Zappia v Comptroller General of Customs

Statutory context 4 Cigarettes imported into Australia attract customs duty (Customs Tariff Act 1995 (Cth), ss 15, 16, 19AB, 19AC, Sch 3, Ch 24) and are "dutiable goods" within the definition of that expression in s 4(1) of the Customs Act. Pursuant to Item 1 in s 132AA(1) of the Customs Act, import duty must be paid at the time of entry of dutiable goods for home consumption. However, importers of dutiable goods are able to store them in bonded warehouses licensed under Pt V of the Customs Act and duty does not become payable until they are entered for home consumption: s 68, 99, 71C of the Customs Act; CEO of Customs v John Deere Limited (2006) 155 FCR 208 at 214, [17]. Whilst warehoused, imported cigarettes in respect of which duty has not yet been paid remain subject to "customs control": Customs Act, ss 30(1)(a)(vi) and 30(1B)(b). 5 Section 35A of the Customs Act, at the relevant time, provided: (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. … (2) An amount payable under subsection (1), (1A) or (1B) shall be a debt due to the Commonwealth and may be sued for and recovered in a court of competent jurisdiction by proceedings in the name of the Collector. … (4) This section does not affect the liability of a person arising under or by virtue of: (a) any other provision of this Act; or (b) a security given under this Act. 6 Section 37 provides: Accounting for goods A person accounts for goods or a part of goods to the satisfaction of a Collector in accordance with this section if, and only if: (a) the Collector sights the goods; or (b) if the Collector is unable to sight the goods - the person satisfies the Collector that the goods have been dealt with in accordance with this Act. 7 Section 36 of the Customs Act also makes it an offence for a person who has, or has been entrusted with, the possession, custody or control of dutiable goods which are subject to customs control to fail to keep the goods safely. Section 36 relevantly provides: (1) A person commits an offence if: (a) goods are subject to customs control; and (b) the person has, or has been entrusted with, the possession, custody or control of the goods; and (c) the person fails to keep the goods safely. Penalty: 500 penalty units. (2) A person commits an offence if: (a) goods are subject to customs control; and (b) the person has, or has been entrusted with, the possession, custody or control of the goods; and (c) the person fails to keep the goods safely. Penalty: 60 penalty units. 8 An offence against s 36(2) is an offence of strict liability: s 36(3).

Factual background 9 The underlying facts were essentially not in dispute and were set out by the Tribunal as follows: 10 The cigarettes in question had been held at a bonded warehouse at Smithfield, New South Wales operated by Zaps Transport (Aust) Pty Ltd ("Zaps" or "the company"). John Zappia, the applicant's father, was a director of the company at the time and Domenic Zappia was employed as the company's general manager. 11 Zaps held a warehouse licence issued under Pt V of the Customs Act, which authorised it to store tobacco and tobacco products, and other goods subject to customs control (other than petroleum and like products.) The licence included a condition that the company would inform the Australian Taxation Office (which administers the Customs Act) in writing of any other person "participating in the management or control of the warehouse" and the company had provided the names of both John and Domenic Zappia to the Australian Taxation Office. 12 Zaps had commercial arrangements with a number of companies that imported cigarettes, including with Richlands Express Pty Ltd ("Richlands"). Under the arrangement with Richlands, Zaps held a stock of cigarettes in its warehouse on an ongoing basis. On 15 April 2015, after there had been four thefts of cigarettes stored at the warehouse, the licence was varied by the CEO of Customs so as to withdraw Zaps' authority to store tobacco products there. Thereafter the only goods that Zaps was authorised to store at the warehouse pursuant to the licence were "goods subject to customs control being alcohol". Following the change to its licence, Zaps still held a quantity of cigarettes at the warehouse imported by Richlands. Zaps sought permission from Customs under s 71E of the Customs Act to move the Richlands' cigarettes to other licenced premises, but that permission was not given. In the meantime, Zaps was also negotiating with Richlands over Richlands' obligation (under commercial arrangements in place between Richlands and Zaps) to reimburse Zaps for liabilities that Zaps had already incurred in respect of prior thefts of Richlands' stock from the warehouse. Zaps was asserting a warehouseman's lien over the remaining Richlands' cigarettes. On 23 May 2015 there was a further break-in at the warehouse during which 400,000 of Richland's cigarette sticks were stolen. 13 On 27 August 2015 a Collector served a statutory demand under s 35A of the Customs Act on the company and upon each of John and Domenic Zappia for payment of the equivalent amount of duty payable on the stolen cigarettes. The amount demanded was $188,032. 14 The statement of facts and reasons attached to the demand made on Domenic Zappia recited that: 1. You are the general manager of [Zaps]. 2. Zaps operate a warehouse and storage enterprise located at 37-329 Woodpark Road Smithfield NSW 2164. 3. [Richlands] entrusted Zaps with tobacco or tobacco products for storage at their premises. 4. These tobacco or tobacco products were subject to the control of the CEO of Customs and were not duty paid. 5. As General Manager of Zaps, you are a person who has (or has been entrusted with) possession, custody or control over the goods stored at Zaps premises. 6. On 23 May 2015 a break-in and theft of 400,000 … cigarettes occurred at Zaps premises … 7. The cigarettes stolen on 23 May 2015 from Zaps premises were the goods owned and entrusted to Zaps by Richlands. You have failed to keep dutiable goods safely as required by paragraph 35A(1)(a) of the Customs Act … 15 The demands were challenged in the Tribunal and the applications were all unsuccessful. 16 This appeal from the Tribunal's decision is brought by Domenic Zappia alone: Zaps is in liquidation and John Zappia is a bankrupt.

The tribunal decision 17 The Tribunal found that the demands under s 35A(1) were all properly made. 18 The Tribunal first considered, and made a finding, that the cigarettes had not been kept safely. At [13]-[14] the Tribunal said: There is no doubt the goods in question were dutiable, and they were not kept safely. While I was provided with evidence about security measures that were implemented at the Zaps warehouse, those measures failed. In any event, nobody was able to account for the dutiable goods when called upon to do so. (An explanation of how one might account for the dutiable goods to the Collector of Customs is set out in s 37 of the Act. Suffice to say nobody did the things referred to in s 37.) Section 35A imposes strict liability. As the High Court explained in Collector of Customs for the State of New South Wales v Southern Shipping Company Limited [1962] HCA 20; (1962) 107 CLR 279, it makes no difference if the responsible person had taken reasonable steps to secure the goods. If something happened to the goods which results in a loss of duty, responsibility for that loss falls on the person or persons 'entrusted with...the possession, custody or control of excisable goods': per Dixon CJ at p 287. 19 The Tribunal then considered whether the each of the applicants was a person who, at the relevant time, had, or was entrusted with, the possession, custody or control of the cigarettes. 20 The Tribunal found that Zaps, as the licensee of the warehouse, had, and was entrusted with the possession, custody and control of the cigarettes at the time they were stolen. 21 At [26]-[29] the Tribunal considered and rejected an argument put on behalf of John and Domenic Zappia that s 35A(1) did not apply to them because Zaps held the warehouse licence and it was the contracting party with Richlands. The Tribunal reasoned at [29]: If the section had only referred to possession of the goods, it would be easier to see how the individual applicants could argue their involvement with the goods was purely in their capacity as corporate officers, so that the corporation alone was in possession. But the section casts the net wider to include those who might have custody or control. Corporate officers might exercise control in the relevant sense in the course of discharging their responsibilities. Whether a particular officer or employee exercises control in relation to goods in a given case will be a question of fact. 22 The Tribunal found that John Zappia, "as the person in charge", both "exercised control over the goods in the relevant sense" and "was entrusted with that control in his capacity as an officer of Zaps": at [30]. The basis for the conclusion (at [27] and [30]) that John Zappia was "the person in charge" is set out at [22]: John was a director of Zaps at all material times. It was clear from the oral evidence of John and Dominic that John was in overall command of the business. John approved the arrangement with Richlands, had overall direction of what happened with the goods, and demanded that the lien be asserted. 23 The Tribunal also found that Domenic Zappia had "exercised control" of the goods at the relevant time and held that s 35A(1) also applied to him. The Tribunal said at [31]: I am also satisfied Domenic exercised control over the goods, albeit that his control was subordinate to that of his father and - ultimately - that of the company. The evidence establishes that he was the one who directed what was to happen to the goods on a day-to-day basis. He exercised delegated authority under which he could accept and release the goods. If he gave orders with respect to the goods, the employees followed them. His operational role was underlined by the fact he met with the officers from the ATO on 25 May 2015 to discuss what had happened to the goods. 24 The relevant evidence relating to Domenic's role was earlier set out by the Tribunal at [23]-[26] as follows: Domenic was employed as a manager albeit that Zaps was, in effect, a family business. His role must be understood in the context of the relationship he had with John. Domenic did not simply report to John in the course of a master-servant relationship. John was Domenic's father, which makes for a much richer, more textured relationship. Domenic agreed in his oral evidence that he was employed to oversee operations at the warehouse. In the course of cross-examination, Domenic said he made the operational decisions at the warehouse, albeit that he delegated some matters to staff. Domenic said he attended to the documentation required for customs' purposes. He agreed he oversaw what happened to the goods and that he was responsible for what happened - although he added he was subject to the direction of his father. He initially said he was not responsible for communicating with the ATO. His father took care of most of that. Domenic subsequently agreed he did handle some of the paperwork and communications with the ATO, but insisted he did so at his father's direction. He also said he did not have any input into the decision to claim a warehousemen's lien over the goods. Domenic explained in his oral evidence that he was subordinate to his father in the business. Domenic said his father gave him operational control, but Domenic was required to refer anything 'big' - anything that might require legal advice or have tax implications - to his father for resolution. I note Domenic met with officers from the ATO on 25 May 2015 to discuss the break-ins that occurred. He represented the company without his father being present in those dealings. (transcript references omitted)

