Collector of Customs (NSW) v Southern Shipping Co Ltd

Collector of Customs (NSW) v Southern Shipping Co Ltd - [1962] HCA 20 - HCA 1962 case summary — Zoe

Section 60 of the Excise Act 1901-1952 Cth was placed in that Act in its present form by s. 4 of Act No. 55 of 1952. This was done in consequence of the decision of this Court in Morton v. Union Steamship Co. of New Zealand Ltd. [4] in which reg. 188 of the Excise Regulations was held beyond the power to make regulations conferred by the Act. Section 60 resembles the regulation in many ways but not sufficiently to make it proper to construe the section by means of the regulation. But the case involves both the meaning of the section and its validity. The facts of the case are perhaps simple enough. Some excisable goods upon which excise had not been paid - cartons of tobacco - were to be shipped from Sydney to Hobart. The defendant's ship was to carry them. She lay at No. 4 wharf, Circular Quay, on which was a store: the wharf and the store were owned by the Maritime Services Board but the wharf was appointed for the purpose of the Customs and no doubt the store was provided by the Board accordingly for the protection of the goods. The consignor (who was the manufacturer) had made an entry of the excisable tobacco for removal to an approved place in Hobart (see s. 58 and reg. 204) and a dispatch note which were duly stamped and the goods released accordingly (see s. 57). But as excise duty remained unpaid and the goods had not been entered for home consumption they were "subject to the control of the Customs". They were delivered to the defendant at the wharf for shipment but pending being placed aboard ship were put in the store. It was Easter 1957 and the store was locked over Good Friday and the Saturday. At some time before 5 a.m. on the Sunday the store was broken into by thieves and forty cartons of tobacco were stolen. The Collector says that the defendant had been entrusted with the goods and at the time of the theft they were in the defendant's possession, custody or control and that under s. 60 (1) the defendant must pay the equivalent of the excise, an amount of £2,274. The defendant denies that the conditions provided by s. 60 were fulfilled and begins by asserting that it had neither possession, custody nor control and it was not then "entrusted with the goods". One fact upon which the company relies in support of this contention is that, in accordance with usage, if not of the imperative requirements of the Customs, the keys of the store after it had been locked on Thursday night had been lodged in the Customs office. The Customs office itself was locked up overnight and the keys of the store were not available to the defendant. At some place on the wharf there is kept under seal a key of the Customs office in case of emergencies but except by breaking the seal and using this key, the defendant could not gain access to the keys of the store. Section 60 (1) provides that where a person who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the control of the Customs (a) fails to keep those goods safely; or (b) when so requested by a Collector, does not account for those goods to the satisfaction of the Collector, that person shall, on demand pay to the Commonwealth an amount equal to the amount of the excise duty which in the opinion of the Collector would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand. It seems clear enough that when the consignors delivered the goods to the defendant as a carrier by sea, for doubtless they were "received for shipment" by the defendant as a carrier at the wharf, the possession was entrusted to the defendant. It may be that if, for however brief a period, the defendant lawfully surrendered, or divested itself of the possession, custody or control of the goods, that would mean that the defendant's responsibility under s. 60 was terminated or suspended. Did placing the keys in the Customs office, at all events when it was locked up, work such a suspension or termination? The answer must be that it did not. It meant no more than that for safe keeping the key was placed in the Customs office, not that the Customs were thereby placed in possession of the goods in lieu of the defendant. Then did the defendant "fail to keep the goods safely" within the meaning of par. (a) of the sub-section? That depends on the interpretation of par. (a). "Safely" seems to mean safe from loss or destruction: for the subject is excise duty, not the condition of the goods. The provision is pointed at the loss of goods involving the loss of excise duty. The time of payment of excise duty is at or before entry for home consumption. The hypothesis is that by the loss of the goods duty has been escaped. There must be some doubt whether the destruction of the goods was also contemplated but upon the words of the section destruction is certainly covered. It is said, however, for the defendant that "fail" involves some want of care, some neglect or default. Considering the object of the provision and the place it takes, this ground must "fail". It means to place on the person having possession, custody or control an absolute duty. Having regard to the place of the section it may be that the manufacturer is not included within the section but clearly other persons who are entrusted with the goods, as, for example, under s. 58 (b) or (c), fall within s. 60 and incur what may be called an absolute duty to keep the goods safe from loss or destruction. Perhaps the word "absolute" is too strong for it may be conceded that it is possible to except inevitable casualty - what once was called "Act of God". Paragraph (b) presents difficulties as an alternative but it would seem that it is pointed at cases where it cannot be shown that the goods were lost or destroyed but at the same time they are not produced and their whereabouts is not disclosed. Oddly enough, in the present case the Collector took the view that the goods had not been accounted for to his satisfaction although it seems clear enough that he accepted the statement that they had been stolen in the manner described. However, this does not matter because the defendant incurred a liability under s. 60 (1) (a). It incurred the liability subject to the question whether s. 60 is a valid enactment. It is contended for the defendant that s. 60 is invalidated by s. 55 of the Constitution. It is argued that it is a law imposing taxation. As it was enacted by No. 55 of 1952 that would mean under the first limb of s. 55 that the other provisions of that Act, not the provisions of the Excise Act 1901, would be "of no effect". That, of course, would not relieve those liable to the supposed tax under s. 60. But the argument goes on to maintain that s. 60 is invalidated by the second limb of s. 55 of the Constitution. It is said that being a law imposing taxation it must deal with one subject of taxation only, unless it is a law imposing a duty of excise or a law imposing a duty of customs. Naturally, customs is put on one side. The denial of its being a law imposing duties of excise rests upon the view that s. 60 does not impose a pecuniary liability on the goods, whether in respect of production, manufacture or distribution. It is said its very hypothesis is that the goods have disappeared. The impost cannot enter into the price; it cannot be an indirect tax; it is levied because the goods have not been kept safely or cannot be accounted for. Therefore it is not an excise. Yet, it is said, it is a tax. Being a tax it is nevertheless imposed in respect of more than one subject of taxation, that is to say, every variety of goods lost or destroyed or disappearing which falls within the Excise Act. These varieties or descriptions of goods are, so it is contended, different subjects of taxation within the very hypothesis of s. 55 which excepts duties of excise and of customs from the prohibition that laws imposing taxation should deal with one subject of taxation only. That is the argument.

