Defiance Enterprises Pty Ltd v Collector of Customs for the State of Queensland; Kelly v. Defiance Enterprises Pty Ltd [1991] QSCFC 70 [1992] 2 Qd R 81

IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 66 of 1989 BEFORE: Mr. Justice Demack Mr. Justice Thomas Mr. Justice Mackenzie BRISBANE, 28 JUNE 1991 ] REVISED COPIES ISSUED j i Court Reporting Bureau t Date: f 0/ C\ / oj (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter ,Court Reporting Bureau.) BETWEEN: DEFIANCE ENTERPRISES PTY . LTD. (Plaintiff) Respondent -and- THE COLLECTOR OF CUSTOMS FOR THE STATE OF QUEENSLAND (First Defendant) Appellant -and- COMMONWEALTH OF AUSTRALIA (Second Defendant) Appellant No. 880 of 1989 BETWEEN : FRANCIS IVOR KELLY (Suing in his capacity as Comptroller-General of Customs for the Commonwealth of Australia) (Plaintiff) Appellant -and- DEFIANCE ENTERPRISES PTY. LTD. (Defendant) Respondent JUDGMENT MR. JUSTICE DEMACK: In this appeal I have reduced my reasons to writing which I now publish. In my opinion, the appeal should be dismissed with costs. ■Govt. Printer, Qld. 1 [1991] QSCFC 70 -- 1 of 29 -- | MR. JUSTICE THOMAS: I also would make that order and I publish my reasons. MR. JUSTICE MACKENZIE: I agree that the appeal should i i be dismissed with costs. I publish my reasons. MR. JUSTICE DEMACK: The order of the court is that the appeal is dismissed with costs. 1/ 10 20 20 BO 40 40 ! 50 50 i j 60 ■Govt. Printer, Qld. 2 60 -- 2 of 29 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT Writ No. 880 of 1989 oA^BETWEEN: FRANCIS IVOR KELLY (Suing in his capacity as Comptroller-General of Customs for the Commonwealth of Australia) (Plaintiff) Appellant AND: DEFIANCE ENTERPRISES PTY. LTD. (Defendant) Respondent BY ORIGINAL CLAIM AND: DEFIANCE ENTERPRISES PTY. LTD. (Plaintiff) Respondent FRANCIS IVOR KELLY (First Defendant) Appellant AND: COMMONWEALTH OF AUSTRALIA (Second Defendant) Appellant BY COUNTER CLAIM DEMACK J THOMAS J MACKENZIE J -- 3 of 29 -- ■A -- 4 of 29 -- Reasons for judgment delivered by Demack J, Thomas J and Mackenzie J.von 28.6.91 All concurring as to the orders. "APPEAL DISMISSED WITH COSTS. ! ! -- 5 of 29 -- -- 6 of 29 -- IN THE SUPREME COURT OF QUEENSLAND ^ • • • FULL COURT No. Before the Full Court Mr. Justice Demack Mr. Justice Thomas Mr. Justice Mackenzie BETWEEN: DEFIANCE ENTERPRISES PTY LTD (Plaintiff) -and- THE COLLECTOR OF CUSTOMS FOR THE STATE OF QUEENSLAND (First Defendant) -and- COMMONWEALTH OF AUSTRALIA (Second Defendant) No. BETWEEN: FRANCIS IVOR KELLY (Suing in his capacity as Comptroller-General of Customs for the Commonwealth of Australia) (Plaintiff) -and- DEFIANCE ENTERPRISES PTY LTD (Defendant) BY ORIGINAL CLAIM -and- DEFIANCE ENTERPRISES PTY LTD (Plaintiff) -and- FRANCIS IVOR KELLY (First Defendant) -and- COMMONWEALTH OF AUSTRALIA (Second Defendant) 66 of 1989 Respondent Appellant Appellant 880 of 1989 Appellant Respondent Respondent Appellant Appellant BY COUNTERCLAIM -- 7 of 29 -- 2 JUDGMENT - DEMACK J. , j , Delivered the 28th day of June, 1991 ^ t . '%on aav CATCHWORDS : Customs duty - Dough divider and moulder - Whether "output capacity" greater than 2500 pieces per hour - Capacity determined by use within baking process Counsel: Mr. G. Gibson Q.C. with J.A. Logan for appellant Mr. P. McMurdo for respondent Solicitors : Australian Government Solicitor for appellant Feez Ruthning for respondent Hearing date: 11th June, 1991 -- 8 of 29 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT - No. BETWEEN: DEFIANCE ENTERPRISES PTY LTD (Plaintiff) -and- THE COLLECTOR OF CUSTOMS FOR THE STATE OF QUEENSLAND (First Defendant) -and- COMMONWEALTH OF AUSTRALIA (Second Defendant) No. BETWEEN: FRANCIS IVOR KELLY (Suing in his capacity as Comptroller-General of Customs for the Commonwealth of Australia) (Plaintiff) -and- DEFIANCE ENTERPRISES PTY LTD (Defendant) BY ORIGINAL CLAIM -and- DEFIANCE ENTERPRISES PTY LTD (Plaintiff) -and- . FRANCIS IVOR KELLY (First Defendant) -and- COMMONWEALTH OF AUSTRALIA (Second Defendant) BY COUNTERCLAIM JUDGMENT - DEMACK J. Delivered the 28th day of June, 1991. 