Kingswood Distillery P/L v Comptroller General of Customs

[1993] FCA 9

NOT SUITABLE FOR GENERAI. DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	)
1
NEW SOUTH WALES DISTRICT REGISTRY )	NG 812 of 1992

)

GENERAL DIVISION 1

BETWEEN:  KINGSWOOD DISTILLERY PTY LIMITED

Applicant

AND :  COMPTROLLER GENERAL OF C

Respondent

CORAM: Burchett J.
PLACE: Sydney

DATE : 8 January 1993

EX TEMPORE REASONS FOR JUDGMENT

BURCHETT J.:

This is an application for interlocutory relief.

applicant carries on a distillery producing mainly industrial alcohol. Such an operation requires a licence under the Distillation Act 1901, which (it was common ground) is an Act concerned with the Commonwealth's power in respect of excise. The fact that that is the ground of the Act is of some importance, perhaps, for its construction. The scheme of the Act, for relevant purposes, can be essentially grasped from ss. 12 to 24(1) inclusive, which provide:

following classes: 

"Distillation of spirits
12. A person shall not distil spirits unless he is
licensed under this Act so to do or otherwise than
in accordance with the licence granted to him under
this Act.

Penalty: $1,000.

Description of licences
13. Licences to distil shall be divided into the

(a)	Spirit makers' licences - (1) General licences authorizing the licensee to distil spirits from any material. (2) Wine distillers' licences authorizing the licensee to distil spirits from wine or lees of wine.
(b)	Vignerons' licences authorizing the licensee to distil spirits from wine or lees of wine for the purpose of fortifying wine.

(C) Experimenters' licences authorizing the licensee to distil spirits from any material for the purpose of research into the production or use of fuel ethanol, including research relating to the development of technology for such production or use.

Licence fees

16. (1) The annual fees for licences shall be as

prescribed.

(2) Until otherwise prescribed the amount of the

fees for licences shall be in accordance with the

scale in Schedule I to this Act.

Applications

17. Applications for licences may be made to the

Collector and shall be in the form and be accompanied by the particulars prescribed.

Applicant to pay licence fee and give security
18. (1) The applicant for a licence shall pay to
the Collector the prescribed licence fee and shall
give security to the Collector for compliance with

this Act in accordance with the scale prescribed.

Form of security

19. A security shall be given in a manner and form

approval, be by bond, guarantee, cash deposit or any	approved by the Collector and may, subject to that
other method, or by two or more different methods.
Collector to grant licence 20. (1) The Collector if satisfied that the application ought to be granted may grant a licence to the applicant, but if the application is refused the licence fee shall be returned to the applicant.
(2) The Regulations shall prescribe the number of experimenters' licences that may be in force at any one time, and the Collector shall not grant an experimenter's licence if that number of such licences is in force.
Period of licences 21. Licences shall unless previously cancelled remain in force until 31 December next after the granting of the licence. Renewal of licences 22. (1) Licences may be renewed by the Collector upon an application for renewal before the expiry of the licence sought to be renewed and on payment of the annual licence-fee:
Provided that the Collector may in exceptional circumstances extend for a period not exceeding 7 days the time within which application for renewal of the licence and payment of the licence fee shall be made.
(2) The liability of the subscribers to the security given in respect of the original licence shall, in the absence of any notice of termination on the part of the subscribers, remain in full force for the period for which the licence is renewed.
Fresh security 23. The Collector may require the applicant for the renewal of a licence to give fresh security, and if fresh security is not given accordingly may refuse to renew the licence.
Transfer and cancellation 24. (1) Licences may be transferred by permission on security being given by the transferee and may be cancelled by the Minister by Gazette notice if the licensee is convicted of any offence against this
Act. "

The form of licence provided for by S. 17 is indicated by

the licence which was issued to the applicant in this case,
dated 18 April 1979, as follows:

" SPIRIT ]MAKER'S GENERAL LICENCE

This Licence is issued to KINGSWOOD DISTILLERY PTY. LTD. upon the condition that he complies with the Distillation Act 1901, and the Regulations thereunder relating to Spirit Makers' Licences, and authorizes him to Distil Spirits upon his premises situated at O'CONNELL STREET, ST. MARYS, N.S.W.

Unless previously cancelled, this Licence shall remain in force until 31st December, 1979, but may be renewed in accordance with Section 22 of the

Distillation Act 1901.

Dated this 18th day of APRIL, 1979
Senior Assistant Collector of Custonts for the
State of NEW SOUTH WALES"

It may be significant to note the provision by that form: "Unless previously cancelled, this licence shall remain in force until 31 December 1979 but may be renewed in accordance with section 22 of the Distillation Act 1901."

