Neat Domestic Trading Pty Ltd v Awb Ltd and Another

[2003] HCA 35

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(Decision by: Gleeson CJ)

Neat Domestic Trading Pty Ltd
vAwb Ltd and Another

Court:

Judges:
Gleeson CJMcHugh J
Kirby J
Hayne J
Callinan J

Subject References:
Administrative law
Administrative decisions
Judicial review
Whether private company making decision under an enactment
(CTH) Administrative Decisions (Judicial Review) Act 1977 ss 3(1), 5(2)(f), 6(2)(f)
(CTH) Wheat Marketing Act 1989 s 57

Legislative References:
Administrative Decisions (Judicial Review) Act 1977 - s 3(1); s 5(2)(f); s 6(2)(f)
Wheat Marketing Act 1989 - s 57

Hearing date: 14 November 2002
Judgment date: 19 June 2003

Canberra

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Decision by:
Gleeson CJ

[1] This appeal concerns a statutory scheme regulating the export of wheat, and the administrative law principles governing the role in that scheme of a corporation representing growers' interests.

[2] The regulatory scheme took effect from 1 July 1999. The background, and the government policy, were set out in an explanatory memorandum relating to the Wheat Marketing Legislation Amendment Act 1998 (Cth), which amended the Wheat Marketing Act 1989 (Cth) (the Act). The explanatory memorandum stated:

17. The AWB was established in 1939 to control the marketing of wheat in Australia. It has operated under various Commonwealth statutes with details of wheat marketing changing over time, including deregulation of the domestic market in 1989. The most recent legislation is the Wheat Marketing Act 1989. Under that Act, the AWB has the sole right to export wheat. It also has responsibility for the commercial aspects of wheat marketing through operating wheat pools.

18. Following lengthy discussion, Government and industry have agreed that from 1 July 1999 responsibility for all commercial aspects of wheat marketing will be taken over by a new grower owned and controlled Corporations Law company structure. Consequently, from 1 July 1999, the only ongoing Government involvement (and therefore regulatory impact) in wheat marketing will be in relation to the export monopoly on wheat which will be managed, from that time, by a small independent statutory body.

19. The international market for wheat is distorted by the interventionist policies of other grain producing countries such as the US and EU which use varying forms of domestic support and export subsidy programs. Aggressive use of these programs can substantially reduce international wheat prices.

20. The export monopoly, therefore, provides a tool to conduct the export marketing of Australian wheat to maximise the net returns to growers. It is also considered that the export monopoly provides a net benefit to the wider Australian community.

...

32. The most appropriate option is to legislate the export monopoly on wheat to an independent statutory body to be known as the Wheat Export Authority (WEA). For an initial period of five years the legislation will provide that the new grower company pool subsidiary has an automatic right to export wheat. Requests to export wheat from other than the grower company (as currently happens) would be managed by the WEA to separate regulatory and commercial functions.

33. The WEA would be formed by retaining the "shell" of the existing statutory AWB as a suitably renamed and reshaped independent body. Its functions would be limited to: managing and approving requests to export wheat from organisations other than the pool subsidiary; monitoring the use of the monopoly; and accounting to Government and industry as required on performance of its functions.

34. The WEA would monitor and assess the pool subsidiary's use of its wheat export rights to ensure that the company was using them in accordance with the intentions of Parliament.

...

98. The WEA must consult Company B about all requests for consent to export wheat. In the case of proposed exports in bulk, ie other than by means of bags or containers, a consent may not be given unless nominated company B has first approved the export. This requirement supports the automatic right given by the Bill to Company B to export wheat and reflects the importance of bulk exports in the overall marketing arrangements.

[3] The policy of the legislation appears from para 18. The reason for the policy is stated in paras 19 and 20. Surveillance of the administration of the policy is contemplated in para 34.

