Re Automotive Components Limited (Receivers and Managers Appointed) (In Liquidation) And Secretary, Department of Industry and Science
[2015] AATA 79
•13 February 2015
[2015] AATA 79
DivisionGENERAL ADMINISTRATIVE DIVISION
File Number 2014/1693
ReAutomotive Components Limited (Receivers and Managers Appointed) (In Liquidation)
APPLICANT
And Secretary, Department of Industry and Science
RESPONDENT
DECISION
Tribunal Deputy President S A Forgie
Date 13 February 2015
Place Melbourne
The Tribunal decides to affirm the decision of the delegate of the respondent dated 15 January 2014 to deregister the applicant as a participant of the Automotive Transformation Scheme under r 2.28(2)(a) of the Automotive Transformation Scheme
Regulations 2010.…[sgd] S A Forgie..
Deputy President
CATCHWORDS
AUTOMOTIVE TRANSFORMATION SCHEME – ATS participant - automotive component producer – deregistered in January 2014 on basis that unlikely to meet ongoing conditions of its registration as an ACP in 2013 ATS year – applicant registered in national interest from 1 January 2012 to 31 December 2013 and not required to meet production volume and value conditions – whether production volumes and values assessed by reference to 2013 ATS year or 2014 ATS year - production value is total revenue of sales of automotive components produced in preceding 12 months – condition to be met in each ATS year following the ATS year in which the registration takes effect and so in 2013 ATS year – decision affirmed
LEGISLATION
ACIS Administration Act 1999; sections 3, 6
Administrative Appeals Tribunal Act 1975; section 37
Automotive Transformation Scheme Act 2009; sections 3, 4, 5, 6, 7, 8, 9
Legislative Instruments Act 2003ACIS Administration Regulations 2000; regulation 14
Automotive Transformation Scheme Regulations 2010; regulations 1.4, 1.5, 1.6, 1.7, 1.8, 1.0, 1.15, 1.16, 1.19, 2.1, 2.5, 2.8, 2.12, 2.14, 2.15, 2.18, 2.19, 2.20, 2.21, 2.22, 2.25, 2.26, 2.27, 2.28, 2.30, 2.32, 3.1, 3.9, 3.11, 3.12, 3.14, 5.6, 7.1, 7.2Automotive Transformation Scheme Order 2010, dated 31 May 2010
CASES
Parks Holdings Pty Ltd v Chief Executive Officer, Customs [2004] FCA 820; (2004) 81 ALD 365; 56 ATR 210
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490OTHER MATERIAL
Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
REASONS FOR DECISION
The Automotive Transformation Scheme Act 2009 (ATS Act) provides for the establishment of the Automotive Transformation Scheme (ATS) by the Automotive Transformation Scheme Regulations 2010 (ATS Regulations) to encourage competitive investment and innovation in the Australian automotive industry.[1] Under the ATS, those who are engaged in the production in Australia of motor vehicles, engines or engine components, automotive machine tools or automotive tooling or automotive services and who are registered as participants in the scheme are entitled to cash payments of assistance for eligible investment and eligible production. The ATS replaced the Automotive Competitiveness and Investment Scheme (ACIS) established earlier under the ACIS Administration Act 1999 (ACIS Act) and the ACIS Administration Regulations 2000 (ACIS Regulations) to provide transitional assistance to encourage competitive investment and innovation in the Australian automotive industry in order to achieve sustainable growth in the context of trade liberalisation.[2]
[1] ATS Act; s 3(1)
[2] ACIS Act; s 3
Automotive Components Limited (Receivers and Managers Appointed) (In Liquidation) (ACL) had been registered as an Automotive Component Producer (ACP) first in quarter 1 of 2001 for Stage 1 and then re-registered in quarter 1 of 2006 for Stage 2, of ACIS.[3] Therefore, it was a “participant” in relation to ACIS[4] until the end of 2010. On or about 23 December 2010, ACL applied for registration under ATS. Its application was approved and it was registered as an ATS participant, and more particularly as an ACP, with effect from 1 January 2011.[5] When it appeared that it would not meet the conditions of its registration, under ATS, ACL applied for permission for its registration to be continued in the national interest according to r 2.25 of the ATS Regulations. The Minister gave his permission on 27 February 2012 under r 2.25 of the ATS Regulations. Provided ACL met all conditions other than those specified in rr 2.22(1) and (2) relating to production volumes and values, it would continue to be registered in the ATS in the national interest until 31 December 2013.[6] On 15 January 2014, a delegate of the Secretary of the then Department of Industry (Secretary) approved ACL’s deregistration as a participant in the ATS on the basis that, in 2013, it was unlikely to meet the ongoing conditions of its registration as an ACP under r 2.22(1)(a) of the ATS Regulations.[7]
[3] T documents; T8 at 1/87 A “quarter” means a period of three months commencing on 1 January, 1 April, 1 July or 1 October of a year: ATS Regulations; r 1.5(1).
[4] ACIS Act; s 6(1)
[5] T documents; T3A at 1/8a
[6] T documents; T26 at 1/204
[7] T documents; T123 at 2/172-174 and ACL was advised of the decision in a letter dated 17 January 2014: T documents; T124 at 2/176-177
ACL’s application for review of the Secretary’s decision raises for consideration the nature of the obligations imposed by r 2.22(1) and (2) and, particularly, whether the production values are assessed by reference to those in the 2013 ATS year or by those in the 2014 ATS year. I have decided that r 2.22 requires an ATS participant[8] who is an ACP to meet the conditions of its registration in each ATS year following the ATS year in which it was registered. That meant that ACL first had to meet the conditions of its registration in the 2012 ATS year. The effect of its continued registration in the national interest for the 2012 and 2013 ATS years meant, however, that it was not required to comply with those conditions until the 2014 ATS year.
[8] An “ATS participant means a person, entity or group registered under the Automotive Transformation Scheme.”: ATS Act; s 4
The conditions that it had to meet in the 2014 ATS year after the conclusion of the Ministerial exemption related to two matters. The first related to production volumes of its nominated automotive component. The second related to production values. Those production values were required to be assessed by reference to the total revenue from sales of the automotive components “in the preceding 12 months”. In my reasons below, I explain why I have decided that meant that they had to be assessed by reference to the 12 months preceding the 2014 ATS year; i.e. by reference to the total revenue from sales of the automotive components in the 2013 ATS year. The production value of the automotive components in the 2013 ATS year had been $419,034 and so below the $500,000 threshold prescribed by r 2.22(1)(a). That meant that ACL could not satisfy the condition relating to production value in the 2014 ATS year even if it satisfied the production volume condition by producing at least 30,000 automotive components in that year. Therefore, under r 2.28(2)(a), the Secretary was required to deregister ACL as an ATS participant and I have affirmed the decision of the delegate of the Secretary dated 15 January 2014.
BACKGROUND
There was no dispute between the parties as to the facts forming the background to the issues arising in this matter. Those facts are also supported by the material in the
T documents[9] and I will set them out in this section of my reasons.
[9] Documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975
ACL was established in 1986 and was one of three companies comprising the ACL Group. Across two factories based in Launceston (ACL Bearing Co, a division of ACL) and Brisbane (ACL Gasket Co, a division of ACL), it manufactured and sold automotive components such as engine bearings, bearing materials, powder metallurgy and metal powders.[10] Among those whom it supplied were the Ford Motor Company of Australia (Ford Australia) (original equipment engine components) and the spare parts division of Toyota Motor Company Australia. On 26 August 2009, the directors of the ACL Group decided to appoint voluntary administrators to each company in the ACL Group. On the same day, Ford Australia appointed Mr Greg Keith and Mr Matthew Byrnes of Grant Thornton Australia Pty Ltd (Grant Thornton) to be Receiver Managers of ACL. Ford Australia took that step as a secured creditor wanting to ensure the continued supply of engine components to its engine manufacturing operations in Geelong.
[10] ATS Business Plan – Update, November 2013: T documents; T6 at 1/71-1/73
When ATS was scheduled to begin on 1 January 2011, ACL applied for registration as an ATS participant. It was registered as an ACP, and so as an ATS, participant with effect from that day. The basis on which it was registered does not appear from the letter dated 15 March 2011 advising it of its registration but I have found at [18]-[22] below that it was registered under ATS by virtue of the transitional provisions in Part 7 of the ATS Regulations.[11] Under ACIS, ACL had met the conditions of its registration by producing 48,953 units of Ford Valve Seat Insert Sets, which was its nominated component at the time with a total production value of $572,439 during 2010.[12]
[11] T documents; T3A at 1/8A
[12] T documents; T8 at 1/89
In its quarterly return for quarter 3 of 2011, ACL made a request to change its nominated component from a Ford Valve Seat Insert Set to an Engine Bearing Set. The change was made on 15 September 2011.[13] During 2011, ACL manufactured 24,565 Engine Bearing Sets for Ford Australia with a value of $603,266[14] but this did not meet the criteria set out in r 2.22(1)(a) regarding the number of components ACL was required to produce in Australia according to the conditions of its registration under ATS.
