FEDERAL COURT OF AUSTRALIA

Minister for the Environment v Shri Ganesh Associates Pty Ltd [2013] FCA 1118

THE COURT DECLARES THAT:

1        (Pronounced 28 October 2013) On 5 February 2013 and 29 April 2013, the respondent, from 104-106 Elizabeth Drive, Liverpool, New South Wales, engaged in conduct that was in breach of section 12AA of the Fuel Quality Standards Act 2000 (Cth) by supplying diesel that did not comply with the Fuel Standard (Automotive Diesel) Determination 2001 (as amended).

THE COURT ORDERS THAT:

2        (Pronounced 28 October 2013) The name of the applicant be changed from the ‘Minister for Sustainability, Environment, Water, Population and Communities’ to the ‘Minister for the Environment’ pursuant to the Administrative Order dated 18 September 2013.

3        (Pronounced 28 October 2013) The respondent be restrained, by itself, its servants or agents or any of them, or otherwise howsoever, for two years, from supplying diesel in Australia that does not comply with the Fuel Standard (Automotive Diesel) Determination 2001 as amended from time to time.

4        (Pronounced 28 October 2013) The respondent pay the applicant’s costs as agreed or assessed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INTRODUCTION

1        This is an application by the Minister for the Environment (“the Minister”) for relief in relation to contraventions by the respondent of s 12AA of the Fuel Quality Standards Act 2000 (Cth) (“the Act”) by reason of the respondent supplying fuel which failed to comply with the Fuel Standard (Automotive Diesel) Determination 2001 (as amended) (“the Determination”) made under s 21 of the Act.

2        The facts constituting the contraventions have been admitted by the respondent and are contained in the Statement of Agreed Facts dated 25 October 2013. The parties are also agreed that the respondent voluntarily undertook a number of steps in response to the contraventions, which I set out below. The Minister accepts that these steps were appropriate.

3        Although initially sought by the Minister’s application, in the circumstances the Minister does not press for the imposition of a civil penalty under s 12AA of the Act for the contravention. However, the Minister seeks an injunction restraining Shri Ganesh Associates Pty Ltd (“Shri Ganesh”) for a period of two years from supplying diesel in Australia which does not comply with the Determination and a declaration that Shri Ganesh, by supplying fuel on 5 February 2013 and 29 April 2013 that did not comply with the Determination, engaged in conduct that was in breach of s 12AA of the Act, together with the Minister’s costs. The relief sought by the Minister is not opposed by the respondent save for the order as to costs. For the reasons which I set out below, I have reached the view that it is appropriate to grant the relief sought by the Minister including, in the exercise of my discretion, the order as to costs.

THE LEGISLATIVE REGIME UNDER THE ACT

4        The objects of the Act as set out in s 3 are to:

“(a)    regulate the quality of fuel supplied in Australia in order to:

(i)    reduce the level of pollutants and emissions arising from the use of fuel that may cause environmental and health problems; and

(ii)     facilitate the adoption of better engine technology and emission control technology; and

(iii)     allow the more effective operation of engines; and

(b)     ensure that, where appropriate, information about fuel is provided when the fuel is supplied.”

5        Section 21 of the Act relevantly provides:

“Base standard

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

Standard may apply only in specified circumstances

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

…

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.”

6        The Determination is a determination made under s 21 of the Act. Specifically s 5 of the Determination provides that:

“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.

7        The reference on the item in the table to “flash point” is a reference to the lowest temperature at which the fuel can form an ignitable mixture in air. I note that the Determination is expressly made to promote one of the objects of the Act referred to in s 3, namely, to “allow the more effective operation of engines”.

8        Part 2 of the Act sets out a regulatory regime in relation to activities involving fuel and fuel additives. Relevantly, s 12AA provides:

    “12AA 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)        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.”

9        Section 65(1) of the Act provides relevantly:

    “Injunctions

    Grant of injunction

(1)        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.”

