Brett Cattle Company Pty Ltd v Minister for Agriculture
[2020] FCA 732
•2 June 2020
FEDERAL COURT OF AUSTRALIA
Brett Cattle Company Pty Ltd v Minister for Agriculture [2020] FCA 732
File number: NSD 1102 of 2014 Judge: RARES J Date of judgment: 2 June 2020 Catchwords: ADMINISTRATIVE LAW — validity of delegated legislation — test for validity — representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) — livestock export industry — where public affairs broadcast revealed inhumane treatment of Australian cattle exported to Indonesian abattoirs — where broadcast resulted in public outcry and political pressure on Government — where the Minister made two control orders under s 7 of the Export Control Act 1982 (Cth) in short succession — where second control order prohibited the export of all livestock from Australia to the Republic of Indonesia for a period of 6 months — where first control order did, but second control order did not, provide power to grant exceptions — where purpose of second control order was to enable Australian Government to develop a regulatory and compliance regime to address concerns regarding slaughter of livestock in Indonesian abattoirs — where various exporters were already capable of ensuring livestock exported to the Republic of Indonesia would remain within a closed loop system and not be subject to inhumane conditions up to the time of slaughter — whether second control order was valid exercise of Minister’s power under s 7 of the Export Control Act — whether second control order invalid on basis of unreasonableness — application of proportionality tool of analysis to evaluate validity of delegated legislation — whether second control order was suitable, necessary and appropriate and adapted to achieve a legitimate end within power conferred on Minister by s 7 of the Export Control Act — second control order was unreasonable, capricious, unnecessary and inadequate in its balance — second control order invalid
TORTS — misfeasance in public office — whether Minister committed tort of misfeasance in public office by making second control order — elements of tort — untargeted malice — where Minister did not receive or seek advice as to legality of second control order — where Minister received Departmental and general legal advice regarding worldwide ban on livestock exports but imposed ban only on exports to Republic of Indonesia — where Minister sought legal advice as to liability for compensation if he made an order — whether Minister reckless as to his power to make second control order under the Export Control Act when he took risk as to its validity without obtaining legal advice as to form of order he made
TORTS — misfeasance in public office — whether Minister committed tort of misfeasance in public office by making second control order — elements of tort — untargeted malice — whether necessary that tortfeasor recklessly indifferent to, or knew of, harm that would result from action or whether sufficient that harm to persons affected reasonably foreseeable — where Minister timed second control order to prevent particular shipment of cattle leaving Australia — where Minister knew, or was reckless as to whether, making second control order would result in harm to industry participants –– Minister committed the tort of misfeasance in public office by making second control order
DAMAGES — compensatory damages — where second control order caused significant distortion in livestock export market — where two alternative hypothetical scenarios pleaded — whether Minister would have made different control order, if exercising power validly —where Minister did not give evidence and his actions in making second control order made quantification of damages difficult — where alternative control order would have provided power to grant exceptions to a general prohibition on livestock exports to Indonesia — where applicant suffered loss of a commercial opportunity — quantification of damages
EVIDENCE — where Minister did not give evidence — no direct evidence of Minister’s state of mind or of what he would have done had he exercised his power validly — where impugned decision made after Cabinet meeting — where Minister put no documents before Cabinet — whether inference open that any evidence the Minister would have given would not have assisted the respondents
Legislation: Australian Meat and Live-Stock Industry Act 1997 (Cth), ss 3, 4, 10, 17
Evidence Act 1995 (Cth), s 140
Export Control Act 1982 (Cth), ss 3, 7, 25
Federal Court of Australia Act 1976 (Cth), Part IVA
Judiciary Act 1903 (Cth), s 39B
Legislative Instruments Act 2003 (Cth), ss 4, 17, 26, 38, 42 Australian Meat and Live-stock Industry (Export of Live-stock to the Republic of Indonesia) Order 2011
Australian Meat and Live-stock Industry (Export of Live-stock to the Republic of Indonesia) Order 2011 (No2)
Export Control (Export of Live-stock to the Republic of Indonesia) Order 2011
Export Control (Orders) Regulations 1982, r 3
Export Control (Protection of Animal Welfare) Order 2011
Export Control Repeal Order 2011
Cases cited: Attorney-General (SA) v Adelaide Corporation (2013) 249 CLR 1
Armory v Delamirie (1722) 1 Stra 505; 93 ER 664
Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223
Australian Securities and Investment Commission v Hellicar (2012) 247 CLR 345
Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353
Banco de Portugal v Waterloo & Sons Ltd [1932] AC 452
Banditt v The Queen (2005) 224 CLR 262
Betfair Pty Ltd v Western Australia (2008) 234 CLR 418
Brunswick Corporation v Stewart (1941) 65 CLR 88
Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Commissioner of Metropolitan Police v Caldwell [1982] AC 341
Commonwealth v Fernando (2012) 200 FCR 1
Communications, Electrical, Electronic, Information, Postal Plumbing and Allied Services Union v Australian Competition and Consumer Commission (2007) 162 FCR 466
Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) (1981) 147 CLR 297
Cornwall v Rowan (2004) 90 SASR 269
Coulter v The Queen (1988) 164 CLR 350
Dunlop v Woollahra Municipal Council [1982] AC 158
Electrolux Home Products Pty Ltd v Australian Workers Union (2004) 221 CLR 309
English and Scottish Mercantile Investment Co Ltd v Brunton [1892] 2 QB 700
Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146
Ferrier v Wilson (1906) 4 CLR 785
Garrett v Attorney-General [1997] 2 NZLR 332
Graham v Minister for Immigration (2017) 263 CLR 1
Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46
Jones v Dunkel (1959) 101 CLR 298
Jones v Metropolitan Meat Industry Board (1925) 37 CLR 252
Kirk v Industrial Relations Commission (NSW) (2010) 239 CLR 511
Kuhl v ZurichFinancial Services Australia Ltd (2011) 243 CLR 361
Lamason v Australian Fisheries Management Authority [2009] FCA 245
LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499
McCloy v New South Wales (2015) 257 CLR 178
Minister for Immigration v Li (2013) 249 CLR 332
Minister for Primary Industries and Energy v Austral Fisheries Pty Ltd (1993) 40 FCR 381
Minister for the Arts, Heritage and Environment v Peko-Wallsend Ltd (1987) 15 FCR 274
Minister of Fisheries v Pranfield Holdings Ltd [2008] 3 NZLR 649
Minister of State for Resources v Dover Fisheries Pty Ltd (1993) 43 FCR 565
Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388
Murphyores Incorporated Pty Ltd v The Commonwealth (1976) 136 CLR 1
Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources (2005) 138 LGERA 11
Nationwide News Pty Ltd v Wills (1992) 177 CLR 1
Northern Territory v Mengel (1995) 185 CLR 307
Nyoni v Shire of Kellerberrin (2017) 248 FCR 311
Obeid v Lockley (2018) 98 NSWLR 258
Parramatta City Council v Pestell (1972) 128 CLR 305
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257
Plaintiff S157/2002 v The Commonwealth (2003) 211 CLR 476
Potter v Minahan (1908) 7 CLR 277
Ratcliffe v Evans [1892] 2 QB 524
Rawlinson v Rice [1997] 2 NZLR 651
Reg. v Anderson; Ex parte Ipec-Air Pty Ltd (1965) 113 CLR 177
Sanders v Snell (1998) 196 CLR 329
Sanders v Snell (No 2) (2003) 130 FCR 149
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
South Australia v Tanner (1989) 166 CLR 161
South Australian River Fishery Association Inc and Warwick v South Australia (2003) 85 SASR 373
State of South Australia v Lampard-Trevorrow (2010) 106 SASR 331
The Commonwealth v Northern Land Council (1993) 176 CLR 604
The Commonwealth v Progress Advertising and Press Agency Co Pty Ltd (1910) 10 CLR 457
The Commonwealth v Tasmania (1983) 158 CLR 1
The Queen v Australian Broadcasting Tribunal; Ex Parte 2 HD Pty Ltd (1979) 144 CLR 45
Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1
Three Rivers District Council v Bank of England [1996] 3 All ER 558
Wentworth v New South Wales Bar Association (1992) 176 CLR 239
Williams v Melbourne Corporation (1933) 49 CLR 142
Date of hearing: 19 July–26 July 2017, 18 October 2017, 3 December 2018–12 December 2018 Registry: New South Wales Division: General Division National Practice Area: Administrative and Constitutional Law and Human Rights Category: Catchwords Number of paragraphs: 496 Counsel for the Applicant: Mr N C Hutley SC, with Mr S Free, and Mr T Boyle on 19 July 2017–26 July 2017 and 18 October 2017, Mr N C Hutley SC, with Mr C Withers, and Mr T Boyle on 3 December 2018–12 December 2018 Solicitor for the Applicant: Minter Ellison Counsel for the Respondents: Mr N Williams SC, with Mr M O’Meara, and Ms D Tucker on 19 July 2017–26 July 2017 and 18 October 2017, Mr N Williams SC, with Mr M O’Meara, Ms S Patterson, and Ms D Forrester on 3 December 2018–12 December 2018 Solicitor for the Respondents: Australian Government Solicitor
Table of Corrections 14 July 2020 In paragraph [108] deleted “was” before “in respect” In paragraph [128] deleted “to” before “the Secretary” In paragraph [166] added “of” before “live cattle” In paragraph [266] deleted “to be” before “obtained” In paragraph [344] corrected “animal” In paragraph [377] changed “not unjustifiable” to “not justifiable” In paragraph [380] corrected “there” before “was a real risk” In paragraph [386] changed “or” to “to” before “evaluate how” In paragraph [409] changed “below” to “above” ORDERS
NSD 1102 of 2014 BETWEEN: BRETT CATTLE COMPANY PTY LTD
Applicant
AND: SENATOR THE HONOURABLE JOE LUDWIG IN HIS CAPACITY AS THE FORMER MINISTER FOR AGRICULTURE, FISHERIES AND FORESTRY
First Respondent
COMMONWEALTH OF AUSTRALIA
Second Respondent
JUDGE:
RARES J
DATE OF ORDER:
2 JUNE 2020
THE COURT ORDERS THAT:
1.The parties confer and, on or before 25 June 2020, file draft orders to give effect to the reasons for judgment published today, and in the event of disagreement file, in mark up, the draft orders identifying the points of difference each proposes together with written submissions limited to 5 pages in support of their respective positions.
