Commissioner of Taxation v Esho & Anor

PARTIES : Francois Esho (First Defendant)

Riselite Pty Limited (Second Defendant) FILE NUMBER(S) : SC 12687/2002 Mr D Fagan SC with Mr G T Johnson COUNSEL : (Plaintiff)

Mr H Dhanji (Defendants) Ms S Lawrence Australian Government Solicitor (Plaintiff) SOLICITORS : Mr Warren Ball, Warren F Ball & Co (Defendants)

LOWER COURT Local Court JURISDICTION : LOWER COURT 1196/02 FILE NUMBER(S) : LOWER COURT Ms Forbes LCM JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

12687/2002 - COMMISSIONER OF TAXATION v FRANCOIS ESHO & ANOR

JUDGMENT (Appeal decision Local Court Magistrate - averment under Excise Act) 1 MASTER: By summons filed 26 September 2002 the plaintiff seeks firstly, to appeal the whole of the judgment or orders of Ms Forbes LCM made on 30 August 2002 and seeks orders that the appeal be upheld; secondly, that the record of the local court be removed into this court, and that the orders made 30 August 2002 by Forbes LCM be quashed or set aside; and, thirdly, that the alleged offences are found proved and that the matter be remitted to Forbes LCM to determine penalty or alternatively that the matter be remitted to the Magistrate to be dealt with according to law and that the defendants pay the plaintiff's costs of this appeal and of the proceedings below. This is an appeal under s 104 of the Justices Act 1902. The plaintiff relied on three affidavits of Samille Anne Harvey Lawrence sworn 11 November 2002, 21 November 2002 and 22 November 2002. The matter has been referred to me for hearing by the list Judge. 2 On 30 August 2002, Forbes LCM made orders dismissing the informations laid against the first defendant charging him with 140 offences contrary to s 117B(2) of the Excise Act 1901 and s 5 of the Crimes Act 1914; 137 offences contrary to the previous s 117 of the Excise Act (now repealed) and s 5 of the Crimes Act; one offence of possession of tobacco contrary to s 117(2) of the Excise Act and s 5 of the Crimes Act and one charge of possession contrary to s 117(2) of the Excise Act; and dismissing the informations laid against the second defendant charging it with 140 offences contrary to s 117B(2) of the Excise Act, 137 offences contrary to the previous s 117 of the Excise Act (now repealed) and one offence of possession of excisable goods contrary to s 117(2) of the Excise Act; and ordered that the plaintiff pay the defendants' costs. 3 Section 117B(2) provides that a person must not sell excisable goods on which duty has not been paid. The penalty is 100 penalty units. Section 117(3) states that strict liability applies to subsection (2). 4 In each of those offences the prosecutor avered these facts: "(1) The cut tobacco referred to in each of the offences herein had been cut by cutting machine in Australia.

(2) Neither you nor Riselite Pty Limited were a licensed manufacturer of tobacco. (3) On the relevant date you directed and managed the activities of Riselite Pty Ltd and whatever was done by Riselite was done by you on behalf of Riselite or under your direction (4) Excise duty had not been paid on the cut tobacco referred to in each of the offences herein. (5) Andrew Hay is an officer of the Australian Taxation Office currently holding a position to which the Commissioner of Taxation has delegated his power to bring this Excise prosecution. (6) This prosecution is brought in the name of the office of the Commissioner of Taxation." 5 Section 104(2)(b) and (c) of the Justices Act 1902 states that an informant may appeal under this Division to the Supreme Court on a ground that involves a question of law alone against an order made by a Magistrate in summary proceedings dismissing an information or complaint, or an order for costs made by a Magistrate in summary proceedings. 6 The Supreme Court may, after hearing an appeal, determine the appeal by dismissing the appeal or confirm, quash, set aside or vary the conviction, order or sentence appealed against or any part of it; increase or reduce the sentence appealed against; make such other orders as it thinks just; or remit the matter to the Magistrate who made the conviction or order, or impose the sentence, to hear and determine the matter of the appeal (s 109).

