Kawasaki Motors Pty Ltd v Comptroller General of Customs

Re; KAWASAKI MOTORS PTY LTD
And: COMPTROLLER GENERAL OF CUSTOMS and GARRICK WILLIAM HAND
No. G554 of 1990
FED No. 391
Administrative Law - Customs

COURT

IN THE FEDERAL COURT OF AUSTRALIA

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

CATCHWORDS

Administrative Law - Judicial Review - judicial invalidation ab initio of revocation of instrument - earlier second revocation of same instrument - whether a nullity or invalid - whether instrument reinstated or recreated by invalidation of revocation - date on and from which reinstatement occurs - effect on earlier revocation

Customs - tariff concession orders permitting imported products without duty - local goods serving similar functions - statutory tests - comparison with description in tariff concession orders not with goods themselves

Words and Phrases - "capable of being produced in Australia" - "identity" - "identical goods" - "goods serving similar functions"

Customs Act 1901 (Commonwealth) Part XVA sections 269B(3), 269B(4), 269C(1), 269G, 269K, 269N(7), 269P(1), 269P(3)

Customs Regulations regulation 181(1)

Acts Interpretation Act 1901 section 33(1), (3)

Judiciary Act 1903 section 39B

Administrative Decisions (Judicial Review) Act 1977

Dr Drury's Case (1610) 77 ER 688

Cooper v Wandsworth Board of Works (1863) 14 CBNS 180

Commissioner for Railways (New South Wales) v Cavanough (1935) 53 CLR 220

Twist v Randwick Municipal Council (1976) 136 CLR 106

Minister for Immigration and Ethnic Affairs v Haj-Ismail (1982) 40 ALR 341

FAI Insurances Limited v Winneke (1982) 151 CLR 242

Attorney-General of Hong Kong v Ng Yuen Shiu (1983) 2 WLR 735

Kioa and Ors v West and Anor (1985) 159 CLR 550

Wattmaster Alco Pty Ltd and Ors v Button (1987) 70 ALR 330

Amcor Ltd v Comptroller General of Customs and Ors (1988) 79 ALR 221

Corinthian Industries (Syd) Pty Ltd v Comptroller-General of Customs and Others (1989) 86 ALR 387

HEARING

SYDNEY

#DATE 9:7:1991

Counsel and solicitors Mr C. Stevens
for the applicant: instructed by Baker and McKenzie

Counsel and solicitor Mr P. Roberts instructed by the
for the respondent: Australian Government Solicitor

JUDGE1

INTRODUCTION

This is an application by Kawasaki Motors Pty Ltd (Kawasaki) under section 39B of the Judiciary Act 1903 and under the Administrative Decisions (Judicial Review) Act 1977 for an order of review with respect to a decision under Part XVA of the Customs Act 1901 (Cth)(the Act) to revoke tariff concession order number 8439946 (the first TCO). The decision was taken by the second respondent, Mr Garrick William Hand, a delegate of the first respondent, the Comptroller-General of Customs. The date of revocation as stated in the Government Gazette was 5 July 1990. Other evidence says that it was 6 July 1990. The hearing proceeded on the basis that the latter date was correct.