[4] In the above paragraphs, AWB is the Australian Wheat Board. The "new grower company pool subsidiary" referred to in para 32, which is also "nominated company B" referred to in para 98, is AWB (International) Ltd (AWBI), which is, in turn, a wholly owned subsidiary of AWB Ltd. Both are companies limited by shares, and incorporated under the Corporations Law of Victoria. The shares in AWB are divided into classes. One class of shares, whose holders control the board of directors, and which carry voting rights, but not the right to receive dividends, can only be held by wheat growers. AWB and AWBI together make up the "new grower owned and controlled Corporations Law company structure" referred to in para 18.

[5] The statutory provision enacted to give effect to the policy explained above is s 57 of the Act, which is as follows:

57 Control of export of wheat

(1) A person shall not export wheat unless:

(a)

the [Wheat Export] Authority has given its written consent to the export of the wheat; and

(b)

the export of the wheat is in accordance with the terms of that consent.

Penalty:

(a)

in the case of a natural person -- $60,000; or

(b)

in the case of a body corporate -- $300,000.

(1A) The prohibition in subsection (1) does not apply to nominated company B.

(2) An offence against subsection (1) is an indictable offence.

(3) The Authority's consent to the export of wheat may be limited to the export of the wheat in specified circumstances, in accordance with specified requirements or by a specified person.

(3A) Before giving a consent, the Authority must consult nominated company B.

(3B) The Authority must not give a bulk-export consent without the prior approval in writing of nominated company B. For this purpose a consent is a bulk-export consent unless it is limited to export in bags or containers.

(3D) An application for a consent under this section must be accompanied by such fee (if any) as is prescribed by the regulations. The fee is payable to the Authority.

(3E) The Authority must issue guidelines about the matters it will take into account in exercising its powers under this section.

(4) In proceedings for an offence against subsection (1), a certificate signed by the Chairperson and:

(a)

stating that the Authority did not consent to the export of particular wheat; or

(b)

setting out the terms of a consent given by the Authority;

is prima facie evidence of the matters set out in the certificate.

(5) The prohibition in subsection (1) is in addition to, and not in substitution for, any prohibition by or under the Customs Act 1901 or the Export Control Act 1982.

(6) For the purposes of subsection 51(1) of the Trade Practices Act 1974, the following things are to be regarded as specified in this section and specifically authorised by this section:

(a)

the export of wheat by nominated company B;

(b)

anything that is done by nominated company B under this section or for the purposes of this section.

(7) Before the end of 2004, the Authority must conduct a review of the following matters, and give the Minister a report on the review:

(a)

the operation of subsection (1A) in relation to nominated company B;

(b)

the conduct of nominated company B in relation to:

(i)

consultations for the purposes of subsection (3A); and

(ii)

the granting or withholding of approvals for the purposes of subsection (3B).

[6] Section 57(7) reflects the reference in para 32 of the explanatory memorandum to "an initial period of five years". Of course, the review and report might not result in any alteration of the scheme, but in considering the meaning and effect of s 57, it is material to note that the conduct of AWBI (nominated company B) in the granting or withholding of approvals for the purposes of subs (3B) is to be the subject of political review and accountability.

[7] Subsections (3A), (3B) and (6) are of direct relevance to this appeal.

[8] The appellant is a domestic and international grain trader. On a number of occasions before 1 July 1999 the appellant was granted permits for the bulk export of wheat. On six occasions between November 1999 and January 2000 the appellant sought the consent of the Wheat Export Authority to the bulk export of durum wheat. In five cases, the proposed destination was Italy; in one case it was Morocco. In each case AWBI declined to give its approval, and the authority was obliged to withhold consent.

[9] The appellant, being a competitor of AWBI in relation to the export of wheat, complained that AWBI was contravening the Trade Practices Act 1974 (Cth). It was confronted with the problem of s 57(6) of the Act, which refers to s 51(1) of the Trade Practices Act. That section provides that, in determining whether there has been a contravention of the Trade Practices Act of a kind of possible relevance to the present case, anything specifically authorised by legislation must be disregarded. The appellant endeavoured to overcome that obstacle by claiming relief under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the Judicial Review Act), contending that the refusal of AWBI to give approval was a decision of an administrative character under an enactment (Judicial Review Act s 3(1)), and that it involved an improper exercise of power, being an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the case (Judicial Review Act ss 5(2)(f) and 6(2)(f)).

