Neat Domestic Trading Pty Ltd v Wheat Export Authority

NEAT's six applications 59 The six applications to which this case relates are as follows:

1. Application No 992652 dated 4 November 1999 to export 25,000 tonnes of ADR3 to Italy.
2. Application No 992660 dated 4 November 1999 to export 25,000 tonnes of ADR3 to Morocco.
3. Application No 993831 dated 9 December 1999 to export 25,000 tonnes of ADRF to Italy.
4. Application No 993831 dated 9 December 1999 to export 25,000 tonnes of ADR6 to Italy.
5. Application No 000254 dated 13 January 2000 to export 50,000 tonnes of ADRF to Italy.
6. Application No 000465 dated 31 January 2000 to export 25,000 tonnes of ADRF to Italy. 60 At this stage I will set out the documentary material relating to these applications together with the reasons given by the relevant AWBI officer for refusing to approve them.

First and second applications: Nos 992652 and 992660 61 The first and second applications were made at the same time and were dealt with together by both the WEA and AWBI. Accordingly it is appropriate to discuss them together. 62 Both applications were faxed by NEAT to the WEA on 4 November 1999 using pro forma application forms apparently issued by the WEA. They were accompanied by a faxed letter from Peter Howard of NEAT setting out a number of reasons why it was submitted the applications should be granted. These included the following propositions: · NEAT had previously exported a number of cargoes of durum with the permission of AWB. · AWB was not quoting a cash price for ADR3 to Australian growers. · NEAT could achieve a much higher price for ADR3 than the last price quoted by AWB. · In these circumstances it would be unfair to NEAT and Australian durum growers if AWB were to prevent the granting of a permit. 63 On the same day, 4 November 1999, both applications were sent by the WEA to AWBI. In accordance with the protocol devised between these organisations, the identity of both the permit applicant and the proposed overseas buyer were deleted from the material received by AWBI. 64 On 8 November 1999 two letters were faxed from AWB to the WEA indicating that AWBI did not approve either application. The reason given in both letters was as follows: "Approval is not granted on the basis that the issuing of the permit would jeopardise AWB (International) Limited's marketing strategy and adversely impact on the net returns received by growers who deliver to the National Pool." 65 On 9 November 1999 the WEA wrote to Mr Howard of NEAT informing him that the applications had been unsuccessful. 66 The AWBI officer who dealt with these applications was Mr Nicholas Gomersall, then employed as pricing strategist for AWBI. In paragraph 17 of his affidavit dated 30 June 2000 Mr Gomersall gave the following reasons for declining these applications: "I considered the applications and decided that they should not be approved. My reasoning was as follows: (a) The countries of destination were Morocco and Italy. I was aware that AWBI was already negotiating with buyers in Morocco and Italy and had secured some sales; (b) In Italy, we were negotiating with nine buyers or brokers; (c) In Morocco, we were talking with three buyers; (d) I considered that sales to Morocco and Italy by another trader were likely to have a negative impact on these current negotiations and future business opportunities; (e) Allowing another trader to negotiate with buyers in the same markets would see Australian wheat competing with Australian wheat and the price received for the wheat would, therefore, be likely to be less than if AWBI were the only seller in the market; (f) AWBI had already traded ADR2 with an optional destination to Algeria or Morocco. I was concerned that if a trader sold lower quality grain into the Moroccan market for a substantially lower price that this would impact on AWBI's ability to continue to trade the higher quality grain. I was also keen for AWBI to retain control of sales to that market. (g) Further, I knew that returns for sales by another trader would only go to a limited number of growers who had delivered to that trader and not to growers who deliver to the national pool in general. (h) I considered that giving of bulk-export consent to another trader was likely to have a negative impact on AWBI's single desk marketing arrangements with serious consequences for Australian growers. (i) Therefore, I was of the opinion that approving granting of a permit in this case was likely to adversely impact on the net returns received by growers who deliver to the national pool, contrary to AWBI's constitutional obligation to maximise returns to growers who deliver to the national pool. (j) I also considered that this applicant could trade on a FOB (Free on Board) basis as an alternative to trading under a bulk export permit."

Third and fourth applications: No 993831 67 On 9 December 1999 NEAT sent two applications to the WEA seeking consent for the export to Italy, of, respectively, 25,000 tonnes of ADR Feed and 25,000 tonnes of ADR6. They were accompanied by a faxed letter from Mr Howard of NEAT pointing out that the proposed Italian buyer, Casillo, was prepared to buy from NEAT at the same rate it would pay AWB. As NEAT had much lower operating costs than AWB, the return to durum growers from NEAT exports would be considerably higher than from AWB. 68 The WEA treated the applications as a single combined application which was forwarded to AWBI on the same day, 9 December 1999. On 10 December 1999 AWBI refused to give its approval. The letter contained identical reasons for the refusal as had been given in relation to the first and second applications. On 13 December 1999 the WEA wrote to Mr Howard of NEAT informing him that the applications had been rejected. 69 On 17 December 1999 Mr Howard wrote to Stuart Richardson of AWBI pointing out that there would be much higher returns to growers if NEAT were allowed to sell directly to its Italian buyers. He complained that AWB was denying NEAT the right to sell to the highest bidder by "not agreeing to facilitate trade like last year" [as to which see later] and at the same time blocking NEAT's applications for export permits. He requested a statement of reasons under the ADJR Act. In a separate letter dated the same day he also sought a statement of reasons from the WEA. 70 On 21 December 1999 Mr Richardson of AWBI wrote to NEAT, declining to provide reasons for its decision on the basis "AWB (International) Limited does not have legislative authority to make a decision over the consent to a bulk export permit and, therefore, s 13(1) of the Act does not apply in this situation". 71 On 6 January 2000 the WEA provided a statement of reasons for declining these applications. The operative reason was as follows: "In accordance with section 57(3B) of the Act the WEA cannot give its consent to the bulk export of wheat without the prior approval in writing of AWB (International) Ltd. In this instance AWB (International) Ltd refused to give the necessary approval." 72 Mr Gomersall was the AWBI officer who dealt with these applications. In his affidavit of 30 June 2000 he gave the following reasons for declining them: "I considered the applications and decided that they should not be approved. My reasoning was as follows: (a) I was aware that the Italian customer Casillo had recently been in Australia at the time and that AWBI was in negotiations with Casillo; (b) I believed that this application was likely to be for sale of the durum to Casillo. Casillo told me in negotiations that NEAT were prepared to offer lower prices for durum. (c) I considered that if sales of durum to Casillo by another trader were permitted, AWBI may be undercut on price and lose the sale. (d) I also considered the matters set out in paragraph 17 above in so far as they relate to Italy."

