Australian Trade Commission v Underwood Exports Pty Ltd

[1997] FCA 1060

FEDERAL COURT OF AUSTRALIA

ADMINISTRATIVE LAW - Administrative Appeals Tribunal - Tribunal’s duty to make findings on material questions of fact under s 43(2B) of the Administrative Appeals Tribunal Act 1975  - role of Court on judicial review is not to analyse Tribunal’s decision minutely - Tribunal required in these circumstances to make specific findings on the central question - failure of Tribunal to do so - remitted to Tribunal for further consideration.

Administrative Appeals Tribunal Act 1975 (Cth), ss 33, 43(1), 43(2B), 44
Evidence Act 1995 (Cth), ss 103, 106, 178
Export Market Development Grants Act 1974 (Cth), s 11Z(2)

Copperart Pty Ltd v Federal Commissioner of Taxation (1993) 26 ATR 327 applied
Minister for Immigration and Ethnic Affairs v Wu (1996) 185 CLR 259 applied
Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 applied
East Finchley Pty Ltd v Federal Commissioner of Taxation (1989) 90 ALR 457 considered
Dornan v Riordan (1990) 24 FCR 564 considered
Davies v Australian Securities Commission (1995) 59 FCR 221 considered and applied

AUSTRALIAN TRADE COMMISSION v UNDERWOOD EXPORTS PTY LTD
VG 167 of 1996

MANSFIELD J
ADELAIDE (HEARD IN MELBOURNE)

17 OCTOBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 167  of   1996

BETWEEN:	AUSTRALIAN TRADE COMMISSION         APPLICANT
AND:	UNDERWOOD EXPORTS PTY LTD         RESPONDENT
JUDGE:		MANSFIELD J
DATE OF ORDER:		17 OCTOBER 1997
WHERE MADE:		ADELAIDE (HEARD IN MELBOURNE)

THE COURT ORDERS THAT:

1. Appeal allowed.

1. Application remitted to Administrative Appeals Tribunal for rehearing or further hearing.  Parties given leave to make submissions as to appropriate nature of further consideration by the Administrative Appeals Tribunal.

1. Cross appeal dismissed.

Note:  Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 167 of 1996

BETWEEN:	AUSTRALIAN TRADE COMMISSION          APPLICANT
AND:	UNDERWOOD EXPORTS PTY LTD         RESPONDENT

JUDGE:	MANSFIELD J
DATE:	17 OCTOBER 1997
PLACE:	ADELAIDE (HEARD IN MELBOURNE)

REASONS FOR JUDGMENT

INTRODUCTION

This appeal pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act") is from the decision of the Administrative Appeals Tribunal ("the Tribunal") given on 6 March 1996.  The ground of appeal as a matter of law, although variously stated in the grounds of appeal, is based upon the alleged failure of the Tribunal to make findings of fact on critical matters or on matters material to its decision in the course of reaching its decision.

Under s 43(2B) of the AAT Act, the Tribunal is directed in the following terms:

"Where the Tribunal gives in writing the reasons for its decision, those reasons shall include its findings on material questions of fact and a reference to the evidence or other material on which those findings were based."

It is contended that:

"1.The Administrative Appeals Tribunal has a responsibility to reach firm conclusions about material questions of fact in issue before it.

2.The Tribunal is bound to express those conclusions in clear and unambiguous terms.

3.The Tribunal is not relieved of these obligations by reasons of a conflict of testimony or an unwillingness on its part to pass upon the credit of witnesses who have given conflicting testimony, save in exceptional cases in which the Tribunal forms the view that none of the witnesses before it can be relied upon.

4.A failure to satisfy these obligations constitutes an error of law for the purposes of s.44 of the Administrative Appeals Tribunal Act."

The respondent did not specifically join issue with those propositions of law, although I think they are somewhat dogmatic.  I discuss the relevant law hereunder.  The respondent's contention, broadly speaking, is that the Tribunal complied with those obligations.

Those general propositions of law are said to be established by Jones v Minister for Immigration and Ethnic Affairs (1995) 63 FCR 32, Dennis Willcox Pty Ltd v Federal Commissioner of Taxation (1988) 79 ALR 267, Casarotto v Australian Postal Commission (1989) 86 ALR 399, Copperart Pty Ltd v Federal Commissioner of Taxation (1993) 26 ATR 327 and Kidner v Secretary, Department of Social Security (1993) 31 ALD 63. As the respondent did not gainsay those propositions of law, it is unnecessary to refer to the authorities in detail at this point.

It is however necessary to clearly identify what falls within those principles, that is to determine what were the material questions of fact which the Tribunal had to determine, and then to review its reasons to see whether it did so determine them in an appropriate way or at all.

The applicant does not contend that this Court should impose or substitute its view on any particular fact or facts for those of the Tribunal, but complains that the Tribunal simply failed to make firm conclusions about certain material questions of fact, particularly in relation to one critical fact about which the respondent contends that the Tribunal failed to make a finding.

