Commonwealth of Australia v 5 Star Foods Pty Ltd
[2002] VSC 70
•27 March 2002
f
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 2119 of 2000
| COMMONWEALTH OF AUSTRALIA (COMMONWEALTH DEPARTMENT OF AGRICULTURE FISHERIES AND FORESTRY) | Plaintiff |
| v | |
| 5 STAR FOODS PTY LTD (ACN 005 714 616) | Defendant |
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No. 7933 of 2000
| ESPOSITO HOLDINGS PTY LTD (ACN 079 763 303) and OTHERS | Plaintiffs |
| v | |
| COMMONWEALTH OF AUSTRALIA and OTHERS | Defendants |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19, 20, 21, 22, 25 and 26 February 2002 | |
DATE OF JUDGMENT: | 27 March 2002 | |
CASE MAY BE CITED AS: | Commonwealth of Australia v 5 Star Foods Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 70 | |
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Customs and Excise – manufacturing milk levy – manufacturer of milk produce – company which sells manufactured milk not a manufacturer – whether first purchaser of milk produce liable to pay manufacturing milk levy – restitution for levy paid – whether voluntary payment – whether claim for restitution statute barred.
Primary Industries (Excise) Levies Act 1995 (Cth), Schedule 6 cll. 1, 2, 6(1)(b), 13.
Limitation of Actions 1958 (Vic), s. 20A.
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APPEARANCES: | Counsel | Solicitors |
| No. 2119 of 2000 For the Plaintiff | Mr D.M. Clarke | Tress Cocks & Maddox |
For the Defendant | Mr C.A. Connor | Kliger Partners |
| No. 7933 of 2000 For the Plaintiffs For the 1st Defendant For the 2nd and 3rd Defendants | Mr C.A. Connor | Kliger Partners |
HIS HONOUR:
This trial concerns imposition by the Commonwealth of a manufacturing milk levy in the financial year 1999-2000 upon dairy products of a business which traded under the name United Dairy Power (“UDP”). There are in fact two proceedings which were heard together.
In the first proceeding, No. 2119 of 2000, the Commonwealth sues 5 Star Foods Pty Ltd (“5 Star”) as the person carrying on the business of UDP, seeking unpaid manufacturing milk levies in respect of the months March, April, May and June 2000 and penalty for unpaid or late paid manufacturing milk levies and other milk levies. Its claim as amended in the course of the trial is set out in its amended statement of claim filed on 20 February 2002.
In the second proceeding, No. 7933 of 2000, four plaintiffs, Esposito Holdings Pty Ltd, Sanva Pty Ltd, Imbergee Pty Ltd and 5 Star, as owners of the UDP business, seek to recover from the Commonwealth manufacturing milk levies paid by UDP in each of the months of the 1999-2000 financial year. In that proceeding two other owners of the business, Antonio Pillirone and Carmelo Pillirone, are joined as defendants for conformity, but they took no part in the proceeding. The claims of the plaintiffs in this proceeding are those set out in their third amended statement of claim filed on 25 February 2002.
These claims, and particularly the claim brought in proceeding No. 7933 of 2000, were complicated by the fact that, during the financial year in question, the ownership of UDP changed. Prior to 8 September 1999 the registered proprietor of the business name was Antonio Patrick Esposito; from that date to 27 March 2000 the registered proprietors were Esposito Holdings, Imbergee, Sanva, Mr A. Pillirone, and Mr C. Pillirone; and thereafter the registered proprietor was simply 5 Star. This complication, however, was resolved by agreement between counsel. It was accepted that, if UDP had a liability to the Commonwealth as was contended in proceeding No. 2119 of 2000, 5 Star was the appropriate party against whom judgment should go. Likewise, if UDP is entitled to relief as is sought in proceeding No. 7933 of 2000, judgment should go in favour of 5 Star.
The issues raised in these proceedings may be conveniently identified as the following:
(1) Was UDP liable as manufacturer to pay the manufacturing milk levy.
(2) Was UDP liable as an intermediary to pay the manufacturing milk levy.
(3)If no to question (1) and (2) and, subject to question (4), is UDP entitled to recover in restitution the amount of manufacturing milk levy paid by it in respect of that milk?
(4)Is the claim of UDP for recovery of the levy paid barred by s. 20A of the Limitation of Actions Act 1958?
(5)If yes to question (3) and no to question (4), what amount is recoverable in respect of the levy paid?
(6)If yes to question (1) or (2), is UDP liable to pay penalty for non-payment or late payment of the manufacturing milk levy?
(7)Is UDP liable to pay penalty for non-payment or late payment of the other levies imposed on its dairy produce?
(8)What sum is UDP liable to pay as penalty?
In the course of trial it was agreed that I should not determine question (5); this issue, should it arise, will be determined at a later hearing.
The Milk Levies
In 1995 the Commonwealth put in place a new domestic market support scheme for the dairy industry. This was achieved, in part at least, by three amending statutes: the Dairy Produce Amendment Act 1995[1], the Dairy Produce Levy (No. 1) Act 1986[2] and Dairy Produce Levy (No. 2) Act 1986[3]. For the period with which I am concerned, 1 July 1999 to 30 June 2000, the statutory regime for the imposition of dairy levies is to be found in the Primary Industries (Excise) Levies Act 1999[4]. This statute dealt with the imposition of levies on a number of primary products including, in Schedule 6, dairy produce. I shall refer to this statute as the Excise Levies Act. An associated statute which dealt with the collection of these and other primary industry levies is the Primary Industries Levies and Charges Collection Act 1991[5]. This Act I shall call the Collection Act.
[1]No. 45 of 1995.
[2]No. 46 of 1995.
[3]No. 47 of 1995.
[4]No. 31 of 1999.
[5]No. 25 of 1991.
No less than nine levies are imposed on relevant dairy produce including seven levies which are imposed in different situations pursuant to cl. 6 of Schedule 6 of the Excise Levies Act. The two levies with which I am concerned, the manufacturing milk levy and, to a lesser extent, the market milk levy are imposed by paragraphs 6(1)(a) and (b) of Schedule 6 to the Excise Levies Act. Broadly speaking, market milk is the expression used in the legislation for milk for human consumption in liquid form, and manufacturing milk is milk other than market milk. Clause 13 of the schedule, which deals with the persons by whom the levies are payable, stipulates that the manufacturing milk levy is payable by the manufacturer; all but one of the remaining levies, including the marketing milk levy, are payable by the producer. Pursuant to s. 17 of the Collection Act, levies and any penalties are recoverable by the Commonwealth as debts due to it but where the Commonwealth has entered into a collection agreement with an organisation pursuant to s. 11 of the Collection Act, the levies are payable to the collecting organisation. In the year in question, the Australian Dairy Corporation (“ADC”) was such a collecting organisation. The money received by the Commonwealth from these two levies is paid into the Domestic Market Support Fund established under Part VI Division 5 of the Dairy Produce Act 1986[6]. From this fund is paid to producers of manufacturing milk a domestic market support payment in respect of all manufacturing milk produced in Australia in a month ending on 1 July 2000[7]. I shall return in some detail to these provisions.
