Commissioner of Taxation v Evenfont - [2008] NSWSC 1371

CITATION: Commissioner of Taxation v Evenfont [2008] NSWSC 1371

HEARING DATE(S): 30/4/07, 3/5/07, 2/5/07, 9/5/07, 14/5/07, 15/5/07 , 17/5/07, 25/6/07, 26/6/07, 27/6/07,28/6/07, 29/6/07, 3/8/07, 4/9/07, 5/9/07, 10/9/07, 12/9/07, 14/9/07, 23/4/08

JUDGMENT DATE :
22 December 2008

JUDGMENT OF: Bell JA at 1

DECISION: 1. Dismiss the Second Further Amended Statement of Claim;
2. The plaintiff is to pay the defendants’ costs.

CATCHWORDS: EXCISE PROSECUTION – averment of facts – evidence in rebuttal – onus not discharged

LEGISLATION CITED: Excise Act 1901 (Cth)

CATEGORY: Principal judgment

CASES CITED: Chief Executive Officer of Customs v El Hajje [2005] HCA 35; 79 ALJR 1289
Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd [2003] HCA 49; 216 CLR 161
Ludwigs Canberra Bond Seller Pty Ltd v Sheen (1982) 65 FLR 347
Wilson v Chambers [1926] HCA 15; (1925-1926) 38 CLR 131

PARTIES: Commissioner of Taxation (Plaintiff)
Evenfont Pty Limited (1st Defendant)
Truegain Pty Limited (2nd Defendant)
Robert Lenard Pullinger (3rd Defendant)
Paul Andrew Lucas (4th Defendant)

FILE NUMBER(S): SC 20013/99

COUNSEL: R M Goot SC / R Wilson (Plaintiff)
D P Robinson SC / J Horowitz (Defendants)

SOLICITORS: Australian Government Solicitor (Plaintiff)
Horowitz & Bilinsky (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BELL JA

Monday 22 December 2008

20013/99 Commissioner of Taxation v Evenfont Pty Ltd

JUDGMENT
BELL JA:
Introduction

1 The defendants are charged with offences under the Excise Act 1901 (Cth) (the Act) that arise out of the alleged evasion of duty payable on the production of petroleum products that were manufactured at the first defendant’s, Evenfont Pty Ltd’s (Evenfont) refinery located at Rutherford (the Rutherford plant) in the period 16 September 1996 to 21 April 1997. The second defendant, Truegain Pty Ltd (Truegain), is Evenfont’s ultimate holding company. The third and fourth defendants, Robert Lenard Pullinger and Paul Andrew Lucas, were the directors of Evenfont and the directors and with Glowbye Pty Ltd shareholders of Truegain.

2 Evenfont had a plant located at Seven Hills from which it produced heating oil, which was an excisable product (the Seven Hills plant). Evenfont acquired the premises at Rutherford in late 1994 and constructed a more sophisticated refinery, which commenced operations in September 1996. The Rutherford plant produced two excisable products. One, heating oil, was subject to excise duty at the rate of 7.171 cents per litre. The other product, which I shall refer to as “motor spirit” was a petroleum product subject to excise at the rate of 34.559 cents per litre.

3 It is alleged that Evenfont evaded payment of excise duty that was payable by the failure to declare quantities of motor spirit and heating oil to the Australian Customs Service (Customs) and by the misdescription of motor spirit as heating oil.

4 The operative pleading is the Second Further Amended Statement of Claim (the 2FASOC), which charges the four defendants with offences that are set out in five groups. The first group alleges the offences with which this judgment is principally concerned. They are pleaded in pars 16 – 67 and charge (i) the evasion of excise duty contrary to s 120(1)(iv); (ii) the knowing making of statements to a Customs officer that were false or misleading in a material particular contrary to s 120(1)(vi)(A) and (iii) the movement of excisable goods without permission contrary to s 61.

5 At the commencement of the hearing Mr RJ Burbidge QC, who with Mr RB Wilson was then appearing for the plaintiff, abandoned the prosecution of each of the charges that are pleaded in groups 2, 3 and 4, being those alleged in pars 68 - 141 of the 2FASOC. It is unnecessary to refer further to these paragraphs of the pleading. The offences charged in pars 142 – 146 of the 2FASOC relate to the alleged evasion of duty payable on the production of heating oil manufactured at the Rutherford refinery, which was documented as an inter-company transfer to the Seven Hills refinery. In each instance the product was transported from the Rutherford to the Seven Hills plant by Lewington’s Transport Pty Ltd, I will refer to these changes as the Lewington’s loads.

6 References to provisions of legislation are to the Act as it stood in the period that is the subject of the charges unless otherwise stated.

7 It is an offence under s 120(1)(iv) to evade payment of any duty which is payable.

8 The liability to pay duty is provided by s 54(1):

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

9 Excisable goods are goods in respect of which excise duty is imposed by the parliament and includes goods that are the subject of an excise tariff. The Excise Tariff Act 1921 (Cth) imposes duties of excise, which are set out in the Schedule. In the period that is the subject of the charges the Schedule prescribed rates for the payment of duty in respect of the following:

11(A) Gasoline and other petroleum or shale spirit, having a flashpoint of less than 23 degrees Celsius when tested in an Abel Pensky closed test apparatus, not being goods falling within item 17(B)

…

11(E)

…

10 Throughout the period that is the subject of the charges Evenfont held a manufacturers’ licence (No. 1S001297) that had been issued by Customs and which permitted it to manufacture excisable petroleum products, at the Seven Hills plant. In March 1996 Evenfont applied for the transfer of the licence to cover the new Rutherford plant, which was expected to commence operation in April 1996. There were delays in the construction of the new refinery. The licence application was held in abeyance. In the period between September 1996 and January 1997, during the commissioning of the Rutherford plant, excisable product was being produced at the Rutherford plant before the licence was transferred. Customs was aware of this fact.

11 Evenfont held a “permission to deliver certain goods for home consumption without entry” (no. 1S00590) (issued under s 61C(1) of the Act) throughout the period that is covered by the charges. It was permitted to move excisable goods from the bonded area of its plant without prior formal clearance of every item manufactured. It was required to submit to Customs a weekly return in the form of a “Nature 40 Entry for Home Consumption” (the Weekly Entry) for all products moved into home consumption during the previous week. The Weekly Entry was required to be lodged by close of business on the Tuesday following the end of each accounting week. The accounting week ended at midnight every Monday. On lodgement of the Weekly Entry Evenfont was required to pay the total excise duty payable on all the manufactured product that had been moved into home consumption in the accounting week.

12 The defendants are charged with the evasion of amounts of duty on the date of the Weekly Entry for each of 25 weeks between 16 September 1996 and 21 April 1997. For each of the 25 weeks the defendants are charged with one count of evasion of duty contrary to s 120(1)(iv); one count of knowingly or recklessly making a statement that is false of misleading and one count of the movement of excisable goods without authority. With the exception of the weeks ending 16/9/96, 21/10/96 and 17/2/97 more than one transaction is particularised in respect of each of the three offences alleged in each accounting week. In schedules prepared by the plaintiff and the defendants each transaction was identified by a transaction identification number. There are 105 transactions involved in the charges that are pleaded in pars 18 – 67. In 39 transactions the plaintiff alleges that the defendants failed to declare a quantity of motor spirit or heating oil (the undeclared transactions). In 66 transactions the plaintiff alleges that a quantity of motor spirit was misdescribed as heating oil in the Weekly Entry thereby evading payment of the correct amount of duty that was payable (the misdescription transactions).

13 Mr D Robinson SC, who with Mr J Horowitz appeared on the defendants’ behalf, complained that the pleading of the “rolled-up” charges was inappropriate however, he did not submit that any prejudice was occasioned by the form of the pleading. It was not suggested that there was any uncertainty as to the allegations that the plaintiff was making.

14 The Criminal Code 1995 (Cth) does not apply to the offences. The plaintiff must prove the intentional evasion of duty with respect to the offences under s 120(1)(iv). It is not sufficient to establish that Evenfont failed or omitted to pay an amount of duty that was payable by it: Wilson v Chambers [1926] HCA 15; (1925-1926) 38 CLR 131 per Knox CJ at 136.

15 In Ludwigs Canberra Bond Seller Pty Ltd v Sheen (1982) 65 FLR 347 at 354 Gallop J observed:

Income Tax (Management) Act

Denver Chemical Manufacturing Co. v. Commissioner of Taxation (N.S.W.)

Australasian Jam Co. Pty. Ltd. V. Federal Commissioner of Taxation

It is appropriate in my view to apply the meaning enunciated by Dixon J in the penal provisions now under consideration, namely, that the word “evade” means more than the intentional withholding of information or the mere furnishing of misleading information, but requires some blameworthy act or omission on the part of the appellants.

16 Section 120(1)(vi)(A) makes it an offence to knowingly or recklessly make a statement to an officer that is false or misleading in a material particular. Each charge under s 120(1)(A) is based on the statements in the Weekly Entry for the accounting week in which the particularised transactions occurred. It is the plaintiff’s case that the statements were knowingly false at the time they were made.

17 Section 61 makes it an offence to move, alter or interfere with excisable goods subject to the control of Customs except as authorised by the Act. Excisable goods are subject to the control of Customs until delivered for home consumption or for exportation to a place outside Australia. As noted, Evenfont held a permission under s 61C(1) of the Act throughout the period that is covered by the charges. Failure to comply with a requirement of the permission is an offence: s 61C(4). No attention was directed to the way in which the plaintiff sought to establish the s 61 charges which were pleaded in association with the charges under s 120(1)(iv) and (vi)(A) in respect of each of the 25 periods that are the subject of pars 16 – 67 of the 2FASOC.

18 In excise prosecutions provision is made for the plaintiff to aver facts and for the averment to constitute prima facie evidence of the matter or matters averred: s 144(1). Where the matter averred is a mixed question of law and fact the averment is prima facie evidence of the fact only: subs (2)(b). Any evidence given by witnesses in support or rebuttal of a matter averred is to be considered on its merits and the credibility and probative value of such evidence is neither increased nor diminished by reason of the provisions of s 144: subs (3).

19 The averment of a matter in an excise prosecution does not extend to an averment of the intent of the defendant: s 144(4)(a).

20 Where it is necessary to establish the state of mind of a body corporate in an excise prosecution it is sufficient to show that a director of the body corporate by whom the conduct was engaged in had that state of mind: s 145A(1). Any conduct engaged in on behalf of a body corporate by a director within the scope of his actual or apparent authority or by any person at the direction or with the agreement (express or implied) of a director where the giving of the direction is within the scope of actual or apparent authority is deemed to have been engaged in also by the body corporate: subs (2). A reference to a state of mind includes a reference to the knowledge, intention, opinion, belief or purpose of the person and the person’s reasons for his or her intention, opinion, belief or purpose: subs (5).

21 The standard of proof in an excise prosecution is beyond reasonable doubt: Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd [2003] HCA 49; (2003) 216 CLR 161. The averment of matters does not alter the incidence of the final burden of proof: Chief Executive Officer of Customs v El Hajje [2005] HCA 35; (2005) 79 ALJR 1289 at 1295-1296 [33].

22 The plaintiff pleads and avers the following material facts:

[11] Between 18 June 1992 and the date of commencement of these proceedings Mr Pullinger and Mr Lucas were the directors of, and former shareholders in, Evenfont and were at all material times the directors of and, together with Glowbye Pty Ltd shareholders in, Truegain.

[12] Mr Pullinger and Mr Lucas at all times managed the activities of Evenfont and Truegain, and whatever was done by Evenfont and Truegain was done by Mr Pullinger and Mr Lucas on behalf of Evenfont and Truegain or under the direction and control of Mr Pullinger and Mr Lucas.

[13] Mr Pullinger and Mr Lucas, or one of them, compiled and signed each Entry for Home Consumption referred to and particularised in the claim, or gave direct instructions for the compiling and endorsement of each such Entry, and Mr Pullinger and Mr Lucas were aware of the existence of false particulars in each of the said Entries.

[14] At all material times Evenfont’s Rutherford premises had constructed on it the following storage tanks each of which was used for the storage of the product shown, and only the product shown:

Tank Number Used for the Storage of

Tank 113 Motor Sprit, as from approximately 25 March, 1997

[15A] The product contained in tanks 111 and 112 (and tank 113 as from on or about 25 March, 1997) at Evenfont’s premises at Rutherford (herein after referred to as “motor spirit”) was alternatively referred to as motor spirit, white spirit, light, light heating oil, or simply, “W/S” or “LT” in the business records of Evenfont and by Evenfont, and was at all times a petroleum product identical to, and having all the properties of, gasoline, and dutiable accordingly.