2.The proceeding be stood over for case management on 29 June 2020 at 9.30am.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
RARES J:
1. INTRODUCTION
[1]
2. BACKGROUND
[7]
2.1 The legislative context
[7]
2.2 How Brett Cattle operated
[12]
2.3 Australia’s live animal export industry
[19]
2.4 Restraining boxes for cattle
[25]
2.5 The Minister assumes office
[35]
2.6 The Indonesian live cattle market
[50]
2.7 The Minister attends a cattleman’s conference on 1 April 2011
[54]
3. INDONESIAN LIVE CATTLE IMPORTERS
[60]
3.1 The nature of the industry’s supply chains
[60]
3.2 Elders Indonesia
[64]
3.3 Santori
[74]
3.4 TUM
[79]
3.5 AGP
[82]
3.6 Brett Cattle agrees to sell cattle to Elders
[86]
4. THE FOUR CORNERS BROADCAST
[87]
4.1 The lead up
[87]
4.2 The broadcast
[110]
4.3 The aftermath
[114]
5. THE POLITICAL AND LEGISLATIVE RESPONSE
[126]
5.1 The First Control Order
[126]
5.3 The Minister meets with the industry
[135]
5.4 The pressure for action grows
[141]
5.5 The weekend of 4 and 5 June 2011
[155]
5.6 The events of 6 June 2011
[170]
5.7 The events of 7 June 2011
[195]
5.8 The Second Control Order
[204]
6. AFTER THE SECOND CONTROL ORDER
[209]
6.1 The immediate aftermath
[209]
7. THE NEW ESCAS SYSTEM COMMENCES
[237]
7.1 The ESCAS approval process
[241]
7.1.1 Elders Indonesia’s ESCAS approval
[248]
7.1.2 Santori’s ESCAS approval
[256]
7.1.3 TUM’s ESCAS approval
[257]
7.1.4 AGP’s ESCAS approval
[259]
7.2 Conclusion on the ability of the industry to comply with the ESCAS
[265]
8. BRETT CATTLE’S CLAIM AGAINST THE COMMONWEALTH
[267]
8.1 The elements of the tort of misfeasance in public office
[269]
8.2 The test for determining the validity of delegated legislation
[285]
9. CONSIDERATION – LIABILITY
[311]
9.1 The Commonwealth’s submissions
[311]
9.1.1 As to validity of the Second Control Order
[311]
9.1.2 The Minister’s state of mind
[315]
9.2 The Second Control Order was invalid
[317]
9.2.1 The issues before the Minister
[317]
9.2.2 Was the Second Control Order suitable?
[327]
9.2.3 Was the Second Control Order necessary?
[330]
9.2.4 Was the Second Control Order adequate in its balance?
[355]
9.3 The Minister committed the tort of misfeasance in public office
[364]
9.3.1 The Minister’s state of mind as to his power
[374]
9.3.2 The Minister’s state of mind as to the likely harm
[382]
9.3.3 Conclusion as to misfeasance
[391]
10. WHAT DAMAGE DID BRETT CATTLE SUFFER?
[396]
10.1 Principles
[397]
10.2 Brett Cattle’s submissions – the no change scenario
[402]
10.3 The assured export system scenario
[404]
11. QUANTIFICATION OF LOSS
[428]
11.1 What exports were lost between 7 June 2011 and the implementation of the ESCAS?
[428]
11.2 The parties’ submissions
[436]
11.3 Consideration
[444]
11.4 Agreed facts as to quantify Brett Cattle’s loss
[463]
11.5 Resolution of disputed quantum issues
[466]
11.5.1 The delayed sales loss
[466]
11.5.2 The lost sales
[478]
11.5.3 The agistment loss
[482]
11.5.4 The cartage loss
[490]
11.5.5 The bank charges loss
[491]
12. THE COMMON QUESTIONS
[493]
13. CONCLUSION
[495]
1. INTRODUCTION
Otto von Bismarck is often credited with coining the aphorism “Laws are like sausages; it is better not to see them being made”. This representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) arises from the public outcry following the broadcast by the Australian Broadcasting Corporation on 30 May 2011, on its Four Corners program, of graphic video footage of inhumane slaughter of Australian cattle exported to Indonesia and the decision in response on 7 June 2011 of the then Minister for Agriculture, Fisheries and Forestry, Senator the Hon Joe Ludwig, to make the Export Control (Export of Live-stock to the Republic of Indonesia) Order 2011 (the Second Control Order) that prohibited the export of livestock to Indonesia for six months.
Brett Cattle Company Pty Ltd, the applicant, operated Waterloo Station, a property of nearly 189,500 hectares located about 540 kilometres south-west of Katherine in the Northern Territory. Brett Cattle had about 17,300 head of cattle at the beginning of 2011. It was one of many live cattle exporters affected by the Second Control Order. It claims to have lost the opportunity to sell about 2,776 head, principally into that market in 2011 because of the impact of the Second Control Order and to have suffered losses of $2,480,939.
Brett Cattle contends that the Second Control Order was invalid and that, in making it, the Minister acted in misfeasance of his public office because, first, he was recklessly indifferent as to whether the order was beyond power under the Export Control Act 1982 (Cth), and secondly, he knew that the order was likely to harm Brett Cattle or the class of live cattle exporters, of which it formed part, or he was recklessly indifferent as to whether the order was likely to cause such harm. Brett Cattle contends that if the Minister had not made the Second Control Order, one of two scenarios would have eventuated, first, he would have made no further order affecting the export of live cattle to Indonesia or, secondly, he would have put in place, around 7 June 2011, a system that created an exception to a general prohibition that would have allowed such exports to occur provided that an exporter could satisfy conditions that ensured that the cattle would not be subjected to any unacceptable or inhumane conditions or treatment.
The Minister and the Commonwealth, the respondents (collectively the Commonwealth), deny both that the Second Control Order was invalid and that the Minister committed misfeasance of his office. They also deny that Brett Cattle suffered any loss, or loss of the magnitude it claimed, on the basis that, even had the Minister made a different order that permitted exports to occur before he repealed the Second Control Order on 6 July 2011, Brett Cattle and other class members would not have been able to obtain any approval for exports of cattle in the intervening period or sooner than actually occurred. That is because the Commonwealth contends that no exporter would have been able to establish that there was, or would be, a secure supply chain to ensure that any Australian cattle exported to Indonesia would not be treated inhumanely. The Commonwealth pointed to the fact that it was only on 10 August 2011 that the first live shipment of cattle left Australia for Indonesia under the new Export Supply Chain Assurance System (ESCAS), that the Minister had approved on 6 July 2011, as indicative of the time that it would have taken, in any event, before any live exports could have occurred had the Second Control Order allowed the Minister to permit a shipment that satisfied appropriate conditions.
I will consider the issue of liability by first describing the legislative context, Brett Cattle’s operations, the factual situation in the industry, including what was known to the Minister’s Department, and the Minister’s state of mind prior to the making of the Second Control Order, and the circumstances in which the Second Control Order came to be made, namely whether it was valid and, if not, the Minister committed misfeasance in his office. I will make findings on the legal issues in respect of liability. Next, I will consider the factual context for the damages issues, namely the steps taken by the industry and the Department to establish the conditions under which exports could resume and the particular claims for damages that Brett Cattle makes. I will then make findings on the remaining legal issues and address the common questions.
The trial occurred in two phases. The first, in July 2017, dealt principally with issues of liability, while the second, which was delayed because Brett Cattle amended its statement of claim in October 2017 and there was a need for further substantial discovery, occurred in December 2018. The Commonwealth called no witnesses in the first phase, but called two in the second phase.
2. BACKGROUND
2.1 The legislative context
The Export Control Act provided for the control of the export of certain goods, including animals. In the period between 19 April 2011 and 7 July 2011, the Act relevantly provided in s 3 that, unless the contrary intention appeared:
goods means:
(a) an animal or a plant, or part of an animal or a plant;…
order means an order made by the Minister or Secretary under the regulations.
prescribed goods means goods, or goods included in a class of goods, that are declared by the regulations to be prescribed goods for the purposes of this Act.
regulations includes orders.
Next, s 7 provided:
7 Prohibition on export of prescribed goods
(1) The regulations may prohibit the export of prescribed goods from Australia.
(2) Regulations made for the purposes of subsection (1) may:
(a) prohibit the export of prescribed goods absolutely;
(b) prohibit the export of prescribed goods to a specified place;
(c) prohibit the export of prescribed goods unless specified conditions or restrictions are complied with; or
(d) prohibit the export of prescribed goods to a specified place unless specified conditions or restrictions are complied with.
(3) Without limiting the generality of subsection (2), regulations made for the purposes of subsection (1):
(a) may provide that the export of prescribed goods, or the export of prescribed goods to a specified place, is prohibited unless a licence, permission, consent or approval to export the goods or a class of goods in which the goods are included has been granted as prescribed by the regulations; and…
(emphasis added)
Under s 25(1), the Governor-General could make regulations not inconsistent with the Act prescribing matters necessary or convenient to be prescribed for carrying out or giving effect to the Act. The power included, as s 25(2)(g) and (h) provided, regulations that empowered, respectively:
·the Minister to make orders, not inconsistent with the regulations, with respect to any matter for or in relation to which regulations could provide (s 25(2)(g)); and
·the Secretary to make orders not inconsistent with the regulations or any order that the Minister made under the power conferred in s 25(2)(g), with respect to any animals that were prescribed goods for or in relation to which the regulations could provide (s 25(2)(h)).
The Export Control (Orders) Regulations 1982 provided in reg 3:
The Minister may, by instrument in writing, make orders, not inconsistent with regulations made under the Act, with respect to any matter for or in relation to which provision may be made by regulations made under the Act.
The Australian Meat and Live-Stock Industry Act 1997 (Cth) (the AMLI Act) provided for, among other matters, the issue of licences for export of meat and livestock from Australia and the regulation of meat and livestock export businesses. The AMLI Act defined “meat” to mean and include the flesh of animals and the by-products of animal slaughter (s 3). The Secretary of the Department had power under the AMLI Act:
·to grant licences to export meat or to export livestock from Australia (s 10); and
·to make orders, by a legislative instrument, not inconsistent with the regulations made under the AMLI Act, including orders prohibiting absolutely, or subject to compliance with conditions, the export or sale for export of meat or livestock by reference to the countries or places to which the meat or livestock might be exported or any other matter that the Secretary thought appropriate (s 17(1)(a); (3)(a)(iii) and (v)).
2.2 How Brett Cattle operated
Brett Cattle purchased Waterloo Station in October 2004. The late Dougal Brett was the manager of the station until his death in a helicopter accident in 2015. His wife, Emily Brett, assisted him in operational decision making for the company. Mrs Brett explained in her evidence that during the period leading up to June 2011 Brett Cattle had about 10,000 breeding cows which were predominantly grey Brahmans, because the Indonesian market preferred that breed. As at June 2011 Brett Cattle had recently started to conduct a cattle cartage business using two road trains for carrying cattle as well as fodder. This generated a small proportion of its income.
The wet season in 2010–2011 was long and the rainfall was so significant that by early May 2011 the roads were still not passable for cattle trucks. The dry season usually ran from April to October and sales of cattle usually occurred during the dry season.
Brett Cattle managed its herd on a year to year basis by mustering breeder cows and their calves to separate, after weaning, all the steers (castrated males) for sale and all but the best heifers (females that have not produced a calf) which would be retained for breeding. Mrs Brett estimated that about 800 to 1,000 heifers would be retained each year in this process. She said that in 2011, the sole market for Brett Cattle’s steers and heifers was the one for Indonesian live exports. Those cattle were well suited to being placed on Indonesian feedlots for fattening in a similar climate before slaughter. That was because it was impractical to cart cattle to the Eastern States. For example Southern Queensland was about 3,300 kilometres from Waterloo Station. If cattle were sent on such a journey it would be necessary to spell them on the way, which would be difficult, especially for large numbers.
Mrs Brett explained that the land in the Northern Territory was considered to be good for breeding the species of cattle that are grown there but not suitable for fattening them. That was why it was necessary for Brett Cattle, and other cattle breeders, to sell most of each year’s progeny, apart from the need to retain some heifers and bulls to replace those that had come to the end of their useful life. Mrs Brett said that there was not enough feed to keep the cattle bred for sale on stations after they were between 18–24 months old. Waterloo Station had carrying capacity of about 20,000, but did not have enough feed or water to support larger numbers. There was a constant breeding cycle and no particular calving (or breeding) time. Brett Cattle left bulls in the paddocks with the cows and heifers and would muster twice in April to May and August to September to cull the herd.
