Australian Trade Commission v Goodman Fielder Industries Ltd
[1992] FCA 462
•30 JUNE 1992
Re: AUSTRALIAN TRADE COMMISSION
And: GOODMAN FIELDER INDUSTRIES LIMITED
No. N G21 of 1992
FED No. 462
Trade and Commerce - Principal and Agent
(1992) 15 AAR 498
(1992) 36 FCR 517
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Beaumont(1), Gummow(1) and Einfeld(1) JJ.
CATCHWORDS
Trade and Commerce - export grants - Export Market Development Grants Act 1974 - grant entitlement - computation of export earnings - whether wheat had been sold in Australia and exported by claimant for grant - functions of Australian Wheat Board in relation to export of wheat.
Principal and Agent - export of goods - whether Australian company concurrently liable to Australian seller as principal with overseas buyer of goods.
Administrative Appeals Tribunal Act 1975
Australian Trade Commission Act 1985
Export Market Development Grants Act 1974
Wheat Marketing Act 1984
Wheat Marketing Act 1989
Teheran-Europe Co. Limited v S.T. Belton (Tractors) Limited (1968) 2 QB 53
Montgomerie v United Kingdom Mutual Steamship Association, Limited (1891) 1 QB 370
Scott v Geoghegan and Sons Pty Ltd (1969) 43 ALJR 243, applied
HEARING
SYDNEY
#DATE 30:6:1992
Counsel and Solicitors for the Applicant: Ms C. Simpson QC and Ms R.
Henderson instructed by the Australian Government Solicitor.
Counsel and Solicitors for the Respondent: Mr Alan Robertson instructed
by Blake Dawson Waldron.
ORDER
THE COURT ORDERS THAT:
The application be dismissed, with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
The applicant, Australian Trade Commission ("the Commission"), appeals on questions of law, pursuant to s. 44 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act") from a decision of the Administrative Appeals Tribunal ("the AAT") given 20 December 1991.
The appeal, although in the original jurisdiction of the Court, was argued before the Court constituted as a Full Court by reason of sub-s. 44(3)(c) of the AAT Act.
The AAT set aside the decision of the Commission to include a certain sum in the "export earnings" of the Goodman Fielder Wattie group of companies ("the Group") for the year commencing 1 July 1988 ("the grant year"). The Commission is established by s. 7 of the Australian Trade Commission Act 1985. The respondent ("GFI") is a member of the Group. The term "export earnings" appears in the Export Market Development Grants Act 1974 ("the Grants Act"). The result of the decision was to deny a claim by GFI for a grant of $100,000 under the Grants Act in respect of the grant year.
The Grants Act provides for the making of grants with the purpose of providing incentives for the development of export markets. Section 13(1) of the Grants Act provides that a person desiring to obtain a grant shall submit a claim to the Commission. The central provision of the legislation is s. 12. This provides:
"12 (1) The Commission shall consider every claim duly made and determine whether the claimant has a grant entitlement and, if so, the amount of that grant entitlement.
(2) Where the Commission determines that a claimant has a grant entitlement, the Commission shall pay to the claimant a grant equal to the amount of the grant entitlement so determined."
Claims are to be made in respect of a "grant year", a term defined in s. 3(1). A grant is not payable to a corporation in respect of a particular grant year if the "export earnings" of that corporation and its affiliates in that grant year exceed $20 million: s. 14(4). The term "export earnings" is given content by s. 3A. So far as is immediately material sub-s. 3A(1) provides:
"3A(1) A reference in this Act to the export earnings of a person, in relation to a grant year, shall be read, subject to the operation of this section, as a reference to the sum of -
(a) in respect of eligible goods sold in Australia by that person at any time and exported by that person during that grant year - so much of the consideration received or receivable by that person in respect of the sale and export as is attributable to the free on board value of the goods ..."
The expression "grant year" includes the year commencing on 1 July 1986 or any of the three next succeeding years (see s. 3(1)). "Eligible goods" has the meaning given by s. 5. The wheat with which this case is concerned were "eligible goods".
