Lego Australia Pty Ltd v Paraggio

No judgment structure available for this case.

LEGO AUSTRALIA PTY LIMITED and THE PERSONS LISTED IN THE APPLICATION HERETO
t/as ERNST AND YOUNG v. PHILLIP PARAGGIO; DAVID ROONEY; FRANCIS IVOR KELLY;
WENDY ELDER; WAYNE MARTIN MORRISON and OTHERS
No. NG371 of 1992
FED No. 575
Number of pages - 34
Administrative Law
(1993) 44 FCR 151
(1993) 122 ALR 356

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J(1)

CATCHWORDS

Administrative Law - Search warrants - Application for issue - Duty of applicant to disclose all material information - Whether warrant is invalidated by failure of applicant to disclose matters of which he was unaware - Relevance of fact that undisclosed information is known to other officers of agency employing applicant, or held in its files - Materiality of certain information known to applicant but not disclosed - Whether there was a misrepresentation by applicant to magistrate - Whether applicant has duty to instruct magistrate on relevant law - Whether magistrate took into account irrelevant material or made an unreasonable decision - Whether magistrate failed to take into account a relevant matter.

Crimes Act 1914, s.10.

Administrative Decisions (Judicial Review) Act 1977, s.5

Customs Act 1901, ss.154, 157, 158, 159, 160 and 161.

HEARING

SYDNEY, 7, 8, 13, 14 April and 29 July 1993

#DATE 20:8:1993

Counsel for the Applicants: R Ellicott QC and A Bannon

Solicitors for the Applicants: Blake Dawson Waldron

Counsel for the Respondents: M Weinberg QC and G Johnson

Solicitors for the Respondents: Australian Government Solicitor

ORDER

THE COURT ORDERS THAT:

The Application be dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

WILCOX J This proceeding calls into question the validity of two search warrants issued on 30 October 1991 and 7 November 1991 by a Justice of the Peace, Wendy Elder, the fourth respondent. The warrants were issued at the instance of the first respondent, Phillip Paraggio, an officer of the Australian Customs Service ("ACS"). The second respondent, David Rooney, is also a Customs Officer. The third respondent is the Comptroller-General of Customs. The fifth respondents are nine members of the Australian Federal Police to whom the warrants were addressed. Ms Elder submitted to the order of the Court, except as to costs. The other respondents appeared by counsel to resist the claim. For simplicity, I will refer to the respondents other than Ms Elder as "the respondents". The applicants in the proceeding are Lego Australia Pty Limited ("Lego Australia" or, more briefly, "Lego"), a company involved in the distribution in Australia of toy building materials, and the members of a firm of accountants, Ernst and Young. At material times, Ernst and Young (or their predecessors, Ernst and Whinney) acted on behalf of Lego in connection with the assessment of customs duty on imported goods.

The applicants' case is that, in applying for the warrants, Mr Paraggio failed to disclose to Ms Elder material matters of which he was aware, or ought to have been aware, and made statements that were false or misleading. They say that this conduct breached the duty adhering to an applicant for a search warrant. The applicants further contend that Ms Elder's decisions to issue the warrants were decisions of an administrative character made under a Commonwealth enactment (s.10 of the Crimes Act 1914) so that the Administrative Decisions (Judicial Review) Act 1977 applied to them. The applicants say that there was no evidence to justify the making of either decision (see s.5(1)(h) and s.5(3)(b) of the Administrative Decisions (Judicial Review) Act); alternatively, that, in making the decisions, Ms Elder failed to take into account relevant considerations (s.5(1)(e)) and s.5(2)(b)), took irrelevant considerations into account (s.5(1)(e) and s.5(2)(a)) and exercised her power so unreasonably that no reasonable person could have so exercised the power (s.5(1)(e) and s.5(2)(g)). The applicants claim that any one of these grounds entitles them to: an order quashing or setting aside the warrants; an order restraining the first, second, third and fifth respondents from acting or continuing to act upon the warrants, or continuing to hold documents or other items seized pursuant thereto; an order for re-delivery of all seized documents and other items; and an award of damages, including punitive damages, against the first, second and third respondents. I am not presently concerned with the last matter. A pre-trial direction was made postponing until a later time the determination of the quantum of damages (if any) to which the applicants are entitled as a result of the issue and execution of the warrants.
Critical to the case asserted by the applicant is the material placed before Ms Elder at the time of the application for the warrants. That material may be understood more readily if I first summarise the evidence (such as it is) concerning Lego's dealings with ACS and refer to the relevant legislation.
The applicants' evidence regarding Lego-ACS dealings traverses in detail the events of 1977 and 1978 . It sketches the position between 1978 and 1981 but then falls silent. The respondents adduced some evidence of contacts after 1981, mainly in the form of correspondence. However, the evidence concerning dealings between late 1981 and early 1988 is minimal. This is surprising. The Information produced to Ms Elder referred to two suspected offences, each of which was alleged to have been committed over a period of time terminating in January 1988. The Information described the offences in this way:

"(a) Between December 1977 and January 1988 Lego Australia Pty Limited contrary to section 29A of the Crimes Act 1914 with intent to defraud by false pretences caused a benefit to be given by the Commonwealth in that it falsely represented to the Australian Customs Service that 'Lego' toy products purchased by it from Lego Overseas A/S Denmark had been received by it on a consignment basis thereby attracting a lower customs valuation and consequently a lower assessment to customs duty than was rightly payable.

(b) Between October 1984 and January 1988 Lego Australia Pty Limited contrary to section 29D of the Crimes Act defrauded the Commonwealth of custom duty in that it falsely represented to the Australia Customs Service that 'Lego' toy products purchased by it from Lego Overseas A/S Denmark had been received by it on a consignment basis thereby attracting lower customs valuation and consequently a lower assessment duty than was rightly payable."

The early dealings between Lego and ACS: 1977-1981
5. Lego building blocks have been imported into Australia for many years. Prior to the incorporation of Lego Australia, a United Kingdom company known as British Lego Limited ("British Lego") operated in Australia. From time to time it dispatched materials to its Australian employees. They sold the goods on the Australian wholesale market, apparently mainly to retailers.

In mid-1977 Patrick Michael Going, an employee of British Lego, contacted Harold Dunner, the Senior Inspector, Appraisements, in the Sydney office of ACS. Mr Going requested assistance in determining the correct value for duty of goods imported into Australia by British Lego. The two men met on 7 July 1977. Mr Going made a file note of their discussion, the accuracy of which was affirmed in evidence by both participants. The note quotes Mr Dunner as stating:

"that the only method of calculation of the value for duty purposes available to Lego was the End Realisation Method ("ERM"), because the transfers of goods to the Australian branch were not at arm's length" (original emphasis).

The note also attributes to Mr Dunner a statement that any charge for goods, made by a head office to a branch, is irrelevant for duty assessment purposes.

According to Mr Dunner's evidence about this conversation, he explained the necessary method of calculation to Mr Going by saying that British Lego should take the price charged to the first independent buyer after importation and deduct from that price, first, the cost of transporting the goods from the place of export to Australia and, second, the costs and expenses incurred in Australia (other than advertising expenses that would be borne by a supplier in an independent sale). It followed from this formula that the outgoings of the Australian branch of British Lego, incurred in making sales, were deductible from the gross price; but not any profit the branch might make. However, this limitation had no practical importance. Documents shown to Mr Dunner indicated that the prices charged to the Australian branch by its head office corresponded with those realised on first Australian sales. There was no local profit.
It appears from Mr Going's file note that he showed Mr Dunner some calculations of value for duty and that they included what Mr Going called "normal profit margin". He explained to Mr Dunner that this figure had nothing to do with actual profit; it was a figure selected to reflect his understanding of what was usual in the Australian toy trade. Mr Dunner accepted this approach in principle, though reserving his opinion on the percentage claimed by Mr Going (20%) until he made further inquiries.
Shortly after this meeting, Mr Going wrote a letter to Mr Dunner setting out a calculation by which he concluded that the value for duty was equal to 41.47% of wholesale value. This figure purported to be the "open market" value; that is, the amount that would be paid in a transaction between an exporter and importer operating at arm's length. According to Mr Going's calculations, it was reached after allowing a deduction of 24.97% for specified expenses (chiefly freight and insurance, administration and selling expenses), 23.1% as being the "normal trade profit margin" usual in the toy industry and 10.46% for duty paid. Mr Dunner accepted these figures. On 27 July 1977, he wrote to the Australian branch of British Lego requesting that invoices for all further shipments be at the Australian wholesale value, but with an endorsement in these terms:

"Value for duty refer file number N77/9857 - 41.47% of invoice price dutiable."

As will be obvious from the foregoing explanation, the "invoice price" referred to in the endorsement was to be equal to the Australian wholesale price.

The method of calculation of value adopted by Mr Dunner was called into question by ACS officers in Canberra. However, after some written debate, it was approved. Having regard to the course of argument in this case, it is important to note that the decisions of Mr Dunner and his Canberra superiors were both made in the belief that the goods were sent to Australia by British Lego on a consignment basis, and not imported pursuant to a contract made between the importer and exporter. They understood that there could not be a contractual relationship between these two parties; they were both parts of a single legal entity, British Lego. However, it is only fair to add that, to Mr Dunner at least, it would have made no difference if the importer and exporter had been separate legal persons and the importation made pursuant to a contract between them. Mr Dunner's position was then, and remained at the trial, that a contract between two related companies can never be used as a basis of calculation of duty.
On 6 December 1977, Lego Australia was incorporated, under a different name. Apparently, the new company did not immediately commence trading. On 30 June 1978, Mr Dunner had a meeting with Mr Tony Brown, the senior British Lego representative in Australia. Mr Brown furnished a proposed ERM valuation for 1978 showing a value for duty equal to 38.6% of the Australian wholesale price. Mr Dunner accepted this calculation. Mr Brown informed him that a Danish company called Lego Overseas A/S ("Lego A/S") was buying out the British company and taking control of the Australian operations. According to the file note made by him at the time, "without mentioning whether we would have a branch or subsidiary operation", Mr Brown asked Mr Dunner "whether this change would have any bearing on our customs duty position". Mr Dunner said that it would not, provided that the documentation submitted for Customs clearance remained unchanged. According to Mr Brown's note, Mr Dunner re-affirmed this even when told that the company was considering "whether we should go for a branch or subsidiary operation".
On 3 August 1978, Mr Brown wrote a letter to Mr Dunner confirming that Lego A/S would take control of the Australian operations. He said that a local company had been incorporated; it would change its name to "Lego Australia Pty Limited". Mr Brown asked that the name be noted and concluded:

"In accordance with your advice, we will continue to declare all shipments at the Australian wholesale value and the shipping documents will be endorsed to show the file number, N77/9857 (which we understand is to remain unchanged), and the agreed end realisation value of 38.6% of the Australian wholesale price."

