French, W.M. t/as Sports Car World v O'Connor, D

[1985] FCA 213

Re: WALTER MURDOCH FRENCH TRADING AS SPORTS CAR WORLD
And: DESMOND O'CONNOR
V. No. G 303 of 1984
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Northrop J.

CATCHWORDS

Administrative Law - judicial review - Customs - forfeiture of goods - notice of seizure of goods pursuant to Customs Act 1901.

Practice and Procedure - discovery and inspection of documents - claim documents are privileged from production for informer and system objections - public interest: frustration of proper administration of justice balanced against harm being done to the community by disclosure of material.

Administrative Decisions (Judicial Review) Act 1977 s.5

Customs Act 1901 ss.203, 205, 208A, 229

HEARING

MELBOURNE
#DATE 23:5:1985

ORDER

THE COURT ORDERS THAT the motion be refused with costs.

(Settlement and entry of Orders is dealt with by 0.36 of the Federal Court Rules.)

JUDGE1

This is the return of a motion by the applicant for an order that the respondent produce for inspection documents numbered 10 to 48 inclusive in Schedule 1 of Part 2 of the respondent's list of documents.

1. The respondent is a Customs Officer and is an authorised person under sub-section 203(1) of the Customs Act 1901. The applicant is the proprietor of a business called Sports Car World and imports motor vehicles into Australia. In the course of his business, the applicant imported four motor vehicles being 500SEC Mercedes Benz Coupe motor vehicles. On 24 October 1984 the respondent, as an authorised person, gave notice of seizure of three of the motor vehicles, the reason stated being as follows:
   
   

"(i) PURSUANT TO SECTION 229(1)(a) OF THE CUSTOMS ACT 1901 THE SAID MOTOR VEHICLES WERE SMUGGLED AND OR UNLAWFULLY IMPORTED AND

(ii) PURSUANT TO SECTION 229(1)(i) OF THE SAID ACT IN RESPECT OF THE SAID MOTOR VEHICLES

(a) THERE WAS PRODUCED TO AN OFFICER THREE INVOICES FROM REDCAR LTD. DATED 17 APRIL, 1984 NUMBERS 84756A, 84688A, 84788A WHICH ARE FALSE OR WILFULLY MISLEADING IN A PARTICULAR IN THAT THE UNIT COSTS SHOWN ARE NOT THE AGGREGATE OF ALL PAYMENTS MADE OR TO BE MADE DIRECTLY OR INDIRECTLY BY THE PURCHASER TO OR FOR THE BENEFIT OF THE VENDOR IN CONNECTION WITH THE SAID VEHICLES AND

(b) THERE WAS MADE AN ENTRY NUMBER C41810286 WHICH IS FALSE IN THAT THE CUSTOMS VALUES SPECIFIED IN THE SAID ENTRY ARE UNDERSTATED."

On the same day, the respondent gave notice of seizure of the fourth motor vehicle for reasons stated in similar form.

1. On 21 November 1984, the applicant made a claim for the four motor vehicles under sub-section 205(6) of the Customs Act.

2. It is necessary to make brief reference to some of the provisions of the Customs Act. Section 229 specifies goods which are forfeited to the Crown. The relevant paragraphs of that section relied upon by the respondent are those set out in paragraphs (a) and (i) which are as follows:
   
   

"229.(1) The following goods shall be forfeited to the Crown:

(a) All goods which are smuggled, or unlawfully imported, exported, or conveyed.

...

(i) All goods in respect of which any entry invoice declaration answer statement or representation which is false or wilfully misleading in any particular has been delivered made or produced.

..."

Under sub-section 203(1) an authorised person may seize any forfeited goods or any goods that he believes on reasonable grounds are forfeited goods. Where goods are seized under s.203, the authorised officer who seized the goods must, under s.205, give notice of seizure to the appropriate person. That notice must specify the reasons for the seizure. As indicated above, that was done in this case. Under sub-section 205(6), where a notice under sub-section (2) has been served, the goods shall be deemed to be condemned as forfeited to the Crown unless within thirty days after the day on which the notice was served, the owner of the goods gives notice in writing to the appropriate person stating that he claims the goods. The applicant has given that notice. Thereafter, the Collector of Customs is empowered by s.208A to give notice to the owner requiring him to bring an action against him within four months for the recovery of goods and if the owner does not within that period bring an action for the recovery of the goods, the goods shall be deemed to be condemned as forfeited to the Crown without any further proceedings. In the present case, the Collector has not given notice under s.208A.

