Auswest Timbers Pty Ltd v Secretary to the Department of Sustainability and Environment
[2010] VSC 389
•1 September 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
No. 6595 of 2004
| AUSWEST TIMBERS PTY LTD | Plaintiff |
| v | |
| THE SECRETARY TO THE DEPARTMENT OF SUSTAINABILITY AND ENVIRONMENT | Defendant |
---
JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 31 May 2010 and 1-3, 7-10, 23 and 24 June 2010 | |
DATE OF JUDGMENT: | 1 September 2010 | |
CASE MAY BE CITED AS: | Auswest Timbers Pty Ltd v Secretary to the Department of Sustainability & Environment | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 389 | |
---
MISLEADING OR DECEPTIVE CONDUCT – whether representations constitute misleading or deceptive conduct, as to future matters, and in trade or commerce – whether reliance on representations – whether duty to correct alleged representations – whether Secretary of the Department of sustainability and Environment a “trading corporation” – s 51A, s 52, s 82(1), s 87 of the Trade Practices Act 1974 (Cth) – s 9, s 159 of the Fair Trading Act 1999 (Vic)
CROWN – extent to which Crown bound – whether Secretary is an emanation of the crown and excluded from the operation of Part IV of the Trade Practices Act 1974 (Cth)
FORESTS ACT – Sawlog licences – defences with respect to representations by the Secretary under the Forests Act 1958 (Vic) – effect of Fair Trading Act and Trade Practices Act provisions, and s 109 of the Australian Constitution
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Peters SC with Mr D. Crennan | Slater & Gordon |
| For the Defendant | Mr P. Collinson SC with Ms E. Dias | Norton Rose Australia |
HIS HONOUR:
Background
The plaintiff, Auswest Timbers Pty Ltd, owns and operates timber mills at Bussleton in Western Australia, in the Australian Capital Territory and, relevantly for the present proceedings, the Orbost Mill, which is situated at Brodribb, which is near the town of Orbost in East Gippsland.
The defendant, the Secretary to the Department of Sustainability and Environment (“DSE”), is a corporation established under s 6 of the Conservation Forests and Lands Act 1987 (Vic). The State department of which the defendant is Secretary has, at various times, been known by other names, including the Department of Conservation Forests and Lands (“DCFL”), the Department of Conservation and Environment (“DCE”) and the Department of Natural Resources and Environment (“DNRE”). For present purposes, it is sufficient to treat the department as a continuing entity, in spite of its name changes from time to time. For convenience, it is referred to as “the Department”. In any event, it was common ground that the Secretary of the Department is a legal person capable of being sued. Issues do, however, arise as to the nature of this legal personality, in the context of issues as to whether the defendant is an emanation of the Crown in right of the State of Victoria and whether the defendant is a “trading corporation” within the meaning of the Trade Practices Act1974 (Cth) (the “TPA”). In relation to the activities of the defendant, questions also arise as to whether they are “in trade and commerce” within the meaning of relevant provisions of the TPA and the Fair Trading Act1999 (Vic) (the “FTA”).
On 17 April 1998, the plaintiff purchased from Monier Roofing Ltd (“Monier”) its Orbost timber operations, including the Orbost Mill, for the sum of approximately $2.9 million. Monier was then a subsidiary of CSR Ltd and its significant, if not only, operational role was to provide roof battens from its various timber mills which were utilised as part of the home building and other construction operations of CSR Ltd. As part of these arrangements, the plaintiff entered into an agreement with CSR Ltd to provide roof battens, in place of the arrangements that had previously existed within the CSR Ltd structure with Monier Roofing Ltd, as it was then known.
Forest timber cutting and extraction in Victoria is regulated under the Forests Act1958 (Vic) (the “Forests Act”). The regulatory process has at all relevant times been, and continues to be, regulated by the defendant and the Department. Under this regime, it was necessary for the plaintiff, as the purchaser of the Orbost Mill, to obtain a right to timber so that its sawmilling operations could continue at Orbost. Consequently, on or about 23 September 1998, the plaintiff took a transfer of timber licence No. S000355 from Monier, which by this time had changed its name to 099 639 847 Ltd.
Broadly speaking, the plaintiff’s case is that on or about 4 March 1998, the defendant represented, and continued to represent until 30 June 2005, that the holder of the licence which the plaintiff had taken from Monier would be the subject of an offer of renewal for 15 years with the same volume and log quality provided for in that licence, subject only to agreement on the price for the timber the subject of the licence. The defendant denied any such representation and, further, submitted that the plaintiff could not succeed on the basis of the relief which it claimed because the defendant was an emanation of the Crown, the activities of the defendant were not, at any relevant time, in “trade and commerce” and, in any event, if there were any representation made, the plaintiff did not establish that it had relied upon the representation in any relevant sense for the purpose of establishing its cause of action. The parties also joined issue with respect to the nature and extent of the loss and damage claimed by the plaintiff.
Purchase of the Orbost Mill
In 1998, the plaintiff was contemplating purchasing the Orbost Mill for a price in the vicinity of $3 million.
The Orbost Mill produced milled timber which was obtained for this purpose from the East Gippsland forests to the extent that they are State forest for the purpose of the provisions of the Forests Act. The timber was provided to the Orbost Mill under licence from the Crown, pursuant to s 52 of the Forests Act. Licensing of this nature is required, as the grant of licences in respect of any Crown land (pursuant to the Land Act 1958 (Vic)) is prohibited under s 51 of the Forests Act. Consequently, the Forests Act exclusively governs the ways in which property rights in ‘reserved forests’ may be allocated or granted.
The licence held for the Orbost Mill at the time of its purchase by the plaintiff was granted to Monier for a period from 19 October 1993 to 30 June 2003. The licence was number S000355 and was subject to various terms and conditions as set out in Schedule 1 to that licence, which provided as follows:
“ SCHEDULE 1
Area of Supply: East Gippsland Forest Management Area
Annual
Allocation Period Quantity
(m3 nett) from to (m3 nett)
31 345 19/10/1993 – 30/06/2003 Grade D and better sawlogs 31 345
Licence Fee:
The licence fee for 1993/94 will be $1.64 per cubic metre (nett) and will be indexed annually to changes in sawlog royalty rates in subsequent years.
Licence Renewal:
After the fifth year of this licence the annual allocation will be reviewed for the period following the expiry of the licence. The Secretary and the licensee may negotiate an agreed licence fee for the renewal of this licence. If agreement is not reached before the beginning of the ninth year of this licence, rights to a renewal licence will be put to public tender during the ninth year. The licensee will be given the opportunity to match competing tenders.
Licence Conditions:
This licence is subject to the attached Licence Conditions for licences granted pursuant to the Forests Act 1958 and as amended from time to time and any Additional Conditions hereunder.
Additional Conditions:
1.Notwithstanding the date of issue of this licence, the annual allocation of 31 345 m3 (nett) will be made available in 1993/94.
2.This licence has been issued following the surrender of all rights, entitlements and obligations held under licences S000098 and S000200 on the condition that those rights – entitlements and obligations are transferred and incorporated into a single consolidated licence.”
For convenience, this Licence is referred to as “the Original Licence”.
The Original Licence was renewable at the discretion of either the Director-General (which was also referred to in the relevant legislation at various times as the “Secretary”; more recently this power has been designated to the “Minister”), under s 52 of the Forests Act. The accepted practice with respect to renewals of licences such as the Original Licence was reflected in the provisions of Schedule 1 of that Licence. Namely, that the annual allocation of timber would be reviewed for the period following the expiration of the licence, and that the “Director-General” and the licensee may negotiate an agreed licence fee for the renewal of the licence. If agreement in this respect was not reached before the beginning of the ninth year of the licence, the rights to renew the licence would be put to public tender during its ninth year. As Schedule 1 indicates, if the renewal process was put out to public tender, the licensee would be given the opportunity to match competing tenders. The purpose of this renewal process was to provide licence holders with certainty of supply of timber as a result of the renewal of existing licence arrangements or, at least, to enable them to make alternative supply arrangements in the event that existing licence arrangements were not to be renewed.
In exercising its discretion to renew a licence, the defendant considered issues such as value adding the timber (i.e. utilising timber as a value added resource). In the event that commercial value adding did not occur in the hands of the licensee, the defendant may, if it decided to renew the licence, reduce the grade of timber available under the renewed licence. During discussions between the plaintiff and the defendant with respect to the former’s intended purchase of the Orbost Mill, the plaintiff was advised by the defendant that it would be expected to engage in commercial value adding of the timber or the grade of timber available to it under the licence would be reduced.
In mid-1997, the plaintiff, having decided that the Orbost Mill could be a potential acquisition, embarked on a process of due diligence and discussions with its bankers and also with the defendant in relation to the prospects of renewal and the basis of renewal of the Original Licence. This process, which occurred in late 1997 and early 1998, culminated in –
(1)the purchase of the Orbost Mill and associated timber operations from Monier by the plaintiff for approximately $2.9 million on 17 April 1998; and
(2)the transfer of licence no. S000484 (which had replaced the Original Licence, licence no. S000355) to the plaintiff, and the assumption of all the obligations and entitlements by the plaintiff.
It is the plaintiff’s position that, having purchased the Orbost Mill and taken a transfer of the licence, it organised its timber milling business conducted at the Orbost Mill and invested and expended moneys on the basis that, as the holder of the licence which had been transferred to it, it would be offered a renewal of that licence for 15 years with the same timber volume and log quality.
Victoria’s native forests policy developments
The development and implementation of government policy with respect to the logging and management, more broadly, of forests in Victoria, and elsewhere in Australia, has been the subject of significant public debate and policy development. Anyone living in Victoria for the last 10 to 20 years who took a modicum of interest in State issues would be aware of the community and political controversy in relation to the management of timber resources and the logging of State forests. East Gippsland and the Wombat State Forest readily come to mind.
The plaintiff was not, of course, a mere bystander, as it had a direct interest in the movements in this community and political debate and consequent developments and changes in Victorian Government policy. It had a direct economic interest, though this is not to imply that it did not have an interest as a corporate citizen in sustainable forests and environmental issues generally.
Evidence was led by both the plaintiff and the defendant in relation to the community and political debate and the development of Victorian State Government policy. For present purposes, a sensible starting point is 1992.
In late 1992, the then Prime Minister, Mr Paul Keating, and all State Premiers and Territory Chief Ministers signed a National Forest Policy Statement (the “Statement”).[1] The Statement commenced with the following introductory material:[2]
[1]The Statement was entitled “National Forest Policy Statement – A new focus for Australia’s forests (second edition)”, 1992.
