Boral Resources (SA) Ltd and CEO of Customs [1999] AATA 94 (18 February 1999)

Last Updated: 18 February 1999

DECISION AND REASONS FOR DECISION [1999] AATA 94

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N96/596 & N96/597

GENERAL ADMINISTRATIVE DIVISION )

Re Boral Resources (SA) Ltd

Applicant

And Chief Executive Officer of Customs

Respondent

DECISION

Tribunal Justice Mathews, President

Date 18 February 1999

Place Sydney

Decision The Tribunal affirms the decisions under review.

(Sgd) Justice Mathews

..............................................

Justice Mathews, President

CATCHWORDS

CUSTOMS - diesel fuel rebate - rebate paid in circumstances where it was not payable - the circumstances in which the CEO of Customs can demand repayment

Customs Act 1901ss. 164, 164AA, 165,

Re Dasrod Pty Ltd and Collector of Customs (1991) 14 AAR 351

Brisbane City Council v Attorney General For Queensland (1908) 5 CLR 695

Chu Kheng Lim and Others v Minister For Immigration, Local Government and Ethnic Affairs (1992) 110 ALR 97

Trade Practices Commission v Gillette Company (No 2) (1993) 118 ALR 280

Cooper Brookes (Wollongong) Pty Ltd v. Federal Commissioner of Taxation (1981) 35 ALR 151

Kingston and Another v Keprose Pty Ltd (1987) 11 NSWLR 404

REASONS FOR DECISION

18 February 1999 Justice Mathews, President

1. The applicant seeks review of two decisions of the respondent, each dated 12 April 1996, by which the respondent, pursuant to s 165(3) of the Customs Act 1901 (the Act), decided that diesel fuel rebates previously paid to the applicant should not have been paid, and demanded their repayment. The issues are identical in relation to each of the two decisions, and they will be discussed together.

2. The parties are in agreement as to the essential facts of both matters. Indeed an agreed statement of facts was lodged prior to the hearing. The only issue between the parties is one of law, namely whether the respondent was entitled to demand repayment having regard to the provisions of s 165(3) and (4) of the Act.

3. The agreed statement of facts in relation to one of the two decisions is in the following terms:

AGREED STATEMENT OF FACTS

The parties agree as follows:

In relation to the Howard Springs Site (N96/596)

1. On 30 June 1994 a Notice of Intention to claim diesel fuel rebate was lodged with the Respondent by the Applicant covering the above site. (refer pages 11-12 of T documents)

2. On 7 April 1995 the Applicant lodged with the Respondent an application for diesel fuel rebate in respect of the site known as Howard Springs, together with supporting documentation. (refer pages 13-27 of T documents)

3. On 13 April 1995 a facsimile was sent by the Applicant to the Respondent, including copies of extractive mineral leases in respect of the Howard Springs site. (refer pages 28-30 of T documents)

4. On 18 April 1995, payment was approved by the Respondent of rebate of $99, 127.67 for the 332, 086 litres claimed in the application. That payment was duly made.

5. On 12 April 1996 the Respondent determined that diesel fuel rebate should not have been paid to the Applicant in respect of the Howard Springs site and demanded under section 165(3) of the Customs Act repayment of the monies paid. (refer pages 32-34 of T documents)

6. In making the application for diesel fuel rebate, the Applicant has acted in good faith, has not been fraudulent and has not been convicted of an offence against the Customs Act 1901 in respect of these matters, nor been required to pay, or paid, a penalty under subsection 164AA(1) or (1A) of the Customs Act.

7. That the Applicant has not used the diesel fuel for a different purpose to that for which it was purchased within the terms of subsection 164(2) of the Customs Act.

8. ...

9. The Respondent accepts that this case would be determined adversely to it if the dicta contained in the decision of O'Connor J, the then President of the AAT, in Re Dasrod Pty Limited and Collector of Customs, 15 November 1991, unreported, is followed, but the Respondent does not accept the correctness of that dicta.

