Chief Executive Officer of Customs v Corniche Motors Pty Ltd & Ors

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(Judgment by: Johnson J)

Chief Executive Officer of Customs
vCorniche Motors Pty Ltd & Ors

Court:

Judge:
Johnson J

Subject References:
Customs
Customs prosecution under Customs Act 1901 (Cth)
Evasion of duty
False statements
Smuggling
Settlement agreement
Convictions and declarations by consent
Agreed penalty in full and final satisfaction of penalty imposed by Court
Appropriate penalties

Legislative References:
Crimes Act 1914 (Cth - s 16A
Customs Act 1901 (Cth) - s 153; s 233(1)(a); s 233(1AA); s 233AB(1); s 234(1)(a); s 234(1)(d); s 234(2)(a); s 234(2)(c); s 234(3); s 247

Case References:
Chief Executive Officer of Customs v Corniche Motors Pty Ltd & Ors - [2003] WASC 244
Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) - 216 CLR 161
Chief Executive Officer of Customs v Mak & Anor - [2002] WASC 235
Chief Executive Officer of Customs v Red Dale Holdings Pty Ltd & Ors - [2004] WASC 141
Comptroller-General of Customs v Kingswood Distillery Pty Ltd, unreported; NSWSC; - Library No 60385/94; 5 December 1997
Goulding v Penello (1999) - 43 ATR 179
L Vogel & Son Pty Ltd & Anor v Anderson (1968) - 120 CLR 157
Trade Practices Commission v Allied Mills Industries Pty Ltd (1981) - 37 ALR 256
Chief Executive Officer of Customs v Coflexip Stena Offshore International SA & Ors - [2001] WASC 346
Chief Executive Officer of Customs v Owens International Freight (Australia) Pty Ltd & Ors (2002) - 50 ATR 229
Chief Executive Officer of Customs v Ozzy Tyre & Tube Pty Ltd & Anor - [2005] NSWSC 948
Chief Executive Officer of Customs v Pavlovich (2001) - 47 ATR 402
Comptroller-General of Customs v Jayakody, unreported; - SCt of Vic (Byrne J); 13 December 1993>
Comptroller-General of Customs v JCT Wong & Rizoli Pty Ltd (1998) - 103 A Crim R 491
Hayes v Weller (No 2) (1988) - 50 SASR 182
Lanham v Brake (1983) - 52 ALR 351
Minister for Customs & Excise v Aunger Accessories Pty Ltd [1969] - 5 ASR 441
Murphy v HF Trading Co - (1973) 47 ALJR 198
Walsh v N & M Gangemi Nominees Pty Ltd & Anor - [2001] WASC 79

Suggested reading:

Hearing date: 16 November 2005
Judgment date: 12 December 2006

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Judgment by:
Johnson J

Plaintiff
and
First Defendant: Corniche Motors Pty Ltd
Second Defendant: Jonvie Pty Ltd
Third Defendant: Jeffrey Gordon Carger
Fourth Defendant: Harry Jones

Counsel:
Plaintiff : Ms W EndebrockBrown
First Defendant : Mr C E Chenu
Second Defendant : Mr C E Chenu
Third Defendant : Mr C E Chenu
Fourth Defendant : Mr C E Chenu

Solicitors:
Plaintiff : Australian Government Solicitor
First Defendant : Durack & Zilko
Second Defendant : Durack & Zilko
Third Defendant : Durack & Zilko
Fourth Defendant : Durack & Zilko

File No/s : CIV 1255 of 2001

1. JOHNSON J: This action, brought by the Chief Executive Officer of Customs by his authorised delegate ("Customs"), was commenced by writ of summons seeking declarations and convictions against the first to fourth defendants in respect of contraventions of s 233(1)(a), s 234(1)(a) and s 234(1)(d) of the Customs Act 1901 (Cth) ("the Customs Act"). The writ further seeks the repayment of unpaid duty under s 153 of the Customs Act in respect of the goods involved in the contraventions of the Customs Act .

