Re Western Mining Corporation Limited v Minister of Industry and Commerce [1984] FCA 422 (21 December 1984)

FEDERAL COURT OF AUSTRALIA

Re: WESTERN MINING CORPORATION LIMITED
And: MINISTER FOR INDUSTRY AND COMMERCE
No. WA G.2 of 1983
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Davies J.

CATCHWORDS

Administrative Law - Judicial Review - Customs Tariff - refusal to make by-law or determination - foreign and local refractories - whether Australian goods a "suitable equivalent" - whether in fact determination made - failure to take into account relevant consideration - unreasonableness

Customs and Excise - refusal to make by-law or determination - meaning of "suitable equivalent" - ministerial discretion

Words and Phrases - "suitable equivalent"

Administrative Decisions (Judicial Review) Act 1977 (Cth)

Customs Tariff Act (Cth) s.33A, schedule 2 item 19

Customs Act 1901 (Cth) ss.271, 272, 273

Nashua Australia Pty Limited v Channon (1981) 36 ALR 215

Murphyores Incorporated Pty Ltd & Ors v The Commonwealth of Australia & Ors [1976] HCA 20; (1976) 136 CLR 1

Finance Facilities Pty Limited v Federal Commissioner of Taxation [1971] HCA 12; (1971) 127 CLR 106

HEARING

CANBERRA
21:12:1984

ORDER

1. The application for an order of review is granted.

2. The decision under review is set aside and the matter is remitted to the respondent for his reconsideration.

3. The respondent shall pay the applicant's costs of the application to be agreed or taxed.

DECISION

This is an application under the Administrative Decisions (Judicial Review) Act 1977 (Cth). The application reads, inter alia,

"Application to review the decision of the delegate

of the Respondent furnished to the Applicant on 2
December 1982 to refuse to make a By-law or
determination to partially exempt flash furnace
refractories from customs duty on the ground that
suitably equivalent goods are not reasonably
available from Australian production or
manufacture.

The applicant is aggrieved by the decision for the
following reasons :-

(a) the Applicant required flash furnace
refractories to reline its No.2 Flash
Furnace at its Kalgoorlie Nickel Smelter;

(b) the Applicant imported the required flash
furnace refractories from Austria;

(c) the Applicant applied to the Respondent
under item 19 of Part I of the Second
Schedule of the Customs Tariff Act 1966 for
a By-law or determination to be made that
there were no goods a suitable equivalent of
which that is the produce or manufacture of
Australia (sic) reasonably available;

(d) the Respondent refused to make such a By-law
or determination and as a consequence
thereof the Applicant has been obliged to
pay more customs duty that (sic) it would
have had to if the said By-law or
determination had been made.

The grounds of the application are as follows :-

(a) the making of the decision was an improper
exercise of the power conferred by the
Customs Act 1901 and the Customs Tariff Act
1966 in pursuance of which it was purported
to be made in that :-

(i) the Respondent's delegate took
irrelevant considerations into
account in the exercise of the power,

(ii) the Respondent's delegate failed to
take relevant considerations into
account in the exercise of the power,

(iii) the Respondent's delegate exercised
the power in accordance with a rule
or policy without regard to the
merits of the case,

(iv) the exercise of the power was so
unreasonable that no reasonable
person could have so exercised the
power;

(b) there was no evidence or other material to
justify the making of the decision;

(c) the decision was contrary to law."

2. It is not in dispute that, in 1981, the applicant imported from Austria certain refractory bricks and tiles and that those goods were correctly entered for home consumption under item 69.02 of the First Schedule of the Customs Tariff Act 1966 (Cth).

3. However, the applicant thereafter sought from the respondent a by-law or determination having retrospective effect pursuant to the provisions of ss.271, 272 and 273 of the Customs Act 1901 (Cth). Those sections read:

"271. Where -

(a) an item of a Customs Tariff, or a proposed
item of a Customs Tariff, is expressed to
apply to goods, or to a class or kind of
goods, as prescribed by by-law; or

(b) under an item of a Customs Tariff, or a
proposed item of a Customs Tariff, any
matter or thing is expressed to be, or is to
be determined, as prescribed or defined by
by-law,

the Minister may, subject to the succeeding
sections of this Part, make by-laws for the
purposes of that item or proposed item.

