Bayside City Council & Ors v Telstra Corp Ltd

[2003] HCATrans 382

[2003] HCATrans 382

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S79 of 2003

B e t w e e n -

BAYSIDE CITY COUNCIL

First Appellant

MORELAND CITY COUNCIL

Second Appellant

FRANKSTON CITY COUNCIL

Third Appellant

YARRA CITY COUNCIL

Fourth Appellant

and

TELSTRA CORPORATION LIMITED

First Respondent

TELSTRA MULTIMEDIA PTY LTD

Second Respondent

HURSTVILLE CITY COUNCIL

Third Respondent

KOGARAH MUNICIPAL COUNCIL

Fourth Respondent

LEICHHARDT MUNICIPAL COUNCIL

Fifth Respondent

PARRAMATTA CITY COUNCIL

Sixth Respondent

PENRITH CITY COUNCIL

Seventh Respondent

RANDWICK CITY COUNCIL

Eighth Respondent

HORNSBY SHIRE COUNCIL

Ninth Respondent

DRUMMOYNE COUNCIL

Tenth Respondent

BURWOOD COUNCIL

Eleventh Respondent

CONCORD COUNCIL

Twelfth Respondent

STRATHFIELD MUNICIPAL COUNCIL

Thirteenth Respondent

Office of the Registry
  Sydney  No S80 of 2003

B e t w e e n -

MORELAND CITY COUNCIL

Appellant

and

OPTUS VISION PTY LTD

First Respondent

OPTUS NETWORKS PTY LTD

Second Respondent

WARRINGAH COUNCIL

Third Respondent

RANDWICK CITY COUNCIL

Fourth Respondent

BLACKTOWN CITY COUNCIL

Fifth Respondent

Office of the Registry
  Sydney  No S83 of 2003

B e t w e e n -

WARRINGAH COUNCIL

First Appellant

RANDWICK CITY COUNCIL

Second Appellant

BLACKTOWN CITY COUNCIL

Third Appellant

and

OPTUS VISION PTY LIMITED

First Respondent

OPTUS NETWORKS PTY LIMITED

Second Respondent

MORELAND CITY COUNCIL

Third Respondent

Office of the Registry
  Sydney  No S84 of 2003

B e t w e e n -

HURSTVILLE CITY COUNCIL

First Appellant

KOGARAH MUNICIPAL COUNCIL

Second Appellant

LEICHHARDT MUNICIPAL COUNCIL

Third Appellant

PARRAMATTA CITY COUNCIL

Fourth Appellant

PENRITH CITY COUNCIL

Fifth Appellant

RANDWICK CITY COUNCIL

Sixth Appellant

HORNSBY SHIRE COUNCIL

Seventh Appellant

DRUMMOYNE COUNCIL

Eighth Appellant

BURWOOD COUNCIL

Ninth Appellant

CONCORD COUNCIL

Tenth Appellant

STRATHFIELD MUNICIPAL COUNCIL

Eleventh Appellant

and

TELSTRA CORPORATION LIMITED

First Respondent

TELSTRA MULTIMEDIA PTY LTD

Second Respondent

BAYSIDE CITY COUNCIL

Third Respondent

MORELAND CITY COUNCIL

Fourth Respondent

FRANKSTON CITY COUNCIL

Fifth Respondent

YARRA CITY COUNCIL

Sixth Respondent

GLEESON CJ
McHUGH J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 1 OCTOBER 2003, AT 12.13 PM

Copyright in the High Court of Australia

__________________

MR N.J. YOUNG, QC:   If the Court pleases, I appear with my learned friend, MR M.N. CONNOCK, for the appellants in proceedings S79 and S80, the third respondent in S83 and the third to sixth respondents in S84.  (instructed by Maddocks)

MR F.M. DOUGLAS, QC:   May it please the Court, I appear with my learned friends, MR K.M. CONNOR and MR G.R. KENNETT, for Warringah Council and Hurstville City Council and the other New South Wales Councils.  (instructed by Deacons) 

MR P.J. HANKS, QC:   If the Court pleases, I appear with MS J.M. JAGOT for the Telstra respondents in the appeals.  (instructed by Mallesons Stephen Jaques) 

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR N. PERRAM, for the Optus respondents in each matter.  (instructed by Gilbert & Tobin) 

MR H.C. BURMESTER, QC:   If it please the Court, I appear with MS M.A. PERRY for the Commonwealth Attorney‑General, intervening in all matters.  (instructed by Australian Government Solicitor) 

MR P.A. KEANE, QC, Solicitor‑General of the State of Queensland:   If the Court pleases, I appear with my learned friend, MR G.R. COOPER, for the Attorney‑General for the State of Queensland, intervening in support of the appellants in each matter.  (instructed by Crown Law (Queensland)) 

MR R.J. MEADOWS, QC, Solicitor‑General for the State of Western Australia:   May it please the Court, I appear with my learned friend, MR R.M. MITCHELL, on behalf of the Attorney‑General for Western Australia, intervening in both matters.  (instructed by Crown Solicitor (Western Australia)) 

MS P.M. TATE, SC, Solicitor‑General for the State of Victoria:   May it please the Court, I appear with my learned friend, MS K.L. EMERTON, for the Attorney‑General of Victoria, intervening in all four matters in support of the Councils of Victoria and New South Wales whether they appear as appellants or respondents.  (instructed by Victorian Government Solicitor) 

GLEESON CJ:   Could I mention to counsel that we will be adjourning from 12.30 until 2.00 pm today, because, as you may know, during the luncheon adjournment there will be the first of our public events in celebration of our centenary, which involves the Australian Bar Association, and I would hope that people who are here would feel welcome to attend that.  Could I also mention that I understand counsel have been informed by the Registry that I hold some shares in Telstra and that the parties have no objection to my sitting.  Yes, Mr Young. 

McHUGH J:   It is the same with me.  I hold shares in Telstra. 

CALLINAN J:   So do I.  I think most people do. 

KIRBY J:   I do not. 

MR YOUNG:   May it please the Court, the case raises, as well as constitutional issues, issues as to the application of clause 44(1) of Schedule 3 of the Telecommunications Act if it is constitutionally valid.

GLEESON CJ:   Is that excise issue still in play?

MR YOUNG:   No, your Honour.  Can I commence by going to the scheme of the Telecommunications Act to see where clause 44 sits in context.  Clause 44 is found in Schedule 3, which is given force and effect by section 484 in Part 24.  Section 484 itself comprises the whole of Part 24 of the Act which is headed “Carriers’ powers and immunities”.  I will come back to Part 24 in Schedule 3, but can I deal as briefly ‑ ‑ ‑

KIRBY J:   Do you know why it was done that way?  That is an unusual style, is it not?

MR YOUNG:   It is an unusual style but it is the style adopted throughout this Act.  Some of the more important provisions of the Act are found in schedules.  For instance, the licence conditions are found in Schedule 1 ‑ ‑ ‑

KIRBY J:   This is the privatisation of federal legislation, is it?

MR YOUNG:   To some extent, yes, your Honour.  The scheme of the Act is to regulate to some extent the activities of entities described as carriers and service providers.  A carrier is the holder of a carrier licence granted under section 56 and a service provider is simply a provider either of carriage services or content services which are described in sections 85 and 86.  The fulcrum of the Act, as it might be described, is section 42.  Section 42 provides that a network unit, which essentially means any communication line in Australia, as described in section 25, must not be used:

to supply a carriage service to the public, unless:

(a) the owner holds a carrier licence; or

(b) a nominated carrier declaration is in force –

There are certain categories of communications that are exempted, including communications in the nature of broadcasting, electricity supply, defence, et cetera. 

The grant of a carrier licence is made the occasion for imposing various conditions on a carrier.  Section 61 provides that:

A carrier licence is subject to the conditions specified in Schedule 1.

If the Court turns to Schedule 1, the Court will see that the conditions so imposed include in Part 2 of Schedule 1 a necessity for an industry development plan and, most importantly, in Parts 3, 4 and following, carriers are obliged to grant others access to their facilities in certain stipulated respects.  That seems to be the main function of the grant of a carrier licence, namely, to impose an obligation to grant others access to the facilities and infrastructure maintained by the carrier. 

