Papua New Guinea Law Reports - 1990
[1990] PNGLR 77
N803
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
DOLPHIN ENTERPRISES PTY LTD
V
SAUN AND THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Waigani
Hinchliffe J
8 August 1988
10-11 August 1988
29 August 1988
13 February 1990
CUSTOMS - Customs duties - Special rates - Pleasure craft - Commercial craft - Vessel “designed for pleasure or sport” - Use for pleasure or sport not criteria - Customs Act (Ch No 101).
The tariff classifications made under the Customs Act (Ch No 101) impose a duty of 25 per cent on vessels “designed for pleasure or sport” and a duty of 7.5 per cent on commercial vessels “for the transport of both passengers and goods”.
Held
(1)      The mere fact that a vessel is used for “pleasure” or “sport” does not render it a vessel “designed for pleasure or sport” for the purposes of the tariff classifications.
(2)      A vessel built in 1966 as a passenger/light cargo vessel and used at all times as such was dutiable as a vessel for the transport of both passengers and goods.
Statement of Claim
These were proceedings in which the plaintiff sought amongst other things a declaration that the correct and lawful tariff item applicable to a vessel for the purposes of the Customs Act (Ch No 101) and subsidiary legislation thereunder was a specified tariff item 1055.
Counsel
J Shepherd, for the plaintiff.
D Lambu, for the defendants.
Cur adv vult
13 February 1990
HINCHLIFFE J: Part of the statement of claim in this matter goes as follows:
“4.      The plaintiff is and was at all material times the owner of a light cargo/passenger charter vessel known as MV ‘Unity’.
5.       The MV ‘Unity’ was built in 1966 as a light cargo/passenger ferry vessel... .
6.       The plaintiff purchased the MV ‘Unity’ in October 1987 ... from Jack Walton of Cairns, Queensland, Australia. At that time the MV ‘Unity’ was based at Cairns and was an Australian registered vessel.
7.       The plaintiff imported the MV ‘Unity’ to Papua New Guinea in December 1987 for the purpose of commercial use of the vessel on charter and for the shipping of light cargo.
8.       . . . has passenger seating for 45 persons and a 20 ton cargo hold.
9.       By letter dated 11 January 1988 the plaintiff requested the first defendant to make a determination as to the appropriate tariff rate of import duty applicable to the MV ‘Unity’ ... .
10.     ... the first defendant by his Assistant Secretary Comptroller (Revenue), E Leva, notified the plaintiff to the effect that the Bureau of Customs had classified the MV ‘Unity’ under Tariff Classification 89.01.03 with duty at 25%, that is to say that the MV ‘Unity’ had been classified as a vessel designed for pleasure, and directed the plaintiff to pay that import duty ... .
11.     ... the plaintiff, under protest, paid import duty of K10,928.62 ... to the Collector of Customs ... .
12.     The plaintiff says ... that the correct ... import duty classification ... should have been under Tariff item 1055 tariff classification 89.01 ... classified ... as a commercial vessel for the transport of both passengers and goods, the rate of import duty ... 7.5%.
13.     The Marine Services Section of the Department of Transport of Papua New Guinea has classified the MV ‘Unity’ as a commercial excursion vessel and as such the MV ‘Unity’ is subject to the provisions of the Merchant Shipping Act Ch 242. Marine Pleasure craft are not subject to that Act.
14.     The first defendant has ... refused or failed to re-classify the MV ‘Unity’ under Tariff item 1055 ... .
15.     If the MV ‘Unity’ was classified under Tariff item 1055 the correct amount of import duty payable would be (and is) the sum of K3,278.59.
16.     The first ... and the second defendant by the first defendant have wrongfully refused or failed to refund to the plaintiff the sum of K7,650.03 being the difference between the said sums of K10,928.62 and K3,278.59.
Wherefore the plaintiff claims:
1.       A Declaration that the correct and lawful tariff item applicable to the MV ‘Unity’ for the purposes of the Customs Act Chapter 101 and subsidiary legislation thereunder is Tariff item 1055.
2.       Judgment against the first defendant and the second defendant in the sum of K7,650.03.
3.       Interest ....
4.       Costs.”
Mr Lambu, for the defendants, argued at the commencement of the trial that I should not hear the matter any further because the plaintiff was in breach of s 176 of the Customs Act which provides, inter alia:
“(1)    If a dispute arises as to:
(a)      the amount of rate of duty on any goods; or
(b)      the liability of any goods to duty under any Customs tariff, the owner of the goods may pay under protest the sum demanded by the Collector as the duty payable in respect of the goods.
(2)      A protest under Subsection (1) shall be made by writing on the entry of the goods the words ‘Paid under protest’ and adding a statement of:
(a)      the grounds on which the protest is made; and
(b)      if the entry relates to more than one description of goods — the goods to which the protest applies, — followed by the signature of the owner of the goods or his agent.
...
(5)      Proceedings do not lie for the recovery of any sum paid to the Customs, as the duty payable in respect of any goods, unless:
(a)      the payment is made under protest under Subsection (1); and
(b)      the sum is paid as the duty payable under any Customs tariff, and the proceedings are commenced within six months after the date of payment.
(6)      ....”
