CATCHWORDS

CONTRACT - Australian distributorship of machinery of a particular German manufacturer - whether fiduciary agency - "Romalpa" clause in sales of goods to distributor - effect - whether goods affected by floating charge held by Bank - re-purchase of goods at cost plus duty and import charges, and later re-export of some of the goods back to Germany - whether duty "drawback" belonged to original importer or re-purchaser - whether it was received by original importer as a fiduciary - the nature of a "drawback" - whether the "owner" of goods the subject of a drawback claim must be identical with the owner at the time of importation - effect of novation of contract - effect of later termination agreement - whether duty refund under retroactive Commercial Tariff Concession Order belonged to original importer or to company introduced by novation which had reimbursed the original importer the full amount of the duty paid - construction of termination agreement and whether it effected an assignment of any right to the duty refund.

FIDUCIARY DUTIES  - whether import documents were held by agent as fiduciary - equitable compensation for breach of fiduciary duty causing loss.

PRACTICE - allowance of interest under s. 51A of Federal Court of Australia Act, nature of discretion and rate.

TRADE PRACTICES ACT, S. 52 - representation of intention honestly held, later a change of intention - keeping quiet about change of intention was deceptive conduct - a representation does not cease to be misleading because the party giving it binds himself contractually to comply with it if he does not intend to honour his contract.

Federal Court of Australia Act, 1976, s. 51A

Trade Practices Act, 1974, ss. 52, 75B

Fair Trading Act, 1985 (Vic), s. 11

Aluminium Industrie Vaassen B.V. v. Romalpa Aluminium Ltd

[1976] 1 WLR 676

W & J Investments Ltd v. Commissioner of Taxation (1987) 16 FCR 314

Alcoa of Australia Ltd v. Button (1984) 55 ALR 101

Davies v. London and Provincial Marine Insurance Co. (1878) 8 Ch.D. 469

Winterton Constructions Pty Ltd v. Hambros Australia Limited (1992) 39 FCR 97

Elconnex Pty Limited v. Gerard Industries Pty Limited (1991) 32 FCR 491

Demagague Pty Ltd v. Ramensky (1992) 39 FCR 31

Poseidon Ltd v. Adelaide Petroleum NL (1991) 105 ALR 25

Hospital Products Ltd v. United States Surgical Corporation (1984) 156 CLR 41

Commonwealth Bank of Australia v. Smith (1991) 42 FCR 390

Bailey v. Namol Pty Limited (1994) 53 FCR 102

Wan v. McDonald (1992) 33 FCR 491

Bennett v. Minister of Community Welfare (1992) 176 CLR 408

Smallacombe v. Lockyer Investment Co Pty Ltd (1993) 114 ALR 568

Australian Guarantee Corporation Limited v. Border Printing Services Pty Ltd, unreported, Lockhart, Spender and Hill JJ., 21 April 1989

Namol Pty Ltd v. A W Baulderstone Pty Ltd (1993) 119 ALR 187

ALTENDORF AUSTRALIA PTY LIMITED v. PARKANSON PTY LIMITED & ORS

NG 493 of 1991

Burchett J.

Sydney

26 April 1995

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    NG 493 of 1991

                                  )

GENERAL DIVISION                  )

           BETWEEN:     ALTENDORF AUSTRALIA PTY LIMITED

                             Applicant

               AND:     PARKANSON PTY LIMITED

                             First Respondent

                        PETER DOUGLAS ELSWORTH

                             Second Respondent

                        BERNARD HANLEY

                             Third Respondent

CORAM: Burchett J.

PLACE: Sydney

DATE : 26 April 1995

                MINUTE OF ORDERS OF THE COURT

     THE COURT ORDERS THAT the applicant bring in, on a date to be fixed, short minutes of orders to reflect the reasons of the Court.

NOTE:     Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    NG 493 of 1991

                                  )

GENERAL DIVISION                  )

           BETWEEN:     ALTENDORF AUSTRALIA PTY LIMITED

                             Applicant

               AND:     PARKANSON PTY LIMITED

                             First Respondent

                        PETER DOUGLAS ELSWORTH

                             Second Respondent

                        BERNARD HANLEY

                             Third Respondent

CORAM: Burchett J.

PLACE: Sydney

DATE : 26 April 1995

                    REASONS FOR JUDGMENT

BURCHETT J.:

     By its amended statement of claim, the applicant ("Altendorf Australia") pleads a number of causes of action against the respondents.  These stem from a series of agreements, beginning with some arrangements, to which the applicant was not a party, made by its German parent company, Wilhelm Altendorf & Co GmbH ("Altendorf Germany").  It is alleged that the first respondent ("Parkanson"), of which the other respondents, Messrs Elsworth and Hanley, were directors, was the agent of Altendorf Germany for the import into Australia and distribution of certain machinery, particularly a type of panel saw and certain machines known as Sudhoff edge banders.  (An edge bander applies a laminated strip to the surface of a panel board after it has been cut.  While the Altendorf saws led the market in Australia, being a high quality product, the Sudhoff machines performed badly, and were eventually withdrawn from sale here.)   A major issue in the case is whether in reality Parkanson was, from the beginning, an agent in a sense importing fiduciary obligations, or only became such an agent at a later time, following events to be recounted.  Other issues concern the competing claims of Altendorf Australia and Parkanson to receive beneficially certain payments made and to be made by the Australian Customs in respect of duty refunds and duty drawbacks.  It will be necessary to explain the nature and genesis of those refunds and drawbacks.  There are also issues as to the terms of an agreement reached to dissolve the relationship between Altendorf Australia, Altendorf Germany, and a Mr H.P. Schwager and his eponymously named Swiss company, of which he is the sole director and "owner", on the one hand, and Parkanson, on the other, and as to the sufficiency of Parkanson's compliance with that agreement.

     The claims pursued against Parkanson are based in contract, fiduciary duty, constructive trust, the concept of unjust enrichment, and s. 52 of the Trade Practices Act 1974 (Cth).  The claims against Messrs Elsworth and Hanley are based in s. 11 of the Fair Trading Act 1985 (Vic) and s. 75B of the Trade Practices Act.  Altendorf Australia also relies on an assignment, made after the institution of the proceedings, by Altendorf Germany and Mr Schwager's company of any rights they may have had in the business of Parkanson pursuant to certain contracts made in 1988 and June 1990, including rights to duty drawback and refund, and under those contracts and the dissolution agreement.

     The beginning of the transactions out of which this case arose was an agreement made in about August 1988 between Altendorf Germany and Mr Schwager's company, which was known as Hans P. Schwager and was therein referred to as "HPS", by which "the sole right to market Altendorf Sliding Table Dimension Saws in the territory of Australia" was granted to Hans P. Schwager, with specific permission to assign the contract to Parkanson (then known as Theo Park & Son (Aust.) Pty. Ltd.).  The agreement, which was promptly assigned by Hans P. Schwager to Parkanson, contained a number of provisions which might be expected to be found in a distributorship agreement.  It is unnecessary to set them all out here.  Clause VI was headed "PRICING POLICY", and read:

    "HPS has the right to set their [sic] own prices for Altendorf products in Australia, but must ensure that the chosen price level does not have a negative effect on planned sales targets.  On demand, HPS must fully inform Altendorf of the terms at which the Altendorf products are offered, for example:

     -    discounts of all kinds

     -    terms of payment and delivery

     -    warranty obligations."

Clause X, which deals with warranties, contains the expression "HPS's buyer or customer".  These provisions seem clearly to imply that the distributor is not a mere agent effecting a transaction on behalf of Altendorf Germany, but is a buyer from Altendorf Germany which then resells to customers of the distributor.  Nevertheless, the distributor assumes responsibility for the promotion of Altendorf products in Australia.  Clause XXI provides:

    "With needed support from Altendorf, HPS will make every reasonable effort to ensure effective sales promotion of the Altendorf range in Australia, including:

     -    representing Altendorf with proper care and attention

     -    regular customer and dealer calls

     -    normal advertising and publicity

     -    full commitment of HPS selling organization, including adequate sales training

     -    reports to Altendorf on the general state of the market, HPS's promotion and sales activities, and those of the competition.  ..."

The clause continues with a provision for "minimum quotas" for sales, and for termination (in certain circumstances) for failure to achieve these quotas.

     At the same time that the distributorship agreement was entered into and assigned, a licence was granted by Altendorf Australia to Hans P. Schwager, in consideration of the distributorship contract, to use the registered trade mark of Altendorf in Australia for the duration of that contract, and to name a department of the licensee "ALTENDORF AUSTRALIA".  This licence was also assigned to Parkanson. 

     The distributorship agreement referred, in cl. IX, to "attached conditions of sale", which it stated were "valid for the purposes of this contract".  Several copies of the attached conditions of sale were in evidence.  Most of them appeared to be photocopied from one copy held by Altendorf Australia.  These were all difficult to read.  However, there was also a more legible copy, and there is no reason to doubt that at all relevant times each of the parties had access to legible copies.  I simply do not accept evidence given by Mr Elsworth to the contrary.  The annexure was headed "Conditions of Sale and Delivery".  It contained a cl. V, which read as follows:

    "Property reservation.

