Clarence City Council v Commonwealth of Australia
[2020] FCAFC 134
•6 August 2020
FEDERAL COURT OF AUSTRALIA
Clarence City Council v Commonwealth of Australia [2020] FCAFC 134
Appeal from: Clarence City Council v Commonwealth of Australia [2019] FCA 1568 File numbers: TAD 35 of 2019
TAD 36 of 2019Judges: JAGOT, KERR AND ANDERSON JJ Date of judgment: 6 August 2020 Catchwords: HIGH COURT AND FEDERAL COURT – jurisdiction of the Federal Court – power to award declaratory relief – nature of a declaratory judgment – standing to seek declaratory relief – discretion to award declaratory relief – municipal councils seek declaration in respect of the interpretation and application of leases to which they are not a party – leases between Commonwealth and corporate lessees of airports – contractual mechanism for payment of rates, land tax and other taxes by lessees to councils – mechanism contemplates that councils will participate in, and derive benefits under, the leases – Commonwealth and lessees in agreement as to calculation of payments – councils dispute calculation of payments – whether councils have standing to seek declaratory relief – whether councils have a sufficient interest in declaratory relief – whether “matter” arises under laws made by Commonwealth Parliament
CONSTITUTIONAL LAW – judicial power of the Commonwealth – requirement for a “matter” – whether there is a “matter” before the Court – whether there is a justiciable controversy – whether there is an enforceable right, duty or liability to found a “matter”
CONTRACTS – doctrine of privity of contract – scope and effect – difference between executory and declaratory judgments – whether councils lack standing to seek declaratory relief because of inconsistency with doctrine of privity of contract – accord and satisfaction – estoppel
Held: appeals allowed – notices of contention dismissed –
a “matter” exists before the court – councils have standing to seek declaratory relief – councils have real commercial and practical interest in declaratory reliefLegislation: Airports Act 1996 (Cth)
Airports (Transitional) Act 1996 (Cth)
Commonwealth Places (Application of Laws) Act 1970 (Cth), s 4
Federal Court of Australia Act 1976 (Cth), ss 19(1), 21, 23
Fire Service Act 1979 (Tas), Div 3 of Pt VI
Judiciary Act 1903 (Cth), ss 39(1B), s 39A(1A), 39B(1A), 78B
Local Government Act 1993 (Tas), s 93A
Valuation of Land Act 2001 (Tas)
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Ainsworth v Criminal Justice Commission [1992] HCA 10; 175 CLR 564
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Milebush Properties Ltd v Tameside Metropolitan Borough Council [2011] EWCA Civ 270
Minister for Immigration and Multicultural and Indigenous Affairs v B (2004) 219 CLR 365
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Pape v Federal Commissioner of Taxation (2009) 238 CLR 1
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Pasini v United Mexican States (2002) 209 CLR 246
Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal (2012) 246 CLR 379
Plaintiff M61/2010E v Commonwealth (2010) 243 CLR 319
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Date of hearing: 4 May 2020 Registry: Tasmania Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 193 Counsel for the Appellants: Mr S B McElwaine SC with Ms K Cuthbertson Solicitor for the Appellants: Shaun McElwaine + Associates Counsel for the First Respondent: Mr C Lenehan SC with Ms K E Foley Solicitor for the First Respondent: HWL Ebsworth Lawyers Counsel for the Second Respondent: Dr K Stern SC with Ms L Coleman Solicitor for the Second Respondent: Corrs Chambers Westgarth
Table of Corrections 10 September 2020 In paragraph 36, “Commonwealth and the” and “each” has been deleted from the first sentence. 10 September 2020 The following sentence has been added to paragraph 36: “The Commonwealth filed amended defences which, by way of summary, denied that each of the Councils is entitled to the relief sought, pleaded that the form of certain declarations sought by the Councils were “impermissibly imprecise”, and pleaded that the jurisdiction or power of the court under which the Councils sought particular consequential relief was not identified”. 8 July 2021 In paragraph 10 of the judgment, a quotation mark has been inserted after the word “place”, to end the quotation. 8 July 2021 In paragraph 10 of the judgment, “Explanatory Memorandum, Airports Bill 1996 (Cth), p 8” has been replaced with “Explanatory Memorandum, Airports (Transitional) Bill 1996, p 9”. ORDERS
TAD 35 of 2019 BETWEEN: CLARENCE CITY COUNCIL
Appellant
AND: THE COMMONWEALTH OF AUSTRALIA
First Respondent
HOBART INTERNATIONAL AIRPORT PTY LTD (ACN 080 919 777)
Second Respondent
JUDGES:
JAGOT, KERR AND ANDERSON JJ
DATE OF ORDER:
6 AUGUST 2020
THE COURT ORDERS THAT:
1.The appeal is allowed.
2.The second respondent’s notice of contention is dismissed.
3.The orders made by the primary judge on 24 September 2019 be set aside.
4.The proceeding be remitted to the primary judge for final determination.
5.By 4.00 pm on 14 days after the date of this judgment, the parties are to file orders by agreement in respect of the costs of the application and cross-claim previously heard by the primary judge, and the costs of the appeal and the notice of contention heard by the Full Court, or, if no agreement is reached, written submissions (of no more than five pages) as to the appropriate orders in respect of these matters. The issue of costs will then be determined on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
TAD 36 of 2019 BETWEEN: NORTHERN MIDLANDS COUNCIL
Appellant
AND: THE COMMONWEALTH OF AUSTRALIA
First Respondent
AUSTRALIAN PACIFIC AIRPORTS (LAUNCESTON) PTY LTD (ACN 081 578 903)
Second Respondent
JUDGES:
JAGOT, KERR AND ANDERSON JJ
DATE OF ORDER:
6 AUGUST 2020
THE COURT ORDERS THAT:
1.The appeal is allowed.
2.The second respondent’s notice of contention is dismissed.
3.The orders made by the primary judge on 24 September 2019 be set aside.
4.The proceeding be remitted to the primary judge for final determination.
