Supreme Court of WA|2001-03-26|Before: Mr P, Sperling J, Byrne J, Templeman J

Narelle Maree Walsh, Delegate of The Chief Executive Officer of Customs v N and M Gangemi Nominees Pty Ltd & Anor [2001] WASC 79 (26 March 2001)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : NARELLE MAREE WALSH, DELEGATE OF THE CHIEF EXECUTIVE OFFICER OF CUSTOMS -v- N AND M GANGEMI NOMINEES PTY LTD & ANOR [2001] WASC 79

BETWEEN : NARELLE MAREE WALSH, DELEGATE OF THE CHIEF EXECUTIVE OFFICER OF CUSTOMS

Primary industry - Taxes and duties - Diesel fuel rebates - Excise Act - Plea of guilty for multiple breaches of Excise Act - Imposition of penalties for illegally claiming diesel fuel rebates - Whether penalties agreed by the office of Customs and the defendant were appropriate and within the range imposed by Excise Act - Whether penalties agreed by parties should be fixed as the penalties of the Court

Comptroller-General of Customs v Kingswood Distillery Pty Ltd, unreported; SCt of NSW (Sperling J); 5 December 1997

Lanham v Brake (1983) 34 SASR 578

Bridal Fashions Pty Ltd v Controller-General of Customs (1996) 140 ALR 681

Comptroller-General of Customs v Jayakody, unreported; SCt of Vic (Byrne J); 9 November 1993

Comptroller-General of Customs v JCT Wong & Rizoli Pty Ltd [1998] NSWSC 711; (1998) 103 A Crim R 491

Evans v Button (1988) 92 FLR 203

Minister for Business and Consumer Affairs v Evans (1984) 54 ALR 128

Minister of State for Customs and Excise v Aunger Accessories Pty Ltd (1969) 16 FLR 94

Murphy v HF Trading Co (1973) 47 ALJR 198

Trade Practices Commission v Allied Mills Ltd [1981] FCA 142; (1981) ATPR 40-241

1 TEMPLEMAN J: I have before me a matter which started out as a contested action by the chief executive of the Office of Customs, against two defendants, N. and M. Gangemi Nominees Pty Ltd and Nino Gangemi. Nino Gangemi is a director of the first defendant. The action is concerned with offences under the Excise Act alleged to have been committed by the defendants. The matter has proceeded before me this morning on the basis of a statement of facts which has been formally agreed by counsel on behalf of the defendants.

2 That statement of facts will be on the court file and will form part of the Court record. It is not necessary for me to read it into these reasons. It is sufficient to say that the defendants were charged with breaches of the Excise Act arising from the use of diesel fuel in respect of which a rebate had been obtained, for purposes which were not permitted if rebated fuel were to be used. Essentially, the defendants were carrying on a farming operation and also a grain carting business using a semitrailer truck.

3 The farm business used diesel fuel which was eligible for the rebate. The trucking business used diesel fuel which was not eligible. Over a period of some 10 years the defendants claimed diesel fuel rebate for fuel which was used for trucking business. It has not been possible, because of the way the rebated and non-rebated fuels were mixed, to say precisely how much was used for each purpose. However, the parties have reached agreement by negotiation as to that: and the upshot of the agreement is that it is now admitted by the defendants that over the relevant period $53,675.46 worth of rebate was obtained when there was no entitlement to it.

4 I should say also that in addition to using the rebated fuel for ineligible purposes, the defendants were also charged with making false declarations to the authorities in relation to applications for fuel rebates.

5 The matter has proceeded by way of negotiation between the parties. The trial has not therefore proceeded because the defendants have, in effect, pleaded guilty to the offences, or some of the offences with which they were charged. The parties have also negotiated what they considered to be appropriate penalties.

6 The matter comes before me to fix the penalties. It is accepted by both parties that ultimately that is a matter for the Court. However, it is urged on me that I should accept the agreement that the parties have reached on the basis that what they have agreed between themselves is within the range of penalties imposed by the relevant legislation.

7 A number of things need to be said about that. The first is that in this unusual situation the claim for penalty under the legislation is a civil matter. That being so there would seem to be no reason why the ordinary principles should not apply in which the settlement of civil litigation between parties is very much encouraged. In various authorities to which I have been referred, and in particular Lanham v Brake (1983) 34 SASR 578 there have been various factors taken into account in relation to offences of this kind. These include the seriousness of the offence, the prevalence of the offence, the obvious difficulty of detecting the breaches, the consequent need to impose deterrent penalties, whether the offences were such as were permitted by persons of generally good character and the legislative policy embodied in the relevant decisions.

