Comptroller General of Customs v Zappia [2018] HCA 54: High Court Allows Appeal

Monday 26 November 2018 @ 2.10 p.m. | Legal Research | Taxation

In the recent judgment of Comptroller General of Customs v Zappia  [2018] HCA 54 (14 November 2018), the High Court unanimously allowed an appeal from a judgment of the Full Court of the Federal Court of Australia, which set aside a decision of the Administrative Appeals Tribunal ("the AAT").

Background

Zaps Transport (Aust) Pty Ltd ("Zaps") operated a warehouse. John Zappia was the sole Director of Zaps and his son Domenic Zappia ("the Respondent") was employed by Zaps as its General Manager and its Warehouse Manager.  In May 2015, some 400,000 cigarettes were stolen from Zaps' warehouse with the stolen goods being classified as "dutiable goods", which, at the time of the theft, had not been entered for home consumption.  The Customs Act 1901 (Cth) (the "Act") provides at s 35A(1) that a person who:

"… has, or has been entrusted with, the possession, custody or control of dutiable goods subject to customs control, and who fails to keep those goods safely … shall, on demand by a Collector, pay to the Commonwealth the amount of customs duty which would have been payable on those goods had they been entered for home consumption on the day of the demand …”

In the judgment, their Honours also outlined the definition of “dutiable goods” at [para 2]:

“… [dutiable goods] include goods in respect of which customs duty is payable . Tobacco products are dutiable goods … Customs duty is payable on dutiable goods by the time those goods are entered for home consumption … The customs duty is payable as a debt to the Commonwealth by the ‘owner’ of the goods …”

A demand was made by the Collector to the Respondent, the respondent's father and Zaps for “customs duty which would have been payable on those goods had they been entered for home consumption on the day of the demand”, with their Honours noting at [para 16] of the judgment:

“… Each notice asserted a failure to keep the stolen goods safely as required by s 35A(1)(a) and demanded from each respective person payment of an amount equal to the customs duty which would have been payable on the stolen goods if those goods had been entered for home consumption on the day on which the demand was made”.

The Appeals

The Respondent, the respondent's father and Zaps applied to the AAT for review of the Collector's decisions to demand payment from each of them. Each demand was affirmed at the AAT.

The Respondent then appealed to the Full Court of the Federal Court.  By majority, the Full Court of the Federal Court allowed the appeal, with White and Moshinsky JJ saying:

"that s 35A(1) on its proper construction "is not to be understood as directed to the kind of control exercised by an employee of a licensed warehouse, acting in that capacity" [at 42 of the High Court's decision]

The Full Court of the Federal Court set aside the decision of the Tribunal and declared that the demand made by the Collector on the Respondent was "invalid and of no effect".

Outcome of the High Court Appeal

By special leave, the Applicant then appealed to the High Court.  The High Court overturned the decision of the Full Court of the Federal Court, and held that an employee of a warehouse licence holder is capable of being a person who "has, or has been entrusted with, the possession, custody or control" of the relevant goods. 

Kiefer CJ and Bell, Gageler and Gordon JJ concluded in their joint judgement [at paras 41 and 42]:

“…The facts found by the Tribunal were sufficient to establish that Domenic was a person who had the possession, custody or control of the stolen goods and who failed to keep those goods safely … he had authority to direct what was to happen to the goods in the warehouse on a day-to-day basis was sufficient to establish that he had the requisite degree of power or authority in relation to the goods … The appeal is to be allowed … the appeal to the Federal Court is to be dismissed …”

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Sources:

Comptroller General of Customs v Zappia  [2018] HCA 54 (14 November 2018)

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