Scarfe, Delegate of the Chief Executive Officer of Customs v Coflexip Stena Offshore International SA

[1999] WASC 242

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   SCARFE, DELEGATE OF THE CHIEF EXECUTIVE OFFICER OF CUSTOMS -v- COFLEXIP STENA OFFSHORE INTERNATIONAL SA & ORS [1999] WASC 242

CORAM:   MASTER SANDERSON

HEARD:   11 NOVEMBER 1999

DELIVERED          :   3 DECEMBER 1999

FILE NO/S:   CIV 1721 of 1999

BETWEEN:   ROBERT WILLIAM SCARFE, DELEGATE OF THE CHIEF EXECUTIVE OFFICER OF CUSTOMS

Plaintiff

AND

COFLEXIP STENA OFFSHORE INTERNATIONAL SA
First Defendant

COFLEXIP SA
Second Defendant

COFLEXIP STENA OFFSHORE ASIA PACIFIC PTY LTD
Third Defendant

FLORA JANE DIXON
Fourth Defendant

TASSO PAPAELIAS
Fifth Defendant

ERNST & YOUNG (A FIRM)
Sixth Defendant

Catchwords:

Practice and procedure - Pleading in Customs Act prosecution - Turns on its own facts

Legislation:

Nil

Result:

Statement of claim struck out

Representation:

Counsel:

Plaintiff:     Mr S D Hall

First Defendant             :     No appearance

Second Defendant         :     No appearance

Third Defendant           :     No appearance

Fourth Defendant          :     Mr W S Martin QC

Fifth Defendant            :     Mr W S Martin QC

Sixth Defendant            :     Mr W S Martin QC

Solicitors:

Plaintiff:     Australian Government Solicitor

First Defendant             :     No appearance

Second Defendant         :     No appearance

Third Defendant           :     No appearance

Fourth Defendant          :     Mallesons Stephen Jaques

Fifth Defendant            :     Mallesons Stephen Jaques

Sixth Defendant            :     Mallesons Stephen Jaques

Case(s) referred to in judgment(s):

Bridal Fashions Pty Ltd v Comptroller General of Customs (1997) 17 WAR 499

Carlton v Rogers; ex parte Carlton (1985) 82 FLR 40

Comptroller of Customs v D'Aquino Bros Pty Ltd, unreported; SCt of NSW; No 60223 of 1995; 14 March 1996

Gallagher v Cendak [1988] VR 731

Jack Brabham Holdings Pty Ltd v Minister for Industry, Technology and Commerce (1988) 85 ALR 640

Neil Pearson & Co v Comptroller-General of Customs (1995) 38 NSWLR 443

Case(s) also cited:

Carter Holt Harvey Manufacturing Group Pty Ltd v Comptroller General of Customs [1997] 1 Qd R 1

Ex parte Graham; Re Dowling (1968) 88 WN (NSW) 270

Kelly v JRA Ltd (1990) 92 ALR 651

Killick v The Queen (1981) 147 CLR 65

Lawrence v The Queen (1981) 38 ALR 1

Lineham v Public Service Association (1982) 44 ALR 289

R v Hush; Ex parte Devanny (1932) 48 CLR 487

Shaw v The Queen (1952) 85 CLR 365

1. MASTER SANDERSON:  This is an application by the fourth, fifth and sixth defendants to strike out the whole of the plaintiff's statement of claim, or, alternatively, certain paragraphs thereof.  The statement of claim in question is in fact the plaintiff's amended statement of claim dated 27 August 1999.  Before dealing with the plaintiff's application I should say something generally as to the nature of this action and give some detail as to the claim made by the plaintiff against the fourth, fifth and sixth defendants.

2. This action is what is generally known as a Customs Act prosecution.  The plaintiff, as the delegate of the Chief Executive Officer of Customs, seeks declarations against the defendants that they have contravened certain provisions of the Customs Act 1901.  Consequent upon these declarations being made, the plaintiff seeks to have imposed upon each of the defendants monetary penalties under the terms of the Customs Act 1901.  The nature of Customs Act prosecutions (as that term is defined in s 244 of the Customs Act) was considered by the Full Court of this Court in Bridal Fashions Pty Ltd v Comptroller General of Customs (1997) 17 WAR 499. The court put the position as follows (at 503):

   "Proceedings of this type (Customs Act prosecutions) are rather curious in nature.  They are civil in form but because they extend beyond seeking compensatory relief they are penal in substance.  In some ways they may more properly be assimilated to criminal proceedings rather than civil actions.  There is no such thing as a criminal action … .  It has to be recognised that they are civil proceedings and they are to be conducted in accordance with the practices and procedures of the court in its civil jurisdiction."

