Director-General of Social Services v les

Federal Court of Australia|1984-06-29

Administrative Law - tudicial review - review of Ministers' decisions - minimum tender price fixed for coal - whether 'reviewable decision" - whether conduct

leading to the making of a decision - whether made under

an "enactment" - whether decision unreasonable - meaning of "unreasonable" - consideration of departmental system

Customs (Prohibited Export) Regulations, reg.9 Customs Act 1901 (Cth) 3.112

Director-General of Social Services v les (1983) 47 ALR 281

Director-General of Social Services v Hangan (1982) 45 ALR 23

Director-General of Social Services v Chaney (1980) 31 ALR 571

Between : CURRAGH COAL SALES COMPANY PTY LIMITED And : JOHN MAXWELL WILCOX, LIONEL BOWEN and PETER WALSH

QUEENSLAND DISTRICT REGISTRY No. G.58 of 1984 GENERAL DIVISION BETWEEN =: COMP PIY LIMITED Applicant AND ° : J i. WILCOX L 0! and PETER WALSH Respondents QRDER JUDGE MAKING ORDER Davies, J

The respondent's costs shall be taxed and paid by the applicant.

GENERAL DIVISION BETWEEN: OAL S 0 PTY LIMITED Applicant AND : JOHN W (e) LIONEL BOWEN and PETER WALSH Respondents REASONS FOR JUDGMENT (ex tempore) Coram : Davies. J

This 18 an application under che Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act") to reviewa decision by the Acting Minister of State for Trade and Resources. on 16 May 1984. and a subsequent decision of the Manister of State for Trade and Resources not to alter that decision of is May 1984. The effect of the decisions was to stipulate the price

of $56 per tonne as the minimum price that the applicant, Curragh Coal Sales Company Pty Limited. mav tender in its current negotiations for the sale of coal to the Steel Authority of india

As part of its case. the applicant challenges the fixing of that price in the context of the fixing of other prices for other

The fixing of that minimum price is challenged either as a decision under req.9 of the Cust (Pr t erts) Regulations or as conduct leading to the making of such a decision. Sections 5 and 6 of the ADJR Act are relied upon.

Sub-sections i12(1) and (2)(c) of the Customs Act 1901 (Cth) provide

"112.(1) The Governor-General may, by regulation, prohibit the exportation of goods from Australia.

(2) The power conferred by sub-section (1) may be exercised -

(ec) by prohibiting the exportation of goods unless specified conditions or restrictions are complied with.'

Regulation 9 of the Customs (Prohibited Export) Requlations

provide, in sub-reg.(2), that the requlation applies, inter alia, to coal. that being a good specified in the seventh schedule.

"(3) The exportation from Australia of goods to which this regulation applies is prohibited unless

(a) a permission in writing to export the qoods or a class of qoods 1n which the goods are included has been granted by the Minister or an authorized person: and

(3E) A permission granted for the purposes of sub-regulation (3) may specify conditions or requirements to be complied with by the holder of the permission and may, in respect of any such condition or requirement. specify the time (heing a time before or after the exportation of the goods to which the permission relates) at or before which the condition or requirement shall be

(3H) The Minister or an authorized person shall not unreasonably refuse -

(a) to grant a permission for the purposes of sub-regulation (3); or

(B) to consent to the assignment or surrender of & permission referred to in sub-requiation (3B)."

In my opinion, sub-reg.(3H) applies to sub-reg.(3) and to sub-reg.(3E). Accordingly, a decision to qrant or refuse a

permit. or to grant a permit subject to conditions, 1s invalid if

In my opinion, the word "unreasonable" is to be given its meaning in ordinary parlance. not the meaning given to the term for the purposes of the common law principles relating cto the

validity of subordinate legislation or administrative action.

In the present case, the Ministers did not issue to the applicant a permit subject to a condition though that course was open to then. They implemented a svstem of administrative

supervision of exports. which system was first announced by the

Minister enunciated to Parliament new procedures of which the

"However, from today, ezporters who wish to enter into negotiations under new or existing contracts will be required to obtain specific approval before making any offers or responding to any offers or entering into any commitments. This

will also apply in respect of negotiations already in progress,

Consultation will take place between individual companies and officers of my Department. Against the background of continuing consultation with the industry and the advice of my - Department, I will determine the parameters within which a company or companies will be authorised to negotiate. Such parameters might include, as circumstances require 1t. pricing provisions, tonnage. duration or other usual provisions of commercial commodity contracts.