[6]See ss. 107, 105(a).
[7]Dairy Produce Act 1986 (Cth), ss. 108A, 108C.
It is necessary that I draw attention at this stage to the scheme then in place in Victoria which had been established under the Dairy Industry Act 1992 (Vic) for equalisation of returns to farmers in respect of milk for consumption as liquid milk. This scheme was implemented by a statutory authority called the Victorian Dairy Industry Authority (“VDIA”). Broadly speaking, the VDIA estimated the quantity of milk required for human consumption in Victoria for a given month and required that this quantity be sold to it by farmers on a quota basis. The sale was achieved by the acceptance of milk by its delivery to the VDIA carrier by an authorised agent of the VDIA or by the appropriation of the milk by an authorised agent which held a Milk Processors Licence for processing market milk[8]. Authorised agents were appointed pursuant to s. 49. According to Rodney Norman Williams, a dairy industry consultant, who gave evidence before me, the functions of authorised agents included testing milk, standardising it at 3.8% to 4% butterfat content and making payment to the farmers for the milk purchased. This is confirmed by cl. 11 of the Agency Agreement entered into between VDIA and UDP dated 22 July 1999. Pursuant to this provision it is the obligation of UDP to standardise the milk accepted on behalf of VDIA before it is delivered to the carrier of VDIA unless it is relieved of this obligation. For these functions authorised agents were paid by the VDIA a handling fee of 3.62 cents per litre. In the financial year 1999-2000 UDP, Murray Goulburn Co-operative Co Ltd (“Murray Goulburn”) and Warrnambool Dairy and Butter Factory Ltd (“Warrnambool”) were authorised agents.
[8]Dairy Industry Act 1992 (Vic), s. 51(1).
Was UDP Liable as Manufacturer?
The manufacturing milk levy is imposed upon certain dairy produce pursuant to cl. 6(1)(b) of Schedule 6 of the Excise Levies Act. The product upon which the manufacturing milk levy is imposed is described in cl. 6(1)(b) as follows:
“… relevant dairy produce:
(i)delivered to a manufacturer by the producer during a month ending after 30 June 1999 and before 1 July 2000; or
(ii)produced by a manufacturer and used by the manufacturer, during a month ending after 30 June 1999 and before 1 July 2000, in the manufacture of dairy produce;
other than dairy produce referred to in paragraph (a).”
The excepted “dairy produce referred to in paragraph (a)” is milk upon which is imposed the market milk levy pursuant to cl. 6(1)(a) of the schedule. In that provision this milk is described as follows:
“relevant dairy produce, supplied by the producer during a month ending after 30 June 1999 and before 1 July 2000, in relation to which the producer has received, or is entitled to receive, a payment relating to liquid milk for human consumption in Australia.”
Clause 13 of the schedule deals with the question, who pays the levy. The paragraphs dealing with market milk levy and management milk levy are the following:
“(1)The market milk levy imposed by this Schedule on relevant dairy produce is payable by the producer of the relevant dairy produce.
(2)The manufacturing milk levy imposed by this Schedule on relevant dairy produce delivered to, or used by, a manufacturer of dairy produce is payable by the manufacturer.”
In the legislative provisions which I have and will set out in this judgment the words and expressions highlighted are those which are subject to definition in the Levies Excise Act or the Collection Act. Definitions from the Collection Act are imported into the Levies Excise Act by s. 4 of the latter Act “unless the contrary intention appears”. For present purposes the following definitions from cl. 1 of Schedule 6 to the Excise Levies Act are relevant.
“manufacturer means a person who carries on a business that consists of, or includes, the manufacture of dairy produce.
relevant dairy produce means dairy produce that is:
(a) whole milk; or
(b) whole milk products.
whole milk means whole milk produced in Australia.
whole milk product means a product that:
(a)is produced by modifying, or extracting material from, whole milk; and
(b)consists of, or contains, milk fat.”[9]
I shall deal later with the definition of “producer” in the Collection Act.[10] For my present purposes it is sufficient that I record that it was common ground that the dairy farmer was the producer of raw milk.
[9]Schedule 6, cl. 1.
[10]See [52] below.
Counsel for the Commonwealth put his case on both limbs of cl. 6(1)(b). I queried with him what was meant by sub-paragraph (ii) in this sub-clause. How could it be that relevant dairy produce could be produced by a manufacturer and used by the manufacturer in the manufacture of dairy produce? The use of the definite article before “manufacturer” where second appearing suggests that it is the same manufacturer which produces and uses the dairy produce. The difficulty arises in supposing how it might be that a person might produce a thing and use that thing in the manufacture of the same thing. Perhaps the solution lies in supposing that the sub-paragraph contemplates the person producing a thing and using that thing in the manufacture of another thing. If this be what is intended, then the further question arises as to why such a formula has been selected as the event upon which the levy is imposed on the thing which the manufacturer has produced and later used for manufacture. Another possibility is that the word “and” in the clause should in fact read “or” so that the levy is imposed upon relevant dairy produce which is either produced by a manufacturer or used by the manufacturer. This is suggested by provisions such as cl. 13(2) which I have set out above. There, the critical feature of the leviable dairy produce is that it is used by a manufacturer. Regrettably this is not how cl. 6(1)(b)(ii) is expressed. No submission, however, was put as to this and I shall say nothing further about it. As I mentioned to counsel, my difficulty with paragraph (ii) should not be easily put aside, not only because the Commonwealth relies upon it in this case, but also because the terminology is used again and again in cl. 6(1) of the schedule. Although counsel for the Commonwealth told me that his client relied upon this sub-paragraph, he was unable to offer any interpretation to resolve the difficulties. After seeking instructions, he finally submitted that sub-paragraph (ii) was intended to cover the situation where some manufacture takes place on the farm, a circumstance which does not apply here. In the end, no meaningful construction was offered as to how paragraph (ii) might apply to the circumstances of this case and I am unable to conclude that manufacturing milk levy is imposed upon the dairy produce in this case pursuant to cl. 6(1)(b)(ii) of the schedule.
