Dahlia Mining Co Ltd v Collector of Customs

Re: DAHLIA MINING CO. LTD. and NORTH WEST IRON CO. LTD. trading as SAVAGE
RIVER MINES
And: COLLECTOR OF CUSTOMS
No. G339 of 1991
FED No. 833
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Davies J.(1)

CATCHWORDS

Administrative Law - appeal from the Administrative Appeals Tribunal - whether imported oil was a "topped crude" rather than a "fuel oil" under the Customs Tariff Act - whether proceedings in the AAT conducted in a manner that was procedurally unfair - whether one party taken by surprise - whether Tribunal found a crucial fact which had not been deposed to by any witness and not put by a direct question to any witness and not evidenced by some form of verification.

Customs Tariff Act 1982 (Cth) Schedule 3

HEARING

SYDNEY

#DATE 20:12:1991

Counsel for the Applicants: Mr D.F. Jackson QC and Mr J.S. Hilton

Solicitors for the Applicants: Dunhill Madden Butler

Counsel for the Respondent: Mr B.J. Skinner

Solicitors for the Respondent: Australian Government Solicitor

ORDER

The appeal be allowed.

The decision of the Administrative Appeals Tribunal of 7 June 1991 in this matter be set aside.

The matter be remitted to the Administrative Appeals Tribunal to be heard and decided again, with or without the hearing of further evidence.

The Respondent pay the Applicants' costs of the application.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is an appeal from a decision of the Administrative Appeals Tribunal which found in favour of the Collector of Customs with respect to the classification of certain oil which had been imported by the appellants, to whom I shall refer as "Savage River Mines".

The matter has had a long history. There was first a decision of an Administrative Appeals Tribunal constituted by Deputy President C.J. Bannon QC, Mr C.J. Stevens and Mr G.R. Taylor, given on 3 September 1987 and noted in 17 ALD 377. An appeal from that decision was heard by a Full Court constituted by Fox, Davies and French JJ., a decision reported at (1988) 79 ALR 258. The appeal was allowed and the matter was remitted for rehearing. A second decision of the Tribunal similarly constituted given on that remittal was handed down on 10 February 1989, reported at 17 ALD 449.
These decisions related to an importation of oil on 4 January 1986 on the vessel "Elota". In the first proceeding, the Tribunal found for the Collector of Customs. In its second decision, the Tribunal by majority, Mr Stevens dissenting, found for Savage River Mines. The Collector of Customs appealed from that decision on 7 March 1989 but ultimately discontinued the appeal shortly before it came on for hearing. The enforcement of the Tribunal's decision became the subject of proceedings in the Supreme Court of New South Wales, reported at (1989) 90 ALR 193.
The essential issue was whether the oil fell within sub-item 27.10.1 of the Customs Tariff Act 1982 (Cth) Schedule 3 ("the Tariff"), as amended by the Customs Tariff Amendment Act (No. 2) 1983 (Cth), Schedule 7, as a topped crude oil, or whether it fell within sub-item 27.10.2, as a fuel oil.
Savage River Mines had a contract with Cominet S.A., whose agent was Minimet Australia Pty Ltd, which contract specified that the oil was to be "a medium fuel oil and/or topped crude at Seller's option" meeting the specifications (as to specific gravity, flash point, sulphur, viscosity etc) which the contract laid down.
It was not in dispute that a topped crude is a crude oil treated by atmospheric distillation to remove such elements as gasoline, kerosene and gas oil or that, once the oil has undergone vacuum distillation or the further refinery process of catalytic cracking to give further fractions of gasoline, kerosene and gas, the resultant product is not a topped crude but a fuel oil. Nor was it in dispute that topped crude is ordinarily used as feedstock, that is to say for further processing, whilst fuel oil is usually used by an ultimate user in a furnace, boiler or bunker for producing heat or power.
No evidence was called before the Tribunal as to the processing that the oil had undergone. The evidence before the Tribunal relied upon an analysis of the oil and upon the use to which the oil was put.
Dr P.D. Batts, an expert called on behalf of Savage River Mines, explained at the first hearing that Savage River Mines used the oil for the purposes of a process which converted magnetite and pyrite to a form of iron ore, haematite. Dr Batts explained that Savage River Mines operated a pelletising plant whereby the ore, magnetite and pyrite, was processed. A hot stream of gases initiated by burning the oil thereby set up a chemical reaction which converted the magnetite and pyrite to a single product, haematite, which is iron oxide. Dr Batts gave evidence that "the oil is not used in the normal sense of a fuel oil. The uses of a fuel oil are well defined and are normally for burning for the purposes of producing heating." Dr Batts said that, on his analysis, the oil was a topped crude, that the use of the oil was not a normal use of fuel oil and that, in his opinion, the more specific description of the oil was "topped crude."
Dr Batts was supported by Dr Frank Peters who challenged a definition of "fuel oil" which had been developed by Customs.
There were three witnesses called for the Collector of Customs. Mr H.J. McMahon, Assistant Comptroller-General, said, inter alia, that in his view, topped crude was crude oil used for further processing whereas fuel oil was a finished product. Mr Kevin Richardson, an officer with Caltex Oil Pty Ltd, said that the term "topped crude" referred to refinery feed stock. Mr Thomas Savage, the executive officer of the Chemical Engineering Foundation, said that crude oil came with a wide variety of properties. Having been processed by atmospheric distillation, the oil could be sold as topped crude or as industrial fuel oil depending upon the intended use. Having regard to the use of the oil in question, he regarded it as fuel oil.
That was the substance of the matter as presented to the Tribunal in the first instance, though the evidence was voluminous. As can be seen, the evidence did not disclose a clear distinction between a topped crude and a fuel oil. It was open to conclude from the evidence that some topped crudes could be used as fuel oils. There was no challenge to the evidence given by Dr Batts that, in his opinion, the oil had undergone only the process of atmospheric distillation. Indeed, Mr Savage said as to the oil in question, "Again, by commercial standards you would not go much beyond atmospheric distillation, in normal circumstances."
In the light of the conflicting evidence, the Tribunal was confronted with a difficult decision. Although it was well understood in general terms what was a topped crude and what was a fuel oil, there did not seem to be any clear line of demarcation between the two terms. It appeared that some topped crudes could be used as fuel. The case was complicated by the fact that, although Savage River Mines intended to burn the oil, it did not use the oil in the way that ordinary fuel oil would be used. Moreover, the makeup of the oil was not known from an original source but had to be ascertained from analysis.
Unfortunately, the Tribunal, in its first decision, did not take all these matters into account to arrive at its decision. In its first decision, the Tribunal concluded:-

