Comptroller General of Customs v Zappia

[2018] HCATrans 140

[2018] HCATrans 140

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S91 of 2018

B e t w e e n -

COMPTROLLER GENERAL OF CUSTOMS

Appellant

and

DOMENIC ZAPPIA

Respondent

KIEFEL CJ
BELL J
GAGELER J
NETTLE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 8 AUGUST 2018, AT 10.07 AM

Copyright in the High Court of Australia

MR S.P. DONAGHUE, QC, Solicitor‑General of the Commonwealth of Australia):   May it please your Honours, I appear with MR D.F.C. THOMAS and MR R.A. MINSON, for the appellant.  (instructed by the Australian Government Solicitor)

MR G.O’L. REYNOLDS, SC:   May it please the Court, I appear for the respondent with my learned friends, MR R.S. ANGYAL, SC, MR D.P. HUME and MS J.K. MEE.  (instructed by Hall Partners)

KIEFEL CJ:   The question of leave in relation to the notice of contention, Mr Reynolds?

MR REYNOLDS:   We do not press that.

KIEFEL CJ:   Thank you.  Yes, Mr Solicitor.  The parties would be aware in accordance with the new trial practice we will be adjourning at 11.15 for 15 minutes.

MR DONAGHUE:   Yes, your Honour.  Your Honours, this appeal arises out of the theft of 400,000 cigarettes from a licensed warehouse in May 2015.  That theft followed four previous thefts of cigarettes from the same warehouse over the preceding 18‑month period, the most recent of which had occurred about six weeks earlier.  At the time of the last theft, the relevant theft here, duty had not been paid with respect to the 400,000 stolen cigarettes.

Section 35A of the Customs Act, which is, as your Honours know, the provision at the heart of this appeal, responds to the risk that dutiable goods will be stolen or will otherwise irregularly enter into home consumption before duty is paid, and it does that by imposing upon a person:

who has, or has been entrusted with, the possession, custody or control of dutiable goods –

an obligation “to keep those goods safely”.  If the goods are not kept safely then the Collector can demand payment of:

an amount equal to the amount of the duty –

that:

would have been payable on those goods if they had been entered for home consumption on the day on which the demand was made.

I will come to the text of the section in due course.  The issue on the appeal is, we submit, quite a narrow one.  It is whether, on the proper construction of 35A, an employee is capable of being a person who has or has been entrusted with the possession, custody or control of goods.

In the Court below, we submit that Justices White and Moshinsky gave a one‑size fits all answer to that question.  They said an employee cannot be such a person.  Your Honours will see that at a number of places in the reason, but if you could go to the core appeal book I will identify a number of the passages where it appears clearly that their Honours gave an answer of that kind, starting at page 58.  I will come to the reasoning that leads up to it, but at paragraph 105, you will see the second sentence that considerations are said to point against:

the term “control” [there] encompassing the kind of control exercised by employees.

If you go on to the next page to paragraph 112, these factors which, again, I will come to, are regarded:

as pointing against an understanding that s 35A(1) refers to the possession, custody or control of employees.

At paragraph 116, over the page again, summarising their Honours’ reasoning:

we consider that a number of matters indicate that s 35A(1) is not to be understood as directed to the kind of control exercised by an employee of a licensed warehouse, acting in that capacity.

So, their Honours’ reasoning was directed towards establishing a global proposition that employees just did not have the kind of possession, custody or control that could engage 35A.

By contrast, Justice Davies, if your Honours go back to page 38 of the book in paragraph 36, rejected that approach and her Honour said that whether or not the section applies, reading from the third line of paragraph 36, depends on the facts of the case:

and the answer in each case will depend on the measure of control exercised by the person over the dutiable goods.  In an appropriate case the answer may be provided simply by pointing to the fact that the person was acting in his or her capacity as an employee at the time, and under the direction of someone else.  But employment is not the test as to whether s 35A(1) does apply and I would not construe s 35A in a way that meant that an employee, acting lawfully, could never be liable under that section. 

In short, we submit that – and that aspect of her Honour’s reasoning is correct and should be preferred to that adopted by the majority. 

GAGELER J:   What do you say about what her Honour said in paragraph 35 on the previous page with the sentence beginning “However”?

MR DONAGHUE:   Your Honour, can I defer that question a little while because that is a major part of the submissions that I am intending to develop.

GAGELER J:   Yes.

MR DONAGHUE:   Our primary submission is that the section should not be read as subject to the kind of limit that her Honour identifies in that sentence.  But I will develop that.  Your Honours, I will structure the oral case by reference to the six headings that your Honours will see, I hope, in the outline about point 5 now because the last was the notice of contention which is not pressed.  So that is where I am going.

If I could start then with the facts - the focus being on the facts as found in at the AAT for the obvious reason that the decision to issue the notice under section 35A is subject to merits review in the AAT and once that merits review happens any factual basis upon which the Collector originally acted in issuing the notice is overtaken by the facts as found by the AAT.  I mention that because there is some reliance in our friend’s written submission on the facts as identified by the Collector rather than by the AAT.

In the AAT’s reasons, which relevantly start on page – well, they start on page 5.  If your Honours could go to page 7 of the appeal book you will see in paragraph 3 the first sentence – the company called:

Zaps Transport (Aust) Pty Ltd (Zaps) operated a bonded warehouse . . . in the western suburbs of Sydney. 

In paragraph 4, the Tribunal makes reference to the obvious fact that taxes are a significant part of the retail price of alcohol and cigarettes, so they are an attractive target for black marketeers.  In paragraph 5, Zaps held a warehouse licence under Part V of the Act to which I will come, pursuant to which it stored cigarettes for warehousing at the premises identified in paragraph 3.  That licence, as you see in paragraph 6 in the last few lines, contained a condition:

that the company would inform the Australian Tax Office (‘ATO’) . . . in writing of any other person ‘participating in the management or control of the warehouse’ –

and pursuant to that condition two people were identified to the ATO:  one, John Zappia; and two, John Zappia’s son, Domenic Zappia, the respondent in this proceeding.  So he was identified to the ATO as one of the two people who had the management or control of the warehouse in which the goods were stolen.

GORDON J:   Being an employee?

MR DONAGHUE:   Being an employee, yes, the operations manager.

GORDON J:   Consistent with section 81(1)(d)?

MR DONAGHUE:   Yes, that is correct.

GAGELER J:   Mr Solicitor, I do not want to distract you, really, but there is a bracket of reference in paragraph 6 to the ATO administering - I take that to be the Customs Act?

MR DONAGHUE:   Yes.

GAGELER J:   Is that a purely administrative arrangement or is there a statutory basis for that?

MR DONAGHUE:   Your Honour, can I check that?  I will check, your Honour.  I think the administration of the Act has shifted at some point from what formerly was Customs to the ATO but I will need to check exactly how that occurred.

GAGELER J:   Thank you.

MR DONAGHUE:   Having dealt with the background in relation to the notices of demand and the question of whether the company, the licensee, had the possession, custody or control of the goods, the Tribunal then arrives, on page 11, at the question of whether or not either John or Domenic Zappia was subject to 35A and in paragraph 22 you see the Tribunal recording that John was in the overall command of the business.

And then at 23 there is what appears to be a summary, really, of the evidence given by Domenic and in relation to his role, leading up to findings in paragraph 31.  So, looking at 23, he was employed as the manager of Zaps, a family business, which is said to mean that:

Domenic did not simply report to John in the course of a master‑servant relationship –

it was “more textured”.  Just pausing there, that might be thought in itself to make this an awkward vehicle to be reaching any global conclusions about the relationship between employees and the operation of 35A because this was not a simple or normal employee relationship.

But, moving on, Domenic agreed in his evidence – and I emphasise four points from paragraph 24 – one, he oversaw “operations at the warehouse”.  Two:

he made the operational decisions at the warehouse, albeit that he delegated some matters –

Three:

he attended to the documentation required for customs’ purposes.

And four:

he oversaw what happened to the goods and that he was responsible for what happened ‑ although [he says] subject to the direction of his father.

He had, as is said in paragraph 25 “operational control”, referring anything big – by which he seems to have meant not operational decisions about goods coming in or out of the warehouse but questions about legal advice, tax et cetera – to his father.  And it is noted in 26 that, in the context of the dealings with the ATO that followed the theft of the goods, it was Domenic who handled those, not his father.

At paragraph 29, at the bottom of page 12, you see the Tribunal’s understanding of the section.  It casts a wide net:

The drafting of the section reflects an almost ruthless determination to protect the revenue.

And then the Tribunal notes that if the section had just talked about possession, it might have been easier to see how one could confine the section to the corporation, but the Tribunal notes it goes wider than possession to include custody or control and that officers might exercise custody or control, whether or not they do so being, as Justice Davies accepted, a question of fact.

On the facts of the case, the finding at paragraph 31 is that the Tribunal was:

satisfied Domenic exercised control over the goods . . . The evidence establishes that he was the one who directed what was to happen to the goods on a day‑to­day 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.

So that was the Tribunal’s factual finding that underpins the conclusion that the respondent had control and therefore he fell within 35A.

Can I go from there, your Honours, to the Act and before coming to 35A just situate it briefly within the relevant statutory scheme.  Your Honours will find the relevant version of the Act behind tab 3.  And if I could invite you to start – there are page numbers in the bottom right‑hand corner of each page – if you go to page 45, behind tab 3 ‑ page 44, in fact, you will see section 68 of the Act.

NETTLE J:   Did you say 58, Mr Solicitor.

MR DONAGHUE:   Sorry, 68, on page 44.

NETTLE J:   Thank you.

MR DONAGHUE:   So in 68(1), near the top of page 44:

This section applies to [relevantly]:

(a)       goods that are imported into Australia –

Where the section applies – if your Honours go to subsections (2) and (3) you will see that the owner of the goods is given two options.  And the difference between (2) and (3) is temporal.  So (2) allows you to act before a certain time; (3) requires you to do the act by the time the goods arrive in Australia.  And the two options are:  either, one, to enter the goods for home consumption or, two, to enter the goods for warehousing.

If the goods are entered for home consumption then duty becomes payable immediately.  Your Honours see that.  You do not need to go to it but it is section 132AA on page 92 of the extract.  That section provides that duty is payable at the time when goods are entered into home consumption, and section 165, which you also do not need to go to, says that duty is payable by the owner.

If, on the other hand, the goods are not entered for home consumption but are entered for warehousing then one goes to section 99 on page 87.  It provides in section 99(2):

the holder of a warehouse licence must not permit warehoused goods to be delivered for home consumption unless:

(a)  they have been entered for home consumption ‑

So it is at the point where the goods are entered for home consumption that they are able to be delivered from the warehouse under 99(2), but at that point one goes back to 132AA and the duty is payable.

GAGELER J:   There is an extra element there that I think features throughout the scheme.  It is not just that they are entered for home consumption, but there has to be an authority to deal with them.

MR DONAGHUE:   There does.

GAGELER J:   Does that authority to deal only get issued or only apply once the duty is actually paid?

MR DONAGHUE:   Yes, if the authority to deal is responsive to the goods being entered for home consumption, but there is also an authority to put them into the warehouse in the first place.

GAGELER J:   I understand that, but the authority to deal that is referred to in section 99(2)(b) must have a statutory base.  Are you able to refer us to that?

MR DONAGHUE:   To the statutory base to enter them for home consumption.  I think, your Honour, it is 71C, I believe.

NETTLE J:   71E?

MR DONAGHUE:   71C, your Honour; 71C, on page 51.

GAGELER J:   A particular part of it?

MR DONAGHUE:   The authority to deal comes under subsection (4) of 71C.

GAGELER J:   Thank you. 

MR DONAGHUE:   Up until the time when the goods are entered for home consumption, they are subject to the concept that the Act refers to as “customs control”.  One sees that defined in section 30 of the Act:  “Customs control of goods” on page 35 of the book:

(1)    Goods shall be subject to customs control as follows:

(a)    as to goods to which section 68 applies –

I will not take your Honours through the whole regime, but these goods were subject to customs control by reason of 30(1)(a)(vi), which then directs attention to section 30(1B)(b).  In effect, the goods remain subject to customs control until they are delivered for “home consumption in accordance with an authority to deal”, which is the section 71C reference that I just made.

GORDON J:   It is like a chain of custody.

MR DONAGHUE:   Yes.

GORDON J:   In other words, they go from responsibility to responsibility.

MR DONAGHUE:   But they stay, even as passed from hand to hand with –

GORDON J:   Subject to customs control.

MR DONAGHUE:   Subject to customs control until they are entered, and they do not get entered until the duty is paid.

GORDON J:   At each point along that chain someone is responsible for them.

MR DONAGHUE:   Someone or some multiple group of people.  Section 35A, to which I will come, applies only when the goods are subject to customs control.

There are two sections within the regime that we thought - on reflection they are not central to the appeal but we should have given your Honours, and I hope they have been handed to you with our oral outline - in fact I think we have given you three sections, but the first of those is section 33(1). 

Section 33(1) and (2) create criminal offences of intentionally moving or moving respectively goods that are subject to customs control where the movement is not authorised.  So it gives ‑ well it obviously limits the capacity to move goods around while they are subject to customs control and it can be authorised in a number of different ways. 

Most relevantly, for our purposes, is the next section I have given your Honours, section 71E, which allows applications to be made for movement permission, to move goods around, and you will see in 71E(2):

A documentary movement application must:

(a)       be made by the owner of the goods concerned - 

but in 71E(4):

Where goods are moved to a place other than a warehouse in accordance with a permission . . . an officer of Customs may, at any time while the goods remain under customs control, direct in writing that they be moved from that place to a warehouse. 

So Customs has a capacity under 71E to direct that goods must be kept within a warehouse.

The final section we have given your Honours, and this is a little out of order, but you should have a copy of 273GA there.  That is the provision that permits review in the Administrative Appeals Tribunal under subsection 1(a) of a decision of a collector under 35A in making a demand. 

