Administrative Law - ucicial Review - Customs Tarifr - vucic rertusal to maxe by-law or determinaticn - forergn ana iocal refractories - whether Austrail1an gcods a "suitable equivaient" - whether in fact determinaticn made - failure to take unto acceunt relevant consideration - unreasonacrieness Customs and Excise - refusal to make ov-law ocr determination - meaning or "suitable equivaient" Ministerial discretion Words and Phrases - ""suitabie equivalent" Administrative Decisions (dudicial Review) Act 1377 (Cth) ee Customs Tariff Act (Cth) s.33A, schedule 2 item 19 Customs Act 1901 (Cth) ss.271, 272, 273 Nashua Australia Pty Limited v Channon (i981) 36 ALR 215 Murphyores Incorporated Pty Ltd & Ors v The Commonwealtn of Australia & Ors (1976) 136 CLR 1 Finance Facilities Pty Limited v Federal Commissioner cf Taxation (1971) i127 CLR 106 WESTERN MINING CORPORATION LIMITED v MINISTER FOR INDUSTRY AND COMMERCE No. WA G.2 of 1983 Davies, J 21 December 1984 Canberra IN THE FEPERAL COURT OF AUSTRALTA WESTERN AUSTPALIA DISTRICT REGISTRY ) ) ) v} No. ) : WESTERN MINING CORPORATION BETWEEN LIMITED AND : MINISTER FOR TOMMERCE ORDER JUDGE MAKING ORDER : Davies J DATE_OF ORDER 21 December 1984 Respondent WHERE MADE F Canberra QRDER : 1. The application for an order or review 1s granted. 2. The decision under revisw is set aside and the matter is remitted to the responcent for his reconsideration. 3. The responaent shail pay tne applicant's costs of tne application to ope agreed or taxed. IN THE FEDERAL COURT OF AUSTRALIA >» ) WESTERN AUSTRALIA DISTRICT PEGISTRY) No. WA G.2 of 1982 ) GENERAL DIVISION ) BETWEEN : NESTERN MINING COPPORATION LIMITED Applicant AND 3 MINISTER FOR INDUSTRY AND COMMERCE Respondent REASONS FOR JUDGMENT CORAM : Davies, J 2i_ Dec r_ i198 This 18 an application under the Administrative Decisions (Judicial Review) Act 1977 (Cth). The application reads, inter alia, "Application to review the decision of the delecate of the Respondent furnished to the Appiicant on 2 December 1982 to refuse to make a By-law or determination to partially exempt flash furnace refractories from customs duty on tne ground tnat Sultably equivalent goods are not reascnabiyv available from Australian production or manufacture. The applicant is agarieved by the decision for the following reasons :- (a) the Applicant required flash furnace refractories to reline its No.zZ Flash Furnace at its Kalgocrlie Nickel Smelter; oy) (b) the Applicant importea tne required flash furnace refractories from Austria; {c) (d) the Applicant applied 'to tne Respondent unaer item 19 or Part I cl the <Fecond Scnedule of the Customs Taritr Act 1966 fcr a By-law or determination to be mace that there were no goods a su:ztabie equivalent or which that 18 the procuce or manufacture of Austraiia (sic) reasonably avaiiaple; the Respondent refused to make such a By-law or determination and as a consesuence thereof the Applicant has been obliged to pay more customs duty Enat (s1c) 21 would have had to 1f the said By-law or determination had been mace. The grounds of the application are as foliows :- (a) (b) (c) It 1s not in daspute that, in 1981. the applican from Austria the making of the decision was an improper exercise of the vyower conferred by the Customs Act 1901 and the Customs Tariff Act 1966 in pursuance of which it was purported to be made in that :- (i) the Respondent's delegate fock irrelevant considerations into account in the exercise or the power, (11) the Respondent's delegate failed to take relevant considerations ainta account in the exercise of the cower, {211) the Respondent's delegate exercisea the power ain accordance with a rule or policy without regard to the merits of the case, (iv) the exercise of the power was sc unreasonable that no reasonarbie person could have so exercised tne power; there was no evidence or other materiai to justify the maxing of the decision; the decision was contrary to law." certain refractory bricks ana tiies ana that goods were correctly entereac for home consumption under 69.02 of the First Schedule of the Customs Tariff Act 1966 { ct bha s lat However, the applicant tnereafter sought from respondent a pv-law pursuant Act 1901 to the provisions of ss.271l, 272 and 273 of the Cus (Cth). Those sections read : "271. Where - (a) an item of a Customs Tariff or a propcsed item of a Customs Tariff, apply to gooas, or toa c goods. as prescriped by by-1l 1s expressed to iass or kinda of aw; or a) (b) under an item of a Customs Tarirf, or a proposed item of a Customs Tariff, any matter or thing 1s expressed to be. or 1s to be determined, as prescribed or defined by by-law, the Minister may, subject to the succeeding sections of this Part, make by-laws for che purposes of that item or proposed item. 272. The Minister may specify in a py-law made for the purposes of an item, or a proposec item, ct a Customs Tariff that is expressed to apply to qoods, or to a class or kind of aqoods, as prescribed by by-law - (a) the goods, or the class or kind of goods, to which that item or proposed item applies; (b) the conditions, if any, subject to wnaich that item or proposed item applies to those goods or to goods included in that ciass cr kind of goods; and (co) such other matters as are necessary to determine the goods to which that item or proposed item arplies. 