Supreme Court of NSW|1998-07-24|Before: Carruthers AJ

Francis Ivor Kelly Comptroller-General of Customs v Jct Wong and Rizoli Pty Ltd Matter No 12178/89 [1998] NSWSC 711 (24 July 1998)

FRANCIS IVOR KELLY COMPTROLLER-GENERAL OF CUSTOMS v JCT WONG & RIZOLI PTY LTD

The Supreme Court of New South Wales Common Law Division

Full details of the offences are to be found in my judgment of 10 July. However, the following brief details may conveniently be re-stated.

Mr Wong through the interposition of various companies including Rizoli imported wooden furniture from Hong Kong to Australia, for sale in Australia, over the period from at least 1982 to 1987. The furniture was shipped in 20' containers, the owner being nominated in the Entry for Home Consumption by the customs agents, on instructions from Mr Wong, to be Rizoli.

On 17 April 1987 Customs officers at Port Botany broke the seal of a container discharged from the Oriental Knight and, in addition to furniture stowed within the container destined for Rizoli, T-shirts and other clothing were discovered to be secreted within the furniture.

on 27 April 1987 investigating Customs officers attended at Mr Wong's home, 26 Barwon Avenue Turramurra, from which location he conducted his business and kept the relevant business records.

Mr Wong made significant admissions in relation to the smuggling of the T-shirts and other clothing in the container discharged from the Oriental Knight. Further large quantities of T-shirts were located at his premises. The Customs officers took possession of a considerable quantity of documentation consisting of carbon copies of letters written in Chinese by Mr Wong to associates in Hong Kong and original letters written by such associates from Hong Kong to Mr Wong in Sydney.

As far as the Oriental Knight shipment is concerned, Rizoli was charged with attempting to defraud the Commonwealth pursuant to s 7 and s 29D of the Crimes Act (Cwth) 1914 (the Crimes Act) and Mr Wong was charged with being knowingly concerned in Rizoli's attempt to defraud the Commonwealth pursuant to sections 5, 7 and 29D of the Crimes Act.

Each pleaded guilty in the Local Court and both were committed for sentence to the District Court. On 30 June 1989 Rizoli and Mr Wong were each fined $60,000.00 and allowed 12 months to pay by his Honour Judge Shadbolt. The duty sought to be evaded was assessed at $270,000. The smuggled goods were condemned.

As a result of the translation and examination by investigating officers of the documentation obtained from Mr Wong's home, the subject Customs prosecution was commenced in this Court in 1989. The matter has had a long and somewhat tortuous history culminating in my judgment of 10 July 1998.

The plaintiff Comptroller-General of Customs (as Mr Kelly was in 1989) alleged in the Further Amended Statement of Claim (the Statement of Claim), that in three separate shipments, T-shirts and other clothing were smuggled into Australia in containers declared to be carrying only furniture. In respect of each shipment Rizoli has been charged with smuggling, contrary to s 233(1)(a) of the Customs Act 1901 as amended, evasions of duty, contrary to s 234(1)(a), and making a false entry, contrary to s 234(1)(d) of the Act. With respect to each of these alleged offences the plaintiff charged that the first defendant Mr Wong was concerned therein pursuant to s 236 of the Act. Thus as against each defendant nine offences were alleged.

As I have indicated I found each of these offences proved. With regard to the first shipment, the relevant goods were smuggled on board the Asian Pearl which arrived at Port Botany on or about 8 January 1987; with regard to the second shipment, the goods were smuggled on the Oriental Expert which arrived at Port Botany on or about 4 February 1987, and, with regard to the third shipment, the goods were smuggled on board the Khudozhnik Zhukov (Zhukov) which arrived at Port Botany on or about 24 March 1987. In each case, as I have already indicated, T-shirts and similar garments were secreted in containers declared to be packed solely with furniture and, in respect of which duty was paid only on the furniture.