Grounds of appeal 7 The plaintiff pressed only grounds, 1 2 and 7 in the summons. Firstly, the plaintiff alleges that the Magistrate after having found a prima facie case against the first and second defendant [in respect of all the offences] firstly, erred in law by failing to give effect to the averments that the cut tobacco was cut by cutting machine in Australian in accordance with the principles set out in The King v Hush; ex parte Devanny (1932) 43 CLR 487; secondly, there was no evidence tendered to negate the proposition that the goods (cut tobacco) referred to in the charges were manufactured in Australia, or alternatively, there being no evidence (apart from the averments) where the said good were manufactured, the said averments ought, as matter of law, to have been accepted as discharging the final onus borne by the plaintiff upon the question of whether the said goods were manufactured in Australia; and thirdly, the learned Magistrate erred in law to the extent that she found that the sufficiency of the averments(s), to prove that the subject goods were manufactured in Australia, was reduced by any absence of evidence that the matter averred was something known to the defendant. The offences charged did not depend on the defendant(s) having such knowledge. 8 The issue is whether an averment in revenue proceedings without any further evidence being tendered proves the offence beyond reasonable doubt. 9 Section 144 of the Excise Act 1901 provides: "144 Averment of prosecution sufficient

(1) In any Excise prosecution the averment of the prosecutor or plaintiff contained in the information, complaint, declaration or claim shall be prima facie evidence of the matter or matters averred.

(2) This section shall apply to any matter so averred although: (a) evidence in support or rebuttal of the matter averred or of any other matter is given by witnesses; or

(b) the matter averred is a mixed question of law and fact but in that case the averment shall be prima facie evidence of the fact only. (3) Any evidence given by witnesses in support or rebuttal of a matter so averred shall be considered on its merits and the credibility and probative value of such evidence shall be neither increased nor diminished by reason of this section.

(4) Subsection (1) shall not apply to: (a) an averment of the intent of the defendant; or

(b) proceedings for an indictable offence or an offence directly punishable by imprisonment. (5) This section shall not lessen or affect any onus of proof otherwise falling on the defendant." 10 The offences charged in this case were that the tobacco the subject of the charge was "manufactured or produced in Australia" - s 5(1) Excise Tariff Act 1921. By force of s 5(1) the manufacture or production in Australia was essential to the good being "excisable". The Excise Act 1901 contained the sections under which the charges were laid. It defines "excisable goods" as those "in respect of which excise duty is imposed by the Parliament". This relates to the Excise Tariff Act and in particular to the requirement of manufacture or production in Australia under s 5(1). 11 The meaning of "manufactured or produced in Australia" contained in s 5(1) is expanded by the definition of "manufacture" in s 4. Section 2 of the Excise Tariff Act states that the Excise Act "shall be read as one with this Act". Section 4 of the Excise Act defines "manufacture" to include "all processes in the manufacture of excisable goods". 12 The informations averred to the fact that, in each offence, the cut tobacco had been cut by a cutting machine in Australia.

