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Re Leung Mo-chu

Judgment Cited authorities 10 Cited in Precedent Map Related
Vincent
Judgment Date09 October 1980
Year1980
Judgement NumberHCMP369/1980
Subject MatterMiscellaneous Proceedings
CourtHigh Court (Hong Kong)
HCMP000369/1980 RE LEUNG MO-CHU

HCMP000369/1980

In the High Court Miscellaneous Proceedings
Full Bench 1980 No. 369

IN THE MATTER of an application by LEUNG Mo-chu trading as Alliance Trading Co. for leave to apply for Judicial Review by way of Certiorari and Mandamus; and for Declarations
and
IN THE MATTER of the Import and Export Ordinance, Cap. 60.

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Coram: Liu and Macdougall, JJ. in Court.

Date of Judgment: 9th October, 1980.

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JUDGMENT

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Liu, J.:

1. Until 1959 Hong Kong exported textile products without restraint to must territories. In 1959, Hong Kong agreed to subject its textile exports to the United Kingdom to a self-imposed limitation. Thereafter there have been a multitude of bilateral restraint agreements on textile exports with various countries, which presently include the United States of America, the European Economic Community, Canada, Finland, Sweden, Austria and Switzerland. A code of accepted practice and guidelines has developed into a set of inter-national rules, better known as "the Arrangement Regarding International Trade in Textiles" which is concisely described as "the Multi-Fibre Arrangement" or "the M.F.A." Under the M.F.A., Hong Kong has been able to retain some of her rights in free trade but has nevertheless to yield to certain restraints. The M.F.A., in effect, leaves Hong Kong with some fluidity on recognizable principles within which hopefully the restraint limit may be negotiated to her advantage. Hong Kong has, of course, the obligation to honour her commitments under the M.F.A. and, as a starting-point, must demonstrate her ability to suppress exports below these maximum concessions of her international counterparts.

2. A quantitative restraint is preferable and has been secured by Hong Kong. Towards that end, a quota system has been devised for exports to countries under the M.F.A. The importance of supervision and policing of exports under the quota system cannot be more strongly emphasised by Mr. Tsao, our acting Director of Trade Industry and Customs.

3. The Director has, admittedly, no power under the Import and Export Ordinance to make regulations for "the imposition and administration of quota controls". The Director has laid down some "instructions of an administrative nature, governing the creation and administration of a quota allocation scheme". In Wong Man-shun v. R.(1), in delivering the judgment of the Court of Appeal the Chief Justice found "no objection in law" to this scheme and was of the opinion that the Governor in Council had impliedly approved the operation of the quota allocation system which remains subordinate to and can be overridden by such regulations as may be made under section 31(1)(q) of the Ordinance.

4. These administrative instructions were promulgated with a view to regulating export licences and should be implemented compatibly with the proper exercise of the power to issue these licences under section 3(1) of the Ordinance.

5. In implementing and operating the export quota control scheme, the Director consults and confers with the Textiles Advisory Board which is comprised of 15 prominent members of the textile trade and is under his ex-officio chairmanship.

6. In early February 1979, the Director received a complaint from Her Majesty's Customs & Excise that certain textile consignments of Hong Kong origin had landed in England under the cover of Indonesian documentation without the requisite quotas.

7. Divers documents were thereafter seized by the Director from the applicant company, the Alliance Trading Company. These documents, on their proper production, would enable a judicial tribunal to reach the following conclusions:

(1) Upon receipt of an order for textile goods from a London importer, the Alliance Trading Company caused the same to be manufactured in Hong Kong and to be shipped in double-packing, an inner carton packing and an outer carton packing, at extra expense, first to Indonesia and there-after to London, and
(2) False Indonesian documentation for establishing, inter alia, Indonesian origin was caused to be secured by the Alliance Trading Company for the same cargo.

8. Hong Kong's reputation has been tarnished, but the applicant cannot be fixed with any liability without formal proceedings in which these documents may hopefully be tendered and proved.

9. After investigation and on advice, the Director considered "that a prosecution could not be sustained because of the inherent difficulty of obtaining evidence from outside jurisdiction and because there was insufficient evidence to establish certain other elements of the offence".

