Liaver v Errington [2003] QCA 5

SUPREME COURT OF QUEENSLAND

CITATION: Liaver v Errington [2003] QCA 5

PARTIES: SEIT HAMIT LIAVER (appellant/respondent) v MICHAEL LEONARD ERRINGTON (respondent/applicant/appellant)

FILE NO/S: CA No 210 of 2002 / DC No 23 of 2001

DIVISION: Court of Appeal

PROCEEDING: Application for leave s 118 DCA (Criminal)

ORIGINATING COURT: District Court at Cairns

DELIVERED ON: 31 January 2003

DELIVERED AT: Brisbane

HEARING DATE: 18 October 2002

JUDGES: McMurdo P, Davies JA and Holmes J / Separate reasons for judgment of each member of the Court, Davies JA and Holmes J concurring as to the orders made, McMurdo P dissenting in part

ORDERS: 1.Application for leave to appeal allowed / 2.Appeal allowed / 3.Set aside the orders of the District Court and reinstate the order of the magistrate for reparation in the sum of $14, 610.60 with this variation, that it is made in respect of count three on the complaint / 4.No order as to costs

CATCHWORDS: CRIMINAL LAW – COMMONWEALTH OFFENCES – MANUFACTURE OF EXCISABLE GOODS – FAILURE TO PAY DUTY ON EXCISABLE GOODS – where respondent sentenced for manufacture of tobacco without a manufacturer’s licence – where respondent ordered to pay reparation in respect of loss to the Commonwealth resulting from the offence – where reparation order of Magistrate overturned on appeal to District Court – where applicant seeks reinstatement of Magistrate’s order – whether there was ‘entry for home consumption’ for the purposes of s 54 of the Excise Act 1901 (Cth) – whether the respondent, as manufacturer or owner, was liable to pay the duty from the time the tobacco was manufactured – whether the Commonwealth suffered a loss “by reason of” the offences / PRACTICE AND PROCEDURE – EXERCISE OF JUDICIAL DISCRETION – whether the Magistrate erred in the exercise of his discretion to make the reparation order – whether the Magistrate gave sufficient weight to the respondent’s means and the actual benefit flowing from the offences to him. / Excise Act 1901 (Cth), s 54(1), s 58(1A), s 117B, s 161 / Crimes Act 1914 (Cth), s 21B / Customs Act 1901 (Cth), s 132, s 153 / Cadbury-Fry-Pascall Pty Ltd v Federal Commissioner of Taxation (1944) 70 CLR 362, considered / Cameron v Holt (1980) 142 CLR 342, considered / Chief Executive Officer of Customs v Tony Longo Pty Ltd (2001) 52 NSWLR 458, considered / Davies v Taylor (1996) 140 ALR 245, considered / Hookham v R (1994) 181 CLR 450, considered / Kanbur Pty Ltd v Adams (1984) 3 FCR 192, considered / Kimberly-Clark Ltd v Commissioner of Patents & Anor (1988) 84 ALR 685, considered / Main Electrical v Civil & Civic (1978) 19 SASR 34, considered / Malika v Stretton (2001) 204 CLR 290, considered / Mitty’s Newsagency v Registrar of Trade Marks (1983) 78 FLR 217, considered / Morton v Union Steamship Co of New Zealand Ltd (1951) 83 CLR 402, followed / R v Justices of the Peace at Yarram; ex parte Arnold [1964] VR 31, considered / Vickers v Young (1982) 65 FLR 260, considered / Wilson v Chambers & Co. Pty Ltd (1926) 38 CLR 131, considered / Wing On & Co. Ltd v Collector of Customs for New South Wales (1938) 60 CLR 97, considered

COUNSEL: A W Moynihan for the appellant/respondent / A J Rafter for the respondent/applicant/appellant

SOLICITORS: Legal Aid Queensland for the appellant/respondent / Commonwealth Director of Public Prosecutions for the respondent/applicant/appellant

1. McMURDO P: I have read the reasons for judgment of Holmes J in which the issues and facts are set out.

2. I agree with Holmes J's reasons for concluding that the respondent was liable to pay duty on the tobacco which he both manufactured and sold.

