Airservices Aust v Canadian Airlines

[1998] HCATrans 407

IN THE HIGH COURT OF AUSTRALIA

Registry  No C1 of 1998

B e t w e e n -

AIRSERVICES AUSTRALIA

Applicant

and

CANADIAN AIRLINES INTERNATIONAL LTD

Respondent

Registry  No C2 of 1998

B e t w e e n -

AIRSERVICES AUSTRALIA

Applicant

and

MONARCH AIRLINES LTD

Respondent

Registry                   No C3 of 1998

B e t w e e n -

AIRSERVICES AUSTRALIA

Applicant

and

POLARIS HOLDING COMPANY

Respondent

Applications for special leave to appeal

GLEESON CJ
GUMMOW J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 20 NOVEMBER 1998, AT 9.32 AM

Copyright in the High Court of Australia

__________________

MR D.J.S. JACKSON, QC:   May it please your Honour, in each matter I appear with my learned friend, MR J.C. SHEAHAN, SC, for the applicant.  (instructed by Mallesons Stephen Jacques)

MR J.C. CAMPBELL, QC:   May it please the Court, I appear with my learned friend, MR A.S. BELL, in each matter for the respondent.  (instructed by the Allen Allen & Hemsley)

MR H.C. BURMESTER, QC:  Acting Solicitor‑General for the Commonwealth.  May it please the Court, I appear for the Attorney‑General of the Commonwealth, intervening in support of the applicant.  (instructed by the Australian Government Solicitor)

GLEESON CJ:   Thank you, Mr Solicitor.  Yes, Mr Jackson.

MR JACKSON:   Your Honours, this case squarely raises, in our submission, the issue of what is connoted by the requirement of a discernible relationship between the amount of a fee for service and the value of the service in testing whether a charge is a fee for service on the one hand, or taxation on the other.  Both before the Full Court and before her Honour Justice Branson, the applicant lost the case because its charges were characterised as taxes ‑ ‑ ‑

KIRBY J:   You have lost all along the way so far.

MR JACKSON:   Yes, your Honour, and not as fees for services.  The characterisation of fees for services in the cases which have been decided by this Court to date have involved, in our submission, two elements.  The first of them is that there be identifiable services provided to, or at the request, of the person who has to pay for them, that provider benefit which is the quid pro quo for the fee; and the second requirement, or element, is that there be a sufficient relationship between the amount of the fee and the value of the benefit or the cost of the benefit which is provided.  It is only on the second of the elements that the applicant has lost the case, both before the Full Court and before her Honour.

KIRBY J:   There is not waiting in the wings the question of the unjust terms, though, and that has not been tried; that has not been decided below.

MR JACKSON:   Your Honour is correct.

KIRBY J:   That is put forward as a reason why we should not treat this as a suitable vehicle and that the matter can come up in some future time when that complication is not before the Court.

MR JACKSON:   There are a number of things to be said about that, your Honour. Firstly, the acquisition point is a point, of course, arising under the Constitution, which it is if the case is appropriate for this Court to deal with.

Secondly, that it has not been dealt with to date by either her Honour or by the Full Court is a matter which could be dealt with by this Court by way of remitter rather than not treating the case as suitable for special leave on the tax question.

KIRBY J:   That is again a case where we are interfering with the orderly running of the case, though, and the matter is then cut up into pieces, and parts of it dealt here and parts of it dealt elsewhere, instead of allowing it to take its course.  Though, of course, if the Full Court is right, that is the end of the matter.

MR JACKSON:   Yes, your Honour.  But, in a sense, what your Honour says is so, but the case was tried factually on the acquisition point before her Honour.  She just found it unnecessary to deal with it in terms of the reasons for judgment. 

May we also add that this case is not alone, in the sense that there are other cases on foot which raise both the tax question and the acquisition question between the successor to the Civil Aviation Authority, which is Airservices, and other airlines.

GLEESON CJ:   Presumably with the increasing importance of a user‑pays approach to services, the issue on which you lost below is becoming of increasing importance.