272. The Minister may specify in a by-law made for
the purposes of an item, or a proposed item, of a
Customs Tariff that is expressed to apply to
goods, or to a class or kind of goods, as
prescribed by by-law -

(a) the goods, or the class or kind of goods, to
which that item or proposed item applies;

(b) the conditions, if any, subject to which
that item or proposed item applies to those
goods or to goods included in that class or
kind of goods; and

(c) such other matters as are necessary to
determine the goods to which that item or
proposed item applies.

273.(1) The Minister may determine, by instrument
in writing, that, subject to the conditions, if
any, specified in the determination, an item, or a
proposed item, of a Customs Tariff that is
expressed to apply to goods, or to a class or kind
of goods, as prescribed by by-law shall apply, or
shall be deemed to have applied, to the particular
goods specified in the determination.

(2) The Minister may make a determination
under the last preceding sub-section for the
purposes of an item, or a proposed item, of a
Customs Tariff whether or not he has made a by-law
for the purposes of that item or proposed item.

(3) Where, under this section, the Minister
determines that an item, or a proposed item, of a
Customs Tariff shall apply, or shall be deemed to
have applied, to goods, that item or proposed item
shall, subject to this Part and to the conditions,
if any, specified in the determination, apply, or
be deemed to have applied, to those goods as if
those goods were specified in a by-law made for
the purposes of that item or proposed item and in
force on the day on which those goods are or were
entered for home consumption."

4. The item of the tariff which the applicant sought to have applied retrospectively was item 19 of schedule 2 of the Customs Tariff Act 1966 (Cth) which applied to

"19. Goods, as prescribed by by-law, being goods a
suitable equivalent of which that is the produce
or manufacture of Australia is not reasonably
available".

If the goods imported by the applicant were prescribed by by-law made under s.271, or if the Minister or his delegate determined by instrument in writing that item 19 applied to those goods, then, pursuant to s.33A of the Customs Tariff Act 1966 (Cth), those goods would be dutiable at the rate applicable to item 19. Such a by-law or determination may not be made unless, at the time of importation, a suitable equivalent was not produced in Australia or was not reasonably available.

5. Although the application was expressed as an application seeking an order of review with respect to a refusal to make a by-law or determination, Mr R.J. Meadows, of counsel, who appeared for the applicant, sought as part of his case to prove that, on 16 November 1982, an appropriate determination in the applicant's favour had been made by Mr D.D. Bolton, a delegate of the Minister authorised to make such a determination and that such determination had not been but should be carried into effect.

6. The facts relied upon with respect to this alleged determination were that, in November 1982, Mr Bolton, after considering evidence that had been presented to him, formed the view that a determination was appropriate. He gave instructions for the preparation of a determination and of a letter to the applicant's customs agent to accompany it. It is known that he received such documents and, on 16 November 1982, he signed the letter. Mr Bolton has sworn that he did not sign the determination, but his recollection was merely that he did not remember signing it. Mr Bolton did not give out the letter and the determination for either postage or recording. He placed both documents in his safe. The determination was not entered, in accordance with the usual procedure, in the register of determinations. The letter and determination remained in Mr Bolton's safe while he made further enquiries. Ultimately, Mr Bolton decided to refuse to make a by-law or determination. After internal reconsideration in the department, that decision was conveyed to Brambles Ruys Limited ("Brambles-Ruys"), the applicant's customs agent, by letter dated 2 December 1982. It is that refusal which is the subject of the application for an order of review.

7. I need not decide the issue whether or not the determination was signed. What s.273 requires is a determination made by instrument in writing. In my opinion, s.273 has in mind not a determination which is signed but a determination in writing that is issued. A determination which is merely signed by its author is not made. The determination is made when it is handed over for distribution or otherwise delivered or published.