3. I also agree with Holmes J's reasons for concluding that a reparation order under s 21B Crimes Act 1914 (Cth) was able to be made in respect of either or both the offence of intentionally possessing excisable goods (tobacco) on which duty had not been paid under s 117(1) Excise Act 1901 (Cth) (count 2) and the offence of intentionally selling excisable goods (tobacco) on which duty had not been paid under s 117B(1) Excise Act 1901 (Cth) (count 3).

4. The magistrate, however, made the reparation order on the first count, intentionally manufacturing excisable goods (tobacco) under s 25(1) Excise Act 1901 (Cth), which, as Holmes J explains, cannot be said to give rise to any loss of duty. The magistrate therefore erred in imposing a reparation order on count 1. In determining whether to make a reparation order and the amount of any order under s 21B Crimes Act 1914 (Cth), a court has a discretion which must be exercised judicially.¹ Relevant factors include the means of the offender to pay the reparation order and other circumstances personal to the offender.² Slicer J in Davies v Taylor³ expressed the view that the exercise of discretion under s 21B Crimes Act 1914 (Cth) differs from that in imposing a penalty but does not equate simply with the ordinary principles of civil law. Circumstances such as complexity, suitability of civil proceedings, differing degrees of causative responsibility and absence of any utility in the making of an order, may be taken into account. Slicer J referred to Hookham v R⁴ and the observations of Brennan J⁵ (as he then was), Deane, Dawson and Gaudron JJ,⁶ and concluded "that the exercise of discretion is not wholly constrained. It permits limited regard to personal circumstances, efficacy of the order, relative causative effect on loss, the conduct of co-offenders and complexity. But its exercise is guided by an objective rather than a subjective approach to those circumstances."

[11] For the reasons given by Holmes J, there should be no order as to costs of the appeal.

[12] DAVIES JA: I agree with the reasons for judgment of Holmes J and with the orders she proposes.

[13] HOLMES J: The respondent, Seit Hamit Liaver, and his wife have been tobacco farmers near Mareeba for 30 years. They are licensed tobacco producers for the purposes of the Excise Act 1901, but they do not hold a licence to manufacture tobacco. On 28 November 2000 officers of the excise unit of the Australian Taxation Office executed a search warrant at their property.

Twenty-five kilograms of manufactured tobacco (which is known as “chop-chop”) were found. The respondent admitted that he had cut that tobacco and as much as another 150 kilograms in the same year. He had sold 60 or 70 kilograms of the “chop-chop” over the last couple of months at a price of $30 per kilogram. The discovery of the cut tobacco, and the respondent’s admissions led to the making of a complaint against him containing the following counts:

“1.Between the seventh day of September 2000 and the twenty-eighth day of November 2000 at Biboorah in the State of Queensland, SEIT HAMIT LIAVER did, contrary to Section 25(1) of the Excise Act 1901, intentionally manufacture excisable goods, namely tobacco, knowing the goods were excisable goods.

On the twenty-eighth day of November 2000 at Biboorah in the State of Queensland, SEIT HAMIT LIAVER did, contrary to Section 117(1) of the Excise Act 1901, without permission intentionally possess manufactured excisable goods on which duty had not been paid, namely 25 kilograms of tobacco, knowing the goods were excisable goods on which duty had not been paid.

Between the seventh day of September 2000 and the twenty-eighth day of November 2000 at Biboorah in the State of Queensland, SEIT HAMIT LIAVER did, contrary to Section 117B(1) of the Excise Act 1901, intentionally sell excisable goods, namely tobacco, on which duty had not been paid knowing the goods were excisable goods on which duty has not been paid.”

The Magistrate’s orders

[14] The respondent pleaded guilty in the Magistrates Court to each count, the prosecution and the defence having consented to having the matter dealt with by way of summary jurisdiction. Had the charges proceeded on indictment, in each case the maximum penalty available would have been

“Two years imprisonment or the greater of:

(a) 500 penalty units; and

(b)five times the amount of duty that would payable if the goods had been entered for home consumption on the penalty day”

but as the matters were dealt with summarily the maximum sentence available was, by virtue of s 4J(5), a sentence of imprisonment for a period not exceeding 12 months or a fine not exceeding 60 penalty units or both. However, s 21B of the Crimes Act 1914 also enabled the magistrate to make a reparation order in respect of any loss to the Commonwealth resulting from the offence. It is in the following terms:

