Malika Holdings Pty ltd v Stretton

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HIGH COURT OF AUSTRALIA

GLEESON CJ,
McHUGH, GUMMOW, KIRBY AND CALLINAN JJ

MALIKA HOLDINGS PTY LTD   APPELLANT

AND

VIRGINIA STRETTON  RESPONDENT

Malika Holdings Pty Ltd v Stretton [2001] HCA 14
15 March 2001
M14/2000

ORDER

1.   Appeal allowed with costs.

2.   Set aside the orders made by the Court of Appeal of the Supreme Court of Victoria on 4 December 1998 and in place thereof, order that the appeal to that Court be dismissed with costs.

On appeal from the Supreme Court of Victoria

Representation:

B J Shaw QC with M A Dreyfus QC for the appellant (instructed by Vann Fisher & Associates)

G T Pagone QC with M M Gordon for the respondent (instructed by Australian Government Solicitor)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

  1. GLEESON CJ.   I agree that the appeal should be allowed, and with the reasons given by Gummow and Callinan JJ.

  2. To ask whether s 167 of the Customs Act 1901 (Cth) ("the Act") constitutes the only means by which a person may challenge the amount and rate of, and the liability of goods to, customs duty invites consideration of the circumstances in which a person might need or wish to make such a challenge.

  3. The manner in which the system of imposition of duties of customs operates, and the requirements affecting an entry of goods for home consumption, may well mean that, in most circumstances, a challenge of the kind mentioned will be made by a person who is compelled, in order to have the goods released, either to pay duty under protest pursuant to s 167, or to enter into an agreement upon terms and conditions satisfactory to the Customs authorities.  Such an agreement might have the same practical effect as s 167.

  4. However, as the facts of the present case illustrate, circumstances could arise in which the authorities are not in such a position of advantage. Because of the chain of events leading up to the dispute, the Collector of Customs found it necessary to commence an action to recover a debt. In part, the action was based upon an agreement made by the appellant. There is a dispute as to the meaning and effect of that agreement. It does not arise in the present appeal. There was also a claim based upon a demand made under s 165 of the Act; but there is a dispute as to whether a valid demand was made. Again, that issue does not presently arise. The statement of claim alleges that the amount of duty payable in respect of the subject goods was $44,540.77 which constitutes a debt due and payable to the Crown. That allegation is to be read in the light of s 153 of the Act.

  5. The general rule in adversarial litigation is that it is for the party alleging a material fact, when that fact is put in issue, to prove the fact. In the case…

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Details
Case
[2001] HCA 14
Decision Date

CaseChat Overview and Summary

The High Court of Australia considered an appeal from the Court of Appeal of the Supreme Court of Victoria concerning the recovery of unpaid customs duty. The dispute arose when Malika Holdings Pty Ltd imported cotton garments, declaring them as "handcrafted" and thus exempt from duty. After the goods were released, Customs determined the garments were machine-made and attracted duty. The Collector of Customs subsequently sought to recover this duty, but Malika Holdings did not pay it, either under protest or otherwise.

The central legal issue before the High Court was whether section 167 of the *Customs Act 1901* (Cth) prevented the owner of goods from disputing the amount or liability to duty in proceedings initiated by the Collector for recovery, unless the duty had first been paid "under protest" and a separate action commenced for recovery. The Court of Appeal had held that the owner could not dispute the duty in the Collector's action unless this procedure was followed, requiring the owner to initiate a separate action if they wished to challenge the duty.

The High Court, by majority, allowed the appeal. The Court reasoned that section 167 of the *Customs Act* did not preclude an owner from disputing the rate or amount of duty, or the liability of goods to duty, in an action brought by the Collector to recover unpaid duty. The Court found that the owner could raise such disputes irrespective of whether the duty had been paid under protest. The Court's interpretation was that the owner was permitted to challenge the Collector's claim directly within the Collector's proceedings, rather than being forced to pay under protest and then initiate a separate action.

Consequently, the High Court allowed the appeal with costs, setting aside the orders of the Court of Appeal and dismissing the appeal to that Court with costs.

Orders

Orders of the court

1. Appeal allowed with costs.

2. Set aside the orders made by the Court of Appeal of the Supreme Court of Victoria on 4 December 1998 and in place thereof, order that the appeal to that Court be dismissed with costs.