5.By 4.00 pm on 14 days after the date of this judgment, the parties are to file orders by agreement in respect of the costs of the application and cross-claim previously heard by the primary judge, and the costs of the appeal and the notice of contention heard by the Full Court, or, if no agreement is reached, written submissions (of no more than five pages) as to the appropriate orders in respect of these matters. The issue of costs will then be determined on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
TABLE OF CONTENTS
INTRODUCTION
[1]
BACKGROUND
[10]
Regulatory context
[10]
Leasing of federal airports
[14]
Entry into the leases
[18]
Valuation disputes
[23]
Councils’ application for declaratory relief
[33]
Primary judge’s decision
[38]
APPEALS TO THE FULL COURT
[42]
Grounds of appeal
[42]
Notices of contention
[44]
Hearing of the appeals
[46]
LEGAL PRINCIPLES
[49]
Judicial power, jurisdiction and the requirement of a “matter”
[50]
Declaratory relief
[57]
Federal Court’s statutory power
[57]
Standing, discretion and a “matter”
[67]
Doctrine of privity of contract
[76]
Third parties to a contract and declaratory relief
[95]
Meadows
[96]
JN Taylor
[98]
CE Health
[102]
Aussie Airlines
[107]
Ashmere Cove
[112]
Edwards
[119]
CGU
[122]
Reconciliation of principles
[128]
Existence and quality of the controversy
[132]
Absence of controversy between contracting parties
[133]
Enforceability of underlying right
[139]
Implications of the analysis above
[143]
Quality of the applicant’s interest
[145]
APPLICATION TO THE PRESENT CASE
[154]
Existence and quality of the controversy
[154]
Accord and satisfaction
[155]
Estoppel
[164]
Subject matter element
[168]
Quality of the Councils’ interests in the declaratory relief
[173]
New grounds on appeal?
[175]
Characterisation of the Councils’ interests in relief
[177]
Statutory consequences regarding fire service contribution
[184]
Discretion to refuse relief
[188]
CONCLUSION
[191]
REASONS FOR JUDGMENT
THE COURT:
INTRODUCTION
The appellants in these two proceedings (Councils) are councils for municipal areas in the State of Tasmania. In these proceedings, the Councils seek to obtain declaratory relief in respect of the interpretation and application of contracts to which the Councils are not parties. The question for determination is whether they are entitled to do so. This raises interrelated issues concerning this Court’s jurisdiction and power to award declaratory relief, a party’s standing to obtain such relief, and the common law doctrine of privity of contract.
The appellant in the first proceeding, Clarence City Council, administers a municipal area covering the eastern suburbs of Hobart and surrounding localities. The appellant in the second proceeding, Northern Midlands Council, administers a municipal area that extends from the south of Launceston to the Tasmanian central midlands. Relevantly for the present case, the territories administered by the Councils include the Hobart International Airport and Launceston Airport (Airports) respectively.
Due to constitutional limitations, the Councils do not have power to levy rates or charges in respect of the sites covered by the Airports, which are owned by the Commonwealth. At the time of the privatisation of Australia’s federal airports in the 1990s, this was perceived to create a competitive imbalance between the operators of the Airports (amongst other newly privatised airports) and their actual or potential competitors. To implement a policy of “competitive neutrality”, the Commonwealth resorted to a contractual solution, which is now the subject of the present litigation.
The Councils seek declarations in respect of two separate leases (leases) between the first respondent in each proceeding, the Commonwealth, and the second respondents in each proceeding, the respective lessees of the Airports—Hobart International Airport Pty Ltd and Australian Pacific Airports (Launceston) Pty Ltd (collectively, Lessees). The leases include a mechanism to the effect that, where council rates and taxes are not payable by the Lessees because the Airport site is owned by the Commonwealth, the Lessees must pay to the relevant Council an amount, as notified by the Council, calculated according to certain parameters described in the leases. The Councils, however, are not parties to the leases.
As a result of events detailed in these reasons, the Councils (which are opposed in this respect by the Commonwealth and the Lessees) contend that the Lessees have failed to pay the Councils the amounts which the Lessees are obliged to pay under the leases. The dispute results from differing interpretations of the leases relating to the manner in which the payments are to be calculated. The difficulty for the Councils is that, despite being ostensible participants in (and purportedly intended recipients of benefits under) the leases, they are not parties to the leases and are accordingly not entitled to enforce the leases’ terms. In these circumstances, the Councils instead seek declaratory relief in this Court in respect of the interpretation and application of the leases.
However, the primary judge held that the Councils had no standing to seek such relief. According to his Honour, to grant the Councils standing in the present case would be to jettison the fundamental and binding common law doctrine of privity of contract. The primary judge consequently dismissed the Councils’ proceedings.
With great respect to the primary judge, the claim in this proceeding by a third party to a contract for declaratory relief in respect of the interpretation of that contract does not raise the privity doctrine. Instead, the question of standing is to be determined by reference to, in particular, the constitutional and statutory requirement for a “matter”, and the test for standing applicable to claims for declaratory relief. In the present case, these matters centre on, first, the existence and quality of the controversy regarding the Councils’ claim to declaratory relief and, second, the quality or character of the Councils’ interest in that relief.
For these reasons expressed below, the Councils have standing to seek the declaratory relief in respect of the interpretation and application of the leases. Although the parties to the leases—the Commonwealth and the Lessees—are not in dispute, this is not, by itself, an impediment to the crystallisation of a justiciable controversy. Moreover, in the present case, the Councils, which are participants and beneficiaries under the terms of the leases, have a sufficient interest in the declaratory relief sought, which, if granted, would be of real commercial and practical importance to the Councils.
On this basis, we allow the Councils’ appeals and dismiss the Lessees’ notices of contention. Although the Councils have standing, it remains to be determined whether the Councils are entitled to the declaratory relief sought in the circumstances of the present case. The proceedings will be remitted to the primary judge to determine that question.
BACKGROUND
Regulatory context
In the 1990s, the Commonwealth privatised Australia’s federal airports and entered into long-term leases with private airport operators (including the Lessees in respect of the Airports). A central event in this process was the enactment of the Airports Act 1996 (Cth) (Airports Act) and the Airports (Transitional) Act 1996 (Cth) (Transitional Act). The role of the Airports Act was “to establish the regulatory arrangements to apply to the airports currently owned and operated on behalf of the Commonwealth by the Federal Airports Corporation (FAC), and Sydney West Airport, following the leasing of those airports”: Explanatory Memorandum, Airports Bill 1996 (Cth), p 1. The role of the Transitional Act was to put in place “a framework which gives effect to the Government’s decision to lease all the Federal airports effectively as ongoing businesses with staff and management in place” under a two stage process, with leases over the major Federal airports at Sydney and Sydney West, Melbourne, Brisbane and Perth to be sold in a first phase and the remainder of the Federal airports to be sold in a second phase: Explanatory Memorandum, Airports (Transitional) Bill 1996 (Cth), p 9. See generally Australian National Audit Office, Management of Federal Airport Leases, Audit Report No. 50 2003–04 (Australian National Audit Office, Canberra, 2004) pp 9 and 27-28; Australian National Audit Office, Management of Federal Airport Leases: Follow Up, Audit Report No. 25 2006–07 (Australian National Audit Office, Canberra, 2007) pp 11 and 21-23 and Bartsch RIC, Aviation Law in Australia (5th ed, Thomson Reuters, 2019) pp 596-598.
