LLFJ and Chief Executive Officer of Customs

[2015] AATA 397

[2015] AATA  397

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2015/1845
Re	LLFJ
APPLICANT
And	Chief Executive Officer of Customs
RESPONDENT

INTERIM STAY ORDER

Tribunal	Deputy President S E Frost
Date	1 May 2015
Date of written reasons	4 June 2015
Place	Sydney

Pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975, the Tribunal orders that:

(1)        Subject to clause (2) below, the Tribunal’s interim stay order dated 24 April 2015 is not extended beyond 6.00 pm on 1 May 2015.

(2)        The implementation of the Respondent’s decision of 15 April 2015, insofar as it concerns the storage of stock on behalf of [XYZ Trading], is stayed until 6.00 pm Friday 8 May 2015, or until further order of the Tribunal, on the following conditions:

(a)      That a licensed static security guard be present continuously on the premises at all times other than the Applicant’s actual trading hours.

(b)     That the Applicant notify the Respondent forthwith if there is a change in the provider of the security services referred to in (a) above, and the name of the new master security licence holder.

(3)        For the avoidance of doubt, the Applicant is not permitted to take into stock, from any entity, any additional tobacco or tobacco products during the period covered by this order

Liberty to apply is reserved.

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Deputy President S E Frost

CATCHWORDS

PRACTICE AND PROCEDURE – application for stay – warehouse licence – applicant's licence varied so as to remove the approval to receive, store or move under bond customable tobacco and tobacco products – interim stay ordered as a matter of urgency – consideration of whether to extend the stay – identification of the persons who may be affected by the review – weighing of the interests of those persons – whether desirable to extend the stay – securing the effectiveness of the hearing and determination of the application for review – stay not extended, subject to one exception

LEGISLATION

Customs Act 1901 – s 82B

Administrative Appeals Tribunal Act 1975 – s 41(2)

CASES

Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185

REASONS FOR DECISION

Deputy President S E Frost

4 June 2015

1. On 1 May 2015 I decided, subject to one exception, not to extend an interim stay order that I had made on 24 April 2015.  The exception related to the storage of stock on behalf of a particular client of the applicant (to which I will refer by the pseudonym XYZ Trading).  I gave oral reasons for my decision on 1 May 2015 and the respondent has now requested a statement in writing of those reasons.  This is that statement.

   INTRODUCTION

2. Since 2007 the applicant has held a warehouse licence under the Customs Act 1901 which authorises it to store and deal in certain dutiable goods which have not yet had duty paid on them.

3. On 15 April 2015 the respondent decided to vary the applicant’s warehouse licence, with immediate effect, by removing the approval to receive, store or move under bond customable tobacco and tobacco products.  The immediate trigger for that decision was the theft of tobacco products from the warehouse on 5 April 2015.  That was the third theft of tobacco products in 12 months.  The thefts have caused the respondent to become concerned about the possible consequent loss of revenue to the Commonwealth.

4. Also on 15 April 2015 the respondent notified the applicant that it would need to remove from its licensed warehouse, by 23 April 2015, all customable tobacco and tobacco products that it currently had on its premises.

5. The applicant applied for an order under section 41(2) of the Administrative Appeals Tribunal Act 1975 staying or otherwise affecting the operation or implementation of the decision.  On 22 April 2015, I conducted an urgent interlocutory hearing for the purpose of considering the application for the stay.  The applicant had by then filed an affidavit sworn by the director of the applicant and the applicant relied on the contents of the affidavit in support of the stay application.  The director also gave oral evidence and was cross-examined by counsel for the respondent. 

6. The matter was not able to be dealt with to finality on that day.  I granted a brief interim stay until 6 pm on 24 April 2015 and indicated to the parties that the hearing of the application would be resumed on the afternoon of 24 April 2015.

7. On resumption the applicant relied on a further affidavit, this one by the son of the director.  The son is also the managing director of the applicant’s warehouse business.

8. The parties provided oral submissions in support of their respective positions and, again on an interim basis, I extended the stay order until 6 pm on 1 May 2015.  At the time of granting the interim order on 24 April I indicated that I would provide on 1 May either a final decision on the stay application or at least a further, considered, extension of the earlier interim orders.

9. On a fuller consideration of the materials and the parties’ submissions I formed the view that, subject to the exception relating to the storage of stock on behalf of XYZ, the interim stay order ought not to be extended beyond 6 pm 1 May 2015. 

   RELEVANT LEGISLATION

10. The decision under review is a decision made under section 82B of the Customs Act. That provision allows the CEO of Customs to vary the conditions specified in a warehouse licence. It also provides that a variation cannot take effect before the end of 30 days after the giving of the notice, or the end of a shorter period specified in the notice if the CEO considers that it is necessary for the variation to take effect earlier. As already mentioned, the CEO decided that the variation should take effect immediately.

11. A decision to vary the conditions specified in a warehouse licence is reviewable by the Tribunal under s 273GA(1)(b) of the Customs Act.

12. Ordinarily, by s 41(1) of the AAT Act, the making of an application to the Tribunal for a review of a reviewable decision does not affect the operation of the decision or prevent the taking of action to implement the decision.

13. However, by section 41(2) of the AAT Act, the Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision. The making of such an order is subject to the following:

    ·the Tribunal must be of the opinion that it is desirable to make the order;

    ·that opinion must be formed after taking into account the interests of any persons who may be affected by the review;

    ·any such order must be considered by the Tribunal to be “appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review”.