That, we submit, is a significant section because it provides a safeguard against what might be thought or feared to be the potentially oppressive application of a demand under section 35A, because on a merits review of the decision to issue a – on our construction, your Honours will understand multiple people might be liable under 35A ‑ potentially liable under 35A to pay the duty as, indeed, we submit was the case here, that Zaps, the licensee, and the two nominated people who had control of the warehouse, Domenic and John, were all issued with notices under section 35A and all sought merits review.

There is by reason of 273GA, a capacity for the Tribunal to recognise that even if the conditions in the section are satisfied it may not be on the particular facts of the case the correct or preferable decision to issue a notice against a particular person.  So there is oversight of the decision that a collector might make in exercise of the power under 35A, not just of a judicial review kind but of a merits review kind.

GORDON J:   Is that dealing with double recovery?

MR DONAGHUE:   Can it end up with double recovery? 

GORDON J:   Is that dealing with double recovery?

MR DONAGHUE:   It is, in our submission, that but also potentially more than that because it might be that the case that for whatever factual reason the Tribunal might say in the circumstances of this case there are five people potentially on the hook under section 35A but I consider that it would be oppressive for you to pursue two of those five because the – or for a range of possible reasons.  But it might be that looking at a particular collocation of facts it is more appropriate in the eyes of the Tribunal to sheet liability home for the loss of the goods to some rather than others of the possible recipients of a notice. 

GORDON J:   Because you accept you cannot have double recovery consistent with Sogo?

MR DONAGHUE:   Yes, I do.  Against that background, can I take your Honours to Part V which is the part dealing with warehouses?  Again, I do not need to linger on this section.  Warehouse licences are provided for in section 79(1) which you see on page 56 of the book.  The application for the licence under section 80(d) needs to set out the name of the persons whom the Collector of Customs is required to consider under section 81(1)(a), (b), (c) and (d).  If your Honours turn to 81(d), you see the provision that Justice Gordon mentioned to me earlier, that the Comptroller shall not grant a warehouse licence, if in his or her opinion:

an employee of the applicant who would participate in the management or control of the warehouse is not a fit and proper person –

That term picks up the definition you see back in 78(3) which is a deeming provision:

a person shall be taken to participate in the management or control of a warehouse if:

(a)he or she has authority to direct the operations of the warehouse or to direct activities in the warehouse, the removal of goods from the warehouse, or another important part of the operations –

So, plainly, in our submission, the respondent was a person, on the facts found by the AAT, who had authority to direct entry and removal of the goods.  He was plainly a person who had control of the warehouse within the meaning of that management or control within the meaning of that provision.

It shows, in our submission, a recognition within the face of the Act that a person who is an employee under (1)(d) may nevertheless be very significant in the granting or otherwise of authority of a licence to operate a warehouse, given the significant potential impact that failure to operate the warehouse properly will have on the revenue. 

GORDON J:   It also works in this way, does it not, that where you have an obligation on the warehouse licence‑holder – whoever that person or entity is – to nominate and identify those persons within the licence‑holder who will have management or control of the goods subject to customs? 

MR DONAGHUE:   Indeed, and differentiates those people from the wider mass of employees.  I accept that.  Now, your Honours, as against all of that brief overview, could you then turn to section 35A of the Act on page 39 of the book - sorry, just while I think of it, before I go into 35A, your Honour Justice Gageler – I am instructed that the regulation of warehouses that store excise equivalent goods, which includes cigarettes, has been administratively delegated by the Comptroller General of Customs to the ATO by appointing ATO staff as officers under the Customs Act.  That is the way it has been done.

GAGELER J:   Thank you.   

MR DONAGHUE:   So, 35A has been part of this Act since 1957.  An exact analogous provision was considered by this Court in a case I will come to shortly, Collector of Customs v Southern Shipping and has not attracted any significant controversy since then.  The proper construction of the provision plainly begins and ends with the text construed in context and in light of the provision’s purpose.

I will come in more detail when analysing the Full Court’s reasons to the meaning of “possession, custody or control” but at this stage just make the obvious point from the text of the section that it does not, in its terms, refer to the exclusive possession, custody or control, separate possession, custody or control, complete custody or control, personal custody or control, all of those various qualifiers appearing in our friend’s written submissions, often emphasised in our friend’s submissions, so those submissions emphasise qualifiers or limits on the statutory text that simply are not found there.

NETTLE J:   He gets all that out of “the”, does he not?

MR DONAGHUE:   Yes.  In our submission, the “the” supports the idea that the words that follow are a compound expression, that is the work that the “the” does.  We are talking about possession, custody or control, as a concept but one ‑ and I will develop our submission in response to that in a moment.  But, textually, the only foundation for it is, as your Honour Justice Nettle identifies that, the definite article in that provision.

Section 35A(1) applies in its terms where “a” person has been entrusted, not “the” person.  So, the ordinary meaning of the section, in our submission, using the indefinite article, is that it is capable of applying to multiple people who may have the possession, custody or control of the goods.  That stands within the same section 35A in rather marked contrast with subsection (1A) and (1B) which were introduced about 10 years later, I think, in 1968 and both of those provisions deal with a specific situation where a particular person has been given an authority to deal or an authority to move goods under section 71E. 

Where you have a specific person who has applied for and obtained such permission, then under (1A) and (1B) that person, that identified person, is – and, so, your Honours see the “the” in (1A)(c) and “the person”, and, similarly, in (1B)(b):

the person to whom the permission was given –

is subject to a specific regime whereby you do not ask did that person have the possession, custody or control of the goods, you just ask was that the person who got the permission and, if so, then they can be subject to an equivalent regime whereby the Collector can demand that they pay duty.  But, the contrast, in our submission, suggests that when Parliament was looking at this concept where it wanted to refer to a particular person, it did so, as it did in (1A) and (1B), “the person” as distinguished from the more general “a person” one finds in subsection (1).

The Full Federal Court relied in paragraph 86 of its reasons on the fact that there were a number of places in the Act which use the words “the person” and it was said that in these provisions, the Customs Act contemplates that there will be a single person in possession of the goods and there were a number of sections listed there.

The list is interesting in that, if your Honours go back to section 30 you will see – I am taking your Honours to the provisions that the Full Court listed in and relied upon in paragraph 86 of its reasons.  If your Honours go back to section 30(1)(a)(iii) and (iv) you do see references to “the person”, but they are references to the person who has possession.  They are not suggestive that only a single person can have the possession, custody or control of goods. 

At its highest it might be thought to support the proposition that, in some places in the Act, the Act contemplates that only one person might have possession, but it is incapable of going further.  Because it is incapable of going further it does not really shed any light on the meaning of a person having the possession, custody or control of the goods.  So that is a problem with the section 30 examples given. 

The Full Court also relied upon section 36(4)(b) and (6)(b).  If your Honours go to those sections –

KIEFEL CJ:   I am sorry, what was that again?

MR DONAGHUE:   Sorry, your Honour, section 36(4)(b) and (6)(b).  They are relevantly the same.  They are offence provisions.  In both cases we have a provision which starts with the words:

A person –

just like 35A(1):

commits an offence if:

(a)goods are subject to customs control; and

(b)the person has, or has been entrusted with, the possession –

But in that context, we submit, plainly “the person” is the same person who is referred to in the opening part of the section, the “a person”.  It is just a reference back.  It is not capable of doing the work that the Full Court assigned to it in that paragraph of its reasons; as suggested, that there is only a single person with possession, custody or control.  So that was, we submit, simply an error by their Honours.

The word “person” itself, we submit, is obviously a wide word capable of embracing both natural persons and corporations, as the Acts Interpretation Act emphasises in section 2C.  It is not, of course, when one looks at 35A, confined in its operation to warehouses at all.  If one moves away from the warehouse case and considers goods that have arrived at a port and that are being taken from the port to the warehouse in a truck, the driver of that truck is, on our submission, a person who has the possession, custody or control of the goods. 

Not in a warehouse context at all but just as a matter of language, the truck driver falls within the section.  The truck driver is a person who quite obviously has the potential to divert the goods to somewhere they should not go or not to deliver all of the goods that are loaded onto the truck to be entered for warehousing.  So the truck driver is a person whose behaviour is capable of leading to the loss of goods in a way that will have an adverse impact for the revenue.

As we understand our friend’s case, if the truck driver is employed even by a company that they own then 35A has no application to the truck driver because they are an employee.  Certainly that would seem to follow from the Full Court’s reasoning.  In that way one immediately sees a gaping hole in the protection of the revenue that section 35A is evidently intended to provide.

GAGELER J:   Let us just take that example.  If the truck driver has a traffic accident on the way from the dock to the warehouse, 35A applies?

MR DONAGHUE:   Has a traffic accident with what consequence, your Honour?

GAGELER J:   With the consequence that the goods are damaged beyond repair.

MR DONAGHUE:   No, because the safety – I will make this good by reference to Southern Shipping – is not keeping the goods physically safe from destruction, it is keeping them safe from entering into home consumption without the payment of revenue.

GORDON J:   So the answer is the goods are produced and therefore able to be accounted for, they just happen to be damaged.

MR DONAGHUE:   Yes, indeed.  If the warehouse burnt down so that the goods were destroyed so that they could not enter into home consumption, that is not relevantly a failure to keep the goods safely for the purpose of this provision because there is no loss to the revenue.

KIEFEL CJ:   But, if the truck overturned and the goods spilled and people came and took them that would be a different ‑ ‑ ‑

MR DONAGHUE:   Yes.  And, that is why I clarified with Justice Gageler because in that situation the answer would be “yes”, because the goods have escaped from customs control.

The other thing to note about this section, is that while it is not confined to warehouses, it does, obviously, apply to them, in our submission, and so much has been accepted in the Federal Court in a case called Drew v Dibb that is included in the bundle but that I will not take your Honours to.

GORDON J:   Does it not apply – I do not understand why you are putting this because, if it applies, as I understand your argument from the whole scheme of customs control – so from the time that they arrive in Australia at the port of import all the way through including, for example, depots under Part IVA.  Is that not your position?

MR DONAGHUE:   It applies across‑the‑board, yes.

GORDON J:   I see. 

MR DONAGHUE:   Until the goods leave customs control.

GORDON J:   Yes.

MR DONAGHUE:   But, there used to be within the Act ‑ ‑ ‑

GORDON J:   Section 90.

MR DONAGHUE:   ‑ ‑ ‑ section 90 and section 92, I think 92(4), dealing specifically with warehouses, which imposed a liability on the licensee of the warehouse in equivalent terms to 35A and that provision was there from the enactment of the Act.  And, it existed in the Act in parallel with 35A for over 20 years’ time.  So, the Parliament had dealt specifically with the obligation of the licensee of the warehouse and then, on the enactment of 35A, enacted a provision that went wider.  We have given your Honours ‑ ‑ ‑

KIEFEL CJ:   When was section 90 removed?

MR DONAGHUE:   In 1980, your Honour.  Yes, it is section 92.  I apologise if I misspoke.

KIEFEL CJ:   Section 92.

MR DONAGHUE:   It was repealed and if your Honours want to see it, it is behind tab 4 in the bundle:

The licensee of every warehouse shall –

. . . 

(4)Pay the duty on all warehoused goods removed . . . except by authority and on all warehoused goods not produced . . . on demand unless such goods are accounted for to the satisfaction of the Collector.

Now, we submit that that is significant because in its application to a licensed warehouse, the effect of our friend’s submissions is that because they say the acts of employees and officers must be regarded as acts only of the corporate licensee – of the employer – in effect, their construction of the Act collapses the operation of 35A back so that it is exactly equivalent to section 92(4).

It might have different operations when you are not talking about warehouses, but the effect of their construction is to undo any broadening of the Act that was brought about by the enactment of 35A with respect to warehouses.  And that, we submit, is an unlikely intention to attribute to the Parliament, particularly given the co‑existence of the provisions for an extended period of time.

I have mentioned that the purpose of 35A is to protect the revenue and that is a purpose that was referred to in the second reading speeches – I will not take your Honours to them but we have given it to you in volume 2 of the joint book, behind tab 28.  But, it is also a purpose that has long been recognised, including by this Court, and to make that good if I could take your Honours to Collector of Customs (NSW) v SouthernShipping (1962) 107 CLR 279. It is behind tab 12 in the joint book of authorities. This case is both the leading authority on the interpretation of the section but also, we submit, an instructive example on its facts as to how the section applies.

Like this case, it involved theft of tobacco but unlike this case the theft was not from a warehouse.  It was instead from a storeroom on a wharf at Circular Quay in Sydney.  The actual provision in issue was section 60 of the Excise Act which is reproduced at the bottom of the first page of the report in the footnote and it is in relevantly identical terms to 35A.  It was the model for 35A.  There is no relevant difference textually between them.

The matter came before the Full Court on a case stated by Justice McTiernan, and the case stated is reproduced in the report and it repays some inspection, so if I could ask your Honours to start there on page 280 of the report and if your Honours go down to about point 8 on the page you will see a few words in the number “7”, so the numbered paragraphs are reproduced but not separated as paragraphs within the report.  But at paragraph 7 of the stated case, it is recorded that:

After the goods were delivered to the defendant at No. 4 wharf they were placed in a store, capable of being locked described in the statement of claim as ‘the Bond Store’ but colloquially known as ‘the dead house’.

Now, moving over on to the top of the next page, 281, in paragraph 9 - sorry, I should have read out, if I had read on the next sentence after ‘the dead house’:

The store was not a warehouse licensed by the Minister –

At page 281 about four lines down, paragraph 9:

The Maritime Services Board of New South Wales is the owner of No. 4 wharf, Circular Quay.