[15B] In the alternative, if at any time the product contained in tanks 111 and 112 (and, latterly, tank 113) was not motor spirit and not a petroleum product identical to, and having all the properties of, gasoline, but some other form of white spirit, it was dutiable nevertheless at no less than the rate herein after averred for motor spirit and gasoline, being manufactured by Evenfont for blending with leaded and unleaded patrols at the premises of Marina, a business owned and operated by Camile Trading Pty Ltd, and at other premises, and was at all times so blended after its manufacturer by Evenfont with leaded and unleaded petrols at such and thereafter sold as gasoline.

Excise Tariff Act

23 Evenfont supplied a copy of the Weekly Entry to Mr Drummond, an excise officer attached to the Petroleum Section of Customs with a copy of its weekly statement of operations. The statement of operations detailed all the raw product that had entered the refinery during the accounting week, what product had undergone refining processes, what end-products, and the quantities of the end-products, that had been produced as a result of the process of manufacture.

24 Evenfont’s licence required it to keep records and to furnish returns as directed by the Chief Executive Officer of Customs. The statement of operations was one of the records that it was required to keep under the terms of its licence. After the Rutherford plant commenced operations the form of the statement of operations was modified by the addition of a column recording inter-company transfers of product and the movement of product described as “residuals”. Evenfont kept an internal statement of operations recording the production at the Rutherford plant. It maintained records of the movement of manufactured product transported from the Rutherford plant (the outgoing tankers schedule).

25 On 22 September 1997 Customs officers executed a search warrant and seized documents that were located at Evenfont’s head office at Seven Hills and at the Rutherford plant. The seized documents included the Statements of Operations and the internal Statements of Operations for the Rutherford plant and the outgoing tankers schedules.

26 The proceedings were commenced by statement of claim which was filed on 20 January 1999. At that time the plaintiff was the Chief Executive Officer of Customs, who then had responsibility for the general administration of the Act. As a consequence of certain changes to which it is not necessary to refer, that responsibility now resides with the Chief Commissioner of Taxation, who was substituted as plaintiff in the proceedings.

27 The trial was conducted by the parties on the common understanding that Item11(A) of the Schedule to the Excise Tariff Act specified the rate of duty payable in respect of:

Gasoline and other petroleum of shale spirit, having a flashpoint of less than 23 degrees Celsius when tested in an Abel Pensky closed test apparatus, … .

Excise Tariff

28 The plaintiff was given leave to amend the pleading to include the averment in par 15C.

29 It had at all times been the plaintiff’s case that one of the products manufactured at the Rutherford plant and variously described as “motor spirit”, “white spirit”, “white shit”, “W/S”, “light” or “LGT” was dutiable under Item 11(A) as “gasoline” in that it had a flashpoint of less than 23º C. One plank of the defendants’ case was that “gasoline” is a substance having characteristics in addition to a flashpoint of less than 23ºC and that the Rutherford plant was not capable of producing “gasoline”. The defendants acknowledged that on occasions they had declared product produced at the Rutherford plant as “motor spirit” dutiable at the Item 11(A) rate but asserted that this had been done because they understood, wrongly, that petroleum product which was to be blended by the purchaser and sold as petrol was subject to the higher rate of duty.

30 Professor Batts gave evidence of the characteristics of gasoline as the term is understood within the petroleum industry. He explained that many petroleum products have a flashpoint of less than 23ºC and yet are not gasoline. Gasoline is a fuel that is able to work efficiently in an internal combustion engine. In the petroleum industry in the period 1996 – 1997 gasoline was understood to be a substance with the characteristics specified in Australian Standard AS 1876. It was required to possess an octane rating within specified parameters. The Rutherford plant did not have the facilities necessary for the downstream processing of motor spirit to produce gasoline having the characteristics specified in AS 1876. I accept Professor Batts’ evidence in these respects.

31 “Gasoline” is not defined for the purposes of the Act or the Excise TariffAct. Its inclusion in the Schedule may be thought anomalous. Gasoline is the name used in the United States for the product that in this country is known as “petrol”: the Macquarie Dictionary, 2nd Revision. The term used in AS 1876 is “petrol”. Item 11(A) of the Schedule refers to three substances; “gasoline”, “other petroleum” and “shale spirit”, having a flashpoint of less than 23ºC. Since gasoline is a petroleum product and it has as one of its characteristics a flashpoint of less than 23ºC it is not clear what purpose its inclusion in Item 11(A) was intended to serve.

32 “Gasoline” is distinguished for the purposes of the Schedule from “other petroleum”, having a flashpoint of less than 23ºC. I am not persuaded beyond reasonable doubt that any product manufactured at the Rutherford plant was “gasoline” within Item 11(A) of the Schedule.

33 The pleading of par 15B is obscure. Read literally it avers that a product not being “motor spirit” or “gasoline” is nonetheless dutiable at the rate applicable to “motor spirit and gasoline” because it was manufactured by the defendants for blending with leaded and unleaded petrol by the purchaser, Camile Trading Pty Ltd (Camile). The liability to pay duty is on the manufacturer of excisable goods and does not depend upon the use to which the product is put by the purchaser. Mr Goot was not able to explain the reason for the inclusion of par 15B. The plaintiff does not rely upon it. (T’cpt 861).

34 The plaintiff accepted that his case in relation to each of the offences charged is dependent upon the averment in par 15C, that the product contained in tanks 111 and 112 and (from 25 March 1997) 113 was other petroleum having a flashpoint of less than 23ºC when tested in an Abel Pensky closed test apparatus and was dutiable as being within Item 11(A) of the Schedule. (T’cpt 861-862)

35 Mr Lucas described the production process at the Rutherford plant. His description was consistent with the account given by Professor Batts who inspected the plant in 2003 and again in 2007. The plant was not operational on either of these occasions but the distillation columns and other facilities were as they had been in 1996-1997, save that the sidedraw tray attached to column 2 had been removed. Mr G Coombes, a Customs officer inspected the plant in June 1997 at the time of the Customs audit. His description of the plant, which is contained in a Minute annexed to his affidavit is consistent with the account of Mr Lucas and Professor Batts. In light of the issues that remained live following the amendment that is reflected in the 2FASOC, it is sufficient to describe the operation of the Rutherford plant in general terms.

36 The Rutherford refinery had two distillation columns. Crude oil was drawn through a reactor vessel into the Stage 1 column. The material in the crude oil with a boiling point of up to approximately 140ºC to 145ºC vaporised and was drawn through the top of the column into a condenser, from where it condensed and drained into a receiving vessel. This product is described as Stage 1 overheads. The Stage 1 overheads were pumped from the receiving vessel into storage tanks. Stage 1 overheads were a clear fluid.

37 The remaining product in the Stage 1 column was pumped through to a heat exchanger and its temperature was raised. From the exchanger it was pumped into the Stage 2 column. The Stage 2 column was fitted with a re-boiler, which heated the material causing the lighter fractions to vaporise and come over the top of the column into a condenser, from which they would condense and drain into a receiving vessel. The product of the Stage 2 column is referred to as Stage 2 overheads. Stage 2 overheads were pumped to storage tanks from the receiving vessel. The Stage 2 overheads varied in colour from a light beer colour to a golden colour with green tinges.

38 The product remaining in the Stage 2 still at the end of the production process was referred to as “residuals”. Residuals were a waxy, brown product that was solid at room temperature. The residuals were pumped from the bottom of the second stage distillation column to a storage tank. They were sold to BHP as coal spray oil; some were sold as a furnace fuel; some were used as boiler fuel to run the Rutherford plant and some were used as fuel for the boiler at the Seven Hills plant.

39 I will refer to the Stage 1 overheads as “motor spirit” and to the Stage 2 overheads as “heating oil”. The plaintiff accepted that Stage 2 overheads were dutiable under the Schedule at the lesser rate. There is an issue about the extent to which, if at all, Stage 1 overheads were blended with Stage 2 overheads at the Rutherford plant but to the extent that the plaintiff fails to exclude the reasonable possibility that a given load of product was other than pure Stage 1 overheads it was accepted that it would fail to have established that the product was dutiable at the Item 11(A) rate. It is the plaintiff’s case that all product stored in tanks T111, T112, and (from 25 March 1997) T 113, was Stage 1 overheads, a petroleum product having a flashpoint of less than 23ºC when tested in the specified apparatus.

40 Critical to the plaintiff’s case are the entries that are contained in a red bound foolscap Universal account book (Exhibit A) (the red book), which was seized by Customs officers in the course of executing a search warrant at the Rutherford plant on 22 September 1997. The red book includes details of the product that was transported from the plant. In some instances the storage tank from which the product was loaded is stated. The plaintiff avers that the red book accurately sets out (except where indicated to the contrary in the 2FASOC) the identity and amount of petroleum goods manufactured at the Rutherford premises and the date and destination of outbound petroleum goods.

41 Entries in the red book were made by Andrew Carter the manager of the Rutherford plant and by the shift supervisors; Mark Chapman, Mark Bonomini, Terry Brown and Rodney Rinkin. It has the appearance of being a daily log of events recording incoming and outgoing product and incidents occurring during the manufacturing process. The product loaded at the plant is described with the use of abbreviations that include “w/s”; “Lt”; “W/S”; “light” and “Lgt” and “light H.O”. It is the plaintiff’s case that these references are to Stage 1 overheads that were dutiable at the rate prescribed in Item 11(A). Other entries refer to “H/O” and “heavy HO”, which the plaintiff contends are references to the Stage 2 overheads, which it is accepted were dutiable at the rate prescribed in the Schedule for heating oil. Where the red book records product loaded from tanks 111, 112 and (after 25 March 1997) 113 it is the plaintiff’s case that the product was Stage 1 overheads which were dutiable at the Item 11(A) rate.

42 Mr Lucas and Mr Pullinger both gave evidence of being unaware of the existence of the red book until after the execution of the search warrant. Mr Goot submitted that I would reject this evidence because it was inherently implausible. In my view it was not. Mr Pullinger was based at the Seven Hills head office. His role was principally concerned with finance, strategy and sales. Mr Lucas was a “hands on” director who was present at the Rutherford refinery four days a week for significant periods on each day. Mr Lucas gave directions concerning the manufacture and loading of the product. He did not have a designated office at the plant but he made use of the office that was next to Mr Carter’s office. The red book was located in the top drawer of a four-drawer cabinet in Mr Carter’s office. Among the other entries in the red book there are instructions for the shift supervisors. There is not a single entry in Mr Lucas’ handwriting in the red book. The plaintiff contends that Mr Lucas was engaged throughout the period covered by the red book in the regular evasion of duty, if this were so it may be thought surprising that he would sanction the maintenance of a log accurately recording details of the movement of dutiable product which were inconsistent with the elaborate paperwork trail that was presented to Customs.

43 The plaintiff relies on the averments in the 2FASOC and on the entries in the red book to establish each offence.

44 The 39 “undeclared” transactions relate to entries in the red book that record a load of manufactured product despatched from the Rutherford plant which does not correspond to a record of the same number of litres of product in the outgoing tankers schedule or in the statement of operations. It is to be observed that there are in each accounting week records in the outgoing tankers schedule and the statement of operations of a load of product which is not recorded in the red book and which in the majority of instances is broadly comparable in quantity to the alleged undeclared load.

45 It is the defendants’ case that all loads were declared to Customs and that to the extent that there are differences in the size of the load between the red book entry and the Customs’ documents, the difference may be the result of error in the red book entry or, in some cases, the result of the product being remeasured and re-dipped at the Seven Hills plant.

46 The 66 “misdescribed” transactions refer to entries in the red book which record loads of “w/s”, “light”, “lgt” and, on some occasions, loads drawn from T111, and T112, which were declared to Customs as heating oil. The defendants’ case is that the principal product manufactured at Rutherford was heating oil and that Stage 1 overheads were commonly blended with Stage 2 overheads to produce a more marketable heating oil. It was their case that blending took place in the storage tanks including tanks 111, 112 and 113 and at the point when the product was loaded into the compartments of the tankers.

47 The fact of re-dipping of the tankers at the Seven Hills plant and the blending of Stage 1 and Stage 2 overheads were in issue.

