New South Wales Supreme Court CITATION : CEO of Customs v Camile Trading Pty Ltd & Ors [2006] NSWSC 1401 26/04/06 01/05/06 - 05/05/06 08/05/06 - 10/05/06 HEARING DATE(S) : 15/05/06 - 18/05/06 05/06/06 - 09/06/06 31/07/06 01/08/06 - 03/08/06 JUDGMENT DATE : 19 December 2006 JURISDICTION : Common Law Division JUDGMENT OF : Kirby J DECISION : (1) In respect of the allegations by the plaintiff relating to the blending of diesel; the allegations concerning the blending of leaded and unleaded petrol; and in each case, in respect of each of the nine periods in the Further Amended Statement of Claim - I convict Camile Trading of: First, an offence under s35 of the Excise Act 1901, in that the company manufactured excisable blended petroleum products without a licence under the Act; Secondly, an offence under s61 of the Excise Act 1901, in that the company moved excisable goods without permission; Thirdly, an offence under s120(1) of the Excise Act 1901, in that the company intentionally evaded excise duty; (2) Further, in respect of each such offence, I convict Lesley Ronald Fletcher of having been knowingly concerned in the commission of such offences; (3) I stand over to a date to be fixed the hearing in respect of penalty for both Camile Trading and Mr Fletcher; (4) I reserve for further submissions the issues identified in paragraph [381] and paragraph [562]; (5) I reserve the question of costs against the first and second defendants; (6) I dismiss the plaintiff's case against the third and fourth defendants, with costs; (7) The matter will be listed for mention at 9.15 am on Tuesday 13 February 2007 to fix a date in respect of outstanding issues. The plaintiff and first and second defendants should prepare, and agree if possible, draft Short Minutes of Orders reflecting these reasons. CATCHWORDS : Action under the Excise Act 1901 and the Excise Tariff Act 1921 - allegations that blending petrol and diesel without a licence - evading duty - elements each offence - construction Excise Act and Regulations. Excise Act 1901 Excise Tariff Act 1921 Director of Public Prosecutions Act 1983 LEGISLATION CITED : Customs Act 1901 Evidence Act 1995 Trade Practices Act 1974 Crimes Act 1914 (Cth) CEO of Customs v Camile Trading P/L & Ors [2006] NSWSC 475 Jones v Dunkel (1959) 101 CLR 298 Murray v The Queen (1987) 11 NSWLR 12 Longman v The Queen (1989) 168 CLR 79 CASES CITED : Cramptom v The Queen (2000) 206 CLR 161 Briginshaw v Briginshaw (1938) 60 CLR 336 Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 Baxter v Ah Way (1909) 10 CLR 212 CEO of Customs v El Hajji (2005) 218 ALR 457 Chief Executive Officer of Customs (Pl) Camile Trading Pty Limited (1st Def) PARTIES : Leslie Ronald Fletcher (2nd Def) Evenfont Pty Limited (3rd Def) Robert Leonard Pullinger (4th Def) FILE NUMBER(S) : SC 20859/1997 P S Hastings QC/R B Wilson (Pl) COUNSEL : P Byrne SC/S J Stanton (1st & 2nd Defs) J Horowitz (3rd & 4th Defs) Aust Govt Solicitor (Pl) SOLICITORS : Access Business Lawyers (1st & 2nd Defs) Horowitz & Bilinsky (3rd & 4th Defs) I N D E X Para 1. INTRODUCTION 1 An outline of the Plaintiff's case. 4 Petroleum products. 12 The statutory framework. 32 Elements of each offence. 58 2. MR BARTLETT'S EVIDENCE 66 Mr Bartlett's association with Camile Trading. 66 Diesel and heating oil. 78 Leaded and unleaded petrol. 102 The expertise of Mr Bartlett. 122 Formula for blending. 134 Cross examination of Mr Bartlett. 166 Record keeping of Camile Trading. 177 The search on 26 November 1996. 184 Petrol samples. 213 3 OTHER EVIDENCE RELEVANT TO MR BARTLETT 229 The evidence of Mr Gibb. 229 The evidence of Mr Handcock. 239 Other drivers of Camile Trading. 257 Evidence relating to Evenfont. 268 Mr Fletcher's evidence. 292 4. EVALUATION OF MR BARTLETT'S EVIDENCE AGAINST THE FIRST AND SECOND DEFENDANT 318 Warnings. 318 The context. 320 The documentary and cash trail. 325 Corroboration of Mr Bartlett's account. 336 Mr Bartlett as a witness. 345 Findings in respect of diesel and heating oil. 362 Leaded and unleaded petrol. 382 5. THE CASE AGAINST EVENFONT AND 406 MR PULLINGER Background. 406 The evidence of Mr Bartlett. 418 Cross examination of Mr Bartlett. 430 The Evenfont operation. 462 The crude oil operation. 467 The waste oil operation. 472 The treatment of waste slops. 477 The audit evidence. 481 Preliminary submission by Evenfont. 499 The submissions of the plaintiff. 515 The description "Waste to Boiler" 528 The Excise Regulations. 543 6. QUANTIFICATION OF DUTY EVADED BY CAMILE TRADING PTY LIMITED 558 7 ORDERS 563 1. INTRODUCTION 1 KIRBY J: By Further Amended Statement of Claim, the Chief Executive Officer of Customs ("Customs") (the plaintiff) has commenced an action under the Excise Act 1901 and the Excise Tariff Act 1921 against four defendants: * The first defendant, Camile Trading Pty Limited ("Camile Trading"), a petroleum wholesaler at Albion Park Rail; * The second defendant, Mr Leslie Ronald Fletcher, a director and shareholder of Camile Trading; * The third defendant, Evenfont Pty Limited ("Evenfont"), the operator of a refinery at Seven Hills and later at Rutherford, New South Wales; and * The fourth defendant, Mr Robert Lenard Pullinger, a director and shareholder of Evenfont. 2 The plaintiff seeks the conviction of each defendant in respect of offences under the Excise Act 1901, namely: * Section 35, which is concerned with the manufacture of excisable goods; * Section 61, which is concerned with the movement of excisable goods; and * Section 120(1)(iv), which is concerned with the evasion of excise duty payable in relation to excisable goods. 3 Customs also seeks the recovery of the unpaid duty and certain penalties. An outline of the Plaintiff's case. 4 The Amended Statement of Claim is voluminous. It runs to 235 pages. It is accompanied by a series of schedules. The schedules have been compiled from the records of Camile Trading (and others) seized by Customs when it searched the company's depot and other premises on 26 November 1996. The schedules are likewise voluminous. They are the foundation for the plaintiff's claim in respect of the evasion of duty. They deal with the following issues: Schedule A: Diesel purchases. Schedule B: Sale of diesel. Schedule C: Unleaded petrol purchases. Schedule D: Ethanol purchases. Schedule E: Unleaded petrol sales. Schedule F: Super purchases. Schedule G: Super sales. 5 The action is concerned with the blending of three petroleum products: * First, the blending of diesel and heating oil; * Secondly, the blending of unleaded petrol with a number of different petroleum products and ethanol; and * Thirdly, the blending of leaded (or super) petrol with various petroleum products and ethanol. 6 It is alleged by Customs that the blending of petroleum products occurred during a two and a half year period between 1 April 1994 and 21 November 1996. The action is complicated by the amendment of the Excise Act and Tariff Schedule during that period. The Statement of Claim defines nine separate periods where there were material changes to either the Act or the Schedule. The nine periods are as follows: (Ex H6) Period 1: 1.4.94 - 10.5.94 Period 2: 11.5.94 - 30.6.94 Period 3: 1.7.94 - 31.7.94 Period 4: 1.8.94 - 31.1.95 Period 5: 1.2.95 - 30.6.95 Period 6: 1.7.95 - 31.7.95 Period 7: 1.8.95 - 31.1.96 Period 8: 1.2.96 - 31.7.96 Period 9: 1.8.96 - 21.11.96 7 The relevant legislation will be examined in detail in a moment. In broad terms, Customs alleges that Camile Trading blended petroleum products and, in doing so, manufactured excisable goods. The manufacture of excisable goods requires a licence (Excise Act 1901, s34). An offence is committed where the manufacturer has no licence (s35) ("the licence offence"). Further, once manufactured, excisable goods are subject to Customs control. They cannot be moved without the permission of the controller. If they are moved, an offence is committed (s61) ("the movement offence"). Here it is said that Camile Trading, having manufactured blended petrol and diesel, moved such fuels from the depot at Albion Park without permission. Finally, Customs assert that Camile Trading blended petroleum products to obtain a price advantage. The ingredients in the blend were either excise free or carried an excise tariff significantly less than the gasoline/diesel rate. The blend of diesel or petrol had therefore been manufactured more cheaply than an equivalent amount of unblended petrol or diesel. The manufacture involved, according to Customs, the evasion of excise duty which is an offence (s120(1)) ("the evasion charge"). 8 There was, according to Customs, complicity in each of these offences by Mr Fletcher, the second defendant. Mr Fletcher was a director of Camile Trading. He also owned ninety percent of its shares. There was another director, Mr John Bartlett, who owned ten percent of the shares. He managed the depot at Albion Park. Mr Bartlett gave evidence on behalf of Customs. Before doing so, on 26 April 2006 he was given an undertaking by the Director of Public Prosecutions, in these terms: (Ex A17) "I, John Edward Thornton, Acting Director of Public Prosecutions of the Commonwealth of Australia, hereby undertake pursuant to section 9(6) of the Director of Public Prosecutions Act 1983 that: (a) any answer you give, or statement or disclosure you make, in the course of giving evidence in the proceedings specified in the Schedule; (b) the fact that you disclose or produce a document or other thing in the said proceedings; or (c) any information, document or other things that is obtained as a direct or indirect consequence of any answer you give, statement or disclosure you make, or a document or thing you disclose or produce in the said proceedings; will not be used in evidence against you in any criminal or civil proceedings in any federal court, or court of a state or territory other than in proceedings in respect of the falsity of any evidence you may give." 9 Customs also alleges complicity on the part of the third defendant (Evenfont) and fourth defendant (Mr Pullinger, a director of Evenfont), but only in respect of the offences concerning leaded and unleaded petrol. There is no allegation of complicity against the third or fourth defendants concerning diesel. In broad terms, it is alleged that Evenfont and Mr Pullinger were knowingly concerned in the offences of Camile Trading in the following respects: * First, each was involved in the supply of petroleum products to Camile Trading, knowing that they would be used unlawfully in blending and the manufacture of excisable blended petrol, whether leaded or unleaded; and * Secondly, Evenfont and Mr Pullinger provided assistance to Camile Trading in the form of advice concerning blending and the testing of blended products. 10 It will become apparent from the description of Camile Trading's operations, which will be set out below, that Evenfont was also involved in the delivery of heating oil to Camile Trading which, on the plaintiff's case, was later blended with diesel. However, it should be emphasised that no allegation of complicity is made in respect of diesel. 11 Before examining the evidence, it may be useful to describe the nature of the petroleum products blended, and the statutory framework within which the blending of petroleum products may take place. Petroleum products. 12 The plaintiff's case involves an assertion (made by Mr Bartlett and others) that certain formulae were used to blend diesel and petrol. According to Customs, blended diesel involved a 50/50 blend of the following: * diesel purchased from one of the major oil companies (such of Mobil Oil); and * heating oil. 13 On the plaintiff's case, the blend of leaded and unleaded petrol involved differing proportions of the following: * leaded or unleaded petrol, purchased from one of the major refineries (such as Mobil Oil); * white spirits; * toluene or xylene; and * ethanol. 14 An understanding of the manufacturing process is relevant. It is especially important to an understanding of the allegations made by Customs against Evenfont and Mr Pullinger. Two experts gave evidence concerning the manufacture of petroleum products, Professor David Trimm (called by Customs) and Professor Barry Batts (called by Evenfont). Professor Trimm is the Professor of Chemical Technology at the University of New South Wales. He was, at one time, the Head of the School of Chemical Engineering and Industrial Chemistry. Professor Batts is an Adjunct Professor at Macquarie University in the Department of Chemistry. Both are well qualified. Both had a wide experience in the petroleum industry. 15 Crude oil is the basic feedstock in the manufacture of petroleum products. It is made up of more than a thousand chemical compounds. The compounds comprise different combinations of elements, namely: (Ex Z1: p4(12)) Carbon 84-87% (by weight) Hydrogen 11-14% (by weight) Sulphur 0-03% (by weight) Nitrogen 0.2% (by weight) 16 Essentially therefore, crude oil consists of compounds which are different combinations of carbon and hydrogen molecules. These compounds are generically known as hydrocarbons (Trimm: Ex Z1: p4/5(13)). 17 The compounds making up crude oil boil at different temperatures, according to their molecular weight. Manufacturing involves the separation of crude oil into "fractions" through distillation. Distillation requires the heating of the crude oil until boiling point fractions or "cuts" appear in the distillation column (Trimm: Ex Z1: p6(15)). Professor Batts described the process in these terms: (Ex EV11: p3(2.3)) "2.3 ... the vapour is condensed and collected. A crude oil and its liquid products will have a range of boiling points, one for every component of the mixture. As the oil is heated, all of any one component will convert to vapour and be distilled off before the temperature rises again to reach the boiling point of the next most volatile compound when it, in turn, will be distilled and collected in the receiving vessel. This process repeats itself continuously as the temperature in the still is raised, until every component in the mixture has been distilled." 18 By this means the crude oil is separated into fractions, the upper and lower limit of each fraction being determined by an assigned boiling point range (Trimm: Ex Z1: p7(17)). A boiling point distribution curve may be plotted based upon the oil or petroleum fractions which may be collected at various temperatures within the range. Professor Batts said this: (Ex EV11: p4(2.3)) "2.3 ... The Initial Boiling Point (IBP) is the temperature at which the very first drop of distillate is collected and the Final Boiling Point (FBT) the temperature at which at the material has distilled." 19 In respect of diesel, there is an Australian Standard for its manufacture (AS 3570-1988) (Ex Z2). It specifies a boiling point range of 190º C to 350º C, as well as a particular "flashpoint", that is, the temperature at which the compound will ignite (Trimm: Ex Z1: p9(21)). Diesel also has a particular "viscosity", that is, a particular consistency measured by the force per unit area resisting uniform flow. 20 Heating oil is a kindred but different compound. There is no Australian Standard in respect of heating oil. It is not uncommon, however, to refer to the American Standard. The boiling point in respect of heating oil overlaps with that of diesel (170 to 270º C) (cf diesel 190º C to 350º C). Professor Trimm said this: (Ex Z1: p8/9(20)) "20 ... The average molecular weight of the heating oil cut is usually less than that which is taken for diesel fuel production. The heating oil cut usually contains lighter hydrocarbons that have a lower boiling point range than those in the cut that is used for diesel. The cut taken for diesel fuel would contain compounds boiling at 190 C and above. It would not contain the lighter ends usually found in heating oil." 21 Mixing heating oil with diesel lowers the flashpoint. Lowering the flashpoint has obvious safety implications. The mixture is more volatile and will ignite at a lower temperature than unmixed diesel fuel (Trimm: Ex Z1: p9(21)). 22 Heating oil is usually used in a burning process so as to produce heat. There are important differences between the viscosity of heating oil and diesel (Trimm: Ex Z1: p10(24)). Professor Trimm said this: (Ex Z1: p9/10(23)) "23 The viscosity of the fuel used in diesel engines is a critical consideration, as such engines are designed to run on fuels with a particular viscosity. If the viscosity of the fuel is too low engine performance is impaired and there is greater wear and tear on the engine." 23 Professor Trimm added this: (Ex Z1: p10(25)) "25 ... diesel fuel may be used for burning to produce heat. However, heating oil should not be used in diesel engines, in part, because its viscosity is usually too low." 24 There is a further difference that can be important. The chemical compounds in diesel and heating oil both contain waxes. They dissolve in warmer temperatures. Professor Trimm said this: (Ex Z1: p10(26)) "26 ... as temperature is lowered, these waxes form and separate out from the product. The temperature at which these waxes commence to do this is referred to as the 'cloud point' of the fuel or oil. At this point, the waxes begin to appear as a cloud or haze in the product." 25 He added: (Ex Z1: p10(28/29)) "28 Diesel fuel contains significantly more waxes than does heating oil. Consequently, the cloud point for diesel is a higher temperature than for heating oil. As temperature is lowered, waxes will separate out of diesel well before they will separate out of heating oil. 29 Diesel engines have been designed to operate with diesel fuel containing the higher wax content and, when temperatures are in the warmer range, the larger amounts of dissolved wax in diesel fuel help to act as an efficient lubricator of the engine. In colder months, when wax formation from diesel fuel can be a problem, the refineries add limited amounts of heating oil or kerosene to the diesel fuel, in specific proportions, so as to prevent the waxing and keep the waxes in solution so that they may perform their lubricating function. The point here is to keep the larger amounts of wax in solution. The Australian Standards contain requirements relevant to this process." 26 Moving from diesel to petrol, again there is an Australian Standard (AS 1876-1990) (Ex Z2). Professor Trimm provided the following definition: (Ex Z1: p11(30)) "30 ... Gasolines are a complex mixture of hydrocarbons having a boiling point range from 100C to 400C (as determined by the ASTM method). Motor gasoline is manufactured by blending components to promote high antiknock quality, ease of starting, quick warm-up, low tendency to vapour-lock and low engine deposits." 27 Professor Trimm added: (Ex Z1: p12(31)) "31 The 'lighter ends' produced during the distillation process, that is, the hydrocarbons with lower boiling points, form the base from which petrol is refined. There are a number of essential measures of motor gasoline which reflect the chemical properties of that product and the efficiency with which it will combust. These essential measures include, but are not limited to, research octane number (RON), motor octane number (MON) and antiknock index, the latter being an average of relevant RON and MON figures. These measures describe the probability of auto-ignition in front of a flame front which, if it occurs, will produce a knocking sound whilst the engine is running. The higher the octane number of a fuel, the more the energy that is produced upon ignition, and the less is the probability that engine knocking will occur. Also, petrol engines are designed to run with fuel with particular octane ratings." 28 Here, there is an issue whether gasoline (leaded or unleaded) was combined with white spirit (which has a low octane rating), and other products designed to "beef up" the fuel (ethanol, xylene or toluene). White spirit is a refined product manufactured from crude oil with a boiling point range of between 140º C and 200º C. It is primarily used as a solvent. It is not suitable for blending with petrol. Professor Batts said this: (Ex EV11: p5(2.8)) "2.8 (a) ... If white spirit is blended with (unleaded petrol) the RON will be markedly lowered and the resultant fuel will cause a car engine to 'ping' with the likelihood that it will suffer damage. (b) Petrol is a carefully considered mix of components which will allow the engine of a motor vehicle to run under a wide range of conditions from idling at traffic lights to passing a heavy truck whilst travelling uphill and towing a caravan. The engine must also be able to start in both hot weather (Broken Hill in summer) and under freezing conditions (skiing holidays). ... To blend into a petrol a white spirit ... will seriously alter the balance of the components required and result in an inferior performing fuel." 29 To compensate for the low octane rating of white spirit, additives with a high octane rating (the BXT group, which includes toluene and xylene) may be added. However, caution is required. Professor Trimm said this: (E Z1: p13(36)) "36 ... it is difficult to predict how any additives used will function. Toluene, for example, consists of a methyl substituted aromatic and may be used to enhance the octane number. If toluene is added to a petrol/white spirits mixture the increase in octane level of the final mixture will not necessarily be a simple linear increase directly related to the volume of the additive (proportional to the volume of the mixture)." 30 There are other issues (including the meaning of the word "condensate") which were dealt with by Professors Trimm and Batts. They are relevant specifically to the plant and products of Evenfont and are best dealt with in the context of the plaintiff's case against the third and fourth defendants. I will return to these issues below. 31 Let me turn, at this point, to the Excise legislation relevant to this prosecution. The statutory framework. 32 The prosecution is, of course, concerned with the alleged failure of Camile Trading to conform with the regime established by the Excise Act 1901 and to pay duty on manufactured goods. Fundamental to the prosecution is the need for Customs to prove that Camile Trading was engaged in the manufacture of "excisable goods". A number of definitions appear in the Excise Act which are relevant (s4): " 'Excisable goods' means goods in respect of which excise duty is imposed by the Parliament, and includes goods the subject of an Excise Tariff or Excise Tariff alteration proposed in the Parliament. ... 'Licence' means a licence to manufacture excisable goods. 'Manufacture' includes all processes in the manufacture of excisable goods. ... 'Manufacturer' means a person licensed under this Act to manufacture excisable goods." 33 Part IV of the Act is headed "LICENSING OF MANUFACTURERS". The Collector of Customs is given power to grant licenses to manufacture, with or without limitations (s34). The Statement of Claim avers that Camile Trading had no such license (para 6), which the Defence neither admits, nor denies. There is no evidence that Camile Trading had a license. On the assumption that Customs is able to prove the manufacture of excisable goods, it seeks the conviction of Camile Trading in respect of the following provision: " Manufacturers to be licensed 35 Subject to the regulations, a person shall not manufacture excisable goods except pursuant to this Act and a licence granted thereunder. Penalty: $5,000." 34 Part VI of the Act carries the following heading: " PART VI - PAYMENT OF DUTY, REMOVAL OF EXCISABLE GOODS FROM FACTORIES, AND EXCISE CONTROL" 35 It contains the following provision: " Liability to pay duty 54 The manufacturer of excisable goods, or, where the owner of excisable goods enters them for home consumption, the owner of the goods, shall pay to the Collector, in accordance with this Act, the Excise duty on those goods." 36 A regime is established which is designed to ensure that excisable goods remain under Customs control until permission is given for their movement. There are the following provisions: "Entry for home consumption etc. 58(1) Subject to subsections (2) and (4), entries may be made by the manufacturer or owner and passed by an officer and may authorize the removal of excisable goods for: (a) Home consumption. (b) Removal to an approved place that is an approved place in relation to goods of all kinds or in relation to goods of the kind that are to be entered. (1A) An entry in subsection (1): (a) shall be made in accordance with an approved form, or in a manner approved by the Comptroller; (b) shall contain such information as is required by the Comptroller; (c) shall be signed or authorised in a manner required by the Comptroller; and (d) shall be lodged with, or transmitted to, the Customs." 37 Where the manufacturer of excisable goods fails to conform with that regime and moves goods without permission, an offence is committed against s61, which is in these terms: " Customs control 61 All excisable goods are, until delivered for home consumption or for exportation to a place outside Australia, whichever first occurs, subject to the control of Customs and must not be moved, altered or interfered with except as authorised by this Act. Penalty: $20,000" 38 The final offence alleged by Customs is concerned with the evasion of duty. It is created by s120 which, relevantly, is in these terms: " Offences 120(1) A person shall not: ... (iv) Evade payment of any duty which is payable; ... (2) A person who contravenes subsection (1) is guilty of an offence punishable upon conviction: ... (b) in the case of an offence against paragraph (1)(iv), by: (i) where the Court can determine the amount of the duty on goods the payment of which would have been evaded by the commission of the offence if the goods had been entered for home consumption on: (A) where the date on which the offence was committed - that date; or (B) where the date is not known to the Court - the date on which the prosecution for the offence was instituted; a fine not exceeding 5 times the amount of that duty and not less than 2 times that amount; or (ii) where the Court cannot determine the amount of that duty, a fine not exceeding $50,000; ... " 39 The commencement date for the first of the nine periods in the Statement of Claim (1 April 1994) was selected because it marked the commencement of certain amendments to the Excise Act and Regulations. The amendments were the subject of comment in an earlier judgment in these proceedings (CEO of Customs v Camile Trading Pty Limited & Ors [2006] NSWSC 475). It is convenient that I reproduce in this judgment much of the same material. The Excise Act was amended by inserting a new Part, namely: "PART VIIB - SPECIAL PROVISIONS RELATING TO BLENDED PETROLEUM PRODUCTS" 40 In the Second Reading Speech, the Minister identified the objective of the amendments relevant to this action in these terms: " MR PUNCH: This bill is part of a package of bills introducing the following measures ... ... there will be amendments to the Excise Act 1901 ... to address substantial revenue loss through the substitution of excise free or low duty products for petroleum fuels. Resolution of this issue involves ensuring certain blended petroleum products and crude oil or condensate delivered for use otherwise than as refinery feedstock are excisable products, and that the excise duty payable on the blend, the crude oil or condensate will be payable at a rate equal to either the diesel rate or the leaded petrol rate, depending upon the composition of the petroleum product." 41 The excisable goods said to have been manufactured (s35), moved (s61) and in respect of which duty was evaded (s120) were, according to the plaintiff, "excisable blended petroleum products". The new Part included the following provision relating to manufacture: " Blending is to be treated as manufacture 77H(1) For greater certainty so far as concerns the application of the provisions of this Act, petroleum blending to produce an excisable blended petroleum product is taken to constitute the manufacture of that excisable blended petroleum product. (2) Subsection (1) does not imply that, in the absence of such a provision, the blending of substances (whether petroleum products or not) would not constitute the manufacture of the substance produced by the blending." 42 The new Part also included a series of definitions, which are important: "Definitions 77G In this Part, unless the contrary intention appears: 'blended petroleum product' means the product of the blending of a petroleum product (including a petroleum product that is itself a blended petroleum product) with another substance or other substances, whether that other substance or those other substances are petroleum products or not; 'excisable blended petroleum product' means a blended petroleum product that is not an exempt blended petroleum product; 'exempt blended petroleum product' means a blended petroleum product that is exempt under section 77J; 'petroleum product' means: (a) any excisable goods classified to item 11 or 12 or to sub-item 17(A) or 17(B) of the Schedule to the Excise Tariff Act 1921; or (b) any imported goods that would be classified to item 11 or 12 of that Schedule if they were produced in Australia." 43 The classification in the Schedule, referring to "Gasoline" and "Diesel", specified rates. These rates were higher than those attracted by some of the constituents allegedly added to leaded, unleaded petrol or diesel supplied by Camile Trading. 44 The definition of "excisable blended petroleum product" is Part VIIB requires the product manufactured to have two characteristics. First, it must fall within the definition of a "blended petroleum product". Secondly, it must not be an "exempt petroleum product", which is defined by s77J, in these terms: "Exempt blended petroleum products 77J(1) For the purposes of this Part, a blended petroleum product is an exempt blended petroleum product if: (a) it is made by a person who is not a statutory blender; or (b) it is declared by the regulations to be an exempt blended petroleum product. (2) For the purposes of subsection (1) but subject to subsection (3), a person is a statutory blender if that person, or another person acting on that person's behalf, produces, or has, at any time after this section commences, produced, in the aggregate: (a) more than 300 litres of blended petroleum products on any day; or (b) more than 600 litres of blended petroleum products during any continuous period of 30 days; or (c) more than 3,000 litres of blended petroleum products during any continuous period of 12 months." 45 Therefore, the plaintiff must establish that Camile Trading was not a "statutory blender" and must further establish that the blended petroleum product had not been declared exempt by regulation. 46 I will come to the regulations shortly. It should, however, be noted that a person will not be a statutory blender in two circumstances. The first is where small quantities of petroleum products are blended, as set out in s77J(2). Here, Camile Trading, on the evidence, was blending significantly more than the specified quantities in subsection (2). It could not therefore rely upon that exemption. The second circumstance arises where the petroleum products, which are blended, have been declared exempt under the regulations. 47 Turning to the Excise Regulations, which likewise commenced on 1 April 1994, they were amended to insert the following: "PART 10 - BLENDED PETROLEUM PRODUCTS" 48 Regulation 175 provided that expressions used in the regulations had the same meaning as in Part VIIB of the Act. Under the heading, "Exempt blended petroleum products", a definition is provided of "waste oil" as follows: " 176(1) In this regulation, 'waste oil' means a petroleum product that, because of use or degradation from storage, is no longer useable by itself without reprocessing: (a) for any purpose; or (b) for any purpose except as burner fuel; ..." 49 Regulation 176(2) was introduced by the following words: " 176(2) For the purposes of paragraph 77J(1)(b) of the Act, the following blended petroleum products are exempt blended petroleum products:" 50 Regulations 176(2)(a) to (e) dealt with a blend of waste oil and various petroleum products. These paragraphs are in these terms: "(a) a blend of waste oil and a petroleum product where duty has been paid on the petroleum product at the rate specified in paragraph 11(E)(3) of the Schedule to the Excise Tariff Act 1921; (b) a blend of waste oil and diesel fuel where duty has been paid on the diesel fuel at the rate specified in paragraph 11(E)(2) of the Schedule to the Excise Tariff Act 1921; (c) a blend of waste oil and stabilised crude petroleum oil where duty has been paid on the stabilised crude petroleum oil at the rate specified in paragraph 11(H)(2) of the Schedule to the Excise Tariff Act 1921; (d) a blend of waste oil and condensate where duty has been paid on the condensate at the rate specified in paragraph 11(J)(2) of the Schedule to the Excise Tariff Act 1921; (e) a blend of waste oil and an excisable blended petroleum product where duty has been paid on the excisable blended petroleum product at the rate specified in section 6G of the Excise Tariff Act 1921;" 51 The remaining regulations defined particular exemptions. They included the following: " 176(2) (h) a blend of gasoline with a product used to enhance its octane rating where duty has been paid on the gasoline at the rate specified in subparagraph 11(A)(3)(b) or (c) of the Schedule to the Excise Tariff Act 1921; (i) a blend of a petroleum product with prepared additives that: (i) enhance the performance of an internal combustion engine; or (ii) assist in its maintenance; after duty on the petroleum product has been paid at the rate specified in subparagraph 11(A)(3)(b) or (c), or paragraph 11E(2) of the Schedule to the Excise Tariff Act 1921; (j) a blend of any petroleum product with ethanol after the petroleum product has been cleared from Customs control;" 52 Reference was also made to regulation 176(2)(m): "(m) a blend of a petroleum product with another substance after the petroleum product has been cleared from Customs control where the blended petroleum product is not suitable for use as a fuel;" 53 The regulations to this point speak of "a blend of a petroleum product" (singular) with some other substance or, in the case of regulation 176(2)(j), "any petroleum product [singular] with ethanol". In regulations 176(2)(p) and (q) the regulations refer to "a blended petroleum product". Regulations 176(2)(p) and (q) are as follows: "(p) a blended petroleum product produced in the course of refining crude oil being a product that is not suitable for use as a fuel; (q) a blended petroleum product produced in a warehouse licensed under section 79 of the Customs Act 1901 if it is entered for home consumption in terms of item 11 of the Schedule to the Excise Tariff Act 1921;" 54 Regulations 176(2)(t) and (u) are important. Both are introduced by the expression "Blends of petroleum products ..." (plural). The regulations are as follows: "(t) blends of petroleum products not containing goods specified under paragraph 11(A)(3) of the Schedule to the Excise Tariff Act 1921, where duty has been paid on all the constituents of the blend at the rate specified in paragraph 11(E)(2) of the Schedule to the Excise Tariff Act 1921; ... " 55 Paragraph 11(A)(3) deals with gasoline, as set out below. Regulation 176(2)(t) makes reference to paragraph 11(E)(2) of the Schedule to the Excise Tariff Act 1921, which is in these terms, specifying a rate equivalent to the gasoline rate: " 11(E)(2) Goods, as follows: (a) automotive diesel oil; (b) industrial diesel fuel; (c) marine diesel fuel." 56 Regulation 176(2)(u) is as follows: "(u) blends of petroleum products containing goods specified under paragraph 11(A)(3) of the Schedule to the Excise Tariff Act 1921, where duty has been paid on all the constituents of the blend at the rate specified in subparagraph 11(A)(3)(b) of the Schedule to the Excise Tariff Act 1921." 57 The Schedule to the Excise Tariff Act 1921 in clause 11A dealt with gasoline, specifying certain categories (which are not relevant) and then including a catchall provision, "Other" (Clause 11A(3)(b)), where the gasoline rate applied. Hence, in respect of regulation 176(2)(u), where the blend of petroleum products contained gasoline, the blend was exempt if duty had been paid on all the constituents of the blend at the gasoline rate (the highest rate). Elements of each offence. 58 What, then, must Customs prove to establish each offence? The common element in respect of each alleged offence is the need to prove, beyond reasonable doubt, the manufacture of excisable goods. Here the excisable goods are said to be excisable blended petroleum products. Proof involves Customs demonstrating, beyond reasonable doubt, the following: * First, that the goods handled by Camile Trading at its depot were "petroleum products" as defined (Excise Act s77G), being goods under items 11 and 12 of the Schedule to the Excise Tariff Act 1921 (relevantly gasoline, that is, leaded or unleaded petrol, or diesel fuel). * Secondly, that the petroleum products had been "blended" as defined (Excise Act s77G), namely the gasoline or diesel fuel was in each case the product of blending of a petroleum product (including a petroleum product which itself is a blended petroleum product) with another substance, or other substances, whether or not that other substance, or those other substances, were petroleum products. * Thirdly, that the blended petroleum product was not exempt under s77J(1) of the Excise Act in that: (a) it was made by a person who was not a statutory blender (s77J(1)(a) and s77J(2)); and (b) it was not exempt under the Excise Regulations (Reg 176(2)). 59 Turning to the first alleged offence, that of manufacture (s35), the following elements must be proved: * First, that Camile Trading is a person for the purposes of the section. * Secondly, that Camile Trading was engaged in manufacturing petroleum products, that is blending (s4, s77H(1) Excise Act). * Thirdly, that the product manufactured was an excisable blended petroleum product (s77G). * Fourthly, that Camile Trading had not been granted a license by the Collector of Customs under s34 of the Act. 60 There is no doubt concerning the first and fourth elements. The contest concerns elements two and three. 61 Turning to the offence under s61, the elements are: * First, that Camile Trading manufactured excisable goods, namely excisable blended petroleum products, at its depot at Albion Park. * Secondly, that in respect of such goods, no entry for home consumption, transhipment or warehousing was made. * Thirdly, that Camile Trading was not authorised by Customs to move the excisable goods from the depot at Albion Park. * Fourthly, that the excisable goods were moved (by mobile tankers from the depot). 62 The Statement of Claim includes averments in respect of the second, third and fourth elements which the Statement of Defence neither admits nor denies. Again the real contest concerns element one. It was Camile Trading's case that it had not manufactured excisable blended petroleum products and therefore there was no occasion to follow the regime contemplated by Part VI of the Act, completing entries for home consumption and seeking the permission of Customs before petroleum products were transhipped from the depot to various retail outlets. There is no doubt in respect of elements two, three and four. The issue for examination in this and other offences concerns the manufacture of excisable goods, namely excisable blended petroleum products. 63 The final alleged offence concerns the evasion of duty said to have been payable by Camile Trading under the Act. To establish that offence, Customs must establish the following elements beyond reasonable doubt (ignoring, for the moment, issues of quantification): * First, that Camile Trading manufactured excisable blended petroleum products. * Secondly, that duty was payable in respect of such goods. * Thirdly, that the duty was not paid. * Fourthly, that duty was evaded in that the failure to pay was intentional. 64 Here the contest concerns elements one and four. If the goods were excisable, then obviously duty was payable (element two). It is averred that it was not paid (element three). There was no suggestion that it had been paid. So far as element four is concerned, the following provision of the Excise Act 1901 is relevant: " Conduct by directors, servants or agents 145A (1) Where, in an Excise prosecution in respect of any conduct engaged in by a body corporate, it is necessary to establish the state of mind of the body corporate, it is sufficient to show that a director, servant or agent of the body corporate, being a director, servant or agent by whom the conduct was engaged in within the scope of his or her actual or apparent authority, had that state of mind. (2) Any conduct engaged in on behalf of a body corporate: (a) by a director, servant or agent of the body corporate within the scope of his or her actual or apparent authority; or (b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, servant or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, servant or agent; shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate. (3) Where, in an Excise prosecution in respect of any conduct engaged in by a person other than a body corporate, it is necessary to establish the state of mind of the person, it is sufficient to show that a servant or agent of the person, being a servant or agent by whom the conduct was engaged in within the scope of his or her actual or apparent authority, had that state of mind. (4) Any conduct engaged in on behalf of a person other than a body corporate: (a) by a servant or agent of the person within the scope of the actual or apparent authority of the servant or agent; or (b) by any other person at the direction or with the consent or agreement (whether express or implied) of a servant or agent of the first-mentioned person, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the servant or agent; (5) A reference in this section to the state of mind of a person includes a reference to the knowledge, intention, opinion, belief or purpose of the person and the person's reasons for his or her intention, opinion, belief or purpose." 65 Against that background, let me turn to the evidence of Mr Bartlett, being the backbone of the plaintiff's case. 2. MR BARTLETT'S EVIDENCE Mr Bartlett's association with Camile Trading. 66 Mr John Bartlett worked for some years as a truck driver. In 1985, or thereabouts, he worked for Mr Fletcher delivering petroleum products in a tanker. He remained with him for about six months. He thereafter performed the same work for another employer, Mr George Ayoub. Mr Ayoub used the business name, Marina Petrol. In 1989, Mr Bartlett ceased driving so that he could manage Mr Ayoub's business selling and distributing petroleum products. In 1990, the business moved to premises at Albion Park Rail, south of Wollongong. Underground storage tanks and associated equipment were installed, namely: (Statement of Claim, para 16 averment; Bartlett Ex A1: p6/7(11)) "16. At all material times the First Defendant's premises had constructed on it the following storage tanks each of which had the capacity as shown and was used for the storage of the product as shown: Tank No. Used for the storage of: Capacity (in litres) Tank 1 Leaded petrol 70,000 Tank 2 Unleaded petrol 70,000 Tank 3 Unleaded petrol Blend 70,000 Tank 4 Diesel 70,000 Tank 5 Ethanol 70,000 Tank 6 Solvents 58,000 Tank 7 Leaded petrol Blend 58,000 Tank 8 White Spirit 58,000 Tank 9 Unleaded petrol 45,000 Tank 10 Leaded petrol Blend 45,000 Tank 11 Heating Oil 58,000 Tank 12 Evenfont supplied HO 58,000 Tank 13 White Spirit 14,500 Tank 14 Kerosene 11,000 67 In 1992 the company, Camile Trading, was formed as the vehicle for the ownership of the business, Marina Petrol, and the depot. Mr Bartlett was made a director and given a ten percent shareholding in the company. Shortly after, Mr Fletcher examined the business with a view to purchase. The purchase was consummated in August 1992 (Bartlett: Ex A1: p4(7)). Mr Fletcher replaced Mr Ayoub as a director and purchased his ninety percent shareholding. Mr Bartlett, in his affidavit, made the following statement, referring to Mr Fletcher (which Mr Fletcher did not dispute in his affidavit in reply): (Bartlett: Ex A1: p4(7); cf Ex CT-2A) "From then on, I took all my instructions from him." 68 Mr Fletcher gave the following evidence: (T637/8) "Q. Did you exercise that control to ensure that the activities of the company were conducted in accordance with your wishes? A. The company was generally run by myself and Mr Bartlett. Q. But as 90 percent shareholder you had the ability to control and make decisions over Mr Bartlett? A. Yes." 69 Mr Bartlett remained a director of Camile Trading and continued to hold ten percent of its shares. His function was to run the depot. He was required to organise the delivery of various petroleum products to the depot and to supervise their receipt and storage. He was also engaged in their sale and delivery to retail outlets. He organised the computer system, often working from home after hours using a home computer to which records from the company were transmitted. He said he worked long hours and had few holidays (Ex A1: p1/2(2)). 