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HIGH COURT OF AUSTRALIA

Airservices Australia v Canadian Airlines International Ltd

[1999] HCA 62

Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne, Callinan JJ

14-15 April, 3 May, 2 December - Canberra

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Gummow J.   359  This judgment is divided into Sections as follows:

		paragraph
I	The Facts	[360]
II	Constitutional Background	[372]
III	The CA Act 1988	[381]
	Functions and powers of the Authority	[385]
	Economic burden on the Authority	[387]
IV	Commercial Operations of the Authority	[391]
	Financial and corporate planning by the Authority	[391]
	Financial structure of the Authority	[396]
V	The Charges	[404]
VI	The Determination	[408]
VII	"Not … Amount to Taxation"	[416]
	Economic evidence and "Ramsey pricing"	[420]
	Case law	[435]
VIII	The Critical Problem	[451]
IX	Validity of the Determination	[462]
	Reasonable rate of return	[465]
	Allocation of the Authority ' s total costs	[470]
	Other grounds in the Notice of Contention	[471]
X	Validity of the Lien Provisions	[480]
XI	Conclusions	[507]

 

I - THE FACTS

  360  These appeals were heard together. They concern the power of the appellant, the Civil Aviation Authority (the Authority), both to impose levies, or "charges" , for services and facilities it provides in discharge of its functions under the Civil Aviation Act   1988 (Cth) (the CA Act 1988) ^[1] and to enforce payment by a statutory lien imposed upon the aircraft in respect of which the services and facilities were provided. The CA Act 1988 is an example of a statutory regime regulating the provision of services, where the cost of the provision of those services is financed by the users thereof and the necessary infrastructure remains under public ownership. The financial structure provided by the CA Act 1988 for the Authority (now Airservices Australia) ^[2] will be considered in Section IV of these reasons. It is convenient now to outline the circumstances which led to the institution of these appeals.

  361  Compass Airlines Pty Ltd (Compass) operated 5 leased aircraft on Australian domestic routes between 1 December 1990 and 20 December 1991. Compass obtained the registration in Australia of each aircraft. Canadian Airlines International Ltd (Canadian Airlines), the respondent in the first appeal, was the owner of an Airbus Industrie A310-304 aircraft leased to Compass, and Monarch Airlines Limited (Monarch Airlines), the respondent in the second appeal, was the lessee of 2 Airbus Industrie A300B4-605R aircraft which were in turn sub - leased to Compass. Canadian Airlines executed a lease agreement with Compass on 5 June 1991, and delivery of the aircraft to Compass was to occur on or about 17 June 1991. Monarch Airlines executed 2 lease agreements with Compass on 29 June 1990, the term of the leases commencing on 14   November 1990 and 28 November 1990 respectively. On 25 June 1990, the respondent in the third appeal, Polaris Holding Company (Polaris), leased to Compass, in separate agreements, 2 Airbus Industrie A300-600R aircraft. The lease terms for these aircraft commenced in April and August 1991. It is not clear from the record whether Polaris owned the aircraft or had leased them from the owner or a head lessee.

  362  On 26 June 1991, in reliance upon the power conferred upon the Board of the Authority by s 66(2) of the CA Act 1988, the Chairman signed and sealed a determination ^[3] (the Determination). This stated that "the Board HEREBY DETERMINES that the charges shall be fixed and the persons by whom and the times when the charges are payable for the period commencing on 1 July 1991 shall be as specified in the schedule numbered 1 to 37 attached hereto" . The Determination provided that it was to come into effect on 1 July 1991. Section 67 of the CA Act 1988 imposed limits upon the power conferred by s 66 to fix the amount or rate of the charges; in particular, that the amount or rate of the charges "shall not be such as to amount to taxation" . The content of the Determination, in conjunction with ss 66 and 67 , will be considered in Sections V to IX of these reasons. However, it should be noted immediately that the effect of cl 21(a) thereof was to designate Compass as the party by whom charges for the use of facilities and services by the 5 aircraft leased to Compass were to be payable to the Authority.

  363  The Authority billed Compass for charges purportedly payable to the Authority by Compass arising under the Determination. For 4 of its leased aircraft, Compass paid part only of the sums billed and, for the fifth aircraft, no part of the invoice sum was paid to the Authority. Apart from its obligation to pay the charges, Compass became liable under s 66 of the CA Act 1988 to pay to the Authority penalties in the nature of interest upon the charges. In the period between September and December 1991, the penalty interest totalled $650,262.58. On 18 December 1991, a statutory lien was vested in the Authority in each of the 5 aircraft, purportedly pursuant to s 69 of the CA Act 1988, to cover the charges and the penalty interest which had accrued and would thereafter accrue with respect to each aircraft. The validity of Div 2 of Pt VI (ss 66 to 83 ) of the CA Act 1988, which is headed "Charges and Statutory Liens" , other than ss 66 and 67 , is challenged by the respondents. This aspect of the appeals will be considered in Section X of these reasons.

  364  On 20 December 1991, the Federal Court of Australia placed both Compass and Compass Holdings Limited in provisional liquidation. This was an event of default under each of the agreements pursuant to which Compass leased the aircraft. Each of these lease agreements in turn authorised the lessor to terminate, and to remove the aircraft from Australia.

  365  It was at this critical juncture that the interests of the respondents were restricted by those of the Authority: the lessors were precluded by statute from exercising their rights to remove the aircraft from Australia. Section 78A of the CA Act 1988 provided:

   

A person who knows or has reasonable grounds to believe that a statutory lien is in effect in respect of an aircraft must not remove that aircraft from Australian territory without the prior approval of an authorised officer.

 

Penalty: Imprisonment for 3 years.

No written approval from an authorised officer was forthcoming. In January 1992, each of the respondents entered into a deed with the Authority by which, subject to the terms of the deed, each respondent agreed to pay "under protest" the outstanding moneys claimed by the Authority in respect of the aircraft it had leased to Compass. The Authority acknowledged in the deed that the payments were made "under protest" . Pursuant to the respective deeds, the Authority was paid $2,888,740.97 by Canadian Airlines, $5,002,187.86 by Monarch Airlines and $5,239,058.07 by Polaris. Upon payment, s 75(1) of the CA Act 1988 brought about the result that the liens over the aircraft ceased to have effect.

  366  It is unnecessary to consider the contractual rights and obligations of the parties to each of these deeds, other than to note their broad effect; each respondent is entitled to recover the moneys paid by it to the Authority, with interest at the rate of 7.5% per annum calculated from the date of the deed in question, if a court decides that, as against the respondents, the liens did not validly secure payment of the charges or for any reason the liens or the charges, or both, in whole or in part, are illegal, void or unenforceable.

  367  By actions commenced in this court, each respondent sought a declaration that Div 2 of Pt VI of the CA Act 1988 is invalid and judgment for the moneys paid to the Authority with interest at 7.5% per annum. The original jurisdiction of this court was attracted by the constitutional question respecting the validity of Div 2 of Pt VI of the CA Act 1988. ^[4] The nature of the money claim is less apparent. The obligations of the Authority under the deeds to make payments to the respondents arise only if there first be a favourable decision on the issues respecting the charges or liens. That had not occurred when the actions were instituted and indeed was an object sought to be achieved in those actions. The money claim is best understood as an action to recover moneys had and received by the Authority, the payment having been made under compulsion, in the sense of that term established by Mason v New South Wales. ^[5]

  368  By orders in each action dated 28 April 1993 the proceedings were remitted to the Federal Court. Branson J held that the Determination, insofar as it fixed the charges in question, was beyond the power conferred by s 66 of the CA Act 1988, under which it had been made, because it did not satisfy the limitations on power imposed by s 67 . ^[6] Her Honour thus did not have to consider any constitutional issues. The full court (Beaumont, Wilcox and Lindgren JJ) dismissed appeals by the Authority. ^[7]

  369  The issues in this court require an appreciation of the functions and powers conferred on the Authority by the CA Act 1988. This in turn is assisted by an understanding of the place in the financial structure of government, established by the Constitution, of statutory bodies, such as the Authority, through which various spheres of economic activity are regulated.

  370  The services in question were provided to Compass by the Authority. It would have been open to the Parliament to have substituted for that body a department of State of the Commonwealth established under s 64 of the Constitution and controlled by the fiscal provisions of the Constitution to which reference will be made in the next Section. That appears to have been the regime formerly employed. Further, the Parliament might have provided for the provision of those services by an entity or entities privately owned and operated under a franchise system with accompanying financial arrangements.

  371  It is convenient now to consider the constitutional background against which the Authority was created.

 

II - CONSTITUTIONAL BACKGROUND

  372  In Australian Tape Manufacturers Association Ltd v Commonwealth, Mason CJ, Brennan, Deane and Gaudron JJ said: ^[8]

   

The principle adopted by the Constitution is that revenues or moneys raised shall form part of [the Consolidated Revenue Fund] from which they can be appropriated only for Commonwealth purposes and only by law. That principle finds expression in s 81 . It is supplemented by s 83 which forbids the drawing of money from the Treasury except under appropriation by law.

Section 81 of the Constitution provides:

   

All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution.

Section 83 mandates that "[n]o money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law" .

  373  The Authority is not financed, except in limited circumstances, by appropriations under s 83 of the Constitution, nor do the revenues or moneys raised or received by the Authority form part of the Consolidated Revenue Fund. The Authority stands apart from the financial structure imposed by the Constitution on the Executive Government of the Commonwealth. The Authority is a hybrid entity. It owes its life to statute and does not form part of the Executive Government of the Commonwealth. ^[9] It derives its funding principally from sources other than appropriations by law from the Consolidated Revenue Fund, in particular, charges fixed by determination under s 66 of the CA Act 1988.

  374  Thus the issues presented in these appeals are not to be answered by asking whether the charges eventually paid to the Authority by the respondents were exacted by a law which provided the Commonwealth with a source of additional revenue. Further, the character of the provisions of the Act in question is to be determined by their operation, not by whether they were made with an objective which might be the raising of revenue.

  375  The Authority is but one of a number of bodies established by laws of the Commonwealth to exercise what once may have been and elsewhere may be regarded as governmental functions. ^[10] For example, s 69 of the Constitution provided for the transfer to the Commonwealth of various departments of the public service in each State, including "posts, telegraphs, and telephones" and "lighthouses, lightships, beacons, and buoys" . The officers of the transferred departments became subject to the control of the Executive Government of the Commonwealth. ^[11] Nevertheless, the present state of affairs finds its origins in the colonies before federation when the corporate form became a common vehicle for carrying out government activities. ^[12]

  376  The establishment of entities such as the Authority to discharge public functions using sources of finance other than appropriations of public moneys involves significant change to the financial structure of the Commonwealth. These developments also bear upon the nature of responsible government, in particular with respect to the position of the Minister charged with the administration of the statute constituting the entity in question. ^[13]

  377  In Hughes Aircraft Systems International v Airservices Australia, ^[14] Finn J has remarked on 2 "significant fissures in Australian jurisprudence" arising from the use of the corporate form as a vehicle for carrying out the activities of government. His Honour said:

   

The one concerns the constitutional status and standing in our system of government of statutory corporations that by statute are subject to prescribed (hence, presumably, correspondingly limited) powers of ministerial direction. Do they fall within the Executive? Or are they a fourth arm of government? The other raises the extent to which the manner of scrutiny of the formally "non - governmental" action of a statutory corporation (that is, entering into a "commercial" contract) can or should be affected by the considerations that it nonetheless is a public body that is so acting and that in so doing it is exercising a public function.

