Comptroller-General of Customs v Zudov
[2023] VCC 545
•21 April 2023
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMON LAW DIVISION | Revised Not Restricted Suitable for Publication |
| General List |
Case No. CI-22-01585
| COMPTROLLER-GENERAL OF CUSTOMS | Plaintiff |
| v | |
| IOSIF IGOREVICH ZUDOV | Defendant |
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JUDGE: | HER HONOUR JUDGE ENGLISH | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 October 2022, 21 February, 9 March, 5 & 18 April 2023 | |
DATE OF JUDGMENT: | 21 April 2023 | |
CASE MAY BE CITED AS: | Comptroller-General of Customs v Zudov | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 545 | |
REASONS FOR JUDGMENT
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Subject:COMMON LAW
Catchwords: Customs – offences – smuggling – importation of tobacco – evasion of duty – false statement – conviction – no appearance by defendant – deterrence – totality – minimum penalties.
Legislation Cited: Crimes Act 1914 (Cth), s16A, s16C; Customs Act 1901 (Cth), Part XIII, s233, s234, Part XIV, s244, s245, s247, s255, s263; County Court Act 1958 (Vic), s78A; County Court Civil Procedure Rules 2018 (Vic), order 63A.
Cases Cited:Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd & Ors [2003] HCA 49; Comptroller-General of Customs v D’Aquino Bros Pty Ltd (1996) 135 ALR 649; Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd & Ors (No 2) [2006] QSC 40; Comptroller-General of Customs v Haidary [2018] VCC 848; Chief Executive Officer of Customs v Pham [2006] NSWSC 1370; L Vogel and Sons Pty Ltd v Anderson (1968) 120 CLR 157; CEO of Customs v Coulton [2005] NSWSC 869; CEO of Customs v Pham & Anor [2003] NSWSC 971; Oshlack v Richmond River Council [1998] HCA 11
Judgment: Penalty of:
1.$5,000 for smuggling;
2.$130,000 for evading duty ($84,000 subject to the operation of s245(2) of the Act); and
3.$3,000 for making a false statement.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A Haban-Beer | Australian Government Solicitor |
| For the Defendant | No appearance | - |
HER HONOUR:
Introduction
1These charges arise from the smuggling of tobacco products at Melbourne Airport on 8 April 2019 in breach of the provisions in Part XIII of the Customs Act 1901 (Cth) (“the Act”).
2It was alleged the defendant smuggled 78,200 cigarette sticks of tobacco. The duty payable on the importation as at the date of the offence was $63,948.05.
The charges
3The defendant was charged, by way of Statement of Claim dated 27 April 2022, with three offences under the Act: smuggling goods (contrary to s233(1)(a)); evading payment of duty that is payable (contrary to s234(1)(a)); and making a false statement to an officer (contrary to s234(1)(d)(i)).
4At the time of the alleged offences, a penalty unit was $210.
Smuggling goods s 233(1)(a) of the Act
5Section 233(1AA) provides a person who contravenes subsection (1) commits an offence punishable upon conviction. In relation to the smuggling of goods, the penalty prescribed in section 233AB(1) of the Act is a penalty not exceeding five times the amount of that duty. In this case, the maximum penalty is $319,740.25.
Evading payment of duty that is payable s 234(1)(a) of the Act
6In relation to evading payment of duty, section 234(2) provides a person who contravenes subsection (1) commits an offence punishable upon conviction. In an offence against section 234(1)(a) the penalty prescribed in section 234(2) is a penalty not exceeding five times the amount of that duty ($319,740.25) and not less than two times that amount ($127,896.10). I note this section has a minimum penalty applicable.
Making a false statement to an officer s 234(1)(d) of the Act
7In relation to making a false statement, the penalty prescribed in section 234(2) provides a person who contravenes (1) commits an offence punishable upon conviction. Section 234(2)(c) provides subject to subsection (3) by a penalty not exceeding 250 units, that is $52,500.
Part XIV Customs prosecutions
8This is a prosecution brought under Part XIV of the Act.
9The charges fall within the definition of customs prosecution as set out in section 244(a) of the Act, for the recovery of penalties under the Act.
10Section 245(1) Institution of prosecutions provides customs prosecutions may be instituted by the Comptroller-General of Customs by action, information or other appropriate proceeding.
11Pursuant to section 245(1)(d) of the Act, the County Court of Victoria is a Court in which customs prosecutions may be instituted.
12Section 247 provides:
“Every customs prosecution in a court referred to in subsection 245(1) may be commenced prosecuted and proceeded with…in accordance with the usual practice and procedure of the Court in civil cases…”.