The Commission concluded that a grant was not payable because when calculating the relevant "export earnings" it included $13,425,538 for the sale of bulk wheat to various countries in the South Pacific Basin. If it had not been for the inclusion of those moneys, the earnings of GFI and its affiliates would not have exceeded $20 million and GFI would be entitled to receive a grant in accordance with the Act. GFI contended that it did not sell or export the goods in question as principal. It said it acted as agent for either the Australian Wheat Board ("AWB") or certain foreign companies which were its subsidiaries, or both.
In that regard, sub-s. 3(2) of the Grants Act provides:
"3(2) For the purposes of this Act, where an act is done by an agent on behalf of his principal, it shall be deemed to be done by the principal and not by the agent."
In addition, GFI submitted that no consideration had been received or was receivable by it or any of its affiliates because payment went directly to the AWB from the overseas buyers of the wheat.
The Group comprises a number of corporations. The ultimate parent company of GFI is Goodman Fielder Wattie Limited ("the parent company") which was formerly named "Goodman Fielder Limited". The immediate parent of GFI is Goodman Fielder Mills Limited ("GF Mills"). The parent company has subsidiaries in the Solomon Islands and in Papua New Guinea. In the Solomon Islands it has a controlling shareholding in Fielder Industries (SR) Limited which itself has a wholly owned subsidiary Solomon Delite Bakery and Mills Limited. In Papua New Guinea the parent company owns all of the shareholding in Gillespie Bros Holdings Limited which in turn is a wholly owned subsidiary of Fielder Gillespie (PNG) Pty Limited which has a 74% shareholding in Associated Mills Limited.
It is necessary to say something as to the position of the AWB. Immediately before 1 July 1989 (the end of the grant year) the AWB existed under the Wheat Marketing Act 1984 ("the 1984 Act"). It was then continued in existence by s. 4 of the Wheat Marketing Act 1989 ("the 1989 Act"). The 1984 Act had been amended with effect from 12 December 1988 (that is to say, during the grant year) by the Wheat Marketing Amendment Act 1988, but nothing turns upon the amendments for present purposes. Subject to an exception not here relevant, no person was permitted to export wheat without the consent in writing of the AWB (sub-s. 25(2) of the 1984 Act; and see now s. 57 of the 1989 Act). One of the functions of the AWB was to control the export of wheat from Australia (para. 5(2)(c) of the 1984 Act; see now para. 6(1)(a) of the 1989 Act). One of its powers was to sell or dispose of or make arrangements for the sale or disposal of wheat (para. 5(4)(c); see now para. 7(2)(c) of the 1989 Act). Further, the AWB might require a purchaser of wheat from the AWB to give it "a guarantee or other security for the payment of the purchase price of the wheat" (para. 5(4)(d); see now para. 7(2)(d) of the 1989 Act).
The particular bulk sales of wheat which led the Commission to decide adversely to the application for a grant under the Grants Act were made in five shipments, one from Newcastle and four from Brisbane in the period between 15 August 1988 and 27 April 1989. The consignees were Associated Mills Limited, in Papua New Guinea, and Solomon's Delite Bakery and Mills Limited, in the Solomon Islands. The sequence of events in relation to each transaction was explained by Miss J.A. Raavel who had been employed as Shipping Manager in the Starch Division of GF Mills. One of her tasks had been to arrange for the shipment of bulk wheat to the subsidiary companies in Papua New Guinea and the Solomon Islands; this was done as a service to those companies. They processed wheat at their mills. Miss Raavel liaised with the AWB in relation to the contract and shipping arrangements for the wheat to be dispatched directly to the overseas subsidiaries. She worked with Mr George Keirle who was the General Manager of the PNG division of GF Mills. The Papua New Guinea and Solomon subsidiaries of the Group came under his area of responsibility. Mr Keirle was Miss Raavel's supervisor in the organisation, but she did not report to him.
In relation to each shipment the following sequence of events occurred. The relevant overseas subsidiary contacted Mr Keirle in relation to the tonnage and grade of wheat to be obtained for it from the AWB. Mr Keirle then approached the AWB to arrange a contract for the supply of wheat to the subsidiary. A contract was then prepared by the AWB which named the AWB as vendor and the parent company as buyer. The contracts, with modifications by the AWB, were in the "Standard F.O.B. Short Form Contract for Australian Wheat (Fixed Price)" prepared by the AWB. It obliged the buyer to establish and maintain a bond security acceptable to the AWB to cover the full F.O.B. value of the wheat. The contract price in $US was set at the daily rate per tonne for the date of the contract less 0.5%. Miss Raavel understood that the contracts were entered into with the parent to provide the AWB with recourse against an Australian company. On 28 January 1988 GFI had written to the AWB reporting that National Australia Bank had approved a facility of $23 million in favour of the AWB consisting of $19 million to cover all wheat purchased by the Australian flour and stock feed mills of the Group and that the $4 million balance was "to cover our mills in Papua New Guinea and The Solomon Islands."
