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CASE NOTE ON CEO –v- LABRADOR LIQUOR WHOLESALE PTY LTD
HIGH COURT OF AUSTRALIA 5 SEPTEMBER 2003

HIGH COURT RAISES THE BAR ON STANDARD OF PROOF
IN CUSTOMS PROSECUTIONS

The High Court, in a landmark decision, has ruled that Customs must apply the criminal standard of proof, i.e. beyond reasonable doubt, in Customs prosecutions under the Customs Act. The case arises from the particular context of the Customs Act which governs the basis for these types of Customs prosecutions.

Where an importer contravenes the Customs Act and it is alleged that this has been done fraudulently so that the Commonwealth is deprived of the Customs duty that would have otherwise been payable, then proceedings are taken against the importer generally, in one of two methods.

The first method is for a prosecution to be instituted by the Director of Public Prosecutions for an offence against the Crimes Act. This has not been so common in the past but is becoming more and more common. Generally, however, this type of proceeding will only be taken where there is very clear cut evidence against the importer. This is because the nature of these proceedings are clearly criminal proceedings and the case against the importer must be proved beyond a reasonable doubt, i.e. the criminal standard of proof.

The other way that proceedings can be instituted against an importer is pursuant to section 247 of the Customs Act. This, in essence, allows for proceedings to be issued in the Supreme Court (or the appropriate lower court) 'in accordance with the usual practice and procedure of a court in civil cases or in accordance with the directions of the Court or a Judge.' In practice, this is meant that proceedings are issued on behalf of the CEO of Customs through the Australian Government Solicitors office by way of a civil writ. This writ seeks to claim the duty said to have been evaded and then seeks to extract monetary penalties pursuant to the relevant sections of the Customs Act.

The issue that has troubled the courts around Australia for many years in respect of these 'civil prosecutions' is the question of what is the applicable standard of proof that should be applied. In the past, there has been inconsistencies between different court levels and different States as to how this question was to be decided. In Victoria for example, the Magistrates' Court would apply the criminal standard, whereas the County Court and Supreme Court would apply the civil standard. The application of the civil standard, however, was often affected by what was known as the rule in the Briginshaw case. This required that if the civil standard were to be applied, the nature of the issue would necessarily affect the process by which reasonable satisfaction is attained and exactness of proof would be expected.

It can be appreciated that all of the above created a lot of uncertainty in terms of the way that these civil prosecutions, which were sometimes known as quasi-criminal matters, were handled in the courts.

The other complicating matter in these civil prosecutions is the ability of Customs to rely on what are called averments under section 255 of the Customs Act. This section provides that Customs, in any prosecution, can aver as to matters of fact and that declaration will be prima facie evidence of the matter averred. Customs cannot aver as to matters of law or intent. In a sense, the averment procedure reverses the onus of proof. It is not used in Crimes Act prosecutions, but is used in Customs Act prosecutions.

It can be appreciated that combining the use of averments and the lower standard proof gives Customs the ability to pursue claims which otherwise would not meet the normal criminal law thresholds.

In the Labrador case, the High Court has made a detailed analysis of the legislation, Parliament's intentions and the history of the legislation and the way it has been judicially interpreted. In a unanimous decision, the High Court has ruled that the criminal standard of beyond reasonable doubt is to apply in these type of Customs prosecutions. It did, however, rule that the proceedings nevertheless were still to be conducted on the basis of civil procedure and that, therefore, provisions of the particular relevant Evidence Act relating to civil cases would apply in the trial of the relevant proceedings.

Kirby J noted:

This court has consistently held that, to deprive a person of a fundamental right or privilege recognised by the law, clear legislative provisions are required. This is especially so where that right or privilege may be viewed as a basic doctrine of the law or, in effect, a "practical guarantee of fundamental rights" and something more than a mere rule of evidence law applicable in proceedings. In part, this approach to statutory meaning arises from the respected Court's accord to the legislature assuming, as they do, that the Parliament would not intend drastic consequences for ordinary civil entitlements without expressly considering and approving them. In part, the rule derives from the judicial recognition that "vigilance is required against accidental or unintended erosions of that right".

Hayne J Noted:

The standard of proof to be attained in Customs prosecutions or excise prosecutions is not to be fixed by court established rules of practice about commencing prosecuting or proceeding with a prosecution. Nor is to be fixed by directions given on those subjects by a court or judge. Standard of proof is not to be fixed by either of those methods because it does not fall within the identified subject matters: commencing prosecuting or proceeding with a prosecution.

In other words, Hayne J (who wrote the major judgment) was noting that, while section 247 permitted the Judge to give directions as to the way the case was to be run in terms of certain rules, the section did not give the Judge the power to set the standard of proof.

Hayne J also made some interesting observations on the consequences of the application of the criminal standard of proof in terms of the way the averment provisions are to be used. He said:

No matter what standard of proof is adopted, the averment provisions may, in certain circumstances, confront a Judge with the difficulty of resolving a competition between the requirement of the averment provisions that, as a matter of law, certain facts may, but need not, be taken to have been established to the requisite standard, and evidence tendered in contradiction of that conclusion. No matter what the standard of proof, the Judge can resolve that competition in favour of the party making the averment only if persuaded of the existence or occurrence of the fact averred.

CONCLUSION AND CONSEQUENCES

This case will make it much harder for Customs to be able to successfully run civil prosecution cases under the Customs Act. They will now have to run these to the criminal standard of proof. Furthermore, the High Court has given the strong indication that even the use of averments will not be of great assistance because the Judge nevertheless, will still need to be satisfied on a criminal standard as to the correctness of the matters being averred to.

It has long been the writer's view that people who offend against the Customs Act in a fraudulent matter are guilty of a criminal offence. As such, they should be prosecuted under the Crimes Act and face the threat of jail. By failing to adopt this course, Customs has long given the impression that offences against the Customs Act are simply 'white collar crimes' that can be disposed of by the payment of a fine. While the fines applicable can sometimes be very substantial, it is the writer's opinion that the wrong message has been sent to the commercial community by Customs failing to treat these Customs Act transactions as the criminal matters that they really are. This High Court decision is, accordingly, very welcome.

LOUIS GROSS B. Juris., LL.B.
LOUIS GROSS & ASSOCIATES

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