Chief Executive Officer of Customs BY Robert Harry Wales, His Duly Authorised Delegate v Corniche Motors Pty Ltd
[2006] WASC 280
CHIEF EXECUTIVE OFFICER OF CUSTOMS BY ROBERT HARRY WALES, HIS DULY AUTHORISED DELEGATE -v- CORNICHE MOTORS PTY LTD & ORS [2006] WASC 280
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 280 | |
| Case No: | CIV:1255/2001 | 16 NOVEMBER 2005 | |
| Coram: | JOHNSON J | 11/12/06 | |
| 27 | Judgment Part: | 1 of 1 | |
| Result: | Convictions and declarations by consent Pecuniary penalties imposed | ||
| B | |||
| PDF Version |
| Parties: | CHIEF EXECUTIVE OFFICER OF CUSTOMS BY ROBERT HARRY WALES, HIS DULY AUTHORISED DELEGATE CORNICHE MOTORS PTY LTD JONVIE PTY LTD JEFFREY GORDON CARGER HARRY JONES |
Catchwords: | Customs Customs prosecution under Customs Act 1901 (Cth) Evasion of duty False statements Smuggling "Settlement agreement" Convictions and declarations by consent Agreed penalty in full and final satisfaction of penalty imposed by Court Appropriate penalties |
Legislation: | Crimes Act 1914 (Cth), s 16A Customs Act 1901 (Cth), s 153, s 233(1)(a), s 233(1AA), s 233AB(1), s 234(1)(a), s 234(1)(d), s 234(2)(a), s 234(2)(c), s 234(3), s 247 |
Case References: | Chief Executive Officer of Customs v Corniche Motors Pty Ltd & Ors [2003] WASC 244 Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 Chief Executive Officer of Customs v Mak & Anor [2002] WASC 235 Chief Executive Officer of Customs v Red Dale Holdings Pty Ltd & Ors [2004] WASC 141 Comptroller-General of Customs v Kingswood Distillery Pty Ltd, unreported; NSWSC; Library No 60385/94; 5 December 1997 Goulding v Penello (1999) 43 ATR 179 L Vogel & Son Pty Ltd & Anor v Anderson (1968) 120 CLR 157 Trade Practices Commission v Allied Mills Industries Pty Ltd (1981) 37 ALR 256 Chief Executive Officer of Customs v Coflexip Stena Offshore International SA & Ors [2001] WASC 346 Chief Executive Officer of Customs v Owens International Freight (Australia) Pty Ltd & Ors (2002) 50 ATR 229 Chief Executive Officer of Customs v Ozzy Tyre & Tube Pty Ltd & Anor [2005] NSWSC 948 Chief Executive Officer of Customs v Pavlovich (2001) 47 ATR 402 Comptroller-General of Customs v Jayakody, unreported; SCt of Vic (Byrne J); 13 December 1993 Comptroller-General of Customs v JCT Wong & Rizoli Pty Ltd (1998) 103 A Crim R 491 Hayes v Weller (No 2) (1988) 50 SASR 182 Lanham v Brake (1983) 52 ALR 351 Minister for Customs & Excise v Aunger Accessories Pty Ltd [1969] 5 ASR 441 Murphy v HF Trading Co (1973) 47 ALJR 198 Walsh v N & M Gangemi Nominees Pty Ltd & Anor [2001] WASC 79 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
CORNICHE MOTORS PTY LTD
First Defendant
JONVIE PTY LTD
Second Defendant
JEFFREY GORDON CARGER
Third Defendant
HARRY JONES
Fourth Defendant
(Page 2)
Catchwords:
Customs - Customs prosecution under Customs Act 1901 (Cth) - Evasion of duty - False statements - Smuggling - "Settlement agreement" - Convictions and declarations by consent - Agreed penalty in full and final satisfaction of penalty imposed by Court - Appropriate penalties
Legislation:
Crimes Act 1914 (Cth), s 16A
Customs Act 1901 (Cth), s 153, s 233(1)(a), s 233(1AA), s 233AB(1), s 234(1)(a), s 234(1)(d), s 234(2)(a), s 234(2)(c), s 234(3), s 247
Result:
Convictions and declarations by consent
Pecuniary penalties imposed
Category: B
Representation:
Counsel:
Plaintiff : Ms W EndebrockBrown
First Defendant : Mr C E Chenu
Second Defendant : Mr C E Chenu
Third Defendant : Mr C E Chenu
Fourth Defendant : Mr C E Chenu
Solicitors:
Plaintiff : Australian Government Solicitor
First Defendant : Durack & Zilko
Second Defendant : Durack & Zilko
Third Defendant : Durack & Zilko
Fourth Defendant : Durack & Zilko
(Page 3)
Case(s) referred to in judgment(s):
Chief Executive Officer of Customs v Corniche Motors Pty Ltd & Ors [2003] WASC 244
Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161
Chief Executive Officer of Customs v Mak & Anor [2002] WASC 235
Chief Executive Officer of Customs v Red Dale Holdings Pty Ltd & Ors [2004] WASC 141
Comptroller-General of Customs v Kingswood Distillery Pty Ltd, unreported; NSWSC; Library No 60385/94; 5 December 1997
Goulding v Penello (1999) 43 ATR 179
L Vogel & Son Pty Ltd & Anor v Anderson (1968) 120 CLR 157
Trade Practices Commission v Allied Mills Industries Pty Ltd (1981) 37 ALR 256