“Reparation for offences

Where:

(a) a person is convicted of an offence against a law of the Commonwealth; or

(b) an order is made under section 19B in relation to a federal offence committed by a person;

the court may, in addition to the penalty, if any, imposed upon the person, order the offender:

(c) to make reparation to the Commonwealth or to a public authority under the Commonwealth, by way of money payment or otherwise, in respect of any loss suffered, or any expense incurred, by the Commonwealth or the authority, as the case may be, by reason of the offence; or

(d) to make reparation to any person, by way of money payment or otherwise, in respect of any loss suffered by the person as a direct result of the offence.”

[15] The respondent was sentenced to a period of imprisonment of three months but released forthwith on a recognizance in the sum of $2,000 to be of good behaviour for three years. The prosecutor submitted, and the magistrate accepted, that a reparation order should be made in the sum of $14,610.60, the amount of excise duty which would have been payable on 60 kilograms of tobacco if entered for home consumption; 60 kilograms being the lesser of the amounts which the respondent admitted having sold.

The appeal to the District Court

[16] The respondent appealed to the District Court against the making of the reparation order, arguing, firstly, that because he had never become liable to pay excise duty on the tobacco sold, the Commonwealth had not suffered a loss. That argument was based on the terms of s 54(1) of the Excise Act, which imposes the following requirement to pay excise duty:

“54 Liability to pay duty

(1) The licensed manufacturer of excisable goods, or, where the owner of excisable goods enters them for home consumption, the owner of the goods, shall pay to the Collector, in accordance with this Act, the Excise duty on those goods.”

Because the goods had not been entered for home consumption, it was contended, no obligation to pay excise duty arose, and it could not, therefore, be said that the Commonwealth had suffered a loss.

[17] The learned District Court judge rejected that argument, expressing the view that it was not necessary that the procedures prescribed in ss 58, 59,59A and 61C of the Excise Act be followed in order for entry for home consumption to have occurred. He found support, he said, for that view in the judgment of the Court of Appeal of New South Wales in Chief Executive Officer of Customs v Tony Longo Pty Ltd.⁸ Rather, he concluded, the respondent had entered the manufactured tobacco for home consumption when he sold it. Thus, if a reparation order were to be made it should have been made in respect of the third, rather than the first, count; but that was a matter which could readily be rectified.

[18] However, the learned judge accepted a second argument advanced for the respondent, that the Commonwealth had not suffered a loss “by reason of” the offences. That was, his Honour reasoned, because “the commission of the offences whilst giving rise to an obligation to pay duty did not of themselves cause the Commonwealth any loss.” It was the failure to pay duty (with which the respondent was not charged) which gave rise to the loss, not the manufacture, possession or sale of the goods. Because his Honour found in the respondent’s favour on this point, a third argument, that as an exercise of discretion the reparation order should not be made, was not considered. The appeal was upheld and the reparation order set aside.

The application for leave to appeal

[19] Here the applicant seeks leave to appeal from that decision, arguing that the learned judge erred by adopting too narrow a reading of the words “by reason of the offence” in s 21B. The respondent, on the other hand, sought to resist the application by arguing that his Honour’s construction and application of s 21B was correct, and further sought to support the result by contending that no liability to pay excise duty had arisen, because the goods were not entered for home consumption; and even if they were, that created only a liability to pay the excise duty, which did not become a loss to the Commonwealth in the absence of demand. Alternatively, any liability to pay duty arose by reason of failure to pay pursuant to s 54, not by reason of contravention of s 117B, which dealt with the unlawful sale of excisable goods. In any event, the magistrate had erred in the exercise of his sentencing discretion in imposing a reparation order or a reparation order requiring payment of such a large amount.

[20] Both counsel were content for the matter to be fully argued so that if leave were to be given the appeal itself could be dealt with.

Entry for home consumption

[21] Section 54(1) of the Excise Act, the terms of which have already been set out, identifies the licensed manufacturer as required to pay the duty on the goods, but the obligation becomes that of the goods’ owner where he or she enters them for home consumption. By virtue of s 58(1), entries for home consumption may be made by the licensed manufacturer or owner. The entry on being passed may authorise the removal of excisable goods for home consumption or removal to an approved place, but the goods remain subject to the CEO's control until delivered for home consumption or exportation (s 61). Section 61C(1) enables a Collector to give permission in writing for delivery for home consumption notwithstanding that no entry has been made and passed. By s 61C(2), goods delivered for home consumption by such authority are deemed to be entered for home consumption on the day they are delivered.