Fifth application: No 000254 73 On 13 January 2000 NEAT applied to the WEA for consent to the export of 50,000 tonnes of ADR Feed to Italy. In an accompanying letter, Mr Howard said that NEAT could offer durum growers a significantly higher price (by about $35 per tonne) than AWB was bidding for ADR Feed. NEAT's Italian buyer, the letter said, specifically wanted to purchase ADR Feed from NEAT rather than buying commingled stocks, because of potential quality problems. 74 On the same day, 13 January 2000, the application was sent by the WEA to AWBI. Approval was refused by AWBI again on the same day, 13 January 2000. The reasons given were identical to the reasons given in relation to each of the earlier applications. On 18 January 2000 the WEA wrote to Mr Howard of NEAT informing him that the application had been rejected. 75 Mr Gomersall was again the officer who dealt with this application. In his affidavit he gave the following reason for rejecting it: (a) This was an application to export ADR Feed to Italy; (b) AWBI already had a program for trading ADR6 in Italy. ADR6 is only one grade higher than ADR Feed; (c) I was concerned that allowing another trader to sell slightly lower grade durum into the same market for a consequentially lower price may soak up the demand for that range of grade of wheat with the effect that AWBI would be unable to sell ADR6 into that market; (d) I was also concerned about the potential for vomitoxin levels in the durum. I was aware that in December1999, vomitoxin levels in excess of the maximum levels for human consumption recommended by US authorities and a number of AWBI customers were found in durum sites in Northern New South Wales. As a result, AWBI instigated a freeze on the movement of durum to port for export shipments until tests were carried out to ensure grain was within acceptable standards. The Australian Quarantine and Inspection Service did not test for vomitoxin levels and so AWBI carried out these tests. Testing took up to two weeks and was not done at port; (e) I was of the view that if unsafe levels of vomitoxin were found by the overseas customers, this could seriously affect Australia's reputation as a supplier of grain that is safe for human consumption. Therefore, I considered that it would be unwise to allow the export of any wheat without it first being proved to be within acceptable limits; (f) In addition, I considered the matters set out in paragraph 17, above, in so far as they relate to Italy." 76 On 8 February 2000 NEAT sent a faxed request to the WEA that it provide a statement of reasons for rejecting this application and that it review its earlier decision. On 2 March 2000 the WEA provided a statement of reasons. Again, the reason given was that AWBI had refused to approve the application. 77 NEAT's request that the decision be reviewed was sent by the WEA to AWBI on 6 March 2000. On 8 March 2000 AWBI notified the WEA that, having reviewed the application, it still did not approve the bulk permit application. The reasons given in the letter were as follows: "Approval is not granted on the basis that AWB (International) Limited has a specific marketing strategy for all durum categories for the European market, which includes the marketing of this product in Italy. Further, AWB (International) Limited is currently transacting business with customers in Italy for ADR Feed. The issuing of this bulk permit would potentially: · place Australian durum in competition with Australian durum in the Italian market, and in the European market more generally, thereby undermining AWB (International) Limited's pricing strategy; · have a negative impact on these, and any future business opportunities, in this market; · jeopardise the long term marketing strategy adopted by AWB (International) Limited in this market or the wider European market for durum; · reduce or completely erode premiums which AWB (International) Limited extracts in this market; · adversely impact on the net returns received by growers who deliver to the National Pool; and · undermine the principles and disciplines of the Single Desk selling arrangements." 78 On 13 April 2000 the WEA wrote to NEAT informing it that its application for review of the earlier decision had been unsuccessful. 79 The AWBI officer who dealt with the re-consideration application was Stuart Richardson, AWBI's Product Manager (International). In an affidavit dated 30 June 2000 Mr Richardson gave the following reasons for declining the application. "I considered the application and decided that it should not be approved. My reasoning was as follows: (a) I was aware that AWBI was already transacting business for this wheat into Italy and I believed that the wheat was destined for the same customer, Casillo This was because in my experience Casillo was the only Italian buyer interested in purchasing ADR Feed; (b) I was of the view that a permit would impact on returns as there were limited buyers world wide; (c) I also considered that further exports would jeopardise AWBI's strategy in durum and undermine the single desk principles; (d) I also considered the matters set out in paragraphs 10(d)-(e), above." 80 The matters set out in paragraphs 10(d)(e) of Mr Richardson's affidavit were the matters he specified in support of AWBI's rejection of NEAT's sixth application (see below at par [82]).

Sixth application: No 000465 81 On 31 January 2000 NEAT sent an application to the WEA for consent to export 25,000 tonnes of ADR Feed to Italy. This was apparently intended as a substitute for the failed fifth application: in his covering letter, Mr Howard of NEAT said: "In view of the AWB (International) Limited's continued failure to provide any valid reason for blocking NEAT'S applications for bulk export permits, I have resubmitted another application for a lesser tonnage of ADR Feed to Italy." On the same day, 31 January 2000, the application was forwarded by the WEA to AWBI. On 2 February 2000 AWBI wrote to the WEA, indicating that it would not give its approval. The reasons given were identical to the reasons given for refusing the re-consideration of the fifth application (quoted above in para [77]). 82 Mr Richardson was the AWBI officer who considered this application. In his affidavit he gave the following reasons for rejecting it: "I considered the application and decided that is should not be approved. My reasoning was as follows: (a) The country of destination was Italy. The application was for export of ADR Feed (DRF); (b) I was aware that AWBI had recently completed business with buyers in Italy and was actively discussing further business with buyers in Italy for the same grade and similar grades of wheat; (c) I considered that if a permit was issued for export of ADR Feed at this time to another trader, this had the potential to impact on existing and future business opportunities in Italy; (d) I was concerned that if a trader supplied more wheat to buyers in the same markets, that would see Australian wheat competing with Australian wheat which would bring prices down and that this would impact on the returns received for Australian growers; and (e) Therefore, as part of my duty to maximise returns to growers, consistent with AWBI's constitutional obligation, I recommended that the approval be denied." 83 On 7 February 2000 the WEA wrote to NEAT informing it that its application had been rejected. On 6 March 2000 NEAT wrote to the WEA asking that a statement of reasons be provided and requesting that the WEA review its decision. 84 No further documentation relating to this application was included in the papers tendered in these proceedings. If NEAT's application for review was considered at all, it was clearly unsuccessful.