     1    The goods delivered remain our property until payment of the full amount of our claims against the customer, unconcerned their [sic] legal argument, and still when the purchase price of deliveries especially indicated has been paid.  The customer is not authorized to any pawning or assignment.

                            . . .

     7    In case the articles still subordinate to our reservation of property are seized by any third party, the customer is obliged to inform us without delay by adding the seizure minutes and to protest against the seizure by mentioning that these seized goods are our property.  Expenses resulting from this intervention are at the buyer's debit.

                           . . ."

This clause, plainly enough, was intended to have effect as a Romalpa clause: Aluminium Industrie Vaassen B.V. v. Romalpa Aluminium Ltd [1976] 1 WLR 676.

     In one respect, the written agreements did not precisely reflect the arrangements the parties had concluded between them.  Although the distributorship contract obtained by Hans P. Schwager (hereinafter H.P. Schwager) was simply assigned to Parkanson, the intention always was, and the practice of the parties conformed with it, that H.P. Schwager was substituted for Altendorf Germany, purchasing from it and then reselling to Parkanson.  There was good reason for this, as Parkanson was unable to provide the working capital which would have been necessary to sustain a continued direct course of trading with Altendorf Germany, and H.P. Schwager fulfilled the function of financier.  Parkanson was not required to effect payment before achieving a sale in Australia, receiving an extension of bills of exchange at a rate of 1% per month interest.  But although the purchaser from Altendorf Germany was the Swiss Company H.P. Schwager, and although by virtue of the Romalpa clause which I have set out, the ownership of the goods at the time of their importation into Australia remained with H.P. Schwager, it was Parkanson which arranged the importation, paid the customs duties, and resold in Australia in due course.

     In early 1990, problems developed.  Parkanson had ordered considerable quantities of stock which it had not sold.  The resulting liability in respect of customs duties and other charges in respect of the goods, together with its liability for interest to H.P. Schwager, had accumulated to a very large amount.  A contributing factor was an accident which Mr Elsworth had suffered when on holidays in Fiji in January 1990.  This left Parkanson to some extent rudderless for possibly six weeks.  Another contributing factor was the drain on Parkanson's resources, and on the time of its executives, imposed by difficulties with particular products, the Sudhoff machines.  They had to deal with clamorous complaints from customers.  Although Altendorf Germany met the warranty costs, concentration upon this problem was a hindrance to the efficient pursuit of Parkanson's business.  Nevertheless, I think Mr Elsworth and Mr Hanley, in evidence, exaggerated the impact of the Sudhoff debacle; more potent forces against which Parkanson had to struggle in early 1990 were the down turn in the Australian economy, and its own failure to provide against that down turn in time by the reduction of its ordering programme.

     On 23 April 1990, Mr Elsworth, who was now fully recovered, or nearly so, sent by facsimile a letter to Mr Schwager in which he stated that "sales have been averaging only 50% of previously established rate", and that this had been the position "for the past six months".  He referred to competition from Italian machines which were available at a substantially lower price.  He stated:

    "Action is required to reverse the continuing decline in Altendorf sales volume, which, together with Sudhoff problems, is seriously threatening viability of Theo Park."

He requested a reduction in Altendorf prices, waiver of part of the interest, urgent payment of two invoices totalling almost $27,000 "because of the current liquidity position which has developed for reasons outlined above", and he referred to the Sudhoff problems as requiring "an action plan" as to which he was to provide further information.  His facsimile message went on to state:

    "Currently all Altendorf/Sudhoff stock is in the name of Theo Park and forms part of bank security, because of a charge over company assets held by the bank.  While no immediate problems exist, continuing depressed trading conditions, together with the large amount of cash in duty and spares, could lead to real liquidity problems for Theo Park.  I believe it is prudent to act now for all Altendorf/Sudhoff stock to be sold by Theo Park to a company owned by Altendorf or HPS.  Altendorf Australia Pty Ltd, a wholly owned subsidiary of Altendorf Germany may be an appropriate vehicle to purchase this stock, or alternatively, any entity owned by HPS could purchase and therefore own this stock.

     The purchase cost would be into store cost and Theo Park would then pay out all documentary bills at the same time.

     Altendorf/HPS would then own the stock and not be at risk in the event of the bank having claim to any Theo Park assets. 

     Theo Park liquidity position would also immediately be greatly improved by recovering the duty paid out on this stock.  As machines are sold, Theo Park would invoice the dealer and would pay the owner of this stock (Altendorf/HPS) the cost price of the machine, i.e. the same price the entity paid Theo Park for the machine."

Under the heading "ongoing agency relationship and involvement with IMA and Scheer" (these were additional Altendorf products), Mr Elsworth wrote:

    "The current difficult trading conditions and consequent affect [sic] on liquidity highlight the potential risk to stock security and the ability of Theo Park to earn a sufficient margin to maintain an organization which is required to adequately service the market during such periods.

                            . . .

     The answer to this difficulty may well be a change in the trading relationship between Theo Park and Altendorf."

He went on to suggest that "(t)he goods imported into Australia be owned by a local entity of Altendorf/HPS" and that Parkanson receive "an agreed commission on sales".

     On any fair reading of this communication, it is quite clear that, although the Sudhoff machines constituted a problem, the real and serious problem related to market conditions, and to the decisions taken by Parkanson in relation to Altendorf products generally.  Parkanson had an awkward liquidity worry, made potentially more dangerous by its failure to take account, in its dealings with its bank,    of the Romalpa clause affecting its purchases of stock.  Whatever the position vis-à-vis third parties, there was no reason to think this clause did not bind Parkanson as against H.P. Schwager.

     Mr Schwager's reply was immediate and severe.  He sent a facsimile dated 25 April 1990 to Mr Elsworth, which included the following:

    "How you can advise me that you have given unpaid stock as security is against our agreement and understanding and I am lost for words how I feel about this.  ...  I don't want to be blackmailed, and I am furious over the attempt of you to do so.  ...  Let me tell you Peter, get the house in order, quickly.  Get my stock secured as we want [sic - scilicet won't] be talking any further, or be transferring any funds to you."

On 1 May Mr Elsworth responded, claiming that Mr Schwager had "fully understood in the past that the bank has a floating charge over all the assets of Theo Park".  That, of course, would not necessarily mean that the bank had a floating charge over assets that did not belong to Parkanson because the subject of contracts containing valid Romalpa clauses: see the discussion in Chitty on Contracts 27th ed. (1994) vol. II sec. 41-135.  Although statements were made in evidence by Mr Elsworth about alleged doubts as to the efficacy of the Romalpa clause in the agreement in question, no legal argument was presented to me suggesting that a clause in this form would not have been entirely effective.  Mr Schwager, by facsimile of 2 May 1990, denied that he had ever agreed to a charge over his stock, which he pointed out was then valued at DM1,367,492.50.  He again required the position to be "corrected immediately".

     Mr Schwager's facsimile of 2 May 1990 concluded:

    "Why you think I should just waive the interest charges or why Altendorf should just give you a 10% discount on all machines in stock without you even indicating [an] effort on your part is beyond me.  At the same time to be informed that you have used my stock as security and if I want to secure my own stock I should pay your duty is as much as I am prepared to take."

Mr Elsworth responded on 4 May 1990 with a further facsimile, which included the following:

    "Funds required to transfer all stock into Altendorf Australia is the amount owing on documentary bills (as this matches almost exactly value of stock), plus clearance and duty charges of approximately $200,000. 

     Will do exact pricing today and fax you the details.  As previously indicated, the duty and clearing charges are included in this stock value to provide the injection of cash back into Theo Park."

Again, this facsimile message makes it clear that the problems had, in Mr Elsworth's view, been exacerbated by the difficulties with the Sudhoff machines, but were not centred upon those difficulties.  There had apparently been a "complete halt to sales" by April.

     In the period 4 to 7 June 1990, meetings were held in Melbourne between Mr Schwager and Mr W Altendorf of Altendorf Germany, together with a Mr Thiele, on the one hand, and Mr Elsworth and Mr Hanley on the other.  They discussed a variation of the distributorship agreement as assigned to Parkanson.  Messrs Elsworth and Hanley presented their proposal to change the basis of the agreement for the future, and it was suggested that the new arrangements be implemented from 1 July 1990.  The parties hammered out terms involving the payment of a fixed retainer and rental subsidy to Parkanson, on a monthly basis, together with costs of advertising and promotions to be approved by Altendorf Germany, and a commission, to be paid monthly, of 8% of total turnover.  Interest was to be payable on stock at 1% per month 90 days from the bill of lading date.  It was also part of these discussions that, as had been foreshadowed in the exchange of facsimiles to which I have referred, Parkanson's acute liquidity position would be alleviated by its unsold stock being taken over at cost including customs duty.  Mr Schwager said to Mr Elsworth words to the following effect:

    "I will only pay you for actual costs incurred by you in respect of the Altendorf and Sudhoff machines I am taking back.  I will pay you the CIF price plus duty plus delivery charges.  To do this I can release you from the unpaid drafts and pay the balance to you."

