Din, L. v Honorable John Christopher Hurford, Minister for Immigration & Ethnic Affairs
[1985] FCA 270
•19 JUNE 1985
Re: MINISTER FOR INDUSTRY & COMMERCE
And: WESTERN MINING CORPORATION LIMITED (1985) 7 FCR 67
No. WA G14 of 1985
Administrative Law - Customs and Excise
COURT
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA
DISTRICT REGISTRY
GENERAL DIVISION
Woodward(1), Toohey(1) and Pincus(1)
CATCHWORDS
Administrative Law - judicial review - decision by Minister's delegate under Customs Act that provision in Customs Tariff Act for a reduced tariff in respect of goods the manufacture of a "suitable equivalent" for which is "not reasonably available" in Australia did not apply to goods imported by respondent - appeal against decision granting order of review of delegate's decision - consideration of matters properly to be taken into account by delegate - whether goods must be comercially interchangeable to be a suitable equivalent - relevance of lack of testing of "equivalent" goods - costs
Words and Phrases - "suitable equivalent", "reasonably available"
Administrative Decision (Judicial Review) Act 1977
Customs Act 1901 ss. 271, 272, 273
Customs Tariff Act 1966 s.33a, item 19 of Schedule 2
Customs and Excise - Customs duty - Reduction in duty under "by-law system" - Decision of delegates of the Minister - Refusal to grant by-law with respect to imported product - Application for orders of review granted - "No material upon which a reasonable decision-maker could have come to the conclusion reached by the delegates" - Appeal by Minister - Test as to whether local product was a "suitable equivalent" for imported product - Whether conclusions reached by delegates was open to them - Whether failure to adequately test local product a material factor - Customs Act 1901 (Cth), ss 271, 272, 273 - Customs Tariff Act 1966 (Cth), s 33A, Sched 2, Item 19.
Administrative Law - Judicial review - Decision not to grant reduction in customs duty under Item 19 of Sched 2 of the Customs Tariff Act 1966 - Whether conclusions reached by delegates of the Minister open to them - Relevance of giving more weight to a relevant factor than a court would have done or failing to give weight to a relevant factor - Administrative Decisions (Judicial Review) Act 1977 (Cth).
HEADNOTE
Delegates of the Minister had decided that Item 19 of Sched 2 of the Customs Tariff Act 1966 (the Act) did not apply to certain refractory bricks imported by the respondent company so as to enable the respondent to be relieved of its obligation to pay full customs duty on those bricks. In response to an application made under the Administrative Decisions (Judicial Review) Act 1977 (the Judicial Review Act), Davies J. granted the order of review sought, holding that there was no material upon which a reasonable decision-maker could have come to the conclusion to which the delegates did come. On appeal by the Minister against this decision:
Held: (1) In determining whether particular local goods are a "suitable equivalent" for imported goods within Sched 2, Item 19 of the Act, the ultimate question is, taking the various qualities of both products all in all and considering the purpose to which they were to be applied, could it be said that the local product would not perform its intended function about as well as the imported product. The test is not whether the products are "commercially interchangeable", as any two compared products may have certain qualities markedly different from one another yet each be, in all, a suitable equivalent of the other.
(2) Applying the test enunciated above to the material here, it is not possible to assert that the conclusion the delegates reached was not open to them.
(3) Under the Judicial Review Act, the fact that it is found by the court that a decision-maker has given more weight to a relevant factor than the court would have done, does not mean that the decision may be upset merely upon that ground alone.
Re Moore; Ex parte Co-operative Bulk Handling Ltd (1982) 56 ALJR 697, referred to.
(4) In determining whether one product is a "suitable equivalent" for another, the fact that the local product has not been proved in practical use may, and depending on the circumstances often would, be material. A letter of one of the delegates stating, inter alia, that "the fact that the local product has not been proven in service is not, in itself, a consideration for by-law admission" indicated that the decision-maker left a relevant matter out of account and on that basis the decision could not stand.
(5) Even though in a given case there are no Australian goods which are "suitably equivalent" and "reasonably available" within Item 19, Sched 2 of the Act, a discretion does remain in the decison-maker to refuse an application for a by-law on proper grounds.
(6) The decision under review be set aside and the matter remitted to the Minister for reconsideration in the light of the reasons of this Court.
