Chief Executive Officer of Customs v Tony Longo Pty Ltd

Chief Executive Officer of Customs v Tony Longo Pty Ltd - [2001] NSWCA 147 - NSWCA 2001 case summary — Zoe

[24]

1 MASON P: I agree with Heydon JA. 2 HEYDON JA: Background This is an appeal by leave by the plaintiff from an order made on 6 December 1999 by Adams J sitting in the Common Law Division striking out the Statement of Claim and an order that the plaintiff pay the defendant's costs. 3 The proceedings commenced by Summons filed on 29 April 1998. An order was made on 2 November 1998 that the proceedings continue on pleadings. By a Statement of Claim dated 12 February 1999, it was alleged that the defendant had unlawfully failed to pay duty in relation to the importing of shoes. There were allegedly 31 importations. The Statement of Claim dealt with each importation separately. Paragraphs 3-7 alleged in relation to the first importation, for example, that 672 pairs of shoes were imported, and imported into Australia for home consumption, from Portugal in or about July 1997; that at that time the defendant was the owner of, the importer of, and beneficially interested in the goods; that the goods were not entered as required under Pt IV of the Customs Act 1901; that customs duty in the amount of $9116.86 was payable; and that no duty had been paid. Paragraph 158 alleged that pursuant to s 153 of the Customs Act, the plaintiff was entitled to recover from the defendant unpaid customs duty in respect of the goods in the amount set out. The total claim was $579,012.47. 4 The defendant moved to strike out the Statement of Claim under Pt 15 r 26 of the Rules of the Supreme Court as disclosing no reasonable cause of action. The defendant argued that the obligation to pay duty depended on the goods being entered for home consumption pursuant to s 68(1) of the Customs Act by reason of s 132. Since, as the plaintiff alleged, there was no entry for home consumption, the defendant contended that there was no obligation to pay duty. 5 The Notice of Motion appeared to rest on the contention that the Statement of Claim disclosed no reasonable cause of action (see Pt 15 r 26(a): the reasons for judgment disclose no trace of any submission that paragraph (b) or paragraph (c) applied). However, the reasoning of the trial judge was not couched in terms of whether there was a reasonable cause of action: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 129. Rather, it attempted to arrive, as if an order had been made under Pt 31 r 2 for a separate question to be tried, at an answer based on the correct construction of the legislation, not merely a reasonably arguable one. 6 The matter proceeded in the same way in this Court. It was common ground that for the purpose of resolving the arguments it was necessary to assume the truth of the matters of fact alleged in the Statement of Claim.

[41]

The plaintiff's submissions on appeal in outline 16 The plaintiff submitted that under s 153 of the Customs Act it was claiming a Crown debt, namely duties of Customs. The relevant duties of Customs were imposed, as s 18(1) of the Customs Tariff Act 1982 and s 21(1) of the Customs Tariff Act 1987 provided, on "goods imported into Australia". The rates for the particular goods, footwear, were specified in Chapter 64 of Schedule 3 by reason of s 19 and s 22 respectively of those two Acts. The value of the goods to which the rates were to be applied was the customs value of the goods ascertained or determined in accordance with Div 2 of Pt 8 of the Customs Act, by reason of s 11(2) and s 13(2) respectively of those Acts. 17 The plaintiff then submitted that the primary judge had erred in deciding the matter in reliance on s 132. According to the plaintiff, the purpose of s 132 was to fix the rate at which import duty should be levied by reference to the date of entry when the goods were entered; where they had not been entered, the rates in force at the time of importation applied, and s 132 had no operation. 18 The plaintiff then made the following specific submissions. First, Wilson v Chambers and Co Pty Ltd (1926) 38 CLR 131 was a decision of the Full High Court which had rejected the construction that by reason of s 132 the obligation to pay duty was not triggered by importation, but only by entry of goods for home consumption, and the primary judge had erred in his analysis of it. Secondly, the decision of Starke J in Wing On v The Collector of Customs for New South Wales (1938) 60 CLR 97 was a decision rejecting the materiality of s 132, and the primary judge had erred in his analysis of it. Thirdly, the Full High Court in dismissing the appeal from Starke J in Wing On's case used language favouring Starke J's approach but inconsistent with the primary judge's decision, and the distinguishing of the Full High Court's decision by the primary judge was unsatisfactory. Fourthly, the primary judge erred in failing to apply Attorney-General v Ansted (1844) 12 M & W 520; 152 ER 1304 and Brook's Wharf & Bull Wharf Ltd v Goodman Brothers [1937] 1 KB 534. Fifthly, the primary judge had erred in distinguishing an observation of the Queensland Court of Appeal in Carter Holt Harvey Manufacturing Group Pty Ltd v Comptroller-General of Customs (1996) 128 FLR 96 at 97-98 that s 153 was applicable notwithstanding that no entry had been made. Sixthly, the primary judge had erred in following Re Prechelt (1999) 149 FLR 334 because it had failed to consider the five contrary authorities and was wrongly decided. 19 Finally, the plaintiff drew attention to the fact that the result of the primary judge's approach was that no duty could be collected on imported goods if there were no entry, which could facilitate an escape from paying duty. The provisions to which the defendant referred as minimising the practical extent of this problem were said by the plaintiff to have limited effectiveness.

