Pegasus Supply Solutions Pty Ltd and Collector of Customs [2020] AATA 4688 (24 November 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2017/5739
Re:Pegasus Supply Solutions Pty Ltd
APPLICANT
AndCollector of Customs
RESPONDENT
Decision
Tribunal:Mr P W Taylor SC, Senior Member
Date:24 November 2020
Place:Sydney
The Collector’s 18 August 2017 Demand is set aside and the matter is remitted to the Collector for reconsideration in accordance with the direction that the Applicant has failed to account to the satisfaction of the Collector only in relation to the Items that are indicated in Schedule 4 (by the “- n” values) as having a shortfall quantity.
...................................................[sgd].............................
Mr P W Taylor SC, Senior Member
Catchwords
CUSTOMS AND EXCISE – customs duty – dutiable goods – where company held warehouse licence under Customs Act 1901 (Cth) – where Collector carried out stock count of all excise equivalent goods held at warehouse premises – where Collector issued request to account - where Applicant served with demand under s 35A(1) – whether Applicant has satisfactorily accounted for the goods in accordance with s 37 – decision under review set aside
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) ss 2A, 43
Australian Border Force Act 2015 (Cth)
Customs Act 1901 (Cth) ss 4, 30, 31, 33, 35A, 36, 37, 42, 68, 69, 70, 71A, 71C, 71DH, 71DJ, 71E, 71M, 72, 79, 81, 82, 82A, 82B, 82C, 86, 87, 90, 91, 92, 99, 105C, 114, 117, 122, 124, 126, 132, 149, 162A, 165, 186, 214AB, 214AC, 214ACA, 229, 273GA
Customs Act 1957 (Cth)
Customs Act (No. 2) 1968 (Cth)
Customs Amendment (Enhanced Border Controls and Other Measures) Act 2009 (Cth) Schedule 4
Customs Tariff Act 1995 (Cth) Schedule 3 Chapters 22 & 24Excise Act 1901 (Cth) s 60
Cases
Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 293 ALR 412; [2012] HCA 56
Bollinger & Chief Executive Officer of Customs (1997) 48 ALD 697; (1997) 26 AAR 9
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2
Collector of Customs (NSW) v Brian Lawler Automotive Pty Ltd (1979) 24 ALR 307
Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279
Collector of Customs (Vict) v Wilh Wilhelmsen Agency Pty. Ltd. [1956] HCA 74; (1959-60) 102 CLR 147
Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390
Commonwealth v Baume (1905) 2 CLR 405
Comptroller General of Customs v Zappia [2018] HCA 54; (2018) 265 CLR 416
Cranfield v Bridgerove Ltd [2003] EWCA Civ 656; [2003] 3 All ER 129
Customs and Excise Legislation Amendment Act 1992 (Cth)
Director of Public Prosecutions v Leys (2012) 296 ALR 96; [2012] VSCA 304
Films and Casting Temple Pty Ltd v Malla [2013] NSWCA 377
FH Faulding Co Ltd v Collector of Customs [1991] FCA 543
Kim v Minister for Immigration [2008] FCAFC 73; (2008) 167 FCR 578; 248 ALR 51
Kowalski and Repatriation Commission [2014] AATA 141
Leeder v Mayor, etc, of the Town of Ballarat East [1908] VLR 214
Lilley v Comcare (2013) 216 FCR 214
Moama Refinery Ltd v Chief Executive Officer of Customs [2001] FCA 1287
Moore v Electoral Registration Officer for Borders [1980] SLT (Sh Ct) 39
Pearce v Coynes Freight Management Group Pty Ltd [2010] FCA 320 540
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; 153 ALR 490; [1998] HCA 28
Puglisi v Administrative Decisions Tribunal of New South Wales Appeal Panel (2001) 52 NSWLR 350; (2001) 116 LGERA 194; [2001] NSWCA 298
Re a Former Student & DEETYA (1997) 49 ALD 692; (1997) 26 AAR 172
Re Secretary, Department of Social Security v Barnett (1990) 22 ALD 328
SZGME v Minister for Immigration and Citizenship and Refugee Review Tribunal [2008] FCAFC 91 at [30]-[36]; (2008) 168 FCR 487; 247 ALR 467; 102 ALD 31
SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 91 ALJR 936
Studio Fashion (Australia) Pty Ltd and Chief Executive Officer of Customs [2015] AATA 366Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9; (2014) 253 CLR 531; (2014) 306 ALR 547
Secondary Materials
Customs Regulations 2015 (Cth)
Explanatory Memorandum, Customs Amendment (Enhanced Border Controls and Other Measures) Bill 2009 (Cth)
REASONS FOR DECISION
Mr P W Taylor SC, Senior Member
24 November 2020
Pegasus Supply Solutions Pty Ltd (“Pegasus”) operates two warehouses at adjacent premises in Railway Parade, Marrickville, New South Wales. There it warehouses imported and other goods, both its own property and that of third parties. The imported goods relevant to the present proceedings are Pegasus owned alcohol and tobacco products, and some tobacco products owned by Trojan Trading Company Pty Ltd (“Trojan Trading”). They had been entered for warehousing at Pegasus premises prior to the Collector’s June 2016 stock take “count” that is central to the present proceedings. (The circumstances involved in the “count” are outlined later in these reasons:- see paragraph 75 below.)
At the time of the June 2016 stock take “count” Mr J Horne was the sole director and shareholder of Pegasus. He was also the sole director, and principal shareholder, of Trojan Trading. Mr Horne took an active part in the 2016 “count”, but relinquished his Pegasus roles by about 21 October 2016. Although he continued to occupy his status with Trojan Trading, he does not appear to have participated, to any significant extent, in the post count interactions between Pegasus and the Collector. Those interactions were instead with Mr Janilionis, Pegasus operations manager.
Pegasus has held a warehouse licence under Part V of the Customs Act 1901 (Cth) (“CA”) for its premises at 71-73 Railway Parade warehouse since about March 2014. In mid July 2015 that licence was amended, to include the adjacent premises at 75-77 Railway Parade. The amended licence reflected licensee obligations, and Collector’s powers, under various CA provisions (summarised in Schedule 2 Item 11). It was also subject to conditions, including obligations to keep proper records and to allow and assist Customs inspections, of the kind outlined in Item 9 of Schedule 2 to these reasons.
In addition to its warehouse licence, Pegasus held various movement permissions under CA s 71E. Those permissions, which were either “continuing” or “single” movement permissions, authorised the movement of goods, predominantly between warehouse premises, and sometimes to other locations. The evidence about their nature, number and relevance to the June 2016 count was not entirely clear or consistent. One continuing movement permission related to Pegasus transfer of its business operations, in early 2014, from a Botany warehouse to its Marrickville premises. Another continuing movement permission authorised the movement of imported alcohol products to the premises of a business providing flight service catering at several Australian airports. At an early point in his oral evidence Mr Janilionis estimated that in the period covered by the June 2016 stock take count Pegasus likely held somewhere between 25 and 30 continuous movement permissions. However, at later points, the effect of Mr Janilionis’ evidence appeared to be that he thought the “transfer” permission had ceased to be relevant after September 2014 and that the “flight service” permission(s) were the only other continuous permission(s) Pegasus had held. At a still later point in his evidence Mr Janilionis diffidently accepted propositions that Pegasus had held other movement permissions, both continuing and single, relating to tobacco products.
The relevant characterisation of Pegasus and Trojan Trading’s imported alcohol and tobacco products as “excise-equivalent goods” (“EEG goods”) for the purposes of the CA was common ground.[1] As EEG goods they were subject to “customs control” from the time of their importation. They remained subject to that control (despite being warehoused) until they were either (i) entered (or delivered) for home consumption or, (ii) exported.[2] Goods under “customs control”, are variously referred to as either “in bond”, “under bond”, “customable”, or “warehoused” goods. Where any customs duty is payable in respect of “customable” goods, they are also “dutiable goods” for the purposes of the CA provisions:- CA s 4(1) The “dutiable” status of Pegasus and Trojan Trading’s imported alcohol and tobacco products was common ground.
[1]Customs Act 1901 s 4, Customs Regulations 2015 reg 9 & Schedule 1 Clause 1, Items 1-60, Customs Tariff Act 1995, Schedule 3 Chapters 22 & 24.
[2]Customs Act 1901 s 4, 30(1)(a)(vi), 30(1B). Entry and delivery for “home consumption” is addressed in Customs Act ss 68(1)(a), 68(2)-(3), 68(3B) & 69.
The Collector’s August 2017, $1.6m statutory demand
This Demand is the subject of Pegasus’ 25 September 2017 review application.[3] It was conveyed in the second of two, 29 August 2017, letters a Collector of Customs[4] sent to Pegasus. The first letter (i) notified Pegasus of three adverse findings the Collector had made as the result of the 2016 “count” and audit of the warehouse operations and, (ii) foreshadowed later communication about those matters as breaches of Pegasus licence conditions. A statement of reasons attached to the letter recited events involved in the 2016 “count”, identified the Collector’s 9 October 2016 request to account for “underbond stock that our 100% count had found to be in question”, outlined subsequent related communications, and set out the reasons for the adverse findings. The principal adverse finding was that, following the Collector’s October 2016 request, Pegasus had not “accounted for dutiable goods satisfactorily”. The other findings were that it had moved goods without authority, and had failed to keep proper records.
[3] The review jurisdiction in relation to the making of a Demand arises under CA s 273GA(1)(a).
[4]The expression “Collector of Customs” means either the Comptroller General of Customs or any “officer of customs” carrying out a relevant statutory function:- see CA ss 4(1), 8 & the Australian Border Force Act 2015 ss 11(3) & 14(2). The expression “officer of customs” includes (i) Departmental employees and, (ii) persons / office holders that are the subject of an authorisation by the Comptroller General of Customs:- see CA ss 4(1), 4(!B)-(1E}.
The audit finding of failure to account in response to the 9 October 2016 request provided the basis for the Collector’s second 29 August 2017 letter. That letter announced the Collector’s issue of the accompanying $1,638,201.88 Demand under CA s 35A. The statement of reasons recorded that the Collector had not accepted either Pegasus’ assertions of error in the June 2016 count, or its invitation to “recount”. The final paragraph of the reasons recorded the Collector’s determination that Pegasus had not satisfactorily accounted for various products. The individual products, the integers of the associated duty calculation, and the corresponding duty amount, were listed in four separate tables in an annexure to the statement of reasons. Each product was typically identified by reference to a specific “entry” document:- see paragraph 20 below. Typically, but not always, that was the most recent N20 entry. In some instances although the list identified only one specific N20 entry, it actually related to the total quantity of products that had been entered under several entry declarations. The content of the Demand tables can be summarised as follows:-
(a)Table 1:- approximately 540 litres of six different alcoholic spirit products, owned by Pegasus, that were attributed to separate warehouse entries. The duty value of these products ($16,190) reflected about 1% of the total Demand amount.
(b)Table 2:- approximately 72 (20 & 30 litre) kegs of Heineken beer, also owned by Pegasus. The duty value of these products ($2,819) was obviously a very minor part of the total Demand amount.
(c)Table 3:- approximately 4 pallets of various stick tobacco products owned by Pegasus. The duty value of those (approximately 13) different products was about $1m, and accounted for 61% of the Demand amount.
(d)Table 4:- approximately 800Kg of various “loose” tobacco products owned by Trojan Trading. The duty value of those goods ($620,000) accounted for about 38% of the Demand amount.
In the course of the review proceedings the Collector resiled from positive contention that Pegasus had not satisfactorily accounted for some of the goods included in the Demand Tables, and accepted that there was an evidentiary basis for the Demand amount being correspondingly varied. That acceptance had the practical effect of warranting reduction of the Demand to an amount likely to approximate $706,000:- see further paragraphs 105 to 114 below.