The privatisation of Australian airports, and the operation of the Airports Act and Transitional Act, have been judicially considered in various contexts: Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406 (Aussie Airlines) at 407-408 per Lockhart J (with Spender and Cooper JJ agreeing); Brisbane Airport Corp Ltd v Wright [2002] FCA 359; 120 FCR 157 at [3]-[13] per Dowsett J; Ryan v Westgroup Pty Ltd (Receivers And Managers Appointed) [2004] WASC 1 at [11]-[14] per Pullin J; Village Building Co Ltd v Canberra International Airport Pty Ltd (No 2) [2004] FCA 133; 134 FCR 422 at [13] per Finn J; Westfield Management Ltd v Brisbane Airport Corporation Ltd [2005] FCA 32 at [18]-[38] per Cooper J; Direct Factory Outlets Pty Ltd v Westfield Management Ltd [2005] FCA 34; 144 FCR 23 at [18]-[38] per Cooper J; Police and Nurses Credit Society Ltd v National Australia Bank Ltd [2005] WASCA 68 at [32]-[37] per McKechnie J and [62]-[64] per Simmonds J; Virgin Blue Airlines Pty Limited [2005] ACOMPT 5; 195 FLR 242; (2006) ATPR 42-092 at [18]-[24] per Goldberg J, Mr G F Latta and Dr J S Marsden; Sydney Airport Corporation Ltd v Australian Competition Tribunal [2006] FCAFC 146; 155 FCR 124 at [41] per French, Finn and Allsop J and Commonwealth of Australia v Essendon Airport Pty Ltd [2019] FCA 1411 (Essendon Airport) at [5]-[15] per Steward J.
At the time of privatisation, the Commonwealth was concerned to create a “level playing field” between the operators of these newly privatised airports and their actual or potential competitors. A source of the perceived competitive imbalance was the fact that Commonwealth land (which the new operators leased) was not amenable to council rates or State land taxes, while their actual or potential competitors were liable to pay such rates and taxes. This results from s 114 of the Constitution, which, for reference, provides as follows:
A State shall not, without the consent of the Parliament of the Commonwealth, raise or maintain any naval or military force, or impose any tax on property of any kind belonging to the Commonwealth, nor shall the Commonwealth impose any tax on property of any kind belonging to a State.
The Commonwealth’s concern particularly stemmed from the principle of “competitive neutrality” to which the Commonwealth and the States and Territories had agreed in a “Competition Principles Agreement” dated 11 April 1995. An overarching purpose of that agreement, as described in its preamble, was “to achieve and maintain consistent and complementary competition laws and policies which [would] apply to all businesses in Australia regardless of ownership”. For general background, see Rail Access Corporation v New South Wales Minerals Council Ltd (1998) 87 FCR 517 at 518 per Black CJ, Wilcox and Goldberg JJ; Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2012] HCA 36; 246 CLR 379 at [71] per French, Gummow, Hayne, Crennan, Kiefel and Bell JJ; Essendon Airport at [16] and Miller RV, Miller’s Australian Competition Law and Policy (3rd ed, Thomson Reuters, 2018) pp 55-58, 409, 463-466 and 501-512.
Leasing of federal airports
The Transitional Act provided for the leasing of federal airport sites to both Commonwealth-owned companies and privately owned companies. In the case of leases to Commonwealth-owned companies, provision was also made for the sale of shares in those companies to new owners. At the time of entry into the leases, s 3 of the Transitional Act described the regulatory context as follows:
Simplified outline
The following is a simplified outline of this Act:
•This Act provides for the leasing of certain airports.
•Airport land and other airport assets will be transferred from the Federal Airports Corporation (FAC) to the Commonwealth.
•The Commonwealth will grant an airport lease to a company. The company is called an airport-lessee company.
•Immediately after the grant of the airport lease, the Commonwealth may transfer or lease certain assets to the airport-lessee company.
•Certain employees, assets, contracts and liabilities of the FAC will be transferred to the airport-lessee company.
Then, in Pt 3 of the Transitional Act (entitled “Original grants of airport leases to companies”), s 21 relevantly provides as follows:
Commonwealth may grant airport lease to a Commonwealth-owned company
(1) The Commonwealth may grant an airport lease under this section.
(2) The Commonwealth must not grant an airport lease under this section unless the lessee is a company all of whose shares are beneficially owned by the Commonwealth.
(3) If a purported lease contravenes subsection (2), it is of no effect …
Section 22 of the Transitional Act similarly provides as follows:
Commonwealth may grant airport lease to a company that is not owned by the Commonwealth
(1) The Commonwealth may grant an airport lease under this section.
(2) The Commonwealth must not grant an airport lease under this section unless the lessee is a company none of whose shares are beneficially owned by the Commonwealth.
(3) If a purported lease contravenes subsection (2), it is of no effect.
The term “airport lease” adopted in ss 21 and 22 is defined by reference to its meaning in the Airports Act: s 4 of the Transitional Act. At the time of entry into the leases, s 5(1) of the Airports Act relevantly provided as follows:
airport lease means a lease of the whole or a part of an airport site, where:
(a) the Commonwealth is the lessor; and
(b) if the airport is not a joint-user airport—the leased area includes the airport runways; and
(c) if the airport is a joint-user airport—the leased area consists of the area ascertained in accordance with the regulations.
Entry into the leases
To facilitate the privatisation of the Airports, the Commonwealth granted the leases to the Lessees in respect of each Airport pursuant to s 22 of the Transitional Act (extracted above at [16]). The lease for the Hobart International Airport is dated 10 June 1998, commencing on 11 June 1998, and is for a term of 50 years, with a 49 year option to renew. The lease for the Launceston Airport is dated 28 May 1998, commencing on 29 May 1998 and is for the same term as the Hobart Airport lease. Each of the leases are in materially similar terms. The following provisions of the leases are key.
The opening clause of each lease explains the context and operation of the agreement as follows:
1.1 LEASE AND CONCURRENT LEASE
In consideration of the payment by the Lessee to the Lessor of a premium which is not refundable in any circumstances, the Lessor grants to the Lessee pursuant to the Airports (Transitional) Act 1996 a Lease of the Airport Site (including the Structures) for the Term. This Lease operates as a concurrent lease over all that part of the Airport Site which is the subject of leases existing as at the Grant Time.
For the purposes of the present case, the key provision of the leases is clause 26 (titled “Rates and Land Tax and Taxes”), which provides (in full) as follows:
26.1PAYMENT OF RATES AND LAND TAX AND TAXES
The Lessee must pay, on or before the due date, all Rates, Land Tax and Taxes without contribution from the Lessor.