HISTORY

On 31 July 1984 the first TCO took effect in respect of "skicraft, ride on, direct drive, jet pump propelled". It permitted Kawasaki to import its jet skis into Australia without incurring the 21% duty which normally applies.
On 11 September 1989 Mr R J Woodleigh, Managing Director of Hydro-Bike (Australia) Pty Limited (Hydro-Bike), wrote to the Australian Customs Service stating that his company was an Australian manufacturer of jet bikes and skis and requesting that the tariff concession be removed from imported jet bikes and skis. On 27 September 1989 Mr Woodleigh told the Australian Customs Service that his company's jet skis were similar to Kawasaki's imports. He said that his products in the jet range became available for sale on 1 July 1989 and that his company was currently able to produce up to 480 units per annum. Further details were provided. Apparently in consequence, the first TCO was purportedly revoked by the respondents on 4 October 1989 (the October revocation).
Kawasaki objected to the revocation and applied, inter alia, for a further tariff concession order. The number of this application was 8908039. On 11 April 1990 this application was finally refused.
Kawasaki also made an application to this Court for review of the October revocation. On 6 July 1990, the respondents, apparently on the basis of an assessment of the litigation, accepted that the first TCO was invalid and decided to undo the revocation. As a consequence, on 20 July 1990 Kawasaki's application for its review became the subject of consent orders made by Justice Davies to the effect that the October revocation be set aside ab initio.
On the same 6 July, however, as Customs had decided to undo the October revocation, the first TCO was revoked on fresh grounds (the July revocation). This meant that Kawasaki became entitled to the repayment of duty paid in respect of goods imported between 4 October 1989 and 6 July 1990 but were liable for duty on goods imported after that date. This was with the exception, as provided for by the Act, of goods which were already in transit at that date. It is the July revocation which is the subject of this application.
Some complicated evidence about computer entries and bureaucratic practices was given to explain these matters. Mr Paul Richard O'Connor, Director of the Court section of the Customs Service, stated in an affidavit that consequent upon the acceptance of the invalidity of the October revocation, the first TCO was removed from the Service's computer records. In cross examination, Mr O'Connor said that the number was actually removed from the computer records within a matter of days of 4 October 1989. I accept that the affidavit contained an error and that the oral evidence is correct, especially because, for reasons which will appear, it also accords with commonsense. Certainly Kawasaki does not appear to argue it any other way. The matter appears to be of little relevance to the legal issues involved here but does explain some administrative actions taken subsequently.
A question arises as to whether on 6 July the first TCO was in fact re-created. A file note signed by Mr Ronald George Houston (an employee of the first respondent) and dated 20 July 1990 indicated Mr Houston's view that it was "administratively impossible" to reinstate the first TCO. Thus there may have been no TCO to revoke on 6 July. This case can be decided on this ground alone unless there is an inference permitting a conclusion that the first TCO was restored or a new one created. There was certainly nothing in existence to revoke on the gazetted day of 5 July, but section 269P(3) makes this irrelevant.
In fact a notice of motion returnable on 4 December 1990, and stood over to the hearing, was filed in this matter seeking a decision, as a preliminary point, on the question whether the first TCO was in existence on July 6 1990 such that it could on that date have been revoked. However, as matters turned out, the hearing was not so confined. It also dealt with the subsequent, and remaining, issue whether if the first TCO was in existence, the July revocation was legally valid in accordance with the principles of administrative law.
Before addressing these central questions, one peripheral matter arose. On 19 July 1990 a concession order with the same description as the first TCO was purportedly created with the number 8908039 (actually by written alteration to the typed 8439946, the number of the first TCO), to be valid from 1 January 1988 to 6 July 1990 (the second TCO). This number was the same as the application lodged by Kawasaki subsequent to the October revocation and rejected on 11 April 1990 as earlier mentioned. In fact Mr O'Connor also testified that this number was relied upon in correspondence between the parties in regard to requests by Kawasaki for a second concession order. This was presumably because it was the number accorded the application. The second TCO was not gazetted.
There is dispute between the parties as to whether this constitutes a TCO. Evidence was given that the second TCO was used to permit a refund of duty to be made to Kawasaki. Yet the day after it came into existence, the first TCO's reinstatement by the Court "ab initio" would have legalised this payment. The backdating of the TCO's commencement to 1 January 1988 is mysterious. The backdating of its conclusion seems only to be explicable on the basis of computer and administrative imponderables. The second TCO itself did not purport to revoke anything. However, as it is not part of this application, its relevance to these proceedings appears limited and it is not necessary for me to decide whether or not it was a valid TCO.
WAS THERE ANYTHING TO REVOKE ON 6 JULY?
Kawasaki argued that the July revocation was either invalid and a nullity or it achieved nothing. It submitted that as at 6 July, the October revocation of the first TCO still stood so there was nothing to revoke. The "administrative impossibility" view expressed in the file note of Mr Houston of 20 July, especially when, as he said was the position here, the instrument continued to be relied upon after its supposed revocation, was relied on for the conclusion that the first TCO was not reinstated. However, Mr Houston presumably also thought it relevant that on the same day as he penned his opinion, Customs consented to the order of Justice Davies invalidating the October revocation ab initio, i.e. from its coming into existence on 4 October 1989.
The respondents submitted that there is no legal bar to making a second revocation when a first one is declared or found to be invalid: see section 33(1) Acts Interpretation Act 1901. This section reads:

Where an Act confers a power or imposes a duty, then, unless the contrary intention appears, the power may be exercised and the duty shall be performed from time to time as occasion requires.

This section, however, does not answer the question whether there is a power to revoke at a time when there is an existing revocation in operation.

Subsection (3) may also be relevant to this issue. It reads:

Where an Act confers a power to make, grant or issue any instrument ... the power shall, unless the contrary intention appears, be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.

The Customs Act, far from providing a contrary intention, expressly permits revocation in section 269P. Thus this provision would only be useful here if it permitted a second revocation of an already revoked TCO while the first revocation was still operative. I can find nothing in the Acts Interpretation Act or in the Customs Act to support a concept that the revocation of an instrument can be validly duplicated, or that an instrument can be revoked in advance of its reinstatement, as occurred following the consent orders made by Justice Davies.
The respondents contended that because of those consent orders, the October revocation no longer legally exists and cannot be a bar to the July revocation: Commissioner for Railways (New South Wales) v Cavanough (1935) 53 CLR 220; Wattmaster Alco Pty Ltd and Ors v Button (1987) 70 ALR 330; Dr Drury's Case (1610) 77 ER 688. This position appears to ignore the fact that when the July revocation was made, the invalidation of the October revocation had not taken effect.
In Wattmaster, a Full Court of this Court concluded:

A decision made in purported exercise of a statutory discretion, but which is affected by a relevant irregularity, will normally be treated as valid until successfully impugned by an appropriate plaintiff, but once the decision is held to be bad in law it will be treated as being invalid - at least in so far as substantive rights are concerned - as from the date upon which it was made.

