Re Labrador Liquor Wholesale Pty Ltd and CEO of Customs

[2006] AATA 485

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 485

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2006/144

GENERAL ADMINISTRATIVE DIVISION		)
Re		LABRADOR LIQUOR WHOLESALE PTY LTD

Applicant

And CEO OF CUSTOMS

Respondent

DECISION ON STAY APPLICATION

Tribunal Senior Member B J McCabe

Date2 June 2006

PlaceBrisbane

Decision The application for stay is refused.

........{Sgd}......................................

B J McCabe
  SENIOR MEMBER

CATCHWORDS

CUSTOMS – application for stay of decision to cancel warehouse licence by the CEO of Customs – licence was cancelled due to convictions of serious offences under the Customs Act – applicant deemed not a fit and proper person to hold a licence – convictions being appealed – stay power under the AAT Act – appropriateness of stay – licence expires in a short period

Administrative Appeals Tribunal Act 1975 s 41

Customs Act 1901 s 79, 83, 86, 87

Excise Act 1901

Australian National Railways Commission and Moyle (1988) 15 ALD 571

Cape York Airlines Pty Ltd and Civil Aviation Safety Authority (2004) 80 ALD 369

Civil Aviation Safety Authority v Hotop (2005) 145 FCR 232

General Medical Council v Spackman [1943] AC 627

Griffiths Grif-Air Helicopters Pty Ltd and Civil Aviation Authority (1991) 31 ALD 380

Minister for Immigration and Multicultural Affairs v Ali (2000) 62 ALD 673

Shi v Migration Institute of Australia Ltd (2003) 134 FCR 326

Worldaudio Ltd and Australian Communications and Media Authority [2006] AATA 177

Yolbir v Administrative Appeals Tribunal (1994) 48 FCR 246

REASONS FOR DECISION ON STAY APPLICATION

2 June 2006 Senior Member B J McCabe

introduction

1. Section 79 of the Customs Act 1901 provides for the issue of warehouse licences. The holder of a warehouse licence is entitled to import goods which may be stored temporarily in the warehouse before customs duty has to be paid or the goods are exported. Imported goods can only be warehoused in licensed premises. The licence can be suspended (s 86) or cancelled (s 87) in certain circumstances.

2. The applicant in these proceedings, Labrador Liquor Wholesale Pty Ltd, was the holder of a warehouse licence. A delegate of the Chief Executive Officer (CEO) of Customs decided to cancel the applicant’s warehouse licence pursuant to s 87 after the applicant and two of its officers were convicted of offences under the Act. The delegate apparently formed the view the convictions suggested the applicant was not a fit and proper person to hold a warehouse licence – one of the grounds for suspension or cancellation under ss 86 and 87. The Supreme Court of Queensland imposed substantial penalties in respect of the breaches. The applicant and the officers have appealed the convictions to the Queensland Court of Appeal, and that court has stayed the execution of the trial judge’s orders pending the hearing of the appeal.

3. The applicant has asked the Tribunal to stay the decision of the CEO of Customs pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) pending the outcome of the appeal to the Queensland Court of Appeal. The applicant and the respondent were heard in relation to the request at a hearing on 23 May 2006. These reasons relate to that application.

the power to order a stay

4. The Tribunal’s power to stay the operation or implementation of a decision is found in s 41(2) of the AAT Act, which provides:

The Tribunal may, on request being made, as prescribed, by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.

5. The principles governing the exercise of the discretion under s 41(2) are reasonably settled. They can be found in cases like Worldaudio Ltd and Australian Communications and Media Authority [2006] AATA 177, Cape York Airlines Pty Ltd and Civil Aviation Safety Authority (2004) 80 ALD 369, Griffiths Grif-Air Helicopters Pty Ltd and Civil Aviation Authority (1991) 31 ALD 380 and Australian National Railways Commission and Moyle (1988) 15 ALD 571. A reading of those cases suggests the Tribunal should have regard to at least four factors when considering whether it is desirable to grant a stay:

·     Prejudice to the parties or anyone else;

·     Any threat to the public interest if a stay is granted;

·     The merits of the applicant’s case on review;

·     Whether the review application would be rendered pointless if the stay is not granted.

6.      The last of these points is particularly important. The power to order a stay is available for the limited purpose of securing the effectiveness of the ultimate hearing.

7.      I will deal with these considerations below. It is convenient to deal with the first two together.

prejudice and the public interest

8.      I was provided with two affidavits (exhibits 1 and 2) sworn by Jeffrey Bryce, one of the directors of the applicant. In exhibit 1, Mr Bryce described the operation of the applicant’s business. He opined (at paragraph 34):

In the absence of a licence, Labrador will, in a short period of time, be unable to run its business. If Labrador cannot meet its obligations [to major customers], irreparable hardship will be caused to the business.

9.      In exhibit 2, he said (at paragraph 15) it was not practical to sell the business without a warehouse licence. He said a sale would also be problematic because it would leave him without a business to return to in the event his convictions were overturned on appeal.

