AMI Toyota Limited v The Comptroller-Generasl of Customs

[1988] HCATrans 242

IN THE !H-GH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M63 of 1988

B e t w e e n -

AMI TOYOTA LIMITED

Applicant

and

THE COMPTROLLER-GENERAL OF CUSTOMS

and THE COMMONWEALTH OF AUSTRALIA

Respondents

Application for special leave to

appeal

MASON CJ

BRENNAN J

GAUDRON J

AMI

TRANSCRIPT ·oF 'PROCEEDINGS

AT MELBOURNE ON FRIDAY, 14 OCTOBER 1988, AT 10.22 AM

Copyright in the High Court of Australia

MlT 4/1/JM 1 14/10/88

MR B.J. SHAW, QC: If the Court pleases, in this matter

I appear with my learned friend MR J.G. SANTAMARIA

for the applicant. (instructed by Phillips Fox)

MR M.E.J. BLACK, QC: If it please the Court, I appear with

my learned friend MR B.R. KENDALL for the

-=---respondents. ( instructed by the Australian

Government Solicitor)

MASON CJ: Mr Shaw?

MR SHAW: 

There has been a little difficulty in getting

copies of the legislation that is presently

being handed up. If the Court pleases, this
application involves two points,and if I might

mention the second and subsidiary one

first, simply to say in respect of it that it
is significant that if leave be granted in

respect of the first point, leave should also

be granted in respect of the second. The second

point arises in this way:  the claim was a claim

for repayment of amounts which had been paid
under protest of customsduty and it was said that

interest was payable on the amounts claimed to be

repaid from the date of payment under protest in

accordance with the provisions of section 167

of the CUSTOMS ACT. That question, of course,
only arises if we are successful on the first

point. It arose before His Honour the trial

arise before the Full Court because we failed	judge because we succeeded there; it did not
there.	We failed before the trial judge on that point

but it is sub:nitted that the point is a significant point

because it raises the question whether payment

under protest constitutes payment with demand

for the provisions of section 58 of the

SUPREME COURT ACT so that a right to interest

arises, and that is obviously a question of

general importance.  I merely mention it now

because if I do not mention it now I am going

to forget it.

If I might now go to the first point, the

first point is a point which arises under

section 161B of the CUSTOMS ACT and it arose

in this way: the applicant imports motor cars

from Japan under contracts which provide for

payment in yen and in relation to the shipments

in question it arranged forward exchange contracts

to provide for the yen which it would need at the time

when payment fell due under the contracts and it

employed those forward exchange contracts in order
to effect the payments. Those contracts had been
arranged at rates of exchange which were more

favourable to the applicant than the spot rate

which was available on the day of exportation.

Accordingly, a q~estion arose under section 161B

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whether a fair rate of exchange at the date

of exportation wa~ as the Comptroller said,
spot rate at that time, or whether it was
the rate which was available to the applicant

pursuant to the forward exchange contracts.

There was an agreed statement of facts -

BRENNAN J: What does it mean exactly, "or whether

it was a rate that was available to the

applicant"?

MR SHAW:	I am sorry, Your Honour?
BRENNAN J:	You say, "or whether it was a rate available

to the applicant".

MR SHAW:	It was the rate which was available to the
applicant under the forward exchange contract.
GAUDRON J:	And used?
MR SHAW:	And used, yes.
BRENNAN J:	Do you mean that he had then the yen available to pay?
MR SHAW:	What I mean, Your Honour, appears at pages 35 and 36
in paragraphs 8 and 9 of the agreed statement of
facts. Paragraph 8 is:

In the course of its business, the Plaintiff

regularly enters into forward contracts for

the purchase forthe-purchase of Japanese

Yen and U.S. dollars. The Plaintiff enters

into those forward contracts in the

expectation of drawing upon the same forward

contracts when the shipments which it
expects to import have been exported from

Japan. Not all the forward contracts are

necessarily used to pay for the shipments

that were first envisaged. Some were drawn

upon earlier than planned and in other cases

the forward contracts were rolled over until

a later date and used at that date to pay

for shipments other than those originally

contemplated.

By reason of such forward contracts, the

Plaintiff had available to itJ -

at the two dates wich are referred to -

rates of exchange between Japanese Yen and

U.S. dollars and between Australian dollars

and U.S. dollars which provided to the

Plaintiff an effective rate of exchange

between Japanese Yen and Australian dollars

which was morefavourable than the rate of

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exchange taken into account and applied by

the first Defendant when he demanded and

imposed customs duty - - -

BRENNAN J:  Is the contract one by way option, or by way

of purchase?