Miss Raavel confirmed all details of the contracts with the AWB and gave it details of shipping dates, the carrier, the quantity and grade of wheat and payment details. The AWB then sent her bills of lading, certificates of value and origin and invoices. The invoices were stated to be for the account of the parent company. The bills of lading bore the logo of the AWB and described the AWB as the shipper. The address of the overseas subsidiary appeared in the space marked "notify address". No consignee was designated, the statement on the bills reading "consigned to order or his or their assigns." The charter parties were made with the overseas subsidiary. The "Auswheat 1983" form was used. This bore the logo of the Board.
The documents were forwarded to the overseas subsidiary which then made payment directly to the AWB's bank account in New York. The overseas subsidiary also made a payment of "commission" (shown in the accounts of the Group) to a bank account of G.F. Mills in the United States of 75% of the half of 1 percent "commission" granted by the Board. The stated price per tonne in the written contracts included a sum of $4.50 which was for three months credit provided by the AWB to the buyer and when calculating the "commission" this sum was taken off the price. The commission was, in effect, a discount traditionally provided by the AWB in the South Pacific.
The AWB delivered the wheat directly to the ship which was chartered by the overseas subsidiary. The bills of lading were dated the same day as the ships departed and the AAT found that they were issued after the goods were shipped on board so that the bills were a document of title. As we have indicated, the Australian company received the bills but passed them onto the overseas subsidiary. An export return was lodged with the Australian Customs Service in relation to each shipment. The authority number quoted on the returns is that of the parent company. This came about because the Australian Customs Services notified GF Mills that the AWB had not been lodging export returns and that Goodman Fielder should do so. On the certificates of value and origin, the parent company completed the declaration as the exporter, showing the particulars of the overseas subsidiary under the heading "consignee/sold to".
In the reasons the AAT said that the above circumstances gave rise to three possibilities. The first was that the AWB sold the wheat to GFI or the parent company, which then sold it on to the overseas subsidiary as a "back to back" contract. The second was that the AWB sold the wheat directly to the overseas subsidiary with GFI acting as agent for the AWB. The third was that AWB sold the wheat directly to the overseas subsidiary with GFI acting as agent for the overseas subsidiary. It will become apparent that in our view this did not exhaust the possible characterization at general law of the effect of what was done by the parties.
In the result, the AAT assessed the primary facts, which were not really disputed, against an incomplete statement of the relevant law. The AAT found, on balance, that GFI and its Australian affiliates were acting as agents for the overseas subsidiaries. It said that this conclusion was in particular supported by the method of payment for the goods by the overseas subsidiaries and by the physical movements of the goods. Accordingly, the AAT set aside the decision under review and remitted the matter for reconsideration in accordance with the direction that the earnings of GFI from the export of goods from Australia by the shipments detailed in the reasons of the AAT were not export earnings of GFI.
Before turning to the particular statutory provisions which have given rise to the questions of law that are before us, it is appropriate to refer to some settled propositions of the law of principal and agent. In Teheran-Europe Co. Ltd v S.T. Belton (Tractors) Ltd (1968) 2 QB 53 at 59-60 Donaldson J. said that an agent can conclude a contract on behalf of his principal in one of three ways:-
(a) By creating privity of contract between the third party and his principal without himself becoming a party to the contract.
(b) By creating privity of contract between the third party and his principal, whilst also himself becoming a party to the contract.
(c) By creating privity of contract between himself and the third party, but no such privity between the third party and his principal.
In considering the issues which arise on this appeal it will be important to bear in mind, in particular, category (b). Donaldson J's decision, as regards questions of agency, was affirmed by the Court of Appeal: (1968) 2 QB 545. Earlier, in Montgomerie v United Kingdom Mutual Steamship Association, Limited (1891) 1 QB 370 at 372 Wright J. said, describing it as an important proposition, that:
"(I)n all cases the parties can by their express contract provide that the agent shall be the person liable either concurrently with or to the exclusion of the principal, or that the agent shall be the party to sue either concurrently with or to the exclusion of the principal."