I return, then, to cl. 6(1)(b)(i) of the schedule. The evidence showed that, in each month of the year 1999-2000, UDP purchased and took delivery of raw milk from dairy farmers, the producers of that product. This raw milk included a quantity which had to be delivered to the VDIA as market milk quota with which I am not concerned. The question, therefore, as to the applicability of this sub-paragraph and therefore as to the imposition of the levy upon that product becomes whether the raw milk was delivered by the farmer to a manufacturer, as that term is defined. If so, the liability of UDP to pay that levy turns upon the second question: whether UDP was the manufacturer in terms of cl. 13(2).
It was submitted on behalf of the Commonwealth that the requirements of cl. 6(1)(b)(i) would be satisfied if the milk in question was delivered to a person whose business was or included that of manufacturer at any time in the financial year. So, it was put, if UDP was a manufacturer only in the month of July 1999, all milk delivered to it in the remaining 11 months of the year was, by reason of that fact, subject to the manufacturing milk levy. I reject that submission.
The definition of manufacturer is not expressed in terms of a person who manufactures product at a particular time; it is in terms of the business which the person carries on at that time. A company may be carrying on the business of manufacturer on a given date notwithstanding that it is not actually manufacturing anything on that date.
Furthermore, it is clear from the structure of the levy legislation that milk is dealt with on a monthly basis. Clause 6(b)(1) speaks of delivery to a manufacturer during a month in the year in question. The amount of the levy is fixed by reference to the milk fat and protein content of the month’s milk[11]. This is to be contrasted with the provision with respect to the acquisition off-set levy which appears to be dealt with on an annual basis[12].
[11]cll. 7, 8.
[12]See Schedule 6, cl. 6(c), 9.
An associated feature of cl. 6(1) of the schedule which supports this conclusion is that each of the paragraphs (a) to (g) imposes a levy on relevant dairy produce in a specifically prescribed event. The imposition of the levy, therefore, fixes the commodity upon which the levy is imposed and the time of its imposition. To take the manufacturing milk levy as an example, relevant dairy produce, including whole milk, delivered to a manufacturer by a producer in a given month is subject to the levy at the time of delivery, subject always to the market milk exception. Since relevant dairy produce includes all manner of milk products as well as whole milk itself, it is possible that this levy might be imposed numerous times as the product moves from manufacturer to manufacturer in the process from the cow to the ultimate consumer. This duplication is avoided in the legislation by sub-cl. 6(2) which, in such a case, fixes the imposition of the levy at the time and circumstance of its first imposition. This temporal aspect of the imposition of the levy leads to the conclusion that, under cl. 6(1)(b)(i), the moment of imposition of the levy is when the relevant dairy produce is delivered to a person who is then a manufacturer. This is the person who has the obligation to submit a monthly return in the month that it uses the milk in its manufacture of dairy produce[13] and who is liable to pay the levy[14] within the time specified in reg 10.
[13]reg 13.
[14]Schedule 6, cl. 13.
I conclude as a matter of construction that, for the purposes of the manufacturing milk levy, enquiry is directed to each month of delivery. If in that month the recipient of the milk from a producer carried on the business of manufacturer of milk produce, then the levy is imposed on that milk and that manufacturer is liable to pay this levy[15].
[15]Schedule 6, cl. 13(2).
Attention, therefore, shifts to the question whether, in each of the months of 1999-2000, UDP was a manufacturer as defined in cl. 1, that is, whether it carried on a business that consisted of or included the manufacture of dairy produce. It will be noted that, in the definition of manufacturer, the manufactured dairy produce is not qualified. It would, therefore, include dairy produce, such as market milk, to which a manufacturing process such as homogenisation or pasteurisation had been applied.
It is necessary to step back in time, for a moment, to the events of the financial year 1998-9. At that time a business called Sudano Cheese Company purchased milk from dairy farmers, had it standardised by Murray Goulburn and then used this standardised product in its manufacture of cheese. This business was in fact conducted under that name by Pillirone & Sons Pty Ltd whose directors included Mr C. Pillirone and Mr A. Pillirone. Sudano Cheese, as manufacturer, paid the manufacturing milk levy on the milk it purchased, other than market milk. In 1999 this business was in financial difficulties and was in arrears in its payments to the ADC of this levy. As from July 1999 in circumstances to which I shall later refer, Sudano Cheese ceased taking deliveries from its farmers. This role was then undertaken by UDP which, it will be recalled, was a new business owned by another company in which the Pillirones had or were to have an interest. This new business was to purchase the milk from the farmers and, after delivering the market milk quota to VDIA, was to sell and deliver most of the balance to Sudano Cheese which could then concentrate on the manufacturing aspects of its business.
And so, during each month of the year 1999-2000, UDP collected in tankers the milk from the farmers which was measured by it for quantity and tested for fat and protein content. Some, but not all, of this milk was delivered to the Leongatha factory of Murray Goulburn where it was again measured for quantity and tested for fat and protein content. The arrangement between UDP and Murray Goulburn came to an end in April 2000. The relevant activities of the Leongatha factory, therefore, occurred in each month of the year in question except May and June 2000. The Commonwealth relied upon the processing which was carried on at the Leongatha factory as rendering UDP a manufacturer in each of these 10 months.
Milk delivered by UDP to Murray Goulburn during these 10 months was not kept separate from other milk received by Murray Goulburn. It was commingled with this other milk and kept in Murray Goulburn’s silos. As required, a quantity of this milk was standardised to the requirements of the VDIA and delivered to it as market milk and credited against the quota of milk which UDP’s farmers were required to deliver and sell to the VDIA for processing into drinking milk. A further quantity of milk standardised to the specification of Sudano Cheese was delivered by Murray Goulburn at UDP’s direction to Sudano Cheese to be manufactured into cheese, and a further quantity which was delivered to Warrnambool in and from September 1999 to be converted into skim milk powder or simply for purchase by Warrnambool. Finally, a further quantity of milk which was not required by UDP for its own purposes was purchased from UDP by Murray Goulburn. Murray Goulburn also purchased from UDP the butter fat which was a by-product of the standardisation and skimming processes.
Not all of the milk purchased by UDP from the farmers in 1999 - 2000 was delivered to Murray Goulburn, even in the 10 months during which UDP dealt with that factory. In May and June 2000 all of UDP’s quota of market milk was delivered to Paul’s Victoria Ltd (“Paul’s”) where it was standardised and processed for drinking milk. Furthermore, in May and June 2000, which are the months of low milk production, the cost of milk to UDP was so high that it was uneconomic to convert it into milk powder. UDP therefore delivered and sold some milk directly to Warrnambool in those months for it to use for its own purposes. Finally, some of UDP’s milk was sold in unstandardised form to manufacturers such as Nestlé Food and Beverage and Fresh Cheese Pty Ltd and, presumably, used by them for their own purposes. It was indicated by counsel on behalf of UDP that milk which did not pass through the hands of Murray Goulburn is not the subject of the restitution claim.
