FEDERAL COURT OF AUSTRALIA

Pearce v Coynes Freight Management Group Pty Ltd [2010] FCA 320

Citation:		Pearce v Coynes Freight Management Group Pty Ltd [2010] FCA 320
Parties:		STEPHEN PEARCE (A COLLECTOR UNDER THE CUSTOMS ACT 1901) v COYNES FREIGHT MANAGEMENT GROUP PTY LTD (ACN 005 283 821)
File number:		VID 687 of 2009
Judge:		DODDS-STREETON J
Date of judgment:		1 April 2010
Catchwords:		CUSTOMS and EXCISE – Customs duties – Where dutiable goods stolen from licensed warehouse while under control of Customs – Whether warehouse licensee “owner” of goods within definition in s 4(1) of Customs Act – Whether warehouse licensee entitled to remission of duty – Whether defences available to demand under s 35A of Customs Act available.
Legislation:		Customs Act 1901 (Cth), ss 4, 35A, 68, 71A, 71BA, 79, 80, 90, 91, 92, 94, 99, 101, 153 (repealed), 163, 165, 183 Customs Regulations 1926 (Cth), r 126, r 127, r 128 Customs Tariff Act 1995 (Cth), ss 15, 16
Cases cited:		The Attorney General  v Ansted & Ors (1844) 152 ER 1304 Brook’s Wharf and Bull Wharf Ltd v Goodman Brothers (1937) 1 KB 534 Chief Executive Officer of Customs v John Deere Ltd (2006) 155 FCR 208 Chief Executive Officer of Customs v Tony Longo Pty Ltd t/as Aquila Shoes (2001) 52 NSWLR 458 Chief Executive Officer of Customs v Tony Longo Pty Ltd t/as Aquila Shoes (2000) 158 FLR 213 Collector of Customs for the State of New South Wales v Southern Shipping Company Limited (1962) 107 CLR 279 Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285 Drew v Dibb (2008) 169 FCR 320 Goben Pty Ltd v The Chief Executive Officer of Customs and Anor (No 2) (1996) 68 FCR 301 Malika Holdings Pty Limited v Stretton (2001) 204 CLR 290 Mistmorn Pty Ltd (in liq) and Anor v Michael Yasseen (1996) 21 ACSR 173 Moama Refinery Pty Ltd v Chief Executive Officer of Customs (2001) 115 FCR 205 Parks Holdings Pty Ltd v Chief Executive Officer of Customs (2004) 141 FCR 165 Re Prechelt (1999) 149 FLR 334 Sidebottom & Ors v Giuliano & Ors (2000) 98 FCR 579 Sidebottom & Ors v Giuliano (2002) 123 FCR 594 Wilson v Chambers & Co Pty Ltd (1926) 38 CLR 131 Wing On & Co Limited v Collector of Customs for New South Wales (1938) 60 CLR 97 Collector, Customs of (NSW) v Wing On & Co Limited (1937) 11 ALJR 238
Date of hearing:	15 February 2010
Place:	Melbourne
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	199
Counsel for the Applicant:	Dr S P Donaghue
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	Mr G H Livermore
Solicitor for the Respondent:	Monahan + Rowell

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 687 of 2009

 

BETWEEN:	STEPHEN PEARCE (A COLLECTOR UNDER THE CUSTOMS ACT 1901) Applicant
AND:	COYNES FREIGHT MANAGEMENT GROUP PTY LTD (ACN 005 283 821) Respondent

 

JUDGE:	DODDS-STREETON J
DATE:	1 April 2010
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

Introduction

1                     The principal question in this proceeding is whether a warehouse licensee from whose warehouse dutiable goods were stolen while under control of Customs may defend a demand made under s 35A of the Customs Act 1901 (Cth) (“the Act”) to pay an amount equal to the duty which would have been payable had the goods been entered for home consumption on the date of the demand, on the ground that the warehouse licensee was entitled to a remission of duty under s 163 of the Act, either because it was an owner within the definition of s 4(1) of the Act who was liable to pay duty in respect of the goods under s 153[1] or otherwise.

2                     The application raises for determination the following issues:

(a)                Is a warehouse licensee, who has or has been, within the meaning of s 35A of the Act, entrusted with the possession, custody or control of dutiable goods subject to the control of Customs necessarily an “owner” of the goods within terms of the definition in s 4(1) of the Act, and hence liable to pay duties in respect of the goods as Crown debts under s 153?

(b)               Is the warehouse licensee entitled to seek and obtain a remission of duty under s 163 of the Act either because it is an owner liable to pay the duty or because the entitlement to seek a remission extends to a person liable under s 35A to pay an amount equivalent to duty?  If so, does such an entitlement constitute a defence to a demand under s 35A?

the application

3                     By an amended application dated 11 November 2009, the applicant, Stephen Pearce (an officer of the Australian Customs and Border Protection Service (“Customs”) and a collector under the Act) seeks:

Declarations:

1.                   A declaration that the Respondent –

(a)                is not a person who is entitled to apply for a remission of duty on the goods (as referred to at paragraph 5 in the Applicant’s Fast Track Statement) pursuant to section 163 of the Customs Act 1901 or at all; and

(b)                is therefore not entitled to apply to the Administrative Appeals Tribunal for a review of the decision of an officer of Customs dated 21 August 2009 not to remit the duty.

2.                   A declaration that, if any remission is granted, such remission is no defence to the present Federal Court recovery proceeding.

Orders:

3.                   An order under subs. 35A(2) of the Act that the Respondent that it pay the Applicant the sum of $194,519.64.

4.                   An order for costs pursuant to s.43 of the Federal Court of Australia Act 1976.

5.                   An order for interest from the date on which the cause of action arose to the date of judgment pursuant to s. 51A of that Act.

6.                   Such further or other orders as the Court deems appropriate.

The Facts

4                     The respondent, Coynes Freight Management Group Pty Ltd (“Coynes”), at all material times operated and managed two warehousing businesses under the respective names “Argus Bond” and “Coynes Storage Solutions” at 5‑29 Frederick Road, Brooklyn, Victoria (“the premises”).  The warehouse was licensed under s 79 of the Act to store underbond goods.  The warehouse bore the Warehouse Establishment ID 2011C.

5                     On 30 May 2008, Armik Group Pty Ltd (“Armik”) imported a quantity of vodka from the Ukraine into Australia.  The vodka was subject to duty pursuant to ss 15 and 16 of the Customs Tariff Act 1995 (Cth).

6                     The vodka was covered by Import Declaration N20 Declaration ID AALFJ3A96 lodged on 29 May 2008.

7                     The Import Declaration relevantly stated:

Importer Details:           ABN CAC or CCID 3405873 5470 1

Name:                                      Armik Group Pty Ltd

Ref                               Inv 199

Warehouse establishment ID 2011C Name:  Argus Bond

8                     The vodka the subject of Import Declaration N20 AALFJ3A96 was entered for warehousing in the Argus Bond at Coynes’ premises.

9                     On or about 7 June 2008, 849 cartons of the vodka imported by Armik containing 2,825.2 litres of alcohol (“the goods”) were stolen from the premises by persons unknown.

10                  By the letter of the applicant as Manager, Cargo Control and Audit Victoria, Australian Customs Service to Coynes dated 2 January 2009 (“the letter of demand”) the applicant demanded that Coynes pay a total amount of $216,003.26.

11                  The letter stated:

File NO: V02/06749                                         Customs House

                                                                       Cargo Control & Audit

                                                                       GPO Box 2809

                                                                       Melbourne Vic 3001

2 January 2009

The Secretary

Coynes Freight Managements Group Pty Ltd

C/- Mutual Trust Pty Ltd

Level 33, 260 Collins Street

MELBOURNE VIC 3000

Dear Sir,

DEMANDS FOR AMOUTN EQUAL TO DUTY AND FOR GST ON VODKA STOLEN FROM BOND

 

I refer to the theft of 849 cartons of vodka containing 2825.2 litres of alcohol (“the goods”) from your licensed warehouse on or about 7 June 2008 and to subsequent correspondence.

Please note that the demand dated 24 July 2008 previously issued for this matter is withdrawn and replaced by this one.

I am writing to demand payment from your company of –

(a)        the sum of $194,519.64, being the amount equal to the duty that would have been payable if the goods were entered for home consumption on the date of this letter; and

(b)        the sum of $21,483.62, being the assessed amount of GST that the company is liable to pay in respect of the goods.

The total amount demanded in this letter is therefore $216,003.26.

(a)        Demand under s.35A of the Customs Act 1901 for amount equal to duty

 

Subsection 35A(1) of the Customs Act 1901 (“the Act”) provides as follows:-

(1)        Where a person who has, or has been entrusted with, the possession, custody or control of dutiable goods which are subject to the control of the Customs:

(a)        fails to keep those goods safely; or

(b)        when so requested by the collector, does not account for those goods to the satisfaction of a Collector;

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.

At the time when the goods were stolen, your company was a (legal) person who had, or had been entrusted with, possession, custody or control of the goods, being dutiable goods which were subject to the control of Customs.  I consider that your company failed to keep those goods safely within the meaning of subs. 35A(1).

Accordingly, pursuant to paragraph 35A(1)(a) of the Act, I demand that your company pay the sum of $194.519.64, being an amount equal to the customs duty which would have been payable if the goods were entered for home consumption on the date of this demand.  Details of how this amount is made up are set out in Annexure A.  This sum should be paid to Customs by no later than the close of business on 14 January 2009.  I make this demand under subs. 35A(1) in my capacity as a Collector within the meaning of the Act.

If this amount is not paid, Customs intends to proceed with legal action to recover it as a debt to the Commonwealth under subs. 35A(2) of the Act.

 

(b)        Demand for GST amount payable on the vodka

 

Annexure A sets out the duty and GST amounts in terms of the affected import entry.  A replacement Notice of Assessment for the GST for $21,483.62 is provided at Annexure B.  Please note that the applicable subsection is 105-5(2).

This sum should also be paid no later than the close of business on 14 January 2009.  This demand is made by me as an officer with the delegation from the Commissioner of Taxation to bring a recovery proceeding under s. 255-5 of Schedule 1 to the Taxation Administration Act 1953 for GST that is due and payable.

If this GST amount is not paid, I intend to proceed with legal action to recover it as a debt to the Commonwealth under that section.

Yours sincerely,

Stephen Pearce

Manager

Cargo Control & Audit – Victoria

Australian Customs Service

12                  Coynes did not comply with the letter of demand.  The demand remains unsatisfied.

13                  By an “application for remission of duty” dated 11 August 2009, Coynes requested that “an amount said to be equal to the duty of $194,519.64 be remitted”.

14                  The application stated:

To:       AUSRALIAN GOVERNMENT

            AUSTRALIAN CUSTOMS SERVICE

                        APPLICATION FOR REMISSION OF DUTY

 

 

OWNER DETAILS

OWNER ID (ABN, ABN/CAC or CCID)

ACN 005 283 821

OWNER NAME:  COYNES FREIGHT MANAGEMENT GROUP PTY LTD

WHICH IS AN OWNER IN THE EXTENDED SENSE THAT WORD IS USED IN SECTION 4 OF THE CUSTOMS ACT.

