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Arabicas Pty Ltd v Coffee Industry Corporation Pty Ltd [1998] PGNC 137; [1998] PNGLR 19 (22 July 1998)

[1998] PNGLR 19

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

ARABICAS PTY LTD

V

COFFEE INDUSTRY CORPORATION PTY LTD

WAIGANI: WOODS J
16, 22 July 1998

Facts

The defendant is a company incorporated under the Companies Act but is given statutory powers under the Coffee Industry Corporation (Statutory Functions and Powers) Act 1991 to issue certificates of registration for exporters and for manufacturing facilities. Under the Act, all coffee exporters are to be registered and authorized by defendant before they can export coffee. The plaintiff applied for a certificate of registration as a coffee exporter to export organically grown coffee. The certificate of registration was given but the following condition was attached: "Arabicas Pty Limited is not to sell locally or export any coffee purporting to be ‘organically’ or ‘naturally’ grown and processed". It is from this that the plaintiff seeks judicial review arguing inter alia, that the defendant acted unreasonably and took into consideration irrelevant matters when it imposed the condition stated above.

Held

1. The defendant does not have the power to restrict the applicant from using the word "organically" or "naturally" grown coffee.
   
2. The defendant had regard to matters, which it did not have, power by statute to consider in the exercise of its discretion. It applied irrelevant considerations. It did not properly consider the matters in the exercise of the limited discretion it had.
   

Review allowed, condition quashed.

Papua New Guinea cases cited

Kekedo v Burns Philp & Ors [1988-89] PNGLR 122.

Other cases cited

Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] EWCA Civ 1; [1947] 2 All ER 680.

Council of Civil Service Unions v Minister for the Civil Service [1984] 3All ER 935.

Counsel

P Payne, for the plaintiff.
A MacDonald, for the defendant.

22 July 1998

WOODS J. The plaintiff is seeking judicial review of the decision of the defendant on the December 4 and notified to the plaintiff on January 30, 1998 to impose upon the Certificate of Registration as a coffee exporter issued by the defendant to the plaintiff the condition - Arabicas Pty Limited is not to sell locally or export any coffee purporting to be ‘organically’ or ‘naturally’ grown and processed.

The Coffee Industry Corporation Limited is a company registered under the Companies Act and given powers under the Coffee Industry Corporation (Statutory Functions and Powers) Act 1991 to issue certificates of registration for exporters and for manufacturing facilities. The Act requires coffee exporters to be registered before they can export coffee. Registration is reviewable every year.

The members of the Corporation include persons active in the coffee industry such as grower associations, an exporter association, a plantation association and certain government officials. This means that the Board of the Corporation includes persons with strong financial interests in the coffee industry. The policy appears to suggest a measure of self-regulation within the industry. We thus have a company and a board with a certain measure of control over the industry and control over the licensing of coffee processors and exporters. This corporation cannot be said to be a Government body, it is a privately registered company with the usual memorandum and articles of association, however it does have statutory powers under the Act referred to. This means that because it comprises people with their own vested interest in the industry and it has a measure of control by statute over the operation of the industry, the actions of the Board must be seen to be impartial and fair across the industry and also that it is a body that is subject to a measure of review by way of judicial review.

The application for judicial review is made under National Court Rules Order 16. In the statement filed with the application, the applicant is alleging that the Corporation acted ultra vires its powers under the Act, in that it imposed a harsh and unreasonable condition on the Certificate of Registration. It took into consideration irrelevant considerations, and it acted harshly and unreasonably in applying terms that had not been defined by reference to the Act. Judicial review is the procedure a person may pursue to challenge administrative decisions that they consider adverse to themselves. However the authorities are quite clear that in judicial review the court is not concerned with the merits of the decision being reviewed but the legality of the procedures followed and the final decision. As was said by Lord Diplock in Council of Civil Service Unions v Minister for the Civil Service [1948] 3 All ER 935 the grounds under which administrative action is subject to control by judicial review are illegality, irrationality and procedural impropriety. And the authorities have made it clear that review is not an appeal procedure, and the reviewing court will not substitute its judgment or discretion for the judgment or discretion of the body under review, and facts determined by the body under review are rarely open to review in the reviewing court. A leading authority is the case Associated Provincial Picture Houses v Wednesbury Corporation [1947] EWCA Civ 1; [1947] 2 All ER 680 which laid down the following propositions:

"The reviewing court is not a court of appeal. Subject to complying with the law the discretion of a body to whom the discretion is entrusted is absolute. It must be a real exercise of the discretion.

The body must have regard to matters to which it is expressly or by implication referred by the Statute conferring the discretion. It must ignore irrelevant considerations. It must not operate on the basis of bad faith or dishonestly. It must direct itself properly in law.

It must act as any reasonable person would act and must not be so absurd in its actions that no reasonable person would act in that way."

These principles were summarised in Kekedo v Burns Philp & Ors [1988-89] PNGLR 122 by Kapi DCJ who said:

"... the circumstances under which judicial review may be available are where the decision making authority exceeds its powers, commits an error of law, commits a breach of natural justice, reaches a decision which no reasonable tribunal could have reached or abuse its powers’, and, ‘the purpose of judicial review is not to examine the reasoning of the subordinate authority with the view to substituting its own. Judicial review is concerned not with the decision but with the decision making process".

