Brambles Australia Limited v Secretary, Department of Industry, Tourism and Resources [2005] FCA 1289 (16 September 2005)

Last Updated: 16 September 2005

FEDERAL COURT OF AUSTRALIA

Brambles Australia Limited v Secretary, Department of Industry, Tourism and Resources [2005] FCA 1289

ADMINISTRATIVE LAW – appeal from decision of Administrative Appeals Tribunal – applicant provides specially moulded trays for use in facilitating automotive assembly process - refusal of application for registration as "automotive service provider" under ACIS Administration Act 1999 (Cth) – whether applicant provided services "relating solely to production" – whether applicant provided "production services" – whether applicant’s trays constituted "automotive machine tools" – meaning of "production"

WORDS AND PHRASES – "relating solely to"


ACIS Administration Act 1999 (Cth)
ACIS Administration Regulations 2000 (Cth)


Chief Executive Officer of Customs v Dyno Wesfarmers Limited (1997) 73 FCR 1 referred to
Commissioner of Taxation v Comber (1986) 10 FCR 88 referred to
Commissioner of Taxation v Jax Tyres Pty Ltd (1984) 5 FCR 257 referred to
East Finchley Pty Ltd v Federal Commissioner of Taxation (1989) 90 ALR 457 referred to
Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 referred to
Randwick Municipal Council v Rutledge [1959] HCA 63; (1959) 102 CLR 54 referred to
Re Wandoo Alliance Pty Ltd and Chief Executive Officer of Customs [2001] AATA 801; (2001) 34 AAR 98 referred to
Ryde Municipal Council v Macquarie University [1978] HCA 58; (1978) 139 CLR 633 discussed
Transplant and Breeding Services Pty Ltd and Australian Industrial and Development Incentives Board (1983) 5 ALN N94 referred to


Industry Commission, The Automotive Industry (1997)


BRAMBLES AUSTRALIA LIMITED v SECRETARY, DEPARTMENT OF INDUSTRY, TOURISM AND RESOURCES

VID 720 OF 2004

WEINBERG J
16 SEPTEMBER 2005

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 720 OF 2004

ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:	BRAMBLES AUSTRALIA LIMITED APPLICANT
AND:	SECRETARY, DEPARTMENT OF INNOVATION, TOURISM AND RESOURCES RESPONDENT
JUDGE:	WEINBERG J
DATE OF ORDER:	16 SEPTEMBER 2005
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The decision of the Administrative Appeals Tribunal, given on 14 May 2004, to affirm the decision of the respondent, be set aside.
3. The matter be remitted to the Administrative Appeals Tribunal to be determined according to law and in accordance with these reasons for judgment.
4. The respondent pay the applicant’s costs of this appeal.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 720 OF 2004

ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:	BRAMBLES AUSTRALIA LIMITED APPLICANT
AND:	SECRETARY, DEPARTMENT OF INNOVATION, TOURISM AND RESOURCES RESPONDENT

JUDGE:	WEINBERG J
DATE:	16 SEPTEMBER 2005
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

INTRODUCTION

1 This is an appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act") from a decision of the Administrative Appeals Tribunal ("the AAT"). While the present proceedings are described in s 44 of the AAT Act as an appeal, they are proceedings in this Court’s original jurisdiction and are limited to questions of law. By its decision the AAT affirmed a decision of the Secretary, Department of Industry, Tourism and Resources to refuse an application by CHEP Australia ("CHEP"), a business owned by the applicant, for registration as an automotive service provider ("ASP"). That application was made pursuant to s 26(3) of the ACIS Administration Act 1999 (Cth) ("the Act"). "ACIS" is the abbreviation for the "Automotive Competitiveness and Investment Scheme", which is established under the Act.

BACKGROUND

2 CHEP provides certain services to Australian automotive vehicle manufacturers. It applied for registration as an ASP in an application dated 27 September 2001. In general terms, registration as an ASP entitles a person, if certain other requirements are met, to receive duty credits that are used to offset import duty paid or payable on certain imports.

3 In a letter dated 24 October 2001 in further support of its application, CHEP described the services it provides to Australian automotive manufacturers as follows:

"CHEP works with automotive component manufacturers and vehicle manufacturers by providing a returnable packaging system which includes the:

• Supplying of industry standard returnable containers and crates; and
• Designing and providing stillages that are custom made for the customer’s manufacturing process.

These stillages must be designed to the manufacturer’s specifications so that their interaction with the production process is optimised."

4 On 15 March 2002, CHEP was informed that its application had been refused. CHEP applied to the AAT for review of this decision, pursuant to s 114(c) of the Act.

5 For the purposes of the AAT review, and with the consent of the parties, submissions were restricted to the services CHEP provides to Holden Limited ("Holden") in relation to Holden’s V6 engine program. These services were considered the applicant’s "best case" for registration.

6 The services provided to Holden involve supply of a customised returnable container system, specifically designed and developed by CHEP for Holden’s requirements. In broad terms, CHEP has designed trays precisely moulded for a variety of V6 engines or components. These trays are provided by CHEP to the manufacturer of these parts in the United States. The manufacturers fill the trays, which are then stacked and transported by Holden to its manufacturing plant in Australia. The trays are then placed next to the operator on the production line (sometimes with an arrow pointing to which way a component should be inserted). Components are taken out of the trays as they are required on the production line. Once the trays are empty, they are returned to CHEP, and then cleaned and inspected before being sent back to the United States, where the cycle recommences. CHEP is responsible for ensuring enough trays are available for Holden’s needs at any one time.

