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High Court of New Zealand Decisions |
Last Updated: 31 May 2012
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2012-404-1242 [2012] NZHC 1139
UNDER the Customs and Excise Act 1996, the Judicature Amendment Act 1972, the Declaratory Judgments Act 1908 and/or Parts 18 and 30 of the High Court Rules
IN THE MATTER OF A proposed exercise or exercises of power under sections 73, 74, 76, 87, 88 and/or 89 of the Customs and Excise Act 1996
BETWEEN TERMINALS (NZ) LIMITED Applicant
AND THE COMPTROLLER OF CUSTOMS Respondent
Hearing: 14-15 May 2012
Counsel: R Harrison QC and A Sorrell for the Applicant
M Palmer and S Kinsler for the Respondent
Judgment: 25 May 2012
JUDGMENT OF MALLON J
TERMINALS (NZ) LIMITED v THE COMPTROLLER OF CUSTOMS HC WN CIV 2012-404-1242 [25 May
2012]
Contents
Introduction ....................................................................................................................................... [1] Background to the dispute................................................................................................................ [4]
The operation .................................................................................................................................. [4] The effect of adding butane to petrol ............................................................................................ [12] Background to commencing operation ......................................................................................... [15] Ethanol licence ............................................................................................................................. [27] Customs investigation ................................................................................................................... [31]
The Customs and Excise Act 1996 ................................................................................................. [34]
Goods on which excise duty is imposed ........................................................................................ [34] The Excise and Excise-equivalent Duties Table ........................................................................... [37] Manufactured goods ..................................................................................................................... [43] When the liability arises ............................................................................................................... [46] Comptroller assessments .............................................................................................................. [50] Customs rulings ............................................................................................................................ [52] Appeals ......................................................................................................................................... [54]
First cause of action: meaning of “manufacturing” ..................................................................... [57]
The words of the definition ........................................................................................................... [60] Case law ....................................................................................................................................... [63] Scheme of the CE Act .................................................................................................................... [76] Legislative purpose: history and nature of excise tax ................................................................... [89] Legislative history: definition of “manufacturing” .................................................................... [107] Overall assessment: meaning of “manufacturing” in light of context and purpose ................... [119]
Second cause of action: breach of legitimate expectation .......................................................... [124] Third cause of action: promissory estoppel ................................................................................ [135] Result .............................................................................................................................................. [136]
[1] TNZ operates a facility at Mount Maunganui which, amongst other things, dispatches motor spirit (also commonly referred to as petrol) to its associated company, Gull.1 In dispatching the motor spirit, TNZ adds a small quantity of butane to the imported motor spirit in accordance with Gull’s specifications. The issue in this case is whether the TNZ operation is “manufacturing” as defined in the Customs and Excise Act 1996 (“the CE Act”).
[2] Both motor spirit and butane are subject to excise duty under the CE Act if they are imported or manufactured in New Zealand. The excise duty rate for butane is considerably less than the excise duty rate for motor spirit. At present, the excise duty on the imported motor spirit is paid at the motor spirit rate and the excise duty on the butane is paid at the butane rate. However, if TNZ’s operation in adding butane is “manufacturing”, then the butane will be subject to the (higher) motor spirit rate. The consequence would be that TNZ would be liable for substantial excise duty for the period of its operation.
[3] TNZ brings this issue to the Court by way of a judicial review application. There are three grounds of review. The first ground concerns the meaning of “manufacturing”. The second ground contends that in now seeking to assess excise duty on the butane dispatched to Gull, at the motor spirit rate, the Comptroller of Customs is breaching a legitimate expectation created by (alleged) assurances made in 2002. The third ground contends that the Comptroller is estopped from making the assessment because of those same (alleged) assurances. The second and third causes of action are alternatives, and they relate only to the retrospective assessments that the Comptroller seeks to make and arise only if TNZ’s first ground is not made
out.
1 The shareholder of Terminals (NZ) Limited (“TNZ”) and Gull New Zealand Limited (“Gull”) is
directly or indirectly Raeside Pty Ltd, Australian company.
The operation
[4] TNZ commenced business in New Zealand at Mount Maunganui in 1998. It owns and operates a substantial fuel storage facility. It stores motor spirit, diesel and other products (which it refers to as “additives”) for Gull (a retailer of motor spirits which commenced retail sales in New Zealand from 1999) and BP (a competing fuel distributor) under contractual arrangements. Of particular relevance for this proceeding is the motor spirit, butane and ethanol which TNZ stores for Gull.
[5] When TNZ commenced operations, it was the importer of Gull’s motor spirit. On 1 July 2007 Gull became the importer. Currently the importer is Mobil. The imported motor spirit arrives at the southern side of the Tauranga harbour in a dedicated tanker vessel. Excise duty is paid on the imported motor spirit in accordance with the importer’s entry for those goods. It is delivered to TNZ’s facility via a 12 inch steel pipeline which runs from the vessel to TNZ’s facility. The tanker serves other fuel companies with storage facilities at Mount Maunganui. They have their own or share dedicated pipelines.
[6] The butane is produced in New Zealand (as a by-product of refining petroleum) and supplied to TNZ by OnGas. TNZ assigned the supply contract with OnGas to Gull on 13 June 2007. Excise duty on the butane is payable when it is produced which occurs before it arrives at TNZ’s facility. TNZ stores the butane in a storage tank which is underground for safety reasons. It is located near what is called the “gantry” building at TNZ’s facility.
[7] The ethanol that arrives at TNZ’s facility is a potable form of alcohol. As such it is potentially subject to a high level of excise duty. It is exempt from duty if it is “denatured”. Denaturing is the process of rendering the ethanol non-potable (i.e. not able to be drunk). The ethanol for Gull is delivered to TNZ’s facility in a bonded tanker with seals in place. On arrival at the facility it is immediately denatured by the addition into the tanker of approximately 1.1% motor spirit. The denatured ethanol is then pumped from the tanker into one of TNZ’s ethanol storage
tanks. These tanks are above ground and are adjacent to the gantry. All of TNZ’s dealings with ethanol occur in TNZ’s “Customs Controlled Area” (a term in the CE Act).
[8] Each of the storage tanks have outlet pipes running from them to the gantry. For the large tanks (i.e. including those that store motor spirit), the pipes are eight or ten inches in diameter. For the smaller storage tanks (i.e. including the butane storage tank), the pipes are four inches in diameter. The smaller pipes connect with the appropriate larger pipes within the gantry. Immediately prior to the connection point the four inch pipes reduce to one inch. With all these pipes leading to the gantry, there is what is described as a “spaghetti” effect at the point where the pipes arrive at and enter the gantry. The pipes are prominently labelled so that it can be seen what product each pipe contains.
[9] All of the products (including the motor spirit, butane and ethanol just mentioned), or combination of them, are “dispatched” by TNZ in accordance with the requirements and specifications of Gull and BP.2 The great majority of this is dispatched via the gantry (where there are loading bays) into large tankers (30,000 to
40,000 litre capacity). The gantry contains several labelled delivery pumps, for delivery of a particular product specification into the tanker. Each tanker has separate compartments, so that different products and product specifications can be loaded.
[10] In the case of motor spirit, delivery of butane or other “additives” into the main delivery pipe is achieved by a computer-controlled individual pump and valve system.3 This enables precise amounts of the additive to be pumped into the main pipe delivering the motor spirit. The motor spirit with the butane added is dispatched to Gull’s tankers via the pumps in the gantry. It is this operation that is
said by the Comptroller to constitute “manufacturing” motor spirit.
3 The Comptroller notes that “additives” is a defined technical term. I use the term in its general
rather than its technical sense.
[11] The various products stored at TNZ produce a number of possible fuel combinations. In the case of Gull, the greatest volume of products dispatched are the following:
Regular motor spirit plus Butane % Regular motor spirit zero Butane Premium motor spirit plus Butane % Premium motor spirit zero Butane
Premium motor spirit plus Butane % + Ethanol 10% Premium motor spirit zero Butane + Ethanol 10% Regular motor spirit plus Butane % + Ethanol % Regular motor spirit zero Butane + Ethanol %
The effect of adding butane to petrol
[12] The Comptroller has filed an affidavit from Vladimir Koutsaenko as to the effect of adding butane to petrol. Mr Koutsaenko is employed by the Ministry of Economic Development. He is a Senior Adviser in the team that is responsible for ensuring the quality and safety of motor spirit/petrol and other fuels in New Zealand. He gives evidence that:
8. ... Petrol cannot be characterised by one specific formula because it is a mix of several of hydrocarbons which co-exist in various proportions in the blend and practically do not interact between each other in a chemical reaction. Petrol is a blend (or mix) of a number of chemicals. It is not a new substance produced as a result of chemical reaction. This is why it is possible to define the content of petrol and quantify its various ingredients, e.g. aromatics or olefins, as required by the Regulations.
9. Butane is not petrol: taken alone as a single ingredient it could not be, or represent, petrol. It does not fit within the definition of petrol
in the Regulations. Butane is a gas which is produced usually as a product of, or at least in conjunction with, oil and natural gas production. It is reduced to liquid form for transportation and storage purposes.
...
11. Likewise petrol is not butane. Therefore if, for example, 3 litres of butane is added to 100 litres of petrol the result is 103 litres, approximately, of petrol. The butane is still separately identifiable in the petrol if the petrol is analysed, as described above, but the 3 litres of butane became part of the petrol so there is approximately 3 litres more of petrol than there was before the addition.
[13] Mr Koutsaenko goes on to say that the petrol is not the same as it was before the butane was added. He says that the Vapour Pressure will have changed and he would also expect there to be a slight change in the Percentage of Volume Evaporated at 70°C. (These are terms used in the Regulations.)