[22] It was common ground that the respondent had not made an entry for home consumption as prescribed by s 58 of the Excise Act. Nor was there any suggestion of delivery with a Collector’s authority under s 61C, giving rise to a deemed entry. That raised the questions of whether it could be said that the respondent had entered for home consumption in some other way than that contemplated by s 58 - as the applicant submitted, by sale of the goods – or, alternatively, whether liability was imposed on the respondent independently of s 54.

Was there an entry for home consumption for the purposes of s 54?

[23] Mr Rafter, for the applicant, submitted that the learned judge at first instance was correct in concluding that the term ‘enters them for home consumption’ did not require the following of the procedures in the Act and, as the learned judge did, placed reliance on Chief Executive Officer of Customs v. Tony Longo Pty Ltd.⁹ But that case, which dealt with provisions of the Customs Act 1901, was not concerned with what constituted entry of goods for home consumption, but rather with whether entry for home consumption was required in order to make goods dutiable. It turned on construction of s 132 of the Customs Act, which provided that the rate of import duty payable on goods was the rate in force when they were entered for home consumption.

[24] The argument for the defendant in Longo was that the effect of s 132 was to render the obligation to pay duty on goods dependent on their being entered for home consumption. As it had not made an entry for home consumption, it followed that there was no obligation to pay duty. Heydon JA, with whose judgment Mason P and Rolfe A-JA agreed, reviewed a line of High Court cases which in ratio or dicta supported the conclusion that goods became dutiable once imported. In Wing On & Co. Ltd v. Collector of Customs for New South Wales¹⁰ Starke J, sitting in the original jurisdiction of the High Court, rejected an argument that duties only became payable upon the entry of the goods for home consumption. He referred to the imposition of customs duties by the Customs Tariffs 1933, and to s 153 of the Customs Act which provides that

“All duties shall constitute Crown debts charged on the goods in respect of which the same are payable and payable by the owner of the goods and recoverable at any time in any court of competent jurisdiction by proceedings in the name of the collector.”

Thus, he reasoned, customs duties were charged on the goods and became due to the Crown immediately upon importation; and the Act prescribed that the duties were payable by the owner of the goods.

[25] The Full Court of the High Court in Wing On did not have to decide the point at which goods became dutiable, the issue then being solely whether a third party who acquired ownership of the goods was liable to pay duties. Latham C.J. characterised s 153 as operating to charge the duties on the goods as well as imposing a personal liability to pay the duty upon the owner. Rich J and Dixon J similarly regarded s 153 as significant in imposing a charge on the goods payable by the owner and those taking ownership from him, with the necessary inference that the duty was payable before as well as after entry for home consumption.

[26] In Wilson v Chambers & Co. Pty Ltd¹¹, another case considered at length by Heydon JA, the High Court accepted that duty was payable on importation of goods and, implicitly, that there was no requirement that they be entered for home consumption before any liability arose. There were dicta in Malika v Stretton¹² to the effect that s 153 of the Act entitled the Collector to recover duty immediately goods were imported. Consistently with the cases reviewed, the court in Longo concluded that the obligation to pay important duty was triggered by importation, not by entry of goods for home consumption. The principal reasons advanced for reaching that conclusion were that this construction was the one favoured by High Court authority, and that it reduced opportunities for escaping duty.

[27] There is nothing in Longo which would suggest that entry for home consumption can occur except as statutorily prescribed. The Excise Act in s 58(1A) prescribes what is required of an entry; it is quite clear that it is to be a written document in an approved form. The entry must, by s 58(1), be passed by an officer in order to authorise removal of the goods, so it is difficult to envisage how anything but a written entry could be contemplated. The single circumstance in which the Act provides for an entry to be deemed made is that of permission from a Collector to deliver for home consumption under s 61C. In the face of that specific provision the applicant’s argument that there is some general notion of entry by delivery becomes even less compelling.