Pegasus’ threshold argument
Pegasus’ substantive position acknowledged that it had not been able to account satisfactorily for some products to which the Demand related:- see paragraphs 112 & 112(e) below. It nevertheless contended that the remainder of the contentious goods had been in the warehouse at relevant times and had been satisfactorily accounted for to the Collector. Notwithstanding that substantive position, Pegasus contested the validity of the Collector’s August 2017 Demand. The contest involved two related propositions. The first (somewhat imprecisely articulated) proposition relied on the asserted proper interpretation of CA s 37. According to (my understanding of) the Applicant’s asserted interpretation[5]:-
[5]I have based my understanding principally on the Applicant’s 28 November 2019 submissions at ¶6, 18 (addressing ¶24 of the Respondent’s 22 November 2019 submissions) & 19, 20 (addressing ¶25 & 26 of the same submissions).
(a)the only means of accounting for goods (for the purpose of satisfying a Collector’s request to account) are “if, and only if” either:-
(i)the Collector “sights the goods”:- CA s 37(a);
(ii)or, if the Collector is “unable to sight the goods”, the person satisfies the Collector that they have been “dealt with in accordance with this Act”:- CA s 37(b).
(b)the legislation only permits “satisfactory accounting” if the Collector is not “unable to sight the goods”.
(c)if the Collector refuses, makes no request or attempt to sight the goods, or the goods are objectively able to be sighted it cannot be said that the Collector is “unable to sight the goods”.
(d)the exclusive and disjunctive means contemplated by CA s 37(a) imply an obligation that, before issuing a Demand, a Collector must either:
(i)ask the requested person to produce the goods for sighting.
(ii)(perhaps) otherwise attempt to sight the goods.
(iii)(at least) not refuse to sight / attempt to sight the goods, when asked to do so by the person who has been requested to account.
The second threshold proposition Pegasus advanced is related to the first, but perhaps partly alternative to it. This proposition characterised the Collector’s 9 October 2016 letter as the only request to account identified in the Demand reasons, and the only relevant request to account. The October 2016 request is said to have been invalid because it “denied Pegasus the ability to avail itself of all modes of accounting provided for” by CA s 37. Less obliquely stated, the assertion is that the request rejected the possibility of Pegasus satisfactorily accounting by showing the goods to the Collector. The invalidity of the request is said to remove the basis for the Demand itself.[6]
[6]The asserted invalidity of the Demand would not deprive the Tribunal of review jurisdiction:- see Collector of Customs (NSW) v Brian Lawler Automotive Pty Ltd (1979) 24 ALR 307; Kim v Minister for Immigration [2008] FCAFC 73 at [21] & [38]; (2008) 167 FCR 578; 248 ALR 51; Tamberlin, Gyles and Besanko JJ. It would however, dictate the outcome of the review, because the Tribunal could not affirm the Demand unless the October 2016 request was valid:- decision:- Kowalski v Repatriation Commission [2014] AATA 141 at [36]-[39]; (2014) 62 AAR 495.
The first of Pegasus’ threshold contentions involves an assertion that the absence of an attempt to sight goods, or the rejection of a sighting invitation by a requested person, establishes the factual proposition that the Collector is not “unable to sight the goods”. That assertion is not consistent with the plain and ordinary meaning of the wording of CA s 37, and it is certainly not a logically correct proposition. Nor is there any contextual basis for construing the “unable to sight” contingency as implying either any attempt, or actual sighting, obligation.
A more rational, and contextually justifiable, basis for a finding that the Collector is not “unable to sight the goods” would be the proven physical existence, and accessible location, of “customable goods”. However, reliance on such a contingency as the legislatively intended barrier to “satisfactory” accounting, seems unlikely. It involves the (difficult to accept) proposition that, in enacting CA s 37, the legislature intended to require a Collector to sight goods, even where the Collector was otherwise satisfied that the goods existed, had been safely kept and had otherwise been dealt with in accordance with the CA requirements.
Despite its apparently inherent difficulty, Pegasus’ first proposition was maintained throughout the review proceedings, although perhaps primarily as an aid to underlying arguments that a requesting Collector had an obligation to at least attempt to sight contentious goods, and denied procedural fairness unless that attempt was made. The proposition raises a potentially determinative question about the proper interpretation of CA ss 35A & 37. Answering that question requires regard to (i) the “dealing” and the “accounting” obligations of licensed persons who have responsibility for “customable goods” and, (ii) the inspection, and request to account, powers available to a Collector / officer of Customs. Finally, it requires regard to the terms of CA ss 35A & 37 (as well as awareness of the related offence provisions in CA s 36). Those terms have to be construed consistently with the apparent statutory purpose, for the reasons summarised by McHugh, Gummow, Kirby and Hayne JJ in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; 153 ALR 490; [1998] HCA 28. In passages that have often been cited their Honours said:-
[69] The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole". In Commissioner for Railways (NSW) v Agalianos , Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed.
[70] A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court "to determine which is the leading provision and which the subordinate provision, and which must give way to the other". Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.
[71] Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision. In Commonwealth v Baume Griffith CJ cited R v Berchet to support the proposition that it was "a known rule in the interpretation of statutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent".
The observation in the last of the three cited paragraphs from the judgment in Blue Sky, whilst emphasising the need to pay regard to the full content of the statutory provision, in no sense contradicts the imperative of purposive contextual construction. This was made clear by French CJ and Hayne J in Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 293 ALR 412; [2012] HCA 56. The relevant passage in their Honours judgment was in the following terms:-
[24] The context and purpose of a provision are important to its proper construction because, as the plurality said in Project Blue Sky …, “[t]he primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute”. That is, statutory construction requires deciding what is the legal meaning of the relevant provision “by reference to the language of the instrument viewed as a whole” and “the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed”.
Neither does contextual construction deny the importance of the ordinary meaning of words. In SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 91 ALJR 936 Kiefel CJ, Nettle and Gordon JJ said this, in an exegesis upon the ProjectBlue Sky principles:-
[14] …Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.
The point was perhaps made most clear in the judgments in Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9; (2014) 253 CLR 531; (2014) 306 ALR 547. In that case the point at issue (which has some parallel in evaluating Pegasus’ contention about the proper construction of CA s 37(b) – see paragraph 57 below) was the extent to which a statutory provision could permissibly be construed to have a meaning consistent with words not actually present in its text. The plurality judges said this:-
[37] Consistently with this court’s rejection of the adoption of rigid rules in statutory construction, it should not be accepted that purposive construction may never allow of reading a provision as if it contained additional words (or omitted words) with the effect of expanding its field of operation. As the review of the authorities in Leys (Director of Public Prosecutions v Leys (2012) 296 ALR 96; [2012] VSCA 304) demonstrates, it is possible to point to decisions in which courts have adopted a purposive construction having that effect. And as their Honours observed by reference to the legislation considered in Carr v Western Australia, the question of whether a construction “reads up” a provision, giving it an extended operation, or “reads down” a provision, confining its operation, may be moot.
[38] The question whether the court is justified in reading a statutory provision as if it contained additional words or omitted words involves a judgment of matters of degree. That judgment is readily answered in favour of addition or omission in the case of simple, grammatical, drafting errors which if uncorrected would defeat the object of the provision. It is answered against a construction that fills “gaps disclosed in legislation” or makes an insertion which is “too big, or too much at variance with the language in fact used by the legislature”.
Although Gageler and Keane JJ dissented in the result in Taylor, their Honours’ description of the appropriate construction approach accorded with that of the majority.[7] Their Honours said this:-
[65] Statutory construction involves attribution of legal meaning to statutory text, read in context. “Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning … But not always”. Context sometimes favours an ungrammatical legal meaning. Ungrammatical legal meaning sometimes involves reading statutory text as containing implicit words. Implicit words are sometimes words of limitation. They are sometimes words of extension. But they are always words of explanation. The constructional task remains throughout to expound the meaning of the statutory text, not to divine unexpressed legislative intention or to remedy perceived legislative inattention. Construction is not speculation, and it is not repair.
[66] Context more often reveals statutory text to be capable of a range of potential meanings, some of which may be less immediately obvious or more awkward than others, but none of which is wholly ungrammatical or unnatural. The choice between alternative meanings then turns less on linguistic fit than on evaluation of the relative coherence of the alternatives with identified statutory objects or policies.
[7]The substance of what Gageler and Keane JJ said was repeated by Kiefell CJ, Bell and Nettle JJ in SAS Trustee Corporation v Miles [2018] HCA 55; (2018) 92 ALJR 1064 at [20].
These principles, which emphasise the structure and purpose of the statutory scheme, are important to bear in mind in evaluating Pegasus’ proposition about the proper construction of CA s 37.
The “dealing” obligations under the CA
In Schedule 2 I have outlined the principally relevant CA provisions. It is readily apparent from the outline that goods subject to customs control cannot be moved or dealt with otherwise than in accordance with a relevant authority or permission given by either the Comptroller General of Customs or a Collector:- Schedule 2 Items 1, 4, 5 & 6; see CA ss 33(1)&(2), 71E & 99(2). Obtaining such a permission, for the purposes of warehouse entry, home consumption entry or export, requires compliance with prescriptive procedures involving formal declaration to, and obtaining formal authorisation from, Customs.
The formal declarations may be lodged either by submitting the completed prescribed form at a Customs office, or by online entry into the Customs “Integrated Cargo System” reporting system. Relevant to the present matter there are three main categories of declaration:-
(a)for warehousing of customable goods:- Nature 20 Warehousing Full Import Declaration (“N20”) – see CA ss 68(3B) & 71DH. Each N20 is allocated a unique 9 character identifier. The N20 may cover different products. They are required to be identified in separate “lines” of the N20.
(b)for entry for home consumption:- Nature 30 Ex - Warehouse Full Import Declaration (“N30”) – see CA s 71A. An N30 also has a unique 9 character identifier, and may cover different products. An N30 should allocate goods to an N20 declaration, although the attribution appears to be required more for the purpose of calculating a running balance of the goods, rather than for monitoring the physical location of the goods entered under a particular N20.
(c)for export:- Export Declaration (“EDN”) – see CA s 114. Like the other forms of Declaration each EDN has a 9 character identifier. There is no specific requirement that an EDN attribute goods to a particular prior N20 entry. However, where a warehouse licensee held similar goods for different owners, there would be a practical need for its own warehouse records to differentiate between differently owned N20 entries.
Movement permissions under CA s 71E (or CA s 97) provide the requisite authority for the movement of warehoused “customable goods” for purposes other than home consumption or export. A movement permission must be the subject of an application to Customs and may relate to either particular goods or to a particular class of goods. A permission has a numerical identifier and will typically be subject to conditions requiring appropriate identification of the goods, and the systematic recording of the movements. However, there are no requirements for the actual movements (or the attribution of the goods to any particular “entry” Declaration) to be the subject of specific declarations to Customs. Consequently, the actual movements are not captured by the Customs “Integrated Cargo System”. However, where goods are moved, they should be accompanied by a permission slip containing relevant information, including reference to the relevant N20 for the goods.
The other relevant matters indicated by the provisions outlined in Schedule 2 are to the following effect:-
(a)on receiving the goods into its warehouse, pursuant to an N20 Declaration and subsequent “authority to deal” (or a movement permission from another warehouse), Pegasus became a person whose ability to deal with the goods was subject to “customs control”, dependent on specific customs authorisation in relation to removal from the warehouse, and subject to an obligation to produce, or account for, the goods whenever requested:- Schedule 2 Items 1 – 6, 9, 11, & 12.
(b)a Collector had a statutory power to enter any warehouse premises at any time, for the purpose of examining “customs control” goods and records relating to them:- Schedule 2 Items 9 & 11, see CA s 91.
(c)under CA s 90, and as an aspect of the typical warehouse licence conditions, any “Customs official” could request access to any of the licence holder’s records relating to the “condition, holding … or movement” of any “customable goods”:- see Schedule 2 Items 8, 9 & 11.
