HKSAR v. MARK INTERNATIONAL LTD

HCMA896/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.896 OF 2004

(ON APPEAL FROM TWS 2428 OF 2004)

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J U D G M E N T

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1. The appellant was on 16 August 2004 convicted by Magistrate Glass of one offence contrary to section 6D(1) and (3) of the Import and Export Ordinance, Cap.60 (“the Ordinance”).  On the same day, the appellant was fined $25,000.  An appeal against sentence was abandoned on 7 December 2004 and was dismissed.  The appellant now appeals the conviction. 

2. The charge was in these terms :

“Information has been laid that you on or about 29 December 2002, in Hong Kong, exported textiles, being a prohibited article specified in the second column of Part I of the Second Schedule to the Import and Export (General) Regulations, Cap. 60, to a country specified in the third column of that Schedule, otherwise than under and in accordance with an export licence issued by the Director, in that you exported 140 dozen ladies’ 96% cotton 4% spandex woven jacket to the USA under Export Licence No. 2HK330443 when the said textiles were not covered by a validated Production Notification.”

3. Much of the case for the prosecution was agreed.  The appellant is a garment exporter, in part exporting garments manufactured by other companies.  When clothing is exported from Hong Kong to the USA, the export must be covered by an Export Licence issued by the Trade and Industry Department against valid export quotas.  Certain garments, and they include the ones exported by the appellant and subject to this charge, are required to be manufactured pursuant to a Production Notification lodged with the Trade and Industry Department for validation prior to the commencement of the assembly work of the component parts into finished garments.

4. On 28 October 2002, the Trade and Industry Department issued a production notification to a company called Full Phone Garment Factory for 10 dozen girls’ 100% cotton woven jackets.  That production number was 02PU115744.

5. An export licence requires an application by both the manufacturer of the garments and the exporter of the garments, if they are different companies, and a declaration from each in respect of the goods and the production number.  On 21 November 2002, at almost the same time the manufacturer Full Phone Garment Factory and the appellant applied for an export licence to export to the USA 140 dozen ladies’ 96% cotton 4% spandex woven jackets.  The production number used for the application by both the manufacturer and the appellant was 02PU115744, the same number that had been issued by the Trade and Industry Department to the manufacturer on 28 October 2002.  I note that not only the quantities and the material from which the jackets were to be made, but also the size of the jackets differed between that set out in the production notification, and that set out in the application for export licence.

6. As part of the application for the export licence the appellant made this declaration :

“I declare that the goods covered by this export licence application are also covered by the production notification, quoted in this application, and that the goods are made in the manner as stated in the said production notification.  For problems related to origin criteria, I undertake to assume full responsibility, should the consignment in question encounter any customs clearance problem.  I also understand that the Director-General of Trade and Industry may not take up the matter with the US authorities.”

7. The Trade and Industry Department issued the export licence the same day as the application and the appellant exported the goods specified in the application sometime thereafter.  The matter came to the attention of the Customs and Excise Department, and on 28 July 2003 officers from that department visited the appellant regarding the investigation of this case.  Mr. Ma Chun Fung, the Shipping Manager of the appellant was interviewed by the customs officers and was unable to produce any validated production notification to cover the shipment relating to the export licence.  He told the officers that his company did not have a copy of the production notification at that time.

8. The magistrate accepted from a witness from the Trade and Industry Department that the information in a production notification came from the manufacturer in the first instance and that that information was not released to an exporter and that her department did not encourage applications for that information from exporters.  To obtain that information the exporter would need to obtain a letter of authority from the manufacturer before it would be released.

9. Evidence was given by Mr. Ma who testified that he was responsible for all matters that led to the issue of the export licence in this case and had been responsible for all matters between the manufacturer and his company.  It was his evidence that at the time of his preparation of his part of the application for an export licence the manufacturer had faxed to him the production notification application and that he incorporated that number in the export licence application.  It was his evidence that during an application for an export licence the manufacturer would make a declaration that would be copied to his company by the Tradelink system.  He said he would then check the production notification number and the manufacturer's declaration and he would fill in the quota number for the export licence and have the exporter’s export licence declaration done.  He said it was common practice for the exporter to rely upon the information supplied by the manufacturer for the preparation of the export licence application.

10. It was his evidence that at the time of preparing this particular export licence application the manufacturer had faxed to him the production number application and that he had checked its number.  He testified he checked the nature of the garments listed in the production notification, the approval number, the date of validation, the name of the factory and the description of the garments.  It is clear from this evidence that he relied wholly on the document faxed to him by the manufacturer.

11. The principal grounds of appeal relied upon by Mr. Hung, counsel for the appellant, are firstly, that the magistrate was wrong in finding that the appellant was in material breach of the terms of the issue of the export licence and that this made the licence invalid; and secondly, that when he considered the common law defence provided in AG v. Fong Chin yue [1995] 1 HKC 21 he wrongly rejected the evidence of the appellant and wrongly found that the defence had not been made out.

12. In his findings, at paragraph 28, the magistrate said this:

“…. I found that it had exported 140 dozen ladies jackets using export licence no 2HK330443 that stated and declared that PN no. 02PU115744 covered the shipment to USA.  This PN was valid for only 10 dozen different garments, and the defendant could not show a validated PN had been issued for the whole quantity.  This was therefore a breach of a material precondition for the issue of the export licence which the Director had power to invoke under Section 3(1) and Section 6AC(4) of the Import and Export Ordinance.  I found the Director would not have issued the licence if it had known the PN was not for the goods involved.  I found the prosecution had therefore proved beyond reasonable doubt the defendant was in material breach of the terms of the issue of the export licence and I found this made the licence invalid.”

