Collector of Customs v Bathox Pty Ltd [2002] FCA 1581

FEDERAL COURT OF AUSTRALIA

Collector of Customs v Bathox Pty Ltd [2002] FCA 1581 CUSTOMS & EXCISE – claim by Collector that the respondent had failed to "account" to satisfaction of Collector under Excise Act 1901 (Cth) s 60 – undertaking by Collector to provide audit report alleged by respondent – whether injunction available to restrain Collector from bringing proceedings where delay in making allegation. Excise Act 1901 (Cth)

Project Sky Blue Inc v Australian Broadcasting Authority (1998) 194 CLR 355 cited COLLECTOR OF CUSTOMS V BATHOX PTY LIMITED NO. N 265 OF 2001 BEAUMONT J 12 DECEMBER 2002 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 265 OF 2001

BETWEEN: COLLECTOR OF CUSTOMS

APPLICANT

AND: BATHOX PTY LIMITED

RESPONDENT

JUDGE: BEAUMONT J

DATE OF ORDER: 12 DECEMBER 2002

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. No formal orders be made. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 265 OF 2001

BETWEEN: COLLECTOR OF CUSTOMS

APPLICANT

AND: BATHOX PTY LIMITED

RESPONDENT

JUDGE: BEAUMONT J

DATE: 12 DECEMBER 2002

PLACE: SYDNEY

REASONS FOR JUDGMENT BEAUMONT J:

Introduction 1 There remains one further issue to be resolved in these proceedings. That is the issue tendered by pars 3(i)(d) and (e) of the defence which is purportedly an answer to par 11 of the applicant's further amended statement of claim. Sub-pars (d) and (e) should be read in conjunction with sub-par (c) as follows: "(c) The Respondent by letter dated 29 October 1998 denied any shortfall and through its solicitors made several requests for the Applicant to supply particulars of the audit so that the cause of the discrepancy could be ascertained. (d) In associated proceedings brought by a servant of the Applicant in the Local Court against the Respondent for the retention of certain goods and business records seized by Customs officers during the aforesaid audit, the said servant of the Applicant undertook to the Respondent to supply the particulars of the audit; (e) Notwithstanding several requests made in writing by the Respondent through his legal advisers, and the undertaking given by the servant of the Applicant, no such particulars were supplied prior to the commencement of these proceedings;" 2 I have allowed the respondent to re-open its case in order to prove the terms of the "undertaking" pleaded in sub-par (d). In that connection, the respondent has read the affidavit of its solicitor, Mr Khoury, sworn 11 December 2002, in which Mr Khoury says: "3. On 22 December 1998, I appeared for the Respondent at the St James Local Court before Magistrate Malcolm Beveridge. Mr Robert Bromwich of counsel appeared for the Applicant. Annexed hereto and marked 'A' is a copy of my Notice of Appearance. Annexed hereto and marked 'B' is a copy of Mr Bromwich's Notice of Appearance. 4. Prior to the hearing, I held discussions with Mr Bromwich with a view to facilitating the court process and coming to some terms in order to save time and costs. 5. I said to Mr Bromwich words to the following effect: 'My client will consent to your application for an extension of time if your client undertakes to supply the particulars of your client's audits and supply an explanation regarding the papers that have been returned to us'. 6. I then observed Mr Bromwich apparently seeking and obtaining instructions from the Applicant, Mr Chapman, who was present at the hearing. Mr Bromwich then gave the undertaking to supply particulars of the audit and an explanation regarding the papers by 11 January 1999. Annexed hereto and marked 'C' is a copy of a contemporaneous note of such made by me. 7. The court then made the order for the seized material to be retained by the Applicant until 5 May 1999. Annexed hereto and marked 'D' is the relevant page of the court file noting the order made. 8. I caused a search of the office file which located entries in my time costing sheets. Annexed hereto and marked 'E' is copy of timesheet written by myself in relation to the court proceedings on 22 December 1998 written that same day." 3 Objection was taken on behalf of the Collector of Customs ("the Collector") to the second sentence of par 6 of the affidavit. Over objection, I permitted Mr Khoury to give oral evidence, in proper form, of the conclusion purportedly stated in the second sentence of par 6. 4 Mr Khoury then gave evidence that Mr Bromwich said to him on the occasion in question: "They [the Australian Customs Service ("Customs")] will give you a copy of the audit once it is completed, and any relevant working papers". 5 As has been seen, in par 6, reference is made to a copy of a contemporaneous note made by Mr Khoury at the time. This consists of a handwritten note written by Mr Khoury on the Court list before the Magistrate on 22 December 1998. The following there appears (in Mr Khoury's handwriting): "1 Particulars of audit papers – 11/1/99. 2 Explanation and reasons – 11/1/99. 1 Audit Report. < 2 We dispute discrepancy < 3 Time extention [sic] - < 4 Difficulties with Business.." 6 As has also been seen, Mr Khoury annexed to his affidavit as annexure "D", the Court file note of the order made. It records the following: "Order that things seized may be retained until 5/5/99". There is, however, no undertaking noted by the Magistrate on the Court record. 7 Annexure "E" to the affidavit of Mr Khoury shows, relevantly, the following: "CLIENT No. TIME CODE PARTICULARS Bathox 8464 20 3 St. James Court – Magistrate Beveridge - - - 2 R. Bromwich – for ACS - - - 2 17 Kath Wray – Re Court orders and - - - - Undertakings and possible Demands. - - 1 17 G. Wray – Re Orders & Undertakings"