"It appears to us therefore that fuel oil can be understood as being a fractionated product of the refining of a crude or of the further refining of a topped crude, but not in the parlance of refining, the topped crude itself, even though the latter could be utilised as a fuel oil, perhaps with some wastage of the higher octane constituents. This view appears consistent with the construction of the tariff and explains in our opinion the distinction drawn in sub-items 27.10.1 and 27.10.2 between topped crude on the one hand and the goods in 27.10.2 which are products of the further refining of topped crude."

The Full Court considered that this approach was incorrect as the evidence established that some topped crudes could be used as fuel oil and that it was therefore incorrect for the Tribunal to read down the term "fuel oil" to exclude all topped crudes. The Full Court thought that an interpretation of the Tariff did not require the contrary view. I may interpose that the term "topped crude" appears to refer to a stage of processing whereas "fuel oil" appears to refer to the use which the oil is designed to fulfil, i.e., as a fuel. The Full Court considered that, if an oil fell within both classifications, then the Interpretation Rules in Schedule 2 of the Tariff should be considered to ascertain which classification was to be preferred. In particular, regard would need to be had to the issue whether one of the classifications provided a more specific description of the goods from the other. The Full Court thought that the use to which the oil was designed to be put could be taken into account in considering these issues.
In the decision on the reconsideration, given on 10 February 1989, the Deputy President and Messrs Taylor and Stevens may have forced their thinking into a structure which they considered to have been imposed on them by the reasons for judgment of the Full Court. The Full Court did not intend this but merely laid it down that the Tariff did not, as a matter of interpretation, require that "fuel oil" be oil other than a "topped crude".
In his reasons for decision, the Deputy President, after expressing his disagreement with the legal view expressed by the Full Court, found that the oil fell into both categories, topped crude and fuel oil, but added "I find it (the Elota oil) is not used by the applicant as a fuel oil, when heated, but as a flue gas in a chemical conversion process." The Deputy President held that, as the product had more uses than merely as a fuel oil, "topped crude" was the more specific description.
In his reasons for decision, Mr Taylor appears to have disregarded the use which the oil was designed to serve and said:-

"The test, in my view, is that a topped crude is always capable of further refinement, whereas in the case of a fuel oil, it may or may not be able to be further refined."

Mr Taylor held that "topped crude" was the more specific description of the subject oil as the oil was capable of further refinement.