MR JACKSON:   We would submit so, your Honour, and in the context of prior decisions of this Court, to put it in a very general way, and perhaps, a way that is too vague to be helpful, but nevertheless, the expressions of what connection is required between the value of the service and the amount of charge, in the prior decisions of this Court, are at a fairly low level.

GLEESON CJ:   We think we will hear what Mr Campbell has to say, Mr Jackson.

MR JACKSON:   Thank you, your Honour.

GLEESON CJ:   Yes, Mr Campbell.

MR CAMPBELL:   Your Honours, the fundamental question that is involved here is a question which involves the construction of section 67, a particular provision. It is a question which involves the application of section 67 to a particular group of charges, particular group of rates of charge for a particular year, namely the 1990 to 1991 year.

KIRBY J:   Yes, but the point of principle is posed in the Full Court decision, and that point of principle involves a great deal of money, and an extremely important national service, and the issue appears, on the face of things, to be a matter of general importance.

MR CAMPBELL: The way in which the submissions that are put by the Civil Aviation Authority run, simply jump over the first limb of section 67. They leap straight to the question of what is taxation, and that is simply not what has been decided below. What has been decided below, in the judgment of Justice Beaumont that Justice Wilcox agreed with, was that this was a provision which required the charging authority to make an honest attempt at working out what the cost was of the charges that it was imposing a fee for service in relation to it – and they did not even try.

Because they did not even try, that was quite sufficient to result in the case being dismissed.  The reason why it was clear to Justice Beaumont that they did not even try was because of the construction that was put on the particular determination.  The particular determination was one which, as his Honour read it, levied charges for particular landings at particular airports.

KIRBY J:   There are 160,000 routes, I think I read, in Australia.

MR CAMPBELL:   There are 160,000 routes in the sense that it is possible to fly from one airport to another within Australia.

KIRBY J:   What sort of chaos would that be, if you had to have a differential arrangement for each route, and each landing on each route, and each length of service.  That is a completely unrealistic interpretation of the statute.

MR CAMPBELL:   It is a question of fact as to whether it is unrealistic.  It is a matter of what are the costs of providing particular services.  It is not as though the factual material that has been presented below suggests that there is a different range of facilities which is being accessed on each of those 160,000 routes.  The question is dependent upon the way in which the particular charging provision was put together.

GUMMOW J:   This is section 67, is it?

MR CAMPBELL:   Yes.

GUMMOW J:   That has been repealed, has it not?

MR CAMPBELL: Section 67 is no longer in the Civil Aviation Act.  There is a provision which is somewhat like it in the Airservices Act.  It is to do with the splitting off of the functions to Airservices Australia.

KIRBY J:   Does that mean that the issue is not live under the new Act, or in the new statutory provisions, because that would be a very relevant matter to a special leave application?

MR CAMPBELL:   The answer is that it is, and it is not. 

KIRBY J:   Tell me where it is not.

MR CAMPBELL:   The legal test is the same, however the factual matrix against which the legal test needs to be applied has changed enormously.  There was evidence before the trial judge that when this particular provision came in, when there was this requirement imposed upon the Civil Aviation Authority to have user‑pays charging, that the accounts, the accounting services available to the Civil Aviation Authority, were inadequate.  There was evidence that there was a computer program in the course of development by Mr Barnes which would enable there to be a better allocation of costs to provision of services.

There was evidence before her Honour that even in the year after this there was a vast change in the charges that were levied precisely because the Authority had been able to get its cost accounting information more up to speed.

Your Honours will recall that one of the aspects of this particular charging for 1990‑91 was that the services that were air services, I think they are called, which consisted of the terminal navigation and en route charges were ones where it was not possible, on the basis of the information that they had at the time, to work out how the overheads should be allocated, and so all of the overheads were lumped into the en route charge. 

KIRBY J:   But do you agree with the proposition of the applicant, that if your arguments are correct, and if the Full Court’s decision is correct, then the charges have, perhaps forever, certainly for a long time, been invalid.

MR CAMPBELL:   If there has been a different determination each year, we have simply not looked at what the determinations are for other years.

KIRBY J:   If that is a possibility, would that not mean that the issues that are posed by the case are very significant in terms of the income that has been received and, perhaps, liability of the applicant to refund the payments.