1. By application dated 21 November 1984 the applicant made application for an order of review under the Administrative Decisions (Judicial Review) Act 1977, the Judicial Review Act, seeking to review "the decision of the respondent to detain, refuse to surrender and seize goods of the applicant" being the four motor vehicles. For present purposes, the parties agreed that the decision can be treated as the decision of the respondent made under sub-section 203(2) of the Customs Act. The grounds of the application were those stated in the following paragraphs of sub-section 5(1) of the Judicial Review Act, namely:
   
   

(b) that procedures that were required by law to be observed in connexion with the making of the decision were not observed;

(c) that the person who purported to make the decision did not have jurisdiction to make the decision;

(d) that the decision was not authorized by the enactment in pursuance of which it was purported to be made;

(e) that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made;

the particulars of this ground were those set out in sub-section 5(2):

(a) taking an irrelevant consideration into account in the exercise of a power;

(b) failing to take a relevant consideration into account in the exercise of a power;

(f) an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case.

(f) that the decision involved an error of law;

(h) that there was no evidence or other material to justify the making of the decision.

During the course of submissions Counsel for the applicant indicated that as a result of further material supplied by the respondent, the applicant would be seeking to amend its application by including the further particulars under sub-section 5(2) of the Judicial Review Act, namely:

(d) an exercise of a discretionary power in bad faith;

(g) an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power;

(j) any other exercise of a power in a way that constitutes abuse of the power.

Reference should be made to sub-section 5(3) of the Judicial Review Act insofar as reliance is placed upon paragraph (h) of sub-section 5(2). It should be noted also that no particulars were given of the grounds apart from the statement of the grounds in a form similar to those set out in the Judicial Review Act.

1. By his application, the applicant claimed as follows:
   
   

"1. An order that the decision and the two notices of seizure issued by the respondent on the 24th day of October 1984 in respect of the said motor vehicles be set aside.

2. A declaration that the said motor vehicles are the property of the applicant and an order directing the respondent to deliver the same to the applicant."

1. The applicant did not, pursuant to sub-section 13(1) of the Judicial Review Act, request the respondent to furnish reasons for his decision. During the course of submissions on the motion, Counsel for the applicant indicated that at the hearing the applicant would be contending that the Court should determine whether the motor vehicles were forfeited goods. Counsel indicated that the Court had jurisdiction to determine these matters in the proceedings by reason of the associated jurisdiction under s.32 of the Federal Court of Australia Act 1976 or by reason of the accrued jurisdiction. No views are expressed on this matter.

2. At the directions hearing, orders were made by consent directing the parties to make, swear and file affidavits of discovery and to interrogate. Those directions were somewhat unusual having regard to the nature of proceedings brought under the Judicial Review Act; see for example the recent decision of Fisher J. in Reid v. Nairn, Federal Court of Australia, 25 March 1985, unreported, in which a number of earlier decisions on the same point are noted.

3. The respondent has given discovery. In his list of documents he objects to produce for inspection the documents set out in Part 2 of the Schedule. Included among those documents are those identified by numbers 10 to 48 inclusive. The grounds of the objection to those documents are set out as follows:
   
   

"The documents enumerated in Part 2 of Schedule 1 are priviledged from production on the ground:-

(a) as to the documents numbered 10 to 48 inclusive, that their production would be contrary to the public interest;

(i) as to the documents numbered 10 to 44 inclusive, they have been provided to the Australian Customs Service on a confidential basis. Production of these documents would enable the identity of the persons providing the material set forth in the documents to be determined which I believe would severely impair the ability of the Australian Customs Service to obtain similar material in the future and would diminish the Austrtalian Customs Service's ability to properly perform its duties and discharge its responsibilities.

(ii) as to the documents numbered 45 to 48 inclusive, their production would disclose lawful methods by which the Australian Customs Service in Victoria undertakes investigations into breaches or possible breaches of Commonwealth legislation for which the Service is responsible. Such disclosure would severly diminish the effectiveness of such methods in the future and would thereby diminish the Service's ability to properly administer and enforce the said legislation."

Those documents coming within sub-paragraph (i) can be identified as the "informer objections" and those documents coming within sub-paragraph (ii) can be described as the "system objections".