Mr Stevens identified the subject oil as falling within both sub-items of the Tariff. He found that the use which Savage River Mines made of the oil was use as a fuel oil. He then concluded that neither of the expressions "topped crude" and "fuel oil" was a more specific description and that, under Interpretation Rule 3(1)(c), the last classification, that is the fuel oil classification, applied.
It was accepted in both the decisions of the Tribunal that the oil had not been subjected to vacuum distillation or catalytic cracking.
There was an appeal from the second decision of the Tribunal but it was discontinued shortly before the hearing. That dealt with the importation on the "Elota", subject only to the enforcement proceedings before Giles J. in the Supreme Court.
In the meantime, there had been a further shipment on the "MV Kotuku" on 14 December 1987 and there was an application before the Tribunal relating to the shipment. It appears that, during the hearing preceding the second decision, that application was joined with the application as to the Elota oil. It was directed that the applications be heard together and that the evidence in the one case be evidence in the other. However, after that had occurred and after evidence as to the Kotuku oil had been given on 29 November 1988 on behalf of Savage River Mines, Mr Mole, the representative for the Collector showed certain documents to Mr Ellicott who appeared for Savage River Mines. As a result, the application relating to the Kotuku shipment was adjourned to be heard separately.
In his evidence given on 29 November 1988, Dr Batts said that the Kotuku oil was not a pure topped crude. Dr Batts said that kerosene had been added but that the oil would be 73% topped crude. In later evidence in 1990, he amended this proportion to 80%. Thus, the oil was similar to but not the same as the Elota oil; but that is not to say that the evidence as to the Elota oil was irrelevant.
When the matter came on for hearing on 3 December 1990, Mr Taylor had retired and the Tribunal had been reconstituted to include Mr T.R. Russell.
On 3 December 1990, the issue was raised as to whether it had been proper to reconstitute the Tribunal by adding Mr T.R. Russell. Mr A. Robertson, counsel for Savage River Mines, said that the matter was part heard and that it was desirable to deal with the matter as expeditiously as possible. Mr J. Jeffrey, counsel for the Collector, said that the Collector had no objection to the reconstituted Tribunal. There was further discussion as Mr Russell would not have had the opportunity of hearing the witnesses who had already given evidence, though he would have the opportunity of hearing further evidence from Dr Batts and of comparing it with any evidence adduced on behalf of the Collector.
When the subject of further evidence from the Collector was raised, Mr Robertson objected for, on 15 February 1990, another member of the Administrative Appeals Tribunal, Deputy President McMahon, had given a direction that "The respondent is to file and serve an affidavit or affidavits of the evidence upon which they intend to rely at the resumed hearing by Wednesday 14 March 1990." No further affidavit had been filed on behalf of the Collector.
The Deputy President then suggested that the matter should proceed on the footing that the findings of fact set out in his reasons for decision of 10 February 1989 be accepted as prima facie correct, including a preference for the evidence of Dr Batts over the other witnesses. Both counsel were at that stage prepared to accept that course.
The Deputy President went on to say, "That would still leave it open to you (Mr Robertson) and to Mr Jeffrey ... to raise before us any additional evidence ... as to the alleged difference in the process or the mixture used." Mr Jeffrey said "I do intend to call a further witness." Mr Robertson said that he had no objection to the findings of Deputy President Bannon being treated as prima facie findings of fact insofar as the past evidence was concerned for, as Mr Robertson said, "We are happy. We finished our case a year and a half ago." Mr Robertson went on to say, however:-

"It is a separate question as to whether the Crown, after two years since the last hearing, and nine months since the direction, should be entitled to adduce further evidence of which we have had no notice until 10.15 this morning. And even now we do not know what the nature of that evidence is. We do not know whether we have to call further experts. It is quite intolerable."

I should state immediately, that, in my opinion, it was procedurally unfair for Mr Jeffrey to concur in the course suggested by the Deputy President. As no further affidavits had been filed on the Collector's part and as Mr Jeffrey had not announced the issues which he in fact intended to raise, neither the Tribunal nor Mr Robertson was aware in a formal way that Mr Jeffrey intended to dispute the fundamental facts which the Deputy President had found on 10 February 1989. Mr Jeffrey intended to allege that the subject oil was not a topped crude because it had passed through the process of vacuum distillation. This being the case he intended to put, it was misleading for him to concur in the procedure that the findings of the Deputy President would be treated as prima facie correct. His concurrence in that course inevitably misled the Tribunal and Mr Robertson. It was inevitable that, if he raised the issue as to vacuum distillation, the Tribunal including Mr Russell would have to give detailed consideration to the whole of the evidence already given, including the evidence relating to the Elota shipment.
However, the understanding as to the prima facie validity of the findings of the Deputy President having been reached, Mr Jeffrey, who had earlier stated that he had an unsworn affidavit by Mr G.R. Shuptrine, was asked by the Deputy President to hand it up. The Deputy President said: "We will treat this as Exhibit F." Mr Robertson objected at that point and there was a short adjournment. After the adjournment, Mr Robertson said that he had no objection to the affidavit and would not wish to cross-examine the deponent, Mr Shuptrine. Mr Jeffrey undertook to have the affidavit sworn and filed by the following day. Mr Shuptrine was the witness previously mentioned by Mr Jeffrey.
Mr Jeffrey subsequently sought to tender some correspondence which the Collector of Customs had obtained through the New Zealand Customs Service from the refining company, New Zealand Refining Co Ltd ("NZRC"), which had produced the oil imported on the M.V. Kotuku. The subject correspondence was a photostat document of several pages. The first page was a fax from Customs in New Zealand to a Mr John Christmas of NZRC, seeking information. The second page was a fax from NZRC in response stating inter alia:-

