such an article as is referred to in Schedule 1), vessel or vehicle is liable to forfeiture,

order that the article, vessel, or vehicle –

(i) be forfeited to the Government;

(ii) be delivered to the claimant subject to any condition which it may specify in the order; or

(iii) be disposed of in such manner and subject to any such condition as it may specify in the order.”

Section 28(6)(b) has no application to the present case.

The history and construction of the statutory provisions

59.  Although the discretion conferred by s.28(7) is expressed in unqualified terms, without any specification of criteria, the scope of the discretion is necessarily circumscribed by reference to the context and purpose of Pt VI of the IEO.  Part VI deals with forfeiture of articles seized in connection with contraventions of the IEO and the regulations and vessels and vehicles seized which have been used in connection with such contraventions. 

60.  Proceedings for the forfeiture of goods liable to forfeiture for breach of the laws governing importation and exportation have a long history, which is notable for its severity (see Forbes v. Traders’ Finance Corporation Ltd (1971) 126 CLR 429 at 440-442, per Windeyer J; Collector of Customs v. Glavish [1993] 3 NZLR 302 at 303, per Hillyer J).  Historically, the severe sanction of mandatory forfeiture and condemnation of the relevant goods was applied, irrespective of the innocence of the owner of the goods, as a deterrent to discourage what was, and still is, regarded as very serious illegal activity and to protect the revenue.  Indeed, in some jurisdictions, such as the United Kingdom, Australia and New Zealand, legislation providing for mandatory forfeiture or condemnation of the relevant goods is still in force. 

61.  In Canada and Hong Kong, however, the severity of the old law has been alleviated by conferring a discretion on the courts to order the relevant goods to be delivered to the owner.  The introduction of a discretionary regime to replace a mandatory regime was designed to soften the harsh impact of mandatory forfeiture or condemnation on an owner of goods who was innocent of any association with the contravention of the law that led to the goods becoming liable for forfeiture.  In the case of Canada, this is apparent on the face of the legislation which provides for an innocent owner to apply to the Minister for relief against forfeiture with an appeal to a court from the Minister’s decision (see Customs Act 1985, ss 122, 138-139).  In the case of Hong Kong, the purpose of conferring the discretion, though the same, is not exhibited in this way.  

62.  The present regime in Hong Kong which confers a discretion on the court or magistrate where the seized article (not being a strategic commodity) is liable to forfeiture was first enacted in the Import and Export Ordinance (No. 67/70).  This Ordinance repealed the earlier Importation and Exportation Ordinance, s.17 of which provided for a regime of mandatory forfeiture and condemnation of an article “liable to forfeiture” because it was the subject of a contravention of the Ordinance or regulations thereunder.  This mandatory regime prescribed a procedure, similar to the present procedure under ss 27 and 28, whereby the Director was required to give notice to the owner, any person claiming that an article seized was not liable to forfeiture was to give notice to the Director who was then directed to apply to a magistrate for condemnation of the article.

63.  If the magistrate found that the article, vessel or vehicle was liable to forfeiture at the time of seizure, s.17(8) provided “he shall condemn it as forfeited”.  Under that mandatory regime, the only question was whether the article, vessel or vehicle was liable to forfeiture.  The magistrate had no discretion to order an article, vessel or vehicle liable to forfeiture to be delivered to the owner, as the magistrate has under s.28(7).

64.  Viewed in the light of the history which I have outlined, the purpose of the discretion conferred by s.28(7) is to be seen as enabling a court or magistrate to alleviate the harsh impact which an order for forfeiture would have on the innocent owner of an article liable to forfeiture, by ordering it to be delivered to him unconditionally or conditionally.  No other purpose has been suggested.  Nor is there anything in the language of Pt VI or the history of the legislation to indicate that the purpose of s.28(6) and (7) is to do more than bring into existence a discretionary regime for the benefit of an innocent owner; in other respects the purposes to be served by making an order for forfeiture remain the same as they have always been, that is to act as a deterrent to serious illegal activity and to protect the revenue.  It is with these considerations in mind that the s.28(7) discretion is to be exercised.

The burden of proof

65.  On a hearing under s.28(7) the Commissioner bears the onus of establishing that the seized article is liable to forfeiture, namely that it is the subject of a contravention of the IEO or the regulations.  Once this is established the Commissioner makes out a prima facie case for the order for forfeiture of the article and, in the absence of evidence to support an exercise of the discretion to order delivery of the seized article to the claimant, the court will make an order for forfeiture.  That is the true position under the IEO follows from the fact that, in the circumstances supposed, the article is liable to forfeiture as an article which was the subject of the contravention of the IEO or the regulations.