Service providers are dealt with in sections 86 and following.  As section 86 provides, a service provider may either be:

(a)  a carriage service provider; or

(b)  a content service provider.

As the labels suggest, the first provides a service of allowing communications to be carried on cables, infrastructure, et cetera; the second, a content service provider deals with the actual provision of the communications service.

Carriage service providers are not licensed.  They are described in section 87.  Content service providers are described in section 97.  They are persons who use or propose:

to use, a listed carriage service to supply a content service to the public –

Content service providers are subject to a series of rules that are set out in Schedule 2; those rules are given force by section 98.

The service provider rules in Schedule 2 are concerned with the standard of telephony services and the nature of telephony services to be provided to users.  For instance, “Operator services” are to be provided under Part 2, “Directory assistance services” under Part 3, “Integrated public number database” under Part 4, “Itemised billing” under Part 5.

As well, the Act has a whole series of provisions that commence with what is called universal service obligations in Part 7 commencing at section 137. A universal service obligation applies to those service providers that the Minister declares to be national or regional service providers under section 150. What then follows under the Act are a series of obligations that are imposed, such as untimed local calls, Part 8; emergency calls, section 264; confidentiality, section 270. The scheme of the Act, therefore, is one in which the Act, either through the ‑ ‑ ‑

HAYNE J:   Can I just stop you, Mr Young?  You are galloping.

MR YOUNG:   Yes, your Honour.

HAYNE J:   I go from section 136 to section 270 at the moment in the print.

McHUGH J:   Yes, so do I.

GUMMOW J:   Reprint 3.

MR YOUNG:   The Court would be most assisted by Reprint 1, which was the Act in force during 1998.  I apologise.

GLEESON CJ:   We will get it over the adjournment, but we should be working from Reprint 1.

MR YOUNG:   Yes, your Honour.

GLEESON CJ:   Thank you.

HAYNE J:   As at what date is the critical date?  If I load it from Scale, what date will I want?

MR YOUNG:   The rates were imposed in 1997 to 1999.

HAYNE J:   After lunch can you give me an “as at” date, because if you load it from Scale you can get an “as at” date.

MR YOUNG:   Yes, if your Honour please.

KIRBY J:   These repeals do not affect the issue in the appeal class.

MR YOUNG:   They do not affect the provisions that are directly in issue in this proceeding, that is so.

KIRBY J:   It has not been rendered moot or irrelevant to the future by the repeals?

MR YOUNG:   No, your Honour.  The reason why I went to the general scheme of the Act in the rather hasty summary I was giving the Court is this, that clause 44(1) refers to a carrier.  Under the Act the distinguishing feature of a carrier is that it is a person or entity that holds a carrier licence.  That is simply a licence that is required under section 42, if a person wishes to use a network to supply carriage of services to the public.

It has simply made the occasion for imposing a number of obligations by virtue of licence conditions.  Otherwise the Act imposes various obligations on either carriage service providers or content service providers.  But a carrier need not necessarily provide any services; it is simply the holder of a licence who proposes to provide a carriage service.  Obviously a carrier may have other business interests and activities, similar in a sense to the Broadcasting Act in that you need a licence to provide a carriage service, but otherwise the mere grant of a licence is not needed to authorise any specific activities or the conduct of any aspect of a telecommunications business.  It may be occasion for imposing various obligations by way of licence conditions.

GLEESON CJ:   Mr Young, this may be one of the reasons you are referring us to this legislation and it may be something you want to think about over the luncheon adjournment, but the reasoning of the Full Court in relation to discrimination, as I understand it, proceeded on the basis that you find the discrimination in a comparison between the treatment of service providers under this Act and some other people.  How do you know with whom to compare the treatment?

MR YOUNG:   The Act itself gives very little, if any, guidance about that matter.  The Full Court said that the comparators were others, any others, who make a similar use of public space.  On the evidence that included not just other utilities such as electricity and gas franchisees under State legislation but also railway operators, hospitals, other public users of space who put up signage.  It includes water facilities, it includes railways, railway signage, boom gates and the like.

CALLINAN J:   Mr Young, there is an agreed statement of facts in the Optus Case at page 157 which sets out fairly fully I think the other authorities whose activities are the subject of comparison.  Do you have anything like that in your case.

MR YOUNG:   Yes, your Honour.  In our case there is an agreed set of facts at, for instance, appeal book 79.

CALLINAN J:   It shows what the parties regarded anyway as the comparable authorities’ activities.

MR YOUNG:   Yes, but that list is not exhaustive, your Honour. Section 154(2) of the Local Government Act exempts from rateable land Crown land which is unoccupied, Crown land which is occupied for public purposes ‑ ‑ ‑

CALLINAN J:   Could I just ask you this question, relevant to what you are talking about? Are all of the other activities with which any comparison could be made, that is to say, those set out in the agreed facts and others of the kind to which you were just referring, are all of those activities undertaken pursuant to State as opposed to federal legislation? I will tell you why I ask that, that this is a power exercised here under 51(v) of the Constitution. Might it not arguably also involve an acquisition of property, acquisition of air space, acquisition of subterranean land?

KIRBY J:   Justice Gummow raised that in the special leave application, or one of the Justices did.

CALLINAN J:   It might be a point of distinction because everything else a State can control without rendering itself liable to just terms, whereas, of course, the Commonwealth cannot do that.

GUMMOW J:   You have some Commonwealth places, have not you?  You have post boxes?

MR YOUNG:   Yes.

GUMMOW J:   Paragraph 16 and 17 on page 81.

MR YOUNG:   Yes.

KIRBY J:   Is the pipe a Commonwealth place, is it?

MR YOUNG:   Yes.  I will give a partial answer in two ways.  So far as acquisition of property is concerned, if there were any acquisition of property, there is an express compensation provision in Division 8 of Schedule 3, section 42.

GUMMOW J:   Section 42?

MR YOUNG:   Yes.

GUMMOW J:   Clause 42, is it?

MR YOUNG:   I am sorry, clause 42 of Division 8 of Schedule 3.

CALLINAN J:   At any rate, there has never been a claim for compensation by any of the authorities?

MR YOUNG:   No, and also section 591 of the Act deals with compensation as well.  But so far as the Victorian Councils are concerned, the rates were imposed on the occupation of public land by the relevant towers and cables of Optus and Telstra.  So it is not a case that we have looked at, really, through the viewpoint of an acquisition of property.

CALLINAN J:   You would probably get a great deal more in rates than you would ever get in a capital payment.

MR YOUNG:   Yes.  Now, the Act provides authority in Divisions 2, 3, 4 and 5 of Schedule 3, but that is authority for the establishment of installations and the like and access to land, but it seems to stop short of an actual acquisition of property.

GLEESON CJ:   All right.  Perhaps you can develop this at 2.00 pm.  Tomorrow we are going to sit from 10.00 am to 4.00 pm and we would expect counsel for the parties and interveners, if they have not already done so, to agree between themselves upon a division of time.  We will adjourn now until 2.00 pm.

AT 12.33 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.05 PM:  

GLEESON CJ:   Yes, Mr Young. 

MR YOUNG:   May I go back to the two questions asked of me before the adjournment.  In answer to Justice Hayne, the members of the Bench will find in front of them a schedule of relevant dates from the viewpoint of Victorian Councils.  The table gives the dates of the rate declarations and the rate notices issued by the four Councils that have been challenged.  The New South Wales charging decisions relate to the 1997/1998 financial year and a range of other dates relevant to the decisions made by those various Councils.  That is why I answered his Honour Justice Hayne by saying, dates in the period 1997 to 1999. 

Secondly, sections 136 to 270 were repealed by Act No 52 of 1999, which was assented to on 5 July 1999.  Those provisions imposed various service obligations on service providers.  None of them are of central importance to the matters in issue in this proceeding; they are simply illustrative of the scheme of the Act to impose various obligations on service providers, either by way of licence condition in the case of carriage service providers, or by way of direct enactment in the case of content service providers. 

Can I go to Schedule 3.  Part 1 contains a simplified outline of what it achieves.  This is the only part of the Act that confers a range of powers on carriers and then stipulates for certain immunities to apply. 

McHUGH J:   What about duties, obligations?  Does the Act impose any obligations to provide services?