COURSE OF DEALINGS BETWEEN NEAT AND AWBI 85 It is apparent that NEAT and the AWB Group had an amicable working relationship, at least until the second half of 1999. On various occasions before 1999 NEAT sought and was granted permits for the bulk export of wheat. On other occasions, NEAT entered into what was described in evidence as a "wash-through" arrangement with AWBI, which effectively enabled it to circumvent the export permit scheme. Under this arrangement, NEAT sold wheat to AWBI but then bought it back at much the same price on an FOB basis. AWBI was technically the shipper, so there was no need for NEAT to obtain an export permit. The evidence indicates that the last of these "wash-through" arrangements between AWBI and NEAT took place in January 1999. NEAT sought on several subsequent occasions to transact with AWBI on a similar basis, but AWBI was not prepared to repeat this arrangement. This was the basis of Mr Howard's complaint in his letter quoted at par [69] above. 86 In the latter of part of 1999 relations became increasingly strained between AWBI and durum growers generally, and between AWBI and NEAT in particular. This is evidenced by the letters contained in the "Tender Bundle" produced at the hearing. Some of this correspondence is highly illuminative of AWBI's policy against approving bulk export permits, and thus bears mention here. 87 The first letter worthy of note was written by AWBI to Mr Howard of NEAT on 23 April 1999. It referred to AWB's "on-going review of internal business processes" and indicated that, as a result of this review, no "concessional arrangements"[ie "wash-through arrangements] would be entered into in future. More significantly for current purposes, the letter contained the following passage: "In the current market environment, AWB will not issue permits for the shipment of wheat other than in containers and permits will only be issued for the export of wheat in containers at the discretion of AWB Limited." (both italics and highlights in the original) 88 On 1 July 1999 the 1999 amendments to the Act came into force and the final stage of the restructuring of AWB and its subsidiaries was completed. Shortly afterwards, commencing on 14 July 1999, an interesting line of correspondence took place after Mr Richardson of AWBI mistakenly granted approval for the bulk export of 35,000 tonnes of wheat to India. The applicant on this occasion was not NEAT, and the wheat in question was not durum wheat, but the episode is nevertheless relevant to the issues raised here, as it illustrates the strength of AWBI's policy against approving bulk export permits. 89 The application in question was made by a company called Pars Ram Brothers (Australia) Pty Limited ("Pars Ram"). It was sent to AWBI by the WEA with a number of permit applications for non-bulk exports. Mr Richardson mistakenly believed the application also to be a non-bulk one, and signified AWBI's approval. The WEA had already issued an export permit to Pars Ram when the mistake was discovered a few days later. AWBI's immediate reaction was to inform the WEA that a mistake had been made and that as a result no valid approval had been given. However the WEA, having obtained legal advice on the matter, responded that both AWBI's approval and the WEA's consent to Pars Ram's application were valid. It declined to revoke or vary its consent to this application. 90 On 23 July 1999 the General Manager of AWBI wrote a memorandum to AWBI Board members about the Pars Ram affair. The memorandum contained the following passage: "This situation has obvious implications for AWB (International) Limited. The existence of a bulk permit is in direct contravention of AWB's current policy not to issue such permits." 91 On 28 July 1999 an internal AWB memorandum discussed the various options available to AWBI as a result of the mistaken Pars Ram approval. They were: 1 do nothing 2 letter to traders 3 media release. Under the second option, "letter to traders", it was suggested that AWB might write to wheat traders informing them that the Pars Ram permit had been consented to by mistake and did not represent a shift in AWB's policy on bulk permits. The following passage then appeared: "However, this approach may unnecessarily bring the issue into the spot light and, if passed on to journalists, may draw media attention. Further, by drawing attention to this issue it is possible that the question of why AWB maintains a 'no bulk permit policy' may be raised where it has not been an issue to date." The memorandum sought comments as to the proposed options. 92 On 26 August 1999 an information paper was prepared relating to the mistaken Pars Ram approval. This contained the following passage: "This situation has obvious implications for AWB. The existence of a bulk permit is in direct contravention of AWB's current policy not to issue such permits because of the potential impact uncontrolled bulk exports may have on premiums achieved by AWB in these markets and the quality reputation Australian wheat has achieved." 93 The paper went on to note that there had been limited media interest in the matter and to express the view that it would not "do any long term damage to the reputation of AWB (International) Limited or its marketing strategies". It was emphasised that guidelines and protocols should be put in place to ensure that it could not happen again. An annexed document headed "Media Position" set out (or so it appears) AWB's suggested response to any media questions about the matter. One section of the document is in the following terms: "So what is AWB's policy on bulk exports? AWB (I)'s current policy on bulk permits is that it opposes them being granted. The criteria for assessing them is quite simple - we must be satisfied that the issuing of a permit would not jeopardise our overall marketing strategy or affect the net returns received by growers who deliver to the National Pool. The real competition is beyond our shores - in the US the EU and Canada. The issuing of a bulk permit simply means that Australian wheat in overseas markets which will impact on premiums which can be achieved in these markets and, consequently, the returns to all Australian growers. [Only if raised] Further, Australia has built its reputation on being able to consistently supply high quality product which meets the customers exacting needs and to back this up with after sales technical service. This reputation will be jeopardised because bulk permit holders are unable to ensure security and consistency of supply and are unable to be backed up the sale with technical assistance."[sic][emphasis in the original] 94 It would seem that this issue then died. The papers contain no further reference to it. 95 In late 1999 increasing tension was developing between AWBI and durum wheat growers. On 24 September 1999 Mr Laskie, the General Manager of AWBI, wrote to the Chairman of the WEA outlining the current position between AWBI and the Australian Durum Producers' Co-operative ("ADPC") regarding the marketing of durum from northern New South Wales. The letter enclosed a document setting out AWB's proposals for co-operation between the ADPC and the AWB Group. There was also a press release put out by the Grain Council of Australia headed "Single Desk Must Stay!" in which the President of the Grain Council was quoted as strongly supporting the maintenance of the single desk export system, and as criticising suggestions by durum growers that AWB should relinquish its single desk policy in relation to durum wheat. In his letter, Mr Laskie described the benefits of the "single desk" in the following terms: "With the single desk as the preferred system of marketing Australian wheat overseas, AWB seeks to avoid situations where Australian wheat may compete with Australian wheat in an overseas market. If this occurs, premiums which would otherwise be captured by AWB and returned to growers are competed away. It is, therefore, essential that under the single desk, AWB is in a position to prevent this occurring. The preferred position ADPC has taken to date, we believe, has the potential to seriously undermine Australia's marketing strength, jeopardising the continued existence of the single desk. The position adopted by the ADPC to date presents no tangible benefits to the Australian wheat industry as a whole, or even the majority of durum wheat growers. Although the ADPC has stated on numerous occasions that they do not wish to undermine the integrity of the single desk, we believe that any alternative arrangement to that which we have proposed would do exactly that. We are hopeful that ADPC will be willing to work with AWB under our current proposal. However, should they decline our offer, then AWB's position remains that we would not be prepared to approve the issuing of a bulk permit. Any decision must be such that we are satisfied that the issuing of a permit would not jeopardise our overall marketing strategy or affect the net returns received by growers who deliver to the National Pool. If a bulk permit was issued, we could not be certain of this. Further, this would also be in conflict with the position of both the GCA and the Minister. Whilst AWB (International) Limited may consider the issuing of container permits (as part of the Wheat Export Authority's consultative process), we believe that such an option is unlikely to satisfy ADPC." 96 On 13 October 1999 Mr Howard of NEAT wrote to Mr Rogers, the Chief Executive Officer of AWB, setting out something of the history of NEAT's dealings with AWB, and seeking advice as to "what position the AWB intends to adopt with NEAT for the 1999/2000 season". Specifically, answers were requested to the following questions: · whether AWB would grant NEAT export permits if it can obtain better prices for growers than AWB's prices. · whether AWB would be prepared to buy from and then sell back to NEAT on a FOB basis as an alternative to giving export permits, [ie enter into a "wash-through" arrangement]. 97 Mr Rogers answered these questions in a faxed letter dated 29 October 1999. In it he emphasised that, in the current market environment, AWB "will not approve the issue of any bulk permits for the shipment of wheat to any market". Nor, the letter indicated, would any further "concessional" arrangements be entered into. As to bulk exports, the letter continued as follows: "We have consistently maintained the position of no bulk permits and will continue to do so for the foreseeable future. AWB has adopted this position in order to preserve the integrity of the single desk and to ensure that we are able to fulfill our legislative objective to maximise returns to growers. We are mindful of avoiding situations where Australian wheat may compete with Australian wheat in an overseas market, undermining overall returns to growers and potentially damaging the reputation of Australian wheat overseas. As we have noted to the ADPC and others on occasion, should NEAT consider that they are able to achieve better values in an overseas market than those obtained by AWB then you should contact AWB. In these circumstances and in accordance with the single desk all growers may be able to benefit from these opportunities through the pool. Alternatively of course, NEAT may seek to obtain an export permit from the Wheat Export Authority for containerised or bagged wheat." 98 On 3 November 1999 Mr Howard wrote to Mr Rogers of AWB expressing his disappointment at AWB's stand. The next day, 4 November 1999, NEAT sent to the WEA the first two export applications that we are concerned with in this case. 99 On 7 December 1999 Mr Howard of NEAT wrote to Stuart Richardson of AWBI indicating that NEAT had received bids for ADR Feed and ADR6 which would return higher prices to growers than AWB's cash prices. The letter proposed that there be a "wash-through" arrangement, namely that NEAT should sell the goods to AWB and then buy them back on a FOB basis. On 10 December 1999 Mr Richardson responded, saying that "AWB will not be issuing export permits for bulk wheat shipments, and needing to have a consistent approach to all participants in the industry, the buy and sell arrangements transacted with NEAT during the 1989/99 season, will not be repeated". In the meantime, on 9 December 1999, NEAT had lodged its third and fourth applications for bulk export consent. 100 Thereafter the correspondence, at least that part of it emanating from NEAT, became progressively more curt. On 13 December 1999 Mr Howard wrote to Mr Richardson saying that durum growers were not happy with the way AWB was controlling the industry. Again, on 15 December 1999 a faxed letter from Mr Howard to Mr Richardson expressed NEAT's frustration at the course of events, and claimed that AWBI was "abusing the powers conferred to it under s 57 of the Wheat Marketing Act 1989". On 16 December 1999 Mr Richardson responded to some of the issues raised by Mr Howard. The letter contained the following reference to bulk export permits: "In terms of the application for export permits for bulk shipment, AWB (International) Limited will respond to any request from the WEA, and each request will be considered on a case by case basis. In the current environment, AWB will not approve the issuance of permits for the shipment of wheat other than in containers and permit applications for containerised wheat will only be consented to for particular export destinations." 101 The correspondence continued in similar vein through much of December 1999. NEAT put AWBI "on notice" that it and its grower clients would hold AWBI responsible "for all costs losses associated with its failure to properly assess NEAT's application for export permits". 102 On 13 January 2000 the fifth of NEAT's application for a bulk export permit was sent to WEA. The correspondence relating to this application is described earlier at pars [73] to [80]. 103 On 24 January 2000 a meeting took place at Gunnedah between local durum growers and representatives of NEAT, the WEA and the AWB Group. The meeting was chaired by Mr John Anderson, then Acting Prime Minister. It was addressed by Mr Trevor Flugge, the Chairman of AWB Limited. Mr Richard Heathcote, a durum grower who was present at the meeting, said that Mr Flugge's opening comments were as follows: "I have two things to say to you, the first is good afternoon and the second is there will be no permits granted for the bulk export of any types of wheat." He described Mr Flugge as saying words to the effect of "there will be no permits, it is not negotiable, it is not open for discussion, you can forget about permits". Mr Gomersall, who was also present at the meeting, conceded that Mr Flugge made a statement to the effect that "there will be no permits granted for the bulk export of any types of wheat". However Mr Gomersall said that he did not recall Mr Flugge using the words described by Mr Heathcote, "there will be no permits, it is not negotiable, it is not open for discussion". Indeed he said that Mr Flugge qualified his statement that no permits would be granted by saying words to the following effect; "this is in the context of market conditions existing at this time and AWBI's role in serving the market". According to Mr Gomersall, Mr Flugge also said "the issue of granting permits will be reviewed if there is a market failure," a qualification which Mr Heathcote said he did not hear. 104 On 1 February 2000 Mr Flugge wrote to the Deputy Prime Minister, Mr Anderson, outlining AWB's position in relation to the export of durum wheat. It was a lengthy letter which I do not propose to reproduce. Certain portions, however, bear repetition. In particular, in relation to the bulk export of wheat, the letter made the following comments: "The position is that AWB (International) Limited will not approve the issue of a permit for the bulk export of durum, or any other wheat at this time. Consistent with this position, AWB (International) Limited is not prepared to support any concessional arrangements that would allow particular traders preferential treatment to 'wash' grain through the National Pool. This position is consistent with the need to preserve the single desk for wheat exports. Should there be widespread opposition to this approach, then the appropriate forum for redress is to consider the validity of single desk selling arrangements. This is an issue for debate within the industry and it is their responsibility to approach the Government in this respect. It is unfortunate that AWB has been the target of constant criticism from industry when it is industry structure that is at the centre of the current debate. Any suggestion otherwise is quite simply, fallacious. AWB (International) administers the single desk on behalf of growers. It does not belong to AWB and it is important that growers recognise this. As I noted and Monday, any concession would result in the destruction of the single desk. You will recall that I was supported in this view by the Chairman of the NSW Grains Board, himself a large durum grower. Despite claims to the contrary, it is simply not possible to quarantine any concession to a select group of northern NSW durum growers. I understand that the permit concerned would result in grain sales for less than 15 growers. AWB is responsible for maximising returns to 45,000 growers and legislation prevents AWB from jeopardising this objective." 105 Mr Flugge noted in the letter that NEAT's key contact in the Italian market was a trader who had recently been hosted by AWB in a tour of Australia. The Italian trader, Mr Flugge said, was using NEAT's position as a potential seller of ADR6 as a "bargaining tool" in his negotiations with AWB. Mr Flugge continued "This is exactly the sort of risk the single desk is designed to avoid - having Australian wheat competing against Australian wheat in an overseas market and eroding premiums to the detriment of Australian growers". 106 The letter then responded to various criticisms of AWB in its handling of durum marketing. It concluded in the following terms: "As you can see Minister, AWB has treated this entire issue as extremely serious. We have approached it in a diligent and consistent manner in order to preserve the integrity of the single desk. This is our responsibility under legislation." 107 In a document dated 31 March 2000 addressed to the WEA, AWBI commented on "General issues surrounding bulk permit applications". This document is headed "Commercial in Confidence". I am not sure why confidentiality has been claimed. So far as I can see, the document does not raise matters which are not otherwise dealt with in the evidence. Nevertheless, because of its confidential status, I shall be circumspect about quoting from it. However there are portions of the document which elucidate AWBI's insistence on maintaining the single desk in a manner which is relevant here. The document commented on a number of "broader Single Desk issues in relation to the impact of bulk permits" which it said needed to be taken into consideration. It was pointed out that AWBI undertakes an annual export marketing program of many million tonnes. Its marketing programs and strategies are based on being the sole exporter of Australia's wheat crop in order to maximise returns to some 45,000 growers. The issuing of bulk permits, the document said, would lead AWBI to lose control of a number of advantages provided under the single desk system with consequent negative impact on growers who deliver to the National Pool. These advantages were described as follows: · Strength of Unity - Branding and Product Differentiation · Strategic Marketing and Price Discrimination Under this head the document made the following points: "As the operator of the single desk, AWB(I) maintains control over the export of Australia's entire bulk export program. Because this situation also affords AWB(I) a level of control over the price expectation for Australian wheat in each of our individual markets (by limiting buyers' ability to "shop around" between different suppliers), this allows AWB(I) to price discriminate across markets thereby maximising returns which necessarily are passed onto growers who deliver to the National Pool. The issuing of a bulk permit may breakdown this advantage by allowing other players into the market and reducing the ability of AWB(I) to price discriminate because it cannot be guaranteed of its pricing strategy in other markets." · Perception of Sole Exporter Under this head, AWBI commented that the fact that all bulk exports are conducted by the one body removes the ability for buyers to "play" Australian parties off against each other. · AWBI's Charter to Maximise Return to Growers Under this head, it was pointed out that issuing of bulk permits would generally run counter to this charter as it would provide returns to a select group of growers to the detriment of those growers who delivered their grain to the national pool. · Quality Reputation · AWBI's R & D Investment Under this head, it was pointed out that AWBI had undertaken significant research and development programs across numerous overseas markets, thereby increasing the market for Australian wheat in those countries. This had been possible only because of AWBI's position as the sole supplier of Australian wheat to these markets. 108 The above material sets out the course of dealings between NEAT and AWBI over the relevant period, and AWBI's stated attitudes towards its single desk policy. Against this background it is relevant to turn to the oral evidence of Mr Gomersall and Mr Richardson, the two AWBI officers who considered NEAT's applications. The reasons given in their affidavits for rejecting the applications were referred to earlier. 109 Each of these witnesses was cross-examined by Mr Hughes QC, who appeared for NEAT, about various aspects of AWBI's operations. Mr Gomersall was asked by Mr Hughes how long it had taken him to consider NEAT's applications. He said that he spent fifteen to twenty minutes considering the first two combined applications, Nos 992652 and 992660. However, he said, there was a "decision-making and a thought process that extended back months that went into the actual forming of the decision". He denied that his refusal of the applications was automatic. 110 Mr Hughes questioned Mr Gomersall about AWB's concern to preserve the single desk marketing system. Mr Gomersall agreed that this was an important factor in his decision-making process, but denied that it was the only one. 111 Mr Hughes asked Mr Gomersall how much information he had about each application when it was referred to him. He answered that he knew the quantity and grade of wheat, the destination, and the proposed date of shipment. He said that he knew nothing about the price at which the wheat was to be sold, and agreed that this would have been a relevant piece of information. Later, however, he pointed out that NEAT was effectively acting as AWBI's competitor in the market and, as he put it, "it is very rare that you would ask your competitor what price he is offering to a customer and expect to get an answer". 112 Mr Gomersall said that between November 1999 and March 2000 there was strong competition in Italy for Australian wheat, with a multiplicity of prospective sellers. He said that the quantity of wheat involved in NEAT's applications would have had a price impact on the Italian market. 113 Mr Hughes questioned Mr Gomersall about his suggestion, in paragraph 25 of his affidavit, that one of his reasons for refusing approval for NEAT's fifth application (No 000254) was his concern about possible unsafe levels of vomitoxin. It was suggested that he could have made testing for vomitoxin a condition of AWBI's approval of this permit. He agreed that this could have been done, and that probably he had been at fault in not seeking that these tests be carried out. Mr Hughes put to him that the question of vomitoxin levels was not a genuine ground for refusing AWBI's refusal. Mr Gomersall said "No, I believed it was a real ground". 114 Mr Gomersall conceded that during his employment with AWBI (he commenced on 13 July 1999) he did not approve one bulk export permit. Nor did he put to paper his reasons for refusing any of the applications referred to him. 115 Mr Gomersall said that he was aware of the Pars Ram fiasco, and of AWBI's policy not to approve bulk export applications in the current environment. The "current environment", he said, included the market environment which was susceptible to change on a daily basis. 116 One final portion of Mr Gomersall's evidence bears mention. Quite early in his cross-examination, the following exchange took place: "Mr Hughes: Perhaps I can short cut it this way: when you were dealing with these four application was it your belief that applications for bulk export permits could not be assessed against AWB's position on a contract by contract basis but rather must take into consideration the broader objectives of AWB International in maximising the return to growers over the life of the pool and in the longer term? A: If that means that you have to look, rather than at the individual sale to the overall marketing strategy, then yes, I agree. If that means what? A: I agree that the marketing - sorry, can you repeat the question. At the time when you were dealing the four bulk export applications with which you did deal, did you act on the belief that permits could not be assessed against AWB's position on a contract by contract basis, but rather must take into consideration the broader objectives of AWB International in maximising the return to growers over the life of the pool and in the longer term? A: Yes, I mean I assess a permit, not on a, specifically relating only to the instances for that, that one sale, but a marketing strategy, and what I have to, how I have to maximise returns over a 12 to 18 month period." 117 Mr Richardson was also cross-examined by Mr Hughes. It was Mr Richardson who had mistakenly signed the bulk export approval in the Pars Ram case. Mr Hughes questioned him about this matter. Mr Richardson conceded that in July 1999 AWBI had a policy against the granting of bulk export permits. Mr Hughes asked Mr Richardson about AWBI's letter dated 23 April 1999 (referred to above at para [87]) which, relevantly, said: "In the current market environment, AWB will not issue permits for the shipment of wheat other than in containers …". Mr Richardson agreed that he knew about this policy and that it did not alter while he was dealing with bulk export permits. He also agreed that it was for his seniors, not himself, to determine whether there had been a change in the current market environment which would justify a departure from AWBI's normal policy. In other words, the policy which prohibited the grant of bulk export permits was to remain in place unless and until Mr Richardson's seniors at AWB "decreed that there had been a change of circumstances to justify departure from the policy". This did not occur during the period between November 1999 and March 2000. 118 Ultimately, Mr Richardson agreed with Mr Hughes that the "real reason" why he rejected both applications was because of the existence of the policy against bulk export permits and the fact that his seniors had not notified a change of market conditions justifying departure from the policy.

