Chief Executive Officer of Customs BY Ross Alfred Blackall, His Duly Authorised Delegate v Aquino
[2004] WASC 271
CHIEF EXECUTIVE OFFICER OF CUSTOMS BY ROSS ALFRED BLACKALL, HIS DULY AUTHORISED DELEGATE -v- AQUINO [2004] WASC 271
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 271 | |
| Case No: | CIV:1207/2004 | 3 DECEMBER 2004 | |
| Coram: | MCKECHNIE J | 3/12/04 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Global penalty $500,000 | ||
| D | |||
| PDF Version |
| Parties: | CHIEF EXECUTIVE OFFICER OF CUSTOMS BY ROSS ALFRED BLACKALL, HIS DULY AUTHORISED DELEGATE WALTER LESLIE AQUINO |
Catchwords: | Customs prosecution Deliberate evasion over a period of years Failure to maintain integrity of bond store Penalty to be applied |
Legislation: | Customs Act 1901 (Cth), s 33, s 234 |
Case References: | Anderson v L Vogel & Son Pty Ltd (1967) 41 ALJR 264 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
WALTER LESLIE AQUINO
Defendant
Catchwords:
Customs prosecution - Deliberate evasion over a period of years - Failure to maintain integrity of bond store - Penalty to be applied
Legislation:
Customs Act 1901 (Cth), s 33, s 234
Result:
Global penalty $500,000
(Page 2)
Category: D
Representation:
Counsel:
Plaintiff : Ms W Enderbrock-Brown
Defendant : Mr M J Hardy
Solicitors:
Plaintiff : Australian Government Solicitor
Defendant : Hardy Bowen
Case(s) referred to in judgment(s):
Anderson v L Vogel & Son Pty Ltd (1967) 41 ALJR 264
Case(s) also cited:
Nil
(Page 3)
- MCKECHNIE J:
Introduction
1 By writ of summons issued on 18 February 2004 the Chief Executive Officer of Customs as plaintiff sought various declarations against Walter Leslie Aquino the defendant. By application dated 17 November 2004 the plaintiff seeks orders and declarations in accordance with a minute of consent orders as follows:
"a. A declaration that on dates unknown between 23 February 1999 and 17 May 2001 the defendant moved, altered or interfered with goods subject to the control of Customs without authorisation in contravention of section 33(1) of the Customs Act 1901;
b. A declaration that the defendant evaded payment of duty which was payable in respect of such goods in the amount of $201,883.00 in contravention of 234(1)(a) of the Customs Act 1901.
c. Convictions against the defendant in respect of the contraventions referred to in paragraphs (a) and (b) above.
d. An order that the defendant pay to the plaintiff a penalty of an amount to be determined by this Honourable Court of not more than $50,000 in respect of the contravention referred to in paragraph (a) above.
e. An order pursuant to section 234(2)(a) of the Customs Act 1901 that the defendant pay to the plaintiff a penalty to be determined by this Honourable Court of not less than 2 times and not more than 5 times the amount of the duty which was evaded in respect of the contravention referred to in paragraph (b) above.
f. An order pursuant to section 153 of the Customs Act 1901 that the defendant pay to the plaintiff unpaid duty in respect of the goods referred to in paragraph (a) hereof, being the amount of $56,654.
g. An order that the defendant do pay the costs of the plaintiff fixed in the amount of $27,000.00."
(Page 4)
2 The matter proceeds by way of an outline of agreed facts which was also filed 17 November 2004. It is important to acknowledge that from the time at which the Customs officers attended the defendant's premises he has co-operated fully and frankly with Customs officers.
Material facts
3 The material facts taken from the Outline follow:
"7. At all material times Calejac Pty Ltd ('Calejac') was a company trading as 'Kappa Australia', in the business of importing and wholesaling sportswear.
8. At all material times the Defendant was a director of Calejac, involved in and responsible for the day to day running and control of Calejac's business.
9. Calejac commenced importing goods into Australia in August 1996. Between August 1996 and 17 May 2001 (the date of warrant execution), Calejac made approximately 600 importations of goods with a total customs value of more than $6,900,000.
