Re Toyota Motor Sales Australia Limited v Collector of Customs [1991] FCA 59; 56 Customs 28 FCR 27/13 Aar 310 (28 February 1991)

FEDERAL COURT OF AUSTRALIA

Re: TOYOTA MOTOR SALES AUSTRALIA LIMITED
And: COLLECTOR OF CUSTOMS
No. G349 of 1990
FED No. 56
Customs
28 FCR 27/13 AAR 310

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Morling(1), Gummow(1) and Hill(1) JJ.

CATCHWORDS

Customs - import duty - rebate - motor vehicles - reimbursement for repairs to vehicles defective on importation - whether reimbursements give rise to rebate - meaning of "rebate of, or other decrease" in price Customs Act 1901, s. 163(1)(b)

Customs Regulations, r. 126(g)

HEARING

SYDNEY
28:2:1991

Counsel for the appellant: C. Darvall, QC and D.L. Ronzani

Instructed by: Landerer and Co.

Counsel for the respondent: D.M. Yates

Instructed by: Australian Government Solicitor

ORDER

Appeal dismissed.

Appellant to pay respondent's costs.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This is an appeal on a question of law from a decision of the Administrative Appeals Tribunal ("the Tribunal") in proceedings in which Toyota Motor Sales Australia Pty Limited ("Toyota Australia") sought review of a decision made by a Delegate of the Collector of Customs that applications for refund of duty paid by it on imported motor vehicles should be refused. The appeal is brought pursuant to s. 44 of the Administrative Appeals Tribunal Act 1975.

2. Pursuant to para. (b) of s.163(1) of the Customs Act 1901 refunds, rebates and remissions of duty may be made subject to such conditions and restrictions as are prescribed. The prescriptions appear in reg. 126 of the Customs Regulations in force under the Customs Act, the relevant prescription being as follows:

"126. Where -
...
(g) the price of goods for the purposes of Division 2 of
Part VIII of the Act was taken into account in
determining under that Division the customs value of
the goods and a rebate of, or other decrease in, that
price accrues to the importer of the goods by reason -
(i) of a fault or defect in the goods; or
(ii) that the goods did not conform to
contract specifications furnished by the
importer to the manufacturer or supplier,
and the rebate, or decrease, was not taken into
account in determining that customs value;"

3. The basis of the applications for refunds of duty was that Toyota Australia had received payments from its Japanese parent,Toyota Motor Corporation ("Toyota Japan"), in satisfaction of claims made in respect of defects in imported Toyota commercial vehicles. Such payments were claimed to be rebates of, or reductions in, the prices paid for those vehicles which accrued to Toyota Australia by reason of faults or defects in the vehicles, and thus within the prescription contained in reg. 126(g).

4. The facts which gave rise to the claims for refunds of duty may be shortly stated. In 1985 Toyota Australia became the exclusive importer into Australia of Toyota motor vehicles pursuant to a franchise agreement ("the Importer Agreement") made with Toyota Japan. Under the Importer Agreement Toyota vehicles were sold by Toyota Japan to Toyota Australia, which resold them through distributors to consumers. Each consumer was given a warranty in respect of the vehicle he purchased. The terms of this warranty were contained in a booklet described as the Toyota Commercial Vehicle Warranty and Service Record ("the Customer Warranty"). In respect of the repairs to the motor vehicles the subject of the proceedings before the Tribunal, such repairs had been effected by distributors and claims had been made by them against Toyota Australia for the cost of carrying them out. It was Toyota Australia's obligation under the Importer Agreement to meet the cost of these repairs.

5. Most such repairs related to work covered by the warranties. However, there were occasions when repairs outside the strict terms of the Customer Warranty were made and were paid for by Toyota Australia. When Toyota Australia's National Service Manager considered it reasonable, the company met the costs of remedying hidden defects in vehicles although the work involved in remedying these defects sometimes fell outside the strict terms of the warranty.