[2]Statement, p 1.
“This Statement outlines agreed objectives and policies for the future of Australia’s public and private forests.
It is the joint response of the Commonwealth, State and Territory Governments to three major reports on forest issues — those of the Ecologically Sustainable Development Working Group on Forest Use, the National Plantations Advisory Committee, and the Resource Assessment Commission’s Forest and Timber Inquiry — and it builds on the 1983 National Conservation Strategy for Australia initiated by the Commonwealth Government and the 1986 National Forest Strategy for Australia developed by the Australian Forestry Council.
The three levels of government in Australia have specific interests in and responsibilities for forest management. State and Territory governments have primary responsibility for forest management, in recognition of the constitutional responsibility of the States for land use decisions and their ownership of large areas of forest. The States and Territories have enacted legislation that allocates forest land tenures and specifies the administrative framework and policies within which public and private forests are managed.”
This introductory material was followed by a vision statement and the identification of important characteristics of that vision. The vision, broadly stated, was:[3]
“The Governments share a vision of ecologically sustainable management of Australia’s forests.”
[3]Statement, p 3.
The National Forest Policy Statement also contained an elaboration of specific objectives and policies. In particular, reference was made to these objectives and policies with respect to “Efficient use and value adding” and “Wood pricing and allocation”. In these respects, reference was made to the following:
“Efficient use and value adding
…
The Governments are committed to providing certainty and security for existing and new wood products industries to facilitate significant long‑term investments in value‑adding projects in the forest products industry. To this end the Governments have agreed, subject to statutory requirements, on the following initiatives to satisfy the commercial requirements of potential investors:
•Completion of comprehensive regional assessments, as outlined in Section 4.3, and negotiation of a Commonwealth-State regional agreement to form the basis for meeting wood production, nature conservation and other forest allocations. In this respect the Commonwealth will give full faith and credit to accredited State assessment processes, practices and procedures, consistent with the Intergovernmental Agreement on the Environment.
…
The Governments will continue to support the introduction of higher value adding uses of wood and greater log recovery and utilisation rates through new technologies. In this context the Industry Commission will conduct an Inquiry into opportunities for adding value to Australia's forest products. The Inquiry will examine possible impediments to the expansion of the forest products industry and recommend ways of removing those impediments. These objectives will also continue to be supported through research funding and as priority areas under the research and development program (see Section 4.10).
…
•Commonwealth–State regional agreements based on comprehensive regional assessments (see Section 4.3) or agreements between a State and the Australian Heritage Commission on the management of forests listed on the Register of the National Estate (including the application of harvesting codes of practice) will constitute the basis on which the Commonwealth will meet its legislative obligations under s. 30 of the Australian Heritage Commission Act 1974. For areas not covered by comprehensive regional assessments, existing processes and annual export approvals will apply.”
Wood pricing and allocation
The pricing and allocation system for wood from public native forests has a major bearing on the structure and efficiency of the wood products industry and on the return to the community from use of a publicly owned resource. The State Governments will encourage the use of logs for their highest net value‑added end use. Accordingly, they will adopt the following principles as the general basis for pricing and allocation arrangements for wood from public native forests:
–Prices will be market based, at least cover the full cost of efficient management (including regeneration) attributable to wood production, include a fair return on capital, and provide an adequate return to the community from the use of a public resource.
–Harvesting rights will reflect security of supply for wood users, will be clearly defined, and will be transferable when this does not result in the creation of excessive market power.
–The allocation system will be flexible and will involve competitive bidding arrangements for appropriate amounts of the resource, thus enabling the entry of new processors and allowing small operators to compete for niche markets.
Forest services have made significant changes to their pricing and allocation systems. They will continue to develop their systems to reflect the foregoing principles, including approaches involving competitive bidding systems where regional wood markets exist. Where competitive markets are not achievable, prices set through administratively determined allocation systems should at least cover the efficient costs of wood production and provide an adequate return to the community.
•Forest services will, where feasible, allocate a substantial proportion of harvesting rights through competitive bidding, with varying time frames and varying wood volumes, to allow opportunities for the entry of new processors and niche operators.
•Following the current review of competition policy, the State Governments will consider options for increasing the public accountability of their commercial forest operations, including through the possible application of the principles and provisions of the Trade Practices Act 1974.”
My reason for setting out some of the material contained in the National Forest Policy Statement at some length is to provide some context to the thinking, nationally and in Victoria, in relation to the management of forests and the pricing policies that were thought to be appropriate for the use of a publicly owned resource in the context of an overall forest management policy.
The National Forest Policy Statement and the inter-government and industry discussions that one would expect to have been taking place were reflected in various documents internal to the defendant and also in documents passing to and from sources external to the defendant. For example, on 4 May 1995, Mr Wareing, Manager, Forest Commerce, wrote a memorandum, endorsed by Mr R. Rawson, Director, Forests Services, and Mr A. Thompson, Secretary of the Department, that was approved by the then Minister. The memorandum recommended a comprehensive review of the timber licensing system and the suspension of renewal of licences pending that review. In December 1996, Mr Pendrigh, then Acting Manager, Commercial Forestry, drafted a paper entitled “Licence Renewal Considerations” which he circulated to the Commercial Forestry Managers Group within the defendant for comment. In that document, reference was made to deficiencies in the then current licensing system with a number of options put forward, including the conversion of all timber licences to sales contracts on renewal and removal of the Royalty Equation System, by which royalty rates were then determined. A number of responses were received by Mr Pendrigh from Forestry Managers, including, on 29 March 1997, a response from Mr Geoff Scales, which contained a discussion of possible approaches, including the implementation of an options system. Mr Pendrigh’s paper was circulated as a draft and, apart from this comment from Mr Scales, its ultimate fate was not clear.
In 1994 the Council of Australian Governments endorsed the principles of national competition policy reform outlined in the Hilmer report.[4] As a result of the review, the States were obliged to review legislation to assess whether or not it complied with national competition policy and, if necessary, make appropriate legislative changes. The requirements of the national competition policy led to a variety of reviews and assessments of the content and operation of the Forests Act.
[4]The report was the result of a review commissioned by the then Prime Minister, and chaired by Professor Frederick Hilmer: “National Competition Policy” (25 August 1993).
On 30 July 1997, Margaret Matthews, Manager Competition Policy in the Department sent a paper entitled “National Competition Review of the Forests Act 1958” to the Executive Director, Forestry and Fire within the Department. The express purpose of this inter-departmental memorandum was to provide information about the process for the national competition policy review of the Forests Act. It also attached, in draft, proposed terms of reference for the review process, review arrangements and reform options. Under the heading “Reform Options”, the draft paper set out the following:
“The review should specifically address the appropriateness of:
·provisions which prescribe for the granting of licences and permits for grazing, timber harvesting and other forest produce;
·provisions which regulate activities with resultant restrictions on competition;
·provisions which provide for the granting of leases for the use of land in State forests.”
It was proposed that written submissions from the public should be called for and provided by 3 October 1997, with the review reporting its findings and recommendations to the Minister by 23 December 1997. The terms of reference for this legislative review of the Forests Act were also sent to Mr Paul Myers of the Department of Premier and Cabinet, and to Mr David Briggs of the Department of Treasury and Finance, by facsimile transmission from Mr Rod Grace of the defendant on 14 August 1997.
Further correspondence and inter and intra departmental communications occurred in August and September 1997. This included a letter from the Secretary, the defendant, to the Minister for Conservation and Land Management regarding the terms of reference for the National Competition Review of the Forests Act, noting that the review had been listed as a “high priority/major Model 1 (review)” and was scheduled to be commenced in 1997. On 15 September 1997, the then Premier, the Honourable Jeff Kennett MLA, wrote to the then Minister for Conservation and Land Management approving the terms of reference. Various officers of the defendant’s Department, including Mr Pendrigh, then advised that the National Competition Policy (“NCP”) Review of the Forests Act would be undertaken from early October, to be completed by early January 1998. As the plaintiff submitted, it was clear that this review of the Forests Act was being dealt with at the highest level by the defendant, the defendant’s Department and the Victorian Government as a “high priority” review.
In October 1997, KPMG submitted a “Proposal for a NCP Review of the Forests Act 1958” (dated 1 October 1997). This Proposal contained the following comment under the heading “Competition issues”:[5]
“We note that the Guidelines contain a discussion, in Section 3.4 ‘Natural Resource Management Regulation’ under the heading ‘Forestry Policy’, on matters that the author considers are key issues for review. These are the determination of royalty rates and the amounts of timber to be offered for logging. Regarding the former, DNRE operates an administered pricing system for hardwood logs. There is arguably a case on efficiency grounds for a greater market-based pricing of logs through competitive bidding for timber harvesting rights which are transferable.”
[5]KPMG Proposal, pp 3 and 4.
On or about 2 October 1997, Mr Michael Taylor, the then Secretary of the Department, provided a memorandum to the then Minister, regarding the NCP Review of the Forests Act, together with a letter to the Premier for the Minister’s signature replying to the former’s request for more detail about the coordination of the National Competition Policy Review of the Act with a more general review of the Act. The attached letter was apparently sent to the Premier, the substantive part of which was as follows:
“You asked for some further information regarding the coordination of the NCP review of the Forests Act1958 with the more general review of the legislation which is also occurring. There are two teams working on the review of the Act. One team is overseeing the NCP review while the other team is examining the basis for new legislation. These teams will have ongoing dialogue during the review process and, when reviews are completed, the proposal for new legislation will be developed incorporating the recommendations from the NCP review.”
Mr Pendrigh identified Mr Richard Rawson’s initials on this memorandum. He also gave evidence that he was only incidentally involved in the review of the Forests Act but that he recalled meeting the KPMG consultants as part of the review process they undertook. In any event, it appears clear from the memorandum and the 3 October 1997 letter to the Premier that two reviews of the Forests Act were occurring during this latter part of 1997. Mr Rawson appears to have been responsible for coordinating the issues the subject of those reviews.
On 19 December 1997, KPMG provided the defendant with a document entitled “Review of the Forests Act 1958”. The primary issues the subject of the review were summarised as follows:[6]
[6]KPMG Review of the Forests Act 1958 (19 December 1997), p 1.
“Legislative objectives
Provide for commercial use of the State’s hardwood timber resource to meet present and future generations’ requirements.
Outcome sought
Ongoing supply of timber resource.
Problem addressed
Negative externalities of unfettered private exploitation of timber resource. Without legislation forest resource would be exploited without taking account of full social costs and ongoing supply could not be assured.”
