CEO of Customs v Camile Trading & Ors

CEO of Customs v Camile Trading & Ors - [2001] NSWSC 1075 - NSWSC 2001 case summary — Zoe

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20859/97 CHIEF EXECUTIVE OFFICER OF CUSTOMS v CAMILE TRADING PTY LIMITED & ORS Judgment 1 STUDDERT J : This is an appeal from a decision of Master Harrison. 2 In the proceedings before the master, the appellants, who were the third and fourth defendants named in an amended statement of claim, made application by way of notice of motion for orders that: "1. The Amended Statement of Claim be dismissed insofar as it relates to the third and fourth defendants, alternatively that it be struck out, alternatively that paragraphs 685 to 700 inclusive be struck out. 2. In the alternative the Plaintiff's statement of claim be stayed in relation to the third and fourth defendants…" 3 The appellants did not succeed on the notice of motion and hence the current appeal. 4 The amended statement of claim, the form of which attracted the application before the master and the appeal to this Court, is an extremely lengthy pleading. The plaintiff named in it is the Chief Executive Officer of Customs. In the proceedings instituted by the pleading, the plaintiff seeks the convictions of the first defendant, Camile Trading Pty Limited, the second defendant, Leslie Ronald Fletcher, the third defendant, Evenfont Pty Limited, and the fourth defendant, Robert Lenard Pullinger, for various alleged breaches of the Excise Act 1901: "[As against the first and second defendants] A. The conviction of the First Defendant and Second Defendant for offences contrary to section 35 of the Excise Act 1901 as pleaded herein. B. The conviction of the First Defendant and Second Defendant for offences contrary to section 61 of the Excise Act 1901 as pleaded herein. C. The conviction of the First Defendant and Second Defendant for offences contrary to section 120(1)(iv) of the Excise Act 1901 as pleaded herein. [As against the third and fourth defendants] D. The conviction of the Third Defendant and Fourth Defendant for offences contrary to section 35 of the Excise Act 1901 as pleaded herein. E. The conviction of the Third Defendant and Fourth Defendant for offences contrary to section 61 of the Excise Act 1901 as pleaded herein. F. The conviction of the Third Defendant and Fourth Defendant for offences contrary to section 120(1)(iv) of the Excise Act 1901 as pleaded herein." 5 As the orders sought in the amended statement of claim indicate, the relevant provisions of the Excise Act for present purposes are ss 34, 35, 61 and 120. There have been substantial changes to the Excise Act since the events to which these proceedings relate, in particular by Act No. 115 of 2000, but I set out below those relevant provisions in force at the relevant times. 6 A manufacturer of goods which attract excise duty was required to have a manufacturing licence. Section 34 of the Excise Act provided: "Licences to manufacture may be granted by the Collector, and may licence manufacture without limitation or subject to any specified limitation." 7 It was an offence to manufacture excisable goods without a licence. Section 35 provided: "Subject to the regulations, a person shall not manufacture excisable goods except pursuant to this Act and a licence granted thereunder. Penalty: $5,000." 8 Excisable goods were subject to control by customs and s 61 provided: "All excisable goods are, until delivered for home consumption or for exportation to a place outside Australia, whichever first occurs, subject to the control of Customs and must not be moved, altered or interfered with except as authorised by this Act. Penalty: $20,000." 9 Section 120 (1)(iv) was directed at the evasion of duty: " (1) A person shall not: ........... (iv) Evade payment of any duty which is payable...