8. I now return to the application for an order of review with respect to the refusal to make a by-law or determination.

9. The applicant corporation carries on substantial nickel operations in Western Australia. It operates a refinery situated between Kalgoorlie and Kambalda, known as the "Kalgoorlie Nickel Smelter". The smelter was built in 1972 and incorporated a flash furnace designed by Outokumpo Oy of Finland. It is necessary to line the flash furnace with refractory bricks which must be able to endure extremely high operating temperatures. Outokumpo Oy recommended the use of Austrian refractories and the applicant since 1972 has used bricks supplied by Veitscher Magnesitwerke Actien-Gesellschaft of Austria ("Veitscher"). In November 1978, a new flash furnace was installed again using these refractories. It becomes necessary after a period of years to reline a flash furnace. In 1980 the applicant decided that it was necessary to reline the furnace installed in 1978. Invitations to bid for relining the refractories were forwarded to six companies, three foreign and three based in Australia. Of the Australian companies, only Harbison ACI Pty Limited ("Harbison ACI") supplied a quotation. The applicant entered a contract to purchase bricks from both Veitscher and Harbison ACI and the application for by-law of 8 April 1981 prepared by the applicant's customs agent outlined this as follows:

"...after careful examination of all bids the final
decision was that 85% of the order would be placed
with the original supplier namely Veitch (sic) of
Austria, but that 15% would also go to Harbison
ACI for their new product - Nucon 60XD. This
product has recently been developed but not proved
under these conditions. Should the Harbison ACI
Nucon 60XD prove itself it will of course be a
major consideration for future re-lines.

In your examination of the attachments we would
like you to take particular account of two of the
stress factors associated with this type of
furnace. They are thermal shock and wash erosion.
Both of these cause refractory erosion as
explained later and are controlled by the
selection of raw material used in the
refractories. This is the fundamental reason for
requiring bricks etc. of 100% pre-sintered ore."

10. By letter of 19 May 1981, Brambles-Ruys was informed that further consideration would be given to the Western Mining request:

"...on receipt of documentary evidence in the form
of correspondence exchanged, establishing that
suitably equivalent goods are not reasonably
available from Australian manufacturers including:

Refractories Manufacturers Association of
Aust. ..."

11. On 22 December 1981, Brambles-Ruys wrote to the Refractories Manufacturers' Association of Australia requesting support for its by-law application. The Association replied by letter of 28 January 1982 -

"...no objections have been received following
circulation of your letter. In the circumstances,
this Association would not oppose the entry under
by-law of refractory bricks."

12. By letter of 25 February 1982, Mr Bolton refused to apply item 19 in Schedule 2 to the imported refractories -

"In the context of item 19, the term 'suitably
equivalent' does not mean that Australian goods
must be identical in design, composition, quality
or price to be regarded as suitably equivalent,
but rather that they are broadly capable of
fulfilling the function for which the goods are
required.

Correspondence submitted with your application
indicates that Harbison ACI Pty Ltd are able to
supply suitably equivalent goods.

In the circumstances, by-law admission is not
appropriate and your request is refused."

13. Brambles-Ruys sought reconsideration of this decision, enclosing a letter of 20 August 1984, from Harbison ACI -

"This letter will confirm our position regarding
the by-law entry of refractory brick imported by
Western Mining Corporation for the reline of their
flash furnace during 1981.

The refractory products that we had been
developing were supplied to Western Mining with a
view to installing them in limited quantities for
the relining of their flash furnace, with the
object of trialling the product in this practical
application.

We have constantly endeavoured to progressively
upgrade our product which has in the past not met
the requirements necessary for a flash furnace
reline application.

We appreciate the fact that our product was not
approved at the time of the reline and in view of
the enormous expense which would result from the
premature shutdown of the furnace due to
refractory failure, we consider it reasonable to
agree that our product was not a suitable
equivalent at that time.

It is for these reasons that we consider that we
did not have available a suitably equivalent
product and therefore did not oppose the granting
of by-law for these goods when approached by the
Refractory Manufacturers Association of Australia.

