Mihos v Attorney-General HC Wellington CIV-2004-485-1399

[2007] NZHC 1802

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2004-485-1399

BETWEEN  GEORGE MIHOS Applicant

AND  ATTORNEY-GENERAL Respondent

Hearing:         3-4 May 2007

Counsel:        T Ellis and A W Rossiter for Applicant

W G Liddell, W L Aldred and C A Brown for Respondent

Judgment:      7 June 2007 at 3 pm

INTERIM JUDGMENT OF BARAGWANATH J

This judgment was delivered by Justice Baragwanath on 7 June 2007 at 3 pm pursuant to Rule 540(4) of the High Court Rules

Registrar/Deputy Registrar

Date:………………………

Solicitors:
Brandons, Wellington
Crown Law Office, Wellington

Counsel:

T Ellis, Wellington

MIHOS V ATTORNEY-GENERAL HC WN CIV-2004-485-1399  7 June 2007

Table of Contents

Para No.

Introduction  [1] Factual background  [4] First contention: need for conviction  [23]

Discussion  [33] The scheme and sequence of the Act  [44] History of the legislation  [50] Second contention: delegation  [53]

Third contention: s 9 of the Bill of Rights and the common law

challenge to the refusals of waiver of forfeiture  [58]

The pleading point  [60] Discussion  [66] The conduct of Customs  [70] The effect on Mr Mihos  [72] The Minister’s role  [74] The Court’s role  [75] Decision reserved; timetable ordered  [77]

Introduction

[1]      Customs import entry forms completed by the applicant, supported by false supplier’s invoices, understated the values of five cars he sought to import from Singapore by 35 % compared with the actual purchase prices.   The effect was to understate GST of some $2000 payable at the time of import.  As a result cars valued at some $45,000 were confiscated.

[2]       Section 225 (1)(a) of the Customs and Excise Act 1996 (the Act) states that among the goods which are forfeited to the Crown are those “in respect of which an offence has been committed”.  Although there has been no criminal prosecution, a Customs officer,  claiming  to  act  under  authority delegated  from the  Controller, formed the opinion that such an offence had been committed in respect of the cars. Considering that they were therefore forfeited to the Crown she seized them under s 226.   The applicant made to the Minister of Customs and Excise two successive applications under s 235 for waiver of the forfeiture, each of which was declined.

By this application for review the applicant challenges the forfeitures, seizures and refusals of waiver.

[3]      A procedural point has emerged.  The Crown complains that the applicant’s pleading of “disproportionality” of penalty in terms of s 9  of the New  Zealand Bill of Rights Act 1990 did not alert it to the need to file additional background evidence.   That is said to include but not be limited to the relationship in an operational sense between the civil forfeiture regime and the prosecution of offences under the Act, the level of fines imposed by the Courts in respect of offences which Customs suspected the applicant to have committed, and the operation of forfeiture regimes in other statutory contexts.

Factual background

[4]      The following schedule lists the respective values of the cars as shown (1) in the import entry form completed by the applicant from invoices he submitted to Customs and (2) in an invoice later received by Customs from the Singapore supplier

which conformed with bank documents showing actual cash flows:

Vehicle	(1)Value on import entry form	(2)Value on invoice supplied by Bencars to customs
1995 Jaguar JX6	NZ$ 7216.49	SGD 10,000
1996 BMW 52oI	NZ$ 8,762.88	SGD 12,500
1997 BMW 316I	NZ$ 5,154.63	SGD 8,000
1997 SAAB 9000CS	NZ$ 3,092.78	SGD 5,000
1998 Volvo S70T	NZ$ 5,154.63	SGD 8,000

NZ$29,381.41 (=SGD 28,500)  SGD43,500 (=NZ$45,486.49)

The difference is SGD15,000 or NZ$16,105.08.  Its consequence is that Goods and

Services Tax payable at the time of import was understated by $1,932.89.

[5]      On  15  April  2003  five  vehicles  arrived  at  the  Port  of  Auckland  from

Singapore.    The applicant had paid the vendor on 18 March $23,107.57 and on

1 April $22,378.92, a total of $45,486.49.

[6]      On 17 April he called a Customs officer in Wellington, Ms Mahonen, seeking advice on the importation of the vehicles, saying that he had not previously made an importation.  In accordance with the authority of s 95, which requires an importer to supply business records to a Customs officer, she told him that among the documents required to  complete customs  clearance  were  invoices  for  the  vehicles  showing payment, bill of lading and invoice for the freight paid.  Later that day he produced to Ms Mahonen documentation which included five separate invoices for a total of SGD28,500.  She had recently completed a course in valuation. Considering that the values appeared to be too low, she pointed to the value shown on the invoice for one of  the  cars  and  asked  the  applicant  if  that  what  he  had  paid  for  that  car. The applicant replied “yes, I wouldn’t pay more than that for the car”.  He signed the import entries for the NZD equivalent of the invoice total at the date of lodgement of the entry, $29,381.41.  The officer asked the applicant for bank statements showing what was paid for the cars.  He said he would call his agent in Singapore, Bencar, and get the documents.

[7]      Five days later, on 22 April, the applicant visited the Auckland Customhouse and attempted to complete fresh import entries. He provided two remittance slips, one showing a payment on 18 March 2003 from the applicant’s New Zealand bank to Bencar of SGD22,000 and the other a “forex transaction” the same day from that bank to the supplier for NZ$23,107.57.   He was required to fax the documents to Wellington.