10.     Mr Bryce said the business is currently clearing its stock pursuant to single transaction permissions – an administrative process that requires the applicant to obtain permission from Customs in respect of each transfer of stock to another warehouse. (Some of the stock does not attract customs duty but may attract excise duty. The applicant’s Excise Manufacturer and Excise Storage licences under the Excise Act 1901 have also been cancelled by the Australian Taxation Office. That decision is not being contested in these proceedings. The Australian Taxation Office is apparently granting single transaction permissions in respect of each transfer of goods subject to excise.)

11.     I accept the applicant’s business will probably be forced to close in the near future if a stay is not ordered. It cannot trade without the relevant approvals, and I accept Mr Bryce’s claim that a sale of the business would be difficult to organise given the business will shortly cease to be a going concern. I assume it is possible the applicant could organise a sale at a reasonable price if he was allowed time to do so (ie, if the licence were restored for a period so that the business could be marketed as a going concern). I also accept Mr Bryce faces a significant loss.

12.     Mr Northcote, for the respondent, pointed out the applicant and its directors have been found to have engaged in a serious fraud on the revenue. He says a stay order would put them back in business where they might perpetrate further frauds. He says a stay order would prejudice the respondent and – because the public is interested in efficient revenue collection – it would be contrary to the public interest.

13.     These are important points. Holders of warehouse licences occupy positions of trust. Permitting a licensee to continue in business after its licence was cancelled is problematic in two ways. Firstly, there is a risk that the errant licensee might continue the fraudulent activities which resulted in the successful prosecution. That will hurt the CEO of Customs and ultimately the taxpayer. Secondly, there is a danger that the warehouse licensing scheme itself might be undermined. A licensee who breaches its obligations must be seen to be the subject of prompt regulatory action. A failure to apply appropriate sanctions will undermine the credibility and effectiveness of the warehouse licensing scheme, which will damage the public interest in orderly and efficient revenue collection.

14.     Mr Woods, on behalf of the applicant, said the applicant had no objection to a reporting system which required the applicant to report each transaction to the respondent. A protocol under which each movement of goods into and out of the warehouse was reported to the respondent (on the understanding that the respondent could conduct regular spot checks or audits) might protect the public against a direct threat to the revenue. But agreeing to such an arrangement creates the risk of an appearance that the Tribunal is prepared to compromise the effectiveness of the warehouse licensing scheme.

merits

15.     The applicant and its directors have been convicted of serious offences of dishonesty. Those offences go to the very heart of the question of fitness and propriety to hold a warehouse licence. The Tribunal is unlikely to disturb a cancellation decision while those convictions are on the record. It follows that the appeal to the Tribunal is without merit on the current state of the evidence. The best the applicant can say is that the application for review will become meritorious if and when the Court of Appeal sets aside the convictions. The applicant goes on to argue that the case before the Court of Appeal has reasonable prospects of success. The applicant says the Tribunal should take comfort from the fact the Court of Appeal has stayed the orders of the trial judge pending the outcome of the appeal. The applicant says I should, in effect, follow the example of the Court of Appeal.

16.     Mr Northcote urged me not to second-guess a decision of a superior court, even if it is subject to appeal. He pointed out that appeals are typically unsuccessful. He added that a partial success on appeal might not assist the applicant. He also pointed out that the findings of the trial judge to the effect that the applicant had falsified invoices were not subject to attack on appeal. Mr Northcote said that finding alone would justify a cancellation decision by the respondent even if the Court of Appeal overturned the convictions.

17.     I agree with Mr Northcote that it would not ordinarily be appropriate to look behind a decision of a superior court: see, for example, General Medical Council v Spackman [1943] AC 627 at 634-635 per Viscount Simon; see also Minister for Immigration and Multicultural Affairs v Ali (2000) 62 ALD 673 at 684 per Branson J. But nor is it appropriate for me to look behind the stay order issued by the Court of Appeal. I accept it is permissible to have regard to the fact the applicant has been granted a stay by the Court of Appeal when assessing merits for the purpose of s 41(2) of the AAT Act. The fact a stay has been ordered by the Court of Appeal suggests the criminal appeal has some merit, which may change the complexion of the applicant’s case before the Tribunal in due course. I accept that if the applicant and its directors are partly or even wholly successful on the criminal appeal there may still be adequate grounds for cancelling the licence, but that dispute can only really be resolved at a full hearing of the application for review.

18. I note the Federal Court has repeatedly said the power in s 41(2) is to be given a broad interpretation: see, for example, Yolbir v Administrative Appeals Tribunal (1994) 48 FCR 246 at 249 per Davies, Burchett and O’Connor JJ; Shi v Migration Institute of Australia Ltd (2003) 134 FCR 326 at 332 per Tamberlin J; Civil Aviation Safety Authority v Hotop [2005] FCA1023 at [44] per Siopis J. When viewed in that light, I think the provision permits me to have regard to the potential for a dramatic improvement in the applicant’s case if the applicant and its directors succeed in the Court of Appeal.

would the review application be rendered pointless without a stay?