Around October each year Mr Brett would take stock of the number of heifer weaners and steers there were on Waterloo Station so as to be in a position to understand how many of each would be available to be sold in the following year’s dry season. He then made enquiries of either livestock agents or live cattle exporters to ascertain the likely demand and prices for the forthcoming dry season so that he and Mrs Brett could prepare a budget for Brett Cattle. The station experienced rates of stock loss between 1.5% and 3% depending on whether Brett Cattle could provide supplement feeding. Each new year, around the time when cattle could be put on road trains to move out of the station, Mr Brett began negotiating sales in earnest and then concluded contracts by email. The contracts would provide Brett Cattle with information as to the number of head of each sex, their required maximum weight, and price. Generally the contracts were for exports to Indonesia and involved Brett Cattle dealing with one of North Australian Cattle Company Pty Ltd (NACC) that was a subsidiary of Elders Ltd, Australian Rural Exports Pty Ltd (Austrex), Wellard Rural Exports Pty Ltd (Wellard) and South East Asian Livestock Services (SEALS).
Brett Cattle treated its cattle with hormone growth promoters, which was not a widespread practice in southern Australia and made its cattle less attractive for the domestic market. Indonesia introduced a maximum weight of 350kg for imported cattle in 2010. The Australian feedlots preferred that cattle weighed between 380kg and 400kg when delivered. Mrs Brett explained that there was not enough space on Waterloo Station to grow cattle out to that weight range and so Brett Cattle had to pay for their agistment whilst they fattened on better pastures in areas such as Blackall in Central Queensland. On good growing pasture the cattle could grow close to one kilo per day, but would not grow as much if kept in a feedlot.
Prior to despatching cattle for export to Indonesia, Brett Cattle had to muster them using helicopters, stockmen on motorbikes and horseback, depending on the terrain and distance from the holding yards. It owned one helicopter but would charter two or three more to do the mustering. The cattle were chosen on the basis of their weight. They had to be dipped to get rid of buffalo fly and ticks in readying them for export and were held in the yards for four or five days before the road trains took them to the port of loading. During the time the cattle were in the yards, three to five Brett Cattle staff, on a daily basis, gave them feed, cleaned the water troughs and checked their condition as part of standard animal husbandry practice.
2.3 Australia’s live animal export industry
The live animal export industry had had a history of controversies that emerged from time to time about inhumane or inappropriate treatment of animals after they left Australia, either in relation to conditions on ships transporting them to their ultimate destinations, or as to their treatment after arrival there. There had been various government reviews and specific regulations or orders under the Export Control Act to address problems as they arose.
Most recently, prior to the publication of the Four Corners program on 30 May 2011, the Secretary had made an order under the AMLI Act in relation to the export of livestock, particularly cattle, to Egypt (the 2008 AMLI Order). The Explanatory Statement for that order (issued pursuant to s 26 of the Legislative Instruments Act 2003 (Cth), now called the Legislation Act 2003 (Cth)) and the regulation impact statement explained that the Australian and Egyptian Governments had entered into a memorandum of understanding in September and October 2006 on the handling and slaughter of Australian live cattle exported to Egypt. That had occurred following the suspension by a predecessor of the Minister of all trade in live cattle into Egypt. The suspension was the consequence of a broadcast on 26 February 2006 in the 60 Minutes current affairs program of video footage that raised serious animal welfare and handling concerns relating to the then treatment of Australian live animal exports to Egypt.
The memorandum led to the establishment of a new facility at an Egyptian port that Australian officials and industry representatives assessed in November 2007 as meeting the Australian Government’s requirements and the then version of the current guidelines for animal welfare promulgated by the World Organisation for Animal Health (known by the acronym OIE). The facility consisted of a feedlot and slaughterhouse that ensured that the live Australian cattle that had been tagged before export would be able to be traced individually from before the time they left this country to the point of slaughter in a “closed system” (or what is also called a “closed loop”). In 2010, the OIE replaced that version with the 2010 Terrestrial Animal Health Code that was in force in 2011 to which I will refer in these reasons as “the OIE Code”.
The purpose of the closed loop system was to ensure that no Australian livestock could be exposed to handling or slaughtering conditions en route to, or in, Egypt that did not meet the then version of the OIE guidelines and any other conditions that the Minister or the Secretary imposed. This objective would be achieved because a livestock export licence to Egypt would require, pursuant to the Secretary’s powers to impose conditions under the AMLI Act, that the livestock remain, at all times, within the verifiable closed system. One particular concern that the memorandum of understanding and the new closed loop system addressed was the previous “high risk of leakage”, where animals were slaughtered under unapproved arrangements such as street slaughter or unapproved slaughterhouses. The new arrangements required that prior to export, each live animal be tagged individually with a functioning radio tracking device and that on arrival, there would be adequate quarantine for the animals to mitigate the risks of poor handling and slaughter practices. The Secretary subsequently could, and did, approve new Egyptian ports and facilities.
Perhaps prophetically, the regulation impact statement for the 2008 AMLI Order stated:
The tracking of individual animals and installation of electronic inventory systems is achievable in Egypt given the relatively low numbers of animals (30,000 animals per annum) and the limited (approved) holding and slaughtering facilities available. Applying the same requirements to a market such as Indonesia that imported more than 386,000 cattle in 2006 (and where there are 80–90 feedlot/holding facilities and 350 slaughtering facilities) would not be feasible.
(emphasis added)
Nonetheless, both the Australian Government and the live cattle export industry recognised that live cattle exports continued to require attention to ensure the application of appropriate animal welfare standards in the processes of export, the receipt and slaughter of the animals in the countries of destination, not least because of the potential for future exposés like the February 2006 60 Minutes broadcast.
2.4 Restraining boxes for cattle
From 2000, the live cattle export industry, through industry bodies including Meat and Livestock Australia Limited (MLA) and LiveCorp sought to develop cattle restraining boxes to promote humane methods of holding an animal immediately before slaughtering it in lieu of more primitive and brutal methods to disable and hold steady a beast, such as cutting a tendon, gouging its eye or hoisting it aloft while attempting to kill it. As this description reveals, ad hoc or traditional methods of slaughter, outside a modern abattoir, could be crude and very cruel.
The idea behind the restraining box was that it would hold the individual animal in a restraint and then turn it into a position where a slaughterman could easily, humanely and quickly kill it. As the Four Corners program later revealed graphically, that idea fell well short of ensuring an acceptable result. The first and crudest versions of the restraining boxes were called ‘Mark I’ boxes and these were progressively deployed in Asia, particularly Indonesia, by the Australian live cattle export industry. A June 2009 review, that MLA and LiveCorp commissioned, portrayed the development of restraining boxes as seeking to avoid causing animals severe pain and distress. It reported that at 30 June 2009, 96 Mark I boxes were in use, while subsequent models were in development. The review noted that the OIE Terrestrial Animal Health Code 2008 required the minimisation of avoidable pain and suffering at every stage of the pre-slaughter and slaughter processes until the death of the animal, and:
The development of the code involved a study of specific issues associated with slaughter without stunning, acknowledging religious and cultural requirements. The OIE concluded that the process of slaughter without stunning should not be exempt from the guidelines and consequently methods of restraint have to comply with several basic requirements, as detailed below:
• Provision of a non-slip floor.
• Ensuring that the restraining equipment does not exert excessive pressure, thus causing the animal to struggle or vocalise.
• Engineering equipment to reduce the noise of hissing air and clanging metal.
• Ensuring equipment has no sharp edges that would harm animals.
• Using restraining devices appropriately and not jerking them or making sudden movements.
The installation of a restraining box will only achieve all the desired outcomes of the OIE Code if it is operated by a knowledgeable and skilful stockman and maintained to ensure that acceptable standards of animal welfare are consistently achieved.
(emphasis added)
The review concluded that the use of the restraining boxes improved “the aesthetics of the casting process and is likely to improve animal welfare” but that scientific verification of its actual impact on animal welfare was yet to occur. Importantly, it added that the Mark I boxes demanded “a higher degree of skill and stockmanship to ensure a good welfare outcome”.
In May 2010, MLA and LiveCorp received a final report of a study they had commissioned titled “Independent study into animal welfare conditions for cattle in Indonesia from point of arrival from Australia to slaughter” and published it in January 2011. The Minister read this in early February 2011.
On 22 December 2010, the Royal Society for the Prevention of Cruelty to Animals Australia (RSPCA) provided the Minister with its response to the study. The study’s four authors wrote to the Minister on 27 January 2011 in reply to the RSPCA’s criticisms saying that they unreservedly stood by their assessment process and reiterated their conclusion that “animal welfare was generally good and that Australian cattle in Indonesia were generally coping well with the conditions to which they were exposed”.
The study stated that the OIE guidelines had “guided” its assessment including of feedlot management, slaughter processes, animal handling and restraining boxes. The study authors attended six feed lots and 11 slaughter facilities and observed the use of “15 industry funded restraining boxes and 6 improvised ‘copy’ boxes”. It noted that while several advanced facilities used stunning, most were unsophisticated and would not find it feasible to adopt stunning.
Stunning involved using an electrically powered or mechanical device to render the animal senseless so that it could be manoeuvred readily into a position for a slaughterman to kill it promptly and efficiently without it offering resistance or suffering pain or discomfort.
The study noted that in about four (or 17%) of the 26 acts of slaughter using the restraining boxes that the researchers had witnessed, the animal regained its feet after release. The researchers said that they witnessed a total of 29 acts of slaughter, including ones using the restraining boxes, and observed that the process of casting the animals down in the box on average resulted in moderate, rather than mild, severity of fall and 3.5 head lifts per animal after casting, and that this posed “a significant risk to animal welfare” and:
While restraining boxes were observed to significantly improve animal welfare, where severity of the fall was severe and head slapping occurred, significant animal welfare issues were identified that should be addressed through SOP [Standard Operating Procedure] and training.
(emphasis and acronym definition added)
The study observed that operators at the facilities with replica boxes lacked training and posed a potential animal welfare issue. It noted that slaughtermen did not appear to appreciate, and the SOP did not provide guidelines dealing with, the need to cut the animal’s carotid arteries appropriately and to manage occurrences of occluded arteries and false aneurisms that posed issues for an animal’s welfare because it could remain conscious for an extended period. The researchers observed one occasion when 18 cuts were made to kill the animal. They observed that this was “a potential animal welfare issue” (emphasis added) but that the resulting colour of the meat did not appear to affect its saleability in the wet market, i.e. the market for immediate local consumption. They also noted some instances of animals having their eyes harmed or tails twisted in the slaughtering process and inconsistent use of SOP in restraining animals and using the restraining boxes including for significant periods before slaughter and that:
Following the Halal cut, there were occluded carotid arteries in 48% of cattle and possible extended consciousness in 10% of cattle.
They said that stunning “deliver[ed] the single biggest animal welfare benefit” and said that its use “in the slaughter of Australian cattle in Indonesia should be an aspirational goal. In appendix 4, the study reported its recommendations for compliance with the OIE Code and gave those priorities, including giving high priority to ensuring that there were competent and experienced animal handlers because of the significant variations between the excellent and poor treatment of animals that researchers had observed in relation to numerous provisions in the OIE Code.
2.5 The Minister assumes office
On 16 September 2010, soon after he had become the Minister, Senator Ludwig spoke at the 2010 AgForce Conference in Rockhampton saying that he did not intend to make “any drastic changes to Government Policy within the portfolio. This includes areas such as live animal exports”.
The Minister’s practice was to read Departmental in-confidence minutes, and other material, such as briefs, on or reasonably contemporaneously with the date on which his office received those documents from his Department. If he first read those in an electronic form on an iPad, his not invariable practice was to sign them at a later time, dating them when he first recalled reading them. A Departmental in-confidence minute was in the form of a document that the Minister could submit to Cabinet for its consideration. I will describe such a document as a ‘Departmental minute’.
The Minister had received a Departmental briefing for his new portfolio that informed him that Indonesia was Australia’s largest market for live cattle exports, comprising in 2009 about 80%, with 768,113 cattle, valued at $478 million.