[13] T documents; T9 at 1/90
[14] T documents; T24 at 1/201
On 23 December 2011, ACL applied to the Minister under r 2.25 to continue its registration as an ATS participant on the basis that registration would be in the national interest. The background to its application was that:
“… the lower production volumes achieved by Ford Australia during 2011, will most likely see ACL’s production volumes of OE engine bearing sets for Ford Australia drop below the 30,000 units $500,000 production value threshold required by ATS regulation 2.22(1) and (2). These unfortunate events are beyond ACL’s control, but have obvious implications for ACL’s continued participation in the ATS program.”[15]
[15] T documents; T17 at 1/103
As to the timing of the change in registration should the Minister grant its application, ACL asked that:
“… the National Interest ATS registration comes into effect within a timeframe that will allow ACL to submit a quarterly return for Q1 2012 under the new National Interest ATS registration, and to allow ACL to submit its return for Q4 2011 under its existing ATS registration. Subject to the National Interest ATS registration being granted in accordance with the above, and subject to our following understanding of the operation of the ATS legislation being correct, we request that out existing ATS registration be terminated.
If our understanding is not correct, please contact us as a matter of urgency, so that we can understand exactly where we stand on this important issue.
It is our understanding that under the ATS regulations, ACL are still eligible ATS participants until 31 December 2011. The regulations state at 2.22(2) that:
(a)The ACP must meet the requirement in each ATS year following the ATS year in which the ATS registration takes effect; and
(b)The production value of components produced by the ACP is the total revenue from sales of the automotive components (excluding indirect tax) in the preceding 12 months.
The requirement under regulation 2.22(1)(a) make it a condition of registration that:
the ACP produce in Australia at least one kind of automotive component for use as original equipment in at least 30,000 motor vehicles or in at least 30,000 engines and that the production value of the components be at least $500,000
It is our understanding that ACL is only required to be [sic] meet this threshold eligibility requirement in the ATS year following the year in which the ATS registration takes effect (Regulation 2.22(2)(a)). The year in which the ATS registration took effect was 2011. Hence, it is our understanding that the regulations state that ACL are required to meet the 2.22(1)(a) eligibility criteria from 1 January 2012.
Accordingly, it is our understanding that ACL’s Q4 2011 ATS quarterly return will be submitted under our current ATS registration, which took effect on 1 January 2011, as ACL is still an eligible ATS registrant until the end of Q4 December 2011.
However, between the dates of 1 January 2011 and 31 December 2011, it appears unlikely that ACL will meet the eligibility requirement in relation to production volumes and we seek to continue our ATS registration under regulation 2.25, which allows companies to continue ATS registration in the national interest.”[16]
[16] T documents; T17 at 1/103-1/104
ACL’s application for registration under r 2.25 was granted by the Minister on 27 February 2012. The Minister wrote to Mr Byrnes, as ACL’s Receiver and Manager, on that day advising that he had:
“… decided that it would be in the national interest to continue ACL’s registration in the ATS. Specifically, due to ACL’s exclusive manufacture of in-line 6 engine bearings, I believe ACL’s continued registration in the ATS would provide benefit in the automotive industry and the Australian economy.
ACL will remain registered in the ATS provided it meets the following conditions:
·ACL continues to meet all the conditions of registration other than the conditions set out in subregulations 2.22(1) and (2); and
·ACL continues to manufacture in Australia in-line 6 engine bearings for Ford Motor Company of Australia Limited.
Subject to all conditions being met, ACL will continue to be registered in the ATS in the national interest until 31 December 2013. If by this time ACL meets the annual registration requirement, its registration will revert back to the standard ATS registration.”[17]
[17] T documents; T26 at 1/204
During 2012, ACL produced 19,565 Engine Bearing Sets with a value of $527,505. It returned those figures in its Quarterly Return for Quarter 1 of 2013 dated 15 May 2013.[18] Shortly before that, on 29 April 2013, ACL’s Launceston operations had been placed on the market for sale. No buyer had been found by 30 July 2013 when the Receiver Manager advised ACL’s stakeholders that those operations would be wound down and cease production in June 2014. In the meantime, the Brisbane based operations were the subject of negotiations regarding their sale.[19]
[18] T documents; T86 at 2/51
[19] T documents; T93 at 2/61
When ACL lodged its Quarterly Return for Quarter 3 of 2013, it reported that it had produced 10,592 Engine Bearing Sets in the Quarters 1, 2 and 3 that year. The total value of those sets was $317,506.[20] The Quarterly Return for Quarter 3 of 2013 is dated 3 December 2013 and ends with a note from ACL reading:
“Following a change to an alternative nominated component in Q3 2011, ACL’s eligibility for ATS remains marginal. The company failed in 2012 to meet the volume requirements for on-going registration requirements under paragraph 2.22(1)(a) of the ATS Regulations, and is likely to fail to do so again in 2013. The company is subject to a successful determination from the Minister to continue registration in the National Interest which expires in 2013. The company has recently announced that it is ceasing operations in June 2014.”[21]
[20] T documents; T115 at 2/160
[21] T documents; T115 at 2/160
In view of the figures returned and of this advice, an officer of the then Department of Industry (Department) took the view that it appeared unlikely that ACL would meet the conditions imposed by the Minister in his approval for its continued registration under ATS in the national interest. Therefore, ACL would cease to be registered in the ATS as at 31 December 2013 and would not be able to claim assistance beyond that date.[22] On the basis of that information, a delegate of the Secretary decided to deregister ACL on 15 January 2014 under r 2.28(2)(a) on the basis that it was unlikely to meet the ongoing conditions of registration as an ACP under r 2.22(1)(a) in 2013.[23] ACL was informed of the Secretary’s decision in a letter dated 17 January 2014.[24] The relevant parts of that letter read:
“On 27 February 2012 ACL was granted permission from the Minister to continue ATS registration in the National Interest under Regulation 2.25 of the Regulations. Subject to all conditions of the approval being met, ACL would continue to be registered in the ATS in the National Interest until 31 December 2013. If by this time ACL was able to meet the annual ATS registration requirements, its registration would revert back to the standard ATS registration.
In 2012 ACL reported in ATS, a total production value of 19,565 sets of its nominated original equipment component, that being the Ford engine bearing set, with a total production value of $527,505.
Up to and including Quarter 3 2013, ACL has reported in ATS, a total production volume of 10,592 sets, with a total production value of $317,506. In a letter 30 July 2013, you advised that the ACL ‘business sale’ process had been unsuccessful and therefore the business was being wound down … Based on this assessment, ACL is considered unlikely to meet the ongoing conditions of registration as an ACP under paragraph 2.22(1)(a) of the Regulations in 2013.
As a consequence I am writing to advise that Automotive Components Limited (Receivers and Managers Appointed) (In Liquidation) has been deregistered from the Automotive Transformation Scheme in accordance with paragraph 2.28(2)(a) of the Regulations.”[25]
[22] T documents; T119 at 2/167
[23] T documents; T123 at 2/172
[24] T documents; T124 at 2/176-177
[25] T documents; T124 at 2/177-178
ACL completed its Quarterly Return for Quarter 4 of 2013 on 10 February 2014. It reported that it had produced 3,991 Engine Bearing Sets with a value of $101,528.[26] That meant that its production of components for 2014 was in the order of 14,583 units with a value of $419,034.
