Control Customs Pty Ltd and CEO of Customs - [2001] AATA 284

DECISION AND REASONS FOR DECISION [2001] AATA 284

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2000/1109

GENERAL ADMINISTRATIVE DIVISION       )
           Re      CONTROL CUSTOMS PTY LIMITED
  Applicant
           And    CHIEF EXECUTIVE OFFICER OF CUSTOMS
  Respondent

DECISION

Tribunal The Hon. R N J Purvis, QC , Deputy President

Date 9 April 2001
PlaceSydney

Decision      The decision under review is affirmed.
  [sgd]           R N J Purvis, QC
  Deputy President
CATCHWORDS
CUSTOMS – corporate licence to act as Customs agent – whether person of integrity – consideration of moral principle and character – previous misconduct – whether relevant person has understood error of his ways – whether appreciates significance of his experience – whether displays regret – whether permanent defect in character – whether series of events singular to the time of misconduct – whether likelihood re-occurrence – partial restitution – hardship – voluntary qualified assistance to authorities since time of misconduct – continuing work in customs industry – nature of offence – way in which it was carried out – degree of seriousness – systematic longstanding abuse of trust – no relevant circumstances which establish rehabilitation – lack of frankness and truth
Customs Act 1901 – ss 183C, 183CC, 181
Re SRH and Comptroller-General of Customs (1995) 21 AAR 401
Stasos v Tax Agents' Board (NSW) (1990) 90 ATC 4950
Ex Parte Macauley (1930) 30 SR (NSW) 193 at 194; The Law Society of NSW v Bannister (1993) 4 LPDR 24 at 28; In re Vadasz (1988) 146 LSJS 455

REASONS FOR DECISION

The Hon. RNJ Purvis, QC , Deputy President

the application

This is an application lodged on the 19 July 2000 seeking review of a decision made by the Chief Executive Officer of Customs ("the Respondent") on 20 June 2000 to not grant a licence to Control Customs Pty Limited ("the Applicant") to act as a customs agent (now as and from the 1 July 2000 a "customs broker" consequent upon the provisions of the Customs Legislation Amendment Act (No.2) 1999).
The request for a corporate licence was referred by the Respondent to the National Customs Agents Licensing Advisory Committee which, after conducting an inquiry, duly reported. The Respondent adopted the recommendation of the committee and on the 14 July 2000 in a letter to Mr Con Evans, a director of the Applicant stated:

"…
I have considered that report, and have decided to adopt the Committee's recommendation. I have also accepted and adopted the findings of fact contained in the report, and the reasons the committee gave for making their recommendation.
I am obliged to have regard to certain matters when deciding whether to grant a licence in accordance with section 183CC of the Customs Act 1901. In particular I must not grant a customs broker's licence to a company if I am of the opinion that a director, officer or employee of the company, who would participate in the work of the company if it were a customs broker, is not a person of integrity.
You are now a director of Control Customs Pty Ltd, and you would participate in the work of the company if the company were granted a corporate customs brokers licence. I am of the opinion that you are not a person of integrity for the reasons contained in the report. In these circumstances I must refuse your application for a corporate customs brokers licence for Control Customs Pty Ltd.
…" (TII)

The Applicant contends that "the Chief Executive Officer did not apply the criteria set out in section 183CC of the Customs Act according to law".
the hearing
At the hearing of the application for review the Applicant was represented by Mr Marsh of counsel, the Respondent by Mr Roger Northcote, an advocate for the Australian Government Solicitor.
There was received into evidence the documents lodged by the Respondent pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, marked T1 to T12. Other documents tendered on behalf of the Respondent were marked, as follows:
Exhibit No Description Date
Statement Gregory J Weppner 5 March 2001
Application for Corporate Customs Agents Licence by Control Customs P/L 26 November 1997
Hearing transcript NCALAC 29 November 1999

Oral evidence was given by Mr Con Evans on behalf of the Applicant and Mr G J Weppner, an officer of the Australian Customs Service upon which each of them was cross-examined.
the relevant legislation
A statutory monopoly to enter goods on behalf of their owner is conferred upon customs brokers by section 181 of the Customs Act 1901 ("the Act"). Effectively only the owner of goods and authorised employees of the owner or an authorised licensed customs broker, can make import entries of goods.