Discussion 119 I am satisfied on the evidence that the effective reason for AWBI's refusal to approve NEAT's application in each case was the existence of its policy against bulk permits for the export of wheat. In spite of Mr Gomersall's protestations that the existence of the policy was only one of a number of relevant factors, the evidence overwhelmingly indicates that: · AWBI had a policy against approving the bulk export of wheat · AWBI rejected NEAT's applications in pursuance of this policy. 120 As to the existence of the policy, the evidence is all one way. The strength of the policy was illustrated by the consternation which followed the mistaken issue of a bulk export permit to Pars Ram. But even without the Pars Ram affair, it is incontrovertibly clear that, during the whole of the period which is relevant to this case, AWBI had a policy that, "in the current market environment", no bulk export permits would be approved. As to what was the current market environment at the time, the evidence is not so clear. I shall be discussing this matter shortly. It is plain, however, that the relevant market environment, whatever it was, did not alter during the relevant period, namely between November 1999 and March 2000. 121 In my view the evidence overwhelmingly indicates that it was this policy, and this policy alone, which dictated the rejection of each of NEAT's applications. Mr Gomersall said that the existence of the policy was but one of a number of considerations which he took into account when declining to approve NEAT's applications. In this regard, his affidavit and that of Mr Richardson, set out a number of factors which were said to have been taken into account in rejecting the various applications. Some of these considerations were specific to the particular application and some were of a more general nature. In so far as specific or individual considerations are concerned, I have difficulty in accepting that they played any realistic part in the rejection of the applications. The evidence indicates that these factors probably did exist. If considered, they would no doubt have provided further grounds for declining to approve the applications. But I cannot accept that they were in fact given any realistic consideration at that stage. The applications were bound to be rejected in any event in pursuance of the overall policy. The situation is different in relation to the more general considerations which were said in the affidavits to have been taken into account when the applications were rejected. I accept that these considerations were instrumental in the formulation of the policy and were therefore indirectly, if not directly, relevant to AWBI's rejection of the application in each case. I shall be discussing these considerations shortly. 122 In a letter dated 16 December 1999 (referred to earlier in par [99]) Mr Richardson assured Mr Howard that each request for export permits for bulk shipment would be considered on a case by case basis. But in the next sentence he continued: "In the current environment, AWB will not approve the issuance of permits for the shipment of wheat other than in containers". These statements are, as I see it, inherently contradictory. If no permits were to be approved, the assessment of each case on an individual basis was a meaningless exercise. AWBI's assurance that this would occur was a hollow one in these circumstances. 123 This, however, is by no means the end of the matter. Adherence to policy cannot on its own be a ground for complaint. Indeed the application of policy can denote an approach which is both consistent and principled. The real question, as I see it, is whether the policy has been applied so inflexibly that relevant considerations have been ignored. That, in my view, is the fundamental issue for determination here: did AWBI, in applying its policy against bulk export permits, fail to consider material matters which should have been taken into account? In particular, should it have given realistic and genuine consideration to the particular matters which were urged in support of each application? 124 In determining this issue, it is appropriate to have regard to the following matters: · The legislative context in which the decisions were made; · AWBI's obligations under its constitution; · The considerations which dictated AWBI's policy against bulk export permits; · The considerations which were urged in support of NEAT's applications. 125 I shall discuss each of these matters in turn.

