Chief Executive Officer of Customs v Camile Trading Pty Ltd and Ors

• 12 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

20859/97 CHIEF EXECUTIVE OFFICER OF CUSTOMS v CAMILE TRADING PTY LIMITED AND ORS

JUDGMENT 1 HIS HONOUR: This is an Excise Prosecution pursuant to Part XI of the Excise Act 1901 (the Act) to recover penalties and unpaid excise duty pursuant to that Act or alternatively, an order for reparations pursuant to s 21B of the Crimes Act 1914 (Cth). 2 The proceedings were commenced by Statement of Claim filed on 23 September 1997 in the general Civil List of the Common Law Division and accordingly are subject to Practice Note 120 relating to Differential Case Management. There are four defendants, namely Camile Trading Pty Limited (first defendant), Leslie Ronald Fletcher (second defendant), a director of, and shareholder in the first defendant, Evenfont Pty Limited (third defendant) and Robert Lenard Pullinger (fourth defendant), a director of, and shareholder in, the third defendant. 3 By consent, an Amended Statement of Claim was filed on 26 June 2001, following which the third and fourth defendants applied for such Amended Statement of Claim to be dismissed or stayed so far as it related to them, or alternatively, that certain paragraphs relating to them be struck out. Master Harrison refused the application: [2001] NSWSC 770 but ordered the plaintiff to file and serve a Further Amended Statement of Claim. The third and fourth defendants appealed from the decision of Master Harrison but such appeal was dismissed by Studdert J on 23 November 2001: CEO of Customs v Camile Trading Pty Limited & Ors [2001] NSWSC 1075. In the meantime, the Further Amended Statement of Claim was filed on 20 September 2001, it runs to 705 paragraphs including particulars and covers 232 pages. 4 In substance, the Further Amended Statement of Claim alleges that between 1992 and 1996, the first defendant carried on business as a petroleum wholesaler and sold unleaded petrol, leaded petrol and diesel from its premises at Albion Park Rail without the relevant manufacturer's licence under s 34 of the Act, whilst the third defendant carried on business manufacturing petroleum products and was the grantee of such a licence. It is further alleged that the first defendant was involved in the blending of diesel fuel, unleaded petrol and leaded petrol during 9 discrete periods. The reason why the allegations are made in respect of 9 discrete periods is apparently that the rate of duty varied from time to time. 5 Paragraphs 676-682, plead the complicity of the second defendant in the matters earlier pleaded against the first defendant, whilst paragraphs 683-700 plead the complicity of the third and fourth defendants in the blending of both leaded and unleaded petrol. Paragraphs 701-704 set out particulars of each of the offences alleged under s 35 (manufacture excisable goods without a licence), s 61 (move or alter excisable goods until delivered for home consumption or export otherwise than as authorised by the Act) and s 120(1)(iv) (evade payment of duty). 6 Paragraph 705 is as follows: "And the plaintiff pursuant to s 144 of the Excise Act 1901 avers all matters of fact contained in paragraphs 1-700 and as particularised in the Statement of Claim." 7 The orders sought are the conviction of all defendants for offences against ss 35, 61 and 121 of the Act, an order for the recovery of penalties against each of the defendants pursuant to the Act, an order for the payment of unpaid excise duty by the first and second defendants or alternatively, an order for reparations to be paid by the first and second defendants pursuant to s 21B of the Crimes Act 1914, costs and interests. 8 On 22 May 2002, the third and fourth defendants filed Verified Defences to the original Statement of Claim and on 23 May 2002, the first and second defendants filed a Verified Defence to the Further Amended Statement of Claim. 9 By such Defence, the first and second defendants admit matters such as corporation, carrying on business premises, employment of the second defendant etc, they neither admit nor deny the contents of a large number of other paragraphs, they do not plead to matters only affecting the third and fourth defendants and deny that the matters alleged in paragraph 649 (alternative allegation of movement of excisable goods in breach of s 61) can be proved by averment. They also pleaded in answer to the whole of the Further Amended Statement of Claim that the pleading constitutes an embarrassment and abuse of process in that is seeks to prove the commission of serious offences requiring proof beyond reasonable doubt and their trial on indictment, by having the same heard in the DCM list in the Civil Jurisdiction of Supreme Court and in that it seeks to prove intent by averment, and, in these respects they reserve their rights to challenge the pleading accordingly. 10 On 6 February 2004, the present Notice of Motion was filed seeking the following orders:

1. That pursuant to Supreme Court Act s 54 these proceedings be transferred to the Criminal Division.
2. That leave be granted to the first and second defendants to withdraw any verified defences filed by them and to file in lieu thereof an unverified defence.
3. Further or other order
4. Costs. 11 Part XI (ss 133-153) of the Excise Act 1901 is headed ""Excise Prosecutions". It has been substantially amended recently but at the time the events alleged in these proceedings, the relevant provisions were as follows. 12 Section 133 provided for proceedings by the Customs for the recovery of penalties under any Excise Act or for the condemnation of goods seized as forfeited to be referred to as "Excise Prosecutions", and s 134 specified that such Excise Prosecutions could be instituted in the Supreme Court of a State or other specified courts. Section 136 was as follows: 136. Every Excise prosecution in a court referred to in subsection 134(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. 13 Section 143 (i) provided for the defendant to be competent to give evidence, and except for an indictable offence of, or an offence directly punishable by imprisonment, such defendant was also made compellable to give evidence, whilst by s 144(1), the averment of the prosecutor or plaintiff contained in the originating process was to be prima facie evidence of the matters averred, notwithstanding that evidence in support or rebuttal of the matter averred or of any other matter be given by witnesses or that the matter averred be a mixed question of law and fact, in which case it should be prima facie evidence of the fact only. Subs(3)(a) excluded as evidence an averment of the intention of a defendant. 14 The Customs Act contains similar provisions, s 244 of that Act corresponding with s 133 of the Excise Act, s 245 with s 134, s 247 with s 136, s 252 with s 143 and s 255 with s 144. 15 On behalf of the first and second defendants, it was submitted that because the proceedings seek orders for "conviction" and therefore require proof beyond reasonable doubt: Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 201 ALR 1, they are in the nature of criminal proceedings, and accordingly, the ordinary civil procedures of the court are inappropriate particularly Differential Case Management as prescribed by Practice Note 120 which requires the filing of verified defences, the service of witness statements and the giving of discovery. It was claimed that such procedures would violate the defendants' rights to silence and privileges against self-incrimination and exposure to penalties. 16 The proposition that the proceedings are in the nature of criminal proceedings misstates the authority of Labrador Liquor Wholesale. In that case, Hayne J, with whom Gleeson CJ and McHugh J agreed, said that Customs and Excise Prosecutions (that case concerned both) should not be classified as civil proceedings or as criminal proceedings as they include characteristics of both: at [114], [136], although proof beyond reasonable doubt of the essential ingredients of the relevant offences is required: at [144]-[145]; but such proof may be established by reliance on the averment provisions such as in s 144 of the Act: at [142]. 17 His Honour then went to consider the effect of s 136 of the Act (s 242 of the Customs Act in similar terms) and held that, in the absence of any particular procedures for proceedings by the Crown in revenue cases, that section required the Court to apply its usual practice and procedure in civil cases, including the rules of evidence, and it followed in that case that the provision of the Queensland Evidence Act which related to civil proceedings applied and not those which related to criminal proceedings: at [147]. 18 The application that the proceedings be transferred to the Criminal Division of the Court is therefore misconceived for two reasons; firstly, because the High Court in Labrador Liquor Wholesale expressly rejected the proposition that such proceedings are criminal in nature and held that, as specified in s 136, the Court's ordinary rules of practice and procedure in civil cases should apply; and secondly, because there is no Criminal Division. A Criminal Division was established by Act no 88 of 1979 s 3 Sch 1 (3)(c) but it was abolished by Act no 172 of 1998 s 3 Sch 10 [2], and there are now only two Divisions apart from the Court of Appeal namely, the Common Law Division and the Equity Division: Supreme Court Act 1976 s 38. 19 The alternative submission was that, even if the proceedings are not conducted as a trial on indictment, they should not be subject to Differential Case Management and the defendants should not be required to take any steps prior to the close of the plaintiff's case at the trial to give any indication of the nature of their defence including filing pleadings or other matters, witness statements, giving discovery or answering interrogatories, and that they should have leave to withdraw their Defence already filed, and file unverified Defence.