MR SHAW:	It is by way of purchase.
BRENNAN J:	So that the acquisition of the yen, that is

the ownership of the yen, occurs prior to the

date of exportation?

MR SHAW:	No, Your Honour, there is provision for the
delivery of the yen and payment for it on
the appropriate day, whatever it is, and then
ownership in the yen, passes.
BRENNAN J:	I see.
MR SHAW:	Such arrangements were as appears - and this is
important, it is submitted - at pages 49 to 50.
The bottom two lines on 49:

Forward exchange contracts are now,

as the evidence shows -

this is in the findings of the trial judge -

almost universally employed in the import
and export trade. If not, they are

transacted as a matter of ordinary commercial

practice to safeguard purchase commitments.

And then the last two sentences in the paragraph:

The parties agreed that the plaintiff

agreed in advance an effective exchange

rate for Japanese yen which was not otherwise

available on the date of payment.

So that this sort of arrangement is universal,

or almost universal, in the import trade and it

is submitted that for that reason, and the other

reasons which appear at page 15 of the application

book and the following pages - which I will not

read to the Court but I assume the Court has read -

that the question which arises is one of very

general importance. That being so - - -

BRENNAN J:  Mr .

.Shaw,. you have referred, however, to the

question of rolling over, in your submissions,
before the trial judge, is that correct?

MR SHAW: That does happen, yes, Your Honour.

BRENNAN J:  Now, what is involved in rolling over?

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MR SHAW:	What can happen, Your Honour, is that instead
of the contract being fulfilled in accordance
with its terms, it can be extended or it can
be taken up earlier. But, Your Honour, that
question is not, it is submitted, relevant to the matter which the Court has to consider here; but

~-what happened here was, rates were available

and were used.

Now, the question, it is submitted, is one of importance and accordingly the real question

is whether or not our submission is one which

is sufficiently worth arguing to have this Court

consider it.

MASON CJ: Yes, that seems to be the fundamental question.

MR SHAW:	Now, what we say about that by way of commencement
is, first of all, it was an argument which was
accepted by the trial judge; secondly, we say
this: that in the Full Court there were two
judments only - the third member of the Court agreed
with the other two members of the Court. At page 62
of the appeal book, in the paragraph which commences
mthat page, His Honour Mr Justice Fullagar, said this:

I consider, with respect, that I fully

understand the reasoning adopted by the
learned trial Judge, but on the arguable

matter of construction of the statute I take

a different view.

The other judgment was the judgment of Mr Justice Gray

which is at page 69, and His Honour, in the second

last complete paragraph on the page, says this:

Although there is much to be said on each

side of the argument I prefer the construction

of s.161B(l) put forward by the defendant.

The other judgment was His Honour Mr Justice Tadgell,

who said, at page 75, that he agreed generally

with the reasons given by the other two members of

the Court but did not want to say anything in

particular himself.

So that it is submitted that the position

is that the question is one of general importance

and it was a question on which we have succeeded

before one member of the supreme court and the

other members of the supreme court who have

considered the matter have said that the question

is an arguable one. That being so, it is submitted

that the prima facie position is that the application

should succeed. We go on to say this: the conclusion

reached by the Full Court produces what, it is

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submitted, is a most peculiar result. It is

most peculiar for this reason: it turns on the

construction of 161B and what that says is:

Where an amount that is, in accordance with

this Division, required to be taken into

account for the purpose of ascertaining the

value of any imported goods is not an

amount in Australian currency, the amount

to be so taken into account shall be the

equivalent in Australian currency of that

amount, ascertained according to a fair

rate of exchange at the date of exportation

of the goods.

A convenient place to find those words is at page 66

of the application book.

Now, the argument turned principally on the presence in those provisions of the word "fair", also, of course, "at the date of exportation of

the goods", and it was said that in substance

in the Full Court, "fair" meant fair to everybody

and if it had to be fair to everybody at the date

of exportation, it had to be available to everybody

at the date of exportation and a forward rate of

exchange was not ex hypothesi available to
everybody at the date of exportation, and that was

that. Now, the consequence of that method of

reasoning is that the rate of exchange which the
court has held is a fair rate of exchange to be

used in calculating the equivalent of the price

is a rate of exchange which, put at its highest

in accordance with what His Honour the trial judge

said at page 49, nobody in the import trade uses;

nobody, because forward exchange contracts are

universally employed, so His Honour said, in

the import trade or, he goes on to say, "almost

universally".