MR YOUNG:   In the way I indicated earlier, yes, your Honour.  Obligations, for instance, to provide access to ‑ ‑ ‑

McHUGH J:   To provide access, yes.

MR YOUNG:   The carrier’s facilities are contained in Schedule 1 but attached by way of licence conditions and then various service obligations were in the Act such as operator assistance calls, untimed local calls, emergency calls and so forth.  So, yes, the answer is it does, your Honour, but by and large in terms of the conduct of a telecommunications business, there is no grant of power or authority for that to be found in the Act.

Divisions 1 to 6 confer particular powers on carriers because of their need to have access to land to install facilities.  For instance, if we pass through them fairly quickly, Division 2 in Part 1 of Schedule 3 confers powers in relation to the inspection of land.  Division 3 confers various powers on a carrier for the purposes of installing facilities, Division 4 for the purposes of maintaining facilities.  Those powers are circumscribed by conditions set out in Division 5 and Division 6 deals with the need to obtain installation permits to install particular facilities.

The scheme of Schedule 3 is that it is those particular powers that authorise particular activities where there is a need for statutory authority that are then made the subject of a number of specified immunities from State and Territory laws.  You find that in Division 7 of Part 1 of Schedule 3.  The scheme of Division 7 and the way in which it contrasts with Division 8 containing clause 44, is important.  Can I go to Division 7, clause 36.  Clause 36(1) provides that the relevant powers in:

Divisions 2, 3 and 4 do not operate so as to authorise an activity to the extent that the carrying out of the activity would be inconsistent with the provisions of a law of a State or Territory.

That is qualified by the provisions of subclause (2) making it subject to clause 37.  Then clause 37 contains a limited exemption from certain specified State and Territory laws. 

(1)  This clause applies to an activity carried on by a carrier if the activity is authorised by Division 2, 3 or 4.

(2)  The carrier may engage in the activity despite a law of a State or Territory about -

and then a number of specified matters appear.  Clause 38 provides for the concurrent operation of State and Territory laws.  Clause 39 is important because it specifically provides that:

This Division does not affect the liability of a carrier to taxation under a law of a State or Territory.

The scheme, therefore, is that Division 7 sets out the extent to which activities authorised by Divisions 2, 3 and 4 are to be exclusive and exhaustive of State laws.

KIRBY J:   Was that clause, that is to say 39, elaborated in any way in the second reading speech, indicating in any larger terms the purpose of enacting that clause?

MR YOUNG:   No, I think the answer is not, your Honour.  There was some elaboration in the explanatory memorandum of its interconnection with clause 44, which I will come to in a moment.

KIRBY J:   Is its relevance as an indication of the purpose of the Federal Parliament for the purposes of section 109?

MR YOUNG:   Yes.  Our case of course is that Division 7, including clause 39, sets out the extent to which this scheme is to operate exclusively with State laws, and State taxation is not within that exclusive field.  The question then is, having carefully set out the extent to which the regime is intended to be exclusive, what is clause 44 aimed at in the next division?  Our case is that it is aimed at something quite different, namely preventing certain categories of State law operating in the circumstances described in that clause.

GUMMOW J:   I do not quite follow that.  Why is that quite different?

MR YOUNG:   It is quite different because it is one thing to make a Commonwealth law that declares exclusivity in respect of a particular regime to a specified extent.  It is a different thing to go beyond that and to say a State shall not make effectively certain categories of law.  In other words, the juxtaposition of Division 7 and Division 8 shows that Division 7 is concerned to define the Commonwealth field, Division 8 is concerned with something quite different.

KIRBY J:   So your theory is you can do it as long as you do not spell it out that that is what you are doing.

MR YOUNG:   No.  You can of course spell out the extent to which the regime is exclusive, but it is quite a different thing to enact a law that says certain categories of State legislation are proscribed or prohibited from taking effect and then to say when the State enacts a law in that category there is an inconsistency between clause 44 and the State law that has subsequently been enacted.  That is not in any sense to define the extent to which a regime for which the Commonwealth has made positive provision shall be exclusive and exhaustive.  It is, rather, simply to set up a prohibition against a category of State law so that when a State law falls within the prohibited area it is said to be a direct inconsistency.

KIRBY J:   You are arguing the central point in the case now as distinct from taking us through the ‑ ‑ ‑

MR YOUNG:   Your Honour asked me what ‑ ‑ ‑

KIRBY J:   You are tantalising us of what is to come.

MR YOUNG:   Yes, your Honour.

KIRBY J:   This is a preview of what we are going to face.

MR YOUNG:   Can I turn to clause 44 in Division 8 which is headed “Miscellaneous”.  No doubt the Court has looked at the provisions of clause 44.  Can I draw attention to these features of clause 44(1) firstly.  On its face, unlike Division 7, it is not confined or directed towards the activities that required statutory authorisation that are set out in Divisions 2, 3 and 4 of Schedule 3.  Where provisions were intended to govern or regulate Division 2, 3 and 4 activities, that is stipulated expressly in this piece of legislation.  For instance, on the very provision that precedes it, clause 43, and then looking a little bit further on in Division 8 itself, clause 52.

Secondly, the plain language of clause 44(1) purports to provide that a State or Territory law “has no effect” in a specified respect.  The concept of “no effect” is further explained by paragraphs (b) and (c) of subclause (1).  Paragraph (b) says: 

without limiting paragraph (a), a person is not entitled to a right, privilege, immunity or benefit, and must not exercise a power, under a law of a State or Territory to the extent to which the law discriminates –

et cetera.  That paragraph, we would say, indicates that the law is not simply limited or aimed at providing a shield to carriers when they carry out Division 2, 3 and 4 activities, for instance.  It strikes at other persons and denies them the ability to exercise or the enjoyment of rights conferred by State law. 

Next, clause 44(2) is part of the context, but that strikes at other State or Territory laws where they have the effect of discriminating against eligible users.  “Eligible users” are defined in subclause (3), effectively, so that it applies to any user of the telecommunications network.  Then there are the ministerial powers to exempt a State or Territory law from subclauses (1) or (2), conditionally or unconditionally, that are set forth in subclauses (4) to (7).  The noteworthy feature of that is that the legislation itself provides no test or standard for determining when the invalidating effect of clause 44(1), or the engagement of section 109, is not to operate.  It is left at large, to the discretion of the Minister. 

GUMMOW J:   Sorry, why is that so? 

MR YOUNG:   The legislation contains no specification of circumstances in which the Minister may or may not grant an exemption.  That is unlike circumstances where Ministers have been given a power of that kind, as considered in the Native Title Case and the Port MacDonnell Fishermen’s Case.  It perhaps is some indication of ‑ ‑ ‑

GUMMOW J:   Is this an argument that the section is invalid?  Is it a Dignan’s Case point? 

MR YOUNG:   Relevantly, your Honour, we are only concerned here with 44(1).  It might be the basis of an argument to impugn those subsections as in Dignan’s Case, but here it simply sheds light on the operation, both intended and actual, of clause 44(1). 

HAYNE J:   What is the light you say it sheds? 

MR YOUNG:   It is our submission that the work that clause 44(1) was intended to perform was to deny operational validity to a State law of any kind whatsoever where it has the character of discriminating, or would have the effect of discriminating, against a carrier. 

GUMMOW J:   Is that saying 44(1) is invalid? 

MR YOUNG:   It is our submission that, yes, it is invalid. 

GUMMOW J:   It is not supported by the telegraphic power? 

MR YOUNG:   No, it is not supported by section 51(v) and, moreover, it runs headlong into established principles founded upon the same federal tenets as the Melbourne Corporation principle, to the effect that a Commonwealth law cannot directly seek to deny operational validity to State legislation. 

I will come to those submissions and expand on them.  Can I go though next to the Full Court’s declaration at appeal book 349.  So far as concerns the Victorian Councils, the relevant declaration is that in 3(b) at page 349 of the appeal book.  The declaration is that:

Part 8 of the Local Government Act 1989 (Vic), to the extent that it authorises the twelfth to fifteenth respondents to declare and recover from the appellants rates and charges on land occupied by telecommunications cables;

discriminates or has the effect (whether direct or indirect) of discriminating against a carrier or carriers generally within clause 44(1) of Schedule 3 . . . and is to that extent inconsistent with clause 44(1) and invalid pursuant to section 109 of the Constitution.