If during the negotiations a company wishes to change the parameters 1t will be necessary to seek a variation to the approval."

reasonable prices for our exports of raw materials and the maximum tonnages that prevailing marketing conditions will allow. In a depressed market place tonnage and price movements can have a tremendous overall effect on our balance of payments and consequently the well being of Australians as a whole.

..-Because of these wider implications. the Government, in discharging its responsibilities in respect of the preservation of the national interest, must bear in mind our very real international responsibilities as well as the interests of the Australian industry."

Guidelines to give effect to that system were issued on 26

October 1978. and more recently a description of the system has been set out in a memorandum entitled "Australian Coal Export and the Role of the Australian Government" issued on 14 June 1983 by Me J.M. Wilcox who is a first assistant secretary. In the course

"In addition to their requirements under these export control policies. Australian coal exporters are also subject to special administrative guidelines. Under these guidelines. exporters and potential exporters are required to consult the Department of Trade to obtain the Minister's agreement on negotiation parameters prior to entering into substantive negotiations with potential buyers. An advantage of the mandatory discussions prior to negotiations 1s that they provide the Government with a good information base on market conditions, thus assisting in discussions with companies and improving the quality of submissions to the Minister. In these

pre-negotiation discussions with companies, parameters are determined in regard to price and price-related clauses. Companies are free to

negotiate within the determined parameters in the sure knowledge that Government approval will follow."

an the present case, there was an invitation to tender distributed by SAIL. Four Australian producers met the tender specifications in substance and desired to tender. Each separately sought approval for a minimum tender price, or price Parameter as it 13 called. tn the applicant's case. the price Parameter was first fixed at $58 per tonne. This was subsequently reduced to $57.50 per tonne, and subsequently the applicant sought a parameter between $54 and $56, and sugaested that $55.50 might be obtainable. The Acting Minister for Trade.

on 16 Mav 1984, reduced the applicant's parameter to $56.

Subsequently the Minister declined to reduce it further.

It was said by Mr W. Pincus, QC, whe, with Mr P.G. Fryberd, QC, and Mr R. Gotterson, appeared for the respondent, that the Court did not have jurisdiction to review those actions. He submitted in effect that the actions were taken under

Section 3(1) of the ADJR Act defines "decision to which this Act applies" as

',..a decision of an administrative character made -.--under an enmactment...'.

Section 3(2) of the Act further provides that. in the Act. a ceference to making a decision includes a reference to

"(@) doing or refusing todo any other act or thing, ...".

It 1S not necessary to examine these srovisions at ienath. in mv opinion. the action taken oy each Minister constituted a 'decision". Each action had a substantial commercial effect so far as the applicant was concerned. Effectively the applicant could not tender a price lower than the stipulated parameter. The establishment of the parameter had an immediate detrimental effect and prevented the applicant from acting other than in accordance with it. I think it had the effect or ultimacy which

Director-General of Social Services v Hales (1983) 47 ALR 281, Director-General of Social Services v Hangan (1982) 45 ALR 23 and

Director-General of Social Services v Chaney (1980) 31 ALR 571.

There being decisions. the question arises whether they

were made under an enactment as-defined 1n the ADJR Act. In my

view they were. They were made under the authority conferred by reg.9 of the ( ibit ts) ations. Regulation 9 confers a discretion and the guidelines under which

the actions were taken were established to make it clear tnat this discretion would be exercised within those guidelines. The discretion gave force to the action taken. Should the applicant not comply, the applicant was aware it would not obtain export

Effectively, though not in law, the stipulation of tne parameter was the operative decision, as was supmitted by Mr R.N.

Chesterman. QC, who. with Miss M.A. Wilson. appeared for che

In my opinion. therefore, the action was taken under req.9

Mr Chesterman did not submit that req.3 did not authorize the imposition of conditions as to price. He submitted. however, that the decisions under review did mot bear the stamp o2f reasonableness which req.9(3H) required. I accept that the criteria of reasonableness applies to the preliminary step of

fixing price parameters. This step in practice acts as an

alternative means of imposing a condition upon a permit.

Clearly, as the power emerges from reg.9, the stipulation of the

Mr Chestermarn submitted on behalf of the applicant, first, that a uniform price should have been fixed. He relied. inter alia. upon paragraph 5 of the affidavit of Ieuan Roberts. sworn 14 June 1984, which reads in part.

",..However, the proscription achieved by this specification 18 1n my opinion such that there is insufficient scope for internal quality variation of a kind which could override price as a determinant of the award of the contract."

