CEO Customs v Afiouny & Anor

Supreme Court of NSW|2004-02-09|Before: McDougall J, Dougall J

Introduction 1 By statement of claim filed on 5 March 2002, the plaintiff seeks the conviction of each of the defendants for specified offences relating to the alleged smuggling of cigarettes, the alleged evasion (or attempted evasion) of duty and the alleged making of false or misleading statements. The plaintiff also seeks the recovery of substantial monetary penalties against each defendant. 2 By notice of motion filed on 3 December 2002, the defendants seek (1) an order that the statement of claim "be struck out as an abuse of the process of the Court". Alternatively, they seek that (4) the actions against them be severed; (5) declarations that they "are not required to further plead to the Statement of Claim herein"; (6) an order removing the matter from the Differential Case Management List; and (7) an order vacating a timetable established by orders of a Registrar of this Court. (I have omitted reference to prayers 2 and 3, which were not pressed.) 3 It is common ground between the parties that the proceedings are a "Customs Prosecution" as that expression is defined by s 244 of the Customs Act 1901 (Cth). The essential question that was debated on the hearing of the defendants' notice of motion was whether that Customs prosecution could be "proceeded with … in accordance with the usual practice and procedure of [this] Court in civil cases", or whether it should be "proceeded with … in accordance with the directions of [this] Court or a Judge". The plaintiff contended for the former proposition. The defendants contended for the latter. They said, in addition, that "the directions of [this] Court or a Judge" could only be formulated ad hoc - i.e., to meet the requirements of the particular case - and after they had been given an opportunity to be heard on the directions to be given.

The evidence 9 The evidence filed in support of the defendants' notice of motion comprised two affidavits sworn by their solicitor. That evidence showed that:

(1) The first defendant was the father of the second defendant.

(2) The first defendant and the second defendant operated separate businesses.

(3) Neither defendant had any interest in the business of the other.

(4) Nonetheless, each business had the same postal address and principal place of business. 10 The evidence further contained some argumentative assertions, which do not bear on the resolution of the issues raised by the notice of motion.

The issues for decision 11 I directed the parties to state the issues that, they said, were raised by the defendants' notice of motion. The defendants stated the issues as follows:

What is the repository of the power of choice created by the word "may" together with the three limbs of s 247 Customs Act ?

Whether it is inappropriate to apply civil procedures to the present proceedings.

Whether all substantive questions (not limited to the standard of proof) and all questions of substantive law are subject to the common law of the Commonwealth to which civil procedure must give way.

Whether it is inappropriate in the absence of argument to apply one limb of s 247 Customs Act in preference to the other. The defendant is entitled to be heard as to which limb of s 247 applies to the conduct of the proceedings.

Absent formal rules for the conduct of the proceedings, whether the proper construction of s 247 requires the Court to determine on a case by case basis what procedure applies to the proceedings, including the present proceedings.

Absent hearing from the defendant as to procedure and absent a reasoned determination of the procedure to be applied in the prosecutor's statement of claim, whether the present case should be struck out as an abuse of process.

Whether the joinder of the defendants to the statement of claim and the entitlement of each to a separate trial involves a question of substantive rights under the common law of crime of the Commonwealth of Australia, and whether it is to be determined applying the tests applicable to criminal proceedings and accordingly whether the rules of civil procedure (including the DCM rules) must give way to that law.

Whether applying civil procedures to a case where criminal standards apply amounts to procedural unfairness. 12 The plaintiff accepted that this was an appropriate statement of the issues.

The legislation 13 Part XIII of the Customs Act deals with the subject of "Penal Provisions". Part XIV deals with the subject of "Customs Prosecutions". The relevant sections are found in Part XIV. 14 Section 244, as it stood at the time relevant to these proceedings (it has since been amended), provided as follows: "244 Interpretation Proceedings by the Customs for the recovery of penalties other than a pecuniary penalty referred to in section 243B under this Act or for the condemnation of ships, aircraft or goods seized as forfeited are herein referred to as Customs Prosecutions." 15 Section 245(1) authorised the institution of Customs prosecutions by the Chief Executive Officer of Customs (see the definition of "CEO" in s 4(1) of the Customs Act) "by action, information or other appropriate proceeding … in the Supreme Court of a State". 16 Sections 247 reads as follows: "247 Every Customs Prosecution in a court referred to in sub section 245(1) may be commenced, prosecuted and proceeded with in accordance with any rules of practice (if any) established by the Court for Crown suits in revenue matters or in accordance with the usual practice and procedure of the Court in civil cases or in accordance with the directions of the Court or a Judge." 17 Reference should also be made to ss 140 and 141 of the Evidence Acts 1995 (Cth and NSW), and to ss 79 and 80 of the Judiciary Act 1903 (Cth).

