Hawker Pacific Pty Ltd v Freeland [1983] FCA 139; (1983) 79 FLR 183 (10 July 1983)

FEDERAL COURT OF AUSTRALIA

HAWKER PACIFIC PTY LTD v. FREELAND [1983] FCA 139; (1983) 79 FLR 183
Administrative Law

COURT

FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
Fox J.(1)

CATCHWORDS

Administrative Law - Administrative Decisions (Judicial Review) Act 1977 (Cth) - "Decision" within Act - Commonwealth awarding contract and issuing purchase order for supply of aircraft - Whether decision made under enactment - Whether unsuccessful tenderer a "person aggrieved" - Audit Act 1901 (Cth), s 71 - Finance Regulations 1942, regs 51, 52, 52A - Administrative Decisions (Judicial Review) Act 1977 (Cth). Held: (1) The power of the Commonwealth to contract is an inherent prerogative of governmental power. The decision to award a contract, whilst regulated by the Finance Regulations passed pursuant to the Audit Act 1901 (Cth), is an exercise of that power and not a decision under any enactment.

New South Wales v Bardolph [1934] HCA 74; (1934) 52 CLR 455, applied.

(2) The issue of a purchase order as required by reg 52A is no more than a part of the exercise of the prerogative power.

(3) The applicant, unsuccessful in its tender, was a "person aggrieved" within the meaning of the Administrative Decisions (Judicial Review) Act 1977 because of the selective invitation to tender as well as by the submission of a tender which involved cost and considerable documentation.

HEARING

1982, December; 1983, July 6, 7, 8, 9, 10. 10:7:1983
STATED CASE

Application, by way of a case stated, to determine whether an award, by the Commonwealth, of a contract to supply aircraft was a matter within the Administrative Decisions (Judicial Review) Act 1977.

K A Handley QC and J A Farmer, for the applicant.

P W Young QC and J J S Steele, for the first and second respondents.

D A Staff QC and C A Sweeney, for the third respondent.

Solicitors for the applicant: Priddle Gosling.

Solicitor for the first and second respondents: B J O'Donovan, Commonwealth Crown Solicitor.

Solicitors for the third respondent: Darvall McCutcheon.
BAG

DECISION

6 July 1983
Fox J. This case concerns the award, by the Commonwealth, of a contract to supply five aircraft. The matter comes before the court by way of an application under the Administrative Decisions (Judicial Review) Act 1977 (Cth).

By advertisements in the Sydney Morning Herald and the Melbourne Age on 17 September 1980 and in the Commonwealth Government Gazette of 23 September 1980, the Department of Transport (now named the Department of Aviation (the Department)) publicly invited registrations of interest by potential suppliers of light twin engine aircraft.

Seven companies responded. Three of these were eliminated by the Department's preliminary evaluations. Four potential suppliers offering a total of eight types of aircraft remained. A "certificate of exemption" purporting to exempt the Department from having to call for tenders publicly (see reg 52 of the Finance Regulations 1942) was signed by the Acting Assistant Secretary (Commercial) on 27 October 1981.

The Department then invited the remaining four companies to tender. These included the applicant and the third respondent. Tenders closed on 17 February 1982. The contract was awarded to the third respondent on 22 June 1982. A document called a "purchase order" for the same aircraft, was prepared on the same day.

The applicant complained that the aircraft which the third respondent contracted to supply did not accord in all respects with the specifications in the invitation to register an interest, nor with that respondent's tender.

At an early stage in the applicant's case the parties agreed to submit four questions for separate decision. Although in a form sufficient for the purpose of the proceedings, the questions were not then formulated as a stated case pursuant to O 29 of the Rules. Following argument upon each question I gave ex tempore answers. The parties have since submitted a document stating substantially the same questions, but in accordance with O 29. The questions now are:

1. Whether the alleged "decisions" referred to in the applicant's further
amended application -

(a) To award the contract (being exhibit "E" tendered by the

applicant)

to the third respondent; or

(b) To issue a purchase order (being exhibit 1 tendered by the second
respondent) to the third respondent

are decisions or either of them is a decision of an administrative

character under an enactment.

