CEO of Customs v Camile Trading Pty Limited

CATCHWORDS : Action under the Excise Act 1901 and the Excise Tariff Act 1921 - allegation of blending petrol and diesel without a licence - evading duty - penalties on each offence - two offenders, one knowingly concerned - evasion - second defendant died after conviction and before penalty hearing - whether liability abated - intention of legislature in statute - award of reparation to be shared equally.

Excise Act 1901 (Cth) LEGISLATION CITED : Excise Tariff Act 1921 (Cth) Law Reform (Miscellaneous Provisions) Act 1944 (NSW) Sex Discrimination Act 1984 (Cth)

Chief Executive Officer of Customs v Camile Trading P/L & Ors [2006] NSWSC 1401 Managing Director, New South Wales Technical & Further Education Commission v Fines (1993) 32 NSWLR 385 Healey v Williams (1985) 10 FCR 254; 64 ALR 140 Kalejs v Minister for Justice & Customs [2001] FCA 1769; (2001) 111 FCR 442 CASES CITED : Halpin v Dept of Gaming & Racing [2007] NSWSC 815 Stephenson v Human Rights and Equal Opportunity Commission (1996) 68 FCR 290 Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Limited [2003] HCA 49; (2003) 216 CLR 161 Pearce v The Queen [1998] HCA 57; (1998) 194 CLR 610 EPA v Barnes [2006] NSWCCA 246

TEXTS CITED : Archbold: Criminal Pleading, Evidence & Practice 2008

CEO of Customs (Pl) PARTIES : Camile Trading Pty Limited (1Def) Leslie Ronald Fletcher (2 Def)

COUNSEL : P Hastings QC/R Wilson (Pl) S J Stanton (Def)

SOLICITORS : Australian Government Solicitor (Pl) Access Business Lawyers (Def)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

20859/1997 CEO of Customs v Camile Trading P/L & Ors

JUDGMENT (on Penalty) 1 KIRBY J: By an Amended Statement of Claim, the Chief Executive Officer of Customs ("Customs") commenced an action under the Excise Act 1901 (Cth) and the Excise Tariff Act 1921 (Cth) against a number of defendants, including: · Camile Trading Pty Limited ("Camile Trading"), a petroleum wholesaler at Albion Park Rail; · Mr Leslie Ronald Fletcher who was a director of Camile Trading and held 90 percent of the shares of that company. 2 Customs sought the conviction of the company for offences under the following provisions of the Excise Act: · Section 35, which is concerned with the manufacture of excisable goods; (penalty: fine maximum $5000) · Section 61, which is concerned with the movement of excisable goods; and (penalty: fine maximum $20,000) · Section 120(1)(iv) which is concerned with the evasion of excise duty payable in relation to excisable goods. (penalty: If the duty evaded can be ascertained, the penalty range is between 2 times and 5 times the amount of duty evaded (s120(2)(b)(i)). If it cannot be so ascertained, a maximum penalty of $50,000 applies (s120(2)(b)(ii)). 3 The conviction was also sought of Mr Fletcher for each offence upon the basis that he was "knowingly concerned" in Camile Trading's offences. Camile Trading was effectively a "one man company". 4 In broad terms, Customs alleged that Camile Trading blended petroleum products, and in doing so, manufactured excisable goods. It was alleged that three petroleum products had been blended, namely: · First, the blending of diesel and heating oil; · Secondly, the blending of unleaded petrol with a number of different petroleum products and ethanol; and · Thirdly, the blending of leaded (or super) petrol with various petroleum products and ethanol. 5 According to Customs, the blending had occurred during a two and a half year period between 1 April 1994 and 21 November 1996. The action was complicated by the amendment of the Excise Act and Tariff Schedule during that period. The Statement of Claim defined nine separate periods where there were material changes to either the Act or the Schedule. The nine periods were as follows: Period 1: 1.4.94 - 10.5.94 Period 2: 11.5.94 - 30.6.94 Period 3: 1.7.94 - 31.7.94 Period 4: 1.8.94 - 31.1.95 Period 5: 1.2.95 - 30.6.95 Period 6: 1.7.95 - 31.7.95 Period 7: 1.8.95 - 31.1.96 Period 8: 1.2.96 - 31.7.96 Period 9: 1.8.96 - 21.11.96 6 The manufacture of excisable goods requires a licence (Excise Act 1901, s34). An offence is committed where the manufacturer has no licence (s35) ("the licence offence"). Further, once manufactured, excisable goods were subject to Customs control. They could not be moved without the permission of the controller. If they were moved, an offence was committed (s61) ("the movement offence"). Here, Customs alleged that Camile Trading, having manufactured blended petrol and diesel, moved such fuels from its depot at Albion Park without permission. Finally, Customs asserted that Camile Trading blended petroleum products to obtain a price advantage. The ingredients in the blend were either excise free or carried an excise tariff significantly less than the gasoline/diesel rate. The blend of diesel or petrol had therefore been manufactured more cheaply than an equivalent amount of unblended petrol or diesel. The manufacture involved, according to Customs, the evasion of excise duty which was an offence under s120(1) ("the evasion charge"). 7 After a lengthy trial, judgment was given on 19 December 2006 ([2006] NSWSC 1401). Camile Trading was convicted of each offence. Mr Fletcher was also convicted, he having been "knowingly concerned" in each offence. The matter was thereafter stood over until 13 February 2007 for mention. There was, on that day, a discussion concerning the timetable for submissions on penalty. On 12 April 2007, the hearing on penalty was fixed for 27 July 2007. However, on 3 July 2007 Mr Leslie Ronald Fletcher died. The hearing date was vacated. On 14 May 2008, a consent order was made in these terms: "Pursuant to Uniform Civil Procedure Rule 2005/Regulation 7.10(2)b the Court appoints Brett Fletcher of 20 Drysdale Road Albion Park to be representative of the estate of the late Leslie Fletcher for the purposes of the proceedings and with the consent of Brett Fletcher." 8 Submissions were ultimately made on 11 July 2008.

