_Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd & Others_

_Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd & Others_ - [2006] QSC 4 - QSC 2006 case summary — Zoe

[26]

"And this was A4 and with compliments slips, I take it. Yes, you agree with that, don't you?-- I'm not sure if we had compliments slips printed at the same time.

All right, anything else?

HIS HONOUR: Did you eventually have with compliments slips printed?-- Might have had one or two batches of it, yes, but it's not standard stationery, your Honour.

MR GOTTERSON: All right. I'll ask you to have a look at this document. It's miscellaneous 1.0086. If you look at that and will you agree with me, having seen it, that it is new-style letterhead with compliments slips?-- Yes.

...

MR GOTTERSON: I suggest to you, Mr Wright, that you had the with compliments slip and your A4 printed by your printer engaged once you worked out the new letterhead?-- It would seem so, yes.

...

HIS HONOUR: When was that, please, Mr Wright?-- I don't recall, your Honour.

MR GOTTERSON: Well, could I suggest to you, Mr Wright, that you had your new-style letterhead as early as late 1994.

...

HIS HONOUR: Mr Gotterson wants you to comment on the suggestion that you had it by late 1994?-- I really can't recall, Mr Gotterson.

MR GOTTERSON: Very well. I'm going to ask you to look now, Mr Wright, at document - defendant's document 0001.216, and would you agree with me that it is new-style letterhead?-- Absolutely, yes.

It's a letter dated the 11th of November 1994, is it not?-- Correct.

...

So by November 1994 you obviously had your new-style letterhead?-- Yes.

And you had stationery printed in it?-- Yes.

And I suggest you had with compliments slips printed in it; didn't you?-- Most likely.

Why is it then that you didn't give Mr Richard Lal a copy of the new-style with compliments slip when he visited, as you said in your evidence, in early 1995?-- It's quite possible that, at the time of his visit, we didn't have any more stock of the new - new-style letterhead.

... I suggest you got your new-style letterhead in late 1994. Do you agree with that?-- Yes, it would seem so.

And are you suggesting that by early 1995 you'd run out of it?-- It's possible, Mr Gotterson.

Right. In any event, do you say you had run out of with compliments slips by then?-- That too is possible, yes.

You don't know?-- I don't know for sure. No.

Had you run out of new-style letterhead by then?-- It's possible.

You don't know?-- No.

If you had new-style letterhead, wouldn't you have given - even if you didn't have with compliments slips, given A4 with new-style letterhead on it to Mr Lal?-- In preference, if I had stock, of course, I would.

Yes. In fact you've described your old-style letterhead as boring, didn't you, in your evidence-in-chief?-- Yes.

You would, of course, give your new customer new-style letterhead?-- Yes.

So the best you can put it, though you got new stationery in late 1994, by early 1995 you might have run out of with compliments slips and A4?-- Correct.

...

Mr Wright, I suggest you didn't give Richard Lal any letterhead at all? You didn't give him any sheet of A4 or torn off sheet of A4 with letterhead on it at all.

That's the case, isn't it?-- I disagree with you, Mr Gotterson.

...

You say your preference or the course you took was to give him a torn off piece of old-style letterhead?-- Because if that's what I had available, that's what I would have done.

Not a way to impress a new customer, I suggest?-- Mr Gotterson, if you don't have stock, you do your best."

[62]

"Do you recall an occasion in 1998 speaking to a solicitor, Mr Michael Forde?[18]-- No.

In 1998 was your mobile number then 0418-651-621?-- That sounds familiar.

Can I suggest that on the 5th of March 1998 Mr Forde spoke to you on the telephone. He introduced himself as a solicitor acting for Labrador Liquor. Does that remind you at all?-- No, I have no recollection of that.

Do you recall telling Mr Forde that the water had been ordered by a Mr Harvey Treetle or Mr Harvey Cheetle?-- I know of that name. I do not have a recollection of that discussion.

Was it the case that the water had been ordered by a Mr Harvey Feetle or Cheetle?-- Can you repeat the question, please.

Was it the case that the water had been ordered by a Mr Harvey Feetle or a Mr Harvey Cheetle?-- I can confirm that the order was placed to me by a member of our staff. I can also confirm that I facilitated the payment of the order with Pure & Natural to the address on the document. I had no discussion with Harvey Cheetle, had no dealings with him and I do know of the name, but I do know in respect of certain liquor transactions our company had had dealings with Harvey Cheetle but I had no discussions with Harvey Cheetle.

HIS HONOUR: Who was he, please, Mr Sirr?-- He was a liquor trader. As far as I can recall, he was based in South Australia. He was involved in the importing of - parallel importing of certain spirit products. He also sold wine. I have never met the man.

Had your company had previous dealings with him?-- We had.

MR HACK: Do you recall or do you not recall telling Mr Forde that it was Mr Harvey Cheetle who had ordered this water?-- I have no recollection of a discussion with the gentleman you refer to.