The material which follows appears under the heading “Restrictions on competition”. In relation to the determination of hardwood supply levels and price, in the context of consideration of restrictions on competition, the following statement was made:[7]
[7]KPMG Review of the Forests Act 1958 (19 December 1997), p 2.
“A less restrictive option for determining royalty exists. Section 53 already provides for licences to be offered for sale by auction or tender. Reserve price is set by reference to the competitively neutral cost of supply. Market demand would determine the sawlog price. Licence fees should only cover the cost of administering licences, in effect the royalty becomes the price of sawlogs.”
This KPMG document appeared to be either a preliminary summary document or merely a summary of the material and recommendations contained in the main KPMG Review. This appears from the concluding material in the 19 December 1997 Review document:[8]
[8]KPMG Review of the Forests Act 1958 (19 December 1997), pp 2 and 3.
“Preliminary view on broad recommendations
1Remove provision granting exclusive control and management of commercial services regarding timber supply.
2Remove minimum sawlog supply provision.
3Change practices of administering pricing to sale of sawlogs by auction or tender.
4Change DNRE practices on lease, licence, permits et cetera to incorporate:
· clear explicit criteria for issue;
· transparent processes for issue including review where application refused or licence revoked;
· charges to reflect competitively neutral cost of provision.”
On or about 22 December 1997, KPMG provided a first draft of the full Review of the Forests Act to the defendant. This draft report of 71 pages continued to reflect the general approach as summarised in the 19 December 1997 “Review of the Forests Act 1958”, particularly with respect to timber pricing policy. In the discussion with respect to the determination of hardwood supply levels and price, the following recommendations and observations were made:[9]
[9]“KPMG Review of the Forests Act – draft report” (22 December 1997), pp 50-1.
“We recommend that the DNRE’s administered pricing policy in relation to logs be changed to a more market-based determination of log prices. …
A more market-based log pricing policy is consistent with current national policy on forest resource exploitation. As noted previously, the Victorian Government is a signatory to the National Forests Policy Statement (NFPS). The NFPS sets out the following pricing principles:
·prices will be market-based;
·prices should at least cover the full cost of efficient management attributable to wood production;
·prices should include a fair return on capital;
·prices should provide an adequate return to the community from the use of a public resource;
·harvesting rights will be transferable (tradeable) when this does not result in the creation of excessive market power;
·the allocation system will be flexible and involve competitive bidding arrangements for appropriate amounts of the resources; and
·where competitive markets are not achievable, prices set through administratively determined allocation systems should at least cover the efficient costs of wood production and provide an adequate return to the community.
The present pricing of logs by DNRE does not meet the pricing principles incorporated in the NFPS. In our view there should be increasing use of competitive tendering as the basis of price setting where practicable. A tendering system would reflect a market determination of prices and consequently eliminate the restriction on competition resulting from the present below-market administered prices.
A market-based approach to pricing could involve the abolition of the licence fee and royalty components of the present price of logs. We understand DNRE has a proposal currently under consideration to increase licence fees, perhaps partly in response to the apparent large premiums on traded sawlog licences. We consider increasing the licence fee to be an inferior means of capturing more of the ‘market value’ of the resource allocation embodied in licences. Alternatively, the licence fee could be set at a smaller amount related only to administrative costs, with the royalty level adjusting to demand conditions for licences. DNRE appears to be increasing confusion as to the appropriate roles of the licence fee and royalty components of log pricing.
The more efficient, and transparent, approach would be to have tender- or auction-based pricing. This need not involve a licence fee/royalty distinction, a single price could be paid by the successful bidder with the administrative costs of the selling system recovered either in a tender/bid fee or the cost-based reserve price or source combination of both.
…”
The KPMG first draft of the full Review of the Forests Act concluded with the following draft recommendation with respect to the reform of log pricing:[10]
“8.2.2 Reform log pricing
We recommend that the DNRE’s administered pricing in relation to logs be changed to a more market-based determination of log prices…
A more market-based log pricing is consistent with current national policy on forest resource exploitation…
In our view, the present pricing of logs by DNRE does not meet the pricing principles incorporated in the (National Forests Policy Statement) …
Also, we advocate an increasing use of competitive tendering where practicable. A tendering system would reflect a market determination of prices and consequently eliminate the restriction on competition resulting from the present below-market administered prices.”
[10]“KPMG Review of the Forests Act – draft report” (22 December 1997), pp 62-3.
On or about 6 February 1998, KPMG delivered a second draft report to the Department entitled “NCP Review of the Forests Act 1958 – draft report” of 110 pages. The draft report is, as the plaintiff submitted, replete with references to the replacement of the licence system with an auction process. Thus, the following comments were made in the context of a discussion of sawlog allocation and pricing in the course of a discussion of less restrictive alternatives to current practices:[11]
[11]“KPMG NCP Review of the Forests Act – draft report” (6 February 1998), pp 71-2.
“A more efficient system (to the existing administered licensing system) would seem to be one where timber quantities are allocated by tender either on a spatial or delivered quantity basis.
The NFPS sets out the following principles:
·Prices will be market based…
·The allocation system will be flexible and involve competitive bidding arrangements for appropriate amounts of the resource…
·Increased use of the competitive tendering is the base of price setting where practicable is desirable. The tendering system would reflect the market determination on prices and consequently illuminate the restriction on the competition resulting from the present below – market administered prices…
A more efficient transparent approach would be to have tender- or auction – based pricing. This need not involve a licence fee/royalty distinction; a single price could be paid by the successful bidder with the administrative costs of the selling system recovered either in a tender/bid fee for all the cost base reserved price or some culmination of both…
the price reserved system to prevent collusion or under bidding: reserves could be based on market assessments and entail a requirement to at least cover the competitively neutral cost of supply…
the important feature of this market-based pricing approach is not the increase in the revenues that would undoubtedly accrue at DNRE…it would decrease barriers to entry to hardwood timber markets, and enhance the position of efficient saw millers. The magnitude of this effect would depend on the effectiveness of an auction or tender type system in delivering the anticipated benefits. However, practical examples of this type of forest pricing do exist (such as performed by the United States’ Forest Service).”
The second draft KPMG report also contained the following recommendation in relation to the reform of timber allocation and log pricing:[12]
“9.2.2.2 Reform timber allocation and log pricing
We recommend that the DNRE’s administered allocation and pricing policy in relation to logs be changed to a more market-based determination of log prices. This may not necessarily require legislative amendment, given the generality of current provisions. Section 21 provides a power to sell timber by public auction or tender and Section 53 provides the power to sell by auction or tender the right to any leases of land in reserved forests (section 51) and any licences and permits in relation to forest produce in a reserved or protected forest (section 52). Reserve prices could be set by reference to the competitively neutral cost of supply and sale. A more market-based log pricing policy is consistent with current national policy on forest resource exploitation in the National Forests Policy Statement to which the Victorian Government is a signatory.
While in principle we advocate an increasing use of competitive tendering as the basis of resource allocation and price setting where practicable, we recognise there are complex issues in the design of a market-based system to be resolved. We recommend further work on the design of allocation and pricing mechanisms be undertaken and options for a market-based approach evaluated.”
[12]“KPMG NCP Review of the Forests Act – draft report” (6 February 1998), p 87.
On the basis of this material, it is reasonable to suppose that those officers of the Department responsible for forest policy were aware that KPMG were recommending that an auction-based system for pricing and allocation of timber be implemented, and that the then current licensing system be substantially modified to comply with National Competition Policy, which it is clear that the defendant knew that the State was required to comply with. Nevertheless, it is also clear from the second draft of the KPMG report on the review of the Forests Act that “complex issues in the design of a market-based system [were yet] to be resolved”.[13]
[13]“KPMG NCP Review of the Forests Act – draft report” (6 February 1998), p 87.
In a memorandum dated 15 June 1998, Mr Tony Bartlett (of the Forests Service within the defendant’s Department) provided Mr Rod Grace (of the Competition Policy Unit, also within the same Department) with a draft Government response with respect to the NCP Review of the Forests Act. Mr Bartlett noted that the Government supported moving further towards market-based systems for sawlog allocation. The draft Government response which was attached to that memorandum referred to recommendation 9.2.2.2 of the KPMG NCP Review of the Forests Act which was to the effect that the Department, the defendant, should change its administered allocation and pricing policy in relation to logs to a more market-based determination of log prices. The plaintiff relied upon parts of the material contained in the draft Government response with respect to this recommendation in the KPMG Review. It is, in my view, important that the passages relied upon be placed in context. The relevant parts of the Government response were as follows (with the passages relied upon by the plaintiff set out in italics):
“Response
The Government accepts the principle that allocation and pricing of logs from State forest should utilise market-based mechanisms where practicable and that there should be increased use of these mechanisms over time.
Discussion
The review states that ‘the change to a more market-based allocation and pricing policy may not necessarily require legislative amendment, given that the Act already contains provisions enabling the Director General to sell by auction or tender the right to any lease, licence or permit in relation to forest produce.’ It suggests that ‘reserve prices could be set by reference to the competitively neutral cost of supply and sale’ and advocates ‘the increased use of competitive tendering as the basis of resource allocation and price setting where practicable’, but recommends ‘further work on the design of allocation and pricing mechanisms be undertaken and options for a market-based approach be evaluated’.
The Victorian Government, as a signatory of the National Forest Policy Statement, accepts the following principles as the general basis for log pricing and allocation arrangements from State forest:
·prices will be market-based at least covering the full cost of efficient management, a fair return on capital and adequate return to the community;
·harvesting rights will reflect security of supply for wood users and be transferable generally;
·the allocation system will be flexible and involve competitive bidding arrangements for appropriate amounts of the resource.
Although these principles cannot be uniformly applied across all State forest log allocation and pricing arrangements, they are being applied at present where appropriate and it is expected that there will be greater use of these mechanisms in the future. Reserve prices are set for logs made available under auction and tender processes. It is anticipated that in the future, Forestry Victoria would set reserve prices based on a range of factors including the competitively-neutral cost of production.
The establishment of Forestry Victoria, with a clear charter for efficient commercial management of commercial forestry on State forest, will encourage the greater use of market-based mechanisms for log allocation and pricing. However, it is important that this Service Agency has the appropriate flexibility to determine its own pricing and allocation policies in line with government policies and the need to foster the development and expansion of efficient, competitive forest industries. It will be in the interests of Forestry Victoria to undertake further work on the design of allocation and pricing mechanisms.”