IMPORT DECLARATION ID:  Customs Entry Number is through to be

AALFJ3A96-1

BROKER DETAILS – IF APPLICABLE

 

 

GOODS DETAILS

Name of Ship/Aircraft or Establishment:

MAERSK DECATUR Voyage 0811

Establishment Code:

Date of Arrival of Vessel:  In Melbourne thought to be on or about 30 May 2008.

Date of arrival of container in Coynes premises on or about 5 June 2008.

Location of Goods at time of Application:

Unknown, the container and everything in it having been stolen from Coynes premises.

Marks and Numbers

Container TTNU 2949397

Number of Packages, Descriptions of Goods, Rate and Tariff Item:

Vodka said to be in Container TTNU 2949397: The amount said to be equal to the duty on the vodka is said in Australian Customs letter to Coynes on 2 January 2009 to be $194,519.64

Amount of Duty sought to be remitted – Amount said to be equal to the Duty namely:  $194,519.64

Coynes Freight Management Group Pty Ltd has been informed by Detective Senior Constable Dean Maher of the Footscray CIU, telephone 8398 9899, fax 8398 9952 that certain persons are to be charged in connection with the theft of the vodka.

I REQUEST A REMISSION OF THE STATED AMOUNT OF DUTY ON THE ABOVE MENTIONED GOODS FOR THE FOLLOWING REASON(S):

 

The goods consisting of vodka said to be in Container No. TTNU 2949397 were stolen at the place of export of the goods and before the goods left the control of customs

Signature                      MONAHAN + ROWELL 11.8.2009

Monahan + Rowell, Agent of the owner – in the sense that the word “owner” is defined in Section 4 of the Customs Act.

CUSTOMS OFFICIAL USE ONLY

 

Date:

Customs File Reference:

State:

Name of Section Sub-Collectorate:

Application received and entered in the register:  ……..Yes         ……..No

Customs Officer Name:

Customs Officer Signature:

Date:

15                  By a letter dated 21 August 2009, Customs rejected Coyne’s application for remission of duty.

16                  The letter stated:

File No: V02/06749

21^st August 2009

Mr Robert Tuck

Mohan + Rowell

Level 31

525 Collins Street

VIC 3000

 

REJECTION OF COYNES FREIGHT MANAGEMENT GROUP PTY LTD (ABN 13 005 283 821) APPLICATION REGISTERED AS NUMBER 1402 FOR REMISSION OF DUTY

 

Dear Mr Tuck

 

I refer to your application dated 11^th of August 2009 requesting the remission of duty on Alcohol linked to Import Entry AALFJ3A96.  This Nature 20 gave permission for those goods to be warehoused at a S79 licensed place, Argus Bond whose Establishment ID is 2011C, which is owned by your client Coynes Freight Management Group Pty Ltd (ABN 13 005 283 821).

Applications for remission of duty (ie via a B730) must be made by the importer cited on the affected Import Entry or an agent that entity specifically authorises to make applications for remission of duty on their behalf.  I have rejected this application (registered on 12 August 2009 as Number 1402) because Coynes Freight Management Group Pty Ltd is not the entity cited in the Importer Field on AALFJ3A96, namely Armik Group Pty Ltd (ABN 34 0587 354 470).

I note your reference to the term owner in S4 of the Customs Act 1091, namely ‘Owner in respect of goods includes any person (other than an officer of Customs) being or holding himself or herself out to be the owner, importer, exporter, consignee, agent or person possessed of, or beneficially interested in, or having any control of, or power of disposition over the goods.”

 

A B730’s Owner Detail field is used to collect the information needed to assess if the applicant is the entity cited in the Entry’s Importer Field.  If not, as here, the application is rejected.  My area routinely advises clients the entity cited in the Importer field may have to pay the duty if the goods are unaccounted for and granting a remission is limited to extinguishing only the duty that the entity cited in the Entry’s Importer field might otherwise owe.

If you wish to discuss this matter further please contact me on (03) 9244 9035

Yours sincerely

 

Mark Gillespie

Supervisor

Cargo Control

Australian Customs and Border Protection Service

17                  By an application to the Administrative Appeals Tribunal dated 16 September 2009, Coynes applied for a review of the decision recorded in the Australian Customs’ letter of 2 August 2009.

18                  The application stated the following reasons for seeking review of the decision:

(a)    The decision is wrong and or is not maintainable having regard to the definition of owner in Section 4 of the Customs Act 1901.

(b)    The Application for Remission of Duty ought to have been granted having regard to the matters set out in the Application dated 11.8.09.

(c)    The Customs Act does not provide that the “owner” who applies for a remission of duty must be the person named on the Import Entry as the Importer.

(d)    Coynes Freight Management Group Pty Ltd reserves the right to add to the reasons set out in this application after Australian Customs has responded to a letter written to it on 27 August 2009 by Monahan + Rowell.

19                  The relevant Customs officer, Mark Gillespie, made a Statement of Findings on Material Questions of Fact and Reasons for Decision dated 28 October 2009.

20                  Mr Gillespie stated that he rejected Coynes’ application for remission of duty by letter dated 21 August 2009.

21                  Mr Gillespie referred to the relevant legislation and regulations.  He stated that the underbond goods were under Customs control until delivered into home consumption.  Coynes’ custody of the underbond (duty unpaid) goods at its licensed Angus Bond premises was restricted to moving and storing them within the premises.  Coynes had no power to move the goods beyond their premises or dispose of them.  Rather, Armik (being named in the importer field) had sole control and the power to dispose of the goods, and thus only Armik could apply for remission.  Further, the demand under s 35A did not seek duty, but an amount which was not subject to the remission provisions of the Act or the related Regulations.

22                  Mr Gillespie concluded:

In summary, Customs routinely rejects applications for remission of duty if they are made by an entity other than the one referred to in the ‘Importer Field’ or a duly authorised agent.  In this case, the applicant is not eligible for remission of duty for the underbond goods declared at AALFJ3A96 because:

(a)                Armik (the entity referred to in the ‘Importer’ field) had the power to move the goods between places and dispose of them and is therefore the owner for the purposes of the Remission Application;

(b)                The applicant (the entity referred to in the FID’s ‘Warehouse Establishment’ field) had no role other than to have custody of, and store the goods;

(c)                The $194,519.64 cited in the Remission Application is not duty and is therefore not eligible to be remitted.

The Legislation

23                  The principal sections of the Act relevant to the application are as follows:

Section 4(1) relevantly provides:

In this Act, except where otherwise clearly intended:

Duty means duty of Customs.

Owner in respect of goods includes any person (other than an officer of Customs) being or holding himself or herself out to be the owner, importer, exporter, consignee, agent, or person possessed of, or beneficially interested in, or having any control of, or power of disposition over the goods.

Warehouse means a place that a person or partnership is licensed under section 79 to use for warehousing goods.

Warehoused goods means:

(a)        goods received into a warehouse in pursuance of an entry for warehousing or permission granted under section 71E; or

(b)        goods blended or packaged in a warehouse in compliance with this Act.

Section 35A provides:

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 the control of the Customs:

(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.

(1A) Where:

(a)        dutiable goods subject to the control of the Customs are, in accordance with authority to deal or by authority of a permission given under section 71E, taken from a place for removal to another place;

(b)        the goods are not, or part of the goods is not, delivered to that other place; and

(c)        when so requested by a Collector, the person who made the entry or to whom the permission was given, as the case may be, does not account for the goods, or for that part of the goods, as the case may be, to the satisfaction of a Collector in accordance with section 37;

the 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 the goods, or on that part of the goods, as the case may be, if they had been entered for home consumption on the day on which the demand was made.

(1B) Where:

(a)        dutiable goods subject to the control of the Customs are, by authority of a permission given under section 71E, removed to a place other than a warehouse; and

(b)        the person to whom the permission was given fails to keep those goods safely or, when so requested by a Collector, does not account for the goods to the satisfaction of a Collector in accordance with section 37; the 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.

(2)        An amount payable under subsection (1), (1A) or (1B) shall be a debt due to the Commonwealth and may be sued for and recovered in a court of competent jurisdiction by proceedings in the name of the Collector.

(3)        In proceedings under the last preceding subsection, a statement or averment in the complaint, claim or declaration of the Collector is evidence of the matter or matters so stated or averred.

(4)        This section does not affect the liability of a person arising under or by virtue of:

(a)        any other provision of this Act; or

(b)        a security given under this Act.

24                  Section 153 of the Act, which was in force at the date on which the goods were stolen from Coynes’ warehouse (see footnote 1) stated:

153  Recovery of duties

All duties shall constitute Crown debts charged upon the goods in respect of which the same are payable by the owner of the goods and recoverable at any time in any court of competent jurisdiction by proceedings in the name of the Collector.

25                  Pursuant to the Regulations, a particular form (B730) is prescribed for applications for refunds, rebates or remissions of duty.  It relevantly requires:

Owner Details

Owner Name

Import Declaration ID

The Customs Regulations 1926 (Cth)relevantly provide:

126      Circumstances under which refunds, rebates and remissions are made

(1)        Each of the following circumstances is prescribed for the purposes of section 163 of the Act, namely where:

(a)        the goods on which duty has been paid or is payable have deteriorated or been damaged, lost or destroyed after being received at the place of export of the goods and before the goods became subject to the control of Customs;

(b)        the goods on which duty has been paid or is payable have deteriorated or been damaged or destroyed while subject to the control of Customs;

(c)        the goods on which duty has been paid or is payable:

(i)         have been lost while subject to the control of Customs; or

(ii)        have been stolen after being received at the place of export of the goods and before the goods left the control of Customs;  …

127      Conditions for refund etc of duty

(1)        A refund of duty shall not be made unless an application for the refund in accordance with regulation 128 is delivered in accordance with that regulation within the period within which that application may, by virtue of regulation 128A, be made.

(1B)     Subregulation (1) does not apply if the circumstances mentioned in subregulation 128AA (1) or (2) apply.

(2)        Subject to subregulation (3), a remission of duty shall not be made unless an application for the remission in accordance with regulation 128 is delivered in accordance with that regulation before the goods leave the control of the Customs.

(3)        Subregulation (2) does not apply if the goods on which duty was payable have been totally lost or destroyed or have otherwise ceased to exist.

…

(4)        A refund or remission of the whole of the duty paid or payable on goods mentioned in paragraph 126 (1) (a), (b) or (d) that have not been totally lost or destroyed, or have not otherwise ceased to exist, will only be made if Customs is notified and the goods:

(a)        are destroyed:

(i)         under the supervision of an officer; or

(ii)        after Customs tells the person who made the application that the goods can be destroyed; or

(c)                are exported.

