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Federal Court of Australia |
AVIATION - air traffic services - charges for - imposed by aviation authority on aviation operators - when does a statutory levy amount to taxation - whether charges reasonably related to costs of providing services to operators - "expenses" - whether charges were genuine fee for services or tax.
INTERPRETATION OF INSTRUMENTS - construction of s 67 Civil Aviation Act 1988 - whether imposes two distinct requirements - "hendiadys" - construction of Determination of Airservices Australia (formerly Civil Aviation Authority) - whether plural reference may be interpreted as singular where appropriate.
Civil Aviation Act 1988 - s 67
Acts Interpretation Act 1901 - s 23(b)
Monarch Airlines Limited v Airservices Australia (1997) 72 FCR 534 - cons.
Air Caledonie International v Commonwealth (1988) 165 CLR 462 - cons.
Montchel Pty Ltd v Civil Aviation Authority [1991] FCA 466; (1991) 31 FCR 445 - cons.
Semco Salvage and Marine Pte Ltd v Lancer Navigation Co Ltd [1997] UKHL 2; [1997] 2 WLR 298 - appl.
Matthews v Chicory Marketing Board (Vict.) [1938] HCA 38; (1938) 60 CLR 263 - cons.
Swift Australian Co (Pty) Ltd v Boyd Parkinson [1962] HCA 41; (1962) 108 CLR 189 - cons.
Harper v Victoria [1966] HCA 26; (1966) 114 CLR 361 - cons.
Logan Downs Proprietary Limited v Queensland [1977] HCA 3; (1977) 137 CLR 59 - cons.
The General Practitioners Society v The Commonwealth [1980] HCA 30; (1980) 145 CLR 532 - cons.
Harper v Minister for Sea Fisheries [1989] HCA 47; (1989) 168 CLR 314 - cons.
Sin Poh Amalgamated (H.K.) Ltd v Attorney-General [1965] 1 All ER 225 - appl.
B.P. Australia Ltd v Bissaker [1987] HCA 24; (1987) 163 CLR 106 - appl.
AIRSERVICES AUSTRALIA (FORMERLY CIVIL AVIATION AUTHORITY) V MONARCH AIRLINES LIMITED
NO. AG 34 OF 1997
JUDGES: BEAUMONT, WILCOX AND LINDGREN JJ
DATE: 18 FEBRUARY 1998
PLACE: SYDNEY
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY | AG 34 of 1997 |
|
BETWEEN: | AIRSERVICES AUSTRALIA (FORMERLY CIVIL AVIATION AUTHORITY)
AppELLant |
|
AND: | MONARCH AIRLINES LIMITED
Respondent |
|
JUDGES: | BEAUMONT, WILCOX AND LINDGREN JJ |
| DATE OF ORDER: | 18 FEBRUARY 1998 |
| WHERE MADE: | SYDNEY |
ORDERS:
1. Appeal dismissed with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY | AG 34 of 1997 |
|
BETWEEN: | AIRSERVICES AUSTRALIA (FORMERLY CIVIL AVIATION AUTHORITY)
AppELLant |
|
AND: | MONARCH AIRLINES LIMITED
Respondent |
JUDGES:
BEAUMONT, WILCOX AND LINDGREN JJ DATE: 18 FEBRUARY 1998 PLACE: SYDNEY
INTRODUCTION
This litigation raised important questions as to the limits upon the power of the Board of the appellant, the Civil Aviation Authority (now Airservices Australia) ("the Authority"), to fix charges for services and facilities it provides. In particular, the proceedings were concerned with the true meaning and operation in the present context of s 67 of the Civil Aviation Act 1988 ("the Act") which is as follows:
"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."
A further question in the litigation concerned the constitutional validity of the Authority's statutory power to register, in respect of an aircraft, a statutory lien covering unpaid charges and any penalty that may be payable in that connection.
The respondent, Monarch Airlines Limited ("Monarch"), was the lessee of two aircraft ("the Aircraft") which were sub-leased by Monarch to Compass Airlines Pty Limited ("Compass") in 1990. Until December 1991, Compass operated the Aircraft in Australia. The Authority made demand upon Compass from time to time for the payment of charges claimed to be owed by Compass to the Authority pursuant to the provisions of Division 2 of Part VI (i.e. ss 66-83) of the Act. In December 1991, Compass defaulted under its sub-lease and Monarch terminated the sub-lease. The Authority then claimed that it was entitled to a statutory lien in respect of the Aircraft covering the unpaid charges and penalties payable in that behalf. In order to discharge the lien, Monarch paid the charges and penalties under protest. Monarch then sued the Authority in the High Court of Australia claiming, inter alia: (1) a declaration that Division 2 of Part VI of the Act was invalid; (2) the payment of the sum of $5,002,187.86, together with interest; and (3) damages. The High Court ordered that further proceedings be remitted to this Court.
By its statement of claim, Monarch contended that the charges amounted to taxation; that they were beyond power by virtue of the limits imposed by the provisions of s 67 of the Act; and that, since the charges were illegal, the liens could not validly secure them. Alternatively, Monarch contended that ss 68-83 in Division 2 of Part VI of the Act (dealing with the imposition of liens) were invalid by virtue of the provisions of s 55 of the Constitution since those sections purported to deal with matters other than the imposition of taxation, so that the liens could not validly secure the charges. Alternatively, Monarch claimed, the operation of Division 2 of Part VI of the Act was to effect an acquisition by the Authority otherwise than on just terms, of the property of Monarch in the Aircraft, contrary to s 51(xxxi) of the Constitution, so that the liens were invalid to secure the charges.
A Judge of the Court (Branson J) held that each of the charges was determined in contravention of s 67; that it necessarily followed that the determination fixing the charges was beyond power; that there were therefore no relevant charges "payable in respect of an aircraft" within the meaning of s 69, which provided for the imposition of liens; and that the liens purportedly vested in the Authority were consequently without force or effect (see Monarch Airlines v Airservices Australia (1997) 72 FCR 534 at 580). Her Honour went on to make declaratory orders that the charges purportedly levied by the Authority were void and unenforceable, and that the liens did not validly secure the amount of the charges. In the circumstances, Branson J did not need to address Monarch's alternative constitutional arguments. Her Honour further ordered the Authority to pay Monarch the amount claimed. The Authority now appeals from these orders.
THE LEGISLATIVE SCHEME
The general functions and powers of the Authority are dealt with in Part II of the Act (i.e. ss 9-13). Its functions are, inter alia: to conduct safety regulation of civil air operations; and to provide air route and airways facilities, air traffic control and flight services, a rescue and fire fighting service, a search and rescue service and an aeronautical information service (s 9(1)). The Authority shall perform its functions "in a manner consistent with" the obligations of Australia under the Chicago Convention and any other agreement between Australia and any other country or countries relating to the safety of air navigation (s 11).
Part V of the Act (i.e. ss 43-48) deals with the `Operation of the Authority'. The Board shall give the Minister a copy of a financial plan, in relation to each financial year, that includes, in relation to certain services and facilities provided by the Authority, a forecast of receipts and expenditure and a rate of return and dividend (s 44(2)).
Section 45 provides:
"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 estimated future infrastructure requirements;
(f) the need to maintain the extent of the Commonwealth's equity in the Authority;
(g) the need to earn a reasonable rate of return on the Authority's assets (other than assets wholly or principally used in the performance of [safety] 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."
Part VI of the Act deals with `Finance'. Division 2 of this Part (ss 66-83) deals with `Charges and Statutory Liens'.
Subject to s 66, the Board may make determinations fixing charges and specifying the persons by whom, and the times when, the charges are payable; and fixing the penalty for the purposes of s 66(8) (s 66(2)). By s 66, a "charge" means: (a) a charge for a service or facility provided by the Authority; or (b) a fee or other charge in respect of a matter specified in the regulations (s 66(1)).
Before making a determination, the Board shall give the Minister notice in writing of the proposed determination (s 66(3)). The Minister may, within the stipulated period, give the Board notice in writing approving, or disapproving, the proposed determination (s 66(4)). In so doing, the Minister shall have regard to the duties and responsibilities of the Authority under the Act (s 66(5)).
Subject to s 66(9) (which limits the percentage of the penalty), where a charge is not paid within the period determined by the Board, being a period beginning on the day on which the charge became due and payable, the person liable for the charge is liable to pay the Authority, in addition to the charge, a penalty calculated upon the unpaid amount of the charge from the day on which the charge became due and payable, and compounded (s 66(8)). Charges and penalties may be recovered as debts due to the Authority (s 66(11)).
The provisions of s 67, which are central to the litigation, and which impose limits on the charges, have already been set out.
A public Register of Statutory Liens is to be maintained (s 68). Subject to s 76 (dealing with certificates of amounts unpaid), 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 remains unpaid - then, if an appropriate Departmental officer so directs, the Registrar shall make an entry vesting in the Authority in respect of the aircraft a statutory lien covering: (1) the charge or penalty; (2) any penalty that becomes payable thereafter; and (3) any further outstanding amounts in respect of the aircraft (s 69(1)).
The effect of a lien is dealt with as follows: where a statutory lien has been registered, the provisions of Division 2 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 (s 70(1)). The statutory lien has effect as a security interest in respect of the aircraft ranking in priority: (a) after any previous security interest (other than a floating charge); and (b) before any other security interest (s 70(2)). Provision is made for the consequences that may follow if the amount outstanding remains unpaid, namely, de-registration of the aircraft (s 71), seizure (s 72), or sale by the Authority (s 73).
THE DETERMINATION
The Determination fixing the subject charges, purportedly made by the Board pursuant to s 66(2) was dated 26 June 1991 ("the Determination"). The persons by whom, and the times when, the charges were payable for the period commencing on 1 July 1991, were specified in schedules attached. Relevantly, the Determination dealt with `Charges for Facilities and Services'(cll 1-20); `Incidence of [such] Charges...' (cll 21-26); `Recovery of Charges' (cll 27-28); and `Penalties' (cl 29).