It appears that, shortly after this letter, Lego Australia commenced to trade. Goods were dispatched to it by Lego A/S. Value for duty was calculated at the percentage of the Australian wholesale price which Lego's accountants calculated each year in accordance with the formula accepted by Mr Dunner. Each year Mr Dunner approved the calculation. At the time of each importation, Lego's customs agents presented to ACS the invoices created by Lego A/S. The invoices bore the endorsements requested by Mr Dunner, with a substitution of the latest agreed percentage. On the strength of this endorsement, it seems, the calculated value was accepted without question and duty assessed accordingly.
In the course of his evidence, Mr Dunner said that he was never aware of the precise arrangement between Lego A/S and the Australian company, but he was aware that the Australian company was remitting to Lego A/S an amount equal to 65% of its receipts. This knowledge made him conclude that it was pointless to inquire into the exact arrangement. He thought that 65% of the wholesale price could not represent the arm's length market value of the goods at the time of importation.
On 6 February 1981, Mr Dunner retired from ACS. Almost immediately, he commenced to act as a consultant to Lego Australia.
Later in the year, amendments were made to the provisions of the Customs Act 1901 dealing with valuation of imported goods. It is not necessary for me to reach any conclusion about the application of the new provisions to Lego's importations. But it is desirable to mention them in order to explain the basis of the allegation in the Information that Lego's false representations to ACS, that goods were imported on a consignment basis rather than pursuant to a contract of sale, resulted in a lower customs valuation and, consequently, a lower assessment of customs duty than was rightly payable.

The legislation
17. The 1981 amendments replaced provisions inserted in the Customs Act in 1976. Those provisions involved a concept known as the "Convention Definition of Value". The concept applied a definition of "value of any imported goods" contained in the 1950 Convention on the Valuation of Goods for Customs Purposes. The 1976 Act incorporated into the Principal Act Articles I, II and III of the Convention and the notes thereto. Article I established, as a primary rule, that the value of any goods imported for home use shall be taken to be "the price which they would fetch at the time when the duty becomes payable on a sale in the open market between a buyer and a seller independent of each other", certain specified assumptions being made. Article II explained that a sale in the open market between a buyer and a seller independent of each other presupposes that the price is the sole consideration for the goods, that it is not influenced by any relationship between the parties and that no part of the proceeds of any subsequent disposal or use of the goods will accrue, directly or indirectly, to the seller or any person associated in business with the seller. The notes indicated that, when imported goods are the subject of a bona fide sale, the sale price can generally be regarded as a valid indication of value, subject to any necessary adjustments. But nothing in the incorporated Convention provisions, or elsewhere in the Act as it stood after 1976, specified the method of calculation of value where there was no open market sale. It seems that, under that legislation, there was no warrant for taking into account the Lego invoice price in determining customs value.

A primary purpose of the 1981 amendments was to introduce into the Customs Act rules propounded in an international agreement known as "Customs Valuation GATT Agreement". This agreement came into force on 1 January 1981. As the introduction to a 1989 reprint explains, the agreement:

"sets out five valuation methods, with one fallback method, ranked in a hierarchical order, which must be followed by Customs officers of all signatory countries. Only when no valid Customs value can be found under the first method, can the second method be used, and so on".

Article 1 of the GATT agreement sets out the primary rule:

"1. The customs value of imported goods shall be the transaction value, that is the price actually paid or payable for the goods when sold for export to the country of importation adjusted in accordance with the provisions of Article 8, provided:

(a) that there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which:

(i) are imposed or required by law or by the public authorities in the country of importation;

(ii) limit the geographical area in which the goods may be resold; or

(iii) do not substantially affect the value of the goods;

(b) that the sale or price is not subject to some condition or consideration for which a value cannot be determined with respect to the goods being valued;

(c) that no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Article 8; and

(d) that the buyer and seller are not related, or where the buyer and seller are related, that the transaction value is acceptable for customs purposes under the provisions of paragraph 2 of this Article."

As is apparent from sub-para (d), and unlike the position under the 1976 Australian Act, the fact that the buyer and seller are related does not necessarily require the transaction to be disregarded in fixing value; para.2 might apply. It provides that -

"the fact that the buyer and the seller are related ... shall not in itself be grounds for regarding the transaction value as unacceptable. In such a case the circumstances surrounding the sale shall be examined and the transaction value shall be accepted provided that the relationship did not influence the price".

The paragraph goes on to prescribe a method of examining that question.

Article 2 provides for the determination of value by reference to the price of identical goods, Article 3 by reference to similar goods. Article 4 states that, when price cannot be determined under Articles 1, 2 or 3, it should be determined under Article 5 or, at the request of the importer, Article 6 (computed value). Article 5 relates to deductive value. It relevantly provides:

"1.(a) If the imported goods or identical or similar imported goods are sold in the country of importation in the condition as imported, the customs value of the imported goods under the provisions of this Article shall be based on the unit price at which the imported goods or identical or similar imported goods are so sold in the greatest aggregate quantity, at or about the time of the importation of the goods being valued, to persons who are not related to the persons from whom they buy such goods, subject to deductions for the following:

(i) either the commissions usually paid or agreed to be paid or the additions usually made for profit and general expenses in connexion with sales in such country of imported goods of the same class or kind;

(ii) the usual costs of transport and insurance and associated costs incurred within the country of importation;

(iii) where appropriate, the costs and charges referred to in Article 8.2; and

(iv) the customs duties and other national taxes payable in the country of importation by reason of the importation or sale of the goods."

The scheme of the GATT agreement was reflected in the 1981 amendments to the Australian legislation. The amending Act substituted a new Division 2 in Part VIII of the Customs Act. This Division contained s.157, dealing with the determination of the customs value of goods. The primary rule is that the customs value is "the transaction value of the goods" (s.157(1)). Section 159 contains directions for determining that value; by way of adjustment to the price. The term "price" is defined by s.154 as "the aggregate of all payments made, or to be made, directly or indirectly, in connection with the goods by the purchaser to or for the benefit of the vendor ... in accordance with the contract ..." Neither this definition nor s.159 requires the relevant transaction to be at arm's length. It follows that, unlike the situation under the 1976 legislation, a non-arm's length transaction may be used to determine customs value. Whether it should be used depends upon the circumstances of the particular case. Section 158(1) makes the use of any particular provision of s.157 depend upon sufficient reliable information being available to the Collector. So s.157(1) may be used only where the Collector has reliable information as to the "price" paid for the goods and the value of any adjustments made.
Subsections (2) - (11) of s.157 contain a series of alternative valuation methods. They must be applied, in descending order of preference, as earlier methods are found infeasible. These methods are: reference to the unit price of identical goods (subs.(2)); reference to the unit price of similar goods (subs.(3)); assessment of the deductive value of the goods (subs. (6)); assessment of the computed value of the goods (subs.(7)); and assessment by the Collector (subs.(8)) after disregarding matters specified in subs.(9).
Section 160 deals with use of the unit price of identical or similar goods. It is not necessary to refer further to it; nobody has suggested that there were goods identical or similar to those imported by Lego. Section 161 relates to the determination of the deductive unit price. The initial step is to take the price obtained for the goods at the first arm's length trade sale after importation. The second is to deduct from that price freight and insurance, sales commission, the amount of any value added by assembly, packaging or processing in Australia, customs duty and

"the amount usually added for profit and general expenses (including all costs, direct and indirect, of marketing the goods), taken as a whole, in connection with the sale in Australia of imported goods of the same class or kind, and sold at the same trade level, as the goods concerned."

As I have indicated, it is not necessary for me to determine the effect of the 1981 provisions on the valuation of the goods imported by Lego. For the purposes of the present case, the only material point is that, under the 1981 provisions, a non-arm's length transaction might be used in the calculation of value. Whether the transaction should be so used would depend upon the extent, and reliability, of the information concerning it that was obtained by ACS. But, of course, in order to make that assessment, ACS needed to know about the transaction. Whereas in the past the concealment of a non-arm's length transaction may have had no practical effect, after 1981 it prevented the Collector making a judgment whether to apply the transaction value of the goods. Concealment might affect the amount of duty.

The later Lego-ACS dealings: 1981-1988
26. The Customs (Valuation) Amendment Act 1981 was assented to on 27 October 1981. On the previous day, Mr Tony Brown wrote a letter to Mr Edward Brown, Mr Dunner's successor as Senior Inspector, Appraisements. The letter was drafted by Mr Dunner in his capacity as a Lego consultant. It mentions the new legislation and continues:

"Under the present valuation system it was established on the above file that, at the time of entry, there had been no transaction as the supplier set a price at which the goods were to be sold in Australia. It was therefore necessary to establish the value for duty by the end realisation system.

The circumstances remain the same. At the time of entry there is no transaction to give a price to be the customs value under Article 1 of the G.A.T.T. Valuation System.

