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


McHugh J.   163  The first issue for determination in these factually complex appeals is whether certain charges, purportedly imposed on Compass Airlines by Airservices Australia (formerly the Civil Aviation Authority)[1] for the use of the Authority's airways facilities and services in Australia, were validly imposed. The respondents challenge the validity of the charges on the ground that the determination imposing the charges was ultra vires s 67 of the Civil Aviation Act 1988 (Cth) (the CA Act 1988)[2] which provided:

   

Limits on charges

 

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.

  164  The first issue is in effect a twofold question:

 (1)  Was the amount or rate of the charges imposed by the Authority pursuant to the determination reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which the charges related? and
 (2)  If so, were the charges such as to amount to taxation?

  165  If the charges were validly imposed under s 67, the second issue in the appeal is whether the CA Act 1988 could constitutionally authorise statutory liens to be imposed on aircraft which had incurred charges that remained unpaid. The respondents challenge the validity of the liens on the ground that the sections of the CA Act 1988 imposing the liens are beyond the power of the Parliament because they are a law with respect to the "acquisition of property" other than on "just terms" within the meaning of s 51(xxxi) of the Constitution.

  166  In my opinion, the charges levied by the Authority were validly imposed. The amount or rate of each charge was reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which the charge related, and the charges were not such as to amount to taxation. In addition, the provisions of the CA Act 1988 imposing the statutory liens are constitutionally valid. They are not laws within s 51(xxxi) of the Constitution which requires the provision of just terms, but are valid laws pursuant to s 51(i) of the Constitution. Accordingly, these appeals should be allowed.

I THE FACTUAL AND LEGAL BACKGROUND

The circumstances giving rise to these appeals

  167  The respondents are Monarch Airlines Limited (Monarch Airlines), Polaris Holding Company (Polaris) and Canadian Airlines International Limited (Canadian Airlines). Polaris owned 2 aircraft which it leased to Compass Airlines pursuant to 2 lease agreements, each of which was dated 25 June 1990. The 2 aircraft were subsequently registered in Australia as VH-YMA and VH-YMB. The lease relating to the aircraft VH-YMA commenced in April 1991 and the lease relating to the aircraft VH-YMB commenced in August 1991. Monarch Airlines was at all relevant times the lessee of 2 aircraft which, pursuant to 2 sub-lease agreements dated 29 June 1990, it sub-leased to Compass Airlines. The aircraft were subsequently registered as VH-YMJ and VH-YMK. The sub-lease relating to the aircraft VH-YMK commenced on 14 November 1990 and the sub-lease relating to the aircraft VH-YMJ commenced on 28 November 1990. Canadian Airlines, as lessor, entered into a lease agreement dated 5 June 1991 with Compass Airlines, as lessee, for the lease of an aircraft which was subsequently registered in Australia as VH-YMI.

  168  Thus, Compass Airlines was relevantly the lessee of 5 aircraft:

 -  2 of which (VH-YMA and VH-YMB) Polaris had an interest in as owner and lessor;
 -  2 of which (VH-YMJ and VH-YMK) Monarch Airlines had an interest in as head lessee and sub-lessor; and
 -  one of which (VH-YMI) Canadian Airlines had an interest in as owner and lessor.

  169  Between 1 December 1990 and 20 December 1991, Compass Airlines flew aircraft on domestic routes within Australia. The aircraft flown by Compass Airlines at various times during this period included the 5 leased aircraft referred to above (the leased aircraft). From time to time, the Authority rendered invoices to Compass Airlines in respect of charges purportedly payable to the Authority by Compass Airlines as a result of the use by the leased aircraft of facilities and services provided by the Authority. The charges were levied pursuant to a determination of the Board of the Authority which was purportedly made under s 66 of the CA Act 1988.

  170  During the period 1 September 1991 to 1 January 1992, invoices were rendered by the Authority to Compass Airlines on account of the charges purportedly incurred by each of the leased aircraft. The table below sets out the amount invoiced in this period in respect of each aircraft and the amount paid by Compass Airlines in respect of each of the aircraft, as allocated to the various invoices by the Authority.

Aircraft Total invoiced Amount paid
VH-YMA $3,191,037.18 $731,076.60
VH-YMB $2,538,344.41 Nil
VH-YMJ $3,170,733.16 $1,036,431.58
VH-YMK $3,133,716.30 $1,529,557.86
VH-YMI $3,162,938.39 $408,586.65

  171  Compass Airlines did not pay any of these amounts in full with the result that on 18 December 1991 s 69 of the CA Act 1988 purportedly vested in the Authority a statutory lien in respect of each of the leased aircraft. Penalties for non-payment also accrued on the above amounts pursuant to s 66(8).

  172  On 20 December 1991, joint provisional liquidators of Compass Airlines and Compass Holdings Limited were appointed by the Federal Court on the application of those companies. At 9 pm on that day the leased aircraft were "grounded".

  173  The appointment of the provisional liquidators was an event of default under the terms of each of the agreements pursuant to which Compass Airlines leased the aircraft. Although in each case an event of default authorised the lessor to terminate the agreement and remove the aircraft from Australia, s 78A of the CA Act 1988 prohibited the removal of an aircraft from Australia while a lien in respect of the aircraft was in force unless the Authority gave prior approval to such a removal. No approval was given by the Authority in respect of any of the aircraft.

  174  Faced with the sterilisation of their income-producing assets, in January 1992 each of Polaris, Monarch Airlines and Canadian Airlines entered into a deed with the Authority pursuant to which each of them agreed to pay under protest the relevant charges and penalties purportedly levied by the Authority and the Authority agreed to discharge the liens imposed upon the leased aircraft.

  175  The amounts paid by each of the respondents were as follows:

Polaris $5,239,058.07
Monarch Airlines $5,002,187.86
Canadian Airlines $2,888,740.97

  176  Upon receipt of the above payments, the Authority discharged the liens. The terms of each deed entitle Polaris, Monarch Airlines and Canadian Airlines to recover the money paid by them to the Authority, together with interest, if a court decides that, as against those companies, the lien did not validly secure payment of the charges or that for any reason the lien or the charges, or both, in whole or in part, were illegal, void or unenforceable.

  177  Each of the present respondents commenced an action in the original jurisdiction of this court seeking, in substance, a declaration that Div 2 of Pt VI of the CA Act 1988 was invalid, and the repayment to them of the sums paid by them under protest to the Authority, together with interest. On 28 April 1993, this court remitted the proceedings to the ACT District Registry of the Federal Court. Subsequently, the proceedings were heard by Branson J, who found that the relevant charges were invalid because, whilst the charges (except the meteorological charges) were within the first limb of s 67 of the CA Act 1988, they amounted to taxation, and were invalid by reason of the second limb of s 67.[3] Branson J did not need to consider whether the liens imposed to secure payment of the charges were constitutionally valid.

  178  The full court of the Federal Court dismissed an appeal by the Authority. The full court held that the charges were not reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which the charges related.[4] Thus, contrary to Branson J, the full court held that the charges were not authorised by the first limb of s 67. Because the full court held that the charges were not authorised by the first limb of s 67, it did not need to consider whether the charges were such as to amount to taxation, or whether the statutory liens were constitutionally valid.

  179  The appellant appeals to this court pursuant to a grant of special leave. It was a condition of the grant of special leave that there would be no appeal against Branson J's finding in relation to the meteorological charges.

The functions, powers and duties of the Authority

  180  The CA Act 1988 was described in its long title as:

   

[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.

Prior to the establishment of the Authority upon the enactment of the CA Act 1988 in 1988, most of the Authority's functions were performed by the Department of Transport and Communications. In the Second Reading Speech of the Civil Aviation Bill 1988, Mr Duncan explained the decision of the government to devolve functions from the Department to the new statutory authority. He said:[5]
   

It has been the policy of successive governments that the costs of services provided in support of the conduct of civil aviation operations should be recovered from the aviation industry. Given this policy, the body providing these services should be so structured as to make it adequately responsive to the industry's requirements and to industry's capacity and willingness to meet associated costs. ...

 

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.

  181  Thus, the purpose of the devolution of functions from the Department to the Authority was to allow aviation services to be supplied on a "user pays" basis. Although the CA Act 1988 did not explicitly direct the Authority to recover the costs of providing the services from the users of those services, several of the Act's provisions, when considered in combination, made it clear that giving effect to this principle was a fundamental purpose of the CA Act 1988. Those provisions are set out below.

  182  The functions of the Authority were set out in s 9(1) of the CA Act 1988, which relevantly provided as follows:

   

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;
   ...
 (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.

  183  The powers of the Authority were set out in s 13 of the CA Act 1988. Section 13 relevantly provided:

   

 (1)  In addition to any other powers conferred on it by this Act, the Authority has, subject to this Act, power to do all things necessary or convenient to be done for or in connection with the performance of its functions.
 (2)  Without limiting the generality of subsection (1), the powers include, subject to this Act, power:
   ...
 (f)  to do anything incidental to any of the powers specified in this subsection or otherwise conferred on the Authority.

  184  The Authority was governed by a Board. The Board was to decide the objectives, strategies and policies to be followed by the Authority and to ensure that the Authority performed its functions in a proper, efficient and economical manner.[6] The Board was required to develop a corporate plan and to review and revise it at least annually. The corporate plan was to include a statement of the objectives of the Authority for the subsequent 3 years and was to outline the strategies and policies that the Authority intended to adopt in order to achieve its objectives.[7]

  185  Sections 44 to 47 of the CA Act 1988 were concerned with, amongst other matters, the financial performance of the Authority. They provided as follows:

   

Corporate plan etc to Minister

 

44(1) As soon as practicable after developing or revising the corporate plan, the Board shall give a copy to the Minister.

 

(2) When the Board gives the Minister a copy of the plan, it shall also give the Minister a copy of a financial plan that includes, in relation to each financial year in the period covered by the corporate plan:

 (a)  performance indicators in such terms as the Board thinks appropriate;
 (b)  in relation to 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; and
 (c)  estimates of receipts and expenditure in relation to:
 (i)  search and rescue and aeronautical information services provided by the Authority;
 (ii)  developing, and ensuring compliance with, standards; and
 (iii)  implementing standards, being matters relating to certificates, licences, approvals, permits, registrations and exemptions.

 

Financial targets and performance indicators

 

45 When preparing the financial plan, the Board shall 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 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 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.

 

Estimates

 

46(1) Subject to this section, the Board shall:

 (a)  prepare estimates, in such form as the Minister directs, for each financial year and, if the Minister so directs, for any other period; and
 (b)  submit those estimates to the Minister not later than:
 (i)  in the case of estimates for a financial year - 60 days before the beginning of the year; or
 (ii)  in any other case - such date as the Minister directs.

 

(2) In subsection (1):

 

"estimates" means estimates of receipts and expenditure referred to in paragraph 44(2)(c).

 

Minister may direct variation of financial plan

 

47(1) The Minister may direct the Board to vary the financial plan in respect of financial targets, and performance indicators, relating to the provision of services and facilities.

 

(2) When doing so, the Minister shall consider:

 (a)  the matters referred to in section 45 (other than paragraph (b));
 (b)  the objectives and policies of the Commonwealth Government; and
 (c)  any other commercial considerations the Minister thinks appropriate.

 

(3) A direction shall be in writing and shall set out its reasons.

  186  Section 48 of the CA Act 1988 illustrated the financial independence of the Authority from the Commonwealth by providing that "[w]here the Authority satisfies the Minister that it has suffered financial detriment as a result of complying with a direction given by the Minister under this Act, the Authority is entitled to be reimbursed by the Commonwealth the amount that the Minister determines, in writing, to be the amount of that financial detriment".

  187  Sections 50 and 51 encapsulated what was, to some extent, an arm's length commercial dealing between the Authority and the Commonwealth. Section 50 provided for assets to be transferred from the Commonwealth to the Authority where the asset was held by the Department for the performance of a function which had been devolved to the Authority. Assets so transferred were to be valued and the Commonwealth was taken to have made, on the day of the transfer, a loan to the Authority equal to that amount.[8] The terms and conditions of such a loan as to interest and otherwise were to be determined by the Minister for Finance.[9] Section 52 in substance provided for the transfer of amounts from the Commonwealth to the Authority where the Commonwealth had received a payment in advance for the performance of some function which had been devolved to the Authority.

  188  Section 54 dealt with the capital structure of the Authority. It provided that the value of assets that had been transferred to the Authority by the Commonwealth under s 51, the net realisable value of any rights transferred to the Authority under the CA Act 1988, amounts paid to the Authority out of Parliamentary appropriations, and certain other items, were to be together regarded as the capital of the Authority. It also provided that interest was not payable to the Commonwealth on the capital of the Authority. However, the capital of the Authority was repayable to the Commonwealth at such times, and in such amounts, as the Minister determined in writing.[10]

  189  Section 56 of the CA Act 1988 provided for payment by the Authority of a dividend to the Commonwealth. Section 56 of the CA Act 1988 was in the following terms:

   

Payments of dividends to Commonwealth

 

56(1) The Board shall, within 4 months after the end of each financial year, by notice in writing given to the Minister, recommend that the Authority:

 (a)  pay to the Commonwealth, in relation to the Authority's operations in the financial year, a dividend of an amount specified in the notice; or
 (b)  not pay a dividend to the Commonwealth for the financial year.

 

(2) In making a recommendation, the Board shall have regard to:

 (a)  the matters specified in section 45; and
 (b)  the extent of the Commonwealth's equity in the Authority.

 

(3) Subject to subsection (6), the Minister shall, within 30 days after receipt of the recommendation, give notice in writing to the Board:

 (a)  where the recommendation is that a dividend be paid:
 (i)  approving the recommendation; or
 (ii)  directing the Authority to pay a dividend of a different specified amount; or
 (b)  where the recommendation is that a dividend not be paid:
 (i)  approving the recommendation; or
 (ii)  directing the Authority to pay a dividend of a specified amount.

