Acquista Investments Pty Ltd v Urban Renewal Authority
[2015] SASCFC 91
•20 July 2015
Supreme Court of South Australia
(Full Court: Civil)
ACQUISTA INVESTMENTS PTY LTD & ANOR v THE URBAN RENEWAL AUTHORITY & ORS
[2015] SASCFC 91
Judgment of The Full Court
(The Honourable Justice Vanstone, The Honourable Justice Lovell and The Honourable Auxiliary Justice Debelle)
20 July 2015
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GENERALLY
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - DELEGATION OF POWER
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - UNREASONABLENESS
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - IRRELEVANT CONSIDERATIONS
Appeals against dismissal of claim for judicial review – appellants are entities who would have liked to have tendered for purchase of land held by the Urban Renewal Authority, a statutory corporation, had that land been placed on the open market – land was not placed on the open market but was made the subject of a Deed which granted options to the third respondent to purchase the land over a period – the third respondent’s proposal was to develop the land as an “oil and gas hub” which development potentially offered substantial benefits to the state beyond the sale proceeds – the trial judge found that the decision to enter the Deed was unlawful because “mandatory considerations” found in s 11 Public Corporations Act were overlooked or not applied – further he found the decision to enter the Deed was unreasonable in the Wednesbury sense due to insufficient investigation of the value of the land and of the alternative of putting it on the market - however he found that the contract was not thereby rendered void - in support of their appeal the appellants argued that having made those findings the judge should have declared the Deed void or unenforceable – the respondents argued by notices of contention that the findings that the decision to enter the Deed was unlawful and legally unreasonable were in error and should be set aside, and that the appeal should be dismissed for those reasons as well.
Held (Vanstone and Lovell JJ): that the appeal should be dismissed on the basis that the findings that the Deed was unlawful and legally unreasonable should be set aside and, in any event, that the decision to enter into the Deed was not susceptible of judicial review.
(Debelle AJ dissenting): that the appeal should be allowed on the basis that the judge’s findings that there was non-compliance with s 11 and as to legal unreasonableness were correct and that it followed that the Deed should have been declared invalid and of no effect.
Housing and Urban Development (Administrative Arrangements) Act 1995 (SA) s4, s8, s9, s16, s17, s19, s21, s22, s23, s27, s28, s29, s30; Housing and Urban Development (Administrative Arrangements) (Urban Renewal Authority) Regulations 2012 (SA); Public Corporations Act 1993 (SA) s5, s6, s7, s8, s9, s10, s11, s12, s13; Local Government Act 1999 (SA); Administrative Decisions (Judicial Review) Act 1977 (Cth); Housing and Urban Development (Administrative Arrangements) (Urban Projects Authority) Regulations 1995 (SA); Crown Proceedings Act 1992 (SA) s 5; Public Corporations (Land Management Corporation) Regulations 1997 (SA), referred to.
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; Annetts v McCann (1990) 170 CLR 596; Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth of Australia (1977) 139 CLR 54; Australian National Airlines Commission v Newman (1987) 162 CLR 466; Glasson v Parkes Rural Distributions Pty Ltd (1984) 155 CLR 234; Griffith University v Tang (2005) 221 CLR 99; Kioa v West (1985) 159 CLR 550; Minister for Immigration and Ethnic Affairs v Mayer (1985) 157 CLR 290; Armagas Ltd v Mundogas SA [1986] AC 717; Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223; Australian Conservation Foundation Inc v The Commonwealth (1980) 146 CLR 493; Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438, applied.
Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454; General Newspapers Pty Limited & Ors v Telstra Corporation (1993) 45 FCR 164; Khuu & Lee Pty Ltd v Corporation of the City of Adelaide (2011) 110 SASR 235; Minister for Immigration and Citizenship v Li & Anor (2013) 249 CLR 332, discussed.
Gnych v Polish Club Ltd [2015] HCA 23; MBA Landholdings Pty Ltd v Gungahlin Development Authority (2002) 206 FLR 120; State of Victoria v Master Builders' Association of Victoria [1995] 2 VR 121; Agar v Official Manager of Athenaeum Life Assurance Society (1858) 3 CBNS 725, 140 ER 927; Attorney-General (NSW) v Quin (1990) 170 CLR 1; Attorney-General v De Keyser's Royal Hotel Ltd [1920] AC 508; Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406; Australian Broadcasting Corporation v Redmore Pty Ltd (1987) 11 NSWLR 621; Avon Downs Pty Ltd v Federal Commission of Taxation (1949) 78 CLR 353; Barton v The Commonwealth (1974) 131 CLR 477; Batemans Bay Local Aboriginal Council v The Aboriginal Community Benefit Fund Pty Ltd (1998) 194 CLR 247; Celthene Pty Ltd v WKJ Hauliers Pty Ltd (1981) 1 NSWLR 606; Collector of Customs v Pozzolanic (1993) 43 FCR 280; Commissioner of Taxation of the Commonwealth of Australia v Futuris Corporation Ltd (2008) 237 CLR 146; Corporation of the City of Enfield v Development Assessment Commission (2000) 199 CLR 135; Corporation of the City of Unley v South Australia (1997) 68 SASR 511; Edwards v Santos Ltd (2011) 242 CLR 421; Electricity Trust of SA v Linterns Ltd [1950] SASR 133; Fiordland Venison Ltd v Minister of Agriculture & Fisheries [1978] 2 NZLR 341; Harrisons and Crossfield Ltd v London and North-Western Railway Co [1917] 2 KB 755; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; Reg v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170; Royal British Bank v Turquand (1856) 6 EL & BL 327; Ruddock v Vadarlis (2001) 183 ALR 1; Shop Distributive and Allied Employees Association v Minister for Industrial Affairs (SA) (1995) 183 CLR 552; South Australia v O'Shea (1987) 163 CLR 378; South Australia v Tanner (1989) 166 CLR 161; Spencer v The Commonwealth (1907) 5 CLR 418; State of New South Wales v Bardolph (1934) 52 CLR 455; In Re Land Credit Company of Ireland (1869) LR 4 Ch App 460; Ling v The Commonwealth (1994) 51 FCR 88; Minister for Immigration and Border Protection v Singh (2014) 308 ALR 280; Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259; Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611; Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; Minister for National Revenue v Wrights' Canadian Ropes Ltd [1947] AC 109; Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; Onus v Alcoa of Australia Ltd (1981) 149 CLR 27; Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997; Petersen v Moloney (1951) 84 CLR 91; Politis v Commissioner of Taxation (Cth) (1988) 16 ALD 707, considered.
ACQUISTA INVESTMENTS PTY LTD & ANOR v THE URBAN RENEWAL AUTHORITY & ORS
[2015] SASCFC 91Full Court: Vanstone, Lovell JJ, Debelle AJ
VANSTONE AND LOVELL JJ:
On 13 December 2013 the Urban Renewal Authority (the Authority), the Premier on behalf of the State of South Australia and Adelaide Capital Partners Pty Ltd (ACP) entered into a Deed (the contract) that conferred options on ACP to purchase 407 hectares of land to the north of Adelaide (the Land).
The Authority is a statutory authority established under the Housing and Urban Development (Administrative Arrangements) Act 1995 (the HUD Act). It is the registered proprietor of the Land which is beneficially owned by the Crown.
On 20 May 2014 the appellants, Acquista Investments Pty Ltd and Veolia Environmental Services (Aust) Pty Ltd who jointly conduct a business trading as Integrated Waste Services (IWS) commenced an action for judicial review in this Court seeking, amongst other relief, to set aside the contract. On 7 January 2015 a Judge of this Court declined to grant IWS any of the relief sought and dismissed the action. IWS now appeals to the Full Court. By notices of contention the respondents, the Authority, the State of South Australia and ACP argue that the Judge’s decision should be upheld for reasons additional to and in some respects other than those given by him. The grounds of appeal and the notices of contention put most of the critical findings of the Judge in issue.
The striking feature of these proceedings is that none of the contracting parties wishes to do other than to perform its part of the contract. None of the parties to the contract claims that the contract entered into is beyond power or defective in its execution. At no stage has there been any allegation of bad faith.
The plaintiffs in the action, now the appellants, have no grounds for asserting standing to bring these proceedings beyond their claim that, had the Land been put on the open market, they would or might have been interested in purchasing some or all of it. In all these circumstances standing to make the original application as well as the amenability to judicial review of the decision to enter the contract are live issues.
The more detailed facts of the matter are set out in the reasons of the Judge under appeal: Acquista Investments Pty Ltd & Anor v The Urban Renewal Authority & Ors [2014] SASC 206.
Overview
Broadly speaking, the plaintiffs attacked the validity of the agreement on three fronts. First they argued that the decision to sell the Land was made without power or authority and as a corollary the contract was liable to be set aside. In essence this argument devolved to the question of whether the execution of the contract proceeded on the basis of, and in accordance with, a valid delegation from the Authority. The Judge found that it did. Secondly, the plaintiffs argued that the decision was unlawful and void on account of the asserted non-compliance with s 11(1) of the Public Corporations Act 1993 (SA). That section requires a public corporation (such as the Authority is) to perform its commercial operations in accordance with prudent commercial principles. The Judge found that there had not been compliance with that requirement and that the contract was therefore unlawful; but he declined to declare it void. Thirdly, the plaintiffs argued that the contract should be set aside on the basis that the decision to enter it was “unreasonable in the Wednesbury sense … in that no reasonable person would have made the decision”, (referring to Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223). The Judge upheld that claim but found that this was not such as to render the agreement void.
In this Court the appellants contend that the Judge erred in finding that the contract was entered validly pursuant to a delegation. They also argue that the Judge erred in failing to declare the contract void on account of either or both the unlawfulness and legal unreasonableness which he found. Naturally, the greater part of the appellants’ argument addressed these issues.
Consistent with their notices of contention the respondents argue that the Judge erred in finding the contract to be unlawful on account of failure to comply with s 11 of the Public Corporations Act and erred in finding that the decision to enter the contract was legally unreasonable. For these reasons they contend that those findings should be set aside and the appeal should be dismissed. But more fundamentally the respondents also contend and always have that the decision to enter the contract made by the Cabinet, and the contract itself, are not amenable to judicial review and that the plaintiffs lack standing to bring the action.
