HKSAR v. KWONG CHEUK HIM

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY CRIMINAL APPEAL NO. 801 OF 1997

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J U D G M E N T

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1. The Appellant was convicted after trial in the Magistracy of one charge of attempting to export unmanifested cargo and one charge of attempting to export prohibited articles.

2. The 1st charge, which is contrary to section 18(1)(b) of the Import and Export Ordinance, Cap.60, related to the Appellant's alleged attempt to export unmanifested cargo, being five left-hand-drive vehicles. The second charge (the original Charge 3), contrary to section 6D(1) and (4) of the Import and Export Ordinance Cap.60, stated that he attempted to export prohibited articles, being five left-hand-drive vehicles, which were articles specified in Part II of the Second Schedule to the Import and Export (General) Regulations as requiring an export licence.

Facts

3. On 14th March 1997, Customs Officers intercepted a Chinese vessel in Hong Kong waters at the Cha Kwo Ling cargo area. Inside a container on the vessel they found 4 cars and 1 van. Their wheels and bonnets had been removed and their electrical wiring disconnected. The relevant export manifest filed by Appellant's shipping agent stated the cargo to be "used car parts". Appellant was charged with attempting to export unmanifested cargo and attempting to export prohibited articles i.e. left hand-drive cars.

4. The Appellant was a motor trader carrying on business under the name of Shing Fat Motor Company. Part of his business was shipping car parts to China. It is illegal to export left-hand-drive vehicles to China without a valid export licence. However, there is no restriction on the exporting of car parts. Appellant had a permit to dismantle cars on 24 hours Notice to Customs and Excise, which meant that he would request permission to dismantle vehicles - if within 24 hours there was no objection from Customs and Excise he could go ahead.

5. The Appellant received an order for car parts from China, accordingly, he bought 2 vehicles and sent them to the Boxer Garage Trading Company (known as Bo Shan), a garage he had used before for dismantling motor vehicles into car parts. The vehicles were delivered to Bo Shan before 10:00 a.m. on 12th March 1997, together with 3 other vehicles owned by another person. The Magistrate found eventually that these vehicles could not be connected to the Appellant and they were ignored for the purposes of this appeal.

6. The cars were dismantled; the hoods, wheels and bumper-bars were taken off, and the electric wiring of each vehicle was disconnected. Appellant had instructed the proprietor of Bo Shan to dismantle the engine of each car but he did not do so. The Appellant had arranged for a container to be delivered by truck to Bo Shan and once the dismantling had been finished, the truck driver returned to collect the container into which the vehicles were loaded and delivered for shipping. Although Appellant had told the proprietor of Bo Shan (P.W. 4) to let him know when loading was finished so that he could arrange for the trucking company to collect the container, the proprietor did not do so. The container was removed without the Appellant having an opportunity to inspect the vehicles, or without him knowing the degree of dismantling that had been achieved.

Background

7. As background to the case it is necessary to understand the rather curious practice pertaining to what might be termed the non-exporting of left hand drive vehicles to China.

8. Under the Second Schedule Part II of the Ordinance, left hand drive vehicles are prohibited items, for export to all countries, including China. An export licence is required before they can be exported, but no licence is required for vehicle parts.

9. A rather artificial procedure has developed which avoids the need for an export licence, but ensures that car parts can be reassembled in short order on delivery. This means that cars, often new vehicles, are dismantled to the minimum extent that satisfies Customs and Excise they are "car parts". That in many cases such parts are turned into left-hand drive vehicles on delivery is not a matter that appears to concern Customs and Excise, even though this practice appears to be against the spirit of the legislation.

10. There do not appear to be any departmental guidelines as to what degree of dismantling satisfies Customs and Excise that a vehicle has been turned into parts and no assistance was given to the Magistrate by the evidence of P.W. 1, an officer of Customs and Excise, on this aspect.

11. It is possible to infer from the facts of this case however that if the subject vehicles had had their engines removed from their mountings, (as well as the wheels and hoods removed and wiring disconnected, which work was done) the vehicles would have been considered "car parts" and the Appellant would not have been charged with these offences.

Grounds of Appeal

12. The grounds of appeal were stated as follows:

1(a) the Magistrate erred in law in failing to rule that both offences of which the Appellant was convicted required proof the Appellant intended to export vehicles rather than vehicle parts.

1(b) in relation to charge (3) failing properly to consider and rule that the BMW car body and the Nissan van body seized by officers of Customs and Excise were not vehicles within the meaning of section 2 of the Import and Export Ordinance.

2(a) the Magistrate erred in finding on the evidence that in relation to both charges upon which the Appellant was convicted that he had not proved that he could not with reasonable diligence have known the cargo was unmanifested and prohibited.

2(b) that Appellant did not allow enough time for the vehicles to be dismantled so they could properly be described as car parts.

2(c) that the Appellant did not give specific instructions as to how the cars were to be dismantled.