70 Marina Petrol owned and controlled service stations at Forestville, Tahmoor and Westmead. It had an association with other service stations (some of which carried the name Marina Petrol) which were not owned, but which were controlled (Barrack Heights, Balgownie and Oak Flats). As a wholesaler, it also supplied a number of independent service stations with various petroleum products (Marina Petrol at Nowra, Volume Plus and Truck Stop 31 at Marulan). The storage capacity at the Albion Park depot was significantly increased by the addition of two above ground tanks (tanks 15 and 16). According to Mr Bartlett, they were installed between late 1994 and March 1995. Their capacity was as follows: (Statement of Claim, para 17 averment; Bartlett Ex A1: p6/7(11) and p9(13)) Tank No. Used for the storage of: Capacity (in litres) Tank 15 Leaded petrol Blend 60,000 Tank 16 Unleaded petrol Blend 155,000 71 Pipes connected the tanks to other storage tanks. There was a mechanism on a gantry (with associated valves, stopcocks and a meter to measure the flow volume) to assist the transfer of fuels from one tank to another. Both tanks were fitted with a propeller-like blade to blend the contents (Ex A1: p6(10)). Mr Bartlett asserted that the tanks were procured and installed in the context of large scale blending of both diesel and petrol (leaded and unleaded) and an increasing throughput. They were designed to serve two distinct purposes. The first was concerned with safety. Before their installation, much of the blending was undertaken by drivers manually combining, in the one tanker, various petroleum products. It was a procedure known as "splash blending", where the driver would stand on the back of the tanker, wearing a static belt to minimise the risk of a spark. Tanks 15 and 16 offered the opportunity of large scale blending within the tanks themselves, which was a much safer operation. Secondly, blending in tanks fitted with blades produced a more stable product, where the constituents were less likely to separate (Bartlett: Ex A1: p9(13). 72 Mr Fletcher, responding to this evidence, asserted with some plausibility that, to the best of his knowledge, the tanks were installed in 1995. He referred to an entry in his 1995 diary on 6 September 1995 which related to the larger tank, which was in these terms: (Ex A8) "140,000.00 litre tank arrived on low loader." 73 On 20 November 1996, Mr Bartlett resigned from Camile Trading and left the company. It is not entirely clear why he resigned. He said that he could no longer work with Mr Fletcher (T42). He described Mr Fletcher as a "control freak" (T43). They were "going down different tracks". He elaborated in the following evidence, referring to disclosures made to Customs investigators in 1997: (T45) "HIS HONOUR: Q. Did you describe the track Les Fletcher was going on as compared to the track you were going on? A. That was certainly explained. At the time we were talking heavily with Mobil and I believe Mobil would have given us a carrier's contract to go through, which would have legitimised the business. Les didn't want to go off on this base. He didn't want to be beholding to oil companies." 74 On 26 November 1996, a week after Mr Bartlett resigned, Customs executed search warrants upon the depot, upon Marina Petrol outlets and upon the homes of both Mr Fletcher and Mr Bartlett. Documents were seized and samples of petroleum products were taken. 75 In early 1997, Customs approached Mr Bartlett with a view to enlisting his aid in the prosecution of Camile Trading. On 25 February 1997, Mr Bartlett spoke at some length to Mr O'Malley, a Customs investigator. He ultimately agreed to be interviewed and to make an induced statement, which was then undertaken (and video recorded) on 24 March 1997 and 26 March 1997 (T58). The transcripts of each interview were eventually made available to the defendants. The material was lengthy. Aspects of the interviews, although not many, were put to Mr Bartlett in cross examination. Shortly before giving evidence in these proceedings Mr Bartlett was, as mentioned, provided with an undertaking by the Director of Public Prosecutions in the form set out in para [8] above. 76 This being a short description of Mr Bartlett's relationship with Camile Trading and Mr Fletcher, let me now turn to the system of blending employed at the Albion Park Rail depot, as described by Mr Bartlett. I will deal with the following: * First, Mr Bartlett's evidence concerning the blending of diesel with heating oil. * Secondly, his evidence in respect of the blending of leaded and unleaded petrol. * Thirdly, the issues canvassed in cross examination. * Fourthly, evidence of tanker drivers and other witnesses relevant to the issue of blending. 77 Having assembled that material, I will examine the arguments said to support or contradict Mr Bartlett's testimony. Diesel and heating oil. 78 The excise on diesel (payable at a rate equivalent to the gasoline rate) was significantly more than the excise on heating oil. Using an entry for Home Consumption lodged by Evenfont with Customs in the period November 1995 as an illustration, the gasoline rate at that time was $0.33513, whereas the excise rate for heating oil was $0.06954 (Ex AG). 79 There was some uncertainty before the introduction of Part VIIB of the Excise Act on 1 April 1994 concerning whether the blending of diesel with heating oil could be characterised as the "manufacture" of an excisable blended petroleum product. The terms of s77H of the Act (operating from 1 April 1994) make it clear that the legislature, at least, regarded such blending as "manufacturing" and introduced the amendment for greater certainty (supra para [41]). However, Mr Fletcher having taken advice from Ms Marie Wheat, a Customs Consultant with Price Waterhouse, said that he believed that blending diesel with heating oil was perfectly legal before the amendments (Ex CT-2A, para 64). He therefore blended diesel with heating oil (in roughly equal proportions) before 1 April 1994, but not after (para 68). The prosecution, accepting that there was uncertainty, chose to nominate 1 April 1994 as the commencement date for the first period in the Statement of Claim. 80 It is nonetheless instructive to examine what happened before 1 April 1994. According to Mr Bartlett, the depot blended diesel and heating oil before Mr Fletcher acquired the business in 1992. Indeed, he spoke to Mr Fletcher on this subject when he came to the depot as a prospective purchaser. He told him, according to his affidavit, "we are making a lot of money", adding: (Ex A1: p13(23)) "If we continue blending in this way, we can make a lot of money." 81 Mr Bartlett said that Mr Fletcher came into the business a short time later. Diesel was purchased from Mobil Oil. Tankers with a capacity of 30,000 litres delivered six or seven loads each week (Ex A1: p10/11(18)). Diesel was also purchased from a Mr Topalov, who operated a company BPMA. Six or seven tankers (each with a capacity of about 30,000 litres) would deliver diesel from BPMA each week. The invoices relating to each delivery were given by Mr Bartlett to office staff, including Mrs Brenda Fletcher, the wife of the second defendant. They were entered in the computer system. 82 There was, however, a need for heating oil. According to Mr Bartlett, that issue was discussed with Mr Fletcher a short time after his purchase of the business. The conversation was in these terms: (Ex A1: p14(24)) "Fletcher: "Look, we can get hold of a heap of heating oil from Melbourne." I said: "What sort of money would we pay?" 83 Mr Fletcher provided Mr Bartlett with the cost and details of who he should approach. A tanker from Success (a freight company) delivered the heating oil to the depot. A 50/50 blend was created and road tested by Camile Trading road tankers and found to be satisfactory. Arrangements were then made for the regular delivery of heating oil by Success at the rate of three to five tankers per week. Mr Bartlett said this: (Ex A1: p15/16(26)) "... These loads of heating oil were delivered to the depot in tankers used by Success in its business. These mobile tankers were not driven by any employees of Camile. These drivers sometimes gave me a piece of paper in relation to the loads of heating oil that they had delivered. The only thing written on this piece of paper was the volume of product being carried. No formal paperwork, such as delivery dockets was ever given to me by these drivers when delivering heating oil from Success. I was always present at the depot when these deliveries of heating oil arrived. I paid the drivers in cash for each delivery, although about 10% of the time the cash was actually handed to them by Christine Greenshields, a person working in Camile's office. When each load arrived, I checked the load in each tanker, and then directed the drivers to discharge the heating oil from their mobile tankers into tank 11." 84 On the plaintiff's case, the practice of blending heating oil and diesel was, at the very least, questionable before 1 April 1994, absent a license and the payment of excise. There was therefore a need for subterfuge. Hence, payment was made in cash. No record in the computer system was made of each delivery (Ex A1: p18(30)). Mr Bartlett said that he had a need, nonetheless, to keep track of each delivery. He therefore made a record in his diary, annotating those paid for in cash with the letters "O/D" (meaning "off docket") (T266). Mr Bartlett's 1995 diary was seized by Customs in the search on 26 November 1996 (Ex A12). It recorded deliveries of various products and included the annotation against some "O/D". The 1996 diary was not amongst the documents seized by Customs. Mr Bartlett said he last saw it shortly before he left the employ of Camile Trading. It was in a box of documents placed in the back of the car of Jim Stevens, the father-in-law of Mr Fletcher (Ex A1: p18(30)). Mr Stevens died on 26 January 2004. I will later return to Mr Bartlett's diary when I deal with the evidence concerning the search, and the suggestion that Mr Fletcher had been warned of the search. 85 Mr Fletcher, having determined that he would continue to blend diesel with heating oil, established a cash fund, according to Mr Bartlett. It was to be used to purchase heating oil and other petroleum products used in blending. Mr Bartlett said he contributed $60,000. Mr Fletcher put in $40,000. Mr Bartlett suggested that Mr Fletcher said this: (Ex A1: p14(24)) "They can't follow us if there is no paper trail. No dockets, no cheques - no start, no finish." 86 Mr Fletcher, in his affidavit in response to that paragraph, said this: (Ex CT-2A, para 64) "I have no recollection of any conversation about paper trails and the absence of dockets. As best I can recall, there was no such conversation." 87 After Mr Bartlett resigned in November 1996 his solicitors demanded the repayment of monies he had advanced to the company. The balance of the Loan Account was $35,172 (Annexure LRF-4). Mr Fletcher agreed to repay the money by instalments. 88 Purchases of heating oil, with minor exceptions, were not entered in the Sybiz computer system. Indeed, according to Mr Bartlett, the legitimate need for heating oil in the business was extremely small. He said this: (Ex A1: p19(33)) "Camile received orders for the supply of heating oil from a number of industrial and domestic users of that type of fuel. These orders averaged between 3000 to 4000 litres per week in winter. There were no orders in the other months. To meet these orders, heating oil was taken directly from tank 11 and placed into mobile tankers owned by Camile and driven by Camile employees, and then delivered to the person who had placed the order. These deliveries of heating oil were not mixed with any other petroleum product." 89 Mr Bartlett said that he rang the Marina Petrol controlled service stations and the other associated retail outlets each day to obtain tank dips in order to service their requirements for diesel fuel. He asserted that, with one exception, all diesel that was supplied was a 50/50 blend of diesel and heating oil (Ex A1: p19(35); T88). The exception was the fishing boats at Kiama which were supplied with pure diesel at 20,000 litres per month (Ex A1: p19/20(35 and 36)). Pure diesel was supplied because the company did not wish to run the risk of the fishing vessels breaking down whilst at sea. 90 A number of issues were raised in cross examination. The first and most prominent concerned Mr Bartlett's account of the source of the heating oil. Mr Bartlett said that deliveries of diesel were made by Mobil and BPMA and totalled 12 to 14 tanker loads a week. Success delivered three to five tanker loads of heating oil a week. Yet Mr Bartlett insisted that there was a 50/50 blend. How, then, could there be a 50/50 blend when the number of loads of heating oil did not correspond with the number of loads of diesel? In the context of that issue, the following was put: (T96) "Q. It wasn't a 50 percent blending operation because there was, according to your evidence, a completely disproportionate quantity of diesel being purchased when compared with the quantities of heating oil purchased? A. We don't seem to have got into Pullinger's HO or anything like that yet. Have we got into anything of that yet?" 91 The affidavit of Mr Bartlett had a number of headings. There was a section dealing with the blending of diesel oil and heating out (Ex A1: p10(16ff)). The affidavit included a specific subheading: "Heating Oil Delivered by Success" (para 33ff). In Mr Bartlett's detailed description of the system, he made no reference in his affidavit to a source of heating oil other than Success. In this respect his affidavit reflected the Statement of Claim which identified Success as the source of the heating oil (cf para [21]). 92 At first, the cross examination appeared to undermine Mr Bartlett's evidence of a 50/50 blend. However, upon closer examination, it did not do so. Mr Bartlett plainly did not draft the affidavit. It was drawn by a lawyer upon the basis of statements he had made to Customs' investigators. The omission of Evenfont as a source of hearing oil appeared to be a drafting error. Earlier in the same affidavit, in an introductory paragraph, Mr Bartlett referred to placing orders with various suppliers for petroleum products. In the context of Evenfont, he made the following statement: (Ex A1: p4/5(8)) "(e) Evenfont Pty Ltd ('Evenfont'), the Third Defendant, from which I purchased for Camile, heating oil and white spirits. These products came from the Evenfont premises at Seven Hills and after September 1996, at Rutherford, both premises being in New South Wales. The heating oil from Evenfont was referred to usually as 'HO', and sometimes as 'TCO' or 'CO'. Evenfont itself was usually referred to simply as 'Redline'; ... " (emphasis added) 93 The material tendered also included invoices from Evenfont in respect of the delivery of heating oil (for instance Ex A18). Mr Pullinger, to whose evidence I will later refer, said that heating oil was delivered to Camile Trading. Accordingly, there can be no doubt on the evidence that Evenfont was a substantial supplier of heating oil to Camile Trading during this period. The drafting error, incidentally, may well explain the omission of any allegation in the Statement of Claim against Evenfont of complicity in respect of the blending of diesel. 94 There is an issue, nonetheless, concerning the volume of heating oil delivered and (on the plaintiff's case) blended. I will later deal with that issue. Over time, the throughput of the depot increased significantly after 1 April 1994. Mr Bartlett's estimates of tanker loads were made to Customs investigators after he had ceased work in November 1997. They no doubt reflected the volume of deliveries towards the end of the period in the Statement of Claim, rather than the beginning. 95 A second issue, which was canvassed at some length in cross examination, concerned the cash accumulated in the "kitty" as a consequence of the system which Mr Bartlett described. Mr Bartlett estimated that there was close to $800,000 in the cash tin at the time he left (T70). He described the green ammunition tin where it was kept. He believed that he was entitled to a share of the net proceeds, after the payment of monies due to carriers, suppliers and others. One of his grievances against Mr Fletcher was that he was not paid that share. 96 Mr Fletcher and others gave evidence concerning the nature of the business and the part cash played in that business. As a petrol wholesaler with retail outlets, the business generated significant cash. The source of that cash was not illegitimate, as suggested by Mr Bartlett. It was ludicrous to suggest that the amount kept in the green tin in the safe ever reached anything like $800,000. The excess cash, after payment of legitimate outgoings, was banked every day or every other day. 97 I will return to these issues in my evaluation of Mr Bartlett's evidence. At the moment I am seeking to describe what he said took place, identifying some (but by no means all) of the issues raised in cross examination, providing comment where the issue readily admits an explanation. 98 A third issue concerned the inference that should be drawn from deliveries which were made to retail outlets. Certain invoices suggested deliveries to service stations which, if combined, would produce less than the 50/50 blend described by Mr Bartlett. However, such invoices did not take account of stock on hand, as revealed by daily dips which were provided to Mr Bartlett. In the case of Evenfont, Camile Trading despatched mobile tankers periodically to the refinery where they picked up the heating oil (known as HO, TCO, CO1 or CO II) and took it directly to retail outlets such as Truck Stop 31. Mr Bartlett, however, said in the context of such deliveries, the system operated in the following way: (T223) "Q. In the evidence that you have given in court over the last few days, it is that you have generally painted a picture of that process of blending heating oil with diesel occurring at the Camile depot, that's right, isn't it? A. Yes, that's right. Q. At no other place? It was a situation where the heating oil was brought into Camile - where the diesel was brought into Camile - and it was blended together in different ways over time at Camile, that's right, isn't it? A, Yes, that's what we had done. The only time that any different way of blending went on within the tanker, was when we had taken loads up to Evenfont and done a half/half blend from there to take it to one of the truck stops in Marulan. Q. You see, I suggest to you that the thrust of your evidence in this court, and what is contained in your affidavit, is that the blending process, the blending of hearting oil and diesel, all took place at the Camile depot at Albion Park Rail? A. Yes, you are right there. The blending of the heating oil and diesel was done at the depot. As I say, sometimes we had taken the fuel, a part of the fuel, to Redline and put his stuff on top of it and take it directly. That was only to save time with the vehicles." 99 He acknowledged that he had made no reference to such a practice in his affidavit. He added that it did not happen often and mainly in winter. 100 I will later describe in greater detail the products of Evenfont, including the heating oil. They will be dealt with in the context of the plaintiff's case against the third and fourth defendants. It will emerge that heating oil from Evenfont (as with heating oils generally) had a different and more limited profile than a diesel fuel which conformed to the Australian Standard. However, because a diesel engine, in its design, is forgiving, it is capable of using heating oil as a fuel, although its prolonged use may generate problems. The heating oil from Evenfont came from Nockatunga Crude Oil from southwest Queensland and was dark green in colour (T256). Its colour would lighten when blended with diesel. Given its limitations as a fuel and its colour (which generated complaints), it would seem unlikely, as a general practice, that it was used as diesel unless blended with pure diesel. 101 A fourth issue raised in cross examination concerned tank 4. Mr Bartlett, in one of his earlier interviews with Customs investigators, suggested that tank 4 was used for pure diesel. It was the source of diesel supplied to the fishing fleet. In another interview, he suggested that tank 4 "copped it", meaning that it was a dumping ground for the remnants of various fuels and was anything but pure. This is but one of a number of contradictions in Mr Bartlett's evidence. Leaded and unleaded petrol. 102 The Statement of Claim and the Particulars accompanying each paragraph, broadly reflected the evidence of Mr Bartlett, as set out in his affidavit (Exhibit A1). Referring to those paragraphs which deal with unleaded petrol and the first period, the Statement of Claim aserts the following (paraphrasing): Para 198: Camile Trading purchased quantities of unleaded petrol from the storage facility of Mobil Oil. Paras199/200: The petrol was delivered to the Albion Park depot and placed in storage tanks. 103 The paragraphs that followed were matters of some controversy and importance. They should be quoted in full. They relate to the petroleum product, white spirits, which the plaintiff contends was used as part of the mix in respect of both leaded and unleaded petrol. Mr Fletcher denied that suggestion. Evenfont denied having supplied white spirits to Camile Trading. Indeed, it denied having manufactured white spirits at its refinery. Professor Batts gave evidence (which was uncontested) that the refinery of Evenfont at Seven Hills was incapable of producing white spirits because it is a fraction with a boiling point range between 140 and 200 degrees C. The distillation plant of Evenfont only had a capacity to heat to 140 degrees C. Counsel for Customs answered this controversy by pointing to the wording of the Statement of Claim, which reflected the uncertainty of the plaintiff as to the precise chemical composition of the white hydrocarbon which Customs alleges was purchased from Evenfont and others and blended by Camile Trading. The Statement of Claim in respect of this issue alleges the following: " 201 In the said period the First Defendant purchased quantities of White Hydrocarbons, being a petroleum product known as 'White Spirit'. PARTICULARS (a) the First Defendant purchased White Spirit from Gladstone; (b) further, and in the alternative, the White Spirit was purchased by the First Defendant from Success; (c) the First Defendant purchased White Spirit from S F Bial Pty Limited ('Bial'); (d) the First Defendant purchased White Spirit from the Third Defendant that was known to the First, Second and Third Defendant, as 'White Spirit'; (e) the quantities of White Spirit purchased in the said period was 677,827.39 litres, which was acquired at the rate of approximately five or six loads per week at 30,000 litres per load." 104 The paragraph which followed was rather more definite. It did not use the phrase "white hydrocarbons, being a petroleum product known as white spirit", but simply referred to "white spirit". It was in these terms: " 202 In the said period the White Spirit was delivered to the First Defendant's premises. PARTICULARS (a) the White Spirit purchased from Gladstone and or Success was delivered to the First Defendant's premises by tankers owned or operated by Success; (b) the White Spirit purchased from Bial was delivered to the First Defendant's premises by servants, agents or employees of Bial; (c) the White Spirit purchased from the Third Defendant was collected from the Third Defendant's premises and delivered to the First Defendant's premises by servants, agents or employees of the First Defendant." 105 The "white spirit" was placed in tanks (para 203). The Statement of Claim continued as follows (again paraphrasing): Paras 204/206: Camile Trading purchased ethanol, which was likewise delivered to its depot and stored in tanks. Paras 207/209: Camile Trading purchased "quantities of Aromatic Hydrocarbons in the form of Toluene" which was delivered and stored in tanks. 106 Paragraph 210 alleged that these products were then blended. The paragraph was in these terms: " 210 During the said period the First Defendant did, by mixing, combine quantities of the aforesaid Unleaded Petrol with quantities of the White Spirit, Ethanol and Toluene." 107 The Particulars which accompanied that paragraph were as follows: "PARTICULARS (a) 2,080,210 litres of Unleaded Petrol was combined with quantities of the White Spirit, Ethanol, Toluene in the following proportions: (i) 60% Unleaded Petrol (ii) 22.5% White Spirit (iii) beginning at approximately 1% ethanol in April 1994 increasing to approximately 10% Ethanol in November 1996. (iv) 7.5% Toluene. (b) the principal method of mixing was by mixing the said proportions of Unleaded Petrol, White Spirit, Ethanol and Toluene: (i) prior to March 1995, by discharging quantities of Unleaded Petrol, White Spirit, Ethanol and Toluene from separate storage tanks on the First Defendant's premises directly into the same storage compartments of mobile fuel tankers; and (ii) as from about March 1995, in tank number 16." 108 The solicitors for Evenfont sought further and better particulars. The response from the Commonwealth Crown Solicitor, acting for Customs, included these words: (Subs 3 and 4 Defs: Annex A) "2. The white spirits referred to in the Statement of Claim are a product known by that name which has a widespread use in our economy. 'White spirits' is a term commonly used in both the petroleum industry and the domestic market to describe a petroleum product that consists of White Hydrocarbons. It is produced in the process of distilling crude oil and it has a number of general uses, one of which is as a cleaning fluid. It is not suitable for use in diesel and petrol engines as a power source for those engines. At present, the Plaintiff is unable to provide you with information as to the chemical composition of white spirits other than as stated. This information will be sought and advised to you, although this will not be possible until after 16 July 2000 when the expert engaged by the Plaintiff has returned from overseas." 109 The Statement of Claim was in the same format in respect of leaded ("super") petrol, suggesting the same formula, the same ingredients and the same suppliers. 110 The case for the plaintiff is strengthened if white spirits were used in a blend with leaded or unleaded petrol. White spirit is a petroleum product. It attracts a rate of excise lower than the gasoline rate. It is not listed as an exempt petroleum product in Regulation 176(2). Its use with gasoline would involve the manufacture of an excisable blend of petroleum product, where the full gasoline rate had not been paid on each ingredient of the blend (cf Reg 176(2)(u)) (supra para [56]). 111 Mr Bartlett, in his affidavit and evidence, described the blending process. It was carried out mainly by drivers before the installation of the large blending tanks, 15 and 16. Once they were installed, blending was continuous, producing approximately 150,000 litres each day in total (leaded and unleaded petrol) (T158). Mr Bartlett instructed employees of Camile Trading, including Mr Hennessy and Mr Stevens (the father-in-law of Mr Fletcher), in the method of blending. Mr Stevens worked part time. 112 The Sybiz computer records maintained by Mr Bartlett recorded the purchase of the leaded and unleaded petrol and ethanol (Ex A1: p23(44)). No record was made of the purchase of toluene. Deliveries of toluene were made by S F Bial at the rate of two or three loads (each 30,000 litres) per week. To obscure the paper trail, the invoices of S F Bial were sent to one of the controlled retail outlets, Forestville, for payment (Ex A1: p24(47)). 113 White spirits were also supplied by S F Bial and others. A pure form of white spirits was delivered irregularly and in small quantities (10,200 litres) to service the dry cleaning industry. It was kept separately and was not used for blending. A less pure form, intended for blending, was also delivered by S F Bial. Mr Bartlett produced to the investigators a computer printout of a document headed "All Branch Inventory Report as at July 1996". The document was annotated in Mr Bartlett's handwriting with these words: (Ex A16) "White Spirits S F Bial. Pay cash from Forestville a/c. 2-3 loads p/w." 114 Mr Bartlett said that the annotation was an instruction given to him by Mr Fletcher as to the manner of payment to S F Bial (T155). His evidence continued: (T155) "A. It would have been written by me at some stage to remind me. It would have been written many times in different areas including recorded on the order books. Q. When did you put the writing on that document so far as you are aware? A. I cannot recall that. Q. No idea? A. No idea whatsoever." 115 Submissions by the first and second defendants suggested that it was plausible that the annotation to Exhibit A18 was added after the search by Customs on 26 November 1996, a form of "verbal" designed to incriminate Mr Fletcher (Subs 1 and 2 Defs: p120(462)). The following was added in the same submissions: (para 463) "463 ... It is clearly a document that is contrived by Bartlett and in circumstances where it is subsequent to the search and seizure on 26 November 1996 and given, or put across, in circumstances to have the resemblance of it being authentic and, contemporaneous at the time the instruction was allegedly given." 116 That suggestion was not put to Mr Bartlett. It seems to me most unlikely. The note had the appearance of a contemporaneous record. Had it been fabricated, you would have expected something rather less subtle. The note did not refer to Mr Fletcher. It required interpretation, which Mr Bartlett provided in his evidence. His evidence suggested a systematic failure to record in company records products, the use of which would demonstrate that Camile Trading was engaged in manufacturing (that is, blending involving heating oil, white spirits, toluene etc). On his evidence, a number of suppliers of various products were paid in cash. The note (Ex A16), on its face, records one instruction in relation to one supplier and one product. It could hardly be regarded as an effective "verbal". I believe it to be an authentic document made well before 26 November 1996. 117 Mr Bartlett gave evidence that Mr Fletcher identified a further source of white spirit some time prior to 1995. Mr Bartlett said this: (Ex A1: p26(51) " ... Fletcher said to me: 'We have set up to buy stuff from Central Australia which will be brought into the depot by Vic Newland. You should pay 38.5 cents per litre for the product and 8 cents per litre haulage.'" 118 He added: (Ex A1: p26(52)) "Subsequent to this conversation, I received a 20-litre drum of this white spirit from Vic Newland. Fletcher and I then made up various blends of this white spirit with leaded and unleaded petrol. The blended petrol was then given to Camile's employees to test in their own cars. These tests proved that the blending of petrol and white spirits in the actual proportions used was feasible." 119 After the tests, Camile Trading purchased two loads of white spirit from Vic Newland a week throughout 1995/6. It was delivered by Newland himself. He did not provide documentation and he was paid in cash (Ex A1: p26(53)). The deliveries were not recorded in the records of the company. They were recorded in Mr Bartlett's diary, which he referred to as his "order book". 120 Mr Fletcher, as mentioned, denied the purchase or use of white spirits for the purposes of blending with leaded or unleaded petrol. In the context of Vic Newland, Mr Fletcher said this: (Ex CT-2A: p25(86)) " ... I say that the First Defendant never bought White Spirits from Vic Newland. At no stage was any blending of White Spirit with leaded or unleaded petrol conducted with my knowledge or under my supervision or for that matter, with my consent. I further say that I have no knowledge of blended petrol containing White Spirits being given to any of Camile's employees to test in their cars. I further say, in answer to the paragraph and its contents, that Vic Newland was a carrier not a supplier. He used to collect crude oil from Queensland and take it to the Third Defendant's refinery at Seven Hills." 121 Mr Fletcher likewise denied purchasing white spirits from Evenfont, as asserted by Mr Bartlett (Ex CT-2A: p26(89)). The expertise of Mr Bartlett. 122 Mr Bartlett was closely questioned by counsel appearing for each of the defendants concerning his capacity to appreciate the nature of the products delivered to Camile Trading's depot. Mr Bartlett gave evidence that he inspected each load, checking for water (apart from deliveries of diesel or petrol from the major oil companies). He had a hands-on role in the process of blending. He thereby became familiar with each product. Mr Bartlett said this: (Ex A1: p9(15/16)) " ... The emergence of the petroleum products could be identified by colour, smell and feel. White spirits has a very dry feel on the skin, ethanol feels like it is tearing the skin on your hand away as it evaporates, heating oil simply stays on your hands as does diesel fuel, although the difference between these two is that diesel fuel has a marked greasy feel to it whereas heating oil does not. Another difference between [them] is that heating oil has a stronger kerosene-type smell." 123 In answer to Mr Byrne SC, for the first and second defendants, Mr Bartlett said this: (T162) "Q. Perhaps I should say to you, and I don't mean this critically or disrespectfully, but you're not a qualified person so far as petroleum products are concerned, that's true to say, isn't it? A. It's true to say. Q. You have a working knowledge of the petroleum industry based on your experience in it; that's right, isn't it? A. Mine was hands on. Q. No formal qualifications as such? A. None at all." 124 Nonetheless, Mr Bartlett said that when he worked at the depot he could tell the difference between leaded and unleaded petrol, between diesel and heating oil. He could recognise the difference between "white spirit" supplied by Evenfont and the white spirit delivered by Vic Newland (T57). His identification of products delivered to the depot was assisted by the paperwork the driver was obliged to carry (in the transportation of hazardous chemicals), the panels on the side of the truck, the look, smell and feel of what was being carried (T60). In cross examination he said this: (T62) "Q. And it would be more so, correct me if I am wrong, if the mixture were 50 percent diesel and 50 percent heating oil; is that right? A. Yes. It would be around the same smell. It would be there. Q. Around the same smell as what? A. Kerosene. You'd get a 'keroee' smell. Q. When there is 50 percent heating oil and 50 percent diesel it smells like kerosene? A. No it would have a 'keroee' smell. I didn't say it would smell like kerosene, it would have a 'keroee' smell. Q. That word you are using, 'keroee', is that a word that indicates that it's like kerosene? A. Yes. Q. Are you suggesting that you would be able to pick a 50/50 blend simply by smelling it? A. In those days. Q. And somebody else with your similar experience to you would likely be able to do the same? A. Yes I'd say so, yes. Q. Wasn't a special skill that you had? A. No it wouldn't have been a special skill." 125 Customs called Mr Richard Gibb, a scientist who worked in the petrochemical industry, who at one time had been employed at the Evenfont Refinery at Seven Hills. Counsel for the first and second defendants produced, during the course of cross examination of Mr Bartlett, a number of small jars with samples of petroleum products (some green, some white and some yellowy white) (MFI's 16, 17 and 18). The products were never identified, nor tendered. Their source was never the subject of evidence. It was rather assumed that they came from Evenfont, but that was never confirmed. Mr Gibb was shown these samples. He identified the pale liquid as having the appearance of a "light end fraction" (T593). He said that it was similar in appearance, although he could tell more "if he had a whiff" (T594). Having smelled the sample, Mr Gibb said this: (T594) "Q. Have a whiff if you like? A. (Witness complied) That's certainly not a light end. Q. You just picked up MFI 18. You say that is not a light end? A. No it's got more of a kerosene - it's a sort of heating oil smell. Q. Does it indicate to you what sort of product it is, if it's not a light end? A. That material smells like a light end because it's got a petrol type of smell. Q. MFI 16? A. Yep." 126 Professor Trimm, on the other hand, gave the following evidence: (T542) "Q. The question whether any particular product meets those standards can only really be done by some form of chemical analysis? A. That's correct. Q. It's not something you can do by observing the product in question or --- A. No way. Q. Or indeed by smelling it or feeling it or anything like that? A. I must confess I've never tried to test petrol by feeling it. As far as I know you would not be able to get an accurate analysis by smelling or tasting or looking at it. Q. Right. When you laugh at the prospect of feeling petrol, there has been a suggestion by a witness in this case he in fact can tell the difference between various petroleum products according to the way they react to touch? A. I would have grave doubts of that statement. Q. What about a suggestion that you could tell that a particular product was a 50/50 blend of diesel and heating oil merely by smelling it? A. Couldn't do it." 127 Professor Batts took the same view, rather more emphatically. His evidence was in these terms: (T861) "Q. Just one other matter. Evidence has been given by a witness along the lines that he was able to identify particular petroleum products, firstly by their smell. Is that something that you regard as a reliable means --- A. Oh, no. That would be absolute nonsense. That is the only word I could say. Q. Certainly observation of a liquid that may be of a petroleum product would not necessarily enable any reliable conclusion as to its identity? A. Very true. Q. Have you heard it suggested that a person can reliably identify the nature of a particular petroleum product by feeling it - literally feeling it? A. By feeling it? Q. By putting it on their skin? A. (a) that would be a very stupid thing to do, and (b) you could tell nothing by it." 128 Professor Batts acknowledged that there were differences in colour between various petroleum products. However, he believed that no sensible or accurate conclusion could be drawn without chemical analysis (T862). 129 It emerged, nonetheless, from cross examination, that the experience of Professors Trimm and Batts was vastly different from that of Mr Bartlett. They were scientists who worked in a laboratory. Professor Trimm had not attempted to differentiate between petroleum products by touch or smell. He had not carried out practical tests replicating what Mr Bartlett did each day. Indeed he said, self-effacingly, that whenever he entered the laboratory to perform tests his students asked him to leave lest he break something (T543). 130 Professor Batts' experience was much the same. It was forbidden, by reason of Occupational Health and Safety standards, to touch petroleum products (T876). In the course of testing, they were not smelled. Indeed, an attempt was made to eliminate vapours by the use of a fume cupboard (T876). 131 I do not doubt that in a general way Mr Bartlett was able to discern differences between the products he handled on a daily basis in the manner he described. His assessment based upon smell, appearance, and touch was no doubt crude and incapable of discerning more subtle differences. I accept that he could tell whether diesel had been blended with heating oil by the kerosene smell, but not the proportions of the mix. 132 However, the relevance of this aspect, and the reason the issue was so keenly fought, concerns the white product produced by Evenfont (and others) which, according to Mr Bartlett, was used in the mix of leaded and unleaded petrol. Mr Bartlett, in his evidence in chief, labelled the product "white spirits". However, in answer to Mr Horowitz of counsel for Evenfont, in cross examination, Mr Bartlett acknowledged that everything that came from Evenfont he knew either as "green shit" or "white shit" (T166). The "green shit" was the heating oil mixed with diesel, which may be put to one side. What, then, was the basis of his understanding that the "white shit" was "white spirits"? Mr Bartlett said this: (T171/2) "Q. Now Pullinger and Lucas, Mr Pullinger and Mr Lucas from Evenfont sometimes referred to the 'white shit' that they produced as 'waste slops', didn't they? A. No it was - as far as I can recall it was either called 'light ends' or 'condensate'. Either 'light ends' or 'condensate'. Q. I suggest to you that they referred to it as 'waste slops'. You do not deny that, do you? A. You're the one that's saying that, not me. I just told you that it was always referred to by them as either a 'light ends' or a ... a 'white spirit'. Q. Well I put it to you they never referred to it as 'white spirit'? A. Well you can put that to me if you like, you weren't there for the conversations, there was many many a conversation where these people told us what they were producing or what they weren't producing. Q. Mr Bartlett, they - A. And - I would like to finish. And their interpretation that was used on most of the occasions was a 'condensate'. A 'light ends'." 133 Mr Bartlett clearly recognised that there was a white petroleum product that was delivered to the depot, which he alleges was then mixed with leaded and unleaded petrol. It came from various sources. I accept that he recognised differences between the products, depending upon their source, at least in terms of colour. Some were water white and others tinged with some colour. Mr Bartlett referred to them as "white spirits, condensate or light ends" (cf Submissions of Plaintiff: pp15/16 (para 3.4.6)). I accept, in the case of the white product delivered by Evenfont (the "white shit"), that Mr Bartlett was not in a position, based upon experience, to determine that it was white spirits. That still leaves the issue of whether he was told by Mr Fletcher and/or Mr Pullinger that the white product was white spirits. Formula for blending. 134 Let me move from that to an important aspect of Mr Bartlett's evidence concerning the blending of leaded and unleaded petrol, that is, the formula used for the blend. Mr Bartlett said this: (Ex A1: p36(77)) "At the commencement of the blending of petrol with white spirits and the other products, I had neither the training nor the experience to know what proportions of the products should be used. Fletcher gave me the percentages of white spirit, toluene, ethanol and petrol, whether leaded or unleaded, to use in the blends. Fletcher gave me his diary which had the blend proportions written in it for me to copy. I did this, and subsequently used these proportions when doing the petrol blending." 135 Mr Fletcher's 1995 diary was seized by Customs in the search of his home on 26 November 1996 (Ex A8). Mr Bartlett was familiar with Mr Fletcher's handwriting, which he identified. The diary had an entry on 6 January 1995 referring to "condensate to be picked up". On the opposite page (7 January 1995), the following appears in Mr Fletcher's handwriting: (Ex A8) 22.5 22.5 Cond 60 60 Supe Pet 7½ 7.5 10 10 Eth 100% 136 These figures correspond with Mr Bartlett's evidence concerning the instructions given by Mr Fletcher as to the formula to be used when blending petrol. It will be noticed that Mr Fletcher used the abbreviation "cond" (referring, no doubt, to "condensate"), rather than "white spirits". The formula also closely matched (with one important difference) another document which had some prominence in the plaintiff's case (Ex A7). It was a document printed by Mr Bartlett on his home computer for the investigators during 1997. His computer was initially seized, the data downloaded and then, apparently, returned. Although the document was printed by Mr Bartlett after he had left Camile Trading, it was given to the investigators at a time when he did not have access to Mr Fletcher's diary. I believe that it was an authentic document used by Mr Bartlett in the running of the depot. It was a spreadsheet which recorded both the formulae and details of stock on hand, being a two page document. The first page is headed "Tank Dips" and repeatedly refers to a "blend" of leaded or unleaded petrol. It is in these terms: (Ex A7) TANK DIPS TANKS SUPER 1 8000 ULP 2 10000 TOTAL ULP 35000 ULP/B 3 10000 TOTAL ULP BLEND 100000 DIST 4 15000 TOTAL ULP/ULP BLEND 135000 ETH 5 30000 XYL 6 27000 TOTAL SUPER 23000 S/BL 7 5000 TOTAL SUPER BLEND 45000 A/S 8 53000 TOTAL SUPER/BLEND 68000 ULP 9 25000 SUPER 10 15000 TOTAL DIST 15000 HEAT 11 17000 TOTAL HEAT 17000 H/O 12 34000 TOTAL H/O 34000 W/S 13 7000 TOTAL DIST / HEAT / H/O 66000 KERO 14 4000 S/BL 15 40000 TOTAL KERO / W/S 11000 ULP/B 16 90000 TOTAL A/S / XYL / ETH 110000 TOTAL LTRS 390000 TOTAL LTRS 390000 137 The second page was as follows: (Ex A7) BLEND TANK 16 TOTAL SFL 150000 LTRS 150000 COST TOTAL ULP 90000 60% $0.6837 $61,533 ETH 15000 10% $0.50 $7,500.0 XYL 11250 7.50% $0.55 $6,188 W/S 33750 22.50% $0.4850 $16,369 VIC 42.50 TOTAL LTRS 150000 100.00% TOTAL $91,589 COST CPL $0.6106 TANK 15 SFL 55000 LTRS 55000 COST TOTAL SUPER 39531.25 71.88% $0.7037 $27,818 ETH 4468.75 8.13% $0.50 $2,234 XYL 2750 5% $0.55 $1,512.5 W/S 8250 15% $0.4850 $4,001.3 TOTAL 55000 100.00% TOTAL $35,566 COST CPL $0.6467 138 Tank 16 was the larger tank and used for unleaded petrol. The same formula appearing in Mr Fletcher's 1995 diary appears against the constituents of the mix. The letters "XYL" presumably refer to xylene (an additive and part of the BXT group, similar to toluene). "WS" was the white petroleum product which Mr Bartlett referred to as "white spirits". 