Wilson v Chambers & Co Pty Ltd

38 CLR 131
1926 - 0608A - HCA

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(Judgment by: Isaacs J)

Between: Wilson
And: Chambers & Co Pty Ltd

Court:

Judges: Knox CJ

Isaacs JHiggins J
Rich J
Starke J

Subject References:
TAXATION AND REVENUE
Customs duties
Failure to pay duty
Intention to defraud revenue

Legislative References:
Customs Act 1901 (Cth) No 6 - The Act

Hearing date: 17-18 November 1925 (Sydney)
Judgment date: 8 June 1926

Melbourne

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Judgment by:
Isaacs J

This case comprises three appeals by Richard William Wilson, as Customs officer, from the dismissal of informations, under the Customs Act 1901-1920, against three several defendants, namely, Chambers & Co Pty Ltd , Lawrence Chambers and William Chambers. During the argument it was seen that the facts did not support any charge against William Chambers, and the appeal as to him was dismissed. The other appeals have now to be determined.  

The charges laid against the Company were as follows:

(1)

Under s. 234 of the Act for evading payment of duty in respect of certain goods, namely, enamel, varnish, lead and paint, imported into the Commonwealth at Port Kembla on or about 7th September 1922;

(2)

under s. 68 of the Act for failing to enter the said goods, either for home consumption or for warehousing or for transhipment;

(3)

under s. 33 of the Act for interfering with the said goods as subject to the control of the Customs.

Similar charges were made against Lawrence Chambers. All the offences are alleged to have been committed at Port Kembla, which is a very material circumstance. The main facts are that the Company was agent in Australia of Hoyle & Co of Newcastle-on-Tyne for the sale of goods of the classes referred to. A consignment of those goods about 7¼ or 7 tons in all was sent by Hoyle & Co to the Company deliverable at Sydney. The goods were carried in a ship called the Nauru Chief, which, before calling at Sydney, called in at a small Customs port called Port Kembla, with the goods on board. Lawrence Chambers, who was agent for, and who represented, the Company, visited the ship while in Port Kembla. The ship needed painting, and Lawrence Chambers on behalf of the Company agreed with the ship's officers-and his agreement has since been affirmed and acted on by the Company-to sell all the goods in question to the ship, the goods to remain on board and to be paid for as used by the ship. This arrangement being made, the goods passed into ships' stores. Nothing was done at Port Kembla by way of unshipping the goods or of using them. The Customs officer at Port Kembla allowed the ship to proceed to Melbourne with ships' stores unsealed, a guarantee in the prescribed form being given. At Melbourne some of the goods were used in painting the ship. No duty was paid. The Company has since been paid by the shipowners for the goods. I now consider the charges against the Company in order.  

(1) Evading Payment of Duty

The offence is constituted by s. 234 (a):

"No person shall evade payment of any duty which is payable."

The latter part of the paragraph requires that duty is actually and presently payable; and this is the first inquiry.

The foundation is naturally the Customs Tariff which imposes the duties on "all goods dutiable ... imported into Australia," etc "Dutiable goods" by incorporation of the Customs Act include "all goods in respect of which any duty of Customs is payable." By s. 153 duties payable are Crown debts and instantly recoverable. The first essential for this purpose is importation. Importation does not necessarily include landing the goods. They may be transhipped direct from the ship in which they arrive into the ship or aircraft into which they are to be transhipped, and still be "imported goods" (ss. 68 and 75 (b)).

Section 68 says:

"All imported goods shall be entered either

(a)

for home consumption; or

(b)

for warehousing; or

(c)

for transhipment."