Landing charges
"Landing charges" for "avtur" aircraft were imposed by cl 1. The Determination's interpretation clause defined "landing charge" to mean a charge "payable in respect of use by aircraft of facilities or a service relating to an aerodrome". "Avtur aircraft" was defined to mean an aircraft powered by an engine or engines using aviation turbine kerosene. Clause 1 provided:
"1. 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 1,000 kilogrammes weight specified in Column 3 of that item, is applicable." (Emphasis added).
Item 1 provided, in Column 2:
"Column 2
Aerodrome/Facility
1 Terminal navigation facilities and services, being such facilities and services relating to an aerodrome specified in Schedule 1." (Emphasis added).
Schedule 1 specified the following thirty two aerodromes:
Adelaide Karratha
Albury Launceston
Alice Springs Mackay
Archerfield Maroochydore
Avalon Melbourne
Bankstown Moorabbin
Brisbane Mount Isa
Cairns Parafield
Camden Perth
Canberra Port Hedland
Coffs Harbour Proserpine
Coolangatta Rockhampton
Darwin Sydney
Essendon Tamworth
Hobart Townsville
Jandakot Wagga Wagga"
Column 3 provided for a rate of $3.65 per 1,000 kilogrammes "weight". The term "weight" was defined in the interpretation clause to mean "the maximum take-off weight" ("MTOW").
Clause 2 provided:
"2. 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 1,000 kilogrammes weight specified in Column 3 of that Item, is applicable." (Emphasis added).
Column 2 of Item 2 was in the same terms as that of Column 2 of Item 1, but the rate in Column 3 was less: $1.83 (compared with $3.65).
Clause 3 provided:
3. 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 1,000 kilogrammes weight specified in Column 3 of that Item, is applicable." (Emphasis added).
Column 2 of Item 3 specified the following:
"Fire fighting and rescue service, being such a service relating to an aerodrome specified in Schedule 2." (Emphasis added).
Schedule 2 specified the following twenty one aerodromes:
Adelaide Launceston
Alice Springs Mackay
Avalon Melbourne
Brisbane Norfolk Island
Cairns Perth
Canberra Port Hedland
Coolangatta Rockhampton
Darwin Sydney
Devonport Tamworth
Hobart Townsville"
Karratha
Column 3 provided for a rate of $2.40 per 1,000 kilogrammes weight.
Landing charges for "non-avtur" aircraft (defined as "an aircraft other than an avtur aircraft") were dealt with in cl 6 as follows:
"6. 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 1,000 kilogrammes weight specified in Column 3 of that item, is applicable."
Column 2 of Item 1 provided:
"Column 2
Aerodrome/Facility
Terminal navigation facilities and services, being such facilities and services relating to an aerodrome specified in Schedule 3."
Schedule 3 specified the following six aerodromes:
Adelaide Brisbane
Hobart Melbourne
Perth Sydney"
The rate in Column 3 was $3.65 per 1,000 kilogrammes weight.
Clause 7 provided:
"7. 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 1,000 kilogrammes weight specified in Column 3 of that item, is applicable."
Column 2 Item 1 specified:
"Fire fighting and rescue service, being such a service relating to an aerodrome specified in Schedule 3."
Column 3 specified a rate of $2.40 per 1,000 kilogrammes weight.
Clause 10 provided:
"Availability of Services and Facilities
10. 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." (Emphasis added).
En route charges
Clause 11 provided:
"11. 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 x D/100 x 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 x D/100 x W
(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 x D/100 x 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 x D/100 x W
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.
W is the square root of the weight of the aircraft expressed in tonnes." (Emphasis added).
Meteorological charges
Clause 12 provided:
"12. In respect of the use by an aircraft of meteorological 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:
M - S1 x D/100 x 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:
M - S2 x D/100 x W
(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:
M - S3 x D/100 x 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:
M - S4 x D/100 x W
where -
M is the amount in dollars of the charge payable
S1 is a rate of $0.17
S2 is a rate of $0.75
S3 is a rate of $0.12
S4 is a rate of $0.55
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.
W is the square root of the weight of the aircraft expressed in tonnes." (Emphasis added).
Incidence of charges
The charges for the use of facilities and services are payable in respect of Australian aircraft by the holder of the Air Operator's Certificate, or by the holder of the Certificate of Registration (cl 21).
THE NATURE OF THE SERVICES THE SUBJECT OF THE PRESENT CHARGES
There were three kinds of services involved:
(a) Air traffic services ("ATS")
The ATS were: (i) terminal navigation services ("TNS"), including the provision, maintenance and operation of air traffic control services (including radar) within fifty five kilometres of an aerodrome with an operating control tower, and navigational aids used in take-off, approach and landing; and (ii) en route services ("ERS") including the provision, maintenance and operation of air traffic control information and support and flight navigational aids outside fifty five kilometres from an aerodrome with an operational control tower.
(b) Rescue and fire fighting services ("RFFS")
These included the provision and maintenance by the Authority of rescue and fire fighting equipment and other emergency services available at airports.
(c) Meteorological services
These comprised the provision by the Authority of weather and meteorological information to aircraft, both prior to flight and en route. This information was provided to the Authority by the Bureau of Meteorology. The Bureau was required by the Meteorology Act 1955 to provide this kind of information to civil aviation in Australia. The Bureau charged the Authority a lump sum fee each year for these services. The Authority fixed its charges with a view to recovering the amount it had paid to the Bureau.
THE REASONING AT FIRST INSTANCE
At the trial, as on the appeal, there was little, if any, real dispute about the facts. There was, however, substantial disagreement about the proper interpretation of s 67 and of the Determination.
(a) The construction of the Determination
Branson J rejected Monarch's contention that the effect of the Determination was to impose a separate charge for each of the services, being a separate charge imposed in relation to each landing at an aerodrome listed in the Schedule. The learned primary Judge said (at 563-564):
"In my view cl 1 of the determination imposes a charge within the meaning of the Act, being a charge for services and facilities at the aerodromes referred to in Column 2 of Item 1 in Table 1 of the determination, payable in respect of each landing of an avtur aircraft at an aerodrome referred to in Column 2 of Item 1 in Table 1 of the determination. Similarly, in my view, each of cll 2, 3, 6 and 7 of the determination fixes a separate charge. Clause 11 of the determination, in my view, fixes a separate charge by each of its subparas (a) to (d). Clause 12 of the determination similarly, in my view, fixes a separate charge by each of subparas (a) to (d)." (Emphasis added).
Her Honour added (at 566-567):
"So far as cl 1 of the determination is expressed to create a charge `for services and facilities at the aerodromes referred to in Column 2 of Item 1' it must, it seems to me, be understood as meaning `for the services and facilities referred to in Column 2 of Item 1 at the aerodromes referred to in Column 2 of Item 1'.
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." (Emphasis added).
(b) The meaning of s 67
Her Honour said (at 564) that, in construing the "crucial" words "reasonably related to the expenses incurred or to be incurred by the Authority", regard should be had to their statutory context, namely, the matters of finance with which Part VI is concerned, in particular the financial planning provisions of ss 44 and 45 of the Act, and especially the stated "need to earn a reasonable rate of return on the Authority's assets (other than assets wholly or principally used in the performance of [safety] regulatory functions or the provision of search and rescue services)"; together with the stated "expectation of the Commonwealth that the Authority will pay a reasonable dividend".
Branson J said (at 566):
"I accept that in its ordinary and natural meaning `expenses' does not usually include overheads or profits required for the generating of a rate of return on assets. However, s 67 of the Act must be construed having regard to the context in which it is found. Such context discloses, in my view, a clear parliamentary intention that the CAA do determine charges pursuant to s 66(2) of the Act calculated to bring in revenue sufficient to cover the CAA's overheads and generate a rate of return on its assets. Whether the intention of Parliament is given effect to by a broad understanding of what is to be encompassed by `expenses' or by a broad understanding of `reasonably related' is probably immaterial. The better approach, in my view, may well be an interpretation of s 67 of the Act which accepts that the amount or rate of a charge does not fail to be `reasonably related' to the expenses incurred or to be incurred by the Authority by reason only of its having been calculated on a basis intended to achieve recovery by the CAA of relevant overhead costs and a reasonable rate of return on relevant assets." (Emphasis added).
Her Honour went on to say (at 566):
"It is plain that s 67 of the Act requires that consideration be given separately to each charge determined by the CAA pursuant to s 66(2) of the Act. It will not be sufficient that the amount or rate of the totality of the charges determined by the CAA should be reasonably related to the expenses incurred or to be incurred by the CAA: the amount or rate of each charge must be reasonably related to the expenses incurred or to be incurred by the CAA in relation to the matters to which that charge related." (Emphasis added).
Picking up her interpretation of cl 1 of the Determination for the purposes of s 67, the primary Judge said (at 567):
"In my view, the matters to which the charge created by cl 1 of the determination relates, within the meaning of s 67 of the Act, are the matters for which the charge is made: that is, the terminal navigation facilities and services at the aerodromes referred to in Column 2 of Item 1 of Table 1. It is the landing of an avtur aircraft at an aerodrome referred to in Column 2 of Item 1 of Table 1 which triggers such charge." (Emphasis added).
Noting that cl 11 and cl 12 of the Determination "follow a common pattern", her Honour said (at 567):
"Clause 11 fixes four separate en route charges. In each case the charge is payable on the landing of an aircraft. In each case the charge is `[i]n respect of the use by [such] aircraft of the air route and airways facilities and services operated or provided in Australian territory'... [C]l 11 is intended to fix charges in respect of the use by an aircraft of the network of air route and airway facilities and services operated or provided in Australian territory. Clause 11 is not intended... to fix a charge in respect of the use by an aircraft, the landing of which triggers the charge, of only the specific air route and airway facilities and services used by it on the flight resulting in such landing. The charge was... a charge for the use by the aircraft of any part of the total Australian network of air route and airway facilities and services.
I conclude that so far as the charges created by cl 11 of the determination are concerned, `the matters to which the charge[s] relate' within the meaning of s 67 of the Act are the air route and airways facilities and services operated or provided in Australian territory." (Emphasis added).