6. The costs incurred by Toyota Australia in paying for such repairs was not paid in full by Toyota Japan. The amount which it was prepared to pay, and did pay, to Toyota Australia was calculated in accordance with a formula laid down in a document described as the Warranty Policy. Under the Warranty Policy the obligations of Toyota Australia extend to all Toyota motor vehicles, whether imported by that company or not.

7. Upon payment of the cost of repairs, whether within the strict terms of the Customer Warranty or not, Toyota Australia lodged claims for reimbursement by its parent. These claims were made pursuant to a provision in the Warranty Policy which provided: "Pursuant to the warranty policy, a Distributor may claim reimbursement from (Toyota Japan) for warranty repairs on a vehicle." Toyota Australia is a distributor within the meaning of this provision. Toyota Japan considered the claims, including those outside the strict Customer Warranty, and made reimbursements to Toyota Australia. It is these reimbursements which Toyota Australia claims to be rebates or decreases in price within the meaning of reg. 126(g).

8. The Tribunal was of the view that the amounts paid by way of reimbursement did not fall within reg. 126(g). We are of the same opinion.

9. To have fallen within reg. 126(g) the payments made by Toyota Japan to Toyota Australia must have amounted to rebates of, or other decreases in, the price paid for the motor vehicles. "Price" is extensively defined in s.154 of the Customs Act in wide terms so as to include, inter alia, "all payments that have been made, or are to be made, directly or indirectly in relation to ... goods ... by or on behalf of the purchaser ... in accordance with the contract of sale." The definition thus contemplates that the determination of the price of goods may have to await the occurrence of events after the sale itself has taken place. Hence it is no bar to Toyota Australia's claims for refunds of duty that the reimbursements made to it by Toyota Japan were not received until some time (even some years) after the vehicles were imported and paid for.

10. However, we do not think that the reimbursements can properly be described as rebates of, or decreases in, the prices paid for the motor vehicles. Counsel for Toyota Australia conceded that if it were proper to categorise the reimbursements as repayments of money expended on warranty repairs they would not amount to rebates of, or decreases in, the prices paid for the motor vehicles. His submission was that the reimbursements were not in respect of repairs carried out under the Customer Warranty, but were rebates in price for which provision was made in the terms of sale of the motor vehicles contained in the Importer Agreement.

11. He relied particularly upon Article 22 of the Importer Agreement which provided that: "the Company (i.e. Toyota Japan) shall independently establish the prices of the products which it sells to the importer (i.e. Toyota Australia) and may, at any time, change the said prices." It was submitted that the effect of making a reimbursement in respect of the cost of repairs effected to a vehicle was to change the price of that motor vehicle after its price had been initially fixed.

12. We do not agree with this submission. In the first place, it is reasonably apparent from the Importer Agreement that the prices referred to in Article 22 are the prices quoted by Toyota Japan in respect of the various models or types of motor vehicles which Toyota Australia may import from its parent. In other words, the reference to prices in Article 22 is not a reference to the prices of particular vehicles.

13. Secondly, we do not think that in the ordinary parlance of commercial life the reimbursements can fairly be said to be rebates of, or decreases in, the prices of the relevant vehicles accruing to Toyota Australia by reason of faults or defects in those vehicles. They were payments made to Toyota Australia under arrangements essentially collateral to the purchase of the motor vehicles pursuant to which Toyota Australia was entitled to claim reimbursement in respect of at least some of the expense incurred in meeting its warranty obligations to owners of Toyota vehicles. The contractual arrangements made between the two companies pursuant to which reimbursements were made were plainly independent of the contractual arrangements pursuant to which the motor vehicles were imported.

14. Thus a claim by Toyota Australia for a reimbursement was not a claim against its parent for a rebate of, or decrease in, the price of a vehicle. Rather it was a claim for reimbursement of the cost of repairs for which it had made itself contractually liable. In these circumstances the reimbursements did not fall within reg. 26(g).

15. Accordingly, the appeal must be dismissed. The appellant must pay the respondent's costs.