…

128      Application for refund, rebate or remission of duty

(1)        For paragraph 163 (1AA) (a) of the Act, an application by document for a refund, a rebate or a remission of duty must:

(a)        be in an approved form; and

(b)        include information as required by the form; and

(c)        be signed as required by the form; and

(e)        state which circumstance under subregulation 126 (1), 126B (1), 126C (1) or 126D (1) applies to each of the imported goods; and

(f)        either:

(i)         be given or sent to an officer doing duty in relation to refunds; or

(ii)        be left in a Customs Office at a place designated for lodgment of applications for refunds, rebates or remissions of duty.

relevant case law AND LEGISLATIVE HISTORY

Liability of Owner to Pay Duty

26                  The nature and duration of the liability to pay duty on imported goods, the identity of the persons liable, the dates for calculation of the rate and of the commencement of the obligation have been considered in a number of authorities.

27                  In Wing On & Co Limited v the Collector of Customs for New South Wales (“Wing On”) cigarette papers were smuggled into Australia by a seaman.  They were not entered at the Customs.  The defendant purchased successive lots of boxes of cigarette papers from the seaman and sold some of them to other persons.

28                  Starke J, in the original jurisdiction of the High Court (see (1937) 11 ALJR 238), held that the defendant was liable to pay customs duty on the cigarette papers as a debt pursuant to s 153 of the Act.  His Honour observed that: “[t]he customs duties are charged upon the goods and become a debt due to the Crown immediately upon importation” (see (1937) 11 ALJR 238)  although s 132 provided that all import duties shall be paid at the rate in force when the goods are entered for home consumption.

29                  Starke J observed that while the Customs Tariffs Act 1933 did not explicitly provide who was liable to pay the duties, Brook's Wharf and Bull Wharf Ltd v Goodman Brothers (1937) 1 KB 534 indicated that “primarily the importer[2] is liable”.

30                  His Honour noted, however, that the Act specified that the duties constituted Crown debts which were charged on the goods and payable by the “owner”, a term widely defined in s 4 of the Act.

31                  Starke J held that an “owner” as defined in s 4 was not restricted to the importer of the goods at the moment of importation.  His Honour also rejected the submission that duties became payable only upon entry for home consumption.  He concluded that the owner of the goods charged with duties under s 153 included all persons with possession,, control or disposition of goods charged with customs duties which had not been paid.  Although s 132 specified that the rate of duty was that in force at the date of importation, the owner had a duty to enter them and could not “excuse itself by neglecting to perform this duty” (at 239).  Starke J concluded that the defendant was liable for the duties. 

32                  The Full High Court ((1938) 60 CLR 97) affirmed Starke J’s decision.

33                  Latham CJ considered that when the defendant purchased the smuggled goods, both the importer (smuggler) and the defendant could be called to enter them.  The goods remained charged, and upon sale, each successive owner had a personal liability to pay the duty.  There was no reason to limit “the owner of the goods” liable under s 153 to “the owner of the goods at the time of importation”[3].  Thus, his Honour stated that “the liability to pay the duty follows the goods as a charge and also follows the ownership of the goods as a personal liability until the duty ceases to be payable” ((1937) 60 CLR 97 at 107).

34                  Rich J considered that at least until the goods were entered for home consumption, it was intended that any person who enjoyed “full ownership” should pay the duty (at 107).

35                  Dixon J (at 108) observed that it was “unfortunate” that s 153 “did not say at what time ownership must exist to bring about liability”. His Honour recognised a number of possibilities, including ownership at the time of importation, ownership for the time being or each successive ownership from and at the time of importation until the duty was paid or the goods were entered for home consumption.

36                  Dixon J observed that it was unnecessary to decide whether a person who played no part in introducing goods into Australia, but thereafter obtained property or possession in them (whether knowingly from a smuggler or as a bona fide purchaser) was liable to pay duty prior to the entry of the goods, so long as they remained subject to the control of Customs (see (1937) 60 CLR 97 at 109).  That was because the defendant had some, albeit unspecified, connection with the importation of the goods and had resold them with “the intention of defeating the revenue” (at 109).

37                  His Honour concluded that the goods in question remained subject to the control of Customs (subject to forfeiture) and the specific charge upon the goods under s 153 would “bind all persons taking them unless they are bona fide purchasers for value” (at 110).  The defendant, acting with the intention of defeating the charge, was liable to pay the debt, which it could not defeat by on-sale of the goods (at 110)

38                  In Chief Executive Officer of Customs v Tony Longo Pty Ltd (2001) 52 NSWLR 458 (“Tony Longo”), the plaintiff (Customs) sought to recover under s 153 of the Act unpaid customs duty in respect of shoes the defendant owned and had imported from Portugal to Australia for home consumption.  The goods were not entered for home consumption.

39                  The primary judge struck out the plaintiff’s statement of claim ((2000) 158 FLR 213).  His Honour, in reliance on Re Prechelt (1999) 149 FLR 334,held that no duty was payable until the goods were entered for home consumption, as s 132 provided, broadly, that the rate of any import duty was that in force at that date.  His Honour reasoned that the rate of duty could not be struck unless the goods were first so entered, as there was otherwise no mechanism to attach to particular goods the duty generally imposed by s 21 of the Customs Tariff Act 1987 (Cth).[4]

40                  The Court of Appeal allowed the plaintiff’s appeal.

41                  Before the Court of Appeal, the defendant reiterated that while s 21 of the Customs Tariff Act 1987 identified the type of goods in respect of which Customs duties were imposed, the rate and the identity of the person liable to pay depended on s 132 of the Act.  The defendant submitted that as no rate could be struck before the goods were entered for home consumption, there could be no quantification of what was payable and hence, no debt recoverable under s 153 of the Act.  Customs, in contrast, submitted that duties were imposed under the Customs Tariff Act 1987 on goods imported in Australia and, where goods had not been entered, s 132 of the Act did not operate.  In such a case, the applicable rates would be those in force at the time of importation.  Customs relied, in that context, on Wing On and Wilson v Chambers & Co Pty Ltd (1926) 38 CLR 131(“Wilson v Chambers”).[5]

42                  Heydon JA (with whom Mason P and Rolfe AJA agreed) analysed in detail Wilson v Chambers and Wing On.  His Honour concluded that in Wilson v Chambers, the High Court assumed that the duty was payable on importation and did not accept that due to s 132, no duty was payable until goods were entered by the importer for home consumption.  The High Court had affirmed the dismissal of charges of evasion of duty only because the requisite mental element was wanting, rather than because the duty was not “actually and price entry payable” (at 468) on importation.

43                  Further, Heydon JA considered that Starke J’s rejection of the argument that no duty was payable by reason of s 132 of the Act was authoritative, notwithstanding Dixon J’s concluding observations in Wing On.  Although Dixon J had contemplated that a bona fide purchaser might not be liable and may have based his holding of liability on the intended evasion of duty, Starke J’s reasoning applied both to cases involving evasive schemes and those that did not.

44                  Heydon JA considered that provisions such as s 35A, which were:

“collateral to the primary provisions imposing duty but not to be substituted for them, could neither be the central duty‑raising provisions nor cast light on the construction of those provisions…

The remedies are cumulative on the primary obligations to pay duty.  They are not to be regarded as means of filling a hole left by the relatively narrow view of the primary obligation to pay duty.  The construction propounded by the plaintiff is to be preferred because it permits civil recovery of duty on the importation of goods, rather than leaving the authorities to have recourse to substitutional remedies which are less easy to take advantage of and less wide in their operation.” [487]

45                  Heydon JA dismissed as invalid a distinction between “a duty which is ‘payable’ and a payable duty which has not yet been calculated”.  Rather “[a] duty was not payable unless it has been calculated or is immediately capable of being calculated.  If it were not yet capable of being calculated, it would not be payable.” [469]

46                  In Goben Pty Ltd v The Chief Executive Officer of Customs and Anor (No 2) (1996) 68 FCR 301 (“Goben No 2”).  Davies J acknowledged that, in some contexts of the Act, such as s 167, “the owner of the goods” appeared to “encompass whoever was in fact the owner at time and paid the duty” (at 310) [see also s 183].  In contrast, under s 153, the owner liable to pay duty was not a specific person or the person expressed to be the owner in the entry for home consumption, but anyone within the range of persons falling within the description of “owner” in s 4(1).  In Goben No 2, the delegate of the Chief Commissioner for Business Franchise Licences (Tobacco) New South Wales seized imported tobacco at a licensed bond store because the importer was believed to carry on a tobacco wholesaling business in New South Wales without a licence.  The Chief Commissioner obtained Customs’ authority under s 71E of the Act to move the tobacco to another bond store.  Customs refused the importer’s application to move the products to a bond store in another State.  The applicant complained, inter alia, that Customs was not empowered to permit the Chief Commissioner to move the goods, as he was not the owner.  Rather, the applicant contended that it was the owner of the goods at the date of entry for home consumption and remained the owner for all purposes of the Act while the entry for home consumption was in force.

47                  Davies J concluded that the Chief Commissioner was an “owner” as defined in s 4(1) as he claimed to have taken the tobacco into his custody and was a person having control of the goods.

48                  Davies J stated (at 307):

As his Honour pointed out, the term may comprehend both an agent who has actual corporeal control of goods or documents and the person on whose behalf those goods or documents are held. And the custody or control need not be exclusive.

The term must be read and applied having regard to the context in which it appears. Thus, in Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279, where s 35A of the Customs Act was considered, the Court held that certain goods had been in the "possession, custody or control" of a shipper when they disappeared. At 287, Dixon CJ expressed doubt that the owner of the goods, a manufacturer, would have been encompassed by the section. That was because of the subject matter of s 35A. Section 33 of the Tobacco Act would appear to look not to the proprietor of a warehouse in which goods are stored, but at the person on whose behalf the goods are there kept, for it looks to the situation that the tobacco is evidence of tobacco wholesaling by the person having the possession, custody or control of the goods.

In the present case, as "possession, custody or control" need not be exclusive, it appears to me that the goods were in the "possession, custody or control" of JAS International and of its principal, Goben, notwithstanding that the owner's rights were subject to the obligations due to Customs, that is to say, to the making of an entry for home consumption and the payment of duty. An owner of goods may deal in them notwithstanding that they are under the control of Customs. Section 33 of the Tobacco Act uses the term "for sale", which is prospective. The presumption is not that the goods have been sold but that the person who has "possession, custody or control" is carrying on tobacco wholesaling in New South Wales.

Warehousing

49                  The history, function and purpose of warehousing has been considered in a number of authorities.

50                  In the old case of The Attorney General v Ansted & Ors (“Ansted”)(1844) 152 ER 1304, the Court held that the recently enacted Warehousing Act had not changed the liability to pay duties upon importation to a liability to pay upon entry for home consumption.

51                  In Ansted,the defendants imported dried fruit which they entered for warehousing in a bonded warehouse.  The defendants put their agent in funds to pay the duty on the goods and deliver them from the warehouse for home consumption.  The agent fraudulently misappropriated the money and the defendants obtained the goods without duty being paid.

52                  Lord Abinger CB referred to the “recent acts of parliament” (at 1308) (including the Warehousing Act (which appeared to make duties payable not only on importation, but upon entry for home consumption and also empowered remittal of duties on goods lost or destroyed by unavoidable accident in the warehouse).  His Lordship stated that the recent legislation “was not to discharge the importer from his liability for payment of the duties on the goods imported by him, but only to afford facilities to the commerce of the country, by enabling merchants, in certain cases, to postpone the payment of the duties” (at 1308-9).