The legislative context 126 I described the legislative background to s 57 earlier in this judgment. It is clear that the legislature always intended that AWBI, and before it the Wheat Board, should have a monopoly on the export of wheat from Australia. This was referred to repeatedly in the speeches and memoranda which introduced the various amendments to the Act. However what was meant by the word "monopoly" is not entirely clear. This word can denote both the capacity to control a market as well as the actual exercise of that control. It would be of no great assistance to be told in this case that the legislature intended AWBI to have a monopoly in that it was to have the capacity to control the market. A quick glance at s 57 makes it clear that it does have that capacity. The real question is how the legislature intended that AWBI's control should in fact be exercised. 127 There is some indication in the extrinsic material referred to earlier in this judgment that the legislature intended AWBI's predecessor, the Wheat Board, not only to control the export of wheat but also to be the sole exporter. This is certainly the tenor of the Second Reading Speech introducing the 1992 amendments, which referred to "the continuation of the Wheat Board's single desk export operations" (emphasis added) (see par [6] above). Extrinsic material relating to more recent amendments refer to the "continuation" of the export monopoly, presumably on the same basis. Interestingly, the Explanatory Memorandum relating to the 1999 amendments, under which the WEA was established, said that that body would monitor and assess AWBI's use of its wheat export rights "to ensure that it was using them in accordance with the intentions of Parliament". But the legislation itself gives no indication of what the relevant parliamentary intention might be. Nor is there a great deal of illumination to be derived from the extrinsic materials. The only real assistance comes from AWBI's constitution, which I shall discuss shortly. 128 This having been said, I think it must be assumed from the terms of the legislation and the extrinsic material that Parliament intended that AWBI should be able to exercise its export monopoly on the widest possible basis. In addition, and very significantly in this case, Parliament clearly envisaged that the monopoly would be exercised for the benefit of wheat growers generally. (see paragraph 20 of the Explanatory Memorandum quoted in par [15] above). This also accords with AWBI's obligations under its constitution, a matter to which I now turn.