Branson J said (at 567-568) that it followed that:
"...any disparity between the actual benefit derived by the particular party required by the determination to pay a charge and the amount of the charge is, in the case of charges fixed by cll 1, 2, 3, 6, 7, 11 and 12 of the determination, principally an issue for consideration under the second requirement of s 67 of the Act. The second requirement of s 67 of the Act is that the charge `not be such as to amount to taxation'. In other words,... the first requirement of s 67 of the Act is concerned principally with the amount sought to be raised by each charge while the second requirement is intended to address the relationship between the level of benefit received by the party required by the determination to pay the charge and the amount of the charge required to be paid by that party.
To so understand the first requirement of s 67 of the Act seems... to fit with the expressed intention that it should provide a protection against `surreptitious revenue raising' [a description given in the Parliamentary Debate on the Bill for the enactment of s 67]. Issues of fairness between payees of a charge have no necessary connection with the amount of the revenue raised by that charge.
The requirement of s 67 of the Act that the amount or rate of a charge `shall not be such as to amount to taxation' is to be understood against the authorities dealing with the nature of a tax." (Emphasis and explanation of Parliamentary debate added).
Her Honour then referred to the High Court authorities in the taxation area, including the following observations of Mason CJ, Deane, Toohey and Gaudron JJ in Northern Suburbs General Cemetery Reserve Trust v Commonwealth [1993] HCA 12; (1993) 176 CLR 555 (in considering the meaning of the provision in s 53 of the Constitution that a proposed law shall not be taken to impose taxation by reason only of its providing for the payment of fees for services) that legislation will not impose "a fee for services" if it does not -
"... by its terms establish any sufficient relationship between the liability to pay the charge and the provision [of the relevant service] 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." (176 CLR at 568) (Emphasis added).
Her Honour also noted the observations of Dawson J in Northern Suburbs (at 588) that -
"A particular employer may derive no more benefit from payments made under training guarantee agreements than is derived by employers or the community in general from having a better trained workforce upon which to draw. The training guarantee charge is not [as was said in Air Caledonie International v Commonwealth (1988) 165 CLR 462 at 470] a charge `exacted for particular identified services provided or rendered individually to, at the request or direction of', the employer required to make the payment. It cannot, therefore, be said to be a fee for services or akin to a fee for services in any sense which would prevent it from being a tax."
(c) Terminal navigation charges and the first requirement of s 67
In considering whether these, and the other charges, contravened s 67, her Honour first addressed the "reasonably related to expenses" requirement, returning later to the second requirement that there be no tax.
Branson J said (at 569-570):
"Nothing in s 67 of the Act... compels a conclusion that the CAA was not entitled to determine a rate of charge in relation to the provision of facilities and services at a number of aerodromes, subject, of course, to the requirements that such rate be reasonably related to the expenses incurred or to be incurred by the CAA in relation to the provision of such facilities and services and not be such as to amount to taxation. That is,... s 67 of the Act 1977 does not compel location specific charging unless such charging is the only way to meet the explicit requirements of the section." (Emphasis added).
Her Honour referred (at 570) to expert evidence that virtually all avtur aircraft are heavier than 20,000 kgs; and that there was "a high rate of correlation" between number of seats and either MTOW or its square root, with the correlation to the square root being higher for aircraft, such as those flown by Compass, heavier than 20,000 kgs. Branson J said (at 570):
"... [A] charge may be `reasonably related' to certain expenses without necessarily bearing the closest possible relationship to such expenses.
The issue for present purposes... is whether a rate of charge which has the effect that, in respect of each potential passenger in an aircraft, an amount is payable which is reasonably related to the expenses incurred or to be incurred by the CAA in relation to the matters to which the charge relates, is a rate of charge reasonably related to such expenses. Having regard to the priority given by the Act to air safety,... it is.
It was contended on behalf of the applicants that the `objective of maintaining a constant rate of charge per passenger inevitably means that charges will not reasonably relate to costs'. Costs, it was contended, are incurred by reference to aircraft and not passenger numbers, and as the number of passengers in an aircraft increases, the cost per passenger decreases correspondingly. The answer to this contention... is that the terminal navigation charges were not expressed by the determination to be charges in relation to the use of terminal navigation facilities and services by a particular aircraft. They were expressed to be charges in relation to the provision of terminal navigation facilities and services at 32 different aerodromes. In this regard it is.... significant that the applicants did not dispute that s 66(2AA) of the Act would have allowed the CAA to determine that its charges were payable by airline passengers individually." (Emphasis added).
Her Honour accepted that although the expenses in providing TNS "differed substantially" between aerodromes, the rate of charge did not differ (at 571). But, in her view, this did not have "the legal consequence" that the charges fixed by cl 1 and cl 2 were not "reasonably related" to such matters (at 571-572).
(d) Rescue and fire fighting charges and the first requirement of s 67
For similar reasons, her Honour rejected this "parallel" challenge.
(e) En route charges and the first requirement of s 67
Branson J noted that the Authority acknowledged that the cost of providing these services did not depend upon the weight of the particular aircraft. But her Honour accepted (at 572) that "the majority of air traffic services are provided to aircraft in controlled airspace which are predominantly RPT [regular passenger transport] aircraft [as were, for instance, Compass's aircraft], and that the more expensive en route facilities and services are provided for larger aircraft and not for GA [general aviation] aircraft".
Branson J said (at 572-573):
"... is there a reasonable relationship between a rate of charge calculated by reference to the MTOW of an aircraft and the expenses incurred or to be incurred by the CAA in relation to the use by that aircraft of air route and airways facilities and services operated or provided in Australian territory? There is no challenge by the applicants (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. ...there is a high correlation between number of seats and either MTOW or its square root, with the correlation to the square root of MTOW being higher for aircraft heavier than 20,000 kg.
As in the case of the terminal navigation charges, I conclude that a rate of charges which has the effect that, in respect of each potential passenger in an aircraft, an amount is payable which is reasonably related to the expenses incurred or to be incurred by the CAA in relation to the matters to which the charge relates, is a rate of charge reasonably related to such expenses. The reference in cl 11 of the determination to `the use by an aircraft of air route and airways facilities and services' does not... affect this conclusion. The use referred to is a use of a portion of the total range of such facilities and services operated or provided in Australian territory." (Emphasis added).
(f) Meteorological charges and the first requirement of s 67
After noting (at 574-575) evidence that the Authority's costs in relation to these services consisted of a single item invoice issued each six months by the Bureau of Meteorology; that the use of MTOW and its square root as determinants of the charge reflected international practice; and that some of these services (e.g. high altitude weather information) were used virtually exclusively by large RPT aircraft, Branson J said (at 575):
"... the determination does not offend the first requirement of s 67 of the Act by reason only of its being designed to recover the bulk of the cost to the CAA of the provision of meteorological services from larger RPT aircraft notwithstanding the heavy use by GA aircraft (by reason of their large numbers) of meteorological services."
However, her Honour went on to say (at 575-576):
"Mr Gemmell's concession [in his evidence on behalf of the Authority] that in 1991 the CAA would have been unable to work out the cost of providing meteorological information to particular users, by which I understand him to include particular categories of users, and the failure of any witness to articulate a rationale for the differential between the meteorological charges paid in respect of international flights and domestic flights suggests against such charges bearing a reasonable relationship to the expenses incurred by the CAA in relation to the matters to which the charges relate. The applicants' attack on the meteorological charges assessed against Compass Airline... succeeds on this ground." (Emphasis added).
(g) Did the charges amount to taxation and thus contravene the second requirement of s 67?
Her Honour said (at 577) that, unless "properly... seen as a payment for services rendered", the charges should be "characterised as a tax", since it was not suggested by the Authority that Compass had "any real choice" about whether or not to utilise the services. Branson J went on, in this context, to note (at 577) the observations of Dawson J in Northern Suburbs (at 588, cited above) on the need to identify particular services rendered on an individual basis.
(i) Terminal navigation charges
Her Honour found (at 577) that the Authority's expenses in providing these services "differed substantially" between aerodromes; that Compass did not land aircraft at all of the Schedule 1 aerodromes (of the thirty two, Compass used only six); and that the requirement that Compass pay these charges had the effect of requiring it to contribute to the Authority's expenses in this respect at all such aerodromes. On the other hand, Branson J also found (at 577-578) that Compass was likely to have derived some benefit from the provision of these services "at most if not all" of the Schedule 1 aerodromes; and that the "smooth operation" of all Australian aerodromes (including those at which Compass did not land) "may be presumed to encourage air travel in Australia and to facilitate passenger arrivals at aerodromes at which Compass... did land".
But her Honour concluded (at 578) that "the method of calculation of the terminal navigation charges was determined on a basis which gave significant weight to issues of `price sensitivity' and `economic capacity to pay'". This basis for fixing charges, known as "Ramsey" pricing, embraced an economic theory that, in order to maximise the overall benefits to the community, posited that charges to different users of the Authority's various services should not (in the opinion of Dr V W J Fitzgerald, an economist called by the Authority) be based on cost alone. Rather, under the "Ramsey" approach, one should take account of user demand characteristics. That is, under the "Ramsey" scheme, as applied by the Authority in fixing these charges, prices for different users are set in inverse relation to the sensitivity of their usage to price. In essence, the object of the scheme was the "recovery of fixed costs from users according to economic capacity to pay" (at 556).
As has been noted, her Honour accepted (at 557) expert evidence that there is a high correlation between the number of seats on an aircraft and MTOW or its square root, so that pay load and economic capacity to pay are directly related to MTOW. Dr Fitzgerald gave evidence, which was accepted by her Honour (at 557), firstly, that the use of MTOW as the basis for charging aircraft for airport services, and the square root of MTOW as the basis for charging for en route services, produced the result that the Authority's total airways charges, if looked at on a "per passenger" basis, were "relatively flat" (i.e. similar) across the fleet using Australian airways; and, secondly, that the "sensitivity of usage" of airways services to their price varies directly with the fraction which these charges are of the cost to a passenger. This is because for large aircraft (i.e. those over 20,000 kgs) with many passengers which typically fly relatively long distances, the charges will be a small fraction of the flight costs. For those aircraft, the sensitivity of passenger demand to the charges will be small, and the requirements of "economic efficiency" (i.e. the "Ramsey" pricing principles), according to Dr Fitzgerald's evidence, "dictate that they be charged relatively more per aircraft than smaller aircraft". In this way, the Authority may "achieve... a relatively constant charge per passenger" (at 557).