The Act provides, so far as is here relevant:
" Section 183C Grant of Licence
          (1) Subject to this part the CEO may grant a person a licence in writing, to be known as an agents licence, to act as a customs agent [now a customs broker] at a place or places specified in the licence.
          (2) An agents licence granted to a corporate customs agent shall not specify a place as a place at which the corporate customs agent may act as a customs agent unless the licence specifies as a nominee of the corporate customs agent a customs agent at that place who in accordance with section 183CD is eligible to be its nominee.
…
Section 183CC Requirements for grant of licence
          (1) Where an application is made the CEO shall not grant a agents licence if in his opinion:
…
(b) where the application is made by a company:
          (i) a director of the company who would participate in the work of the company if it were a customs agent is not a person of integrity; or
          (ii) an officer or employee of the company who would participate in the work of the company if it were a customs agent is not a person of integrity; or
…
(4) the CEO shall, in determining whether a person is a person of integrity for the purposes of subsection (1) have regard to:
  (a) any conviction of the person for a prescribed offence committed within the 10 years immediately preceding the making of the application;
  (b) whether the person is an undischarged bankrupt;
  (c) any misleading statement made in the application by or in relation to the person; and
  (d) where any statement by the person in the application was false – whether the person knew that the statement was false
…"

issue for determination

The Respondent in not granting the corporate customs broker licence maintained that Mr Con Evans, a director of the Applicant was not a person of integrity. This is the issue that is now required to be determined by the Tribunal.
As was stated in Re SRH and Comptroller-General of Customs (1995) 21 AAR 401 at 405, section 183CC(4) of this Act is inclusive and consideration of the integrity or otherwise of a person is not limited to the matters set forth in the subsection. The Macquarie dictionary in its definition of integrity refers to "soundness of moral principle and character; uprightness; honesty".
Relevant considerations for determining a persons' integrity or otherwise include whether the relevant person has understood the error of his ways, whether the person appreciates the significance of his experience, whether he displays regret, whether there is a permanent defect in his character and whether the events pertaining to the criminal conduct should be seen as peculiar to a particular time and place. Ultimately the likelihood or otherwise of a future lapse is to be countenanced (Stasos v Tax Agents Board, NSW) 1990 ATC 4950 at 4957; Re SRH and Controller-General of Customs (supra) at 406, 408). The meaning to be attached to the word integrity and the use intended to be made of it, thus embraces morality, soundness of character, uprightness and honesty.
customs entries for duty
Since 1992 electronic customs entries have replaced the previously existing manual procedures and physical inspection. There is not an attendance at Customs and inspection of documents or cash transactions. Electronic documents are created which are to correspond with and be cleared in the system, through matching information recorded by other agencies.
It is still however the broker who enters the electronic material and it was in order to highlight the risks that arise from the conduct of a dishonest broker that Mr Weppner gave his evidence. In brief he said that the vast majority of entries of imported goods are made electronically by customs brokers without any inspection of either the commercial documents or the goods by a customs officer. The integrity and competence of customs brokers is essential to the proper collection of revenue on entry and preventing prohibited imports. A dishonest broker could pose risk both to the revenue and from prohibited imports, and he or she may be able to apply his or her knowledge of customs practices to avoid detection.