139 Tank 15 was dedicated to super petrol. It will be noticed that the formula is different from that used for unleaded petrol (71.88% super cf 60% unleaded petrol). It departs from the assertion in the Statement of Claim which avers that the same formula was used for leaded and unleaded petrol (60%). The plaintiff, in submissions, amended its claim to conform with Mr Bartlett's spreadsheet, an amendment which reduced, in the case of super petrol, the amount of duty said to have been evaded. 140 Returning to Mr Fletcher's 1995 diary, there were other relevant entries, although not many. On 29 December 1995, the following appeared: (Ex A8) ULP SUPER 12000 W 8350 W 4000 XYL 2785 XYL 5320 Eth 4500 Eth 32000 ULP 40000 Super 53320 55535 141 A section at the end of the diary, headed "Notes", contained the following: (Ex A8) XLENE 120 RON 60c TOL 120 RON 59.5c X3B-95/130 80 RON 48c 142 Immediately under that entry was a reference to "ULP 60%" (referring to unleaded petrol), "condensate 13.3%" and "X3B/95/130 16.6%, Eth 10%". Perhaps more significantly, the same document included an entry which closely matched the formula which Mr Bartlett had used in the spreadsheet (Ex A7) concerning super petrol: (Ex A8) SUPER 3.25 ETH = 8.125% 2.00 TOL = 5% 6.00 D18 = 15% 28.75 SUP = 71.875% 40 100% 143 Alongside that entry, and under the heading "ULP", appears a formula which reproduces the proportions for unleaded petrol, deposed to by Mr Bartlett, and again appearing in the spreadsheet. The diary was in these terms: (Ex A8) ULP 12 ULP 24 4.5 WS 9 1.5 TOL 3 2.0 ETH 40 20 litres 40 144 On the page following, there were costings of various combinations of ingredients referring to "WS", "Tol" and "Eth". 145 Mr Fletcher's 1996 diary was also seized by Customs. It included a post-it note in Mr Fletcher's handwriting. The note was as follows: (Ex A11) ETH 2.300 XYL 1.500 WS 4.500 ULP 11.700 146 It is inferred that the quantities relate to a 20 litre batch. Converted to percentages, the ingredients of the mix were as follows: ETH 11.5% XYLENE 7.5% W/S 22.5% ULP 58.5% 147 Reference should also be made to the 1995 diary of Mr Bartlett (Ex 12). At the rear there were a number of pages containing entries which clearly refer to blends of super and unleaded petrol, providing the literage of each ingredient and referring to "ETH" and "WS" (Ex 12). 148 Before dealing with Mr Fletcher's response to this evidence, I should refer to one aspect of Mr Bartlett's elaboration upon this material. He said this: (Ex A1: p39(89)) "Fletcher periodically tested the petrol blend formulas for both leaded and unleaded himself. He had a small laboratory at the Camile depot where he did this. I assisted him in making up these blends in the laboratory. To test a formula we mixed amounts of toluene, ethanol, white spirits and petrol accurately in their respective proportions. We usually made up three or four drums (20 litres each) at a time. The mixing was done by hand. Also, Fletcher directed all Camile employees, including myself, to use the blended petrols in their own cars and in the cars that Camile itself owned, and to report back to him, or to me, on how those vehicles performed using the blended petrols. This procedure occurred on a daily basis from 1992 onwards." 149 Responding to Mr Bartlett's affidavit alleging blending, Mr Fletcher was careful to frame his response by simply denying that aspect of Mr Bartlett's account concerning the inclusion of white spirits. His response to paragraph 67, for instance, was expressed in these terms: (Ex CT-2A: para 100) "I say that I never gave Mr Bartlett a formula that required the addition of White Spirit. Further, I deny that Mr Bartlett blended the petroleum products with White Spirit at my direction or at my request. In addition to the initial formula being devoid of any mention of White Spirit or requiring the use of White Spirit, I say that any amendment to the formula from time to time as given to Mr Bartlett never required the addition of White Spirit as prepared by myself." 150 Mr Fletcher denied knowledge of the blending activities undertaken by Mr Bartlett as described by him and denied that his late father-in-law, Mr Stevens, supervised that blending several days per week (Ex CT-2A: para 105). He denied knowledge of Mr Bartlett's spreadsheet (Ex A7, Ex CT-2A: para 104). So far as the formulae in his own diary were concerned (Ex A8), he said this: (Ex CT-2A: para 108) " ... The diary with the blend proportions written in it were not given to him by me, they were only an experimental blend that I was working on at the time. The reference to "W/S" is a reference to what was referred to as "Waste Slops" which was not White Spirit. In respect of the contents of paragraph 78, I say that the diary is what I recorded as experimental blends that I was working with in early 1995. The reference to WS is Waste Slops and there is also a reference at the notes which are Exhibit A9 to a product called Condensate, which appears in the top left hand section of the first page of the notes which are Exhibit A9. The Condensate was being sought from Santos in South Australia and also, from memory, from a supplier in Victoria. I have a further recollection that it was also being enquired about in Alice Springs. I made diary notes at the time that assist me with that recollection, those diary notes are contained in Exhibit A8 for the entries on 1, 3, 6 and 7 January 1995. ..." 151 Mr Fletcher added: (Ex CT-2A: para 109) "I had no reason to show Mr Bartlett my diary concerning the blending, which was experimental. I say that the blends that were being experimented with at the time in no way compared to or are in any way referable to the blends that Mr Bartlett relies upon as appearing in the Exhibit A12 ... " 152 The affidavit continued: (Ex CT-2A: paras 110/111) "110. I say that there is also a reference, on 29 December 1995, to a further blend that I wrote, which was written on 29 December 1995 but was not shown to Mr Bartlett at any time. The reference to "W" for the entry on 29 December 1995 is a reference to Waste Slops and the other items are respectively Xylene, Ethanol and unleaded and super petrol. They do not refer to White Spirits. 111. I say that a comparison of the percentages contained in Exhibits A9 (JRB007) and A12 (JRB010) demonstrates that they are not the same. An instance of the difference is to compare the percentages in Exhibit A9 in the middle of the page for 'Super' and compare them with Exhibit A12 for the entry for 19/1/1995, where the percentages are for Super, I say as follows: '12,000 A/S 22.5% 5,332 E 10% 4,000 Z 7.5% 32,000 S 60%' I say that the reference to 'A/S' is a reference to Condensate and/or Waste Slops sourced from Alice Springs." 153 In response to Mr Bartlett's assertion that he had a small laboratory at the depot and organised employees, including Mr Bartlett, to road test various blends, Mr Fletcher said this: (Ex CT-2A: para 125) "I deny the existence of a small laboratory at the First Defendant's depot and I similarly deny blending and seeking the assistance of Mr Bartlett in making up the blends as deposed to. I further say that the procedure never occurred on a daily basis from 1992 onwards as it would be physically impossible for me to do so as I travelled considerably in and around the Sydney Metropolitan region as well as down to Goulburn and within the Wollongong environs. I did assist racing car enthusiasts to make blends and some employees were encouraged to use blends on an experimental basis. At no stage did the blends ever constitute or have as one of their constituent elements White Spirit as deposed to by Mr Bartlett." 154 Mr Fletcher elaborated when he gave evidence: (T645) "Q. I was asking you about the blending which you assisted racing car enthusiasts to make. What blending was that? A. We had some people who wanted higher octane fuel for their drag cars and racing cars and I used to make up various blends for them and they would use them. Q. How did you do that? A. I had an American magazine which gave certain blends and what to blend, and it was to do with drag car racing. Q. That involved improving the fuel of the majors, did it, to give it a higher octane rating A. Yes. Q. And not a product in which you would use MS or WS from Evenfont, was it? A. No." 155 Mr Fletcher gave the following answers to Mr Hastings QC (for Customs) in cross examination: (T693) "Q. Mr Bartlett has drawn attention to them and asserts that they were the formulas used from time to time for fuel - blending fuel - do you understand that? A. Yes. Q. And were they? A. All those different formulas at one time or another I would have made blends up for testing. Q. What about blending for sale? A. Well, we could not - we had whatever we could buy. If it was for the sale, not of these blends, but we couldn't always buy - after 1994, it was hard to buy toluene and then we - whatever we could buy, we bought as waste slops, or the other waste slops from Redline. Q. If you couldn't buy toluene after 1994, why in 1995 were you experimenting with blends which contained toluene? A. Because we had small batches. We could buy drums of toluene and I made up small batches for the people that were in the racing cars, or the drag stip at Nowra. Q. You are not suggesting these were for racing cars? A. Yes. Q. What, the WS? A. Yes. Q. It was a waste product? A. Yes, but we put them up. Q. Why would you put a waste product in a high performance motor car? A. Well, these people were paying high prices for them. We made the blends up for them and put them on the dyno for them and they used them." 156 The cross examination continued: (T693/4) "Q. Why would you be putting a poor quality product into a high performance engine? A. Because it is what we could do. It was a waste slops and we made experiments up. Q. It is your evidence, is it, that these calculations now in front of you were in the context of providing racing car enthusiasts products for their cars? A. Yes, and we did. Q. I am asking you whether it is your evidence that these calculations on this page were designed to provide a fuel for a high performance racing engine? A. We did --- Q. I am not asking you that. Are you saying that the entries on this page were created for the purpose of coming up with a formula for racing car engines? A. Yes." 157 Mr Fletcher's explanation was highly implausible. It does not make sense to use low octane waste material as part of a blend in a high performance car, where the blended fuel is supposed to give a competitive advantage over ordinary fuel. I reject his evidence. 158 The contemporaneous documentary material provides strong corroboration of Mr Bartlett's account. In reaching that view I have considered the submissions of the first and second defendants, especially at pages 92 to 94. There is, nonetheless, an issue whether the white material which Mr Bartlett knew as white spirits was, in fact, white spirits or some other petroleum product, whether condensate, light ends or something else. I will return to that issue below. 159 There remains one aspect. Mr Bartlett said this: (Ex A1: p32(67)) " ... The initial formula was given to me by Fletcher and was changed from time to time by him. ... " 160 Mr Bartlett repeated that statement in evidence. The Particulars accompanying para 210 of the Statement of Claim contemplate variation, at least in the context of the ethanol. It will be recalled that the particulars included the following: "(iii) beginning at approximately 1% ethanol in April 1994 increasing to approximately 10% ethanol in November 1996." 161 The documentary exhibits (to which reference has been made) included variations in the formula in respect of the constituents (condensate cf w/s; toluene cf xylene). There was an important difference in the context of super petrol (Statement of Claim 60% cf spreadsheet Ex A7 and the plaintiff's adjusted claim Ex H5 71.875%). The plaintiff's claim in respect of the evasion charge depends upon proof beyond reasonable doubt of the level of evasion, which in turn depends upon proof to the same standard of the formula actually employed. 162 On this material, there is an obvious difficulty with respect to that element. I nonetheless infer that by the time tank 16 was installed (some time after September 1995), the blending operation was well established. The experimental phase, I infer, had been completed. The formulae had been refined to the level set out in Mr Bartlett's spreadsheet (Ex A7). The quantity produced each day was significant (approximately 150,000 litres leaded and unleaded combined). Supplies had been secured, although Mr Fletcher did point to a diary entry on 26 May 1995, which was in these terms: (Ex A8) "Went to Exxon 636 St Kilda Road. Spoke to Sara re Shell query about toluene sales by Exxon to Richard. Showed Sarah letter from Price Waterhouse. She said would be OK by her but would have [to] run it past her boss Robert Smith. Robert told me that he would not jeopardise any business with Shell and if he had to scale our business down he would. Sarah then took me across the room to Hilditch." 163 Mr Fletcher said that toluene ceased to be available after May 1995, although drums could be procured for experimental blends for racing cars (T693). 164 However, a number of comments should be made in the context of that evidence. First, the diary note does not state, in terms, that toluene would not be supplied. The issue at that point had not been resolved. Secondly, Mr Bartlett did not suggest difficulty in respect of this aspect of the formula, although his spread sheet does refer to an alternative to toluene, xylene (Ex A7). In the following passage, Mr Bartlett spoke of the occasional shortfall in ingredients, which was rare: (Ex A1: p35(76)) "Every load of leaded or unleaded petrol that left Camile's depot at Albion Park was a product that had been blended as described above, except on the rare occasion when a retail outlet required a delivery of petrol and we did not have enough ingredients at the depot to blend sufficient petrol to meet the order with blended product. On such occasions, the petrol required was taken from either tank 1 or tank 2. We could go for weeks and weeks sending out blended petrol without running out of any products used in the blending. Occasionally, though, we could not do a blend to meet an order, and when this occurred, we would send out refinery petrol that had not been blended with any other petroleum product. However, this could not happen for 6 or 7 weeks at a time. It was very rare, and we would always endeavour to get the products we needed for blending if at all possible." 165 I infer that an octane enhancing additive, whether xylene or toluene, continued to be used after the installation of the large tank. Cross examination of Mr Bartlett. 166 An attack was made upon the credit of Mr Bartlett. Obviously he left Camile Trading feeling aggrieved. He retained solicitors to recover holiday and long service leave entitlements, as well as money he had loaned the company. He tried to sell his ten percent shareholding in Camile Trading but was prevented from doing so by Mr Fletcher. He has been paid a modest dividend on those shares in the years that have followed. In his words, he has not been able to "get rid of them". He said that he celebrated with champagne every year his departure from Camile Trading on 20 November 1996. 167 In 1997 Mr Bartlett took out an Apprehended Violence Order against Mr Fletcher. He complained that he was being harassed. He said that Mr Fletcher would drive past his home and that, when he saw him on the road, would drive very close to him. He alleged that Mr Fletcher made intimidating telephone calls to his home. 168 One gathers that an Apprehended Violence Order was granted. There was an appeal to the District Court. The appeal was ultimately determined in Mr Fletcher's favour and the order discharged. More than that, in an action for debt by Mr Fletcher against Mr Osmond, Mr Bartlett gave evidence on behalf of Mr Osmond. Money was said to be owing in respect of the supply of fuel. 169 Against that background, the following was put to Mr Bartlett in cross examination: (T55/56) "Q. Do you think it would be fair to describe you attitude towards Mr Fletcher as of February 1998 as a poisonous attitude towards him? A. Yes in that period of time I would have - yes I certainly wouldn't have liked the man. Q. Would it be fair, do you think, to describe your attitude towards Mr Fletcher as being bitterly opposed to him? A. Bitterly opposed, no, but bitterly disappointed and bitterly disliking would be more like it. Q. You see, this is February 1998 you had a bitter dislike for Mr Fletcher? A. Around the period of time, yes. Yes I certainly wouldn't have liked Mr Fletcher. Q. Your attitude to Mr Fletcher, I suggest to you, is reflected in the affidavits that you have sworn in relation to his activities at Camile? A. I don't believe that to be so. The affidavits are as it is. Q. You are, I suggest to you, prepared to say anything against Mr Fletcher if you think it will hurt him? A. Not true. Q. You have got no regard whatsoever, I suggest to you, for the truth? A. That is not true." 170 Mr Bartlett presented as a straight forward and apparently truthful witness, sometimes struggling to remember events that had occurred more than a decade before. Mr Fletcher, in contrast, appeared a most uncomfortable witness. Ultimately, however, the acceptance or otherwise of their evidence will be determined by the logic of their account rather than such impressions. 171 Counsel for Mr Fletcher pointed to certain evidence given by Mr Bartlett which demonstrated, in his submission, that he was an untruthful witness. The evidence was given in the context of paragraph 49 of his affidavit (Ex A1). The paragraph began with these words: "As I have earlier said, during my employment with Camile I maintained and updated a copy of Camile's office records relating to the supply and delivery of the various petroleum products so that I could work from home using my home computer. ... " 172 The paragraph at this point exhibited a document, identified by a number, which was then marked as Exhibit A6. The affidavit continued: (Ex A1: p25(49)) " ... This actual printout comes from my home computer. I made the entries in that document. That document is an 'All Branch Inventory' as at July 1996 which records the delivery of white spirits from Bial to Camile at the rate of 2 to 3 loads per week. This, in fact, was the rate of delivery at that time, each load being around the 10,200 litre mark. That document also records the fact that the loads at that time were being paid for in cash. It also records the instruction given to me by Fletcher at some earlier stage that 'accounts for Bial products were to be paid from the Forestville account'. The reference to Forestville was a reference to a service station at Forestville, NSW, which was controlled by Camille." 173 Mr Byrne SC, when cross examining Mr Bartlett, called for the document exhibited (Ex A6) and began asking questions. Mr Hastings QC (for Customs) then raised a matter in the absence of Mr Bartlett. He pointed out that paragraph 49 had mistakenly exhibited the wrong document. The document exhibited was a computer printout headed "Inventory", and was 55 pages. The correct document was a one page document, Exhibit A16. It was also a computer printout headed "All Branch Inventory", and included Mr Bartlett's handwritten annotation in the following terms (to which reference has been made supra para [113]) "White Spirits S F Bial. Pay cash from Forestville a/c. 2-3 loads p/w." 174 Mr Bartlett was then recalled so that the cross examination could continue. Mr Byrne showed him the document which had been mistakenly referred to (Ex A6). He then asked the following: (T149/150) "Q. There does not appear to be any reference at all of deliveries of white spirit from Bial to Camile during July 1996, does there? A. Yes, I can't see the name Bial in there, but it doesn't mean that the delivery was not put in there under a service station name which we used to use to put the product into and let them pay for it. Q. So, it would not have showed up in Bial; it would have been a delivery to that service station which showed up. Some fudging of the records, is that the situation? A. That would be right. Q. Probably a cash deal -- A. Cash deal -- Q. Some kind of under the table arrangement; a brown paper bag; all that kind of thing, would that be right? A. The service station that that was used for was one in Sydney we had leased and operated. Q. But, you say that somewhere submerged in those entries for July 1996 there is material that enables you to say that there were deliveries of white spirit from Bial to Camile at the rate of two to three loads a week? A. That's where it would be. It would be in the records, as we were told to hide them in the records of the service station. If they are looking for the service station, that's where the records were located, in our owned and operated service station in Sydney. Q. They are hidden or camouflaged in some way? A. Yes, they would be. Q. And they would be cash transactions involving Bial and Camile, is that right? A. That is your assumption of that. Q. I am wondering; if they are hidden - if they are above board transactions, what is the purpose of hiding them or Camile camouflaging them in some way? A. It is the easiest way of hiding anything. If you are going to use it for the blending of fuel, as I said, anything that was left over, the easiest way to do that was to sell the stuff to our own leased and operating service station in Sydney." 175 The cross examination continued: (T151) "Q. What your affidavit says is that looking at that document, I can say that it records the deliveries white spirits from Bial to Camile at the rate of two to three loads a week. Where does it show, on that document, the record of the deliveries from Bial to Camile? A. I would have to go through it and try and memorise where we did all these things. It is 10 years ago. It is going to be hard, but if we have to, I would sit down and try to recall where that was." 176 It was submitted that Mr Bartlett, by reference to a document which was not the document that he in fact had in mind, was prepared to support, nonetheless, the suggestion that he had incorporated hidden cash transactions, when there was no basis for that suggestion. Record keeping of Camile Trading. 177 The answers provided by Mr Bartlett, however, must be seen in the context of other evidence concerning the record keeping of Camile Trading. According to Mr Bartlett, the business of Camile Trading operated outside the regime established by Customs. It did not pay duty. Secrecy and the absence of a paper trail was therefore required. Some only of the products purchased for the business were recorded in the company's computer records. Cash was needed to pay for those where a record would be inconvenient. Alternatively, accounts were referred to a controlled retail outlet for payment so as to obscure the paper trail. 178 An examination of the records seized by Customs provided support for Mr Bartlett's contention. The company had a computer system known as Sybiz to record purchases and sales. An examination of the transactions recorded quickly revealed that some, but not all products were included. Blending inevitably increased the volume of diesel and petrol sold. It meant that petrol and diesel sold was greater than petrol and diesel purchased from the major oil suppliers. Adjustments to the inventory had to be made and were made, sometimes with odd results. 179 There were many illustrations provided by the evidence. Exhibit A16, for instance, furnished a useful example. It purported to be an All Branch Inventory, recording stock on hand. It identified various products and various outlets. However, the inventory was nonsensical, recording in some cases an amount with a minus sign before it. The totals recorded were apparently an attempt to balance the books. 180 Another exhibit included a number of invoices from Evenfont in respect of the delivery of heating oil (HO). When a comparison was made between the deliveries recorded in Exhibit A18 and the stock inventory, Exhibit A6, only three of the eleven loads on the first page were recorded. Yet the same exhibit included a cheque butt relating to the payment to Evenfont for all eleven deliveries (Ex A18). There were other examples. Ethanol was used as part of the petrol blend. Where used with a single petroleum product, it was exempt from duty. However, the ethanol inventory included substantial sales of ethanol to retail outlets controlled by Camile Trading. These documents were shown to Mr Fletcher in the course of cross examination and he responded as follows: (T673/4) "Q. ... But you never sold ethanol as such, did you? A. No, I only seen this document a few days ago and we certainly did not sell it as such. Q. For example, there were no sales of ethanol through the Marina service station at Westmead? A. It was ethanol blended fuel. Q. But not ethanol? A. No. Q. And there were no sales of ethanol at Forestville shown in the second entry? A. No. Q. So these records are just a sham? A. I only seen these the other day and they certainly are not what I know about. That's all. Q. You agree they're a sham? A. I don't know. I have only just seen these. I know nothing of this." 181 The cross examination continued for some time. The following questions were then asked: (T674/5) "HIS HONOUR: Q. I think what you're being asked is, on the basis of your knowledge of the business of which you were effectively the owner or 90 percent shareholder then in November 1995, it would be false to represent that the figure which appears in that entry at the top of the page was sold to Westmead service station, that would be false? A. As ethanol? Q. As ethanol? A. No, we never sold that amount. Q. Sorry? A. We never sold that amount to any service station. Q. And yet I think what you're being asked is that that appears in this record so, insofar as this record purports to be an accurate reflection of the business, it's not, as you understood it? A. Yes, that's correct." 182 Mr Hastings then put the following further questions: (T675) "Q. Can you explain how the company records could be so structured to show sales of ethanol which did not take place? A. No, I can't explain that. Q. You say that you have never, in the time that you have controlled the business, come to learn that these records were being kept in a way which was inaccurate? A. That'd be correct." 183 Returning to the cross examination of Mr Bartlett in the context of Exhibit A6 (which had been mistakenly annexed to paragraph 49) I do not believe, against that background, that the transcript demonstrates that Mr Bartlett was lying. He had before him his affidavit which annexed the wrong document. He had knowledge of a documentary system which was, in many respects, a sham. He was attempting, a decade after the event, and six years after the affidavit had been sworn, to explain the system. The search on 26 November 1996. 184 It is convenient to deal with a related aspect in this context. It concerns the search by Customs of the Camile Trading depot on 26 November 1996. In relation to that search, Mr Bartlett said this, referring to the week before 20 November 1996: (Ex A1: p41/2(94)) "About a week before I left employment with Camile, Fletcher said to me: 'I've got it on good authority that we are going to be hit by Customs. Shred all the paperwork that we don't want them to see." Both Christine Greenshields and myself started to shred documents. We destroyed many records including driver's day sheets, driver's log book sheets and invoices from Evenfont for deliveries from both Seven Hills and Rutherford. Christine and I shredded the bulk of these documents. Christine Greenshields has died since that time." 185 The search warrant was executed at 7.40 am on 26 November 1996. Customs officers O'Malley and Rooney (and others) went to the office of Camile Trading at Albion Park. They were not in uniform. Mr Rooney had a tape recorder. The transcript of the recording including these words where they identified themselves to Mrs Brenda Fletcher: (Ex AA16: p1) "ROONEY: My name is Rooney. I am also from the Australian Customs Service. O'MALLEY: I have a warrant to search the premises. Female (Brenda): There is nobody here I am sorry. (Brenda FLETCHER) O'MALLEY: Ah well, if you'd like to ring them, that's fine by me. Female: I'll just try his mobile. I'll try Mr Fletcher's mobile." 186 Mrs Fletcher then telephoned her husband. It is instructive that Mr O'Malley, at this point, drew the inference that Camile Trading had been tipped off. The transcript of the recording is in these terms: (Ex AA16: p2) "O'MALLEY: Must have known we were coming. MRS FLETCHER: What O'MALLEY: Must have known we were coming. MRS FLETCHER: Oh no, I'm talking about the boys. (To another person) Could you do something for me." 187 The transcript thereafter included the following: (Ex AA16: p2) "Tape off. 0742 hours Male person enters and said: You're a week late, you were supposed to be here last week. Tape on. O'MALLEY: My name is Mick O'Malley I'm from the Australian Customs. MALE PERSON SAID: Yes, David Rooney from Customs. ROONEY: David Rooney also from the Australian Customs. MALE PERSON: Yes. O'MALLEY: Can I just get your name please. MR FLETCHER: Les Fletcher. O'MALLEY: Les Fletcher." 188 Mr Rooney had turned the tape off when Mr Fletcher appeared and spoke. When he turned the tape on, Mr Rooney added the comment which appears in the extract from the transcript. When cross examined, Mr Rooney said this: (T562/3) "Q. Did you have a clear recollection, when you prepared your affidavit, of the events of the day? A. I still have a fairly clear recollection of most of the events that happened on the day. Q. Even down to words that were used in conversation between you and, for example, Mr or Mrs Fletcher? A. Particularly the words, 'What are you doing here? You were supposed to be here last week.' Q. Do you remember those particularly, do you? A. Yes. Q. Why is that? A. Basically because the operation had been planned for a week earlier and then, for technical reasons, it had been passed over for a week and it immediately occurred to me that we had a problem in Customs if somebody had advised Mr Fletcher, or somebody else, that we were supposed to be there a week earlier. Those things stick in your mind. Q. Even 10 years later? A. Even 15 or 20 years. Q. Those things you do not forget? A. If there is a corrupt officer in the group, you normally remember it." 189 There was, in fact, no controversy about whether the words attributed to Mr Fletcher were said by him. Mr Fletcher acknowledged that they were. He explained what he meant in his response to Mr Rooney's affidavit: (Ex CT-2A: para 11) "When I made the comment attributed to me in paragraph 5 about them being 'a week late' I was referring to the State body known as the Office of State Revenue-Business Franchise (Petroleum) who were supposed to return for the purpose of returning papers, having already conducted an audit on our premises on 16 October 1996. I had no prior knowledge of the search by the Australian Customs Service." 190 It was put to Mr Fletcher in cross examination that, had he been confused as to the identity of those at his premises, he would have explained his comment to the Customs Officers (T750). Mr Fletcher said that he had no reason to explain his comment. 191 There is corroboration for the suggestion made by Mr Bartlett concerning the tip off. At the same time as Messrs O'Malley and Rooney were executing a warrant on the depot, other Customs Officers were executing another warrant upon the home of Mr Bartlett. The officers included Mr de la Motte. The conversation, as noted by Mr de la Motte, was in these terms: (Ex P: p3) "I said: 'I have a search warrant relevant to section 198 of the Customs Act here. I will execute this warrant because we have cause to believe that the company, Camile Trading, which I believe you are a director of, has been involved with mixing diesel fuel with heating oil.' Bartlett said: 'I don't know what you're talking about. Let's take a seat.' We then sat at a table on the patio. I said: 'Diesel fuel is about 34 cents a litre excise duty and heating oil is 7 cents a litre. When you mix the two together you're defrauding the government and making a cheaper and illegal product.' Bartlett said: 'How do you know that is happening?' I said: 'We have university tests, scientific tests that prove this has happened.' Bartlett said: 'Well I don't work for Camile. I resigned last week and I didn't do it.'" 192 In cross examination the following was put to Mr de la Motte: (T442) "Q. You are satisfied the notes are an accurate record of what he said to you and what you said to him, that's fair enough, isn't it? A. I am. Q. Now he didn't say at any stage to you words to the effect of 'you guys are seven days too late', did he? A. I have a note on another page in my notebook and it was said to me at the time by officer Rocca that John Bartlett had said to him that he was aware from the conversation with Mr Fletcher that somebody, and that could have been Customs or the Australian Federal Police, were due to come to his house. Now in my notebook, and I can show you, when I got back to Sydney from the job in Barrack Heights, Port Kembla area, I reported that to my director. Now that's what I was told. He did not say that to me." 193 Although I find Mr Fletcher's explanation highly implausible, I will defer for the moment making a finding whether Mr Fletcher did tell Mr Bartlett that he had been tipped off concerning the Customs raid. 194 I should, however, deal with the suggestion that Mr Fletcher also gave instructions to destroy documents (supra para [184]). In substance, Mr Bartlett said that, having been given instructions by Mr Fletcher, he and Ms Christine Greenshields then shredded documents. He acknowledged that Ms Greenshileds had since died. He identified the documents shredded as including drivers' day sheets, drivers' log books, invoices from Evenfont, amongst others. 195 This evidence was the subject of a sustained attack in cross examination. It was one of the few issues where Mr Bartlett was taken to passages in the voluminous statements he had made to investigators when they first spoke to him, and where his previous account appeared to be at odds with the terms of his affidavit. 196 Counsel reminded Mr Bartlett of what he had said in his affidavit (Ex A1: p41/42(94)). Mr Bartlett reaffirmed that the instruction was given by Mr Fletcher to "the girls in the office and myself". He identified one of the girls as Mrs Brenda Fletcher, a person he described as a "new lady" (T210), as well as Ms Greenshields and himself. He said, "heaps of documents were shredded" (T211). He shredded the documents in front of him on his desk. He added that a lot of documents "would have been sorted and destroyed over a period of days" (T211). 197 Mr Bartlett was then taken to the statement he had made to Customs investigators in March 1997 (MFI 5: p7): (T213) "Q. The next entry is Mr O'Malley apparently saying this: 'We've only found one set of documents out of Rutherford.' Rutherford being one of the locations, the other being Seven Hills, where Evenfont was operating out of; is that right? A. That's right. Q. 'Which doesn't surprise me.' And then these words from Mr O'Malley: 'Seeing as we didn't find much documentation at all at Camile.' You see that? A. I can see that, yes. Q. You said: 'No, you wouldn't have.' As if to suggest that you were well aware that there was not much documentation at all at Camile. That is right, isn't it? A. That's right, yes." 198 The cross examination continued: (T213/214) "Q. Then Mr O'Malley says: 'Do you know what happened to the documentation?' You see that? A. Yes. Q. Just stopping there. You knew at that time that you and Christine Greenshields had destroyed the bulk of it by shredding it? A. We'd - yes, we got rid of all of that. Q. That was done on Mr Fletcher's orders, according to what you said in the affidavit. That is right, isn't it? A. Yes that's true. Q. But what you said to O'Malley was - the question was, 'Do you know what happened to the documentation? No.' That was your answer, 'No'? A. Yes, I can see that. Q. 'Actually, it's a funny thing. When we were told we were going to get hit, some of the paperwork was destroyed, but I didn't see all the stuff go, no.' Was that an accurate answer to the Customs officers? A. It would have been an accurate recollection at that time, as all the paperwork would have been destroyed by us and if I did not see it destroyed, it was done while I was outside, or somewhere. As I said, we got rid of a bulk of the paper that was there at the time; Christine Greenshields and myself." 199 Mr Byrne SC then put the following: (T215) "Q. ... I put it to you, Mr Bartlett, that what you have said in your affidavit, which you claim to be the truth, is in stark contrast to what you have said to the Customs officers, which you also claim to be the truth? A. It is right. When I was doing the interviews on the tapes in the very early pieces, it was to the best of my knowledge. Everything that I had said, and at the time of making my statement to the Customs people, it was also to the best of my knowledge at that time, and it is still all truthful. Q. I suggest to you, with great respect, it cannot be all truthful, because one version is starkly different from the other; one of them has to be wrong, with respect? A. I can't see that. In my statement I state we shredded most, or the bulk, of the paperwork, and this other one I say in here that other paperwork was shredded by Fletcher. Well, if that was done while I was not in there, somebody had to get rid of the other stuff." 200 Mr Bartlett added: (T217) "A. Mr Fletcher was there and his wife were there. They are both in the building. They are both capable of destroying paperwork. They are capable of working the equipment and knew what paperwork to get rid of, if they wanted to get rid of any. Q. But you knew it was you and Christine Greenshields that shredded the bulk of the paperwork? A. Not all of it." 201 The issue was pursued: (T217/218) "A. As I said, I seen Fletcher shred quite a number of documents over the time. During that time I was not there totally all the time. If he has shredding anything, he would have shredded it while I was not there. As I say, he probably got rid of the rest of the paperwork. Q. The question was; Did you see Mr Fletcher shredding any paperwork after you got the advice that there was going to be a hit from Customs? A. It's simple for you to get me to go back 10 years. I'm trying to think what happened 10 years ago. It's very hard. I would say that I would have seen Les Fletcher destroy documentation from time to time, but through that time, I can't categorically say that, no. Q. But, you wanted to convey that impression to the Customs Investigators as of March 1997, that Fletcher did it, didn't you? A. For all the documentation to be got rid of, somebody else had to have got rid of the other part of it that was not destroyed. The only people that had access to that office was Fletcher and his wife, and no other people were around after working hours." 202 Mr Bartlett was then taken to answers he gave to the Customs investigators as to the documents destroyed. He said this: (T220) "Q. And the question put, perhaps in fairness, Mr Bartlett, on the page, to put it in context, after you had said that that documentation could be parked at somebody's place, 'What sort of documentation was destroyed?' You said, 'Well, I don't know. You surprise me saying there was no paperwork coming down from Rutherford because I saw it daily.' That was the exchange that preceded the question that is asked at the top of page 8? A. Yes, I can see that, yes. Q. You said, 'I wouldn't have a clue, I really wouldn't. If it was incoming docket, yeah, out they go. Outgoing, they get shredded; whatever.' Right? A. I see that. Q. Is that seeking to convey to the Customs officers that you were shredding basically anything that you could lay your hands on? A. Documentation that I had in my office that I believed needed shredding was all shredded and any other documentation that I believed needed shredding was shredded as well." 203 Those answers are to be contrasted with the affidavit (Ex A1: p42/43(97)) where Mr Bartlett listed, very specifically, the documents which were shredded (drivers' day sheets, log books, invoices from Evenfont, etc). Mr Bartlett had no explanation other than it was something that he had thought of since he was interviewed (T221). 204 These were significant differences, therefore, in Mr Bartlett's recollection. What other evidence is there on the issue? Mr Bartlett, in his general description of the system that operated within the office, described the documentation which was retained and recorded in the company's records and that which was destroyed (that being part of the paper trail which would suggest blending). He said this: (Ex A1: p28/29(58/59)) "58. When the drivers returned with white spirits obtained from Evenfont, they always handed to me a Driver's Load Sheet and a Delivery Docket. The Driver's Load Sheet was a document that the drivers were required to carry in compliance with the Dangerous Goods Act; it showed the quantity of petroleum product being carried and a description of the goods, which was normally recorded on the document as "Petroleum Product", together with the applicable Hazchem and United Nations Code. The Delivery Docket showed the quantity of goods and described them as 'white spirits', 'w/spirits' or simply as 'w/s'. I did not pay for these deliveries of white spirits with cash from the cash tin. 59. I then passed the Driver's Load Sheet to either Brenda Fletcher or Christine Greenshields, both of whom worked in the office at Camile. Brenda Fletcher was Les Fletcher's wife. I heard Fletcher say to his wife and Christine in relation to one of these documents: 'Once you have finished with that, shred it. Get rid of it.'" 205 Mrs Brenda Fletcher denied that suggestion (Ex CT-4: para 9). When she gave evidence, she recalled that there were load sheets. However, she did not know what Mr Bartlett did with them. One gathers that they were not at the depot when Customs carried out its search on 26 November 1996. The material seized that was tendered did not include load sheets. 206 Mr Bartlett gave evidence about two other aspects relevant to the suggested tip off. Both were plausible. His 1996 diary was not seized by Customs and I infer was not at the depot on the day of the search. The diary recorded the deliveries to the depot each day, identifying with the initials "O/D" those paid for in cash. Mr Bartlett said this concerning that diary: (Ex A1: p18(30)) " ... I kept this diary on my desk in the office and I usually referred to it as the 'Order Book'. The last time I saw this diary was about one week before I left Camile's employ. At that time, it was placed in a box and put in the back of Jim Steven's car. Jim Stevens was a Camile employee working in the yard at the depot and is Brenda Fletcher's father." 207 Mr Fletcher responded to this paragraph of Mr Bartlett's affidavit in these terms: (Ex CT-2A: para 70) "I say that with respect to the diary and order book referred to in the paragraph it was always his document which he kept control of. I have no knowledge of either sighting the diary in the back of Jim Stevens' car, nor did I give instructions or, for that matter, physically put it there myself. Jim Stevens is the father of my wife, Brenda. The first time I have ever heard of the diary being placed in the back of Mr Steven's car was when I read Mr Bartlett's affidavit. My father-in-law passed away on 26 January 2004." 208 At the time Mr Bartlett swore his affidavit (11 August 2000) Mr Stevens was alive. I think it most unlikely that Mr Bartlett made it up. The 1995 diary (Ex AA6) was seized by Customs officers at the depot (Rooney: Ex AA1: para 16) (cf Ex A1: p37(81)). 