Consequently "imported goods" as there used is an expression not confined to goods landed or even to goods to be consumed in Australia. On the other hand it does not include all goods in fact arriving by ship in an Australian port. A vessel, say, with a cargo destined for New Zealand may call in at Melbourne or Sydney and may continue her voyage without it being said that the goods it carries are "imported goods" within the meaning of s. 68. Both these extremes are inconsistent with the working provisions of the Customs Act. In my opinion, having regard to the various sections of the Act - and needless to say the question must be solved by reference to that Act and not to other Acts - the expression "imported goods," in s. 68, means goods which in fact are brought from abroad into Australian territory, and in respect of which the carriage is ended or its continuity in some way in fact broken. The underlying concept appears to me to be as follows:

Where, within our territory, some act takes place with regard to goods arriving from abroad, whether in fact they are or are not dutiable or prohibited, which in the absence of some new or further arrangement for carrying them away would make the place of arrival their destination and would therefore result in the goods remaining in Australia, then they are "imported goods" and it is the duty of the "owner" to comply with the provisions of s. 68.

I do not think a mere agreement of sale between two merchants in Australia, even though the property passes, is sufficient in itself to constitute importation. If such an agreement were made before the ship arrived in Australian waters, it could not possibly operate as an importation. If afterwards the goods arrived and were allowed to remain en route, for instance to New Zealand or in the other direction to India, with the actual carriage undisturbed, I do not see how the position would be altered. But in this case there are additional circumstances. The agreement was made with the shipowner; the delivery was accelerated; not only the property, but the right to possession also, was transferred. The contract of carriage was completely ended, and the shipowner's character in which he held the goods was transformed from that of carrier to that of proprietor. What follows is important vis-a-vis the Customs. The goods were, as it is found, taken into ships' stores and were allowed by arrangement, constituted by permission of the Customs and guarantee to the Customs, to be taken on to Melbourne as ship's stores. That involved the result that, not only was the character of the shipowner's possession altered as between the parties, but the character of the goods themselves was also altered as regards the Crown. What was the legal consequence of all this? In my opinion this catena of circumstances eliminates, as unnecessary formalities, the manual delivery by shipowner to consignee, and redelivery by consignee to shipowner. It also treats for Customs purposes those formal processes as having for convenience been eliminated, but as having in substance taken place and as having had real commercial effects. The goods only became "ships' stores" in Port Kembla, and, in substance, that is where they were, by the catena of circumstances mentioned, treated by all parties, including the Crown, as having been shipped as such.

Otherwise, the Customs permission and the guarantee to the Customs rested on no real transaction so far as these goods were concerned. In the result, the goods were "imported goods" and were necessarily "imported" by the Company, and prior in law to their conversion notionally into ships' stores. The goods should have been entered by the Company under s. 68, and as they were by the Company intended to be sold and were in fact sold to the shipowner for use as ships' stores and so treated by all concerned, they should, in my opinion, have been entered as for warehousing. My reason is that the operation, if extended, connotes

(1)

importation into Australia by the Company,

(2)

possible but no necessary consumption in Australia,

(3)

immediate delivery to the shipowner as ships' stores.

I therefore eliminate from the proper entries by the importer (a) home consumption and (b) transhipment. The only appropriate notional entry is therefore "warehousing," for that is the only thing that could have been done, had the notional formalities been actually performed.  

Was there then an instant obligation to pay the duty? The matter depends upon a well-established understanding as to warehousing. The Customs Act, in Part V., deals with the warehousing of goods. Section 78 enacts "Dutiable goods may be warehoused in warehouses licensed by the Minister." Such goods are ex necessitate imported and are within the taxing Act provision quoted. The duty is at once a debt to the Crown, Hamel on the Laws of Customs, at p. 100, states the relevant law and quotes the following authorities: Com. Dig. "Debt." A. 9; Leaper v Smith; ^[F1] Anonymous; ^[F2] Salter v Malapert; ^[F3] Attorney-General v Weeks, ^[F4] and Attorney-General v Ansted. ^[F5] In the last-mentioned case Parke B., who was in accord with Lord Abinger C.B., referring to the Warehousing Act 3 & 4 Will. IV. c. 57, which is the prototype of Part V. of the Customs Act, in effect stated the law to be that, apart from the warehousing provisions, the duty was payable, and that those provisions when complied with suspended the Crown's remedy by giving time for payment until the happening of events mentioned in those provisions for requiring actual payment. He also held that, where by the importer's own fault those provisions were not complied with, the original liability stood and the time for payment had arrived. The commercial necessities that led to the enactment of the warehousing provisions, and that to some extent at least exist in Australia, are found stated in Sir George Stephens' work on Commerce and Commercial Law (1853), at pp. 108 and following. The statement is interesting as supporting practically the principles laid down by the abovementioned authorities. Applying those principles, confirmed by s. 153, to the present case, the time for payment had arrived.  