The CA “accounting” obligation, and discretionary liability
As an incident of the nature of “customs control” (rather than the exercise of a specific statutory power) a Collector can request any person who had, or who had been entrusted with, “customable goods” to account for them:- Schedule 2 Item 12, see CA ss 35A & 36. The Collector has a subjective discretion to determine, whether a proffered accounting is satisfactory. That discretion is to be exercised reasonably:- Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279 at 291 per McTiernan J;[8] and be the product of a sound / reasonable judgment “based upon practical understanding (of the particular facts of the individual case) and good sense”:- Collector of Customs (Vict) v Wilh Wilhelmsen Agency Pty Ltd. [1956] HCA 74; (1959-60) 102 CLR 147 at p 159 per Kitto J. The legislative context, and subsequent authority, both indicate that the primary criterion for that satisfaction, and for the related discretion to issue a written Demand, is whether the circumstances show either the actuality or likelihood of a loss of customs revenue in relation to the contentious goods:- Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279 at 291 per McTiernan, 295 per Taylor J, 299 per Menzies J & 305 per Owen J; Comptroller General of Customs v Zappia [2018] HCA 54 at [28] & [37]; (2018) 265 CLR 416. A potential secondary consideration is the responsibility and culpability of the person who has been requested to account. In his judgment in the Wilh Wilhelmsen Agency Pty Ltd matter Kitto J disavowed resort to “rigid rules” in assessing whether an accounting was satisfactory, required regard to any “circumstances affecting the likelihood of error” and suggested (at 102 CLR 160) that a favourable exercise of the (analogous) discretion under CA s 149 required the Collector to:-
have information about the goods from which he concludes either that there has been no breach of the Customs law which has deprived the Crown of any means of enforcing payment of duty … or that those connected with the ship who were in a position to see that the Customs law was duly observed with respect to the goods ought not in the circumstances to be regarded as responsible for any such breach that has occurred.
[8]Although McTiernan J was the only member of the High Court to express an opinion on the nature of the Collector’s obligations in determining the adequacy of the requested person’s “accounting”, in subsequent cases the requirement of reasonableness has been accepted:- Collector of Customs (Vict) v Wilh Wilhelmsen Agency Pty. Ltd. [1956] HCA 74; (1959-60) 102 CLR 147 at p 160 per Kitto J; FH Faulding Co Ltd v Collector of Customs [1991] FCA 543 at [34].
In the Wilh Wilhelmsen Agency Pty Ltd matter Kitto J was concerned with a CA provision where the question of satisfactory accounting required consideration after, rather than (as in the case of CA s 35A(1)(b)) before, the issue of a demand. Nevertheless, the matters to which His Honour adverted are relevant to both the issue of satisfactory accounting and to the making of a Demand.
The different times at which a Collector may assess the adequacy of a post request accounting, and determine to issue a Demand, leave open the possibility that dissatisfaction with the accounting will not dictate the issue of a Demand. It was accepted in Moama Refinery Ltd v Chief Executive Officer of Customs [2001] FCA 1287 (at [30]-[31], for the purposes of the corresponding provision in Excise Act 1901 (Cth) s 60) that the Demand issue discretion “if it be a discretion, … is completely unfettered” – other than by the scope and purpose of the legislation (and could, for example, take into account the perceived payment ability of the respective potential Demand recipients).
But that recognition of the potential width of the Demand discretion was made in a context of the potential liability of several entities that, at least arguably, had either failed to keep or failed to account for excisable goods. Moama argued, ultimately unsuccessfully, that other persons had a greater degree of culpability and were “more appropriate” recipients of the Demand:- see [2001] FCA 1287 at [23]; 115 FCR 205. Consequently, recognition of the potential width of the Demand discretion does not detract from the likelihood that unsatisfactory accounting by a requested person will suffice to justify, and in most cases likely require[9], the issue of a Demand. Consistent with that view is the approach taken by DP McMahon in Bollinger & Chief Executive Officer of Customs (1997) 48 ALD 697 at [32], [36] & [38]; (1997) 26 AAR 9 (again in relation to a corresponding provision in the Excise Act 1901). There, after referring to what Kitto J had said in the Wilh Wilhelmsen Agency Pty Ltd matter, DP McMahon considered that after a requested person had failed to account, revenue protection was the primary consideration in the exercise of the discretion to issue a Demand. Neither the absence of financial benefit to the unsuccessful accounting party, nor the apparent primary culpability of a third party, was sufficient to refrain from making Demand. This was because (at 48 ALR 708):-
Once goods come under the control of customs, either through importation subject to customs duty or through manufacture subject to excise, or through storage in a controlled environment, the intent of both the Customs Act and the Excise Act is that this control shall be the paramount consideration until the relevant duty is paid.
[9]Subject to the kinds of considerations discussed by DP Forgie in Studio Fashion (Australia) Pty Ltd and Chief Executive Officer of Customs [2015] AATA 366 at [63]-[74],
With similar emphasis on the primacy of the revenue protection purpose, it has been held that the appropriate exercise of the Demand discretion is not contradicted by the currency of related prosecution proceedings, and the potential imposition, in those proceedings, of a penalty, or reparation order, equivalent to the amount of the duty potentially payable in relation to the contentious goods:- Sidebottom v Giuliano [2002] FCA 1262 at [24]-[30].
CA s 37(b) … “if the Collector is unable to sight the goods” …
Pegasus’ contention about the proper construction of CA s 37(b) has to be evaluated with regard to the content and context of CA ss 35A & 37 (in particular). Those provisions are in the following terms (I have added the underlining in s 35A(1)(b)):-
35A Amount payable for failure to keep dutiable goods safely etc.
(1) Where a person who has, or has been entrusted with, the possession, custody or control of dutiable goods which are subject to customs control:
(a) fails to keep those goods safely; or
(b) when so requested by a Collector, does not account for those goods to the satisfaction of a Collector in accordance with section 37;
that person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the duty of Customs which would have been payable on those goods if they had been entered for home consumption on the day on which the demand was made.
…
37 Accounting for goods
A person accounts for goods or a part of goods to the satisfaction of a Collector in accordance with this section if, and only if:
(a) the Collector sights the goods; or
(b) if the Collector is unable to sight the goods—the person satisfies the Collector that the goods have been dealt with in accordance with this Act.
CA s 35A was inserted by the Customs Act 1957 (Cth). It broadened the original CA s 92(4) contingent liability of a warehouse licensee, and substantially reproduced the (post 1952) wording of s 60 of the Excise Act 1901 (Cth). In its original form CA s 35A (i) made the liability amount depend on “the opinion of the Collector making the demand” about the hypothesised dutiable amount and, (ii) did not contain the words “in accordance with section 37”. That subjective former aspect of the wording, relating to the liability amount, was removed by the Customs Act (No 2) 1968 (Cth). The 1968 Act also inserted the corresponding provisions CA s 35A(1A) (relating to the non-delivery of goods that were the subject of a movement permission) and CA s 35A(1B) (relating to a failure to safely keep goods that had been the subject of an authorised movement to non-warehouse premises). Apart from those amendments (and some immaterial subsequent stylistic changes) s 35A(1) retained its original wording until the Customs Amendment (Enhanced Border Controls and Other Measures) Act 2009 (Cth). Schedule 4 of the 2009 Act amended s 35A(1) (and the corresponding provisions in ss s 35A(1A) & (1B)) but only by adding the words “in accordance with section 37” (ie., those underlined in the extract set out above). Thus CA s 35A(1) has consistently provided for the requesting Collector to exercise an element of subjective discretion in determining whether any proffered accounting has been satisfactory. In this respect it has reflected wording employed in many other CA provisions:- CA ss 117, 122, 124, 126, 149 & 229(m).
The 2009 Schedule also inserted the offence provisions in CA s 36. The offence provisions applied to any goods that were subject to “customs control”, irrespective of whether or not they were also “dutiable goods”. The various CA s 36 sub-sections created two separate “mens rea” and “strict liability” offences for each of four different kinds of conduct:-
(a)failure to keep customable goods safely:- see CA s 36(1), (2), (3)
(b)failure to keep safely customable goods that have been moved to premises other than a warehouse”:- see CA s 36(1), (2), (3) & (9)
(c)failure to deliver customable goods that had been moved in accordance with a movement permission:- see CA s 36(5), (7), (8)
(d)failure to account for customable goods:- see CA s 36(4), (5), (6), (7),(8) & (9).
In the case of each of these instances of offending conduct the implicit hypothesis is that the goods are identifiable by reference to a particular entrustment or authority. Given the CA provisions (and licence conditions – see Schedule 2 Item 9) the particular possession or entrustment ought be pursuant to a specific N20, a related authority to deal, or a movement permission (complemented, where necessary, by bond register details). This means that “the goods” to be accounted for in accordance with the CA ss 35A – 37 provisions ought necessarily be described and identified by reference to those specific documents. (Where such specific identification is neither possible nor made, the goods are likely to be described by reference to the time or period of their importation or entry.) This likely necessary particularisation of the goods tends to highlight the difficulty (to which I referred earlier – see paragraph 11 above) of the proposition that demonstrating the objective availability of contentious goods was not intended to constitute satisfactory accounting, for the purposes of CA s 37, unless a Collector actually sighted them.
Moving on from the difficulty of the proposition underlying Pegasus’ contention, it is significant to note that the heading to Schedule 4 of the 2009 Act was “Missing goods and goods delivered without authority”. The Explanatory Memorandum to the 2009 Act was marginally more informative. It stated that the purpose of the Schedule 4 amendments was to deal with “missing goods and goods delivered into home consumption without authority”. Literally construed, both descriptions tended to convey the doubtful proposition that the categories of “missing” goods, and those that had been the subject of unauthorised delivery, were mutually exclusive. However, paragraphs 39 & 40 of the Explanatory Memorandum to the 2009 Act, in setting out the reasons for the insertion of the new offence provisions in CA s 36, placed the emphasis on two, apparently cumulative, considerations namely (i) whether goods had been “safely kept” and, (ii) whether they could also be accounted for (as having been dealt with in accordance with CA provisions). Paragraphs 39 & 40 were in the following terms:-
39. While section 35A of the Customs Act enables the recovery of duty where dutiable goods have gone missing, section 35A does not cover non-dutiable goods which are subject to the control of Customs and which cannot be accounted for by the person who had possession, custody or control over those goods. While no duty applies to these goods, the goods still need to be accounted for as the goods may be prohibited by or subject to a restriction or condition under the Customs Act or another law of the Commonwealth.
40. To ensure that goods, whether dutiable or non-dutiable, which are subject to the control of Customs and in the custody of another person, are kept safely and can be accounted for, new offences are to be included in the Customs Act for failing to keep dutiable and non-dutiable goods safely and for failing to account for the goods to the satisfaction of the Collector if required to do so.
The underlining I have added to paragraph 40 of the Explanatory Memorandum indicates both the cumulative concerns, and the separate failures, to which the offence provisions were directed.
Consistent with the amendments relating to CA ss 35A and 36, the 2009 Act also added the new s 37.[10] Paragraphs 59 & 60 of the Explanatory Memorandum dealt, briefly and uninformatively, with this new CA s 37 provision:-
Accounting for goods
59. New section 37 specifies how a person, if requested, is to account for goods to the satisfaction of a Collector.
60. New section 37 provides that a person accounts for goods or part of goods to the satisfaction of the Collector only if the Collector sights the goods or, if the Collector is unable to sight the goods, the person satisfies the Collector that the goods have been dealt with in accordance with the Customs Act.
[10]The previous versions of both CA ss 36 & 37 had dealt only with the procedure for effecting the entry of goods. Neither provision had addressed questions of liability to account or the consequences of failure to account. Both of those provisions had been repealed by the Customs and Excise Legislation Amendment Act 1992 (Cth).
The Minister’s Second Reading speech was similarly uninformative about the purpose of the new s 37, despite its apparently prescriptive declaration about the manner in which goods were to be accounted for to the requisite satisfaction of a Collector. In terms similar to the Explanatory Memorandum, the Minister outlined the content of the new offence provisions in CA s 36, but made no reference to the content of s 37.