The applicant is alleged to have been guilty of large scale deliberate evasion of excise through a scheme involving false documents of sale and bogus transactions. There is no doubt that proof of these allegations would have justified a refusal of a licence, if the question had been whether a licence under S. 17 should be issued to the applicant. But the cancellation of a licence seems to be treated as quite a different matter in the Act, as S. 24(1) makes it clear that the ground of cancellation to which the Parliament specifically directed its attention was not involvement in conduct which might amount to an offence, but actual conviction. The same view seems to have been taken with

experimenter's licence, in subs. (2) of the same section.

regard to another form of licence provided for by the Act, an

Here, the issue arises in respect of the question of renewal. The Customs Department called upon the applicant to show cause why renewal should not be refused. That was on 3 November 1992. Then, on 30 November 1992, a document was sent to the applicant which, I think, could fairly be regarded as inviting an application for renewal. This document was sent in accordance with the practice followed, on the evidence before me, uniformly over the period of years since December 1979. I should interpolate that, of course, the proceedings are interlocutory, and all statements of fact made in these reasons are purely provisional, on the evidence at this stage, and for the purposes of consideration of this application as an interlocutory application. The applicant responded to the invitation made to it by sending a cheque for the appropriate fee, together with the document contemplated by the practice. The cheque was banked by the department, and payment was made through the applicant's bank account d n the normal course. A document was also received by the applicant, from the department, in response to the application so made and the cheque so forwarded. I set out the terms of the first document :

"The Licensee

Dear Sir,

Please find enclosed Debit Note for Excise

Manufacturer fees due by 1st January 1993.

To facilitate an accurate record, please send both	copies of the enclosed Debit Note together with your
payment, directly to this office at:
Postal: Collector of Customs,

GPO Box 8
SYDNEY 2001

Att: Licence Fee Clerk

or Australian Customs Service
Inland Revenue,
5th Floor,
477 Pitt Street
SYDNEY 2000
Att: Licence Fee Clerk,

Upon receipt of payment a warranted copy of your

Debit Note will be returned for your records.

Yours faithfully,

for Regional Manager,

INLAND REVENUE. "

The "Debit Note'' reads as follows:

"Warehouse Licensing Inland Revenue

This is not an official receipt unless cash register imprint appears hereon

r

Name of Payer

KINGSWOOD DISTILLERY PTY LTD
40 HENRY STREET
LEICHHARDT

NSW 2040

L

PLEASE PRESENT THIS ACCOUNT WITH CHEQUE TO: THE CASHIER, Customs House ( C i t y of Origin)

Cheques should be drawn payable to the Collector of Customs, crossed and marked not negotiable. Remittances by post should be addressed to the Collector of Customs, Customs House.

AMOUNT

EXCISE ESTABLISHMENT FEES	20.00
KINGSWOOD DISTILLERY	1593H

For 12 months commencing
31/12/92. Please pay
Account by that date

There was added, to the original material of which the second document consisted at the time it was originally sent to the applicant, a note in handwriting: "Paid $10 Excise Manufacturers Licence", and underneath that: "Paid $10 Spirit Makers - General Distillers". There was no apostrophe used in the writing of the word "Distillers", but I think it would be a fair reading to read the latter part of what was so written as if the word, "Licence" appeared immediately after it, as that word appears immediately after the word "Manufacturers" in the previous line. The word "Manufacturers" is also without an apostrophe. Immediately adjacent to the handwritten material is a stamp, with initialling in it, which was agreed to be an Australian Customs stamp.

The respondent denies that what was done amounted to a renewal of the licence, but evidence was placed before me from which I think it would be open to a court to infer that there was a renewal. No renewal form appears ever to have been used, so far as the evidence goes, at any time, either in relation to this licence or in relation to any other licence under the Distillers Act. The original licence form which is a prescribed form, says, as I have already indicated, that it

may be renewed. Although renewal is, on the argument put for	the respondent, not merely automatic and it is unnecessary to
decide for the present purposes whether that is so or not, it does appear that the Act distinguishes renewal from the original issue of a licence, and there are a number of indications that renewal may generally involve simply the acceptance of a payment.
Despite the nature of the case made by the applicant before me, which was heard over a substantial period, the respondent did not attempt to prove that its normal course of procedure over the years, either in relation to renewal of the applicant's licence or in relation to the renewal of licences generally, involved some formality beyond what happened here. The respondent contented itself with a denial of renewal, which was objected to and received subject to the objection.
I do not think that such a blanket denial is admissible, but
if it is admissible, I do not think that for the purposes of the present matter, in the light of the rest of the evidence, I could say that that denial destroys the prima facie case made out by the applicant. It is a powerful consideration that the respondent has not put on evidence to show that it has, or had, any other procedure than that which I think may be inferred from the evidence led on behalf of the applicant, especially when the terms of the Act itself are taken into account.
The terms of the Act include, as I have said, a distinction between the licence itself, the form of which is specified, and the renewal, the form of which is not. It may be noted that S . 22(1) provides that:

"Licences may be renewed by the Collector upon an application for renewal before the expiry of the licence sought to be renewed and on payment of the annual licence fee."

