CHEUNG KAI COMPANY v. COMMISSIONER OF CUSTOMS AND EXCISE

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

MAGISTRACY CRIMINAL APPEAL NO. 593 OF 19$6

------------------

BETWEEN

-------------------

___________

JUDGMENT

___________

1. This is an appeal against an order of the Magistrate at Fanling that 1369 Video Cassette Recorders be forfeited under Section 28 of the Import and Export Ordinance, Cap. 60.

Facts

2. These Video Cassette Recorders were originally the subject matter of a prosecution under regulation 4 of the Import and Export (General) Regulations, for conspiracy to export them without a licence.

3. They were found on board a Taiwanese fishing vessel off Kai Kung Tau, in Hong Kong waters, where the vessel was intercepted by a marine police launch.  The master of the vessel said he was going to Taiwan, and produced a manifest and an invoice for the videos. But he had no export licence.

4. When the fishing vessel was taken back to Tai Po Kau and the master was interviewed, it transpired that the videos had been transhipped to his vessel from another vessel outside Hong Kong waters, and that they were to be taken to a man called "Au Chu" in Taiwan, who would pay him over 500,000 Taiwan dollars. They had circuits suitable for use in Taiwan and the U.S.A., but not for Hong Kong or China.

5. The master was prosecuted for conspiring with "Ah Chu" and others to export the videos without a licence under regulation 4(1). He did not give evidence. The case was originally dismissed. But after an appeal to the High Court by way of case stated, he was convicted as charged.

6. Following that conviction, the Respondent in this case, the Commissioner of Customs and Excise, applied for forfeiture of the videos. To this application, the present Appellants made objection claiming that they were the owners of the videos and that the articles were not subject to forfeiture.

7. The application for forfeiture was heard in the Magistrates Court at Fanling. At the hearing, the Appellants sought to establish that they had purchased the videos from suppliers in Hong Kong, and had agreed to sell them to purchasers in Taiwan for 10% over the cost price; that the videos were collected by the Taiwanese purchasers in Hong Kong, but that payment would only be made after the goods had been delivered in Taiwan; and that the videos would remain the property of the Appellants till delivery had been effected in Taiwan and payment made.

8. The Appellants sought to establish these matters by production of six written statements, (including one from the alleged purchaser in Taiwan), under Part IV of the Evidence Ordinance, Cap. 8. (Part IV has the heading "Hearsay Evidence in Civil Proceedings", and it is convenient in this judgment to refer to its provisions as the "Hearsay Evidence provisions".)

9. The Appellants served a notice of intention to produce the statements pursuant to section 47 of the Evidence Ordinance and section 34 of the Export and Import Ordinance. The Respondent did not file a counter-notice requiring the makers of the statements to be called as witnesses. But at the hearing, Crown Counsel objected to the production of the statements.

10. A preliminary issue was taken as to the admissibility of the statements, and the Magistrate then adjourned the case to make a ruling on the matter. In his ruling the learned Magistrate rejected all the statements.

11. The Appellants were then given the opportunity to call evidence in support of their objections. They proceeded to call two of their suppliers and their Manager, a Mr. Luk. But they did not seek to call the proposed purchaser in Taiwan.

12. The learned Magistrate accepted that the Appellants had indeed purchased the videos from the suppliers in Hong Kong, and had paid for them immediately on delivery. He also found that the Taiwanese purchaser took delivery of the videos from the Appellants here in Hong Kong. But he rejected the evidence of Mr. Luk that the price would only be paid when the goods were received in Taiwan and that the videos would remain the property of the Appellants in the meantime.

13. So the learned Magistrate was not satisfied that the Appellants were the owners of the videos at the time they were seized on beard the Taiwanese fishing vessel, and he ordered that the whole consignment be forfeited.

Appeal

14. The Appellants appeal against this order. In particular, they appeal against the Magistrate's rejection of the six written statements, which the Appellants sought to adduce under section 47 of the Evidence Ordinance and section 34 of the Import and Export Ordinance.