In relation to that declaration, we will develop several submissions. The first is that it is not a full or accurate statement of what the Full Court found were the facts that constituted the discrimination, relevantly, which depended upon the effect of other State laws aside from Part 8.

KIRBY J:   Did you move the court to change its declaration, to bring its declaration into line with its reasons?  Why should we be troubled with a formal complaint of this kind?  That is the correct way to deal with these matters before orders are formalised.

MR YOUNG:   Yes, your Honour, we do not make a formal complaint about that matter; it is a way really of introducing, and I am about to come to the ‑ ‑ ‑

GUMMOW J:   A bit of prejudice.

MR YOUNG:   No, that was not my intention, your Honour.

HAYNE J:   You are failing in your duty then, Mr Young.

MR YOUNG:   The second point is that the identified inconsistency in terms of this declaration is inconsistency with clause 44(1), not inconsistency with a scheme for which the Commonwealth had made positive enactments establishing a scheme that was going to regulate carriers’ activities exclusively and exhaustively, but rather inconsistency with clause 44(1).

GLEESON CJ:   Would it make any difference if the words following “extent” were deleted and in their place there were inserted the words “is of no effect”?

MR YOUNG:   At the end of the day, no.  We will contend that the upshot of the Full Court’s reasons is to give clause 44(1) direct invalidating effect and, again, we will try and explain that.

Can I turn to the Full Court’s findings ultimately as to the operation of clause 44(1) and why it was said to discriminate. They are found at appeal book page 319 in paragraph 40 of the Full Court’s reasons. I will not read paragraph 40, but can I make these observations about it. The question that was identified was posed in terms of State laws, not in terms of Part 8. The relevant discrimination was said to lie in the fact that taxes were imposed on a carrier in respect of its:

occupation of a public place by underground or aboveground cables, but is not imposed on other bodies which make a similar use of public places.

And then, in the final sentence:

It is discrimination against the carrier because it accords to it less favourable treatment than to the other occupiers of public space.

GLEESON CJ:   Now, before the word “other” there is a missing word.  Does that mean to any other or another or some others?  How many others would you have to find getting more favourable treatment?

MR YOUNG:   If their Honours’ meaning is that carriers must be accorded treatment that is at least as favourable to the most favourably treated other person, then one would inserts the words “any others”.  That seems to be the thrust of their reasons.  We of course here have a range of statutory exemptions, as I mentioned before the adjournment, some perhaps closer to the same use of space, some not very different.  There does not seem to be any basis for distinguishing between one exemption and the next because the logic seems to be that any differential treatment, whatever public purpose was sought to be served by the State in enacting its statutory exemption, will amount to discrimination in terms of clause 44(1).

In other words, if the only statutory exemption was for Crown land, as we follow the logic of the Full Court they would say that that is discrimination because signs and other things erected by the Crown on Crown land would be a similar use of public space.

GLEESON CJ:   Are we talking here about those big black cables that go down the streets in amongst the overhead telephone lines?

MR YOUNG:   Yes, your Honour.

GLEESON CJ:   What is the taxing regime in relation to the telegraph lines, the ones that carry the phone services?

MR YOUNG:   They are rated similarly but electricity lines have the benefit of a statutory exemption and there are other statutory exemptions for gas pipelines underground.  We are not only talking about the rating of overhead thick black cables but also the rating here of underground broadband cables as well.

GLEESON CJ:   What kinds of potentially comparable service providers are rated in the same way as these providers or carriers?

MR YOUNG:   In Victoria the answer is none because relevantly they seem to have the benefit of statutory exemptions, either by their own statutes or by force of section 154(2) of the Local Government Act.  In New South Wales gas pipes laid by AGL are the subject of charges.

KIRBY J:   They are a private company?

MR YOUNG:   They are a private company.

KIRBY J:   Australian Gas Light Company, yes, or whatever it is called now.  AGL Gas is a private company.

MR YOUNG:   Yes.

KIRBY J:   Can you understand that if somebody is looking at a street and in the ground goes one pipe and it is exempt and in the ground goes another pipe and it is taxed, that they might occasionally feel that that is a little discriminatory again them?

MR YOUNG:   Yes, I understand the argument, of course, your Honour.

KIRBY J:   It is just a little pipe, and they are both pipes and they are both underground.

MR YOUNG:   Yes, but it is a different question whether, from the viewpoint of the State that enacts the exemption, the exemption is justifiable in terms of a matter of public policy.  It is a different question whether the Commonwealth can enact a piece of legislation saying that you, the State, cannot grant exemptions of that kind, nor can you act in such a way as to expose Telstra and Optus to Council rates unless you rate everybody else.  That really is the question and not whether the exemptions are justifiable as a matter of public policy.

KIRBY J:   But is not the inference that if you taxed all authorities that put a pipe in the ground the same, that the tax on the federal authority would be smaller and would be equal to that of State authorities?  That is the mischief of taxing them differently and you burden thereby the federal authority and that is a burden that the Federal Parliament apparently has thought should not fall unevenly.

MR YOUNG:   We would say it is not as simple as that, your Honour, because the Council is entitled in exercising its rating powers to take account of other factors such as environmental impact and other matters.

KIRBY J:   Subject to valid federal law.

MR YOUNG:   But clause 44 is not simply limited to taxation.

GLEESON CJ:   Has anybody been mischievous enough to suggest in this case that if clause 44 takes effect, its consequence is not to invalidate the tax on Telstra, it is to invalidate the exemption ‑ ‑ ‑

MR YOUNG: That is one of our submissions, your Honour, and I think it is also one of the New South Wales’ submissions. Because at the end of the day, particularly if any invalidating work is done, as we say, only by section 109, you need to identify the law that is inconsistent in terms of section 109. That really seems to us to mean the law that is the source of the discrimination complained of. In that event, it is probably not the general neutral taxing power expressed in terms like those of section 154 of the Local Government Act, but rather it is the State laws that grant particular exemptions.

Now, I want, if the Court pleases, to address first the issue of constitutional validity.  To do so it is necessary to assume ‑ ‑ ‑

GUMMOW J:   Well, we have to first construe it, I suppose.

MR YOUNG:   Yes, I was about to make that point, your Honour.

GUMMOW J:   Which is what you have just been doing.

MR YOUNG:   Yes.

GUMMOW J:   So do you construe it in a number of alternative ways or do you ‑ ‑ ‑

MR YOUNG:   Well, we construe it in one way which differs from that which the Full Court adopted and that which the respondents urge.

GUMMOW J:   I know that, but putting your case positively, do you offer one construction and stand or fall by that?

MR YOUNG:   Yes.  We offer a construction which would have the consequence that it would not fall within Commonwealth power, or not so readily fall within Commonwealth power, but we thought it most convenient really to adopt the assumptions as to construction that aligned with the Full Court’s construction and go straight to the heart of the matter, because ultimately it is our submission that the key issue is the constitutional one.  Even if one assumes that clause 44(1) has the meaning and effect given to it by the Full Court in its reasons, it is our submission that it is nonetheless invalid.

GUMMOW J:   Yes, but do you also put forward the construction that the Chief Justice was outlining as a possibility?

MR YOUNG:   Yes, we do.

GUMMOW J:   Would it be invalid then?

MR YOUNG:   Yes.  That is the second stage of our submission.

GUMMOW J:   So you do have two constructions?

MR YOUNG:   Yes, we do.

GLEESON CJ:   Is this a case to which section 15AB of the Acts Interpretation Act could have some application?

MR YOUNG:   It does, because there is an argument about the use of the explanatory memorandum.  It is a case to which ‑ ‑ ‑

GLEESON CJ:   And what is your submission on that?  Does section 15AB have an application here?

MR YOUNG:   There are two construction issues.  The first is can clause 44(1) be read down so as to connect it with Division 2, 3 and 4 activities rather than applying to any State law of any kind.  On that construction issue, if it is thought that there is an ambiguity or obscurity or that there is a need to confirm the ordinary meaning that it should be so read down, then the doorway would be open under section 15AB to the use of the explanatory memorandum. 