[5]

But is s. 60 a law imposing taxation? It certainly imposes a liability to pay an amount estimated to be equal to the amount of some particular excise duty. Sub-section (2) of s. 60 says it is to be a debt due to the Commonwealth and may be sued for and recovered in a court of competent jurisdiction by proceedings in the name of the Collector. Sub-section (4), however, says that the section does not affect the liability of a person arising "under or by virtue of any other provision of this Act or of a security given under the Act". Probably this does not mean that when a payment has been made under s. 60 to the Collector by a person held responsible under that provision for failing to keep the goods safely or to account for them, excise may be recovered from somebody else. All it does is to make the liability under s. 60 collateral and not substitutional for the liability which may have been incurred under other provisions. But on a complete view of s. 60 it seems rather to be a provision for the protection of the revenue, not a primary imposition of taxation. The distinction between a sum of money which can be made recoverable as protection to the revenue and the actual imposition of tax may appear a fine one, but as Moore v. The Commonwealth [1] shows, it is a critical one for the purpose of s. 55 although probably not for any other purpose. Under s. 51 (ii.) of the Constitution the power with respect to taxation extends to enable legislation to be passed for the protection of the revenue that arises from the tax imposed. It is immaterial whether this act is ascribed to s. 51 (xxxix.) or, as is perhaps preferable, is regarded as necessarily involved in the subject matter of the power itself. It must be remembered that the conditions prescribed by s. 60 (1) involved factors which go to safekeeping and to possession, custody and control, and perhaps the movement of the goods from the manufacturer. It is not based on primary notions of liability to tax. It is a secondary liability and is based on the hypothesis that the tax is escaped. It is indeed an ancillary measure and not itself a tax.