[26] T documents; T127 at 2/192
ACL sought review of the Secretary’s decision on 17 February 2015. The basis for its request was an order placed with it by Ford Australia for 35,595 Ford engine bearing sets as original equipment with a value of $835,059. Those sets were to be supplied in the first six months of 2014. Production of those units would mean that ACL would meet the ongoing condition of its ACP registration under r 2.22 in 2014. It asked that its ATS registration be allowed to continue in a seamless fashion in the 2014 year. ACL supported its request with a letter dated 14 February 2013 written by Ford Australia to ACL. Ford Australia first referred to ACL’s deregistration and then advised that it and ACL’s Receivers and Managers had agreed to produce sufficient volumes of the identified component, a Ford engine bearing set, to support Ford Australia’s vehicle production requirements through to October 2016 and, in so far as additional service parts were concerned, beyond that date. Ford Australia concluded its letter saying:
“To be specific, the original equipment volumes required for Ford Australia’s 2014 to 2016 production period will be manufactured by ACL during the current period ending 30 June 2014. The nominated component is the ‘Ford Engine Bearing Set’ and the total ATB number of sets to be delivered during the 2014 calendar year, as original equipment parts, is 35,595 with a value of $835,059.”[27]
[27] T documents; T1 at 1/6A
The Secretary declined to review his decision and made the following points:
(1)ACL’s failure to meet the Minister’s special conditions and requirements led to its being deregistered from ATS;
(2)the Minister’s decision and, in particular, the special conditions and requirements he imposed are not reviewable under rr 5.3 and 5.6 of the ATS Regulations;
(3)although the Department had received ACL’s Quarterly Return for Quarter 4 of 2013, it could not process it as ACL was no longer an ATS participant; and
(4)it was most unfortunate that its contract with Ford Australia had not come about before December 2013 as applications for registration for 2014 had to be submitted by that date.[28]
CONSIDERATION
[28] T documents; T129 at 2/201-202
Registration as an ATS participant
Although its original application to be registered under ATS was not in dispute, I will spend a moment tracing the history of ACL’s registration as an ATS participant as an ACP. That history begins with ACL’s registration as a participant in ACIS under the ACIS Regulations both on and after 1 July 2010. Its registration under the ACIS Regulations did not, of itself, take it outside the scope of r 2.5 of the ATS Regulations when it prescribed the conditions that a producer of automotive components was required to meet for registration as an ACP.
I have set out the conditions prescribed in r 2.5 at [68]-[69] below. In brief, they require that, in the 12 months preceding the application, the producer fulfilled one or other of three criteria: first, it met either the production volume or production value stipulated in r 2.5(1)(a); second, it had demonstrated to the Secretary that, for the ATS year to which the application related, it was likely to meet either the production value or production value stipulated in r 2.5(1)(b); or, third, it had been given permission by the Minister, under r 2.8, to apply for registration as an ACP. On the material that I have, it appears that ACL met both its production volume and its production value in the 12 months preceding its application for registration under ATS.
Its having done so meant that it would have been entitled to apply for registration under r 2.5 but, although the fact of making an application for registration as an ATS participant was essential, its meeting the eligibility criteria set out in r 2.5 was not directly relevant in its being registered as an ATS participant. They were not directly relevant for ACL’s eligibility to apply for registration was only directly relevant under r 2.15 which required the Secretary to examine each application and decide whether to grant it. Regulation 2.15, however, comes within Division 2.4 and that Division did not apply to those who had been participants in ACIS on or after 1 July 2010 and who met the requirements of r 7.2. They came within the transitional arrangements set out in Part 7 as a result of r 7.1.
Regulation 7.2 applied to a participant in ACIS who applied for registration as an ATS participant in accordance with r 2.12(1) before 1 January 2011, provided a business plan containing information set out in r 2.12(3) and satisfied the Secretary that after registration, it would be able to meet the conditions of its registration found in Division 2.5. If the Secretary was so satisfied, Division 2.4 of the ATS Regulations did not apply to it. Material that would otherwise have been relevant in considering eligibility under 2.15 would continue to have relevance in the Secretary’s deciding whether he or she were satisfied under r 7.2(c) that the participant in ACIS would, after registration, be able to meet the conditions of registration in Division 2.5.
A consequence of Division 2.4’s not applying to a participant in ACIS who applies for registration as an ATS participant is that the Secretary is not expressly given power to register that participant. The only power that is expressly given to the Secretary to register a person as an ATS participant is found in r 2.15. That regulation lies within Division 2.4 and cannot apply because, as I have said, r 7.2 provides that Division 2.4 does not apply to a participant in ACIS who comes within it. Therefore, the Secretary’s power to register a participant in ACIS in those circumstances, must be found implicitly within r 7.2 and in the wider provisions of Part 7 applying to transitional arrangements from ACIS to ATS. I refer to r 7.3 in particular for there would be no need to provide for the recognition of investment in plant and equipment and research and development under ACIS as eligible investment under ATS and pave the way for payment of assistance under ATS if the Secretary were not implicitly given power by r 7.2 to register an ACIS participant as an ATS participant.
Period of effect of registration
In providing that “Division 2.4… does not apply to a participant in ACIS who applies for registration as an ATS participant …” if the three criteria are fulfilled, is r 7.2 intended to lead to the conclusion that the whole of Division 2.4 does not apply? That question becomes particularly pertinent in relation to provisions such as rr 2.18 and 2.19. They are located in Division 2.4 with the former providing for the period of effect of registration and the latter providing that registration does not confer entitlement. Issues of that sort are not addressed in the transitional arrangements in Part 7 or elsewhere in the ATS Regulations or in the ATS Act.
It seems to me that r 7.2 is not intended to mean that provisions such as rr 2.18 and 2.19 do not apply. What it provides is that Division 2.4 does not apply to a “participant in ACIS” who applies for registration as an ATS participant and meets the three criteria it specifies in rr 7.2(a), (b) and (c). It does not provide that Division 2.4 does not apply to any subsequent registration of that person as an ATS participant. Regulations 2.18 and 2.19 are concerned with registration and not with a “participant in ACIS” for, once registered as an ATS participant, a person’s previous status is irrelevant except in so far as the treatment of its eligible investment under ACIS may be concerned. That is the subject of r 7.3 of the ATS Regulations and does not alter my conclusion that rr 2.18 and 2.19 of Division 2.4 do apply to a person registered under the transitional provisions of r 7.2.
That means that ACL’s registration under ATS took effect from 1 January of the ATS year in relation to which the application was made i.e. 2011. The period of registration would end either on 31 March 2021 or upon deregistration under r 2.28. That followed from the application of r 2.18(2).
Conditions of registration
The conditions of registration that ACL was required to meet when it was first registered as a participant in ACIS are those set out in r 2.22. I have set them out at [91] above/below. On its initial registration in ATS, ACL was required to comply with the conditions set out in r 2.22(1) as it had not been registered following the Minister’s permission under either rr 2.8 or 2.25. The conditions are framed in r 2.22(1) in relation to an ACP in terms of production volume and production value or, under a different formulation, production value alone. Provided one or other of the conditions is satisfied, there is no need to satisfy both production volume and production value.
The time at which the conditions must be met is the subject of r 2.22(2). That regulation 2.22(2) provides:
“In subregulation (1):
(a)the ACP must meet the requirement in each ATS year following the ATS year in which the ACP’s registration takes effect; and
(b)the production value of automotive components produced by the ACP is the total revenue from sales of the automotive components (excluding indirect tax) in the preceding 12 months.”
On behalf of ACL, Mr Fleming QC submitted that r 2.22 does not impose an ongoing obligation to comply with its conditions on each and every day of the year. What it calls for is an assessment of whether the conditions specified in r 2.22(1) have been met over the course of a specific ATS year i.e. 1 January to 31 December of each year from 2011 to 2021. Whether or not an ATS participant has fulfilled those conditions can only be seen by reference to its results as determined at the end of the particular ATS year. It is only then that the production volume and value can be known and calculated. The requirement set out in r 2.22(2)(b) that the production value is the total revenue from sales of automotive components “in the preceding 12 months” cannot be read as a requirement to calculate the total revenue from sales in an ATS year different from, and previous to, the ATS year in which the conditions must be met. Regulation 2.22(2)(b) should be read as capturing the total revenue from sales during the course of that ATS year.
Mr Clarke of counsel submitted on behalf of the Secretary that the words of r 2.22(2)(b) clearly require reference to be made to the production values achieved in the 12 months before conclusion of the particular ATS year under consideration. Therefore, if an ATS participant’s compliance with r 2.22(1)(a) is under consideration in relation to the first ATS year in which compliances is required by r 2.22(2)(a) (i.e. the ATS year from 1 January to 31 December 2012), the production value is determined under r 2.22(2)(b) by reference to the 12 months from 1 January to 31 December 2011.