[46]

No entry was made in respect to the paint and no duty was paid. 27 Knox CJ then described the procedural background as follows (at 135): "On these facts the respondent Company was charged with the following offences, namely, (1) failing to enter the goods (sec. 68); (2) evading payment of duty (sec. 234); (3) interfering with goods which were subject to the control of the Customs (sec. 33). The respondents Lawrence Chambers and William Chambers were charged with aiding, abetting or being concerned in the commission of the offences alleged to have been committed (sec. 236). All the offences charged were alleged to have been committed with intent to defraud the revenue. On the hearing of the informations no evidence was called for the respondents and the Magistrate dismissed all the informations, being of opinion that the evidence given for the prosecution failed to support, and in fact disproved, the averments of the informant. The question for us is whether his determination was erroneous in law. The charges against respondent William Chambers are not now pressed, and the case may be dealt with as if the charges were against the Company and Lawrence Chambers alone." 28 The charge of failing to enter the goods under s 68 could not be made out unless the goods were imported. The whole court (Knox CJ, Isaacs, Higgins, Rich and Starke JJ) held that there was sufficient evidence of importing and that the charges relating to failing to enter goods had been made out. They also held that the charges relating to interfering with goods subject to the control of the Customs was rightly dismissed. That left the charges relating to evasion of duty which was payable. The High Court held that the Magistrate was correct in dismissing those charges. 29 Section 234(a) provided: "No person shall evade payment of any duty which is payable." Isaacs J summarised the relevant charge against the company thus (at 137): "The charges laid against the Company were as follows:- (1) Under sec. 234 of the Act for evading payment of duty in respect of certain goods, namely, enamel, varnish, lead and paint, imported into the Commonwealth at Port Kembla on or about 7th September 1922 … ."

[47]

As he said of s 234(a) (at 138): "The latter part of the paragraph requires that duty is actually and presently payable; and this is the first inquiry." 30 How did counsel approach that inquiry? E M Mitchell KC for the appellant (i.e. the Crown) argued (at 133): "What the Company did amounted to an evasion of payment of duty under sec. 234." That argument evidently assumed that duty was payable despite the failure to enter the goods. Flannery KC for the Company and Lawrence Chambers submitted in answer to the s 234 charges (at 133): "Sec. 132 shows that duty is not payable until goods are entered for home consumption, and the person who so enters them imports them." In short, Flannery KC was propounding the very argument being employed by the defendant in the appeal to this Court, though doubtless in a cruder form. 31 The response of Knox CJ to that argument was (at 136): "The second charge was that of evading payment of duty (sec. 234). The distinction in meaning between the words 'evade' and 'avoid' is well established, and a charge of evading payment is not made out by evidence which proves no more than that the person charged failed or omitted to pay an amount payable by him. There was nothing to suggest that the agreement to sell the paint to the ship was other than a genuine agreement, nor did the evidence tend to show that the respondents did not honestly believe that in the circumstances it was not necessary to enter the goods or to pay duty in respect of them, or that their intention in selling the goods was to escape payment of duty. In fact the evidence proved no more than an omission to pay duty which was legally payable. In my opinion the Magistrate was right in dismissing the informations founded on sec. 234." 32 That passage, in explicitly stating that duty was legally payable, was rejecting Flannery KC's argument based on s 132. Knox CJ held that the charge had been rightly dismissed for an entirely different reason, namely that there was no proof of a mental state necessary to support a conclusion of evasion. 33 Isaacs J, after concluding that the goods were imported goods, said that the goods should have been entered by the Company under s 68, and as they were intended to be sold to the shipowner for use as ships' stores, should have been entered as for warehousing. He then said (at 140-141): "Was there an instant obligation to pay the duty? The matter depends upon a well-established understanding as to warehousing. The Customs Act , in Part V., deals with the warehousing of goods. Sec. 78 enacts 'Dutiable goods may be warehoused in warehouses licensed by the Minister.' Such goods are ex necessitate imported and are within the taxing Act provision quoted. The duty is at once a debt to the Crown. Hamel on the Laws of Customs , at p. 100, states the relevant law and quotes the following authorities: Com. Dig. 'Debt,' A. 9; Leaper v. Smith [(1721) Bun. 79]; Anonymous [(1606 Lane 15]; Salter v. Malapert [(1617) 1 Roll. 383]; Attorney-General v. Weeks [(1726) Bun. 223], and Attorney-General v. Ansted [(1844) 12 M. & W. 520]. In the last-mentioned case Parke B, who was in accord with Lord Abinger C.B., referring to the Warehousing Act 3 & 4 Will. IV. C. 57, which is the prototype of Part V. of the Customs Act , in effect stated the law to be that, apart from the warehousing provisions, the duty was payable, and that those provisions when complied with suspended the Crown's remedy by giving time for payment until the happening of events mentioned in those provisions for requiring actual payment. He also held that, where by the importer's own fault those provisions were not complied with, the original liability stood and the time for payment had arrived. The commercial necessities that led to the enactment of the warehousing provisions, and that to some extent at least exist in Australia, are found stated in Sir George Stephens ' work on Commerce and Commercial Law (1853), at pp. 108 et seqq . The statement is interesting as supporting practically the principles laid down by the abovementioned authorities. Applying those principles, confirmed by sec. 153, to the present case, the time for payment had arrived." 34 Isaacs J's conclusion that "the time for payment had arrived" can only have been reached as a result of a rejection by him of Flannery KC's s 132 argument. 35 Isaacs J then turned to the distinct issue of evasion. However, in the course of discussing it, he made statements relevant to the present issue. At 142-3 he said: "There was importation of all the goods at Port Kembla. The 'payment' was due there instanter . All the facts were known to the respondents other than William which constituted in law the instant liability to payment of the duty. The respondents (other than William) unquestionably determined not to pay any duty at Port Kembla but to proceed as above stated. The arrangement included a guarantee. Even apart from the special terms of that guarantee, what was actually done was to remove from Port Kembla without payment of duty goods in respect of which duty was instantly payable and on which there existed by statute a charge or security for the payment of the duty."