Assuming that the October revocation can be described as a "relevant irregularity", and its invalidation on 20 July is a decision holding it to be "bad in law", it is necessary to determine whether the July revocation ever took effect because when it was made, there was no TCO in existence to which it could apply.
It is as difficult to draw these various threads and mishaps together, as it is to understand such a confusing scenario of tragi-comic error. But in the interests of a comprehensible resolution of this question, I think I should try.
1. The first TCO was revoked on 4 October 1989. 2. The October revocation was declared invalid by the Court on 20

July 1990 by consent. This means that as at 20 July the first TCO had at all relevant times been in force.

On 6 July 1990, gazetted as 5 July 1990, this TCO was purportedly

revoked again. Section 269P(3) gives priority to the date of the order over the date of the gazettal.

Kawasaki thereupon became entitled to a refund of the duty paid

after the October revocation.

On 19 July 1990 a second TCO was created (but not gazetted) with

effect from 1 January 1988 to 6 July 1990. This may have permitted a refund of duty between 1 January 1988 and 4 October 1989 but seems otherwise irrelevant for present purposes.

Thus on 6 July 1990, the October revocation being still in force,

there was no TCO to revoke. Despite its reinstatement 14 days later, this invalidates the July revocation.

That concludes this case. But in deference to the full argument on the remaining issues and with a view to avoiding a further hearing if my conclusion on this difficult matter is found to be erroneous, I will proceed to consider the second question, namely whether there was evidence to support the conclusions required by law and drawn by Customs so as to permit and authorise the July revocation.
WAS THERE AN ERROR OF LAW IN THE JULY REVOCATION?
Legislation
Relevant provisions in Part XVA of the Customs Act, in order of relevance, read:

269P (1) Where the Comptroller becomes satisfied at any time during which a concession order in respect of particular goods is in force that, if:

(a) that order were not in force at that time; and

(b) an application were to be made at that time for a concession order in respect of the particular goods:

a concession order, or a concession order specifying the item that is specified in the first-mentioned concession order, would not be made in respect of the particular goods (whether by reason that the order would relate to all the particular goods, to goods included in a class of the particular goods or otherwise), the Comptroller may, in his discretion, by order in writing revoke the first-mentioned concession order.

269C (1) Subject to this Part, where the Comptroller, after considering an application under section 269G for the making of an order under this section in respect of particular goods, is satisfied that:

(a) goods serving similar functions to the particular goods are not produced in Australia; and

(b) goods serving similar functions to the particular goods are not capable of being produced in Australia by any person in the normal course of business; the Comptroller shall make a written order, declaring that the particular goods are goods to which a prescribed item specified in the order applies. 269B (3) For the purposes of this Part, identical goods shall be taken to serve similar functions. 269B (4) Without limiting subsection (3), for the purposes of this Part, goods shall be taken to serve similar functions to other goods unless the Comptroller is satisfied that, if both goods were readily available for sale throughout Australia, there would be no significant part of Australia in which there would be significant cross-elasticity of demand between the goods.

Relevantly to this case, these provisions have the effect that in considering whether or not to revoke a concession order pursuant to section 269P(1), the first respondent must ask whether if there was no TCO in existence and an application was made for one, it would be unsuccessful. In other words, the test employed in regard to the revocation is the same as that for an application and must be dealt with in accordance with the requirements of section 269C(1). The decision-maker is obliged to consider whether, within the meaning of the Act, goods serving similar functions to the particular goods were being produced and were capable of being produced in Australia by any person in the normal course of business.
Justice Davies in Corinthian Industries (Syd) Pty Ltd v Comptroller-General of Customs and Others (1989) 86 ALR 387 at 391 held that a determination of "similar functions" under section 269C(1) is governed entirely by the provisions of section 269B(3) and (4). The decision-maker must first decide if the goods are identical. Only if the goods are not identical is it necessary to consider the cross elasticity test. As his Honour said at 391:

If goods are not identical, then section 269B(4) applies.