I think that the difference between the two submissions is best explained in table form. I have assumed that the particular condition to be met was that relating to production volumes and values set out in r 2.22(1)(a), and not that in r 2.22(1)(b), that no exemption has been given and, finally, that the ATS participant was registered with effect from 1 January 2011 and remained registered for the first five ATS years of the ATS:
ATS year[29]
Period
Condition to be met in each ATS year
Production value assessed by reference to revenue sales in preceding 12 months
[29] ATS Regulations; r 1.5
Applicant’s interpretation
Respondent’s interpretation
1
1/01/2011 – 31/12/2011
2
1/01/2012 – 31/12/2012
Production 30,000 automotive components with production value at least $500,000
1/01/2012 – 31/12/2012
1/01/2011 – 31/12/2011
3
1/01/2013 – 31/12/2013
Production 30,000 automotive components with production value at least $500,000
1/01/2013 – 31/12/2013
1/01/2012 – 31/12/2012
4
1/01/2014 – 31/12/2014
Production 30,000 automotive components with production value at least $500,000
1/01/2014 – 31/12/2014
1/01/2013 – 31/12/2013
5
1/01/2015 – 31/12/2015
Production 30,000 automotive components with production value at least $500,000
1/01/2015 – 31/12/2015
1/01/2014 – 31/12/2014
Unfortunately, I do not find r 2.22(2) to be as clearly written as I would like. On one view, and it is a view consistent with that taken by ACL, it gives an ATS participant, who is an ACP, a “year off”, as it were, to get its production up to speed so that it can meet the conditions imposed upon it. That “year off” is achieved if the reference to the “preceding 12 months” in r 2.22(1)(b) is read as a reference to the 12 months of the ATS year in which an ACP is required to meet the condition. The other view that is open, and it is a view consistent with that taken by the Secretary, is that the reference to the “preceding 12 months” is a reference to the 12 months preceding the particular ATS year in which the ACP is required to meet the condition in r 2.22(1).
When I stand back from the particular words of r 2.22(2) and see them against the backdrop of the provisions of the whole of the scheme,[30] though, it seems to me that the second view is the only view that can be taken. Among those wider provisions are those relating to the registration of a person as an ATS participant. They strongly point to the expectation, if not the requirement, that a person who applied for registration was already meeting the production volumes and values or that it could demonstrate that it was likely to do so.
Putting aside the particular provisions of r 2.8 relating to those situations in which registration would be in the national interest, a person may come to be registered as an ACP in one of two ways. First, registration may follow from a person’s application for registration under r 2.5. That person must satisfy the Secretary that it is eligible under r 2.15 and so must satisfy him or her that it either has achieved the production volumes and values set out in r 2.5(1)(a) or, if it cannot, that it is likely to do so “for the ATS year to which the application for registration relates”.[31] That very strongly suggests that the person who is applying for registration is expected to be “up and running” in the first ATS year to which its application relates. If the person applied for registration under ATS at the earliest possible moment, that would be the ATS year beginning 1 January 2011 and ending on 31 December 2011.
[31] ATS Regulations; r 2.5(1)(b)
The second way in which a person may come to be registered as an ACP is under the transitional provisions of Part 7 of the ATS Regulations. Regulation 7.2 provides for registration where a person was a participant in ACIS on or after the commencement of the ATS Regulations on 1 July 2010 and where that person applies for registration as an ATS participant. Such a person was already required to meet similar production volumes and value requirements under r 14 of the ACIS Regulations as a condition of its ongoing registration under ACIS. Furthermore, the Secretary had to be satisfied that the participant would be able to meet similar conditions of registration under Division 2.5 of the ATS Regulations.[32] These provisions also suggest that the person registered under the transitional provisions is expected to be “up and running” in the first year of its registration as an ATC participant.
[32] ATS Regulations; r 7.2(c)
In either case, the structure of the registration provisions does not envisage that an ATS participant will have a “year off” from meeting the conditions in order to “get up to speed” as it were. What r 2.22(2) does envisage, and provide for, is that an ACP will meet the production volumes in the ATS year following the ATS year in which its registration takes effect. In the case of an ACP whose registration takes effect on 1 January 2011, it must meet the production volume specified in r 2.22(1)(a) in ATS year 2012 i.e. in the period from 1 January 2012 to 31 December 2012.
The production values are assessed by reference to the total revenue from sales of the automotive components “in the preceding 12 months”. Mr Fleming argues that the reference to “the preceding 12 months” is a reference to the 12 month period comprised within the particular ATS year being assessed. He argues that it must be read in that way because the assessment of whether an ACP has met the conditions is necessarily made after the conclusion of the ATS year under consideration. I do not doubt that the assessment is made at the conclusion of the ATS year but that does not mean that the remainder of his proposition is correct i.e. that that the requirement that the production value of automotive components “in the preceding 12 months” be a certain amount is to be read as the production value in the ATS year in which the conditions must be met and not in the previous ATS year. There are two lines of reasoning that lead me to conclude that I do not agree with the remainder of that proposition.
The first is based solely on the construction of r 2.22(2). Had Parliament intended the production value to be assessed by reference to the total revenue from sales in the 12 months comprising the ATS year in which the conditions must be met, there would have been no need to refer to the time period at all whether described as the “preceding 12 months or otherwise”. The period, being each ATS year following the ATS year in which the ACP’s registration took effect, would have already been prescribed as the period by virtue of r 2.22(2)(a) i.e. the period in which the ACP must meet the requirement. The fact that Parliament has referred to the 12 months preceding the relevant ATS year in which the requirement is to be met strongly suggests that the production value is assessed by reference to the total revenue from sales of the automotive components in the 12 months preceding the ATS year identified in r 2.22(1)(a) i.e. “the preceding 12 months”.
The second line of reasoning is also based on the construction of r 2.22(2) but has regard to the wider context in which it is placed. Regulation 2.22(1)(a) provides that it is a condition of registration as an ATS participant, who is an ACP, that the ACP both produce the required number of automotive components and that the production value of those components be at least $500,000. Regulation 2.22(1)(b) expresses an alternative condition but that is not the condition that is in issue in this case. There is no question that r 2.22(2)(a) requires the conditions to be met in each ATS year following the ATS year in which the ACP’s registration took effect.
This meant that the first ATS year in which ACL had to meet the requirements of r 2.22(1) was the 2012 ATS year i.e. the first ATS year following the 2011 ATS year in which its registration as an ACP took effect. ACL had to produce at least 30,000 Engine Bearing Sets for Ford Australia in the 2012 ATS year and with a production value of at least $500,000 in order to meet the requirements of r 2.22(1)(a). The production value of those Engine Bearing Sets, being automotive components, was not assessed by their “production value” as assessed by ACL but by reference to the “total revenue from sales” of those automotive components in the period described as “the preceding 12 months”.
The “value” of goods would generally be understood to mean their “worth in monetary terms”[33] but there can be a disjunct between their value in that sense and the “revenue” actually received from their sale. “Revenue” in this context is a reference to “money which comes to a person, organization, etc from any source, eg property, shares, etc. …”.[34] A “sale” of goods (other than a motor vehicle or engine owned by an ATS participant who is registered as a Motor Vehicle Producer (MVP)) is, subject to qualifications in r 1.12 taken to have occurred in the circumstances set out in r 1.11(2) or (3).[35] In summary, a sale of goods is taken to have occurred if:
[33] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers (Chambers)
[34] Chambers
[35] ATS Regulations; rr 1.5(1) and 1.11(1)
“… title to the goods passes from the seller to the buyer for the first time, and the seller:
(i)has received cash or other consideration for the goods; or
(ii)has an enforceable claim against the buyer in respect of the goods; …”[36]
“… the goods … are provided:
(a)as a form of payment to creditors (for example, for sponsorship or advertising); or
(b)as a gift to a non-profit scientific institution, or a charitable or public educational institution.”[37]
[36] ATS Regulations; r 1.11(2)(a)
[37] ATS Regulations; r 1.11(3)(a)
The qualifications are set out in r 1.12:
“(1) Despite regulation 1.11, a sale of goods or services is taken not to have occurred, for these Regulations, in the circumstances mentioned in subregulation (2), (3), (4) or (5).
(2)A sale of goods is taken not to have occurred if:
(a)the goods are lent by a person to another person with the intention that they be returned to the lender; and
(b)the lender retains title to the goods.
(3)A sale of goods or services is taken not to have occurred if a corresponding credit for the goods or services is subsequently issued.
(4)A sale of goods or services is taken not to have occurred if the goods or services have previously been treated as sold for these Regulations.
(5)A sale of goods or services is taken not to have occurred if the transaction relating to the goods or services is between 2 or more companies in a group registered under regulation 2.9 as a single entity.”
