Geelong Wool Combing Ltd and Secretary to the Department of Industry, Science and Resources
[2002] AATA 743
•30 August 2002
DECISION AND REASONS FOR DECISION [2002] AATA 743
ADMINISTRATIVE APPEALS TRIBUNAL N° V2000/1401
GENERAL ADMINISTRATIVE DIVISION
GEELONG WOOL COMBING LTD
Applicant
SECRETARY TO THE
DEPARTMENT OF INDUSTRY,
SCIENCE AND RESOURCES
Respondent
DECISION
Tribunal: Deputy President G.L. McDonald
Date: 30 August 2002
Place: Melbourne
Decision:The Tribunal sets aside the decision under review and substitutes a decision that the proposed activity of the applicant qualifies for registration under the Textile, Clothing and Footwear Strategic Investment Program Scheme 1999 as "an eligible activity".
(sgd) Graham McDonald
Deputy President
ADMINISTRATIVE LAW – textile clothing and footwear scheme – whether a wool top is a "textile" – whether trade usage meaning should be applied - whether application of Easy Care finish an "eligible TCF activity"
Textile, Clothing and Footwear Strategic Investment Program Scheme 1999
Re Pacific Film Laboratories and Collector of Customs (1979) 2 ALD 144
REASONS FOR DECISION
30 August 2002 Deputy President G.L. McDonald
This is an application by Geelong Wool Combing Ltd ("Geelong Wool") for review of a decision of a delegate of the Secretary to the Department of Industry, Science and Resources, refusing the applicant registration for participation in the Textile, Clothing and Footwear Strategic Investment Program Scheme 1999 ("the scheme"). The scheme, inter alia, provides for the payment of a grant, in this case, for the acquisition and construction of a plant and equipment for an activity for an eligible TCF (textile, clothing and footwear) activity. The scheme came into being under the provisions of s.8 of the Textile, Clothing and Footwear Strategic Investment Program Act 1999. The scheme provides for a number of different types of grant. The total grant limit was capped at $700 million in 1999. The Second Reading Speech stated that the scheme was
… aimed at encouraging additional investment TCF industries to add value to the products of early stage processing. The program aims to help in the development of sustainable, internationally competitive TCF industries in Australia during the transition to a freer global trade environment, by providing incentives which will promote investment, innovation and value adding in these industries. The program will also provide incentives to areas which are heavily dependent on TCF manufacturing industries, primarily regional area.
At the hearing Mr G. Griffith, qc, with Mr J. Rutherford, of counsel, represented the applicant and Mr K. Bell, sc, with Mr J. Cranston, of the Australian Government Solicitor, represented the respondent. The Tribunal had before it the documents filed for the purposes of s.37 of the Administrative Appeals Tribunal Act1975 ("the AAT Act"), together with 4 exhibits tendered on behalf of the applicant (exhibits A1 and A4) and no documents were tendered on behalf of the respondent.
To be eligible for registration, the applicant was required to be proposing to carry on an "eligible TCF activity" within clause 5 of the scheme. Clause 5 sets out the meaning of the term "eligible TCF activity", relevantly, as follows:
5Meaning of eligible TCF activity
(1) For the Scheme, each of the following activities is an eligible TCF activity:
(a)a manufacturing activity of a kind mentioned in Parts A to E of Schedule 1 carried on in Australia by an entity;
(b)an activity carried on in Australia by an entity in connection with, or incidental to, the design in Australia for manufacture in Australia of eligible TCF products, some or all of which are intended to be sold in Australia;
(c)an ancillary activity carried on in Australia by an entity in connection with, or incidental to, a manufacturing activity mentioned in paragraph (a) (the manufacturing activity) carried on in Australia by that entity or another entity if, and only to the extent that, operations in respect of the ancillary activity and the manufacturing activity are wholly and mutually interdependent;
(d)an ancillary activity carried on in Australia by an entity in connection with, or incidental to, an activity mentioned in paragraph (b) (the design activity) carried on by the entity or another entity if, and only to the extent that, operations in respect of the ancillary activity and the design activity are wholly and mutually interdependent;
(e)an activity of a kind mentioned in Part G of Schedule 1 carried on in Australia by an entity using an eligible TCF product resulting from a manufacturing activity mentioned in paragraph (a) carried on in Australia by the entity.
(2) However, an activity mentioned in paragraph (1)(a), (b), (c), (d) or (e), that is carried on by an entity both in Australia and elsewhere, is an eligible TCF activity only to the extent that it is carried on in Australia.