So the consequence is; that, in order to be

fair,one has to use a rate availed of by nobody

although available to everybody and it also

ignores the fact that forward rates of exchange

are available to everybody if one cares to

make the necessary arrangements sufficiently

far in advance. It also ignores the fact that

the rate which has been held to be the fair

rate of exchange is itself the forward rate of

exchange because the rate picked on is the spot

rate and the spot rate is a rate which is available

on the date of exportation, but it is a rate then

available for delivery two days hence. So, the

rate which has been said to be a fair rate is

a rate used by nobody and not providing yen on the

date of exportation, but only two days afterwards,

and all because the word "fair" is used. That,

in our submission, is a very curious consequence of

the use of the word "fair".

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BRENNAN J:  Mr Shaw, do we have a copy of the contract for

the acquisition of the yen?

MR SHAW:  No. Your Honour, my recollection is that the

contracts were exhibits in the court below

but they certainly have not been reproduced in

-~he application book and I cannot remember if

- -they were reproduced before the Full Court or

not, but I think they were there.

BRENNAN J:  Can I take you back to the answer that you

first gave me, that these are contracts for the

purchase of ~en? If the importer owned yen,

though he was not entitled to delivery of them

at the date of the initial contract, can one

describe the exchange rate which is inherent in
that contract as an exchange rate of the date

of exportation?

MR SHAW: But, Your Honour, the yen were not - how shall

I put it - ascertained yen sitting in a bag

in the vendor's safe. I do not know what yen

look like, I must confess, but I assume they

are little bits of paper. What happens is that when somebody has to provide yen on a

particular day, they then acquire it, either

by purchasing it on that day or by having

earlier made themselves forward arrangements

and so on, round and round and round. But,

in our submission, Your Honour, it is wrong

to regard the yen as owned from the date of the

contract. The yen is not owned until it is

delivered.

BRENNAN J:  I suppose the real question is: what is a

rate of exchange at the date of the contract?

MR SHAW:  Yes.

BRENNAN J: And the question is whether one can describe

the amount to be paid on completion of the

contract in exchange for the yen then to be delivered

as a rate of exchange, if in fact the arrangement

or the agreement has .been made from an earlier

date?

MR SHAW:	Your Honour, the agreed facts say, and I have
read it to Your Honour, that we had available
a rate of exchange at the relevant time and,
in our.·sbmission, we plainly did, as a result
of the contract, and any obtaining of foreign currency must be pursuant to such contracts. It
all depends on what the contract provides when
delivery is to be: it may be today; it may be
tomorrow, which is called a tom rate; it may be two days hence, which is a spot rate; or it may
be further forward.  They do not often go more
than three months, but they can go up to a year.

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In our submission, His Honour the trial judge

was right, and the Full Court was right, in

regarding what the applicant had available to

it as a rate of exchange, as indeed the agreed

facts say. The question was: was it a fair

rate at the date of exportation. It was said

_~'yes" by the trial, "no" by the Full Court.

To add to the considerations that we have

referred to, might we point out that in fact

the Act has undergone substantial changes in

recent times and the consequence of sections 156,

157, and 159 - section 156 says that: "The value

of any imported goods is the customs val.ue";

section 157 says: "The customs value is the

transaction value"; and section 159 says:	"The
transaction value· is to be determined in

accordance with the section", subsection (2)

says it is "the price". "The price" is defined

in section 154(1) as the "contract price" and then

you add various things to it and they are provided

in subsection (3) as commission or brokerage,

packing costs or charges, goods or services supplied

in connection with the production of the goods,

which is set out, and royalties ·or licence fees

and various other things. The point of referring to thd>.se things is that they are all - instead of the customs value being the objective value at the
date of exportation, it is determined by reference

to the various arrangements which have been entered

into in respect of the goods; the price under the

contract, the cost of packing, the cost of

brokerage. - all individual things, and it is .. submitted

that, looking at the way in which the Act proceeds

in relation to the underlying price, it is appropriate
to look at individual arrangements in respect of the

acquisition of foreign currency, if it be a

foreign currency contract.