  378  The second "fissure" is revealed by the facts in these appeals. With the creation of the Authority, the Parliament severed the immediate control and financial responsibility of the Commonwealth from the provision of air safety services and facilities. There is no issue in these appeals, s 51(xxxi) apart, of the extent, if any, to which the Constitution imposes fetters on the making of laws by which the Authority finances its functions on a "user pays" basis. However, in construing the relevant provisions of the CA Act 1988, questions do arise concerning the constitutionally derived jurisprudence as to the meaning of "fees for services" . These matters will be considered in Sections VII and VIII of these reasons.

  379  This jurisprudence may have application elsewhere; for example, s 60(2) of the Constitution Act 1934 (SA), which, in dealing with the relative powers of the 2 chambers of the South Australian legislature in relation to money bills, provides that a bill, or clause of a bill:

   

shall not be taken to appropriate revenue or public money, or to deal with taxation, by reason only of its containing provisions for the imposition or appropriation of fines or other pecuniary penalties, or for the demand or payment or appropriation of fees for licences or fees for services under the proposed Act.

  380  It is convenient now to consider the material provisions of the CA Act 1988.

 

III - THE CA Act 1988

  381  The validity of those provisions in the CA Act 1988 which vested power in the Authority to provide the facilities and services used by Compass (ss 8 to 16 ) and to fix the charges imposed on Compass (ss 66 to 67 ) were not challenged by the respondents. Section 51(i) of the Constitution, the interstate trade and commerce power, was relied upon by the Authority, and the interveners, to support these provisions. Leave was not sought by the respondents to re - open Airlines of NSW Pty Ltd v New South Wales [No 2]. ^[15] The respondents did, however, submit that the lien provisions in the Act (ss 68 to 82 ) were beyond the legislative competence of the Commonwealth Parliament, a matter to be considered in Section X of these reasons.

  382  The long title of the CA Act 1988 was "[a]n Act to establish a Civil Aviation Authority with functions relating to civil aviation, in particular the safety of civil aviation, and for related purposes" . The CA Act 1988 established the Authority, embodied it with functions and invested it with power to discharge those functions. Further, the CA Act 1988 imposed a financial structure within which the Authority was to operate. The section central to the present appeals, s 67 , which was the subject of differing interpretations in the Federal Court, limited the power of the Authority under s 66 to impose charges, such as those imposed on Compass pursuant to the Determination.

  383  The meaning of a statutory provision must be determined "by reference to the language of the instrument viewed as a whole" . ^[16] In Commissioner for Railways (NSW) v Agalianos, ^[17] Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed" . The process of construing ss 66 and 67 of the CA Act 1988 must therefore begin with an examination of the statutory context of those provisions.

  384  It is appropriate to consider, first, the functions and powers of the Authority and, secondly, the financial structure within which the Authority was to perform those functions. These matters disclose the extent to which, for all practical purposes respecting these appeals, the Authority was obliged to operate on the basis that it would be financially autonomous from the Commonwealth. A corollary was that the Authority was obliged to fund the provision of its facilities and services from its principal source of revenue, namely the charges imposed under ss 66 and 67 of the CA Act 1988.

Functions and powers of the Authority

  385  Part II , ss 8 to 16 of the CA Act 1988, entitled "ESTABLISHMENT, FUNCTIONS AND POWERS OF AUTHORITY" , established the Authority and delineated its functions and powers. Section 9(1) provided:

   

The functions of the Authority are:

 (a)  as provided by this Act and the regulations, to conduct safety regulation of:

 (i)  civil air operations in Australian territory; and

 (ii)  Australian aircraft operating outside Australian territory;

 (b)  to provide air route and airway facilities;

 (c)  to provide air traffic control services, and flight service services, for, in either case, surface traffic of aircraft and vehicles on the manoeuvring area of aerodromes;

 (d)  to provide a rescue and fire fighting service;

 (e)  to provide a search and rescue service;

 (f)  to provide an aeronautical information service;

 (g)  to provide consultancy and management services relating to any of the matters referred to in this subsection;

 (h)  to provide services to the Bureau of Air Safety Investigation in relation to the investigation of aircraft accidents and incidents;

 (j)  any functions conferred on the Authority under the Air Navigation Act   1920 (Cth);

 (k)  any other prescribed functions, being functions relating to any of the matters referred to in this subsection; and

 (m)  any functions incidental to any of the foregoing functions.

  386  Section 9(4) directed, subject to s 12 , that the functions of the Authority to provide services and facilities might be performed at the discretion of the Authority. Section 12 materially provided that the Minister "may give the Authority written directions as to the performance of its functions or the exercise of its powers" and that the Authority was obliged to comply with a direction given by the Minister. Section 11 confined the performance of the Authority ' s functions, requiring the performance to be "in a manner consistent with the obligations of Australia under the Chicago Convention and any other agreement between Australia and any other country or countries relating to the safety of air navigation" . Section 13(1) conferred, in addition to any other powers conferred on the Authority by the CA Act 1988, the "power to do all things necessary or convenient to be done for or in connection with the performance" of the Authority ' s functions.

Economic burden on the Authority

  387  The requirements of the CA Act 1988 for the provision of facilities and services by the Authority imposed a distinct economic burden: high fixed infrastructure costs and relatively low variable costs. That is, in the language of restrictive trade practices law, the provision of these facilities and services tended towards large "economies of scale" and high fixed entry costs. ^[18]

  388  In the United States, it is common for private companies to own the infrastructure which constitutes a natural monopoly for services or which constitutes the primary means of production for a business which exhibits the same or substantially similar economic characteristics as that operated by the Authority. Such private companies, known as "public utilities" , are regulated by a public authority (or commission). ^[19] Professor Schwartz has observed that ^[20] "[t]he most important federal commissions regulate key areas of the economy" and "the quality and service received and the prices paid by consumers in well - nigh every category of trade and commerce" . This regulation involves the adjustment of competing public policy interests. These arise from either the lack of a competitive market for those services, or from the distinct characteristics of the regulated industry.

  389  In contrast, the CA Act 1988 is not directed to the regulation of infrastructure in private ownership. Rather, it removed the infrastructure assets from the ownership of the Commonwealth itself and vested them in the Authority. Further, the CA Act 1988 regulated the provision of the facilities and services by the Authority in a manner which adjusted the competing public policy interests arising from a lack of a competitive market for those facilities and services and the unique subject - matter, civil aviation safety. In delivering the second reading speech for the Civil Aviation Bill, the Minister identified this question concerning the manner of the regulation of the Authority in the following terms: ^[21]

   

A concern expressed from a number of quarters is that safety standards may become degraded if the body responsible for safety regulation is required to operate on a commercial basis and is therefore subject to cost pressures. The commercial nature of the Authority needs to be clearly understood. It will be the Government ' s requirement that the Authority adopt a businesslike approach to its affairs, including the ongoing pursuit of cost efficiency and productivity improvement. The Authority will operate commercially in this sense. However, it will not, because of the nature of its activities, be subject to the full range of pressures that apply to business enterprises operating in a free market situation. Whilst the legitimacy of the concern that safety considerations should not take second place to commercial aspects of the Authority ' s operations is accepted, the latter aspects should be kept in a proper perspective. (Emphasis added.)

  390  To facilitate the legislative purpose or object, as disclosed by the Minister, that the Authority operate on a commercial basis, the CA Act 1988 provided for (i) a system for financial and corporate planning, subject to Ministerial supervision; and (ii) a financial structure within which such planning was to occur.

 

IV - COMMERCIAL OPERATIONS OF THE AUTHORITY

Financial and corporate planning by the Authority

  391  Part V (ss 43 to 48A ) of the CA Act 1988, entitled "OPERATION OF AUTHORITY" , prescribed the system within which the Authority was to undertake corporate and financial planning. The effect of s 43 was to oblige the Board to develop an initial corporate plan and thereafter, for each subsequent financial year, review and revise the plan. Each plan was to include a statement of the objectives of the Authority for the coming financial years and to outline the strategies and policies that the Authority intended to adopt in order to achieve those objectives.

  392  Sections 44 to 48A of the CA Act 1988 provided for Ministerial oversight of the Board ' s corporate and financial planning. Section 44(1) provided that "[a]s soon as practicable after developing or revising the corporate plan, the Board shall give a copy to the Minister" . Section 44(2) obliged the Board to also give the Minister a copy of a "financial plan" in relation to each financial year covered by the corporate plan. The financial plan included, in relation to the services and facilities (other than search and rescue and aeronautical information services) provided by the Authority, a forecast of receipts and expenditure and a rate of return and dividend (s 44(2)(b) ).

  393  The obligations of the Board when preparing the financial plan were specified by s 45 of the CA Act 1988. It required the Board to consider:

   

 (a)  the need for high standards of aviation safety ;

 (b)  the objectives and policies of the Commonwealth Government known to the Board;

 (c)  any directions given by the Minister under section 12 ;

 (d)  any payments by the Commonwealth to the Authority to fund its regulatory functions and search and rescue services;

 (e)  the need to maintain a reasonable level of reserves, having regard to estimated future infrastructure requirements;

 (f)  the need to maintain the extent of the Commonwealth ' s equity in the Authority;

 (g)  the need to earn a reasonable rate of return on the Authority ' s assets (other than assets wholly or principally used in the performance of regulatory functions or the provision of search and rescue services);

 (h)  the expectation of the Commonwealth that the Authority will pay a reasonable dividend ; and

 (j)  any other commercial considerations the Board thinks appropriate . (Emphasis added.)

  394  Section 47(1) empowered the Minister to "direct the Board to vary the financial plan in respect of financial targets, and performance indicators, relating to the provision of services and facilities" . This discretion was fettered by s 47(2) . This obliged the Minister to consider matters in s 45 , the objectives and policies of the Commonwealth Government and such other commercial considerations as the Minister thinks appropriate. Any direction by the Minister to the Board under s 47(1) was required to be in writing and to set out reasons (s 47(3) ).

  395  The CA Act 1988 provided a financial safety valve in the event that the Minister made a direction under the CA Act 1988, other than a direction specified in s 48(3) , and the Authority satisfied the Minister that it suffered financial detriment as a result of complying with the direction. In such circumstances, the Authority was "entitled" under s 48(1) to reimbursement by the Commonwealth. The amount of the reimbursement was that determined by the Minister, in writing, to be the amount of that financial detriment.

Financial structure of the Authority

  396  Part VI (ss 49 to 83E ) of the CA Act 1988, entitled "FINANCE" , provided for the imposition of charges and statutory liens. Division 1 (ss 49 to 65 ) created a four - tiered financial structure, to the consideration of which I now turn.

  397  The first tier of the Authority ' s financial structure was directed to its assets and capital. The opening sections of Div 1 (ss 49 to 50 ) facilitated the transfer of assets from the Commonwealth to the Authority (the Assets). Section 54 in turn provided that the capital of the Authority was to be calculated by reference to the sum of the Assets, any amounts paid by the Authority out of money appropriated by the Parliament for the purpose of providing capital, and a variety of other rights and economic reserves, less (i) loans under s 51 in respect of the Assets; (ii) liability provisions in respect of personnel transferred from the Commonwealth; (iii) debts, liabilities and obligations of the Commonwealth transferred to the Authority under s 51(5) ; and (iv) any amounts of capital repaid to the Commonwealth by the Authority. In respect of the Assets, the relevant Minister was obliged to determine their value as on the day of their transfer (s 51(2)(a) ). The Minister, in addition, was empowered to determine an amount, not exceeding that value, which, by force of s 51(3) , the Authority would thereby be deemed to have borrowed from the Commonwealth on the day of the transfer of those assets. This transfer of assets, revaluation and loan - back mechanism was one step in the process of establishing the Authority as an autonomous financial entity, liable to the Commonwealth for a variety of debts.