53                  Parke B stated (at 1309):

I am of the same opinion. The defendants clearly were, by the general law, liable, as importers of the goods, to the payment of these duties: and the only question therefore is, whether that liability has been affected by the Warehousing Act, 3 & 4 Will. 4, c. 57. It appears from the preamble of that Act, that the object of this and of similar statutes was to promote the trade and commerce of that country, and with that view, it was intended to give the merchant time for payment of the duties until the goods were either exported or taken out for home consumption. It is contended in this case, on behalf of the defendants, that the time for payment of these duties has not arrived, because no entry for home consumption has yet been made. But that is the fault of the defendants themselves, and it does not, therefore, lie in their mouth to say that the time for payment has not arrived. Then they say that the effect of the statute is to give a new remedy for the duties upon goods imported and warehoused, and afterwards entered for home consumption. I think that is not so, and that the alteration introduced by the statute relates only to the time of payment; and here the time of payment has arrived, for the defendants have taken out the goods for home consumption. The remedy of the Crown is therefore no longer suspended: the duties were originally payable by the importers, and the time of payment has arrived. As to the want of an entry for home consumption, that arose from the misconduct of the defendants' agent, and they cannot take advantage of their own wrong.

54                  In its early form, the Australian Customs Act 1901 required warehouse licensees to provide security and to pay duty on goods in specified circumstances.

55                  Section 92(4) of the Customs Act provided that the licensee should: 

pay the duty on all warehoused goods removed from his warehouse except by authority and all warehoused goods not produced by the officer on demand unless such goods are accounted for to the reasonable satisfaction of the collector.

A twenty pound penalty was imposed for contravention.

56                  In relation to s 92(4), Wollaston in Customs Law [Wollaston, HNP Customs Law, 1904 at p59, note 3] stated:

All goods missing from whatever cause, would come under this subsection.  Would the licensee be liable for the duty on goods stolen.  It is considered that he would [it were so held under State Acts], but as to this see sec 96, which would seem to have been considered in connection with the above, and also section 163(b).

…

If goods stored in a bonding warehouse are found to be short in quantity and the deficiency is not accounted for by natural loss, waste, or defective packing, the proprietor of such warehouse would be liable both for the duty on the deficiency to the Customs and the value thereof to the owner unless he had contracted himself out of the liability.

57                  Section 93 of the Customs Act provided:

“No person shall excise by authority open any warehouse or gain access to the goods therein”.

58                  Wollaston (at p59) stated:

The licensee of a warehouse, though in one sense having the custody and being responsible for the care of the goods in the warehouse, cannot open the warehouse or have access to the goods therein without the concurrent of Customs, still less can the owners of the goods.

59                  Section 96 of the Customs Act provided for re-warehousing, an application for which was to be made by the owner.  Section 96(c) provided that:

Duty shall be paid on any disallowed deficiency.

Wollaston (at p60, note 1) stated:  “[t]he licensee of the warehouse is the party liable for this duty”.

60                  Section 163(1) of the Customs Act provided that:

Whenever goods

have receive damage or have been pillaged during the voyage; or

have whilst under Customs control been damaged pillaged or destroyed; or

a refund rebate or remission of the duty as the case may require shall be made in the manner prescribed.

61                  Wollaston (at p105) stated: “[i]t will be observed that the section is imperative in its terms.  The refund must be given subject only to the prescribed manner.”  The author did not address how his view that a warehouse licensee would be liable to pay duty on goods stolen from the warehouse was reconcilable with a non-discretionary entitlement to a refund of duty on pillaged goods. 

62                  Section 100 of the Customs Act provided that the owner could apply for the revaluation of goods which had deteriorated in value, and duty would be paid accordingly if the collector were satisfied that the deterioration had been accidentally caused.

Wollaston stated (at p63) that an accident, in that context, was “an occurrence which could not be prevented by the exercise of ordinary care, caution and skill.”

Introduction of s 35A of the Act

63                  Section 35A of the Act was introduced by the Customs Bill 1957.

64                  At the second reading, Mr Osborne stated [at p 1148 Hansard 8 May 1957]:

The revenue will be protected by the new provisions proposed in clause 5 of the bill, that is, the new section 35A of the Customs Act.

The second amendment relating to securities, that is, the new section 35A, will attach to a person who has been entrusted with the possession, custody or control of dutiable goods the responsibility for paying the duty on any goods which are not kept safely or are not accounted for to the satisfaction of the Collector of Customs. Honorable members may recall that in 1952 the Distillation Act and the Excise Act were amended in this manner. Following those enactments, it became unnecessary, except in special circumstances, for many persons having custody, control or possession of excisable goods to furnish securities to the Department of Customs and Excise in respect of duty payable on the goods.

Experience has shown that the new practice has proved to be a great benefit to both the department and the public and at the same time adequate protection to the revenue has been maintained. For these reasons it is considered desirable that a similar amendment be made to the Customs Act to enable many existing securities to be dispensed with.  However, the wording of the section is not as originally introduced into this Parliament. Honorable members may be aware that an amendment was carried elsewhere, but it is not acceptable to the Government and, at a later stage, I will move to restore the bill to its original form as introduced in the Senate. I propose at the committee stage to move an amendment for the alteration to the wording of section 35A.

65                  Debate focused on whether s 35A should include the amendment inserted by the Senate, which required the collector’s satisfaction to be based on reasonable grounds.

66                  The government opposed that amendment, on the basis that the phrase “to the satisfaction of a collector” was used frequently without qualification in customs and excise legislation, and existing legal principles afforded protection from arbitrary or capricious conduct.

67                  Mr Pollard, in supporting the proposed amendment, referred to the possibility that thieves might enter the premises and steal dutiable goods, yet despite all reasonable precautions, the warehouse licensee would be liable in the absence of the qualification “based on reasonable grounds”.

68                  Section 35A was nevertheless enacted without the proposed amendment.

Liability under s 35A of the Act

69                  The nature of the liability under s 35A of the Act and its relationship to liability under s 153 has been considered in a number of decisions.

70                  In Collector of Customs for the State of New South Wales v Southern Shipping Company Limited (1962) 107 CLR 279(“Southern Shipping”), the High Court held that s 60 of the Excise Act 1901-1952 (Cth)(in the same terms as s 35A) did not impose a tax, but to protect the revenue imposed a liability to pay an equivalent amount in the nature of compensation.  In Southern Shipping, tobacco excisable under the Excise Act 1901-1952 was delivered with the Customs’ authority to a lockable bond store on a wharf owned by the Maritime Services Board.  As the excise had not been paid, they remained, at all relevant times, subject to the control of Customs within the meaning of s 60 of the Excise Act 1901-1952.

71                  The defendant, whose only interest in the tobacco products was as a carrier for reward, owned a ship berthed at the wharf.

72                  The defendant’s servants or agents placed the goods in the store, the key to which they lodged with Customs overnight and during meal breaks.  Over a holiday period, while the key was lodged with Customs, a quantity of the goods were stolen from the store.  The plaintiff Collector of Customs contended that the defendant was liable pursuant to s 60 of the Excise Act 1901-1952, as it had failed to account satisfactorily for the goods.  The defendant refused to comply with the Collector’s demand.

73                  The High Court rejected the defendant’s contention that s 60 of the Excise Act 1901-1952 was invalid pursuant to s 55 of the Constitution as a law imposing taxation which failed to deal with one subject of taxation only, but rather, imposed it on a wide variety of goods.

74                  Dixon CJ (with whom Windeyer J agreed) stated that s 60 was not a law imposing taxation, but instead, imposed “a liability to pay an amount estimated to be equal to the amount of some particular excise duty” (at 288) which was recoverable in a court of competent jurisdiction.  Dixon CJ stated that on “a complete view”, s 60 “seems rather to be a provision for the protection of the revenue, not a primary imposition of taxation.” (at 288)   His Honour acknowledged that “the distinction between a sum of money which can be made recoverable as protection to the revenue and the actual imposition of tax may appear a fine one”.  He observed that “the conditions prescribed by s 60(1) involved factors which go to safekeeping and to possession, custody and control, and perhaps the movement of the goods from the manufacturer.  It is not based on primary notions of liability to tax.  It is a secondary liability and is based on the hypothesis that the tax is escaped.  It is indeed an ancillary measure and not itself a tax” (at 288-9).

75                  Dixon CJ noted that sub-section (4) of s 60 stated that the section did not affect the liability of a person arising “under or by virtue of any other provision of this Act or of a security given under the Act”.  His Honour stated: “[p]robably this does not mean that when a payment has been made under s 60 to the Collector by a person held responsible under that provision for failing to keep the goods safely or to account for them, excise may be recovered from somebody else.  All it does is to make the liability under s 60 collateral and not substitutional for the liability which may have been incurred under other provisions” (at 288).

76                  McTiernan J (at 291) stated that s 60 “imposes duties on custodians of excisable goods, subject to Customs’ control, which are ancillary to and by way of security for the due payment of the excise”.

77                  Kitto J (at 292) stated that s 60 was not a law imposing taxation, but rather, “a liability to make to the Commonwealth a payment in the nature of compensation for a loss of excise duty, the person being made liable because he committed one or the other of two defaults which Parliament has considered sufficient to affect him with responsibility for the loss”.

78                  Taylor J considered that s 60(1) was not a law which imposed taxation but was instead “designed to secure…the collection of the duty imposed by the Excise Tariff” and made provision “for ascertaining the value of the goods as at some specified date” (at 292) for the purpose of the sub-section and in the absence of an entry for home consumption.

79                  Menzies J stated that s 60 was an ancillary provision which, if it imposed taxation, imposed an excise duty and was not invalidated by s 55 of the Constitution.

80                  Owen J considered that s 60 did not impose a tax.  His Honour stated (at 306-7) that “the obligation imposed by the section is to be regarded rather as an obligation to make good to the Commonwealth the loss of revenue which would have been received by it had the custodian of the goods kept them safely or accounted for them to the satisfaction of the Collector. What is declared to be payable is not the excise duty on the goods but an amount equivalent to that duty and there is, I think, a distinction between an obligation to pay a tax and an obligation to compensate the revenue for the loss of tax which would have been paid had the goods gone into consumption through lawful channels”.

81                  The High Court also rejected the defendant’s contention that, because Customs had the store key, the defendant did not have the possession, custody or control of the goods necessary to establish liability under s 60.  Dixon CJ stated that when the consignors delivered the goods to the defendant in its capacity as a carrier by sea, “the possession was entrusted to the defendant” (at 286).  Although lawful surrender of possession, custody or control might suspend or terminate the defendant’s liability under s 60, the lodging of the store key with Customs for safekeeping did not transfer the possession of the goods to Customs.

82                  Further, the High Court held that the warehouse licensee was liable in relation to goods stolen from the warehouse, irrespective of whether it had taken reasonable precautions. 