"RE KOTUKU FUEL OIL

THE PROCESSING THAT WAS CARRIED OUT TO FORM THE FUEL OIL CARGO IS RATHER COMPLEX. THE CARGO WAS A MIXTURE OF SHORT RESIDUE FROM A VACUUM DISTILLATION UNIT AND KEROSENE WHICH WOULD HAVE BEEN MADE EITHER FROM CRUDE DISTILLATION OR FROM THE HYDROCRACKER. THE KEROSENE WAS ADDED TO BOTH LOWER VISCOSITY, SULPHUR AND POUR POINT.

THIS IS THE FIRST TIME THAT NZRC HAS BEEN ASKED TO CLASSIFY HEAVY FUEL OIL AS TOPPED CRUDE. THE COQ WAS DONE BY SGS AND THIS IS ATTACHED."

The next several pages were copies of certificates of quality issued at the time by SGS New Zealand Limited. Each certificate commenced with the description:- "M.V. Kotuku loading TOPPED CRUDE at Marsden Point on 5-6 December 1987." In each certificate, the first entry was "Sample: Topped Crude".

Mr Robertson objected to the tender. He did not object to that part of the tender which constituted the SGS certificates of quality but objected to the remainder on the basis that it was not annexed to an affidavit and could not be the subject of cross-examination.
The Deputy President thought that the fax might be admitted. There was the following discussion:-

"THE D. PRESIDENT: The first page, Mr Robertson, seems to set out the questions that were asked; the second page sets out what the New Zealand Refining Company says about the product and the process by which it was put together. In one sense it is hearsay but it is a statement by a refining company which has got no axe to grind in this matter and this tribunal is not bound by the technical rules of evidence. Why should not we let it in? MR ROBERTSON: Well, for one very good reason. If you look at page 2, the penultimate sentence, if this is relied upon by Customs to establish anything it is hearsay of the grossest and most prejudicial sort. It does not say who was asked, by whom they were asked, and I imagine that some point of prejudice is inherent in that sentence which is going to be relied upon as relevant. THE D. PRESIDENT: Which sentence is that? MR ROBERTSON: `This is the first time that NZRC has been asked to classify heavy fuel oil as topped crude.' I imagine that is the purpose of the tender. THE D. PRESIDENT: I do not see there is much prejudice in that, but supposing the rest of it goes in without that sentence? Any objection to that? MR ROBERTSON: Not at that document no. THE D. PRESIDENT: Well, I think we will admit the whole of this document, Mr Robertson, excluding from the admission the sentence appearing on the second sheet which states, `This is the first time that NZRC has been asked to classify heavy fuel oil as top crude.' MR ROBERTSON: If the tribunal pleases. THE D. PRESIDENT: So that document - are you happy with that, Mr Jeffrey?

MR JEFFREY: No objection at all, sir. THE D. PRESIDENT: Very well. Well, that document which emanates from the Customs Department, Custom House, Whangarei, - W-h-a-n-g-a-r-e-i - New Zealand, consisting of eight sheets will become exhibit 1, I think."