Proceedings in Local Court 13 It was common ground before the Magistrate that in order to establish that the tobacco the subject of the charges was excisable, the prosecution had to prove to the criminal standard that the goods were "manufactured in Australia" in accordance with the above sections. If the tobacco had been cut in Australia then that would constitute its manufacture here (LC t 16.18-35; 32.36 - 34.25). 14 There was some evidence on this topic. A statement by Mr Newton dated 4 April 2001 contained a record of interview of the first defendant. At page 15 it states: "… But because to me was I am doing right things, this is Australian produce and I am selling it… How comes the government…. We never had any sort of inform us chop a chop is an Australian product but you cant sell it unless it goes through certain and that is why in the beginning everybody was thinking it was within the law. And myself until lately I have heard they want to search tobacconists and they fine him and said don't do it. Next time out fine will be different." 15 The plaintiff submitted that this admission constituted some evidence that the product had been cut (and therefore "manufactured") in Australia. 16 A report dated 18 June 2001 of Mr Lawless-Pyne an expert analyst was tendered before the Magistrate. Mr Lawless-Pyne tested a small number of samples of the tobacco. 17 Relevantly his report stated: "The samples were in very poor condition and I was unable to perform any subjective sensory analysis. Additionally, due to the condition of the samples I was unable to utilize an established database [Phillip Morris Limited] has developed using Gas Chromatograph and Mass Spectrometry and matched them against known growing regions within Australia. Therefore I cannot state the full origin of this (sic) samples". 18 Both parties submitted that this evidence meant something different. The defendant submitted that Mr Lawless-Pyne was an expert in determining the origin of tobacco but due to the deterioration of the samples he was provided with he could not give an opinion in this case. This meant that the prosecution did not know and could not establish the origin of the tobacco 19 The plaintiff submitted that Mr Lawless-Pyne could not undertake the analysis and that his evidence was neutral in that there was no evidence one way or the other where the tobacco had been grown and cut. 20 It is not possible to aver any matter of law, see Gallagher v Cendak [1988] VR 731, Vincent J at 738, but it is my view that whether the tobacco was cut in Australia is a question of fact. In Research and Development Engineers Pty Ltd v Lanham (1983) 49 ALR 351, Bollen J, in assessing whether averments before him were of fact or law, phrased the issue simply when he said at 363: "If I assert that an article is made of wood, an allegation that I am wrong is an allegation of fact". In this case, the averment alleges that the tobacco had been cut in Australia. This involves no difficulty of law and is an allegation of fact: see also Brady v Thornton (1947) 75 CLR 140. The parties had agreed that if the tobacco was cut in Australia that meant that it was manufactured in Australia. This being so, the averment that the tobacco was cut in Australia was prima facie evidence of that fact. 21 The primary issue raised by this appeal is whether the averment that the tobacco was cut in Australia required the Magistrate to treat it as establishing that fact as proved beyond reasonable doubt. The plaintiff submitted that it does but even if this were not so in the present case, there was no rational basis upon which the Magistrate could have failed to find the relevant matter not proved to the requisite standard. 22 Both parties referred to a passage from Hush where Dixon J stated at 507-508: "It is to be noticed that this provision, which occurs in a carefully drawn section, does not place upon the accused the onus of disproving the facts upon which his guilt depends but, while leaving the prosecutor the onus, initial and final, of establishing the ingredients of the offence beyond reasonable doubt, provides in effect that the allegations of a prosecutor shall be sufficient in law to discharge that onus. The averment that the contributions were solicited for the association called the Communist Party must be considered with the text and context of the solicitation itself and with the other material in the case. When it is so considered, so much uncertainty is raised, that in my opinion, a tribunal of fact ought not to be satisfied beyond reasonable doubt that the contributions were solicited for the Communist Party." 23 The plaintiff relied upon His Honour's statement in this passage to submit that the allegations of a prosecutor shall be sufficient in law to discharge the onus of establishing the ingredients of the offence beyond reasonable doubt. The defendant submitted that the Magistrate was required in the context of the uncertainty surrounding the evidence to determine whether she was satisfied beyond reasonable doubt that the tobacco was manufactured in Australia. 24 The defendant referred the Court to statements made by Kirby ACJ (as he then was) in Neal Pearson & Co Pty Ltd & Anor v Comptroller-General of Customs (1995) 38 NSWLR 443 at 449. There, His Honour stated: "…the prosecution can rely on an averment to make out a prima facie case. However, an averment will not, of itself, satisfy the persuasive burden of proof that the prosecution must bear." 25 The plaintiff submitted that this statement does not represent the law. 26 In Gallagher, Vincent J surveyed the authorities and warned, at 739, that averments must: "be drawn with care and precision and that the Courts should remain sensitive to the possibility of injustice arising from their use. It must not be forgotten that although they are ascribed the status of prima facie evidence, averments are none the less mere allegations. Their employment can create a risk that a conviction may be recorded against an individual where there is actually no evidence adduced against the alleged offender other than the making of such an allegation." 27 Vincent J quoted from Hush referred to earlier in this judgment but qualified it by reference to May v O'Sullivan (1955) 92 CLR 654, where the High Court stated at 657-9: "The burden of proving guilt beyond reasonable doubt rests on the prosecution from first to last, and, even though the defendant remains silent after a prima facie case has been launched against him, it may very well be that he ought to be acquitted...After the prosecution has adduced evidence sufficient to support proof of the issue, the defendant may or may not call evidence. Whether he does or not, the question to be decided in the end by the tribunal is whether, on the whole of the evidence before it, it is satisfied beyond reasonable doubt that the defendant is guilty. This is a question of fact." 28 In May, the High Court was dealing with the question of whether, when the prosecution has made out a prima facie case, the burden of proof shifts to the shoulders of the defendant and was not specifically referring to averments. However, the case and the statement of principle quoted above from it have been cited with approval in cases concerned with averments. See, for instance, Gallagher, Vincent J at 738 and Research and Development Engineers. 29 In Simmons v Venning [1969] 17 FLR 468 Bray CJ also relied on the authority of May when, referring to his earlier decision in Lemmer v Considine [1969] SASR 211, he said at 471:

