Commissioner of Taxation v Esho & Rieslite P/L

JUDGMENT OF : Shaw J at 1 DECISION : 1) Appeal Dismissed; 2) Plaintiff to pay the defendant's costs of the appeal

CATCHWORDS : Averments - Appeal from Magistrate Crimes Act 1914 (Cth), ss5 Crimes (Local Courts Appeal and Review) Act 2001, s56 LEGISLATION CITED : Excise Act 1901 (Cth), ss 4, 117, 117B, 144 Excise Tariff Act 1921 Supreme Court Rules, Pt 51B Brady v Thornton (1947) 75 CLR 140; Brambles-Ruys v Lanham (1984) 55 ALR 113; 75 FLR 272; Chief Executive of Customs v Labrador Liquor Wholesalers Pty Ltd & Ors (2003) 77 ALJR 1629; Commissioner of Taxation v Esho & Anor [2003] NSWSC 410; Considine v Lemmer [1971] 2 SASR 39; Ex Parte, re Johnston (1943) 60 WN (NSW) 106; Gallagher v Cendack [1988] VR 731; CASES CITED : King v Hush; ex parte Devanny (1932) 48 CLR 487; Lemmer v Considine [1969] SASR 211; May v O'Sullivan (1955) 92 CLR 654; Merrall v Samuels [1971] 2 SASR 378; Neil Pearson & Company Pty Ltd v Comptroller-General of Customs (1995) 38 NSWLR 443; Merrall v Samuels (1971) 2 SASR 378; R v Slattery [2002] NSWCCA 367; Simmons v Venning [1969] 1 SASR 403; Wilson v Clyde Rigging and Boiler Scaling Co Ltd (1959) S.L.T. (Notes) 59 Commissioner of Taxation (Plaintiff) PARTIES : Francois Esho (First Defendant) Rieslite Pty Limited (ACN 003 392 470) (Second Defendant) FILE NUMBER(S) : SC 12503/03 COUNSEL : D. Fagan SC (Plaintiff) H. Dhanji (Defendants) SOLICITORS : Australian Government Solicitor (Plaintiff) Waren F Ball & Co (Defendants)

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

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

12503 of 2003 Commissioner of Taxation (Plaintiff) v

Francois Esho (First Defendant) & Rieslite Pty Limited (Second Defendant)

1 Shaw J: This is an appeal brought by the Commissioner of Taxation (the plaintiff) being an appeal as of right pursuant to s 56 of the Crimes (Local Courts Appeal and Review) Act 2001. That provision entitles a prosecutor to appeal to this court against an order made by a Local Court dismissing a matter the subject of any summary proceedings including an order for costs against the prosecutor in such proceedings "but only on a ground that involves a question of law alone." It is not disputed by Francois Esho and Riselite Pty Limited (ACN 003 392 470) (the defendants) that the appeal has been duly brought pursuant to the provisions to which I have referred, and in compliance with the procedure prescribed by Part 51B of the Supreme Court Rules. 2 The appeal is from the decision of Ms Forbes a magistrate of the Local Court, given on 28 August 2003, in which her Honour dismissed various informations laid against the first and second defendants and ordered that the plaintiff pay the defendants' costs. The background to the litigation, which is quite lengthy, and the factual matrix underlying the questions of law presently tendered are not in dispute. Rather, the disposition of the appeal depends upon the legal effect of an averment contained in the information laid by the plaintiff against the defendants under various provisions of the Excise Act 1901 (Cth) and the Crimes Act 1914 (Cth). 3 I do not think I need to set out in full detail the particular informations laid, because there is no dispute that a necessary element of every offence charged was that the tobacco, which was the subject of the charge, was "manufactured or produced in Australia." However, the decision had the effect, as summarised by the plaintiff, of her Honour having: (a) dismissed 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 offence of possession contrary to s 117(2) of the Excise Act. (b) dismissed 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. (c) ordered that the Plaintiff (informant) pay the Defendant's costs.