2. In November 2002, Customs and the second and fourth defendants, Jonvie Pty Ltd ("Jonvie") and Harry Jones ("Jones"), agreed to resolve the action as between those parties in the manner set out in a Minute of Consent Orders dated 9 May 2003. The chamber summons for consent orders was heard by Barker J and the action against Jonvie and Jones concluded by judgment delivered on 9 December 2003: Chief Executive Officer of Customs v Corniche Motors Pty Ltd & Ors [2003] WASC 244.

3. The action against the first defendant, Corniche Motors Pty Ltd ("Corniche") and the third defendant, Jeffrey Gordon Carger ("Carger") remained on foot and on 16 February 2005 was listed for trial on 9 March 2005.

4. On 25 February 2005, Customs, Corniche and Carger agreed to resolve the action in the manner set out in a Minute of Consent Orders dated 19 October 2005 ("the Minute") and the matter was brought before me by chambers summons on 16 November 2005. In addition to the declarations and orders of conviction and for payment of unpaid duty in the amounts agreed upon and identified in the Minute, Customs also seeks orders imposing penalties on Corniche and Carger in respect of the various contraventions of the Act.

5. The effect of the Minute is as follows:

(1)

To convict Corniche of -

(a)

18 counts of intentionally making a false statement contrary to s 234(1)(d) of the Customs Act ;

(b)

18 counts of evading payment of duty contrary to s 234(1)(a) of the Customs Act ;

(c)

18 counts of smuggling contrary to s 233(1)(a) of the Customs Act ;

(2)

To convict Carger of -

(a)

24 counts of making a false statement contrary to s 234(1)(d) of the Customs Act ;

(b)

24 counts of evading payment of duty contrary to s 234(1)(a) of the Customs Act ;

(c)

24 counts of smuggling contrary to s 233(1)(a) of the Customs Act ;

(3)

To order Corniche and Carger to pay penalties in relation to the offences committed as determined by this Court;

(4)

To order Corniche and Carger to pay unpaid duty in the amount of $20,078.63;

(5)

To order Corniche and Carger to pay the Plaintiff's costs fixed in the sum of $93,000.

Customs prosecutions

6. This recitation of the orders sought and the processes involved identifies the somewhat unusual nature of the proceeding known as a "Customs prosecution". Customs prosecutions have criminal and civil aspects. The usual practice and procedure of the Court in civil cases applies, historically from the way in which revenue proceedings were conducted and, currently by virtue of s 247 of the Customs Act . However, Customs bears the onus of proving elements of the case beyond a reasonable doubt. The hybrid nature of the proceedings, its genesis and the impact on the burden and standard of proof were identified by the High Court in Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 (at [107]) per Hayne J; see also Chief Executive Officer of Customs v Corniche Motors Pty Ltd & Ors (at 4 - 5) and Chief Executive Officer of Customs v Red Dale Holdings Pty Ltd & Ors [2004] WASC 141 (at 4).

7. Presumably because Customs prosecutions involve a civil aspect, and also because of the requirement in s 247 that a Customs prosecution be commenced, prosecuted and proceeded with in accordance with the usual practice and procedure of the Court in civil cases, it has been generally accepted that actions of this type may be settled on a commercial basis without breaching the policy of the Customs Act , or the criminal law, or in any way detracting from the discretion of the Court with regard to sentencing upon conviction in proceedings under the Customs Act : CEO of Customs v Corniche Motors (at 5 - 6); CEO of Customs v Red Dale Holdings (at 4); Chief Executive Officer of Customs v Mak & Anor [2002] WASC 235 per E M Heenan J (at [5]); Trade Practices Commission v Allied Mills Industries Pty Ltd (1981) 37 ALR 256 (at 259); Comptroller-General of Customs v Kingswood Distillery Pty Ltd , unreported; NSWSC; Library No 60385/94; 5 December 1997 per Sperling J (at 6); Goulding v Penello (1999) 43 ATR 179 (at 182) per Heenan J.