[10] The appellant commenced proceedings in the Federal Court. Those proceedings failed at first instance before Mathews J, ^[1] and again on appeal to the Full Court (Heerey, Mansfield and Gyles JJ). ^[2]

[11] There is some difficulty in relating the conduct of AWBI, and the complaint of the appellant, to the context of administrative law. AWB and AWBI are trading corporations, operated for the benefit of their corporators. However, the Act gives each a statutory role which may affect the interests of members of the public, such as the appellant. A question arises as to the extent to which that role is circumscribed. When a statute confers a discretionary power which is capable of affecting rights or interests, the identity and nature of the repository of the power may be a factor to be taken into account in deciding what are intended to be matters that must necessarily, or might properly, be considered in decision-making or whether it is intended that the power is at large. ^[3]

[12] It is important to note provisions of the corporate constitutions of AWB and AWBI, and to relate them, in turn, to the commercial and regulatory context in which s 57 operates.

[13] Article 3.1(b) of the constitution of AWB is as follows:

3.1 In the exercise of their powers the Directors must ensure that:

(a)

...

(b)

the business of the Pool [sic] 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.

[14] Article 13.2 of the constitution of AWBI provides that, in the exercise of their powers, the directors of AWBI must ensure that the business of AWBI is managed in a manner which complies with Art 3.1(b) of the constitution of AWB.

[15] Thus the businesses of AWB, and AWBI, are to be conducted in the interests of maximising returns to growers who sell wheat into the pools. That is part of the background to s 57(3B). The consent of the Wheat Export Authority (the "small independent statutory body" referred to in para 18 of the explanatory memorandum) is necessary for anyone, except AWBI, wanting to export bulk wheat. The Wheat Export Authority must not give that consent unless it has the prior written approval of AWBI. The guidelines which the authority will take into account under s 57(3E) are not said to be binding on AWBI. There is nothing in the legislation to indicate what, apart from the matters it is required by its own constitution to consider, AWBI may or may not take into account in giving, or declining to give, approval. The constitution of AWBI requires its directors, in the exercise of their powers, to have regard to the maximising of returns to growers who sell into the pools.

[16] Behind all this is what was described in evidence as the single desk system of export marketing. Mathews J explained the system, and the marketing policy which it reflected, by quoting from a document of 31 March 2000 addressed to the Wheat Export Authority by AWBI, commenting on "issues surrounding bulk permit applications":

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.

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.

[17] The appellant's complaint about AWBI's withholding of approval of the bulk-export consents sought by it from the Wheat Export Authority is that AWBI was acting in accordance with a rule or policy without regard to the merits of the case. In putting its case in that way, the appellant was invoking ss 5(2)(f) and 6(2)(f) of the Judicial Review Act. The language of those provisions reflects established principles of administrative law expressed, for example, by Lord Browne-Wilkinson in R v Secretary of State for the Home Department ; Ex parte Venables : ^[4]

When Parliament confers a discretionary power exercisable from time to time over a period, such power must be exercised on each occasion in the light of the circumstances at that time. In consequence, the person on whom the power is conferred cannot fetter the future exercise of his discretion by committing himself now as to the way in which he will exercise his power in the future ... By the same token, the person on whom the power has been conferred cannot fetter the way he will use that power by ruling out of consideration on the future exercise of that power factors which may then be relevant to such exercise.

These considerations do not preclude the person on whom the power is conferred from developing and applying a policy as to the approach which he will adopt in the generality of cases ... But the position is different if the policy adopted is such as to preclude the person on whom the power is conferred from departing from the policy or from taking into account circumstances which are relevant to the particular case in relation to which the discretion is being exercised. If such an inflexible and invariable policy is adopted, both the policy and the decisions taken pursuant to it will be unlawful.