13Submissions provided by solicitors for the plaintiff state:
“The effect of s 247 of the Customs Act is to require a State court to apply its usual practice and procedure in civil cases to a customs prosecution.”[1]
[1] Plaintiff’s outline of submissions dated 29 November 2022
14Section 255(1) provides for averment by the prosecution and that in any Customs prosecution the averment of the prosecutor or plaintiff contained in the information, complaint, declaration or claim shall be prima facie of the matter or matters averred.
15The plaintiff seeks a conviction in relation to the three charges.
16The plaintiff also seeks relief by way of the imposition of pecuniary penalties within the range of permissible statutory penalties as outlined at paragraphs 1, 2 and 3 of the ‘Relief Claimed’ section of the Statement of Claim.
17Section 245(2) of the Act provides where a customs prosecution for a pecuniary penalty would exceed 400 penalty units is instituted in a court referred to in paragraph (1)(d), the amount of the penalty that exceeds 400 penalty units ($84,000) is taken to be abandoned.
The nature of these proceedings
18These proceedings are of an unusual nature as offences are alleged but the proceedings have been commenced by way of Writ and Statement of Claim. The relief sought is a finding of guilt on the offences and the imposition of convictions and penalties. I sought written submissions from the plaintiff’s solicitor which were dated 29 November 2022.
19By virtue of section 245 and section 247 of the Act, this is an appropriate proceeding in accordance with the usual practice and procedure of the Court in civil cases. Hence the proceeding is commenced by way of Writ pursuant to rule 5.01 of the County Court Civil Procedure Rules 2018 and Statement of Claim pursuant to rule 5.04.
20This court, when hearing proceedings under the Customs Act, is exercising federal jurisdiction.
21As to whether the proceeding is ‘criminal’ or ‘civil’, I note Justice Kirby in Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd & Ors [2003] HCA 49 stated, at paragraph [53]:
“…one such usual feature is that normally a proceeding resulting in a “conviction” is classified as criminal. To secure such a “conviction” the prosecutor must accept the burden to prove all of the elements of the alleged offence by a standard of proof described as “beyond reasonable doubt.”
22At paragraph [56] Justice Kirby described the statutory penalties as:
“…a kind of hybrid, lying somewhere between compensation, restitution and restoration (the usual business of civil process) and punishment and public denunciation (the usual business of criminal process).”
23Regarding the procedure, Justice Kirby made the following point at paragraph [71]:
“…Without knowing of the history of prosecutions in revenue cases for debts to the Crown, the instruction of section 247 of the Customs Act would seem remarkable, even astonishing. This is because, normally, one would expect that the statutory features and the predominantly penal character of such prosecutions would attract the general rules of practice and procedure observed in criminal cases. The history of Crown revenue law helps to explain the origins of s 247 (and its equivalent in the Excise Act). But it does not diminish the exceptional particularity of the provision by which the Parliament has stated its will.”
24The case is authority that the standard of proof in customs prosecutions such as in section 234(1)(a) and (d) of the Act is that the elements of the offence must be established beyond reasonable doubt. Justice Kirby noted the provisions facilitating proof of offences by averment of matters in the originating process increases rather than diminishes the significance of the standard of proof.
25The fact that these offences are punishable by penalties rather than fines is relevant to the matters proceeding in this manner. Hunt CJ in Comptroller-General of Customs v D’Aquino Bros Pty Ltd (1996) 135 ALR 649 at 655 stated:
“…the right to conduct any prosecution for the recovery of a fine by way of a customs prosecution would seriously erode the defendant’s constitutional right to a trial by jury enshrined in s 80 of the Constitution.”
26In discussing the “commercial necessity for the special procedure permitted in customs prosecutions” his Honour goes on to state:
“…But it is going a very long distance further to hold that the same approach should be taken which would permit the Comptroller-General to proceed by way of customs prosecution in relation to the recovery of fines (which go to the Crown) as well as the recovery of penalties (which go to the Comptroller-General), with the extraordinary consequences that such a prosecution has…”.[2]
[2]Comptroller-General of Customs v D’Aquino Bros Pty Ltd 135 ALR 649 at 656
Procedure in this case
27The defendant was personally served with the Writ and Statement of Claim on 21 June 2022.[3] He has not entered an appearance in respect of this proceeding.