7 In a decision dated 13 October 2003, the AAT found that the applicant was not a "provider of automotive services" for the purposes of the Act, a central requirement for registration as an ASP (Brambles Australia Limited and Secretary, Department of Industry, Tourism and Resources [2003] AATA 1032). Because submissions had only been made in relation to one aspect of CHEP’s services (the services provided to Holden), the AAT did not, at that time, make a final decision in the matter. Rather, it adjourned the proceeding pending further consideration as to whether Brambles wished to "pursue another avenue to establish that it is eligible for registration". However, on 14 May 2004, and at the request of the parties, the AAT affirmed the decision of the respondent (Brambles and Australia Limited and Secretary, Department of Industry, Tourism and Resources [2004] AATA 654). In its reasons for decision, the AAT noted, at [6], it had been "told that Brambles had presented its best case and had taken the view that it would not succeed in relation to other services". It noted that affirmation of the decision meant that "the matter had been finally determined and Brambles could consider other options available to it". In these reasons for judgment, a reference to the AAT’s reasons for decision will be a reference to the reasons published on 13 October 2003, unless otherwise indicated.

8 On 10 June 2004, Brambles filed a notice of appeal from the 14 May 2004 decision of the AAT.

LEGISLATIVE FRAMEWORK

9 The purpose of the Act is set out in s 3. It is:

"...to provide transitional assistance to encourage competitive investment and innovation in the Australian automotive industry in order to achieve sustainable growth, both in the Australian market and internationally, in the context of trade liberalisation."

10 The Act establishes the ACIS. This scheme enables "participants" to receive duty credits, which can be used to offset duty paid, or payable, on certain eligible imports. A "participant" is defined as including an ASP.

11 Section 19(1) of the Act specifies the criteria for eligibility to apply for registration as an ASP. The first requirement is that the person "is a provider of automotive services". The second requirement is that the value of the automotive services be of a requisite size. Under s 26(2) of the Act, the Secretary is obliged to grant an application for registration if satisfied that:

•	the applicant is eligible to apply for that registration (s 26(2)(a));
•	certain procedural requirements have been, or can be, satisfied (s 26(2)(b)-(f)); and
•	registering the applicant would further the purpose of the Act (s 26(2)(g)).

12 The only registration requirement at issue in this proceeding is that the person be a "provider of automotive services". A definition of "automotive services" is set out in reg 9(2) of the ACIS Administration Regulations 2000 (Cth). It provides that "automotive services" are:

"design, development, engineering or production services for motor vehicles, engines, engine components, automotive components, automotive machine tools or automotive tooling, relating solely to:

(a) design, development, engineering or production, including normal design functions..." (emphasis added).

13 Section 6 of the Act provides that "production has the meaning given in section 7". However, s 7 does not exhaustively define the word production. Rather, it sets out a list of circumstances in which a person will be "taken to produce" a thing, the time at which a person is taken to produce a thing, when certain things are "taken to have been produced in Australia", and when automotive services are taken to have been "provided in Australia".

14 Another definition relevant in this proceeding, and to which I shall return later in these reasons for judgment, is that of "automotive machine tools". That term is used in reg 9(2) as set out above at [12]. It is defined in reg 8 of the Regulations as meaning:

"(2) ... machine tools:
(a) that are designed and built to be used solely for:

(i) the production of motor vehicles, engines, engine

components or automotive components; or

(ii) facilitating the provision of automotive services;

...

(5) However, machine tools of a kind mentioned in subregulation (2) do not include the following:

(a) machine tools for the production of raw materials;

(b) machine tools that are ordinarily hand-held;
(c) stillages (other than stillages that are purpose-built for automotive production) or other passive storage equipment." (emphasis added)

THE AAT’S DECISION

15 On the basis of the evidence given by Mr Michael Matthews, General Manager of the Automotive Services Division of CHEP, the AAT made the following findings of fact:

"18. ... The V6 Returnable Container System was developed by CHEP as a result of an invitation by Holden to CHEP and others to develop a returnable packaging system. At the time, Holden had been using wooden crates and disposable packaging that required unpacking and disposal by a team of eight people before the components entered the production line. On the basis of Mr Matthew’s evidence, we find that CHEP consulted closely with Holden as to the needs of its production line and the specifications that the packaging needed to meet. Pursuant to a contract with CHEP, the packaging, that we will refer to as "trays", were designed by Flight Group Ltd and Plexicor Australia Pty Ltd ("Plexicor"). The trays, which are made of plastic, and the tooling required to manufacture them were manufactured by Plexicor, which sub-contracted with another firm to manufacture the pallets onto which trays are packed for transport. Samples of the trays were subjected to trials by Holden in consultation with CHEP.

19. We find that, in general terms and without referring to pricing information that is protected by the confidentiality order, the V6 Returnable Container System works in this way. Holden’s V6 engine and associated components are manufactured in Detroit in the United States of America. Pursuant to a contract between it and Holden, CHEP either delivers the trays to the premises of the manufacturers of the V6 engine and of the associated components or those manufacturers collect them from CHEP. The trays come in a variety of sizes and with a variety of inserts but each is designed especially for a V6 engine or a particular associated component. The inserts and the trays are designed to protect the engines and the associated components from damage such as corrosion or rubbing. In preventing them from rubbing the crate, the V6 engine and associated components are also protected from being contaminated by the material from which the tray is made. Contamination is also minimised by the cleaning process to which CHEP subjects the trays before they are provided to the manufacturers. The design of the trays also takes into account matters such as the space constraints of Holden’s motor vehicle assembly production line, the need to enable processes to be carried out efficiently on that production line and ergonomic considerations relating to those personnel working on the production line."

