FEDERAL COURT OF AUSTRALIA

Minister for Sustainability, Environment, Water, Population and Communities v Fullport Pty Limited [2011] FCA 471

THE COURT ORDERS THAT:

1.    A copy of these Reasons for Decision is to be served upon the Respondent within 7 days.

2.    The Applicant is to file and serve within 14 days Short Minutes of Orders to give effect to these reasons.

3.    The proceeding is stood over to 25 May 2011 with a view to then making final orders.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1    On 17 February 2011, the Minister for Sustainability, Environment Water, Population and Communities filed an Application in this Court.

2    It was claimed that the Respondent, Fullport Pty Limited, had engaged in or was about to engage in conduct that would be an offence under s 12 of the Fuel Quality Standards Act 2000 (Cth) (“Act”). A declaration was also sought that the conduct was in breach of s 12AA(1), together with an order pursuant to s 65. An order seeking the imposition of a penalty was abandoned.

3    The matter was listed for hearing on 5 April 2011. There was no appearance for the Respondent. No question arises as to the Respondent not being aware of the hearing as a letter had been forwarded to the Respondent from the Federal Court Registry on 29 March 2011 expressly advising it of the date and time of hearing. The hearing proceeded in the absence of the Respondent.

4    The events which give rise to the present proceeding centre upon an analysis of diesel fuel taken from “The Big Prawn” service station on 19 January 2011.

The Fuel Quality Standards Act

5    The objects of the Act are set forth in s 3 as including the regulation of “the quality of fuel supplied in Australia in order to… reduce the level of pollutants and emissions arising from the use of fuel that may cause environmental and health problems”. Also included within the objects of the Act is ensuring “that, where appropriate, information about fuel is provided when the fuel is supplied”.

6    Section 12 of that Act provides as follows:

Offence – supplying fuel that does not comply with fuel standards

(1)    A person is guilty of an offence if:

(a)    the person supplies fuel in Australia that is the subject of a fuel standard; and

(aa)    in the case where the fuel standard specifies the circumstances in which the standard applies – the person supplies the fuel in Australia in those circumstances; and

(b)    the person is a constitutional corporation or a Commonwealth entity or the person supplies the fuel in the course of constitutional trade or commerce; and

(c)    the fuel does not comply with the standard; and

(e)    either:

(i)    if the person holds an approval that varies the standard in respect of the supply – the fuel does not comply with the standard as varied; or

(ii)    if another person holds an approval that varies the standard in respect of the supply by the person – the fuel does not comply with the standard as varied; and

(f)    the supply is not in order to comply with a direction or order under an emergency law.

Penalty:  500 penalty units.

(2)    However, the person is not guilty of the offence if the person believes on reasonable grounds that the fuel that is supplied will be further processed for the purpose of bringing the fuel into compliance with the standard or the standard as varied.

(3)    Subsection (1) is an offence of strict liability.

The term “supply” is defined in s 4 of the Act (in part) as meaning “supply (including re-supply) by way of sale…”.

7    Further to s 12, s 12AA provides as follows:

Civil penalty – supplying fuel that does not comply with fuel standards

(1)    A person contravenes this subsection if:

(a)    the person supplies fuel in Australia that is the subject of a fuel standard; and

(b)    in the case where the fuel standard specifies the circumstances in which the standard applies – the person supplies the fuel in Australia in those circumstances; and

(c)    the person is a constitutional corporation or a Commonwealth entity or the person supplies the fuel in the course of constitutional trade or commerce; and

(d)    the fuel does not comply with the standard; and

(e)    either:

(i)    if the person holds an approval that varies the standard in respect of the supply – the fuel does not comply with the standard as varied; or

(ii)    if another person holds an approval that varies the standard in respect of the supply by the person – the fuel does not comply with the standard as varied; and

(f)    the supply is not in order to comply with a direction or order under an emergency law.

Civil penalty:

(a)    for an individual–500 penalty units; and

(b)    for a body corporate–2,500 penalty units.

(2)    However, the person does not contravene subsection (1) if the person believes on reasonable grounds that the fuel that is supplied will be further processed for the purpose of bringing the fuel into compliance with the standard or the standard as varied.

A “penalty unit” is defined by s 4AA of the Crimes Act 1914 (Cth) as $110. The maximum penalty for a corporation is thus $275,000.

8    The phrase “fuel standard” is also defined in s 4 of the Act to mean “a standard under section 21”. Section 21, in turn, provides as follows:

Making fuel standards

Base standard

(1)    The Minister may, by legislative instrument, determine a fuel standard in respect of a specified kind of fuel.