[8]      Ms Mahonen called him about the slips.   He said he had made payment in terms of these remittance slips of a total NZ$43,500.  Asked why he had paid over NZ$40,000 when the invoices were only for some NZ$29,000 he said he did not know and that  he would talk  to  Bencar.    He  was again asked  to  provide  bank statements.

[9]      The next day, 23 April, the applicant provided Ms Mahonen with statements for account 066 at his bank’s local branch for the period 31 January 2003 to 1 April

2003.   They recorded the NZ$23,107.57 transaction but  did not  show the other transaction.   She asked him to produce the bank statement for the other transaction. He returned with a record of a “teller printout” showing payment on 2 April 2003

from account  066 to  another  account  000 of NZ$22,398.92.   That  was  not  the requested bank statement nor did it evidence a foreign payment.  The applicant told the officer that Bencar would fax across new invoices recording values matching the bank statements.

[10]     Also  on  23  April Bencar  sent  Customs  an  invoice  for  the  five  vehicles showing a total value of SGD43,500, SGD15,000 more than that  shown on the five individual invoices provided by the applicant and entered in his import entry form.

[11]     On 1 May 2003 the cars were detained under s 155(3), which empowers that course where the Chief Executive is not satisfied with the correctness of the entry, in order  for  the  goods  to  be  examined  and  investigation  to  be  made  into  their importation.   On the same day Ms Mudford, relying on s 161, gave notice to the applicant’s bank requiring production of the records for all accounts held in the name of the applicant for the period 1 January 2003 to 24 April 2003.   The statements supplied by the applicant’s bank in response included one showing a debit to his account 000 on 1 April by way of FX transaction in favour of Bencar for NZ$22378.92.   So  it  was established  that  the  applicant  had  paid  his  Singapore supplier a total of NZ$45,486.49.

[12] On 2 May 2003 the applicant was given notice of detention of the cars on account of the inconsistency between the invoices and the other documentation. On 26 May 2003 Ms Mudford, relying on s 225(a), purported to seize the cars under s 226 as forfeited to the Crown (the sections appear at [25] below). The cause of the forfeiture was stated in the notice of seizure as the discrepancy between the true and stated prices and the fact that the original invoice was erroneous in a material particular so that there was an attempt to defraud the revenue of Customs. The officer deposed that certain drug information referred to in the documents was not treated as relevant to her decision to seize the vehicles. There being no application by the applicant to call the officer for cross-examination her evidence must be accepted and the drug issue therefore disappears from the case.

[13]     On 23 June 2003 the applicant’s solicitor wrote to Customs seeking waiver of forfeiture pursuant to s 235.  His letter stated that the applicant denied deliberately supplying incorrect information to Customs but accepted that through carelessness or mistake incorrect information was initially supplied so the applicant saw no point in applying to the District Court under s 231 to dispute forfeiture.   Such remedy is available only if there were no reasonable grounds for the seizure.

[14]     The waiver application was supported by a further letter from the solicitor asserting that a Customs officer, Mr Dias-Wanigasekera, had contacted the supplier of Bencar and spoken to one Peggy Ong who admitted that she had made a mistake in relation to the supply of the incorrect invoices but was unable to provide any sensible explanation.  The letter asserted that the applicant had travelled to Singapore to arrange purchase of the five vehicles and was given no invoice at the time of purchase.  The invoices arrived in a courier pack with other documents for the car at about the same time the cars arrived.  The applicant took the documents to Customs and completed forms  for  clearance of the cars,  including  a  declaration  that  the particulars were correct when in fact they understated the purchase price by NZ$15,000.  Subsequently, presumably at the request of Customs, Bencar produced a further single invoice showing the correct prices.

[15]     In  an  affidavit  the  applicant  asserted  that  the  incorrect  invoices  were contained in a sealed DHL courier pack. In the absence of cross-examination such evidence must be accepted. It may be implicit but is not expressly stated that he had not opened the pack before providing it to Customs and so did not know in advance that the invoices were false. But the affidavit does not meet the point that once the pack  was  opened  the  applicant  associated  himself  with  false  figures  for  the transaction  he  had  just  performed  which,  despite  being  expressed  in  Singapore dollars, being central to its profitability must have been well known to him.

[16]     The applicant asserted to Ms Mudford that he did not ask Bencar to produce a false document and that there would be little reason to do so as the amount of GST involved was insignificant as against the risk of losing the cars.  He accepted that he was careless and said that, lacking previous experience, he had trusted Bencar and accepted their documents at face value.  He said that Bencar either made a mistake or

may have a practice of understating values.  He said that he lacks means, does not own a home and had invested most of his savings into purchase and shipping costs for the vehicles so that forfeiture would be a financial disaster for him.  The solicitor copied to Customs a letter to Bencar seeking confirmation that the applicant did not request that incorrect invoices be supplied and that the incorrect prices were shown because of an error in Bencar’s office.  No reply from Bencar was received.

[17]     By letter of 9 December 2003 a senior officer at  Customs submitted the waiver  application to  the Minister  for  decision with a  recommendation  that  the application for waiver of forfeiture be declined.   The submission stated that the Customs service has the resources to check only a small proportion of the import entries that are made and the correctness of the small number of the documents that are produced to Customs officers.  There would therefore be little or no incentive for importers to ensure compliance with the law if goods seized as a result of incorrect declarations were readily returned.  That should occur only if a satisfactory excuse were given for the failure to comply with the legal requirements of importation.

