GTK Trading Pty Ltd v Export Development Grants Board

[1981] FCA 226

Re: G.T.K. TRADING PROPRIETARY LIMITED
And: EXPORT DEVELOPMENT GRANTS BOARD (1981) 56 FLR 292
No. WAG15 of 1981
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Evatt(1), Deane(1) and Ellicott(1) JJ.

CATCHWORDS

Administrative Law - Export expansion grant - goods qualifying for payment of grant - live lobsters caught at sea - whether eligible goods - whether livestock - whether produced or processed - whether produced or processed in Australia - whether substantially of Australian origin

Words and Phrases - "Australia" - "Goods" - "Livestock" - "Produced" - "Processed".

Export Expansion Grants Act 1978 ss.3(1) 4(1)

Acts Interpretation Act (1901) ss.15AA, 15B(1)

Administrative Law - Export expansion grant - Goods qualifying for payment of grant - Live lobsters caught at sea - Whether eligible goods - Whether livestock - Whether produced or processed - Whether produced or processed in Australia - Whether substantially of Australian origin - "Australia" - "Goods" - "Livestock" - "Produced" - "Processed" - Meaning of - Export Expansion Grants Act 1978 (Cth), ss. 3 (1), 4 (1) - Acts Interpretation Act 1901 (Cth), ss. 15AA, 15B (1).

HEADNOTE

The applicant claimed grants under the Export Expansion Grants Act 1978 in respect of the value of live lobsters which it exported to Japan, but the Export Development Grants Board disallowed the applications. The applicant applied to the Administrative Appeals Tribunal to review the decision, and the Tribunal referred a number of questions of law to the Federal Court pursuant to s. 45 of the Administrative Appeals Tribunal Act 1975 (Cth).

The entitlement to a grant depended upon whether the live lobsters came within the definition of "eligible goods" which, by s. 4 (1) included goods:

". . . manufactured, produced, assembled or processed in Australia, where -
(a) not more than 50 per centum of the value of the goods is attributable to materials or parts not of Australian origin; or
(b) more than 50 per centum of the value of the goods is so attributable, but the Board is satisfied that the goods should be treated as substantially of Australian origin."

Section 3 excludes a number of items, including "live-stock" from the class of eligible goods.

Held: (1) Lobsters came within the definition of "goods" in s. 4 of the Export Expansion Grants Act.

(2) The word "live-stock" in s. 3 extends no further than animals kept for the purposes of use or profit, and does not include live lobsters caught at sea.

Deputy Commissioner of Taxation (N.S.W.) v. Zest Manufacturing Co. Pty. Ltd. (1949), 79 CLR 166; Re Integrated Marketing and Export Development Grants Board (1980), 2 ALD 878, referred to.

(3) It was not open to the Tribunal to find that the lobsters were "manufactured" or "assembled" within the meaning of s. 4; but it was open to it to find that they were "produced", which covered the act of catching and caring for the lobsters until they started their journey to Japan; and to find that they were "processed" by being subjected to the series of operations and special treatments which the applicant carried out.

(4) It was open to the Tribunal to hold that the lobsters were processed and produced "in Australia" as they were processed on the mainland, and produced by being caught in the sea above the continental shelf, an area over which Australia has sovereignty.

(5) The live lobsters were wholly produced and processed in Australia and so were wholly of Australian origin.

HEARING

Sydney, 1981, May 5-6; July 1; December 10. #DATE 10:12:1981

REFERENCE OF QUESTIONS OF LAW.

The Administrative Appeals Tribunal referred a number of questions of law arising out of the interpretation of the Export Expansion Grants Act to the Federal Court.

J. D. Merralls Q.C. and C. D. Steytler, for the applicant.

D. K. Malcolm Q.C. and M. C. Lee, for the respondent.

Cur. adv. vult.

Solicitors for the applicant: Parker & Parker.

Solicitor for the respondent: Deputy Commonwealth Crown Solicitor.