10. On about 8 December 1998 the Defendant, acting for and on behalf of Calejac, applied to the Plaintiff for a warehouse licence pursuant to section 79 of the Customs Act in respect of Unit 3, 52 Vinnicombe Drive, Canning Vale, Western Australia.
11. On about 23 February 1999 a section 79 Warehouse Licence No. 5FO13134 ('the Licence') was granted to Calejac authorising the company to use the place known as 'Kappa Australia Bond' at the above address as a place for warehousing imported goods.
12. The Licence was stated to be subject to the statutory conditions contained in the Customs Act and Regulations made pursuant to the Customs Act. Further, the Licence specifically 'drew the attention' of the licensee to the following:
'goods are not to be moved, altered or interfered with without Customs authority (see Customs Act section 33(1))'
(Page 5)
- 13. In addition, the Licence was subject to a number of express conditions, including:
a. 'Where the licensee has received authority to remove goods, either by an entry under section 99 of the Customs Act or by permission granted under section 71E of the Customs Act, the licensee shall be in possession of a customs authorisation for movement BEFORE the goods referred to on that authorisation are moved';
b. 'The goods are to be kept physically separate from duty paid and free goods';
c. 'The unpacking of goods may be undertaken on a continuing basis, provided that appropriate records are maintained which provide a clear audit trail to satisfactorily account for the disposition of the goods involved in the unpacking process'; and
d. 'Unentered goods are NOT to be unpacked'.
14. Section 68 of the Customs Act requires all imported goods to be declared to Customs on their importation. Most shipments are declared through use of a customs 'entry' document either for home consumption or warehousing.
15. Home consumption entries are a request by the importer to have the imported goods released from the control of customs directly into the economy and the document provides for specific details of the shipments and calculations of customs duty and goods and services tax (GST) applicable to the shipment. The goods are delivered from customs control on payment of the calculated amount.
16. Warehousing entries are created where importers want to make use of the legislated duty deferral scheme, wherein imported goods are held under customs control in a licensed customs warehouse without payment of customs duty or GST. Warehousing entries contain the same information as home consumption entries but do not provide calculation of duty and GST payable.
(Page 6)
- 17. If and when the warehoused goods are required, a home consumption entry 'ex warehouse' is created for the particular amount of goods required and customs duty and GST is calculated and paid on this document prior to permission being granted by Customs to deliver the goods from customs control.
18. Home consumption, warehousing and home consumption (ex-warehouse) entries are prepared though the use of preformatted documents, normally created by the importer or his licensed customs broker using the Customs COMPILE computer system. The document created for delivery into home consumption is commonly known and a 'Nature 10', a warehousing entry as a 'Nature 20' and a home consumption entry (ex warehouse) as a 'Nature 30'.
19. Between 23 February 1999 and 17 May 2001 Calejac entered approximately 202 shipments for warehousing on Nature 20s, being goods with a total customs value of $3,610,235.03.
20. Between the same dates, Calejac made 362 entries into home consumption on Nature 30s, being goods with a total customs value of $2,177,506.37.
21. An examination of the Nature 30s for this period reveals a decline year by year of the number of entries for home consumption (ex-warehouse) being made. More particularly:
a. in 1999, 213 Nature 30s were lodged for goods with a total customs value of $1,016,924.61;
b. in 2000, 102 Nature 30s were lodged for goods with a total customs value of $685,567.14; and
c. up to 17 May 2001, 13 Nature 30s were lodged for goods with a total customs value of $206,987.53.
22. An examination of the entries for warehousing against the entries for home consumption (ex-warehouse) for this period also reveals that Calejac should, as at 17 May
(Page 7)
- 2001, have had stored under bond in the warehouse imported goods with a total customs value of $1,432,728.56.
- 23. On 15 May 2001 two Customs officers attended at the warehouse for the purpose of conducting a stocktake of goods within the warehouse. At that time the Defendant stated to the officers 'I have a major problem' and went on to state, inter alia, that some of the goods which should have been stored under bond in the warehouse had been removed from the warehouse and sold without duty being paid in relation to them.