In my opinion, the passages relied upon by the plaintiff do not, in context, take matters further than indicating an acceptance by the Government, as a long-term goal, that log pricing and allocation arrangements should become more market-based. Further, it appears that pricing and allocation policies were required to conform with Government policies which, as other policy development documents at this time show, were at least directed to and emphasised ecological sustainability and proper management of forestry resources as public resources as much as management and development for the benefit of forest industries. It also appears that even the establishment of Forestry Victoria with a charter for commercial management would not affect this position.
The evidence indicated a series of intra and inter-Departmental communications in relation to the process of transition from the then existing sawlog licence pricing and allocation policy to a more market-based policy. However, it is apparent that it was always within the general policy and responsibility of the Government to manage native forest resources sustainably. The latter is particularly clear from the facsimile transmission from Mr Michael James of the Economic Development Branch of the Department of Premier and Cabinet to Ms Norma Marshall and Mr Rod Grace of the Competition Policy Unit in the defendant’s Department. The transitional aspects of the proposed revised Victorian Native Forests Policy were emphasised in a Memorandum from Mr Gerard O’Neill, Executive Director, Forest Services Division of the Department, the defendant, to the Secretary dated February 1999. Under the heading “Adjustment”, the Memorandum posed the following questions:
“Is compensation appropriate?
Who should receive compensation, all licence holders or only those exiting the industry?
Who should fund compensation?”
Also attached to a later version of this document was a diagram with three headings: “Current Situation”, “Transition” and “Preferred Structure”. The diagram refers to the Government policy of developing auctions. The plaintiff submitted that Mr Pendrigh accepted in cross-examination that the proposal to develop an auction system is one of the type ultimately developed, and that he was aware of proposals of this nature at the time of this Memorandum, in February 1999. Mr Pendrigh also gave evidence that he would have seen a document for a presentation which was prepared on or about 26 May 1999 within the defendant, the Department. In a timeline contained in that document, the author contemplated that a transition phase would be in place until the full auction system was implemented in 2004, which the plaintiff submits is what occurred.
A more detailed memorandum along the same lines as the February 1999 memorandum from Mr O’Neill was prepared some months later. This was a memorandum from Mr Gary Stoneham and Mr Duncan Pendrigh to the Executive Director, Forest Services/Deputy Secretary Policy, dated 29 June 1999. The subject matter was “Native Timber Reform Timelines”. The plaintiff placed considerable reliance upon this document as indicating, particularly, Mr Pendrigh’s knowledge of the position with respect to sawlog allocation and licensing having regard to Mr Pendrigh being named as a co-author of this memorandum. In this respect, Mr Pendrigh’s evidence was, in substance, that this memorandum was part of the continuing policy development process with respect to sawlog allocation and licensing and did not represent a concluded position. Further, Mr Pendrigh gave evidence that he disagreed with the process of implementation of the auction system at the time, but whether this was the case is not, in my view, particularly significant when regard is had to the nature of the proposals contained in the 29 June 1999 Memorandum. Additionally, I do not take it to be suggested either by Mr Pendrigh in his evidence or by the defendant that Mr Pendrigh was not aware of the ongoing policy debate within the defendant’s Department and the Government as a whole in relation to the desirability of moving to a more market-based system for the allocation and licensing of sawlogs. What is clear from this 29 June 1999 Memorandum is that the implementation of any policy of this nature had not been finally settled. If and when any such policy was settled, the nature of any transitional arrangements would then need to be settled. Of most relevance in the present circumstances are the following parts of the summary of the proposal:
“5 Proposal summary
The following outlines of the proposal and timelines:
·Principles of an Auction System – The goal is to eventually replace all timber licences with a simultaneous sealed bid auction to replace current arrangements.
·Transition Phase
- Auction design – Auction system owned and operated by Forestry Victoria designed and implemented in 1999/2000.
- Timing of Introduction – Extend all licences until at least 2004 with no renewals after that date; use existing parcels and traded licences until licences cease in 2004.
- Industry Education – Forestry Victoria to develop an industry training and familiarisation program.
…”
The other significant policy document to which extensive reference was made during the course of the trial was to the State Government’s “Our Forests, Our Future” policy statement. Mr Pendrigh gave evidence that the initiation of the “Our Forests, Our Future” policy was not caused by the National Competition Policy or responses to that Policy. Nevertheless, in a letter from The Hon John Thwaites MP, Minister for Environment, to The Hon John Brumby MP, Treasurer of Victoria, dated 27 February 2003, the following statement appeared in relation to developments in the National Competition Review of the Forests Act:
“In February 2002 the Government released a major forests statement Our Forests, Our Future. This statement outlines significant reform in the area of forest management and industry directions, many of which will go a long way to addressing the recommendations of the KPMG report.”
It was also noted that the Government’s response would detail these commitments and that the response was to be completed in March 2003. The “Our Forests, Our Future” policy statement opened with observations that:[14]
“The new figures reveal that if logging licences were renewed at current levels our reserves of suitable timber could be exhausted by as early as 2011 in some areas.
In response, the Government is taking swift action to save our hardwood timber industry and give it a long-term sustainable future. Sawlog harvesting in State forests will be cut by about a third (31%).”
The introductory or background material contained in the policy statement also made reference to the most significant reductions in sawlog harvesting in East Gippsland, Central Gippsland and the Midlands.
[14]“Our Forests, Our Future” Policy Statement (February 2002), p 2.
More particularly, the “Our Forests, Our Future” policy statement made specific reference to the establishment of “VicForests” and to a new licensing and pricing system, in the following terms:[15]
[15]“Our Forests, Our Future” Policy Statement (February 2002), pp 3 and 4.
“VicForests – a New Commercial Entity
One of the main inhibitors to the restructure of the industry has been Government itself. Government is both the monopoly supplier of native forest timber and the environmental regulator. As a result of the inevitable conflicts of these dual roles, the management and protection of Victoria’s forests have suffered.
In accordance with our commitment to National Competition Policy principles, we are required to take into account ecological sustainable development, social welfare and equity considerations, economic and regional development and the efficient allocation of resources, in forming policy.
The National Competition Policy Review of the Forests Act 1958 pointed to the need to reinforce the separation between NRE’s commercial roles and its policy, monitoring and regulatory roles in forest management.
In addition, the data and the range of independent reviews commissioned by the Bracks Government make it very clear that current management arrangements are not suited to delivering the Government’s objectives for ecologically sustainable forest management. Substantial changes are required.
The creation of a separate commercial forest service entity, VicForests, will transparently disentangle the commercial objectives from the regulatory functions of Government.
…
A New Licensing and Pricing System
Long term (15 years) timber licences were struck in the 1980s and 1990s with a view to providing a viable investment horizon for value adding and the establishment of new markets. While some will not expire until later this decade, many are due to expire this year and in 2003.
While sections of the industry are seeking new 15 year licences, it is vital that licensing strategies are consistent with the latest sustainable yield/resource data and reflect the amount of timber available.
The independent Expert Data Reference Group chaired by Professor Jerry Vanclay has provided unequivocal advice that based on the best information available at present, the Government is not well placed to make long term commitments to industry.
We will not risk over-committing resources or over-cutting of our forests again. Where activities are not sustainable, they will not continue.
While sustainable yield is now better estimated, the Government will need the flexibility to adjust supply commitments either upwards or downwards as further refinement of resource estimates occurs. This flexibility is essential to secure the long-term future of the timber industry.
We will therefore issue a combination of new short and long-term (up to 10 year) licences and logging volumes will be regulated by on going assessments of the health of our forests.
It is also clear that sawlog prices paid to Government have not been set on a transparently commercial basis. Recent independent advice to Government suggests that the most appropriate means of ensuring a fair return to the State for resources supplied to the industry is to establish market-based prices by selling timber competitively.
The Government will:
·fund an Our Forests, Our Future package of up to $80 million, including assistance for affected workers and a voluntary licence reduction program.
·grant new short-term licences to companies whose licences expire in 2002 and 2003, while new allocation arrangements are established.
·in consultation with the industry and affected communities, develop regionally appropriate transitions to the new sustainable yields.
·in future, allocate timber on a mix of short term and long term supply arrangements.
·in consultation with the timber industry, phase in market-based sawlog pricing and allocation.
…”
Defendant’s licence renewal policy
There was significant attention given to the defendant’s licence renewal policy, particularly in light of ongoing developments in Victoria’s native forests policy.
The defendant submitted that even in the context of the ongoing developments in Victoria’s native forests policy, the policy with respect to the renewal of long-term licences, as applicable at all relevant times, was as set out in a memorandum from Mr Richard Rawson, Executive Director, Forests Service, to the Minister for Conservation and Land Management, dated 4 February 1998. The plaintiff argued that this Memorandum should not be accepted as evidence of the Department’s policy with respect to the renewal of timber licences because the Memorandum was not signed by the Secretary of the Department, the defendant, and nor was there evidence that the Secretary had approved the Memorandum. Mr Pendrigh gave evidence that the presence of the “Received 5 February 1998 Portfolio Coordination Unit” stamp indicated that the Memorandum had been received by that Unit and was on its way to the Minister’s office, though it had not then been signed by the Minister. Further, Mr Pendrigh said that the notation “CF/10/0001” on the Portfolio Coordination Unit stamp indicated that the Memorandum had come to his office and had been filed subsequent to the Portfolio Coordination Unit having finished with it. It appeared from Mr Pendrigh’s evidence that the process of submitting policy proposals for approval of the Minister did not necessarily involve any formal processing or signing by the Secretary of the Department, the defendant. On the basis of Mr Pendrigh’s evidence and the apparent processing of Mr Rawson’s Memorandum, I am satisfied that this Memorandum is to be taken as a statement of the approved policy of the defendant with respect to the renewal of long-term sawlog licences which was applicable at all relevant times in these proceedings.
The progress in the development and implementation of Victoria’s native forests policies has been examined in some detail. In my opinion, it is clear that even at the stage of the publication of the “Our Forests, Our Future” policy statement in February 2002, it would have to be said that the detail of the Government’s policy on the renewal of long-term sawlog licences was in a state of flux as the Government investigated the possible means of moving to a more market-priced and market-oriented policy with respect to the granting and renewal of sawlog licences. As indicated in a draft of the KPMG Review, it was anticipated that this process might be complex and, it seems, need to take place over a reasonably significant period of time.[16] In any event, Mr Pendrigh’s evidence was that the 4 February 1998 memorandum did represent Government policy and was to be acted upon. There was no evidence to suggest that either the Secretary of the Department, the defendant, or the Minister, disagreed with the contents of this memorandum. Additionally, the position adopted by the plaintiff with respect to the content and timing of its dealings with the defendant in relation to the renewal of the licence is consistent with the timing of the licence renewal processes applicable to a “standard” licence as described in the memorandum.