MR CAMPBELL:   It is going to depend on what has happened in each subsequent year.  I am afraid I do not know what the determinations have been in subsequent years.  It is open to the Authority to fix its charges how it pleases ‑ ‑ ‑

KIRBY J:   It seems realistic to assume that it has continued to proceed in the way in which it did in your case, and that therefore there is a very great amount involved.  It is in an area which is of national and international importance.  The arguments which you advance may be correct, but the issue posed is an important one, it seems, and you may hold on to the decision.  But, it does seem to be a matter of considerable significance with very large ramification for the applicant if the Full Court’s decision is correct.

MR CAMPBELL:   There is a lot of money involved in the 1990‑91 year.

GLEESON CJ:   Have you looked at the decision that the Supreme Court of Canada gave on a related issue four or five weeks ago?

MR CAMPBELL:   I have not, your Honour.

GLEESON CJ:   That was a decision concerning the question of whether fees charged by a court for dealing with applications for probate were a tax or a fee for service.  You have not had a look at that?

MR CAMPBELL:   No, I have not, I am afraid, your Honour.  But, one can readily see numerous distinctions, and of course the constitutional context that one is dealing with in Australia is different to the constitutional context in Canada.

KIRBY J:   But surely one can readily see in the current situation many applications, and the issue is one which ‑ ‑ ‑

GUMMOW J:   I do not think it was relevantly different?, actually.  I know it is in some respects, but I do not think the constitutional structure was relevantly different in Urich’s Case.  Anyway, the distinction between fees for licences and services, on the one hand, and taxes on the other, is drawn in section 53 of our Constitution itself, is it not.

MR CAMPBELL: It is, yes. But, your Honours, the question of what is “reasonably related to the expenses” incurred or to be incurred is essentially a question of fact. The requirement of section 67 requires that there be both elements satisfied and the way in which Justice Beaumont construed the section was not to say that the two limbs of section 67 were identical in meaning. He said that the way it should be construed is that there is a confluence of purpose to be seen between them, and that if one has a charge which is reasonably related to the expenses incurred or to be incurred in relation to the matters to which the charge relates, so that it is not such as to amount to taxation, then that is what the section requires. In its insistence on looking at what is the relationship between the expenses incurred, or to be incurred, by the Authority, the section is imposing a requirement which is an additional and more specific one to the requirement which is involved in the requirement of there being a tax. So, it is not as though this ‑ ‑ ‑

KIRBY J:   But would not the presence of the tax be a fatal stain, whatever was the determination of the first part of the section?

MR CAMPBELL:   That is undoubtedly so, but ‑ ‑ ‑

KIRBY J:   That means you cannot sever that first part.  The applicant is entitled to attack the decision on the second part, and that is what it does.

MR CAMPBELL:   The way in which the decision went, though, was not, in the Full Court, save for Justice Lindgren, by saying, “This is just a matter of taxation.  The way in which Justice Beaumont’s decision went can be seen from the end of his judgment at page 180 in the application book where he had set out numerous factors that were relied upon by the Civil Aviation Authority, and at line 16 says:

In my opinion, however, none of the foregoing considerations properly bear upon the limits enacted explicitly in the provisions of s 67. This follows from the interpretation I have placed upon s 67, and, in particular, my view of the meaning of “reasonably related to the expenses incurred” and of the notion of “taxation” in this context.

KIRBY J:   There it is.  There is the second part.

MR CAMPBELL:   Yes, but the way in which his Honour then goes on to apply it is over the page at 181 line 3:

At the risk of oversimplification, and speaking in general terms, it may be said that the constraints imposed by s 67 appear to have their true rationale in cost accounting, rather than in the economic theory –

GUMMOW J:   I am not quite sure what that means.

MR CAMPBELL: What he is there saying is that he is putting a gloss on the first leg of section 67 as he goes on to explain two sentences later, where he says:

The central element of s 67 focuses on the notion of “expenses incurred or to be incurred by the Authority”.

He goes on to expand on what he means by that – that expenses do not include profits.  He says:

This is very similar to the sense of the familiar descriptions used in the “taxation” cases and expresses essentially the same idea.