24. Between 16 and 21 May 2001 Customs officers attended at the warehouse and conducted an exhaustive stocktake of goods remaining within the warehouse. On 21 May 2001 search warrants were executed at the warehouse and Calejac's customs brokers, respectively.
25. The stocktake and Customs' investigations determined the customs value of goods in the warehouse under bond to be $453,452.98, compared with the $1,432,728.56 which, according to the comparison of Nature 20s against Nature 30s, should have remained in the warehouse under bond.
26. The difference of $979,275.58 represents goods released from the warehouse without being entered as required and without payment of duty and GST (or Sales Tax, as was payable then).
27. The duty which should have been paid on those goods was $201,883 and the GST/Sales Tax payable was approximately $125,000.
28. On 3 September 2001 the Defendant was interviewed under caution by Customs officers with his legal representative present. In the course of that interview the Defendant:
a. stated that he had applied for the Licence to assist with the managing of the cash flow of the business, which had quickly grown beyond expectations. Placing imported goods into bond
(Page 8)
- was seen as 'the ideal scenario' to enable the business to manage importation, clearance and associated payments;
- b. demonstrated a clear understanding of the difference between entering goods for home consumption on a Nature 10 and warehousing the goods on a Nature 20 for subsequent release into home consumption on a Nature 30;
c. demonstrated a clear understanding of the requirement for duty to be paid on goods cleared pursuant to a Nature 30. When asked what he understood his obligations as, he stated 'basically nothing was to leave that bond area unless there was duty paid';
d. admitted obligations to the Plaintiff were not fulfilled in that goods were released without authority from the Plaintiff;
e. admitted he became aware in March 2000 that goods were being released without duty paid;
f. admitted to not telling the Plaintiff at any stage that they were having problems; and
g. admitted that as at 17 May 2001 he could not account for all the stock said to be in the warehouse; and
h. accepted the calculation of duty outstanding on missing goods.
- 29. In the course of the record of interview the Defendant offered the following explanations and matters in mitigation:
a. growth of the business had exceeded expectations;
b. they had struggled to facilitate cash flows required to pay for stock, duty, GST, etc;
(Page 9)
- c. he did not realise the extent of the problem until approached by the Plaintiff in May 2001, and had then worked with the Plaintiff;
d. it occurred because he had not been able to monitor as well as he would have liked; because of staff problems; computer problems; procedures not being up to scratch; and the area being too accessible for staff;
e. they were just not very well organised and that had allowed it to reach the stage it had; and
f. they were putting things in place to fix the problem, for example the Defendant was no longer the managing director and his uncle had taken over that role, having had 20 years' experience previously as managing director for another company.
- 30. Between 14 May 2001 and 24 August 2001 Calejac repaid a portion of the outstanding duty and in December 2002 the Plaintiff called in a $20,000.00 security paid by the Defendant in relation to the Warehouse Licence and offset this amount against the duty owed. $56,654 in duty remains outstanding.
31. Calejac was placed into liquidation on 1 July 2002.
32. The Defendant declared bankruptcy on 17 April 2003."
Conclusion as to defendant's conduct
4 By any measure there was a serious and persistent interference with goods which should have been under bond, together with a significant evasion of duty. I entirely accept that the explanation given to the Customs officers and put forward by Mr Hardy this morning on behalf of the defendant is correct; namely that the business grew beyond expectations and the defendant lacked the experience to run a business of this size and complexity.
5 I do not find there was a deliberate evasion of duty in that the defendant set out to evade duty. I consider that, in the main, he was simply not competent and able to manage the matter. However, it must be noted that he became aware of the problem in March 2000 and it was not
(Page 10)
- until May 2001, when the plaintiff's officers approached him, that he took steps to deal with it. That was a considerable period.