It will be seen that the lack of procedural fairness had commenced to affect the case put for Savage River Mines. Mr Jeffrey had never formally raised the issue that the subject oil was not a topped crude because the oil had been subject to vacuum distillation. He had not put the issue to any witness who had already given evidence. No affidavit raising the issue had been filed in accordance with the directions of Deputy President McMahon. And Mr Jeffrey had concurred in the approach that the findings of Deputy President Bannon should be treated as prima facie correct.
Thus, when Mr Robertson objected to the one sentence in the documents which implied fraud on the part of Savage River Mines or its agents, it appears that he overlooked the reference to vacuum distillation or failed to realise that the contention was seriously to be put that the oil was not a topped crude because it had been the subject of vacuum distillation. Not only had Mr Jeffrey never made the allegation but the certificates in the tender all referred to the oil as "Topped Crude".
It is an essential element of the principles of procedural fairness that adequate notice be given of points that may take the other party by surprise. It is for this reason that the Administrative Appeals Tribunal as well as this Court holds directions hearings and makes orders to ensure that the issues will be understood well before the hearing. In this case, the Tribunal gave such directions. Before the hearing, however, the issue as to vacuum distillation was not raised as it ought to have been.
Apparently, on 29 or 30 November 1988, Mr Mole, who then represented the Collector, had brought to the notice of Mr Ellicott, who then appeared for Savage River Mines, certain documents which included documents in similar terms to this particular document, Exhibit 1. It was that disclosure that caused the matter to be adjourned and to be heard separately from the application respecting the Elota shipment.
However, that was not adequate notice of the issue. The Collector was subsequently, on 15 February 1990, directed to file any further affidavits by 14 March 1990. The Collector did not do so. Indeed, the Collector never proposed or perhaps never was able to file an affidavit on this issue.
After the receipt of Exhibit 1, Dr Batts was called to give further evidence. He said in his evidence that the Kotuku oil was essentially a "topped crude". At the end of his examination in chief, the Deputy President asked Dr Batts as to the process that occurred at Savage River Mines. He gave evidence similar to that earlier given, though the evidence may have made it clearer that the burning of the oil generated a very hot oxygen or air-rich gas stream which then passed over the magnetite and pyrite. The function of the combustion of the oil was to heat the air.
After a luncheon adjournment, Dr Batts said in further evidence in chief that this particular oil, the Kotuku oil, was not a fuel oil. Dr Batts said that a normal fuel oil, because it comes from the back end of the refinery, contains all the heavy metals which, in this process, would do considerable damage to thermocouples and to the refractory bricks. Dr Batts said a normal fuel oil would not be suitable for the pelletising plant.
Dr Batts was cross-examined by Mr Jeffrey. No question was put by Mr Jeffrey as to the use which Savage River Mines made of the oil. Indeed Mr Jeffrey conceded "We do accept that the use is exactly the same (as with the Elota shipment)." Nor was it put to Dr Batts expressly that the oil had been the subject of vacuum distillation. The cross-examination appears to have been designed to show that the information obtained by Dr Batts using a gas chromatograph was not accurate.
The evidence then closed. Counsel addressed. In the course of Mr Robertson's address, the Deputy President indicated that he might switch his view. He said:-

"Now, we have a much better description on this occasion, I think. Or it is clearer to me, anyhow, how this oil is used. And it may be that Mr Stevens' view that it was being used as a fuel oil might be the correct view. That does not solve your second question, of course, of which is the more specific description."

In the course of his address, Mr Jeffrey referred to Exhibit 1. He referred to the statement on p 2:-

"The cargo was a mixture of short residue from a vacuum distillation unit and kerosene ...".

He also referred to the fact that, kerosene having been added, the oil was amenable to use as a fuel.

Mr Robertson, in reply, said that the only expert before the Tribunal who had given evidence about this particular fuel, Dr Batts, had said that the oil was not a fuel oil. The Deputy President then mentioned the contention that the oil was a mixture of short residue from a vacuum distillation unit and kerosene. There were then these passages:-

"THE D. PRESIDENT: Is not that the simple point that it is not a topped crude? MR ROBERTSON: It could not possibly be. It could not possibly be. If this tribunal were to proceed on that basis of a cryptic note in a fax which is unsupported by affidavit, unsworn, untested because we cannot cross-examine the document, it would really --- THE D. PRESIDENT: Well, that is a --- MR ROBERTSON: It would really be a most extraordinary way of proceeding. This --- THE D. PRESIDENT: Well, it is evidence before us. It comes from a refining company in New Zealand which I suppose had no axe to grind in this matter. ...

MR ROBERTSON: It was never put to him (Dr Batts) that this fuel oil was a mixture of short residue from a vacuum distillation unit and kerosene. THE D. PRESIDENT: Well, it may be. Anyhow, you understand the point that I am asking you about. I do not want to say any more about it at this stage. ...

MR ROBERTSON: But, with respect, Mr Deputy President, it is incontrovertible, that it has not been put to Dr Batts that this fuel oil - this is an ambush of the worst character. It is unfair and this tribunal is bound by the rules of natural justice whether or not it is bound by the rules of evidence.

And for my friend to produce a document which is not attached to an affidavit in contravention of the directions hearings, to not put that matter to the witness and then to pop up and say, `oh, well, that is the end of the story. The tribunal is entitled to rely on that evidence' is, in my respectful submission, not a course this tribunal should adopt.

THE D. PRESIDENT: Well, Mr Robertson, I am conscious of your arguments, and, as I have said, if you feel there is any injustice, I would be prepared to consider an application for an adjournment. All these things have been met by adjournments."

Mr Robertson then submitted that there should be an adjournment and that the Collector should promptly cause to be produced an affidavit deposing to the alleged facts "if they wish to rely on them." He added "and we object most strongly to the way this case has been conducted by ambush." The Deputy President said:-

"... it does not seem to me to be proper to ask Customs to produce an affidavit about it. It is your client that bought this oil; not Customs."

The Deputy President later said:-

"And I do not believe it should lie on Customs to produce the evidence. I believe it ought to lie on you to disprove it."

The adjournment was granted.