It follows from these provisions that a “sale” may have occurred even if no revenue is received from it. As provided for in r 1.11(2)(a)(ii), a sale will have occurred if the title passes from seller to purchaser and the seller has an enforceable claim against the buyer in respect of the goods. Payment may be deferred for some reason and some time may pass before it is made. It may turn out that the seller never receives any cash or other consideration because, for example, the buyer becomes insolvent and goes into liquidation. The effect of r 1.12(3) is that a sale will be taken not to have occurred if a credit for the goods is subsequently issued. Even if the seller received cash or other consideration from the buyer at an earlier time when title to the goods passed to the buyer, that cash or consideration cannot be regarded as revenue for there has been no sale. For reasons such as these, there may be a disjunct of some significance between the value placed upon the goods by the ATS participant and the revenue received from the sale of those goods. The amount of revenue from sales in a particular year may not be known for quite some time after the conclusion of that year.
That strongly points to a conclusion that the reference in r 2.22(2)(b) to “the total revenue from sales of the automotive components … in the preceding 12 months” is a reference to the ATS year preceding that referred to in r 2.22(2)(a) i.e. the ATS year in which the ACP must meet the requirement. It is supported by the requirements a person must meet in order to be registered as an ACP. They are set out in r 2.5 set out in [68]-[69] below. I refer particularly to rr 2.5(3) and (4). If the person applying for registration as an ACP is relying on production in the 12 months preceding its application, then:
“… the production value of automotive components produced by an applicant for registration as an ACP is the total revenue from sales of the automotive components (excluding indirect tax) in the 12 months preceding the application.” (emphasis added)[38]
If the person is relying on what it is likely to produce in the ATS year to which the application for registration relates, then:
“… the production value of automotive components produced by an applicant for registration as an ACP is the likely total revenue from sales of the automotive components (excluding indirect tax) in the 12 months following the application.” (emphasis added)[39]
[38] ATS Regulations; r 2.5(3)
[39] ATS Regulations; r 2.5(4)
Whether a person is registered as an ACP on the basis of past or expected production performance, neither is first required to meet the conditions of registration set out in
r 2.22(1) until the ATS year following the ATS year in which the person is registered. Taking 2011 as the ATS year in which registration first takes effect, it takes effect from 1 January 2011 by virtue of r 2.18(1).[40] Compliance is not required until 2012 for that is the ATS year following the ATS year in which the ACP’s registration took effect. On my understanding of the 12 month period to which r 2.22(2)(b) is referring, the ACP who was registered on the basis of future projections is effectively called upon to make good the predicted production values upon which it relied in making its application. In my example, the estimates of those production values would have been made for the 12 month period following the application for registration. In order to be registered as an ACP in the 2011 ATS year, the person had to make its application before 1 January 2011 i.e. before ATS year 2011. It would not be required to meet the production requirements of 30,000 automotive components in ATS year 2011 but it would have to do so in ATS year 2012. The production value of those components would, however, be assessed by reference to the total revenue from sales of the automotive components, excluding indirect tax, in the 2011 ATS year i.e. the ATS year in relation to which it made its predictions in its application for registration. The situation is no different for an ACP which relied on past performance in its application for registration.
[40] That application must be made before 1 January of the ATS year for which registration is sought: ATS Regulations; r 2.14(1)
I also note that reference is made to the year before the ATS year under consideration in
r 3.11. That regulation imposes a cap on the payment of assistance to an ATS participant and provides:
“For a particular ATS year, the payment of assistance under the Scheme to an ATS participant, other than during an eligible start-up period of the ATS participant, must not exceed 5% of the sales value of the ATS participant’s goods and services for the previous year.”[41]
When used in relation to goods, the expression “sales value … for the sale of goods produced in Australia by an ATS participant” means “... the value of the goods sold reduced by the amount of sales tax payable on those goods …”.[42] Again, this suggests that, in my example, compliance in the 2012 ATS year is assessed by reference to the production value of the automotive components in the 2011 ATS year.
[41] ATS Regulations; r 3.11(1)
[42] ATS Regulations; r 1.5(1)
Continued registration
Had the Minister not granted ACL permission to remain registered under ATS in the 2012 ATS year, he would have been obliged to deregister it under r 2.28(2)(a). The basis of the deregistration would have been that ACL had failed to comply with a condition of registration in Division 2.5. That condition was that it had not met the production volume criterion specified in r 2.22(1)(a) but had met the production value criterion specified in
r 2.22(1)(b).
When the Minister decided to give ACL permission under r 2.25 to continue to be registered in the ATS in the national interest until 31 December 2013, he was giving it permission to continue its registration through both the 2012 and the 2013 ATS years. There is no question that ACL complied with the Minister’s condition to continue to manufacture in-line 6 engine bearings for Ford’s Australia. Furthermore, there is no question that ACL was not required to meet with the conditions imposed by rr 2.22(1) and (2) in each of those years. That meant that it did not have to satisfy the Secretary that it had produced at least 30,000 Engine Bearing Sets for Ford Australia in each of the 2012 and 2013 ATS years.
Mr Fleming submitted that the effect of the Ministerial permission was that it did not have to meet the production volumes or production values in those years. He pointed to the permission’s being an instrument and, relying on the statement of Goldberg J in Parks Holdings Pty Ltd v Chief Executive Officer, Customs,[43] submitted that it should be interpreted in accordance with ordinary principles of legislative interpretation. Goldberg J had been considering an instrument of delegation and had said:
“ Of course, an instrument of delegation is not legislation but, in principle, the manner in which it is construed is guided by the authorities regarding statutes. There is no reason to construe an instrument of delegation more strictly. …”
[43] [2004] FCA 820; 2004) 81 ALD 365; 56 ATR 210 at [87]; 385-386; 230
It should also be noted that an instrument or a decision made under an enactment must be made within the terms of the power given by that enactment to make it. In the context of r 2.25 of the ATS Regulations, that meant that, before giving permission to ACL to continue to be registered, the Minister had to be satisfied that it would meet all of the conditions of registration other than those in rr 2.22(1) and (2) if its registration were continued. It also meant that the Minister had to be satisfied that, if it did meet all of those other conditions, it would be in the national interest for ACL to continue to be registered. The terms in which the Minister framed the permission he gave show that he was satisfied of these matters.
The terms of the permission he gave show that ACL’s registration would continue according to the permission until 31 December 2013 i.e. the 2012 and 2013 ATS years. It would continue provided it met all conditions of registration other than those in rr 2.22(1) and (2) of the ATS Regulations and continued to manufacture in Australia in-line 6 engine bearings for Ford Australia. When regard is had to the nature of the obligations imposed by rr 2.22(1) and (2), this meant that:
(1)In the 2012 ATS year, ACL had to:
(a)continue to manufacture in Australia in-line 6 engine bearings for Ford Australia; and
(b)meet all conditions of registration other than those in rr 2.22(1) and (2).
The consequence was that, in the 2012 ATS year, ACL did not have to:
(a)meet the production volume of 30,000 Engine Bearing Sets in the 2012 ATS year; or
(b)meet the production value of $500,000 assessed by reference to the total revenue from sales in the automotive components in the 2011 ATS year i.e. in the preceding 12 months.
(2)In the 2013 ATS year, ACL had to:
(a)continue to manufacture in Australia in-line 6 engine bearings for Ford Australia; and
(b)meet all conditions of registration other than those in rr 2.22(1) and (2).
The consequence was that, 2013 ATS year, ACL did not have to:
(a)meet the production volume of 30,000 Engine Bearing Sets in the 2013 ATS year; or
(b)meet the production value of $500,000 assessed by reference to the total revenue from sales in the automotive components in the 2012 ATS year i.e. in the preceding 12 months.
The Minister’s letter granting permission under r 2.25 had said that, if by 31 December 2013 “… ACL meets the annual registration requirement, its registration will revert back to the standard ATS registration.” That suggests that there was some choice about the matter but there was none. Once 31 December 2013 had passed, the exemption from compliance inherent in the Minister’s permission was at an end. It had to be for r 2.25(8) did not permit the Minister to grant an ATS participant permission to continue registration under r 2.25 for a period greater than two successive years. When regard is had to the nature of the obligations imposed upon it, this meant that, in the 2014 ATS year, ACL had to:
(1)meet the production volume of 30,000 Engine Bearing Sets in the 2014 ATS year; and
(2)meet the production value of $500,000 assessed by reference to the total revenue from sales in the automotive components in the 2013 ATS year i.e. in the preceding 12 months.
In practical terms, the two year period of exemption gave ACL a period of grace of one year – being the 2012 ATS year – when it need not meet either the production volumes or production values normally required of it. While it did not have to meet the production volumes in the 2013 ATS year either, it had to bring its production values up to the minimum of $500,000 in that 2013 ATS year for regard would be had to that figure in determining compliance in the 2014 ATS year. If it could not meet that minimum production value, it could not comply with the conditions of the 2014 ATS year regardless of whether it would meet the production volume during the course of that year or whether the revenue from the sales of the automotive components produced in that 2014 ATS year exceeded $500,000. That revenue would only be relevant in determining whether ACL met the production value condition if it were registered as an ATS participant in the 2015 ATS year.