R. R. BOADEN

ORDER

The question of law referred to it pursuant to s.45 of the Administrative Appeals Tribunal Act be answered as follows: -

(1) Yes

(2) Yes in relation to production and (3) processing but not manufacture or assembly

(4)(a) Does not arise

(b) No

(c) Yes

(5) No

(6) Yes

JUDGE1

G.T.K. Trading Proprietary Limited (the applicant), a company incorporated in Western Australia, carries on business there as a processor and exporter of seafood products. As part of its business it exports live rock lobsters to Japan.

In 1979 it lodged claims for grants under the Export Expansion Grants Act 1978 (the Act) in respect of the years 1977/78 and 1978/79 respectively. The claims for each year included a claim for a grant in respect of the value of live lobsters exported by it to Japan.

These claims were submitted to the Export Development Grants Board (the respondent) which is constituted under the Export Market Developments Grants Act 1974 and has the powers conferred on it by the Act.

In April 1980 the respondent disallowed the applicant's applications in respect of live lobster exports. The applicant subsequently objected to this decision but it was confirmed by the Board in July 1980.

The applicant then applied to the Administrative Appeals Tribunal (the Tribunal) the review the decision.

When the matter came before the Tribunal it, of its own motion, decided that questions of law arising in the proceeding should be referred to this court for decision pursuant to s.45 of the Administrative Appeals Tribunal Act 1975.

The statement of case has annexed to it written and oral evidence adduced before the Tribunal. It also sets out certain findings of fact proved before the Tribunal. In order to appreciate the questions raised in this matter it is appropriate to set out these findings of fact in full.

In 1976 the applicant became aware of a potential market in Japan for live lobsters exported from Western Australia by air-freight.

The live lobster market in Japan is to supply restaurants serving seafood in the Sashemi style which is the eating of raw seafoods. The customers must be able to see the lobsters live in tanks in the restaurant. The selected lobsters are then killed, the meat is cut into fine pieces and presented artistically arranged to the customers within approximately 5 minutes.

There is a premium price paid for live lobsters over that which is paid for cooked lobsters or tails. The species of lobster used to cater for this market is Panulirus Longipes Cygnus known colloquially as the Western Rock Lobster.

The life cycle of the lobsters is a natural process not contributed to by any human effort. The female lobster releases larvae (up to 400,000 eggs per female) in summer. The larvae are carried westward by ocean currents and offshore winds for several hundred to 1,600 kilometres. After approximately 11 months they return to the coast of Western Australia to settle in inshore weed beds.

In November, the lobsters undergo a moult and move to deeper water which coincides with the opening of the catching season. The fishermen set pots just outside the shallow reefs to catch these white soft shelled lobsters. This fishing period is called "the whites" and lasts for approximately 6 weeks during which the fishermen take 35 to 40 percent of the season's catch. From approximately the end of January to the end of June, the end of the season, the fishermen set their pots out in deeper water towards the edge of the continental shelf until they can no longer set them because of the depth of water. When no longer getting a sizeable catch towards the edge of the shelf, the fishermen set pots anywhere where they can find patches of lobsters. This second period of the season is known as "the reds" due to the changing colour of the lobster.

The species is caught off the Western Australian coast between North West Cape and Cape Naturaliste although the greatest concentration of the lobsters is from approximately just north of Geraldton to Mandurah, some 97 kilometres south of Perth. Within the area mentioned above the lobsters are caught from as close as 91 metres off the Western Australian coastline up to the edge of the continental shelf which ranges from approximately 42 to approximately 65 kilometres off the mainland coast. No lobsters are caught beyond the continental shelf. The lobsters are caught by independent fishermen who are licensed pursuant to legislation of the State of Western Australia and of the Commonwealth of Australia and these fishermen sell the lobsters to the applicant. The fishermen give the lobsters particular care and keep the lobsters alive by keeping them out of the heat and the wind in salt water tanks on the boats until they are landed. The fishermen are paid a premium by the applicant for lobsters which are vigorously alive with all legs intact.