1. The applicant is seeking orders to enable him to inspect the documents numbered 10 to 14 inclusive.

2. In his affidavit in support of the application, the applicant denies that any of the motor vehicles are forfeited goods under either of paragraphs (a) or (i) of sub-section 229(1) of the Customs Act. In an affidavit in support of the motion, the solicitor for the applicant exhibits copies of some of the documents discovered by the respondent. These show that some of the documents for which privilege is sought consist of extracts from larger documents, ordinary reports and notes where no objection was taken. The solicitor deposes also to the fact that in his opinion, the documents or parts of documents which are subject to the claim of privilege on the ground of public interest, are relevant to the issue of whether any of the four vehicles are forfeited goods and are relevant to the issue of whether there were reasonable grounds for the belief by the respondent that the four vehicles are forfeited goods and that the applicant will be prejudiced if those documents or parts of documents are not produced to the applicant for inspection or at least to the applicant's legal advisors. A supporting affidavit was sworn by a Mr. Baird who had placed the orders for the four vehicles.

3. Shortly before the motion came on for hearing, the respondent filed an affidavit in which he set out the facts upon which he relied in making the decision to seize the goods, the evidence he relied on to establish those facts and the reasons for him making the decision. In addition, the Comptroller-General of Customs, Mr. Charles, has sworn an affidavit in support of the claim of privilege stating that he believes it would be contrary to the public interest to disclose documents from which the identity of the confidential source of information (the informer objection) could be ascertained or the lawful method of investigation (the system objection) could be ascertained. He endorsed and supported the claims for privilege made with respect to the documents marked 10 to 48. Under the Customs Act, the Comptroller-General of Customs is the Permanent Head of the Customs Department.

4. The issue arising on this motion is illustrated by a reference to the affidavit of the respondent. From that affidavit it appears that the four vehicles were ordered by Mr. Baird on behalf of the applicant from Redcar Ltd. In paragraph 3(ii) of the affidavit, the respondent states that one of those vehicles was purchased by Redcar Ltd. from Zung Fu Co. Ltd. on or about 19 April 1984 and the other three were purchased by Redcar Ltd. from Zung Fu Co. Ltd. on or about 24 April 1984 at the prices therein set out. In that paragraph the prices are calculated by deducting amounts refundable to a purchaser if the vehicle is exported from the Federal Republic of Germany after having been bought in that country; see paragraph 3(iii). In paragraph 3(v) the respondent states that the four vehicles were invoiced by Redcar Ltd. to the applicant on or about 17 April 1984, that is, before the purchase of the vehicles by Redcar Ltd. at prices some 28.07%, 28.07%, 28.07% and 28.91% respectively below the reduced price paid by Redcar Ltd. to Zung Fu Co. Ltd. for each of the vehicles respectively. The prices shown on the invoices of Redcar Ltd. to the applicant were the prices entered on the relevant entry documents in relation to entry into Australia. In his affidavit, the respondent says that his reason for making the decision to seize the four motor vehicles was that he believed that they were unlawfully imported or smuggled and that relevant invoices and entry documents produced to an officer of Customs were false or misleading because they understated the true cost of those vehicles. Other material is contained in the affidavit but for present purposes it is sufficient to say that the respondent took into account explanations made by Mr. Baird and by persons on behalf of Redcar Ltd., the latter explanation being that Redcar Ltd. sold at a loss but was prepared to do so for the sake of future business, but that he did not believe any of those explanations. In identifying the evidence relied on in finding the facts referred to in paragraph 3 the respondent said:
   
   

"As to the facts described in Paragraphs 3(ii) and 3(iii), was from an informer, whose identity I do not wish to disclose, because to do so would, in my submission, be contrary to the public interest."

1. The present case is somewhat unusual in that the respondent has sworn an affidavit which in substance is a statement under sub-sections 13(1) and (2) of the Judicial Review Act. In addition, the respondent has consented to give and has given discovery. In those circumstances the motion has to be determined by applying the well established principles relating to the claim of privilege based on the public interest. The fact that the principles are well established does not make their application an easy task.

2. The parties agreed that initially the Court should be asked to determine the issue raised by the claim for privilege without inspecting the documents for which privilege was claimed. In adopting this course, reference was made to expressions of opinion contained in Air Canada v. Secretary of State for Trade (1983) 2 WLR 494, a decision of the House of Lords. Those opinions are incapsulated in the headnote of the report:
   
   

"...that where the Crown objected to the production of a class of documents on the ground of public interest immunity, the judge should not inspect the documents until he was satisfied that the documents contained material (per Lord Fraser of Tullybelton, Lord Wilberforce and Lord Edmund-Davies) which would give substantial support to the contention of the party seeking disclosure on an issue which arose in the case or (per Lord Scarman and Lord Templeman) which would assist any of the parties to the proceedings, and which was necessary for "disposing fairly of the cause or matter" (and) that only if the judge were so satisfied, should he then examine the documents privately;".