[51]

His opinion necessarily entails the rejection of Flannery KC's s 132 argument. It corresponds with the ratio decidendi of his decision in the original jurisdiction in Wing On and Co Ltd v The Collector of Customs for New South Wales (1937) 60 CLR 97, which is discussed below. 39 What can be said against the proposition that Wilson v Chambers and Co Pty Ltd is a decision of five justices of the High Court turning, as part of the ratio decidendi, on a distinct rejection of the argument based on s 132 expressly advanced to the court? It might be argued that what was said and done in rejecting that argument was not crucial to the outcome, because the upholding by the High Court of the Magistrate's dismissal of the s 234(a) charges turned on the conclusion that there was no evasion. To say that would depend on a very narrow approach to determining the ratio decidendi of the case. The High Court held that but for the Crown's failure to prove a mental element required by the word "evade", the s 234(a) offence would have been made out, because importation rendered duty "actually and presently payable". And neither the primary judge nor the defendant in this appeal did in plain terms accept that what the High Court justices said was adverse to the defendant's construction, but could be put on one side because what they said amounted only to obiter dicta. In any event, even if, contrary to my opinion, the remarks of the justices were only obiter dicta, they were nonetheless propounded in a case where the precise point now under debate was isolated by counsel for decision. They are not dicta of a character which it is open to an intermediate appellate court now to refuse to apply unless either a later High Court has departed from them or a relevant statutory change has taken place: neither of these events has happened. 40 What the primary judge did say about Wilson's case was as follows: "Knox CJ, dealing with the evasion offence charged against the defendants, drew the distinction between 'evade' and 'avoid' and having determined the evidence proved no more than an omission to pay duty which was legally payable, that the information was rightly dismissed (38 CLR at 136). I do not consider that his Honour's judgment deals in substance with the point before me. The same, I think, may be said of the judgments of Higgins and Rich JJ."

[55]

The fact that the respondents determined not to pay any duty formed no basis for Isaacs J's conclusion that duty was due immediately importation had occurred. The same is true of the reference to the fact that failure to enter the goods was the importer's fault. 44 The defendant in oral argument dealt with Wilson's case on an entirely different basis. The argument said that the case: "is explained in terms of the court simply not dealing with Mr Flannery's submission … The Court certainly in dealing with the argument can be taken to have assumed s 132 to have been inapplicable. Their Honours did not decide that point and indeed decided the relevant issue in the case by reference to an absence of intention." 45 The submission made by Flannery KC was not examined elaborately, but it was rejected quite distinctly, and the only available conclusion is that it was examined sufficiently by the justices sufficiently to satisfy them that it ought to be rejected. If it had been the case that "Their Honours did not decide that point", they would have said words to the effect that it was not necessary to decide whether or not duty was payable because the existence of intention had not been proved. Not only did none of them say this, but Isaacs J commenced the relevant part of his judgment at 138 by saying that the "first inquiry" was whether "duty is actually and presently payable". He did not say that it was an inquiry which it was not necessary to answer; rather he answered the inquiry by saying that "the time for payment had arrived" and that the payment was due on importation of the goods at Port Kembla "instanter". 46 The defendant also supported the submission that Wilson's case had not decided the s 132 argument by saying that when the s 132 argument was put to Starke J in Wing On & Co Ltd v The Collector of Customs for New South Wales (1937) 60 CLR 97, he: "significantly did not reject the argument simply by saying that the point had been decided in Wilson v Chambers, a case that had been decided some years before. On our learned friend's argument he could have said that but he did not and in our submission correctly because Wilson v Chambers simply did not decide the point."

[57]

Wing On & Co Ltd v The Collector of Customs for New South Wales: Starke J 48 The next relevant High Court case is Starke J's decision in the original jurisdiction in Wing On and Co Ltd v The Collector of Customs for New South Wales (1937) 60 CLR 97. On 6 September 1937 Starke J heard argument and gave judgment for the plaintiff (the Collector) for £345 15s. On 17 September 1937 he gave reasons for that judgment. He found the following facts (at 98-99): "A Chinese seaman on the s.s. Marella , called variously Jang Sang or Jong Seng, brought cigarette papers into Australia in the years 1934 and 1935, none of which were entered at the customs. In June 1934 the defendant obtained from Jang Sang 59 boxes of these cigarette papers described as 'Zig Zag' cigarette papers and paid him therefor the sum of £41 6s. and sold 50 of these boxes to an hotel-keeper for £46 5s. In August 1934 the defendant obtained from Jang Sang 189 boxes of these cigarette papers described as 'Zig Zag' cigarette papers, and they were invoiced to it for £163 16s. The defendant paid Jang Sang £132 6s. for these papers, and sold 140 of them to the hotel-keeper, who paid the defendant £119 therefor. About March 1935 the defendant also obtained from Jang Sang 107 boxes of these cigarette papers, described as 'Zig Zag' cigarette papers, and also 259 boxes of these cigarette papers, described as 'Repeater' cigarette papers, and paid him therefor £181 14s. 9d. … The defendant knew that the cigarette papers had not been entered at the customs and that no duty had been paid in respect of them." 49 Starke J said the question was whether the defendant was liable to pay the relevant duty of £345 15s. 50 After summarising parts of the legislation, in particular s 153, Starke J said (at 99): "Sec. 132 provides that all import duties shall be paid at the rate in force when the goods are entered for home consumption. The customs duties are charged upon the goods and become a debt due to the Crown immediately upon importation."