  398  A further step consolidating the Authority ' s financial autonomy was the transfer to the Authority of certain rights of the Commonwealth. These arose out of debts, liabilities or obligations of any other person in favour of the Commonwealth, in respect of services or facilities which had previously been provided by the relevant department in the performance of a function now to be performed by the Authority (s 53 ). The Authority was not liable to pay any tax of the Commonwealth or of a State or Territory (s 55 ). ^[22]

  399  Section 56 dealt with the payment out of the Authority ' s profits of dividends to the Commonwealth; in some circumstances the Minister might direct payment of a dividend against the recommendation of the Board. This second tier thus provided for profits of the Authority to be paid to the Commonwealth, as opposed to the direct passage of all the revenues of the Authority into the Consolidated Revenue Fund.

  400  Pursuant to these dividend provisions, the Commonwealth obtained a financial interest in the profitability of the Authority, fashioned in such a way as to ensure that regard was to be paid to the Commonwealth ' s equity in the Authority (s 56(2) ). Section 45 , in conjunction with s 56(2) , facilitated the payment of a sum equal to a reasonable return on the Commonwealth ' s equity in the Authority. It did so by ensuring that the Board, when making its recommendation to the Minister concerning a dividend, had regard to the "need to earn a reasonable rate of return on the Authority ' s assets" and "the expectation of the Commonwealth that the Authority will pay a reasonable dividend" .

  401  The third tier concerned the Authority ' s capacity to raise additional funds. Section 57 provided that the Minister for Finance might, on behalf of the Commonwealth, lend money to the Authority out of money appropriated by the Parliament for the purpose. However, the Authority was empowered to borrow money otherwise than from the Commonwealth or raise money otherwise than by borrowing (s 58 ). To facilitate this raising of funds from sources other than the Commonwealth, the Treasurer, on behalf of the Commonwealth, was empowered to guarantee by contract such further moneys so raised by the Authority (s 59 ).

  402  The fourth tier was found in s 64 . The Authority was a public authority to which Div 2 of Pt XI of the Audit Act 1901 (Cth) ^[23] applied. In complying with its reporting requirements under this legislation, s 64(2)(b) obliged the Authority to include "an assessment of the adverse effect (if any) that meeting the non - commercial commitments imposed on the Authority has had on the Authority ' s profitability during the financial year" .

  403  Central to the process of construing ss 66 and 67 of the CA Act 1988 is an appreciation of the rate structure adopted by the Authority. If the rate or amount of each charge which the Authority had recouped from a particular user of its services had been only the increment to the Authority ' s total costs incurred in producing that extra unit of service on the particular occasion, the Authority may not have recovered sufficient revenue to meet its total costs to all users of that service. This inability would have frustrated the object or purpose of the CA Act 1988. The financial structure of the Authority thus casts contextual light on the meaning of s 67 . It does so, in particular, with respect to (i) the requirement in s 67 of a "reasonable relationship" between the rate or amount of each charge and the "expenses incurred or to be incurred by the Authority in relation to the matters to which the charge relates" ; and (ii) the meaning of the phrase "expenses incurred or to be incurred" . These matters are considered further in Sections VI-IX of these reasons.

 

- V THE CHARGES

  404  It is now convenient to consider the operation of ss 66 and 67 . These are the key provisions for the purposes of these appeals. The material text of ss 66 to 73 of the CA Act 1988 is set out in the judgment of the Chief Justice and Kirby J. However, it is necessary for comprehension of what follows to set out here the text of ss 66(2) and 67 :

   

66(2) Subject to this section, the Board may make determinations:

 (a)  fixing charges and specifying the persons by whom, and the times when, the charges are payable; and

 (b)  fixing the penalty for the purposes of subsection (8).

 

67 The amount or rate of a charge shall be reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which the charge relates and shall not be such as to amount to taxation.

  405  Pursuant to s 66(2) of the CA Act 1988, the Board of the Authority made the Determination. The Determination fixed the charges and specified the persons by whom, and the times when, the charges were to be payable and fixed the penalty for non - payment of the charges for the purposes of s 66(8) . Section 66(4) provided that the "Minister may, within the period referred to in [s 66(5A) ], give the Board notice in writing approving or disapproving the proposed determination" . No such notice was given.

  406  Compass was said to have become liable to pay sums accruing under 4 categories of charges. The charges accrued as a result of the 5 aircraft leased by Compass enjoying the benefit of terminal navigation services (TNS), en route services, rescue and fire fighting services (RFFS), and meteorological services. The grants of special leave to appeal to this court excluded the fourth category of charges. The material clauses of the Determination with respect to the charges imposed on Compass are set out in the judgment of the Chief Justice and Kirby J. The 5 leased aircraft were "high capacity aircraft" as defined in the Determination, and Compass was the holder of the Air Operator ' s Certificates authorising the use of the aircraft on Australian domestic air routes.

  407  The respondents submit that the Authority did not have the power to impose the charges on Compass due to the limits imposed by s 67 of the CA Act 1988. Section 67 of the CA Act 1988 contained 2 limbs, each limiting the Authority ' s statutory power to fix charges: the first required that the amount or rate of a charge be reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which the charge related (the first limb); ^[24] and the second required that the amount or rate of the charge "shall not be such as to amount to taxation" (the second limb). Both the primary judge (Branson J) and the full court held that the Determination was beyond power. Branson J did so for failure of the Determination to satisfy the second limb, ^[25] and the full court for failure to satisfy both the first and second limbs. ^[26] However, the Full Court differed from Branson J in respect to the construction of the Determination, to which I now turn.

 

- VI THE DETERMINATION

  408  The Determination was an instrument issued under statutory authority. Differing views as to its construction were adopted in the Federal Court. In Widgee Shire Council v Bonney, ^[27] Griffith CJ said that, when a statutory instrument "is open to two constructions, on one of which it would be within the powers of the [Authority], and on the other outside of these powers, the former construction should be adopted, ut res magis valeat quam pereat" . This precept is supplemented by the opening clause of s 46(1)(b) of the Acts Interpretation Act 1901 (Cth) which materially provides that the Determination shall be read and construed subject to the CA Act 1988.

  409  The construction adopted by Branson J ^[28] stands in contrast to that in the full court of Beaumont J, with whom Lindgren and Wilcox JJ concurred. ^[29] Beaumont J construed the "matters" , as disclosed by the text of the Determination, to which each charge related as being a landing of an aircraft at a particular aerodrome on a particular occasion. ^[30] Consequently, given the terms of s 67 , the expenses incurred or to be incurred by the Authority in relation to those "matters" were also narrowly confined. His Honour disposed in the negative the final question of whether the rate of the respective charges was "reasonably related" to those narrowly confined expenses. Beaumont J found that the rates for each charge were not a "bona fide (albeit "by and large" ) cost accounting exercise that [made] an honest attempt to match the amount of a charge with the amount expended in providing the specific service for which the charge [was] levied" . ^[31] It followed that the fixing of the charges failed to comply with the requirements of s 67 of the CA Act 1988.

  410  In contrast, Branson J had rejected the respondents' contention that on the proper construction of the Determination "a separate charge is imposed for each of the 4 types of service, and a separate charge is imposed in relation to each landing, at an aerodrome which is listed in the Schedule [to the Determination]" . ^[32] In this court, the respondents submitted that an examination of the Determination shows that the Board imposed separate charges for the particular services or facilities used by separate aircraft in relation to each landing at a specified aerodrome.

  411  Branson J held that each of cll 1, 2, 3, 6 and 7, as well as each sub - paragraph in cll 11 and 12, imposed separate charges. ^[33] Having, correctly, assumed that cll 1, 2, 3, 6 and 7 followed a common pattern, Branson J construed cl 1 on the basis that the reasoning would apply equally to the other clauses. ^[34] Her Honour was of the view that "the matters to which the charge created by cl 1 of the [D]etermination relates, within the meaning of s 67 of the CA Act 1988, are the matters for which the charge is made: that is, the terminal navigation facilities and services at the aerodromes referred to in Column 2 of Item 1 of Table 1" . ^[35] Branson J read cl 1 as creating "a charge for a network of facilities and services, not a charge for facilities and services relating to a particular aerodrome" . ^[36]

  412  Branson J construed cl 11 such that her reasoning would apply equally to cl 12. It is convenient to set out this reasoning: ^[37]

   

Clause 11 fixes four separate en route charges. In each case the charge is payable on the landing of an aircraft. In each case the charge is "[i]n respect of the use by [such] aircraft of the air route and airways facilities and services operated or provided in Australian territory" . In my view, cl 11 is intended to fix charges in respect of the use by an aircraft of the network of air route and airway facilities and services operated or provided in Australian territory. Clause 11 is not intended, in my view, to fix a charge in respect of the use by an aircraft, the landing of which triggers the charge, of only the specific air route and airway facilities and services used by it on the flight resulting in such landing. The charge was, in my view, a charge for the use by the aircraft of any part of the total Australian network of air route and airway facilities and services.

  413  In conclusion, her Honour held that the "matters" to which the charges created by cl 11 related, within the meaning of s 67 of the CA Act 1988, "are the air route and airways facilities and services operated or provided in Australian territory" 285. ^[38]

  414  The proper construction of the "matters" to which each charge "relates" is to be resolved in favour of that construction which would preserve validity of the Determination. Beaumont J ' s analysis forecloses such an outcome, given the rate set for each charge in the Determination. As will be considered in Section IX of these reasons, the fidelity of the construction adopted by Branson J to the statutory purpose of financial autonomy of the Authority from the Commonwealth is supported by a consideration of the power of the Authority to issue the Determination.

  415  Before returning to further consider the operation of the first limb of s 67 , it is convenient to deal with the second limb.

 

VII - "NOT … AMOUNT TO TAXATION"

  416  Section 67 of the CA Act 1988 curtailed the power of the Authority to fix the rate or amount of a charge by reference to the prohibition that it "not be such as to amount to taxation" . This phrase may be compared to and contrasted with references in the Constitution to taxation. In ss 53 and 55 of the Constitution, reference is made to proposed laws "imposing taxation" , whilst in s 51(ii) the Parliament is given power to make laws for the peace, order and good government of the Commonwealth "with respect to … taxation" . Section 114 prohibits the States, without the consent of the federal Parliament, from, amongst other matters, imposing "any tax on property of any kind belonging to the Commonwealth" . This section also commands "nor shall the Commonwealth impose any tax on property of any kind belonging to a State" .

  417  Therefore, the meaning of the second limb in s 67 does not, without more, "pick up" existing jurisprudence on any individual section in the Constitution. However, in light of the language adopted in the first limb of s 67 , the second limb can properly be seen to incorporate the distinction drawn between a tax and a fee for service.