[16]See “KPMG NCP Review of the Forest Act – draft report” (6 February 1998), pp 5417-8.
The critical provisions of the 4 February 1998 memorandum were as follows:
“…
BACKGROUND
…
3.Most long-term licences have been issued for 15 years. While licences are not strictly renewable (the Forests Act requires that a new licence is issued), existing licences contain clauses that indicate renewal can be negotiated. Renewal of the ‘standard’ licence can be negotiated after 10 years. There are 52 ‘evergreen’ licences, and renewal of these licences can be negotiated after 5 years.
The relevant clause in a ‘standard’ licence is:
After the tenth year of this licence, the annual allocation will be reviewed for the period following expiry of the licence. The Director-General and the licensee may negotiate an agreed licence fee for the renewal of this licence. If agreement is not reached before the beginning of the fourteenth year of this licence, rights to a renewal licence will be put to public tender during such fourteenth year. The licensee will be given opportunity to match competing tenders.
and the relevant clause in an ‘evergreen’ licence is:
After the fifth year of this licence, the licensee may seek the renewal of the licence on the basis of firm proposals for new investments. The Director-General will review the allocation to ensure that it is consistent with the current legislated sustainable yield rates and negotiate with the licensee an agreed licence fee for the renewal of this licence. In the absence of new investment proposals the Director-General and licensee may negotiate a mutually agreed licence fee after the tenth year of the licence. If agreement is not reached before the beginning of the fourteenth year of this licence, rights to a renewal licence will be put to public tender during such fourteenth year. The licensee will be given opportunity to match competing tenders.
4.Most standard licences and many evergreen licences are now at the stage where renewal can be considered by the Department and the customer concerned.
ISSUES
5.The proposed approach to licence renewals is to be based on the following objectives and principles:
Objectives
· To provide longer term secure contracts to those companies which will make a dramatic change to the industry structure.
· To provide short term and relatively cheap licences to those who may wish to exit the industry, and to free up some resource which can be used to:
Øtest market prices
Øprovide management flexibility to cater for necessary supply adjustments.
· To provide at least a similar level of security as is presently available for the bulk of existing licensees, but to get away from ‘renewal’ of licences based on a judgement by NRE of what the licensee has done with the resource.
· To provide a consistent relationship between fees for different licences, so that different licensees are not disadvantaged by separate and unrelated adjustments to licence fees.
· To provide a flexible licence structure which allows the customer to move between various licence options.
Principles
· New licence fees are to be established once every five years commencing July 1998. The licence fees which are established remain fixed for the five year period concerned, rather than being linked to movements in royalty as they are now.
…
· Licences are to remain tradeable.
7.An incentive is to be offered to those licensees who may wish to exist the industry, by effectively buying out licences, through a reduction in licence fees and royalty, over a period of about 5 years. Any wood which becomes available through this process would be re-sold on short term licences. This will allow us to test market prices, and it will also provide flexibility for any necessary future wood supply adjustments.
…”
Representations
The representations relied upon by the plaintiff were contained in a letter dated 4 March 1998 from Mr Duncan Pendrigh, Acting Manager, Commercial Forestry, a section or division of the defendant’s Department. This letter was written at the request of Mr Gary Addison, the Managing Director of the plaintiff, as a result of a meeting with Mr Pendrigh. Omitting the formal parts, the letter contained only two sentences, as follows:
“I refer to our meeting of yesterday where we discussed the renewal of Monier’s licence number S000355.
I can guarantee, subject to agreement on price, that the holder of this licence will be offered a renewal licence for fifteen years with the same volume and log quality as shown on the current licence.”
The representations as pleaded were:
“(a)Subject to agreement on price, the holder of licence no. S0000355 under the Forests Act 1958 would be offered a renewal licence for 15 years with the same volume and log quality (‘the first representation’); and
(b)The Department, the defendant, could guarantee that, subject to agreement on price, the holder of licence no. S000355 under the Forests Act 1958 would be offered a renewal licence for 15 years with the same volume and log quality (‘the second representation’).”
The plaintiff further pleaded that the first representation was made with respect to future matters and that the defendant did not have reasonable grounds for making that representation.
The defendant relied upon the following:
(a)the operation of s 52(6)(a) and (b) of the Forests Act;
(b)the fact that the subsequent changes to the licensing procedure brought about by the introduction of the Sustainable Forests (Timber) Act 2004 (Vic) were not, and could not have been, known to the defendant until early 2002;
(c)the assessment of forest resource in East Gippsland management area of February 1997;
(d)the defendant’s alleged policy and intention to renew long-term sawlog licences with the same annual allocation or volume; and
(e)the fact that the defendant supported renewal of licences to licensees who entered into value adding activities.
Returning to the plaintiff’s position, one of its principal arguments was that the defendant had no reasonable grounds for making the first representation. In this respect, the plaintiff relied upon the operation of ss 51A, 52, 82(1) and 87 of the TPA. The plaintiff relied upon the following parts of these provisions:
“51A(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
…
For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have reasonable grounds for making the representations.
52(1)A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
…
82(1)a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 5lAC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
…
87(1)Subject to subsection (1AA) but without limiting the generality of section 80, where, in a proceeding instituted under this Part, or for an offence against section 44ZZRF or 44ZZRG or Part VC, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IV, IVA, IVB, V or VC, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 82, 86C, 86D or 86E, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first‑mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage.”
The plaintiff submitted that ss 82(1) and 87 of the TPA provided its cause of action by reference to the norm of conduct provided for in s 52. Section 51A, an evidentiary and deeming provision, operates to caste the burden of proof upon a defendant who has made a representation about a future matter to prove that it had reasonable grounds for making that representation.[17] The position under s 52 without the operation of s 51A was stated by the Federal Court[18] in Global Sportsman Pty Ltd v Mirror Newspapers Ltd:[19]
“The non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor’s intention lacked any, or any adequate, foundation. Similarly, that a prediction proves inaccurate does not of itself establish that the maker of the prediction did not believe that it would eventuate or that the belief lacked any, or any adequate, foundation.
… An expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps that there is basis for the opinion. At least if those conditions are met, an expression of opinion, however erroneous, misrepresents nothing.”
[17]Ting v Blanche (1993) 118 ALR 543 at 552, per Hill J.
[18]Bowen CJ, Lockhart and Fitzgerald JJ.
[19](1984) 2 FCR 82 at 88.
Section 51A of the TPA does not introduce a rule of law that a promise which is not performed or a prediction which is not fulfilled is thereby misleading or deceptive. Section 51A operates to require the conduct of the representor, if established, to be treated as misleading or deceptive in the absence of reasonable grounds for the making of that statement. In other words, the provisions of s 51A have an adjectival operation which casts the evidentiary burden upon the representor in the absence of reasonable grounds being established, and supports it with a powerful deeming provision.[20]
[20]Fubilan Catering Services Limited v Compass Group (Australia) Pty Ltd [2007] FCA 1205 at [546]-[547].
The plaintiff relied upon the knowledge of the defendant and its officers with respect to the development and implementation of Victoria’s native forests policy between 1992 and 8 May 1998 when Mr Grace of the Competition Policy Unit of the Department sent an email to Mr Tony Bartlet, both also Departmental officers, and Mr Pendrigh with respect to the Government response to the KPMG Review of the Forests Act. In that email, he expressed the view that the Government response to the KPMG Report would not involve an overwhelming amount of work, given that there were “no surprises in the review report and you seem to be clear on the direction in which the Forests Services is heading”.[21] The plaintiff’s submission was that the work that was being undertaken by the defendant in relation to the NCP Review and the review of the Forests Act, which has already been examined in some detail,[22] indicated that the defendant was, at all relevant times, aware of significant impending changes in Victorian Government policy in relation to native forests. Consequently, it was said, an officer in Mr Pendrigh’s position could not reasonably give any assurance to the plaintiff that the timber licence for the Orbost Mill would be renewed for 15 years with the same volume and log quality. Additionally, the plaintiff argued that the knowledge of Mr Pendrigh, as an individual officer, was not of itself decisive as the authorities established that relevant knowledge on the part of the defendant extended to include all the broader corporate knowledge within the operation of the defendant’s Department.
[21]See above, paragraphs 29 and 30.
[22]See above, beginning at paragraph 19.
In response, the defendant emphasised that sub-s 51A(2) of the TPA does not operate as a deeming position if evidence is adduced by a representor to the effect that the representor had reasonable grounds for making the representation.[23] It was submitted that where the representor adduces such evidence, it is then a matter for the Court to determine, on the balance of probabilities in the ordinary way, whether or not the representor had reasonable grounds for making the representation (with the onus resting on the plaintiff in the usual way).[24]
[23]Referring also to s 4 of the Fair Trading Act1999 (Vic) which, it was submitted, is to the same effect.
[24]See Fubilan Catering Services Limited v Compass Group (Australia) Pty Limited [2007] FCA 1205 at [545] (per French J). The Full Federal Court dismissed an appeal from French J’s decision: Fubilan Catering Services Ltd (Incorporated in PNG) v Compass Group (Australia) Pty Ltd [2008] FCAFC 53.
In particular, the defendant submitted that s 51A requires the representor to show:
(a)some facts or circumstances;
(b)existing at the time of the representation;
(c)on which the representor in fact relied;
(d)which are objectively reasonable; and
(e)which support the representation made.[25]
[25]Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513.
In determining whether a person had reasonable grounds for expressing an opinion or making a prediction as to a future matter, it is necessary to judge the matter as at the date of representation.[26] This does not, however, preclude the examination of evidence of later events which may cast light upon the overall probabilities, which in certain circumstances may offer the most reliable guidance. Nevertheless, the test is one of reasonableness and “[i]t remains vital to guard against hindsight illusion”.[27]
[26]City of Botany Bay Council v Jazabas Pty Limited [2001] NSWCA 94 at [83] per Mason P citing Lyndel Nominees Pty Ltd v Mobil Oil Australia Ltd (1997) 37 IPR 599, Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513.
[27]City of Botany Bay Council v Jazabas Pty Limited [2001] NSWCA 94 at [83] per Mason P.