 

(4) The Minister shall have regard to:

 (a)  the matters specified in section 45 (other than paragraph (b));
 (b)  the objectives and policies of the Commonwealth Government;
 (c)  the extent of the Commonwealth's equity in the Authority; and
 (d)  any other commercial considerations the Minister thinks appropriate.

 

...

  190  Section 64 provided that Div 2 of Pt XI of the Audit Act 1901 (Cth) was to apply to the Authority. Section 64(2) provided:

   

In its annual report under Division 2 of Part XI of the Audit Act 1901 (Cth), the Authority shall include:

 (a)  an evaluation of its overall performance against:
 (i)  the objectives set out in the corporate plan in force during the financial year; and
 (ii)  the financial targets and performance indicators set out in the financial plan in force during the financial year; and
 (b)  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.

  191  It is evident from these provisions that the Authority was intended to operate on a commercial basis and to be, to a large extent, financially autonomous and financially separate from the executive government. It is also evident that the Audit Act 1901 (Cth) gave effect to the "user pays principle" of public policy - the requirement in s 56(6) that any dividend be paid out of profits, when considered in conjunction with the "need to earn a reasonable rate of return on the Authority's assets" in s 45(g), and the "expectation of the Commonwealth that the Authority will pay a reasonable dividend" in s 45(h), indicates that the Authority was intended to recover the costs of providing its services from the users of those services. Indeed, s 67 itself enshrined this principle to some extent.

The statutory scheme for the imposition of charges

  192  Section 66 of the CA Act 1988 relevantly provided:

   

(1) In this section:

 

"charge" means:

 (a)  a charge for a service or facility provided by the Authority; ...

 

(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 ...

 

(3) Before making a determination, the Board shall give the Minister notice in writing of the proposed determination:

 (a)  specifying the day on and from which the determination is intended to operate;
 (b)  if it fixes a charge or penalty, specifying the basis of the charge or penalty; and
 (c)  if it varies a charge or penalty - specifying the reason for the variation.

 

...

 

(4) The Minister may, within the period referred to in subsection (5A), give the Board notice in writing approving or disapproving the proposed determination.

 

(5) In doing so, the Minister shall have regard to the duties and responsibilities of the Authority under this Act.

 

...

 

(6) The Board may make a determination only if:

 (a)  the Minister has approved it; or
 (b)  the period within which the Minister may give to the Board a notice under subsection (4) has expired without the Minister having given such a notice.

  193  It is convenient to set out again s 67, the construction of which is central to resolution of the first issue raised in these appeals:

   

Limits on charges

 

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.

Services and facilities in respect of which charges were determined

  194  The Authority divided the services it provided into 3 categories for the purpose of charging: air traffic services, rescue and fire fighting services, and meteorological services.

Air traffic services

  195  Air traffic services (ATS) were those services related to the control and coordination of air traffic. For the purposes of charging, the Authority divided ATS into 2 categories: terminal navigation services (TNS) and en route services (ERS). TNS included the provision, maintenance and operation of air traffic control services (including radar) within 55 km of an aerodrome with an operating control tower, and navigational aids used in the take-off and landing of aircraft. ERS included the provision, maintenance and operation of air traffic control information and support, and flight navigational aids, outside a 55 km radius from an aerodrome with an operating control tower.

  196  The trial judge made the following findings of fact in relation to ATS:[11]

 -  more sophisticated air navigation facilities and services and terminal facilities and services are set in place at airports at which larger aircraft land;
 -  ATS are available to be used by all aircraft whatever their size; however, the majority of ATS are provided to aircraft in controlled air space;
 -  the priority given by the Authority to regular passenger transport (RPT) aircraft over general aviation (GA) aircraft in the allocation of controlled air space meant that there were considerably more RPT aircraft than GA aircraft in controlled air space.

Rescue and fire fighting services

  197  Rescue and fire fighting services (RFFS) related to the provision and maintenance by the Authority of rescue and fire fighting facilities and services, including the provision and maintenance of rescue and fire fighting equipment and other emergency services available at airports.

  198  The effect of s 11 of the CA Act 1988 was to require the Authority, in 1991-92, to perform its functions in a manner consistent with the obligations of Australia under the Chicago Convention. The "Chicago Convention" was defined in s 3 as comprising the Convention on International Civil Aviation done at Chicago on 7 December 1944, the protocols amending that Convention, and the annexes to that Convention relating to international standards and recommended practices being annexes adopted in accordance with that Convention.

  199  In relation to RFFS, Annex 14 to the Chicago Convention (Annex 14) recommended the allocation of categories to aerodromes, based upon the length of the longest aircraft normally using that aerodrome. It recommended the minimum useable amounts of fire extinguishing agents to be available at the different categories of aerodrome, and the minimum discharge rate of foam solution for each category.

  200  The larger the aircraft that landed at an aerodrome, the higher the category of the aerodrome according to Annex 14, and the more expensive it was to provide RFFS at that aerodrome. However, whilst the level of RFFS which was available at any aerodrome at any given time was dependent upon the category of the aerodrome, the RFFS were available for all aircraft which landed at that aerodrome.

  201  Owing to the variance in the number of aircraft movements between aerodromes, the cost per tonne landed of providing RFFS at a small aerodrome could be higher than the cost per tonne landed of providing RFFS at a larger aerodrome, notwithstanding that the total cost of providing RFFS was higher at larger aerodromes that at smaller aerodromes. For example, the cost to the Authority of providing RFFS at Sydney airport was $0.74 per tonne landed while it was $4.14 per tonne landed at Cairns airport.

Meteorological services

  202  Section 6 of the Meteorology Act 1955 (Cth) required the Bureau of Meteorology to provide meteorological services for the purposes of, inter alia, civil aviation in Australia. Each year the Bureau charged the Authority a lump sum for the provision of these services, and the Authority fixed charges for the services which were intended to recover the lump sum payable by the Authority to the Bureau. The meteorological services provided by the Bureau were:

 (a)  observations in the form of aerodrome weather reports;
 (b)  forecasts of weather conditions en route;
 (c)  forecasts of weather conditions at aerodromes; and
 (d)  meteorological watch and warnings of meteorological phenomena hazardous to aircraft operations en route and to aircraft operations, aerodrome facilities and aerodrome services at aerodromes.
All of the above services were required by Annex 3 of the Chicago Convention.

  203  It is unnecessary to consider the meteorological services in any further detail as no issue relating to the charges for those services is presently before this court. They are mentioned in order to convey a complete picture of the services provided by the Authority.

The determination

  204  A determination of charges made pursuant to s 66(2) of the CA Act 1988 was published in the Commonwealth Gazette on 28 June 1991 (the Determination). The Determination defined certain terms. An "avtur aircraft" was defined as "an aircraft powered by an engine or engines using aviation turbine kerosene." A "non-avtur aircraft" was defined as "an aircraft other than an avtur aircraft." "Weight" was defined to mean the "maximum take-off weight".

  205  As the nature of the charges levied is fundamental to the outcome of these appeals, it is necessary to set out the relevant sections of the Determination in some detail. The Determination fixed charges for services and facilities under 4 headings: "Landing Charges - Avtur Aircraft"; "Landing Charges - Non-avtur Aircraft"; "En route Charges" and "Meteorological Charges". Set out below is the detailed charging regime provided for by the Determination under each of these headings.

Landing Charges - Avtur Aircraft

  206  A "landing charge" was defined to mean "a charge payable in respect of use by aircraft of facilities or a service relating to an aerodrome".

  207  Clause 1 of the Determination provided:

   

In respect of each landing of an avtur aircraft at an aerodrome referred to in Column 2 of Item 1 in Table 1 below, a charge for services and facilities at the aerodromes referred to in Column 2, calculated at the rate per 1000 kilogrammes weight specified in Column 3 of that item, is applicable.

Column 2 of Item 1 in Table 1 read: "Terminal navigation facilities and services, being such facilities and services relating to an aerodrome specified in Sch 1".

  208  There were 32 aerodromes listed in Sch 1. Included were the major capital city airports, small regional aerodromes such as Mackay and Tamworth and small metropolitan aerodromes such as Bankstown in Sydney and Essendon in Melbourne.

  209  Column 3 of Item 1 in Table 1 set out a rate of $3.65 per 1000 kg of weight.

  210  Clause 2 of the Determination provided:

   

In respect of each landing of an avtur aircraft at a place, being a place other than an aerodrome at which an Aerodrome Control Service is available at the time of the landing, within a control zone associated with an aerodrome referred to in Column 2 of Item 2 in Table 1 below, a charge for services and facilities at the aerodromes referred to in Column 2, calculated at a rate per 1000 kilogrammes weight specified in Column 3 of that Item, is applicable.

Item 2 was described in Column 2 of the table in identical terms to Item 1; Column 3 of Item 2, however, set out a rate for Item 2 of $1.83 per 1000 kg weight.

  211  Clause 3 of the Determination provided:

   

In respect of each landing of an avtur aircraft at an aerodrome referred to in Column 2 of Item 3 in Table 1 below, a charge for services and facilities at the aerodromes referred to in Column 2, calculated at the rate per 1000 kilogrammes weight specified in Column 3 of that Item, is applicable.

  212  Column 2 of Item 3 read as follows:

   

Fire fighting and rescue service, being such a service relating to an aerodrome specified in Schedule 2.

  213  Schedule 2 specified 21 different aerodromes, and Column 3 of Item 3 provided for a rate of $2.40 per 1000 kg weight.

  214  Clauses 4 and 5 of the Determination are not presently relevant.

Landing Charges - Non-avtur Aircraft

  215  Clause 6 provided:

   

In respect of each landing of a non-avtur aircraft at an aerodrome referred to in Column 2 of Item 1 in Table 2 below, a charge for services and facilities at the aerodromes referred to in Column 2, calculated at the rate per 1000 kilogrammes weight specified in Column 3 of that item, is applicable.

Column 2 of Item 1 in Table 2 provided: "Terminal navigation facilities and services, being such facilities and services relating to an aerodrome specified in Sch 3." Schedule 3 specified the 6 aerodromes of Adelaide, Brisbane, Hobart, Melbourne, Perth and Sydney. The rate specified in Column 3 of Item 1 in Table 2 was $3.65 per 1000 kg weight.

  216  Clause 7 provided:

   

In respect of each landing of a non-avtur aircraft at an aerodrome referred to in Column 2 of Item 2 in Table 2 below, a charge for services and facilities at the aerodromes referred to in Column 2, calculated at the rate per 1000 kilogrammes weight specified in Column 3 of that item, is applicable.

Column 2 of Item 2 specified: "Fire fighting and rescue service, being such a service relating to an aerodrome specified in Schedule 3." Column 3 of Item 2 specified a rate of $2.40 per 1000 kg weight.

  217  Clauses 8 and 9 of the Determination are not presently relevant.

  218  Clause 10 of the Determination provided:

   

A charge, referred to in paragraphs 1, 2, 3, 4, 5, 6, 7, 8 or 9 above, is not payable unless, at the time of the landing of the aircraft, the facilities or services to which the charge relates are available for use by the aircraft.

En route Charges

  219  Clause 11 provided:

   

In respect of the use by an aircraft of air route and airways facilities and services operated or provided in Australian territory, a charge is payable on each landing -

 (a)  in the case of a flight by an avtur aircraft weighing 20,000 kilogrammes or less between two aerodromes in Australian territory, in accordance with the following formula:
   C = R1 × D/100 × W
 (b)  in the case of a flight by an avtur aircraft weighing more than 20,000 kilogrammes between two aerodromes in Australian territory, in accordance with the following formula:
   C = R2 × D/100 × ÖW
 (c)  in the case of a flight by an aircraft weighing 20,000 kilogrammes or less between a place outside Australian territory and a place in Australian territory, in accordance with the following formula:
   C = R3 × D/100 × W
 (d)  in the case of a flight by an aircraft weighing more than 20,000 kilogrammes between a place outside Australian territory and a place in Australian territory, in accordance with the following formula:
   C = R4 × D/100 × ÖW

 

where -

 C  is the amount in dollars of the charge payable
 R1  is a rate of $3.60
 R2  is a rate of $16.15
 R3  is a rate of $2.85
 R4  is a rate of $12.75
 D  is the distance travelled by the aircraft expressed as the great circle distance in kilometres -
 (i)  between two aerodromes in Australian territory; or
 (ii)  between the first point of entry to an Australian Flight Information Region and the first aerodrome of destination in Australian territory;
 (iii)  between the point of entry to an Australian Flight Information Region and the next point of departure from an Australian Flight Information Region.
 W  is the weight of the aircraft expressed in tonnes.
 ÖW  is the square root of the weight of the aircraft expressed in tonnes.

Meteorological charges

  220  Clause 12 of the Determination imposed charges for meteorological services. For the reasons I have stated, it is not necessary to deal with the meteorological charges.

II ARE THE CHARGES ULTRA VIRES SECTION 67 OF THE CA Act 1988?

  221  To resolve the first issue in these appeals, it is necessary to deal with the following matters:

 1.  the correct construction of the Determination;
 2.  the meaning of the first limb of s 67 and its application to this case; and
 3.  the meaning of "taxation" in s 67 and its application to this case.

The correct construction of the Determination

  222  To determine whether the charges imposed by the Determination are ultra vires s 67 of the CA Act 1988, it is first necessary to determine the nature of the charges which the Determination, on its proper construction, purported to impose on aircraft operators. The clauses dealing with TNS and RFFS charges, namely cll 1, 2 and 3 (in relation to avtur aircraft) and cll 6 and 7 (in relation to non-avtur aircraft), are capable of 2 competing constructions.