Background

Background to the litigation

In my opinion, in an action by the Collector of Customs to recover the amount of duty allegedly payable in respect of goods, the owner is permitted to challenge the rate or amount of duty or the liability of goods to duty. Moreover, the owner may do so, irrespective of whether or not it has paid the duty under protest under s 167. Because that is so, the appeal must be allowed.The material facts On or about 23 September 1986, the owner imported cotton garments[3]. It lodged an entry for home consumption with accompanying invoices which described the goods as "handcrafted cotton garments". No duty was payable on handcrafted cotton garments. Consequently, the goods imported were entered as having "Nil" duty payable on them. [3]Stretton v Malika Holdings Pty Ltd [1999] 2 VR 38 at 40 [8]. Seven days later, the goods were released to the owner after it gave a written "guarantee" or undertaking to pay "any additional duty charges applicable"[4]. During October and November 1986, Customs officials, who had earlier taken samples of the goods for testing, obtained advice that the garments were machine-made. If that was so, the goods attracted duty. [4][1999] 2 VR 38 at 40 [9]. With the possible exception of a demand for additional duty in December 1986 – which is in dispute – the respondent ("the Collector") took no steps to recover the duty until late in 1988. In April 1989, Customs officials made a formal demand for payment of the amount now claimed, stating that the sum claimed could be paid under protest pursuant to s 167 of the Act. The owner failed to pay the sum claimed under protest or otherwise. Section 167 At the relevant time[5], s 167 of the Act provided:[5]It was common ground between the parties that the relevant time is 1986, and so the relevant version of the Act is Reprint No 4. Since then, the Act has been amended several times. The parties did not direct the Court to any subsequent transitional or other provision affecting the legislation which applies. In addition, as in the court below ([1999] 2 VR 38 at 46 [23]), the parties did not refer the Court to any regulations which could affect the question. For the sake of convenience, I will generally use the present tense when referring to the provisions of the Act, even if they have been amended or repealed since 1986."(1) If any dispute arises as to the amount or rate of duty payable in respect of any goods, or as to the liability of any goods to duty, under any Customs Tariff, or under any Customs Tariff or Customs Tariff alteration proposed in the Parliament, the owner of the goods may pay under protest the sum demanded by the Collector as the duty payable in respect of the goods, and thereupon the sum so paid shall, as against the owner of the goods, be deemed to be the proper duty payable in respect of the goods, unless the contrary is determined in an action brought in pursuance of this section. (2) The owner may, within the times limited in this section, bring an action against the Collector, in any Commonwealth or State Court of competent jurisdiction, for the recovery of the whole or any part of the sum so paid. (3) A protest in pursuance of this section shall be made by writing on the entry of the goods the words 'Paid under protest' and adding a statement of the grounds upon which the protest is made, and, if the entry relates to more than one description of goods, the goods to which the protest applies, followed by the signature of the owner of the goods or his agent. (4) No action shall lie for the recovery of any sum paid to the Customs as the duty payable in respect of any goods, unless the payment is made under protest in pursuance of this section and the action is commenced within the following times: (a)In case the sum is paid as the duty payable under any Customs Tariff, within 6 months after the date of the payment; or (b)In case the sum is paid as the duty payable under a Customs Tariff or Customs Tariff alteration proposed in the Parliament, within 6 months after the Act, by which the Customs Tariff or Customs Tariff alteration proposed in the Parliament is made law, is assented to. (5) Nothing in this section shall affect any rights or powers under section 163." (emphasis added)Section 163 provides for refunds, rebates and remissions of duty to be made.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

GLEESON CJ HUGH J GUMMOW AND CALLINAN JJ KIRBY J
In October 1994, Gray J answered "yes" to each part of the question[7].[7][1999] 2 VR 38 at 39 [6].The Court of Appeal's decision In December 1998, the Court of Appeal unanimously answered "no" to each part of the question[8]. Batt JA gave the leading judgment. President Winneke agreed with the judgment of Batt JA[9]. Charles JA, in a short judgment, also agreed with Batt JA[10]. The judgment of Batt JA can therefore be taken as the judgment of the Court of Appeal. The Court held that, unless and until the owner paid the duty claimed under protest, the owner was not entitled to challenge the claim in the Collector's writ and statement of claim that the goods which the owner imported were liable to duty. It said that, if the duty has not been paid under protest, then the owner can plead only three matters in defence[11]:(a)that he or she was not the "owner" of the goods (as defined by s 4(1) of the Act);(b)that any demand under s 165 of the Act relied on by the Collector was not made within the 12 month time limit provided by s 165; (c) a constitutional defence.[8][1999] 2 VR 38 at 61 [51].[9][1999] 2 VR 38 at 39 [1].[10][1999] 2 VR 38 at 39 [5].[11][1999] 2 VR 38 at 54-55 [36]. The Court of Appeal said such a construction[12]:" … does not prevent a defendant who has not paid the duty sued for from litigating with the collector the rate or amount of duty or the dutiability of the goods in question. But it does require the owner to do that in a separate action in which the owner is the plaintiff."[12][1999] 2 VR 38 at 55 [38]. The Court held that this construction of the Act did not remove a fundamental common law right or depart from the general system of law because[13]:"An owner who is sued under s 153 for duty claimed and who, by hypothesis, has not to that time paid the duty may immediately pay it under protest and then, as a complete answer to the collector's claim, plead payment as a defence since action brought. … The owner may then sue the collector for recovery of the amount so claimed in a separate action. So, the owner can mount a complete defence (namely, payment) to the collector's action. The principle in [Potter v Minahan[14] and Bropho v Western Australia[15]] is not infringed by the [Collector's] construction, though the clear language effects a change of onus." (original emphasis)[13][1999] 2 VR 38 at 54 [36].[14](1908) 7 CLR 277.[15](1990) 171 CLR 1. The Court said[16]:"[T]he word 'may' in s 167(1) does not confer a discretion, but rather an authorisation or permission, as though the relevant part of the subsection read, ' … it shall be lawful for the owner of the goods to pay under protest …'."[16][1999] 2 VR 38 at 49 [31]. On this construction, if the owner of goods disputes the duty demanded, s 167(1) gives him or her the option of, but does not require, payment under protest. However, the Court went further[17]:"[T]he provision, although in form permissive or facultative, is, in my view, in effect peremptory or exclusive. That is, if an owner of goods wishes to maintain a dispute which has arisen as to one of the specified subject matters the owner must follow the statutable procedure."[17][1999] 2 VR 38 at 50 [31].

Ratio Decidendi

Legal Principle Established

Established by: GLEESON CJ, HUGH J, GUMMOW AND CALLINAN JJ, KIRBY J

Full text does not contain this section.