209 The other matter which Mr Bartlett suggested in relation to the alleged tip off concerned the removal of the cash tins kept in the safe. Mr Bartlett gave the following evidence: (T73/74) "Q. Where were the tins kept? A. At one stage both the tins were kept at the depot in a large safe and when Fletcher said there was going to be a few problems around the place, and I am talking about Customs may be hitting, that tin was then moved to a friend of Les Fletcher's and then hidden at his place. Q. And how often did that happen in the time that you were working with Mr Fletcher at Camile between 1992 and 1996? A. How often did what happen? Q. The removal of the tin? A. Only once. Q. When was that? A. About, it would have been about two, may be three weeks before, two or three weeks before I had left, which would have been in 1996. Q. Well you left 20 November 1996? A. So it would have been three to four weeks prior to that. Q. You say at that time there was some concern that there might have been a visit from Customs around that time, is that right? A. That's right. Q. Do you have a clear recollection of the movement of that tin? A. Yeah, I-- Q. Sorry, what I am talking about is the movement of the tin from the Camile depot to this house where it was hidden? A. Yes, I removed the tin and took it there. Q. Where was the house where it was hidden? A. Um, it's Loftus Street, Barrack Heights. Q. Did you tell the Customs officers about the movement of this tin from Camile to this house? A. Yes, during conversations I told them." 210 I will shortly deal with the evidence of Mr Allen Handcock. He was employed by Camile Trading to drive tankers during the period June or July 1994 and 25 July 1997 (when he had an accident) (Ex K1 (para 2)). It is, however, convenient to deal with one aspect of his evidence in this context. He said this: (Ex K1: p6(32-34) "32 In September of 1996 I can recall Fletcher approaching me and another driver I believe may have been Bernie Smilie, in the yard and he said words to the effect: 'Destroy all the log books, diaries and other paperwork you have in relation to your fuel deliveries and pick-ups.' I then saw another driver, Bernie Smiley, rip pages out of his diary and destroy them by shredding. 33 I do not know why Fletcher wanted my log books destroyed, as they only covered trips of more than 80 kilometres, and did not in any event show what product was being carried, but I destroyed some of them anyway. The copies that I destroyed were the employees copies, not those fixed in the book. 34 As a general rule at Camile, the load sheets (which did actually show the description of the product, its quantity and destination), being placed on return to Camile in a locked box located in the drivers' lunchroom, came into Camile management's possession soon after they were created." 211 Mr Handcock said he never saw the box opened. He saw other drivers place their load sheets in the box (T327). The following question was put to him in cross examination: (T344) "Q. You've also put in your affidavit at paragraph 32 some conversation that you say occurred between you and Mr Fletcher in September of 1996, you see that there? A. Yes. Q. You attribute some words to Mr Fletcher that are written there in paragraph 32? A. Yes. Q. I suggest to you your recollection about that is wrong Mr Handcock because it wasn't Mr Fletcher who gave you those instructions? A. It was Mr Fletcher." 212 It will be noted that Mr Handcock said that the instruction from Mr Fletcher was given in September 1996, not late November 1996. He made no reference to the search of the Camile Trading depot. He may well be referring to a different occasion. Although the evidence may not corroborate Mr Bartlett's evidence concerning the tip off, it does support his account that Camile Trading periodically destroyed documents, which one may infer were documents which may disclose the true nature of the operation. His evidence also supports Mr Bartlett's assertion that Mr Fletcher gave such instructions. Petrol samples. 213 There is a further issue, which is related to the search and whether there was a tip off. It may conveniently be dealt with in this context. Samples were taken by Customs investigators in the course of the search on 26 November 1996. They were taken from tanks within the depot, retail outlets owned and serviced by Camile Trading, and even a tanker about to make a delivery to Volume Plus at Liverpool (T339). Indeed, the tanker was seized, although later returned (Handcock: T340; O'Malley: T532). 214 It will also be remembered that the Customs officer who searched the home of Mr Bartlett said to him that Customs had "university tests, scientific tests that prove" there had been blending (Ex P) (supra para [191]). Yet, the material served by the Crown upon the defendants did not include reports from scientists who had examined the samples, whether before or after the search. In these circumstances, Mr Byrne SC (for the first and second defendants) asked many questions about the taking of samples, and the accuracy of gas chromatography in discerning whether particular constituents, even trace elements, were present in a blend of petrol. It became obvious that a Jones v Dunkel ((1959) 101 CLR 298) submission would be made by the defendants in the absence of such evidence. Almost at the end of the plaintiff's case, Mr Hastings QC (for Customs) said this: (T594/5) "HASTINGS: That in essence concludes the evidence for the plaintiff, subject to one issue that I have raised with my learned friends this morning, which has thrown the cat amongst the pigeons a bit, and that I have provided a folder of material which I think until now has not been seen. I would like my friends to have the opportunity of considering the matters I have raised, but I have been increasingly alert to the fact that my friends are positioning themselves for a Jones v Dunkel submission in relation to testing of samples." 215 Mr Hastings identified what he had in mind: (T882) "What I propose here is to proffer the reports which were obtained in relation to the testing of the samples, which in themselves would negative any suggestion that they were favourable to the defence, and that is the reason why they are not being offered, and at the same time produce file notes which indicate there were problems in relation to the strict proof of the continuity of the samples to make the testing admissible. Secondly, to show that the original testing was done without the aid of a gas chromograph and by the time the samples had been given to a person, before he had access to a gas chromograph, the matter became too difficult to pursue. That involves your Honour seeing the tests which, in a sense, is inappropriate because they are not being put forward as relevant to the facts." 216 Mr Stanton of counsel (in Mr Byrnes' absence) anticipated the defendants would object to the material. 217 The following day, Mr Byrne SC returned. Mr Hastings renewed his tender of the folder of material. There was no objection. It was marked Exhibit AL (T942). At the same time Mr Byrne tendered lengthy submissions on behalf of the first and second defendants relating to the sampling issue, and the exhibit. The submissions suggested that a Jones v Dunkel inference should nonetheless be drawn. 218 Exhibit AL included documents relating to a number of tests upon various samples undertaken by Dr Terence Flynn of the School of Chemistry at the University of New South Wales. There was a report of 1 November 1996, that is, before the search. Dr Flynn examined and tested a number of samples said to have come from Camile Trading. The methodology was described. It did not appear to have included gas chromatography. The report was in these terms: (report p3) "METHODOLOGY Flash point was determined in duplicate on each of the samples in accordance with ASTM Method D 93 (Closed Cup Method). Boiling range was determined in duplicate on each sample in accordance with ASTM Method D 86-92." 219 In respect of diesel, Dr Flynn drew the following conclusions: (report p4) "(i) Diesel samples (a) Flash point Each of the diesel samples tested had lower flash points and lower initial boiling points than that found in typical diesel fuels. A typical flash point for diesel fuel is in the range 80ºC to 57ºC. The samples tested were all in the range 34ºC to 57ºC. These flash point values indicate that the diesel has been adulterated with a hydrocarbon mixture similar to heating oil, top crude or kerosene which have a typical flash points in the range 35ºC to 60ºC. (b) Boiling range The boiling ranges of the samples tested were compared to that of a typical diesel fuel. The initial boiling point of authentic diesel would be in the vicinity of 212ºC however, the initial boiling points of the samples were all below this value. The initial boiling point of the samples tested confirm that the fuels tested were diesel blends containing either light petroleum fraction such as heating oil, top crude or kerosene. Sample 24105 was similar in appearance to top crude with flash point and distillation range data indicating that the sample was not a top crude/diesel blend but top crude alone. Sample 24107 had a very low flash point suggesting that it was a mixture of kerosene and diesel." 220 A number of petrol samples were also examined and tested. Dr Flynn's conclusions were as follows: (report p5) "(ii) Petroleum samples (a) Specific gravity A typical specific gravity of petrol is approximately 0.743 at 15ºC. The specific gravity values of the majority of the petrol samples were all above this value, however only differed in the third decimal place. This is most likely insignificant in terms of detecting any degree of adulteration in the product. The specific gravity of Sample 24109 was significantly different from that of typical petrol, possibly indicating contamination of the petrol with a lighter hydrocarbon fraction or even ethanol. However the boiling point of ethanol is 78.5ºC and there is no indication that there is more material from this sample boiling at this temperature (50% recovery at 94ºC similar to Sample 204022). (b) Distillation range The boiling range of the petrol samples were all in the specified range for authentic unleaded and leaded petrol. It should be noted however, that the manufacturer's boiling range specification for petrol is rather liberal and can only be indicative of gross adulteration or contamination of petrol. The specific gravity is a much more useful indicator for detecting petrol adulteration." 221 The written submissions of the first and second defendants, whilst characterising this report as "damaging" to Camile Trading's interests, said that it nonetheless did not corroborate Mr Bartlett's assertion that white spirits had been used. 222 It is reasonable to infer that Dr Flynn's report was "the university or scientific test" to which Mr de la Motte, the Customs Officer, referred in his conversation with Mr Bartlett. 223 After the search had been undertaken on 26 November 1998, Dr Flynn was again provided with a number of samples which he examined. He produced a number of reports. The reports are somewhat inconclusive. Care was not taken to maintain continuity. Some samples were examined with the aid of gas chromatography, but not others. Fuels deteriorate with time (through evaporation) so that tests undertaken well after the fuels were seized were inconclusive. Some tests revealed simply diesel, or a blend of diesel fuels. Others suggested a blend of diesel and heating oil. Still others suggested a petroleum product from Evenfont mixed with heating oil (Ex AL: p29/30). Such a fuel is not the subject of allegations in the Statement of Claim. 224 The first and second defendants, in the written submissions, nonetheless persist with the Jones v Dunkel argument. They drew attention to the fact that no affidavit had been filed from Dr Flynn (although one was obviously in preparation according to a file note in the exhibit). Dr Flynn was not called. They complain that the material was produced after the Customs officer in charge of the case, Mr O'Malley, had been called. There was therefore no opportunity to put to him matters that may have been put had the folder been served in a timely way. 225 However, it seems to me that no Jones v Dunkel inference adverse to the plaintiff should be drawn. What Dr Flynn can say emerges from the exhibit. Some of it is favourable to the plaintiff (especially the material before the search) and some is, arguably, adverse. It was open to the defendants to object to this material unless Dr Flynn were called, but they did not do so. They could have asked that Mr O'Malley be recalled. No such application was made. I should not speculate upon what either might have said had the defendants insisted that they be called. 226 The material does not greatly advance the debate concerning whether Mr Fletcher had been tipped off, and gave an instruction to destroy documents. Had the samples been pure diesel, or pure leaded or unleaded petrol, that may have strongly supported an inference that Camile Trading was on notice. However, the reports are not clear cut. A number of samples suggested blending or adulteration, although nothing was specifically identified as white spirits. 227 What conclusion should be drawn from all the material (including that relating to the search) concerning whether Mr Fletcher told Mr Bartlett that he had information concerning the possibility of a raid by Customs? Did Mr Fletcher give instructions to Mr Bartlett and others to shred documents? In determining these issues, much will depend upon whether Camile Trading was in fact blending diesel with heating oil and petrol with various petroleum products, as alleged by Mr Bartlett. If Mr Bartlett is to be accepted on that issue, then there was an obvious need to destroy documents that may disclose blending if Mr Fletcher had information that suggested the possibility of a search. Documents of the type identified by Mr Bartlett in his statement (with few exceptions) were not located when the search ultimately took place. However, I should postpone my conclusion on this aspect until I have determined whether Mr Bartlett's fundamental assertion that there was blending should be accepted. I will therefore return to this issue. 228 I have to this point been dealing with Mr Bartlett's evidence, occasionally referring to the evidence of Mr Fletcher and others in relation to particular aspects. Let me move from Mr Bartlett to other witnesses who gave evidence relevant to the account he provided of blending. 3. OTHER EVIDENCE RELEVANT TO MR BARTLETT The evidence of Mr Gibb. 229 I have previously referred to the evidence of Mr Gibb (supra para [125]). He was a scientist employed by Evenfont in the sale of lubricants. His office was next to the laboratory of Mr Lucas (T220). He said he was familiar with the products of Evenfont (Ex AD). He also said this (referring to Redline, which is a business name used by Evenfont): (Ex AD: para 14) "Marina Petrol (Camile Trading Pty Ltd) would purchase Redline products known as 'HO', 'Waste' and 'WS' ('white spirits', often colloquially referred to as 'white shit'). 'Waste' lubricating oil products were collected from various sources, including industry and service stations. They were filtered by the Redline refinery, their water removed, and they were then sold to Kendall Transport." 230 The affidavit provided an elaboration: (Ex AD: para 16) "'WS' was the name given to the product extracted from the 'slops', as well as the name given to the 'light ends' produced from the abovementioned processes. Indeed, 'White Shit' was an alternative name given to light ends. 'Light Ends' are a light petroleum hydrocarbon fraction with characteristics and volatility similar to naptha and petrol. In the distillation process, hydrocarbons are separated by virtue of their boiling point. Since crude oil contains many, many different hydrocarbons, the distillation process produces hydrocarbon fractions that are separated according to their boiling point range, not just one single boiling point. These 'light ends' are the first liquid hydrocarbons that come out of the process. They have a boiling point in the range similar to petrol, and are fairly volatile. As the distillation process continues and the temperature of the distillation process increases, another boiling range of hydrocarbon fluids starts to distil off. This hydrocarbon fraction starts off with a product similar to kerosene or Avtur, then, with increasing temperature, hydrocarbon products similar to heating oil and automotive distillate come off." 231 Mr Gibb said that the colloquial name for "WS" was "white shit" (T583). He had never tested that product. He was not familiar with its characteristics. It was water white in appearance (T584). He made the following statement in chief: (T583) "Q. What would be the normal sort of use for a product such as that? A. In the petroleum industry that would be one of the major components of gasoline. It would be described as often as a sort of a napthas material, and that then would need to have to undergo further processing in a full blown oil refinery to be able to have it - to be able to call it gasoline. Q. Why could it not be immediately used as gasoline without further treatment? A. Because the material was pretty well paraffinic or alyphatic, which basically means that it's long chain hydrocarbons, and for gasoline you need to have an unsaturated chemical structure for it to burn correctly." 232 Mr Gibb gave evidence about the source of "WS", which was "slops". He said this: (T585/6) "Q. What products were generated by the processing of the slops? A. It would be pretty well whatever the original nature of that material was. If it was a gasoline and diesel slops, there would be a gasoline fraction that would come out of that, which would be what we essentially call WS, and then if it was a diesel fraction, that will come out as a diesel. That's really what it is." 233 I will return to this aspect in the context of the plaintiff's case against Evenfont and Mr Pullinger. When cross examined by Mr Horowitz, Mr Gibb said this: (T591/2) "Q. You were not however involved in the refinery side of the Redline business, were you? A. That's correct. Q. And by refinery side, you understand that to mean the side of the business that was involved in the processing of crude oil and the processing of slops, is that right? A. That's right, I wasn't involved in that business. Q. And you don't have any detailed knowledge of how the Redline refinery operated, do you? A. Only the knowledge that I mentioned already, which is I describe as being a fairly crude operation. Q. You were never involved in the payment of excise for any products that came out of the Redline refinery, were you? A. No. Q. You were never involved in the production of the product known as WS, were you? A. No. Q. You were never involved in the sale of any of the WS product to Camile, were you? A. That's correct. Q. You never loaded any Camile tankers with WS, did you? A. No. Q. You never analysed any of the WS product that was purchased by Camile, did you? A. Only from the extent of the samples that were provided from Les, that he asked me to check at Caltex. Q. Buy you don't actually know what was in those samples, do you? A. No. Q. So as you sit here today, you cannot say under oath that you know for sure what the product was that was loaded into the Mobil tankers each time Evenfont sold Camile a load of WS? A. No, because I wasn't involved in that." 234 Evenfont's distillery could not produce white spirits. Since it was Mr Gibb's belief that "WS" (which he referred to as "white shit" or "white spirits") had its source in waste slops, the question whether it was white spirits will depend upon the products manufactured by Evenfont in processing waste slops. I will deal with that issue in the context of Evenfont below. It will emerge that white spirits were not a by-product of waste slops. Hence, Mr Gibb's evidence, when analysed, does not support the suggestion by Mr Bartlett that Evenfont was a source of white spirits. 235 A further aspect of Mr Gibb's evidence concerned a conversation he had with Mr Fletcher. He said this: (Ex AD: para 18) "When I worked at Redline. ... I had a conversation with Les Fletcher, the second defendant, and director of Camile, either in late 1995 or early 1996 when, to the best of my recollection, Fletcher said the following words to me, or words of similar effect to the following: 'I have some samples here, can you have these tested at Caltex?' I said: 'Yes we can. What sort of samples are they?' He said: 'These are blending materials that I am considering using. I need to know the octane rating. I am going to use these materials in blends of condensate from South Australia, mineral turps, White Shit and Unleaded Petrol.'" 236 Mr Gibb swore his affidavit in December 2003. When cross examined, he acknowledged that he was therefore recalling a conversation which had occurred eight years before. It was put to him that Mr Fletcher had not referred to "mineral turps", which would damage a car's duco if it were spilt. The cross examination was as follows: (T590) "Q. I just suggest to you that by reason of the fact that it's eight years that you are remembering back, that it might have been something else other than mineral turps that he was referring to there? A. That could be the case, given the length of time. It's difficult to remember word for word." 237 Mr Gibb's evidence supports the suggestion of blending, at least between unleaded petrol, white shit from Evenfont (whatever its precise character) and some other substance which may or may not have been mineral turps. 238 There was, incidentally, no evidence concerning the outcome of the test which Mr Gibb had been asked to arrange. The evidence of Mr Handcock. 239 Mr Handcock, it will be remembered, was a tanker driver employed by Camile Trading between mid-1994 and mid-1997 (supra para [210]). In his affidavit, Mr Handcock described the products which he carried. One was a product produced by Evenfont which was sold to retail outlets in circumstances where one would infer that it was marketed as "diesel". Mr Handcock said this: (Ex K1: para 13) "The CO11 and HO product I picked up was not diesel fuel but was used in diesel engines. The product was green in colour, which was unlike the colour of diesel from Mobil, BP and Shell. This product was sold to some service stations and transport companies by Camile. When I delivered this product to service stations I would unload directly into the underground diesel tank. The majority of service stations I delivered to only had one underground diesel tank." 240 Mr Handcock said the majority of loads were picked up from Redline (the trade name for Evenfont) and taken directly to retail outlets (T332). Using his diaries, and by reference to a particular day, he said that when he went to Redline he was empty (T349). If that were right, it would suggest that the product delivered was an Evenfont product, not one that had been blended. That evidence, however, is somewhat at odds with what Mr Handcock later said in his affidavit (Ex K1, para 27), which will be referred to below (infra para [247]). 241 Another product which Mr Handcock said that he carried was described as follows: (Ex K1: para 14) "The white spirit or 'WS' from Seven Hills and Rutherford, which Redline yard staff sometimes also referred to as 'white shit' or 'toluene', was like petrol. This 'WS' was unlike petrol in that the smell differed between loads. This product evaporated on the dip-stick quicker than petrol but not as quick as ethanol. In the majority of cases it did not have a dye in it and it was clear in colour." 242 Mr Fletcher, responding to Mr Handcock's affidavit, denied having bought white spirits from Evenfont (Ex CT-2A: para 19). Mr Handcock acknowledged in cross examination by Mr Horowitz, of counsel, that he only ever picked up "green shit" and "white shit" from Evenfont. As indicated in the context of Mr Gibb's evidence, the precise nature of the "white shit" produced by Evenfont will be dealt with below, when the case against Evenfont is considered. 243 Mr Handcock described other products which he delivered to the Albion Park Rail depot. They included ethanol from Manildra at Nowra and CSR at Pyrmont (Ex K1: para 16). They also included the following: (Ex K1: para 17) "I also saw the following being delivered to Camile at Albion Park: a petroleum spirit delivered by Vic Newland from the Central West, a truck from Queensland delivering petrol on occasions, Knights' tankers carrying petroleum products, Toluol delivered by S F Bial and Heating Oil from Success Freightlines Pty Ltd." 244 Mr Handcock also gave evidence concerning the practice at Camile Trading of blending various petroleum products. He said this, concerning tanks 15 and 16: (Ex K1: para 23) "There were 16 tanks at Camile, Albion Park, during my time there. Tanks 15 and 16 held quantities of leaded and unleaded petrol respectively, but, unlike other tanks at Albion Park which stored petrol separately from other products, these tanks were known as 'blender tanks'. Other products were added to the petrol in these blender tanks so that, when loading from these tanks, the product taken on board was a blend of petrol with ethanol from Manildra, toluene and 'WS' from the third defendant, Evenfont's, Redline business. I saw the valves on the various tanks being opened, to allow the different products to flow. On occasions, when blending was taking place, we had to wait until the blending was completed before we were able to load the tankers as the same pumps were needed to carry out both tasks." 245 In respect of diesel, Mr Handcock described the practice in these terms: (Ex K1: paras 25 and 26) "25 While I was not aware of the various quantities of product that were placed in these tanks, I was aware that the blending of product, particularly of diesel fuel and 'HO' (heating oil), also took place at Camile. ... I would blend Heating Oil and HO by turning valves, located on the tank. These valves were connected to pipelines that were connected to each storage tank and were colour-coded and numbered according to the type of product stored in those tanks. These tanks were ultimately connected by pipeline to the loading gantry. 26 Instructions to me ... to perform the blending of these products and for the various quantities of each product to be used in blending were given to me by John Bartlett, Peter (Marzan)." 246 Mr Marzan replaced Mr Bartlett in November 1998. 247 Mr Handcock made the following statement concerning the blending of Redline (Evenfont) HO in the tankers (cf para [240] supra): (Ex K1: para 27) "Blending of Heating Oil and HO and also Rutherford HO and Diesel also occurred within the storage tanks of the tanker vehicles themselves. Whereas normal practice was to load and convey separate product in each of the storage compartments of the vehicle, I can recall being expressly told by Mr Peter Marzan that I was to mix separate products in the same compartment and not to load them in separate compartments." 248 When cross examined upon this material, Mr Handcock said this: (T343/4) "Q. I suggest that there was no blending of diesel fuel and heating oil after 1994, it simply didn't happen? A. I felt sure it was before 1994. Q. It was before 1994? A. As far as I'm led to believe. Q. But not after 1994? A. Yes, because I was working there when I done it." 249 Mr Byrne SC repeated his question shortly after: (T344) "Q. You see I suggest to you Mr Handcock that there was no blending of heating oil with diesel after 1994, it didn't happen after 1994? A. As far as I know it did because I had done it." 250 Mr Handcock also gave evidence concerning the practice of Camile Trading in respect of documents. The description on invoices of the products carried was sometimes false. Moreover, payments were sometimes made in cash. He gave a number of illustrations. Amongst the Marina delivery dockets seized by Customs in November 1996 were invoices which described deliveries of HO (heating oil) to the Westmead service station which was controlled by Marina Petrol (Ex K1: para 20). According to Mr Handcock, Westmead had neither storage tanks for HO, nor diesel. Mr Fletcher responded to Mr Handcock's evidence, saying that the HO obtained from Redline (Evenfont) was not, on his understanding, heating oil. He said the Redline product HO was delivered to Westmead (Ex CT-2A: para 23). 251 Mr Handcock provided a further illustration. It related to the carriage by Camile Trading of "waste oil" to the Marina service station at Forestville. Mr Handcock said this, referring to the Forestville service station : (Ex K1: para 21) " ... this service station does not sell waste for, among other reasons, it has only one storage tank, that being for diesel fuel or HO." 252 Mr Fletcher said that Forestville did sell waste oil (cf Ex CT-2B). I will return to this an issue in the context of Evenfont. 253 Mr Handcock also made the following assertion in his affidavit: (Ex K1: para 22) "When I was driving for Camile, it was common practice at some of these various retail sites to deliver fuel without any delivery documentation at all and to receive payments for that fuel in cash. I was told by Peter Marzan or John Bartlett, on a regular basis, to pick up a parcel or to collect cash from Marina sites." 254 Mr Fletcher denied Mr Handcock's account. He said that deliveries were accompanied by documents describing the product, but not always including the price. He was responsible for cash. If Mr Bartlett gave instructions to drivers to pay in cash, it was without his knowledge or authority. 255 The final aspect of Mr Handcock's evidence concerned the testing of samples. He said this: (Ex K1: para 28) "On occasions, Fletcher, the second defendant, gave me samples of diesel fuel and HO and instructed me to take these samples to Redline at Seven Hills and to give them to the female chemist that worked there. He said words to me to the following effect: 'Alan, I want you to take these diesel fuel and heating oil samples up to Redline for me and give them to the girl in the laboratory, or if she's not there give them to the yard foreman.'" 256 Mr Handcock also said that Camile Trading tankers, including his own, used the Redline (Evenfont) HO product, sometimes giving rise to problems that were taken up with Mr Fletcher or Mr Hennessy and referred to Evenfont (Ex K1: para 29). Other drivers of Camile Trading. 257 Each defendant admitted that, in May 1997, Mr Rooney of Customs attempted to speak to the following persons, who were drivers working for Camile Trading. Mr Rooney was met with a refusal by each (Ex G): (i) Shayne Jurrians (ii) Neil Johnson (iii) Ian Howard (iv) Nelson Hennessy 258 However, Mr Charles Zborja, a tanker driver, did swear an affidavit in March 2000, which was relied upon by the plaintiff. He worked for Mr Ayoub and later for Mr Fletcher at Camile Trading over a six year period. He left in May 1994. His departure from Camile Trading, therefore, was a month or two after the change of legislation on 1 April 1994, and the period relevant to this claim. 259 Mr Zborja said that he was familiar with Camile Trading's operation. He said this: (Ex O: para 4) " ... I became aware from observing the goings-on, from discussions with other drivers, and from my own involvement in carrying out directives given to me by Camile's management, that Camile often mixed different petroleum products within the same tanker load, and that such mixing might take place, depending upon the instructions of Camile's management, at Camile's yard or even while transporting product on the road." 260 One of the suppliers of Camile Trading was Redline of Seven Hills (Evenfont). Mr Zborja said this: (Ex O: para 5) " ... this operation supplied 'HO', 'CO11' and 'WS' (the latter being a petrol-like product) to Camile." 261 Mr Zborja added: (Ex O: paras 6/7) "6. During my time with Camile, it came to my notice that Camile was mixing, or blending, petrol with at least 20% of the 'WS' product that came from the 'Redline' refinery. I can recall Fletcher saying of the blended product: 'I have tested this blend on my car and it runs OK.' I had said: 'My car won't run properly if anyone's fuel is not right.' Fletcher and Bartlett had then made up a blend that my car would run on. To test this blend, I drained all the fuel from my car's petrol tank so as not to give a false result of the blend. 7. The petrol delivered from Camile to service stations contained not only the 20% WS from the 'Redline' refinery, but also between 5% and 10% ethanol. The mixing of these products occurred at the Camile depot situation at Albion Park Rail." 262 Mr Fletcher responded to these paragraphs, saying that he did not instruct Mr Zborja. It was no part of Mr Zborja's job, according to Mr Fletcher, to become familiar with the matters he described (Ex CT-2A: para 16). Mr Zborja's affidavit concluded with these words: (Ex O: para 9) "I and the other drivers blended the petrols at Camile's depot. Both Bartlett and Fletcher said words to the effect: 'We will blend 20% 'WS' and 5% Ethanol with the super and unleaded petrol, as we have tested these percentages and found them to work.' Dyes were also added to the petrols to imitate the colour of unleaded and super petrol. The petrol was then loaded into the tankers and delivered to the various service stations." 263 Mr Fletcher responded to that paragraph as follows: (Ex CT-2A: para 17) "I say that petrol was blended but that it was blended lawfully. I further say that up to 1 April 1994 diesel oil and heating oil were blended. There was no blending of diesel oil and heating oil after that date. I say that when we blended ethanol with petrol, dyes were added but there was nothing illegal in this and a little later, after we commenced this operation the addition of the dyes to the mixing of petrol and ethanol was stopped." 264 When Mr Zborja gave evidence, he said that he observed the blending he described in his affidavit "right up to the time he left" (T430). He blended the fuel in the tanker itself, wearing a static strap (T433). His evidence was as follows: (T433) "Q. What is a static strap? A. That's a strap that takes away any static electricity that is caused by the flow of fuel through the lines, and you don't have an explosion. That's the first thing I do; hook the line up out of the diesel compartment; put half the fuel in, half the component of diesel and put another line in and put half in of heating oil. Q. Do you remember where you delivered the product after it had been blended? A. Just various service stations." 265 When cross examined, Mr Zbroja acknowledged that he'd sworn his affidavit several years after the events that he was describing. He was relying upon his memory. He made no notes. Most of the blending was done in the tankers themselves (T437). Counsel for Camile Trading then put the following: (T439/40) "Q. And you are trying to think back about what happened between 1988 and 1994 and you have got a general impression that there was blending of diesel with heating oil? A. Yeah, there was. Q. But you can't say with absolute precision that that happened in May 1994, can you? A. It happened right up until the time I left. Q. I am not suggesting to you Mr Zbroja that you have got a general impression that this process of blending heating oil and diesel happened the whole time you were there at Camile, that's your general impression, I suggest to you? A. Yeah it is. Q. And I suggest to you that you may be wrong about that, that the situation changed on the 1 April 1994 because there was a significant change in the law on this day, is what I am putting to you. Do you think that's right? HIS HONOUR: Q. Do you agree or disagree? A. I, to the best of my knowledge I think that we were doing it right up until the day I left." 266 Mr Byrne SC pursued the issue, and obtained the following concession: (T440) "Q. Mr Zbroja I want to make it clear to you that what I am putting to you is that you have in your own recollection a general impression of blending of diesel and heating oil happening virtually the whole time that you were there? A. I, I know what you are after and I can't say 100 percent sure on the last day I left or the day before I left that I blended diesel. I can't tell you for sure. As you say over this six year period, I think I blended diesel over that six year period. I can't tell you the day before that I left. Not one hundred percent positive. Q. Sure? A. Is that what you are after? Q. And I suggest to you that you can't tell us in that six year period that it definitely happened in the last month that you were there either, that's right, isn't it? A. Not after all this time, no, I can't, no." 267 In the light of that concession, Mr Zbroja can be relied upon in respect of blending of diesel and heating oil before 1 April 1994, but no really after that day. Evidence relating to Evenfont. 268 I will, as foreshadowed, deal with the plaintiff's case against the third and fourth defendants separately below (Evenfont and Mr Pullinger). Specifically I will deal with the suggestion that they supplied white spirits or a white condensate to Camile Trading knowing that it would be blended with leaded or unleaded petrol. 269 However, in the context of Mr Bartlett's evidence and the plaintiff's case against the first and second defendants (Camile Trading and Mr Fletcher), I should deal with a product supplied by Evenfont, which the plaintiff suggested was blended with diesel. The product was variously known as "CO1", "COII", "TCO" and, finally, "HO". Mr Bartlett and tanker drivers referred to it as "green shit". It will be remembered that there is no allegation of complicity against Evenfont or Mr Pullinger in respect of the heating oil (HO) supplied by Evenfont to Camile Trading (supra paras [9] and [10]). Evenfont, and its holding company, Truegain Pty Limited ("Truegain"), began trading in 1992. When they began, they were concerned with the recycling of waste oils. Evenfont later established a refinery at Seven Hills. Mr Pullinger was a director in charge of sales and finance. Mr Lucas was also a director. He had an engineering background and was in charge of engineering development and production (Lucas: Ex EV-7(8)). 270 Mr Lucas described the manufacture of the product referred to as "green shit". Crude oil was treated by de-watering and filtering, but not refining, to produce a product referred to as "CO1". Mr Lucas described it as a "very dark opaque green". It was very difficult to sell (Lucas: Ex EV-7(13)). In 1993, Evenfont added a bleaching phase to its production, so that it emerged a lighter colour ("COII"). 271 In early 1994, a reactor vessel was used at the Seven Hills plant to steam strip the crude oil. The crude oil was transferred to the reactor vessel and heated to a little over 100º C, at which point steam stripping was applied. The temperature was thereby raised to between 135º C and 140º C. All material with a boiling point less than 140º C would boil off and pass through a condenser to a receiving vessel. The process was called "topping". "Topping" is an atmospheric distillation process because it is done at atmospheric pressure (Lucas: Ex EV-7(17)). The product was then bleached. It emerged opaque and "medium to dark green in colour" (Lucas: Ex EV-7(18)). The name was changed to "TCO" in April 1994, on the advice of Ms Marie Wheat, a consultant with Price Waterhouse. One infers that the change was connected to the change in the Excise Act on 1 April 1994, to which reference has been made (supra para [39]). 272 A further change was made in October 1995. Again, it coincided with a change in legislation (cf Pullinger: T786). Mr Lucas described the change in these terms: (Lucas: Ex EV-7(23) "In October 1995, some changes were made to the Seven Hills plant. Evenfont ceased carrying out atmospheric distillation, and instead carried out the steam stripping and distillation process under a partial vacuum. This resulted in the production of a heating oil, as defined by ASTM 396. Annexed hereto and marked 'B' is a copy of that standard. Evenfont sold this product as 'heating oil', and it was always described as such on our invoices. The delivery dockets relating to this product, however, sometimes referred to it as 'HO'." 273 The expert retained by Evenfont for the purposes of these proceedings, Professor Batts, commented upon the change in the following words: (T868) "Q. The fact that the distillation process was vacuum enhanced would change that position, because you have assumed, for most of your report, that the processes were conducted at atmospheric conditions? A. Yes, I did not see the plant recently. I am led to believe that it was subsequently used, or part of it, as reduced pressure -- a slight vacuum . However, ... why would you do that because it would not make a significant difference to the product? Because, if you reduce the pressure, you would reduce the temperature of the stream he was using for stripping. He said it worked, and I accept it. I did not see the plant running under reducing pressure, so I would not want to comment further than what my comment would tell me." (emphasis added) 274 Mr Bartlett asserted that the HO (or heating oil) from Evenfont was blended with diesel, as previously described (supra para [90ff]). Where it was picked up from Evenfont and taken directly to a retail outlet, the blending would take place in the tanker rather than at the depot (supra para [98]). 275 Mr Pullinger said that "pretty much" all TCO/HO (heating oil) was sold to Camile Trading (T783). By the time it became known as HO, it was all sold to Camile Trading (T783). Mr Pullinger also said that there was a high degree of consultation between Mr Lucas and Mr Fletcher to ensure that products being supplied to Camile Trading were suitable for its use (T785). Mr Pullinger added: (T785) "Q. And you had to make yourself aware, did you not, of what Mr Fletcher was doing with the products to ensure that what you were supplying to him was suitable for his purposes? A. Yes." 276 What was the HO used for by Camile Trading? Mr Pullinger was asked for his understanding. He said this: (T787) "Q. The product that was described as heating oil was not suitable for use as heating oil, was it, as far as you are concerned? A. I think it would be. Q. Wasn't it too volatile? A. Not - heating oil, we sold it to some of our dry cleaners, people like that. Q. Heating oil is a product which generally is used in heaters, is it not, domestic heaters or industrial heaters? A. I wouldn't say that at all. I think products, if they can be used in a burning situation, you can use anything. Q. Wasn't the situation with this product that if you put it into your domestic oil heater it was likely to explode when ignited? A. I wouldn't agree to that. Q. You knew it wasn't being used or consumed by consumers as heating oil, didn't you? A. No, I didn't know that. I didn't know exactly what, when it left our custody, just what exactly it was used for in terms of the intricacies of that. Generally speaking it was used as a fuel oil and it worked." 277 The cross examination continued: (T787/8) "Q. You knew it was being used as a diesel fuel, didn't you? A. I knew it was being used as a fuel in diesel engines, yes. Q. All of it? A. Again I say to you I am not sure about every litre. Q. The vast majority you understood was being sold at a retail level to the public as a diesel fuel? A. The vast majority for use in diesel engines, yes. Q. And it wasn't being sold as a heating oil to the public, was it? A. As I said I am not sure of that." 278 Mr Pullinger was being less than frank. His attention was drawn to the following paragraph in his affidavit in these proceedings (Ex EV-6: p7) "23 ... It was my understanding that all of Evenfont's HO and TCO was delivered direct to Marina customers, such as Truck Stop 31, not to the Marina Depot." 279 Mr Pullinger was then asked the following: (T788) "Q. You knew where it was going? A. As I said to you, I knew where most of it was going, for every litre I didn't know exactly what was there. Q. You say all of Evenfont's product was being delivered directly to Marina customers, such as Truck Stop 31? A. Yes. Q. A service station? A. Yes. Q. You knew all of the product was going to service stations, didn't you? A. As far as that's concerned, yes." 280 Did the HO require blending with diesel before it was suitable for use as "diesel" fuel, as asserted by Mr Bartlett? Mr Pullinger gave the following evidence: (T791/2) "Q. The TCO or HO products were similar to distillate fuel, were they not? A. Similar, yes. Q. But not, as you understood it, immediately suitable for use in diesel engines? A. It was immediately suitable for use in diesel engines, yes. Q. Not desirable though, was it? A. We never had any problems to the point of - with the product itself. So it was suitable in my mind, yes. Q. It had a high level of wax in it, for example? A. Correct. Q. Which is a problem for diesel engines, is it not? A. In some parts of the country, yes. Q. Particularly with the temperature drops? A. Absolutely. Q. The wax comes out of the fuel? A. Just as diesel does, yes. Q. And it contaminates the filters, and so forth? A. Correct. Q. Was it your expectation that that would also be blended, the TCO product? A. No. Q. Wasn't that necessary in order to overcome the problems with the wax, and so forth, before it was sold to the public? A. Again, it depends on where it was sold. I did not expect any blending at all. Q. You thought it could be immediately sold as a diesel fuel? A. As an HO, yes. Q. Even though you had it classified as heating oil for Customs, your expectation was that it would be consumed instantly as diesel fuel? A. In a diesel engine, yes." 281 Mr Lucas gave evidence, broadly to the same effect (T845). He denied that HO was a poor quality fuel (T845). He acknowledged, however, it was a darkish colour, green (T851). 