83                  Dixon CJ held that the defendant had failed to keep the goods safely within the meaning of paragraph (a).  His Honour thought that in the context of s 60, “the safekeeping” was directed at the excise duty, not the goods (at 287):

The provision is pointed at the loss of goods involving the loss of excise duty. The time of payment of excise duty is at or before entry for home consumption. The hypothesis is that by the loss of the goods duty has been escaped. There must be some doubt whether the destruction of the goods was also contemplated but upon the words of the section destruction is certainly covered.

84                  His Honour rejected the submission that “fail” in the context of s 60 involved “some want of care, some neglect or default”.  Rather, his Honour thought that, “considering the object of the provision and the place it takes...[i]t means to place on the person having possession, custody or control an absolute duty. … Perhaps the word ‘absolute’ is too strong, for it may be conceded that it is possible to except inevitable casualty – what once was called ‘Act of God’” (at 287).

85                  His Honour (at 287) considered that paragraph (b) of s 60(1) was “pointed at cases where it cannot be shown that the goods were lost or destroyed but at the same time they are not produced and their whereabouts is not disclosed”.  

86                  McTiernan J stated (at 290) that “[t]he task of keeping goods safely cannot be said to have been fulfilled if the goods are stolen even though reasonable precautions were taken”.

87                  Taylor J stated that “merely to establish that [the defendant] lost the goods by theft at the hand of some unknown person is not to account for the goods;  it is, merely, to account for their disappearance” (at 294-5).  Taylor J further stated (at 295):

The provision is not designed to inflict a penalty upon a bailee for some breach of duty imposed by the bailment; it is a provision which is designed to ensure that the excise revenue shall not suffer if excisable goods, by some irregular means, find their way into home consumption.

88                  Menzies J compared s 50 with the former equivalent provision, which required a manufacturer to give security.  His Honour observed that the new provisions were not aimed at keeping the goods from damage or destruction but ensuring that they “do not get out of customs control into home consumption without the payment of duty”.  Similarly, the account of the goods that is required is an account which shows an authorised relinquishment of loss of possession, custody or control or, despite an unauthorised loss … that the goods have not gone into home consumption without the payment of duty or that notwithstanding the failure to keep the goods safely, Customs control over them is still effective.  It follows that excisable goods which have been stolen from a local store cannot be said to have been “kept safely” and that it could not be a satisfactory account of the missing goods to say merely that they have been stolen, or even that they have been stolen notwithstanding that the person whose duty it is to keep them safely had taken reasonable care to protect them from theft” (at 299).

89                  Brooks Wharf and Bull Wharf Ltd v Goodman Brothers [1937] 1 KB 534 (“Brooks Wharf”) was decided when, under the relevant English customs legislation, duties were “due on importation from the importer and remain due until the goods have been duty discharged from the Customs custody” (at 540).  “Importer” was defined to include any owner or other person for the time being possessed of or beneficially interested in the goods.

90                  Lord Wright MR described the “system of bonded warehouses” under which the importer could warehouse goods without payment of duty on the first entry.  The warehouse was required to give security by bond for the full duties payable on the goods.

91                  In Brooks Wharf, the plaintiffs were bonded warehousemen from whose warehouse some consignments of squirrel skins imported by the defendants were stolen.  The plaintiffs were required to pay the duty on the stolen goods.  They sought to recover it from the defendant importers, on the basis that they were primarily liable.  The importers counterclaimed on the ground that the goods were stolen due to the plaintiffs’ negligence.

92                  Lord Wright MR (with whom Romer LJ and Macnaghten J agreed) held that the warehouseman had discharged their duty as bailees to take reasonable care and precautions, so the counterclaim failed.

93                  Lord Wright MR examined the statutory provisions dealing with warehousing.  He concluded that the importer[6] “is and remains liable for duty as the date of the importation…” (at 541).

94                  His Lordship observed that the Customs Act “also imposed upon bonded warehousemen a liability for the duties so due in certain events” (at 542), including failing to produce deposited goods on request or if goods were taken out of any warehouse without due entry.

95                  The warehouseman had received a demand and Customs had refused to remit the duties payable on the goods (as it was entitled to do under s 87).  His Lordship stated (at 543):

In my opinion, the obligations so imposed on the plaintiffs as warehousemen are ancillary to and by way of security for the due payment to the Customs and do not supersede the liability of the importers, though, if the warehousemen pay the duty, the importers cannot be made by the Customs to pay it over to them a second time.

96                  His Lordship considered that the warehousemen’s payment of the importer’s primary obligation was analogous to a surety’s discharge of a debt.  He stated (at 543):

The payment relieved the importer of his obligation.  The plaintiffs were relieved the importer of his obligation.  The plaintiffs were no doubt liable to pay the Customs, but, as between themselves and the defendants, the primary liability rested on the defendants.  The liability of the plaintiffs as warehousemen was analogous to that of a surety.  It was imposed in order to facilitate the collection of duties in a case like the present, where there might always be a question as to who stood in the position of importer.  The defendants as actual importers have obtained the benefit of the payment made by the plaintiffs and they are thus discharged from the duties which otherwise would have been payable by them.  It may also be noted that the goods which were stolen were the defendants’ goods and the property remained in them after the theft.  If the goods had been recovered, the defendants could have claimed them as their own and would have been free to apply them for home use without further payment of duty.

97                  In Sidebottom & Ors v Giuliano & Ors (2000) 98 FCR 579, Finkelstein J analysed the relationship between the two limbs of s 35A of the Act.  In Sidebottom v Giuliano, the respondent, a collector under the Excise Act 1901 (Cth), requested under s 60(1)(b) of the Excise Act (in the same terms as s 35A of the Act) that the applicants account for certain excisable petroleum products allegedly in their possession, custody or control.

98                  In Supreme Court proceedings, the respondent had alleged that the applicants[7] had contravened the Excise Act by knowingly delivering, storing and blending products to produce excisable petroleum products on which duty was not paid.

99                  Finkelstein J granted an interlocutory injunction restraining the respondent from requesting an accounting.  He considered that there was a serious question to be tried whether the requests were for an improper purpose. 

100               Finkelstein J subsequently accepted that the Collector had information that blended petroleum products were in the applicants’ possession, custody and control and had come in for home consumption without the payment of excise duty.  He discharged the injunction and held that the requests for an accounting under s 60(1)(b) of the Excise Act were valid.

101               His Honour considered Southern Shipping and observed (at 582) that:

The High Court held that s 60 was a provision for the protection of the revenue. The obligation that it imposes upon a person who is or has been entrusted with the possession, custody or control of excisable goods is to ensure that the goods do not irregularly find their way into home consumption. Accordingly, goods will be accounted for if the person parted with possession of them in a manner authorised by the Excise Act. Otherwise the duty to keep the goods safe appears to be absolute except, perhaps, in the case of inevitable accident.

102               Finkelstein J held that where, as an “undoubted fact”, the person in possession had failed to keep goods safe, the Collector could immediately make demand under paragraph (a) of s 60(1) and paragraph (b) could not be properly invoked.  In contrast, paragraph (b) could be relied on where there was doubt about the whereabouts or safekeeping of excisable goods.  In the case before him, as the information that the goods had not been safely kept did not amount to an “undoubted fact”, the revenue might require protection by a request for an accounting under paragraph (b).

103               In Sidebottom & Ors v Giuliano (2002) 123 FCR 594, Goldberg J held that a demand under s 60(1) of the Excise Act  and a prosecution seeking penalties and reparation of duty under s 21B of the Crimes Act 1914 (Cth) in relation to the same excisable goods were not mutually exclusive regimes for the collection of duty.  Goldberg J considered that a demand under s 60(1) could be made on a person who was being prosecuted in respect of the same dutiable transactions. 

104               His Honour thought that s 60(4) (in similar terms as s 35A(4)) preserved the opportunity to initiate a procedure under s 60(1) against a person subject to proceedings under other provisions of the Excise Act “in respect of the same or similar factual substratum by way of excise prosecutions including an appended claim for reparation of duty”.

105               Independently of s 60(4), Goldberg J thought that there was nothing to preclude a demand under s 60(1) after a prosecution for an offence arising out of the same factual substratum” (at 600) had been instituted in the Supreme Court.  The power under s 21B of the Crimes Act to order reparation was discretionary and different elements, such as mens rea, must be established in an excise prosecution.  Thus, his Honour concluded that “[n]o inconsistency arises whilst a demand under s 60(1) remains unsatisfied and a prosecution under ss 117 and 119 is proceeding” (at 600).

106               His Honour acknowledged that if a reparation order were sought under s 21B of the Crimes Act,when determining whether loss had been suffered as a result of the offence,it would be relevant whether a demand under s 60 had been satisfied in respect of the same factual substratum.

107               Goldberg J observed that the respondent was not seeking to recover more than double the duty payable, but had “availed himself of another opportunity to recover the duty payable other than by way of an excise prosecution in the Supreme Court” (at 604).

108               In Moama Refinery Pty Ltd v Chief Executive Officer of Customs (“Moama”) (2001) 115 FCR 205, Ryan J affirmed the refusal of the Administrative Appeals Tribunal to set aside a demand under s 60 of the Excise Act 1901 for an amount equal to the duty which would have been payable on the goods had they been entered for home consumption on the date of the demand. 

109               The applicant had purchased petrol products from one party and sold them to another.  The vendor sold and delivered the goods (which were under the control of Customs at all material times) to the applicant on the understanding that the applicant was a licensed manufacturer purchasing the goods not for home consumption.  No permission under s 61A of the Act had been granted to remove the goods from one specified place to another.

110               Ryan J rejected the argument that because the goods had not been delivered for home consumption as specified in s 61(1)), they were not subject to Customs control, so s 60 did not apply.

111               Further, Ryan J considered that, on the basis of Wing On, successive “owners” could be made subject to a demand under s 60(1), unless and until duty on the goods had been paid.  His Honour stated (at 214):

Wing On makes clear, I consider, that several persons can successively be "owners" of goods and remain so while the goods continue to be subject to Customs control. There is nothing express or implied in s 60 to indicate that each of those successive "owners" may not be made subject to a demand for payment under that section unless and until duty on the goods has been paid.

112               Ryan J considered that although there were multiple potentially liable parties, any discretion to elect which of two or more available recipients should be served with a demand under s 60(1) was “completely unfettered” (at 215).

Current Warehousing Provisions

113               Under the scheme of the Act, when goods are imported into Australia, they must forthwith be entered for home consumption, for warehousing or transhipment.

114               Section 71A provides for making an import declaration.  Section 71A(1) states:

(1)        An import declaration is a communication to customs in accordance with the section of information about:

(a)        Goods to which section 68 applies; or

(b)        Warehoused goods;

that are intended to be entered for home consumption.

115               By s 4(1) of the Act “warehoused goods” means:

(a)        goods received into a warehouse in pursuance of an entry for warehousing or permission granted under s71E; or

(b)               goods blended or packaged in a warehouse in compliance with this Act.