If you then go about another 10 or 12 lines down:

Following upon arrangements made between the defendant and the Maritime Services Board of New South Wales that the ss. Karuah –

which was the defendant’s ship:

should occupy the berth at No. 4 wharf, the gate keys and the store key of No. 4 wharf were handed to the company’s representative –

Now, Justice Taylor in a part of his reasons I will come to later, describes this arrangement, in my submission, correctly, as the storeroom therefore being part of the wharf facilities that were made available to ships that were assigned berths at Circular Quay.  If you were assigned a berth then you got the use of the storeroom that was associated with that particular berth.  But all of this was owned and operated by the Maritime Services Board of New South Wales, not by the defendant. 

You see in the middle of page 281, just before paragraph 10 that there was in addition to the key that was given to the occupier of the wharf another key:

of the Customs Office for use in emergencies was placed under the seal in an accessible place on the wharf.  If the seal was broken for any reason an explanation was required by the Department.

So there was a key available for use in emergencies to allow access, if you broke the seal.  Then, near the bottom of page 281 at paragraph 12, it is about six lines up:

A section of the building containing the store is used as a switch room or meter room in relation to the supply of electricity and this room was at all material times under the exclusive control of the Maritime Services Board of New South Wales.  There is only one door to this room and this door is accessible from the roadway.

Now, over the page on 282, what actually happened was that in the middle of the night, on a Saturday night, 20 April 1957, some person or persons unknown forced the door to the switch room - so this is the room under the exclusive control of the Maritime Board - broke the internal wall between the switch room and the store thereby gaining access to the store and stole the cigarettes.

In our submission, two aspects of that are instructive.  First, the defendant was held liable under section 35A, in some paragraphs that I will take your Honours to, but it is no part of the reasoning of the court to focus on whether or not the defendant had the capacity to keep the goods safe or to focus, as the Full Court focused below, on control over situational factors such as the integrity of the building or the security monitoring arrangements there. 

Those matters that featured in the plurality’s reasons in the Full Court did not feature at all in the High Court and had they featured, it is hard to see how the same result could have followed because this was not a facility over which the defendant’s shipping company had any control as to the locking arrangements, the access through the switch room, the physical integrity of the internal wall.  All of those were matters under the control of the Maritime Board which just assigned the room to the shipping company.  So it is, we submit, very difficult to see on the facts of Southern Shipping how that kind of analysis can properly play a role in the operation of section 35A.

The other point that we draw from the factual account is that it appears plain that at all relevant times there was a key that was readily accessible on the wharf under seal of the defendant.  So that to gain access to this storeroom all you needed to do was to take the key from under seal. 

It may well have been a breach of contract to do so, to take access to the key in that way but if one is asking a question concerned with the capacity – the practical, physical capacity of people to gain access to the goods – it is difficult to say that the only person who had that capacity was the defendant. 

So if one is asking a question about exclusive possession, custody or control these were goods in the dead store that could be accessed by the defendant, by the Board, who had the key, or by anyone else who accessed the spare key.  Again, that does not seem to have troubled the High Court; there was no focus on exclusivity in the reasoning of the Court.

Can I take your Honours briefly through the key passages, starting with Chief Justice Dixon’s judgment, with whom Justice Windeyer concurred.  The concurrence is at page 302.  In the Chief Justice’s judgment, if you go to page 287 at about point 3 of the way down the page, there is a sentence beginning, near the right‑hand side:

It is said, however, for the defendant that “fail” involves some want of care, some neglect or default.  Considering the object of the provision and the place it takes, this ground must “fail”.  It means to place on the person having possession, custody or control an absolute duty.

Then his Honour notes that it might not apply to the manufacturer.  His Honour continues, about halfway down the page:

Perhaps the word “absolute” is too strong for it may be conceded that it is possible to except inevitable casualty – what once was called “Act of God”.

So, subject to “Act of God”, in the Chief Justice’s view, section 58 or 35A imposes an absolute liability.  It was no part of his Honour’s reasoning to inquire into whether there was anything that the defendant could have done to stop the theft or whether they otherwise had the capacity to keep the goods safe.  It just did not feature at all.  That same remark can be made about all of the judgments I am going to take your Honours to.

Over the page on 288 in the middle of the page, there is a reference to it probably not meaning that double recovery is possible but his Honour does not need to decide that on the facts of the case and at about point 7, his Honour refers to the provision being a:

provision for the protection of the revenue -

Justice McTiernan at 289 of his judgment at the bottom of that page notes that the argument was advanced, this is at about point 7:

The defendant also sets up that it was a reasonable precaution to take . . . to put them in the store and it therefore did not fail to keep them safely –

His Honour rejects that argument starting with Justice O’Connor’s analysis in the The King v Lyon as to the purpose of customs control, and we have quoted that passage in our written submissions, the object of the regime being to prevent goods going into home consumption before duty is paid.  Then if your Honours look at the bottom of page 290 running over to the top of 291:

The task of keeping the goods safely cannot be said to have been fulfilled if the goods are stolen even though reasonable precautions were taken.  Under par. (a) the person concerned is not liable unless he “fails” . . . “Fails” is a word with various meanings.  I think that in s. 60 its appropriate meaning is that the person concerned is to be liable if he comes short of keeping the goods safely, that is preserving them from loss or damage.  The word “fails” is not strong enough –

to include the unavoidable.  But it should not – other than that, like the Chief Justice, the provision applies.  Justice Taylor, at page 295, again rejects the argument that liability is anything other than absolute.  So about halfway – about point 3 on page 295, his Honour says that:

the defendant was at pains to establish that the obligation to keep goods safely is not, as it was said, absolute; the expression, it was asserted, connotes a failure on the part of the custodian to observe some unspecified standard of care with respect to their safety.

His Honour then rejects that, going down to about point 6 or point 7:

In the case of s. 60(1), however, the obvious purpose and object of the provision makes it clear that the defendant’s argument must be rejected.  The provision is not designed to inflict a penalty . . . it is a provision which is designed to ensure that the excise revenue shall not suffer if excisable goods, by some irregular means, find their way into home consumption.

Justice Menzies at 299 at about point 3, makes the point that I made in response to your Honour Justice Gageler’s question:

it is hardly likely that the words “keep . . . safely” refer to protecting the goods from damage or destruction or anything of that nature; for the safety with which the section is concerned is that the goods – subject as they are to the control of Customs – do not get out of Customs control into home consumption without the payment of duty. 

GAGELER J:   Sir Owen Dixon seems to have taken a different view about that.  I am not sure – well, it possibly matters.

MR DONAGHUE:   Yes.  I think, as I recall, and I will try to find the passage again, Sir Owen Dixon left the point open. 

GAGELER J:   Well, at the top of page 287, above the passage you read to us.

MR DONAGHUE:   Yes – “safe from loss or destruction”. 

GAGELER J:   About point 2:

There must be some doubt whether the destruction of the goods was also contemplated but upon the words of the section destruction is certainly covered.

MR DONAGHUE:   Was also contemplated.

GAGELER J:   That does not seem to me to be equivocation on his part.

MR DONAGHUE:   The equivocation was whether it was intended.  That was what I had in mind.  I accept what your Honour puts to me.  In our submission there are references, both Justice Menzies and, I think, Justice Dixon that I am about to come to as well, that in the context of this provision the safety with which the section is concerned is about entry into home consumption without the payment of duty and that the provision is not otherwise concerned with the security of the goods and that, we submit, is the better interpretation of the provision.  Certainly the Justice Menzies passage I just read to your Honour is very clear in that respect.  Further down on 299 his Honour says at about point 7:

The words “fails to keep . . . safely” do not require any fault on the part of the person concerned beyond proof that the goods have not been kept safely in the sense indicated.

GAGELER J:   That might be the purpose, Mr Solicitor.  It might have the purpose of not allowing the goods to go into home consumption without duty being paid, but the means might be wider.  That is perhaps what Sir Owen Dixon was saying.  If you look at the operation of section 35A(1)(b), for example, this is a 35A(1)(a) case.

MR DONAGHUE:   Yes.

GAGELER J:   In a 35A(1)(b) case all you need is the Collector coming along and saying, “Show me the goods”.  If the goods cannot be produced it is quite irrelevant what has happened to the goods.

MR DONAGHUE:   Indeed.  One of the arguments that was advanced in Southern Shipping was, “I can account to your satisfaction by telling you the goods were stolen”.  The High Court said, “That does not account for the goods; that just accounts for why you do not have them”.  It does not account for the goods, so I certainly accept that that is so.  To account for them you need to either produce them or show that they have otherwise been dealt with in accordance with the Act. 

Even were it to be the case that the section applies in that situation, there may well be other steps that could be taken to alleviate any perceived unfair operation of 35A.  That was explored in the last couple of paragraphs of Justice Finkelstein’s reasons in Drew v Dibb, where the scenario was that the cigarettes in question were almost worthless.  I think they had become stale, if I can remember the facts correctly. 

But the duty was not payable ad valorem on the value of the cigarettes, it was a fixed rate per stick.  The fact that the resale value of the cigarettes had dropped significantly did not affect the amount of duty payable.  Justice Finkelstein said that the answer to that is applying for rebate mechanisms under the Customs Act rather than finding that 35A does not apply. 

It may be that there would be similar steps that could be taken in the destruction example even if, contrary to the Justice Menzies approach, the section were held to deal with physical destruction rather than just going into home consumption.

GAGELER J:   While I have interrupted you, if you do not mind, in an earlier answer to Justice Gordon you said of course the section would not allow for double recovery, and you mentioned a passage in Chief Justice Dixon’s judgment in Southern Shipping that was directed to double recovery.  How do you actually say double recovery is prevented within the scheme of the Act or by some general principle of law?

MR DONAGHUE:   Your Honour, I think there is – double recovery can mean a couple of different things.  So, there is the primary liability to duty and then the section 35A liability is not a liability to duty, it is to pay an amount equivalent to the amount of the duty.  It is possible for both of those liabilities to exist in parallel with one another. 

In the context of the duty obligation, under the Customs Act the obligation to pay duty can rest upon multiple successive owners of the goods, as has long been recognised and in that context – so, Wing On, I think, is the leading authority in 1937, I do not have the citation in front of me.  In that context, the way Chief Justice Latham approached the analysis was to say that even though liability to pay duty could fall on multiple different owners, that liability subsisted only until someone paid the duty and once any one of the people who were subject to the liability paid then the duty did not continue and it is by that mode of analysis I would say one deals with it. 

So, you can issue a notice under 35A requiring the payment of an amount equivalent to the duty but once someone has paid the duty or once someone has paid the amount equivalent to the duty then there is no longer a proper statutory basis for allowing multiple attempts to recover what has already been recovered.

NETTLE J:   Is that because once the duty is paid by the first man, there is no longer any duty payable on those goods if they were entered for home consumption?

MR DONAGHUE:   Yes, and that is, as we understand it, I am applying by parity of reasoning what Chief Justice Latham did in Wing On 60 CLR 97. But, on the face of the Act, it does not obviously deal with the double recovery problem but it would plainly be contrary to the scheme to have multiple people – it is not contrary to the scheme to protect the revenue by allowing duty to be pursued against the person who the Collector regards as the most appropriate or perhaps the only available source of funds if various people have gone into liquidation, for example, there might be only one possible target to recover the duty and it is appropriate for the Collector in those circumstances to recover against that person, but ‑ ‑ ‑

GORDON J:   Is not the answer also that the Collector has the general administration of the Act, the purpose of this provision is the protection of revenue not the imposition of a penalty and you have section 36 which is the penalty provision.

MR DONAGHUE:   Indeed, the criminal offence provision.  I accept that, your Honour.  The revenue has been protected once the duty has been recovered.

GORDON J:   That is the point and once you have it once you do not get it again.

MR DONAGHUE:   You do not get it again and we do not submit otherwise.  I understood Justice Gageler to be asking me whether I could point to a provision in the Act that produced that consequence and I cannot.

GAGELER J:   Or a principle of law.  I was just trying to, sort of, locate it in the legal firmament somewhere.

GORDON J:   It has arisen in the Income Tax Assessment provisions as well and there have been many authorities which said that once you have, consistent with the general administration of the Act, protection of the revenue or recovery of taxation, the logic is once you have gone through and you have, in effect, met the obligation of the administration of the Act by the Collector or the Commissioner to recover the revenue of tax then the administration is ‑ ‑ ‑

MR DONAGHUE:   I fully accept and embrace that and I am certainly not putting the position to the contrary.  I am, perhaps, grasping for a more satisfactory answer in terms of a more detailed answer but I cannot, I think, do better than what I have said and I certainly accept what your Honour Justice Gordon put to me. 

Could I just finish on Southern Shipping by giving your Honours the reference to Justice Owen at page 304 over to 305? It is really to the same effect as the other passages. It does not import notions of fault – about point 3 down the page:

it may mean no more than “omits” or “does not” . . . In the context in which the word is found here, I think the latter meaning should be given to it. 

So, “fails” just means does not keep safe and does not mean anything more than that.

In my submission, all of those passages that I have just given your Honours reference to are not able to be reconciled, particularly when one bears in mind the facts of the case, with the proposition that 35A only imposes liability on people who have capacity to keep the goods safely.

Moving to the fifth part of the submissions on the outline – the Full Court’s reasoning – in our submission, the way that the plurality got to their conclusion that employees are not covered by 35A, involved three steps, being the steps identified in paragraphs 9, 10 and 11.  Your Honours will see the first step at page 68 of the judgment – sorry, paragraph 68 of the judgment – which is on page 48 of the appeal book – where their Honours carved up the expression, identifying 35A as applying in six situations.  So, it seems to be the “entrusted with” and the “has” times by possession, custody and control is how we get to the six cases.

Our submission is – as your Honours will have seen in writing – that that kind of approach involves error right at the outset because the proper way to interpret this provision – particularly with the definite article at the start “the possession, custody or control” is as a composite expression.