The question of the amenability of the decision to enter the contract to judicial review is critical. At the trial all parties asserted that the relevant decision to sell the Land was made by the Cabinet. Upon the appeal the respondents maintain that position. The Judge found that a “substantive” decision to enter the contract was made by the Chief Executive of the Authority. We consider that the Judge erred in this respect. Debelle AJ is of the same opinion. We consider that the Cabinet made the decision, either as the delegate of the Authority or as an exercise of executive power.
It is a real question whether a decision made by the Cabinet to sell a parcel of land that the Government was in a position to sell is a decision which could be susceptible of judicial review. The appellants asserted that non-compliance with what they call mandatory considerations found in s 11 of the Public Corporations Act brought the decision within the ambit of a reviewable decision. As will be seen, we consider that s 11 is essentially aimed at the internal operations of statutory corporations and is not such as to restrict the powers of the Authority. Accordingly, we do not consider that, even if there were non-compliance with s 11 (as to which we express no opinion) it could lead to a finding that the contract was unlawful and liable to be set aside or declared unenforceable.
The other basis of attack also relied on s 11 and sections of the HUD Act. It is that the decision was legally unreasonable. As mentioned, the Judge upheld this claim. Debelle AJ would uphold this finding. We are of a different opinion. In our view there is no basis to find that the decision was legally unreasonable. The cabinet submissions which might be assumed to have formed the basis of the discussion of the proposal in the Cabinet are before the Court. They are comprehensive in terms of outlining both positive and negative aspects of accepting ACP’s proposal. In our view it would be a mistake to infer that this was the only information provided to the Cabinet or that the discussions were confined to the topics addressed in the papers. There is no reason to think that there was not a robust discussion about the decision.
Even assuming that the only information before the Cabinet was that contained in the cabinet submissions, we would not accept that the decision to accept ACP’s offer and not to go to the open market was shown to be legally unreasonable. The proposal by ACP was quite different from that associated with any other expression of interest. It was not merely to buy the Land but to establish what was referred to as “an oil and gas hub”. It was envisaged that if that proposal were brought to fruition, it would likely involve substantial benefits to the State in terms of investment, infrastructure and jobs. This Court is not in a position to make any judgment as to whether the proposal was likely to come to fruition. No doubt that likelihood would have been debated in the Cabinet. We must assume that the Cabinet considered that the proposal was both genuine and viable. Once so much is assumed, then it can readily be seen that this proposal would have attraction beyond a mere sale of some or all of the Land for, presumably, waste management purposes. In other words, the ACP proposal was quite different from other interest which had been expressed in the Land. To accept a unique proposal such as ACP’s and in so doing forego the opportunity to potentially obtain a greater price per hectare for some or all of the Land could not be seen as legally unreasonable. That is not to say that there were not strong arguments favouring going to the open market. Indeed it might be thought that by going to the open market the Cabinet could have achieved both ends; it might have seen ACP forced to tender at a higher rate in order to secure the Land. However, that does not render the decision to proceed with the proposal without going to the market unreasonable.
It is not the role of this Court, nor is this Court equipped to adjudicate on the validity of the reasons which motivated the Cabinet to approve the proposal. As mentioned, we cannot assume that all the material before the Cabinet or the arguments made for and against the proposal are before this Court. In our opinion a court is not well placed to assess a decision which is a commercial one but which involves wider questions of policy and strategy. The inability of this Court to assess the decision in all its aspects tends towards a conclusion that the decision to enter into the contract was not one susceptible of judicial review, at least on account of legal unreasonableness.
Furthermore, in our opinion the decision to enter the contract was not one which affected any rights, interests or legitimate expectations. The only rights affected by the contract itself were those of the parties to it. For this reason, too, neither the decision to enter the contract, nor the contract itself was amenable to review.
However, since the claims that the decision was unlawful and legally unreasonable were the central planks of the application for judicial review and indeed were found to be made out by the Judge, we propose to deal with each of these issues before amplifying our reasons as to amenability.
Statutory Framework
The HUD Act is concerned with public administration of housing and urban development. The Authority, which is the first respondent, is a statutory corporation established under the HUD Act to facilitate public administration of urban renewal and development. It is subject to the control and direction of the Minister. The Minister is the Minister for Housing and Urban Development, The Honourable Tom Koutsantonis MP.
Part I of the HUD Act entitled “Preliminary” contains the short title and the interpretation sections.
Part II, commencing at s 4 and called “The Minister”, sets out ministerial powers and functions and deals with delegations by the Minister and with his establishment of advisory committees. The powers given to the Minister under s 4 include the power to “acquire, hold, deal with and dispose of real and personal property” (s 4(1)(b)) and to “enter into any kind of contract or arrangement” (s 4(1)(f)). The Minister’s functions given in s 5 include:
5—Functions
The functions of the Minister include—
…
(b) to initiate, undertake, support and promote the development of land and housing in the public interest and to encourage and facilitate public and private sector investment and participation in the development of the State;
…
Part III, commencing at s 8, is entitled “Statutory Corporations”. A statutory corporation is established by the Governor by regulation: s 8(1). It is a body corporate and, subject to any statutory provision, has the powers of a natural person and powers specifically conferred upon it: s 8(3). As mentioned, it is subject to the control and direction of the Minister: s 9. Division 3 of Part III deals with “Boards”, members of which are appointed by the Governor. Section 16 provides the general management duties of boards. Section 16(1) provides that the Board is responsible to the Minister:
16—General management duties of board
(1) The board of a statutory corporation is responsible to the Minister for overseeing the operations of the statutory corporation (and any subsidiary) with the goal of—
(a)securing continuing improvements in performance; and
(b)protecting the long term viability of the statutory corporation and the Crown's financial and other interests in the statutory corporation.
(2) Without limiting the effect of subsection (1), the board must for that purpose ensure as far as practicable—
(a)that appropriate strategic and operational plans and targets are established; and
(b)that the statutory corporation (and any subsidiary) have appropriate management structures and systems for monitoring management performance against plans and targets and that corrective action is taken when necessary; and
(c)that appropriate systems and practices are established for management and financial planning and control, including systems and practices for the maintenance of accurate and comprehensive records of all transactions, assets and liabilities and physical and human resources of the statutory corporation (and any subsidiary); and
(d)that all such plans, targets, structures, systems and practices are regularly reviewed and revised as necessary to address changing circumstances and reflect best current commercial practices; and
(e)that the Minister receives regular reports on the performance of the statutory corporation (and any subsidiary), and on the initiatives of the board; and
(f)that the Minister is advised, as soon as practicable, of any material development that affects the financial or operating capacity of the statutory corporation (or any subsidiary) or gives rise to an expectation that the corporation (or any subsidiary) may not be able to meet its debts as and when they fall due.
Section 17 deals with the provision of staff for a statutory corporation. They are to be public servants unless the Minister otherwise directs. Section 19 empowers the Board to delegate its powers and functions or those of its statutory corporation.
By s 21 the Authority has various powers, including to “acquire, hold, deal with and dispose of real and personal property”: s 21(1)(b), and to “enter into any kind of contract or arrangement”: s 21(1)(f). However, exercise of those powers is subject to any limitation or condition imposed by the Minister. Section 22 provides that a statutory corporation holds its property on behalf of the Crown. In addition, pursuant to s 23 the Minister may transfer land held by a statutory corporation to the Minister, or to the Crown or to another agent or instrumentality of the Crown.
By virtue of s 28 the Minister may set objectives, targets and goals to be pursued by a statutory corporation. A corporation must provide the Minister with such records and information in its control as the Minister requires: s 29.
As enabled by s 8 of the HUD Act, the Authority was established by regulation on 1 March 2012: Housing and Urban Development (Administrative Arrangements) (Urban Renewal Authority) Regulations 2012 (SA) (the Regulations). Regulation 6 provides the functions of the Authority which include:
6—Functions of URA
(1) The functions of URA are as follows:
(a)to “initiate, undertake, support and promote the development of land and housing …,
(b)to encourage, facilitate and support public and private sector investment and participation in the development of the State, including by performing its functions to facilitate development that is attractive to potential investors;
(c) to acquire, hold, manage and dispose of land, … particularly with a view to—
…
(iv)holding land and other property to be made available, as appropriate, for commercial, industrial, residential or other purposes;
…
(l)to carry out its functions to support development that promotes growth in employment and the economy;
...
As contemplated by s 16 of the HUD Act, a Board was appointed to oversee the operations of the Authority. Pursuant to s 19 of the HUD Act the Board effected certain delegations of the Authority’s powers. Relevant for present purposes is the “Property Delegation” which entitled the Chief Executive to execute contracts concerning the disposal of land and the “Contracting Delegation” which delegated to the Cabinet the power to approve entry into contracts of the kind now under consideration.
Several matters arising from this framework are worthy of emphasis. Board members are not directors. By contrast to the governance arrangements of other statutory corporations that hold significant assets (such as councils established under the Local Government Act 1999 (SA)) the corporate status of the Authority is distinct from its Board. Sections 21(1)(b), 22 and 23 of the HUD Act make plain that the property of the Authority is vested in the body corporate, not the Board. Therefore there can be no implication that the assets of the Authority can only be dealt with by decision of the Board. The role of the Board is one of overseeing the operations of the Authority. It is not charged with managing the Authority; that task falls to the Chief Executive and he is subject to Ministerial control. Thus, in our view, having regard to the statutory and regulatory regime, the term which is colloquially used to described such boards, being “advisory boards”, is apt.
Further, it is apparent that the Minister is in a position to direct the Authority to sell land under s 9 of the HUD Act and, pursuant to s 23, he can, with the concurrence of the Treasurer, transfer an asset of the Authority to himself, to another statutory corporation, to the South Australian Housing Trust, to the Crown, or in certain circumstances, to another person or body.
The Authority, but not the Board, is given power to sell assets which it holds. The Board is given power to delegate the Authority’s powers, including the power to dispose of land, but the Board itself does not hold the power of sale. Therefore, until the power of sale is delegated to the Board arguably no person or entity – apart from the Minister in certain circumstances – may exercise that power.