Holding that the terminal navigation charges contravened the second limb of s 67, Branson J said (at 578):
"...significant weight was given to the lesser `price sensitivity' and greater `economic capacity to pay' of operators of large aircraft when compared with the operators of smaller aircraft. ...[W]hilst such matters may be relevant for consideration by taxation authorities, they do not provide an appropriate basis for the determination of a fee for services - at least where the party required to pay has no choice about whether to acquire the services.
...[T]he 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... aircraft landed at only six of those aerodromes, means that a `discernible relationship', as that expression was used by the High Court in [Air Caledonie]... between the amount of the charges and the value of the relevant facilities and services to Compass... is not... able to be identified.
No party suggested that if I should conclude that there was no discernible relationship between the value to Compass... of terminal navigation facilities and services provided to it and the terminal navigation charges which it was required to pay, I ought to attempt to put a value on the terminal navigation facilities and services which it did receive."
(ii) Rescue and fire fighting charges
For similar reasons, Her Honour held that these charges also contravened the second requirement of s 67, noting that these charges required Compass to contribute to the Authority's expenses in respect of these services at the twenty one Schedule 2 aerodromes, whereas Compass aircraft landed at only six of them.
(iii) En route charges
Her Honour accepted (at 579) expert evidence that the more expensive en route facilities and services are put in place for the bigger aircraft and not for small GA aircraft, although they are available for use by small GA aircraft; that such evidence was sufficient to justify a differential in the rates of charges fixed for larger aircraft and for smaller aircraft respectively; that the failure to fix a domestic en route charge for non-avtur aircraft in large part achieved this differential; that non-avtur aircraft on domestic flights make a contribution to the expenses of the Authority in respect of en route facilities and services in the form of the excise imposed on avgas; and that the expenses incurred by the Authority in providing en route facilities and services differed substantially across air routes and airways.
Yet, her Honour observed, Compass was required to pay en route charges determined by reference to the expenses incurred in providing such facilities and services in respect of air routes and airways which its aircraft did not utilise; and these charges were determined by having regard to the "Ramsey" considerations of "price sensitivity" and "economic capacity to pay". Branson J accordingly held (at 579) that these charges also "amount to taxation", contrary to s 67.
(iv) Meteorological charges
Her Honour found (at 579) that the Authority would have been unable to work out the cost of providing meteorological information to particular users; and that it was also impossible for the Authority to work out the cost of providing this information to the various categories of users or to different aircraft types.
Yet, Branson J noted, the meteorological charges fixed by the Authority differed depending upon the category into which the user fell (e.g. domestic and international) and required such charges to be calculated by reference to the MTOW of the relevant aircraft. Finding a contravention here of the second limb of s 67 as well as the first, Branson J (at 579) held that -
"...the amount for the meteorological charges required to be paid by Compass Airlines had no `discernible relationship' to the value which it gained from the provision of such services to its aircraft."
THE AUTHORITY'S GROUNDS OF APPEAL
By its notice of appeal, the Authority challenges the following of the conclusions at first instance -
* That s 67 imposed the two separate requirements mentioned.
* That payment of each of the charges did not constitute payment for services rendered.
* That the second requirement of s 67 was intended to address the relationship between the level of benefit received and the amount to be paid.
* That Monarch had established that there was no discernible relationship between the amount of the charges and the value of the services provided.
* That the second limb of s 67 called for an inquiry as to whether, in the case of each particular use, or user, of the services, the relationship between the amount of the charge and the value of the services was such as to prevent the charges being characterised as taxes.
* That considerations of capacity to pay and price sensitivity do not provide an appropriate basis for the determination of a fee for the services.
* That, since the levels of the TNS and the RFFS charges were determined by reference to the costs of maintaining facilities at thirty two and twenty one aerodromes respectively, and since Compass' aircraft landed at only six of them, those charges were not fees for services and amounted to taxation.
* That since the expenses incurred by the Authority in providing ERS differed substantially across air routes, and since Compass was required to pay these charges by reference to expenses incurred by the Authority in providing these services in respect of all air routes, including those which Compass did not use, and since the charges were determined by having regard to issues of price sensitivity and economic capacity to pay, the charges amounted to taxation.
* That nothing in the evidence indicated how the proportion of the previous ERS charge relating to meteorological services was determined; that Mr Gemmell's evidence that in 1991 the Authority would not have been able to work out the cost of providing meteorological information meant that the Authority would not have been able to work out those costs for categories of users; and that no witness articulated a rationale for the differential in these charges between international and domestic flights.
* That the meteorological charges required to be paid by Compass had no discernible relationship to the value it gained from those services, so that the charges amounted to taxation.
The Authority further submits that the trial Judge should have held that Monarch had not established that the meteorological charges were not set at rates which were reasonably related to the Authority's expenses in relation to the matters to which the charge related.
MONARCH'S NOTICE OF CONTENTION
By its notice of contention, Monarch contends for the following:
* It should not have been held that, in construing s 67, the "matters to which the charge relates" were the facilities and services generally available to which the charge was expressed to relate; rather, it should have been held that these matters were the facilities and services actually used or made available when the liability to pay the charge was incurred.
* Alternatively, for the following additional reasons, the charges contravened s 67: (a) the use of weight in the charging formula bears no reasonable relation to the extent of use of the facilities and services to which the charge relates; (b) in the case of charges for ERS and meteorological services, the absence of any reasonable basis for discrimination in the rates charged to international operators on the one hand, and domestic operators on the other; and (c) the absence of any reasonable basis for discrimination between avgas (i.e. non-avtur) and avtur aircraft (i) in the rate of charge for ERS and meteorological services, and (ii) in the circumstances in which the charge for TNS and RFFS applies.
* Since the use of the facilities and services bore no discernible relationship to passenger numbers, but rather was dependent upon aircraft movements, it was not open to assume that the question of reasonableness of the charges for the purposes of s 67 was answered by considering the amount payable in respect of each passenger.
* Further indications that the charges for TNS, RFFS and ERS were not "reasonably related" to the relevant expenses were the adoption of a uniform rate of charge across a "network" where costs varied substantially between locations, together with the fact that the Authority did not know, in setting the charges, what its expenses were.
* Even if the construction of s 67 contended for by the Authority were to be accepted, the provisions of the Act imposing liens were laws with respect to the acquisition of property otherwise than on just terms and contravened s 51 (xxxi) of the Constitution. Alternatively, the effect of these provisions is to require payment of charges from persons (including Monarch) who did not receive the benefit of any of the facilities or services for which the charges were purportedly levied, so that they were laws with respect to taxation and, by reason of s 55 of the Constitution, are of no effect.
CONCLUSIONS ON THE APPEAL
It will be convenient to consider both the Authority's grounds of appeal and Monarch's contentions together in reaching my conclusions on the appeal.
(a) The meaning of s 67
In its terms, s 67 requires explicitly that 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".
The operation of s 67 was considered by Pincus J, albeit in an interlocutory judgment, now much relied upon by the Authority, in Montchel Pty Ltd v Civil Aviation Authority [1991] FCA 466; (1991) 31 FCR 445 as follows (at 446-7):
"Compliance with [s 67] depends upon the nature of the relationship between the amount or rate of a charge, on the one hand, and the Authority's expenses, on the other. If the two are equal as to each service or facility provided, the relationship is perfect. But it is evident that there is no intention that a calculation must be done in respect of every separate provision of a service or facility. What s 67 contemplates is that there may be a general fixation of charges to relate them to the Authority's expenses, not that an analysis of the expenses shall be made each time a service or facility is provided.
That this is so- i.e. that there may be a general fixation of charges - is clear from three matters. The first is the use in s 67 of the expression `or rate', which allows a charge to be levied on the basis of a formula.
The second is that some charges, under the Regulations in existence at the date of passage of the Act, were at prescribed rates of so much per 1000 kg and others were imposed on the basis of a mathematical formula. There was, under those Regulations, no attempt to relate the charge for each particular service to the expenses incurred in relation to that particular service. One may safely act on the basis that Parliament was aware, in 1988, of the then existing system of charging; it would surely have used language other than that of s 67 of the Act had it intended to require that no such method as was then in use be applied in the future.
The third reason is that the origin of s 67 was in an amendment agreed to in the Senate while the Civil Aviation Bill 1988 was being read for a second time in that chamber. I have been referred to the record of the debate which preceded agreement to the amendment and, so far as one can judge from the expressions used by the Senators, the intention of the amendment was merely to ensure that the charging power was not used as a taxing device." (Emphasis added).
After considering two of the authorities on the question whether "what is ostensibly a fee for services should be classed as a tax" (i.e. The General Practitioners Society v The Commonwealth [1980] HCA 30; (1980) 145 CLR 532, and Air Caledonie International v The Commonwealth (1988) 165 CLR 462, to which I will return), Pincus J went on (at 448-450) to discuss the charging system in the light of the evidence then before him.
There appears to be no other reported case dealing with the meaning or operation of s 67. Given the interlocutory nature of the issue in Montchel, the present questions should, I think, be regarded as free from authority. In particular, the discussion in Montchel about the history of the legislation in an application for interim relief should not be treated as decisive of the issues in the present litigation.
Section 67 uses four distinct notions or concepts: (1) the amount or rate of a "charge" which must be (2) "reasonably related" to (3) "expenses" but so as (4) not to amount to "taxation".
The section must, of course, be read as a whole and in its full context. Nonetheless, as a first step in the process of interpretation, it is helpful to consider the meaning of each of the four concepts or notions mentioned in turn.
"Charge"
Notion (1) does not need explication beyond noting that the Authority may elect, as Pincus J observed, to fix a charge by using a formula method.