16 Before the AAT, Brambles relied on two alternative bases for asserting that it was a "provider of automotive services". These were that the V6 customised returnable container system constituted:

(a) "production services for motor vehicles, engines, engine components, automotive components ... relating solely to ..." one of the matters specified in reg 9(2) ("ground (a)"); or
(b) "design, development, engineering or production services for ... automotive machine tools ... relating solely to ... design, development engineering or production" by virtue of the trays being "stillages that are purpose-built for automotive production" (reg 8(5)(c)) ("ground (b)").

17 Brambles was unsuccessful on both grounds. In relation to ground (a), the AAT found that, in an overall sense, "CHEP’s V6 Returnable Container System is an integral part of the system installed by Holden for the production of its motor vehicles". However, this was not sufficient to satisfy the requirements of reg 9(2). The AAT summarised the requirements of reg 9(2) as follows, at [52]:

"production services are services, being assistance or activities, related solely to production and so to the act of producing. If they are to come within r. 9(2)(a), they may not relate to any collateral or independent activity although they may incidentally fulfil another role or achieve another purpose."

18 In applying these requirements to CHEP’s services, the AAT said, at [54] – [56], that reg 9(2):

"... does not ask us to consider whether CHEP’s activities are for, and so for the benefit of, Holden’s manufacturing enterprise. Rather, it divides up some of the activities that lead to a motor vehicle’s being available for purchase. It divides them into motor vehicles, their components (engines, engine components and automotive components) and automotive machine tools and automotive tooling required to put them together. The assistance or activities directed to the act of production, and so the production assistance, must relate to one or more of those aspects of the finished motor vehicle that sits in the showroom and to none of the other activities that may be required to get it there.

55. When looked at in this way, CHEP’s activities are not directed to providing any form of service to the act of producing the V6 engine components, be they engine components or automotive components, in the United States of America. Its activities in relation to them commence only after they have been produced and their activities are directed to the carriage of the items that have been produced although it is not itself responsible for their carriage. CHEP’s systems and equipment are designed in close consultation with Holden and tailor made for Holden’s precise needs but its activities at this stage are related solely to the provision of purpose-built trays enabling the items to be carried by others. Its activities do not change. Indeed, it is not engaged in the carriage of the goods at any stage and it does not retrieve its trays until after they have been emptied.

56. The delivery of the V6 engine components to Fisherman’s Bend is vital for they are required in the production of motor vehicles. According to the extended definitions in s. 7(1), Holden’s assembling the V6 engine and associated components with other components in order to assemble a motor vehicle would mean that it is taken to have produced it but the delivery of the V6 engine components in CHEP’s trays does not mean that its activities are related to that assembly, solely or otherwise. They are related to the supply of the items but not to their assembly with other components and so not to the production of the motor vehicle. They facilitate the assembly as the manner in which they are set out in the trays is designed with the needs of the operator and the production line in mind. It follows that we do not consider that CHEP’s V6 Returnable Container System may be described as production services, and so automotive services, within the meaning of r. 9(2)(a)." (emphasis added)

19 In relation to ground (b), the AAT noted that the term "stillages" was not defined in either the Act or the Regulations. In any event, it did not determine whether the trays provided by CHEP to Holden were, in fact, stillages. It found that even if they were properly regarded as such, they had not been designed and built to be used solely for production or for facilitating the provision of automotive services, as required by reg 8(2)(a). At [59] the AAT said:

"If the trays are stillages, we are satisfied that they are purpose-built for automotive production in the sense that they are purpose-built so that their contents may be retrieved in an undamaged fashion by the operator, mechanical or human, on the production line in the most efficient manner. For the reasons that we have given earlier, we do not find that they are designed and built for use solely for the production of motor vehicles, engines, engine components or automotive components within the meaning of r. 8(2)(a)(i). We do find, however, that they facilitate, in the sense of "... make easier or less difficult ..." (Macquarie Dictionary, 2nd edition, 1987) the provision of production services at Fisherman’s Bend within the meaning of r. 8(2)(a)(ii).. The question, though, is whether they are designed and built solely for that purpose for they must be if they are to be regarded as automotive machine tools within the meaning of r. 8.. We are not satisfied that they have been designed and built solely for that purpose. They have been designed and built solely for Holden’s purposes but some of those purposes relate to facilitating the provision of production services and some relate to the transportation of the V6 engine components. Certainly, that transportation is intended to ensure that they arrive in an undamaged condition. That may be said to facilitate production services when they arrive in an undamaged condition but, at the same time, the trays are designed and built for their transportation. Transportation is one of the intended uses of the trays and, for the reasons that we have given above, is not to be regarded as the provision of automotive services. It follows that they are not designed and built to be used solely for facilitating the provision of automotive services."

THE APPLICANT’S SUBMISSIONS

20 The applicant contends that the AAT erred by misconstruing and misapplying reg 9(2) (the definition of "automotive services"), and regs 8(2) and (5) (the definition of "automotive machine tools"). The notice of appeal set out a number of grounds of appeal, some with numerous sub-grounds. Two of the grounds, which related to a natural justice point, were not pursued at the hearing before me.

