Customs v CC Investment Company
[2013] VSC 44
•21 February 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 9864 of 2008
| THE CHIEF EXECUTIVE OFFICER OF CUSTOMS | Plaintiff |
| v | |
| THE CC INVESTMENT COMPANY PTY LTD (IN LIQUIDATION) & OTHERS | Defendants |
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JUDGE: | HOLLINGWORTH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15, 19-22 November, 1 February 2013 | |
DATE OF JUDGMENT: | 21 February 2013 | |
CASE MAY BE CITED AS: | Customs v CC Investment Company | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 44 | |
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CUSTOMS & EXCISE – Customs prosecution – Evasion of duty – Intentionally moving goods from warehouse without authority – Penalties – Customs Act 1901 (Cth) ss 33(1), 234(1)(a), 236; Crimes Act 1914 (Cth) ss 4K(3) & (4), 16, 16A
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Livermore Ms C Currie | Australian Government Solicitor |
| For the Second and Third Defendants | Mr R Harris | Settle Legal |
| For the Fourth Defendant | Mr M Hoyne | MGA Lawyers |
HER HONOUR:
The defendants have admitted committing a number of offences contrary to the Customs Act 1901 (“the Act”). It is now my duty to record convictions and impose appropriate penalties.
The offences
For many years, the defendants were involved in the importation and sale of cigars and related products from premises in Toorak Road, Toorak. The first defendant, The CC Investment Company Pty Ltd (“the Cigar Company”), was the importer of the products, and held a warehouse licence for under-bond goods under s 79 of the Act. The second defendant, Alexanders Cigar Merchants Pty Ltd (“Alexanders”), operated a tobacco retail business from the same premises as the warehouse. The third defendant, John Maroudas, and his wife, the fourth defendant, Dimitra (also known as Dimi) Maroudas, worked in the cigar businesses, and owned and/or controlled and/or participated in the management of the two companies.
Throughout the relevant period, the Cigar Company and/or Alexanders imported cigars, other tobacco products and related products into Australia from overseas, and placed them in the warehouse. Upon importation, the products were all subject to the control of the Australian Customs and Border Protection Service (“Customs”) under s 30(1) of the Act, and were liable to duty under s 15 of the Customs Tariff Act 1995. Customs duty was payable:
(a) Before the goods were removed from the warehouse;
(b) Upon lodgement with Customs of an ex-warehouse entry or declaration; and
(c) Upon Customs giving authority to deal with the goods.
On numerous occasions between 14 November 2003 and 16 October 2006 (“the Period”), John and/or Dimitra Maroudas moved or caused the removal of cigars and other products from the warehouse for sale, without lodging any ex-warehouse entry or declaration with Customs, and without paying the duty which was payable on those goods. On each occasion, they did so with the knowledge that the goods should not be moved in the circumstances.
Mr Maroudas was more actively involved in running the import business than his wife, and was responsible for the unauthorised removal of substantially more of the goods than Mrs Maroudas. On the occasions when he did not personally remove goods from the warehouse, Mr Maroudas knew of and encouraged the removal of the goods by Mrs Maroudas. On many of the occasions when goods were removed from the warehouse without authority, they were then sold through the Alexanders’ shop.
As far as the offence of intentionally moving goods subject to Customs control without authority is concerned (s 33(1) of the Act), Mr Maroudas has admitted his guilt to moving 7 different kinds of cigars; these are 7 representative counts. Mrs Maroudas, on the other hand, has admitted her guilt to 111 offences under s 33(1); her offending was primarily as an aider and abettor of her husband, under s 236 of the Act. There is no dispute that the same goods are the subject of Mr and Mrs Maroudas’ offences, being the goods listed in schedule 1 to the statements of agreed facts.
On each of the occasions when Mr Maroudas personally moved, or caused to be moved, or encouraged his wife to move, such goods, Mr Maroudas was also guilty of the evasion of customs duty, contrary to s 234(1)(a) of the Act. Mrs Maroudas was also guilty under that provision, either as a principal, or as an aider and abettor. They have each admitted their guilt to one global count of evasion, contrary to s 234(1)(a), in respect of all instances of evasion during the Period.
The total amount of customs duty which was payable on the cigars which were moved from the warehouse without authority during the Period was not less than $208,575.62.