8 Mr Bromwich was also called to give evidence. He had only a vague recollection of the discussion between himself and Mr Khoury on the relevant date. This is not surprising, given the lapse of time that has occurred (four years) since the events in question. However, I have admitted into evidence as Exhibit "E", a letter written by Mr Bromwich at the time reporting to his instructing solicitor in the following terms: "I confirm that I appeared in this matter today for the applicant before Magistrate Beveridge at St James Local Court. Mr Khoury, solicitor, initially appeared for the respondents, but left before the hearing of the application. As instructed, I told his Worship that further particulars of the discrepancy in the recorded use of concessional spirits, and a further explanation of how the copy documents returned could be found by reference to the seizure list, would be provided to the respondent companies 11 January 1999. This, together with an outline of the issues and the reason why more time was needed, persuaded his Worship to grant the extension of the time for retention of the evidential material sought, ie, until Tuesday, 5 May 1999." 9 Two further matters need to be noted at this point. The first is that (as has been mentioned in my earlier reasons, and in particular my reasons dated 31 October 2002) an exchange of correspondence occurred between the parties on the question raised by Mr Khoury in his evidence. It will suffice, at the present moment, to recall that by letter to Customs dated 28 May 1999, the respondent's solicitors stated with reference to "varied prior correspondence" that they had not received "a copy of the alleged audit together with supporting particulars, documents etc.". 10 The second point to note here is that the respondent has never pursued the present question by any proceedings, whether in the form of a claim for a specific performance or other relief. 11 In Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, McHugh, Gummow, Kirby and Hayne JJ said at [100]: "In a case like the present, however, the difference between holding an act done in breach of s 160 is invalid and holding it is valid is likely to be of significance only in respect of actions already carried out by, or done in reliance on the conduct of, the ABA. Although an act done in contravention of s 160 is not invalid, it is a breach of the Act and therefore unlawful. Failure to comply with a directory provision 'may in particular cases be punishable'. That being so, a person with sufficient interest is entitled to sue for a declaration that the ABA has acted in breach of the Act and, in an appropriate case, obtain an injunction restraining that body from taking any further action based on its unlawful action." (References omitted) 12 I have allowed the respondent to re-open the proceedings by giving evidence, in particular, in the form of the evidence of Mr Khoury, in aid of its submission that, within the meaning of the Project Blue Sky observations I have cited, the respondent was entitled to an injunction to restrain Customs from bringing the present proceedings. 13 For this purpose I am prepared to make a number of assumptions, but without deciding any of the following questions; that is to say: 14 I am prepared to assume in favour of the respondent that Mr Khoury's evidence that I have mentioned should be accepted in its entirety. I am prepared to assume also that such evidence would have constituted a proper basis for the foundation of a claim in equity for equitable relief in the form of an injunction restraining the Collector from prosecuting the present proceedings. That is to say, I am prepared to assume that a claim for specific performance of the promise alleged in Mr Khoury's evidence or, alternatively, a claim based on a form of equitable estoppel was, prima facie, at least, available. 15 However, even if I make all of those assumptions in favour of the respondent, it seems to me that any such equitable claim would, in the discretion of the Court, inevitably have been refused by reason of the delay that has occurred since December 1998. The history of the matter to which I have referred indicates that since at least May 1999, the respondent has been aware that Customs had not performed what the respondent believes to be an enforceable promise. 16 Equitable relief is, of course, discretionary and prejudice in a case such as this to Customs is evident. At the very least, it would take the form of the loss of memory of witnesses, as the evidence of Mr Bromwich discloses, and the possible loss of other records. In those circumstances, I am of the view that no injunction of the kind explained in the observations I have cited from Project Blue Sky would be available in the present case. It must follow, in my opinion, that sub-pars (c), (d) and (e) of par 3(i) of the defence constitute no answer to the Collector's claim. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont.

Associate: Dated: 17 December 2002

Counsel for the Applicant: Mr S Gageler SC Mr C O'Donnell

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the Respondent: Mr P Kintominas

Solicitor for the Respondent: Benjamin & Khoury

Date of Hearing: 12 December 2002

Date of Judgment: 12 December 2002