On 30 November 2010 the Minister received a Departmental minute to inform him that officers of the Department would visit Indonesia with an industry delegation in mid-December 2010 to present Australia’s concerns about the Indonesian Government’s policy to achieve self-sufficiency in beef. The minute noted that, in January 2010, Indonesia had begun limiting the number of import permits that it granted, which the Department expected would result in a 17% reduction in Australian live cattle exports there in 2010. In addition, Indonesia had also begun limiting the arrival weight of imported cattle to 350kg which posed a risk that, if Indonesia were to reject a shipment, there could be quarantine issues were the cargo to be returned to Australia. The minute informed the Minister that Australia had raised its concerns about these changes with Indonesia, including at Ministerial level in carefully targeted and nuanced representations so as “not to overplay Australia’s interest in maintaining trade”, and foreshadowing a proposed visit by Senator Ludwig in early 2011. The minute included statistics showing the volumes and value of live cattle, beef and offal exports to Indonesia and an overview of the live cattle trade with Indonesia that had developed in the preceding twenty years. It noted that the live cattle export industry was attractive and convenient to producers in areas in northern Australia, but that in the first half of 2010 there had been a sharp decline in exports to Indonesia.
As noted above, the RSPCA wrote to the Minister on 22 December 2010 with a detailed critique of the May 2010 study which the Department had provided to it on 15 December 2010. In her covering letter, Heather Neil, the chief executive officer of the RSPCA wrote:
From the information available in the report it is clear that the majority of the animals observed (and likely the majority of animals exported) were subjected to significant levels of pain, fear and distress during their handling and slaughter.
The scale and significance of the animal welfare issues described in the report show that in terms of risks to animal welfare, the situation in Indonesia is equal to the Middle East. Given this, it is not a trade that the RSPCA believes should continue….
It is the way in which the majority of cattle were slaughtered that has shocked us. While the introduction of restraining boxes is offers some improvement on traditional slaughter methods, we are very concerned that Australian-driven developments have served to entrench practices that involve significant risk to animal welfare.
(emphasis added)
On 17 January 2011, the Minister wrote to Peter Kane, the chairman of the Australia Livestock Exporters’ Council (ALEC) referring to their meeting on 30 November 2010 in which they had discussed issues concerning live sheep exports to the Middle East. The Minister also referred to the broadcast on the ABC’s 7.30 Report on 1 December 2010 of footage that Animals Australia had obtained of poor handling, transport and slaughter of sheep to those countries. He reminded Mr Kane that he had told him then that the Government “was very concerned about the mistreatment of animals, and, as part of Australia’s live trade, had committed to assessing proposals to improve animal welfare outcomes”. The Minister asked Mr Kane for his advice on the use of a closed loop system for the importation, lot feeding and slaughter of livestock in importing countries, similar to the system in use for exports to Egypt.
On 21 January 2011, MLA and LiveCorp wrote to the Minister responding to the RSPCA’s 22 December 2010 letter. The letter also attached what the industry bodies said was a “detailed action plan”. The response stated that the two bodies had employed a full time animal welfare manager based in Jakarta to ensure regular training for SOP at all locations, which they noted was critical. They wrote that the industry recognised that stunning was “a further animal welfare improvement” but that OIE standards did not require it and that a number of practical impediments in Indonesia limited its adoption, including the lack of electricity in some areas and the classification of hand held “captive bolt stunners” as weapons in that country. They wrote that their “first priority is reaching these internationally recognised standards”. They included a table that identified industry actions and outcomes. The table noted that a new restraining box (Mark 4) had been designed and the first Mark 4 box had been installed in January 2011.
On 14 January 2011, the Department provided the Minister with a minute on the imminent release on its website of the live trade animal welfare partnership 2009–10 project reports. The minute informed the Minister that he could expect media attention and criticism from animal welfare groups, including the RSPCA, given its concern about the operation of the restraining boxes, slaughter techniques and the (scil: lack of) uptake of stunning. It noted that after the Department had provided the RSPCA with a copy of the May 2010 study, the ABC had enquired about the release of the reports.
The minute summarised that study as “a thorough review of the animal welfare outcomes in Indonesia” that found “overall…animal welfare in Indonesia was generally good” and that industry had accepted its recommendations in the area of animal management, slaughter practices and animal welfare standards and was expanding its programs to address them. It referred, under the heading “Sensitivity”, to the study’s observation of one animal being “struck with a knife using a hard impact to sever the skin about the larynx and then up to 18 cuts were made to sever the neck and both arteries”. The minute advised the Minister that the MLA had stated that this incident was not representative of normal practices in the region and it was providing training and equipment at the abattoir in response to the study’s recommendations. The Department also advised the Minister that the RSPCA was likely to focus on specific examples of poor animal handling or slaughter practice in the study and to demand immediate action from the industry and the Government. It annexed “talking points” for the Minister that indicated that the May 2010 study had been funded by the Government as to 50% and by the two industry bodies as to the balance. The talking points noted that the study was independent and that industry had considered it and was developing a suite of measures to address its recommendations. The talking points also noted one observation in the study of poor slaughter technique but stated that this did not represent normal practice.
On 28 February 2011, the Minister replied to the RSPCA’s letter of 22 December 2010. He noted that the May 2010 study’s authors had “described the improvements in animal welfare at the point of slaughter in Indonesia as ‘profound’ and ‘undeniable’”.
On 21 March 2011, the Minister wrote to Mr Kane reiterating what he had said at the AgForce conference in September 2010, namely that the Government’s support for live animal exports had not changed. He noted having written to ALEC in January 2011 asking the livestock animal export industry to develop proposals to ensure higher standards of animal welfare and was looking forward to receiving ALEC’s response.
On 22 March 2011, Mr Kane responded on behalf of ALEC. He told the Minister that ALEC, MLA and LiveCorp had held forums with exporters that had “reaffirmed that animal welfare was the most important social issue affecting the live export industry”. He said that to improve welfare standards in the Middle East, the industry was proposing adoption of the concept of “supply chain assurance” over the next five years. Mr Kane referred to the Minister’s suggestion for a closed loop system similar to that in Egypt but stated that each market in the Middle East was different. He wrote that the supply chain assurance would “encompass elements of a closed loop system to contain livestock” as much as commercially feasible within port, feedlot and processing facilities to minimise leakage. However, ALEC’s letter focused only on the Middle East and said nothing directly about Indonesia.
On Wednesday 30 March 2011, Lachlan MacKinnon, the chief executive officer of ALEC informed the Department that Animals Australia had footage of cattle being slaughtered in four Indonesian cities and that, although it did not know what the footage portrayed or when it would be used publicly, ALEC was “very nervous”. Mr Kane had tried to inform the Minister’s chief of staff, Michael Carey, of this development and Mr MacKinnon had briefed Alistair Lawrie, a senior adviser in the Minister’s office. They were aware that the Minister was then in Darwin. The Department’s Jo Evans, the executive manager of the trade and market access division, emailed various other officers, including a Deputy Secretary, Philip Glyde, to confirm that the Department’s strategy advice was to prepare defensive talking points for the Minister in anticipation of a “worse case” scenario of what the footage might contain, but would defer convening its animal welfare working group until more was known.
As events unfolded, Mr MacKinnon’s information concerned the footage that became the central focus of the Four Corners broadcast two months later.
On 31 March 2011, the Department provided the Minister with talking points that referred to the unreleased video footage. The talking points stated “stopping the live trade will not improve animal welfare in any of the countries we currently export to” and also referred to a taskforce that the Australian and Indonesian industries had established to identify and address animal welfare issues in Indonesia.
2.6 The Indonesian live cattle market
The parties agreed a number of facts about the Indonesian market for live cattle exports from Australian to Indonesia on which I have drawn here.
Throughout the period of time relevant for this proceeding, Australia was the sole source of live cattle imported into Indonesia. Between 2005 and 2009 the number of live cattle exported annually from Australia to Indonesia increased from 347,267 to 751,143. In about July 2010 the Indonesian Government indicated to exporters that it would only issue import permits in 2010 for a total of 452,000 head. However, in the event, 514,935 head were imported into Indonesia during 2010.
In December in each of 2010, 2011, 2012 the Indonesian Government announced an annual quota for live cattle imports for the next calendar year. On 28 December 2010, it announced that the annual quota for 2011 would be 500,000 head. In 2011, the Indonesian government issued ‘quarterly in advance’ live cattle import permits, that were valid for three months. In the next six months, January to June 2011, Australia exported 220,163 head of cattle to Indonesia.
Prior to June 2011, only an Indonesian importer licensed to import live cattle could apply for an import permit within its quota allocation. The importer had to apply to the Ministry of Agriculture and, when issued, had to have its import permit validated by the Australian Embassy. The Australian Quarantine Inspection Service (AQIS) would not allow a shipment of live cattle to leave Australia unless there were an import permit that the Embassy had validated.
2.7 The Minister attends a cattleman’s conference on 1 April 2011
On 1 April 2011, the Minister made a keynote speech at the Northern Territory Cattleman’s Conference in Katherine at which, among others, Indonesian diplomats were present. He spoke about his recent visit to Indonesia and the importance of the live cattle export trade with that nation. He told the conference:
The live animal export sector is the backbone of many rural and regional communities across Australia, including northern Australia, as it provides a valuable market option for producers.
The Minister referred to the recent Indonesian restrictions on the number and weight of cattle as:
…a concern for industry and for the Government. However I can assure you all that there has been no change to the Government's policy to support Australia's cattle industry, including live animal exports.
During my visit I stressed the importance of maintaining the live cattle trade to my counterparts.
I outlined the importance of providing certainty to both Australian exporters and Indonesian importers with regard to live export and boxed beef.
The Minister then spoke on improving animal welfare, saying that it remained “a significant issue” and expanded on this theme as follows:
Both the Government and industry recognise the importance of improved standards of animal welfare, and the need to clearly demonstrate commitment to those standards to the broader Australian and international communities.
Being part of the international live export trade means Australia can help improve the way it operates-benefiting animals from Australia and other countries as well.
In conjunction with industry, the Australian Government is jointly investing a total of $3.2 million to the Live Trade Animal Welfare Partnership to further improve animal welfare conditions in importing countries.
This is a continuing process of improvement, and more still needs to be done to achieve higher standards of animal welfare practices, particularly in importing countries.
I have asked the Australian live export industry to review the progress they are making on improving animal handling practices in importing countries, as well as other ways to achieve higher standards of animal welfare.
The Australian Livestock Exporters Council has provided me with their views on this topic, and we will be examining these proposals in coming months.
The Gillard Government will continue to work with current trading partners to improve trade conditions for the benefit of both the live cattle and beef industries.
(emphasis added)
During the morning tea break at the conference, the Minister had a conversation with Troy Setter, who was then the chief operating officer of the Australian Agricultural Company (AACo). Mr Setter had been a director of ALEC since 2009 and the Northern Territory Live Exporters Association. Between 2007 and 2010, Mr Setter had been the Darwin manager of NACC, that was one of the world’s largest cattle exporters. In that role he was responsible for exporting, supplying and marketing over 270,000 head of cattle annually.
Mr Setter told the Minister that “we’ve heard that animal activists have been taking footage in Indonesia”. The Minister told Mr Setter that the trade was important to Australia and that the industry and Government had to continue to work together. He said that the Government understood the challenges. Mr Setter said that Indonesia was a difficult market because not every supply chain was the same. He told the Minister that large importers such as Elders (which owned NACC), Santori (being PT Santosa Agrindo), AACo and TUM (being PT Tanjung Unggul Mandiri) had “closed supply chains where they have full control of their cattle”, but that not every other supply chain did. Mr Setter said that NACC had a closed supply chain. He also said that AACo “followed” its cattle throughout its chain, which I infer was not closed.