AMENDED NOTICE OF APPEAL 25 At the hearing, the applicant was granted leave to add four additional grounds to the notice of appeal in accordance with a proposed amended notice of appeal that had been filed and served on the Comptroller. Of the amended notice of appeal, grounds 1, 5, 6, 7, 8 and 10 were ultimately were not pressed. The remaining grounds are as follows: 2. The Tribunal should have held that within section 35A the Applicant was not as an employee was "a person who has, or has been entrusted with, the possession, custody or control of dutiable goods which are subject to customs control". 3. The Tribunal should have held that within section 35A the Applicant as an employee did not have the requisite possession, custody or control of dutiable goods which are subject to customs control. 4. The Tribunal should have held that within section 35A the Applicant as an employee was not entrusted with the requisite possession, custody or possession or control of dutiable goods. … 9. In considering the application of section 35A the Tribunal failed to take into account, and excluded from its consideration as relevant, the witness statement evidence, including the stated purposes of the Applicant, when his evidence was uncontested and relevant to a consideration of section 35A that the Applicant was in a master/servant or employer/employee relationship with Zaps Transport (Aust) Pty Ltd as his employer and John Zappia as a director of Zaps Transport (Aust) Pty Ltd. … 11. Having found that Zaps had the possession, the custody and the control of the goods and that it had been entrusted with the possession, the custody and the control of the goods, the Tribunal erred in law in finding that the Applicant had the control of the goods, for the reason that, on the proper construction of s. 35A(1), at any time only one person can have the control of the goods. 12. Having found that Zaps had the possession, the custody and the control of the goods and that it had been entrusted with the possession, the custody and the control of the goods, the Tribunal erred in law in finding that the Applicant had the control of the goods, for the reason that Zaps' possession of the goods had the consequence as a matter of law that the Applicant did not have control of the goods. 13. The Tribunal erred in law in finding the Applicant liable under s. 35A(1), for the reason that, as an employee of Zaps, he could not be liable under that provision unless a term of his contract of employment with Zaps provided that he had the possession, the custody and the control of the goods and/or that he was entrusted with the possession, the custody or the control of the goods but that, if a term of his contract of employment so provided, s. 326(1)(b) and (c) of the Fair Work Act 2009 (Cth) had the consequence that that term had no effect. (errors and emphasis original.)

Notice of contention 26 In addition to the grounds relied on by the Tribunal, the Comptroller contended that the decision should be affirmed on the ground that: Further or in the alternative to the Tribunal's finding at [31] that the Applicant exercised control over the Goods, the Tribunal also should have found that the Applicant: 1.1 was entrusted with control of the Goods; and 1.2 had, or had been entrusted with, the possession or custody of the Goods. 27 The Comptroller did not press a further ground which it was given leave to advance.

Grounds 2, 3, 4, 9, 11 and 12 of the appeal 28 These grounds can be considered together as they all relate to the proper construction of the phrase "the possession, custody or control" as used in s 35A(1).

The submissions 29 Senior counsel for the applicant argued that the proper reading of the phrase is "the possession, the custody or the control" as the definite article modifies each of the words. Further, it was said, the meaning and effect intended by the use of the definite article is that at any given time only one person can have, or be entrusted with, the possession or the custody or the control of the subject goods. It was argued that as "possession" imports control, a person in "the possession" of dutiable goods necessarily has "the control" of those goods and, as a result, another person cannot also have "the control" of those goods at the given time. In further support of this submission, senior counsel referred to the quasi-absolute nature of the liability that the section imposes on a person and argued that because the section imposes absolute liability on such persons, the legislature must have intended that there be no ambiguity as to the identity of the person on whom that liability is imposed. It was submitted that it followed as a matter of law from the finding of the Tribunal that Zaps was in possession of the dutiable goods at the relevant time that Domenic Zappia, as Zaps' employee, did not have "the control" of those goods in the relevant sense. A correlative argument was that Domenic Zappia, as an employee of Zaps, had the right and duty to do only that which his contract of employment required him to do and as a mere employee he did not have "the possession, custody or control" nor was he entrusted with "the possession, custody or control" of the cigarettes in question. 30 Senior counsel for the Comptroller argued that the meaning of the word "control" as used in the phrase is not informed or limited by the general law concept of "possession", as the words in the phrase are disjunctive and the section operates where a person has, or is entrusted with, either possession, or custody or control of the subject goods. It was further submitted that to come within the section, a person's "control" need not be exclusive or amount to "possession" or "custody" but, in each case, whether a person has "control" of dutiable goods is a question of fact. Senior counsel argued that the facts found by the Tribunal established that the applicant had "control" of the subject goods (at [31]) and as the Tribunal found that the goods were not kept safely (at [13]) the Tribunal correctly held that s 35A(1) applied to the applicant.

