Maersk Australia Pty Ltd v Fiji Islands Revenue & Customs Authority [2015] FJHC 1008; Civil Action 10.2011 (11 December 2015)

IN THE HIGH COURT OF FIJI AT SUVA
Civil Jurisdiction

Civil Action No. 10 of 2011

Between:

Maersk Australia Pty Ltd
First plaintiff

And:

Shipping Services Fiji Ltd
Second plaintiff

And:

Fiji Islands Revenue & Customs Authority
Defendant

Appearances: Mr H.K. Naginfor the plaintiffs
Mr F. Haniff with Ms S. Hazelman for the defendant
Dates of hearing: 24th, 25th, 26thand 30th September, 2013 and 2nd October, 2013

Judgment

1. The first plaintiff is a company incorporated in Australia and operates a shipping line. The second plaintiff is the agent of the first plaintiff in Fiji. OMEGA Corp Fiji Limited had imported 25 containers of frozen sardines in October and November,2009, on the first plaintiff's shipping line. The cargo was not released to OMEGA Corp Fiji Limited, as it failed to pay freight. The plaintiffs state they exercised their rights under the bill of lading and declared the cargo abandoned. The plaintiffs found a buyer, Hans Marine Company Ltdto purchase the consignment for $500,000 and pay for the logistics, storage, local taxes and customs duties. It is alleged that FIRCA, the defendant caused loss to the plaintiffs, by failing to facilitate the sale of the cargo to its buyer and selling the cargo by auction negligently in a highly irregular manner, in breach of its duty as a "bailee".
   
2. The defendant states that the arrangement of the plaintiffs with its buyer was made almost six months after the shipment arrived, when the period during which the cargo should been removed had lapsed. The decision on whether or not to accept such an arrangement and the determination of the reserve price for the cargo was in the discretion of the defendant. The auction of the cargo was advertised in the Gazette and the Fiji Sun. The plaintiffs' buyer could have placed its bid. The defendant states that no legal proceedings can be brought against it as agent of the State, in respect of any tax or duty payable under any law specified in the First Schedule of the FIRCA Act. Finally, the defendant states that the action should have been filed against the consignee. FIRCA is wrongly named.
   

The determination

3. The case for the plaintiffs is that the defendant failed to sell the cargo to Hans Marine Company Ltd and insisted that the sale proceed by way of auction.
   
4. The defendant's position is that the sale proceeded by way of auction, as the second plaintiff had not cleared the cargo in terms of the Customs Act nor invoked the other provisions of the Act to take the goods out of customs control, as advised. Imported goods are required to be cleared within three days.
   

The Customs Act

5. The regime of the Customs Act, as so far as relevant, provides as follows.
   
   • (a) Section 8(2) of the Customs Act declares that all imported goods shall be subject to customs control.
     
   • (b) Section 30 states that an "entry in respect of imported goods shall be made on the forms prescribed.."
     
   • (c) Unentered Goods
     

Section 27(1) provides that the owner of the ship or its agent must within 4 days of the completion of discharge of the goods deliver to the Comptroller, a list of all goods unloaded from the ship not yet cleared.

Section 27(2) is attracted, if imported goods remain uncleared after the expiry of 3 days from the date of the completion of the discharge, a Customs Officer can direct the owner of the ship or his agent to remove or store the goods to a customs warehouse, or other approved place which "place is deemed to be a Customs warehouse" under sub-section (3).

(d) Subsection 4 states that for "determining the amount of any duty chargeable, any imported goods which have remained uncleared after the expiration of 3 days ..are deemed to have been removed to and deposited in a customs warehouse ".

(e) In terms of section 63(1) if "unentered goods deposited in a customs warehouse under ..section 27 (2) are not lawfully removed within 7 days after deposit, they may be sold by public auction after 7 days public notice of sale has been given". The proviso to the section provides that goods of a perishable nature may be sold by public auction or otherwise, at any time, after notice of intention to sell has been given to the consignee.

(f) Subsections (3) and (4) of section 63 provides that the proceeds of goods sold must be set of against duties, expenses of sale and rent and charges due to Customs and the balance paid to the person claiming to be the owner of the goods.

6. PW1,(Bernard Hong Tiy, Director of the second defendant company)was the sole witness for the plaintiffs.
   
7. He produced a letter of 5th March, 2010, from the second plaintiff to Betty Wang, director of Agape Fishing Enterprises Ltd requesting her to make an offer for the cargo of 25 containers.
   