[18]     The  officer  stated  that  the  Customs  Service  was  not  persuaded  that  the applicant did not know that the invoices were incorrect.  He had personally bought them from Singapore and made the inaccurate import entry.   He had also paid the balance  of  the  purchase  price  just  over  two  weeks  earlier.    The  invoice  had understated the purchase price of each of the vehicles substantially.

[19]     As to the assertion that Ms Ong had admitted to a Customs officer that she had made some sort of error  in the preparation of the  invoices,  the submission recorded that the Customs officer to whom the admission was allegedly made emphatically denied that there had been such admission.   Customs advanced the alternative allegation that, even if there was no intention to make an erroneous entry or to produce erroneous invoices, the applicant was at the very least negligent, as he admitted, and such conduct would preclude the Customs Service from supporting his application for waiver of forfeiture.   It noted that if the applicant considered that Bencar was principally at fault by supplying incorrect invoices he would have a remedy  against  that  company.    The  Minister  accepted the  recommendation  and declined the application for waiver.

[20]     On 12 January 2004 new solicitors for the applicant wrote to the Minister seeking reconsideration of the refusal to waive forfeiture.  They submitted that the penalty imposed was far in excess of what could be deemed equitable and that an application  for  judicial  review  would  appear  to  have  every  chance  of  success. The points made were:

a)       Any detriment  to  the  Crown  was  limited  to  the  GST  which  they calculated at $1875;

b)       Even if the applicant acted deliberately there was no detriment to the Crown.   Since he is GST registered he could claim a refund of the import tax;

c)       As he was GST registered he would have to pay GST on the sale of the  car  and  the  Crown  would  benefit  from  the  additional  GST payable;

d)The applicant was clearly importing the cars with a view to selling them at a profit.  That profit would be taxable and he would have to pay tax on the $15,000 understated.   Even at  a 19% tax rate that would be far in excess of the GST he would save on the understated amount.    That  would  be  a  benefit  to  the  Crown.    So  far  from defrauding the Crown the applicant had in fact defrauded himself.

[21]     By report of 2 April 2004 a senior officer of Customs recommended to the Minister that the further application for waiver be declined.  Customs referred to the submission  that  penalty of  seizure  of  the  vehicles  far  exceeded  what  could  be deemed  equitable  and  that  the  detriment  to  the  Crown  was  only  a  small  GST shortfall, which would have been recouped on sale given the applicant’s registration for GST so that the Crown had not been defrauded.  The officer submitted that the Minister had previously been in possession of all the relevant facts; that no errors or omissions in the original decision making process had been denied; that the vehicles were seized not on the basis of defrauding the revenue but because the applicant had

made an erroneous entry and  produced documents that were erroneous in a material particular.

[22]     The Minister reconsidered and again declined the application for waiver of forfeiture.  The applicant was notified on 5 April 2004 and the present proceedings were commenced on 12 July 2004.

First contention: need for conviction

[23]     Mr Ellis’ primary contention is that the settled interpretation and application of the customs legislation relied on by the Crown, which is in comparable terms to that of other similar jurisdictions, infringes fundamental constitutional principle. The principle is that  forfeiture of goods is forbidden except  following a judicial hearing attended by the conventional protections of a proceeding  in  open  court before  a  judge  with  full  opportunity to  present  the  defence  case.  The  Crown’s response is that such construction is inconsistent with both the language and the purpose of the Customs Act and disregards a settled approach adopted in England since at least 1810 and in Canada, Australia and the USA as well as in New Zealand.

[24]     The central relevant provisions of the Customs and Excise Act are ss 225 and

226 which are reproduced in part:

225     Goods forfeited

(1)      The following goods shall be forfeited to the Crown:

(a)       goods in respect of which an offence has been committed

under—

…

(ii)      section 203 of this Act (which relates to offences in relation to entries):

(iii)     section 204 of this Act (which relates to offences in relation to declarations and documents):

(iv)     …

(vii)     section 211 of this Act (which relates to defrauding the revenue of Customs):

…

(b)       goods dealt with in contravention of [various sections]:

(c)       dutiable or prohibited goods found in the possession of any person who, when questioned … denied or failed to disclose the possession of those goods:

(d)      dutiable  or  prohibited  goods  found  in  the  course  of  a search…

…

(k)       uncustomed goods that are found in any place:

… (o)…

226     Procedure for seizure

(1)      A Customs officer… may seize any forfeited goods or any goods that he or she has reasonable cause to suspect are forfeited.

(2)      Goods  may be seized as forfeited wherever  the goods  are found within New Zealand.

(3)      Forfeited goods, other than prohibited goods, may be seized at any time within 2 years after the forfeiture has arisen.