116               The applicant for a warehouse licence granted under s 79 of the Act must make an application complying with s 80 which, inter alia, requires a description of the place proposed to be licensed and specification of the kinds of goods that would be warehoused.  The licence must not be granted if, inter alia, the physical security of the place is not adequate having regard to its nature, the kinds and quantity of goods that would be kept there and the procedures and methods to be adopted to ensure the security of the goods.

117               The licence is subject to conditions (including a requirement that the holder notify the CEO within 30 days of the substantial change in a matter affecting the physical security of the warehouse, the plant or equipment used or the records kept).

118               A warehouse licence may be suspended or cancelled, in which case the CEO must publish a notice informing the owners of goods that they are required to pay duty or remove them to another place in accordance with the permission of the Collector, failing which the goods will be sold.

119               Section 90 sets out the obligations of a warehouse licence holder to stack and arrange goods and to provide reasonable access for officers to examine them.  By s 91, a collector may gain access and enter the warehouse at any time and examine the goods.

120               By s 94, warehoused goods may be destroyed at the request of the owner and the duty remitted if the goods are worth less than the amount of the duty; and, by s 95, the owner may request the revaluation of warehoused goods that have deteriorated as the result of accidental damage.

121               Section 99 provides that:

(1)        Warehoused goods may be entered:

(a)        for home consumption; or

(b)        for export.

(2)        Subject to sections 69 and 70, the holder of a warehouse licence must not permit warehoused goods to be delivered for home consumption unless:

(a)        they have been entered for home consumption; and

(b)        an authority to deal with them is in force.

122               In Chief Executive Officer of Customs v John Deere Ltd (2006) 155FCR 208 (“John Deere”), Jessup J analysed the effect on warehousing on the obligation to pay duty.  In John Deere, the respondent’s imported goods were entered for warehousing when duty was payable at 5% and subsequently entered for home consumption when, as a result of amendments, such goods were allegedly to be imported free.

123               The respondent contended that under s 132(1) of the Act, the rate of import duty was that in force when the goods were entered for home consumption, at which point (not importation) the rate of duty applicable to the goods should be ascertained.  Section 132AA of the Act provided that import duty, if any, on goods entered for home consumption must be paid by the time of that entry.

124               The applicant contended that by s 153, as construed in Tony Longo, duty was both payable and calculable at the point of importation.

125               Jessup J accepted that according to the reasoning in Tony Longo, at the time when the goods were imported, the respondent was under an immediate obligation to pay the duty referrable thereto (ie: 5%).  His Honour recognised, however, that “s 132 of the Customs Act must have some work to do” (at 212).  Further, Heydon JA in Tony Longo, apparently accepted that under the warehousing provisions and s 132, “if goods, immediately upon their importation, were entered for warehousing, the time for payment of Customs duty, in practice at least, would not yet have arrived” (at 213).

126               Jessup J observed (at 214) “it is, I think, implicit in the way that Heydon JA dealt with this aspect of the authorities that his Honour considered that, if goods were entered for warehousing on importation, and nothing more, then the time for payment had not yet arrived”.

127               Jessup J further stated (at 214):

Looking at the operation of the Customs Act in the light of Tony Longo, and the authorities to which Heydon JA referred, the position appears to be as follows. When goods are imported, they must forthwith be entered for home consumption, for warehousing or for transhipment. If they are entered for home consumption at that point, the rate of duty payable will be the rate of duty in force then: s 132. If the goods are entered not for home consumption but for warehousing, the obligation to pay customs duty will be suspended for the time being. If the goods are later entered for home consumption, that suspension is immediately lifted and the rate of duty payable is the rate in force at that time: s 132. That is also the time when the import duty must be paid: s 132AA. If this analysis is correct, as I consider it to be, the result in the present case is that the duty had to be paid at, but not before, the time when the goods were entered for home consumption and at the rate then applicable. Such a conclusion is permissible only because the obligation, which otherwise arose at the time of importation, to pay the duty was suspended when the goods were, forthwith upon importation, entered for warehousing.

128               His Honour concluded that, following their entry for warehousing and prior to their entry for home consumption, “in accordance with the principles explained by Heydon JA in Tony Longo, the obligation to pay duty was in a state of suspension.  When the goods were in fact entered for home consumption, s 132 of the Customs Act operated to fix the duty as that which then applied” (at 215).

129               In Drew v Dibb (2008) 169 FCR 320, Finkelstein J considered warehouse licensees liability for allegedly valueless imported cigarettes which were stolen from their warehouse.   At the date of the theft, s 35A coexisted with s 92(4) of the Act, which provided that the licensee of any warehouse shall:

pay the duty on all warehoused goods removed from its warehouse except by the authority and on all warehoused goods not produced to the officer on demand unless such goods are accounted for to the satisfaction of the Collector.

130               The warehouse licensees resisted a demand to pay an amount in respect of the stolen cigarettes on three bases.

131               First, they submitted that s 35A did not apply, because a warehouse licensee’s liability was exclusively dealt with by s 92, which was located within the part of the Act dealing with warehouses.  Further, it was unlikely that parliament intended to impose liability on a licensee by two overlapping provisions.

132               Finkelstein J rejected that submission.  His Honour observed that the overlap was only partial, as s 35A was much wider in scope than s 92, and, by its plain language, would cover a warehouse licensee.  There was “no good reason to read it down” (at 323).

133               Further, his Honour observed that s 92 had been repealed and replaced by a provision which did not repeat s 92(4).  Finkelstein J rejected the warehouse licensee’s submission that the repeal of s 92(4) signalled a legislative intention entirely to eliminate a warehouse licensee’s responsibility to pay duty on goods removed from the warehouse without authority, his Honour stated (at 323):

The ordinary place at which imported goods are stored prior to entry for home consumption is a licensed warehouse, and thus to exclude warehoused goods from the scope of s 35A would have a significant negative impact upon customs revenue. As a general rule Parliament is usually concerned with increasing the revenue; thus, in the absence of a clear statement that warehouse licensees are in fact excluded from the statutory regime, I can see no reason to impute this intention to Parliament. Rather, I think it more reasonable in the circumstances to conclude that when s 92 was repealed Parliament did not insert a substitute for s 92(4) because the view was taken that s 35A covered the field.

134               Secondly, the respondents contended that because the stolen cigarettes were stale, improperly packaged and lacked an established market in Australia, they had no value and could not be dutiable.

135               Finkelstein J, having regard to the structure of the Act, rejected the contention that valueless goods should not be subject to duty.  His Honour stated (at 323-4):

But there is a more fundamental flaw in the respondents' market value submission. Even if I were to accept that the cigarettes had no value at the time of importation, the duty payable on cigarettes is not an ad valorem duty but a duty imposed at a fixed rate on each individual cigarette, without reference to brand name or market value. If following importation goods diminish in value, provision is made for a refund, rebate or remission of duty. This is dealt with by s 163 of the Customs Act and the Customs Regulations 1926 (Cth). Regulation 126 sets out the circumstances in which refunds, rebates and remissions may be made. Those circumstances include: (a) where the goods on which duty has been paid or is payable have deteriorated or been damaged, lost or destroyed before they become subject to the control of customs; (b) where goods on which duty has been paid or is payable have deteriorated or been damaged or destroyed while subject to the control of customs; and (c) where goods on which duty has been paid or is payable have been lost or stolen while subject to the control of customs. If this, or any other regulation, is applicable, then an application for rebate may be made; but at the same time, that a rebate or remission may be available is not a defence to an action for the recovery of the duty.

136               His Honour also concluded that, it was not established that the cigarettes were valueless and the very fact of their importation suggested otherwise.

137               Thirdly, the respondents contended that under s 35A, the applicant must establish both a failure to keep the goods safely and a failure satisfactorily to account for them.  The inference was that if valueless goods were entered for home consumption, the revenue would not be harmed, nor the object of s 35A defeated.  The applicant relied on Owen J’s view in Southern Shipping that the Collector could rely on paragraph (b) in doubtful cases and call for an account of absent goods to satisfy himself that the revenue had not suffered.  Where the goods had been stolen, it was probable that they would go into home consumption.

138               Finkelstein J observed that the two conditions of s 35A were alternative, not cumulative.  His Honour did not consider (assuming Owen J’s views to be correct) that the Collector in the case before him was bound to be satisfied by the respondent’s accounting, as there was evidence of some sales and hence risk of loss to the revenue.

139               Finkelstein J recognised the possibility that s 35A could produce unfair results and observed (at 326):

Although I need go no further, because it might be said there is some unfairness about the result in this case I ought to say a few words about that topic. First of all, it is distinctly possible that s 35A can produce unfair results. For example, the duty to keep goods safe has been held to be nearly absolute: Southern Shipping 107 CLR at 287 (stating that only force majeure might be an exception to the duty); see also Sidebottom98 FCR 579 at [11]. Thus, short of a showing that, say, Godzilla had stomped the warehouse, the respondents could not avoid liability for a failure to keep dutiable goods safe, no matter how many precautions they had taken in an attempt to safeguard the cigarettes. Moreover, even under Owen J's approach, a Collector is not required to request an accounting where the duty to keep safe has been breached. Thus, even in the hypothetical of the waterlogged and utterly worthless cigarettes, if a Collector were to simply present a demand without mentioning an accounting, that would be the end of the matter. …

What then is a person in the position of the respondents, who failed to keep goods safety but considers that the loss of the goods poses little threat to the revenue to do.  … the respondents’ proper course, is to seek a refund, rebate or remission of the payments under s 163 of the Customs Act and reg 126 on any qualifying basis.”

140               In Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285 (“SCI Operations”), the High Court held that the right to a refund under s 163(1) was enforceable by an action for debt if the prescribed conditions were satisfied.  In SCI Operations, importers obtained a reduction of duty by a Commercial Tariff Concession Order (deemed effective from a date several years earlier by s 269N of the Act).  Section 167(4) provided that no action should lie for the recovery of any sum paid to Customs as the duty payable in respect of any goods, except in specified circumstances.  Subsection 5 provided that s 167 did not affect any rights or powers under s 163.  Regulation 126(f) provided that a claim for a refund must be made in a prescribed way, inter alia, within 12 months.

141               The importers did not make a claim for refund under the Regulations, but brought proceedings for the duty plus interest.  The Commonwealth paid the principal sum and the importers.

142               Gaudron J considered that, despite the permissive terms of s 163(1), the refund provisions conferred “a right enforceable by an action for debt” where the conditions specified in regs 128 and 128A were satisfied, as the specific provisions of s 269N would be defeated if s 163(1) conferred “any discretion to refuse a refund of the differences between the duty actually paid and the amount payable on the basis that a Commercial Tariff Concession Order took effect on the date specified in it” (at 304-5).

143               McHugh and Gummow JJ observed that the refund did not depend on “the abstract meaning of the term ‘may’ in s 163(1)” but on whether “the particular context of words and circumstance make it not only an empowering word but indicate circumstances in which the power is to be exercised so that in those events the ‘may’ becomes a ‘must’”.  Their Honours stated (at 312):

Legislation should not readily be construed as conferring upon the executive branch of government a discretion to retain, rather than an obligation to refund, moneys received under a statutory entitlement which from a subsequent date has been displaced by the operation of that legislation. Regulation 126 operates to identify circumstances which, by their own force, identify the prescribed circumstances in which refunds, rebates and remissions may be made under s 163(1). … There is no element of discretionary judgment as to the existence of the requisite circumstances and no requirement that any officer of the Executive form a particular opinion in the matter.