The relevant provision of the Excise Tariff Act 1921 (Cth) provided that manufacture or production in Australia was essential to the goods being "excisable". The Excise Act defines "excisable goods" as those in respect of which excise duty is imposed by the Parliament, thus causing one to look back at the Excise Tariff Act and to the requirement of manufacture or production in Australia. There is a definition of "manufacture" in the Excise Act (s 4) as including "all processes in the manufacture of excisable goods". There is no dispute about this statutory regime and it is common ground, and was at first instance, that:

(a) in order to establish that the tobacco subject of the charges was excisable, the prosecution had to prove to the criminal standard (beyond reasonable doubt) that the goods were "manufactured in Australia" in accordance with the statutory provisions to which I have referred;

(b) if the tobacco had been "cut" in Australia then that would amount to having been manufactured here. That would leave open for the plaintiff to prove on the criminal onus that a person had intentionally sold excisable goods on which duty had not been paid knowing, or being reckless as to whether the goods were excisable goods on which duty has not been paid: see s 117B of the Excise Act . 4 There is also a strict liability offence pursuant to s 117B (2) of that Act which prohibits the sale of excisable goods on which duties are not being paid. Thus, an issue for the learned magistrate was whether the tobacco had been cut in Australia. Each information contained an averment of the fact that: "the cut tobacco referred to in the offence herein had been cut by a cutting machine in Australia." 5 The word "averment" has no definite meaning. It may include both allegations of law and allegations of fact [subject of course to the particular statutory basis of the averment]. Under some Acts the averment is taken to be prima facie evidence of the "fact only": Brady v Thornton (1947) 75 CLR 140 at 146 per Starke J. Except for effect given to them by statute an "averment as such is not evidence …": Wilson v Clyde Rigging and Boiler Scaling Co Ltd (1959) S.L.T. (Notes) 59. 6 For presently relevant purposes the averment provision is contained in s 144 of the Excise Act which provides: 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) does not apply: (a) to any fault element of an offence; or (b) in relation to any offence for which imprisonment is a penalty; or (c) to proceedings for an indictable offence.

5. This section shall not lessen or affect any onus of proof otherwise falling on the defendant.

Thus in summary the averment has the effect that: (i) it is prima facie evidence of the fact averred; (ii) evidence given by witnesses in support or rebuttal of a matter so averred is to be considered on its merits and the credibility/probity value of such evidence "shall be neither increased nor diminished by reason of this section." 7 Broadly speaking, the plaintiff says that it is entitled to rely upon the averment alone, asserting that there was no other evidence which could serve to preclude or dissuade the tribunal of fact from being satisfied beyond reasonable doubt that the tobacco was cut (that is, manufactured) in Australia. Nor, the plaintiff argues, was there any evidence capable of raising uncertainty about the proposition, and hence there: was no rational basis upon which the magistrate could have failed to find the relevant matter proved to the requisite standard.

8 There was other evidence which, on the face of things, bore upon the correctness or otherwise of the averment. First, there were certain records of interview, which were said to constitute admissions by the first defendant, Mr Esho. However, in her decision, the learned magistrate regarded Mr Esho's admission has having "no weight". The plaintiff concedes that that conclusion was open to the court at first instance and "no complaint is made in respect of it." I assume that that concession springs, at least in part, from the narrow basis of the present appeal, that is to say it is an appeal only on a ground that it involves a question of law alone (my emphasis). 9 Secondly, certain expert evidence was tendered, being the report of a Mr Lawless-Pyne, an analyst, dated 18 June 2001. It involved an attempt by this expert to test some samples which relate to a proportion of the total number of charges laid. Mr Lawless-Pyne related that he received a number of samples of the tobacco on 21 May 2001, more than a month and a half after they had been seized. In his report he said: 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 utilise an established database [Phillip Morris Ltd] has developed using Gas Chromatograph and Mass Spectrometry and match them against known growing regions within Australia. Therefore I cannot state the full origin of this (sic) samples.

