New South Wales Supreme Court CITATION : CEO Customs v Bayatpour [2003] NSWSC 1062 HEARING DATE(S) : 16/10/2002 17/10/2002 JUDGMENT DATE : 21 November 2003 JURISDICTION: Common Law Division JUDGMENT OF : Hidden J at 1 DECISION : Defendant convicted of each charge CATCHWORDS : CUSTOMS PROSECUTION: - Charges of smuggling, evading duty, omitting material matter in statement - standard of proof - mental element of each offence LEGISLATION CITED : Customs Act 1901: s233(1)(a); s234(1)(a) and (d) Crimes Act 1914 (Cth) s4F(2) CEO of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 201 ALR 1 CASES CITED : Vogel and Son Pty Limited v Anderson (Minister for Customs and Excise) (1967-68) 120 CLR 157 Wong v Kelly (1999) 154 FLR 200 PARTIES : Chief Executive Officer of Customs - Plaintiff Abbas Bayatpour - Defendant FILE NUMBER(S) : SC 20146/00 COUNSEL : R Bromwich - Plaintiff Defendant in person SOLICITORS : Australian Government Solicitor - Plaintiff Defendant in person IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HIDDEN J Friday, 21 November, 2003 20146/00 – Chief Executive Officer of Customs v Abbas Bayatpour REASONS FOR JUDGMENT 1 HIS HONOUR: This is a Customs prosecution, pursuant to Pt XIV of the Customs Act. The plaintiff, the Chief Executive Officer of Customs, alleges that on or about 21 January 2000 the defendant, Abbas Bayatpour, committed three offences under the Customs Act 1901: (1) smuggling (s233(1)(a)); (2) evading payment of duty (s 234(1)(a)); and (3) knowingly or recklessly omitting a material matter in a statement to an officer of Customs (s 234(1)(d)(ii)). 2 The history and nature of proceedings under Pt XIV of the Act were sketched by Hayne J in CEO of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 201 ALR 1, at para 101ff. It is unnecessary to refer to those matters apart from the standard of proof borne by the plaintiff. At the time of the hearing before me there was uncertainty about that question, and it was yet to be considered by the High Court in the Labrador case. Now that the High Court has delivered its judgment, it is clear that the plaintiff must establish the elements of each of the offences to the criminal standard. Counsel for the plaintiff, Mr Bromwich, had submitted that I should apply the civil standard in the manner accepted in Wong v Kelly (1999) 154 FLR 200, per Stein JA at 209-210. However, he argued that, in any event, the evidence was sufficient to establish each of the offences beyond reasonable doubt. 3 The defendant had legal representation at an earlier stage in the proceedings but he appeared before me in person. He did not adduce any evidence (although he had given an exculpatory account to Customs Officers in an electronically recorded interview, to which I shall refer later). He made submissions, both orally and in writing, which demonstrated an understanding of the relevant law and the factual issues to be determined. 4 Most of the facts upon which the plaintiff relies are the subject of agreement by the defendant or, at least, are unchallenged. The only live issue is whether the defendant had the knowledge necessary to establish the mental element of each of the offences, a matter to which I shall turn in due course. 5 In January 2000 a shipping container was transported from a port in China to Sydney aboard a vessel called the "Kapitan Serykh". The ship arrived at Sydney on 21 January 2000 and the container was discharged that same day. 6 On 25 January 2000 the container was examined by Customs officers. In it were 413 cardboard cartons said, according to their labels, to contain plastic sealing tape. Forty-three cartons at the front of the container did contain tape of that kind. The remaining 370 cartons contained cigarettes. How they were packaged is immaterial for present purposes. It is sufficient to say that, in all, there were some 3,700,000 cigarettes. 7 On 17 January 2000, a few days before the container arrived in Sydney, the defendant engaged SBI Shipping Pty Ltd to clear it through Customs and to deliver it. He dealt with Mr Anthony Chalita, director of that company. He provided to Mr Chalita a bill of lading and other documentation disclosing that the consignment was of 413 cartons of packing tape, supplied by World-Wide Technologies Limited, a Hong Kong company, to "Tools King Importing and Distributing" of 15 Franklin Road, Cherrybrook. 8 The defendant carried on a business under the registered name "Bayat International". The principal place of that business was shown in the relevant government records as 5 Franklin Road Cherrybrook, but the business was actually carried on at an industrial unit at 10/250 Milperra Road, Milperra. "Tools King Importing and Distributing" was not registered as a business name, but there was a registered business under the name "Tools King". The proprietors of that business were Kassim Abood and Hani Rizk, who were known to the defendant. The address of Tools King was a unit in the same complex as the defendant's business, 17/250 Milperra Road, Milperra. 9 On 21 January 2000, the day the container arrived, an entry for home consumption was lodged with Customs electronically by Manton Cramb International Pty Ltd, a Customs agent. That document is central to the plaintiff's case. The information contained in it was supplied to Manton Cramb by Mr Chalita of SBI Shipping. A few days earlier the defendant had provided to Mr Chalita the sales tax number allocated to Tools King as the number to be quoted in the entry for home consumption. The day before the container arrived Mr Chalita arranged for the allocation by Customs of an "owner code" on behalf of "Tools King Importing and Distributing", and that code also appears on the document. The defendant, trading as Bayat International, had previously been allocated an owner code for entering goods for home consumption and that code was current at the time. 10 In the result, what was asserted by the entry for home consumption was the arrival in Australia of a consignment of 413 cartons of plastic tape, directed to "Tools King Importing and Distributing." It showed an assessment of duty at the relatively modest amount of $1,097.87, which was paid. Duty on the cigarettes would have been the very much larger figure of $698,264. 