The uninformative nature of both the Explanatory Memorandum and the Minister’s Second Reading speech suggests that the new CA s 37 provision neither intended, nor was understood, to effect a substantive alteration to the content, or the means of satisfying, the accounting obligations relating to “customable goods”. Rather the section was presented as merely consequential upon, and complementary to, the “missing goods” focus indicated in the Explanatory Memorandum. Consistent with that view, and the different factual scenarios contemplated by CA ss 35A & 36 (see paragraph 30 above) it is material to note that the expression “missing goods” appears to have contemplated both (i) goods that had been specifically identified (either as “not safely kept”, misdelivered or otherwise not located) and were the subject of a specific request and, (ii) goods that “cannot be shown”[11] to have suffered any such fate, and were merely part of a general accounting request (for example, following a stock take “count”). Against this apparent contemplation, the alternative methods of accounting provided for in CA s 37, are best regarded as merely confirmative of the ultimate enquiries likely to be required in the typical and foreseeable circumstances in which a request to account might be made.[12]
[11]The “cannot be shown” expression was used by Dixon CJ in Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279 at 287 – in the context of describing that “failure to keep safely” expression as involving an almost absolute obligation to prevent the “loss or destruction” of customable goods, and the reason for the apparently alternative (“keep” and “account”) obligations provided for in Excise Act 1901 s 60. McTiernan J expressed a similar view, and described the paragraph (b) “account” wording as a “dragnet provision”. Other members of the High Court characterised the duty as directed not at the physical condition of the goods, but at precluding the risk of the goods becoming available for “home consumption” use without the payment of duty:- see Taylor J at 295-6, Menzies J at 299, Owen J at 305.
[12]This conclusion is not contradicted by the consideration that a Collector need not request a person to account where goods have been lost or destroyed as a result of the person’s failure to keep them safely:- see Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279 at 299 & 305 per Menzies J & Owen J; Pearce v Coynes Freight Management Group Pty Ltd [2010] FCA 320; (2010) 183 FCR 540 at [138]-[139]
That view is encouraged by the recognition that CA s 37 appears to proceed on the basis of a binary categorisation of “requested to account” goods as either sighted or unsighted. Pegasus contention, on the other hand, necessarily posits a third category – of goods that the Collector has not sighted, but that are objectively “able to be sighted”. This contention places primary weight on the “is unable to sight the goods” phrase in CA s 37(b), and confines assessment of the contingency to the objective facts of the existence and location of the goods.[13] The contention involves the proposition that in enacting CA s 37, the legislature intended to require sighting by Customs in every case where the goods were available, even where that availability could be established (and the goods accounted for) by other means. The further proposition implicit in the contention is that the legislature intended to preclude those in control of demonstrably available “customable goods” from discharging their obligation of accounting to the satisfaction of a Collector, and to provide for their guilt of CA s 36 offences, unless a Collector actually sighted the goods.
[13]I have previously rejected the proposition that CA s 37 is amenable to a construction that the Collector’s failure to request or attempt to sight goods would establish that the Collector was not “unable to sight the goods”:- see paragraph 11 above.
Such a potential practical result of Pegasus’ preferred construction of CA s 37(b) involves an incongruity that tends against its likely correctness. The incongruity can only be avoided by characterising CA s 37 as obliging a Collector not only to attempt to sight the goods, but also to be successful and objectively accurate in so doing. However, there is no contextual basis for imposing such a duty. Indeed since the “entrusted” person has the statutory obligation to account for the goods, it would seem to be inconsistent to impose a sighting obligation on the Collector. Furthermore, contrary to Pegasus’ contention, there is neither a contextual, nor any other good reason, to construe the expression “the Collector is unable to sight the goods” as either requiring, or limited to, proof of the objective unavailability of the contentious goods. The actual wording of CA s 37(b) addresses the contingency that the Collector is “unable” to sight the goods, and not the objective circumstances of the goods themselves. This wording is not apt to posit enquiry about the objective availability of the goods. It is more readily indicative of a simple enquiry as to whether the Collector has in fact successfully sighted the goods.
The Collector’s original written submissions advanced a construction of CA s 37(b) that it required a sequence of events in which the Collector’s inability to sight the goods had to be established as a fact, as a precursor to relevant demonstration of dealing in compliance with the CA provisions. The proposition advanced was that the “request to account” could be a two step process in which a Collector first requested to sight the goods and subsequently, after that request did not result in a sighting, then required the person to demonstrate compliant dealing with the goods. That contention was apparently advanced either (i) because of uncertainty about the interaction between CA ss 35A & 37 (ie., doubt whether the legislative intention was as suggested in paragraph 38 above), (ii) because of a view that a request to account would only be made when, because of a failed sighting attempt, goods were apprehended to be missing or, (iii) for the purpose of deflecting Pegasus’ complaint about the Collector’s refusal to “recount” the goods after the 9 October 2016 request. The contention involved the proposition that the 2016 count, which had not resulted in the Collector sighting (all / the contentious) goods, relevantly satisfied the CA s 37(b) contingency that the Collector “is unable to sight the goods”.
In revised submissions provided after the hearing the Respondent adhered to that original contention, but characterised it as alternative to a “primary” contention. The “primary” contention was that neither CA s 35A nor CA s 37 required that, as a pre-condition to the issue of a valid Demand, a Collector must have requested or attempted to sight contentious “customable” goods.
As the Respondent’s revised submissions contended, and as I point out later in these reasons, there is neither a threshold nor formality requirement for a Collector’s request to account:- see paragraphs 61 & 65 below. That absence of formality, and the ample inspection powers and obligations arising under both the CA provisions and the typical warehouse licence conditions (see Schedule 2 Items 9 & 11), leave no doubt that a Collector could at any time seek to inspect / examine / sight warehoused goods, and do so irrespective of any apprehension that goods were missing.[14] Any such request could be regarded as a request to account for the purposes of CA s 35A(1)(b). There are however, a number of difficulties with the Collector’s initial (and later, alternative), “two step” procedure, submission.
[14]Where a Collector apprehends goods are actually “missing” CA s 35A(1)(a) permits the immediate issue of a Demand, without any requirement to request a person to account for the goods:- see Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279 per Dixon CJ at 287.5.
First of all, there is no contextual support for the proposition that CA s 37 actually requires a two step process of (i) request to sight and, (ii) request to account. Nor is there anything in the wording of any of the potentially relevant CA provisions that requires, as distinct from permits, a Collector to “sight” goods.
The second difficulty with the Collector’s initial submission is that it assumes the inability criterion in CA s 37(b) could be satisfied by an inability to sight that precedes the / a relevant request to account for the goods. However, CA s 37 should be regarded as having a permissive purpose. That purpose is to allow a requested person to account by either the Collector’s sighting of the goods or (albeit contingently) by demonstrating compliant dealing with the goods. Those alternatives are available in response to any request to account. It follows that even if a Collector had previously unsuccessfully requested, or attempted, to sight goods, such a prior failure / lack of success would not necessarily preclude a person who received a subsequent request to account for the same goods from seeking to satisfy the request by producing the goods and seeking to have the Collector sight them. The criterion that enlivens the CA s 35A(1)(b) power to issue a Demand is that the requested person “does not account”. That criterion points to the state of affairs when the Demand power is exercised. Consistent with that pointer the CA s 37(b) criterion uses the present tense in identifying the contingency that the Collector “is unable to sight the goods”. These considerations, with their emphasis on the contemporaneity of the requested person’s failure to account, and the Collector’s inability to sight the goods, tend to contradict the proposition that a pre request inability to sight the goods would necessarily suffice to demonstrate the Collector’s relevant inability. (If the “not unable” contingency is subject to a criterion of reasonableness, it may contribute to a conclusion of inability:- see paragraph 67 below.)
The third difficulty with the Collector’s initial submission is that it did not really address the proper construction of “unable” in the CA s 37 context. The submission, despite some preliminary ambiguity, ultimately rejected the proposition that “is unable” meant “objectively unavailable for inspection”. The proposition advanced was that the “unable” criterion was subject to an implicit concept of reasonableness. The result of this was said to be that a Collector could be regarded as unable to sight goods where they could not “reasonably have been expected to have (attempted) to do so” in the particular circumstances. The Collector’s submissions developed this proposition to the point of contending that the Collector could be regarded as “unable” to sight the goods at the time of the August 2017 Demand, because the Collector had not sighted the goods in the stock count in June 2016. The submission contemplates that CA s 37(b) invites enquiry into the reasonableness of the Collector’s refusal to sight the goods. It ultimately involves reliance on the proposition that in the present case the Collector acted reasonably in not attempting to sight the goods – despite (i) Pegasus repeated insistence that the goods had been in the warehouse at all times, (ii) the inherent potential for error in the stock take count (see paragraph 125 below) and, (iii) the conceded proposition that, at least in some limited circumstances, an appropriate reconciliation would have been a practicable exercise (see paragraph 89 below).[15]
[15]In oral submissions, towards the end of the review hearing, and in response to my specific enquiry, the Collector’s counsel arguably accepted, and at least did not dissent from, the proposition that an arguably correct construction of the “unable” criterion was that it was not subject to any limitation of reasonableness and could include inability for “any reason”:- see Tcp 380.10.
Depending upon the context and purpose in which it is used, the adjective “unable” can connote causal incapacities of quite disparate kinds. They range from physical impossibility, to disinclination (sometimes subject to a qualification that it is reasonably based), inadvertence, misadventure or even mere error.
The criterion of physical impossibility, or something close to it, is most likely to accord with the intended connotation of “unable” where the context involves assessment of capacity in relation to matters such as a liability to pay a specific amount, or the possession of the physical means of satisfying another similarly ascertainable criterion. A situation of the former kind was addressed in Films and Casting Temple Pty Ltd v Malla [2013] NSWCA 377. There the point in issue was the recoverability of the amount of a “proven balance” from a third party, whose liability was contingent on the primary debtor being “unable to pay”. The NSW Court of Appeal held (at [91]-[100]) that the fact the payment obligation only related to the “proven balance outstanding” necessarily enquired about the primary debtor’s objectively assessed financial capacity. A situation of the second kind, similarly focussing on objective capacity, was addressed by the same court in Puglisi v Administrative Decisions Tribunal of New South Wales Appeal Panel (2001) 52 NSWLR 350; (2001) 116 LGERA 194; [2001] NSWCA 298. That case involved statutory fishing licence eligibility criteria, and their conditional exemptions. The eligibility criteria depended on proof of historical catch quantities. The exemptions applied where the person had been “unable” to achieve the catch quantities because of illness, loss of equipment or “other significant reasons”. The licence applicant’s contention was that he had not achieved the required catch quantities because regulatory restrictions had made it uneconomic to operate in the relevant fishery. The NSW Court of Appeal rejected the argument that the “economic logic” underlying the licence applicant’s reasonable decision not to fish in the relevant fishery was sufficient to establish he had been “unable” to satisfy the eligibility criteria. In so doing, Heydon JA noted (at [56]) that “in some statutory contexts” the meaning of the word “unable” may extend beyond objective impossibility. But His Honour (at [51]) pointed to the particular regulatory context as being concerned with questions of objective physical capacity, rather than the subjective considerations potentially relevant to its utilisation.
In Leeder v Mayor, etc, of the Town of Ballarat East [1908] VLR 214 the question arose in the context of the failure of a convalescing plaintiff to comply with a statutory requirement to either give a timely notice of an injury causing event or “show some sufficient reason” why the person had been “unable to give such notice.” The statutory reference to “sufficient reason” perhaps pointed inherently to a lesser requirement than physical impossibility, but Hodges J (at 219–221), in passages that have been influential in later decisions, remarked that “unable” was itself “a word of more extensive signification” than objective incapacity, and covered a potentially wide range of meanings, potentially extending to what he called “any trifling obstruction”. His Honour accepted that, where the postulated activity was a matter of “duty” the adjective “unable” should not be given “a too extended meaning”. But His Honour considered that a person’s compromised medical situation could properly justify a finding that they were relevantly “unable” to give the required notice. His Honour went on to observe that -
… there is a still more common use of this word that indicates still more clearly the very wide area covered by it, as when a man writes to his friend, saying — ‘I was sorry that I was unable to keep my appointment to dine with you last night, but my son was taken suddenly ill’. And similar language is used with regard to an alleged inability to keep other appointments. Other instances might be given of the use of the word in the ordinary intercourse of man with man.