Case(s) also cited:
Chief Executive Officer of Customs v Coflexip Stena Offshore International SA & Ors [2001] WASC 346
Chief Executive Officer of Customs v Owens International Freight (Australia) Pty Ltd & Ors (2002) 50 ATR 229
Chief Executive Officer of Customs v Ozzy Tyre & Tube Pty Ltd & Anor [2005] NSWSC 948
Chief Executive Officer of Customs v Pavlovich (2001) 47 ATR 402
Comptroller-General of Customs v Jayakody, unreported; SCt of Vic (Byrne J); 13 December 1993
Comptroller-General of Customs v JCT Wong & Rizoli Pty Ltd (1998) 103 A Crim R 491
Hayes v Weller (No 2) (1988) 50 SASR 182
Lanham v Brake (1983) 52 ALR 351
Minister for Customs & Excise v Aunger Accessories Pty Ltd [1969] 5 ASR 441
Murphy v HF Trading Co (1973) 47 ALJR 198
Walsh v N & M Gangemi Nominees Pty Ltd & Anor [2001] WASC 79
(Page 4)
1 JOHNSON J: This action, brought by the Chief Executive Officer of Customs by his authorised delegate ("Customs"), was commenced by writ of summons seeking declarations and convictions against the first to fourth defendants in respect of contraventions of s 233(1)(a), s 234(1)(a) and s 234(1)(d) of the Customs Act 1901 (Cth) ("the Customs Act"). The writ further seeks the repayment of unpaid duty under s 153 of the Customs Act in respect of the goods involved in the contraventions of the Customs Act.
2 In November 2002, Customs and the second and fourth defendants, Jonvie Pty Ltd ("Jonvie") and Harry Jones ("Jones"), agreed to resolve the action as between those parties in the manner set out in a Minute of Consent Orders dated 9 May 2003. The chamber summons for consent orders was heard by Barker J and the action against Jonvie and Jones concluded by judgment delivered on 9 December 2003: Chief Executive Officer of Customs v Corniche Motors Pty Ltd & Ors [2003] WASC 244.
3 The action against the first defendant, Corniche Motors Pty Ltd ("Corniche") and the third defendant, Jeffrey Gordon Carger ("Carger") remained on foot and on 16 February 2005 was listed for trial on 9 March 2005.
4 On 25 February 2005, Customs, Corniche and Carger agreed to resolve the action in the manner set out in a Minute of Consent Orders dated 19 October 2005 ("the Minute") and the matter was brought before me by chambers summons on 16 November 2005. In addition to the declarations and orders of conviction and for payment of unpaid duty in the amounts agreed upon and identified in the Minute, Customs also seeks orders imposing penalties on Corniche and Carger in respect of the various contraventions of the Act.
5 The effect of the Minute is as follows:
(1) To convict Corniche of -
(a) 18 counts of intentionally making a false statement contrary to s 234(1)(d) of the Customs Act;
(b) 18 counts of evading payment of duty contrary to s 234(1)(a) of the Customs Act;
(c) 18 counts of smuggling contrary to s 233(1)(a) of the Customs Act;
(a) 24 counts of making a false statement contrary to s 234(1)(d) of the Customs Act;
- (b) 24 counts of evading payment of duty contrary to s 234(1)(a) of the Customs Act;
(c) 24 counts of smuggling contrary to s 233(1)(a) of the Customs Act;
- (3) To order Corniche and Carger to pay penalties in relation to the offences committed as determined by this Court;
(4) To order Corniche and Carger to pay unpaid duty in the amount of $20,078.63;
(5) To order Corniche and Carger to pay the Plaintiff's costs fixed in the sum of $93,000.
Customs prosecutions
6 This recitation of the orders sought and the processes involved identifies the somewhat unusual nature of the proceeding known as a "Customs prosecution". Customs prosecutions have criminal and civil aspects. The usual practice and procedure of the Court in civil cases applies, historically from the way in which revenue proceedings were conducted and, currently by virtue of s 247 of the Customs Act. However, Customs bears the onus of proving elements of the case beyond a reasonable doubt. The hybrid nature of the proceedings, its genesis and the impact on the burden and standard of proof were identified by the High Court in Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 (at [107]) per Hayne J; see also Chief Executive Officer of Customs v Corniche Motors Pty Ltd & Ors (at 4 - 5) and Chief Executive Officer of Customs v Red Dale Holdings Pty Ltd & Ors [2004] WASC 141 (at 4).