Now, what the court said, the Full Court,

was that to proceed in the way that we wished

to proceed was to introduce a subjective element

and inequality of taxation into the assessment

of customs duty. But, in our submission, that is

simply mistaken, because in the first place there

is nothing subjective about these forward exchange

contracts. They are individual, if you like, but
they are not subjective. They are just as objective

as the price. Secondly, there is no element of

inequality of taxation because people will pay

customs duty in accordance with whatever arrangements

they may make. That is not inequality; it is just taxing them equally on a different basis. So that it is submitted that for all those reasons what

Their Honours said. namely that the question

is arguable, is perfectly correct. Not only

is it arguable, we submit, but the result which

Their Honours have come to is very odd indeed. And,

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in our submission, the question being important,

the case is an appropriate one for leave to

appeal and, .in our submission, the application

should succeed.

MASON CJ:  Thank you, Mr Shaw. Yes, Mr Black?

MR BLACK:  If the Court pleases. My_ learned friend

has referred to one judge who has found in his

favour, in fact we have six appellate judges

our way: there were three in the supreme court

and the matter has also been before the Full Court

of the Federal Court in a case of LNC (WHOLESALE)

PTY LTD V COLLECTOR OF CUSTOMS, 77 ALR,at 347,

where the Full Court, although politely, we would

say, distinguising the decision of Mr Justice Marks,

came to a conclusion that was entirely consistent

with it, in our respectful submission. So the
matter has been considered in two jurisdictions at

the highest level in those jurisdictions and the

resµlt has been clear in each case.

In those circumstances, it is submitted that

the law is settled, and correctly settled, and

does not require the further consideration by

this Court. In suppose of that we take the Court

to the factual background which, in our submission,

is important in this case to demonstrate the

pecularities of the result contended for by my

learned friend. The first thing to note, in

our respectful submission, is that not all

forward exchange contracts, however universally

used used they may be, are in fact used for

particular shipments, or indeed for any shipment.

That appears in the findings and observations of

Mr Justice Gray at 64.5 of the application book.

Next, the proceeds of forward exchange contracts

may be used,according to what is desirab.le

conunercially, for purposes quite unrelated to the

purchases of goods and indeed this is what occurred

in another action brought by the plaintiff before

Mr Justice Marks, and which failed, where it was

decided,against the present applicant, that the

argument was not available since the yen had not

been used for the purchase of the goods, the purchase

of the relevant currency. That is at pages 44 to 45

of the application book.

Next, it is not even usual, on the evidence,

for an importer to arrange a particular contract

which matches a particular importation. Rather

what the importer does is to have a portfolio of

forward contracts at differing exchange rates,

which one can then use according, of course, to

one's legitimate commercial advantage. That appears

from 68 point 9 in the conclusion of Mr Justice Gray.

So, in practice, what the applicant's argument

involves is that·it-can take its forward exchange

rate if it wishes, which it will wish if it is

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advantageous, but it can use the actual exchange

rate - that is to say presumably something

approximating to what one reads in the financial

columns of the newspapers, something like that - on

the date of exportation if that suits the purposes.

--recorded at the bottom of page 68 of the application -~hat was the subject of a concession which appears

book where Mr Justice Gray said:

The point made by the learned trial

judge -

which was a swing on the roundabout's type of point -

depends for its validity upon the assumption

that in all cases the importer will pay for

the importation with yen derived from a

forward exchange contract. But, as was

conceded by Mr. Shaw, this is by no means

the case.

So the argument, if correct, leads to a

situation which, in our submission, the Act does

not comtemplate; the situation where an importer
does what it wishes, when it wishes, and takes
the most favourable rate, either the rate

approximating to that which one reads in the

newspapers, which is an actual rate, or a
rate that it has procured for itself. In our

submission, that result is plainly inconsistent

with either there being the sort of rate of

exchange that the Act contemplates, or that being

a fair rate of exchange. In our submission, the
expression "fair rate of exchange" can be compared

with such expressions as "a fair thing", or "a fair

value" which indicates something objective, generally

available and indeed fair to both parties, and

consistently fair to both parties, in this

case the revenue of the Connnonwealth and the importer.

So, far from producing an odd result, in our

submission, the result arrived at by two appellate

courts - the identical result - produces a

conclusion that is consistent with good sense

and indeed with the wording of the statute.	If
further argument be needed, in our submission,
it is to be found in section 161J(2).

(Continued an page llJ)..