1. That approach has been approved in Young v. Quin, Full Court, Federal Court of Australia, 12 February 1985, unreported. In that case Bowen C.J. said:
   
   

"Where a claim of public interest immunity is made in respect of documents it is for the Court to decide whether or not to uphold the objection. The Court may ask for a clarification or an amplification of the objection to production, being careful not to impose requirements which could only be met by divulging the very matters to which the objection relates. The Court also has power to examine the documents privately. It has been said this power should be sparingly exercised. Indeed, the better view appears to be that the Court should not inspect the documents unless it decides that, on balance, the documents probably ought to be produced. (Conway v. Rimmer (1968) AC 910 at pp 952, 953 and 971 and see Air Canada v. Secretary of State for Trade (1983) 2 WLR 494)."

1. In determining claims of privilege based on the public interest, the Court is required to weigh conflicting principles. There are many statements in the authorities relating to this matter. For present purposes, it is sufficient to refer to what Bowen C.J. said in Young v. Quin:
   
   

"The public interest has two aspects which may conflict: one that harm shall not be done to the community by the disclosure of material; the other that the administration of justice shall not be frustrated by the withholding of material which should be produced if justice is to be done. The court has to decide which aspect of the public interest predominates. It was expressed by Gibbs ACJ. in Sankey v. Whitlam (1978) 142 CLR 1 at p 39 as follows:-

'In some cases .... the Court must weigh the one competing aspect of the public interest against the other in deciding where the balance lies.'

Stating the position in regard to documents, Gibbs C.J. in Alister v. The Queen (1984) 58 ALJR 97 at p 98 said:

'The final steps in this process - the balancing exercise - can only be taken when it appears that both aspects of the public interest do require consideration - i.e., when it appears, on the one hand, that damage would be done to the public interest by producing the documents sought or documents of that class, and, on the other hand, that there are or are likely to be documents which contain material evidence.' ".

1. In the present case, the claim to privilege has been supported at a very high level, the Permanent Head of the Department. I am satisfied that the informer objection and the system objection come within a traditional head of the public interest; compare what was said by Beaumont J. in Young v. Quin, above. In these circumstances it is necessary for the applicant to establish that, in the public interest, the proper administration of justice will be frustrated if the relevant documents are not produced. As an initial step, this matter should be considered by the Court without the Court inspecting those documents. The issues can be stated. Were the motor vehicles purchased by the applicant at a price less than the price paid for them by Redcar Ltd.? If so, does that fact justify the belief held by the respondent? Was there jurisdiction in the respondent to make the decision, compare Brunetto v. Collector of Customs, Federal Court of Australia, Toohey J., 12 December 1984, unreported, or was there an absence of facts, the existence of which were necessary for the making of the decision? In other words, were there reasonable grounds upon which the respondent could base his belief that the motor vehicles were forfeited goods? Was the respondent's decision vitiated by mala fides?

2. Counsel for the applicant contended that the transaction between Redcar Ltd. and the applicant was at arms length, the invoices raised by Redcar Ltd. represented the whole of the consideration payable by the applicant, that this was a normal transaction, that even if the price paid by Redcar Ltd. to Zung Fu Co. Ltd. was higher, that could not affect the true transaction between the applicant and Redcar Ltd., that by inference the price paid by the applicant was comparable to the price of other similar motor vehicles and that the respondent, by relying upon other purchases by the applicant, has indicated a lack of bona fides. The contentions made on behalf of the applicant were, in essence, that the documents the subject to the claim of privilege all relate to the true cost of the motor vehicles to the applicant and to the basis upon which the respondent made his decisions and that the documents for which privilege was claimed in all probability, contained material which would support the applicant's contention and would assist the applicant in this case and inspection was necessary for disposing fairly of the application.

3. Those provisions of sections 203, 205, 208A and 229 of the Customs Act which are summarised above form part of the scheme under that Act whereby the ownership of goods may be vested in the Crown by operation of that Act and in the absence of a Court order. As was said by Kitto J. in Powers v. Maher (1959) 103 CLR 478 at p 483:
   
   

"...clear it is that whenever a state of affairs arises in which any one of the descriptions of goods contained in the eighteen paragraphs of s.229 is satisfied, that section intends to effect at once some change in the legal situation with respect to those goods, be it a transfer of ownership to the Crown or only the creation of a right in the Crown to bring about such a transfer by immediate seizure."