  223  On the first construction, the clauses imposed a charge on account of the provision to an aircraft of those particular services and facilities which were provided from, or geographically located at, the particular aerodrome at which the aircraft landed. In contrast, on the second construction, the clauses imposed a charge on account of the provision of the services and facilities provided at all the aerodromes listed in Sch 1 (in the case of cll 1 and 2 ), Sch 2 (in the case of cl 3) or Sch 3 (in the case of cll 6 and 7), and the occasion of landing at a particular aerodrome was simply the trigger for incurring liability to pay the charge. The second construction views the charges as being on account of the use of a "network" of facilities and services which were rendered from numerous individual aerodromes.

  224  The 2 constructions arise from an inconsistent use of plural and singular expressions in the clauses themselves and the tables to which the clauses made reference. Clause 1 is a representative example. It provided:

   

In respect of each landing of an avtur aircraft at an aerodrome referred to in Column 2 of Item 1 in Table 1 below, a charge for services and facilities at the aerodromes referred to in Column 2 ... is applicable. (Emphasis added.)

The reference to the singular aerodrome makes it clear that liability to pay the charge was incurred only upon landing at a relevant aerodrome. The reference to services and facilities at aerodromes suggests, however, that, while the charge was incurred on landing, it was a charge for, or on account of, the provision of services and facilities at all the aerodromes referred to in Column 2, and not just for the particular services and facilities which were provided from, or located at, the aerodrome at which the landing was made. Yet in Column 2 of Item 1 in Table 1, the reference was to a singular aerodrome: "Terminal navigation facilities and services, being such facilities and services relating to an aerodrome specified in Sch 1".[12] This suggests that the charge was only on account of the particular services and facilities which were provided from, or located at, the aerodrome at which the landing was made. On this view, the plural in the referring clause was used simply because the clause operated upon the list of aerodromes in Sch 1, notwithstanding that on each occasion that the clause operated, it only levied charges on account of the use of services and facilities which were provided from, or located at, the particular aerodrome at which the landing was made.

  225  The choice between these 2 competing constructions is important because s 67 of the CA Act 1988 required that the charges be "reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which the charge relates". The content of the phrase "the matters to which the charge relates" in the context of the Determination depends upon which of the 2 competing constructions is correct. If the first construction is correct, "the matters to which the charge relates" will be only matters related to the provision of those services and facilities which were provided from, or located at, the aerodrome at which the landing generating the charge was made. If the second construction is correct, "the matters to which the charge relates" will be matters related to the provision of services and facilities across the entire network of aerodromes set out in Sch 1 (in the case of cll 1 and 2), Sch 2 (in the case of cl 3) or Sch 3 (in the case of cll 6 and 7) of the Determination.

  226  At first instance, Branson J held that the second construction was the correct one. Her Honour said :[13]

   

To the extent that there may be an inconsistency between the reference in the opening lines of cl 1 to "services and facilities at the aerodromes referred to in Column 2" and the reference in Column 2 of Item 1 of Table 1 to "facilities and services relating to an aerodrome specified in Schedule 1", it seems to me that the language of the opening lines of the clause must prevail. That is, in my view, the charge created by cl 1 is a charge for a network of facilities and services, not a charge for facilities and services relating to a particular aerodrome.

  227  In the full court of the Federal Court, Beaumont J (with whom Wilcox J agreed in this regard) held, contrary to the decision of Branson J, that the first construction was the correct one. His Honour reached this conclusion for the following reasons:[14]

 -  The concept of a "network" was not mentioned in the CA Act 1988, the regulations or the Determination, and it could not be suggested that a landing charge was applied in return for permission to take off at one airport, fly, and land at another airport, because the licensing of aircraft operations and the grant of approval to land and take off were dealt with by other provisions of the CA Act 1988, or by the provisions of the Air Navigation Act 1920 (Cth), or by statutory regulations.
 -  Clause 10 provided that a charge was not payable unless, at the time of landing, the facilities or services were "available for use by the aircraft", and this could not possibly be a reference to any "network" of facilities or services at each of these aerodromes.
 -  Clause 1 should be construed in light of s 67, and s 67 spoke of the amount or rate of "a charge" and of the expenses incurred "in relation to the matters to which the charge relates". It therefore proceeded upon the footing, consistent with the authorities explaining the notion of what amounts to "taxation", that there would be a particular or individual relationship between the fee payable and the specific service for which, or in relation to which, it is payable.
 -  The plural "aerodromes" in cl 1 can be interpreted as the singular "aerodrome" where appropriate, and by reading "aerodromes" as "aerodromes or aerodrome", an unjust and arbitrary interpretation is avoided. The second construction was unjust and arbitrary because it required an operator landing at only one of the aerodromes in Sch 1 to contribute to the expense of providing services and facilities relating to the 31 other Sch 1 aerodromes. Sin Poh Amalgamated (HK) Ltd v Attorney-General of Hong Kong[15] and BP Australia Ltd v Bissaker[16] are authority for reading a plural as a singular where appropriate. Section 23(b) of the Acts Interpretation Act 1901 (Cth) also allows a plural to be read as a singular.

  228  In my opinion, notwithstanding these reasons of Beaumont J and although both constructions are reasonably open, the second construction is preferable for the reasons set out below.

  229  First, the Determination should be construed in accordance with the maxim ut res magis valeat quam pereat. In Widgee Shire Council v Bonney,[17] Griffith CJ said:

   

[W]hen a by-law is open to two constructions, on one of which it would be within the powers of the local authority, and on the other outside of these powers, the former construction should be adopted, ut res magis valeat quam pereat.

  230  The rationale behind this principle rests upon the presumed intent of the body promulgating the impugned instrument. In Birch v Australian Mutual Provident Society,[18] Barton J indicated that a construction of a delegated legislative instrument which is intra vires the enabling statute is to be preferred to one which is ultra vires the enabling statute:

   

for the reason that it must not be taken that the [body], in framing the by-laws, intended to exercise anything beyond their statutory powers.

  231  The construction of the Determination, adopted by the full court of the Federal Court, inevitably leads to the clauses of the Determination dealing with TNS and RFFS charges being ultra vires s 67 of the CA Act 1988, because those charges were invariant across all the various aerodromes and were not in any way related to services or facilities provided at a particular aerodrome. The charges depended only upon the weight of the landing aircraft and the distance travelled by the aircraft. If the first construction is adopted, the lack of a relationship between the amount of the landing charges and the services or facilities provided at a particular aerodrome means that the Determination does not comply with the requirement in s 67 that the amount or rate of the landing charges be "reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which the charge relates".

  232  Accordingly, a construction which means that the Determination is arguably valid should be preferred to one which would automatically invalidate it. The Authority should be presumed to have intended to make a valid determination.

  233  Second, although the charges purported to be imposed for TNS and RFFS, no charge was imposed for services and facilities provided on take-off or within the controlled zone after take-off where there was no subsequent landing in Australia. This omission indicates that the landing was the occasion or trigger for a charge, rather than that the charge was for services associated with landing. It would be odd if the Authority had adopted a regime which charged aircraft an amount based on the particular service or facility rendered to an aircraft upon landing at a particular aerodrome, and yet provided to the aircraft take-off services and services subsequent to take-off free of charge.

  234  Third, the existence of cl 10 does not necessarily indicate that the charges were on account of services and facilities provided at a particular airport. Clause 10 extinguished a liability to pay charges which would otherwise arise, in circumstances where "the facilities or services to which the charge relates" were not available for use by the aircraft. It may be conceded that "the facilities or services to which the charge relates" in cl 10 were the facilities or services at the particular aerodrome at which the aircraft landed, as otherwise the liability to pay would only be extinguished in a situation where the facilities and services were unavailable across the whole network, or some significant proportion of it. Such an event seems extremely unlikely to occur, and would perhaps only ensue in the rare event of a catastrophic widespread failure of the Authority's systems.

  235  Unless one is to give cl 10 an interpretation which would mean that it has almost no practical operation, therefore, the "facilities or services to which the charge relates" in cl 10 must be the facilities or services at the particular aerodrome at which the landing was made. But this does not mean that the expression "facilities and services relating to an aerodrome" in Column 2 of Tables 1 and 2 as incorporated into cll 1, 2, and 6, or the expression "service relating to an aerodrome" as incorporated into cll 3 and 7, must be read as meaning the service or services and facilities provided from, or located at, a particular aerodrome.

  236  Clause 10 operated of its own force, unlike the items in Column 2 of each of Tables 1 and 2 which only operated by being incorporated by reference into cll 1, 2, 3, 6 and 7. Each of these operative clauses referred to "services and facilities at the aerodromes" (emphasis added). Given the different context, there is no reason why the provisions should be interpreted in the same way. There is no inconsistency in saying that the landing charge was on account of the provision of facilities and services across the whole network and also saying that the liability to pay this charge was extinguished when the facilities and services were not available at the particular aerodrome at which the aircraft landed. The most that can be said about the effect of cl 10 is that the description of the event creating liability to pay the charge as "landing ... at [a specified] aerodrome" must be modified to "landing at a specified aerodrome at a time when the facilities and services were available at that aerodrome".

  237  Beaumont J, in arriving at his preferred construction, said: "Finally, and most significantly, in my opinion, it is legitimate to interpret the plural reference in this part of cl 1 as the singular where this is appropriate",[19] and relied on s 23(b) of the Acts Interpretation Act 1901 (Cth) together with the case law considering it and its equivalent provisions to read the plural "aerodromes" in cll 1, 2, 3, 6 and 7 as the singular "aerodrome". His Honour did so because "[i]n this way, an unjust and arbitrary interpretation is avoided".[20] Beaumont J referred to the example of an aircraft operator making a single landing at one of the relevant aerodromes. He thought that "[i]t would be arbitrary and unjust to require that such an operator contribute to the expense of providing services and facilities relating to the 31 other Sch 1 airports."[21]

  238  Section 23(b) of the Acts Interpretation Act 1901 (Cth) states that, unless the contrary intention appears, "words in the singular number include the plural and words in the plural number include the singular."

  239  Thus, s 23(b) allows either a plural expression to be read as a singular expression or a singular expression to be read as a plural expression. In this case, the 2 competing constructions of the Determination arise out of the very fact that there is an inconsistent use of a plural expression followed by a singular expression. Section 23(b) is therefore inconclusive, as the choice of the use to which it is put (reading aerodromes as aerodrome or reading aerodrome as aerodromes) must depend upon a view of the correct construction of the Determination which is arrived at other than by reference to the terms of s 23(b).

  240  With great respect to Beaumont J, there is nothing which is necessarily arbitrary and unjust in requiring a user who uses part of a network on one occasion to contribute a proportion of the expense of maintaining the whole network. It does not seem to me, for example, that it is unjust that a person who makes few telephone calls each year should be required to pay the same telephone line rental fee as more frequent users of the telephone. Moreover, in this case, the charges are not arbitrary in the sense that they were calculated on an ad hoc, capricious or irrational basis - an aircraft operator may have ascertained the amount of charges he or she would incur upon any particular landing simply by applying the formulae set out in the Determination. The view that the charging regime set up by the Determination was "arbitrary and unjust" is too slender a basis for concluding that the first construction should be adopted. It is not a reason for displacing the principle explained in Widgee Shire Council v Bonney[22] and Birch v Australian Mutual Provident Society.[23]

Are the charges reasonably related to the expenses incurred or to be incurred in relation to the matters to which the charge relates?

The relevant comparison

  241  The first limb of s 67 requires a comparison between 2 items in order to determine whether the first of them meets the criterion of being "reasonably related" to the second. The first item is clear and unambiguous - the "amount or rate of the charge". The reference to "amount or rate" is significant in that it envisaged both a flat fee and some varying fee being within the ambit of s 67. The second item is the "expenses incurred ... or to be incurred in relation to the matters to which the charge relates". This item itself contains 2 components - the "expenses incurred or to be incurred" and the "matters to which the charge relates". The consequence of preferring the second construction of the Determination is that the "matters to which the charge relates" are the network of services and facilities provided by the Authority in the category of services being charged for. What then are "the expenses incurred or to be incurred ... in relation to" the network of services and facilities in the category being charged for?

  242  In O'Grady v Northern Queensland Co Ltd,[24] Toohey and Gaudron JJ held that the phrase "in relation to" is an expression of "broad import", although its precise ambit is confined by the context in which it appears. In the same case, I said:[25]

   

The prepositional phrase "in relation to" is indefinite. But, subject to any contrary indication derived from its context or drafting history, it requires no more than a relationship, whether direct or indirect, between two subject matters.

  243  If the phrase "on account of" had been used instead of the phrase "in relation to", then clearly the relevant expenses would be only those expenses that were directly incurred by the Authority in order to provide the relevant services. However, the phrase "in relation to" indicates that the relevant expenses are wider in scope - they are all those expenses which bear a relationship, whether direct or indirect, to the provision of the relevant category of services. The question then is this: is the amount or rate of the charge for a particular category of service, reasonably related to the expenses incurred or to be incurred by the Authority which bear a relationship, whether direct or indirect, with the provision by the Authority of the network of services and facilities within that category?

  244  Before this question can be answered, it is necessary to give content to the criterion of comparison, namely, "reasonably related".

The meaning of "reasonably related"

  245  The concept of "reasonableness" is a category of indeterminate reference.[26] Its application in a given factual situation cannot depend upon a logical formulation. In one sense, the appearance of the word "reasonable" or a variant in a statutory provision is, as Oliver Wendell Holmes Jr pointed out, nothing more than a direction to the court applying the provision "[to derive] the rule to be applied from daily experience".[27] The requirement that the charges be reasonably related to the expenses as described above at least requires that there be some rational relationship between the charges and the expenses. But once this rather low threshold is met, the degree of closeness of the relationship which is required in order for the statutory requirement to be satisfied cannot be described in the abstract. It depends on the application, to the circumstances of a particular case, of the fact-value complex that the word "reasonably" invokes. Important in that assessment are the purposes or objects of the CA Act 1988 - one of which was to have the Authority provide aviation services and charge for them on a "user pays" basis.