So in this case before me, I am considering the powers of the Corporation and the decision making process whereby the Board of the Corporation placed a certain condition on the Certificate of Registration of the applicant as a coffee exporter. As part of its method of control of the industry, the Corporation has issued a set of policy guidelines for the registration of coffee exporters, processors and manufacturers however these guidelines refer to the use of the words ‘certified organic coffee’ and seem to adopt the criteria of an overseas certifying agency called the National Association for Sustainable Agriculture Australia Ltd (NASAA). These guidelines seem to be restricted to the concept of ‘certified’. The condition placed upon the applicant refers to the words ‘organically’ and ‘naturally’, however nowhere in the Act is there any provision or definition of what those words mean or how those words can be imposed. There is provision under the Act for regulations to be promulgated to affect all producers and processors however I have been referred to no regulations, which define or otherwise explain these words. The reference to papers and reports is always of ‘certified organic’ being the reference to NASAA above and which seem in the absence of statutory adoption of that organisation to be a matter between individuals and that overseas body for sale in countries where that certification is relevant. However this body is not the statutory certification body generally in PNG and only is accepted in the guidelines and again the condition imposed here does not include or refer to ‘certified by NASAA’ it merely covers the use of the words ‘organically’ and ‘naturally’.

So where does the Corporation have the power to impose controls using those words. It is suggested that the power comes from its overall power to regulate the industry and the use of the policy guidelines. I cannot find the power anywhere in the Act for such criteria to be applied. Whilst in this age it seems to be economically desirable and even policy wise desirable to consider marketing controls which, to use modern terminology, are environmentally friendly and accord with public conceptions of what is good and ‘natural’ there is no statutory control over the use of those words. At the end of the day, it is matter of a company’s own credibility and liability under the laws of passing off and false pretences whether it considers it satisfies certain criteria. It is open to companies to apply to use nationally accepted or even internationally accepted criteria as for example the reference to NASAA but that is not the position here. And it is noted that there are other "organically’ verifying agencies in the world. Whilst the applicant may have had approval from NASAA at one stage, it is not claiming that right here. And whilst the criteria applied by NASAA has been accepted by the Corporation in its guidelines, it is not by law established as the criteria here for the use of the words ‘organically’ and ‘naturally’. It has not been submitted to me here that the Corporation is an accredited certifying agency in respect of ‘Organic Coffee’. It is submitted that the power to restrict the use of the word organic or natural is within the powers of the Board to prevent a nuisance within the industry, which could mislead the general public. It is submitted by the Corporation that it has the power to impose conditions such that every organisation seeking to export or otherwise sell organic coffee can only trade in certified organic coffee. I cannot find that the Act gives such a wide power. It is submitted that the powers under the Act allow the Board to impose such conditions on a license as they see fit. This is the exercise of a very wide discretion and should be done very carefully with a full analysis. Did the Board consider this matter carefully in the exercise of their discretion? The Board at a meeting on the 4 December 1997 imposed this condition. However the minutes of the meeting of that Board make no specific reference to the applicant or to those conditions. There is merely a blanket note:

"7.19 Mr Hagon mentioned that apart from the HCE, the Board should endorse the management’s recommendation on the export licenses".

It is submitted that there was a detailed report from the Chief Executive Officer which was the basis of that blanket reference and which included reference to a condition to be applied to the applicant. So is this sufficient consideration for the exercise of a discretion, which can seriously restrict a major player in the industry in the exercise of its own self-control. It is acknowledged in the Corporations own papers that the applicant is a major player in the industry, therefore being so it must have its own reputation to consider. I cannot find anywhere that the Corporation has the power to restrict the applicant with the use of the words organically or naturally.

I find considering the ‘Wednesbury’ principles, that the Board had regard to matters, which it did not have, power by statute to consider in the exercise of its discretion. It applied irrelevant considerations. It did not properly consider the matters in the exercise of the limited discretion it had.

As I said earlier in the judgment, because of the special nature of the Corporation, a private company registered under the Companies Act the members of which are persons with their own individual financial interests in the industry, the Board should be completely open when dealing with matters which can affect individuals rights and livelihoods albeit under a statutory power. The minutes of the meeting of the Board of the December 4 do not reflect that there was a proper consideration of the condition that was imposed, even if it was within the power of the Corporation to impose conditions applying criteria which are not matters reflected in the provisions of the Act nor in Regulations under the Act. The Board has clearly acted outside its powers.

I allow the review. I find that the Board of the Coffee Industry Corporation Ltd has acted outside its powers in imposing the Condition 1: Arabicas Pty Limited is not to sell locally or export any coffee purporting to be ‘organically’ or ‘naturally’ grown and processed; on the Certificate of Registration as a Coffee Exporter issued to Arabicas Pty Limited.

I quash the condition.

Lawyer for the plaintiff: Blake Dawson Waldron Lawyers.
Lawyer for the defendant: Warner Shand Lawyers.