  418  Further, the use of the phrase "amount to taxation" is properly construed as informing the meaning of the first limb. The first limb requires that the amount or rate of each charge be "reasonably related" to the expenses incurred or to be incurred in relation to the matters to which each charge relates. "Reasonable" , particularly when used to provide a criterion for the sufficiency of the connection between 2 subject - matters, is a relative term and textual indeterminacy therefore lurks in s 67 with the phrase "reasonably related" . ^[39] It is a concept in need of standards. It is proper to construe the second limb of s 67 as providing a standard. The prohibition that the rate or charge "not … amount to taxation" indicates the circumstances within which the Authority could formulate a pricing structure which would reasonably relate the amount or rate of each charge to the expenses incurred or to be incurred in relation to the matters to which that charge related. Within this ambit, the restrictions in the first limb allow for the Authority to select a particular rate or amount.

  419  It is necessary now to determine how the second limb provides an epexegesis of the operation of the first limb. In doing so, consideration of the role of government regulation in redistributing economic surplus and the existing case law on the meaning of "fees for services" is required. However, it is convenient first to turn to the economic evidence received at the trial and the method by which the Authority selected the rate of the charges imposed on Compass. This will cast light on the foundations (not always disclosed in the judgments in question) of the case law respecting the meaning of "fees for services" .

Economic evidence and "Ramsey pricing"

  420  Dr Fitzgerald, an economist, gave evidence for the appellant by way of oral testimony and a written report (the Report). Dr Fitzgerald was cross - examined. Branson   J found that the respondents did not make any serious challenge to the "validity of the economic theory espoused by Dr Fitzgerald or to his conclusion concerning [the Authority's] pricing policies in 1991-92 so far as they were based upon such economic theory" . ^[40] Her Honour accepted the cogency of this evidence, although she rejected its relevance to the issues she determined.

  421  In the Report, Dr Fitzgerald opined that the resources used by the Authority had an "opportunity cost" to the Australian community. The prices for services should, as a matter of general economic theory for highly competitive markets, be charged at "marginal cost" ^[41] by the service provider in order to recover the opportunity cost from the user group. Dr Fitzgerald then isolated the central difficulty when applying this proposition to the financial structure of the Authority:

   

The difficulty with those principles in the [Authority ' s] case is that its activity has the characteristics of a natural monopoly: its fixed costs are very large and would not be fully recovered by pricing on a marginal cost basis. The issue then is how to price so as to achieve an outcome as close as possible (in terms of the level and pattern of usage of the [Authority ' s] services) to the economically most efficient outcome while fully recovering its costs from its users as a group.

In the Report, having concluded that average costs will exceed the marginal cost for the provision of the services and facilities by the Authority, Dr Fitzgerald put the issue in the following terms:

   

It is then not appropriate to set the price of the service equal to marginal cost, for this would mean that total costs would exceed total revenues, implying that the shortfall must be paid by someone other than the users as a group - violating the "user pays" principle. (Original emphasis.)

  422  The so - called ""user pays" principle" is referential to Dr Fitzgerald ' s major premise that the "opportunity cost" for the provision of the facilities and the services by the Authority is to be recovered from the user group of those facilities and services. This premise belies the possibility of another source, appropriations by law from the Consolidated Revenue Fund, a matter considered in Section II of these reasons. However, ss 66 and 67 of the CA Act 1988 provided for recovery of the opportunity cost from the users of the Authority ' s facilities and services. The Authority was empowered to impose charges on its users which, in turn, required the selection of a rate, or pricing, structure by the Authority in order to calculate the charge to be paid in respect of use on a particular occasion.

  423  Chief Judge Posner ^[42] has commented, extrajudicially, on the three principal restrictive trade practice concerns facing regulators of public utilities in the United States:

   

(1) profit control (the regulated firm ' s rates are not to exceed the level necessary to enable the firm to cover its cost of service, including a reasonable return on invested capital); (2) entry control (a firm may not provide a regulated service without first obtaining a certificate of public convenience and necessity from the regulatory agency); (3) control over price structure (the firm may not discriminate in its rates).

The question at stake in the present case does not involve any application of Pts IIIA , IV or XIB of the Trade Practices Act 1974 (Cth) to services provided by governmental authorities. However, the question does concern the third of the issues identified by the Chief Judge. Dr Fitzgerald put the pricing structure problem in stark relief in the following passage in the Report:

   

Unlike a producer in a highly competitive industry, a monopoly producer which is not prevented from doing so can make more profit by setting the price of its service above marginal cost. From the community ' s viewpoint, too few services will then be produced, at too high a price. For this reason, the pricing practices of monopolies have often been subject to regulation, with a view to obliging them to set prices at (or close to) the marginal costs of production, and to make only normal profits. The recent trend has been to attempt to maximise exposure to competition where possible (as in electricity generation or telephony), rather than to have government directly involved in setting prices, but there are cases where this is not feasible and it is appropriate for government at least to set the rules for pricing and to require authorities to be efficient. This is the case for airways services. (Original emphasis.)

  424  The Authority adopted a price, or rate, structure based on an economic theory known as "Ramsey pricing" . ^[43] It is a method for imposing price distinctions and variations between users of the same or similar services and facilities. The characteristic selected to discriminate between users was economic capacity to pay. ^[44] As Dr   Fitzgerald identified in the Report, this method involves the price charged a user departing from marginal cost to the extent that the user "values" the commodity (as reflected by inelastic demand or the user ' s economic capacity to pay).

  425  One alternative was identified as dual or two - part tariff pricing. For example, historically, the statutory telecommunications provider in New Zealand charged customers both a fixed access or rental charge and a variable traffic charge depending on the time and distance of the calls. ^[45] Dr Fitzgerald, under cross - examination, identified the difficulty likely to be faced by the Authority if it had adopted a two - part tariff system: it could be assumed that a high proportion of potential users would not have paid the first tariff or entry price. This hypothetical initial tariff would have been set at a price sufficient to recover the total fixed costs of providing the service.

  426  The effect of Dr Fitzgerald ' s evidence was that the adoption of Ramsey pricing by the Authority was the "most economically efficient outcome" in terms of the level and usage of services provided by the Authority. Ramsey pricing minimised the impact on the level and usage of the services provided by the Authority of the recovery of the fixed costs of the Authority.

  427  Nonetheless, the pricing structure adopted by the Authority was not a perfect application of Ramsey pricing. The precise elasticities of demand of the various users were not measured, nor were the rates imposed in the Determination expressly calculated by reference to elasticity of demand. Rather an approximation was used. The Authority set the charges by reference to the maximum take - off weight (MTOW) of the aircraft using the services.

  428  Dr Fitzgerald ' s evidence was that the effect of using this variable was that the total of the Authority ' s "airways charges on a per passenger basis for 1991-92 were relatively flat across the fleet using Australian airways" and that "the sensitivity of usage of airways services to their price varies directly with the fraction which these charges are of the cost to a passenger of a flight" . ^[46] Dr Fitzgerald ' s evidence underscored that (i) for freight aircraft, economic capacity to pay was directly related to MTOW; and (ii) for passenger aircraft, the economic capacity to pay was related to the number of seats on a particular aircraft. There was a high correlation, for the 45 aircraft types using Australian airways in the relevant financial period, between the number of seats on a passenger aircraft and MTOW or its square root. Dr Fitzgerald concluded that "[o]ther things affecting the unit cost of passenger travel being equal, it will be optimal to vary charges per aircraft so as to achieve - as the Authority did - a relatively constant charge per passenger" . ^[47]

  429  Broadly, and this is highly significant for these appeals, the effect of the pricing structure adopted by the Authority was to subsidise the provision of services to users with high elasticities of demand (or high economic incapacity - in the sense of unpreparedness or unwillingness - to pay). It did so by using the economic surplus which it obtained from those users with high inelasticities of demand (or high economic capacity to pay) for those services. The means by which this redistribution occurred was the exercise in the Determination of the statutory power of the Authority to levy the charges. Whilst all users were charged the marginal cost of the service provided, the burden of paying the fixed costs incurred by the Authority was not equally borne by all users. This is the hidden subsidy within the pricing structure adopted by the Authority. Certain (inframarginal) users of the services subsidised the provision of services to other more price sensitive, or economically fragile (marginal), users.

  430  Chief Judge Posner has highlighted the difficulties faced when fixing rate structures for economic entities such as the Authority: ^[48]

   

In the case of an industry in which average cost decreases with output, a firm that charged a uniform price equal to its marginal cost would not recover its total costs. It could recover them by setting a uniform price equal to average cost. This would force customers willing to pay a price equal to or slightly above marginal cost but not the higher price equal to average cost to turn to more costly substitutes. Neither result is optimal, and the proper solution to the dilemma is a matter of fair debate. One attractive possibility is to charge a price equal to marginal cost for marginal purchases and a sufficiently higher price for inframarginal purchases to cover total costs without losing those sales. Although the proper design of the rate structure is not easy, this approach seems preferable to either the uniform marginal - cost price, which necessitates a government subsidy to make up the deficit in covering total costs, or the uniform average - cost price, which excludes the marginal sale.

  431  Where Ramsey pricing is adopted, it would appear to be inevitable that some users, or customers, are required to pay a higher price than would apply under a uniform average cost pricing structure. However, the problem of setting a uniform average cost price is that it gives rise to a subsidy which is "indirect but inescapable: the additional price that the rejected marginal customers must pay for substitute products is a cost imposed on them in order to enable inframarginal customers to buy at a cheaper price than if an efficient pricing system were employed" . ^[49]

  432  In the present case, if a uniform average cost price structure had been adopted, the highly price sensitive or "marginal" user would have had no substitute service provider. The Authority was the sole provider of the facilities and services at the aerodromes to which the charges applied. If an average cost charge was imposed, it might be that an airline, operating a barely profitable route with passengers who were extremely price sensitive to increases in air fares, would cancel its operations and thus the "use" of the facilities and services of the Authority.

  433  However, the issues of construction of s 67 of the CA Act 1988 which arise in light of this differential treatment between users are not resolved by asking whether there was a "rational basis" for that treatment. That and cognate expressions are understood in a particular sense in United States constitutional law respecting "substantive due process" . In particular, in considering statutes regulating socioeconomic matters and containing norms which discriminate between persons on the basis of non- "suspect" and non- "quasi suspect" classifications, the federal courts, in applying the constitutional guarantee, engage in "rational basis review" . ^[50] The present litigation is outside any such universe of discourse. The United States position respecting utilities is further discussed in Section IX of these reasons.

  434  It is convenient now to turn to the existing case law on the meaning of "fees for services" .

Case law

  435  The case law concerns (i) the disputed validity of State laws said to impose duties of excise forbidden by s 90 of the Constitution, rather than fees for services; ^[51] (ii) the operation upon laws of the Commonwealth of s 55 of the Constitution to render of no effect in a law, dealing with the imposition of taxation (rather than requiring a fee for a service), any provision dealing with any matter other than the imposition of taxation; ^[52] and (iii) Commonwealth laws which were not supported by s 51(ii) of the Constitution as laws with respect to taxation (because they concerned fees for services) and were not supported by any other head of power in s 51 . ^[53]

  436  To determine the character of a law imposing a monetary burden, Latham CJ in Matthews v Chicory Marketing Board (Vic) ^[54] stated that the following positive and negative attributes, if they all be present, will suffice to stamp an exaction of money with the character of a tax: "a compulsory exaction of money by a public authority for public purposes, enforceable by law, and … not a payment for services rendered" (emphasis added). A question to be determined in the present appeals is whether the charges imposed, in respect of the use of the Authority ' s services and facilities by the aircraft operated by Compass, constituted "payment[s] for services rendered" , that is, "fees for services" .