Cussen J took a similar view of the “flexible” meaning of “unable”. His Honour observed (at 223–224):
Sometimes, where it is used with reference to a person, it connotes an act or series of acts which no human being could do; sometimes an act or series of acts which the particular person referred to could not in any circumstances do; sometimes an act or series of acts which this person could not in existing circumstances do; and sometimes an act or series of acts which in existing circumstances this person could do if he directed his mind to nothing else, but which, having regard to other circumstances, he could not reasonably be expected to do. It therefore sometimes involves a comparison of the various circumstances influencing action or inaction. If the contemplated action and its consequences are of trifling importance, very little may be sufficient to induce a person to say that he is unable to do it. The examples of an invitation to dinner or to join in a walk will illustrate this class of cases. On the other hand, there are cases of which those involving the giving of notice under this Statute may be examples, where much graver reasons would be required before a person should be able to say that he was ‘unable’.
The approach evident in Leeder has an obvious, and accepted, application in the context of assessment of the extent of a person’s incapacity as a result of injury or illness. In that context, determination of whether a person is “unable” to perform an activity or function requires regard to the risks (of pain, discomfort and sequellae) associated with the postulated activity, and the reasonableness of exposure to them, having regard to the totality of the person’s circumstances:- Lilley v Comcare (2013) 216 FCR 214 at [77]-[78].
Similar breadth of meaning, permitting regard to the circumstantial, and not necessarily objective, reasonableness of the particular person’s relevant inactivity, has been accorded to a range of other statutory provisions. They have included provisions where (i) inability (to earn a livelihood) was a precondition to eligibility for a social security benefit:- Re Secretary, Department of Social Security v Barnett (1990) 22 ALD 328; and (ii) timely notice was a conditional threshold barrier to invoking a procedure to enforce a statutory right:- Re a Former Student & DEETYA (1997) 49 ALD 692; (1997) 26 AAR 172
The applicability of this breadth of meaning of “unable” is particularly appropriate where the postulated activity is not a matter of “duty”, in the sense to which Hodges J referred in Leeder. For example, in the context of electoral registration, the expression “unable to go in person to the polling station” has been held to extend to persons who, because of the cost or length of the journey, could not reasonably be expected to attend:- Moore v Electoral Registration Officer for Borders [1980] SLT (Sh Ct) 39. Yet another example arises from circumstances where the extent of a person’s rights depends on establishing that a third person was “unable” to take the postulated action. Thus, in the context of a procedural discretion to extend time where a court had been “unable to serve” a document, the criterion of inability to serve was held not to require evidence of attempted service and extended to inactivity that was the result of allocation of resources, error or even complete oversight:- see Cranfield v Bridgerove Ltd [2003] EWCA Civ 656; [2003] 3 All ER 129 at [26] to [29].
It follows from the above that considerations relevant to the proper interpretation of “unable” will certainly include (i) the characterisation of the postulated activity as either a matter of duty, or a pre-condition to the assertion of a right or the exercise of a power, (ii) the purpose of the contingency and, (iii) the consequences of it not being satisfied. Two other matters are also likely to be relevant. The first of them is any apparent assumption about the capacity of the postulated actor. The second is the nature of the factual enquiry the “unable” contingency is postulated to involve.
In the present case there is no basis for characterising a Collector as having a duty to sight the goods:- see paragraph 38 above. Secondly the purpose of the “unable to sight” contingency is simply to permit the requested person to satisfy the Collector of their compliance with the CA provisions, by providing an account of their dealings with the goods. Thirdly, the potential consequences of the contingency not being satisfied (if the Pegasus contention were correct) would be that a Collector’s refusal to sight goods, or even a failure to do so (because of a Collector’s unreasonable refusal or a mistaken identification or counting of objectively available goods) could preclude the requested party from being able to account for the goods, and render them guilty of offences provided for in CA s 36.
In relation to the question of any underlying assumption about the Collector’s capacity, the fulsome powers of entry and inspection contained in the CA (as summarised in Schedule 2 Item 11) indicate that the question of ability to sight the goods is unlikely to have been concerned with any inadequacy of a Collector’s actual powers. Rather the CA s 37(b) contingency must have been directed at circumstantial inability. But in being so directed, it made no attempt to limit that circumstantial inability to either the physical absence of the goods or to impose any “good reason” or reasonableness limitation on the permissibly relevant considerations.
In relation to the question of the likely statutory intention to entertain a factual enquiry about the reasons for, or the reasonableness of, a Collector being “unable to sight the goods”, the observations of Heydon JA in Puglisi v Administrative Decisions Tribunal of New South Wales Appeal Panel (2001) 52 NSWLR 350; (2001) 116 LGERA 194; [2001] NSWCA 298 at [60] can be recognised as having analogous force when applied to the present matter. His Honour said this:-
[60] … The expression “unable” in the context of legislation establishing periods limiting the ability of plaintiffs (including plaintiffs of limited intelligence and means, whose mental powers may have been affected by injury) to commence litigation, particularly limitation periods as short as ten days, is to be construed differently from the expression “unable” in the context of a legislative enactment regulating the distribution of licences for the exploitation of a scarce resource. That is peculiarly so where the legislative enactment is part of a scheme creating as criteria for the eligibility to receive permission to exploit the resource events in the history of fishing businesses extending over periods of up to eight years. To construe the legislative enactment as permitting and compelling examination of a series of commercial decisions making up the history of those fishing businesses for periods of that length would call for clearer language than that which is to be found (in the relevant regulation) …
The point to which this passage draws attention is the inherent unlikelihood that the CA s 37(b) contingency (of the Collector being “unable” to sight contentious goods) was intended to invite, or encourage, a factual enquiry about either the objective existence of the goods, or the sufficiency of the reasons for any absence of sighting by a Collector. The only postulated purpose of an enquiry of the former kind would be to establish that the Collector was not objectively “unable to sight” the goods, and was thus required to sight them. But such a requirement would only be triggered by affirmative evidence that the goods were in fact available for identification and sighting as the goods the subject of a relevant request. Evidence of that kind would make any requirement for the Collector to sight the goods one of pointless formality. Such a formality is unlikely to have been the real statutory intention. Conversely, the only purpose of an enquiry about the sufficiency of the Collector’s reasons for not sighting goods would be to recognise CA s 37 as having imposed some such conditional obligation, but the actual wording of the provision provides no contextual basis for concluding that such a result would reflect the statutory intention.
Once these aspects of the CA s 37(b) criterion are appreciated, the unqualified expression “is unable to sight the goods”, used in the context of CA provisions that permit, but do not oblige, Customs inspection, most readily carries the meaning “is unable to sight the goods for any reason”. With that meaning it at least includes being “unable” because of non-attendance at the warehouse following the 9 October 2016 request, even if that non-attendance was merely the consequence of subjective dissatisfaction with the likely utility of such an attendance. The expression is not confined to the meaning that would be conveyed if it were worded in the passive voice expression that “the goods are unable to be sighted”. Nor is it one that requires a factual enquiry about the objective sufficiency of the reasons underlying an absence of “sighting” by a Collector.[16]
[16]The point may be made by hypothesising the example of a Customs inspection, following a request to account, where the contentious goods are presented, but either not satisfactorily identified at that time as the contentious goods, or mistakenly presented in a different quantity, or mistakenly miscounted. It each of those situations the only reasonable conclusion to reach would be that the Customs officers had been “unable to sight the goods”, and the alternative accounting contemplated by CA s 37(b) would be available, without any requirement that Customs revisit the warehouse – in response to assertions / assurances of error in the first attendance and attempted “sighting”.
The preferable construction of CA s 37(b) is that it operates simply as an exclusive, and unqualified, antonym to the “sight” accounting contemplated by CA s 37(a). Interpreted in that way CA s 37(a) & (b) simply posit the alternative situations where a Collector either sights or does not sight the goods. That interpretation captures the essential (and exhaustive) disjunctive apparently suggested by a contextually purposive reading of CA ss 37(a) & (b). It is consistent with the construction of CA s 37 favoured by Kiefel CJ, Bell, Gageler and Gordon JJ in Comptroller General of Customs v Zappia [2018] HCA 54; (2018) 265 CLR 416. Their Honours said (at [29]):-
[29] Stated in affirmative terms, the obligation imposed by s 35A(1)(a) is to keep the dutiable goods safely, including by preventing their entry into home consumption without customs duty being paid. Stated in similarly affirmative terms, the obligation imposed by s 35A(1)(b) when read with s 37 is, on request by a Collector, either to show the dutiable goods to a Collector or to satisfy the Collector that those goods have been dealt with in accordance with the Act.
In the light of the preceding considerations I reject the first proposition involved in Pegasus’ threshold contention that the August 2017 Demand was invalid. The objective physical availability of the goods (assuming it were established) would not dictate a conclusion that a Collector is not “unable” to sight the goods (see further paragraph 67 below), and would not preclude accounting by means other than sighting.
Construction / validity of the 9 October 2016 request
The accounting failure sanction for which CA s 35A(1)(b) provides, depends on four contingencies - that a person (i) “has, or has been entrusted with” customable goods, (ii) that the goods are “dutiable”, (iii) the person has been requested by a Collector to account for them and, (iv) the person does not account to the Collector’s satisfaction:- (see paragraph 28 above). In the present matter there is no dispute that Pegasus had been entrusted with the contentious goods.[17] What Pegasus disputes is that the Collector’s 9 October 2016 letter was an effective request to account for those goods.
[17]Any authorised possession or control over “customable goods” suffices to constitute relevant entrustment for the purposes of the CA:- Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279 at 287 per Dixon CJ; Comptroller General of Customs v Zappia [2018] HCA 54 at [30]-[32] & [41]; (2018) 265 CLR 416.
The wording of the Collector’s 9 October 2016 request letter is outlined later in these reasons:- see paragraph 84 below. Contrary to the self description in the opening sentence of the letter, neither CA s 37 itself, nor CA s 35A(1), confers a statutory request power, conditions the permissible request circumstances, nor regulates the manner or content of any Collector’s request. On the contrary, CA ss 35A and 36 inherently assume that a Collector’s authority to request a person to account has an independent basis. Such an assumption is warranted by the effect of, at least, CA s 30(1)(a) (which relevantly declares most EEG goods to be subject to “customs control”) and CA s 33(2) (which prohibits the unauthorised movement of goods subject to “customs control”). Indeed the ability of any Collector to request a person to account for goods subject to “customs control” is properly to be regarded as:-
(a)an incident of the character of the goods as “dutiable goods which are subject to customs control”
(b)an aspect of Pegasus warehouse licence conditions, and
(c)implicit in a Collector’s power to enter a licenced warehouse at any time, and a licensee’s corresponding statutory obligation to provide reasonable access to warehoused goods, and to permit access to its accounting records:- see CA ss 90, 91 & Schedule 2 Items 9(f)&(g).
Consequently, the reference to CA s 37 in the 9 October 2016 letter as the apparent source of Collector’s request power should be regarded as either mistaken, or as a mis-expressed reference to the required form of accounting.
In any event, Pegasus did not rely on that mis-expression as adversely affecting the validity of the request. Pegasus contended that the request was invalid because of two other considerations. First the request letter stated that, in order to account for the goods Pegasus would need to demonstrate they had been “dealt with in accordance with the Customs Act”. This was said to betray the Collector’s misunderstanding of the accounting options permitted by CA s 37, and to evidence an intention to permit an accounting limited only to the “selective transactions under the second limb of s 37”. Second, perhaps as a way of emphasising the asserted reality of the first point, the Collector was said to have unreasonably refused Pegasus’ requests / invitations to re-attend its premises for the purpose of sighting the goods.