[61]

Hope JA said at 664: "A decision of a justice of the High Court sitting at first instance is of course of the greatest persuasive authority for this Court, but this Court is not bound to follow it, and since the decision is challenged, it becomes necessary to decide whether the construction placed upon the agreement by Owen J was the correct one." 52 Even if Wilson v Chambers and Co Pty Ltd (1926) 38 CLR 131 had not been decided, the giving to Starke J's decision in Wing On's case of "the closest and most respectful consideration", being a decision "naturally entitled to the greatest respect", which is "of its nature a most persuasive precedent", and indeed "of the greatest persuasive authority for this Court" would be likely to result in adherence to it. The case was argued by among the ablest counsel of the day. E M Mitchell KC appeared for the plaintiff. Spender KC - a future President of the International Court of Justice - and A R Taylor - a future High Court judge - appeared for the defendant. Judgment was reserved. The opinions stated in Starke J's reasons for judgment were those of one of the ablest lawyers who ever sat on the High Court. 53 The primary judge in the present case said of Starke J's opinion, after quoting the passage set out above: "It is important, I think, to note as making at least one point of distinction, the observation of Dixon J (as he then was) [in Wing On and Co Ltd v The Collector of Customs for New South Wales (1938) 60 CLR 97 at] 109 that - 'But it is sufficiently plain that under some understanding the goods were brought to the defendant company uncustomed and that they were at once resold, all with the intention of defeating the revenue.' … Although the proposition stated by Starke J is broad enough to apply to what might be the present circumstances, yet I consider that it was significantly affected by the consideration that the defendant was party to a scheme to evade duty and, with respect, the reasoning of Muir J in Prechelt is more directly in point." 54 The observation of Dixon J was made in a passage concluding with the proposition that s 153 imposes a specific charge on goods which binds all persons taking the goods, subject to the possible exception of those who are "bona-fide purchasers for value". Dixon J's observation about the intent to defeat the revenue may be directed to exclude the operation of that possible exception. However that may be, the fact that the defendant was party to a scheme to evade duty was no part of Starke J's reasoning in rejecting the argument based on s 132. That reasoning is operative both in cases involving evasive schemes and cases not involving evasive schemes. In cases involving evasive schemes, there cannot be a finding of evasion unless there is first an obligation to pay duty which is evaded. And in other cases duty cannot be claimed unless there is an obligation to pay it. Starke J's approach identifies the obligation as arising at the same moment in each instance - the moment of importation. 55 The defendant's written submission on Starke J's decision, after quoting the passage quoted above, was: "26. With respect, his Honour is quite correct. Failure to enter the goods for home consumption cannot excuse the payment of appropriate customs duties. But of course the effect of the Customs Act is to specifically provide for such circumstances. As previously indicated, goods not entered for home consumption as required may be removed to a warehouse under the control of Customs (section 72), and a person who moves the goods subject to the control of Customs is liable to a penalty (section 33) or fails to keep the goods safe must pay the duty that would have been payable if they had been entered for home consumption (section 35A). Again, there are offences set out in the Customs Act for smuggling and unlawful importation (section 233) and goods improperly moved or dealt with are forfeited to Customs (section 229)." 56 This submission, which puts part of the defendant's argument seeking to investigate the ill-effects of its preferred construction, confesses and seeks to avoid. It confesses that "Failure to enter the goods for home consumption cannot excuse the payment of appropriate customs duties." The next sentence is not correct: "But of course the effect of the Customs Act is to specifically provide for such circumstances." The Customs Act does not specifically provide for the payment of appropriate customs duties on goodswhich have not been entered for home consumption. Each of the other remedial sections mentioned - ss 33, 35A, 72, 229 and 233 - has limitations which make it less effective than the obligation to pay duty recognised by Starke J. 57 The defendant in oral submissions accepted that Starke J's decision in Wing On's case in terms rejected the s 132 argument advanced by the defendant. However, the defendant made three points. 58 The first point made by the defendant in oral submissions about Starke J's decision in Wing On's case was that Starke J rejected the argument by reference to Attorney-General v Ansted (1844) 12 M & W 520; 152 ER 1304. The defendant submitted that that case: "was inapplicable to the scheme of the Act as it then was. His Honour was no doubt influenced by [ Brook's Wharf and Bull Wharf Ltd v Goodman Bros [1937] 1 KB 534] which he referred to [at 60 CLR 97 at 99]."