  437  In Air Caledonie International v Commonwealth, the court commented upon Latham CJ ' s statement in 3 respects: ^[55]

   

The first is that it should not be seen as providing an exhaustive definition of a tax … The second is that, in Logan Downs Pty Ltd v Queensland, ^[56] Gibbs J made explicit what was implicit in the reference by Latham CJ to "a payment for services rendered" , namely, that the services be "rendered to" - or (we would add) at the direction or request of - "the person required" to make the payment. The third is that the negative attribute - "not a payment for services rendered" - should be seen as intended to be but an example of various special types of exaction which may not be taxes even though the positive attributes mentioned by Latham CJ are all present.

Turning to the third proposition, the court then considered the character of a law which, whilst nonetheless satisfying the positive attributes mentioned by Latham CJ, did not constitute a tax: ^[57]

   

Thus, a charge for the acquisition or use of property, a fee for a privilege and a fine or penalty imposed for criminal conduct or breach of statutory obligation are other examples of special types of exactions of money which are unlikely to be properly characterized as a tax notwithstanding that they exhibit those positive attributes. On the other hand, a compulsory and enforceable exaction of money by a public authority for public purposes will not necessarily be precluded from being properly seen as a tax merely because it is described as a "fee for services" . If the person required to pay the exaction is given no choice about whether or not he acquires the services and the amount of the exaction has no discernible relationship with the value of what is acquired, the circumstances may be such that the exaction is, at least to the extent that it exceeds that value, properly to be seen as a tax . (Emphasis added.)

In Air Caledonie, the court, having considered ss 53 to 55 of the Constitution, went on to state that the reference in s 53 to "fees for services" was to "be read as referring to a fee or charge exacted for particular identified services provided or rendered individually to, or at the request or direction of, the particular person required to make the payment" . ^[58]

  438  The court in Air Caledonie disposed of the case on the ground that the administrative procedures for re - entry into Australia imposed on a citizen could not "properly be seen as the provision or rendering of "services" to, or at the request or direction of, the citizen concerned" ^[59] and therefore the law was not one imposing a fee for service. The court went on to consider that the Migration Act   1958 (Cth) did not identify any "particular services provided or rendered to the individual passenger for which the impost could relevantly be regarded as a fee or quid pro quo" . ^[60] The second reading speech of the responsible Minister disclosed that the revenues from the immigration impost were not to be used for other services to be provided to the persons who suffered the liability to pay the impost. Rather the revenues were to be paid into the Consolidated Revenue Fund.

  439  The legislation at issue in Northern Suburbs General Cemetery Reserve Trust v Commonwealth ^[61] created a scheme whereby the moneys raised from the charge were dedicated to fund the provision of employment related training. The court held that there was an insufficient relationship between the liability to pay the levy and the provision of services. It was said in the joint judgment that the legislation fell "a long way short of requiring either that the money received be expended on the provision of eligible training programs or that the money received be expended in relation to eligible training programs for those employers" ^[62] who incurred the liability to pay the training charge, and as such the training charge was not a fee for service. ^[63]

  440  Dawson J, in a separate judgment in Northern Suburbs, adopted the reasoning in Air Caledonie and applied it in the following manner: ^[64]

   

The employees of an individual employer upon whom the charge is levied might or might not benefit from a training program financed by a State or Territory. If a training program may be characterized as a service it is not a particular service rendered to a particular employer by reference to the charge levied upon him. A particular employer may derive no more benefit from payments made under training guarantee agreements than is derived by employers or the community in general from having a better trained workforce upon which to draw. The training guarantee charge is not a charge "exacted for particular identified services provided or rendered individually to, at the request or direction of" the employer required to make the payment. It cannot, therefore, be said to be a fee for services or akin to a fee for services in any sense which would prevent it from being a tax.

  441  The facts of the present appeals stand in contrast to those in Air Caledonie and Northern Suburbs. The Authority provided "services" to Compass to which the charges imposed related. Nonetheless, the respondents submit that the charges imposed, properly characterised, "amount to taxation" within the meaning of s 67 of the CA Act 1988 and thus are not "fees for services" . The respondents submit that the charges will "amount to taxation" if the Determination, in specifying the charges, imposed a tax. This will be so, the respondents submit, if (i) in words taken from an earlier decision, "the amount of the exaction has no discernible relationship with the value of what is required" ; ^[65] and (ii) the liability to pay is not in respect of any particular service but generally for the purposes of defraying expenses or not merely for a particular nominated service but in truth also for, as the respondents put it, "carrying the CA Act 1988 considered as a whole into effect, that is to say, for administration expenses generally" . ^[66] These submissions rely on the statement in Air Caledonie italicised in the quotation above from the joint judgment. ^[67]

  442  Three threshold problems arise. One is that if ss 66 and 67 of the CA Act 1988, in authorising the Determination, are laws imposing taxation they may do so, but s 55 of the Constitution would deny effect to any provision in the CA Act 1988 dealing with any other matter. In the end, the respondents disavowed any reliance on s 55 . But the conundrum remains unless, as pointed out earlier in this Section, the second limb of s 67 be construed as incorporating the distinction between a tax and a fee for service which, in turn, informs the requirement in the first limb of a "reasonable relationship" .

  443  The second problem is that in Air Caledonie it was unnecessary for the court to consider the means by which "value" was to be assessed. The case turned on the lack of services provided. In this case, the question of the assessment of value squarely arises and it does so in circumstances where no market exists for the services. For the statement of the court in Air Caledonie to be of weight to the determination of these appeals, it is first necessary to determine the meaning of "value" in the context of the present appeals.

  444  What to an economist is "value" does not necessarily find its synonym in "market value" or "exchange value" as understood in the case law respecting resumptions which has been built up around Spencer v Commonwealth. ^[68] "Market value" is determined by an inquiry into what a willing purchaser will pay and a not unwilling vendor will receive for the subject - matter being valued. ^[69] The premise of the inquiry is that an efficient market exists or, at least, that an efficient market can be reasonably hypothesised from an existing inefficient market. Where there is no market for exchange of the subject - matter, it is necessary to consider other means of fixing value. ^[70]

  445  In Harper v Minister for Sea Fisheries, ^[71] this court decided that a licence fee for the taking of abalone was not an excise duty. Abalone was a finite resource and the licensing regime precluded unlicensed persons from taking abalone. As Brennan J emphasised, "[t]he only compensation, if compensation it be, derived by the public for loss of the right of fishing for abalone consists in the amounts required to be paid by holders to obtain the abalone licences" . ^[72] Mason CJ, Deane and Gaudron JJ characterised the licence fee as: ^[73]

   

properly to be seen as the price exacted by the public, through its laws, for the appropriation of a limited public natural resource to the commercial exploitation of those who, by their own choice, acquire or retain commercial licences. So seen, the fee is the quid pro quo for the property which may lawfully be taken pursuant to the statutory right or privilege which a commercial licence confers upon its holder. It is not a tax.

  446  Brennan J concluded that the licence fee was not a tax as the amounts payable were of the "same character as a charge for the acquisition of property" . ^[74] Whilst agreeing with Brennan J, Dawson, Toohey and McHugh JJ commented that the "fact that it is possible to discern a relationship between the amount paid and the value of the privilege conferred by the licence, namely, the right to acquire abalone for commercial purposes in specified quantities" , was "[m]ost important" . ^[75]

  447  The statutory formula by which in Harper the amount of each abalone licence was calculated turned on the gross value of abalone. Equally, it was not disputed that abalone meat and abalone shell were "marketable commodities" . ^[76] The value of the privilege to take abalone conferred by the licence was referable to the market value of abalone meat and abalone shell. It was unnecessary for the court to consider non - market values when attempting to discern a relationship between the amount paid for the licence and the value of the privilege conferred. Further, it was unnecessary in that case to consider the relationship between the amount paid and the costs of administering the licensing system.

  448  In Swift Australian Co (Pty) Ltd v Boyd Parkinson, ^[77] the court decided that fees imposed by regulation, for the purpose of both defraying the expenses of providing a service for the inspection of meat for sale and carrying into effect the CA Act 1988 under which the regulations were made, were not fees for services and were excise taxes. Dixon CJ, with whom Kitto and Windeyer JJ concurred, rejected the contrary submission, stating: ^[78]

   

It is evident from the introductory words of the regulation that some attempt is made to represent the fees as a charge for services. But when the regulation is examined it appears that the fees are not payable in respect of any particular service but generally for the purpose of defraying expenses. Further, and this perhaps is fatal to the argument, the expenses are not merely those of inspecting meat but those of carrying the Act considered as a whole into effect, that is to say, for administration expenses generally.

  449  However, the present case does not suffer such a "fatal" defect. The charges imposed defray those costs incurred by the Authority for the provision of the network of services to which those costs relate. As will be discussed in Section VIII, Dixon CJ ' s additional observation that the fees be payable in respect of particular services is not determinative of the present case.

  450  Here, in determining the meaning of the second limb of s 67 of the CA Act 1988, and thus the concept "fees for services" , "value" of the services provided by the Authority is to be determined by reference to the costs incurred. ^[79] More particularly, what, on a proper construction of the CA Act 1988, is required is an assessment of the total costs necessarily, or reasonably, incurred or to be incurred in providing the services in a financial period. Allowance is also to be made for a reasonable rate of return on the equity (or assets) of the Authority and a margin which may arise from bona fide errors in financial planning by the Authority, matters considered further in Section IX.

 

VIII - THE CRITICAL PROBLEM

  451  It is now necessary to turn to the third and critical problem which is revealed in applying the statement in Air Caledonie, referred to above in Section VII, to the present case. It is that the adoption of Ramsey pricing by the Authority, as the method of structuring the price (or rate) of the charges imposed on Compass, severed any discernible relationship between the amount charged a user and costs incurred in providing the particular services to the user.

  452  The charges imposed pursuant to the Determination were the result of rates set by reference to Ramsey pricing. Ramsey pricing uses inelasticity of demand, or economic capacity to pay, as the material criterion linking the price, or amount payable, and the provision of particular services to the user. In Re Eurig Estate, ^[80] the Supreme Court of Canada considered that significant price discrimination between users of services which cost the same to provide gives rise to the inference that there is no reasonable connection between the cost of the individual service provided and the amount charged. In that case, a probate levy was charged under regulations pursuant to an Ontario statute ^[81] without reference to the cost of the service of granting probate. Rather, the levy was imposed on a graduated scale increasing in cost with the value of the estate subject to probate, that is, it was an ad valorem rate structure. The proceeds of the levy were intended for defraying the costs of court administration in general, in contrast to offsetting the costs of providing the service of granting probate. ^[82] It was unnecessary for the Supreme Court to consider the character of a law by which a public body imposed a charge to fund the provision of a service where the public body operated with a cost structure similar to that of the present Authority.

  453  Ramsey pricing involves the imposition of a rate structure for the provision of services to the entire user group of those services such that, broadly, particular users (that is those with high demand inelasticity) subsidise other particular users (ie those with high demand elasticity). That each user pays at least the marginal cost emphasises that the rate of the charges imposed has little to do with the cost of providing the particular service to a particular user. Rather it has everything to do with recouping high fixed costs incurred in providing a network (or integrated system) of services to a group of users.