As a matter of plain meaning the 9 October 2016 letter cannot be construed as containing (or foreshadowing) a refusal to sight goods, or an insistence that Pegasus could only “account” by documentary (or other) evidence that it had dealt with the goods “in accordance with the Act”. The actual request contained in the 9 October 2016 letter was simply that Pegasus account “to the satisfaction of a Collector”. It thus necessarily contemplated an accounting in either of the two modes exclusively permitted by CA s 37. The statement in the letter that Pegasus would need to “demonstrate that the goods were dealt with in accordance with this Act” cannot be construed as a refusal to contemplate accounting by sighting the goods. Nor can it reasonably be construed to mean that Pegasus was precluded from establishing that the goods were still present in the warehouse and available for inspection. On the contrary, the statement was, in reality, only a statement of the obvious expectation generated by the details in the Appendices to the request – which evidenced the Collector’s contemporaneous (and in many respects, uncontentious) understanding that a significant number of the goods (certainly the exported goods in Appendix B to the request) were no longer being warehoused. Furthermore. the underlying reality (particularly pertinent where goods of multiple owners are being warehoused) is that merely sighting goods that were of the same description as those listed in the Appendices to the Request, would not itself sufficiently account for the goods. If there were warehoused goods that Pegasus contended were the entered goods listed in the Tables accompanying the request, Pegasus would need to demonstrate that those goods (i) belonged to Pegasus or Trojan Trading and, (ii) had been warehoused prior to June 2016.
In any event, there is no substance in the proposition that a Collector’s request to account for “customable goods” could be invalid in any relevant sense. Customs controlled the goods and, having regard to both the CA provisions and the typical warehouse licence conditions, is regarded as having “entrusted” them to Pegasus. Pegasus had statutory obligations to maintain, and make available to Customs, records of its handling and custody of the goods. Nothing points to any requirement of formality, as to the timing, circumstances or content of a Collector’s request to account (as distinct from the requirement for a written CA s 35A Demand). That analysis of the content of the relevant CA provisions, and the content of the 9 October 2016 request, provide no foundation for, and tend to contradict, the proposition that a Collector’s request to account for dutiable goods could ever be invalid. The only question to determine is a factual one:- did a Collector make a request to account. It is impossible to construe the 9 October 2016 as anything other than such a request.
Even if, contrary to the view I have formed, the 9 October 2016 letter could be viewed as either (i) a refusal to conduct any further inspection of the warehouse or, (ii) a dismissal of the likely utility of such a further inspection, neither of those interpretations of the request letter would deprive it of its essential character as a request to account. Nor is the validity of the request adversely affected by the consideration, urged by Pegasus, that the Collector subsequently unreasonably refused to return to the warehouse for the purpose of sighting the goods. For the reasons set out earlier, the character of being “unable” to sight the goods, for the purpose of CA s 37(b) is neither subject, nor realistically amenable, to any limitation of the reasonableness in the Collector’s conduct in relation to attempting to sight the goods:- see paragraphs 38 to 59 above. Neither CA s 37, nor any other CA provision, imposed on a Collector an obligation to sight contentious goods. Consequently, there is no good reason to regard the Collector’s conduct in not sighting goods as any impediment to Pegasus ability to otherwise satisfactorily account for the goods.
If, contrary to the view I have formed, the “unable” criterion is subject to a requirement of reasonableness in not sighting the goods, I would hold that the Collector nevertheless acted reasonably in not attempting to sight goods, despite the assertions and urgings Pegasus made in the course of its responses to the October 2016 request to account, and despite the matters I noted earlier:- see paragraph 44 above. I would reach that conclusion for the following reasons:-
(a)the request related to a wide range of goods, including, in the case of Appendix B, exported goods that were clearly not able to be sighted, with the result that an extensive process of “accounting” was likely to be required in any event.
(b)Appendix A to the request typically (although not exclusively) specified goods by reference to particular N20 declarations, but Pegasus maintained only a “running balance” bond register and was, to the Collector’s understanding, typically unable to match any goods to specific entry / declaration document.
(c)given the specificity of the request, there would likely have been limited utility in merely “sighting” goods in the warehouse, it would have been necessary to undertake an exercise of establishing, necessarily by examination of documentary records, that any sighted goods were in fact the actual goods to which the request related.
(d)the ongoing operation of the warehouse between June 2016 and August 2017, would reasonably be regarded as likely to require examination of the warehouse movement records, for that extended period, in relation to all of the goods that were proposed to be “sighted”.
(e)the extensive “revision” of Pegasus warehouse records in that period, tended to point to the risk of significant unreliability in the primary records, and the resolution of any / all of those difficulties was a matter for Pegasus to address, and satisfy the Collector accordingly
(f)the number of contentious goods involved in the requested “sighting” was large, and that tended to add to the risk of any proposed “re-sighting” involving an extended and complicated activity.
(g)given the nature of Pegasus’ business, there were likely to be instances (unpredictable as to their frequency and extent) in which the same kind of imported goods were subject to different ownership, and that had the potential to further complicate and extend the scope of activities required to carry out any further “sighting” of contentious warehoused goods.
(h)there was a reasonable basis (given the declared purpose of the June 2016 count, and Pegasus post count assurance) for the Collector to consider that the June 2016 “count” was accurate and to further consider that any further warehouse “count”, many months after June 2016, would not itself be likely to have significant practical utility.
In his supplementary statement, Mr Khokhar addressed Mr Papworth’s April 2018 report, and inspection count. He noted Mr Papworth appeared to have relied on a bond register version that differed from the one Pegasus had provided at the time of the June 2016 count. Nevertheless Mr Khokhar (i) agreed with Mr Papworth’s assertion of a 150 unit EDN movement in November 2016, (ii) did not dispute Mr Papworth’s assertion about the absence of any evidence of warehouse entries between June 2016 and April 2018 and, (iii) did not dispute Mr Papworth’s 120 unit count in April 2018. Nevertheless, Mr Khokhar opined that neither the November EDN movement, nor Mr Papworth’s 120 unit inspection count, established error in the stocktake count, or otherwise provided a satisfactory accounting for the goods that were the subject of either the request or, and more importantly, the August 2017 Demand.
In dealing with Mr Khokhar’s reasoning in relation to other products with shortfalls at the time of the June 2016 count, where there was evidence of post count N30 or EDN movement quantities whose totals exceed the June 2016 count tallies, I have considered that neither the apparent absence of the goods from the warehouse in June 2016, nor the inability to attribute goods to a particular N20 entry record, necessarily precludes satisfaction with an accounting proffered after the date of the request to account:- see paragraphs 128 & 129 above. Whilst I remain of that view, the accounting proffered by Pegasus for this product, particularly in Exhibit 4A, is far from satisfactory.
As is apparent from the Exhibit 4A spreadsheet, and from Schedule 1 (see cell AB:38) Pegasus does in fact assert warehouse entries, totalling 100 units, in December 2016. Those entries, if they in fact related to the “MXP” product, would alone tend to confound satisfaction that the 120 units counted by Mr Papworth in April 2018 could in fact be attributed to the N20 entries that were the subject of the request to account, and involved in the Demand.
As the “X” notation in Schedule 1 (at cell F:38) indicates, in the 22 June 2019 explanatory letter the Respondent did not accept that the “bundle” Pegasus had proffered to support the Exhibit 4A reconciliation actually related to the MXP coded product. Mr Janilionis responded by acknowledging that the “bundle” (and thus the reconciliation) involved an “amalgamation” of two products. Without providing the product codes, he gave the product names as “Erinmore Mixture Pipe Tobacco” and “Erinmore Flake Pipe Tobacco”. He asserted that the Exhibit 4A, 160 unit, warehouse balance as at February 2019 had in fact been 151 units at the time of the June 2016 stock take. (It may be noted that this adds a further element of inconsistency to the 2016 count values noted in Schedule 1:- see cells J, K, M, R & S:38.)
In the course of his subsequent cross examination Mr Janilionis agreed that the MXP code related to a product variously described in the N20 declarations as Mixture Pipe Tobacco and Mixture 50 gram Tobacco, but he asserted an understanding that “Erinmore Mixture” and “Erinmore Flake Tobacco” were the same product as Mixture Tobacco. He asserted that the Exhibit 4A spreadsheet reconciliation dealing with Mixture Pipe Tobacco, “pooled” those products, and another which he named as “Erinmore Flake” (perhaps inadvertently omitting the word “Tobacco”).
Later, when taken to N30 entries that had been included in the MXP reconciliation spreadsheet in Exhibit 4A, Mr Janilionis agreed that “Mixture Tobacco” and Erinmore Flake” were not identical products, and conceded that, at least in one instance, an N30 entry in Exhibit 4A related to a product recorded as Erinmore Flake. Consistent with that concession, Mr Janillionis acknowledged that he could not tell accurately whether the particular product in each movement record was either Mixture Tobacco or Erinmore. Then when taken to the actual June 2016 count records, with their use of separate product codes (EFP5:Erinmore Flake, ER1:Erinmore Mixture Tin and MXP:Mixture Tobacco) he conceded that he had no basis to dispute the accuracy of the product differentiation or their respective warehouse balances. He then described the Exhibit 4A reconciliation as basically a “reverse engineered” exercise, working backwards “logically” from the current (160 unit) holding in the warehouse.
Resort to the June 2016 stock lists and bond register reveals listings relating to a number of the products to which Mr Janilionis alluded. Those products, the additional product descriptions used by Mr Janilionis, and their codes (where known) are set out in the following table.
When Mr Janilionis was questioned further about the different product codes, Mr Janilionis expressed confidence that the reconciliation exercise in Exhibit 4A should have included, and did only include, the MXP and ERI codes and not the other Erinmore code products.
Given that last part of Mr Janilionis’ evidence, and the contemporaneous stock count records in June 2016, the considerable controversy as to whether the Mixture Tobacco included the Erinmore Mixture Tin product coded ER1, appears to be almost irrelevant. The ERI product, with its consistently recorded warehouse balance of 12 units, was duly located and correctly tallied in the June 2016 count. It follows that even if the two differently coded products were in fact the same, there is no basis for questioning the count tally (which was 212 plus 12 or 224 in total) and the shortfall remains as that established by the annotated stock list records (ie, 371 + 12 = 383 minus 212 -12 = 159).
Alternatively, there is a quite inadequate evidentiary foundation for the proposition that the stock codes MXP and ERI in fact involved the same product. Their specific differentiation in the bond register, and the stock on hand list, provides a compelling contradiction of the proposition. Mr Janilionis conceded that he had no real involvement with, or knowledge of, Trojan Trading’s systems and practices at the time of the June 2016 count. He said that the only appropriate explanation could be provided by Mr Horne. Mr Horne did not give evidence, and Mr Janilionis suggested that Pegasus and Mr Horne had not parted on good terms.
This is an instance where there was clear evidence that the product was located and counted in the warehouse. The count value of 212 units that the Collector adopted was apparently corroborated by (although it arguably exceeded) Mr Horne’s contemporaneous count. In those circumstances there is no adequate basis for concluding that a substantial number of the goods was simply missed in the course of the June 2016 count. That remains a possibility, if a substantial quantity of the subsequent N30 entries listed in the Exhibit 4A reconciliation in fact involved “MXP: Mixture Tobacco”. But that proposition was not established by Pegasus, and its likely accuracy was confounded by the considerable inconsistency in both the June 2016 attributed balance values, Pegasus’ November 2016 response, and the post count warehouse tallies asserted by Pegasus.
Accordingly, the preferable conclusion is that the Demand decision should be affirmed in relation to this particular item.
Romeo Y Julietta Short Churhills - Schedule 1 row 41 - Item 4.12
This is one of the few products were there was an element of disagreement / uncertainty about the “attributed balance” at the time of the June 2016 count. (The different values shown in Schedule 1 (at cells J&K:41) reflect the matters summarised in the following paragraphs.)