The contention of the Commonwealth was that, due to UDP’s dealings with Murray Goulburn during the 10 month period to April 2000, with Paul’s in May and June 2000 and with Warrnambool from September 1999 to June 2000, it was a manufacturer. The determination of this contention which was challenged on behalf of UDP involves the consideration of two issues: whether the process of standardisation is a process of manufacture and whether the involvement of UDP in this process when it was undertaken by Murray Goulburn or Paul’s, rendered it a manufacturer. It was accepted that the conversion of milk to skim milk powder was a manufacture of that product so that in the case of Warrnambool, it is only the second issue which requires attention.
As to the first issue, standardisation is a mechanical process whereby the composition of milk is altered by adjusting its butterfat, protein or solids content to a specified percentage of the whole. This was the description of the process given by Paul Brent Kerr, the General Manager – Operations of Murray Goulburn and I am content to act on it.
A significant portion of UDP’s milk, other than market milk, which had been standardised by Murray Goulburn or Paul’s was delivered and on-sold to Sudano Cheese for manufacture into cheese. Standardisation of the raw milk is the first or an early step in this cheese-making process which in other circumstances may have been performed by Sudano Cheese itself. Accordingly, it was put that standardisation is not a process of manufacture but is merely a process preparatory to manufacture.
Counsel for the Commonwealth referred to cl. 2 of the schedule to the Excise Levies Act with provides as follows:
“For the purposes of this Schedule, a person who applies any process to relevant dairy produce is taken to use the relevant dairy produce in the manufacture of dairy produce unless:
(a) the process consists only of chilling; and
(b) the person is the producer of the relevant dairy produce.”
It was contended that this demonstrates that the intention of the schedule is that the application of any process to milk, even its mere chilling, would otherwise have been a process of manufacture.
I was taken to various dictionary definitions of “manufacture”. It is a word in common parlance, having no special meaning in the dairy industry. Accordingly, I declined to receive evidence of its meaning. Likewise, I am not assisted by the definition of this term in other unconnected legislation, such as the Dairy Industry Act 1992 (Vic). The cases to which I was referred also emphasise that the word should be given its meaning in ordinary everyday language[16]. To my mind this meaning comprehends the application of a repetitive process, especially a mechanical process, to a thing or things to bring it or them to a form or condition specified. This process may be directed to producing a thing in a state fit for sale, for consumption by the end user, for attachment to or assembly with other things or for some further process. The process of standardisation is a process of manufacture and the person whose business it is to standardise milk is a manufacturer of dairy produce, namely, standardised milk.
[16]Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297 at 304-5, per Gibbs CJ.
I turn then to the second and more difficult issue, whether a person who, in the course of business, supplies a thing to another for that other to apply to it a process of manufacture and who receives back the manufactured product is themself engaging in the business of manufacturing that product. On behalf of the Commonwealth it was submitted that this follows as a matter of ordinary experience. A person who agrees with a landholder to build a house and who delivers up to the landholder a completed house is properly and ordinarily said to carry on the business of builder notwithstanding that they have let to contractors all of the tasks of construction and that they or their employees have not touched a tool or any material used in the construction. Counsel added that it would be remarkable if a person in the position of UDP could avoid liability for excise as a manufacturer simply by letting out the manufacturing process to be performed by an independent contractor.
What is surprising was that there appears to be no authority which deals with, or even sheds light on, this issue. Accordingly, the question must be addressed as a matter of principle.
Much reliance was placed on behalf of the Commonwealth upon many statements made by UDP throughout 1999 to 2000 that it was itself a manufacturer. They appear notably in the documentation which UDP submitted to the ADC. These admissions, however, lose a good deal of their force when they are seen in the context in which they were made. UDP had merely stepped into the shoes of Sudano Cheese which was undoubtedly a manufacturer and paid manufacturing levies as such. As will be seen, UDP was obliged in order to facilitate the operation of the levy system and, more importantly for it, the domestic market support scheme, to complete forms provided by the ADC which contained no description of it other than that of manufacturer.
Nor have I overlooked the concession made on behalf of UDP on Day 1 of the trial that it did not seek to recover levy payments made in, perhaps not dissimilar, circumstances where its milk was processed by manufacturers other than Murray Goulburn. Counsel said on behalf of UDP that in seeking the equitable remedy of restitution it would itself do equity by abandoning claims for money where it has suffered no loss. I do not see in this concession any admission that UDP was liable to pay the levy which it paid in those circumstances and which it does not now seek to recover.
It is convenient that I mention, too, at this stage, that I am not concerned with any belief in the Commonwealth that UDP was a manufacturer, nor with any intent of UDP to become a manufacturer in the future, nor with any perception in the dairy industry generally, if there be such a thing, that UDP or some person performing the acts which it did, was a manufacturer. I therefore put to one side the submissions of the Commonwealth to that effect. The short point which I am to decide is whether UDP at the relevant time in fact carried on a business of manufacturing dairy products.
Counsel for UDP submitted that the question whether his client carried on the business of manufacture of dairy produce by reason of the carrying on of the processes by Murray Goulburn, Warrnambool and Paul’s must have regard to the particular arrangements pursuant to which these processes were applied to the milk. It is to these arrangements that I now turn.
The arrangement with Murray Goulburn dates back to that which had previously been put in place between Sudano Cheese and Murray Goulburn in 1997 and which is set out in a letter from Murray Goulburn to Mr C. Pillirone on behalf of Sudano Cheese dated 18 April 1997. This arrangement was extended and modified in 1998 as appears from another letter from Murray Goulburn to Sudano Cheese dated 29 June 1998. The arrangement was called in the letter a “Market Milk Swap Agreement” but it dealt with manufacturing milk as well as market milk. In summary, under this agreement as modified, Sudano Cheese was to deliver all of its milk to Murray Goulburn’s Leongatha factory. Murray Goulburn would standardise the Sudano Cheese market milk quota to the requirements of the VDIA and the balance of the milk would be standardised to 3.1% butterfat which was the requirement for Sudano Cheese’s cheese production. The consideration passing to Murray Goulburn for this work had two components. The first was the payment of one half share of the handling fee payable by VDIA to UDP in respect of the market milk quota which share was paid or credited to Murray Goulburn by UDP. Second, was the purchase from Sudano Cheese of the butterfat which was the by-product of the standardisation process at a price about 30 cents per kilogram below market price. Since the milk received by Murray Goulburn was commingled with other milk in its silos, property in the Sudano Cheese milk passed to Murray Goulburn so long as it held it. Deliveries to Sudano Cheese or at its direction were of an equivalent quantity of milk from the common stock which had been processed to the required butterfat standard. As a matter of administration, a running account of milk received and milk delivered and maintained by Murray Goulburn. It would seem, too, that as an undoubted manufacturer of cheese, Sudano Cheese submitted monthly returns for this milk to the ADC and paid on it the manufacturing milk levy.