To this Mr Elsworth replied: "O.K.".  The reference here to "taking back" was not a reference to the later return of certain goods to Germany (of which I shall have to give an account), but to the arrangements under which Parkanson was relieved of their cost and title was passed to Altendorf Australia.

     An agreement was drawn up in due course, dated 4 July 1990, made between Altendorf Australia, Parkanson and H.P. Schwager.  Pursuant to those terms, Altendorf Australia purchased the stock referred to in the agreement (which was, on the evidence - a schedule listing it is missing from the copies of the agreement tendered - the unsold stock held as at 4 July 1990 by Parkanson) for the sum of DM1,153,601.  Payment was effected by the release by H.P. Schwager of drafts and bank bills in the sum of DM1,184,720.45, with a balancing payment by Parkanson to Altendorf Australia of DM31,101.45.  (This seems to involve a minor arithmetical error of DM18.)  There was a separate purchase of spare parts by Parkanson from H.P. Schwager for DM52,891.80.  Parkanson became bailee of the stock for Altendorf Australia, and, of course, it was contemplated that Parkanson would continue to effect sales of the stock, but as agent on behalf of Altendorf Australia.

     In his submissions, counsel for Parkanson has suggested that there were two agreements, an agreement reached in June and the agreement in writing made 4 July 1990.  Certainly, in a sense that is so.  But in substance the whole arrangement was worked out in the period 4 to 7 June 1990, and I am satisfied that, generally, when references were later made to "the June agreement", or to an agreement identified by reference to the June discussions, those references included the terms finally set down in the form of an agreement in the document dated 4 July 1990.  That document was concerned with one aspect only, but a very important aspect, of the entire set of terms negotiated in the discussions in early June.  Counsel for Parkanson himself put to Mr Schwager in cross-examination the question: "May I take it that before signing the agreement [i.e. the agreement of 4 July 1990] you satisfied yourself that it set out all that you had understood was agreed about the terms upon which the stock were being sold in your discussions of about June 1990?"  Mr Schwager answered: "That's correct."  In fact it was plainly not correct, since the agreement of 4 July 1990 does not go on to set out the details of the terms upon which Parkanson was to continue to hold the goods on behalf of Altendorf Australia after the completion of the sale.  But the important point is that both counsel and the witness were at one in regarding the agreement of 4 July 1990 as simply recording terms which had already been agreed in the previous month.  That accords with the evidence of Mr Elsworth, who referred in his affidavit to the agreement of 4 July 1990 as "entered into as a result of the meeting of early June, 1990".  It is also consistent with a contemporary document.  On 30 June 1990, H.P. Schwager sent a facsimile to both Parkanson and Altendorf Australia which commenced:

    "As we have now received the final figures of the actual stock held in Australia, we can now proceed in completing the transaction [emphasis added].

     The following is now required -

                            . . .

     2)   As soon as Chris Schulz is in possession of the verification the following needs to be documented -

          a)   Altendorf Australia takes over all the stock from Theo Park as per list No. 2 and supporting documents (2a to 2e)

                             totally DM1,153,601.

          b)   Theo Park & Son pays for all outstanding spare parts as per Statement of the 30.06.1990

                             totally DM52,891.80

     3)   To offset this total payment of DM1,210,546.60 H.P. Schwager releases Theo Park from all drafts as per list No. 3

                             totally DM1,184,702.45

          against payment from Theo Park of balance DM83,993.25

          [This figure of 83,993.25 is, of course, the total of the two figures of 31,101.45 and 52,891.80 which appear in the agreement of 4 July 1990.]

     4)   Draft No. 54-61885 - DM130,225.20 and

                   54-61854 - DM115,791.20

          will be cleared through customs as Theo Park & Son and then taken over by Altendorf Australia against presentation of Invoices for customs and clearing charges.

     This to be part of actual agreement of transfer.

                           . . ."

     A particular matter which was discussed in the June meetings, according to Mr Schwager - and I accept this evidence, was the possibility of re-exporting to Germany some of the Sudhoff equipment, which had presented such difficulties to Parkanson, and obtaining a duty drawback in respect of it.  (A duty drawback is a refund of customs duty made in the circumstance that goods on which duty had been paid have then been re-exported from Australia.)  However, no decision to re-export the Sudhoff machines was made at that time.  I accept the evidence of Mr Schwager that, during the discussion, he made a statement to the effect:

    "So that we can work out the most economically efficient way of resolving this problem, we want to consider whether re-exporting the Sudhoff edge- banders to Germany is in fact an option.  In order for us to do so, we will need to know whether we will become entitled to a duty drawback upon the re-export of such machines.  Kindly make the necessary enquiries and let us know",

to which Mr Elsworth replied: "I will find out for you."  I also accept that, later in the discussions, Mr Elsworth made the assertion: "Upon the re-exportation of goods like the Sudhoff edge banders, there will be an entitlement to a duty drawback."  The discussions extended over more than one day, and I think it is probable Mr Elsworth had made some enquiry, although possibly not a very full enquiry. 

     On 4 September 1990, Mr Hanley reported to Mr Schwager concerning the Sudhoff machines.  He made some particularly withering comments about a model known as the K70.  Mr Schwager replied on 12 September 1990, advising agreement to the return of four of the K70 machines, and adding: "Also, please advise us on how we can obtain the duty refund for the K70 machines."  Shortly afterwards, Mr Schwager telephoned Mr Elsworth, and said:

    "I refer to the facs. that I have just sent you and confirm that we intend re-exporting the Sudhoff machines to Germany.  Please obtain the duty drawback on our behalf."

Mr Elsworth responded:

    "I will do so.  I will find out the correct procedure for making a drawback application and will report back to you."

Following this conversation, Mr Schwager sent a further facsimile to Parkanson, referring to the loading of the container of equipment to be returned, and adding:

    "At the same time I have to request from you to obtain the refung ex customers [sic - scilicet refund ex Customs] as they are all goods, which have been imported under Theo Park & Son."

In the context, the reference to a refund obviously referred to a drawback.  Parkanson's reply dated 28 September 1990 makes it clear that agreement had been reached on the return to Germany of a considerable quantity of machinery and equipment, apart from the four K70 edge banders, including nine V30 edge banders and six Altendorf panel saw spare tables.  Parkanson's communication concluded:

    "We have contacted customs regarding duty refund and expect answer from them on Monday also and will send details via fax to you."

A further facsimile dated 2 October 1990 from Parkanson to Mr Schwager listed the machinery and equipment to be returned, varying some details slightly, and concluded:

    "I need for customs purposes a fax from you requesting me to return these items."

An immediate reply was sent by Mr Schwager on 3 October 1990, requesting the return of the "machines and parts to our
factory in Minden [i.e. the Altendorf factory in Germany]".  Mr Schwager's facsimile concluded:

    "Please submit the required documentation to customs [sic] for the refund of paid duty on returned goods."

     The goods were in fact returned to Germany.  The refund payable by way of drawback of duty was requested in or about October by Parkanson, according to Mr Hanley, in the sum of $22,491.20.  An invoice sent by facsimile to Mr Schwager from Parkanson on 31 October 1990 covers the four K70 edge banders and the nine V30 edge banders, and explains a discrepancy in the number of V30 machines, for it contains a note that one was not in fact returned and was not included in the duty refund.  After some delay, until a date by when Parkanson's commission agency had been terminated, the refund was received from Customs by Parkanson.  One of the issues in the case is whether it was received on behalf of Altendorf Australia.  It is convenient to make at once the finding that the arrangements which were concluded, and the communications which took place between the parties, are consistent only with the application for a drawback having been made on behalf of Altendorf Australia.  Mr Schwager, of course, was a director both of H.P. Schwager, the Swiss company, and also of Altendorf Australia and, in addition, he frequently acted as agent for Altendorf Germany.  But, the stock having originally belonged to his Swiss company, Mr Schwager deliberately arranged for it to be taken over by Altendorf Australia upon payment to the original purchaser from the Swiss company, Parkanson, of the cost price, customs duties and import charges.  It was Altendorf Australia, as owner of the goods, pursuant to the agreement reached in June and settled on 4 July 1990, which authorized the return of the goods to Germany.  The arrangements made by Parkanson for that return were made on its behalf.  In the circumstances, there is no doubt that Parkanson did not apply for the drawback for itself.  It did so as an agent, and it was at the time an agent owing fiduciary duties to Altendorf Australia pursuant to the agreement reached in June.  Ultimately, I did not understand either Mr Elsworth or Mr Hanley to contest that the application for the drawback was not initially made by Parkanson on its own behalf.  However, they claimed that, as a result of a further agreement, Parkanson became entitled to treat the moneys, when received, as its own. 