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The structure of the pleading 10 In the introductory paragraphs of the statement of claim 1-17, it is pleaded against the first defendant that between 1992 and 1996 it carried on business as a petroleum wholesaler and sold unleaded petrol, leaded petrol and diesel from its premises at Albion Park Rail. It is pleaded that the second defendant was a director of the first defendant. It is further pleaded that the first defendant had no relevant Excise Manufacturer's Licence under s 34 of the Excise Act. 11 It is pleaded against the third defendant (the first appellant) that it carried on business manufacturing petroleum products and that unlike the first defendant it was the grantee of an Excise Manufacturer's Licence. It is pleaded that the fourth defendant (the second appellant) was a director of the third defendant. 12 Paragraphs 18-197, which are pleaded against the first and the second defendants concern the blending of diesel fuel and cover nine discrete periods. The contents of those paragraphs do not assume relevance for present purposes. Then paras 198-441 of the statement of claim relate to the alleged blending of unleaded petrol. They address nine periods, the explanation for this apparently being that the rate of duty differed from time to time. Then paras 442-675 deal with the alleged blending of leaded petrol. 13 In paras 676-682 the alleged complicity of the second defendant in the matters earlier pleaded against the first defendant is recited. Then paras 683-700 plead the complicity of the appellants in the blending of both leaded and unleaded petrol. The pleading was further amended after the master's judgment in certain respects, but the parties have asked the Court to address the arguments presently raised, considering the statement of claim in its present form. The amendments incorporated in the most recent pleading do not alter the essential substance of the appellants' challenge to the pleading, as it was expressed in the statement of claim considered by the master. 14 In para 683 the pleading refers to each of the earlier nine periods identified in the amended statement of claim, alleging that, by mixing, quantities of unleaded petrol were combined with white spirits, ethanol and toluene, and in particulars under that paragraph the pleader indicates the plaintiff is going to rely upon proof of the material facts as pleaded in paras 198-441. 15 Paragraph 684 follows the same format as para 683 in relation to leaded petrol and so do the particulars set out under para 684. 16 Paragraph 685 asserts the supply of white spirits to the first defendant in each of the nine periods earlier identified in the statement of claim, and para 686 asserts such supply by the first appellant with knowledge that the white spirits would be used by the first and the second defendants to mix with leaded and unleaded petrol as pleaded in para 683 and 684. 17 It is asserted in para 686A that the first appellant knew that the first defendant had no relevant licence under s 34 of the Excise Act. 18 In para 687 it is alleged the first appellant advised the first defendant in what proportions to mix the white spirits, ethanol and toluene with unleaded petrol, and in para 688 a like allegation is made against the third appellant concerning advice given to the first defendant for mixing proportions for leaded petrol. 19 In para 689 it is pleaded that the first appellant knew the first defendant would, during each of the nine periods, transport the blends, including unleaded petrol and the other identified ingredients from its premises at Albion Park, and para 690 makes like assertions concerning leaded petrol and the other identified ingredients. 