  454  In Australian Tape Manufacturers, ^[83] the court held that a law imposing a financial burden may be characterised as a law imposing taxation within the meaning of s 55 of the Constitution even if the payments received are not required to be paid into the Consolidated Revenue Fund. In their joint judgment, Mason CJ, Brennan, Deane and Gaudron JJ observed that the purpose of s 81 of the Constitution would be "circumvented readily if a law which imposed a tax on one group for the benefit of another group in the community was not a law ' imposing taxation '" . ^[84] For example, in Attorney-General (NSW) v Homebush Flour Mills Ltd ^[85] a financial burden was imposed by a New South Wales law upon the owners of flour for the relief of necessitous farmers. The issue was whether the law imposed a duty of excise within the meaning of s 90 of the Constitution. It was held to be an excise. Starke J emphasised that the imposition of this financial burden on the first group was "not in exchange for any service rendered to them but for a government purpose, namely, the relief of necessitous farmers" . ^[86]

  455  The critical distinction presented by the present appeals is that the redistribution occurs within a single user group, and the incidents which trigger liability to pay each of the charges which effect the redistribution are part of a common service provided to that user group and inter - connected by a cost structure with the characteristics identified in Section III above.

  456  The changes in the governmental arrangements for the provision of services, considered in Section II of these reasons, are significant here. The charges imposed by the Determination are examples of financial burdens placed upon "users" to fund public assets and the provision of public services. The case law on the meaning of "fees for services" is concerned with those provisions of the Constitution which give special classification to taxes, including excise taxes. The present appeals concern the construction of s 67 of the CA Act 1988, not its validity. The question of validity arises only with respect to the Determination, the issue being whether by reason of s 67 it was beyond the power conferred on the Authority by s 66 .

  457  On its proper construction, s 67 of the CA Act 1988 involves the notion of a fee for service as an indicator of a reasonable relationship between the amount or rate of a charge imposed by a determination of the Board and the expenses of the Authority in relation to the matters to which that charge relates. The requirement that a discernible relationship exist between the amount charged a user and the provision of particular services to the user, as considered by the court in Air Caledonie ^[87] and Northern Suburbs, ^[88] does not apply to cases such as the present. That there may have been no reasonable or discernible relationship between the amount or rate of a charge imposed by the Determination and the value of the service to aircraft operations on particular occasions is not determinative of the present appeals.

  458  The operation of the Determination has the following characteristics. First, the incident which triggered the liability of a particular user to pay each of the charges was a step in the provision of a service to that user. Secondly, each particular service was part of a set (or network) of integrated or inter - connected services which were made available by the Authority to a user group (the services), the integration or inter - connection arising from the cost structure of the Authority and the network of aerodromes to which the services related. Thirdly, the Authority provided the services in circumstances where it would not have recovered its total costs for the services if it had charged the marginal cost for particular services to all users. ^[89] Fourthly, the Authority set the rate for each of the services by reference, as described in Section VII of these reasons, to each particular user ' s economic capacity to pay; however, the rate obliged each user to pay at least marginal cost for the provision of the service on a particular occasion. Fifthly, the provision of the services was in discharge of functions conferred on the Authority by the CA Act 1988. Finally, as indicated in Section III of these reasons, the Authority, if not expressly obliged to do so, was expected to generate revenue from the user group in order to cover its costs of providing the services.

  459  In the case of the Determination, these features would otherwise disclose no immediately apparent relationship between the amount or rate of the charge and the value of the service to a particular user on a particular occasion. Nevertheless, if each of the charges is a reasonably and appropriately adapted means of achieving a legitimate public purpose, each is properly to be characterised as a fee for services, and its amount or rate will bear to expenses the reasonable relationship required by the first limb of s 67 .

  460  However, 2 further questions are to be considered in determining whether the means chosen by the Authority were not reasonably and appropriately adapted. The first arises if the total revenue raised by each charge exceeds the total costs necessarily, or reasonably, incurred or to be incurred in providing the services in a financial period (making allowance for a reasonable rate of return on the equity (or capital) of the Authority and a margin of error which may arise from bona fide errors in financial planning by the Authority) (the first question). The second arises if the functions of the Authority to which the legitimate public purpose relates are not substantially for the benefit, whether directly or indirectly, of the user group subject to the charges (the second question).

  461  The second limb of s 67 , which requires that the amount or rate of the charges "not amount to taxation" , is clarified, in the sense discussed earlier in this Section, by the meaning of "fees for services" . The second limb of s 67 informs the requirement in the first limb that there be a "reasonable relationship" between (i) the expenses incurred or to be incurred in relation to the matters to which each charge relates; and (ii) the amount or rate of the charge. There will be such a "reasonable relationship" where (a) the "matters" to which each charge relates are constituted by the provision of the integrated or inter - connected service network, as held by Branson J and considered in Section VI of these reasons; and (b) the rate structure adopted by the Authority for each charge satisfies the criterion of a fee for service as indicated in these reasons. It is convenient now to consider the validity of the Determination in light of these matters.

 

IX - VALIDITY OF THE DETERMINATION

  462  The rate structure adopted for each charge is to be measured against the criterion of "fees for services" explained in Sections VII and VIII of these reasons.

  463  The rate structure imposed by the Determination for each charge was based on the Ramsey pricing model. MTOW was used as a surrogate for price elasticity. It was not suggested that these rates were designed other than to facilitate the recovery of the costs (including a reasonable rate of return) of providing the entire system of services and facilities for civil aviation safety. This is a matter which is a legitimate public purpose unrelated to revenue - raising, in discharge of the Authority ' s functions under the Act. On the footing that the construction of Branson J as to the "matters" to which each charge relates should be accepted, it is to be concluded provisionally that each charge was a reasonably and appropriately adapted means of achieving a legitimate public purpose, other than revenue - raising, related to the functions of the Authority. It would follow that the charges imposed are properly characterised as "fees for services" . Further, it would follow that the functions of the Authority, to which the above public purpose relates, were substantially and directly for the benefit of the user group subject to each of the charges. Therefore the second question does not arise.

  464  It remains to be considered whether the issues involved in the first question apply here so as to displace this provisional conclusion. The respondents' Notices of Contention raise several matters which are referable to whether the total revenue raised by each charge exceeded the total costs necessarily, or reasonably, incurred or to be incurred in providing the services in the financial year 1991-1992. It is convenient now to deal with these contentions.

Reasonable rate of return

  465  Rate regulation of public utilities in the United States is subject to constitutional review under 2 clauses of the United States Constitution: the due process clause of the Fifth Amendment and the equal protection clause of the Fourteenth Amendment. Broadly, these clauses so operate as to make the validity of orders fixing those rates turn not upon the method of computing the rate base; rather, validity turns upon whether the rates have an impact which is "just and reasonable" . A rate which enables the utility to maintain its financial integrity, to attract capital and to compensate investors for the risks they take will not be unjust and unreasonable even if it produces only a meagre return on the present "fair value" of the public utility ' s assets. ^[90] No such doctrine applies under the Australian Constitution. The question to be determined on the facts of the present case is whether the Determination authorised the Authority to act in a manner which was beyond the power conferred by ss 66 and 67 of the CA Act 1988 when it selected a rate for each charge which operated to produce a particular return on equity.

  466  At trial, Mr Gemmell gave unchallenged evidence for the appellant, accepted by Branson J, that the Authority ' s charges were set to produce: ^[91]

   

a forecast 7.5% (real) rate of return on the capital employed by the [Authority]. In effect, the 7.5% is treated as a cost. The economic rationale for this is that it represents the opportunity cost of the investment in assets of the [Authority]. Unless there was a return on capital employed by the [Authority], it would be irrational for the [Authority's] shareholders to have invested capital in it. The investment would simply represent a subsidy to the aviation industry. To put it another way, without equity capital the [Authority] would be compelled to borrow all its capital requirements, and pass on the commercial borrowing costs (as opposed to the [7.5%] rate of return) as part of its charges.

The forecasting of a 7.5% rate of return on the capital employed by the Authority in the provision of all of its services and facilities was then added to formulate a total cost base. Branson J accepted the evidence of Mr Barnes, an officer of the Authority who undertook corporate financial planning, the development of prices for major services and pricing policy matters in general. His evidence concerned the method employed by the Authority in calculating its total cost base. Her Honour summarised this evidence: ^[92]

   

Mr Barnes' evidence was that the first step was for an estimate to be made of the total outgoings of the [Authority] for the 1991-92 year. The second was to calculate the total value of the [Authority's] assets and to calculate 7.5% of such value … The figure which resulted from this procedure was treated as the cost of the [Authority]. The cost of the [Authority] was then broken down into the cost of each service so that the aggregate of the revenue from each service covered the cost of the [Authority].

  467  Beaumont J in the full court held that the phrase "expenses incurred" in s 67 of the CA Act 1988 excluded any element of profit. ^[93] In order to determine whether the charge imposed is a fee for service, a comparison between the revenue generated and the total costs necessarily, or reasonably, incurred or to be incurred in providing the services to which the charge relates in a financial period is required. These total costs include an allowance for a reasonable rate of return on the equity (or assets) of the service provider and a margin of error which may arise from bona fide errors in financial planning by the service provider. The phrase in s 67 "expenses incurred or to be incurred" is to be construed, consistently with what has been said in Section VII of these reasons as to the construction of the first limb of s 67 , as incorporating these allowances.

  468  The evidence considered above supports the proposition that the rate of return adopted by the Authority was reasonable with respect to the total cost base of the Authority. With respect to the rate of return, the respondents' sole contention was that the rates of each of the TNS, RFFS and en route charges in the Determination were not reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which each charge related. This was said to be by reason of the "inclusion of a rate of return of 7.5% on assets as an "expense"" . In light of the construction of the first limb of s 67 , this contention is not made good.

  469  I turn now to consider the manner in which the total cost base of the Authority was divided between the charges and the remaining contentions raised by the respondents' Notices of Contention.

Allocation of the Authority ' s total costs

  470  Branson J accepted the evidence of Mr Barnes as to the manner in which the Authority divided its total costs into the costs of the particular services for which charges were to be determined, as set out in the judgment of Gleeson CJ and Kirby J. Mr Barnes accepted that the Authority ' s information systems did not allow this task to be undertaken with 100% accuracy. A computer spreadsheet model had been created in mid-1989 and designed to allocate the Authority ' s corporate overheads and support costs across the services provided by the Authority, with the aim of updating the fully distributed costs of providing each of those services. However, it could not be used because of the lack of reliable information. In addition, Mr Barnes conceded that the Authority did not, at the relevant time, have the accounting systems necessary to enable it to implement a scheme for location specific charging for the Authority ' s services. However, no evidence was adduced that, when undertaking its financial planning for the purposes of setting the rates of each of the charges in the Determination, the Authority was in breach of statutory obligations or otherwise acted in a manner which would give rise to a finding that it did not act bona fide.

Other grounds in the Notice of Contention

  471  The respondents' Notices of Contention raised various grounds attacking the validity of the Determination. Ground 1 contended that a number of reasons, additional to those accepted by the full court, exists for concluding that the rate of each of the TNS, RFFS and en route charges was not reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which each of those charges related, or that the charges were such as to "amount to taxation" contrary to the second limb of s 67 . The remaining reasons to be disposed of arising under ground 1 of the Notices of Contention are:

   

 (c)  In the case of the en route charges, the discrimination in the rate of charge between international and domestic operators, where no reasonable basis was established for doing so.

