On 14 November 2018, the High Court unanimously held that an employee manager, of a ‘bonded warehouse’ could be liable for duty (on goods stolen from that warehouse) as, relevantly, having ‘possession, custody or control‘ of dutiable goods. The Court held that it was not only the bonded warehouse licence holder who could have this ‘possession, custody or control’.
In doing so, it upheld the original AAT decision (in favour of the Comptroller) and overturned the Full Federal Court decision, which held that an employee could not have the relevant ‘control’.
The facts were these.
- A company: Zaps Transport (Aust) Pty Ltd (“Company“), operated a warehouse (the Bonded Warehouse) in which goods subject to “customs control” under the Customs Act 1901 (Cth) (“the Act“) were stored. Thus was under a warehouse licence issued to the Company, under Pt V of the Act.
- The respondent was employed by the Company as its general manager and warehouse manager (the Manager).
- The Manager’s father was the Company’s sole director.
- In May 2015, tobacco goods were stolen from the Bonded Warehouse. The stolen goods were “dutiable goods”, and, at the time of the theft, they had not been “entered” for home consumption.
- Section 35A(1) of the Act provided, relevantly, 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.
- After the theft at the Bonded Warehouse, a Collector made demands to each of the Manager, his father and the Company under s 35A(1) of the Act.
AAT: The Manager, the Manager’s father and the Company applied to the AAT, for review of the Collector’s decisions, to demand payment from each of these three parties. The Tribunal affirmed all three of the decisions  AATA 202. In relation to the Manager, the Tribunal found that he had directed what was to happen to the stolen goods on a day-to-day basis and concluded that he had exercised “control” over them.
Full Federal Court: The Manager appealed to the Full Court of the Federal Court  FCAFC 147. A majority of that Court allowed the appeal, concluding that the “kind of control” over goods exercised by an employee of a warehouse licence holder, who acts in his or her capacity as an employee, does not meet the level of “control” required by s 35A(1).
By special leave, the Comptroller General of Customs appealed to the High Court.
The High Court 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.
- The reference in s 35A(1) to the “possession, custody or control” of goods is to the degree of power or authority that would enable a person to meet the obligations imposed by s 35A(1)(a) and (b).
- Those obligations are to keep the goods safely and, on request, to show the goods to a Collector or to satisfy a Collector that the goods have been dealt with in accordance with the Act.
- Any person who possesses this degree of power or authority, irrespective of the manner in which the person might exercise that power or authority, will be a person who “has” the possession, custody or control of goods.
- Such persons are not, therefore, limited to warehouse licence holders.
- The facts found by the Tribunal established that the respondent was a person who had the possession, custody or control of the stolen goods and who had failed to keep those goods safely. The demand issued to him was valid.
(Comptroller General of Customs v Zappia  HCA 54, Kiefel CJ, Bell, Gageler, Nettle and Gordon JJ, 14 November 2018.)
[LTN 221, 15/11/18; Tax Month – November 2018]
CPD questions (answers available)
- Did the High Court find the manager of a bonded warehouse, liable for unpaid customs duty, on goods stolen from the bonded warehouse?
- Under s35 of the Act, what persons are liable for unpaid duty on goods that were not kept ‘safely’ in the bonded warehouse?
- Was the company, that held the licence to run the bonded warehouse, also, assessed to the unpaid duty on the stolen goods?
- Was the sole director of this company, also, assessed on the unpaid duty?
- Which of the assessed parties appealed the decisions to assess duty, to the AAT?
- Did the AAT find that any of these parties, had the requisite degree of ‘control’, to be assessed on the unpaid duty?
- Which parties appealed to the Full Federal Court?
- Which parties appealed to the High Court?
- Did the High Court find that an employee could have the requisite degree of control to be liable for the unpaid duty (not just the licensee) and that, based on the AAT’s findings of fact, the Manager was liable to the unpaid duty?