Deregistration
Once it became apparent that ACL could not comply with the conditions that would be imposed upon it in the 2014 ATS year when it was no longer subject to the modified conditions that had applied in the 2012 and 2013 ATS years, the Secretary had no choice but to deregister it under r 2.28(2)(a). It was likely to fail to meet its production value of $500,000 assessed in the manner required by r 2.22(2)(b) i.e. by reference to the total revenue from sales in the automotive components in the 2013 ATS year i.e. in the preceding 12 month. That was so even if, as the later correspondence from Ford Australia suggested, it was likely to meet the production volumes during the course of the 2014 ATS year.
That means that I consider that the Secretary reached the correct decision. There remains a question, however, that I do not have power to consider but which I think needs to be canvassed. I think that for it is, at first sight, difficult to understand why ACL would not be entitled to payment of assistance in respect of Quarter 4 of the 2013 ATS year. The Secretary made a decision to that effect when he made his decision to deregister ACL. It is particularly difficult to understand in view of ACL’s having complied with the conditions according to the Minister’s permission to continue its registration but I venture to suggest that it is the correct decision.
The Secretary’s decision to deregister ACL was made on 15 January 2014. Until it was made, ACL remained registered for it is clear from r 2.18(2) that the period of its registration extended from 1 January 2011 until its deregistration on 15 January 2014. That meant that, for the whole of the 2013 ATS year, ACL had been a registered ATS participant and had complied with the conditions according to the Minister’s permission to continue its registration. It lodged a quarterly return for Quarter 4 of the 2013 ATS year on 14 February 2014 within the time and manner provided in r 3.1 of the ATS Regulations.[44] By that time, however, it was not an “ATS participant” as that expression is defined in s 4 of the ATS Act for it was not registered under the ATS.[45] Regulation imposes an obligation to provide quarterly returns on an “ATS participant”. Even if that requirement could be read to refer to a person who has been an ATS participant in the quarter to which the quarterly return relates, there is another hurdle to overcome. Regulation 3.14(1) provides that “A payment of assistance under the Scheme may only be made to an ATS participant.” By the time any payment would have been calculated and paid, ACL was no longer an ATS participant. Payment was not authorised under r 3.14(1).
[44] T documents; T127 at 2/184-197
[45] Furthermore, it was not an “ACP” within the meaning of the ATS Regulations for that expression is defined in r 1.5(1) of the ATS Regulations to mean “… a person registered as an automotive component producer under the Scheme.”
I would also support the sentiment expressed by the Secretary in reviewing the decision. It was most unfortunate that events did not unfold so that ACL had applied for registration under r 2.5 in respect of the 2014 ATS year. It could have relied on its contract with Ford Australia to satisfy the conditions in Division 2.5 on the basis that it was likely to do so.
DECISION
For these reasons, I have decided that the Secretary’s decision to deregister ACL as an ATS participant was correct. Therefore, I affirm the decision of the delegate of the Secretary dated 15 January 2014.
THE AUTOMOTIVE TRANSFORMATION SCHEME
Section 3 of the ATS Act provides:
“(1) The object of this Act is:
(a)to encourage competitive investment and innovation in the Australian automotive industry; and
(b)to place the industry on an economically sustainable footing;
by providing assistance to a participant in the Automotive Transformation Scheme based on the participant’s investment if the investment is of a kind prescribed by the Scheme.
(2) The object is to be achieved in a way that:
(a) improves environmental outcomes; and
(b) promotes the development of workforce skills.”
The ATS Act does not set out how this object is to be achieved. Instead, s 5 requires regulations to be made prescribing a scheme (ATS). Among the matters to be prescribed are those regarding the registration of participants in ATS (ATS participants),[46] payments of amounts to those participants if certain conditions are satisfied and the review of decisions.[47] Section 6(e) permitted the ATS to provide for deregistration of an ATS participant. Assistance given under ATS is either capped assistance or uncapped assistance.[48] Section 8 assumes that ATS will have two stages when it prescribes the total amount of capped assistance for each of Stage 1 and Stage 2. Stage 1 is defined as the period beginning on 1 January 2011 and ending on 31 December 2015 and January, February and March 2016. Stage 2 is defined as the period beginning on 1 January 2016 and ending on 31 December 2020 and January, February and March 2021.[49]
[46] ATS Act; s 4
[47] ATS Act; ss 5(1)(a), (b) and (e)
[48] ATS Act; s 7
[49] ATS Act; s 4
Under the ATS Regulations, r 1.4(2) provides that ATS participants are entitled to cash payments of assistance for eligible investment and eligible production. Eligible investment is investment by an ATS participant in allowable plant and equipment or allowable research and development but only to a certain value, which is the maximum claimable value.[50] In the case of an ACP, the maximum claimable value for allowable plant and equipment is calculated according to r 1.19. Its calculation varies according to whether the ACP has purchased the plant and equipment, acquired it under a sale and leaseback arrangement, acquired it under an operating lease or built or made it. In the case of plant and equipment acquired under an operating lease and in Australia, the maximum claimable amount for a quarter is the total amount paid as rent in that quarter for any period within the period starting at the beginning of the period commencing two years before the ATS year for the ACP and ending at the end of 31 December 2020.[51]
[50] ATS Regulations; r 1.15
[51] ATS Regulations; r 1.19(5)(a)(i)(A)
As the expression “eligible production” is defined in terms of “… production by an MVP in allowable production …”,[52] it is clear that only an ATS participant who is a motor vehicle producer (MVP) may claim assistance for eligible production. That this is so is confirmed by r 1.24 which provides that an ATS participant, who is an MVP, may claim the production of motor vehicles, engines and engine components as allowable production and by r 1.25 which provides for the way in which the maximum claimable value for that allowable production is worked out. No reference is made to allowable production by an ATS participant who is not an MVP.[53]
[52] ATS Regulations; r 1.16
[53] This conclusion is also consistent with the calculations prescribed in the Automotive Transformation Scheme Order 2010, to which I refer at [88] below.
An Automotive Components Producer
A person may have only one current registration under the ATS as prescribed in the ATS Regulations. It may be registered as an MVP, an automotive component producer (ACP), an automotive machine tools producer or automotive tooling producer (AMTP) or an automotive service provider (ASP).[54]
[54] ATS Regulations; r 2.1(1)
ACL has been registered as an ACP. What is meant by the expression “automotive component” is the subject of r 1.7.[55] There is no doubt that ACL was producing automotive components but the general definition of the expression puts the ATS into context in so far as it relates to registration as an ACP. Subject to certain exceptions and qualifications set out in rr 1.7(2), (3) and (4), r 1.7(1) provides that:
“An automotive component means any component (whether its construction or assembly had been completed or not):
(a)that is for use in any type of vehicle that, if it were imported, would be classified to Chapter 87 of Schedule 3 to the Tariff; or
(b)that has the essential character of a component to which paragraph (a) applies.”
[55] ATS Regulations; r 1.5
Regulation 1.6 sets out what is meant by the production of goods and the provision of services in Australia. Regulations 1.6(1) and (2) relate generally to all production regardless of the thing produced. They provide:
“Assembly of components can be production
(1)A person is taken to produce a thing even if the process of production consists entirely of assembling the thing from component parts and the person does not produce any of those parts.
No production unless sale has occurred
(2)A person is taken to produce a thing only at the time when the person sells the thing produced.”
Regulation 1.6(6) makes specific provision for the production of automotive components, automotive machine tools or automotive tooling. It provides:
“Subject to subregulations (1) and (2), an automotive component, an automotive machine tool or automotive tooling is taken to have been produced in Australia if:
(a)at least one substantial process in the manufacture of the automotive component, automotive machine tool or automotive tooling is carried out in Australia; and
(b)the automotive component, automotive machine tool or automotive tooling, as the case requires, has passed final quality control at the end of a production line in Australia.”[56]
[56] The expressions “automotive machine tool” and “automotive tooling” are defined in rr 1.8 and 1.10: ATS Regulations; r 1.5(1)
Regulations 1.11 and 1.12 provide for circumstances in which a sale of goods or services is taken, or taken not, to have occurred.
Identifying those who may apply for registration as an ACP under ATS
An examination of the ATS Regulations shows that there are three ways in which a person may apply for registration as an ATS participant. In addition to those, there is one way in which a person may apply for continued registration even though it has not complied with the conditions relevant to its registration.