The second construction issue is the one on which the Full Court had recourse to the memorandum, which was the meaning of the expression “discriminate” or “have a discriminatory effect” in the clause.  Now, on that question their Honours said they were applying the ordinary meaning of “discrimination”.  It is not at all clear that there was any avenue that opened up the doorway to section 15AB to use the explanatory memorandum in that way.  We were contending for the ordinary meaning of “discrimination” as well being different treatment based upon an inappropriate, improper or irrelevant distinction. 

It seems that the Full Court said differential treatment is enough regardless of the basis on which the distinction is made.  But if it is permissible to have regard to the explanatory memorandum, it certainly would need to be looked at on both construction issues, and on the first we say it is more helpful to ourselves than against us.  I will explain that, if your Honour please.

Now, on the constitutional questions there are two matters that require examination.  The first is whether there is a sufficient connection with the head of power in section 51(v); no other head of power is suggested as being relevant.  The second question is even if the clause has a connection with section 51(v), is it nonetheless invalid as a bare attempt to exclude State legislative power?  I will deal with the second first.

GLEESON CJ:   What does the word “bare” mean in that context?

HAYNE J:   Nasty, horrid.  Is it anything more than an intensifier of no relevant constitutional content, Mr Young?

MR YOUNG:   Well, it is the word used by Sir Owen Dixon in Wenn’s Case, your Honour ‑ ‑ ‑

GLEESON CJ:   It does not mean barefaced.

MR YOUNG:   No, it does not.  His Honour was discussing two situations, one where you can have a provision that expressly excludes State legislation in the particular area and his Honour said if there is otherwise a Commonwealth regime of legislation, to which this is an adjunct, which is intended to be exhaustive and exclusive, the express declaration that State law is not to apply can be treated exactly as that; the declaration of intention that helps to discern that the field otherwise covered is intended to be exhaustively covered by the Commonwealth.  But if it is not that kind of situation where you have an otherwise existing Commonwealth field that is intended to be exhaustive or exclusive, then the pejorative will attach to a law ‑ ‑ ‑

GLEESON CJ:   Well, an example of it would be, would it not, the Commonwealth saying “We don’t care to enact legislation about the transmission of pornographic material by the use of these means of communication, but we prohibit the States from enacting any law on that subject at all”?

MR YOUNG:   Yes it would, and then if the States came to enact such law, one presumes the argument would be advanced that the Commonwealth having enacted a prohibition, when the State enacts the relevant category of law, there is a direct inconsistency with a prohibition, therefore section 109 is attracted to invalidate the State law.  That is simply a circuitous way of arguing that the Commonwealth prohibition has a direct operation to invalidate State law and that would be a category of law that falls within what Sir Owen Dixon described as an invalid bare attempt to exclude State concurrent power from the field that the federal legislature has not effectively and exhaustively dealt with.  That is really the distinction.

KIRBY J:   Is not the functional distinction where the Federal Parliament sees a particular mischief that already exists and says, “This is not on; we’re going to deal with this specifically and expressly and therefore we will enact a provision that says the State laws will not invade that space directly”.  Is that not the functional reason and, arguably, is that not what they saw here?  They saw these exemptions and they said, “We’re not going to accept that”.

MR YOUNG:   Yes, but, your Honour, it may be a legitimate exercise of Commonwealth power if that space was otherwise occupied by a positive Commonwealth regime, but here it is not.  Aside from clause 44(1) you have clause 39 saying that the States and Territories may tax the activities of carriers, even the activities of carriers falling within Divisions 2, 3 and 4.  So the space is validly not occupied by the Commonwealth and then, not having occupied the space, they go on to prohibit the States enacting a law of a kind described in clause 44(1).  That is a different situation; it is the sort of situation that Sir Owen Dixon was describing when he used that expression in Wenn’s Case.

KIRBY J:   What was Wenn’s Case about?  What was the actual circumstance that arose?

MR YOUNG:   It was a case about preference in employment to returned servicemen.  The Commonwealth had made provision in that area and the States purported to do so likewise.  The question arose whether the Commonwealth legislation was a bare attempt to exclude State concurrent power.  It was held to be not the case.

Can I go, if I may, to the Native Title Case 183 CLR 373 where the relevant principles are stated. It is the most recent statement of principles. Can I go to page 464. The argument is identified under the heading at about point 3 on the page. There are two parts where the Court identified the relevant principles, first at 464 beginning immediately after the reference to section 107 at about point 5 on the page with the words:

It is therefore beyond the legislative power of the Commonwealth Parliament –

et cetera.  Next at page 466, the first complete paragraph, including the extract from the GMAC Case.

KIRBY J:   Can it be said that this is part of a trend of legislation to overcome uncertainties as to the purpose of the federal legislature for the purpose of section 109?  We have already been taken to a provision in the schedule which indicates it is not the intention to do a certain thing.  Is this any more than stating this is the intention to require equal treatment in taxing of federal agencies with State agencies if ‑ ‑ ‑

MR YOUNG:   We would say not, your Honour, because if the Commonwealth wants to legislate about the activities of carriers and to protect them in a field covered by positive Commonwealth laws from State taxes, it can of course do so by legislating exclusively and exhaustively.  It is our submission that this is something different again from that situation.

KIRBY J:   That is one way to look at it.  The other way to look at it is to turn it on its head and say if you do not tax agencies of the State that do or do not rate – bring to rates the agencies of the States which put pipes in the ground, then you will not do it to a federal agency.  You make your choice.

MR YOUNG:   That, in our submission, seems to be attempting to deny operational validity directly to State laws because the State laws produce the consequential effect that is disliked by the Commonwealth.

KIRBY J:   That is one way to put it, but another way to put it is that you will not overburden federal agencies to the exemption of State agencies because that is unjust to the federal agencies, and we will make it clear that that is against the will of the Federal Parliament.

MR YOUNG:   Let me give your Honour an example, still on the taxing field even though clause 44 is not so limited.  There is no reason why the same logic would not apply to the economic burden of payroll taxes.  It might be said that because you give exemptions from payroll tax to the State Crown or certain State agencies, you cannot impose a payroll tax on employees of a carrier, which is a private business, because that will burden them in a fashion which is unfavourable when compared to other State entities.  The same argument about discrimination would travel a very long distance and not be limited to the taxation field if this is permissible.

GUMMOW J:   I think what is quoted against you by your opponents is the paragraph at the bottom of 467 going over to 468.

MR YOUNG:   That was the one I was coming to, your Honour.  That is the meat of it.  But it is what it starts off with: 

Where it is within the legislative competence of the Commonwealth Parliament to prescribe an exclusive statutory regime, a Commonwealth law which merely expresses an exclusion of the operation of a State law is not construed as an attempt to invalidate the State law directly.  It is construed as an expression of intention that the Commonwealth law should have exclusive operation. 

We embrace that totally, but we say that the precondition that governs the ability to construe such a Commonwealth law as an expression of intention to cover a field exclusively does not exist here, because there is no set of Commonwealth rules and regulations that covers the field that clause 44(1) is said to manifest an intention about.  Clause 44(1) operates in areas that have nothing to do with the Commonwealth rules that are otherwise laid down by the Telecommunications Act, in particular, Divisions 2, 3 and 4. 

Can I make this point.  The only way in which clause 44(1) can have any operation – and this seems to be common ground – is by attracting section 109.  It cannot operate directly, and there is a long line of cases to that effect, including the Native Title Case.  The Full Court accepted that clause 44(1) could only operate by attracting section 109.  They said 109 was attracted because the law was inconsistent with clause 44(1). 

Now, that, in our submission, is not the sort of situation described in that passage in the Native Title Case.  The Court is not talking about inconsistency in circumstances where the inconsistency is between a direct prohibition, like clause 44(1), and a law that it is targeting.  It is talking about a situation where you can construe a provision such as clause 44(1) as manifesting an intention that, by other positive provisions, the Commonwealth intends to cover the field. 

Can I give another example, in addition to the Native Title Case, in Botany (1992) 175 CLR 453 at 463. Botany concerned Commonwealth regulations that were a lot like clause 37 in this case.  The regulation is cited at page 464.  In the last complete paragraph at 464, the Court said: 

Regulation 9.2 is designed to ensure that the carrying out of the works and the exercise of the rights is governed by, and is in accordance with, the environmental standards as defined by the Regulations, that is, the Commonwealth standards, and to ensure that the work authorized by Commonwealth law is neither prevented nor hindered by State law. 