Mr Setter gave evidence that he had had an earlier (but some time before April 2011) discussion with the Minister about “the supply chain work that we had been doing”, but did not elaborate on that topic, beyond saying that in the conversation in Katherine, the Minister stated that “we will need to work together; we will stick with you, Troy; we will stick with the industry”.
3. INDONESIAN LIVE CATTLE IMPORTERS
3.1 The nature of the industry’s supply chains
As Mr Setter told the Minister in April 2011, there were several large importers of live cattle into Indonesia that had supply chains over which they had control of the cattle in them, at least, to the point of slaughter if that occurred in an abattoir operated by one of them. Those importers were PT Elders Indonesia, a subsidiary of Elders, and Santori, but, as I explain below, not TUM or PT Agro Biri Perkasa (AGP). It is necessary to understand the precise nature of the supply chain that each of those four importers operated in the period prior to the making of the Second Control Order on 7 June 2011. I deal with that issue in the following section of these reasons in relation to each of the four importers.
Ashley James was the manager of NACC in 2011. He held that position for four years. He said that NACC’s business was to export live cattle to South East Asia, but predominantly to Indonesia. The live cattle for slaughter market was known as the “wet market” as opposed to the market for pre-packaged or boxed beef. NACC’s Indonesian customers were, in order of amount of purchases, TUM, Santori, Elders Indonesia and PT Widodo Makmur Parkasa (and its subsidiary, Pash Tengah.
Mr James said that an Indonesian import permit required an importer to take the cattle to only one specified location. I infer that the importer would have to specify the feedlot to which the cattle would be taken after the 14 day quarantine period following their disembarkation from the ship. However, after the cattle arrived at the feedlot specified in its import permit, the importer was not constrained from selling or moving the cattle elsewhere.
In June 2010, Mr James was involved in the preparation of customer profiles for each of TUM and Santori for use by the board of Elders. These revealed that in 2009, Santori imported (from all sources) into Indonesia a total of about 134,000 head (or about 20% of the total Indonesian market), TUM 82,000, Widodo 51,000 and Elders Indonesia 22,000. TUM purchased exclusively from NACC.
3.2 Elders Indonesia
From 2003 to 2013, Richard Slaney was president and director of Elders Indonesia. He explained in his evidence that Elders Indonesia operated as a part of the Elders group. He was in charge of Elders Indonesia’s day to day operations and had been involved in the Indonesian cattle industry since 1999. Elders operated several feedlots in Australia. Elders also owned and operated a livestock carrier, MV Torrens, and chartered other vessels as needed to carry live cattle to Indonesia. Each of the ships Elders used for this trade complied with the regulatory requirements of the Australian Maritime Safety Authority.
Before the Second Control Order, Elders Indonesia acquired from NACC live cattle for export from Australia to Indonesia, which met all Australian domestic requirements for the care, health and handling of the animals (including for AQIS) up to the point of export. Once the cattle arrived from Australia, Indonesia required that they be held in quarantine in a feedlot for 14 days where they were vaccinated and had blood samples taken. About half of Elders Indonesia’s imports of live cattle were tagged in the ear with a visible RFID (radio frequency identification device) or a National Livestock Identification Scheme (NLIS) tag. Those names for the tags were interchangeable and did not signify that there were different tag types (I will usually refer in these reasons to all these tags simply as NLIS tags). Before July 2011 the use of NLIS tags was mandatory in Western Australia and voluntary in both the Northern Territory and Queensland.
If cattle did not have an NLIS tag, Elders Indonesia caused them to be tagged with a Z tag when the cattle arrived at the quarantine facility that it used as part of its (Elders Indonesia’s) inventory control system from the animal’s induction into that inventory until the point of its slaughter. Unlike the NLIS tags, a Z tag was a visual, but not electronically readable, means of identifying each animal individually. Elders and Elders Indonesia used the Z tags and NLIS tags to trace each animal’s overall movement in the Elders supply chain.
Elders Indonesia owned a feedlot in Lampung province on Sumatra (about ten hours drive and a ferry ride away) and leased an abattoir at Bogor to the south of Jakarta in which it owned all the plant and equipment. Cattle were kept for fattening at that feedlot typically for between 80 to 110 days (a fattening cycle) (although that could last 120 or even 150 days on occasion) and its capacity was about 21,000 head annually. Mr Slaney said that prior to June 2011, Elders Indonesia was intending to expand the feedlot’s capacity to 30,000 head per annum over the next two years. The abattoir’s about 40 employees worked on a single shift of six days per week that had the capacity to process about 21,000 head annually. Some of those employees had been trained and accredited in Australia.
As soon as Elders Indonesia began operating the Lampung feedlot in 2008, Mr Slaney implemented a quality assurance system for it that used substantially the same procedures as Elders applied in its feedlot in Charlton, Victoria. Similarly, by 2007 (about one year after commencing operations) Mr Slaney had Elders Indonesia implement a quality assurance system at the abattoir. At that time Elders Indonesia obtained accreditations for the abattoir under the ISO 9001 standard, which applied for processing and manufacturing, and the Hazard Analysis and Critical Control Points (HACCP) standard, which applied a systematic approach for food safety there. Neither standard dealt with the way in which cattle were slaughtered. And, the abattoir had used stunning since 2000. Mr Slaney gave unchallenged evidence that Elders Indonesia managed the lairage of cattle (i.e. the livestock yards in which cattle are held) and the slaughtering process, and had always used stunning at the abattoir so that the animals “were always very well looked after”.
Mr Slaney said that this abattoir’s capacity per shift could not have been increased but its overall capacity could have been increased by running a second shift. As at 6 June 2011, the abattoir ran a day shift processing boxed beef. This involved animals being stunned, then killed, chilled overnight and deboned before being packaged into vacuum sealed bags. The abattoir could be readily converted to also run a night shift to supply the “wet market”, as occurred immediately after Elders Indonesia obtained its ESCAS approval.
Elders Indonesia also imported and sold Australian cattle to about six or seven small abattoirs in Indonesia, one near Jakarta and the others in Sumatra. Mr Slaney decided to which abattoirs cattle were sent based on prevailing market prices. Thus, if the prices for boxed beef resulted in better margins for Elders Indonesia, he would maximise their processing through its own abattoir near Jakarta. These other abattoirs had Mark I boxes and processed a total of up to about 50 head per day or roughly half of the total number of cattle that Elders Indonesia imported. However, as noted above, if the Elders Indonesia abattoir worked two shifts daily it could process the total of 21,000 cattle that matched the annual capacity of its Lampung feedlot. Thus Elders Indonesia had the ability to process all the cattle that it imported in its own feedlot and abattoir, rather than sell any of them to its six or seven customers, and to ensure that it could account for every animal by use of its Z tags that it placed on animals that did not already have an NLIS (or RFID) tag.
The audit of Elders Indonesia’s feedlot and abattoir that SAI Global Ltd conducted on 6 to 8 July 2011 (as part of the implementation of the ESCAS approval process) established that “computer software and records are excellent and enable complete traceability of individual animals from exporter to slaughter”. The audit found that the documentation required existed and included the procedures that the Department had specified. SAI Global noted that it had identified some areas that “top management” needed to review and consider “so as to ensure appropriate preventative actions are implemented prior to the next audit” and, importantly, that “staff at the feedlot exhibited good knowledge and practice with regard to animal welfare”. SAI Global noted that, initially, some animals had slipped when being discharged from trucks and that three others out of ten had needed to be stunned a second time, but that the Elders Indonesia staff had taken corrective action that remedied those problems.
I accept Mr Slaney’s unchallenged evidence that the remedial actions were “tweaking” and that:
in a processing situation with cattle, we will get those variants on a given day in most situations. And so, therefore, the auditor would often go back and …let you process again or …do it again, and ..that was …. quite a normal situation. It’s very difficult to maintain 100 per cent stunning of those cattle. Likewise, cattle could be coming off a truck after a rainy morning and cattle slip. He will recognise those variations we get in in the normal processing of cattle. So but, certainly, there’s always room for improvement, yes.
I am satisfied that prior to the Second Control Order, Elders and Elders Indonesia (including NACC’s sales to it) operated a closed loop system for cattle processed in Elders Indonesia’s feedlot and abattoir that used internationally accepted and humane practices to account, care for and slaughter Australian cattle exported to Indonesia.
3.3 Santori
Santori was a subsidiary of the publicly listed substantial Indonesian enterprise, Japfa Group, and the largest importer of live cattle into Indonesia. Santori had two mechanised western style feedlots in Sumatra, one at Barki and a smaller one at Probolinggo. It sourced its live cattle from three suppliers, one of which was NACC. Mr James regularly visited and checked on how the cattle were progressing though those feedlots, as well as those that TUM operated, in addition to visiting the bigger abattoirs to which Santori and TUM sold. Santori’s two feedlots had the capacity of feeding about 60,000 per fattening cycle (equivalent to a total of about 180,000 head annually). It owned an abattoir that, according to the Elders customer profile of Santori (see [63] above), processed about 20% of the cattle in its feedlots and sold the balance into the wet market.
Santori was NACC’s second largest customer. Mr James acknowledged that prior to June 2011, not all cattle that NACC exported from Australia to Indonesia were tagged. He said that NACC’s cattle were not scanned as they were loaded or unloaded and that, depending on the importer, they might have been scanned or not when they arrived at the importer’s feedlot.
There was no direct evidence as to the standards of animal welfare or slaughtering methods in the Santori facilities prior to 7 June 2011. On 13 June 2011, Santori’s Group General Manager, Samuel Wibisono, said in an email, a copy of which the Secretary of the Department, Dr Conall O’Connell, received the next day, that its abattoir was ISO accredited and that it was installing readers for NLIS tags there to set up the closed system that the Minister required. He wrote that Santori’s two feedlots already operated NLIS readers and that he believed “we can be ready for an overall feedlot and abattoir audit in as early as 2 months” (emphasis added). However, it is not quite clear what Mr Wibisono meant by “an overall…audit”, for earlier in his email he said that he envisaged perhaps, relevantly, Santori and Elders “could pass an audit to comply with the current requirements of Minister Ludwig”. However, by 16 June 2011 MLA had provided the Department with information about Santori’s then position with respect to ensuring compliance with animal welfare standards from which I infer that it was, if not then fully, substantially compliant and, so, capable of achieving immediate compliance with the OIE Code after whatever minor shortcomings there may have been in its processes.
This inference is reinforced by Santori’s ability to show such compliance in material that it gave to the Department on 22 June 2011. As at 16 June 2011, Santori was using stunning in its abattoir to process 50 head of chilled beef cuts per day, had the capacity to process up to 160 head in an eight hour shift and could work more than one shift. It stated that it had documented standard operating procedures, complied with both the HACCP and ISO 2200 standards as well as the OIE Code and had the ability to trace individual animals using NLIS tags that it placed on every animal. Given its substantial financial position, Santori would have been able to source and readily install any necessary equipment.
Therefore, I find that prior to 7 June 2011 Santori was capable of establishing without delay or difficulty that it could, or did then, operate a closed loop supply system that complied with then OIE Code for all cattle that it processed through its feedlots and abattoir.
3.4 TUM
TUM was a family owned business that imported live cattle exclusively from NACC. It had two feedlots near Jakarta, the larger one at Tanjung Burung, that could process about 25,700 head per fattening cycle, and the smaller at Pulo, that could process about 5,600 head per cycle. Both feedlots had concrete floors in which the cattle were hand fed.