[14] Mr Koutsaenko goes on to say that blending butane with petrol can result in the Octane Number changing and that there might be other changes to the properties of the petrol, such as density. However the latter is, he says, outside his area of expertise. And, as to changes in the Octane Number, TNZ’s operation in adding butane does not change regular motor spirit from regular motor spirit, nor does it change premium motor spirit from premium motor spirit. Mr Bodger, the general manager of TNZ, says that the addition of butane to Gull’s motor spirit does not effect any change in the essential nature of the motor spirit.
Background to commencing operation
[15] TNZ first began adding butane to Gull’s motor spirit in 2001. TNZ had received a cargo of motor spirits that was slightly under specification. Butane from a road tanker was added to the motor spirit. This led to TNZ investigating adding butane on an on-going basis. As part of these investigations, in August 2001 TNZ began discussions with a third party about the construction of tanks for butane. Alongside this, TNZ was also investigating adding ethanol to motor spirits. The addition of ethanol was supported by Government, but it was complex to get it to the point where it could be legally manufactured and sold at a price that would incentivise its use. Adding butane had no such complexity. It was permitted within
the regulatory framework, provided the result remained within the relevant specifications.
[16] Mr Ferrell was the fuels manager for Gull at this time. Mr Ferrell says the economics of adding butane “would not stack” if Customs’ position was that butane added to motor spirits would be subject to the motor spirits rate. However if that were Customs’ view, it would also mean that the timing of when excise needed to be paid would shift from arrival to when the fuel left the terminal. This would provide significant cash flow advantages for TNZ.
[17] Mr Mountford, the Terminal Manager of TNZ, reported to Mr Ferrell. On Mr Ferrell’s instructions, Mr Mountford had telephone communications with Mr Wakefield, a Senior Customs Officer based in Tauranga, about the possibility that TNZ would manufacture biofuels. Excise duties in relation to biofuels and ethanol were discussed. TNZ also advised that it was looking into adding butane.
[18] The evidence about what was discussed in the telephone communications is not entirely clear. Mr Wakefield confirms that there was a telephone discussion before he received the letter of 4 April 2002 (set out below) but he cannot recall the specifics. There is evidence that Mr Mountford reported to Mr Ferrell that Customs’ position was that the butane would be at the butane excise duty rate and that there would be no further duty payable as a result of adding butane to the motor spirit. Sometime prior to 8 April 2002, Mr Ferrell was preparing a report for the TNZ board. Mr Ferrell asked Mr Mountford to get written confirmation of Customs’ position.
[19] As a result, by letter dated 4 April 2002, Mr Mountford wrote in these terms:
Re: “In-to-truck” Fuel Mixing
I write to confirm the details of our telephone conversation today and to ask for written confirmation from your office to ensure I have made the correct interpretation based on our conversations.
Terminals NZ Ltd intends to mix fuel components from storage tanks within it[s] compound into a fuel truck or drums at the point of loading. Each of the components will be Duty/Excise paid at the applicable rate for each component into our store prior to loading either on import or at time of
purchase from the local NZ suppliers. The mix will then be sold to our customers at the time of request for the mix. It is not our intention to be blending in our bulk tanks at this stage.
Typical components for the mix are but not limited to: Gull Regular or Premium Motor Spirit (80-90%)
Denatured Ethanol (5-10%)
Un-Odorised Butane (5-10%)
A variety of combinations of components including but not limited to the above may be used in any combination from time to time depending on customer requirements. Quantities are expected to be substantial but indeterminate at this time for any one combination.
Based on our conversation today we determine that:
1. Each of the individual components has had Duty/Excise paid at the applicable rate at the respective point in the importation/supply/manufacture chain;
2. The mixing of any combination of these components into the truck/drum prior to sale is NOT SUBJECT TO further Duty/Excise.
...
[20] Before receiving a response to this letter, Mr Ferrell prepared his report to the TNZ Board (dated 8 April 2002) seeking approval to proceed with the Butane project. The capital for the butane blending project was estimated to be NZ$300,000. Mr Ferrell reported that “a large proportion of the economic benefit of injecting butane into petrol is the difference in excise”.
[21] Mr Wakefield responded, by letter dated 9 April 2002, to Mr Mountford’s
enquiry in these terms:
I am writing in reply to your letter dated 4 April concerning your Company’s proposal to mix fuel components from storage tanks to fuel trucks for the purpose of supplying special needs customers.
I understand that all the individual components to be used will have had
Duty/Excise paid on them prior to mixing.
I can confirm that the mixing of any combination of these components into the truck/drum prior to sale will not be subject to further Duty/Excise liability.
[22] Mr Wakefield’s evidence is that, before replying to the letter, he made an
inquiry with head office. He thinks that he spoke to Alan Smith, as he was the excise
expert within Customs. In an internal email dated 1 April 2011 (when Mr Wakefield was later asked to recall his recollections) he says that he believes “the decision was based on the fact that the blending involved excise included components only”. For his part, Mr Smith recalls a telephone conversation with Mr Wakefield in the early
2000s relating to the implications of Gull and TNZ trialling biofuels in one of their company vehicles. His evidence is that he recalls telling Mr Wakefield that he did not see any issue in what was proposed by TNZ, given the small nature of the trials and that the fuel components involved were excise paid.
[23] Mr Wakefield’s evidence is that he was aware, at the time of the correspondence with TNZ, that the Government was encouraging companies to begin biofuel trials using sustainable products, such as ethanol, to blend with petrol to reduce the consumption of imported petrol. Mr Wakefield says that he recalls using the term “special needs customers” to summarise the reference in Mr Mountford’s letter to “[a] variety of combinations of components including but not limited to the above may be used in any combination from time to time depending on customer requirements” (his emphasis). He says that he saw this as all wrapped up with TNZ’s experimental biofuels trialling and that special needs customers might be things like racing cars, tractors or other farm machinery, or taxi cabs. He says that he interpreted the inquiry from Mr Mountford as related to this trialling and testing on a limited basis.
[24] In any case, Mr Ferrell and Mr Mountford did not understand the reference to “special needs customers”. Mr Mountford’s evidence is that as a result he telephoned Mr Wakefield. His evidence is that he sought to establish “the consistency of approach by Customs to all mixtures created by TNZ/Gull”. He says that he obtained “the necessary clarity” in that telephone call. He made a handwritten note on the 9 April 2002 letter from Mr Wakefield as follows: “Confirmed phone conversation 25/5/02 1:45 pm applies to gross petrol station volumes as well”. Mr Mountford says that as a result of this conversation he was confident that excise issues were clarified. With that clarification Mr Ferrell was also satisfied, and TNZ then moved on to other aspects of the project.
[25] Mr Wakefield’s evidence is that he cannot recall whether there was a telephone enquiry on 22 May 2002. He goes on to say that he is particularly concerned about Mr Mountford’s notation on the letter. He says that extending the biofuels trial to the distribution of gross petrol volumes was a far reaching decision and “would have rung major alarm bells”. He says that because of the revenue implications he “would not have made such a decision on the spot and certainly not without checking with Wellington.” He also says that the correspondence with TNZ would have been filed in the Tauranga office.
[26] In March 2003 TNZ began adding the butane to Regular motor spirit. In
August 2003 it began adding butane to Premium motor spirit.
Ethanol licence
[27] On 7 October 2003 Customs received an application from TNZ for a licence to store and denature ethanol. The application was made because Customs told TNZ that it needed one. The licence application was for TNZ to have a Customs Controlled Area. This was because ethanol in a potable form attracts excise duty at a high rate ($49.55 per 1 al). However, if it is denatured in accordance with a formula approved by the chief executive, it is zero rated. The denaturing takes place inside the Customs Controlled Area. The licence was issued to TNZ on 10 October 2003.
[28] In November 2003 Mr Smith was corresponding with EECA about excise duty liability on a blend of motor spirit and ethanol leaving TNZ’s Customs Controlled Area. In an email dated 13 November 2003 Mr Smith said:
I’ve just had a new thought.
Given that Gull are setting up a Customs Controlled Area (CCA) for their ethanol, so that they can denature it themselves, this may mean they will also have the ability to blend within the CCA. As the CCA is before the tax point, this means the petrol/ethanol blend would be regarded as “petrol” when it left the CCA and would be subject to Excise duty and ACC levy. This means the Excise & levy would be paid on the ethanol component as well as the petrol. I cannot imagine why Gull would want to do things this way but it is an option open to them. Hope I haven’t spoilt your day. Regards, Alan.
[29] This email was forwarded to TNZ. TNZ did not respond to Customs about this.
[30] In August 2007 Gull was the first retailer to sell an ethanol blend motor spirit.
Customs investigation
[31] In 2010 Customs received a complaint from BP, a competitor of Gull in the fuel distribution sector. The complaint was that TNZ was blending motor spirit with butane and not returning the full excise duty on the blend. The complaint arose because BP had determined that Gull was blending butane with motor spirit. The price differential (before duty) between butane and motor spirit did not explain Gull’s low pricing. BP wanted to consider doing the same and sought clarification from Customs about the excise responsibility and collection for butane blending. Customs told BP that its view was that butane blending was a manufacturing process. BP wrote to the Minister of Customs complaining about what it saw as a market distortion arising from the non-payment by TNZ of the motor spirit rate on the butane in the blend.