[18] It will be necessary to return to the question whether what is here involved is a decision of an administrative character, being an exercise of a discretionary power, to which those principles apply. Let it be assumed, for the moment, that this is so.

[19] The reference in the appellant's submissions to the merits of its applications for bulk-export consent requires further analysis. The information provided by the appellant to the Wheat Export Authority in support of each application for consent was relatively sparse. It amounted to little more than information that there was a purchaser in a certain country for a certain quantity of durum wheat, which the appellant had available for export. Bearing in mind that the appellant and AWBI were competitors, it may not be surprising that further information was not provided. What, exactly, does it mean to speak of the "merits" of such an application? Presumably, it was self-evident that the proposed transaction would be in the financial interests of the appellant, and its suppliers; if it were otherwise, it would not be proposed. Is that a consideration to which AWBI was bound to pay regard? Section 57 plainly envisaged that AWBI would be, if not the sole, at least the principal, exporter of Australian wheat. It conferred on AWBI what was, in effect, a capacity to veto bulk exports by any potential competitor. This reflected the single desk system of export marketing; a system described in the explanatory memorandum as a monopoly. In this context, a reference to "merits" cannot sensibly be a reference to the financial interests of the appellant. The legislation gave AWBI a power to veto any application. That would always be adverse to the interests of an applicant. Where a statute confers a monopoly on X, and then gives Y power to relax the monopoly, but only if X approves, then it is not easy to give practical content to a suggested legislative requirement that X consider on its merits each proposal for a relaxation of X's monopoly. But it can hardly mean that X is required to have regard to the financial interests of its would-be competitor.

[20] In such a context, where there is at least a potential conflict between the interests of the exporter seeking approval and the interests AWBI is required by its constitution to pursue, the concept of the merits of an application for approval must be related to considerations, if any, that AWBI is required or entitled to take into account, or considerations that are extraneous to its decision. It is to the provisions of the Act that one must look for some warrant for concluding that a particular consideration is obligatory, or available, or extraneous. ^[5] Judicial review is not an invitation to judges to decide what they would consider fair or reasonable if they were given the function conferred upon AWBI. The appellant might genuinely believe that the system itself is unfair. A judge might share that opinion. Nothing follows from that. The question is what, if anything, the Act requires, or permits, or forbids AWBI to take into account in giving effect to its role in the system.

[21] It is possible that, in a given case, an exporter, applying for consent from the Wheat Export Authority, might seek to make out a case to show that the granting of the consent could not possibly have any adverse effect upon the single desk system of marketing, or upon AWBI, or the growers whose interests it represented. Given that AWBI was entitled, indeed bound, to pursue grower interests, an exporter might seek to show that a particular application promoted those interests, or was at least incapable of affecting them adversely, either directly or indirectly. That is not the present case. As noted above, the appellant provided little information in support of each application. It did not present information or argument in support of a change of the single desk policy, or seek to show that the policy was irrelevant to its particular proposals.

[22] It may also be accepted that personal animosity towards an applicant, or a desire to confer a personal benefit upon a particular grower or exporter, would be extraneous considerations; and others may be imagined. But they have nothing to do with the present appeal. The sole complaint is that AWBI adhered to a policy; and that, in its adherence to the policy, it failed to take account, or foreclosed consideration, of matters it was either required or entitled to take into account.

[23] The policy manifested in s 57 itself is not difficult to discern. It is to be understood in the light of the history of wheat marketing, the exigencies of the international market, and the single desk system. Section 57(7) suggests that the policy is open to legislative review, but, in its present form, it involves conferring on AWBI a right to export, and requiring that any other potential bulk exporter must obtain the consent of the Wheat Export Authority, which must, in turn, have the approval of AWBI. The legislation confers upon AWBI a practical monopoly on the bulk export of wheat, save to the extent to which the authority (which is to issue guidelines) and AWBI (which is not bound by the guidelines, but whose conduct is subject to review and report) are prepared to relax the monopoly.