The contraventions of s 33(1) and 234(1)(a) during the Period involve significantly overlapping criminal conduct, although the elements of the offences differ.
Mr Maroudas and Alexanders have also admitted their guilt to the intentional evasion of duty payable on cigars imported on or about 14 January 2007. Acting on behalf of Alexanders, Mr Maroudas imported 90 cigars, together with a humidor and cigarette lighters. He did not list the cigars on the import declaration, which accompanied the humidor and lighters. He had also asked the supplier of the goods not to show the 90 cigars on the commercial invoice. The duty payable on the cigars was $366.65.
Alexanders has admitted committing 3 other offences of evading duty, in contravention of s 234(1)(a). The offences relate to cigars and humidors imported on or about 20 November 2004, and 5 and 14 December 2004. The total amount of duty evaded by Alexanders in relation to those 3 offences was $1,100.39 (being the sum of $226.29, $290.10 and $584.00).
The proceedings and their settlement
This proceeding was commenced in 2008, seeking convictions and monetary penalties against the defendants. It is a Customs prosecution under Part XIV of the Act.
A separate proceeding was commenced in 2010 against the Cigar Company and Mr Maroudas, seeking the sum of $1,279,798.25, being an amount equal to the duty payable on goods moved from the premises between January 2001 and October 2006. The 2010 proceeding was a recovery proceeding brought under s 35A(2) of the Act.
On 11 September 2012, the two proceedings were fixed for trial commencing on 15 November 2012, on an estimated duration of 10 days.
As the Cigar Company had been placed in liquidation since the commencement of the proceedings, the proceedings against that company were stayed.
On 31 October 2012, shortly prior to the trial date, Alexanders and Mr Maroudas executed terms of settlement with Customs. On 15 November 2012, orders were made by consent in both proceedings.[1] In this proceeding, the orders included declarations that Alexanders and Mr Maroudas had committed each of the relevant offences. In the 2010 proceeding, Mr Maroudas consented to an order that he pay Customs the sum of $1,279,798.25.
[1]The authenticated order in the 2010 proceeding incorrectly shows the date as 16 November 2012; the orders were in fact made on the previous day.
The trial against Mrs Maroudas commenced on 19 November 2012 and ran for a number of days. On 22 November 2012, Customs and Mrs Maroudas executed terms of settlement, and orders were made by consent in this proceeding, including declarations that Mrs Maroudas had committed each of the relevant offences.
The parties have put before the court statements of agreed facts, for the purposes of determining the appropriate penalties.
Prescribed penalties
For a breach of s 234(1)(a) (duty evasion), the maximum penalty which may be imposed is 5 times the amount of duty payable, and the minimum penalty is 2 times the amount of duty payable, where the value of the goods is known. If the value of the goods is not known, the maximum penalty is $55,000 per offence (500 penalty units at $110 per unit). Here, the value of the goods has been agreed in respect of each of the offences.
The maximum penalty which may be imposed for a breach of s 33(1) (intentional unauthorised removal) is $55,000 per offence (500 penalty units at $110 per unit). There is no prescribed minimum penalty for this offence.
This means that the maximum and minimum penalties which may be ordered in respect of the offences are as follows:
Offender Offence Maximum Minimum Alexanders Duty evasion (4 offences) $7,335.20 $2,934.08 Mr Maroudas Duty evasion during the Period (single offence) $1,042,878.10 $417,151.24 Duty evasion on 14/1/07 $1,833.00 $733.30 7 counts of intentionally moving 7 different kinds of cigars without authority $385,000.00 N/A Mrs Maroudas Duty evasion during the Period (single offence) $1,042,878.10 $417,151.24 111 intentional unlawful movement counts $6,105,000.00 N/A
The fact that Mr and Mrs Maroudas face substantially different penalties in respect of the unlawful movement counts during the Period comes about because of the way their settlement agreements were negotiated and structured. As mentioned earlier, the unlawful movements involve the same goods in each case.
Relevant sentencing principles
Each of the offences is a “federal offence” within the meaning of s 16 of the Crimes Act 1914 (Cth). Among the factors which s 16A of the Crimes Act requires the court to take into account are the following:
(a) The nature and circumstances of the offence (s16A(2)(a));
(b) If the act forms part of a course of conduct consisting of a series of criminal acts of the same or a similar nature, that course of conduct (s 16A(2)(c));
(c) If the person has pleaded guilty to the charge, that fact (s 16A(2)(g));
(d) The need to ensure the person is adequately punished (s16A(2)(k)); and
(e) The character, antecedents, age, means and physical or mental condition of the person (s 16A(2)(m)).