I note that, during the hearing, I gave leave to amend the grounds of appeal to add the following:

“(2)(m)Whether there was any evidentiary findings on which the Tribunal could be satisfied that in fact Underwood was incurring expenditure during the relevant period primarily and principally for the purpose of creating and seeking opportunities and demand for the sale by it in the USA of goods manufactured by Tronics 2000

(2)(n)There was no evidentiary findings on which the Tribunal could be satisfied that in fact Underwood was incurring expenditure during the relevant period primarily and principally for the purpose of creating and seeking opportunities and demand for the sale by it in the USA of goods manufactured by Tronics 2000.”

THE NATURE OF THE CLAIM

The Tribunal on 6 March 1996 set aside a decision made by the applicant and determined in favour of Underwood Exports Pty Ltd ("Underwood") in a claim made by Underwood under the Export Market Development Grants Act 1974 ("the Act") in respect of the 1991-1992 year for an export development grant for the alleged sale by Underwood for export, or the export and sale by Underwood of certain machinery. The Tribunal remitted the matter to the applicant with the direction that Underwood’s claim be paid subject to the applicant requiring any or further verification as to the amounts claimed. It was asserted by Underwood that the expenditure incurred fell within s 11Z(2) of the Act which provides:

"Expenditure is qualifying export development expenditure of a person to whom this section applies if, in the Commission's opinion, it is incurred primarily and principally for the purpose of:

(a)creating or seeking opportunities for; or

(b)creating or increasing demand for;

the sale by that person for export, or the export and sale by that person, of eligible goods manufactured, produced, assembled or processed in Australia."

There was no dispute that the machinery in question constituted goods manufactured in Australia and constituted "eligible goods" under the definition contained in s 5(1)(a) of the Act. The issue upon which there was focus at the stages of the application was the purpose for which the expenditure was incurred by Underwood. That is the critical question: see Sea King Pty Ltd v Australian Trade Commission (1986) 69 ALR 277 at 284. What is important for present circumstances is not the fact of development expenditure having been incurred, or that it was incurred for the purposes of seeking or creating opportunities for export, but whether that compendious purpose involved the sale by Underwood for export or the export and sale by Underwood of the eligible goods.

BACKGROUND TO THE TRANSACTION

Tronics Incorporated ("Tronics Inc") was at material times a distribution company incorporated in the United States of America in 1990.  Its directors included a Mr J R Rose ("Mr Rose").  Tronics 2000 Pty Ltd ("Tronics 2000") was a company incorporated in Australia, whose directors included Dr R Latham (“Dr Latham”), Mr K Harford (“Mr Harford”), and Mr J Gilmour (“Mr Gilmour”).  For many years it has manufactured label application machinery in Melbourne.  In about August 1990 some discussions took place between Tronics 2000 and Mr Rose on the topic of Tronics 2000 selling its machinery into the USA market.  Those discussions progressed to a point where a memorandum of understanding relating to the establishment of the joint venture between Mr Rose and Tronics 2000 was signed by both Mr Rose and Mr Harford in October 1990.  However, for reasons which it is not necessary to go into, that proposed joint venture arrangement did not proceed.

The subject transactions then took place.  At that time Mr Rose and May Rose ("Mrs Rose") were, and had been for some time directors of a family investment company then called Underwood Investments Pty Ltd.  In June 1992 Underwood Investments Pty Ltd changed its name to Underwood Exports Pty Ltd.  Mr and Mrs Rose were divorced, but were on good terms.  There is evidence that Mr Rose, who by then was living, or was about to live, in the United States decided at least to explore the prospect of Underwood being involved in the export of the machinery manufactured by Tronics 2000 to Tronics Inc.  Mr Rose gave evidence that he sought to involve Mrs Rose, who lives in Melbourne, in the proposal through Underwood.  The critical issue was as to the real role of Underwood in the transaction.

It is clear then that there was substantial export of machinery manufactured by Tronics 2000 to Tronics Inc.  The point in issue which the applicant had to determine was whether that export was by Tronics 2000, through Underwood as its agent, or by Underwood as principal, it having acquired the equipment of Tronics 2000 and then exporting it for sale itself as owner.  There was significant conflicting material on that topic.  The alternative options available for determination by the applicant, and then by the Tribunal, were as follows:

1. Mr Rose claimed that he had reached an oral agreement with Mr Harford in about January 1991 that Tronics 2000 machinery would be sold to Underwood and then sold by Underwood to his company Tronics Inc for its sale and distribution in the USA, and that the transaction which proceeded was in accordance with that agreement.

1. Mr J Wood (“Mr Wood”), for Tronics 2000, told the Tribunal that in April 1991 a distributor agreement prepared on behalf of Tronics 2000 had been signed by Mr Rose, the critical terms of which were clauses 4(a) and 13 which provided:

“4(a)Tronics will sell to the distributor during the term of this agreement such products as the distributor may require for resale subject to availability and upon terms and conditions of this agreement.

. . .

13.The relationship of Tronics and the distributor is that of seller and buyer.  The distributor, its officers and employees and agents are not and shall not be deemed and shall not represent themselves as the agents or representatives of Tronics nor shall they have any right to enter into any contract or commitments in the name of or on behalf of Tronics in any respect whatsoever.”

In that agreement Tronics 2000 is defined as Tronics and Tronics Inc is defined as the distributor.

There are two forms of that document in evidence, but the relevant clauses are the same in each.  One of those forms has been signed by Tronics 2000.  Neither was signed by Tronics Inc.  The agreement was only between Tronics 2000 and Tronics Inc as a direct distribution agreement.