[7]

This case, which is stated under s. 18 of the Judiciary Act 1903-1959 Cth, consists of facts found upon the trial of an action based upon s. 60 of the Excise Act 1902-1952. The action arose out of the theft from a store on a wharf at Sydney of a substantial part of a consignment of tobacco which had been delivered to the defendant for shipment to Hobart. The whole consignment consisted of excisable goods which had not been entered for home consumption. The goods were subject to the control of the Customs and were in transit in the course of "removal to an approved place" in accordance with s. 58 of the Excise Act. The occupier of the wharf and the store was the Maritime Services Board. The consignment was deposited with the approval of Customs in the store pending shipment. In accordance with Customs' procedure the key of the store was kept in the Department's office on the wharf but it was accessible to the defendant if there was any occasion to open the store. The store was broken into and part of the consignment stolen at night and the thieves have not been detected nor the goods traced. The Collector sued the defendant on the basis that it was liable under both pars. (a) and (b) of s. 60 (1) to indemnify the Collector in respect of the stolen goods. The defendant has contended by way of defence that because Customs had control of the key of the store, the Customs not the defendant was in possession of the consignment and the defendant was therefore not answerable for its loss. The defendant also sets up that it was a reasonable precaution to take for the safety of the goods pending shipment to put them in the store and it therefore did not fail to keep them safely within the meaning of par. (a): and that as regards par. (b) it gave an unimpeachable explanation of the reason of the disappearance of the goods by reporting their theft which the Collector ought in law to accept. Further the defendant says that s. 60 is not a good exercise of the legislative power of the Federal Parliament.

[19]

Upon these facts there can be no question that the goods came into the possession of the defendant. But the key of the "dead-house" did not at all times remain in its possession. In accordance, it is said, "with the usual practice" this key was left in the Customs office on the wharf during meal breaks and from the cessation of work at the end of each working day until the commencement of work on the next working day. Nevertheless, a duplicate key of the Customs office was left on the wharf under the seal of the Customs in order that it might be available for use in case of emergency during the absence from the wharf of the Customs staff. The theft of the goods took place at sometime between midnight on Saturday 20th April 1957 and 5 a.m. on Sunday 21st April 1957 and during the whole of this period the key of the "dead-house" was in the possession of the Customs. It is upon this circumstance that the defendant founded the contention that during this period the goods were not in its possession or custody or under its control. Each time the key of the "dead-house" was placed in the Customs office, it is contended, the possession, custody and control of the goods passed from the defendant to the plaintiff and, presumably, on each occasion when the key was taken from the Customs office possession, custody and control was re-assumed by the defendant. The additional point is made, that according to the provisions of the Act, the goods were at all times "subject to the control of the Customs" and it is asserted that delivery of the key to the Customs office operated to transfer actual possession, custody and control. To my mind the solution of this problem - if there be one - is a question of fact rather than of law. No doubt the delivery of the key of a room or a shed may constitute constructive delivery of the goods which it contains. But such a result depends upon the accompanying intention of the parties and there is nothing in the admitted facts to suggest that the key of the "dead-house" was placed in the Customs office with any such intention. It is, I think, impossible to spell out from the facts that the defendant intended to relinquish, or that the plaintiff intended to assume, possession of all the goods in the "dead-house", free or otherwise, on each occasion when the key was deposited in the Customs office. We are not told anything about the origin or purpose of the so-called "usual practice" but there is nothing to suggest that the lodging of the key in the Customs office represented anything more than an additional precaution to ensure the safe custody of excisable goods whilst in the ship-owner's possession and during periods when work was not being carried on and, perhaps, when its staff were absent from the vicinity of the wharf. That being so, I am of opinion that the first question ought to be answered by saying that upon the facts appearing in the case stated the goods in question were in the possession, custody and control of the defendant at the time when they were stolen.