14. The interim stay orders that I made on 22 and 24 April were for the purpose of maintaining the status quo.  Given the urgency of the application I did not have the opportunity of considering the position fully.  Nevertheless, I was mindful that the immediate operation of the decision under review might have operated to the detriment of the applicant to such an extent that, even if it were ultimately successful in its application for review of the substantive decision, its financial position by then may be irrecoverable.  A successful outcome in those circumstances would have provided cold comfort to the applicant.

15. In the ensuing days I had the opportunity to consider the material in more detail. 

    IDENTIFYING THE PERSONS WHOSE INTERESTS MAY BE AFFECTED BY THE REVIEW

16. In Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185, Downes and Jagot JJ said:

    [50]     … [T]he AAT must identify for itself and consider the relevant interests.  Unless it does so, the AAT cannot form the required opinion. …

    [51]     The nature of the decision under review will affect the identification of the “interests of any persons who may be affected by the review”.  Accordingly, those interests are to be identified by reference to the statutory scheme under which the decision under review was made. …

    [52]     Determining whether the making of an order under s 41(2) of the AAT Act is desirable requires resolving these potentially competing interests [between the different classes of persons who may be affected].  In this process of resolution the scheme embodied by the legislation under which the [decision under review] is made is central. …

    [53]     … For the AAT to form an opinion under s 41(2) of the AAT Act (that it would be desirable and in the “interests of any persons who may be affected by the review” to make an order staying or otherwise affecting the operation or implementation of [the decision-maker’s] decision) [the various] elements of the statutory regime, and the balance between the competing interests that they represent, must be treated as a fundamental element in the weighing of the competing considerations.

17. The applicant and the respondent are the two most easily identifiable persons whose interests may be affected by the review.

18. For the applicant, storing and transporting tobacco and tobacco products owned by its customers are income-generating activities.  The applicant’s managing director swore in his affidavit that the revenue generated from tobacco products is approximately 37% of the applicant’s total storage revenue, and approximately 8 to 10% of total revenues.

19. The respondent’s interest lies in the fact that the applicant stores in its warehouse goods which are subject to duty but which have not yet had duty paid on them.  The applicant’s director estimated the duty that would be payable on the tobacco products currently stored in the warehouse, if they went into home consumption, was about $25 million.  Security of those goods is of course an important issue for the respondent because of the potential impact on Commonwealth revenue if security is not strong enough and, for whatever reason, dutiable products go into home consumption without the payment of duty.  Since the respondent notified the applicant of its decision to vary the warehouse licence, the applicant has taken steps to increase its security.  For example, one of the conditions attaching to the interim stay orders was that there be a static security guard on premises during any periods when the applicant’s warehouse premises were not open for business.

20. An additional category of persons whose interests may be affected by the review are the applicant’s clients, whose goods are stored in the warehouse.  If the applicant is no longer permitted to store tobacco and tobacco products in the warehouse then the clients who own products within those categories will need to arrange to have those products removed to alternative licensed warehouses.  In that context there is evidence that at least some of the applicant’s clients have already made enquiries about moving their products to alternative premises and no problems have been identified except for some slight delays in finalising those arrangements.

    SECURING THE EFFECTIVENESS OF THE HEARING AND DETERMINATION OF THE APPLICATION FOR REVIEW

21. During the first hearing on 22 April 2015, the applicant’s solicitor asked the director to explain the economic impact of the decision upon the warehouse business.  He said:

    WITNESS:  At this time it’s highly stressful, that’s all I can – I mean it’s day-to-day try to deal with all the matters to try and resolve the payment to the ATO.  I’m doing everything I possibly can to either have the insurances pay the ATO or deal with potentially them winding me up.  I don’t know which way to go.

    SOLICITOR:  But what do you say are the economic circumstances that will confront your company in the next one to two months if you are required to return all tobacco products that you hold to all of your customers if you are prohibited from storing any tobacco products at your premises and if you are unable to receive any more into bond?

    WITNESS:  I’d have to try and replace the revenue which is going to be extremely difficult in such a short space of time and I’d have to terminate some of the staff.  There’s no question about that because there’s no revenue to justify their employment.

22. Of course, the witness could give no guarantee that the revenue could be replaced within a short time frame.  He also offered the view that if the licence were not restored to its former state then it “could potentially” render the company insolvent.

23. But that did not satisfy me that a continuation of the interim stay order was appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.  This is not a case of the kind which would render success on appeal nugatory if the stay were not continued.  There will undoubtedly be a financial impact on the applicant if it is no longer permitted to store tobacco and tobacco products, but I was not persuaded that the applicant would be so severely impacted that its business would collapse or that it would be unable to proceed with its application for review or continue to fund its legal representation.

24. Having identified and assessed the interests of those persons likely to be affected by the review, I was satisfied that it was not desirable to extend the interim stay order, and that extending it was not appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.  I therefore declined to extend it beyond 6 pm on 1 May 2015.

    EXCEPTION – THE STORAGE OF STOCK ON BEHALF OF XYZ TRADING

25. One of the earlier thefts had been of products owned by XYZ.  The applicant and the respondent had been engaged in discussions about some of the consequences of that theft.  The applicant had indicated that, in light of those discussions, it would be contrary to the interests of both the applicant and the respondent if the applicant were compelled to remove currently held XYZ stock.  While that issue remained unresolved, and to guard against any possible adverse consequences of such a removal, I made an exception with respect to currently held XYZ stock.

I certify that the preceding 25 (twenty -five) paragraphs are a true copy of the reasons for the decision herein of Deputy President S E Frost

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Associate

Dated 4 June 2015

Date(s) of hearing

22 and 24 April 2015

Solicitors for the Applicant

Counsel for the Respondent

[Suppressed]

Mr M Gollan

Solicitors for the Respondent

Australian Government Solicitor