The defendant submitted that the following evidence provided proof of reasonable grounds, which existed at the time of the statements made by Mr Pendrigh contained in the letter dated 4 March 1998; which was relied upon by the plaintiff as containing both the first and the second pleaded representations. The defendant submitted that this evidence established that the contents of that letter, the alleged representations or statements, were objectively reasonable and that the evidence supported the representation that was made:
(a)Government policy at the time was for renewal of long-term licences with the same volume and grade of timber, with some allowance for market prices to be applied to set the licence fee for long-term licences. That policy was set out in the memorandum by the Executive Director, Mr Richard Rawson, dated 4 February 1998, which appears to have been approved by the Minister.[28] This was, as submitted by the defendant, in accordance with the Victorian Timber Industry Strategy of 1986.[29]
[28]See above, paragraph 36.
[29]Report titled “Victoria Timber Industry Strategy” (August 1986).
(b)It was submitted that the Court should find that Mr Pendrigh received and saw the Renewal Policy at the time, from the file markings on the document, as discussed previously.[30] In this respect it was noted that Mr Pendrigh’s evidence was that:
[30]See above, paragraph 36.
“I know that I would not have written the March letter to Gary Addison unless I could be certain that the Minister would sign off on a 15 year licence because I knew the extent of my delegation and for the delegation to be exercised through – for the licence to be issued Governor-in-Council would have to approve it and Governor-in-Council would have to have the Minister sign off on the request …”.
(c)The Renewal Policy represented the conclusion of the defendant’s review of the licence renewal policy, which had been conducted by Mr Pendrigh himself in 1997 and also in 1998. Mr Pendrigh’s licence renewal paper, which formed the basis of the Renewal Policy, had a common theme which was “to continue to provide long term security to licencees [sic], so renewed licences to [sic] encourage continued value adding, but to also establish some shorter term licences to enable us to have a market price which could be applied to royalties across the licences”.
(d)Mr Pendrigh’s evidence was that he expected the negotiations with the Victorian Association of Forest Industries (“VAFI”) to conclude within 6 to 12 months and in accordance with the Renewal Policy. The Renewal Policy was presented to the industry body, VAFI, at the start of the licence renewal negotiations which were held in late May 1998. In relation to timing, Mr Pendrigh said in his oral evidence:
“Do you recall writing the letter, Mr Pendrigh?---I do.
What was your expectation at the time of writing the letter as to when the renewal licences would be offered?---I expected to be able to offer renewal licence during 1998/1999.
Do you mean by that a financial year?---That’s right. So between 1 July 1998 and 30 June 1999.
Why did you hold that expectation?---Because I expected to be able to settle the negotiation with the industry about the terms of the new contracts, so a standard format contract within the calendar year.”
(e)In that regard, Mr Pendrigh’s expectation was borne out in the short-term, with negotiations commencing towards the end of May 1998. However, the negotiations became “drawn out” after significant differences arose as to terms and conditions, and persisted into late 2000; and
(f)The East Gippsland Regional Forest Agreement established an agreement between the Commonwealth and the State of Victoria which ended with a 20-year undertaking to manage the forests in a specific way and to map the areas that were either reserved or available for timber production.
In the course of his evidence, Mr Pendrigh said that he relied on the matters outlined above in making the statement in the 4 March 1998 letter. In particular, he said:
“Can you explain why you were in a position to make that statement in the second paragraph of that letter?---There was [sic] two principal reasons. First was that I believed that the Minister - if we went to issue a 15 year licence in the near future the Minister would sign that on the way to Governor-in-Council because the policy was established and the information on the policy was on the - contained in the memo of 4 February.
Do you mean the memorandum signed by Mr Rawson?---That’s correct. Secondly, the forests in East Gippsland – for East Gippsland were subject to a regional forest agreement that had been signed in 1997 and without the RFA we couldn’t be certain that we would be able to continue to supply the volumes necessarily at the levels we were at that time so we would have had to have waited for an RFA before writing such a letter, notwithstanding the policy.”
The plaintiff submitted that the defendant was engaged in a competition policy review and that as part of that review, KPMG had recommended a change to the system of licences, including the abolition and non-renewal of existing licences and the sale of sawlogs by auction or by tender to the public. It was submitted by the defendant that the crux of the plaintiff’s submission was that this recommendation created “uncertainty” regarding renewal of long-term licences. However, the defendant submitted that there was no relevant uncertainty which might go to establish that the making of the statements by Mr Pendrigh in the 4 March 1998 letter were made without reasonable grounds. The points relied upon by the defendant in this respect were as follows:
(a)Mr Pendrigh was aware of the review of the Forests Act and was “incidentally” involved. He was aware of what KPMG was recommending at the time he wrote the final draft of the licence renewal paper in mid-January, which formed the basis of the Renewal Policy.
(b)The recommendations of KPMG did not have to be accepted by the Secretary and could be accepted or rejected.
(c)The recommendations made by KPMG in April 1998 were not accepted by the Kennett Government in its formal response of May 1999, particularly in relation to allocation and pricing, and regarding KPMG's pricing analysis.
(d)This reflected the fact that the political situation in 1997 and 1998 was such that the Kennett Government “weren’t keen on initiating those reforms at that time. I think they were going to wait for the next election before they moved”. The reason “was of a political nature in that the Kennett Government was concerned about its reputation in regional Victoria and wanted to do the best it could to improve its standing in regional Victoria and upsetting a very important rural and regional industry or having reforms coming through at that time weren’t seen to be politically wise”.
(e)Mr Pendrigh was aware of the issues surrounding pricing of timber at the time of writing the March 1998 Letter. His evidence was that the DSE was “looking at setting a differential licence fee. So a licence that went for longer and could be renewed more frequently would attract a higher licence fee than one that was of a shorter duration or couldn’t be renewed as often. That was the general plan” and the DSE had a “very clear market signal about the value of these licences in the marketplace because the licences were tradable and there had been about 80 trades or thereabouts at 1997 and 1998”.
(f)The Renewal Policy was therefore not inconsistent with the overall recommendation in the KPMG Report, because it provided for the introduction of an approach that allowed the DSE to test market prices and set royalty rates in accordance with, or taking account of, those prices. Mr Pendrigh said:
“My response is that we felt that the policy set out in the Rawson memo of 4 February responded to the competition policy in a way that we felt would make us compliant from a range of perspectives. So if you look at the first sentence under 9.2.2.2 on 5434: ‘We recommend that DNRE’s administered allocation and pricing policy in relation to logs be changed to a more market based determination of log prices’; ‘to a more market based’ approach, not a fully market based approach. So that’s what we were doing.”
(g)Mr Pendrigh was aware that the DSE wanted to secure increased returns from sawlog licensing and that no price could be stated until negotiations with the industry were complete. This explained his choice of the words “subject to price” in the March 1998 letter.
(h)The “Our Forests, Our Future” policy was not the result of the National Competition Policy. The reforms that eventuated in the devolution of the commercial branch of the Forests Service Division were not the result of the KPMG Review. As has been mentioned, such reform was not supported by the Kennett Government at the time Mr Pendrigh wrote the March 1998 letter.
(i)Even in 1999, the policy had not changed.
(j)To the extent that the KPMG Report recommended a market-based pricing system, this did not affect the status of the Renewal Policy or Mr Pendrigh’s other grounds for making a representation as to a 15-year renewal (compared to royalties or fees levied for the same) because the March 1998 Letter expressly carved out “price” from any assurance.
Consequently, the defendant submitted that whatever options might have existed with respect to the review of the Forests Act or competition reform, the Renewal Policy was the Minister’s policy at the date when Mr Pendrigh wrote the letter of 4 March 1998. Thus, the defendant submitted, Mr Pendrigh was reasonably entitled, indeed, expected, to rely on that policy and to implement it.
More generally, it was submitted that in the present context, each case turns on its own particular facts. Nevertheless, it was submitted that the City of Botany Bay Council v Jazabas Pty Limited[31] was an analogous and helpful decision of the New South Wales Court of Appeal. In that case, the plaintiff was interested in purchasing a site for development and sought assurance from the Council regarding development approval. The Council’s Director of Planning and Environment, Ms Cuthbert, told the Plaintiff (in 1993) that she did not believe the company would have a problem in obtaining such approval. Later events revealed that there would have been problems with obtaining approval if the Council had given effect to the recommendation of the Department of Environment and Planning’s “Risk Assessment Study” (RAS).[32] The plaintiff brought a claim for misleading and deceptive conduct, negligence, and estoppel. The observations of Mason P in respect of reasonable grounds (s 51A of the TPA) are apt (at [96], Beazley JA agreeing at [105]):
“It may well be the case that (as a matter of environmental law) the Council ought to have had a greater regard to the RAS, the risks it highlighted, and the recommended risk reduction zone at all times since 1985. But it was not legally bound to give effect to the Department’s views expressed in the RAS, but not translated into prescriptive requirements. And it did not do so, as a matter of policy or practice, until late 1996. Mrs Cuthbert was asked to predict the likelihood of development approval issuing and she did so, carefully and correctly. The material she had at hand and upon which I infer she relied meant that such prediction was reasonably based.”
[197]See s 5.
Consequently, the significance of the licensing activities of the Commercial Forestry Branch of the defendant must be assessed in this broader context, including the other regulatory and policy-making activities of the defendant. I accept that even if the activities of the Commercial Forestry Branch are properly described as “trading activities”, these do not form a “significant or substantial part” of the defendant’s activities. The Annual Report for the 1997-1998 financial year to which reference has been made was presented to the Minister and tabled in Parliament pursuant to ss 53 and 53A of the Financial Management Act1994 (Vic). It follows that reports of this nature form an important part of the transparency and accountability of the defendant to the Government and, ultimately, the people of Victoria through the Victorian Parliament. Additionally, the Auditor-General of Victoria reviews financial statements of this nature to determine whether the State’s public bodies are achieving their objectives effectively and are doing so economically and efficiently and in compliance with all relevant Acts.[198]
[198]See Audit Act1994 (Vic), s 1.
The defendant submitted that the annual reports of the defendant are not decisive of the nature of the activities of the defendant and, consequently, whether the defendant is to be regarded as a “trading corporation”. Reference was made to Mr Pendrigh’s evidence in cross-examination that the Commercial Forestry Branch produced “fictional profit and loss” statements which “had no bearing on the way appropriations and revenues were dealt with”.[199] The defendant also submitted that statements within the annual reports emphasising the functioning of the defendant in a “businesslike” manner are also not decisive. Conducting an activity in a businesslike way does not, in itself, mean that the activity is “trading” in the requisite sense. Indeed, the defendant submitted that it would be surprising if the defendant would not conduct its activities in a businesslike manner.[200] In this respect, reference was made to the comments of Buddin J in Knevitt v Commonwealth of Australia.[201] In that case, it was concluded that the Electronic Weapons Systems Division of the Defence Material Organisation in the Commonwealth Defence Department was not “carrying on a business” for the purpose of section 2A of the TPA. Buddin J said:[202]
“In today’s world it would not be acceptable for any public instrumentality to conduct its activities in a fashion that was other than ‘business-like’ regardless of whether or not it was a ‘separate business unit’.”
