CEO of Customs v Camile Trading & Ors

Plaintiff - Chief Executive Officer of Customs 1st Defendant - Camile Trading Pty Ltd PARTIES : 2nd Defendant - Leslie Ronald Fletcher 3rd Defendant - Evenfont Pty Ltd 4th Defendant - Robert Leonard Pullinger JUDGMENT OF : Master Harrison

COUNSEL : Plaintiff - P Hastings QC; R Wilson 3rd & 4th Defendants - D Hammerschlag SC SOLICITORS : Plaintiff - Australian Govenment Solicitor 3rd & 4th Defendants - Horowitz & Bilinsky Solicitors CATCHWORDS : strike out part of statement of claim Excise Act 1901 (Cth) LEGISLATION CITED : Crimes Act 1914 (Cth) Supreme Court Rules Pt 13 r 5; Pt 15 r 26 Air Services Australia v Zarb (NSWCA, Unreported, 26 August 1998) Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 Webster & Anor v Lampard (1993) 177 CLR 598 Yorke v Lucas (1983 - 1984) 158 CLR 661 CASES CITED : Sammy Russo Meat Supplies Pty Ltd v Australian Safeway Stores (unreported, Goldberg J, Federal Court of Australia, 3 September 1998) Pioneer Electronics Australia Pty ltd v Edge Technology Pty Lrd [1999] FCA 142 (24 February 1999, kenny J) Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (Federal Court of Australia, French J, 3 September 1991, unreported) Ratcliffe v Evans (1892) 2 QB 542 Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413 H 1976 Nominees Pty Ltd v Galli (1979) 40 FLR 242 DECISION : (1) The plaintiff is to file and serve a further amended statement of claim within 21 days; (2) The third and fourth defendants are to pay the costs of the notice of motion. The plaintiff is to pay the costs thrown away by the minor amendments made in the further amended statement of claim.

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

20859/97 - CHIEF EXECUTIVE OFFICER OF CUSTOMS v CAMILE TRADING PTY LTD & ORS

1 MASTER: By notice of motion filed 21 August 2001 the third and fourth defendants seek an order that the amended statement of claim be dismissed in so far as it relates to the third and fourth defendant, alternatively that it be struck out, alternatively that paras 685 to 700 inclusive be struck out. Alternatively, the claimant seeks that the amended statement of claim be stayed in relation to the third and fourth defendant. The third and fourth defendants did not make any submissions on the stay issue and I have not dealt with it. The plaintiff is the Chief Executive Officer of Customs, Camile Trading Pty Ltd is the first defendant, Leslie Ronald Fletcher is the second defendant, Evenfont Pty Ltd is the third defendant and Robert Leonard Pullinger is the fourth defendant. 2 The statement of claim is a very lengthy document and covers some 705 paragraphs. Essentially it involves the taking of civil proceedings against the defendants in relation to breaches of the Excise Act 1901 (Cth). It is common ground that the applicable law is the Excise Act as it was prior to the 2000 amendments taking effect. 3 Briefly, s54 of the Excise Act (the Act) refers to the liability to pay duty by the manufacturer of excisable goods. Section 59 creates an obligation to pay excise duty. Section 133 refers to proceedings for the recovery of penalties as excise prosecutions. Section 134 stipulates that excise prosecutions may be instituted by the CEO of Customs by appropriate pleadings in a State Supreme Court. The excise prosecution may be prosecuted before a Court of summary jurisdiction in accordance with the usual practice and procedure of the court in civil cases (s136). 4 Interestingly, s140 provides that no objection shall be taken or allowed to any originating process for any alleged defect in substance and in form or for any variance between such originating process and the evidence adduced at the hearing, and the court shall at all times make any amendment necessary to determine the real question in dispute or which may appear desirable. Even so, the plaintiff is still obliged to plead a cause of action against the defendants.