20 A similar issue arose in Chief Executive Officer of Customs v Afiouny [2004] NSWSC 79, a case after Labrador Liquor Wholesale where McDougall J held that the ordinary rules of civil practice and procedure applied including those relating to Differential Case Management, statements of issues, evidence and the like. With respect, I agree with McDougall J as to the applicability of ordinary civil procedure including Differential Case Management proceedings and consider that I should follow his decision. 21 The filing of the Statements of Claim and Defences, Differential Case Management and trial procedure, as well as the rules of evidence, are clearly matters of practice and procedure and consequently, s 136 mandates that the ordinary rules relating to such matters are to be applied. Just as in Labrador Liquor Wholesale, the requirement of proof beyond reasonable doubt was held not to require the provisions of the Queensland Evidence Act relating to criminal cases to be applied, but those applicable to civil cases, so here the requirement of proof beyond reasonable doubt does not require any special procedure other than that which ordinarily applies in civil cases. 22 The Supreme Court Rules applicable in civil proceedings provide the filing of Verified Defences (Pt 15 r 23) placing the proceedings in the DCM list (Pt 26 r 3) and Practice Note 120. These requirements may be varied by court order (Pt 1 r 12, Pt 15 r 23(10) and Pt 26 r 1) this being a discretionary power conferred by the Rules and applicable in all civil matters. The provision of witness statements and affidavits is a discretionary matter for the Court under Practice Note 120 at the interlocutory stages of proceedings. 23 However, although the ordinary civil procedure of the Court is to be applied, regard must also be had to the privileges against self-incrimination and self-exposure to penalties. As was pointed out in Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at [13], the privilege against self-exposure to penalties is one of a trilogy of privileges that bear some similarity to the privilege against self-incrimination, the other two being those against exposure to forfeiture and exposure to ecclesiastical censure. Although the privileges against exposure to penalties and forfeitures had their origins in the rules of equity relating to discovery, the privilege against exposure to penalties has long been recognised by the common law and is no longer simply a rule of equity relating to discovery. The privileges against self-incrimination and exposure to penalties are not available to corporations: Evidence Act 1995 s 187. 24 In Australian Competition and Consumer Commission v FFE Building Services Ltd (2003) 130 FCR 37, the Full Court of the Federal Court considered this privilege in a civil action for pecuniary penalties pursuant to s 76 of the Trade Practices Act 1975 where the issue was whether the individual respondents should be required to file witness statements prior to the close of the plaintiff's case, it being conceded that the privilege was not available to corporate respondents. The Court (Emmett, Healy and Jacobson JJ) summarised the principles relating to the privilege as follows: "12 The privilege against self-incrimination protects an individual from making a disclosure that may lead to incrimination or to the discovery of real evidence of an incriminating nature. Further, a respondent in a proceeding that is solely for the recovery of a pecuniary penalty should not be ordered to disclose information or produce documents that may assist in establishing his or her liability to the penalty. 13 The privilege of refusing to answer questions or provide information on the ground that the answers or the information might tend to expose the party to the imposition of a pecuniary penalty: · Is not confined to discovery and interrogatories; · Is available at common law; · Is distinct from the privilege against exposure to conviction for a crime The rationale for the privilege is that an applicant must prove its own case and should not get any assistance from the respondent in proving its case. The privilege can only be abrogated by statute. As the privilege is not subject to judge made exceptions or qualifications, it cannot be abridged or undermined in consequence of a Court accepting undertakings proffered by the applicant designed to avoid or diminish the danger that provisions of the information would expose the respondent to a penalty….. 14 By requiring an individual respondent, prior to the closure of an applicant's case, to file statements of evidence proposed to be given by witnesses to be called by that respondent, such a respondent would be exposed to the risk that indirect or derivative evidence, being evidence obtained by using the material disclosed in the statement as a basis of investigation, could be tendered against the imposition of a penalty or may lead to the discovery of real evidence in support of the imposition of a penalty" (references omitted) . 25 The Court there refused to order the filing and service of witness statements by the individual respondents in advance of the hearing, notwithstanding that the plaintiff was prepared to give undertakings not to use any information contained therein to advance its case. In reaching its conclusion, the Court followed the earlier decision of Sackville J in Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (1999) 163 ALR 465 in preference to the later Victorian Court of Appeal decision in Sidebottom v The Federal Commissioner for Taxation (2003) 6 VR 302. 26 More recently, in Rich v Australian Securities Investments Commission (2004) 209 ALR 271, being proceedings under the Corporations Act 2001 (Cth), the Commission sought declarations of contravention, compensation orders and disqualification of the appellant from acting as a director. Reversing the decision of the New South Wales Court of Appeal, the High Court held that the seeking of an order for disqualification was not purely protective of the public, but constituted proceedings for a penalty so that the privilege applied and the respondent could not be ordered to give discovery. It was conceded by the Commission in the High Court that if he was not liable to give discovery, he was not liable to be ordered to file affidavits in advance of the hearing. 27 I turn now to consider the position in relation to pleadings, as opposed to discovery, affidavits, and witness statements. In civil cases, the object of pleadings is to define and narrow the issues so that evidence is only led about facts which are in dispute between the parties. Pleadings are governed by SCR Pt 15 and allegations in a pleading not traversed by an opponent (by denial or non-admission) stand admitted: Pt 15 r 20. 28 The issue of pleadings in proceedings for penalties, specifically under the Customs Act, was considered by the Full Court of the Supreme Court of Western Australia in Bridal Fashions Pty Ltd v Comptroller-General of Customs (1996) 140 ALR 681. 29 The Court reviewed the nature of the privileges against self-incrimination and self-exposure to a penalty and noted that neither privilege was available to corporations. Their Honours then (at 696) drew attention to the averment provisions in s 255 of the Customs Act (s 144, Excise Act) and concluded that in the light of that provision, a defence merely denying or not admitting an allegation of fact in the statement of claim would not enable a defendant to lead evidence at the trial to negate the effect of the averment, and would therefore be an exercise in futility, as the practical effect of the averment provision is that a defendant will ordinarily be required to raise an affirmative allegation in its defence, otherwise it will not be able to tender positive exculpatory evidence. They suggested as this could be done by a pleading such as: "If (which is denied or not admitted) the alleged fact was as pleaded in paragraph X, the defendant says…..". 30 Their Honours concluded at 697: "To summarise, a pleading in the defence that the defendant does not admit an allegation, and puts the plaintiff to the proof thereof would not prevent the operation of s 255(1). It would not be an appropriate plea. Should the defendant admit an allegation in the statement of claim, it would thereby waive the privilege against self-incrimination. If the defendant were to deny an allegation in the defence it would not incriminate itself. Should the defendant set up an affirmative case in the form suggested it would not incriminate itself. In the circumstances, the privilege has no practical application in the pleading of a defence to the statement of claim in a customs prosecution. Accordingly, the privilege against self-exposure to a penalty or self-incrimination does not preclude the (defendant) from pleading in the ordinary way to the allegations in the statement of claim."