The Public Corporations Act was in force when the HUD Act was passed. It is concerned with the control of public corporations. Certain sections of the Public Corporations Act apply to the Authority by force of the Regulations. Part 2 of the Public Corporations Act is entitled “Ministerial control”. It contains sections 6 to 10. Sections 8, 9 and 10 are declared by regulation to be applicable to the Authority. They deal with the right of the applicable Minister, or the Treasurer, to attend board meetings of a corporation and to have access to board papers.
Part 3 is headed “Performance and scope of corporation’s operations” and contains sections 11 to 13, each of which apply to the Authority. Section 11 imposes obligations upon a public corporation including to perform its commercial operations in accordance with prudent commercial principles and to use its best endeavours to achieve a level of profit consistent with its functions. The appellants claimed and the Judge held that this section was breached by the decision to contract with ACP.
The Authority is the successor of the Land Management Corporation. The assets of the Land Management Corporation, including the Land, were transferred to the Authority in 2012.
The decision to enter the contract
Documents tendered before the trial Judge show that the Cabinet made the decision to approve entry into the contract on 2 December 2013. At trial this was common ground as between all parties, although the appellants argued that the Cabinet had no power to do so. The decision of the Cabinet was communicated to the Authority by the Minister’s staff on 3 December 2013. On 11 December 2013 the Chief Executive of the Authority executed the contract to give effect to the Cabinet’s decision.
In our opinion the trial Judge was correct to find, as a matter of inference, that the Minister approved the execution of the contract by the Chief Executive as required in the “Property Delegation”. There was a clear evidentiary basis for that inference, including the sequence of events, the December cabinet submission being signed by the Minister and the part his staff played in advising the Authority of the decision. Apart from anything else, the Minister and the Premier, the Honourable Jay Weatherill MP, were recommending the proposal to the Cabinet. We consider this inference was well open to the Judge.
The Judge further found that the Minister was not acting under dictation in approving the decision. In assessing the question of whether he should approve entry into the contract the Minister was required to take into account the functions of the Authority as set out in reg 6 of the Regulations. He was also entitled to take into account Government policy as indicated by its decision that the proposal should be accepted. The Cabinet may properly indicate to a decision-maker what is Government policy: Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth of Australia (1977) 139 CLR 54 at 116. In circumstances where the Minister recommended the proposal to the Cabinet and secured Cabinet approval, it is difficult to argue that the Minister’s approval was given other than independently. The onus of proving dictation was upon the plaintiffs. They failed on that issue before the Judge and we agree with his decision.
With great respect to the trial Judge, we consider an inquiry as to whether the Chief Executive made an independent decision – or a “substantive decision” as the Judge termed it – to enter into the contract to be unwarranted. Material before the Judge demonstrates that staff of the Authority spent some months examining ACP’s proposal, seeking advice about it and preparing a contract for consideration by the Board, and, eventually, the Minister and the Cabinet. It would be surprising, to say the least, if the Chief Executive was not apprised of developments at each stage, if not closely involved in them. However, we find no justification for interpreting the delegation to the Chief Executive as requiring a “substantive decision” on his part.
In our view the Chief Executive was authorised to execute the contract, at least by reference to what was called the “Property Delegation”. The Chief Executive held a power of attorney from the Authority authorising him to execute deeds to which the Authority was a party. He also held a delegation from the Board of the Authority giving him the power to execute contracts concerning the disposal of land, provided that where the land value was over $4.4 million the Minister approved the contract. There was no question about the regularity of that delegation.
There were some differences between the draft contract which went before the Cabinet and that which was later executed by the Chief Executive. The differences included the shape and size of the areas relating to each option and the terms of the long term licence. In resolution 10 of the December cabinet submission it was noted that refinement of the documentation was continuing. In any event, we note that at trial, the appellants conceded that, were the Judge to find that Ministerial approval was given, it would cover the contract in its final form. In our opinion that concession was appropriately made having regard to the range of delegated powers held by the Chief Executive.
These facts alone validate the execution of the contract.
However, the respondents also mounted a strong argument to the effect that a separate, “Contracting Delegation” delegated to the Cabinet the power to approve the entry into contracts of this nature. Further, the first and second respondents argued that the scheme of the HUD Act and Regulations was not such as to rob the Premier, as head of government, of executive power to bind the State in contract, where the contract was incidental to the ordinary and well recognised functions of government. As seen, the HUD Act makes clear that the Authority is subject to Ministerial control. It further empowers the Governor to transfer assets of the State to the Authority, and vice versa. These provisions support a construction that the HUD Act was not intended to abrogate executive power in respect of State assets.
As we observed, in our opinion the validity of the transaction can be readily justified by reference to the Property Delegation and there is therefore no need to examine the respondents’ further arguments. However, we would not wish it to be assumed that we agree with the trial Judge’s decisions against the respondents on these subsidiary arguments.
It is convenient to add at this point that at the close of the evidence the respondents applied to amend their case to include the alternative argument that the Minister rather than the Cabinet approved the entry into the contract. The Judge gave reasons for permitting the amendment: [209]-[218]. A ground of appeal raises this decision. We consider that the Judge’s reasons are cogent. He relied in part on his assessment of the way the litigation had been conducted. There was no challenge to his findings in that regard. The decision was very much a matter of discretion. We do not consider that this ground is made out.
Did the Authority fail to comply with s 11
The appellants argue that having found that the decision to enter the contract was made in contravention of s 11 of the Public Corporations Act and for that reason was unlawful, the Judge should have declared the purported contract invalid as being ultra vires, and therefore no contract at all. The appellants argue that the Judge’s error was to introduce an extra step into his analysis, namely to return to the legislation to determine as a matter of statutory construction what result was intended to flow from a failure to comply with s 11: [623]. Having made that analysis the Judge declined to declare the contract void.
By notices of contention the respondents argue that the Judge erred in finding that the decision to enter the contract was made without taking into account the considerations found in s 11; and the third respondent further argues that, in any event, the s 11 factors were not mandatory considerations.
The Judge found that s 11(1) Public Corporations Act imposed two separate obligations on a public corporation, being to employ prudent commercial principles and to use its best endeavours to achieve a level of profit consistent with its functions: [466]. The Judge found that the Chief Executive failed to have regard to prudent commercial principles [578]. He found that the subsection required the decision-maker to identify the available alternatives, identify the advantages and disadvantages of the alternatives and to make a rational decision. The Judge found that the decision was irrational. He did so for the reasons identified by him in Part H of his reasons (being [493]-[564]) and reiterated at [575]-[576]. He said:
575For the reasons given in Part H, the decision of the Chief Executive was not a rational decision. The alternative course of action of marketing and selling the Land in an open and competitive process was not considered beyond being identified as an alternative, nor were its advantages and disadvantages relative to accepting the ACP offer considered. No consideration was given to the benefits or detriments of granting options to ACP compared to engaging in an open or competitive marketing process to sell the Land. The Chief Executive failed to have regard to prudent commercial principles in deciding to enter into the Contract.
576The Chief Executive was entitled, if not required, to have regard to the functions of the Authority which included public interest functions. Those considerations included the prospect of the Land being developed for industrial purposes in the public interest to promote growth in employment and the South Australian economy. However, no consideration was given to the prospect of achieving those functions by granting options to ACP compared to engaging in an open or competitive marketing process to sell the Land. Nor was any weighing of commercial factors and non-commercial factors undertaken. The Chief Executive failed to have regard to prudent commercial principles consistent with the Authority’s functions in deciding to enter into the Contract.
Section 11 applies to the Authority by operation of reg 8 of the Regulations. It is convenient to set out the section:
11—General performance principles
(1) A public corporation must perform its commercial operations in accordance with prudent commercial principles and use its best endeavours to achieve a level of profit consistent with its functions.
(2) A public corporation must perform its non-commercial operations (if any) in an efficient and effective manner consistent with the requirements of its charter.
(3) Where a public corporation's charter identifies any operations of the corporation as non-commercial operations, the operations are to be regarded as such for the purposes of this section.
Naturally, s 11 applies to a range of public corporations with widely differing functions. The reference in s 11(2) to non-commercial operations tends to underline this fact.
It is common ground that the requirements of s 11 must be read in conjunction with and subject to the functions of the public corporation under consideration. Here, those include encouraging, facilitating and supporting public and private sector investment in the development of the State: reg 6(1)(b), and supporting development that promotes growth in employment and the economy: reg 6(1)(l).
In his work entitled “Government Contracts” (Federation Press, 2013) Nicholas Seddon characterises the nature of statutory provisions the non-observance of which might lead to an invalid contract. The broad distinction he draws is between rules going to internal governance as against rules designed to regulate dealings with the “outside world”. He states at [8.18]:
Broadly, in the context of government contracting, if the purpose of the statutory rule or procedure is to serve an administrative or possibly accounting purpose, then its non-observance should not affect the contract. On the other hand, if the legislation is directed at preserving the integrity of the competition for government business (that is, usually a tendering procedure), then non-observance may render the process invalid. Non-observance of the proper rules of the competition may render the process unfair to a particular tenderer or group of tenderers and, ultimately, undermines the government’s credibility in the market place. Thus, broadly, legislative provisions embodying internal rules for the making of contracts or the spending of money are directory while legislative rules governing dealings with the outside world are more likely to be mandatory.
The High Court recently examined again the circumstances in which a contract may be unenforceable for statutory illegality: Gnych v Polish Club Ltd [2015] HCA 23. There, the Polish Club, a licensee, agreed to lease part of its licensed premises to the appellants without first obtaining the approval of the Independent Liquor and Gaming Authority, contrary to the obligation imposed upon it in s 92(1)(d) of the Liquor Act 2007 (NSW). That subsection provided that a licensee “must not” lease or sublease such premises without that approval. Later the Club decided to terminate the relationship, asserting that its own failure to seek the approval meant that the appellants had no lease.