26.2EX GRATIA PAYMENT IN LIEU OF RATES AND LAND TAX
(a)Where Rates are not payable under sub-clause 26.1 because the Airport Site is owned by the Commonwealth, the Lessee must promptly pay to the relevant Governmental Authority such amount as may be notified to the Lessee by such Governmental Authority as being equivalent to the amount which would be payable for rates as if such rates were leviable or payable in respect of those parts of the Airport Site:
(i)which are sub-Leased to tenants; or
(ii)on which trading or financial operations are undertaken including but not limited to retail outlets and concessions, car parks and valet car parks, golf courses and turf farms, but excluding runways, taxiways, aprons, roads, vacant land, buffer zones and grass verges, and land identified in the airport Master Plan for these purposes,
unless these areas are occupied by the Commonwealth or an authority constituted under Commonwealth law which is excluded from paying rates by Commonwealth policy or law. The Lessee must use all reasonable endeavours to enter into an agreement with the relevant Governmental Authority, body or person to make such payments.
(b) Where Land Tax is not payable under sub-clause 26.1 because the Airport Site is owned by the Commonwealth, payments in lieu of Land Tax must be made by the Lessee in respect of those parts of the Airport Site:
(i) which are sub-leased to tenants; or
(ii) on which trading or financial operations are undertaken including, but not limited to, retail outlets and concessions, car parks and valet car parks, golf courses and turf farms, but excluding runways, taxiways, aprons, roads, vacant land, buffer zones and grass verges, and land identified in the airport Master Plan for these purposes,
unless these areas are occupied by the Commonwealth or an authority constituted under Commonwealth law which is excluded from making payments by Commonwealth policy or law. Unless otherwise directed by the Lessor, the Lessee will make payments promptly in lieu of land tax at the relevant State rate to the Commonwealth addressed as provided for in subclause 24.1.
These payments in lieu of Land Tax will be levied on a financial year basis. The Lessee must submit an assessment of the payment in lieu of land tax to the Commonwealth on 31 August of the current financial year with this payment due 30 days later. Land value assessment for the purposes of making payments .in lieu of land tax are required at least every three years.
(c) Where Taxes such as stamp duty, payroll tax, financial institutions duty and debits tax imposed by a Governmental Authority are not payable by the Lessee because they are Taxes on transactions, instruments or activities on or related to the Airport Site owned by the Commonwealth, the Lessee must pay to the relevant Governmental Authority such amount as is equivalent to the amount which would be payable for such Taxes if such Taxes were leviable or payable.
For the purposes of cll 26.1 and 26.2(a), the word “Rates” is defined to mean “all rates (including water rates and sewerage rates), and levies to defray expenses levied or imposed by a Governmental Authority on land or on owners or occupiers of land in relation to their ownership or occupation of that land”. For this purpose, and for the purposes of cll 26.2(a) and (c), the Councils, as established under the Local Government Act 1993 (Tas), are the relevant “Governmental Authority” in respect of each Airport.
The leases also relevantly contain an “entire agreement” clause as follows:
28.ENTIRE AGREEMENT
The terms of this Lease constitute the entire agreement between the parties for the subject matter referred to in this Lease and all prior arrangements, agreements, representations and undertakings will have no effect. No modification or alteration of any clause of this Lease will be valid except in writing signed by each party.
Valuation disputes
The final sentence of cl 26.2(a) of the leases requires the Lessees to use all reasonable endeavours to enter into an agreement with the Councils to make the payments to the Councils contemplated by cl 26.2(a). There is only one instance of such an agreement, namely an agreement dated 14 May 2004 between Clarence City Council and Hobart International Airport Pty Ltd (Hobart Lessee), which specified the basis upon which the “Lease Compliance Payments” (as defined in that agreement) would be payable by the Hobart Lessee to Clarence City Council. This included prescribing the areas of the Hobart International Airport that were subject to such payments. The term of the agreement, however, was only five years. The agreement was not renewed, and there is no suggestion that the agreement was subsequently applied by way of a holding over mechanism.
With that exception, the Lessees and the Councils have not entered into any agreement of the type contemplated by the final sentence of cl 26.2(a) of the leases. Notwithstanding the absence of such agreements, the Lessees have made payments to the Councils in accordance with independent valuations of the Airports in each financial year since the commencement of the leases. This conduct continued without trouble until the 2014 financial year.
In the 2014 financial year, the Valuer-General for Tasmania (Valuer-General) undertook a revaluation of each Airport site. The outcome, in broad terms, was a significant increase in the quantum of the equivalent amount payable by the Lessees to the Councils under the leases. The Lessees objected to the Valuer-General’s valuation, and protracted correspondence and meetings between the Lessees, Councils and the Commonwealth ensued.
The valuation dispute broadly related to two issues. The first is the identification of the portions of each Airport site that are to be included for the purposes of the calculation under cl 26.2(a) of the leases. For instance, the Lessees contended that the calculation should not extend to the common user areas of each Airport, such as the check-in areas and the departure lounges. The second issue is whether the methodology applied by the Valuer-General resulted in correct assessments. The Lessees said that the Valuer-General applied the wrong methodology to determine the capital value and the assessed annual value of the areas to which the equivalent amount calculation was to be applied.
In an endeavour to resolve the disputes, the Commonwealth engaged an independent valuer, Herron Todd White (HTW). On 19 March 2016, the Commonwealth informed Australian Pacific Airports (Launceston) Pty Ltd (Launceston Lessee) by letter that HTW had provided a valuation report that “accord[ed] with the terms of the lease”; that “the ex-gratia rates determination accurately reflects the obligation imposed on [the Launceston Lessee] for payments in lieu of rates”; and that “… as the Department understands [the Launceston Lessee] has made payment to [Northern Midlands Council] exceeding the amounts determined in the report, it considers [the Launceston Lessee] to have met its lease obligation for the years addressed by the valuation” (that is, the 2014, 2015 and 2016 financial years). The Commonwealth wrote to the same effect to the Hobart Lessee on 3 June 2016.
On 24 August 2016, the Commonwealth further informed the Launceston Lessee by email that it would be “asking the independent valuer to revisit the valuations” but “would not expect the most recent ex-gratia payments to be revisited”.
After HTW provided a revised valuation report dated 4 April 2017, the Commonwealth, on 5 May 2017, informed the Lessees by separate letters that “[g]oing forward”, absent any formal agreement between the respective Councils and Lessees, it would consider the Lessees compliant with the obligation in cl 26.2(a) “should it make payments in lieu of rates to [the Councils] on the basis of a valuation and methodology consistent with” the revised HTW valuation. Relevantly, HTW did not apply a value to the common user areas in its revised valuation.
The Lessees subsequently paid the respective Councils for the purposes of cl 26.2(a) of the leases on the basis of the valuations and methodology set out in HTW’s revised valuation report for the 2017 and 2018 financial years.
As a result of these events, the parties to the leases—the Commonwealth and the Lessees—are not in dispute about the operation of cl 26.2(a) of the leases or the Lessees’ compliance with that sub-clause. Instead, the Commonwealth’s position is that the Lessees have paid the appropriately calculated amount of equivalent rates for the relevant financial years and, provided that the Lessees pay rates in the future on the basis of a valuation and methodology consistent with HTW’s revised valuation, then the Lessees will be acting in accordance with the terms of cl 26.2(a) of the leases.
