Possession
is nine-tenths of the law and Customs looks to have first claim against $587,000
held as security against imported clothing released during inquiries into a
long-running double-invoicing scam run by Auckland retailers Jenny Elizabeth
Joblin and Nicholas James Clegg.
Joblin and Clegg were
convicted and fined in 2016 for engineering a double-invoicing scam between
2010 and 2014 that saw GST and customs duty totalling some $680,000 evaded with
bulk clothing imported from China undervalued by about $2.8 million. Chinese exporters provided two sets of
invoices for Joblin’s and Clegg’s companies Federation Clothing Ltd, Public
Gallery Ltd and Only For You Ltd enabling a reduced price to be declared at the
border for tax assessment.
These companies went
into liquidation in February 2016, leaving liquidators to tidy up the mess. The High Court ruled it was in the public
interest for prosecutions to continue against all three insolvent companies
despite their liquidation. The
liquidators challenged fines imposed: Federation $450,000; Public Gallery
$45,000; Only For You $20,000. They said
it was pointless fining the companies when creditors were not going to be paid
in full. Justice Lang refused to reduce
the fines. Significant fines are
required to deter others, he said. The
rewards from false invoicing are great and the risk of detection is low.
Payment of the fines is
a separate issue. Court fines are not a
provable debt on insolvency. Fines remain outstanding despite personal
bankruptcy or company liquidation, although in the case of a company this is of
limited benefit since a company does not live on after liquidation. The
liquidators demanded Customs hand over $587,000 cash held as security for the
release of one container holding stock required for sale. These funds were borrowed from ASB Bank after
Customs held up the container when first investigating suspicions of a
double-invoicing scam. ASB claims the
loan’s circumstances were misrepresented and it is an innocent victim of
double-dealing by Joblin and Clegg.
Justice Lang said the Customs and Excise Act allows Customs to seize
goods for unpaid taxes. This right of
seizure extends to cash bonds paid over as substitute for the goods' release.
Exfc
16 Ltd v. Customs – High Court (28.03.17)
17.029