And you don't recall telling him that it had been ordered by a company in South Australia?-- I don't recall having a discussion with that gentleman.

HIS HONOUR: Supposing that you had had a discussion and supposing that you did say those things back in 1998, presumably, that would've been the position as you then recollected it; is that correct?-- Your Honour, I don't recall having a discussion with the lawyer that you are referring to. If your question is such that-----

But if you did have that discussion would you have said the position as you then knew it?-- If I had had that discussion, and being eight years ago, I may have said words to that effect that Mr Cheetle may have facilitated that transaction. He may have made a call to our office. He was known to the company at that time on an ad hoc basis. If I had had that discussion, I might have said words like that.

You had no reason not to tell anyone who you spoke to, such as Mr Forde, if you spoke to him, you had no reason-----?-- Yes.

-----not to tell him the true position?-- Certainly not.

MR HACK: Thank you. I have nothing further.

MR REDMOND: No re-examination.

HIS HONOUR: One question I had, Mr Sirr, if this was a telephone order?-- Yes.

It was a rather large one, some $12,000, I think, or so. Would your company normally accept such a large order and have the goods delivered without some level of confidence as to the probability of payment?-- Definitely.

What-----?-- Definitely. I would not have allowed an order to be delivered unless I had absolute confidence that the order was going to be paid for and the way in which I would've had absolute confidence was either dealing with someone like Harvey Cheetle, with whom we had had prior dealings, or a payment by the company in advance of the shipment being effected.

It appears from your paper work that there was no payment in advance?-- The paper work I have doesn't show a deposit or a payment. All I have here, your Honour, is a remittance to the supplier of the product. I haven't been furnished with any other records.

I see. I see what you mean. It's possible that you were paid in advance for this?-- That's correct. I certainly - I can be 100 percent certain I would not have allowed that delivery to go through unless I was absolutely satisfied that we were going to get paid."

[269]

Honiara shipment

[190] The Honiara shipment took place in container number TPHU 824197-2. According to the plaintiff it contained 1,000 cases of beer, 360 cases of whisky and 136 gross cartons of cigarettes. According to the defendants it contained beer and whisky as alleged by the plaintiff and 136.5 shipping cartons, containing 6,445 gross cartons, of cigarettes. Mr Wright on behalf of Labrador caused EDI to enter its contents for export, and acquitted the goods out of Labrador's bond register, on the latter basis.

[191] The earliest-dated documents in Labrador's files when they were seized by Customs in September 1996 were the letter on new-style letterhead dated 3 May 1996 and the letter on old-style letterhead "To whom it may concern", dated 7 May, to which I have referred earlier. My findings in relation to the latter document are set out above.[57]

The new-style commercial invoice and packing list and other documents

[192] It is common ground that on 8 May 1996 Mr Michael Quan on behalf of QQQ faxed an order to Labrador for "1 FCL assorted products" comprising the beer and whisky referred to above "plus various cigarettes available as discussed by phone". As to payment, the order specified "Documents to be sent to our bankers National Bank of Solomon Islands for payment ten (10) days after arrival of vessel." Confirmation by return fax was requested.

[193] Labrador's records contained, but those of QQQ did not, a letter purporting to have been faxed to QQQ, dated 8 May and signed by Mr Wright. It referred to the order and advised that Labrador would attempt to ship "per your verbal request on the Highland Chief (V84)". It confirmed prices in accordance with the order and noted that cigarette prices would be $68.00 per thousand units. It concluded, "Confirmation of quantity will be advised per telephone as soon as possible." It is unnecessary to determine if this document is genuine; but it seems unlikely.

[194] The next documents (by date) in Labrador's records (but missing from those of QQQ) are a new-style commercial invoice and a new-style packing list. They were typed by Mrs Wood and dated 8 May 1996. The invoice[58] has a number of features worth noting:

[272]

[195] It was originally common ground that the container was packed on or about 10 May.[59] When Mr Bryce gave evidence he asserted a belief that packing took place on 17 May. At first he claimed not to recall the basis for this belief. Then he asserted that certain stock had not arrived until the day before the container was packed. He also claimed that there was a problem with the container and that the shipping company delayed sailing. Mr Bryce's belief does not accord with the documentary evidence. First, according to Labrador's bond registers, the beer and the whisky in the container (and for that matter the cigarettes which Labrador claimed were also in the container) were acquitted on 10 May. Second, the Export Receival Advice (a document created by Mr Leggett of EDI on behalf of Labrador to be given to the driver taking the container to a storage depot on the wharf[60]) specified 10 May as the date the container was packed. Third, the bill of lading was issued on 15 May when, as the bill records, the container was received for carriage by the ship or ship's agent. I am satisfied that packing did not take place on 17 May.