15. Mr. Robert Tang, Q. C. appeared for the Appellants on the hearing of the appeal. Mr. Tang's argument was based almost completely on the interpretation and operation of the Hearsay Evidence provisions and of the rules concerning hearsay evidence in Order 38 of the Rules of the Supreme Court, Cap. 4. (These rules originally appeared as separate rules - viz. the Evidence (Hearsay) Rules 1970. But the 1970 rules were revoked in 1980 and replaced by new rules inserted in Order 38 of the Rules of the Supreme Court, viz. Rules 20 to 34. These rules correspond exactly with similar rules in Order 38 of the Rules of the Supreme Court in England. In this judgment, I propose to refer to them as the "Hearsay Rules".)

16. It seems that the learned Magistrate and Crown Counsel may not have fully understood the Hearsay Rules, and Mr. Tang explained their operation in some detail. He assumed that Crown Counsel accepted that the Hearsay Evidence provisions applied. But in this he was not correct. For it is the main contention of Mr. McCoy that section 47 and the other Hearsay Evidence provisions do not apply to Magistrates Courts. He submits that they have never been extended to Magistrates Courts, and he cited a passage to this effect in the judgment of Deputy Judge Cruden in TSANG Koon-ah v. The Queen, Magistracy Appeal No. 211 of 1985, at pages 13 and 14.

17. Mr. McCoy relies on the Evidence (Amendment) Ordinance 1969 (Commencement) Notice 1970 (L. N. 154 of 1970), which brought the Hearsay Evidence provisions into force. (This Notice is quoted in part in a note at the bottom of page 31 of the 1984 Revised Edition of the Evidence Ordinance, Cap. 8.)

18. Paragraph 2 of that Notice provided that the Hearsay Evidence provisions came into operation on 1st December 1970 for the purposes of the following civil proceedings, viz.: -

"(a)	proceedings (other than proceedings in bankruptcy) in the Supreme Court and the District Court;
(b)	proceedings before any tribunal, other than a court, to which the strict miles of evidence apply;
(c)	arbitrations and references to which the strict rules of evidence apply;
(d)	applications and appeals arising out of the proceedings mentioned in sub-paragraphs (a) to (c)."

Not only are Magistrates Courts not mentioned in paragraph (a), but being courts they are not covered by the reference to tribunals in sub-paragraph (b). Similarly sub-paragraphs (c) and (d) do not apply.

19. So it is quite clear that the Hearsay Evidence provisions have never been brought into force in Magistrates Courts. Indeed this is borne out in the Explanatory Note to the 1970 Legal Notice.

20. In these circumstances, I agree with respect with Judge Cruden and I accept Crown Counsel's submission that section 47 and the other Hearsay Evidence provisions do not apply to Magistrates Courts and that the latter have never been empowered to receive hearsay evidence in civil proceedings.

21. The learned Magistrate therefore never had the power to admit such statements under section 47, and he was right to reject them.

22. As for the argument that Crown Counsel cannot take such a point on appeal, it is apparent that Crown Counsel did take this point before the Magistrate but that he was unsuccessful.

23. As for whether the proposed statements were admissible pursuant to section 34 of the Import and Export Ordinance, Cap. 60, the question arises whether the Hearsay Evidence provisions apply to Magistrates Courts by virtue of section 34(2); and if they do, there is the further question whether they apply generally or only for the purposes specified in section 34(1).

24. In considering the two questions it is first useful to set out the terms of section 34 of the Import and Export Ordinance:-

               "34. (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 (which relates to the admissibility of hearsay evidence in civil proceedings) shall apply as if proceedings under this Ordinance were civil proceedings."

25. Crown Counsel argues that, if the Hearsay Evidence provisions have never been brought into force in Magistrates Courts, they cannot be made to apply to Magistrate Courts by virtue of section 34(2), even for the limited purposes specified in section 34(1).