Consideration 31 The issue is the meaning of the word "control" read as part of the composite phrase "the possession, custody or control" appearing in the context of s 35A(1). Where a word forms part of a composite phrase, the approach to construction is to consider the meaning of the word by reference to its context in the composite phrase, not to look at the individual words in isolation from the other words in the phrase: Sea Shepherd Australia Ltd v Commissioner of Taxation [2013] FCAFC 68 at [34] per Gordon J (with whom Besanko J agreed). The construction contended by senior counsel for the applicant does not consider the meaning of "control" in the context of the phrase read as a whole, but focusses only on the meaning of the word "possession" without considering the disjunctive use of the word "control" included as part of the composite phrase. 32 The words "custody" or "control" can be used interchangeably as synonyms for the word "possession" (Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499 at 519 (Gibbs ACJ) ("Smorgon's case")) but each of the words has varying significations and they are not synonymous in meaning. Whilst "control" is an element of "possession" (Horsley v Phillips Fine Art Auctioneers Pty Limited [1995] NSWSC 78 at [69]-[70]; Hedberg v Woodhall (1913) 15 CLR 531; Smorgon's case at p 534 (per Mason J)), "possession", "custody" and "control" are all degrees of some right, power or authority to deal with the goods in question and, in the phrase, they are differentiated by the use of the disjunctive "or". The use of the disjunctive "or" indicates that the word "control" is not intended to bear the same connotation as "possession" or "custody" and that the section is intended to have application to persons wider than persons having (or entrusted with) "possession" or "custody". 33 In Smorgon's case the High Court considered the meaning of the composite phrase "in his custody or control" in the context of s 264(1)(b) of the Income Tax Assessment Act 1936 (Cth). Section 264(1)(b) entitled the Commissioner to require a person by notice in writing to produce all books and documents "in his custody or under his control" relating to the person's, or any other person's, income or assessment. In issue was whether documents which the taxpayers had placed into safe deposit boxes at a bank were in the bank's custody or under its control. The High Court held that the composite expression "in his custody or control" was concerned not with the legal relationship of the person to whom the notice is given to the documents required to be produced but with the ability of a person to produce the documents when requested and even though the bank had bound itself by contract to refrain from exercising the power, it nonetheless had the ability to produce the documents because it had the keys to open the boxes. In the oft cited passage at pp 532-4, Mason J said of the composite expression "in his custody or control" in the context of s 264(1)(b) of the Income Tax Assessment Act 1936 that: The primary definition of "custody" in the Shorter Oxford English Dictionary is "Safe keeping, protection; charge, care, guardianship"… The content of "control" is somewhat different from that of "custody"; however, both are "wide enough to include many types of possession which are not commensurate with full ownership" … Although the use of the composite expression "in his custody or under his control" does not assist us in determining the precise limits of the meaning of "control", it does evidence a legislative intention to employ the words in their widest sense. In the circumstances of this case where the Bank has the actual ability to open the boxes without damage to them, though contractually bound not to do so, and where no box can be opened without the Bank first providing access to it and a key, it is my opinion that the Bank does have "control" over the documents to a sufficient degree to come within the scope of that word as it is used in s. 264 (1) (b). There is to my mind no reason to limit the scope of "custody and control" to "exclusive custody and control"… Even the view that custody, or possession, must reside exclusively in one person at any given time (Paton, Bailment in the Common Law (1952), pp. 6-9) does not relieve the Bank from compliance with a lawful notice to produce documents under s. 264. Whether or not Professor Paton is right in his suggestion that on true analysis the bank in the Dollfus Mieg Case (1949) Ch 369 had exclusive possession yet Tripartite Commission retained control over the disposition of the gold bars, it seems clear that in that case, as in the present case, there was scope for the exercise of some "control" by both the bailor and bailee. In these circumstances the Bank falls, at the least, within the ambit of the exercise of "control" under s. 264 whether or not it also has possession or custody of the documents. 34 In Goben Pty Ltd v CEO of Customs (No 2) (1996) 68 FCR 301, Davies J cited this passage as authority that "possession, custody or control" for the purposes of that expression as used in s 33 of the Business Franchise Licences (Tobacco) Act 1987 (NSW) need not be exclusive. Senior counsel for the applicant contended that Goben was wrongly decided or distinguishable, arguing that the phrase under consideration in Smorgon's case omitted the word "possession". However, as stated, the applicant's construction does not give any work for the words "custody" or control" to do if the phrase is construed as the applicant contended. Furthermore, having regard to the object of s 35A as a section for the protection of the revenue (Collector of Customs (NSW) v Southern Shipping Company Limited (1962) 107 CLR 279 in respect of the cognate provision in s 60 of the Excise Act 1901-1952 (Cth)) there is not a compelling reason why the words in the composite phrase should be construed narrowly in the manner contended for the applicant. 35 The words of limitation appear not in the use of the definite article modifying the three words "possession, custody or control" (as contended by senior counsel for the applicant) but from the requirements of subparagraphs of s 35A(1), which must be met for liability to attach to a person under s 35A(1). Collector of Customs (NSW) v Southern Shipping Company Limited is authority that the word "fail" in the context of s 35A only requires proof that the person concerned has not kept the dutiable goods safely or accounted for them when requested and it is not necessary to show fault or neglect on that person's part for liability to attach under the section. Consistent with the statutory purpose, the section operates to place on a person an absolute duty to keep the goods safe from loss or destruction (short of an Act of God): Collector of Customs (NSW) v Southern Shipping Company Limited at 287. As Finkelstein J colourfully stated in Drew v Dibb (2008) 169 FCR 320 at [25] "short of showing that, say, Godzilla had stomped the warehouse, the respondents could not avoid liability for a failure to keep dutiable goods safe, no matter how many precautions they had taken in an attempt to safeguard the cigarettes". However, the (almost) absolute nature of the liability does not gainsay the need to show that the "control" exercised by a person must be such that it can be said that the person concerned "failed" to keep goods safely or to account for those goods to the Comptroller. The word "fails", in this context, connotes some omission on the part of the person concerned to keep the goods safe or to account to the Comptroller: Victoria v Commonwealth [1975] HCA 39; Collector of Customs (NSW) v Southern Shipping Company Limited. Although the word "fails" in the context of s 35A(1) does not import concepts of fault or default, for a person to "fail" to keep the goods safely or to account for those goods to the Comptroller in the relevant sense, the person must have some responsibility or obligation to do so. The "keeping safe" with which s 35A(1)(a) is concerned is ensuring that the goods do not get out of Customs' control into home consumption without payment of duty: Collector of Customs (NSW) v Southern Shipping Company Limited. The "accounting" with which s 35A(1)(b) is concerned is prescribed in s 37. A person accounts for goods to the satisfaction of a Collector in accordance with s 37 if the Collector sights the goods or, if the Collector is unable to sight the goods, the person satisfies the Collector that the goods have been dealt with in accordance with this Act. In either instance, it is not sufficient for liability to attach to the person under the section merely to inquire whether a person is exercising "control" over the goods, but it is also necessary to consider whether the control exercised by the person extends to control over the safe keeping of the goods or accounting for them as required by s 37 as a person does not "fail" to meet either of the requirements under s 35A(1)(a) or (b) unless either of those requirements are within the scope of the person's control. This construction is consistent with s 36 which makes non-compliance with the requirements an offence. 36 Whether a person has sufficient control to impute liability for failing to keep the dutiable goods safely or to account for those goods as requested by the Comptroller must depend on the facts in each case, and the answer in each case will depend on the measure of control exercised by the person over the dutiable goods. In an appropriate case the answer may be provided simply by pointing to the fact that the person was acting in his or her capacity as an employee at the time, and under the direction of someone else. But employment is not the test as to whether s 35A(1) does apply and I would not construe s 35A in a way that meant that an employee, acting lawfully, could never be liable under that section. Accordingly, I reject the submission that it must follow from the fact that Domenic Zappia was in an employment relationship with the company that s 35A cannot apply to him. 37 However, the Tribunal only decided the question as to whether Domenic Zappia had control over the goods. Whilst it made the finding that the goods had not been kept safely it did not relate that finding to the nature and degree of control exercised by Domenic Zappia over the goods. By only considering whether Domenic Zappia had control over the goods without also considering how the requirements of subparagraphs of s 35A(1) were engaged in relation to him, the Tribunal erred in law in its approach and did not apply the correct legal test. 38 Moreover, contrary to the Comptroller's submissions, the Tribunal was not bound to find that s 35A(1) applied to the applicant. The reasoning at [23]-[26] and [31] in relation to Domenic Zappia is expressed at such a level of generality that it is not at all clear as to what control Domenic Zappia actually had, or was entrusted with, in respect of the goods in question. The reasons do not elaborate on or explain the "operational control" exercised by Domenic Zappia in relation to the goods or in what respect he was subject to the direction of his father save that, according to Domenic Zappia, he had to consult his father on "anything 'big' - anything that might require legal advice or have tax implications". But because the Tribunal did not address the statutory question in its consideration of the evidence, the Tribunal's consideration of the evidence left open the question of whether the "operational control" exercised by Domenic Zappia was such that s 35A(1)(a) applies to him. 39 On this last point, ground 10 of the notice of appeal, which was ultimately not pressed by the applicant, was in terms that in the absence of a finding that the applicant failed to keep the dutiable goods safely or account for them to the satisfaction of the Collector the Tribunal erred in law in finding the applicant liable under s 35A(1). In answer to that ground of appeal, paragraph 2 of the Comptroller's notice of contention alleged that if the Tribunal did not find that the applicant failed to keep the dutiable goods safely or account for then to the satisfaction of the Collector, the Tribunal should have so found on the proper construction of the provision given its factual findings that: (a) Zaps operated a bonded warehouse in which the goods were stored: at [2], [9]; (b) the Applicant was a manager employed by Zaps who dealt with the day-to-day operations of the warehouse: [24]; (c) the goods were stolen from the warehouse: [9]; (d) the applicant oversaw what happened to the goods in the warehouse and was responsible for what happened to them, subject to the direction of his father: [24]; and (e) the applicant directed what was to happen to the goods on a day-to-day basis and exercised delegated authority under which he could accept and release the goods. 40 In the course of oral argument, senior counsel for the applicant accepted that "had the Tribunal addressed its mind to the issue it could have made a finding against the applicant as contended by the Comptroller" and, perhaps encouraged by the bench in light of that acknowledgment, did not pursue ground 10 with the consequence that the Comptroller did not pursue para 2 of his notice of contention. Had these matters been pursued, there would not, in any event, have been a different result on the appeal. The inquiry that the Tribunal engaged in about the control exercised by the applicant did not address the statutory requirements for the application of s 35A(1). All the Tribunal did was establish that the applicant exercised control over the goods but the Tribunal failed to consider whether the degree of control was sufficient to enliven subpara (a) in relation to the applicant. The findings made by the Tribunal do not compel a finding that subpara (a) was engaged in relation to the applicant as the Tribunal did not make an unqualified finding in relation to the control exercised by the applicant. 41 As the Tribunal did not address the correct statutory question and erred in law, the appeal should be allowed (though not for the reasons advanced on behalf of the applicant). As the findings do not enable a determination on the correct legal test, the matter should be remitted to the Tribunal for its reconsideration in accordance with the law.

Ground 13 of the appeal 42 I have had the benefit of reading the draft decision of White and Moshinsky JJ and agree with their conclusion and reasons on this ground.

Notice of contention 43 It is unnecessary to deal with the Notice of Contention in view of my conclusion that the Tribunal was not bound to find that s 35A(1) applied to the applicant based on the findings made.

conclusion 44 The appeal should be allowed and the matter remitted to the Tribunal for its reconsideration in accordance with the law. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies.