He relied upon the statement in the evidence of Me Wilcox in cross-examination that he, Mr Wilcox, was unaware of any market in the world where tenders for the suppiy of coal against precise specifications such as the SAIL specifications had resulted in the contract going to ather than the Lowest tenderer. Mr

Chesterman also relied upon the affidavit and oral evidence of Mr

However, the evidence on the whole snows that the quality of coal, including the quality of the coal of the four producers concerned in the SAIL tender. does vary, and that, from time to

I am not satisfied that the coal produced by the four

producers has the same value, notwithstanding that it 1s coai

which meets the detailed prescription of specifications in the

SAIL tender and I accept the submission put to me by Mr Pincus on this point. Indeed, the evidence of Mr Dunstone indicates that

he himself accepted that view, for he thought that if one price

were fixed. one particular producer would benefit thereby.

I could not say that it would be unreasonable to determine one price, if there were factors which would make it reasonable to determine a price for one tender, and to fix that parameter for all the Australian producers who tendered. Sut, on the other hand, I do not think that I could say that it was unreasonable to fix different prices in relation to different coals. It could be

The fixing of a uniform price has a degree of fairness about it in that it provides an objective criteria which each of the competing tenderers is aware of, but. that apart, it 1s not

necessarily a fair way of fixing price parameters, for probably a

uniform price would often. and probably in the present case

would, benefit one or more of the producers to the disadvantace

In the circumstances. I am not satisfied that the decision

was unreasonable on the basis that a uniform price parameter was

Mr Chesterman next submitted on behalf of his client that.

in fixing price parameters, the Minister or his advisers should

have adopted a formula or used a better means of calculating a price, perhaps by using and giving weight to a formula or

I would accept that the present system is a very deficient way of determining a price parameter, though I say that without intending any criticism of the department. Departmental officers make . judgments on inadequate information obtained by means of interviews. by obtaining opinions and hearsay and by gathering together facts from very many different sources. Those facts are gathered from applicants for price parameters, from competitors, and from overseas persons. Departmental officers then come toa view as to a price parameter, without using any objectively accepted criteria. and without disclosing to the producers precisely what they have done or the basis on which they have done it. Officers use intuition or judgment to form a final

view, though they are not themselves marketing officers.

Nevertheless, the evidence in this case has not disclosed that there presently 13 any reliable formula which can be used. Mr Dunstone referred to one formula which appeared in a report in 1980, but has not shown chat that formula is regularly applied

either by vendors or purchasers. The applicant did not suaqqest

On the whole of the evidence, I am satisfied that, in the

present state of knowledge, and indeed because of the task, which

is to fix a price parameter for the sale of goods to an overseas purchaser, a considerable element of judgment must be involved. Morover,. I am not satisfied that, by failing to adopt the formula to which Mr Dunstone referred in his evidence, either the officer advising the Ministers or the Ministers themselves were unreasonable. Further, it was not shown that there was any other formula generally accepted in the industry, or even commonly in use in the industry which ought to have been adopted. Therefore, although I have sympathy for Mr Dunstone's view that other tests could have been applied, I do not think that [ can say that the officers, or the Ministers, acted unreasonably in calculating the

The problem with a calculation based upon the method adopted is that it depends largely upon the judament of an officer of the public service made. as I have said. on inadequate information. Such a judgment 13 almost certainly flawed, in s0 far as it expects to be an exact calculation of a correct result. In the end. it simply is no more than the exercise of judgment by a person who ius not in fact a marketing person inthe coal industry, though as an officer of the department the officer

would have access to information concerning the industry which

Mr Chesterman then submitted that the price of $56 per tonne was unattainable from SAIL. On this point. I can say

little more than that [I think the evidence does not enable me to

conclude that that is so. There has been an exercise of judgment, and Mr Wilcox is of aview that that price is attainable. Whether or not it will be will depend in the end

I do not think any purpose would be served by my going into the details of the evidence of prices obtained in India in earlier years, or in other countries. It seems to me that information is limited. and [I am not in any sound position myself to make a judgment about this matter. I conclude that it was reasonable for Mr Wilcox to act upon his own judgment that $56

could be obtained, and for the Ministers to act upon that advice.

Mr Chesterman next submitted that the decision was unfair having regard ta the quantum of the differential in the Parameters of the four Australian producers. AS8ut here again the evidence before the Court is very limited. and I see lLlittie purpose in reciting the detailed evidence. Certainly, 1f I myself had to make a decision as to the quantum of the

differential. I would want far more evidence than 13 available ts

I accept the evidence qiven that it was unreasonable to apply a differential in the present case. As I have said. that

ls not to say that I think 1t would have been unreasonable to

On the question of the differential. [ do not think it can be said that Mr Wilcox. if he was the officer who calculated the differentials in this case. as I think he was, and the Ministers who acted upon that advice, were unreasonable. The differentials were calculated in accordance with a means ordinarily adopted, and they satisfied in the end Mr Wilcox' view as to what was a proper differential between each of the companies having regard

The aspect of the decisions that has most concerned me is that I think that the system of overviewing exports and of fixing price parameters does not achieve much of what has been stated for 1t. In his memorandum of 14 June 1983, Mr Wilcox said :

"The Australian Government approach in issuing parameters is te not discriminate between exporters and to avoid a situation where, by the

nature of Government action, any exporter is given more favourable treatment than any other."