20 In paras 691-692 it is asserted that at all material times, that is during each of the nine identified periods, the first appellant knew that the first defendant intended to avoid excise duty on the blends of unleaded and leaded petrol. 21 In para 693 it is pleaded that the first appellant by reason of the facts earlier pleaded against it "aided, abetted, counselled or procured or by act or omission was directly or indirectly knowingly concerned in the commission of the offences against the Act by the first defendant, namely offences against ss 35, 61 and 120 of the Excise Act..." 22 In para 694 the case is pleaded against the second appellant relying upon the conduct of the first appellant as pleaded against it, being done at the second appellant's direction and/or with the second appellant's knowledge and/or with the second appellant's acquiescence. 23 In paras 695, 695A, 696, 697, 698 and 699 the relevant knowledge of the second appellant is pleaded, and then in para 700 it is pleaded against the second appellant that by reason of those facts earlier pleaded the second appellant "aided, abetted, counselled or procured or by act or omission was directly or indirectly knowingly concerned in the commission of the offences against the Act by the first defendant, namely offences against ss 35, 61 and 120 of the Excise Act." 24 The pleading goes on to assert under para 702 that excise duty was evaded by reason of the distribution of the excisable goods without entry for home consumption in accordance with the Act. Such particulars are given for the purposes of the offence under s 120(1)(iv). 25 Then para 703 provides further particulars about the offence under s 35 of the Excise Act: "The blending of petroleum and other products...being excisable blended petroleum products manufactured by the first defendant was contrary to s 35 of the Excise Act as excisable goods were manufactured by the first defendant without a licence." 26 Paragraph 704 provides particulars of the offence alleged under s 61: "Each of the quantities of excisable goods being excisable blended petroleum products...were moved by the first defendant contrary to s 61 of the Excise Act, when they were delivered for wholesale supply and/or sale to service stations and other persons." 27 Finally, in para 705, the pleader avers the facts earlier pleaded pursuant to s 144 of the Excise Act, which provision renders the averment prima facie evidence of the matters averred: "(1) In any Excise prosecution the averment of the prosecutor or plaintiff contained in the information, complaint, declaration or claim shall be prima facie evidence of the matter or matters averred. (2) This section shall apply to any matter so averred although: (a) evidence in support or rebuttal of the matter averred or of any other matter is given by witnesses; or (b) the matter averred is a mixed question of law and fact but in that case the averment shall be prima facie evidence of the fact only. (3) Any evidence given by the witnesses in support or rebuttal of a matter so averred shall be considered on its merits and the credibility and probative value of such evidence shall be neither increased nor diminished by reason of this section. (4) Subsection (1) shall not apply to: (a) an averment of the intent of the defendant; or (b) proceedings for an indictable offence or an offence directly punishable by imprisonment. (5) This section shall not lessen or affect any onus of proof otherwise falling on the defendant."