[199]Transcript p 561.
[200]And see Environment East Gippsland Inc v VicForests [2010] VSC 335 (Osborn J; 1 August 2010):
[201][2009] NSWSC 1341.
[202][2009] NSWSC 1341, at [56].
The defendant also noted that it had been doubted that the concept of “trading” extends to the provision of service under a statutory obligation to fix a fee the liability of which appears to be statutory. Thus, in Quickenden v Commissioner O’Connor of the Australian Industrial Relations Commission,[203] Black CJ and French J said that it was “questionable” whether the provision of educational services by a University within a statutory framework amounted to “trading” (in the context of considering whether the University of Western Australia was a “trading corporation” for the purposes of the Workplace Relations Act 1996 (Cth)). Their Honours stated:[204]
“The [Higher Education Funding Act 1988 (Cth)] creates a liability for each student to the University in respect of each course of study undertaken in a semester. The amount is not fixed by the University but rather by the Minister under published guidelines. The concept of “trading” is a broad one. It is doubtful, however, that it extends to the provision of services under a statutory obligation to fix a fee determined by law and the liability for which, on the part of the student, appears to be statutory.”
[203](2001) 109 FCR 243.
[204](2001) 109 FCR 243 at [56].
The defendant also submitted that the charging of a licence fee or royalties for the removal of timber from State forests pursuant to the Forests Act, in force at the relevant time, is not to be seen as “trading”. Reference was made to the following provisions of that Act at that time:
(a)Section 5(1)(c) provided that the Secretary has exclusive control and management of the collection and recovery of royalties and charges under the Act in respect of licences.
(b)Section 21(1) provided that, subject to the Act, the Secretary may permit the taking of timber or other forest produce at not less than such minimum rates or amounts as were prescribed by or under the Act (section 21(1)(a)).
(c)Section 99(2) provided for the Governor-in-Council to make regulations not inconsistent with the provisions of the Act for the purpose of prescribing the rate or amount of rentals, royalties, fees, dues and charges payable in respect of any licence.
(d)Section 51(2) provided, inter alia, that the Secretary could grant a licence for the removal of timber subject to the payment of any fees, royalties or charges that the Secretary may determine.
On the basis of these submissions of the defendant, which I accept, when the activities of the defendant are considered as a whole, any “trading” activities do not “form a sufficiently significant proportion of its overall activities to merit its description as a trading corporation”. Alternatively, an evaluation of the extent of any “trading activities” against the totality of the defendant’s activities demonstrates that the former are not so significant to give the defendant “the character of a trading corporation”. The role of the defendant insofar as it concerns commercial activity is primarily to regulate that activity rather than to engage in it. It follows, on this basis the provisions of s 52 do not apply to the defendant, whether or not their operation would otherwise have been attracted.
Defences under the Forests Act
Prior to its repeal by the Sustainable Forests (Timber) Act2004 (Vic), paragraphs 52(6)(a) and (b) of the Forests Act provided that:
“52. Licences and permits with respect to forests
…
(6)(a) The Director-General [the Secretary] may in writing inform any person who holds a licence or permit under this section to cut and remove trees and timber for saw-milling purposes of the period (not exceeding twenty-one years) for which the Director-General [the Secretary] will grant him further licences or permits for the same purpose.
(b)The Director-General [the Secretary] shall not by reason of having given information pursuant to this sub-section be bound to grant a further licence or permit to cut and remove any particular volume or quantity of trees or timber.”
The Sustainable Forests (Timber) Act2004 (Vic) was assented to on 16 June 2004. That Act repealed s 52(6) of the Forests Act and extinguished any rights, entitlement or purported rights in existence before that repeal, and precluded proceedings being taken in respect of any loss, damage or injury arising out of that extinguishment.[205] Section 27 of the Act meant that the plaintiff’s licence expired at the end of its term (as existing immediately before the commencement of that section). It further meant that the plaintiff was not entitled to have such licence renewed or reissued, whether any entitlement, right or purported right to do so may have arisen in respect of that licence under section 52(6) or in any other manner.[206]
[205]Section 107 (which repealed section 52(6) of the Forests Act) and section 108 (which inserted section 52AA into the Forests Act), both came into operation the day after the Act received the Royal Assent (that is, on 17 June 2004) pursuant to section 2(1).
[206]Sections 27 and 34 came into operation on 1 August 2004: Government Gazette 29 July 2004 page 2120.
The relevant provisions of the 2004 Act are as follows:
“Section 27, Sustainable Forests (Timber) Act 2004 (Vic):
On and from the commencement of section 25,[207] a transferred licence (east)[208] expires at the end of its term (as existing immediately before the commencement of that section) and, despite anything to the contrary in that licence or section 52(6) of the Forests Act 1958 as in force immediately before its repeal—
[207] Section 25 came into operation on 1 August 2004: Government Gazette 29 July 2004 page 2120.
[208]Auswest’s licence was declared a transferred licence (east) on 1 August 2004: Special Government Gazette No. S179, 1 August 2004.
(a) VicForests is not empowered to renew or reissue any transferred licence (east) or grant any further licences or permits in relation to that licence; and
(b) any entitlement, right or purported right in existence before that commencement in respect of the granting of any further licence or permit under section 52(6) of the Forests Act 1958 as in force immediately before its repeal ceases to exist; and
(c) the holder of a transferred licence (east) is not entitled to have that licence renewed or reissued, whether any entitlement, right or purported right to do so in respect of that licence arose under section 52(6), a term or condition of that licence or in any other manner; and
(d) no proceedings may be taken—
(i) in respect of any loss, damage or injury from or arising out of—
(A) the loss of any entitlement, right or purported right referred to in paragraph (b) or (c); or
(B) the enactment of this Division; or
(ii) to seek a renewal, reissue of a transferred licence (east) or the grant of any further licences or permits in relation to that licence, whether arising out of an entitlement or a right or purported right to do so under section 52(6), a term or condition of that licence or in any other manner; and
(e) no compensation is payable in respect of any loss, damage or injury from or arising out of—
(i) the loss of any entitlement, right or purported right referred to in paragraph (b) or (c); or
(ii) the enactment of this Division.
Section 34, Sustainable Forests (Timber) Act 2004 (Vic):
Nothing effected or to be effected by this Part or done or suffered under this Part —
(a) is to be regarded as placing any person in breach of contract or confidence or as otherwise making any person guilty of a civil wrong; or
(b) is to be regarded as placing any person in breach of, or as constituting a default under, any Act or other law or obligation or any provision in any agreement, arrangement or understanding including, but not limited to, any provision or obligation prohibiting, restricting or regulating the assignment, transfer, sale or disposal of any property or the disclosure of any information; or
(c) is to be regarded as fulfilling any condition that allows a person to exercise a power, right or remedy in respect of or to terminate any agreement or obligation ...
Section 52AA, Forests Act 1958 (Vic):
On the repeal of section 52(6) by section 107 of the Sustainable Forests(Timber) Act 2004 —
(a) despite anything to the contrary in section 14 of the Interpretation of Legislation Act 1984, any entitlement, right or purported right in existence immediately before that repeal in respect of the granting of any further licence or permit for a licence or permit of a kind referred to in section 52(6) as in force immediately before its repeal ceases to exist; and
(b) the holder of a licence or permit of a kind referred to in section 52(6) is not entitled to have that licence or permit renewed or reissued, whether any entitlement, right or purported right to do so arose under section 52(6), a term or condition of the licence or permit or in any other manner; and
(c) no proceedings may be taken—
(i) in respect of any loss, damage or injury resulting from or arising out of—
(A) the loss of any entitlement, right or purported right referred to in paragraph (a) or (b); or
(B) the enactment of this section; or
(ii) to seek a renewal, reissue or grant of a licence or permit, whether arising under any entitlement, right or purported right to do so under section 52(6), a term or condition of the licence or permit or in any other manner; and
(d) no compensation is payable in respect of any loss, damage or injury resulting from or arising out of —
(i) the loss of any entitlement, right or purported right referred to in paragraph (a) or (b); or
(ii) the enactment of this section.
[emphasis added].”
I accept that ss 27 and 52AA of the Sustainable Forests (Timber) Act2004 (Vic) are “cascading” in effect. In my opinion, a plain reading of the relevant parts of those provisions may, as the defendant submitted, be summarised as follows:
(a)Each transferred licence (east) expired at the end of its term as that term existed immediately before 1 August 2004 (section 27);
(b)the holder of such a licence was not entitled to have that licence renewed or reissued, whether such entitlement, right or purported right arose under section 52(6) or a term or condition of the licence “or in any other manner” (licence bar) (s 27(c)/s 52AA(b));
(c)the licence-holder is not permitted to bring proceedings in respect of any loss, damage or injury from or arising out of the loss of any entitlement, right or purported right referred to in the licence bar (proceedings bar) (s 27(d)(i)(A)/s 52AA(c)); and
(d)no compensation is payable in respect of any loss, damage or injury from or arising out of the loss of any entitlement, right or purported right referred to in the proceedings bar (compensation bar) (s 27(e)(i)/s 52AA(d)).
In relation to sub-s 52(6), the defendant submitted that it was relevant that on 2 December 1997, Monier wrote to the defendant’s Department stating “We are having discussions with Messrs Geoff Squires and Gary Addison about the future of our Orbost sawmill and sawlog licence [sic]” and authorised the defendant to “release information” to Mr Squires and Mr Addison. Mr Addison’s evidence was that he saw that letter at the time. Mr Pendrigh’s evidence was that if a third party approached the Department with an inquiry about a licence, formal release was always sought from the licensee to provide information to that third party. He said that the letter of 2 December 1997 was the kind of letter to which he was referring in this respect.
Consequently, the defendant submitted that the 4 March 1998 letter should be treated as an exercise of the power conferred by sub-s 52(6) of the Forests Act before its repeal by the Sustainable Forests (Timber) Act2004 (Vic). In any event, the defendant submitted, even if sub-s 52(6) did not apply, the words of s 27(c) (and s 52AA(b)) of the Sustainable Forests (Timber) Act2004 (Vic) are broad enough to include any entitlement, right or purported right, whether such right “arose under s 52(6) … or in any other manner”.