…

(Emphasis added)

[25]     Mr Ellis submits that while s 125(1)(a) employs the passive “an offence has been committed”, before there can be forfeiture the law requires not merely proof of the  fact  of  commission  of  an  offence  to  a  civil  standard  but  actual  criminal conviction. The principle of no forfeiture without conviction is, he argues, both a fundamental part of the judge-made law and an integral part of the sacrosanct body of constitutional law that lies at the heart of our uncodified constitution.  That is, he submits, stated explicitly in New Zealand legislation, some of it  retained  by the Imperial Laws Application Act 1988 and accessible in Volume 30 of the Reprinted

Statutes at pp 25-34 and 41-45.  It includes Magna Carta, three 14th century statutes

and the Bill of Rights of 1688 as well as the New Zealand Bill of Rights Act 1990. He refers to s 6 of the Interpretation Act 1999:

6        Enactments apply to circumstances as they arise

An enactment applies to circumstances as they arise.

and submits that, given the status of these measures as legislation, there applies a fortiori   the “principle of legality” that  a statute is presumed to  conform with fundamental principles of the common law: R v Secretary of State for the Home Department ex p Pierson [1998] AC 539, R v Secretary of  State for the Home Department ex p Simms [2000] 2 AC 115 and R v Secretary of State for the Home Department ex p Daly [2001] 2 AC 532.

[26]     It is possible to clear away shortly the argument for direct application of chapter 12 of the 1689 Bill of Rights which provides:

Grants of forfeitures – That all grants and promises of fines and forfeitures of particular persons before conviction are illegal and void:

[27]     The Crown’s answer, which I accept, is that the Act did not invalidate the making of forfeitures affecting particular persons before their conviction, as well as the making of grants and promises of fines.  What it rendered illegal and void was the making, pre-conviction, of grants and promises in relation to valid fines and forfeitures.  The history is recounted in Chitty’s “Prerogatives of the Crown” (1820) at  pp 213-226  and  Blackstone’s  “Commentaries”  in  pp 251-252  of  volume  2. As Crown  counsel  submitted,  historically  the  monarch  had  a  right  under  the prerogative  to  both  the  real  and  personal  property  of  individuals  convicted  of felonies or treason, or otherwise tainted.  That prerogative right was abolished by the Forfeiture Act 1870.  So while formerly the King had lawfully obtained property by forfeiture and in addition claimed the power to grant it to third parties, by the Bill of Rights 1688 grants or promises of fines or forfeitures before the conviction of, or judgment against, the party on whom they are to be levied were invalidated.  So that statute does not directly assist the applicant’s argument that forfeiture without trial is in principle unconstitutional.

[28]     Mr Ellis cited the Civil and Criminal Justice Statutes in both 1351 and 1354. Emphasis in the following citations is added.  The former states:

4.        None    shall    be    taken    upon    suggestion    without    lawful presentment; nor disfranchised, but by course of law –

Whereas it is contained in the Great Charter of the franchises of England, that  none  shall  be  imprisoned  nor  put  out  of  his  freehold,  nor  of  his franchises nor free custom, unless it be by the law of the land; it is accorded, assented,  and  stablished,  that  from  henceforth  none  shall  be  taken  by petition or suggestion made to our lord the King, or to his council, unless it by indictment or presentment of good and lawful people of the same neighbourhood where such deeds be done, in due manner, or by process made by writ original at the common  law; nor  that  none be out of his franchises, nor of his freeholds, unless he be duly brought into answer, and forejudged of the same by the course of the law; and if any thing be done against the same, it shall be redressed and holden for none.

[29]     The 1354 Statute states:

3.        None shall be condemned without due process of law

No man of whatever estate or condition that he be, shall be put out of land or tenement,  nor  taken,  nor  imprisoned,  nor  disinherited,  nor  put  to  death, without being brought to answer by due process of the law.

As  Mr Ellis  submits,  the  provision  is  to  similar  effect  to  chapter 29  of  the

Magna Carta of 1297 which is referred to in the 1351 statute:

Imprisonment, etc, contrary to law.  Administration of justice.

No freeman shall be taken or imprisoned, nor be disseised of his freehold or liberties  or  free  customs,  or  be  outlawed  or  exiled,  or  any  otherwise destroyed;  nor  will  we pass  upon  him  nor  condemn  him  but  by  lawful judgment of his peers by the law of the land.

[30]     Likewise the Observance of Due Process of Law Statute 1368 provides:

…3 None should be put to answer without due process of law…

It is assented and accorded, for the good governance of the commons, that no man be put to answer without presentment before justices, or matter of record, or by due process and writ original, according to the old law of the land: and if any thing from henceforth be done to the contrary, it shall be void in the law, and holden for error.

[31]     In Thomas and Hilaire v Baptiste [2000] 1 AC 1 the Privy Council discussed the 1354 statute in the context of the constitution of Trinidad and Tobago. The majority stated at p 21:

…[by] the confirmation of Magna Carta by Edward III in 1354… the expression “due process of law” replaced the “law of the land” in Article 39

of the original version.  Coke regarded the two expressions as synonymous. They protected the subject  from absolute  monarchy  and  the  exercise of arbitrary power.  This interpretation may have appropriate in the absence of either a written constitution or a doctrine of the separation of powers and at a time when a sovereign legislature was in the habit of passing Acts of Attainder.  But such expressions mean different things in different ages…

At page 22:

In their Lordships’ views “due process of law” is a compendious expression in which the word “law” does not refer to any particular law and is not a synonym for common law or statute.  Rather it invokes the concept of the rule of law itself and the universally accepted standards of justice observed by civilised nations which observe the rule of law…

At page 24:

The due process clause must therefore be broadly interpreted.   It does not guarantee the particular forms of legal procedure existing when the Constitution came into force; the content of the clause is not immutably fixed at that date…

In the minority judgment Lords Goff and Hobhouse noted at p 32-33:

The expression “due process of law” came to be used as a synonym for the expression “law of the land”…
The  authorities  show  that  the  requirement  is  that  rights  and  liabilities, criminal and civil, be determined in accordance with the law of the land as a matter of both substance and procedure.
[32]	Mr Ellis   argued   that   the   Customs   Service   has   assumed   the   role	of

investigating, judging and punishing individuals such as the applicant without public hearing and public notification of the outcome.  There is, he says, great potential for disproportionate and arbitrary penalties; in essence the Customs Service is operating its own parallel system of an executive court.