The product was identified in the October 2016 request to account as having been the subject of a 10 unit N20 entry in March 2015. That identification was subsequently repeated in the August 2017 Demand Tables. However, Mr Khokhar’s working tables for the Demand included a further 6 unit entry in August 2015. Pegasus’ response in the Exhibit 4A reconciliation disputed this entry, on the basis that it related to a different product. Pegasus further indicated that the 6 units had, in any event been the subject of two N30 home consumption entries, in April and May 2016.
The stock on hand report utilised in the June 2016 “count” included four similarly named, but differently coded, “Romeo Y Julietta” products. All of them were listed as having a “zero” warehouse quantity.[32] All four products were also listed in the bond register, again with a “zero” warehouse quantity - as a result of various entries for home consumption between April 2015 and May 2016. The same zero holding, specifically relating to this particular product item (with the product code “RSC2”) was reported in Pegasus November 2016 response. That response identified only the 10 unit entry of March 2015, and indicated that it had been fully acquitted by entries for home consumption in June and December 2015.
[32]No handwritten tally or acknowledgement for this particular product appears on this version of the stock list. There is another handwritten tally sheet on which a similarly branded, but different named, product has been listed, and accorded a 1 unit count;- see T14 at page 163. The name and count tally appear to have been struck through. On the printed stock list, a “1 unit” tally has also been recorded for a similarly named, but differently coded, product. Notwithstanding the resultant uncertainty of the count records, that matter proceeded on the basis that 1 unit of product “RSC2” had been counted in the June 2016 count exercise.
The October 2016 request to account only related to the 10 unit March 2015 entry, asserted an “attributed balance” of 6 units, and noted that only 1 unit had been counted. This resulted in an apparent 5 unit shortfall.
The August 2017 Demand also only specified the 10 unit entry in March 2015. However, it asserted the subsequent home consumption entry of 6 units, a June 2016 “count” of 1 unit, and a 3 unit shortfall. Regard to the explanation contained in Mr Khokhar’s supplementary statement reveals that in preparing the Demand tables he had in fact (i) had regard to the August 2015 6 unit warehouse entry, (ii) regarded that entry as having been fully acquitted by home consumption entries in April and May 2016 and, (iii) had also taken into account a March 2017 home consumption entry of 2 units. This process, together with the “I unit” June 2016 count, resulted in the “3 unit” shortfall indicated in the demand (rather than the 5 unit shortfall indicated in the October 2016 request):- see Schedule 1 cells Q,T,V & X:41.
Contrary to the matters in paragraph 227 above, but consistent with the October 2016 request, the Exhibit 4A reconciliation asserted an attributed balance of 6 units in June 2016. It asserted a 4 unit balance after the March 2017 home consumption entry. Consistent with the latter, Mr Papworth reported sighting 4 units in the warehouse as at April 2018. Those two circumstances provide the basis for Pegasus’ assertion of satisfactory accounting for the goods. However, and perhaps unsurprisingly, given the matters indicated in the preceding paragraphs, the Respondent’s 22 July 2019 letter indicated its non-acceptance of the Exhibit 4A reconciliation.
The reconciliation proffered by Pegasus in Exhibit 4A, with its indication of a warehouse holding, and apparent substantiation by Mr Papworth’s March 2018 inspection count, does point to the possibility that the product had been miscounted in the June 2016 stock take count. The Respondent’s apparent acceptance of the March 2017 home consumption entry arguably implies acceptance of that possibility.
However, the significance of both the possibility of miscounting, and the Respondent’s apparent partial acceptance of it, has to be assessed against the background of the totality of Pegasus contemporaneous records. All of those positively disavowed any warehouse holding of the product at the time of the June 2016 count:- see paragraph 227 above. In those circumstances, the retrospective reconciliation proffered in Exhibit 4A cannot be regarded as providing a satisfactory accounting for the goods. Accordingly, the preferable conclusion is that the Demand decision should be affirmed, in relation to this particular item.
Van Nelle Tobacco - Schedule 1 row 41 - Item 4.13
This product was the subject of two warehouse entries in July and December 2015, and two entries for home consumption, in August 2015 and May 2016. They resulted in an uncontentious “attributed balance” of 338 units as at June 2016. That was also the count indicated in the stock on hand list used in the June 2016 count. However, the contemporaneous hand written count records, both those completed by the Customs officers and those subsequently provided by Mr Horne, counted only 337 units.
The bond register for this product also indicated a total warehouse holding of 338 units, made up of the 18 unit balance of the July 2015 entry, and the whole of the 320 unit entry, which had been purchased from another warehouse entity in January 2016. Notwithstanding the bond register and stock list details, the October 2016 request to account only addressed the July 2015 20 unit entry, asserted a warehouse balance of 17 units and a corresponding single unit shortfall. In turn, Pegasus’ November 2016 response only referred to the July 2015 N20 entry document, and asserted a warehouse holding of 18 units at the time of the June 2016 count. (These details are reflected in Schedule 1 - at cells J, K & R:42.)
It is also apparent from Schedule 1 (see cells S, AH, AI & AJ: 42) that Pegasus asserts warehouse holdings, of either 18 or 20 units, at various times between October 2017 and February 2019, after taking into account the November 2016 export of 320 units. Those subsequent, and inconsistent, assertions provide no basis for expressing dissatisfaction with the accuracy of the 337 unit count recorded in the contemporaneous handwritten records of the June 2016 count. On the contrary, they do provide a basis for scepticism about the accuracy of the Exhibit 4A reconciliation, and they detract from satisfaction that Pegasus has satisfactorily accounted for the 1 unit shortfall detected at the time of the June 2016 count, and maintained in the August 2017 Demand. Accordingly, the preferable conclusion is that the Demand decision should be affirmed, in relation to this particular item.
Cohiba Mini White 10s - Schedule 1 row 41 - Item 4.14
This product was the subject of a single 5 unit N20 entry in December 2015, and two entries for home consumption, in February and May 2016. Those transactions resulted in an uncontentious “attributed balance” of 3 units as at June 2016. That was also the count indicated in the Pegasus bond register. However the stock on hand list used in the June 2016 count appears (despite the contrary assertion in the entry in Exhibit 25R) not to have listed this particular product. This is because, whilst there are several “Cohiba” products included on the stock on hand list, the “Mini White” name, and 2 unit count value, were added by hand to both of the printed lists utlised by Mr Horne and the Customs officers during the June 2016 count.
The details summarised in Schedule 1 (in column R) indicate that Pegasus’ November 2016 response to the request to account asserted a warehouse holding of 3 units at the time of the June 2016 count. The other details in Schedule 1 (columns AH to AJ) indicate both Pegasus’ assertion of a 3 unit warehouse balance, and Mr Papworth’s corresponding “count” in March / April 2018 and in February 2019.
The available information suggests a difficult to reconcile conflict between the actual June 2016 count, and the inference available from the Exhibit 4A records and Mr Papworth’s apparently corroborating counts in 2018 and 2019. Certainly one possible conclusion is that the June 2016 count was mistaken. But the fact that both the handwritten records reached the same value establishes that the goods were actually sighted and counted, and that tends against the likelihood of mistake. The “3 unit” balance asserted in Pegasus’ November 2016 response, and in the Exhibit 4A reconciliation may be accepted as accurate, but given the many acknowledged irregularities in Pegasus bond register, it does not warrant a conclusion that Pegasus has satisfactorily accounted for the I unit shortfall the subject of both the request to account and the Demand. Before reaching such a conclusion, some explanation should have been provided for (i) the absence of an entry on the stock list and, (ii) the discrepancy between the bond register and the corroborated handwritten count totals. Furthermore, there ought to have been some evidence to explain the circumstance in which the additional unit had been located in the warehouse, or at least some specific evidence pointing to the likelihood of a mistake in the June 2016 count. There was no such evidence. Accordingly, the preferable conclusion is that the Demand decision should be affirmed, in relation to this particular item.
La Gloria Torpedo No 1 Maduro - Schedule 1 row 41 - Item 4.15
This product was the subject of a single N20 entry in October 2014, and six entries for home consumption (between October 2014 and April 2016) resulting in an uncontentious “attributed balance” of 17 units as at June 2016. That was also the count indicated in both the Pegasus bond register, and the stock on hand list used in the June 2016 count. However, the relevant page of the stock on hand list used in the June 2016 count has no handwritten annotation relating to this particular product (unlike annotations for other products on the same page). This contrast between products listed on the same page of the stock list suggests that the particular product was not actually sighted and counted during the June 2016 stock take count.
Pegasus’ November 2016 response to the request to account asserted that the bond register / stock list quantity was held in the warehouse. Apparently consistent with that assertion, Mr Papworth located 17 units in the warehouse in March 2018.
Notwithstanding the correspondence between the contemporaneous warehouse records and the result of Mr Papworth’s subsequent inspection, as well as the Respondent’s acceptance (in the 22 July 2019 letter) that the proffered “bundle” of documents supported the Exhibit 4A reconciliation, Mr Khokhar rejected that reconciliation as a satisfactory accounting. His reasons, which the Respondent adopted in final submissions, were to substantially the same effect as those I addressed earlier in these reasons, in connection with items 1.10 and 1.11:- see paragraphs 141, 142, 151 & 152 above. Those reasons are unpersuasive because the absence of goods from the warehouse in June 2016 is not determinative of a failure to provide a satisfactory accounting in response to the August 2017 Demand:- see paragraph 128 above.
As in the case of item 1.11, there remains the difficulty that neither the asserted warehouse presence of the goods at the time of the June 2016 count, nor the circumstances of their subsequent apparent location, was the subject of any direct evidence. I alluded to difficulties of this kind when dealing with the Johnny Walker goods:- see paragraph 136 above. In that case, where other similarly branded goods had been both listed and located, Pegasus had originally acknowledged the shortfall in its November 2016 response to the request for account. In the present case the circumstances differ in material respects.
The bond register entry, the presence of the product on the stock list, the absence of any handwritten annotations on the stock list, the absence of any record indicating subsequent warehouse entries, the reported presence of the goods in March 2018, and the inherent risk of error in the count process (see paragraph 125 above) are circumstances that incline me to the view that the greater probability is that these goods were in the warehouse, but overlooked and uncounted, in the course of the June 2016 count – as Pegasus impliedly asserted in its November 2016 response to the October 2016 request. The cryptic information contained in the November 2016 response does not demonstrate that Pegasus had satisfactorily accounted for the goods prior to the preparation of Exhibit 4A, and the provision of the “bundle” relied on to support it. However, the matters indicated in Exhibit 4A, and the other considerations to which I have referred above, lead to the preferable conclusion that Pegasus has now satisfactorily accounted for the goods. Accordingly, the Demand should be varied in the manner contended for by Pegasus.
La Gloria Wavel Maduro - Schedule 1 row 41 - Item 4.16
This product was also the subject of a single N20 entry in October 2014, and five entries for home consumption (between October 2014 and April 2016). That resulted in the uncontentious “attributed balance” of 29 units as at June 2016. That was also the count indicated in both the Pegasus bond register and the stock on hand list used in the June 2016 count. However the relevant page of the stock on hand list used in the June 2016 count has no handwritten annotation relating to this particular product (unlike annotations for other products on the same page). This contrast between products listed on the same page of the stock list suggests that the particular product was not actually sighted and counted during the June 2016 stock take count.
Pegasus’ November 2016 response to the request to account asserted that the bond register / stock list quantity was held in the warehouse. Apparently consistent with that assertion, Mr Papworth located 29 units in the warehouse in March 2018.
Notwithstanding the correspondence between the contemporaneous warehouse records and the result of Mr Papworth’s subsequent inspection, as well as the Respondent’s acceptance (in the 22 July 2019 letter) that the proffered “bundle” of documents supported the Exhibit 4A reconciliation, Mr Khokhar rejected that reconciliation as a satisfactory accounting. His reasons, which the Respondent adopted in final submissions, were to substantially the same effect as those I addressed earlier in these reasons, in connection with items 1.10 and 1.11:- see paragraphs 141, 142, 151 & 152 above. Those reasons are unpersuasive because the absence of goods from the warehouse in June 2016 is not determinative of a failure to provide a satisfactory accounting in response to the August 2017 Demand:- see paragraph 128 above.