The engagement of HTW, however, did not resolve the disputes from the Councils’ perspective. This was because the Lessees made payments to the Councils in amounts calculated in accordance with HTW’s valuations, and not the (higher) amounts (based on the Valuer-General’s valuation) that were notified by the Councils in rates notices sent each year. The Councils do not accept that these payments by the Lessees satisfied the Lessees’ obligations under cl 26.2 of the leases.
Councils’ application for declaratory relief
The Councils commenced proceedings in this Court in July 2018. In the proceedings before the primary judge, the Councils sought declaratory relief with respect to the proper construction of cl 26.2(a) of the leases, and the Councils’ entitlement to receive payments under that sub-clause.
The declarations sought by the Councils in respect of each lease were in materially identical terms. The declarations sought by Clarence City Council in relation to the Hobart International Airport site, pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (FCA Act), were as follows:
(a)Upon a proper construction of clause 26.2 of a Lease Agreement entered into between the first respondent as Lessor, and the second respondent as Lessee, dated 10 June 1998 and granted in respect of the land known as the Hobart Airport (the Lease) the areas that must be included in the calculation of the ex-gratia rates equivalent payment includes each of the areas specified in attachment ‘A’ to the amended statement of claim;
(b)A declaration that the second respondent is obliged to make payments to the applicant pursuant to clause 26.2 of the lease:
(a)calculated in accordance with valuations made by the Valuer-General pursuant to the Valuation of Land Act 2001 and as set out in the valuation list; and
(b)as notified by the applicant in each rates notice issued by it to the second respondent.
(c)A declaration that the second respondent has not correctly calculated the amount of each of the ex-gratia payments that it has made to the applicant in each of the financial years 2014/2015 – 2017/2018 inclusive pursuant to the Lease; and
(d)Alternatively, a declaration as to how the ex-gratia payment in lieu of rates is to be calculated in accordance with clause 26.2 of the Lease.
The relevant aspects of Clarence City Council’s amended statement of claim (which is in relevantly identical terms to Northern Midlands Council’s amended statement of claim) were extracted at [16] of the primary judge’s reasons. The Councils concede that they are not privy to the leases, and thereby do not have an entitlement to sue on the leases. They further accept that, in seeking declaratory relief in respect of the leases, they are not asserting any statutory entitlement (with one exception briefly discussed from [184] below), nor do they claim that the benefit of a contractual promise was held on trust for them. The Councils nonetheless claim to be entitled to declaratory relief on the basis that they are directly and financially concerned in the correct interpretation of the leases, and the application of the leases in respect of the Airports.
The Lessees filed amended defences, which, relevantly for present purposes, pleaded that the Councils did not have standing to seek and obtain declaratory or consequential relief; that the Councils’ claims did not involve a justiciable controversy such as to constitute a “matter”; and that, having regard to the foregoing, the Court should otherwise refuse to grant declaratory relief in the exercise of its discretion. The Commonwealth filed amended defences which, by way of summary, denied that each of the Councils is entitled to the relief sought, pleaded that the form of certain declarations sought by the Councils were “impermissibly imprecise”, and pleaded that the jurisdiction or power of the court under which the Councils sought particular consequential relief was not identified. The Lessees further filed cross-claims seeking declaratory relief in connection with their allegation that, on the basis that they had reached agreements with the Commonwealth regarding the quantum of payments to be made under cl 26.2(a) of the leases, any cause of action the Commonwealth may have had against the Lessees under that sub-clause had been discharged by accord and satisfaction or, alternatively, that the Commonwealth was estopped from resiling from those agreements.
The trial of both proceedings before the primary judge involved extensive evidence and lengthy cross-examination about proper land valuation methodologies. There was also detailed oral and written submissions concerning, among other matters, the proper construction of the leases (in particular cl 26.2(a)); the admissibility of evidence; parliamentary privilege; and whether a fire service rate “levied” by the Councils is a fee for service or a tax.
Primary judge’s decision
On 24 September 2019, the primary judge dismissed the Councils’ proceedings: Clarence City Council v Commonwealth of Australia [2019] FCA 1568 (Primary Judgment). Although the primary judge received substantial evidence at trial regarding the proper construction and application of the leases, his Honour dismissed the Councils’ applications solely on the basis that the Councils lacked standing to seek the declaratory relief in their applications: ibid at [14] and [63].
The primary judge observed that the Councils accepted that the Commonwealth and the Lessees were not in dispute about the operation of cl 26.2(a) of the leases, nor the Lessees’ compliance with that sub-clause: Primary Judgment at [23]-[24]. Then, after outlining the parties’ submissions on standing, the primary judge set out (at [42]-[62]) his reasons for dismissing the Councils’ claim to standing. As aspects of his Honour’s reasoning are considered below, it is convenient to extract the primary judge’s consideration in full:
Consideration of standing issue
[42]As Deane J said in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 [(Trident)], at 141: “At the time of the establishment of this Court, the common law of England and of this country was long settled in its insistence upon the principle of privity of contract, that is to say, the general rule that only the parties to a contract are bound by, and entitled to enforce, its terms”. Over the course of the 20th century, the cases “have served only to reinforce the principle of privity of contract as a fundamental rule of the common law” (at 141, per Deane J).
[43]It follows that “a third party is neither bound by nor entitled to enforce the terms of a contract between others” (Trident at 142, per Deane J). As Deane J in Trident makes clear, that is a fundamental and binding common law rule.
[44]Deane J (at 143) cited with approval the following passage from the first edition of Professor Anson’s work, to which I have taken the liberty of adding the party equivalents in these proceedings:
A contract is an agreement between two or more persons, by which an obligation is created, and those persons are bound together thereby. If the obligation takes the form of a promise by A [the lessees] to X [the Commonwealth] to confer a benefit upon M [the Councils], the legal relations of M [the Councils] are nevertheless unaffected by that obligation. [They were] not a party to the agreement. [They were] not bound by the vinculum juris which it created, and the breach of that legal bond cannot affect the rights of a party who was never included in it.
[45]Deane J continued (at 143):
This explanation of the general rule remains valid to the present day. Indeed, it corresponds with that advanced by Barwick CJ in [Coulls v Bagot’s Executor & Trustee Co, Ltd (1967) 119 CLR 460, at 478] when his Honour commented that he would “find it odd that a person to whom no promise was made could himself in his own right enforce a promise made to another”. As those explanations make clear, the rule of privity is not properly to be seen as a rule of exclusion of rights of action which would otherwise exist. It is a statement or reflection of an aspect of the nature of a contract, namely, that a contract between two or more parties does not, of itself, directly confer rights or impose liabilities upon persons who are not parties to it. If a third party is to be entitled to rights and subject to obligations in relation to a contract to which he is a stranger, those rights and obligations must have some basis, either in statutory provision or in common law principle, beyond the mere contract. They cannot be based merely on the contract since the contract, of itself, directly operates only between the parties to it …
(Emphasis added).