A.Registration: general criteria
There is no question that ACL has been a producer of automotive components at all relevant times. Regulation 2.5(1) provides for application for ACP registration:
“(1) A person who is a producer of automotive components may apply to the Secretary for registration as an ACP if:
(a)in the 12 months preceding the application:
(i) the person produced in Australia at least one kind of automotive component for use as original equipment in at least 30 000 motor vehicles or in at least 30 000 engines and the production value of the component was at least $500 000; or
(ii)the production value of the automotive components produced by the person in Australia as original equipment was at least 50% of the production value of all automotive components produced by the person; or
(b)if paragraph (a) does not apply – the person is able to demonstrate, to the satisfaction of the Secretary, that for the ATS year to which the application for registration relates:
(i)the person is likely to produce in Australia at least one kind of automotive component for use as original equipment in at least 30 000 motor vehicles or at least 30 000 engines and the production value of the component will be at least $500 000; or
(ii)the production value of the automotive components produced by the person in Australia as original equipment is likely to be at least $500 000 and to comprise at least 50% of the production value of all automotive components produced by the person; or
(c)if neither paragraph (a) nor (b) applies – the person has been given permission by the Minister, under regulation 2.8, to apply for registration as an ACP.”
If r 2.5(1)(a) applies:
“… the production value of automotive components produced by an applicant for registration as an ACP is the total revenue from sales of the automotive components (excluding indirect tax) in the 12 months preceding the application.”[57]
[57] ATS Regulations; r 2.5(3)
If r 2.5(1)(b) applies:
“… the production value of automotive components produced by an applicant for registration as an ACP is the likely total revenue from sales of the automotive components (excluding indirect tax) in the 12 months following the application.”[58]
B.Registration: Ministerial permission to apply for registration in the national interest
[58] ATS Regulations; r 2.5(4)
Regulation 2.8 provides for a person to seek the Minister’s permission to apply for registration as an ATS participant on the basis that registration would be in the national interest. The Minister must be satisfied that the person meets all of the registration requirements but need not be satisfied that those set out in rr 2.4(1)(a) or (b), 2.5(1)(a) or (b), 2.6(1)(a) or (b) or 2.7(1)(a) or (b) applying to be registered as an MVP, ACP, AMTP or ASP, as the case may be, are met.[59] If so satisfied, the Minister may give the person permission.[60]
[59] ATS Regulations; r 2.8(3)
[60] ATS Regulations; r 2.8(2)
In deciding whether to grant permission to apply for registration on the basis that registration would be in the national interest, the Minister must have regard to the following matters:
“(a) whether the person would have been able to comply with the normal threshold eligibility requirements but for circumstances beyond the person’s control such as a natural disaster, an industrial accident or an industrial dispute.
(b)whether the registration of the person would significantly enhance the competitiveness of the Australian automotive industry;
(c)whether the registration of the person would provide significant benefits either to the Australian automotive industry or to the Australian economy;
(d)whether the registration of the person would introduce significant innovations in the Australian automotive industry;
(e)whether the registration of the person would generate significant employment opportunities in the Australian automotive industry;
(f)whether the registration of the person would have significant strategic, regional or environmental impacts;
(g)whether the registration of the person would significantly improve environmental outcomes;
(h)whether the registration of the person would significantly promote the development of workforce skills.”[61]
[61] ATS Regulations; r 2.8(4)
Regulations 2.8(6) and (7) apply should the Minister decide to grant permission:
“(6) If the Minister grants a person permission to apply for registration, the Minister must, in the decision granting that permission, set out the conditions to which the permission, and any subsequent registration, is subject.
(6A)…
(7)For the avoidance of doubt, conditions determined by the Minister under subregulation (6) are additional to any other requirements under these Regulations.”
C. Registration: a person who was a participant in ACIS
Part 7 of the ATS Regulations applies to a person who was a participant in ACIS on or after the commencement of those regulations i.e. 1 July 2010.[62] Regulation 7.2 provides:
“Division 2.4 of these Regulations does not apply to a participant in ACIS who applies for registration as an ATS participant if:
(a)the participant makes an application in accordance with subregulation 2.12(1) before 1 January 2011; and
(b)the participant provides a business plan that contains the information mentioned in subregulation 2.12(3); and
(c)the Secretary is satisfied that the participant will, after registration, be able to meet the conditions of registration in Division 2.5.”
[62] ATS Regulations; rr 7.1 and 1.2
Division 2.4 comprises rr 2.12 to 2.19. In summary, they are concerned with the content of an application for registration, the time by which a person must make an application, the matters of which the Secretary must be satisfied before he or she is obliged to grant an application, the Secretary’s power to seek further information, the period of effect of registration and the effect of the mere fact of registration. I return to these matters at [80]-[87] below.
D.Continued registration: Ministerial permission to continue registration in the national interest
Regulation 2.25 applies to an ATS participant who did not become registered under ATS, and so an ATS participant, following the Minister’s giving permission under r 2.8. An ATS participant meeting that description “… may seek the Minister’s permission to continue registration as an ATS participant on the basis that registration would be in the national interest.”[63]
[63] ATS Regulations; r 2.25(1)
When permission is sought, r 2.25(2) sets out the Minister’s power and its broad parameters:
“If the Minister is satisfied that, subject to the ATS participant’s meeting all the conditions of registration other than the conditions set out in subregulation (3), it would be in the national interest for the ATS participant to continue being registered, the Minister may, by notice in writing, give that permission.”
In the case of an ATS participant who is an ACP, the conditions set out in r 2.25(3) are those set out in rr 2.22(1) and (2).[64]
[64] ATS Regulations; r 2.25(3)(b)
Regulation 2.25(4) sets out the matters to which the Minister must have regard in deciding whether or not to grant an ATS participant permission to continue registration. With variations of language to cater for the differences between consideration of whether a person should be permitted to apply for registration and whether an ATS participant should be permitted to continue registration, the provisions of r 2.25(4) mirror those of 2.8(4). The ATS participant must produce information required of it by the Minister together with an updated business plan of a kind required to be produced to the Secretary under r 2.27.[65]
[65] ATS Regulations; r 2.25(5) and see [90] below for r 2.27
If the Minister grants an ATS participant permission to continue registration, he or she must, in the decision granting that permission, set out the conditions to which the ongoing registration of the ATS participant is subject.[66] Regulation 2.25(7) goes on to provide:
“For the avoidance of doubt, conditions determined by the Minister under subregulation (6) are additional to any other requirements under these Regulations.”
[66] ATS Regulations; r 2.25(6)
The Minister is not permitted to grant an ATS participant permission to continue registration under r 2.25 for a period of more than two successive ATS years.[67]
[67] ATS Regulations; r 2.25(8)
Making an application for registration
A person must make an application for registration as an ATS participant, including registration as an ACP, in accordance with Division 2.4 of the ATS Regulations. Regulation 2.12 sets out the form and content of an application for registration. Without limiting other material that must be lodged:
“… an applicant for registration must include a business plan of the applicant, containing:
(a)details of the strategies that will enable the applicant to carry on sustainable operations in the Australian automotive industry for a 5 year period starting on 1 January of the year of registration; and
(b)operational plans, details of financial commitment and controls, financial projections and assumptions on which forecasts are based; and
(c)details about how the applicant will meet the object of the Act, particularly economic sustainability, in a way that will improve environmental outcomes and promote the development of workforce skills; and
(d)such other particulars as are required by the form in respect of the period or periods specified in the form.”[68]
[68] ATS Regulations; r 2.12(3) A period in the form in relation to the business plan may commence on or after 1 January of the ATS year in which registration is sought: ATS Regulations; r 2.12(4).
When must a person apply for registration?
A person must apply for registration before 1 January of the ATS year for which registration is sought. The Secretary must not accept an application for registration for an ATS year after 1 January of that year.[69] The expression “ATS year” means a year identified in the table set out in r 1.5(1) for which eligible investments or eligible production may be claimed by an ATS participant. Ten years are identified in the table beginning on 1 January 2011 and concluding on 31 December 2020.
[69] ATS Regulations; r 2.14(1) and (2)
Regulation 2.14(3) deals expressly with those who have been granted permission to apply under r 2.8:
“For the avoidance of doubt, the persons to whom this regulation applies include a person who has been granted permission to apply for registration under regulation 2.8.”