After purchase by the applicant suitable live lobsters are segregated from the remainder of the catch by the applicant and put into its water tanks on shore. The tanks are partitioned so that each day's catch can be identified. The lobsters are watched for five to seven days by which time those that have remained alive are considered to be able to stand the rigours of export. During the culling procedure described above the live lobsters are "staged" in that during the five to seven day period they are not fed and they discharge all or most of the contents of their stomachs. Filtration systems remove the waste. It is believed that the removal of the stomach contents in this way helps the lobsters to stand up to air-freighting.

Air-freighting is carried out on three days per week and the lobsters commence the journey by being taken out of the water tanks at approximately 7 a.m. so as to be placed on to an interstate flight at 9.30 a.m.

The lobsters are graded into small or medium sizes to facilitate packing during which time they are checked for quality. After grading and checking the lobsters are immersed in extremely cold water (two to four degrees celsius) for 20-30 seconds which has the effect of stunning them so that they are accordingly more amenable to packing.

The lobsters are then packed 16 per box in two layers of eight surrounded by sawdust. A chilled salt water ice bottle is put in each box to keep the lobsters cool and relatively quiet. The boxes are then sealed and held either in the applicant's chiller room or in a refrigerated van for transit to the airport where they are loaded in a refrigerated compartment of the aircraft for the flight to Japan.

The boxes in which the lobsters are packed are required to be marked in a particular way and stamped for export. They are also marked with the words "Product of Australia".

The boxes arrive in Japan within 24 hours of their leaving Perth, and are distributed and sold at auction within 48 hours after leaving. Ninety-eight percent of the lobsters survive to be then placed live in tanks in the restaurants.

The Act enables claims to be made by exporters for an incentive grant entitlement in respect of each year ended 30 June. The entitlement for a particular year is calculated in relation to what is termed the exporter's "export earnings increment" for that year and the amount of the grant differs depending on whether the increment exceeds or does not exceed certain stipulated amounts specified in s.13 of the Act.

The export earnings increment of a year is calculated in accordance with the provisions of s.6 of the Act by reference to the exporter's "export earnings" in that year which (under s.5) depend on the value of sales of "eligible goods". It is to the definition of "eligible goods" found in s.4 of the Act that the questions in this reference relate. That section provides: -

"4.(1) A reference in this Act to eligible goods shall be read as a reference to goods (other than excluded goods, goods referred to in sub-section (2) or goods that are not to be taken to be eligible goods by virtue of a regulation under sub-section 22(3)) that, in the opinion of the Board, have been manufactured, produced, assembled or processed in Australia, where -

(a) not more than 50 per centum of the value of the goods is attributable to materials or parts not of Australian origin; or

(b) more than 50 per centum of the value of the goods is so attributable, but the Board is satisfied that the goods should be treated as substantially of Australian origin.

(2) For the purposes of sub-section (1), where meat is exported to the United States of America or Canada by virtue of a quota allocated under a scheme prepared by the Australian Meat and Live-stock Corporation, that meat shall not be taken to be eligible goods."

The questions referred to this Court by the Tribunal are as follows: -

(1) Is it open to the Tribunal, in law, to find that the live lobsters which were exported by the applicant ("the lobsters") were "goods" within the meaning of that term in section 4(1) of the Export Expansion Grants Act 1978 ("the Act")?

(2) Is it open to the Tribunal, in law, to find that the lobsters were goods that were manufactured or produced or assembled or processed within the meaning of those terms in section 4(1) of the Act?

(3) Is it open to the Tribunal, in law, to find that the lobsters or any of them were goods that were manufactured or produced or assembled or processed in Australia?

(4) Is it open to the Tribunal, in law, to -

(a) find that the lobsters had materials or parts within the meaning of those terms in section 4(1)(a) of the Act,

(b) find that a percentage of the value of the lobsters is attributable to materials or parts not of Australian origin, or

(c) be satisfied that the lobsters should be treated as substantially of Australian origin?

(5) Is it open to the Tribunal, in law, to find that the lobsters were "live-stock" within the meaning of that expression as contained in the definition of "excluded goods" in section 3(1) of the Act?