With regard to the Asian Pearl shipment the value of the clothing smuggled was HK$270,562.00, and the duty payable thereon was AUS$193,039.00. With regard to the Oriental Expert shipment the value of the clothing smuggled was HK$335,994.00 and the duty payable thereon was AUS$224,652.00. With regard to the Zhukov shipment the value of the clothing smuggled was HK$303,327.00 and the total duty payable thereon was AUS$176,816.00.

It is convenient when considering the appropriate penalty for these offences to recall the oft-quoted passage from the judgment of Kitto J in L Vogel & Son Pty Ltd v Anderson (1967-1968) 120 CLR 157 at 164:

"The duty evaded has now been paid, and I understand that when the evasions were discovered the defendants gave the Customs every assistance in their investigations. But when all the considerations relied upon by the defendants have been given due attention the case still cannot be regarded as other than a serious one. Not only are the defendants guilty of a sustained course of conscious wrongdoing, but the offences are in a field in which punishments for deliberate offences must be severe. The Customs laws represent the judgment of Parliament upon an important aspect of the economic organization of the community, and the object of the penal provisions is to make that judgment as effective as possible. It is important to remember that Customs officers have of practical necessity to rely extensively upon the information supplied to them by importers, for the flow of commerce could not be maintained if every importation had to be fully investigated. Moreover, detection of frauds is not always easy. No doubt ordinary conceptions of honesty and of civic responsibility suffice to ensure a great deal of fair dealing with the Customs, but for some people little seems to matter but fear of the consequences of discovery. The Customs Act makes those consequences potentially drastic. It is for the courts to make them, in suitable cases, drastic in fact, for otherwise traders who are not saved by qualms of conscience from willingness to defraud their fellow citizens may weigh the profits they hope for against the penalties they have cause to fear and find the gamble worthwhile."

The objective circumstances, insofar as the present offences are concerned, are very serious and involve what Kitto J referred to as "a sustained course of conscious wrongdoing" for commercial greed. Large quantities of valuable goods were smuggled as part of a deliberate and systematic scheme of deception of Australian Customs. It is clear from a letter which Mr Wong wrote to his then agent in Hong Kong "Uncle Cho" in 1983 that commercial greed was his prime motive. In that letter Mr Wong said:

"Concerning the T-shirts. Our last batch will arrive in Hong Kong during the month. Uncle Cho, you can put your mind at rest concerning this matter. If I am not more than 100% certain, I will not do it. I understand that if things happen, it will be detrimental to you. But from my point of view, it will be even worse. So, you can be rest assured. What is more, the reason why I am able to order such large numbers of camphor chests is all the on-going costs (shipping costs, customs clearance and other expenses) have been calculated on the T-shirts, so that the cost to me for the camphor chests are reduced to the minimum. My whole sale price is the lowest in the whole of Australia."

This letter also indicates that Mr Wong was willing to implicate others in the commission of his offences.

This letter is also significant in that it makes it clear that Mr Wong was conscious of the drastic consequences which would flow to him if he were "caught out" but that he considered the gamble to be worthwhile.

Section 16A of the Crimes Act sets out the matters to which a court must have regard when imposing a sentence or making an order in respect of any person for a federal offence. The benchmark laid down by sub-section.(1) of that section is that the Court must impose a sentence or make an order that it is of a severity appropriate in all the circumstances of the offence.

Sub-section (2) of s 16A sets out ( in addition to any other matters), specific matters which the Court must take into account as being relevant and known to the Court. Those criteria involve both objective and subjective matters. I have said sufficient thus far to indicate the gravity of these matters from an objective point of view.

I set out now the penalty regime in the Customs Act which is equally relevant to the principal offences committed by Rizoli and the involvement of Mr Wong in the commission of each of those offences. Relevantly s 236 provides that any person, in any way directly or indirectly concerned in the commission of any offence against the Act, shall be deemed to have committed such offence and shall be punishable accordingly.