Evidence

It will be recalled that at the end of September 1989, Hydro-Bike had told Customs that its product had already been available for sale for 3 months. No doubt this was the prime justification of the October revocation. However, the evidence before the second respondent as decision-maker in July 1990 was that after 4 October 1989 there had been delays in the launching of the jet ski produced by Hydro-Bike and very little manufacturing was occurring because of two relocations of its factory premises.
On what appears to be 11 October 1989 (the photocopy is unclear), Commercial Customs Services Pty Ltd (acting on behalf of Kawasaki) sent a form to Hydro-Bike Aust Ltd headed "Approach to Australian Manufacturers". It included a questionnaire which Mr Woodleigh filled out on 30 October 1989. He stated that he produced a "ride on jet bike direct drive jet pump propelled", that "orders would be excepted (sic) under our normal company ... forms and conditions" and that a TCO on jet skis would "be a direct and competitive import threat to our market if produced as this would make imported products in some instances cheaper than our own" (photocopy is not entirely legible).
On 2 January 1990 Mr Woodleigh told a Mr W. O'Brien of the Australian Customs Service that his company had officially launched its "jet ski" on that day. Mr Woodleigh also stated that descriptive material and a video would be forwarded by the end of the week. However, on 15 January 1990 Commercial Customs Services Pty Ltd wrote to Customs stating that investigations had shown that no product launch occurred on 2 January and that no jet ski had yet been sold.
On 14 February 1990 the second respondent visited the premises of Hydro-Bike and interviewed Mr Woodleigh. In his notes on the visit, Mr Hand reported that he was told that the company was in the process of changing its name to Thunderbolt Jet Skis and relocating the factory. A minute produced by Mr Hand stated that at the time of his visit, the manufacturing/ assembly line was being relocated to the new premises. Thus presumably Mr Hand did not see a line in operation although this fact is not mentioned in the section 13 Statement of Reasons, produced by Mr Houston on the basis of Mr Hand's file notes at a time when Mr Houston was acting in Mr Hand's position. Also not listed in these Reasons is Mr Hand's contemporaneous note in the report of his visit that "Mr Woodleigh was confident that he would be fully operational by the end of February 1990".

Kawasaki questioned the weight of this evidence on the basis that it occurred before the relocation of the factory, and that therefore the second respondent did not see the state of the new factory. It suggested that the respondents ought to have made further investigations immediately prior to the July revocation because of the history of misstatements by Mr Woodleigh. I have referred to some of these misstatements already and will mention some others shortly.
Kawasaki also said that in fact Mr Hand only visited the premises of Hydro-Bike and not those of Thunderbolt. According to this submission, since these companies are separate entities, any information provided regarding Hydro-Bike's production ability cannot form the basis for a finding that Thunderbolt has such ability. I do not think that any adverse conclusion is available from this highly technical distinction. Kawasaki did not suggest that the two companies were not in substance the same and in fact conceded the continuity of ownership. On the evidence, what was involved appears to be no more than a change of name. However, the earlier part of the submission concerning the value of Mr Hand's findings on his visit does require consideration.
Mr Hand stated in his notes that Mr Woodleigh considered himself an inventor/designer with a proven ability to manufacture similar water craft, such as a larger vessel propelled by an outboard motor. He related having been told on his February visit that one jet ski was on firm order, with the deposit paid, and that the ski was close to completion. There were also several inquiries for orders. Mr Woodleigh claimed to Mr Hand that he had established possible markets overseas such as the Philippines.
The evidence shown to Mr Hand in February 1990 was that Mr Woodleigh's company had a 3 months lease of factory premises (with options to lease a neighbouring unit and to buy each), that it had certain patents, trade names and finance, and that it had prepared advertising. The company had obtained the rights to the production of the engine. Mr Hand was also provided with projected production figures and told that a prototype had been produced and that the company was actively seeking orders for the supply of jet skis.
By letter from Mr Woodleigh on 23 April 1990, Customs was provided with photographs of the production line and told "that production level was in the range of 6 units for the day as required" with "production time at about 55 minutes".
On 25 May 1990 a video illustrating the operation of the Thunderbolt jet ski sent to Customs together with an invoice evidencing the sale of one jet ski on that day. This was a remarkable coincidence. There was no evidence before the respondent of any further or additional sales. It all appears to have been a very long week after 2 January, and a veritable commercial lifetime since 1 July 1989.
On 14 June 1990 a letter from Thunderbolt confirmed that the company was in full production of jet skis, three and a half months or almost a year later than earlier stated, depending on which statement is highlighted. It also revealed that one jet ski had been sold, that they had the components to produce 7 units, that engine rights had been obtained, that there would be an imminent launch (a second one, after the 2 January "launch" - perhaps a third, if the original date of availability on 1 July 1989 could be so described) and that they would be participating in the Melbourne boat show.
An article in the Gold Coast Bulletin of June 29 1990 was brought to the attention of Customs prior to 6 July. It stated that Thunderbolt would soon be launching the jet ski and would be in full production by Christmas 1990. This appears to be inconsistent with the information that the "official launch" had taken place on 2 January 1990 and "full production" was achieved in June. In the Statement of Reasons, the second respondent (per Mr Houston) specifically stated that he did not consider there to be any inconsistency.
Identical goods
The Act provides that the first task is to examine the relevant identity of the two products. Justice Davies said in Corinthian Industries that section 269C(1) first requires an examination as to whether the Thunderbolt product is identical to the Kawasaki product. At 390-1 his Honour said that 'identical goods are identical'. It is a question of fact and the task posed is whether there was evidence to support the respondent's conclusion in favour of identity. There is a preliminary legal problem as to the basis on which identity is to be established, namely whether the comparison of the local product is to be made with the actual imported goods or with their description in the TCO.
Kawasaki agreed, at least for the purposes of argument, that the genus is "jet propelled drive-on skis" and that both products are of that genus, but it said that that is not the determinant in relation to whether or not they are identical goods. It is necessary to look at the subclasses as a segment of that overall class, to include either engine capacities, or the sizes, speeds or dimensions of the craft. In a comparison of the two jet skis, it must be possible to fit the local jet ski within the same subcategory of the description in the TCO which the Kawasaki jet ski represents. The argument was that to answer the question of identity in the affirmative, it is not sufficient that the local product fit within the description of the TCO. Instead, the actual imported jet ski must be identical, in its specific features, to the local product.
However, as I shall show shortly, the interpretation of the Act given in the cases seems to focus on the fact that an applicant for a TCO has the right to, and does in fact, fix whatever description of its imported goods it considers most clearly represents them. Thus if the imported goods are something distinctly different from the local product, it is for the applicant to apply for a TCO to describe this narrower category of goods. Justice Davies in Corinthian Industries envisaged, at 395, that applications are valid so long as they do not "insert trivial or decorative details into a description of goods so as to avoid the intent of Part XVA". His Honour said:

If a suggested description of goods for a concession order is an accurate and proper description of the goods sought to be imported, then those are the tests to be applied to the goods as described.

No suggestion was made by Kawasaki that the description in the TCO was inaccurate of its product. It merely sought to focus on its subsidiary features and then argue that the local product differs in those specific respects.
A Full Court of this Court (Davies, Morling and Gummow JJ.) in Amcor Ltd v Comptroller General of Customs and others (1988) 79 ALR 221 held at 233 that:

the decision maker must answer the question posed by section 269(1)(b) (this appears to be a typing error for section 269C(1)(b)) in relation to the class of goods described in the form of words for which the TCO is sought.

Item A of the relevant form of application calls for a "Precise Description of Goods to be Imported". Customs Regulation 181(1) requires a description that identifies the goods and their function.
I agree that an approach which follows the description in the documents rather than the characteristics of the goods themselves is rather technical and can certainly lead to some peculiar, even absurd, results. Thus for example, although people seeking to sell or purchase "bar fridges" would not normally be in the market for large two-door refrigerator-freezers, an application for a TCO in respect of "refrigerators" would subject the one to comparison with the other. The public may even be required to pay more for an imported product which has in fact no Australian-made equivalent, merely because the importer or importer's agent wrongly or insufficiently described the goods in question. But this exercise calls for statutory interpretation and import duties and tariffs are very technical concepts. Moreover, these laws were never over-endowed with logic. Perhaps that is why they are now coming under close scrutiny.
It is true that the Act on its face speaks of the identity and functional similarity of "goods" not "descriptions of goods". But the cases and a close examination of the terms of the Act reveal that it requires first a consideration of "an application for ... an order ... in respect of particular (imported) goods" and then a comparison between the local product and the particular imports which the application embraces. In other words, the Act requires of the decision-maker only that it be determined whether there are identical goods to the particular goods in the application or TCO. There may be several imported goods which fall within a particular description. Nothing in the Act requires the decision-maker to make a comparison with each one of them. I therefore reject Kawasaki's submission and proceed on the basis that "identical" means "identical to the description given by the applicant".
Kawasaki's submissions next require me to determine from which document the description is to be taken. The argument was that the description in the TCO was irrelevant. It reasoned from the requirements of section 269P(1) that the decision-maker in the case of a revocation has to consider what it called the "notional" circumstance that an existing TCO was not in force. In this "notional" situation there is no TCO description and it can therefore not be treated as a basis for establishing identification. Instead, it is an implied or "notional" application for the TCO being considered for revocation that should be addressed.
This argument seems to me to be somewhat contrived. On an application, notional or otherwise, Customs officers would have before them the description in the application which, if successful, would normally become the description in the TCO. Presumably it must do so: see section 269C(1), as otherwise the application must be refused.
In Amcor and Corinthian Industries, no TCO had yet been granted and the Courts acted entirely on the basis of the description in the relevant applications. If, as Kawasaki suggests, the decision-maker must assume that he is dealing with an application, presumably he is required to do so on the basis of the description therein contained. Since the description in the application for this particular TCO would have been the same as in the TCO itself (as it was successful), it is an exercise in semantics to say that an error of law was made by considering it on the basis of the TCO.
Functional similarity
However, Kawasaki further submitted that the fact that the goods have an identical mechanical or physical function does not establish that the goods are identical. Justice Davies in Corinthian Industries at 397 stated that to determine the question of identical goods solely by reference to identity of function is an incorrect approach. His Honour said at 390 that section 269B(3):

"says and means that if goods are identical, they are deemed to serve similar functions."