That, in our submission, is significant for three reasons.  The first is that with respect to a composite expression, it is well settled that the meaning of one part of the provision might, usefully, inform or eliminate other parts of the expression and a useful encapsulation of that approach is found this Court’s judgment in XYZ v Commonwealth which is behind tab 24 in volume 1 of the joint book of authorities – XYZ (2006) 227 CLR 532. If your Honours turn to paragraph 176 which is at the bottom of page 592, and this is in the joint judgment of Justices Callinan and Heydon, their Honours point out:

It is sometimes inappropriate to dissect a composite phrase into particular parts, give each part a meaning which that part has when used in isolation, and combine those meanings so as to give the composite phrase a meaning at odds with the meaning it has when construed as a composite phrase.

That, we submit, is exactly what happened in this case because what the Court did was split the phrase up, then drill down into the meaning of “possession”, say possession means exclusive possession – this is our step 2 – and then, having said possession means exclusive possession, that meaning was then used to confine the meaning of custody and control later on in the section.  That is the way that the Court’s analysis was structured.  So, the root of the problem starts from the severing‑up of the composite phrase.

Similarly, in the same case, in XYZ, Chief Justice Gleeson, at paragraph 19, made the same point:

There are many instances where it is misleading to construe a composite phrase simply by combining the dictionary meanings of its component parts.

GAGELER J:   I mean, it is difficult to rely on a dissenting judgment where that is exactly what the majority did in construing this constitutional phrase.  You might be right as a general principle, but all you are illustrating is that there are exceptions.

MR DONAGHUE:   Your Honour, I do not deny that there are exceptions.  The phrase in issue there was “external affairs”.  I appreciate –and I am not relying on the dissent for the outcome, but I do not think that the principle is controversial.  Certainly, Justice Davies, in paragraph 31 of her judgment, made the same point by reference to a judgment of your Honour Justice Gordon in the Full Federal Court in Sea Shepherd Australia Ltd v Commissioner of Taxation, and the citation appears there.         So I think, in my submission, as a matter of principle the approach is clear and I do not seek to go any further than that.

The fact that this expression is a compound expression is confirmed, if confirmation is needed, by the approach that the Court took in the Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd, which your Honours will find behind tab 16. That is (1979) 143 CLR 499. This case is probably familiar to all of your Honours. It is the case involving an attempt to use the notice power under section 264 of the Tax Act to require the production of the contents of a safe deposit box held by the ANZ. And the relevant power in 264, which you see set out in the judgment at page 517 where I think Chief Justice Gibbs reproduces section 264. But the power, by notice in writing to require the production of material, extended to require the production of:

books, documents and other papers whatever in his custody or under his control relating thereto.

So their Honours were concerned with the meaning of “custody” or “control” and the particular question was:  when you have a safe deposit box in your vault where the key is in the possession of the person who has the safe deposit box but it is possible for the bank to use its own key to open the box, albeit that to do so would be in breach of the contractual arrangements between the bank and the owner of the box, is the contents of the box in the custody or control of the bank?  That was the issue that the Court was confronting and the answer was that it is, that the contents of the box were in their custody or control.

And, relevantly, for our purposes the custody or control is treated as a composite expression, notwithstanding the “or”.  I think our friends, in writing, have suggested you cannot have a composite phrase when there is an “or”.  That, we submit, is not correct, as this case shows.

If your Honours are looking at Chief Justice Gibbs’ judgment at 519, at about point 7 in the last paragraph, a few lines down, his Honour notes:

But s.264 does not speak of “possession”; it uses the wider, and vaguer, words “custody” and “control”.

So his Honour is obviously not confining those words by reference to possession; he is acknowledging their wider ambit.

The two words are sometimes used as synonyms . . . a distinction is drawn between “physical control, detention, or de facto possession” . . . and “legal possession”, which is “a definite legal relation of the person to the thing possessed”. . . . physical control is generally called “custody”.

Then, going over on to page 520, there is a discussion, a further discussion, about “custody” and the ability to produce.  In the middle of the page, some note, I rely on all of that but I will not read it, but in the middle of the page, his Honour says:

For example, if an employer gives his books of account to a servant [employee] to keep on his behalf, a notice under s. 264 can be given to the servant, who has physical control, although the master has the legal possession.

So, that is an acknowledgement of a point that I will develop more a little later but there is a clear, recognised distinction by reason of which the words “custody” or “control” are applied to the position of an employee or servant who has goods even if they do not have possession of them and the Full Court’s reasoning rather denies that distinction. 

Perhaps, if your Honours, I think I have got a minute or two before the break, if I could just finish with the ANZ Case.  The other judgment I take the Court to is Justice Mason with whom Justice Jacobs agreed and if your Honours turn to page 532 of the judgment you see at the bottom of page 532 a discussion of the meaning of “custody”:

“Safe keeping, protection; charge, care, guardianship”.

It is said to be of “no consequence” to the fact that the bank has custody, that “the Smorgons have rights of access”.  So it did not need to be exclusive, quite plainly.  Then, at 533:

The content of “control” is somewhat different from that of “custody”; however, both are “wide enough to include many types of possession which are not commensurate with full ownership” –

That can vary in the context, it is acknowledged.  Then, in the last couple of lines in the middle of the page of the top paragraph:

Although the use of the composite expression “in his custody or under his control” does not assist us in determining the precise limits of the meaning of “control”, it does evidence a legislative intention to employ the words in their widest sense.

We submit that that same intention is evident in the phrase the “possession, custody or control” as a composite expression that supports giving those words all of the component parts the meaning in their widest sense rather than to cut back the meaning of the whole expression by reference to what is said to be the meaning of its narrowest part.  If it please the Court.

KIEFEL CJ:   Yes, the Court will adjourn for 15 minutes.

AT 11.15 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.29 AM:

KIEFEL CJ:   Yes, Mr Solicitor.

MR DONAGHUE:   Thank you, your Honour.  I have reached paragraph 10 of the oral outline.  I said there were three steps in the Full Court’s reasoning, and I am up to step 2.  Step 2 is that the plurality erred in construing possession as meaning exclusive possession.  That their Honours construed the term in that way appears clearly at paragraph 97 on page 55, where their Honours said:

there are sufficient indications in the Customs Act . . . that the possession to which s 35A refers is possession which is exclusive of possession by others.

Their Honours based that on the word “the” in front of “possession, custody or control”.  That was the first basis.  The second basis is the reference:

to “the” person who is in the possession or control –

That is a little odd, with respect, because section 35A does not use the word “the” person.  So their Honours are relying on some language that does not appear in the section.  But those two things, the “the possession” and the “the person”, were said to be strongly indicative of a result which their Honours then confirmed by reference to what they referred to as the:

usual principle concerning the construction of penal provisions ‑ ‑ ‑

GORDON J:   This is not a penal provision.

MR DONAGHUE:   No.  In relation to that we say, one, it is not a penal provision, quite clearly, as appears from Southern Shipping; and, two, that presumption in any event has not fared well particularly recently in this Court.  For example, in Aubrey v The Queen we have given your Honours the reference in footnote 39 of our submissions, but your Honour the Chief Justice and Justices Keane, Nettle and Edelman rejected a submission based on that presumption, saying that penal statutes are to be construed in accordance with the ordinary rules of construction.  One, it is not penal.  Two, even if it was penal that would not provide a basis to depart from the ordinary approach to construction in any event. 

That really means, if one does away with that presumption and with the reference to that person which do not appear in the section, that the whole weight of the conclusion that possession means exclusive possession rests, as your Honour Justice Nettle put to me earlier this morning, on the word “the” before the expression.  As I have already submitted, we contend that that means no more than that one approaches the words that follow as a composite expression.

That the words do not mean exclusive possession we say emerges quite clearly when one has regard to the wider context that we are here concerned with provisions that are subject to the control of customs for this reason, that the ordinary, if not invariable position with respect to goods that are subject to section 35A is that the person who is holding the goods and is required to keep them safely, for example, in a warehouse, will be doing so on behalf of someone else:  the owner of the goods, being the person who will ultimately be expected to pay the duty before the goods enter for home consumption. 

The owner of the goods is the person who has at very least a right to legal possession of the goods, subject to compliance with the various authorities required under the Act.

So, if “possession” means exclusive possession section 35A will not work because the position of the 35A person will never be exclusive because the owner will be another person who also has a right to possession.  For that reason alone we submit that it is not tenable to construe this regime as focusing on exclusive possession, custody or control. 

The fact that more than one person can have such possession and, indeed, that the owner might share the possession, custody or control with the warehouse operator is confirmed, albeit in a slightly different statutory context, by the decision in Goben Pty Ltd v Chief Executive Officer of Customs (1996) 68 FCR 301 which your Honours will see behind tab 17 in the joint book. It is a decision of Justice Davies.

This is a case that arose, again concerned tobacco, arose under New South Wales franchise licence legislation and your Honours can see the terms of section 33 of the New South Wales Act at the bottom of the headnote page.  It used the language “possession, custody or control”, so the same phrase. 

In effect, the case concerned a scenario where the appellant had imported tobacco into New South Wales from New Zealand.  They said they were not going to keep it in New South Wales that they were going to send it on to South Australia because they were not permitted to sell it within New South Wales, they did not have the relevant licence but the New South Wales authorities had evidence that they were intending to sell it, that they were conducting a wholesale operation within New South Wales, so pursuant to section 33, or 33 and 58 which you see over the top of the next page, the Commissioner seized the tobacco. 

The tobacco at the relevant time was in a warehouse under the Customs Act so they seized it not by taking it from the warehouse but by applying stamps to the relevant products to indicate that they had been seized.  Without wanting to dwell on the case too long at pages 306 and 307 you see an argument about whether or not the importer still had the possession, custody or control of the goods and circumstances where they were in the warehouse being operated by JAS International. 

There is a discussion at the bottom of 306 about the wide denotation of the phrase “possession, custody or control”, quotes from the ANZ Bank Case I have already taken your Honours to and the conclusion that was then reached just under letter E on page 307 was that:

“possession, custody or control” need not be exclusive, it appears to me that the goods were in the “possession, custody or control” of JAS International –

that is the warehouse:

and of its principal, Goben –

who had the owners’ rights.  So, it is illustrating the point that I made that in statutory context it does not work for section 35A to be construed as meaning “exclusive”. 

Finally, the last step in the Full Court’s reasons was that if, contrary to the submissions I have just made, “possession” means exclusive possession, then that meaning confined custody and control.  To get there, there were really two sub‑steps in the Court’s reasoning.  One was that to rely, as your Honours will see on pages 58 to 59 of the appeal book, paragraphs 106 through to 110, on the proposition that 35A was enacted in a context where employees are not regarded as having the possession of their employer’s goods, so the focus was on the word “possession” and there were quotes from a couple of texts and a number of authorities said to support that proposition. 

If your Honours have our written submissions, I think, perhaps the most efficient way of me doing this is to ask your Honours to turn to those submissions at paragraph 47.  The point that I am seeking to make is this, that while the material on which the Full Court relied in those paragraphs does provide some support for the proposition that employees often do not – there is no invariable rule, but employees often do not have the possession of their employer’s goods, the same materials, when you look at them, support the conclusion that the employees do have the custody or control of the employee’s goods and, indeed, the common law developed the notions of custody or control of goods specifically to deal with the situation of a servant who did not have possession of the master’s goods but who, nevertheless, had those goods in his or her physical control. 

So if your Honours have paragraph 47, you will see we have some rather extensive footnotes on that page and if I could just emphasise a couple of the passages that we have quoted.  We have given your Honours, in volume 2 of the joint book of authorities, the relevant abstracts from all of this secondary material so that if your Honours want to see the wider context you have it. 

But it is sufficient for my purposes to note in paragraph 32, the last couple of lines we have extracted from Palmer on Bailment in 2009, noting that as a general rule the servant does not obtain possession of the master’s chattels.  The rule is subject to wide exceptions and it may be questioned whether it is of any practical value. 

Then in paragraph 33, extracting from Pollock and Wright, there is a general reluctance to separate possession from custody but the law does so in special cases as where the servant holds on behalf of the master, and then there is the example given to illustrate the tailor and the coat. 

So the tailor sends the coat to the house.  JS, the master, puts on the coat, has physical control and possession, takes off the coat, gives it to the servant to take back to the tailor, now the servant has control, in this connection generally called custody, while JS has possession.  So the Full Court is confining custody and control by reference to possession but the common law did the reverse, that the concepts of custody and control were to extend to deal with the situation where the servant did not have possession. 

GAGELER J:   All of this proceeds - the entire footnote, indeed, really the discussion in your paragraph 47, proceeds from a common law legal conception of possession, that is, that is connotes a definite legal relationship with a thing.  Is that the way the word “possession” is to be read in this collocation or are we talking about here what Pollock and Wright would have called de facto possession? 

MR DONAGHUE:   Your Honour, I am going to this material only to answer the way that the Full Court rely upon it.  In the end, our submission is that your Honours are construing in a statute a composite expression “possession, custody or control” to be construed as Justice Mason said in ANZ with all the generality of the words.

It is no part of our case that you have to descend into common law notions of individual concept be it possession, custody or control to give meaning to that phrase.  If I qualify my answer in that way, in my submission the better – if one is doing that, the better view is that possession does not just mean the physical custody of the object because to construe it in that way would have it add nothing to custody or control because custody or control are really the physical part of possession without the legal right associated with it. 

GAGELER J:   Is possession confined to the legal conception of “possession” or does it have two aspects?

MR DONAGHUE:   It certainly extends to the legal aspect of possession which is why I would say that the owner of the goods, which are held in the warehouse, has possession of the goods.

GORDON J:   Do you need that?  I do not quite understand where this is going in this sense.  You have 78(3) which is a deeming provision for management or control of a warehouse and 78(3) uses those words “management or control” and it picks up authorities to direct activities, removal of goods, all of the things to which Mr Zappia – Domenic Zappia was found to have.  So why are we going through all of this?