As there are no identical or similar goods imported into Australia, it is not possible to use Articles 2 and 3. Therefore, under Article 4 it becomes necessary for this Company to nominate which of Articles 5 or 6 shall be used to determine the customs value. In view of the pattern established under the present system and the doubt whether the information necessary to determine a computed value would be readily available, this Company prefers to use the deductive method. A deductive value has been prepared and is attached. The deductive value is calculated at 33% of the Australian wholesale price. Could you please confirm that the system of entry established on File No. N77/9857 can be continued and that LEGO may be entered on a value equal to 33% of the wholesale invoiced value."

It will be noted that this letter is ambiguous. It says that "there is no transaction to give a price to be the customs value under Article 1 of the G.A.T.T. Valuation System". Does this mean that there is no transaction at all? Or does it mean that there is a transaction but not one capable of being used under Article 1 (s.157 of the Australian Act)? Reading the sentence alone, the latter interpretation seems apt. But the sentence is introduced by the words: "The circumstances remain the same". So it is necessary to go back to the previous paragraph. In that paragraph Mr Brown refers to the original position "that, at the time of entry, there had been no transaction as the supplier set a price at which the goods were to be sold in Australia"; that is, no transaction at all.
It is true that the supplier did set the Australian price. But the more fundamental reason why there was no transaction was that the importer and the exporter were parts of the same legal entity. That was why the end realisation method was used. That much, at least, had now changed; the importer and exporter were separate legal entities capable of entering into a contract with each other. Mr Brown's letter leaves uncertain whether or not they now did so.
Mr Edward Brown responded to this letter on 11 November, 1981. Making no distinction between a situation where there was no transaction at all and one where there was a transaction, but one incapable of providing a price under Article 1 of the GATT system, he "agreed that Valuation should be determined in accordance with Article 5 (Deductive method) which you are currently applying by an end realisation system". He went on to say that the submitted calculation was satisfactory provided that the method and figures were certified by Lego Australia's auditors and that shipments for 1981-82 should continue to be valued at 33% of the invoiced wholesale value with the invoices referring to file N77/9857.
The evidence includes a letter written by Mr Dunner, in his role as a consultant to Lego Australia, to Mr Tony Brown on 19 July 1983. It appears from the letter that, prior to writing it, Mr Dunner "examined the trading arrangements and relationship between your company and its overseas supplier". He summarised the factual position as he understood it:

"1. Your company is a wholly owned subsidiary of your supplier.

2. Goods are supplied to your company documented by a transfer document called an 'Invoice (Transfer Note)' which is an invoice but it does not show the price between a buyer and seller as there is no sale. The document indicates the goods being forwarded and the price to be charged by your company when the goods are later sold to buyers in Australia, e.g., retail stores.

3. Your supplier issues a second document referring to the Invoice (Transfer Note) by number and indicating an amount to be transferred in respect of the goods. This amount is the selling price to your customers in Australia less all operating expenses, i.e., it includes the profit gained by your operations in Australia. It has no bearing on the entry of the goods and therefore is of no concern to Customs."

Mr Dunner commented that the situation he described was "the same as existed in 1977" when he was approached by Mr Going. He was wrong about that; in 1977 one company was both exporter and importer. There was then only one invoice for each importation. Mr Dunner did not explain to Mr Brown why the invoice referred to in para.3 had no bearing on the entry of goods. Arguably, at least, it would evidence a transaction falling within Article 1 of the GATT agreement (s.157(1) of the Australian Act), although it would be necessary to make adjustments to the invoiced price.
On 29 August 1983, Garry Jones, who had become Senior Inspector, Appraisements, in June 1982, wrote to Mr Brown in these terms:

"I refer to our discussion and your letters of 15 July and 24 May, 1983 concerning adjustments required to determine the actual duty payable for importations during the 1982 calendar year. Your figures have been accepted as the basis of calculating the actual duty payable using the deductive method of valuation. Therefore, applications for refunds of duty based on the Customs value of goods imported during 1982, being 27.29% of the wholesale price, will be considered.

For 1983, the Department accepts your submission that 30% of the wholesale price should be used when calculating duty in accordance with Article 5 of the GATT Code. Invoices should be endorsed as previously advised."

The letters of 15 July and 24 May, referred to in the opening sentence, refer to a calculation similar to that previously used to determine value under the end realisation method.
Mr Jones left ACS in 1985. He commenced employment with Ernst and Whinney and was assigned work connected with Lego. On 28 November 1985 he attended a meeting at Lego's offices with Brian Bourke, an officer employed in the Securities section of ACS. Mr Bourke's duties concerned the enforcement of conditions of tariff concession orders. He visited Lego in that connection. Lego's Financial Manager, Geoff Moore, was also present. According to a reporting memorandum from Mr Jones to John Higgins, a partner of Ernst and Whinney, dated 15 January 1986, the meeting discussed "refunds on Customs duty and goods used outside the terms of certain by-laws". Mr Jones said these matters were satisfactorily resolved. He went on to say that, during the meeting, Mr Moore mentioned that an invoice separate to that presented to Customs was received for each shipment -

"and that the second invoice reflected the export price required as payment by the exporter and that the amount was paid in accordance with the terms of sale".

Mr Jones went on:

"Knowing the complex reasons why the present valuation method was approved I suggested I would speak with him and Jamie Bretherton later when more time was available to examine the details and so as not to waste Mr Bourke's time."

Mr Bretherton was a Lego employee.
Mr Jones stated that the method of valuation used by Lego Australia -

"is based on the premise in respect of the importations, that there was no sale between exporter and importer; the goods being imported 'on consignment".

After the meeting, Mr Jones learned that this premise was not valid. He said in the memorandum to Mr Higgins:

"In later discussions by phone and at Lego's premises I was told by Geoff Moore and Jamie Bretherton that the importations were now the subject of a contract of sale between exporter and importer and that the transaction had the characteristics of any normal sales transaction for imported goods.

Further, I was shown import documentation and the second invoices as evidencing the circumstances of the sales. Geoff and Jamie both were positive that a 'consignment' situation did not describe the import arrangements. I expressed my disquiet that the approved method of valuation may not now be appropriate and that the 'export price' shown on the second invoice could possibly form the basis of the Customs value. If so, this would mean higher Customs duties than currently paid, because of increased Customs values."

It is apparent that Mr Jones realised the significance of the information he was given. His memorandum reveals that Mr Moore spoke to Mr Tony Brown about the matter. Mr Brown indicated a wish to speak to Mr Dunner. On 14 January 1986, the day before the memorandum was written, Mr Moore requested Ernst and Whinney's "urgent assessment in writing on the proper Customs valuation method now applicable", together with "comments on any adjusting action we consider necessary". The evidence does not reveal what (if any) adjusting action was taken. Neither does it indicate how it came about, having regard to the information obtained by Mr Jones and conveyed to Mr Higgins, that Ernst and Whinney subsequently assured ACS that the goods were received by Lego Australia on a consignment basis.
Mr Bourke said that his practice was to make a written report of meetings. However, such reports are destroyed after five years. He does not now have a report of the meeting of 28 November. Mr Bourke said that, without reference to his report, he could not remember the conversation at the meeting. He did not recall any discussion about the invoicing system. But he added that, as a securities officer, his concern was to check dealings with goods after importation. He was not concerned with dealings prior to importation.
The next contact revealed by the evidence is a meeting on 2 November 1987 between Ann Maree McCormack and John Ferian, ACS officers, with Mr Moore and Brian Chora of Ernst and Whinney. During this meeting, Mr Moore and Mr Chora provided to the ACS officers Lego's financial reports for the years ended 31 December 1978 and 31 December 1986 and a document detailing the costs used in the 31 December 1986 "calculation of duty liability based on the deductive method". This document included an item, "freight and insurance", which was stated to represent "the cost of shipping the stock to Australia pursuant to the terms of the consignment agreement i.e. that Lego Australia is to ship stock at its own expense". Ms McCormack requested Mr Moore to supply the wholesale selling price list and evidence that the price on the Customs invoice is the actual Australian selling price. She also sought a copy of Lego Australia's consignment agreement and copies of documents showing the money Lego sent to Denmark for the goods. Ms McCormack explained that these documents "could be helpful for our purposes", but Messrs Chora and Moore responded that they "could not see how these documents would have relevance". They refused to supply them.
On 18 January 1988, Ernst and Whinney wrote to ACS in connection with Ms McCormack's request for the consignment agreement. The letter implied that goods were imported pursuant to an informal consignment agreement. The letter read:

"We refer to recent discussions wherein Lego Australia Pty. Ltd. ('Lego Australia') was asked to supply a copy of the consignment agreement between Lego Australia and Lego Overseas A.S. ('Lego Overseas').

As explained to you, there is no formal written consignment agreement between Lego Australia and Lego Overseas. The consignment agreement is reflected in correspondence and consignment shipping and sales documentation between the two parties.

We understand that the consignment agreement is shortly to be reduced to a formal written agreement as is the case between the related exporter and Lego subsidiaries in other countries. In the meantime, the parties have exchanged letters which record the terms of the consignment agreement between them. A copy is attached for your information. As soon as a copy of the formal agreement is received by us, we will provide you with it."

ACS must have sought further information about the matter. On 9 September 1988 Ernst and Whinney wrote a further letter. It contained the following:

"We refer to your telephone enquiries of the company's Mr Bretherton and our Mr Higgins in the above matter. In particular, you enquired as to the basis of valuation adopted by the company in respect of current entries for home consumption.

We confirm that for many years the company has paid customs duty upon the deductive basis of valuation. This basis is appropiate (sic) because stock is consigned by the exporter to the company under arrangements whereby the company agreed to store the exporter's stock consigned to Australia, but only enters into contracts for the purchase of goods from that stock as and when occasion demands. Accordingly, there is no relevant transaction in relation of the goods at the time of importation."