"Reasonably related"
As to the meaning of (2), the concept of "reasonably related" in the present context, the primary dictionary meaning (Macquarie Dictionary) of "related" is "associated; connected" (cf. Tooheys Ltd v Commissioner of Stamp Duties (NSW) [1961] HCA 35; (1961) 105 CLR 602 at 613-4, 620-1). The relevant dictionary meaning (Shorter Oxford English Dictionary) of "reasonably" is "sufficiently, fairly". In other words, what is intended, in my view, is that the amount or rate of the charge must be sufficiently or fairly associated or connected with the relevant "expenses".
"Expenses"
As to (3), the concept of "expenses", the commercial dictionary meaning (Macquarie) which appears to be apposite here is: "charges incurred in the execution of an undertaking or commission".
This meaning of the term "expenses" was recently addressed by the House of Lords in Semco Salvage and Marine Pte Ltd v Lancer Navigation Co Ltd [1997] UKHL 2; [1997] 2 WLR 298. There, "salvor's expenses" were defined in a Convention as "the out-of-pocket expenses reasonably incurred by the salvor in the salvage operation and a fair rate for equipment and personnel actually and reasonably used in the salvage operation, taking into consideration the criteria [there specified]".
Lord Mustill observed (at 305) that -
"The principal issue in the present appeal concerns the definition of `expenses' in article 14.3, and in particular that part of it which includes in the expenses `a fair rate for equipment and personnel actually and reasonably used in the salvage operation...' Four elements have been identified as possible components of the `fair rate'. The direct costs to the salvor of performing the service; the additional costs of keeping the vessels and equipment on standby; a further element to bring the recoverable `expenses' up to a rate capable of including an element of profit; and, a final element bringing the recovery up to the level of a salvage award. The respondent owners of ship and bunkers (`the owners') accept that the first two elements are properly included. For their part, the appellants Semco concede that the fourth element cannot be included. In my opinion this understanding is plainly right, for reasons too plain to call for elaboration. The dispute revolves around the third element. Semco assert, and the owners deny, that this too should feature in the calculation under article 14.3."
Lord Mustill went on to say (at 308):
"In its ordinary meaning [the] word [`expenses'] denotes amounts either disbursed or borne, not earned as profits... It is moreover highly significant that article 14.2 twice makes use of the expression `expenses incurred' by the salvor, for in ordinary speech the salvor would not `incur' something which yields him a profit." (Emphasis added).
Lord Lloyd said (at 312):
"`[F]air rate for equipment and personnel actually and reasonably used in the salvage operation' in article 14.3 means a fair rate of expenditure, and does not include any element of profit. This is clear from the context, and in particular from the reference to `expenses' in article 14.1 and 2, and the definition of `salvors' expenses' in article 14.3. No doubt expenses could have been defined so as to include an element of profit, if very clear language to that effect had been used. But it was not." (Emphasis added).
Lord Lloyd added (at 313):
"[Counsel for the salvage company] argued that if fair rate means rate of expenditure it would require `a team of accountants' in every salvage arbitration, where the environment has been at risk. Mr. Thomas's answer was that the basic rates in the present case (not a straightforward one) were agreed without difficulty by the two firms of solicitors. In any event accountants are nowadays, as he says, a part of ordinary life."
A similar interpretation, including an appropriate allowance for overheads (cf. Dart Industries Inc. v Decor Corporation Pty Ltd [1993] HCA 54; (1993) 179 CLR 101) excluding any element of profit, should, in my view, be attributed to the phrase "expenses incurred" in s 67. (See also Westpac Banking Corporation v ASC (1997) 72 FCR 318 per Cooper J at 329).
"Taxation"
The meaning of concept (4), "taxation", in the present context has been discussed by the High Court in a line of authority explaining why a particular charge may, or may not, be a duty of excise and a tax for the purposes of s 90 of the Constitution, and also considering the limits upon legislative powers imposed by s 53 or s 55 of the Constitution. Both s 53 and s 55 speak of laws "imposing taxation", and, as has been seen, s 53 states, inter alia, that a proposed law shall not be taken to impose taxation by reason only of its containing provisions for the payment of "fees for licences" or "fees for services". An analysis of the cases shows that the jurisprudence developed by the High Court, in deciding whether legislation, in truth, imposes "taxation", has acknowledged the difficulties in generalising in this area. The Court has, however, always preferred substance over form.
The logical starting point is the well-known statement by Latham CJ in Matthews v Chicory Marketing Board (Vict.) [1938] HCA 38; (1938) 60 CLR 263 (at 276) of the positive and negative attributes which, if they all be present, will suffice to stamp an exaction of money with the character of a tax -
"... a compulsory exaction of money by a public authority for public purposes, enforceable by law, and ... not a payment for services rendered."
In Swift Australian Co (Pty) Ltd v Boyd Parkinson [1962] HCA 41; (1962) 108 CLR 189, a statutory regulation provided that a fee of one shilling for 100 lb of beef, or portion thereof, was payable by the occupier of a butcher's shop "for the purpose of defraying the expenses of inspection of meat for sale and of carrying [the] Act into effect ...". Yet it was held that fee was imposed as a tax.
Dixon CJ said (at 200-1):
"It is evident from the introductory words of the regulation that some attempt is made to represent the fees as a charge for services. But when the regulation is examined it appears that the fees are not payable in respect of any particular service but generally for the purpose of defraying expenses. Further, and this perhaps is fatal to the argument, the expenses are not merely those of inspecting meat but those of carrying the Act considered as a whole into effect, that is to say, for administration expenses generally. The fees collected are payable into Consolidated Revenue and there they are of course subject to appropriation by Parliament. They are not directed by law into any particular fund the expenditure of which is limited even to the administration of the Act. Further, under the Act it is quite impossible for beef to be broken up without incurring fees for, wide as the definition of butcher's shop is, the regulation itself extends to the occupier of an abattoir or slaughter-house as well." (Emphasis added).
In Harper v Victoria [1966] HCA 26; (1966) 114 CLR 361, legislation required owners of eggs to present them to a Board for grading, testing etc. and to pay a fee determined by the Board to defray its expenses. The fee, which was to be paid into a special fund, was held not to be imposed as a tax.
Section 41C, subss (5) and (6), of the legislation provided:
"(5) Every person presenting eggs under this section shall pay to the Board for the grading testing marking and stamping of such eggs such fee or fees as may be fixed by the Board to defray the expenses incurred therefor.
(6) The Board shall from time to time estimate the expenditure incurred by the Board with respect to the grading testing marking and stamping of all eggs delivered and presented to the Board under this Act and, subject to any regulations, shall determine and fix accordingly the fee or fees payable for the grading testing marking and stamping of eggs."
Taylor J said of s 41C(6) (at 378):
"It would, of course, be an abuse of the power vested in the Board by that sub-section 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... No such [question], however, arise[s] in the present case." (Emphasis added).
Menzies J said (at 379):
"... s. 41C, sub-ss. (5), (6) and (7) does ensure that what such a retailer has to pay to the Board for those services must be the proportionate part of the expenses which the Board actually incurs in testing, grading and marking all eggs presented to it for those purposes."
In rejecting the plaintiff's contention that the fee was a duty of excise, Owen J said (at 382):
"... under the Act the fee payable to the Board is payable for services rendered by it and its amount is determined by the cost to the Board or the cost, as estimated by the Board, of rendering those services."
In Logan Downs Proprietary Limited v Queensland [1977] HCA 3; (1977) 137 CLR 59, legislation empowered the Minister to levy an assessment on each owner of livestock. The Act required the assessment to be paid into a "Stock Fund" which was to "be applied to the payment of all expenses incurred... in the execution of [the] Act as well as to the provision of such husbandry services... as the Minister may from time to time determine". It was held that the levy was a tax.
Gibbs J said (at 63):
"`[It] is not a payment for services rendered'... The amount levied does not purport to be, and is not in fact, a payment for services rendered to the person required to pay it. The Stock Fund is no doubt applied for purposes which are beneficial to farmers and graziers generally, but no particular service or benefit need be rendered to any owner of stock who is required to pay an assessment, and if, by coincidence, the person liable to pay an assessment has been rendered some service under the Act, the assessment is not payable because that service has been performed, and bears no necessary relation to the expenditure incurred in providing that service." (Emphasis added).
Mason J, holding that, in the present respect, Matthews' Case was indistinguishable, said (at 78-9):
"It was pointed out that s. 6 authorizes the application of the stock fund in payment of the cost of administration of the Act and in the provision of husbandry services to the cattle, sheep and pig industries and to such other animal industries as the Minister, from time to time, may determine. Consequently, the Act does not permit the application of revenue raised by the tax for the general purpose of consolidated revenue. However, the Marketing of Primary Products Act contained a somewhat similar provision which authorized the application of the moneys raised by means of the imposition of the tax in the administration of a compulsory pool for the marketing of chicory and other connected purposes. None the less the imposition was held to constitute an excise." (Emphasis added).
In the General Practitioners' Case, legislation dealing with medical benefits provided, by s 16C(2), that where an eligible person who wished to become an "approved" practitioner gave an undertaking, with a fee of $10 or of such other amount as may be prescribed, the Minister should either accept the undertaking, or refer the question to a Committee.
Gibbs J said (at 561-2):
"... it is a fee for services. It is the price which a medical practitioner, who seeks to become an approved pathology practitioner, must pay for the purpose of having his undertaking considered by the Minister, and either accepted or referred for inquiry and report to a Medical Services Committee of Inquiry. In other words, it is a charge for the services performed in dealing with the application. The fact that it is paid into Consolidated Revenue does not prevent it from being a fee for services. The nature of such a payment is not determined by what is done with it after its receipt. Further, 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. An exaction may properly be characterized as a licence fee notwithstanding that the licence is one that must necessarily be obtained and the same is in my opinion true of a fee for services; fees charged for compulsory licences, or for holding plants or animals in quarantine, might provide examples.
The amount of an exaction may, I think, be relevant to the question whether it is a fee for services, since an exaction may be so large that it could not reasonably be regarded as a fee." (Emphasis added).