MR DONAGHUE:   Your Honour, I do not need it.  I am dealing with it because we lost in the Full Court on the basis that the Full Court said it means exclusive possession on a slender foundation.  They relied upon that by saying employees do not have possession and they say as – I will take your Honours to it in a minute, in paragraph 111, you would have expected Parliament to use specific language if it was intending to depart from that position.  Our point is ‑ ‑ ‑

GORDON J:   But it did. 

MR DONAGHUE:   Well Parliament used – in using “custody and control” – used the language that the common law used to pick up the rights of the employees in relation to goods of their employer.  So to the extent that you want specific language it is hard to see how Parliament could have used language that would better have captured the kind of rights of the employees than that which it did use. 

So that is really all I am seeking to do, to say well that criticism, when you look at where these words come from, they are very apt words to extend to the kind of scenario we have here.  I do not need to do any more from that either.  I do not suggest that what your Honour puts – your Honour Justice Gordon puts to me is not enough to get to the answer that I seek.  I am really just seeking to answer the way that the Full Court dealt with this. 

So, your Honours, I have mentioned paragraph 111.  Their Honours said, having gone through this material that was said to show that employees do not have possession, then said in 111, it is:

but a short step to conclude -

So if “possession” does not include possession by employees, it is a short step to conclude that nor does “control”.  Your Honours, it is a huge step.  It is contrary to all of the material that is there in footnote 47, and the history.  It is contrary to the evident intention of the composite phrase to be construed with all the generality that the words admit.  It fails to bring into account matters that were recited by the Full Court earlier in its reasons and then that never come back again.  So, if your Honours go back to page 51 of the book, paragraphs 81 through to 82, their Honours acknowledge that the purpose of protecting the revenue might suggest that the provision:

should not be given a narrow construction.

That, we respectfully submit, is clearly right.  But, that need not to adopt a narrow construction does not seem to have informed the ultimate conclusion.  The fact that custody or control might add to possession – given that they are used conjunctively – is acknowledged in 83 but not taken – or 83 and 84.  So, those kinds of factors, in our submission, meant that the step that the Full Court described as but a short step at 111 was a step that could not properly be taken.

The final point that we make, your Honours, is if your Honours go to paragraphs 102 through to104, on page 57, you will see that at 101 – having acknowledged that there was what is said to be:

a sense in which employees . . . exercise at least physical control over bonded goods.  Depending on their . . . hierarchy –

they may be able to control all the sorts of matters that Domenic Zappia, the respondent, could control.

There are then some findings made at a very high level of generality, and without any evident factual foundation, as to what the usual position is of employees in a bonded warehouse.  They will usually not control situational matters, security and staffing, usually be subject to the direction and control of others, usually not be there except in ordinary working hours.  And, then in 103, a reference to fault:

it is easy to envisage circumstances in which employees, without any fault on their part, will not have the capacity to keep goods safe –

That, we submit, really embodies the error that was made by the Full Court because that is to construe 35A in a way that reintroduces, by a side‑wind, the fault concept emphatically rejected by this Court over 50 years ago in Southern Shipping and never since challenged.

So, in our submission – for all of the reasons that I have already addressed – the appeal should be allowed.  The Full Court erred in its construction.  That only leaves, then, the question of what should be done.  Your Honours will have seen that all members of the Full Court – I withdraw that. 

At paragraph 120, the plurality said, even if we are wrong about what we have said above, the matter should still be remitted.  And, the reason identified in paragraph 120 was to allow more detailed findings to be made about:

whether Domenic was exercising a form of control by which he could have kept the goods safely –

KIEFEL CJ:   So in this regard their Honours were on the same page, so to speak, as Justice Davies at paragraph 36 and the majority at 99.

MR DONAGHUE:   Yes, exactly.  The whole court said it had to be remitted, but the reason that their Honours said that was because what was missing were said to be findings about whether there was a form of control whereby the goods could have been kept safely.

If your Honours accept our primary submission based on Southern Shipping, that is not a relevant inquiry, so the reason for the remittal does not arise.  The only relevant inquiry is:  did the respondent have the possession, custody or control of the goods?  The finding in paragraph 31 of the AAT’s reasons is enough to support the conclusion that he did.

BELL J:   In particular because of the finding that Domenic could accept and release the goods.

MR DONAGHUE:   Precisely, and that, we submit, is enough.

BELL J:   So notwithstanding the vagueness, for example, of the discussion in the AAT’s reasons of the open‑textured nature of a father‑son business relationship.

MR DONAGHUE:   Indeed.  Precisely.  I accept some of the findings are vague, but there is enough, particularly the matter your Honour Justice Bell just put to me, so that in our submission it is not necessary to remit the matter because the only inquiry is an inquiry that should not in fact have been made.

KIEFEL CJ:   How much weight would you give the Tribunal’s reference to operational control?

MR DONAGHUE:   In the context of all of the findings, your Honour, so one has operational control, I think, in paragraph 25.

KIEFEL CJ:   Operational decisions, I think, at 24.

MR DONAGHUE:   Yes.

KIEFEL CJ:   Operational role at 31.

MR DONAGHUE:   In my submission, it really harks back to what I said earlier by way of the purpose of this provision being to keep goods safely from entering into home consumption without the payment of the duty.  The critical matter is control over goods coming into and leaving the warehouse.  That is the central focus of attention.  There is a direct finding, as Justice Bell just put to me, about that in paragraph 31.

While I readily accept – and as I understand it, there was actually quite some detailed evidence about this, but the evidence did not find reflections in the findings.  It would have been better if the findings had been more detailed, I accept, but our submission is that there are enough.  If your Honours do not accept that then we submit that the appeal should be allowed and the matter should be remitted to the Tribunal, but our primary submission is that there is no need for that.

GAGELER J:   My understanding of the facts is that the goods were stolen in a break‑in.

MR DONAGHUE:   Yes.

GAGELER J:   Is it necessary for the control to extend to the physical security of the perimeter of the warehouse?

MR DONAGHUE:   No.  It cannot be, your Honour, given Southern Shipping.  In Southern Shipping the defendant shipping company plainly did not have that control and yet was unanimously found to be liable. That is why we say it is a false inquiry. Your Honours can see at 102 the kinds of matters that the Full Court was bringing in were the kinds of matters that, if they are part of the inquiry, Southern Shipping should have been decided differently.  If the Court pleases.

KIEFEL CJ:   Thank you.  Yes, Mr Reynolds.

MR REYNOLDS:   Your Honours should have our outline.

GORDON J:   Could you please speak up so I could hear you, Mr Reynolds, sorry.

MR REYNOLDS:   I said, your Honours should have our outline.

KIEFEL CJ:   Yes, we do, Mr Reynolds.

MR REYNOLDS:   I am proposing to track that fairly closely.  Could I start with paragraph 2 or what we have said in paragraph 2 as to the essential holding made by the Full Court which is, as we have put it there, that the AAT erred in law as to the meaning of “control”.  We submit that is clear from the paragraph to which we refer there, namely paragraph 119. 

Importantly, we submit in paragraph 3 that that was the – that the Full Court held that that was the only basis for the AAT’s decision.  In other words, when one analyses this judgment of the Full Court it is centred on the word “control” and although obviously they say things about other words in the section, their actual holding is confined to that and we say that that is clear from the paragraphs to which we have there referred.

It is not a finding, and I will come to this a little bit later, directed globally towards the words “possession, custody or control”.  But before I come to what we say about that what I want to do is direct your Honours to what we submit is the construction adopted by the majority of the Full Court. 

We have done that or we have attempted to do that in paragraph 4 of our submissions.  Your Honours will see there the various aspects which we have there highlighted:  first, that the person must have “the” control - a small word but very important here, not just “some” control, an observation which is made at several points in the judgment or at least two; second of all that we are talking about a form of “complete” control rather than one which is “some” control or “limited” control.

The Full Court or the majority also say we are talking here about “physical” control, so the completeness should be coupled with that concept, namely, complete physical control.  Then, and your Honours have already been taken, this is (iv) and (v), to the notions of the duties first of all to keep the goods safe and second of all the responsibility of accounting to the Collector in accordance with section 37 which, as your Honours will have noted, is principally by demonstrating that the goods have been dealt with in accordance with the Act.

So, that is the first part, we submit, of the equation.  That is the construction adopted by the majority, as they said, at paragraph 116 of the judgment referring back by allusion to a number of matters which they have referred to previously in the judgment.

When one collects them together, then one has the various aspects collected, we submit, as we have done in paragraph 4.  So we are talking here about a form of control which has various aspects, a form of, if you like, paramount control which has those various indicia.  So that is one half of the equation.

The other half, and we have put this at paragraph 5, the duality, if you like, in the approach by the Full Court is also to reject as wrong in law the approach adopted by the AAT.  If your Honours could perhaps go to the AAT’s reasons – this is in what is described as the core appeal book at page 13, and my learned friend took your Honours at some level to these passages.  Your Honours will see various things there.  At about line 9, using the numbers on the side of the page, it talks about who might have control:

Corporate officers might exercise control . . . Whether a particular officer or employee exercises control in relation to goods in a given case will be a question of fact.

I underline those words.  In paragraph 30 they are talking of course about John and again they use this word “exercise”.  If your Honours go to paragraph 31, which is about my client Domenic, again the word “exercised” is used and again the word, as in paragraph 30, the word “over”.  At about line 22, this is a form of control which is “subordinate”.  It is exercised - about line 26 - “on a day to‑day basis” – that is, from time to time.  Again, the word “exercised” in the next line - it is “delegated”.

So one sees this is a very and must be a very different form of approach that is adopted by the AAT.  One concern or the Full Court’s approach is whether you have control.  With the AAT the emphasis is on “exercise”.  We submit that there is at least implicit in these paragraphs the notion of a capacity to exercise control, not just the fact of exercising.  That is clear from paragraph 31 but also from paragraph 29.

The word “over” is also used.  We are talking here about having control of something, not about exercising control over.  It is also at least implicit in these paragraphs that they are talking here about some control or exercising, as I would put it, a measure of control and also one that again, at least implicitly, is exercised periodically – that is, from time to time.

It is also not a form of paramount control.  It is one – and this is stated expressly – which is subordinate and delegated.  So there is, we submit, a duality in the Full Court’s approach, both putting positively certain aspects of the construction and also rejecting the construction, insofar as there is one, by the AAT.  So that is, we submit, the way that the judgment should be construed and we have submitted that at paragraph 6 of our document.

Can I deal with what seems to be perhaps the largest point in the case, which is that the Comptroller General submits that the reasons of the Full Court are to be taken as adopting a construction which – my words, not theirs – reads out, as it were, distributively the words “possession, custody or control” so that they could not possibly, could never apply to someone who was an employee.  That is the way the first ground of appeal has been couched.  It is said that the Full Court erred by saying that an employee can never come within this provision.

We submit that that is not either a correct or a fair reading of what the Full Court have said.  We submit – and this is in paragraph 7 – that these observations, along those lines, are really nothing more than a conclusion that is drawn from the construction with this duality, as we have said, which is found elsewhere in the judgment. 

If your Honours go to paragraph 7 we submit there that the conclusion that is drawn – and this is these various paragraphs at the bottom of that paragraph ‑ is that the kind of control exercised by a person acting in the capacity of an employee of a licensed warehouse was not generally of the kind envisaged by the section and that a number of matters point against section 35A(1) as being understood as directed to that kind of control.

Well, if we go back to paragraph 4, we submit that that must be right.  If you look at the construction, assuming it is correct, we have put there and add in the rejection of what the AAT has said, then one could not conclude that what the Commonwealth was directing the provision at is the form of control that is exercised by an employee.

The sort of control an employee exercised would not generally be of that kind.  Indeed, it is perhaps not, we do not submit, impossible but extremely difficult to envisage a situation where all of the integers we have put in paragraph 4 would be correct in respect of an employee.

NETTLE J:   Could they apply in a one‑man company case?

MR REYNOLDS:   Yes.  That is the exact example that I have in mind and that perhaps is what has happened here in relation to John, that you have, if you like, a one‑man company, as your Honour said, and that might be an example, the only one that I have been able to think of, which would perhaps satisfy those requirements. 

They are correct in saying, when you talk about, as I have said, employees of licensed warehouses, that they do not generally have the kind of control that we are talking about here in paragraph 4 and when one looks textually at these three paragraphs they just do not say – that is, 116, 105 and 112 – they just do not say what the Comptroller General says they say, and it would be a ‑ ‑ ‑

KIEFEL CJ:   I think the majority thought, at least in one respect, that, if this was to capture employees, you would expect the words to be used.

MR REYNOLDS:   Yes.

KIEFEL CJ:   But I think it is put against you that it is one thing to say that you would not expect an employee to have this kind of control, it is another thing to elevate that to a universal assumption which then governs the construction of 35A.

MR REYNOLDS:   With respect, we agree, but we say that they have not elevated it to a universal proposition and that that is not a fair reading of the judgment.

KIEFEL CJ:   You are saying the majority were true to the text.

MR REYNOLDS:   Quite, and that is exactly what I am going to embark upon next, but I will come to that in a moment.  We are simply not talking, if we go to paragraph 4, of the sort of control that an employee would normally exercise.  One needs to think of a very special situation, such as the one your Honour Justice Nettle pointed to, which is perhaps a candidate for an employee having that form of paramount control, that is, with these various aspects in paragraph 4 and also, as it were, taken as rejected the approach by the AAT.

NETTLE J:   Just to stay with the one‑man company example, do you accept that that is so because in that case the man has exclusive control?

MR REYNOLDS:   Your Honour, I am going to come to that in a moment.  Your Honour will notice – in fact, a little while – I can deal with it now – but your Honour will have noticed that that word does not appear in paragraph 4.

NETTLE J:   No, it did not.