Like Mr Tony Brown's letter of 27 October 1981, this letter is potentially misleading. It correctly states that for many years Lego has paid customs duty upon the deductive basis of valuation. Using the present tense, it states that "stock is consigned" under arrangements whereby Lego Australia contracts to purchase the goods only when occasion demands. In 1988, and speaking of the current position, that statement may have been true. As will appear, Mr Paraggio was later told that Lego Australia adopted a consignment arrangement with Lego A/S effective after 31 December 1987. But the letter links the "many years" practice of paying customs duty on a deductive basis with the current consignment arrangement by using the words: "This basis is appropriate". I think that, having regard to their context, a not overly-suspicious reader who was unaware of the change on 31 December 1977 would take these words to mean that the deductive basis is, and always has been, appropriate because the goods are, and always have been, imported on a consignment basis.

The developing dispute
44. In early 1989, ACS determined that the sales made by Lego A/S to Lego Australia were a sufficiently reliable indication of value to be used for valuation purposes. ACS so advised Lego on 19 May 1989:

"I refer to a 1977 arrangement between your company and the Australian Customs Service whereby Lego products imported into Australia from your overseas parent company would be valued for custom purposes under an end-realisation method. With the introduction of the GATT valuation system in 1981, this arrangement was amended to allow use of a flexible approach to the deductive method.

Following a review of the operation and importations of your company, it has been determined that this previously agreed method of valuation is no longer appropriate and future importations on and from June 1, 1989 should be valued by a flexible approach to the transaction value method under Section 157(8) of the Customs Act.

Given that there is a known price which your supplier has set for the goods at the time of importation and the first sale which takes place after importation is between the two Lego companies, this decision is entirely consistent with the primary aims of GATT i.e. to as far as possible value goods according to actual monies paid in a sale."

The letter then dealt with consequential machinery matters.
Lego did not accept ACS' view. There were discussions. In order to give Lego an opportunity to make a submission, ACS postponed the change for a month, until 1 July 1989. Lego lodged a submission, but no agreement was reached. Lego continued to lodge returns on the old (deductive) basis. As I understand the evidence, the difference between the amount payable under the deductive method and that claimed by ACS to be payable under the transaction method, from 1 July 1989 to 30 June 1990, is $1,234,846.
In May 1990, Mr Rooney performed an internal audit, at Lego's premises, of its import dealings. The audit confirmed ACS' view that the transactions with Lego A/S could reliably be used. In July 1990, ACS required Lego Australia to adopt this method in future. Further, it demanded payment of the claimed $1,234,846 shortfall for the previous year. I gather that Lego did change its method of valuation for future imports but it resisted the demand for payment of the alleged shortfall. It maintained that the deductive method was appropriate and said that, in any event, any shortfall was not recoverable. Lego lodged an appeal to the Administrative Appeals Tribunal ("AAT"). There were unfruitful settlement discussions. The parties suspended negotiations pending Lego's application for a tariff concession order in respect of certain lines. The suspension was still in force when the warrants were issued.
Mr Paraggio apparently became involved in the matter at the time of the audit. He was then Director, Import Audit, of ACS in Sydney. He read Mr Rooney's audit report and a number of ACS files. Those files contained all the information recounted above except the communication between Mr Dunner and Mr Tony Brown in July 1983 and the material regarding the meeting between Mr Bourke and Messrs Moore and Jones in November 1985 and, of course, Mr Jones' report on that meeting to Mr Higgins. Shortly after he read the files, Mr Paraggio came into possession of what he called in his first affidavit "certain confidential data". In that affidavit, Mr Paraggio did not reveal the data, claiming public interest immunity. However, after undertakings were given about maintaining confidentiality, the information referred to by Mr Paraggio was set out in a later affidavit.
It appears that a former Lego employee, whom Mr Paraggio dubbed "Mr Ogle", saw Mr Paraggio on 24 May 1991. Mr Ogle knew about the audit. He told Mr Paraggio that Lego had been "evading duty for a long time and are still doing it even though they have tidied up their act to appear otherwise". He said that, when he started with Lego in 1986, the company operated a system whereby it owned the goods at the time of importation. It paid for the goods 90 days after invoice date. Mr Ogle said that he knew this was not how the situation was represented to ACS. He told Mr Paraggio that in 1987 the system was changed; Lego Australia relinquished title to the goods but retained possession. Its purpose was to revert to a consignment arrangement and to disassociate the importation transactions from sales in Australia.
Mr Paraggio met Mr Ogle again a few days later. He obtained a statement from him. The statement is dated 1 July 1991. It reveals Mr Ogle's true name and that he was employed as an accountant by Lego Australia from May 1986 until April 1991. The statement contains the following:

"During the whole of this time imported goods purchased as trading stock were represented by two sets of documents from LEGO Overseas A/S, Denmark. One set was used for internal purposes, and a second set for customs entry and clearance. The information contained in the two sets of documents was essentially the same but differed in the stated price of the goods.

From the time I started with LEGO up to August 1990 the documents used for customs purposes disclosed an amount known as the wholesale amount and a value for duty calculated at thirty percent of the wholesale amount. The value for duty was the amount on which duty was paid notwithstanding this amount was consistantly (sic) lower than the amount remitted for the same goods.

Up to December 1987, the internal set of documents reflected the sales transaction between LEGO Australia and LEGO Overseas and specified the terms of payment and value of the remittance required. Accounts were paid 90 days from invoice date. The value of the goods was taken up in LEGO Australia's books of account at invoice date and LEGO Australia effectively assumed ownership of the goods.

On December 31, 1987 LEGO Overseas purchased all of LEGO Australia's current trading stock and entered into a consignment arrangement with LEGO Australia. The effect of this arrangement was create (sic) a simultaneous purchase and sale in the books of LEGO Australia: the purchase being between LEGO Australia and LEGO Overseas and the sale between LEGO Australia and a third party.

At all times the book entries and payments were made at a price agreed between the two companies. This price was known internally as the export price, and with one exception the price remained in force for a twelve month period. ie from January to December of each year. With perhaps a few exceptions the export price was a higher amount than the value for duty calculated at thirty percent of the wholesale amount. All invoices and/or consignment advices were raised at the prices ruling at the date of the transaction.

When I first started with LEGO I was under the impression that Customs had full knowledge of the arrangement existing between LEGO Australia and LEGO Overseas to import goods. I was informed by fellow staff members that this arrangement had been in place since the beginning of LEGO's operation in Australia and allowed LEGO to import goods under the deductive method of valuation. Notwithstanding, my observation of available records indicated that goods were purchased under a normal sales transaction.

When the consignment arrangement was implemented in December 1987 in my mind this did not change the relationship between LEGO Australia and Customs in respect of the documentation. Only when new procedures were introduced in 1989 to support the consignment arrangement did it become apparent to me that Customs had no knowledge of the actual circumstances under which goods had been purchased and imported by LEGO Australia previously.

I was concerned that this situation compromised my professional intregity (sic) and upon querying the new arrangememts (sic) and procedures was informed by Geoff Moore, the Finance Manager, that this was the procedure and that he did not like it amy (sic) more than I did. He added that this was the policy that now had to be followed and he had no more choice in the matter than I did.

On reflection I can say that between 1986 and August 1990 the internal sets of documents received by LEGO Australia represented the actual import sales transaction and were never revealed to Customs until the time of the audit in 1990. The sets of documents produced to Customs for entry and clearance purposes were not a reflection of the commercial reality that exists between LEGO Australia and LEGO Overseas."

At about this time, ACS sought advice from Brian Booth, a person associated with the Accounting Department of the University of New South Wales. I gather that Mr Booth is on the teaching staff of the Department. Apparently, ACS provided some documents to Mr Booth. In June 1991 Mr Rooney reported to Mr Paraggio that Mr Booth considered that Lego's imports were not on a consignment basis. Mr Paraggio himself telephoned Mr Booth. He asked Mr Booth how sure he was, from what he had seen, that Lego was not importing on a consignment basis. Mr Booth replied:

"I am absolutely sure. The audited financial statements speak for themselves. They show stock and stock in transit as assets and this is evidence of ownership by Lego Australia of that stock".

The Information
52. On 28 October 1991, Mr Paraggio saw Ms Elder. He placed before her an Information dated that day. The Information is a lengthy document. I will not set it out in full. However, in view of its importance to the case, I will attempt a summary and quote the portions critical to the argument.

Paragraphs 1-6 set out background information. This material is adequately summarised above. No complaint is made of these paragraphs. The document proceeds:

"7. Between 1976 and 1981 the provisions of Division 2 of Part VIII of the Act had as the basic measure of 'customs value' the price that would be paid for goods purchased under a notional contract of sale in the open market between a buyer and seller in an arms-length transaction. In non-arms-length transactions, adjustments were made to the contract price to bring it to an open market level. In 1981 these provisions of the Customs Act were amended. These amendments had the effect of varying the system of customs valuation to impose duty upon the actual or 'transaction' value. Duty is payable under this system on the actual sale value of the contract.

8. Under both valuation systems, where a consignment arrangement exists between the exporter and the importer, 'customs value' may be established on the basis of the sale of comparable goods in comparable circumstances or by the use of actual or expected realisations. The latter method, known until 1981 as the 'end-realisation method', and later as the 'deductive method', calculates the 'customs value' of goods by deducting certain allowable expenses from the price of the first sale after importation to an unrelated buyer in Australia.

9. From the time it commenced trading, following incorporation on 6 December 1977, until 18 January 1988 Lego Australia Pty Limited represented to Customs that the 'Lego' products imported by it into Australia were imported on consignment and not pursuant to a contract for sale. On this basis the 'customs value' of the goods was accepted by Customs as being properly calculated in accordance with the 'end-realisation method' and later the 'deductive method'.

10. In 1986 Customs commenced a review of the valuation method used by Lego Australia Pty Limited after Customs noted that the level and range of expense deducted from domestic selling prices had increased significantly.

11. On 18 January 1988 the firm of chartered accountants Ernst and Whinney, chartered accountants, wrote on behalf of Lego Australia Pty Limited to Customs in response to a request by Customs that Lego Australia Pty Limited supply a copy of the consignment agreement between Lego Australia Pty Limited and Lego Overseas A/S. The letter stated:

'... there is no formal written consignment agreement between Lego Australia and Lego Overseas. The consignment agreement is reflected in correspondence and consignment shipping and sales documentation between the two parties.'