CONCLUSION

The contravention of the Act is established

10        As submitted by the Minister and accepted by the respondent, the agreed facts establish the contravention of s 12AA of the Act. For convenience, I have referred in brackets to the particular subsection that sets out the element of the statutory cause of action to which a particular admission relates.

        On 5 February 2013 and 29 April 2013, Shri Ganesh sold and supplied diesel to members of the public in Australia (s 12AA(1)(a) of the Act).

        On each of those occasions, the diesel sold by Shri Ganesh was subject to the Determination which required that the diesel must not have a flash point temperature lower than 61.5°C (s 12AA(1)(a)).

        Shri Ganesh is a corporation incorporated under the Corporations Act 2001 (Cth) and is therefore a constitutional corporation as defined in s 4(1) of the Act (s 12AA(1)(c)).

        Diesel sold by Shri Ganesh on 5 February 2013 and 29 April 2013 did not comply with the Determination (s 12 AA(1)(d)) for the reason that:

o        on 5 February 2013 the flash point temperature of the diesel taken from Pump 8 was 48.0°C; and

o        on 29 April 2013 the flash point temperature of the diesel taken from Pump 7 was 53.5°C.

        Shri Ganesh did not hold an approval to vary the Determination in respect of the supply of diesel between 4 February 2013 and 29 April 2013 or at any time since. Nor did any other person hold an approval to vary the Determination in respect of the supply of diesel by Shri Ganesh between 4 February 2013 and 29 April 2013 or at any time since (s 12AA(1)(e)).

        Shri Ganesh was not required to comply with a direction or order under an emergency law between 4 February 2013 and 29 April 2013, or at any time since, including a direction of the Liquid Fuels Security and Policy Section of the Department of Resources, Energy and Tourism (s 12AA(1)(f)).

The application for a declaration

11        The Minister accepts that once Shri Ganesh was notified of its non-compliance with the Act, Shri Ganesh voluntarily undertook a number of steps in an effort to respond to its circumstances appropriately, including by the following steps:

        by one of its four directors, Mr Mittalkumar Patel, Shri Ganesh immediately made enquiries of its principal fuel supplier as to the quality of the diesel that it had supplied to Shri Ganesh:

        Mr Patel personally made efforts to ensure that the non-compliant diesel supplied to the respondent was completely removed from Shri Ganesh’s tanks;

        Mr Patel instructed employees of Shri Ganesh to submit fuel samples privately to Intertek Testing Services (Australia) Pty Limited for testing on three separate occasions; and

        between 3 July and 8 July 2013, Shri Ganesh voluntarily ceased selling and supplying diesel to members of the public.

12        Nonetheless, the Minister contends that it is appropriate in the circumstances of this case for a declaration to be made that the conduct alleged constituted a contravention of s 12AA of the Act. I accept that submission for the following reasons.

13        First, while no express power to declare that s 12AA of the Act has been contravened is conferred by the Act, I consider that this Court has power under ss 21(1) and 23 of the Federal Court of Australia Act 1976 (Cth) to make such a declaration, this being a matter in respect of which this Court has original jurisdiction: see, by analogy, RAIA Insurance Brokers Limited v FAI General Insurance Co Limited (1993) 41 FCR 164 at 176-177 (Beaumount and Spender JJ) in relation to declarations of a contravention of the Trade Practices Act 1975 (Cth).

14        Secondly, I consider that, having reached the conclusion that the provision has been contravened, it is in the public interest that the Court formally indicate the result of the litigation: see, by analogy, Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No. 2) (1993) 41 FCR 89 at 100 (Sheppard J), 106 (Foster J), 110 (Hill J). Such a declaration may well promote the purposes of general deterrence, as submitted by the Minister. In reaching this view I have also had regard to the seriousness with which the Parliament apparently views contraventions of s 12AA which is reflected in the civil penalty that may be imposed for a contravention, namely, for a body corporate, 2,500 penalty units.