The parties’ principal submissions

144               The applicant contended that the conditions for Coynes’ liability under s 35A of the Act were satisfied, as having been entrusted with the possession of dutiable goods subject to the control of Customs, it had failed to satisfy its virtually absolute obligation to keep them safely.  Further, a demand dated 2 January 2009 for the sum of $194,519.64 had been made, but remained unsatisfied.

145               Coynes contended that it was not subject to s 35A, which applied in terms only in relation to dutiable goods, that is, “all goods in respect of which any duty of Customs is payable.”  If duty had been paid, and the relevant goods were not subject to the control of Customs, there was neither a literal nor a policy basis for the application of s 35A, as the revenue would not require protection in any relevant sense.  While acknowledging that in the present case, duty had not been paid, Coynes submitted that it was both liable to pay, and entitled to a remission of duty on the goods.  In Coynes’ submission, Customs erroneously rejected its application for remission because Coynes was not an importer/owner (and therefore, by inference, neither liable to pay duty nor to apply for a remission thereof).

146               Coynes submitted that s 35A could not apply if the duty been paid, and by parity of reasoning, its entitlement to a remission of duty precluded a demand under s 35A.  As a matter of substance, there would be no outstanding obligation to pay duty either where duty had been paid and a refund obtained or where a party was entitled to remission of the duty payable.  Coynes submitted that it was entitled to a remission of duty because, on the reasoning of the applicable authorities, it was liable to pay duty and also satisfied the other criteria for remission under s 163 and the relevant regulations.

147               Coynes submitted that it was an “owner” of the goods within the expanded definition of s 4(1) which was deliberately cast in broad terms in order to protect the revenue.  Having the possession, custody or control of the goods necessary for liability under s 35A, Coynes was also concurrently an “owner” under s 4(1) liable by s 153 to pay duty on dutiable goods prior to their entry for home consumption.

148               In reliance on Southern Shipping, Wing On, and Tony Longo, Coynes submitted that its liability to pay duty as an owner of the goods arose immediately upon importation independently of the making of a demand.  Such liability rested not only on the owner at the time of importation or any single owner, but on all successive or concurrent owners until the duty was paid.

149               Coynes did not submit that any party who had the possession, custody and control necessary for liability under s 35A was ipso facto an owner under s 4(1) of the Act and thus liable to pay duty.  Counsel nevertheless conceded that he could not think of a case where a party with the necessary possession, custody or control for the purposes of s 35A would not satisfy the definition of “owner” in s 4(1).

150               Coynes submitted that as an owner liable to pay duty, it was entitled to a remission under s 163, having satisfied the applicable conditions.  In particular, reg 126(1)(c)(ii) prescribed as a circumstance for the purposes of s 163 of the Act that:

(c)        the goods on which duty has been paid or is payable:

…

(ii)                have been stolen after being received at the place of export of the goods had before the goods left the control of Customs

151               Coynes alternatively submitted that if there were a discretion to refuse remission where the conditions of s 163 and the relevant regulations were satisfied, it would not be exercised against a bona fide party who was not at fault, such as Coynes.

152               Although its construction would remit liability under s 35A in respect of stolen, lost or destroyed goods, Coynes submitted that, on a proper construction, the legislation imposed no liability, so it was not a question of avoidance.  Further, remission would not be available to some parties, such as thieves, or in all circumstances.  It would not apply, for example, if the warehouse licensee abandoned the goods without Customs’ approval.

153               The applicant disputed Coynes’ construction of ss 4(1), 35A and 153 and their mutual operation.  He contended that a warehouse licensee was not an owner within terms of the s 4(1) definition on whose liability to pay duty entitlement to remission necessarily depended.  The applicant submitted that Coynes’ possession of the goods was extremely circumscribed and subject to the control of Customs.  Alternatively, he submitted that if Coynes were an “owner”, it was not liable to pay duty because the obligation was suspended for the period of warehousing.  Only when the goods were removed by the theft would the liability to pay crystallise.  Coynes was not, therefore, on any view, an owner liable to pay duty at the date of the application for remission. 

154               The applicant initially submitted that Coynes, if otherwise a liable owner, was not entitled to a remission of duty because it was not an owner at the date of the application for remission (having ceased to possess the goods) and had not used or complied with the requirements of the prescribed form.  Those submissions were ultimately not pressed.

155               The applicantfurther contended that if Coynes were liable to pay duty and entitled to receive a remission, that circumstance did not constitute a defence to a demand under s 35A.  The applicant submitted that consistently with the legislative goal of protection of the revenue, entitlement to remission of duty could not affect liability under s 35A, as the revenue could otherwise suffer loss without the compensation the legislature intended.  Goods could be lost, diminished in value or stolen prior to entry for home consumption and if, in such case, the duty were remitted in recognition of the owner’s hardship, the revenue would have sustained loss, unless compensation were available under s 35A.  Section 35A did not impose a tax, but provided compensation for ‘escaped’ duty.  The compensatory nature of the liability under s 35A indicated that it must apply irrespective of the remission of duty, which was confined to the distinct and entirely different liability to pay duty.  Accordingly, in Drew v Dibb (2008) 169 FCR 320, Finkelstein J recognised that the availability of a rebate or remission of duty did not constitute a defence to a demand under s 35A.

156               The applicant submitted that s 35A(4) reinforced the conclusion that a demand under s 35A was entirely distinct and separate from the payment or remission of duty.

Discussion

157               In my opinion, Coynes, on the applicant’s demand, was liable under s 35A of the Act to pay an amount equal to the duty which would have been payable on the goods had they been entered for home consumption on the day the demand was made.  As the demand has not been satisfied, Coynes remains liable.

158               The conditions for liability under s 35A were satisfied.  It is  common ground that Coynes had or was entrusted with the possession, custody or control of dutiable goods subject to the control of Customs.  As the goods were stolen, it failed to keep them safely in accordance with the practically absolute obligation recognised in relevant authority as independent of fault.

159               Further, in my opinion, Coynes does not have a defence to liability under s 35A based on its entitlement to a remission of duty, whether as an owner under s 4(1) which was liable to pay, and entitled to remission of, duty on the goods; or because remission of duty under s 163 of the Act is not confined to a liable owner but extends to persons liable under s 35A of the Act.

160               In my view, although Coynes, as a warehouse licensee had, within the meaning of s 35A of the Act, possession, custody or control of goods subject to the control of Customs which were entered for warehousing, it neither is nor was an owner within the terms of s 4(1) liable to pay duty under s 153.  Nor is it entitled to a remission of duty under s 163 of the Act.

161               The possession, custody or control of a warehouse licensee pre-requisite for liability under s 35A, is, when read literally and in isolation, within the definition of an owner under s 4(1), the status of which founds liability to pay duty under s 153.  The relevant provisions are, however, interrelated constituents of an integrated statutory regime for the imposition and recovery of duty on imported goods.  They should be construed together in the context of the legislative duty scheme as a whole, and in accordance with the established statutory goals.

162               As the Full Court of the Federal Court observed in Parks Holdings Pty Ltd v Chief Executive Officer of Customs (2004) 141 FCR 165, the Act has “such a long history and which has received, in certain respects, an authoritative interpretation not always self-evident from the statutory language…” (at 176 per Black CJ, Sackville and Sundberg JJ).  In Tony Longo, Heydon JArecognised that courts should proceed by reference to the High Court’s dicta as a guide to the meaning of the legislation.

163               The Act imposes the liability to pay duty on imported goods on the “owner”, a term broadly defined in s 4(1) to include not only the importer, but a wide range of persons holding a specified status or relationship to the goods.  Liability under s 153 has been held to attach to, and subsist concurrently in, each successive such owner until the duty is paid, either at the rate applicable on the date of importation or at the rate in force at the date of their entry for home consumption.  The Act allows for the rebate, refund and remission of duty in specified circumstances, including where the goods are damaged or lost, deteriorate or are stolen while under the control of Customs.

164               Upon importation, the owner must enter the goods for transhipment, for home consumption or for warehousing in a licensed warehouse.  Warehousing permits the owner to postpone the payment of duty while the goods are secured from entry for home consumption in a licensed warehouse.  During warehousing, the goods are dutiable but the remedy to enforce the obligation is suspended.  The goods remain under the control of Customs and the owner’s access is accordingly limited.  The warehouse operator is expressly obliged to keep the goods safely and to secure them from delivery for home consumption unless they have been entered for home consumption and an authority to deal with them is in force.

165               By s 35A, the Act renders liable to pay an amount equivalent to duty, a person with possession, custody or control of the goods who fails to keep them safely or to satisfactorily account for them.  It was not disputed that a warehouse licensee would have possession, custody or control in the relevant sense, although the application of s 35A is not limited to warehouse licensees.  In Southern Shipping for example, a carrier of the goods was held to have the requisite possession, custody or control. 

166               The extended definition of “owner” in s 4(1) of the Act gives meaning to the term where it is used in the Act, “except where otherwise clearly intended”.  Its width, as the authorities recognise, serves the goal of protection of the revenue.  The definition may not apply in all contexts of the Act, (as, for example, in ss 167 and 183, where the term “owner” is apparently used in a narrower and more conventional sense).  Moreover, the fact that the description of a person who is not expressly designated an “owner” literally satisfies an isolated element of the definition of that term does not necessarily bring the person within the definition.  It does not follow, in my view, that because the possession, custody or control of dutiable goods prerequisite for a person’s liability under s 35A of the Act broadly corresponds to an element of the definition of an “owner” of goods under s 4(1), that the person is ipso facto an owner liable to pay duty under s 153 of the Act.

167               The term “owner” used in other sections of the Act, including s 153, is not employed in s 35A.  Section 35A merely sets out the circumstances which will render a person liable.  The actual “possession, custody or control” specified in s 35A appears narrower than the corresponding element in the definition in s 4(1).  Unlike the definition of “owner”, s 35A does not refer to holding out.  The words “possession” and “control” are coloured and qualified by their use in a composite phrase with “custody” and “entrusted with” in the context of the additional requirements to keep safely or account satisfactorily for the goods, which suggests the safeguarding, custodial or bailment functions traditionally characteristic of the warehouse licensee in customs legislation.

168               As Dixon CJ in Southern Shipping observed, “it must be remembered that the conditions prescribed by s 60(1) [ie s 35A] involved factors which go to safekeeping and to possession, custody and control, and perhaps the movement of the goods from the manufacturer.  It is not based on primary notions of liability to tax” (at 288-9).

169               Section 35A was introduced to impose liability on a person with possession, custody or control of dutiable goods so that, inter alia, existing requirements to furnish securities in respect of such duty could be dispensed with.