The High Court held that the consequence of statutory illegality is a matter of statutory construction. Examining the terms of s 92(1)(d) the plurality comprising French CJ, Kiefel, Keane and Nettle JJ noted that it “proscribes the grant by the licensee rather than that which is granted”: [43]. Further, s 92 provided for a penalty for breach of its prohibition. In addition, the Liquor and Gaming Authority was empowered to cancel a licence entered into in disobedience of the subsection. Therefore a finding that failure to comply would render the lease void was not consistent with the regime established by the Liquor Act and its policy and purposes.
In separate reasons, Gaegler J referred to two indicia of the legislative intention which tended against construing the agreement to lease as unenforceable. The first was the reference in the statement of objects in the Liquor Act to the regulatory system being “flexible and practical” and the second was to what his Honour called “the extensive range of discretionary powers” conferred on the Authority to deal with the licence in question: [82]-[83].
For these reasons the Court unanimously held that the failure to obtain the required approval did not render the contract unenforceable.
In Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454 the plaintiff, Australian Broadcasting Corporation (ABC), had entered into a contract worth in excess of $500,000 without obtaining prior ministerial approval. The obligation to do so was found in s 70 of the Australian Broadcasting Corporation Act 1983 (Cth) in these terms:
70. (1) The Corporation shall not, without the approval of the Minister –
(a)enter into a contract under which the Corporation is to pay or receive an amount exceeding $500,000 …
The High Court held, by majority, that a breach of the requirement did not invalidate the contract.
The majority comprising Mason CJ, Deane and Gaudron JJ noted at 457 that the words of the subsection were directory in the sense that they addressed the exercise of the ABC’s power rather than their existence. If there were legislative intent to confine the powers of the ABC or to invalidate any contract entered without complying with the provision, it would have to be found in the wider context of the Act. The majority examined the general structure of the Australian Broadcasting Corporation Act. It examined the context of other provisions in the same Part as s 70, headed “Finance”. It noted s 69(2) which was framed in comparable terms. That subsection provided that monies of the ABC “shall not” be expended otherwise than in accordance with the estimates of expenditure approved by the Minister. The majority said at 458-459:
That direction could not, however, sensibly be construed as concerned to confine power or invalidate the otherwise lawful expenditure of money by the A.B.C. It would, for example, border on the absurd to construe s. 69(2) as having the effect that no supplier of goods or services to the A.B.C. could know that he had a lawful or valid claim to payment unless he first ascertained that the purchase price, however small, came within the four corners of the detailed estimates of the A.B.C. in the form (possibly unpublished or unavailable to him) in which they had been approved by the Minister.
The majority referred to the fact that other consequences could flow from disobedience to either subsection.
We consider that there is nothing in the Public Corporations Act to indicate that s 11 is intended to confine the powers of public corporations in general or the Authority in particular. The Act does not provide that the validity of any individual decision is dependent on compliance with s 11. The thrust of s 11 is towards the conduct of the operations of public corporations rather than to the legality of individual decisions taken by a corporation. There is the obvious point that if s 11 is intended to confine the content of powers given to the Authority in the HUD Act, it is odd that the restriction appears in a very general provision in the Public Corporations Act.
Necessarily, the terms of s 11 are general. They apply to both the commercial and non-commercial activities of a public corporation. The expressions used in the section appear as guiding principles or, as Mr Roder SC for the third respondent put it, “exhortations”. There is difficulty and uncertainty in applying such standards to any particular decision. Whether prudent commercial principles were brought to bear upon a decision will not always be clear. The wisdom of any particular approach will sometimes take many years to become apparent. It would be entirely unsatisfactory if the validity of a particular transaction depended on an evaluative judgment of a court long after a transaction was completed. Similarly, whether a corporation used its “best endeavours” to achieve a goal and whether it performed efficiently or effectively are not readily measured. These requirements are framed as matters of internal governance. Using the language of Redmore, they appear to be directory. Treating these principles as constraining the power of a corporation to enter a contract would lead to uncertainty. Such uncertainty would make transacting with a public corporation commercially unviable. Indeed, every contract of purchase or sale, no matter how minor, would be open to question. The nature of the requirements of s 11 are in contrast to those in the Australian Broadcasting Corporation Act and the Liquor Act discussed in Redmore and Gnych, compliance with which was a question of fact and readily ascertainable.
We would add that it does not follow from our construction that non-compliance with s 11 will have no consequences. The Public Corporations Act contains provisions which, where applicable, deal with supervision and contain sanctions for misconduct. The HUD Act provides for the overseeing of the performance of the Authority by means of a scheme of auditing, reporting and supervision: sections 27 to 30.
For these reasons we find that the asserted non-compliance with s 11 does not have any impact on the lawfulness of the decision of the Cabinet to enter the contract, or the contract itself.
If it is correct, as the Judge found and as we agree, that a decision in breach of s 11 would not lead to an unenforceable contract then it is hard to see what jurisdiction this Court has to examine the question of compliance with s 11; that is, whether or not there was compliance with the principles referred to in s 11 is not a matter giving rise to this Court’s supervisory jurisdiction.
Was the decision legally unreasonable
The Judge found that the decision of the Chief Executive to enter into the contract was “unreasonable in the Wednesbury sense”: [508]-[552]. He said he would have reached the same conclusion if the decision was that of the Cabinet or the Minister, Mr Koutsantonis: [553]. The Judge said he would have reached that conclusion irrespective of whether the decision-maker’s information was confined to the materials contained in the September and December cabinet submissions, or included material before the Board and the Minister: [564].
The decision was found to be unreasonable, in essence because the decision-maker did not have an adequate basis upon which to assess the value of the offer: [550] and [552], and was a decision taken against the recommendation of the Authority: [546]-[547].
In particular the Judge found that there were “fundamental prerequisites” to making an informed, prudent and rational decision, which had not been met: [552]. These were that:
1.there should have been an exploration of the merits of engaging in a competitive marketing and sales process: [511], [529] and [550];
2.there should have been an exploration of the nature, extent and significance of alternative interest in the Land: [512]-[517] and [529];
3.the valuations of the Land at hand were unreliable or irrelevant: [521]-[528] and an up to date and relevant valuation should have been obtained; and
4.there should have been a consideration of the critical difference in terms of value between an option as opposed to a sale agreement: [541]-[545].
When considering these findings it is important to have in mind the chronology of events concerning the ACP proposal.
The letter to the Premier from ACP, amounting to an unsolicited proposal to acquire some of the Land, was dated 18 June 2013. The Premier referred the letter to the Minister so that the Authority could consider it and provide advice upon it. In August officers of the Authority met with representatives of ACP to discuss the proposal. On 29 August 2013 ACP solicitors wrote to the Premier making a more formal proposal and sending a draft contract. This letter explained that ACP proposed to develop the Land into an international standard industrial development and estimated economic benefits to the South Australian economy of over $2 billion. Further detail was provided.
The Land is situated at Gillman and Dry Creek in the greater Adelaide Metropolitan Area. The proposal was to purchase and develop some 417 hectares which included some 266 hectares of the former Dean Rifle Range (DRR). Most of the Land is identified in “The 30 Year Plan for Greater Adelaide” as an “existing key industry area”. The rest is identified as a combination of “Metropolitan Open Space System” and an area of “high environmental significance”. Part of the Land had earlier been earmarked for the failed “Multifunction Polis” development. Land upon which the DRR had operated was being compulsorily acquired from the Corporation of the City of Adelaide (ACC). Both the Authority and the ACC had obtained valuations of that land, which were far apart. Because of that variance the Authority had commissioned a range of experts in the fields of planning, environment and quantity surveying to provide advice to its valuer to better inform that valuation.
The matter first went to the Cabinet on 23 September 2013. The cabinet submission was drafted within the Authority and signed by the Premier and the Minister. It is clear that prior to drafting the September cabinet submission officers of the Authority had sought advice about the proposal from officers of the commercial section of the Crown Solicitor’s Office, it had consulted with officers of the Department for Manufacturing, Innovation, Trade, Resources and Energy (DMITRE) in relation to the “potential future development of the Land to service the oil and gas sector” and other matters, and that it had advice from officers of the Department of Treasury and Finance.
The September cabinet submission was presented to the Cabinet by the Premier and the Minister.
The September cabinet submission noted that a number of key elements and implications of the ACP proposal required further consideration and clarification. Included among them was the fact that the proposal did not provide an opportunity for market testing of demand or pricing for the Land. The submission addressed a number of factors relevant to the proposal including potential adverse impacts or risks associated with it. There was reference to the risk of transacting land in an off-market setting and the requirements of the Authority. The following excerpt from the submission addresses its approach to valuing the Land:
5.What are the potential adverse impacts or risks associated with this proposal, for both government and the community, and how will they be managed?
As an unsolicited offer, the ACP proposal does not provide an opportunity for market testing demand or pricing for the land, either in a single holding (as ACP proposes) or developed into individual allotments or superlots by Renewal SA (or a third party).
[Redaction for Legal Professional Privilege]
Land Valuation
The risk of transacting land in an off-market setting is generally managed through Renewal SA’s “Real Property Marketing and Pricing Policy” (Renewal SA’s Pricing Policy) which sets out conditions for managing the risk that land is transacted at an appropriate value. Renewal SA’s Pricing Policy stipulates that the price should be set having regard to two independent market valuations. Renewal SA’s Pricing Policy, however, has never been applied to a landholding of this scale.
The current book value of the land as at 30 June 2013 is $32.743 million, and the statutory valuation for the land (upon which statutory fees/charges are based) is $25.854 million. In the context of the DRR acquisition, the associated claim for compensation by ACC is generally consistent with these figures. The extensive valuation work for the DRR acquisition suggests a value for the land of between $18.567 million and $58.632 million with a mid-point of 38.600 million.
On this basis, it appears that the ACP proposal appropriately manages the risk of achieving public value in relation to the land transaction. [Redaction for Legal Professional Privilege] It should be noted that any accepted offer would need to ensure that the upfront and subsequent payments, and any security held over such subsequent payments meet agreed minimum requirements to ensure that a good price is actually achieved.