The Authority's rationale for the pricing structure in the Determination

  246  Branson J accepted the evidence of economic theory given by Dr Vincent Fitzgerald, an economic expert called by the Authority. The only dispute between the parties was the relevance of that theory in determining the issues in the case.[28]

  247  As Dr Fitzgerald's evidence shows, economic theory dictates that, to ensure an efficient allocation of resources, the price charged for a service should be equal to the marginal cost of its provision, since that measure of cost most closely reflects the opportunity cost to the community of using, or not using, the extra resources needed to produce, or not produce, an extra unit of service. In economics, "marginal cost" is defined as the increment to total cost in producing an extra unit of service. In a competitive market with many producers, prices will tend to equal marginal cost through the pressures of the market because, to stay in business, all producers will have to operate at or very close to best practice costs, including a profit return on their assets or funds employed. However, as Dr Fitzgerald points out, natural monopolies are characterised by very large fixed costs of production relative to variable costs. The Authority fell into this category, as the fixed costs of such items as radar equipment and control towers are large. Once this equipment is installed, the cost of providing one more air traffic control service (the marginal cost) is quite small relative to total cost, and the average cost of providing the service (which includes the fixed cost) exceeds the marginal cost. In such a situation, if the price for a service is set with reference to marginal cost, total costs would exceed total revenues, meaning that the "user pays" principle would be violated, because the cost of providing the services would have to be borne by persons outside the user group.

  248  If prices were set at a level above marginal cost so as to recoup total costs, then, as Dr Fitzgerald explains it, certain users would be caused to "greatly curtail their usage." The issue, then, confronting the natural monopolist is:

   

how to set prices to the various users of the various services concerned so as to recover the total costs of the resources involved from the users as a group, while minimising the extent to which the outcome (in terms of the level and pattern of usage of the services among the users) deviates from the most efficient outcome - ie that which would emerge if prices were set at marginal costs.

  249  Dr Fitzgerald's evidence explained 2 possible solutions to this problem. One was to charge a two-part price, in which the Authority could have charged all aircraft operators a fixed access fee per period to recover part of the fixed costs, plus a usage charge equal to the marginal cost of providing that service. However, he explained that this would be impractical because the Authority's fixed costs were very large compared with total costs. A two-part pricing structure would therefore require either:

 (a)  very large access fees, thereby entirely excluding otherwise infrequent users, such as general aviation operators and some international airlines; or
 (b)  the introduction of a wide variety of two-part charges supported by a regulatory regime designed to exclude particular users from those service domains for which they had not paid access fees. Such a system was said to be "very costly to administer and fraught with inequities".

  250  Another possible solution is that which was in fact adopted by the Authority, that is a pricing structure on the basis of "Ramsey pricing". The major tenet of Ramsey pricing is that "prices to different categories of users should be set in inverse relation to the sensitivity of their usage to price." Dr Fitzgerald gave evidence that a pricing structure based on Ramsey pricing carries "no connotation of cross-subsidisation so long as each category of user pays at least marginal cost for each unit of service". He noted that, for passenger aircraft, capacity to pay was related to the number of seats on a particular aircraft.[29] For the 45 aircraft types which used Australian airways, a high correlation existed between number of seats and either maximum take-off weight (MTOW) or its square root. For larger aircraft, the correlation between number of seats and the square root of MTOW was higher, for smaller aircraft the correlation was higher with MTOW simpliciter.

  251  In addition, the evidence disclosed that the International Civil Aviation Organisation (ICAO) recommended that airports have certain minimum RFFS capabilities.[30] The minimum recommended RFFS capabilities for an airport increased with increases in the length of aircraft regularly landing at that airport. To this extent, there was a relationship between RFFS requirements and the size of the aircraft. Hence a relationship existed between RFFS requirements and the MTOW of the aircraft.

  252  As a result of these considerations, MTOW or its square root (depending on the size of the aircraft) was chosen as a basis for charging for RFFS, TNS and ERS. In addition, distance was chosen as a basis for charging for ERS because the extent of services received bears a relationship to the distance travelled. The ICAO also recommended that ERS charges should be levied on the basis of the weight of the aircraft and the distance travelled.

  253  The net result of using MTOW as the basis of charging for TNS and RFFS and using MTOW and its square root as the basis of charging for ERS was that total Authority charges on a per passenger basis for 1991-92 were relatively flat across the fleet of aircraft using Australian airways. Dr Fitzgerald described the situation as follows:

   

For large aircraft with many passengers, which typically fly relatively long distances, the charges will be a small fraction of the flight costs. Therefore, for these aircraft, the sensitivity of passenger demand to the charges will be small, and economic efficiency - specifically, Ramsey pricing principles - dictate [sic] that they be charged relatively more per aircraft than smaller aircraft. Other things ... 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.

The calculation of the rates of the charges in the Determination

  254  Having chosen the variables upon which the charges were to be based, the Authority next had to calculate the rates of charge to be applied to these variables.

  255  The calculation of the rates began by determining the costs of the Authority. This was achieved by making an estimate of the total outgoings of the Authority for the 1991-92 year (which included interest charges), adding to this figure 7.5% of the value of the Authority's assets (representing the rate of return on assets as accepted by the Commonwealth Government), and subtracting the interest charges. The evidence disclosed that the attribution of total costs as calculated to individual facilities and services was based upon a 1988 cost allocation study. This information was updated for the 1991-92 year by use of a computer model which was said to function as a "broad indication of the continued accuracy of the cost relativities established by the earlier study". However, as between TNS and ERS, a decision was made to attribute all ATS (the description of TNS and ERS together) overheads to ERS. This was the result of a judgment that it would minimise the impact of the charges on usage patterns and it would therefore accord with Ramsey pricing principles. As a result, approximately 80% of all ATS costs were attributed to ERS. However, Dr Fitzgerald gave evidence that this allocation involved no cross-subsidy, as each service at least bore its marginal costs.

  256  The next step was to estimate the revenue base of the Authority. For TNS and RFFS, forecast growth rates were applied to the number of chargeable tonnes landing at the airports providing the services. For ERS, forecast growth rates were applied to composite weight/distance figures. The forecast growth rates were arrived at after consultation by the Authority with the industry in relation to the rate of growth for each of the sectors in the aviation industry. This led to a weighted average for the growth rate in the revenue base of each service category, which accounted for the proportion of the revenue base for each service contributed by each sector. The sectors in the aviation industry comprise international operations, domestic RPT (which are mainly jet aircraft which are fuelled by aviation turbine kerosene (avtur)), and general aviation (mainly small combustion engined aircraft fuelled by aviation gasoline (avgas)).

  257  The calculation next factored in revenue received by the Authority other than by way of charges after taking account of the forecast rates of growth for each sector. The Authority's revenue included receipts from the Commonwealth of a proportion of its avgas excise collections. The receipts were paid to the Authority in respect of its provision of ERS, TNS and RFFS to aircraft fuelled by avgas. The calculation then deducted from the target cost of each service revenue attributable to that service, a share of overall corporate miscellaneous revenues, such as interest earned, and a share of revenues from avgas excise. This produced the target amount which needed to be recouped by way of charges for each service. This was then divided by the forecast revenue base (in terms of the forecast number of units of the charging variables) for each service to produce the rate of charge for that service.

RFFS

  258  By the above process, the RFFS charges were set at a level so that the income that they generated, when added to other RFFS-attributable revenue, recovered the total cost to the Authority of providing RFFS across the network. Cost in this context included a rate of return of 7.5% to the Commonwealth on its assets.

  259  The evidence disclosed that, in relation to avgas aircraft (which comprise the majority of non-avtur aircraft), the major source of recovery of costs was the money which the Authority received from the excise which the Commonwealth levied on avgas fuel. There was difficulty in apportioning the RFFS costs attributable to non-avtur aircraft, for the reason that the Authority would not have provided RFFS at the same level but for the existence of the avtur aircraft. As a group, avtur aircraft approximated to the group of large, RPT aircraft. The RPT aircraft, for safety reasons, required a high level of RFFS. The expedient which was adopted was to levy RFFS charges on non-avtur aircraft at capital city airports only. This was done on the basis that the facilities and services at primary airports were the most sophisticated facilities and the most expensive to provide.

TNS

  260  In relation to the rates for TNS arrived at as a result of the process described above, Branson J accepted Mr Barnes' evidence that "he was confident that in 1991-92 the aggregate of the en route charges and the terminal navigation charges recovered the right amount of money".[31] This suggests that the total revenue received from the aggregate of the ERS charges, the TNS charges and the TNS-attributed portion of the avgas excise, was approximately equal to the aggregate costs incurred by the Authority in providing ERS and TNS. However, as I have indicated, 80% of all ATS costs were attributed to ERS.

  261  The evidence of Mr Barnes, which was accepted by Branson J, was that it was not reasonably possible to say that any particular proportion of the costs of TNS related to non-avtur aircraft because the services were provided for the larger avtur aircraft.[32] As a result, the same expedient adopted in relation to RFFS for non-avtur aircraft was employed in relation to TNS - that is to charge non-avtur aircraft only for landing at the 6 capital city airports which provided a high level of service.

ERS

  262  As I have indicated, virtually all system support costs of ATS were recovered by charges for the ERS. Before Branson J, there was no challenge by the present respondents (other than in respect of the 7.5% planned rate of return on assets and the allocation of system overheads) to the appropriateness of the total revenue generated by the en route charges.[33]

  263  The entire cost of providing ERS for both the inward and outward legs of international flights was recovered with a charge which only related to the inward legs of flights. This was said to be for the sake of administrative simplicity. The effect of Mr Barnes' evidence in relation to the different rates levied for domestic and international ERS was described by Branson J as follows:[34]

   

Mr Barnes gave evidence that in the early part of the 1988 year an exercise had been undertaken to identify the marginal cost of services provided specifically for international flights and that that exercise provided the basis for the amount sought to be recovered by the international en route charges. Mr Barnes said that such 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".

The finding of the full court of the Federal Court

  264  Because of the construction which Beaumont J gave to the Determination, his Honour held that s 67 required that the amount or rate of a particular charge be reasonably related to the expenses incurred or to be incurred by the Authority in relation to the particular service provided to a particular aircraft on the particular occasion that it was charged. His Honour (with whom Lindgren J agreed on this point) said:[35]

   

In short, no attempt was made to match, even in approximate terms, the amount of a charge with the expense of providing a specific service as s 67 contemplated. In the result, the amount or rate of each of the charges under challenge was not "reasonably related" to the relevant "expenses".

  265  Beaumont J's construction of the Determination meant that the full court of the Federal Court had no need to consider whether the first limb of s 67 was satisfied on the basis of the "network" interpretation of the Determination. As the full court's construction was incorrect, its finding with respect to the first limb must be set aside. Whether the charges are within the first limb of s 67 must therefore be determined by reference to the Notices of Contention, in which the respondents have set out matters which they contend expose as erroneous Branson J's conclusion that the ERS, TNS and RFFS charges were within the first limb of s 67.

The notices of contention

  266  In para 1 of the Notices of Contention, the respondents contend that, in addition to the reasons the full court gave for concluding that the charges were not reasonably related to the expenses incurred or to be incurred in relation to the matters to which the charge relates, the full court's finding was correct because the following matters meant that the rate of each of the TNS, RFFS and ERS charges was not reasonably related to the expenses incurred by the Authority in relation to the matters to which each of those charges related:

 (a)  the use of MTOW in the charging formula, which bears no reasonable relation to the extent of use of the facilities and services to which the charge relates;
 (b)  the adoption of a uniform rate of charge across a network where costs varied substantially between locations;
 (c)  in the case of the en route charges, the discrimination in the rate of the charge between international and domestic operators, where no reasonable basis was established for doing so;
 (d)  the discrimination in the rate of the charge (in the case of the en route charges) and in the circumstances in which the charges apply (in the case of the TNS and RFFS charges) between avgas and avtur aircraft, where no reasonable basis was established for doing so;
 (e)  the fact that the appellant did not know, in setting the various charges, what its expenses to be incurred were in relation to the provision of the services to which the charges related;
 (f)  the inclusion of a rate of return of 7.5% on assets as an "expense".

  267  Paragraph 2 of the Notices of Contention asserted that Branson J erred in making the following findings in support of her conclusion that the charges were reasonably related to the expenditure incurred or to be incurred in relation to the matters to which the charge relates:

 (a)  assuming that there was a reasonable relationship in terms of the amount payable in respect of each passenger in an aircraft, even though use of the services bore no discernible relationship to passenger numbers but was dependent on aircraft movements;
 (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 fixed rate for international en route charges did not have the consequence that the higher fixed rate for domestic en route charges did not reasonably relate to the expenditure 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 other evidence;
 (e)  considering, in the case of en route charges, the reasonableness of the charges for the purposes of s 67 of the CA Act 1988 by having regard to the frequency with which those aircraft or types of aircraft used particular services or facilities, and failing to take into account the fact that the charges were only levied on aircraft when they did in fact use those services or facilities;
 (f)  concluding that the more expensive en route facilities and services were put in place for bigger aircraft;
 (g)  concluding that the differential in rates fixed for larger aircraft and small aircraft was justified by reference to expenses.