170               Liability under s 35A is in relation to a narrower category of goods (dutiable goods subject to the control of Customs) than goods generally, in relation to which an owner is liable to pay duty.  The commencement of liability to pay also differs under s 35A and s 153.  Under s 35A, the liability arises upon the demand.  Under s 153, it arises upon importation of the goods.

171               Most obviously, the nature of the liability under the relevant sections is different.  The liability under s 153 is to pay duty.  The liability under s 35A is to pay an amount equivalent to duty which would have been payable had the goods been entered for home consumption at the date of the demand.  The ancillary, collateral and compensatory nature of the liability under s 35A (predicated on the escape of duty due under the primary liability) has been clearly established by the authorities.

172               Coynes’ submissions in the present case were directed to the position of a warehouse licensee.  It did not submit that any person with possession, custody or control of dutiable goods sufficient for a precondition of liability under s 35A would necessarily constitute an owner liable to pay duty under s 153 of the Act, but such was the probable effect of its argument.  Counsel could not identify any instance where, on Coynes’ analysis, a party liable under s 35A would not be concurrently liable to pay duty as an owner under s 153.

173               On Coynes’ analysis, a warehouse licensee’s liability to pay duty would depend on its status as an owner of the goods arising through possession, custody or control of the goods.  It would subsist prior to and independently of liability under s 35A, which additionally requires the failure to keep safely or account satisfactorily for the goods and the making of a demand.

174               The circumstances giving rise to an owner’s liability to pay duty under s 153 encompass and extend beyond those founding liability under s 35A.  No obvious purpose would be served by expressly rendering liable for specified breaches of obligation a person already liable on a wider basis, irrespective of such failure.  Section 35A’s collateral, compensatory function would be unnecessary to protect the revenue if every person satisfying a precondition of liability thereunder was also primarily liable to pay duty.

175               If Coynes’ construction is correct, it is difficult to discern how s 35A could effectively impose ancillary or compensatory liability or what additional revenue protection it would secure.  Other anomalies, such as the potentially different quantum of the distinct but coexistent liabilities under s 35A and s 153 would also arise.

176               Moreover, until 1980 a warehouse licensee was, pursuant to s 92(4), liable to pay duty on warehoused goods removed from the warehouse without authority or not satisfactory accounted for.  Section 92(4) suggested that the warehouse licensee was not an “owner” of the goods liable to pay duty in circumstances other than those it specified.  When s 92(4) was repealed, as Finkelstein J observed in Drew v Dibb, s 35A “covered the field”.  If a warehouse licensee with possession, custody or control of goods within the meaning of s 35A were concurrently an owner liable to pay duty, the availability of remission would, as the applicant contended, effectively negate the almost absolute obligation inherent in s 35A to keep the goods safely or to satisfactorily account for them.  In substance, the sanction for breach would be remitted.

177               The applicant submitted that the limited nature of a warehouse licensee’s possession, custody or control of the goods (which was subject to the control of Customs) did not suffice to constitute it an owner within the meaning of s 4(1).  The applicant alternatively submitted that Coynes (if an owner within s 4(1)) was not liable to pay duty, because the obligation to pay was suspended conterminously with the possession on which its status as owner depended, and revived only when the goods were stolen.

178               Those submissions do not, in my view, accord with the authorities which establish that the status of owner and the concomitant liability to pay duty persist until the duty is paid, although the factual circumstances founding the status of owner may have terminated.  The remedy, rather than the underlying liability, is suspended during warehousing.  Further, the control of Customs has not been held to exclude possession or control of the goods by other parties.

179               If the definition of “owner” applies, the authorities suggest little scope for exceptions from the consequences.  The better view is that Coynes, as a warehouse licensee, was not an owner within terms of s 4(1), having regard to the legislative history, the function, obligations and liabilities of warehouse licensees and the current operation of s 35A within the statutory scheme for the imposition and recovery of duty on imported goods.

180               Section 163 provides for, inter alia, the remission of duty in circumstances prescribed in the regulations.  Section 163 does not specify any particular person as the applicant for or grantee of a remission, but simply states that remissions of duty may be made.  It does not refer to the remission of amounts equivalent to duty payable under s 35A.  By s 163(1AA), the regulations, subject to subs (1AD), may prescribe the manner of making applications.  In SCI Operations, the High Court held that, at least in relation to refunds, once the prescribed conditions were satisfied, the applicant had a non-discretionary entitlement.  Before me, the question whether Customs had a discretion in relation to remissions of duty was not the subject of detailed submissions.

181               Regulation 126 prescribes the circumstances under which refunds, rebates and remissions are made.  The first circumstance is, if the goods on which duty has been paid or is payable have deteriorated or have been damaged or destroyed while subject to the control of customs under regulation 126(1)(b).  The second is if the goods on which duty has been paid or is payable have been lost while subject to the control of Customs or have been stolen after being received at the place of export of the goods and before the goods left the control of Customs under regulation 126(1)(c).

182               Coynes’ primary case was that a warehouse licensee from whose warehouse goods are stolen is concurrently liable under both ss 35A and 153 to pay both the duty and an amount in compensation for it, but is entitled to a probably non‑discretionary remission of duty in respect of the stolen goods.

183               In such circumstances, the warehouse licensee’s primary liability as an owner would itself be illusory and at the same time, would emasculate the ancillary liability under s 35A by invoking remission in order to rebut both liabilities – directly, in the case of the liability to pay duty, and indirectly, in the case of liability under s 35A, by substantively undercutting the precondition that the goods in question be “dutiable”.

184               Such a conclusion would, in my view, subvert s 35A’s statutory objective of ensuring revenue protection by imposing an ancillary, compensatory liability to pay an amount in lieu of duty which has escaped by the delivery of goods into home consumption without payment (as is likely in the case of theft).  A warehouse licensee has an express statutory obligation to prevent such delivery and is obliged under s 35A to keep the goods safely or to satisfactorily account for the same.

185               The legislative history of the function, obligations and liability of a warehouse licensee fortifies the conclusion that, under the current statutory regime, they are not primarily liable to pay duty as owners, but rather, are only liable to pay an amount under s 35A.

186               In my opinion, it is unlikely that the current legislative scheme contemplates that the same person would be liable to pay both duty and an amount in compensation for its loss.  In Southern Shipping, Dixon CJ expressly doubted whether s 60 (ie s 35A) applied to the owner/consignor of the goods (at 287).  Although Goldberg J held in Sidebottom & Ors v Giuliano (2002) 123 FCR 594 that s 60 of the Excise Act and prosecution for reparation of duty were not mutually exclusive regimes, those regimes imposed liability to pay reparation for, or an amount equivalent to, duty.

187               In Moama, Ryan J’s observation that successive “owners” could be subject to a demand under s 60 of the Excise Act, applied Southern Shipping’s analysis of successively liable owners to s 60 of the Excise Act, but his Honour did not specifically consider whether an owner under s 4(1) of the Act could be liable under s 35A.

188               If s 35A imposes liability only on persons who are not “owners” within the s 4(1) definition, it does not follow that “double recovery” of both duty and an equivalent amount is permitted.  As Dixon CJ stated in Southern Shipping,s 35A(4) recognises that there is a primary liability which is unaffected by the liability under s 35A.  It does not mean that Customs could collect both the duty and compensation for it.  While Dixon CJ recognised that persons could be liable concurrently under both provisions, his Honour did not state that concurrent liability under both provisions could subsist in the same person.  Such a conclusion would appear contrary to his recognition of primary and essentially collateral nature of the different liabilities.

189               The licensed warehouse was introduced at an early stage in the development of Customs legislation to facilitate commerce by affording merchants a respite for payment of import duty on goods, although the liability arose at the time of importation.

190               During warehousing, the obligation to pay was postponed, but the goods remained subject to the control of Customs, which limited the owner’s access to the goods and imposed stringent restrictions on the warehouse licensee’s freedom to deal with or control them.  Under earlier legislation, the warehouse licensee was expressly liable to pay duty in limited circumstances and was obliged to give security (while maintaining a lien over the goods).  The legislation implicitly recognised that the warehouse licensee was distinct from the importer owner, on whom the primary liability rested.

191               It may be assumed that when a warehouse licensee was liable to pay duty, it also entitled to apply for a remission thereof in the specified circumstances.  Wollaston (writing prior to the introduction of s 35A and when the warehouse licensee’s obligations to keep goods safely was not absolute) observed that remissions would not be available under various provisions if the loss or destruction of goods was due to the warehouse licensee’s neglect or default, or where goods in its custody were stolen.

192               Under the present legislation, a warehouse licensee is no longer expressly liable to pay duty in any circumstances.

193               Section 163 is limited, in terms, to a remission of duty (emphasis added).  It does not refer to the remission of an amount due under s 35A.  While it does not expressly state who is entitled to apply for a remission of duty, in my opinion, only a person liable to pay duty is entitled to a remission.  A person liable only to pay an amount in compensation for duty under s 35A would not be so entitled.  Therefore, following the repeal of liability for duty under s 92(4), although a warehouse licensee may be liable under s 35A, it is not liable to pay duty as an owner, nor entitled to apply for a remission under s 163.

194               In Drew v Dibb, Finkelstein J recognised that s 35A might produce unfair results and contemplated that they could be addressed by remission of duty under s 163 on any qualifying basis.

195               The imposition of liability on the warehouse licensee under s 35A in relation to goods are stolen from a licensed warehouse (at least where they are of undiminished value) does not appear anomalous given the almost absolute nature of the obligation thereunder and the warehouse licensee’s obligation under s 99(2).  Unless the goods are recovered, the owner will not enter them for home consumption.  The stolen goods will probably be delivered into home consumption without duty being paid and unless the warehouse licensee pays an amount in compensation, the duty will escape.

196               If, however, the stolen goods had deteriorated or were of no value, it could be seen as anomalous that the warehouse licensee (whose liability is ancillary and designed to compensate for the escape of duty) was liable to pay an amount equivalent to the full duty when the primarily liable party might have obtained a reduction or remission.  In such a case, it could be argued that no duty, or only a reduced amount of duty, had escaped in the relevant sense.

197               Further anomalies could arise from the sequence of the making of the demand under s 35A.  If the owner had already paid the duty and obtained a remission, it would appear that nothing would be payable under s 35A.  Further, if the stolen goods were recovered and the owner wished to enter them after Customs had made a demand under s 35A (which had been satisfied) the Act makes no provision for that circumstance.

198               In the present case, however, it was not suggested that the goods stolen from Coynes’ warehouse were of no or diminished value.  The current legislation contemplates that, on breach of its virtually absolute obligation to prevent the unauthorised delivery of goods to home consumption, a warehouse licensee will be liable to pay an amount pursuant to s 35A of the Act without entitlement to remission.  The fact that a remission may or would have been available to the persons liable to pay duty does not, in my view, constitute a defence under s 35A.

Further Applications

199               The above questions were set down for hearing and determination on the basis that these reasons could first be considered and any further joinder might then be made.

 

I certify that the preceding one hundred and ninety-nine (199) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dodds‑Streeton.

Associate:

Dated:         1 April 2010