8. Where the parties to a Customs prosecution have reached a commercial settlement, the role of the Court is to record convictions against the defendants in respect of each contravention of the Act referred to in the Minute, to impose a penalty in relation to each such contravention as well as make the other orders to which the parties have agreed.

Summary of facts

9. Corniche is a registered Australian proprietary company involved in the importation and sale of motor vehicles. Carger and Jones were directors of Corniche, and Jonvie and Carger were the sole shareholders. Jones and his wife were the sole directors and shareholders of Jonvie. Between 8 June 1997 and 28 October 1999, the defendants were involved in the importation of a number of luxury motor vehicles for commercial purposes. In total, 54 vehicles were imported in the 24 shipments over 29 months. Before the incorporation of Corniche on 29 January 1998, six importations occurred in the names of Jonvie, Jones, Carger and two natural persons that it is unnecessary to name. After registration of Corniche, all importations occurred in the name of Corniche. Initial importations were of single vehicles but later importations were of up to four vehicles at a time.

10. The investigation into these importations revealed a system involving the provision of false documents by the overseas suppliers of the vehicles for use by the defendants for customs purposes, as well as the attempted verification of the declared false purchase price by way of a copy of a telegraphic money transfer for the declared undervalue. The payment which this telegraphic transfer reflected was actually only the first of two payments to be made for the vehicles.

11. Attached to these reasons is a Schedule of Shipments ("the Schedule") identifying the relevant information in relation to the importation of each vehicle including the date, a description of the vehicle, the declared customs value, the true customs value, the amount and percentage amount of undervaluation and the amount of duty evaded.

12. Of the shipments identified in the Schedule, the first shipment on 8 June 1997 and the third shipment on 14 December 1997 were imported by Jonvie and Jones who have already been dealt with for the offences committed in relation to those importations.

13. With respect to Corniche, the offences before the Court arise from 18 importations by Corniche between 5 April 1998 and 10 November 1999. With respect to Carger, the offences relate to his involvement, directly or indirectly, in all 24 shipments identified in the statement of claim as being:

(1)

two importations in the name of Carger on 22 September 1997 and 14 December 1997;

(2)

18 importations in the name of Corniche occurring between 5 April 1998 and 10 November 1999;

(3)

two importations in the name of Jonvie and Jones on 8 June 1997 and 14 December 1997;

(4)

two importations in the name of third parties associated with Carger on 20 September 1997 and 16 November 1997.

14. For the purpose of each importation a Customs broker was employed to enter the vehicles with Customs. There is no allegation of any wrong doing on the part of the Customs broker who simply relied on the information provided to him. Entering the vehicles with Customs involves the lodgement of a document known as a "Nature 10 Entry for Home Consumption" which requires certain information to be provided by the importers so that the customs value can be determined. The customs value is the basis for determining the customs duty and sales tax owing. Once the amounts owing are paid the imported goods are cleared and released by Customs.

15. The system used to import the vehicles and by which the offences were committed in relation to each shipment, involved the production to Customs of documentation, usually a receipt or sales invoice, which did not declare the full purchase price of the vehicles. The documentation was provided to the broker from the defendants as importers or representatives of the importers. The documentation, addressed to the importer, was provided by the overseas purchasing agent for the specific purpose of evidencing a lesser purchase price. Not all the documents were prepared by the purchasing agent which indicates that others were brought within Corniche's and Carger's scheme, at least to that extent.