Nothing else is expressly provided. I think that, at least arguably, this provision is concerned only with the due making of the application and payment of the fee. It is qualified by a proviso which is again concerned only with the making of the application and the payment of the fee, and which seems to contemplate that the decision to renew may be left to the very last moment - to some time less than seven days. If the draftsman had contemplated something more than the informal method of renewal which the evidence suggests has in fact been adopted, one would have expected something much more elaborate in the Act itself. Seven days seems an extraordinarily short time to have been provided if substantial matters were intended to be dealt with, particularly as the seven days is not a minimum but a maximum. In other words, there is provision for an extension of seven days, pursuant to which something might be done on the last day.

Furthermore, it is to be noted, as was raised during the

course of argument, that nothing is said about the operations

of the distillery during the seven days period. It would be

rather odd if it were contemplated that distilleries would cease operations for such a period and then start again immediately after it. If anything other than a fairly automatic right of renewal had been contemplated, it is strange that the legislature did not consider the effect upon the operations of a distillery, and the necessity to provide expressly whether or not those operations had to cease. It may be said that it is odd that that has not been done in any case, but I think the respondent's view of the legislation makes the oddity the more extreme. At any rate, it can be said that the draftsman probably did not contemplate a renewal which would be other than more or less automatic, when a section in those terms was drafted.

In this situation, a procedure seems to have been adopted over a period of many years. That cannot, of course, af fect

the construction of the Act. But given the indications in the Act that the significant matter is the grant of the licence in the first place, and that annual renewal may rather be concerned with making payment of the appropriate fee, as distinct from justifying the grant of a licence all over again as if there never had been a licence, the evidence of what has been done can enable inferences to be drawn as to whether, in fact, those things have been done which amount to a renewal. If there has been a renewal, it is arguable that the grounds asserted by the decision-maker for his decision were not available, for two reasons. Their nature is reliance on an

central plank of the decision, rather than reliance on the	inference from denial of guilt, which seems to have been the
particular matters to which the applicant's attention had been drawn and in respect of which the applicant had been called upon to make reply. And by virtue of the Act itself, there is a specific singling out of conviction, as distinct from matters established to a lesser degree, to be the ground for cancellation of a licence. But in any case, the decision does not purport to be a decision to cancel. It purports to be a decision not to renew, and if renewal had already taken place, it was plainly an inappropriate decision for the decision- maker to have purported to make.
Given that there is a serious question to be tried, I turn to the other matters that would sway an exercise of discretion. It is plaln that the purported withdrawal of a licence, at a day's notice, is an extremely serious matter from the point of view of the applicant. It is also an action which is unlikely, except in extreme circumstances, to have been contemplated by the Parliament when the Act was passed. This consideration may have a bearing on the true construction of the sections to which I have already referred, but at any rate, it is clear that the Parliament would hardly have considered that licences should be issued for a 12-month period, and that then, on the last day of that period or thereabouts, a decision should be made to terminate them, with the obvious serious consequences for businesses that might be involved.
I take into account that the Department has an important function to perform in relation to the licensing of distilleries, and that it is a serious matter if the operations of a distillery are carried on by someone who ought not to be licensed. But the Act itself contemplates - as I have already pointed out - that the remedy for which it makes specific provision arises upon actual conviction of an offence. That has not occurred here; nor has an offence been
established in any of the traditional ways. The decision- maker has not had the opportunity of testing the material that was put before him; nor, in the nature of the function he was performing, could he have had. It was suggested that a grant of relief might lead to the commission of an offence under S. 12. The court, of course, cannot authorise someone to do something that is illegal, but the fact is that, on the evidence that has been put before me at this stage, it cannot be said that the applicant has been, is, or would be, committing an offence by carrying on the distillery. The form of relief which the circumstances permit the court to grant would not involve the court authorising any such action. The applicant must, itself, take the responsibility for any decision to act on the basis that it is still licensed, if that is what it desires to do.
In the circumstances, I have come to the conclusion that, applying the well known tests in Australian Coarse Grain Pool Ptv Ltd v. Barlev Marketina Board of Oueensland ( 1982) 46 ALR
398, a case has been made out for an interlocutory order. The
order I make is that, until further order, the respondents be restrained from taking any steps on the basis that the licence of the applicant under the Distillation Act 1901 was not renewed on or about 10 December 1992, or on the basis of the purported decision referred to in the application of 31 December 1992. Costs will be costs in the cause.

I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Burchett.

Associate:
Date: 8

Counsel for the Applicant:	Dr G.A. Flick with Mr A.J. Clout
Solicitors for the Applicant:	Messrs Pelosi & Associates
Counsel for the Respondents:	M r C.J. Stevens Q.C.
with Mr G. Elliott
Solicitor for the Respondents:	Australian Government Solicitor
Date of hearing:	8 January 1993