[46]During the course of his reply in closing, senior counsel for the applicants, Mr S B McElwaine SC, submitted that the councils’ case “turns on the proposition that subjectively the parties to the agreement are mistaken as to the correct legal interpretation and then the effect of the clause or the bite of the clause upon the designated portions of the airport site. And the strongest argument that can be put in favour of the councils on that point is that the subjective intention of the parties, what they presently believe, what they believed at the time, is irrelevant. That is the consequence of the application of the objective theory of contract interpretation”.
[47]He continued: “The objective theory sometimes produces a result that neither party intended, but that’s the consequence of it. So all we seek to do is to have this court determine the legal meaning of the contract and it matters not that the parties to it are ad idem in their understanding if that understanding is wrong”.
[48]Later on, Mr McElwaine put the proposition that it is not necessary to establish that some legal right of the councils is infringed, and that it is sufficient if they are “to receive a benefit under a contract to which one is not a party by reason of the imposition of an obligation by one contracting party upon the other”.
[49]At that point, I asked him: “But doesn’t [that] run headlong into what Deane J said in Trident, that the right can’t be derived from the contract itself, otherwise why do we have a privity rule?” Our exchange continued:
MR McELWAINE SC : No. And I didn’t mean to submit that … It’s not founded in this case upon some right that arises under the contract to interfere with the contract.
O’CALLAGHAN J: So what is it founded on?
MR McELWAINE SC: It’s the benefits that are received from a proper interpretation and application of a contract. So it goes back to the objective contract theory point…
[50]With the greatest respect to counsel, it seems to me that our exchange puts into sharp relief the fact that the councils’ case does run headlong into the fundamental proposition enunciated by Deane J in Trident that if a third party is to be entitled to rights in relation to a contract to which it is a stranger, those rights must have some basis beyond the mere contract, and that if they have no such basis, the law will not recognise them.
[51]As is apparent from the oral submissions to which I have referred, the councils’ case is founded squarely upon an insistence that the parties to the contract have got the question of what their agreement means wrong. As Mr McElwaine put it, the councils’ case is premised upon the contention that “the parties to the agreement are mistaken as to the correct legal interpretation and … the effect of the clause”. See [46] above. That submission, it seems to me, makes it plain that the councils’ asserted “right” is based “merely on the contract”.
[52]So much is also made clear in the councils’ replies dated 9 November 2018 (see [20] above), in which they plead that they have standing because the circumstances are such that they have a real interest in the subject matter of the declarations that they seek, being the economic advantage that will accrue to them, depending upon the meaning of the provisions of the lease that are in issue in these proceedings.
[53]As Deane J made clear in Trident, in language that admits of no ambiguity or relevant qualification (see [45] above), that will not do, because a stranger’s right to declaratory or other relief in respect of rights under a contract, if it is to have such a right, cannot be based merely on that contract. That is because “it is of the very nature of a contract that it does not, of itself, confer any direct right of enforcement upon a person who is not a party to it”. See Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, at 142, per Deane J.
[54]In CGU Insurance Ltd v Blakeley (2016) 259 CLR 339 at 370-371, [92]-[96], Nettle J said that CGU’s submission that the lack of contractual privity between it and the liquidators deprived CGU and the liquidators of the character of adversaries (with the result that there was no justiciable controversy between them) required consideration separately from the question of Federal jurisdiction [omitting [92]-[96] of Nettle J in CGU].
[55]The councils contended that they are not relevantly an “outsider” in the sense that Nettle J uses the term; that whether one is, or is not, an outsider “turns on a fact-specific inquiry”; and that their case should be regarded as falling within one of the “exceptions” that his Honour alluded to because of the real and substantial financial interest that the councils have in the outcome of the case.
[56]I do not agree, because, for the reasons given by Deane J in Trident that I have dealt with above, to do so, in a case such as this, would involve jettisoning the doctrine of privity.
[57]CGU Insurance Ltd, upon which the councils placed considerable reliance, is a case of a quite different type, because there the plaintiff liquidator relied on statutory rights (namely those arising under s 562 of the Corporations Act and s 117 of the Bankruptcy Act). As the lessees submitted, CGU Insurance Ltd does not support any abandonment of the principle of privity of contract, nor does it support an entitlement to declaratory relief in every case in which a third party may have an expectation of an economic benefit under a contract between other entities.
[58]In his closing oral submissions, Mr McElwaine also emphasised the decision of Lockhart J (Spender and Cooper JJ agreeing) in Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406. In that case the parties to the relevant head lease, the Federal Airports Corporation (the FAC), as the head lessor, and Qantas, as the head lessee, were in heated dispute about whether Aussie Airlines was “a new entrant to the domestic aviation industry”. Qantas said they were not and the FAC said they were. It followed that Qantas was “plainly a contradictor”. See Aussie Airlines at 415. As Neill LJ (Nourse LJ agreeing) said in Meadows Indemnity Co Ltd v The Insurance Corporation of Ireland plc [1989] 2 Lloyd’s Law Reports 298 at 304-305, cases where a plaintiff seeks a declaration as to its legal rights which are being contested by a defendant “despite the absence of any direct contractual link”, and where the declaration is sought to resolve an issue between the plaintiff and the defendant, fall into a different category. Even in cases that do fall into such a category, whether a stranger, not seeking to invoke a statute, or claiming the benefit of a trust, or a relevant expectation of a benefit, or any other so called “exception” to the privity rule, will be entitled to declaratory relief will depend upon all the circumstances of the case. (As to there being no “true exceptions” to the rule of privity, see Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 135 (per Brennan J), and 143 (per Deane J)).
[59]In this case, on the other hand, to adopt what Ormiston JA said in CE Heath v Pyramid Building Society [1997] 2 VR 256 at 270, the “two parties [to the contract] … [have] not themselves raised any issue as to its meaning and effect and at least one of whom [the lessee in each case] object[s] to the court’s interfering with [their] private affairs”. In a case such as that – that is, in this case – where the parties agree that the terms of their agreement have been complied with, and where no source of a right is claimed other than the terms of that agreement, the applicant has no standing to seek declaratory relief, for the reasons explained by Deane J in Trident.
[60]In any event, Aussie Airlines cannot be read to effect by a side wind a radical change to principles of privity that have been well understood and accepted in Australia since the 19th century. But to accept the councils’ submission about that case would, with great respect, do just that.