48 Mr Pullinger and Mr Lucas each gave evidence and the evidence of each was challenged. Mr Pullinger’s visits to the Rutherford plant were infrequent. He had limited knowledge of the production side of the business. The plaintiff submitted that Mr Pullinger’s evidence relating to the storage of product at Rutherford was unconvincing. There was nothing about Mr Pullinger’s demeanour or the content of his responses on this or other topics that I found to be unconvincing. The principal challenge to Mr Pullinger’s evidence was the credibility of his account that he had given instructions to Andrew Carter that if the heating oil was dark other product should be added to it to lighten it. (T’cpt 250.48-50) It is true that Mr Pullinger did not refer to his instruction to Mr Carter in his affidavit that was sworn on 25 May 2007. However, in that affidavit he set out the terms of his conversation with Mr Fletcher of Camile, which included his assertion that he had offered to arrange for Evenfont to add larger quantities of light heating oil to the product in order to lighten it. He stated that he told Mr Fletcher that he would tell Mr Carter to direct the supervisors to have a sample of blended product to show to the drivers after it had been leaded. (Pullinger affidavit 25 May 2007 at [9]) The instruction is recorded in the red book. The omission of the instruction to Mr Carter in the affidavit was not in the circumstances a matter which I considered adversely affected Mr Pullinger’s credit.

49 Mr Lucas had made a careful review of the red book and of the various documents seized by Customs at the time of the execution of the warrants. He had a thorough understanding of the production process at the Rutherford plant. He was criticised for resisting propositions which were said to clearly arise from a “common sense” reading of the red book. This criticism assumes that there was a common sense meaning of the entries in question. One criticism was of Mr Lucas’ evidence that the reference to “w/s” in the instruction dated 26/9/96 (red book p 12) was to waste slops. (T’cpt 401.40 – 402.36) The evidence did not enable me to conclude that self evidently Mr Lucas’ insistence in this respect was contrary to common sense. Mr Lucas was criticised for his refusal to comment on the purpose for which employees made entries in the red book. (T’cpt 417.46) Mr Lucas was a precise witness. I did not take from his manner of giving evidence on this topic that his unwillingness to agree to broad propositions put to him by the cross-examiner made him uncreditworthy. I did consider that Mr Lucas’ evidence concerning the entry in the red book for 17 October 1996 which reads, “loaded tanker with w.s. emptied T111, balance from T112”, was unconvincing. I make the same observation about Mr Lucas’ answers to questions concerning the entry in the red book for 31 October 1996, “switched tanks T112 (87.45%) to T 111 (7.84%)”. (T’cpt 444.45-57) There were other occasions in the course of a long cross-examination when I was left with the impression that Mr Lucas was unwilling to make what I considered to be appropriate concessions.

50 A number of former Evenfont employees gave evidence. Mr Carter evinced a reluctance to give evidence and was generally unimpressive in his presentation. His inability to recall matters did not impress as genuine. He was a witness in whose evidence I placed no reliance.

51 Mr Chapman, Mr Bonomini, Mr Brown and Mr Rinkin had all worked at the Rutherford plant at the time of these events. Each appeared to be doing his best to give truthful and accurate evidence. Mr Handcock was a driver for Camile. He, too, impressed as a witness doing his best to give truthful and accurate evidence.

52 Mr Axiak was employed at the Seven Hills plant at the time the Rutherford plant was being commissioned. He gave evidence in the defendants’ case. He was at the date of giving evidence still in Evenfont’s employ. His recall of events was relatively poor. He volunteered an explanation for an event, why tanker drivers may not have been aware of the re-dipping of their tankers, which I found unconvincing. To the extent that Mr Axiak’s evidence is inconsistent with Mr Handcock’s or with the evidence of the supervisors I did not accept it.

53 Mr Lucas described the designation of the tanks at the Rutherford plant as follows:

Tanks 100 – 102 were crude receiving tanks [200,000 litre capacity each]

Tanks 103 – 105 were for waste oil [200,000 litre capacity each]

Tanks 106 – 110 were intermediate process tanks (for storage for unfinished product and storage of residuals – although residuals were usually only kept in tanks 109 and 110, as these were the only tanks that had heating coils to keep the residuals liquid) [52,000 litre capacity each]

Tanks 111 – 112 were used for the storage of Stage 1 overheads (along with the sidedraw heating oil cut from October or November 1996) [52,000 litre capacity each]

Tanks 113 – 114 were standby tanks [52,000 litre capacity each]

Tanks 115 – 119 were waste solvent tanks [22,000 litre capacity each]

Tanks 120 – 124 were finished product tanks [75,000 litre capacity each]

54 Customs officers carrying out the search of the Rutherford premises on 22 September 1997 asked Mr Carter, the plant manager, to draw samples from tanks 124 and 111. As Mr Carter was collecting the samples from tank T111 Officer Oxford asked, “so what do these tanks contain?” and Mr Carter replied, “motor spirit”. Mr Oxford asked, “what do you use motor spirit for?” and Mr Carter responded, “I wouldn’t use this in your car. It would stuff it”. Mr Carter then took the customs officers to the control room where he accessed a computer file with a screen headed, “Tank storage”. Mr Carter made handwritten notations on a document using the data displayed in the computer file. The document with Mr Carter’s handwritten notations (exhibit D) records the products stored in the various tanks at the date of the execution of the search warrant. From this document it appears that on 22 September 1997 tanks 100 – 102 were being used to store crude oil; tanks 103 – 105 were being used to store waste oil; tanks 109 and 110 were being used to store residuals; tanks 111 and 112 were being used to store Stage 1 overheads; tanks 120 – 124 were being used to store heating oil.

55 The samples taken from tanks 124 and 111 were analysed by Terrence Flynn, an analytical chemist. He determined the specific gravity and flashpoint measurements of each. Specific gravity measures the density of a fluid compared to water, where water on the scale has a value of 1. He compared the results against the specifications contained in Australian Standard AS 3570 for automotive diesel fuels.

56 The sample taken from T124 was a clear, dark straw-coloured fluid. The sample taken from tank T111 was a clear colourless fluid.

57 The specific gravity and flashpoints recorded by Mr Flynn were as follows:

Sample	SG (15°C)	Flash point
Seal 010670, Tank T124	0.8075	62.0°C
Seal 203542, Tank T111	0.7250	13.2°C
Standard diesel	0.8657	82.0°C
Standard kerosene	0.7973	48.5°C
Standard heating oil	0.8187	66.5°C

58 Mr Flynn’s flashpoint determinations of each of the samples was carried out with the use of the Pensky-Martens Closed Cup Tester. The flashpoint of the sample taken from tank T124 was below that of authentic diesel (82°C), but similar to that of heating oil (66.5°C). From the results of the specific gravity and flashpoint tests, Mr Flynn concluded that the sample taken from tank T124 was similar to heating oil. The sample taken from tank T111 could be described as a “light cut” (a more volatile, low boiling point hydrocarbon mixture). The sample taken from tank T124 was a “medium cut” (a less volatile, medium boiling point hydrocarbon mixture). Mr Flynn explained that the sample taken from tank T111 is better described as a light petroleum fraction than as being similar to petrol. (T'cpt 179.45) A light petroleum fraction is distilled very early in the process. Mr Flynn agreed that the sample taken from T111 was not “gasoline”. (T'cpt 180.42) The product stored in tank T111 on 22 September 1997 was a petroleum product having a flashpoint of less than 23ºC and was dutiable at the Item 11(A) rate. The product stored in tank T124 on 22 September 1997 was heating oil.

59 The Rutherford plant was capable of producing the two products that Mr Flynn analysed; a clear spirit being a petroleum product with a flashpoint of less than 23ºC (the Stage 1 overheads) and heating oil (the Stage 2 overheads). Evenfont’s evidence was that it was primarily in the business of selling heating oil. Mr Lucas and Mr Pullinger each agreed that there were occasions when Evenfont declared product that it sold to Camile, which was described as “motor spirit”, as dutiable at the Item 11(A) rate. Mr Pullinger said that this occurred when Stage 1 overheads were sold to Camile to be used as an extender blended in its petrol products. (T'cpt 221.55) Mr Pullinger agreed that motor spirit was sold to Camile at a higher price than heating oil. However, he did not agree that it made no commercial sense to dispose of the Stage 1 overheads as other than motor spirit. This was because the unit price included the excise. When this consideration was taken into account Mr Pullinger’s impression was that the sale of motor spirits produced a loss position. (T'cpt 229.40-45) It remained unclear, given this circumstance, why Evenfont sold Stage 1 overheads to Camile as motor spirit on any occasion.

60 It was Mr Lucas’ account that whenever Stage 1 overheads were sold without having been blended with Stage 2 overheads, the product was described on the delivery dockets and invoices as “motor spirit” and was declared to Customs as motor spirit. Duty was paid at the Item 11(A) rate. Mr Lucas said that he used the term “motor spirit” after receiving advice from Ms Wheat, the excise consultant retained by Evenfont. Ms Wheat was with Price Waterhouse at the time. Although the motor spirit sold by Evenfont to Camile was not gasoline, Evenfont paid excise duty on it at the gasoline rate because it knew that it was going to be blended by Camile with petrol.

61 In the plaintiff’s submission, it strained credulity that Mr Pullinger and Mr Lucas, both of whom had a history of involvement in the petroleum products industry, might have entertained the belief that excise was payable at a higher rate because the product, once entered into home consumption, was to be blended by the purchaser. Mr Robinson submitted that the plaintiff’s submission was to be assessed against the pleading of the same misconception in par 15B of the 2FASOC. Mr Robinson pointed to the introduction into the Act in 1994 of the provisions dealing with blended petroleum products. In his submission, it was easy to understand that Mr Lucas and Mr Pullinger may have entertained some confusion concerning the operation of the provisions. There was no evidence of any advice given by Ms Wheat with respect to the payment of duty on product sold to Camile as an extender to be blended with petrol. However Mr Lucas and Mr Pullinger were not challenged that the claimed basis for payment at the higher rate was nonsensical.

62 In the course of submissions Mr Goot relied on records, which showed the delivery of specified loads of motor spirit to Camile and its returns to the Office of State Revenue, which contained declarations of each such delivery. The point made was that the quantities were identical. The inference was that Camile had sold the exact amounts, a circumstance which did not sit well with acceptance of the claim that the product had been sold to be blended. The fact that Camille may have on sold the product on a given occasion without blending it, is not in the circumstances a basis for rejecting the evidence of Mr Lucas and Mr Pullinger concerning their understanding of the use to which the product was to be put.

63 I turn firstly to the evidence concerning re-dipping. Mr Coombes, a senior inspector with the Petroleum Group of the Inland Revenue Branch of Customs said that Evenfont had asked to be allowed to test the Rutherford process as part of commissioning the new plant and that Customs consented to this on the basis that any product manufactured at Rutherford was to be taken up in the records maintained at Seven Hills and that this would be confirmed by a subsequent audit at the Rutherford plant.

64 In a Minute dated 17 December 1996 Mr Coombes recorded Evenfont’s request that its existing licence covering the Seven Hills plant remain in place for a concurrent period of up to three weeks to permit the staged clearance of product from the old site. Existing receipt, storage and production records were to be maintained at Seven Hills during this period and a new set of records in the same approved format to be utilised at the new site. Mr Coombes recommended that an amended excise manufacturers licence for the new site be immediately issued and that the existing manufacturers licence remain in force until 24 January 1997 to allow for the progressive clearance of excisable goods from the Seven Hills premises.

65 It is Evenfont’s case that the transfer of its licence to the Rutherford plant was effected on 27 January 1997 and that until that date it was required to deliver any excisable product into home consumption from its Seven Hills premises. Clause 11(a) of its Permission required that duty be assessed according to the quantity of each delivery corrected to 15°C. At the Rutherford plant a sample was generally taken at the time the tanker was being loaded and this was measured in the control room by Mr Lucas, Andrew Carter or one of the supervisors. The measurements were recorded on a handwritten sheet that was sent by facsimile to the Seven Hills office. At the Seven Hills office the measurements were corrected to 15°C for each load.

66 After the tanker was loaded at the Rutherford premises the driver would dip each of the tanker’s compartments to measure how much product had been loaded. This information was entered onto a load sheet, which identified the product, the quantity and the destination. It is the defendants’ case that in the period between September 1996 and 27 January 1997 when tankers containing product produced at the Rutherford refinery reached the Seven Hills premises they would be re-dipped so that the amount of product could be verified. The trip between Rutherford and the Seven Hills plant takes around two hours. Product that left Rutherford at about 36 - 46°C had generally cooled to around 25 – 30 °C by the time it arrived at the Seven Hills premises. Mr Lucas said that it was common for there to be discrepancies between the measurement taken with the dipstick at Rutherford and the measurement taken on re-dipping at Seven Hills. This was largely due to the change in temperature. In some cases Mr Lucas suggested that the discrepancies were the result of human error, either in the measurement taken by dipping or in recording the result.

