FEDERAL COURT OF AUSTRALIA OneSteel Manufacturing Pty Limited v The Comptroller-General of Customs [2017] FCA 828 File number: NSD 766 of 2017 Judge: RARES J Date of judgment: 24 May 2017 Catchwords: PRACTICE AND PROCEDURE – where competing import declarations lodged for cargo under Customs Act 1901 (Cth) and Comptroller-General of Customs unable to identify person entitled to be given import declaration advice under s 71C(4) – interlocutory application for order requiring Comptroller-General to issue import declaration advices in respect of cargo to applicants – balance of convenience PRACTICE AND PROCEDURE – usual undertaking as to damages – whether appropriate to limit applicants' obligation to give undertaking as to damages only to co-applicant company and not to co-applicant deed administrators of company – purpose of usual undertaking as to damages Legislation: Customs Act 1901 (Cth) ss 4, 68, 71A, 71C Cases cited: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 Hilditch Pty Ltd v Dorval Kaiun KK (No 2) (2007) 245 ALR 125 National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 Date of hearing: 24 May 2017 Registry: New South Wales Division: General Division National Practice Area: Administrative and Constitutional Law and Human Rights Category: Catchwords Number of paragraphs: 36 Counsel for the Applicants: Mr A Stewart SC with Mr K Josifoski Solicitor for the Applicants: Holman Fenwick Willan Solicitor for the First Respondent: Ms R Deane of the Australian Government Solicitor Counsel for the Second and Third Respondents: The Second and Third Respondents did not appear ORDERS NSD 766 of 2017 BETWEEN: ONESTEEL MANUFACTURING PTY LIMITED (ADMINISTRATORS APPOINTED) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) First Applicant MARK MENTHA, CASSANDRA MATHEWS, MARTIN MADDEN AND BRYAN WEBSTER IN THEIR CAPACITIES AS ADMINISTRATORS OF ONESTEEL MANUFACTURING PTY LIMITED Second Applicant AND: THE COMPTROLLER-GENERAL OF CUSTOMS First Respondent KYZA FREIGHT PTY LTD T/A CHINA SEA RATES Second Respondent TIM ROUTH Third Respondent JUDGE: RARES J DATE OF ORDER: 24 MAY 2017 Upon the applicants, by their senior counsel, giving to the Court the usual undertaking as to damages: THE COURT ORDERS THAT: 1. The first respondent do all things lawful and necessary to be done to release the cargo entered under import declarations ACW4RNFEW; ACW6A4CTJ; ACW6AA9GH; ACW6A9NTG; ACW6CERGX; ACW4RX4XE; ACW6A9X37 from bond to the first applicant, including issuing an authority to deal under s 71C(4) of the Customs Act 1901 (Cth). 2. A copy of these orders be served by the applicants on the second and third respondents by email at tim@chinasearates.com by no later than 5.00pm on 24 May 2017. 3. If the second and third respondents oppose the final relief sought in the originating application, they must file and serve a notice of address for service by no later than 30 May 2017. 4. The originating application be stood over for further directions and, if no appearance is entered pursuant to order 3, final hearing on 1 June 2017 at 9.30am. 5. The costs of the interlocutory hearing be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) RARES J: 1 OneSteel Manufacturing Pty Limited (subject to a deed of company arrangement) and its deed administrators applied to the Court on Monday, 22 May 2017 for orders for short service on the three respondents, namely, the Comptroller-General of Customs and two persons claiming an interest in a cargo of steel, Kyza Freight Pty Limited, trading as China Sea Rates, and its director, Tim Routh. I ordered that each of the respondents be served by 2.30pm on Monday by email at the addresses that the parties had used in correspondence and made the proceeding returnable today at 9.30am. 2 The Comptroller-General appeared by his solicitor, but there was no appearance by either Kyza Freight or Mr Routh when the matter was called outside the Court this morning. I am satisfied by the affidavit of Nicolaas van der Reyden of 22 May 2017, the solicitor for OneSteel and the administrators, that he served each of the respondents in accordance with the orders made on 22 May 2017. However, an affidavit by Mr Routh of 23 May 2017 and a copy of emails that he had sent to the Registrar of the Court and the solicitors for OneSteel and the Comptroller-General were provided to me during the hearing today. Having read those documents, without admitting them into evidence, I was unable to understand the nature of the claim which Kyza Freight or Mr Routh were seeking to make in the circumstances I will describe below. Background 3 In essence, the reason that this proceeding has come to Court is that OneSteel's customs agent in Australia, DSV Air and Sea, and Kyza Freight each electronically lodged separate import declarations to enter the cargo for home consumption under ss 68 and 71A of the Customs Act 1901 (Cth). 