7 Presumably because Customs prosecutions involve a civil aspect, and also because of the requirement in s 247 that a Customs prosecution be commenced, prosecuted and proceeded with in accordance with the usual practice and procedure of the Court in civil cases, it has been generally accepted that actions of this type may be settled on a commercial basis without breaching the policy of the Customs Act, or the criminal law, or in any way detracting from the discretion of the Court with regard to sentencing upon conviction in proceedings under the Customs Act: CEO of Customs v Corniche Motors (at 5 - 6); CEO of Customs v Red Dale Holdings (at 4); Chief Executive Officer of Customs v Mak & Anor [2002] WASC 235 per E M Heenan J (at [5]); Trade Practices Commission v Allied Mills Industries Pty Ltd (1981) 37 ALR 256 (at 259); Comptroller-General of Customs v Kingswood Distillery Pty Ltd, unreported; NSWSC; Library No 60385/94;
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- 5 December 1997 per Sperling J (at 6); Goulding v Penello (1999) 43 ATR 179 (at 182) per Heenan J.
8 Where the parties to a Customs prosecution have reached a commercial settlement, the role of the Court is to record convictions against the defendants in respect of each contravention of the Act referred to in the Minute, to impose a penalty in relation to each such contravention as well as make the other orders to which the parties have agreed.
Summary of facts
9 Corniche is a registered Australian proprietary company involved in the importation and sale of motor vehicles. Carger and Jones were directors of Corniche, and Jonvie and Carger were the sole shareholders. Jones and his wife were the sole directors and shareholders of Jonvie. Between 8 June 1997 and 28 October 1999, the defendants were involved in the importation of a number of luxury motor vehicles for commercial purposes. In total, 54 vehicles were imported in the 24 shipments over 29 months. Before the incorporation of Corniche on 29 January 1998, six importations occurred in the names of Jonvie, Jones, Carger and two natural persons that it is unnecessary to name. After registration of Corniche, all importations occurred in the name of Corniche. Initial importations were of single vehicles but later importations were of up to four vehicles at a time.
10 The investigation into these importations revealed a system involving the provision of false documents by the overseas suppliers of the vehicles for use by the defendants for customs purposes, as well as the attempted verification of the declared false purchase price by way of a copy of a telegraphic money transfer for the declared undervalue. The payment which this telegraphic transfer reflected was actually only the first of two payments to be made for the vehicles.
11 Attached to these reasons is a Schedule of Shipments ("the Schedule") identifying the relevant information in relation to the importation of each vehicle including the date, a description of the vehicle, the declared customs value, the true customs value, the amount and percentage amount of undervaluation and the amount of duty evaded.
12 Of the shipments identified in the Schedule, the first shipment on 8 June 1997 and the third shipment on 14 December 1997 were imported by Jonvie and Jones who have already been dealt with for the offences committed in relation to those importations.
(Page 7)
13 With respect to Corniche, the offences before the Court arise from 18 importations by Corniche between 5 April 1998 and 10 November 1999. With respect to Carger, the offences relate to his involvement, directly or indirectly, in all 24 shipments identified in the statement of claim as being:
(1) two importations in the name of Carger on 22 September 1997 and 14 December 1997;
(2) 18 importations in the name of Corniche occurring between 5 April 1998 and 10 November 1999;
(3) two importations in the name of Jonvie and Jones on 8 June 1997 and 14 December 1997;
(4) two importations in the name of third parties associated with Carger on 20 September 1997 and 16 November 1997.
14 For the purpose of each importation a Customs broker was employed to enter the vehicles with Customs. There is no allegation of any wrong doing on the part of the Customs broker who simply relied on the information provided to him. Entering the vehicles with Customs involves the lodgement of a document known as a "Nature 10 Entry for Home Consumption" which requires certain information to be provided by the importers so that the customs value can be determined. The customs value is the basis for determining the customs duty and sales tax owing. Once the amounts owing are paid the imported goods are cleared and released by Customs.
15 The system used to import the vehicles and by which the offences were committed in relation to each shipment, involved the production to Customs of documentation, usually a receipt or sales invoice, which did not declare the full purchase price of the vehicles. The documentation was provided to the broker from the defendants as importers or representatives of the importers. The documentation, addressed to the importer, was provided by the overseas purchasing agent for the specific purpose of evidencing a lesser purchase price. Not all the documents were prepared by the purchasing agent which indicates that others were brought within Corniche's and Carger's scheme, at least to that extent.
16 The purchasing agent was a person in Hong Kong who sourced all the vehicles the subject of the charges. Amongst the documents seized under warrant during the investigation into these offences was the following correspondence from the purchasing agent to Carger in relation
(Page 8)
- to a particular shipment setting out the true details of the transaction, including the actual price and what is described as the "paper purchase price":
"Sums will look like this on the current shipment:
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First payment as usual of $121,000 which is the invoice price to my account. Second payment (of the difference of $210,700 less $121,000) of $89,700 to the other account as before."
17 The final paragraph is evidence of both the mode of payment and the fact that certain legitimate telegraphic transfer documents provided to Customs as additional verification of the stated purchase price reflect only part of the actual purchase price. The "other account" referred to in the final paragraph was in the name of another person connected to the agent. However, there was no dispute that the money deposited in that account was to be accessed by the purchasing agent.