10. The sole issue between the parties is whether the Respondent had power under section 165(3) of the Customs Act 1901 to demand repayment of the rebate. The Applicant now accepts that following the decisions of the AAT in Re Boral Resources (NSW) Pty Ltd & Ors and Chief Executive Officer of Customs (1996) 43 ALD 380 and Re CSR Limited and Chief Executive Officer of Customs (1997) 46 ALD 746 and the Full Federal Court in CSR Limited and Chief Executive Officer of Customs (1997) 26 AAR 84 that its operations at Howard Springs were not eligible for diesel fuel rebate as they were not "mining operations" as relevantly defined in subsection 164(7) of the Customs Act.

...

4. The agreed facts in relation to the second decision are, in all relevant respects, identical to those quoted above and there is little point in repeating them here.

5. The sole issue in dispute being a matter of law, no evidence was tendered at the hearing other than the production of the s 37 documents. Both Mr Bowers, who appeared for the applicant, and Mr Northcote, for the respondent, had previously furnished written submissions, and these were the subject of elucidation and discussion during the hearing.

6. As at the relevant date, subss 165(3) and (4) provided as follows:

(3) Where a rebate has been paid to a person and the whole or a part of the rebate was not payable to him, he shall repay the whole or that part, as the case may be, of the amount of rebate paid to him on demand being made by the CEO within 12 months from the date on which the rebate was paid.

(4) Where a court or the Administrative Appeals Tribunal determines, or an officer or employee of the Commonwealth performing duties in the Attorney-General's Department (being an officer or employee who is entitled, under section 55D of the Judiciary Act 1903, to practice as a barrister and solicitor in any Territory) advises, in writing, that, in particular circumstances, the rebate, or a part of the rebate, paid to a person in respect of diesel fuel used by that person should not have been paid, the CEO shall not, under subsection (3):

(a) demand repayment of that rebate or that part of that rebate from that person; or

(b) demand repayment of any amount of rebate paid, in similar circumstances, to any other person who, by reason of the operation of that decision, would appear not to have been entitled to that amount;

unless the person referred to in paragraph (a) or (b):

(c) has been convicted of an offence against this Act in respect of the obtaining of that rebate; or

(d) has been required to pay a penalty under subsection 164AA(1) or (1A) in respect of the application for that rebate and has paid that penalty.

7. It was common ground that the decisions of the Administrative Appeals Tribunal (AAT) and the Federal Court referred to in para 10 of the agreed statement of facts postdated the Chief Executive Officer's (CEO's) demand for repayment. Accordingly any determination made by the AAT or the Court, as the case may be, did not fall within the terms of s 165(4). It follows that the CEO's demands for repayment were not made pursuant to the determination of a court or the AAT, nor to advice received from an officer or employee of the Attorney-General's Department. The result, according to the respondent's submission, is that an essential pre-condition for the operation of subs (4) has not been met, and the CEO is not subject to the restrictions set out in that provision.

8. The applicant submits that this involves an unduly restrictive interpretation of subs (4). According to the applicant, the operation of s 165(4) is not dependant upon there being a relevant determination or advice, notwithstanding the opening words of that provision. In this respect the applicant relies upon the decision of O'Connor J, then President of the AAT, in Re Dasrod Pty Ltd and Collector of Customs (1991) 14 AAR 351. Her Honour in that case was reviewing a decision of the Comptroller of Customs (the predecessor of the CEO) under s 164(2) of the Act. That section entitled the Comptroller to demand repayment where a person had obtained a rebate but had, in the event, used diesel fuel in a manner which would not attract a rebate. Her Honour construed the provision as requiring repayment when a person had purchased diesel fuel, intending to use it in a manner which would attract the rebate, but had subsequently changed his or her mind and used the fuel in a different way. In reaching this conclusion her Honour had regard to the provisions of s 165(3) and (4). In doing so, she made the following observation:

Section 165(3) and (4) clearly cover the situation where rebate has never been payable to a person and yet the person has received rebate. Section 165(4) has the practical effect that it will only be possible to obtain repayment of rebate to which a person was never entitled where the person is convicted of an offence against the relevant Act in respect of obtaining a rebate or the person has been required to pay a penalty. For all practical purposes, unless a person has been fraudulent or has misled the respondent, or has knowingly and recklessly obtained a rebate which was not payable, the respondent will not be able to recover. ... (at p 355)