In June 1999 this arrangement, in effect, passed to UDP when Sudano Cheese ceased taking deliveries from its farmers. There were discussions between Mr C. Pillirone and Mr Esposito with Arno Vecgravis, an employee of the ADC in charge of the collection of the levy. I shall return to these discussions with Mr Vecgravis; for present purposes I am concerned with the arrangements between UDP and Murray Goulburn.
Mr Kerr, who with Steven O’Rourke represented Murray Goulburn in the discussions, spoke of a meeting in September 1999 in which he was told by Mr Esposito and Mr C. Pillirone that UDP would simply replace Sudano Cheese under the existing arrangement between it and Murray Goulburn. Neither Mr O’Rourke nor Mr C. Pillirone was called as a witness. I accept Mr Esposito’s evidence that this meeting in fact occurred earlier, in June rather than September 1999. The two witnesses who gave evidence of it did not, however, disagree as to what was discussed. I find that the existing arrangement was agreed to continue with UDP instead of Sudano Cheese providing the milk to Murray Goulburn. For my present purposes the standardisation of the manufacturing milk for Sudano Cheese was to continue as before, and this is what happened. As with the previous arrangement between ADC and Sudano Cheese, UDP included the Murray Goulburn milk in its returns to the ADC, describing itself as a manufacturer, and it made the levy payments, albeit not punctually.
The facts as I have found them show that Murray Goulburn was in 1999-2000 engaged in the manufacture of standardised milk. It was that company which decided what processes were to be applied for the purpose of standardisation and when and how they were applied to the milk in its silos. Murray Goulburn was not a mere contractor providing labour for the processing of material for and on behalf of UDP[17]. Nor can it be said, consonant with ordinary usage, that a company conducts the business of manufacturer where it does not hold itself out as performing a process of manufacture and it does not itself perform such a process, but engages an independent contractor to do this. The essential point of difference between such a company and the example of the builder proffered by counsel for the Commonwealth can be demonstrated by taking another example which is a little more apposite since it concerns work on a chattel rather than on land. A consumer who wants a caravan might engage a person to manufacture it. That person would be understood to carry on the business of manufacturer of caravans notwithstanding that the work is sublet to a factory which actually makes the caravan. Alternatively, the consumer might go to a dealer and place an order for a caravan which meets certain specifications. In due course, the dealer has the caravan constructed at the same factory and then delivers the manufactured product to the consumer. This dealer does not carry out the business of manufacturer of caravans notwithstanding that the consumer’s order has been passed on to a manufacturer. In this example, as in the present case, the person who arranges for the performance of the manufacturing process carries on the business of manufacturer only where they hold themself out to the customer as performing or causing to be performed the manufacturing process and, therefore, assumes the obligation to perform it. Put another way, the difference is between a company which holds itself out as carrying on the business of selling manufactured objects and the company which holds itself out as carrying on the business of manufacturing objects for sale. Whether in a given case a person or company is or is not a manufacturer in these circumstances will depend also upon a number of factors including the following which appear in the present case. Where the company performs or causes to be performed a manufacturing process upon product owned by its customers then this is an indication that it is engaged in the business of manufacture. Where its payment is calculated by reference to the work performed this too suggests that it is a manufacturer.
[17]See Dawson v Deputy Commission of Taxation (1984) 56 ALR 367 at 373, per King CJ (SC, SA).
In the case of its UDP milk product delivered to and by Murray Goulburn a proper analysis of the relationship between the UDP and its customers and UDP and Murray Goulburn leads to the conclusion that UDP was not engaged in the business of the standardisation of milk. It sold to the VDIA and to its commercial customers, such as Sudano Cheese, milk of a specified butterfat content which Murray Goulburn manufactured and delivered to it or at its direction.
I now turn to the arrangements between UDP and Warrnambool. These were described in evidence by Mr Esposito and Mr Wallace and are recorded in a letter from Warrnambool dated 27 August 1999 signed as an acceptance by Mr C. Pillirone on behalf of UDP. In summary, the arrangement was that UDP would deliver quantities of milk each month to Warrnambool which would then convert the milk into milk powder. The consideration was the payment to Warrnambool of $730 per tonne of powder produced. The surplus cream was at first to be returned to UDP but, later, Warrnambool purchased this by-product. The letter contains a title transfer provision whereby a title in the powder passes to Warrnambool when the conversion process is complete and remains with Warrnambool until payment in full of the agreed charges. This means that, during the performance of the conversion process, the milk remains the property of UDP[18]. The powder is then stored at the expense of Warrnambool for 30 days and, thereafter, at the cost of UDP until delivered at the direction of UDP to its purchaser.
[18]As was the case in Caltex Oil (Australia) Ltd v The Dredge “Willemstad (1976) 136 CLR 529.
The significant differences between the arrangement with Murray Goulburn and that with Warrnambool are, first, that the manufacturing process was applied by Warrnambool to milk which was owned at the time by UDP and, second, that Warrnambool was paid a price which was directly referable to the quantity of product it produced.
Notwithstanding these differences, I conclude for the reasons set out with respect to the Murray Goulburn arrangement that the conversion process carried out by Warrnambool did not render UDP a manufacturer of skim milk powder.
Again, I reach this conclusion notwithstanding the admissions made by UDP to the ADC that it was a manufacturer during the months it delivered milk to Warrnambool for conversion. I do not read the statement on the packaging of the powder that it had been manufactured for UDP as an admission that it had been manufactured by UDP.
The third activity relied upon as rendering UDP a manufacturer is the standardisation of its market milk in May and June 2000 by Paul’s for delivery to VDIA. Little is known of the arrangement pursuant to which this standardisation carried out other than that Paul’s paid for the butterfat by-product, perhaps at less than the market price for butterfat. This market milk falls within the exception to cl. 6(b) of the schedule so that any manufacturing process applied to it is not relevant for my purposes. In any event, for the reasons set out with respect to Murray Goulburn, I am not satisfied that Paul’s standardisation renders UDP a manufacturer.
It was not, I think, suggested that the unconditional sales by UDP of milk to Nestlé or to any other manufacturer rendered UDP a manufacturer. In any case, I do not so find.