Standard may apply only in specified circumstances

(1A)    The fuel standard may specify the circumstances in which the standard applies.

More stringent standard

(2)    The fuel standard may provide for more stringent parameters to apply in respect of supplies of the fuel in specified areas in Australia.

Minister must not give preference

(3)    In applying subsection (2), the Minister must not give preference (within the meaning of section 99 of the Constitution) to one State or part of a State over another State or part of a State.

Regard to be had to objects of Act

(5)    In making a determination under this section, the Minister must have regard to the objects of this Act.

9    Pursuant to s 21 there was published a “Fuel Standard (Automotive Diesel) Determination 2001” (“Determination”). That Determination commenced on 1 January 2002. Clause 5 of the Determination provided for what was there described as “operability standards for diesel”. That clause provided as follows:

Operability standards for diesel

(1)    To allow the more effective operation of engines, diesel of a kind mentioned in an item of the following table must, in relation to the parameter mentioned in that item, comply with the specification for that parameter mentioned in that item.

(2)    For subsection (1), compliance with the specification for a parameter is determined by application of the testing method, as existing on the commencement of the Fuel Standard (Automotive Diesel) Amendment Determination 2009 (No. 1), for that parameter mentioned in that item of the table.

Of present relevance is the standard that all diesel must have a minimum “flash point” of 61.5° C.

10    Relevant to the remedies sought by the Applicant are s 65(1) and 65(3).

11    Section 65(1) provides as follows:

If a person has engaged, is engaging, or is about to engage, in any conduct that is or would be:

(a)    an offence against this Act; or

(b)    a contravention of a civil penalty provision;

a Court may, on the application of the Minister or any other aggrieved person, grant an injunction restraining the person from engaging in the conduct.

Section 65(3) provides as follows:

The power of a Court to grant an injunction may be exercised:

(a)    whether or not it appears to the Court that the person intends to engage, or to continue to engage, in conduct of that kind; and

(b)    whether or not the person has previously engaged in conduct of that kind.

The Big Prawn

12    The Big Prawn service station is located on the Pacific Highway at Crangan Bay, Frazer Park, in the State of New South Wales. The service station was formerly known as the “Big-T-Roadhouse”.

13    A business name search of the Big-T-Roadhouse revealed that it was previously registered in the name of Jarpab Pty Limited. Mr Kenneth Silverside was the previous director and secretary.

14    Subsequently, Fullport Pty Limited came to operate the site. A search of the records of that company reveal that Mr Silverside was a director for a period from July 1999 to September 2009 and for one day in 2010, namely 19 July 2010.

15    On 19 January 2011 two Fuel Inspectors employed by the Department of Sustainability, Environment, Water, Population and Communities visited The Big Prawn service station. They were Mr Grahame Meekin and Mr John Edwards. They asked to speak to the “owner of the site” and were then introduced to Mr Silverside.

16    The Inspectors presented to Mr Silverside their Identity Cards and then informed him that they were on site to take samples of diesel fuel under s 41A of the Act. The following conversation then took place:

Mr Silverside was then asked if he was aware of the “sampling procedures” and he replied “Yes”.

17    A sample of diesel fuel was then taken – two litres were sealed and given to Mr Silverside; two litres were sealed and taken by the Inspectors to a testing laboratory for analysis and a final sample of two litres was sealed and retained in the Department’s custody. Mr Silverside remained inside whilst the samples were taken. The sample of fuel taken was paid for.

18    An analysis was then undertaken on behalf of the Applicant Minister and an analytical report was prepared. That report provided in part as follows:

This sample was tested as received and the following results obtained.

It will be noted that the analysis correctly records that the Determination prescribed a minimum of 61.5°C as the “flash point” for diesel fuel and recorded the diesel fuel as tested as having a “flash point” of 26.0°C.

19    Subsequent testing carried out in late February 2011 also on behalf of the Minister recorded the diesel fuel then tested as having a “flash point” of <23.0°C.

20    It should also be noted that The Big Prawn site has previously attracted the attention of Fuel Inspectors and this Court.

21    On 20 November 2008 Buchanan J noted an undertaking given on behalf of Jarpab Pty Ltd in the following terms:

“… by itself, its servants or agents not to supply or sell diesel fuel contrary to the Fuel Standards (Automotive Diesel) Determination 2001 (as amended from time to time) made under s 21 of the Fuel Quality Standards Act 2000 (Cth) for a period of 2 years from the date of these orders.”