4 As a result, the computer system operated by Customs recognised automatically that the Comptroller-General was then not in a position to give effect to either set of import declarations made by DSV or Kyza Freight in respect of the cargo. That was because the Comptroller-General was unable to identify the person who was entitled to be given an import declaration advice under s 71C(4) of the Act in respect of the cargo. Section 4 of the Act contains the definition of "Owner in respect of goods", as: including any person (other than an officer of Customs) being or holding himself or herself out to be the owner, importer, exporter, consignee, agent, or person possessed of, or beneficially interested in, or having any control of, or power of disposition over the goods. 5 Understandably, faced with competing claims by DSV and Kyza Freight as to which had the right to enter the goods for home consumption, the Comptroller-General was not in a position to determine which ought be recognised by the giving of an import declaration advice under s 71C. 6 The transactional chain giving rise to the importation of the cargo is somewhat complicated. Not all the facts may be before me, but I will set out the material matters to explain why I consider it appropriate to make an interlocutory order that the cargo be released to OneSteel. Suffice to say that from about November 2016, OneSteel sought to purchase a cargo of about 7,000 metric tonnes of steel, consisting of universal columns and parallel flange channels, from Hyundai Corporation in South Korea. 7 The original contractual arrangements involved OneSteel seeking to finance the purchase of the cargo through Steel Masters International (ME) FZE, a company doing business from Dubai in the United Arab Emirates. A purchase contract dated 25 November 2016 between OneSteel as buyer, and Steel Masters, as seller, identified the components of the cargo and that Hyundai was its manufacturer. It provided that OneSteel would pay Steel Masters about USD3,770,000 for the cargo. 8 Next, Steel Masters entered into a financing arrangement with Mercantile Credit Inc, a New York based company, to assist in the funding of about 50% of the purchase price for the cargo. Mercantile Credit opened a letter of credit with Israel Discount Bank of New York (IDB Bank). The letter of credit was subsequently amended to provide for a later shipment date than had originally been agreed. The amended letter of credit, by its terms, would expire, if not drawn on, on 25 April 2017. 9 On 9 April 2017, the cargo was shipped on board MV Molengracht, a ship owned by Spliethoff Transport BV, in Incheon, South Korea for discharge at Newcastle, Australia. The seven bills of lading, representing the total cargo, issued on behalf of the carrier, named Hyundai as the shipper and were made out to the order of "Israel Discount Bank of New York". The notify party was DSV (the first bills of lading). On 9 April 2017, Hyundai issued seven invoices for the cargo to Mercantile Credit that, again, named DSV as the notify party. 10 On 20 April 2017, when Hyundai's bank, NongHyup Bank International, presented the documents on which it sought IDB Bank to pay under the letter of credit, IDB Bank rejected the documents as not conforming to the requirements of the letter of credit. 11 On 21 April 2017, DSV electronically lodged import declarations in respect of the cargo. On that same day, a Collector electronically issued import declaration advices under s 71C of the Act before duty had been paid. By force of s 71C(4), only when duty had been paid could a Collector communicate electronically, to DSV, an authority to take the goods into home consumption. 12 On 25 April 2017, the letter of credit, that remained undrawn, expired. 13 In the meantime, OneSteel, Hyundai and Steel Masters sought to negotiate a substitute transaction. 14 The cargo was discharged at Newcastle on 27 April 2017. 15 On 3 May 2017, Kyza Freight lodged its competing import declarations for the cargo in which it was identified as the importer, and OneSteel as the owner. Those import declarations used the bills of lading numbers contained in the documents that IDB Bank had rejected. 16 On 4 May 2017, NongHyup Bank, at the request of Hyundai, asked IDB Bank to return the shipping documents, including the first bills of lading, which the latter then held at NongHyup Bank's disposal. Shortly thereafter, IDB Bank returned the shipping documents to NongHyup Bank. 17 On 8 May 2017, Hyundai, Steel Masters and OneSteel entered into a new contract for the sale of the cargo under which OneSteel was to pay 80% of the purchase price within three days and Steel Masters the balance of 20%, on condition that Hyundai arrange for a new set of bills of lading (the second bills of lading) to be issued by Spliethoff (the 8 May contract). 