Consideration of application for registration
Regulation 2.15(1) requires the Secretary to examine each application for registration and to do so within the consideration period set out in r 2.15(4). In so far as an application by a company for registration as an ACP is concerned, r 2.15(2) provides:
“If the Secretary is satisfied:
(a)that the applicant is eligible to apply for registration; and
(b)that the applicant has provided the information and documents (if any) required by the approved form; and
(c)that the applicant can comply with the relevant document retention obligations set out in regulation 2.26; and
(d)…
(e)where the applicant is a company – that the company is a fit and proper person; and
(f)where the applicant is a company – that each of the directors, and each officer or shareholder who is in a position to influence the management of the company, is a fit and proper person; and
(g)that registering the applicant would, as required by subregulation 2.2(2), further the object set out in subsection 3(1) of the Act;
the Secretary must grant the application and inform the applicant accordingly.
Note:Regulation 2.16 sets out the matters to which the Secretary must have regard in determining whether a person is a fit and proper person.”
If the Secretary is not satisfied of a matter set out in r 2.15(2), he or she must refuse the application for registration.[70]
[70] ATS Regulations; r 2.15(3)
Period of effect of registration
If the Secretary grants an application for registration, “… the registration has effect on and from 1 January of the ATS year in relation to which it is made.”[71] It does so whether the application was made following the Minister’s having given permission to do so under r 2.8 or otherwise under Division 2.2 of the ATS Regulations.
[71] ATS Regulations; r 2.18(1)
Whether the application was made following the Minister’s having given permission to do so is relevant in determining the period for which registration continues. The general situation where it was not made in that way is provided for in r 2.18(2):
“If the application for registration was not made following the Minister’s permission under regulation 2.8, the registration ends on the earlier of:
(a) 31 March 2021; and
(b) deregistration under regulation 2.28.
Note:An ATS participant may ask to be deregistered under paragraph 2.28(2)(c).”
Where the application for registration was made following the Minister’s having given permission, regard must be had to r 2.18(3):
“If:
(a)the application for registration was made following the Minister’s permission under regulation 2.8; and
(b)the ATS participant is not able to comply with the conditions of registration set out in Division 2.5;
the registration ends on 31 December of the second ATS year following the registration.
Note: Regulation 2.14 limits when applications for registration can be made.”
Registration does not confer entitlement
Regulation 2.19 provides that:
“Registration under the Scheme does not, by itself, confer an entitlement on an ATS participant to assistance under the Scheme.”
An ATS participant must comply with any conditions set out in the ATS and payments, whether of capped or uncapped assistance, may only be made on condition that they may be offset, in whole or in part, or recovered in the circumstances prescribed in the ATS.[72]
[72] ATS Act; s 9(1)
Regulation 3.9 of ATS sets out the total amounts of capped assistance that may be given in each of the ten ATS years subject to the scheme. The total amount in each year is divided between those ATS participants who are MVPs and the remaining ATS participants. The way in which payments for assistance are made to both groups of ATS participants is set out in an Order made by the Minister:[73] the Automotive Transformation Scheme Order 2010 (ATS Order). That Order is a legislative instrument within the meaning of the Legislative Instruments Act 2003.[74]
[73] ATS Regulations; r 3.12
[74] ATS Regulations; r 3.12(3)
Conditions of registration
Regulations 2.20, 2.26 and 2.27 establish conditions for registration as an ATS participant regardless of the precise nature of that participant’s registration. Regulation 2.20 provides:
“It is a condition of registration for an ATS participant that the ATS participant comply with the requirements of the Act and the Scheme.”
Regulation 2.26 prescribes the obligation of each ATS participant to maintain, or create and maintain documents that evidence all of the particulars contained in each quarterly return it provides. Within 45 days of the end of the third quarter of each ATS year, each ATS participant must provide the Secretary with an update of the business plan it provided under r 2.12(3) in accordance with the approved form. That is the effect of rr 2.27(1) and (3). Regulation 2.27(2) provides that:
“The update must include:
(a)in accordance with any Order made under regulation 6.7:
(i)details about how the ATS participant is meeting the object set out in subsection 3(1) of the Act, particularly economic sustainability; and
(ii)information concerning any activities of the ATS participant directed to improving environmental outcomes and promoting the development of workforce skills; and
(b)any other information for the relevant ATS year that is required in the approved form.”
The period covered by the update is the subject of r 2.27(4):
“Each update must cover the 5 year period starting on 1 January of the next year following the date by which it is to be provided under this regulation.”
Regulations 2.21 to 2.24 then go on to prescribe conditions for each type of registration that leads to a person’s being an ATS participant. Of relevance is r 2.22 relating to ACP registration. It provides:
“(1) It is a condition of registration for an ATS participant who is an ACP (other than an ATS participant mentioned in subregulation (3)) that:
(a)the ACP produce in Australia at least one kind of automotive component for use as original equipment in at least 30 000 motor vehicles or at least 30 000 engines and that the production value of the component be at least $500 000; or
(b)the production value of the automotive components produced in Australia by the ACP as original equipment is at least $500 000 and comprises at least 50% of the production value of all automotive components produced by the ACP.
(2)In subregulation (1):
(a)the ACP must meet the requirement in each ATS year following the ATS year in which the ACP’s registration takes effect; and
(b)the production value of automotive components produced by the ACP is the total revenue from sales of the automotive components (excluding indirect tax) in the preceding 12 months.
(3)If the ACP:
(a)had been registered following the Minister’s permission, under regulation 2.8, to apply for that registration; or
(b)has continuing registration following the Minister’s permission under regulation 2.25;
the ACP must comply with the conditions relating to ongoing registration specified by the Minister in granting that permission.”
Transfer of registration
Although there is no suggestion that there has been a transfer either of registration or of investment, I will briefly touch on the transfer provisions found in Division 2.7 as it is part of the context of ATS. When an ATS participant transfers its business to a person who is not an ATS participant, the transferee may apply to the Secretary for a transfer of registration. The information that the transferee must provide in its application is set out in
r 2.30(3). The Secretary is given power to approve the transfer of registration either with or without conditions or to refuse it: r 2.30(4). The Secretary must not approve the transfer in the circumstances set out in r 2.30(5). A transfer of registration is not permitted otherwise than under r 2.30: r 2.30(1). Upon the Secretary’s approving a transfer of registration, the transferor ceases to have any eligibility under ATS in relation to eligible investment.[75]
[75] ATS Regulations; r 2.32(1)
Deregistration
Regulation 2.28 is entitled “Deregistration”. Regulation provides that:
“The reasons for deregistration are set out in subregulations (2), (4) and (5).”
Regulations 2.28(2), (4) and (5) do not set out reasons for deregistration so much as require the Secretary to deregister an ATS participant if the prescribed circumstances arise. There is no question that ACL was a fit and proper person at all relevant times and that it had not asked to be deregistered. In so far as they do not relate to those two circumstances, I will set out the provisions of rr 2.28(2), (4) and (5):
“(2) The Secretary must deregister an ATS participant if, at any time:
(a)the Secretary is satisfied that the ATS participant is not likely, or has failed, to comply with a condition of registration in Division 2.5; or
(b)…
(c)…
(3)…
(4)The Secretary must deregister an ATS participant in the following circumstances:
(a)…
(b)if the ATS participant is an ACP:
(i)the ACP was registered on the basis that, in the ATS year to which the application for registration relates, the ACP is likely to do the things set out in subparagraphs 2.5(1)(b)(i) and (ii); and
(ii)at any time during the 12 months following the application, the Secretary determines that it is unlikely that the ACP will be able to do those things;
(c)-(d)…
(5)The Secretary must deregister an ATS participant if:
(a)the ATS participant was registered on the basis that the ATS participant’s registration would further the object in subsection 3(1) of the Act (as required by subregulation 2.2(2)); and
(b)the Secretary determines that the registration does not further the object of the Act.”
Review of decisions
In so far as deregistration is concerned, r 5.6(f) provides:
“Application may be made to the AAT for the review of the following decisions:
(a)-(e)…
(f)a decision by the Secretary under regulation 2.28 to deregister an ATS participant;
(g)-(i)…”
I certify that the ninety five preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ……[sgd]…….............................................
Associate
Dates of Hearing 31 October 2014
Date of Last Submission 26 November 2014
Date of Decision 13 February 2015
Counsel for the Applicant Mr Michael Fleming QC with Mr Patrick Noonan
Solicitor for the Applicant Mr Sam Cox
HWL Ebsworth Lawyers
Counsel for the Respondent Mr Tom Clarke
Solicitor for the Respondent Ms Cherie Canning
Australian Government Solicitor
“ The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute ... The meaning of the provision must be determined ‘by reference to the language of the instrument as a whole’ ... In Commissioner for Railways (NSW) v Agalianos ..., Dixon CJ pointed out that ‘the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed’. Thus, the process of construction must always begin by examining the context of the provision that is being construed ...
A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals ...”
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