MR REYNOLDS:   I will deal with that point now rather than not respond to your Honour directly.  This paragraph 97, to which my learned friend took your Honours, we submit does not state – this is at page 55 – that the word “control” is to be construed as exclusive control.  It is talking there about possession.  As I say, the approach in paragraph 4 implicitly rejects my learned friend’s construction.  What is more, we do not suggest that it has to be absolutely exclusive.  What is required is the kind of paramount control your Honours see set out there in paragraph 4 that the judgment is ‑ ‑ ‑

GORDON J:   I am so sorry, can you go to paragraph 98 just to make sure that I understand that?

MR REYNOLDS:   Sorry, your Honour.

GAGELER J:   I want to ask you a question about the characteristics in paragraph 4 in a moment but ‑ ‑ ‑

MR REYNOLDS:   Should I do it ‑ ‑ ‑

GAGELER J:   Please do, yes.

MR REYNOLDS:   Your Honour Justice Gordon ‑ ‑ ‑

GORDON J:   I just wanted to understand.  Were you trying to draw a distinction between exclusive possession and exclusive control?

MR REYNOLDS:   Yes.  So, if you go to ‑ ‑ ‑

GORDON J:   In 98, do they not – I think this is what is put against you – draw upon the exclusive possession argument to bring about the fact that they must have exclusive control?

MR REYNOLDS:   The point is made at the end of the paragraph which is ‑ ‑ ‑

GORDON J:   Yes.  Do you accept that that is what they say?

MR REYNOLDS:   I accept that they say only those who have the control, not those who only have some control and I have put that in paragraph (i) of the paragraph ‑ ‑ ‑

GORDON J:   Yes, and that means exclusive control?  I just do not quite understand how you cannot, given what is set out in 98.

MR REYNOLDS:   Your Honour, we say it is the control – and this is a form of paramount control.

GORDON J:   I see.

MR REYNOLDS:   It is not just some control.  It is way more than that but does not have to reach to the level of being exclusive control.

NETTLE J:   But it must be paramount?

MR REYNOLDS:   Yes, so that if ‑ ‑ ‑

GORDON J:   So I should replace “complete” in (ii) with “paramount”, should I?

MR REYNOLDS:   No, no.  I have said – and obviously I am working with the words of the judgment – that that has to be taken in conjunction, as we have put it also with the word “physical” control and that we are not talking here about some form of limited or partial control.  We are talking about a form of paramount dominion which – we will be coming to this later on, but Justice Mason in what I will call the ANZ Case – sometimes called the Smorgon Case – talks about a range of meanings of this word. 

We would put it, as it were, about two‑thirds to three‑quarters up – not at the uppermost level of the meaning of “control” but not one that is utterly exclusive but one which, as we have said there, amounts to a form of paramount control with these various indicia. 

GORDON J:   I am going to leave it but we are going to come back to the way in which you deal with the construction question yourself, are you, after this?

MR REYNOLDS:   Yes, the words.  That is the next thing. 

GORDON J:   Thank you.

MR REYNOLDS:   If I am allowed to put off your Honour’s inquiry, it will be three minutes or so, depending on how we go.

GORDON J:   Thank you.

MR REYNOLDS:   That is our approach to the construction of the reasons.  I think I was beginning to say that it is a particular style of judgment, as all judgments are, but it is one that is, with respect, both scholarly and makes a number of observations, some more oblique than others.  It is not a style of judgment that simply says in a paragraph, “Here it is,” which is obviously what we are attempting to do in bringing the various threads together in paragraphs 4 and 5. 

But we submit that – I was not going to go to the actual text of them – it just is not a fair reading to say that they have excised from the whole of the operation of this section anyone who can be designated an “employee”, at least of a licensed warehouse, nor would I seek to defend such a construction. 

What I would say, and I am repeating myself, is that when one looks at the form of control or, rather, the construction that they have given, it is only in an extreme case that one could really think of that covering an employee, particularly if one is talking about an employee at a licensed warehouse.

We submit – we have said this at paragraph 8 – that their approach is correct and that they were correct to reject the AAT’s approach and that if it need be in the alternative the substance of their approach is correct.  I do not say this critically, but one of the things your Honours will have noted about the Commonwealth’s submissions is they attempt to clip observations that are made by at least the majority in the Full Court.

We submit when one looks to the construction as we put it by the Full Court that either that or the substance of it is the correct way of approaching the matter.  I am not submitting that there would not be another construction that is perhaps available, that it is in substance identical or almost identical to the approach by the Full Court, but not in a way which would lead to a different result in this case.

Your Honour Justice Gordon, with respect, is inviting me to look at the text, and that is where we want to start because the point that we make ‑ and we make these various points at paragraphs 10 to 15 – we say that there are number of points.  I usually put “first”, “secondly”, “thirdly”, et cetera, but I am trying not to do that these days.

KIEFEL CJ:   We are most grateful.

MR REYNOLDS:   Yes.  That is the substance of what I am doing here, albeit perhaps with better style.

GAGELER J:   Could I ask the question if it is an appropriate time:  you use the term “paramount control”.

MR REYNOLDS:   Yes.

GAGELER J:   I think to capture the first two characteristics that you mention in paragraph 4 so you have the complete control over the goods.

MR REYNOLDS:   At least complete physical control, yes.

GAGELER J:   My question is this:  is it not possible for an individual to have the last two characteristics that you have mentioned in paragraphs 4 and 5, which I can see are linked to the statutory text quite closely - is it not possible for an individual to have those characteristics without having complete physical control?

MR REYNOLDS:   Well, we would submit not because you have got these dual aspects ‑ and, with respect, your Honour Justice Gordon put this well earlier talking about a sort of chain of custody ‑ that if you have got a – to this very high standard, very high standard, almost absolute, got to keep the goods safe within that standard and you have also got to be in a position on request to demonstrate that anything that has happened to the goods has been done in accordance with the Act then, I ask rhetorically, how could you conceivably be in a position to comply with those obligations unless you had an extremely high measure of control?  We would submit, adopting what the Full Court have said, one amounting, at least in substance, to a form of complete physical control. 

We are going to deal with this aspect that your Honour – I do not want to appear to be fobbing your Honour off but when I deal with paragraphs 14 and 15 of this outline, I am going to be returning to this precise point of (iv) and (v).  If you wish, with respect, to continue on with it I am happy to but it would ‑ at the moment the way this is structured I would be diverting to it.  But just returning, if I may, to your Honour Justice Gordon’s focus on the words which, as this Court has said many times, if we start with text, and this I have dealt with in paragraph 11 which I am not going to deal with right now, I am going to come to that in a moment with the individual words. 

But what I would prefer to focus on before we get to that, particularly given some of the statements that have been made on behalf of the Comptroller General, is that we need to look, first of all, at the phrase itself, so I am trying to meet that challenge by doing just that.  We are talking about the phrase, as we have said in our outline “has the control of” in the context of section 35A.

Now, we submit that when one looks at that expression as a matter of ordinary English, that it has a particular meaning and it refers to – it connotes, a form of paramount control or dominion.  If one just focuses on those words, and your Honours will have your own ideas about the context in which such words appear, if you are to say of somebody that they “have the control of something” we are not talking here in that phrase of something which is either subordinate or periodic or merely involves the capacity to exercise control or we are not talking either just about some level of control or the ability to exercise that.

Now, your Honours, as I say, will have your own examples in mind of that, but one of the techniques which your Honours will be familiar with from lexicography is the expression “used of” and your Honours will recall that is a technique used by lexicographers, composers of dictionaries, to indicate the connotations or the nuances of both particular words but also of particular phrases.

It is a technique perhaps more commonly adopted in relation to languages that are no longer spoken, medieval French or Latin or what have you, because it is only by looking at the particular uses to which the phrase is put in context that one can understand what its connotations are.

The technique obviously can still be used, we do use it consciously or subconsciously in trying to understand what a particular phrase means.  If we focus back here on these words “have the control of”, I want to throw up some examples ‑ I am not suggesting they are exhaustive ‑ of the sort of situation where one would use that expression. 

One might use it of somebody who is the captain of a team or one might use it of a judge sitting alone in a case or a conductor of an orchestra, Speaker of the House of Representatives, the umpire or, as in cricket, there might be two, two umpires in charge of a game. 

Now, if we look at those examples, I am again not suggesting there are not others, but they all have within them the notion of having this form of paramount control that we have been talking about but, in particular, in contradistinction to others in all of those situations who either exercise some degree of control or exercise periodically some control or who have the capacity to do so.

So the various players in a team, not just the captain, can exercise control over the game.  If your Honours will permit me to say so, counsel sometimes exercise a measure of control over a case.  The first violin or others can exercise control or a measure of it from time to time, not just the conductor, and we can go on and give examples about the Speaker or about the umpire in a game. 

But when one looks at the way that expression is used in common parlance, it has these connotations and it, we submit, is an approach which the Full Court’s reasons are consistent with one cannot get away from the fact that there has been a choice of words here.  It is or looks deliberate.  There are other forms of expression that could have been used.  One could have talked about exercise of control over, or exercise some control over and that would have been clear enough if that is what was intended. 

So it is only a small point in the sense of the dimensions of it but, I submit, it is at one level the key to the case, and as your Honour Justice Gordon says or implies, that is where we have to start.  And we submit that is a very important aspect of the way the phrase should be analysed. 

If I can move to my second point, which is in paragraph 11, I put it there so that we do not start construing little words which ‑ ‑ ‑

NETTLE J:   Just before you go to 11, how does Pollock’s example of JS’s servant taking the jacket to the tailor fit with your conception of control – Pollock and Wright’s example of JS, the master giving his servant the jacket, which has come from the tailor, to return to the tailor and Pollock says, “The master has possession of course because he has legal possession but the servant, who is given the jacket to take back to the tailor, has control of the jacket”?

MR REYNOLDS:   If one were looking at the precise phrase that we are dealing with in this context, I would submit that within the meaning of this phrase that servant does not “have the control of that garment” because, to develop that slightly, the paramount control of it rests with the owner.

BELL J:   Why in the context of section 35A would it be that a person who has the authority to accept and release dutiable goods the subject of customs control into home consumption does not exercise control whatever wider or lesser meaning one is going to give to control, surely in this context it is difficult to see why, if one has that authority, one cannot be said, for the purpose of 35A, to be a person in control?

MR REYNOLDS:   I would submit, if one goes particularly to the two points your Honour Justice Gageler focused on a while ago, that only amounts to a small segment of those concepts of having the control to satisfy this absolute duty and, secondly, of ensuring the goods are only dealt with in accordance with the Act.  True it is that one, I submit with respect, very small segment of probably the latter would be encapsulated by what your Honour has just referred to, but it is only that small portion.

GAGELER J:   Do you apply the same analysis to the word “custody”?

MR REYNOLDS:   Would I?

GAGELER J:   Yes.

MR REYNOLDS:   That requires a form of paramount custody.  I submit that when one is talking about custody then, for the most part, that again would involve in this context the custody of the licensee of the warehouse.  But going back to a different example from the one your Honour Justice Nettle mentioned previously, one could envisage, albeit probably rarely as a practical matter, a licensee of the warehouse bring about a situation where an employee had been given this custody of particular goods for the purpose of keeping them safe and ensuring that they were only dealt with in accordance with the Act.

So the answer I would give to your Honour is it is not the same, but perhaps not dissimilar, that one could give custody for both safekeeping and ensuring that the Act is complied with without – I withdraw that – and in an unusual situation it might be that an underling would have custody within the meaning of that phrase.

If we go back to the words – sometimes judges get irritated by focusing on minutiae, but I do, if I may, just want to spend two or three minutes on this because at the risk of appearing overly pedantic these individual words, small as they are, are we submit very important here.  One cannot gainsay the general proposition and, again, we have set this out in paragraph 11, or tried to summarise it in our note there.  We point out that the word “has” means “hold” or “possess” rather than “exercises”.  And one would not normally be said to possess, control in a situation where one is simply exercising it on behalf of another, which is the AAT’s approach.

Likewise, the word “the”, your Honours have seen that the AAT have been, one way or another, focusing on the exercise from time to time of some control or in a situation where there is subordination and delegation.  And we submit that that word is particularly emphatic in this context.

We also emphasise the word “of” in the expression “control of” rather than “control over”.  There is a danger, we respectfully submit, with an approach that seeks to paraphrase these words in a way that is inconsistent.  We say that is what the AAT have done with their actual meaning.

So, if I can move then to the third point which, we submit, is very important and that is that this section 35A is immediately adjacent to the provisions of section 36 which creates a number of offences – relevantly, using the same words.  I am not going to take your Honours through the text of that provision.  Your Honours can see, even at a glance, that the same words are used and that is, obviously, as a matter of context, important to the construction of the words as they appear in the immediately preceding section.

We have summarised a number of points in paragraph 12 of our document saying that the operation of the criminal law should be certain.  I appreciate these are principles which are extremely well‑known to your Honours but I do want to take issue, to a slight degree, with something my learned friend said – and I may be over‑reading it – but he implied ‑ ‑ ‑

KIEFEL CJ:   May I interrupt you, Mr Reynolds?

MR REYNOLDS:   I am sorry, your Honour?

KIEFEL CJ:   May I interrupt you?

MR REYNOLDS:   Of course.

KIEFEL CJ:   The offences in section 36, have they been there for a long time since the predecessor of section 35A?

MR REYNOLDS:   I am not quite certain when they ‑ ‑ ‑

KIEFEL CJ:   Or, should I say at the time section 35A came in?

MR REYNOLDS:   Came in.

KIEFEL CJ:   Perhaps you could have a look at that over the luncheon break.

MR REYNOLDS:   Thank you, your Honour.  I will do that. 

I am not going to take your Honours through Beckwith, but your Honours recall it well.  It does say that the ordinary rules of construction are applied.  But, it also stresses – and it has not been overruled, it has been adopted repeatedly – that if the provision remains ambiguous or doubtful, then the ambiguity or doubt may be resolved in favour of the subject.