The Statement of Claim 5 Paragraphs 1 to 17 are uncontroversial. It pleads that the first defendant used the business name of Marina Petrol and that the second defendant was a director and shareholder of the first defendant. In para 5 it is alleged that between 1995 and 1996 the first defendant carried on the business of a petroleum wholesaler, through which it sold unleaded petrol, leaded petrol and diesel from its premises in Albion Park Rail. The first defendant was not a grantee of an Excise Manufacturers Licence granted pursuant to s34 of the Excise Act (the Act) by the plaintiff. The third defendant, Evenfont Pty Ltd, carried out the business of manufacturing petroleum products in Seven Hills and Rutherford. The ultimate holding company of the third defendant is Truegrain Pty Ltd. Truegrain Pty Ltd holds all the issued shares in the third defendant. The fourth defendant and Paul Andrew Lucas were directors and shareholders in the capital of Truegrain Pty Ltd. The fourth defendant was a grantee of an excise manufacturer's licence. The gravamen of the allegations is that the defendants blended petroleum products so that less excise duty became payable. 6 The first section of the statement of claim relates to the topic of diesel and heating oil blending. Paragraphs 18 to 197 deal with this topic. These paragraphs are further broken down into subsections which group the allegations into nine time periods from 1992 to 1996. As I understand it, there are no allegations made in these against the third and fourth defendants in relation to diesel and heating oil blending. Paragraphs 198 to 441 refer to petroleum blending of unleaded petrol. Likewise these paragraphs are broken into nine time periods. Paragraphs of 442 to 675 refer to petroleum blending for leaded petrol. Paragraphs 676 to 682 relate to the second defendant only. Paragraphs 683 to 700 refer to the third and fourth defendants. I shall refer to these paragraphs in detail later in this judgment. 7 I shall refer to the paragraphs relating to petroleum blending of unleaded petrol in detail to outline the allegations being made against the third and fourth defendants. The allegations in relation to leaded petrol are similarly pleaded. The first period covered under the heading petroleum blending for unleaded petrol is 1 April 1994 to 10 May 1994. In para 198 it is alleged that between 1 April 1994 and 10 May 1994, the first defendant purchased 2,080,210 litres of unleaded petrol for use in the business it then conducted. Paragraph 199 alleges that within the period the unleaded petrol was delivered to the first defendants premises and then gives particulars. Paragraph 200 refers to the unleaded petrol being stored on the first defendant's premises. Paragraph 201 refers to the first defendant purchasing quantities of white hydrocarbon being a petroleum product known as white spirit and gives particulars. Paragraph 202 alleges the white spirit was delivered to the first defendant's premises. Paragraph 203 alleges the white spirit was stored in the first defendant's premises. Paragraph 204 alleges the first defendant purchased a particular quantity of ethanol and that it was delivered to the first defendant's premises (Para 205). Paragraph 206 the ethanol was stored on the first defendant's premises. The similar process goes through in relation to the aromic hydrocarbon in the form of toluene (Paras 207 - 209). 8 In para 210 it is alleged that the first defendant did, by mixing, combine quantities of unleaded petrol with quantities of white spirit and toluene and gives particulars. It alleges that the first defendant did not have a licence pursuant to the Act permitting it to mix or combine these products. At para 212 it alleges that by these matters pleaded the first defendant did during the said period manufacture excisable goods in breach of the provisions of the Act. It alleges there were breaches of s35 and 77H of the Act. It puts an alternative paragraph in that as an alternative to para 212 the first defendant acting in breach of s5 of the Crimes Act 1914 (Cth) on each and every occasion that it mixed the product. 9 Paragraph 214 calculates the amount of excise duty payable. Paragraph 215 alleges that the first defendant had not paid the amount of duty payable and by para 216 it is alleged that that the failure to pay the amount of duty was intentional. By para 217 it alleges that the first defendant has, during the said period, evaded the payment of excise duty that was payable pursuant to the provisions of the Act and is there for in breach of s120 of the Act. By para 219 it is alleged that the product was then removed from the first defendant's premises and that the plaintiff did not have permission or authorisation to remove to excisable goods and that there was no entry for home consumption, transhipment or warehousing made or lodged with the plaintiff for the excisable goods, being the mixture. At para 222 it alleges that the first defendant breached s61 of the Act. 10 It should be noted that in some of the paragraphs, for example 228, the white spirit was purchased from the third defendant and was collected from the third defendant's premises and delivered to the first defendant's premises by agents of the first defendant. Allegations of the third defendant's involvement is wrapped up in para 685 (referred to later in this judgment).