67 Sam Axiak said that in late 1996 trucks started to come to the Seven Hills plant from Rutherford and that it had been his understanding that product manufactured at the Rutherford plant had to pass through a Customs point at Seven Hills. Although these trucks were not loaded or unloaded at Seven Hills, all of them were dipped/measured by either him or by employees acting at his direction. The process took about 10 minutes. He would take the load sheet from the driver and then dip each compartment. If the details recorded on the load sheet were correct no change was made to it. If there was either more or less product Mr Axiak changed the load sheet to reflect the correct reading. In these instances he made a copy of the corrected load sheet and placed the copy in a folder or tray in the office. The corrected load sheet was handed back to the driver. The driver always handed over the load sheet before the re-dipping although the driver did not always remain when the re-dipping was done. Mr Axiak said it was very rare for there to be a difference when the load was re-dipped. On those occasions the difference was “just a few litres out probably, yeah”. (T'cpt 627.16)

68 After a period of some months Mr Axiak recalled that the Rutherford trucks no longer came to the Seven Hills premises, unless they came there to be loaded or unloaded. He had been told that product manufactured at Rutherford no longer had to pass the Customs’ point at Seven Hills.

69 Allan Handcock worked with Camile as a tanker driver. He used to pick up loads from a firm he knew as Redline. Redline was a business name owned by Truegain. It was the name used by Evenfont for the business carried out at the Seven Hills plant. Mr Handcock said that when he took a Camile tanker to Rutherford for filling he would dip the filled compartments to establish the quantity and check the figure with the Evenfont staff to ensure that the two coincided. He recorded the quantity so that he was in a position to inform Camile of the load when he delivered it. Sometimes Rutherford staff would dip the tanker and give him the figure to check. Mr Handcock recalled that although meters were always available for use on the Rutherford tanks, sometimes the staff bypassed the meters when filling his tanker. When the operations at Rutherford commenced he and other drivers had been instructed on all occasions to take the load collected from Rutherford to the Redline premises at Seven Hills. They had been instructed to park the tanker at the Seven Hills premises for around two hours. This instruction was given whether the final destination of the load was Camile’s premises at Albion Park or for delivery to a petrol station known as Truck Stop 31 at Marulan. At no stage during the period when the tanker was at the Seven Hills premises was it dipped. Mr Handcock had no recollection of ever encountering a member of Evenfont’s staff at Seven Hills re-dipping any tanker that he had taken there. During the period when the tanker was waiting at Seven Hills, Mr Handcock usually slept in the tanker or on a lounge in the lunchroom. He did not receive any documentation at the Seven Hills plant. He was never given a reason for the Seven Hills stop. He took around a half dozen loads from the Rutherford plant to the Seven Hills plant.

70 Rodney Rinkin was employed by Evenfont at the Rutherford premises between 1996 and 1998 as a supervisor. He reported to Mr Carter. He had no recall of an instruction that tanker drivers leaving Rutherford with product were to go to the Seven Hills plant before delivering the load to Camile, which was located at Albion Park. He never gave an instruction on these lines. He understood that Rutherford was a bonded area for Customs.

71 Mr Bonomini commenced working at the Rutherford plant around February 1996. After the refinery commenced operations he worked as a supervisor reporting to Mr Carter. He had no recall of an instruction that tanker drivers were to convey their loads to the Seven Hills plant before delivering the product to the customer.

72 Mr Chapman was also a supervisor at the Rutherford plant. He did not give any instruction for tankers leaving Rutherford to go to Seven Hills on their way to the Camile premises at Albion Park. Mr Chapman had not known that during the commissioning phase the Rutherford plant did not have a “licence for the production of product”. (T’cpt 679.51-54) He had no recall of instructing tanker drivers to go to Albion Park (the Camile premises) via the Seven Hills plant. (T’cpt 675.10-13)

73 I put to one side that Mr Carter had no recall of giving any instruction that tanker drivers were to take their loads via Seven Hills during the commissioning phase. I take into account that none of the three supervisors recalled giving such an instruction and it is to be expected that if it happened they would have been responsible for giving the direction. However, Mr Handcock’s evidence provided support for the acceptance of Mr Lucas’ account that in the commissioning phase tankers were directed to take loads from Rutherford to Seven Hills. The fact that Mr Chapman and Mr Rinkin did not recall that the Rutherford plant was not the subject of Evenfont’s manufacturers’ licence in the initial period may suggest that their memory of events after a number of years is imperfect. Mr Handcock recalled the instruction because he had to make the detour via the Seven Hills plant, which was unexplained oddity. Mr Handcock said that his tanker had not been re-dipped. While it is true that he may have been resting during this downtime at Seven Hills I would have expected him to remember handing over his load sheet so that the load could be re-dipped.

74 I accept that tankers taking loads from the Rutherford plant were for an initial period directed to stop at the Seven Hills plant before delivering the load to the purchaser. Since it is not suggested that many loads were on re-dipping found to differ in quantity from the measurement taken at the Rutherford plant it is open to consider that Mr Handcock’s tanker could have been re-dipped and because no alteration was made to the load sheet he has no recall of the matter. Mr Handcock’s evidence is consistent with the acceptance of Mr Lucas’ evidence in this respect.

75 In my view the re-dipping issue assumed an importance that it did not warrant. The differences between the quantity described in the red book and the quantity of the load in the statement of operations (being a load not recorded in the red book in the relevant period) is in relation to transaction nos. 2, 3, 5, 6, 12,13, 19, 20, 21, 23, 26 & 27, 28 & 29, and 38 too great to be explicable as the result of a variation detected on re-dipping by reason of the load cooling or otherwise. Mr Axiak did not suggest that he had ever found a discrepancy of more than a few litres on re-dipping. Mr Lucas offered re-dipping as one possibility based on his knowledge of the procedures that were in place during the initial phase of operations of the Rutherford plant. He did not say that he had recall of any occasion when a substantial discrepancy was reported as the result of re-dipping. Indeed, assuming that all loads in the period 10 September 1996 to 27 January 1997 were re-dipped at the Seven Hills plant it is noteworthy that in the great majority of cases the measurements were identical.

76 The difference between the size of the loads recorded in the red book and the size of loads recorded in the outgoing tankers’ schedule and the statement of operations is not explained by the evidence of re-dipping at the Seven Hills plant.

77 Customs carried out an audit of the Rutherford plant for the period 1 February to 30 April 1997. Mr Coombes said that the tests carried out as part of the audit process would have included a comparison of weekly crude oil receipts against storage, transfer and production losses; comparing weekly throughput losses; comparing monthly excise payment against monthly invoice sales; establishing that the measuring equipment was accurate; ensuring that all receipts were accounted for; ensuring that all deliveries were accounted for; establishing that the statement of operations correctly reported quantities for the relevant periods; checking the accuracy of converting dip figures to standard volume and ensuring that the results agreed with the closing stock; and establishing that all crude oil receipts were accounted for. One hundred per cent of relevant transactions during the audit period were examined.

78 Mr Coombes concluded at the end of the 1997 audit that all relevant excise duty had been paid by Evenfont. As the plaintiff submitted, Mr Coombes did not have access to the red book. However, it is to be borne in mind that Mr Coombes and the other officers responsible for the 1997 audit were aware that Evenfont’s Rutherford plant was the subject of interest to Customs’ investigations branch at the time they conducted the audit.

79 At the conclusion of the evidence the plaintiff conceded that he could not establish the basis for the allegations with respect to certain of the transactions that he particularised in the 2FASOC. In a written submission it was said:

[8] The plaintiff is willing to concede now, after all the evidence is in, that, in all the instances where the same petroleum quantity, or potentially the same petroleum quantity, can be located within the Outgoing Tanker record as is located in the Red Book on the same day or within a reasonable time either side of that day, a finding beyond reasonable doubt of those charges should not now be expected, and that the related explanations, whatever they are, should be accepted and that those charges should be dismissed.

[9] The rationale for this concession is that cases where the quantities may match exactly, after explanation, are not dependent upon a re-dipping operation. There are 11 such examples and they are ID nos: 10, LL1, LL2, LL3, LL4 (item for 33,000 litres on 2 January, 1997, paragraph 38, page 4 of PL1), ID 24, 26, 27, 30, 36 and 40 (for 10,000 litres on 1 April, 1997, paragraph 62, page 13 of PL1.

80 In addition to the 11 transactions referred to in paragraph 9 of the above submission, Mr Goot conceded that the plaintiff could not establish transactions 28 and 29 (T'cpt 778.1).

81 Mr Goot noted that the transaction on 2/1/97 involving 33,000 litres of dark HO was not pressed. The load was within the pleading, but had not been allocated a transaction ID number. Transaction 99 was also abandoned by the plaintiff. (T'cpt 778.40-45)

82 Truegain is charged as second defendant with every offence in the 2FASOC. Beyond the averments in pars 7 and 8 of the 2FASOC that Truegain is the ultimate holding company of Evenfont and at all material times was the proprietor of the registered business names Redline Lubricants and Australian Waste Oil Refineries and permitted Evenfont to use those business names, there is nothing in the averments or the evidence to establish a basis for its liability for any of the offences. So much was acknowledged by Mr Goot in the course of submissions. (T'cpt 727.52-728.1)

83 The accessorial liability of Mr Pullinger and Mr Lucas is based upon the averment in par 13 of the 2FASOC and such inferences as are drawn from the signing of the Weekly Entry in respect of each group of related charges for the accounting period. In written submissions Mr Goot put the basis of the accessorial liability of Mr Lucas and Mr Pullinger in this way:

The critical focus in these proceedings is upon the actions of the two personal defendants, the corporations being merely static entities. If the Court is satisfied that the offences were committed this could only have been with the involvement of Mr Lucas the fourth defendant in the preparation of the documents which supported the declarations made to Customs. Mr Pullinger the third defendant knew what products were being manufactured and sold and he was involved in the general running of the business (eg T227). The evidence shows that the two personal defendants necessarily planned the deception.

84 The transactions that are alleged to have involved the evasion of duty by the failure to declare loads of motor spirit or heating oil and which the plaintiff did not abandon at the hearing are transactions nos. 2, 3, 4, 5, 6, 10, 12, 13, 17, 16, 19, 20, 21, 23, 38, 41, 42, 43, 49, 53, 54, 63, 64, 67, 70, 76, 77, 86, 87, and 100.

85 PL 1 is an exhibit to Mr Lucas’ first affidavit. Tab 1 of PL1 is a table prepared by Mr Lucas which records the red book entry in respect of each load of manufactured product that the plaintiff alleges Evenfont failed to declare. In the adjacent column of Tab 1 to PL1 Mr Lucas records details taken from the outgoing tankers schedule and the statement of operations recording a load of manufactured product which was declared to Customs in the accounting week and for which there is no entry in the red book. The discrepancies in the size of the loads are significant in the sense that they are, generally, more than a few litres and are not explicable on the basis of re-dipping. However in many instances they involve differences of less than 1,000 litres. The plaintiff's case in relation to each charge of evasion of the payment of duty particularises the whole of the load recorded in the red book as the amount of duty evaded. This is based upon demonstrating that a load identical to the load described in the red book does not appear in the statement of operations. It overlooks that a load more or less the size of the load recorded in the red book does appear in the statement of operations and is not recorded in the red book.

86 In the course of oral submissions, I raised with Mr Goot whether the plaintiff relied on any evidence that the loads recorded in the statement of operations and outgoing tankers schedule, but not recorded in the red book, related to production from Seven Hills. (T'cpt 713.22-34) It was not submitted that there was any evidence of unaccounted for product manufactured at the Seven Hills plant.

87 In written submissions it was put on the plaintiff’s behalf that:

Bearing in mind that both Rutherford and Seven Hills refineries were operational at the time and there was a significant amount of ex-Seven Hills product which might be declared and be recorded as having duty paid on it, it would not be too difficult to assert that particular Seven Hills products were the missing ex-Rutherford product, provided only that a compelling reason could be given which might account for the inevitable frequent mis-match in quantities and, bearing in mind that any Customs audits were subject to the accuracy of the source documents provided, that internal Statements of Operations were created which might tend to support the product originating from Rutherford if allegations such as those here were ever made. (WS [4])

88 I reject the submission that I should reason, in the absence of evidence, that Evenfont may have unaccounted quantities of product that had been manufactured at the Seven Hills plant and that it declared loads of this product in each of the accounting weeks that is the subject of a charge.