22    Thereafter, in December 2009 a separate proceeding was commenced against the present Respondent, Fullport Pty Limited. On 5 February 2010, Emmett J made orders in that proceeding including an order in the following terms:

Pursuant to s 65 of the Fuel Quality Standard Act 2000 (Cth), the respondent is restrained for a period of 2 years from supplying or selling by itself, its servants or agents diesel that has any or all of the following qualities:

a)    sulphur content greater than 10 mg/kg as determined by ASTM D5453;

b)    distillation temperature at which 95% of diesel has been recovered not above 360°C as determined by ASTM D86.

A Supply of Diesel Fuel?

23    The relief claimed in the Application embraced both declaratory and injunctive relief.

24    A declaration was claimed as to an alleged contravention of s 12AA(1) of the Act; an order restraining the supply of diesel fuel was sought pursuant to s 65 of the Act.

25    It is considered that there should be no declaratory relief but that an order should be made pursuant to s 65(1).

26    Both s 12 and s 12AA refer to a person who “supplies fuel in Australia.” Section 65 is more broadly expressed. That section refers to a person who “has engaged, is engaging, or is about to engage, in any conduct” that would be an offence under the Act.

27    It is concluded that ss 12 and 12AA should be confined to those circumstances in which a person is shown to have in fact supplied diesel fuel that fails to comply with the requisite standard and that that section does not extend to those circumstances in which a person is “about to engage” in the supply of such fuel.

28    Moreover, in the present proceeding, it is further concluded that there is no evidence of any “supply” of diesel fuel to any person. There are two reasons for concluding that the taking of the samples of diesel fuel by the two Inspectors on 19 January 2011 and the payment for that fuel does not constitute a “sale” for the purposes of the definition of “supply” set forth in s 4 as contended on behalf of the Applicant Minister.

29    First, it may well be queried whether there was a “sale” of the diesel fuel in circumstances where there was no evidence to support any agreement or consent on the part of the Respondent to the taking of the samples. Indeed, a Fuel Sample Record (“Record”) evidenced the taking of the sample and had provision for details to be completed as to (for example) the address from where the fuel was taken, and the date. The Record also contained provision for the giving of consent. That part of the Record was completed as follows:

How this notation on this part of the Record came to be made was not the subject of either evidence or submissions. But the Record so completed provides no evidence of the Respondent having agreed to a “sale” of the diesel fuel as opposed to the Respondent resigning itself to the fact that a sample could be and was in fact taken.

30    Second, given the “search and seizure powers” conferred upon inspectors pursuant to Part 3 of the Act, it is not considered that a taking of a sample of diesel fuel pursuant to those powers constitutes a “supply” for the purposes of ss 12 or 12AA. The Applicant correctly accepted that the act of taking the sample was pursuant to the authority conferred by s 44(1). Rejected is the submission that such a compulsory taking of diesel fuel can nevertheless constitute a “sale”. Section 44 rendered lawful that which otherwise would be unlawful (cf. Federal Commissioner of Taxation v ANZ Banking Group Ltd (1977) 143 CLR 499 at 535 per Mason J). Payment for the sample compulsorily acquired cannot transform a compulsory acquisition into a transaction whereby one party voluntarily agrees to sell and the other voluntarily agrees to buy.

31    To so confine the ambit of the term “supply” in ss 12 and 12AA, it is considered, is consistent with the contrasting manner in which those sections have been drafted and the contrasting wider ambit of operation of s 65. It is also consistent with the need to strictly construe a provision which constitutes an offence and which potentially exposes a person to significant penalties. Section 4 also stands in contrast to other statutory provisions which (for example) define the term “supply” as extending to having goods “in possession for the purpose of sale”: eg, Fair Trading Act 1987 (NSW), s 4.

32    Such a construction is also consistent with the word itself and the definition of that term. To “supply” fuel necessarily involves a “consensual” transaction between a person supplying fuel and a person acquiring the fuel. In the context of construing the term “supplies” in ss 75AD and 75AG of the Trade Practices Act 1974 (Cth), in Cook v Pasminco Limited [2000] FCA 677, 99 FCR 548 Lindgren J reached the following conclusion:

[25] The notion of “supply” in the TP Act is the counterpart of “acquire”, which is defined in s 4(1) in these terms:

“    ‘Acquire’ includes:

(a) in relation to goods - acquire by way of purchase, exchange or taking on lease, on hire or on hire-purchase; and

(b) in relation to services - accept ...”.

[26] The definitions of “supply” and “acquire” are symmetrical: a supply of goods must occur as part of a bilateral “transaction” or “dealing” under which the other party acquires them. Neither the applicants nor anyone else acquired the emissions.