The effect of the authorities was summed up by Mr F.M.B. Reynolds, the author of ch. 1 in vol. 2 of "Chitty on Contracts" 25th ed., 1983. Mr Reynolds wrote, para. 2274:
"The fact that a person is an agent and is known to be so does not, however, of itself necessarily prevent him incurring personal liability. Similarly he may be entitled to sue. Whether this is so is to be determined by the construction of the contract, if written, and by its nature and the surrounding circumstances. When the agent does contract personally the scope of the contract which he makes requires careful analysis. He may undertake sole liability to the exclusion of his principal: conversely he may undertake joint liability on the main contract together with his principal. He may act as surety for his principal, or enter into a collateral contract with its own terms. The possibilities shade into one another, and there is no general rule."
See also the commentary by the same author on article 105 of "Bowstead on Agency", 15th ed., 1985, pp. 426-429, and Scott v Geoghegan and Sons Pty Ltd (1969) 43 ALJR 243 at 245, per Taylor J.
In our view, as a matter of general law, the correct characterisation of the transactions is that the AWB sold to the overseas subsidiary and that the sale was brought about by the activities of Mr Keirle and Miss Raavel, that is to say by the Australian companies. The position of the AWB was protected by the inclusion of the parent company as a principal, so that the Board might look directly to it in Australia, in default of performance by the overseas subsidiary.
The factual matrix includes the statutory function of the AWB to control the export of wheat and its powers to sell or make arrangements for the sale of wheat and require purchasers to provide it with security for payment. The overseas subsidiaries initiated each shipment by contact with Mr Keirle who in turn contacted the AWB. The contracts were drawn so as to be expressed as being between the AWB and the parent company, but in the circumstances that was at least consistent with a need perceived by the AWB to have ready recourse against an Australian company. The price, in US dollars, included a discount given by the AWB for sales to the South Pacific area, which at the very least is inconsistent with the parent company being itself a buyer, free to resell where it wished. The bills of lading described the AWB as the shipper and wheat received by the Australian company were passed by it to the overseas subsidiary. The AWB delivered the wheat directly to the ship. The charter parties were made with that subsidiary using the AWB's "Auswheat 1983" form. The AWB issued invoices addressed to the parent company but payment was made by the subsidiary directly to the AWB's bank account in New York. This is consistent with the AWB having put itself in the position that if the subsidiary had failed to effect payment, the AWB would have been able to insist upon payment by the parent company.
The question is whether this involvement of the parent company as a concurrent principal, in the manner we have described, is such as to lead to the conclusion that, within the meaning of s. 3A(1)(a) of the Grants Act, it was the parent company which sold the wheat in Australia and exported it.
The expressed purpose of the Grants Act is to provide incentives for the development of export markets by the payment to successful claimants of the "grant entitlements" for each "grant year". Persons with an aggregate of "export earnings" for a particular grant year in excess of $20 m. are not to receive grants in respect of that year, being, in the view of the legislature, not in need of an incentive. Subsection 3A(1) sets out in six paragraphs descriptions of sums which are to be treated as "export earnings". Paragraph (1)(a) is the only one which is relied upon in this case.
For that provision to apply against the respondent so as to deny it the grant entitlement it claims, it has to be shown that the wheat in question was sold by the parent company in Australia and exported by it. The ordinary meaning of "export" is to send commodities from one country to another using the verb "send" as indicating that which occasioned or brought about the carriage of the commodity from one country to another; cf. Canton Railroad Co v Rogan 340 US 511 at 515 (1951).
Here the wheat was sold and exported by the AWB both in a practical or commercial sense, and in the sense required by para. 3A(1)(a) of the Grants Act. The conclusions that the wheat was sold by the AWB and exported by it are not contradicted by the perhaps special circumstances that in addition to its rights against the overseas subsidiaries of the Group the AWB could look also to payment by the parent company.
It follows that whilst our reasoning differs from that of the AAT there was no error of law in its conclusion that the Commission wrongly decided that the export earnings of the Group for the 1988/89 grant year exceeded $20 m.
The application should be dismissed, with costs.
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