Ground 1(a)

13. The Appellant submitted that the offences were offences of strict liability and accepted that in respect of the first charge the prosecution was not required to prove that the omission to file a manifest was the Appellant's fault. Appellant submitted however that the prosecution did have to prove that the cargo being exported consisted of vehicles, at least at the stage when Appellant raised in defence his belief that the cargo consisted of vehicle parts.

14. It was argued that the Magistrate was obliged to find on the evidence that the Appellant did not know that P.W.4, the proprietor of Bo Shan, had dismantled the vehicles insufficiently and once the Appellant had raised the issue of whether he intended to commit the actus reus of the offence of exporting vehicles the prosecution was obliged to prove that he did so intend. It was the Appellant's case that the prosecution had failed to do so.

15. The Appellant argued that both offences of which he was convicted required the Prosecution to prove that the appellant intended to export vehicles rather than vehicle parts and that the Magistrate erred in law in failing to make a ruling to that effect.

16. In fact the Magistrate did not consider adequately whether the failure of P.W.4 to sufficiently dismantle the vehicles was within the knowledge, or control, of Appellant and whether Appellant had the intention of committing the actus reus of the offence i.e. the export of motor vehicles.

17. The Magistrate appears to have misconstrued the decision in R. v. Cheng Kai and Yun Yin Pa Magistracy Appeal 753/94 which held that it is not a defence for the exporter to say he did not intend to file a false manifest. The Magistrate did not consider further whether or not that case ruled out a defence of an exporter being honestly unaware that the cargo was not that which he intended to export. In Cheng Kai there was evidence the exporter knew what was being shipped were electrical appliances and not pallets as the cargo was described in the manifest. In the instant case the prosecution evidence by the end of the trial was insufficient to prove that the Appellant intended to commit the actus reus of the offence.

18. P. W.4 the proprietor of Bo Shan was the major prosecution witness in this regard. The quality of his evidence was poor, he appeared to the Magistrate as an unreliable witness, yet the Magistrate formed an unfavourable impression of Appellant based largely on P.W.4's evidence, despite major alterations made to important aspects of that evidence.

19. Initially P.W.4 denied he had been instructed to dismantle the vehicles to the extent of removing their engines - later he admitted that he had been so instructed. He denied that Appellant asked him to notify him when the work was finished, but later agreed he had been so instructed but had not done so. P.W.4 denied that Appellant had called him to enquire about whether the container had left, but later agreed that such a call had been made. He also claimed initially that he did not know the vehicles were to be dismantled for the purposes of export, despite the fact that the vehicles were almost new. In his statement to Customs and Excise, he had admitted that the Appellant had told him the dismantled cars were to be shipped to China. Further, his business Bo Shan was in the trade of dismantling vehicles for scrap and for exporting goods, and on an earlier occasion Bo Shan had done a similar job for another of the Appellant's companies.

20. The Magistrate's Statement of Findings at 140-O to 143-E traverses his view of Appellant's actions based largely on P.W.4's evidence, but at no stage does he turn his attention to the question of whether the alterations to P.W.4's evidence raised serious doubts whether Appellant had intended the actus reus. If the Magistrate had considered this aspect I am of the view he would have come to a different conclusion on the evidence before him.

21. The basis of grounds 1(b) 2(a)(b) and (c) relate to various errors perpetrated by the Magistrate in considering the evidence; - certain areas of evidence he misunderstood, others he mis-stated in his Statement of Findings.

Ground 1(b)

22. The argument on this ground was that the Magistrate failed to consider and properly rule on the issue whether what was found in the container constituted two vehicles within the meaning of section 2 of the Import and Export Ordinance Cap. 60. The Appellant made a submission of no case to answer on the basis that what was in the container were not vehicles but vehicle parts.

Evidence Relating to "vehicles"

23. P.W.1 was one of the Customs Officer who dealt with the seizure of the vehicle.

24. P.W.1 at 24H-L said he tried to start the ignition of all the vehicles - that he heard some noise and saw the dash-board lights were on. He said "All the vehicles worked" but did not make it clear whether the noise was that of the engine starting or the starter motor turning over. No attempt was made to test drive the vehicles even after the wheels were put on.

25. He did not know when a vehicle ceased to be a vehicle for Customs and Excise purposes and was unaware of the definition of "vehicle" as set out in S.2 of the Import and Export Ordinance. He said he was unaware of his department's stance on this matter.

26. In answer to a question by the Court he confirmed the sound he heard on turning the ignition was that of the engine turning over even although it didn't actually start.

27. There was an extensive argument by defence counsel as to whether the vehicles the subject of the charges were vehicle parts or vehicles in terms of the definition in the Ordinance.

28. The Magistrate found a case to answer without ruling on this aspect and in his Statement of Findings proceeded on the basis that the defence had conceded the point. At 140-M, "At any rate, it is accepted that what was in the container were cars and not car parts" No such concession was ever made by the defence. It was incumbent on the Magistrate to make such a finding, given the nature of the charges and the absence of a concession.