8. Hans Marine Company Ltd, a "sister company" of Agape Fishing Enterprises Ltd by its letter of 7 May,2010, to the second plaintiff confirmed its tender of $ 500,000 for the containers.
   
9. PW1, in cross-examination, accepted that Hans Marine Company Ltd had not agreed in that letter, to make payment of customs dues nor plugging or storage charges.
   
10. The second plaintiff by letter of 11th May, 2010, notified the defendant that " Hans Marine Company Limited, of Suva.. had been successful in bidding for the abandon cargo detailed in the attached Bill of lading".
    
11. On 12 May,2010,DW1, (Sadasivan Naicker, Team Leader, Wharf Operations of FIRCA) replied to the the second plaintiff as follows:
    

I refer to your letter dated 11th May,2010,and wish to advice that the Customs entrybe made to clear the 25 x 40 ft Container fish bait on the original invoice and other document..

The above goods had been advertised for Auction. So please facilitate clearance at "earliest possible"...(emphasis added)

12. In cross-examination, PW1 agreed that it was a requirement under the Customs Act that a customs entry be made, as advised by DW1, in the above letter.
    
13. PW1 contended that the Customs dept was initially willing to proceed with a private sale. He produced a communication dated 14th May,2010, from David Oakley, a Customs Officer at the Suva wharf to DW1 recommending that:
    

the shipment be cleared as soon as can be by facilitating (the second plaintiff's) request to clear the cargo for the potential buyer.. After successfully applying to withdraw it from the uncleared cargo list they should be allowed to progress with normal clearance and remove after all dues and duty elements involved be cleared with customs. (emphasis added)

14. DW1 said that Oakley was a junior officer, as admitted by PW1. PW1also agreed that Oakley's communication states that all dues must be cleared with the Customs, in the first instance.
    
15. The plaintiffs, in the closing submissions filed on their behalf contend that there was clear evidence that the plaintiffs had instructed Carpenters Shipping to undertake customs clearance.
    
16. PW1's evidence was to the contrary. His cross-examination on that pointwas as follows:
    

Q. Did Carpenters Shipping make the Customs entry?

A. I have not seen one.

Q. No customs entry was made to clear the goods?

1. I do not recall if one was made.
   

Q. Do you have documentation from Carpenters Shipping?

1. I had meeting with Carpenters Shipping.
   

I cannot recall any document. Customs entry document is important, if cleared normally.
(emphasis added)

17. I would agree with counsel for the defendant, Mr Haniff's submission that the contention that Carpenters Shipping was appointed to do the clearance, was an afterthought.
    
18. The plaintiffs argue that DW3,(Jalal Dean, General Manager,FIRCA retired on December,2010)insisted that the sale proceed by auction. In support, the plaintiffs rely on a letter of 24th May,2010, sent by DW3 to the second plaintiff after a meeting. This contention is not borne out in that letter. The letter reads:
    

Abandoned 25 x 40 ft Reefers of Frozen Sardines

A meeting held in my Office today clarified that any cargo which becomes uncleared and allocated a Lot No. becomes property of the State by virtue of S. 27 of the Customs Act. Only three avenues are optional at that stage. First is payment of regular duties and taxes and clearance from Customs control, second is disposal by public auction under S. 63 of the Customs laws and third is destruction of goods, if the goods have perished and are no longer valid for any form of sale.

This letter confirms discussion as above.

...

If your Office is aware of potential buyers then direct them to be present in the Customs auction due on Tuesday 25th May 2010 at 1000 hours so that the burden of this massive liability is diminished with the buyer making payments and taking away this cargo.( emphasis added)

19. DW1, in his evidence in chief said that he was in attendance at that meeting of 24 May, 2010, with representatives of the second defendant. DW2 confirmed DW3's evidence that the plaintiff was advised of the three options available under the Customs Act, as set out in the above letter. The second defendant did not want to make a customs entry,as thenduty would be assessed. Nor invoke the provisional warehousing and imperfect warehousing provisions of the Act, to take the consignment out of the auction.
    
20. DW1 said that a customs entry can be processed within a day. He was asked in cross-examination, if a time limit was given to the second plaintiff to make a customs entry. His answer was as follows:
    

.as shipping agents they know for how long we keep cargo which was lying for 6 months and nobody made entry from January to May for 6 months..

21. DW1 and DW3testified there was no effort nor commitment on the part of the second plaintiff to get clearance from Customs. Since no entry was filed by 25th May, 2010, the defendant proceeded with the auction.
    