[196] It is an agreed fact that on or about 8 May 1996 Mr Wright on behalf of Labrador instructed EDI to prepare an entry for export in respect of the goods to be exported to Honiara.[61] He gave this instruction by sending Mr John Leggett by facsimile a handwritten list of the goods to be included in the entry. Two versions of this document (or at least of the first page of it) were seized by Customs from EDI in September 1996.[62] It is apparent from the handwritten alterations on the second version that it is a later transmission of the first. The first version consisted only of page 1 of the facsimile message. It specified the vessel and voyage number and one seal number (22269248). It listed the beer and the whisky; then it listed "17 ▄ Dunhill King Size Filter Cigarettes $11,560". It is impossible to read what was originally written underneath the blacking out. After that there is an entry for "Winfield Red Cigarettes", but the quantity and value are not stated (someone has inserted question marks).

[197] The second version specified an additional seal number. As well as the beer and the whisky, it listed the seven lines of cigarettes set out in the commercial invoice. At the left of each line was a numeral representing the quantity of goods and at the right a dollar value for the goods. In the case of the cigarettes the numeral was unaccompanied by a unit of measure. This was in stark contrast to the liquor where the unit was specified as "cases". Having regard also to the blacking out of the unit of measure of Dunhill cigarettes, the omission appears deliberate. There has been considerable crossing out and substitution of the quantities. Mr Wright said that he made those crossings out and substitutions "based on what had come in". The appearance of the document is consistent with its having been amended from time to time after its initial creation and I accept Mr Wright's evidence on that point. According to Labrador's bond registers, the last of the cigarettes arrived on 10 May, so that is the earliest date when quantities could have been finalised. Not until then was Mr Wright in a position finally to nominate the goods to be included in the entry for export.

[198] However there is reason to think that Mr Wright probably did not send the second version, and that EDI did not lodge the entry for export, until 13 May. It is common ground that prior to the container's leaving Labrador's premises, two seals (nos 22269248 and 005996) were attached to it.[63] One of the alterations which Mr Wright made to the list was the addition of the second seal number (005996). Mr Wright testified that this seal was couriered to Labrador's premises on 13 May and on this point I accept his evidence.[64] It is unlikely that this alteration could have been made before that date. Mr Wright probably sent the facsimile on that day. (The container was also transported from Labrador's premises on that date,[65] and the bill of lading was issued on 15 May, so it is unlikely to have been later than 13 May.) I am conscious that this involves an elastic reading of the agreed facts that the instruction was given on or about 8 May and that EDI lodged the entry for export with Customs on or about 11 May.[66] However I make the findings in reliance upon the words "or about" in the agreed facts, and make them more readily because they are findings which favour the defendants.[67]

[199] The new-style commercial invoice and packing list were probably prepared on 11 or 12 May. They could not have been prepared until the quantities intended to be included in the entry for export were finalised, and some of the goods listed did not arrive in Labrador's store until 10 May. Because the documents refer only to one seal (22269248), they were prepared before the delivery of the second seal on 13 May. It is unclear why they should have been backdated.

[200] Under the prevailing system, a Customs broker lodged an entry for export by entering details of the export transaction directly into a computer maintained by Customs. The information required to be entered included the seal number on the container. The computer automatically allocated an export clearance number to the transaction and the details, including that number, could be printed out. The printout of the Honiara shipment shows that the only seal number entered by EDI was 005996. When the container arrived at Honiara, that was the only seal on it.[68] No witness from EDI gave evidence; but the fact that only the later seal number was entered notwithstanding the initial provision of the earlier one to EDI suggests that EDI was aware of the change of seal. That in turn suggests that the change occurred before the container left Labrador's premises. Neither Mr Wright nor Mr Bryce gave evidence of exactly what happened to bring about that change. It is not possible to reach any conclusion as to whether the container was unlocked at the time the seals were changed.

The old-style commercial invoice and packing list

[201] Mr Michael Quan, the director of QQQ who placed the order for the Honiara shipment, died in 2003. Evidence about the affairs of QQQ was given by his brother and co-director, Lawrence. He examined certain business records of QQQ relating to its transaction with Labrador. They included an old-style commercial invoice and an old-style packing list. The typist who produced these documents was neither Mrs Wood nor Mrs Lapré, but by this time Labrador had its own computer.[69] The old-style invoice, like the new-style invoice, was dated 8 May 1996 and addressed to QQQ 's post office box number, not its facsimile number. It covered the same lines of beer and whisky as the new-style invoice and referred to the same vessel and container number. There were, however, some important differences between the two invoices. The old-style invoice specified the numbers of both of the seals on the container. The line of cigarettes was stated:

[274]

Payment terms were, "Settlement ten (10) days after arrival of vessel in Honiara, direct to our bank via the National Bank of Solomon Islands." No additional amount was charged for freight or handling, but prices were specified to be "CnF Solomon Islands in Australian dollars". QQQ kept this invoice in its records; it did not lodge it with Solomon Islands Customs.

[202] It is difficult to understand how or why this invoice was created unless it was created by Mr Wright. Mr Michael Quan had no reason to create it; it was not needed for Solomon Islands Customs. Moreover it would constitute a remarkable coincidence that he should have created a false invoice using the same superseded letterhead as was used (on the defendant's version) by an unconnected person in Fiji to create other false invoices.