(2A) Also, despite subsection (1), each of the following activities is not an eligible TCF activity:(a)the manufacture of hides or leather used, or intended to be used, in motor vehicles;
(b)an activity carried on in connection with, or incidental to, the design for manufacture of hides or leather used, or intended to be used, in motor vehicles;
(c)an ancillary activity carried on in connection with, or incidental to, a manufacturing activity mentioned in paragraph (a).
(d)an ancillary activity carried on in connection with, or incidental to, a design activity mentioned in paragraph (b).
(3) In this section, ancillary activity means:
(a)an early-stage processing activity of a kind mentioned in Part F of Schedule 1; or
(b)…
Schedule 1, Part A, items 2, 3 and 4 are as follows:
1 …
2 Cotton Textile Manufacturing (including blends)
This category consists of manufacturing of yarns, fabrics woven, non-woven, felted or tufted, wholly or predominantly of cotton or similar fibres including flax, jute, hemp or kapok.
* Yarns, manufacturing
* Tyre cord yarns or fabrics, manufacturing
* Fabrics or other textiles, manufacturing3 Wool Textile Manufacturing (including blends)
This category consists of the manufacturing of yarns, fabrics woven, non-woven, felted or tufted, wholly or predominantly of cotton or other animal fibre including mohair, angora, cashmere, alpaca or silk.
* Fellmongered, slipe or skin wool, manufacturing
* Yarns, woollen or other animal fibre, manufacturing*Fabrics or other textiles, from woollen or worsted manufacturing processes, derived from animal fibres
4 Textile Finishing
This category consists of any activities involved in the processes of dyeing, printing, and finishing, including any process of impregnation, coating or lamination for imparting particular end use properties to yarns, fabrics or other textiles, whether in-house or on a fee or commission basis, using client supplied materials or materials purchased or transferred in from other manufacturing entities.
The facts, as found by the delegate and are agreed between the parties, were as set out in the statement of reasons, prepared for the purposes of s.37 of the AAT Act, and are as follows:
FINDINGS ON MATERIAL QUESTIONS OF FACT
12.Geelong Wool Combing Ltd (GWC) is an incorporated company (ACN 007 072 773) which operates an established early-stage wool processing facility in Geelong, Victoria.
13.On 30 June 2000 DISR received an Application for Registration from GWC under the Textile, Clothing and Footwear Strategic Investment Program Scheme 1999 dated 23 June 2000 (T4). That application (in response to question 30) sought registration in respect of manufacturing activities undertaken by GWC, falling within the following category:
Part A
…4 Textile Finishing
This category consists of any activities involved in the processes of dyeing, printing and finishing, including any process of impregnation, coating or lamination for imparting particular end use properties to yarns, fabrics or other textiles, whether in-house or on a fee or commission basis, using client supplied materials or materials purchased or transferred in from other manufacturing entities.The Applicant identified "impregnation, coating or lamination" as the particular manufacturing activities the subject of the application.
14.In response to question 35, the Applicant indicated that it intended to make the following investment/purchases for which a Type 1 grant may later be claimed:-
New plant or equipment acquisitions 3
Very brief description of investment/purchase Actual or estimated
Cost ($000's)
Installation and commissioning of a commission $5,500superwash finishing plant together with ancillary
equipmentNew buildings or structures, or alterations
Additional laboratory, relocation of current storage $1,000
Area, encapsulation of existing waste press and
relocation of current blending area.15.Accompanying GWC's application (in addition to an Organisation Chart showing GWC as controlling another entity, Topsoils of Australia Pty Ltd and financial statements prepared by GWC's accountants for the years ended 30 June 1997, 30 June 1998 and 30 June 1999) was a Statement of Strategic Business Intent which read in part as follows:-
STRATEGIC INTENT
The following statement of strategic intent encapsulates the essence of the present business whilst at the same time providing direction for the future:
"GWC is a profitable, customer-focussed organization providing flexible, quality wool-processing services to the textile industry."
In line with the philosophy of seeking value adding opportunities and reinforced by our strategic intent, GWC has identified a value adding project in the area of commission application of Easy Care finishes.
COMMISSION APPLICATION OF EASYCARE FINISHES1
Client feedback has identified a potential market for Easy Care finishes with sufficient volume demand to establish a commercial viable business venture.
…
1Easy Care is a generic term used to describe varying level of treatment of finished wool that is Machine Washable - safely machine washable and Total Easy Care wash and tumble dry.16.GWC's established business involves the making of woollen tops on commission. A top is an assemblage of substantially parallel woollen fibres produced as a result of processes known as carding and combing. These assemblages of fibres are later spun to produce yarn, however spinning is not an activity undertaken by GWC. Top-making is an early-stage wool processing activity.