Then at the bottom of the page, fourth last line: 

Viewed in this way, reg. 9.(2) is plainly valid.  This is not a case in which the Commonwealth law is aimed at preventing or controlling State legislative action rather than dealing with a subject matter assigned to the Commonwealth Parliament.  Nor is it a case in which the Commonwealth law invalidly seeks to displace or expand the operation of s. 109. 

There can be no objection to a Commonwealth law on a subject which falls within a head of Commonwealth legislative power providing that a person is authorized to undertake an activity despite a State law prohibiting, restricting, qualifying or regulating that activity. 

That is the equivalent here of clause 37. 

McHUGH J:   But why is this not a law with respect to corporations, because it seeks to protect the corporation?  Supposing clause 44 had said a person shall not harm or shall not discriminate against a particular carrier.  You would have to concede that was within the power.

MR YOUNG:   Yes.

McHUGH J:   What is the distinction between those two situations?  In the illustration I gave, you were looking to private actors; in clause 44(1) you were looking to State legislation.  What is the difference?  Both may harm the carrier which the Federal Government wishes to protect.

MR YOUNG:   Yes.  Your Honour, in my submissions I am making the assumption that there is a connection with a head of power.

McHUGH J:   Once you make that, does O’Reilly’s Case not destroy your argument?

MR YOUNG:   No, your Honour.  O’Reilly’s Case was a case about the Commonwealth Shipping Commission in circumstances where the Commonwealth had made it clear that it intended its laws to exhaustively and exclusively cover the position of the Shipping Commission in respect of taxation by expressly providing ‑ ‑ ‑

McHUGH J:   Remind me again, but O’Reilly - the law in that only excluded taxation laws, did it not?

MR YOUNG:   It did, yes, but it otherwise made positive provision and authorities for the operation of the commission.

McHUGH J:   Yes.

MR YOUNG:   But O’Reilly is quoted at this page of Botany.  Can I illustrate the first point I was trying to make and then I will come back to your Honour’s question.  The passage from Sir Owen Dixon’s judgment in O’Reilly makes it clear that the specific provision about taxation was treated as an adjunct to Commonwealth legislation that disclosed an intention to occupy the field, that is, the relevant activities of the shipping line were to be governed by Commonwealth law alone.  That is why his Honour says in the middle of that passage:

The Court has interpreted s 109 as operating to exclude State law not only when there is a more direct collision . . . but also when there is found in federal law the manifestation of an intention on the part of the federal Parliament to ‘occupy the field’.  Surely, consistency with that doctrine –

that is, the doctrine of occupying the field –

demands that a legislative power, such as that given by s 51(i), must extend to a direct enactment which expressly excludes the operation of State law provided the enactment is within the subject matter of the federal power.

So the first point we make is, yes, in O’Reilly, you could specifically exclude State taxes from applying to the Commonwealth Shipping Commission because you had enacted a positive body of Commonwealth laws to govern the activities of that commission.  It was part of that process of occupying that field to expressly declare the intention to exclude State taxes.  That is a different situation, where there is no field that has been occupied.

Can I to your Honour’s question about the head of power.  The mere fact that clause 41 may be said to have a connection with 51(v) or with corporations does not mean that it is necessarily valid.  The proposition stated in Wenn - and the passage is quoted at the bottom of 464 and the top of 465 in Botany - and the Native Title Case and GMAC all say, notwithstanding there may be a connection, if over and above that the law directly attempts to deny the States’ ability to exercise legislative power, it will fall foul of the Constitution because of the fundamental tenets that underpin the Wenn principle, just as they underpin the Melbourne Corporation doctrine.

McHUGH J:   Dose what you have just said accurately state the doctrine?  Correct me if I am wrong, but I thought the doctrine was that as long as the law displacing State law could itself be characterised as a law with respect to the head of power, no more was required for its validity.

MR YOUNG:   No.

McHUGH J:   You reject that?  That is wrong?

MR YOUNG:   With respect, that is wrong, your Honour.

McHUGH J:   My recollection is failing.

MR YOUNG:   Melbourne Corporation 74 CLR 31 and the cases that follow it make that claim.

GUMMOW J:   Yes, we know about the Melbourne Corporation Case too, Mr Young, but putting that to one side, is not what Justice McHugh said to you correct?

MR YOUNG:   I am sorry, your Honour.

GUMMOW J:   Putting Melbourne Corporation aside and federal inhibitions and so on, is not what Justice McHugh put to you correct?

MR YOUNG:   No, your Honour.

GUMMOW J:   Why?

MR YOUNG:   For the very same reasons that have been explained in Melbourne Corporation and Queensland Electricity Commission.  The principle in Wenn that you cannot directly legislate to deny ‑ ‑ ‑

GUMMOW J:   You cannot deny State power.  We are talking about inconsistency of laws.  You keep slipping from power into inconsistency.

MR YOUNG:   No, your Honour.  If one looks at clause ‑ ‑ ‑

GUMMOW J:   Sir Owen Dixon was very concerned to mark out 51 against 52.  He was saying you cannot manoeuvre yourself under 51 into the situation it occupies in the Commonwealth if you had an exclusive head of power.

MR YOUNG:   Your Honour, this goes to State power, not just State laws, because it says that any attempt by a State to enact an exemption in a way that favours its creatures but does not favour Telstra or Optus is invalid - of no effect, in the language of clause 44(1) – and, what is more, no powers or benefits can be conferred on other persons in terms of 44(1)(b).  Can I go to ‑ ‑ ‑

HAYNE J:   That is a series of propositions driven by an understanding of discrimination.

MR YOUNG:   No.  With respect, I adopt the Full Court’s description of “discrimination”.

HAYNE J:   Maybe, but it is a series of propositions driven by the content which you have given to the notion of discrimination.

MR YOUNG:   Well, obviously, the proposition depends upon the operation of clause 44(1), but I am accepting the Full Court’s operation of 44(1) to invalidate these rates.

HAYNE J:   I understand that.  If you take this schedule as a whole, can you look at it in this way?  Carriers may do the things set out in Divisions 2, 3 and 4.  Carriers are subject to generally applicable State laws including taxes except for – you then have the planning exceptions.  They are not subject to State laws that are directed only at carriers.

MR YOUNG:   If your Honour – that is to redefine “discrimination”, but let me accept it.  If that is the true operation of clause 44(1), it still falls foul of the fundamental constitutional principles I have been trying to get to, namely because it purports to give a general immunity by way of invalidating State laws of any kind whenever they have that discriminatory effect on carriers, whether that be connected with anything that is otherwise the subject of authority or empowerment by the provisions of the Telco Act.  Now, that is to attempt to lay down a prohibition and then when a law is enacted by a State that crosses that prohibition to say, “Aha, there’s an inconsistency”, then section 109 operates.

McHUGH J:   But at best this seems an argument about form.  Surely given the Botany Case the Parliament could enact a law which said the Local Government Act (Vic) does not apply to carriers. Do you concede that?

MR YOUNG:   If the non‑application to carriers is connected with an area where the Commonwealth has made positive provision.  It could not simply do that in the abstract.

McHUGH J:   Well, I mean, O’Reilly just took ‑ ‑ ‑

MR YOUNG:   Carriers are not an agency of the Commonwealth in the same way that the Shipping Commission was.

McHUGH J:   But they are a subject of Commonwealth power.

MR YOUNG:   Only in this sense, your Honour, that the Commonwealth has enacted legislation that imposes certain obligations on carriers and gives them ‑ ‑ ‑

GUMMOW J:   No, no.  The Commonwealth imposes a prohibition.  No engagement in these activities unless you have a carrier’s licence.

MR YOUNG:   Yes.  Well, exactly that situation was dealt with in Coffs Harbour by this Court, and the Court said the mere fact that broadcasting is prohibited without a licence does not mean that the conferral of a licence carries with it power or carries with it the proposition that all activities of the holders of broadcasting licences are therefore immune from State law.