His Honour went on to say (at 562):
"If s. 16C (2) were construed as meaning that there was no limit to the amount of the fee that might be prescribed, it might well follow that the Health Insurance Amendment Act would be an Act imposing taxation and that the remaining provisions of that Act would be invalid. What is to be prescribed under s. 16C (2) is clearly the amount of a fee - the section expressly so indicates - and unless the words of the section were unambiguous the Court would not ascribe to them a meaning which enabled so large an amount to be prescribed that the exaction could properly be described as a tax with the consequence that the other provisions of the amending statute became invalid. The Parliament cannot possibly have intended such a result, and the maxim ut res magis valeat quam pereat should be applied. In my opinion the intention that can be gleaned from the provisions of s. 16C (2) is that the amount to be prescribed shall be such that the amount payable remains a fee. In the present case no amount has been prescribed, and the amount of $10 is not so large as to give the exaction the character of a tax."
In Air Caledonie, legislation provided that a passenger who travelled to Australia on an overseas flight, and who was not exempt, should pay a fee for his or her immigration clearance. The fee was to be collected by the airline, and paid by it to the Commonwealth. It was held that, at least insofar as it related to Australian citizens, the fee was a tax.
After noting (at 466) that the Parliament did not indicate the criteria by reference to which the Executive was to fix the amount of the fee, or was to exempt any passengers, or class of passengers, the Full High Court said (at 467):
"... in Logan Downs Pty. Ltd. v. Queensland, Gibbs J. made explicit what was implicit in the reference by Latham C.J. to `a payment for services rendered', namely, that the services be `rendered to' - or (we would add) at the direction or request of - `the person required' to make the payment."
The Court added (at 467):
"... 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 C.J. 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." (Emphasis added).
The Court went on to say (at 468-9):
"If the fee had been exacted only in those cases where the arriving passenger was not an Australian citizen, it would have been arguable that, regardless of whether it was a `fee for services', it was not a tax. In that event, and notwithstanding the countervailing analogy of a customs duty which is clearly a tax, there might have been some force in an argument to the effect that it was to be seen as a charge imposed upon the passenger for the privilege of entering Australia or as a licence fee and that the requirement that the airline operator collect the fee (and pay the amount of it to the Commonwealth if not collected from the passenger) could not convert it into a tax. However, as has been seen, the fee was payable by, and in respect of, both citizens and non-citizens arriving on an international airline flight. The only exemption was of those whom the Executive might see fit to prescribe by regulation. The right of the Australian citizen to enter the country is not qualified by any law imposing a need to obtain a licence or `clearance' from the Executive. In the case of such a returning citizen, the impost could not be regarded as a charge for the privilege of entry."
Their Honours continued (at 469-70):
"In one sense, all taxes exacted by a national government and paid into national revenue can be described as `fees for services'. They are the fees which the resident or visitor is required to pay as the quid pro quo for the totality of benefits and services which he receives from governmental sources. It is, however, clear that the phrase `fees for services' in s. 53 of the Constitution cannot be read in that general impersonal sense. Read in context, the reference to `fees for services' in s. 53 should, like the reference to `payment for services rendered' in the above-quoted extract from the judgment of Latham C.J. in Matthews v. Chicory Marketing Board, be read as referring to a fee or charge exacted for particular identified services provided or rendered individually to, or at the request or direction of, the particular person required to make the payment." (Emphasis added).
In contrasting the impost there with the ten dollar fee in General Practitioners, the Court said (at 470-1):
"... 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'. Therefore, the fee which s. 34A purported to exact was, at least in so far as it related to passengers who were Australian citizens, a tax and the provisions of the section were, for relevant purposes, a law `imposing taxation'."
Air Caledonie was followed, and a similar approach adopted, in Northern Suburbs (above, at 567-568, 587-588).
In Harper v Minister for Sea Fisheries [1989] HCA 47; (1989) 168 CLR 314, statutory regulations prohibited the taking of abalone except by the holder of a licence. The fee for the licence was fixed according to the quantity of abalone that the licensee was authorised to take. The prices payable annually by the plaintiff for his licences over a three year period were $9,576, $18,079 and $17,976 (plus a fee of $100 for issuing the licence) respectively.
Brennan J held (at 336) that the amounts payable to obtain the licences were of the same character as a charge for the acquisition of property and, accordingly, not a tax or a duty of excise.
Agreeing with Brennan J, Dawson, Toohey and McHugh JJ added (at 336):
"Whilst the proper conclusion is that the amount paid for a commercial abalone licence is not a tax and, therefore, is not a duty of excise, that conclusion flows from all the circumstances of the case. Most important is the fact that it is possible to discern a relationship between the amount paid and the value of the privilege conferred by the licence, namely, the right to acquire abalone for commercial purposes in specified quantities. In discerning that relationship it is significant that abalone constitute a finite but renewable resource which cannot be subjected to unrestricted commercial exploitation without endangering its continued existence." (Emphasis added).
Their Honours went on to say (at 337):
"Clearly the line between a price paid for the right to appropriate a public natural resource and a tax upon the activity of appropriating it may often be difficult to draw. But what is otherwise a tax is not converted into something else merely because it serves the purpose of conserving a natural public resource."
The following conclusions may be drawn from this line of authority for our purposes:
* There is no simple universal test for determining whether a statutory levy "amount[s] to taxation".
* The question is to be objectively determined, and all the circumstances need to be considered.
* Substance is to be preferred to form.
* Generally speaking, a true or genuine fee for particular identified services rendered individually to, or at the request or direction of, the particular person required to make the payment, will not be a tax.
* A charge that is so large that it could not "reasonably" be regarded as a fee for services will usually be found to be a tax. There is an element of proportionality involved, so that the absence of any "sufficient" or "discernible" relationship between the amount of the fee and the cost or value of the service will generally indicate a tax. But an exact economic equivalence is not essential in order to avoid characterisation as a tax.
Against this background, I turn to other aspects of the construction of s 67.
As has been seen, the Authority challenges the primary Judge's conclusion that s 67 involved two distinct requirements. In my view, there is considerable force in the Authority's argument.
On behalf of Monarch, reference is made to the legislative history in support of her Honour's approach. In its original form, cl 67 of the Bill merely provided that "[a] charge shall not be such as to amount to taxation". The requirement of "reasonably related" etc. was added in the Senate.
It is further submitted for Monarch that, even if s 67 is treated as analogous to a "hendiadys" (i.e. a single idea expressed in two sets of words with the conjunction "and"), it is still true to say that the second requirement in a hendiadys does add to the meaning that is conveyed by the first and adds a requirement which needs to be fulfilled if the entire complex idea conveyed by the hendiadys is to be realised.
As D C Pearce and R S Geddes have observed in their work, "Statutory Interpretation in Australia" (4th ed., 1996, at 112), if one part of a provision taken by itself imposes an unreasonable obligation on a person, the provision may be construed as if it were a hendiadys. But, if the two parts can each reasonably stand on their own, they may be construed separately.
In my opinion, if either limb of s 67 had stood alone, the meaning of each would, as has been seen, have been tolerably clear, notwithstanding that the application of either limb could, in some circumstances, be a difficult exercise. It could not, however, be said that compliance with either limb imposed an unreasonable burden upon the Authority. At the same time, given my interpretation of the four key concepts incorporated in s 67, I can see no inconsistency between the two limbs. Indeed, each is, in substance, saying the same thing, especially given my construction of "reasonably related", of "expenses" and of the character of "taxation" in the present context. In other words, I would read the word "and" where it appears between the two limbs to mean "so that [it]"; or, to similar effect, I would read s 67 as if the word "accordingly", or something to that effect, were inserted after "and". That is to say, I would give the provision a purposive interpretation. It should be read so as to reflect one ultimate end, to ensure that the Authority's charges for its services are not excessive. Section 67 can achieve this object or purpose by requiring that an appropriate nexus be established between the fee and the service provided, on the footing that it will necessarily follow that, if this nexus is maintained, the payment of the fee will not amount to taxation. In my view, s 67 reflects this one, fundamental, consideration.
(b) The meaning of the Determination
When s 67 speaks of expenses incurred "in relation to the matters to which the charge relates", what, for the purposes of the Determination, are such matters?
The charge fixed by cl 1, for instance, is described as a "landing charge", and is only "applicable" "[i]n respect of each landing... at an aerodrome referred to in Column 2 of Item 1 in Table 1 below..." (Emphasis added). Likewise, Column 2 speaks of "facilities and services relating to an aerodrome specified in Schedule 1". (Emphasis added). If it stood alone, this use of the singular would indicate that the s 67 "matters" were the facilities and services relating to the particular aerodrome at which the aircraft landed. The use of the singular (i.e. a single aerodrome) is also consistent with the definition, already noted, of "charge" in s 66(1)(a) of the Act as "a charge for a service or facility provided by the Authority". But, as her Honour noted, cl 1 goes on to provide that the charge is "for services and facilities at the aerodromes referred to in Column 2". (Emphasis added). What, if anything, is the significance of the change from the singular ("aerodrome") to the plural ("aerodromes") in this connection?
Before addressing this question, it is necessary to consider the meaning of "for" in the phrase "for services and facilities...". One of the dictionary meanings (Macquarie) of "for" is: "in order to obtain". This appears to be an appropriate use of the word here. That is to say, that a landing charge is applicable in respect of each landing at a Schedule 1 aerodrome, being a charge applicable in order to obtain the subject services and facilities. But what, in fact, are the subject services and facilities?
According to the Authority's argument, which the primary Judge accepted, they are those services and facilities which relate to all of the Schedule 1 aerodromes, viewed as "a network", and not merely those relating to the aerodrome at which the aircraft lands.
With all respect, I have difficulty with this interpretation of cl 1.
For one thing, the concept of a "network" is not mentioned in the Act, the regulations or the Determination. Nor could it be suggested that a landing charge is applied in return for permission to take off at one airport, fly, and land at another airport. The licensing of aircraft operations and the grant of approval to land and take off are dealt with by other provisions of the Act, or by the provisions of the Air Navigation Act 1920 , or by statutory regulations.
One of the dictionary meanings (Shorter OED) of "network" is a "complex system of rivers, canals, railways, wireless transmitting stations, etc." (Emphasis added). This appears to be the sense in which the term was used by Branson J, when regard is had to the meaning of "system": the primary meaning of that term (Shorter OED) is an "organised or connected group of objects"; and in various scientific and technical uses it means "A group, set, or aggregate of things, natural or artificial, forming a connected or complex whole". (Emphasis added).