  268  The respondents accept that the criterion of "reasonably related" does not require an exact equivalence between the amount or rate of a charge and an expense. However, many of their submissions seemed to assume that, although exact equivalence was not required, the criterion of "reasonably related" required some relationship of "reasonable proportionality" between charges and expenses. Paragraphs 1(a), 1(b), 1(c), 1(d), 1(e), 2(a), 2(c), 2(e) and 2(g) of the Notices of Contention are contentions based on this premise. But s 67 does not say that the charges must be "reasonably proportional" to expenditure. It only requires a reasonable relationship to exist. Indeed, the inclusion of the word "amount" in s 67 envisages a flat charge. Such a charge must often not be reasonably proportional to the expenses because it does not vary as the expenses do.

  269  Furthermore, paras 1(c) and 1(d), and to some extent paras 2(b), 2(c), 2(f) and 2(g), recast the relevant inquiry by focusing on whether there is unreasonable discrimination as between different types of aircraft and different operating routes instead of whether each individual charge meets the criteria of s 67. While unreasonable discrimination as between charges may in some cases indicate that a particular charge is not reasonably related to expenses, this is not a necessary consequence of such discrimination. Moreover, it brings in a concept of "unreasonable discrimination" which is not grounded in s 67. Section 67 has no prohibition on discrimination. The correct approach is to apply s 67 to each charge individually to determine whether the statutory requirements are met, not to make a comparison as between charges.

  270  Of the other matters in the Notices of Contention listed above, paras 2(b), 2(d) and 2(f) are quarrels with conclusions of fact as found by the trial judge. The limited circumstances in which this court will overturn on appeal findings of fact made by a trial judge who has seen the witnesses are discussed by Dixon CJ and Kitto J in Paterson v Paterson.[36] The evidence in this case was complex, lengthy and technical. This court should be slow to interfere with findings of fact made by the trial judge who undoubtedly became highly familiar with the technical aspects of the case over the lengthy course of the trial. Because that is so, the respondents have failed to convince me that Branson J erred to such an extent as would justify this court in interfering with her findings of fact.

  271  In relation to the issue raised by para 1(f), Branson J held that, in the context of s 67 and the CA Act 1988 as a whole, the word "expenses" could include a reasonable rate of return on assets.[37] There is much to be said for the view that, in the context of s 67 and the CA Act 1988 as a whole, "expenses" should be so interpreted. Section 45(g) of the CA Act 1988 obliged the Authority to have regard to the need to earn a reasonable rate of return on its assets when preparing its financial plan. But whether or not "expenses" should be so interpreted is in my opinion immaterial because, even if the rate of return is not an expense in the strict sense, in the statutory context it is in the nature of an expense (as a cost of capital) and within the purview of s 67. Branson J referred to Mr Gemmell's unchallenged evidence that the Authority's charges built in:[38]

   

a forecast 7.5% (real) rate of return on the capital employed by the CAA. 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 CAA. Unless there was a return on capital employed by the CAA, it would be irrational for the CAA's shareholder 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 CAA 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 criterion of "reasonably related" is broad enough to admit of a factor which, although not an expense in the strict sense, is in the nature of an expense.

  272  Accordingly, the fact that charges were calculated with reference to a rate of return does not prevent the charges from being reasonably related to the expenses incurred or to be incurred in relation to the matters to which the charge relates.

  273  It will be apparent from what I have said above that I consider that the respondents have failed to make out any of the grounds advanced in paras 1 and 2 of the Notices of Contention.

Are the charges otherwise reasonably related to expenses?

  274  As described in detail above, for each of RFFS, TNS and ERS, the charges in the Determination were arrived at by:

 1.  first arriving at charging variables (MTOW for RFFS and TNS; and MTOW, ÖMTOW and distance for ERS); and then
 2.  calculating, given these charging variables, what rates were required to recoup from each class of aircraft (that is avtur or non-avtur) the approximate cost of, or expenditure incurred in, providing each category of service to that class of aircraft.

  275  The selection of the charging variables involved considerations relevant to Ramsey pricing and international conventions with respect to charging for aviation services. In so far as Ramsey pricing was employed, it was used to achieve one of the underlying purposes of the CA Act 1988 - that of the Authority providing aviation services on a "user pays" basis. Each variable selected has a sound economic justification. It could not be suggested that any variable selected was too arbitrary or capricious to found the basis of the charges.

  276  The calculation of expenditure on each category of service involved approximations and estimates, and also considerations relevant to Ramsey pricing, because of the problems associated with calculating a marginal cost. Accordingly, there was not a precise correlation between actual expenditure in providing a category of service and the cost attributed to that category of service. For example, Ramsey pricing principles meant that in the case of ERS and TNS, all overheads were attributed to ERS. However, s 67 includes any expenditure which bears some relationship, whether direct or indirect, with the provision by the Authority of the network of services and facilities in the category of service to which the charge relates. Furthermore, to a large extent, each category of service and facility supplied by the Authority is interdependent with other categories of services and facilities provided by the Authority. The Authority does not make available one category of service or facility in isolation from the others. Although at a particular time, a particular aircraft may utilise only one category of service or facility, nevertheless each is interrelated in the sense that their combination is what ensures the safety and efficiency of aviation in the skies in and around Australia. The effect of the network of services is greater than the sum of the effect of each individual service.

  277  In my opinion, given that the variables selected have a sound economic justification, that the pricing structure was employed in order to achieve an underlying purpose of the CA Act 1988, that the rates of charges were essentially determined with reference to approximate cost, that s 67 permits regard to be had to a wide range of expenditures, and that the services and facilities provided by the Authority are interrelated, a reasonable relationship exists between the rate of each of the RFFS, TNS and ERS charges and the expenditure incurred by the Authority in providing the categories of service to which those charges related.

  278  Accordingly, in my opinion, each of the RFFS, TNS and ERS charges were within the first limb of s 67.

Are the charges "such as to amount to taxation"?

The meaning of "taxation" in s 67

  279  Numerous Commonwealth Acts[39] contain provisions that a charge is not to be "such as to amount to taxation". The term "taxation" is defined in only one of the provisions which uses this formulation, namely, s 65(7) of the Employment Services Act 1994 (Cth) which provides:

   

An amount payable as mentioned in paragraph (2)(b) must not be such as to amount to the imposition of taxation within the meaning of section 55 of the Constitution.

Some of the provisions are similar to s 67 of the CA Act 1988 in that they include the "reasonably related" requirement, as well as the "not be such as to amount to taxation" requirement.

  280  Examples of such provisions are:

   

A charge fixed under subsection (1) must be reasonably related to the expenses incurred or to be incurred by the ACA in relation to the matters to which the charge relates and must not be such as to amount to taxation.[40]

 

An aeronautical charge shall not be fixed at an amount that exceeds the amount that is reasonably related to the expenses incurred or to be incurred by the Corporation in relation to the matters in respect of which the charge is payable and shall not be such as to amount to taxation.[41]

 

A charge fixed under subsection (1) must be reasonably related to the costs and expenses incurred or to be incurred by APRA in relation to the matters to which the charge relates and must not be such as to amount to taxation.[42]

 

The amount or rate of a charge must 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 must not be such as to amount to taxation.[43]

  281  The use of the criterion "not be such as to amount to taxation" is clearly a device which is used by the Parliament to limit the power of statutory authorities to levy charges, pursuant to delegated legislation, for services rendered by those authorities. This is the function being performed by the word "taxation" in s 65(7) of the Employment Services Act 1994 (Cth), and it would therefore seem likely that the word "taxation" is being used in the other provisions mentioned, and in s 67 of the CA Act 1988, in the same sense in which it is used in s 65(7) of the Employment Services Act 1994 (Cth).

  282  In Lennon v Gibson & Howes Ltd,[44] Lord Shaw of Dunfermline speaking on behalf of the Privy Council said:

   

In the absence of any context indicating a contrary intention, it may be presumed that the Legislature intended to attach the same meaning to the same words when used in a subsequent statute in a similar connection.

  283  Fullagar J made comments to a similar effect in Gale v FCT:[45]

   

[N]ice distinctions ought not be drawn between different forms of words in statutes in pari materia.

  284  Moreover, s 55 of the Constitution renders invalid any provision of a "[law] imposing taxation" which deals with a matter other than taxation.

  285  It is likely that the Parliament, in cognisance of this fact, intended the word "taxation" in s 67 and its equivalent provisions to have a meaning which coincides with the meaning of "taxation" in s 55 of the Constitution. A statutory prohibition on levying taxation (in its constitutional sense) pursuant to delegated legislation prevents the situation where a whole Act save for one provision is invalid because that one provision incidentally authorises taxation to be levied pursuant to delegated legislation.

  286  Accordingly, I would regard the word "taxation" in s 67 of the CA Act 1988 as equivalent to "taxation within the meaning of s 55 of the Constitution". There is a substantial body of jurisprudence which has been built up in this court concerning the constitutional meaning of "taxation".

Distinction between "taxation" and "fee for services"

  287  In Matthews v Chicory Marketing Board (Vic),[46] Latham CJ listed features which, if present, indicate that an exaction of money is taxation:

   

a compulsory exaction of money by a public authority for public purposes, enforceable by law, and ... not a payment for services rendered.

  288  In this case it does not automatically follow from the conclusion that the charges are "reasonably related to the expenses incurred or to be incurred ... in relation to the matters to which the charge relates" that the charges are "fees for services" and therefore not taxation. No doubt the existence of this relationship means that the charges are, prima facie, to be regarded as fees for services. However, there are 2 reasons why a conclusion that the charges are not taxation cannot be reached without further analysis.

  289  First, the services were ones which an aircraft operator was required by law to acquire if he or she wished to fly in Australian airspace.[47] If the operator wished to fly in Australian airspace, he or she had no practical alternative but to acquire the services in question. Thus, in a practical sense, the exaction was compulsory and the compulsory nature of the exaction is an indication that a charge is taxation. In General Practitioners Society v Commonwealth,[48] however, Gibbs J said that "the fact that the service for which the fee is charged is one which the practitioner is in effect compelled to obtain does not in my opinion alter the character of the fee or convert it into a tax".[49]

  290  In this case, the aircraft operators were not compelled to fly in Australian territory, but they were compelled to obtain at least some of the services (such as air traffic control services) if they wished to do so. The material facts of the case cannot be distinguished from those in General Practitioners. Accordingly, in my opinion, the element of practical compulsion involved in the charges does not destroy the prima facie character of the charges as fees for services.

  291  Second, and more significantly, the pricing structure employed by the Authority was such that it was not possible to identify a discernible relationship at the lowest level between the amount of a particular charge and the value of the particular service received by a particular user as the quid pro quo for the charge. This feature of the charging structure is an indication that the charges are taxation.

  292  In Air Caledonie International v Commonwealth,[50] this court, after referring to Latham CJ's statement in Matthews, said:

   

The third [comment] 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. 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.

  293  In Harper v Minister for Sea Fisheries,[51] Dawson and Toohey JJ and I, referred to this passage from Air Caledonie in the context of saying that an exaction of money for the purpose of conserving a public natural resource could amount to taxation if the exaction "has no discernible relationship with the value of what is acquired".[52]

  294  The formulation that the exaction must be related to the "value of what is acquired" which was enunciated in Air Caledonie and Harper v Minister for Sea Fisheries differs slightly from that described in previous cases in this court. In Harper v Victoria,[53] Taylor J indicated that a charge for an egg grading service would be a tax:

   

if fees were fixed which bore no relation to the expenditure incurred by it with respect to the grading, testing, marking and stamping of eggs delivered and presented to it. (Emphasis added.)

  295  In Marsh v Shire of Serpentine-Jarrahdale,[54] Barwick CJ held that delegated legislation, which purported to exact a charge, was ultra vires because:

   

the fee bears no relation to the cost of administering a licensing system. It is evidently not a charge fixed as a reasonable fee for the issue of licences. Whilst that consideration may not be always decisive, in my opinion, the statute in this case authorized no more than fees which fall within this description.

This passage suggests that, in the context of the taxation/fee for services dichotomy, a charge must bear a reasonable relationship to the cost of providing the service in order to be characterised as a fee for service.

  296  Similarly, in Swift Australian Co (Pty) Ltd v Boyd Parkinson,[55] where the appellant argued that a particular exaction was a tax, McTiernan J said:

   

It is argued for the respondent that the pecuniary exaction in the present case falls within that category [of a fee for services] and, in support of that argument it cites figures to show that the amount exacted was less than the costs of administration. This argument is of doubtful worth, since the scale stands whatever may be the costs of administering the Act. (Emphasis added.)

  297  But Air Caledonie and Harper v Minister for Sea Fisheries show that the emphasis in determining whether a fee for services is taxation has shifted from cost to value. Unless this shift had been made, it would have been difficult, if not impossible, to describe the charge in Harper v Minister for Sea Fisheries as a fee for services. In that case, the formula for determining the licensing fee was explicitly related to the market value of abalone taken in the previous licence period and there was no attempt to relate the amount of the licence fee to the cost of administering the licensing scheme.

  298  In my opinion, however, the shift from "cost" or "expenses" in the earlier cases to "value" in Air Caledonie and Harper v Minister for Sea Fisheries is not a conceptual shift. It is really a recognition of the fact that the cost of a service is merely evidence of whether the payment is for that service. Thus, the expenses incurred in providing, or the costs of providing, a service are simply one criterion of the relationship. In Harper v Minister for Sea Fisheries, on the other hand, market value, as promulgated by declaration in the Gazette by the Director of the relevant government department, was the relevant criterion for determining whether the payment was for the benefit acquired. In Air Caledonie, the issue of "value" did not arise, as the court held that:[56]

   

[a] requirement that a returning citizen submit, in the public interest, to the inconvenience of such administrative procedures at the end of a journey cannot, however, properly be seen as the provision or rendering of "services" to, or at the request or direction of, the citizen concerned.