16. The purchasing agent was a person in Hong Kong who sourced all the vehicles the subject of the charges. Amongst the documents seized under warrant during the investigation into these offences was the following correspondence from the purchasing agent to Carger in relation to a particular shipment setting out the true details of the transaction, including the actual price and what is described as the "paper purchase price":

"Sums will look like this on the current shipment:

	Paper purchase price (I have receipts in hand):	Invoice price to you, showing a little profit:	Actual price:	Price to you:
911 SC	50K	53K	75K	80K
500 SEL	30K	35K	42K	47K
RR	10K	15K	25K	30K
450 SEL	18K	18K	40K	45K
Packing	--	--	--	8.7K
		$121,000		$210,700

First payment as usual of $121,000 which is the invoice price to my account. Second payment (of the difference of $210,700 less $121,000) of $89,700 to the other account as before."

17. The final paragraph is evidence of both the mode of payment and the fact that certain legitimate telegraphic transfer documents provided to Customs as additional verification of the stated purchase price reflect only part of the actual purchase price. The "other account" referred to in the final paragraph was in the name of another person connected to the agent. However, there was no dispute that the money deposited in that account was to be accessed by the purchasing agent.

18. It is also not in dispute that certain handwritten notes prepared by Carger and seized under warrant confirm that the true purchase price of the vehicles was as set out in the column entitled "Price to you". The notes set out above also indicates a $5000 difference between the actual price and the price to the importers. The difference reflects the amount it was agreed would be paid to the purchasing agent for each of the cars sourced.

19. It is apparent from the evidence that on each importation the subject of these charges, the Customs broker was provided by Carger and/or on behalf of Corniche with information, whether it was a sales invoice, a sales contract, a telegraphic transfer or a receipt said to be in full and final settlement of the purchase price, which identified an amount which was less than the actual amount paid for the vehicles. This was done for the purpose of reducing the amount of customs duty payable.

20. I do not propose to recite the specific facts in relation to the importation of each vehicle. As was the approach taken by counsel for Customs, I propose to refer to one shipment or importation of vehicles by way of example. However, as I have indicated, the Schedule attached to these reasons identifies the information in relation to each shipment and neither party has suggested that there is any basis to differentiate between the offences, other than in relation to the amounts of money involved.

21. The importation selected by counsel as a typical shipment was the second last importation by Corniche of four vehicles on 17 September 1999 which is shipment number 21 on the Schedule. For the purpose of entering the four vehicles with Customs, Carger provided to the Customs broker a sales invoice addressed to Corniche which was obtained from the overseas purchasing agent which set out the description of the vehicles and the purchase price in Hong Kong Dollars as follows:

1978 Porsche 911: HK$53,000

1984 Mercedes Benz 500 SEL: HK$35,000

1979 Mercedes Benz 450 SEL : HK$18,000

1970 Rolls Royce Shadow: HK$15,000

Carger also provided correspondence from BankWest confirming the telegraphic transfer of HK$121,000 to the account of the overseas purchasing agent.

22. On the basis of the information provided, the Customs broker lodged the Entry for Home Consumption with Customs, declaring the total invoice price to be HK$121,000 on which duty and sales tax payable was calculated as AUD$4,515.99 and AUD$8,004.93 respectively. These amounts were subsequently paid by Carger and the vehicles were released by Customs.

23. The document created by the purchasing agent set out above relates to this particular shipment. It indicates that the actual price paid by Corniche for the shipment of vehicles was HK$210,700. Based on the true invoice price, Customs subsequently calculated the true duty and sales tax payable as AUD$7,359.02 and AUD$13,019.64 respectively.

24. The following summary of the details of Corniche's and Carger's offending are not in dispute and are based on the information in the Schedule:

(1)

The total declared customs value of all the vehicles imported was AUD$266,293.67 whereas the total true customs value of all the vehicles imported was AUD$468,769.46, an undervaluation of AUD$202,475.79;

(2)

The undervaluation per importation ranged from 16.45 per cent for the second shipment to 60.22 per cent for the twentieth shipment. The overall undervaluation was 43 per cent;

(3)

The total customs duty paid for all shipments was $52,178.21 whereas the true customs duty payable was $90,147.50, a benefit to Corniche as importer of $37,969.29.