TUM sold only into the wet market. Prior to 7 June 2011 TUM did not own an abattoir, having sold the one it had owned in about 2008 or 2009. Thus, at that time, TUM could have been part of a closed loop supply chain that, however, would finish prior to the cattle being despatched from TUM’s feedlots to an abattoir. All the cattle could be accounted for from the time NACC exported them to when TUM was ready to despatch them for slaughter.
Accordingly, the abattoir at which any cattle that NACC sold to TUM were to be slaughtered would have to be identified as one that complied with appropriate quality assurance standards and the OIE Code before Mr Setter’s assurance about it to the Minister on 1 April 2011 could be relied on in respect of how its cattle would be slaughtered.
3.5 AGP
Between 2000 and 2017 Gregory Pankhurst was chief operating officer of AGP. In 2002 AGP entered into a joint venture with Consolidated Pastoral Co to conduct a cattle feedlotting business in Indonesia. Mr Pankhurst lived in Indonesia and was responsible for AGP’s purchases of livestock, arranging their transport from Australia to Indonesia, fattening them after their arrival and then marketing them to abattoirs for sale at, in Mr Pankhurst’s words, “the farm gate”.
AGP had two feedlots on Sumatra, a larger one at Lampung, with a capacity of 28,000 head and a smaller one at Medan, with a capacity of 7,500 head. It used a fattening cycle of 120 days so that it had a total annual capacity of about 105,000 head of cattle. However AGP tried to maintain the feedlots at between 60% to 70% capacity. AGP applied the OIE Code or better in caring for cattle at its feedlots. Mr Pankhurst said that prior to 7 June 2011 the majority of AGP’s imported cattle came from Western Australia and had NLIS tags. In addition, on arrival, AGP put a manual tag on each animal that had visually readable means for its identification. AGP did not scan the NLIS tags or add the manual ones until the animals came out of quarantine and arrived at one of its two feedlots. When a tagged animal left the feedlot, AGP scanned its tag. However, the purchasing abattoirs did not scan the tags.
AGP did not own any abattoirs in Indonesia, but in the first half of 2011 sold to between 22 to 25 abattoirs, some of which were government owned and others privately owned. Most processed between 5 and 25 head each per night and had a total capacity between them on a single shift of about 250 to 300 head. Only three of the abattoirs that purchased from AGP before June 2011 used stunning. At particular times of year, such as festivals, the abattoirs would increase their intake by working one or more extra shifts so that up to 1,000 animals were slaughtered each day.
I accept Mr Pankhurst’s evidence that AGP had total control of each of the animals it imported from the time of disembarkation from the ship to when it left the feedlot for the abattoir. However, that meant that, like TUM, prior to June 2011 AGP could only provide a closed loop supply chain up to when the cattle left its feedlots and thereafter it had no control over them, including over their welfare.
3.6 Brett Cattle agrees to sell cattle to Elders
On 4 April 2011, the late Mr Brett, on behalf of Brett Cattle, entered into an Elders standard form agreement to buy and sell for delivery 1,100 Brahman steers for $2.15 per kg and 1,100 Brahman heifers for $1.95 per kg. The purchaser was NACC. Delivery was to be on or around 31 May 2011 FAS (free along side) a wharf at Wyndham, Western Australia.
4. THE FOUR CORNERS BROADCAST
4.1 The lead up
On 6 April 2011, Ms Evans emailed Mr Glyde and others in the Department with an update on the Animals Australia footage. She said that industry and the RSPCA had informed the Minister’s office that Four Corners might be working on a story about the issue of live trade to Indonesia, with a broadcast later in April or May 2011 and that the Minister’s office “is getting prepared”. She referred to the footage, a recent Parliamentary debate on the subject and a Senate estimates hearing, including questions on notice and questions that the RSPCA had raised in a meeting with the Department in March 2011. She said that the Minister’s office had requested talking points in anticipation of a request for him to be interviewed.
As is apparent from the above facts, by early April 2011 both the Minister and his Department knew that there was likely to be a major public affairs broadcast in the near future that would feature some graphic and disturbing footage of cattle being slaughtered or mistreated at probably four sites in Indonesia. Yet, the Department did not prepare, and the Minister did not seek, any policy response beyond talking points, despite the potential impact on a substantial domestic industry, Australia’s international trade, reputation and its relationship with the Indonesian Government. Likewise, the industry was hardly being proactive, beyond cooperating with the producers of Four Corners.
On 29 April 2011, the Department, through Mr Glyde, provided the Minister with a minute on the topic of live cattle exports. It dealt with the need for the Minister to decide about possible responses to the Four Corners program once it was broadcast, including possibly consulting with Cabinet. This minute referred to the possibility that Four Corners would air footage of facilities where Australian Government funding had been provided to improve facilities or train handlers and that the Minister may be asked about this. It suggested three options, first, that the Minister refer to an existing set of actions, including his request for industry to develop options, including closed loop systems, to improve animal welfare throughout the live export supply chain, secondly, release a public options paper (and a possible outline was attached to the minute) and, thirdly, announce a new set of actions. The minute recommended the first of those options that was broadly along the lines of the supply chain assurance model that industry was working towards. It said that issuing an options paper had “significant risks” of stirring up controversy and would take some time to develop and the announcement of new actions, while feasible, might require Cabinet discussion.
The options paper proposed using the OIE Code as the minimum animal welfare standards, however it noted:
Preferred approach - industry assessment against standards/goals and/or importing country assessment. The cost of trade for most export industries is the establishment of commercial linkages and. at times, infrastructure to support the trade. In the live animal trade this equates to ensuring that minimum agreed standards (OIE for example) are being met. Therefore, it is an industry responsibility to assess and report on the welfare standards of receiving countries. This approach is closely aligned with the industry's suggested Supply Chain Assurance model. A target of 100% compliance for all shipments with OIE standards is unlikely to be achieved other than through a closed system, and industry is unlikely to agree to such a target. Animal welfare groups will push for such a target and call for exports to be suspended/banned for any breach of the standards.
(emphasis added)
On 6 May 2011, Mr Lawrie sent to Ms Evans for comment a copy of an ALEC draft “Strategic vision for in-market animal welfare” dated April 2011 that he had received. The draft contemplated that all animals exported from Australia be managed through known supply chains and treated humanely under OIE Code and standards to be achieved by 2015. The draft set out a timetable to that end.
On 10 May 2011, Mr MacKinnon sent the Department a final version, now headed “Indonesia animal welfare action plan”, that stated a timetable for achieving what it identified as its desired outcome:
From 2015, Australian livestock will only be supplied into facilities where supply chains meet relevant sections of the OIE […] standards.
On 11 May 2011, the MLA informed the Department that the Indonesian action plan had had significant input from, and was endorsed by, the Indonesian importers and that the Indonesian Government had been consulted and also supported the plan.
On 13 May 2011, the Department provided a minute to the Minister addressing both the strategic vision and action plan. The minute noted that the industry sought the Government’s support for those documents so that the industry could launch them on the ABC’s Landline program (a rural affairs focused current affairs show) prior to the Four Corners broadcast going to air. The minute gave the Department’s initial assessment of what the industry proposed, prior to the Minister meeting with its representatives. The Department considered both documents to be positive initiatives and “a good starting point for further discussion and development”. The minute observed that a key policy question was what the Government would do if the industry failed to achieve the goals set on time, noting that the timing “lacks urgency”. That question included whether the Government would impose a ban on exports to countries in which the milestones were not met by the due date. The minute reminded the Minister of the likely imminence of the Four Corners broadcast and its likely high sensitivity. The Minister annotated, signed and dated 27 May 2011 a version of the minute that was unsigned by the Department. He wrote on it “please add to reading pack”.
Also, on 13 May 2011, Mr Glyde signed a further minute for the Minister with the Department’s review of the Government’s policy settings for the live export trade and suggested that he select one of the policy options for approval. The Minister noted, by hand, “Overtaken by events: NFA” [scil: No further action]. I infer that, since the Minister took no decision on the policy options, the events that overtook the subject matter of the minute were the aftermath of the Four Corners program that was broadcast over two weeks later. The three options in the minute were to allow the live export trade to continue on the basis of, first, supporting the current industry approach, which involved accepting that some animals would be treated inappropriately, secondly, ensuring the OIE Code’s standards would be met, in default of which trade would be banned to non-compliant markets or, thirdly, allowing the industry to work towards minimising cases of animals being treated below the OIE Code’s standards within an agreed time frame.
I infer that AGP would have had to provide the Department with some detail about the three initially approved abattoirs before it could gain approval under the assured export system (as it did in gaining the Austrex shipment approval on 5 August 2011 without apparently an audit) and that this would have taken some time because AGP did not own or operate the abattoirs itself, unlike Elders Indonesia and Santori. I infer that this process would have taken about 14 days, so that AGP lost the ability to import for 45 days in 2011.
Thus, if an Exceptions Order had been made, each importer would have been able to satisfy the Minister or the Department of its ability to operate a closed loop supply chain with animal welfare standards at least consistent with the OIE Code weeks earlier than when it obtained the first ESCAS approval. Once the importer had done so, I infer that it would have immediately begun acting as it ultimately did in seeking to bring as many of its customer abattoirs into a condition to meet the then anticipated ESCAS requirements or those that would have applied in the assured export system. In other words, once the three importers had been able to satisfy the requirements of the assured export system, they would have begun investing immediately into increasing the numbers of cattle they could process in their closed loop supply chains, as they actually did once the ESCAS system began. That means that the number of lost days before the importer’s first ESCAS approval represented the loss of the chance to import a larger volume of cattle at the end of 2011 when their ESCAS supply chains had a much greater capacity.
Mr Slaney said that before June 2011 Elders was processing around 600 cattle on a monthly basis in its abattoir and selling another 600 head to its six or seven other customer abattoirs. He said that the monthly total would increase to 1,600 head during Ramadan. He said that Elders Indonesia could contain in its feedlot and process in its abattoir about 21,000 head per annum on a single shift, which is about 1,750 per month [67]). I find that if the assured exports scheme scenario applied during the lost export period, then Elders could have imported and processed in its closed loop system about 1,750 head per month.
Santori could hold a total of about 180,000 head per annum or 15,000 per month in its two feedlots. In the ordinary course it processed about 20% or 3,000 of those animals per month in its abattoir that operated a single shift, but had the capacity to operate two shifts. Brett Cattle asserted that Santori would have processed 160 head per day or 4,800 per month at its abattoir. It made that estimate based on the abattoir operating one shift. I infer that Santori would have operated its abattoir on two shifts because, if the assured export scheme scenario operated, there would be a limitation on the number of abattoirs that could comply with the OIE Code during the lost export period. There would have been a considerable demand for cattle to go into the wet market in Indonesia in this period that could not otherwise be satisfied. Thus, I infer, based on Mr James’ evidence, Santori would have processed in its closed loop system as many head for which it had capacity during the lost export period, namely about 6,000 per month (see [77]). Indeed, this may understate the Santori abattoir’s capacity (of about 9,600 head), if it worked two shifts to process more (see [74] and [77] above).