HEARING
Perth, 1985, May 28; June 19. #DATE 19:6:1985
APPEAL
Appeal against a judgment of Davies J. granting an application for an order of review of a decision made under the Customs Act 1901 (Cth).
N P Hasluck, for the appellant.
R J Meadows and P C S van Hattem, for the respondent.
Cur adv vult
Solicitors for the appellant: Australian Government Solicitor.
Solicitors for the respondent: Freehill, Hollingdale & Page.
GFV
ORDER
The order made by the Honourable Mr. Justice Davies on 21 December 1984 be varied by substituting for paragraph 2 thereof the following:
"2. The decision under review is set aside and the matter is remitted to the Minister for Industry and Commerce for reconsideration in the light of the reasons of the Full Court".
Otherwise the appeal is dismissed.
The respondent pay one half of the appellant's costs of the appeal.
Orders accordingly
JUDGE1
This is an appeal against a judgment of Davies J. granting an application for an order of review of a decision made under the Customs Act 1901. Provisions of that Act, referred to in more detail below, permitted the relevant Minister or his delegate to make decisions wholly or partly relieving imported goods of their burden of duty, under what has become known as the commercial by-law system. Delegates of the Minister declined to grant the relief which the present respondent sought, but his Honour held that there was "no material upon which a reasonable decision-maker could have come" to the conclusion to which the delegates came; that was, to put it generally, that the facts were not such as to permit the granting of the relief sought. His Honour also detected errors of a legal kind in the reasoning which led to the decision attacked.
Because of the first basis of the judgment just mentioned, it is necessary to refer to the facts in some detail. The preliminary observation should be made that neither party sought, so far as the record discloses, any assessment from an independent source of the factual issues raised; the whole of the information on which the appellant's delegates acted was supplied by the respondent, with the exception of three reports of the Industries Assistance Commission, each of which contained observations of relevance to applications of the sort being considered.
Under ss.271, 272 and 273 of the Customs Act the Minister is empowered to make by-laws (under ss.271, 272) or determinations (under ss.273) having the effect of applying certain items in the Customs Tariff to particular goods or classes of goods. The application by the present respondent was to obtain a by-law or determination applying, to certain refractory bricks which it had imported, item 19 of Schedule 2 of the Customs Tariff Act 1966, which was expressed as follows:
"19. Goods, as prescribed by by-law, being goods a suitable equivalent of which that is the produce or manufacture of Australia is not reasonably available".
Had the application to the Minister been successful, then pursuant to s.33A of the Customs Tariff Act 1966 the goods would have become dutiable at a lesser rate than that otherwise applicable.
The factual question to which the material placed before the primary Judge related was whether the goods the subject of the application were within the description in Item 19 of Schedule 2 set out above, that is whether they were "goods a suitable equivalent of which that is the produce or manufacture of Australia is not reasonably available". That point was decided adversely to the present respondent, by the Minister's delegates, but his Honour held, as mentioned above, that there was no evidence to support their conclusion.
The imported products as to which the question of the level of duty arose were refractory bricks supplied by Vietscher Magnesitwerke Actien-Gesellscheft ("Vietscher"). The competing Australian products were refractory bricks available from Harbison ACI Pty. Ltd ("Harbison"). The present respondent had a need, in 1980, to reline a flash furnace at the Kalgoorlie Nickel Smelter which it owns and operates. It called for bids from various companies and about the time it did so Mr. D.R.T. Hall, a metallurgical superintendent employed by the respondent, wrote a memorandum to the resident manager of the smelter, dated 23 October 1980, commenting on the relative merits of imported and local refractory bricks. The memorandum seems to us of particular importance, since it is one of the few documents in the record which might be regarded as expressing an objective rather than a subjective view on the crucial factual question. Although generally in favour of the view that the imported refractories, and in particular those from Vietscher, were superior to the current Harbison product it also contained information tending to suggest that the latter was adequate for the purpose:
"The relative performance of imported and local refractories is difficult to quantify and the smelter has no records that accurately compare refractory performance. The generally held view by the smelter personnel is that imported chrome-magnesite refractories have provided the best performance and this impression has been formed largely by the use of - (i) Harbison ACI refractories in the smelter converters which gave poor performance 1973-75 and
(ii) an electric furnace lining supplied by Kaiser Refractories (N.S.W.) which failed prematurely in 1979. The very best converter refractory life has been achieved with high quality imported refractories".