As is apparent, the finding as to which of those two versions of the arrangement represented the true position was critical to whether the expenditure by Underwood in respect of which the claim was made was for the purpose of generating opportunities for, or the demand for, the sale or the export and sale by Underwood of the Tronics 2000 machinery.

There was a significant conflict of evidence on that question, including oral evidence and there was significant evidence beyond the oral evidence which supports one or other of those versions of the arrangement whereby Tronics 2000 machinery was exported to Tronics Inc in the United States.  It is fair to say, as counsel for both the applicant and Underwood acknowledged, there was evidence upon which the Tribunal could have determined one or other of those versions of the arrangement was correct, or might even have determined that even if the written agreement involving a direct distributorship arrangement between Tronics 2000 and Tronics Inc had been signed, nevertheless the arrangement which was entered into was of a different nature in fact.  There were significant issues of credit involved in relation to the oral evidence.

THE TRIBUNAL’S REASONS

The Tribunal’s introductory observations noted the witnesses for Underwood as including Mr Rose, Mrs Rose and Mr R Chandler (“Mr Chandler”), its export agent, as well as the statement of Mr H Truber , the operations manager of Universal Air Cargo Pty Ltd and an affidavit of Ms S Davlin (“Ms Davlin”), the office manager of Tronics Inc., and for the applicant as including Mr Wood, chairman of an advisory board to Tronics 2000 during 1991, Dr Latham and Mr Harford, its joint managing directors, and Mr Gilmour, its chairman, together with a statement of Mr M Davis an investigation officer.

The Tribunal’s reasons then record the evidence of Mr Rose on material issues, and intermingled with that review it noted other apparently uncontentious matters and a brief description of other evidence.  It was in the course of that descriptive phase of its reasons that there appears the observation that Tronics Inc:

“... was incorporated in the USA towards the end of 1990 for the purpose of marketing the machinery produced in Australia by Tronics 2000 and exported to it by Underwood."

Given both the context of the Tribunal’s reasons in which that appears, and the Tribunal’s subsequent discussion on the very topic on the role of Underwood, I do not consider that that observation was intended by the Tribunal to amount to its finding on the important issue of fact as to Underwood’s role which it had properly identified for its determination.

The Tribunal’s reasons then refer in some detail to the oral evidence of Mr Rose, Mr Wood and Dr Latham as to whether there was an oral agreement of the nature asserted by Mr Rose or a distributor agreement of the type referred to above, which Mr Wood in particular, but also Dr Latham, deposed to as having been signed by Mr Rose for Tronics Inc.  Mr Rose denied having done so.  As to the suggestion that Mr Rose may have destroyed the executed copy, the Tribunal merely observed:

"There was an allegation that Mr Rose may have removed the executed copy retained by Tronics 2000 and destroyed it along with the copies which it is said he took with him.  This is a serious allegation.  It was denied by Mr Rose."

The Tribunal did not then proceed expressly to determine where the true facts lay on that issue.

It referred to several matters which might have been taken by it to assist in determining that question, including the terms of payment which Tronics Inc in fact adopted, and the absence of any reference by Tronics 2000 to the written document and on the other hand the absence of any reference by Mr Rose to the oral arrangement and Underwood’s role when during 1992 the relationship between Tronics 2000 and Tronics Inc was under strain, and the subsequent communications up to 1994 when the disputes between them were ultimately resolved.

The Tribunal concluded:

"The Tribunal is unable to say whether such an agreement (the written agreement) was ever signed.  ...  Given that the Tribunal is not able to say whether any, and if so which agreement was signed, no conclusion that Mr Rose signed a binding distribution agreement between Tronics Inc and Tronics 2000 in April 1991 is justified."

The context of that finding must of course be, as the Tribunal itself recognised, that it was standing in the shoes of the applicant, and so it was to reach its decision as to whether Underwood's claim for an export grant should succeed to its reasonable satisfaction, after considering the totality of the evidence before it, and without either party bearing any onus of proof.  No submission was put that the Tribunal, in expressing its role in that way, was in any sense in error.

Counsel for the applicant put it that that attitude constituted an abdication of the Tribunal's duty to resolve that critical finding of fact.

At issue before the Court, therefore, is whether those observations of the Tribunal do constitute a finding to its reasonable satisfaction on the totality of the evidence that no such written agreement was entered into, or merely a finding that it is unable to find that no such written agreement was entered into.

The Tribunal’s reasons then continue to recite in summary form the evidence of Mr Rose and of the responses to others concerning it.  In the course of doing so, it noted a signed agreement dated 9 January 1991 between Underwood and Tronics Inc which describes Underwood as a "wholesaler and exporter of packaging machinery" (the label application machinery manufactured by Tronics 2000) whose purpose is to "exploit the market potential for its products in the United States of America", and which appoints Tronics Inc to promote sales of that machinery including procuring orders, referring them to Underwood, and which provides for Underwood then to arrange the shipment of the machinery on a "stock transfer basis" to Tronics Inc to onsell to USA customers.