QQQ's market and the nature of its business

[203] On the plaintiff's case, 136 sleeves (gross cartons) was a quantity which QQQ might have hoped to have sold in the Solomon Islands; 136 shipping cases was not. To support that case the plaintiff led evidence from Lawrence Quan to the effect that there was no market in the Solomon Islands for the quantities of the brands specified in the new-style commercial invoice. The defendants did not challenged that evidence and I have no hesitation in accepting it. Plainly QQQ would not have imported 136 shipping cases for the domestic market.

[204] The defendants advanced a different hypothesis. They suggested that Michael Quan might have been importing the cigarettes for re-export to Australia. In support of that hypothesis they called evidence from Mr Graeme Stonehouse. In 1995 Mr Stonehouse operated a company which was a licensed cigarette wholesaler in Queensland. During that year his company purchased 2,000 to 3,000 shipping cases of cigarettes from QQQ in 10 to 15 shipments. He dealt with Michael Quan. Mr Stonehouse explained (and Mr Lawrence Quan confirmed in general terms) that at that time cigarette manufacturers such as Rothmans charged Australian wholesalers approximately $55.00 per thousand cigarettes, but charged wholesalers in the Solomon Islands (and other developing nations) only $20.00 per thousand cigarettes. It was therefore economically feasible for Mr Stonehouse to buy his cigarettes from QQQ rather than from the manufacturer. On that basis, Mr Hack submitted that QQQ, through Mr Michael Quan, might have purchased the cigarettes for re-export to Australia.

[205] There are three difficulties with that theory which in my judgment are sufficient to dispose of it. First, the scheme would be economically feasible only if QQQ were buying from the cigarette manufacturer. It could not work with cigarettes initially purchased in Australia at the price charged by the manufacturer to Australian wholesalers. That was all the more true in the present case, given that Labrador purchased not from the manufacturers but from other dealers. Second, there is no evidence that QQQ continued this business after 1995. If it did so, it was not through Mr Stonehouse. The business which he conducted slowed at the end of 1995 or in early 1996, to the extent that he went to Honiara "to try and resurrect [it]". He was unsuccessful and in early 1996 his business ceased trading in imported cigarettes. There seems no reason why QQQ should not have continued to deal with him if it were still re-exporting to Australia. The explanation may be that, as Mr Lawrence Quan suggested in his evidence, Rothmans limited the quantities which it would sell to the Solomon Islands because it had a policy of not overloading the market and not allowing stock to remain for too long on shelves. Third, Mr Lawrence Quan thought that his brother was re-exporting only Winfield cigarettes, not other brands.

[206] In my judgment there was no commercial reason why QQQ would have entered into a contract to buy the quantities of cigarettes specified in the new-style invoice.

The Invoice and Combined Certificate of Value and Origin

[207] Although not a form uniquely for use in the Solomon Islands, an Invoice and Combined Certificate of Value and Origin was a form which an importer in that country was required to lodge. Investigation by Customs turned up two versions of such a form relating on their face to the shipment presently being considered. One was among the documents seized from Labrador in September 1996.[70] The other was lodged with Solomon Islands Customs on or about 11 June 1996.[71] Both versions nominated Labrador as the exporter and supplier and QQQ as the purchaser. Both nominated the port of loading as Brisbane, the vessel as the Highland Chief, the final destination and port of discharge as Honiara and the date of departure as 15 May 1996. Both specified the container number (but no seal number) and the two lines of alcohol in the consignment. Both specified an amount of $2,868.28 for freight. (This was the amount for freight in the new-style commercial invoice, but the additional amounts for courier and administrative fees in that invoice were not included in either version.) Both claimed to have been issued at Brisbane on 15 May 1996. However there were some important differences between the two versions.

[208] In the Honiara version:

[284]

He advanced no explanation for this enigmatic statement.

[211] On the other hand, Mr Wright denied any involvement in the Honiara version of the form. In particular he denied applying Labrador's corporate seal and sending the document to QQQ. He agreed that only he or Mr Bryce could have applied the seal to the document. The question arose whether the impression on the document had really been made by Labrador's seal. It was not possible to get the seal and make comparative impressions with it because, according to Mr Wright, the seal went missing sometime prior to April 1997, when a replacement was purchased. There were however a number of documents bearing impressions which it was agreed were made by the seal before it was lost ("the genuine impressions"). It is possible to compare those impressions with the impression on the Honiara document ("the Honiara impression"). To assist in that regard each side called a handwriting expert. The plaintiff called Mr Heath. The defendants called Mr Marheine. There was no challenge to the expertise of either man.