WHITE AND MOSHINSKY JJ: 45 The principal issue on this appeal on a question of law from the Administrative Appeals Tribunal (the Tribunal) is whether the general manager of a bonded warehouse is, when bonded goods have not been kept safely, liable pursuant to s 35A of the Customs Act 1901 (Cth) to pay to the Commonwealth an amount equal to the duty otherwise payable on those goods.

Background circumstances 46 Pursuant to Item 1 in s 132AA(1) of the Customs Act, import duty must be paid at the time of entry into Australia of "dutiable goods" for home consumption. However, importers of goods are able to store them in bonded warehouses licensed under Pt V of the Customs Act. One effect of imported goods being stored in a bonded warehouse is to defer the time at which the duty becomes payable - see ss 68, 71C and 99 of the Customs Act. The duty is payable when the goods are entered for home consumption and at the rate of duty then in force - see s 132 of the Customs Act and Chief Executive Officer of Customs v John Deere Ltd [2006] FCA 1280; (2006) 155 FCR 208 at [17]. By s 165 of the Customs Act, duties constitute debts payable by the owner of the goods and are recoverable in any court of competent jurisdiction. 47 By reason of ss 15, 16, 19AB, 19AC and Ch 24 of Sch 3 of the Customs Tariff Act 1995 (Cth), cigarettes imported into Australia attract customs duty and, accordingly, are "dutiable goods" as defined in s 4(1) of the Customs Act. 48 Zaps Transport (Aust) Pty Ltd (Zaps) operated a bonded warehouse (the Warehouse) in Western Sydney pursuant to Warehouse Licence No 6379 issued under Pt V of the Customs Act (Licence 6379). 49 At material times, John Zappia (John) was a director of Zaps. Zaps employed some 25 employees in the Warehouse, one of whom was his son Domenic Zappia (Domenic), who was the Warehouse manager. Zaps had provided the names of each of John and Domenic to the Australian Taxation Office (the ATO) in accordance with a condition of Licence 6379 which required it to inform the ATO of the persons "participating in the management or control of the warehouse". 50 In 2014 and early 2015, thieves broke into the Warehouse on several occasions and stole cigarettes stored there under bond. Subsequently, on 15 April 2015, the Chief Executive Officer of Customs (the CEO) varied Zaps' licence so as to withdraw its authority to store cigarettes in bond. The effect was that thereafter the only goods subject to customs control which Zaps could store at the Warehouse were alcohol products. 51 At the time of the variation, Zaps still held in the Warehouse a large number of cigarettes which had been imported by Richland Express Pty Ltd (Richland). Zaps sought permission from the CEO under s 71E of the Customs Act to move the Richland cigarettes to another licensed warehouse. After an initial refusal, permission to do so was granted on 27 May 2015. In the meantime, on 23 May 2015, another break-in occurred at the Warehouse and a large quantity of the Richland cigarettes (some 400,000) was stolen. 52 On 27 August 2015, the Comptroller General of Customs served notices of statutory demand on each of Zaps, John and Domenic under s 35A of the Customs Act. By those notices, the Comptroller General, relevantly, demanded payment of an amount equivalent to the customs duty which would have been payable on the stolen cigarettes. 53 Section 35A of the Customs Act, as in force at the time of service of the statutory notices, was as follows: 35A Amount payable for failure to keep dutiable goods safely etc. (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. (1A) Where: (a) dutiable goods subject to customs control are, in accordance with authority to deal or by authority of a permission given under section 71E, taken from a place for removal to another place; (b) the goods are not, or part of the goods is not, delivered to that other place; and (c) when so requested by a Collector, the person who made the entry or to whom the permission was given, as the case may be, does not account for the goods, or for that part of the goods, as the case may be, to the satisfaction of a Collector in accordance with section 37; the 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 the goods, or on that part of the goods, as the case may be, if they had been entered for home consumption on the day on which the demand was made. (1B) Where: (a) dutiable goods subject to customs control are, by authority of a permission given under section 71E, removed to a place other than a warehouse; and (b) the person to whom the permission was given fails to keep those goods safely or, when so requested by a Collector, does not account for the goods to the satisfaction of a Collector in accordance with section 37; the 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. (2) An amount payable under subsection (1), (1A) or (1B) shall be a debt due to the Commonwealth and may be sued for and recovered in a court of competent jurisdiction by proceedings in the name of the Collector. (3) In proceedings under the last preceding subsection, a statement or averment in the complaint, claim or declaration of the Collector is evidence of the matter or matters so stated or averred. (4) This section does not affect the liability of a person arising under or by virtue of: (a) any other provision of this Act; or (b) a security given under this Act. 54 The statutory notice issued to Domenic recited (relevantly) that the cigarettes stolen from the Warehouse were goods "entrusted" to Zaps by Richland; that Domenic was a person "who has (or has been entrusted with) possession, custody or control over the goods stored at Zaps premises"; that Domenic had failed to keep the cigarettes safely as required by s 35A(1)(a) of the Customs Act, and, accordingly, that Domenic was liable under s 35A of the Customs Act to pay to the Commonwealth an amount equivalent to the customs duty otherwise payable on the stolen cigarettes. The amount claimed in the statutory notice was $188,032.

The Tribunal decision 55 In the proceedings in the Tribunal, each of Zaps, John and Domenic sought review of the statutory notices, asserting that they were not liable under s 35A. 56 The Tribunal found that the statutory demands had been properly made and affirmed the decision to issue each demand: Zaps Transport (Aust) Pty Ltd, Domenic Zappia and John Zappia v Comptroller General of Customs [2017] AATA 202. The Tribunal reasoned as follows: (a) Zaps had been entrusted with possession, custody and control of the Richland cigarettes initially and continued to have possession, custody or control of them after the variation to Licence 6379 on 15 April 2015. It exercised (by its employees) physical control over the cigarettes in the Warehouse; it asserted that control against strangers; it kept the cigarettes under lock and key; and its relationship with Richlands in relation to the cigarettes continued, at [17]; (b) section 35A "operates as a drag-net" reflecting "an almost ruthless determination to protect the revenue" and encompasses those who "might have" custody or control of goods, at [29]; (c) officers of a corporation "might exercise control in the relevant sense in the course of discharging their responsibilities", at [29]; (d) "whether a particular officer or employee exercises control in relation to goods in a given case is a question of fact", at [29]; (e) John exercised control over the cigarettes in the relevant sense and had been entrusted with that control in his capacity as an officer of Zaps, because all of the evidence pointed to him having been "in charge", at [30]; (f) Domenic also exercised control over the cigarettes, at [31]. 57 The Tribunal explained its conclusion concerning Domenic as follows: [31] I am also satisfied Domenic exercised control over the goods, albeit that his control was subordinate to that of his father and - ultimately - that of the company. The evidence establishes that he was the one who directed what was to happen to the goods on a day-to-day basis. He exercised delegated authority under which he could accept and release the goods. If he gave orders with respect to the goods, the employees followed them. His operational role was underlined by the fact he met with the officers from the ATO on 25 May 2015 to discuss what had happened to the goods. 58 Earlier at [24]-[25], the Tribunal had referred to Domenic's evidence that he had been employed to "oversee operations" at the Warehouse; that he made the operational decisions at the Warehouse, although delegating some matters to staff; that he attended to the documentation required for customs purposes; that he oversaw what happened to the goods and that, subject to the direction of his father, he was responsible for what happened in the Warehouse; and that, while his father had given him operational control, he was required to refer anything "big" to him for resolution. 59 As can be seen, both the findings made in [31] of the Tribunal's reasons and the summary of his evidence are expressed at a level of generality and did not canvas in detail the obligations of Domenic under his contract of employment, nor the particular tasks which he in fact undertook in that employment. 60 The Tribunal member also considered that the fact that Domenic was John's son made for a "much richer, more textured relationship" than the usual employer/employee relationship, but did not indicate the conclusions he drew from the relationship having that character. 61 As can be seen, the Tribunal found that John both exercised control over the cigarettes and had been entrusted with that control, whereas in the case of Domenic, the Tribunal found only that he had exercised control. On the hearing of the appeal, the Comptroller General submitted that, when the Tribunal's reasons are read as a whole, it had also found that Domenic had been entrusted with that control. It is true that the Tribunal did at one stage indicate that it would consider whether both John and Domenic had been entrusted with the cigarettes, but it is plain that the finding in [31] was only that Domenic had control of them. In our opinion, the Tribunal's reasons cannot be reasonably understood as containing the additional finding for which the Comptroller General contended. 62 By the time of the Tribunal decision, John had become bankrupt and Zaps had commenced to be wound up. 63 Domenic now appeals pursuant to s 44 of the Administrative Appeals Tribunal Act 1976 (Cth) (the AAT Act) against the Tribunal decision on a number of grounds. Some of the grounds were abandoned during the course of the hearing of the appeal. Of those grounds which were pursued, most contend in one way or another that s 35A does not encompass employees of the person or entity to whom goods have been entrusted in a bonded warehouse and that Domenic was not, in any event, a person who had had control over the cigarettes. 64 By a Notice of Contention, the Comptroller General contends that the Tribunal should also have found that Domenic had been entrusted with the possession, custody or control of the cigarettes. Following Domenic's abandonment of Ground 10 in the Notice of Appeal, the Comptroller General did not pursue an additional contention that, if the Tribunal had not found that Domenic failed to keep the goods safely within the meaning of s 35A(1)(a), then such a finding should have been made given other factual findings made by the Tribunal.