But see Bert Needham Automotive Co. Pty. Ltd. v. Federal Commissioner of Taxation (1976) 10 ALR 501 per Rath J. at pp 505-508.

1. If Customs, claiming goods are forfeited under s.229 of the Customs Act, refuses to deliver goods to the "owner", the "owner" could institute proceedings in the appropriate Court seeking the recovery of those goods possibly by an action for conversion or detinue. That action could be instituted even though no notice of seizure had been given under s.203. In that action, the Court would determine whether the goods were forfeited goods under s.229.

2. If notice is given to the "owner" under s.203, then, unless the "owner" gives notice under s.205, the goods are deemed to be condemned as forfeited to the Crown without any further proceedings being necessary. In those circumstances, and provided there has been compliance with the requirements of the Customs Act, at the very latest, the ownership in the goods is transferred to the Crown upon the statutory condemnation. If the "owner" does give notice under s.205, there is a second opportunity by which the statutory condemnation may take effect. In the absence of the "owner" commencing an action for the recovery of the goods, notice may be given under s.209 and if within the period of four months referred to in that section the "owner" does not bring an action in the appropriate Court for the recovery of the goods, the statutory condemnation occurs. On this analysis, the important matter to note is that a dispute as to whether the goods are forfeited to the Crown under s.229 are determined by legal proceedings brought by the "owner" in the appropriate Court. This may bring about some unexpected consequences, see for example Willey v. Synan (1935) 54 CLR 175.

3. An application under the Judicial Review Act for an order for review of a decision to seize goods where the authorised person claims that he believed on reasonable grounds that the goods seized were forfeited goods under s.229 of the Customs Act, is different in nature from an action referred to in the previous paragraph. In the proceedings under the Judicial Review Act, no issue arises as to whether in fact the goods seized are forfeited goods under s.229. If the application succeeds, the applicant is not entitled to an order for the recovery of the goods; see Brunetto v. Collector of Customs, above. Customs may continue to detain the goods. Customs may give a fresh notice under s.203. What is in issue in proceedings under the Judicial Review Act is whether the respondent believed on reasonable grounds that the goods seized are forfeited goods. In the present case, what is in issue is whether the respondent believed on reasonable grounds that the four Mercedes motor vehicles were forfeited goods under paragraphs (a) or (i) of sub-section 229(1) of the Customs Act. The claim for privilege must be considered with respect to the nature of the proceedings presently before the Court.

4. The proceedings are being brought under the Judicial Review Act. For present purposes, it is not appropriate to consider the motion on the basis of the proceedings being for the purpose of determining whether the motor vehicles are forfeited goods, the Court not having decided it has jurisdiction to hear and determine that matter. Despite the consent given for discovery, it must be remembered that in proceedings under the Judicial Review Act of the kind presently before the Court, discovery is not to be used for the purposes of fishing; see Reid v. Nairn, above. In all the circumstances of this case and in applying the approach expressed in Air Canada v. Secretary of State for Trade, above, and as applied in Young v. Quin, above, I am not satisfied that the administration of justice will be frustrated by the withholding of the discovery of documents of which privilege is claimed. I reach this conclusion without having to inspect the documents. The position would be no different if the discovery was to be limited to named persons from among the legal representatives of the applicant. For the purposes of the Judicial Review Act application, and in the light of the statement of reasons given by the respondent for his decision, the applicant has not made out his case. To adapt the words from Air Canada v. Secretary of State for Trade, above, I am not satisfied that the documents for which privilege is claimed contain material which would give substantial support to the applicant on an issue arising in this case under the Judicial Review Act. I am not satisfied that those documents would assist the applicant. I am not satisfied that those documents are necessary for disposing fairly of the application.

5. The respondent was not bound to accept the explanations given to him by Mr. Baird and of the representative of Redcar Ltd. The assertion of a ground under the Judicial Review Act, in the absence of material to suggest there is a basis to support that ground, does not enable an applicant to seek discovery to try to find material to support the claim. Where discovery is given but an objection of privilege is made, in the absence of material to suggest there is a basis to support the ground, the Court should not inspect the documents. In the present case, in my opinion there is no material to suggest a basis to support the grounds relied upon by the applicant. The Court should not inspect the documents. On the balance of the conflicting public interests, the Court finds in favour of the respondent.

6. The motion is refused with costs.