Insofar as the smuggling offences under s 233(1)(a) are concerned where (as in this case) the court can determine the amount of duty which would have been payable on the smuggled goods if those goods had been entered for home consumption, s 233AB(1)(a) specifies a penalty not exceeding five times the amount of that duty and not less than two times that amount.

The same regime applies in relation to the offences under s 234(1)(a) of evading payment of duty. Insofar as the offences under s 234(1)(d) of making an entry which is false are concerned, the maximum penalty must not exceed $5,000.00: see s 234(2)(c).

In Hayes v Weller (1988) 50 SASR 182 the Supreme Court of South Australia (In Banco) (King CJ, Jacobs and Perry JJ) was concerned with an appeal by the Comptroller-General of Customs from an order of the sentencing judge discharging the respondent, without proceeding to conviction under s 19B(1) of the Crimes Act, for illegal importation of a motor vehicle, whereby $22,992.00 duty was evaded. The learned sentencing judge, referring to the financial burden which even the minimum penalty of twice the duty evaded would impose on the respondent, together with evidence of his prior good character, considered that it was appropriate to discharge him under s 19B of the Crimes Act without proceeding to conviction.

That order was set aside by the Full Court on the basis that although the character and antecedents of the respondent were capable of giving rise to the application of s 19B, the sentencing judge erred in applying the provision in that case because he had not given due weight to the legislative policy enshrined in sub-section 233AB(1)(a) and s 239 of the Customs Act, which imposed mandatory minimum penalties, since all penalties were additional to forfeiture and would inherently entail a serious financial burden on many offenders. The Court re-sentencing the respondent imposed a penalty of $46,000.00 on the charge of smuggling (ie. double the duty evaded.)

It is important to note that Perry J. who gave the leading judgment of the Court said (at 187) after referring to evidence asserting that the respondent was a person of good character:

"However, it seems to me that in the case of a deliberately planned fraud executed over a period of time, in this case over a period in excess of twelve months and involving during that time a number of steps necessary to execute the transaction and a number of subterfuges in an endeavour to avoid detection, the Court must be, at the very least, circumspect in accepting at their face value testimonials as to previous good character.

The very nature of the offence in question might well have led to the view that it could not be said that the character and antecedents of the [respondent] were such as to attract the application of section 19B."

However, his Honour went on to say that, be that as it may, the sentencing judge could only have reached the view that s 19B should be applied after failure to give due weight to the legislative policy embodied in the relevant provisions of the Customs Act requiring the fixation of minimum and maximum penalties.

In the instant case it is perfectly understandable that the plaintiff charged Rizoli, in respect of each shipment, with three charges, one involving smuggling, one involving the evasion of duty and the third involving making a false entry, and also charged Mr Wong with being concerned in each of them.

In Murphy v H. F. Trading Co. Pty. Limited (1973) 47 A.L.J.R. 198 at 199-200, Gibbs J said:

"Since the decision in L. Vogel & Son Pty. Ltd. v. Anderson, Minister of State for Customs and Excise (Cth), supra, it is not possible for the defendants to argue that they ought not to be convicted of more than one offence in respect of each evasion of duty. That is not to say that the joinder of a multiplicity of charges arising out of one transaction is to be commended; I respectfully agree with what Taylor J said on this subject in Scott v. Geoghegan & Sons Pty. Ltd. (1969), 43 A.L.J.R. 243, at p.245. However, in imposing penalties it is material to consider that `though the offences in each group were separate offences in law, they were substantially contemporaneous and connected': L. Vogel & Son Pty. Ltd. v. Anderson, Minister of State for Customs and Excise (Cth), supra. At p. 168."

In Riverside International Imports Pty. Limited v Luckman (Supreme Court of Victoria, unreported 10 August 1989) King J said (at page 5):

"It is also true that a result of being charged with both smuggling and evasion of duty they are being subjected to minimum penalties in respect of offences which are contemporaneous and connected. However, the legislature has, by prescribing minimum penalties in respect of both offences, made it clear that such a result is within its contemplation."