[61]Mr McElwaine also took me to two decisions of the English Court of Appeal which assert that the law has “moved on” since the decision in Meadows Indemnity, and that declaratory relief is now, at least in England, not to be refused on the ground that the claimant is not a party to the relevant contract. See Feetum v Levy [2006] Ch 585, at 606, [82] and Milebush Properties Limited v Tameside Metropolitan Borough Council [2011] EWCA Civ 270 at [35]-[45]. But those cases are of doubtful authority. As the learned authors of Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed., 2015) at [19-205] observe, since many previous decisions bound the Courts of Appeal in those cases, “it is difficult, with respect, to see that it was open to [those courts] to state the law differently, particularly by stating that whether a plaintiff who seeks a declaration has a private right against the defendant is merely a matter going to the court’s discretion. The suggestion that the law had ‘moved on’ is concerning. It makes insufficient allowance for the fact that binding decisions stated the law to different effect”.
[62]Whatever the position in England, the observations in Feetum and Milebush to which I have referred above do not represent the law in Australia. As Nettle J said in CGU Insurance Ltd at 371, [96], the proposition articulated in Meadows Indemnity that a person not a party to a contract has no locus, save perhaps in exceptional circumstances, to obtain a declaration in respect of the rights of other parties to that particular contract because it would be contrary to the whole principle of privity “largely accords” with Australian authority.
As the Councils lacked standing to seek the declaratory relief, the primary judge concluded that both proceedings were to be dismissed: Primary Judgment at [14] and [63].
On 18 October 2019, after receiving short written submissions from the parties, the primary judge ordered that the Councils pay the Lessees’ costs of the proceedings, including the costs of the Lessees’ cross-claim against the Councils: Clarence City Council v Commonwealth of Australia [2019] FCA 1721.
APPEALS TO THE FULL COURT
Grounds of appeal
The Councils appealed the primary judge’s decision to the Full Court on 8 October 2019. The notices of appeal filed by the Councils (which were materially identical) sought that the primary judge’s orders be set aside, and for the proceedings to be remitted to the primary judge for final determination. The notices of appeal raise the following grounds of appeal:
The learned primary judge erred in law as follows:
1.At [50-51], [53], [56] and [59] in concluding that the privity of contract doctrine operated to deny standing to the appellant for the reason that the claims asserted did not have some basis beyond the mere contract when, properly understood:
(a).the appellant did not sue on the lease so as to directly enforce it;
(b).the obligation that is created at clause 26.2 of the lease is incapable of operation absent the taking of action by the appellant namely notification of the equivalent amount to the lessee in each rating year;
(c).a question before the Court was whether the appellant had given notification of the equivalent amount to the lessee calculated in the manner that the contracting parties required in order to effectuate their bargain;
(d).the answer to that question did not turn upon the common subjective understanding of the contracting parties as to the meaning of clause 26.2; and
(e).the declarations sought were functionally related to the role that the contracting parties assumed the appellant would perform by giving notice of the equivalent amount payable;
2.In his reasoning at [50-51] and [53] and in his conclusion at [55-56] that the appellant was an ‘outsider’ without standing to apply for the declarations that were sought when, correctly understood, a declaration as to the meaning of clause 26.2 would enable the appellant not as an outsider but as the notifier under the contract to correctly calculate and then advise the lessee of the equivalent amount;
3.In his reasoning at [57] in distinguishing CGU Insurance Ltd v. Blakeley in that he misunderstood that before the appellant could have an expectation of benefit under the leases, it was necessary, as an anterior step, to calculate and notify the lessee of the equivalent amount in a manner consistent with the requirements of the lease and for that reason the declarations sought did not amount to an impermissible incursion upon, an attempt to act inconsistently with or an abandonment of the privity of contract doctrine;
4.At [58] in distinguishing this Court’s decision in Aussie Airlines Pty Ltd v. Australian Airlines Ltd by confining the principles there set out to cases of controversy between contracting parties when, properly understood, those principles may apply to cases where:
(a).the controversy is between the claimant and the contracting parties;
(b).resolution of that controversy turns on the objective meaning of the contract; and
(c).the outcome impacts upon the claimant’s commercial interests or is otherwise of real and practical importance and is not hypothetical;
5.At [55]-[56], [58], [59] and or [62] in that he confined his analysis of cases that may involve ‘exceptional circumstances’ to those:
(a).where the source of the right claimed arises otherwise than by operation of the contract; and
(b).where the parties to the contract are in dispute as to compliance with the terms of the contract;
and in so doing failed to determine whether the particular circumstances of the case were sufficient namely:
(c).clause 26.2 cannot operate unless the appellant notifies an equivalent amount to the lessee that is correctly calculated;
(d).prior to 2014 the appellant had calculated and notified the equivalent amount to the lessee in reliance upon valuations as notified by the Valuer-General pursuant to the Valuation of Land Act 2001, which amounts the lessee paid;
(e).disputes between the appellant and the respondents only arose in consequence of the undertaking of a revaluation by the Valuer-General, which led to a material increase in the calculation of the equivalent amounts;
(f).the Commonwealth and the lessee then actively engaged with the appellant, in meetings and in correspondence, in an attempt to reach agreement as to the correct basis for the calculation of the equivalent amounts;
(g).no agreement was reached;
(h).the lessee paid, with the knowledge and consent of the Commonwealth, amounts calculated by it despite the contrary notification that was provided by the appellant in each disputed rating year in the form of rates notices; and
(i).the obvious inference that once the proper meaning of clause 26.2 is determined by declaration, then it is likely that the lessee and the appellant will enter into the agreement that clause 26.2 contemplates, by the exercise of reasonable endeavours on the part of the lessee, with the effect that the appellant will then have an enforceable contractual right to receive the benefit of the calculated equivalent amounts in each rating year and for the duration of the lease;
6.Overlooked the alternative contention of the appellant that the Fire Service Contribution component of each disputed rates notice is a fee for service, not a tax, that is payable in relation to the leased land with the consequence that the appellant’s statutory right to make and to recover the charge pursuant to the Local Government Act 1993 is a sufficient basis to establish standing for the declaratory relief that it sought.
Notices of a constitutional matter were given by the Councils for the purposes of s 78B of the Judiciary Act 1903 (Cth) (Judiciary Act) in relation to the sixth ground extracted above. The notices described the nature of the constitutional matter as follows:
Whether a fire service levy pursuant to s.79 of the Fire Service Act 1979 (Tas) imposed in the form of service rate pursuant to s.93 of the Local Government Act 1993 (Tas) in relation to the [Airports], which is a place acquired by the Commonwealth for public purposes within the meaning of s.52(i) of the Constitution, is properly characterised as a fee for service or an impermissible form of taxation?