Mrs Rose gave evidence as to how the system was to operate.  Tronics Inc would send any order it had procured both to Tronics 2000 and to Underwood, and Tronics 2000 would manufacture to order.  Then “on behalf of Underwood” she would arrange for Universal Air Cargo Pty Ltd to collect the machinery manufactured and ship it to Tronics Inc, and although either Tronics 2000 or Underwood was shown as the shipper, Underwood paid for all shipping costs.  The machinery itself at no point came to Underwood’s premises.  Tronics 2000 issued statements to Underwood for the machinery shipped to Tronics Inc, although sometimes its invoice was addressed to Tronics Inc and copied to Underwood.  Underwood drew the cheques to Tronics 2000 for payment of the machinery, and Tronics Inc paid Underwood for the machinery by telegraphic transfer of funds.  The documents confirmed that, on all but one occasion, Underwood paid Tronics 2000 for the machinery exported to Tronics Inc.

The Tribunal noted evidence given by Mr Chandler which tended to confirm the arrangement deposed to by Mrs Rose, and the evidence of Ms Davlin which also confirmed that arrangement but on the other hand disclosed an audit or reconciliation conducted in September 1992 of the dealings between Tronics Inc and Tronics 2000 which did not feature Underwood at all.  Mrs Rose was the only witness about whom the Tribunal made an unequivocal finding accepting her having given her evidence "honestly and openly".  It had no doubts as to her honesty.  It does not necessarily follow that she was reliable in how she described transactions.  The Tribunal in fact made specific findings based upon Mrs Rose's evidence.  They include that she may not have maintained satisfactory records, in part because the direct contact between Tronics 2000 and Tronics Inc in that period “played a part in obscuring the involvement of Underwood from the management and Board members of Tronics 2000”, and that during the period in 9 August 1991 to 23 December 1992 Underwood paid Tronics 2000 at least $415,335.96 in twenty eight separate payments.  In fact, it observed that:

"There seems no doubt that Underwood paid Tronics 2000 for all goods exported to Tronics Inc, with the exception of the first payment which was made by a company associated with Mr Rose."

The issue of course is whether those payments were made on behalf of Tronics Inc, Underwood acting as agent, or were made by Underwood as purchaser of the goods from Tronics 2000.

The Tribunal expressed itself as satisfied that orders obtained by Tronics Inc from USA customers on behalf of Underwood, in accordance with the agreement between them dated 9 February 1991, were relayed by Tronics Inc to Underwood and to Tronics 2000, and that payments were made to Tronics 2000 by Underwood in relation to them.  Other than referring to the agreement of 9 February 1991 (which it must therefore have found to have been in existence and to have been operative), that finding does not necessarily indicate in what capacity Underwood made the payments to Tronics 2000.

The Tribunal then, properly in my view, proceeds to address that issue.  The documentation concerning the ownership of the goods disclosed that invoices were issued by Tronics 2000 to Tronics Inc, including the following notation:

"This is a condition of sale invoice [sic] ownership of above goods is not transferred until payment in full has been received."

After noting that that invoice term did not accord with Mr Rose’s understanding of the arrangements with Mr Harford, but without making any express finding as to whether it accepted the evidence of Mr Rose or Mr Harford, it said:

“There is no dispute about the fact that Underwood made the payments for the purchase of the goods.  The Tribunal is satisfied, despite the reservation contained on the face of the invoices issued by Tronics 2000, that it was the intention of the parties that property in the goods was to pass at the time Underwood paid a deposit.”

It does not then say to whom the property was to pass.

That very question, as the Tribunal noted, was the focus of communications between Tronics 2000 and Tronics Inc in March and April 1992, in which Tronics Inc requested invoices to be issued to Underwood not to Tronics Inc, and Tronics 2000 refused to do so as that was not the arrangement.  A meeting to discuss difficulties which was held in April 1992 between Mr Rose, and Mr Harford and Mr Gilmour, recorded that Tronics 2000 would investigate possible compliance with the Tronics Inc request for changes in future ordering/invoicing practices to permit it to obtain export incentive benefits; that referred to Underwood’s role.  Mr Rose gave evidence that no agreement specifically about distribution was then reached.  In May 1992 there were discussions with Mr Chandler as to whether both Tronics 2000 and Underwood could both be eligible for export grounds.

Conduct during the later part of 1992 was coloured by worsening relationships centred on Tronics 2000 claiming a significant unpaid debt.  The Tribunal observed:

“In the view of the Tribunal the fact that there was money owing to Tronics 2000 by Underwood which remained unpaid played a major part in the breakdown in the relationship ...”

but again the content of that observation does not indicate that the Tribunal there was making a specific finding that Underwood owed that sum as purchaser from Tronics 2000 of the exported machinery.  However, correspondence from Tronics 2000 to Underwood in that period and thereafter was noted by the Tribunal as asserting Underwood’s obligation to pay the amount outstanding.  The Tribunal said Tronics 2000 had the aim of placing pressure on “Mr Rose, Tronics Inc and/or Underwood” to pay the amount outstanding.  However, it specifically rejected the evidence of Dr Latham and Mr Harford that the letters to Underwood were sent to procure payment but without attention to the source of payment.