12. Ernst and Whinney sought to provide evidence of that statement in subsequent correspondence."

The Information then refers to five annexed letters from Ernst and Whinney. The first, dated 18 January 1988, is the response to Ms McCormack's request on 2 November 1987 to see a copy of the consignment agreement. It contains the statement quoted in para.11. The second, dated 9 September 1988, has already been quoted.
In the fourth letter, dated 13 January 1989, Ernst and Whinney repeats that -

"stock is consigned to the company by Lego Overseas A/S and is stored in Australia at the company's expense. The company may enter into contracts with Lego Overseas for the purchase of goods from that stock as and when occasion demands. Stock may also be re-exported from Australia without property in the stock passing to the company".

In the final letter, of 15 May 1989, the accountants say:

"We enclose as requested a listing by Lego model numbers. Against each number is an amount which Lego Overseas A/S has advised it will entertain in offers to purchase goods from the Lego Overseas A/S consignment stock held in Australia by the company. We confirm that while it may accept or reject such offers, the practice of Lego Overseas A/S has been to accept the company's offers to purchase consignment stock in the amounts listed."

Paragraph 13 of the Information refers to ACS' letter to Lego of 19 May 1989 requiring it to change its method of valuation and Lego's reply of 30 May. The reply is annexed. It is signed by Mr Tony Brown, as Managing Director, and includes the statement:

"the stock in Australia is owned by the exporter and the first sale takes place after the goods have been imported."

Paragraph 14 refers to the changeover date. It annexes a submission, made by Ernst and Whinney and dated 20 July 1989, repeating the claim that goods are consigned by Lego A/S to Lego Australia. The submission says that there is no standing offer by Lego A/S to Lego Australia;

"Rather, an indicative price list only is provided and Lego Overseas remains free to accept or reject the Company's offers to purchase consignment stock."

Paragraph 15 annexes a copy of Mr Rooney's audit report. Paragraphs 16 and 17 deal with ACS' claim for the "shortfall" of $1,234,846.
Paragraphs 18-23 deal with the information supplied by "Mr Ogle". Without revealing his name or precise position, these paragraphs accurately convey the substance of his statement, quoted above.
Paragraphs 24 to 27 deal with the probable location of relevant documents.
The Information seeks warrants covering five locations: Lego Australia's offices at Lane Cove, two offices of Ernst and Young and the business premises and home of Mr Higgins, who had then left Ernst and Young but continued to advise Lego.
Apparently the Information misstated the floor level of Mr Higgins' business premises. On 7 November 1991, Mr Paraggio saw Ms Elder again. He produced to her a further Information. It repeated the contents of the earlier document but corrected the floor level. Ms Elder issued a fresh warrant showing Mr Higgins' correct business address. No new material was put before Ms Elder on this occasion. Nobody suggests that anything turns on the fact that a later warrant was issued.
The search warrants were executed. Some documents were seized. Copies of them were later supplied to the applicants' solicitors. On 9 June 1992 this proceeding was commenced.

Legal principles: the duty of disclosure
65. Unlike the situation that commonly arises in search warrant cases, the present applicants do not contend that the warrants were defective in form. Their complaint concerning the warrants relates to the material Mr Parragio placed before Ms Elder at the time of making application for their issue.

As earlier indicated, this part of the applicants' case has two aspects: failure to disclose relevant information, and active misrepresentation of the relevant facts and law. The undisclosed information, in turn, divides into two categories: information actually known to Mr Paraggio, but not disclosed to Ms Elder; and information not known to him but which, the applicants say, should have been known to him.
In relation to all these matters, counsel emphasise the importance of the Information. They cite George v Rockett (1990) 170 CLR 104 wherein the High Court of Australia, at 118-119, discussed the relationship between the material placed before a magistrate and the terms of the warrant she/he is asked to issue. The Full Court of this Court referred to that decision in Karina Fisheries Pty Limited v Mitson (1990) 26 FCR 473 at 481:

"... to require a strict duty of full disclosure of material facts by the informant seeking a warrant is but to reflect the traditional policy of the common law to protect the privacy of individuals against the arbitrary use of the power of entry and search.

The obligation arises also from the fact that of necessity, the issue of a search warrant is an ex parte procedure. In granting ex parte relief, the courts of equity have always required the applicant for such relief to bring to the notice of the court all facts material to the determination of the right to that relief. In such cases, as the High Court pointed out in Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 at 682:

'Uberrima fides is required, and the party inducing the Court to act in the absence of the other party, fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all the material facts which that party would presumably have brought forward in his defence to that application.'"

At 482-483 the Court considered what was meant by a "material fact". They said that a fact is material in the relevant sense -

"if that fact be one that may (not would) have affected the exercise of the discretion on the part of the justice to issue the warrant" (original emphasis).

Referring to Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 40, the Court contrasted a matter so insignificant that it could not have materially affected the decision to issue the warrant.
There are authorities dealing with the situation where an informant is unaware of a material fact. In Thomas A Edison, Isaacs J referred to Clifton v Robinson (1853) 16 Beav 355; 51 ER 816 wherein Romilly MR dissolved an ex parte injunction obtained without disclosure of a material fact. He said that "the circumstance of a party having forgotten a material fact" was not a sufficient excuse for its non-disclosure.
The decided cases exhibit some inconsistency regarding the position where an applicant for a warrant has never been aware of a material matter. Counsel for the applicants place reliance on some English decisions which suggest a duty to make reasonable inquiries before applying for a Mareva injunction (see Mareva Compania Naviera SA v International Bulk Carriers SA (1975) 2 Lloyd's Rep. 509) or Anton Pillar order (see Anton Pillar KG v Manufacturing Processes Ltd (1976) 1 Ch.55). In Bank Mellat v Nikpour (1985) FSR 87 the Court of Appeal dealt with a case where a judge had discharged a Mareva injunction because of the plaintiff's failure to make a full and frank disclosure. The case involved a claim by an Iranian bank against its former chief executive and principal shareholder. The primary judge made the comment that he was "not satisfied that proper enquiries were made in Tehran before asking for the injunction". On appeal counsel challenged this approach, saying that the non-disclosure was innocent. At 90 Lord Denning MR said that he accepted that argument -

"to this extent: There may sometimes be a slip or mistake - in the application for a Mareva injunction - which can be rectified later. It is not for every omission that the injunction will be automatically discharged. A locus poenitentiae may sometimes be afforded: but not in this particular case".

Lord Denning pointed out that the original writ showed no cause of action. The writ was amended to claim a loan but this claim was abandoned. The writ was again amended to claim that the defendant had improperly caused moneys to be credited to his account, but Lord Denning thought the material before the Court indicated "a good arguable defence" to that claim. Slade LJ at 92 quoted what was said by Isaacs J in Thomas A Edison. He went on (at 93) to say that:

"no amount of urgency or practical difficulties can, in my judgment, justify the making of a Mareva application unless the applicants have first made serious attempts to ascertain the relevant cause of action and to identify for the benefit of the court the principal facts that will be relied on in support of that cause of action".

He said that the plaintiff must have been aware of the defendant's defence that he had provided good consideration for the money. None of the Court of Appeal judges dealt with the question whether the plaintiff breached its obligation to the court if it failed to make thorough inquiries.

Jeffrey Rogers Knitwear Productions Limited v Vinola (Knitwear) Manufacturing Company (1985) FSR 184 concerned an Anton Pillar order in a copyright case. Whitford J discharged the order, saying at 189 that -

"the plaintiffs failed to disclose such relevant knowledge as they had acquired relating to the position of these defendants, and failed in what to my mind was their plain duty, which was to pursue the investigations further".

Despite the width of this statement, the complaint made against the plaintiff, which Whitford J found proved, was that facts known to its advisers were misstated to the judge who made the original order. The case is not really one of failure to inquire.
The final English case is Columbia Picture Industries Inc v Robinson (1987) 1 Ch 38. This was also a copyright case, the question being whether proper disclosure had been made when application was made for a Mareva injunction and Anton Pillar order. Scott J discharged the order, saying at 81:

"In the result, the defendants' complaint of non-disclosure is, in my judgment, made out. There was, in my view, a serious failure on Mr. Roy Brown's part to place before the court all the relevant material of which he knew or of which he would have known had he read properly Mr. Browne's file. And it was unarguably his duty to have read properly that file."

This passage does not support a general duty to make inquiries before making an ex parte application. The respondent was the owner of a video shop. The plaintiffs alleged the use of "pirate" tapes but they failed to disclose to the judge that the shop also traded legitimately, with the result that all the tapes in the shop were seized. At the time he swore his affidavit in support of the application for the ex parte orders, the plaintiffs' solicitor, Mr Brown, had in his possession a file revealing the full facts. The non-disclosure occurred because he failed to read the file.
Counsel for the respondents argue that, wilful blindness apart, a warrant is not invalidated by non-disclosure of something that the applicant for its issue never knew, whether or not it is something that he/she ought to have known. They say that the true English rule is set out in a Practice Note concerning ex parte applications issued by Lord Lane CJ on 30 March 1983 and recorded at (1983) 1 All ER 1119-1120. Paragraph 3(2) of Section B of that note deals with the content of affidavits in support of ex parte applications:

"(2) The affidavit in support should contain a clear and concise statement (a) of the facts giving rise to the claim against the defendant in the proceedings, (b) of the facts giving rise to the claim for the interlocutory relief, (c) of the facts relied on as justifying application ex parte, including details of any notice given to the defendant or, if none has been given, the reasons for giving none, (d) of any answer asserted by the defendant (or which he is thought likely to assert) either to the claim in the action or to the claim for interlocutory relief, (e) of any facts known to the applicant which might lead the court not to grant relief ex parte, (f) of the precise relief sought."