However, we do believe that subject to the current
trial should no failure occur we would then
consider our product be tried and proved for this
application and could therefore confidently offer
our product for future relines."

14. After considering this information, Mr Bolton formed the view that a determination was appropriate and he then caused the abovementioned letter and determination to be prepared and these were placed in his safe as I have mentioned above. However, subsequently he was asked by superior officers to consider certain Industries Assistance Commission Reports. Mr Bolton considered Report No.264 and Report No.268. After considering these reports, he decided, on 30 November 1982, to refuse a determination under s.273.

15. The letter of 2 December 1982, advising of this refusal, read as follows:

"I refer to your letter, CMC525 (RAM:SGL) of 25
August on behalf of Western Mining Corporation
seeking a review of the decision to refuse by-law
admission of imported Flash Furnace Refractories.

While it is acknowledged that Harbison A.C.I. Pty
Ltd did not object to your request for by-law
admission and, in fact offered support to your
application, the fact remains that, when initial
enquiries were made, the Australian manufacturer
did offer a local alternative.

The fact that the local product had not been
proven in service is not, in itself, a
consideration for by-law admission.

You may recall that the Industries Assistance
Commission, in its report No. 268 of 29 June, 1981
on By-law Admission of Certain Goods, etc., quoted
a case with a similar background. They commented
as follows :

'The Commission considers that (the
importer's) requirement, which amounts to
performance testing of the local product, is
a commercial matter as would be the
provision of indemnity against product
failure. In the Commission's view, the
evidence indicates that (local) product
would meet (the importer's) requirements and
for by-law purposes there is no necessity
for further performance testing to establish
suitable equivalence. The Commission is
satisfied that the local boards are suitably
equivalent to those imported by (the
applicant)'.

As you know, the Government accepted the
Commission's Report in its entirety and thus the
principles outlined therein are being employed by
the Department in its administration of the by-law
system.

In the circumstances, as it has not been proven
that suitably equivalent goods were not reasonably
available from Australian production, the decision
to refuse by-law admission of Flash Furnace
Refractories must be maintained."

This letter was written by Mr C.W. Channon, who undertook the internal reconsideration. In his affidavit, Mr Bolton did not specify what it was in the IAC reports which caused him to change his mind. However, it seems probable that Mr Bolton and Mr Channon took a similar view. I therefore accept that the letter of 2 December 1982 set out the reasons for the refusal of a by-law or determination.

16. As can be seen from the above correspondence, Harbison ACI had developed a new product, Nucon 60XD, which it regarded as suitable for the applicant's furnace and Harbison ACI had the view that its goods would be as durable or better than the Veitscher refractories. But the Harbison ACI products were new and they had not been tried in any similar furnace. Moreover, they were not of the same composition. The Veitscher refractories were comprised of 100% pre-sintered ore. Only 30% of Nucon 60XD brick materials were pre-sintered ore and, in fact, the quotation by Harbison ACI recommended the use of only 20% of these bricks, the other 80% to be of refractories not containing any pre-sintered ore. Bricks comprised of pre-sintered ore were less susceptible to thermal shock than other refractories. However, Harbison ACI was of the view that they were more prone to wash erosion than its bricks and that its refractories would last as long or longer.

17. The evidence which was before Mr Bolton at the time when he made his decision showed that the quality of the bricks lining the furnace was a very important matter. Not only was the cost of replacing the bricks extremely expensive, in this case the cost of the imported goods was $464,940.16, to which must be added labour, but the value of lost production during relining or during repair was very high.

18. In my opinion, there was no material before Mr Bolton from which he could reasonably draw the conclusion that a suitable equivalent to the Veitscher bricks was produced in Australia and was reasonably available. The Harbison ACI bricks were produced in Australia and were available but I cannot see that it was reasonable to draw the conclusion that they were a suitable equivalent. The whole of the evidence before Mr Bolton showed that they were of a different composition, they were not 100% pre-sintered bricks and that, not having been tried in the applicant's furnace, which had been designed with the Austrian bricks in mind, nobody knew whether they would perform as well as the Veitscher bricks. Harbison ACI hoped that they would but the bricks were in fact of different composition and were untested.