3. During the course of his submissions, counsel for the defendants submitted that statements in other jurisdictions go further than what was said in the Bridal Fashions decision and more closely equate Customs Act prosecutions to criminal proceedings.  Reference was made to Comptroller of Customs v D'Aquino Bros Pty Ltd, unreported; SCt of NSW; No 60223 of 1995; 14 March 1996 and to what was said by Kirby P in Jack Brabham Holdings Pty Ltd v Minister for Industry, Technology and Commerce (1988) 85 ALR 640 at 653. The point that counsel was attempting to reinforce by referring to these decisions was the need for averments contained in the statement of claim to be drawn succinctly and with precision. As will become apparent in these reasons, I accept counsel's point but in doing so it is unnecessary for me to consider the precise nature of these proceedings. For present purposes it is enough if I adopt what was said by the Full Court in the Bridal Fashions decision.

4. Turning to the nature of the claim itself, the sixth defendant is a firm of accountants who from time to time provide advice in relation to duty payable on goods imported into Australia.  The fifth defendant is a partner in the sixth defendant.  The fourth defendant is a consultant who at the relevant time was engaged by the sixth defendant to give advice in relation to importations, the subject of these proceedings.  The first and second defendants are companies incorporated in France and between them they wholly own the shares in the third defendant.  The third defendant is the manufacturer of piping which is used in the offshore oil and gas industry.

5. The plaintiff's claim against the fourth, fifth and sixth defendants can be summarised in the following way.  In or about June 1995 the third defendant sort advice from the sixth defendant concerning the importation of certain raw materials which were to be used in the manufacture of piping.  It appears that the third defendant wanted to know what its liability for Customs duty would be if it imported raw materials which it said were to be used to manufacture pipes for sale overseas, but which were subsequently used for the manufacture of pipes sold locally.  In effect, it was seeking information about what is referred to in the pleadings and throughout the correspondence as the TEXCO Scheme.  This scheme allows a party to import raw materials into Australia and pay no duty where it is intended that the raw materials will be used for the manufacture of goods sold overseas.  If, subsequently, it is found that the goods when manufactured are not sold overseas but sold locally, then duty becomes payable.  The key to the scheme is that, at the time the raw materials are imported, it is intended by the importer that the manufactured goods will be sold overseas.  Once that intention alters then the duty must be paid.

6. Advice was provided by the sixth defendant to the third defendant in relation to the TEXCO Scheme by a facsimile dated 15 June 1995.  A copy of this facsimile is to be found as part of Annexure "KB1" to an affidavit of Kevin Beattie, sworn 22 September 1999.  The facsimile is signed by the fourth defendant.  It would appear that the advice given in the facsimile is incorrect.  It is suggested that under the TEXCO Scheme raw materials can be imported and once the finished product is sold, if it is sold locally duty is then payable.  In fact, it is necessary for the importer to have the intention of using the raw materials to manufacture goods for export before the TEXCO Scheme applies.  Of course, for the purposes of a pleading summons it has to be accepted that the allegation made by the plaintiff that the advice given to the third defendant was wrong is in fact the case.  I express no concluded view on this question and it is not relevant to the matters at issue.  Subsequent to this advice and on 21 September 1995 the sixth defendant wrote to the Senior Inspector of Customs applying for an exemption from duty for raw materials imported by the third defendant, such exemption being pursuant to the TEXCO Scheme.  A copy of this letter is also to be found in Annexure "KB1" to Beattie's affidavit.  The letter is in the name of the sixth defendant and is signed by the fifth defendant.  It is the plaintiff's position that at the time this letter was written the fourth, fifth and sixth defendants knew that it was not the intention of the third defendant to use all of the raw material imported to manufacture goods for export.  It is then alleged that when goods were imported by the third defendant and duty was not paid there was a breach by the third defendant of the provisions of the Customs Act.  It is alleged that the fourth, fifth and sixth defendants were knowingly involved in such breaches.  It is on this basis that the plaintiff seeks to impose penalties on each of the defendants.

7. Put in that way, the claim against the fourth, fifth and sixth defendants is relatively straight forward.  However, the amended statement of claim is anything but a simple document.  It is not a question of a complex fact situation leading to a complex pleading.  Rather, it is the technique which is being employed by the draftsman in drawing the amended statement of claim which causes confusion.  It will be enough if I give one example.  Paragraph 11(iv) is in the following terms:

   "By reason of the matters set out in paragraphs 2(ii)(b), 3, 5, 6 and 9 hereof, the statements in both letters and referred to in paragraph 11(i) (ii) above were false or misleading in material particulars in that, as at September 1995, for the year 1995/96 not all, or alternatively, not more than 50%, of the pipes manufactured were to be exported."