The list contained in s 16A is not exhaustive; other factors may be relevant. In the case of customs offences, there is no dispute that general deterrence is an important sentencing consideration. In L Vogel & Son Pty Limited v Anderson,[2] Kitto J made the following observations, which have been frequently cited with approval:
The Customs laws represent the judgment of Parliament upon an important aspect of the economic organisation of the community, and the object of the penal provisions is to make that judgment as effective as possible. It is important to remember that Customs officers have of practical necessity to rely extensively upon the information supplied to them by importers, for the flow of commerce could not be maintained if every importation had to be fully investigated. Moreover, detection of frauds is not always easy. No doubt ordinary conceptions of honesty and of civic responsibility suffice to ensure a great deal of fair dealing with the Customs, but for some people little seems to matter but fear of the consequences of discovery. The Customs Act makes those consequences potentially drastic. It is for the courts to make them, in suitable cases, drastic in fact, for otherwise traders who are not saved by qualms of conscience from willingness to defraud their fellow citizens may weigh the profits they hope for against the penalties they have cause to fear and find the gamble worthwhile.
[2](1968) 120 CLR 157 at 164.
Although not mentioned in s 16A, denunciation also has a role to play in sentencing for offences such as these, where a commercial enterprise has made profits to which it was not entitled by the evasion of duty.[3]
[3]CEO of Customs v Ozzy Tyre & Tube Pty Ltd [2005] NSWSC 948 at [96].
In respect of the unauthorised movement offences, the court may impose a single penalty against each offender, to reflect the totality of that offending (s-s 4K(3) and (4) of the Crimes Act). The single penalty must not exceed the maximum penalties which could have been imposed if each offence was dealt with separately. The parties have all submitted that it is appropriate to impose single penalties here.
Customs, Alexanders and Mr Maroudas made joint submissions to the court in relation to the appropriate penalties for the offences. Although Mrs Maroudas and Customs did not file joint submissions, there was substantial agreement between their respective submissions, particularly in relation to the appropriate total penalty. This is not unusual in the area of Customs prosecutions, where a settlement has been agreed between the parties. The question which then arises is what approach the court should take to such joint submissions.
In The Comptroller-General of Customs v Perri Cutten of Australia Pty Ltd and Michael Gannon,[4] Southwell J held that:
It is, of course, not common in most jurisdictions of a quasi-criminal or criminal nature that the parties should be able to come to court with an agreed penalty and, of course, the Court is not bound by the agreement. On the other hand, the Customs jurisdiction has its own peculiarities and, in my view, it would not be in the public interest for the Court not to take considerable notice of a settlement whereby the plaintiff and its servants are saved, probably, an enormous amount of time in the preparation and prosecution of the offences or, perhaps more offences, if there was no settlement and, of course, the courts are relieved from hearing what might have been a long and very expensive trial.
[4]Supreme Court of Victoria, 21 March 1991, unreported, at 2.
In Comptroller-General of Customs v Kingswood Distillery Pty Ltd,[5] Sperling J held that the court should take the same approach to joint submissions on penalty in a prosecution for evading excise duty[6] as the Federal Court took in civil penalty proceedings under the Trade Practices Act 1987. That decision was applied in a customs prosecution by Templeman J in CEO of Customs v Gangemi.[7]
[5]Supreme Court of NSW, 5 December 1997, unreported.
[6]The offence there was the equivalent under the Excise Act 1901 to the offence of evading customs duty under s 234(1)(a) of the Act.
[7][2001] WASC 79.
The correctness of that approach has been endorsed more recently in this court by Bongiorno J in Commissioner of Taxation v Australian Petroleum Suppliers Pty Ltd,[8] an excise prosecution case.
[8][2003] VSC 240 at [30].
I proceed on the basis that I should give effect to the jointly proposed penalties, unless I regard them as outside the permissible range of appropriate penalties.
A further point of principle arises here, as a result of the contents of the terms of settlement with Mrs Maroudas; it does not arise with the other terms of settlement. Her terms record an agreement to make joint submissions to the court that a total penalty of $800,000 be imposed. However, they also contain the following clauses:
4. Regardless of the amount of the Penalty imposed by the Court, the CEO of Customs agrees that, subject to compliance by Dimitra Maroudas with paragraph 5 hereof, it will limit the amount that it seeks to recover from Dimitra Maroudas in respect of such Penalty, to the amount of $200,000.