     Before turning to the next step in the story, it is desirable to go back to the arrangements reached in June and finalized on 4 July 1990.  As at 4 July 1990, the goods the subject of two invoices referred to in Mr Schwager's letter of 30 June 1990, from which I quoted earlier in these reasons, had not been cleared through Customs.  As the documentation was in the name of Theo Park & Son (as Parkanson was then known), that letter, in its numbered paragraph 4, made special provision in respect of them.  They were to be cleared through Customs by Parkanson and then taken over by Altendorf Australia, which was to reimburse Parkanson "for customs and clearing charges".  At the time of what was referred to in one of Mr Schwager's affidavits as "the June agreement", the machines in question were on the high seas en route to Australia.  In the course of the discussions which led to that agreement, Mr Schwager referred to the two shipments, remembering that the invoices and shipping documents had already been made out, and said:

    "Please clear them from Customs on our behalf and pay the duty.  We will reimburse you as for all the other machines you are transferring to us."

Mr Elsworth said: "O.K.".  Altendorf Australia in fact provided the import duty in respect of these machines, although the documents remained in the former name of Parkanson, the invoices from the customs agents being paid by Parkanson only upon the basis of lodgment of the money into its account arranged by Mr Schwager.  The total amount of duty involved was $25,718.04.  I mention this matter separately, because there can be no doubt that in paying the duty in respect of these goods, and in finalising their importation, Parkanson acted as agent for Altendorf Australia.  It seems to me that, in this situation, Parkanson must have held the documents in respect of the importation as a fiduciary on behalf of its principal.

     Mr Schwager and Altendorf Germany remained unhappy with Parkanson's performance after the agreement arranged in June 1990, and they of course controlled Altendorf Australia.  They decided, or at any rate Altendorf Germany decided, to terminate the existing arrangements, substituting Altendorf Australia as distributor of Altendorf products in Australia without the agency of Parkanson.  In late November 1990, Mr Schwager and Mr Altendorf visited Australia to discuss their plans with Mr Elsworth and Mr Hanley.  While he was in Australia, Mr Schwager made enquiries about the duty drawback, and spoke to Mr Hanley about it.  Mr Hanley assured him there would be no problem, and that payment would be made. 

     However, when Messrs Elsworth and Hanley learned that Parkanson's contract would be terminated, they privately decided not to let Altendorf Australia, H.P. Schwager or Altendorf Germany have the duty drawback.  But they said nothing of this to Mr Schwager or Mr Altendorf.  They negotiated for payment of a sum of compensation in respect of the termination of Parkanson's contract.  It is not necessary to decide, and no party asked me at the hearing to decide, whether the termination was justified in law.  There were provisions in the original contract for termination for failure of sufficient performance.  Whether the difficulties encountered by Parkanson supported or refuted an application of this clause is perhaps debatable.  It may also be debatable whether the provision as to the term of the contract survived the radical changes wrought in June 1990, involving the introduction of a new party, Altendorf Australia, as the importer, or whether there was from that time a new contract in the eye of the law, subject to termination upon reasonable notice.  It is not always easy to decide whether a contract has been varied or terminated upon the substitution of a fresh agreement: see W & J Investments Ltd v. Commissioner of Taxation (1987) 16 FCR 314 at 322-323.  Whatever the position, it is plain that the parties chose at that point to negotiate rather than to litigate.  They agreed that the agency business would be transferred to Altendorf Australia, that a sum of $70,000 would be allowed to Parkanson in respect of the winding down of its agency business for Altendorf products, and that, in addition, Parkanson would be paid for the spare parts it had on hand and the cost to it of certain items including a computer system, fork-lift and service van for which it claimed it would have no further use upon losing the Altendorf agency.  A record of the arrangement was set down in writing by Messrs Elsworth and Hanley, although they now claim that this did not represent the entire agreement.  The document reads as follows:

    "TRANSFER OF BUSINESS TO ALTENDORF SYDNEY [this is a reference to Altendorf Australia]

                      NOVEMBER 22, 1990

     TAKE OVER OF ASSETS

       SPARE PARTS      ...       $ 59,000

       COMPUTER SYSTEM  ...         39,000

       FORKLIFT         ...         15,500

       SERVICE VAN      ...         15,000  $ 128,500

     ALLOWANCE TO WIND UP BUSINESS                 70,000

                                    TOTAL:  $ 198,500

     TERMINATION DATE

     THE BUSINESS WILL BE TERMINATED ON DECEMBER 31, 1990.

     EXISTING ARRANGEMENTS ARE ALL VALID UNTIL DECEMBER 31, 1990.

     NOTE:

     COST OF FURNITURE TO BE RESOLVED UPON PRODUCTION OF INVOICES FROM WILLY ALTENDORF.

     DECEMBER SALES TO CLOSE FOR THEO PARK ON DECEMBER 15, 1990.

     ALL STOCK WILL BE TRANSFERRED AND THE FINAL PAYMENT, INCLUDING DECEMBER MANAGEMENT FEES AND DECEMBER COMMISSION WILL BE PAID ON DECEMBER 20, 1990.

     WE AGREE TO TRANSFER ALL MATTERS RELATING TO ALTENDORF AUSTRALIA, I.E. STOCK, COMMUNICATIONS AND TECHNICAL INFORMATION TO THE NEW OFFICE IN AN ORGANISED MANNER."

     The agency business of Parkanson was terminated as at the end of December 1990, and settlement in the sum of $217,637.56, less a retention amount of $7,000, i.e. $210,637.56, was paid to Parkanson on behalf of Altendorf Australia on 31 January 1991.  Altendorf Australia had appointed a new managing director, a Mr Michael Burdette, who checked the equipment received under the termination agreement.  He found that some items were damaged and some were missing.  He then spoke to Mr Elsworth who, after initially denying it, eventually conceded, in respect of the computer equipment referred to in the agreement: "Well, you didn't get everything, but it's got nothing to do with me.  Talk to Hanley about it."  When Mr Burdette spoke to Mr Hanley, he received a reply which could only be described as truculent.  Mr Hanley appeared to regard himself as justified in doing nothing about compliance with his agreement on the
ground that the negotiated compensation for termination of the agency was too low.  Facsimile messages about the computer items that had not been handed over, which Mr Burdette sent subsequently to Parkanson in the course of the first half of the new year, were simply ignored, as was a letter dated 28 May 1991 in which Mr Burdette drew attention to an error in the amount claimed by Parkanson for spare parts, which in itself accounted for $4,481.89 of the $7,000 retained.  Mr Burdette gave evidence, too, of inspecting the fork-lift and finding it unserviceable because of ruptured pipes in its hydraulics and other problems, of personally driving the van and finding it unserviceable, and that four of the machines delivered as stock were not new stock but used machines worth approximately half the new value.  There was also a part, being a table for an F45 Altendorf saw, which had deep score marks on it so affecting it as to reduce its value from the list price of $4,493 to scrap value.  The four used machines had a list price of DM7,805 each. 

     In December 1990, Mr Burdette raised with Mr Elsworth the matter of the duty drawback which was to have been applied for in October.  Mr Elsworth said he had already applied for it.  On 19 December 1990, Mr Schwager requested Mr Burdette to speak to Mr Elsworth to "establish how duty refund ex Sudhoff will be paid".  By then, however, Mr Elsworth had gone overseas.  On 28 May 1991, Mr Burdette wrote to Parkanson, for the attention of Mr Elsworth, referring to their discussion in December of "the duty draw back [sic] refund with regards to equipment which was sent back to Germany".  He advised that he had received information "that this duty refund has been paid to your company", and concluded:

    "We would therefore appreciate it if you could please send us, within seven days, the payment and relevant documentation received from the Australian Customs Department."

This letter, too, was ignored, as was a reminder, also asking for payment of the duty drawback, sent on 24 June 1991.  Mr Burdette tried again by letter dated 23 July 1991, addressed for the attention of Mr Elsworth, which reads, omitting formal parts:

    "RE: CUSTOMS DUTY REFUND

     Further to our telephone conversation today we confirm our conversation as follows:-

     •    You have claimed that Theo Park now trading as Parkinsons [sic] have always paid duty for Altendorf Panel Saws and have NOT been compensated for this by Hans Schwager, Wilhelm Altendorf GmbH or any other party connected with Wilhelm Altendorf Gmbh.

     •    You claimed that you owned the machines and that Wilhelm Altendorf Gmbh purchased them back from your company.  Part of the `buy back price' did include the full component of duty.

     •    What we require is simply the customs documentation RELEVANT to F45 Altendorf Panel Saws purchased back from your company by Wilhelm Altendorf GmbH on the understanding that all previous panel saws' duty was in fact paid by Theo Park.

     •    The reason for us requesting the documents is simply to make a legitimate claim to customs [sic] for the duty refund.  In addition to this we would require your written permission to
make this claim as the documentation is in the name of Theo Park.

     •    We are not in receipt of a fax by your company requesting machine numbers. You have agreed to re send [sic] this fax so that we may answer the questions asked.