17The specific activity under item 4 of Part A of question 30 in respect of which GWC sought registration was the application of "Easy Care" finishes to woollen tops prior to spinning, so as to render the finished wool machine washable or, in some cases, machine washable and capable of being tumble dried.
Exhibit A was tendered as an example of a wool top.
Mr A. Spira, managing director of the applicant company, in his witness statement to the Tribunal, described the qualities of Easy Care finish as follows:
…
7. … It is an application of a shrink proofing process designed to prevent felting shrinkage of woollen fibres. Felting is manifested [sic] a thickening of the fibre, by fibre entanglement and is completely irreversible.
and the process as involving:
…
10.The continuing shrink proofing of wool tops which is proposed by the applicant consists of the following:
10.1The process that damages the surface of the wool to modify its frictional characteristics; for example by the application of acid chlorination. This is a pre-treatment for the subsequent application of a resin.
10.2Neutralisation to deactivate any residual acid or chlorine.
10.3The application of a polymer resin (usually hercoset) which is applied onto the wool tops as a coating.
10.4Application of a softener.
10.5Drying in order to cure the resin.
Both Mr Spira and Mr R. Couchman, manager, Australian Wool Technical Development Group, a division of the Woolmark Company (formerly the Australian Wool Research and Promotion Organisation), provided witness statements and gave oral evidence to the Tribunal. Both were accepted as experts in the field of the manufacturer of wool fibres and textiles.
It was Mr Couchman's evidence that the application of the Easy Care finish can be carried out at either an early or later stage of the wool manufacturing process. However, it was more cost-effective for it to be carried out at the earliest stage. It was the evidence of both Mr Spira and Mr Couchman that, in the wool industry, a wool top was classified as "a textile". Yarn is made by drawing wool from a top so that the strands become thinner and thinner, until a twist is applied. A yarn may be woven or knitted. Yarn, when woven, becomes a fabric. It was agreed by both witnesses that a wool top was not correctly understood in the industry as being either "yarn" or "fabric", a point, in any event, conceded by Mr Griffith, qc, on behalf of the applicant.
The evidence clearly establishes that the process of applying the Easy Care finish to the wool top involves "impregnation, coating or lamination" and it imports a "particular end use property", namely, non-shrinkage when the wool product is washed in water. The proposed application of the Easy Care finish is irreversible. The evidence from Mr Spira also established that the applicant carries out its business on a commission basis, using wool supplied by a client. The question for the Tribunal is whether the proposed process falls within that contemplated by the use of the words "other textiles" where those words appear in the context of "yarns, fabrics or other textiles" in item 4 of Part A of Schedule 1.
The respondent's submits that the words "other textiles" takes a meaning from the context of both the scheme and of the preceding words "yarns" and "fabrics", so that its meaning is restricted to material which is spun or which is in cloth form. Since, as the evidence established, a wool top is an unspun assemblage of fibres, it does not fall within the meaning imparted by item 4. It is submitted that Part F, which describes wool top manufacture as part of "early-stage processing" (for "ancillary activity" purposes of clause 5(1)(c) and (d)), identifies the proposed process more with an early-stage than it does with a textile finishing process. The Tribunal accepts that the applicant's proposed processes are not "wholly and mutually independent" so that clause 5(1)(c) does not apply. It was submitted that the object of the scheme is to exclude any early-stage processing, except where it falls within the specifically identified ancillary activity definition and, then, it must meet the "wholly and mutually interdependent" requirement of clause 5(1)(c). Since the proposed process occurs at an early-stage of the manufacturing process and since the item contemplates products at a secondary or finishing stage of the manufacturing process, the activity falls outside the ambit contemplated by the use of the words "other textiles". On behalf of the respondent, Mr Bell, sc, rejected that the scheme, being beneficial in nature, should, if a doubt exists as to interpretation, be interpreted beneficially in favour of the applicant.
On behalf of the applicant, it was submitted that the words used in item 4 of Part A of Schedule 1, rather than narrowing the context, expand it. It was submitted that this is so because items 2 and 3, for instance, describe yarns and fabrics of a particular type (that is, are inclusive of what is eligible). Whereas the words "other textiles", in the context of item 4, broaden the reach of the item when regard is had to the broad industry meaning attributed to the word "textile". It was submitted that the manufacture of woollen tops was to be distinguished from the application of the Easy Care finish—the latter involving a different manufacturing process from the former. It was also argued that, even if the respondent's submission was to be accepted, the proposed process resulted in imparting an end use property to yarn, fabrics, etc. Since the proposed process added value to the product, it met the aim of the scheme to encourage value adding being carried out in Australia and, consequently, it qualified for registration as an "eligible activity".
