SUPREME COURT OF WESTERN AUSTRALIA
Goulding v Penello and Another
Heenan J
24 August, 19 October 1999 - Perth
Heenan J. The plaintiff, who is a delegate of the Chief Executive Officer of Customs, seeks declarations and consequential orders in relation to breaches of the Customs Act 1901 (Cth) arising from the importation of goods. The action, brought in the civil jurisdiction of the court, was commenced by writ issued on 7 October 1996.
2 Mr Lorenzo Penello, the first defendant, is the managing director of the second defendant, a company which carries on business in Western Australia as an importer of bicycles, bicycle parts and accessories. On 10 occasions between March 1994 and March 1995 the company imported large quantities of cycling shoes from France. The shoes were not fitted with cleats when they were imported and were subject to the payment of duty.
3 When the first 4 shipments of the shoes arrived in Perth the proper duty was paid and they were cleared by Customs for home consumption. Subsequently, on or about 12 September 1994, Mr Penello first became aware of the existence of a tariff concession order which enabled cycling shoes fitted with cleats to be imported into Australia duty free. On 16 September 1994 he applied for a refund of the duty which he had paid, making a statement in relation to each shipment to the effect that the goods were subject to the order. On 19 September 1994 a Customs officer telephoned his Customs broker and asked him to provide samples of the shoes for the purpose of determining whether they fell within the terms of the order. Thereupon Mr Penello provided shoes which were fitted with cleats, although they had been imported without them. As the Customs officers were satisfied that the shoes as provided fell within the terms of the order, refund of the duty paid was approved. On 29 September 1994 Mr Penello received $34,173.39 by way of refund.
4 On 27 October 1994 Customs officers processed the fifth shipment of cycling shoes. On this occasion Mr Penello's Customs broker made a point of satisfying himself as best he could that the shoes met the terms of the tariff concession order. Mr Penello told him that "inserts" which were fitted to the shoes were "cleats" in terms of the order and he claimed that the shoes were exempt from duty on that basis, supporting the claim with a statement to the effect that they were subject to the order. The shoes were admitted without the payment of duty. The same procedure was adopted in relation to the next 3 shipments, which were processed on 4 November and 28 December 1994 and on 3 January 1995 respectively. In respect of those 4 shipments duty amounting to a total of $34,086.90 was avoided.
5 On 7 March 1995 a similar claim and statement were made in respect of the ninth shipment. However, by then a new procedure had been introduced. Customs officers arranged for samples to be taken from the shipment while it was held at the Qantas bond store at Perth Airport. The Customs officer who examined the shoes was not satisfied that they conformed with the terms of the tariff concession order. He saw, it seems, that inserts and not cleats were fitted to the shoes. Consequently, he informed Mr Penello's Customs broker that the benefit of the tariff concession order did not apply to the shipment and that duty was payable. Mr Penello paid $13,441.25, the amount of duty, under protest.
6 On or about 24 March 1995 the tenth shipment arrived and a similar claim and statement again were made. Two days before then Mr Penello had arranged for his Customs broker to inform the Customs officers that the French company which supplied the shoes in the ninth shipment had erred in not mounting the cleat system as had been done in relation to past shipments and had apologised for the error, giving an undertaking that it would not occur again. The Customs officer who had dealt with the ninth shipment arranged for samples to be drawn from the tenth. Another Customs officer who examined the shoes mistook inserts for cleats and reported that the shoes were fitted with cleats. In that way the shipment was released for home consumption and duty amounting to $18,731.89 was avoided. As it happened, within the next day or so the first Customs officer saw the shoes. Having appreciated immediately that they did not have cleats fitted and, therefore, did not satisfy the terms of the tariff concession order, he referred the matter to investigation officers. They reviewed all of the importations.
7 On 26 May 1995, after seizing various documents relating to the importations, Customs officers interviewed Mr Penello. During the interview he produced correspondence from his French supplier demonstrating that in the future the latter was prepared to supply shoes with an "insert cleat" of a type which would satisfy the terms of the tariff concession order. It seems that at all times, had Mr Penello requested it, the French company would have supplied shoes with insert cleats - for an additional cost which was less than 10% of the price of the shoes and which was only about one-third of the duty payable. As it was, from mid-September 1994 until the latter part of May 1995 he had engaged in a process of misleading his Customs broker and Customs into believing that the shoes were properly fitted with cycling cleats with a view to obtaining reimbursement of duty or avoiding it.
8 The charges brought in this action comprise the following:
- (a) 6 charges of smuggling - s 233(1)(a);
- (b) 6 charges of evading payment of duty - s 234(1)(a);
- (c) 4 charges of obtaining non-payable refunds - s 234(1)(b); and
- (d) 10 charges of knowingly or recklessly making a statement to an officer of Customs that is false or misleading in a material particular - s 234(1)(d).