AGP’s two feedlots had a total capacity of about 105,000 or about 8,750 per month. AGP operated a closed loop system, that complied with the requirements of the ESCAS, up to the time the cattle left its feedlots ([85]). I infer that, based on the short period in which they gained approval in the ESCAS, the three abattoirs in which AGP had installed stunning equipment before 7 June 2011 (Z-Beef, Zul and Sofyan) would have been able to satisfy any requirements for an assured export scheme ([84], [256], [260]). AGP upgraded those three abattoirs to increase their total daily capacity from between 15 to 20 head per night to about 75 head using one shift (or about 2,250 per month). I infer that these upgrades occurred between 7 July 2011 and late July and mid-August 2011, once AGP knew what the ESCAS requirements were and that there was certainty about the live cattle export trade continuing. Had an assured export system scenario applied, I infer that AGP would have begun its upgrade program immediately after 7 June 2011. Thus, AGP would have been able to sell cattle to abattoirs in its closed loop system that progressively increased in number from 3 to 22 by late November 2011 (i.e., this upgrading work would have occurred one month earlier than actually occurred, once the ESCAS requirements became known) ([259]). This would have enabled AGP to import from about 21 June 2011 (allowing about two weeks for it to have satisfied the requirements of an assured export system) progressively more and more cattle during the second half of 2011 at the commensurate rate of growth it did between 5 August 2011 and 31 December 2011 (as the number of its complying and upgraded customer abattoirs increased), those imports would have included about a further about 4,400 head (based on its pre 7 June 2011 monthly total feedlot capacity of about 8,750 per month) for about 15 days.
Had the Minister made an Exceptions Order on or about 7 June 2011, Falconia would have been able to carry her cargo of 1,900 head that Mr Jackman had told the Minister were destined for Elders Indonesia’s feedlot. The Minister would have imposed conditions that those cattle be identified by being tagged and only be slaughtered in Elders Indonesia’s abattoir. I am satisfied that Elders would have taken immediate steps to ensure that those conditions would be met. Elders Indonesia’s abattoir could process 58 head daily. It would take about five weeks to slaughter that cargo which would occur progressively over a three month period into the future once the cattle had completed their fattening cycle.
And, had the Minister made an Exceptions Order, it is likely that International, as well as AGP, would have been able to satisfy the Minister within a similar period of no later than the 38 days between the Third AMLI Order and 12 August 2011, when it obtained its first approval from AQIS. That is because International was able to satisfy the ESCAS requirements within about five weeks of the Third AMLI Order. Similarly, SEALS is likely to have been able to satisfy the Minister under an Exceptions Order within the two months it took to obtain such an approval. In any event, both International and SEALS would have been able to satisfy the requirements for an ESCAS approval by about 13 July 2011 and 8 August 2011 respectively, assuming that the Department would have established those during the period an Exceptions Order remained in place with the more active co-operation of Indonesia than occurred by no later than 7 July 2011.
In those circumstances each of the six exporters with approvals under the ESCAS as at 31 December 2011 is likely to have obtained export permits at least one month earlier than it did. That would have given each of them the opportunity to export for the whole of one extra month in 2011 with at least the approved capacities that they actually had in December 2011 (since exports would have begun at least one month before they in fact did after the Third AMLI Order). And, based on my findings, during the lost export period, Elders Indonesia, Santori (through at least Wellard) and AGP (through at least Austrex) would have been able to import cattle into Indonesia respectively 22, 35 and 15 days earlier than occurred while they had to wait until the Third AMLI Order came into force.
Had Elders Indonesia, Santori and AGP been able to import cattle under the assured export system scenario during the 22, 35 and 15 day periods to which I referred above, it is likely that those imports would have reflected the imports actually made in the corresponding period once they and their Australian suppliers gained their ESCAS approvals, as summarised in the table below:
Date Exporter No of Head 29 July 2911 NACC (for Elders Indonesia) 3,000 5 August 2011 Austrex (for AGP) 4,060 12 August 2011 Wellard (for Santori) 6,402 6 September 2011 Wellard 6,465 9 September 2011 Wellard 17,772 16 September 2011 Wellard 4,115 Total 41,814
Since Santori was the largest Indonesian importer of live cattle from Australia, I infer that it imported all four of the Wellard shipments totalling 34,754 head in the 35 day period between 12 August 2011 (when the Secretary approved the first shipment for which AQIS subsequently granted its permit on 16 August 2011) and 16 September 2011.
That raises the question whether each of Elders Indonesia, AGP and Santori could have processed all of those head within its supply chain eventually (after the cattle completed their quarantine and fattening cycles) to the point of slaughter earlier than when each received its first ESCAS approval, as well as being able to do so for the equivalent number of head they actually imported in 2011.
Elders Indonesia would already have the 1,900 head from Falconia to process in its closed loop supply chain, had she been allowed to load on about 7 June 2011. NACC obtained its first ESCAS approval for 3,000 head 22 days after the Third AMLI Order. While Elders Indonesia’s abattoir could process up to 1,750 head per month, Elders would have anticipated obtaining approval for the six or seven customer abattoirs progressively, as in fact occurred. I infer that Elders would have been able to provide the Minister a verifiable assurance that it would retain the 3,000 head at its feedlot and only allow them to be sent to an abattoir that satisfied the requirements of an assured export system. As events transpired NACC was able to gain ESCAS approvals in 2011 to export over 50,000 head. Thus, had the Minister made an Exceptions Order, it is likely that it could have been able to export to Elders Indonesia or another customer that complied with the requirements of an assured export system, the 1,900 head in the Falconia cargo and about another 3,000 head in late June 2011.
Similarly, I infer that Austrex would have been able to satisfy the Minister to grant it an export permit for another 4,060 head which it could have processed in an assured export system as it progressively increased the capacity of its supply chain. As I noted in [427], soon after the Third AMLI Order came into force other Indonesian feedlots and abattoirs with substantial capacity were able to satisfy the Secretary that they should be approved in the ESCAS.
For the same reasons, I infer that Wellard would also have been able to export for Santori about 35,000 head more in the 35 days of its lost export period. It appeared to have been able to export substantial numbers of cattle under the ESCAS without difficulty.
Thus I find that in the lost export period NACC, Austrex and Wellard would have been able to export (in addition to the actual exports each made between 7 July 2011 and 31 December 2011) about an additional 44,000 head (including the Falconia cargo). This is a similar number of head that Ms Mellor informed Mr Lawrie on 3 June 2011 were due to be shipped between 8 and 18 June 2011 ([147]) although, of course, not all of those shipments may have been destined for supply chains that could have complied with the requirements of an assured export system.
There were substantial numbers of live cattle exported in September, October and November 2011, with December appearing to be a quieter month. Had the Minister made an Exceptions Order so that all six exporters would have had an extra month in 2011 (being December) in which to export live cattle to Indonesia, based on the pattern and size of their actual shipments in the table at [434] it is likely that they would have exported about a further 45,000 head in about late November and December half of 2011. That is because the ESCAS supply chain each had would have had the capacity to absorb about that number of head by then. I have arrived at that estimate using a broad brush approach based on the following table:
Exporter No of Head Austrex 3,000 Halleen 1,000 International 10,000 NACC 9,000 SEALS 2,000 Wellard 20,000 Total 45,000
Thus, it is likely that, had the Minister made an Exceptions Order, about 88,000 head, or approximately the balance of the unfilled Indonesian quota, would have been exported. However, this methodology and assessment has not been considered by the parties. Accordingly, before determining the question of what exports would have been made in 2011 had an Exceptions Order been made, I will allow them to make further submissions as to any errors in the methodology or analysis that I have undertaken in arriving at the provisional findings above. I am also to make a finding about what allowance might be appropriate having regard to the need for me to assess the value of the loss of opportunity.
11.4 Agreed facts as to quantify Brett Cattle’s loss
On 9 August 2011, Brett Cattle entered into a new contract with NACC to sell up to 3,200 head of Brahman, comprising 1,600 steers for $1.95 per kg and 1,600 heifers for $1.80 per kg for export to Indonesia on or around 4 September 2011. In the event, this contract came to be performed on 12 September 2011 when NACC took delivery of 2,656 head.
During 2011, Brett Cattle sold a total of 3,609 head in the following completed transactions:
Date Purchaser No of Head Net proceeds of sale (including GST) 12 September 2011 NACC (Export see [463] above) 2,656 $1,586,121.59 27 October 2011 NACC (Domestic sale at Blackall) 130 $48,846.42 4 November 2011 Moonson Pastoral (Domestic) 479 $252,417.20 24 November 2011 AACO (Domestic) 229 $116,267.80 15 December 2011 Top End Land & Livestock (Export) 115 $84, 620.67
The parties agreed that Brett Cattle sustained the following losses as a result of the Second Control Order and that, if it were invalid, it could recover as damages (subject to the qualifications in (1), (3) and (4) below):
(1)extra costs of $127,307 incurred due to the resale of the 2,200 cattle the subject of the 4 April 2011 contract between Brett Cattle and NACC (see [86] above). However, the Commonwealth argued that if an exceptions order had been made, and the Minister had been satisfied that the cattle could have been exported into a closed loop supply chain that complied with the OIE Code, Brett Cattle would have incurred those costs in any event (the delayed sales loss);
(2)lost sales of 1,366 head, being the difference between the 4,976 cattle that Brett Cattle would have sold in 2011 had the Second Control Order not been made, and the 3,610 head that it sold in that year (where the parties agreed that the value of the lost sales should be based on the average prices and weights per kilogram of $1.95 for heifers that weighed 295 kilograms and $2.15 for steers that weighed 320 kilograms). The lost sales would have been $1,207,598 if, as Brett Cattle contended, 65% of the 1,366 head lost sales were steers, or $862,799, if, as the Commonwealth contended, only 50% would have been steers (the lost sales);
(3)a loss for agistment that should be based proportionally on Brett Cattle having incurred $950,000 as the cost of agisting 1,751 head in 2011 and 2012. However, the Commonwealth disputed that so many, or any, head needed to be agisted (the agistment loss);
(4)$46,034 as the cost of cartage of the 1751 head to where Brett Cattle agisted them. However, the Commonwealth argued that liability for this loss accrued only if and to the extent that Brett Cattle could establish the agistment loss (the cartage loss); and
(5)$150,000 in fees, penalties and additional interest charges on overdue payments and its overdraft facility (the bank charges loss).
11.5 Resolution of disputed quantum issues
11.5.1 The delayed sales loss
Brett Cattle was due to dispatch, on 31 May 2011, the cattle appropriated to meet its contractual obligations under its 4 April 2011 contract with NACC. However, only after Brett Cattle had mustered them out of paddocks, based on their weight, and dipped them to clean buffalo fly and ticks from them, Mrs Brett said that NACC informed it that MV Sahiwal Express, the vessel scheduled to carry them to Indonesia, would now only load on 13 June 2011 at Wyndham.
Normally, after mustering and dipping, Brett Cattle kept the animals due to be consigned in a holding yard for four or five days and fed them hay. Three to five people had to perform that task. Once the Second Control Order was in effect, Brett Cattle continued to hold and feed 2,200 head, that it had mustered in anticipation of what it needed to deliver to NACC, in the holding yards for a further 21 days. Mrs Brett explained that Brett Cattle decided to act in that way because of the uncertainty of whether these animals might be able to be sold under the NACC contract and the cost that it would have to incur if the cattle were returned to their paddocks and the same process of mustering, dipping and feeding them had to be undertaken again if a new sale occurred later.
On 6 June 2011 NACC sent AQIS a notice of intention and a consignment risk management plan (the AQIS notice) in anticipation of 2,141 of Brett Cattle’s animals being loaded on board Sahiwal Express on 13 June 2011.
The Commonwealth argued that the AQIS notice stated that the whole consignment for loading on board Sahiwal Express on 13 June 2011 was destined for delivery to persons other than Elders Indonesia, Santori, TUM and AGP. It contended that, therefore, the cargo would not have been approved under an assured export system scenario. It followed, so the argument ran, that Brett Cattle would not have been able to sell those animals at the time and accordingly did not suffer any loss that it would have been able to avoid under an assured export system.
I reject the Commonwealth’s argument. Had an assured export system scenario been in place, as Mr James said, NACC (see [442]) would have rearranged its position so as to maximise the use of Elders Indonesia’s then significant unused capacity which was more than adequate to receive and handle Sahiwal Express’ proposed cargo of 2,717 head. After all, it had already chartered the ship and the impact of the new situation restricting the issue of export licences to persons who could comply with the requirements of the assured export system would have created a supply shortage in Indonesia and commercial opportunities for those, like NACC, through Elders Indonesia, who could comply with the new regime.