8 It is clear from the papers that I have, including proposed minute of order, and deed of agreement and charge, between the Australian Customs Service and the defendants, that a good deal of negotiation has gone into this proposed minute of order. I have no difficulty in making the assumption that all of these factors have been taken into account by the authorities, particularly having regard to the penalties which have been agreed, to which I will refer in a moment.

9 The factors do not directly refer to mitigating circumstances, although one of the matters which is properly taken into account is whether the offences were committed by persons of generally good character. However, the defendants were represented by counsel, and I have no reason to assume other than that any mitigating circumstances have properly been advanced on behalf of the defendants and have been taken into account in the settlement which has been reached.

10 Turning to the penalties which it is proposed, the total figure I am informed is an amount of $250,000. That is made up in this way: first, and quite properly, there is reparation to be made of the $53,675.46, being the rebate that was claimed when it should not have been. Clearly, the defendants have to pay that back. Then it is proposed that there be a fine imposed on the second defendant of $134,188.65. That is two and a half times the amount of rebate obtained by the contravention: and that is a figure which is one half of the maximum penalty which can be imposed for offences of this kind.

11 That figure is clearly within the range and it seems to me to be appropriate. This is a serious offence. It involves dishonesty on the part of the defendants. Although the offences involve a reversal of the normal onus of proof one can understand that that is not unreasonable in the circumstances because claims are made by individuals or companies and the authority has to rely on the honesty of the persons making the claims.

12 However, I can see that although the offences have been committed over a long period of time and must involve conscious dishonesty they are not the most serious of the kind that could be imagined. So, it seems to me, to impose one-half of the maximum penalty is, as I have said, not unreasonable.

13 In relation to the offences of making false declarations, of which there are 11 in number, the maximum penalty for each offence is $5000. What is proposed is that there be a penalty imposed for each offence of $1688, which is about one-third of the maximum penalty.

14 Again it must be borne in mind that we are here concerned with 11 offences, so that there are totality considerations to be taken into account. In those circumstances again it seems to me that the figure of $1688 for each offence is reasonable under the circumstances.

15 There is another factor which seems to me militates in favour of accepting the proposal put up by the parties, and that is this: it is clear from the deed of agreement and charge between the parties that provision has been made for payment over a period of the relevant penalties in a way in which those payments are secured from, amongst other things, the sale of land which is to be mortgaged, as I understand it, for the benefit of the customs service.

16 It follows that although the penalties will be paid over a period, the prospects of recovery in full are virtually guaranteed. If the matter had proceeded to trial and fines had been imposed then the result would not necessarily have been as satisfactory from the point of view of the customs service in relation to recovery.

17 It seems to me that there are strong public policy considerations which militate in favour of this kind of approach. In taking that view I note that it accords with the view taken by Sperling J in the common law division of the Supreme Court of New South Wales in an unreported decision, Comptroller-General of Customs v Kingswood Distillery Pty Ltd, unreported; SCt of NSW (Sperling J); 5 December 1997.

18 It seems to me that there is a public interest in settling the dispute and avoiding the need for complex litigation which this case would have involved: and in protecting the public as far as possible by ensuring that payment of the penalties are made.

19 It seems to me, as I have said, that the amounts of the penalty proposed are reasonable, as being within the range. And involving as they do a payment of something like four times the amount of the over-claim and rebate, it seems to me that the proper settlement achieves a satisfactory deterrent effect.

20 Persons who are tempted to commit this kind of offence in the light of knowledge that these sorts of penalties will be imposed, may well find in the future that higher penalties are imposed. But one would hope that the outcome of this case would achieve a sufficient level of publicity to bring the message home to potential offenders.

21 Given that the statement of facts is agreed it seems to me to be appropriate to make the declaration in terms of the minute of proposed orders. The only modification I would make to the order is to link the statement of facts to the minute so that the order does not appear to contain a declaration by consent which the Court could not make. Subject to that - and I will hear from counsel in a moment - I will make the orders contained in the proposed minute.

22 I should mention only one matter that I have overlooked, and that is that the $250,000 total includes an element of costs fixed at $25,000 which the defendants will pay to the plaintiffs.

Narelle Maree Walsh, Delegate of The Chief Executive Officer of Customs v N and M Gangemi Nominees Pty Ltd & Anor [2001] WASC 79

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Judgment (38 paragraphs)

Narelle Maree Walsh, Delegate of The Chief Executive Officer of Customs v N and M Gangemi Nominees Pty Ltd & Anor [2001] WASC 79 (26 March 2001)

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Cases Cited (7)