The Full Court in Amcor held at 233 that the question is concerned with physical or mechanical identity.

These decisions mean that if goods are functionally similar but not identical, they are not caught by the section. In terms of the correct approach to be adopted by a decision-maker in relation to "functional similarity", therefore, I take these statements of law to mean that, in comparing the product stipulated in the TCO with the relevant local product, the question must be asked whether in those respects they are physically or mechanically identical.
This requires a determination as to whether the Thunderbolt product is a "ride on, direct drive, jet pump propelled ski craft" in a physical or mechanical sense. Justice Davies' warning that "function" is an element only of this "identity" is timely in this respect, in that, assuming the local goods can be described as a ski craft used for water sport, a variety that lacks, say, a direct drive feature, is not identical.
Was there evidence upon which to conclude "identity"?
On November 17 1990, Kawasaki arranged the purchase of a jet ski made by Thunderbolt from Stoney Creek Motor Cycles, Sydney. Its witnesses inspected this craft and provided evidence that the jet ski produced by Thunderbolt was not identical to the Kawasaki jet ski. It seems that the second respondent never saw or had regard to either product, but proceeded on descriptive material of the Kawasaki model and at best a video of a Thunderbolt product. Kawasaki complained that if he had at least looked at its product, he would have seen that the Thunderbolt could not possibly be comparable to it. Kawasaki submitted that the second respondent should in any event have found, on the basis of the material before him, that the two jet skis were dissimilar.
For the reasons given earlier, I cannot see how these submissions can be upheld. One of Kawasaki's own witnesses, Mr J.J. McCaffrey, a mechanical engineer, testified that a Thunderbolt jet ski was a "ski craft, ride on, direct drive, jet pump propelled". Kawasaki does not suggest that on this basis the local product was not identical and did not possess functional similarity to its own product, nor did the evidence before me suggest otherwise.
It follows that whatever the failings of his methods, the conclusions of the second respondent in these respects were and are supported by evidence that the goods produced in Australia are identical to the particular goods described in the TCO. The second respondent, therefore, did not make an error of law in so finding, by directing the question of identity to the broad characteristics of the TCO description.
Cross elasticity of demand
As Justice Davies commented in Corinthian Industries, it is clear that since the question of identical goods was correctly answered affirmatively, it was not necessary for the respondents to address the cross elasticity test in section 269B(4). However, in the event that an appellate court is of a different opinion to me in relation to my earlier findings, and as full argument was addressed to this issue, I will consider the submissions put in this regard.
Kawasaki submitted that to justify the July revocation, Customs were obliged, but failed, to ask whether, and conclude that, the granting of a concession order would, because of the consequent price reduction, cause a demand response in the market place such that it would swing domestic demand to the imported jet ski. Kawasaki asserted that one product was not, in fact, easily capable of being marketed for the other, principally because the Kawasaki jet ski is dissimilar in most respects to the Thunderbolt jet ski. Because of price and performance characteristics, Kawasaki submitted, it should be anticipated that they would appeal to different markets.
The respondents did not address this issue at the hearing but submitted that since identity was established, consideration of cross elasticity was not necessary. The section 13 Statement of Reasons asserts that cross elasticity existed but apart from its reference to the fact that both were jet skis and for recreational use, no evidence or economic analysis was provided as a basis for that conclusion. However, if Kawasaki's suggestions were the appropriate criteria, many commonly available imported products, such as motor cars, shoes and chocolate, would escape the protective regime.
It is true that there was no real evidence to support Kawasaki's submission on this question. In addition, it seemed to be asking for a comparative assessment of the specific features of the Kawasaki jet ski rather than of the broad characteristics which comprised the first TCO. However, on the assumptions on which I am proceeding, the respondent was obliged to consider the question of cross elasticity of demand. Mere reference to the description and use of the respective products is not sufficient evidence or consideration. Hence, if the goods are or should have been found to be not identical, I find that an error of law occurred in that the existence of a cross elasticity of demand was not adequately considered as required by section 269B(4).
Produced in Australia
Finally, a question arises in section 269C(1) as to whether, assuming identity or functional similarity between the Thunderbolt and the Kawasaki product as described in the TCO, it can be said that there was sufficient evidence to justify a finding that as at 6 July 1990 the Thunderbolt jet ski/bike was being produced in Australia and was capable of being produced here in the normal course of business. The respondents came to the conclusion that there was such evidence.
The Full Court discussed this problem in Amcor. Their Honours commented at 229 that the test of "capability of producing" is preparedness to accept orders for the supply of such goods that had been, were being or were to be produced. The Full Court stressed that this definition contains an objective element. The Court said at 231:

We read the provisions of Pt XVA as being concerned with the making of a practical and realistic assessment of the situation as to local manufacturing capability.

