Consideration
65 As noted above, the key issue before the Tribunal, and before this Court on appeal, concerns the correct construction of the phrase "fails to keep [the] goods safely" in s 35A(1) of the Customs Act. Are these words capable of applying in the present circumstances, where the goods were not lost, destroyed or consumed, and there was no failure to pay duty, while the goods were subject to customs control?
66 The issue is one of statutory construction. The principles of statutory construction are well established. It is sufficient for present purposes to refer to: s 15AA of the Acts Interpretation Act 1901 (Cth); Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at [39]; Certain Lloyd's Underwriters v Cross (2012) 248 CLR 378 at [24]-[26]; and SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362 at [14].
67 Although s 35A(1) has been set out above, for ease of reference we set it out again:
(1) Where a person who has, or has been entrusted with, the possession, custody or control of dutiable goods which are subject to customs control:
(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 a Collector in accordance with section 37;
that person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the duty of Customs which would have been payable on those goods if they had been entered for home consumption on the day on which the demand was made.
For present purposes, only paragraph (a) of s 35A(1) is relevant.
68 Section 35A(1) is to be construed in the context of the Customs Act as a whole and in light of its legislative purpose. The relevant context includes ss 30 and 69, which have been set out above.
69 Section 35A(1)(a) has three elements, each of which is necessary for liability to arise:
(a) the person has, or has been entrusted with, the possession, custody or control of dutiable goods;
(b) the goods are subject to customs control; and
(c) the person fails to keep the goods safely.
70 In the present case, there is no issue regarding the first element of s 35A(1). Mr Hurley accepts that he "[had], or [had] been entrusted with, possession, custody or control" of the relevant goods, which were dutiable goods, from importation until they were removed from the LTA bond warehouse (at least).
71 The second element of s 35A(1) set out above is that the goods are subject to "customs control". This concept is relevantly defined in s 30, which has been set out at [10] above. Section 30(1)(a)(vi) refers to goods that are excise-equivalent goods and are not examinable food. The alcoholic beverages in the present case fall into this category. Section 30(1)(a)(vi) provides that such goods shall be subject to customs control "until whichever of the events mentioned in subsection (1B) happens first". Section 30(1B) refers to three events. Of these, the only relevant event is that described in paragraph (b), namely "the excise-equivalent goods are delivered into home consumption in accordance with an authority to deal or in accordance with a permission under section 69, 70 or 162A". In our view, and notwithstanding the Collector's submission to the contrary, on the plain meaning of these provisions the alcoholic beverages ceased to be subject to customs control when they were delivered into home consumption pursuant to the applicable PSP. This occurred when they were removed from the LTA bond warehouse.
72 The contrary submission advanced by the Collector is that, unless and until the duty on the goods is paid, the goods remain subject to "customs control". In our view, that submission is irreconcilable with the text of the Act. As explained above, s 30 relevantly provides that the goods shall be subject to customs control until whichever of the events mentioned in subsection (1B) happens first. Of the three events referred to in that subsection, paragraph (b) is the only event that is relevant in the circumstances of this case. Paragraph (b) refers to the goods being "delivered into home consumption" in accordance with a permission under s 69. There is no reference in s 30(1B)(b) to duty on the goods having been paid. Indeed, the evident purpose of the permission regime in s 69 is to allow goods to be delivered into home consumption without duty first being paid on the goods. For these reasons, we reject the Collector's submission that the alcoholic beverages remained subject to customs control until duty on the goods had been paid.
73 We now turn to the third element of s 35A(1) set out above, namely that the person "fails to keep [the] goods safely". The conclusion reached by the Tribunal was, in essence, that in circumstances where the duty on the goods was not paid, Mr Hurley had failed to keep the goods safely. The Tribunal reached this conclusion notwithstanding the fact that, by reason of the PSP issued under s 69, no duty was payable while the goods were subject to customs control; the duty was payable later, after the goods had been delivered into home consumption and ceased to be subject to customs control. The Collector supports the Tribunal's conclusion and reasoning.