Section 35A 65 Section 35A(1) was inserted into the Customs Act by the Customs Act 1957 (No 37 of 1957) (Cth). Subsections (1A) and (1B) were inserted by the Customs Act (No 2) 1968 (No 104 of 1968) (Cth). Some aspects of the application of subs (1) have been established by the authorities concerning it and its analogues. 66 The Customs Acts seeks (relevantly) to ensure that goods imported into Australia for home consumption are not released until the applicable duty has been paid, or at least secured: Goben Pty Ltd v The Chief Executive Officer of Customs (No 2) (1996) 68 FCR 301 (Goben) at 304. 67 Section 35A(1) is an element of the statutory scheme because it contemplates the imposition of a liability on any person who has the possession, custody or control of dutiable goods or who, even though not in the possession etc., has been entrusted with their possession, custody or control. It has been held to encompass warehouse licensees: Drew v Dibb [2008] FCA 1057; (2008) 169 FCR 320 at [8]-[9]. Subsections (1A) and (1B) are also elements of the statutory scheme because they permit a corresponding liability to be imposed on a person who is authorised to move dutiable goods subject to Customs control and on a person who is authorised to keep dutiable goods in a place other than a warehouse. 68 The liability contemplated by s 35A(1) may be imposed in six situations, namely, on a person who has the possession, or the custody or the control of goods, or who has been entrusted with the possession or the custody or the control of goods. 69 The safety with which s 35A(1) is concerned is not the protection of the goods from loss or damage but the ensuring that the goods do not get out of Customs control into home consumption without the payment of duty: Collector of Customs for the State of New South Wales v Southern Shipping Company Ltd (1962) 107 CLR 279 (Southern Shipping) at 296 (Taylor J), at 299 (Menzies J) and at 305 (Owen J) (in relation to s 60 of Excise Act 1901 (Cth), the terms of which are relevantly similar to s 35A). The obligation to keep dutiable goods safe while under Customs control imposed by s 35A(1) is effectively absolute in nature: Southern Shipping at 287 (Dixon CJ), at 290-1 (McTiernan J), at 299 (Menzies J) and at 305 (Owen J).