66 of 1989 Respondent Appellant Appellant 880 of 1989 Appellant Respondent Respondent Appellant Appellant Donald Alwynne Brown commenced his own business as a baker in Adelaide in 1948. He continued in that business -- 9 of 29 -- 2 until December 1984 when he sold out to Defiance Enterprises Pty Ltd ("Defiance"). By that time, his business had a corporate face, Sottoriva Australia Pty Ltd ("Sottoriva" ). In addition to the baking business, Sottoriva imported baking machinery. Among the machines imported was an Olympia dough divider and moulder from a West German firm Paul Busse ("Busse"). The automatic model was called Olympia Type 4A and the semi-automatic Olympia Type 4. Sottoriva received its first shipment of Olympia Type 4 in about 1982. In 1985, Defiance imported some Olympia Type 4 machines from Busse. The capacity of these machines to divide and mould buns was tested by two Customs investigators who were satisfied that the output of each machine was between 1800 and 2000 pieces per hour. In 1988 Defiance imported some more Olympia Type 4 machines, and a dispute arose between Defiance and officers of the Collector of Customs for the State of Queensland ("the Collector") about the capacity of these machines. The significance of the dispute lies in the fact that dough dividing and moulding machines "having an output capacity not greater 2500 pieces per hour" attract the benefit of Tariff Concession Order 8533726. Machines with a greater capacity attract duty at 15% but those receiving the concession attract duty at 2%. The Collector purported to exercise his powers of seizure under s. 203 of the Customs Act . Defiance requested the release of the machinery and made provision of security for -- 10 of 29 -- 3 its release. It-then commenced proceedings for a"declaration that the machinery is not forfeited.- - --- .... The Collector, by his counterclaim, alleged that the rcv^u- importation had been done with intent to defraud the revenue and sought additional customs duty in the amount of $31,747.71. The Commonwealth of Australia ("the Commonwealth") joined in the action as second defendant, and by its counterclaim sought a declaration that the machinery was forfeit and that the amount of the security, $275,097.90, was payable to the Commonwealth. In a second action, the Collector sought declarations that Defiance had committed twelve offences against provisions of the Customs Act in the documentation submitted on its behalf in respect of the importation of the machinery. The two actions were heard together by Lee J .. He found that the machines had an "output capacity not greater than 2500 pieces per hour". He declared that the machines were not forfeited and that no further duty was payable. He found that the alleged offences were not committed. The Collector has appealed against these findings. The very thorough judgment of Lee J. did not simply deal with the basic issue, namely, the output capacity of the machines. It also covered a number of contentious legal questions that would have to be considered if he was in error upon the question of output capacity. These issues were also argued on appeal . The evidence which Lee J. dealt with in detail and with great care showed:- -- 11 of 29 -- 4 (a) Some of the printed material Defiance received from > Busse referred to the machines as having a capacity of not more than 2500 pieces per hour. (b) Some of the printed material Defiance received from Busse referred to the machines as having a capacity of up to 10,000 pieces per hour. (c) The 1985 test showed a capacity of between 1800 and 2000 pieces per hour. (d) A test in March 1989 at Cooparoo showed a capacity of between 2057 and 2215 pieces per hour. (e) A series of tests conducted at Loganlea in July 1989 showed a capacity of up to 8156 pieces per hour. In respect of the Busse material His Honour found that Busse "was lax in the preparation of illustrated brochures and in their contents", (p. 393). He considered the 1985 test, the Cooparoo test and the Loganlea tests in detail. He found the Loganlea tests artificial and unconvincing. They had involved the use of up to four men to perform the tests. The dough which was divided and shaped was then removed, and thrown onto a counter and eventually dumped. He found that the usual method of operation in industry was to use one person (p. 409). I have set out very little of His Honour's careful findings, but I am satisfied that I have said enough to put the Collector's submission in context. Before Lee J., and on appeal, it was submitted that for Customs' purposes goods must be classified or identified according to the condition of the item itself at the time of -- 12 of 29 -- 5 importation . In this regard the - end use i and * the ^importer' s intention are irrelevant. Particular reliance was placed upon Whitton v. Falkiner (1915) 20 C.L.R. 118. That case concerned the importation of a number of vehicle chassis, which could be linked together to form a road train. One was equipped with a petrol-driven engine and generator. The others had electric motors. When linked together the electricity generated by the one drove the motors on the others. The Hight Court