[3]Affidavit of Benjamin May dated 6 October 2022
27 October 2022
28On 6 October 2022, the plaintiff filed a Summons for the application for judgment in default of appearance. On 12 October 2022, the defendant was served with the summons by letter sent by post. An email was also sent to the defendant but to the incorrect email address.[4]
[4] Affidavit of Sverre Edvard Gunnersen dated 20 February 2023
29The matter was originally listed on 27 October 2022. On that date, I sought submissions on the power of the County Court to enter judgment other than for recovery of debt, damages or property, pursuant to Order 21.04 in default of appearance. The matter was adjourned and listed for further hearing on 21 February 2023. The plaintiff provided submissions dated 29 November 2022.
30On 16 February 2023, a letter was sent by express post to the defendant informing the defendant the hearing was listed for 21 February 2023. On the same day an email was also sent to his correct email address.[5]
[5] Affidavit of Sverre Edvard Gunnersen dated 20 February 2023
21 February 2023
31The summons for default judgment was listed for hearing by Zoom[6] on 21 February 2023. The defendant did not appear at Court on that day.
[6] Common Law Division Response to Coronavirus (COVID-19) Practice Note dated 8 February 2023
32Section 4 of the Act defines ‘smuggling’ as:
“…any importation, introduction or exportation or attempted importation, introduction or exportation of goods with intent to defraud the revenue.”
33As noted, section 255 of the Act provides in any customs prosecution the averment of the prosecutor or plaintiff contained in the claim shall be prima facie evidence of the matter or matters averred.
34Based on the averment in the statement of claim at paragraphs 6 to 26, in respect of the facts averred I found each of the elements of the charges proven beyond reasonable doubt.
35On 21 February 2023, the Court made the following Orders:
“1.The offences charges at paragraphs [2] to [4] of the Charges section of the statement of claim are found proven.
2.Paragraphs 1 to 4 of the RELIEF CLAIMED section of the statement of claim are adjourned for consideration to 10:30 am on 9 March 2023 at a penalty hearing before her Honour Judge English.
3.The Plaintiff is to personally serve a copy of these orders on the Defendant.
4. Costs reserved.
5. Liberty to apply.”
36In the absence of the defendant, I was reluctant to proceed to recording a conviction in relation to charges of smuggling goods (s233(1)(a)); evade payment of duty (s234(1)(a)); and making a false statement to an officer (s234(1)(d)(i)), without giving him a further opportunity to be heard on that issue.
9 March 2023
37The matter was subsequently listed for penalty hearing on 9 March 2023. The plaintiff was ordered to personally serve on the defendant a copy of the orders made on 21 February 2023. On 8 March 2023, Mr Sverre Gunnersen from the Australian Government Solicitor filed an affidavit regarding service of the orders on the defendant. The process server was unable to serve the Orders personally. The affidavit from Mr Gunnersen relied on an email from a First Constable referencing an incorrect date (in the future) that the orders were handed to the defendant.
38As the evidence of personal service was equivocal, the case was adjourned until 5 April 2023 for a penalty hearing.
39To date, there had been no application made by the defendant to set aside the default judgment.
5 April 2023
40Two affidavits pertaining to personal service were filed with the court. The first affidavit was filed on 4 April 2023 which did not include the time and date of service. The second affidavit filed on 5 April 2023 was jurated with the wrong date by both the server and the person who witnessed the affidavit.
41The penalty hearing was further adjourned to 18 April 2023 for personal service of the orders on the defendant prior to the penalty hearing.
18 April 2023 - Penalty hearing
42The defendant did not appear at the penalty hearing on 18 April 2023.
43I am satisfied the defendant knew of the time and place of the penalty hearing. An affidavit of personal service by Constable Shaun Hamling dated 5 April 2023 was filed with the court.
44The defendant has not provided any information or made any submissions concerning his personal circumstances, and I am therefore making my determination as to penalty in the absence of information concerning possible appropriate mitigating factors or the financial circumstances of the defendant.[7]
[7]See section 16C of the Crimes Act 1914 (Cth)
45I was assisted by detailed written submissions provided by the plaintiff’s solicitors on 7 March 2023 and Counsel’s oral submissions on 18 April 2023.
Factors to be considered in the assessment of penalties
General sentencing principles
46Each of the offences is a federal offence, and the determination of the appropriate sentence or order is governed by s16A of the Crimes Act 1914 (Cth).
47Section 16A(1) mandates the imposition of a sentence or the making of an order that is of a severity appropriate in all the circumstances of the offence. Section 16A(2) provides a non-exhaustive list of mandatory considerations to be taken into account to the extent that they are relevant and known to the Court. These include specific and general deterrence, adequate punishment, the defendant’s prospects of rehabilitation, the defendant’s co-operation with investigations, and the impact of any order on the person’s family or dependants.
