Alpha Precision Pty Ltd v Comptroller-General of Customs

The jurisdiction of the Local Court

1. The application made by the Comptroller-General in the Local Court was made pursuant to s 45 of the Local Court Act 2007 (NSW) which is in Part 4, entitled "Special Jurisdiction".
2. Section 69 of the Local Court Act, which applies to proceedings under Part 4, provides that the court: "may award costs in application proceedings at its discretion and may determine by whom, to whom and to what extent costs are to be paid in or in relation to application proceedings."

The jurisdiction of this Court

1. Section 70(1) of the Local Court Act relevantly provides that: 70 Appeals (1) In relation to any order arising from an application notice: . . . (c) an appeal to the Supreme Court may be made in accordance with Part 5 of the Crimes (Appeal and Review) Act 2001, in the same way as such an application or appeal may be made in relation to a conviction arising from a court attendance notice dealt with under Part 2 of Chapter 4 of the Criminal Procedure Act 1986." [Emphasis added.]
2. It was common ground that Part 5 of the Crimes (Appeal and Review) Act 2001 (NSW) can apply to a decision of the Local Court to award costs in proceedings commenced in its Special Jurisdiction. This conclusion follows from the wording of s 70 of the Local Court Act.
3. Part 5 of the Crimes (Appeal and Review) Act relevantly provides for appeals as of right on a ground that involves a question of law alone (s 52) and appeals by leave on a ground that involves either a question of fact, or a question of mixed law and fact (s 53). Such appeals and applications for leave must be made as prescribed by the rules of court: ss 52(2) and 53(4). Appeals against interlocutory orders made by the Local Court in its Special Jurisdiction lie only on a question of law alone and only by leave. I am satisfied that the costs order made by Atkinson LCM was not an interlocutory order. Accordingly, any ground that raises a question of law may be appealed as of right and any ground that raises a question of fact or mixed law and fact requires leave.
4. Part 51B of the Supreme Court Rules 1970 (SCR) applies to appeals under Part 5 of the Crimes (Appeal and Review) Act. SCR Pt 51B r 6 provides that an appeal must be lodged within 28 days of the material date, being 28 days from 26 July 2017, namely, 23 August 2017.
5. The original summons was filed on 28 August 2017. Accordingly, an extension of time is required. As referred to above, the original summons was not in the proper form and misapprehended the source of this Court's jurisdiction to hear an application for leave to appeal against the costs order as it sought relief pursuant to s 40(2)(c) of the Local Court Act, which applies to matters within the civil jurisdiction of the Local Court.
6. The amended summons is in a substantially different form. Mr Kable, who appeared for Alpha, submitted that the delay was occasioned because of the time required to obtain the transcript of the proceedings in the Local Court. The amended summons, the plaintiff's statement of grounds and written submissions were served pursuant to directions made by the Registrar on 8 February 2018. The amended summons did not specifically seek orders extending time pursuant to SCR Part 51B rule 5(5) although Mr Kable, who appeared on Alpha's behalf at the hearing, accepted that an extension was required.
7. As the Comptroller-General does not point to any prejudice which could not be cured by an order for costs, and as all the costs had, in effect, been spent by the time of the hearing before me, I propose to grant an extension of time to allow the amended summons to be filed and the questions arising from it to be determined.
8. Alpha seeks, in the amended summons, the following orders: "1. Leave to rely upon the Amended Summons. 2. An order setting aside the order made by Magistrate Atkinson LCM on 26 July 2017 that the Plaintiff pay the Defendant's costs in the sum of $25,000.00. 3. An order that the Defendant pay the costs incurred by the Plaintiff in the Local Court as agreed or assessed. 4. An order that the Defendant pay the Plaintiff's costs of the Appeal as agreed or assessed.
9. The proposed grounds of appeal in the amended summons are: "1. Her Honour erred in law in determining that the proceedings below were properly commenced. 2. Her Honour erred in law in determining that the B709D certificate did not authorise the importation of the firearm magazines. 3. Her Honour erred in law in determining that only the B709DA authorised the importation of the firearm magazines. 4. [Not pressed.] 5. The costs order made in consequence of the above was made in error."
10. Ground 4, that her Honour erred in law in determining that the B709DA was not supplied to the defendant until February 2017, was not pressed.