19. The evidence before Mr Bolton showed that the performance of the refractories was crucial. It showed that the life of the refractories was extraordinarily short, the best performing only about three years. What Mr Bolton knew was that the designers of the furnace had recommended the Veitscher bricks and that the Veitscher refractories were well tried and had a good reputation. In the absence of there being any refractories in Australia, which either were of a similar composition, or which were known to perform as well as the Veitscher bricks, or on which scientific evidence was agreed would perform as well as the Veitscher bricks, I think that there was no material upon which a reasonable decision-maker could have come to the conclusion that a suitable equivalent of the Veitscher bricks was produced in Australia. Indeed, neither the Chamber of Manufacturers nor Harbison ACI so contended. Harbison ACI was content to take the view that it expected that the trial which the applicant offered to it, when it purchased 15% of its refractories from Harbison ACI, would be successful and that, when its refractories had been proved, they would be a suitable equivalent of the Veitscher refractories.

20. Mr Bolton changed his mind because of two reports of the Industries Assistance Commission. I do not propose to deal with these reports at any length. I agree with Mr Bolton that their tenor is inimical to the applicant's claim. Report No.268 stated:

"Performance testing of the local product, is a
commercial matter as would be the provision of
indemnity against product failure."

In my view, that report was wrong in law if it intended to convey that performance testing was irrelevant. Similarly, the letter of 2 December 1982 was wrong in law in the statement,

"The fact that the local product had not been
proven in service is not, in itself, a
consideration for by-law admission."

In my opinion, known performance has importance so far as equivalence of product is concerned. In my opinion, it cannot reasonably be said that an untested product of different character is a suitable equivalent to a quality product if the performance of the new product is unknown and if its qualities are a matter of doubt.

21. The Macquarie Dictionary gives the following definitions for the words "equivalent" and "suitable" -

"equivalent, adj. 1. equal in value, measure,
force, effect, significance, etc. 2. corresponding
in position, function, etc. 3. Chem. having the
same capacity to combine or react chemically. -n.
4. that which is equivalent."

"suitable, adj. such as to suit; appropriate;
fitting; becoming."

22. The terms of item 19 require a consideration of the use to which a product is to be put. Goods X may be a suitable equivalent of Goods Y for some purposes yet not for others. Suitability for the applicant's purpose is required. The test is an objective one. The opinion of the applicant or the manufacturer of the goods cannot be decisive but may be of relevance. To satisfy the test of equivalence, goods need not be identical but they must be readily substitutable, that is to say, they must be commercially interchangeable.

23. In the present case, the applicant wanted the best. I do not see how the Harbison ACI product could be described as the best refractories when their qualities were substantially untested in relation to a furnace such as the applicant's and when there was no general scientific or technical agreement that its products were equivalent.

24. It necessarily follows, in my view, that Mr Bolton was unduly influenced by the reports of the Industries Assistance Commission and failed to give weight to a material aspect of the facts, namely, that the Harbison ACI refractories had not been adequately tested. Therefore, the decision under review should be set aside.

25. However, I am not disposed to accede to the applicant's submission that the Court should direct the making of a by-law or determination in the applicant's favour. Sections 271, 272 and 273 confer discretions and were so read by Lee J in Nashua Australia Pty Limited v Channon (1981) 36 ALR 215. In the present case, it is undesirable that I should discuss whether the discretions are wide, see, eg, Murphyores Incorporated Pty Ltd & Ors v The Commonwealth of Australia & Ors [1976] HCA 20; (1976) 136 CLR 1, or infer a duty to exercise once the facts upon which their exercise is dependent have been established, see, eg, Finance Facilities Pty Limited v Federal Commissioner of Taxation [1971] HCA 12; (1971) 127 CLR 106. That issue is not squarely raised by the facts of this present case.

26. In the circumstances, the application for an order of review should be granted, the decision the subject of this application should be set aside and the matter should be remitted to the Minister for Industry and Commerce for his reconsideration. The respondent should pay the applicant's costs, to be agreed or taxed.