48The fact that the defendant has not appeared at Court and has failed to provide submissions as to penalty or disposition makes it difficult to fully explore the matters set out in s16A(2) of the Crimes Act 1914 (Cth).
Contemporaneity of the offences
49I accept that the importation of tobacco by the defendant on 8 April 2019 involved three separate offences which are substantially connected and contemporaneous with each other.[8] Section 4K(4) of the Crimes Act 1914 (Cth) provides a court may impose a single penalty in relation to offences ‘against the same provision of a law of the Commonwealth.’[9] Solicitors for the plaintiff submitted this provision does not apply in this case and that each of the offences should be dealt with as separate offences. It was conceded there was some degree of overlap in the criminal activity of smuggling and evading the payment of duty charges.
[8]Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd & Ors (No 2) [2006] QSC 40
[9] See s 4K(3) of the Crimes Act 1914 (Cth).
50In Comptroller-General of Customs v Haidary,[10] Judge Carmody stated:
“I accept there is an overlap between the conduct of the defendant which satisfies the elements of one offence and constituted a set of facts that prove an element of another offence. The defendant is guilty of smuggling because he intended to defraud the revenue. He makes the false statement…to evade the payment of duty. Therefore, the making of a false statement is not only an offence on its own but it is also conduct that is integral to the offence of smuggling and the evasion of duty.
I am mindful of the need to avoid double punishment, notwithstanding the legislative intention to allow for an offender to be charged with discrete offences despite the likelihood of commonality between conduct satisfying the elements of varying customs offences.”[11]
[10][2018] VCC 848
[11]Comptroller-General of Customs v Haidary [2018] VCC 848 at [21]-[22]
51In submissions I was also referred to Justice Bell in Chief Executive Officer of Customs v Pham.[12] Justice Bell noted the overlap between elements of the smuggling and evading duty offences and that the making false statement was bound up with each of the other offences. Justice Bell proposed to impose a substantial penalty for the evasion of duty and to impose penalties for the related smuggling and making a false statement offences that would be more than nominal but substantially less than if dealt with alone.
[12] [2006] NSWSC 1370
Relevant sentencing principles
52The submissions by the plaintiff firstly noted the seriousness of the offending.
53The seriousness is reflected by the penalties which are severe. The Court must have regard to the maximum penalty for each offence, regardless that it exceeds the jurisdictional limit.
54In submissions the plaintiff referred to Kitto J in L Vogel and Sons Pty Ltd v Anderson, Minister of State for Customs and Excise for the Commonwealth of Australia,[13] who stated: “…but the offences are in a field in which punishments for deliberate offences must be severe."[14]
[13] (1968) 120 CLR 157 at 164.
[14] L Vogel and Sons Pty Ltd v Anderson (1968) 120 CLR 157 at 164
55It was also submitted the fact that the defendant’s suitcases only contained cigarettes, and nothing else, reflected the objective seriousness of the offending.
56The next sentencing consideration submitted by the plaintiff was general deterrence. The submission urged general deterrence be given significant weight and is of particular importance as a sentencing purpose in the imposition of a penalty for offending of this kind. There is an obvious difficulty in detecting these breaches and need “…to render customs offending a very unattractive proposition.”[15]
[15] CEO of Customs v Coulton [2005] NSWSC 869 at [32].
57The next sentencing consideration referenced was cooperation with law enforcement and admission of offending. It was submitted that the defendant made admissions to Customs and co-operated with a search of his baggage. However, he has failed to appear at the court proceedings and the Court has no information from or about him to assess remorse or responsibility.
Reasons for sentence
58I take into account the applicable duty on this shipment of tobacco was $63,948.05.
59The defendant is 27 years old and has no prior convictions alleged against him by way of criminal history.
60Pursuant to section 16A(2)(h), I take into account the degree to which the person has co-operated with law enforcement agencies in the investigation of the offence. I note the defendant was co-operative with investigating officials to the extent when he was asked if he was carrying cigarettes he replied, “a few” and when asked how many he stated, “All the cases are full.” In submissions, the answer “a few” was described as an understatement, and when the defendant was pressed, he admitted his suitcases were full.
61The offending was instantly detected by a search of his luggage. The subterfuge by the defendant was the incorrect particulars on his Incoming Passenger Card.
62The tobacco was easily detected once his bags were opened. The statement by Australian Border Force Officer David Mountain exhibits a photograph of the packets of cigarettes unpacked from the defendant’s luggage.[16]
[16] Statement of David Andrew Mountain dated 24 September 2019
63I accept the plaintiff’s submission that Customs officers rely on the honesty of declarations from travellers entering and leaving Australia.