9 It is as well to note that on 19 August 1999 the Acting Regional Director of the Australian Customs Service and the defendants executed a document which recited the above agreement, acknowledged that Mr Penello was unlikely to be able to pay the unpaid duty and penalties to be imposed against him and went on to record that, notwithstanding that the judgment awarded against him will exceed $240,000, the Australian Customs Service agreed to accept payment of that amount from him in full and final satisfaction of the judgment. The document recorded also that the agreed amount is to be paid by specified instalments and at specified times on or before 1 November 2004 and that in the event of default in payment of any instalment the Australian Customs Service may execute the judgment awarded against Mr Penello by this court.
10 In Comptroller-General of Customs v Kingswood Distillery Pty Ltd, (unreported; SCt of NSW; 5 December 1997), after a similar agreement had been made by the parties in those proceedings, Sperling J said:
See also Chipp (Minister for Customs) v Campbell Beaumont Trading Pty Ltd (22 December 1969, unreported) but referred to by Sheppard J in Trade Practices Commission v Allied Mills Pty Ltd [1981] ATPR 40, 241 at 43,182.It is within the proper exercise of the Comptroller-General's discretion to limit the claim in the manner proposed in the present case. Such a course is conformable with the procedural criminal law. In Maxwell v Queen (1996) 184 CLR 501, the High Court held that it was the province of the Crown prosecutor at a criminal trial to accept a plea in full satisfaction of the indictment, and that the trial judge could not reject the plea (abuse of process aside) if that was by way of review of the prosecutor's decision. I would add, for my own part, that I see nothing untoward in the exercise of the Comptroller-General's discretion in the present case.
11 It remains for the court now to decide whether there should be convictions in relation to the 6 charges of evading payment of duty, to impose the appropriate penalties and finally to make appropriate orders in relation to the payment of duty avoided, interest thereon and costs.
Smuggling and evading duty
12 As we have seen, Mr Penello did not consent to the making of a declaration that he committed the 6 offences of evading payment of duty or of his being convicted of those offences. On his behalf counsel submitted that, because the acts pertaining to those offences are substantially identical to those pertaining to the smuggling offences and because there is very little difference between smuggling and evading duty, the court should discharge him without proceeding to conviction in relation to those charges. The argument, it seems, is based on considerations similar to those in Connelly v Director of Public Prosecutions [1964] AC 1254.
13 Smuggling is defined in s 4(1) of the Customs Act 1901 (Cth) as meaning, inter alia, any importation or attempted importation of goods with intent to defraud the revenue. Clearly it is not the same as actually evading payment of duty. In this case, as in L Vogel & Son Pty Ltd v Anderson, Minister for Customs and Excise (1967) 120 CLR 157, the importing with intent to defraud the revenue and the making of false or misleading statements were merely steps by which Mr Penello committed the ultimate offence of evading payment of duty. At CLR 161 of Vogel's case, Kitto J said:
I conclude that, as a matter of law, there is no reason why Mr Penello should not be convicted also of the 6 offences of evading payment of duty.Each step was undoubtedly one of a connected series of steps, but each was a separate and distinct piece of conduct for all that, and each involved its own deliberate contravention of the Act. Moreover, the ultimate step, the successful getting of the goods through the Customs without payment of full duty, far from being merely the sum of the means employed to that end, was itself a separate piece of conduct in furtherance of the general intent, for it resulted from the defendants' deliberately putting aside the opportunity that still remained to them, even after what they had already done, to pay the full amount of duty.
Crimes Act 1914 (Cth), ss 19B and 4K
14 Counsel for Mr Penello submitted that the court either should apply s 19B of the Crimes Act 1914 (Cth) and pursuant to the provisions of that section dismiss the 6 charges of evading payment of duty or discharge Mr Penello without proceeding to conviction or, if convicting him, should apply s 4K of the Crimes Act 1914 (Cth) so as to impose a penalty in relation to one shipment only. I shall deal with those alternatives in turn.
15 Section 19B(1) of the Crimes Act 1914 (Cth) enables a court to dismiss charges or to discharge a person charged with an offence against the law of the Commonwealth when:
These offences were not trivial and were not committed under extenuating circumstances. In submitting that the section should be applied counsel for Mr Penello stressed that at the relevant time his client was only 24 years old, that he is otherwise of good character and that, by his admission of the offences, belated though it was, he has demonstrated remorse. Counsel informed the court that Mr Penello had been put into the business through the generosity of his father and was naive and poorly advised. He contended that had Mr Penello been aware that payment of a modest additional sum for insert cleats would have relieved him of the obligation to pay duty, very likely none of these offences would have been committed. In my view, although Mr Penello might well qualify for the exercise of leniency under s 19B(1)(b)(i) by reason of character antecedents and age, the substantial question is whether it is expedient to exercise leniency.