Discussion

[33]     The constitutional statutes in force in New Zealand do not deal specifically with chattels.  Chapter 28 of the Magna Carta of 1215 did.  It stated:

28.      Compensation for taking a private property

No constable or other of Our bailiffs shall take corn or other chattels of any man without immediate payment, unless the seller voluntarily consents to postponement of payment.

Chattels were also protected by the Statute 5 Edw 111 c 9, now repealed:

ITEM, It is enacted.  That no Man from henceforth forth shall be attached by any Accusation, nor forejudged of Life or Limb, nor his Lands, Tenements, Goods, nor Chattels seised into the King’s hands, against the Form of the Great Charter, and the Law of the Land.

[34]     Mr Ellis was unable to argue that the case falls directly within language of the 1351 or 1354 statutes, which refer respectively to “franchises [and] freeholds” and “land or tenement”.  He relied rather on the general language of the 1297 and

1368 statutes and on what has been called “the equity” of the 1351 and 1354 statutes, that is the policy which they evidence.

[35]     In  private  law  the  Courts  have  been  cautious  in  their  approach  to  such argument.     In Brandling  v  Barrington  (1827)  6  B&C  467  Lord Tenterden CJ dismissed the plaintiff’s claim that the defendant sheriff had removed the goods of a tenant from premises in his occupation without having paid to the landlord half of the annual rent due contrary to the language of the statute 8 Ann c.14.   He said at 475:

Now the statute speaks only of goods taken by virtue of any execution, and the  plain  sense  of  the  words  as  confined  to  executions  on  judgments. The process under which the sheriff seized and sold the goods in question was not process of execution on a judgment, it was not therefore within the words of the statute.  But it is said, that it was within the equity.  Speaking for myself alone, I cannot forbear observing, but I think there is always danger in giving effect to what is called the equity of the statute, and that it is much safer and better to rely on and abide by the plain words, although the legislature might possibly have provided for other cases had their attention been directed to them.

The wisdom of that judgment has been repeatedly endorsed: Stock v Frank Jones

(Tipton) Limited [1978] 1 WLR 231 (HL) at 239 per Lord Scarman.

[36]     Constitutional   statutes   provide   more   room   for   Mr   Ellis’s   argument. As Priestley JA showed in Adler v District Court of New South Wales (1990) 48

A Crim R 420, 449 ff, the ancient “process” statutes, originally narrow in their scope and application, were anachronistically converted over time to become statements of general constitutional principle. In their modern guise they fall within De Smith’s formula of avoiding the austerity of tabulated legalism.

[37]     Mr Ellis relied on the New Zealand Bill of Rights Act 1990:

21       Unreasonable search and seizure

Everyone has the right to be secure against unreasonable search or seizure, whether of the person, property, or correspondence or otherwise.

He did not plead but sought in argument to rely on:

27       Right to justice

(1) Every person has the right to the observance of the principles of natural justice by any tribunal or other public authority which has the power to make a determination in respect of that person's rights, obligations, or interests protected or recognised by law.

[38]   While cars, being chattels, fall outside the literal scope of the ancient constitutional statutes still in force, one approaches the customs regime with a predisposition to construe it if possible consistently with the applicant’s contention that their policy applies.

[39]     There is debate as to the scope of s 21 of the Bill of Rights in relation to property.   Mr Liddell submitted that earlier decisions Alwen Industries Ltd v Comptroller of Customs (1993) 1 HRNZ 574 and Wilson v NZ Customs Service (1999) 5 HRNZ 134 which treat seizure provisions of the Customs legislation as subject to s 21 are inconsistent both with Canadian authority (Quebec (Attorney- General) v Laroche [2002] 3 SCR 708 (SCC)) and with more recent New Zealand authority.

[40]     In   P   F   Sugrue   Ltd   v   Attorney-General   [2006] 3 NZLR 464, the Privy Council, having considered the issue whether s 21 extended to protect property per se in oral argument, clarified at paragraph [23] that:

Constitutional provisions such as s 21 of the Bill of Rights Act are primarily directed towards preventing the invasion of personal freedom and privacy.

(See also R v Fraser [1997] 2 NZLR 442 at 449 (CA).)

[41]     Further,    in    Williams    v    Attorney-General    [2007] NZCA 52 the Court of Appeal confirmed at paragraph [48] that the “touchstone of s 21 of the Bill of Rights is the protection of reasonable expectations of privacy”. The Court continued:

It is thus only where a person’s privacy interest has been breached that his or her rights under s 21 of the Bill of Rights have been breached and a personal remedy is available…

and later at para [63] stated that:

privacy interests in premises should thus be assessed objectively without any concentration on property rights, or the activities of the accused.