282 Professor Batts described the green product produced by Evenfont in these words: (Ex EV-11: p10(3.5)) "The principal product of the Evenfont plant may be classed as a topped crude oil or subsequently as a heating oil." 283 Professor Batts' attention was drawn to a test carried out by Ampol on the sample obtained by Customs in 1995, in the course of an audit. The conclusion reached, having tested the sample, was expressed in these terms: (Ex EV-1: p40) "The sample failed to meet either the heating oil or diesel specifications. Additionally the sample was brown in colour which is unacceptable for either heating oil or diesel." 284 The following questions were asked in cross examination of Professor Batts: (T871) "Q. Is it a heating oil, I asked you? A. There is no specification set for a heating oil. It certainly has the characteristics of a heating oil and it could be used as a heating oil, yes. Q. Is it a heating oil? A. Then I would have to ask what exactly - if there is no specification for a heating oil something which has the characteristics of material that is used for heating is a heating oil and this material certainly could be used for heating purposes, yes. So is it a heating oil? The answer is possibly. I think you'd have to say, yes, it is a heating oil, it is a top crude and it is a heating oil. That would be where I would come out to." 285 Professor Batts acknowledged that it certainly was an atypical heating oil (T875). Could it be used (directly and without blending) in a diesel engine? Professor Batts said this: (T875) " ... So, it would not trouble me to see a product as a heating oil. It would trouble me if I tried to call it a diesel ... " 286 Professor Batts elaborated: (T876) "Q. They do specify 257 degrees for a 90 percent yield and that result was not obtained until 377 degrees. But 80 percent had been achieved at 346 degrees, do you see that? A. Yes. It does lie outside. I would be cautious about calling it a diesel because it does lie outside. That final boiling point is important for a diesel. Q. It could be an atypical diesel fuel? A. No, because diesel has a set specification. Q. It would be suitable for use in a diesel engine, would it not? A. No. Because the final boiling point of a material is important in use of a diesel engine otherwise if you - you will get a lot of black smoke. Q. What would you need to do to a product giving you this result to render it suitable for use in a diesel engine? A. You would need to cut off the distillation before you got to the end of it. Q. If you did that would it then be suitable for direct use in a diesel engine? A. I do not know what the flash point is of this material, you would have to check that." 287 Professor Batts acknowledged that, although the product produced black smoke, that did not mean it could not be used in a diesel engine (T878). In re-examination, he said this: (T878) "Q. Is there any other reason why this product could not be used in a diesel engine apart from black smoke production? A. The density or specific gravity is lower than it should be. If diesel - that should not trouble its ability to be used and, of course, I do not know what the flash point is. Q. Can you say as you look at this document whether or not a diesel engine would run on this product? A. Oh, yes, I would say a diesel engine would run on this product, certainly." 288 Professor Trimm drew attention to two important differences between heating oil and diesel, apart from the flashpoint and the matters identified by Professor Batts. He said this: (Ex Z(1): p10(25)) "25 ... However, heating oil should not be used in diesel engines, in part, because its viscosity is usually too low." 289 He also made the following comment: (Ex Z(1): p11(28)) "Diesel fuel contains significantly more waxes than does heating oil. Consequently, the cloud point for diesel is a higher temperature than for heating oil. As temperature is lowered, waxes will separate out of diesel well before they will separate out of heating oil." 290 Mr Gibbs, the scientist employed at one time by Evenfont, gave the following evidence as to suitability of Evenfont's HO for use as a diesel fuel: (T584) "HASTINGS: Q. Was the second product that you have been talking about capable of being used in a diesel engine motor vehicle? A. Yes it could. Q. Could it require further treatment or processing? A. If it was my diesel engine I would. Q. What would you have done? A. I certainly would have done some more processing in terms of taking out more of the wax, that would be one of the biggest areas for that, and probably cutting off some more of the heavy end of it. The heavy end being, you know, hydrocarbons that have sort of C12 onwards. Q. What effect does the presence of those hydrocarbons have in a diesel engined motor vehicle? A. The waxy materials would have the effect of filter blocking. So they would block fuel filters. And the heavier components, the C12 and upwards materials, they would probably have more of a combination of adding to soot emissions when the fuel is burnt, because they wouldn't burn completely." 291 So the heating oil (HO) from Evenfont could be used in a diesel engine, partly because "a diesel engine has a very forgiving design" (T846). However, its use as a diesel fuel without blending involves a number of implications. First, the HO produced by Evenfont did not meet the diesel specification in various respects including, no doubt, the flashpoint. Its viscosity was different, as was the cloud point. It would, no doubt, be false and misleading the market it as diesel, although that does not determine whether it was marketed as such. Secondly, such a fuel would give rise to heavy, black smoke. Thirdly, and most importantly, it was visibly not diesel. It was a dark green colour. No doubt that is why it was called "green shit". Blending with pure diesel (in ratio 50/50, as suggested by Mr Bartlett) would ensure that the fuel more closely approximated diesel in its performance and its colour. Mr Fletcher's evidence. 292 Submissions made on behalf of the plaintiff helpfully summarised the substance of Mr Fletcher's evidence (p27/28). The submissions included the following: (p27) "4.1.2 The first defendant denies that it engaged in acts of manufacture by mixing diesel fuel, unleaded petrol (ULP) and leaded petrol (LP) with other petroleum products and substances in a manner contrary to the Excise Act 1901. The specific denials concern mixing diesel fuel with heating oil, and mixing petrol, both unleaded and leaded, with white spirit." 293 There followed a series of propositions which, slightly re-arranged, were as follows: (p27) "4.1.3 In propounding these denials, however, the evidence adduced by the first and second defendants asserts as matters of fact that: (a) diesel, ULP, LP, heating oil, white spirits, toluene and ethanol were purchased and brought to the first defendant's depot; (b) that, prior to 01 April 1994, the first defendant did mix, by blending, diesel fuel and heating oil, and did market the blended product as diesel fuel; ... (d) that the ethanol purchased and brought to the depot was not sold directly in its pure form as ethanol; ... (f) that a product known by the names CO, TCO and HO was purchased from the third defendant and was sold as diesel fuel; (g) that a product known by the name 'WO' was also purchased from the third defendant, or an associated company, and was sold as diesel fuel." 294 Sub-paragraph (c) was in these terms: "(c) that both (unleaded and leaded petrol), at material times, were in fact mixed by blending with the substances ethanol and toluene (first defendant's affidavit sworn 25.05.06 paragraph 95), the resulting blends being sold as (unleaded or leaded petrol) fuel as the case may be;" 295 The paragraph in Mr Fletcher's affidavit, referred to, was as follows: (Ex CT-2A: p27(95)) "95 I say that as at April 1994 there was blending of petrol products with ethanol. I deny the blending activities referred to in this paragraph if they are to include or refer to the addition of white spirits. The addition of toluene occurred later than April 1994 and in circumstances where I was the recipient of advice from Marie Wheat that it was lawful and acted accordingly." 296 The following paragraph is also relevant, where Mr Fletcher said this: (para 96) "96 I deny any agreement as deposed to, or at all, to commence blending refinery petrol with White Spirit. Insofar as other additives were blended, I say they were lawful. I acted on advice obtained from Marie Wheat from time to time. I say that tanks 15 and 16 were constructed for blending purposes for the additive ethanol. I repeat my denial of blending petrol with White Spirit." 297 Sub-paragraph (e) of paragraph 4.1.3 in the plaintiff's submissions was as follows: "(e) that a product known by the name 'WS' was purchased from the third defendant and blended with petrol (Fletcher's affidavit paragraphs 27, 78 and 90);" 298 Two of the paragraphs of Mr Fletcher's affidavit referred to were as follows: (Ex CT-2A: p9 and p23) "27 ... The product 'WS' was blended in the belief that the excise had been paid on it before delivery to Camile. ... 78 ... The tanks numbered 15 and 16 were installed in 1995 and are the two largest tanks in the yard. They have propellers attached to them inside the tanks at the bottom in order to enable mixing operations to occur. The mixing operations would involve the addition of ethanol and also a product which was purchased from the Third Defendant, which was sold as motor spirit but it had excise paid on it already." 299 In respect of the conversation alleged by Mr Bartlett before the search by Customs on 26 November 1996, Mr Fletcher said this: (Ex CT-2A: p26) "90 ... I say that the conversation never occurred and there was never any direction given, either on this isolated occasion or at any time. More to the point no White Spirit was ever delivered and to my knowledge no direction was ever given to the late Christine Greenshields, as alleged in the manner deposed to by Mr Bartlett." 300 Mr Fletcher, therefore, acknowledged the blending of leaded and unleaded petrol. His position was summarised in the submissions made by Customs, in these words: (p28) "4.1.4 The first and second defendants then assert that, to the extent that admitted acts of blending occurred, they were acts that were authorised by the legislation at material times. 4.1.5 The first and second defendants further assert that no offences against the Excise Act 1901 were committed by purchasing the product 'WS' and selling it as petrol after blending it with ULP and LP, nor by purchasing the products 'CO, TCO, HO' and 'WO' and selling them as diesel fuel." 301 During the course of evidence, Mr Fletcher identified the change to the practice of the depot after 1 April 1994, being the commencement date of the new legislation. He said this: (T716/717) "HIS HONOUR: Mr Fletcher, I would like to make it clear that my questions really are directed to the matters being discussed this afternoon which is, I think, super and unleaded petrol? A. Okay. Q. In respect of that you said that you blended before 1 April 1994? A. Yes. Q. And you also blended after that time? A. Yes. Q. How, if at all, did those two blending operations differ? I mean was the 1 April a relevant watershed so far as the super and unleaded petrol was concerned or did you just continue the same operation that you previously conducted back in pre-April '94? A. We first stated blending petrol and ethanol together which was --- Q. Sorry? A. We first started blending petrol and ethanol together which was roughly '93 and during '93 we bought - and I'm not sure of this, we'd have to go back through the records - but we bought some small amounts, from memory, of waste slops of want of a better word from I think it was Evenfont during part of '93 and part of '94 and then - and I don't know for sure but then I think it increased in '94 but we also started to buy some toluol which as we increased blending we wanted for toluol and then that's when Exxon stepped in and went to the person I was buying it off and slowed the sales down. So - and then we run into '94 to the best of my knowledge the biggest change of blending in '94 after April was heating oil and diesel, not so much with what we were blending with the petrol. We kept blending petrol and the waste slops and the ethanol after that and we still blend ethanol and petrol today." (emphasis added) 302 Again it is convenient to leave to one side, for the moment, the petroleum products supplied by Evenfont to Camile Trading, which Mr Fletcher acknowledged were blended with leaded and unleaded petrol. The products manufactured by Evenfont will be specifically examined when the plaintiff's case against the third and fourth defendants is considered. The products include: * "WO" (waste oil) which was processed to produce both a diesel-like petroleum product and a whitish petrol-like product; * "WS", which Mr Bartlett knew as "white spirits" and Mr Fletcher said was "waste slops"; and * "MS" (motor spirits). 303 In this chapter I am concerned to look at evidence that bears upon an evaluation of Mr Bartlett's evidence concerning: * the blending of diesel with heating oil (the heating oil coming from various sources including Success and Evenfont); * the blending of leaded or unleaded petrol with ethanol (which, of course, is not a petroleum product, but a substance derived from sugar) and various petroleum products from sources other than Evenfont. 304 Mr Fletcher acknowledged that he was operating in a very competitive market. He monitored the petrol and diesel prices of his competitors. He adjusted the price of his fuel so that his product would be attractive (T639). He operated on very fine margins, which varied from 4 or 5 cents a litre to a loss. Often he made no profit, or 1 or 2 cents profit a litre (T639). 305 Mr Fletcher's evidence concerning the HO purchased from Evenfont broadly coincided with that given by Messrs Pullinger and Lucas. Mr Fletcher said this: (T645/6) "Q. The records indicate that during the period 1994 to 1996, Camile purchased large volumes of, initially, TCO from Evenfont. You are aware of that, are you? A. Yes. Q. What was done with that product as far as you know? A. That was sold into the market place. Q. Straight out as diesel? A. Yes. We sold it as TCO. Q. I think in the course of 1995, the product from Evenfont became known as HO, not TCO, do you recall that? A. That's correct. Q. Was there some reason why the name was changed? A. I believe it was to do with the way the legislation was written. Q. It was the same product, though, was it? A. I don't believe so. I thought it was treated different, but I'm not a hundred percent sure. Q. But, you sold the product known as HO direct to the retail outlets as diesel? A. No, we sold it as HO. Q. But, for use as a diesel fuel? A. It went into vehicles. It went into diesel engined vehicles. Q. It was intended for distribution as a diesel product? A. Yes." 306 Mr Fletcher could not define the difference between TCO and HO beyond the fact that the change of name was connected to the change in legislation. Mr Lucas, incidentally, gave the following evidence concerning the way in which HO was marketed: (T852) "Q. Do you know under what name Mr Fletcher was selling these products? A. No. HIS HONOUR: Q. What did you understand that question to mean? A. I understood the question to mean that the products, TCO and HO, were sold and did I understand what Mr Fletcher was selling them as. Q. The name given to them when sold to the public? A. That's correct. I did not know." 307 Counsel continued to re-examine Mr Lucas in these terms: (T852) "HOROWITZ: Q. In your experience, is heating oil ever sold for use in diesel engines under the name heating oil? A. Yes. Q. In your experience, is topped crude oil ever sold to the public for use in diesel engines as top crude oil? A. Not any more, no. Q. Was it at the time in 1994 to 1996? A. Yes." 308 Mr Lucas was then asked the following questions: (T852/3) "HIS HONOUR: Q. When you say it is sold as heating oil, how does that come about; from the bowser it is written as heating oil? A. Yes. Q. Just heating oil? A. Yes. Q. Where have you had experience of that? A. I have seen that in Wollongong. Q. Whereabouts in Wollongong? A. In Albion Park. Q. Where? A. At their -- Q. At Camile's? A. At Camile's depot. Q. Apart from that? A. I have not seen it in a commercial service station." 309 I reject Mr Fletcher's evidence that the HO purchased from Evenfont was sold as HO or heating oil. It was plainly sold as diesel. The issue is whether pure diesel was blended with it to make it more saleable. 310 Let me move to Mr Fletcher's evidence concerning the record keeping of Camile Trading. Mr Fletcher was computer illiterate. He left the keeping of records to Mr Bartlett (T638). He agreed he had an interest in ensuring accurate records. He did not check them himself. However, an accountant examined the company's records each month. Nothing was reported to him suggesting that the records were amiss. 311 Mr Fletcher, in cross examination, was taken to various records, which he acknowledged did not reflect the operation of the business as he understood it. This aspect has been referred to already (supra paras [177ff]). There were many examples. The ethanol inventory within the computer system furnishes a convenient illustration. It recorded that ethanol had been sold to retail outlets (T674). Many such sales were listed. In that context, Mr Fletcher said this: (T675) "Q. And yet I think what you're being asked is that what appears in this record, insofar as this record purports to be an accurate reflection of the business, it's not, as you understood it? A. Yes, that's correct." 312 The same inventory recorded substantial sales of ethanol to a company, Encarb, associated with a Mr Koslevski, a friend of Mr Bartlett. Mr Fletcher acknowledged that there were no such sales. He was unaware that the records were a sham. 313 Mr Fletcher's attention was drawn to a number of specific entries in the ethanol inventory. The following questions were put: (T677) "Q. If you glance down at good in entries, there's seven-odd entries over 30,000 litres each, with a couple of exceptions, there might have been eight, the figure of ethanol purchased during that time would be around 240,000 litres, do you see that? A. Yes. Q. You accept, do you, the accuracy of the information concerning the purchases of ethanol? A. I have not see this before a few days ago and all I can say is what's there is what I said but I certainly never - we never brought that amount of ethanol." 314 Mr Fletcher said that ethanol was purchased to blend with leaded or unleaded petrol. They tried to maintain ethanol at 10% of the mix (T675). Mr Fletcher was then asked this: (T678) "Q. Because, if you take the figures for November 1995 which show around 240,000 litres of ethanol being purchased as being used as a 10 percent blend, it means that you have sold something like 2.4 million litres of blended product, would that be correct? In that month? A. I don't know. I can only go on what's there. Q. Which would mean that you would need to have purchased something like 2.2 million litres of fuel with which to blend that ethanol, do you follow that? A. Yes. Q. Did you buy 2.2 million litres of fuel per month? A. I don't know. It would be in our records, one would think. Q. You certainly didn't buy anything like that amount of motor spirit or WS from Evenfont per month, did you? A. No. Q. And, similarly, if you look at the month of February to which I took you - 1996 - on the basis of the records showing 268,000 litres of ethanol being purchased, if it was blended at 10 percent, then you would have sold blended fuel in the vicinity of 2.68 million litres, did you do that? A. I don't know." 315 Mr Fletcher denied any arrangement (and any fund) to pay for certain petroleum products, which were to be used in blending, by means of cash (supra para [84ff]). If Mr Bartlett paid cash, it was, he said, without his knowledge or approval. 316 I have, to this point, completed a broad survey of the evidence relied upon by Customs against the first and second defendants (Camile Trading and Mr Fletcher). I have endeavoured to assemble the evidence relating to the acceptance or otherwise of Mr Bartlett's assertion that Camile Trading (with the complicity of Mr Fletcher): * First, blended diesel with heating oil in the period 1 April 1994 to 20 November 1996; and * Secondly, blended leaded and unleaded petrol with the product WS, being a white hydrocarbon (which Mr Bartlett knew as white spirits or a white condensate), as well as other substances. 317 It remains for me to draw conclusions concerning Mr Bartlett's evidence. Both Customs and the first and second defendants made lengthy submissions. Mr Bartlett was also the main witness in the plaintiff's case against the third and fourth defendants, and came under attack in that context. I am conscious of the areas of attack, as recorded in the chapters which follow, and take them into account, in my evaluation of Mr Bartlett as a witness. 4. EVALUATION OF MR BARTLETT'S EVIDENCE AGAINST THE FIRST AND SECOND DEFENDANTS Warnings. 318 Obviously, the plaintiff's case substantially depends upon the evidence of Mr Bartlett, a former director of Camile Trading (cf Murray v The Queen (1987) 11 NSWLR 12). If Mr Bartlett is to be believed, there was an agreement between himself and Mr Fletcher which was designed to circumvent the provisions of the Excise Act, and to evade duty. He alleges a criminal conspiracy to which he was a party. His evidence, therefore, must be approached with caution. It may be unreliable (cf s165(1)(d) Evidence Act 1995). As mentioned, Mr Bartlett has been given an undertaking by the Director of Public Prosecutions that his evidence will not be used against him (Ex A17) (supra para [8]). His evidence may also be unreliable because the events he is describing occurred so long ago (1994-1996). The accuracy of his evidence depends upon a detailed recollection of matters which were technical and evolving, although the defendants were provided with transcripts made during 1997 of his recollection. Nonetheless, his evidence should be approached with caution on the analogy of Longman v The Queen (1989) 168 CLR 79. 319 On the other hand, it should also be borne in mind that Camile Trading and the other defendants were apprised of the allegations made by Customs within a relatively short time of the events which are the subject of this claim. The depot of Camile Trading and other outlets were searched on 26 November 1996. The matter first came before this Court (Abadee J) on 5 December 1997 (cf Hayne J Crampton v The Queen (2000) 206 CLR 161 at 211, para [140]). The context. 320 The plaintiff, in submissions, emphasised the context within which Camile Trading operated. The context, it suggested, gave plausibility to Mr Bartlett's account. Camile Trading, as a petrol wholesaler, operated on the fringe of a fiercely competitive market. It was in competition with the major oil companies and the network of retail outlets which they operated. Yet, Camile Trading was obliged to deal with the major oil companies in procuring fuel, whether diesel or petrol (leaded or unleaded). Having obtained fuel, it was then sold to independent outlets in competition with the service stations of the major oil companies. The margins which Camile Trading was obliged to accept were small, usually a matter of 1 or 2 cents a litre, and sometimes even a loss. 321 There was, accordingly, an enormous temptation for Camile Trading to seek ways to reduce the cost of fuel, so that it might effectively compete in that market. If the cost of fuel could be reduced, it would then be in a position to offer the independent service stations and its own outlets a discounted rate, which would enable them to successfully compete with the retail outlets of the major oil companies. An obvious way to reduce the cost of fuel was to blend it with cheaper petroleum products and other substances (such as ethanol). 322 Mr Fletcher freely acknowledged that Camile Trading undertook blending before and after the period which is the subject of this claim (1 April 1994 to 20 November 1996). It was common ground that, before 1 April 1994, Camile Trading blended diesel with heating oil. That effected a large saving. The diesel rate (under the Schedule to the Excise Tariff Act 1921) was the same as the gasoline rate (at that time, about 30 cents per litre). The rate for heating oil was about 6 cents a litre. The blend gave Camile Trading a significantly cheaper fuel which, although inferior to diesel, was still capable of powering a diesel engine. 323 The amendments to the Excise Act operating from 1 April 1994 were designed to remove any question that such a practice was unlawful (s77H Excise Act; supra paras [41]). 324 On the plaintiff's case, Camile Trading continued the same practice after 1 April 1994 and, in the context of petrol (leaded and unleaded), continued to blend products which either had no excise or a significantly lower excise rate than the gasoline rate (ethanol and toluene, white spirits or a white condensate). According to Customs, it continued because of the huge savings thereby achieved. Camile Trading was forced (as they had been before 1 April 1994 when the practice was simply questionable) to carry out the blending in circumstances where, so far as possible, no documentary or cash trail was left. The documentary and cash trail. 325 It is useful, before examining Mr Bartlett's evidence, to look at whether there is evidence to support his assertion that, in conjunction with Mr Fletcher, a system was established whereby products were delivered to the depot for blending without appropriate invoices and documentation, and were paid for in cash. 326 A number of observations can be made. First, as Mr O'Malley (Customs investigator) commented to Mr Bartlett, having examined the material seized on the search on 26 November 1996, the documents recovered appeared to be incomplete (supra para [197 ff]). Many documents which you would have expected to find were missing. Secondly, Mr Bartlett and Mr Handcock gave evidence that Success Freightlines delivered heating oil (which was then blended with diesel) and white spirits (then blended with petrol). Mr Bartlett said that there were no invoices and they were paid with cash. Where were the invoices from Success? Where were the invoices from S F Bial, who supplied both toluene and, according to Mr Bartlett, white spirits? Exhibit A16 provided documentary confirmation that S F Bial supplied white spirits. Thirdly, the company nonetheless plainly required records for tax and other purposes. Therefore, some records were created. But the records created did not accurately reflect the nature of the business. Many of them were plainly a sham. The difficulty of the company can be readily appreciated if Mr Bartlett's evidence of blending were correct. There was an obvious problem. If fuel were blended, then the fuel sold would exceed the fuel purchased by a margin which reflected the additional petroleum products and other substances added to the mix. If accurate records were kept, blending would be obvious. There was therefore a need for subterfuge, recording some transactions, but not others, so that ultimately sales were more or less the equivalent of fuel purchased. The company maintained a computer system, Sybiz, designed to disclose stock on hand. Such was the effort in juggling records, that the system produced bizarre results. In Exhibit A16, for instance, the stock on hand was recorded for a number of products as a minus figure. Such discrepancies were removed periodically with a keystroke "Stock Adjustment". The ethanol inventory recorded sales to retail outlets controlled by Camile Trading, whereas ethanol was never sold to or by such outlets, as Mr Fletcher acknowledged. Substantial sales of ethanol were recorded to a company, Encarb. The proprietor of that company was a close friend of Mr Bartlett's. Mr Fletcher acknowledged that such sales were a fiction. He said this, referring to the computer printout Exhibit A16: (T691) "Q. And these minus entries are a reflection of the problem encountered in juggling the books in an endeavour to show fuel in and fuel out? A. I don't know. All I know is that Mr Bartlett controlled the stock, both in and out, and recorded it. Q. Isn't this just another case from the problem that arose from the blending of the fuels which meant that on some occasions the fuel coming in was greater than the fuel going out; as with ethanol the fuel was greater going out than coming in, because petrol was blended - there were problems with the books? A. I can't answer you as well I have answered you, that Mr Bartlett controlled the stock. HIS HONOUR: Q. But I gather you cannot imagine any reason why your depot manager would manufacture a document which was in the form of the document you see in front of you? A. No." 327 Fourthly, I accept Mr Bartlett's account concerning the disappearance of his 1996 diary, shortly before the Customs search on 26 November 1996 (supra para [206]). Mr Bartlett used the diary as an order book. It recorded the sales and deliveries each day. It was the record he used to operate the business. Yet it was not in the office when the search was conducted and therefore not seized. I infer that it had been removed as described by Mr Bartlett. The affidavit of Mr Bartlett was sworn in August 2000 at a time when Mr Stevens was alive. Mr Bartlett's 1995 diary was found (Rooney: Ex AA1: para 16). I infer that the 1995 diary had been overlooked. 328 Mr Fletcher's diaries, incidentally, were also found (the 1996 diary at the Camile Trading depot (Rooney: Ex AA1: para 25) and the 1995 diary at his home (Mutton: Ex E: para 7)). It was said on his behalf that their availability demonstrated that he had given no instruction to destroy diaries and that he had nothing to hide. More than that, their availability was said to support an inference that the formulae which appeared in them related to experimental blends, as Mr Fletcher suggested, and were not recipes for blending used by the depot. Why, it was asked, would he order the removal (and, presumably, the destruction) of Mr Bartlett's 1996 diary, and yet retain his own? I infer he did order the removal by Mr Stevens of Mr Bartlett's 1996 diary (unaware that the 1995 diary was still at the depot). Mr Bartlett had a "hands-on" role in running the depot. He managed the nuts and bolts of deliveries and sales. His diary was capable of providing real insight into the depot's operations, as the 1995 diary demonstrates (Ex A12). Mr Fletcher had a different role in Camile Trading. He was concerned with other aspects of the business. There was almost nothing in his diaries relating to sales and deliveries to Camile Trading. But there was the odd entry, on a couple of pages and at the end of the diary, where there were formulae. I infer that Mr Fletcher had forgotten these entries. 329 Finally, I accept the evidence of Mr Handcock that Mr Fletcher told him and another driver in or about September 1996, to destroy certain documents. Although the evidence did not associate that instruction with an imminent search by Customs, the destruction of documents was consistent with Mr Bartlett's description of the operation, and the need to cover their tracks, removing the paper trail. 330 Let me move from that to the question of cash. Again a number of observations can be made. First, Camile Trading, as mentioned, had a number of controlled retail outlets. Much of the trading by such outlets was in cash. They accumulated quite legitimately, day by day, significant cash. There was therefore the opportunity to conduct part of the business in cash, where that was to the advantage of Camile Trading. The issue is whether Camile Trading took advantage of that opportunity. 331 Secondly, Mr Handcock gave evidence that supported the assertions of Mr Bartlett. He said that he was instructed occasionally to make payments in cash (supra para [250]). 332 Thirdly, Mr Bartlett's 1995 diary recorded the deliveries made to the depot (or most of them) each day. Certain deliveries are annotated with the letters "O/D" (supra para [84]). Mr Bartlett explained that this was an abbreviation for "off docket" and signified a cash transaction. He needed to keep track of the cash being paid out. I accept that evidence. 333 Fourthly, Exhibit A16, it will be remembered, was a computer printout of an All Branches Inventory which included the following annotation in Mr Bartlett's handwriting (supra para [113]: Ex A16): "White Spirits S F Bial. Pay cash from Forestville a/c. 2-3 loads p/w." 334 Mr Bartlett said that he wrote the note to remind himself of an instruction of Mr Fletcher to pay S F Bial, a supplier of white spirits, cash. I accept, for the reasons previously given (supra paras [114] to [116]) that this was an authentic document, made by Mr Bartlett when running the depot. It corroborated his evidence concerning transactions undertaken in cash. 335 Fifthly, I also accept Mr Bartlett's evidence concerning the operation of the "kitty", the green ammunition box used for cash, in the running of the depot. In the context of the matters set out above, Mr Bartlett's description of the system was plausible. There is, perhaps, some support for his assertion that he contributed to the establishment of a fund in the repayment of his loan to the company by Mr Fletcher after he left Camile Trading in November 1996 (supra para [166]). Corroboration of Mr Bartlett's account. 336 There are, of course, two broad allegations made by Mr Bartlett and it is convenient to separate them: * First, there is the allegation of blending diesel with heating oil; * Secondly, there is the allegation concerning the blending of petrol (leaded and unleaded) with a white hydrocarbon which he knew as white spirit, or a white condensate, and other substances (toluene, xylene and ethanol). 337 Dealing first with diesel, Mr Bartlett's account was corroborated in a number of ways. First, Mr Handock's evidence broadly coincided with that of Mr Bartlett. He adhered to his account when cross examined. He had no apparent motive to give a false account. I accept his evidence. 338 Secondly, the spreadsheet of Mr Bartlett (Ex A7) is, I believe, an authentic contemporaneous record used in the running of the depot. Under the heading "Tank Dips" (supra para [136]) it provided documentary corroboration of Mr Bartlett's assertion that diesel was blended with heating oil. 339 Thirdly, I accept that Camile Trading received very significant quantities of heating oil throughout the period which is the subject of this claim, from various sources including Success Freightlines and Evenfont. There is documentary confirmation of such deliveries, including the spreadsheet Exhibit A7 which, I infer, was Mr Bartlett's record on a particular day of the stock on hand. Yet the legitimate need for heating oil (that is, for heating) was miniscule, perhaps three to four thousand litres per week in winter (supra para [88]). What, then, was the remaining heating oil used for? Before 1 April 1994, it was plainly used for blending with diesel, as Mr Fletcher acknowledged. The fact that significant volumes continued to be purchased after 1 April 1994 supports the inference that blending continued. 340 There is no contemporaneous documentation confirming the formula for diesel described by Mr Bartlett (a 50/50 blend). However, it was a simple formula (unlike petrol). You would not expect it to have been written down. I accept that the formula was a 50/50 blend, as asserted by Mr Bartlett. 341 Moving to Mr Bartlett's evidence concerning petrol (leaded and unleaded), again his account was corroborated in a number of ways. First, Mr Handcock described the blending carried out in tanks 15 and 16, although his description was framed in terms of "white spirits from Evenfont or WS". As will emerge, it was common ground that Evenfont could not manufacture white spirits at its Seven Hills refinery, because of limitations concerning its plant. Mr Handcock did not give evidence concerning the other sources of white spirits identified by Mr Bartlett, although he did refer to "a petroleum spirit delivered by Vic Newland from the Central West", which Mr Bartlett identified as one of the sources of white spirits used in blending. 342 Secondly, and more significantly, the second page of Mr Bartlett's spreadsheet (Ex A7) was clearly a contemporaneous document, which I infer was used each day after the installation of tanks 15 and 16, for the purposes of blending leaded and unleaded petrol (supra para [137]). 343 Thirdly, the formulae for blending appearing in Mr Bartlett's spreadsheet (Ex A7) was provided to him, according to his evidence, by Mr Fletcher, and was taken from Mr Fletcher's diary. Mr Fletcher gave evidence that he had no reason to show Mr Bartlett the formulae in his diary (supra para [151]). Yet, the same formulae, including the very specific amount of super petrol (Ex A7, 71.88% cf Mr Fletcher's diary entry 71.875% - supra para [142]) appear in Mr Fletcher's diary (Ex A8). There were variations in the formulae in the dairy. However the variations, I believe, are relevant to whether one can be satisfied beyond reasonable doubt as to the level of evasion (which requires satisfaction in respect of the formula applied). Mr Fletcher's explanation that the formulae noted in the diary were experimental, made for persons engaged in car racing, was highly implausible for the reasons set out above (supra para [157]). I reject that explanation and accept that the formulae in Mr Bartlett's spreadsheet was given to him by Mr Fletcher for use in making the blends. 344 Against this background, let me turn to Mr Bartlett's evidence. Mr Bartlett as a witness. 345 I repeat, for convenience in this context, the observation previously made concerning the demeanour of Mr Bartlett (and Mr Fletcher) set out earlier in this judgment: "[170] Mr Bartlett presented as a straight forward and apparently truthful witness, sometimes struggling to remember events that had occurred more than a decade before. Mr Fletcher, in contrast, appeared a most uncomfortable witness. Ultimately, however, the acceptance or otherwise of their evidence will be determined by the logic of their account rather than such impressions." 346 Mr Bartlett was approached by Customs in February 1997. He made an induced statement (recorded by video) in March 1997. That material was the foundation for his affidavit. His recollection of the running of the depot was therefore reduced to writing reasonably soon after the events which he was describing. The interviews were conducted over many hours. They were later transcribed. The transcripts, as mentioned, were ultimately made available to the defendants. They were used by the defendants on a relatively small number of occasions to demonstrate faults and uncertainties in Mr Bartlett's recollection. 347 The Crown made the following submission in its closing written submissions: (p17 para 3.5.2) "There is no evidence that Bartlett has anything to gain by giving false evidence in these proceedings. Although he has been given an undertaking by the Director of Public Prosecutions (Ex A17), there is no indication that he was in jeopardy at the time when he first came forward, or was offered a reward or inducement to implicate others." 348 Whilst certainly Mr Bartlett had nothing to gain in giving false evidence, it cannot be said that he was not in jeopardy at the time he was approached by Customs. He was a director of Camile Trading. He was the manager of the company's depot. On his account, he had been party to an agreement to blend diesel and petrol in breach of the provisions of the Excise Act, with the intention of evading excise duty. He was, as much as Mr Fletcher, knowingly concerned in offences that may have been committed. Accordingly, he was a potential defendant in an action such as this. On the other hand Mr Fletcher, on Mr Bartlett's account, was the major financial beneficiary, by reason of his 90 percent shareholding, in the evasion which was undertaken. Mr Bartlett may have been in receipt of benefits, about which there is no evidence, it not being in Mr Fletcher's interest (if Mr Bartlett's account is accurate) to expose their precise relationship. 349 I infer Mr Bartlett believed himself to be in jeopardy. Customs investigators were at pains to reassure him, first, by resorting to an induced statement (that could not be used against him) and then by providing him with an Undertaking from the Director of Public Prosecutions. 350 But that said, Mr Bartlett, once reassured, had every reason to tell the truth unless he had some personal axe to grind against Mr Fletcher, which might furnish a plausible reason for him to lie. In saying that, I appreciate that the defendants have no onus whatever to demonstrate a motive to lie. The onus is upon Customs to prove its case. That involves demonstrating that Mr Bartlett was telling the truth concerning the running of the depot. 351 The defendants attacked Mr Bartlett suggesting that his poisonous personal relationship with Mr Fletcher at the time of their break up provided a motive to lie. He set out to harm Mr Fletcher and his business, Camile Trading. The defendants also suggested that, demonstrably, Mr Bartlett had lied in the course of these proceedings. 352 Mr Bartlett acknowledged that he left Camile Trading abruptly on 20 November 1996. He clearly felt aggrieved towards Mr Fletcher. He believed himself entitled to a sizeable proportion of the cash which had been accumulated in the ammunition tin, which he estimated to be as much as $800,000 (less amounts outstanding to carriers and suppliers). He was owed holiday pay and long service leave. He had to employ solicitors to secure his entitlements. He celebrated his departure from Camile Trading on the anniversary of that departure each year (supra para [166]). 353 Mr Bartlett acknowledged in cross examination that his attitude to Mr Fletcher in 1998 was "poisonous". He did not "like the man" (supra para [169]). He was bitterly disappointed with him. However, he insisted that what he had said in his interviews, and ultimately sworn to in his affidavit, was the truth (supra para [169]). 354 Mr Bartlett also acknowledged that, after his departure from Camile Trading, his relations with Mr Fletcher deteriorated to the point where he secured an Apprehended Violence Order against him, believing himself to have been harassed (supra para [167]-[168]). Mr Fletcher ultimately succeeded on appeal in setting aside that order. That occurred several years later. By that time, according to Mr Bartlett, he had put Mr Fletcher behind him. It was water under the bridge. He felt at peace and bore him no ill will. 355 I do not doubt that Mr Bartlett, after leaving Camile Trading and for a number of years, loathed Mr Fletcher. He plainly felt resentful towards him. I accept that he felt that way when first interviewed by Customs, providing them with a description of the operation at the Camile Trading depot. Probably Mr Bartlett still harboured feelings of ill will at the time that he swore his affidavit (August 2000), although I accept that by that stage he had more or less come to terms with what had happened. I accept that, by the time he gave evidence, he regarded this episode in his life as "water under the bridge" and that he was not actuated by ill will. 356 It does not follow that ill will towards Mr Fletcher meant that Mr Bartlett manufactured evidence against him, asserting illegal blending when he knew there was none. There is simply too much evidence that there was such blending. Mr Bartlett's account to Customs in 1997, I believe, had more to do with "saving his own skin". If ill will towards Mr Fletcher played a part, it simply made it easier to disclose the true nature of the operation. 357 It is instructive in this context that, at the time of the break up, there was a philosophical difference between Mr Bartlett and Mr Fletcher. Mr Bartlett referred to the opportunity Camile Trading had to secure a carrier's contract from Mobil Oil. Mr Bartlett saw this as an opportunity to "legitimise" the business (it then being illegitimate because of blending). Mr Fletcher, however, did not wish to be beholden to the oil companies (supra para [73]). 