[28] There is simply no warrant for treating goods as entered for home consumption when neither the requirements of s 58 nor the circumstances of s 61C have been met. The respondent did not in this case enter the goods for home consumption within the meaning of s 54(1). If the applicant has to rely on s 54 as imposing liability for duty on the respondent, it cannot succeed; he is not within the provision’s compass.

The imposition of liability for duty

[29] It is the Excise Tariff Act 1921, not the Excise Act 1901, which imposes liability for duty.¹³ Section 5 of the Excise Tariff Act imposes excise duties in accordance with the schedule to the Act. Such duties are to be charged, collected and paid on goods dutiable under the schedule, manufactured or produced in Australia. Duty is imposed on tobacco as article no 6 of the schedule. The Excise Tariff Act, like the Customs Tariff Act, does not explicitly provide who is liable to pay the duty but implicitly it is primarily the manufacturer or producer, like the importer under the Customs Tariff Act,¹⁴ who is liable. The Excise Act, which must be read as one with the Excise Tariff Act¹⁵, assumes a liability imposed by the Excise Tariff Act.

The Excise Act provisions: s 54 and s 161

[30] Certain provisions of the Excise Act identify persons other than the manufacturer and producer who are liable to duty. Section 161 of the Excise Act, a provision in identical terms to s 153 of the Customs Act (except that it commences ‘all excise duties’ rather than ‘all duties”) gives the duties priority as Crown debts charged on the goods, and renders them payable by the owner of them, but does nothing to displace the primary liability of the manufacturer or producer. In the circumstance where the manufacturer is licensed, s 54 has this effect: he will be relieved of the obligation to pay the duty if the owner of the goods enters them for home consumption.

[31] Both s 54 and s 161 are capable of being read as imposing liability to pay excise duty, but are more properly regarded as dealing with the liability already imposed by the Excise Tariff Act.¹⁶ Section 161 remained in the same form from the enactment of the Excise Act in 1901 until its repeal. Section 54, on the other hand, began its statutory life in the following terms:

“The manufacturer shall be liable to pay to the Collector the Excise duties on all excisable goods manufactured by him.”

[32] The section remained in that form in 1951, when it and s 161 of the Act were considered by the High Court in Morton v Union Steamship Co of NewZealandLtd.¹⁷ The issue in that case was whether reg 88 of the Excise Regulations 1925 was invalid. It imposed a liability for an amount equal to duty on excisable goods not safely kept or accounted for to the satisfaction of the Collector (later incorporated into the Act in the form of s 60(1)). The Court decided that the Regulation imposed a distinct and independent head of liability from those provided for in the Act. In the course of reaching that conclusion, it considered the operation of s 54 and s 161:

“Section 54, which is the first section in Part VI, makes the manufacturer liable to pay to the Collector the excise duty on all excisable goods manufactured by him. Section 161 makes excise duties Crown debts charged upon the goods in respect of which the same are payable and makes them payable by the owner of the goods and recoverable at any time in any court of competent jurisdiction by proceedings in the name of the Collector.” ¹⁸

The Regulation imposed an obligation to pay, not excise duty, but an amount equivalent

“so that the payment did not discharge the obligation of the manufacturer and the owner of the goods in respect of excise but left that liability outstanding.” ¹⁹

Concluding that the Regulation went beyond the statutory power to make regulations, the court observed:

“The Excise Act 1901-1949 has given specific attention to the question who shall be liable to pay excise duty and to the mode in which the excise duty shall be recovered and the occasion on which it shall be paid in the case of entry for consumption.”²⁰

From these passages I infer that the court regarded the two sections as making the duty payable by both owner and manufacturer; one section did not displace the attribution of liability by the other.

[33] By Act No. 55 of 1952 s 54 was repealed and replaced by the following:

“The manufacturer of excisable goods, or, where the owner of excisable goods enters them for home consumption, the owner of the goods, shall pay to the Collector, in accordance with this Act, the excise duty on those goods.”

The second reading speech for the Excise Bill 1952, delivered on 11 September 1952 explained the amendment:

“The act already provides that excisable goods may be entered through the customs of home consumption by either the manufacturer or the owner. The bill contemplates that the payment of the duty shall become the responsibility of the person who clears the goods. The manufacturer will, of course, still be responsible for the payment of duty on excisable goods whilst they are in his licensed factory.”