[212] There were three aspects to the examinations which the experts conducted. First, they compared the general design and characteristics of the Honiara impression with those of the genuine impressions (or in Mr Marheine's case, one of those impressions). Mr Marheine explained that general design referred to the size relationship, the positioning of the text and the positioning of information within the stamp; and characteristics referred to the size, the layout of the information and the relationship and the proportions of that material in the stamp. As he put it, "If we had a transparency of one and placed it over the other, they would be good fits, perfect fits." Second, they looked for individual identifying features existing in common between the genuine impressions and the Honiara impression. Third, they looked for individual identifying features differentiating the genuine impressions from the Honiara impression.

[213] Mr Heath found the general features and characteristics of the impressions entirely consistent and identified a number of common individual identifying features. On the other hand he saw no differences between the Honiara impression and the genuine impressions sufficient to suggest that different stamps were used to make them. He concluded that the impression on the Honiara document was produced using the same common seal stamp as was responsible for producing the genuine impressions.

[214] Mr Marheine also found the impressions identical in general design and characteristics. He did not suggest that there were any significant differences between the Honiara impression and the genuine impression. However in his opinion the individual identifying features relied on by Mr Heath were insufficiently defined and distinguished in the Honiara impression to permit a conclusive opinion. This was due to the degradation of the impression on that document because of "shadowing" or multiple imaging.

[215] Mr Heath nominated three individual identifying features. First, the "I" in "LIQUOR" revealed a tapered terminal feature whereas the top revealed a much thicker construction. Second, there was a narrow initial stroke of the "N" in "A.C.N.". Third, there was a (relatively) narrow and thin bottom left point on the star formation at the centre base of the seal. He highlighted these on attachment 4 to his second report, a photographic enlargement of two impressions. Mr Marheine accepted that these three features, clearly discernible in the genuine impressions, did amount to individual identifying features. His point was that one could not be sufficiently sure of their presence on the Honiara document.

[216] In deciding whether the Honiara impression was made by the same stamp as made the genuine impressions, I must not only form an independent judgment on the issues in contest between the experts, but also consider the matter from the point of view of all the other evidence in this case. Both experts considered the question in the abstract; but I must consider it in the context of the other evidence. It seems to me that the individual similarities identified by Mr Heath are strongly indicative of the impressions having been made by the one stamp, but I would hesitate, for the reasons advanced by Mr Marheine, to express that as a scientific conclusion from the document examination in isolation. However the law does not require scientific certainty. Moreover, in the context of this case I can see no other reasonable hypothesis capable of explaining not only the indicative similarities but also the absence of any significant differences between the impressions. The idea that someone in Honiara (for example Mr Michael Quan) might have been able to manufacture a common seal without incorporating some significant difference from the genuine article, observable under a microscope, I find incredible. I can see no reason why anyone should have attempted to do so. I can see no coherent hypothesis which could explain how anyone could have benefited from doing so.

[217] In my judgment the Honiara impression was made by Labrador's common seal. That being so, it was probably Mr Wright rather than Mr Bryce who applied it. I am satisfied that the Labrador version was a fake created by Mr Wright and that the Honiara version was the genuine document. I shall consider why Mr Wright might have created the Labrador version below.[74]

Documents sent by Labrador to QQQ

[218] Mr Wright testified that he would have received the bill of lading about 16 May (it issued on 15 May). He testified that he would have sent it and the new-style commercial invoice and packing list to Honiara (he was unsure whether he sent the Invoice and Combined Certificate of Value and Origin at the same time). He sent documents to Honiara by courier on 22 May. Lawrence Quan deposed that QQQ received the old-style commercial invoice and packing list, a certificate of age and the Honiara version of the Invoice and Combined Certificate of Value and Origin, but he could not say exactly when. I have already found that Mr Wright did not provide old-style letterhead to Mr Michael Quan.[75] I am satisfied that it was he who sent the old-style commercial invoice and packing list to QQQ, in the courier package sent on 22 May. That package also contained the Honiara version of the Invoice and Combined Certificate.

The voyage

[219] The bill of lading issued on 15 May 1996. In the ordinary course the Highland Chief would have departed Brisbane within a day or two of that date. There is no reason to think that the ordinary course was not followed on this occasion. Mr Bryce suggested that there had been a delay in the sailing; but this was in the context of his attempt to assert that the container had been packed on 17 May. On that point he was wrong.[76] On the other hand a letter from Customs to Solomon Islands Customs dated 14 May stated that the shipment would be departing Brisbane on 17 May. It probably did depart on or about that date.

[220] There is conflicting evidence as to the date of arrival of the vessel at Honiara. The entry for warehousing filled out by Mr Limnanigau, an employee of QQQ, on 5 June stated the date of arrival as 19 May. The plaintiff relied upon that date in its submissions. I do not think it can be correct, as it is about 1,150 nautical miles from Brisbane to Honiara. Moreover, as Mr Hack pointed out in his submissions, a report by Mr Tom Waihere, Senior Collector (Investigations) for Solomon Islands Customs, made on 12 June stated the date of arrival as 28 May. That seems rather a long time for the voyage, but the route may have been indirect, eg via Papua and New Guinea or New Zealand.