Mr Weppner said that prior to 1992 entries had to be physically lodged with Customs, usually together with the relevant commercial documents. Now the vast majority of import and export entries are made by licensed brokers on behalf of owners by electronic means. The commercial documents for these entries are not inspected by any Customs officer and even where the commercial documents are inspected by Customs the goods often are not. An electronic import entry is made by a registered compile user who gains access to the system using a PIN. The details that need to be entered include a basic description, a classification as selected by the broker, the customs value of the goods, the origin of the goods, the importer and the supplier. The compile system automatically calculates the applicable customs duty and GST from the entered details. When all the details are ready the entry is electronically lodged with Customs. Upon receipt of the electronic entry the initial response by Customs is largely automatic, controlled only by Customs programming of the compile system. Payment of the due taxes and processing of the charges is then usually made by the broker by electronic funds transfer. After the payment is received another electronic message from Customs authorises the delivery of the goods.
The combination of the electronic entry systems and the complexity of assessing relevant taxes are said by Mr Weppner to provide considerable risk to the revenue from any incompetent or dishonest broker. There is the potential for error, as well as scope for deliberate deception in regard to each of the relevant factors entailed in calculating duty. A dishonest broker may pose a risk as his or her experience may be used to avoid red line requests upon entry and post-entry audits.
It is not possible for Customs to inspect more than a small fraction of shipments for prohibited imports. To make the best use of its resources, Customs employs an intelligence driven risk management approach to target shipments for inspection. A dishonest broker however with access to the electronic entry system could pose a risk to the public safety, health and other community interest protected by import restrictions. Knowledge might be deployed to help avoid the measures Customs uses to detect prohibited imports.
the factual situation
The Applicant was incorporated on 12 November 1997 having initially as its sole director, secretary and public officer Mrs Christine Evans, the wife of Mr Con Evans. On the 11 December 1999 Mr Con Evans became a director of the Applicant and it is he, according to the relevant application for the corporate customs brokers licence, who is the only person proposed to have authority to direct the customs nominees of the Applicant.
Mr Evans has worked in the customs area of activity since shortly after he completed his secondary education, first as an employee, then a company director, a sole trader for approximately ten years and then again as a company director. It was in about 1987 that, after a year as an employee, he was appointed a director of a company, Courtesy Customs Pty Ltd, the latter company seemingly having a corporate licence. He was then 23 years of age. Courtesy Customs Pty Ltd was experiencing financial difficulties and in order to rectify the situation, Mr Evans and the other director of the company, a Mr Curtis, resolved on a scheme whereby monies properly payable on imported goods to the Collector of Customs were fraudulently misappropriated to their own use and that of a customs officer or officers. In all, the Collector of Customs was deprived of nearly half a million dollars as a direct result of Mr Evans' criminal activity, the same extending from August 1988 to October 1989. He was charged with committing a number of offences and in due course, on pleading guilty, sentenced on the 28 February 1994 to imprisonment for three years with a non-parole period of 12 months. By reason of unspecified assistance afforded by him to Customs investigators the term of imprisonment was reduced to nine months.
In the course of his reasons for sentence the sentencing judge stated:
"…
I see no need to canvass the objective facts in these present remarks as the material tendered in that regard by the Crown has not in any significant way been challenged. It is common ground between the Crown and each of the offenders' legal representative[sic] that, in an objective context, each offender should be regarded as equally culpable.
…
The offender having in the light of that Indication [a sentence Indication] pleaded guilty…Mr Ash [solicitor for Mr Evans] sought to persuade me to reduce the indicated sentence…he relied upon three considerations:
(1) The offender has since the Indication made partial restitution in the amount of $90,000; and done so by way of borrowing that amount, the repayment of which will cause him great hardship over an extended period;
(2) The offender has volunteered qualified assistance to the relevant authorities; and
(3) He has continued to work in the "Customs industry".
I accept that all three of those considerations have relevance, particularly the first and second. Though his assistance, realistically, has had and will have little if any practical value, I accept it to have been a further manifestation of contrition.