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Ground 1: 31 It was first submitted that proceedings in the nature of civil proceedings are not available to recover a "fine" for contravention of s 120(4) of the Excise Act. 32 The respondent brings these proceedings in reliance upon Pt XI of the Excise Act. Section 133 addresses proceedings "for the recovery of penalties" and provides for such proceedings to be referred to as "excise prosecutions". Section 134 enables "excise prosecutions" to be instituted, inter alia, by action in the Supreme Court of a State. 33 Section 136 makes provision for every excise prosecution in a court as referred to in s 134(1) "to be commenced, prosecuted and proceeded with…in accordance with the usual practice of procedure of the court in civil cases …" (Emphasis added) 34 Mr Hammerschlag has submitted that the claim under s 120(1)(iv) is in respect of a "fine" as distinct from a penalty, and that proceedings for the recovery of a fine are in the nature of criminal proceedings, and therefore they cannot be pursued in a civil claim. In short, it is submitted that ss 133, 134 and 136 do not avail the respondent in respect of an alleged offence under s 120(1)(iv), and that if proceedings are to be pursued against the appellants for such an alleged offence, criminal proceedings must be instituted. 35 It is to be observed that this ground concerns only the claim for orders in relation to s 120, since both ss 35 and 61 of the Excise Act expressly provide for "penalties". 36 This ground was not argued before the master but it has been fully argued before me and it is appropriate that it be addressed. 37 The appellant relies upon the decision of the Court of Criminal Appeal in Controller General of Customs v D'Aquino Bros Pty Limited (1996) 135 ALR 649. In D'Aquino a case was stated to the court under s 5B of the Criminal Appeal Act wherein one of the questions posed for the consideration of the court was the question whether s 244 of the Customs Act permitted of a prosecution to recover fines as well as penalties. It was determined that it did not. Section 244 of the Customs Act is expressed in language similar to s 133 of the Excise Act and is followed by provisions enabling proceedings for recovery of penalties to be brought in the courts in their civil jurisdiction. Of course, the decision in D'Aquino is not authority directly referable to the Excise Act. Moreover, the ground here raised by the appellant has been determined against the appellants in Controller General of Customs v Kingswood Distillery Pty Limited (unreported, Sully J, 5 August 1996). 38 The Kingswood Distillery case is directly in point. There the Controller General applied, inter alia, for orders for the conviction of the defendant of an offence under s 120(1)(iv) of the Excise Act and for the recovery of "penalties". The defendant sought summary dismissal of the proceedings upon the basis that any contravention of the statute would only be punishable by a "fine" and a "fine" was not a "penalty" for the purposes of s 133 of the Excise Act. Sully J rejected the defendant's application and said at p 18 of his judgment: "There is, it seems to me, no apparent ambiguity in the language used either in the re-cast section 120 or in the re-cast section 129. If, then, one asks what logical explanation there might be for permitting an excise prosecution pursuant to Part XI of the Act in the case of a 'fine' to which section 129 is applicable, but not permitting such a procedure in the case of a 'fine' to which section 120 is applicable, I can only say that, for my own part, I am wholly unable to see any logical reason for such a distinction. Section 129 punishes offences against sections 117 and 119 of the Act. Sections 117 and 119 form part of Part X of the Act: that is to say, they are part of the scheme of 'Penal Provisions' for which provision is made by Part X of the Act. The offences created by section 120(1) in its re-cast form are, also, offences within Part X of the Act. It is obvious from the range of punishments provided by section 120(2), that the Parliament did not regard an offence against section 120 as being in some way generically less serious than an offence against either of sections 117 and 119. It seems to me to go against the whole sense of the legislative scheme, looked at as a whole, to suppose that Parliament deliberately excluded offences against section 120 of the Act from the procedural provisions of Part XI of the Act." 39 His Honour considered D'Aquino and said as to this decision: "I take the ratio decidendi of D'Aquino to be, and to be no more than, that section 244 of the Customs Act does not authorise a Customs prosecution for the purpose of recovering a 'fine' as distinct from a 'penalty'... D'Aquino had nothing to do with section 120 of the Excise Act. It did not involve an historical analysis of the derivation of section 120 in its legislative form as relevant for present purposes. It did not consider, let alone consider and reject, the process of reasoning exposed by what I have thus far written in this judgment. I do not consider that I am compelled by D'Aquino to apply its reasoning as to a different section of a different statute to section 133, as applicable to section 120, of the Act at present in question." 40 In Kingswood Distillery Sully J conducted a historical analysis of relevant provisions of the Excise Act and, with respect, I find his Honour's reasoning leading to the conclusion that civil process is available for offences under s 120(1)(iv) to be persuasive. In those circumstances I should, and I will, follow his Honour's decision. 41 Accordingly this first ground of appeal fails.