5. Dimitra Maroudas will pay the amount of $200,000 to the CEO of Customs by no later than 18 March 2013.
Similar agreements have been considered by the courts in a number of other customs cases.[9] Some judicial concerns have been expressed about the role of the court in setting penalties, in circumstances such as these, where it is has been agreed that those penalties will not be enforced in full. However, in each of those cases, the court came to the conclusion that nothing done by Customs or the offenders in arriving at a commercial settlement was designed to, or had the effect of, ousting the court’s jurisdiction to impose appropriate penalties under the Act. I adopt that approach here.
[9]For example: CEO Customs v Red Dale Holdings Pty Ltd [2004] WASC 14 at [9]-[10]; CEO Customs v Corniche Motors Pty Ltd [2003] WASC 244 at [5]-[6]; CEO of Customs v Ozzy Tyre & Tube Pty Ltd [2005] NSWSC 948 at [109]-[113].
Submissions as to appropriate penalties
In relation to Alexanders, it was jointly submitted that the following penalties would be appropriate:
Offence Penalty The evasion offence in respect of 90 cigars imported on or about 14 January 2007 $1,283.27[10] The 3 evasion offences in respect of cigars and humidors imported in November and December 2004 $4,946.75[11] Total $6,230.02 [10]This figure is 3.5 times the duty amount of $366.65.
[11]This figure was erroneously said to be 4.5 times the total duty of $1,100.39 payable in respect of the cigars and humidors in the 3 consignments. In fact, 4.5 times $1,100.39 is $4,951.75.
In relation to Mr Maroudas, it was jointly submitted that the following penalties would be appropriate:
Offence Penalty The evasion offence in respect of 90 cigars imported on or about 14 January 2007 $1,283.27[12] The evasion offence in respect of cigars and other products during the relevant period $730,014.67[13] The 7 unauthorised movement offences $68,702.06[14] Total $800,000.00 [12]This figure is 3.5 times the duty amount of $366.65. This is the same suggested penalty as for the co-offender in relation to this offence, Alexanders.
[13]This figure is 3.5 times the duty amount of $208,575.62.
[14]Divided by 7, this figure represents $9,814.58 per offence.
In relation to Mrs Maroudas, Customs submitted that a total penalty of $800,000 would be an appropriate penalty in the circumstances, apportioned as between the offences as the court thinks fit. That is the same total penalty as suggested for Mr Maroudas.
Although Mrs Maroudas did not file a joint submission as to penalty, her submissions accepted that penalties totalling $800,000 were appropriate.
The appropriate penalties
The offending by Mr and Mrs Maroudas during the Period involved systematic and deliberate frauds on the revenue on multiple occasions over a period of almost 3 years. Mr Maroudas was personally involved in more of the unauthorised movements than Mrs Maroudas, and her liability has primarily arisen due to her having aided and abetted her husband. Her culpability is therefore less than her husband’s. Nevertheless, Mrs Maroudas was well aware of what her husband was doing, particularly through her role as book keeper for the businesses, and they both benefitted financially from the offending through their interests in the two companies.
No explanation has been offered to the court as to why they offended, such as might have mitigated the objective seriousness of the offending during the Period. Accordingly, I conclude that they simply made a commercial decision to profit at the expense of the community.
I note that in the 2010 proceeding, Mr Maroudas consented to an order that he pay Customs the sum of $1,279,798.25, albeit that he has not yet made any payment under that order. He and Alexanders have also agreed to the making of certain orders for the payment of Customs’ costs of the proceeding.[15]
[15]The court has the power to order such costs under s 263 of the Act.
The defendants are all entitled to a discount, for the utilitarian value of having pleaded guilty. The community has thereby been spared the expense and inconvenience of a trial which would have lasted for several weeks. That said, the pleas came very late in the day: Mr Maroudas and Alexanders only agreed to plead shortly before the trial was due to commence; and Mrs Maroudas did not plead until the fourth day of the trial.
There is no evidence or suggestion of remorse.