11 As I have said, the documentation which the defendant supplied to Mr Chalita before the container arrived showed the address of the recipient as 15 Franklin Road, Cherrybrook. However, on 27 January 2000, after the container had arrived, the defendant faxed to Mr Chalita a direction that it be delivered to his business premises at 10/250 Milperra Road, Milperra. By then, of course, the consignment had been detained by Customs. 12 On the following day, 28 January, the defendant was interviewed by Customs officers. That interview was electronically recorded and a transcript of it is in evidence. He explained that the business of Bayat International was mainly the importation of dried fruit and spices from Iran and sometimes from Dubai, although he had also imported some carpets from Iran. He said that he wanted to sell that business and move into hardware supplies. 13 Accordingly, he said, in December 1999 he approached the proprietors of Tools King, Hani Rizk and Kassim Abood. It was agreed that he would join their business. He saw the plastic tape as an appropriate commodity for a hardware supplier. He arranged the consignment through a contact with whom he had dealt in Dubai for the purpose of his own business, a carpet supplier named Mohammed Azim. He said that, because he expected to sell the business of Bayat International within a month, Mr Rizk and Mr Abood agreed that the consignment should be imported in the name of Tools King and supplied their sales tax number for that purpose. Mr Rizk wrote the number on the back of a Tools King business card and gave it to him. 14 During a search of the defendant's business premises at Milperra, also on 28 January 2000, Customs officers found that business card. The sales tax number does appear on the back of the card in handwriting. The front of the card bears the name "Tools King" in prominent print. Above that name, in smaller print, appear the words "Importing & Distributing". It is clear enough that those words are intended to describe the nature of the business, and are not themselves part of the business name. Nevertheless, the defendant told the interviewing officers that, when he asked Mr Rizk and Mr Abood for the proper name of the business, he was handed the card and from it he understood the name to be "Tools King Importing and Distributing". 15 He maintained that he had decided to cease trading under the name Bayat International, even though at the time of the interview he was still operating a bank account under that name. He was unable to comment on the fact that an owner code had been obtained for "Tools King Importing and Distributing". He said that he left the preparation of all necessary documentation to Mr Chalita, and he did not even know what an owner code was. He also said that the address for the recipient of the consignment should have been shown in the bill of lading and other documents as 5 Franklin Road Cherrybrook, his home address, and that the reference to 15 Franklin Road was a mistake. 16 He denied any knowledge of the cigarettes. Asked whether there was any possibility of mistake at the overseas end, he could say only that he had arranged the consignment through Mr Azim in Dubai, and that he had had no contact with the Hong Kong supplier or, indeed, with anyone in China about the shipment. 17 Smuggling, the first of the offences charged, is defined in s4 of the Customs Act to mean "any importation, introduction or exportation or attempted importation, introduction or exportation of goods with intent to defraud the revenue". The plaintiff accepts that the second offence charged, evading the payment of duty, has a mental element, that is, an intention to avoid the payment of duty which the offender knows to be payable. By its terms, the third charge of omitting a material matter in a statement to an officer of Customs involves knowledge or, at least, recklessness. For the purposes of the present case, the crucial question is whether the defendant knew that the cigarettes were in the container. If he did, the mental element in each of the three offences is readily inferred. 18 Before turning to my assessment of the evidence, I should record that neither party adduced evidence from Mr Rizk or Mr Abood. That, however, is not a fact which I take into account in any way in evaluating the competing cases. I should also record that the defendant objected to evidence of the finding of certain cigarettes at his business premises and at his home in the course of searches conducted by Customs officers. I find it unnecessary to determine that question because I am able to arrive at my decision without regard to that evidence. 