  299  In the present case, the Authority had a monopoly in the provision of relevant services. The need for a unified system of air traffic control suggests that there is no way in which these services could practicably be provided other than by a monopolist. Moreover, an aircraft operator had no choice as to whether or not to obtain these services if he or she wished to fly in Australia. In the situation of a natural monopolist, no supply side competition exists. There is nothing to generate a market value. The relevant measure of value would seem to be the cost of providing, or the expenses incurred in providing, the service. For present purposes, I will assume that these costs or expenses could include a reasonable rate of return on assets as a "cost of capital", and return to this issue later.

  300  In Air Caledonie, the court indicated that, to be characterised as a "fee for services", the relevant charge must be "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."[57] When this requirement as to the individual nature of the service is combined with the requirement that there must be a discernible relationship between the value of the service provided and the amount or rate of the charge, it tends to suggest that there must be a discernible relationship between the particular charge for the service provided on a particular occasion and the cost of providing that service, or the value of receiving that service. That is a different requirement from a requirement that the total value (or cost) of providing the services on all occasions bear a discernible relationship to the total of all charges levied for those services. Indeed, it is this difference which explains why Branson J concluded that, while the charges for TNS, ERS and RFFS were reasonably related to the expenses incurred by the Authority in relation to the matters to which those charges related, they nevertheless amounted to taxation.[58]

  301  Branson J's "network" interpretation of the Determination meant that, in addressing the first limb of s 67, her Honour was considering the issue of whether the total network expenses incurred by the Authority in relation to each category of charges were reasonably related to the charges imposed on Compass Airlines, on a network basis.[59] In considering whether the charges amounted to taxation, her Honour quoted passages from Air Caledonie and Northern Suburbs General Cemetery Reserve Trust v Commonwealth[60] and asked herself the question:[61]

   

[I]n the circumstance that Compass Airlines aircraft used such facilities and services at only some such aerodromes, was the relationship between the value which it acquired and the amount of the charges which it was required to pay such as to prevent the charges being characterised as taxes?

Her Honour concluded, in respect of TNS, for example:[62]
   

[I]n my view, the fact that the level of the terminal navigation charges was determined by reference to the costs of maintaining facilities and services at 32 aerodromes whilst Compass Airlines aircraft landed at only six of those aerodromes, means that a "discernible relationship", as that expression was used by the High Court in the Air Caledonie case, between the amount of the charges and the value of the relevant facilities and services to Compass Airlines is not, in my view, able to be identified.

  302  Her Honour seems to have thought that, in determining the taxation issue, it was necessary for her to confine her attention to the particular TNS, ERS and RFFS actually rendered to Compass Airlines and that it was not permissible to characterise the particular services rendered to Compass Airlines as use of a network. This view finds some support in the following passage from the judgment of the court in Air Caledonie:[63]

   

Indeed, one need do no more than refer to the second reading speech of the responsible Minister, to which both sides referred the Court, to confirm that the moneys intended to be raised by the purported impost were not related to particular services to be supplied to particular passengers but were intended to provide, when paid into consolidated revenue, a general off-setting of the administrative costs of certain areas of the relevant Commonwealth Department, including, for example, the administrative costs involved in maintaining facilities for the issue of visas in overseas countries and "general administrative overheads". (Emphasis added.)

  303  To similar effect are the comments made by members of this court in Northern Suburbs General Cemetery Reserve Trust v Commonwealth[64] where a statutory scheme required employers to expend a minimum amount in the training of their workforces; any failure to expend the minimum amount resulted in a liability to pay the shortfall to the Commonwealth. The money received by the Commonwealth was designated for expenditure on workforce training. An employer alleged that the legislation imposed a fee for services and was not supported by the taxation power in s 51(ii) of the Constitution. In concluding that the charge was a tax, the majority said:[65]

   

The [Act imposing the charge] does not by its terms establish any sufficient relationship between the liability to pay the charge and the provision of employment related training by the ultimate expenditure of the money collected to regard the liability to pay the charge as a fee for services or as something akin to a fee for services.

  304  Dawson J (with whom I agreed on this issue) said:[66]

   

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. (Emphasis added.)

  305  The above passages may be read as indicating that, to avoid characterisation as a tax, this court has required some relationship between the amount of a particular charge imposed and the value of the services actually received by a particular person on a particular occasion. However, in both Air Caledonie and Northern Suburbs, it could not be said that there was a particular identifiable service provided to the person liable to pay the charges. In terms of their ratio decidendi, Air Caledonie and Northern Suburbs did not hold the charges in question to be taxes because the charges levied in relation to the service did not bear a discernible relationship to the value of that service. Those cases held that the charges were taxes for the reason that no particular service could be identified. In the present case, it is clear that a service, however identified, was being provided.

  306  But in any event, I am of the opinion that, even if the accepted doctrine of the court is that there should be a discernible relationship between a particular charge and the value of a particular service in order for the charge to be characterised as a "fee for service", that suggestion ought to be considered afresh in light of the circumstances in this case.

Relevance of "user pays" to characterising a charge as taxation or a fee for services

  307  If it were correct that there must be a relationship between the particular charge levied and the particular service received, statutory authorities would be constrained to relating charges to the marginal cost of providing the service in order that the charges not amount to taxation. Where the statutory authority has high fixed costs and low variable costs, this constraint would mean that it would not be able to fully recover its costs. In that case, the statutory purpose, such as that underlying the CA Act 1988, could not be achieved. The issue then, is whether such a consideration can be legitimately taken into account in determining whether a charge is taxation or a fee for services.

  308  In R v Barger,[67] Griffith CJ, Barton and O'Connor JJ referred to the meaning of "taxation" in s 51(ii) and said: "[W]hatever [taxation] meant in 1900 it must mean so long as the Constitution exists". This comment may express no more than the traditional distinction between the connotation or meaning of a constitutional term, which does not change, and the denotation or application of a constitutional term, which changes as circumstances change. In any event, in light of current notions of legitimate methods of constitutional interpretation, the comment is not determinative of the factors which may be taken into account in characterising a charge as taxation or a fee for services. As I said in Re Wakim; Ex parte McNally:[68]

   

Philosophers are now said to regard the distinction between connotation and denotation as outdated.[69] And in R v Federal Court of Australia; Ex parte WA National Football League,[70] Mason J said that "[t]he distinction between meaning and denotation is not without its difficulties". But whether criticism of the distinction is or is not valid should not be seen as decisive. What is decisive is that, with perhaps only two exceptions,[71] the Court has never hesitated to apply particular words and phrases to facts and circumstances that were or may have been outside the contemplation of the makers of the Constitution. That is because, with the striking exception of s 92 - which has an historical meaning - the words of the Constitution, for the most part, describe concepts and purposes that are stated at a sufficiently high level of abstraction to enable events and matters falling within the current understanding of those concepts and purposes to be taken into account. In the words of an earlier work of Professor Dworkin,[72] the Constitution draws a distinction between concepts and conceptions. That being so, once we have identified the concepts, express and implied, that the makers of our Constitution intended to apply, we can give effect to the present day conceptions of those concepts.

  309  Accordingly, in my opinion, in characterising a charge as a fee for services or taxation, it is legitimate to take account of the changing circumstances of government which are exemplified by the devolving of functions from government departments to statutory authorities or other corporate bodies which, under the terms of their enabling statutes, have a monopoly on the provision of a certain service and are directed by the legislature to provide those services on a "user pays" basis.[73] Charges by such authorities and bodies should be seen as essentially cost driven, imposed on users for the purpose of reimbursing the cost of services provided. They should not be approached as if they were imposed simply to raise revenue for the general government of the country.

The utility of "discernible relationship" as a discriminant of characterisation in these circumstances

  310  The rationale behind using the existence of a discernible relationship between the value of the particular service received and the amount of the exaction as an indicia of a fee for service appears to be based on 2 related propositions. First, where there is no discernible relationship, it is easier to infer that there is a revenue-raising purpose behind an exaction.[74] In Fairfax v FCT,[75] Windeyer J pointed out that:

   

[t]axes are ordinarily levied to replenish the Treasury, that is to provide the Crown with revenue to meet the expenses of government. That is the prime purpose of the income tax.

  311  In Northern Suburbs General Cemetery Reserve Trust v Commonwealth,[76] Mason CJ, Deane, Toohey and Gaudron JJ answered the plaintiff's argument that the law was not taxation because there was no revenue-raising purpose by identifying a revenue-raising purpose which could be discerned from the operative provisions of the statute, even though it was not set out in its objects. Northern Suburbs indicates that, while "in the characterization of a law with respect to taxation, the legislative purpose has limited relevance",[77] it is nevertheless a factor to be taken into account in determining whether a law is a law "with respect to taxation" within s 51(ii) of the Constitution. In my opinion, the existence or non-existence of a revenue-raising purpose has greater relevance when the issue is whether an exaction is "taxation" or a "fee for services" by reason of a lack of a discernible relationship between the value of a particular service and the amount of the exaction. That is because the presence of a discernible relationship negatives the inference that the charge was imposed for a revenue-raising purpose.

  312  Second, the operation of the market generally means that there will be a relationship between the value of a service provided by the private sector and the fee imposed by the private sector for that service. Thus, an exaction for a service exhibiting this characteristic can be seen to be commercial in nature. Hence it can be characterised as a "fee" even though it is levied by a public authority. But, as the evidence in this case discloses, where a natural monopoly exists, whether in the public or private sector, there are difficulties associated with levying a price which exhibits a discernible relationship to the value of the service provided to a particular user on a particular occasion. Where services are provided by a public authority with a natural monopoly and where the statutory context and the surrounding circumstances otherwise fail to indicate a revenue-making purpose for a charge, the lack of a discernible relationship between the value of a particular service received on a particular occasion and the amount of the charge for that service does not necessarily indicate that the charge has the character of a tax.

  313  What then is the statutory context and what, if any, are the surrounding circumstances from which it can be inferred that there is no revenue-making purpose behind a charge for a service levied by a public authority with the result that the charge can be properly characterised as a fee for a service?

  314  In my opinion, the following elements of the statutory context and the circumstances of this case indicate that the charges are properly characterised as fees for services:

 -  the services were provided by a statutory authority which had as one of its statutory functions the provision of those services or services of that general type;
 -  the position of the statutory authority in providing the services approximated that of a natural monopolist;
 -  the statutory authority was (at least impliedly) directed under statute to recover the costs of providing those services from the users of those services;
 -  the statutory authority exhibited a large degree of financial independence from the executive government and was intended to operate on a commercial basis; and
 -  the pricing structure which gave rise to the lack of a discernible relationship between the value of the services provided on a particular occasion and the charge levied for those services (in this case, Ramsey pricing) was a reasonably and appropriately adapted means of achieving a legitimate public purpose (other than revenue-raising) which was related to the functions, powers or duties of the statutory authority.

  315  These matters support the inference that the lack of a discernible relationship arises from factors, commercial in nature, related to implementing the "user pays" principle of public policy by a body which is financially separate from government. They therefore negate the inference that the particular pricing structure arises from a revenue-raising purpose. Where the total charges recovered for providing the services exceeds the total cost of providing the services, however, a rebuttable presumption naturally arises that the pricing structure is employed for a revenue-making purpose.

  316  Here the evidence disclosed that the rates of the charges were calculated by making an estimate of the total outgoings of the Authority for the 1991-92 year, adding to this figure 7.5% of the value of the Authority's assets (representing the rate of return on assets) and subtracting the interest charges. There is no suggestion that the figure of 7.5% is an unreasonable rate of return on the assets in question. But can that 7.5% rate of return be properly included in the "costs" of the Authority?

  317  The degree of financial autonomy of the Authority from the executive government indicates that a reasonable rate of return on assets from the Authority to the Commonwealth may be legitimately considered to be the cost to the Authority of utilising capital provided by the Commonwealth to provide the services in question. Section 54 of the CA Act 1988 indicates that the capital of the Authority was to be regarded as separate from the capital of the Commonwealth and that the capital of the Authority was, in a large part, previously capital of the Commonwealth. Although s 54(2) stated that "[i]nterest is not payable to the Commonwealth on the capital of the Authority, but the capital of the Authority is repayable to the Commonwealth at such times, and in such amounts, as the Minister determines in writing", s 45 demanded that "[w]hen preparing the financial plan, the Board shall consider", inter alia, "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)."

  318  The rate of return required by the Commonwealth arose as an incident of the Commonwealth utilising the Authority to provide the services in question. The Commonwealth required that its assets provide a reasonable rate of return so that there was no opportunity cost to the Commonwealth of allowing a semi-autonomous statutory authority to tie up what would be Commonwealth assets if the functions of providing the services in question had not been devolved to the Authority. But the overarching purpose of the requirement, as discerned from the operation of the CA Act 1988, was to allow the Authority to provide the services in question while minimising the opportunity cost to the Commonwealth. It was not to "replenish the Treasury".[78]

The charges are not such as to amount to taxation

  319  It follows that in the statutory context of this case the lack of a discernible relationship between the charge levied for, and the value of, a particular service provided on a particular occasion, does not destroy the prima facie character of the charges as fees for services. All the charges in question are therefore properly regarded as fees for services and do not amount to taxation.

III ARE THE LIENS INVALID BY VIRTUE OF SECTION 51(xxxi) OF THE CONSTITUTION?

The statutory framework for the imposition of the liens

  320  Sections 69 and 70 of the CA Act 1988 relevantly provided:

   

Imposition of statutory lien

 

69(1) Subject to section 76, where:

 (a)  at the end of the payment period after a charge became payable in respect of an aircraft, the charge is not paid; and
 (b)  at the end of that period, a statutory lien is not in effect in respect of the aircraft; and
 (c)  the charge or penalty in respect of the charge remains unpaid;
then, if an appropriate officer so directs at any time, the Registrar shall make an entry in the Register in the manner prescribed and, upon the making of the entry, there is vested in the Authority in respect of the aircraft a statutory lien covering the following:
 (d)  the charge or penalty;
 (e)  any penalty that becomes payable in respect of the charge after the entry is made;
 (f)  any further outstanding amounts in respect of the aircraft.