held that none of the chassis was a chassis of a motor car, lorry or wagon. Issue was obviously quite different from the issue in this appeal. However, there is a short passage in the judgment of Isaacs J. which does shed some light, (p. 128):- "The chassis, which on the evidence include the generators and transmission apparatus, are not, as they stand on importation, chassis of what are ordinarily known as 'motor cars, motor lorries and motor waggons'. Looking at each of them as an independent importation, none could be truly said to be constructed for the purpose of any motor car, or any ( motor lorry, or any motor waggon. By the purpose of the chassis is meant, not the special and individual purpose of the person who imports, but the general purpose or use to which the article is put in the ordinary course of events and is specially adapted." It is now well established that identification of the relevant entity is the first step the process of determining customs duty: ( Re Gissing and the Collector of Customs (1977) 14 A.L.R. 555, at p. 557). The passage that I have quoted from the judgment of Isaacs J. recognises this. However, the identification is of "the general purpose or use to which the article is put in the ordinary course of events and is specially adapted." -- 13 of 29 -- 6 One of the questions debated in Whitton v. Falkiner was whether there was some trade meaning for "motor car, lorry or waggon." At p. 127, Isaacs J. said:- "Now, there was absolutely no evidence given as to the trade meaning of 'motor car, lorry or waggon. ' Some witnesses gave evidence as to what they individually 'would' call the article in question. This was objected to, and properly so. It is not for a witness, but for the Court, to say whether the articles should be properly included under the statutory designation. . It is not a matter of scientific or trade opinion whether they ought to be so included . Trade usage and commercial appellation are matters of actual fact. and the evidence properly admissible on such a head is as to what merchants and others did at the date of the Act in fact call such articles. If the articles were at that date unknown, or not known by that name, then merchants cannot, by merely appropriating a particular tariff designation and attaching that to an article, bring it into the country at the rate fixed for the true article of that name unless it be such true article. The language of a Tariff Act, like that of every other Act, is to be taken in its ordinary signification, unless some secondary meaning is proved. The only appropriate secondary meaning in a Customs Act is that of commerce. If a commercial designation of an article is established. that should prevail from the nature of the operations which such an enactment is mainly intended to control . And the commercial designation that is to govern must be one which exists at the time the Legislature spoke, and must be, as the Act is, general and definite, and not local or limited to particular traders. In the absence of evidence as to definite commercial designation different from their ordinary meaning, the interpretation of the words used as ordinary words is within the judicial knowledge." Clearly enough the identification of the relevant entity can in many cases be achieved in the same way as it was done in Whitton v. Falkiner . Here the identification requires a decision about the "output capacity" of the machine. It would seem to me that this is eminently a matter which should be -- 14 of 29 -- 7 determined by -fcJItrade * usage and commercial s appellation" . efeHis ai?fir» < «c©»«sr Honour found, at p. 410, * ^ "The manufacturer has stated and the . industry it - rst? throughout Australia accepts that it has an output ranging from 1800 up to a maximum of 2500 per hour." It has been surprisingly difficult to find any case which deals with an issue close to the one now before the Court. However, the concept of "maximum capacity" was considered by the Court of Appeal in No-Nail Cases Propriety Limited v. No- Nail Boxes. Limited (1944) 1 K.B. 629. One issue in that case involved the payment of royalties on the use of a patented machine. The contract between the parties included, in cl. 7, the provision that "the maximum capacity of each unit shall be declared and guaranteed by the licensor upon installation of such unit". Minimum payments were to be made on the basis of the maximum capacity so declared. It was held that, as the licensor had not given the declaration and guarantee of maximum capacity, it had forfeited its right to minimum payments. In reaching that decision the Court of