Counsel emphasise the words in subpara.(e) "any facts known to the applicant". They say that it is correct in principle to limit the duty of disclosure to matters within the actual knowledge of the applicant. The duty to disclose material facts arises out of the nature of the obligation assumed by an applicant for an ex parte order. It is an obligation uberrima fides, of the utmost good faith. This is a concept familiar in insurance law. In Seaton v Heath (1899) 1 QB 782 Romer LJ said that the obligation on a person seeking insurance was to "not conceal any material fact affecting the risk known to him".
Counsel for the respondents argue that bankruptcy decisions also support the view that, wilful blindness apart, ignorance does not negative good faith. They refer to Official Trustee v Mitchell (1992) 110 ALR 484 where the Full Court discussed the meaning of "good faith" in s.121 of the Bankruptcy Act 1966. At 492 the Court referred to three different formulations of the term discussed by Fisher J in Barton v Official Receiver (1984) 4 FCR 380 at 388-389. The Court went on:

"... each of the three formulations mentioned by Fisher J is concerned with the actual state of mind of the person who took under the disposition. Negligence, stupidity, or blindness to what others might be well able to see are not equivalent to lack of good faith. Of course, in a particular case, a failure to make inquiries a person might have been expected to make may be cogent evidence of such knowledge or suspicion as would deny good faith; but in such a case, the court's finding will not be one of an imputed dishonesty, but rather of a dishonesty inferred as a fact from the circumstances."

Counsel refer also to Re Spratt; ex parte Wilde (1986) 67 ALR 485 at 487 in which Pincus J identified two characteristics of the term "good faith", as used in s.135(4) of the Bankruptcy Act: honesty, and "that there be nothing in the nature of a deliberate abstention from inquiry".

Deliberate abstention from inquiry has been equated to actual knowledge: see, for example, "The Zamora" No.2 (1921) 1 AC 801 at 812 and He Kaw Teh v The Queen (1985) 157 CLR 523 at 531. There is no doubt that it negatives good faith; the applicant is deliberately ignoring factual information which he/she knows may be material to the decision whether or not to make the ex parte order. But wilful blindness is very different from ignorance caused by a failure to make more extensive inquiries; the former is akin to fraud, the latter amounts, at most, to negligence. Fraud is inconsistent with good faith, negligence is not.
If the courts are to impose a duty to inquire, how far must the inquiry extend? It is one thing to say, as in Columbia Pictures, that an applicant for an ex parte order should read his/her brief; it is another to say that the applicant is under an obligation to seek out all the information potentially relevant to the matter. Many ex parte applications are made under circumstances of extreme urgency. If the courts were to impose an obligation to seek out all relevant material, the result would be to deprive many applicants of the opportunity to obtain the desired order.
It is clear from Karina Fisheries that an applicant for a search warrant is not under an obligation to obtain and present to the justice all the information that may conceivably be relevant. In that case the appellants contended that the informant failed to comply with the obligations imposed upon him because he did not produce to the justice a charter party agreement held by the Australian Taxation Office. They argued that the charter party agreement was material because it negated an implication arising from other documents and it refuted the alleged conspiracy to defraud. The Court responded, at 481:

"There are two answers to this submission. The first, is that the existence of the charter party was unknown to the informant seeking the warrants. It was, as is agreed, in the possession and control of the Australian Taxation Office. But it is simply not true to say that documents that are in the possession of the Income Tax Office are thereby taken to be known to the Australian Federal Police seeking a warrant. The police do not act on instructions from the Australian Taxation Office. The decision to obtain a warrant is a decision to be made independently by the police based on the information known to them. If that information is incomplete because there is a document in the possession of some other person which would or might tend to show that no offence was committed that fact can not operate to invalidate the warrant."

Counsel for the applicants argue that the present case is distinguishable from Karina Fisheries. They say that the situation is different where the undisclosed document is held by the same government agency as that employing the informant. They say that Mr Paraggio was a "corporate informant", in the sense that he was representing ACS; he made the application for the warrants only because of his official position and using information derived in that capacity. In their written submissions, counsel say that the passage from Karina Fisheries just quoted -

"is consistent with the view that, if the information had been within the knowledge of the 'police' as opposed to the individual policeman, it would have been sufficient. The absurdity of a contrary view is that the cleaner could be deliberately selected as the informant in order to avoid the duty of disclosure".

It would obviously be unacceptable for an organisation deliberately to choose, as the applicant for a warrant, a person with little knowledge of the matter. But such behaviour is excluded by the requirement of good faith. For an organisation deliberately to select an uninformed person as an applicant for a warrant, in order to avoid the duty of proper disclosure, would be to act in bad faith towards the judicial officer asked to make the order. It would be a form of wilful blindness. The organisation's bad faith would infect its agent, the applicant for the order.
The rejection of one extreme position does not necessarily mean that the other extreme ought to be accepted. It seems to me that it would be equally unacceptable for the courts to require that an officer of a large organisation who seeks an ex parte order disclose every item of material information known to anybody within the organisation, or held in its files; whether or not the officer is personally aware of it. Such a requirement would make it extremely difficult, if not impossible, for officers of large organisations to obtain search warrants. They could never be sure that they had all available material information. For example, information held by the Australian Taxation Office in one taxpayer's file may cast light on the question whether another taxpayer has committed an offence. But the officer investigating the alleged offence, and applying for a search warrant, may have no way of knowing this. The same situation would apply in other large agencies, including ACS, where investigations are conducted by a number of people and there is a need to maintain confidentiality.
I think that the better view, on the authorities, is that failure by an applicant to disclose material information that is in fact unknown to him/her at the time of seeking a search warrant invalidates the warrant only in a case where that information was previously known to the applicant but forgotten, or where the applicant's ignorance results from his/her wilful blindness or other bad faith. None of these matters are suggested in this case.
In the present case there was a dispute as to whether Mr Paraggio ought to have been aware of the content of certain shipping documents, being those pertaining to some Lego importations that arrived by air. These documents related to only a small proportion of total shipments over the relevant years. However, they were important in the argument of the applicants, because they included copies of the second invoice mentioned by Mr Ogle; that is, the invoice revealing a sale by Lego A/S to Lego Australia. If Mr Paraggio had known about these documents, it would have been incumbent on him to inquire further before approaching Ms Elder. But he was unaware of them. The evidence about these documents is complex. Without going into detail, it is apparent that many of the shipping documents were no longer available when Mr Paraggio commenced his investigation; the microfilm copies had been destroyed. Some microfilm copies were still in existence, they not having been destroyed in accordance with the usual procedure; although Mr Paraggio did not know this. Other, more recent, records were available, to Mr Paraggio's knowledge. But they were difficult to access without knowing the relevant transaction numbers. For that reason he did not search them.
In the view I take, it is not necessary to determine whether Mr Paraggio ought to have searched these documents and thus become aware of the contents of such of them as were still available. The applicants do not dispute his evidence that he was in fact unaware of the contents of the shipping documents; and, as I have said, there is no question of wilful blindness or other bad faith.

Failure to disclose: the Dunner conversation
88. I turn to the applicants' complaint that Mr Paraggio failed to disclose to Ms Elder material information of which he was aware. Their counsel listed the items of information that should have been disclosed.

The first item is described by counsel as "what Dunner told Paraggio in the 25/10/91 meeting". This is a reference to a visit of Mr Dunner to ACS' office in Kent Street, Sydney on 25 October 1991, only three days before the first search warrant application. He went to the office at the invitation of Graham Coates, an officer in the Investigations Section. Mr Coates was engaged on the Lego matter and wanted to discuss it with Mr Dunner. It seems that Mr Dunner's visit occupied an hour or two but that Mr Paraggio was present for only a small portion of the time. Mr Dunner said in evidence that he had a discussion with Mr Rooney in Mr Paraggio's presence during which Mr Rooney said to him: "Lego has put it over you". Mr Dunner said that he denied this, pointing out that he was not an ACS investigating officer but merely told Lego the correct method of valuation on the basis of the information they provided to him. He said that he added: "If you have evidence on Lego then it is up to you to use it". According to Mr Dunner, Mr Rooney then said that he knew that there was another set of documents which Lego used in relation to the importation of its goods. Mr Rooney mentioned the informer and said that the products imported into Australia were not subject to a consignment arrangement. Mr Dunner said that he replied:

"I know about the internal price list and whether there is or is not a consignment arrangement is irrelevant. The important thing is that there is no sale prior to the sale by Lego to a retailer which is relevant for the purposes of the Customs Act."

Mr Paraggio's version of this conversation differs in form; but, with one exception, not in substance. Mr Paraggio said that it was he who told Mr Dunner that, although Lego purported to be importing on a consignment basis, there was in fact a sale. But Mr Dunner's response was the same: even if that was so, it would not make any difference because of the relationship between the parties. According to Mr Paraggio, he responded that the transaction value can only be rejected when the relationship affects the price. He said that Mr Dunner disagreed and there was some argument on the point.
The major difference between the two versions of the conversation is that Mr Paraggio denied hearing from Mr Dunner that he was aware of the existence of an internal price list or that Lego Australia imported the goods pursuant to a contract of sale.
The conversation with Mr Dunner of 25 October was not disclosed to Ms Elder. Counsel for the applicants say that it should have been. Ms Elder should have been informed that Mr Dunner did not think he had been misled and that, because of the relationship between Lego A/S and Lego Australia, it was irrelevant to him whether the transaction was a sale or consignment. The importance of the matter, according to counsel, is that this information would have contradicted the assertions in para. 9 of the Information that, from the time it commenced trading until 18 January 1988, Lego Australia represented to ACS that the goods "were imported on consignment and not pursuant to a contract for sale" and that it was on this basis that ACS accepted the calculation of duty in accordance with the end-realisation method and, later, the deductive method. They say that Ms Elder would have thought Mr Dunner's understanding of the position to be of special importance because she was told, by para. (1) of the summary of the field audit report annexed to the Information, that the original decision on valuation was made by Mr Dunner in July 1977.
The significance of the conversation of 25 October depends, of course, upon its content. Mr Dunner's opinion about the utility of the transaction price was immaterial to Ms Elder's decisions. The complaints made in the Information were that Lego misled ACS as to the basis upon which the goods were received in Australia; that Lego represented them to be received on consignment whereas there was in fact a sale; and that this had the effect of reducing customs value. There was ample evidence that Lego represented that the goods were received on a consignment basis. This was the arrangement disclosed by Mr Going to Mr Dunner in 1977. Even when Mr Going told Mr Dunner of the incorporation of Lego Australia, he allowed him to believe that the consignment arrangement would continue. Mr Tony Brown conveyed the same message in his letter of 27 October 1981: "The circumstances remain the same". At the meeting on 2 November 1987, Mr Moore and Mr Chora gave Ms McCormack and Mr Ferian a calculation document that referred to "the consignment agreement". In response to their request to see this agreement, Ernst and Whinney wrote the letter of 18 January 1988 quoted in the Information. They followed this letter with the potentially misleading letter of 9 September 1988.
If the true position was that the goods were received pursuant to contracts for sale, a question would arise as to whether the deductive method was appropriate. This was a matter upon which Mr Dunner and Mr Paraggio held conflicting opinions. If Mr Dunner was right, it would probably be correct to say that the alleged offences were not committed; that, although Lego falsely represented the basis of importation, there was no saving of duty because the deductive method had to be used in any event, for a different reason. However, important though the matter might be at a trial, it was not for Ms Elder to determine who was right. Ms Elder had to consider whether there were reasonable grounds for suspecting the commission of the stipulated offences, not whether those offences had in fact been committed. If Mr Paraggio was right, and subject to proof of other necessary elements, the offences might be established.