273.(1) The Minister may determine, py instrument in writing, that, subject to the conditions, if any, specified in the determination, an item, cr a proposed item, of a Customs Tariff that is expressed to apply to goods, or to a class or xind of goods, aS prescribed by by-law shali apply. cr shall be deemed to have applied, to the particular goods specified in the determination. (2) The Minister may make a determination under the last preceding sub-section fror the purposes of an item, or a proposea item, of a4 Customs Tariff whether or not he has mace a by-law for tne purposes of that 1tem or proposed item. or determination having retrospective ef d. {3) Wnere, under this section, ne Minis determines that an item, or a proposed item, c Customs Tariff shali apply, or snail Le deemea to have applied, to goods, that item or proposed item shall, subject to this Part and to the conditions, if any, specified in the determination, apply. or be deemed to have applied, to those qoods asiif those goods were specified ina by-law made ror the purposes of that item or proposea item ana in force on the day on which those gcods are or were entered for home consumption." The item of the tariff which the applicant sougnt to have applied retrospectively was item 19 of schedule 2 of the Customs Tariff Act 1966 (Cth) which applied to "19. Goods, as prescribed by by-law, being goods a suitable equivalent of which that as the produce or manufacture of Australia is not reasonably available". If the qoods imported by the applicant were prescribed by by-iaw made under s.271, or if the Minister or his deiegate determined by instrument in writing that item 19 applied to those gooas, then, pursuant to s.33A of the Customs Tariff Act 15966 'Cth), those goods would be dutiable at the rate applicapie to item 19. Such a by-law or determination may not be made unless, at the time of importation, a suitable equivalent was not vroauced in Australia or was not reasonabiy available. Although the appiication was expressed as an appizcation seexing an order of review with respect to a refusal to maxe a by-law or determination, Mr R.J. Meadows, of counsei, wno appeared for the applicant, sought as part of his case to prove that. on 16 November 1982, an appropriate determination in the applicant's favour had been made by Mr D.D. Bolton, a delegate of the Minister authorised to make such a determination ana that such aetermination had efrect. The facts relied determination were that, considering evidence that view that a determination for the preparation of a applicant's customs agent received such documents and, letter. Mr Bolton has determination, but his recollection was remember signing it. the determination for poth documents im accordance with determinations. The Bolton's safe Mr Bolton either postage or in his safe. the usual letter while he made 5. not been Eut should be carriea into upon with respect to this aziieded in November 1982, Mr Bolton, after had been presented to nim. formed the was appropriate. He gave instructions determinaticn and of a letter tc the to accompany it. it is known that he on 16 November 1982, he signed sworn that he did not merely that he did not did not give out the ietter and recording. he placed The determination was not entered, procedure, in the register of anc determination remainec in Mr further enquiries. Ultimately, Mr Bolton decided to refuse to make a by-law or determination. After internal reconsideration in the department, that a¢cision was conveyed to Brambles Ruys Limited ("Brambles-Ruys"), the applicant's customs 1s that refusal which is order of review. agent, by letter dated 2 Decemper 1982. ft the subject of the application for an I need not decide the issue whether or not the determination was signed. What s.273 requires 1s oa determination made by instrument in writing. In my opinion, s.273 has 1m mind not a determination which 15 signed Suta determination 1n writing that 15 1ssuea. A determination wnicn is merely signed by its authcr 1s not maae. The determination is or ctherwise a. ja ) cr " v o c ct u Q made when it 1s handed over for delivered or puplished. I now return te the application for an order of review with respect to the refusal to make a by-law or determination. The appolicant corporation carries on substantial pickel operations in Western Australia. It operates a refinery situated between Kalgoorlie and Kambalda, known as the "Kalgoorlie Nickel Smelter". The smelter was built in 