The memorandum admitted that the quality of the locally made product appeared to have improved in the decade just past. It explained that that improvement and another matter had:
"... allowed locally produced refractories to be nominated for normal refractory replacement in the converters and electric furnace. At this time Harbison A.C.I. is the only Australian supplier considered to supply an adequate standard of refractory for normal duty at the Smelter".
On the face of it, the Minister's delegates were entitled to accept the implication in the passage just quoted, namely that Harbison was at the relevant time able to supply an adequate standard of product for normal duty. It is true that the memorandum then says that "in critical areas of application" imported bricks were preferred, but it seems clear that only some and not all of the Vietscher bricks in question were to be used in the critical areas specified.
In the context just mentioned, it seems that "normal duty" is intended to refer to use in the converters, electric furnace and non-critical areas of the flash furnace. The chief critical areas of the flash furnace are, it seems, the reaction shaft and the side walls.
Other information before the delegates showed that local refractories had already been used in the furnace for back linings, and it was claimed that the local product would, at least, be adequate above the bath line and in the roof construction.
Other information emanating from the present respondent on which the delegates might properly have relied is referred to in an undated summary of discussions apparently held between representatives of the respondent and one of the delegates. The discussions included a statement to the effect that erosion of the bricks was caused, in part, by thermal shock, resulting in their flaking. It was said that the respondent:
"... accepted Harbison's arguments that refractories of partly pre-sintered ore handle thermal shock better than bricks made wholly from pre-sintered materials".
Most of the information supplied in the course of the discussions recorded was in favour of the view, which no doubt the respondent honestly held, that the best course was to use, at least principally, the imported material. The passage we have quoted makes it clear, however, that the decision was not 'an open and shut' one, but depended upon the weighing of conflicting factors. The delegates also had before them assertions made by Harbison to the effect that their bricks were at least as good as the Vietscher bricks; we refer, without quoting, to telexes dated 30 January 1981 and 3 February 1981. The position Harbison took during the stage when its bid was being considered is most easily found, perhaps, in a telex dated 29 January 1981 which we would summarise as follows. Harbison had a new product called Nucon 60XD which it said showed lower wear rate in tests using the respondent's flash furnace slag than other Harbison products which the respondent had used. Harbison was not prepared to offer "performance guarantees on eventual refractory life" but recognised its "obligation to supply a high quality refractory product". The telex also claimed that "our regular grade Nucon brick" had compared favourably in performance, alongside imported brands, in the respondent's No. 1 flash furnace.
It is true that, at the request of the respondent, Harbison later wrote to say, in a letter dated 18 August 1982, that its product was not a "suitable equivalent" to the Vietscher bricks. That letter was written to support the claim for a by-law and asserted that the Harbison bricks were supplied "with the object of trialing the product in this practical application". We do not think the delegates were obliged to attach great weight to Harbison's later stance, nor to ignore the inconsistency between the statements which the respondent extracted from Harbison and those which Harbison made of its own volition during the bidding period.
There was also other information unfavourable to the Harbison product placed before the delegates, including a letter dated 8 April 1981 from Brambles-Ruys Pty. Ltd. on behalf of the respondent. Although Davies J. relied on it, in our view the delegates might well have been justified in not accepting the submissions in that letter, some of which did not appear to be accurate. It asserted among other things that it had been decided that 85% of the order would be placed with "Veitch of Austria" (sic) and "15% would also go to Harbison ACI for their new product - Nucon XD". It is not clear that that was ever the intention of the respondent; however that may be, Mr. D.R.T. Hall deposed, on behalf of the respondent, that in the event Japanese bricks were used for the most arduous duty; as to the balance, Vietscher bricks were used in the main, together with "trial patches" of Nucon 60XD and 50. The letter from Brambles-Ruys Pty. Ltd. was also, it appears to us, of doubtful reliability in so far as it asked that, in the examination of the application, particular account be taken of "two of the stress factors associated with this type of furnace". The factors mentioned were thermal shock and wash erosion. The letter implied, contrary to the view of the respondent referred to above, that in both these respects the imported bricks were expected to perform in a superior way; the view of the respondent, as well as that of Harbison, was that the Harbison bricks resisted thermal shock better than did those offered by Vietscher.