[34] What that passage conveys is that the 1952 amendment was intended to maintain a position in which the manufacturer while in possession of excisable goods was responsible for payment of duty up until the time of entry for home consumption. At that point the obligation to pay duty could shift from the manufacturer if he was not the person entering them for home consumption; but, of course, at all times from manufacture there existed a liability for duty.²¹

[35] In sum, the Excise Tariff Act imposes liability for excise duty on the manufacturer or producer of goods. Section 161 made the duties Crown debts and extended the collector’s ability to recover them by making them a charge on the goods and enabling recovery from the owner. Section 54 is not the source of liability to pay duty, but rather operates to reassign liability upon entry for home consumption. As Latham CJ noted in Cadbury-Fry-Pascall Pty Ltd v Federal Commissioner of Taxation:²²

"This practice [of imposing tax in one Act and providing for all other matters dealing with taxation in another Act] has been recognized by this Court as carrying out the constitutional provisions upon a correct basis. It has been held on several occasions that various Assessment Acts do not impose taxation, and it has been so held though such Acts contain provisions that a person should be liable to pay tax or be chargeable with tax."

[36] Apart from meeting constitutional requirements, this construction has this to recommend it: as in Longo it reduces opportunities for escaping duties. Indeed, if it were not the construction adopted, the odd effect would be produced that the offence under s 120(1)(iv), of evasion of duty which is payable, could not be committed unless the goods in question had first been entered for home consumption.

The repeal of s 161

[37] Mr Moynihan argued that the decision in Longo, in maintaining the position taken at first instance in Wing On, that entry for home consumption is not a pre-condition to dutiability, turned on the effect of s 153 of the Customs Act. Longo could be distinguished, he said, on this basis: s 161, its Excise Act equivalent, was repealed by the Taxation Laws Amendment (Excise Arrangements) Act2001, with effect from 4 May 2001. That Act, inter alia, transferred the general administration of excise legislation from the CEO of Customs to the Commissioner of Taxation, and thus brought the Excise Act within the meaning of ‘taxation law’ as defined in s 2 of the Taxation Administration Act 1953. Collection and recovery of excise now falls within Pt 4-15 of the latter Act. Section 250-10(2) provides that liability for excise becomes due and payable as specified by s 54 of the Excise Act. The amount of such liability is, by virtue of s 255-5, a debt due to the Commonwealth and payable to the Commissioner, and may be sued for in a court of competent jurisdiction. Unlike s 161, s 255-5 says nothing as to by whom the debt is payable.

The respondent is liable for duty

[38] Even if Mr Moynihan is correct as to the basis of the decision in Longo, his argument as to the effect of the repeal of s 161 encounters two obstacles. At the time of the commission of the offences in 2000, it remained in the Excise Act. If it required the respondent as owner to pay duty on the goods, its subsequent repeal would not affect that obligation. ²³ But more fundamentally, in this case excise duties were imposed on the tobacco, by virtue of s 5 of the Excise Tariff Act, from the time of its production or manufacture. The respondent, whether as manufacturer or owner, was liable to pay the duty from the time the tobacco was manufactured, notwithstanding that it never was entered for home consumption and regardless of whether demand for payment was made.

Did the Commonwealth suffer a loss “by reason of” the offences?

[39] Having concluded that the Excise Tariff Act imposed a liability for payment of duty on the respondent, the question which underlies the application for leave to appeal is reached: did the Commonwealth suffer a loss by reason of any of the offences he committed? That is to say, by reason of his manufacture of tobacco knowing it was excisable, or his possession of it, or his sale of it, with, as elements in the last two instances, the fact and knowledge that it comprised excisable goods on which duty had not been paid.

[40] Mr Rafter submitted that the learned judge at first instance was in error in considering that it was necessary for the purposes of applying s 21B that the offences “of themselves” caused the loss. He relied on Hookham v R²⁴ for the proposition that non-receipt of revenue resulting from commission of an offence was a loss suffered by the Commonwealth reparable pursuant to s 21B. The liability to pay duty having arisen, the manufacture, or alternatively the sale of the goods on which duty had not been paid, with knowledge that they were excisable goods on which duty had not been paid, was an offence by reason of which the Commonwealth suffered a loss.