64The tobacco was simply packed into three suitcases. The cigarettes were plainly in their cigarette cartons. The basic examination of the defendant’s luggage was all that was required to detect this tobacco importation. The way in which the cigarettes were packed in the suitcases does not suggest a particularly sophisticated operation to evade the detection of Customs officers. I do not consider the level of dishonesty to be at the higher end when compared to other cases of this kind.
65I am of the view this was an unsophisticated act of a similar nature to the defendant’s conduct in the matter of Haidary.[17]
[17] Comptroller-General of Customs v Haidary [2018] VCC 848
66Nevertheless, I am of the view this was serious offending, as the plaintiff declared having no more than 25 cigarettes, whereas he had 78,200, which is a large personal importation. His lack of other luggage suggests this was the sole purpose of his travel.
67I accept adequate punishment and deterrence are relevant sentencing purposes. The non-appearance by the defendant means I have no information regarding factors in s16A(2) of the Crimes Act 1914 (Cth) which may be personal to the defendant.
68I take into account the plaintiff’s submissions that each offence be dealt with separately. In determining the amount of the penalty, I have regard to the principle of totality.
69For the sentencing purposes of punishment and deterrence, I convict the defendant in respect of each of the charges set out in paragraphs 2, 3 and 4 in the ‘Charges’ section of the Statement of Claim dated 27 April 2022.
70In respect of the charge of smuggling, the defendant is ordered to pay a penalty of $5,000.
71In respect of the charge of evading duty, noting the minimum penalty applicable, which in this case is $127,896.10, the defendant is ordered to pay a penalty of $130,000 which is the lower end of the penalty range under the Act, taking into account all the relevant sentencing considerations discussed above. However, the abandonment limit is $84,000, which is 400 penalty units at $210 each.
72In respect of the charge of making a false statement, the defendant is ordered to pay a penalty of $3,000.
73Pursuant to section 16A(1) of the Crimes Act 1914 (Cth), I am satisfied these penalties are of a severity appropriate in all the circumstances of each offence.
Costs
74The plaintiff is seeking the costs and disbursements of the prosecution in the total sum of $22,541.87.
75Section 263 of the Act provides that in customs prosecutions a court may award costs against a party and provides how the costs may be recovered.
76The plaintiff submits section 247 of the Act requires a State court to apply its usual practice and procedure in civil cases to a customs prosecution.
77Section 78A of the County Court Act 1958 (Vic) provides costs of and incidental to all proceedings are in the discretion of the Court. ‘Proceedings’ means any matter in the court.
78The power and discretion of the Court as to costs must be exercised subject to and in accordance with order 63A County Court Civil Procedure Rules 2018 (Vic).
79The usual order as to costs “embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour.”[18]
[18] Oshlack v Richmond River Council [1998] HCA 11 at [67].
80In this case, the prosecution has been successful. I note the matter originally proceeded by an Infringement Notice in the amount of $15,987.01 which it was submitted would have been in full and final settlement of the matter. As that was not paid, the Infringement notice was withdrawn, and this prosecution was commenced.
81In making an award of costs, and referring to section 263 of the Act, Justice James in CEO of Customs v Pham & Anor [2003] NSWSC 971 at [44] stated:
“Thus the old rule that the Crown neither seeks nor recovers costs, particularly in criminal proceedings, is abrogated insofar as these proceedings are concerned. The section is no doubt inserted for more abundant caution lest s 247 which provides for proceedings to be conducted in accordance with the usual practice and procedure of the court in civil cases, should not be wide enough to include an entitlement to make an order for costs. I apprehend the usual discretion provided for by the Supreme Court Act and Rules relating to proceedings generally applies.”
82I intend to make a costs order in favour of the plaintiff, however in my view the defendant should not bear the costs associated with the submissions made to the Court in explanation of the Customs Act prosecution under Part XIV of the Customs Act 1901 (Cth), nor the adjournments for that purpose and those necessitated by the lack of proof of personal service.
83I have regard to the amount of costs awarded by this court in similar cases.
84I note the professional costs and disbursements totalled $27,801.62,[19] and a discounted amount was sought, namely $22,541.87. I note in similar cases before this court the costs have been in the vicinity of significantly less than that amount and in some cases half that amount. I intend to allow professional costs, reasonably incurred, totalling $11,500 and $3,200 for disbursements.
[19] Prosecution’s Schedule of costs, attached to Submissions dated 7 March 2023
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