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Ground 2 42 It was next submitted that the master fell into error in failing to find that s 5 of the Crimes Act did not apply to the Excise Act. 43 Section 5 of the Commonwealth Crimes Act provides: " (1) Any person who aids, abets, counsels, or procures, or by act or omission is in any way directly or indirectly knowingly concerned in, or party to, the commission of any offence against any law of the Commonwealth, whether passed before or after the commencement of this Act, shall be deemed to have committed that offence and shall be punishable accordingly..." 44 The respondent here relies upon that provision in pleading its case against the appellants. 45 It was submitted that the section can have no application in civil proceedings by way of excise prosecution under Pt XI of the Excise Act. The short point is that these are not criminal proceedings so the operation of s 5 is not enlivened. Mr Hammerschlag drew attention to the fact that there is missing from this Act a counterpart to s 236 of the Customs Act, which section states: "Whoever aids abets counsels or procures or by act or omission is in any way directly or indirectly concerned in the commission of any offence against this Act shall be deemed to have committed such offence and shall be punishable accordingly." 46 It was argued that Parliament perceived it to be necessary to enact s 236 because s 5 of the Crimes Act did not apply for the purposes of the penal provisions of the Customs Act. 47 I am not attracted by these submissions. 48 Firstly, in relation to the alleged breach of s 120(1)(iv), s 120(2)(b) identifies an act of evasion under s 120(1)(iv) as being "an offence". Moreover, s 5 of the Excise Act states: "The penalties referred to at the foot of sections indicate that any contravention of the section whether by act or omission is an offence against this Act punishable on conviction by a penalty not exceeding (except as provided by sections 129 to 132, inclusive) the penalty mentioned." 49 Secondly, ss 35 and 61 each have a penalty referred to at the foot of the section and hence s 5 categorises the contravention of each section as being "an offence against this Act". 50 Hence each of the alleged contraventions prompting the proceedings commenced by the respondent amount, if proved, to offences against the Excise Act. The contraventions are offences punishable by conviction. 51 In my opinion, s 5 of the Commonwealth Crimes Act has application. It does not matter whether the punishment of the offences is being sought in proceedings in the nature of civil proceedings or in the nature of criminal proceedings. Mallan v Lee (1949) 80 CLR 198 is in point. In that case a company was charged with contravention of s 230 of the Income Tax Assessment Act in that its public officer, M, in the company's return had knowingly and wilfully understated the income of the company. M was also charged and s 5 of the Crimes Act was relied upon. Latham CJ said as to the operation of s 5: "In my opinion it is quite unnecessary in the present case to determine whether or not the description 'criminal' should be applied to proceedings under s 230 of the Income Tax Assessment Act. The English decisions to which I have referred are decisions upon the question whether a particular proceeding was a 'criminal cause or matter,' but s 5 of the Crimes Act comes into operation whenever there is an 'offence against any law of the Commonwealth.' Parliament has quite clearly declared in s 230 of the Income Tax Assessment Act that certain acts shall constitute an offence, and I can see no reason whatever for a Court ignoring this plain declaration of parliamentary intention and importing into the interpretation of s 5 of the Crimes Act the doubts and difficulties which have arisen in Great Britain with respect to the meaning of the term 'criminal' in relation to informations by the Attorney General to recover penalties in taxation or other cases - a procedure for which, in Australia, Part VII of the Income Tax Assessment Act has been substituted so far as income tax is concerned. The word 'criminal' is sometimes said to be properly applied only to offences against what are called public laws. I should have thought that taxation laws were public laws in every sense, though English cases exhibit a marked reluctance to regard a smuggler or other person who defrauds the Government in matters of revenue as a criminal. Sometimes the possibility of imprisonment upon conviction has been taken as the test. Imposition of a pecuniary penalty as a fine, as distinguished from recovery of a penalty as compensation, equally clearly shows that the Legislature intended to punish an act as being criminal. But, as I have already said, it is unnecessary in the present case to consider whether or not a breach of s 230 is a 'crime' or whether the proceedings in a taxation prosecution adopt a civil or criminal form. Such a breach is plainly an 'offence' within the meaning of that term in the statutes of the Commonwealth Parliament, and s 5 of the Crimes Act applies to 'offences against any law of the Commonwealth,' whether or not they (or legal proceedings to recover penalties in respect of them) may in a particular system of jurisprudence be described as criminal rather than civil in character . I am therefore of opinion that even if s 230 of the Income Tax Assessment Act were held not to create a criminal offence the application of s 5 of the Crimes Act cannot be excluded for that reason. The section plainly creates an offence whether or not that offence should be described as criminal." (Emphasis added) 52 The remarks of the Chief Justice are apposite in the present case. 53 Just as s 5 of the Crimes Act had application where there was an offence against the Income Tax Assessment Act, so too does the section operate where there is an offence against a provision of the Excise Act and here offences are alleged against ss 35, 61 and 120(1)(iv). Accordingly, in my opinion, the respondent is entitled to rely upon s 5 of the Crimes Act.