[32] As a result of this complaint, Customs commenced an audit of TNZ in December 2010. The audit took some time. As a consequence of preliminary audit report findings, from 1 June 2011 TNZ began paying excise tax at the motor spirit rate on the butane added to the motor spirit on a without prejudice basis. Findings and a draft audit report were provided to TNZ on 15 September 2011. The audit report was finalised on 13 March 2012.
[33] The Comptroller then issued assessments in draft for the difference between the motor spirit rate and the butane rate for the quantities of butane added to the motor spirit. These assessments were for the period from March 2003 (when TNZ first started adding butane to Gull’s motor spirit) up to when TNZ began paying excise tax at this rate on 1 June 2011. These draft assessments included a significant “additional duties” component (see below at [49]) although the Comptroller had invited submissions from TNZ on remission of the additional duties prior to the formal assessments being issued. Before this occurred, TNZ commenced this
proceeding. Pending the determination of this proceeding, TNZ obtained interim relief from the High Court restraining the Comptroller from issuing the formal assessments.
The Customs and Excise Act 1996
Goods on which excise duty is imposed
[34] Excise duty is imposed by the CE Act.
[35] It is imposed on manufactured goods under s 73(1) as follows:
73 Excise duty on goods manufactured in manufacturing areas
(1) In respect of all goods that are manufactured in a manufacturing area and that are specified in Part A of the Excise and Excise-equivalent Duties Table there must be levied, collected, and paid excise duties, if any, at the appropriate rates set out in Part A of the Excise and Excise-equivalent Duties Table.
[36] It is imposed on imported goods under s 75(1) as follows:
75 Excise-equivalent duty on imported goods
(1) Subject to this Act, and in addition to any other duties or levies payable on imported goods, excise-equivalent duty at the appropriate rate specified in Part B of the Excise and Excise-equivalent Duties Table must be levied, collected, and paid on all goods specified in Part B of the Excise and Excise-equivalent Duties Table that are imported.
The Excise and Excise-equivalent Duties Table
[37] Part A and Part B of the Excise and Excise-equivalent Duties Table (which is referred to in ss 73 and 75) set out the goods that attract excise or excise-equivalent duty and the rates of that duty. There are three categories of goods which attract excise duty under these tables. These are tobacco, fuel and alcohol.
[38] The Excise and Excise-equivalent Duties Table is in two parts: As stated in the notes, Part A sets out the duties imposed under s 73 of the CE Act (for goods
manufactured in New Zealand) and Part B sets out the duties imposed under s 75 of the CE Act (for imported goods).
[39] Under Part A, there is a heading for fuels. Under that heading, there are two categories: regular motor spirit and premium motor spirit. Each of these is defined with reference to the Tariff item (set out in The Working Tariff Document of New Zealand) that would apply to them if they were imported.
[40] Under each of those headings there are two sub-categories: “blended with ethyl alcohol” (ie. ethanol) and “other”. The regular motor spirit blended with ethyl alcohol attracts duty at the rate of 48.524 cents (plus 8 cents per g of Pb) per 1 unit of motor spirit. The same applies to premium motor spirit blended with ethanol. This means that the ethanol component is free of excise duty.4 All other motor spirit (regular and premium) attracts duty at 48.524 cents (plus 8 cents per g of Pb) per 1 unit. This means that motor spirit manufactured in New Zealand, which is blended with any other product, will attract duty at the motor spirit rate on the total volume of
the blended product.
[41] Under Part A, there is also a heading for Undenatured ethyl alcohol. Under that heading, undenatured ethyl alcohol of an alcohol strength of 80% or higher attracts duty at $49.550 per 1 al. Denatured ethyl alcohol, which is denatured in accordance with a formula approved by the Chief Executive, is free of duty. If it is not denatured in accordance with an approved formula the duty remains at $49.550 per 1 al.
[42] Under Part B, there is also a heading for fuels. Under that heading, the same categories are set out. That is, motor spirit (regular and premium) blended with ethanol attracts duty at 48.524 cents (plus 8 cents per g of Pb) per 1 unit of motor spirits. All other motor spirit (regular and premium) attracts duty at 48.524 cents
(plus 8 cents per g of Pb) per 1 unit.
Manufactured goods
[43] The three categories of goods that are subject to excise are reflected in the
definition of “manufacture” in s2(1) of the CE Act, which is as follows:
manufacture, in relation to goods specified in the Excise and Excise- equivalent Duties Table, means,—
(a) if the goods are tobacco, the process of cutting, pressing, grinding, crushing, or rubbing raw or leaf tobacco, or otherwise preparing raw or leaf tobacco or manufactured or partially manufactured tobacco, and of making cigarettes whether from duty-paid or from non-duty- paid tobacco, and of putting up for use or consumption scraps, waste, chippings, stems, or deposits of tobacco resulting from processing tobacco:
(b) if the goods are a fuel, any operation, or process, involved in the production of the goods:
(c) if the goods are neither tobacco nor a fuel,—
(i) any operation, or process, involved in the production of the goods; and
(ii) any ancillary process (as defined in subsection (3)) that takes place on premises that are not licensed, or required to be licensed, under the Sale of Liquor Act 1989
[44] The meaning of “any ancillary process” in (c)(ii) of the “manufacture”
definition is defined in s 2(3) as follows:
(3) For the purposes of paragraph (c)(ii) of the definition of manufacture in subsection 91), the term ancillary process, in relation to the manufacture of goods specified in the Excise and Excise-equivalent Duties Table that are neither tobacco nor a fuel, means 1 or more of the following processes:
(a) filtering the goods, diluting the goods, or blending the goods with other goods (whether the other goods are the same as, similar to, or different from, the goods);
(b) putting the goods for the first time into a container (for example, a bag, barrel, bottle, can, cask, drum, or keg) in which they might be presented, or from which they might be dispensed, for sale to the public or any member of the public;
(c) labelling or marking, for the first time, containers filled with the goods.
[45] By s 2 (the definition of “manufacturing area”), s 10(a) and s 68 manufacturing of goods must take place in a manufacturing area, being an area that is licensed as a Customs Controlled area.
When the liability arises
[46] Excise duty in relation to goods in Part A (i.e. manufactured goods) is a debt due to the Crown immediately when the goods are removed from the manufacturing area for home consumption (s 76(1)). Goods are deemed to be removed “for home consumption when the goods are physically removed from a Customs controlled area” (s 72). All goods that are specified in Part A of the Table must, “on removal from a customs controlled area, be entered” in a prescribed form (s 70). The excise duty is owed by the occupier of the place where the goods have been manufactured and every person who is or becomes owner of the goods before the excise duty has been fully paid (s 76(2)).
[47] Where manufactured or imported goods are to be used for further manufacturing, there is a provision which enables the manufacturer to claim a credit. This is set out in s 85(1) which is as follows:
85 Duty credits
(1) Where the licensee of a manufacturing area purchases materials or goods for use in manufacture, the licensee may, at the time of making an entry for home consumption as required by section 70, claim, as a credit, excise duty or excise-equivalent duty paid in respect of those materials or goods.
[48] Excise-equivalent duty (that is, duty on imported goods) becomes payable “when entry for home consumption is passed” (s 75(3)). Under s 39 the importer must enter the goods in a prescribed form and manner. Customs officers may inspect the goods. Under s 41, where imported goods have been entered and passed, they must be dealt with in accordance with the Act.
[49] Section 87(1) provides for “additional duty” to be imposed where excise or excise-equivalent duty is unpaid by the due date for payment. However s 87(2)
provides that “the chief executive may, in his or her discretion, remit or refund the
whole or any part of any additional duty imposed by that subsection.”
Comptroller assessments
[50] The duty payable is determined by the “entry” made by the manufacturer or importer. However this is subject to any assessment that the Comptroller may make. This is set out in s 88(1) and (2) as follows:
88 Assessment of duty
(1) An entry for goods made under this Act is deemed to be an assessment by the importer or licensee, as the case may be, as to the duty payable in respect of those goods.
(2) If the chief executive has reasonable cause to suspect that duty is payable on goods by a person who has not made an entry in respect of the goods, the chief executive may assess the duty at such amount as the chief executive thinks proper.
[51] The chief executive may make amendments to assessments to ensure their correctness even though the goods are no longer subject to the control of customs or that the duty originally assessed has been paid (s 89). Duty assessed under s 88(2) or reassessed under s 89 is due 20 working days after written notice has been given of the assessment or reassessment (s 90).
Customs rulings
[52] There is provision to seek a ruling from the chief executive. Section 119 provides:
119 Application for Customs ruling
(1) A person may make an application, in respect of particular goods specified in the application, to the chief executive for a Customs ruling in respect of any one or more of the following matters:
(a) the Tariff classification of those goods under Part 1 of the
Tariff:
(b) the excise classification of those goods under the Excise and
Excise-equivalent Duties Table:
...
(2) An application under subsection (1) may be made—
(a) in respect of imported goods—
(i) at any time before the date of importation into New Zealand of the goods that are the subject of the application; or
(ii) at any later time, if the chief executive in his or her discretion permits; or
(b) in respect of goods manufactured in a manufacturing area—
(i) at any time before the date of manufacture of the goods; or
(ii) at any later time, if the chief executive in his or her discretion permits.
...
(4) Every application under subsection (1) or subsection (3) of this section must be in the prescribed form, and must—
(a) state the name and address of the applicant; and
(b) in the case of an application under subsection (1),—
(i) specify the particular goods that are the subject of the application; and
(ii) specify, in respect of those goods, the matter or matters listed under subsection (1) on which the applicant requests a Customs ruling and the applicant's opinion as to what the Customs ruling should be; and
(iii) unless the chief executive agrees otherwise, be accompanied by the goods or a sample of the goods; and
(c) contain, or have attached, all information that is relevant to a proper consideration of the application; and
(d) be accompanied by the prescribed fee.