It will be recalled that her Honour spoke of the "network" concept when attempting (at 567) to reconcile the apparent inconsistency between the plural reference in cl 1 to "services and facilities at the [Schedule 1] aerodromes" on the one hand, and the singular reference, on the other, in Column 2 of Item 1 of Table 1 to "facilities and services relating to an aerodrome specified in Schedule 1". Branson J was of the opinion, as has been noted, that "the language of... [cl 1] must prevail. That is... the charge... is... for a network of facilities and services, not a charge for facilities and services relating to a particular aerodrome". (Emphasis added).
Section 67, in the light of which cl 1 should be construed, speaks of the amount or rate of "a charge" and of the expenses incurred "in relation to the matters to which the charge relates" (emphasis added). Section 67 thus proceeds upon the footing, consistent with the authorities explaining the notion of what amounts to "taxation", that there will be a particular or individual relationship between the fee payable and the specific service for which, or in relation to which, it is payable. Again, this tends to contradict the introduction of a "network" concept into the present context.
The construction of cl 1 which I favour is also reinforced by the provisions of cl 10 by which, importantly, it is prescribed that a charge is not payable unless, at the time of landing, the facilities or services "are available for use by the aircraft". This could not possibly be a reference to any "network" of facilities or services at each of these aerodromes.
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. A singular interpretation is available, in my view, as a matter of the ordinary process of statutory interpretation, by giving the word "aerodromes" a distributive construction, so as to be read as if the words "or aerodrome" were inserted after it. In this way, an unjust and arbitrary interpretation is avoided. Take the illustration of an aircraft that makes no more than a single landing at only one of the Schedule 1 aerodromes referred to in Column 2 of Item 1 in Table 1. It would be arbitrary and unjust to require that such an operator contribute to the expense of providing services and facilities relating to the thirty one other Schedule 1 airports. It would be quite artificial to regard such an aircraft operator as incurring a liability "for" (i.e. in order to obtain) services and facilities at the thirty one other airports. This may be an extreme example but other, less far-fetched illustrations of arbitrary and unjust outcomes could readily be imagined if the plural interpretation were to be universally applied, as the Authority seeks to do, irrespective of the actual circumstances.
A similar conclusion may be reached, if necessary, by an application of the provisions of s 23(b) of the Acts Interpretation Act 1901 .
Support for the reading down of the plural, where it is appropriate, may be found in two modern decisions of the highest authority dealing with situations which may be seen to be analogous to the present context.
In Sin Poh Amalgamated (H.K.) Ltd v Attorney-General [1965] 1 All ER 225, legislation empowered the appointment of "commissioners" to conduct any inquiry deemed advisable. A single commissioner was appointed. It was held by the Privy Council that no contrary intention appeared in the Hong Kong counterpart of s 23(b) of the Acts Interpretation Act 1901 sufficient to exclude its operation. That is to say, apart from the mere use of the plural which of itself did not show a contrary intention, there was nothing in the context of the legislation which made the power to appoint a sole commissioner out of accord with the expressed intention of the legislature.
Lord Pearce said (at 228):
"It is to the appointing power in s. 2 of the Commissioners Powers Ordinance that one naturally looks first to see whether it contains any intention contrary to reading the plural `commissioners' as including the single `commissioner'. Beyond the bare fact that the plural is used, the section contains no evidence of any such intention. If one inserts after the word `commissioners' the words `or sole commissioner' no difficulty is thereby created, so far as that section is concerned."
His Lordship went on to say (at 228):
"... the fact that certain matters of procedure are drafted to suit the appointment of more than one commissioner appears to be attributable to no more than the fact that the Ordinance is drafted in plural terms. The Interpretation Ordinance was intended to avoid multiplicity of verbiage and to make the plural cover the singular except in such cases as one finds in the context of the legislation reason to suppose that the legislature, if offered such an amendment to the bill, would have rejected it. Here their lordships cannot find any such reason."
In B.P. Australia Ltd v Bissaker [1987] HCA 24; (1987) 163 CLR 106, a question arose as to the meaning of "ship" for the purposes of the Customs Act 1901 and thus for the purposes of the expression "ship's stores" in the Excise Act 1901 . Although the word "ship" was not positively defined in the Customs Act 1901 , an interpretation section provided that:
"`ship' does not include -
(a) a ship that is not currently engaged in making international voyages; or
(b) a ship that is currently engaged in making international voyages but is about to make a voyage other than an international voyage."
Mason CJ, Wilson, Deane, Dawson and Gaudron JJ said (at 113-4):
"The expression `international voyages' in par. (a) of the definition of `ship' in s. 130C must be read as including the singular and as referring to `international voyage' in its defined sense. There is no reason for refusing to apply s. 23(b) of the Acts Interpretation Act (Cth). The words `currently engaged' in pars. (a) and (b) of the definition of `ship' do not evidence a contrary intention or indicate that `international voyage' should be understood in a sense which differs from the defined sense. The reference to the plural may be explained by the fact that a ship is very often engaged, at least indirectly, on more than one international voyage at one and the same time simply because at a given time the ship is travelling to various ports in different nations, picking up and setting down cargo or passengers in each port."
Nor, for similar reasons, are there, in my view, any grounds for refusing to apply s 23(b) here. The use of the singular in the opening words of cl 1 and in Column 2 of Table 1 serves to reinforce this conclusion.
It follows that I would interpret the charge in cl 1 as applicable on each occasion an aircraft landed at a Schedule 1 aerodrome, and as applicable in order for the aircraft to obtain the services and facilities relating to the Schedule 1 aerodrome at which it landed.
For similar reasons cl 2 and cl 3 should be interpreted in the same way.
As has been seen, both cl 11 and cl 12 are more clearly expressed in the above respect. Each provides, in plain terms which do not call for any further interpretation, that in respect of the use of the identified en route and meteorological facilities and services, a charge is payable on each landing. The area of contention between the parties is not the meaning of those clauses but their substantive effect when the "network" concept of pricing the charges is applied.
(c) Did the fixing of the rates of the charges comply with the requirements of s 67?
Given my interpretation of s 67 and of the Determination, can it be said, within the meaning of s 67, that the rates of the charges fixed are "reasonably related" to the Authority's "expenses incurred or to be incurred... in relation to" the TNS relating to the aerodrome at which the aircraft landed, so as "not... to amount to taxation"? And can the same be said of the rates of the charges for the ERS and the meteorological facilities and services?
On behalf of the Authority, reliance is placed upon the primary Judge's findings and conclusions on the question of whether the fixing was reasonable, and in particular, as follows:
* The air traffic facilities and services provided by the Authority were utilised principally by aircraft in controlled air space. With very few exceptions, all large RPT aircraft, such as those flown by Compass, were required by the Air Navigation Regulations to fly in controlled airspace whilst in Australian territory. There were, generally speaking, considerably more RPT aircraft in controlled airspace than GA aircraft.
* The "Ramsey" pricing theory (which, as has been seen, sets prices to different users in inverse relation to the sensitivity of their usage to price and their economic capacity to pay) is widely regarded as a "best practice" approach to the pricing of natural monopolies across the public sector. No cross-subsidy is involved so long as each category of user pays at least the marginal cost for each unit of service.
* The use of MTOW and of its square root as the basis for TNS and ERS charges respectively, produced the result that the total airways charges, considered on a per passenger basis, were relatively flat (i.e. similar) across the fleet using Australian airways.
* The rates of the TNS, RFFS and ERS charges: (a) had the effect that, in respect of each potential passenger in an aircraft, an amount was payable which was "reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which the charge[s] relate[d]"; and (b) were rates of charge reasonably related to such expenses, having regard to the priority given by the Act to air safety.
In addition, in argument before us, Senior Counsel for the Authority submitted that for the purposes of applying s 67, the "reasonableness" of the relationship should be assessed by reference to, inter alia, the following:
* The limitations of the Authority's information system; that is, its inability to implement "location specific charging".
* International charging practices.
* Administrative convenience.
* The needs and desires of the industry participants, determined after consultation with them.
* Consistency, ease of understanding and predictability of charges, so as to enable the Authority and the industry participants to budget.
* The relationship between the use of the facilities and the amount of the charges, that is, the absence of any fixed or standing charge in the event that the services and facilities were not utilised.
* The number of passengers' lives and the value of cargo at risk.
* The "network" within which the services are provided.
* The absence of cross-subsidies as between the services because the revenue generated by each service covers the direct and marginal costs of each service.
* The statutory provisions that the Authority needs to earn a reasonable rate of return on its assets (s 45(g)) and that the Commonwealth expects that the Authority will pay a reasonable dividend (s 45(h)).
* The statutory direction (s 11) that the Authority perform its function in a manner consistent with the obligations of Australia under the Chicago Convention which "in effect" require something like a "network" in the interests of air safety.
In my opinion, however, none of the foregoing considerations properly bear upon the limits enacted explicitly in the provisions of s 67. This follows from the interpretation I have placed upon s 67, and, in particular, my view of the meaning of "reasonably related to the expenses incurred" and of the notion of "taxation" in this context. Nowhere in the language of s 67 is reference made to any of the considerations relied upon by the Authority in fixing its charges. Nor, in my view, is there any basis demonstrated for implying a reference to any such considerations into the provision. In particular, the general financial planning provisions of s 45 cannot, in my view, now be called in aid by the Authority so as to avoid the limits on charges prescribed by the specific terms of s 67.