Appeal rejected the licensor's argument that the maximum capacity of each unit was constant and invariable, as regular and predictable as the movements of the earth. "The figure which represents this capacity is, no doubt, ascertainable, as Atkinson J. said, but that does not mean there can be no doubt or dispute about it", (p. 641). The approach suggested, namely, of ascertaining the capacity by evidence, was, in fact, the course taken before Lee J. . The definition given by the Court of Appeal of the \ -- 15 of 29 -- 8 words "maximum capacity" was "the greatest quantity that the units can produce in a fixed period of time when worked without interruption and with the largest possible amount of material" (p. 640). That can readily be seen as appropriate where the process involved the use of a channelled metal strip, instead of nails, when making boxes, cases and containers. The articles being produced were not perishable food items, so there could be occasions for working without interruption and with the largest possible amount of material. Here the machine was part of a process for making bread. Preparation of the dough, and baking the divided and shaped dough are processes which are integral to the use of the machine, and, thus, to its capacity. Just as each individual chassis in Whitton v. Falkiner could be seen to belong in a road train, so the Olympia Type 4 is clearly seen as an integral part of a baking process, and its "capacity" is determined according to its use within that process. This does not mean that output capacity is determined by the use that an individual importer may put it to. That is a question of end use that must be ignored, and rightly so. But when the obvious use of the . machine is as an integral part of the production of bread rolls, any attempt to ascertain its output capacity in isolation from the baking process is commercial nonsense. As Isaacs J. observed, "the only appropriate secondary meaning in a Customs Act is that of commerce." To ignore the realities of commerce is to distort the purpose of Customs. -- 16 of 29 -- In my opinion, • the most persuasive evidence ^about the output capacity of the Olympia Type 4 is the »evidence about the baking industry's opinion of its capacity.-As part of that opinion, the evidence, that the machine is ordinarily operated by one person, is also critically important. This is a commercial factor, and it demonstrates that the tests at Loganlea were not, in any sense, tests designed to ascertain the output capacity of a machine which was an integral part of the bread making process . They were designed only to waste dough, and that is commercial nonsense. I am satisfied that His Honour's findings about the output capacity of the Olympia Type 4 were correct. The orders he made must stand . The issues raised in the Collector's action in which he sought declarations about a series of offences allegedly committed by Defiance all turn upon the findings about the capacity of the machines. Once the finding in respect of capacity is upheld, there is not need to consider the issues of law that would have arisen, if that finding were overturned . In.my opinion, the appeal should be dismissed with costs. -- 17 of 29 -- IN THE SUPREME COURT : . , . OF QUEENSLAND FULL COURT No. 66 of 1989 Before the Full'-Court - Mr. Justice Demack Mr. Justice Thomas , ~ <- Mr. Justice Mackenzie BETWEEN: AND: AND: DEFIANCE ENTERPRISES PTY. LTD. (Plaintiff) Respondent THE COLLECTOR OF CUSTOMS FOR THE STATE OF QUEENSLAND (First Defendant) Appellant COMMONWEALTH OF AUSTRALIA (Second Defendant) Appellant No. 880 of 1989 BETWEEN: AND: FRANCIS IVOR KELLY (suing in his capacity as Comptroller-General of Customs for the Commonwealth of Australia (Plaintiff) DEFIANCE ENTERPRISES PTY. LTD. (Defendant) BY ORIGINAL CLAIM Appellant Respondent AND: AND: DEFIANCE ENTERPRISES PTY. LTD. (Plaintiff) FRANCIS IVOR KELLY (First Defendant) AND: FRANCIS IVOR KELLY (Second Defendant) BY COUNTERCLAIM REASONS FOR JUDGMENT - THOMAS J. Respondent Appellant Appellant Delivered the 28th day of June, 1991. CATCHWORDS : Customs - Tariff concession - "Output capacity" of machine - Whether to be determined independently of factors relating to human operation of machine - Practical commercial test without reference to factors peculiar to individual users. Customs Act s. 269C(1); Tariff Concession 8533726 Counsel: G. Gibson Q.C. with J.A. Logan for appellant P. McMurdo for respondent Solicitors: Australian Government Solicitor for appellant Feez Ruthning for respondent Hearing date: 11th June, 1991. -- 18 of 29 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT BETWEEN : No. 66 of 1989 AND: AND: DEFIANCE ENTERPRISES PTY. LTD. (Plaintiff) THE COLLECTOR OF CUSTOMS FOR THE STATE OF QUEENSLAND (First Defendant) COMMONWEALTH OF AUSTRALIA (Second Defendant) Respondent Appellant Appellant No. 880 of 1989 BETWEEN: FRANCIS IVOR KELLY (suing in his capacity as Comptroller-General of Customs for the Commonwealth of Australia (Plaintiff) Appellant AND: DEFIANCE ENTERPRISES PTY. LTD. (Defendant) Respondent BY ORIGINAL CLAIM AND: AND: AND: BY COUNTERCLAIM DEFIANCE ENTERPRISES PTY. LTD. (Plaintiff) FRANCIS IVOR KELLY (First Defendant) FRANCIS IVOR KELLY (Second Defendant) Respondent Appellant Appellant REASONS FOR JUDGMENT - THOMAS J. Delivered the 28th day of June, 1991 -- 19 of 29 -- 2 I am in general agreement with the reasons prepared by Demack J. I would add the following observations in support of His Honour's conclusion that the appeal should be dismissed. We are concerned with tariff concession 8533726 which applies a two per cent rate to certain bakery equipment, namely "dividing and moulding machines, dough, having an output capacity not greater than 2,500 pieces/H (per hour)". The output capacity of such machines cannot be determined in a vacuum, or divorced entirely from considerations of human operation and commercial use. This is not to say that factors personal to the importer or end user are relevant in determining the relevant output capacity. The question of output capacity of a machine for the purposes of qualifying for a concessional tariff should be answered in the same practical way as the identification or classification of an article for customs duty purposes. In this respect it is well established that one looks at "the essential character" of the goods. This is not determined by reference to the particular purpose of the importer or purchaser but regard is had to the characteristics of the article itself as it would present itself to an informed observer ( Chandler & Co. v. Collector of Customs (1907) 4 C.L.R. 1719, 1729; Blackwood Hodge (Australia) Ptv. Ltd, v. Collector of Customs (1980) 47 F.L.R. 131, 155; Times Consultants Ptv. Ltd, v. Collector of Customs (Queensland) (1987) 76 A.L.R. 313, 327). -- 20 of 29 -- 3 The power s to declare a concessional " rate^mpplicable'"to ' goods is granted by s. 269C(1) of the Customs Act 1901 . It states "(1) Subject to this Part, where the Comptroller, after considering an application under section 269G for the making of an order under this section in respect of particular goods, is satisfied that: (a) goods serving similar functions to the particular goods are not produced in Australia; and (b) goods serving similar functions to the particular goods are not capable of being produced in Australia by any person in the normal course of business; the Comptroller shall make a written order, declaring tha the particular goods are goods to which a prescribed item specified in the order applies ." It will be noted that the making of such a concession is premised upon the function of the goods in question, and in particular upon the circumstance that goods serving similar functions are not produced and are not capable of being produced in Australia. The concession therefore comes into existence with the function of the goods directly in view. The capacity referred to in the concession must in my view be a functional capacity, not a theoretical capacity. The observations of Isaacs J. in Whitton v. Falkiner (1915) 20 C.L.R. 118, 127 are apposite to a question such as the present in particular - "If a commercial designation of an article is established, that should prevail from the nature of the operations which such an enactment is mainly intended to control ." Counsel for the Collector submitted that the court must concentrate solely upon "the objective capacity of the machine -- 21 of 29 -- 4 itself" divorced from notions of practical operation. This is reminiscent of Matthew Arnold's formulation of the utter objectivity required in the art of literary criticism, namely that one must "see the object as in itself it really is". He further submitted that no regard should be paid to practicalities such as the need for a human being to place the dough in a tray, the tray in the machine and to remove and replace, as a necessary part of its operation in determining the capacity per hour. This was said to be a mere impact of an external circumstance, or a "subjective factor". I would reject these submissions as artificial and unrealistic. The appropriate test must be one in a practical commercial context, but not limited by factors peculiar to individual users . The