Renewal SA’s Pricing Policy entitles Renewal SA to waive competitive process for the disposal of land in certain circumstances, [Redaction for Legal Professional Privilege]
The cabinet submission ran to some 18 pages. The recommendation which went to the Cabinet was that it reject the offer as presented, but that it authorise the Authority, on behalf of the Premier and the Minister, entering into direct negotiations with ACP regarding the acquisition, and that it seek to reach in principle agreement incorporating satisfactory resolution of ten specific matters which the submission highlighted should be addressed. That recommendation was approved by the Cabinet and the matter was referred back to the Authority.
It is apparent that the Authority undertook further negotiations with ACP. It took further advice from the Crown Solicitor and from officers of the government departments mentioned above. It also engaged the services of a probity adviser, being the firm BDO, to address the issue of the proposal not involving offering the Land on the open market. The proposal was also referred to the Board of the Authority. Before the Judge were four board papers, the first being dated 13 November 2013 and the last being dated 28 November 2013.
The proposal next went to the Cabinet via another submission, dated 2 December 2013. The submission set out the history of the proposal and something of the investigations which had been undertaken as regards aspects of the proposal. There were various annexures to the submission. One of the annexures was a minute dated 27 November 2013 from the Director of Government Enterprises (apparently a position within the Department of Treasury and Finance) referred to as a “costing comment”.[1] In that document there was some detail about the history of consideration of the proposal, including its consideration by the Board of the Authority. It was recorded that the Board had resolved to recommend that the ACP offer should be rejected and that, instead, the Land should be offered to the market for sale in a transparent and open manner. It recorded the basis of the Board’s attitude being risks identified by the Board, namely the lack of market testing to determine the “competitively derived market value of the land”, “the probity of accepting an unsolicited offer” for the Land without a competitive sale process and “the potential implications arising from the sale of the land in relation to the Corporation of the City of Adelaide’s claim for compensation for the portion of the subject land compulsorily acquired”.
[1]This document is not to be confused with another document emanating from within Treasury and Finance. In his recitation of the chronology of events leading to the Cabinet decision the learned trial judge referred at [160] to what he called a minute from the Department of Treasury and Finance to the Treasurer “urging rejection of the ACP proposal in favour of an open marketing and sales process”.
We note that when it came to his decision on legal unreasonableness the judge did not refer to this document. However, this document was before us and, what it was, and whether it had any status, were matters of contention during the appeal argument. Since there is an issue about its status we consider we should say something about it.
The document is entitled “Briefing for cabinet notes and other potential walk-in items – 2 December 2013”. It is signed by the Executive Director, Budget Branch. On its face it seems to contain advice to the Treasurer in preparation for his attendance at the cabinet meeting. There is no evidence that it was placed before Cabinet; indeed that would seem not to be a usual practice. Further though, there is no evidence that the brief views expressed in it were ever brought to the attention of Cabinet. Moreover, we do not consider that the document could properly be seen to amount to an “urging” of rejection of the ACP proposal. Rather, the document contained a recommendation that the land be put on the open market, allowing ACP to take part in a bidding process. Whether the author was aware of ACP’s stated refusal to take part in such a process is not known.
We consider that the document has no status and should be disregarded.
It is apparent from material before the Judge that, while on the occasion when it first considered the proposal the Board had resolved to recommend that the proposal be rejected, its last consideration, on 28 November 2013, led to a different result. It led to the Board describing the offer as a “good value offer”. This fact was before the Cabinet. The synopsis of the December cabinet submission included this paragraph:
The revised ACP proposal has been considered by the Urban Renewal Authority Board of Management which resolved to advise Government that the ACP offer (which values the land at $30/m2) represented a good value offer, based upon independent valuation advice and comparable market evidence.
There was further reference to the Board’s more recent consideration of the proposal in the body of the submission. Under the heading “5.10. Announcements” the following passage appeared:
In relation to the risks identified above, and negotiated with ACP, there continues to be a risk that the proposal has not been subjected to an open and transparent market process. This matter has been discussed by the Urban Renewal Authority Board of Management. The Board noted current Renewal SA policies contemplate potential off-market transactions in cases where a “strong justification” exists, however the Board acknowledged that Renewal SA does not have the expertise in the oil and gas sector required to inform Government about whether there is sufficient merit in the ACP proposal to warrant an off-market transaction.
Based on the significant financial modelling undertaken as part of the DRR compulsory acquisition process, the Board was satisfied that the ACP offer (which values the land at $30/m2) represented a good value offer, based upon independent valuation advice and comparable market evidence.
The Board also considered the issue of probity in accepting an unsolicited offer for the subject land and the potential for industry/community dissatisfaction with the sale of the subject land through a non-competitive process. In relation to probity matters, the Board received a Probity Services Letter from the BDO which concluded that “the Lipson Estate procurement process involved a fair, impartial and unbiased process conducted in the public interest without any known conflict of interest”.
(original emphasis)
Despite the robust internal processes adopted by Renewal SA in its dealings with ACP, the concern regarding probity is reinforced by the recent receipt of letters from industry to the Minister for Transport and Infrastructure [then Mr Koutsantonis] expressing an interest in the Government’s intentions, based on hearsay, of the potential sale of the land.
It can be seen that the minute annexed to the cabinet submission from the Director of Government Enterprises (the costing comment) related to a Board position which was superseded by the date of the December cabinet submission. Indeed the last Board consideration occurred the day after the costing comment was signed.
The last paragraph of the passage just quoted also demonstrates that the Cabinet was aware of other interest in the Land.[2]
[2] There was no suggestion at trial or the appeal that any expression of interest in the land was withheld from or misrepresented to the Cabinet by the Minister, the Honourable Tom Koutsantonis MP. Those letters were before the Court. They are expressions of interest of the most general nature in being given opportunity to bid for the land, accurately referred to in the cabinet submission. It would not be accurate to describe them as offers.
The December cabinet submission also addressed the thrust of the ACP proposal. It recorded that the ACP proposal was to promote and reinforce South Australia as a “gateway for global oil and gas companies with interests in developing Australia’s significant oil and gas reserves”. It was recorded that DMITRE had advised the Authority that South Australia was experiencing very strong exploration activity for oil and gas both on shore and in the gulf. This activity was said to be backed by companies with “strong international balance sheets and deep experience in the sector”. Some details of that were given. It was stated that the ACP proposal represented an opportunity to create a cluster of industries in the location, including mining service companies and contractors, some of whom had already established a local presence. This would increase the level of exploration activity as well as lead to subsequent production. It was stated that the revised ACP proposal also focussed on the potential to cluster other significant industries, including advanced manufacturing and distribution and logistics groups.
It was said that the proposal addressed many of the “State 30 Year Plan” objectives. This plan seeks to support economic and job growth “by way of an adequate supply of employment land in appropriate locations”. It was noted that the proposal would contribute to the efficient use of existing infrastructure and would support targeted employment growth in the western Adelaide region. The proposal addressed six elements of the plan including economic growth, business investment, minerals exploration, minerals production and processing, jobs growth and strategic infrastructure.
In the December submission the outcomes of further consideration and negotiation directed by the Cabinet in relation to each of the ten shortcomings identified in the September cabinet submission were examined.
We pause to consider what principles are invoked if a decision which is amenable to judicial review is sought to be impugned as “legally unreasonable”, being the term which is now more often used.
It is sufficient for our purposes to refer only to the decision of Minister for Immigration and Citizenship v Li (2013) 249 CLR 332. The decision there under consideration was that of the Migration Review Tribunal refusing Ms Li’s application for an adjournment pending a (second) skills assessment being made available to her for submission to the Tribunal. On Ms Li’s application to the Federal Magistrates Court for judicial review of that decision, the Court found in her favour. Subsequently, the Full Court of the Federal Court dismissed the Minister’s appeal and an appeal to the High Court also failed.
In the course of its decision the High Court elucidated the meaning of unreasonableness in the Wednesbury or legal sense. All members of the Court agreed that the appeal should be dismissed, the decision of the Tribunal having been unreasonable in the relevant sense. In each judgment there was emphasis on the principle that most decisions of a discretionary nature occur within a band of decisional freedom. That the reviewing court disagrees with the decision does not amount to jurisdictional error. The Chief Justice expressed the principle in this way at [28]:
After all the requirements of administrative justice have been met in the process and reasoning leading to the point of decision in the exercise of a discretion, there is generally an area of decisional freedom. Within that area reasonable minds may reach different conclusions about the correct or preferable decision. However, the freedom thus left by the statute cannot be construed as attracting a legislative sanction to be arbitrary or capricious or to abandon common sense.
(citations omitted)
And further at [30]:
The requirement of reasonableness is not a vehicle for challenging a decision on the basis that the decision-maker has given insufficient or excessive consideration to some matters or has made an evaluative judgment with which a court disagrees even though that judgment is rationally open to the decision-maker.
(citations omitted)
The plurality judgment of Hayne, Kiefel and Bell JJ referred at [75] to the analogy between judicial review of administrative action and appellate review of a judicial discretion. Their Honours said:
House v The King holds that it is not enough that an appellate court would have taken a different course. What must be evident is that some error has been made in exercising the discretion, such as where a judge acts on a wrong principle or takes irrelevant matters into consideration. The analogy with the approach taken in an administrative law context is apparent.
(citations omitted)
Gageler J put it in this way at [105]:
Review by a court of the reasonableness of a decision made by another repository of power “is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process” but also with “whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law”.
(citations omitted)
As we read the reasons these are differences of expression rather than substance and each assists in an understanding of the concept of legal unreasonableness.
We return then to the essential findings of the Judge on this topic which we summarised and numbered earlier. As can be seen, all four of the “fundamental prerequisites” relate to the matter of the value of the Land and whether the offer in all its aspects reflected its true value.