...
[53] A Customs ruling in respect of particular goods is conclusive evidence for the purposes of the Act that the goods “have a particular Tariff classification under Part 1 of the Tariff” or “have a particular excise classification under the Excise and Excise-
equivalent Duties Table” (s 122). The chief executive may amend a ruling and the amended ruling applies from the date notice is given to the applicant (s 124).
Appeals
[54] Both ss 88 and 89 provide for an appeal from the assessment/reassessment to a Customs Appeal Authority. The appeal must be made within 20 working days of the decision. Every assessment is presumed to be correct and is payable accordingly unless on an appeal a different amount is determined or it is determined that no duty is payable (s 91). The obligation to pay the duty is not suspended by the appeal (s 92).
[55] A person dissatisfied with a ruling under s 119 may appeal the decision to the Customs Appeal Authority (s 126). Where an applicant has relied on a ruling in relation to specific goods and as a result has not paid duty on them, the amount of duty that would otherwise be payable is not recoverable as a debt due to the Crown (s 127).
[56] Appeals are “by way of a hearing de novo” and the Authority has all the powers, duties, functions, and discretions of the chief executive (s 255). It has the power to state cases for the opinion of the High Court on questions of law (s 274). Further appeals to the High Court and Court of Appeal are available as of right (ss 272 and 273).
First cause of action: meaning of “manufacturing”
[57] TNZ claims that the Comptroller’s pending assessment is the purported exercise of a statutory power or statutory power of decision as defined in the Judicature Amendment Act 1972. It says that this assessment is to be made on the basis that its activity constitutes “manufacturing”. It seeks review of that purported exercise on the basis that its activity is not “manufacturing” and accordingly it is not liable for excise duty and additional duty. It seeks a declaration to this effect.
[58] The Comptroller submits that the issue ought to have been brought via the statutory dispute resolution procedure under the Act. However, because both parties wish to have a swift resolution of all the issues, she does not maintain an objection to this Court determining the issues in this proceeding. She asks, however, that I “affirm the primacy of the statutory dispute resolution process”. As the parties are agreed that I can and should determine the issues here and this topic was discussed in the judgment on the interim relief application, I consider it is better to leave any further comment on this topic to a case where this issue matters.
[59] I turn to consider whether the Comptroller is correct in her assessment that TNZ is manufacturing motor spirit when it adds butane to it. This depends on the meaning of “manufacturing” as defined in s 2 of the CE Act. As was said in Commerce Commission v Fonterra Co-operative Group Ltd:5
[22] It is necessary to bear in mind that s 5 of the Interpretation Act 1999 makes text and purpose the key drivers of statutory interpretation. The meaning of an enactment must be ascertained from its text and in the light of its purpose. Even if the meaning of the text may appear plain in isolation of purpose, that meaning should always be cross-checked against purpose in order to observe the dual requirements of s 5. In determining purpose the Court must obviously have regard to both the immediate and the general legislative context. Of relevance too may be the social, commercial or other objective of the enactment.
The words of the definition
[60] Starting with the words, TNZ accepts that its activity is an “operation” in terms of the s 2 definition. It submits that its operation does not involve the “production of the goods”. It submits that before its operation there was motor spirit and after its operation there was motor spirit. Although butane is added, with the effect that the motor spirit will have additional butane, there is no change in the nature of the goods which could qualify as “the production of the goods”. For all
practical and legal purposes the motor spirit has not changed.
5 Commerce Commission v Fonterra Co-operative Group Ltd [2007] NZSC 36, [2007] 3 NZLR
767 at [22].
[61] The Comptroller submits that “the production of the goods” adds little to the definition. She submits that before TNZ’s operation there was motor spirit A (as imported) and butane (as manufactured). She says that after TNZ’s operation there was motor spirit B (the imported motor spirit with additional butane). She says that motor spirit B is different from motor spirit in that its vapour pressure will have altered. She notes that TNZ/Gull give motor spirit B a different product name (refer [11] above). She says that, perhaps more significantly, motor spirit B is in greater quantity than motor spirit A. She submits that when there is more motor spirit after the operation than there was before there must have been a production.
[62] The key issue therefore is what is meant by “the production of the goods” in the s 2 definition. If what is involved is simply putting two products together to get one (renamed) product which is, in essence, no more or less than its constituent parts, have goods been produced?
Case law
[63] To answer this issue, TNZ refers to a number of cases in the revenue context which have considered the meaning of “manufacturing” and/or “production”. It says that these cases demonstrate that “manufacture” and “production” are effectively synonymous expressions and both involve the element of producing something different from the materials from which it is made.
[64] Some of the cases, which are concerned with sales tax on goods manufactured in Australia, are: 6
(a) Irving v Munro & Sons Ltd:7 English motorcycles were imported into Australia in parts. All the parts, other than tyres and tubes, were imported. Before leaving England the parts had been assembled so
that the motorcycle was road tested. Once tested, the motorcycle was
7 Irving v Munro & Sons Ltd [1931] HCA 57; (1931) 46 CLR 279.
put back into parts for export to Australia. On arrival in Australia the parts were assembled by a person with the aid of a spanner, locally fitted tyres and tubes were fitted and the motorcycles were ready for sale. This assembly was not “manufacture” for the purposes of sales tax.
(b) Adams v Rau:8 the Court was concerned with whether sales tax was payable on transcripts of judicial proceedings produced by short-hand typists. It was held that the transcripts were not subject to sales tax because the typists were not engaged in the manufacture or production of goods or commodities. Although the transcript was different from the short-hand’s notes from which it was produced, and was capable of sale, it was a service provided to their employers and in these circumstances it would be a misuse of English to describe the work as the manufacture and production of transcripts.
(c) Federal Commissioner of Taxation v Rochester:9 the Court held that cooking fish and potatoes to make “fish and chips” was not manufacturing or producing goods within the meaning of the sales tax legislation. In that case, the legislation defined “manufacture” as including “production, and also the combination of parts or ingredients whereby an article or substance is formed which is commercially distinct from those parts or ingredients ...”.
[65] Counsel for TNZ also refers to two decisions from the United Kingdom. The first of those is McNicol v Pinch.10 In that case the relevant statutory provision required a “manufacturer” of saccharin to hold a licence and excise duty was payable on saccharin. The appellants imported saccharin at a strength of 330 (a mixture that is 330 times as sweet as sugar). The appellants, who did not have a licence,
subjected this mixture to a chemical process. The result of this process was
8 Adams v Rau [1931] HCA 43; (1931) 46 CLR 572.
9 Federal Commissioner of Taxation v Rochester [1934] HCA 17; (1934) 50 CLR 225.
10 McNicol v Pinch [1906] 2 KB 352.
sometimes to produce saccharin at a strength of 550, sometimes at a strength of between 330 and 550, and sometimes less sweet than 330.
[66] The House of Lords, in a majority decision, held that the appellants were not manufacturers of saccharin (and so did not need a licence). Manufactured meant “bringing into being” saccharin. Saccharin is a substance produced from toluene sulphonamide. The saccharin had already been manufactured when it was brought into being from toluene sulphonamide. It was not manufactured again by the appellants’ process. As Bray J said “it was saccharin before it was treated, and it was
saccharin after it was treated”.11 Darling J agreed and said that “the essence of
making or of manufacturing is that what is made shall be a different thing from that
out of which it is made”.12
[67] The second case is Cinzano (UK) Ltd v Customs and Excise Commissioners.13 In that case imported vermouth, having an alcoholic strength of less than 15%, was blended with imported vermouth, having an alcoholic strength of between 18 and 22%. The blending resulted in vermouth at an alcoholic strength of between 15 and 18%. The sole purpose of importing the two different strengths and blending them, was to pay less excise duty than would be payable if vermouth at between 15 and 18% had been imported. The issue was whether this blending meant that wine was “produced” in the UK so that it would be subject to duty at the
between 15% and 18% rate.
[68] Excise duty under the relevant statutory provision was charged on “wine” which was “imported into the United Kingdom” or “produced in the United Kingdom”. The statute defined “wine” as “liquor obtained from the alcoholic fermentation of fresh grapes”. The statute did not define “produced”. The House of Lords held that the statute set out two mutually exclusive alternatives. Wine was either imported or it was produced in the United Kingdom. The wine (as per the
definition) had already been produced before it was imported. It was not produced
11 At 360.
12 At 361.
13 Cinzano (UK) Ltd v Customs and Excise Commissioners [1985] 1 WLR 484 (HL).
again when it was blended. The result was that excise duty was not to be charged on the blended vermouth.
[69] Cinzano and Nichols were cited by the High Court Judge in the New Zealand case of International Bottling Co Ltd v Collector of Customs14 in support of the point that “production” in the definition of “manufacturing” under the Customs Act 1966 involves producing something different from the materials from which it was made. In that case a quantity of whisky, in its raw state, had gone missing from International Bottling’s bulk storage tanks in its designated licensed manufacturing
area. Customs assessed excise duty on the missing whisky.
[70] One of the issues was whether the missing whisky was “manufactured” by International Bottling, in which case excise duty was payable. At that time, the Customs Act 1966 provided for excise duty on the removal of any goods manufactured in a licensed manufacturing area. The definition of “manufacture” was:
...