89 It was not submitted by the plaintiff that in those instances where it is alleged the defendants failed to declare a load and where the statement of operations, outgoing tankers schedule and Weekly Entry demonstrate that a load, albeit lesser than the load recorded in the red book, was declared that the defendant is to be found guilty of the evasion of duty on the difference between the two. The charges are framed, and the plaintiff’s case is, of a failure to declare the whole of the load recorded in the red book.

90 In the majority of cases it is to be noted that the difference between the amount of the load recorded in the red book and the amount recorded as in the outgoing tankers schedule and the adjusted amount (corrected to 15ºC) in the statement of operations favours Evenfont. However, this is not invariably so.

91 I turn now to four of the “undeclared” transactions that involve significant discrepancies between the red book entry and the loads that were declared to Customs.

92 Transaction 3 is particularised in respect of the three related charges pleaded in par 20 of the 2FASOC. Each of the charges under s 120(1) arise out of the submission of the Weekly Entry (1W62688001), which appears to have been signed by Mr Lucas on 24/9/96, and which are particularised by reference to three transactions each alleged to involve the failure to declare loads of heating oil.

93 Transaction 3 refers to the following red book entry:

18.9.96

Loading marina tanker with 34,800 Lt of H/o Start 9.00am Finish 11.30
Broken valve on H/o tank 124 outlet. Gravity feeding through to other tank and loading truck through this tank.

94 The outgoing tanker’s schedule does not record a load of 34,800 litres of heating oil on 18/9/96. There is, however, an entry for that date showing that tanker SLM610 (docket 11393) collected a load of 29,585 litres of heating oil, which after adjustment yielded 29,407 litres. The statement of operations for the week ending 24/9/96 records for 18/9/96 the production of 29,407 litres of heating oil (docket 11393). The red book does not record 29,585 litres of heating oil being loaded on 18/9/96.

95 Mr Lucas offered as one explanation for the discrepancy that on arrival at Seven Hills one tanker compartment containing contaminated product had been unloaded for bleaching and filtering at the Seven Hills plant. He explained that the tanker’s first compartment, which was loaded from the bottom of the storage tank would on occasions be contaminated by the dirt, sludge, rust and/or water that was contained on the bottom of the tank. This explanation is plausible and I am unable to conclude beyond reasonable doubt that transaction 3 involved a failure to declare 34,800 litres of heating oil or, indeed, a failure to declare 5,215 litres of heating oil.

96 There were three transactions particularised as instances of loads that were not declared to Customs, which Mr Lucas was not able to explain by reference to the records that were available to him.

97 The first transaction in this category is no 77. This is one of the transactions which is particularised in respect of the three related charges pleaded in par 56 of the 2FASOC. Each of the charges under s 120(1) arise out of the submission of the Weekly Entry (1W70778001) for the week ending 17/3/97, which appears to have been signed by Ms Pedro on 18/3/97. The plaintiff particularises eight transactions in support of these offences and the offence under s 61.

98 Transaction 77 concerns a load of 31,970 litres of heating oil that it is alleged was not declared to Customs in the Weekly Entry,

99 Transaction 76 also concerns a load of 34,970 litres of heating oil, which is alleged to have not been declared to Customs. The two transactions arise from the following entries in the red book:

15.3.97	4.20 unloaded 33,500 litres of clean oil per Vic to T101 → T102
5.00 loaded 34,970 litres HO ex T122 & T123 to Newlands.
6.15 loaded 31,970 litres HO ex T123 to Newlands

100 Mr Lucas suggests that the two entries recording loads to Newlands is a mistaken duplication. He offers two reasons for this conclusion. First, there is the similarity in the last three digits of the two loads. Second, Newlands tankers only came to the Rutherford plant when dropping off a load of crude oil from Narromine. Mr Newlands’ company was called “Hiring Services”. On occasions Newlands’ tankers would be back-loaded after dropping off a load of crude oil. The red book shows only one delivery of crude oil from Newlands on 15/3/97. This was a load of 33,500 litres. Annexed to Mr Lucas’ second affidavit is a copy of a page from the “green book”, the register of crude oil deliveries to Evenfont. This records one delivery from “Hiring” on 15/3/97; 33,500 litres of crude oil from Santos. I accept that the inference to be drawn from the register of crude oil deliveries is that only one Newlands tanker attended the Rutherford plant on 15 March 1997. The maximum capacity of the Newlands’ tankers was around 35,000 litres. It is unlikely that two loads, in a total of 66,940 litres of heating oil, were loaded to Newlands on 15 March 1997. The entries in the red book that are extracted above appear to have been written by the same person. It may be thought curious that this person should incorrectly record two loads to Newlands. However, the explanation that Mr Lucas proposes is plausible and I cannot be satisfied beyond reasonable doubt that two loads of heating oil were despatched to Newlands on 15/3/97.

101 The outgoing tankers schedule and the statement of operations for the accounting week ending 17/3/97 do not record a load of either 34,970 litres or 31,970 litres of heating oil. Each of those documents records a load of 21,000 litres of heating oil as product manufactured by Evenfont and delivered into home consumption in the accounting week ending 17/3/97 and for which there is no entry in the red book. A copy of the Evenfont invoice, No 1736, dated 15/3/97 records delivery of 21,000 litres of heating oil to Camile. I am not satisfied that two loads of heating oil were transported from the Rutherford plant on 15/3/97. I am satisfied that Evenfont declared the delivery of 21,000 litres made to Camile on 15/3/97.

102 The other two transactions that are particularised as undeclared loads of manufactured product entered into home consumption are transactions 86 and 87. These are transactions which are particularised in respect of the three related charges pleaded in par 58 of the 2FASOC. Each of the charges under s 120(1) arise out of the submission of the Weekly Entry (1W70848003) for the week ending 24/3/97, which appears to have been signed by Mr Lucas on 25/3/97.

103 Transaction 86 refers to the entry in the red book:

22/3/97 2.30pm loaded 25,000 Lt of H/o Ex T123. Lewingtons.

104 There is no record of this load in the outgoing tankers schedule or in the statement of operations and it is not included in the Weekly Entry. Mr Lucas suggests, by reference to the entries in the red book for the period up to and including 22/3/97 a possible explanation for the unexplained load. It appears that on the evening of 21/3/97 Column 2 flooded. Mr Lucas suggested that a likely result of this is was that T123 became contaminated with residuals and that the entry refers to a load of waste oil from the bottom of tank T123, which was transported to Seven Hills to be sold as coal spray oil or furnace fuel.

105 Transaction 87 is the alleged failure to declare 32,410 litres of heating oil. The red book records activities on 23/3/97 to 10.30pm. The date 24/3/97 is not recorded, although certain of the entries on p 143 would appear to relate to activities on that date. The entries include:

10.30pm	Changed residuals from fuel tank (2.250m) to T109 (75.82%). Loaded 33570 HO ex 121/122 Marina Bernie PZS897
Ding will be in to back load later tonight so I’ve got the resids running to T110 – T109 for as long as possible ie 90% or too high in column. There was 1.83m in fuel tank at 17:00 so there is a good 6 hours running time in there. ….
7.30pm	Loaded 32,410 Lts of H/O Ex T124/23. Vic. MX – 36EC

106 The outgoing tankers’ schedule records a load of 4,000 litres of heating oil that was collected by a Marina tanker (docket 11753) on 24/3/97. The red book does not record this load on or about this date. The load after adjustment to 15º came to 3,964 litres. The outgoing tankers schedule records a load of 33,570 litres of heating oil (docket 11754) that was collected by PZS897 on 24/3/97. After adjustment this was a load of 33,335 litres. The statement of operations for the week ending 24/3/97 records a 37,299 litres referable to dockets 11753/54 being the total of the two loads adjusted to 15º. This quantity of heating oil was declared in the Weekly Entry. Mr Lucas is unable to explain the discrepancy between the figure of 32,410 litres in the red book and the 4,000 litres declared in the Customs documentation. He suggests as one possibility that the Rutherford plant was running very short of space to store residuals and that most of transaction 87 was made up of residuals.

107 In assessing the explanations that Mr Lucas offered in respect the three unexplained undeclared loads I note the following matters. After the grant of leave to amend the pleading to aver the matter in par 15C, the defendants were given leave to adduce further evidence. This included a copy of a letter from the investigation section of Customs to Ms Wheat, of Price Waterhouse, who was at the time acting on Evenfont’s behalf. The letter refers to the investigation then being carried out by Customs into “a company that your client supplies with product”. The letter is dated 20 December 1996. Taken with certain of the documents annexed to Mr Coombes’ affidavit, it is reasonable to infer that the reference to the company that was the subject of investigation was to Camile. I accept that it is unlikely that at a time when Mr Lucas and Mr Pullinger were aware that the company to which they were supplying product was the subject of investigation by Customs they would knowingly submit false records to Customs in respect of product supplied to Camile.

108 The offences charged in pars 87 – 99 of the 2FASOC each alleged the failure to declare manufactured fuel oil to Customs. It was the plaintiff's allegation that this had occurred on 25 occasions. PL2, a folder of documents, contains a schedule setting out each delivery of fuel oil that was the subject of these charges and copies of the source documents relating to each delivery of fuel oil from which Mr Lucas had traced each delivery from sale to its declaration to Customs. In his first affidavit he stated that he was able to show on all 25 occasions that the delivery of fuel oil had been declared. This was not challenged.

109 The charges alleged in pars 100 – 141 of the 2FASOC contended that the defendants had failed to declare crude oil that had been received to Customs. There is in evidence two pages from the crude oil register kept by Evenfont and the source documents that trace each delivery of crude oil that was the subject of charge and its receipt by Evenfont. Mr Lucas said that he had been able to show the receipt and uptake in Evenfont’s books of the deliveries of crude oil on all 17 occasions. This was not challenged.

110 Evenfont’s lease of the Seven Hills premises finished around May 1998. Thereafter Evenfont rented premises at Kemps Creek, which were used as its head office. Workshop and laboratory equipment from the Seven Hills plant was taken to Kemps Creek, together with the office equipment and files. On 16 November 1998 there was a break-in at the Kemps Creek premises. Mr Lucas states that tools, small pumps, a fax machine, along with many of Evenfont’s and Truegain’s items were taken. Missing property included invoices and delivery docket books. Exhibit 1 is the report of the break-in created by the investigating police attached to the Green Valley Police Station. The door of the premises appeared to have been jemmied open and some vulgar writing was placed on a whiteboard. Mr Pullinger reported that company papers, including invoices, appeared to be missing. There was no challenge to the evidence concerning the break-in at the Kemps Creek premises. Mr Lucas asserts that he would have had a better chance of explaining transaction ID 77, 86 and 87 had he had the delivery docket books and receiving docket books covering the period as well as the relevant ledgers and invoices.

111 As I have stated the plaintiff’s case that the defendants evaded the payment of duty on 66,940 litres of heating oil in the accounting week ending 17 March 1997 being the combined amount of transactions 76 and 77 cannot be established. At most the evidence would point to a failure to declare 10,970 litres of heating oil. However, I am not satisfied beyond reasonable doubt that this has been established, since it is reasonably possible that the record of the load collected by Newlands on 15 March 1997 contained in the red book is wrong. The record of two loads being collected by Newlands on 15/3/97 within 75 minutes of one another when the inference is fairly open that only one Newlands tanker was at the Rutherford plant on that day does leave open the inference that the red book entry is unreliable in the record of this transaction.

112 I am not able to exclude the reasonable possibility that Mr Lucas’ suggested explanations for transactions 86 and 87 are correct.

113 The plaintiff’s case with respect to each charge which particularises one or more loads as having been not declared to Customs is that there was a deliberate failure to declare the load carried out with the intention of evading the payment of duty and that the Weekly Entry contained a knowlngly false statement in the omission of reference to the load. I am satisfied of the accuracy of the summary that is set out in the Table that is contained in Tab 1 of PL1. I am not satisfied beyond reasonable doubt that the defendants evaded the payment of duty or made knowingly false statements in respect of transaction nos. 2, 4, 5, 6, 10, 12, 13, 17, 16, 19, 20, 21, 23, 24, 26, 27, 28, 29, 30, 36, 38, 40, 41, 42, 43, 49, 53, 54, 63, 64, 67, 70, 76, 99 and 100, because in each instance there is a load that was declared to Customs and which is not contained in the red book. This leaves open that the entry in the red book refers to the load that was declared. The differences in the amounts of the loads, may be the product of human error or which are otherwise unexplained, do not support a finding beyond reasonable doubt that there was an intentional evasion of duty (or a knowingly false statement made in the Weekly Entry) in any given case. The circumstance that on some occasions the difference between the amount of the load recorded in the red book and the amount of the load declared to Customs favoured Customs is an added reason to reject the plaintiff’s case with respect to the “undeclared loads”.