Payment

[221] Labrador received four payments which it claims were in respect of the goods covered by the new-style commercial invoice:

[287]

I simply don't believe him. The story is inherently incredible.

[223] The circumstances surrounding the second and third payments are also suspicious. In each case the person who made the payment is unidentified. In each case the payment was in cash, comprising a mixture of $100 and $50 notes. In each case the deposit was made using preprinted deposit slips bearing Labrador's name. Mr Wright recorded the payments in Labrador's books two days after they were made. He was able to work out that the three payments (totalling $91,170.00) should be attributed to QQQ because their sum was the amount of the part payment required under the new-style invoice. He said it was not surprising that QQQ used Labrador's preprinted deposit forms, as he had given these forms out to a number of customers (I note however that such forms were never used by Coachwork.)

[224] The final payment of $31,867.88 was made by QQQ. It purchased a bank draft on 25 June and sent it to Labrador, which banked it on 18 July. According to Mr Lawrence Quan, that payment was in satisfaction of the amount set out in the Honiara version of the Invoice and Combined Certificate. It will be recalled that that invoice was made up of $28,999.60 for the price of the goods and $2,868.28 for freight. It was the only amount which QQQ ever paid Labrador. That rather suggests that the goods in that invoice were the only goods which QQQ ever purchased from Labrador.

[225] As the above table shows, that payment brought the total amount which Labrador attributed to the Honiara transaction to $123,037.88. However the amount in the new-style invoice was $123,038.28. The discrepancy is small, but it is unexplained except on the basis that the new-style commercial invoice was not genuine.

[226] That discrepancy is significant in another respect. If the new-style commercial invoice were genuine, the balance owing from the payment of the part payments of $91,170.00 until receipt of the bank draft in July would have been $31,868.28. Among the documents seized from Labrador's premises was a handwritten list of outstanding debtors as at 30 June 1996. It is common ground that the list was written by Mr Wright. Included in the list was an item "Solomon Islands 31,867.88". Asked about the "source of the list" in his evidence-in-chief, Mr Wright replied, "I would go through my invoice books, my retail sales books, my export files." That seemed an extraordinary way for a company of Labrador's size to maintain its accounts. One would have thought at the very least that it would have maintained a debtors' ledger. To help explain that oddity, Mr Wright was asked if Labrador had an accounting package back in 1996. He responded, "No, Mr Hack. It's all done manually." That was probably quite true; Labrador acquired a computer only in early 1996. However it does not explain why a business with trade debtors of about $210,000.00[77] would not have kept a debtors' ledger manually. Such a document would have recorded (if the new-style commercial invoice were genuine) the amount of that invoice and the amounts of the three payments allegedly received by 30 June in respect of it. It would have shown a balance of $31,868.28 on that basis. Absent a ledger one would have expected that Mr Wright would have had to calculate the balance owing using the same figures. A calculation would have produced the same balance.

[227] But that is not what Mr Wright said he did. According to his testimony, "I would have gone to my export file for Solomon - for Honiara and had a look to see what was the outstanding balance which would have been the balance as per the final amount still owing to come from Solomon Islands bank." That file held "copies of all correspondence, faxes, the pro forma invoice, copies of the commercial invoice, the packing list, whatever had to do with that shipment." To find the outstanding balance in the file in the absence of a ledger or a calculation required the existence of a document setting out that balance. Mr Wright was led to such a document in his evidence-in-chief:

[289]

That was his explanation for why the debtors' list showed what on his evidence was an incorrect figure.

[228] I have already held that the Labrador version of the Invoice and Combined Certificate was fabricated by Mr Wright.[79] The probable reason for this was to provide a source document which might explain the entry in his handwritten debtors' list in a way which shifted responsibility for originating the "Solomon Islands" figure from him. Mr Wright needed a document showing a figure equal to the amount which he had written. That was why, despite the date on the Invoice and Combined Certificate, it could not show the cigarettes set out in the new-style commercial invoice.

[229] I am satisfied that the cash payments made on 20 and 29 May were not made in respect of the goods in the new-style commercial invoice. Their provenance and appropriation are unexplained; but they are sinister. They do not support the proposition that container number TPHU 824197-2 held those goods. I am satisfied that only the July payment was made in respect of the contents of that container. That payment was made on the Honiara version of the Invoice and Combined Certificate. It supports the plaintiff's claim that the goods in the container were those set out in that document.[80]

Delivery in Honiara

[230] On 14 May 1996 Mr K J Logan, an officer of Customs, wrote to the Acting Comptroller-General of Customs for Solomon Islands regarding the shipment. He nominated the container number and seal number 005996 and requested that officers from Solomon Islands Customs examine the container and forward details of the container number, seal number, whether the seal was intact and an itemised list of the contents of the container including brands and quantities. Copies of documents and other information were also sought.