 (d)  The discrimination in the rate of charge (in the case of the en route charges) and in the circumstances in which the charges apply (in the case of the TN[S] and RFFS charges) between Avgas and Avtur Aircraft, where no reasonable basis was established for doing so.

 (e)  The fact that the [Authority] did not know, in setting the various charges, what its expenses to be incurred were in relation to provision of the services to which the charges related.

Grounds 1(c) and 1(d) are not well founded. The Authority was not obliged to justify the reasonableness of the distinctions adopted in the Determination: the "matters" to which each charge related were open to be selected by the Authority. Ground 1(e) is also not well founded. The "reasonable relationship" criterion in s 67 , as informed by the second limb of s 67 and the meaning of "fees for services" , accommodates errors, such as those indicated by the difficulties canvassed in Mr Barnes' evidence above, which may arise during the course of bona fide financial planning.

  472  In ground 2 of the Notices of Contention, the respondents contended that the full court should have held that Branson J erred on a number of matters in addition to those identified by that court. These matters related to Branson J ' s conclusion that the rate of each of the TNS, RFFS and en route charges was "reasonably related" within the meaning of the first limb of s 67 . In light of the approach taken to the construction of s 67 in Section VII of these reasons, subparas (a) and (e) of ground 2 no longer have any bearing on these appeals.

  473  In dealing with each of the remaining grounds, it is convenient to set out their text:

   

In further support of the reasons it gave for concluding that the rate of each of the TN[S], RFFS and en route charges was not reasonably related to the expenses incurred or to be incurred by the appellants in relation to the matter to which each of these charges relate, and in further support of the matters contended for in Ground 1, the Full Court of the Federal Court should have held that Branson J erred in:

   …

 (b)  concluding that there was a reasonable basis in 1991 for applying a lower per kilometre rate of en route charge to international operators than was applied to domestic operators;

 (c)  concluding that the lower rate fixed for international en route charges did not have the consequence that the higher rate fixed for domestic en route charges did not reasonably relate to the expenses incurred or to be incurred in connection with the matters to which the domestic en route charges related … ;

 (d)  accepting the evidence of Mr Barnes that the en route charge for aircraft on international routes covered both the inward and outward flights … and failing properly to take into account the following evidence:

 (i)  The express terms of the Determination pursuant to which the en route charge was levied which provide for a rate per kilometre for international flights which is less than half that charged to domestic flights.

 (ii)  Admissions made by the appellant in its Amended Defence.

 (iii)  Admissions contained in the appellant ' s own documents and in the cross examination of Mr Gahan.

   …

 (f)  concluding that the more expensive en route facilities and services were put in place for bigger aircraft and not for smaller aircraft … ;

 (g)  concluding that the differential in rates fixed for larger aircraft and small aircraft was justified by reference to expenses.

  474  Each of these subparagraphs concerns the en route charges levied by the Authority pursuant to cl 11 of the Determination. Four separate charges were imposed. The 4 charges were directed to flights of (a) avtur aircraft weighing 20,000 kg or less between 2 aerodromes in Australian territory; (b) avtur aircraft weighing more than 20,000 kg between 2 aerodromes in Australian territory; (c) aircraft weighing 20,000 kg or less between a place outside Australian territory and a place within Australian territory; (d) aircraft weighing more than 20,000 kg between a place outside Australian territory and a place within Australian territory. Different rates were imposed by each of these 4 charges.

  475  The respondents' contentions in subparas (b)-(d) focus on the distinction drawn between domestic and international en route charges in cl 11 of the Determination. The different rates levied by the Authority on flights on international, as opposed to domestic, routes were said by the respondents to evidence the proposition that the domestic flight operators were being charged on a per kilometre basis more than twice the cost of the services they were utilising.

  476  Branson J accepted the evidence of Mr Barnes that these charges were "intended to recover the additional costs which could be reasonably related to international flights, which was the full costs of air traffic control dealing with offshore airspace sectors and a reasonable share of communications costs that were used primarily by aircraft on international routes" . ^[94] Further, to the extent to which it did not contradict Mr Barnes' evidence, Branson J accepted the relevant evidence of Dr   Fitzgerald. This was that, for administrative simplicity, the Authority averaged the costs of its en route services between certain routes, and that the history of prior charging by the Authority, which had reflected an excise once charged on aviation turbine kerosene, had at least an equal impact on the rate of the international en route charges.

  477  These matters are properly to be attributed to the bona fide planning undertaken by the Authority in setting the rate of each of the charges in cl 11 of the Determination, a matter to be taken into account for the purposes of determining the first question. To the extent that the revenue generated with respect to each of the charges in cl 11 was in excess of the costs necessarily, or reasonably, incurred or to be incurred by the Authority in providing the services to which each charge respectively related, this is properly to be attributed to errors which arose in bona fide financial planning the Authority undertook with available planning resources.

  478  Subparagraphs (f) and (g) of ground 2 of the Notices of Contention concern the differential rates imposed for heavier, as opposed to lighter, aircraft in cl 11 of the Determination. These contentions cannot be sustained in light of the evidence at trial that the Authority incurred higher infrastructure costs in order to provide en route services to the heavier aircraft. Further, to the extent that the revenue generated by the rates adopted by the Authority did not directly correlate to the costs necessarily, or reasonably, incurred or to be incurred by the Authority, this is again to be attributed to errors which arose from the bona fide financial planning of the Authority.

  479  The grounds contained in the Notices of Contention therefore do not provide a basis for concluding that the charges imposed in the Determination and challenged in these appeals were other than "fees for services" .

 

X - VALIDITY OF THE LIEN PROVISIONS

  480  Section 66(11) of the CA Act 1988 specified that charges and penalties under the interest provisions in ss 66(8) , 66(9) and 66(10) for overdue charges might be recovered as "debts due to the Authority" . Due from whom? The answer to that question in these appeals is indicated by s 66(2) , in conjunction with cl 21(a) of the Determination, as considered in Section I of these reasons. The effect of cl 21(a) was to make the charges for the use of facilities and services by the aircraft in question payable by Compass. In other circumstances, where the use was by foreign aircraft the Determination provided (cl 22(b)) for payment by the owner of the aircraft.

  481  The statutory lien provisions did not disturb, in the distribution of the proceeds of sale made under s 74 of the CA Act 1988, the priorities of security holders under securities in respect of the aircraft created before the time of registration of the statutory lien. This protection operated to the extent that the security in question covered a debt incurred before registration of that lien (s 70(2) ). This was subject to the qualification that priorities under a floating charge were not protected from the statutory lien. In FCT v Barnes, ^[95] Barwick CJ, Mason and Jacobs JJ pointed out:

   

A floating charge over the whole of the assets and undertaking of a company anticipates the day when the creditor of the company secured by the floating charge may intervene and claim priority over those creditors who have dealt with the company in the meantime.

However, until that day arrived, the chargor was free to conduct its business in its ordinary course, and this may have involved, directly or indirectly, the activities giving rise to the charges covered by the statutory lien.

  482  The statutory lien provisions provided for the deregistration of an aircraft registered in Australia (s 71 ), and the seizure and retention of the aircraft until all outstanding amounts covered by the statutory lien were paid (s 72 ). For so long as the statutory lien had effect, the provisions supporting it applied in spite of any encumbrance in respect of the aircraft, and in spite of any sale or disposition of, or dealing in, the aircraft or an interest therein (s 70(1) ). The statutory lien provisions also applied whether or not the Authority had possession of the aircraft at any time. However, notice of seizure of the aircraft was to be given to various persons including those holding security interests, as well as owners, operators, lessees, hirers and charterers (s 72(a) ). Decisions to impose the statutory lien by entry in the Register of Statutory Liens (s 69(1)), to deregister the aircraft (s 71(1) ), and to sell the aircraft in exercise of the statutory lien (s 73(1) ), were specified in s 82(1) as "reviewable decisions" . This had the consequence that there was an avenue for review by the Authority and in turn the decision of the Authority was a "reviewable decision" in respect of which application may have been made to the Administrative Appeals Tribunal (s 82(6) ). It may be assumed, without deciding, that payment by a party in the position of the respondents of the amount covered by the statutory liens, having the effect that the liens ceased to have effect (s 75(1) ), would have subrogated that party to the rights of the Authority to debts due to the Authority under s 66(11) .

  483  Where statute creates an obligation to pay money it is for the legislature to provide remedies for enforcement of that obligation. Unless the law provides to the contrary, an action will lie for recovery of the money. ^[96] Further, in the Australian colonies there was before federation a number of legislative regimes conferring further rights, in the nature of securities, in respect of indebtedness to public authorities for fees and other dues in respect of the utilisation of services they provided. ^[97] Various laws of the Commonwealth have placed in a preferred position, beyond that enjoyed under the prerogative, indebtedness to the Commonwealth and to other public authorities.

  484  In such cases one question has been whether the law in question has sufficient connection with the head or heads of power relied upon to sustain its validity. Laws designed to facilitate the collection of revenue contain many examples. In FCT v Barnes the court was concerned with provisions of the Income Tax Assessment Act   1936 (Cth) (ITAA 1936) in particular s 221P , which were designed to support the "pay as you earn" system. Barwick CJ, Mason and Jacobs JJ said: ^[98]

   

The overall effect of s 221P(2) , therefore, is that when the whole of the property of a defaulting employer vests in or passes under the control of a trustee and when it includes property representing the value of the deductions made and not paid over, the Crown debt is given priority even over a creditor entitled to the whole of the employer ' s property, as it then exists, as security for his debt. Such a law is a law with respect to taxation.

 

It was suggested but faintly argued that even if s 221P(2) be an otherwise valid law with respect to taxation, it is nevertheless an acquisition of property of a stranger without just terms and therefore is invalid. The principle enunciated in Johnston Fear & Kingham & Offset Printing Co Pty Ltd v Commonwealth (see per Latham CJ ^[99] and per Starke J ^[100] ) as to the relationship of s 51(xxxi) of the Constitution to other legislative powers can have no application to such a provision as s 221P(2) ; cf per Dixon CJ in Attorney-General (Cth) v Schmidt. ^[101]

  485  In the same case Gibbs J, ^[102] with reference to the reasons of Menzies J in FCT v Card ^[103] said that, construed in this way, s 221P did not require A to pay B ' s debt to the Commissioner; rather it required the debt to the Commissioner to be paid out of the company ' s property before the security held over it by A became effective. That being so, the provision was a law with respect to taxation and not a law providing for the acquisition of property.

  486  In Mutual Pools & Staff Pty Ltd v Commonwealth, ^[104] McHugh J referred to the passage in the judgment of Dixon J in Grace Brothers Pty Ltd v The Commonwealth in which his Honour said: ^[105]

   

The legislative power given by s 51(xxxi) is to make laws with respect to a compound conception, namely, "acquisition - on - just - terms" . "Just terms" doubtless forms a part of the definition of the subject matter, and in that sense amounts to a condition which the law must satisfy. But the question for the Court when validity is in issue is whether the legislation answers the description of a law with respect to acquisition upon just terms.

McHugh J then said: ^[106]

   

The compound conception of an "acquisition of property on just terms" predicates a compulsory transfer of property from a State or person in circumstances which require that the acquirer should pay fair compensation to the transferor. When, by a law of the Parliament, the Commonwealth or someone on its behalf compulsorily acquires property in circumstances which make the notion of fair compensation to the transferor irrelevant or incongruous, s 51(xxxi) has no operation. (Footnote omitted.)