During the adjournment, Savage River Mines and its agents sought to meet with representatives of NZRC to discuss the allegation but were refused a meeting. Written questions put to NZRC were, however, answered. The correspondence was subsequently annexed to and discussed in affidavits which were tendered on the part of Savage River Mines at the adjourned hearing on 26 February 1991. The correspondence did not assist Savage River Mines for NZRC still contended that the oil had been the subject of vacuum distillation. Moreover, the annexing of the correspondence brought into evidence the statement earlier rejected that, "This is the first time that NZRC has been asked to classify heavy fuel oil as topped crude." The correspondence also included a fax from NZRC to the applicant's supplier, Minimet, which contained the statement:-

"SHELL OIL NEW ZEALAND REQUESTED US ON 4 DECEMBER 1987 TO CALL THE MATERIAL `TOPPED CRUDE'. WE COMPLIED WITH THIS REQUEST BEING THE EXPRESS WISH OF OUR CUSTOMER AND BECAUSE THE MATERIAL CAN BE DESCRIBED THIS WAY.

WE HAVE ASCERTAINED FROM SHELL OIL NEW ZEALAND LIMITED THAT THEY WERE SIMILARLY REQUESTED BY HILDITCH VINE NZ LTD. WHO IN TURN WERE SIMILARLY REQUESTED BY THEIR CUSTOMER AXEL JOHNSON LTD."

When the hearing resumed on 6 February 1991, there was no affidavit from the Collector of Customs to verify the matters set out in Exhibit 1. There was tendered on behalf of the Collector an affidavit from Mr Gregory Mole as to documents he had shown to Mr Ellicott during the 1988 hearing.
There was a further affidavit from Dr Batts, who annexed a report by him on the comments of NZRC. He deposed that:-

"2. ... I reiterate my conclusion that I do not consider the subject oil to be fuel oil and I consider that the subject oil is principally a topped crude oil.

3. There is no data or evidence provided by NZRC to support its claim that the Kotuku oil was vacuumed distilled. On the basis of the physical properties of the subject oil, which I have analysed, I do not believe that the imported oil was vacuumed distilled."

Dr Batts further deposed as to his analysis of the oil and he commented on the answers given by NZRC to written questions. A comment by NZRC was:-

"Because we understood that this matter was closed in March 1989, no retention of documents, other than standard shipping documents took place, in accordance with our normal practice. NZRC daily operational data is not retained on the computerised PROSS system past a one year period, thus, no operational data can be back-tracked."

Dr Batts, in his report, discussed the substance of the information given by NZRC and expressed the view that it was unreliable. Dr Batts deposed:-

"Clearly, either the composition or concentrations are in error."

Another deponent, Mr Dennis Gunn, said that the contract which Savage River Mines had with Cominet S.A. for the supply of fuel was simply for the supply of medium fuel oil and/or topped crude oil within certain express specifications and that there had been no change to the instructions given to Cominet S.A. Mr Gunn's affidavit annexed copies of correspondence which had passed between Savage River Mines and NZRC in which Savage River Mines had sought to have representatives of Savage River Mines meet with officers of NZRC, which request was refused. Mr Gunn deposed that he was unaware of any of the companies which were mentioned in the material emanating from NZRC and that Savage River Mines had not requested anybody to call the subject oil "topped crude".
Notwithstanding these two affidavits, when the matter came before the Administrative Appeals Tribunal on 26 February 1991, Mr Jeffrey announced that he did not wish to cross-examine the deponents.
The statements by NZRC that it had been requested to call the oil "topped crude" and that, "We complied with this request ... because the material could be described in this way" were strange in the light of the evidence before the Tribunal given by witnesses for both parties that a topped crude is a crude oil derived from atmospheric distillation from which some of the lighter or more volatile elements have been extracted. All witnesses appeared to accept that an oil processed by vacuum distillation could not be described as a "topped crude". Indeed, it was expressly stated in the affidavit of Mr Shuptrine, the affidavit of which an unsworn copy was produced by Mr Jeffrey at the hearing in December 1990, that there were two means of determining whether an oil was a topped crude or a fuel oil, the first being to ascertain the method of its production and whether it had been the subject of vacuum distillation or catalytic cracking and the other being to analyse its qualities. No witness suggested that an oil which had passed through the process of vacuum distillation could be described as a topped crude.
The Tribunal in its decision of 7 June 1991 found that the subject oil was fuel oil and not a topped crude. It did so on two bases. The first was that it accepted the statements emanating from NZRC that the oil had been vacuum distilled. The Tribunal said:-

"The Tribunal sees absolutely no reason to doubt the general tenor of NZRC's statements. They have no axe to grind and it is obvious from the contract between the applicants and Minimet that the applicants were indifferent as to whether they were supplied with a topped crude or a fuel oil, providing it met the criteria set out in the specification."