21 Central to many of the remaining grounds of appeal was the AAT’s construction of the term "production" in regs 9(2) and 8(2). That term appears twice in reg 9(2), which is set out above at [12]. First, "automotive services" are defined as including "production services for motor vehicles, engines, engine components, automotive components...". Second, these "production services" must relate "solely to ... production". Similarly, reg 8(2), which is set out above at [14], provides that "automotive machine tools" include "machine tools ... that are designed and built to be used solely for ... the production of motor vehicles, engines, engine components or automotive components" (emphasis added).

22 Some of the grounds of appeal overlap, and a number of them pointed to the same passages of the AAT’s decision as evidence of different errors. Nonetheless, it is convenient to deal with each of the individual grounds of appeal in turn.

23 The first error identified by the applicant is that the AAT interpreted the phrase "production services for motor vehicles, engines, engine components, automotive components..." in reg 9(2) as requiring the relevant services to be wholly confined to the "production line" of a producer of motor vehicles or engines. A second, and related ground of appeal is that the AAT made the same error in relation to reg 8(2)(a)(i). That is, the AAT found that a thing is only designed and built to be used "solely for the production of motor vehicles [or] engines" if it is designed and built to be used wholly within the production line of a producer of motor vehicles or engines.

24 The AAT’s stated at [50] of its reasons for decision "it is true that s.7 of the Administration Act extends the meaning of production but it does not extend it beyond either end of the production line". In that context, it should be noted that s 7(1), headed "Assembly of components can be production" provides that:

"For the purposes of this Act, 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 component parts."

25 As previously indicated, the remaining sub-sections in s 7 are deeming provisions relating to the time at which a thing is taken to have been produced (s 7(2)) and when production or services are deemed to have occurred or have been provided in Australia (s 7(3)-(7)).

26 Mr Cavanough QC, who appeared for the applicant, contended that the AAT had erroneously interpreted s 7 as meaning that there can be no production "beyond either end of the production line". He cited Commissioner of Taxation v Comber (1986) 10 FCR 88, and East Finchley Pty Ltd v Federal Commissioner of Taxation (1989) 90 ALR 457 as authority for the proposition that a deeming provision cannot be used to distort the ordinary meaning of words, outside the particular deeming effect of that provision. Mr Cavanough submitted that despite s 7 not providing an exhaustive definition of "production", the AAT had drawn limiting inferences from that section that were not warranted.

27 The third error identified by the applicant was that the AAT interpreted the phrase "production services for motor vehicles, engines, engine components, automotive components..." in reg 9(2) as requiring the relevant services to relate to the assembly of items on the production line, and not to the supply of items to the production line. Again, a related error was said to have been made in relation to reg 8(2)(a)(i) – that a thing is only designed and built to be used "solely for the production of motor vehicles [or] engines" if it is designed and built to be used only in relation to the assembly of items on the production line (and not in relation to the supply of items to the production line).

28 The AAT found that the "delivery of the V6 engine components to Fisherman’s Bend is vital for they are required in the production of motor vehicles" and that CHEP’s trays "facilitate the assembly as the manner in which they are set out in the trays is designed with the needs of the operator and the production line in mind". Despite this, it held that the CHEP trays are "related to the supply of the items but not to their assembly with other components and so not to the production of the motor vehicle".

29 The applicant submitted that there are numerous indicators in the Act and Regulations that point to the correct interpretation of "production" being broader than the "production line", or mere "assembly". These indicators were said to include, among others:

•	reg 8(4), which provides that machine tools which satisfy the requirements of regs 8(2) and 8(5) include machine tools for "handling physical inputs that are integral to the production process". Under this regulation, an example is given of a "robotic arm that loads blanks into a stamping machine". The applicant submitted that this example is analogous to the services CHEP provides to Holden; and
•	reg 13E which sets out the kinds of plant and equipment that are "allowable" under the Act (being "allowable" is one requirement in determining which types of investment will qualify an ASP for duty credits). The following are defined as allowable plant and equipment in reg 13E(2):

"(a) plant and equipment for the manufacture, assembly, design, development or engineering of motor vehicles, engines, engine components, automotive components, automotive machine tools or automotive tooling;

(b) plant and equipment directly supporting the manufacture, assembly, design, development or engineering of motor vehicles, engines, engine components, automotive components, automotive machine tools or automotive tooling;

(c) plant and equipment required to comply with a law of the Commonwealth, a State or a Territory directly relating to the manufacture, assembly, design, development or engineering of motor vehicles, engines, engine components, automotive components, automotive machine tools or automotive tooling;

(d) plant and equipment for the activation of manufacturing processes for the production of motor vehicles, engines, engine components, automotive components, automotive machine tools or automotive tooling;

(e) plant and equipment facilitating the provision of automotive services or approved research and development;

(f) plant and equipment indirectly supporting functions that are integral to the production of motor vehicles, engines, engine components, automotive components, automotive machine tools or automotive tooling.

Examples for paragraph (b)

Plant and equipment for build sequencing and process control, supply of materials to an assembly line, movement of components or sub-assemblies from process to process, quality assurance testing and monitoring, or painting or other final preparation of the product as a saleable product.

...

Note   Allowable plant and equipment, for a participant, may include plant and equipment installed on a site that is not owned or controlled by the participant."