[20]

The next question is whether upon the facts stated the defendant failed to keep the goods safely or, having been requested by the Collector so to do, did not account for them to his satisfaction. A good deal of the argument on this aspect of the case turned upon the expression in s. 60 (1) (b) - "does not account for those goods to the satisfaction of the Collector" - and it was contended that if the defendant satisfied the Collector that the goods had been stolen this constituted an accounting for the goods. This, it seems to me, is equivalent to saying that the defendant fulfilled his obligation to account for the goods if, in effect, he established that, without any default on his part, the goods had ceased to be in his possession. No doubt, if he showed that he had parted with them in a manner authorized by the Act, as for example, by delivering them to the manufacturer's bond store in Hobart, this would be an accounting. Such an explanation would trace the goods from his possession to that of the manufacturer in accordance with the provisions of the Act. But merely to establish that he had lost the goods by theft at the hands of some unknown person is not to account for the goods; it is, merely, to account, for their disappearance. If it were otherwise then it seems plain that a person who has been entrusted with the possession of excisable goods might account for them by a recital of facts which showed that he had, within the meaning of s. 60 (1) (a), failed to keep them safely. What this expression means in the context of this clause is of prime importance and the defendant was at pains to establish that the obligation to keep goods safely is not, as it was said, absolute; the expression, it was asserted, connotes a failure on the part of the custodian to observe some unspecified standard of care with respect to their safety. Unless some such standard was predicated there could not, it was said, be a "failure". But as Jordan C.J. said in Ingram v. Ingram [1] : "the meaning of the word "fail" depends upon the context in which it is found. In some contexts it may mean simply the omission to do the thing in question, irrespectively of any reason which may have existed for his not doing it: Miedbrodt v. Fitzsimons [2] ; R. v. Southwark Borough Council; Ex parte Southwark Borough Market Trustees [3] . In other cases it may mean an omission to do the thing by reason of some carelessness or delinquency on his part, but not omission caused by impossibility for which the person in question is not responsible: cf. Loates v. Maple [4] . In other cases, it may mean omission to do the thing, but so that omission caused by impossibility arising from some causes is included and from others is excluded" [5] . In the case of s. 60 (1), however, the obvious purpose and object of the provision makes it clear that the defendant's argument must be rejected. The provision is not designed to inflict a penalty upon a bailee for some breach of duty imposed by the bailment; it is a provision which is designed to ensure that the excise revenue shall not suffer if excisable goods, by some irregular means, find their way into home consumption. So much is clear from the provisions of the Act itself. Section 60 (1) is to be found in Pt VI of the Act and that part purports to relate to Payment of Duty, Removal of Excisable Goods from Factories, and Excise Control. By s. 54 the manufacturer of excisable goods, or, where the owner of excisable goods enters them for home consumption, the owner of the goods, is bound to pay the excise duty which is imposed by the Excise Tariff. The duty must be paid before an entry for home consumption is passed (s. 59) and no excisable goods may be removed from a factory without an entry made and passed authorizing their removal (s. 56). But they may be removed pursuant to an entry for exportation or for removal to an approved place. However a manufacturer may become liable to pay excise duty in respect of goods which have never been entered by him for home consumption. This liability may arise under s. 62 if it appears, on taking stock of excisable goods manufactured by a manufacturer, that duty has not been paid on the full quantity of excisable goods on which duty ought to have been paid. In such a case the manufacturer is bound to pay to the Collector "the amount of the deficiency unless such deficiency is accounted for to the satisfaction of the Collector". But if excisable goods are moved from a factory to an approved place, as these were, can it be said that the excise duty may be recovered from the manufacturer if, whilst in the lawful possession of some person, they are stolen? Proof of the removal with the authority of the Customs and of the necessary transfer of possession would I think account for the deficiency within the meaning of s. 62. The expression "unless such deficiency is accounted for to the satisfaction of the Collector" is not without its difficulties but the manufacturer would, at least, fulfil the requirements of the section if he showed that with the approval of the Customs, he had relinquished possession of excisable goods to a carrier for removal to an approved place. In these circumstances it is I think proper to conclude that the obligation placed upon the carrier by s. 60 (1) is at least analogous to that initially resting upon the manufacturer. That is to say, that whilst he is in possession of the goods it is his responsibility alone to ensure that the goods do not irregularly find their way into home consumption. It is in this sense that he is bound to keep the goods safely and to account for them. That being so he may escape liability if he is still in possession of the goods or if he can account for them by showing that they did not pass into home consumption from his hands. That he may do by showing that he has parted with possession of them in some authorized manner or, I should think, by showing that the goods whilst in his possession have been destroyed. The agreed facts clearly show a failure on the part of the defendant to keep the goods safely in this sense and, that being so, the only other question which remains for consideration is that which arises upon s. 55 of the Constitution.