Now, there is another case to substantially the same effect which I will trouble your Honours to look at just briefly and that is The King v Adams (1935) 53 CLR 563, the passage, and your Honours probably know this well, is at page 367 at about point 6, point 7 in the judgment of Justices Rich, Dixon, Evatt and McTiernan where they talk about extending the operation of the section and they say that “its intention . . . must be clearly expressed” and they then refer to a fairly famous quote from Dickenson v Fletcher but they go on to say this:

notwithstanding the modification in the ancient strictness of its application which has occurred in the course of the modern search after the true nature of some actual legislative intention.  No doubt, in determining whether an offence has been created or enlarged, the Court must be guided, as in other questions of interpretation, by the fair meaning of the language of the enactment, but when that language is capable of more than one meaning, or is vague or cloudy so that its denotation is uncertain and no sure conclusion can be reached by a consideration of the provisions and subject matter of the legislation, then it ought not to be construed as extending any penal category.

They go on to refer to that as a “rule of construction”.  Also important in that context – and I will not take your Honours to it ‑ this is the end of paragraph 12 – is the case of CFMEU v Mammoet Australia.  The proposition there stated is that where there is a penalty imposed then it:

should be “certain and its reach ascertainable by those who are subject to it” –

So, that does not sit, we submit, particularly comfortably with the approach from the Comptroller General or, for that matter, the AAT that this is all a question of fact and you just look at the particular situation and you apply some construction and you have a look at the facts and you work out whether it amounts to control.

That is perhaps putting it unfairly but there is not, with respect, a lot of precision in the approach that is put against us; some might say almost none at all.  That, we submit, will not do with a provision which is adjacent to this criminal provision in virtually identical terms.  We have also said – this is paragraph 13 – we have quoted the usual sorts of principle quoted in relation to penal or quasi‑penal statutes.

KIEFEL CJ:   Is that to read the effect of the requirement that duty be paid in section 35A as a form of punishment?

MR REYNOLDS:   Well, the difficulty – and it has already been the subject of comment in argument – is that probably the most I can say is that it is quasi‑penal.  It is a bit like the case we have referred to there of Murphy v Farmer.  It is not actually a civil penalty and we attempt to take that proposition as far as we can but I do not submit, notwithstanding what is said by the Full Court, that your Honours would actually characterise it as penal.  The most that could be said is that it is quasi‑penal.  Would your Honours pardon me for a moment? 

KIEFEL CJ:   That might be a convenient time, Mr Reynolds.

MR REYNOLDS:   I was going to say at a pinch I could probably finish in about 10 minutes if that was what your Honours ‑ ‑ ‑

KIEFEL CJ:   I would not want to rush you, Mr Reynolds.

MR REYNOLDS:   If your Honour pleases.

KIEFEL CJ:   We will adjourn until 2.15.

AT 12.43 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

KIEFEL CJ:   Yes, Mr Reynolds.

MR REYNOLDS:   Thank you, your Honour.  I am up to paragraph 14 on our outline which picks up paragraph (iv) of that same document and the point we make there focuses on the absolute nature, or near absolute nature of the duty and that is a matter that informs the meaning of “control” and we go on to say that that is an indication that the legislature is talking here about a form of paramount control, the various aspects of which, so far as possible, are conducive to and consistent with the effective discharge of that duty. 

Conversely, anything much less than a form of paramount control such as that, we submit, found by the Full Court would not conform with the effective exercise of compliance with that particular duty.  A very similar point is made in relation to the point made at paragraph 4(v) about the responsibility to account in the manner contemplated by section 37 and the responsibility to ensure that the goods are at all times dealt with in accordance with the Customs Act. 

We quote a passage of Southern Shipping there and make really the same point made in paragraph 14 that that informs the meaning of “control” and is consistent with a form of paramount control rather than with the form of control which the AAT appears to envisage.

It is only a very small point but I thought I should draw it to your Honours’ attention.  If your Honours are looking at Southern Shipping in any detail, your Honours will pick this up.  There is one small matter that I need to draw to your Honours’ attention, and that is that the paragraph I just read from our outline refers to section 37, which your Honours have been taken to and which deals with this notion of satisfying the Collector, effectively focusing on the goods being dealt with in accordance with the Act. 

At the time that Southern Shipping was decided the equivalent provision in the Excise Act – it is found at page 286, at about point 6 – simply talks about accounting to the satisfaction of the Collector.  It does not have those additional words about being dealt with in accordance with the Act.  It is not really apropos of much more than that your Honours have to be a little bit careful with Southern Shipping in that one respect because of the difference in the wording.  To put it another way, this focus on what is dealt with in accordance with the Act is not alive, certainly not to the same extent in Southern Shipping as it is with the current form of the Act.

I said at paragraph 16 that there are difficulties with the AAT’s approach.  We said at paragraph 9, apropos paragraphs 10 to 15 of our outline, that these are matters which tell against the approach by the AAT and I am not going to repeat all of those points again.  I dealt with the difficulties with the AAT’s approach, I think, when I was dealing with those points.

Can I just raise a few additional matters.  The first is that your Honours were taken to the judgment of Sir Anthony Mason in what I call the ANZ Case, sometimes called the Smorgon Case, and one point he does make very clearly is that this word “control” can vary in its connotation and vary quite markedly.  The point that we would make about the approach of the AAT, particularly in paragraph 29, treating this as “a question of fact” which trickles down into the Comptroller General’s approach is that that is really what we would call a non‑construction rather than one which gives content to the meaning of a word which cries out for epexegesis, both generally and in a particular context of this section.

The next point I would make I have already made but just to note it briefly and that is that the approach of the AAT, particularly in paragraph 31 so far as it is apparent, we would submit, distorts the language of the section – a point, as I say, I have already made but it is important.

Next, that there is not really in the approach of the AAT and also, we submit, largely in the approach by the Comptroller General much reasoning in the way the argument is put as to construction.  This is putting it too high, but your Honours will get the effect of what I am saying from this.  If you look at what the Full Court said, “They have done all of these things wrong and we pick off a series of errors; therefore, we win”, it is not an approach that says, “Well, okay, this is exactly how you do construe this provision and here it is”. 

It is, as I said previously, a sort of non‑construction with the risk – and this is my next point – of potentially catching not only employees like my client but really any employee who either exercises or has the capacity to exercise a measure of control in relation to goods.

Can I respond very briefly to conclude with some responses to particular arguments made by the Comptroller?  Obviously, I have responded at various points to various matters that have been raised and I will not repeat those again.  Can I deal first with the emphasis, which is correct as far as it goes, on the protection of the revenue? 

The point that I would make is that in context of this particular section that does not really take the Comptroller General very far because the issue is really how far the legislature was intending to go in pursuit of that object.  It cannot be the case that that object has been – or that purpose has been – pursued at all cost. 

What needs to happen, we respectfully submit, is that if there is doubt about the connotation of control that will largely be resolved by focusing, as we submit we have, on the text and by asking how far does this text go in pursuit of that particular object?

I will not take your Honours to it but we have given your Honours a copy of – and have referred to it in our submissions – the CFMEU v Mammoet Australia Pty Ltd (2013) 248 CLR 619. I draw your Honours’ attention in particular to paragraphs 40 to 41 which I have attempted to summarise in the remarks I have made over the last 90 seconds.

Next, can I deal with the proposition that the Comptroller wishes to – and this is another matter that was emphasised by my friend – the submissions put in terms of these words “possession, custody or control” being a form of composite expression and my friends referred in their reply at – I will just give you the reference – page 4 in footnote 3, to some judgments, one by Justice Basten who referred at that particular passage that is quoted to something being a “kind of hendiadys”. 

That is the effect, we submit, of what my learned friend is putting, that this is a form of hendiadys, although if one wanted to be particularly pedantic one would call it – it is an even rarer word, namely, hendiatris – that it is one whole concept through three words.

The difficulty with that – and my friend did deal with it expressly – is that the examples – so far as we are aware – all of them dealing with the concept of hendiadys use the word “and”, not the word “or” and it is very difficult, we would submit impossible, to read an expression like this which is disjunctive as a composite.  So we would submit your Honours would reject that submission.

The next point I would make – and I am not – there are only a few more points that I wish to draw to your Honours’ attention – is that my learned friend emphasised – as we have emphasised to some degree – the passage in the ANZ Case of Justice Mason at page 533.  My learned friend sought to take from it – this is perhaps, an unfair summary – but suggested that because there are multiple words here that that is an indicator that the words were intended to be employed in their wider sense. 

Now, Sir Anthony does say something like that but we submit that it is important to look at what he said in the precise context of what he was dealing with and what he was talking about there, if your Honours have it to hand – this is at about point 3 on the page – is the importance of assigning content to the word.

The particular composite expression that he is referring to one needs to look at closely and that is - this is at about point 4 on the page “in his custody or under his control”.  Now, the words “in” and “under” are important in that formulation.  Your Honours heard what I said earlier about the notion of “under” the control or I think actually it was more “a control over”.  They are similar expressions which are broadening.

The other thing is that we are talking here about production of documents, not an expression which is used – if you look at our context in relation to a criminal offence in section 36.  So we would submit that this is obviously a very long way from saying that because you get a string of words then they – it can be assumed that the legislature is intending to use them in a wide sense. 

Next, there was some emphasis in the written submissions of the Comptroller General, I think at paragraph 56, about my client putting a construction which really meant that section 35A did not do any more than the old section 92 which talked only about licensed warehouses and he said it is said here it has to mean more than that.  That is why they have used the general words.

My learned friend has really turned that around a little in his submissions with his truck driver point, namely that there are examples, and he accepted this, of situations outside the holder of a licensed warehouse and that, we submit, is the sort of thing that is picked up by these words.  It is not just holders of licensed warehouses.  The Act talks about depot operators, cargo terminal operators, cargo reporters and other forms of entity as well.  So that is, we submit, the reason for – or the primary reason for this kind of omnibus expression so that one does not have to hunker down on those precise examples. 

The next point is that my learned friend sought to draw some comfort on the construction of the words “possession, custody or control” from the judgment of this Court in Southern Shipping and obviously the case is not irrelevant to that inquiry but we would submit that what it does say is not very much and only what they do say tends to be rather oblique.

The reason is that if your Honours - and I will give your Honours the reference in a second but there are multiple references in the judgment to the way the case was argued and that was to focus on whether there had been a – my words not their words – a wholesale transfer of possession, custody or control from Southern Shipping to the other entity, the Customs entity.  So, the focus is on – the references are at 286, point 8; 290, point 7; 293, point 8; 293, point 9; 294, point 1; 294, point 3; 294, point 8; 296, point 8 and 299, point 4. 

So that, perhaps put a little loosely, the flavour of both the argument and the way the case has been decided is assuming Southern Shipping says without conceding anything that we did have possession, custody or control we took it and we gave it to somebody else and, therefore, we cannot be said to be in possession, custody or control by virtue of that. 

So one cannot, sort of, read between the lines to – this is, in effect, we say, what my friend needed to say, you can tell by looking at the facts of that case that the High Court in that case would not have agreed with the approach taken to a construction of “possession, custody or control” by the Full Court here.  We submit, with respect, that that is not the appropriate conclusion your Honours should draw from the case.

Can I conclude with four matters.  The first is your Honour the Chief Justice asked us to ascertain the date of the amendment introducing section 36 to the Act.  The answer is 2009.  I will read onto the record the name of the relevant act, which is long.  It was by the Customs Amendment (Enhanced Order Controls and Other Measures) Act 2009 (Cth), Schedule 4, item 2, something which would have taken me two days to find; Mr Hume managed to do it in about 10 seconds.

The second point that I would like to mention is the time of this theft.  This is in the respondent’s book of further materials at page 16, line 35.  Your Honours have been given the date before of 23 May 2015.  It appears to have been at 5.07 pm on that day, which was a Saturday.  If your Honours go particularly to the top of page 15 – I do not want to take you to it now – of that same book, it appears to be clear that it was never asserted that my client was at the warehouse at the time.

The next thing that I would mention – and it is something which your Honours will, I submit, want to take into account at some level in your construction, and it has not been mentioned at all, I think, other than obliquely in one of the Comptroller General’s paragraphs in his written submissions.  It is that, if one is talking about a theft within the section, the relevant control must exist at the time of the theft.  That is clear from the Southern Shipping Case.  Can I give your Honours the references:  at 286, point 2; 292, point 8; 293, point 7; 294, point 6; 296, point 7; 300, point 6 and 304, point 3.

KIEFEL CJ:   Is this a new point, Mr Reynolds?

MR REYNOLDS:   No, but it is a point which is probably relevant in two respects that your Honours would at some level include that in your assessment of the construction.  It is not a huge point in that respect, probably, but it would also impact on, depending on the construction your Honours adopted, at whether or not there was a remitter, particularly given paragraph 31 of the AAT’s reasoning.  Of course, no one at the Bar table knows what construction your Honours are going to adopt so you should give, as they say, such weight to that matter as you deem fit.

The final thing I mention is that in that same book of materials there is quite an important factual matter and that is that there is a – at pages 7 to 8 there is a letter from an authorised Officer of Customs directed to Mr John Zappia of Zaps Transport Australia Limited.  If I can give you the references at 7, point 33 - that is line 33; page 7, line 37; page 8 at line 18. 

It is made abundantly clear in that letter of 15 April 2015, more than a month before the theft, that Zaps was not licenced to receive, store or move any of the customable tobacco and there is also a covering email at page 5, particularly at around line 20, which talks about the goods not being moved without ATO approval. 

The reason I mention that is that may impact not only on your Honours’ approach generally but also to what your Honours end up ordering in this case.  This is a matter which the Full Court alludes to at paragraph 104 of their reasons where – this is at the top of page 58 or right at the bottom of 57 that:

it was not open to him to relocate the cigarettes –

and the Comptroller General had refused permission for the cigarettes to be relocated and in the letter I took your Honours to I have actually directed that they cannot be moved. 