[64]

He thus abandoned the s 132 argument advanced before Starke J by Spender KC. The case turned in the Full Court on whether persons taking from the importer were obliged to pay the duty which the importer ought to have paid. In particular, the appellant urged a narrow construction of s 153 and the Crown a wide construction. However, the decision by the appellant not to repeat the s 132 argument which failed before Starke J has some significance: it indicates the opinion of counsel that the argument was futile. It is the duty of counsel not to advance futile arguments, and it is also the duty of counsel, normally, to advance arguments which are perceived to have some prospect of success. 62 However, because of the appellant's concession, the dismissal by the High Court of the appeal against Starke J's orders cannot be regarded as containing as part of its ratio decidendi a rejection of the s 132 argument: Baker v R [1975] AC 774 at 788. There are, however, dicta pointing strongly against that argument. 63 Thus at 105 Latham CJ said: "After Jang Sang unlawfully imported the goods and while they were still in his possession the legal position was as follows:- ( a ) Jang Sang was liable to pay duty on the goods as owner in the ordinary sense (ownership being inferred from possession in the absence of contrary evidence). He was also owner under sec. 4, because he was the importer and was also a person possessed of or having control over the goods. ( b ) The goods were charged with the duties (sec. 153). ( c ) The goods were liable to forfeiture (sec. 229 ( a ) and ( g )). ( d ) The goods were subject to the control of the customs (sec. 30( a )). ( e ) Jang Sang was under a statutory obligation to enter the goods (secs. 36, 37 and 68). It is not disputed on behalf of the defendant that Jang Sang continued to be liable to pay the duties, whether or not he parted with the ownership or possession of the goods. This particular liability, which became attached to him by virtue of sec. 153, continues until it is discharged by payment or otherwise. It is admitted that he could not get rid of his liability to pay the duty by getting rid of the goods."

[66]

If the s 132 argument were sound, propositions (1) and (2) could not be correct. 65 Latham CJ then said (at 106-107): "When the defendant sold the goods to a third party and parted with the possession of them, the position remained as described, certainly as to all the matters mentioned under b to e and 2 to 5, except, according to the defendant's contention, in relation to the matters mentioned under (1) and ( a ). The new purchaser would be in the same position as the defendant in relation to liability to pay duties and to make an entry, whatever that position may be. As already stated, it has not been argued that Jang Sang became free of the liability to pay duty when he ceased to be the owner of the goods. This continuous liability was derived from the fact that he was owner of the goods within the meaning of sec. 153. That section imposes the liability on him because he was the owner of imported goods which had not paid duty. In my opinion, as Starke J. held, the defendant was in exactly the same position. The argument for the defendant really seeks to add after the words 'the owner of the goods' in sec. 153, the words 'at the time of importation.' I can see no reason for adding such words. This view is, I think, supported by an analysis to the effect of sec. 153 in relation to its operation in charging the duties on the goods as well as in imposing a personal liability to pay the duty upon the owner. The duties are declared to be Crown debts charged upon the goods 'in respect of which the same are payable.' The duties are so charged so long as they remain payable, that is, until they have been paid by some person. By whom then are the duties so charged to be paid? They are 'payable by the owner of the goods'. The charge on the goods follows the goods until the duties are paid, and the liability of the owner to pay, if he becomes liable to pay at all, lasts until the duties are paid. So, also, a personal liability arises in the case of any person who becomes owner of the goods before the duties are paid. That liability continues to exist until it is discharged by some person satisfying the obligation to pay the duties. I can see nothing in this section to support a contention that the importer or any other person who becomes liable by virtue of the section can be freed from that liability in any other way. The liability to pay the duty follows the goods as a charge and also follows the ownership of the goods as a personal liability until the duty ceases to be payable."

[68]

The "onus" to which Rich J referred was the duty, payable before the goods were entered for home consumption, i.e. on importation. 67 Dixon J said at 108-110: "In support of the company's appeal from that decision, it is contended that the dealings with the goods exposed the company to no civil liability to the Crown for the duty; at worst, it rendered itself liable for a penalty for having smuggled goods in its possession, an offence for which it has been convicted in respect of each of the three transactions …. The appeal was argued as if its determination required us to decide as a general proposition whether a liability to pay customs duty falls upon a person who, having no part in the introduction into Australia of the goods, obtains property or possession by a transaction either with the smuggler or someone claiming under him taking place after the smuggling is complete. Further, the argument appeared to involve the view that if such a person was liable for the duty, it could make no difference that he was a bona fide purchaser for value, so long as the goods remained in point of law subject to, that is, liable to, the control of the customs, because they had not been entered for home consumption [emphasis added]. I think that the facts I have stated raise a narrower question. It is evidence that some connection existed between the defendant company and the importation of the goods. It is not possible to say exactly what the relation was. The defendant may have given a specific order for the goods, or it may be that the company had done no more than raise a reasonable expectation that if such goods were brought to them, having escaped duty, then they would buy them. But it is sufficiently plain that under some understanding the goods were brought to the defendant company uncustomed and that they were at once resold, all with the intention of defeating the revenue. The duties in respect of the goods so dealt with are declared by sec. 153 to be Crown debts charged upon the goods in respect of which the same are payable. The goods were still legally subject to the control of the customs, that is, liable in law to the exercise of physical control by the officers of the revenue and to be dealt with so as to insure payment of the duty. The goods were the subject of forfeiture and sale, and, in the event of any sale by the collector, the proceeds would have been applied in payment of the duty. When sec. 153 charges the duty upon the goods, it means, I think, to impose a specific charge upon the goods which shall bind all persons taking them, at all events unless they are bona-fide purchasers for value."