19. This factor is in many ways the most important because the power in s 41(2) is given for a limited purpose of preserving the status quo pending the review. If the parties could comfortably submit to the review and await the outcome without the benefit of a stay, the discretion to order a stay would not be exercised. A stay would also be refused where the point in issue before the Tribunal will become moot – that is, if the decision under review will cease to have any practical effect.

20.     Evidence given by the applicant suggests a stay will be necessary to preserve the status quo until a hearing can be held following a decision by the Queensland Court of Appeal. In the absence of a stay, the business – the applicant’s customers, and perhaps its plant and equipment – may be lost, which will render the application for review pointless.

21.     Mr Northcote suggests the applicant and its directors should sit on the sidelines of the warehouse business until a decision of the Court of Appeal. He says that if they are cleared, the applicant can simply apply for a fresh licence from the respondent and resume the business. The evidence from Mr Bryce in particular suggests restarting the business would not be as easy as Mr Northcote implies.

22. I am attracted to the applicant’s argument but there is a further complication. Mr Northcote points out the recently-cancelled licence is due to expire in any event on 30 June 2006 by reason of the operation of s 83 of the Customs Act1901. (Section 83 says all licences expire each year on 30 June.) He says there is no point granting a stay of the cancellation decision pending the outcome of the Court of Appeal proceedings since those proceedings will not be resolved before 30 June 2006. The point would be moot by the time the Tribunal got around to dealing with the reviewable decision.

23.     Mr Northcote pointed out that if a stay is not ordered, the licence could not be renewed under s 84. He also foreshadowed that the respondent would reject a fresh application for a licence in light of the convictions.

24.     The applicant says the Tribunal can still order a stay of the cancellation decision and, if and when an application for renewal of the licence is declined, the Tribunal can order a stay of that decision too. The applicant’s argument suggests the decision to cancel the licence and a future decision to reject a renewal beyond 1 July 2006 should be seen as one effective decision that will stand or fall on the outcome of the proceedings before the Court of Appeal.

25.     The applicant relies in particular on the decision of Siopis J in Civil Aviation Safety Authority v Hotop [2005] FCA102. In that case, the airline operator had been in business for 22 years. It required approvals from the regulator to remain in business. CASA had developed a practice of giving short term renewals. It decided to cancel the approval shortly before it was due to expire. The Tribunal exercised the power under s 41(2) to restore the cancelled approval. It also directed that the approval remain on foot until the proceedings had been resolved, which was likely to be some time after the nominal expiration date of the approval. The decision was affirmed on appeal. Siopis J said (at paragraph 43) that s 41(2) orders could have a positive effect in the sense that they permit an applicant to continue to enjoy a statutory benefit that the reviewable decision would have denied to him or her. His Honour said that approach to the provision was consistent with the purpose of the Act: at paragraph 49.

26.     The decision in Hotop is distinguishable from the present facts. In Hotop, CASA had the power to extend approvals and the Tribunal was merely stepping into the decision-maker’s shoes to exercise the power differently. In this case, the decision-maker cannot extend a licence beyond the end of June. It follows the Tribunal cannot treat the two decisions (cancellation and refusal to renew) as one.

27. While I have some sympathy for the applicant’s position, the words of s 41(2) leave me little alternative but to focus on the only decision that is before me. As the Full Court pointed out in Yolbir (at paragraph 9), the words of s 41(2) refer to a power to make orders with respect to “the decision to which the relevant proceeding relates…”. The only decision that fits that description is the cancellation decision. The respondent has not yet made a decision in relation to the renewal; indeed, it has not even received an application. Even if one argued the respondent’s advice to the Tribunal about the prospects of a renewal amounted to a constructive refusal of renewal, the fact remans that decision is not before the Tribunal in these proceedings.

28. On the face of it, the Tribunal cannot grant effective relief in this case when the matter is heard some time in the future because the statute provides that the licence expires at the end of June. The Tribunal cannot reinstate a licence that has already expired by force of statute. Granting a stay so the applicant can continue trading until the end of June would leave it in a position to contest a non-renewal decision, but that is not the point of the power in s 41(2). The stay power is intended to facilitate a proper review of the decision challenged in these proceedings, not to facilitate a decision that will be challenged in proceedings that have not yet been commenced.

conclusion

29. I have considerable sympathy for the applicant. The wording of s 41(2) of the AAT Act requires that the Tribunal focus its attention on what the issue of a stay will achieve in relation to these proceedings. While a stay would be of considerable practical benefit to the applicant and its directors in securing their position in their larger dispute with the respondent, that is not enough. The provision does not permit me to look at a bigger picture. It follows that the application for a stay of the cancellation decision must be refused.

I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member B J McCabe

Signed:         .....................................................................................
  Associate      Adam Ryan

Date of Hearing  23 May 2006
Date of Decision  2 June 2006
The applicant was represented by Mr Woods, of counsel.
The respondent was represented by Mr Northcote.