AWBI's obligations under its constitution 129 The constitution of AWBI was amended on 1 July 1999 in accordance with a determination signed on 31 March 1999, by Mr Vaile, the Minister for Agriculture, Fisheries and Forestry. This constitution contains no "objects" clause. However Article 13.2, under the heading "Powers of Directors", contains the following provision. "13.2 (a) In the exercise of their powers the Directors must ensure that the business of the Company is managed in a manner which complies with Article 3.1(b) of the Parents' Constitution." 130 The "parent" is AWB, whose constitution was also amended on 1 July 1999. Article 3.1(b) of its constitution, referred to in Article 13.2(a) of AWBI's constitution, is in the following terms: "3 Exercise of Directors' Powers 3.1 In the exercise of their powers the Directors must ensure that: (a) …. (b) the business of the Pool Subsidiary is managed with the objective of: (i) maximising the net pool return for Growers who sell wheat into the pools run by the Pools Subsidiary by securing, developing and maintaining markets for wheat and by minimising costs as far as practicable; (ii) distributing the net pool return to Growers who have sold wheat into the relevant pool; and" 131 The combined effect of these provisions is to impose upon AWBI the objective of maximising the return for growers who sell their wheat into its pools, by "securing, developing and maintaining markets" in an efficient manner. This gives content to AWBI's obligations in a manner which must be taken to supplement the legislative provisions. In other words, it must be assumed that the legislature intended AWBI and AWB to operate in accordance with their constitutional charter, and thus to treat as a primary objective the maximisation of returns for growers who sell wheat into AWBI's pools.

The considerations which dictated AWBI's policy 132 The starting point under this head is to define AWBI's policy. We are, of course, concerned here only with AWBI's policy relating to bulk export permits. As to these, AWBI's policy during the whole of the relevant period was encapsulated in its letter dated 23 April 1999 to Mr Howard, namely that, in the current market environment, bulk export permits would not be approved. This raises an immediate question of what is meant by the "current market environment", a matter I shall discuss shortly. First, however, I should address the reasons given by AWBI for maintaining its policy against bulk export consents. 133 The reason most frequently given for AWBI's policy was that the issue of bulk export permits would "jeopardise AWBI's marketing strategy and adversely impact on the net returns received by growers who deliver to the National Pool". This reason was given in a number of the documents and letters emanating from AWBI (see, for instance, par [93] above). Most significantly, this was the reason given by AWBI for rejecting NEAT's first five applications. But this on its own cannot be seen as an adequate explanation for AWBI's policy. It consists merely of assertions as to the consequences of granting bulk export permits and begs the question as to how the issue of these permits will have these negative effects. 134 AWBI's further explanations on this issue are to be found in a number of its letters, most of which have been quoted earlier in this judgment. For instance, in a letter dated 24 September, 1999 (quoted in par [95] above) Mr Laski, the General Manager of AWBI, pointed out that under its single desk policy, AWB is able to avoid situations where Australian wheat might compete with Australian wheat in an overseas market, with a consequent negative impact on premiums returned to growers. The issue of bulk permits to durum growers, would, Mr Laski said, have the potential to "seriously undermine Australia's marketing strength." It would present, he said, no tangible benefits to the Australian wheat industry as a whole, or even to the majority of durum growers. 135 Mr Rogers, the Chief Executive Officer of AWB, made a similar point in a letter dated 29 October 1999 to Mr Howard of NEAT (see par [97] above) Mr Rogers referred to AWBI's "legislative objective" to maximise returns to growers. He said that situations must be avoided where Australian wheat may compete with Australian wheat in an overseas market, thus undermining overall returns to growers and potentially damaging the reputation of Australian wheat overseas. In a similar vein also was Mr Flugge's letter dated 1 February 2000 to the Deputy Prime Minister, Mr Anderson, quoted earlier at par [104]. Mr Flugge's letter was concerned with the durum wheat issue. He said "it is simply not possible to quarantine any concession to a select group of northern NSW durum growers". It must be assumed that he was referring here to NEAT and its growers. Mr Flugge said that to grant a permit would "result in grain sales for less than 15 growers". He pointed out that AWB is responsible for maximising returns to 45,000 growers. 136 The final piece of elucidation on this issue can be found in the confidential document dated 31 March 2000 from AWBI to the WEA. In par [107], I quoted a section of this document under the heading "Strategic, Marketing and Price Discrimination". This section was quoted because it does not appear to contain any confidential material. However it does express AWBI's concerns as to the prejudicial effect on its marketing strategies of the issuing of bulk export permits. 137 This material shows that AWBI's reason for maintaining its policy against bulk export permits can be encapsulated into a very simple proposition, which is this: the grant of bulk export permits might well benefit individual growers who sell their wheat under the permits, but this will be at the likely expense of growers who deliver their wheat to the National Pool. It is against AWBI's constitutional mandate to prefer individual growers who are outside the pool system to growers who are within it. Therefore bulk export permits should not be approved. 138 One further matter remains for consideration under this head, namely what was meant when AWBI said that its policy would be maintained under "current market conditions". There is no definition of this phrase in the documentary material tendered before me. Both Mr Gomersall and Mr Richardson were asked about it, and gave different answers. Mr Gomersall said that the relevant market environment would be likely to change on a daily basis. The tenor of Mr Richardson's evidence, on the other hand, was that any change in market circumstances which would justify an alteration in AWBI's policy would need to be determined by his superiors within the organisation. This did not happen during the period relevant to this case. 139 The bulk of the evidence indicates that when AWBI referred to "the current market environment" it had in mind long-term issues relating to the world wheat market. Mr Rogers, in his letter dated 29 October 1999 (quoted earlier at par [97]) noted that AWBI had consistently maintained its policy of no bulk permits "and will continue to do so for the foreseeable future". There is evidence that Mr Flugge said, at the meeting on 24 January 2000, that the issue of granting permits would only be reviewed if there was "a market failure". 140 In all the circumstances I must conclude that AWBI's qualification that its policy against bulk export permits would be maintained during "the current market environment" referred to major international market conditions which were unlikely to change in the short-term and which did not change during the relevant period. As such, the qualification is of little relevance to the issues raised in this case.

The considerations urged in support of NEAT's applications 141 If NEAT is to succeed in this aspect of its case it must be able to show that when AWBI rejected its applications in pursuance of its policy against bulk export permits, it ignored material which should have been relevant to its decision. It is thus necessary to examine the material which accompanied NEAT's applications and the arguments which were presented in their support. 142 The documentation which AWBI received on each occasion from the WEA was, to say the least, sparse. It consisted of the pro forma application sent by NEAT to the WEA with various sections deleted. The deleted sections related to the identity of the organisation applying for the permit as well as the name and address of the overseas buyer. These deletions were in accordance with a protocol previously devised between AWBI and the WEA. The result was that the application form received by AWBI contained only information as to the grade and quantity of wheat, the country of destination, the load port, the proposed shipping period and whether the export was to be in bags, containers or bulk. 143 In the absence of any direct communication between the permit applicant and AWBI this was the only material which AWBI routinely had available to it when considering applications for approval of export permits. In this case, there was also some direct communication between NEAT and AWBI in relation to its applications, although in some cases it is difficult to be certain whether letters from NEAT to the WEA were also sent to AWBI. 144 So far as I can ascertain, AWBI had the following information about each of NEAT's applications, in addition to the sparse material provided by the WEA.