I conclude, therefore, that during no month of the year 1999-2000 was UDP a manufacturer within the meaning of the expression in the schedule. The manufactured milk levy was not imposed on milk which was delivered by a producer to UDP during that year and it was not liable to pay any such levy as a manufacturer.
Accordingly, the first two questions identified in paragraph [5] must be answered in the negative since the producers of the raw milk delivered their produce to UDP which was then a mere purchaser and whose business did not include that of manufacturing milk produce from the milk delivered to it.
Was UDP Liable as Intermediary?
Very late in the trial, counsel for the Commonwealth amended its statement of claim to contend in the alternative that UDP was liable as an intermediary pursuant to s. 7(1)(b) of the Collection Act. This provision is in the following terms:
“7(1)Subject to subsection (2A), for better securing the payment of levy:
(a)a selling agent who sells products, being products on or in relation to which levy is imposed, on behalf of the producer of the products; and
(b)a first purchaser of such products (otherwise than such products purchased through a selling agent or a buying agent); and …
is liable to pay in accordance with subsection (4), on behalf of the producer, an amount equal to the sum of:
(d)the amount of any levy due for payment on or in relation to the products; and
(e)any amount payable by the producer under subsection 15(1) in relation to that levy.”
Again I have highlighted the terms and expressions which are subject to definition. In s. 4 “first purchaser” is defined as follows:
“’first purchaser’ means a person who, in the course of carrying on a business, purchases collection products from the producers of the products (otherwise than through selling agents) but does not include prescribed persons who so purchase collection products for retail sale;”
Reference in paragraph (e) of s. 7(1) to s. 15(1) is a reference to penalty for late or non-payment of levies. A considerable part of the Commonwealth’s claim is for such levies. Diary product upon which a levy is imposed falls within the definition and collection products.
It is clear enough that UDP, as purchaser of milk from its farmers throughout the year, is a first purchaser. As such, it is liable to pay on behalf of the producer, not the levy imposed pursuant to cl. 13(2) of the schedule to the Excise Levies Act, nor the penalties imposed pursuant to s. 15 of the Collection Act, but, on behalf of the producer an amount equal to the amount of the levy and any unpaid penalties in relation to that levy. The immediate response of UDP to this is that, pursuant to cl 13(2) of the schedule, it is the manufacturer and not the producer who is liable to pay the manufacturing milk levy so that s. 7(1) has no application to this levy.
The answer offered on behalf of the Commonwealth depended upon paragraphs (c) and (e) of the definition of producer in s. 4 of the Collection Act. These paragraphs are in the following terms:
“’producer’ means: ….
(c) in the case of relevant dairy produce …; …
(ii)… the person who, immediately before the product is produced, owns the prescribed thing from which the product is produced; or…
(e)in the case of a product prescribed for the purposes of this paragraph – the person who, under the regulations, is to be taken to be the producer of the product;…”
As to paragraph (c)(ii) I was told by counsel for the Commonwealth that he was not aware of anything that had been prescribed as mentioned in that sub-paragraph. It would appear, therefore, that paragraph (c) has no application.
By the Primary Industries Levies and Charges Collection (Dairy) Regulations 1991 reg 7, dairy produce and relevant dairy produce are prescribed and each of the following persons is taken to be a producer:
“(i) a person who produces relevant dairy produce;
(ii) a manufacturer of relevant dairy produce;
(iii)a prescribed exporter, or a related company, who imports dairy produce into Australia;
(iv)a prescribed exporter, or a related company, who acquires dairy produce that has been imported into Australia;
(v)an importer into Australia of dairy produce that:
(A)was exported from Australia; and
(B)is in the same form, or substantially the same form, as it had when exported.”
The argument for the Commonwealth, then, proceeds as follows. The manufacturing milk levy is imposed on the milk in question pursuant to cl. 6(b)(i) because the producer delivers it to Murray Goulburn, Warrnambool and Paul’s during the year in question. The recipients are all, as I have found, manufacturers in relation to this milk and generally. The producer in this analysis is either UDP or the farmer. This presents an immediate difficulty because it is clear that UDP purchased the manufacturing milk from the farmers and delivered it to the factory on its own account. It was not doing so as agent of the farmers so that the delivery to the factory was not a delivery by the farmer producer. Counsel then relied upon the extended definition of producer in s. 4(1)(e) of the Collection Act. As a manufacturer of relevant dairy produce UDP is taken to be a producer. The difficulty here is that I have concluded that UDP was not a manufacturer.
Nevertheless, the Commonwealth argument proceeds as follows. UDP is the first purchaser of the raw milk and, accordingly, is obliged to pay on behalf of the producer an amount equal to the levy. Although liability to pay the levy falls upon the producer pursuant to cl. 13(2) of the schedule, a manufacturer of relevant dairy produce is taken to be the producer by paragraph (e) of the definition of producer and reg 7. Accordingly, the manufacturer, that is, UDP, is liable to make payment.
To this argument counsel for UDP said many things. First, he drew attention to the fact that the regulations, including reg 7, were revoked by the Primary Industries Levies, Charges and Collection Repeal Regulations 2001[19] which commenced on 1 July 2001. The transitional provision is found in reg 4 of these regulations in the following terms:
“Despite the repeal of regulations by Schedule 1 to these Regulations, those regulations (as in force immediately before the commencement of Schedule 1) continue to have effect in relation to levies and charges imposed before the commencement of Schedule 1.”
[19]SR 111 of 2001.
Counsel for UDP accepted that this transitional provision would preserve the definition of producer insofar as it concerned the imposition of the manufacturing milk levy and the liability to pay that levy including the liability of an intermediary. He nevertheless contended that the transitional provision did not preserve the repealed regulation insofar as it concerned penalties imposed by s. 15 of the Collection Act.
Next, he contended, successfully as I have found, that the manufacturing milk levy was not imposed upon the dairy product which the farmer delivered to UDP because UDP was not a manufacturer. The raw milk of which UDP was undoubtedly the first purchaser was not, therefore, a product “on or in relation to which levy is imposed” within the meaning of s. 7(1)(b) of the Collection Act. It may be that the levy would be imposed on this produce at a later stage in the process of its becoming cheese or milk powder or some other manufactured dairy produce, but the produce was not leviable at the time it came into the hands of UDP. Accordingly, the intermediary provisions had no application.