The Tribunal concluded as follows:

"Mr Gilmour maintained in his evidence that as a matter of principle he could not support Mr Rose's insistence that Underwood was involved in the transactions with Tronics 2000 during the 1991-1992 year.  He regarded, as is evident from the contents of Mr Harford's letter (set out in paragraph 30 herein), that the export grant claim made by Mr Rose was an attempt to reconstruct and re-write history so as to create a role for Underwood which, in reality, had never existed.  However, the Tribunal is satisfied that the facts do not support Mr Gilmour's stance.  The obvious bad relationship between Mr Rose and the personnel of Tronics 2000, and particularly with Mr Gilmour, provides in the Tribunal's assessment an understandable reason for the stance adopted by Mr Gilmour.  However, on the evidence before it the Tribunal is satisfied, despite the deficiencies in the paperwork, that in fact Underwood was incurring expenditure during the relevant period primarily and principally for the purpose of creating and seeking opportunities and demand for the sale in the USA of goods manufactured by Tronics 2000."

THE SUBMISSIONS

It is apparent from the Tribunal's reasons, and from the submissions of counsel for both parties, that the issue as to whether Tronics 2000 was selling the machinery to Underwood, and Underwood in turn selling it or exporting and selling it overseas, or whether on the other hand Tronics 2000 was simply selling the products to Tronics Inc through the agency of Underwood, was a matter the Tribunal had to determine.  The critical issue before the Tribunal was whether Underwood was an exporter, that is whether it was incurring the expense which it incurred for the sale by Underwood for export, or for the export and sale by Underwood, of goods manufactured by Tronics 2000.  The nature of its agreement with Tronics 2000 was the fundamental fact revealing the answer to that issue.

It was contended for the applicant that there was a lacuna in the reasons of the Tribunal of central importance, and that much of the evidence before it, to which it did not refer in detail, was directed to that very question.  It is further contended that the Tribunal has not made general findings adverse to or favourable to the credit or the reliability of the witnesses called by the applicant to uphold its decision, except on limited issues.  It was put that, at one point, the Tribunal declined to permit counsel for the applicant to cross-examine or to adduce evidence to test the credibility of Mr Rose, although ultimately, unless by inference, it made no express finding as to the credibility of Mr Rose.  Thus, it is submitted, it wholly avoided deciding the central issue.

Counsel for Underwood contends that the necessary finding was made, reflected in the summary of the Tribunal’s reasons, in particular by:

• its satisfaction that orders obtained by Tronics Inc from USA customers were, on behalf of Underwood , in accordance with the agreement between them dated 9 February 1991, and were relayed by Tronics Inc to Underwood and to Tronics 2000 and that payments were made to Tronics 2000 by Underwood in relation to them;

• its finding that it was the intention of the parties that the property in the machinery was to pass at the time Underwood paid a deposit;

• its finding that there was money owing to Tronics 2000 by Underwood which remained unpaid during 1992;

• its finding that Underwood did incur expenditure during the relevant period primarily and principally for the purpose of creating and seeking opportunities and demand for the sale in the USA of machinery manufactured by Tronics 2000; and

• its conclusion that it was unable to say whether any, and if so, which written agreement of April 1991 was signed, so that it made no conclusion that Mr Rose signed a binding agreement between Tronics Inc and Tronics 2000 in April 1991.

Thus it is said that the Tribunal accepted that there was an agreement between Underwood and Tronics Inc to export goods belonging to Tronics 2000 from Underwood in Australia to Tronics Inc in America, by Underwood purchasing those goods from Tronics 2000 and exporting them to Tronics Inc in the United States.  It is alternatively put that, in any event, even if there were a finding that Tronics 2000 and Tronics Inc had entered into a form of written agreement in April 1991, the Tribunal had clearly not treated that as a material fact, as the Tribunal regarded the material fact as the terms and nature of the actual business relationship between Tronics 2000, Tronics Inc and Underwood as described above.

The High Court in Minister for Immigration and Ethnic Affairs v Wu (1996) 185 CLR 259 approved the comments of the Full Court of this Court (Neaves, French and Cooper JJ) in Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287 that, upon judicial review, the Court will not be concerned with looseness of language of the Tribunal or unhappy phrasing of its thoughts. Its reasons “are not to be construed minutely and finely with an eye keenly attuned to the perception of error.”  In Wu (above, at 272), Brennan CJ, Toohey, McHugh and Gummow JJ observed that those propositions:

“... recognise the reality that the reasons of an administrative decision-maker are meant to inform and not to be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed.”

Kirby J (at 291-293) set out a series of eight principles to guide a court in the review of an administrative decision such as that of the Tribunal.  His Honour then said (at 293):

“First, it is not erroneous for a decision-maker, presented with a large amount of material, to reach conclusions as to which of the facts (if any) had been established and which had not.  An over-nice approach to the standard of proof to be applied here is undesirable.  It betrays a misunderstanding of the way administrative decisions are usually made.  It is more apt to a court of law conducting a trial than to the proper performance of the functions of an administrator, even if the delegate of the Minister and even if conducting a secondary determination.”

I have sought to apply those directions in this matter.

CONSIDERATION OF TRIBUNAL’S REASONS

Section 43(2) of the AAT Act obliges the Tribunal to give reasons for its decision, and s 43(2B) requires that those reasons include findings on material questions of fact and a reference to the evidence on other material on which those findings were made. The failure of the Tribunal to make findings on material questions of fact will generally show that it has failed to direct its attention to deciding a relevant consideration, and so amount to an error of law: East Finchley Pty Ltd v Federal Commissioner of Taxation (1989) 90 ALR 457.