The making of partial restitution – particularly in view of the means whereby it was effected – certainly calls for a reduction of the previously indicated sentence but I am not persuaded that it, coupled with the other two considerations… justifies resort to periodic detention
…
Quite clearly each has better than average prospects of rehabilitation.
By reason of their present offence and incarceration, there is probably little doubt that their prospect of gainful employment, when they are released from custody – particular in any position of trust – would have been seriously diminished.
Nonetheless, frauds such as those perpetrated by each of these offenders are serious offences and the courts have a clear duty – especially by way of general deterrence – to impose salutary sentences in respect of them. That is particularly so when the fraudulent activity is carried on over an extended period of time and also involves a substantial total sum of money, most of which has not been recovered and is probably in practical terms irrecoverable. The statutory maximum penalty under section 29D is, I note, a fine of $100,000 or imprisonment for 10 years, or both.
Those who will "rort the system" have only themselves to blame if and when they are detected and called upon to pay the price of their crimes…" (T4)
It is noted, as it was by the sentencing judge, that no issue was raised as to the accuracy of the material tendered at the hearing amongst which was an investigation case summary which inter alia stated:
"As the result of the discovery of a forged impression of an Australian Customs Service "May be Delivered" stamp on a clearance advice an information was sworn under section 214 Customs Act, action was taken against Courtesy Customs. The documentation obtained from the company and the subsequent analysis of this and other documents revealed serious irregularities with the payment of customs duties to the Commonwealth.
Two modis operandi (MO) covering some 30 shipments have been identified were monies were diverted from the Government revenue. These monies were remitted by eleven clients of Courtesy Customs as revenue to be paid to the ACS, but diverted into the personal funds of Curtis and Evans.
From the latter part of 1988 until late 1989 two schemes were actioned whereby clients and importers paid Courtesy Customs by cheque for Customs duty and various other charges. The cheques were paid into an account being Courtesy No 1 duty account.
Courtesy Customs would pay the charges such as freight, storage and delivery, however, in relation to the customs duty component they would divert that amount by either writing a cheque to either one or both of the directors or for cash. The company records and cash butts show the payments as being made to "HMC" or Customs. Banking records show that these cheques were either cashed at the time or deposited in a joint personal savings account and withdrawn later.
Both, Curtis and Evans are signatories to all accounts including personal savings account…" (T10)
Prior to his being charged with the above offences and seemingly on account of suspicion being attached to the company Courtesy Customs Pty Ltd, Mr Evans on his own account commenced a customs agency business trading under the name of Control Customs. He continued with the management of this business up to and following his period of imprisonment and until the incorporation of the Applicant; he then transferred to it the assets and liabilities of the sole trader, together with the name "Control Customs". Mrs Evans, the wife of Mr Evans, worked part-time for the sole trader and the company averaging "a couple of days a month" and engaged "on clerical matters".
Initially, as has already been mentioned, Mrs Evans was the sole director of the Applicant but on the 11 December 1999 Mr Evans also became a director. The business carried on by the Applicant other than by reason of it being now performed by a corporation is no different to that engaged in by the firm Control Customs. Each has used and the company still uses customs brokers licensed under the Act to act for clients.
Mr Evans on behalf of the Applicant has applied for a corporate licence because, so he said:
"Clients query why a named customs broker is designated on documentation and not the name of the Applicant.
…
At present he can only retain one customs broker whereas with a corporate licence the company could retain any number of brokers.
…
The absence of a licence reawakens in his mind and in answer to clients the fraudulent events of the past."
Mr Evans acknowledges that he has not nor will he be "signing any customs documents". However, he further acknowledged in the course of his evidence given before the Tribunal, that the decision to incorporate was primarily his and he is the one charged with the management of the company's business. "I am the primary person running the company" he said.
In and by his evidence Mr Evans:

acknowledged that he knew at all relevant times that what he was doing in defrauding the Commonwealth was wrong.
accepted that he was guilty of pre-meditated fraud and felt and feels ashamed
stated that he knew of the involvement of a customs officer or officers and did not do anything to stop their activity
agreed that the modus operandi put in place by himself and Mr Curtis was one of:
creating customs entries, printing them then cancelling them to obtain a clearance advice to which a forged "May be Delivered" stamp was affixed and signed. Copies of the entry for home consumption (printed at the same time as the clearance advice) were on occasions forwarded to clients as evidence of duty payable.
An entry was created at the correct rate of duty, printed then cancelled the entry to obtain a hard copy of the entry for home consumption used to provide evidence of duty payable to the client. A second entry for the goods at a free rate of duty was then created and forwarded to customs for clearance of the goods free of duty.

stated that he gave information to a Customs inquiry whilst he was imprisoned thereby "capitalising" on the remission system
agreed that he told customs officers that he was not prepared to give sworn evidence in a court along the lines of the information provided by him
stated that he regretted what he had done
stated that he wanted to be able in the future to maintain a respectable profile for his wife and four children.

applications for a corporate licence

The subject application dated 9 June 1999 is the second application made by the Applicant seeking a corporate licence. Both applications were referred to the National Customs Agents Licensing Advisory Committee, hearings were conducted attended by Mr Evans and both were refused on the basis that he, a director of the Applicant was not a person of integrity within the meaning of section 183CC of the Act.
The earlier application made on 26 November 1997 and refused on 4 June 1988 followed the registration of the Applicant as a company on 12 November 1997 and the purported appointment by the Applicant of Mrs Evans as its sole director, secretary and public officer. The nominated customs agent was the Applicant's 'customs manager'. The later of the two applications namely that presently before the Tribunal described the nominated agent as 'office manager' and specified Mr Evans as the company representative and the person having authority to direct the nominee. Mr Evans described his position with the Applicant as 'consultant'. When answering the question "do you have any conviction(s) or finding(s) of guilt which are less than 10 (ten) years old or any juvenile conviction(s) or finding(s) which are less then 5 (five) years old Mr Evans answered "no". He acknowledged in his evidence before the Tribunal that the latter answer was incorrect, saying that he thought the question related to the time that had elapsed since the offences were committed and not from the date of conviction.
other matters relevant to the 'integrity' of mr evans
Mr Evans acknowledged that at the time of making the first application in November 1997 for a corporate licence he exercised control of the Applicant, and that it was his job "to get the business". The nominee agent was the one " charged with doing the entries etc". Yet in the application form seeking the corporate licence no mention was made of Mr Evans, and his wife was said to be the person having authority to direct the nominee. This was not consistent with the then factual situation. Mr Evans said that he discussed the form with a customs clerk in Canberra and "he did not ask me to provide anything about myself".
It is true that Mr Evans was not in 1997 a director of the Applicant, but the Tribunal is satisfied on the basis of the evidence placed before it that Mr Evans did at all relevant times manage the affairs of the Applicant and that his conduct may well have been in contravention of the provisions of sections 91A and 229 of the Corporations Law. Mr Evans claimed ignorance of these statutory provisions as well as those pertaining to his managing a company. His lack of awareness, if this be the case, of these obligations of a company officer does not attest well to his diligence or corporate responsibility.
Mr Evans spoke in a general way of others "80 per cent of the industry" who "are crooks, guys from the old school who would commit crimes similar to what I did". "If customs officers would do it for me why would they not do it for others", he said. This knowledge on the part of Mr Evans and his familiarity with the activities of "80 per cent of the industry" does not illustrate a detachment on his part from this prospective criminal element. A favourable consideration of the present application might not be in aid of preventing others attempting to defraud the Respondent.
It was submitted on behalf of the Applicant that it should not be deprived of the benefit of a corporate licence on account of Mr Evans at one time being considered as not being a person of integrity. It was maintained that he had tried to set his life in order, that he was married with four children, and since his release from custody had rebuilt his life. He had cooperated with Customs investigators and had not come to the attention of the authorities for any subsequent wrongdoing.