(b) In relation to any goods specified in the Third Schedule to this Act (other than tobacco), any process of production, assembly, packaging, and any other operation or process involved in the production of the goods, and “to manufacture” and cognate expressions have corresponding meanings;
[71] The whisky was imported for resale. It arrived at International Bottling’s premises in likwitainers and was sampled and tested. It was then pumped into bulk storage tanks. From there it was pumped into a blending tank, filtered through an attemporation plant (filtering, chilling, and bringing back to temperature – to give the whisky clarity if it is chilled with ice) into another blending tank, then bottled and dispatched. At the time the whisky had gone missing, it was in the bulk storage tanks. The further blending (etc) processes had yet to take place.
[72] The High Court held that the whisky was not manufactured at the time it went missing. The whisky had already been produced when it was manufactured in
the United Kingdom. All that had occurred at the relevant time was that it was held
14 International Bottling Co Ltd v Collector of Customs [1995] 2 NZLR 579 (HC).
in containers and tested for quality. Nothing had occurred at International Bottling’s premises, which resulted in anything different from when the whisky was delivered to International Bottling. The Judge considered this result to be consistent with the cases referred to and the ordinary meaning of “manufacture”.
[73] The Comptroller submits that these cases do not assist because of their different facts. I agree that none of the facts are the same as here. The closest is perhaps Irving v Munro & Sons Ltd because in that case something (tyres and tubes) was added to the imported good when it was assembled and before it was ready for sale. However, while the facts are different, the consistent approach has been to ask whether the goods are different from their constituent parts. Storage, assembling, blending or treating are not viewed as “manufacturing” or “producing” in the ordinary meaning of those words.
[74] The Comptroller submits that the cases also do not assist because of their different statutory contexts. I agree that this must be taken into account. I agree that the statutory context in Cinzano was different. The relevant section provided alternatives: importing “or” producing and wine was defined quite specifically. That was consistent with other provisions in the legislation where importation was contrasted with other (alternative) processes. Rochester was also different in that there was a statutory definition of “manufacture” which is not the definition here. In the other decisions from Australia and the United Kingdom it seems that “manufacturing” was not defined by the statute. In International Bottling the statutory definition provided that packaging and assembling were “manufacturing” for the purposes of the Customs Act 1966 (but the whisky had gone missing before the packaging stage of International Bottling’s operation).
[75] It is therefore only in a general way, that the cases are similar: they all arise in the revenue context, where the court is considering whether a process has involved manufacturing so as to determine whether the goods will be subject to tax. In that general context, where “manufacturing” or “producing” is not defined by the statute the courts have adopted an ordinary meaning. That ordinary meaning is a process where the resulting goods are different from their constituent parts. But whether that
is the meaning to be given in the present context depends on the particular statutory context here in light of the statute’s purpose.
Scheme of the CE Act
[76] TNZ submits that the scheme of the CE Act supports its interpretation. It says that, as was the case in Cinzano, the CE Act distinguishes between goods manufactured in New Zealand and imported goods. It says that ss 73(1) and 75(1), read with Part A and Part B of the Table, contemplate one regime for goods specified in Part A which are manufactured in New Zealand, and one regime for goods specified in Part B which are imported into New Zealand.
[77] TNZ submits that when motor spirit is imported, as it was in this case, s 75(1) and Part B apply. It says that the category of “other” motor spirit in Part B includes motor spirit which has not been blended with anything at the time of import, and motor spirit which has been blended with permissible additives, such as butane, at the time it is imported. It says that Part B does not apply to imported motor spirit which, subsequent to being imported, has permissible additives added to it (whether ethanol or butane or anything else).
[78] It also says that s 73(1) and Part A do not apply when motor spirit is imported. Part A, fuels, applies to “motor spirit ... which, if imported, would be classified within” the stated Tariff item numbers. Therefore it is referring to motor spirit which is manufactured in New Zealand. It says that Part A contemplates an initial act of manufacture in New Zealand which is thereupon capable of being classified as “blended with ethyl alcohol” or “other.”
[79] Part B of the Table links to Part A, by referring to the excise number for the equivalent New Zealand manufactured item. Part A in turn refers to a “which if imported, would be classified within Tariff item [number]. These tariff item numbers correspond with numbers that are set out in Chapter 27 of the Working Tariff Document of New Zealand.
[80] Chapter 27 in turn categorises motor spirits into two categories: (1) “in bulk in ships’ bottoms or in containers of a capacity of 5 litres or more”; and (2) “in other containers”. For present purposes it is the first of these that is relevant. That category has two sub-categories: “for manufacture in a licensed manufacturing area” and “other”. Motor spirit under the first of these sub-categories is free of duty (reflecting that the duty will be paid by the manufacturer). Motor spirit under the second of these sub-categories has the duty rates that correspond with the tariff items and amounts in Part A.
[81] TNZ says that the Table and Chapters support its submission that its operation is not manufacturing. It says that Gull has imported motor spirit to be entered for duty purposes as “other” (and not “for manufacture in a licensed manufacturing area”). Customs will have accepted this self-assessed excise- equivalent duty payable by the importer. In the absence of an amendment under s 41, it will continue to be treated as imported under Part B.
[82] TNZ says that there is no gap in what is covered. The imported motor spirit is subject to excise duty at the motor spirit rate. The butane manufactured in New Zealand is subject to excise duty at the butane rate. It says that the “twin legislative purposes of ss 73 and 75” have already been achieved prior to the alleged act of manufacture on which the Comptroller relies. It says that there is nowhere to be discerned in the CE Act a purpose to levy excise duty on “fuels” twice over.
[83] That submission is correct so far as it goes. However, the Comptroller points out that there is no levying of excise duty on fuels twice over. She says that there will be no excise duty paid on the imported motor spirit on landing, because the motor spirit will be going to a manufacturing area. She says that this is reflected in Chapter 27 where motor spirit going into a manufacturing area is “free” of excise duty. She says that it will only be when the manufactured motor spirit (i.e. the imported motor spirit combined with the butane) leaves the manufacturing area that it will be subject to excise duty. She says that this position is reflected in s 85, whereby the licensee who “purchases ... goods for use in manufacture ... may ... claim, as a credit, excise duty or excise-equivalent duty paid in respect of those ... goods”.
[84] TNZ responds that s 85 is not a mirror image of how the duty arises under ss 73 and 75. In its case, under its present arrangements it does not purchase the imported motor spirit or the butane. It could not therefore claim a credit under s 85. The Comptroller responds that no duty was payable on either the motor spirit or the butane as it was to be manufactured in a manufacturing area.15 Moreover, under s 76(2) Gull will be liable for the duty and it will be able to obtain a credit under s 85 as the purchaser.
[85] I consider that the tables and tariff items work, whichever interpretation is correct. If the Comptroller’s interpretation is correct, the motor spirit ought to have been entered as “for manufacture in a licensed manufacturing area”. In that case the importation is free of excise duty, but the motor spirit blended with the butane would fall under the “other” category in Part A of the Table and attract excise duty on the blended volume. If TNZ’s interpretation is correct, the motor spirit is “other” under the Document and then falls under Part B of the table. Excise duty is payable under Part B on that motor spirit on the volume as imported.
[86] I accept that the legislation is intended to operate to avoid a double tax on the imported motor spirit. From the importer’s view point, however, it does this indirectly. The starting point, where goods are imported, is s 75(1). It says that “duty at the appropriate rate specified in Part B of the ... Table must be levied, collected, and paid on all goods specified in Part B of the ... Table that are imported”. That is, if the goods are imported and they are specified in Part B, then the tax must be paid on it at the rate set out in the Table. Part B lists motor spirit. It has a rate for that motor spirit. The starting point then is that imported goods are subject to excise duty. It is only by turning to Chapter 27 that an importer can see that there is no excise duty if the imported motor spirit (whether blended with ethanol or not at the time it is imported) is for manufacture in a licensed area. If the importer does not know or wish to be concerned with the use to which the motor spirit will be put,
excise duty will be paid on landing.
15 Although TNZ’s facility was not a licensed manufacturing area in respect of motor spirits, s 74
of the Act provides that the relevant provisions of the CE Act apply as if the area was licensed as a manufacturing area.
[87] If the motor spirit is then said to be “manufactured” because some butane has been added before it is dispatched, the manufacturer will also be subject to excise duty and the manufacturer will need to claim the refund. However, in this case, TNZ cannot claim the credit because it has not purchased the goods (as s 85(1) requires), and Gull cannot claim the credit because it is not the licensee of a manufacturing area (as s 85(1) also requires).
[88] In my view, the indirect way that double taxation is to be avoided, together with the limited scope of the credit provision in s 85, provide some support for TNZ’s submission that, where two products are combined in an operation or process, and the products have already attracted excise duty under ss 73 and/or 75, the combined product does not attract further excise duty (in the absence of a clear
statutory provision to that effect).16
Legislative purpose: history and nature of excise tax
[89] The Comptroller submits that the cases relied on by TNZ and discussed above ([63] to [75]) do not take into account the purpose of the legislation.17 She points out that Cinzano was immediately overturned by Parliament through an amendment to the legislation.18 The Comptroller says that her interpretation is supported by the purpose of the legislation. She says that Parliament’s purpose is “for the Crown to collect 48.5 cents for every litre of petrol consumed in New Zealand regardless of its origin”. The Comptroller submits that this legislative purpose is supported by the history and nature of excise tax.
[90] The Comptroller submits that, contrary to this legislative purpose, every
consumer of Gull’s petrol is underpaying duty by the volume of the butane added to
16 The approach of the legislature after Cinzano is an example of such a clear statutory provision.
Refer at footnote [18].