22. I reproduce an extract of the cross-examination of PW1 on this point:
    

Q Did you say to hold up auction as we are filing a customs entry to clear to consignment

A. Not specific to that.

Q. You were reluctant/did not want to file customs entry.?

A We started process to file it.

Q. You could have told Mr Jalal Dean &Naicker to please do not auction as we are filing custom entry to clear the consignment.

A He gave us 12 hours notice.

Yes, I did not write that customs entry was to be filed and that we are clearing consignment.(emphasis added)

23. In my view, PW1's evidence supports the defendant's position that the second plaintiff made no attempt to file a customs entry. The officers of the defendant had consistently (commencing with its letter of 12th May,2010)advised the second plaintiff that a customs entry must be filed, as acknowledged by PW1, in his detailed letter of 17 May, 2010, sent to the CEO, FIRCA stating:
    

We have had cordial meetings last week with senior FIRCA officers Mr Sada Naicker and Mr Sami, in regard to this cargo and have been given advice as to what can be done to work out a quantum of chargeable duty for the account of Hans Marine as well as what other border control authority certifications we would need, which we have been working on ever since.(emphasis added)

24. Next, the plaintiffs contended that they had a lien over the cargo, in terms of the bill of lading.
    
25. It was put to PW1 that FIRCA was not a party to the bill of lading. His cross-examination on this point was as follows:
    

Q. On receiving Mr Naicker's letter you responded with your letter of 12th May?.

A. Yes.

Q. You do not have power to have shipments withdrawn from auction.

1. We have lien over the cargo under clause 17 of the bill of lading ...
   

Q. Under S 63 of Customs Act it can be auctioned or sold.

Q. Discretion is with Customs?

A Yes.

Q. Do you expect Customs to accept that duties, taxes and charges are to be paid by Hans Marine?

You look to Hans Marine for duties?

A. Yes.

Q. This can be assessed if you filed customs entry.

A. Yes.(emphasis added)

26. DW3, in evidence in chief said that the Customs Act takes " absolute precedence" over the bill of lading. A shipper could exercise his lien and take control of the cargo, after making a customs entry and paying duties. Since the consignment was under customs control, their rights under the bill of lading was subject to the provisions of sections27, 51 and 63 of the Act, as the second plaintiff was informed by DW3's letter of 1st June,2010.
    
27. Next, the plaintiffs contend that the second plaintiff by its letter of 12 May,2010, wrote to the Warehouse Manager of FIRCA stating that they have considered the cargo as abandoned. The letter reads:
    

.we would like to have the shipments withdrawn from the Auction.

Maersk Linehave now considered this cargo as abandoned. However, we now have a willing buyer- Hans Marine Company Limited.

The total consignmnet value we have agreed to is FJD500,000, which Hans Marine Company Limited will settle with Maersk Line.

..All duties, taxes and logistic charges will be to the account of Hans Marine Company Ltd.(emphasis added)

28. There is a procedure set out in section 190 of the Customs Act to be followed in respect of "Abandoned goods and sweepings". The plaintiffs had not complied with section 190.
    

The auction of 25th May,2010

29. Hans Marine Company Ltd won the bid at the auction conducted by DW2,(Graham Eden, Auctioneer). Hans Marine Company Ltd bid $ 500,000 for the consignment and entered into an agreement with DW2to pay that sum in 48 hours. The arrangement was not adhered to albeit, Hans Marine Company Ltd was given a week to pay the FJ$500,000.00in installments, but did not make the payment. The agreement lapsed.
    
30. On 25th May,2010, PW1 sent an email to DW3, as regards the auction as follows:
    

..We appreciate your instructions to auction the said cargo of frozen sardines during our meeting yesterday. The auction was held today and the purchaser of the cargo was that which has been mentioned in my earlier letter to the CEO. That company is Hans Marine Company Limited.

You mention in your letter that the auction was conducted in the line with Section 63 of Customs Laws, which is of course fine with us, however we seek clarification as to when and how we will be able to recoup monies we have paid out to Fiji Ports Corporation Limited for the prolonged storage of these container, as well as other associated costs that we are out of pocket of, through no fault of our own...(emphasis added)

31. It transpired that Hans Marine Company Ltd had deposited $100,000.00 with the second plaintiff. Hans Marine Company Ltd asked the second plaintiff to return the $100,000.00, in order to make the deposit with the auctioneer.
    