Accordingly, had an Exceptions Order been made, Brett Cattle would not have incurred the delayed sales loss because it would have been able to deliver the 2,141 head to NACC at about the time that this would have occurred in the ordinary course. The Commonwealth did not suggest that Brett Cattle had acted unreasonably in incurring the $127,307 expense and only contested it on the basis of its rejected argument above.
In their joint expert report, Siobhan Hennessey and Antony Samuel (the experts) showed that Brett Cattle had sold an average of 4,525 head of steers and heifers in each of 2008, 2009 and 2010 with each year’s sales varying by less than 100 head from that average. The experts also agreed that:
·Brett Cattle’s total sales in each of the three years averaged 5,082 animals, including steers and heifers; and
·had Brett Cattle achieved its budgeted sales target for steers and heifers of 4,976 in 2011, that would have been 10% higher than the equivalent average sales in the preceding three years, and higher than any of its equivalent sales in the preceding six years.
There is no persuasive feature in the evidence to suggest that had 2011 been a normal year, Brett Cattle would have been able to achieve a materially better or different result in sales than in the three previous years. Mrs Brett did not suggest in her evidence any reason why the 2011 budget forecast of about a 10% increase in sales of steers and heifers would be achievable. Brett Cattle’s sales of steers and heifers in the three years 2008, 2009 and 2010 did not vary in relation to the significant variations in total live cattle exports to Indonesia which were about 640,000, 750,000 and 515,000 in those years.
The experts also agreed that in 2008, 2009 and 2010 Brett Cattle’s sales represented an average of 0.71% of all steers and heifers exported to Indonesia, but in 2010 those sales represented 0.86% of the total relevant exports. There was a drop in Australia’s total exports of live cattle to Indonesia in 2010 that came about after Indonesia introduced a maximum weight restriction of 350kg per head ([38], [51]–[52]). Nonetheless, Brett Cattle’s total export sales remained relatively constant, albeit below its budgeted figure for the 2010 year. That may have reflected the work that Mr and Mrs Brett had done since Brett Cattle acquired Waterloo Station. Indeed, Mr James said that when trade recommenced in 2011, NACC gave Brett Cattle priority because “they had some of the best cattle in the Territory”.
I reject the Commonwealth’s argument that Brett Cattle’s opportunity to make sales in 2011 was limited to a range between 3,500 to 4,000 head and that its claim that it would sell 4,976 head was exaggerated. The argument ignored the facts that Brett Cattle’s actual sales were more than the Commonwealth’s posited low point of 3,500 head and that, effectively, the whole live cattle market lost two months of potential sales (June and July) because of the impact of the Second Control Order.
Brett Cattle actually sold 3,609 steers and heifers in 2011. It also was ready to sell the 2,141 head due to leave on the cancelled contract for export on Sahiwal Express. Those facts supported its claim that it would have sold 4,976 head in 2011 had the Second Control Order not been made. However, in assessing that claim as one for loss of a commercial opportunity, in my opinion, Brett Cattle is likely to have achieved sales of the average number of head from the preceding three years.
Accordingly I find that Brett Cattle would have sold about 4,525 head of steers and heifers in 2011 had the Second Control Order not been made.
11.5.2 The lost sales
The contract that Brett Cattle entered into with NACC on 9 August 2011 for the sale of 3,200 head in equal numbers of steers and heifers came to be performed on 12 September 2011 with the completed sale of only 2,656 head of which 65% were steers. That was a different proportion to the 50% provided in their 4 April 2011 and 9 August 2011 contracts and in Brett Cattle’s budget that Mr Brett had prepared before April 2011. The 4 April 2011 contract would have represented about 44% of Brett Cattle’s agreed expected sales of 4,976 head for 2011. The AQIS notice, that NACC gave on 6 June 2011, stated that the cargo would include 1,259 steers and 882 heifers from Waterloo Station. That meant that about 70% of that cargo were steers.
The Commonwealth relied on Mrs Brett’s evidence in chief in support of its contention in the agreed facts in [465(2)] as follows:
And what mix of steers and heifers were you projecting? --- It would have been around an even mix of both.
I regarded Mrs Brett as a generally honest and reliable witness. However, I do not consider that her answer reflected any more than her supposition that she and Mr Brett had budgeted to sell an even mix. That was a conservative assumption. The evidence showed that an even mix was a different proportion both from Brett Cattle’s consistent historical sales and those it actually made in 2011.
The experts agreed that in the period between 2005 and 2010 Brett Cattle sold on average about twice as many steers as heifers or in proportion of about 66.7% as to 33.3%. Although this historical pattern was not reflected in the contracts of 4 April 2011 and 9 August 2011, I infer that Brett Cattle would have maintained a similar proportion of sales of steers and heifers as had occurred in the past had the 2011 year proceeded in the ordinary course. NACC appeared to have decided to acquire fewer animals under each of those contracts than the agreed numbers. It may be that by NACC buying greater numbers of the more valuable steers the parties were content to vary both the total number of cattle to be sold and the mix, consistently with the historical pattern. This finding is also broadly consistent with Brett Cattle’s other sales during 2011 in which it consistently sold substantially more steers than heifers in about the same proportions as it had historically.
11.5.3 The agistment loss
After the Second Control Order came into force, Brett Cattle had to continue to hold the about 2,200 head it had mustered in anticipation for their shipment on Sahiwal Express. Mrs Brett said that it kept those cattle for about 89 days until 1,600 of them were appropriated for the 9 August 2011 contract with NACC ([463]). Those cattle would not otherwise have needed pastures or supplements to maintain their health and weight. Brett Cattle had to purchase over 26 tonnes of supplements and 415 tonnes of hay that its employees then had to feed to the animals that it now was continuing to keep in the two steer and heifer paddocks, rather than returning them whence they had been mustered.
In the later months of 2011, Mr and Mrs Brett considered that they were overstocked. Mrs Brett said that they had lost faith in the live export market by this time and decided to spread this risk from being solely reliant on the Indonesian market. She said that was why they decided to agist more than the 1,300 unsold head that they had budgeted to sell in 2011 (in the forecast 4,976 sales). In order to preserve Waterloo Station’s pastures for future stock, they decided that they would send stock to agistment which, in the end, totalled some unsold 1,751 head.
They sent 800 head to a property south of Darwin in the Douglas Daly region, with the anticipation of selling them as live exports early in 2012 and the balance to Blackall in Queensland. They had to dip the cattle again, weigh, draft and then load them onto Brett Cattle’s trucks. The cost of carriage of those animals to the agistment destinations is the basis of the claim for the cartage loss.
The trucks drove the consignment destined for Blackall, via Mount Isa, where the cattle were unloaded and spelled for 24 hours or so to rest, feed and water before being reloaded for the carriage to Blackall.
Once in Blackall the cattle were put into a feedlot to be fattened and sold into the domestic market. However, because Brett Cattle had used hormone growth promotants for its animals on Waterloo Station, they fetched less than animals that were not fed hormones, which were more attractive to buyers in southern Australia.
The Commonwealth argued that the agistment loss would arise only if Brett Cattle could establish that it suffered a significant loss of sales in 2011 as a result of the making of the Second Control Order. It relied on its arguments that I have rejected in dealing with the lost sales issue above to support its contention that, even if an assured export system scenario would have operated, no or no substantive sales would have occurred in it before the ESCAS come into operation.
The conduct of Brett Cattle in sending the 1,751 head to agistment was a reasonable response to the Second Control Order’s impact in effecting destruction of its market opportunities. The parties agreed that Brett Cattle’s loss under this category of damage was $950,000 in respect of 1,751 head. The Second Control Order placed Brett Cattle and others in its position in a very difficult situation. Lord Macmillan lucidly expressed the following principle for recovery of damages in such a scenario in Banco de Portugal v Waterloo & Sons Ltd [1932] AC 452 at 506 (albeit that his Lordship was discussing damages for breach of contract, but the principle is of general application):
Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticize the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.
(emphasis added)
The fact that the precise number of cattle that Brett Cattle agisted cannot be precisely linked to a lost sale does not mean that it is disentitled to recover the whole loss $950,000.
11.5.4 The cartage loss
The Commonwealth accepted that if Brett Cattle established the agistment loss, it was also entitled to the cartage loss in the agreed figure of $46,034. The cartage loss arose because, as Mrs Brett explained, Brett Cattle had to use its own road train trucks to transport the 1,751 head to agistment. Accordingly, I find that Brett Cattle is entitled to recover the cartage loss.
11.5.5 The bank charges loss
Throughout the period after 7 June 2011, Brett Cattle experienced significant financial pressure from its bank to reduce its overdraft which was about $2.4 million when the Minister made the Second Control Order. It was paying a penalty rate of interest 3% above its ordinary loan rate of 10.5%, because it had exceeded its approved overdraft limit of $2.2 million. The difficulties in selling cattle after 7 June 2011 exacerbated the financial stress that Brett Cattle was experiencing. One reason why Mr and Mrs Brett decided to expand Brett Cattle’s business into the domestic market after 7 June 2011 was pressure from its bank. The bank had expressed its unease to them that Brett Cattle had been solely dependent on the live export model.
I am satisfied that the interruption to Brett Cattle’s cash flow and its increased expenditure caused by the Second Control Order and the cancellation of the 4 April 2011 contract was a common sense cause of its incurring the bank charges loss. It follows that Brett Cattle is also entitled to recover $150,000 in respect of the additional sums it had to pay to its bank.
12. THE COMMON QUESTIONS
There are at least three questions that I presently consider arise, the answers to which are likely to be common to all claims that group members may have. Those questions and my provisional answers, based on the reasons I have given, are as follows:
(1)Was the Second Control Order valid?
It was invalid for the reasons at [317]–[363] above.
(2)Did the Minister commit the tort of misfeasance in public office when he made the Second Control Order?
The Minister did commit the tort because he acted recklessly as to both his power to make the Second Control Order and the fact that persons engaged in the live export trade to Indonesia would suffer harm from it unjustifiably, for the reasons at [364]–[395] above.
(3)What would have happened had the Minister acted lawfully?
The Minister would have made a control order that provided exceptions to the general prohibition in the Second Control Order in, or to the effect of, the exceptions clause in cl 5 of the First Control Order for the reasons at [404]–[427] above, and provisionally [428]–[462].
In addition, once the parties consider my provisional findings about damages, they should be able to identify common questions as to the capacity that the Indonesian market would have had, after 7 June 2011, to import more cattle on a basis that the Secretary would have approved under the ESCAS or an earlier exceptions power.
13. CONCLUSION
The parties will need to consider the appropriateness and correctness of the methodology and calculation of the total number of cattle that would have been exported to Indonesia in 2011 had the Minister made an Exceptions Order based on my findings, the formulation of the common questions and their answers, and the form of the orders necessary to give effect to these reasons. The parties can also identify any other errors that I may have made and ask for corrections before I make final orders. The Commonwealth will have to pay the costs of the proceedings.
I will order that the parties confer and seek to agree a form of orders to give effect to these reasons and, in the event of disagreement file, in mark up, within 14 days a set of draft orders identifying the points of difference together with written submissions limited to five pages in support of their respective positions.
I certify that the preceding four hundred and ninety-six (496) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate:
Dated: 2 June 2020
Key Legal Topics
Areas of Law
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Administrative Law
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Tort Law
Legal Concepts
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Jurisdiction
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Misfeasance in Public Office
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Compensatory Damages
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Statutory Interpretation
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Proportionality
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