[80]

Secondly, O'Connor J said (at 784-785): "The object of that provision [s 30], if it were necessary to give any reasons for its enactment, is obvious; if once goods go into home consumption, that is, into circulation, it becomes almost impossible to trace them. The only security the customs authorities could have in such a case for the payment of duty would be in most cases the personal security of the importer. Therefore it is, if the Act is to be effective, that all through the dealings with the goods, from the time they are first imported until duty is paid, they must be kept under customs control. In order to secure that end it is provided that no goods can be landed from the ship until the entry has been passed or a permit given by the collector. The entry must be passed before goods can be landed. Entry may be passed in one of three ways. It may be made for home consumption, that is to say, by passing an entry immediately, which, according to the Act, is a warrant for taking the goods away and dealing with them. Before they go out for consumption duty must be paid. For that purpose it is essential that there be a payment of duty contemporaneous with the entry. The other cases for which they may be entered are for warehousing, and for transhipment. Warehouses under the Act are of several kinds. There are some in which a manufacture may be carried on in bond. If goods are imported for the purpose of being manufactured, the manufacture is carried on in the warehouse in bond, and when the manufacture is completed, an entry for home consumption is made and duty is paid. It will be seen from these different kinds of entry that the time for valuation is different in different cases. In the case of an entry for home consumption, it must be made when the goods are landed. In the case of an entry for warehousing, it is not necessary to make a valuation until the time arrives for payment of duty. And if goods are entered for manufacture, matters may be arranged so that the manufacture may be carried out in a warehouse, and duty paid when the manufacture is complete. Thus the time for payment of duty arises only when all the elements necessary for making the valuation are in existence. But if we look at the entry in question here we see that it is an entry for home consumption. That entry cannot be made without payment of duty. Duty cannot be fixed without ascertainment of value, and according to the whole scheme of collection of duties under the Act, the time for payment of duty is the time for valuation." 80 These passages do not assist the resolution of the present controversy. First, R v Lyon concerned the application of s 144, relating to the valuation of medicinal preparations. No counsel and no justice mentioned either s 132 or s 153, and the defendant's present argument was not put to the court. Secondly, O'Connor J's statement that the time for valuation, in the case of an entry for home consumption, is when the goods are landed, appears to favour the plaintiff rather than the defendant. Thirdly, both passages appear to contemplate that goods will be entered for home consumption, if that is the importer's intention, as soon as possible after importation. There had in fact been an entry in that case. Usually there will be, because normally importers are law abiding, and they will comply with their obligations under ss 30, 36 and 68. 81 The defendant then drew attention, in the joint reasons for judgment of Gummow J and Callinan J in Malika Holdings Pty Ltd v Stretton, to [68], which contained a quotation from Gibbs J's judgment in Carmody v F C Lovelock Pty Ltd (1970) 123 CLR 1 at 22-23. The sentence relied on was: "Although the [Act] does not expressly so provide, the duty would normally be paid at the time of passing the entry."

[86]

Carter Holt Harvey Manufacturing Group Pty Ltd v Comptroller-General of Customs 84 This case concerned the construction of s 165 of the Customs Act. Section 165 deals with the obligation to pay duty which has been short levied or erroneously refunded. The following passage appears in the joint reasons for judgment of Fitzgerald P and Mackenzie J (1996) 128 FLR 96 at 97-98: "So far as civil recovery is concerned, the primary section is s 153, which is in Div 1 - 'The Payment and Computation of Duties Generally' and provides: 'Recovery of duties 153. All duties shall constitute Crown debts charged upon the goods in respect of which the same are payable and payable by the owner of the goods and recoverable at any time in any court of competent jurisdiction by proceedings in the name of the Collector.' That provision is plainly applicable where an import entry has not been made, duty has not been paid, and an authority to deal with imported goods has not been obtained." 85 The primary judge said: "If I may say so, with respect, this statement is plainly right, so far as it goes. However, the result might be forfeiture of the goods under s 229(1)(g) at all events. The imported goods would also be subject to a charge referable to an inchoate sum, capable of execution once the amount due is calculated. It does not appear that this decision was referred to by Muir J in Prechelt , but having regard to the issues in it, I do not consider, with the greatest respect, it demonstrates a flaw in his Honour's judgment." 86 The plaintiff's written submission on this passage was: "The appellant submits that Adams J erred in distinguishing this dictum. For his Honour to say, at paragraph 24 of the judgment, that the result might be forfeiture of the goods under s.229(1)(g) and the goods would be subject to a charge referable to an inchoate sum capable of execution once the amount due is calculated, one assumes on the entry having been made, is entirely inconsistent with the judgments of the justices in Wing On & Co (above). It is also inconsistent with the reasoning of the Court of Appeal in Carter Holt Harvey (above)."