8. To ascertain precisely what is meant by that paragraph it is necessary to refer back to seven other paragraphs or subparagraphs.  Furthermore, par 9 refers back to another subparagraph.  The effect is confusing.  It makes the pleading difficult to read and even more difficult to comprehend.

9. Under s 255 of the Customs Act each fact pleaded in the statement of claim is prima facie evidence of the facts alleged.  Although there is no shifting of the onus of proof, it is incumbent upon a defendant to answer the statement of claim because were they not to do so the claim would be established by virtue of the status accorded to the averments in the statement of claim:  see Bridal Fashions (supra).  In such circumstances a plaintiff must draw the statement of claim with precision and in a way that allows a defendant to understand the case to be met:  see Carlton v Rogers; ex parte Carlton (1985) 82 FLR 40 per Derrington J at 41; Gallagher v Cendak [1988] VR 731 per Vincent J at 739; Neil Pearson & Co v Comptroller‑General of Customs (1995) 38 NSWLR 443 per Kirby ACJ at 461. Given the nature of these proceedings and the difficult form of the present amended statement of claim, I am satisfied that the statement of claim ought be struck out in its entirety. I have little doubt that it will be possible to produce a far simpler more concise statement of claim which will enable the defendants to clearly understand the case they have to meet. On that basis there will be unconditional leave to replead.

10. Having reached that conclusion it is not, strictly speaking, necessary for me to say anything further about the specific complaints made by the defendants as to particular paragraphs of the amended statement of claim.  However in deference to the quality of the arguments put by both counsel I should deal briefly with each of the points made on behalf of the defendants and the response made on behalf of the plaintiff.  In adopting this course I am optimistic that the draftsman of the reamended statement of claim may avoid some of the pitfalls found in the present document with a view to avoiding a further pleading summons.

11. A minor objection is taken to par 2(ii)(a) were it is pleaded that the third defendant "is a wholly and jointly owned subsidiary of the first and second defendants".  Although a minor point, it is clear that this statement is inconsistent and the position should be clarified.

12. In par 2(iii) the fourth defendant is described as "an ex‑employee of ACS [Australian Customs Service]".  Objection is taken to this statement on the grounds that it is irrelevant.  It would appear that the plaintiff is attempting to make something of the knowledge the fourth defendant had of the TEXCO Scheme as a consequence of her former employment with the ACS.  This paragraph is referred to in par 8(v)(a), par 10 and par 11(x)(c).  I accept that the plea as to the former employment of the fourth defendant is irrelevant and par 2(iii) should be amended accordingly.

13. Paragraph 2(iv) deals with the fifth defendant and pleads he was a partner in the sixth defendant and "was the partner handling matters relating to the third defendant".  It is somewhat difficult to see why the fifth defendant is named in his own right at all.  He is a partner of the sixth defendant and is accordingly liable if the sixth defendant is liable.  However, if some specific plea is to be made against him then there needs to be something pleaded that is more specific than what is presently contained in par 2(iv).  A similar criticism is properly made of par 2(vii).  There appears to be a plea in that paragraph of some agency arrangement between the fourth defendant and the fifth defendant independent of the fourth defendant's engagement by the sixth defendant.  This raises, again, the question of why the fifth defendant was separately named.  Leaving that issue to one side, the plea is vague and elliptical and cannot stand.

14. A minor criticism is made of par 6(ii).  The defendants complain that it is not clear whether the "goods", as defined, refers to the imported raw materials or the pipes made from the raw materials.  In the course of amending the pleading it would be appropriate that this confusion be removed.

15. As to par 7 of the amended statement of claim, it is submitted by the defendants that it is defective in a number of ways. First, it is said that the reference to s 4 of the Customs Act and the plea that the first, second and third defendants were owners of the goods is confusing because s 4 of the Customs Act defines both "Owner" and "owner".  This objection, although minor, is well‑founded and should be corrected in an amended pleading.

16. The further criticism of par 7 is that it is not specifically pleaded how it is that duty becomes payable to Customs.  The plaintiff needs to plead a series of material facts which, taken together, would give rise to a liability to pay Customs duty.  At present, the sequence is not pleaded.  That is a serious omission and it ought be rectified.