18 It is also not in dispute that certain handwritten notes prepared by Carger and seized under warrant confirm that the true purchase price of the vehicles was as set out in the column entitled "Price to you". The notes set out above also indicates a $5000 difference between the actual price and the price to the importers. The difference reflects the amount it was agreed would be paid to the purchasing agent for each of the cars sourced.
(Page 9)
19 It is apparent from the evidence that on each importation the subject of these charges, the Customs broker was provided by Carger and/or on behalf of Corniche with information, whether it was a sales invoice, a sales contract, a telegraphic transfer or a receipt said to be in full and final settlement of the purchase price, which identified an amount which was less than the actual amount paid for the vehicles. This was done for the purpose of reducing the amount of customs duty payable.
20 I do not propose to recite the specific facts in relation to the importation of each vehicle. As was the approach taken by counsel for Customs, I propose to refer to one shipment or importation of vehicles by way of example. However, as I have indicated, the Schedule attached to these reasons identifies the information in relation to each shipment and neither party has suggested that there is any basis to differentiate between the offences, other than in relation to the amounts of money involved.
21 The importation selected by counsel as a typical shipment was the second last importation by Corniche of four vehicles on 17 September 1999 which is shipment number 21 on the Schedule. For the purpose of entering the four vehicles with Customs, Carger provided to the Customs broker a sales invoice addressed to Corniche which was obtained from the overseas purchasing agent which set out the description of the vehicles and the purchase price in Hong Kong Dollars as follows:
1978 Porsche 911: HK$53,000
1984 Mercedes Benz 500 SEL: HK$35,000
1979 Mercedes Benz 450 SEL : HK$18,000
1970 Rolls Royce Shadow: HK$15,000
- Carger also provided correspondence from BankWest confirming the telegraphic transfer of HK$121,000 to the account of the overseas purchasing agent.
22 On the basis of the information provided, the Customs broker lodged the Entry for Home Consumption with Customs, declaring the total invoice price to be HK$121,000 on which duty and sales tax payable was calculated as AUD$4,515.99 and AUD$8,004.93 respectively. These amounts were subsequently paid by Carger and the vehicles were released by Customs.
23 The document created by the purchasing agent set out above relates to this particular shipment. It indicates that the actual price paid by Corniche for the shipment of vehicles was HK$210,700. Based on the
(Page 10)
- true invoice price, Customs subsequently calculated the true duty and sales tax payable as AUD$7,359.02 and AUD$13,019.64 respectively.
24 The following summary of the details of Corniche's and Carger's offending are not in dispute and are based on the information in the Schedule:
(1) The total declared customs value of all the vehicles imported was AUD$266,293.67 whereas the total true customs value of all the vehicles imported was AUD$468,769.46, an undervaluation of AUD$202,475.79;
(2) The undervaluation per importation ranged from 16.45 per cent for the second shipment to 60.22 per cent for the twentieth shipment. The overall undervaluation was 43 per cent;
(3) The total customs duty paid for all shipments was $52,178.21 whereas the true customs duty payable was $90,147.50, a benefit to Corniche as importer of $37,969.29.
Orders and penalties
25 The agreement reflected in the Minute provides that Customs agrees to accept from Corniche and Carger the sum of $36,922 in full and final satisfaction of the penalty judgment of the Court in this matter together with outstanding duty of $20,078 and costs fixed at $93,000: a total of $150,000. Should Corniche and Carger default on the payment of the sum agreed Customs may execute the judgment obtained in the action.
26 Although the agreement includes payment of a sum of money in "satisfaction of the penalty judgment of the Court", I accept that the settlement agreement does not oust the jurisdiction of the Court to impose penalties provided for in the Customs Act consequent on conviction. Because of the nature of the proceeding, the penalty forms part of the judgment on the action which is payable to Customs. As with any judgment, the successful party may or may not enforce that judgment. In this case, the agreement provides that the judgment will only be enforced if payment of the agreed sum is not made. Settlement then has no affect on the identification of a likely range of penalties for particular types of offences because the record will reveal the result of individual cases and the relevant facts.
(Page 11)
27 The Court has been advised of the factors to which Customs have given consideration in negotiating a settlement. However, it is not for the Court to review or comment upon the settlement reached. Because of the nature of the proceedings as identified and commented upon in the various authorities, and the fact that the Court's role is simply to identify the appropriate penalty for the contraventions identified in the Minute, it is open to Customs, as with any other civil litigant, to reach a settlement of the action on whatever terms it considers appropriate, irrespective of whether the settlement identifies a "penalty" to be paid which is significantly less than a Court would impose.
28 The penalty applicable to the offence of making a false statement contrary to s 234(1)(d) of the Customs Act is a maximum of $5000 plus twice the amount of duty payable: s 234(2)(c) and s 234(3) of the Customs Act. The duty payable by Corniche was $65,796. Therefore, the maximum penalty for the 18 offences is $221,592. The duty payable in relation to the 24 false statement offences committed by Carger was $90,147.50. Therefore, the maximum penalty in relation to the 24 offences committed by Carger is $300,295.