He is not saying it is the same:

That is to say, whilst it may not be practicable, as a strict valuation exercise, to demonstrate an actual or exact correspondence between the charge and the expense, the limits imposed by s 67 will nonetheless be observed if the amount, or rate, of the charge for a service or facility may be seen, when objectively viewed, to have been fixed in good faith so as to approximate the amount of the expenses incurred or to be incurred in relation to that service or facility. In other words, a bona fide (albeit “by and large”) cost accounting exercise that makes an honest attempt to match the amount of a charge with the amount expended in providing the specific service for which the charge is levied, will substantially comply with the dictates of s 67 –

At the beginning of the next paragraph he goes on to say they have not even tried to do that. So, the essential reason for his Honour’s decision is not concerned with general concepts of taxation, it is concerned with the first limb of section 67 as applied to the particular charges, the particular rates of charge, that have been set by this particular determination.

KIRBY J:   Justice Lindgren seems to have considered that Justice Beaumont was dealing with the legal nature of taxation because he gratefully adopts his Honour’s analysis at page 188 line 10.

MR CAMPBELL:   What Justice Lindgren says is whether you adopt the Beaumont approach to construction of the determination, or whether you adopt the Branson approach to construction of the determination, it looks like taxation either way to me.  That is the nub of his Honour’s reasoning. 

KIRBY J:   That gives the leg in for the applicant to get into the court, does it not?

MR CAMPBELL:   But Justice Wilcox was the one who agreed with Justice Beaumont.  It is not as though the ratio of the case below is one which is dependent upon the propositions which are articulated as the special leave questions.

GUMMOW J:   That is going to be argued in other cases, I suppose, in which these sort of questions arise in which there are a number in the courts, I think, on this legislation.  Anyone can argue what the Full Federal Court really decides and so on and so forth.

MR CAMPBELL:   Yes.  That is the first matter that we rely on.  The other matters that we rely on are matters concerned with whether this is a suitable vehicle or not.  While it is correct to say that this is not the sort of case where there was factual contention in the sense that there were allegations that a witness was lying or anything of the sort, there was still a vast volume of factual material which was put before the trial judge.  The appeal books in the Full Court went to some 11 volumes.

GUMMOW J:   This is a threat.

MR CAMPBELL:   It is not so much a threat, your Honour, as requiring the Court to realise what it is letting itself in for.

KIRBY J:   Just trying to make it unpalatable.  But, could we not deal with the matter on the basis of the facts found by the court below?

MR CAMPBELL:   There are many additional facts which would need to be looked at.

KIRBY J:   I understood the applicant’s challenge to be one of principle, not one of fact finding.

MR CAMPBELL:   It is impossible to escape from fact finding given the first limb.  What we say, and what we said in the court below, is that all of the factual matters which arise in connection with the notice of contention are matters which need to be investigated here.  There are numerous matters where we contended in the court below that Justice Branson had not drawn out the full implications of the facts before her.

GUMMOW J:   You had a notice of contention in the Full Court, did you?

MR CAMPBELL:   We did, indeed, and that is at tab 6, your Honour.

GUMMOW J:   That was not dealt with in the Full Court?  They did not need to deal with it?

MR CAMPBELL:   They did not deal with it at all.

KIRBY J:   Presumably you would want to file that in this Court if special leave were granted?

MR CAMPBELL:   We certainly would.

KIRBY J:   And all we would do would be to deal with the issue – or what the Court could do, would be to deal with the issue of principle on the taxation issue.  If that requires reconsideration of the facts, then remit the matter to the Full Court or the Federal Court to deal with any factual questions in the light of the elucidation of principle, and deal with the issues in the notice of contention.

MR CAMPBELL: We would submit that that is not a course which is properly open to the Court; that it is not as though the taxation question is a question which is able to be isolated. One has a compound test posed by section 67 which requires the rate of charge to be both “reasonably related to the expenses” and not such as to amount to taxation.

KIRBY J:   But if it has been - the decision below has been made flawed by a view of taxation, then that would require the setting aside of the decision and a reconsideration of the decision in the light of the elucidation of that concept in the section.