As far as Mrs Maroudas’ personal circumstances are concerned, I am told that she is a 49 year old mother of two, who has worked throughout her adult life (both in the paid workforce and as a mother). She has no convictions of any nature.
Nothing has been put before the court as to Mr Maroudas’ personal circumstances.
In a case such as this there is also a need for general and specific deterrence, denunciation and just punishment.
In the circumstances, I am satisfied that the penalties proposed in relation to Alexanders and Mr Maroudas are entirely appropriate and within the permissible range of appropriate penalties.
As far as Mrs Maroudas is concerned, her moral culpability and actual involvement is less than her husband’s, although she has pleaded guilty to a substantially larger number of unauthorised movement charges than him. The totality principle has particular relevance in her case. However, she has agreed to submit to the imposition of the same total penalty as her husband, as part of a commercial resolution of the case against her. In the circumstances, I am satisfied that penalties totalling $800,000 are appropriate for her, and within the permissible range of appropriate penalties.
There will be orders in the following terms:
1.The second defendant be convicted of each of the offences set out in paragraph 1 of the declaration and order dated 15 November 2012 and pay the following penalty in respect of each offence:
Paragraph reference in declaration and order
Offence
Penalty
1(a)
Evading duty on 90 cigars on or about 14 January 2007 in contravention of s 234(1)(a) of the Customs Act.
$1,283.27
1(b)
Evading duty on 32 cigars and 3 humidors on or about 20 November 2004 in contravention of s 234(1)(a) of the Customs Act.
$1,018.30
1(c)
Evading duty on 66 cigars and 3 humidors on or about 5 December 2004 in contravention of s 234(1)(a) of the Customs Act.
$1,305.45
1(d)
Evading duty on 132 cigars and 6 humidors on or about 14 December 2004 in contravention of s 234(1)(a) of the Customs Act.
$2,628.00
Total:
$6,235.02
2.The third defendant be convicted of each of the offences set out in paragraph 2 of the declaration and order dated 15 November 2012 and pay the following penalty in respect of each offence:
Paragraph reference in declaration and order
Offence
Penalty
2(a)
Evading duty on cigars and other tobacco products during the period from 14 November 2003 to 16 October 2006 ("the Period") in contravention of s 234(1)(a) of the Customs Act.
$730,014.67
2(b)
Evading duty on 90 cigars on or about 14 December 2007 in contravention of s 234(1)(a) of the Customs Act.
$1,283.27
2(c)
Intentionally moving a quantity of Trinidad Fundadores cigars during the Period in contravention of s 33(1) of the Customs Act.
$9,814.58
2(d)
Intentionally moving a quantity of Joya de Nicaragua cigars during the Period in contravention of s 33(1) of the Customs Act.
$9,814.58
2(e)
Intentionally moving a quantity of Cohiba Siglo VI cigars during the Period in contravention of
s 33(1) of the Customs Act.$9,814.58
2(f)
Intentionally moving a quantity of Romeo y Julietta Cazadores cigars during the Period in contravention of s 33(1) of the Customs Act.
$9,814.58
2(g)
Intentionally moving a quantity of Hoyo de Monterrey Epicure cigars during the Period in contravention of s 33(1) of the Customs Act.
$9,814.58
2(h)
Intentionally moving a quantity of King Edward Special 5s cigars during the Period in contravention of s 33(1) of the Customs Act.
$9,814.58
2(i)
Intentionally moving a quantity of Montecristo Edmundo cigars during the Period in contravention of s 33(1) of the Customs Act.
$9,814.58
Total:
$800,000.00
3.The fourth defendant be convicted of each of the offences set out in paragraph 1 of the declaration and order dated 22 November 2012 and pay the following penalty in respect of each offence:
Paragraph reference in declaration and order
Offence
Penalty
1(a)
Evading duty on cigars and other tobacco products during the Period in contravention of s 234(1)(a) of the Customs Act.
$625,726.86[16]
1(b)
Intentionally moving goods during the Period in contravention of s 33(1) of the Customs Act.
$174,273.14
Total:
$800,000.00
[16]This is 3 times the unpaid duty of $208,575.62.
4.The third defendant pay the plaintiff's costs of this proceeding (including disbursements) up to and including 31 October 2012.
5.The second defendant jointly and severally pay 25% of the amount of the plaintiff's costs which the third defendant is liable to pay pursuant to paragraph 4.
6. There be no order as to costs against the fourth defendant.
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