The Tribunal further said on this point:-

"We do not accept the view that it is a matter for NZRC to support its claim that the `Kotuku' oil was vacuum distilled. It was the duty of the applicants to correctly enter the imported goods and to pay any appropriate customs duty."

The Tribunal also said:-

"Further the manufacturer was told to invoice the product as `topped crude'. We do not know the reason for this but we do know that under the Act `topped crude' may be imported free of duty into Australia. We consider that the respondent should draw this matter to the attention of the Commonwealth Attorney-General."

As can be seen, the unverified statements of NZRC were, in the minds of the members of the Tribunal, extremely prejudicial to Savage River Mines. Fraud was suspected. Not surprisingly, the case passed from the situation where, subject to further evidence, the findings of the Deputy President of 10 February 1989 were to be treated as prima facie correct to the situation where, on material that was not verified by any witness, Savage River Mines lost on all points.

The Tribunal accepted the minority view previously expressed by Mr Stevens held with respect to use. The Tribunal said:-

"The Tribunal is satisfied that the material in question was used in its imported condition as a fuel, without being subjected to any refining or other treatment. It was burned in a furnace, producing heat and chemical compounds in gaseous form (carbon dioxide and water). We have reached the conclusion, having regard to the evidence at pp 46 to 49 of the transcript, that the applicants' use of the product was as a fuel oil. This accords with the view taken by Mr Stevens in 17 ALD 449 at 455."

The Tribunal also relied upon a third ground, namely:-

"The addition of kerosene destroys the essential feature of a topped crude - namely that it contains only those fractions of a crude oil which remain at a certain point in a distillation process and does not contain the more volatile materials which have been removed because their boiling points have been passed or reached in the process. The Tribunal would not be persuaded by an argument that the product contained at least 80 per cent topped crude, was thus principally topped crude, and therefore could be described as topped crude."

The Tribunal further mentioned two aspects of the supply contract as assisting the Tribunal to the view that the fuel was fuel oil. These were discussed in two paragraphs immediately proceeding the ultimate paragraph of the reasons for decision. I need not discuss either of these matters as they seem to be minor points which would not have had any significant influence on the Tribunal's decision.

The challenge to the Tribunal's decision is made on the ground of procedural fairness. The issue is whether the Tribunal should have allowed in as evidence on the Collector's behalf the crucial statement that the oil had been the subject of vacuum distillation and the statement that NZRC had been asked in this specific case so to describe the product.
The case is an unusual one. It had been fiercely contested at all stages. There had been two previous decisions of the Tribunal and a judgment of the Full Court of this Court. There had been proceedings in the Supreme Court of New South Wales. Experts had been called on each side and cross-examined. There were three hearings before the Administrative Appeals Tribunal extending from June 1987 to February 1991. In all the evidence that was given, on both sides, no witness deposed that this oil had been the subject of vacuum distillation and it was not expressly put to any witness in cross-examination that that had occurred. Accordingly, the Tribunal found a crucial fact which had not been deposed to by any witness and which was not alleged to be the fact by any direct question put on the point to a witness.
The issue is whether it was procedurally fair for evidence of a crucial and disputed matter to be brought in otherwise than by the usual means by which the Tribunal received evidence, that is to say, by the reception of the documents which are usually described as the T documents, the documents which were before the original decision-maker when the decision under review by the Tribunal was made, of affidavit evidence, of oral evidence given at the hearing and by the reception of agreed documents. That is the ordinary procedure of the Administrative Appeals Tribunal.
The Tribunal is not bound by the rules of evidence. The Tribunal will readily reject merely technical objections to evidence and will insist that matters which are not really in dispute will be proved in the most efficient manner. The Administrative Appeals Tribunal has been innovative in this respect. But to say that the Administrative Appeals Tribunal is not bound by the rules of evidence is not to say that it is not bound to provide to the parties a fair and equal opportunity to present a case. And this, the Tribunal ordinarily does. Because the Act contemplates that the ordinary course of the proceedings will be by way of reception of oral evidence on disputed matters, that is the way in which the Tribunal usually proceeds.
This present evidence was not before the decision-maker when the decision was taken. Nor was it original documentation which had later been located. There is no problem about the certificates. They were expressed as certificates of samples of topped crude. They were formal documents by a person qualified to make an analysis. They certified the oil to be "topped crude". No objection was made to them or, if made, was likely to be accepted.