There is no dispute that, even though the plaintiff made a payment under protest, it did not fully comply with s 176(2) in that the statement required by the section was later sent separately from the document registering the payment under protest.
Mr Lambu has argued that the section is clear and that under s 176(5), I should dismiss the plaintiff’s claim.
On the face of it, that is a fairly convincing argument but at the end of the day I cannot agree with Mr Lambu. The defendants, it appears, did not raise this defence until the time of trial, well after the pleadings had closed. Order 8, r 14, of the National Court Rules 1983, provides as follows:
“In a defence or subsequent pleading the party pleading shall plead specifically any matter, for example, performance, release, any statute of limitation, fraud, or any fact showing illegality:
(a)      which he alleges makes any claim, defence or other case of the opposite party not maintainable;
(b)      which, if not pleaded specifically, may take the opposite party by surprise; or
(c)      which raises matters of fact not arising out of the preceding pleadings.”
The defendants have not complied with the rule. I am of the view that they had ample time to amend their defence to comply and they have failed to do so. Clearly the plaintiff has been taken by surprise. It is too late to raise the defence now and I do not allow them to do so. They must proceed on their defence as filed.
If the MV “Unity” was designed for pleasure or sport, then it would attract a rate of duty of 25 per cent. If it is otherwise, then it would attract a rate of duty of 7.5 per cent.
The evidence is clear that the vessel was built in 1966 as a passenger/light cargo vessel. It was used in Bass Strait as a passenger vessel from 1967 until 1977. From 1978 to 1985, it was used by the Anglican Diocese in the Torres Strait as a passenger/light cargo vessel. From 1985 to 1987, it was not in use and since its importation into Papua New Guinea it has been used as a passenger and light cargo vessel.
I am quite satisfied that the vessel was not designed for pleasure or sport. When it was purchased by Mr Walton in 1985 or thereabouts, he intended to convert it into a luxury cruiser but because of his ill-health it was never converted. It would seem to me that the vessel has had no substantial changes since it was built some 24 years ago.
I can only agree with Mr Shepherd when he submitted as follows:
“... the purpose of item 1056 is to ensure that yachts and other vessels ‘designed for pleasure or sports’ which are imported into the country for recreational private use are levied at a much higher rate of duty than is the case for other vessels. Pleasure craft such as ski-boats, runabouts and yachts imported for recreational use are often considered luxury items and accordingly Parliament has obviously imposed a much higher customs duty on such vessels.
On the other hand, a vessel imported for commercial use should be classified under item 1055 even when operated commercially it gives ‘pleasure’ or ‘sport’ to passengers who hire the vessel from the owner or to persons with whom the owner deals in the day to day business of operating the vessel.”
Therefore I cannot agree with the defence witnesses who said that the vessel is used at times for pleasure hence it falls within item 1056. That is not the point. Clearly the vessel was not designed in 1966 as a pleasure vessel. It was designed as a passenger/light cargo vessel.
Those types of vessels do not attract the higher rate of duty in Papua New Guinea. That rate belongs to the pleasure craft for private use.
It is interesting to note that because the vessel is being used commercially and not as a private pleasure craft, it is required to be registered under the Merchant Shipping Act (Ch No 242). It is also subjected to many other requirements under that Act. I also note that s 1 of the Merchant Shipping Act defines “pleasure craft” as follows:
“a vessel that is:
(a)      exclusively used for pleasure; and
(b)      not used for:
(i)       hire; or
(ii)      reward; or
(iii)     any commercial purpose.”
I am quite satisfied that the MV “Unity” has only been used for commercial purposes in Papua New Guinea, not only as a charter cruise boat about Port Moresby but also for the carriage of coastal cargo for which it has a coastal trading licence pursuant to the provisions of the Merchant Shipping Act.
As I mentioned earlier, the only time it was intended to convert the vessel into a pleasure craft was back in 1985. I have no doubt that there would have been substantial design changes and if that had occurred, then the defendants may have had a stronger argument. Needless to say, if that had occurred then the vessel would probably never have come to Papua New Guinea because after conversion it would more than likely be of little use commercially. Of course, that is all academic because no design changes occurred to place it in the pleasure craft category.
After considering all of the evidence, including the many exhibits, I am quite satisfied that the MV “Unity” is not a vessel that was designed for pleasure or sport. The evidence before me is overwhelmingly against that suggestion. The wording of item 1056 is quite clear and straightforward. There is no need to read anything into it to make sense of it. It is sensible as it stands.
It follows that the vessel falls within item 1055 and the rate of duty is 7.5 per cent.
1.       I declare that the correct and lawful tariff item applicable to the MV “Unity” for the purposes of the Customs Act (Ch No 101) and subsidiary legislation thereunder is tariff item 1055.
2.       Judgment for the plaintiff against the first defendant and the second defendant in the sum of K7,650.03.
3.       Interest pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act (Ch No 52) in the sum of K1,275.00.
4.       I order that the defendant pay the costs of the plaintiff to be taxed on the National Court scale.
5.       That the payment of the judgment and interest and the plaintiff’s costs be made no later than four weeks following delivery of the certificate of taxation.
6.       Time abridged.
Orders accordingly
Lawyer for the plaintiff: Kibi Kara.
Lawyer for the first and second defendants: State Solicitor.