(6) Is it open to the Tribunal, in law, to find that the live lobsters or any of them were "eligible goods" within the meaning of that term in section 4(1) of the Act?

It is convenient to deal initially with questions (1) and (5).

Were the live lobsters "goods"? If so, were they "live-stock"?

Both parties agreed that it was open to the Tribunal in law to find that the live lobsters were "goods" and we agree with this concession. The more difficult question is whether they are "live-stock".

This issue arises because "goods" in s.4 do not include what are termed "excluded goods". This phrase is defined in s.3 of the Act as follows: -

"3. Excluded goods means -

(a) minerals;

(b) shorn wool in the grease,

(c) bulk wheat, including bagged wheat;

(d) sugar in any of its recognised commercial forms derived from sugar cane or sugar beet;

(e) livestock;

(f) waste and scrap materials; and

(g) goods that are excluded goods by virtue of regulations under sub-section 22(2)".

It was submitted on behalf of the applicant that the word "live-stock" should be given its ordinary English meaning and that it would not ordinarily include live lobsters caught in the sea. It was submitted that in ordinary parlance live-stock were domestic animals and that even though the definition in the Shorter Oxford English Dictionary included "any animals dealt in for use or profit" (as well as those kept for use or profit) this was not the ordinary usage of the word "live-stock".

There is no definition of "live-stock" in the Act and its meaning therefore is to be determined in the context in which it is found.

The object of the Act is to grant incentives to increase Australian exports. This, in itself, does not assist with the interpretation of the word.

Some assistance is, we think, to be gained from the definition of "excluded goods". In paragraphs (b) to (d) the definition excludes greasy wool, bulk wheat and sugar derived from sugar cane or sugar beet. Wool and wheat are the direct produce of primary production and sugar, as described, is indirectly the produce of primary production. Each is a major and well established item in Australia's export trade and, in the context of an Act designed to promote exports, it is not surprising that they are excluded from the incentive system. Also excluded with "live-stock" are minerals, waste and scrap materials. Minerals are also a very substantial and well established part of our export trade.

Although it is difficult to apply to the paragraphs of the definition an ejusdem generis construction we think the inclusion of these items does give some clue to the meaning of the term "live-stock". It tends to favour a construction that would interpret the word "live-stock" as referring to goods which are the subject of another well established export activity, namely, the export of domestic animals such as live sheep which are kept for use or profit.

The context in which the word "live-stock" is found may therefore be said to favour a construction which would exclude animals such as live lobsters which are not domestic and are not kept and maintained for use or profit. However, because the context is not conclusive, we think one is thrown back to its ordinary meaning. In ordinary parlance we do not think the word "live-stock" would include live lobsters caught at sea. Indeed, there is much to be said for the view that it would not, in any event, include fish even if raised in hatcheries. It is unnecessary to decide this in this case but we are quite satisfied that the word "live-stock" as used in the definition extends no further than animals which are kept for the purposes of use or profit. In other words, it is clear, in our opinion, that the word is not intended to include live lobsters caught at sea and dealt with as are the lobsters in this case.

There is strong authority for the proposition that the word "live-stock" according to its ordinary meaning does not cover fish at all. In Deputy Commissioner of Taxation v. Zest Manufacturing (1949) 79 C.L.R. 166, the High Court held that fish bred for sale or for stocking rivers were not "live-stock" for the purposes of the Sales Tax Exemptions and Classifications Act.

Both Rich J. (at p.172) and Dixon J. ((as he then was) at p.173)) expressed the view that it was not in accordance with ordinary English usage or parlance to apply the word "live-stock" to fish. They, McTiernan, Williams and Webb, J.J. (Latham C.J. dissenting) held that in the context of the sales tax legislation, the word "live-stock" did not include fish. Williams J. for instance held that it was appropriate only to animals which inhabit the land and quite inappropriate to animals which inhabit the water.