"...[I]t is not enough for a court to find that a prima facie case has been made out, whether by statutory pre-sumption or by any other means, and that that case is unanswered by credible evidence, and that therefore there must be a conviction. The court must still decide whether in that state of affairs it is satisfied of the guilt of the accused beyond reasonable doubt." 30 In Considine v Lemmer [1971] SASR 39, Bright J also said at 51:

"I agree that a prima facie case, uncontradicted by credible evidence, does not lead automatically to conviction. For the prima facie case may do not more than tend to prove guilt: it may or may not, if unexplained, satisfy beyond reasonable doubt. It may contain weaknesses which inspire doubt...But with respect, I think that there is a difference between prima facie proof of a fact arising as a result of evidence and prima facie proof of a fact arising as a result of a statutory presumption. In either situation the court must have regard, at the close of the case, to the question whether the fact is proved beyond reasonable doubt."

31 However, in Merrall v Samuels (1971) 2 SASR 378 Wells J narrowed the application of this principle when he at 382-3: "A statutory presumption that fact A is prima facie proof of fact B cannot be weighed like ordinary oral testimony...Where there is prima facie proof of a fact based upon such a statutory presumption, that proof is, in the absence of credible evidence tending to the contrary that engenders a reasonable doubt as to the truth of that fact, sufficient to establish that fact beyond reasonable doubt; and a Court, in such circumstances, is not obliged, in supposed obedience to principles enunciated in May v O'Sullivan , to weigh that proof again when all the evidence is before it...A statutory presumption that fact A is prima facie proof of fact B is in no way impaired by reason only that some evidence has been led that is relevant to the existence or non-existence of fact B; the operation and effect of that presumption will depend finally upon the tendency and weight of the evidence led as to fact B in all the circumstances of the case...Where there is a prima facie presumption by statute that fact B exists, but evidence has been led or elicited (by the prosecution or the defence or both) the total effect of which gives rise, in all the circumstances of the case, to a reasonable doubt as to whether fact B does exist, that fact has not, according to the standard of proof in a criminal case, been satisfactorily established..." 32 It is apparent from this passage that while a court may not be "obliged" to weigh the evidence before it in accordance with May it may still do so. Moreover, Justice Wells's proposition that the operation and effect of a presumption will depend upon the tendency and weight of the evidence in all the circumstances of the case would still require that there be some consideration by a court as to whether the burden of proof has been discharged beyond reasonable doubt. 33 On the basis of these authorities, the plaintiff's appeal on the first ground must fail. In a given case where a fact is averred, there must still be a consideration by the court of the fundamental standard that an offence be proven beyond reasonable doubt. In this matter, the Magistrate was not required by law to treat the averment that the tobacco was cut in Australia as establishing that the defendant was guilty of the offence. She was entitled to consider whether the case against the accused was proven in accordance with the requisite standard. 34 The Australian Law Reform Commission, in its report entitled Customs and Excise, Report 60 (Fyshwick ACT, National Capital Printing, 1992) Vol 2, chapter 12, p 150, examined the difficulties raised by averments and stated that:

"Perhaps the central difficulty is that mentioned by Chief Justice Bray in Simmons v Venning in which he asked how a court was to make the 'jump' from a prima facie case to satisfaction beyond all reasonable doubt if there was nothing more than the averment."