1972 and incorporated a flash furnace designed by Outokumpo Oy of Finland. [t 1s necessary to line the flash furnace with refractory bricks which must be able to endure extremely high operating temperatures. Outokumpo Oy recommended the use of Austrian refractories and the appircant since 1972 has used bricks supplied by Veitscher Maqnesitwerxe Actien-Gesellschaft of Austria ("Veitscher"). In November 1978, a new flash furnace was installed again using these refractories. It becomes necessary after a period of vears to reliine a flash furnace. In 1980 the applicant decided that 1t was necessary to reline the furnace instailed in 1978. invitations to bid for relining the refractories were forwarded to six companies, three foreign and three based in Australia. Of the Australlan companies, only Harbison ACI Pty Laimitea ("Harbison ACI") supplied a quotation. The applicant entered a contract to purchase bricks from both Veitscher and Harbison ACI and the application for by-law of 8 April 1981 prepared by the applicant's customs agent outlined this as follows : ~~ ",,,atter carerul examination of ali bids tne finai decision was tnat 85% of tne scraer woulic be viacea witn the original supplier namely Veitch (31¢) sf Austria, but that 15% would also go to Haroison ACI for their new product - Nucon 609xXD. This product has recently been developed but not provea under these conditions. Should the Haro1son ACI Nucon 60XD prove itseif it will of course nea major consideration for future re-lines. In your examination of the attachments we wou.ida like you to take particular account of two of the stress factors associated with this tyse cf furnace. They are thermal shock ana wasn ercsion. Both of these cause refractory erosion as explained later and are controlled by the selection of raw materiai used in the refractories. This is the funaamentai reason for requiring bricks etc. of 100% pre-sintered ore." By letter of 19 May 1981, Brambles-Ruys was informed that further consideration would be aiven to the Western Mining request : "\..onm receipt of documentary evidence in the form of correspondence exchanged, establishing tnat suitably equivalent goods are net reasonably available from Australian manufacturers including: Refractories Manufacturers Association of Aust. ..." On 22 December 1981, Brambles-Ruys wrote to the Refractories Manufacturers' Association of Austrai1la requesting support for 1ts by-law application. The Association replied by letter of 28 January 1982 - '",..no objections have been received foilowing circulation of your letter. In the circumstances, this Association would not oppose tne entry under by-law of refractory bricks." By letter of 25 February 1982, Mr Boltcn refusea to arg iy 1tem 19 1m Schedule 2 to the imported refractories - "In the context of item 19, the term sultabiv equivalent' does not mean that Australian goods must be identical in design. composition, quality or price to be regarded as suitably equivalent. 8. but ratner that thev are broadiy capabie oa fulfilling the function for whicn the gcods ar required. Tt e Correspondence submitted with your applicaticn indicates that Harbison ACI Pty Ltd are abie tc supply suitably equivalent goods. In the circumstances, by-law admission is not appropriate and your request 1s refused." Brambles-Ruys sought reconsideration of this decision, enclosing a letter of 20 August 1984, from Harbison ACI - "This letter will confirm our position regarding the by-law entry of refractory brick importea by Western Mining Corporation for the reline of their flash furnace during 1981. The refractory products that we had been developing were supplied to Western Mining with a view to installing them in limited quantities for the relining of their flash furnace, with the object of trialling the product in this practical application. We have constantly endeavoured to progressively upgrade our product which has in the past not mev the requirements necessary for a flasn furnace reline application. We appreciate the fact that our product was not approved at the time of the reline and in view of the enormous expense which would result from the premature shutdown of the furnace due to refractory failure, we consider 1t reasonable to agree that our product was not a suitaple equivalent at that time. It 1s for these reasons that we consider tnat we did not have available a suitably equivalent product and therefore did not oppose tne granting of by-law for these goods when approached by tne Refractory Manufacturers Association of Australia. However, we do believe that subizect to the current trial should no failure occur we woulii tnen consider our product be tried and proved for this application and could therefore confidentiyv offer our product for future relines." After considering this information, Mr Bolton formed the view that a determination was aporavriate and he tnen caused the