Issues of construction 70 Counsel for Domenic submitted that the Tribunal's finding at [16]-[19] that Zaps had possession, custody or control of the Richland cigarettes meant, as a matter of law, that Domenic could not simultaneously have had control of the cigarettes. This was said to be so because the possession contemplated by s 35A(1) necessarily includes control so that it was not possible for one person to have the control of goods at the time that those goods are in the possession of another. 71 In support of this submission, counsel referred to Hedberg v Woodhall (1913) 15 CLR 531 which concerned an offence of being in "possession or control" of undersized fish. The question in the case was whether the statute created two offences. The High Court held that the provision created only one offence, with Griffiths CJ (with whom Barton J agreed) saying at 535: A little consideration, however, will show that in substance there was only one charge, namely, having the fish in his control, with or without possession. For if the defendant had them in his possession, they were, necessarily, in his control. Possession is a larger term, and involves control; so that the charge of having in possession involves the charge of having in control. (Emphasis added) 72 Counsel submitted that, in the light of the Tribunal's finding that Zaps had possession of the Richland cigarettes, application of the principle in Hedberg v Woodhall should be dispositive of the present appeal. We would not accept that submission given the different text, context and purpose of s 35A in the Customs Act. Further, the decision in Hedberg v Woodhall may be explicable having regard to issue of possible duplicity of charges it involved. 73 Domenic's other principal submissions were, first, that possession in the relevant sense involves exclusivity so that it is not possible for two or more persons simultaneously to have possession (including control) of dutiable goods and that s 35A(1) does not, in any event, operate to impose a liability on an employee, even a senior employee, of the licensee of a bonded warehouse. 74 These submissions raise some difficult questions concerning the reach of s 35A(1) and the concepts of possession, custody and control which it employs. 75 The term "possession, custody or power" has been said to have a wide denotation: Goben at 306 (in relation to s 33 of the Business Franchise Licences (Tobacco) Act 1987 (NSW) (the Tobacco Act)). In ordinary usage "one has in one's possession whatever is, to one's knowledge, physically in one's custody or under one's physical control": Director of Public Prosecutions (Jamaica) v Brooks [1974] AC 862 at 866 (Lord Diplock) (cited by Gleeson CJ in Tabe v The Queen [2005] HCA 59; (2005) 225 CLR 418 at [7]); R v Boyesen (1892) 2 All ER 161 at 163 (Lord Scarman). In Momcilovic v The Queen [2011] HCA 34; (2011) 245 CLR 1 in a relation to an offence of possession of a drug of dependence, French CJ said at [16]: The Drugs Act does not otherwise define "possession", which therefore bears its ordinary meaning. To ascertain that meaning, however, is no ordinary task. The word "possession" embodies a "deceptively simple concept" which has never been completely logically and exhaustively defined and may vary according to its statutory context. It has been described as "always giving rise to trouble". Nevertheless, there are certain essential elements of the concept. Possession of a thing ordinarily involves physical custody or control of it. Possession has also long been recognised as importing a requirement, independent of common law mens rea, that the person in possession of something knows that he or she has it in his or her custody or control. (Citations omitted) 76 In relation to goods, a distinction is commonly drawn between actual or a de facto possession (which requires physical possession with knowledge) and legal possession (which may exist when a person does not have physical possession but has control over the goods). In Horsley v Phillips Fine Arts Auctioneers Pty Ltd [1995] NSWSC 78 at [70], Santow J referred to this distinction by reference to Words and Phrases Legally Defined (Butterworths, 1989, Third ed) at 389: The word "possession" may mean effective, physical or manual control, or occupation, evidenced by some outward act, sometimes called de facto possession or detention as distinct from a legal right to possession. This is as a question of fact rather than as of law. "Possession" may mean legal possession: that possession which is recognised and protected as such by law. The elements normally characteristic of legal possession are an intention of possessing together with that amount of occupational control of the entire subject matter on which it is practically capable and which is sufficient for practical purposes to exclude strangers from interfering. Thus, legal possession is ordinarily associated with de facto possession but legal possession may exist without de facto possession, and de facto possession is not always regarded as possession in law. 77 Thus, it is possible for a person to have actual possession of goods but not their legal possession. A person who has possession of goods unlawfully provides a ready example. 78 The expression "possession, custody or control" does not have a fixed meaning and so may vary according to the context in which it appears: Commissioner of Taxation (Cth) v Australian & New Zealand Banking Group Ltd (1979) 143 CLR 499 (Smorgon) at 520, 533. The sense in which the expression is used is to be determined having regard to the text, context and purpose of the statute in which it appears and by reference to the statutory policy: Australian Securities Commission v Dalleagles Pty Ltd (1992) 36 FCR 350 at 358-9 (French J). 79 The Macquarie Dictionary defines the noun "control" as (relevantly) "the act or power of controlling; regulation; domination or command". This suggests that, depending on context, control may be either physical (in the sense of actual physical control) or legal (in the sense of having power to control). 80 The concepts of "custody" and "control" were considered in Smorgon which concerned s 264(1) of the Income Tax Assessment Act 1936 (Cth). That section authorised the Commissioner to require an examinee to produce records "in his custody or under his control". The question in the case was whether documents placed by taxpayers into safety deposit boxes at a bank were in the custody or control of the bank and so liable to be produced to the Commissioner. At 532-3, Mason J appeared to reflect the distinction just referred to when he said: The primary definition of "custody" in the Shorter Oxford English Dictionary is "Safe keeping, protection; charge, care, guardianship". … The content of "control" is somewhat different from that of "custody"; however, both are "wide enough to include many types of possession which are not commensurate with full ownership" … It is difficult to ascribe a precise meaning to "control" in s 264 as the content of the word is normally dictated by its context and can vary from sole absolute dominion over the object "controlled" to "something weaker than 'restraint', something equivalent to 'regulation'" … Although the use of the composite expression "in his custody or under his control" does not assist us in determining the precise limits of the meaning of "control", it does evidence a legislative intention to employ the words in their wider sense. … There is to my mind no reason to limit the scope of "custody and control" to "exclusive custody and control". 81 In the present case, a number of features bear upon the proper construction and application of s 35A(1). The first is that its evident purpose is to provide some protection to the public revenue by permitting the Collector of Customs to recover the amount of lost duty from an identified class of persons. This factor, considered by itself, suggests that s 35A(1) should not be given a narrow construction. 82 Secondly, s 35A(1) is concerned with the possession, custody or control of goods and not of real estate. 83 Thirdly, the words "possession", "custody" and "control" are used disjunctively, thereby implying that a person may have either the possession or the custody or the control of goods. This may suggest that the terms "custody" and "control" are intended to encompass circumstances which are insufficient to amount to possession of goods. 84 Fourthly, by their very nature, there is some overlapping of the concepts. This may indicate that while the term possession is concerned with legal rights, the terms custody and control are more concerned with physical control. 85 Counsel emphasised the use in s 35A of the definitive article "the" before the words "possession, custody or control". This contrasted with the use of the indefinite article "a" before the word "person". He submitted that, in accordance with principle, the Court should strive to give effect to every word in s 35A(1): Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [71]. This included the word "the" before the expression "possession, custody or control". Counsel submitted that the appropriateness of applying this principle in the context in s 35A(1) is indicated by the fact that the provision has an intelligible (but seemingly different) meaning if the word "the" is disregarded. The effect, he submitted, was that while s 35A(1) could refer to more than one person, its operation was confined to a person who had the possession, the custody or the control, as the case may be. 86 There are aspects of the context in which s 35A(1) appears which support the applicant's contention. The Customs Act refers in several instances to "the" person who has possession of goods - see, s 30(1)(a)(iii) and (iv), s 30(1A)(a), s 36(4)(b), s 36(6)(b) and s 77EB(b) refers to "the" person in whose possession or under whose control the goods were at the time a detention order was given. In these provisions, the Customs Act seems to contemplate that there will be a single person in possession of dutiable goods at any one time or a single person who will have the requisite control. This does not preclude the circumstance in which two or more persons acting in concert may have possession or control, but circumstances of that kind may be put to one side for present purposes. 87 Further, s 36 of the Customs Act creates a number of offences arising from a failure to keep goods safely or to account to the Collector of Customs for them. Section 36(1) and (2) provide: Offences for failure to keep goods safely (1) A person commits an offence if: (a) goods are subject to customs control; and (b) the person has, or has been entrusted with, the possession, custody or control of the goods; and (c) the person fails to keep the goods safely. Penalty: 500 penalty units. (2) A person commits an offence if: (a) goods are subject to customs control; and (b) the person has, or has been entrusted with, the possession, custody or control of the goods; and (c) the person fails to keep the goods safely. Penalty: 60 penalty units. (3) An offence against subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. 88 As can be seen, the difference between the two offences is that subs (2) is an offence of strict liability whereas subs (1) is an offence containing a mental element. No doubt for this reason, the maximum penalty for a subs (1) offence is much greater than that prescribed for a subs (2) offence. 89 Of relevance for present purposes is that in creating criminal offences, s 36(1) and (2) use the same terminology appearing in s 35A(1) with, it may be inferred, the same meaning. Thus the meaning of the terms in s 36(1) and (2) may inform the meaning of the same terms in s 35A(1). This is so even though s 36(1) and (2) in their current form were inserted into the Customs Act in 2009, well after the enactment of s 35A(1): R v Seller [2013] NSWCCA 42; (2013) 273 FLR 155 at [100]. 90 In the criminal law, the concept of possession is usually understood as requiring exclusive possession. In Moors v Burke (1919) 26 CLR 265, the question was whether the defendant (a Customs officer) had "actual possession" of skeins of wool which he had placed in a locker to which at least one other Customs officer had access as of right. After referring to a number of the texts concerning the concept of possession, the High Court said (at 271): Possession is proved by various acts varying with the nature of the subject matter. But exclusiveness is essential. That, of course, does not mean that several persons may not in concert have and exercise that exclusive possession as against the rest of the world. (Emphasis added) Later, at 274, the Court said: "Having actual possession" means, in this enactment, simply having at the time, in actual fact and without the necessity of taking any further step, the complete present personal physical control of the property to the exclusion of others not acting in concert with the accused, and whether he has that control by having the property in his present manual custody, or by having it where he alone has the exclusive right or power to place his hands on it, and so have manual custody when he wishes. In its nature it corresponds to its companion expression "conveying", which necessarily involves instant personal physical control to the exclusion of others. These two expressions are obviously intended to cover the whole ground of actual personal control - that is, whether the property is kept stationary or is in motion. But it does not include the case of a person who has put the property out of his present manual custody and deposited it in a place where any other person independently of him has an equal right and power of getting it, and so may prevent the first from ever getting manual custody in the future. In that event the property is not his actual possession: it is where he may possibly reduce it again into actual possession, or, on the other hand, where the other person may himself reduce it into his actual exclusive possession. (Emphasis added) 91 The High Court held in Moors v Burke that the circumstance that another Customs officer had had equal access to the locker and the ability, independently of the defendant, to remove the wool meant that the defendant could not be said to have had exclusive possession of the wool. 92 The above passage from Moors v Burke has often been cited, including in contexts in which the word "possession" was not preceded by the adjective "actual": see, Pendlebury v Kakouris [1971] VR 177 at 181; Button v Cooper [1947] SASR 286 at 293; Perna v Police [2007] SASC 306, (2007) 99 SASR 151 at 154-5. Further, Moors v Burke was referred to with approval in He Kaw Teh v The Queen (1985) 157 CLR 523 at 538 (Gibbs CJ with whom Mason J agreed) and at 599-600 (Dawson J). 93 Other cases which have emphasised the element of exclusivity in the concept of possession include McCaskill v Marzo (1944) 46 WALR 64 at 71-2 (Wolff J); Yates v Hoare [1981] VR 1034 at 1038 (Kaye J). 94 Counsel for the Comptroller General submitted that the control to which s 35A(1) refers should not be understood as exclusive control because the provision itself contemplates concurrent control by another, namely, "customs control". The same argument seems to have been put in Goben. That case concerned s 33 the Tobacco Act which established a presumption that tobacco in a person's "possession, custody or control" which exceeded a prescribed quantity was so possessed for the purpose of sale as a wholesaler. The submission concerning the effect of customs control was rejected by Davies J who held, at 304, that the "control" of Customs authorised by the Customs Act was not the kind of possession, custody or control of goods in ordinary parlance but instead was the regime by which Customs ensured that goods imported for home consumption would not be released until the appropriate duty had been paid. We respectfully agree with Davies J on this issue and would apply the same reasoning with respect to s 35A. See also in this respect Kitano v The Queen (1974) 129 CLR 151 at 170 (Mason J). 