74 In Southern Shipping, the High Court gave the words "fails to keep [the] goods safely" in a comparable provision (s 60 of the Excise Act 1901 (Cth)) a broad interpretation, consistently with the purpose of the provision, being to safeguard the excise revenue. In particular, Dixon CJ (with whom Windeyer J agreed) stated at 287 that "safely" means "safe from loss or destruction". His Honour stated that the provision places on the person having possession, custody or control "what may be called an absolute duty to keep the goods safe from loss or destruction". Chief Justice Dixon added that, 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'". The reasoning of McTiernan J at 290-291 is to similar effect.
75 The reasons of other members of the High Court in Southern Shipping emphasise that the purpose of the provision is the protection of the excise revenue, and in broad terms equate a failure to keep goods safely with a failure to ensure payment of the duty on the goods. While these statements may, on their face, appear to support the Collector's position, it is important to appreciate that these statements were made in a context where the Excise Act (at that time) did not contain a provision comparable to s 69 of the present Customs Act. Justice Taylor stated at 295:
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.
(Emphasis added.)
76 Justice Menzies stated at 299:
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.
77 Justice Owen stated at 304-305:
[The provision's] purpose is to protect the revenue by ensuring that excisable goods do not go into consumption by devious means and without excise duty being paid on them.
(Emphasis added.)
78 As indicated above, the High Court was not addressing a situation where goods are delivered into home consumption, without being entered for home consumption, pursuant to a permission granted under a provision comparable to s 69 of the Customs Act. The statements of Taylor J, Menzies J and Owen J set out above need to be read with this in mind.
79 In particular, we note that Taylor J referred to excisable goods finding their way into home consumption "by some irregular means". These words are inapposite in a case, such as the present, where goods are delivered into home consumption pursuant to a permission granted under s 69 of the Customs Act. In the present case, the goods were delivered into home consumption in accordance with the applicable PSP, and thus regularly rather than irregularly.
80 The passage from the judgment of Menzies J refers to goods that are subject to "the control of Customs". His Honour stated that the safety with which the section is concerned is that the goods "do not get out of Customs control into home consumption without the payment of duty". Again, these words are inapposite in a case where goods are delivered into home consumption pursuant to a permission granted under s 69 of the Customs Act. The same observation applies to the passage from the judgment of Owen J.
81 As has already been noted, the issue before the High Court in Zappia was different from the issue in the present case. In Zappia, the issue was whether the relevant individual had possession, custody or control of the goods. The facts of that case did not involve a permission having been granted under s 69 of the Customs Act, and the observations of the High Court about the statutory purpose of s 35A were made in that context: see, for example, at [28]-[29] per Kiefel CJ, Bell, Gageler and Gordon JJ.
82 In each of Southern Shipping and Zappia, something in the nature of loss, destruction or consumption happened to the goods, resulting in a loss of duty, while the goods were subject to customs control. However, in the present case, nothing relevantly happened to the goods, and there was no loss of duty (because duty was not yet due), while the goods were subject to customs control. The goods were delivered into home consumption in accordance with the applicable PSP, and thereupon ceased to be subject to customs control. In these circumstances, we consider that it would be straining the text of s 35A(1) too far to conclude that, in respect of goods that were subject to customs control, Mr Hurley failed to keep the goods safely.
83 Insofar as the Collector submits that, in respect of goods that are subject to customs control, there is a failure to keep the goods safely if the duty on the goods is not paid, irrespective of when the duty is payable, we do not accept that submission. The provision refers to a failure to keep goods safely in the context of goods that are subject to customs control. In our view, in circumstances where no duty is payable while the goods are subject to customs control, it cannot be said that there has been a failure to keep the goods safely by reference to events that do (or do not) happen until later in time. We consider that it must be possible to determine, as at the time when the goods cease to be subject to customs control, whether or not there has been a failure to keep the goods safely.