26. But if that were the case, it would make section 34(2) wholly ineffective. For criminal proceedings under the Import and Export Ordinance are all summary, and forfeiture proceedings under that Ordinance are determined by a magistrate. So if section 34(2) did not have the effect of applying the Hearsay Evidence provisions to proceedings in Magistrates Courts, there would be no other courts in which the provisions could apply.

27. Accordingly I hold that section 34(2) does have the effect of making the Hearsay Evidence provisions apply to proceedings in Magistrates Courts.  That being so, the further question arises whether they are applicable generally, or only for the limited purposes set out in section 34(1).

28. Mr. Mullick, who appeared with Mr. Tang, argued that section 34(2) should be given a broad and literal interpretation. But I see no reason for taking that line. The opening words of section 34(2) make it quite clear that the Hearsay Evidence provisions apply only ''for the purposes of this section". These words must refer to the provisions of section 34(1). Section 34(1) sets out 2 situations under paragraph (a) and 7 situations under paragraph (b) where the onus of proof lies upon a defendant in criminal proceedings, or upon a claimant in forfeiture proceedings.

29. Section 34(1) is similar to section 94A of the Criminal Procedure Ordinance, Cap. 221, and reverses the burden of proof in criminal and forfeiture proceedings, where the ingredients of certain offences are peculiarly within the knowledge of a defendant or a claimant. Moreover the provisions of section 34(1) reflect, and are obviously intended to apply in the case of criminal proceedings for offences under sections 15, 7, 10, 16, 20A, 12 or 17 of the Import and Export Ordinance and to forfeiture proceedings for a contravention of any of those sections.

30. I presume that section 34(2) was intended to provide a measure of relief to defendants and claimants, who are affected by section 34(1), and that it enables them to meet the burden of proof thrown on them, by adducing statements under the Hearsay Evidence provisions, instead of having to call oral evidence.

31. The circumstances in which such statements are permitted are accordingly specific and very limited, and I see no reason why they should be allowed in other situations, or to prove other facts.

32. The Defendant's statements in this case were not directed to proving any of the facts set out in section 34(1), but were drafted to establish that payment would be made for the videos after delivery in Taiwan, and to prove that the videos remained the property of the Appellants in the meantime.

33. In paragraph 7 of his Ruling, the learned Magistrate states:-

"I have perused the various statements set out in the Notice of the 22nd January 1986 and am satisfied that at no instance is there any attempt to prove any of the facts set out in section 34(1) of the Import and Export Ordinance. That being so there is no necessity to consider the various statements further in the light of that section."

34. Crown Counsel argues that the Magistrate was right when he made this ruling, and I agree. The statements do not come within any of the situations set out in section 34(1), except possibly paragraph (a)(ii), and they attempt to prove facts right outside the narrow scope of section 34(1).

35. In these circumstances I hold that the learned Magistrate was right in rejecting the proposed statements under section 34(2) of the Import and Export Ordinance.

36. Finally there is Mr. Mullick's argument that the Hearsay Evidence provisions apply to Magistrates Courts by analogy or by spirit, even if they do not apply specifically.

37. But if the Hearsay Evidence provisions do not apply, either under Legal Notice 154 of 1970 or under section 34(2) of the Import and Export Ordinance, there is no other way in which they can apply, without further legislative provision.

38. In these circumstances the only evidence before the learned Magistrate was the testimony of Mr. Luk which he did not believe, and which he found thoroughly unsatisfactory. He rejected Mr. Luk's evidence that the purchase price was not to be paid until the videos reached Taiwan and that they were the property of the Appellants at the time they were seized.

39. Having seen and heard the witness, the learned Magistrate was entitled to take this view, and there are no grounds for reversing his finding that the Appellants had failed to prove they were the owners of the videos when the goods were seized.

40. I therefore dismiss this appeal against the order for forfeiture by the learned Magistrate, with costs to the Respondent.