Did, then, the defendant evade payment? It depends on what is meant by the word "evade" in the particular context. The word itself is not rigid. As was said by Lord Hobhouse in Simms v Registrar of Probates, ^[F6]

"everybody agrees that the word is capable of being used in two senses: one which suggests underhand dealing, and another which means nothing more than the intentional avoidance of something disagreeable. Beyond this, nothing is to be found having much bearing on the construction of the word, which depends entirely upon its use in the Colonial Acts."

That is to say, we start with the alternative possible meanings of the word itself and as to anything further we are thrown upon the construction of the statute in hand. Before proceeding to construe the statute for the purpose of ascertaining what precisely is there meant by the word "evade"-a process involving important consequences both to the revenue and to the mercantile community-it is necessary to understand properly the observations of Lord Hobhouse. The "something disagreeable" to which he refers may or may not, so far as concerns the intrinsic meaning of the word "evade" apart from context, be a legal obligation. Whether in a given statute it connotes guilt or innocence and in what circumstances depends entirely on the true construction of the statute itself. Here the "disagreeable thing" to be avoided is "payment." That is, the person "intentionally avoids payment" in fact of a sum which in law is payable.

But whether the "intention" extends so as to make belief in facts constituting liability to pay, or, still further, belief in actual liability to pay, the criterion of the offence is another question and a serious one both for Commonwealth and individual. It would be serious one for the Commonwealth, because ignorance of essential facts, by reason (say) of wilful neglect or even unreasonable business carelessness or ignorance of actual liability, would exclude liability for evasion because there would be no actual belief. The first alternative would be serious for honest merchants because, even with full knowledge of the facts, there might be a genuine dispute as to the law supported by strong legal opinion which, however, in the end might be held erroneous. In such case, if mens rea be adopted as the test, it would exist, because, as the Privy Council held in Bank of New South Wales v Piper, ^[F7] at pp. 389, 390,

"the absence of mens rea really consists in an honest and reasonable belief entertained by the accused of the existence of facts which, if true, would make the act charged against him innocent."

Their Lordships went on to hold that the party charged must be presumed to know the law whether he did so or not. The expression "honest and reasonable belief" indicates that facts of which a reasonable man in the given situation would avail himself must be taken into account. That is, for the purposes of mens rea. And it establishes that the law accepts in such cases the standard of reasonableness as a test of culpability. If, therefore, s. 234 (a) be construed so as to make every intentional avoidance of a payment actually due an evasion where there is knowledge of the facts, actual or imputed, constituting liability to pay, then there was undoubtedly a contravention of the paragraph in the present case. That is seen at once by a relation of the salient facts. There was importation of all the goods at Port Kembla. The "payment" was due there instanter. All the facts were known to the respondents other than William which constituted in law the instant liability to payment of the duty. The respondents (other than William) unquestionably determined not to pay any duty at Port Kembla but to proceed as above stated.