MR CAMPBELL: Yes, but it would not be open, we would submit, to the Court to only do half the job. It would be necessary for the Court to decide whether section 67 really struck down this particular set of determinations or not. That is something which would involve considerable examination of the factual material.

KIRBY J:   I cannot see why we could not just deal with the issue of constitutional principle, or principle relating to taxation, and leave it to the Federal Court to redo the exercise of the discretion in the light of the elucidation of that principle.  We would not want to get involved in the detail factual analysis.

MR CAMPBELL: We submit that when one has a test of the type that is posed by section 67 which requires a particular charge to be reasonably related to the expenses incurred in providing the service for which that

charge relates, there is just no getting away from detailed factual analysis.  The trial below took eight days ‑ ‑ ‑

GUMMOW J:   If you are right about that, no case on section 67 can ever get there.

MR CAMPBELL:   It would depend on what the error was.

GLEESON CJ:   Your time seems to be up.

MR CAMPBELL:   It is, your Honour.  If I could rely on the written submissions in so far as the acquisition of property is another lion in the path where we would submit that there are excellent prospects of our client succeeding, and that provides a further matter which ‑ ‑ ‑

KIRBY J:   The Federal Court might have to deal with.

MR CAMPBELL:   It has been fully argued on two occasions, your Honour, and, indeed, this matter has been remitted to the Federal Court five and a half years ago.  If your Honours please.

GLEESON CJ:   Mr Solicitor, if leave to appeal were granted, would the Attorney propose to renew the application for intervention.

MR BURMESTER:   He would, your Honour.

GLEESON CJ:   To what end?  For the purpose of putting what kind of a submission to the Court?

MR BURMESTER:   For the purpose of putting submissions concerning the meaning of taxation, and the proper construction of a provision such as section 67.

KIRBY J:   This is to support the applicant, is it?

MR BURMESTER:   In support of the applicant.

GUMMOW J:   Would these be submissions that were not here already?

MR BURMESTER:   Pardon, your Honour?

GUMMOW J:   Would this be doing something that was not already going to be done by the parties?  You do not come here as of right.  You have no right to intervene in this, have you?

MR BURMESTER:   Your Honour, we think the issues raise, as it were, issues of constitutional significance, and while ‑ ‑ ‑

GUMMOW J:   In substance, if not in form, that might be right.

MR BURMESTER:   That is correct, your Honour.

KIRBY J:   We would not have to decide now whether the Court would allow you to intervene at the hearing of the appeal if special leave were granted.  That would be a matter that could be determined at the time of that application.

MR BURMESTER:   That is correct, your Honour. 

GUMMOW J:   It would obviously be helpful if the other side saw your written submissions well in advance.

MR BURMESTER:   Yes, your Honour, we would be happy to make submissions available.

GLEESON CJ:   Thank you, Mr Solicitor.

MR BURMESTER:   Thank you.

KIRBY J:   Could I just ask, is this a matter that would require – or, has there been a section 78B notice?

MR BURMESTER:   There has been, your Honour.

GLEESON CJ:   Mr Jackson, there is one matter we would like to hear from you about.  What do you say in response to the submission made by Mr Campbell that if we were to grant special leave in this case it would involve a good deal of factual investigation of matters that were not the subject of decision in the court below?

MR JACKSON:   They were the subject of decision before Justice Branson, and the respondent to the application here lost before her Honour on those issues.

KIRBY J:   Do you accept her Honour’s findings of fact for the purpose of the application for special leave to appeal?

MR JACKSON:   Yes.  There is only one respect in which we challenge her Honour’s findings by the appeal in the Full Court, by which we would, if given unlimited leave, be able to challenge her findings before this Court, and that is the factual findings she made about the meteorological charge.

GUMMOW J:   Wait a minute; did you challenge them before the Full Court?

MR JACKSON:   Yes, we did, and the Full Court did not get to deal with that issue because of the way in which it disposed of the case.

KIRBY J:   That was a fixed annual amount which was divided up.  That was all ‑ ‑ ‑

MR JACKSON:   Her Honour found that there was not enough evidence to show what the connection was for one part of the meteorological charge.  We, in the submissions in reply said in effect ‑ ‑ ‑

KIRBY J:   a little bit of weather in Cooma is hard to divide from the rest of the weather of the nation.