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Ground 3 54 The next ground argued concerns the second appellant only. It is submitted that since the pleading asserts throughout that it was the first appellant which supplied materials and the first appellant which gave advice, if it was a case to which s 5 of the Crimes Act applied, it was the first appellant which, on the pleadings, aided and abetted and it could not be argued that the second appellant also aided and abetted, when the pleader was relying against the second appellant upon precisely the same matters as were pleaded against the first appellant. The second appellant's liability was pleaded as arising by reason of his position as a director of the first appellant and it was pleaded against him that the first appellant acted at his direction or with his knowledge or acquiescence. If this was the only way the case was to be presented against the fourth defendant it was submitted that it was impermissible for the respondent to pursue both the appellants when it was relying against each upon precisely the same acts to establish liability. 55 Mr Hammerschlag cited Hamilton v Whitehead (1988-1989) 166 CLR 121 in support of this submission. In that case the respondent was charged with six counts of being knowingly concerned in the commission by a particular company of six offences under s 169 of the Companies (Western Australia) Code. The company itself was charged with contravention of the code, but the company's liability was a direct liability, not a vicarious one, by reason of the statutory provision giving rise to the liability of the company. It was determined in the High Court that the circumstances were such as to give rise to liability not only in the company but in the respondent, its managing director. In their joint judgment, Mason CJ and Wilson and Toohey JJ said at 127-128: "There can be no doubt, on the facts of the present case, that the respondent, in placing the advertisement and in dealing with those who replied to it, was the company. He was its managing director and his mind was the mind of the company. The company therefore was liable as a principal for the breaches of s 169 of the Code. The liability was direct, not vicarious. It is against this background that the liability of the respondent falls to be considered. As we have said, the applicant relies upon s 38(1) of the Interpretation Code, the terms of which have been set out. Since the respondent was the actor in the conduct constituting the offences and had knowledge of all the material circumstances, it must follow, according to the applicant, that the respondent was 'knowingly concerned' in the commission of the offences committed by the company." 56 It is clear that in Whitehead the company and its officer committed difference offences, so that case is not directly in point. The company offended against s 169 of the Companies Code because the officer's acts were the acts of the company; the officer's offence was against s 38 of the Interpretations Code. However, in the present case, it is submitted both appellants are alleged to have committed the same offence, and the claim against the second appellant is not maintainable because his acts were the acts of the first appellant. 57 Mr Roberts of Senior Counsel, on behalf of the respondent, submitted that the second appellant could not escape liability by reason of acting through the first appellant. The fact that the first appellant was vicariously liable for and was also deemed to do that which was done by the second appellant did not result in the second appellant escaping liability for his acts. Mr Roberts referred to s 145A(2) of the Excise Act: " (2) Any conduct engaged in on behalf of a body corporate: (a) by a director, servant or agent of the body corporate within the scope of his or her actual or apparent authority; or (b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, servant or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, servant or agent; shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate ."

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(d) in paras 691 and 692, knowledge that the first defendant intended to avoid excise duty of both the blends containing leaded and unleaded petrol. 69 This ground also related to the pleading of knowledge in the second appellant. Paragraphs 695, 695A, 696, 697, 698 and 699 repeated the same assertions of knowledge as were made against the first appellant in the paragraphs above referred to in relation to that appellant. 70 It was submitted that the pleading failed to comply with Pt 15 r 7(1) which provides: "A pleading of a party shall contain, and contain only, a statement in a summary form of the material facts on which he relies, but not the evidence by which those facts are to be proved..." 71 It is contended by the appellants that the respondents' pleading is defective because it fails to plead the material facts from which the conclusion of "knowledge" is derived. 72 In support of that submission, Mr Hammerschlag cited three decisions in the Federal Court: Sammy Russo Meat Supplies Pty Limited v Australian Safeway Stores (unreported, Goldberg J, 3 September 1998); Chan Cuong Su v Direct Flights International Pty Limited (1999) ATPR 41-677; and Pioneer Electronics Australia Pty Limited v Edge Technology Pty Limited (1999) FCA 142 (unreported, Kenny J, 24 February 1999). I have considered each of the above authorities in which the sufficiency of pleadings was considered under Order 11 of the Federal Court Rules. In each of those Federal Court cases the court was concerned to consider the sufficiency of a pleading in the particular circumstances of the case, circumstances differing from those which the respondents' pleading here addresses. 73 Mr Roberts submitted in the present case that the assertion of knowledge in each of the paragraphs above identified constituted the pleading of the material fact for the purposes of Pt 15 r 7(1). In my opinion that submission is correct. The respondent is not required by this rule to plead the evidence upon which proof of the material fact of knowledge will be sought to be proved. In my opinion the pleading sufficiently identifies those matters as to which it is asserted each of the appellants had knowledge and no more was required to satisfy Pt 15 r 7. 74 This ground has not been established. Ground 6 75 The appellants have next submitted that the pleading is embarrassing in a number of respects, warranting relief under Pt 15 r 26. I shall address these matters in the order in which counsel addressed them in written submissions filed. None of these matters was addressed in oral submissions:

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