GUMMOW J:   That is right.  Therefore they have gone further.  With an awareness of that decision they have gone further in this legislation, by equipping the franchise you get with your licence with these particular characteristics.

MR YOUNG:   Yes.  I wanted to go to Melbourne Corporation if I may.

GUMMOW J:   What are we going to get out of Melbourne Corporation?

MR YOUNG:   The proposition that the mere fact that a law is connected with a head of power is no necessary answer to the arguments that we are endeavouring to develop.  A relevant passage ‑ ‑ ‑

McHUGH J:   You are immediately in a different area of discourse, are you not?

MR YOUNG:   No, your Honour.

McHUGH J:   Melbourne Corporation is based on the structure of the Constitution. It is an implication that arises from the structure of the Constitution. Here, in the present case, we are concerned between the interrelationship of a law of the Parliament and State law and 109.

KIRBY J:   Well, you say, as I understand it, right or wrong, there is a matter of the structure of the Constitution. It is the concurrent powers of the States.

MR YOUNG:   Yes, absolutely, and one asks oneself what principle underpins the principles stated by Sir Owen Dixon in Wenn’s Case and then endorsed in GMAC, Native Title Case, Gerhardy v Brown and so forth.

McHUGH J:   But can I just press you on this because does not Melbourne Corporation depend upon a necessary implication drawn from the structure of the Constitution which cuts down the 51 powers?

MR YOUNG:   Yes.

McHUGH J:   Now, you are in a different area when you are talking about 109.  You cannot get a necessary implication out of 109 – or are you going to attempt to get it out of 107 or 106?

MR YOUNG:   Well, with respect, your Honour, we would say this, that the principle that has been stated many times by this Court that a Commonwealth statute cannot directly deny operational validity to a State law, which was stated in Wenn and GMAC, is founded on exactly the same principles of federalism as underpinned Melbourne Corporation. It is founded on sections 106 to 109 of the Constitution. One only needs to look at the sort of law in issue in Melbourne Corporation and in The Second Uniform Tax Case to see that we are speaking in the same area of discourse as that which clause 44 enters into.

In Melbourne Corporation, the provision of the Banking Act in question, section 48, was concerned to prevent payment of a State tax until Commonwealth taxes had been paid.  What Sir Owen Dixon said about that was that the fact that in one aspect the law bears a connection with the banking power, as it obviously did, was no answer if the law fell foul of the implied principle that the Commonwealth cannot directly legislate in a way to intrude upon core State functions.

GUMMOW J:   What is the core State function here?

MR YOUNG:   Well, here it is the power of legislating.

KIRBY J:   And I suppose you could say, and the State Parliaments giving such exemptions as seems appropriate to them.

MR YOUNG:   Absolutely.

GUMMOW J:   Well, if that is right, O’Reilly is wrong.

MR YOUNG:   No, O’Reilly was concerned with legislation directed towards an agency of the Commonwealth.  That was clearly explained in the reasons for decision of Sir Owen Dixon and the other members of the Court in the majority that that was the reason why it was held that the Commonwealth having legislated exclusively for its national shipping line, it could legislate, within a head of power, that the States shall not impose a particular tax, but it only was valid as a manifestation of intention to cover the field and it was the covering of the field that attracted section 109 to invalidate any consequential State tax.

Now, in Queensland Electricity Commission v Commonwealth 159 CLR 193 at 217, Sir Anthony Mason stated the principle drawn from the Melbourne Corporation line of cases.  He said expressly that “the principle prohibits discrimination . . . against the States generally” and “protects legislatures as well as executive governments”.  That is at 217.  At 218 at about point 4 on the page his Honour identified the foundation of the principle in these words:

MR DOUGLAS:   Telecommunications carriers shall pay an annual tax to the government of New South Wales of $100,000 per year each.

KIRBY J:   They are not likely to be as stupid as to try that one on.

MR DOUGLAS:   Well, why not?  That is an example of it, your Honour, and that is something which is aimed at carriers.

GUMMOW J:   And no one else?

MR DOUGLAS:   Not at anyone else, no.

KIRBY J:   Why do you not just look at the nature of the business of different organisations that are supplying services to the community.  I just do not see the difficulty.  I mean, discrimination is a concept which is in section 117.  That was put to good use to protect barristers.  There was not any real difficulty in doing that.

MR DOUGLAS:   But it was put to good use and discussed in a particular context in Castlemaine Tooheys and also in a later case of Waters.

HAYNE J:   Just sticking for a moment to the example you gave, that might be a law which discriminates against carriers generally.  What work would you give to the words “or would have the effect (whether direct or indirect) of discriminating”?

MR DOUGLAS:   In our respectful submission, your Honour, that is intended to encapsulate the concept of indirect discrimination which was discussed by this Court, particularly in Justices Gaudron and McHugh’s judgment in Waters’ Case, so it is not where the law on its face actually discriminates, but it is the effect of the law which brings about the discrimination.

HAYNE J:   Does that necessarily invite attention to the identification of suitable comparator?

MR DOUGLAS:   Yes, it would, your Honour, in our respectful submission, consistently with the principles in Castlemaine Tooheys.

HAYNE J:   Then what is the comparator that 44(1)(a) invites attention to?

MR DOUGLAS:   In the case of particular carriers, it is other carriers.

HAYNE J:   Plainly, but in the last case?

MR DOUGLAS:   In the case of carriers generally we have difficulty, I must say, in finding a comparator and tend to the view that the best way to read that is discrimination in the sense of laws aimed against, as distinct from seeking equality of treatment.

HAYNE J:   Laws aimed against seem to me at first blush to fall more easily into the first part of 44(1)(a).  The law discriminates against, if you read discrimination as aimed towards, aimed against, but you are then left with this further clause which, on that analysis, seems to be given no work to do, and that troubles me.

MR DOUGLAS:   Your Honour, it would work if you had a law such as that simple one which I put where ‑ ‑ ‑

HAYNE J:   Plainly, the engaged, I understand that, but it is to give work to this second path that I am directing attention.

MR DOUGLAS:   That is, has the effect of a direct or indirect?

HAYNE J:   Yes.

McHUGH J:   It may operate on conditions rather than, for instance, on volume or on the type of facility.

MR DOUGLAS:   Yes, I accept that, your Honour.  Another way of putting it – I think Mr Young has taken you to the relevant provisions and they are collected also in our written submissions.  Under the Act you have carriers, so you cannot actually provide carriage services unless you are a licensed carrier.  The licensed carrier is normally the owner of a network unit or the person who is given the nominated declaration.

McHUGH J:   I mean, the discrimen could be towers, it could be low impact facilities, so that there could be discrimination among the carriers themselves indirectly or directly.

MR DOUGLAS:   The example I was trying to drive towards was this, that you have this concept of carriage service providers or content service providers who are the non‑licence entities which use carriers or come to agreements with carriers to use their networks.  Now, let us say, for example, you had a law which said in relation to a carriage service provider, “You have to pay this extremely large sum of money every year to the New South Wales Treasury” and that had a significant financial impact upon carriers, because carriage service providers in those circumstances could not feasibly use the facilities which carriers could provide, and such a law would operate indirectly upon carriers, but nonetheless would be discriminatory against carriers.

GLEESON CJ:   Now, you said about two minutes ago that you are having some difficulty giving meaning to the concluding words of paragraph (a). 

MR DOUGLAS:   More having difficulty identifying the comparator, if we are to look at it in terms of the way the Court has suggested in Castlemaine Tooheys. 

GLEESON CJ:   In resolving that difficulty, can you get any assistance from section 15AB of the Acts Interpretation Act? 

MR DOUGLAS:   I do not think so, your Honour.  Justice Wilcox did not gain any assistance from the explanatory memorandum, and that is the only material which the respondents have sought to use, to try and provide some explication of the utilisation of these words. 

KIRBY J:   You seem to be, with respect to you, wilfully blind to see a comparator when you are not looking at the purpose.  I mean, the purpose is to ensure a level playing field for those who supply public services and therefore have to have access to local government authority land, public land, through local authorities.  If you take that as the purpose for the level playing field and that that is deemed to be important for the implementation of the federal law, then I do not think there is any difficulty whatever in finding a comparator. 