[41] Mr Rafter also submitted, plainly correctly, that the learned judge at first instance had erred in saying in the course of his judgment that it was open to the magistrate to have dealt with the question of unpaid duty directly as part of the penalty imposed for the commission of the offences. That was not so, because the maximum penalty on summary conviction was that set out by s 4J(3)(a) of the Crimes Act, a maximum fine not exceeding 60 penalty units or 12 months imprisonment or both. However, it does not appear that the learned judge’s error in this regard could have had any bearing on his conclusion that the Commonwealth had not suffered a loss “by reason of” the offences.

[42] Mr Moynihan argued that there had been no loss to the Commonwealth. The situation was to be distinguished from that in Hookham²⁵ where the offence was failing to pay group tax and the

“Commonwealth suffered a loss by being deprived of money which it would have been paid had it not been for the commission of the offences in question”. ²⁶

Any loss, Mr Moynihan said, arose under the provision creating liability to pay, not pursuant to the offence provisions. Possession or sale of the goods did not produce any loss.

[43] Hookham, in my view, assists the applicant only to the extent of demonstrating that the relevant loss may be a loss to the revenue; there need not be an actual deprivation of property. In that case the offences which the appellant was deemed by virtue of s 8Y(1) of the Taxation**Administration Act 1953 to have committed were offences of failure to pay group tax deductions. There is little difficulty with the proposition that a failure to pay produces a loss.

[44] Davies v Taylor²⁷ was to similar effect. In that case the appellant was a director of a group employer which had failed to remit deductions, and was deemed by s 8Y to have committed the offences. He sought to argue that the real cause of the loss to the Commissioner of Taxation was the conduct of a banker, but for which the Commissioner would have been a priority creditor when the company went into receivership and would have been paid in full. Both at first instance and on appeal the argument was rejected, with the conclusion reached that the loss was occasioned each time the payments were not remitted. It was possible, Slicer J said, that there might be concurrent causes of the loss without altering the offender’s responsibility; but on the facts of that case the action of the bank was not concurrent but subsequent.

[45] The phrase “by reason of” has received consideration in other contexts. In Main**Electrical v Civil & Civic²⁸ one of the questions for the consideration of the South Australian Full Court was whether a dispute had arisen “by reason of” an order constituting an agreement between the parties. Bray CJ considered the meaning of the phrase:

“[It] implies a relationship of cause and effect between the terms and provisions of the contract and the claim in question, but it is a relationship which may be indirect (see The Diamond [1906] p 282 where damage caused by water to put out a fire was held to be damage “by reason of” fire) and one which may exist when the cause is only potential or hypothetical (see Reg. v Steel (1876) 1 QBD 482 where it was held that a statute giving a defendant acquitted of liable the right to recover his costs sustained “by reason of such … information” covered his costs incurred previously to the filing of the information).

[46] In Vickers v Young²⁹, involving construction of s 229A(2) of the Customs Act which applied to monies or goods which had come in to the possession or control of a person “by reason of” the commission of various offences, Morling J relied, inter**alia, on the passage above from Main Electrical Pty Ltd agreeing with the conclusion that the relationship of cause and effect implicit in the words “by reason of” need not be direct. The resulting construction, he said, promoted the purpose or object of the Customs Act and was to be preferred to the applicant’s, which did not.

[47] Kanbur Pty Ltd v Adams³⁰ was a decision concerning the same provision of the Customs Act. McGregor J concluded that a share certificate and a certificate of title were goods which had come into the second applicant’s possession or under his control “by reason of” his offending conduct:

“Possession or control need not, as I read the section, be the immediate result without intervening steps of the forbidden conduct – so long as it is ultimately achieved by reason of (as a result of) that conduct. If it is necessary to say so, the expression ‘by reason of’ envisages the possibility of and includes a more remote relationship or chain of causation between the conduct in par. (a) and the attaining of possession or control.” ³¹

[48] In Mitty’s Newsagency v Registrar of Trade Marks³², the relevant provision provided for an extension of time for objection to a trade mark where the failure to proceed was occasioned “by reason of” an error or omission on an individual’s part. Beaumont J adopted the meaning given to the expression in Main Electrical Pty Ltd and Vickers v Young. He also referred with approval to the conclusion of Sholl J in RvJustices of the Peace at Yarram; ex parte Arnold³³ that “by reason of” could extend to consequential matters. Those authorities were again applied by Jenkinson J in Kimberly-Clark Ltd v Commissioner of Patents & Anor³⁴, another trade mark case concerning the same provision.