 

...

 

Effect of lien

 

70(1) Where a statutory lien has been registered in respect of an aircraft and until the lien ceases to have effect, the following provisions of this Division apply, in spite of any encumbrance in respect of the aircraft and any sale or disposition of, or dealing in, the aircraft or an interest in the aircraft, and whether or not the Authority has possession of the aircraft at any time.

 

(2) For the purposes of priorities amongst creditors and the purposes of the distribution of the proceeds of a sale made under section 73, the statutory lien has effect as a security interest in respect of the aircraft ranking in priority:

 (a)  after any security interest (other than a floating charge) in respect of the aircraft created before the time of registration of the statutory lien, to the extent that that security interest covers a debt incurred before that time; and
 (b)  before any security interest not falling within, or to the extent that it does not fall within, paragraph (a).

  321  Section 71 of the CA Act 1988 provided for the de-registration of an Australian aircraft if an outstanding amount covered by a statutory lien remained unpaid at the end of 6 months after the later of the day on which it became an outstanding amount and the day on which the lien was registered. Section 72 of the CA Act 1988 provided for seizure by the Authority of an aircraft if an outstanding amount covered by a statutory lien remained unpaid at the end of 9 months after the later of the day on which it became an outstanding amount and the day on which the lien was registered. In such a case, s 71 required that the Authority, through its authorised officer:

   

 (a)  shall take reasonable steps to give notice of the seizure to:
 (i)  such persons as, in the opinion of an authorised officer, have a security interest in the aircraft;
 (ii)  each person who is any of the following, namely, an owner, operator, lessee, hirer, charterer or pilot in command, of the aircraft; and
 (iii)  such other persons as are prescribed; and
 (b)  may keep possession of the aircraft until all outstanding amounts covered by the statutory lien are paid.

  322  Section 73 provided:

   

Sale of aircraft

 

73(1) If an outstanding amount covered by the statutory lien is unpaid at the end of 9 months after the day on which it became an outstanding amount or the day on which the lien was registered, whichever is the later, the Authority may at any time, whether or not the aircraft has been seized under section 72:

 (a)  sell the aircraft as prescribed, whether by public auction or private contract;
 (b)  make and execute all instruments and documents necessary for effecting the sale; and
 (c)  give full and effective title to the aircraft free of all encumbrances, leases and contracts of hire.

 

(2) Before selling the aircraft, the Authority shall take reasonable steps to give reasonable notice of the sale to the persons referred to in paragraph 72(a).

  323  Section 74 dealt with the application of payments received by the Authority in discharge of amounts covered by statutory liens. The payments were to be applied in discharge of those amounts in the order in which they became payable. Section 75 provided that a lien ceased to have effect if there was no outstanding amount covered by the lien, if the aircraft was sold under s 73, or if an appropriate officer so directed in writing.

The argument in the courts below

  324  At first instance and in the full court of the Federal Court, the respondents contended that the provisions of the CA Act 1988 relating to the liens, namely ss 68 to 81, were invalid because they were laws with respect to "the acquisition of property ... from any ... person for any purpose in respect of which the Parliament has power to make laws" on other than just terms. That being so (so the argument went), the negative implications in s 51(xxxi) of the Constitution precluded the Commonwealth from imposing the liens. Neither Branson J nor the full court had to decide this question because they each held that the charges which the liens secured were invalid. The respondents also initially contended that the liens provisions imposed taxation and as such the CA Act 1988 was in breach of s 55 of the Constitution. However, that argument was abandoned in this court.

The operation of s 51(xxxi)

  325  Not every taking or acquisition of property from a person or State by the Commonwealth is an acquisition for the purpose of s 51(xxxi) of the Constitution. In Mutual Pools & Staff Pty Ltd v Commonwealth,[79] Brennan J described the operation of s 51(xxxi) of the Constitution:

   

Section 51(xxxi) of the Constitution has a dual effect. First, it confers power to acquire property from any State or person for any purpose for which the Parliament has power to make laws and it conditions the exercise of that power on the provision of just terms. Second, by an implication required to make the condition of just terms effective, it abstracts the power to support a law for the compulsory acquisition of property from any other legislative power[80] (s 122 apart).[81] Nevertheless, there are sundry laws providing for the acquisition of property which are supported by heads of power other than s 51(xxxi) and which are not affected by the requirement of just terms. For example, laws providing for the imposition of a tax,[82] the compulsory payment of provisional tax,[83] the seizure of the property of enemy aliens,[84] the sequestration of bankrupts' property,[85] the forfeiture of prohibited imports or the exaction of fines and penalties[86] have been held to be unaffected by the guarantee of just terms. If the laws considered in these cases had been classified as laws falling within s 51(xxxi), the acquisitions of property for which they provided would have failed for want of the provision of just terms. Clearly there are some laws which, though they provide for what can properly be described as an acquisition of property, are not classified as laws falling within s 51(xxxi). The acquisitions of property for which they provide are not acquisitions of property for the purposes of s 51(xxxi). (Emphasis in original.)

Did the liens provisions effect an acquisition of property in the circumstances of this case?

  326  The first issue is whether the liens provisions operated to effect an "acquisition of property". The appellant argued that no acquisition of property could take place until an aircraft had been seized under s 72 or sold pursuant to s 73 and that there was no such seizure or sale in this case. Once a lien was vested in the Authority in respect of an aircraft, s 78A of the CA Act 1988 prohibited removal of that aircraft from Australian territory without the approval of the Authority (which was not given in this case). Notwithstanding this interference (virtually a taking) with property, the Authority claims that Australasian United Steam Navigation Co Ltd v Shipping Control Board[87] is authority for the proposition that a restriction on the use of an aircraft while it remains in the possession of its owner does not effect an acquisition for the purposes of s 51(xxxi). The respondents, on the other hand, contend that the liens vested in the Authority conferred on the Authority "an identifiable and measurable advantage"[88] relating to the ownership or use of property. They therefore effected an acquisition of property.

  327  In Mutual Pools, Deane and Gaudron JJ said:[89]

   

[T]he word "acquisition" is not to be pedantically or legalistically restricted to a physical taking of title or possession. Once it is appreciated that "property" in s 51(xxxi) extends to all types of "innominate and anomalous interests",[90] it is apparent that the meaning of the phrase "acquisition of property" is not to be confined by reference to traditional conveyancing principles and procedures.

  328  Section 69 of the CA Act 1988 referred to the liens being "vested" in the Authority and s 70(2) described the liens as a "security interest". The operative effect of the liens was to divest the respondents of valuable interests in the aircraft including the right to demand the immediate return of the aircraft should it be seized and the ability to sell the aircraft and give clear title to the aircraft to the buyer. Furthermore, the Authority obtained an "identifiable and measurable advantage"[91] by the vesting of the lien because the Authority was given rights of control in that it could refuse to approve the removal of the aircraft by the respondents until the outstanding charges were paid.

  329  Accordingly, in my opinion, the liens provisions effected an "acquisition of property", notwithstanding that there was no seizure or sale of the aircraft.

Principles relevant to the characterisation of the liens

  330  Although the 2 major propositions referred to by Brennan J in Mutual Pools are well established by decisions in this court, a difficulty arises in determining which "sundry laws" providing for the acquisition of property "are supported by heads of power other than s 51(xxxi) and which are not affected by the requirement of just terms."[92] In the passage quoted above, Brennan J provides examples of laws which have been held to fall outside s 51(xxxi). However, the liens provisions of the CA Act 1988 do not precisely match any class of law which has been previously held by this court to fall outside s 51(xxxi). They are most closely analogous to laws providing for the forfeiture of property as a consequence of, and a penalty for, a breach of a Commonwealth law, a class of laws examined in Burton v Honan,[93] Cheatley v Queen,[94] and Re Director of Public Prosecutions; Ex parte Lawler.[95] They differ from such laws, however, because the lien did not vest in the Authority as a result of a breach of a Commonwealth law. There was no provision of the CA Act 1988 which created a positive statutory obligation to pay to the Authority the charges secured by the lien. Instead, s 66(11) of the CA Act 1988 simply provided that charges and penalties may be "recovered as debts due to the Authority".

  331  Because no precedent is on all fours with the present case, the question arises as to whether there is any principle which enables a court to say whether an apparent acquisition of property by the Commonwealth can be justified by a head of power other than s 51(xxxi) of the Constitution. In Burton v Honan,[96] Dixon CJ, in the course of referring to the implied incidental power of the Parliament, said:

   

[E]verything which is incidental to the main purpose of a power is contained within the power itself so that it extends to matters which are necessary for the reasonable fulfilment of the legislative power over the subject matter.

H is Honour, in referring to a law which provided for the forfeiture of goods imported in breach of the Customs Act 1901 (Cth), later said:[97]
   

It is nothing but forfeiture imposed on all persons in derogation of any rights such persons might otherwise have in relation to the goods, a forfeiture imposed as part of the incidental power for the purpose of vindicating the Customs laws.

  332  Dixon CJ's comment contains the genesis of the approach which has been since adopted in varying degrees by members of this court in determining whether a law which effects the acquisition of property is nevertheless outside the requirement of "just terms" in s 51(xxxi). That approach is one of characterisation. Thus, in Mutual Pools, Mason CJ expressed the view[98] that, of the cases which prima facie fall within s 51(xxxi), but which are to be regarded as authorised by the exercise of specific powers on other than just terms:

   

it may be said that they are all cases in which the transfer or vesting of title to property or the creation of a chose in action was subservient and incidental to or consequential upon the principal purpose and effect sought to be achieved by the law so that the provision respecting property had no recognizable independent character.

In the same case, Deane and Gaudron JJ gave a more explicit explanation of the issues of characterisation involved. Their Honours said:[99]
   

The settled method for determining whether a particular law is or is not of the kind referred to in one or other of the grants of legislative power contained in s 51 is that of characterization. That being so, the indirect operation of par (xxxi) does not extend beyond abstracting from other grants of legislative power authority to make laws which can properly be characterized as laws with respect to the acquisition of property for a purpose in respect of which the Parliament has power to make laws. That does not, of course, mean that a law will be outside the reach of par (xxxi) unless that is its sole or dominant character. For the purposes of s 51, a law can have a number of characters and be, at the one time, a law with respect to the subject matter of a number of different grants of legislative power. However, unless a law can be fairly characterized, for the purposes of par (xxxi), as a law with respect to the acquisition of property, that paragraph cannot indirectly operate to exclude its enactment from the prima facie scope of another grant of legislative power. Put differently, "it is at least clear that before the restriction involved in the words 'on just terms' applies, there must be a law with respect to the acquisition of property (of a State or person) for a purpose in respect of which the Parliament has power to make laws".[100]

  333  Despite the recognition by their Honours that a law can bear more than one character and a denial that a law will be outside s 51(xxxi) unless that is its "sole or dominant character", the approach taken by other members of the court to s 51(xxxi) appears to search for the "sole or dominant character" of the law. Support for this assertion may be found in statements which have implicit in them a choice of characterisation between s 51(xxxi) and another s 51 head of power. The analysis often seems to indicate that a law is outside s 51(xxxi) because it is more properly regarded as being within another s 51 head of power - which is based on an assumption that there is a "most correct" characterisation of a law.

  334  For example, in Mutual Pools, Deane and Gaudron JJ gave 2 examples of categories of laws which are likely to be outside s 51(xxxi). Those categories were "laws which provide for the creation, modification, extinguishment or transfer of rights and liabilities as an incident of, or a means for enforcing, some general regulation of the conduct, rights and obligations of citizens in relationships or areas which need to be regulated in the common interest",[101] and "laws defining and altering rights and liabilities under a government scheme involving the expenditure of government funds to provide social security benefits or for other public purposes."[102] Their Honours explained that, where such laws are of general application, "even though an "acquisition of property" may be an incident or a consequence of the operation of such a law, it is unlikely that it will constitute an element or aspect which is capable of imparting to it the character of a law with respect to the subject matter of s 51(xxxi)."[103] But the only logical way in which a generally described category of laws can be held to be unlikely to bear a particular characterisation is if the characterisation suggested by its general description can be said to preclude that other characterisation.

  335  Similarly, in Mutual Pools, Brennan J said:[104]

   

Although s 51(xxxi) abstracts from other heads of power the power of acquisition which that paragraph itself confers, it does not thereby abstract the power to prescribe the means appropriate and adapted to the achievement of an objective falling within another head of power where the acquisition of property without just terms is a necessary or characteristic feature of the means prescribed.

 

In each of the cases in which laws for the acquisition of property without the provision of just terms have been held valid, such an acquisition has been a necessary or characteristic feature of the means selected to achieve an objective within power, the means selected being appropriate and adapted to that end. Therefore a law which selects and enacts means of achieving a legitimate objective is not necessarily invalid because the means involve an acquisition of property without just terms. What is critical to validity is whether the means selected, involving an acquisition of property without just terms, are appropriate and adapted to the achievement of the objective. The absence of just terms is relevant to that question, but not conclusive. Where the absence of just terms enhances the appropriateness of the means selected to the achievement of the legitimate objective, the law which prescribes those means is likely to fall outside s 51(xxxi) and within another supporting head of power.

  336  This passage to some extent utilises the criteria expressed in Nationwide News Pty Ltd v Wills[105] for determining whether a law is supported by the implied incidental power inherent in a s 51 head of power. This is significant, as it appears to incorporate an assumption that if a law is properly characterised as an incidental law with respect to another head of power in s 51, it is not within s 51(xxxi).