GUMMOW J:   Why would you get your first run on the facts in an appeal here?

MR JACKSON:   On a meteorological charge, we accept that it would be perfectly appropriate for this Court to limit the leave to the charges, not including the meteorological charge.  We have done that by ‑ ‑ ‑

GLEESON CJ:   What would be the precise form of limitation that we would impose?

MR JACKSON:   If your Honours granted leave limited to grounds 3 to 8 of the draft notice of appeal.

GUMMOW J:   What pages are they?

MR JACKSON:   Page 239, my learned junior tells me, your Honour.  That would not include ground 9 which raises that question of fact which I have mentioned before.

GUMMOW J:   Which ones are in – 2 and 3?  Which ones are you pressing?

MR JACKSON:   Grounds 3 to 8 inclusive, but not in respect of the meteorological charge.

GLEESON CJ:   Would you be good enough to formulate the limitation that you are proposing so that we can make it part of an order if we were minded to do so?

MR JACKSON:   That the leave granted be limited to grounds 3 to 8 of the draft notice of appeal, and so as not to include ‑ ‑ ‑

GUMMOW J: Not so?

MR JACKSON:   And so as not to include the meteorological charge.

KIRBY J:   Would that leave the decision of the Full Court then standing on the meteorological charge?  Would that not create, assume that the Court were with you in the appeal, that would create a certain intellectual disharmony between the decision of this Court and the decision of the Full Court?  I suppose we could, having the order before us, order that the matter be reconsidered by the Full Court in the light of the decision of this Court.

MR JACKSON:   Your Honours could, and it would be wrong for me to say that the Full Court ‑ ‑ ‑

GUMMOW J:   The appeal would be here.  The grounds would be limited.  We could deal with the appeal by sending it back as to the other matter.

MR JACKSON:   Yes, your Honour.

GUMMOW J:   That is what it will come to, is that right?

MR JACKSON:   Yes.

GLEESON CJ:   Would you mind just explaining why you have left ground 2 out of that  proposal.

GUMMOW J:   Yes, I was puzzled by that.

MR JACKSON:   It could be included or excluded.  I did not want, by the generality of ground 2, to be thought to have gone more widely, but there is no reason to leave it out, I am sorry, your Honour, once one makes the limitation of not including the meteorological charge.

GLEESON CJ:   Your proposal then is altered to a proposal that leave be granted, limited to grounds 2 to 8 in the draft notice of appeal, but so as not to include the matter of the meteorological charges?

MR JACKSON:   Yes, your Honour.  Thank you.

GLEESON CJ:   Mr Campbell, what do you have to say about that proposal in relation to your submission concerning facts?

MR CAMPBELL:   It would limit the factual inquiry by the smallest smidgin.  The meteorological charges were charged by a one line invoice.  There is very little factual complexity concerning them.  There would still be significant factual matters which needed to be gone into before this Court concerning the other three.

KIRBY J:   But the applicant says he accepts the decision of Justice Branson on the facts for the purpose of the appeal.

MR CAMPBELL:   He may; we would not, and we would seek leave to file a notice of contention in substantially the same form as the notice of contention which is set out behind tab 6.

GLEESON CJ:   Why would you need leave to file a notice of contention?

MR CAMPBELL:   We may not.

GLEESON CJ:   Thank you.  Mr Jackson, if leave to appeal, limited as you have proposed, were granted, how long would you expect the hearing of the appeal to take?

MR JACKSON:   I think our submissions - and the reason I put it in this form is because I am not quite sure as to how many parties would appear ‑ our submissions, I think, would take between half to three‑quarters of a day in full.  I am conscious that often those time estimates come down once one gets before the Court.

GLEESON CJ:   I do not think you have answered my question.  I have have invited you to make an attempt to estimate how long the entire matter would take.

MR JACKSON:   I think between one and two days, your Honour.

GLEESON CJ:   In this matter, there will be a grant of special leave to appeal limited to grounds 2 to 8 in the draft notice of appeal, and so as not to include the matter of the meteorological charges.

AT 10.07 AM THE MATTER WAS CONCLUDED