Ground 2(a)

29. The Appellant submitted that both offences were offences of strict liability and the defence of reasonable diligence was available to Appellant i.e. the doing of that which under ordinary circumstances and having regard to expense and difficulty can be reasonably required. The Appellant relied on the case of R. v. Chan Kim-fai M.A. No. 982/93 where it was stated "What are reasonable steps, what is reasonable diligence, will vary with the facts and with the legislative context in which those words appear."

30. The Appellant argued that he had been reasonably diligent as he sent the cars to a garage experienced in the dismantling of cars for export; that work previously done for his other company had been satisfactory; specific instructions were given to P.W.4 which should have resulted in the vehicles becoming car parts for the purposes of the Ordinance and that P.W. 4 had not told him, despite being told to do so, when the dismantling work was finished thus depriving Appellant of the opportunity to inspect the container before it left P.W.4's premises. It was pointed out that it would be commercially unfeasible for the Appellant to have supervised the whole of the dismantling process, at best he could have been required to inspect the work on completion.

31. It was submitted that on the proven facts, the Appellant had shown due diligence and the Magistrate had erred in finding to the contrary. Further, the Magistrate erred in law by applying a test of utmost diligence.

32. At 142S of his Statement of Findings the Magistrate, having earlier stated his opinion of the Appellant's activities in relation to instruction and inspection said "I just say that the defendant, in carrying on this business of exporting cars to China, is sailing pretty close to the wind as to whether it is car or car parts, and I would expect that if he is in this business he has got to show the utmost diligence and I do not believe he did enough to ensure that what he exported was car parts."

33. It appears from this that the Magistrate may have formed the view, unjustified in the circumstances, that the Appellant was involved in a business that was per se illegal. While it might be fair to comment that the nature of the trade was somewhat artificial, given that it was clearly accepted by Customs and Excise that car parts were likely to be reunited immediately on delivery, the trade itself was not illegal as long as the cars were in parts and the proper export procedures were followed. The Magistrate did not start what further action Appellant could have or should have taken to satisfy the test of utmost diligence.

34. That apart, the Magistrate's reference to "utmost diligence" indicates that he misunderstood what he was required to be satisfied of in considering Appellant's actions. The defence open to Appellant on these offences of strict liability was that of reasonable diligence - the standard imposed by the Magistrate was much higher. The Magistrate's error in this respect is sufficient basis for allowing the appeal.

Ground 2(b)

Insufficient Time to Dismantle

35. The Magistrate found that the Appellant did not allow enough time for the vehicles to be dismantled so that they could properly be described as car parts.

36. At 140I he stated, "There is some evidence that he was suggested to take the motor out, but he said because of shortage of time that day he did not do this. If the engine had been removed - a job that took about one and a half hours at most, I think one hour in respect of a new car - would this have been considered to be sufficient to call it a dismantled car or car parts?"

37. Later at 143D "Also the time to dismantle the cars, which was one day, put a very tight time constraint on it ..." and at 143J ... "I am satisfied ... that the time frame was not sufficient to carry out the dismantling in one day ..."

38. This appears to be a mis-reading of P.W.4's evidence as there was no suggestion from him that Bo Shan was under any time pressure for the dismantling. Bo Shan had ample staff available on the day in question and, according to P.W.4, the engines of all 5 vehicles could have been removed in 3 hours as they were almost new cars. The only mention of any time constraint was that P.W.4 let the loaded container leave when the truck driver returned earlier than expected to collect the container for delivery to the shipping agent. Because the driver was anxious to leave, P.W.4 allowed him to do so, but failed to advise Appellant the work was finished. The Magistrate's finding that Appellant had not allowed sufficient time for dismantling the vehicles was incorrect.

Ground 2(c)

Insufficient Instruction to Dismantle

39. In considering whether the Appellant had given specific instructions how the cars were to be dismantled the Magistrate at 141T - 142A said:

"Anyway, they were sent to Bo Shan where Mr. Ho was supposed to make them into parts and dismantle them. There were no specific instructions as to how they were to be dismantled. As far as Mr. Ho can recall he has not had dealings with the defendant himself before."

There was clear evidence before the court that instructions had been given to Bo Shan, including an instruction to dismantle the engine. They were written on an invoice which was produced at trial as Exhibit D.1. The Magistrate was aware of that instruction, because during the trial he put to P.W.4 that he had not done the job he was supposed to do, i.e. dismantle the cars to the extent of taking the engines out and P.W.4 agreed that he had not.

40. The instructions given by Appellant were specific and sufficient to ensure that the vehicles became car parts. There was written acknowledgment from Bo Shan that the engines had to be removed from the car bodies. The Magistrate erred in finding that the Appellant's instructions were insufficient.

41. Having considered each ground of appeal I am of the view that the Appellant has succeeded in showing that these convictions are not correctly founded.

42. Accordingly, I allow the appeal against conviction.