The High Court has allowed an appeal against a decision of the Full Federal Court on the definition of persons who ‘has, or has been entrusted with, the possession, custody or control’ of goods on which customs duty is payable. Zappia worked for his father and his father’s company, Zaps Transport (Aust) Pty Ltd, as its warehouse and general manager and, as notified to the Australian Taxation Office, Zappia was one of the people who participated in management and control of the warehouse. Following the theft of tobacco products from the warehouse, the ATO served a notice of demand under s 35A(1) of the Customs Act 1901 (Cth) to Zappia, his father and Zaps. Section 35A(1) provides that
Where a person who has, or has been entrusted with, the possession, custody or control of dutiable goods which are subject to customs control:
(a) fails to keep those goods safely; or
(b) when so requested by a Collector, does not account for those goods to the satisfaction of a Collector in accordance with section 37;
that person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the duty of Customs which would have been payable on those goods if they had been entered for home consumption on the day on which the demand was made.
The ATO notices stated that each failed to keep the goods that were stolen safe, and demanded the payment of the customs duty that would have been payable on the tobacco products. The Administrative Appeals Tribunal affirmed each ATO notice, finding that the products were not safely kept, and that Zappia, his father, and Zaps each exercised control over the products (at ). In relation to Zappia, the AAT found that he exercised authority delegated from his father, was in control of the goods in the warehouse and its employees on a day-to-day basis (at ). Following Zappia’s sole appeal to the FCAFC (his father went bankrupt and Zaps went into liquidation), a majority of the Court allowed the appeal on the basis that Zappia was merely an employee and had only partial ‘control’ over the goods (at ff). Davies J held that ‘possession, custody or control’ was a composite phrase that pointed to the ‘right, power or authority’ to deal with the goods; liability will depend on the case and the measure of control, but an employee could, in principle, be in control (at ).
The High Court unanimously allowed the appeal. The joint judges (Kiefel CJ, Bell, Gageler and Gordon JJ) noted that s 35A(1) must be read in light of their statutory purpose of subjecting goods to customs control, specifically, to ensure customs is paid on them before they are delivered to consumers (at ). This obligation is to keep dutiable goods safely, including preventing them entering into home consumption without customs duties being paid (at ). Turning to the ‘possession, custody or control’ phrase, for the joint judges (at )
The critical reference within the description to ‘the possession, custody or control’ must be read in that context, recognising that none of the terms ‘possession’, ‘custody’ or ‘control’ has a fixed legal meaning and that the power or authority of a person in relation to a thing connoted by any one or more of those terms in statutory collocation is a question of degree. The individual terms, used disjunctively, serve to indicate both that the requisite degree of power or authority is not closely confined and that the requisite degree of power or authority can arise from such a range of sources that, depending on the circumstances, one term might be more appropriate to use than another.
It is thus a reference to a degree of power or authority in relation to dutiable goods (at ) and should be read as a ‘compendious reference’ to the degree of power and authority sufficient to enable a person to meet the requirements that they keep the goods safely and produce them on request to an ATO Collector or show the Collector that the goods have had their duties paid (at ): ‘A person who “has” the possession, custody or control of dutiable goods within the meaning of the section is a person who possesses power or authority in relation to those goods to that degree, irrespective of the manner in which that person might choose to exercise that power or authority.’ (at ). There is no requirement that a person hold paramount or exclusive power over the goods (at ) and, given the scheme of the Act, it is unsurprising that several persons might be liable under s 35A (at ). That one of these persons might be subject to the direction of another is not sufficient to disqualify that person from having some power or authority over the goods (at ). On the facts established by the Tribunal, Zappia’s day-to-day management meant he had possession, custody and control over the goods, and that they were stolen from the warehouse at a time in which he had that authority establishes that he failed to keep them safely (at ).
Nettle J agreed wit hthe joint judges, and added points on previous cases on tax and customs case law, noting that a spectrum of cases run between the approaches in two major decisions, Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd and Goben Pty Ltd v Chief Executive Officer of Customs [No 2] (at ):
In effect, ANZ and Goben represent the end points of the range of contexts which may inform the meaning of the expression ‘possession, custody or control’ and its cognates. ANZ is representative of cases where the context is a statutory provision that has the object of obtaining production of something in a person’s custody or control, and which therefore implies that custody or control extends to persons having de facto power of disposition over the thing which is sought to be produced. In contrast, Goben is representative of cases in which the context is a statutory provision that has the object of attributing an intent to sell to a person in possession, custody or control of specified goods and which therefore implies that “possession, custody or control” is limited to persons having legal power to sell those goods.
For Nettle J, the present matter fell into the former category: the purpose of s 35A(1) is to motivate those with the ability de facto to keep dutiable good safe to do so, and where failing to do that causes them to be liable to pay the Collector the duties payable (at ). Section 35A(1) is focused more on preventing goods passing into home consumption without duties being paid than it is with defining the legal relationship between the possessor and the goods (at ).
|High Court Judgment|| HCA 54||14 November 2018|
|High Court Documents||Zappia|
|Full Court Hearing|| HCATrans 140||8 August 2018|
|Special Leave Determination|| HCATrans 51||21 March 2018|
|Appeal from FCAFC|| FCAFC 147||19 September 2017|
|| AATA 202||17 February 2017|