10. On the completion of investigations, "the Director came to the view that it was imperative that he should take administrative action to fulfil his obligations under the M.F.A." Whereupon the Director was desirous of calling upon the companies accused to surrender an equal quantity of quota for the same or other category which should have accompanied the transhipment. Such surrender was requested under threat of suspension or refusal of export licensing facilities to the European Economic Community in the interim. The Director notified the applicant of his intention and invited representations. The notification of the Director drew an indignant reply.

11. By a letter dated the 31st December 1979 to the Alliance Trading Company, the Director informed the applicant that its "1980 preliminary quota allocation will be withheld until they have complied with the Director's penalty". Initially, the Director required a permanent surrender by the applicant of 18,522 pieces of Category 8 quota for the United Kingdom market. Ultimately, the Director was prepared to accept a surrender of 18,522 pieces quota in equal shares from the applicant company and another company allegedly involved. Without prejudice, the Director was willing to consider a surrender of quotas in other categories. The Director was adamant that "until the full amount of quota required has been surrendered on a permanent basis, export licensing facilities for textiles to the E.E.C. will continue to be denied". The Director also decided to withhold the applicant's 1980 preliminary allocation of quotas. It was implicit from the decision of the Director that the quotas for 1980 which would have been allocated to the applicant could not be sold, transferred or otherwise taken advantage of.

12. The applicant company has had no Category 8 quotas, and in 1979 Alliance Trading Company was allocated 4,463 pieces of Category 7 quota for Belgium, Netherland and Luxemberg.

13. The Director purported to impose these conditions in the above terms under section 3(1) of the Import and Export Ordinance. By a letter to the applicant's solicitors dated 4th March 1980, the Legal Department intimated that the action taken by the Director was administrative in nature "against violators of the quota system" so as to "preserve the integrity of Hong Kong's quota system in the eyes of its international trading partners".

14. 18,522 pieces of Category 8 quota are worth in the region of a quarter of a million dollars in the market. The loss to the applicant of its 1980 allocation would be additional.

15. I turn next to the relevant provisions under the Import and Export Ordinance and the Regulations made thereunder. It would be more convenient to begin with Regulation 4 of the Import and Export (General) Regulations under which no textiles are to be exported to any country without a licence. Any contravention of this regulation is a criminal offence punishable on conviction by a fine of $50,000 and one year's imprisonment. Regulation 5(1) prohibits the exportation of goods to any territories subject to a quota system without a licence which may only be obtained by a holder of a valid quota allocation certificate. Thus, Regulation 5(1) attaches a pre-condition to the issue of an export licence in respect of a country subject to a quota system. Sub-regulation (2) of that regulation reads as follows:

"Paragraph (1) shall be in addition to, and not in derogation from the powers conferred on the Director by section 3 of the Ordinance."

These regulations were made under section 3(2) of the Ordinance.

16. Section 3(1) of the Ordinance reads as follows:

"The Director may issue any licence required under this Ordinance and may attach thereto such conditions as he may see fit to impose."

17. The treble use of the word "may" in section 3(1) has given rise to countless interpretation difficulties. The last word "may" governs the nature of the conditions sought to be imposed, and these conditions are to be such as the Director "may see fit". That is plain language for endowing the Director with a discretion. The question is how wide that discretion is and in what way it should be exercised.

18. In my view, the second "may" also clearly introduces an element of discretion. A Director may or may not attach conditions. The question to be asked is the same as that for the last word "may".

19. Whether section 3(1) empowers the Director to attach conditions to the issue of a licence or to the licence itself presents yet a further moot point. It is provided by section 31(1)(d) that the Governor in Council may make regulation for prescribing conditions to be observed before or after the issue of a licence. One may be forgiven for doubting if conditions for its issue were deliberately omitted and whether any distinction was intended to be drawn between "observed" and "performed". Conditions to be observed may well be different from conditions to be performed. A condition prohibiting shipment of goods other than as specified in the licence is, strictly speaking, a condition to be observed. A condition...

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