The problem arose with respect to statements made by NZRC during the course of the hearings that the oil had been the subject of vacuum distillation and that NZRC had been asked to describe the product as topped crude. That information or the substance thereof was in the hands of the Collector of Customs by November 1988. In the context that the matters were proceeding by way of affidavit evidence, with witnesses being examined and cross-examined, the Collector should, in my opinion, have been required to obtain an affidavit from NZRC as to the facts of the production of the oil.
It is unusual and quite outside my experience for the Tribunal to receive as evidence a contention by somebody raised during the course of the proceedings as to a vital issue and for that contention to be evidenced by a mere statement of it and not by some form of verification such as an affidavit or statutory declaration.
The Deputy President who presided at the hearing took the view that it was for the importer, Savage River Mines, and not for the Collector of Customs, to give evidence as to the manner of production of the material. But that was not so. The determination of whether oil is a topped crude or a fuel oil may be undertaken either by analysing the product or by ascertaining how it was produced. Thus, analysis of a product is a standard method of approaching this type of issue and that is the way Savage River Mines chose to proceed. It was always open to the Collector to adopt the other means, to go to the company that had produced the oil and to ascertain what had been the process of production. There was no obligation upon Savage River Mines to do this.
Savage River Mines had its contract with Cominet S.A., whose agent in Australia was Minimet. Savage River Mines did not deal with NZRC and, even now, nobody knows what was the chain of dealings with NZRC. Savage River Mines had shipping documents which described the goods as "Topped Crude". Its expert had independently analysed and examined the oil and deposed to the fact that oil was a topped crude. That was all that had to be done from the point of view of Savage River Mines.
I should add that there was no cross-examination of Mr Gunn who deposed to the bona fides of Savage River Mines and to the fact that Savage River Mines had taken no step to have goods wrongly described. The allegation was never put to any witness of Savage River Mines that it had acted other than bona fide and fairly in the matter.
As I have mentioned, Exhibit 1 was admitted after objection to only one aspect of it. Subsequently, some of the information on which the Tribunal acted came from Mr Gunn's affidavit which had attempted to deal with the issue which had been raised. But all this followed from the fact that the Collector of Customs did not comply with the direction given as to the filing of affidavits and after Mr Jeffrey had agreed that the findings of the Deputy President in the second decision should be accepted as prima facie correct. It was in the context of that circumstance and in the context that there was no affidavit verifying the allegation as to vacuum distillation that Mr Robertson made no objection to Exhibit 1, save to the one sentence which later went in because of Mr Gunn's affidavit. It seems to me that, if Mr Jeffrey had seriously intended to put the allegation that these goods were not topped crude because they had been vacuum distilled, Mr Jeffrey ought expressly to have raised the matter. He did not do so until he commenced his final address in December 1990. Mr Robertson and the Tribunal must have been misled thereby.
On the whole, it seems to me that, at the time when Mr Jeffrey raised the point, the Tribunal should have directed that, as a matter of procedural fairness, the matter relied upon be the subject of an affidavit so that, if it was challenged, as it was, the issue could be the subject of cross-examination. The Tribunal did not take that stand, however, and the matter was adjourned with the onus being put upon Savage River Mines to rebut the contention as best it could. Savage River Mines was not able to do so, partly because NZRC would not meet with it to discuss the matter. But Savage River Mines should never have been put in that position. The allegation was not its allegation but an allegation put by the Collector of Customs.
In these circumstances, it seems to me that the proceedings went astray procedurally. The way in which the matter developed was unfair to Savage River Mines.
In my opinion, the decision of the Tribunal should be set aside and the matter should be remitted to be heard and decided again.
Senior counsel for Savage River Mines has submitted that, after all this time, the matter should be brought to an end and that the Court should itself make a decision as to the classification. However, the Court cannot itself make a decision in a case such as this. I have said enough to indicate that the issue is a debatable one and a number of views are open. I do not have and have not attempted to form a decided view that the subject oil was a topped crude or a fuel oil or that, if it were both, one of the descriptions was more specific than the other.
On any view of the evidence, the oil was not a pure topped crude. Dr Batts estimated that it was at most 80% topped crude. Kerosene had been added to improve the quality of the oil for end use by combustion. Dr Batts said that, absent the kerosene, "the oil would not pump ... so they would have to add a kerosene to it so that it would have any type of market value." Dr Batts said that the kerosene lowered the viscosity and to a lesser extent the pour point. Kerosene is not a topped crude. As the oil was not a pure topped crude but had been modified to adapt it for end use by combustion, it would be open to a tribunal to find that the oil was not a topped crude but a fuel oil, or that, if it were both, sub-item 27.10.2 applied either because it was the more specific description or the last of the applicable classifications. It would be open to a tribunal of fact to find that an oil which had been modified or blended so as to be suitable for end use by combustion, that is to say as a fuel, was a fuel oil. Sub-item 27.10.2 does not use the term "normal fuel oil", which Dr Batts in his evidence tended to suggest it meant.
In the circumstances, the appeal will be allowed. The decision of the Administrative Appeals Tribunal will be set aside and the matter will be remitted to the Administrative Appeals Tribunal to be heard and decided again, with or without the hearing of further evidence. The respondent should pay the costs of these proceedings.

[1991] FCA 833

20 DECEMBER 1991