19 I approach the matter as one would a criminal case based upon circumstantial evidence. It is for the plaintiff to establish that the only reasonable explanation for the proven facts is that the defendant knew that the cigarettes were in the container. Put another way, the plaintiff bears the burden of excluding any reasonable explanation inconsistent with that knowledge. Applying that test, I find that the plaintiff's case is made out. 20 In the light of all the evidence, I am satisfied that the defendant was the sole consignee of the shipment and that the proprietors of Tools King had nothing to do with it. I am not dissuaded from that conclusion by the fact that he had their business card and their sales tax number. How that came about I cannot say. However, even if he had had some discussion with them about joining them in their business, this consignment was not undertaken in collaboration with them. I am fortified in that view by his use of the name "Tools King Importing and Distributing". Most likely, that was the result of his misreading the business card. Alternatively, the use of that name was a deliberate deception to provide an added veneer of legitimacy to the ostensible importation of an item such as packing tape. 21 If the consignment had been for the purpose of the Tools King business, there is still no good reason why the defendant would not have used his own business name, Bayat International. I am satisfied that the defendant sought to distance himself from the importation, so that neither his name nor that of his business appeared in any of the documents which might in the ordinary course come to the attention of Customs. The only document pointing directly to him was the fax to Mr Chalita of 27 January 2000, to which I have referred at para 11 of these reasons. That bore the fax header "Bayat International" and was signed by him. No doubt, however, he did not anticipate that that document would be seen by Customs officers, particularly as it was sent after the shipment had arrived and the duty appropriate for the plastic tape had been paid. 22 If the defendant were not the intended recipient of the cigarettes, then their arrival in the container could only have been a terrible mistake. Such a proposition simply beggars belief. It is improbable enough even if the shipment of the cigarettes had been legitimate, with the intention that the appropriate duty be paid. It is even more improbable if the shipment were a smuggling operation. It had all the signs of being just that. The placement of the cartons containing the cigarettes behind forty-three cartons which did contain plastic tape strongly suggests an attempt to deceive Customs officers in the event of the container being inspected. 23 In addition, the shipment appeared to be precisely what had been ordered, according to the relevant documents: 413 cartons of packing tape. On the whole of the evidence, the notion that the cigarettes could have been intended for someone other than the defendant is absurd and I reject it. 24 It is unnecessary to examine a further submission by Mr Bromwich, which has considerable force, that the importation of 413 cartons of packing tape was most unlikely to have been a profitable exercise for the defendant. On the evidence which I have summarised and the findings which I have made, I am satisfied beyond reasonable doubt that the defendant knew that the cigarettes were in the container. That being so, again in the light of the whole of the evidence, I am satisfied to the same degree of the mental element of each of the three offences charged. I find each offence proved and the defendant is convicted of each of them. 25 I turn, then, to the question of penalty. It was appropriate that the second and third offences be charged in addition to the offence of smuggling, even though they were bound up in the same enterprise, but their connection is a matter properly to be taken into account in assessing the penalties to be imposed: Vogel and Son Pty Limited v Anderson (Minister for Customs and Excise) (1967-68) 120 CLR 157. 26 The penalty provided for smuggling is to be found in s 233AB(1) of the Customs Act: for present purposes, a penalty not exceeding five times the amount of duty which would have been payable on the cigarettes. It is not in dispute that the amount of that duty would have been the figure set out in para 10 of these reasons, $698,264.00. At the time of the offence that subsection provided for a minimum penalty of twice the duty payable. However, that provision was removed by an amendment of May 2000 and, by virtue of s4F(2) of the Crimes Act 1914 (Cth), the defendant has the benefit of that amendment. 27 The penalty for evading payment of duty is prescribed by s234(2)(a): for present purposes, a penalty of not less than twice nor more than five times the amount of duty payable. By that subsection, the minimum penalty which I could impose in respect of this offence is $1,396,528.00. The penalty for omitting a material matter in a statement to a Customs officer is to be found in s234(2)(c): a penalty of up to $5,000. 28 It will be seen, then, that there is a minimum penalty for evading payment of duty but not for the other two offences. Clearly, I must assess penalties on each of the three offences with an eye to their total effect. The minimum penalty for the second charge is a very substantial figure and that fact, it seems to me, must affect the penalties which I impose on the other charges. 29 The report of the Vogel case does not set out in detail the penalties imposed, but it appears that substantial penalties were visited upon smuggling charges with more or less nominal penalties in respect of a series of other related offences. That may be the appropriate course in the present case. However, the decision in Vogel is thirty five years old and it may be that there is recent authority suggesting some other approach. For that reason, I shall invite submissions from the parties about penalty on the day that this judgment is handed down. ********** Last Modified: 11/24/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.