[22]

The foundation of this argument is to be found in the words of s. 60 (1) which, in the circumstances specified by the sub-section, purport, in terms, to create an obligation to pay, not the excise duty, but "an amount equal to the amount of the excise duty ". This, it is said, is a new impost and not the duty imposed by the Excise Tariff and, that being so, the amending Act by which the sub-section was introduced - Act No. 55 of 1952 - offended against s. 55 of the Constitution. It would, of course, be of no avail to the defendant to show that this Act offended only against the first paragraph of s. 55 and, accordingly, it was sought to invoke the provisions of the second paragraph. The tax, it was said, was not a duty of excise and the Act dealt with more than one subject of taxation. Alternatively, it was contended that, if the tax was properly to be regarded as a duty of excise, the amending Act did not deal with duties of excise only. There are fallacies in this argument but it is unnecessary to explore them. Section 60 (1) is not, in my view, a law which imposes taxation and the initial step in the defendant's argument is, at the most, only superficially attractive. What the sub-section is designed to secure is the collection of the duty imposed by the Excise Tariff and in order to achieve this it was necessary, for the purposes of the sub-section and in the absence of an entry for home consumption, that some provision should be made for ascertaining the value of the goods as at some specified date. This the section does by providing that what shall be paid shall be "an amount equal to the amount of the Excise duty which, in the opinion of the Collector, would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand". Of course, the same result might have been achieved simply by requiring payment of the amount of excise duty which, in the opinion of the Collector, would have been payable if the goods had been entered for home consumption upon some specified day. But the difference in terminology is, in my view, of no constitutional significance and the provision, as it stands, is a provision dealing with the collection of the charge imposed by the Excise Tariff.

[27]

Comparing the existing provision with those which it replaced, it is to be observed that the former liability of the manufacturer to give particular security has disappeared and the obligation to pay to the Commonwealth falls in either of the cases mentioned upon the person who either has, or has been, entrusted with the possession, custody or control of the goods. In this setting it is hardly likely that the words "keep safely" refer to protecting the goods from damage or destruction or anything of that nature; for the safety with which the section is concerned is that the goods - subject as they are to the control of Customs - do not get out of Customs control into home consumption without the payment of duty; similarly, the account of the goods that is required is an account which shows an authorized relinquishment of possession, custody and control or, despite an unauthorized loss of possession, custody and control, that the goods have not got into home consumption without the payment of duty or that, notwithstanding the failure to keep the goods safely, Customs control over them is still effective. It follows that excisable goods which have been stolen from a local store cannot be said to have been "kept safely" and that it could not be a satisfactory account of the missing goods to say merely that they have been stolen, or even that they have been stolen notwithstanding that the person whose duty it was to keep them safely had taken reasonable care to protect them from theft. The words "fails to keep safely" do not require any fault on the part of the person concerned beyond proof that the goods have not been kept safely in the sense indicated. In many cases the failure to keep the goods safely will inevitably mean that no satisfactory account for them can be given but, notwithstanding this, I do not regard pars. (a) and (b) of s. 60 (1) as necessarily cumulative provisions. They are expressed as alternatives and goods which might in fact have been kept safely enough may nevertheless not be accounted for satisfactorily merely because the person with, or entrusted with, possession, custody or control simply refuses to account for them at all. Of course it hardly needs to be said that if the goods have not been kept safely but an account for them is given to the satisfaction of the Collector, that would end the matter, for in such a case there would not be any demand by the Collector.

[30]