[231] There is no evidence to establish the date upon which the container was unloaded. After it was unloaded it remained in a secure area of the port of Honiara controlled by Solomon Islands Customs. It was examined by a team of four officers led by Mr Waihere on 11 June. Mr Limnanigau was also present on behalf of QQQ. There was only one seal on the container (005996) and it was intact.[81] Mr Waihere described the examination process in his affidavit:

[291]

[232] The evidence of Mr Limnanigau was to somewhat different effect. His affidavit referred simply to cartons, without identifying whether he was referring to gross cartons (sleeves) or shipping cartons (shipping cases). In cross-examination he maintained that the cartons which he saw were shipping cartons. Obviously both he and Mr Waihere cannot be correct.

[233] I unhesitatingly prefer the evidence of Mr Waihere as to what was in the container at the time of the inspection. There was no suggestion that this witness was anything but honest in his answers. He knew that the examination was special because of the request from Australia. He personally did the counting. He wrote the results of his examination in a contemporaneous report. His evidence on the results of his count was unchallenged in cross-examination and there was no application for him to be recalled for further cross-examination after Mr Limnanigau gave his evidence. Mr Limnanigau gave his evidence by video link and there were from time to time the difficulties caused by this method of examination. His grasp of English was inferior to that of Mr Waihere. The only reference to cigarettes in the entry for warehousing, which he had personally filled out, was to "Rothmans KSF", the weight of which was stated to be 20.4 kg. That was what two or three shipping cases full of cigarettes would have weighed; 136 shipping cases would have weighed far more. Surely Mr Limnanigau would have been astonished to have seen so many when the container was opened, yet he said nothing.[82] On this point I do not accept his evidence.

[234] On behalf of the defendants, Mr Hack submitted that I could not be confident that the container had not been interfered with prior to its inspection by Mr Waihere. (I take it that by "interfered with" the submission refers to the removal of about 133 shipping cartons of cigarettes.) He submitted that on the evidence of Mr Stonehouse, procedures on the wharf at Honiara were "fairly lax". I take that to refer to evidence by Mr Stonehouse that he was able when in Honiara to accompany a QQQ vehicle onto the wharf when goods were unloaded from a container on to the vehicle. It was however an unsealed container with only one padlock, to which the QQQ employees had the key. It must therefore have already been cleared by Customs, so no impropriety is demonstrated. Mr Stonehouse said that the vehicle was not stopped on its departure, which does demonstrate some laxity. On another occasion, he said, he went for a stroll through the port facility and was not stopped, but he was vague about precisely where he went and did not suggest that he could have removed goods from a sealed container under Customs control.

[235] In addition to evidence of the possibility that the cigarettes were removed from the container before its inspection, there was evidence relating directly to the packing of the container to support the contention that what was exported was indeed 136.5 shipping cartons of cigarettes. I turn to that evidence.

The packing of the container

[236] Both Mr Wright and Mr Bryce swore that the container was packed with the goods set out in the new-style invoice and packing list. The defendants sought to support their testimony by evidence from Mr Stonehouse who was alleged to have been present at the time of packing. They also gave evidence of the presence of Customs officers at Labrador's premises at the time of the packing.

[237] During May 1996 two Customs officers, Mr Holiday and Mr King, were carrying out routine auditing activities at Labrador's premises. These activities had nothing to do with the events the subject of the prosecution and the officers were not initially opened as witnesses in the plaintiff's case. In the course of cross-examining another Customs officer, Mr Hack asked if he was in a position to comment on the proposition that the two auditors were present at Labrador's premises at the time when the Honiara shipment was being packed and the container sealed. He could not; but the plaintiff promptly made arrangements for the two officers to be called, in effect for cross-examination. In relation to an occasion at Labrador's premises on 7, 13 or 17 May 1996, the following propositions were, expressly or by implication, put to one or other, or both, of them:

[301]

I do not believe the last answer. Mr Bryce did not identify which seal he was referring to. Indeed he made no mention of the fact that two seals were used. There was no suggestion in cross-examination that Mr Holiday had applied a seal himself or had seen a seal applied. Moreover Mr Bryce's evidence "I recall going into Paul Holiday particularly, one of the Customs officers there, and saying, 'Paul, do you want to come and have a look at this container now it's packed?'" is inconsistent with the cross examination of Mr King and Mr Holiday, where it was suggested that the invitation was directed to Mr King who in turn spoke to Mr Holiday. I am not prepared to accept Mr Bryce's evidence in relation to this incident except where it was corroborated by Mr Stonehouse.