The relevant legislation

1. In order to appreciate the requirement that the Comptroller-General file the application in the present case, it is necessary to summarise the relevant provisions which apply to imported goods.
2. Section 203B of the Customs Act provides that, where an authorised person suspects on reasonable grounds that there are "special forfeited goods" at a "Customs place", the authorised person may seize any goods reasonably suspected of being special forfeited goods. Section 205 provides that, within 7 days after goods have been seized (including under s 203B), the responsible person must serve a seizure notice (in accordance with s 205A) on the owner or the person in whose possession the goods were when they were seized.
3. Section 183UA defines "Customs place" as including an airport. It also defines "forfeited goods" as meaning goods described as forfeited to the Crown under s 229. The expression "special forfeited goods" includes forfeited goods referred to in s 229(1)(b). Section 229(1)(b) provides that all prohibited imports shall be forfeited to the Crown.
4. Section 205B provides that the owner of goods that have been seized may make a claim to, relevantly, the Comptroller-General for the return of the goods.
5. If the goods were seized as "special forfeited goods" the Comptroller-General must bring proceedings in the Local Court for a declaration that the goods are special forfeited goods within 120 days of the claim for their return. If no such proceedings are commenced within 120 days or if, at the completion of the proceedings no order for condemnation of the goods as forfeited to the Crown is made, the goods must be returned: s 205D.
6. Section 50 provides that the Governor-General may, by regulation, prohibit the importation of goods into Australia. Section 51(1) provides that goods, the importation of which is prohibited under s 50, are prohibited imports. The importation of handgun magazines into Australia is prohibited under reg 4F of the Customs (Prohibited Imports) Regulations 1956 (the PI Regulations) unless and until it falls within the identified categories and one of the tests identified in Schedule 6 of the Regulations relating to the imported goods has been satisfied. Regulation 4F of the PI Regulations relevantly defines "firearm magazine" for the purposes of reg 4F as "a magazine designed or intended for use with a firearm, whether or not complete, damaged, temporarily or permanently inoperable, or unfinished."
7. For present purposes, the relevant test was the police certification test in cl 4 of Pt 1 of Sch 6 of the Customs (Prohibited Imports) Regulations 1956, which relevantly provided: "4. Police certification test 4.1 The importation of an article complies with the police certification test if: (a) before the importation of the article, the importer was given a statement, in an approved form, by a relevant police representative to the effect that the importer holds a licence or authorisation according to the law of the relevant State or Territory to possess the article, or that a licence or authorisation to possess the article is not required under the law of the relevant State or Territory; and . . . (d) the importer produces to a Collector: (i) the statement in the approved form; . . ."
8. In other words, in order to pass the police certification test, the importer was required to obtain a statement in an approved form to the effect that the importer is authorised to possess the article in the relevant State or Territory and produce the statement to a Collector (being an authorised representative of the Comptroller-General).
9. As it was proposed to import the magazines into New South Wales, the Weapons Prohibition Act 1998 (NSW) was also relevant. Section 4 of the Weapons Prohibition Act defined "prohibited weapon" as meaning anything described in Sch 1. Section 4(2)(a) relevantly provided that, for the purposes of the Weapons Prohibition Act: "anything that would be a prohibited weapon if it did not have something missing from it, or a defect or obstruction in it, is taken to be a prohibited weapon."
10. Clause 4(4)(f) of Sch 1 of the Weapons Prohibition Act relevantly includes: "a pistol magazine with a capacity of more than 10 rounds."