9. Her Honour went on to note the Parliamentary intention that a distinction be drawn between the situation where a person legitimately obtained a diesel fuel rebate and subsequently misused the diesel fuel, (which was covered by s 164(2)), and cases where rebate of duty was never payable (which was covered by s 165(3)). In Dasrod the applicant fell outside the terms of s 164(2). Her Honour noted that the Comptroller had not purported to make a decision under s 165(3) and it was therefore unnecessary to consider whether he could have recovered a rebate under that provision.

10. Mr Bowers relies upon the passage quoted above in urging that the only pre-condition for the operation of s 165(4) is that a person has received a rebate in a situation where it was never payable. Once this condition has been met, the person will obtain the protection of s 165(4) in that a notice under s 165(3) cannot be issued unless there has been fraudulent, misleading or reckless conduct. The reference in subs (4) to a relevant determination or advice is, according to the applicant, facultative rather than restrictive.

11. In support for this construction of s 165(4), the applicant pointed to a number of anomalies which it was suggested would flow if the interpretation urged by the respondent were to be adopted. These anomalies are, in my view, significant, and I shall be discussing them later. In the meantime it is appropriate to turn to the respondent's submission as to the meaning of s 165(4).

12. The respondent points out that O'Connor J's comments as to the operation of ss 165(3) and (4) were clearly obiter. As her Honour herself observed, she was concerned in that case with the operation of s 164(2), a provision which was different in form, substance and operation from s 165(4). It is, the respondent urges, not permissible to "read out" or ignore an operative part of a legislative provision simply because its inclusion might have anomalous results. Mr Northcote in any event disputes that the construction for which the respondent contends would lead to anomalies, a matter I shall be discussing later.

discussion of issues

13. I must agree with the respondent's submission as to the prima facie meaning of s 165(4). It is not generally permissible for courts to treat words of statutes as mere surplusage, to be ignored in the interpretation of the legislation (Brisbane City Council v Attorney General For Queensland (1908) 5 CLR 695 at p 720; Chu Kheng Lim and Others v Minister For Immigration, Local Government and Ethnic Affairs (1992) 110 ALR 97 at p 102; Trade Practices Commission v Gillette Company (No 2) (1993) 118 ALR 280 at p 290). Still less can they treat whole phrases in that manner. The reference in s 165(4) to the determination of a court or the AAT, or the advice of an officer of the Attorney-General's Department, was clearly intended to affect the operation of the section. In other words, there are two pre-conditions for the protection afforded by paras (c) and (d) of s 165(4). They are, first, that the rebate was paid to a person in circumstances where it should not have been paid, and secondly that there has been a determination to that effect by a court or the AAT, or an advice from an officer of the Attorney-General's Department. The first of those pre-conditions has been met in the instant case but the second has not.

14. I do not see this conclusion as conflicting in any way with O'Connor J's observations in Dasrod. Her Honour was not purporting to analyse the scope of s 165(4), nor to discuss how it stood together with s 165(3). She was merely examining the overall operation of these two provisions in the context of s 164(2).

15. On the face of it, and on the basis of the issues raised by the parties in their submissions, this conclusion would compel an overall finding in favour of the respondent. However there are, in my view, real difficulties with such a finding. These primarily arise from the anomalies and absurdities which, as the applicant points out, would be bound to follow a finding for the respondent. Many of these were described in the applicant's written submissions. The overall position would be this: if the CEO, without seeking the benefit of a relevant determination or advice, decided of his own volition that a rebate should not have been paid, then he would be entitled to demand its repayment under s 165(3) without restriction, in other words without regard to whether the recipient had obtained the rebate in good faith. If, however, the CEO received a determination or advice to the effect that the rebate should not have been paid, then repayment could only be sought from a person who had been fraudulent, misleading or reckless in obtaining it. To put it another way, if the CEO were officially told that the rebate should not have been paid, then his hands would be tied in the manner set out in s 165(4). If he made the same decision without advice, then he would be unrestricted in the action he could take to recover the rebate. This could operate as a powerful disincentive for a CEO to seek official advice as to whether he should seek repayment of a particular rebate. The moment he is told that he should, then his powers of recovery would be restricted by virtue of s 165(4).