[92]

The defendant submitted: "In referring to the 'rate of any import duty payable', the section proceeds on the basis that it is applicable to all duty payable on imported goods. Critically, the section is not couched in terms suggesting that, notwithstanding an otherwise existing liability to duty, that duty is taken to be calculated at the time of entry for home consumption. The section clearly presumes no other pre-existing liability to customs duty. The section fulfils the important role of enabling quantification of the duty payable on the imported goods. As Adams J points out in his judgment (paragraph 10), rates of duty may well vary between the time that goods are imported into Australia and the time that they are the subject of an entry for home consumption. As Adams J also points out (paragraph 17), adopting the analysis of Muir J in Re Gregg Prechelt [1999] QSC 36, section 132 performs the critical requirement of 'identifying the amount of tax to be calculated as assessed … so that absent such a provision there is no mechanism by which tax imposed in a general way by sections 15 and 16 [sections 21 and 22 of the Customs Tariff Act ] can attach to particular goods'. … Section 153 clearly presupposes the quantification of the duties which it constitutes as 'Crown debts'. This is because the essence of a 'debt' is that it is a sum certain: Whelan v Kelly (1884) 14 LR lr 387. Yet in accordance with section 132(1) of the Customs Act the quantification of such a debt can only occur once goods are entered for home consumption. It follows that unless and until the goods are entered for home consumption no debt arises under section 153 and no amount is payable by the owner under that section." 93 The submission encounters the following difficulties. First, even though s 132 may be capable of being read as being the only source of duty and as the only guide to the time when duty is calculated, that is not the reading which the High Court has adopted. Secondly, the High Court cases, contrary to the approach of Muir J and the primary judge, do not assume that a duty imposed on importation can only be calculated pursuant to s 132: they do not distinguish between the creation of the debt and its quantification.

[98]

That submission stretches the language employed in both s 35A and the Southern Shipping case beyond its fair meaning. Section 35A, read in the light of the construction applied to s 60 in that case, does not exact duty, and does not say that only that which is exigible as duty is that which would have been payable if the goods had been entered for home consumption on the day on which a s 35A demand was made. It operates to make payable an amount equal to duty - not duty payable on the day of importation as the plaintiff submits, nor duty payable on the day when the goods were entered for home consumption (as the defendant submits), nor duty payable on the day when the goods ought to have been entered for home consumption, but on the duty which would have been payable on a quite different day - the day when the demand was made. In short, it selects a date by reference to which the s 35A amount is to be calculated which is a date different from any of the possible dates for which the parties contend. 100 The defendant also relied on ss 233, 233AB and 234. It said: "Relevant provisions relating to criminal liability are sections 233, 233AB and 234 of the Customs Act . An importer who fails to enter goods for home consumption may be guilty of the offence of 'smuggling' contrary to section 233 if the importer's intention was to defraud the revenue: see section 4 of the Customs Act and L Vogel & Son v Anderson (1968) 120 CLR 157 at 166-167. Section 233AB provides that the penalty applicable to that offence is to be determined, where possible, by reference to ' the amount of the duty that would have been payable on smuggled goods to which the offence relates if those goods had been entered for home consumption ' (emphasis added). An importer who fails to enter goods for home consumption and thereupon to pay customs duty may also be guilty of the offence of evading payment of duty contrary to section 234(1)(a). Section 234(2) similarly provides that the penalty applicable to that offence is to be determined, where possible, by reference to ' the amount of the duty that would have been evaded by the commission of the offence if the goods had been entered for home consumption' (emphasis added)."

[101]

In short, any gap left in favour of persons who sought to escape duty by not entering goods for home consumption was met by other provisions. 102 The defendant submitted that once goods were imported they were under the control of Customs until exported or otherwise dealt with as provided in s 30(a). If goods subject to the control of Customs were moved, altered or interfered with, a penalty was payable (s 33(1)), and the goods were forfeited to the Crown (s 229(1)(g)). Where an entry was not made for imported goods, they could be removed if directed by the Collector and sold (s 72). An amount equal to the duty that would have been payable could be demanded under s 35A. There could be prosecutions for smuggling (ss 233 and 233AB) and evasion of duty (s 234). 103 These provisions do not completely stop up the gap left by s 132 in which an importer who does not enter goods for home consumption can manoeuvre. They do not overcome fully the practical difficulties raised by the defendant's construction. Sections 33, 233 and 234 depend on proof of mens rea at the criminal standard of proof. Indeed, the defendant conceded that on its argument an importer who never intended to enter the goods for home consumption was not a smuggler acting in contravention of s 233, because the revenue was not defrauded unless there was an obligation to pay duty, and that obligation did not arise until entry of the goods for home consumption. By parity of reasoning, that importer would not offend s 234 because no duty would be payable, and it could not be said that the importer was evading it. This concession, if correct, significantly narrows the efficacy of s 233 and 234. Section 35A does not apply where it cannot be established that the importer who should have paid duty on importing the goods or (as the defendant would have it) on entry for home consumption retains possession, custody or control of dutiable goods. The remedy of forfeiture under s 229(1)(g) depends on the Crown being able to seize the goods. The removal and sale under s 72 depend on the Collector being able to identify and have access to the goods. 104 There is a further difficulty with the defendant's argument based on s 35A. Section 35A applies to persons in a particular relationship with "dutiable goods". Section 4 provides that the expression "dutiable goods" includes "all goods in respect of which any duty of Customs is payable." On the defendant's case, no duty of customs is payable until goods are entered for home consumption. If they have been entered for home consumption, then s 35A applies, but not before. In that event s 35A is not a means of blocking the gap left if the goods have not been entered for home consumption. 105 The plaintiff put a more general submission in answer to the defendant's reliance on such provisions as ss 33, 35A, 229(1)(g), 233, 233AB and 234. The submission started from the proposition that these were underpinning provisions designed to reinforce the integrity of the Customs Act so far as it, and in particular s 30(a), sought to ensure that goods must remain under the control of Customs until duty is paid. The plaintiff relied on the following words of Gibbs J in Carmody v F C Lovelock Pty Ltd (1970) 123 CLR 1 at 23-24: "The object of the policy of the Customs Act that goods must be kept under customs' control until duty is paid is, as O'Connor J went on to point out in R v Lyon [(1906] 3 CLR 770], obvious; it is to render the statute effective and to protect the revenue. The general provisions of the Customs Act provide no guide to the question whether the special provision which permits dumping duties to be imposed ought to be confined in its operation to goods which remain subject to customs' control. The argument for the defendant attempts to convert provisions designed to strengthen the hand of the collectors of the customs into provisions that limit and restrict the powers of the Minister. To accept this argument would be to give these sections an effect that was plainly not intended."