[42]     I find it unnecessary however to enter the debate.  As McGechan J observed in Westco Lagan Ltd v Attorney-General [2001] 1 NZLR 40 at [95]:

…Parliament  is  sovereign  and  can  pass  any  legislation  it  sees  fit.  In particular, Parliament can enact laws expropriating property without compensation. In doing so, it can step right through existing laws and rights, obliterating  remedies  which  otherwise  would  exist...  It  is  not  for  the unelected Courts to frustrate that legislative ability. If content of legislation offends, the remedies are political and ultimately electoral...

[43]     I have concluded that the applicant’s contention is simply inconsistent with both the scheme and the sequence of the Customs and Excise Act, particularly ss 225 and 226, and also with its history.

The scheme and sequence of the Act

[44]     Section 225(1) provides for the forfeiture of some 14 categories of goods in respect of which it is unnecessary for any offence to have been committed.  Only the first category relates to “goods in respect of which an offence has been committed”. Read alone or in another context that phrase might be read as importing the need for the Crown to secure a conviction of the offence.  Read within the context of s 225(1) ([25] above) the force of that argument is reduced.   Section 226(1) provides that goods which either possess the status of already being forfeited goods, or which a

customs officer has reasonable cause to suspect to be of that  character, may be seized.   In respect of the 14 s 225(1) categories other than (a), status as forfeited arises by operation of law immediately upon the factual event stipulated in (b)-(o); there is no question of court proceedings.   That suggests there must be a similar result under (a) immediately an offence has been committed; i.e. before there has been any trial.

[45]     Section 228 provides:

228      Forfeiture to relate back

Where, pursuant to section 225 of this Act, goods are forfeited and the goods are seized the forfeiture relates back to the date of the act or event from which the forfeiture arose.

It gives emphasis to the present point.

[46]     Forfeiture is not the end of the matter.   Seizure of forfeited goods other prohibited goods may be made only within two years after the forfeiture has arisen (s 226(3)). The forfeiture is defeasible by passing of that period without seizure or if there is a successful application to the District Court under s 231 that the seizure be disallowed in whole or in part (s 232).  Also of importance is s 234:

234      Condemnation if no appeal against seizure

Where no application is made under section 231(1) of this Act within the time specified in that section, the goods shall be deemed to be condemned to the Crown as if such an application had been made and dismissed.

[47]     So the sequence is:

a)       satisfaction of a s 225 (1) condition renders the goods forfeit so as to be potentially vulnerable both to seizure and condemnation;

b)       the goods may be seized;

c)       if any application for judicial order disallowing seizure (s 231) or to the Minister for waiver of forfeiture (s 235) is unsuccessful, or none is made, the goods are condemned to the Crown.

[48]     Contrary to the scheme under former legislation discussed in the dissenting judgment of Richardson J in Williams v Attorney-General [1990] 1 NZLR 646 at

675, now in New Zealand as in Australia (Little’s Victory Car Co v Carroll [1948] VLR 249, 254) condemnation can occur without judicial intervention. It is convenient to view the forfeiture process as giving the effect of an order nisi (that is it may be defeasible) compared with condemnation (comparable with an order absolute or final judgment).

[49]     Such construction yields a result at odds with Mr Ellis’s submissions.  But it conforms with the long-settled architecture of the customs law in this and other states.

History of the legislation

[50]     In Williams v Attorney-General  Richardson J stated at 677:

…the current customs legislation is not unusual in its approach to forfeiture, seizure and condemnation.   In the history of English, Australian, Canadian and New Zealand customs legislation such forfeiture and associated provisions  are  common,  drastic  and  far  reaching.     They  have  been considered a necessary measure to vindicate the rights of the Crown and to ensure the strict and complete observance of the customs laws which are notoriously difficult of complete enforcement in the absence of strong provisions supporting their administration.

[51]     He   cited   Blewitt   v   Hill   (1810) 13 East 13; 104 ER 270 where Lord Ellenborough CJ held that smuggling on the plaintiff’s ship by a commander appointed by the Admiralty led to its forfeiture despite the plaintiff’s innocence, although the plaintiff was entitled to sue the commander. Other leading authorities to like effect, concerning the legislative schemes of England, Canada, the USA and Australia, are The Annandale (1877) 2 PD 179, Martineau v Minister of National Revenue [2004] 3 SCR 737, United States v 1960 Bags of Coffee (8 Cranch 398 (1814), and Burton v Honan (1952) 96 CLR 169.

[52]     I am satisfied that what would otherwise be the presumptive application of the  ancient  constitutional  statutes  is  excluded  by  the  legislative  scheme  of  the Customs Act, which itself is consistent with the pattern of customs legislation in

New Zealand and comparable states.   The  first  submission  fails.    It  is  however necessary to return to the constitutional statutes when considering the applicant’s final contention.

Second contention: delegation

[53]     It  is  convenient  next  to  consider  the  argument,  succinctly  advanced  by Mr Ross, that there had been no valid seizure because the relevant Customs officer, Ms Mudford,  lacked  delegated  authority  to  make  decisions  under  s  236  which confers authority on the Chief Executive.   An instrument of delegation of s 236 authority to Ms Mudford under s 41 of the State Sector Act 1988 had been executed on 19  April 2002.    But on  4  April 2003  the  Chief Executive  signed  a  further instrument of delegation which stated that the delegated functions and powers:

…may  be  exercised  from  12  May  2003…  All  delegated  functions  and powers previously issued to [Ms Mudford] are hereby  revoked.