Mr Wilcox' hopes may very well be satisfied when a parameter is fixed for one company which 13 the sole company negotiating for a contract. In such a case 1t would be useful to have Government support in the negotiations by the stipulation of a price parameter, and no disadvantage would be suffered. The game position does not seem to me to apply when prices are fixed in the circumstance that Australian producers are in competition

In my opinion, it would be sheer accident if pricina

parameters were fixed so to put the producers all in an

absolutely equal position. Tf they are net equal, then the contract will be awarded having regard to the differences that

exist between then. One of the differences that will exist between them will be the different tendered orice. Thus the fixing of the parameter intends itself to create a difference between producers, andthe difference so fixed will inevitably advantage some producer or producers to the disadvantage of

It may further be pointed out that the fixing of the price Parameter on the basis that was done in this case, taking into account certain but not all qualities of the coals, does not take into account all the factors which one would think would be taken into account in the fixing of a price between vendor and purchaser. Thus a producer with low production costs mav be prepared to lower the price to overcome a poor record of reliable supply, or because the producer desired to maintain a workforce in full occupation, or because the producer had acquired new plant and desired production to keep it fully occupied. Some producers may have a freight disadvantage. or advantage. Ail such matters are ordinarily taken into account ina market determination of price. but the determination of the price

Parameters in the present case was made on a much more limited

I have no confidence that the system will not lead asa

general cule, in circumstances such as the present, to favour one or more producers as against others. Nor am I confident that officers of the Department of Trade and Resources can gain

sufficient expertise and information to be consistently fair to

Nevertheless, the price v-arameter system was designed with certain important ends in view. It was designed to achieve a proper price for Australian coal. It was designed to prevent the sale of Australian coal at unduly low prices thereby disadvantaging the Australian community, and it was desiqned to prevent the sale of Australian coal at a price which was so low

as to disadvantage overseas producers, and thereby to interfere

with the international relations hetween Australia and other

countries. These matters must be taken into account.

Mr Chesterman submitted that the present svstem of fixing price parameters is "grossly unsophisticated and 13 incapable of producing a rational or reasonable result". Mr Chesterman further submitted that the results were arbitrary and not reasonable. I have some sympathy for this view. I am satisfied that the system will preduce results which from time to time will operate unpredictably and which will appear to producers to be arbitrary because the assessment of parameters proceeds upon judgment and discretion and not upon objective criteria, or even upon bases that are fully disclosed to the industry. However.

the system gives effect to Government policy which looks both at

the effect upon the Australian community, and upon the effect

upon other communities of the export of Australian coal.

I am not satisfied that the decision to impose such controls 1s unreasonable, and indeed in a matter such as this a court should be loath to take a 'iew that a decision made at a high level for the protection of he community was unreasonable. Export controls of the type with which we are concerned in this case were imposed as the result of a political decision, and the fixing of a parameter 13 a decision for which the Minister 1s answerable in the Parliament. There would need to se a clear case of unreasonableness for this Court to form a view tnat export controls of the nature with which we are concerned are

I would add that 1¢ 13 not a simple matter to establish a system of export controls: involving the setting of export prices, which would not at times appear to operate arbitrarily. This 1s not an area in which there 18 any objective criteria which can determine the correct price, or where a decision can De made after long hearings at which applicants for price parameters can fully put a case and be tested in relation to other producers, or

indeed where external review on the merits would be appropriate.

I thank that I should conclude that the decisions under

review were taken in accordance with a well-established svstem,

that it has not been shown that that system was unreasonable. or that there was any step taken in relation to the decisions with which we are concerned which was unreasonable, or. indeed. that

That is not to say that it would not be proper after this hearing for the department to review again some of the attitudes held with respect to the fixing of prices. As I say, I have little confidence that the system achieves the qualities which Mr

In summary, however, I am not satisfied that the decisions

under review were unreasonable having regard to the context in which they were made. It follows that the application should be

ey ro - 'g pages a-2 a true com, of tn9 -e oles for

At a glance

Court

Decision date

Source

Judgment (139 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (6)