18 Section 5 of the Finance Act 1985 (UK) provided that the process of blending wine would
constitute the production of wine if the process resulted in wine at a higher level of duty than
one of the constituent wines. This provision took effect five days after the decision of the House of Lords in Cinzano (UK) Ltd v Customs and Excise Commissioners [1985] 1 WLR 484. Regulations were also promulgated to provide for credits to ensure that there would not be double taxation from the amendment.
the motor spirit, which has been subject to duty at the butane rate rather than the motor spirit rate. The butane rate is approximately 10 cents per litre whereas the motor spirit rate is approximately 48.5 cents per litre. The effect of TNZ’s interpretation is that the Government has 38.5 cents per litre (plus GST) less to spend on roads, road safety and associated outputs.
[91] The Comptroller’s submissions set out a helpful summary of the history of excise tax. The Comptroller says that excise tax has always been understood to be an indirect tax on goods produced for home consumption. She says that it is indirect because it is collected by an intermediary, but the intermediary will pass the burden on to the consumer in the form of a higher price. She says that GST and excise duty are the main forms of indirect taxes in New Zealand. These submissions are
supported by references to Economic dictionaries,19 an OECD Glossary20 and
academic commentary.21
[92] The Comptroller refers to the statutory references to “home consumption” (for example in ss 72 and 75(3)) as supporting this point. The Comptroller says that the concept of “removal for home consumption” dates back to the origins of the Customs regime in New Zealand and beyond. Rather than paying duty at the border
immediately upon import, goods were off-loaded into Customs’ control spaces,22
with duty becoming payable when the goods left those spaces rather than when they arrived in the country.
[93] The Comptroller submits that excise duty is also a specific tax – that is, a tax levied at an absolute amount per unit of a commodity. In support of this point, the Comptroller refers to s 2(2) of the CE Act. That section sets out the temperature at which the quantity of fuel (and alcohol) is measured for the purpose of determining
the duty to be paid.
20 Glossary of Statistical Terms (OECD, 2008).
[94] The Comptroller submits that levying at a per unit amount enables the tax to be “hypothecated” (meaning that it is earmarked for specific social expenditure). She submits that for hypothecation to be possible, Parliament must be able to levy the tax at rates which adequately internalise the externalised costs of consumption. In the case of fuel, these costs are mostly transport infrastructure. The specific tax also enables Parliament to affect the price of goods in a way that advances social policy. In the case of fuel, it is said that this social policy might be to reduce the use of dirty fuels.
[95] The Comptroller submits that excise tax on fuel (and the related ACC levy and Petroleum Fuel Monitoring levy) historically has always been hypothecated in New Zealand. The Comptroller’s submissions inform me that excise duty on motor spirit proper was first imposed under the Motor-spirits Taxation Act 1927.23 Under s 2 of that Act it was a per gallon tax and the Minister could specify the temperature at which the quantity of any motor spirit was to be calculated. The Minister could
exempt the duty on the fuel if satisfied that it was to be used for manufacturing or scientific purposes and had been rendered unfit for use as a fuel in motor vehicles. By ss 6 and 9 of that Act, after deduction of various fees, 92% of moneys were to be paid into what was called the “Revenue Fund of the Main Highways Account”. The Comptroller says that this was therefore a tax on domestic consumption, for the purpose of funding roads, and there was a critical emphasis on volume.
[96] The Comptroller’s submissions set out legislative changes made in 1931,
1949 and 1953. Moving forward to 1961, in legislation at that time, the duty was replaced with a new duty administered as a form of wholesale sales tax. As with the duty it replaced, it was a per gallon tax, the duty was to be set aside to the National Roads Fund, and motor spirit used for industrial and scientific purposes was exempt. In 1986 the tax was brought back under the Customs regime. In 1989 the National Roads Fund became the Land Transport Fund under the Transit New Zealand Act
1989. Part 5 of that Act provided for the apportionment of excise duty. It was that
legislation that was in force when the CE Act was enacted.
[97] Later, by the Land Transport Management Act 2003, excise and excise- equivalent duty was to go to the newly renamed National Land Transport Fund. The Land Transport Management Amendment Act 2008 then established the New Zealand Transport Agency to administer the National Land Transport Fund. That Agency is required to prepare a National Land Transport Programme which must be guided by the Government Policy Statement on Land Transport. A key purpose of that policy statement is to “link the amount of revenue raised from road users with
the planned levels of expenditure from the national land transport fund”.24
[98] Seen against this history and context the Comptroller says that excise duty on fuel is in effect a proxy for a charge of road use. She submits that if TNZ’s operation is not “manufacturing” then Parliament’s intent has not been met, because excise duty is not collected on Gull’s motor spirit on a per unit basis.
[99] TNZ submits that the Comptroller’s submission takes the purpose of the overall regime too far. TNZ submits that the meaning of “manufacturing” is to be read in light of the purpose of the CE Act. TNZ acknowledges that words of a section are not to be read in isolation, and the consistency of an interpretation of those words with the statute book as a whole may be relevant.25 But it says that the meaning of “manufacturing” in the 1996 CE Act cannot be derived from legislation enacted in 2003 and 2008. It submits that even though the tax is “earmarked” for road costs, it is an earmarking at the point of importation or manufacturing, not an earmarking “at the pumps”. It submits that nowhere does the CE Act say that every
last unit of motor spirit used on the road is to be subject to excise tax and in turn spent on road costs. It points out that the ACC levy and the Petroleum Fuel Monitoring levy are linked to when excise and excise-equivalent duty is payable and therefore do not add to the analysis.
[100] I agree with TNZ’s submissions. The task is not to look for an interpretation of “manufacturing” in the CE Act that will be best give effect to the overall regime under which tax under one Act is set aside under another Act for specific purposes.
It is the purpose of the CE Act, as enacted, that is to be given effect. In the CE Act,
24 Section 84(1) Land Transport Management Act 2003.
25 Agnew v Pardington [2006] 2 NZLR 520 (CA) at [32] and [41].
the legislature has set out what is subject to excise tax at the motor spirit rate. It says that:
(a) Motor spirit manufactured in New Zealand, if blended with ethanol, is taxable on the volume of motor spirit without the ethanol.
(b) Other motor spirit manufactured in New Zealand is taxable on its total volume.
(c) Motor spirit imported into New Zealand, if blended with ethanol, is taxable on the volume of motor spirit without the ethanol.
(d) Other motor spirit imported into New Zealand is taxable on the total volume.
[101] If Parliament intended to enact a regime under which imported and manufactured fuel was subject to excise tax as a “proxy” for domestic consumption of fuel, then it is these volumes (as manufactured or imported) that are “the proxy” for domestic consumption of fuel. It is not inconsistent with the “proxy” concept if every last unit of motor spirit used on the road is not taxed at the motor spirit rate.
[102] That Parliament’s intent is for excise tax to be levied on volumes as imported or manufactured regardless of domestic consumption, is illustrated by the following example. A Gull tanker, after leaving TNZ’s gantry full of motor spirit product(s), may be involved in a road accident and the cargo may be spilt or it may explode. The excise duty will already have been paid even though the motor spirit will not be consumed by the domestic consumer. In this example the excise duty might be a proxy for the clean-up costs of the accident (rather than domestic consumption). However, the funds from the excise duty may not be called upon at all, if there is insurance which covers the clean-up costs.
[103] The Comptroller thought that this example was covered by Regulation 61 of the Customs and Excise Regulations 1996. However this regulation relates to, and corresponds with, s 113 of the CE Act. It permits refunds where goods are damaged,
destroyed, pillaged, or lost before their release from a customs controlled area. It does not cover the situation where the goods are damaged, pillaged or lost after their release from a customs controlled area, as is the case in the example referred to.
[104] The legislature has therefore not determined that every unit of motor spirit blended with other products that goes into a fuel tank of a vehicle on the road, will be subject to excise tax. Even though not every unit that is consumed on the roads may have been taxed, the overall regime as intended by Parliament (through, now, the CE Act and the Land Transport Management Act 2003) is given effect. Manufactured (as defined) or imported fuel is subject to excise tax at the volumes manufactured or imported. The excise tax from these goods is used for road costs.
[105] Moreover, it is not clear on the evidence before me that increasing volume by adding butane will equate to more miles driven on the roads. Nor is it clear on the evidence whether butane increases volume without increasing the “dirty” element of the fuel. The evidence is that adding butane increases volume without changing its essential characteristics. But that may not be the same as how the motor spirit performs in the particular car in which it ends up. It may therefore be that butane added to motor spirit does not equate to more miles on the road or greater consumption of “dirty” fuel.
[106] For all these reasons I consider it goes too far to say that “manufacturing” must mean an operation involving the addition of another product before the motor spirit is “removed for home consumption”. The legislative purpose does not require that interpretation. The legislative purpose in respect of excise tax on motor spirits is to tax both imported motor spirit and manufactured motor spirit. In each case the motor spirit is to be taxed by volume at the motor spirit rate. The only exception to this is where ethanol is added to the motor spirit. In that case, the ethanol is excluded from the volume to be taxed. That legislative purpose is met if TNZ’s interpretation is correct, even though it means that less excise tax is collected and correspondingly there is less money to spend on roads.
Legislative history: definition of “manufacturing”
[107] TNZ submits that the legislative history of the definition of “manufacturing”
supports its submissions. The Comptroller disagrees.
[108] The Comptroller’s submissions helpfully set out the early history on this topic. “Manufacturing” was not initially defined in the New Zealand excise legislation. However, as early as 1879, the term “tobacco manufacturer” was given a wide definition, covering tobacco “prepared by any means” (amongst other things).26 “Manufacture” was not otherwise defined in the 19th century Customs Acts27 or in the Customs Act 1913, the Motor-spirits Taxation Act 1927 or the Motor Spirits
Duties Act 1961.