The defendants submit that had Mr Lawless-Pyne been able to give evidence that the tobacco was grown in Australia, this would have been available to support an inference that the tobacco was cut in Australia. The defendants do not accept the plaintiff's submission that this expert evidence was neutral and thus effectively irrelevant. On the contrary, the defendants submit that the deterioration of the samples prior to the expert being able to analyse them raised questions of uncertainty which meant that the averment, although prima facie evidence, did not result in the material consideration which was the subject of the averment having been proved beyond reasonable doubt. 10 This prosecution has already been the subject of an earlier appeal to this court on a question of law. On 30 August 2002 the same magistrate dismissed all of the informations and the plaintiff brought an appeal to the Supreme Court, which was upheld by Master Harrison on 21 March 2003. I refer with gratitude to the detailed reasons of the learned master in that earlier round of the litigation: Commissioner of Taxation v Esho & Anor [2003] NSWSC 410. That appeal was upheld, in part, and remitted to the Local Court for determination according to law. As I appreciate the basis upon which the master found that the appeal should be upheld, it turned upon an infelicity of language used by the magistrate (arguably a material error of substance) when she expressed her opinion that the averment was "insufficient in law" to sustain the allegation of the offence charged. The master concluded: 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 …… 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. [40] 11 However, it is noteworthy that the earlier aspects of that appeal, which overlapped with some of the grounds of appeal agitated before me, were unsuccessful. In particular, ground one of the appeal before the court as presently constituted complains of "the failure of the magistrate to act upon the averment, treating it as proof of the charge sufficiently satisfying the onus of proof in the absence of anything to contradict or detract from it." This is in similar terms and of the same effect as grounds one and two of the plaintiff's grounds on the first appeal: see at [7] of the master's judgment. 12 The master cited a number of cases including Merrall v Samuels (1971) 2 SASR 378 at 382 - 3 per Wells J directing the need for attention to "the total effect" of the evidence and whether that total effect gives rise, in all of the circumstances of the case, to a reasonable doubt as to whether the fact does exist. It was in those circumstances that Wells J took the view that the fact which is the subject of the averment may not have been established according to the criminal onus of proof. The master said that the plaintiff's appeal on the first ground must fail. She expressed the following view: 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. [33]

If this passage is correct, then it tells against the cogency of the plaintiff's case in relation to ground one as propounded before me. 13 The well-known authority of May v O'Sullivan (1955) 92 CLR 654 deals with the effect of a prima facie case in these terms: 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 (656 - 657) and; at 685: 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.

It is true that that authority does not deal expressly with the question of averments, but it does deal broadly with prima facie proof sufficient to constitute a case to answer, and distinguishes that from the ultimate verdict of guilt innocence.

14 Recently in the High Court of Australia in Chief Executive of Customs v Labrador Liquor Wholesalers Pty Ltd & Ors (2003) 77 ALJR 1629 at [142] Hayne J said: ….although the averment provisions do not place upon the defendant the burden of disproving facts, averments of the customs will suffice to discharge its onus of proving those facts. It will, in every case, be a matter for the judge to say, on the whole of the material, whether the facts are established to the requisite degree of proof. The judge may, but need not , treat what is properly averred as establishing that degree of proof. (my emphasis)

Hayne J said that there was a need for the tribunal of fact to be "actually persuaded" of the existence of the fact averred before finding that fact was proved beyond reasonable doubt [144]. In the same paragraph, his Honour went on to say: The averment provisions, therefore, neither suggest nor require departure from the tentative answer expressed earlier in these reasons that if conviction is sought, proof beyond reasonable doubt of the elements of the relevant offence is necessary.

This was in the context of the court determining that in prosecutions under the Customs Act 1901 (Cth) and the Excise Act alleging evasion of excise duties the elements of the offence must be proved beyond reasonable doubt. 15 Gleeson CJ [1] and McHugh J [3] expressly agreed with the reasons of Hayne J. In determining that the criminal standard of proof was applicable, Kirby J said; The enactment of provisions facilitating the proof of offences under the two federal Acts by the averment of matters in the originating process increases rather than diminishes the significance of the standard of proof which the law demands of the prosecutor to achieve success. [82]

During the course of this passage, Kirby J cited, by footnote (89), part of the discussion by Hayne J of the significance of the averment provisions without any hint of disagreement.

16 A broadly analogous provision was considered by the High Court in the King v Hush; ex parte Devanny (1932) 48 CLR 487 where Dixon J said at pp 507 - 508 that the averment that contributions that were solicited for 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.

The effect of Hush was that the High Court was not satisfied to the criminal standard of the matters averred, and also the lower court could not have been so satisfied. As the defendants point out, in the present case, the plaintiff must persuade this court that the magistrate must have been satisfied beyond reasonable doubt as to the matter averred in order to make good the first ground of appeal. 17 In Neil Pearson & Company Pty Ltd v Comptroller-General of Customs (1995) 38 NSWLR 443 Kirby A-CJ said at p 459: … 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." (Allen and Dowd JJ agreed with Kirby A-CJ). 18 In Ex Parte, re Johnston (1943) 60 WN (NSW) 106, Davidson J (who formed part of the majority) emphasised that despite the use of averments as prima facie evidence, "it is the magistrate's function to determine whether he is satisfied beyond reasonable doubt" (at 110). 19 In their submissions, the defendants have placed particular stress on important warning given by Vincent J in Gallagher v Cendack [1988] VR 731 at 739 where his Honour said 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 nonetheless 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 that the making of such an allegation.