The evidence leaves the Tribunal satisfied that the application of the proposed Easy Care product is a "finish" and, being irreversible, imparts a "particular end use property" for purposes of Schedule1, Part A, item 4. The evidence also establishes it as a process involving "impregnation, coating or lamination". There was no dispute about, and the Tribunal accepts, that the applicant operates on a commission basis. The only issue is whether the process, which the applicant proposes to apply to wool tops, falls within the category of "textile" in the phrase "… yarn, fabrics or other textiles". The evidence clearly establishes that a wool top is neither "yarn" nor "fabric".
The uncontested evidence of Mr Spira and Mr Couchman clearly establishes, and the Tribunal accepts, that in the woollen manufacturing industry the word "textile" has a broad meaning and would be uniformly understood to encompass a wool top. Their evidence was enhanced by the reference to the American trade definition identified in Mr Spira's witness statement (exh 2, AS10), which is as follows:
…
textile, n—originally a woven fabric, now generally applied to:
(1) staple fibers and filaments suitable for conversion to or use as yarns, or for the preparation of nonwoven fabrics, (2) yarns made from natural or manufactured fibers, (3) fabrics and other manufactured products made from fibers as defined above, and from yarns, and (4) garments and other articles fabricated wholly from one or more of the above elements, and articles made principally from the above when the products retain the characteristic flexibility and drape of the original fabrics.
It was the evidence that it had the above broad meaning in Australia in 1999 when the scheme was introduced. The question then is whether the word is to be given its trade meaning in the context in which it appears in the scheme.
The scheme is clearly intended to apply to a particular manufacturing industry, that is, the textile, clothing and footwear industry. Since the scheme applies to a particular industry, then it is more likely that the interpretation of words and/or terms used will be susceptible to usage having a technical or trade meaning. In Re Pacific Film Laboratories and Collector of Customs (1979) 2 ALD 144 at 152, the Tribunal quoted the following (from Craies on Statute Law ,7th ed. at 162):
… if the statute is one passed with reference to a particular trade, business or transaction and, words are used therein which everybody conversant with that trade, business or transaction knows and understands to have a particular meaning in it, then the words are to be construed as having that particular meaning which may differ from the ordinary or popular meaning.
If a trade meaning was to be applied to the word "textile", it would extend the ordinary meaning of that word. An interpretation which leads to an extension of meaning can be more readily applied than one which restricts what would be ordinarily understood by a word or term (Re Pacific Laboratories at p.156).
14. Further, the Tribunal does not accept Mr Bell's, sc, submission that the legislation should not be beneficially interpreted in favour of an applicant, when a doubt as to meaning of a word or term may exist. The fact that there is a cap applied to the amount of grant available does not negate the beneficial aspect sought to be achieved by the scheme.
On the other hand, if the Tribunal was to adopt an ordinary understanding of the meaning of the word "textile", then the effect would be to exclude the applicant from participation in the grant process because in ordinary parlance a wool top would not be regarded as a textile. The applicant would also be excluded from the grant process if an interpretation was applied to the words "other textiles" so as to place them in the genus of "yarn" or "fabric" (that is, something that is spun or cloth which is woven or unwoven). Given the aim of the scheme, as set out in the Second Reading Speech, and as is apparent from the fact of the introduction of the scheme, the application of an ordinary meaning would result in frustrating the broad aim of what Parliament was seeking to achieve. Accordingly, in the view of the Tribunal such an interpretation should be rejected.
The Tribunal is satisfied that the word "textile" has a trade meaning when used in item 4 of Part A of Schedule 1 of the scheme. The trade meaning is broader than its ordinarily understood meaning. That trade meaning extends to cover a wool top as being a textile in item 4. All the other requirements of the definition contained in clause 5 of the scheme being satisfied, the proposed activity of the applicant complies as "eligible activity" under the scheme.
Accordingly, the decision under review should be set aside and a decision substituted that the proposed activity of the applicant qualifies for registration under the scheme as "an eligible activity".
I certify that the seventeen [17] preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President G.L. McDonald(sgd) Catherine Thomas
ClerkDate of Hearing: 4 June 2001
Date of Decision: 30 June 2002
Counsel for the applicant: Mr G. Griffith, qc, with Mr J. Rutherford
Solicitor for the applicant: Messrs Harwood Andrews
Counsel for the respondent: Mr K. Bell, sc,Solicitor for the Respondent: Mr J. Cranston, Australian Government Solicitor
0
0
0