Allegations Against the Third and Fourth Defendants 11 At the end of para 603 it says in proving the material fact alleged against the third and fourth defendants in para 683 the plaintiff will offer proof of all material facts pleaded within paras 198 to 441 of this statement of claim. In para 684 it is alleged that the several acts of the first defendant, whereby it acquired and stored the petroleum products that it so combined are set forth in paras 442 to 675 of the statement of claim. Again it pleads, in proving the material fact alleged against the third and fourth defendant in para 684, that the plaintiff will offer proof of all the material facts pleaded in paras 442 to 675 of the statement of claim. Thus, the essential elements which contravene ss 61 and 120 have been pleaded against the first and second defendants in paras 198 to 675 of the amended statement of claim. 12 Paragraph 685 refers to the nine time periods and directs the third defendant's attention to certain paragraphs where it alleges they were involved in supplying white spirits in respect of the blending of unleaded and leaded petrol. 13 Paragraph 686 states that the third defendant supplied such white spirits to the first defendant knowing at all material times that they would be used by the first defendant by mixing them with unleaded and leaded petrol and that, at para 687, the third defendant advised the first defendant as to the proportions of white spirit, ethanol and toluene that should be used in the mixing of those products with leaded and unleaded petrol. Paragraph 688 alleges that during these periods the third defendant knew that the first defendant would transport the blend of unleaded petrol, white spirits, ethanol and toluene from its premises at Albion Park Rail. Paragraph 690 refers to the same activity in relation to leaded petrol. Paragraph 691 and 692 say that the third defendant knew that the first defendant intended to avoid the payment of excise duties on the blends of leaded petrol, white spirits, ethanol and toluene that it manufactured. Hence it is alleged that the third and fourth defendants were involved in the supplying of white spirits which they knew would be mixed with petrol, that they knew the first and second defendants would transport that blend and that they knew that the first and second defendants sought to avoid paying excise duties. 14 Paragraph 693 is perhaps the most critical paragraph involving the third and fourth defendants, in that it pleads that, by reasons of the material facts pleaded against the first and second defendants, the third defendant 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 Act. It also makes reference to s5 of the Crimes Act. 15 The relevant provisions from the Excise Act, referred to in the statement of claim, are as follows: "Manufacturers to be licensed 35. Subject to the regulations, a person shall not manufacture excisable goods except pursuant to this Act and a licence granted thereunder. Penalty: $5,000. … Customs Control 61. 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. … Offences 120. (1) A person shall not: (i) Sell except by authority any excisable goods unlawfully removed from a factory; …

(v) Obtain any drawback which is not payable; 16 Section 5 of the Crimes Act relevantly provides: "5 Aiders and abettors (1) Any person who aids, abets, counsels, or procured, 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."

The Law on Summary Judgment 17 Part 15 r 26 provides: "(1) Where a pleading - (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading;

(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or

(c) is otherwise an abuse of the process of the Court, the Court may at any stage of the proceedings, on terms, order that the whole or any part of the pleadings be struck out. (2) The Court may receive evidence on the hearing of an application for an order under subrule (1)." 18 Part 13 r 5 says: "(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings- (a) no reasonable cause of action is disclosed;

(c) the proceedings are an abuse of the process of the Court, the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings."

19 In a Court of Appeal decision Air Services Australia v Zarb (NSWCA, unreported, 26 August 1998) Rolfe AJA found it useful to remind himself of the highly demanding test imposed on a party seeking summary judgment. His Honour referred to Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 and Webster & Anor v Lampard (1993) 177 CLR 598. I have reproduced some of the passages quoted in Zarb. 20 In General Steel Barwick CJ, who heard the application alone stated: "Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed." 21 Barwick CJ also said: "It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of cause of action - if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; be manifest that to allow them' (the pleadings) 'to stand would involve useless expense." 22 In Webster Mason CJ, Deane and Dawson JJ reinforced the rigorous testing stating, at p 602: "The power to order summary judgment must be exercised with 'exceptional caution' and 'should never be exercised unless it is clear that there is no real question to be tried."' 23 According to Rolfe AJA in Zarb: "The demanding nature of the test is in no way lessened in circumstances where there are the potential for difficult factual and legal issues to arise. Rather, as the decision in Webster made clear, it is heightened: see also Wickstead & Ors v Browne (1992) 30 NSWLR 1 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241." 24 The third and fourth defendant submitted that the claim made against them is entirely accessorial and depends on the pleading and establishing knowledge (meaning actual and not constructive knowledge) of the essential elements constituting the principle contravention or contraventions. 25 Section 5 of the Crimes Act is slightly similar to s 75B of the Trade Practices Act 1974 (Cth). Section 75B provides that a reference to a person involved in a contravention shall be read as a reference to a person who: "(a) has aided, abetted, counselled or procured the contravention;

(b) has induced, whether by threats or promises or otherwise, the contravention;

(c) has been in any was, directly or indirectly, knowingly concerned in, or party to, the contravention; or