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MR BLACK (continuing):  Now, that section allows the

Comptroller, for the purposes of the section

as a whole, to publish in cases of doubt and

where he thinks it is desirable to do so,

rates which are then deemed to be the fair

- - rates of exchange and one of his powers is to

publish under 161B(2)(b) a rate prospectively.

Now, therefore it would appear, in our

submission,that there is a power to publish
something which, once published, will set the

rate for anyone who is in the market and do so

prospectively. It will set a rate that is
universally applicable. In our submission,

that indicates, since that may be done for the

purposes. of the section, that powerfully indicates

that the section itself is talking about something

generally available and, finally, we would submit

that what in truth in relied upon here is not

really a rate of exchange at all and that was a

view that particularly commended itself to Mr Justice Sweeney in delivering the first

of the judgments in the Full Court of the

Federal Court in the LNC (WHOLESALE) case at

page 350. What His Honour said in substance,

and we would respectfully say it is correct,

that, in ordinary parlance, a rate of exchange

on a particular date is the rate produced on

that date, not something that is produced at

some earlier date.

We do not deny that the matter is of importance

but we say that the matter is settled by two

decisions of appellate courts that have looked

closely at the matter and, therefore, special

leave should be refused.	May it please the
Court.

MASON CJ: Thank you, Mr Black. Yes, Mr Shaw.

MR. SHAW:	May we say this, if the Court pleases:
learned friend says that "fair" in section 161B my
means fair to everybody. In our submission,
when one looks at the section, that is simply
not so. What it means is, in support of that we say there is no reference to "everybody". What it means is a rate of exchange which produces the
fair equivalent in Australian currency and it
is a fair equivalent of the price and, in our
submission, nothing could be a fairer equivalent
of the price than what was in fact its equivalent.
BRENNAN J:	Was section 161B part of the CUSTOMS ACT at

the time that the Brussels defintion of value was

in the CUSTOMS ACT? In other words, before the

price equivalent came in?

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MR SHAW:	Your Honour, that section was not there in
those terms but there has been a section with
a reference to a fair rate of exchange for a long, long while and by that I mean maybe 50 or 60 years.
BRENNANJ:	So that that formula is one which was applied

when there was the objective criterion of value.

MR SHAW:  Yes, although those precise words were not there.

BRENNAN J: Yes.

MR SHAW:	But, our submission is that what the "fair" must refer to equivalent, what one has to produce is
a fair equivalent and, in our submission, it is
nothing to the point to say that the importer can
choose or effect what is the equivalent because,
after all, he can choose what the price is and
he can choose what the brokerage is all by
negotiating it so, in our submission, there is
nothing in that.  My learned friend refers to
the provisions of section 161B(2). It is true
that that subsection has the effect which he
says but the significant thing is that, in order to get such a fixed rate, one needs use of the provisions of that section that simply has not happened here. So that rather than support my learned friend's submission, in our submission it supports ours and, lastly, my learned friend
refers to what was said by His Honour
Mr Justice Sweeney saying that here - or rather there, what was available was not really a
rate of exchange at all. In our submission,
the agreed statement of facts in this case prevents any such submission and, even if it
does not, the agreed statement of fact shows that. At least persons engaged in this piece of litigation thought that what was available to the applicant was a rate of exchange and, in our
submission, the Act ought to be interpreted in
a way which gives the words used in it the sort
of meaning they have in the community rather
than a meaning adopted by His Honour
Mr Justice Sweeney who, however  eminent a
jurist he may be, is not experienced in commerce in the way that persons who are engaged in the
transactions here are. They, day-to-day, deal in these matters. They thought there was a rate of exchange and, in our submission, what His Honour said is really not, if I may say so with respect, a
fair way of approaching the section. If the Court
pleases.

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MASON CJ: Yes, thank you, Mr Shaw. The Court will announce

its decision in this matter at 2.15 pm.

AT 11.(JO-AM THE MATTER WAS ADJOURNED

UNTIL LATER THE SAME DAY

UPON RESUMING AT 2.25 PM:

MASON CJ: The Court,having considered the submissions of

doubt to justify a grant of special leave to appeal. The application is therefore refused.

the parties in this case, has come to the conclusion

that the actual decision of the Full Court of the

MR BLACK:  May it please the Court, I apply for costs in

those circumstances.

MASON CJ:	You cannot resist that?
MR SHAW:	No, Your· Honour .
MASON CJ:	The application is refused with costs.

AT 2.26 PM THE MATTER WAS ADJOURNED SINE DIE

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