It was also said on his behalf that Mr Evans was contrite as to his criminal history and "wanted to get away from living with his previous crime". If the application should be granted it would still be necessary for the Applicant to employ a customs broker thus placing a person between the Applicant and a client. It was further contended that the provision by him of an incorrect answer as to his criminal history in the present application and not making mention of himself and his involvement with the Applicant in the 1997 application, should not be taken to indicate a lack of integrity on his part. The Tribunal has difficulty in accepting these submissions. They are indicative of the defects in character earlier mentioned in these reasons.
The Respondent relies on the evidence of Mr Weppner as indicating the extent to which Mr Evans as a director of the Applicant is in a position to control if not influence the conduct of a customs broker. It is said that no evidence of an objective nature was placed before the Tribunal as to the character, uprightness, honesty and soundness of moral principle of Mr Evans. Difficulty in distinguishing between genuine rehabilitation and mere claims of it is made more so by reason of the absence of such evidence.
Reinstatement which in the present context means enabling Mr Evans to be a director of a corporate licensee should only be granted in exceptional circumstances (Ex Parte Macauley (1930) 30 SR (NSW) 193 at 194; The Law Society of NSW v Bannister (1993) 4 LPDR 24 at 28; In Re Vadasz (1988) 146 LSJS 455 at 457. The necessity for Mr Evans to establish genuine contriteness and an understanding of his misdeeds is appropriate given the risk identified by Mr Weppner. The conduct of Mr Evans in relation to his managing the affairs of the Applicant whilst still within the statutory prohibition period, providing false information in the present application and omitting relevant details in the earlier application, are all indicia of a lack of moral principle and honesty.
The Tribunal accepts the submissions made on behalf of the Respondent as they relate to the events reflecting adversely upon Mr Evans and indicating defects in his uprightness and character. However, the nature of the offences committed by him and Mr Curtis in respect of which he was sentenced and served a term of imprisonment cannot be disregarded. It is correct to say that the offences are not now by reason of the passage of time required by the Act to be specifically considered. However, in the context of determining whether the prerequisite of integrity has been established it is relevant to note the nature of the offences, the way in which they were carried out, and the degree of their seriousness, all in the context of possible subsequent conduct on the part of Mr Evans. The offences entailed a systematic, longstanding abuse of trust. The motive on the basis of the evidence before the Tribunal was greed. The circumstances of the commission of the offences require caution before accepting any claims of contrition and rehabilitation. Apart from the passage of time per se, there are not any relevant acts or circumstances that warrant a favourable finding as to rehabilitation.
The same standards apply to a person applying for a customs brokers licence as for a company applying for such a licence, except that in the latter instance a broker would be positioned between the client and Customs. However, the arrangement that Mr Evans now seeks to put in place is not vastly different to that existing at the time of the commission of the offences. He seeks again to be the director of a licensed broker.
It is trite to say that intrinsic character does not readily change. However, if it is to be maintained that there has been a change, evidence to this effect is required the same to be objectively established as an issue of fact. There has not been placed before the Tribunal any evidence as to this issue other than that of the mere passage of time. The Tribunal is satisfied that Mr Evans did not set forth the factual situation in the first corporate application and was not truthful in the answers provided in the second application. The Tribunal is further satisfied that Mr Evans conducted himself contrary to the provisions of the Corporations Law even be it that he maintained he was not aware of the consequence of his conduct. He should however have been so aware.
The Tribunal is satisfied on the basis of the whole of the evidence before it, that Mr Evans, a director of the Applicant and a person who would " participate in the work" of the Applicant if it were to be granted a corporate licence, is not a person of integrity. Accordingly the decision under review is affirmed.

I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon. R N J Purvis, QC, Deputy President
Signed:         .....................................................................................
  Associate
Date/s of Hearing  6 March 2001
Date of Decision  9 April 2001
Counsel for the Applicant        Mr Stuart Marsh
Solicitor for the Respondent    Mr Roger Northcote