84 We also consider that a contrary construction would tend to undermine the statutory purpose of the permission regime in s 69. The provisions of the Customs Act need to be read in a coherent manner that gives effect to all of its provisions. If a person who has possession, custody or control of goods that are subject to customs control could be liable under s 35A(1) if duty is not paid by the obligor after the goods are delivered into home consumption pursuant to a PSP, the person would be unwise to allow the goods to be delivered into home consumption. This would tend to undermine the evident purpose of s 69, which is to allow goods to be delivered into home consumption without entering the goods for home consumption.
85 Further, s 36(1) of the Customs Act contains an offence provision in substantially the same terms as s 35A(1). The construction adopted by the Tribunal, and contended for by the Collector, if correct, would apply equally to s 36(1). It is unlikely that the Parliament intended criminal liability to attach in circumstances such as those in the present case, where duty was not payable while the goods were in the possession, custody or control of the relevant person and subject to customs control, the goods were delivered into home consumption in accordance with a permission under s 69, and it was only later that the obligor failed to pay the duty: Stevens v Kabushiki Kaisha Sony Computer Entertainment (2005) 224 CLR 193 at [45] per Gleeson CJ, Gummow, Hayne and Heydon JJ.
86 We note that, had it wished to do so, the Commonwealth could have required LTA to provide security for compliance with the conditions applicable to the PSP, including the payment of duty: see s 42 of the Customs Act. Thus, there is a mechanism available under the Act to ensure payment of duty by the obligor in circumstances where a PSP is in place.
87 Insofar as the Tribunal relied, and the Collector relies, on the obiter observations of Sundberg J in Caltex at [155]-[157], we consider the facts of that case to be different from those of the present case, and that the case is distinguishable on that basis.
88 The goods in issue in that case were residual oils produced by the applicant (Caltex) as a by-product of its refining of crude oil. The applicant then re-used the residual oils by burning them as fuel in its own refinery. The primary holding was that the residual oils were not dutiable goods. However, Sundberg J also considered, in the alternative, the validity of a demand for payment that had been made by the respondent (the Commissioner) on Caltex under s 60(1) of the Excise Act. As noted above, s 60(1) of the Excise Act is comparable to s 35A(1) of the Customs Act. Further, the Excise Act contained a provision (s 61C) that was comparable to s 69 of the Customs Act. Section 61C of the Excise Act (set out in Caltex at [56]) empowered the Commissioner to give permission for specified goods to be delivered for home consumption without the formal entry of the goods under s 58. As noted in Caltex at [57], during the relevant period, Caltex held permissions under s 61C in respect of petroleum products manufactured at each of its three refineries. These permissions allowed Caltex to deliver petroleum products for home consumption for each period of one week, without an entry of those products for home consumption being made and passed under the Excise Act and without payment of excise duty on those products until the day following the end of each weekly period.
89 At [140], Sundberg J accepted a submission of the Commissioner that the residual oils had been "delivered" for or into home consumption when Caltex dedicated them, as articles of commerce, to consumption as a refinery fuel at its premises: see also [133(c)], [134]. At [149]-[171], Sundberg J considered the issue of the validity of the demand under s 60 of the Excise Act. At [155], Sundberg J stated:
If I am correct in finding that [the residual oils] were delivered, then the Commissioner's control ceased at the time they were delivered (ie when dedicated as refinery fuel oil). However it is not correct to say that s 60 has no application in respect of goods over which the Commissioner's control has come to an end. The section applies where: (1) a person has or has had possession of excisable goods; (2) the goods are subject to the Commissioner's control (ie have not been delivered); and (3) there is a failure to keep them safely or a failure to account for them. It seems to me that the requirement (2) for the goods to be subject to control is concerned with and referable to the period during which they are in the possession of the relevant person rather than the time at which the Commissioner relies on the section. The very thing the section is concerned with is the loss of goods (for example, their disappearance without adequate explanation) or the movement of goods into home consumption while subject to control and without the payment of duty. Section 60 it seems to me has no less an application to excisable goods that have ceased to be subject to control, where the cessation of that control is a result of the manufacturer delivering the goods into home consumption in an unauthorised manner.
(Emphasis added.)