That warning should be regarded a fortiori in circumstances where some of the evidence, and I refer to the expert evidence, at least raises a question mark as to whether the averment was correct. 20 R. Else Mitchell argued that averments did not constitute any fundamental breach of legal principle (that is, in particular, the presumption of innocence) because the averment only provides sufficient evidence for the case to go to the jury and the jury may then acquit if it is not satisfied of guilt beyond reasonable doubt. The learned author took the view that the value of this rule "… will vary … according to the nature of the matter sought to be proved by an averment i.e., whether it is a formality only or a matter of substance" (at p 178). ["A Note on Averments"; (1945) 19 ALJ 178; cf. Kevin Anderson, "Averments" (1945) 19 ALJ 102]. I do not think it can be reasonably disputed that, in the case before me, the matter which is the subject of the averment is a substantive ingredient of the offence and not merely formal. . 21 It is true, as the plaintiff argues, that a number of South Australian cases appear to give greater weight to averments than the role ascribed to them in the authorities to which I have just referred. One such judgment is that of Bright J in Considine v Lemmer [1971] 2 SASR 39 where his Honour said that: in the absence of acceptable evidence tending to disprove the fact and therefore capable of inspiring a reasonable doubt it is a sufficient basis [that is to say an allegation in a complaint] for proof of the fact beyond reasonable doubt. (at 51,52)

However, it is perhaps somewhat contradictory that his Honour goes on to say that this was not the same thing as saying that in law It [the averment] must be accepted, for any proof, however cogent, of any factors is presumably within an area of legal choice. (my emphasis). (at 52).

I note in passing that this judgment of the Full Court of the Supreme Court of South Australia reversed the judgment of Bray CJ of that court: Lemmer v Considine [1969] SASR 211. See to like effect Merrall v Samuels [1971] 2 SASR 378 at 382 per Wells J. 22 Bray CJ reiterated his view that it was an error by a magistrate to convict simply because he found the prima facie case unanswered by credible evidence, without considering the question of satisfaction beyond reasonable doubt in Simmons v Venning [1969] 1 SASR 403 at 405; this was followed by Legoe J in Brambles-Ruys v Lanham (1984) 75 FLR 272; (1984) 55 ALR 113 at 135, 136.

23 With all due respect to the South Australian authorities relied upon by the plaintiff, it is my view that the preponderance of authority to which I referred does not stretch so far and that I should both as a matter of judicial comity and because, in my opinion, the cases to which I have referred, other than the South Australian cases, accord with correct principle. I note the divergence of opinion between Bray CJ and the Full Court. 24 The two "errors" identified by the plaintiff in her Honour's reasoning are first of all, in reliance upon the South Australian authorities, the failure of the magistrate to act upon the averment in the absence of anything to contradict or detract from it. Based upon the authorities which I have cited and considered I reject that ground. 25 Secondly, a short passage at the end of her Honour's decision is the subject of criticism. She said: Mr Esho is now placed in a position where he cannot contradict that averment by way of an analysis of the tobacco that was seized. As a result of the totality of the evidence before the court I am satisfied that there is a doubt as to where the tobacco was manufactured, and in those circumstances the information is dismissed.

In my opinion, the difficulty in which the expert was placed is at least a relevant consideration when the magistrate is required to consider the totality of the evidence. It tends to show uncertainty or doubt. There was a possible disadvantage to the defendants as a result of the deterioration of evidence, destructive of the availability of scientific analysis: R v Slattery [2002] NSWCCA 367. Even if I am wrong in so holding, I think that it was open to the magistrate nevertheless to take the view that the place of manufacture was no mere formality but an essential ingredient of the offence and in all of the circumstances that she was not satisfied beyond reasonable doubt that the averment was sufficient to lead to a conviction, even though it meant that there was a case to be answered. 26 Even if there is, contrary to my view, some error of reasoning ascertainable in the magistrate's decision, to the extent that this court has any discretion in the matter, I would nonetheless favour dismissal of the appeal. I have regard to the history of the matter and, in particular, the determination of a prior appeal to this court on over-lapping matters and the refusal of a stay application at first instance (which application was based upon the destruction of the tobacco prior to testing) on the basis that the averment provision did not oblige the court to find the fact averred proved, and to find the defendants guilty. 27 For these reasons, I order that the plaintiff's appeal should be dismissed and that the plaintiff should pay the defendants' costs of the proceedings in this court.

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