matter is a question of fact, and I consider that Lee J. gave proper consideration to the countervailing factors in the evidence. I do not propose to repeat the matters already canvassed by Demack J. in support of His Honour's finding. I would simply add that the evidence of the seller's invoices, brochures and accompanying documents over a long period (including purchases in 1984), with one exception, reveal consistent descriptions of the goods that they were marketing as having a capacity of up to 2,500 items per hour. The one brochure which suggested a higher capacity, (10,000 per hour) excited the suspicions of the Collector in 1985 and was investigated in that year. The suspicions were rejected. In ex. 34 (a report of that Customs' investigation) the suggestion of a printing mistake or other error in that -- 22 of 29 -- 5 particular brochure was noted , as was the .conduct?1 of *a s test with independent persons in the industry present.r > Thesresult was an hourly output of 1,800 pieces and "it was agreed by the . . , ^ gentlemen of the industry present that the above result was about average" . It was not suggested that the documentation was deviously framed by the German seller, let alone that it consciously understated the output capacity of the machines it was endeavouring to sell over many years. They were documents that could and would have been relied on by the Collector if they had supported his case. In the circumstances of this case the overall effect of these documents strongly tends the other way, and it is difficult to see why they should not be thrown into the balance in the importer's favour. Indeed counsel for the Collector did not suggest otherwise. Counsel for the respondent submitted that output capacity over one hour is the true issue, not five times what the machine could achieve in 12 minutes under conditions that could not realistically be maintained. That was the period of the high output test upon which the appellant relied before His Honour. The appeal is essentially based upon the submission that because Mr. Donohoe's test showed such capacity over 12 minutes, this is capable of proportional projection. There are three things wrong with the Collector's submission. The first is that it relies upon a test that ignores any realistic operational context; in the second place the 12 minute test simply intensifies the element of unreality, requiring multiplication of conditions that could not be maintained over any reasonable period; and in the third -- 23 of 29 -- 6 place His Honour was not bound to rely upon this ; particular piece of evidence favouring the Collector of Customs in the context of a case which contained considerable - evidence leading to a contrary conclusion. Broadly speaking His Honour preferred the empirical evidence to the theoretical, and I agree with His Honour's approach. I would not be prepared to set aside His Honour's findings of fact, and would dismiss the appeal with costs. -- 24 of 29 -- r IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 66 of 1989 Before the Full Court Mr. Justice Demack Mr. Justice Thomas Mr. Justice Mackenzie BETWEEN : AND: AND: DEFIANCE ENTERPRISES PTY . LTD. (Plaintiff) THE COLLECTOR OF CUSTOMS FOR THE STATE OF QUEENSLAND (First Defendant) COMMONWEALTH OF AUSTRALIA (Second Defendant) Respondent Appellant Appellant No. 880 of 1989 BETWEEN: FRANCIS IVOR KELLY (suing in his capacity as Comptroller-General of Customs for the Commonwealth of Australia (Plaintiff) AND: DEFIANCE ENTERPRISES PTY. LTD. (Defendant) BY ORIGINAL CLAIM AND: AND: AND: DEFIANCE ENTERPRISES PTY. LTD. (Plaintiff) FRANCIS IVOR KELLY (First Defendant) FRANCIS IVOR KELLY (Second Defendant) Appellant Respondent Respondent Appellant Appellant BY COUNTERCLAIM JUDGMENT - MACKENZIE J. Delivered the 28th day of June, 1991. Counsel: Mr. G. Gibson Q.C. and J. Logan for Appellants. Mr. P. McMurdo Q.C. for Respondent. Solicitors: Australian Government Solicitor for Appellants. Feez Ruthning for Respondent. Hearing date: 11th June, 1991 -- 25 of 29 -- IN THE SUPREME COURT OF QUEENSLAND * - 1 * • ■ FULL COURT *'• : No. 66 of 1989 BETWEEN: AND: AND: DEFIANCE ENTERPRISES PTY. LTD. (Plaintiff) Respondent THE COLLECTOR OF CUSTOMS FOR THE STATE OF QUEENSLAND (First Defendant) Appellant COMMONWEALTH OF AUSTRALIA (Second Defendant) Appellant No. 880 of 1989 BETWEEN : FRANCIS IVOR KELLY (suing in his capacity as Comptroller-General of Customs for the Commonwealth of Australia (Plaintiff) Appellant AND: DEFIANCE ENTERPRISES PTY. LTD. (Defendant) BY ORIGINAL CLAIM AND: DEFIANCE ENTERPRISES PTY. LTD. (Plaintiff) Respondent Respondent AND: FRANCIS IVOR KELLY (First Defendant) Appellant AND: FRANCIS IVOR KELLY (Second Defendant) Appellant BY COUNTERCLAIM JUDGMENT - MACKENZIE J. Delivered the 28th day of June, 1991. -- 26 of 29 -- 2 This is an appeal against a decision adverse to the Collector of Customs for the State of Queensland and the Commonwealth in relation to the question whether baking equipment imported by Defiance Enterprises Pty. Ltd. falls within a tariff concession. A concessional rate is applicable where the Collector is satisfied that goods serving similar functions to particular goods are not produced in Australia and such goods are not capable of being produced in Australia by any person in the normal course of business. (s. 269C(1) Customs Act 1901) The Collector made an order providing for a two per cent rate of duty in respect of dough dividing and moulding machines having an output capacity not greater than 2,500 pieces per hour. If the capacity exceeded 2,500 pieces per hour the duty was 15 per cent. The fundamental issue in the appeal was whether in view of certain experimental evidence obtained at the instigation of the Collector, the machines had an output capacity in excess of 2,500 pieces per hour. The operation of the machine is dependent on human input, with the result that the criterion of "output capacity" immediately loses, to some extent at least, a totally objective basis. Demack J. has set out the kind of evidence that was before the learned trial Judge, and I need not repeat it. I agree generally with Demack J.'s reasons and wish only to add a few additional remarks. The learned trial Judge who gave thorough attention to the competing claims found that the machines had a capacity not greater than 2,500 pieces per hour. Although the criterion of "output capacity" in respect of a machine that requires human -- 27 of 29 -- 3 intervention to keep the supply of raw materials up to ; its cannot be wholly objective, it is not correct to have ?regard : to the importer ’s intentions or to a particular user ! s method of use in , oasis i®*-; determining output capacity (Whitton v. Falkiner (1915) 20 C.L.R. 118 at 123, 131 ) . Regard is to be had to the goods themselves and to their essential character ( Whitton at 123, 131; Chandler & Co. v. Collector of Customs (1907) 4 C.L.R. 1719 at 1730; Re Gissina and The Collector of Customs (1977) 14 A.L.R. 555 at 557; Blackwood Hodge (Australia) Pty. Ltd, v. Collector of Customs (1988) 47 F.L.R. 131; Times Consultants Pty. Ltd, v. Collector of Customs (Queensland) (1987) 76 A.L.R. 313). However, where "output capacity" has to be determined, it is ultimately a question of fact. The learned trial Judge had in evidence before him substantial evidence in the form of manufacturer's promotional material, evidence of tests carried out under experimental conditions, and some evidence as to the opinion of people in the bakery trade as to the output capacity of the machines. The results of the tests varied, but with the exception of the tests carried out for the Collector, they were consistent with the manufacturer's claims of a capacity not exceeding 2,500 pieces per hour. The only discordant note in the manufacturer's literature was one brochure that said that the capacity was 10,000 pieces per hour. However, there was some evidence in a Customs Department report suggesting that this had been explained as a printing error. There was certainly no suggestion of deception on the part of the manufacturer as to the capacity of the machine. -- 28 of 29 -- 4 The experiments done for the Collector of Customs were performed over short periods, far less than an hour, and the output over that short period was extrapolated to give an hourly rate. Those figures were substantially in excess of 2,500 pieces per hour, but the learned trial Judge was clearly of opinion that the validity of these tests as a true measure of output capacity was affected by a variety of circumstances to which he referred and described them as "artificial and unconvincing". In my opinion the learned trial Judge was entitled to reject this evidence and to accept the body of evidence pointing to the conclusion that the machines fitted the description in the tariff concession order. It therefore becomes unnecessary to consider other matters dealt with by the learned trial Judge and argued on appeal before us as to the essential nature of an offence against s. 234(1 ) (d) and (e) of the Customs Act, and in particular whether they are absolute offences or whether chapter 5 of the Criminal Code applies to them. In my opinion, the appeal should be dismissed with costs. -- 29 of 29 --