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Comptroller General of Customs v Zappia

Comptroller General of Customs v Zappia

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HIGH COURT OF AUSTRALIA
KIEFEL CJ,
BELL, GAGELER, NETTLE AND GORDON JJ
COMPTROLLER GENERAL OF CUSTOMS APPELLANT
AND
DOMENIC ZAPPIA RESPONDENT
Comptroller General of Customs v Zappia
[2018] HCA 54
14 November 2018
S91/2018
ORDER
1. Appeal allowed.
2. Set aside orders 1, 2 and 3 of the order of the Full Court of the Federal Court of Australia made on 19 September 2017 and, in their place, order that the appeal to that Court be dismissed.

On appeal from the Federal Court of Australia
Representation
S P Donaghue QC, Solicitor-General of the Commonwealth, with D F C Thomas and R A Minson for the appellant (instructed by Australian Government Solicitor)
G O'L Reynolds SC with R S Angyal SC, D P Hume and J K Mee for the respondent (instructed by Hall Partners)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

Customs and excise – Customs control – Dutiable goods – Possession, custody or control of dutiable goods – Where company held warehouse licence under Customs Act 1901 (Cth) – Where dutiable goods stolen from company's warehouse before goods entered for home consumption – Where respondent employed by company as general manager and warehouse manager – Where s 35A(1) of Customs Act relevantly provided that a person who "has, or has been entrusted with, the possession, custody or control" of dutiable goods subject to customs control and who fails to keep goods safely shall, on demand by Collector, pay amount equal to customs duty which would have been payable if goods had been entered for home consumption on day of demand – Where respondent served with demand by Collector under s 35A(1) – Where respondent applied to Administrative Appeals Tribunal for review of Collector's demand – Where Tribunal found respondent directed what was to happen to goods on day‑to-day basis – Whether respondent was person who "has, or has been entrusted with, the possession, custody or control" of dutiable goods subject to customs control.
Words and phrases – "authority to deal with", "Collector", "customs control", "dutiable goods", "employee", "fails to keep the goods safely", "has, or has been entrusted with", "home consumption", "management or control", "operational control", "owner", "possession, custody or control", "power or authority", "warehouse licence".
Customs Act1901 (Cth), ss 30, 35A, 36, 37, Pt V.

KIEFEL CJ, BELL, GAGELER AND GORDON JJ. This appeal from a judgment of the Full Court of the Federal Court[1], given on appeal on a question of law from a decision of the Administrative Appeals Tribunal[2], turns on whether an employee of the holder of a warehouse licence can meet the description of "a person who has, or has been entrusted with, the possession, custody or control of dutiable goods which are subject to customs control" in s 35A(1) of the Customs Act 1901 (Cth) ("the Act"). Contrary to the conclusion of the majority in the Full Court, an employee of the holder of a warehouse licence…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] HCA 54
Decision Date: 14 November 2018

CaseChat Overview and Summary

The case of *Comptroller General of Customs v Zappia* involved an appeal to the High Court of Australia concerning the interpretation of section 35A(1) of the *Customs Act 1901* (Cth). The dispute arose after dutiable goods were stolen from a warehouse operated by a company, Zaps, which held a warehouse licence. The Collector of Customs issued a demand for payment of customs duty to Mr Zappia, the general manager and warehouse manager of Zaps, on the basis that he had failed to keep the goods safely. Mr Zappia sought review of this demand before the Administrative Appeals Tribunal.

The central legal issue before the High Court was whether Mr Zappia, as an employee and manager of the company operating the licensed warehouse, was a person who "has, or has been entrusted with, the possession, custody or control" of the dutiable goods subject to customs control, within the meaning of s 35A(1) of the *Customs Act*. This required the Court to determine the scope of "possession, custody or control" in the context of an employee managing a warehouse licensed under the Act, particularly when the goods were stolen from the company's premises.