358 Mr Bartlett was not shown the transcripts of his interviews with Customs (T58) before he gave evidence. He had not been provided with the affidavits of other witnesses called by Customs (T36). He did have a copy of his own affidavits. His recollection on some issues was unclear and, on other issues, wrong. However, his account, by and large, was consistent and plausible. Given the elapse in time, and the complexity of the operation he was describing, I believe that, in giving his evidence, he was drawing upon memory, rather than some account manufactured in order to harm Mr Fletcher. 359 Mr Byrne SC, for the first and second defendants, placed great emphasis in submissions upon certain answers Mr Bartlett provided which, it was suggested, demonstrated that he was lying. It will be remembered that Mr Bartlett was cross examined concerning a paragraph in his affidavit in which the draftsman had mistakenly annexed a particular document (Ex A6) (supra para [173 ff]). When cross examined, Mr Bartlett gave a number of answers by reference to the wrong document, purporting to justify statements he had made in his affidavit in circumstances where he clearly had some other document in mind (Ex A16). 360 However, for the reasons provided (supra para [183]), I am not persuaded that Mr Bartlett's answers, in the context of the record keeping of Camile Trading, which he was endeavouring to describe, were lies. The most that can be said against Mr Bartlett is that he was, on a relatively small number of occasions, wrong or less that accurate in his recollection, which is perhaps unsurprising after more than a decade. 361 Accordingly, I accept Mr Bartlett's evidence. I accept that Mr Fletcher knew that Mr Bartlett operated the depot in the way that he described in his evidence. Indeed Mr Fletcher, with Mr Bartlett, devised that method of operation. Mr Fletcher was well aware that products used in blending were paid for in cash, through a kitty in the green ammunition tin and that deliveries of such products were accompanied by little or no documentation. He knew that documentation, where it existed, was later destroyed. I further accept that Mr Fletcher told Mr Bartlett in November 1996 that he had it on good authority that Customs may raid the depot, and instructed him to get rid of documents that may support the suggestion of blending. I am satisfied that Mr Bartlett and other office staff then did shred and dispose of documents. I reject Mr Fletcher's explanation for his words to Mr O'Malley (supra para [189]) at the time of the search, namely, that he mistakenly thought the investigators from Customs were from State Revenue. Findings in respect of diesel and heating oil. 362 Accordingly, I accept that Camile Trading, with the knowledge and complicity of Mr Fletcher, blended diesel and heating oil during the nine periods between 1 April 1994 and 20 November 1996 and, as such, was engaged in the manufacture of an excisable blended petroleum product, that is (cf supra para [58]): * First, that the goods handled during the period 1 April 1994 to 20 November 1996 at the Camile Trading depot were petroleum products as defined under the Excise Act s77G, namely, diesel and heating oil; * Secondly, that diesel and heating oil were blended, that being, by definition, the manufacture of a blended petroleum product (s77H(1)); * Thirdly, that the blended petroleum product was excisable in that it was not exempt under s77J(1) of the Excise Act since: (a) Camile Trading was not a statutory blender; and (b) the product blended with diesel (heating oil) was not exempt under the Excise Regulations (Reg 176(2)). 363 Turning to the offence under s35, I have previously identified the four elements which the plaintiff needs to prove under that section (supra para [59]), namely: * First, that Camile Trading was a person for the purposes of the section, namely, a corporation; * Secondly, that Camile Trading was, during the periods identified in the Statement of Claim, engaged in the manufacture of petroleum products, namely, blending diesel with heating oil; * Thirdly, that the blended fuel was an excisable blended petroleum product (s77G) (supra para [362]); * Fourthly, that Camile Trading had not been granted a licence by the Collector of Customs under s34 of the Act. 364 I believe the plaintiff, in respect of each period, has proved these elements beyond reasonable doubt. It has also proved, beyond reasonable doubt, the complicity of Mr Fletcher in those offences. 365 Turning then to s61, I accept that during the periods and in the context of diesel and heating oil: * First, that Camile Trading manufactured during the nine periods, excisable goods, namely excisable blended petroleum products, being a blend of diesel and heating oil; * Secondly, that in respect of such goods, no entry for home consumption, trans-shipment or warehousing was made; * Thirdly, that Camile Trading was not authorised by Customs to move the excisable goods from the depot at Albion Park or, where the blending took place in the back of a tanker away from the depot, to move the tanker; * Fourthly, that the excisable goods were moved (by mobile tankers) from the depot, or the tanker then delivered the excisable blend of diesel and heating oil to various retail outlets. 366 Accordingly, I am satisfied beyond reasonable doubt that the offences alleged by the plaintiff were committed by Camile Trading with the complicity of Mr Fletcher. 367 Moving to the offence of evasion under s120(1) of the Act, I am likewise satisfied beyond reasonable doubt in respect of each element, namely: (cf supra para [63]) * First, that Camile Trading manufactured excisable blended petroleum products during each of the nine periods, namely blended diesel and heating oil; * Secondly, that duty was payable in respect of such products; * Thirdly, that duty was not paid; * Fourthly, that the duty was evaded in that the failure to pay was intentional. 368 There can be no question of Mr Fletcher's intention to evade duty and therefore of the company's intention to evade duty (s145A Excise Act 1901). The blending of heating oil and diesel was a surreptitious operation largely paid for in cash, without a documentary trail. Mr Fletcher was the major beneficiary of that operation. He acknowledged that he well knew that it was unlawful, after 1 April 1994, to blend diesel and heating oil unless a license had been obtained from Customs and duty was paid. 369 However, a number of issues arise in the context of the quantification of the duty evaded. Mr O'Malley, the officer in charge of the prosecution, made calculations of the duty evaded. For the purposes of making those calculations he examined the invoices of Camile Trading, including its computer records, to determine the diesel that had been purchased. He then made certain assumptions as to the blending of heating oil with that diesel. He assumed the diesel purchased by Camile Trading was excise paid at the diesel rate (which is the highest rate). He assumed the heating oil was excise paid at the relevant heating oil rate, which was much lower than the diesel rate. He assumed a 50/50 blend as deposed by Mr Bartlett. Mr O'Malley prepared a schedule, which he later revised, in which he listed each of the purchases made by Camile Trading of diesel through each of the nine periods (Ex H4). He excluded a number of invoices from a company, BPMA, upon the basis that they were dubious. The schedule was therefore put forward as a conservative tabulation of diesel which Camile Trading had purchased for resale. 370 However, there are certain difficulties in respect of which I would seek further assistance. Schedule A, which accompanied the Statement of Claim, listed the suppliers of diesel to Camile Trading in each of the nine periods. The deliveries are listed and the supplier identified. The final and revised schedule relied upon by Customs (part of Ex H4) divided the suppliers into two columns, as follows: (Ex H4, Schedule MJO2) "From Mobil : From ACR" 371 However, some of the entries in Schedule A, later characterised as "From Mobil", identified deliveries by Evenfont or its parent, Truegain Pty Limited. In period 4 there were the following entries: 8 Dec 94 3882 From Truegain Pty Ltd 27480 12 Dec 94 3899 From Truegain Pty Ltd 33170 19 Dec 94 3810 From Truegain Pty Ltd 8450 19 Dec 94 3811 From Truegain Pty Ltd 22270 13 Jan 95 3826 From Truegain Pty Ltd 15220 14 Jan 95 3828 From Truegain Pty Ltd 22490 16 Jan 95 3830 From Truegain Pty Ltd 30050 24 Jan 95 3839 From Truegain Pty Ltd 24130 25 Jan 95 4015 From Truegain Pty Ltd 31050 372 In Schedule A, period 5, in the section later referred to (in Ex H4) as "Mobil", the following purchases of diesel by Camile Trading were identified: 23 Feb 95 4144 From Truegain Pty Ltd 29800 21 Jun 95 4571 From Truegain Pty Ltd 35540 21 Jun 95 4572 From Truegain Pty Ltd 21100 24 Jun 95 4574 From Truegain Pty Ltd 31080 26 Jun 95 4575 From Truegain Pty Ltd 31130 28 Jun 95 4577 From Truegain Pty Ltd 25990 373 Period 6, likewise, included a number of purchases of diesel from Truegain. Periods 7 and 8 in Schedule A included purchases from both Evenfont and Truegain. 374 Evenfont and its parent, Truegain, operated a refinery at Seven Hills and later at Rutherford. It was not associated with Mobil nor, so far as I am aware, with ACR. The refinery at Seven Hills was not capable of producing diesel. It produced a petroleum product known to Mr Bartlett and others as "green shit". The product, as already explained, was variously identified by Evenfont as CO1, COII, TCO and, finally, HO (supra para [268 ff]). It was not diesel. It did not meet the specification for diesel in various respects (supra para [282 ff]). It was a heating oil, although an atypical heating oil (supra para [285] Prof Batts). It was, nonetheless, capable of powering a diesel engine. I will shortly examine, when dealing with Evenfont below, the manufacturing process undertaken by Evenfont in producing "green shit". It will emerge that the source of "green shit" was either: * the processing of crude oil; or * the process undertaken to refine waste oils; or * the process undertaken to separate waste slops. 375 The end product, the so-called "green shit", was then sold to Camile Trading. The issue is what Camile Trading did with it. Mr Bartlett's evidence suggested that the "green shit", the HO from Evenfont, was used as heating oil and combined in a blend with diesel which was then marketed as "diesel" (supra para [90 ff]). If that were right, then it would be inappropriate to include Evenfont (or Truegain) as a supplier of diesel. Rather it was, on this evidence, a supplier of heating oil. For the purposes of calculating the duty evaded under s120 of the Excise Act, it seems to me that the literage in Schedule A relating either to Evenfont or Truegain may have to be deleted. 376 There were two other possibilities. There was evidence to support each. The first was that the heating oil supplied by Evenfont to Camile Trading was then sold by Camile Trading to its customers as diesel (without blending), even though it did not satisfy the specification for diesel and was distinctly inferior. If that were right, it would, no doubt, be a fraud upon the customers and a possible breach of other legislation, such as the Trade Practices Act 1974. However, since there was no blending, the practice would not involve an evasion of duty. It would appear to have no relevance to the claim brought by the plaintiff. 377 The remaining possibility was that the heating oil from Evenfont was blended with heating oil from another source (if only to lighten the colour, which may otherwise arouse suspicion). Again, because of the forgiving nature of a diesel engine in all but extreme climatic conditions, such a mix would be capable of driving a diesel engine. That practice, were it undertaken, would involve the blending of petroleum products and an evasion of duty. However, it is not, I believe, the case that Customs has sought to make against Camile Trading. 378 The investigator in charge of the case, Mr O'Malley, was cross examined by counsel for the first and second defendants in respect of this issue. It was Mr O'Malley who made the selection of invoices in Schedule A to the Statement of Claim. Mr Byrne SC (appearing for Camile Trading) put the following questions to Mr O'Malley: (T512) "Q ... Yesterday I think you said that there was no purchases by Camile of diesel from Evenfont, do you remember saying that? A. Yes. Q. You knew that Evenfont and Redline and a company by the name of Truegain were all associated companies, part of the same group? A. That's correct. Q. Purchases from any one of them represented purchases from all of them, almost? A. No. I don't agree with that. Q. Well they were all part of the same group, you agree with that? A. Yes I do. Q. I wonder if you could just have a look if you would at Schedule A which deals with diesel purchases? A. Yes. Q. If I can take you to the seventh page, you see there are a number of purchases from Truegain. This is of diesel by Camile? A. Just this period 1 August?" 379 The cross examination continued: (T513) "Q Have you looked at the supporting documentation for those individual purchases? A. I may have at the time, I can't recall. Q. Documents that relate to those individual transactions have been inspected by you when you prepared the schedule, I suggest to you? A. I would imagine so, yes. Q. Some of those individual transactions related, I suggest to you, to a product which is known as or described as Waste Oil Slops? A. That could be totally correct, yes. Q. But it was apparently entered as diesel? A. In Camile's records, yes. Q. And in your schedule here as well? A. As diesel, yes. Q. So there was no distinction made by you between diesel and Waste Oil Slops? A. No there wasn't. Q. I suggest to you that that applies to a number of those purchases without going to the detail of? You agree with that generally do you? A. It may have been described as Waste Oil Slops, yes." 380 Mr Gibb (a former employee of Evenfont) said that, when waste slops from Caltex were separated and processed, the result reflected the nature of the slops. That is, if it were fundamentally a gasoline fraction it would emerge as such, and similarly with diesel (supra para [232]). I assume Mr O'Malley included in Schedule A invoices which were the diesel fraction. Nonetheless I find it puzzling that there should be some invoices from Truegain and others from Evenfont (cf Ex EV 14). 381 Before dealing with the issue of quantification under s120(2), I should appreciate further submissions from counsel for the plaintiff and the first and second defendants. Leaded and unleaded petrol. 382 Let me move from that to the suggested offences committed by Camile Trading and Mr Fletcher in the context of leaded and unleaded petrol. The issue is more complicated than in the case of diesel. Customs must prove, not only that there was blending, but that the blending involved either: * white spirits; or * a white hydrocarbon known to Mr Bartlett and others as white spirits, although a "condensate" or "light ends" (Gibb: supra para [88]). 383 There is no question that leaded and unleaded petrol was blended, as asserted by Mr Bartlett. Mr Fletcher acknowledged that, even after the introduction of the amending legislation on 1 April 1994, Camile Trading continued blending leaded and unleaded petrol. According to his testimony, only ethanol was added (it being exempt from excise) and, after advice from Ms Marie Wheat, toluene (it being excise paid). He denied the use of white spirits or any white petroleum product, whether described as "condensate" or "light ends". However, he did acknowledge using, as part of the blend, the product of Evenfont, known as "WS", which he termed "waste slops". Mr Fletcher asserted that it was open to him to blend such a product as full duty had been paid, and it therefore satisfied the exclusion provided by Regulation 172(2)(u) (supra para [56]). 384 So, clearly Evenfont supplied Camile Trading with "white shit", which was then used in a blend with leaded and unleaded petrol. The "white shit" was not white spirits. I will postpone (until the examination of the operation of Evenfont) the precise nature of the white product which Evenfont supplied to Camile Trading, the so-called "white shit". 385 For the moment, in considering the claim by Customs against the first and second defendants, I will confine my attention to the suppliers of white spirits other than Evenfont. The suppliers were said to include S F Bial, Gladstone, a company in Victoria (whose product was delivered by Success Freight Line) and a carrier, Vic Newland. Each was identified by Mr Bartlett as a supplier of a white petroleum product which he knew as white spirits or a condensate. 386 There was no evidence from persons associated with S F Bial, Gladstone, Success or Vic Newland. Nor were there documents. Mr O'Malley, the person at Customs in charge of the claim, explained that no search warrant was directed to S F Bial or Gladstone because, at that time, each was suspected of fraud and was under investigation. Gladstone was later prosecuted for fraud. 387 I am satisfied beyond reasonable doubt, nonetheless, that white spirits, or a condensate, was ordered and used by Camile Trading during the period which is the subject of this claim. First, I accept Mr Bartlett when he asserts that, in the context of discussing formulae, Mr Fletcher used the term "white spirits" to describe the white petroleum product which was ultimately purchased and used. He may also have used the term "condensate", as his diary suggests (supra para [142]). Whether it was white spirits or a condensate, it was a white, cheap, low octane fuel which could then be enhanced by the addition of high octane additives such as toluene (or xylene) and ethanol. The spread sheet used by Mr Bartlett in the running of the depot, Ex A7, included, as part of the mix for both leaded and unleaded petrol, an ingredient "W/S". Mr Bartlett said that that ingredient was white spirits although, at times, he broadened that description to include "a condensate" or "light ends" (cf plaintiff's written submissions 26.6.06, p15, para 3.4.6). 388 I should add that Mr Fletcher went to the trouble and expense in 1995 of purchasing and installing two large blending tanks fitted with propellers to assist blending (Tanks 15 and 16). He said he did so for the purpose of blending petrol (leaded and unleaded) with ethanol (and later toluene). There was no evidence concerning the relative cost of these ingredients compared to petrol and whether he thereby effected a saving. Certainly ethanol was excise free and I assume was cheaper than petrol. Toluene was excise paid on purchase, and difficult to procure. It was an additive which improved the octane rating (as did ethanol). Mr Fletcher went to some trouble to secure a supply. I infer he did so because he had to supplement the low octane rating of the white spirits or condensate which he included in the mix. 389 Secondly, it will be remembered that one of the documents relied upon by Customs was the computer printout which contained an annotation by Mr Bartlett (Ex A16). The annotation recorded an instruction from Mr Fletcher. For convenience, the annotation is repeated. It was in these terms: (Ex A16) "White Spirits S F Bial. Pay cash from Forestville a/c. 2-3 loads p/w." 390 That document is important for a number of reasons. It corroborated Mr Bartlett's claim that in his dealings with his employer, Mr Fletcher spoke of "white spirits" and that S F Bial was a supplier. The document (Ex A16) also corroborated Mr Bartlett's claim that suppliers were paid in cash. There was little or no documentation. There was a need for secrecy. Had blending been confined to the addition of ethanol (and perhaps toluene), there would have been no reason for secrecy or cash. In a legitimate operation, each purchase of ethanol (and toluene) would have been accurately recorded and paid for by cheque. However, the Sybiz ethanol inventory was a fiction, as Mr Fletcher acknowledged (supra para [180 ff]). I infer this was a cheap fuel where excise had not been paid at the gasoline rate. 391 Thirdly, there were entries in Mr Fletcher's 1995 diary (Ex A8) in his handwriting, which set out various petrol blends. They included ingredients described as "W" (supra para [140]), "WS" (supra para [143]) or "WS" (in the 1996 diary) (supra para [145]). His diary also included references to "cond", clearly a reference to condensate. Mr Fletcher's explanation for these entries, namely that he was producing experimental blends for high performance racing cars, where the blends included waste products or low octane condensate, was simply unbelievable (supra para [150 ff]). It was a lie in respect of a material matter, where the only explanation was a consciousness of guilt. 392 Fourthly, Mr Gibb, a scientist who worked for Evenfont, had a conversation with Mr Fletcher either in late 1995 or early 1996 which corroborated an aspect of Mr Bartlett's evidence concerning the use of condensate in a blend. The conversation has been set out above (supra para [235]) which, for convenience, I repeat, quoting the words of Mr Fletcher: (Ex AD(18)) "He said: 'These are blending materials that I am considering using. I need to know the octane rating. I am going to use these materials in blends of condensate from South Australia, mineral turps, White Shit and Unleaded Petrol.'" 393 Accordingly, I am satisfied beyond reasonable doubt that (leaving aside the products of Evenfont, which I will deal with below), during the nine periods in the Statement of Claim, Camile Trading blended leaded and unleaded petrol with various petroleum products and other substances which included white spirits or a white condensate. As such, Camile Trading engaged in the manufacture of an excisable blended petroleum product, that is: (cf para [50]) * First, that the goods handled during the period 1 April 1994 to 20 November 1996 at the Camile Trading depot were petroleum products as defined under the Excise Act, s76G, namely, leaded and unleaded petrol and white spirits or a white hydrocarbon which was a condensate or light ends; * Secondly, that the leaded or unleaded petrol and white spirits, or condensate, were blended with ethanol and other substances, that being, by definition, the manufacture of a blended petroleum product (s77H(1)); * Thirdly, that the blended petroleum product was excisable in that it was not exempt under s77J(1) of the Excise Act, since: (a) Camile Trading was not a statutory blender, and (b) the product blended with leaded or unleaded petrol (white spirits or a condensate) was not exempt under the Excise Regulations (reg 176(2)). 394 So, turning to the four elements of the offence under s35 of the Excise Act (supra para [59]), the plaintiff must prove the following: * First, that Camile Trading was a person for the purposes of the section, namely, a corporation; * Secondly, that Camile Trading was, during the periods identified in the Statement of Claim, engaged in the manufacture of petroleum products, namely, blending leaded and unleaded petrol with petroleum products which included white spirits or a condensate; * Thirdly, that the blended fuel was an excisable blended petroleum product (s77G) (supra para [394]); * Fourthly, that Camile Trading had not been granted a licence by the Collector of Customs under s34 of the Act. 395 The plaintiff, in respect of each period, has proved these elements beyond reasonable doubt. It has also proved, to the same standard, the complicity of Mr Fletcher in those offences. 396 Turning then to s61, I accept that during the periods in the Statement of Claim and in the context of leaded and unleaded petrol and white spirits or a condensate: * First, that Camile Trading manufactured during each period, excisable goods, namely excisable blended petroleum products, being a blend of leaded or unleaded petrol and white spirits or a condensate; * Secondly, that in respect of such goods, no entry for home consumption, trans-shipment or warehousing was made; * Thirdly, that Camile Trading was not authorised by Customs to move the excisable goods from the depot at Albion Park; * Fourthly, that the excisable goods were moved (by mobile tankers) from the depot. 397 Accordingly, I am satisfied beyond reasonable doubt that the offences alleged by the plaintiff were committed by Camile Trading with the complicity of Mr Fletcher. 398 Moving to the offence of evasion under s120(1) of the Act, I am likewise satisfied beyond reasonable doubt in respect of each element, namely: (cf supra para [63]) * First, that Camile Trading manufactured excisable blended petroleum products during each of the nine periods, namely, a blend of leaded and unleaded petrol with white spirits or a condensate; * Secondly, that duty was payable in respect of such products; * Thirdly, that duty was not paid; * Fourthly, that the duty was evaded in that the failure to pay was intentional. 399 Again, there can be no question that Mr Fletcher intended to evade duty and therefore that the company intentionally evaded duty (s145A Excise Act 1905). As in the case of blending diesel with heating oil, the blending of leaded and unleaded petrol with other petroleum products, including white spirits or a condensate, was carried out surreptitiously, largely paid for in cash with few documents. Whilst Mr Fletcher asserted that blending petrol with ethanol and toluene (or xylene) was permissible, he well understood that blending with white spirits or a condensate was not exempt under the regulations. He understood that such a blend with leaded or unleaded petrol would require a license, since Camile Trading was not a statutory blender (s35). He no doubt appreciated that the company would require permission to move the blend once manufactured (s61) and excise duty would be payable on each ingredient at the gasoline rate. 400 One then comes to the issue of the quantification of the duty evaded under s120(2)(b). Schedules have been prepared by Mr O'Malley (Ex H5) upon differing assumptions. However, as I have already remarked, satisfaction beyond reasonable doubt in respect of the duty evaded requires proof of the formula used when mixing the excisable blended petroleum products. The Statement of Claim itself (para [210 and equivalent paragraphs relating to later periods], supra para [160]) makes it clear that the blending went through an experimental phase where the rate of ethanol introduced to the mix was 1% in the early days, and was 10% by the end. I have previously said (supra para [162]) that, by the time the large tanks, tanks 15 and 16, were installed and operational, the blending was well established with a significant throughput. Mr Fletcher made a diary note that the largest tank was delivered to the depot on 6 September 1995. I also infer that it was installed and operational by 1 November 1995. I infer that the formulae which appear in the spreadsheet of Mr Bartlett relating to these tanks (Ex A7: supra para [137]) were used between 1 November 1995 and 20 November 1996. The relevant formulae are set out in the Schedules attached to Mr O'Malley's revised statement (Ex H4), namely, Schedule MJO3 in respect of unleaded petrol (where unleaded petrol was 60% of the mix) and MJO6 in respect of leaded or super petrol (where leaded petrol was 71.875%). 401 In respect of the periods between 1 April 1994 and 31 October 1995, I am unable to be satisfied beyond reasonable doubt as to the formula which was used in blending leaded or unleaded petrol. I cannot, therefore, determine the amount of duty evaded (s120(2)(b)(ii) of the Excise Act 1905). 402 However, has the plaintiff established the level of duty evaded, at least for the period 1 November 1995 to 20 November 1996? There are two difficulties, one straightforward, and the other less so. There was the suggestion by Mr Fletcher that toluene was unprocurable after May 1995, causing him to travel to Melbourne in an endeavour to secure supplies (as noted in his diary on 26 May 1995) (Ex A8) (supra para [162]). Mr Bartlett acknowledged that, in manufacturing the petrol blend for leaded and unleaded fuel, there were occasions when the necessary ingredients were not available. However, he added that such occasions were "very rare" (Ex A1, p35 (para 76)) (supra para [164]). Even though such occasions were rare, can one be satisfied beyond reasonable doubt, in these circumstances, as to the precise level of duty evaded? In my view, it is open to make a generous discount of, say, 10% and be satisfied that duty was evaded in respect of the balance. Such a discount, therefore, should be made. 403 It follows that I reject Mr Fletcher's evidence as to unavailability of toluene. Whilst there may have been difficulties in procuring toluene after May 1995, at least openly, I am satisfied that either toluene or a similar additive, such as xylene, was available and used (cf Mr Bartlett's spreadsheet Ex A7; supra para [137], which included the ingredient "xyl" which I infer was xylene). 404 Greater uncertainty, however, attends the second difficulty. The plaintiff's case in respect of leaded and unleaded petrol, as outlined above, involved the blending of white spirits, or a condensate, as one of the ingredients. The throughput each day was substantial (approximately 150,000 litres per day) (supra para [162]). There were a number of suppliers of white spirits or condensate, including S F Bial, Gladstone (from Victoria), and Vic Newland. The third defendant, Evenfont, was also identified by Mr Bartlett as a further supplier. It was clear that Evenfont did indeed deliver a white hydrocarbon which Mr Bartlett knew as white spirits and which the drivers referred to as "white shit" during the period 1 November 1995 to 20 November 1996. Some of it was said to be of poor quality, so that it had to be blended with white spirits or white hydrocarbons from another supplier to make up the 22.5% (unleaded petrol), or 15% (leaded) used in the mix (cf Ex A7 supra para [137]). Since Evenfont did not have the capacity to product white spirits, what was the nature of the substance known to Mr Bartlett as white spirits supplied by Evenfont? Has the plaintiff established beyond reasonable doubt that it was not an exempt petroleum product, such that a mix of petrol which included that substance, was an "excisable blended petroleum product" (s77G Excise Act 1905 and Reg 176(2) of the Excise Regulations) (supra para [42 ff]). The answer depends upon a close examination of the so-called "white shit" and the process by which it was manufactured. 405 I will, therefore, postpone the issue of quantification under s120(2) in respect of leaded and unleaded petrol in the period 1 November 1995 to 20 November 1996 until after the examination of the plaintiff's case against Evenfont and Mr Pullinger (the third and fourth defendants). Once the nature of the "white shit" delivered by Evenfont to Camile Trading has been identified, a judgment can be made as to the implications of blending that product with leaded and unleaded petrol. 5. THE CASE AGAINST EVENFONT AND MR PULLINGER Background. 406 The differing roles of Mr Bartlett and Mr Fletcher in the running of Camile Trading have already been described. Mr Bartlett ran the depot. He was there six days a week and was in close touch with what happened on the seventh day. He recorded deliveries and other information (such as tank dips) in his diary each day (cf Ex A12). In my judgment, with few exceptions, his account of what happened at the depot was reliable. 407 Mr Fletcher had a different role. It was his company (as the 90% shareholder). He dealt with Evenfont and Mr Pullinger. Evenfont and Camile Trading had an extremely close, indeed symbiotic, relationship. Like Camile Trading, Evenfont existed on the fringe of the industry, operating an antiquated refinery at Seven Hills. It produced a number of products, which I will shortly describe. The products, overwhelmingly, were produced for consumption by Camile Trading. They were tailored to meet Mr Fletcher's needs. Mr Pullinger said this: (T785) "Q. Presumably because the products from the plant that were to be supplied to Camile, there was a high degree of consultation, was there not, to ensure that the product being supplied was suitable for what Camile was able to market? A. Consultation between Paul and the operators? Yes. Q. More like you and Mr Fletcher? A. Yes. Q. Or Mr Lucas and you and Mr Fletcher? A. Mainly myself and Les at that time. Q. Because if Mr Fletcher couldn't market what you were producing then presumably he would stop buying it? A. Correct. Q. You would need to know that you were producing products he was able to market? A. That's correct." 408 From time to time there were problems and complaints, although Mr Pullinger said not many. Mr Pullinger added: (T785) "Q. They would be matters which would cause you and Mr Fletcher to have to consider the nature of the product being produced, would you not, and discuss whether it was suitable? A. Yes. Q. I think you mentioned in your affidavit that there was a process of weekly settlements where Mr Fletcher would come to Evenfont's premises and settle up for the previous week? A. Correct. Q. Did that provide opportunities for this process of consultation as to the quality of your products? A. Absolutely. Q. And you had to make yourself aware, did you not, of what Mr Fletcher was doing with the products to ensure that what you were supplying to him was suitable for his purposes? A. Yes." 409 Mr Fletcher was introduced to Mr Pullinger by Ms Marie Wheat, a consultant in customs and excise (Ex EV6 (para 6)). Evenfont was very conscious of the Excise Act and Regulations. The evidence presented an illustration of the way in which it adjusted its operation so that it was arguably within the letter of the law. I have referred to this issue already (supra para [272 ff]). Broadly, Evenfont produced and sold to Camile Trading two products. They were colloquially identified as "green shit" and "white shit". In fact, as will emerge, the "green shit" was produced from a number of different sources, as was the "white shit". One source involved the processing of crude oil from south eastern Queensland. The "green shit" was given a number of different names, COI, COII, TCO and finally HO. The change in name reflected a change in processing, as I already described (supra paras [269 ff]). The changes both in name and processing were made with the Excise Regulations in mind. It will be remembered that before October 1995, the green product from crude oil had been called "topped crude oil" (TCO), which was then subject to excise at the heating oil rate (0.06954 cents per litre). That was to change, as explained in the following Minute by a Customs officer made on 31 January 1996: (Ex EV1) "Evenfont Pty Ltd produce about 1 million litres of product per month. Evenfont Pty Ltd was primarily producing Topped Crude Oil which was sold at the Excise rate of 0.06954 cents per litre. The major purchaser of this product was Camile Trading Pty Ltd (part of the Marina Group of independent fuel distributors). When the excise rate changed, in late October 1995, on Topped Crude as engine fuel to 0.33513 cents per litre Evenfont Pty Ltd began producing what they now call Heating Oil in its place from the same base product (Crude Oil). This is reflected by the entries and excise payments which are made at a lower rate. Camile Trading Pty Ltd remains the major purchaser from Evenfont." 410 A supervising officer added the following comment: (Ex EV1) "The changed administrative arrangements seem to have only the effect of relabelling product." 411 Certainly there was also a change in the method of production after October 1995. Before the change in Regulation, the distillation had been carried out at atmospheric pressure. After it was carried out under a partial vacuum. Mr Lucas said this: (Ex EV7 (23)) "In October 1995, some changes were made to the Seven Hills plant. Evenfont ceased carrying out atmospheric distillation, and instead carried out the steam stripping and distillation process under a partial vacuum. This resulted in the production of a heating oil, as defined by ASTM 396. Annexed hereto and marked 'B' is a copy of that standard. Evenfont sold this product as 'heating oil', and it was always described as such on our invoices. The delivery dockets relating to this product, however, sometimes referred to it as 'HO'." 412 Professor Batts, the expert retained by Evenfont, made the following comment upon the change: (T868) "A. Yes, I did not see the plant recently. I am led to believe that it was subsequently used, or part of it, as reduced pressure -- a slight vacuum . However, ... why would you do that because it would not make a significant difference to the product? Because, if you reduce the pressure, you would reduce the temperature of the stream he was using for stripping. He said it worked, and I accept it. I did not see the plant running under reducing pressure, so I would not want to comment further than what my comment would tell me." (emphasis added) 413 Had Evenfont not changed the method of production, it would truly have been open to the charge that it was simply relabelling the product, as Customs suspected. The production change, coinciding as it did with the change in Regulation, strongly suggested that it was introduced by reason of the legislative change. Nonetheless, as Customs recognised, the product was itself still arguably a heating oil, although (as Professor Batts acknowledged), an atypical heating oil. 414 Mr Bartlett, at Camile Trading's depot, was oblivious to the subtleties of these changes. He simply received a tanker load of "green shit" or "white shit", which he then blended. He said this: (T183) "Q So, you are only familiar with 'white shit' coming out of the Evenfont refinery - you are only (familiar) with 'green shit' and 'white shit' coming out of the Evenfont refinery? A. The one at Seven Hills? Q. Yes? A. That is about the only stuff that I know that came out of there. But, in saying that, the 'green shit', its name had been changed on a number of occasions to suit whatever, but we had waste oil, CO-1, CO-2. It might have been that." 415 Mr Bartlett added: (T183) "Q. So, you don't know why the name of CO-1 or CO-2, CO and HO change? A. Les Fletcher had told me to change the name because we needed to know what name we were going to write down at the time, and it was because of something that was happening with Customs, or an excise thing. But, it coincided with talking with either Pullinger or this Mary Weekes (sic), I think her name was, and we had a name made to suit." 416 It was, as mentioned, Mr Fletcher who dealt with Evenfont and Mr Pullinger, and knew them well. Mr Bartlett had limited contact with either. He said they came to the depot a number of times, Mr Pullinger more frequently than Mr Lucas. Mr Bartlett also said he went to the Evenfont plant at Seven Hills on several occasions. Mr Pullinger and Mr Lucas, in their evidence, both suggested that their level of contact with Mr Bartlett was significantly less than he had suggested. I am inclined to think, although it does not greatly matter, that Mr Bartlett's estimates were rather more reliable than those of Mr Lucas and Mr Pullinger. The aversion which Mr Bartlett had for Mr Pullinger is likely to have been the product of greater contact than Mr Pullinger was willing to acknowledge (cf Bartlett T179; Lucas EV7 (59)). 417 The point is that Mr Bartlett's knowledge of Evenfont was largely gathered from occasional meetings and periodic remarks by Mr Fletcher. His recollection of these matters, after ten years, was far less reliable than his recollection of what he did, day in and day out, managing the depot. The evidence of Mr Bartlett. 418 It will be remembered that the plaintiff's case against Evenfont and Mr Pullinger in respect of complicity is not concerned with the supply by Evenfont to Camile Trading of heating oil ("green shit"), to be blended with diesel (supra para [9]), It is concerned with the supply of "white spirits" ("white shit"), knowing that it was to be used by Camile Trading in a blend with leaded and unleaded petrol. The plaintiff asserted that the "white shit" was supplied, knowing that Camile Trading had no manufacturing licence, knowing that the provisions of the Excise Act (the completion of an entry for home consumption and supervision by Customs) would be ignored, and knowing that excise duty would not be paid. 419 I believe Evenfont certainly knew that Camile Trading did not have a manufacturing licence (cf Pullinger T823). It may be inferred that Mr Pullinger (and Evenfont) also knew that no duty had been paid on the blend created with products from Evenfont and that the formalities of Customs control had also been ignored. The real issue, as already stated, concerns the nature of the products which Evenfont manufactured for Camile Trading. Mr Bartlett, in his affidavit, described that product as "white spirits". He said this: (Ex A1, p27(55)) "55. Commencing in late 1992, and continuing until late 1996, Camile purchased additional white spirits from Evenfont, initially from its plant at Seven Hills and then later from its plant at Rutherford as well. Over the periiod, Camile purchased two to three 30,000 litre loads of white spirit each week from the Seven Hills plant and, between about August 1996 and November 1996, two 32,000 (approximately) litre loads of white spirit per week from the plant at Rutherford." 420 He added: "56. I did not place orders with Evenfont for the purchase of white spirits. Each week I received telephone calls from an employee at the Seven Hills plant advising that the plant was 'full' with white spirit. These calls were made by the Fourth Defendant, Robert Leonard Pullinger (hereinafter 'Pullinger'), Paul Lucas, or by the yard manager at Seven Hills. On each occasion, the caller told me what quantities of white spirits they wished to be removed from the plant and requested me to send a Camile tanker to collect it. After each call, I dispatched a Camile tanker to collect the white spirits, usually the next day. I never prepared any paperwork in relation to the collection of white spirits from Evenfont nor did I ever give the driver that I dispatched any such paperwork. I simply said to each driver that I dispatched: 'Go to Seven Hills (or Rutherford) and collect a load of white shit.'" 421 Mr Bartlett did not pay for the deliveries with cash from the cash tin (para 58). The "white spirits" were added to tanks 15 and 16, and used for the blending with leaded and unleaded petrol (para 60). These tanks, indeed, were purchased through Evenfont, who arranged for the installation of rotating paddles to assist blending. 422 Mr Bartlett also deposed to two other aspects. They are relevant to the plaintiff's case on complicity. He said that Mr Lucas, as the director of Evenfont with an engineering background (supra para [269]), provided advice to Mr Fletcher concerning blending. Mr Bartlett said this: (Ex A1, p40(92)) "92. On numerous occasions from 1992 onwards, Bob Pullinger and Paul Lucas, sometimes together and sometimes separately, came to the Camile Depot. Paul Lucas was an employee of Evenfont at the time. When they came, they spoke to both Fletcher and myself. Fletcher and I showed them the tanks that were installed at the depot, the system of pipes joining the various tanks, how the blending motors were installed and the associated electrical works. I can recall Fletcher speaking to them about the blending of white spirits, toluene and ethanol with refinery petrols. I cannot now recall the precise words that were said by Fletcher. However, on a number of these occasions he did explain to them both just how the blending was done and the percentages of each product used in the blending at the time that each such conversation occurred. I was present, and heard, on more than one occasion, similar conversations take place between Fletcher and Pullinger and Lucas at Evenfont's premises at Seven Hills." 423 The other aspect (also relied upon to demonstrate complicity) concerned the testing of the various blends. Mr Bartlett mistakenly assumed that Mr Lucas was a chemist. He said this: (Ex A1, p38(86)) "86. I can recall visiting Evenfont, Seven Hills, on various occasions during 1993 to 1996 and watching Paul Lucas a chemist and a director of Evenfont's doing tests in a laboratory situated at their premises on blends of Success heating oil and Mobil diesel that Fletcher and I had taken there. 87. Once supplies of Heating Oil started coming from Evenfonts Rutherfod plant heating oil diesel blends were tested. On 31 October 1996 I saw Fletcher fill three one litre coffee jars with blends of product. One was a 50/50 blend of Rutherford 'HO' and diesel, another was a 60/40 blend of Rutherford HO and diesel and the last was a 75/25 blend of Rutherford HO and diesel. The HO had come [out] of a 20 litre drum and the diesel came out of a tanker. I saw Fletcher mark those jars with numbers 1, 2 and 3 and the word 'sample'." 