(Emphasis added)

30 It was submitted that reg 13E(2) indicates that an ASP would be eligible for duty credits for activities that are broader than the AAT’s interpretation of "production". Particular attention was drawn to the example given for reg 13E(2)(b). While reg 13E(2) does not expressly affect the definition of "automotive services", the applicant submitted that it would be unusual for an activity not to qualify a person for registration as an ASP, where that same activity might be eligible for duty credits.

31 Similar arguments were made by the applicant in relation to reg 13G which sets out allowable research and development activities.

32 The fifth ground of appeal was that, in relation to reg 9(2), the AAT had erred by requiring the relevant services to constitute production, rather than merely relate to it. Mr Cavanough contended that the applicant had only to show that its services were production services relating solely to production. It did not have to show that it provided services of production. The words "relating solely to" indicated that the legislature intended the scope of reg 9(2) to be broader than services of production.

33 The applicant submitted that the legislation was drafted with the knowledge that the automotive industry is, and was at the time the legislation was enacted, a globally integrated industry, involving a globally integrated process of production. This was acknowledged in the Industry Commission report that preceded the legislation (The Automotive Industry (1997)) and the Explanatory Memorandum to the Act. It submitted that even if CHEP’s services to Holden are properly characterised as "transportation" (as the AAT described them), they are transportation for the purposes of production, and this is sufficient to come within the phrase "relating solely to ... production".

34 In support of this submission, the applicant cited cases involving the diesel fuel rebate where diesel used in transport of vehicles or boats to mining sites were found to be journeys for the purpose of mining minerals. See Re Wandoo Alliance Pty Ltd and Chief Executive Officer of Customs [2001] AATA 801; (2001) 34 AAR 98 and Chief Executive Officer of Customs v Dyno Wesfarmers Limited (1997) 73 FCR 1.

35 The applicant also submitted that these arguments apply equally to the phrases "machine tools ... that are designed and built to be used solely for ... the production of motor vehicles..." and "machine tools ... that are designed and built to be used solely for ... facilitating the provision of automotive services" in reg 8(2) (the sixth ground of appeal). That is, even if the trays are "machine tools" designed and built for the purpose of transportation, this transportation is solely for the purpose of production.

36 The seventh ground of appeal was that the AAT had erroneously equated "production" with "manufacture". At [35] of the AAT’s reasons for decision, it stated that "production" seemed to it to mean "the act of producing, creating or manufacturing the thing that is produced, created or manufactured". Mr Cavanough contended that "production" in fact had a wider meaning than "manufacture". The AAT acknowledged that its conclusion was inconsistent with an earlier AAT decision in Transplant and Breeding Services Pty Ltd and Australian Industrial and Development Incentives Board (1983) 5 ALN N94 ("Transplant and Breeding"). However, it concluded that its decision would be consistent with the reasoning of Lockhart J in Commissioner of Taxation v Jax Tyres Pty Ltd (1984) 5 FCR 257 at 261. The applicant submitted that Transplant and Breeding was directly in point, and should have been followed, and further submitted that the AAT’s reasoning had the effect of unnecessarily narrowing the meaning of "production" in this context.

37 The eighth ground of appeal was that the AAT had erroneously treated production as an "act" rather than an "activity" or "activities". Mr Cavanough argued that reg 9(3) expressly indicates that the legislature intended the services set out in reg 9(2) to be considered as "activities". Regulation 9(3) provides:

"Without limiting subregulation (2), services of a kind mentioned in subregulation (2) include the development and sale of computer software relating solely to an activity mentioned in that subregulation." (emphasis added)

38 The applicant contended that this interpretation led the AAT into error by limiting the characterisation of production to a single point at a single location, and therefore created an unwarranted restriction on the term "production".

39 The ninth ground of appeal relates to the distinction between services that are "incidental", and those that are "collateral" to production. At [52] of its reasons, the AAT stated:

"Those production services [referred to in sub-reg 9(2)] are services, being assistance or activities, related solely to production and so to the act of producing. If they are to come within r.9(2)(a), they may not relate to any collateral or independent activity although they may incidentally fulfil another role or achieve another purpose."

40 The applicant claimed that the AAT had erroneously found services that are "unquestionably" "incidental" to "production services ... relating solely to production" to fall outside the ambit of reg 9(2).

41 The tenth and final ground of appeal was that even if the AAT had been correct in limiting the term "production" to meaning "assembly", it did find that CHEP’s services facilitated assembly (see the extract from [56] above). The applicant submitted that, in the face of this finding, it was not reasonably open to conclude that the services were not "automotive services".

THE RESPONDENT’S SUBMISSIONS

42 The respondent, represented by Mr Hanks QC, denied each of the grounds of appeal, and maintained that the AAT did not err in its construction of the Act or the Regulations. Central to many of the respondent’s contentions was an emphasis on the requirement in reg 9(2)(a) that the "production services" must relate "solely to ... production", and the similar requirement in reg 8(2), that "automotive machine tools" include "machine tools ... that are designed and built to be used solely for ... the production of motor vehicles..." (emphasis added).

43 Again, it is convenient to deal with each of the grounds of appeal in turn, and in the same order as set out above in the applicant’s submissions.

44 First, in relation to whether "production" extends beyond the "production line", it was submitted that the applicant had not given a fair account of the AAT’s interpretation of reg 9(2)(a). The AAT had recognised that s 7 did not prescribe the meaning of "production", and had ultimately looked to the ordinary meaning of that term. While Mr Hanks acknowledged that the AAT had derived support for its interpretation from s 7, ultimately, the restrictions placed upon the concept of "production" were related to the requirement that the relevant activity relate "solely to ... production". The same arguments were relied upon in relation to the AAT’s construction of reg 8(2).