First and second applications 145 NEAT's first and second applications, Nos 992652 and 992660 were sent to the WEA on the same day, 4 November 1999. They were supported by a faxed and e-mailed letter from Peter Howard of NEAT. The evidence does not indicate whether this letter was sent only to the WEA or to both the WEA and AWBI. It is appropriate in the circumstances to assume the latter. The reasons given by Mr Howard in support of his application were, as relevant here: · that AWB Limited was not quoting a cash price for ADR3 to Australian growers. · that NEAT could achieve a much higher price for ADR3 than the last price quoted by AWB Limited. · that in these circumstances it would be unfair to NEAT and Australian durum growers if AWB Limited were to prevent the granting of a permit.

Third and fourth applications 146 NEAT's third and fourth applications, No 993831, were sent to the WEA on 9 December 1999. They were accompanied by a letter from Mr Howard pointing out that the proposed Italian buyer was prepared to buy from NEAT at the same rate it would pay AWB. As NEAT had lower operating costs than AWB, the return to durum growers from NEAT exports would be higher than from AWB. It is by no means certain that this letter was received by AWBI. However two days earlier, on December 7 1999, Mr Howard faxed a letter to Mr Richardson of AWBI saying that the bids NEAT had received from its overseas buyer would give growers a higher return than AWB's cash prices for pool returns. The information in both documents was therefore essentially the same.

Fifth application 147 NEAT's fifth application, No 000254, was accompanied by a letter from Mr Howard saying that the overseas buyer specifically wanted to purchase ADR Feed from NEAT rather than buying commingled stocks. There is no indication whether this letter was received by AWBI.

Sixth application 148 NEAT submitted its sixth application, No 000465, in substitution for its unsuccessful fifth application. Therefore it must be assumed that the reasons given in support of the fifth application were also relied upon here.

Conclusion 149 The sparse material which was sent by the WEA to AWBI in relation to NEAT's various applications contained nothing which could be expected to deflect AWBI from applying its policy against bulk export permits. If that was all the information that was received by AWBI, then it is difficult to see how it could be said that AWBI's decisions were made in disregard of any relevant considerations. However I think it is appropriate, for the purposes of this discussion, to assume that AWBI also received NEAT's submissions in support of its various applications. In some cases there is evidence that these submissions were directly communicated by NEAT to AWBI. In other cases it is reasonable to infer that AWBI was at least made aware of the general nature of these submissions. 150 An examination of the matters relied upon by NEAT in support of its various applications shows that they generally related to the benefits to be derived by growers whose wheat was to be exported under the proposed permits. No attempt was made, so far as I can ascertain, to address AWBI's primary concern, namely that the grant of a permit might provide benefits for those growers, but at the possible detriment of growers who supplied their wheat to AWBI's pools. 151 In this context I return to the authorities relating to the proposition that discretionary decisions should not be made in blind pursuance of policy. Bankes LJ in Kynoch contrasted the position where a body says that it will apply policy unless there is something exceptional in the individual case, and, on the other hand, where the body says that it will not hear any application by whomsoever made. So long as the policy has been adopted for legitimate reasons, no objection, he said, could be taken to the first course. The second course however was objectionable. He said that there was a "wide distinction" between these two classes of case. 152 This "wide distinction" might well be discernible on a theoretical basis. It can, however, become blurred in practice, as the present case demonstrates. Indeed AWBI's decisions which are challenged here could fall into either class, depending on how they are to be categorised. In AWBI's favour, it would appear that there were legitimate considerations supporting its policy against bulk export permits. Indeed AWBI's constitutional mandate required that, if there is a clash between the interests of growers who supply wheat to the pool and those of growers who are outside the pool system, AWBI should prefer the former. AWBI clearly perceived the grant of bulk export permits as clashing with the interests of growers who supplied to the pool. This was, on the material before me, an approach which it was legitimately entitled to take. No substantial argument was presented by NEAT against this approach. Indeed NEAT's submissions did not address the question of whether there was a potential clash between the interests of growers it represented and the interests of the growers who supplied to the national pool. As a result, AWBI's fundamental concerns about the grant of bulk export permits were not addressed at all. No argument was put which could be expected to deflect AWBI from applying its policy against bulk export permits. 153 According to the above analysis, the present situation would fall within Bankes LJ's first category, to which no objection could be taken. But looking at the matter in a different light, it might be argued that AWBI's decisions rejecting NEAT's applications came within Bankes LJ's second, impermissible category, in that the decisions were made, according to my earlier findings, in the inflexible application of AWBI's policy that no bulk export applications of any kind were to be granted in any circumstances. 154 If it were necessary for the resolution of this case to categorise NEAT'S decisions according to Bankes LJ's distinction, I would place them within the first category. AWBI was obliged under its constitution to treat as a primary objective the maximisation of returns for growers who sell wheat into its pools. It had determined, on apparently tenable and legitimate grounds, that the grant of bulk export permits, whilst benefiting some growers outside the pool, had the potential to impact negatively on the returns of growers within the pool system. Accordingly, the grant of bulk export permits was perceived to be against AWBI's constitutional charter. It was for this reason that it set its face against issuing bulk export permits, and that it refused each of NEAT's applications. 155 The arguments urged by NEAT in support of its applications did not, as I commented earlier, seek to address the fundamental issue which dictated AWBI's policy. NEAT's primary arguments were that the growers it represented would be prejudiced by the refusal of export permits. It did not address the question of how the grant of a permit might impact upon growers within the pool, this being AWBI's primary concern under its constitutional charter. In the words of Lord Reid in British Oxygen (quoted above at par [47]) there was no "substantial argument reasonably presented urging a change of policy". Or, again as Lord Reid put it, NEAT did not have anything new to say. 156 The local cases might be taken to require a more individual approach from decision-makers than is required under the English cases. It was suggested in Chumbairux that decision-makers should be prepared to deviate from policy in every case. But this must depend on the nature of the decision and the extent of the decision-maker's discretion. In this case, AWBI's discretion was fettered by its constitutional mandate. AWBI was not at liberty to make decisions which were contrary to its primary objective, namely the objective of "maximising the net pool return for Growers who sell wheat into the pools run by [AWBI] by securing, developing and maintaining markets for wheat and by minimising costs as far as practicable". AWBI regarded the grant of bulk export permits as being inconsistent with this objective. If it was correct in this assessment (and there is nothing to show it was not) then it is difficult to see that it had any discretion at all to approve NEAT's permits. 157 It is trite to say that each case must be determined according to its own particular merits. The present case is, in many respects, a very unusual one. AWBI was, as Mr Gomersall conceded, concerned more with its overall marketing strategy than with the merits of individual cases. Its decisions in this case were clearly made in the inflexible application of its policy against bulk export permits. On the other hand, this policy accorded with AWBI's constitutional charter. It was based on apparently legitimate considerations. No material was put before AWBI which challenged the legitimacy of those considerations, or which provided any argument to the effect that the bulk export permits which were sought could be granted in a manner that was consistent with AWBI's consitutional mandate. In other words, no material was put before AWBI which could be expected to persuade it to deviate from its policy. 158 In these circumstances, the decisions AWBI made were the only decisions it could be expected to make, given its constitutional mandate. It follows that AWBI, in making these decisions, did not fail to take account of relevant considerations. This ground of challenge has not been made out.