16. Further anomalies were suggested by the applicant. Some of them, as set out in the applicant's written submissions, are as follows:

10. If the Respondent's construction is right, it would have absurd results. For example, the CEO of Customs could, if in receipt of oral advice from the Attorney-General's Department, demand repayment of rebate without any restriction. If the advice was provided in writing however, a demand could only be issued where a person has been convicted of an offence or had been required to pay a penalty

11. Further, if the Respondent is correct, there would be the strongest disincentive for an applicant ever to settle a case. On the Respondent's construction a settlement, saving costs and the time of a court or AAT, would leave an applicant exposed to a notice under s 165(3) whereas to obtain a decision of the court or AAT, even in a hopeless case (where for example the court or AAT was bound by a High Court decision) would give the applicant the protection of s 165(4).

12. Equally, on the argument advanced for the Respondent, the Respondent could issue a notice under a 165(3) the day before a decision of a Court or AAT was handed down. In the event that the Respondent was successful before the Court, having issued the notice the day before, the Respondent, on his present argument, would be entitled to proceed to recover the amount the subject of notice, if, however, the Respondent waited until the day of the decision to issue the notice, he would be restricted by the limiting words of s 165(4)(c) and (d).

17. These consequences are, in my view, so incongruous and absurd that it is difficult to believe that they were intended by Parliament when it introduced s 165(4). It is thus relevant to turn to the Second Reading Speech and the Explanatory Memorandum which accompanied the introduction of this provision.

18. Section 165(4) was first enacted in 1989. Until then s 165(3) operated without restriction. The relevant portion of the Second Reading Speech says this about the proposed s 165(4):

Clauses 7 and 17 of the Bill amend the diesel fuel rebate scheme legislation to give the Comptroller-General of Customs authority to waive recovery of overpayment of rebated duty in certain circumstances. These are where the Australian Customs Service has initially allowed the payment of a rebate in respect of a particular type of off-road activity but, as a result of a subsequent court or Administrative Appeals Tribunal decision, or legal advice provided to Australian Customs Service, it is apparent that rebate should not have been paid. Currently, the Australian Customs Service is obliged to recover the full amount of rebate in such circumstances. In most of these cases, the claimants have acted in good faith and recovery action would cause financial hardship. In such circumstances, the government considers it unreasonable to seek recovery of the rebates paid, other than in cases of fraud or where the rebate was not payable but was nevertheless knowingly or recklessly obtained. The amendments proposed will provide this sensible flexibility. (Hansard, 1989, vol 166, at p 1825.)

19. The relevant portions of the Explanatory Memorandum are in the following form:

In brief, the changes to the diesel fuel rebate scheme will:

* permit the Comptroller-General of Customs to waive recovery of overpaid diesel fuel rebate in circumstances where the rebate has been paid in good faith, but as a result of a subsequent Court, Tribunal, or Attorney-General's decision or advice the rebate should not have been so paid, (Clauses 7 and 17); (at p 1)

* ...

20. Later, the memorandum returns to s 165(4):

Clause 7 amends section 165 of the Principal Act, to:

* ...

* provide that where a Court or the Administrative Appeals Tribunal has decided, or an opinion from a lawyer from the Attorney-General's Department advises, that rebate should not have been paid to a person in a particular circumstance, then any person who has been paid rebate in that circumstance will not be obliged to repay that rebate.