31 The Court also held (at 695) that the corporation defendant could not avoid pleading on the ground that information disclosed by it might, in practical terms, destroy the utility of the privilege for the individual defendant. 32 With respect, I agree with their Honours' analysis, my only reservation being that in some cases, pleading a positive exculpatory case may give leads or open up fresh fields of enquiry to the plaintiff, thus exposing the defendant to incrimination or penalty. 33 In Alfred v Walter Construction Group Ltd [2003] FCA 993, declarations were sought that each of the respondents had contravened s 170 NT (1) of the Workplace Relations Act 1996 and orders imposing penalties were sought against the corporate, but not the individual respondents. Gyles J declined to exempt the individual defendants from filing Defences because in the circumstances of that case, where no penalties were being sought against them, the filing of a Defence could not expose them to any penalty. 34 In the present case, the first and second defendants admit paragraphs 1-5 and 15 of the Further Amended Statement of Claim. Bridal Fashions is authority for the proposition that to the extent of the admission, the second defendant has waived the privilege. Paragraphs 1(a) and, so far as affects them, paragraph 4 of their Defence contain general denials of allegations in the Further Amended Statement of Claim and so could not possibly provide any information directly or indirectly exposing the second defendant to any conviction or penalty, and similar considerations apply to paragraph 2, in which they neither admit nor deny, or paragraph 3 by which they do not plead to matters affecting only the third and fourth defendants. Paragraphs 5 and 6(a) and (b) plead matters of law. 35 Accordingly, the Defence as pleaded raises no matters which could incriminate the second defendant or expose him to a penalty, and so there is no reason why his Defence should not be filed and verified in the ordinary way. The first defendant has no privilege to be protected. 36 It is unnecessary to consider in this case what the position might be if an individual defendant in a case such as the present wished to raise a "positive" defence by way of confession and avoidance seeking to raise new and different facts. It may be that in such case, the rules would be dispensed with to the extent of permitting the individual defendant to file an unverified defence, but I express no concluded view on this issue. 37 In any event, the verified Defence has been filed and served and, even if it were not required to be verified, that is not reason for withdrawing it at this stage. In any event, I cannot see what the effect would be of "withdrawing" it after it has been not only sworn, but also verified and served. 38 For these reasons, I am satisfied that the verified Defence should remain on the file, the proceedings should remain in the ordinary general list of the Common Law Division and be subject to Differential Case Management in accordance with Practice Note 120, although orders should not be made for the individual defendants to give discovery, answer interrogatories, produce documents under notice to produce, file affidavits or provide witness statements prior to the final hearing. I was informed during the hearing that an order has been made for the filing of affidavits although not yet complied with. This order should be varied to exclude from its operation the second and fourth defendants. Bridal Fashions, ACCC v FFE Building Services and Alfred v Walter Construction Group establish that the corporate defendants cannot refuse to comply with such a direction on the ground that to do so will incriminate the individual defendants or expose them to penalties. 39 In view of the long delays that have already occurred, the proceedings should be made ready for trial as expeditiously as possible so that a hearing date can be allocated. 40 I order that the motion be dismissed with costs.

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