The importance of the claim by Mr Dunner that he told Mr Paraggio that he knew about the internal price list depends upon what inference should be drawn from that knowledge. Mr Dunner did not say in evidence that he told Mr Paraggio that he knew that the goods were being sold by Lego A/S to Lego Australia. Counsel for the applicants argue that anybody who knew of the existence of an internal price list would realise that the goods must be imported pursuant to sales contracts. But Mr Dunner did not reach that conclusion. During the course of his evidence, and in an endeavour to clarify his state of knowledge, I put a few questions to Mr Dunner. His answers to the final two questions summarised his position:

"... Are you saying that you knew that Lego Australia was remitting 65 per cent to Lego Denmark; you did not quite know what was the legal structure, whether it was a sale or what but whatever it was it could not represent a price for the goods unaffected by the relationship? --- Yes.

That accurately summarises your position? --- Yes".

Contrary to the submission of counsel, it does not seem to me that knowledge of the existence of an internal price list equals knowledge that the goods were imported pursuant to contracts of sale between Lego A/S and Lego Australia. An internal price list supposes sales by Lego A/S to Lego Australia at some stage; but it is just as consistent with sales after importation as before. A consignment procedure contemplates that, as goods are required by retailers, they will be purchased by Lego Australia from Lego A/S.
If Mr Dunner did in fact know about an internal price list, his reasoning must have followed that just stated. Mr Dunner said in evidence that he was not informed, and neither did he ask, whether there were pre-importation sales by Lego Overseas to Lego Australia. He regarded the matter as irrelevant because of the relationship of the parties.
Having regard to the foregoing, it seems to me unimportant whether or not Mr Dunner told Mr Paraggio that he was aware of the internal price list. However, in case the matter is material, I indicate that I prefer Mr Paraggio's denial to Mr Dunner's assertion. I do not criticise Mr Dunner. I thought he was an honest witness, doing his best to recall a conversation that had taken place some 18 months earlier. My preference for Mr Paraggio's account rests on two circumstances. First, Mr Dunner had a long conversation with ACS officers on 25 October. The conversation seems to have been discursive, taking in various matters including the joys of retirement. But it included reference to the Lego case, at a time when Mr Paraggio was not in the room. In the nature of things, it would be very difficult for Mr Dunner to recall whether he made a particular comment when Mr Paraggio was present or when he was not. Secondly, Mr Paraggio was actively involved in the investigation. It was reaching a climax, only days away from an application for search warrants. If Mr Dunner had said anything, in Mr Paraggio's presence, that cast fresh light on the matter, he would have noticed and remembered it. The case put by counsel for the applicants on this aspect of the matter is that Mr Dunner informed Mr Paraggio as to the true situation on 25 October; that Mr Paraggio ignored this new information and withheld it from the magistrate; and now denies having received the information in the first place. I do not know what Mr Paraggio would gain by doing this. More importantly, I cannot reconcile this suggested course of conduct with my assessment of Mr Paraggio. I was favourably impressed with Mr Paraggio, from his performance in the witness box. He seemed to me an honest, fair-minded and reasonable person. He is obviously a dedicated and conscientious Customs officer. No doubt, like everyone else, he is capable of error, but I believe that he attempted to carry out this investigation in a fair and professional manner. I cannot attribute to him the deviousness that this submission entails.

Failure to disclose: other matters
99. Counsel for the applicants list several other matters, known to Mr Paraggio but not disclosed to Ms Elder, which they claim to be material.

First, they point out that Lego Australia did not commence business until mid-1978. The first count set out in the Information alleges that "(b)etween December 1977 and January 1988" Lego Australia falsely represented the position. Plainly, the reference to December 1977 was wrong. The suspected criminal conduct could not have commenced before mid-1978. Indeed, one can go further. Given the terms of the 1976 legislation and Mr Dunner's view about the appropriate way of calculating value, it is unlikely that the relevant period commenced before the end of 1981. But it seems to me that any error in the commencing date in the first count is immaterial. The gravamen of the alleged offences was that Lego caused ACS to believe that the goods it imported were received on consignment, as distinct from sale prior to importation, and that this caused a lower customs valuation with a lower duty assessment. There was evidence to support a reasonable suspicion of those facts throughout the whole of the period specified in the second count and for most of the period, possibly from as early as October 1981, referred to in the first count. It is inconceivable that Ms Elder's decision to issue the warrants would have been different if the first count had stated the period of commencement of the offence as October 1981 rather than December 1977.
Secondly, counsel complain that Ms Elder was not shown the form of invoices presented to ACS after 1988 or told about the course of conduct adopted for future transactions in 1989. Counsel did not explain how this information would have assisted Ms Elder to determine whether there was a reasonable basis to suspect the commission of the two alleged offences, both of which were said to be complete by January 1988.
Thirdly, it is said that Ms Elder should have been informed that the files disclosed that ACS requested

"that there be a customs invoice separate from the company documentation which invoice disclosed a price less than the amount being remitted from Australia to overseas and that such remittance included the normal Australian wholesaler's profit".

This submission refers to the arrangement made between Mr Going and Mr Dunner in mid-1977 and re-affirmed in mid-1978. But, with respect to counsel, it misstates the effect of that arrangement. In his letter of 19 July 1977 (written before Lego Australia was incorporated) Mr Going said -

"we have issued instructions that all future invoices for shipments will show the Australian wholesale value and beneath a line reading 'Value for duty refer file number N77/9857 - 40.7%' and this amount will be shown".

On 3 August 1978, after Lego Australia commenced to trade, Mr Tony Brown advised Mr Dunner that "we will continue to declare all shipments at the Australian wholesale value" and the shipping documents would be endorsed as before, but with a lesser stated percentage. The requirement that the shipping documents disclose the Australian wholesale price did not constitute a request for a Customs invoice separate from the company's own documentation. Such a practice was perfectly consistent with there being no sale before importation, as was the position in 1977 when the procedure was first adopted.
Fourthly, counsel say that Mr Paraggio should have disclosed to Ms Elder that:

"the mere fact of sale did not dictate the use of the intra group sale price but rather on the available material, an end realisation method was appropriate or, at the very least, not necessarily inappropriate".

The correctness of this contention is ultimately a matter of law, to be determined after all the relevant facts were ascertained. As I have already pointed out, if the proposition is correct, it would afford a defence to any prosecution for the suspected offences. But the possibility that particular facts, if established, would afford a defence to the proposed charges, was not material to the question whether there were reasonable grounds to suspect the commission of the alleged offences. There were no facts known to Mr Paraggio, or to ACS, that established the likelihood of the defence arising. Everything would depend upon the circumstances surrounding the transactions between Lego A/S and Lego Australia. ACS had no knowledge about that matter. One of the purposes of the application for the search warrants was to establish the existence and terms of those transactions.
Next, counsel submit that Mr Paraggio should have told Ms Elder that ACS had been advised that it had only a 40% prospect of success in the pending AAT proceedings. To put the matter in this way is not quite correct. ACS had apparently been advised that it had a 40% chance of winning, a 40% chance of losing and 20% was "in the balance". This was a curious way of stating the matter; on this assessment, each party has an equal (or 50%) chance of success. But it does not matter what the odds were. A central point in the AAT proceedings was the recoverability of the moneys paid between 1 July 1989 and 30 June 1990, having regard to ACS' conduct in June-July 1989. Ms Elder had no concern with that matter.
Finally, counsel say that Ms Elder should have been informed "that all valuation methods in theory should produce the same arms-length figure". Perhaps they should; although this case tends to suggest that practice does not always follow theory. However, that theoretical proposition was a matter of law upon which Ms Elder could form her own opinion. I reject the view, put in several contexts by counsel for the applicants, that an applicant for a search warrant breaches the obligation of disclosure if he/she fails to instruct the justice on the relevant law. That principle has never been applied to analogous situations, such as applications to a court for an ex parte injunction. Counsel cited no case in which it has been applied to an application for a search warrant. Of course, as always, an applicant must not knowingly misstate the law. But I see no warrant for imposing upon an applicant (often a non-lawyer) an obligation to instruct the justice (usually a lawyer) in the relevant law.