18 After the originals of the first bills of lading had returned to Hyundai, it in turn surrendered them to Spliethoff's South Korean agent in accordance with Hyundai's obligations under cl 8 of the 8 May contract. Spliethoff then issued the second bills of lading that, relevantly, reflected the 8 May contract by naming the shipper as Hyundai and the consignee as OneSteel. The second bills of lading had the same numbering and notations as the first bills of lading and stated that the cargo had been loaded on board Molengracht on 9 April 2017. Spliethoff was named as carrier, notwithstanding that the second and third bills of lading were in substantively different terms, being straight bills and not order bills. 19 On 11 May 2017, OneSteel paid its 80% of the purchase price, namely USD2,841,669.61, to Hyundai by bank transfer, and Steel Masters paid the balance of the money owing by it to Hyundai. Thus, on those payments occurring, each party to the 8 May contract had performed fully its obligations. 20 On 12 May 2017, Spliethoff notified the parties to the 8 May contract that Hyundai had confirmed to Spliethoff that it had received full payment for the cargo, that the endorsed original second set of bills of lading had been returned to Spliethoff, and that Spliethoff had issued electronic delivery orders for the cargo to be released and made available to OneSteel in Newcastle for collection. 21 On 15 May 2017, because of the impasse that had been created by Kyza Freight's lodgment on 3 May 2017 of its competing import declarations in respect of the cargo, DSV, OneSteel, Steel Masters and Spliethoff decided that Spliethoff would amend the second bills of lading by causing to be issued a third set, using the suffix of A after each of the bill numbers (the third bills of lading). 22 However, the use of the third set of bills of lading failed to achieve its intended purpose because Kyza Freight or Mr Routh lodged another competing set of import declarations, this time using the amended bill numbers of the third bills of lading. That caused the computer system of the Comptroller-General, once again, to suspend the efficacy of the import declaration advices issued to DSV under which the cargo had been cleared for home consumption under s 71C of the Act. 23 On or about 16 or 17 May 2017, OneSteel caused payment to be made to the Comptroller-General of all duty, including any anti-dumping duty. The Comptroller-General accepts that all relevant duty, in respect of the cargo, has been paid by OneSteel. 24 On 22 May 2017, Hyundai emailed OneSteel, stating that first, Hyundai had received the total invoice price for the cargo of USD3,577,404.49 from OneSteel and Steel Masters, secondly, Hyundai had not instructed any party, at any time, to take any steps to recover the cargo or any outstanding sums of payment in respect of the cargo, and, thirdly, "Hyundai corporation does not have any knowledge of Kyza Freight Management Pty Ltd trading as China Sea Rates or Tim Routh". The role of Kyza Freight and Mr Routh 25 On the material presently in evidence, Mr Routh appears to have introduced himself into the matter in an email dated 2 May 2017 that he sent, using the business name China Sea Rates, to DSV that asserted that his "finance business www.kyzainvestments.com is handling the above mentioned shipment and attached bill of lading". The bill of lading which he attached was an unsigned copy of a bill in the set of the first bills of lading that had been made out to the order of IDB Bank. Mr Routh's email asserted that there was a USD3.7 million letter of credit "attached to" that bill. He asked that DSV "hold the clearance and delivery, until the client ha[d] met the conditions" of the letter of credit. 26 Of course, as I have noted, by that stage, the letter of credit had expired on 25 April 2017 in accordance with its terms. It is difficult to understand how, in those circumstances, Kyza Freight or Mr Routh could assert or maintain an interest in any of the first bills of lading that were to the order of IDB Bank when it no longer held the bill, a copy of which Mr Routh had attached to his 2 May email, or any of the other bills of lading, otherwise than as agent for the vendor, Hyundai, or its bank, NongHyup. 27 Mr Routh's subsequent correspondence that is in evidence does not explain the nature of whatever argument he or Kyza Freight seek to assert as to how, under an expired letter of credit to which they were not even parties, they acquired or held, as at 2 May 2017 or subsequently, any rights in respect of the cargo. Consideration 28 Gummow and Hayne JJ set out the organising principles relevant to the grant of interlocutory relief in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at 81-84 [65]-[71], with which Gleeson CJ and Crennan J agreed (at 68 [19]). 