15        Thirdly, the making of the declaration is not opposed by the respondent.

The application for an injunction

16        As earlier mentioned, s 65 of the Act provides that the Court may grant an injunction restraining a person from engaging in conduct that is or would be (relevantly) a contravention of a civil penalty provision where the person has engaged in such conduct. I have found, for the reasons earlier set out, that there has been a contravention of the Act. As such, my discretion is enlivened.

17        As to the question of whether I ought to exercise my discretion, I have taken into account the agreed facts as to the steps voluntarily taken by the respondent which demonstrate immediate and appropriate responses to the situation upon being advised of the contraventions.

18        Nonetheless, on balance, I accept the Minister’s submission that the grant of an injunction for a two year period is appropriate given the respondent’s relative inexperience in the industry in order to reduce the risk that Shri Ganesh will engage in conduct in the future that would contravene s 12AA of the Act. This lack of experience was not specifically an agreed fact contained in the Statement of Agreed Facts. However, it was the evidence of Mr Patel that Shri Ganesh had only recently been formed and purchased the petrol station, and that he himself was also new to the industry. While that evidence was admitted as to the question of costs, these were clearly matters which were not in issue between the parties. Nor did the respondent oppose the grant of the injunction. Given these matters, I consider that it is appropriate to grant the injunction sought by the Minister for a period of two years.

The application for costs

19        The Court has a wide discretion in relation to costs under s 43 of the Federal Court of Australia Act 1976 (Cth). Nonetheless, it is well settled as a matter of principle that, in the absence of special circumstances, the successful party is entitled to an award of costs in its favour.

20        In the present case, the respondent submitted that the appropriate order was that there be no order as to costs on essentially two grounds.

21        First, the respondent contended that once it was alerted to the contravention, the respondent through Mr Patel had acted diligently and promptly of his own volition to inform itself of the relevant legal obligations and to take reasonable steps to ensure future compliance with them, including to identify the source of the problem. Furthermore, as I have earlier mentioned, the Minister accepted that the respondent had taken appropriate steps. The respondent also referred to the fact that it had relied upon certification by its suppliers as to the quality of the fuel with which it was supplied, but that, notwithstanding those and other representations as to compliance of the fuel with the relevant standard, the tests which Mr Patel had arranged to be undertaken indicated that the fault lay with the suppliers.

22        Secondly, given the respondent’s co-operation upon the issues being drawn to its attention, the respondent contended that the Minister could have taken a different approach rather than pursuing this litigation.

23        In my opinion, neither of these considerations suffice to establish special circumstances so as to justify a departure from the ordinary ‘rule’ that costs follow the event. The contravention was established on the evidence and for the reasons earlier given, I have reached the view that the Minister was entitled to the relief ultimately sought. The first reason given by the respondent above does not meet that point. While the steps taken by the respondent upon being alerted to the contravention would have been relevant to the question of a penalty if that had remained in issue, they do not bear upon the question of costs, as the Minister submitted.

24        As to the second reason given by the respondent in support of its submission, it can be appropriate in some cases for the Court to have regard to the reasonableness of a party’s conduct in commencing, defending or conducting proceedings in exercising the discretion as to costs. However, I do not consider that the conduct of the Minister in pursing this litigation indicates any reason to deprive the Minister of his costs. The Minister is relevantly charged with the administration and enforcement of the Act and, in particular, has standing under s 65 to seek injunctive relief, and was on the evidence entitled to the relief ultimately sought. I also note that the Minister did not commence these proceedings until a second contravention had occurred.

25        Finally, I note that it was not contended by the respondent that the Minister should be entitled to only a proportion of its costs by reason of the fact that the Minister had abandoned its initial application for a civil penalty.

26        For these reasons, I consider that it is appropriate for me in the exercise of my discretion to make a declaration that the respondent has contravened s 12AA of the Act, to grant the injunction restraining the respondent, its servant or agents for two years from supplying diesel in Australia that does not comply with the Determination, and to make an order for costs in favour of the Minister.

Associate:

Dated:    30 October 2013