35 In Simmons, Bray CJ, at 471, said: "I agree that when the prima facie case is made out solely by virtue of a statutory presumption it is a difficult and perhaps a baffling task to discover appropriate criteria by which to judge whether that prima facie case has been converted to satisfaction beyond reasonable doubt." 36 As the report of the Australian Law Reform Commission on Customs and Excise also points out, at 156, in determining whether averments should be disallowed, a court may take into account:

(i) whether the averment relates to a matter that is merely formal and is not substantially in dispute;

(ii) whether the prosecutor is in a position to adduce evidence and if not whether the difficulty derives from overseas or the obtaining of evidence would result in undue cost or delay;

(iii) whether the defendant is reasonably able to obtain information or evidence about the matter; and

(iv) what admissions the defendant has made. 37 The Magistrate in her decision stated: "The issue in this case is whether the Crown has established beyond reasonable doubt as a question of law that the goods seized were manufactured in Australia. There is nothing on the face of the tobacco or in the evidence that established it was manufactured in Australia as a question of law. It is clear that averments of law are not admissible as evidence. A determination as to whether this tobacco was cut in Australia is a legal consideration. The prosecution say I can rely on the admission by the defendant. The defendant said to the officer in the record of interview that it was an Australian product. Taking his word at face value they do not necessarily exclude the possibility that the product was packaged by Australians. Further, there is no tobacco manufactured in different countries and that he knew this was manufactured in Australia. The inference from the answers in the record of interview is that it is somebody. And admission in this form has little evidential value. The only other relevant evidence in this case as to where the tobacco was manufactured is the evidence of the analyst, Mr Jeremy Lawless-Pine. He states by a reported (sic) dated 18 June 2001, that the samples were in a very poor condition and I was unable to perform any subjective sensory analysis. He could not determine from the sample the origin of the tobacco. No doubt, if he could have determined that the tobacco was grown in Australia, the Court would be asked to infer that it was also manufactured in Australia. However in the absence of that finding no such inference can be drawn. There is no evidence before me that the averment is in the knowledge of the defendant. IN MY OPINION THE AVERMENT IS INSUFFICIENT IN LAW TO SUSTAIN THE ALLEGATION OF THE OFFENCE CHARGED AND I DISMISS THE INFORMATIONS." 38 The plaintiff's submission that there was no rational basis upon which the Magistrate could have failed to find the offence proved beyond reasonable doubt overlooks the fact that a Court may consider a number of factors in determining whether guilt is proven beyond the requisite standard. As Justice Vincent in Gallagher, at 739, pointed out, a court must balance the needs of the authorities against the "possible unfairness" of the use of averments towards a defendant. In this matter, there was the potential for such unfairness to arise since it was found that little weight could be attributed to the defendant's admission and the Magistrate, as a result, had only this evidence and the averment to rely upon. Thus, it is my view that the Magistrate was entitled to come to the conclusion that she did. 39 The plaintiff's seventh ground of appeal attacks the Magistrate's ultimate finding, quoted above, that there was "no evidence before her that the "averment was in the knowledge of the defendant" and that in her opinion the averment was "insufficient in law" to sustain the allegation of the offence charged. The plaintiff submitted that s144(1) of the Excise Act necessarily had the effect that the averment was sufficient in law to sustain the allegation and that the defendant's knowledge of the matter averred is irrelevant to whether the averment is sufficient to sustain a finding that the offence is proven beyond reasonable doubt. The defendant also submitted that the Magistrate's reference to the averment as not being in the defendant's knowledge could be understood as no more than a finding that there was no other possible source of evidence, including the defendant, to support the averment. I am unsure what the Magistrate sought to convey by this statement. 40 The Magistrate erred when she found that the averment was insufficient at law and this may have tainted the reasoning by which she arrived at her ultimate decision. This finding was one of a general misconception on the Magistrate's part with respect to the basis upon which the evidence before her should have been weighed. As is apparent from the quotation taken from May above, the question before the Magistrate should have been one of fact. After the plaintiff had made its case she was required by law to consider on the basis of the facts before her whether the evidence was sufficient to prove the offence. Instead, the Magistrate stated that the issue before her was whether the Crown had established that the tobacco seized was manufactured in Australia as a question of law. The appeal is upheld. The decision of the Magistrate dated 30 August 2002 is set aside. The matter is remitted to the Local Court for determination according to law. 41 Costs are discretionary. Normally costs follow the event. The defendant is to pay the plaintiff's costs as agreed or assessed. 42 The Court orders:

(2) The decision of Magistrate Forbes dated 30 August 2002 is set aside.

(3) The matter is remitted to the Local Court to be determined according to law.

(4) The defendant is to pay the plaintiff's costs as agreed or assessed. **********

Last Modified: 06/02/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.