114 I do not find established beyond reasonable doubt that any of the transactions which the plaintiff particularises as instances of the evasion of duty by the failure to declare loads of product manufactured at Rutherford and entered into home consumption. It follows that I am not satisfied that any statement in any Weekly Entry submitted by Evenfont contained a statement made knowingly (or recklessly) falsely with respect to the transactions relating to loads that are particularised as being not declared to Customs.

115 I turn now to the 66 transactions in which it is alleged Evenfont evaded duty by entering for home consumption goods that were misdescribed as heating oil when they were other petroleum products for which duty should have been paid at the Item 11(A) rate. Again, the plaintiff’s case is substantially dependent upon inferences to be drawn from the contents of the red book. In particular, on the inferences that arise from the reference to loads being drawn from tanks 111 – 113 or from the abbreviated description of the product. The plaintiff’s case is that where an entry in the red book shows that “W/S”; “light”; “light HO” or “LGT” was loaded or that the load was drawn from tanks T111, T112, and, after 25/3/97, T113, the product loaded was “motor spirit” that was dutiable at the Item 11(A) rate. Not all the misdescription transactions are based on entries in the red book which refer to the product by an abbreviation consistent with it being “motor spirit” and identified a tank from which the load was drawn. This is true of the transactions nos. 1, 7, 8, 11, 25, 31, 32, 35, 37, 39, 45, 55, 74, 95 and 104.

116 The plaintiff's analysis of the red book discloses that the contents of tanks T111 – T113 were transferred or rotated within that group of tanks on 31 occasions and that the contents of tanks T120 – T124 were switched, transferred or changed within that group on 77 occasions. There is no record in the red book of any occasion when the contents of tanks T120 – T124 were switched, transferred or changed with any of the tanks T111 – T113. From this body of evidence it is submitted the inference can be drawn beyond reasonable doubt that a load described as “W/S”; “light”; “light HO” or “lgt” coming from tank T111 or T112 or T113 is the product of the Stage 1 column, being a product generically described as motor spirit and answering the description of an other petroleum product having a flashpoint of less than 23°C.

117 The plaintiff’s case derives some support from evidence apart from the red book tending to suggest that tanks T111 – T113 were used for the storage of Stage 1 overheads. Mr Lucas said that he had designated those tanks for that purpose. Those tanks were used for the storage of motor spirit on the day of the execution of the search warrant. The sample taken from T111 examined by Mr Flynn had a specific gravity of 0.725 and a flashpoint of 13.2°C. Its appearance on visual inspection was a clear, colourless fluid. The sample was consistent with the product being “motor spirit”, which is how Mr Carter described it. Mr Carter was then the manager responsible for the refinery.

118 It was Mr Lucas’s evidence that Stage 1 overheads were blended with Stage 2 overheads in the storage tanks and sometimes in the tankers in order to produce a heating oil that was lighter in colour. This was done because the colour of the oil was important to customers. Blending the Stage 1 overheads with the Stage 2 overheads also improved the function of the heating oil in winter, as it tended not to freeze up and clog a vehicle’s fuel filters. Stage 2 overheads that were not blended were sold as a darker heating oil.

119 All the tanks at Rutherford were interconnected, which meant that product could be moved from one tank to any other tank. Mr Lucas said that tanks regularly had different products stored in them. Tanks 111 and 112 would have dark heating oil stored in them from time to time, rather than light heating oil and tanks 120 – 124 would have had light heating oil stored in them from time to time, rather than dark heating oil. According to Mr Lucas, blending of Stage 1 overheads and Stage 2 overheads was regularly carried out in tanks 111 and 112 and sometimes in tank 113. Sometimes blending was carried out in tanks 120 to 124, depending on the stock level at the time. Tanks 111 to 113 were better to blend in because they were tall, vertical tanks with a narrow diameter. Tanks 120 and 124 were squat shaped with a larger diameter. It is easier to blend in narrow diameter tanks because it is possible to get a greater velocity of mixing than in a wide diameter tank.

120 The Marina tankers had between five and seven compartments. Some tankers had compartments that were manifolded, which meant that the whole tanker could be loaded through the manifold. Those tankers that were not manifolded were loaded one compartment at a time. If the tanker was manifolded blending could be carried out in the tanker by pumping a quantity of one product into tanker followed by a certain quantity of another product. Blending could be done through the loading pump, which had the ability to pump from two tanks at once.

121 Mark Chapman said that on occasions he received orders to blend product that was to be put into a particular tanker. (T'cpt 679.1-5) He said that the products had been blended in the tank and in the truck at the time of loading. It was possible to blend the product as it was pumped into the tank by opening valves to enable a stream from each of two tanks to be pumped into the compartment of the tanker. Mr Lucas decided which of the product was to be blended. Mr Chapman described the colour of the heating oil as varying from light golden to a heavy dark green. He agreed that in order to obtain a different colour heating oil he had mixed lighter coloured Stage 1 product with darker coloured Stage 2 product. (T'cpt 680.22-37)

122 Terry Brown undertook operational duties at the refinery when requested by the supervisor to do so. These included the loading and unloading of tankers. He recalled that occasionally a tanker would be filled with one product in one compartment and another product in another compartment. (T'cpt 695.9-10) Mr Brown said that Stage 1 product was blended in a tank or loaded as an individual product. He said that the blending of Stage 1 product would have been done in the heating oil tanks. He recalled that this had been done. In Mr Brown’s experience blending never took place in a tanker. (T’cpt 696.45-48) Mr Brown was not aware that colour was an important feature of the Stage 2 product.

123 Mr Bonomini’s duties from time to time included transferring products from one tank to another tank and unloading tankers bringing crude oil to the refinery and loading tankers taking refined product from the refinery. In his experience, when product was moved from one tank to another on site it was never for the purpose of mixing or blending product from Stage 2 with product from Stage 1 or vice versa. Mr Bonomini referred to Stage 1 overheads as “light ends”. It was a crystal clear fluid. He never saw the colour of the Stage 1 product change. Stage 2 was a “heavy end” or heating oil. It varied from being a clear to a slightly straw coloured maize oil product. (T'cpt 683) On occasions if there was a problem with the Stage 2 distillation column it was possible that there would be a carry over of the heavier ends. In the context I understood him to be acknowledging that the colour of the product in such an instance may be darker. He agreed that the colour of the products had been monitored. He also agreed that samples of the product were sent with the tanker loads to Marina. He was not aware that there was any issue from the customer’s point of view with the colour of the product. He understood from Les Fletcher, who ran Marina, that it was the smell of the product that caused a problem, rather than its clarity. (T'cpt 684)

124 Mr Bonomini had some recall that Mr Pullinger had given an instruction concerning the need for the driver of the outgoing tanker to be shown a sample of the product. The instruction, which appears to have been recorded by Mr Bonomini, is recorded in the red book in an entry dated 2/1/97:

Request per R Pullinger

When loading Marina Tankers with any product the driver is to be shown a sample jar containing sample of whatever we are loading.

125 When Mr Bonomini supervised the loading of tankers Stage 1 product and Stage 2 product were never loaded in a way that permitted them to be blended within the tanker. It may have happened that two products were loaded into the same compartment of a tanker. This would have been a “shandy”; (T'cpt 687.47) an expression used in the industry when a tanker driver puts the wrong product in the wrong hole. Mr Bonomini was clear in his recall in this respect. He was a credible witness.

126 Mr Rinkin described the refinery as producing two products; “light” and “heavy”. These came from columns 1 and 2. To Mr Rinkin’s knowledge, the two were not mixed together at any stage. (T'cpt 689.50-53) Mr Rinkin recalled that light used to come out of tanks T111 and T112. Tanks T123 and T124 were used for heavy. (T'cpt 690) Mr Rinkin said that the Stage 1 product was clear and it did not vary in colour. The product from Stage 2 was a “yellowy colour” (T'cpt 691.13). The Stage 2 product varied in colour, sometimes it would be a little bit darker, but not much. If there had been something wrong with the process they were instructed that it be pumped back through the other tanks. He did not recall the Stage 2 process being green in colour.

127 Mr Rinkin had a recollection of an instruction that was to do with colour variations. Mr Rinkin had no knowledge of two products being mixed in tanks to achieve the right colour. (T'cpt 692.15)

128 Mr Lucas’ evidence that the colour of the heating oil manufactured at the Rutherford plant was important was a detail that none of the staff recalled. Entries in the red book tend to confirm Mr Lucas’ evidence in this respect. On 31 December 1996 the red book records:

We need to watch the colour of our HO and vary our product tank accordingly

The following is to be adopted.

1) samples of Stage 2 product to be taken hourly and compared to those in plant (3 jars labelled DARK, OKAY, GOOD).

Anything darker than the OK sample is to be directed to storage tank T121, this tank is currently interlinked with tanks T120 and T123, all tanks will fill equally and the level transmitter for tank T121 is being used to indicate level in all three tanks

Anything that is = to OK in colour or lighter is to be directed to tanks T122, T124

When loading Marina we must check whether we need to load DARK or GOOD HO, and thus use the appropriate tank.

129 On 2/1/97 there was the request from Mr Pullinger, to which I have referred.

130 On 22/1/97 there is a notation:

Note to Shift Supervisors

* Please ensure, when loading tankers (Marina), that a sample is taken during loading (first compartment) and that the driver is shown what is being loaded

This applies to both light & heavy.

Heavy sample to be labelled and left in my office.

[This notation appears to be signed by Mr Carter.]

131 On 1 February 1997 a notation records:

Changed to T124 @ 0400. Colour OK and improving. Colour in 122 is equal to dark sample, but as only 19.3% in 122 if product is put back to this tank when colour reaches start up shade by 50% should be acceptable, by 75% will definitely be correct shade.

132 Contrary to the plaintiff’s case there are entries in the red book which do provide support for Mr Lucas’ evidence that at least on occasions blending of Stage 1 and Stage 2 overheads occurred:

§ On 15 November 1996 there is an entry that records the loading of 31,410 litres of heating oil from tank T111. It will be recalled that the plaintiff avers that the red book accurately sets out the identity and quantum of petroleum goods manufactured at the Rutherford premises except where indicated to the contrary. As I understand it, the plaintiff’s case is that the entry for 15/11/96 is an instance in which the entry in the red book is an error.

§ On 19 December 1996 the red book contains an entry that records the loading of 31,480 litres of heating oil from T111. On the plaintiff’s case this would appear to be a further error in the red book.

§ On 29 December 1996 the red book records the switching of the Stage 1 H/O tanks from T111 to T 112. Again, this on the plaintiff’s case is said to be a further error.

§ On 1 January 1997 the redbook records that 31,790 litres of H/O were loaded from T112. Later on the same day it is recorded that 1 load (35,000 litres) of H/O from tanks T111 and T112 were loaded for Marina. Whoever made this entry drew a line through the word “light” and substituted H/O as a description of the product that was drawn from T111 and T112. This is strongly suggestive that on 1/1/97 the product stored in T111 and T112 was understood by the writer to be heating oil. On the same day Mr Chapman recorded that the last 4.74% had been pumped out of T124 and into T121 of dark and that T124 “is now on line for light H/O”.

§ On 6 January 1997 the red book records two loads for Marina: 30,000 litres of light HO from T124 and a load of light from T111/T112.

§ On 3 February 1997 the red book records a load of 33,060 litres of light H/O drawn from T121/T120 and T123 for Marina.

§ On 21 February 1997 the red book records that 21,170 litres of light from T111 was loaded with 13,980 litres of light from T122 for Marina.

§ On 26 March 1997 the red book records that 13,180 litres of w/s were loaded from T112 and 17,990 litres of H/O from T124 for Marina.

133 In a Minute prepared at the time of the 1997 Customs audit Mr Coombes described the production process at the Rutherford plant. His account was based on his inspection of the plant and the account of its operation which was given to him by Mr Lucas. He noted that there were separate delivery meters for Stage 1 product and for Stage 2 product and that loads could be blended at this point or delivered pure from either Stage 1 or Stage 2. It was Mr Coombes’ understanding that an integral part of the Evenfont production process at Rutherford involved the blending of petroleum products in order to bring the end product to within certain specifications.