Facts

1. In order to appreciate the context in which the costs order was made, it is necessary to set out in summary form the undisputed facts.
2. On 30 November 2015 the Commissioner of Police in New South Wales issued a statement confirming that Alpha was a firearms dealer and held a licence to possess, relevantly, 500 magazines with a capacity of 10 rounds (the B709D Form).
3. On 14 December 2015 the Commissioner of Police in New South Wales issued a statement confirming that Alpha held a licence to possess, relevantly, firearms magazines (being item 17 in Part 2 of Sch 6 of the PI Regulations), the capacity of which was not specified (the B709DA Form).
4. On 23 December 2015 Alpha imported through Sydney airport, relevantly, 51 handgun magazines. Upon importation, Alpha provided the Form B709D to a representative of the Comptroller-General. It was common ground that there was no evidence that Alpha provided the B709DA Form to the Comptroller-General's representative, either on importation or at any time before 21 February 2017.
5. The Comptroller-General considered that the hand gun magazines had a capacity greater than 10 rounds as they were fitted with an obstruction, known as a dimple, which temporarily limited their carrying capacity to 10 rounds but which could be removed from the magazines to increase the carrying capacity to 17 rounds. The Comptroller-General, after having regard to the definition of "prohibited weapon" in s 4 of the Weapons Prohibition Act, and the provisions of s 4(2), formed the view that the importation of the Goods was not authorised by the B709D form. The Comptroller-General seized the Goods pursuant to s 203B(2).
6. On 17 May 2016, the Comptroller-General issued Seizure Notice NN0360972 (the first seizure notice) in respect of the goods. Jamie Lim, the plaintiff's sole director, sought the return of the goods by a Claim for Return of Seized Goods (an authorised form for that purpose) dated 16 June 2016 on the following ground: "I am applying for the necessary permit to accuire [sic] the goods."
7. Mr Lim did not suggest in the Claim for Return that the goods were other than hand gun magazines with a capacity greater than 10 rounds. He did not provide the B709DA Form or, indeed another other document which authorised the importation of the goods.
8. A second seizure notice was issued on 15 August 2016 in respect of 253 handgun magazines described as "17 with dimple for 10". Alpha lodged a further Claim for Return of Seized Goods form in which it marked the box on the form indicating that the goods had been incorrectly described.
9. On 14 October 2016 the Comptroller-General filed an application in the Local Court seeking a declaration that the 304 handgun magazines (being the total magazines referred to in the first and second seizure notices) imported into Australia by the plaintiff on or about 23 December 2015 (the Goods) and seized by an officer of Customs under s 203B(2) of the Act were special forfeited goods and that they be condemned as forfeited to the Crown pursuant to s 205D(2)(e). The Goods were valued at about USD1,800.
10. The principal issue between the parties was whether, as the Comptroller-General contended, the Goods included firearm magazines with a capacity greater than 10 rounds, in which case their importation was not authorised by the Form B709D; or whether, as Alpha contended, the magazines were 10-round magazines and that, accordingly, the B709D satisfied the police certification test.
11. The Comptroller-General filed and served evidence in the Local Court proceedings from an Australian Federal Police firearms expert who demonstrated that the obstruction (dimple) on the pistol magazines could be removed, thereby enabling the magazines to accept 17 rounds as initially designed.
12. On 21 February 2017, pursuant to directions for evidence made by the Local Court, Alpha served on the defendant an affidavit of Mr Lim dated 14 February 2017. Annexure "B" to that affidavit was the B709DA Form (referred to above). When the Comptroller-General saw this form, it formed the view that it authorised the importation of the Goods because, on its face, it authorised the importation of handgun magazines of any capacity (including 17 round capacity magazines).
13. The police certification test (referred to above) required not only that the importer of goods be given a statement in the approved form by a police representative to the relevant effect but also requires the importer to produce the statement in the approved form to, relevantly, the Comptroller-General.
14. Once the Comptroller-General received the B709DA form, its solicitors wrote to the plaintiff on two occasions, offering to withdraw the application in the Local Court on the basis that each party bear their own costs. The Comptroller-General also requested that Alpha provide evidence that the B709DA form had been produced to the Comptroller-General at any stage prior to 21 February 2017. As referred to above, Alpha accepted that it had not adduced any evidence that it had produced the B709DA form to the Comptroller-General prior to 21 February 2017.
15. Alpha was not prepared to resolve the Local Court proceedings on the basis that each party bear its own costs.
16. The Comptroller-General withdrew its substantive application at the following court mention on 14 March 2017, leaving only the issue of costs. The Comptroller-General opposed a costs order being made in favour of Alpha and sought an order that Alpha be ordered to pay its costs. The Comptroller-General contended that, until 21 February 2017, the Goods were prohibited imports and it was not until the provision of the B709DA Form on that date that the police certification test was satisfied, thereby making the continuation of the proceedings unnecessary. Alpha continued to contend that the B709D Form always authorised the importation and that the proceedings ought not to have been commenced at all.
17. As part of the costs dispute in the court below, each party was provided with the opportunity to file evidence (summarised above) and submissions. The matter then proceeded to a hearing before Atkinson LCM on 26 June 2017, at which the plaintiff was represented by Mr Wilcher of counsel and the defendant was represented by Ms Raj, a solicitor. At the conclusion of the hearing, her Honour reserved her decision.