32. On 26th May, 2010, the second plaintiff wrote to the defendant that:
    

Hans Marine now would like us to reimburse this FJD 100K, in order to place a deposit with your auctioneer. GEA and Associates. However, we will not be able to give them this until we are assured beyond all doubt that our claims for costs from the auction proceeds will be paid.

33. DW3 informed the plaintiff by his letter of 1st June,2010 that the balance of the proceeds would be payable to person claiming to be the owner of the consignment, in terms of section 63 (4) after "Customs ..deduct(s) what is legally deductible", the Customs "cannot give any form of assurance".
    
34. The sale to Hans Marine Company Ltd did not proceed. The consignment was once again put up for auction on 18 June, 2010, in terms of section 63 of the Customs Act.
    
35. The auction was advertised in the Fiji Sun on 17 June, 2010. On the same day, DW3 had sent emails to various custom departments informing them of the auction on 18 June, 2010.The auction was stood down by the auctioneer to seek instructions from the defendant whether to accept the bid of $100,000.00. DW3, in his evidence in chief stated that Customs accepted the bid of $100,000.00, although "it was less than the reserve price..as it was a long outstanding matter".
    
36. Mr Nagin, counsel for the plaintiffs put it to DW1 and DW3 that the auction scheduled for 17th January,2010, was deferred at the request of the consignee, although it had not filed a customs entry.
    
37. DW2replied that the consignee had made the necessary application under Regulation 152(5) to remove the consignment from the auction list, prior to the auction of 17 January 2010. DW3 said that the consignee had given a hand written letter under Regulation 152. DW3 said that he had asked the second plaintiff to provide an undertaking. The second plaintiff's letter of 12 May,2010,(reproduced above)was inadequate, in terms of Regulation 152
    
38. In my view, the explanation given by the defence for declining to defer the subsequent auction is in my view, legally acceptable. DW3 said that the goods were of a perishable nature, "the cargo was inspected and starting to decompose and there was a likelihood of further decomposition". The Customs was given a CERTIFICATE OF CONDEMNATION OF FOOD of 27th May,2010, from the Health office. That document was produced in evidence.
    
39. Regulation 152 (5)provides that the withdrawal of goods from auction is at the discretion of the defendant. The regulation reads:
    

Goods advertised for sale by public auction in the Gazette may in exceptional circumstances, at the sole discretion of the Comptroller, be withdrawn from sale if he or she receives a written notice from the owner of the goods requesting withdrawal not less than 48 hours before the sale is due to take place. The owner of any goods withdrawn from sale under this regulation shall pay all duties and charges due on such goods and remove them from customs control within 48 hours from the day on which they were to be sold.(emphasis added)

40. Moreover, section 63 states that goods of a "perishable nature may be sold by the proper officer, either by public auction or otherwise, at any time, after notice of intention to sell has been given to the consignee".
    
41. In my view, DW1 and DW3 had acted according to the provisions of the Customs Act and from time to time advised the plaintiffs of the necessary statutory steps to be taken.
    
42. It is evident the grievance of the plaintiffs arises from the failure of a consignee, OMEGA Corp Fiji Limited to pay freight. The defendant, in its statement of defence quite correctly states that the plaintiffs had taken the risk of shipping unpaid cargo and the consignee failed to take delivery. The proper defendant should have been the consignee. Mr Haniff posed the following question to PW1:
    

Q. If freight was prepaid you would wait till consignee takes over?

1. Yes and consignee would pay plugging charges
   

43. When PW1 was asked in cross-examination, why the plaintiffs did not file action against the consignee. His answer was the consignee was "in and out of New Zealand".
    
44. The plaintiffs claim is founded on the defendant's duty of care, alternatively, as bailee. That proposition is contrary to section 26 of the Customs Act, as Mr Haniff points out in his reply. Section 26declares that " the owner or agent of the.. ship shall be responsible, for (goods unloaded into a customs area) for the purposes of the customs law, as if the goods had not been removed from the.. ship".
    
45. Finally, as stated in the defence no liability attaches to the defendant for goods sold through the statutory process, as provided in regulation 152(7) of the Customs Regulations. This reads:
    

The Comptroller shall not be liable to compensate any person in respect of any sale made pursuant to the Act.

46. In my judgment, the case for the plaintiffs is misconceived
    
47. Orders
    
    1. I dismiss the action of the plaintiffs.
       
    2. The plaintiffs shall pay the defendant costs summarily assessed in a sum of $ 5500.
       

11 December, 2015

A.L.B. Brito-Mutunayagam
Judge