13. Mr. Hung argues that a proper interpretation of the provisions of the Ordinance provides that if a licence is issued, it is a valid licence which the Director has power to cancel, revoke or suspend and that a material irregularity in the application for the licence will not result in an invalid licence. 

14. In particular he points me to section 3(4) of the Ordinance, which provides:

“Notwithstanding subsection (3), if the Director is satisfied that any licence was issued by him as a result of fraudulent misrepresentation of any fact or any other unlawful act by the applicant therefore he may at any time cancel, revoke or suspend the licence.”

15. It is Mr. Hung’s argument that the Director of the Trade and Industry Department (“the Director”) having been given discretion as to whether to cancel, revoke or suspend the licence it must have been the intention of the legislation that even a licence issued by fraudulent misrepresentation of any fact or by any other unlawful act of the applicant would remain a valid licence until the Director exercised his discretion to cancel, revoke or suspend it.  He argues that if the licence were void ab initio by virtue of the fraudulent misrepresentation or unlawful act of the applicant there would be nothing upon which the Director could exercise his discretion.  With this I agree.  An export licence in respect of this ordinance is the creation of statute and the statute is clear.

16.  The magistrate went on to consider whether the appellant had satisfied the common law defence set out in the case of A-G v Fong Chin yue (supra) In that judgment the court held that in an offence of strict liability, as was before this magistrate: 

" it would be a defence if the accused could prove on a balance of probabilities that he believed for good and sufficient reasons, though erroneously, that the provisions of the Ordinance had been complied with.”

17.  Having identified the proper test the magistrate went on to consider the evidence upon which he could determine whether the appellant had on the balance of probabilities satisfied that test.  In order to invoke and satisfy the defence it was necessary for the appellant to show that at the time the application for an export licence and the declaration as to the truth of the production notification was made by Mr. Ma the appellant believed for good and sufficient reasons, though erroneously, that the provisions of the Ordinance had been complied with.

18.  It was the case for the appellant that prior to the application for the export licence Mr. Ma had received from the manufacturer a faxed copy of the production notification and that he inspected the number allotted to the production notification on it together with the description of the goods and having satisfied himself that they matched the goods to be exported pursuant to the export licence made, the application and the declaration.

19.  The magistrate carefully considered the evidence of Mr. Ma as to his receipt of the fax copy of the production notification and his consideration of it.  He said this about the evidence of Mr. Ma:

“I listened carefully to the evidence given by DW1 but I found even after so doing [that] I was not impressed with his evidence and I found I did not believe he was telling the truth about the situation.  I therefore rejected his evidence especially when it conflicted with the prosecution witnesses and as stated herein.  I did not believe that he had done any more than simply fill in the details of the defendant's export licence and had the declaration completed based upon information supplied to him.” 

And further:

“I believed that the defendant contacted the broker after the Customs and Excise enquiry about the production notification and the broker then send it the fax.  I did not believe the date of the fax was genuine.  This fax was admitted by DW1 to contain wrong information upon the quantity of the jackets which I found satisfied me beyond reasonable doubt that the witness did not have this document with him when he made the application for the export licence.  I believed he would have noticed such a major discrepancy if he had checked the application as carefully as he said he did.  I further believed the defendant’s witness was lying when he said it was usual for a manufacturer to over make an order to such a large extent in order to allow for defective garments in the manufacturing process.  Even on his own evidence he did not know the true position with his own company which, he said, was a large garment manufacturer.” 

20.  The magistrate also relied upon the admitted facts, which state:

 “On 28.7.2003 the Customs visited the Mark International Ltd regarding the investigation of the present case.  Mr. Ma Chun-fung shipping manager of the defendant company was interviewed and furnished exhibits P19 to P27 to the Customs.  At that time he was unable to produce any validated production notification to cover the shipment related to export licence number 2HK330443.  He stated that his company did not have production notification copy at that time.”

21. At the end of the day the situation is this. Either Mr. Ma of the appellant relied upon the faxed copy of the production notification alone and that copy did not match the number of goods to be dispatched pursuant to the export licence and was a forgery or if, he had not received that faxed copy, he relied on nothing more than the production notification number which he knew should relate to the goods.  The magistrate did not believe that he had received a faxed copy of the production notification and notwithstanding the arguments of Mr. Hung I find that he had good reason to come to that finding.  It is clear that the manufacturer practiced fraud and misrepresentation in this case and others. 

22. Having properly found that the appellant had not received a faxed copy of the production notification the magistrate went on to consider whether on the balance of probabilities that the appellant without that copy of the faxed production notification had good and sufficient reason, though erroneously, to believe the provisions of the Ordinance had been complied with.  He found the appellant did not satisfy that test.

23. He was correct in doing so.  Without that copy the appellant could have done nothing more than fill in the number of the production notification and make the declaration as to the truth of that production notification without any consideration as to whether the declaration was true.

24. I am satisfied the magistrate approached this matter both as to the facts and the law in a careful and considered manner. His finding that the licence was invalid was irrelevant to the decision as to whether the appellant was guilty of the charge before him and whether the appellant had properly made out the defence available to him.

25.  The appeal against conviction is dismissed.