The continued existence of the right. 9 In Managing Director, New South Wales Technical & Further Education Commission v Fines (1993) 32 NSWLR 385, Mahoney JA said this: (at 387) "Where a party to a proceeding dies after the proceeding has been commenced and before it has ended by a decision, at least two questions are apt to rise: (a) whether the right which the proceeding has been brought to enforce continues to exist notwithstanding the death; and (b) (if it does) how the fact of death affects the procedural aspects of the proceeding." 10 Counsel for the late Mr Fletcher submitted that the proceedings should be characterised as being in the nature of criminal proceedings. A conviction had been recorded in respect of various offences. A penalty was about to be imposed when Mr Fletcher died. That penalty should be seen as a "criminal penalty, not a civil penalty". According to counsel, the rule in criminal proceedings was therefore appropriate. At common law in proceedings upon indictment, where an accused person dies, the indictment was noted and the proceedings then abated "unless and until the court, on cause being shown, otherwise orders" (Archbold: Criminal Pleading, Evidence & Practice 2008 - para [3-212]). 11 Counsel for Customs, in response, made the following submission: "13. The proceedings have been brought in the Supreme Court of NSW in accordance with s134(1) of the Excise Act 1901. By virtue of s136 of the Act, the prosecution may be commenced, prosecuted and proceeded with in accordance with 'the usual practice and procedure' of this court in civil cases. The abatement question is a matter of practice and procedure, and the question should be determined upon the basis of the law that would be applied as to this issue in civil proceedings. This brings the provisions of s2 of the Law Reform (Miscellaneous Provisions) Act 1944 into play as well as the UCP Rules, with the result that the cause of action survives." 12 The issue has been considered in a number of cases: Healey v Williams (1985) 10 FCR 254; 64 ALR 140; NSW TAFE Commission v Fines (supra); Kalejs v Minister for Justice & Customs [2001] FCA 1769; (2001) 111 FCR 442; Halpin v Dept of Gaming & Racing [2007] NSWSC 815. Most cases deal with the transmission of rights from the deceased to his or her legal representative. However, as with the Law Reform (Miscellaneous Provisions) Act, 1944 (NSW) s2(1), the principles equally apply to the transmission of a liability. 13 The common law distinguishes between rights and liabilities or causes of action that are transmissible from the deceased to his or her personal representative and those that are not. Kenny J in Kalejs v Minister for Justice & Customs (supra), said this: (at 446/7) "15. … Prior to the English Law Reform Miscellaneous Provisions) Act 1934 (the 1934 Act) and to its legislative counterparts in other common law jurisdictions, it was generally accepted that actions in contract sounding in pecuniary damage, or actions on proprietary rights and the like, were transmissible, although generally actions in tort were not. The latter actions were subject to the doctrine expressed in the maxim, actio personalis moratur cum persona (that is, a personal action dies with the person). This meant that a right of action for tort was brought to an end by the death of either party: see, for example, Ryan v Davies Brothers Ltd (1921) 29 CLR 527 at 532; Harris v Lewisham and Guy's Mental Health NHS Trust [2000] 3 All ER 769 at 774. … " 14 However, as Mahoney JA noted in NSW TAFE Commission v Fines (supra), the nature of the right which the late Mr Fines sought to enforce was "a statutory right" (at 387). He had been a teacher at TAFE and had been dismissed. He appealed against that dismissal to a Tribunal established to deal with such matters. The Tribunal heard evidence over several days and adjourned to hear submissions. Mr Fines died before the submissions were made. His executors sought to continue the proceedings in his place. The Tribunal refused. His dismissal, however, had consequences for his estate, in terms of his remuneration and other entitlements, which were greater if his dismissal were invalid. In this context, Mahoney JA said this: (at 388) "The question whether statutory rights of this kind are to survive death depends upon the intentin of the legislature; there does not appear to be any general or presumptive rule: see Jones v Simes (1890) 43 Ch D 607; Dean v Wiesengrund [1955] 2 QB 120 and the cases there referred to; see the discussion of an analogous question in Mayne v Jaques (1960) 101 CLR 169. Although in terms the right granted to him by the Act may be merely a right of appeal, the grant of that right carried with it the substantive rights, to salary, wages or allowances and the like, referred to in the Act: see, eg, Mayne v Jaques (at 171-172) per Fullagar J." 15 The approach by the full Federal Court in Stephenson v Human Rights and Equal Opportunity Commission (1996) 68 FCR 290, was similar. The Court held that a complaint made to the Commission under the Sex Discrimination Act 1984 (Cth), did not abate upon the complainant's death. That conclusion was reached upon the proper construction of the statute under which the rights arose. Wilcox J (Jenkinson and Einfeld JJ agreeing) said this: (at 296/7) " … I do not think that common law rules are relevant to this case. Those rules were evolved by judges as necessary ancillaries to substantive common law principles, also evolved by the judges. They are meaningful only in relation to the common law actions to which they relate. Where a right of action is created by statute, guidance must be sought in the statute itself; a Parliament that creates a cause of action may ordain as it pleases in relation to the cause of action's survival on death of a party. And the same principle applies in relation to a statutory entitlement that falls short of constituting a 'cause of action', as lawyers use that term, or a statutory proceeding. If the common law rules are irrelevant, it follows that s2(1) of the Law Reform (Miscellaneous Provisions) Act 1944 (NSW) is also irrelevant." 16 In Chief Executive Office of Customs v Labrador Liquor Wholesale Pty Limited [2003] HCA 49; (2003) 216 CLR 161, Hayne J (Gleeson CJ at McHugh J agreeing) determined the issue in that case (which concerned the standard of proof in a Customs prosecution) by reference to the statute and the orders sought, rather than attributing a description of "civil" or "criminal" to the proceedings as a whole (para [136]). Counsel for Customs urged the same approach in this matter, which I accept. The question should be determined by reference to the specific terms of the statute. 17 Here, the proceedings were instituted in the Supreme Court in accordance with s134(1) of the Excise Act 1901. By s136(1) they have been conducted in accordance with the usual practice and procedure of the Court in civil cases. The Controller of Customs served a statement of claim, formulating causes of action based upon each element in the section allegedly breached. Monetary penalties were sought in accordance with those sections, as well as reparation by the recovery of the duty evaded (where it could be ascertained) and costs. At the time the prosecution was commenced, the Act only made provision for monetary penalties. Since 7 September 2000, a term of imprisonment may be imposed for certain offences. 18 The Excise Act does not expressly deal with the circumstance that confronts this Court, that is, the death of the person prosecuted after conviction and before penalties have been imposed. What, then was the intention of the legislature? Counsel for Customs pointed to two matters which strongly suggested, it was submitted, that liability was transmissible to the estate of a person who had been prosecuted. First, the Act attaches, or may attach, the penalty to property rather than the person. Section 148 provides that the pecuniary penalty may be levied from the sale of goods belonging to the defendant. Section 151 provides that the conviction of a person for an offence shall have effect as a condemnation of the goods in respect of which the offence was committed. Section 161, whilst not dealing with penalties, provides that excise duties are Crown debts charged upon the goods, payable by the owner of the goods and recoverable at any time. 19 Secondly, the Excise Act 1901 is a revenue statute. It makes provision for the imposition and collection of excise duty. It is unlikely that Parliament would have intended that revenue, otherwise due to the Commonwealth, should be forgiven as a result of the death of the person liable to pay it, in circumstances where the duty had been evaded. 20 I note that Hall J in Halpin v Dept of Gaming & Racing (supra), said this: (para [34]) "34. Where the death of a party to proceedings occurs following a decision or order which effectively determines the proceedings but in which further orders are outstanding, it will, in my opinion, often be the case that the proceedings have not abated or lapsed. … " 21 I accept the argument of Customs. The proceedings have not abated. The liability is transmitted to the estate of Leslie Ronald Fletcher, now represented by Brett Fletcher.