(d) has conspired with others to effect the contravention." 26 In a joint judgment, in Yorke v Lucas (1983-1984) 158 CLR 661, at page 670, the High Court (per Mason ACJ, Wilson, Deane and Dawson JJ) stated: "In our view, the proper construction of paragraph (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention." 27 The third and fourth defendants submitted that the pleadings make numerous averments to other parties and then pleads as a conclusion, or a series of conclusions, knowledge, including knowledge of someone's unfulfilled intentions. The fundamental complaint by the third and fourth defendants is that the pleadings failed to comply with Part 15 Rule 7(1) in that it fails to disclose the material facts from which those conclusions are derived. 28 The plaintiff submitted that the third and fourth defendants have misused the word conclusion. The plaintiff submitted that it was clear from the factual basis that inferences could be drawn and not conclusions, that is, inferences can be drawn from the facts as to the third and fourth defendants' knowledge. For example it is pleaded the third defendant provided facilities for testing the mixture and supplied some of the white spirit. According to the plaintiff, the statement of claim pleads the third and fourth defendants' physical involvement in the offence and the mental elements alleged. In this regard the third and fourth defendants referred to two federal court decisions: Sammy Russo Meat Supplies Pty Ltd v Australian Safeway Stores (unreported, Goldberg J, Federal Court of Australia, 3 September 1998) and Pioneer Electronics Australia Pty Ltd v Edge Technology Pty Ltd [1999] FCA 142 (24 February 1999, Kenny J). With respect, I did not find these cases of assistance. 29 It is not sufficient that the statement of claim simply express a conclusion drawn from facts which are not stated - see Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 114; though in some circumstances to plead a conclusion may be to plead a material fact - see Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (Federal Court of Australia, French J, 3 September 1991, unreported). Not only must all material facts be pleaded but they must be pleaded with a sufficient degree of specificity, having regard to the general subject-matter, to convey to the opposite party the case that party has to meet - see Ratcliffe v Evans (1892) 2 QB 524 at 532; Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413 at 417. It must be apparent on the fact of the document that the facts pleaded, if proved, would establish the cause of action relied upon - see H 1976 Nominees Pty Ltd v Galli (1979) 40 FLR 242 at 246. It is not a function of particulars to take the place of the necessary averments in the statement of claim. Trade Practices Commission v David Jones (Australia) Pty Ltd at 114. Further, a pleading must state the facts that if not specifically pleaded might take the other party by surprise. 30 The third and fourth defendants submitted that all matters pleaded in paras 683 to 692 and 694 to 699 are not capable of constituting aiding and abetting, counselling or procuring within s 5 of the Crimes Act. Whilst it may have been the intention for the first defendant to avoid payment of excise duty, nothing pleaded or particularised equates to an allegation that the third or fourth defendants had anything to do with the intention or carrying it into effect. 31 It is pleaded that the first and second defendants did not have a licence. It has also been pleaded that the petrol had been purchased by the first and second defendants and delivered to and stored at their premises. It is alleged that the first defendant mixed and combined products (as defined earlier) and transported the excisable goods. The elements that constitute breaches of ss 35, 61 and 120 have been properly pleaded as against the first and second defendants. It is pleaded that the third and fourth defendants knew that the first defendant intended to avoid the payment of excise duties. It is also pleaded that they supplied the white spirits that they knew would be mixed with petrol and transported. Nor can it be said that the third and fourth defendants will be taken by surprise at trial. 32 In order for the third and fourth defendants to be found guilty of these offences it must be pleaded that they aided, abetted, counselled or procured by act or omission in any way directly or indirectly, or were concerned in or party to the commission of any offence against the Commonwealth. Paragraph 693 pleads the words above. 33 It is my view that the essential elements of the contravention have been pleaded. The material facts have been pleaded as has their knowledge. The pleading cannot be said to be hopeless. I also bear in mind s140 of the Excise Act. The paragraphs relating to the third and fourth defendants pleaded in the amended statement of claim should not be struck out. 34 The plaintiff conceded that the heading 'Against All Defendants', found from para 18, may need to be amended. It further conceded that there should be additional paras 686A and 695A to the effect that the third and fourth defendants knew that the first defendant was not the grantee of an excise manufacturer's licence pursuant to s34 of the Act. These minor amendments need to be incorporated in a further amended statement of claim. 35 Costs are discretionary. As the third and fourth defendants were largely unsuccessful with their arguments, they should pay the costs of the motion. However, the plaintiff is to pay the costs incurred in making the minor amendments to the further amended statement of claim. 36 The court orders:

(1) The plaintiff is to file and serve a further amended statement of claim within 21 days.

(2) The third and fourth defendants are to pay the costs of the notice of motion. The plaintiff is to pay the costs thrown away by the minor amendments made in the further amended statement of claim.

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