This is not a case where the Tribunal has failed to mention or consider a contention on a material question in determining the review before it; cp. Dennis Willcox v Federal Commissioner of Taxation (above); Casaratto v Australian Postal Commission (above).

There are cases where a Tribunal’s reasons have made it impossible to understand why a particular decision was made.  In Dornan v Riordan (1990) 24 FCR 564, the Full Court (Sweeney, Davies and Burchett JJ) set aside an order of the Pharmaceutical Benefits Remuneration Tribunal made under the National Health Act 1953 (Cth).  That Tribunal had prepared a long report under that Act, about which the Full Court said (at 568):

“... while the reasons disclose the material which the Tribunal took into account, it is impossible to glean from the Tribunal’s reasons what was the reasoning process that led it to its determination”.

That failure was found to constitute an error of law.  See also Collins v Repatriation Commission (1980) 48 FLR 198 at 211-212; Pettitt v Dunkley [1971] 1 NSWLR 376. Similarly, in Davies v Australian Securities Commission (1995) 59 FCR 221, Hill J set aside an order of the Tribunal reprimanding a registered auditor for a breach of s 1292 of the Corporations Law, inter alia, for a failure to comply with s 43(2B) of the AAT Act. The relevant failure was characterised as follows (at 244):

“However, where there is conflicting evidence (as is here the case) it is incumbent upon the Tribunal at least to indicate its reasons for preferring the evidence of one witness from that of another.  . . .  In my view, the Tribunal has not, in the present case, complied with this obligation.”

See also Bisley Investment Corporation Ltd v Australia Broadcasting Tribunal (1982) 59 FLR 132. Hill J in Copperart Pty Ltd v Federal Commissioner of Taxation (above) had to again consider a similar contention, where the reasons of the Tribunal comprised a long recitation of the evidence followed by conclusions of fact which, without any specific findings on credit, necessarily must have involved the rejection of some of the evidence and of certain of the witnesses as reliable. Hill J (at 329) said:

“The parties are entitled to know what evidence the Tribunal accepted and what evidence it took into account.  Likewise, the parties are entitled to know what evidence the Tribunal rejected.  Without this knowledge the parties will have but an incomplete idea of the Tribunal’s process of reasoning and a lesser respect for the Tribunal’s decision-making process.”

That decision was reversed by the Full Court in Copperart Pty Ltd v Federal Commissioner of Taxation (1994) 50 FCR 345 on other grounds. On the particular issue referred to above, Davies J (with whom Gummow and French JJ agreed) at 125-126 noted without apparent disagreement the observations of Hill J; it was not necessary to further deal with them in resolving the appeal. Other illustrations of decisions of the Tribunal which were successfully challenged by reason of the Tribunal’s failure to address in its reasons an important issue raised for determination before it are provided by Kidner v Secretary, Department of Social Security (1993) 31 ALD 63; Nelson v Inspector-General In Bankruptcy (1997) 36 ATR 1; and Nabru Nominees Pty Ltd as Trustee of the Urban Family Trust No 2 Trust v Commissioner of Taxation (Heerey J, 21 July 1997, unreported).

In general, Underwood’s response was to assert that, the issue of the role it played in the export of the machinery manufactured by Tronics 2000 having been central to the Tribunal’s decision, it had addressed and decided that issue and, to the extent necessary, had made the necessary findings of fact and given sufficient reasons for its decision.

Whether that proposition is correct will appear from the reasons of the Tribunal, which I have summarised above.  This is not a case where a central issue can have been simply bypassed.  In reviewing its reasons, I do bear in mind the strictures of the High Court as to approaching that task with too refined or critical an eye.

The Tribunal has ultimately decided in favour of Underwood, and so must have decided that as between Tronics 2000 and Underwood at material times the relationship was one whereby Tronics 2000 sold the machinery, when manufactured to order, to Underwood and Underwood then onsold it and exported it to Tronics Inc.  There was evidence upon which it could have reached that conclusion.  But in the course of its reasons:

• it specifically declined to make a finding whether or not Mr Rose signed on behalf of Tronics Inc in about April 1991 an agreement for the sale to it directly by Tronics 2000 of machinery ordered by it;

• it did not specifically find one way or the other that there was an oral agreement made in about January 1991 between Mr Rose, presumably on behalf of Tronics Inc and Underwood, and Tronics 2000 through Mr Harford and Dr Latham;

• it did not make any finding as to the reliability of Mr Rose’s evidence either generally or on any particular matters including as to whether any such written agreement was signed by him, or was later destroyed by him, or whether any oral agreement was entered into by him in January 1991;

• it did not make any finding as to the reliability of the evidence of Mr Wood, Mr Harford or Dr Latham either generally or on the particular matters as to whether any such written agreement was entered into or as to whether the oral agreement of January 1991 was made, other than not accepting the evidence of Dr Latham or Mr Harford that their subsequent demands on Underwood were made without focus on the source of the funds demanded;

• it did not make any specific findings based upon the evidence of Mr Chandler or of Ms Davlin; and

• it did not put into the context of its findings the evidence of the different views as to the role of Underwood in March 1992 or April 1992, including that thereafter the parties would further discuss the distribution arrangements including Underwood’s role, or the subsequent advice sought from Mr Chandler as to whether both Tronics 2000 and Underwood could each be eligible for an export grant.