This brings me to the next point which I have already touched upon in my consideration of cl. 6(1)(b)(i) of the schedule. A person is not a producer or a manufacturer in gross; it is necessary to ask what it is that the person produces or manufactures. More particularly, it is necessary to ask in terms of reg 7(ii) what it is that a manufacturer of relevant dairy produce is taken to be the producer of. Section 7(1)(b) of the Collection Act imposes liability upon the first purchaser “of such products”, that is, products on which the manufacturing milk levy is imposed. Let it be assumed that this is raw milk, for this is what UDP purchased from the producer. The first purchaser is then liable to pay on behalf of the producer of raw milk the levy due for payment on the raw milk. Let it be assumed, contrary to my conclusion, that the raw milk in the hands of UDP is leviable and that the levy is payable by the manufacturer, that is, UDP as the manufacturer of standardised milk. The argument, if it is to succeed, must at this point equate the producer whose liability is to be assumed by the intermediary with the manufacturer which is UDP. The deeming provision of reg 7 can achieve this only if the regulation has the effect that the producer of raw milk is to be taken to be the manufacturer of standardised milk. To my mind the regulation does not perform this task. This step in the Commonwealth argument also fails.
It follows for all of these reasons that UDP was not, in 1999-2000, liable as an intermediary to pay an amount equal to the manufacturing levy on the milk it delivered to Murray Goulburn, other than market milk.
Is UDP Entitled to Restitution?
In its third amended statement of claim, UDP alleges an entitlement by way of restitution to $976,287.80 which is said to be the total of levies paid by it in 1999-2000, less the market milk levy and less other levies paid. I say nothing about the correctness of this methodology or about the resultant figure, which is apparently intended to be the total of manufacturing milk levies paid in that year. UDP then reduces this figure by $470,033.14 representing the manufacturing milk levy paid in respect of deliveries to Warrnambool and Nestlés, leaving a balance claimed of $506,254.66.
The equity pleaded as giving rise to this right of restitution is the fact that the payments of the levy were made under a mistaken belief. The belief in question was that UDP believed that the Commonwealth was legally entitled to issue the monthly assessments of dairy levies and to demand and receive payment of the manufacturing milk levies and the penalty sums and that UDP was legally obliged to pay those levies and penalties[20].
[20]Statement of claim, paras. 12, 13, 14.
Counsel for UDP then put a wider basis for the equity entitling his client to restitution. It was submitted that the Commonwealth received money for which it had no entitlement in the first place and that this entitled UDP to restitution. This basis was not pleaded nor do I think that, without more, it provides a firm legal basis for the restitutionary relief which UDP seeks.[21]
[21]See Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 256-7, per Deane J.
In its defence the Commonwealth joined issue with these allegations and asserted its entitlement to demand, receive and retain the manufacturing milk levies and penalties. No argument was presented that this relief was not available having regard to the ADC’s obligation to refund overpayments pursuant to s. 18 of the Collection Act[22], and I say nothing further about this.
[22]See Commissioner for State Revenue (Victoria) v Royal Insurance Australia Ltd (1994) 182 CLR 51 at 90, per Brennan J, Toohey and McHugh JJ concurring.
I have concluded that UDP was not liable to pay the manufacturing milk levies. It will follow that it has no liability to pay penalties for failing to pay those levies punctually or at all. It is, therefore, necessary to consider the statutory and factual framework under which the levies were paid in order to determine where the equities lie.
In each month in the year 1999-2000 UDP submitted returns relating to manufacturing milk as required by reg 11 of the Primary Industries Levies and Charges Collection (Dairy) Regulations. The form of the returns submitted follows that recommended, but not prescribed, by the ADC in its scheme outline of June 1995. The information required in the form of return is minimal and does not precisely comply with the statute or the regulations[23]. Manufacturers, as the persons liable to pay the manufacturing milk levy, are required in the returns to specify the total manufacturing milk intake for the month[24] in litres and its milk fat and protein content in kilograms. These figures are to be arrived at by deducting from the figures of total milk intake for the month those for market milk. According to the ADC scheme outline, the recommended form of return was intended to provide to the ADC information triggering the domestic market support payments to be made to farmers[25] as well as the manufacturing milk levy to be paid by the manufacturer. Since it was the manufacturer which customarily paid the farmers for milk purchased, the support payments paid to and those levies payable by producers were customarily received from and paid to the ADC by the manufacturer, such as Sudano Cheese prior to July 1999, and the purchase payments to farmers were adjusted by the manufacturer accordingly to reflect these payments and receipts from ADC. I mention this because it was commercially important, albeit not necessary, for UDP to be able to credit its farmer producers with their domestic market support payments. This meant that it would be dealing with farmers in a way that they were used to and on the same basis as they dealt with manufacturers such as Murray Goulburn. Furthermore, it perhaps relieved the farmers of the tedium of keeping records for and lodging returns with the ADC.
[23]Compare reg 16(2).
[24]Compare reg 13(b).
[25]See Dairy Produce Act 1986, s. 108C.
A further feature of this legislative structure is that dairy produce which is exported is not subject to the manufacturing milk levy. The approach of the legislation, however, is not to exempt this produce for export from the imposition of the levy, as is the case with market milk exception, but rather to create an entitlement to a rebate equal to the amount of manufacturing levy paid on the exported product.[26] It is not a true rebate, however, since the repayment is to be made by the ADC to the exporter[27] and not the manufacturer who has paid the levy; and the rebate is to be paid with respect to the exported product when it has been exported[28], typically, some time after the manufacturing milk levy has been paid. Notwithstanding this legislative regime, it seems that the ADC, in the case of UDP at least, paid the rebate by crediting UDP with the amount payable to the exporter in respect of exported product in a given month against the manufacturing milk levy payable by UDP in respect of raw milk purchased by it in the same month.
[26]Dairy Industry Act 1986, s. 108E.
[27]s. 108E(8).
[28]s. 108E(2).
A final feature of the involvement of UDP and the accounting to the farmers concerns the price paid by VDIA for the farmer’s market milk quota. This money was credited to the farmer by UDP either as part of the price paid by UDP as purchaser or as part of the price paid by it as authorised agent of the VDIA. The evidence is not clear on this point. The payment, however, represents another aspect which rendered it commercially desirable for UDP to handle all paperwork and financial dealings with the farmers relating to levies and payments.
It will be recalled that Sudano Cheese, as purchaser of raw milk, as manufacturer and as authorised agent of VDIA, had, prior to 1 July 1999, provided this accounting and administrative service for its farmers. It was the intention of the promoters of UDP that it do likewise and, in June 1999, there occurred a meeting at the Sudano Cheese premises at Hoppers Crossing. Present were Mr Vecgravis, Mr C. Pillirone, Mr Esposito and Vincenzo Sticca, who was a director of 5 Star and its accountant. Present from time to time at this meeting was also Mr A. Pillirone.