[115]

The statutory scheme considered 110 Goods are imported when a ship comes to an Australian port, or an aircraft lands in Australia, with goods on board for the purpose of being there discharged and delivered to a consignee: Wilson v Chambers and Co Pty Ltd (1926) 38 CLR 131; Forbes v Trader's Finance Corporation Ltd (1971) 126 CLR 429 at 443-444; R v Bull (1974) 131 CLR 203, 215 and 254-5. 111 When goods were imported, under the legislation in force at the relevant time, s 68 required that they be entered for home consumption, for warehousing, or for transhipment. 112 If goods were entered for home consumption, s 132 applied. 113 If goods were entered for warehousing, they were "warehoused goods" by reason of the definition of that expression in s 4. Wollaston, p 45, states: "The warehousing is the placing of goods in a bonding warehouse … until the duty thereon is paid." Part V dealt with warehouses. Warehouses were places licensed by the Comptroller for warehousing goods (s 79) which were intended to be secure both from the point of view of the moral quality of licensees and the physical security of the places (ss 81, 82, 86 and 87). A warehouse licence was to be subject to "such … conditions … for the protection of the revenue, for the purpose of ensuring compliance with the customs Acts or otherwise as are prescribed." The holder of a warehouse licence was to arrange the warehouse and the goods in it in such a manner as to permit Customs officers to carry out their duties: s 90. Goods in warehouses might be sorted, bottled or repacked (s 92). They might be blended or packaged and then delivered for home consumption (s 98). By s 99(1) warehoused goods might be entered for home consumption or for export. If they were entered for home consumption, s 132 applied. If the goods were entered for export, Part VI Div 2 had to be complied with. An export entry was a communication to Customs of information concerning goods intended for export that was effected either by document or by computer: s 114(1). By s 113(1), the owner of goods intended for export had to enter the goods for export and was prohibited from allowing them to leave the place of exportation or to be loaded on the ship or aircraft in which they were to be exported unless an authority to deal with them had been given by Customs under s 114C. 114 Turning to the entry of imported goods for transhipment, the first issue is the meaning of transhipment. The only light cast on the matter by the Customs Act comes from s 128, particularly s 128(c). Section 128 provided: "Ships' stores and aircraft's stores which are unshipped or unloaded with the consent of the Collector shall be entered: (a) for home consumption; (b) for warehousing; or (c) for transhipment to another ship or aircraft."

[117]

Wollaston also said: "Goods are not 'imported' until brought within a port of entry with the intention of landing them there. Consequently goods which are not intended to be discharged at that port need not be dealt with in manner directed by [s 68]. They need not even be reported …. It is clear, however, from the context that for the purposes of [s 68], goods intended to be transhipped, as distinguished from goods to be carried on without transhipment, are 'imported' and must be reported and entered." 115 The principal reasons for favouring the plaintiff's contention that duty is payable on all goods imported whether or not they have been entered for home consumption are that it is favoured by High Court authority and that it reduces opportunities for escaping duty. 116 There is one difficulty in the plaintiff's construction. It operates satisfactorily where goods were imported for home consumption. If they were entered for home consumption immediately, as they should have been (s 68(a)), duty was payable at the s 132 rate. If they were not entered, duty was payable at the rates operating at the time of the importation. However, if the debt flowing from the obligation to pay customs duty arose on importation, and the goods were entered for warehousing or transhipment (i.e. export), or, having been warehoused, were entered for export, what happened to the debt? Was it still exigible, and if not why not? The plaintiff's construction offered no clear answer to these questions. The plaintiff submitted that the legislation operated on the assumption that the debt was no longer exigible. When a s 36 entry had been made, s 39 gave the Customs power to give authority for the goods to be dealt with accordingly. If warehoused goods were entered for home consumption, the owner or importer would not be able to deal with the goods without paying the duty. If goods were entered for export, then in practice authority to deal with the goods would be given without the need to pay duty. The plaintiff was not able to point to a specific provision explicitly absolving the importer from the obligation to make payment of duty where goods were imported, warehoused and then exported. The plaintiff did not refer to ss 162, 162A and 163, but the answer to that difficulty may lie in them. Sections 162 and 162A provided that where goods were imported, the Collector might accept a security or an undertaking for the payment of duty; if the goods were then exported within twelve months, the duty was not payable. Section 163 provided: "(1) Refunds, rebates and remissions of duty may be made: (a) in respect of goods generally or in respect of the goods included in a class of goods; and (b) in such circumstances, and subject to such conditions and restrictions (if any), as are prescribed, being circumstances, and conditions and restrictions, that relate to goods generally or to the goods included in the class of goods. (1A) The regulations may prescribe the amount, or the means of determining the amount, of any refund, rebate or remission of duty that may be made or the purposes of subsection (1)."

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