66.  It is therefore for the claimant, in order to avoid this outcome, to make out a case for an exercise of the discretion to order delivery of the article to him.  He may do this by proving facts to the satisfaction of the court, according to the balance of probabilities, that show that he did not in any way participate in or facilitate, either by design or negligence, the contravention which has resulted in the article becoming liable to forfeiture.  To say this is to say no more than that a party who seeks to have a judicial discretion exercised in his favour bears the burden of establishing his case.  It is not for his opponent to negative the existence of such a case.

67.  What I have just said has additional force in the context of Pt VI of the IEO.  Whether the claimant is wholly innocent of any connection with the relevant contravention of the IEO is a matter that lies within his knowledge, not the Commissioner’s knowledge.  It would put a heavy burden on the Commissioner if he were compelled in every case to shoulder the burden of showing that the claimant participated in, or facilitated, the relevant contravention.  Even if, in some cases, the Commissioner is aware of evidence that indicates that the claimant is complicit in the contravention, that fact is no justification for suggesting that, in some way or other, the legal burden rests on the Commissioner in such cases simply because there is an issue of serious misconduct.  The existence of such an issue cannot justify a reversal of the onus of proof which lies on an applicant seeking the exercise of a judicial discretion to make an order in his favour.  I would add also that the legal burden of proof relates to the making out of a case not to the proof of particular facts.

68.  I acknowledge that my approach to the meaning and application of s.28(7) is in some respects inconsistent with what was said in R v. CEC Finance Ltd [1993] 1 HKC 127.  While I accept the correctness of the decision in that case, with the greatest respect to Mr Justice Bokhary PJ, it is my view that not everything said in that case should be accepted.

Article 11(1) of BOR

69.  In essence the appellant’s argument is that because the forfeiture of the silver depends upon a finding that he is not innocent in relation to the contravention of the IEO, the proceedings are to be characterized as criminal proceedings.  The consequence, so the argument runs, is that the presumption of innocence applies in accordance with art.11(1) and the Commissioner bears the onus of proof of the appellant’s complicity, according to the criminal standard of proof beyond reasonable doubt.

70.  The appellant, invoking the decision of this Court in Koon Wing Yee v. Insider Dealing Tribunal (2008) 11 HKCFAR 170 at 187F, submits that the classification of the offence under domestic law, though important, is by no means conclusive because the second and third criteria – the nature of the offence and the nature and severity of the potential sanction – are more important.  Here, the appellant says, a finding that the owner of goods is complicit in an offence under the IEO “is a form of conduct which can be readily characterized as criminal conduct” (Koon Wing Yee at 191A).  And, as to the severity of the penalty, it has often been stated that forfeiture provisions are “penal and deterrent in nature” (See, for example, Attorney General v. So Lo-kam [1986] HKLR 564 at 569G, per de Basto J), resulting as they do in the deprivation of the owner’s property in the article.

71.  There is, however, very strong authority in the European Court of Human Rights for the proposition that forfeiture proceedings are civil in character and do not involve the determination of a criminal charge for the purposes of provisions in the European Convention on Human Rights and Fundamental Freedoms (“the European Convention”) which correspond with arts 10 and 11(1) of the BOR (see Air Canada v. United Kingdom (1995) 20 EHRR 150 and Allgemeine Gold-und Silberscheideanstalt (AGOSI) v. United Kingdom (1987) 9 EHRR 1).  There is also strong English authority to the same effect in the context of the Human Rights Act 1998 (UK) (see Goldsmith v. Customs and Excise Commissioners [2001] 1 WLR 1673; R (Mudie) v. Dover Magistrates’ Court [2003] QB 1238; Gora v. Customs and Excise Commissioners [2004] QB 93).  The appellant seeks to distinguish these cases on the basis that the United Kingdom legislation in question provided for mandatory forfeiture and did not contain the discretionary element provided for in s.28(7).

72.  The suggested distinction is no more than an immaterial point of difference.  In Air Canada, the Strasbourg Court pointed out (at 177) that the relevant section provided a process in rem against, inter alia, any vehicle used in smuggling.  It was on this very ground that this Court, in Koon Wing Yee (at 193E), distinguished Air Canada from the proceedings in question in Koon Wing Yee.  It is the character of the proceedings as civil proceedings in rem against the goods that denies them the character of criminal proceedings.

73.  Once this is accepted, as it must be, it is impossible to conclude that a discretionary power to relieve against the forfeiture that would otherwise follow converts the process into the determination of a criminal charge, even if the exercise of the power is conditioned on a showing of non-complicity in the relevant contravention.   

Conclusion

74.  In proceedings under s.28(7), while the Commissioner bears the onus, according to the civil standard of proof, of establishing that the article seized is liable to forfeiture, the claimant bears the legal burden of making out his case on the balance of probabilities for an order for delivery to him of the seized article, either unconditionally or conditionally.

Orders

75.  I would dismiss the appeal and by consent order that there shall be no order as to costs.

Chief Justice Li :

76.  The Court unanimously dismisses the appeal, with no order as to costs.