Matters relevant to penalty. 22 The offences committed by Camile Trading, with which the late Mr Fletcher was knowingly concerned, were serious offences of their type. Camile Trading, through Mr Fletcher, had a petrol and diesel wholesale operation. It was a commercial operation on a very large scale. It was conducted mainly with cash and without documentation for a sustained period of two and a half years (between 1 April 1994 and 21 November 1996). Significant excise duty was intentionally evaded by the company, with the knowledge and complicity of Mr Fletcher. 23 Customs was able to prove, beyond reasonable doubt, the duty evaded on the diesel fuel which was sold. However it could not, ten years on, demonstrate beyond reasonable doubt the amount of duty evaded on the sale of blended leaded and unleaded petrol, except for a short period (Period 9). 24 In imposing penalties, general deterrence remains an important consideration. Neither the company nor Mr Fletcher had previous convictions. 25 There are, in respect of both the company and the late Mr Fletcher, twenty seven offences, arising from the three sections under which they were each prosecuted and the fact that there were nine separate periods between April 1994 and November 1996. 26 I have been urged to apply the approach to sentencing in Pearce v The Queen [1998] HCA 57; (1998) 194 CLR 610, so that there would be some overlap, as it were, between fines, and the total discounted. However, Pearce v The Queen was a case concerning the imposition of terms of imprisonment in the context of multiple offences. It does not apply in the context of fines for multiple offences (EPA v Barnes [2006] NSWCCA 246, para [50]). Nonetheless, I am conscious, in imposing these penalties, of the total amount which each offender (and in the case of Mr Fletcher, his estate) will be obliged to pay. 27 In respect of the offences under s120(1) of the Excise Act, concerning the evasion of duty, the penalty involves a range between 2 times and 5 times the amount of duty evaded, where it can be ascertained. What should be done in circumstances of evasion by one party (Camile Trading) with complicity by another (Mr Fletcher)? Counsel for Customs suggested that the appropriate order (for want of a more rational approach) involved determining the penalty (by selecting a multiple between 2 and 5 times the duty evaded) and then ordering each defendant to pay half. Mr Stanton of counsel, for the defendant, did not suggest otherwise. 28 The duty evaded in respect of diesel is as follows: Period 1 $69,881 Period 2 $100,643 Period 3 $70,639 Period 4 $316,614 Period 5 $346,252 Period 6 $42,435 Period 7 $787,533 Period 8 $1,153,920 Period 9 $1,007,015 TOTAL $3,894,932