The decision in Labrador 18 The operation of s 247 of the Customs Act was considered by the High Court in Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 77 ALJR 1629. In that case the appellant, by its writ of summons and amended statement of claim, sought declarations that each of the respondents was liable to conviction for certain specified offences, against the Customs Act and the Excise Act 1901 (Cth); convictions accordingly; orders for recovery of penalties; and orders for reparation pursuant to s 21B of the Crimes Act 1914 (Cth). 19 The Court held unanimously that (omitting further reference to the Excise Act):

(1) The standard of proof required for the appellant to obtain convictions for offences against specified provisions of the Customs Act was proof beyond reasonable doubt of each of the elements of the relevant offences; and

(2) Section 247 of the Customs Act required the Court (there, the Supreme Court of Queensland) to apply its usual practice and procedure in civil cases in proceeding with the present matters, so that the relevant provisions of Queensland law regulating the admissibility of evidence as to facts in issue are those that would be applied in a civil case. 20 Hayne J gave the leading judgment, Gleeson CJ and McHugh J concurring. Gummow and Kirby JJ, in separate judgments, agreed in the orders proposed by Hayne J. Although, in some respects, their Honours reasoned differently to Hayne J, that related to the basis upon which they concluded that the standard of proof required to obtain a conviction was proof beyond reasonable doubt. For obvious reasons, there was no dispute before me as to the standard of proof. 21 Gummow J concluded at 1635 [40] that s 247 stipulates "for the prosecution to be proceeded with in accordance with the usual practice and procedure of the Supreme Court of Queensland in civil cases". His Honour said that "[t]he question of the admissibility of documentary evidence as to facts in issue … falls within the ordinary meaning of the expression - 'the usual practice and procedure of the [Supreme] Court [of Queensland] in civil cases ' ". 22 On this point, Kirby J at 1644 [92] agreed with the views expressed by Gummow and Hayne JJ.

The defendants' submissions 23 Mr J L Glissan QC, who appeared with Mr K J Manion of Counsel for the defendants, submitted that there had been no issue before the Court in Labrador as to which of the methods of procedure laid down in s 247 was applicable. (I interpose that it was not suggested by either party, as it was not suggested in Labrador, that there were any "rules of practice … established by the Court for Crown suits in revenue matters".) Accordingly, he submitted, I was not bound to apply the reasoning of Hayne J at 1655 [147] that I have referred to in para [19(2)] above. 24 It does not appear from the decision of the Court in Labrador that the respondent had taken the point that it was inappropriate to proceed in accordance with the usual practice and procedure of the Court in civil cases, or that it was necessary to proceed by way of directions given ad hoc after it had been given the opportunity to be heard on the form of the directions. However, I do not think that it is open to me to say that, for this reason, I am entitled to disregard the clear reasoning of the Court, or the Court's conclusion. The defendants' submission, that the decision of the Court was, on this point, given per incuriam is one for that Court to consider. 25 Given that, in my judgment, I am bound by the decision in Labrador to conclude that the defendants' notice of motion must fail, I do not see any point in burdening these reasons with extended analysis of the defendants' submissions. The defendants' written submissions will remain with the papers and their oral submissions have been transcribed. The essential steps in those submissions may be summarised as follows:

(1) The present proceedings were criminal in nature.

(2) The criminal onus and standard of proof therefore applied.

(3) It followed that "the proceedings need not be conducted according to civil procedure but criminal procedures may apply as the Court directs".