Did AWBI UNLAWFULLY PURPORT TO DELEGATE ITS FUNCTIONS TO AWB? 159 This issue arose pursuant to a late amendment to NEAT's Statement of Claim. Shortly before the hearing of this matter, a paragraph was inserted in the Statement of Claim in the following terms: "12A Further or in the alternative, the functions of the third respondent under section 57 of the Act were not delegable and the second respondent therefore had no authority to act on its behalf in the exercise of these functions." 160 At the same time, the claims that AWBI had unlawfully refused to approve NEAT's applications were amended by inserting a claim that approval was refused by the third respondent "or by the second respondent purporting to act on its behalf". 161 Early in the hearing of the matter, Mr Robertson expressed concern as to the potential scope of this amendment. He was only able to deal with this new claim, he said, if it was raised solely as a legal issue involving the construction of the service agreement between AWB and AWBI. If other matters were to be relied upon in support of this ground then he would probably need to adduce evidence as to how AWBI conducted its day to day operations. In response, Mr Hughes said "we are simply relying on the fact that under the service agreement the functions of dealing with these bulk export applications were entrusted to AWB Limited". Mr Hughes also said that he would rely upon paragraphs (1) and (2) of Mr Gomersall's affidavit dated 30 June 2000. 162 NEAT was then permitted to rely upon these newly framed claims upon the basis specified by Mr Hughes, namely that the issue was entirely a legal one relating to the effect of the service agreement, and would not involve the consideration of evidence relating to specific operations or communications between the parties. 163 The evidence which was given during the case indicated that some of the letters apparently emanating from AWBI were in fact written on AWB letterhead. This and other evidence indicated a possible blurring between the identities of the two bodies. However in accordance with Mr Hughes' assurance that these matters would not be relied upon pursuant to NEAT's "unlawful delegation" point, this evidence must be disregarded. It would be unfairly prejudicial to the respondents if the matter were to be dealt with on any basis other than that initially indicated by Mr Hughes, namely that this challenge was based entirely on the conclusions to be drawn from the construction of the service agreement. 164 NEAT's point under this head is simply this. The power to give or withhold approval for a bulk export permit was conferred by s 57(3B) of the Act to AWBI alone. This is a non-delegable power which must be exercised by AWBI and not by someone else on its behalf. The decisions to withhold approval of NEAT's applications were made by Mr Richardson and Mr Gomersall acting as employees of AWB. In so acting they were fulfilling AWB's obligation to AWBI under the service agreement between them. On a true construction of that service agreement, read in conjunction with AWB's constitution, AWBI exercised no control over those officers in the exercise of their functions. Mr Hughes submitted that the role of AWB was that of an independent contractor to AWBI. AWB's employees were to deal with the approval of permits. AWBI had no control over the manner of performance of those services. Accordingly, the decisions in question were the decisions of AWB, not AWBI. 165 In order to resolve this issue it is necessary to turn, albeit briefly, to the constitutions of AWB and AWBI and to the terms of the service agreement between the two companies. 166 Article 3.1(e) of AWB's constitution is in the following terms: "3 Exercise of Directors' Powers 3.1 In the exercise of their powers the Directors must ensure that: …… (e) the business of the Company is managed with an objective of the AWB Group (other than the Pools Subsidiary) providing services (which may include but are not limited to, administrative, human resources, marketing, risk management, funding and treasury services) to the Pools Subsidiary efficiently and at competitive prices and of offering at competitive prices funding services to growers who sell wheat into the pools run by the Pools Subsidiary; and" 167 AWBI's constitution contains no provision as to how its functions are to be performed. It must be remembered that AWBI is a wholly owned subsidiary of AWB. Accordingly, it is AWB who appoints the directors of AWBI and whose presence constitutes a quorum at AWBI's general meetings. 168 The service agreement between AWB and AWBI is specified to take effect on 1 July 1999. Clause 2 of the agreement contains, as relevant here, the following provisions: "2 Services Provider Appointment & Obligations

1. AWB Limited is obliged under its constitution to ensure that the business of AWB (International) Limited is managed with the objective of maximising net returns for pool participants.
2. AWB (International) Limited appoints AWB Limited as its service provider to provide AWB (International) Limited with Services on and subject to the terms and conditions of this agreement. …….. 4. AWB Limited agrees to act as AWB (International) Limited's service provider and to provide the Services on and subject to the terms and conditions of this agreement. …… 6. AWB Limited will use its best endeavours to provide the Services to AWB (International) Limited to the extent at the time and to the standard as determined by Key Performance Indicators negotiated by both parties. In providing the Services, AWB Limited shall have regard to the requirement under its Constitution to endeavour to ensure that services are provided to AWB (International) Limited effectively and at competitive prices. ….." 169 Under Clause 4 of the agreement, AWB agreed to provide AWBI with services described as "core corporate services" which included company secretary services, legal services, human resources and change management, accounting and administrative services and "other services as agreed". Under Clause 6, AWB agreed to provide "operational services" which included marketing services, risk management services and merchandising support. The agreement provided for a service charge to be paid by AWBI to AWB in an amount to be negotiated between them, having regard to a number of specified factors. 170 The service agreement is silent on the subject of who should exercise control over any members of staff provided by AWB under the agreement. 171 The final piece of evidence relevant to this issue is to be found in the affidavits of Mr Gomersall and Mr Richardson. Paragraphs 1 and 2 of Mr Gomersall's affidavit dated 30 June 2000 is in the following terms: "1. I am an employee of the Second respondent (AWBL) to this proceeding. I am presently a Pricing Strategist for the Third Respondent (AWBI) and was previously a durum merchant for AWBI. 2. I provided services to AWBI as both Pricing Strategist and durum merchant pursuant to the Services Agreement between AWBL, AWBI and AWB (Finance) Limited, effective 1 July 1999, whereby AWBI engaged AWBL, on the terms of that agreement to provide services to AWBI. Annexed hereto and marked "NJG-1" is a copy of the said agreement." 172 Mr Richardson's affidavit is in almost identical terms except that his current position was said to be that of Product Manager International for AWBI. 173 I accept that the power conferred by s 57(3B) of the Act upon AWBI is to be exercised by that body and by no one else. As Gibbs J said in Race Course Co-operative Sugar Association Limited v Attorney-General of the State of Queensland [1979] 142 CLR 460 at 481: "When a discretionary power is conferred by statute upon the Executive Government, or indeed upon any public authority, the power can only be validly exercised by the authority upon whom it was conferred. Its exercise cannot be delegated to someone else, unless the statute, upon its proper construction, permits such delegation. Some case which illustrate this proposition, such as Allingham v Minister of Agriculture [1948] 1 All ER 780; 64 TLR 290; may perhaps be regarded as applying the maxim delegatus non potest delegare, whereas others, such as Ratnagopal v Attorney-General (Ceylon) [1970] AC 974, may simply provide authority for the obvious proposition that a statute which on its proper construction confers a power on A does not permit the power to be exercised by B." 174 Whilst I accept that AWBI was itself required to exercise its powers under s 57(3B), I am satisfied that it did so. The mere fact that AWBI performed its functions through staff which was provided, for a fee, by AWB, does not constitute an abdication to AWB of its decision-making functions. The service agreement does not purport to delegate AWBI's functions to AWB. As Mr Robertson pointed out, there is a significant difference between an agreement under which A requests that B carries out its functions, and one where A requests B to make available, for a price, personnel who can assist it to carry out its functions. In the first case there is a delegation of functions, in the second there is not. This case, in my view, clearly falls within the second category. 175 It follows that this aspect of NEAT's claim cannot be sustained.

CONCLUSION 176 My findings in favour of the respondents on the two substantial issues raised in the case means that there can be no question of relief under the TP Act. The exemption contained in s 57(6) clearly applies to AWBI's decisions which were challenged in these proceedings. Accordingly, there are no matters left outstanding in the proceedings. The application must be dismissed. 177 Although the substantial relief in these proceedings was sought against the second and third respondents, the first respondent, the WEA, was separately represented and was present throughout the hearing. Mr Hughes conceded that, in the event that NEAT's application was unsuccessful, it could not resist an order that it pay the costs of all respondents. 178 I dismiss the application. I order the applicant to pay the costs of all respondents. I certify that the preceding one hundred and seventy-eight (178) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mathews.

Dated: 18 December 2000 Counsel for the Applicant: Mr T Hughes QC with Mr S Gageler

Solicitor for the Applicant: Withnell Hetherington

Counsel for the First Respondent: Mr N Williams with Mr R Tyson

Solicitor for the First Respondent: Australian Government Solicitor

Counsel for the Second and Third Respondent: Mr A Robertson SC with Mr A Tonking

Solicitor for the Second and Third Respondent: Arthur Robinson Hedderwick

Date of Hearing: 20- 21 July 2000, 11 October 2000

Date of Judgment: 18 December 2000