  487  A law which imposes a penalty, by way of forfeiture of property, for an unlawful activity is a valid law of the Commonwealth, if otherwise within a head of power; at least in some instances this will be so even if the owner of the property was not involved in the unlawful activity. ^[107] That is not this case. There is no offence against a law of the Commonwealth to which the statutory lien provisions are appendant.

  488  Nor is the notion of fair compensation to the person whose interests in the aircraft are displaced or postponed irrelevant or incongruous on grounds that (a) the lien provisions are an exercise of the taxation power in s 51(ii) of the Constitution; and (b) the exercise of that power necessarily involves an acquisition of property from the taxpayer. Proposition (b) is well established but proposition (a) does not apply to the lien provisions. Whatever other heads of power in s 51 support them, they are not laws with respect to taxation.

  489  More to the point is the requirement in s 81 of the Constitution that "[a]ll revenues or moneys" raised or received by the Executive Government of the Commonwealth form one Consolidated Revenue Fund. Of that provision Quick and Garran observe: ^[108]

   

"Revenue is the annual yield of taxes, excise, customs duties, rents, etc, which a nation, state, or municipality collects and receives into the treasury for public use" (Webster, Internat Dict). It includes not only revenue from taxation, but all revenue received by the Government as payment for services rendered - such as the revenue of the post and telegraph department. It also includes all payments in the nature of penalties, or fees for licenses, etc, and in fact every kind of public income.

  490  Section 81 thus proceeds on the footing that a concomitant of the provision of the services will be a quid pro quo expressed as an obligation in favour of the service provider. ^[109] To supplement that exchange by the further notion of compensation to be furnished by that provider to a party receiving the services, or the benefit of the provision of those services, is irrelevant or incongruous in the sense used by McHugh J in the above passage from Mutual Pools. This is so whether the service provider is the Executive Government itself (thereby attracting s 81 of the Constitution) or a body, such as the Authority, exercising functions under a law of the Commonwealth which creates it and endows it with those functions.

  491  In a given case, provision of the services under a determination might require payment of a "fee" by a particular user which so departs from the criteria, applied in Sections VIII and IX of these reasons, as to what will constitute a fee for service, as to deny it the character of a charge for the provision of the service and give it the character of a new form of taxation. This might attract, among other matters, the operation of s 55 of the Constitution. Aickin J referred to this possibility in General Practitioners Society v Commonwealth. ^[110] However, s 51(xxxi) of the Constitution still would have no application in such circumstances.

  492  What is of more significance for the present case is, in addition to the propositions derived in Section VII of these reasons from the authorities of this court discussed there, a particular holding in General Practitioners. ^[111] This was that the service in question may be one which the recipient in practical terms may be compelled to obtain in order to conduct a particular activity regulated by the legislative scheme which prescribes the fee. In the present case, the effect of the Determination was to impose the specified charges for the use, by aircraft operated by Compass (but in respect of which the respondents were interested either as owners or head lessees), of services and facilities provided by the Authority. The privilege so obtained was necessary for the conduct in Australia of commercial operations using those aircraft.

  493  The consequences which the statutory lien provisions attach to the classification of charges and penalties as debts due to the Authority contain elements of practical and legal compulsion designed to achieve recoupment of those debts. But the accrual of the debts owed the Authority and the subsequent imposition of the statutory liens to facilitate payment were not the product of any compulsion exerted by the Authority. Those having control of the operations of the aircraft as operator or lessee or owner (such as, respectively, Compass and the respondents) had been legally free as they pleased to introduce them or not into Australian trade and commerce, in particular for the conduct of commercial passenger operations. ^[112]

  494  The protection which s 51(xxxi) provides, as Dixon J put it, ^[113] is not "a protection … to the general commercial and economic position occupied by traders" . The debts, with concomitant aids to recovery, were created by the Act and the Determination in return or exchange for the provision by the Authority of services essential to the conduct of the commercial passenger operations in question. It is incongruous to treat the constitutional protection of property in the aircraft as requiring protection of the commercial and economic position of those who employed, or permitted or required the employment of, the aircraft in operations requiring the provision of services which by law could come only at a particular price.

  495  The placement of Compass in provisional liquidation on 20 December 1991 was, on the respondents' case, an event of default entitling them to terminate their arrangements with Compass and to remove the aircraft from Australia. Shortly before the provisional liquidation, the statutory liens had vested in the Authority. The effect of s 78A of the CA Act 1988 was to prohibit the respondents removing the aircraft from Australia without the consent of the Authority. The CA Act 1988 also conferred the other remedies to which reference has been made.

  496  The substance of the complaint by the respondents is that the Determination made the charges payable not by them but by Compass, and it was the default by Compass which led to the imposition of the statutory liens; these were imposts which the respondents, all foreign corporations, had to satisfy to avoid the impounding of the aircraft in Australia and to remove the threat of the destruction of their titles and interests in the aircraft by exercise of the statutory power of sale.

  497  It was said in their joint judgment in Australian Tape Manufacturers by Mason CJ, Brennan, Deane and Gaudron JJ, that a law may be supported by a head of power outside the operation of s 51(xxxi) if it imposes an obligation that involves "a genuine adjustment of the competing rights, claims or obligations of persons in a particular relationship" . ^[114] If that relationship "need[s] to be regulated in the common interest" , the law is likely to fall outside s 51(xxxi) because it is unlikely that any "acquisition of property" which is an incident of the operation of that law will be capable of imparting to the law the character which attracts s 51(xxxi) . ^[115]

  498  The criterion which is invoked by their Honours in this passage has some affinity with the notion attributed ^[116] to Sir Matthew Hale CJ that when private property is "affected with a public interest" it is subject to regulatory control by the state. The Lord Chief Justice was speaking ^[117] of the scope and limits of 3 interests relative to the operation of such utilities as a public port, namely private property, public use and the interest of the Crown in the facilitation of trade, and of the power of the Crown to confer, in the public interest, exclusive franchises upon terms regulated by it. ^[118]

  499  This notion for a time was influential in the United States in the interpretation of the guarantee in the Fifth and Fourteenth Amendments against deprivation of property without due process of law. ^[119] However, Holmes J in his dissenting judgment in Tyson & Brother v Banton said, perhaps characteristically, that "the notion that a business is clothed with a public interest and has been devoted to the public use is little more than a fiction intended to beautify what is disagreeable to the sufferers" . ^[120] In his dissent in the same case, Stone J discerned an element of circularity in the reasoning involved in application of that notion. ^[121] In the United States, the "public interest" doctrine, with respect to the permissible regulation of the rates, charges and conditions of service of business enterprises, has fallen into disfavour. ^[122]

  500  Moreover, it may be said that many laws which affect property rights are in some sense made by the legislature in an attempt to resolve competing claims with respect to that property and its use. As a result, it may not be easy to draw a line between a law to which s 51(xxxi) applies and one which resolves competing claims or specifies criteria for some general regulation of conduct which is "needed" in the sense used in Australian Tape Manufacturers.

  501  However, the line drawn in Australian Tape Manufacturers is to be drawn in the present case. The statutory lien provisions are part of the regulatory scheme for civil aviation safety created by the CA Act 1988. The lien provisions adjust the respective interests of those who own, lease or operate the aircraft and of the provider of services necessary for commercial operations of the aircraft in Australia. The interests of security holders are, to the extent discussed above, not displaced. The services were provided by the Authority to the aircraft, in the sense that it was particular operations using the aircraft which provided the incident for the attraction of the charges.

  502  It would be an error to classify the relationship to which the statutory scheme gave rise as if all that were involved was an obligation in the nature of a contract between Compass and the Authority to which the respondents were strangers who might rely upon some mutation of the doctrine of privity. The "price" which had to be provided or suffered to acquire from the Authority services to the aircraft was the indebtedness of Compass. This was supplemented by the remedies available to the Authority, recourse, or threat of recourse, to which provided a strong incentive to the respondents to see that the charges and penalties were met.

  503  The bundle of rights and remedies held by the Authority constituted the exchange for the provision of the services. In the events that occurred, the services were provided, but the charges and penalties were not recouped to the Authority. For the Authority then to assert its rights and remedies against the respondents is not to compulsorily acquire property from the respondents with an attendant obligation of fair compensation to the respondents from the Authority. The lien provisions are not invalid as laws which must answer the condition imposed by s 51(xxxi) of the Constitution in order to be valid.

  504  It is not to the point that other legislative arrangements may have been made to secure payment to the Authority. For example, in argument references were made to the provision of bonds or the imposition of a requirement of payment in advance of the provision of services. Questions might then arise, though they were not explored in argument, as to whether in those circumstances treaty obligations to which Australia is subject could be discharged. As indicated in Section III of these reasons, s 11 of the CA Act 1988 obliged the authority to perform its functions in a manner consistent with the Chicago Convention and any other international agreement relating to the safety of air navigation. The legislation is not invalid by reason of the circumstance that if the legislation had been in another form there would have been an even clearer case for validity. Nor do I place any particular significance upon the presence of analogous lien provisions in the legislation of many other countries ^[123] respecting landing fees and other charges for aircraft operations. If any analogy is apt, it is that referred to by the Chief Justice and Kirby J respecting the position established at the time of federation with respect to those maritime claims which were enforceable by actions in rem.

  505  There remains the submission by the respondents that the provisions respecting statutory liens in Div 2 of Pt VI of the CA Act 1988 are not supported by any head of power in s 51 , putting s 51(xxxi) to one side (as it should be on this hypothesis). The charges secured by the statutory lien are, relevantly, charges for services or facilities provided by the Authority (s 66(11) ). One function of the Authority immediately involved for these appeals was the provision of air traffic control services and flight service services for "surface traffic of aircraft … on the manoeuvring area of aerodromes" (s 9(1)(c) ). An "aerodrome" relevantly is (s 3(1) ) "an area intended for use wholly or partly for the arrival, departure or movement of aircraft" , which is established as an aerodrome under the Civil Aviation Regulations (Cth) (the Regulations). Licensing of aerodromes under the Regulations was provided for in Div I of Pt IX of the Civil Aviation Regulations (Cth) (regs 86 to 94 ) and an aircraft may not take off or land from any place that was not established, licensed or authorised thereunder (reg 92 ). These regulations applied, in their broadest operation, to all air navigation within Australian territory (reg 3(1)(g) ). A provision of that scope is supported in its application to the safety, regularity and efficiency of intra - state air operations by s 51(i) of the Constitution. The holding to that effect in Airlines of NSW Pty Ltd v New South Wales [No 2] ^[124] was not challenged.

  506  Upon that basis, to charge for services and facilities provided at such aerodromes and to provide means for the recovery of those charges by liens imposed upon the aircraft whose use of the services and facilities was the occasion for the charges, has sufficient connection with s 51(i) of the Constitution. That is true also of what appear to have been the other relevant functions of the Authority, to which the charges and liens related, those functions conferred by paras (b) , (d) and (m) of s 9(1) of the CA Act 1988. These links are not so insubstantial, tenuous or distant that Div 2 of Pt VI of the CA Act 1988 cannot sensibly be described as a law with respect to that head of power. ^[125]

 

XI - THE CONCLUSIONS

  507  Each appeal should be allowed and orders made as proposed by the Chief Justice and Kirby J.