The reasons of the court below

1. In an oral judgment delivered on 27 July 2017 the magistrate ordered Alpha to pay the Comptroller-General's costs in the sum of $25,000.
2. Her Honour concluded, having considered "the whole of the circumstances" and "the whole of the evidence", that she was satisfied on the balance of probabilities that "the respondent never provided the necessary form, namely the B709DA form" to the Comptroller-General until Mr Lim's affidavit was served on 21 February 2017. Her Honour also said: "[I]t is possible to infer that the respondent [Alpha] did recognise the importance of this document [B709DA Form], given the fact that it took steps to have one obtained. I am satisfied that in this particular importation, the respondent was required to comply with the statutory requirements themselves. The statutory requirements were indeed complied with when the B709DA form did come into the hands of the applicant and, as I indicated earlier, once this happened the steps were taken to withdraw the application to have the goods declared special forfeited goods."
3. Her Honour also referred to the expert evidence and said: "An expert's report was obtained ... A further conclusion was the magazines with minimal modification are capable of being loaded with 17 [calibre] rounds of ammunition and functioning in the pistol with 17 [calibre] rounds of ammunition ..."
4. Her Honour found that the Comptroller-General acted appropriately in relation to the proceedings, both in relation to commencing them and then taking steps to withdraw the application as soon as it became apparent that the necessary form (the B709DA Form) had been received by Comptroller-General through its legal representative.
5. Her Honour concluded: "In terms of whether or not a costs order should be made, I find that the applicant [the Comptroller-General] has been successful in the proceedings in the sense that it brought matters to a head, prompted the respondent to provide the necessary document to [the Comptroller-General] and then enabled the proceedings to be resolved. By contrast, the respondent failed to comply with its legal requirements under the statutory scheme and it was only after the proceedings had commenced that the necessary documentation was provided and it was via solicitors rather than direct to [the Comptroller-General]. In the circumstances I find that it is appropriate that the Comptroller-General has his legal costs paid by the respondents. . . . I am not satisfied that the respondent is entitled to have its costs paid. Whilst the application was withdrawn, it was in circumstances where [the Comptroller-General] was forced to take action because the necessary document had not been lodged as contemplated by the legislation. . . . In those circumstances, if he [Mr Lim] had provided the necessary document to [the Comptroller-General] it would not have been necessary for these proceedings to have commenced."
6. It is plain from the magistrate's reasons that her Honour was satisfied that the B709DA Form was "the necessary form" and that the B709D Form did not satisfy the police certification test. Her Honour was satisfied that the Goods had a capacity of greater than 10 rounds (and hence were not authorised under the B709D Form). This is evident from her Honour's conclusion on the basis of the expert evidence referred to in the passage set out above.
7. Her Honour found that the reason the Comptroller-General withdrew his application in the Local Court was that it was provided with "the necessary form" (the B709DA Form), which contained no restrictions regarding the capacity of the magazines and therefore, in the Comptroller-General's view, satisfied the police certification test. On that basis, her Honour found that the Comptroller-General was the successful party and ought have a costs order in its favour.

The principles for making costs orders where there has been no final determination on the merits

1. Before turning to the grounds of appeal, I propose to set out the relevant principles for the making of costs orders where there has been no final hearing. In Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624; [1997] HCA 6, McHugh J summarised the relevant principles as follows. "In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extracurial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. . . . The critical question in this case then is whether or not the prosecutrix acted reasonably in bringing these proceedings and whether the respondents acted so unreasonably in not informing the prosecutor that an application to review the decision to refuse a visa was being considered that it would be proper for the Minister to pay the whole or part of the cost of the proceedings."
2. Factual disputes, which do not arise on the question of costs but would have arisen had the matter been finally be litigated, cannot be determined in a hearing where the only issue is costs, following a matter which has not been determined on the merits. In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84, Basten JA (Meagher and Payne JJA agreeing) said at [8]: "[A]lthough it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon."
3. In the present case, her Honour's decision that the Comptroller-General had acted reasonably and Alpha had acted unreasonably appears to have been based on the following two principal findings: 1. the B709D form, which was provided to the Comptroller-General at the time of importation, did not cover the Goods because their capacity was greater than 10 rounds; and 2. there was no evidence that Alpha had provided the B709DA Form to the Comptroller-General until 21 February 2017, which was over four months after the filing of the application in the Local Court.
4. The second matter was common ground. The first matter was in issue. While her Honour was not entitled to conduct a "hypothetical trial" to determine issues in dispute for the purposes of costs (see the passage extracted above), the parties adduced, and her Honour considered and made findings on, evidence on issue (1) above. The question whether the B709D Form covered the Goods required a consideration of the magazines and their capacity and physical form, as well as the provisions of the Weapons Prohibition Act set out above. Her Honour addressed the evidence (which was relatively confined) and the relevant legislative provisions in making the finding in (1) above for the purposes of determining the costs question.