The question is whether on the whole of the material the view was reasonably open that the Harbison bricks constituted a "suitable equivalent" for some or all of the Vietscher bricks. His Honour held that it was not, principally for the reasons that the Harbison bricks were "new and they had not been tried in any similar furnace", that they were not of the same composition as the Vietscher bricks, that the latter were less susceptible to thermal shock and that the performance of the bricks was crucial.
We are of the view, with respect, that all of these reasons were correctly stated by his Honour, except that relating to thermal shock. Further, it has to be noted that special considerations may well have applied to the new type of Harbison brick, the Nucon 60XD. That aside, as to the other bricks, in essence what the delegates had before them consisted merely in assertion and counter assertion, unless the delegates were obliged to treat the claims made by Harbison in support of its bid as cancelled out by the statements elicited from it to support the respondent's application for a by-law. Although the respondent obviously preferred the Vietscher bricks, we think there was no really cogent evidence before the delegates that the Harbison bricks (excluding the Nucon 60XD) were, objectively speaking, inferior to the Vietschers. Harbison claimed that their bricks (other than the Nucon 60XD) had in actual recent use in the respondent's flash furnace compared favourably with imported bricks and we can find in the record no disproof of that statement.
If the view of the primary Judge that there was no evidence that the Harbison bricks constituted a suitable equivalent is to be upheld, that must be so because of the following factors:
1. Vietscher was a better established manufacturer and its products therefore had a higher reputation.
2. It was important to obtain bricks from a very reputable manufacturer. The costs of failure of the furnace would be very great.
3. As to the Nucon XD 60 bricks, although they had been subjected to some performance testing, they had not actually been in use in any similar furnace.
On the evidence available to them, the delegates must, we think, have made those findings. The question then is whether that necessarily produces the result that the Australian bricks were not a "suitable equivalent". That, in turn, depends on the meaning of the expression.
It is curious that although the Commonwealth has foregone duty over many years on the basis that no suitable equivalent of goods imported or to be imported was available, the critical words do not appear to have received any judicial explanation until Davies J. delivered his reasons. His Honour remarked:
"Suitability for the applicant's purpose is required. The test is an objective one. The opinion of the applicant or of the manufacturer of the goods cannot be decisive but may be of relevance. To satisfy the test of equivalence, goods need not be identical but they must be readily substitutable, that is to say, they must be commercially interchangeable".
We accept, with respect, the correctness of these views with the exception of expression "commercially interchangeable". The relevance of that reservation to the facts of this case is that the two types of goods being compared may have certain qualities markedly different from one another yet each be, in all, a suitable equivalent of the other. That the Austrian bricks, in this case, were of markedly different composition from the Australian bricks does not necessarily matter; the ultimate question is, taking their various qualities all in all, and considering the purpose to which they were to be applied, could it be said that the Harbison bricks would not perform their intended function about as well as the Veitschers? We say "about as well" because, having in mind the purpose of the by-law scheme, it is unlikely that precise equivalence was what the legislature had in mind and, indeed, that would seldom be found to exist in practice; questions of degree are necessarily involved.
It does not seem to us possible, on the material, to assert that the conclusion the delegates reached was not open to them, applying the test we have enunciated. One difficulty is that the documents do not disclose the facts with complete clarity. An aspect of their obscurity is that on 3 February 1981 Mr. D.R.T. Hall recommended to the resident manager of the respondent that there be a purchase of "refractories of the highest quality from Vietscher". That was apparently in pursuance of a "blanket recommendation" from Vietscher "to use their highest quality brick throughout the entire furnace" mentioned in the same document. However the purchase order dated 17 March 1981 suggests that in fact bricks of varying qualities were ordered from Vietscher and we are not sure whether that was in accordance with the recommendation. We must also have regard to the fact that the delegates received oral information from the respondent, a summary of which is referred to above. It may very well be that, from this or other sources of knowledge, the delegates obtained a more accurate understanding of the facts than is available to us from a perusal of the documents. Harbison proposed a particular layout and mix of various grades of its bricks, but it is clear that the notion of suitable equivalence has nothing to do with the way the order for the bricks came to be placed. What the delegates had to consider was whether the Harbison bricks, or any of them, constituted a suitable equivalent of the Vietscher bricks actually imported, or any significant number of them. We do not think it possible to hold that it was not open to the delegates to arrive at a conclusion adverse to the respondent on that question. It is true that the lack of in-service experience of the Nucon XD60 bricks was an important factor, but, even as to that grade it was not necessarily decisive.