     •    With reference to the duty drawback issue (our letter dated 28/5/91 and 24/1/91 refers) you have advised us that you will NOT repay the duty unless the $7000 retention is repaid to your company.  We have not been advised of what your objections are to the letter referring to the $7000 dated 28 May 1991.

     We would appreciate your written response to the issues raised in this letter."

To this letter also, Mr Burdette received no reply. 

     After Mr Burdette had given oral evidence, including evidence of his correspondence sent to Parkanson and Parkanson's failure to reply, counsel for Parkanson was granted a short adjournment to take instructions.  Following that adjournment, he elected not to cross-examine Mr Burdette.  In the circumstances, I accept Mr Burdette's evidence, and I accept the accuracy of the account given in Mr Burdette's letter of 23 July 1991 of what Mr Elsworth had said to him by telephone that day.  I do not believe the suggestion made by Mr Elsworth in cross-examination that he did not answer Mr Burdette's letters because he found them offensive.  There was nothing offensive about them.

     Some important matters emerge from the letter of 23 July 1991.  In the first place, Mr Elsworth had said on the telephone that he would not make the duty drawback payment
unless he received the $7,000 retention sum, but he did not point to any inaccuracies in the earlier letter of 28 May 1991 which explained why the retention sum had not been paid.  It is significant that there was no suggestion at this time of any right to retain the duty drawback payment, except as an offset to the retention sum.  Nor, according to the unchallenged evidence of Mr Burdette, did Mr Elsworth at any time tell Mr Burdette anything "to the effect that Parkanson did not have to pay the duty drawback money to Altendorf because there had been a release given to Parkanson in late 1990".  Nor was the letter of 23 July 1991 ever answered.

     The letter is also important for its statement of the issues relating to a different point altogether.  By the time this letter was written, a new duty refund question had arisen, quite apart from the duty drawback in respect of goods sent back to Germany.  The new refund related to all panel saws imported from 29 February 1988, the subject of a Commercial Tariff Concession Order number TC 8803186 made 20 August 1990 and gazetted 12 September 1990, which referred to "SAWS, mitre, woodworking".  None of Altendorf Germany, H.P. Schwager and Altendorf Australia was aware of the existence of this concession, or of the possibility of obtaining a refund pursuant to it, until shortly before Mr Burdette's letter.  The opportunity now just beginning to be appreciated was the subject of another letter he had written the previous day, 22 July 1991, to the directors of Parkanson, as follows:

    "RE: DUTY REFUNDS

     As we have to date not received much co-operation from your company in relation to receiving documentation required by customs to claim this duty we wish to advise you of the details and the implications of non co-operation.

     Australian Customs have agreed to a duty refund for all (in our case F45) tilting panel saws.  This refund goes back to 29/2/88 but the concession ends on 20/8/91.  Any submissions lodged after this date will NOT be considered.

     In the event that we cannot lodge the documents as a result of your non co-operation we will have no choice but to start proceedings against your company to recover all the duties paid for all F45's since 29/2/88 as your company did not pay the duty in the first place.

     All this is totally unnecessary and all we are requesting is the original documentation in order that we can lodge our claims and then return all the documentation.  We urge you that common sense prevails and that you hand John Bradley ALL the required documentation as you promised to do on 23/7/91."

It is apparent that the date 23/7/91 is an error; probably 23 June 1991 was meant, since in that month there had been a request for documents.  In any case, Mr Burdette, who had not been involved in the agreement of June 1990 nor in the previous distribution arrangements, plainly wrote the letter of 22 July 1991 under a misapprehension, so far as the statement that Parkanson "did not pay the duty in the first place" is concerned.  But his telephone conversation with Mr Elsworth the next day seems to have set him straight on this, and what he was thereafter seeking, apart from the matter of the duty drawback in respect of goods returned to Germany, was the documentation required to make a claim for a refund in respect of the imported goods taken over at the cost of duty and charges paid under the June agreement as formalized and settled on 4 July 1990. 

     A suggestion was made by Mr Elsworth that Altendorf Australia or H.P. Schwager was attempting to steal - he put it as high as that - Parkanson's documents.  I have no hesitation in rejecting this allegation, which was quite unsupported on any rational basis, and sits particularly ill with the refusal to cross-examine Mr Burdette.  Although Altendorf Australia did eventually make a claim for the whole of the duty refund, on the ground that, as it alleged, Parkanson was its fiduciary agent bound to hold such a windfall on behalf of the fiduciary's principal, that claim was not made until much later.  In the light of the way the claims in this proceeding have evolved, and having regard to the evidence of Messrs Schwager and Burdette and to the documents, I have no doubt that the claim put forward by Altendorf Australia to a duty refund additional to that involved in the duty drawback was a claim genuinely and properly made in respect of goods taken over by it pursuant to the arrangements made in June 1990.  If Mr Elsworth really thought there was something surreptitious about the actions of Altendorf Australia, the most likely explanation is that his own guilty conscience led him to see dissimulation in others.  For the fact is that he and Mr Hanley had decided to withhold the duty drawback payment they had agreed to obtain on behalf of Altendorf Australia at the request of Mr Schwager in the previous October.  That they had at the time no justification for this is apparent from their concealment of the fact of the receipt of the money, and the quite unworthy intimation given to Mr Burdette that the withholding of the duty drawback payment was related to the retention sum of $7,000.  Since well over half that sum related to what was admittedly a misstatement in the stock lists, even if the whole of the very small balance was properly due, it would have been a simple matter, had Mr Elsworth been acting honestly, to have deducted it from the duty drawback sum upon effecting payment.  After his long silence since December, when he had given the impression the money was to be paid upon receipt, as had certainly been understood in October, he had by 23 July 1991 offered no other excuse than the retention of the $7,000.  Nor was any other excuse forthcoming until well after the institution of these proceedings.  Indeed, on 31 October 1990, Mr Elsworth had sent to Mr Schwager notice of the return of the goods to Germany, in some detail, to which he had attached a copy of what he described as the "duty refund application".  That was the application for a duty drawback in respect of goods of which the total export price was shown in Australian dollars as $111,036.77.  If the duty refund was not being sought on behalf of Altendorf Australia or an entity in which Mr Schwager was interested, it is unlikely copies of the drawback applications would have been sent to Mr Schwager.

     But Parkanson now defends the claim made in respect of the duty drawback on a basis not mentioned at the time.  What is claimed by Messrs Elsworth and Hanley is that the termination agreement made in November 1990 included a release of all claims, and that one of the claims so released (although they were careful to say nothing about it at the time) was Altendorf Australia's right to receive the duty drawback payment.  There is, of course, no mention of any such release in the terms drawn up by Messrs Elsworth and Hanley themselves, on 22 November 1990, to record the essential features of the termination agreement.  But they say there was an oral agreement reached that there were to be no further claims or payments between the parties.  Mr Schwager denies this, and I accept his evidence.  I think the suggestion of a release was a pretext thought up afterwards, the initial pretext by reference to the retention sum of $7,000 being obviously incapable of justifying the withholding of the whole of the duty drawback payment.

     But what of the duty refund pursuant to the Commercial Tariff Concession Order in respect of the stock taken over pursuant to the agreement reached in June 1990?  At the time of that agreement, none of the parties could have been aware that the duty refund would become available, since the decision to issue the Commercial Tariff Concession Order was not made until 20 August 1990.  When it was made, it did not immediately come to the notice of any of the parties.  The first person, whose knowledge could be in any way relevant for the purposes of this case, to appreciate that a right to a refund might have arisen was the customs agent who had handled the importation of Altendorf products on behalf of Parkanson, a Mr Ponya of Able Customs Agency.  He gave evidence that in about October 1990 he read a notice of the concession published by the Australian Customs Service, and sent a letter to Mr Elsworth accordingly.  His letter was dated 2 October 1990 and was addressed as follows:

    "Mr. P. Elsworth,

     Theo Park & Son (Aust.) Pty. Ltd.,

     9 Milgate Street,

     Oakleigh South, Victoria, 3167."

It is not suggested that this was not the correct address at the time.  The letter continued:

    "Re: Altendorf saws

     Dear Peter [Mr Elsworth's first name],

     Late August Customs granted a Tariff Concession Order TC8803186; and backdated it to 29.2.1988, it covers

     `SAWS, mitre, woodworking'

     If this is of any interest please give me a call.

     Regards, Tom Ponya."

Mr Elsworth denied receipt of this letter, and denied that he knew anything about the availability of a refund until well into the next year.  It is a curious fact that, although Mr Ponya had been acting on behalf of Parkanson since March 1989, and although he made an initial application for a part of the duty refund on behalf of Parkanson in July 1991, Mr Elsworth abruptly terminated his instructions to make further
applications on about 25 July 1991, and arranged for the bulk of the refund applications to be made by another firm.

     A strong attack was made at the hearing on the evidence of Mr Ponya.  He is apparently involved in litigation with Parkanson, and it was suggested he had fabricated the letter of 2 October 1990, presumably as an act of malice.  I have no hesitation in rejecting that attack.  I think Mr Ponya was an honest witness, and I think the photostat of his letter which he produced was a genuine copy, although it was not the copy made at the time, which has not been located, but a further photocopy of a copy, probably produced when the original copy was forwarded to solicitors.  There is more than one possible explanation of suggested discrepancies in relation to the stationery used.  It is not worth pursuing these since, whatever the precise explanation, I have no doubt of the honesty of Mr Ponya's evidence.