In Re: Integrated Marketing and Export Development Grants Board ((1980) 2 ALD 878) the Administrative Appeals Tribunal considered the meaning of the word "live-stock" in the Act and held (by majority) that it did not refer to live eels caught in estuaries and exported. In the joint majority judgment Fisher J. and E.W. Coates discussed the Act and the relevant cases and concluded that the true meaning of the word in the Act was domesticated animals used by man. Their analysis supports the view we have reached and we agree with them.

We were referred to a number of other cases on the meaning of the word "live-stock". It is sufficient to say that all of them depend on the context in which the word is found. (See Earl of Normanton v. Giles & Anor. 1 All E.R. 106; Creswell v. B.O.C. Limited (1980) 1 W.L.R. 1556; Minister of Agriculture Fisheries and Food v. Appleton (1970) 1 Q.B. 221 and Peterborough Royal Fox Hound Show Society v. Commissioners of Inland Revenue (1936) 2 K.B. 497).

It follows from this that we would answer question 1 of the reference "Yes" and question 5 "No".

Were the lobsters manufactured, produced assembled or processed?

As appears from s.4 of the Act the live lobsters exported in this case can only satisfy the definition of "eligible goods" if they were, within the meaning of that section, "manufactured, produced, assembled or processed" prior to their export from Australia.

It was conceded that neither of the words "manufactured" or "assembled" was appropriate to describe what had happened to the lobsters during the process of breeding and catching or at any stage until they were exported. The real question is whether they were produced or processed.

"Produced" is not defined by the Act but s.3 provides that "processed" in relation to goods does not include "graded", "packed" or "sorted".

As appears from the facts the lobsters breed in the sea off the West Australian coast until they are caught by licensed fishermen. They are then given special care to keep them alive by keeping them out of the heat and wind in salt water tanks on the fishing boats. After being purchased by the applicant they are put into tanks on shore. They are observed for five to seven days during which period they are not fed and discharge all or most of the contents of their stomachs. Filtration systems in the tanks remove the waste. It is said that the removal of the stomach contents helps them to stand up to air freighting. They are then graded into sizes to facilitate packing and checked for quality. After grading and checking they are immersed in extremely cold water for 20 to 30 seconds which has the effect of stunning them. Next, they are packed into boxes surrounded by sawdust and a chilled salt water ice bottle is put into each box to keep them cool and quiet. They are loaded into a refrigerated compartment for their flight to Japan where they are eventually placed live into tanks in restaurants for human consumption.

An analysis of what happens to them between being caught and beginning their journey to Japan indicates a number of things occur which, apart from sorting, packing and grading, are designed to preserve them live and fit for human consumption when they reach Japan. The retention of them in the tanks, their immersion in extremely cold water and the subsequent keeping of them at low temperatures until they leave appear to be aimed at this.

The ordinary meaning of the verb "process" is to treat or subject something to a particular or special method (see Shorter Oxford Dictionary, Webster's New International Dictionary and Collins Dictionary of the English Language) and in our opinion this is apt to describe what happens to the live lobsters on the mainland before they commence their journey. Although what occurs in part happens in the course of grading, packing and sorting them, the operations in question are, in our opinion, properly described as a "process". The lobsters are subjected to a series of operations or treated by a special method. In this sense they are processed or subjected to a special series of operations which, in this case, are designed not only to pack them but to preserve them live for human consumption in Japan. The success of the process is the fact that 98% of them survive the journey.

The other question is whether they are "produced". The Shorter Oxford Dictionary defines the verb "produce" as "to bring forth, bring into being or existence; to bring (a thing) into existence from its raw materials or elements; to give rise to, bring about, effect (an action, condition etc.) In relation to an animal or plant, it defines it to mean "to generate, bring forth, yield".

Webster includes in the definition of "produce" the following meaning - "to make economically valuable: to make or create so as to be available for satisfaction of human needs".

In the light of the Shorter Oxford definition, it is, in our opinion, appropriate to describe the act of catching the lobsters as brings them forth or "producing" them. We think it is also apt to describe the act of catching them together with what happens to them from the moment they are caught until they start their journey to Japan as "producing" them.