The grounds of appeal

1. The grounds set out in the amended summons did not contain a ground which challenged the adequacy of the reasons given by the magistrate, although that submission was made in the plaintiff's written submissions. Had I considered there to be any substance in the ground, I might have invited Alpha to seek leave to add the ground to its amended summons. However, in the circumstances, it was not necessary to do so and Alpha made no such application. Her Honour's reasons were, in my view, comprehensive and did not omit reference to any relevant matter. They were sufficient to expose her Honour's reasoning and recorded the findings which were made on the basis of the evidence adduced at the hearing.
2. I turn to the grounds of appeal set out in the amended summons. Although each ground is couched in terms of a legal question, by the inclusion of the words "in law", none of the grounds which are pressed qualifies as a question of law. Grounds 1, 2 and 3 must be addressed together because, for the reasons given below, they do not differ in substance. Ground 5 is merely a conclusion and does not add to grounds 1-3.
3. Alpha argued that there was no need for the proceedings to be commenced because the B907D Form authorised the importation of the Goods and the Comptroller-General ought to have allowed the Goods to be imported because they were not, on this basis, prohibited goods. This raises a question of mixed fact and law, in respect of which leave is required: s 53(1)(b). The same question is raised by grounds 2 and 3.
4. I am not persuaded that leave ought be granted on any of these grounds.
5. It was, in my view, open to her Honour to find that the B709D Form did not authorise the importation of the Goods. As her Honour found, s 4(2) of the Weapons Prohibition Act has the effect that the magazine is to be assessed as if it did not have the "obstruction" (also called a dimple) which limited its capacity to 10 rounds, rather than the 17 rounds, which was its capacity once the obstruction had been removed. The effect of this finding was that the proceedings were properly commenced (it being common ground that there was no evidence that the B709DA Form had been provided to the Comptroller-General) and it was only the B709DA Form which authorised the importation of the goods.
6. In making this finding, her Honour considered all of the evidence, including correspondence from the NSW Police which advised that, irrespective of the dimple which restricted the capacity of the magazines to 10 rounds, the magazines were still considered high-capacity (17-round) magazines. Moreover, her Honour was also entitled to take into account that Alpha's initial Claim for Return of Seized Goods did not take issue with the description of the goods as being handgun magazines "for more than 10 rounds" and indicated that Alpha was applying for the necessary permit to acquire the goods. I consider this finding was open to her Honour.
7. As is expressly provided for in s 69 of the Local Court Act the magistrate's power to award costs was discretionary. The principles relating to appellate review of discretionary decisions are well known. Before a court on appeal will interfere with a discretionary decision, such as an order for costs, the applicant must demonstrate that the discretion miscarried or the order was plainly unjust or unreasonable. For the reasons given above, I consider that it was open to her Honour to approach the issue of costs in the way that she did and to order Alpha to pay the Comptroller-General's cost of the proceedings.
8. In particular, it was open to her Honour to reject Alpha's submission that the Comptroller-General "wholly failed" and find that, on proper analysis, the Comptroller-General was the successful party. The Comptroller-General was obliged by s 205D to commence the proceedings once the Goods had been seized since, had it not done so within 120 days of Alpha's claim for return of the goods, it would have had to return the Goods. Before the proceedings had been finally determined, Alpha provided the missing document (the Form B907AD) which satisfied the police certification test, thereby rendering the proceedings unnecessary as Alpha was entitled to have the Goods returned. The inference is reasonably open that, had Alpha provided the Form B907AD at the time of importation, the Goods would not have been seized since Alpha would have been entitled to import them, as they would not have been prohibited goods. There would, in that event, have been no need for the Comptroller-General to have commenced proceedings at all.

Costs

1. The parties did not suggest that costs in this Court ought not follow the event, although Mr Hutchins, who appeared for the Comptroller-General, indicated that costs ought not finally be determined before the Comptroller-General had been given an opportunity to put further material before the Court, relevant to the costs order.

Orders

1. For the reasons given above, I make the following orders: 1. Extend the time within which the plaintiff is to file the summons to 28 August 2017. 2. Grant leave to the plaintiff to file the amended summons in the form of the document behind ta 19 of Exhibit A (the Court book). 3. Refuse leave to the plaintiff to appeal against the costs order made by Atkinson LCM on 26 July 2017. 4. Order the plaintiff to pay the defendant's costs of the proceedings in this Court. 5. Direct that, if the defendant seeks an order that the costs in (4) above be paid on a higher basis than the ordinary basis: 1. the defendant is to provide written submissions together with any evidence in support to my Associate within seven days' hereof; 2. the plaintiff is to provide written submissions together with any evidence in support to my Associate within fourteen days' hereof; and 3. the defendant to provide written submissions in reply within a further seven days. 1. Direct that, if the defendant seeks an order that the costs be paid in a gross sum pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW), the evidence and submissions in support be provided in accordance with the timetable set out in (5) above. 2. Grant liberty to apply on 3 days' notice.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 June 2018