At the risk of oversimplification, and speaking in general terms, it may be said that the constraints imposed by s 67 appear to have their true rationale in cost accounting, rather than in the economic theory or broader notions of "equity" embraced by the Authority. Nor, as has been indicated, can I accept that the "network" concept is appropriate in the application of s 67. The central element of s 67 focuses on the notion of "expenses incurred or to be incurred by the Authority". As was decided in Semco, this ordinarily denotes amounts either disbursed or borne (including indirect or overhead expenses), but not amounts earned as profits. In requiring that the charge be "reasonably related" to the expenses incurred, s 67 is, I think, speaking in terms of the expenses being connected or associated to the charge to an extent or degree that may be described as having the quality of being "sufficiently" or "fairly" or "discernibly" or "transparently" related. This is very similar to the sense of the familiar descriptions used in the "taxation" cases and expresses essentially the same idea. That is to say, whilst it may not be practicable, as a strict valuation exercise, to demonstrate an actual or exact correspondence between the charge and the expense, the limits imposed by s 67 will nonetheless be observed if the amount, or rate, of the charge for a service or facility may be seen, when objectively viewed, to have been fixed in good faith so as to approximate the amount of the expenses incurred or to be incurred in relation to that service or facility. In other words, a bona fide (albeit "by and large") cost accounting exercise that makes an honest attempt to match the amount of a charge with the amount expended in providing the specific service for which the charge is levied, will substantially comply with the dictates of s 67 so that the required nexus is fairly or sufficiently demonstrated. I agree with Pincus J in Montchel (at 446) that the relationship need not be perfect. At the same time, I cannot, with respect, agree that s 67 permits a "general fixation" of charges.
In fact, as has been seen, no attempt was made to set the quanta of the charges that were fixed on any location specific basis. Rather, they were purportedly fixed on a "network" basis by reference to expenses incurred in providing services of that type across the whole of Australia. Moreover, the charges were also fixed by reference to the ability of users to pay, and an element of profit was allowed.
The consequences of the Authority's failure to attempt to match, even on a "by and large" basis, the amount or rate of a charge with the specific facility or service for which the charge is raised is reflected in the following figures and statistics. For the financial year ending 30 June 1991 more than 80 per cent of the Authority's income came from aircraft operations. Of that total revenue, domestic jet aircraft were the source of 47 per cent, international operators 31 per cent, and non-jet aircraft only 4 per cent. Yet for each of the years for which statistics are given (i.e. 1985-1989 inclusive), the number of hours flown by GA aircraft (which were mostly non-jet) far exceeded the number of hours flown as part of domestic airline activity, and the number of GA aircraft movements (i.e. take-offs and landings), far exceeded the number of movements attributable to domestic and international airline activity combined.
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". Nor were they a "true" fee for service. Accordingly, the charges also amounted to taxation, contrary to the constraints imposed by s 67.
None of this is to suggest that air safety is not important or that "Ramsey" pricing principles lack merit. Section 67 says nothing to that effect and is simply silent on these questions. Rather, s 67 addresses an entirely different consideration, namely the relationship between the expense incurred, or to be incurred, in providing a particular service or facility to an individual operator and the amount or rate of the charge payable by the operator for that service or facility. The thrust of s 67 is that, in this scenario, the relationship must be such as not to be seen as excessive, or (really the same thing) not to amount to taxation. In fixing its charges, the Authority, instead of considering the relationship between the expense and the charge on the individual operator basis mentioned, sought to adopt a "network" approach and to apply the "Ramsey" principles to all its charges so as to minimise the cost that might be passed on by the operator to individual passengers. There is nothing in the language or evident purpose of s 67 to justify this course. In essence, the Authority's approach was flawed because it assumed that s 67 did no more than provide that its charges must be generally "reasonable" rather than reasonably related to relevant expenses, a very different concept.
Finally, for completeness, it may be noted that, in my view, the provisions of the Chicago Convention are not significant for present purposes. It will be recalled that the Authority relies on the provision of s 11, which states that the Authority "shall perform its functions in a manner consistent with the obligations of Australia under the Chicago Convention". I agree with the submissions advanced on behalf of Monarch: firstly, that whilst s 9 provides that the Authority's functions include the provision of the subject services and facilities, the fixing of a charge by a determination under s 66(2) is the exercise of a power, rather than the performance of a "function"; and, secondly, that, in any event, the Chicago Convention does not, in fact, impose any obligation to establish a network system of charging, or "Ramsey" pricing principles.
In my opinion, it must follow that the charges were not validly imposed. I would dismiss the appeal for this reason.
MONARCH'S ALTERNATIVE ARGUMENTS
In the circumstances, I need not deal with the alternative arguments advanced on behalf of Monarch that s 67 was infringed in the other ways mentioned in its notice of contention, that is, by reason of the discrimination alleged between international and domestic operators and between avtur and non-avtur users. Nor need I deal with Monarch's alternative submissions that the imposition of the liens infringed the provisions of s 51(xxxi), and s 55, of the Constitution.
ORDERS
I propose that the appeal be dismissed with costs.
|
I certify that this and the preceding forty nine (49) pages are a true copy of the Reasons for Judgment herein of the Honourable
Justice Beaumont |
Associate:
Dated: 18 February 1998
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY | AG34 of 1997 |
|
BETWEEN: | AIRSERVICES AUSTRALIA (formerly CIVIL AVIATION AUTHORITY)
Applicant |
|
AND: | MONARCH AIRLINES LIMITED
Respondent |
JUDGES:
BEAUMONT, WILCOX AND LINDGREN JJ DATE: 18 FEBRUARY 1998 PLACE: SYDNEY
WILCOX J: I have had the advantage of reading in draft form the reasons for judgment of Beaumont J and Lindgren J. Lindgren J helpfully analyses the significant differences between the views of Beaumont J and those of the primary Judge, Branson J.
One difference between Branson J and Beaumont J concerns the question whether s 67 of the Civil Aviation Act 1988 imposed two limitations on the amount of the rate or charge that the Board was empowered to fix ("reasonably related to the expenses incurred or to be incurred by the Authority" and "not ... such as to amount to taxation") or one composite limitation. If the charges with which this appeal is concerned amount to taxation, the difference seems not to matter. However, for such importance as it might have, I indicate my preference for the view of Beaumont J. Both verbal formulae say the same thing; the first seems to have been added by way of political flourish in the course of Parliamentary debate.
If there was no reasonable relationship between the charges fixed by the Board and the expenses incurred by the Authority regarding the matters to which they relate, the charges amounted to taxation and were invalid. As Branson J observed, before it is possible to determine whether there was such a relationship, it is necessary to identify the matters to which the charges related. This immediately raises the problem of construction of the Determination imposing the charges discussed by Branson and Beaumont JJ. Branson J adopted a "network" approach whereas Beaumont J reads the relevant clauses as imposing charges in relation to particular landings at particular airports. On this issue as well, and for the reasons he gives, I prefer the approach of Beaumont J.
Adoption of the Beaumont construction virtually concludes the contest; the Board made no attempt to relate the amount of a charge to the expense of providing a particular service at a particular airport. For this reason, I agree the charges were not validly imposed. The appeal should be dismissed with costs.
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I certify that this and the preceding one (1) page is a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.
|
Associate:
Dated: 18 February 1998
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY | AG 34 of 1998 |
|
BETWEEN: | AIRSERVICES AUSTRALIA (FORMERLY CIVIL AVIATION AUTHORITY)
Applicant |
|
AND: | MONARCH AIRLINES LIMITED
Respondent |
JUDGES:
BEAUMONT, WILCOX AND LINDGREN JJ DATE: 18 FEBRUARY 1998 PLACE: SYDNEY
Both Branson J and Beaumont J think that the charges fixed by the Determination are such as to amount to taxation, and are therefore not authorised by s 66(2) of the Civil Aviation Act 1988 by reason of the operation of s 67 of that Act. I agree with them.
In certain respects, their Honours' reasons differ. Branson J construes s 67 as imposing two limitations on the amount of the rate or charge which s 66(2) empowers the Board to fix, whereas Beaumont J considers that it imposes only one. Branson J is of the view that the matters to which the charges fixed by cll 1, 2, 3, 6, 7, 11 and 12 of the Determination relate are networks of facilities and services (landing, en-route and meteorological). Beaumont J, on the other hand, thinks that the matters to which the charges relate are the provision of the facilities and services in respect of particular landings and the particular aerodromes at which they occur (cll 1, 2, 3, 6 and 7) and the use of identified en route and meteorological facilities and services (cll 11 and 12). Branson J is of the opinion that each charge is "reasonably related to the expenses incurred or to be incurred by the Authority in relation to the matters to which the charge relates" (the networks), while Beaumont J thinks that it is not and for this reason is such as to amount to taxation.
Their Honours' differences of approach do not compel different answers to the question whether the various charges are such as to amount to taxation, and I have decided not to explore those differences with a view to arriving at a preference for one against the other.
I gratefully adopt the analysis of the legal nature of taxation given by Beaumont J, and that of Branson J as recounted by his Honour. The amounts of the various charges bear no discernible relationship to the cost of the provision of services on particular occasions, in respect of which the particular charges were made against particular persons from time to time. Dixon CJ's characterisation of the fees with which Swift Australia Co (Pty) Ltd v Boyd Parkinson [1962] HCA 41; (1962) 108 CLR 189 (at 200-1) was concerned is applicable to the charges in the present case:
" ... the fees are not payable in respect of any particular service but generally for the purpose of defraying expenses."
If Branson J's views on the contentious issues to which I have referred be accepted as correct, I agree with her that each charge nonetheless amounts to taxation unless it can properly be viewed as a fee for services rendered on particular occasions, and it cannot be so viewed for the reasons referred to above. If Beaumont J's views on those issues be accepted as correct, I agree with him that each charge amounts to taxation because it was not in the nature of such a fee for the same reasons, and, as well, because the amount or rate of each charge was not "reasonably related" to the relevant "expenses" for the reasons given by his Honour.
Accordingly, I agree with Beaumont J that the appeal should be dismissed with costs.
|
I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice
Lindgren |
Associate:
Dated: 18 February 1998
|
Counsel for the Appellant: | Mr D J S Jackson QC with Mr K Barlow of counsel |
| Solicitors for the Appellant: | Mallesons Stephen Jaques |
| Counsel for the Respondent: | Mr J C Campbell QC with Dr A Bell of counsel |
| Solicitors for the Respondent: | Allen Allen and Hemsley |
| Date of Hearing: | 24, 25, 26 September 1997 |
| Date of Judgment: | 18 February 1998 |
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/1998/79.html