We pass now to consider the question whether the result at which Davies J. arrived may be supported on other grounds. His Honour held that one of the decision makers was "unduly influenced" by reports of the Industries Assistance Commission and "failed to give weight" to a material aspect of the facts, namely that the Harbison bricks had not been adequately tested. As to the former, we do not accept that under the Administrative Decisions (Judicial Review) Act 1977 a decision may be upset merely on the ground that the decision maker gave more weight to a relevant factor than the Court would have done, if it had had the function of making the decision in the first instance; see Re Moore; ex parte Co-operative Bulk Handling Ltd. (1982) 56 ALJR 697. As to the latter, we would make a similar observation and add that the lack of practical testing applied to only one grade of the Harbison bricks. We do not agree, with respect, that the matters just mentioned justified setting the decision aside.
A more difficult problem, raised by his Honour, is whether the decision is vitiated by the contents of a letter written by Mr. C.W. Channon, one of the delegates, dated 20 December 1982, and in particular by the following sentence:
"The fact that the local product had not been proven in service is not, in itself, a consideration for by-law admission".
That was said to be derived from an Industries Assistance Commission report, No. 268. In determining whether one product, intended to be put to practical use, is a suitable equivalent for another, we are of the view that the fact that the alleged equivalent has not been proved in practical use may, and depending on the circumstances often would, be material. If the letter intended to convey that the Industries Assistance Commission report established a principle contrary to that which we have just stated, then it was in error. More generally, any factor whatever which may throw light upon the suitability of a product for its intended use may be relevant in determining an application for a by-law.
So much is, we think, clear but it is less certain whether the letter we have mentioned, and in particular, the sentence quoted, intended to say that lack of testing in service was necessarily irrelevant. Further, the remark was pertinent only to the qualities of one grade of the Harbison bricks in question.
On the whole, we think the better view is that the letter should be read in the way suggested by the respondent, from which it follows that the decision left a relevant matter out of account. On that basis, it must follow that the decision cannot stand, for the point excluded from consideration cannot be said to be without significance; nor can it be postulated that, but for that error, the decision would have been the same. To the contrary: the evidence showed that before reference to the Industries Assistance Commission report, a decision had been taken to grant a by-law and it was the content of that report which seems to have caused a change of mind.
We add two further comments. Firstly, as we understood the argument for the respondent, it was being asserted that the effect of the relevant statutory provisions was that if there were no Australian goods, being "suitably equivalent" and "reasonably available", an applicant for a by-law must necessarily be successful, there being no discretion to refuse an application. Although the matter was but briefly argued, we should say that it is our view that this submission is incorrect and that a discretion remains to refuse an application for a by-law on proper grounds; it is unnecessary, in this case, to determine what matters are relevant to the exercise of that discretion.
Secondly, we understand that no problem arises, in this case, as to the price of the proffered Australian product. When the price of a suitable Australian product exceeds that of the imported product, a question will arise whether the former is "reasonably available", but with that problem we are not concerned.
In the result, we agree that, for one of the reasons given by his Honour, the decision should be set aside and the matter remitted to the Minister for reconsideration. However, that reconsideration will be on a basis significantly different from that which would have been necessary had the Minister followed the decision of the primary Judge; in particular, of course, we have not agreed with his Honour's view that a conclusion adverse to the respondent on the question whether any of the Australian bricks constituted a suitable equivalent was not reasonably open. In that sense the appellant has had a significant success. It is necessary to vary the order of Davies J. by replacing its second paragraph in the following way:
"2. The decision under review is set aside and the matter is remitted to the Minister for Industry and Commerce for reconsideration in the light of the reasons of the Full Court".
No other change in that order is required and in particular the order for costs made by his Honour should stand. Half the costs of the present appellant in relation to the appeal should, we think, be paid by the present respondent; that will adequately reflect the extent to which the appeal has had a favourable outcome.
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