134 The red book does not record any instance of the marrying of any of tanks T111 - T113 with any of T120 - T124. This and the evidence of Mr Bonomini, Mr Rinkin and Mr Brown suggests that blending of Stage 1 and Stage 2 product at the Rutherford refinery in the tanks did not occur with the frequency that Mr Lucas recalled. In particular the evidence is against a finding that Stage 1 overheads were blended with Stage 2 overheads in T111 – T113 on other than rare occasions. However, the plaintiff’s contention that there was no blending of Stage 1 and Stage 2 product at the Rutherford cannot be sustained. The red book entries referred to above are against the finding, as is Mr Coombes’ Minute and my acceptance of the evidence of Mr Chapman.

135 As I have stated, the plaintiff’s case is dependent in relation to each transaction that is particularised on acceptance of the accuracy of the red book entry and that is so notwithstanding Mr Goot’s acknowledgement that there are errors in certain of the entries contained in it. The difficulty of proving a case to the criminal standard in such a circumstance is apparent. The point is illustrated by transaction 18 which is relied upon as one of two transactions in support of the three related charges pleaded in par 36 of the 2FASOC, which relate to the week ending 23 December 1996. Transaction 18 alleges that the defendants misdescribed 31,480 litres of motor spirit manufactured at the Rutherford plant on or about 19 December 1996 as heating oil in the Weekly Entry. The red book records this entry as “loaded 31,480 Lt of H/O from T111 for Marina”.

136 The outgoing tankers schedule records that on 19/12/96 tanker SLM610 was loaded with 31,480 litres of heating oil (the adjusted figure came to 31,260 litres) (docket 11562) being a product with a specific gravity of 0.808.

137 Evenfont’s invoice no. 1559 dated 19/12/96 records the sale of 31,480 litres of heating oil to Camile (docket 11562) at a unit price of 0.485. The evidence is consistent with this being the unit price for heating oil. A copy of delivery docket 11562 is in evidence: it records the product as 31,380 ltrs of H.O and the registration no of the tanker as SLM 610.

138 The plaintiff submits that I would be satisfied beyond reasonable doubt that the product loaded was motor spirit notwithstanding that the supporting documentation is consistent with it being heating oil as Mr Chapman’s entry in the red book records, because it was drawn from tank T111. As later appears, there is an entry in the red book recording an occasion when residuals were stored in T111. I am unable to accept the plaintiff’s submission.

139 Transaction 22 is particularised in support of the three related charges pleaded in par 38 of the 2FASOC, which arise out of the submission of the Weekly Entry (1W70078002) relating to the week ending 6 January 1997. The Entry appears to have been signed by Mr Lucas on 7/1/97. Transaction 22 relates to a load of 35,490 litres of product which the plaintiff alleges was motor spirit and which was declared to Customs as heating oil. This is based on an entry in the redbook dated 3/1/97, “35,490 ex T111 to Marina”. The outgoing tankers schedule for the week ending 6/1/97 records that tanker SLM611 (docket 11591) collected a load of 35,490 litres of heating oil (after adjustment 35,277 litres) and that the product had a specific gravity of 0.809. A copy of delivery docket 11591 is in evidence. It records that SLM611 delivered 35,490 ltrs of H.O on 3/1/97. Evenfont’s invoice 1590 dated 3/1/97 records the sale of 35,490 litres of heating oil delivered by tanker SLM611 for a unit price of 0.465. The red book does not purport to identify the product. The inference that the Court is asked to draw beyond reasonable doubt is that because it is said to have come from tank T111 it was motor spirit. I do not draw that inference beyond reasonable doubt.

140 Paragraph 60 of the 2FASOC charges three related offences arising out of the submission of the Weekly Entry (1W70918022) relating to the week ending 31/3/97, which appears to have been signed by Ms Pedro on 1/4/97. The plaintiff particularises six transactions (nos 88, 89, 90, 91, 92, and 93) each of which is said to be an occasion when motor spirits were misdescribed as heating oil in the declaration to Customs in support of these charges.

141 Transaction 88 concerns 11,110 litres. The reference is to the red book entry as follows:

25/3/97

7.30pm loaded. 19,840 Lt of H/O Ex T122/T121. Loaded 11,110 Lt of w/s Ex T111.

142 Together the quantities amounted to 30,950 litres.

143 The outgoing tanker’s schedule for the week ending 31/3/97 records that on 25/3/97 SLM608 (docket 11758) took delivery of 30,950 litres of heating oil. The specific gravity of the load was 0.805. The temperature of the load was 27°.

144 Evenfont’s invoice no. 1758 dated 25/3/97 records the sale of 30,950 litres of heating oil delivered by SLM608 at a unit price of 0.485.

145 Transaction 89 refers to 15,000 litres. The entry in the red book is as follows:

26/3/977am loaded 19,980 Lt of HO & 15,000 Lt light to MARINA PZS897 Bernie out of T111 & T113.

146 It will be noted that on the plaintiff's case this was a quantity of heating oil and a quantity of Stage 1 overheads. Both products came from tanks which the plaintiff allege always contained Stage 1 overheads. The combined load was 34,980 litres.
147 The outgoing tanker’s schedule for the week ending 31/3/97 records that on 26/3/97 PZS897 (docket 11760) took delivery of 34,980 litres of heating oil. The specific gravity of the product was 0.806. The temperature of the product was 27°.
148 Evenfont’s invoice no. 1760 customer dated 26/3/97 records the sale of 34,980 litres of heating oil delivered by PZS897 at a unit price of 0.485.
149 Transaction 90 refers to 13,180 litres. The entry in the red book is as follows:
[26/3/97] 8.40pm loaded. 13,180 Lt of w/s Ex T112 and 17,990 Lt of H/O Ex T124. Marina.

150 The total of the two produced a load of 31,170.

151 The outgoing tankers schedule for the week ending 31/3/97 records that on 26/3/97 SLM609 (docket 11761) took delivery of 31,170 litres of heating oil. The specific gravity of the product was 0.803. The temperature was 29°.

152 Evenfont’s invoice no. 1761 dated 26/3/97 recorded the sale of 31,170 litres of heating oil delivered by SLM609 at a unit price of 0.485.

153 Transaction 91 concerns 13,990 litres of motor spirit. The entry in the red book is as follows:

27/3/97

9.30am loaded 34010 litres to Marina (13990 litre ex T111 & 20020 litres HO ex T123 and T120) per Max SLM611.

154 The total of the load was 34,010 litres.

155 The outgoing tankers schedule for the week ending 31/3/97 recorded that on 27/3/97 SLM611 (docket 11763) took delivery of 34,010 litres of heating oil. The specific gravity of the product was 0.807. The temperature was 25°.

156 Evenfont’s invoice no. 1763 dated 27/3/97 recorded the sale of 34,010 litres of heating oil delivered by SLM611 at a unit price of 0.485.

157 Transaction ID 92 concerns 13,960 litres of motor spirit. The entry in the red book is as follows:

28/3/970815 Loaded 20010 HO ex 120/123, 13,960 light ex 111/113 to MARINA per MAX SLM611.

158 The total load was 33970 litres.
159 The outgoing tanker’s schedule for the week ending 31/3/97 records SLM611 (docket no. 11765) took delivery of 33970 litres of heating oil which adjusted produced 33664 litres. The specific gravity of the load was 0.806. The temperature was 26°.
160 Evenfont’s invoice no. 1765 dated 28/3/97 recorded the sale of 33,970 litres of heating oil delivered by SLM611 at a unit price of 0.485.
161 Transaction 93 refers to 28,440 litres. The red book entry is as follows:
30/3/97 Loaded 28440 lt of Light ex T112 to Marina per Mark SLM609.

162 The outgoing tanker’s schedule for the week ending 31/3/97 records that on 30/3/97 SLM609 (docket 11767) took delivery of 28,440 litres of heating oil which after adjustment yielded 28,156 litres. The specific gravity of the product was 0.805. The temperature was 28°.

163 Evenfont’s invoice no. 1767 dated 30/3/97 recorded the sale of 28,440 litres of heating oil delivered by SLM609 at a unit price of 0.485.

164 Transactions 90 and 91 may be thought to provide some support for an acceptance of the evidence that Evenfont was in the business of producing heating oil and that Stage 1 overheads were blended to produce a lighter, more acceptable oil.

165 Entries in the red book show a product described as HO being drawn from tanks T111/113 on occasions. An entry on 14 March 1997, records that at 9.30am “changed resids from fuel tank to T111”. This appears to be an occasion when residuals were stored in tank T111. Mr Goot submitted that it was inconceivable that Stage 2 product would have been stored in a Stage 1 tank on any occasion because it would have adulterated the tank. As the defendants submitted, no evidence was led to support that proposition and the 14/3/97 entry, if correct, does not support it. If the 14/3/97 entry is incorrect it undermines the accuracy of the red book.

166 On 7 January 1997 the red book records that 29,940 litres of H/O were loaded from tanks T124 & T122. It is to be noted that the outgoing tanker’s document records that on 7/1/97 tanker SLM608 (docket number 11598) collected a load of 29,940 litres of product described as motor spirit, which after adjustment yielded 29,641 litres. Its specific gravity is recorded as 0.730. The inference to be drawn is that the product referred to in the red book as “H/O” was motor spirit and not heating oil. The defendants instance this transaction as an occasion when motor spirit was being stored in T124 and T122. Another view is that the entry contains errors, both in referring to the product as “HO” and in describing the tanks from which it came. Again, the point to be made is that a case constructed entirely on the reliability of the red book is weakened by every instance suggestive of error.

167 One further matter that is relied upon by the defendants as casting doubt on the claim that the red book is a complete record of all incoming and outgoing product, relates to the delivery of crude oil to the Rutherford refinery. In his affidavit sworn 6 June 2007 Mr Lucas refers to the register in the “green book” (copies of which appear behind tab 4 of PL3) which records all the deliveries of crude oil to Rutherford and to Seven Hills. The Rutherford deliveries are able to be distinguished from the deliveries to Seven Hills. By reference to that register Mr Lucas calculates that 1.32 million litres of crude oil were brought into the Rutherford refinery in the period 16 September 1996 to 14 April 1997, which are not recorded in the red book. This evidence was not challenged and I accept it.

168 A critical difficulty with the plaintiff's case in relation to all the charges alleging that motor spirit was misdescribed as heating oil with a view to the evasion of duty is that the outgoing tanker records and statement of operations record the specific gravity of the product as 0.800 or above.

169 The specific gravity of all product manufactured at Rutherford was measured by Mr Lucas or by one of the supervisors. The measurement was recorded on a sheet which was sent by facsimile to the Seven Hills head office weekly. The red book includes entries which point to the testing of the product to ensure the specific gravity was within the appropriate range. Thus, on 15 January 1997 there is a notation “SG test for stage 1 product to be between .710 →.725”. It is reasonable to infer that frequently the measurement was taken by the staff and not by Mr Lucas. None of the Rutherford employees gave evidence of being asked to falsify the specific gravity measurement of product or the records of the same. It was not put to Mr Lucas or to Mr Pullinger that the outgoing tankers schedules were false in the statement of the specific gravity of the product. If the specific gravity measurement is accepted, it is a strong indicator that product possessing an SG measurement of .8 and above was heating oil and not motor spirit.

170 It is to be observed that the one load declared as motor spirit being the load collected by SLM611 (docket no. 11744) on 19/3/97 of 34,960 litres had a specific gravity of 0.721 appropriate to motor spirit. If the outgoing tanker’s document is a correct measurement of the specific gravity of the whole of the product contained in the load, the red book entry that 14,020 litres was heating oil, would be an error. Another view would be that the assertions in the outgoing tanker’s document concerning the measurement of the specific gravity were not accurate or, alternatively, recorded the specific gravity of part of the load contained in one compartment, but not that contained in another compartment. As I have noted there was no challenge along these lines.

171 I have examined the redbook entries and the corresponding entries in the outgoing tankers schedule and the statement of operations for each of transactions which the plaintiff contends are instances of the intentional misdescription of the Stage 1 overheads as heating oil dutiable at the lower rate. In every instance the outgoing tankers schedule records the load as heating oil. In every instance the specific gravity of the load is consistent with the product being heating oil. In every instance Evenfont’s invoices show the sale at the unit price applicable to heating oil.

172 There is a further difficulty in accepting the plaintiff’s case as proved beyond reasonable doubt. This concerns the sidedraw tray. Mr Lucas said that shortly after the commencement of the commissioning phase of the Rutherford plant, in approximately October or November 1996, a sidedraw tray was fitted to the Stage 2 distillation column, which allowed fractions to be drawn out of the column from around half to two-thirds of the way up the column. The purpose of installing the sidedraw tray was to increase efficiency and to prevent the Stage 2 column from flooding. These fractions, a very light heating oil, were deposited into the Stage 1 overheads receiver vessel and blended with the Stage 1 overheads before being pumped into the storage tanks. The resulting blend of Stage 1 overheads with the sidedraw cut of light heating oil produced a light beer coloured product, which was a heating oil.