45 As to whether "production" is limited to mere "assembly", it was again submitted that the applicant had not given a fair account of the AAT’s reasoning. Mr Hanks argued that the AAT’s findings in relation to "assembly" were concerned with s 7(1), which equates "production" with "assembling a thing from component parts". The respondent challenged the applicant’s submission that it would be unusual for an activity not to qualify a person for registration as an ASP, but for that same activity to be eligible for duty credits (as appeared to be the case under regs 13E and 13G). Mr Hanks submitted that it was by no means inconsistent to have restrictive eligibility criteria, but once eligibility had been established, to have a wider range of activities capable of counting towards obtaining duty credits.

46 The respondent denied that the AAT had required the relevant services under reg 9(2)(a) to constitute production, rather than merely relate to it. Rather, the limitations imposed by the AAT were again said to arise from the requirement that the services relate "solely" to production. The AAT had rejected CHEP’s application because its activities related to a collateral activity, namely the carriage by others from the point of production to the point of assembly. This reasoning was also put forward as an answer to the applicant’s complaint that reg 8(2) had been misconstrued when the AAT found that "transportation" of components to the production line disqualified particular services from coming within the ambit of that regulation. The diesel-fuel rebate cases were argued to be of no assistance to the Court as the statutory regime was not analogous to the regime at issue in this case.

47 In relation to the applicant’s submission that the AAT had equated "production" with "manufacture", the respondent argued that the AAT had made no such finding. Rather, it read "production" as referring to "the act of producing". The AAT had not found that CHEP did not provide "automotive services" because "production" had the same meaning as "manufacture". Again, it was submitted that the AAT had found that CHEP did not provide automotive services because CHEP’s activities did not relate solely to production. In any event, Mr Hanks did not accept that "production" has an inherently wider meaning than "manufacture". Although there may be circumstances where that is so, at least so far as the dictionary is concerned, it was submitted that ordinarily these terms are regarded as synonymous.

48 The respondent denied that the AAT had confined "production" to a single "act" rather than "activity", and that CHEP’s activities had failed to qualify CHEP for ASP status because of this.

49 In relation to the ground of appeal that the AAT had excluded services that were "unquestionably incidental" to "production services ... relating solely to production", the respondent submitted that this ground invited the Court to review findings of fact. The AAT had found that CHEP’s services related to activities that were collateral to production. While "incidental" activities were said to fall within the ambit of "solely related to production", "collateral" activities did not.

50 Ultimately, Mr Hanks contended that the word "solely" confines the production services that may constitute "automotive services" as services related to production to the exclusion of all else. The AAT found that CHEP’s activities did not relate "solely to ... production", a finding that was reasonably open to it.

CONCLUSION

THE FINDING THAT CHEP’S SERVICES DO NOT RELATE SOLELY TO PRODUCTION

51 In my view, the central issue in this proceeding is whether the AAT erred in finding that CHEP’s services do not relate solely to production. Counsel for the respondent repeatedly relied upon this requirement in reg 9(2) as a basis for defending the AAT’s reasoning, and as an answer to many of the applicant’s grounds of appeal.

52 As indicated above, the AAT made findings of fact that the "delivery of the V6 engine components to Fisherman’s Bend is vital for they are required in the production of motor vehicles", and that CHEP’s services "facilitate the assembly". At the same time, CHEP’s services were found to relate to a "collateral" or "independent" activity, namely transportation. On the AAT’s reasoning, even if CHEP’s services were related to production, their relationship to "transportation" or "supply" to the "production line" took them outside the ambit of reg 9(2).

53 The AAT cited a number of authorities dealing with the concept of "sole purpose" as the basis for the finding that "ancillary" purposes are permissible, but "collateral" or "independent" purposes are not. See Randwick Municipal Council v Rutledge [1959] HCA 63; (1959) 102 CLR 54 ("Rutledge") and Ryde Municipal Council v Macquarie University [1978] HCA 58; (1978) 139 CLR 633 ("Ryde"). The latter case is instructive. It involved a provision of the Local Government Act 1919 (NSW) which exempted from payment of rates "land which is vested in the Macquarie University ... and is used or occupied by the University ... solely for the purposes thereof". The issue was whether rates were payable on buildings leased to shops and banks which were open to members of the public, but which were "designed" to be for the benefit of students and staff of the University, and provided a source of income for its student union. In that case it was held that the fact that the buildings were leased on commercial terms and that the University derived "subsidiary and incidental benefit from using the land for its purposes does not mean that the land is not used exclusively for University purposes": Ryde at 644 per Gibbs ACJ. His Honour noted, at 644, that the use of the land was "wholly ancillary to, and directly facilitated, the carrying out of the principal objects of the University; it was not collateral or additional to those purposes."

54 I note that the statutory formulation in Ryde did not contain the words "relating to". Nor did the relevant statutory formulation in Rutledge.

55 CHEP’s services may well be correctly characterised as services of transportation. However, this does not mean that they do not "relate to" production and, more importantly, "relate solely to" production. In the present proceeding, it is common ground between the parties that CHEP’s trays cannot be used for any function other than transportation of specific parts from manufacturers to Holden’s plant in Australia. Therefore, to the extent that CHEP’s services are services of transportation, it is transportation solely relating to production. The services are not services of transportation for the purpose, for instance, of on-selling the parts and engines to third parties, or transporting parts that are not used exclusively in Holden’s production process. They do not, in my view, relate to an independent or collateral purpose.