Mr Ross submitted that revocation took effect on 4 April.  So the bank requisition issued by Ms Mudford on 1 May lacked authority, being issued during a hiatus between the revocation of the first delegation and the entry into effect of the second on 12 May.  Accordingly the bank evidence was unlawfully obtained and should be excluded.    Without that  evidence  there  is no  sufficient  evidence  to  support  the seizure or to justify the refusal of waiver.

[54]     The argument fails for two reasons.  The first is verbal.  The term “hereby” has no temperal connotation and of itself says nothing as to when the old delegation is to terminate, providing simply that the termination is to be effected by the second document.

[55]     The second reason  is that  the task of construing  any  document,  whether statute, written contract or, as in this case, a unilateral document, is not a mechanistic and blinkered exercise but a purposive one of determining what meaning is to be ascribed to the writing.    In the case at  least  of statutes  and  bi-  or  multipartite contracts it is usually unhelpful to speak of “intention” except as a conclusion when the exercise of construction is complete, at which stage use of that expression is

harmless.   In the case of statutes the Interpretation Act 1999 requires the text and purpose to be examined to determine meaning.  In the case of contracts which are not unilateral the test of meaning is not subjective, with enquiry as to the actual intention of the parties, but objective, imputed by the Court on the basis of what an informed objective bystander, understanding the human propensity for error, would make of it. The Court’s preference for a sensible result where that conflicts with being literal has led to purposive construction, whereby strained meaning or even the rejection of incompatible words and phrases will be adopted to provide a just and practical result. The latest example of this approach is the judgment of the Supreme Court in Wholesale Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37 30 May 2007.

[56]     There is no principled basis for abandoning these techniques when construing a deed  poll or  any other  unilateral document  such  as  the  second  instrument  of delegation.  Nor is there any reason why the Controller would wish to undertake a pointless exercise of withholding authority from a trusted delegate to perform the statutory responsibilities so clearly confided to her both before and after the period of the alleged hiatus.   No straining of the  language of the second  instrument  is required to read it as meaning that the supersession effected by “hereby” was to take effect not when the document was executed, but at the moment the new delegation commenced so that the transition would be seamless.

[57]     It  is therefore unnecessary to  enter the  difficult  area  of whether  lack  of express delegated authority means that its purported exercise is a simple nullity, or whether, as in some cases of want of judicial authority, a public interest in avoiding breakdown in the administration of government processes is consistent under the rule of law with a doctrine of residual prerogative or de facto authority subject to judicial control.  See Just One Life Limited v Queenstown Lakes District Council CA 72/03

18 May 2004 and Wilson v Auckland City Council HCAK CIV 2004-404-003303

5 April 2007.

Third contention: s 9 of the Bill of Rights and the common law challenge to the refusals of waiver of forfeiture

[58]     The remaining argument is founded on s 9 of the New Zealand Bill of Rights Act supported by claims at common law of Wednesbury unreasonableness of the conduct of Customs and the Minister.  Section 9 confers the right:

…not to be subjected to torture or to cruel, degrading, or disproportionately severe punishment

(emphasis added)

which is a contemporary expression of common law principle.

[59]     Expressed in general terms the principles are uncontroversial.  The exercise is the familiar one of the Court being called upon to determine the legality of executive conduct which is a conventional application of the rule of law.  As Secretary of State for the Foreign and Commonwealth Affairs v R (Bancoult) [2007] EWCA Civ 498

23 May 2007 makes clear, save on grounds of non-justiciability, itself a narrowing concept, the Courts will not recognise any Alsatia where the Executive is permitted to act free of judicial review for illegality.  Here the decision is that of the Minister from  whom  there  is  no  right  of  appeal.    The  Court  is  therefore  confined  to considering the legality as distinct from the merits of the ministerial judgment.  It is however beyond dispute that there may be such disproportion between the conduct and what is effectively a penalty imposed as to render the decision unlawful and thus amenable to judicial review.  How that best should be formulated and applied in this case is a matter of both importance and difficulty.

The pleading point

[60]     The application for review pleaded:

54 The  seizure  of  the  cars  and  subsequent  forfeiture  was  … disproportionate treatment or punishment contrary to s 9 NZBORA and the common law.

It sought:

D       A declaration that the forfeiture and seizure of the cars was disproportionate punishment or treatment contrary to s 9 NZBORA.

[61]     In his written reply Mr Ellis invited the Court to “tackle once and for all the continuum that  exists  from Wednesbury  unreasonableness  to  disproportionality”. Mr Liddell submitted that the pleading did not assert that the seizure of the cars was “bad in administrative law” and so the Crown did not have to answer, “in an administrative law sense”, a case that the seizure was unlawful as engaging the controversial issue of proportionality in administrative law. He submitted that had such a pleading been made the Crown would have led evidence upon it.

[62]     I accept that there is no stand alone pleading that the conduct of the Crown was “disproportionate” insofar as that concept, common in European human rights jurisprudence and now fashionable in English Human Rights Act cases, differs from the conventional Wednesbury argument pleaded at para 50:

…the  unreasonable  use  of  the  [Minister’s]  powers  [when  making  his decision  entailed]    unreasonable use of  those powers  and  the failure to consider relevant considerations and the consideration of an irrelevant consideration…

[63]     But the s 9 right to be free of  “disproportionately severe punishment” was squarely pleaded as a ground for review and must be dealt with.

[64]     Mr Ellis submits that, even if his principal argument (of need for conviction) is not accepted, the forfeiture of cars worth $45,000 for a misdescription of value resulting in immediate loss of GST of under $2000 is so disproportionate as to be unlawful and such as to require the intervention of the Court.