17. Paragraph 8(v) pleads that the fourth defendant "knew or ought to have known" that the second option mentioned in her letter of 15 June 1995 was unlawful.  The claim against the fourth defendant is that she was knowingly concerned in the breach of the Customs Act by the third defendant.  What is required is a plea of actual knowledge.  The plea in the form of par 8(v) cannot stand.

18. Paragraph 11(ix) pleads, with respect to the fifth defendant, that he contravened s 234(1)(d) of the Customs Act read in conjunction with s 257 of the Act.  Section 234(1)(d) makes it an offence to knowingly or recklessly make a false or misleading statement to a Customs Officer.  Section 257(3) says that where it is necessary to establish the state of mind of a person it is sufficient to show that a servant or agent of the person by whom the conduct was engaged in acted within the scope of his or her actual or apparent authority to establish the state of mind.  Under the particulars, subpar (g) alleges that the fifth defendant engaged in conduct in her capacity as an agent of the fifth defendant and therefore knowledge of the breach of the Act is sheeted home to the fifth defendant.  As I have indicated above, it is difficult to see how the fourth defendant is the agent of the fifth defendant.  If such a plea is to be maintained then material facts must be set out which justifies the plea.  That is not presently done.  Subparagraph (h) suffers the same fault.  Neither are proper pleas.  There is also a difficulty with subpar (c).  It is difficult to understand how the fourth defendant was the agent of the third defendant in any sense.  The reference forward to par 11(x) further confuses the matter.  Paragraph 11(ix)(c) cannot stand.

19. Paragraph 11(x) is an allegation that the fourth defendant aided and abetted contravention of s 234(1)(d).  The paragraph does not plead who committed the principle offence and for that reason alone it is bad.  The particulars given do nothing to clarify the position.  Rather, they seem to confuse the question as to precisely what is alleged against the fourth defendant.  Once again it raises the question of why the fourth defendant should be named in his personal capacity rather than a partner in the sixth defendant.  I have already discussed this issue and nothing further on the question need be said.

20. The same comments apply to par 11(xii).  Once again, the principal offence is not specified and the particulars do nothing to clarify the position.  The plea is bad and cannot stand.

21. Complaint is made in relation to par 15(ii).  This is a plea in relation to the third defendant and really does not concern the fourth, fifth and sixth defendants.  Nonetheless, it does seem to me that the defendants' submission that the subparagraph does not plead material facts but rather a conclusion and is, for that reason, bad.  In the context of a redrafting of the statement of claim consideration should be given to amendment to par 15(ii).

22. By par 17(iii) the plaintiff pleads that by reason of the foregoing paragraphs and, in particular, par 8 and par 11(x) the fourth defendant aided and abetted a contravention of s 234(1)(d).  The reference to par 8 and par 11(x) is unhelpful.  Paragraph 8 deals with the letter of advice written by the fourth defendant to the third defendant in relation to the TEXCO Scheme.  Assuming the advice in that letter was wrong, that does not mean that the fourth defendant contravened the Act.  It is difficult to see that the giving of wrong advice itself is actionable.  If it is alleged, as I understand to be the case, that when the third defendant acted on the fourth defendant's advice an offence was committed and the fourth defendant aided and abetted the commission of the offence, then that is a different matter.  Furthermore, the particulars are of no assistance.  Paragraph 17(iii) cannot stand.

23. In relation to par 17(iv) it is said by the defendants that the failure to plead the relationship between the fourth and fifth defendants and the defects in relation to the allegations of the principal offence against the fourth defendant are fatal to the plea.  I agree.  Paragraph 17(iv) cannot stand.

24. In par 17(v) the particulars pleaded do not support the allegation made in the paragraph as a whole.  The paragraph is bad and cannot stand.

25. In relation to par 17(vi), it is bad in the sense that it is dependant upon par 17(iii) and (v).  The actual claim against the sixth defendant must be pleaded with precision and par 17(vi) does not achieve that end.

26. Finally, in par 21 it appears that the claim is that the fourth, fifth and sixth defendants aided and abetted the third defendant in smuggling goods contrary to the Customs Act.  It is difficult to see how, as the claim is said to be put against each of the three defendants, they could have aided and abetted a smuggling operation.  Certainly par 21 in its present form is unacceptable and that may in part be due to defects in par 19.  It may be appropriate for the plaintiff to consider again whether or not it is appropriate to plead this cause of action against the defendants.

1. The statement of claim will be struck out and there will be leave to replead generally.  I will hear the parties as to the precise form of the orders.