     That leaves the question whether Mr Elsworth in fact received the letter.  He denies it, but I was not impressed by Mr Elsworth as a witness.  At many points, he appeared to me to be motivated by a desire to give the evidence that he thought would assist his case rather than to tell the truth.  The same observation applies to Mr Hanley.  I think also that they were quite dishonest about the duty drawback, which they had agreed both implicitly, and also, I think, expressly, to obtain on behalf of Altendorf Australia.  Mr Ponya gave clear evidence of the system in his small office according to which the letter would in the ordinary course have been properly posted.  I think it is more probable than not that it was received by Mr Elsworth, despite his denial.  However, it is another question whether he appreciated its significance at any time before about the middle of 1991.  On the one hand, his sudden rejection of Mr Ponya as Parkanson's agent is consistent with an attempt to distance himself from a source of information the receipt of which he did not wish to acknowledge; but on the other hand, the delay until almost the last minute in the making of applications of great financial significance suggests previous ignorance of their availability.  On the whole, I think the most probable explanation of events is that the difficulties Parkanson was going through at the time of the receipt of Mr Ponya's letter, and shortly afterwards the dramatic change in the nature of its business which occurred in November 1990, distracted Mr Elsworth's attention, so that the significance of the letter was overlooked.  It was therefore not until very shortly before the applications for refunds were made that Mr Elsworth became aware there was a pot of gold to be obtained.  I have no confidence in the veracity of his account of how that occurred.  But one thing is clear; upon understanding the situation, Mr Elsworth determined, as he had done in respect of the duty drawback, to keep all of the money, hoping that Mr Schwager and Altendorf Australia would remain in ignorance, or at least would do nothing about it.

     Before I turn to the several claims made by Altendorf Australia, it is convenient to refer to the relevant provisions of the Customs Act 1901 and the Customs Regulations.  The topic of refunds of duties is dealt with in Division 3 of Part VIII of the Customs Act.  In that Division, s. 163(1) provides:

    "Refunds, rebates and remissions of duty may be made:

     (a)  in respect of goods generally or in respect of the goods included in a class of goods; and

     (b)  in such circumstances, and subject to such conditions and restrictions (if any), as are prescribed, being circumstances, and conditions and restrictions, that relate to goods generally or to the goods included in the class of goods."

By reg. 126(1) of the Customs Regulations, a number of circumstances are prescribed for the purposes of s. 163 of the Act.  One of those circumstances is (f): that

    "after duty has been paid on goods ... a Commercial Tariff Concession Order is made under Part XVA of the Act, the effect of which is that duty is not payable on those goods or duty is payable on those goods at a rate which is less than the rate which was applicable when the goods were entered for home consumption".

Section 269C of the Customs Act, which is contained in Part XVA, provides for the making of a Commercial Tariff Concession Order where goods serving similar functions to those of goods of a particular class or kind are not produced in Australia, and are not capable of being produced in Australia by any person in the normal course of business.  By s. 269N, certain concession orders shall be deemed to have come into effect on a day before the making of the order which is specified in the order.  I am speaking of these provisions, which have since been substantially amended, as they stood in 1990 when the Commercial Tariff Concession Order in question in this case was made. 

     It will now be appreciated that, upon the making of the Commercial Tariff Concession Order in respect of the types of saws involved in the present matter, which specified a date in February 1988 as the date on which it should be deemed to have come into effect, an entitlement to a refund arose under s. 163 of the Customs Act.

     A duty drawback is a particular kind of refund: Customs and Excise Law (1984) by E.J. Cooper, para. 3,008, although by s. 4 of the Customs Act the word "drawback" includes also a "bounty or allowance".  As Woodward J. pointed out in Alcoa of Australia Ltd v. Button (1984) 55 ALR 101 at 102, there is no comprehensive definition of a drawback in the Act.  However, the word has been used for centuries in relation to duties of customs, and his Honour accepted the definition of it which appears in the Shorter Oxford English Dictionary: "An amount paid back from a charge previously made; especially a certain amount of excise or import duty remitted when the commodities on which it has been paid are exported".  By s. 168 of the Customs Act, the sole section in Part IX, the making of regulations providing for drawbacks of duty paid on goods imported into Australia is authorized.  Regulations have been made accordingly.  Regulation 129(2) of the Customs Regulations provides:

    "Subject to these Regulations, drawback of import duty may be paid on the exportation of imported goods to which this regulation applies."

Regulation 134(1) provides:

    "Drawback of import duty is not payable on the exportation of goods unless:

     (a)  before the exportation, the owner of the goods gives to the Collector a notice in an approved form, or in an approved statement, of the owner's intention to claim drawback on the exportation; and

     (b)  before the exportation, the goods are available at all reasonable times for examination by an officer; and

     (c)  records that show:

          (i)   that duty has been paid on the goods; and

          (ii)  relevant details of the receipt, use and disposal of the goods by the owner;

     are available at all reasonable times for examination by an officer; and

     (d)  a claim for drawback of import duty paid in respect of the goods that:

          (i)   is in an approved form; and

          (ii)  sets out the amount of the claim and such other information as that form requires;

          is given by the owner referred to in paragraph (a) to the Collector:

          (iii)after exportation; and

          (iv)  not later than 12 months after the day on which the goods are exported; and

     (e)  the person making the claim states in the form of claim that, to the best of the knowledge, information and belief of that person, those goods:

          (i)   have not been used in Australia other than for the purpose of being inspected or exhibited; and

          (ii)  have not been, and are not intended to be relanded in Australia ... ."

     It will be noticed that nothing in this regulation suggests the owner of the goods at the date of the exportation must be identical with the owner at the time of the importation.  The condition imposed by para. (e) is not that there has been no change of ownership, but that the goods have not been "used in Australia" other than as specified.  The word "owner", of course, must have the wide range of meanings given to it by s. 4 of the Customs Act 1901, by which, "except where otherwise clearly intended", it "includes any person (other than an officer of Customs) being or holding himself out to be the owner, importer, exporter, consignee, agent, or person possessed of, or beneficially interested in, or having any control of, or power of disposition over the goods".  This is not to say that the Comptroller, having regard to the nature of a drawback as a refund, would not be entitled to insist upon the involvement of the importer who had paid the duty. 

     In the present case, goods were imported by Parkanson, as distributor for Altendorf Germany, under contractual arrangements which involved it in agreeing to purchase the goods, but did not pass title to it until after payment
contemplated as tied to the effecting by it of a resale in Australia.  In the events that happened, it never acquired title to the goods the subject of the drawback, nor to the other goods taken over by Altendorf Australia at cost including customs duties and import charges.  Upon a true analysis, what happened pursuant to the agreement negotiated in June 1990 was not that title was transferred from Parkanson to Altendorf Australia, but that contractual arrangements contemplating an ultimate acquisition of title by Parkanson were varied or abrogated, and title was, instead, passed from H.P. Schwager to Altendorf Australia.  Parkanson was fully reimbursed in respect of customs duties and import charges paid by it, and its obligation to pay the price of the goods pursuant to bills of exchange was released.  No profit element was involved, and it is clear that the expression used at the time was accurate - the goods were "taken over" by Altendorf Australia.  As nothing was then known about the Commercial Tariff Concession Order, no reference was made to it; but the possibility of a duty drawback becoming payable was known, and was contemplated when the oral agreement was made.  I have come to the conclusion that the parties intended this to be available to Altendorf Australia in the event that any of the goods taken over were exported back to Germany, that being an option open to Altendorf Australia as the parties recognized at the time.  I do not think the evidence of references made to this subject in the June discussions is reasonably open to any other understanding.  The matter was not fully spelled out only because it was so completely understood on both sides.  There would be no sense in Altendorf Australia reimbursing Parkanson in respect of the duty in order to export the goods back to Germany so that Parkanson could obtain and keep for itself a refund of the same duty.  Accordingly, I think the applicant Altendorf Australia is entitled to succeed in respect of the amount of the duty drawback, which was received on its behalf so as to be held in trust for it: The Registrar of the Accident Compensation Tribunal v. Commissioner of Taxation of the Commonwealth of Australia (1993) 178 CLR 145 at 165-166.

     It is strictly unnecessary to consider whether the later arrangements, made in September and October 1990, for the return of the goods to Germany and the making of the application for the drawback, pursuant to which Parkanson was relieved of any obligation to pay interest at 1% per month in respect of the cost of the goods, involved a contractual conferral upon Altendorf Australia of entitlement to the drawback when received.  But the relief obtained by Parkanson in respect of the 1% interest was plainly capable of amounting to consideration, as indeed was the mutual release of the reciprocal obligations of the parties in respect of these goods under their agency contract, and if I had not taken the view that the matter was covered by the contract made in June, I would have concluded that an agreement was reached in September or October.  However, the conclusion that there was a contract made in June, dealing with this matter, means that
the later arrangements did not involve the making of a contract, but the implementation of the contract already made.