[65]      He submits that Parliament has provided a penalty for avoidance of GST by means other than customs infringement of at most 40% of the tax due in the case of gross carelessness (Tax Administration Act 1994 s 141C).  That is $800, less than a sixth of the penalty sustained.    Moreover on sale of the cars the GST component would have been the subject of credit for the full amount, so the disproportion is

accentuated. Both the policy of the ancient constitutional statutes and the language of s 9 of the modern Bill of Rights should prevent such result.

Discussion

[66]     It is beyond argument that the conduct of the Crown, including the decisions not to exercise the ministerial power of waiver, may be reviewed by this Court. To do so raises yet again the question of what degree of intensity should be selected by the Court in reviewing the conduct of Customs.   Mr Ellis invites close scrutiny. He submits that on any forfeiture, even if the legislation exempts the Crown from the

need to obtain a criminal convictions, the principles of the 14th century and other

constitutional statutes and of legality must apply.  The argument is supported by the analogy  of  Parliament’s  tax  policy.     If  GST  underpaid  by  reason  of  gross carelessness in other contexts can carry a penalty of only $800, how can the Minister’s decision not to waive the $45,000 forfeiture, at least in part, be justifiable?

[67]     There are two major arguments in reply.   One is that  the case does not concern the imposition of a criminal penalty at all.  Rather it is about the exercise of a power of waiver of a fixed consequence set by Parliament, from which a Minister may grant dispensation in whole or in part.  In all other like states customs forfeiture is treated not as a criminal penalty but as a simple civil consequence of objective events.

[68]     The second, which overlaps, is that the administration of the customs is not, unlike the assessment of criminal penalties, part of the every-day administration of the criminal law which for the most part affects New Zealanders and with which the Court is familiar.  Nor is it part of the tax law which for the most part affects persons resident or at least trading in New Zealand in respect of whom the Commissioner is likely   to   have   significant   records   and   capacity   (as   under   s   16   of   the Tax Administration Act) to access at leisure records which it is the taxpayer’s duty to maintain (ss 22-3).    Rather it concerns the terms on which disincentives are to be imposed to deter breach of the customs regime by all importers, many of whom will not be New Zealanders and in respect  of whom no  records are held. There are millions of such transactions a year.

[69]     It is necessary to consider the perspective in which the conduct of Customs and of the Minister and its effect on the applicant is to be viewed.

The conduct of Customs

[70]     I am satisfied that the officers of Customs acted lawfully in treating the cars as forfeited and seizing them pending the Minster’s decisions as to waiver.    Such result is required by the foregoing construction of ss 225-6 of the primary legislation, which of course is not reviewable.

[71]     The only conduct that  is potentially reviewable  is that  which  led  to  and included the two ministerial refusals of waiver.

The effect on Mr Mihos

[72]     In Belcher v Chief Executive of the Department of Corrections CA184/05

19 September  2006  the  Court  of  Appeal  rejected  a  priori  labels  and  required characterisation of conduct impacting upon a subject according to its real consequences.  That approach is appropriate in appraising the effect on Mr Mihos of the Minister’s refusal to waive forfeiture.

[73]     While Parliament has provided that forfeiture shall happen automatically on the  happening  of  any  of  the  events  stipulated  in  s 225(1),  that  consequence  is provisional.  That is not only because of the power of the District Court under s 231 to give relief if there was no reasonable cause for the forfeiture or the requirement of seizure within two  years.   It  is also  because Parliament  has recognised that  the consequences of automatic forfeiture may be excessive.  Hence the Minister’s power under s 235 to grant relief wholly or in part.

The Minister’s role

[74]     The Minister’s role is analogous to the Royal Prerogative of Mercy, which in

Burt v Governor-General [1992] 3 NZLR 672 the Court of Appeal held to be subject

to judicial review, a decision followed by the Privy Council in Lewis v Attorney- General of Jamaica [2001] 2 AC 50. But as those decisions show, care is required by the Court in reviewing the Prerogative. The same must be the case in reviewing a ministerial refusal to waive a forfeiture stipulated by primary legislation.

The Court’s role

[75]     The  principle  in  Secretary  of  State  for  the  Foreign  and  Commonwealth Affairs  v  R  (Bancoult), of general reviewability of executive  conduct,  does  not answer the difficult and important question of what intensity and what principles of review the Court should apply.  The work of the Executive and of the Court, as two of the limbs of government, is complementary.   The Executive is charged by Parliament and by the common law of the prerogative with the task of governing the state;  the  judiciary  with  ensuring  compliance  with  the  law.    Before  the  Court embarks on its task it is bound to ensure that it fully understands the implications of the options that may be open.

[76]     This case has been pending since 12 July 2004.  I have nevertheless decided that, to ensure that the Court is properly informed, the just and efficient course is to give  the  Crown  an  opportunity  to  file  the  background  material.  Otherwise  a judgment on proportionality would risk lacking the necessary perspective.

Decision reserved; timetable ordered

[77]     This  is therefore an  interim  judgment  in  respect  of the  third  contention. I direct the Registrar to arrange a telephone conference to fix a timetable for the filing of further material.

[78]     Judgment on the present issue and as to the final determination of the case, including any question of discretion, is reserved until the further evidence upon it is received.

W D Baragwanath J