[49] In all of the foregoing cases the expression “by reason of” was held, unsurprisingly, to require a cause and effect relationship, although there might be a number of steps along the way, and more than one cause might contribute. In the present case if there is a loss to the Commonwealth, it is of excise duty. It cannot be said that manufacture of excisable goods gives rise to any loss of duty; there is no cause and effect to be found there. Possession and sale do not of themselves give rise to a loss; but the offences of possession and sale of which the respondent was convicted also include the element of non-payment of duty. In each of the offences of possession and sale of excisable goods on which duty has not been paid, the gravamen is the non-payment of duty, just as in Cameron v Holt³⁵ the gravamen of the offence of presenting a document which was false in a particular was not the presentation, but the falsity.³⁶ In other words, it is not the possession or sale of tobacco which is at the heart of culpability; it is that duty has not been paid on that tobacco.

[50] It can, in my view, properly be said that possession by the respondent, a person liable to pay the duty, of excisable goods on which the duty was not paid caused a loss of that duty to the Commonwealth. Similarly, it can be said that sale of the goods by the respondent in circumstances in which duty clearly had not been paid gave rise to a loss. But since the reparation order was in fact made in respect of the amount of duty unpaid on the quantity sold – 60 kilograms – rather than on the amount in the possession of the respondent, of the two charges the reparation order would more appropriately be made in respect of the sale charge.

[51] The last argument against leave to appeal was that the magistrate erred in the exercise of his discretion to make the reparation order. In this respect, MrMoynihan submitted that the magistrate had not given sufficient weight to the respondent’s means and the actual benefit flowing from the offences to him. What was put in mitigation at first instance was that the respondent and his wife shared their tobacco farm with four children. Their annual farming income was less than $40,000. The respondent had received a return of about $1,800 from the sale of tobacco.

[52] The existence of those matters does no more than indicate that there were factors to be taken into account in the exercise of the discretion, and perhaps even that the discretion might differently have been exercised. It does not demonstrate that the magistrate failed to exercise it properly. The magistrate acknowledged the respondent’s circumstances in his sentencing remarks, observing that he was “the classic battling farmer”. Nonetheless, he said his view was that a reparation order should be made. There is nothing pointed to which shows that there was error in that exercise of discretion.

[53] The reparation order was properly made. I would allow the application for leave and the appeal, set aside the order of the District Court and reinstate the order of the magistrate for reparation in the sum of $14,610.60 with this variation, that it is made in respect of count three on the complaint.

[54] Mr Rafter at the beginning of the application indicated that since the chief aim of the appeal was the obtaining of clarification for the purposes of other excise prosecutions, the applicant would not seek costs against the respondent. Accordingly no order should be made as to costs.

Footnotes

1. See Murphy, Minister of State for Customs & Excise for the Commonwealth of Australia v H F Trading Co Pty Ltd (1973) 47 ALJR 198, Gibbs J (as he then was) at 201 and Vlahov v Commissioner of Taxation (1993) 26 ATR 49, Full Court of Western Australia, White J, Franklyn and Ipp JJ agreeing. ↩

2. Ibid. ↩

3. (1996) 140 ALR 245, 253. ↩

4. (1994) 181 CLR 450. ↩

5. At 456. ↩

6. At 460. ↩

7. (1996) 140 ALR 245, 254. ↩

8. (2001) 52 NSWLR 458. ↩

9. (2001) 52 NSWLR 458. ↩

10. (1938) 60 CLR 97. ↩

11. (1926) 38 CLR 131. ↩

12. (2001) 204 CLR 290 at 301, 313 & 325. ↩

13. This must be so; s 55 of the Commonwealth Constitution requires that laws imposing taxation deal only with the imposition of taxation. All other provisions relating to the duty are contained in the Excise Act. See Taxation (1944) 362 at 372 - 373; (1987) 163 CLR 329 at 341.