On the other hand, we have difficulty in describing what happens to them from the moment the applicant purchases them from fishermen until they leave on their journey as "producing them". Webster's definition "to make economically valuable or to make so as to be available for satisfaction of human needs" is perhaps appropriate to describe what occurs at this stage. However, we do not think in ordinary parlance these actions could be described as the production of live lobsters. In our view their production involves their catching as well as the subsequent on-shore activity.

We would answer question 2 - it is open to the Tribunal to hold that the lobsters were goods which were "produced" or "processed" but not "manufactured" or "assembled".

Were they produced or processed in Australia?

We have already stated our view that it is open to the Tribunal to hold that they were processed prior to export. The process to which they are subjected occurs on the mainland and therefore it is clear that they are processed in Australia.

A more difficult question is whether they are produced in Australia.

If the words "in Australia" are used in a strictly geographical sense and if, as we have said, the production of the lobsters in any event includes the catching of them, those lobsters caught beyond the coastal sea, that is beyond three nautical miles, would not be wholly produced in Australia.

Section 15B(1)(b) of the Acts Interpretation Act ^901 provides that, except so far as the contrary intention appears, any reference in an Act to "Australia" shall be read as including a reference to "the coastal sea of Australia". But this provision does not treat as within "Australia" that part of the sea which lies above the continental shelf where portion of the lobsters are caught.

On the other hand, it is quite clear that the seabed of the continental shelf is an area over which Australia has sovereignty and that the Commonwealth Parliament has power to legislate in respect of fisheries in the sea above the continental shelf.

In the context of an Act which, as we interpret it, is wide enough to confer benefits in relation to the export of fish and lobsters, the words "in Australia" in s.4 should not, in our opinion, be given a strict geographical meaning but one wide enough to cover fish and lobsters which are caught in waters above the Australian continental shelf. These are waters which under the Fisheries Act 1952 (Commonwealth) are referred to as "Australian waters" and to which a distance of 200 nautical miles from the coast are included within the "Australian fishing zone" defined in that Act. It would indeed be odd if this Commonwealth Act, designed as it is to promote the export (inter alia) of fish, had to be interpreted so as to apply it to those fish caught within the territorial sea (over which fisheries State Parliaments exercise legislative power) but not to those caught above the continental shelf beyond the territorial sea (over which fisheries the Commonwealth Parliament exercised legislative power). It is a conclusion which common sense would resist.

In our view, in the context of this Act, it is not a forced use of language to describe fish caught in the seas above the Australian continental shelf as fish produced "in Australia". Where, as in this case, lobsters are caught on the Australian continental shelf by fishermen licensed under Australian law and landed in Australia and then purchased and processed ready for export on the Australian mainland the description of them as goods produced in Australia is even more apt.

This is a construction of the Act which, in our view, clearly promotes the purpose and object underlying it and is therefore to be preferred by us in accordance with s.15AA of the Acts Interpretation Act.

Is the value of the live lobsters attributable to materials or parts not of Australian origin?

This question raises the application of s.4(1)(a) and (b) which relate to whether the value of the goods is attributable to materials or exports not of Australian origin. It is not, in our view, an appropriate use of language to speak of a live lobster having only portion of its value attributable to parts of or not of Australian origin. The lobster is either wholly of Australian origin or not.

Because we are of the view that the live lobsters are wholly produced and processed in Australia, it follows that, in our opinion, they are wholly of Australian origin.

This means that, in our opinion, sub-paragraph (a) is satisfied for if they are wholly of Australian origin it must follow that not more than 50% of the value of the goods is attributable to materials or parts not of Australian origin, i.e. the whole of the materials constituting all the parts of the lobster are of Australian origin.

Conclusion

In our opinion the questions in the reference should be answered as follows: -

(1) Yes

(2) ) Yes in relation to production and

)

(3) ) processing but not manufacture or

) ) assembly.

(4) (a) Does not arise

(b) No

(c) Yes

(5) No

(6) Yes