29 I am satisfied that the evidence of Colman O'Loghlen in his affidavit of 22 May 2017, from which I have taken the account of the documentary and other matters set out above, establishes a prima facie case that OneSteel is the legal and beneficial owner of the cargo and is entitled to be issued forthwith with import declaration advices that give OneSteel authority to take the cargo into home consumption pursuant to s 71C(4) of the Act: see e.g. Hilditch Pty Ltd v Dorval Kaiun KK (No 2) (2007) 245 ALR 125 at 132-134 [22]-[31]. Moreover, Mr O'Loghlen explained that, first, OneSteel is liable for the wharfage, or storage, charges for the cargo, that are in the order of $100,000 per week and, secondly, OneSteel's customers who ordered about 60% of the cargo urgently require the steel for their own construction projects, including at Brisbane Airport and WestConnex. Mr O'Loghlen also said that OneSteel is the only manufacturer in Australia of the types of steel product in the cargo. While in this case OneSteel imported the cargo, he said that the lead time for sourcing or manufacturing such a cargo was about four months. 30 In those circumstances, I am satisfied that the balance of convenience overwhelmingly favours the making of an order requiring that the Comptroller-General cause import declaration advices in respect of the cargo to be issued to OneSteel under s 71C(4) of the Act. Undertaking as to damages 31 Initially, OneSteel sought an order that only it, as opposed to its co-applicants, the administrators, give an undertaking as to damages. The applicants' senior counsel argued that there was a potential that OneSteel or its undertaking may be sold prior to 30 June 2017 and that, if that occurred, the administrators would only have recourse to a right of indemnity from its assets with which to satisfy the undertaking as to damages. 32 The Comptroller-General objected to any limitation of the applicants' obligation to give to the Court the usual undertaking as to damages being confined to only OneSteel. I also indicated that in my opinion such a course was contrary to principle, having regard to the, albeit only analogous, principles referred to by Mason CJ, Brennan and Deane JJ in National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277, and to what Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ said in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 41-43 [65]-[66] as to the importance and scope of an undertaking as to damages to protect the positions of both any party bound by an interlocutory injunction or other interlocutory order of a similar character, such as the appointment of a receiver to a company, and any third parties who may be affected by the interlocutory order. 33 The purpose of requiring any party seeking such interlocutory relief giving, as a condition of obtaining that relief, the usual undertaking as to damages to the Court is to ensure that any person who may have been affected adversely by such an order as a result of its making, or in the event that it ought not to have been made, would have the right to ask the Court to provide relief, so far as money can do, to compensate him, her or it. The purpose of the undertaking is to protect such persons in respect of the Court's use of its powers at a time when it was not in a position finally to determine the rights and liabilities of the parties to the proceeding or how the impact of the interlocutory relief may affect the rights of third parties. 34 This is clearly a case in which the administrators would be capable of protecting themselves, in the event of any sale of OneSteel or its undertaking, so as to be able to meet any liability under an undertaking as to damages. In my opinion, there was no basis on which it would be just, in the circumstances, to expose the Comptroller-General, Kyza Freight or Mr Routh to a situation in which a commercial transaction with which they had nothing to do (namely a subsequent sale of OneSteel or its undertaking), may result in OneSteel not itself being in a position to pay any damages due pursuant to the undertaking, in respect of the grant of the interlocutory orders, which both it and the administrators had obtained. 35 In those circumstances, the administrators, properly, now have joined with OneSteel, by their senior counsel, in each offering to the Court the usual undertaking as to damages. Conclusion 36 For these reasons, I am of opinion that I should order that the Comptroller-General do all things lawful and necessary to release the cargo that has been entered by DSV from bond to OneSteel, including requiring him to issue import declaration advices to deal under s 71C(4). I consider that, having regard to the commercial urgency and the unexplained absence from Court today of Kyza Freight and Mr Routh, I should stand the proceeding over to 1 June 2017 for further directions. I also will order that if Kyza Freight or Mr Routh wish to oppose the grant of final relief, including a declaration that OneSteel is and at all relevant times has been the owner of and entitled to immediate possession of the cargo, they enter an appearance on or before 30 May 2017, in default of which I will make the application for final relief returnable also on 1 June 2017. I will reserve the costs of the proceeding. I note that the Comptroller-General at this stage does not seek an order for costs. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate: Dated: 24 July 2017