The relevant valuations were neither before the Cabinet, nor before the Judge. What both had were references to the various valuations and observations arising from them. The Judge’s approach was to critically examine what he knew of each valuation and to express views about the perceived deficiencies attending it. The considerations referred to by the Judge (numbered 1 to 4 by us) were all matters which were raised on the face of the cabinet submissions. There was clear reference to the fact that accepting the offer would deny any opportunity of putting the Land on the open market. There was reference to the fact that in recent times there had been other interest in the Land and it was obvious that accepting the ACP offer would deny any opportunity to explore the extent of that interest. The various deficiencies found by the Judge in the existing valuations, such as being out of date or containing opinions as to values which were far apart or valuing only part of the Land, were plainly matters before the decision-maker. Whether there could be satisfactory extrapolation from the valuations was a question of judgment. The fact that the ACP offer involved the purchase of options as opposed to a sale was plain on the face of the proposal as described in the cabinet submissions and in the draft contract annexed to the December submission. We know that all these matters were before the decision-maker.
Importantly, it is to be remembered that the Authority (or its statutory predecessors) had owned most of the Land for more than 30 years. The Authority had fielded inquiries from potential purchasers in that time. It had access to the actual valuations prepared by the valuers involved in the Adelaide City Council dispute. It had geographical knowledge of the DRR and of the features of that land as against the balance of the Land. In his analysis of the question of legal unreasonableness, the Judge referred at [546]-[547] to the Board’s view of the ACP proposal, under the heading “Attitude of the Board”. However, the only reference the Judge made was to its earlier resolution that the offer should be rejected and the Land offered on the open market. That was the Board’s 21 November recommendation, but that recommendation did not express any view about the value of the Land or whether the ACP offer reflected that value. The Judge said at [547]:
The December Cabinet submission itself made no reference to [the earlier] Board resolution, nor did it identify any reason why the Board’s views should be disregarded or why the ACP offer should be accepted instead of the Land being offered to the market for sale.
However, as we have set out, the 21 November board recommendation did not address value and had been superseded by the Board’s 28 November recommendation, which described the revised ACP offer as a “good value offer”. Further, the Board had noted that the question of whether the ACP proposal met with the Government’s strategic economic development objectives would ultimately be a policy decision for the Cabinet.
In our view, at this point of his deliberations the Judge must have either overlooked the fact that the Board’s final advice on the offer was that it represented good value, or, without justification, given that fact no weight. The decision-maker was entitled to rely on that advice. It was entitled to take the view that the subject matter of the various criticisms made by the Judge would have been considered by the Board prior to forming its view. The decision-maker was not obliged to go behind the Board’s advice any more than it was required to go to the detail of advice from DMITRE or the Crown Solicitor. Our opinion is that the failure to take into account the Board’s advice is such as to erode the Judge’s finding on “Wednesbury unreasonableness”.
We would also make the point that it is a mistake to treat the relevant decision as a choice between going to the open market or not. ACP had clearly stated that it would not take part in a competitive bidding process. We note there is no evidence that at this time there was any other prospective developer of the Land, as opposed to interested purchasers. If it were determined that the Land should be put on the open market then that would involve the risk that ACP would, true to its word, walk away. The decision to be made was whether or not to accept the offer involving a proposal to develop an “oil and gas hub” on the Land, with all the benefits that might entail.
We have observed that the Cabinet must have been aware of matters that were adverted to in the cabinet submissions. What we do not know is what other knowledge, information or matters of history were brought to the Cabinet table by the Ministers present. It can clearly be inferred that the issues mentioned in the cabinet submissions were before the Cabinet. But it cannot be inferred that the Cabinet’s consideration went no further than these matters. We consider that there is a real danger in assuming that the Cabinet’s discussion and evaluation of the proposal was confined to the facts, assertions and arguments contained within the cabinet submissions. This highlights the difficulty in assessing a decision based on uncertain factual material.
Further, there is the question of how the Judge brought to account the fact that the ACP proposal involved development of an oil and gas hub and ancillary services, as against a direct sale of the Land perhaps for waste management or other purposes. The Judge referred to this issue at [551] of his reasons but set it aside on the basis that the cabinet submissions had not purported to compare the larger economic and social benefits of the ACP proposal against “a sale to other developers”. He further outlined that the cabinet submissions did not in this context refer to the fact that a sale of options over the Land would result in the Land being encumbered for some years, or that ACP itself would need to find investors to fund the project.
With respect to the Judge, we disagree with this approach. There was no requirement for the cabinet submission to go into such detail. Indeed these aspects of the proposal were self-evident and were matters for the Cabinet to discuss.
More importantly, policy decisions of this type are quintessentially those of the Government or its Ministers. This Court is not in a position to evaluate competing policy considerations of this nature. These are ultimately decisions for Government, over which the electorate is the final arbiter. Again, the failure to give weight to the intrusion of a policy issue into the decision is, of itself, enough to bring down the Judge’s decision on unreasonableness.
The Judge went on to state at [552] that the matters earlier referred to by us as numbers 1 to 4 were such “fundamental prerequisites” that any decision made in ignorance of them would necessarily be legally unreasonable. We understand the Judge to mean that even if the ACP proposal promised larger economic and social benefits to the State than a mere sale of the Land, the failure of the cabinet submissions to measure those possible benefits against the drawbacks of the proposal (including that it was only an option agreement, that the development was contingent on investors being found, and that benefits would flow only in the longer term) meant that such policy considerations could not overcome the deficits referred to by the Judge as fundamental prerequisites. To put that differently, we think the Judge was saying, if the policy issue were to trump the absence of the fundamental prerequisites, then the cabinet submissions needed to address its drawbacks. We respectfully differ from that position. Not only was the decision-maker entitled to rely on the expressed opinion of the Board as to value, but even apart from that, it was entitled to give such weight as it saw fit to the fact that the ACP proposal was of an entirely different nature and calibre as compared with a mere sale of the Land for purposes which might not advance any wider governmental policy.
There was no other development proposal before the Cabinet. Assessment and evaluation of such proposals is a Cabinet role, and there is no reason why it cannot make such an assessment on a proposal standing alone.
The decision to enter the contract raised, at least, the following issues: the strategic importance of the Land to the State; employment consequences for the northern suburbs of Adelaide; the promotion of certain industries in the State; consequences for general revenue; the drawback that the transaction was not to go to market; and, competition issues. The decision was complex, multifactorial and policy based. There are no objective criteria against which the Court is able to measure whether the decision was reasonable or commercially prudent in terms of the State’s long-term economic, industrial and employment objectives.
For these reasons we consider that the Judge’s finding that the decision was legally unreasonable should be set aside. If, contrary to our conclusion, the decision to enter the contract was susceptible of judicial review, we would have held that the plaintiffs failed to demonstrate that the decision fell outside the area of decisional freedom reserved to the decision-maker. We would have reached that position whether the decision-maker was seen to be the Cabinet or the Minister.
Amenability
The Judge held that the decision on behalf of the Authority to enter the contract was amenable to judicial review because it raised public law matters: [283]. Specifically he found:
(a)whether the contract was entered into on behalf of the Authority by a person with the power or authority under s 19 of the HUD Act (the power to delegate powers and functions) is a matter of public interest involving public rights and duties. That meant the decision was amenable to review: [284];
(b)whether there was a breach of s 11 of the Public Corporations Act (the mandatory considerations provision) is a matter of public interest involving public rights and duties, either because the contract might be void or because the decision to enter it might be unlawful: [285]-[286]; and
(c)that if the decision to enter the contract was made without reference to one or more of the mandatory relevant considerations found in s 11 Public Corporations Act or if the decision amounted to an abuse of the powers given to the Authority in s 21 including the right to sell real property (which impliedly must be used reasonably) then it was made in disregard of public law obligations and was liable to be examined to determine if it were “unreasonable in the Wednesbury sense”: [287] and [501].
All respondents argue that neither the decision to enter into the contract nor the contract itself was amenable to judicial review. The first and second respondents argue that review can only proceed if some right, title or interest is affected by the executive action; and here there was none. Further, they argue that review is concerned with determining the legal limits of the power being exercised and whether those have been transgressed; but here those limits are not discernible. In such circumstances any review can only be a merits review. The third respondent argues that the decision to enter the contract was not an exercise of public power because it did not affect rights, interests or legitimate expectations; and that the decision was taken on the basis of policy considerations, rather than by reference to objectively definable matters.
We start with the assumption that judicial review may be available in respect of certain decisions and actions of the Executive exercising prerogative, statutory, or common law powers.
Where the power being exercised arises from statute, judicial review may be available to determine the limits of that power and whether the decision went beyond those limits: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, 584. We have found that s 11 did not operate to restrict the Authority’s powers to contract and so the question of compliance with it is a matter for the Executive, rather than the courts. The provision could be described as directory in the sense that word is used in Redmore.
We have also found that the contract was entered into validly pursuant to, at least, the Property Delegation; although we doubt that it is for this Court to examine that issue other than at the instance of a party to the contract. We say that because the drafting of the delegations permitted by s 19 of the HUD Act and actions purportedly performed pursuant to them are essentially matters of internal governance. In circumstances where the parties have the capacity to enter the contract and where there is no question of fraud or bad faith, it is difficult to see a role for this Court.
As regards s 21 of the HUD Act, we consider that the fact that the power to sell is numbered among the Authority’s powers as set out in the section does not transform it into a power the exercise of which may be reviewed. The section merely grants the power to do that which any person has under the general law. As Gummow, Callinan and Heydon JJ said in Griffith University v Tang (2005) 221 CLR 99 at [82]:
… a statutory grant of a bare capacity to contract does not suffice to endow subsequent contracts with the character of having been made under that enactment.
In General Newspapers Pty Limited & Ors v Telstra Corporation (1993) 45 FCR 164 the reach of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the ADJR Act) to contracts entered into by the defendant, a statutory corporation (referred to in the decision as Telecom), was discussed in the context of its failure to award a contract to the plaintiff, a printer who had been earlier told that it was “on the tender list”.
Having discussed a line of cases including Kioa v West (1985) 195 CLR 550, Glasson v Parkes Rural Distributions Pty Ltd (1984) 155 CLR 234, Minister for Immigration and Ethnic Affairs v Mayer (1985) 157 CLR 290, Australian National Airlines Commission v Newman (1987) 162 CLR 466, Davies and Einfeld JJ (with whom Gummow J agreed at 194) said at 172:
The ADJR Act is thus concerned with decisions which, being authorised or required by an enactment, are given force or effect by the enactment or by a principle of law applicable to the enactment. Issues concerning the relevant factors to be taken into account, irrelevant factors which should not be taken into account, improper purposes, and the law to be applied will be matters to be decided having regard to the provisions of the enactment under which the decision is made, and the object and purposes of that enactment.