Because of the use of the word "normal" in the relevant provision, the Court went on at 232:

The supplier must be prepared to accept orders in a competitive environment and therefore to supply the goods of acceptable quality, at a competitive price, within a reasonable time and to comply with any other obligations placed upon suppliers of such goods in the normal course of trade.

The Full Court seems to have stressed two aspects of this requirement - first, that the Australian manufacturer is accepting orders for the relevant product and, second, that it was objectively and realistically capable of meeting those orders.
On the basis of Mr Woodleigh's letters, the materials provided and Mr Hand's visit to the factory premises, the respondents claimed abundant evidentiary foundation for a conclusion that the relevant goods were in fact, and were capable of, being produced in Australia in the normal course of Thunderbolt's business. The Statement of Reasons says that the decision-maker concluded that Thunderbolt jet skis were available for order and sale in the ordinary course of business because one had been produced, because the jet ski was at the stage of being launched on the market, and because there existed quotations, orders, an invoice for the sale of one and the employment of a marketing consultant. Although it is not entirely clear from the Reasons, the second respondent appears only to have decided that identical goods were being produced in Australia as required by section 269C(1)(a). He said nothing expressly about whether they were capable of production in the normal course of business under section 269C(1)(b). The negative format of the subsection suggests that the "and" between paragraphs (a) and (b) may not be strictly conjunctive. On one view, goods being produced must be "capable of production". On the other hand, the requirement that this capability be "in the normal course of business" may mean that both elements are to be determined.
Accepting orders
Kawasaki submitted that the respondent had regard to a number of irrelevant considerations. Some of the considerations pointed to are that Thunderbolt:
1. planned to market its jet skis worldwide;
2. was actively seeking orders;
3. provided a quote for supply to the Philippines.
Following the views of the Full Court in Amcor, as I must, I find that these considerations were relevant to the question whether the local manufacturer was accepting orders in the normal course of business.
Supply
I agree with Kawasaki's submission that the respondents should have asked themselves and determined whether the Thunderbolt product was commercially marketable; that is, they should have addressed the question whether Thunderbolt was capable of supplying the orders it was seeking.

Again, Kawasaki submitted that a number of irrelevant considerations were taken into account, namely that Thunderbolt:
4. had obtained relevant patents and trade names;
5. had stocks of engines and could obtain other parts at short notice;
6. showed the jet ski in use on video.
I find that these considerations were relevant to the issue of ability to produce but not of sufficient substance and weight to found a conclusion that Thunderbolt was producing or capable of producing an identical product to the Kawasaki jet ski described in the TCO within the ordinary course of business.
Kawasaki submitted that the Australian jet ski product was as at 6 July 1990 not yet manufactured but was merely a prototype or, as it was described at the hearing, a "home-made back yard jet ski". The one jet ski sold by the Australian manufacturer was not a production model. Mr McCaffrey testified that there was a fine line between seeing this particular model as a poor quality product or as a prototype. He also testified that in order for this particular jet ski to be produced on a production or manufacturing line, what was needed was "total redesign, retesting and then tooling up for the manufacturer. That could be anything from three months to one year." I accept this evidence.
As with the cross elasticity test, the respondents argued that the quality of the Australian product was not a relevant consideration. They also submitted that there was no evidence to suggest that the quality was so inferior as to require the exercise of a discretion not to revoke.
On this issue, both these submissions are clearly wrong. The Full Court in Amcor stated that to achieve the statutory capability to supply the goods, they must be of an acceptable quality. The evidence established that the single Thunderbolt jet ski produced was qualitatively inadequate. It may even still be experimental or at least still be in a developmental phase. In other words, Thunderbolt was unable to supply a jet ski of sufficient quality to comply with the features of the "competitive environment" which Amcor requires.
Kawasaki further submitted that, having regard to the conflict between the information in the newspaper article and other information, and in the context of earlier misstatements as to when production would be occurring, the respondents should have made further inquiries. On this basis it was contended that there should be a finding that Thunderbolt jet skis were in fact not in commercial manufacture as at 6 July 1990 and that the company was not then capable of producing jet skis in the normal course of business. The respondents, in this submission, had made an unreasonable decision by virtue of undue weight being given to irrelevant factors and lack of consideration for relevant factors.
I agree with Kawasaki's submissions in these respects. What the second respondent saw and learned in his February visit was of minimal value as support for his conclusions on production and supply. The dubious, unreliable and inconsistent nature of Mr Woodleigh's various assurances and promises must or ought to have raised further doubts, at least sufficiently to have required further inquiries. The evidence presented at this hearing could not found a proper conclusion that identical or functionally similar goods were actually being produced in Australia or were capable of being produced here in the normal course of Thunderbolt's business.
In my opinion, the respondents did not sufficiently or in substance consider this question and there was insufficient evidence before them to make an affirmative finding if it had been considered. To all intents and purposes the evidence makes it impossible to conclude that Thunderbolt could have met the Amcor requirements of supply in a competitive environment of quality goods at a competitive price within a reasonable time. This was a significant error.
Thus if contrary to my view, the correct legal conclusion here is that the July revocation was achieved in law, I would find that the respondents erred in the determinations required by section 269C(1) concerning the production or capacity for production in the normal course of business of a local competitor to the Kawasaki imported product described in the first TCO.
Was notice required that the respondent were considering a revocation?
Kawasaki said, and Customs did not dispute, that it was given no notice by the respondents that they were contemplating the July revocation. Thus no opportunity was provided to Kawasaki to make any representations to the respondents on the question whether such a revocation should take place. Kawasaki argued that the respondents had a legal obligation to provide that information and opportunity.
It was not suggested that there is an actual requirement under the Act for the respondents to take into consideration the effect of a revocation of a TCO on importers taking advantage of it. On the other hand, no provision in the Act modifies or excludes such a duty. However, the fact that the respondents would know that revocation would adversely affect an importer imposed, so the argument went, a duty of natural justice to take such matters into consideration and to permit the importer the opportunity of consultation and being heard.
Kawasaki alleged that a legitimate expectation of compliance with those rules of natural justice arose from the following somewhat repetitive grounds:
- Kawasaki had been able to take advantage of the TCO since 1984
- Kawasaki had placed orders overseas and the revocation would