29 The penalty range with respect to the offence of evading payment of duty contrary to s 234(1)(a) of the Customs Act is a minimum of twice the amount of duty evaded and a maximum of five times the duty evaded. The amount of duty evaded by Corniche was $32,181.66. Therefore, the penalty range for each of Corniche's 18 offences is $64,363.32 to $160,908.45. The amount of duty evaded by Carger was $37,969.29. Therefore the penalty range for each of Carger's 24 offences is $75,938.58 to $189,846.45. The Court is required to impose at least the minimum penalty, notwithstanding matters of mitigation or other principles of sentencing: Goulding v Penello per Heenan J (at 184 - 5).
30 The penalty in relation to the offence of smuggling contrary to s 233(1)(a) of the Customs Act is a maximum of five times the duty properly payable on the smuggled goods: s 233(1AA) read with s 233AB(1). The amount of duty payable by Corniche on the smuggled goods was $65,769. Therefore the maximum penalty for each of Corniche's 18 offences is 5 x $65,796 or $328,980. The amount of duty payable by Carger was $90,147.50. Therefore the maximum penalty for each of Carger's 24 offences is 5 x $90,147.50 or $450,737.50.
Submissions on penalty
31 It was submitted on behalf of Customs that, in imposing penalty, the following matters should be taken into account:
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- (1) The obvious difficulty of Customs in detecting breaches of the Customs laws, and the consequent reliance placed by them on importers to ensure that goods imported into Australia are declared honestly and accurately so that the correct amounts of duty and sales tax/GST are paid;
(2) The recognised need for deterrence, specifically in relation to the defendants to ensure vigorous and careful compliance in the future, but also more generally in relation to others in the business of importing and dealing with Customs as a reminder or warning that due care must be taken in the course of those dealings, or significant penalties may be imposed;
(3) The legislative policy embodied in the relevant provisions.
32 In this case, the paper trail was complex and difficult to analyse. In relation to some acts of importation during the relevant period by or on behalf of Corniche, Customs was not able to gather all of the evidence required to prove the elements to the necessary extent.
33 In this case, Carger kept handwritten records of the actual values involved, however, evidence of that type does not become available unless Customs become aware of some problem or anomaly with the importations. The way in which this series of offences came to light was that on a random review of one importation the value appeared to be extraordinarily low. As a result Customs issued to the importer a document referred to as a "query memorandum" requesting verification of the price paid for the vehicles involved in the last two shipments. Of course, it was open to Carger at this point to abandon the scheme and acknowledge the true value of the vehicles. However, Carger chose to provide further documentation such as the telegraphic transfer and invoices from the supplier to support the undervaluation. As a result of Customs' continuing suspicion, an investigation commenced and ultimately it was the investigation into the amount of money being sent overseas and the fact that it exceeded the stated values that caused Customs to seek warrants which located the documentation revealing the way in which the scheme operated.
34 I accept the submission that these offences are difficult to detect. Commonsense indicates that it would not be possible to verify the value of every item brought into the country. Consequently, the system must rely on the honesty of importers. Therefore, as counsel for Customs acknowledged, there is a need for a strong general deterrence component in the penalties imposed so as to encourage compliance.
(Page 13)
35 In this regard, counsel drew the Court's attention to the decision of Kitto J in L Vogel & Son Pty Ltd & Anor v Anderson (1968) 120 CLR 157 (at 164):
"The Customs laws represent the judgment of Parliament upon an important aspect of the economic organization of the community, and the object of the penal provisions is to make that judgment as effective as possible. It is important to remember that Customs officers have of practical necessity to rely extensively upon the information supplied to them by importers, for the flow of commerce could not be maintained if every importation had to be fully investigated. Moreover, detection of frauds is not always easy. No doubt ordinary conceptions of honesty and of civic responsibility suffice to ensure a great deal of fair dealing with the Customs, but for some people little seems to matter but fear of the consequences of discovery. The Customs Act makes those consequences potentially drastic. It is for the courts to make them, in suitable cases, drastic in fact, for otherwise traders who are not saved by qualms of conscience from willingness to defraud their fellow citizens may weigh the profits they hope for against the penalties they have cause to fear and find the gamble worthwhile."
36 Customs' submission concerning the need for deterrence reflects the views of Barker J as stated by him in CEO of Customs v Red Dale Holdings (at 10 - 11) where the authorities supporting the need for general deterrence are also set out. I have no difficulty in accepting the need for specific and general deterrence and the rationale underlying that need in cases of this type.
37 Counsel for Customs further submitted that, in imposing penalty, it is necessary to consider the course of conduct; the importations were numerous, they occurred over a very long period of time and were a conscious system of wrongdoing. A submission was also made that the percentage undervalue commenced at a fairly conservative rate and increased over time. In my view the figures in the Schedule do not support that proposition. Nevertheless, the average percentage of 43 per cent indicates that this was no slight reduction in value and the financial benefits of the enterprise were significant.