- (b) the court is satisfied, in respect of that charge or more than one of those charges, that the charge is proved, but is of the opinion, having regard to:
- (i) the character, antecedents, cultural background, age, health or mental condition of the person;
- (ii) the extent (if any) to which the offence is of a trivial nature; or
- (iii) the extent (if any) to which the offence was committed under extenuating circumstances;
- that it is inexpedient to inflict any punishment, or to inflict any punishment other than a nominal punishment, or that it is expedient to release the offender on probation …
16 The penalty provided by the Customs Act 1901 (Cth) for smuggling (s 233AB(1)) and for evasion of duty (s 234(2)(a)) in the case of each offence is an amount not exceeding 5 times the duty evaded and being not less than twice that amount. Thus the total of the minimum penalties for the 6 smuggling offences and for the 6 offences of evading duty in each case is $132,520.08 and the total of the maximum penalties is $331,300.20. The penalty for obtaining a non-payable refund (s 234(2)(b)) is an amount not exceeding 5 times the refund and being not less than twice the refund - in other words, a minimum of $68,346.78 and a maximum of $170,866.95 for those 4 offences. The overall range, therefore, is from $333,386.94 to $833,467.35, without taking into account the penalty (not exceeding the sum of $5000 and twice the amount of the duty payable on the goods in question) which applies to each of the 10 offences of making a false and misleading statement (s 234(3)).
17 Such penalties, buttressed by the minimum penalty provisions and the requirement for payment of double the duty avoided, have long been a feature of Customs law. In L Vogel & Son Pty Ltd v Anderson (above) at CLR 164 Kitto J said:
For the considerations mentioned by the Supreme Court of South Australia (in banco) in Hayes v Weller (No 2) (1988) 50 SASR 182; 37 A Crim R 349, I am satisfied that the application of s 19B in this case would not give due weight to the legislative policy which has imposed mandatory minimum penalties in relation to these offences.The Customs laws represent the judgment of Parliament upon an important aspect of the economic organisation of the community, and the object of the penal provisions is to make that judgment as effective as possible. It is important to remember that Customs officers have of practical necessity to rely extensively upon the information supplied to them by importers, for the flow of commerce could not be maintained if every importation had to be fully investigated. Moreover, detection of frauds is not always easy. No doubt ordinary conceptions of honesty and of civic responsibility suffice to ensure a great deal of fair dealing with the Customs, but for some people little seems to matter but fear of the consequences of discovery. The Customs Act makes those consequences potentially drastic. It is for the courts to make them, in suitable cases, drastic in fact, for otherwise traders who are not saved by qualms of conscience from willingness to defraud their fellow citizens may weigh the profits they hope for against the penalties they have cause to fear and find the gamble worthwhile.
18 Counsel for Mr Penello relied also on the provisions of s 4K of the Crimes Act 1914 (Cth), which, where relevant, reads as follows:
In R v Bibaoui [1997] 2 VR 600 the Court of Appeal of Victoria held that the above provisions do not apply to indictable offences but are confined to summary offences. That view was considered by the Court of Criminal Appeal of South Australia in R v Jackson (1998) 72 SASR 490, the majority of the court not dissenting from that view. In Comptroller-General of Customs v Wong & Rizoli Pty Ltd (1998) 103 A Crim R 491 Carruthers AJ applied the provisions of the section. However, in that case it was common ground between the parties that the section was applicable to the imposition of penalties and his Honour did not express reasons for accepting that it should apply. Without deciding the matter, for present purposes I shall adopt the view that the provisions of the section are of application only to courts of summary jurisdiction and not to proceedings such as these. Even if that is not the correct view, in my opinion the provisions of s 234(2)(a) of the Customs Act 1901 (Cth) clearly specify a minimum penalty of twice the amount of duty which would have been evaded by the commission of the offence. In those circumstances, the court is required to apply that penalty. Had the legislature intended otherwise, it would have provided for a maximum but no minimum penalty, as it has done in s 234(2)(c) (relating to the offence of making a false or misleading statement) and s 234(2)(d) (relating to the offences of refusing to answer questions or to produce documents and selling or offering to sell goods upon the pretence that they are prohibited imports or smuggled goods). In my opinion, as is the case with s 20 of the Crimes Act 1914 (Cth) (see Zarb v Kennedy (1968) 121 CLR 283 per Barwick CJ), s 4K of the Crimes Act 1914 (Cth) must yield to any contrary intention to be found expressly or by necessary implication in a statute creating a particular offence. It was clearly the intention of Parliament that the offence of evasion of payment of duty should be punished, upon conviction, by the minimum penalty specified and that the penalty cannot and should not be diminished in any way.