The defendant submitted that these matters should be applied to the factual circumstances of this matter, as follows:
(a) The plaintiff’s licence S000484 expired at the end of its term on 30 June 2003;
(b)The plaintiff was not entitled to have the licence renewed or reissued, including where that entitlement, right or purported right arose under the March 1998 Letter (that is, “under section 52(6) ... or in any other manner”);
(c)The plaintiff is not permitted to take proceedings in respect of any loss, damage or injury from or arising out of the “licence bar” (as described in the preceding paragraph); and
(d)No compensation is payable to the plaintiff in respect of any loss, damage or injury from or arising out of the proceedings bar (as described in the aforementioned paragraph).
The defendant noted that there appear to be no cases in which the relevant provisions have been judicially considered. However, the defendant submitted that the Second Reading Speech of the Sustainable Forests (Timber) Bill sheds light on the manner in which the provision was intended to operate and assists in discerning Parliament’s intention. That intention was, the defendant submitted, to ensure that no proceedings or claims could be brought in respect of the failure to renew a licence granted under the previous system:[209]
“The Government supports a sustainable timber harvesting industry, and VicForests will continue to meet the terms of existing licence commitments to current licence-holders for the remainder of their current licence periods. In line with its functions, VicForests will then progressively move to new commercial arrangements of its own making. Beyond meeting these existing commitments the government does not wish VicForests to be hampered with questions about any ongoing obligation to further extend licences. Any ongoing question about the renewal or reissue of licences under the current provisions of the Forests Act will jeopardise this key element of the reforms. The government is firm about the introduction of a new system for the pricing and sale of timber resources. The government wishes the licensing system to end in a clear and orderly manner, and it wishes to provide VicForests with a clean slate for its new system.” [emphasis added]
[209]Hansard, Legislative Assembly, 13 May 2004, 1330 at 1332 (Minister for Agriculture on behalf of the Minister for Environment).
Finally, it was submitted that the words “in respect of” and “arising out of” in each of the relevant sub-paragraphs of s 27 (and s 52AA) of the Sustainable Forests (Timber) Act2004 (Vic) are sufficiently wide enough to encompass, either expressly or by necessary implication, claims for relief which are brought under the machinery of the FTA. The defendant submitted that such an interpretation is necessary to address the mischief which Parliament intended to address.[210] The defendant further submitted that any other reading would allow the provisions to be usually circumvented by claims (such as by the plaintiff), which effectively seek compensation for non-renewal of a licence.
[210]CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408.
The plaintiff submitted that insofar as s 56 of the Forests Act, prior to its repeal, purported to permit the making of the representations or to bar the plaintiff from seeking relief by reason of the making of the representations, these provisions were not applicable because, at the relevant time, the plaintiff was not a person who holds a licence or permit “within the meaning of s 56”.
In my opinion, this is an artificially narrow interpretation of the operation of the provisions of sub-s 56(6). At the very least, its provisions should extend to apply to representations made to a person such as the plaintiff, who was, in a real and commercial sense, to be regarded as an agent of Monier, the licence holder, or a successor in title to the licence holder. As was clear from the terms of the 2 December 1997 letter and the evidence of Mr Addison and Mr Pendrigh, this position was known to all parties, the plaintiff and the defendant, at the relevant time. The plaintiff’s interpretation of the provisions of sub-s 56(6) would, in my view, substantially constrain the operation of these provisions in what is likely to be the very situation in which information with respect to the grant of further licences or permits might have been expected to be requested from the defendant (or its predecessor). In any event, it appears at least as likely that potential licensees should seek these assurances from the defendant and, as the apparent purpose of these provisions is to protect the defendant in the provision of such information, such a limitation would appear to be contrary to the purpose of those provisions and lead to an anomalous result.[211]
[211]Pearce and Geddes, Statutory Interpretation of Australia (6th ed, Lexis Nexis, 2006), 27-29, [2.5]; and see also 58-61, [2.34].
As the defendant submitted,[212] , a purposive interpretation should be adopted.[213] The Second Reading Speech of the Sustainable Forests (Timber) Bill, given on 13 May 2004, by Mr Cameron, Minister for Agriculture, said that s 52AA of the Forests Act (inserted via clause 108 of the Bill), “operates in a similar way” to clauses 27 and 30 of the Bill and:
“takes away any entitlement, right or purported right of a holder of a licence or permit referred to in section 52(6) to have their licence or permit renewed or reissued.
The proposed section further provides that no proceedings may be taken in respect of any loss, damage or injury from or arising out of the loss of such an entitlement, right or purported right or as a result of the enactment of that section, and that no compensation is payable in respect of any loss, damage or injury from or arising out of the loss of any such entitlement, right or purported right, or as a result of the enactment of the section.”
The Government’s intention was also made abundantly clear, and supports a wider interpretation of the provisions, in that part of Mr Cameron’s Second Reading Speech, to which reference has already been made.[214]
[212]See paragraph i. of the defendant’s supplementary closing submissions, dated 22 June 2010.
[213]Kelly v The Queen (2004) 218 CLR 216 at [97]-[98]; Bropho v Western Australian (1990) 171 CLR 1 at 20; and see s 35(a) Interpretation of Legislation Act 1984 (Vic).
[214]See above, paragraph 179.
The plaintiff referred in its submissions to a pleading by the defendant that paragraphs 52(6)(a) and (b) formed a basis for the defendant having “reasonable grounds” for making a representation with respect to a future matter. It was submitted by the plaintiff that the operation of ss 52(6) could not in any way serve as the basis of any defence to the plaintiff’s claims under the provisions of the TPA by reason of the operation of s 109 of the Commonwealth of Australia Constitution Act, which provides that “when a law of a State is inconsistent with the law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid”. It was submitted that the High Court has interpreted the operation of s 109 as follows:
“[W]hen a State Law, if valid, would alter, impair or detract from the operation of the law of the Commonwealth Parliament, then to that extent it is invalid”.[215]
[215]Victoria v the Commonwealth (1937) 58 CLR 618 at 630, per Dixon J; see more recently, APLA v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 354- 355 per Gleeson CJ and Heydon J, at 425-426 per Kirby J, at 486-489 per Callinan J.
In my opinion, the plaintiff’s position with respect to the operation of the relevant provisions of the Forests Act and also the provisions of the Sustainable Forests (Timber) Act2004 (Vic) vis-à-vis the TPA is clearly correct. Consequently, any liability which the defendant might otherwise have had under the provisions of the TPA is not affected by the provisions of this State legislation. The position is, as indicated previously, otherwise with respect to the operation of the State FTA. Nonetheless, the Forests Act provisions prevail as specific rather than general legislative provisions. That is, to the extent that it might be said that the FTA provisions, as subsequent legislation, affect the operation of previously enacted provisions of the Forests Act, I am of the view that the FTA provisions are provisions of a general nature, and ought not to be interpreted to affect the specific provisions of the Forests Act.[216] In any event, if any repeal occurred, it would not retrospectively affect any rights of parties or the position subsisting ‘between parties’, as a result of the operation of any earlier provisions of the Forests Act.[217]
[216]See Goodwin v Phillips (1908) 7 CLR 1 at 14 (O’Connor J); and see Pearce and Geddes, above n 211, 257-8 [7.18].
[217]See Interpretation of Legislation Act 1984 (Vic) ss 14 to 16; and see Pearce and Geddes, above n 211, 200-202 [6.7] and [6.8].
Limitation of actions
The defendant claimed that the plaintiff’s action was time-barred by virtue of sub-s 82(2) of the TPA, sub-s 159(3) of the FTA and also under sub-s 5(1) of the Limitation of Actions Act1958 (Vic). The plaintiff, on the other hand, argued that none of these limitation periods had expired as to prevent its bringing this proceeding. In particular, the plaintiff submitted that the cause of action does not accrue under s 82 of the TPA until the event occasioned by loss or damage occurs. More particularly, the plaintiff submitted that the damage which it claims to have suffered arose as a result of a hidden contingency which may or may not ever have occurred after 1998, depending upon whether the defendant exercised a discretion to renew the licence or not. The plaintiff submitted that it was when events took a course of non-renewal of the licence that the damage was suffered. The defendant, on the other hand, says that the loss and damage claimed occurred immediately upon the purchase of the Orbost Mill sawmill business.
Having regard to the view I have taken in relation to the issues considered, it is not now necessary to pursue and resolve these limitation of actions arguments.
Conclusions and orders
For the preceding reasons, the plaintiff has failed to establish that the representations which it claims were made to it by the defendant constituted a breach of the provisions of either s 52 of the TPA or s 9 of the FTA. In relation to both pieces of legislation, the representations did not, in my view, amount to misleading or deceptive conduct and they were not, in any event, made in “trade or commerce”. In relation to the TPA, the defendant is not subject to the provisions of s 52 or any of the related provisions because it is part of the Crown in right of the State of Victoria and, in any event, is not a “trading corporation” as defined in that Act. In relation to the FTA, its provisions do not apply because, even in the event that the representations had been found to amount to misleading or deceptive conduct under the provisions of s 9, they were not made in “trade or commerce”. Finally, I have found that the defences available to the defendant under the provisions of the Forests Act apply to protect it from any liability for or in respect of the representations alleged to have been made by it to the plaintiff, with the result that at least under Victorian statute law, it can have no liability. Nevertheless, I have found that as a result of the operation of s 109 of the Commonwealth of Australia Constitution Act, the relevant provisions of the Forests Act would not operate to the exclusion of provisions of the Commonwealth TPA in the event that those provisions were otherwise applicable.
Accordingly, I will order that there be judgment for the defendant. I will hear the parties in relation to the form of final orders, and reserve the question of costs.
“26. It can be seen that the order emphasises the intention that VicForests operates commercially by reference to the commercial basis of its particular purpose, the requirement that it operate as efficiently as possible consistent with prudent commercial practice, and the further requirement that it must be commercially focussed. As against these matters however it must operate in a framework consistent with Victorian government policy and priorities generally.
…
28. VicForests was established after the release in 2002 of the State policy entitled ‘Our Forests Our Future’. That policy referred to the fact that the National Competition Policy Review of the Forests Act 1958, pointed to the need to reinforce the separation between the role of governmental commercial functions and its policy and regulatory roles in forest management.
29. The policy stated the intention to transparently disentangle the commercial objectives from the regulatory functions of government by the creation of a separate commercial forest service entity.”
and see [102] to [175].
10
7
0