95 It is convenient to address at this point a submission of Domenic that it is the Comptroller General who was exercising effective control of the cigarettes at the time of the theft on 23 May 2015. That control was said to arise from the Comptroller General's refusal at that time of permission to Zaps to remove the cigarettes to another bonded warehouse. In our view, that submission ought not be accepted, for similar reasons to those given in the preceding paragraph. The regime of control exercised by Customs in relation to dutiable goods is not to be equated with the "possession, custody or control" of the kind to which s 35A refers. 96 Counsel for Domenic recognised that understanding the concept of possession as involving an element of exclusivity may be inconsistent with the approach adopted by Davies J in Goben. Davies J had referred to the statement of Mason J in Smorgon that there was "no reason to limit the scope of 'custody and control' to 'exclusive custody and control'" and had treated that statement as also governing the position under the Tobacco Act. There may have been a basis on which this aspect of Smorgon could have been distinguished, as Smorgon was concerned with the production of documents to the Commissioner of Taxation, and not with a criminal offence. It is, however, not necessary to explore that issue further because, as noted above, the meaning of the term "possession, custody or control" is to be determined by its own statutory context, and Goben did not concern s 35A of the Customs Act. We would not regard Goben as standing against the conclusion that the possession to which s 35A refers is exclusive possession. 97 In our opinion, there are sufficient indications in the Customs Act, and in particular in the provisions to which we have referred, that the possession to which s 35A refers is possession which is exclusive of possession by others. The references to "the" possession, custody or control and to "the" person who is in the possession or control are strongly indicative that this is so. At the very least, there is ambiguity in this respect in s 35A(1) and that ambiguity should, in accordance with usual principle concerning the construction of penal provisions, be resolved by adopting the narrower construction: Beckwith v The Queen (1976) 135 CLR 569 at 576. 98 It would not be appropriate to reason that, because the term "possession" refers to possession which is exclusive of that of others, the terms "custody" and "control" in s 35A are confined in a similar way. It is possible that more than one person may have control of goods at any particular time. However, the fact that the legislature has chosen to confine those who have possession to those who have exclusive possession provides some support for the inference that s 35A selects for the burden it contemplates only those who have the control of the goods at material times, and not those who have only some control. 99 Another matter of context which appears to point to the same understanding is that it is reasonable to infer that s 35A(1) is directed to those persons who, by reason of their possession, custody or control of goods or who, by reason of having been entrusted with the possession, custody or control of goods, have the ability to keep those goods safely or, when so requested by a Collector, to account for the goods to the satisfaction of the Collector in accordance with s 37. Put negatively, it is not to be expected that s 35A(1) is intended to be a means by which a liability could be imposed on persons whose possession, custody or control of goods, or the extent of their entrustment with the goods, was insufficient to enable them to keep the goods safe or to account for them. This means that the kinds of omissions which may give rise to the liability for which s 35A(1) provides may assist in informing the identification of those who may be subject to its obligations. Although, as Finkelstein J noted in Drew v Dibb, s 35A is capable of producing unfair results, we consider it appropriate to understand it as directed to those who do have the capacity to keep the goods safe or to account for the goods to the satisfaction of a Collector when requested to do so. 100 As noted earlier, the keeping safe to which s 35A(1)(a) refers is the ensuring that the goods do not get out of Customs' control into home consumption without payment of duty. Section 37 provides for the way in which a person is to account for goods to the satisfaction of a Collector. It provides: 37 Accounting for goods A person accounts for goods or a part of goods to the satisfaction of a Collector in accordance with this section if, and only if: (a) the Collector sights the goods; or (b) if the Collector is unable to sight the goods - the person satisfies the Collector that the goods have been dealt with in accordance with this Act. In short, in order to account for the goods the person must be able to permit the Collector to sight the goods or to satisfy the Collector that the goods have been "dealt with" in accordance with the Customs Act. 101 There is a sense in which employees in a bonded warehouse may be understood to exercise at least physical control over bonded goods. Depending on their position in the employment hierarchy, they may make decisions about, and/or attend to, the location and disposition of the goods in the warehouse; the persons who may have access to the goods in the warehouse; and the protection of the goods while they remain in the warehouse. 102 However, in most cases, there will be limitations on the control able to be exercised by employees. They will not usually have control over situational matters such as the selection of the particular warehouse in which the goods are to be kept, the structure or the structural integrity of the warehouse, and the security and staffing arrangements within the warehouse. Further, employees are usually subject to the direction and control of their employer and so will not have freedom of action with respect to goods stored in a bonded warehouse. Further still, employees are present at their place of work only during working hours and do not usually exercise control at other times. 103 Having regard to these matters, it is easy to envisage circumstances in which employees, without any fault on their part, will not have the capacity to keep goods safe or to account for them in the required way. 104 The present case provides an illustration. On the Tribunal's findings, such control as Domenic exercised was subject to the direction and supervision of his father, John. His control was of the day-to-day kind relating broadly to "operational" matters. It was not suggested that his control extended to situational matters. In particular, it was not open to him to relocate the cigarettes in another warehouse. He had to comply with the instructions (whether explicit or implicit) from Zaps in that respect, those instructions no doubt having been influenced by the refusal of the Comptroller General to grant permission for the cigarettes to be relocated to another (and perhaps more secure) warehouse. Further, such control as the Tribunal found Domenic to have exercised appears to be no more than an exercise of his duties as manager. In discharging those duties, he was acting as the human agent of Zaps, and not in any sense on his own account. He was the instrument (or at least one of the instruments) by which Zaps discharged its responsibilities. 105 In our opinion, these are important aspects of the context in which the term "control" in s 35A is to be construed. They point against the term encompassing the kind of control exercised by employees. 106 Furthermore, s 35A was enacted in a context in which employees of an owner or licensee of goods were not generally regarded, when acting in their capacity as employees, as having possession of those goods. 107 In Pollock & Wright "An Essay on Possession in the Common Law" Clarendon Press, 1888, Pollock states at 58: [A] servant in charge of his master's property, or a person having the use of anything by the mere licence of the owner, as a guest has the use of the furniture and plate at an inn, generally has not possession. … One of the very few writers who have yet seriously and profitably discussed the English doctrine of Possession has thought the distinction between the custody of a servant and the possession of a bailee anomalous, and would find in it a survival of the ancient rule that a slave was incapable of acquiring or possessing anything unless as his master's instrument. It may be doubted whether personal servants were generally unfree men at the time when the common law of trespass was in the course of active formation: and something is to be said for the reasonableness of the existing rule apart from its history. We have pointed out in the Introduction that in a great number of common cases the servant may be said not even to have possession in fact, for he would not be supposed by any ordinary observer to have the physical custody of the thing otherwise than on his master's behalf and at his master's disposal. There has certainly been a good deal of fluctuation in the language of our books, and a servant has sometimes been allowed to sue in his own name for trespass of the goods of which he was in charge. (Emphasis added and citations omitted) 108 In Stephen's Digest of the Criminal Law, Macmillan, Fourth Edition, 1887, the author says at 222: A moveable thing is in the possession of … the master of any servant, who has the custody of it for him, and from whom he can take it at pleasure. 109 More modern discussions of the principle appear in Burnett v Randwick City Council [2006] NSWCA 196 at [89]-[97]; Anderson Group Pty Ltd v Tynan Motors Pty Ltd [2006] NSWCA 22, (2006) 65 NSWLR 400 at [42] and Horsley at [75]. See also Strange Investments (WA) Pty Ltd v Coretrack Ltd [2014] WASC 281; (2014) 107 IPR 102 at [77]. 110 In an analogous context in Burnett v Randwick City Council, Tobias JA held in relation to the concept of possession: [95] [T]o adopt and adapt the passage from Pollock & Wright (at 58) …, although a person may be in charge of a company's equipment and business (as the appellants were in the present case), like a person having the use of anything by the mere licence of the owner, such a person will generally not have possession. … [T]here was no evidence of any overt act of the corporate owner of the equipment by which the status of its possession or custody in the hands of the appellants changed from mere physical custody to a right to immediate possession in their personal capacities. [96] To hold otherwise would, in my view, pierce the corporate veil in a way that is impermissible. It is a truism to say that a company can only act through its officers and agents. An officer may well carry on the company's business and his or her decisions may control the manner in which the company's property is held, used, acquired or disposed of. However, this does not vest in that officer (including … even a managing director), with such control and dominion over the property of the company as to change the physical custody of that property from the possession of the company to the possession of the officer in the sense that that officer then has the immediate right to possession of, or the possessory title to, the company's property entitling him or her to sue for trespass or conversion in his or her own name. 111 This part of the context may support two inferences. First, that the term "possession" does not encompass the possession by an employee and, if that be so, it would be but a short step to conclude that nor does the term "control". Secondly, if the Parliament had intended s 35A to operate in relation to employees in a way which was different from conventional understanding, it is to be expected that it would have made that plain by express words, and it has not. 112 Accordingly, we regard these factors as pointing against an understanding that s 35A(1) refers to the possession, custody or control of employees. 113 Reference should be made in this context to the "document production" cases as they may be thought to indicate a contrary position. Smorgon and Dalleagles provide examples. As already seen, Smorgon involved a notice to a bank to produce documents held for customers in safe deposit boxes, pursuant to a power acquiring the production of documents by a person of documents "in his custody or under his control". Dalleagles concerned the production by a solicitor of documents for which legal professional privilege was claimed, pursuant to a power to compel production of documents in a person's "possession". Both the bank and the solicitor were held to have "custody or control" or "possession", as the case may be. 114 Taken at face value, these decisions could be said to support the view that s 35A(1) is also directed to the possession, custody or control of goods by an employee. We doubt that that is so. The production of documents cases may be distinguished because of their particular statutory context. This context was explained by Stephen J at first instance in Smorgon at 504-5: The section itself is concerned with the obtaining of information in both oral and in documentary form. When it deals with the latter it contemplates that those over whom the Commissioner may exercise his power will have documents available for production to him. The section is, then, not concerned with the legal description of the relationship of such a person to particular documents, whether it be ownership, possession, custody or something else, and this despite the fact that it is that relationship which accounts for his ability to produce those documents. Its concern is, rather, with the existence of that ability itself. See also Gibbs ACJ at 520 and Mason J at 534-5. 115 Section 35A, in contrast, is concerned with the relationship between the person and the goods because it contemplates implicitly that the person to whom it refers will stand in such a relationship to the goods and to a Collector of Customs that the person should be able to keep the goods safe and to account to the Collector for the goods in the manner contemplated by s 37. 116 In summary, we consider that a number of matters indicate that s 35A(1) is not to be understood as directed to the kind of control exercised by an employee of a licensed warehouse, acting in that capacity. Those matters include the fact that the term control appears to be used in the sense of physical control, the use of the definite article "the" indicates that s 35A refers to the person who has the control and not merely some control; that the control exercised by employees is not generally of that kind; and the improbability (in the absence of express words to that effect) that the statute would impose a liability on employees who act as no more than the human agent of those who do have the possession, custody or control of the bonded goods. 117 We are concerned that the approach we would adopt may be said to be different from that taken by the Tribunal in Re Australian Petroleum Supplies Pty Ltd and Givliano [2001] AATA 1050 at [94]-[118] in relation to s 60 of the Excise Act but note that the considerations to which we have referred above were either not applicable to s 60 or were not drawn to the Tribunal's attention. 118 The matter raised by the Comptroller General's Notice of Contention fails for the same reasons. 119 This means that the Tribunal has erred in law in its understanding of the meaning of the term "control". It determined the review adversely to Domenic even though he was an employee and even though he had incomplete control over the goods. An order should be made setting aside the decision of the AAT made on 17 February 2017 and setting aside the Statutory Demand of the Collector of Customs directed to Domenic dated 27 August 2015. 120 If that conclusion be wrong, we would still regard the Tribunal as having erred in law because of its failure to consider whether Domenic was exercising a form of control by which he could have kept the goods safely or have accounted for them within the meaning of s 35A(1). An error of this kind would require the matter to be remitted to the Tribunal for further consideration in accordance with the law but, for the reasons given above, that is not the course we consider appropriate.