[27] No amount of evidence on the final hearing can alter the fact that the emissions did not move from the respondents to the applicants or anyone else as part of a consensual transaction or dealing. Accordingly, the applicants will not be able to prove that the respondents “supplied” the emissions.

As pointed out by the New South Wales Court of Appeal in Spittles v Michael’s Appliance Services Pty Ltd [2008] NSWCA 76, 71 NSWLR 115 when also considering s 75AD, this approach to the term “supply” has long been accepted and is in accordance with “common parlance”. Handley AJA there observed:

[15] The definition of supply is inclusive, and its normal meaning is available to the appellant. Its normal meaning was considered in Symes v Stewart (1920) 28 CLR 386 and held to include delivery by a bailee to his bailor. In Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297 its normal meaning was held to include delivery by a seller to the buyer after the property had passed. In Re Hardy; Ex parte Turner (1947) 48 SR 133 at 135, 65 WN (NSW) 32 at 33 Jordan CJ said: “ ‘Supplied’ … has, I think, the meaning which it has in common parlance, namely, provided by or on behalf of a person to whom the thing belongs to someone to whom it does not or did not belong.”

His Honour there referred with approval “to other authorities dealing with the ordinary meaning of the word including Cook v Pasminco…”. Bell JA and Barr J agreed.

33    The present proceeding did not expose any “bilateral transaction or dealing” in which the Respondent was truly given any freedom to resist.

34    Had the legislature intended to create an offence having any wider ambit of operation it could (for example) have drafted ss 12 and 12AA in terms of a “person who supplies or offers for supply …”. In a context where an offence is created, there is no reason to construe the term “supply” in any wider manner than that set forth in Cook v Pasminco.

35    In different statutory contexts where (for example) it is an offence to supply drugs, the term “supply” is sometimes given an extended definition and defined as including “keeping or having in possession for supply”: eg, R v Carey (1990) 20 NSWLR 292. But such was not the approach taken by the Commonwealth legislature when drafting the legislation presently in issue.

36    To so conclude is not to give the word “supply” a restrictive meaning or to make proof of an offence difficult. The offence would be made out, for example, by evidence of a customer simply filling his tank with non-compliant diesel fuel and paying for it. Instances can be cited where those enforcing legislation make what are commonly referred to as “trap purchases”. The offence could also have been proved by tendering any records as to diesel fuel sourced from the particular tank from which the samples were taken on 19 January 2011. The difficulty in the present case is that there was no such evidence of any consensual “supply” of the diesel fuel in question.

37    The claim for declaratory relief as to a contravention of s 12AA thus fails.

38    The claim for an order in the nature of injunctive relief, however, should succeed. Section 65(1) extends to both a person who “has engaged” or “is engaging in … any conduct that … would be … an offence against this Act” and also to a person who “… is about to engage in … any conduct that … would be … an offence against this Act”.

The Form of an Order

39    There is no doubt that an order should be made pursuant to s 65(1) “restraining the [Respondent] from engaging in the conduct”.

40    Little if anything can be said against a conclusion that a service station operator who has diesel fuel available for sale to customers is “about to engage” in a sale of that fuel and that that sale would then be a contravention of the Act. The availability of the diesel fuel which did not comply with the Determination on 19 January 2011 and again in late February 2011 supports such a conclusion.

41    A question arises, however, as to whether any order should be confined to restraining the Respondent from engaging in the supply of diesel fuel with a flash point of less than 61.5° C (namely the conduct in which it is “about to engage”) or whether it could be more broadly framed to restrain any supply of diesel fuel not in accordance with the Determination. The wider form of order was sought in the Application as filed.

42    In some circumstances the statutory context may indicate the conferral of a power to issue an injunction in extremely wide terms: eg, Foster v Australian Competition and Consumer Commission [2006] FCAFC 21, 149 FCR 135. Of relevance to the conclusion there reached by Ryan, Finn and Allsop JJ were the amendments that had been made to the Trade Practices Act by the Statute Law (Miscellaneous Provisions) Act 1983 (Cth) and, in particular, s 80(4) and (5). Those sub-sections provided as follows:

(4) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised:

(a)    whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind;

(b)    whether or not the person has previously engaged in conduct of that kind; and

(c)    whether or not there is an imminent danger of substantial damage to any person if the first mentioned person engages in conduct of that kind.

(5) The power of the Court to grant an injunction requiring a person to do an act or thing may be exercised:

(a)    whether or not it appears to the Court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing;

(b)    whether or not the person has previously refused or failed to do that act or thing; and

(c)    whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person refuses or fails to do that act or thing.

In ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 255 to 256, Lockhart J characterised s 80 as “essentially a public interest provision”. His Honour later referred to the amendments to s 80(4) and (5) in 1983 and continued on to say:

Subsections (4) and (5) of s 80 are novel because they empower the court to grant injunctive relief notwithstanding that the defendant has not previously engaged in the prohibited conduct or does not intend to engage in it again or to continue to engage in it or there is no imminent danger of substantial damage. Yet these are the traditional requirements for equitable injunctive relief.

These subsections substantially depart from the traditional basis for the grant of injunctions in Chancery. Indeed, it moved the authors R P Meagher, W M C Gummow and J R F Lehane, Equity Doctrines and Remedies (2nd ed, 1984) to say at par 21.111 (p 597) that the effect of the new amendments (that is the amendments introduced as from 20 June 1983 to subss (1), (4) and (5) of s 80) “is to come very close to empowering the Court to grant injunctions whether or not they are justified in law, and whether or not they are warranted on the facts”. There is no doubt that subss (4) and (5) depart from the general law in permitting injunctions to be granted in the circumstances therein mentioned; but in my opinion they do not suggest legislative nihilism.

In my opinion subss (4) and (5) are designed to ensure that once the condition precedent to the exercise of injunctive relief has been satisfied (ie contraventions or proposed contraventions of Pt IV or V of the Act), the court should be given the widest possible injunctive powers, devoid of traditional constraints, though the power must be exercised judicially and sensibly.

Subsequently, in BMW Australia Ltd v Australian Competition and Consumer Commission [2004] FCAFC 167, 207 ALR 452, Gray, Goldberg and Weinberg JJ concluded:

[36] … By s 80(1) of the Trade Practices Act, the court is given a wide discretion as to the terms of an injunction. Section 80(4)(a) removes the normal rule that an injunction is only to be granted to restrain threatened or impending conduct, in the case of a restraining injunction. Section 80(5) removes the same rule in the case of a mandatory injunction. In such cases, it is clear that the terms of any injunction based only on past conduct should be limited to restraining a repetition of precisely that conduct. The case of an injunction based on an intention to commit further conduct is different. There, the terms can be cast more widely, in order to catch conduct of any kind threatened or intended.

43    In the present statutory context, it is considered that the terms of both s 65(1) and (3) should be approached in a like manner. The purpose to be served by an order under those provisions serves a significant public interest in promoting the object and purpose of the Act as a whole. Once it is concluded that a respondent is “about to engage” in conduct that would constitute a contravention of the Act, and was presumably also offering for sale in late February 2011 diesel fuel which also did not comply with the Determination, an order can be made. The form of any order need not necessarily be confined to restraining the Respondent from engaging in the particular conduct that may make out the contravention in the present proceeding.

44    But the order to be made in the present proceeding should be so confined. No reliance was sought to be placed by the Applicant upon either the events which gave rise to the undertaking proffered to Buchanan J or the events which led to the decision of Emmett J. The facts presently before the Court are those primarily relating to the events on 19 January 2011 – as supplemented by the later sample which was tested in late February 2011. The form of order should thus be confined to the supply of diesel fuel which does not comply with the “flash point” criteria prescribed by the Determination.

Conclusions

45    It is thus considered that no offence under s 12 and no contravention of s 12AA of the Act has been made out. But it is considered that the Applicant has established that the Respondent was “about to engage” in conduct that would constitute an offence or a contravention.

46    The claim for declaratory relief is thus dismissed.

47    The claim for an order under s 65(1), however, succeeds. The form of order need not necessarily be confined to the facts and circumstances of the present contravention – namely, a contravention by reason of supplying diesel fuel with a flash point of less than 61.5° C. But it is considered that in this proceeding the order should be so confined and that the order as sought in the Application should not be made. The order to be made should also be confined to the period suggested in oral submissions on behalf of the Applicant, namely two years.

48     There is no reason why the normal rule as to costs should not apply, namely that the Respondent should pay the costs of the Applicant. There should be no apportionment of costs or a reduction in the costs recoverable by the Applicant by reason that it has succeeded in obtaining only part of the relief sought in the Application.

ORDERS

49    The Orders of the Court are:

1.    A copy of these Reasons for Decision is to be served upon the Respondent within 7 days.

2.    The Applicant is to file and serve within 14 days Short Minutes of Orders to give effect to these reasons.

3.    The proceeding is stood over to 25 May 2011 with a view to then making final orders.

Associate:

Dated:    11 May 2011