abovementioned letter and determination to be prepared and these were placed in his safe as I nave mentioned above. Hewever, subsequently he was asked by superior officers to consider certain Industries Assistance Commission Reports. Mr Boiton considered Report No.264 and Report No.268. After considering these reports, he decided, on 30 November 1982, to refuse a determination under s.273. The letter of 2 December 1982. advising of this refusal, read as follows : "I refer to vour letter, CMC525 (RAM:SGL) of 25 August on behalf of Western Mining Corporation seeking a review of the decision to refuse by-law admission of imported Flash Furnace Refractories. While it 1s acknowledged that Harbison A.C.I. Pty Ltd did not object to your request for by-law admission and, in fact offered support to your application, the fact remains that. when initial enquiries were made, the Australian manufacturer did offer a local alternative. The fact that the local product had not seen proven in service 15 not, in autselr, a consideration for by-law admission. You may recall that the Industries Assistance Commission, in its report No. 268 of 29 June, 1981 on By-law Admission of Certain Goods, etc., quotea a case with a similar backaround. They commented as follows : 'The Commission considers that (the importer's) requirement. which amounts") tc performance testing of the local product, 15 a commercial matter as would be the provision of indemnity aqainst product failure. In the Commission's view, the evidence indicates that (local) product would meet (the importer's) requirements and for by-law purposes there 1S no necessity for further performance testing to establisn suitable equivalence. The Commission is satisfied that the locai boards are suitably equivalent to those imported bv {the applicant)'. 10. As you «know, the Government accerted the Commission's Report in its entirety and thus the Principles outlined therein are being employed by the Department in its administration of tne by-law system. In the circumstances, aS it has not been proven that sultably equivalent qoods were not reasonaply available from Australian production, tne decision to refuse by-law admission otf Flash Furnace Refractories must be maintained." This letter was written by Mr C.W. Channon, wno undertook the internal reconsideration. In his affidavit, Mr Bolton did not specify what it was in the IAC reports which caused him to change his mind. However, 1t seems probable that Mr Bolton and Mr Channon took a similar view. I therefore accept that the letter of 2 December 1982 set out the reasons for the refusal of a by-law or determination. As can be seen from the above correspondence, Harbison ACI had developed a new product, Nucon 60XD, which it regarded as suitable for the applicant's furnace and Harbison ACI had the view that its goods would be as durable or better than the Veitscher refractories. But the Harbison ACI products were new and they had not been tried in any similar furnace. Moreover, they were not of the same composition. The Veitscher refractories were comprised of 100% pre-sintered ore. Univ 3 J = x of Nucon 60XD brick materials were pre-sintered ore and, in fact, the quotation by Harbison ACI recommended the use of only 20% of these bricks, the other 80% to be of refractories not containing any pre-sintered ore. Bricks comprised of pre-sintered ore were less susceptible to thermal shock than other refractories. However, Harbison ACI was of the view that they were more wrone to wash erosion than its bricxs and that its refractories would ll. last as long or longer. The evidence which was before Mr Boiton at the time wnen ne made his decision showed that the quality or the bricks iining the furnace was a very important matter. Not only was the cost of replacing the bricks extremely expensive, in this case the cost of the imported goods was $464,940.16, to which must be added labour, but the value of lost production during relining or during repair was very high. In my opinion, there was no material before Mr Bolton from which he could reasonably draw the conclusion that a suitable equivalent to the Veitscher bricks was produced in Australia and was reasonably available. The Harbison ACI bricks were proauced in Australia and were available but I cannot see that it was reasonable to draw the conclusion that they were a suitable equivalent. The whole of the evidence before Mr Bolton snowed that they were of a different composition, they were not 100% pre-sintered bricks and that, not having been tried in the applicant's furnace, which had been designed with the Austrian bricks in mind, nobody knew whether they would perform as well as the Veitscher bricks. Harbison ACI hoped that they would bur the bricks were in fact of different composition and were untested. The evidence before Mr Bolton showed that the performance of the refractories was crucial. It showed that the