On the other hand, it specifically accepted Mrs Rose as an honest witness and that she did not keep satisfactory records.  It said it was satisfied that the direct contact between Tronics 2000 and Tronics Inc played a part in obscuring the involvement of Underwood from the management and Board members of Tronics 2000; apart from accepting the system for invoicing and payment, as confirmed by documents, it is unclear what involvement of Underwood is there referred to.  It is not appropriate to ascribe to that observation a rejection of Dr Latham or Mr Harford or Mr Wood either as truthful or credible witnesses.  The Tribunal also specifically accepted that, as between Tronics Inc and Underwood, the written agreement between them dated 9 February 1991 defined that relationship in fact.  It also positively found, presumably though not explicitly by accepting Mr Rose’s evidence on this topic, that property in the machinery passed upon payment by Underwood of the deposit.

But for the penultimate paragraph of its reasons, quoted in full above, in my view those observations about the Tribunal’s reasons illustrate that it did not make specific findings on the central question as to whether Underwood in the relevant period acted as a purchaser of the machinery of Tronics 2000 in its own right, so as to onsell and export the machinery to Tronics Inc, or merely as agent for Tronics Inc.  Nor did it make express findings on issues clearly raised before it, and directly relevant to that ultimate question, as to the status of either the alleged January 1991 oral agreement between Tronics Inc and Underwood through to Mr Rose or the alleged April 1991 written agreement.  Nor, of the same general significance, did it make findings necessarily associated with those matters as to the reliability of the evidence on such topics of Mr Rose, Mr Harford, Mr Wood or Dr Latham.  There are some other aspects noted above which also, in my view, should have been the subject of specific findings.

In my view that penultimate paragraph of the reasons does not satisfactorily overcome or deal with those issues.  That paragraph certainly represents a finding, contrary at least to Mr Gilmour’s evidence, that Underwood was involved in the export of Tronics 2000 machinery in the period in question.  To that extent, it must therefore be rejecting Mr Gilmour’s evidence.  It describes his evidence as a “stance”, explained by the ill-will which existed from about mid 1992, but does not explain why the letters and notes consistent with that stance in April 1992 are apparently given no weight or why Mr Gilmour’s evidence of his dealings with Mr Rose about April 1992 were not then addressed.  It does not deal with the nature of the earlier arrangement from either January 1991 or April 1991.  It does not deal with any other issues of credit.  It does not really address the true nature of Underwood’s role, in the light of those matters.  Its concluding sentence does not explicitly address whether Underwood’s expenditure for promoting export of Tronics 2000 machinery was as a seller, or an exporter and seller, of that machinery or in some other capacity.  The applicant acknowledged that Underwood had some role in the export of the Tronics 2000 machinery, and including that it arranged that export and paid Tronics 2000 for it.  What was in issue was the capacity in which it did so.  In my view, the Tribunal’s findings do not ultimately address that core issue and do not do so by addressing and resolving the disputed relevant issues debated before it which would lead to its resolution, including the issues as to the reliability of the witnesses, other than Mrs Rose, who appeared before it.

CONCLUSION

Accordingly, I have come to the view that the appeal should be allowed.  I accordingly propose to remit the matter to the Tribunal for further consideration in accordance with these reasons, and as sought in the notice of appeal.  The parties were agreed that the question of whether that remitter should be to the Tribunal as presently constituted or as a differently constituted Tribunal was a matter upon which it was appropriate to hear further from them in the light of my reasons.  Accordingly, apart from announcing my decision, I shall hear the parties further on that question.  I note the approach adopted by Heerey J in Nabru Nominees (above, at 11-12).

In making my decision, I should stress that I am not myself making any assessment of the quality of the materials and evidence before the Tribunal, or to be taken as suggesting that, to the extent that the Tribunal has made findings as recorded in its reasons, there is no proper basis for such findings.  It was not the nature of the applicant’s submission on this application to make any such attack.  Nor am I to be taken as indicating in any way that any particular material or evidence before the Tribunal should bear a particular significance either generally or in relation to other evidence or material before the Tribunal; such matters are entirely for the Tribunal upon its further consideration of the application.

The grounds of appeal also raise two matters which, it was submitted, the Tribunal erred in failing to address in its reasons for decision at all.  Those two matters were said to be that Mr Rose, in 1994 in the presence of Judge Adams, had asked for all Tronics 2000 invoices issued to Tronics Inc to be reissued to Underwood, and that Mr Rose had acknowledged on his evidence that he had destroyed two original distributor agreements of about April 1991 between Tronics 2000 and Tronics Inc, although he asserted that each of those documents were unsigned.  I would not accept those matters as the basis for allowing the application independently of my conclusion on the principal ground of appeal.  It is up to the Tribunal to decide what weight it gives to particular evidence before it.  It is not obliged in its reasons to refer in detail to every piece of evidence presented to it or to explain why it gives weight or greater weight to one particular piece of evidence.  For the reasons given earlier, it is not appropriate for the Court on a review such as the present to parse and analyse the Tribunal’s reasons minutely with a view to finding some apparent flaw in its reasons, and in the face of the import of its reasons when viewed sensibly as a whole and in a restrained and balanced way.  See generally Steed v Minister for Immigration and Ethnic Affairs (1981) 37 ALR 620 at 621; Blackwood Hodge (Australia) Pty Ltd v Collector of Customs, New South Wales (No.2) (1980) 47 FLR 131; Politis v Federal Commissioner of Taxation (1988) 16 ALD 707.