38 The defendants in this case were involved in a commercial enterprise. The purpose of the offending was clearly to reduce the cost of
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- the vehicles to the company, thereby increasing the company's profit margin on the sale of each vehicle. Counsel for Corniche and Carger stated that the enterprise was never profitable, however, that fact is clearly not a result of the defendants' activities in undervaluing the vehicles to Customs. I am told the cause was the unanticipated poor condition of the vehicles imported. However, even if the company was unable to sell the cars for the expected profit, duty would have had to be paid regardless of the amount the cars could be sold for and irrespective of whether the company made a profit. Therefore, it remains the case that the benefit to the defendants as a result of their offending is the difference between the actual duty and the duty paid.
39 Counsel for Customs submitted that, in determining the appropriate penalty, the Court is entitled to take into account the fact that the duty owing has been paid although it is not immediately clear to me which of the defendants or which combination of defendants paid the duty. I am entitled to take that into account, although only to the extent that, in appropriate cases, a financial penalty for an offence from which an offender derived a financial benefit would usually be set at a level which at least deprives an offender of any benefit from the offence. To do otherwise would provide an incentive to breach the law because of the financial advantage even if apprehended. This was the concern that was expressed by Kitto J in L Vogel v Anderson (at 164) when he observed that the aim of imposing drastic consequences was to prevent people from finding the gamble worthwhile.
40 It is also the case, as I have noted, that when asked by Customs for information verifying the purchase price of the vehicles from the last two shipments, Carger provided additional false information. Counsel for Customs further submitted that Carger offered little or no cooperation to Customs throughout the investigation. He was asked to participate in a record of interview but declined to do so. That, of course, is his right, but he cannot then rely on his cooperation or early admission of guilt as a mitigating factor. Jones, on the other hand, acknowledged the offences at a relatively early point in the proceedings and thereafter fully cooperated with Customs.
41 On behalf of Customs it was submitted that Corniche's and Carger's offences should attract higher penalties than those imposed on Jonvie and Jones. The basis of the submission was that Carger was the person primarily responsible for establishing the importation business, purchasing the vehicles, providing the necessary documentation to the customs broker and paying the purchase prices and all costs associated
(Page 15)
- with the importations. This summary of Carger's role is accepted by him. Jones' role, on the other hand, was the responsibility for the sale of the vehicles once they were brought into Australia. It is said that even that role was a sideline to his other businesses.
42 The point at which settlement of the proceedings was reached is also said to be a distinguishing factor between these defendants and Jonvie and Jones. The proceedings were commenced in 2001. Jonvie and Jones reached a settlement with Customs in November 2002. Corniche and Carger reached a settlement in February 2005 although settlement negotiations commenced after the settlement with Jones and Jonvie in 2002 and the terms on which settlement was reached with Carger and Corniche were offered by them on 17 December 2004. Initial offers were considered by Customs to be wholly inadequate.
43 Customs also took the position that there has been no overt acceptance of guilt or remorse shown by Carger throughout the settlement negotiations other than to enter into the agreement which Customs insisted include convictions for the offences.
44 It is also the case that the conduct of Corniche and Carger can be distinguished from that of the individual who might be unable to pay or have difficulties in paying the full amount of duty. Neither was the conduct a spur of the moment act to reduce the cost of a desired item. By that comment I am in no way condoning either type of breach. Both types of offender are culpable but, in my view, the actions of the defendants are more clearly the product of greed than momentary temptation.
45 The mitigating factors relating to Corniche and Carger are conceded by Customs to be the service to the public interest in respect of the costs which have been saved as a result of the settlement reached. Because of the late stage at which a settlement was reached, avoidance of trial costs is submitted by Customs to be the only mitigating aspect of the settlement. Payment of the first instalment of the settlement sum in accordance with the settlement agreement is acknowledged by Customs as being mitigatory.
46 As I have noted, Counsel for Corniche and Carger advised the Court that, although the importation of the cars was a commercial enterprise, it was a substantially unsuccessful one. At the time of the hearing Corniche was no longer trading, at least with respect to the importation and sale of motor vehicles; the company was still registered but inactive.
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47 With respect to the timing of the settlement agreement, counsel for Corniche and Carger submitted that the topic of settlement was first raised by them in November 2002, shortly after negotiations with Jones and Jonvie commenced. The first offer was made by Corniche and Carger in December 2002. Whilst Customs considered the initial offers wholly inadequate, it was said that they were bona fide offers in an amount these defendants were in a position to pay. According to counsel, these defendants had few assets, were unable to borrow the money and the settlement which was ultimately achieved resulted from the assistance and cooperation of Carger's wife who provided the family home as security for the payment of the settlement sum over a period of time. It was the acceptance of payments over time rather than a lump sum which enabled Corniche and Carger to enter into the settlement agreement. Counsel submitted that the delay in reaching settlement was as a result of insufficient funds, said to be a matter beyond their control and hence not an appropriate point of distinction between these defendants and the defendants who have already been dealt with. Consequently, any discount given to Carger should not be significantly less than the discount given to Jones.