173 Mark Chapman who was a supervisor at the Rutherford plant throughout the period of the charges confirmed that during the commissioning phase of the Rutherford plant there had been a difficulty with vapour load coming off the Stage 2 distillation column and that this had been addressed by the installation of the sidedraw tray half way to two-thirds up the Stage 2 column. Mr Chapman said that initially the sidedraw cut had gone back to Stage 2, but that it had also been re-directed to the Stage 1 overhead tank when required. (T'cpt 677) This had occurred from time to time. When the sidedraw cut was sent to the Stage 1 overhead tank it mixed with the Stage 1 overhead product. This produced a light heating oil, which was a very light coloured product. Mr Chapman agreed that the colour of the product varied depending upon the particular crude oil that had been used. Mr Chapman said that in terms of selling the product, Stage 1 overheads, when blended with the product from the sidedraw, was sold as light heating oil “wouldn’t be motor spirit, would be light heating oil” (T'cpt 677).

174 Mr Bonomini’s duties included running the columns, which involved monitoring the temperatures and pressures and flow rates of the Stage 1 and Stage 2 columns. He confirmed that there had been a sidedraw tray installed to column two. His evidence continued (T’cpt 687.9-20):

175 Mr Bonomini described the fraction produced from the sidedraw to column 2 going to “the same condenser”. The diagram showing the Rutherford crude oil process flow, which is annexure B to Mr Lucas’ affidavit of 28 May 2007 does not depict the sidedraw. It is shown diagrammatically in the document “Rutherford production process”, which was MFI 9 and became exhibit S. This somewhat crude depiction of the process shows the product of the Stage 2 distillation column sidedraw cut going to the Stage 1 overheads, which I take to be a reference to the condenser. I take Mr Bonomini’s evidence to be consistent with acceptance of Mr Lucas’ evidence that fractions taken from the Stage 2 column through the sidedraw cut were blended with the Stage 1 overheads.

176 I accept that from sometime in October or November throughout the balance of the period that is the subject of the charges a sidedraw tray was attached to column 2 and that a light heating oil fraction was drawn through this and on occasions mixed with the Stage 1 overheads. Mr Lucas’ evidence was consistent with the sidedraw being consistently directed to the Stage 1 overheads receiving tank. As I have noted, Mr Bonomini’s evidence may be thought to support this conclusion. Mr Chapman was confident in his recall that the sidedraw cut was directed at times to the Stage 1 receiving tank and at times to the Stage 2 receiving tank. Mr Bonomini was less clear in his description and recall of the sidedraw tray. I am satisfied that the sidedraw was directed on occasions to the Stage 2 overheads receiving tank. However the evidence would not permit a conclusion that on any given date between October 1996 and 21 April 1997 the fractions from the sidedraw tray were not being directed to the Stage 1 receiving tank.

177 It is not clear when the sidedraw tray was removed from the Stage 2 column. In his first affidavit Mr Lucas said that it had been removed in or about the second half of 1997 (at [108]). It is possible that the sidedraw tray was not in use on 22 September 1997 at the time the samples were taken from T111.

178 As I have noted, there are entries in the red book that the defendants rely on as supportive of Mr Lucas’ and Mr Chapman’s evidence that the Stage 1 overheads blended with Stage 2 overheads were sometimes sold as heating oil. Transactions such as 90 and 91 do not support the plaintiff’s submission of inherent improbability in this respect. I accept that the colour of the heating oil sold by Evenfont was a matter of significance to Camile and that there is support for acceptance of Mr Lucas’ evidence that on occasions Stage 1 overheads were blended with Stage 2 overheads in order to produce a lighter heating oil. On some occasions the red book contains errors. In these circumstances, and given that each allegedly misdescribed load had a specific gravity appropriate to heating oil and was sold at the unit price for hearting oil, I am unable to conclude that in any given instance the plaintiff has established beyond reasonable doubt that a load declared as heating oil was in fact motor spirit, being Stage 1 overheads, a petroleum product with a flashpoint of less than 23ºC when tested in an Abel Pensky closed test apparatus, and dutiable at the item 11(A) rate under the Schedule to the Excise TariffAct.

179 The only remaining charge is the one pleaded in par 142 (and in the alternative in par 144) of the 2FASOC, which relates to the Lewington’s loads. It will be recalled that the plaintiff abandoned the first four Lewington’s loads as particulars of either charge. This left the fifth load which relates to 35,900 litres of heating oil which was transported by Lewington’s from the Rutherford plant to the Seven Hills plant on 23 November 1996.

180 The charges are pleaded as follows:

[142] During the period 6 October, 1996 to 23 November, 1996 the First Defendant evaded payment of duty of Excise which was payable on the production of heating oil manufactured at the First Defendant’s premises at Rutherford and documented as an intra-company transfer to the First Defendant’s premises at Seven Hills, and the Plaintiff charges hereinbelow that the First Defendant committed an offence in those terms against the Act, being an offence under section 120(1)(iv) of the Act.

[143] By reason of the matters pleaded and averred in this Statement of Claim, the Second, Third and Fourth Defendants aided, abetted, counselled or procured or by act or omission were directly or indirectly knowingly concerned in, or party to, the commission of that offence against the Act by the First Defendant, namely an offence under section 120(1)(iv) of the Act.

[144] In the alternative to paragraph 142, the First Defendant breached section 120(1)(iv) of the Act on each of the 5 occasions during the said period from 6 November, 1996 to 23 November, 1996 that it failed to declare to Customs, and to pay duty on, the production of heating oil manufactured at the First Defendant’s premises at Rutherford and documented as an intra-company transfer to the First Defendant’s premises at Seven Hills.

[145] In the alternative to paragraph 143, the Second, Third and Fourth Defendants aided, abetted, counselled or procured, or by act or omission were directly or indirectly knowingly concerned in, or party to, the commission of those 5 offences by the First Defendant during the said period.

[146] In respect of all and each of the offences in paragraphs 142 and 143 or, in the alternative, paragraphs 144 and 145, the Plaintiff further avers and particularises as follows

181 The particulars that are pleaded in support of these charges relevantly relate to 35,900 litres of heating oil manufactured at the Rutherford plant on 23 November 1996. The plaintiff avers that, “the product was loaded at the Rutherford premises and delivered from that premises” on or about 23 November, 1996. It is further averred that in the Weekly Entry for the week ending 26 November 1996 (1W63318004P) and in the supporting documentation, being the statement of operations and the outgoing tankers schedule, and in the red book there was no reference to this excisable product either as “normal manufacture” or as an inter-company transfer. The plaintiff pleads that duty was payable at the heating oil rate and that it was not paid.

182 The pleading of the offence charged in par 142 is deficient. The plaintiff charges that duty was evaded in respect of the manufacture of product that was documented as an inter-company loan. The plaintiff does not plead that the product was entered for home consumption, when duty became payable. The same defect attends the pleading of the offence in par 144. For the reasons that I explain below, I am not in any event satisfied beyond reasonable doubt that the plaintiff has established what I take to be the factual basis of the charge relating to the fifth Lewington’s load.

183 On 26 November 1996 Evenfont submitted the Weekly Entry for the week ending 25 November 1996 (1W63318004P). The Entry stated that Evenfont had manufactured 506,865 litres of heating oil in the previous week. The statement of operations and the outgoing tankers schedule did not record the load. The Weekly Entry did not declare it as product that had been entered for home consumption in the previous week. The red book did not refer to the load.

184 The Lewington’s delivery docket for 23 November 1996 shows that the load was collected “from Maitland” and delivered to “Seven Hills”.

185 It is the defendants’ case that the load was an inter-company transfer of product. Since it was not delivered into home consumption in the week ending 25 November 1996, the product was not dutiable. As I understood Mr Lucas’ evidence, it was his belief that the entry in the redbook on p 37 for 22/11/96 recording a load of “35,900 litres ex T122” is a reference to the fifth Lewington’s load. He suggested that the amount of the load recorded in the redbook (and on the Lewington’s docket) was wrong and that it was a load of 32,400 litres of heating oil which during the commissioning phase of the Rutherford plant had been transferred to Seven Hills for treatment. The internal statement of operations for the Rutherford plant records the transfer of 32,400 litres of heating oil on 22/11/96 as an inter-company transfer (Tab 2, PL1 p 35). The statement of operations supplied to Customs for the week ending 25/11/96 records 32,400 litres of heating oil as an inter-company transfer.

186 It is to be noted that an internal statement of operations for the week ending 25/11/96 recorded 32,400 as an inter-company transfer of crude oil. Mr Lucas said that this was an error in the paper work. He said that the crude oil receipts book did not show an entry for this amount of crude oil.

187 Each of the allegations which were particularised in support of the charges in pars 142 and 144 occurred in November at a time when I accept the Rutherford plant was still in the commissioning phase. Mr Lucas says that in the commissioning phase product was transferred from the Rutherford plant to the Seven Hills plant for reasons including bleaching and filtering of the product.

188 The statement of operations records an inter-company transfer of 32,400 litres of heating oil. It is reasonably possible that the amount of the load recorded at the Rutherford plant was wrongly stated in the redbook and the accompanying Lewington’s docket. The Rutherford internal statement of operations and the statement of operations supplied to Customs are consistent with 32,400 litres of heating oil being transferred to Seven Hills as an inter-company transfer. Mr Lucas said that the crude oil receipts book did not have a corresponding entry for the receipt of 32,400 litres of crude oil. It is reasonable to assume that the plaintiff had access to the crude oil receipt book as the result of the execution of the search warrants. I accept that the crude receipts book did not record receipt of 32,400 litres of crude oil in the relevant period. I am not persuaded beyond reasonable doubt that the load of heating oil collected by Lewington’s on or about 23 November 1996 was not one and the same as the quantity of heating oil recorded as an inter-company transfer in the statement of operations for the week ending 25/11/96.

189 For these reasons I have concluded that the plaintiff has failed to establish beyond reasonable doubt that Evenfont evaded the payment of excise duty that was payable on any of the occasions that are particularised in pars 18 – 67 and pars 142 and 144 of the pleading. The plaintiff has failed to establish beyond reasonable doubt that on any of the occasions particularised in the pleading of pars 18 – 67 Evenfont knowingly or recklessly made a statement to an officer that was false or misleading in a material particular. Finally the plaintiff has failed to establish beyond reasonable doubt that on any of the occasions particularised in pars 18 – 67 Evenfont moved, altered or interfered with excisable goods except as authorised by the Act. The prosecution against Evenfont as principal and each of the other defendants in respect of their asserted accessorial liability fails.

ORDERS

1. Dismiss the Second Further Amended Statement of Claim;

2. The plaintiff is to pay the defendants’ costs.

*******

CITATION:	Commissioner of Taxation v Evenfont [2008] NSWSC 1371
HEARING DATE(S):	30/4/07, 3/5/07, 2/5/07, 9/5/07, 14/5/07, 15/5/07 , 17/5/07, 25/6/07, 26/6/07, 27/6/07,28/6/07, 29/6/07, 3/8/07, 4/9/07, 5/9/07, 10/9/07, 12/9/07, 14/9/07, 23/4/08
JUDGMENT DATE :	22 December 2008
JUDGMENT OF:	Bell JA at 1
DECISION:	1. Dismiss the Second Further Amended Statement of Claim; 2. The plaintiff is to pay the defendants’ costs.
CATCHWORDS:	EXCISE PROSECUTION – averment of facts – evidence in rebuttal – onus not discharged
LEGISLATION CITED:	Excise Act 1901 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Chief Executive Officer of Customs v El Hajje [2005] HCA 35; 79 ALJR 1289 Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd [2003] HCA 49; 216 CLR 161 Ludwigs Canberra Bond Seller Pty Ltd v Sheen (1982) 65 FLR 347 Wilson v Chambers [1926] HCA 15; (1925-1926) 38 CLR 131
PARTIES:	Commissioner of Taxation (Plaintiff) Evenfont Pty Limited (1st Defendant) Truegain Pty Limited (2nd Defendant) Robert Lenard Pullinger (3rd Defendant) Paul Andrew Lucas (4th Defendant)
FILE NUMBER(S):	SC 20013/99
COUNSEL:	R M Goot SC / R Wilson (Plaintiff) D P Robinson SC / J Horowitz (Defendants)
SOLICITORS:	Australian Government Solicitor (Plaintiff) Horowitz & Bilinsky (Defendants)