(4) It further followed that "[i]t is not appropriate that a defendant be called upon in accordance with ordinary civil procedure to disclose its defence by way of a pleading or otherwise", so that "the defendant, if required to comply with civil procedures at all, should not be required to go further than specific denials".

(5) Further, "[t]he applicable substantive law is therefore the criminal law" so that "[e]ach defendant is subject to the rules relating to separate trials and separation of counts which apply in criminal proceedings … ".

(6) There was an inappropriate joinder of the two defendants which was done "to obtain a collateral advantage in relation to evidence and the determination of questions of fact".

(7) For the reasons already given, "it is inappropriate to apply civil procedure; the discretion should be exercised to order the application of laws of criminal procedure as routinely apply in lower courts on summary prosecutions … ". 26 The first and second submissions should be accepted. They are consistent with the decision in Labrador. As the defendants' case was put in argument, the submissions that followed them were based on acceptance of the first two submissions. To put it another way: the following submissions (for example, as to the nature of the defence, the joinder of the defendants and the application of differential case management procedures) were to be dealt with at the level of principle, on the basis that the applicable rules of procedure were those of criminal procedure, rather than civil procedure. There was no argument directed to the merits, and relevant discretionary considerations, of those submissions on the assumption that they were to be determined in accordance with the applicable rules of civil procedure. I mention this to make it clear that my views on the fate of the defendants' notice of motion should not be taken as indicating any consideration by me of, let alone adjudication upon, the intrinsic merits of the particular submissions by reference to the applicable principles of civil procedure. 27 That this is the correct approach to take to the notice of motion was confirmed by what Mr Glissan said, in answer to a question from me, were the essential questions that it raised. He stated them as follows:

(1) It was inappropriate to apply the civil procedure of this Court to the present proceedings (because they were criminal in nature).

(2) All substantive questions, including the burden of proof and the question of separate trials, were subject to the common law of crime of Australia.

(3) The proper construction of s 247 requires the Court to consider ad hoc and after argument the appropriate procedure to be followed.

(4) Because these proceedings were governed by Parts XIII and XIV of the Customs Act, " informed by section 4 of the Crimes Act", it was inappropriate to apply the civil procedure of this Court.

(5) For the same reasons, all substantive questions should be determined by reference to the common law of crime of Australia.

(6) The determination of the questions of abuse of process and joint hearing is to be made by reference to the common law criminal test.

(7) The differential case management rules, including requirements for statements of issues, statements of evidence and the like, affect substantive rights and conflict with s 247 of the Customs Act, and s 4 of the Crimes Act.

(8) There would be procedural unfairness in applying civil procedure to a case where the criminal onus and standard of proof apply. 28 Mr Glissan conceded, in my view correctly, that if I concluded that I was bound by what Hayne J said in Labrador at 1655 [147] that would dispose (before me) of issues (2) to (7), and that issues (1) and (8) could be dealt with on their merits by the giving of appropriate directions.