Section 326(1) of the Fair Work Act 2009 (Cth) 121 It is appropriate to address one further submission advanced by Domenic. 122 By Ground 13 of the Amended Notice of Appeal, Domenic contended that the effect of s 326(1)(a) of the Fair Work Act 2009 (Cth) (the FW Act) was to preclude him, as an employee of Zaps, from being liable under s 35A(1). 123 Section 326 provides (relevantly): 326 Certain terms have no effect Unreasonable payments and deductions for benefit of employer (1) A term of a modern award, an enterprise agreement or a contract of employment has no effect to the extent that the term: (a) permits, or has the effect of permitting, an employer to deduct an amount from an amount that is payable to an employee in relation to the performance of work; or (b) requires, or has the effect of requiring, an employee to make a payment to an employer or another person; if either of the following apply: (c) the deduction or payment is: (i) directly or indirectly for the benefit of the employer, or a party related to the employer; and (ii) unreasonable in the circumstances; (d) if the employee is under 18 - the deduction or payment is not agreed to in writing by a parent or guardian of the employee. (2) The regulations may prescribe circumstances in which a deduction or payment referred to in subsection (1) is or is not reasonable. … 124 It was not suggested that any regulation made under s 326(2) was pertinent presently. 125 Domenic's argument was that he could be liable under s 35A(1) only if his contract of employment with Zaps contained a term providing either that he was entrusted with possession, custody and control of the Richland cigarettes or that he was to have possession, custody or control of the cigarettes. However, if his contract did contain such a term, it could not, by reason of s 326(1), have any effect. Domenic relied in particular on subs (1)(b) and (c). 126 When pressed to identify the term in the contact of employment on which s 326(1) was said to operate, Domenic's counsel said that it was a term that Domenic was, as general manager of Zaps, entrusted with possession, custody or control over goods stored in the Warehouse. 127 In our opinion, Domenic's submission based on s 326 cannot be sustained. 128 A principal difficulty with this submission is that Domenic did not advance the argument in the Tribunal. There was accordingly no examination in the Tribunal of Domenic's contract of employment, let alone of its terms, and the Tribunal did not make any findings about those matters. The evidence in the Tribunal did not even disclose whether Domenic's contract was in writing or oral, or partly oral and partly in writing. The Tribunal was not asked to make findings about the presence of any implied terms in the contract. 129 An appeal to this Court from a decision of the Tribunal lies (relevantly) only on a question of law: AAT Act, s 44(1); Haritos v Federal Commissioner of Taxation [2015] FCAFC 92, (2015) 233 FCR 315 at [62]. The principles relating to the raising of a new point on appeal apply as much to appeals pursuant to s 44(1) as they do more generally. The principle is that stated by the plurality in Water Board v Moustakas (1987) 180 CLR 491 (Moustakas) at 497: [A] point cannot be raised for the first time upon appeal when it could possibly have been met by calling evidence below. Where all the facts have been established beyond controversy or where the point is one of construction or of law, then a Court of Appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied. (Citations omitted) 130 In Repatriation Commissioner v Warren [2008] FCAFC 64; (2008) 167 FCR 511 at [78], Lindgren and Bennett JJ (with whose reasons Logan J agreed on this point) addressed the application of the Moustakas principle in relation to an appeal under s 44(1), at [78]: The Court will more readily permit a matter to be raised for the first time in this Court on an appeal from a tribunal where: (a) the matter is a pure question of law, such as a question as to the validity of a regulation … or a question as to whether the tribunal has applied the correct standard of proof on the true construction and application of legislation …; (b) the matter goes to a misapprehension that was shared by the parties before the tribunal and therefore by the tribunal itself … such as a shared misapprehension as to the applicable law …; or (c) the matter goes to a condition precedent to the availability of a power, the exercise of which will have a serious impact on the individual … (Citations omitted) 131 This statement has been cited with approval in later cases: Hussain v Minister for Foreign Affairs [2008] FCAFC 128, (2008) 169 FCR 241 at [40]; Culley v Australian Securities and Investments Commission [2010] FCAFC 43, (2010) 183 FCR 279 at [16]; Ward v Commissioner of Taxation [2016] FCAFC 132, (2016) 153 ALD 433 at [30]; Batchelor v Commissioner of Taxation [2014] FCAFC 413, (2014) 219 FCR 453 at [91]. 132 None of the circumstances described in Warren exist in the present case. Instead, the absence of evidence and findings of fact by the Tribunal is an insurmountable problem for the present submission of Domenic. The Court can do no more than speculate as to the terms of the contract of employment, but this much can be said. While it is theoretically possible that Domenic's contract contained an express term to the effect for which he now contends, it is a term of such an unusual kind that a court or tribunal would require direct evidence before making a finding to that effect. The term is not of the kind which would be implied as a matter of law. Nor could this Court hold that the postulated term is of a kind which was necessarily implicit in Domenic's contract, so that it could be taken to have been implied as a matter of fact: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 422-3. The Court would at the least need to know all of the relevant matters bearing upon the terms of Domenic's contract of employment with Zaps before being able to make a finding that the postulated term was included as one of them. 133 Domenic's counsel sought to overcome these difficulties by submitting that the postulated term must have formed part of Domenic's contract of employment because otherwise he would have been a "trespasser" in the Warehouse and a "trespasser" in relation to the cigarettes. In our view, ordinary logic tells against this submission. Other terms in Domenic's contract could have avoided these suggested problems. For example, a term to the effect that Domenic was to exercise oversight and supervision of the activities within the Warehouse would have meant that he would not be a trespasser in the Warehouse and would not be a "trespasser" in relation to the cigarettes. 134 Accordingly, we consider that it is not now open for Domenic to advance the submission based on s 326(1) of the FW Act. 135 There are other difficulties with the submission. The term for which Domenic contends would not, in the terms of s 326(1)(b), require him to make any payment at all. It is also to be doubted that the postulated term could be said to have the effect of requiring Domenic to make any payment. One would not wish to exclude altogether the possibility that there may be circumstances in which a term of a contract of employment is crafted so as to make an employee liable to discharge an obligation imposed by statute. However, the difficulty for Domenic's present contention is that the postulated term does not require any payment at all: such a liability arises on a demand being made pursuant to s 35A(1) and then only on satisfaction of the conditions to which it refers. Only one of those conditions is that the person to whom the demand is made either have possession, custody or control of the goods in question or have been entrusted with that possession, custody or control. 136 Next, Domenic's submission depends on the postulated term requiring a payment which is directly or indirectly "for the benefit" of Zaps. Domenic submitted that this condition would be satisfied because his payment would discharge the liability of Zaps pursuant to the statutory demand served on it. The correctness of that submission turns on the proper construction of the expression "directly or indirectly for the benefit of the employer" in subs (1)(c)(i). One cannot discount entirely a construction of that expression which would have it refer the payments which, when made, operate indirectly for the benefit of an employer. However, the expression may also refer to the purpose of the payment, that is, to payments which are made in order to benefit the employer, directly or indirectly. As it is not necessary for the determination of the present appeal to express a final view about this construction, we consider it preferable that consideration of the point be deferred until the occasion arises and when the Court has had the benefit of full argument. 137 In our view, the ground of appeal based on s 326(1) of the FW Act fails.

Conclusion 138 For the reasons given above, we would allow the appeal and would set aside the order made by the Tribunal. We would substitute an order that the Statutory Demand dated 27 August 2015 served by the respondent on the applicant is invalid and of no effect. I certify that the preceding ninety-four (94) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices White and Moshinsky.