424 Mr Bartlett's first affidavit, from which this material has been drawn, was sworn on 11 August 2000. He swore a second affidavit on 2 May 2001. The affidavit was clearly directed to the issue of complicity on the part of Evenfont and Mr Pullinger in the blending operation conducted by Camile Trading. Mr Bartlett recounted in greater detail conversations he claimed to have overheard between Mr Fletcher and Mr Pullinger at a time when the relationship between Camile Trading and Evenfont was being formed. Mr Lucas was said to have been present. Mr Pullinger, according to Mr Bartlett, spoke in terms of Evenfont being in a position to supply "a solvent". White spirits, incidentally, are a solvent (Prof Trimm, Ex Z1, p13(34)). According to Mr Bartlett, the following was said either by Mr Pullinger or Mr Lucas: (Ex A2, p3(7)) "The solvent is low cost. You can put 10% in with petrol; more, if you can beef it up with toly." 425 Mr Bartlett continued: (para 8) "8. During this discussion, Pullinger produced a graph. Written on it were the words 'Exxon Graph'. When he did this, Pullinger said: 'Have a look at this.' It showed the octane ratings of different petroleum products, including white spirits and toluene. Lucas said: 'There's the petrol band, and there's the white spirits band. You can see what the octane ratings are.' Lucas also said: 'You should be able to work out percentages from this. We should be able to mix these things to give you your ratings.'" 426 Price was discussed. According to Mr Bartlett, Mr Pullinger said it would be cheaper if cash were paid (Ex A2, p4(9)). 427 Once the relationship had been established, Mr Fletcher regularly tested various blending formulae, enlisting the aid of Mr Bartlett and others to ensure the blend actually worked. They used their own vehicles. Mr Bartlett said this: (Ex A2, p7(15)) "15. ... On some 6 or 7 occasions from about 1994 to November 1996, Fletcher and I together took blends of petrol and white spirits, toluene and ethanol that we had made up at Albion Park to Evenfont's premises at Seven Hills where we handed them to Lucas. Sometimes, these blends were of leaded petrol and, sometimes, they were of unleaded petrol. ..." 428 The samples were taken by Mr Lucas to his laboratory. The outcome was later discussed. Mr Bartlett recounted his conversation with Mr Lucas in these terms: (Ex A2, p7(16)) "16. ... During the conversation, either Lucas or Pullinger said to Fletcher and me: 'The percentages of white spirits are too high. We have to back it off.' Pullinger complained about backing off the white spirits, following which he said: 'We should be able to decrease the petrol and increase the toluene, or even your ethanol, to bring the rating back up.'" 429 The formula was periodically varied to accommodate problems that had been encountered (Ex A2, p8(18)). Mr Bartlett said that there were no invoices or paperwork (Ex A2, p10(25)). He added: (Ex A2, p11(25)) "25. ...I handed amounts of around $100,000 in cash to Pullinger on some of the monthly occasions that he came to Camile's depot. I have also given him similar amounts in cash at times that I have gone to Evenfont's premises at Seven Hills." Cross Examination of Mr Bartlett. 430 Mr Fletcher denied Mr Bartlett's account, as did Mr Pullinger and Mr Lucas. Mr Bartlett, whilst possessing expertise in the identification of various petroleum products, was not in a position, based upon experience, to determine whether the white or whitish petroleum product from Evenfont, which he knew as "white spirits" or "white shit", was in fact white spirits (supra para [133]). Indeed, clearly it was not, since Evenfont did not have the capacity to distil white spirits, as I have stated. But did Mr Pullinger or Mr Lucas refer to their product as "white spirits"? It was plain that they did not. Mr Bartlett said this: (T171) "Q. Now Pullinger and Lucas, Mr Pullinger and Mr Lucas from Evenfont sometimes referred to the 'white shit' that they produced as 'waste slops', didn't they? A. No it was - as far as I can recall it was either called 'light ends' or 'condensate'. Either 'light ends' or 'condensate'." 431 Mr Bartlett's statements, as set out above, should be understood in this light. I will examine below the nature of the white hydrocarbon that was delivered, the "condensate or light ends", and whether it came within a classification which was exempt under the Excise Regulations. 432 Let me move to the second aspect of Mr Bartlett's evidence, the technical advice as to blending allegedly provided by Mr Lucas and, to a lesser degree, by Mr Pullinger, as well as the testing said to have been undertaken by Mr Lucas. As a generality, I have no doubt that Evenfont, and particularly Mr Lucas, regularly provided technical advice on blending to Camile Trading, including to Mr Bartlett. The two companies worked hand in glove. They were dependent upon each other. Mr Lucas, although not a chemist, was an experienced engineer who had worked with industrial solvents for nine years (Ex EV7, paras 1 to 9). He had acquired considerable expertise in respect of petroleum products. I do not doubt that his advice concerned, amongst other things, the blending of diesel with the heating oil supplied by Evenfont. Problems had been encountered with Evenfont's product, by reason of excessive wax, which tended to block filters especially in certain temperatures. These problems were, according to Mr Lucas, overcome. I accept Mr Bartlett's account that, in a context of the "white shit" supplied by Evenfont, there was similar consultation, advice and adjustment, as problems presented. 433 However, the advice given in the context of blending heating oil and diesel is not relevant to the issues in the Statement of Claim, since the plaintiff does not assert complicity in the context of diesel. The case on complicity arises in the context of advice given by Evenfont as to the blending of Evenfont's "white shit" with leaded and unleaded petrol (and other ingredients). Such advice would only be reprehensible, and a basis for inferring complicity, if the "white shit" from Evenfont was knowingly being blended in circumstances amounting to the manufacture of an excisable blended petroleum product, by a company without a licence and in circumstances where duty was being evaded. As mentioned, Evenfont and Mr Pullinger certainly knew that Camile Trading did not have a manufacturing licence. It may be inferred that they also knew that Camile Trading had not established the regime of a secure bonded area, required in respect of excisable goods (which Evenfont had), and did not pay excise duty on any blend which included the products they supplied. 434 However, Camile Trading and Evenfont (as well as Messrs Fletcher and Pullinger) asserted that the product known as "white shit", which Evenfont supplied, and which Camile Trading blended, was excise paid at the full gasoline rate, or excise exempt. There was no inhibition, in their view, upon blending such products with leaded or unleaded petrol. They asserted that the inclusion of "white shit" in a blend did not create an excisable blended petroleum product (s77G; supra para [42]). 435 I will later examine this contention. However, one must first determine the nature of the "white shit" which Evenfont supplied, and whether it was in fact excise paid or an exempt petroleum product under the Regulations. 436 If what was blended was excise paid or exempt, then advice given by Mr Lucas would furnish no basis for a finding of complicity. Blending petroleum products, as such, was not prohibited. What was prohibited was knowingly assisting in blending in circumstances that gave rise to an excisable blended petroleum product where there was no licence, no submission to Custom's control and an evasion of duty. It was not suggested, or unambiguously suggested, that the advice provided extended beyond the products which Evenfont supplied. 437 Moving to the second aspect relied upon by the plaintiff to prove complicity, did Mr Lucas carry out tests (as opposed to providing advice) on various samples, as alleged by Mr Bartlett? The comments made in the context of advice apply equally to testing. It will be remembered there were problems concerning the heating oil supplied by Evenfont to Camile Trading, when used in diesel engines. There was wax and an excess of water (Ex EV7, para 67). Three or four samples were sent to Seven Hills to be tested (Ex EV7, para 68). In respect of petrol, whether leaded or unleaded, Mr Lucas said this: (Ex EV7, para 69) "69. I am not aware that Fletcher ever gave me a blended product to test. If he did, I would not have been aware that it was blended. This is because the lab at the Seven Hills plant did not have a gas chromatograph between 1994 and 1996. A gas chromatograph is necessary to determine the constituents of a blended petroleum product. The only equipment we had was distillation equipment (to tell us the boiling range), a flashpoint tester, a Karl Fischer water titrater (to tell us water content) and a rudimentary test to determine the cold filter plugging point of our heating oil (the temperature at which the wax within the heating oil will begin [to] solidify and block fuel filters)." 438 Professor Batts gave evidence as to the rudimentary nature of the laboratory at the Seven Hills plant at that time. He said this: (Ex EV11, p7(3.1)) "I was shown the laboratory, the tanks for receiving feed-stock, the pot still and associated boilers, clay bleaching area, filters and storage tanks for finished product. The laboratory was rudimentary. I recall seeing boiling point and flash point apparatus but little else. Over the next couple of years I re-visited the site to discuss the purchase of suitable laboratory equipment, particularly a gas chromatograph. There was no gas chromatography instrument at the time of my first visit." 439 Mr Pullinger, responding to Mr Bartlett's first affidavit (paras 90 and 91), provided the following somewhat contradictory commentary, referring in paragraph 90 to an alleged conversation about blending: (Ex EV6, p6(27)) " Para 90: I deny ever having such a conversation with Fletcher. There would be no point bringing a sample petrol blend to the Seven Hills plant, as we did not have the necessary equipment to obtain any meaningful results. Para 91: I recall Fletcher coming to Seven Hills with samples of Evenfont's product that had had some problems in the market place. Fletcher asked us to have a look at it to see what the story was. I recall this happening approximately 6 or 8 times between 1994 and 1996. I do not recall Fletcher ever coming with any other products. As far as I am aware, Bartlett never came to us with any product to test." 440 I accept that, at the relevant time, the laboratory was rudimentary. I therefore accept that the capacity of Mr Lucas to test samples provided by Camile Trading was limited. However, Mr Bartlett was not an expert observer. I think it likely that he did deliver samples and did witness Mr Lucas perform work in the laboratory. Mr Handcock provided the following evidence, which I accept: (Ex K1, p5(28)) "28. On occasions, Fletcher, the Second Defendant, gave me samples of diesel fuel and HO and instructed me to take these samples to Redline at Seven Hills and to give them to the female chemist that worked there. He said words to me to the following effect: 'Alan, I want you to take these diesel fuel and heating oil samples up to Redline for me and give them to the girl in the laboratory, or if she's not there give them to the yard foreman.' " 441 Evenfont also had a role in arranging more sophisticated tests with other laboratories. Mr Gibb said this, in a passage already quoted, recounting a conversation with Mr Fletcher in late 1995, or early 1996: (Ex AD p6(18)) "18. ... [He said:] 'I have some samples here, can you have these tested at Caltex?' I said: 'Yes we can. What sort of samples are they?' He said: 'These are blending materials that I am considering using. I need to know the octane rating. I am going to use these materials in blends of condensate from South Australia, mineral turps, White Shit and Unleaded Petrol.'" 442 The remaining aspects of Mr Bartlett's account were less reliable, and in some cases his recollection was wrong. He suggested, in the passage set out above, that at the initial meeting in 1992, Mr Pullinger said to Mr Fletcher, in his presence and that of Mr Lucas, that Evenfont could supply a low cost solvent for blending. Mr Pullinger produced a graph from the oil company, Exxon, to illustrate the different octane ratings. By this means he demonstrated how a cheap low octane product, such as white spirits, could be blended with a higher octane product such as toluene, to achieve an octane rating which was acceptable. In cross examination by Mr Horowitz of counsel, for Evenfont, Mr Bartlett said this: (T177/8) "HOROWITZ: Q. Now you gave evidence yesterday that Mr Fletcher produced a graph to you once which showed different octane ratings on it; do you remember that? A. Yes, that's right. Q. Was this a graph from an oil company, do you recall? A. I think it might have been. From memory it was a glossy type thing, so it would have been something that would have been related maybe from an oil company. Or somebody that produced it anyway. Q. I suggest to you that the graph you are referring to was an Exxon graph; do you recall that? A. No, as I said it was a graph. Q. Have you seen a lot of graphs [of] octane ratings in your years in the petroleum business? A. No, never. Q. That was the only one you'd ever seen? A. That was the only one I've ever seen. Q. That was shown to you by Mr Fletcher? A. Yes. Q. When was that? A. Way way early in the piece. It would have been way way early in the piece. Way way. Q. Where did he show it to you? A. In his office. Q. Was there anyone else in his office at the time - A. On his desk. Q. - who saw this graph as well? A. No only him and me there at the time, I would say. That I can recall anyway." 443 Mr Bartlett was then shown his second affidavit, where he had identified Mr Pullinger as producing the graph. The cross examination was in these terms: (T178) "Q. And if you could turn to paragraph 8, which is on the fourth page, at the top there it says: 'During this discussion Pullinger produced a graph. Written on it were the words Exxon graph.' It's not true that Mr Pullinger has ever shown you an Exxon graph is it? A. It would have been - Pullinger would have pulled out a graph I should imagine. I was shown the graph by Les Fletcher opened up, and explained about the different octane ratings of different fuels. Q. You just told us you were alone in the office at Camile? A. I said - Q. Mr Fletcher, and that he showed you the graph, and that you have never seen one anywhere else? A. Never seen. Q. Didn't you? A. I never seen anything before until this, Mr Fletcher showed me the graph in his office. Q. You're making up evidence against Mr Pullilnger to make him a defendant in this lawsuit, aren't you? A. I've got no reason to do that at all with Bob Pullinger. Not true." 444 On that aspect, Mr Bartlett's evidence was unsatisfactory and cannot be accepted. 445 Mr Bartlett's assertion that deliveries by Evenfont were not accompanied by appropriate documentation was also doubtful. There were many Evenfont invoices in evidence, although the source (whether Evenfont or Camile Trading) was not always clear. The arrangement Camile Trading had with Evenfont was unusual. Mr Bartlett, as the person in charge of the depot, would place orders with other suppliers, who would then have them delivered by carriers. However, the arrangement with Evenfont (apparently made by Mr Fletcher) by-passed Mr Bartlett. Evenfont would telephone the depot, indicating that it had their product to deliver (whether "green shit" or "white shit"). Mr Bartlett would then despatch drivers to attend the Seven Hills refinery (and later, Rutherford) to take delivery. Payment would occur between Mr Fletcher and Mr Pullinger at their weekly settlement meetings. Although I have doubts about Mr Bartlett's assertion that there were no documents from Evenfont, I do not see this aspect as bearing adversely upon his credibility. 446 The final matter in respect of Mr Bartlett's testimony, concerned the cash allegedly paid by Camile Trading to Mr Pullinger by Mr Fletcher and, on at least one occasion, by Mr Bartlett. Mr Pullinger denied that he or Evenfont were ever paid in cash. It was an important aspect. Cash is often the hallmark of an illegal operation. Mr Bartlett described the actions of Mr Fletcher as follows: (T104) "Q. Never even any discussion between you and Mr Fletcher about the way in which the supplies from Evenfont were paid for, is that right? A. Yes that's right. Q. No discussion between you at all? A. That's right. Q. Did you ever see Mr Fletcher coming back with wads of cash to throw in this ammunition tin? A. No but I saw Les Fletcher go away with wads of cash to throw in Bob Pullinger's hands. I saw him hand them to him when he came down and visit us from time to time; walked away with big parcels of money. So I saw that. Q. And how often did you see that during the period of - A. Very regular because being the amounts of fuel that were taken out, and Pullinger always wanting his money, and wanting his stuff out, it was regular. Q. You said very regular a minute ago, how frequent is very regular? A. Very regular. Pullinger would have come down at least once a month, and Fletcher was up there every few days. Q. But no discussion ever between you and Mr Fletcher about the amounts of cash that might be transferred between him and Mr Pullinger; never a word about? A. There was no need. Q. But weren't you a director of this company? A. (No answer). Q. Didn't you have an interest in it? A. Yeah I did. One of the things you do is put faith in the people who you are working with, and he done that deal, and that's the way it went, and that's what he did and I accepted that." 447 These observations, recounted more than a decade later, were not set out in those terms in either affidavit sworn by Mr Bartlett, and specifically the second affidavit which dealt with cash. Counsel later returned to this issue. Mr Bartlett gave a rather different account, suggesting that he was relying upon inference and assumption, rather than observation and his own actions. He said this: (T134) "Q. Just in relation to that issue, did I understand you to say yesterday, and correct me if I am wrong, that so far as payments of cash to Evenfont was concerned, that was something that you left to Mr Fletcher? A. Yes, he dealt with Pullinger more than what I ever did. Q. Well it was something that you left to Mr Fletcher, in Fletcher handled the cash transactions between Camile and Evenfont, is that right? A. Yes, that's right. Q. Not you? A. No. I at times I would have stacked it in some envelopes, or something like that. It was on rare occasions that that happened." 448 Mr Bartlett added: (T135) "Q. So I just want to clarify that. You say that was Mr Fletcher's deal. That is what you said? A. Well that's what he did. That was - that's my interpretation of it. It's his deal. He worked with him. All his - everything he did was with Pullinger. It was on rare occasions that I spoke to Pullinger anyway, other than on the telephone to do with ordering and things like that. Q. It was something Mr Mr Fletcher and Mr Pullinger had as a sort of secret between them, and you were more or less kept out of that; is that right? A. No it was no secret, it was just that those two did their operations between themselves." 449 Mr Bartlett was cross examined further about the terms of his affidavit (Ex A2, para 25) where he had suggested that he personally handed Mr Pullinger $100,000 on one occasion. Mr Bartlett retreated from that assertion, saying that he was with Mr Fletcher and saw cash left for Mr Pullinger (T136/7). 450 Again, on this aspect, Mr Bartlett's evidence was contradictory and less than satisfactory. The allegations against Mr Pullinger are plainly serious. Before they could be accepted, I would need to be satisfied at least to the standard suggested in Briginshaw v Briginshaw (1938) 60 CLR 336. On Mr Bartlett's evidence, standing alone, I could not be so satisfied. 451 Mr Hastings QC (for Customs) in his closing submissions, drew attention to certain records, which were invoices from Evenfont relating to the supply of heating oil. They were part of the weekly settlement process. He submitted that a comparison of the invoices presented in a particular period, and the cheque drawn in settlement, showed that a number of invoices were missing. The sequence of invoices and the cheque butt did appear to support that suggestion. The proper inference, on his argument, was that the missing invoices had been paid for in cash (T1102/1104). 452 This late submission prompted a further round of written submissions. On 14 August 2006, Mr Horowitz of counsel (for Evenfont) set out a number of reasons why the inference could not be drawn, or should not be drawn. Customs responded on 18 August 2006 with yet more submissions in support of their original suggestion. 453 The difficulty is that the material available in respect of this issue does not allow a complete audit of the invoices provided by Evenfont and the cheques drawn in payment. The inference is invited upon the basis of incomplete material. I do not feel comfortable in drawing it, even as a matter of probability. I agree with the submission made on behalf of Evenfont that, at the end of the day, there is no corroboration of this aspect of Mr Bartlett's evidence, and his evidence is unsatisfactory. 454 Was Mr Bartlett lying? If he were lying, that would obviously reflect adversely upon other aspects of his testimony. I am not able, however, to reach that view, partly because of another peripheral aspect of the evidence. It was an aspect that appeared to me odd. It also appeared to have great potential for the secret passing of money. I emphasise once more that I make no finding that there were cash payments. 455 One aspect of Evenfont's business, which I will shortly describe, was the collection and processing of waste oil. There was evidence that waste oil was collected and sold in significant quantities to Camile Trading. There were invoices raised in respect of each load. The product was described as waste oil. The charge was 7 cents per litre. Mr Pullinger said that the cost of collecting and delivering the waste oil to Camile Trading was 5 cents per litre. The waste oil was ultimately sold by Camile Trading (either with or without blending) as diesel, for approximately 65 cents a litre, providing a massive profit. Mr Pullinger gave the following evidence: (T794) "Q. It seems a generous price, seven cents a litre, to charge Camile? A. We had to get rid of it." 456 It was Mr Pullinger's expectation that the waste oil would be distributed by Camile Trading in its retail outlets for use in diesel engines (T798). Mr Pullinger asserted (and I will return to this issue) that the waste oil, being impure, was classified for excise purposes as a "waste oil" (Reg 176(2)) and was exempt from excise duty. Hence it could be sold very cheaply. When asked about that assertion in cross examination, Mr Pullinger responded as follows: (T797) "Q. Even though you considered it could have been used in a vehicle engine? A. Correct. Q. Did Customs know that? A. I can't remember if we - logic would say to me that it was a waste oil, so there was a waste oil and, therefore, outside of Customs' control. Q. It was called a waste oil? A. Yes. Q. But, it was still used in a vehicle's engine? A. Anything can be used in a diesel engine. As I say, you can pump sump oil into the diesel. Q. I am not talking about five minutes before the engine blows up, but capable of being used on a regular basis for the purposes of running an engine? A. That's correct." 457 Mr Fletcher was cross examined in respect of the purchase and use of the "waste oil" received from Evenfont. He said this: (T657) "Q. Let me give you a hint, on the invoice or delivery docket I have taken you to for 7 August 1996 the figures 64.9 appear. Would that remind you that you were able to buy a [product] for seven cents a litre and sell it for 64.9 cents a litre? A. You would have to go back to the suppliers to see how they treated it in their books." 458 The cross examination continued: (T657/8) "HASTINGS: Q. I am not asking you about their books I am asking you about the way you treated it in your books and here you are buying a product as waste oil for seven cents a litre and selling it at Forestville for 64.9 cents a litre as diesel fuel and you say it was excise paid, do you? A. I believe so. Q. How much? A. I don't know. Q. What rate of excise on any petroleum product would enable a supplier to pay the excise, produce the product and sell it at a profit and still charge you only seven cents a litre? A. I can only go on what's here." 459 The following was then put: (T659) "Q. You must have thought it was Christmas? A. Yes. Q. It was too good to be true. That doesn't happen in the real world, that you can buy an excise paid petroleum product for seven cents a litre and sell it for 65 cents a litre, that doesn't happen, does it? A. Yes." 460 The plaintiff did not submit there was a cash payment in the context of this product. I repeat that I draw no such inference. Nonetheless, I do not feel myself able comfortably to conclude that Mr Bartlett was deliberately lying. Indeed, I accept that Mr Bartlett believed that Mr Pullinger was paid cash, as were many other suppliers. I think it likely, nonetheless, that his belief was based upon assumption and inference, rather than observation or admission. 461 Let me move from Mr Bartlett's evidence to an explanation of the petroleum products manufactured by Evenfont and supplied to Camile Trading. It is this material, I believe, which holds the key to whether Evenfont was knowingly concerned in the manufacture by Camile Trading of excisable blended petroleum products outside the regime of Customs and without payment of excise duty. The real issue is whether Evenfont was supplying Camile Trading with a white petroleum product (whether a condensate or light ends) which it knew would be blended with leaded and unleaded petrol (and other ingredients) and which it also knew was not duty paid at the gasoline rate. The Evenfont operation. 462 In 1992 Messrs Pullinger and Lucas (using the corporations Evenfont and Truegain) leased a refinery at Seven Hills. The refinery was old. It had been established in the 1950s. It originally had been the plant of Marefine, a company that recycled and blended lubricating oils. Marefine used the business name, Redline, which was painted on the street front side of the plant. Evenfont continued to use that name. The manufacturing licence it sought from Customs was held by Evenfont, which dealt with all products which were excisable. Where a product was not subject to excise (or so regarded by Evenfont), it was transferred to Truegain (by a book entry) and then sold in almost every case to Camile Trading. 463 There were three aspects to the Evenfont/Truegain operation: * First, it processed crude oil from south east Queensland; * Secondly, through Truegain, it collected and processed waste oils and petrol; * Thirdly, before May 1996, it processed waste slops purchased from Caltex Oil. 464 Each process yielded two products, namely: * the so-called "white shit", which was a white hydrocarbon described as a condensate or light ends. It was not a white spirit. * the other being "green shit", which was ultimately used by Camile Trading for blending with diesel. 465 It will be remembered that the plaintiff's case against the third and fourth defendants is not concerned with the blending of Evenfont products with diesel. It is therefore not concerned with "green shit". The case is concerned with the blending of leaded and unleaded petrol with "white shit". Mr Horowitz of counsel (for Evenfont) produced a diagram as an aid to his final submission, which was most helpful (Ex EV14), and which I reproduce (references omitted). 466 The case brought by the plaintiff against the third and fourth defendants concerns the blending or possible blending of "WS" or "white shit" at the top of the diagram. The crude oil operation 467 In 1994 the purchase and sale of crude oil was brought under Customs control. It had not previously been an excisable product. To trade in crude oil from 1 April 1994, a licence was required. Evenfont became a licence holder. It was obliged to meet certain criteria, as described by Mr Lucas: (Ex EV7, p6(26)) * "Had to have a boundary security fence, including locked gates EXHIBIT EV14 * Had to nominate the storage tanks and process equipment that would be used to manufacture products from crude oil (known as the 'bonded area'). The bonded area was marked down on a floor plan and provided to customs as part of the licence application process * Had to have a method for measuring the finished products at the point of sale to determine the amounts that had to be entered for home consumption and upon which excise had to be paid * Had to post a security bond with customs." 468 Licence holders, such as Evenfont, were subjected to an audit each year by Customs. I will later refer to the findings of each audit. 469 The changes made by Evenfont in late 1995 to the processing of crude oil (switching from Topped Crude Oil to HO), have already been described (supra para [269 ff]). Evenfont was required to complete an Entry for Home Consumption (which included a statement of operations) in respect of anything that left the bonded area. Such forms were lodged with Customs each week, accompanied by payment of excise. Customs would then clear the product by issuing a receipt (Ex EV7, p6(27)). The product manufactured (the "green shit") (TCO or HO) was ultimately used by Camile Trading as a blend with diesel, as I have described. Excise was paid at the heating oil rate by Evenfont (approximately 6 cents per litre compared to the diesel rate of over 30 cents per litre). 470 The "white" residue which remained after the production of TCO/HO was, according to Mr Lucas and Mr Pullinger, used as feedstock to operate the boilers at the refinery. It was not sold to Camile Trading. It appeared on the Entry for Home Consumption as "waste to boiler" (cf Ex AG, p7). Mr Lucas said that there were two boilers, one with a capacity of 50,000 litres and the other one smaller. The two boilers consumed about 29,000 litres of fuel a week (T828). Since the plaintiff, as I will shortly describe, has suggested that the residue from the processing of crude oil (that is, the "white shit") may have been diverted to Camile Trading for blending with petrol, I should more fully describe the operation. Mr Lucas said this: (T829) "Q. You will see there is an entry in there of 32,920? A. Correct. Q. How is that amount calculated? A. The boiler feed tank had a particular criteria as far as design, diameter, height. We didn't have any measuring transmitters on any of our tanks, they were done by sight and we used to stock take on a daily basis and each one of those tanks, particularly this one, was measured as in height and the contents of the level of the liquid was calculated accordingly. Q. When you talk about this tank, this is the tank that is the boiler fuel tank, is it? A. That's the one that feeds the boilers. Q. You said that it was the condensate or the light ends of the top crude oil process that was used to fuel the boiler? A. Correct. Q. Was that stored immediately after being taken off the crude oil in the boiler fuel tank? A. It was in the process of manufacture. It was actually collected in a separator tank and then from that separator tank, once the water or most of the water had been removed, it was then pumped across to the boiler feed tank. Q. Why is there only one entry on the sheet you are looking at for waste to boiler? A. Because we would only do it in a transfer in a particular time when the boiler feed tank was low and it was easier then to measure the amount we transferred rather than having small amounts which added an inaccuracy to our stock." 471 No excise was payable on feedstock, since it was classed as a "waste oil" (Reg 176(1)(b) of the Excise Regulations), and none was paid. The waste oil operation. 472 The second product which yielded both "green shit" and "white shit" involved the processing by Truegain of waste petrol, diesel and oil. Mr Lucas described the sources of these waste products in these words: (Ex EV7, p8(37)) * "From service stations whose tanks had become contaminated with water or other petroleum products, or, in the case of diesel, a type of fungus. * From service stations and depots that were being decommissioned. For example, Truegain collected large volumes of waste petrol and waste diesel from the Caltex depot at Balmain as it was being decommissioned during the 1990's. * From waste stations and depots that were being decommissioned. For example, Truegain collected large volumes of waste petrol and waste diesel from the Caltex depot at Balmain as it was being decommissioned during the 1990's. * From waste lubricating oils from motor cars and diesel engines. These waste lubricating oils often contained petrol and diesel fuel which is generated by leakage from the combustion process (known as 'blowby'). * From waste oil from garages, car yards, mines and other industrial companies which carried out their own vehicle repairs. Such waste oil often contained petrol or diesel, as it is a common practice in repair workshops to wash a vehicle's engine pasrts in petrol or diesel. This petrol or diesel would then be dumped into waste oil tanks or drums." 473 The waste products were dewatered and filtered. In the case of waste oils, they would also be steam stripped in the reactor to a temperature of between 150º and 140º C. The waste petrols derived from this processing were described as "low grade", with some only of the fractions ordinarily found in pure petrol. Their use in car engines required blending with other products, to increase the octane rating (Lucas: Ex EV7, p9(41)). 474 Messrs Pullinger and Lucas said these products were sold as waste oil to Camile Trading, the "green shit" being, fundamentally, a contaminated diesel, and the "white shit" being separated and processed petrol fractions within the waste product. According to the third and fourth defendants, the products derived from waste petrol, diesel and oil were not subject to Customs control and not subject to excise. Mr Lucas said this: (Ex EV7, p10(44)) "44. Truegain did not pay any excise on the waste petrols and diesels that it recycled during the period April 1994 to November 1996. This was because waste petrols and diesels have already had excise paid on them (at the time they were entered into home consumption at their refinery of origin), and are therefore not under customs control. Such products did not need to be accounted for on Nature 40 forms." 475 I will shortly deal with the 1996 audit of Evenfont conducted by Customs (in May 1997). The audit papers included a description of Evenfont's operation, including the waste oil operation. It is plain from that description that Customs accepted that the recycling and reprocessing of waste oils and petrol was a non excisable activity. The description in the audit papers included these words: (Ex EV2, fol 51) "There are some non excise related activities at Seven Hills. These being blending and then marketing of lube oils. This operation takes place under the trading name of Redline Lubricants. The other operation is the collection and processing waste oils. Examples of these oils are; used sump oils, transmission oils and transformer oils. This operation is conducted by Australian Waste Oil Refineries a division of Truegain Pty Ltd." 476 The suggestion was that excise had already been fully paid at the gasoline rate (on petrol fractions recovered), or the diesel rate (on diesel fractions retrieved). The plaintiff, in submissions, did not suggest that the use of Evenfont/Truegain products derived from the waste oil/petrol recovery operation gave rise to evasion by Camile Trading (and complicity by Evenfont and Mr Pullinger). The treatment of waste slops. 477 Caltex has two pipelines, one from Kernell to Banksmeadow and the other from Kernell to Newcastle. Waste slops are a by-product of the transfer of fuels by means of these pipelines. Mr Lucas explained the process in these words: (Ex EV7, p7(32)) "32. ... Caltex would send one petroleum product down the line pushed by a slug of water. The point where the water comes into contact with the petroleum product is called the 'interface'. Mixing of the water and petroleum product occurs at the interface. The interface would be removed at the other end of the line and sent to a slops tank. Another petroleum product would then be sent down the line with another slug of water. The interface for that transfer would then be placed in the same slops tank. Evenfont would pick up the slops once the tanks were full. The slops we picked up always contained a mixture of water, leaded and unleaded petrol, kerosene, heating oil and diesel." 478 Before May 1996, Evenfont purchased waste slops from Caltex. Caltex had not paid excise. The petroleum product which Evenfont was able to derive from the processing of waste slops was therefore subject to excise. The product was whitish in colour and termed "motor spirit" (MS). Evenfont completed an entry for home consumption in respect of its production, paying excise at the full gasoline rate (Lucas: Ex EV7, p7(33)). Mr Lucas said this: (Ex EV7, p8(35)) "35. The motor spirit was a low-grade petrol. The process of removing the motor spirit from the other contaminated material rendered it low grade because the distillation range was not complete. Motor spirit normally has a distillation range starting at 50-70 degrees Celsius and ending at 180-220 degrees Celsius. Evenfont's steam stripping process only removed motor spirit up to a temperature of 135-140 degrees Celsiuis. As a result, the motor spirit was missing most of the heavier ends and would have a lower octane rating. To use this material in a car engine, it is necessary to increase the octane rating by adding enhancers such as ethanol." 479 During the trial, the plaintiff paid some attention to the residue of this process, termed "waste oil slops". This was the "green shit" sold to Camile Trading through Truegain (cf Ex EV14) (supra para [465]). It was regarded by Evenfont (and later Truegain) as a "waste product" because it was contaminated. The plaintiff criticised that characterisation, asserting that it was not a "waste oil" under the regulations. It was sold by Camile Trading and used by it as diesel or a blend with diesel, as Evenfont well knew. 480 Before dealing with the submissions made by the parties, I should describe the audits of Evenfont undertaken by Customs each year after 1994. Evenfont relied upon this material as confirmation of the accuracy of the description provided by Mr Lucas and Mr Pullinger of Evenfont's and Truegain's operations. The audit evidence. 481 The first audit was conducted in 1994, soon after Evenfont obtained its licence. Those conducting the audit were told by their superiors to approach their task with the following frame of mind: (Ex EV4, p1) "I re-iterate, as discussed this morning, that my main concerns in terms of the audit are that you view the licensees records of receipts and production with healthy scepticism, given the information surrounding Redline Lubricants and their past history, and that you thoroughly check out all sales with the supposed purchasers of the topped crude oil." 482 It was a systems based audit, designed to identify deficiencies in the record keeping of Evenfont and detect "excise leakage". It was conducted at the plant by officers who viewed the operation (cf Coombes T399). It was described by Chief Inspector Glasson, in a letter that followed (dated 31.10.94), as an "in-depth examination of your installation operations" (Ex EV4, p11). The outcome was satisfactory. No duty had been evaded. Three minor recommendations were made and were quickly acted upon by Evenfont (Ex EV4, p13). 483 On 2 December 1994, Evenfont wrote to Customs foreshadowing a change in its operations. It intended to treat waste slops purchased from Caltex (Ex EV3). It undertook to preserve all documentation and keep a statement of operations. 484 By 1995 Evenfont, perhaps because of its association with Camile Trading, was clearly under close scrutiny by Customs. Mr Gerard Coombes, a Senior Inspector Petroleum Operations, was assigned to the audit team. The audit papers were tendered. Mr Coombes gave evidence. He described the audit as "an in-depth examination". Evenfont was required, as part of its record keeping, to complete a statement of operations each week. The statements were closely examined and cross checked with receipts, deliveries and payments. Because Evenfont was a small refinery, the decision was taken to examine all documents rather than simply a sample (Ex EV1, p31 ff). 485 The audit papers noted the suspicious sequence, suggestive of excise evasion, which has already been the subject of comment (supra para [269 ff]) in respect of the switch from the production of topped crude oil to heating oil. A Minute of 3 April 1996 included the following: (Ex EV1, p43) "Evenfont P/L were the licensed manufacturers of topped crude, paid the appropriate Excise for that product and sold to a number of distributors. It is believed that some of these distributors sold quantities of the product as a road fuel. As a result the rate of Excise on topped crude was raised to that of diesel (item 11G2b 23) unless certain conditions laid down in the tariff were met. Within a few weeks of the raising of the Excise on topped crude to that of diesel Evenfont P/L began to produce heating oil. Officer Ferian and I took a sample of this heating oil, on Thursday 22 February 1996 ... " 486 The sample was tested. The audit team received the result, which was included in the papers, and which was as follows: (Ex EV1, p40) "The sample failed to meet either the heating oil or diesel specifications. Additionally the sample was brown in colour which is unacceptable for either heating oil or diesel." 487 However, notwithstanding these results, it was recognised that there was no standard for heating oil and that the product, for classification purposes, was probably a heating oil such that no duty had been evaded. The Customs Minute, responding to the test results, was in these terms: (Ex EV1, p41A) "There is no standard for heating oil that we can find as the ASTM standards group it under fuel oils. To classify this product under the Customs Tariff I believe, from the information supplied by the limited test carried out by Ampol, it would be ruled out as fuel oil 2710.00.30 36 but possibly fit as heating oil 2710.00.30 27 and therefore would be the same under the Excise Tariff. As Evenfont P/L are moving to new premises at Maitland where they are to use new processes I don't believe the cost of further Tests at this stage are worthwhile. This move is to be within 4 weeks they are slowing production and about to transferring (sic) their licence We will test their new product as soon as possible." 488 Again the audit did not reveal the evasion of duty by Evenfont, or other significant issues. 489 With six months of that memorandum, on 26 November 1996 Customs officers searched the premises of Camile Trading and seized documents. At the same time, Customs searched Evenfont, also seizing documents. Evenfont had, shortly beforehand, established its Rutherford plant in August 1996. It sought the transfer of its manufacturing licence from Seven Hills to Rutherford. On 17 December 1996, Mr Coombes recommended that transfer, subject to the following checks, which he intended to conduct: (Ex EV13) "... The existing Receipt, Storage and Production records will be maintained at Seven Hills during this change over period and a new set of records in the same approved format, will be utilised at the new site. At the completion of the transfer period this (sic) I intend to undertake a complete audit of the records of both sites to ensure accountability has been met." 490 Before the 1996 audit (conducted in May 1997), Mr Coombes conferred with Mr O'Malley, the Chief Investigator from Customs in charge of the investigation of Camile Trading and Evenfont. The audit plan identified the gathering of information to assist the investigation as one of its objectives (Ex EV1, fol 51). The audit papers include a description of Evenfont's operation. The description coincided with that given by Messrs Pullinger and Lucas in these proceedings. Two products were produced which were excisable, namely, the processing of crude oil to produce HO, or heating oil, and the processing of waste slops to produce motor spirits (Ex EV2, fol 52). 