56 The implication of the AAT’s construction of the words "relating solely to ... production" is that any activity that relates solely to production, but which can also be characterised in some other way as involving a different activity, would not satisfy reg 9(2) (unless that activity is "ancillary" to production). Therefore, to give an example, if the work that Holden does at its Fisherman’s Bend plant was actually conducted at two separate plants, and parts had to be transported from one to the other to complete the production process, those "transportation services" would not be considered by the AAT to be solely related to production. This would be a surprising result.

57 In my opinion, the AAT construed the term "relating solely to ... production" in reg 9(2) too narrowly. The effect of its construction was to require CHEP’s services to "constitute" rather than relate solely to production. In approaching the matter in that way, the AAT fell into error.

THE FINDING THAT CHEP’S SERVICES ARE NOT "PRODUCTION SERVICES"

58 A number of the applicant’s grounds of appeal related to whether the AAT adopted an unduly narrow construction of the term "production services" in reg 9(2). The AAT stopped short of adopting a definitive construction of the term "production services". It stated, at [40]:

"It would be open to attribute to the expression "production services" its first meaning i.e. assistance or activities or the supply of articles or commodities that are themselves an integral part of the activities, articles or commodities required for the production, creation or manufacture of a thing"

59 The AAT stated that this "is not the point at which we may stop". It went on to analyse the requirement that the production services be services "relating solely to ... production". After analysing the constraints imposed by that requirement, which I have discussed earlier in these reasons for judgment, the AAT found, at [56], that:

"the delivery of the V6 engine components in CHEP's trays does not mean that its activities are related to that assembly, solely or otherwise." (emphasis added)

60 The statement that CHEP’s services are not related to assembly "solely or otherwise" is inconsistent with the balance of the reasoning in the AAT’s decision. It implies that it was not the fact that CHEP’s services related to a "collateral" or "independent" activity that took them outside the ambit of reg 9(2). Rather, it was that the services are not related to assembly at all. Mr Hanks properly acknowledged that there was a "logical difficulty" with this statement, given the AAT’s findings of fact.

61 The finding that CHEP’s trays do not relate to assembly "solely or otherwise" forms the basis of the AAT’s finding that CHEP’s services did not constitute "production services". After stating that CHEP’s activities do not relate to assembly "solely or otherwise", the AAT said, at [56], in relation to CHEP’s trays, that:

"They are related to the supply of the items but not to their assembly with other components and so not to the production of the motor vehicle... It follows that we do not consider that CHEP's V6 Returnable Container System may be described as production services, and so automotive services, within the meaning of r. 9(2)(a)."

62 In acknowledging that there was a logical difficulty in the finding that CHEP’s services did not relate to assembly "solely or otherwise", Mr Hanks accepted that "it’s going too far to say that there was no relationship to the assembly". The AAT appears to have assumed that for something to be a production service, it must at least be related to assembly. Arguably this confuses construction of the term "production services" with the "solely related to" requirement in reg 9(2). However, in any event, it does not change the fact that the basis for the AAT’s finding that CHEP’s services are not "production services" is erroneous –CHEP’s services are plainly related to assembly, and production.

63 The applicant’s ground of review in relation to the construction of the term "production services" is framed as follows:

"The Tribunal erred in holding that, in order to fall within the expression ‘production services ... for motor vehicles [or] engines’ in regulation 9 of the Regulations, the services in question ... must not relate to the supply of items to the production line (as distinct from the assembly of items on the production line)."

64 In my view, the AAT did not find that having a relationship to the supply of items to the production line would per se disqualify services from being "production services". Rather, it found, as a matter of fact, that CHEP’s services related to supply and did not relate to assembly, and therefore could not be production services.

65 As outlined above, on the basis of its findings of fact, this finding, that CHEP’s services did not in any way relate to assembly, was not reasonably open to the AAT on the basis of its findings of fact.

66 I reject the respondent’s contention that the AAT’s comments in [56] of its reasons for decision, set out at [18] of these reasons for judgment, are only directed to the deemed concept of "production" under s 7(1). The reference to s 7(1) near the beginning of this paragraph makes the point that just because Holden’s assembly of components is deemed to be production pursuant to that section, does not mean that delivery of components to Holden is itself an act of production. The finding that CHEP’s services are not production services in [56] applies generally. It is not limited to an interpretation of "production services" based solely on the meaning of "production" as provided for under s 7(1).

67 The applicant also contended that the AAT erred by requiring "production services" to be wholly confined to the "production line" of a producer of motor vehicles or engines. In support of this contention, the applicant pointed to a sentence in [50] where the AAT said that "s.7 of the Administration Act extends the meaning of production but it does not extend it beyond either end of the production line".

68 However, at [35], the AAT observed:

"Having regard to the structure of the Administration Act and the Regulations, the ordinary meanings of the word "production" and the manner in which Parliament has sought to include certain activities within the compass of the word "production" through s. 7, it seems to us that it means the act of producing, creating or manufacturing the thing that it is produced, created or manufactured. The expansionary provisions of s. 7 lead us to consider that it is arguable that, like manufacture, "production" requires that there can be no production unless the thing that is produced is different from that out of which it is made..."