Then, applying that principle, their Honours said (at 173):
In the present case, the decisions relied upon involved the entry of contracts and the conduct challenged was conduct leading to the making of the contracts. No statute made specific provision for such contracts, merely conferring upon Telecom all the powers of a natural person including the power to enter into a contract. That was a mere conferral of capacity to act. The contracts were not relevantly authorised or required by and were not made under an enactment. The validity of the contracts and of the acts done was governed entirely by the law of contract, not by the statutes. Thus, the ADJR Act had no application to the conduct or to the alleged decisions.
It was also observed that procedural fairness was not in issue as, no tenders having been called, there was no relationship between Telecom and the plaintiff such as to impose on Telecom the obligation to give the plaintiff a right to be heard: 173-174. Although these statements were made in the context of the ADJR Act, they remain relevant to the issue of whether the decision was an exercise of public power.
It may also be asked whether the decision to enter into the contract affected any rights, interests or legitimate expectations. The answer must be that so far as the plaintiffs were concerned it did not. The decision itself was of no legal consequence. The instrument which affected rights and interests was the contract; but the rights and interests affected were only those of the contracting parties. The appellants had no legitimate interest in the decision-making process or in the contract beyond their hopes that they would be given an opportunity to bid for the Land if it were to be placed on the open market.
In the absence of an applicable statutory provision the executive power being exercised amounted to a common law power. The fact that the Executive exercises a power it enjoys at common law does not, of itself, render its decision immune from review. However, given the circumstances of this case, including the absence of any allegation of lack of good faith or any suggestion that circumstances arose in which procedural fairness had to be afforded, any review must necessarily amount to an impermissible merits review.
The parties referred us to only two cases, each decided in State courts, in which decisions relating to the awarding of State government contracts were found to be amenable to judicial review. In State of Victoria v Master Builders’ Association of Victoria (1995) 2 VR 121 the Victorian Government, acting through a building industry task force, formulated a list of builders who would not be eligible for future government contracts. This was referred to as a “blacklist”. The Master Builders’ Association challenged this conduct. The Court was persuaded to make a declaration that the builders had not been afforded procedural fairness at the point when their names were put onto the blacklist.
When the September Cabinet submission is examined, it is apparent that, although it was recognised that ACP wished the sale to be an off-market transaction, there was a complete failure to examine the question whether it might be better to place the Gillman land on the market for sale by competitive process or to accept the offer by ACP. The Synopsis to the September Cabinet submission noted “A number of key elements and implications of the ACP proposal require further consideration and clarification before it can be fully assessed”. The first element was expressed in these terms:
The proposal does not provide an opportunity for market testing demand or pricing for the land, either in a single holding (as ACP proposes) or developed into individual allotments or superlots.
The submission returned to the issue in Section 5 of that part of the submission that is headed “Discussion”. Section 5 examined the potential risks associated with the proposal. The first sentence reads:
As an unsolicited offer, the ACP proposal does not provide an opportunity for market testing demand or pricing for the land, either in a single holding (as ACP proposes) or developed into individual allotments or superlots by Renewal SA (or a third party).
Section 5 then goes on to note the Marketing & Pricing Policy which states that in an off-market transaction the price should be set having regard to two independent valuations of market value. It noted that the Authority’s Marketing & Pricing Policy had never been applied to a sale of land of the magnitude involved in this transaction, a reason sufficient in itself to call for an examination or analysis of what might be the better process by which to sell the land. The submission then referred to the book value of the land and the valuations received by the Authority in respect of the claim for compensation by the Adelaide City Council. That section of the paper then goes on to express concerns as to whether acceptance of the proposal would result in the creation of an effective monopoly for ACP in the supply of land in the Gillman area, to examine the area to be sold and the timeframe for development, and to examine the question whether ACP should be granted exclusivity in relation to the land for a period. Each of those three matters were then addressed in the ten points that are listed in para 2 of the decision of Cabinet made on 23 September.
What is noticeable about Section 5 of the Cabinet submission is that:
·there is no analysis of the question whether the advantages of the land (that had been listed earlier in the submission) were such that it would be better to sell the land by competitive process;
·there is no examination of the extent to which others might be interested in the land other than to make allowance for land to satisfy the offers made by Incitec and Metcash; and
·there is no suggestion that officers of the Authority had consulted real estate agents experienced in selling large areas of land suitable for industrial purposes. The evidence was that no such discussions with real estate agents occurred.
All three were important matters to consider when deciding how to sell the land.
As to the last of these three points, the evidence of Mr Brumby, an officer of the Authority who managed assets comprising 41 buildings and 235 properties covering a total area of 690 acres, should be noted. He said that it was the usual practice of the Authority, when it sold a significantly large parcel of land, to engage the assistance of a real estate agent experienced in selling substantial property. Real estate agents, he said, were usually aware of the extent of interest in the market, knowledge that the Authority might not necessarily have. Mr Brumby also described the advantages of calling for expressions of interest in land as including the opportunity to test the market and also to obtain basic data on which the Authority could analyse what would be the best outcome for the Authority in terms of the sale and disposal of the land. No discussions with real estate agents had occurred in connection with the ACP proposal. Mr Brumby also gave evidence that, in June 2014, the Authority had engaged real estate agents to sell by competitive process over 47 hectares of land known as Grand Trunkway West (which adjoins the Gillman land). The land was advertised for sale in August and September 2014.
In short, apart from considering the question of valuation, nowhere in the submission is to be found any exploration of the question whether it would be more advantageous for the Authority to accept the offer or to put the land on the market for sale by a competitive process. In addition, there was no consideration of the question whether the statement by ACP that its investors would not participate in a tender process was an honest statement of a firm intention not to engage in a tender process or whether it was a ploy to keep competitors out of the selling process. A prudent vendor does not accept at face value a statement by a person offering to buy land that he will not engage in a competitive sales process.
Mr Rollison gave evidence that there was no practical obstacle to putting the land to a competitive tender process. He was unable to say why the Authority did not do so. He also acknowledged that there was no practical obstacle to getting up to date valuations of the land the subject of the negotiations with ACP.
The December Cabinet submission suffered from the same defects. Essentially, the December submission followed the form of the September submission. Section 5 examined the risks of the ACP proposal. After noting that the offer from ACP was unsolicited and there has been no opportunity to test the market, the following sentence appears:
The risk associated with considering an unsolicited proposal was addressed in the 23 September 2013 submission.
That sentence seriously misstated the position. As just noted, the September Cabinet submission failed to examine whether it was more appropriate to accept the offer from ACP or put the Gillman land on the market for sale by a form of competitive process.
Like the September Cabinet submission, the December Cabinet submission failed to examine the issues as to the most appropriate way by which to sell the Gillman land. It failed to examine whether the acknowledged advantages of the land, advantages that had been extolled by ACP, were such that it was more prudent to sell the land by a competitive process. No advice had been obtained from real estate agents experienced in dealing with large areas of industrial land. Importantly, there was a total failure to examine the question whether other parties had expressed interest in purchasing part or all of the Gillman land. What is particularly striking about the December Cabinet submission is that it fails entirely to inform Cabinet of the offers made in mid-November by both IWS and E & A Ltd. The interest expressed by both IWS and E & A Ltd was known to the Minister, Mr Koutsantonis. The letters from both were before him. It is most remarkable, to say the least, that Mr Koutsantonis failed to refer to those expressions of interest when he addressed the Board of the Authority on 25 November. It is equally remarkable that he did not refer to either in the Synopsis that he signed on 2 December when presenting the December Cabinet decision. A striking aspect of the December Cabinet submission is, not only the absence of any reference to the offers made by both IWS and E & A Ltd but also the absence of information as to whether others might have expressed interest in the Gillman land and any assessment of the demand for the land.
At para [214] above, I commented on remarkable aspects of the following sentence at page 10 of the December Cabinet submission:
Despite the robust internal processes adopted by Renewal SA in its dealings with ACP, the concern regarding probity is reinforced by the recent receipt of letters from industry to the Minister for Transport and Infrastructure expressing an interest in the Government’s intentions, based on hearsay, of the potential sale of the land.
The absence of any reference to the offers by IWS and E & A Ltd is the more remarkable given the oblique reference to them in the sentence quoted above. Those offers were plainly relevant to the question whether others might have expressed interest in purchasing the Gillman land. The absence of any reference to those offers is yet another indication of the failure of Cabinet to consider what was the most suitable method by which to sell the Gillman land. It also demonstrates that attention was largely focussed only on the question whether ACP had satisfied the ten issues identified by Cabinet at its meeting on 23 September. The fact that rumours were circulating and that those rumours had produced the two offers in mid November to buy part or all of the Gillman land were reasons enough to consider the fundamental question, that is to say, the question which was the most appropriate method by which to sell the Gillman land.
The third paragraph of Part 5 of the December Cabinet submission notes that an external probity adviser BDO had been consulted. However, the adviser’s report discloses that he did not in any respect consider the question whether the sale should be by competitive process. In the result, the December Cabinet submission did little more than address in detail the extent to which ACP had agreed to the shortcomings of the ACP Proposal identified in the Cabinet decision made on 23 September and examine in some detail the implications of the proposal.
To summarise, what is entirely absent from both the September and December Cabinet submissions is any examination or analysis of the question that any prudent vendor considers at the very outset, namely, what is the best means by which to sell the land intended for sale. There is no examination or analysis of the respective advantages or disadvantages of selling the Gillman land by competitive process as distinct from accepting ACP’s unsolicited offer. All that is considered is the ACP offer and whether it would be justified by the valuations received in respect of the compulsory acquisition of the interest of the Adelaide City Council. No examination is made of the question whether there was any advantage in testing the demand for the land by offering the land for sale by competitive process. Nor was there any examination or analysis of the implications of three critical factors that affected the question whether the Authority should engage in a competitive selling process or instead accept the unsolicited offer from ACP. They were the fact that the land was regarded as key industrial land close to road, rail and sea transport, an assessment of the demand for the land, information as to the extent of interest expressed by others in the land and advice from real estate agents with experience in sales of substantial areas of land for industrial and commercial purposes. Stripped to essentials, the submissions did little more than state that the ACP proposal was consistent with the Authority’s intended use of the land and assess the financial and other implications of the offer. The policy grounds were not significant and, importantly, there was no policy ground which could not have been satisfied by a sale of the land on the competitive market.