If there is something that the Court has said in antidiscrimination law generally about comparators that answers my answer to it, well, let it be laid before us, but at the moment you are talking in very general terms and I do not see any problem whatever in finding a comparator for the purpose of implementing this will of the Federal Parliament if it be valid. 

MR DOUGLAS:   If your Honours could just go to Waters’ Case (1991) 173 CLR 349, I just want to go to a passage in the judgment of Justice McHugh.

KIRBY J:   You see, in the Street Case, the comparator was a barrister up there in Queensland and a barrister in Sydney.  They both have chambers, they both come to court, they both argue cases, they both represent clients and they both get fees. 

MR DOUGLAS:   Your Honour, in Waters at page 409 in Justice McHugh’s judgment, the two passages from Castlemaine Tooheys which are significant in this context are set out.  So it is firstly said:

“A law is discriminatory if it operates by reference to a distinction which some overriding law decrees to be irrelevant –

that is the first time –

or by reference to a distinction which is in fact irrelevant to the object to be attained; a law is discriminatory if, although it operates by reference to a relevant distinction, the different treatment thereby assigned is not appropriate and adapted to the difference or differences which support that distinction.”

GUMMOW J:   Now, if one can look at the explanatory memorandum, do you get any clues?

MR DOUGLAS:   The only clue in relation to carrier ‑ ‑ ‑

GUMMOW J:   As to comparators.

MR DOUGLAS:   Yes.  The only clue, your Honour, I think that one can get out of it is that reference is made in the explanatory memorandum to section 120 as being the progenitor of this.  So one can possibly go back to section 120 and try and find out what they had in mind there.

GLEESON CJ:   Do you have an argument to the effect that the explanatory memorandum contains precisely the same ambiguity as the statute?

MR DOUGLAS:   We do, your Honour.  In our written submissions we have said that.

GLEESON CJ:   If you look at the words in parentheses against the first dot point, it says:

other bodies owning such equipment such as electricity authorities would be exempt –

Well, does that mean all other bodies or some other bodies?  If you said “such as gas companies”, then you would get a different result from the result you would get if you made a comparison with electricity authorities.  Now, what is it that would make gas companies either more or less comparable with telecommunications carriers than electricity authorities?  Which is the comparator you would choose?

MR DOUGLAS:   I cannot imagine you would choose either, your Honour.

GLEESON CJ:   But if you had to choose one, why would you prefer electricity authorities to gas companies?

MR DOUGLAS:   There is no logical reason why you would make the choice, your Honour.

GLEESON CJ:   Maybe you would prefer gas companies because they are private enterprise and not State agencies.

MR DOUGLAS:   But that does not seem to be a good basis for comparison.

KIRBY J:   Not now.

GLEESON CJ:   So that is the ambiguity - an ambiguity in the legislation is found also in the explanatory memorandum on that approach.

MR DOUGLAS:   Firstly, your Honour – and secondly, that first example which is given, as we would read it, is an example of direct, not indirect, discrimination, and yet it is said to be an example of indirect discrimination.

GLEESON CJ:   At the moment, I have a feeling that the explanatory memorandum, if you can have recourse to it, does clear up some of the uncertainties in the legislation but not others.  For example, it rather indicates, does it not, an intention that what should be struck at is the law that imposes the taxation, rather than the law that grants the exemption?

MR DOUGLAS:   We prefer that approach.  I understand an alternative submission was made before, but it is not terribly illuminating for the reasons which we set out in paragraph 11 of our submissions in reply.  We regard it as being somewhat confusing.  The first example is one, as I have already said, of direct discrimination and yet it is said to be indirect discrimination.  The second is – if one goes to clause 45 of Schedule 3, one will see that there is a contemplation that there can in fact be some State laws on this matter.  It is really difficult to see how laws as described under that second bullet point would be consistent with Part 1 of Schedule 3. 

Possibly one of the most important considerations which one has to bring to bare in this analysis – and it is not only just a question of textual analysis, but it goes to constitutional power, because if on the one hand you have a law of the Commonwealth which says that a carrier shall not be subject to a particular burden, that is one thing.  On the other hand, if you have a law which says a carrier shall only be subject to a particular burden if all other entities within a relevant area are also subject to that burden, because that is effectively what is happening here and ‑ ‑ ‑

KIRBY J:   In brackets, because we frankly do not trust you and you are going to try to load us up with the costs.

MR DOUGLAS:   Yes, but if that is the nature of the law – and that is the nature of the law which we are dealing with here – one has to look at it in terms of section 51(v) and say, “Is that a law with respect to telecommunications?”, because on the one hand a law which says, “We relieve telecommunication carriers from these burdens”, well, that is ‑ ‑ ‑

KIRBY J:   But you have to read that with the provision that says, you will be liable to State and Territory taxes.  We accept that.  We will be liable for them.  But you will be liable for them on an equal playing field.

MR DOUGLAS:   Then you have to ask yourself the question, your Honour:  what business is it of the Commonwealth to demand of the State of New South Wales that in order for it to be able to levy payroll tax or charges under section 611 on a telecommunications carrier, it must charge its own State railways.  What has that to do with the subject matter of telecommunications?

GLEESON CJ:   Mr Douglas, is it the fact, in this case, that gas suppliers in New South Wales are not exempt from these charges, but gas suppliers in Victoria are exempt from the rates in question?

MR DOUGLAS:   I know that they are not exempt in New South Wales.  I understand that they are exempt in Victoria, your Honour.

GLEESON CJ:   I would not want to cause any unnecessary distress, but could a possible outcome of this case be that New South Wales wins and Victoria loses?

MR DOUGLAS:   I cannot imagine why that would bring about that result, your Honour.

GLEESON CJ:   Well, can I make a suggestion as to why it might bring about that result:  because in New South Wales, if you asked the question, “Are pipeline users exempt from tax?”, the answer is, “Some of them are and some of them are not”.  Whereas, in Victoria, if you asked the same question, the answer is, “Yes, they are all exempt”.  So that if you are enquiring whether it is discriminatory to impose a tax on telecommunications pipeline users, as a matter of fact you might get one result in New South Wales and a different result in Victoria.

MR DOUGLAS:   That would only be because one formed the view that those pipeline users were relevantly comparators for the purposes of clause 44.

GLEESON CJ:   Well, that might be because you formed the view that if you looked at the relevant comparators, in New South Wales it yielded no answer.  It certainly yielded no answer that justified a conclusion of discrimination, because some of the comparators paid tax and some of them did not.

MR DOUGLAS:   Your Honour, I still come back to saying that I find it very difficult to conceive of how a public utility, simply because it uses public land in New South Wales, is a comparator of a telecommunications company simply because it uses public land in New South Wales.  Or, if in fact they are, if a law does go that far, then I think, in our respectful submission, one has to look at it in terms of section 51(v), which is

relevantly the power which is sought to support it, because it becomes a law looking at its true character, which seeks to ensure equality of treatment between public utilities of the State of New South Wales and private telecommunications carriers, simply because they use the same land in New South Wales.

You then have to ask as a matter of characterisation, consistently for relevant principles which we have set out in our submissions, how is that a law with respect to telecommunications?  It is one thing to say it is a law which seeks to relieve a carrier of the burden, and if that affects an acquisition of property in the way in which Justice Callinan suggested before, well and good, we will get our compensation in a lump sum and not by regular payments under section 611.  But it is quite another thing not just to relieve the carriers of the burden but to say they shall only be subject to a burden on conditions that State instrumentalities and other favoured entities of the State of New South Wales are charged. 

GLEESON CJ:   You might want to think about this overnight and come back to it in the morning, but I have to say that, just as at present advised, I am having some difficulty in understanding why, if you are looking for a comparator of a pipeline user in New South Wales, you would select as your comparator the pipeline that carries electricity cables and reject as your comparator the pipeline that carries gas. 

MR DOUGLAS:   My response to that, your Honour, is to say that we reject both, but I will come back to that in the morning. 

GLEESON CJ:   Is that a convenient time? 

MR DOUGLAS:   Yes, it is. 

GLEESON CJ:   We will adjourn until 10.00 am. 

AT 4.18 PM THE MATTERS WERE ADJOURNED
UNTIL THURSDAY, 2 OCTOBER 2003