Accordingly, upon the construction of s. 60 (1) which I have adopted, the defendant both having, and having been entrusted with, the possession, custody and control of 295 cartons of tobacco, failed to keep safely, in the sense of s. 60 (1), 40 of those cartons and, when called upon by the Collector to account for them, did not do so in any manner that could be regarded as satisfactory. I consider, therefore, that upon the provisions of the Excise Act as they stand, questions I (a) (b) (c) and (d) and II should be answered affirmatively, but this does not conclude the matter for, after the case had been stated asking questions I and II, the defendant obtained an order adding a further question, III - "Whether the said s. 60 is invalid on the ground that it is beyond the powers of the Parliament of the Commonwealth and/or contrary to the provisions of s. 55 of the Commonwealth Constitution." It is to this question that I now turn. To consider the question it is necessary to go back to the Excise Act 1952, which brought s. 60 into the excise legislation. It comprises four sections: the last, with which we are particularly concerned, repeals ss. 59 and 60 of the Excise Act 1901-1949 and inserts the present ss. 59 and 60 in their stead. Section 1 merely deals with the title and citation of the Act and the Excise Act as amended; and s. 2 substitutes for earlier sections two machinery sections which deal with duties of excise but do not impose taxation. Section 3, which repeals s. 54 of the Excise Act 1901-1949 and inserts the present s. 54 in its stead, according to the accepted view, does not impose taxation. Section 54 is as follows: "The manufacturer of excisable goods, or, where the owner of excisable goods enters them for home consumption, the owner of the goods, shall pay to the Collector, in accordance with this Act, the excise duty on those goods." If, therefore, s. 60 imposes taxation but the other provisions brought into the Act by the Excise Act 1952 deal with something other than the imposition of taxation, the effect of the first provision in s. 55 of the Constitution - "Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect" - would render those other provisions of no effect but would leave s. 60 standing. At the other end of the scale, if s. 60 does not impose taxation, then s. 55 of the Constitution, which has no application except in relation to laws that impose taxation, cannot in any way affect the validity of the Excise Act 1952 or any part of it. The only intermediate position which I can see would be to treat s. 60 as imposing taxation (not duties of excise) and some of the other provisions in the Excise Act 1952 as dealing with the imposition of taxation (duties of excise) so that, notwithstanding the application of the first part of s. 55 to so much of the Act as does not deal with the imposition of taxation, there would be room left for the operation of so much of the second part of s. 55 as provides that a law imposing taxation shall deal with one matter of taxation only with the resulting invalidity of the whole of the Excise Act 1952 because it would impose one tax and deal with another matter of taxation.

[33]

The facts are that the British Australasian Tobacco Co. Pty. Ltd. delivered 295 cartons of manufactured tobacco to the defendant at No. 4 wharf, Circular Quay to be carried by it in one of its ships to Hobart. No excise duty had been paid upon the goods but delivery of them to the defendant at the wharf and the proposed shipment therefrom to Hobart had been duly authorized by the Customs authorities in accordance with the Act and regulations. At all times the goods were excisable goods and subject to the control of the Customs within the meaning of s. 60. After delivery to the defendant they were placed by it in a shed on the wharf, colloquially known as the "dead house", with the knowledge and approval of the Customs authorities. The shed was used not only for the safekeeping of goods subject to the control of the Customs but also for the safekeeping of free goods which were particularly valuable or liable to pillage. It was, however, not a warehouse licensed pursuant to s. 78 of the Customs Act. The key to the store was handed (presumably by the Customs authorities) to the defendant on 17th April 1957 and during working hours it remained in its possession until 24th April 1957. The "usual practice" was for the key to be placed in the Customs office during non-working hours and pursuant to this practice it was placed by one of the defendant's employees in the Customs office at 11 p.m. on 18th April 1957 and remained there over the Easter holidays. Some time between midnight on Easter Saturday and 5 a.m. on Easter Sunday while the key was still in the Customs office, some unknown person forced the door of a switch-room adjoining the store and, having entered the switch-room and broken down a fibroplaster wall between the switch-room and the store, gained access to the store and stole 40 cartons of the tobacco. On 23rd April 1957 the defendant informed the plaintiff in writing of this fact and, on 28th May 1957, the plaintiff wrote the defendant a letter in which he requested it to account for the missing goods to his satisfaction. The letter set out the provisions of s. 60 and gave details of the goods. Further correspondence took place between the parties and, on 19th June 1957, the plaintiff wrote to the defendant stating that it had failed to account for the missing goods to his satisfaction and calling upon the defendant in terms of s. 60 to pay excise duty amounting to £2,274 9s. 2d. The parties are in agreement that the goods were in fact stolen as stated by the defendant.

At a glance

Court

Decision date

Before

Source

Judgment (40 paragraphs)

Parties

Cited By (3)