2. Whether the following matters or any one or more of them are
sufficient of themselves to make the applicant a "person aggrieved"

within

the meaning of the Administrative Decisions (Judicial Review) Act 1977:

(a) That the applicant having by letter dated 13 October 1980 (being
exhibit marked "WES1" and referred to in the affidavit of Warwick
Edward Slade sworn 8 October 1982 and filed in these proceedings)
registered an interest in tendering pursuant to a public

invitation

so
to do (being annexure "A" to the said affidavit of Warwick Edward
Slade) was invited to tender for the supply of aircraft; or

(b) That the applicant was one of only four persons invited to tender
and did tender for the supply of aircraft after a large number of
persons had been invited to register an interest in tendering;

(c) That, as evidenced by the minutes being exhibits "F" and "G"
tendered by the applicant and by the minute and Contract Board
Business Paper being exhibits 2 and 3 tendered by the second
respondent, the applicant's aircraft and the third respondent's
aircraft were the only aircraft considered finally as being

suitable for

the second respondent's purposes.

3. Whether the Certificate of Exemption No 554 executed on 27 October
1981, being exhibit 4 tendered by the second respondent, was valid.

4. If the said Certificate of Exemption No 554 was not valid, whether the
procedure adopted by the first respondent or the second respondent its
servants and agents in calling for registrations of interest and
subsequently
inviting in the manner it did (as evidenced by the exhibit marked "WES2"
referred to in the said affidavit of Warwick Edward Slade) tenders for

the

supply of aircraft, constituted the public invitation of tenders
within the meaning of the Finance Regulations.

QUESTION 1

The applicant argued that both the award of the contract and the issue of the purchase order were decisions of an administrative character under the Finance Regulations.

These Regulations are made under s 71 of the Audit Act 1901 (Cth) of which subs (1)(e) is relevant to this case:

"71.(1) The Governor-General may make regulations (not inconsistent
with the provisions of this Act) for carrying out the provisions of this
Act and in particular for and in relation to -

. . .

(e) the purchase of chattels and other property for or by the
Commonwealth; . . . ."

The relevant Finance Regulations are regs 51, 52, sub-regs (2), (3) and (4)

of reg 52AA and reg 52A:

"51.(1) Subject to any Act making provision with respect to contracts
for supplies and to regulation 52AA of these Regulations, where -

(a) any supplies the estimated cost of which exceeds $200 are
required:

(b) there is no existing contract between the Commonwealth and a
supplier under which the supplies so required can be obtained;
and

(c) the supplies are not obtained under a contract between a State
and a supplier,

at least three representative quotations for the supplies shall, whenever
possible, be obtained unless tenders are publicly invited.

. . .

(3) Where the estimated cost of any supplies exceeds $200 but does
not exceed $500, a quotation obtained under this regulation in respect
of the supplies may be oral or in writing, but, in the case of an oral
quotation, the details of the quotation shall be recorded in the
appropriate Departmental file.

(4) Where the estimated cost of any supplies exceeds $500, each
quotation obtained under this regulation in respect of those supplies
shall be in writing.

52.(1) Subject to any Act making provision with respect to contracts
for supplies and subject to the next succeeding regulation, contracts
shall not be entered into, and orders shall not be placed, for supplies

the

estimated cost of which exceeds $10,000 unless tenders have first been
publicly invited for those supplies.

52AA.

. . .

(2) Where the Secretary certifies that compliance with regulation 51
of these Regulations, or with the last preceding regulation, in respect

of

supplies of a kind specified in the certificate is, having regard to the
nature of the supplies and to the established practices in a profession,
business, trade or industry connected with the supply of supplies of that
kind, impracticable or inexpedient, regulation 51 of these Regulations or
the last preceding regulation, as the case may be, does not apply to
supplies of that kind.