     No prolonged consideration is required of the alternative claims put forward by the applicant under the Trade Practices Act and the Fair Trading Act.  I should say that I think it was the intention of Messrs Elsworth and Hanley, at the time of the making of the arrangements for the return of the goods to Germany, that Parkanson would obtain the drawback payment on behalf of Altendorf Australia, and not on behalf of Parkanson itself.  But whether or not there was really any contractual obligation binding Parkanson, its conduct was deceptive in the circumstances in that, having honestly represented itself as intending to obtain the drawback on behalf of Altendorf Australia, it preserved a careful silence when it later dishonestly decided it would in fact keep the money itself.  To keep quiet in circumstances of that kind has been regarded as fraudulent (see Davies v. London and Provincial Marine Insurance Co. (1878) 8 Ch.D. 469 at 475, per Fry L.J., cited in Contractual Non-Disclosure (1994) by Prof. A. Duggan, M. Bryan and F. Hanks at 28-29), where the intention was to induce some action based on the representation which was known to be no longer true.  Here, Messrs Schwager and Altendorf, the agents of Altendorf Australia, were persuaded to pay a large sum without securing first the drawback refund, which they would undoubtedly have insisted upon securing in some way had they known of the change in Parkanson's intention.  On that basis, s. 52 of the Trade Practices Act and s. 11 of the Fair Trading Act were applicable: Winterton Constructions Pty Ltd v. Hambros Australia Limited (1992) 39 FCR 97 at 113-114; Elconnex Pty Limited v. Gerard Industries Pty Limited (1991) 32 FCR 491 at 499; Demagague Pty Ltd v. Ramensky (1992) 39 FCR 31.  Also, since Messrs Elsworth and Hanley were themselves the guiding minds of Parkanson, who made the relevant decisions, s. 75B of the Trade Practices Act was applicable as well to fix them with accessory liability for misleading conduct in which they knowingly participated.  Their personal liability, of course, is the only remaining matter of importance relating to the drawback controversy, since Parkanson itself is liable on the bases already discussed.  But the fact that Parkanson was bound in contract to comply with its representation did not prevent that representation from being misleading, when Parkanson knew it did not intend to honour its contract.  Cf. Poseidon Ltd v. Adelaide Petroleum NL (1991) 105 ALR 25, and Negotiating in Good Faith by Prof. G. Shalev, in Equity and Contemporary Legal Developments (1992) at 823.

     As regards the duty refund pursuant to the Commercial Tariff Concession Order, the arguments of the parties ranged far and wide over the rights conferred by the original distributorship agreement, the later agency agreement, the contract finalized in July 1990, the agreement of November 1990, the doctrine of unjust enrichment, constructive trust and the fiduciary obligations inherent in an agency relationship.  But, essentially, the applicant's case came down to a wider claim, and a narrower claim.  The wider claim was to the whole of the duty refund back to 1988.  This was put on the basis that the relationship between the parties was always a relationship of principal and fiduciary agent, so that the law would not permit Parkanson, as such an agent, to retain for itself the windfall profit represented by the duty refund; it should account for that to its principal.  Insofar as the applicant was not at all times the principal, reliance was placed upon an assignment to it of the rights of Altendorf Germany and H.P. Schwager, although that assignment was not made until after the institution of proceedings.  Alternatively, the applicant Altendorf Australia relied on the terms of the November 1990 agreement as involving an assignment by Parkanson to it of all the assets of the business of Parkanson in relation to Altendorf products, including any rights to a duty refund.  The narrower claim relied on the agreement negotiated in June 1990, and completed on 4 July 1990, as entitling the applicant to so much of the duty refund as related to the stock taken over at cost including duty.  It was said to be "antithetic to the fundamental basis" of this agreement that Parkanson should be entitled to the duty refund in respect of those goods.  It was pointed out that the agreements

    "were entered into to bail Parkanson out of its financial crisis and secure the agency and the stock against possible insolvency of Parkanson.  The parties did not know of the possibility of the July refund when negotiating in mid-1990.  However, the negotiations and agreements of June and July 1990 were made in the context of an on-going relationship of principal and agent.  The 4 July 1990 agreement involved Altendorf acquiring the current stock for the price of the outstanding bills [subject, of course, to the reimbursement of the duty and charges]."

It was pointed out that, from the time of the agreement of 4 July 1990, the relationship of Parkanson to this stock was that of an agent owing, as such, fiduciary duties to Altendorf Australia.

     I have come to the conclusion that I should reject the wider claim.  I do not think it is necessary to analyse the many authorities which were cited on the issue of fiduciary duty.  That is because I do not think the relationship created by the original agreement between Altendorf Germany and H.P. Schwager, which was assigned to Parkanson, gave rise to any relevant fiduciary duty.  The question, of course, is not whether it gave rise to any fiduciary duty; it is whether it gave rise to a duty of that kind which could impinge upon the question whether Parkanson would be entitled to the benefit of the duty refund.  The relationship of exporter and sole distributor does not, in itself, give rise to the kind of fiduciary duty asserted on behalf of the applicant: Hospital Products Ltd v. United States Surgical Corporation (1984) 156 CLR 41.  So far as each transaction of importation was concerned, it was an ordinary commercial transaction by which Altendorf Germany sold goods to H.P. Schwager of Switzerland, which then sold them to Parkanson for resale in Australia.  When, subsequently, it turned out that Parkanson was able to obtain a refund of certain duties paid by it in relation to
the importations involved, I can see nothing in the transaction to impose upon it fiduciary obligations in respect of the moneys received: cf. Keith Henry and Company Proprietary Limited v. Stuart Walker and Company Proprietary Limited (1958) 100 CLR 342 at 350-351.  The back dated benefit was certainly a windfall, but there seems no reason why it should be received by the middle man H.P. Schwager or the manufacturer Altendorf Germany, each of which received its price, rather than by the importer which paid the duty the subject of the refund.  Of course, in a sense it is an undeserved windfall, since the legislative intention, in providing for the concessional tariff, seems to have been to benefit, neither the exporter nor the importer, but the recipient within Australia who had to acquire an imported product because no Australian equivalent was available.

     The alternative ground is the alleged assignment in November.  The agreement then arrived at was, of course, concluded orally, although its principal terms were reduced to writing by Messrs Elsworth and Hanley.  They employed the words: "We agree to transfer all matters relating to Altendorf Australia, i.e. stock, communications and technical information to the new office in an organised manner."  They also headed their notes of the agreement: "TRANSFER OF BUSINESS TO ALTENDORF SYDNEY NOVEMBER 22, 1990".  The question is whether there was a complete transfer of all rights appertaining to the business, or whether Parkanson retained its right to receive the duty refund in respect of otherwise concluded transactions.  The problem of construction of the agreement is made the more difficult by the fact that Messrs Schwager and Altendorf knew nothing of the Commercial Tariff Concession Order, while I have concluded on the probabilities that Messrs Elsworth and Hanley, though informed of it, were oblivious of the fact that it might be applicable.  The parties before me took opposite extreme positions.  On the one hand, the applicant argued that the agreement should be construed as covering all rights of Parkanson in respect of its distributorship and agency back to the beginning, and therefore back to the earliest refund date, 29 February 1988.  On the other hand, the respondents claimed that the document drawn up by Messrs Elsworth and Hanley should be construed, in the light of the restriction of the expression "all matters relating to Altendorf Australia" by the following expression "i.e.", so as to limit the transfer to stock, communications and technical information, and so as to eliminate any further assignment whatever, notwithstanding the heading "transfer of business ... ". 

     In my opinion, neither of the extreme positions taken up by the parties can be sustained.  In the first place, it is common ground that the document drawn up by Messrs Elsworth and Hanley does not constitute the whole of the agreement reached orally.  In the next place, the suggested limitation by reference to the Latin abbreviation "i.e." does not stand well with the heading, which is eloquent of an intention that an entire business was to be transferred.  The allowance of the sum of $70,000, on top of the various specific sums, so as to make up a total of about $200,000 seems to me to be consistent with the heading.  To the extent that there is doubt about the meaning of the writing, it should be understood contra proferentes, rather than otherwise.

     In his evidence, Mr Schwager accepted that the document drawn up by Messrs Elsworth and Hanley "summarized" the terms of the arrangement.  Apart from this, and the general probabilities of the situation, there is little to go on in reaching a conclusion as to any precise terms.  For Mr Schwager gave only very general evidence about it, and I did not find the evidence of Messrs Elsworth and Hanley acceptable.  Mr Schwager did make it clear that Mr Elsworth was offering the business known as Altendorf Australia, which had been conducted by Parkanson and was distinct from the company Altendorf Australia.  Mr Schwager regarded that as a business which was not Parkanson's to sell, and his attitude was that what was being acquired was Parkanson's assets, that is, as I understood him, its assets of its business as agent in respect of Altendorf products.  He did say that these assets were listed in the document drawn up.  In his affidavit he stated that Mr Elsworth said: "You may as well buy my company", and that he replied: "We will negotiate an amount to pay you for your company structure.  What will it include?"  Mr Elsworth's reply contained the general expression "and other items".