Misrepresentation
109. The submissions regarding misrepresentations reiterate, to an extent, matters raised under the heading of failure to disclose. In opening their written submissions on this topic, counsel say that it was highly misleading for Mr Paraggio to make the "bald statement" in para.9 of the Information that Lego Australia represented "that Lego products were imported on consignment". This submission is then supported by reference to 16 matters. The first of them takes the same point about date as previously mentioned, mid-1978 not December 1977. The next 11 matters relate to contact between Lego Australia and Mr Dunner in 1977/1978 and Mr Dunner's understanding of Lego's practice. There is then a reference to Mr Paraggio's concession in evidence that there is no "single piece of paper" which amounts to a criminal representation. This is followed by an observation that Mr Ogle's information could not extend earlier than 1986, when he commenced employment with Lego Australia, and that Mr Ogle's statement does not contain evidence of the making of a misrepresentation. Counsel then revert to the matter of the invoices, saying that ACS could not "rely on the invoices as representations but dismiss them as something which did not need to be disclosed to Ms Elder because they could not be found". Finally, it is asserted that there is no evidence of misrepresentation.

I do not think that any of these points indicate that Mr Paraggio misrepresented the case to Ms Elder. The points are put in support of the proposition that para. 9 of the Information was misleading in stating:
"(f)rom the time it commenced trading, following incorporation on 6

December 1977, until 18 January 1988, Lego Australia Pty Limited represented to Customs that the 'Lego' products imported by it into Australia were imported on consignment and not pursuant to a contract of sale".

As I have already said, I agree that there is a question when Lego's representations commenced. It certainly was not as early as December 1977, if that is what the quoted words mean. It probably was not before Mr Dunner's departure in 1981. It is arguable that Mr Tony Brown's letter to ACS of 26 October 1981 constituted a representation that Lego was importing on a consignment basis - "The circumstances remain the same". It is clear that Ms McCormack and Mr Ferian were told that goods were imported on a consignment basis. And there is no doubt that Ernst and Whinney represented that Lego imported goods on consignment and not pursuant to contracts of sale. I have already quoted from their letters. It is enough to recall the letter of 9 September 1988 in which Ernst and Whinney wrote that "for many years" Lego has paid duty upon the deductive basis of valuation and that "(t)his basis is appropriate" because stock is consigned by the exporter to Lego Australia pursuant to arrangements whereby it enters into purchase contracts as and when occasion demands. "Accordingly", the accountants said "there is no relevant transaction in relation to the goods at the time of importation".
For the purposes of this case, it is not necessary to evaluate the weight of this evidence or to determine the proper construction of the various letters sent to ACS. It is sufficient to say that there was material that supported a reasonable belief that Lego had misrepresented the position to ACS and thereby saved duty. None of the 16 points raised by counsel affect that situation.
I should make particular reference to the applicants' submission that it was a misrepresentation of the position for Mr Paraggio to suggest, as he did by the terms of the alleged offences, that the effect of Lego's representations was to save duty.
As already mentioned, the original arrangement was made when the goods were imported and exported by the one company (British Lego). Even if Mr Dunner had been told that Lego A/S would be forwarding goods to Lego Australia pursuant to sale transactions, he would probably have continued to favour use of the end realisation method; not because there was no transaction at all, but because he believed the transaction between the two companies to be an unreliable guide to value. More senior officers might have taken a different view. But I think that the terms of the 1976 legislation would have made it difficult for ACS to rely on the transactions between Lego A/S and Lego Australia, if it had known of them. So it is likely that Lego's failure to tell ACS that goods were being shipped pursuant to sales transactions had no effect on Customs revenue during Mr Dunner's time. However, whatever the position at that time, there is reason to suspect an effect on revenue after his retirement and the commencement of the 1981 amendments. The evidence provides no clue as to how Mr Dunner's immediate successor, Mr Edward Brown, would have reacted to knowledge of the true position. Mr Brown held office from February 1981 to June 1982. But it does reveal the attitude of Mr Jones, who became Senior Inspector, Appraisements, in June 1982 and held the position for over three years, all of which fell within the period referred to in the first count set out in the Information and part of which fell within the period of the second count. It will be recalled that Mr Jones left ACS to go to Ernst and Whinney and, shortly thereafter, was surprised and alarmed to learn that goods were then (November 1985) imported pursuant to contracts of sale between the exporter and importer, not received on consignment as he had previously believed. Mr Jones thought that this made a difference. As he said in his memorandum of 15 January 1986 to Mr Higgins, if the export price shown on the "second invoice", that is, the invoice setting out the true transaction, is used "this would mean higher Customs duties than currently paid, because of increased Customs values". On Mr Jones' approach, the suppression by Lego of information that it was now importing pursuant to sales transactions had the effect of decreasing the amount of duty paid.

No evidence to justify decisions to issue warrants
115. I turn to the errors attributed by the applicants to Ms Elder. In the first place it is said that there is no evidence to justify the decisions to issue the warrants. To a great extent, counsels' submissions on this matter overlap their submissions concerning what was placed before the magistrate. Some of them stray from the topic of what was placed before Ms Elder to what should have been placed before her, repeating matters already stated. The only submissions on this topic that are truly "no evidence" points are that there was no evidence placed before Ms Elder that Lego represented that it received goods on a consignment basis and that there was no evidence that this resulted in payment of less duty.

In evaluating the "no evidence" submission, it is relevant to recall the terms of s.5(3) of the Administrative Decisions (Judicial Review) Act:

"(3) The ground specified in paragraph (1)(h) shall not be taken to be made out unless -

(a) the person who made the decision was required by law to reach that decision only if a particular matter was established, and there was no evidence or other material (including facts of which he was entitled to take notice) from which he could reasonably be satisfied that the matter was established; or

(b) the person who made the decision based the decision on the existence of a particular fact, and that fact did not exist."

Ms Elder was not required to decide whether or not it was established that Lego made a representation to ACS that goods were imported on a consignment basis. Relevantly, she had only to determine whether the material placed before her provided reasonable grounds for suspecting that false representations had been made and that these representations attracted lower customs duty. Mr Tony Brown's letter to Mr Edward Brown of 26 October 1981 was not placed before Ms Elder, but she did have the various Ernst and Whinney letters of 1988 and 1989. These letters were written at or after the expiration of the period mentioned in the charges but they spoke of a system that had apparently been in existence for many years; thereby suggesting that Lego had always received goods on consignment. They argued strongly for the deductive valuation system, thereby suggesting that this was preferable from Lego's point of view. Presumably, this was because it involved a lower duty payment. Moreover, Ms Elder had a summary of Mr Ogle's allegations. They clearly conveyed that, for many years, Lego kept two sets of documents, one of which was kept secret from ACS, and that this practice was abandoned only in late 1987 when Ernst and Whinney informed Lego of the proposed ACS audit. Ms Elder also had before her the report of the ACS audit team stating that -

"the current situation can only benefit the importer as he is only using a 60% figure of the Consignment Price, the full Consignment Price which represents the true FOB should be entered".

The report said that -

"(t)he failure to disclose this information has led to a serious shortfall in import duty over the past years".

It cited, as an example, a shortfall of duty of $1,472,787.65 for the twelve months from 1 May 1989 to 30 April 1990. It seems to me that Ms Elder had ample evidence that there was a reasonable suspicion that Lego's misrepresentations led to lower duty than would otherwise have been paid.

Failure to take into account relevant considerations and unreasonableness
117. These two topics may be considered together. Once again they overlap the matters raised by counsel in connection with the information supplied to Ms Elder. This is obvious from the first submission: that Ms Elder failed to take into account matters of which she was not aware. I do not think that failure by a decision maker to take into account matters of which she/he is unaware vitiates a decision, either on that ground or on the ground of unreasonableness, except perhaps in a case where centrally relevant material is obviously readily available to the decision maker: cf. Prasad v Minister for Immigration and Ethnic Affairs (1985) 6 FCR 155 at 169-170.

Counsel also say that Ms Elder failed to take into account inconsistencies between statements made in the documents placed before her. They refer in particular to aspects of the audit report, seeking essentially to argue that its reasoning was flawed.
Ms Elder had the relevant documents before her. What she made of them I do not know. There is no reason to suppose that she failed to take any of them into account. She may have reached the conclusion that, whilst there was scope for argument about the detail of the matter, or whether Lego had misconducted itself at all, she was satisfied that there was a reasonable basis for suspecting the commission of the alleged offences. Ms Elder was not determining the question of guilt or innocence, or even whether there was a disclosed prima facie case. I see no basis for the conclusion that, in addressing that question, she failed to take into account any relevant matter or that her decision was unreasonable.

Taking into account irrelevant considerations
120. Finally, it is said that Ms Elder took into account the irrelevant consideration -

"that the mere fact of sale necessarily dictated or, alternatively, would have dictated in this case that the end realisation method was not applicable or that a different value for duty would have resulted".

In relation to this ground, it is enough to say that there is no evidence that Ms Elder reached that conclusion; nor was this a matter she had to determine. To repeat the point once again, she was concerned with reasonable suspicion; not whether or not the offences were made out.

Orders
122. In support of their damages claim the applicants contend that the conduct of Mr Paraggio was negligent or, alternatively, constituted misfeasance in public office. If I had reached the conclusion that the warrants might be vitiated by non-disclosure of material unknown to Mr Paraggio, it would have been necessary to determine whether he was negligent in being ignorant of that material. As I have reached the contrary conclusion, that is not necessary. As to misfeasance in public office, it is clear that there is no basis for such a claim. Misfeasance in public office arises only where a public officer acts with the object of injuring the plaintiff (malice) or knowledge of the invalidity of the act: see Dunlop v Woollahra Municipal Council (1982) AC 158 at 172 and Bourgoin SA v Ministry of Agriculture, Fisheries and Food (1985) 3 WLR 1027 at 1044-1050, 1075-1077. There is no warrant in the evidence for the suggestion that Mr Paraggio was actuated by malice towards the applicants or that he knew of any defect in the material he placed before Ms Elder.

The Application must be dismissed with costs.

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Citations

Lego Australia P/L & Ors v. Paraggio, P. & Ors [1993] FCA 575 ((1993) 44 FCR 151; (1993) 122 ALR 356)

Most Recent Citation

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20 AUGUST 1993