Nor is it possible to imply from the terms of the Cabinet submissions that there was any attempt to assess the merits of either method of sale and determine which, in the event, was to be preferred. The only examination of the issue was the remark “as an unsolicited offer, the ACP proposal does not provide an opportunity for market testing demand or pricing for the land”. That brief statement cannot, in any sense, constitute an examination or analysis of the merits of selling by competitive process as distinct from accepting the unsolicited offer of ACP. That brief statement, in fact, demonstrates that there was a complete failure to undertake any realistic examination or analysis of what would be the most effective method of sale.
I do not overlook the fact that both the September and the December Cabinet submissions consider a range of other issues including matters of policy. On any view of the matter, those other issues were relevant. However, neither submission attempts in any sense to weigh those policy issues against the fundamental question whether it would be more prudent to accept the offer or more prudent to sell the land by competitive process, a question that had to be considered at the very outset. It was a question that had to be considered if regard was to be had to the requirement in s 11 that the Authority must perform its commercial operations in accordance with prudent commercial principles.
Cabinet, therefore, entirely failed to address a critical factor that went to the very heart of the question whether it was commercially prudent to accept the unsolicited offer from ACP. As Cabinet was purporting to act on behalf of the Authority, it was bound by the mandatory obligation in s 11 of the Public Corporations Act to apply prudent commercial principles in respect of the transaction. Cabinet simply failed in any respect to examine the merits of selling the Gillman land by competitive process and weigh the merits of selling by competitive process against the merits of accepting the unsolicited offer from ACP. This is not a case where Cabinet has given inadequate weight to certain matters and undue weight to others. Instead, it is clearly apparent that no consideration at all has been given to one critical factor that Cabinet was bound to consider. Nor is there anything to suggest that other relevant matters had been weighed against that factor.
Some Other Aspects of the Cabinet Submissions
An examination of both the September and December Cabinet submissions demonstrates that the policy issues were few. The September Cabinet submission identified them as follows:
·that the ACP proposal will provide an ongoing supply of developed industrial land which will facilitate economic activity and employment outcomes in the State: page 4;
·that the proposal provides for the development of the land by the private sector and thereby removes the risk from the public sector, together with the associated costs implications: page 5; and
·that the proposal is consistent with the 30 Year Plan which identifies the majority of the land as a “key industrial area” and that the successful development of the land for industry is essential to meet the projected requirements for industrial land in western Adelaide and to maximise the benefit of past State government and Federal government investment in major infrastructure: page 7.
The September Cabinet submission also contained a section examining the financial implications of the ACP proposal. None of those matters was said to be a reason for not offering the land for sale by competitive process. Instead, they were merely identified as advantages and consequences of the ACP proposal. Furthermore, the September submission did not either identify or address the fact that each of those matters was capable of being achieved if the Gillman land had been sold by competitive process. When each of these policy issues is examined, it is apparent that each is capable of being achieved if the Gillman land had been sold by competitive process.
The December Cabinet submission followed the format of the September submission. It added little that was new. It did, however, note (at page 3) that the Authority had recently experienced cost increases in relation to some of its development works and that development of the broader area of the Gillman land will achieve an internal rate of return of five per cent. It noted also that the proposal allows the State to achieve the forecasted development profits for the project without incurring associated development costs, thereby reducing the financial risk to government. There was also an amended estimate of the financial implications of the proposal. Again, each of those factors was capable of being achieved if the Gillman land had been sold by competitive process.
Two major elements of the December Cabinet submission were the reports that the officers of the Authority had negotiated to their satisfaction the ten issues listed in para 2 of the decision of Cabinet on 23 September and the fact that the Board of the Authority had considered the ACP proposal and advised that it represented good value. That fact was reported in the Synopsis to the submission in these terms:
The revised ACP proposal has been considered by the Urban Renewal Authority Board of Management which resolved to advise Government that the ACP offer (which values the land at $30/m2) represents a good value offer, based upon independent valuation advice and comparable market evidence.
That statement is not entirely correct. The revised ACP proposal was embodied in the Draft Deed (Version 7.1). At no time did the Board of the Authority ever see that draft. Nevertheless, and putting the incorrect statement to one side, the fact that Cabinet had been given the advice of the Board does not, in my view, remedy the fact that, at no time was there an examination of the respective merits of accepting the ACP offer or selling the Gillman land by competitive process.
Another fact that seems to explain why Cabinet did not on 2 December consider whether it should offer the land for sale by competitive process lies in the terms of the decision of Cabinet made on 23 September. It is apparent from the terms of para 4 of Cabinet’s decision on 23 September that Cabinet had decided to enter into a contract to grant ACP options to purchase the Gillman land if two conditions were satisfied. The first was a successful outcome to the negotiation of the ten points identified in para 2 of its decision. The second was the Authority’s assessment of the proposal. In consequence, all that Cabinet had subsequently to consider was whether agreement had been reached with ACP on the ten matters listed in para 2 of its decision and whether the Authority approved the proposal. It was unnecessary for Cabinet later to consider the fact that the Gillman land had not been offered for sale by competitive process. It was not surprising, therefore, that when Cabinet was informed at its meeting on 2 December that the ten points had been successfully negotiated with ACP and that the Board of the Authority had advised that the ACP offer represented “a good value offer” that Cabinet resolved to enter into the Contract with ACP without any consideration of the implications of the fact that the land had not been offered for sale by competitive process.
A Failure to Consider a Highly Relevant Factor
There was, therefore, a failure to comply with the terms of s 11(1) of the Public Corporations Act, a provision with which the Authority was bound to comply. Although, as Mason J noted in Peko-Wallsend at 41, that it is, generally speaking, for the decision-maker and not the Court to determine the appropriate weight to be given to matters that are required to be taken into account, this is an instance where there is a clear statutory obligation to act with commercial prudence. The Authority was bound to comply with the express statutory obligation imposed by s 11 of the Public Corporations Act to perform its commercial operations in accordance with prudent commercial principles consistent with its functions.
The absence of any examination of the question which was the most advantageous process by which to sell the Gillman land had the consequence that the decision of Cabinet was severely skewed. All that was effectively considered was whether there were grounds for accepting the offer by ACP and whether ACP had agreed to the ten points listed in the decision of Cabinet made on September. What was entirely absent was any examination of the very first matter for consideration, namely, did sound reasons exist for accepting the ACP offer as opposed to selling the Gillman land by competitive process. Cabinet did not have any material before it that examined that question in either the September or December Cabinet submission. More significantly, Cabinet was not even asked to consider that question. It is, therefore, reasonable to infer that there was a complete failure to address or examine any of the questions bearing upon the fundamental question lying at the heart of any decision to sell land.
The respondents contended that it is not uncommon for a person selling land to have to consider whether to accept an offer that has been made for the land. Not infrequently, that decision must be made either when first considering to sell land by private treaty or by public auction or when land has been offered by sale by auction and an offer is made before the auction. However, in either instance, a prudent vendor will carefully examine and consider the implications of the offer. In doing so, the prudent vendor will have regard to all circumstances that might affect the value of the land including making an assessment of the extent of the interest of others in the land. That is not what occurred in this case. Cabinet was not asked to consider that question nor did it address that question. There was simply no examination of the question whether the land should be sold by competitive process having regard to the fact that it was prime land for industrial and commercial purposes and without any assessment of the extent of the interest of others in the land.
For all of these reasons, the decision of Cabinet to enter into the contract failed to have regard to a relevant and important factor that it was bound to consider with the consequence that there was a failure to comply with s 11(1) of the Public Corporations Act. It also constituted a complete failure to act as a prudent vendor.
The Decision was Unreasonable
In my view, the failure to address those factors leads also to the conclusion that the decision was unreasonable. The question whether the Authority should have offered the Gillman land for sale by a competitive process or whether it should have accepted the ACP offer was a crucial matter that had to be considered at the outset. It is a factor that any prudent vendor would examine. When as large an area of land as 400 hectares is being considered for sale, the prudent vendor would be all the more conscious of the need carefully to examine the advantages of the land and the likely demand for the land as well as the merits and likely result of selling the land by a form of competitive process. Having considered all of those matters, a prudent vendor would then determine whether it was more appropriate to accept the unsolicited offer or put the land on the market for sale by competitive process. In this case, there is both a failure to engage in that process and a failure to examine the extent to which, if at all, policy and other issues might bear upon that decision. While it is readily apparent that policy and other issues were examined in the two Cabinet submissions, they are not examined in the context of a decision which is the most appropriate process by which to sell the land. Not only was Cabinet not given any information on these questions, Cabinet was not even informed that it should consider the position. The failure to address these issues is so significant that the decision to enter into and execute the contract with ACP was a decision that is unreasonable in the Wednesbury sense with the consequence that the decision is invalid.
Conclusion
For these reasons, I would allow the appeal. I would make declarations and orders as follows:
1. Appeal allowed.
2.Set aside the orders of Blue J herein made on 7 January 2015 and substitute the following orders in their stead:
2.1 Declare that the deed between the Minister for State Development, the Urban Renewal Authority and Adelaide Capital Partners Pty Ltd and dated 13 December 2013 is invalid and of no effect.
2.2 Order that the Urban Renewal Authority, the Minister for State Development and Adelaide Capital Partners Pty Ltd, their servants or agents be restrained from taking any steps to effectuate the deed made between the Minister for State Development, the Urban Renewal Authority and Adelaide Capital Partners Pty Ltd dated 13 December 2013.
2.3 That the respondents pay the appellants their costs of the trial and of this appeal.
9
14
1