Of those present, Mr Vecgravis, Mr Esposito and Mr Sticca gave evidence. They were in broad agreement that Mr Esposito informed Mr Vecgravis that UDP had been established to take over the dairy farmer supply arrangements previously handled by Sudano Cheese. Thereafter, the accounts of the conversation differed somewhat. I find that the men discussed how the financial arrangements for levy payments to the ADC and payments by the ADC might be set in place. They discussed the administrative difficulties caused by the fact that UDP was not a manufacturer and was, therefore, not liable to pay the manufacturing milk levy. Indeed, there was discussion as to how UDP might set itself up as a manufacturer so that it might conveniently assume the role previously played by Sudano Cheese. I accept the evidence of Mr Vecgravis that Mr Esposito made it clear that he wanted UDP to be able to sell its product as a “levy paid product” so that its purchaser would not itself have to pay any levy. Mr Vecgravis said that the meeting closed on the basis that UDP would be established as a manufacturer so that it might lawfully pay the manufacturing milk levy. Mr Esposito said that Mr Vecgravis accepted that, technically, UDP was not a manufacturer but that the ADC would nevertheless be content to treat it as such, as he had with another milk broker. He said that Mr Vecgravis insisted that, since UDP would pass on the levy which it paid in the sale price of its product, UDP should insert in any contract for the sale of its product a clause that, if UDP did not pay the levy, the purchaser would. This version is confirmed by the terms of a fax sent by Mr Vecgravis to Mr C. Pillirone dated 25 June 1999.
If it be necessary to choose between these two accounts of how the meeting closed, I would, on the balance of probabilities, prefer that of Mr Esposito, confirmed as it is by the fax of 25 June and by the evidence of Mr Sticca. But, for my present purposes, the two important facts which emerge from this meeting are common ground. They are, first, that UDP was anxious for its own commercial reasons to be treated as liable to pay the manufacturing milk levy and, second, that it well knew that, as broker and not as a manufacturer, it was not liable to pay this levy. It was, to use Mr Esposito’s expression, a means of conveniently channelling the levy payable by its customer, the manufacturer, to the Commonwealth.
This conclusion is fatal to UDP’s claim for restitution as pleaded, for it had no belief that it was obliged to pay the manufacturing milk levy. Its payment was voluntary: UDP elected to pay the levy because this suited its commercial convenience.[29] It is equally fatal to the broader unpleaded basis upon which the restitution case was founded. I conclude that UDP is not entitled to restitutionary relief.
[29]See David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 174 CLR 353 at 373-4
The Limitations Defence
In paragraph 23A of its defence filed on 21 May 2001 the Commonwealth asserts that the defendants’ claim for repayment of $76,985.25 being that part of the sum of $89,195.24 said to have been paid on 27 September 2000 which is referable to the manufacturing milk levy is statute barred. The claim of UDP was substantially redrawn in its amended statement of claim filed on 20 February 2002 and an amended defence was filed on behalf of the Commonwealth on 22 February. The limitations defence is omitted from this last pleading but it was addressed before me as an issue. Although the question does not arise given my findings on the primary issues, I shall set out my views upon the contentions. The relevant statutory bar is to be found in s. 20A of the Limitation of Actions Act 1958 (Vic) which is in the following terms:
“20A. Limitation on proceeding for recovery for tax
(1)Subject to sub-section (2), a proceeding for the recovery of money paid by way of tax or purported tax under a mistake (either of law or of fact) must be commenced –
(a)within 12 months after the date of payment; or
(b)in the case of a proceeding in accordance with another Act that provides for the refund or recovery of the money within a longer period, within that longer period.
…
(5)In this section –
‘proceeding’ includes –
(a)seeking the grant of any relief or remedy in the nature of certiorari, prohibition, mandamus or quo warranto, or the grant of a declaration of right or an injunction; or
(b)seeking any order under the Administration Law Act 1978;
‘tax’ includes fee, charge or other impost.”
On its face, this provision would bar claims for tax paid prior to 12 months before the proceeding was commenced on 8 December 2000. The only payment falling outside that period is that made on 27 September 1999 mentioned above. Counsel for UDP presented a number of submissions in opposition to the application of this statutory bar.
First, he submitted that the imposition of the manufacturing milk levy is not a tax within the definition of sub-s. (5). There is no substance in this point.
Second, it was put that s. 90 of the Commonwealth Constitution gives exclusive legislative power to the Commonwealth over the imposition of excise duties. Accordingly, the Victorian Parliament may not pass legislation affecting this matter. Counsel for UDP hastened to assure me that the submission did not lead to the conclusion that s. 20A of the Limitation of Actions Act is invalid to the extent that it trespasses upon the legislative area reserved for the Commonwealth; he contended that the Victorian Parliament must be taken not to have intended to trespass in that area so that the legislation should be construed to give effect to this intention.
A third, and associated, submission depended upon s. 32(1) of the Limitation of Actions Act. This section provides as follows:
“32(1)Save as in this Act otherwise expressly provided this Act shall apply to proceedings by or against the Crown in like manner as it applies to proceedings between subjects:
Provided that this Act shall not apply to any proceedings by the Crown for the recovery of any tax or duty or interest thereon.”
It was put that the reference in this section to the Crown should be taken to refer only to the Crown in right of the State of Victoria and not the Crown in right of the Commonwealth. Accordingly, it follows that the Act does not apply to proceedings by or against the Commonwealth Crown.
The claim of UDP is a claim in equity for restitution. It is brought against the Commonwealth in a State court. The limitation point is a procedural one by which the Commonwealth, like any litigant, is bound, having regard to s. 64 of the Judiciary Act. In short, just as the Commonwealth’s claim may be barred by a limitation provision imposed by State legislation[30], so too is the Commonwealth entitled to raise it as a defence.
[30]Maguire v Simpson (1976) 139 CLR 362.
I conclude, therefore, that UDP’s claim for repayment of manufacturing milk levy paid before 8 December 2000 is, if otherwise good, barred by s. 20A of the Limitation of Actions Act 1958 (Vic).
What Amount is Recoverable by UDP in Respect of Levies Paid
This question, of course, does not arise given my conclusions on the earlier issues. In any event, the parties were agreed that the determination of this issue should be deferred, so I need say nothing about it.
UDP’s Liability for Penalty
It was accepted by the Commonwealth that, if it should appear that UDP was not liable to pay the manufacturing milk levy, the Commonwealth’s claims against it must fail. It follows that the issues which I have numbered (6), (7) and (8) in paragraph [5] above do not arise.
Orders
It would seem that the appropriate substantive orders arising out of these conclusions should be that, in each proceeding, there be judgment for the defendant or defendants, other than the second defendant and thirdnamed defendant in Proceeding 7933 of 2000.
I will hear counsel as to the precise terms of the orders to be made and upon any issues as to costs.
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