     In my opinion, it was not the intention of the parties that the "TRANSFER OF BUSINESS TO ALTENDORF SYDNEY", by which was meant a transfer to Altendorf Australia, was to include rights of Parkanson, if any, appertaining to that business conducted by it prior to the agreement negotiated in June 1990.  I think the parties would have regarded anything to do with transactions prior to June as irrelevant to the transaction they were negotiating in November.  It is arguable that the June agreement may have operated as a novation, allowing the earlier distributorship agreement to continue in a varied form, that is, the June agreement may not have terminated it altogether.  However, this is somewhat doubtful.  But whatever the strict legal position about that, I do not think the parties in November were negotiating for a transfer of any residual assets which may have existed as a result of the earlier transactions, when the contract was of a very different nature and bound different parties.  They were negotiating to enable Altendorf Australia to take over the agency business in the new form, as a commission agency, which had been established by the agreements negotiated in June.  Although the possibility of duty refunds in relation to that business was not present to their minds, I consider, despite some concessions wrung from Mr Schwager in cross-examination, that the heading to the document drawn up by Messrs Elsworth and Hanley should be accepted as showing an intention to transfer the whole of the business operations, including any rights appertaining to them, in relation to this agency business.  The general probabilities of the situation support that view.  It is not to be thought that, if some transaction were, at the date of the change over, to be incomplete, the rights of Altendorf Australia would be in doubt, as between it and Parkanson.  A clean break with a new start was intended.  It was for that that Parkanson was to receive the $70,000 and to be paid the cost price of used equipment.  In effect, I accept the applicant's submissions as to the width of the assignment, but subject to my conclusion that it was not intended to extend back into the transactions undertaken by Parkanson as an importer, purchasing on its own account and not as commission agent.  However, it was intended to include all matters taken over on 4 July 1990 so as to become part of the agency business thereafter carried on. 

     This conclusion makes it strictly unnecessary to consider whether, in any event, Parkanson would have been obliged to hold on behalf of Altendorf Australia any amount of duty refund received in respect of goods in relation to which it had been fully reimbursed the duties paid by it, pursuant to the July agreement.  However, in my opinion the narrower duty refund claim should also be upheld on this basis.  The agreement reached in June was that, as between Altendorf Australia and Parkanson, Altendorf Australia was to take over Parkanson's position as the importer, reimbursing it fully for its expenses, and I think it was implicit in this transaction that Altendorf Australia acquired all Parkanson's rights in respect of the importation of the goods.  The duty refund was not known about, but the unhesitating acceptance of the rights of Altendorf Australia in respect of the other refund, the drawback, which was known about, is clear evidence to support my conclusion.  Upon receipt of the refund in respect of these goods, Parkanson became a constructive trustee for Altendorf Australia.

     In the course of the evidence, it emerged that special considerations may apply to so much of the duty refund entitlement as relates to the two shipments which were on the high seas at the time of the negotiation of the June agreement.  It appears that the duty in respect of these shipments was provided by Altendorf Australia, although the invoice was made out to Parkanson, which was placed in funds by Altendorf Australia to effect the payment, since the shipping documents, pursuant to the arrangements in existence at the time they were drawn up, named Parkanson as the importer.  The case of these two shipments is, of course, a fortiori in relation to the finding I have just made.  But no claim was made for the refund by Parkanson because, in their case, it recognized that it would not be entitled to any moneys paid by Customs.  At the same time, and despite repeated requests from Mr Burdette, Parkanson wrongfully retained the documents which were needed to enable a claim for a refund to be lodged.  The refund, as a result, became unobtainable within a few months by reason of lapse of time: see reg. 128A(4).  I think Parkanson held those documents as a fiduciary, and is liable to Altendorf Australia in the amount of the refund that would have been obtained had it acted responsibly and with proper care and diligence as a fiduciary agent: see Commonwealth Bank of Australia v. Smith (1991) 42 FCR 390 at 395, cited by Sir Anthony Mason in his article The Place of Equity and Equitable Remedies in the Contemporary Common Law World (1994) 110 LQR 238 at 243-245; Bailey v. Namol Pty Limited (1994) 53 FCR 102 at 109; Wan v. McDonald (1992) 33 FCR 491 at 520-521; Bennett v. Minister of Community Welfare (1992) 176 CLR 408 at 426-427, per McHugh J.; and see the note on Causal Relationships between a Fiduciary's Default and the Principal's Loss by J.D. Heydon Q.C. in (1994) 110 L.Q.R. 328 at 333-335.

     The applicant Altendorf Australia also makes a number of claims, arising out of the November agreement, on the basis that the fork-lift and vans required repairs (amounting in all to $1,880.81), there were missing items from the computer (valued at $1,164), the cost price of the computer had been misstated to the extent of $18,712.32, and certain of the stock handed over had been used or was damaged, with a consequential reduction in its value of some $14,521.79.  It was conceded that $2,518.11 of the amount of $7,000 retained would need to be deducted from anything awarded on this basis.

     In my opinion, the agreement to pay cost price, in itself, indicates that what was being paid did not have a necessary relation to the value of items such as the fork-lift and vans.  They were being taken over in the condition in which they then were.  I can understand Mr Burdette's annoyance when the fork-lift was found to be inoperable and the van unroadworthy.  It may be there was some misrepresentation, for it is hard to believe that Messrs Schwager and Altendorf knowingly accepted these items in that condition, but I do not think the applicant has discharged the onus of proof in this regard.  Not without some hesitation, I reject the claim relating to the fork-lift and van. 

     The missing items of the computer are in a different category because of the evidence, to which I have already referred, strongly suggesting that Mr Elsworth and Mr Hanley quite well recognized there had been a breach of the November agreement in this respect.  Indeed, I conclude they showed a contemptuous disregard of their obligations.  The amount is small, but I think the applicant is entitled to recover it.

     However, the further claim that the cost price of the computer was misstated should be rejected.  In the context of the November agreement, it does not seem to me to have been incorrect to attribute to the computer a cost on the basis of the cost price shown in lease financing documents.  Liability for that amount had been incurred.  I can see no reason why a pay-out figure, the amount of which was a pure matter of chance depending on the extent to which the goods had actually been paid for, should be substituted.

     As regards the used and damaged stock, I think a distinction should be drawn.  Some of this stock consisted of Sudhoff machines.  Having regard to the history of problems with those machines, I am not satisfied, on the balance of probabilities, that the parties would have assumed that these items were in good condition.  The machines had been roundly condemned on more than one occasion, and it was known that machines had been substituted because of the difficulties encountered in maintaining those that had been sold, particularly where they had been taken to remote areas.  On the other hand, I think the claim in respect of a damaged table, being a part for an Altendorf saw, should be allowed at $4,393, arrived at by deducting $100 for its scrap value from the list price of this item.  As is conceded, a deduction of $2,518.11 should be made, since this amount was retained from the payment made under the November agreement, and exceeds the amount of the over payment in respect of parts which was also made under that agreement.

     The written submissions lodged by the parties do not mention the matter of interest, but it is claimed in the Amended Application under s. 51A of the Federal Court of Australia Act 1976 and otherwise.  Subject to anything which may be said upon the bringing in of short minutes, I think it is a matter in which interest should be allowed under s. 51A: Smallacombe v. Lockyer Investment Co Pty Ltd (1993) 114 ALR 568 at 574; Australian Guarantee Corporation Limited v. Border Printing Services Pty Ltd (unreported, Lockhart, Spender and Hill JJ., 21 April 1989).  In the latter case, their Honours said that "the award of interest is mandatory unless good cause is shown".  As for the rate or rates, see Namol Pty Ltd v. A W Baulderstone Pty Ltd (1993) 119 ALR 187 at 188, where Davies J. adopted the same rates as would be applicable in the Supreme Court of New South Wales, when sitting in this State.

     The remaining claims against Parkanson under the Trade Practices Act, the remaining claims against Messrs Elsworth and Hanley under the Fair Trading Act, and the remaining derivative claims against them under the Trade Practices Act do not seem to me to lie in the circumstances, and would in any case duplicate the relief pursuant to claims which I have allowed.

     I direct the applicant to bring in, on a date to be fixed, short minutes of orders to reflect the reasons of the court.  I shall then hear any arguments as to interest and costs.

     I certify that this and the preceding fifty-three (53) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.

     Associate:

     Date: 26 April 1995

     Counsel for the Applicant:        Mr S.D. Rares S.C. with Mr G.A. Sirtes

     Solicitors for the Applicant:         Levingstons

     Counsel for the Respondents:      Mr J.B. Simpkins

     Solicitors for the Respondents:   Swaab & Associates

     Dates of hearing:                 2, 3, 4, 5, 6 and 27 May 1994