life of the refractories was extraordinarily short, the best performing only about three years. What Mr Bolton knew was that the designers of lz. the furnace had recommended tne Veitscner oricks ana tnat the Veitscner refractories were weil tried and had a acood reputation. In the absence of there being any refractories in Australia, which either were of a similiar composition. or wnich were kncwn to perform as well as the Ve1tscher bricks, or on wnichn scientiric evidence was aqreed would perform as well as tne Veitscher bricks, I think that there was no materiai uron which a reasonaple cecision-maker could have come to the conclusion that a suitable equivalent of the Veitscher oricks was produted in Australia. Indeed, neither the Chamber of Manufacturers nor Harbison ACI so contended. Harbison ACI was content to taxe the view that 1t expected that the trial whicn the applicant offered to it, when it purchased 15% of its refractories from Harbison ACI, would be successful ana that, when 1ts refractories had been proved, they would be a sultable equivalent of the Veitscner refractories. Mr Bolton changed his mind because of two resorts or tae Industries Assistance Commission. I do not propose to Geal with these reports at any length. I agree with Mr Bolton that their tenor is inimical to the applicant's claim. Report No.2638 stated : "Performance testing of the locai product, isa commercial matter as would be the provzsion of indemnity against product failure." In my view, that report was wrena in law if 1t intendea to convey that verformance testing was irrelevant. Similariv, tne letter or 2 December 1982 was wrong in law in the statement, "The fact that the local product had not vpeen proven in service 15 now. in atseif,. a consideration for by-law admission." In my opinion. known perfcrnance has importance so 'rar as equivalence of product 1s concerned. In my opinion, 1t cannct reasonaply be said that an untested product of dirtferent character 1S a suitaple equivalent 'o a quality preoauct if tne performance of the new product 1s unknown and if its quailties are a matter of doubt. The Macquarie Dictionary gives the following definitions for the words "equivalent" and "suitable" "equivalent, adj. 1. equai in value, measure, force, effect, significance, etc. 2. corresponding in position, function, etc. 3. Chem. having the same capacity to combine or react chemically. -n. 4. that which is equivalent." "sultable, adi. such as to suit; aporopriate; fitting; becoming." The terms of item 19 require a consideration of the use ta wnich a product is to be put. Goods X mav bea suitabie eguivalent of Goods Y for some purposes yet not for others. Suitability for the applicant's purpose is required. The test 1s an objective one. The opinicn of the arplicant or the manufacturer of the qoods cannot be decisive but may ce oF relevance. To satisfy the test of equivalence, goods need not oe identical but they must be readily substitutable, that 15 9 say, they must be commercially interchangeable. In the present case, the applicant wanted the best. I do not see how the Harbison ACI product could be descripeda as the best refractories wnen their qualities were supstantiallv id. untested in reiation to a furnace such as tne apyilcant's and when there was no general scientific or technical agreement tnat 1ts products were equivalent. It mecessarily follows, inmy view, that Mr Boiton was unduly anfluenced by the reports of the Industries Assistance Commission ana failed to give weight to a material asrect of the facts, namely, that the Harbison ACI refractories had not been adequately tested. Therefore, the decision under review shcuid be set aside. However, I am not disposed to accede to the applicant's submission that the Court should direct the making of a by-law or determination in the applicant's favour. Sections 271, 272 and 273 confer discretions and were so read by Lee Jin Nashua Australia Pty Limited v Channon (1981) 36 ALR 215. In the present case, 1t is undesirable that I should discuss whether the discretions are wide, see, ec, Murphyores Incorporated Pty Ltd & Ors v The Commonwealth of Australia & Ors (1976) 136 CLR 1. or infer a duty to exercise once the facts upon which thelr exercise 1s dependent have been established. see, eg, Finance Facilities Pty Limited v Federal Commissioner of Taxation (1971) 1:7 CLR 106. That issue is not squarely raised by the facts of this oresent case. In the circumstances, tne application for an order of review should be cranted, the decision the subiect of this application should be set aside and the matter should be remitted ts tne Minister for industry and Comm reconsideration. The responaent shoulc pay costs, to be agreed or taxed. | certify that this and the fuucteen C4) preceding pages are a true copy of the reasons for judgment herein of The Honour able Mr. Justia F.7 DIVES Associcte Dated © 20/2/87