48 In my view, nothing of significance turns on the timing of the settlement. Customs has obviously incurred costs in proceeding with this action to this point. However, those costs, or at least a significant proportion of them, are to be paid by Corniche and Carger under the agreement. Ultimately, the mitigating factor is that a trial has been avoided and that will be taken into account when determining the appropriate penalty.
49 Carger's counsel conceded the facts upon which the submission of Carger's greater involvement was based but disputed that the facts justified any differentiation between him and Jones. Despite the fact that Carger was a director of Corniche and directly involved in the commission of the offences, Jones was a willing party to the scheme and derived an equal benefit from it. On that basis it was submitted that there should be a high degree of parity between the penalty imposed on Jones by Barker J and that which is imposed on Carger. This issue was addressed by Barker J in CEO of Customs v Corniche Motors (at 8):
"On the basis of the available evidence, Customs accepts the fourth defendant [Jones] was not as intimately involved with the importation side of the business as the third defendant [Carger], who is not affected by the matters presently before me. However, numerous documents were seized from his premises
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- which clearly evidence the dual invoice and payment system and other relevant factors, such as his involvement in conducting the business of Corniche Motors in the third defendant's absence. Seized documents also clearly set out in detailed form the accounting between the third and fourth defendants by which each contributed equally to the costs and shared equally in the profits derived from the importation and sale of each vehicle."
- The only other reference in the judgment of Barker J to the involvement of Carger and Jones in the unlawful enterprise is this (at 12):
"It is said by Customs and counsel for the second and fourth defendants [Jonvie and Jones] that the fourth defendant (allegedly with the third defendant) guided the conduct of the first defendant (Corniche Motors Pty Ltd) in respect of the various charges for which I must now impose penalty."
51 It was certainly Carger who dealt with the overseas purchaser, who agreed purchase prices, who paid the overseas supplier and who gave all of the documentation to the broker to allow the goods to be imported. However, Jones was also a director of Corniche and, through his company Jonvie, was a partner in the business. Significantly, although Jones' responsibility as a director of Corniche was to sell the vehicles once they were brought into Australia, he would carry out all necessary aspects of the scheme to evade customs duty when Carger was absent. As I have noted, Jones benefited equally from the scheme. Jones' admitted his guilt in relation to 21 charges of evading customs duty which are the same 21 of the 24 charges for which I am to impose a penalty on Carger. In circumstances where, if Carger was available, Jones was not the one who actually dealt with the importation, a plea to charges where the overt acts were carried out by Carger is an admission of his full participation in the scheme. Where two people are jointly and knowingly involved in a commercial enterprise to sell goods imported pursuant to a scheme to evade Customs duty, both benefit equally from the scheme, but each play different roles in the enterprise, it is not necessarily the case that the one who performs the physical acts involved in evading Customs duty is more culpable than the one who occasionally performs those acts but otherwise
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- plays the lawful role in the enterprise. In the circumstances that here apply I do not accept that Jones was in any way less culpable than Carger because he did not have the same day-to-day involvement in the scheme and I can find nothing in the reasons of Barker J in CEO of Customs v Corniche Motors which indicates that the penalty imposed was reduced to reflect any lesser culpability.
52 Conversely, I am not persuaded that Carger's culpability is any greater although his physical involvement may have been so.
Penalty
53 Section 16A of the Crimes Act 1914 (Cth) applies to all Commonwealth offences and hence to breaches of the Customs Act. In relation to this matter, as a result of subs (2) I am required to take into account the nature and circumstances of the offences, the course of conduct, any loss resulting from the offences, the degree of contrition shown, whether the offender has pleaded guilty, cooperation with authorities, deterrence, punishment, the character, antecedents, age and means of the offender, the prospect of rehabilitation and the effect of any sentence on the offender's family or dependents.
54 These defendants have been charged in relation to each importation in which they were involved with the offences of making a false statement, evading duty and smuggling. Whilst the offences are separate and distinct, they are components of the one transaction which is each separate importation and the penalty imposed should reflect that fact. Kitto J, the Judge at first instance, addressed this issue in L Vogel v Anderson (at 161):
"It was said that in each case the importing with intent to defraud the revenue, the presentation of a false invoice as genuine, the making of a false entry and the production of a document or documents containing an untrue statement or untrue statements were merely steps by which the ultimate offence of evading payment of duty was committed. Each step was undoubtedly one of a connected series of steps, but each was a separate and distince [sic] piece of conduct for all that, and each involved its own deliberate contravention of the Act. Moreover, the ultimate step, the successful getting of the goods through Customs without payment of full duty, far from being merely the sum of the means employed to that end, was itself a separate piece of conduct in furtherance of the general intent, for it resulted from the defendants deliberately putting aside the
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- opportunity that still remained to them, even after what they had already done, to pay the full amount of duty."