- In certain circumstances, whilst both the ACS and claimants may erroneously believe that as a matter of law, a particular use of diesel fuel may allow customs duty to be rebated under the DFRS, it may ultimately be determined as a matter of law that the use is not. In those circumstances, the Comptroller is obliged under the Audit Act 1901 to recover the monies erroneously paid out. The Government believes that in the circumstances where claimants have made their application in good faith, and the ACS has paid the rebate, it is undesirable to oblige the claimant to repay the duty. Accordingly, this amendment to the law is made to preclude the Comptroller-General from demanding the repayment of the erroneously paid rebate. (new subsection 165(4)). The only exceptions to this provision are persons who are subsequently convicted of an offence under the Act, or have paid an amount of penalty pursuant to section 164AA of the Principal Act. (at p 5-6)

21. There is no suggestion in either of these explanations that, absent a relevant AAT or court determination, or advice from the Attorney-General's Department, the Comptroller-General (or CEO) should retain the right to demand repayment of a rebate which has been obtained in good faith. Indeed the Explanatory Memorandum, by its terms, would appear to exclude the existence of such a right.

22. All of this leads me to the conclusion that, when Parliament introduced s 165(4), it intended to curb the CEO's power to seek recovery of a rebate under s 165(3) by the introduction of two restrictions, first by requiring that the rebate had been obtained by fraudulent, misleading or reckless conduct, and also that the demand be preceded by a relevant determination or advice to the effect that the rebate should not have been paid. If this conclusion is correct it means that the legislative draughtsman, when grafting the restrictive provisions of subs 165(4) onto the existing power conferred by subs (3), failed to take account of the extent of that existing power. As a result it was inadvertently left open for the CEO to bypass the restriction of s 165(4) in the event that there was no relevant determination or advice.

23. I suggested this as a possible scenario during the course of the hearing. Not surprisingly, Mr Bowers embraced the idea and Mr Northcote argued strongly against it. According to Mr Northcote, the interpretation urged by the respondent does not produce anomalous results. It was the intention of the legislature, he says, that the restrictions contained in paras (c) and (d) of s 165(4) should apply only where there has been a relevant determination or advice. He points out that there is a very high volume of applications for diesel fuel rebate, which are routinely dealt with in an expeditious manner. However, as Mr Northcote points out, mistakes can sometimes be made. For example, computer error can lead to rebates being paid to the wrong person, or to excessive amounts being paid to rebate claimants. The amounts mistakenly paid can sometimes be substantial. If my suggested interpretation of ss 165(3) and (4) were to be adopted, and the restrictions contained in s 165(4) were to apply in all cases, Mr Northcote says that the CEO would be unable to obtain repayment of these moneys. He would be able to fulfil the first condition by obtaining an advice from the Attorney-General's Department to the effect that the amount should not have been paid, but would be unable to fulfil the second, as the money would not have been received as a result of fraudulent, misleading or reckless conduct.

24. This argument can, in my view, be readily met. For any amount mistakenly paid in the circumstances described by Mr Northcote would not be characterised as "a rebate in respect of diesel fuel" for the purposes of s 165(4), and would be recoverable outside the scheme of the Act.

25. In the result I cannot accept that the legislature intended the combined effect of ss 165(3) and (4) to be as Mr Northcote suggests. The real question is whether the terms of those provisions are such that I can interpret them in the manner which I believe was intended by Parliament. A literal approach to statutory interpretation would not permit this course. However the literal construction rule of statutory interpretation has, in recent times, been required to bow to more purposive approaches to interpretation. As Mason and Wilson JJ said in Cooper Brookes (Wollongong) Pty Ltd v. Federal Commissioner of Taxation (1981) 35 ALR 151 at 169:

The literal construction rule has been expressed in various ways. In earlier times it was expressed more absolutely than it is today, possibly because the courts, anxious to distinguish between legislative and judicial functions, were at pains to emphasize that it is no part of the judicial function under the cloak of construction to amend statutes merely to overcome shortcomings in their operation. One of the strongest statements of the literal rule is to be found in the judgment of Higgins J in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 at 161-162:

"The fundamental rule of interpretation, to which all others are subordinate, is that a statute is to be expounded according to the intent of the Parliament that made it; and that intention has to be found by an examination of the language used in the statute as a whole. The question is, what does the language mean; and when we find what the language means, in its ordinary and natural sense, it is our duty to obey that meaning, even if we think the result to be inconvenient or impolitic or improbable." See also Nolan v Clifford (1904) 1 CLR 429 at 453.