69 In my view, the reasoning in [35] appears to be at the heart of the AAT’s construction of "production services". Therefore, I am not persuaded, on the basis of [50] of the AAT’s reasons for decision, that it ultimately did decide that "production" does not extend beyond the "production line" per se. To find otherwise would involve the kind of "excessively fine scrutiny of the language of executive bodies and administrative tribunals" that the High Court warned against in Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 at 272.

70 In its written submissions, the applicant contended that it could be inferred from the AAT’s reasons for decision that it limited the concept of "production line" to the final assembly line at Fisherman’s Bend. As I have concluded that the AAT did not, ultimately, limit the concept of "production services" to the "production line", it is strictly unnecessary to address this point. However, given that this matter will be remitted to the AAT to determine the matter in accordance with law, I should indicate that I accept the applicant’s submission that "production" in the context of the Act is properly construed as a globally integrated process. This has implications in terms of the correct characterisation of the geographic scope of "production" in the present case. "Production" is not just the process that happens at Holden’s plant at Fisherman’s Bend. Rather, Holden’s plant is part of a much larger production process that encompasses the manufacture of parts and engines in the United States, the transport of those parts to Australia, and their final assembly at Holden’s plant. Therefore, it would be incorrect to limit the scope of "production" to what occurs solely at that plant.

THE FINDING THAT CHEP’S TRAYS DO NOT CONSTITUTE AUTOMOTIVE MACHINE TOOLS

71 As set out above, the AAT relied upon the same reasoning as was applied in relation to the "solely relating to" requirement in reg 9(2), to find that CHEP’s trays did not constitute "automotive machine tools" pursuant to reg 8(2). That is that the trays are designed and built to be used for a "collateral" or "independent" purpose, namely transportation. Therefore, the applicant claimed that the AAT made the same errors of construction in relation to reg 8(2) as it did in reg 9(2).

72 Establishing that CHEP’s trays are "automotive machine tools" only assists the applicant if it were found that CHEP’s services were "production services" under reg 9(2), but not production services for "motor vehicles, engines, engine components or automotive components". This is because even if the applicant can establish that CHEP’s trays are "automotive machine tools", it still has to demonstrate that CHEP provides "production services for ... automotive machine tools" in order satisfy reg 9(2), and therefore establish that the applicant is an "automotive service provider".

73 Regulation 8(2)(a) is formulated slightly differently to reg 9(2). It provides, subject to reg 8(5), that a "machine tool" is an automotive machine tool if it is:

"designed and built to be used solely for:

(i) the production of motor vehicles, engines, engine components or automotive components ; or
(ii) facilitating the provision of automotive services..."

74 Despite these differences, on both limbs of reg 8(2)(a), the AAT found that CHEP’s trays failed the requirement that they be designed and built "solely" for the requisite purpose because they also were designed and built for the purpose of transportation. Given that it referred to the same reasoning in coming to this conclusion as that which applied under reg 9(2), I identify the same errors as those outlined above in relation to the construction of the "relating solely to production" requirement.

IS REMITTAL FUTILE?

75 The applicant submitted that, on the basis of the AAT’s findings of fact, only one conclusion was open to the AAT: that CHEP’s services did constitute "automotive services" within the meaning of the Act and Regulations. The effect of this submission was that it would be futile for the AAT to give further consideration to this matter. Therefore, the applicant sought an order setting aside the AAT’s decision and remitting the matter to the AAT with a direction that:

"the services provided by the applicant to Holden Limited pursuant to its contract with Holden Limited to provide a customised returnable container system with respect to Holden’s V6 engine program (or alternatively specified parts of those services) are ‘automotive services’ within the meaning of ACIS Administration Act 1999 and the ACIS Administration Regulations 2000."

76 I am unable to agree that reg 9(2), upon its proper construction, leaves open only one conclusion to the AAT. As such, I will not grant such an order.

77 I have found that, on the basis of the AAT’s own findings of fact, CHEP’s services do relate solely to production. However, this alone is not sufficient to satisfy the requirements of reg 9(2). There must also be a finding that CHEP’s services are "production services", either for "motor vehicles [or] engines" or for "automotive machine tools". While the AAT was in error in finding that CHEP’s services are not "production services" because they do not relate "solely or otherwise" to assembly, this does not necessarily mean that CHEP’s services are "production services". As noted above in these reasons for judgment, the AAT stopped short of adopting a definitive construction of the term "production services". It is logically possible that services may relate solely to production, but not be "production services" for either "motor vehicles [or] engines" or for "automotive machine tools".

78 In summary, there are still further factual findings that need to be made by a decision-maker, and which go beyond mere rectification of the errors of law I have identified in the AAT’s reasoning, before a finding that CHEP’s services do constitute "production services" under reg 9(2) can be made. As such, the matter should be remitted to the AAT. I do, however, emphasise the comments I have made above in these reasons for judgment at [70] in relation to the construction of the term "production".

REMITTAL TO THE SAME, OR A DIFFERENTLY CONSTITUTED, TRIBUNAL?

79 The final question to be determined is whether, having found that the AAT erred, the matter should be remitted to the same tribunal, or one that is differently constituted.

80 In the end, both parties were of the view that the matter should be remitted to the same tribunal. I will make orders accordingly.

I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.

Associate:

Dated: 16 September 2005

Counsel for the Applicant:	Mr AL Cavanough QC, with Mr MF Fleming
Solicitors for the Applicant:	Minter Ellison
Counsel for the Respondent:	Mr P Hanks QC
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	20 June 2005
Date of Judgment:	16 September 2005