- In the judgment of the appellate Court these observations were described as "unanswerable": L Vogel v Anderson (at 168) per Taylor, Menzies and Owen JJ. The Court added that, in determining the appropriate penalties to be imposed in respect of the offences, it was material to take into consideration that, though the offences in each group were separate offences in law, they were substantially contemporaneous and connected: (at 168).
55 The penalties to be imposed must reflect the extent of the wrongdoing including the number of offences and the period of time over which the scheme was carried out, the seriousness of the offences and the difficulties which confront Customs in ensuring compliance and identifying breaches of the relevant law. However, the penalties should also reflect the connection between the three types of offences. In terms of mitigation, I consider the only truly mitigating factors to be that a trial has been avoided and that neither Corniche nor Carger have previously participated in conduct of this type.
56 In determining the penalties to be imposed on Corniche and Carger, I have considered the penalties imposed on the second and fourth defendants. The penalty imposed on Jonvie for one offence of evasion of duty, where the duty evaded was $943.22, was twice the duty evaded. Jonvie's penalty for one offence of making a false statement was $3000 where the maximum penalty was $13,039.92.
57 Jones' conviction was for 21 offences of evasion of duty where the duty evaded was $34,998.05 and 21 offences of making a false statement. Jones was fined three times the amount of duty evaded or $104,994.15 for the evasion offences. He was fined $70,000 for the false statement offences where the applicable maximum penalty was $260,670.32.
58 In relation to Carger I would impose the following penalties:
(1) The available sentencing range for the 24 offences of evading duty is $75,938.58 to $189,846.45. For the reasons outlined above I consider that the penalty imposed on Carger should be the same as that imposed on Jones, although reflecting the fact that Carger is being dealt with for 24 offences. Therefore I will impose a penalty of three times the duty evaded (3 x $37,969.29) which is $113,907.87.
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- (2) The penalty for an offence of making a false statement is $5000 plus twice the amount of duty payable. The duty payable for the 24 offences was $90,147.50. Therefore, the maximum penalty which applies to the 24 offences of making false statements is $300,295. The penalty imposed on Jones for 21 counts was $70,000 where the duty payable was $77,835.16. This reflects a figure of 26.35 per cent of the maximum penalty. Taking the same approach to the 24 offences committed by Carger, the penalty I impose will be $79,000 which reflects a similar percentage of the maximum penalty available for 24 charges and is the amount I consider appropriate in all the circumstances.
(3) The penalty for the offence of smuggling is a maximum of five times the duty properly payable. The duty payable for the 24 offences was $90,147.50. Therefore the maximum penalty is $450,737.50. In imposing a penalty for these offences I am mindful of the connection between the offences and the fact that each offence arises out of the same importation and the one course of conduct and the purpose of the exercise was to evade duty. I am also mindful of the fact that, where the type of penalty imposed is a fine, an appropriate overall penalty cannot be achieved by making the whole or part of the penalty for one offence or group of offences run concurrently with others. Although Carger is properly charged with all three offences, I take the view that the penalty for the smuggling offences should be at the lower level for the reasons I have mentioned. However, the fines imposed on the other offences are towards the lower end of the scale for such a concerted course of dishonesty and for that reason I believe the fine imposed should at least reflect the benefit to Carger of the commission of these 24 offences; that figure is $37,969.29. It is important to emphasise that a figure representing the duty evaded would not, in my view, be appropriate where the only offences committed were the smuggling offences. The penalty I impose will be $37,969.29.
59 In relation to Corniche I would impose the following penalties:
(1) The penalty range applicable to Corniche's 18 charges of evading duty is from twice the amount of duty evaded of
- $32,181.66 which is $64,363.32 to five times the duty evaded which is $160,908.45. Again, I consider that three times the duty should be imposed as the penalty for the 18 offences. The penalty imposed will be $96,544.98.
- (2) The maximum penalty for each of Corniche's 18 offences of making a false statement is $5000 plus twice the amount of duty payable. The duty payable by Corniche was $65,769. Therefore, the maximum penalty for the 18 offences is $221,592. I consider that a penalty reflecting a quarter of the maximum is appropriate in the circumstances. The penalty imposed will be $55,398.
(3) The penalty for the offence of smuggling is a maximum of five times the duty properly payable which for Corniche's 18 counts of smuggling was $65,769. The maximum penalty for Corniche is therefore $328,980. I propose to take the same approach with Corniche as I have with Carger, and for the same reasons, and impose a penalty which reflects the benefit to the company of the unlawful conduct. The penalty imposed will be $32,181.66.
Final Orders
60 Subject to any further matter raised by counsel, I propose to make the following orders:
(1) Declarations and orders in terms of the Minute of Consent Orders attached to these reasons.
(2) As against Corniche:
(a) For the evasion offences I impose a penalty of $96,544.98.
(b) For the false statement offences I impose a penalty of $55,398.
(c) For the smuggling offences I impose a penalty of $32,181.66.
(a) For the evasion offences I impose a penalty of $113,907.87.
(b) For the false statement offences I impose a penalty of $79,000.
(c) For the smuggling offences I impose a penalty of $37,969.29.
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