6 While one can understand a certain degree, perhaps, of the defendant putting his head in the sand and hoping the problem would go away, nevertheless, it was a lengthy period and no doubt the amount of duty owed to the plaintiff increased during that period of over a year. In saying that, as I say, I do not find there was a deliberate evasion. However, the facts disclose more than simply being in a muddle.
7 It is not necessary to make extensive reference to the law. The leading case and authority remains probably Anderson v L Vogel & Son Pty Ltd (1967) 41 ALJR 264, particularly the passage from Kitto J at 267. There are other cases but really the facts speak for themselves.
Matters of mitigation
8 The Chief Executive Officer as plaintiff does not seek the maximum penalty in each case. He points to the following matters in favour of the defendant:
"(a) the full admissions made and cooperation given to Customs officers from the beginning of the stocktake in May 2001 and through to the completion of the Customs investigation;
(b) the willingness of the defendant from the beginning of the action to admit the contraventions and resolve the matter with the plaintiff;
(c) the repayment of a significant amount of the duty evaded; and
(d) the service to the public interest in respect of the costs which have been saved by the admissions made which otherwise would have been incurred by a complicated and lengthy litigation."
9 These are all matters which it is proper to take into account in assessing a total overall penalty and which mitigate the seriousness otherwise disclosed by the objective features of the conduct.
10 There are other matters to take into account and those have been helpfully put before me today by Mr Hardy. I note that Calejac is now in liquidation and no dividend has been paid. The defendant and his wife,
(Page 11)
- who works as a teacher, have suffered the loss of all of their assets as each of them was declared bankrupt, Mrs Aquino being a guarantor.
11 The family is entirely dependent on the income of Mrs Aquino. The defendant, no doubt due to the stress of running the business which had grown beyond his ability to manage, and also of course these matters of serious evasion of duty, is in a state of health to which I have been referred by way of medical report but will not detail. Suffice to say he is unlikely to work again in the near future. He and the family are well thought of in their community. He has no prior offences of this kind.
12 The penalties which I propose to impose are towards the lower end of a range of appropriate penalties and the express reason for that is the co-operation that the defendant has given to the Customs officers and those matters personal to him which have had significant impact on him. I say that because, whichever way one views it, these are serious offences and are a significant impost on the community when duty is evaded. Also, the system works because of the integrity of bonded warehouses. When that integrity is breached in a sustained manner, as here, the community is also at risk.
Significance of co-operation
13 The penalties that I impose do not so much reflect the seriousness of the offence but reflect more particularly the personal circumstances and the cooperation that the defendant has given. It is always in the public interest in Customs prosecutions that persons should cooperate fully when problems are discovered and one way of recognising that and encouraging it in others is to moderate the penalty that would otherwise be imposed.
Orders
14 Therefore the only other matter I should mention is that the penalty in relation to the breach of s 33 is a maximum fine of $50,000. In relation to the breach of s 231A the legislative penalty, which has a poetic ring to it, is a minimum of two times the amount of duty evaded and a maximum of five times the amount of duty evaded. As the amount of duty evaded here was $201,883 the range of penalties which I may impose ranges from $403,766 to $1,009,415.
15 With that in mind I now make the following orders. I make a declaration that on dates unknown between 23 February 1999 and 17 May 2001 the defendant moved, altered or interfered with goods subject to the control of Customs without authorisation in contravention of s 33(1) of
(Page 12)
- the Customs Act 1901. Secondly, a declaration that the defendant evaded the payment of duty which was payable in respect of such goods in the amount of $201,883 in contravention of s 234(1)(a) of the Customs Act 1901.
16 I order that convictions be recorded against the defendant in respect of a breach of the sections in the manner referred to in the declarations I have just made. I order that the defendant pay to the plaintiff a penalty in the amount of $15,000 in respect of the breach of s 33(1) of the Customs Act. I order that the defendant pay a penalty of $485,000 in respect of the breach of s 234(2)(a) of the Customs Act. I order that the defendant pay the plaintiff unpaid duty in respect of goods referred to in the first declaration in the amount of $56,654 and I order that the defendant pay the plaintiff's costs which are fixed in the amount of $27,000.
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