[242] To some extent, Mr Bryce's evidence was corroborated by Mr Stonehouse. The latter testified that at an unspecified time on an unspecified date in May 1996 he went to Labrador's premises to see Mr Wright. He found Mr Wright engaged in an audit with two Customs officers. Mr Wright said that he was busy and suggested that Mr Stonehouse talk to Mr Bryce "and he would see me not long after". He went through to the warehouse and found Mr Bryce engaged in packing a container. Mr Bryce told him the container was going to Honiara and that he was only halfway through loading it. He said the truck was due to arrive at any moment. At that stage the third of the container furthest from the doors[87] contained "quite a few" cases of cigarettes and appeared to contain spirits behind them (although it was difficult to see beyond the first row). Mr Bryce was packing cigarettes by taking sleeves out of the cases and packing them on top of the spirits. There were a few cases on a pallet inside the container and another 32 awaiting packing on a pallet outside. After the former pallet had been emptied and removed, Mr Stonehouse threw the remaining 32 into the container for Mr Bryce to pack. This Mr Bryce did, packing them along one side of the container, not in full rows. They did not reach the doors of the container. There was some discussion as to whether the "balance of the beer" would fit in the remaining space. Mr Stonehouse did not think it would, and had a bet with Mr Bryce to support his opinion. In the event it fitted in, very neatly filling the last hole. Mr Bryce showed Mr Stonehouse a seal when he was about to close the container. They then walked into the office, Mr Bryce saying that he was going to get one of the Customs officers to seal the container with him. He spoke to the Customs officers and one of them went with him out to the warehouse. Mr Stonehouse continued to the inner office to speak to Mr Wright.

[243] The evidence of both Mr Bryce and Mr Stonehouse differed from what was put in cross-examination and opened in two significant respects. First, Mr Bryce did not suggest in his evidence that either officer was involved during the packing of the container or even saw it before packing was complete, although he did claim that Mr Holiday had seen the stock that was to go into the container. In particular he did not allege that he showed either officer a chalk mark on the floor of the container, nor did he allege that either was involved in a conversation about whether all of the goods would fit in the container. Second, the goods packed closest to the entrance of the container were, on his evidence and that of Mr Stonehouse, cartons of beer, not cartons of cigarettes as was opened. Given the tightness of the alleged pack, no cigarettes could have been visible to Mr King, even if he went with Mr Bryce as alleged.

[244] The defendants submitted that it would suggest a particular bravado for Labrador to be attempting to evade duty on $92,820.00 worth of cigarettes in the presence of Customs officers undertaking an audit; particularly to have involved Mr King and Mr Holiday in some banter with Mr Bryce about fitting the goods into the container. The difficulty with that submission is that it is impossible to determine with any precision what happened at Labrador's premises on 13 May (assuming that was the day the container was packed) and the sequence in which it happened. Why a second seal was needed was not explained. The time of Mr Stonehouse's visit is unknown. Important elements of Mr Bryce's evidence are uncorroborated and that evidence itself is unreliable.

[245] Whatever the level of bravado displayed by Mr Bryce, the more important question is whether the evidence just discussed, considered with all of the other evidence relevant to the point, opens up a reasonable hypothesis consistent with innocence. When I consider that evidence and the evidence relating to the opportunity for the container to be tampered with, and balance it against the evidence of Mr Waihere relating to the seal, the documentary evidence of the contents of the container, the evidence regarding the nature of QQQ's business and the evidence regarding payments to Labrador, I have no doubt that when the container left Labrador's premises its contents were as set out in the Honiara version of the Combined Certificate of Value and Origin. Those were the goods which Labrador exported.

Conclusions regarding Honiara shipment

[307]

[250] First, Mr Bryce packed all of the containers used for the disputed transactions. As Mr Bryce's evidence regarding the Honiara shipment showed, the process of packing culminated with the application of a seal to the container. Second, in each case he knew that details were provided to Customs for export clearance for the goods listed in the relevant export entry.[89] Third, Mr Bryce swore that the container for the Honiara shipment would definitely have contained more than one row of shipping cartons of cigarettes. Whatever went on at Labrador's premises in relation to the shipment, that was not the position at the time the container left Labrador's premises. I reject that evidence. I can think of no reasonable hypothesis by which the container could have left Labrador's premises loaded as it was without Mr Bryce's knowledge. Fourth, there was evidence from Mr Bryce about the packing and contents of the Fiji shipments, not in his evidence in chief but in cross-examination: Mr Bryce insisted that the Fiji containers held "international brand spirits" and denied that he packed any of them with the goods listed in the relevant old-style commercial invoice. I reject those denials. I have already found that when those containers left Labrador's premises they held such goods. I can conceive of no rational means by which that state of affairs could have come about without the involvement of Mr Bryce. He must have known the true contents of the containers. Fifth, given that knowledge, his persistent denials that the containers held the goods listed in the old-style commercial invoices could not have arisen from forgetfulness, confusion or inadvertence. If he could not remember what was in the containers, Mr Bryce could have said so. Sometimes he almost seemed to say this, but invariably he returned to his theme that the containers did not hold those goods. I can see no rational explanation for these denials; I think they demonstrate a consciousness of his own and Labrador's guilt.[90] Finally there is Mr Bryce's evidence that Labrador never purchased spring water, nor had it at its premises. I have already rejected that evidence.[91] Mr Bryce must have known about the water and must have packed it into the container for the first Fiji shipment. In short, there is some evidence that Mr Bryce was concerned in the matters alleged by the plaintiff against Labrador.

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Judgment (344 paragraphs)

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