Finally, it was contended that the Tribunal erred in precluding certain cross-examination of Mr Rose directed to his credit generally, apparently to show that on at least one occasion unrelated to the present transactions he had made false statements concerning the importation by him of certain goods and further erred in that it did not admit evidence of a conviction recorded against him for making false statements to the United States Customs in an unrelated matter. It was not put in submissions that the evidence showed that Mr Rose had a tendency to act in a particular way in relation to the importation of goods by him: cp. Part 3.6, Evidence Act 1995 (Cth). Part 3.7 of that Act deals with evidence going only to a witness’s general credibility. Such cross-examination is permissible if evidence adduced in cross-examination has substantial probative value: s 103. The proof of the conviction, facilitated by s 178 of that Act, may be advanced on credibility only if the witness has denied the substance of the evidence: s 106(b) and (e) of that Act. If in a court, therefore, the proof of that conviction could be adduced but only if the court had otherwise permitted cross-examination on the topic, having regard to s 103 of that Act, and Mr Rose had denied it.

No submission was put that, even assuming the Tribunal was bound by the rules of evidence under the Evidence Act 1995 (Cth), the Tribunal had erred in terms of the proper application of s 103 of that Act. Furthermore, the Tribunal in conducting a review, is not bound by the rules of evidence and is to act with as little formality and technicality as the requirements of the Act permit: s 33, AAT Act. Its obligation to accord procedural fairness generally will involve providing an opportunity to a party to adduce relevant evidence and to cross-examine on relevant matters; Fletcher v Federal Commissioner of Taxation (1988) 19 FCR 442; Australian Postal Commission v Hayes (1989) 23 FCR 320. Accordingly, there may be occasions when the Tribunal’s refusal to permit cross-examination may constitute reviewable error.

However, in the present matter, I am not satisfied that such error is demonstrated simply because the applicant did not seek to make out that, even if the rules of evidence applied to the Tribunal, its ruling not to permit cross-examination on that topic was erroneous having regard to the provisions of s 103 of the Evidence Act 1995 (Cth).  Accordingly, whilst I am not to be taken necessarily as endorsing the ruling of the Tribunal on this matter, and indeed upon reconsideration or further consideration the issue might be further ventilated, I do not conclude that this ground of appeal has been made out.

THE CROSS APPEAL

Underwood cross-appealed, complaining that when the Tribunal determined to set aside the decision under review, it remitted the matter to Austrade with a direction that Underwood’s claim be paid subject to Austrade requiring any or any further verification as to the amounts claimed. It submitted that it should not have added that rider, as there was no dispute about the entitlement. The only issue was said to be the qualification of Underwood under s 11Z(2) as an exporter, as it had clearly incurred expenses properly and justifiably incurred beyond the limit of the potential grant. The applicant contends that that topic of quantum was not addressed by the Tribunal and refers to the initial decision. It submitted that as the initial decision by it, and by internal reconsideration, involved disallowance of Underwood’s claim the issue of quantum was not determined by it and so no appeal to the Tribunal lay under s 40A of the Act by which the Tribunal could determine the quantum of Underwood’s entitlement.

Section 40A(6) of the Act entitled Underwood to apply to the Tribunal for review of the decision made “in connection with” its claim for a grant, in the particular circumstances refusing the claim. That claim, of which the Tribunal became seized by the application to it, included the claim for a specified amount under the Act; s 43, AAT Act. However, the Tribunal was not obliged to finally resolve all aspects of the claim. It is expressly empowered by ss 42D and 43(1)(c)(ii) of the AAT Act to remit a decision to a decision maker, and its power to make in all respects the decision which the decision maker might originally have made is a discretionary one: s 43(1), AAT Act. In my view, the Tribunal was therefore empowered to make the order which it did, and it is not shown to have fallen into error in exercising the power in the way in which it did. No particular error in its approach was sought to be made out. It appears that it was either assumed by the parties that the appropriate quantum of Underwood’s claim, if its entitlement were established, was not in issue but I do not regard the Tribunal’s decision on this aspect, even in the light of that assumption, as being infected with error.

Accordingly, I dismiss the cross appeal. As the matter is generally to be reconsidered by the Tribunal, it may of course deal with the question of the quantum of Underwood’s claim if, after reconsideration, its entitlement to the grant under the Act is established.

I certify that this and the preceding twenty one (21) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate:

Date:  

Counsel for the Applicant:	Mr R R S Tracey QC with him Mr M J D Green
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	Mr S L Marks
Solicitor for the Respondent:	Sheezel Sandor & Associates
Date of Hearing:	15 May 1997
Date of Judgment:	17 October 1997