For substantially the same reasons as those relating to item 4.15, the more likely conclusion is that these goods were in fact missed during the June 2016 stock take count, and have been satisfactorily accounted for in the Exhibit 4A reconciliation. Accordingly, the Demand should be varied, in relation to this item, in the manner contended for by Pegasus.
Conclusion
Consistent with the views I expressed earlier (see paragraphs 113 to 116 above), the preferable Tribunal decision is to set aside the August 2017 Demand and remit the matter to the Collector for redetermination in accordance with these reasons for decision and, in particular, the findings indicated in Schedule 4.
The Collector’s 18 August 2017 Demand is set aside and the matter is remitted to the Collector for reconsideration in accordance with the direction that the Applicant has failed to account to the satisfaction of the Collector only in relation to the Items that are indicated in Schedule 4 (by the “- n” values) as having a shortfall quantity.
250.
251. I certify that the preceding 249 (two hundred and forty-nine) paragraphs are a true copy of the reasons for the decision herein of Mr P W Taylor SC, Senior Member
...................................[sgd].....................................
Associate
Dated: 24 November 2020
Dates of hearing: 18 - 21 February 2019
30 July 2019 - 2 August 2019
7 November 2019Counsel for the Applicant: Mr John Whelan (18 – 21 February 2019)
Mr Tim Flaherty (remaining hearing dates)Solicitors for the Applicant: Mr Michael Flaherty Counsel for the Respondent: Ms Tamara Phillips Solicitors for the Respondent: Ms Nicolette Strauss Schedule 1:- Demand items and calculation.
see paragraph 111 above
Schedule 2 – Customs Act 1901 – Overview of relevant provisions
see paragraph 19 above
Customs control:- Subject to certain (presently immaterial) qualifications, all imported goods that are “excise equivalent” alcohol and tobacco products are subject to “customs control” when they are imported:- see CA s 30(1)(a) & 68(1)(a).
The imported goods remain subject to “customs control” until they are either:-
(a)used in the manufacture of “excisable goods”:- CA s 30(1)(a)(vi), 30(1B)(a);
(b)entered or delivered for “home consumption” in accordance with a relevant authority, permission or declaration and advice:- CA s 30(1)(a)(vi) & 30(1B)(b); s 69 (permission to deliver without entry); s 70 (special clearance goods) & 162A (permission conditional upon the provision of security for payment of duty); s 71C(1) & (4) (import declaration / advice / authority to take into home consumption); or
(c)exported in accordance with the relevant entry and authorisation provisions in CA ss 113, 113AA, 114 (entry and declaration), CA s 114C (export entry advice):- see CA ss 30(1)(a)(vi) & 30(1B)(c).
Dutiable goods:- Imported goods are generally liable to customs duty under the Customs Tariff Act. That duty must be paid when the goods are entered for home consumption and at the then applicable rate:- CA s 132(1). If imported goods are excise equivalent goods and have been used in manufacture whilst warehoused (or in premises licensed under the Excise Act), duty becomes payable when the owner lodges a return for a manufacturing period:- CA s 105C. Customs duty is a debt payable to the Commonwealth by the “owner” of the goods:- CA s 165. The “owner” of goods includes any person who has possession or control of them:- CA s 4(1).
Entry for warehousing:- Imported goods must be entered either for home consumption or for warehousing (in a licensed warehouse):- CA ss 4(1) (definition of “warehouse”), 68(2) & (3). If they are not entered within the prescribed time, a Collector may cause them to be removed to a warehouse:- CA s 72. An entry for warehousing requires the importer to make a warehouse declaration (in the required form:- see CA s 71M), and receive (contingent on the payment of any applicable fees) a warehouse declaration advice:- CA ss 68(3B), 71DH & 71DJ. A warehouse declaration advice must state that the goods are either “cleared for warehousing” or to be held for further examination:- CA s 71DJ(3). If the goods have been “cleared for warehousing” a Collector must give a written authority to “take the goods into warehousing”:- CA s 71DJ(4)-(6).
Entry of home consumption or export:- Goods that have been entered for warehousing may subsequently be entered for either home consumption or export:- CA s 99(1) & Items 2(b) & 2(c) above. Until one of those entries occurs warehoused goods remain subject to customs control. Delivery of warehoused goods for either home consumption or export is prohibited, unless an “authority to deal” has been issued:- CA s 99(2)&(3).
Movement of customs control goods:- Whilst goods are subject to customs control, any unauthorised movement, alteration of or interference with the goods, constitutes an offence of strict liability:- see CA s 33. Unauthorised movement of customs control goods results in their forfeiture to the Crown:- CA s 229(1)(g).
Security for customs control goods:- The Commonwealth has the right to require security for compliance with the CA in relation to any goods subject to “customs control”. Any “officer of Customs” may refuse to deliver goods, or give any “authority to deal” with them, unless and until any required security has been given:- see CA s 42.
Warehouse licences - eligibility:- An authority to deal in relation to an entry for warehousing will typically be conditioned upon delivery of the goods to a licensed warehouse. The grant of a warehouse licence is conditional upon the Comptroller General of Customs satisfaction that (i) the applicant (their partners, officers or employees) are fit and proper, (ii) the premises are secure, (iii) the applicant has suitable equipment and, (iv) the applicant would keep books of account and records suitable to enable them to be audited by an officer of Customs:- CA ss 79 & 81(1).
Warehouse licence conditions:- A warehouse licence is subject to statutory conditions requiring written notification of any substantial change in the physical security, equipment or account and record keeping relating to the operation of the warehouse:- CA s 82(1)(d)-(f). The licence may be subject to any additional conditions the Comptroller General of Customs considers to be either necessary or desirable to ensure compliance with Customs legislation:- CA s 82(3), 82A & 82B. Those conditions will typically include, and in the case of Pegasus’ licence did contain, conditions to the following effect:-
(a)separate storage of warehoused “customable goods”
(b)receipt and movement of goods only in accordance with an N20 Declaration or another kind of permission granted by Customs officers
(c)the conduct an annual stock take
(d)notification to Customs of any substantial change in the quantity or type of warehoused goods, including any loss, theft or damage to goods.
(e)providing “all reasonable facilities and assistance” (including office accommodation and space) for Customs officers to use whilst undertaking duties (ie., the examination of goods or conducting “compliance checks / assessments) at the licensed premises
(f)maintenance of “accountable and auditable records of the condition, quantity, movement and storage” of warehoused goods
(g)allowing Customs officers to “inspect … copy or take extracts of” any records relating to “the condition, quantity, movement and storage” of warehoused goods.
Licence condition breaches:- Any breach of a warehouse licence condition is an offence of strict liability, and may result in either suspension or cancellation of the licence:- CA ss 82C, 86(1)(g), 87(1)(a). Suspension of a licence precludes the lawful use of the warehouse (except in accordance with the permission of a Collector):- CA s 87(6) & (7). Cancellation of a licence triggers alternative obligations to either pay any applicable duty or move the goods (in accordance with a Customs permission)- CA s 87(4).
Inspection / examination by Customs:- The holder of a warehouse licence must (i) “stack and arrange” the goods so as to permit reasonable access and examination by Customs officers and, (ii) provide assistance to a Collector in examining the goods and otherwise performing duties at the warehouse: CA s 90. A Collector has a statutory authority to enter a warehouse at any time (including by the use of force) and examine any goods in the warehouse:- CA s 91. Any officer of customs may examine, and do whatever is reasonably necessary to examine, any goods that are subject to customs control:- CA s 186. An appropriately authorised Customs officer, after giving written notice, may enter premises and search the premises and inspect or examine any goods or records: CA s 214AB, 214AC, 214ACA.
Offences and liability to account:- A Collector’s “authority to deal” given under CA s 71DJ(4)-(6) authorising goods to be taken into warehousing necessarily results, on their delivery to the warehouse, in the entrustment of the goods to the warehouse licensee. The licensee thereafter commits an offence if they (a) fail to keep the goods safely, (b) fail, on request, to account for the goods “to the satisfaction of a Collector” or, (c) fail to deliver the goods in accordance with an authority to deal or a movement permission:- CA s 36(1)-(3) & (4)-(7). Where a relevant failure to keep, or account satisfactorily for, the goods has occurred, a Collector may make a written Demand for payment of “the amount of the duty” that would be payable if the goods were entered for home consumption as at the Demand date:- CA s 35A(1). The Collector may take court proceedings to recover the amount, and in those proceedings the Collector’s statement or averment is evidence of the matters stated or averred:- CA s 35A(2) & (3).
A person accounts for goods to the satisfaction of a Collector “if and only if” (i) the Collector sights the goods or, (ii) “if the Collector is unable to sight the goods”, the person otherwise satisfies the Collector that the goods have been dealt with in accordance with the Act:- CA s 37.
Schedule 3 – The June 2016 audit / stock take count
Schedule 4:- AAT Review - Shortfall findings
see paragraphs 130, 131 & 249 above
Item Product Name AAT finding Ex 4A / 25R Short "n" "n" 1.7 Dalmore 12YO 12x1000ml 40% -5 1.8 Johnnie Walker Green 12x1000ml 40% -1.5 1.9 Jose Cuervo Esp Plata (Silver) 6x1L 38% -10 1.10. Lillet Blanc Aperitif 6x750ml 17% 0 1.11 Myers Rum 12x1L-40% 0 1.12 Patron XO Cafe 6x750ml 35% -14 2.7 Heineken Lager 4.9% 20L Airkeg -1 2.8 Heineken Beer 30 Litre 5% kegs 0 3.7 Chung Hwa 0 3.8 Double Happiness -2 3.9 Panda 0 3.10, 3.11 Karelia Lights 0 3.12, 3.13 American Legend 0 3.14 Yunnan Special (S.P.DF) 0 3.15 Yuxi (EXP HP) 0 3.16 B&H FF KS Box -5 3.17 B&H Smooth Lights KS 0 3.18 Dunhill Blue 0 3.19 Dunhill Red -1 4.7 Macanudo Gold Crystal Tube 0 4.8, 4.9 Mixture Pipe Tobacco -153 4.10. Hdm Le Hoyo Des Dieux -24 4.11 Cohiba Club 10s -3 4.12 Romeo Y Julieta Short Churhills -3 4.13 Van Nelle Tobacco -1 4.14 Cohiba Mini White 10s -1 4.15 La Gloria Torpedo No 1 Maduro 0 4.16 La Gloria Wavell Maduro 25s 0
- AGLC
- Pegasus Supply Solutions Pty Ltd and Collector of Customs [2020] AATA 4688
- Case
- [2020] AATA 4688
- Decision Date
CaseChat Overview and Summary
The primary legal issue before the Tribunal was whether the Applicant had satisfactorily accounted for the missing excise equivalent goods in accordance with section 37 of the *Customs Act 1901* (Cth). This involved determining whether the goods were genuinely missed during the stocktake and subsequently accounted for through the Applicant's reconciliation process, or if they represented an unaddressed shortfall for which duty was payable.
The Tribunal found that the goods in question were more likely missed during the June 2016 stocktake and had been satisfactorily accounted for in the Applicant's Exhibit 4A reconciliation. The Tribunal reasoned that the goods remained subject to customs control until they were used in manufacture, entered for home consumption, or exported. However, in this instance, the evidence supported the conclusion that the shortfall was a result of an error in the stocktake rather than an unaccounted-for removal of goods.
Accordingly, the Tribunal set aside the Collector's August 2017 Demand and remitted the matter to the Collector for redetermination. The Tribunal directed that the Applicant should only be considered to have failed to account for goods in relation to items specifically indicated in Schedule 4 as having a shortfall quantity.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
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