I might say, parenthetically that such an approach does not offend against section 4C, which was introduced into the Crimes Act by Act No 120 of 1987. This is because they are not the same acts or omissions which constitute the two offences.

The Customs and Excise Amendment Bill 1982 involved a review of penalties under the Customs Act, including penalties for the subject offences. During the course of his second reading speech on that Bill the then Minister for Business and Consumer Affairs said (inter alia) on 24 March 1982 (Hansard 1373):

"The review took into consideration the matters to which I have just referred, the difficulties faced by Customs in supervising the growing flow of goods into and out of Australia, the need for Customs to rely to a significant degree on the integrity of importers and exporters and the magnitude of the rewards that can be obtained from revenue evasion or unlawful import or export activities. It was concluded that the levels of penalties for most non-narcotics Customs offences should be substantially increased. The Bill proposes that the penalty for revenue-related offences should be up to five times the amount sought to be evaded and not less than two times that amount."

The Minister reinforced by those words the importance of deterrence when imposing penalties for Customs offences of the nature of those presently under consideration. Two factors which weigh heavily on my mind insofar as the assessment of penalty is concerned in the instant case, are, firstly, the fact that that the offences were committed eleven years ago and secondly the multiplicity of offences, albeit, as I have said, no criticism can be levelled at against the Plaintiff in that regard. It is clearly not appropriate to impose the minimum penalty in relation to each offence as that would offend against the principle of totality. However, the difficulty arises of determining how the Court can mitigate the effect of the statutory regime of minimum and maximum penalties without doing disservice to the legislature's intent.

One possible avenue for mitigation of the minimum penalties specified, in relation to the smuggling and evade duty matters, is by the application of s 20 of the Crimes Act (Conditional release of offenders after conviction); see John C Morish Pty. Ltd. v. Luckman (1977) 30 FLR 88; Sheen v. Geo. Cornish Pty. Ltd. (1978) 2 NSWLR 162; Lanham v. Brambles-Ruys Pty. Ltd. (1984) 37 SASR 16; Stitt v CBI Constructors Pty Ltd (1990) 93 ALR 325 and Regina v. ON Clinic Australia Pty Ltd (Court of Criminal Appeal 6 November, 1996, unreported).

An alternative (and to my mind much more satisfactory) avenue for mitigation of the minimum penalties is by the application of s 4K (Continuing and multiple offences) of the Crimes Act, and, in particular, sub section (4) of that section. It is common ground between the parties that s.4K is applicable to the imposition of penalties in the instant case.

I turn now to the subjective matters which were dealt with in evidence and submissions by Mr Graham of Queen's Counsel on behalf of both defendants on 22 July.

Affidavit evidence was tendered by Mr Graham from respected members of the community who speak highly of Mr Wong's character, apart from the commission of these offences and his valuable contribution to the Australian community as a whole and to the Chinese community in particular. Mr Wong's family has clearly settled well into this country and its members are obviously well established both socially and from a business point of view. Mr Wong was not called to give evidence on mitigation and there is no evidence before me as to his present business activities or, indeed, any of his business activities since the commission of these offences. An affidavit by Mr Wong's solicitor establishes that the family home at Turramurra, which is in the joint names of Mr & Mrs Wong, is valued at $400,000.00 and is subject to a mortgage with the sum of $278,958.00 presently outstanding. However, the affidavit does not disclose what other assets or financial interests Mr Wong has, and, therefore, I know nothing of his overall financial position. Perhaps, it may fairly be said that the solicitor's affidavit is more significant by reason of what it does not say rather than by what it does say.

No evidence was led regarding Rizoli's financial situation, or indeed, whether the company is trading. I shall refer to this matter later in this judgment.