(3) The next succeeding sub-regulation applies to supplies of the
following kinds:

(a) metals for use in the manufacture, by or on behalf of the
Commonwealth, of coins, medals, medallions, plaques and other
like objects at a mint;

(b) supplies relating to the defence of the Commonwealth;

(c) supplies for the Department of Housing and Construction;

(d) supplies obtained by or on behalf of the Administrator of the
Territory of Christmas Island in connection with the
administration of the Territory; and

(e) supplies approved, or to be obtained, by the Purchasing Division
of the Department of Administrative Services or by a Tender
Board of a Department.

(4) Where the Secretary, or an officer authorized by him by
instrument in writing for the purpose, certifies, in respect of

particular

supplies, being supplies of a kind to which this sub-regulation applies,
that compliance with regulation 51 of these Regulations, or with the last
preceding regulation, is, by reason of the urgency with which those
particular supplies are required, the sources of those particular

supplies

or otherwise, impracticable or inexpedient, regulation 51 of these
Regulations or the last preceding regulation, as the case may be, does
not apply to those particular supplies.

52A.(1) Where a Requisition for supplies has been approved by the
person or persons to whom it had been submitted for approval under
regulation 48, the Permanent Head shall issue a Purchase Order in
accordance with Form 13 in respect of the supplies specified in the
Requisition.

(1A) It shall be sufficient compliance with the requirements of
subregulation
(1) if an authorized officer issues the Purchase Order therein
referred to.

(2) Unless the Minister otherwise approves Purchase Orders shall be
prepared in triplicate and shall be numbered consecutively.

(3) A Purchase Order shall not be issued except in accordance with
the Requisition as approved."

QUESTION 1(a) - THE AWARDING OF THE CONTRACT

The Finance Regulations provide various conditions precedent that need to be satisfied before a contract can be awarded. The power to contract is an inherent prerogative or governmental power which is regulated by those Regulations (notably regs 51 and 52). The decision to award a contract is an exercise of this power and is therefore not made under an enactment (see New South Wales v Bardolph [1934] HCA 74; (1934) 52 CLR 455 at 474-475, 496 and 508).

Compliance with the Regulations is but a step leading to the awarding of the contract. I do not accept the applicant's proposition that because the Regulations regulate the power to contract they were the source of a "valid power" to contract.

I answer question 1(a) - No.

QUESTION 1(b) - THE ISSUE OF THE PURCHASE ORDER

Regulation 52A provides that the Permanent Head "shall" issue a purchase order after a requisition for supplies has been approved. It was submitted that its issue was purely mechanical and therefore that no relevant decision was involved. The use of the word "shall" does suggest that this is the case. It is also clear that the purchase order is an accounting document for the purposes of the Audit Act 1901, see s 34 (by virtue of s 71 of the Audit Act 1901 the Finance Regulations are "for carrying out the provisions of" the Act).

While a purchase order is a document addressed to the intended supplier, and may be the document on which he acts, it does not follow that the person who signs it or authorises its issue, is the person who makes the decision that the goods be purchased. Regulations 48 and 52A indicate the contrary. It does not seem to me possible, by referring to documents brought into existence to implement the order, to escape the fact that the order is part of an exercise of the prerogative.

I answer question 1(b) - No.

QUESTION 2

The provisions of the Administrative Decisions (Judicial Review) Act 1977 dealing with the requirement that an applicant be a "person aggrieved" have been widely construed on numerous occasions. It is trite law that the applicant must suffer as a result of the decision complained of beyond the suffering of an ordinary member of the public. The mere fact that the applicant and the third respondent were business competitors does not make the former a "person aggrieved".

In this case business competitors registered their interest and were then selectively invited to tender for the aircraft contract. Only four persons were so invited. Questions 2(a) and 2(b) differentiate between the invitation to tender and the submission of a tender. It seems clear as a matter of practical consideration, that the applicant was a "person aggrieved", at least by virtue of its submission of a tender. The cost of tendering and the volume of documentation alone indicate this.

In the circumstances I also regard the applicant's claim to be a "person aggrieved" as being supported by its receipt of an invitation to tender. The selective invitation initiated the applicant's commitment to prepare a tender and placed it far beyond the position of a member of the public. At the later stage referred to in question 2(c) only aircraft proposed by the applicant and the third respondent were considered.

I answer question 2(a) - Yes.

I answer question 2(b) - Yes.