adversely affect the cost and selling price of the imported jet skis

- Kawasaki was interested in continuing to import jet skis into

Australia

- complaints had been made by Kawasaki that their sales had been

affected the previous summer by the October revocation

- the tariff had a substantial bearing on the price

An additional factor going towards natural justice requiring notice and a hearing are that there is no right of appeal, and the decision therefore constitutes a final determination of rights.
In this submission, Cooper v Wandsworth Board of Works (1863) 14 CBNS 180 was said to have established the principle that someone in Kawasaki's position, whose rights and legitimate expectations are thus affected, should have the opportunity to be heard prior to the revocation process. See also Minister for Immigration and Ethnic Affairs v Haj-Ismail (1982) 40 ALR 341; FAI Insurances Limited v Winneke (1982) 151 CLR 242; Attorney-General of Hong Kong v Ng Yuen Shiu (1983) 2 WLR 735.
It was further submitted that there was no particular need for prompt action on the respondents' part in regard to this TCO because there was no suggestion that the local industry (i.e. Thunderbolt) would require immediate protection from foreign competition.
The respondents submitted that:
(a) there is nothing in the statute that required the respondent to

consult or inform the applicant: Kioa and Ors v West and Anor (1985) 159 CLR 550; Twist v Randwick Municipal Council (1976) 136 CLR 106;

(b) the provision relating to an application for a new TCO which, if

granted, would take effect from date of revocation (section 268N(7)) envisages that importers will have an opportunity of putting their case after revocation;

(c) speedy action in revoking may be important to protect local

industry;

(d) importers are protected from the effects of TCOs by special

provisions regarding "in transit" goods;

(e) if notice was to be given, it would have to be given to everyone

contemplating taking advantage of the TCO. This would require gazetting and there is no such requirement in the Act.

They might also have pointed out that section 269K permits further applications when an earlier one is refused and even a reconsideration of an earlier rejected application.
My earlier conclusions make it unnecessary to address this matter in detail. It will suffice to say that I accept the respondents' argument. Well-known authority in this area of the law makes clear that there is no warrant for reading into this essentially administrative function a requirement that submissions first be invited and considered before a TCO may be revoked.
CONCLUSIONS
I find that the July revocation was a nullity or invalid because there was no existing TCO to revoke. If that finding is held to be erroneous I find that there was evidence to support the respondents' conclusion of identity of the competing products as described in the first TCO. If that finding is held to be incorrect, I find that the respondents failed to disclose sufficient reasons to support the presence of a cross elasticity of demand between the two products. I also find that there was insufficient evidence to support a conclusion, and it was in fact most improbable, that an identical product could be produced in Australia in the normal course of Thunderbolt's business so as to be able promptly and efficiently to supply goods of quality to a viable commercial competitive market.
In the result the application succeeds on both the major issues raised. The application will be granted in substance and costs awarded to the applicant. The parties should bring in short minutes of appropriate orders to give effect to these conclusions.

[1991] FCA 391

09 JULY 1991