Analysis 29 For the reasons that I have given in para [24] above, I conclude that the decision in Labrador makes it inevitable that the notice of motion must fail. All members of the Court held that the practice and procedure in civil cases of the Supreme Court of Queensland applied to the proceedings in question. I do not think that it is open to me to say that, because the alternative (as advanced by the defendants in these proceedings) was not (or may not have been) argued, the Court's decision was, to that extent, given per incuriam. 30 Even if I could properly regard the question as open, I would not have accepted the defendants' submissions. Section 247 provides for three, apparently alternative, methods of procedure. The first recognised the historical background (which is traced in detail in the judgment of Hayne J in Labrador at 1646 [101] to 1647 [107]) that, in England, there were rules of practice established by the courts for Crown suits in revenue matters. There were not, at the time the Customs Act came into force, and still are not, such rules in Australia. 31 The second and third methods of procedure for which s 247 provides recognise that there may be no rules of practice established by the court for Crown suits in revenue matters. They therefore, in my view, seek to cover the alternatives in a comprehensive way. The first alternative refers to the usual practice and procedures of the relevant court in civil matters. It assumes that the prosecution (for want of a better word) is brought in a court that has such procedures. The second alternative appears to me to assume that the court in which the prosecution is brought may not have such procedures. In that case, the prosecution is to be conducted in accordance with directions given by the court or a judge. 32 It follows, in my view, that it is inappropriate to talk of the existence of a "repository of the power of choice created by the word 'may'" in s 247. The procedure to be adopted and applied will depend upon the circumstances. If there are rules of procedure that fall within the first limb of the section, then it is those rules that will be applied. If there are not, and if the court in which the proceedings are commenced has a "usual practice and procedure … in civil cases" then it is that practice and procedure that will be applied. One only gets to the third limb if neither of the first two limbs is applicable. 33 Where there are usual practices and procedures in civil cases then, in the ordinary way, those practices and procedures will include either an express or an incidental power to give directions to enable the proceedings to be brought on for hearing in a way that is consistent with the interests of justice, the interests of the parties, and the legitimate requirements of case management. There is therefore no need for a separate power to give directions ad hoc: that would form part of the usual practice and procedure of the court in civil cases. See, for example, Pt 26 r 1 of the Supreme Court Rules. 34 It may be thought to be incongruous, or anomalous, that the civil rules of procedure apply to the conduct of what is in substance a criminal case. However, that is a necessary consequence of the clear expression of the will of the legislature: see Gummow J in Labrador at 1635 [40], and compare Kirby J at 1644 [92]. If, as I think is the case, the application of civil procedures to what is in substance a criminal proceeding is a necessary consequence of that expression of the legislative will then it matters not that, either conceptually or subjectively, this might be thought to be "inappropriate". Equally, it matters not that the result of the application of civil procedures to what is in substance a criminal proceeding may be thought to produce "procedural unfairness". The Court cannot disregard what the legislature has clearly expressed. The result, I think, is that this Court must apply its civil procedures on a case by case basis in the management and, ultimately, trial of such proceedings. 35 The distinction between substance and procedure is not always easy to discern, and may in any event depend upon the purpose for which the distinction is drawn: see Hayne J in Labrador, at 1649 [117] to 1652 [131]; and see also John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503, 542 [97] to 544 [100]. Nonetheless, it is in my view clear that the subjects attacked by the defendants in paragraphs 4, 5, 6 and 7 of their notice of motion are matters of practice and procedure. Conformably with the view that I take of the decision in Labrador, and conformably also, I think, with the decision of the High Court in Naismith v McGovern (Federal Commissioner of Taxation) (1953) 90 CLR 336, those matters fall to be dealt with according to the usual practice and procedure of this Court in civil cases.

The plaintiff's notice of motion 36 On 26 November 2002, the plaintiff filed a notice of motion seeking summary judgment. That notice of motion was supported by an affidavit of Joseph Gjedsted, sworn 26 November 2002. At that time, defences had been filed (on 5 June 2002) that did no more than, with few exceptions, either not admit or deny the allegations in the statement of claim. Amended defences, likewise either not admitting or denying most of the allegations in the statement of claim, but in addition making further answers to some of those allegations, are apparently to be filed (see the second affidavit of the defendants' solicitor, sworn 31 January 2003). 37 Mr O'Donnell of Counsel, who appeared for the plaintiff on the hearing of the notice of motion, informed me that the plaintiff's notice of motion was not pressed and that the plaintiff would consent to an order that it be dismissed. However, he said, the plaintiff sought the costs of that notice of motion. 38 The parties did not put submissions dealing with the costs of the plaintiff's notice of motion. They should have an opportunity to do so if required; in the absence of such submissions, I would order that the costs of the notice of motion be costs in the proceedings.

(1) Order that the plaintiff's notice of motion filed 26 November 2002 be dismissed.

(3) Order that the defendants' notice of motion filed 3 December 2002 be dismissed.

(4) Order that, unless the defendants make application to the contrary within 7 days, the defendants pay the costs of that notice of motion.

(5) Any application in respect of the costs reserved by order 2 or conditionally ordered by order 4 is to be made on or before 27 February 2004 by arrangement with my associate. ******

Last Modified: 02/27/2004 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.

NSW) Judiciary Act 1903(Cth)

CITATION : CEO Customs v Afiouny & Anor [2004] NSWSC 79 HEARING DATE(S) : 9 February 2004 JUDGMENT DATE : 25 February 2004

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