I answer question 2(c) - Yes.

QUESTION 3

In the circumstances, this question does not arise. It was, however, argued before me, and I expressed views upon the matters raised or matters in similar terms, at the conclusion of argument. I shall therefore discuss these matters.

The certificate of exemption (exhibit 4) was granted pursuant to sub-reg (4) of reg 52AA which applies to supplies specified in sub-reg (3) of that Regulation. It was challenged on the basis that:

(i) it did not refer to "particular supplies", and
(ii) it did not state the reasons for certification; and
(iii) the supplies were not approved by a Tender Board of the Department.

The applicant submitted that the certificate must refer to a particular

aircraft and not aircraft of a kind. The argument was based on the proposition that sub-reg (2) of reg 52AA refers to "supplies of a kind" and therefore where sub-reg (4) refers to "particular supplies" a greater degree of specification was required. I find no difficulty with that initial proposition.

However, the applicant suggested that the Department would have to specify the particular aircraft they wanted, without publicly calling for tenders, before a certificate exempting the Department from calling public tenders could be issued. This suggestion is quite circuitous and is opposed to the spirit of the basic requirement in reg 52 that there be public tenders.

The detailed recommendations set out in the document before the certificate listed eight aircraft and specified that they achieve certain altitude, payload and purpose requirements. They went far beyond specifying aircraft of a kind in a generic sense. The certificate clearly relates to those specifications and on this question they should be read together. To my mind the certificate was of sufficient particularity to satisfy reg 52AA(4).

By s 72 of the Audit Act 1901 the Regulations may authorise persons there specified to give "directions" to officers in relation to any of the matters for which regulations may be made. Regulation 127A(1) does just that with respect to the Minister or Secretary of the Department of Finance. In this case par 12 in Pt 25 of the Finance Directions (in evidence as exhibit B) is as follows:

"Certificate of Exemption from Tenders and Quotations (Finance
Regulation 52AA(4))

12. The reason(s) for seeking a dispensation from the requirement
either to obtain representative quotations or publicly invite tenders,
shall be clearly stated in writing by the recommending officer and
contracts shall not be signed or orders placed until the certificate is
given. If the authorised person gives the requested certificate, he shall
clearly state on the papers the reason(s) which have satisfied him that

he

should so certify."

The certificate is found at the foot of page 3 of exhibit 4:

"CERTIFICATE OF EXEMPTION NO 554

In accordance with Finance Regulation 52AA(4) I hereby grant a
Certificate of Exemption from the invitation of public tenders.

(Sgd T M Wheeler)

A/Assistant Secretary

(Commercial)
27 October 1981"

Counsel for the applicant submitted that the certificate contains no reasons

and therefore is in breach of direction 12. Regulation 127A(5) is relevant in determining the consequences. Counsel was not, however, prepared to contend that invalidity of the certificate resulted; the irregularity was used "in aid of the general argument". In the circumstances, no final decision is required from me, although I incline to the view that invalidity did not result. Direction 12 deals with internal administrative procedures and should probably be understood as directory only (see Hatton v Beaumont (1977) 2 NSWLR 211 per Hope JA at 215).

Regulation 52AA(4) only applies if one of the paragraphs of sub-reg (3) is satisfied. Paragraph (e) of that sub-regulation is the only relevant paragraph. It refers to "supplies approved, or to be obtained, . . . by a Tender Board of a Department". The Department has no Tender Board so called. It does have a Contract Board.

Having regard to the evidence of the affidavit of Mr Charles Ross Groat and the annexures thereto, I conclude that, for the purposes of reg 52AA(3)(e), the Contract Board was a Tender Board.

I answer question 3 - Does not arise.

QUESTION 4

This question does not arise, although it was submitted by both parties that if I answered Question 3 in accordance with the views I have expressed, the answer should be - No. It is not necessary to say anything further.

My answers to the questions posed for separate decision are therefore:
Question 1 (a) - No.
1 (b) - No.
Question 2 (a) - Yes.
2 (b) - Yes.
2 (c) - Yes.
Question 3 - Does not arise.
Question 4 - Does not arise.