29 Customs also seeks reparation, that is an award of the duty evaded, which is appropriate, and which should be approached upon the same basis (that is, split equally between Camile Trading and the estate of Mr Fletcher). 30 In that context, bearing in mind that these are very old offences (1994 to 1996), it seems to me the appropriate multiple is 2 times. Accordingly, the penalty in respect of the duty evaded is as follows: Period 1 $139,762 Period 2 $201,286 Period 3 $141,278 Period 4 $633,228 Period 5 $692,504 Period 6 $84,870 Period 7 $1,575,066 Period 8 $2,307,840 Period 9 $2,014,030 TOTAL $7,789,864

31 The amount of duty evaded could not be ascertained in respect of either leaded or unleaded petrol, apart from Period 9 (in each case). The amount of duty evaded in Period 9 was as follows: · Unleaded petrol $1,722,438 · Leaded petrol $753,455 32 Where the duty cannot be ascertained, the maximum penalty is $50,000 for each offence. The fact that it is a maximum suggests that it may be moderated if appropriate. I believe the appropriate amount in respect of each offence, and each offender, where the duty cannot be ascertained is $40,000. 33 So far as costs are concerned, it was submitted on behalf of Mr Fletcher's estate that the hearing was made significantly longer because there were two additional defendants, both acquitted. I accept that submission. The plaintiffs should recover 60 percent of their costs. Again, they should be divided equally between Camile Trading and the estate of Mr Fletcher.

Orders. 34 With respect to Camile Trading Pty Limited, I make the following orders:

In respect of the conviction under s35 of the Excise Act 1901, Camile Trading is fined $3,500 in respect of each of the nine periods, a total of $31,500.