[109] When the Customs Act 1966 was enacted, “manufacture” of tobacco still had the wide definition from the earlier legislation, but there was no definition of manufacture for the other goods which were subject to excise duty under that Act. This changed with an amendment in 1986.28 That amendment provided that:
“Manufacture” includes –
(a) In relation to tobacco ...
(b) In relation to any goods specified in the Third Schedule to this Act (other than tobacco), any process of production, assembly, packaging, and any other operation or process involved in the production of the goods; -
And “to manufacture” and cognate expressions have corresponding meanings.
[110] This was the definition at the time of International Bottling. One year after that decision, the CE Act received its Royal assent. At that time the CE Act defined “manufacture” as follows:
“Manufacture”, in relation to goods specified in the Third Schedule to this
Act, means, -
26 Section 2 of the Tobacco Act 1879.
27 Customs Act 1841, 1846, 1858, the Customs Duties Acts 1856 and 1858, and the Customs and
Excise Duties Act 1881, 1885, 1888 and 1891.
28 Section 2 of the Customs Amendment Act 1986.
(a) In relation to tobacco ...
(b) In relation to goods other than tobacco, a process of production, assembly, packaging, or other operation or process involved in the production of the goods; -
And “to manufacture” and cognate expressions have corresponding
meanings.
[111] The definition in the CE Act for goods other than tobacco was a narrower definition than under the Customs Act 1966 (as amended in 1986) because it was an exhaustive (‘‘means”) definition rather than an inclusive (“includes”) definition. Also, rather than “any process of ... and any other operation or process involved in the production of the goods ...” (as in the Customs Act definition), it became “a process of ... or other operation or process involved in the production of the goods” (although it is doubtful that this subtle change had any substantive effect).
[112] TNZ submits that in enacting the definition in the CE Act, Parliament must have adopted the International Bottling approach to what was meant by “manufacture” and “production”. That is to say that Parliament must have accepted that “manufacturing” meant producing something different from its constituent parts. That might be going too far because in International Bottling all that had happened at the point the whisky was stolen was that it had been stored and tested. It can, however, be assumed that Parliament did not consider it necessary to recast the definition in light of that decision as had occurred in the United Kingdom after Cinzano. So in New Zealand, to store and test whisky, was not viewed as an operation or process which ought to render whisky subject to excise tax on the basis that it was “manufactured” in New Zealand.
[113] The definition of “manufacture” was amended again in 2002. This is the current definition which is set out at [43] above. This amendment separated fuel from the category of “other goods”, so that there became three categories covered by the definition: tobacco, fuel and other (rather than two: tobacco and other goods). The latter category is in effect alcohol. With this amendment, the definition of manufacturing for fuel no longer included “assembly” or “packaging”. As TNZ’s counsel says, assembling and packaging are not processes that would ordinarily be apt to describe any process associated with fuel. It may therefore be that the words
were removed because they were redundant in relation to fuel, rather than that Parliament intended to narrow the definition in relation to fuel. At the same time, however, the definition of manufacturing in respect of alcohol was added to. The parties disagree as to whether this was intended to extend the definition in relation to alcohol.
[114] The submission for the Comptroller is that the definition for both fuels and alcohol remained wide – applying to “any” operation or process involved in the production of goods. In relation to alcohol, the Comptroller submits that (c)(ii) of the definition clarifies what is covered under (c)(i), but does not extend it. The immediate difficulty with this submission is that the definition of manufacturing for alcohol is that set out in (c)(i) “and” (c)(ii). Ordinarily “and” indicates that there is something additional. If (c)(ii) was intended to clarify, rather than extend, the definition, the legislature could have said “and, for the avoidance of doubt, (c)(i) includes ...”, rather than simply “and”.
[115] That Parliament’s intent was to extend “manufacturing” to something more than “any operation or process involved in the production of the goods” is confirmed by the Explanatory Note to the Bill which introduced the amendment which said:29
The term manufacture is used in the principal Act in a number of contexts. Section 10(a) of the principal Act, for example, requires areas that are used for the manufacture of goods specified in Part A of the Third Schedule of the principal Act to be licensed. Section 68 of the principal Act prohibits, with certain exceptions, the manufacture of goods of that kind outside those licensed areas. Further section 73 of the principal Act imposes excise duties on goods of that kind that are manufactured in those licensed areas. The current definition of the term, in section 2(1) of the principal Act, distinguishes between the manufacture of tobacco and the manufacture of the 2 other classes of goods specified in the Third Schedule of the principal Act (fuels and alcoholic beverages). The new definition of the term manufacture distinguishes between all 3 of those classes of goods (tobacco, fuels, and alcoholic beverages) in order to extend the element relating to alcoholic beverages so that it includes ancillary processes (as defined by new subsection (3), proposed to be added by clause 3(4).) (Underlining is my emphasis.)
29 Customs and Excise Amendment Bill (No 4) 2001 (184-1) (explanatory note) at 2.
[116] The extended definition in relation to alcohol covers “filtering the goods, diluting the goods, or blending the goods with other goods (whether the other goods are the same as, similar to, or different from, the goods)”. TNZ’s operation involves blending the motor spirit (as imported) with butane. The amount of the butane is determined by a computer process but it is nonetheless a blending that is achieved. That is an operation which comes within the description of activities set out in this extended definition. That extended definition applies to goods that are neither tobacco nor fuel. No similar extended definition applies to fuel. In my view, reading the definition of manufacture in relation to fuel, in comparison with the definition for alcohol, strongly supports TNZ’s submission that its operation or process is not an operation “involved in the production of goods”. The goods (motor spirit and butane) have already been produced. TNZ blends and dispatches those already produced goods. That is an ancillary process in relation to fuel which, it seems, Parliament did not intend to be within the definition of “manufacture”.
[117] The Comptroller’s response to this point is that the absence of an amendment to cover “ancillary processes” for fuel is neutral at best. The Comptroller submits that it is unusual for a court to find that a change to one part of an Act was intended, in effect, to also change, by inference, another part of the Act. In support of this submission the Comptroller refers to the commentary in Burrows and Carter.30 That commentary starts its discussion by saying that “[i]t is a difficult question whether an amendment to some provisions of an Act can change the proper interpretation of the rest of its provisions.”31 It goes on to discuss some examples in the cases and the different views expressed by the Judges in those cases. It concludes “this subject, then, must be left with many others: everything depends on the particular statute, and on the nature of the amendments in question.”32
[118] In the present context, the amendment made by the later legislature was to
separate out “fuels” from other goods, to delete in relation to fuel some of the
30 JF Burrows and RI Carter Statute Law in New Zealand (4th ed, LexisNexis, Wellington, 2009) at
642-648.
31 At 644.
32 At 647.
processes that had been part of the definitions that previously applied to fuels, and to extend the definition in relation to other goods. It was not a case where the amendment was made to a different section altogether where the question might arise whether the legislature intended to do anything other than deal with that particular amending provision. This also makes the situation different from the two decisions
cited in the Comptroller’s submissions on this point.33 Parliament must be taken to
have turned its mind to both the appropriate definition for “fuels” and the appropriate
(and different) definition for other goods.
Overall assessment: meaning of “manufacturing” in light of context and purpose
[119] TNZ’s operation is “manufacturing” under the CE Act if it is an operation “involved in the production of the goods”. The relevant goods in this case, that is those that are subject to excise duty, are motor spirit and butane. The Comptroller does not contend that TNZ is involved in the production of butane. She contends that TNZ’s operation is involved in the production of motor spirit. When butane is added to motor spirit, the resulting blend remains motor spirit, but there is now more of it. She submits that because there is now more motor spirit than there was before the butane was added, there has been a production of motor spirit.
[120] While at first blush that submission has an attraction, it is not persuasive on closer analysis. The greater total volume that results from the operation arises from blending (i.e. combining/mixing) two products. Blending two goods is not necessarily what is meant by “production of the goods”. That is because the goods in the blend were already in existence (i.e. produced) before they were blended. It is for this reason that the courts have asked whether the goods that result from the process or operation are any different from the goods before the process or operation.
That is not determined by whether the blend now has a new name.
[121] In the present case there were X units of motor spirit (with some levels of butane already in the motor spirit mixture as imported) and Y units of butane before the operation. Afterwards there was motor spirit and butane with combined units of X and Y. A mixture had been made but it was no different from its constituent parts in any material way. In its ordinary meaning, to blend two products into one combined product (although it can be described as an operation or process) is not necessarily the same as to “manufacture” or “produce” the combined product where the combined product which is not different to its constituent parts. If Parliament intended this kind of operation or process to be captured then it could have said so more explicitly, as it has done in the case of alcohol.
[122] I consider that the best indicator of Parliament’s intent comes from the definition of “manufacturing” for motor spirit, as compared with the definition of “manufacturing” for alcohol. This intent is consistent with the ordinary meaning of the words of the definition. It is also supported to some degree by the scheme of the Act whereby the liability under s 75 arises on the importer in accordance with the importer’s “entry” for the goods and the scope for a manufacturer to claim a credit does not directly match the liability that arises under ss 73 and 75. This view is not contrary to an intent to tax importers an manufacturers as a proxy for domestic consumption.
[123] For these reasons I consider that TNZ’s operation (whereby butane is added to the imported motor spirit) is not “manufacturing” as defined in the CE Act.
Second cause of action: breach of legitimate expectation
[124] My conclusion on the first cause of action means that it is not necessary to determine the second cause of action. I will, however, address some of the main points that were raised by the parties.