I shall deal seriatim with the matters raised by Mr Graham in his submissions. He has stressed the delay associated with these proceedings, noting that they commenced in 1989. This delay has not been the fault of either the plaintiff or the defendants, but is merely a consequence of the overburdened resources of the Supreme Court. Be that as it may, Mr Wong has had the pressure of these proceedings hanging over his head for some nine years. My attention was drawn to the judgment of the Full Court of the Federal Court in Crawley v Regina (1981) 36 ALR 241. That case certainly dealt with the significance, for sentencing purposes, of the lapse of time since an offence was committed. It is of somewhat limited assistance insofar as the present proceedings are concerned. However, I propose to take into account the question of the long delay involved in these proceedings in the imposition of the appropriate penalties.

In this context I was reminded of the penalties imposed by Judge Shadbolt in relation to the Oriental Knight shipment and the remarks which his Honour made at the time of imposing the fines of $60,000.00 each upon the defendants. Those remarks must of course be assessed in the context that Judge Shadbolt was concerned with only one shipment.

The issues of contrition and rehabilitation were also raised. However, there is a difficulty here in that Mr Wong elected not to give evidence of contrition or rehabilitation in the sentence proceedings. Further, the substantive proceedings have been resolutely defended on legal grounds, albeit, no defence has even been sought to be raised on the merits. Mr Wong is perfectly entitled to raise in his defence such legal technicalities as his legal advisers consider to be available. However, there is necessarily a tension here with a submission of contrition.

Nevertheless, under no circumstances must the Court take into consideration, to the detriment of the defendants, when fixing the appropriate penalties, the fact that the proceedings have been defended. I do take into consideration the fact that these proceedings and consequent penalties must constitute an extreme embarrassment to Mr Wong and his family as respected members of the community and, particularly the Chinese community. They must necessarily impose financial hardship upon him and his family.

Certain figures have been put before the Court to establish that there have been massive reductions in the rate of duty imposed upon items of the nature smuggled into this country since the date of the subject shipments. By way of illustration the duty which was evaded on the Asian Pearl shipment of January 1987 was $193,039.00. The current rate of duty upon the smuggled goods on that ship would now result in an aggregate liability for duty in the sum of $16,454.00. Of course, as Mr Tabuteau of counsel for the plaintiff pointed out, whatever the current rates of duty may be, Mr Wong obtained the benefit of the evasion of the duty payable on the goods in 1987. Further, the defendants have had the use of that money since that date. They have also had the commercial advantage of obtaining the goods at a considerably lower cost than their competitors.

Mr Graham also reminded me of the following passage from the judgment of Windeyer J. in Cobiac v Liddy [1969] HCA 26; (1969) 119 CLR 257 at 269:

"The whole history of criminal justice has shewn that severity of punishment begets the need of a capacity for mercy. The more strict a rule is made, the more serious become the consequences of breaking it, the less likely it may be that Parliament would intend to close all avenues of exception. Especially when penalties are made rigid, not to be reduced or mitigated, it might seem improbable that Parliament would not retain a means of escaping the imposition of a penalty which must follow upon conviction, that it would abolish it, not directly but by a side wind. This is not because mercy in Portia's sense should season justice. It is that a capacity in special circumstances to avoid the rigidity of inexorable law is of the very essence of justice."

I have no hesitation in saying that I have found the assessment of the appropriate penalties in this case to be one of extraordinary difficulty. It is necessary for me carefully to balance the objective and the subjective circumstances and, in particular, as admonished by the Full Court in Hayes v Weller to pay due respect to the legislative intent. Deterrence, unquestionably, is a significant aspect of sentencing for offences of the subject nature. I must bear in mind the admonition of Kitto J. in Vogel that offences such as these place an obligation on the Court to impose "drastic" penalties.