[24] There is nothing inherently wrong in an administrative decision-maker pursuing a policy, provided the policy is consistent with the statute under which the relevant power is conferred, and provided also that the policy is not, either in its nature or in its application, such as to preclude the decision-maker from taking into account relevant considerations, or such as to involve the decision-maker in taking into account irrelevant considerations. The policy, and its application, must be measured against those requirements, having regard to the matter presented for decision, and the information and arguments, if any, advanced for or against a particular outcome.

[25] Mathews J found that, in withholding approval in respect of the appellant's applications for bulk-export consent, AWBI had determined to pursue a policy that would be maintained "under current market conditions". She described that policy as follows:

[The] 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.

[26] Mathews J considered, and I agree, that there is nothing about such a policy that is inconsistent with the Act, or with the role it assigned to AWB. Furthermore, there was nothing about the particular circumstances of any of the appellant's applications that required reconsideration of the policy, or that rendered the policy irrelevant, or potentially irrelevant, to those applications. The policy was a proper policy, available to AWBI consistently with the legislative scheme, and there was nothing in the circumstances of the case that demonstrated a refusal to entertain the possibility that a particular case might fall outside the policy, or require its reconsideration. ^[6] No such case was advanced on behalf of the appellant, either to the Wheat Export Authority, or to AWBI, or in this court. There was nothing contrary to the Act in the adoption by AWBI of a general policy; a policy which so closely reflected the legislative purpose. The complaint that the policy was administered in an unduly inflexible manner was rejected by Mathews J. It is entirely theoretical, no reason having been advanced as to why the policy should have been relaxed in the case of the appellant other than that it would have been in the interests of the appellant, and its suppliers, for that to be done. As Mathews J found, "no material was put before AWBI which could be expected to persuade it to deviate from its policy".

[27] Mathews J was right to reject the appellant's case on what might be termed the administrative law merits. That makes it strictly unnecessary to decide whether the withholding of an approval by AWBI was a decision of an administrative character made under an enactment. I should indicate, however, that my preference is for the view (accepted by Mathews J) that it was. While AWBI is not a statutory authority, it represents and pursues the interests of a large class of primary producers. It holds what amounts, in practical effect, to a virtual or at least potential statutory monopoly in the bulk export of wheat; a monopoly which is seen as being not only in the interests of wheat growers generally, but also in the national interest. To describe it as representing purely private interests is inaccurate. It exercises an effective veto over decisions of the statutory authority established to manage the export monopoly in wheat; or, in legal terms, it has power to withhold approval which is a condition precedent to a decision in favour of an applicant for consent. Its conduct in the exercise of that power is taken outside the purview of the Trade Practices Act.

[28] In Burns v Australian National University , ^[7] Ellicott J said, in relation to the meaning of "administrative" in the context of s 3 of the Judicial Review Act:

It is obviously unwise to attempt a comprehensive definition but, in my opinion, it is at least apt to describe all those decisions, neither judicial nor legislative in character, which Ministers, public servants, government agencies and others make in the exercise of statutory power conferred on them, whether by Act of the Parliament or by delegated legislation. In other words it at least covers the decisions made in executing or carrying into effect the laws of the Commonwealth. Such decisions, as the definition indicates, may or [may] not require the exercise of a discretion. Usually they will.

[29] The argument that what is involved is not a decision of an administrative character under an enactment takes as its focus the private interests represented, and pursued, by AWBI, as distinct from the public character of the Wheat Export Authority. That appears to me to involve an incomplete view of the interests represented by AWBI, and also to leave out of account the character of what it does, which is, in substance, the exercise of a statutory power to deprive the Wheat Export Authority of the capacity to consent to the bulk export of wheat in a given case.

Conclusion

[30] The appeal should be dismissed with costs.