[125] I start with two matters that were raised that I consider do not carry any weight in relation to the legitimate expectation claim. The first is that Customs maintain that it first became aware that TNZ was adding butane to Gull’s motor spirit as a result of the complaint from BP. Affidavits from Customs refer to earlier audits
in relation to the ethanol and note that the butane operation was never mentioned by TNZ during these audits. TNZ for its part says that it never sought in any way to hide the butane operation and that it understood that Customs was aware of it (through the earlier correspondence and because the butane labelled pipes were clearly visible at the facility). On the evidence before me, I could not find that TNZ sought to hide what it was doing.
[126] The second relates to TNZ’s decision to obtain a licence in respect of ethanol. I agree with TNZ that blending with ethanol needed a licence for reasons that do not apply to butane. TNZ’s licence authorises it to denature ethanol and to add that to motor spirit. To avoid excise duty on ethanol, denaturing must be in accordance with a formula approved by the Chief Executive. Arguably, the adding of the denatured ethanol to the fuel may fall within the term “ancillary process” under s 2(3) and thus be “manufacturing”. In any event, that TNZ applied for a licence for this process on Customs’ request, does not mean that TNZ understood that Customs would view the addition of butane to motor spirits as “manufacturing”.
[127] Turning to the claim under this head, TNZ contends that in April 2002 (as clarified in May 2002) (refer to [18] to [25] above) Customs assured TNZ that it would not be subject to further excise duty if it added butane to motor spirit where each of those goods had already been subject to excise duty. It says that as a result
of these assurances TNZ structured its affairs accordingly.34 TNZ submits that this
gave rise to a legitimate expectation that the Comptroller would not, without prior notice, assert that TNZ’s operation constituted “manufacturing”. It says that this legitimate expectation existed until TNZ received the Comptroller’s findings in its audit letter dated 15 September 2011. TNZ says that it would now be wrong for the Comptroller to go back on the assurances given by assessing excise duty for the
period from March 2003 until 15 September 2011.
[128] In considering this claim it is not necessary that I determine precisely what was said in the telephone conversation on 22 May 2002. I will proceed on the basis that TNZ was led to believe, from the letter of 8 April 2002 together with the telephone conversation, that excise duty would not be payable on the butane added to motor spirit, at the motor spirit rate. That understanding may have arisen as a result of a misunderstanding from Customs about TNZ’s intentions (arising from an absence of detail about how the blending would occur except that it would not be in its bulk tanks or because of the other discussions around biofuels). It may also be that the Customs officer did not use the precise words that are noted on that letter even though that was what Mr Mountford understood from the conversation. Neither of these points matter. They do not matter because I consider that a legitimate expectation of a kind to prevent the Comptroller from now assessing TNZ for duty on the butane at the motor spirit rate could not arise from that letter and telephone conversation for the reasons that follow.
[129] TNZ submits that there is a distinction between a legitimate expectation which seeks to defeat a statutory duty (which it cannot do) and a legitimate expectation which fetters a statutory discretion (which it may do if, not to give effect to the expectation, will amount to an abuse of power by the decision maker).35 It submits that s 73 and s 75 impose an obligation on the importer/manufacturer to pay duty, and on the Comptroller to levy and collect the duty as returned by the
importer/manufacturer. It submits that s 88 is not mandatory because under that section the Comptroller “may” assess duty. It enables the Comptroller to assess duty where she has reasonable cause to suspect that duty is payable, but does not require her to make that assessment. It submits that in the present case it would be an abuse of that power to make an assessment of duty (for the period at issue here), when the Comptroller, through Mr Wakefield, had assured TNZ that no such duty was payable
and TNZ had acted in reliance of that assurance.
[130] TNZ relies on Attorney-General v Steelfort Engineering Company Ltd36 in support of this submission. That case was concerned with duty on imported air- conditioners under the Customs Act 1966. Customs had determined that the air- conditioners were within a concession available for dehumidifiers. Later Customs decided that the air-conditioners were not entitled to the concession. Customs sought from Steelfort (the importer in that case) payment of the duty for one of the three years that it considered duty should have been paid, pursuant to a Customs department policy. There was then an Ombudsman inquiry in response to complaints from Steelfort’s competitors. Pursuant to that inquiry the Ombudsman concluded that the Collector of Customs had no discretion, as a matter of law under the Customs Act, to waive payment of duty lawfully owed. Following that, Customs then sought to recover the full three years duty from Steelfort. Steelfort brought judicial review proceedings.
[131] The Court of Appeal found (as had the High Court) that the concession properly applied to Steelfort’s air-conditioners. This meant that no duty was payable. The Court of Appeal nevertheless went on to express its view on the question of whether Customs had acted lawfully in entering into the settlement (to require payment of one rather than three years) at that time, and whether it acted improperly when it later reversed that decision. In considering that issue, the Court
of Appeal started with the following:37
In the United Kingdom it is well established that a tax authority, like any other official, is under a general obligation not to act unfairly in the exercise of a statutory discretionary power. To do so can amount to an abuse or excess of power (In re Preston [1984] UKHL 5; [1985] AC 835). Review of a decision for unfairness may be available where the conduct complained of is equivalent to a breach of contract or a breach of an assurance concerning future behaviour. The extent of the obligation to act fairly will depend upon the particular circumstances and terms of the statute. The tendency of the Courts is, however, against reading a statute in a way which removes protection for those affected by the exercise of power by officials.
[132] As with the CE Act, the Customs Act in issue before the Court of Appeal gave the Collector the power to amend an assessment. As the Court of Appeal said,
under this power the Collector “may” make alterations or additions and it did not
36 Attorney-General v Steelfort Engineering Company Ltd (1999) 1 NZCC 55-005 (CA).
37 At 7.
impose “an absolute obligation on the Collector to assess and collect duty regardless of the circumstances.”38 It considered that there was room under the CE Act regime for the approach taken by the House of Lords in Preston.39 Applying that approach to the facts at hand, the Court of Appeal concluded as follows:40
There is no general power to dispense with the collection of duty. Where the Collector is satisfied that duty is properly payable there is an obligation to collect that duty unless to do so would amount to an abuse of power in particular circumstances. But a question of liability for duty may sometimes be genuinely a matter of dispute ... In circumstances of that kind it may be appropriate for the Collector to decide to enter into a compromise or settlement, forgoing all or part of the claimed duty. Ordinarily the Department will not be free thereafter to depart from the arrangement it has made with the importer. To attempt to do so could be seen as an abuse of power or as an endeavour to exercise a power which, by virtue of the compromise, no longer exists in the particular situation. It is more doubtful, however, whether it is an abuse for the Collector to change his mind about an informal ruling – one which has not been given pursuant to a systematic process or as a means of resolving a dispute over interpretation or Departmental liability.
[133] The Comptroller says that the alleged assurance relied on in this case is no better than the kind of informal ruling that the Court of Appeal in Steelfort doubted would give rise to an abuse of process. She refers to the statement in R v Inland Revenue Commissioners ex parte MFK Underwriting Agents Limited that:41
It is one thing to ask an official of the revenue whether he shares the taxpayer’s view of a legitimate provision, quite another to ask whether the revenue will forgo any claim to tax on any other basis.
[134] In my view the assurance relied on in this case was not of a kind that TNZ could legitimately expect the Comptroller to adhere to. It was not reasonable for TNZ to rely on a handwritten note of a telephone conversation as recording a considered determination, ruling, or decision by the Comptroller that excise duty was not payable at the motor spirit rate on the butane. This is particularly so when Parliament has set out in the CE Act the circumstances in which the Comptroller can
be bound through the issue of binding rulings. TNZ submits that it could not seek a
38 At 8.
39 R v Inland Revenue Commissioners, ex parte Preston [1984] UKHL 5; [1985] AC 835 (HL).
40 Attorney-General v Steelfort Engineering Company Ltd (1999) 1 NZCC 55-005 (CA) at 8.
ruling because s 119 requires that the application for a ruling be made in respect of particular goods. I do not see that as preventing an application in respect of Gull’s motor spirit and butane goods. In any event there is no evidence that TNZ considered whether an application could be made. In my view the informal indication received from Mr Wakefield was not an assurance of a kind that fairness now requires the Comptroller to be bound by it, in the exercise of her powers under s 88.
Third cause of action: promissory estoppel
[135] TNZ included this cause of action on a “belt and braces” approach. TNZ’s counsel considered it might provide a remedy if the Court were to determine that a “substantive” legitimate expectation was not part of the law in New Zealand. The cause of action was not pressed by TNZ and no detailed submissions were made. In light of the conclusion I have reached on the first cause of action, it is unnecessary to determine this cause of action. Other than saying that, where the representation giving rise to the alleged estoppel relates to the exercise of a statutory power, in my view it would not provide a remedy in circumstances were a legitimate expectation is not made out, I leave the matter there.
Result
[136] My conclusion on the first cause of action is that the TNZ operation at issue here is not “manufacturing” under the CE Act with the result that excise tax at the motor spirit rate is not payable on the butane. Accordingly I make a declaration to that effect. The parties may agree the precise terms of the order (in accordance with this judgment). They have leave to refer the wording back to me if agreement is not possible.
[137] Costs are reserved, but I can indicate that there does not appear to be any reason why they should not follow the event. The parties are to endeavour to resolve the quantum of costs that should be paid in accordance with the High Court Rules’ schedule. If they cannot do so, they have leave to refer the items in dispute to me.
[138] Should it be necessary to refer the wording of the declaration or any issue as to costs to me, the parties are to file memoranda within one month of today’s date.
Mallon J
Solicitors:
Jones Young, Auckland for Applicant
Crown Law, Wellington for Respondent
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