The arrangement included a guarantee. Even apart from the special terms of that guarantee, what was actually done was to remove from Port Kembla without payment of duty goods in respect of which duty was instantly payable and on which there existed by statute a charge or security for the payment of the duty. The constitutive facts being known and the law presumed to be known, what prevents contravention on the interpretation assumed? But the actual arrangement makes the position more acute. It was the intention of the respondents that the duties arising in law at Port Kembla should never be paid; and they never have been. The guarantee was "to furnish a list of all dutiable stores consumed on the voyage, and to pay duty thereon at the port of Melbourne." That is, if none of the goods were consumed on the voyage from Port Kembla to Melbourne, there was to be no duty paid at all, and any duty paid was to be in respect of future happenings, not of what had taken place at Port Kembla. If, therefore, "evasion" rests simply on knowledge actual or constructive of facts creating liability to pay and on the intention to avoid the payment legally required by reason of that liability, the respondents must be convicted. But in my view of the statute that is not the legislative intention, an intention that would operate frequently to the detriment of the revenue and frequently to the detriment of honest traders. The solution is this:We begin with the intrinsic neutral meaning of evade as intentional avoidance. Then, by a process of elimination, we can see what the Legislature intended the word to connote. Being erected into an offence by s. 234 with a maximum penalty of PD100, it is manifest that the evasion contemplated is more than mere omission to pay instanter.

And compare Ramsden v Lupton, ^[F8] at pp. 28, 30. On the other hand, the evasion penalized by s. 234 clearly does not connote intent to defraud the revenue. That is shown by s. 241, which doubles the maximum penalty where that intent is charged and proved. The position so far is that "evasion" is more serious than mere omission to pay and less serious than attempting to defraud the revenue. At this point one observation is material. Defrauding the revenue is not confined to escaping payment for ever. Escaping for a time with an intention to pay when convenient and in the meantime depriving the Customs of its security is defrauding the revenue, though the moral tint is a shade lighter (see R. v Naylor). ^[F9]

Now, what is the evasion which the statute places intermediately between simple omission and fraud on the revenue. Any trick or artifice or force which results in obtaining dutiable goods without payment of duty is a fraud on the revenue, and is, therefore, outside simple "evasion." Bringing to the solution what should in a doubtful case always be assumed, a presumption of just intention consistent with safeguarding the Customs revenue, the test must be whether the Crown debtor has acted honestly and reasonably in relation to his public obligations. It is the same test as the Privy Council has stated with regard to mens rea. If, legally owing the duty, the importer has not merely omitted to pay, but has omitted without any reasonable grounds for withholding payment, he has "evaded" payment. If, however, he can show any reasonable excuse for omitting to pay, he does not evade payment. He may genuinely and without negligence be unaware of the facts constituting liability; he may have misunderstood a regulation or a law; he may, though perfectly cognizant of all necessary facts, be strongly advised that either on construction or constitutionally the law does not reach him. Such a man does not, in my opinion, "evade" payment. On the other hand, if his ignorance of facts arises through his own unbusinesslike conduct, so as to be unreasonable in his case want of knowledge is no reasonable excuse. That, as already shown, is not because of the absence of mens rea as ordinarily understood. It is simply because what he ought to know in his situation when his public obligations are in question, he is taken to know. But the only test of what he ought to know is what a man in his position acting reasonably would know. Consequently, it all comes to a question of honesty and reasonable conduct.

The conclusion is that s. 234 (a) is contravened when there is intentional non-payment without honest and reasonable excuse of duty which is payable. Then, was there an honest and reasonable excuse here? In my opinion there was. The arrangement made was on the mutual basis that no duty should be paid at Port Kembla but that the guarantee arrangement should stand. On that ground, on that only, do I think the charge should fail.  

2. Failure to Enter

For the reasons given, I am of opinion there was a contravention of s. 68, and the appeal as to this should succeed.  

3. Interference

With respect to the third charge based on s. 33 there was, with one exception, no physical act of any kind at Port Kembla which could be said to be an interference with the goods. "Interfere" in s. 33 is not satisfied by a mere mercantile contract. Contracts between merchants are not prohibited by s. 33: they do not interfere with goods; they merely affect the right of individuals to interfere with the goods. The one exception referred to is the moving of the goods from Port Kembla in the vessel. But that was done by permission, and there was no breach of s. 33.  

What I have said with regard to the Company applies equally to Lawrence Chambers, who by reason of his agency for the Company came within the statutory definition of "owner" in respect of the goods.  

The appeals, respecting the Company and Lawrence Chambers, should, therefore, in my opinion, be dismissed as to the charges under ss. 33 and 234, and allowed as to s. 68.