It would have been better had Higgins J omitted the last clause of the last sentence from the passage which we have quoted. The last clause may be taken to suggest that the operation of a statute is not relevant to the ascertainment of its meaning and this is certainly not now the case, if it ever was. Generally speaking, mere inconvenience of result in itself is not a ground for departing from the natural and ordinary sense of the language read in its context. But there are cases in which inconvenience of result or improbability of result assists the court in concluding that an alternative construction which is reasonably open is to be preferred to the literal meaning because the alternative interpretation more closely conforms to the legislative intent discernible from other provisions in the statute.

26. A little later their Honours said:

... when the judge labels the operation of the statute as "absurd", "extraordinary', "capricious", "irrational" or "obscure" he assigns a ground for concluding that the Legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discovered from those provisions.

Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended. (at p 170)

27. In Kingston and Another v Keprose Pty Ltd (1987) 11 NSWLR 404 at 423 McHugh JA made the following observations:

A purposive and not a literal approach is the method of statutory construction which now prevails: cf Fothergill v Monarch Airlines Ltd [1981] AC 251 at 272-273, 275, 280, 291. In most cases the grammatical meaning of a provision will give effect to the purpose of the legislation. A search for the grammatical meaning still constitutes the starting point. But if the grammatical meaning of a provision does not give effect to the purpsoe [sic] of the legislation, the grammatical meaning cannot prevail. It must give way to the construction which will promote the purpose or object of the Act. The Acts Interpretation Act 1901 (Cth), s 15AA, and the Interpretation Act 1987 (NSW), s 33, both require this approach to statutory construction. ...

But first and last the function of the court remains one of construction and not legislation. As Lord Diplock has pointed out "the task on which a court of justice is engaged remains one of construction; even where this involves reading into the Act words which are not expressly included in it": Jones v Wrotham Park Estates Ltd (at 105).

Purposive construction often requires a sophisticated analysis to determine the legislative purpose and a discriminating judgment as to where the boundary of construction ends and legislation begins. But it is the technique best calculated to give effect to the legislative intention and to deal with the detailed and diverse factual patterns which the legislature cannot always foresee but must have intended to deal with if the purpose of the legislation was to be achieved. Moreover, it is the technique which may finally induce the draftsmen of statutes to state broad principles rather than to draw the detailed enactments which now emanate from the legislatures. Only then will statute law escape the comment of Sir Carleton Allen that a "statute is probably the most repellent form of written expression known to man": "The Literature of the Law", Aspects of Justice (1958) (Stevens & Sons Ltd) at 284.

28. The difficulty of applying the purposive test in this case is that the terms of subs 165(3) and (4) are, on their face, relatively clear. For these provisions to be interpreted in a manner which would avoid the anomalies and absurdities I have mentioned would involve some significant re-writing. And I do not think that this is an appropriate judicial task. In McHugh J's words, the situation here has gone past the boundary of construction and entered the field of legislation.

29. The clear words of subss 165(3) and (4) favour the contentions urged by the respondent. In the circumstances I have no alternative but to apply those words and reach a finding in favour of the respondent, notwithstanding the anomalies which might result. One matter of consolation is that neither these provisions, nor the consequential anomalies, lasted much beyond the circumstances which gave rise to this case. By Act No 97 of 1997 (Cth), subs 165(4) was repealed and subs 165(3) was amended so as to exclude diesel fuel rebates from its operation. A completely new scheme was established for recovering diesel fuel rebates which had been overpaid or wrongly paid. Accordingly, my decision in this case is unlikely to have many lasting consequences.

30. I affirm the decisions under review.

I certify that this and the twelve preceding pages are a true copy of the decision and reasons for decision herein of Justice Mathews.

Signed: (Sgd) Zoe Nielsen .....................................................................................

Associate

Date/s of Hearing 11 November 1998

Date of Decision 18 February 1999

Applicant's Representative Mr J Bowers

Respondent's Representative Departmental Advocate