GAGELER J:   I just do not understand how you want us to take that into account.  What do you want us to draw from that?

MR REYNOLDS:   Your Honour, there has been some emphasis in the argument on the facts.  Your Honour knows, with respect, that we are dealing with a question of construction primarily.  To the extent that your Honours need to look at the factual matters it will be primarily on the issue of remitter but some of the questions that your Honours have directed to me have been – have focused upon the particular situation on my client and what he was or was not able to do and I need to put that letter to your Honours as part of the background, primarily factual.

KIEFEL CJ:   But what are we supposed to draw from it?

MR REYNOLDS:   Your Honour, as I say, it goes primarily to the question of what your Honours do with the matter but the answer is ‑ ‑ ‑

KIEFEL CJ:   Do you say it goes to the factual question of control?

MR REYNOLDS:   It could or it might and ‑ ‑ ‑

KIEFEL CJ:   That is an entirely new point, is it not?  That is a new point.

MR REYNOLDS:   Well, it is not so much a new point, your Honour, as a matter which has been referred to at some level by the Full Court and it is what it is.  I would be remiss ‑ ‑ ‑

KIEFEL CJ:   I am getting a little confused.  Do you want the matter to go back to the AAT?

MR REYNOLDS:   Well, your Honour, my approach is obviously to try to hang on to what the Full Court has done.  So our preferred course is for your Honours endorse the test by the Full Court or if your Honours see fit to do so, vary it in a way that it would still result in there being no need for a remitter because the ‑ ‑ ‑

KIEFEL CJ:   By extending a factual finding?  Is that what we are to do?

MR REYNOLDS:   No, no I do not mean that, your Honour.  I am sorry; I apologise for the lack of clarity.  No, your Honours – one sees that this matter – will construe it as you decide.  We would submit that your Honours would adopt a construction to the effect of what I have put where there is no need for remitter.  It may be that your Honours formulate, in your wisdom, a test which is slightly different from the Full Court’s, in which case, taking that example, there would be no need for a remitter.

All I am trying to say is our preferred course is that there be a test adopted that means that my client wins and there is no remitter.  I am not trying to overturn factual findings, but I felt that I needed to place the discussion which we had earlier in the context of that letter.

BELL J:   But taking us to that letter you were not seeking to agitate the point that you lost, as I understand it, not only before the Tribunal but in the Court of Appeal, that the letter had the effect, as it were, of taking Zaps, John and Domenic, out of 35A because the authority to hold had been revoked by the Comptroller?

MR REYNOLDS:   It is not that clean a point, no.  But we have talked about ‑ ‑ ‑

NETTLE J:   Does this go to the paramountcy that you were speaking of earlier?

MR REYNOLDS:   Well, it might if your Honours were looking at, for example, another test, say, similar to the one the Full Court adopted and your Honours are looking at what you were going to do by way of an order in relation to the matter.  I am saying that that is one of the matters to which your Honours might legitimately have regard in determining what order to make.

GORDON J:   Can I ask one question?  You said earlier in relation to section 35A that you accepted that it had to deal with depots and warehouses in a range of activities.

MR REYNOLDS:   Yes.

GORDON J:   Would you explain then to me what role, if any, 78(3) has where it, in effect, identifies that certain conduct is sufficient to be the exercise of control, that is including someone who has authority in relation to the removal of goods from the warehouse?  Does that cut across your paramountcy argument and if not, why not?

MR REYNOLDS:   Would your Honour pardon me for a moment?

GORDON J:   Certainly. 

MR REYNOLDS:   There is a provision in here about persons who are taken to participate in management or control and this defines the ambit of that expression.

GORDON J:   Well, it is a deeming provision in relation to those activities.  It is not a conclusive description of what might constitute management or control.  What I think it reads is it is that for those activities, one of which is directing removal of goods from the warehouse, then you are taken to be deemed to have participated in the management or control for the purpose of the licensing conditions.  I am just asking, having regard to the submission you made after lunch about the role of 35A, whether that cuts across your paramountcy argument. 

MR REYNOLDS:   Well, the difficulty, we would submit, is that it is only for the purposes of this part and 35A is not in that part.  So it is of limited scope and I would submit, at least for that reason, that it does not impact on the construction which I have put.

GORDON J:   Thank you. 

MR REYNOLDS:   If the Court pleases.

KIEFEL CJ:   Thank you.  Yes, Mr Solicitor.

MR DONAGHUE:   Your Honours, can I start with my friend’s outline, paragraph 4.  Your Honours will note – there was some questioning about this in 4(i) – that one of the essential components that our friends say one derives from 35A is that a person must have “the control”.

Now, if one pauses to ask, “Where does that requirement come from?” and if one goes to the text of 35A(1) you do not see it.  The text refers to “the possession, custody or control”.  Immediately to get the textual link, our friends invite your Honours to break up the phrase and to apply the definite article to each component within it.  That, we submit, is not the right approach, for the reasons that your Honours have already been taken to, including in the ANZ Case, in Justice Mason’s analysis, where of course there was the disjunctive “or” between the custody or control but it was still treated as a composite phrase.

The Full Court did not get their notion of “the control” from that textual foundation, they got it through a different path of reasoning which your Honours see at paragraphs 97 and 98 of the judgment at 55 to 56 of the appeal book.  Paragraph 97 is a paragraph that I took your Honours to, which is the paragraph where, in the clearest of terms, the Full Court says that the possession to which 35A refers is possession which is exclusive of the possession of others.

As we understood our friend’s oral submissions, he did not attempt to defend that paragraph.  He just said that the important part of the judgment is about control, it is not about possession, and that the finding about control can stand separately from the paragraph 97 reasoning. 

That prompted a question from your Honour Justice Gordon about paragraph 98 and it is paragraph 98 where one finds how the Full Court got its notion of “the control”, that being the same notion that one finds then reflected in 116 of the judgment.  And, it came by inference from the fact that the legislature, having chosen to confine the expression “possession” to “exclusive possession”, that provides support for the inference that 35A means “the control”.  So, the Full Court, in using that concept, derived it from a foundation which it seems to us that our friends do not attempt to defend.

GAGELER J:   Mr Solicitor, there is something in the point put against you, to the effect, that it is not good enough really just to criticise the reasoning of the Full Court.  It is more helpful, at least, to affirmatively state the proper construction of the term.  Does your affirmative construction go beyond just giving the word “control” the natural meaning?  Is there more to it than that?

MR DONAGHUE:   There is more to it because we submit that the phrase “possession, custody or control” is a very familiar phrase in the law used, obviously, in the discovery context but in a number of other contexts to embrace the widest possible form of control.  And, the legislature in adopting that phrase here is using a phrase well‑understood in the law to mean a very wide form of control – relationship with the relevant goods.

We do not need to invite your Honours to chart the outer boundaries of that phrase in this case.  And, if we invited your Honours to, no doubt your Honours would refuse to do so which is enough for us in the case to say that it, at least, includes the kind of control referred to in 78(3) about which your Honours Justice Bell and Justice Gordon have asked, about control over the removal of the goods into home consumption.  It, at least, includes that and that is all I need.

GAGELER J:   I may have cut you off – you were dealing with paragraph 4 of Mr Reynolds’ hand‑up document.

MR DONAGHUE:   Yes.

GAGELER J:   You obviously do not accept (i) and (ii).

MR DONAGHUE:   No.

GAGELER J:   Do you accept any of the other elements of his asserted essential requirements for control?

MR DONAGHUE:   I accept that the control being spoken of is physical control.  I do not accept (iv) for the reasons I have already advanced in respect of Southern Shipping.  In my submission, (iv) is inconsistent with Southern Shipping.  In relation to (v) I say that that would be sufficient – not necessary, but it is sufficient to constitute control.  So that once one has capacity over the discharge of the goods, for example, that would show that you are a person who is within the section.

Our friend’s notion of paramount control seems to us not to have any foundation, either in the legislative text or in the reasoning or anywhere else.  It seems to us not to serve a useful purpose in the understanding of the provision or in construing it in a way that achieves its purpose. 

If I can seek to illustrate that very briefly in two ways:  one is to return to my truck driver example from this morning.  The truck driver, employed by a large trucking company, will be directed by his or her employer to go to a particular wharf, pick up the goods and take them to a warehouse.  That person is obviously in a subordinate position and their engagement with the goods is periodic.

Mr Reynolds’ submissions were that the section does not pick up either subordinate or periodic control, that it needs to be paramount and that paramount, whatever it means, does not include those kinds of things.  If that be so then, on that construction requiring paramount control, the truck driver who has the obvious capacity to allow the goods to escape into home consumption without payment of the duty by either taking them somewhere different to the place they have been instructed to do so or by allowing some of the goods from the truck to be taken en route would not fall within the section.  That, we submit, collides quite obviously with the purpose that the provision is intended to serve and rather points against the idea that one needs paramountcy.

Perhaps another way of looking at it is my second example, which is if one changes the facts of ANZ a bit and takes a safety deposit box for which three people have keys, it is, we submit, difficult to see how any one of the three could be said to have paramount control over whatever goods happened to be in the box.  But the fact is that any one of the three could go and take those goods and do with them as they wish, as long as they do it before the other relevant people. 

The concept to which the control is directed has nothing to do with paramountcy; it has to do with the capacity to take the goods and allow them to enter into home consumption.  That capacity may exist without any notion of paramountcy entering into the equation.

The next point I seek to make relates to section 36 of the Act, which is the criminal offence provision, and the reliance our friend placed on that.  Your Honour the Chief Justice asked a question:  when did this offence come in?  We agreed with the answer that Mr Reynolds gave to that, the answer being it came in in 2009.  So one had section 35A from 1957 without an accompanying criminal offence provision until 2009, and then the legislature enacts a provision using the same language, relevantly, as is found in 35A.

It seems that the argument that is put against us is because 36 is a criminal provision and it should be accordingly treated as a penal provision and strictly construed, that means that section 35A should be construed in the same way as a penal provision and strictly construed.  There are, we submit, two problems with that analysis.  One is that where Parliament adopts a provision that has been in the Act for over 50 years, using exactly the same language and has been construed by the courts, one would ordinarily expect Parliament to be using the same meaning as has already - so if the two provisions do mean the same thing, we submit the better interpretation is that 36 means the same as 35, rather than that the meaning of 35A has changed over 50 years after its original enactment.  So that is one problem.

The second problem is that it is accepted and, interestingly, one example of this is in one of the cases that our friends handed up to your Honours today, a case of Murphy v Farmer, that even where the same words are used, once in a criminal provision and once not, while there is a presumption of uniform meaning that presumption may or may not be given great weight depending on the circumstances.

So in that case a provision using the world “false” in two different but similar contexts in the Act was held by a majority of the Court, the Court was divided but was held by Justices Deane, Dawson and Gaudron, to carry a different meaning in the criminal provision than it bore in a closely related context in a civil penalty or a civil forfeiture context.  So, it required, in effect, a mens rea or mental type element in the criminal provision that was not there in the civil forfeiture context.  So, in our submission, one gets very little from section 36 in the construction of 35A.

Next, and briefly in relation to Southern Shipping, it appeared at one point just after lunch that our friends were inviting your Honours to distinguish or at least be cautious about Southern Shipping because the Act at that time did not contain section 37 which your Honours will recall expressly says that when one is dealing with accounting for the goods the question is have they been accounted for by showing that they have been dealt with in accordance with the Act. 

That is what section 37B of the Act now says and it is put that that was not there in Southern Shipping.  That is true but if your Honours look in Southern Shipping, for example, near the bottom of page 294 in Justice Taylor’s judgment, his Honour held that when the phrase – when 35A or its equivalent uses the words “account for to the satisfaction of the Collector”, that means account for being dealt with in accordance with the Act.  In other words, it was held as a matter of interpretation in Southern Shipping that the words meant exactly what it is now said in 37 they mean.  So, there is not a relevant distinction there, in our submission.

Also, if it matters, the factual point about theft in the middle of the night in this case - sorry, in the afternoon on the weekend when the employer was not there, one might equally say of Southern Shipping the theft was in the middle of the night at a time when the goods were in the storehouse and the key was lodged with the Marine Board, so that the Southern Shipping Company in fact at the time had no capacity to access the storeroom when the theft occurred.

Finally, your Honours, the last point about this document our friends referred to.  Your Honour Justice Bell asked a question that I think was directed to paragraph 95 of the Full Court’s reasons at paragraph 55, which records an argument that our friends had run below to the effect that because they sought permission to move the cigarettes and they had not been given the permission to move the cigarettes that had a bearing on the application of section 35A, and the argument was rejected at paragraph 95.  There is no notice of contention raising that point.

The facts cannot be relied upon in that way.  Perhaps more to the point, the proceeding in the Full Federal Court was an appeal on a question of law under section 44 of the AAT Act.  That is what has made its way here.  Quite what your Honours are supposed to do with freestanding documents included in a book called “Respondent’s Book of Further

Material” in circumstances where a legal proceeding has come up in that way is not clear.

The relevant factual foundation for this case is the findings of fact made by the AAT – if they were supplemented.  If they were able to be supplemented in the Full Court then that would be one thing but on an appeal to this Court there is not, in our submission, any proper basis for putting additional documentary material before the Court.

Even if there were, with great respect to our friends, it is not clear what your Honours are supposed to do with these facts.  If it were relevant to know the history about the permission to move these goods, this letter would not be the only document your Honour would need.  So there is a more extensive factual history, including an application by Richlands, the owner of the goods, to move them to another warehouse, made quite some time before.  Then I think only two or three days before the theft, Zaps sought to move the goods.

So there is a whole background there that your Honours do not have.  Your Honours do not need it but looking at a tiny snapshot, in our submission, is not going to assist your Honours.  Thank you, your Honours.

KIEFEL CJ:   The Court reserves its decision in this matter and adjourns to 10.00 am tomorrow.

AT 3.03 PM THE MATTER WAS ADJOURNED