The High Court allowed the appeal, setting aside the orders of the Full Court of the Federal Court of Australia. The Court reasoned that while Mr Zappia exercised significant day-to-day operational control over the goods and directed their handling, this control was exercised in his capacity as an employee and agent of the company, Zaps. The company, as the holder of the warehouse licence, was the entity entrusted with the possession, custody, and control of the dutiable goods by their owner. Mr Zappia's role, though involving operational management, did not amount to having or being entrusted with possession, custody, or control in a manner that would render him personally liable under s 35A(1) for the failure to keep the goods safely. The Court distinguished between the company's statutory responsibility and the delegated operational authority of an employee.

Orders

Orders of the court

1. Appeal allowed.

2. Set aside orders 1, 2 and 3 of the order of the Full Court of the Federal Court of Australia made on 19 September 2017 and, in their place, order that the appeal to that Court be dismissed.

Background

Background to the litigation

A decision of a Collector to make a demand under s 35A(1) is subject to review by the Tribunal[32]. From the decision of the Tribunal on review an appeal lies on a question of law to the Federal Court[33].[32]Section 273GA(1)(a) of the Act.[33]Section 44(1) of the Administrative Appeals Tribunal Act1975 (Cth).The facts Zaps operated a warehouse pursuant to a warehouse licence issued to it under Pt V of the Act. Mr John Zappia was the sole director of Zaps. Domenic, his son, was employed by Zaps as its "general manager" and its "warehouse manager". In accordance with the standard condition of its warehouse licence which required such notification, Zaps had notified the Australian Taxation Office that each of Domenic and his father was a person who participated in the management or control of the warehouse. Tobacco products were stolen from the warehouse in a break‑in which occurred when none of Zaps' employees were present. Following a meeting between Domenic representing Zaps and officers of the Australian Taxation Office, a Collector served a notice of demand under s 35A(1) of the Act on each of Zaps, Domenic and his father. Each notice asserted a failure to keep the stolen goods safely as required by s 35A(1)(a) and demanded from each respective person payment of an amount equal to the customs duty which would have been payable on the stolen goods if those goods had been entered for home consumption on the day on which the demand was made. Zaps, Domenic and his father each applied to the Tribunal for review of the decision to demand payment from them. Each was unsuccessful; the Tribunal affirmed each decision of the Collector. In affirming the Collector's decisions to demand payment, the Tribunal found that the tobacco products had not been kept safely[34], that Zaps had been entrusted with the possession, custody and control of those tobacco products by their owner[35], that Domenic's father as the person "in overall command of the business"[36] exercised control over the stolen goods and had also been entrusted with that control in his capacity as an officer of Zaps[37], and that Domenic also exercised control over the tobacco products[38]. [34][2017] AATA 202 at [13].[35][2017] AATA 202 at [16]-[19].[36][2017] AATA 202 at [22].[37][2017] AATA 202 at [30].[38][2017] AATA 202 at [31]. In relation to the control exercised by Domenic, having recounted evidence to the effect that he made the operational decisions at the warehouse, that he oversaw and was responsible for what happened to warehoused goods and that he had operational control of the warehouse subject to needing to refer anything "big" – meaning any decision that might require legal advice or that might have taxation consequences – to his father[39], the Tribunal expressed its finding as follows[40]:"I am also satisfied Domenic exercised control over the goods, albeit that his control was subordinate to that of his father and – ultimately – that of the company. The evidence establishes that he was the one who directed what was to happen to the goods on a day‑to‑day basis. He exercised delegated authority under which he could accept and release the goods. If he gave orders with respect to the goods, the employees followed them. His operational role was underlined by the fact he met with the officers from the [Australian Taxation Office] ... to discuss what had happened to the goods."[39][2017] AATA 202 at [24]-[25].[40][2017] AATA 202 at [31].

Evidence

Evidence Before The Court

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Decision

Reasons for decision

KIEFEL CJ, BELL, GAGELER AND GORDON JJ NETTLE J

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Ratio Decidendi

Legal Principle Established

Established by: KIEFEL CJ, BELL, GAGELER AND GORDON JJ, NETTLE J

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