- (3) Charges against the same person for any number of offences against the same provision of a law of the Commonwealth may be joined in the same information, complaint or summons if those charges are founded on the same facts, or form, or are part of, a series of offences of the same or a similar character.
- (4) If a person is convicted of 2 or more offences referred to in subsection (3), the court may impose one penalty in respect of both or all of those offences, but that penalty shall not exceed the sum of the maximum penalties that could be imposed if a separate penalty were imposed in respect of each offence.
19 The above considerations apply also to the submission on behalf of Mr Penello that the imposition of a penalty in respect of each of the charges of evading duty would offend against the principle of totality. Just as general legislative provisions must yield to a specific provision relating to the imposition of penalty, so must the principle of totality.
General considerations
20 Over a period of more than 6 months Mr Penello defrauded or attempted to defraud Customs of $100,433.43 by deliberately seeking to mislead Customs officers, and his broker, into believing that the cycling shoes which he imported fell within the terms of the tariff concession order. His remorse, it seems, was prompted only by his apprehension and the likelihood of his conviction.
21 In respect of the first 4 shipments Mr Penello obtained a non-payable refund of $34,173.39 by making a false and misleading statement in relation to each shipment. In respect of the last 6 shipments he evaded payment of a total of $66,260.04 in duty by smuggling those shipments and making a false and misleading statement in relation to each. In effect, the obtaining of the refund was the product of one transaction only. The 8 charges brought in respect of that transaction, though relating to separate offences in law, were "substantially contemporaneous and connected", the words used by the High Court in Vogel's case (above) at CLR 168. Likewise, the evasion of the duty was the product of 6 transactions. Application of the "one-transaction rule" (see 1 and Shaw v The Queen (1989) 39 A Crim R 343 at 347 per Brinsden J) usually would result in the imposition of no more than 7 cumulative penalties, no matter how many charges were brought. But in this case, as we have seen, because of the minimum penalty provisions in the Customs Act 1901 (Cth), the court is unable to apply that rule. In these circumstances it seems to me - as it seemed to Taylor J in Scott v Geoghegan & Sons Pty Ltd (1969) 43 ALJR 243 at 245 - that the multiplicity of charges is oppressive and is "the product of zeal which outruns all sense of proportion".
22 After taking into account the character, antecedents and age of Mr Penello and the potentially drastic consequences of the penalties which the law requires me to impose, I am of the opinion that the above considerations justify the imposition of a low penalty in respect of the 10 offences of making a false or misleading statement and of the minimum penalty applicable to each of the other offences.
23 Motions for judgment were to have been heard on 14 October 1999 and, in order to give counsel the opportunity of agreeing upon the form of the judgment, a copy of my proposed reasons was made available to each of them on the previous day. In those reasons, when touching upon the penalty for making a false or misleading statement, I referred to a "mandatory payment" of double the duty in question and went on to order payment by Mr Penello of an amount of $200,866.86. Fortunately, counsel for the defendants drew my attention again to s 234(3) and pointed out that the payment of double the duty, forming part of the prescribed penalty, was not expressed as mandatory. On reflection, I am satisfied that, on a correct reading of the subsection, in respect of the 10 offences of making a false or misleading statement, the penalties which the court may impose range from nil to $250,866.86.
Conclusion
24 By reason of the admissions which Mr Penello has made the plaintiff is entitled to declarations that he committed the 6 offences of smuggling, the 4 offences of obtaining non-payable refunds and the 10 offences of making false or misleading statements and to orders for his conviction of those 20 offences. By reason of the findings which I have made the plaintiff is entitled also to declarations that Mr Penello committed the 6 offences of evading payment of duty and to orders for his conviction of those offences.
25 The total amount of the duty properly payable in respect of all 10 shipments was $100,433.43. Of that amount Mr Penello still is required to pay $86,992.18, comprising $34,173.39 in respect of the refund which he received following the first 4 shipments and $52,818.79 in respect of the duty evaded following the remaining shipments.
26 In respect of the 6 offences of smuggling, I impose a penalty of $132,520.08. In respect of the 6 offences of evading duty I impose an additional penalty of the same amount. In respect of the 4 offences of obtaining a non-payable refund, I impose an additional penalty of $68,346.78. In respect of the 10 offences of making a false or misleading statement, I impose an additional penalty of $500 only. According to my calculations those penalties amount to a total of $333,886.94.
27 I order also that Mr Penello pay interest on the unpaid duty of $86,992.18 in accordance with s 32 of the Seat of Government Supreme Court Act 1935 (Cth) as from 5 September 1995, the date upon which Customs demanded payment from him, for the duty short paid.
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