  337  Brennan J reaffirmed his Mutual Pools approach in Re Director of Public Prosecutions; Ex parte Lawler,[106] a case in which the issue was the validity of a law providing for forfeiture of a fishing vessel which was found fishing in the Australian fishing zone in breach of s 100 of the Fisheries Management Act 1991 (Cth). In the same case, Deane and Gaudron JJ said:[107]

   

[T]he validity of a law that effects or authorizes forfeiture of property in consequence of its use in the commission of an offence depends on whether it can be characterized as a law with respect to some matter concerning which the Commonwealth Parliament has power to make laws. Almost invariably, the validity of a law which effects or authorizes forfeiture of the property of "an innocent third party", by which is meant a person who neither committed the offence nor knowingly facilitated its commission, will depend on the law being reasonably incidental to the power in question. And that will usually involve a consideration of whether it is reasonably capable of being seen as appropriate and adapted to achieving, or, as reasonably proportionate to some object or purpose within power.[108]

  338  Mason CJ said in Lawler[109] that "[t]here is, as I see it, no inconsistency between what I said in [Mutual Pools] and what is said with respect to s 51(xxxi) by Deane and Gaudron JJ in the present case". Dawson J's judgment in "Lawler" also discloses a similar approach.[110]

  339  Thus, the approach taken by the court to s 51(xxxi) is an exception to the general principle that a law can bear more than one character for the purposes of s 51.[111] Although this is so, I would prefer to approach the issue in a different way from that expounded by Deane and Gaudron JJ in Lawler.[112] Where the inquiry is whether an acquisition of property is within federal power but outside s 51(xxxi), a two-stage process must be undertaken. First, is the impugned law a law within s 51(xxxi)? Second, if no, is the law otherwise within the legislative power of the Commonwealth as a law with respect to another head of federal power? It is incorrect to seek to answer the second question and treat it as determining the answer to the first. Section 51(xxxi) doctrine holds that, where that paragraph applies, the power of acquisition is abstracted from all other heads of Commonwealth power. The first question must always be answered, therefore, before resort is had to the second question.

  340  I discussed the first question in Mutual Pools[113] where I said:

   

The compound conception[114] 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.

  341  In that passage, I gave content to the first question in a manner which is independent of the answer to the second. If the law effects an acquisition of property and the notion of compensation is not incongruous or irrelevant, the law is within s 51(xxxi) and its validity will depend on whether it provides just terms for the acquisition, nothing more. Of course, the notions of incongruity and irrelevance necessarily assume that the subject matter or the purpose of the acquisition is one that, but for s 51(xxxi), would prima facie fall within another head of federal power such as taxation, bankruptcy or defence. But that is different from treating s 51(xxxi) as if, in some circumstances at least, its content is the residue of other federal powers. Where the Commonwealth acquires property, s 51(xxxi) must be addressed at the beginning and not at the end of the inquiry.

  342  If the circumstances are such that the notion of fair compensation to the transferor is irrelevant or incongruous, the law is not a law with respect to s 51(xxxi). Its validity will then depend on whether it can be supported under another head of federal power. If the law is correctly characterised as within the core of a s 51 head of power, other than s 51(xxxi), there is no need to resort to the implied incidental power. However, as the inquiry will only be made in a situation where the operation of a law effects the acquisition of property, it will often be difficult to say that the law falls "fairly and squarely within the core of the subject matter"[115] of another s 51 head of power.[116] When that is so, the extent of the incidental power will be decisive.

  343  There remains to be examined the precise manner in which the test for incidental power has been applied in s 51(xxxi) cases. In Nationwide News, Mason CJ said:[117]

   

Each specific grant of legislative power in the Constitution extends to all matters incidental to the subject matter of the power which are "necessary for the reasonable fulfilment of the legislative power"[118] over that subject matter. Or, to put it another way, the specific substantive power extends to matters "the control of which is found necessary to effectuate its main purpose".[119] ...

 

The formulations to which I have just referred are not without their difficulties. The first formulation impliedly assumes and the second expressly assumes that a legislative power has a main purpose or object. As very few of the Parliament's legislative powers are truly purposive powers, the reference to purpose or object in this context has a wider meaning. The ascertainment of what is the main purpose or object of a particular power may in some cases be a matter of some difficulty. But in the case of s 51(xxxv) no such difficulty arises. The main, if not the sole, purpose or object of the power is the prevention and settlement of interstate industrial disputes and the sole means of achieving that object is by means of conciliation and arbitration226.[120]

 

The second difficulty which arises from the formulations already quoted is to be found in the use of the word "necessary". If one thing emerges clearly from the decisions of this Court it is that, to bring a law within the reach of the incidental scope of a power, it is enough that the provision is appropriate to effectuate the exercise of the power; one is not confined to what is necessary for the effective exercise of the power.[121]

  344  Perhaps in recognition of one of the difficulties referred to by Mason CJ - that of identifying the "main purpose" of a non-purposive head of power - Brennan J's judgment in Mutual Pools[122] couches the test for determining whether a law is incidental to a s 51 head of power in terms of whether "the acquisition of property without the provision of just terms ... [is] a necessary or characteristic feature of the means selected to achieve an objective within power, the means selected being appropriate and adapted to that end".[123] Thus, Brennan J refers to achieving an objective within power, rather than achieving the "main purpose" of the power. In my opinion, this shift from the requirement of an incidental law achieving the main purpose of the power to the requirement of an incidental law achieving an objective within power, is one which is required in order to surmount the difficulty referred to by Mason CJ. This more liberal formulation of the test for an incidental power is evident in the judgment of Deane and Gaudron JJ in Lawler, who refer to "some object or purpose within power",[124] in my judgment in Nationwide, in referring to achieving the "main purpose or purposes",[125] and in the judgment of Dawson J in Nationwide who says that "notwithstanding the immediate operation of the law, if its end lies within the scope of the power, then there will ordinarily be a sufficient connexion to support the law".[126]

The application of these principles to this case

Is the notion of fair compensation irrelevant to or incongruous with the liens provisions?

  345  The conclusion that the charges which the liens secured are "fees for services" and not taxation is important to the resolution of this question. It means that the debt secured by the lien was the quid pro quo accruing to the Authority as the result of its prior supply of valuable services to the aircraft operator. The lien was used to secure an existing indebtedness and it was only in force until that indebtedness was discharged.[127] The subject matter of the lien is one that is arguably within the power conferred on the Parliament by s 51(i) and s 51(xxix) of the Constitution. If "fair compensation" were to be paid to those having a proprietary interest in an aircraft upon the imposition of a lien, it would mean that the Authority would have an interest in the aircraft which on sale could be realised to satisfy the operator's previously incurred debt to the Authority, but on the other hand the Authority would incur a liability to pay "fair compensation" to those having a proprietary interest in the aircraft. The amount of this liability for "fair compensation" would be at least equal to the amount secured by the lien (as the "fair value" of the lien in the sense of the amount required to be paid before it will be discharged), and may be greater than the amount secured by the lien (if fair compensation involved an amount for loss of profits consequent upon the loss of use of the aircraft). Thus, the entire purpose of the lien would be frustrated as the Authority would be no better off, and indeed may be worse off, in terms of net recovery of the charges levied as a quid pro quo for the provision of the services. Accordingly, in my opinion, the imposition of a statutory lien in these circumstances is irrelevant to or incongruous with the notion of fair compensation in the sense adverted to by me in Mutual Pools.[128] Fair compensation would not be incongruous or irrelevant if there were no services provided. But that is not this case.

Are the liens provisions supportable by another s 51 head of power?

  346  The Authority argued that the liens provisions were incidental to the provisions of the CA Act 1988 relating to the provision of airways services by the Authority and the charging of aircraft operators for those services. The Authority contended, and the respondents did not seriously contest, that the provisions of the CA Act 1988 relating to the provision of airways services by the Authority and the charging of aircraft operators for those services are supported by either or both of s 51(i), the interstate and overseas trade and commerce power, and s 51(xxix), the external affairs power. The reliance on s 51(i) is in part based on Airlines of NSW Pty Ltd v New South Wales [No 2].[129] The effect of Airlines [No 2] is that provision of services to intra-State traffic, in so far as those services are concerned with ensuring or promoting the safety of interstate or international aviation, is supported by s 51(i). Reliance is placed on the external affairs power in so far as the provisions of the CA Act 1988 gave effect to Australia's obligations under the Chicago Convention or were a means for effectuating an objective of the Chicago Convention.[130]

  347  The real issue between the Authority and the respondents is whether the liens provisions are properly characterised as laws within the implied incidental power of s 51(i) and/or s 51(xxix). This leads to the question whether the liens provisions are "reasonably capable of being seen as appropriate and adapted to achieving ... some object or purpose within"[131] s 51(i) or s 51(xxix).

  348  The purpose which the liens provisions sought to achieve was securing the payment of the charges levied for the services provided by the Authority. Given that levying the charges is within s 51(i), making the exercise of that power effective by securing the payment of those charges is undoubtedly a purpose within the scope of s 51(i). The only issue is whether imposing a lien is reasonably capable of being seen as appropriate and adapted to that purpose. Perhaps the strongest argument for contending that the liens provisions are not appropriate and adapted is that they bore harshly upon third parties such as the respondents themselves, who were owners of, lessors of, or had other proprietary interests in, the aircraft which had accrued the charges secured by the liens, even though the charges had been accrued by the operator of the aircraft and not by those third parties. Yet harsh though this may be, it is not decisive.

  349  It is true that, in Lawler, Deane and Gaudron JJ said:[132]

   

It can, we think, be taken that a law for the forfeiture of the property of an innocent third party, in the sense indicated, will not often satisfy the tests which reveal whether a law is reasonably incidental to a head of legislative power.

This statement by their Honours is based on their conception of an "innocent third party" as a "person who neither committed the offence nor knowingly facilitated its commission".[133] Undoubtedly, the forfeiture of the property of such a person would not in general promote the enforcement of, or compliance with, the law in question. For example, forfeiture of the property of the neighbours of an offender would not promote the enforcement of the law in question.

  350  However, the liens provisions are not open to this objection. What I said in Lawler about the legislation pursuant to which the vessels were forfeited seems applicable to the liens provisions:[134]

   

The forfeiture of vessels engaged in illegal fishing not only sends a persuasive message to potential wrongdoers, it also prevents further illegal use of the vessels and renders the illegal behaviour of the masters and crews unprofitable.[135] Knowledge by the owner of a foreign vessel that he or she can lose the vessel also assists in enforcing the Act because it makes it likely that the owner will exercise vigilance to prevent the vessel being used in breach of the Act.

  351  While there is no "illegality" in this case, the analogy of this case with the above passage is that the owners and lessors of an aircraft, like the owners of the ship in Lawler, cannot be regarded as third parties who have no rational connection with the achievement of the purpose sought to be achieved by the impugned provision.

  352  In addition, in this case, the "innocent" third parties received a benefit from the provision of the services on account of which the charges were levied, even though they had themselves not incurred the charges. Owners and lessors of aircraft benefited in that:

 1.  without acquiring the services, the operator of the aircraft could not fly the aircraft commercially in Australia and therefore would not have taken the lease; and
 2.  the services, being largely directed to safety, protected the physical integrity of their valuable assets which were the aircraft.

  353  Moreover, any reasonable due diligence process on the part of the owners or lessors prior to the granting of a lease to the operator would have disclosed that at the time the leases were executed, the Australian regulatory framework included the liens provisions. That such a process in fact took place in this case is illustrated by the fact that the leases made the imposition of a lien on the aircraft an event of default. Thus, the imposition of liens over the aircraft was one of the commercial risks evaluated by the owners and lessors when negotiating the lease.

  354  In determining whether a particular provision is appropriate and adapted to achieving a particular purpose, it is also permissible to have regard to legislative schemes in other jurisdictions. In Burton v Honan,[136] the fact that the forfeiture provisions were "Customs provisions which are of a standard pattern" was a factor militating in favour of the finding that they were supported by the implied incidental power. The imposition of liens upon aircraft for non-payment of air service charges is part of legislation in the United Kingdom[137] and Canada.[138] It is a non-exceptional legislative measure in international aviation. There is also a close analogy between the rights granted by the liens provisions and the existence of maritime liens in admiralty law.[139]

  355  It is also relevant to have regard to the difficulty of securing payment of charges in another manner.[140] In this regard, it is necessary to take account of the fact that an aircraft is a highly mobile piece of property which can be removed from the jurisdiction at very short notice. Because of the nature of the services provided by the Authority, a significant proportion of users of those services are unlikely to be domiciled, or have any assets, in Australia. The Authority may be left without an effective manner of recovering these charges if it did not have any rights in rem against the only asset of its debtor which may be present in Australia.

  356  The respondents contend that despite these considerations, there were other measures which would have secured payment of charges levied by the Authority in a manner less drastic than the imposition of a statutory lien, such as requiring a bank guarantee for charges before an operator was permitted to fly. However, in Burton v Honan, Dixon CJ said:[141]

   

These matters of incidental powers are largely questions of degree, but in considering them we must not lose sight of the fact that once the subject matter is fairly within the province of the Federal legislature the justice and wisdom of the provisions which it makes in the exercise of its powers over the subject matter are matters entirely for the Legislature and not for the Judiciary.

  357  In my opinion, whatever view one takes of the justice or wisdom of the liens provisions, the above considerations indicate that they are undoubtedly reasonably capable of being seen as appropriate and adapted to the achievement of a purpose (securing payment of the charges) which is within the scope of s 51(i). Therefore the liens provisions are properly characterised as being a law with respect to s 51(i).

Orders

  358  I would allow the appeals and make orders as proposed by Gleeson CJ and Kirby J.


View full documentView full documentBack to top


© Thomson Legal & Regulatory Limited ABN 64 058 914 668 trading as Australian Tax Practice