In respect of the convictions under s61 of the Act, Camile Trading is fined $14,000 in respect of each of the nine periods, a total of $126,000.

In respect of the duty evaded for the sale of diesel and heating oil, the penalty should be twice the duty so evaded, of which Camile Trading should pay half, namely:

Period 1 $69,881 Period 2 $100,643 Period 3 $70,639 Period 4 $316,614 Period 5 $346,252 Period 6 $42,435 Period 7 $787,533 Period 8 $1,153,920 Period 9 $1,007,015 TOTAL $3,894,932

In respect of the duty evaded upon the blending of unleaded petrol and other petroleum products, which could not be ascertained (Periods 1 to 8 inclusive), Camile Trading is fined $40,000 for each period, a total of $320,000. In respect of the ninth period, the duty evaded was $1,722,438, so the penalty imposed under s120 is double that amount, ie, $3,444,876, of which Camile Trading should pay half, being $1,722,438. Therefore Camile Trading should pay a total of $2,042,438 in relation to the blending of unleaded petrol with other petroleum products.

In respect of the duty evaded by reason of the blending of leaded, or super petrol, with petroleum products, which could not be ascertained (Periods 1 to 8 inclusive), Camile Trading is fined $40,000 for each period, a total of $320,000. In respect of the ninth period, the duty evaded was $753,455, so the penalty imposed under s120 is double that amount, ie, $1,506,910, of which Camile Trading should pay half, being $753,455. Therefore Camile Trading should pay a total of $1,073,455 in relation to the blending of leaded or super petrol.

I order reparation, that is that the defendants, Camile Trading and the estate of the late Leslie Ronald Fletcher, pay the duty evaded, to be shared equally, so that each pays $3,185,413.

I order Camile Trading to pay half of the awarded costs of the plaintiff to be taxed or assessed (being 60 percent of the total). 35 In respect of the late Leslie Ronald Fletcher, I make the following orders:

In respect of the conviction under s35 of the Excise Act 1901, Mr Fletcher is fined $3,500 in respect of each of the nine periods, a total of $31,500.

In respect of the convictions under s61 of the Act, Mr Fletcher is fined $14,000 in respect of each of the nine periods, a total of $126,000.

In respect of the duty evaded for the sale of diesel and heating oil, the penalty should be twice the duty so evaded, of which Mr Fletcher should be half, namely:

Period 1 $69,881 Period 2 $100,643 Period 3 $70,639 Period 4 $316,614 Period 5 $346,252 Period 6 $42,435 Period 7 $787,533 Period 8 $1,153,920 Period 9 $1,007,015 TOTAL $3,894,932

In respect of the duty evaded upon the blending of unleaded petrol and other petroleum products, which could not be ascertained (Periods 1 to 8 inclusive), Mr Fletcher is fined $40,000 for each period, a total of $320,000. In respect of the ninth period, the duty evaded was $1,722,438, so the penalty imposed under s120 is double that amount, ie, $3,444,876, of which Mr Fletcher should pay half, being $1,722,438. Therefore Mr Fletcher should pay a total of $2,042,438 in relation to the blending of unleaded petrol with other petroleum products.

In respect of the duty evaded by reason of the blending of leaded, or super petrol, with petroleum products, which could not be ascertained (Periods 1 to 8 inclusive), Mr Fletcher is fined $40,000 for each period, a total of $320,000. In respect of the ninth period, the duty evaded was $753,455, so the penalty imposed under s120 is double that amount, ie, $1,506,910, of which Mr Fletcher should pay half, being $753,455. Therefore Mr Fletcher should pay a total of $1,073,455 in relation to the blending of leaded or super petrol.

I order reparation, that is that the defendants, Camile Trading and the estate of the late Leslie Ronald Fletcher, pay the duty evaded, to be shared equally, so that each pays $3,185,413.

I order the estate of the late Leslie Ronald Fletcher to pay half of the awarded costs of the plaintiff to be taxed or assessed (being 60 percent of the total). 36 In summary, apart from costs, the amounts payable under these orders by Camile Trading are:

1. In respect of the convictions under s35 -- $31,500.

2. In respect of the convictions under s61 -- $126,000.

unleaded petrol and other petroleum products -- $2,042,438

Therefore, Camile Trading should pay total penalties of $10,353,738. 37 In respect of Mr Fletcher, there will be the same total ($10,353,738) in respect of offences under the same sections involving the same products, together with his share of the costs. **********

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