90 In the last sentence of the above passage, Sundberg J referred to a situation where goods ceased to be subject to the Commissioner's control as "a result of the manufacturer delivering the goods into home consumption in an unauthorised manner". That is different from the present case, where the goods were delivered into home consumption (by being removed from the LTA bond warehouse) in accordance with the applicable PSP.
91 At [157], Sundberg J stated:
In relation to the failure to keep safely point …, the Commissioner relied on the decision of Finkelstein J in Sidebottom 98 FCR 579 and his Honour's discussion of the purposes of s 60 as explained by the High Court in Southern Shipping 107 CLR 279. What is clear from each of those cases is that s 60 imposes an essentially absolute duty to keep goods safely and to ensure they do not find their way into home consumption without the payment of duty. Where that does occur, the goods will have found their way into home consumption "irregularly", that is, in a manner not authorised by the Excise Act, and s 60 will apply in order that the revenue might be protected. The Commissioner said that the residual oils found their way into home consumption irregularly when Caltex consumed them without duty having been paid. I agree. As I said earlier, Caltex's consumption of the residual oils at its refineries amounted to "home consumption". It follows that Caltex's dedication of the residual oils as refinery fuel oil, without paying excise duty, and subsequent consumption of them by burning them, means that they found their way into home consumption irregularly. Caltex's consumption of the residual oils in this manner (by burning and thus using them up or "destroying" them) was therefore a failure to keep them safely within s 60(1)(a). As Dixon CJ said in Southern Shipping 107 CLR at 287, the safe keeping comprehended by s 60(1)(a) is the keeping safe from loss or destruction, because "the provision is pointed at the loss of goods involving the loss of excise duty". Caltex relied on the judgments of Taylor J (at 296) and Menzies J (at 299) in Southern Shipping 107 CLR 279 and their Honours' references to damage or destruction. However, their observations were directed not to a case such as the present (where the "destruction" is the consumption of the residual oils as a fuel) but to a rejection of the proposition that the section imposes a duty of care not to permit goods to be damaged or destroyed.
(Emphasis added.)
92 As the highlighted parts of the above passage indicate, on the facts of the case, Sundberg J found that the residual oils found their way into home consumption "irregularly". That is to be contrasted with the facts of the present case, where the alcoholic beverages were delivered into home consumption (by being removed from the LTA bond warehouse) in accordance with the applicable PSP, and thus regularly rather than irregularly. Caltex is, therefore, distinguishable. If and to the extent that Sundberg J expressed the view that a failure to pay duty after the goods have been delivered into home consumption (and thus ceased to be subject to customs control) may bear upon whether or not, in respect of goods that are subject to customs control, the relevant person "[failed] to keep [the] goods safely", we would respectfully disagree with his Honour, for the reasons given above.
93 In the present case, it was accepted by the Collector that statutory permission under s 69 was conferred by the PSPs and that such permission allowed the goods to be delivered into home consumption without payment of duty. The fact that it was an express condition of the permission that the duty would be paid did not mean that in the event the condition was not met there was a failure to keep the goods safely while they were subject to customs control. Nor could the existence of the condition mean that the goods were subject to some form of ongoing customs control despite the permission. The statutory permission operated to end the period when the goods were subject to customs control. Nor was payment of the duty a condition precedent to the permission or some form of concurrent obligation the performance of which was required in order for there to be permission. A condition of that character would defeat the evident purpose of the permission which was to allow the goods to be delivered into home consumption without payment of the duty (on the basis that the duty would be paid at a later date). Therefore, once the permission was acted upon and the goods were delivered into home consumption, the Collector was left to enforce the condition in respect of goods outside customs control and could not rely upon obligations which applied only whilst the goods had the status of being subject to customs control. The Collector could not then resurrect the status of the goods being subject to customs control by reason of the failure to perform the condition. The Collector was not without means of protection. As we have noted, there was a right to require security. Also, permission could be refused for appropriate reasons.
94 For these reasons, in our view, the phrase "fails to keep [the] goods safely" in s 35A(1) of the Customs Act is not capable of applying to the present facts and circumstances.