Dealing first with the imposition of penalty against Mr Wong, I am persuaded by the plaintiff that there should be a conviction recorded with regard to each of the nine offences which I have found proved. Thus I record a conviction against Mr Wong in relation to each of the offences in paragraphs 3(A) to 11(A) (inclusive) of the Statement of Claim. I propose to impose the minimum penalty in relation to the smuggling offence with regard to the most recent shipment namely the _Zhukov. A_ccordingly, with regard to the smuggling offence under paragraph 9(A) of the Statement of Claim I impose a penalty of $353,632.00 (ie. 2 x $176,816). Pursuant to the provisions of sub-section (4) of s 4K that penalty is to include the smuggling offences under paragraphs 6(A) and 3(A) of the Statement of Claim.

I intend to impose the same sentencing pattern with regard to the evasion of duty on the Zhukov shipment. Accordingly I impose a penalty of $353,632.00 in relation to the evade duty conviction under paragraph 10(A) of the Statement of Claim. That penalty is to include the evade duty offences under paragraphs 7(A) and 4(A) of the Statement of Claim.

With regard to the false entry offence relating to the Zhukov shipment under paragraph 11(A) I impose a fine of $1,000.00. That penalty is also in respect of the false entry offences under paragraphs 8(A) and 5(A) of the Statement of Claim. The total penalties imposed against Mr Wong are therefore $708,264.00. I also order Mr Wong to pay 50% of the plaintiff's costs. An application for time to pay both the penalties and costs may be made to the Registrar of the Court.

I am also persuaded by the plaintiff that there should be a conviction recorded against Rizoli with regard to each of the nine offences which I have found proved. Thus I record a conviction against Rizoli in relation to each of the offences in paragraphs 3(A) to 11(A) inclusive, of the Statement of Claim.

As I have earlier remarked, no evidence was led in relation to the financial standing (if any) of Rizoli nor, indeed, whether it is trading. And, indeed, no concern was expressed , at the sentencing proceedings by counsel on behalf of Rizoli as to any adverse effect upon Rizoli's financial viability by the imposition of penalties upon it. The distinct possibility must exist, therefore, that the company is devoid of assets. However, penalties must be imposed upon it, and I propose to impose identical penalties upon Rizoli to those which I have imposed upon Mr Wong.

Accordingly, in relation to the smuggling offence under paragraph 9(A) of the Statement of Claim a penalty of $353,632.00 is imposed which, pursuant to sub-section (4) of s 4K, is also in respect of the offences under paragraphs 6(A) and 3(A) of the Statement of Claim. As to the evade duty offences, a penalty of $353,632.00 is imposed upon Rizoli in relation to the evade duty offence under paragraph 10(A) of the Statement of Claim and that penalty is also in respect of the offences under paragraph 7(A) and 4(A) of the Statement of Claim.

With regard to the offence of making a false entry under paragraph 11(A) of the Statement of Claim a penalty of $1,000.00 is imposed and that penalty is in respect of the offences under paragraphs 8(A) and 5(A) of the Statement of Claim. The total penalties imposed against Rizoli are therefore $708,264.00.

The plaintiff has also sought an order against Rizoli for reparation under s 21B of the Crimes Act equal to the aggregate amount of duty avoided. Consistent with what I understand to be the practice in these matters (and in the exercise of my discretion) I shall make that order. Accordingly pursuant to the provisions of s 21B of the Crimes Act I direct Rizoli Pty Limited to make reparation to the Commonwealth of Australia in the sum of $594,507.00 by way of duty evaded in the subject shipments.

An application for time to pay (if that be relevant) in respect of the penalties, costs and reparation order may be made to the Registrar of the Court.

Francis Ivor Kelly Comptroller-General of Customs v Jct Wong and Rizoli Pty Ltd Matter No 12178/89 [1998] NSWSC 711

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Judgment (63 paragraphs)

Francis Ivor Kelly Comptroller-General of Customs v Jct Wong and Rizoli Pty Ltd Matter No 12178/89 [1998] NSWSC 711 (24 July 1998)

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Legislation Cited (2)

Cases Cited (7)