491 The audit examined both the Seven Hills operation, which closed on 31 January 1997, and made an initial assessment of Rutherford. The audit papers reveal the type of checks or tests that were undertaken. They included: * a comparison between the weekly crude oil receipts and storage and transfer losses to production (fol 54); * a comparison between storage losses against stock (fol 56); * a comparison of weekly losses against production (fol 59); * a comparison of monthly excise payments against monthly invoice sales (fol 62); * a check to ensure the Statements of Operations correctly reported quantities for the relevant periods (fol 65); * a check to ensure that all crude oil receipts were accounted for (fol 57). 492 There were many other checks undertaken, including a check upon the equipment and its accuracy, a check to ensure that all deliveries were accounted for, and so on. Again, the entire operation was examined (rather than sampling), because it was a reasonably small operation and because of the interest of Customs in the company. 493 On 8 May 1997, Customs wrote to Evenfont reporting the outcome. The letter said this: (Ex EV2, fol 69) "Comparisons made between Crude Oil storage and production against the respective loss or gains did not give any conclusive results or trends. This may be attributed to many factors including calibration of the measurement equipment, smaller product batches and differing operator assessments. However, when the losses/gains are converted to a percentage of the base figure averaged over the audit period, the result is within an acceptable range." 494 There were minor problems, which were identified. No duty had been evaded. Indeed, an error had been made resulting in the overpayment of duty in a small amount ($6,000) (Ex EV2, fol 70). The result, overall, was stated in these terms: (Ex EV2, fol 70) "Overall, the outcome of the audit was pleasing and the results were within an acceptable range." 495 Customs, however, did not lose interest in Evenfont. In May 1997 it identified the scope of a more thorough audit of Rutherford to be undertaken that year. Again the audit again involved a one hundred percent check, rather than sampling (Ex EV12, p19). The audit was described by those who conducted it in these terms: (Ex EV12, p20) "This was the initial audit for the Rutherford plant, and Investigations have a very keen interest in the company. Therefore, the audit itself was conducted in a thorough and patient manner." 496 The auditors made reference to a change in legislation which would effect the waste oil recycling operation of Truegain. They said this: (Ex EV12, p20) "At present, not all of the operations at Rutherford are considered excisable. However, it is the intention of the ACS, as part of the Fuel Substitution Minimisation Scheme to broaden the ACS's scope of control. Evenfont would be effected by this at Rutherford. Their waste oil recycling plant would then come under the control of the ACS." 497 In the letter to the company which followed, Customs stated that it was satisfied from its "observations that all excisable production from the plant had been excise paid as appropriate" (Ex EV12, p22). It added: "Overall, the results of the audit are pleasing and the trend analysis indicates that there is a gradual improvement in the efficiency of the plant." 498 When Mr Coobes gave evidence, he affirmed these findings. He nonetheless acknowledged that the audit was not in a position to verify the description given by Evenfont of the product carried to, or taken from, the premises (T424). Preliminary submission by Evenfont. 499 Counsel for Evenfont drew attention to what he claimed was "a fatal defect" in the plaintiff's claim. The case made by the plaintiff against the third and fourth defendants was unambiguously a case that Evenfont (with the complicity of Mr Pullinger) supplied white spirits to Camile Trading knowing that it was to be blended with petrol (whether leaded or unleaded). The Further Amended Statement of Claim was in these terms: " 685. During each of the 9 periods previously pleaded herein and set forth hereunder (hereinafter referred to as 'the relevant periods'), the Third Defendant supplied white spirits to the First Defendant ... PARTICULARS The supplies of white spirits by the Third Defendant to the First Defendant for each of the 9 relevant periods are: (a) with respect to the blending of unleaded petrol, as pleaded in paragraphs 201(d) and 202(c) ... (b) with respect to the blending of leaded petrol, as pleaded in paragraphs 445(d) and 446(c) ... 686. The Third Defendant supplied such white spirits to the First Defendant knowing, at all material times, that they would be used by the First and Second Defendants by mixing them with unleaded and leaded petrol as pleaded in paragraphs 683 and 684 hereof." 500 The paragraphs incorporated by reference, identified in the particulars, defined the case against the first and second defendants. They did so rather more broadly. They were as follows: " 201. In the said period the First Defendant purchased quantities of White Hydrocarbons, being a petroleum product known as 'White Spirit'. PARTICULARS (d) the First Defendant purchased White Spirit from the Third Defendant that was known to the First, Second and Third Defendant, as 'White Spirit'. 202. In the said period the White Spirit was delivered to the First Defendant's premises. PARTICULARS (c) the White Spirit purchased from the Third Defendant was collected from the Third Defendant's premises and delivered to the First Defendant's premises by servants, agents or employees of the First Defendant." 501 Two things should be noted: first, the inverted commas around the words "white spirits" (in para 201) and, secondly, the uncertainly as to who was said to know the product as "white spirits". 502 Particulars were sought and supplied in these terms: "2. The white spirits referred to in the Statement of Claim are a product known by that name which has a widespread use in our economy. 'White spirits' is a term commonly used in both the petroleum industry and the domestic market to describe a petroleum product that consists of White Hydrocarbons. It is produced in the process of distilling crude oil and it has a number of general uses, one of which is as a cleaning fluid. It is not suitable for use in diesel and petrol engines as a power source for those engines. At present, the Plaintiff is unable to provide you with information as to the chemical composition of white spirits other than as stated. This information will be sought and advised to you, although this will not be possible until after 16 July 2000 when the expert engaged by the Plaintiff has returned from overseas." 503 Mr Horowitz (for Evenfont) then sought to address the plaintiff's arguments. It was not entirely clear from written submissions made on behalf of the plaintiff on 28 June 2006 what was said to be the white hydrocarbon supplied by Evenfont to Camile Trading (with the complicity of Mr Pullinger), knowing that it was to be blended with petrol. Counsel, I think accurately, identified two possibilities from the plaintiff's written submissions, namely, the condensate or light ends which were the by-product of processing crude oil (cf plaintiff's written submissions para 3.4.10), and the white condensate which Evenfont described as motor spirits produced from the processing of Caltex waste slops (cf para 4.2.6 plaintiff's submissions). 504 Counsel for the third and fourth defendants, pointing to the terms of the pleading against Evenfont and Mr Pullinger, said this: "9. The Plaintiff's case against the Third Defendant must fail for the simple reason that neither the 'condensate' produced from the distillation of crude oil, nor the 'residue' remaining from the distillation of waste slops, falls within the definition of 'white spirits'." 505 There was no need, in Mr Horowitz's submission, to go further and to examine the merits. It was common ground that Evenfont could not manufacture white spirits and did not supply white spirits to Camile Trading. Whatever may be the position in respect of the first and second defendants (where the pleading was arguably much wider), the case which Evenfont and Mr Pullinger had to meet, and the only case according to Mr Horowitz, involved the supply of white spirits, nothing else. 506 The issue arose at the end of the trial, during the course of addresses. The question of amendment was then debated. The debate included Camile Trading since, arguably, the same point was available to them. Under s138 of the Excise Act 1905, there was a five year limitation. Attention was drawn to a number of authorities, including the following passage from Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279, where the following was said: (at 286/87) "The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (In Liquidation) (1916) 22 CLR 490 at p517, per Isaacs and Rich JJ. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. See, eg, Browne v Dunn (1893) 6 R, at p76; Mount Oxide Mines , at pp 517-518." 507 The plaintiff, responding to these submissions, asserted that there was no need to amend the Statement of Claim. Its case was, and always had been, that the petroleum product which those at Camile Trading referred to as "white shit" had been supplied by Evenfont with the complicity of Mr Pullinger, knowing that it would be blended with leaded and unleaded petrol. That product was known to Mr Bartlett as "white spirits", even though in truth it was a condensate or light ends, terms which Mr Bartlett also employed. 508 If, contrary to that submission, amendment were thought necessary, it was submitted by Customs that it should be permitted. Attention was drawn to s140 of the Excise Act which was in these terms: " No objections for informality 140 No objection shall be taken or allowed to any information, summons or other originating process for any alleged defect therein in substance or in form or for any variance between such information, summons or other originating process and the evidence adduced at the hearing in support thereof, and the Court shall at all times make any amendment necessary to determine the real question in dispute or which may appear desirable." 509 Mr Hastings QC (for Customs) drew attention to the differences between that provision and what he termed "the conventional provision" such as s15C Crimes Act 1914 (Cth). The difference, he suggested, could be explained by the peculiar nature of a Customs prosecution. It was motivated by the same policy considerations as averments (Baxter v Ah Way (1909) 10 CLR 212 at 216; Chief Executive Officer of Customs v El Hajje (2005) 218 ALR 457). There are obvious difficulties in the prosecution of those who conduct their operations in secret. Customs is obliged to reconstruct, as best it could, what occurred (T1094/5). 510 Mr Byrne SC (for the first and second defendants) and Mr Horowitz (for the third and fourth defendants) opposed any amendment. They asserted that it was statute barred. They had, in any event, been irrevocably prejudiced. The case had been conducted on the pleadings. Witnesses had not been examined or called in respect of some other case which Customs may now wish to bring. 511 Because a considered view of the issue would have been likely to have delayed the trial, I made a number of rulings (T1073/1081). The effect of the rulings was to allow the amendment, subject to the limitation argument. The opportunity to recall witnesses was given to each party, as well as calling additional evidence, if they chose. In the event, none of the defendants asked that any witness be recalled. Nor did they seek to call any additional evidence. 512 Having reflected upon the issue, I believe the amendment was unnecessary in the case against the first and second defendants. The pleading was sufficiently broad to comprehend the case which the plaintiff sought to make (involving a white hydrocarbon which was a condensate or light ends). Although the case against the third and fourth defendants was more tightly pleaded, the paragraphs identified came at the end of a very long Statement of Claim. The draftsman, it may be thought, was using shorthand to some degree, as he or she had throughout the Statement of Claim (as in paras 201 and 202 (supra para [500]), where shorthand (white spirits) was used in para 202, rather than repeating the long winded preamble in para 201). Although paragraphs 685 and 686 used the term "white spirits" without qualification, the Particulars add the qualification. They refer back to the case against the first and second defendants and the broader terminology there employed. None of the defendants was, I believe, in any doubt as to the case he or it was obliged to meet, namely, the use by Camile Trading of the "white shit" which Evenfont supplied. Indeed, it will be noticed that the defence filed on behalf of the third defendant included the following paragraph: "14. The Defendant denies that it sold to the First Defendant or that the First Defendant purchased from it or that the First Defendant's servants, agents or employees collected from the Defendant any white spirit or white hydro-carbons as averred and alleged or that it sold or provided to the First Defendant directly or indirectly any white spirits or white hydro-carbons which were allegedly mixed or combined by the First Defendant as averred. The Defendant does not know and cannot admit the truth of the other allegations and averments contained in paragraphs 198 to 675 inclusive." (emphasis added) 513 No amendment is necessary in the plaintiff's case against the third and fourth defendants. There is no fatal defect in the pleading. 514 There is therefore a need to consider the merits of the plaintiff's case against the third and fourth defendants. The submissions of the plaintiff. 515 It will be remembered that Evenfont produced, on the one hand, "white shit" and, on the other, "green shit". It did so processing three distinct products, as depicted diagrammatically in Exhibit EV14 (supra para [465]). The three products were: * crude oil; * waste petrol and waste oil; * Caltex waste slops. 516 What then, according to the plaintiff, was the source of the "white shit" supplied by Evenfont (or Truegain) to Camile Trading, which made Evenfont and Mr Pullinger knowingly concerned in the illegal blending operations of Camile Trading? To give rise to complicity, the "white shit" must be excise unpaid at the gasoline rate and not exempt under the Excise Regulations. If it were excise paid (at the gasoline rate) or exempt, its use in a blend would not give rise to an excisable blended petroleum product (cf s77G and s77J Excise Act; supra paras [42] to [44]). 517 The plaintiff, in helpful written submissions, identified the separate operations which Evenfont conducted, in these words: "4.2.3 However, the third and fourth defendants have adduced evidence: (a) that the third defendant manufactured a petroleum product by distillation (heating of crude oil and condensation of vapours therefrom) in the form of heating oil which it sold almost exclusively to the first defendant under the names CO, TCO and HO. This product cannot be regarded as diesel fuel (Professor Batts' affidavit at paragraph 6.2.5); (b) that it also manufactured a petroleum product condensate by distillation which it sold to the first defendant by the name of 'MS'. The evidence describes this product as a 'low grade petrol'. This product was manufactured by heating and distillation (of adulterated petrol and diesel obtained from Caltex) and left a 'residue' after the 'MS' had been removed by distillation. This product cannot be described as petrol (Professor Batts at paragraph 6.2.5); (c) that it sold, through the agency of an associated company known as Truegain Pty Ltd, the residual product of its distillation processes to the first defendant, being a product described as waste oil and known by the name 'WO'; (d) that its distillation of crude oil produced a condensate of hydrocarbon compounds which boiled at below 140 degrees Celsius. The yield of condensate (condensed vapours) from the crude oil input was approximately 10% to 11.5% of the volume of the crude oil (Lucas transcript p 843, 844). It was said that all of this condensate was used by the third defendant to fuel its heating and distillation activities." 518 In truth, again as helpfully depicted in Mr Horowitz's diagram, Exhibit EV14 (supra para [465]) paragraphs (a) and (d) in this description were both aspects of the one operation, that is the processing of crude oil. Two products emerged from that process. One was the heating oil (the "green shit") (which was then blended with diesel by Camile Trading) and a white condensate, WS (the "white shit"), which Mr Lucas (and Mr Pullinger) said was not sold, but used by Evenfont as boiler feedstock. 519 The plaintiff identified its case as involving the supply to Camile Trading of products (b) and (d) above. It said this: "4.2.6 John Bartlett deposed to deliveries of white spirit to the first defendant's depot, from several sources, which were mixed with ULP and LP at the depot. Part of these deliveries, he said, but not all, came from the third defendant. The abovementioned 'condensate' and 'residue' (paragraphs 6.3(b) and (d) above) (sic, renumbered 4.2.3 (b) and (d)) is the source, the plaintiff alleges, of the white spirit obtained by the first defendant from the third defendant that Bartlett deposes to. Bartlett, in evidence, described this product as 'white shit', 'light ends' and 'condensate'. It is beyond doubt that the third defendant's manufacturing processes brought quantities of this condensate and residue into being; it was an inevitable outcome of the heating process." (emphasis added) 520 The plaintiff later alluded to a "third product" (para 4.2.12). However, I believe that there was no basis for that suggestion. The Evenfont operation was repeatedly examined by Customs in yearly audits, which have been described. The operation, as described in the audit papers, does not suggest a "third product". 521 So the Evenfont operations which need to be more closely examined concern the following: * First, the motor spirits (paragraph (b) in the plaintiff's description); * Secondly, the white residue or condensate produced from the crude oil distillation (paragraph (d) in the plaintiff's description). 522 In respect of those operations, the plaintiff posed the following questions: "4.2.7 The questions, therefore, are whether the Court can accept the evidence adduced for the defendants: (a) that none of this 'condensate' (from the distillation of crude oil) was sold or delivered to the first defendant and that it was all used as fuel for their own boilers and (b) that all the said 'residue' (from the distillation of adulterated fuels from Caltex) was in fact residue, rather than condensate, and was waste oil which was used as boiler fuel." 523 The first question raises an issue in respect of the condensate, which is the by-product of crude oil (paragraph (d) in the plaintiff's description above). The second is a reference to motor spirits (paragraph (b) above). 524 The questions, as framed, require amendment. The plaintiff's case on complicity against Evenfont and Mr Pullinger requires that they prove that Evenfont (or Truegain) supplied Camile Trading with a white condensate upon which excise had not been paid at the full gasoline rate, which the company and Mr Pullinger knew would be blended by Camile Trading (not having a licence, or having submitted to Customs control and without the payment of duty). So the issue concerning the nature of the product supplied by Evenfont to Camile Trading concerns an element of the offence. It must be proved beyond reasonable doubt. It is not simply a question of whether the Court can accept the defendants' evidence, as though determining which version was more likely (Mr Lucas or Mr Bartlett). The question is whether there is a reasonable possibility that the description by Messrs Lucas and Pullinger of the Evenfont operation is accurate. 525 What was said to be reprehensible about the supply of these products, giving rise to complicity on the part of Evenfont and Mr Pullinger? The plaintiff appeared to rely upon two arguments. The first concerned an aspect of the cross examination of Messrs Pullinger and Lucas. It was suggested, upon the basis of certain answers provided, that Mr Lucas' evidence should be rejected as unreliable, in which case one would be left with Mr Bartlett's assertion that Evenfont supplied "white shit" which was, by inference, a cheap white condensate where excise had not been paid at the gasoline rate. 526 The second basis involved the construction of the Excise Regulations. The plaintiff appeared to suggest that blending motor spirits with ethanol and petrol (leaded or unleaded) necessarily involved offences where Evenfont and Mr Pullinger knew of the proposed blending and were therefore guilty of complicity. 527 I will now examine each suggestion. The description "Waste to Boiler". 528 I have described the process undertaken by Evenfont in dealing with waste slops (supra paras [477 ff]). The process involved the separation and treatment by Evenfont of petrol fractions to create a white product, termed motor spirits. That product was subject to excise at the gasoline rate, which was paid. There was also a green residue (representing diesel fractions) which Evenfont regarded as a waste product. No duty was paid. The attack upon Mr Lucas (and Mr Pullinger) concerned that "waste product". So the argument was concerned with an aspect of Evenfont's operation which did not, as such, involve the supply of "white shit" (to be later blended with petrol). Rather, the practices employed by Evenfont in the context of "green shit" were put forward by the plaintiff as a basis for inference in respect of "white shit". 529 It will be remembered that "waste oil" was defined under Reg 176(1) in these terms: " Exempt blended petroleum products 176(1) In this regulation, 'waste oil' means a petroleum product that, because of use or degradation from storage, is no longer useable by itself without reprocessing: (a) for any purpose; or (b) for any purpose except as burner fuel; ..." 530 Here the residue, after processing the waste oil slops, was capable of being used in a diesel engine. Mr Pullinger said this: (T798) "Q. Do I take it that it would not come as a surprise to you that Mr Fletcher was able to distribute it to his Forestville service station and sell it as diesel fuel? A. If that is what he did, I don't know. Q. But, it wouldn't surprise you that he was capable of doing that? A. No. Q. Was that your expectation, that when Truegain supplied waste oil bulk, that Mr Fletcher would distribute it through retail outlets for sale as diesel fuel? A. Yes." 531 Mr Lucas gave much the same evidence. He said this: (T840) "Q. How, if it is a waste product, could it be directly used in motor vehicle engines? A. It was a mixture of three products that were very - quite easily used in internal combustion engines. Q. Therefore, why was it waste? A. Because it was a mixture of three products, unfit for their original use." 532 Mr Lucas added: (T840) "Q. If it could be used in a diesel engine, how could it be unfit? A. That is the terminology that waste oil fits under. Q. I am sure, but could you answer my question. If the product could be used in a diesel engine, how could it be unfit? A. I can't answer that." 533 Mr Pullinger acknowledged that he was not sure that Customs knew the residue could be used in a diesel engine and that that was the intention (T797). Mr Pullinger added in cross examination: (T797) "Q. It was called a waste oil? A. Yes. Q. But, it was still used in a vehicle's engine? A. Anything can be used in a diesel engine. As I say, you can pump sump oil into the diesel. Q. I am not talking about five minutes before the engine blows up, but capable of being used on a regular basis for the purposes of running an engine? A. That's correct. Q. As far as you were concerned, this waste oil slops was capable of doing just that? A. Correct. Q. Even though you had apparently represented to Customs that it was waste oil? A. Sorry, I didn't represent to Customs, I told them exactly what it was and the decision was made, as it was a mixture of three different products, it was classed as waste oil." 534 Although the "green shit", the residue after extracting the motor spirits from waste slops, was clearly an impure product which only partially resembled diesel, the definition of "waste oil" is not framed in terms of purity. It is a definition framed in terms of utility. Here the residue could not be described as "no longer usable without reprocessing for any purpose or any purpose other than as a boiler fuel". It could be used (with or without blending) as diesel to the knowledge of Evenfont and was so used by Camile Trading. 535 The suggestion that Customs may have been mislead as to the true nature of the residue was, according to the plaintiff, underlined by a further aspect. Messrs Pullinger and Lucas were cross examined upon the declaration that they had each made to Customs when completing the Entries for Home Consumption. Mr Pullinger, who gave evidence first, was shown a number of such entries that he had signed. Attached to each entry was a signed statement of operations which was divided into two sections, one headed "Product in Process" and the other "Excisable Product". The section "Product in Process" was, in turn, divided into various columns designed to show in litres what had been produced. One of the columns subtracted from the total was headed "Waste to Boiler", thereby reducing the amount of excisable product. 536 It was apparent during Mr Pullinger's cross examination that the amounts entered in the "Waste to Boiler" column, when processing Caltex waste slops, were very high. They were much higher than would have been used as boiler feedstock, as Mr Pullinger acknowledged. Mr Pullinger said, however, that Mr Lucas was in charge of production. He was the appropriate person to deal with such issues. 537 Mr Lucas then gave evidence. He sought to answer in chief the insinuation that had been made that Customs had been deliberately mislead by describing saleable fuel not destined for the boiler as "Waste to Boiler". Mr Lucas said that when they began processing Caltex waste slops, he used the same form which had already been used in processing crude oil. That form had a column "Waste to Boiler". The residue, after processing motor spirits, was entered in that column. He then said this: (T830) "Q. Was any of the product that is listed in that column used in the boiler itself? A. No. Q. Why was it entered into that column if, in fact, the product wasn't used in the boiler? A. Well, the sheet was a copy of the TCO heating oil sheet and it was probably incorrectly categorised as waste to boiler, it should have been categorised differently. Q. Why didn't you change the form in this respect? A. It was basically because it was a product that didn't come under excise control anyway. Q. What do you mean by that? A. Well, it was a waste product, therefore, did not have excise, was not under the excise regime." 538 When the operation was transferred to Rutherford, the form was changed to identify accurately the waste product which was used as feedstock in the boilers and "waste product" later on-sold. The change was made in the week ending 25 November 1996. Another column was added to the standard form, "Boiler Residue Consumed" (T835; Ex AH). The change was made, according to Mr Lucas, because Rutherford had a continuous process of distillation. It was necessary to adjust the form to reflect accurately that process (T836). The change, as it happened, coincided with the Customs raid upon Camile Trading and Evenfont (26 November 1996). Mr Lucas insisted, nonetheless, that the change had been in contemplation for a number of months. 539 This evidence, as I have said, relates to the "waste" residue of the processing of waste slops, which was one source of the "green shit" used as diesel (with or without blending) (cf Ex EV14). I emphasise again that the plaintiff's claim against Evenfont and Mr Pullinger is not concerned with diesel or the supply of "green shit" or its use in blending. What, then, is the relevance of this material? As I understand the plaintiff's submissions, the exploration of this issue was primarily directed towards the credit of Mr Lucas and the reliability of the statements of operation forms completed by Evenfont in the context of the white condensate, which was a by-product of the processing of crude oil (supra para [465]). In the statements of operation dealing with the production of crude oil, Evenfont asserted that the "white shit" (WS) was used as boiler feedstock (supra para [470]). Customs, in its submissions, questioned the accuracy of that assertion. The proper inference, according to Customs, was that the by-product of the processing of crude oil, which Mr Gibb described as "a condensate" or "light ends", had been diverted to Camile Trading for use with petrol and other products in a blend. Because the residue had been represented as boiler feedstock, no excise had been paid. 540 Such a submission appears to me to draw a long bow. I am not persuaded. Evenfont, at its refinery at Seven Hills, had two boilers, one larger than the other. They required fuel. There was no evidence of any other source of fuel other than that provided by Evenfont, namely the residue after processing crude oil. The evidence was that the boiler consumed about 29,000 litres of fuel a week. There was no evidence that that figure was inaccurate or exaggerated. 541 Accordingly, the condensate (the "white shit") which was the by-product of the processing of Queensland crude oil can be put to one side. I accept, as a matter of probability (and certainly as a reasonable possibility), that it was used as fuel for the boilers at the plant. As such, it was waste oil and exempt from duty (Reg 176(1)(b) Excise Regulations). I do not believe that it was diverted to Camile Trading. It was not a source of the "white shit" delivered to Camile Trading. 542 The remaining issue concerns the white condensate (called motor spirits by Evenfont) which was said to give rise to complicity on the part of Evenfont and Mr Pullinger. The Excise Regulations. 543 The plaintiff's written submissions said this: "4.2.16 The second defendant gave evidence that the first defendant, in fact, mixed a 'motor spirit' obtained from the third defendant with petrol (affidavit paragraphs 27, 78 and 90). He described this as 'WS'. This must have been, at least, the product manufactured and known by the third defendant as 'MS', that is, the 'low grade petrol'. Lucas knew that the first defendant would mix this product with ethanol and '... with other petrol if needs be' (transcript p 850.4). This is sufficient to show that the third defendant supplied petroleum products to the first defendant knowing that they would be blended with refinery petrol by the first defendant." 544 That paragraph appears to suggest that it would be reprehensible (giving rise to offences under the Act, including the evasion of duty and complicity on the part of the third and fourth defendants) to blend the Evenfont product, motor spirits, with ethanol and petrol. That submission raises an issue concerning the construction of the Excise Regulations. I now turn to that issue. 545 The evidence established the following: * First, that the "white shit" supplied by Evenfont to Camile Trading, described as motor spirits, was derived from waste slops purchased by Evenfont from Caltex; * Secondly, that Evenfont and Mr Pullinger knew that motor spirits would be blended by Camile Trading with leaded or unleaded petrol, as well as ethanol; * Thirdly, they also knew that motor spirits was a "low grade petrol", low on octanes, which would require enhancement through toluene or xylene; and * Fourthly, the motor spirits supplied by Evenfont to Camile Trade was excise paid at the full gasoline rate. 546 Would a blend of leaded or unleaded petrol which incorporated these elements be an "excisable blended petroleum product" for the purposes of s77G of the Excise Act (cf supra para [42])? It will be remembered that, to be an excisable blended petroleum product, the petroleum product must not be exempt. The various exemptions provided by Reg 176(2) of the Excise Regulations were analysed in the previous judgment CEO of Customs v Camile Trading Pty Limited (supra para [39]). The mischief which the amending regulation sought to address was identified in these words in the passage previously quoted (supra para [40]) which, for convenience, I repeat: " MR PUNCH: This bill is part of a package of bills introducing the following measures, ... ... there will be amendments to the Excise Act 1901 ... to address substantial revenue loss through the substitution of excise free or low duty products for petroleum fuels. Resolution of this issue involves ensuring certain blended petroleum products and crude oil or condensate delivered for use otherwise than as refinery feedstock are excisable products, and that the excise duty payable on the blend, the crude oil or condensate will be payable at a rate equal to either the diesel rate or the leaded petrol rate, depending upon the composition of the petroleum product." 547 In the previous judgment, the following was said: (para [27]) "27. However, the regulations, according to the plaintiff, had been carefully drawn with the legislative objective in mind. A contrast is made in the subparagraphs of regulation 176(2) between "a blend of a petroleum product" (singular) (or, in the case of paragraph (h), "a blend of gasoline") with subparagraphs (t) and (u) which speak of "blends of petroleum products" (plural). There is a further expression "a blended petroleum product" (singular) used in particular circumstances in subparagraphs (p) and (q), which have no application here. However, where the regulations use the singular, that is the expression "a blend of petroleum product", they do so quite deliberately. Subparagraphs (i), (j) and (m) for instance, contemplate a single petroleum product (such as leaded or unleaded petrol) on which duty at the maximum rate has been paid, with an additional substance, such as performance enhancing additives (176(2)(i)), or ethanol (176(2)(j)) or methanol (176(2)(k))." 548 I accepted that construction (para 29). The blend created by Camile Trading (with the knowledge of Evenfont and Mr Pullinger) should be characterised as "blended petroleum products" (plural), being a mix of a number of petroleum products and of the substance ethanol. The relevant exemption, therefore, is Reg 176(2)(u), dealing with petroleum (as opposed to diesel) blend of a number of products. The regulation is in these terms: "(u) blends of petroleum products containing goods specified under paragraph 11(A)(3) of the Schedule to the Excise Tariff Act 1921, where duty has been paid on all the constituents of the blend at the rate specified in subparagraph 11(A)(3)(b) of the Schedule to the Excise Tariff Act 1921." 549 Since publishing the previous judgement, I have reconsidered Reg 176(2)(j) which, unlike the other regulations referred to, uses the phrase "any petroleum product". On reflection, I believe a combination or blend of petroleum products would come within the phrase "any petroleum product". Hence, the addition of ethanol (which is free of excise) to a combination of petroleum products (such as we have here) would still be exempt, subject to otherwise satisfying the requirements of Reg 176(2)(u). That is, to be exempt under that regulation, each ingredient in the blend must be excise paid at the gasoline rate, that is, the highest rate. 550 Here each ingredient, apart from ethanol (which was excise free), appears to have satisfied that requirement. The leaded and unleaded petrol was excise paid. The "white shit" derived from waste slops (the motor spirits) was excise paid at the full gasoline rate. 551 Toluene and xylene (and other additives within the BTX group) were excise paid at the gasoline rate. There was an exchange of correspondence between the plaintiff and Customs relevant to this issue. On 15 November 1994, at the beginning of Camile Trading's relationship with Evenfont, Mr Fletcher wrote to Customs seeking clarification of the requirements in respect of blending various products with petrol. His letter of 25 November 1994, was in these terms: (Ex N, annex 1) "With reference to our recent discussion on the 14th November 1994 concerning the proposed activities we wish to introduce to our business. As you are aware we have a Customs License for the blending of Ethanol with various fuels. We are now looking toward purchasing various grades of Motor Spirit which we intend adding a small quantity of Octane Enhancer (approx 5-10%). All motor spirit purchased, we are assured, will have the appropriate custom's excise paid prior to delivery to our Depot. It is my understanding that our Company does not require a blending license issued by Customs and that the octane enhancer we are considering using is not subject to excise at this time. I would appreciate it if you would confirm, in writing, at your earliest convenience my understanding, as outlined above is correct and acceptable to you. Should you have any questions regarding this or any other matter please do not hesitate to contact me." 552 Mr Coombes of Customs responded on 29 November 1994 as follows: (Ex N, annex 2) "I refer to your letter of 25 November 1994 in which you requested advice on the licensing requirements for the blending of duty paid motor spirit with an octane enhancer. Regulations within the Fuel Substitution legislation exempt persons from holding a Manufacturer's Licence for the blending of duty paid petroleum products with octane enhancers. Octane enhancers such as the BTX group of chemicals are classified as excisable products and are duty paid at the gasoline rate, unless they qualify for free entry under the excise by-laws. Use of BTX chemicals as octane enhancers in on road fuels does not qualify for free by-law treatment under the Excise tariff. It is therefore expected that appropriate duty would be paid on such octane enhancers by the manufacturer or supplier prior to your receipt. Accordingly the proposed activity as described above, may be undertaken by your company without the necessity to take out an Excise Manufacturer's Licence. Should you require any further information regarding this matter please contact me on the above telephone number." (emphasis added) 553 What about the ethanol, which was also added to the blend, and which was excise free? I have alluded to this issue already (supra para [549]). Where there is a blend of petroleum products, each excise paid at the full gasoline rate, to which ethanol is then added, does the ultimate blend, including ethanol, come within the exemption of Reg 176(2)(j)? I believe it does. 554 First, such a construction does no violence to the objective which the amending regulations were designed to promote. All duty has been paid. It is quite unlike the situation (which occurred in respect of white spirits and other white condensates purchased by Camile Trading from suppliers other than Evenfont), where a cheap product, upon which excise had not been paid at the full gasoline rate, was blended to produce a cheap fuel. 555 Secondly, the combination of leaded or unleaded petrol, toluene and "white shit" from Evenfont (being motor spirits), each excise paid at the full gasoline rate, would be a "blended petroleum product" (as defined s77G) (supra para [42]). It only ceases to be exempt and becomes an excisable blended petroleum product where the ingredients in the blend are not excise paid at the full gasoline rate (cf Reg 176(2)(u) and s77J). If one assumed a two stage process, where a blend of petroleum products was created, each excise paid at the full gasoline rate, such a fuel would be exempt under Reg 176(2)(u). If later ethanol were added, it still would be exempt within Reg 176(2)(j), since the blend would come within the broad words "any petroleum product" to which ethanol was added, such products having been cleared from Customs' control. In my view it makes no difference that the blending occurs in one operation, rather than after a two stage process. 556 Accordingly, in my view, the plaintiff has not proved beyond reasonable doubt that Evenfont and Mr Pullinger were knowingly concerned in the offences of Camile Trading. The blend of their product by Camile Trading (the "white shit") which was motor spirits, which Evenfont and Mr Pullinger must be taken to have contemplated, was a blend which was exempt under the regulations, or rather, the plaintiff has not proved beyond reasonable doubt that it was not exempt. 557 There should be a verdict for the third and fourth defendants with costs. 6. QUANTIFICATION OF DUTY EVADED BY CAMILE TRADING PTY LIMITED 558 At the end of the analysis of the plaintiff's case against Camile Trading and Mr Fletcher, I postponed an issue concerning the quantification of duty evaded by Camile Trading in respect of leaded and unleaded petrol in the period 1 November 1995 to 20 November 1996 (supra para [405]). In view of the findings made concerning Evenfont and Mr Pullinger, is it possible to be satisfied beyond reasonable doubt in respect of the duty evaded on leaded and unleaded petrol during that period? 559 The relevant findings made are these: * First, that leaded and unleaded petrol was blended by Camile Trading in the period 1 November 1995 to 20 November 1996, where the throughput, in total, was approximately 150,000 litres per day. * Secondly, that the formulae used in respect of leaded and unleaded petrol are those set out in Mr Bartlett's spreadsheet relating to tanks 15 and 16 (Ex A7); * Thirdly, that an ingredient in each blend was white spirits or a white hydrocarbon which was a condensate or light ends; * Fourthly, that the suppliers of that product were: S F Bial Gladstone Vic Newland, or Evenfont/Truegain; * Fifthly, that for the reasons provided in paras [386 ff], I am satisfied beyond reasonable doubt in respect of all suppliers, apart from Evenfont/Truegain, that excise had not been paid at the gasoline rate on the white spirits or condensates supplied; * Sixthly, that the "white shit" supplied by Evenfont/Truegain, which was motor spirits, was excise paid at the gasoline rate. 560 Further, the plaintiff does not suggest that complicity arose out of the supply of "white shit" from the waste oil operation. I take that to mean there was nothing reprehensible, in excise terms, in the supply of that product by Evenfont to Camile Trading. 561 To calculate the level of evasion, one would have to know the contribution to throughput by each supplier, or know at least with certainty both the total throughput during the period identified (1 November 1995 to 20 November 1996) and the contribution to that throughput by Evenfont/Truegain. I am not sure, without further assistance, whether the evidence discloses that material. Although the dates I have nominated do not correspond precisely with the period claimed, I assume the total leaded and unleaded petrol can be calculated for the period 1 November 1995 to 20 November 1996. However, my impression is that there is some uncertainty concerning the precise amount of "white shit" which Evenfont is supposed to have supplied to Camile Trading. One would need to isolate and specify the "white shit" supplied by Evenfont (whether motor spirits or waste oils), which should then be subtracted from the total. The duty which was evaded related to other suppliers. My impression is that the evidence does not permit that calculation. 562 If that impression is right, then in respect of all nine periods in the Statement of Claim, the amount of excise evaded is incapable of determination (s120(2)(b)(ii) Excise Act 1905). However, I will reserve this issue for further submissions. 7. ORDERS 563 I make the following orders: 1. In respect of: * the allegations by the plaintiff relating to the blending of diesel; * the allegations concerning the blending of leaded and unleaded petrol; and * in each case, in respect of each of the nine periods in the Further Amended Statement of Claim, I convict Camile Trading of: * First, an offence under s35 of the Excise Act 1901, in that it manufactured excisable blended petroleum products without a licence under the Act; * Secondly, an offence under s61 of the Excise Act 1901, in that the company moved excisable goods without permission; * Thirdly, an offence under s120(1) of the Excise Act 1901, in that the company intentionally evaded excise duty. 2. Further, in respect of each such offence, I convict Lesley Ronald Fletcher of having been knowingly concerned in the commission of such offences. 3. I stand over to a date to be fixed the hearing in respect of penalty for both Camile Trading and Mr Fletcher. 4. I reserve for further submissions the issues identified in paragraph [381] and paragraph [562]. 5. I reserve the question of costs against the first and second defendants. 6. I dismiss the plaintiff's case against the third and fourth defendants, with costs. 7. The matter will be listed for mention at 9.15 am on Tuesday 13 February 2007 to fix a date in respect of outstanding issues. The plaintiff and first and second defendants should prepare, and agree if possible, draft Short Minutes of Orders reflecting these reasons. ********** 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.