Notices of contention
On 30 October 2019, the Lessees each filed notices of contention seeking to affirm the primary judge’s decision on grounds other than those relied upon by the primary judge. The notices of contention were in similar terms. The notice of contention filed by the Launceston Lessee provided as follows:
Grounds relied on
Further and in the alternative to the grounds relied upon by the Court below, the proceedings should be dismissed on the following grounds:
1.The Appellant's claim does not involve a justiciable controversy between the Appellant and the Respondents such as to constitute a “matter” in respect of which the Court has jurisdiction, by reason of the following:
(a) there is no dispute, and positive agreement, between the First and Second Respondents with respect to the construction and effect of cl 26.2(a) of the Lease;
(b)there is no dispute, and positive agreement, between the First and Second Respondents as regards those parts of the airport site that fall within and outside of the ambit of cl 26.2(a) of the Lease;
(c)there is no dispute, and positive agreement, between the First and Second Respondents as to the amounts required to be paid by the Second Respondent to the Appellant under cl 26.2(a) of the Lease for financial year (FY) 2013/14 to 2017/18 inclusive;
(d)there is no dispute, and positive agreement, between the First and Second Respondents as regards the Second Respondent's compliance with the obligation in cl 26.2(a) of the Lease for each of FY 2013/14 to 2017/18 inclusive;
(e)there is no dispute, and positive agreement, between the First and Second Respondents as to the basis upon which future payments ought to be made by the Second Respondent to the Appellant in order to comply with cl 26.2(a) for the duration of the Lease;
(f)the Appellant:
i.is not a party to the Lease and does not enjoy the benefit of any contractual promise held on trust by the First or Second Respondent under cl 26.2(a) of the Lease;
ii.has no statutory or other enforceable right to receive from the Second Respondent payment of rates as set by the Appellant pursuant to the Local Government Act 1993 (Tas) in respect of rateable land, or an amount that is equivalent to such rates;
(g)the right to enforce cl 26.2(a) of the Lease as against the Second Respondent lies with, and only with, the First Respondent;
(h)the First Respondent would be precluded, if it sought to do so, from seeking to compel the Second Respondent to make any further payment under cl 26.2(a) of the Lease or from seeking relief in legal proceedings on terms that are inconsistent with the representations and conduct as pleaded in the Second Respondent's Statement of Cross-Claim, on the basis that:
i.any cause of action which the First Respondent may have had as against the Second Respondent under cl 26.2(a) of the Lease for FY 2013/14 to FY 2015/16, and/or for FY 2013/14 until expiry of the Lease, has been discharged by accord and satisfaction.
ii.the First Respondent is taken to have admitted in its Defence to the Second Respondent’s Statement of Cross-Claim that it would be estopped by operation of a promissory estoppel and/or conventional estoppel for the period from FY 2013/14 to FY 2020/21 inclusive; and
iii.further and in the alternative, any cause of action which the First Respondent may have had as against the Second Respondent under cl 26.2(a) of the Lease for FY 2013/14 to FY 2015/16 and/or for FY 2016/17 until expiry of the Lease, has been discharged by accord and satisfaction.
2.Further and in the alternative, the Court does not have original jurisdiction as the matter does not arise under any laws made by the federal Parliament within the meaning of s 39A(1A)(c) of the Judiciary Act 1903 (Cth).
3.Further and in the alternative, the Court should decline to exercise its discretion to grant the relief sought by the Appellant in the circumstances pleaded at paragraph 1 (a)-(h) above, individually and cumulatively.
Notices of a constitutional matter were given by the Lessees for the purposes of s 78B of the Judiciary Act in relation to the first ground of their notices of contention. The notices raised the Lessees’ contention that these proceedings do “not involve a matter arising under a law of the Commonwealth as there is no justiciable controversy to be quelled by the Court”.
Hearing of the appeals
The appeals were heard via videoconference on 4 May 2020. Mr McElwaine SC appeared with Ms Cuthbertson of counsel for the Councils, Mr Lenehan SC appeared with Ms Foley of counsel for the Commonwealth, and Dr Stern SC appeared with Ms Coleman of counsel for the Lessees. Each had filed detailed written submissions in support of their respective cases. The parties’ specific submissions are considered in the course of these reasons. A broad summary of the parties’ submissions is as follows.
The Councils, with the support of the Commonwealth, contend, in summary, that the Councils have standing in the present case to seek the declaratory relief in respect of the interpretation and application of the leases, and that, relatedly, there is a “matter” before this Court for determination. This follows, in the submission of the Councils and the Commonwealth, because of, first, the real commercial and practical interest of the Councils in obtaining the declaratory relief sought and, second, the existence of a justiciable controversy in respect of the meaning of the leases between the Councils on one hand and the Commonwealth and the Lessees on the other hand. The Councils and the Commonwealth contend that the primary judge erred in concluding that a grant of standing in the present case would jettison the doctrine of privity of contract. The Councils and the Commonwealth further contend that the “matter” in the present case is one that falls within this Court’s federal jurisdiction under s 39B(1A) of the Judiciary Act because, amongst other reasons, the leases owe their existence to federal law.
In response, the Lessees contend, in summary, that the primary judge was correct to hold that the Councils did not have standing to seek the declaratory relief in respect of the interpretation and application of the leases. For similar reasons, the Lessees raise (in their notices of contention) that there is equally no “matter” before the Court. According to the Lessees, this follows from the fact that the Councils’ claim for relief is not based on any legal right or entitlement (statutory, contractual or otherwise); that there is no dispute between the parties to the leases as to the meaning of cl 26.2; and that the Commonwealth is otherwise barred from departing from their agreed application of cl 26.2 due to principles of “accord and satisfaction” and estoppel. The Lessees further contend that, even if there is a “matter” before this Court, it has not arisen under laws made by the Commonwealth Parliament. It is insufficient, in the Lessees’ submission, that the leases owe their existence to federal law; the subject of the controversy—the Councils’ asserted entitlement to a benefit under the lease—does not derive from federal law.
LEGAL PRINCIPLES
The present case involves the consideration of various interrelated legal concepts, including this Court’s jurisdiction (and the requirement for a “matter”), this Court’s power to award declaratory relief, the standing of a party to obtain such relief, the nature of declaratory relief and the doctrine of privity of contract. Given the conceptual multiplicity, it is convenient to first present the relevant conceptual framework.
Judicial power, jurisdiction and the requirement of a “matter”
The Federal Court of Australia, as a court created by the Commonwealth Parliament, may only exercise “judicial power of the Commonwealth”: s 71 of the Constitution; R v Kirby; Ex parte Boilermakers’ Society of Australia [1956] HCA 10; 94 CLR 254 at 271-272 per Dixon CJ, McTiernan, Fullagar and Kitto JJ; see also Alqudsi v The Queen [2016] HCA 24; 258 CLR 203 at [167]-[169] per Nettle and Gordon JJ. It is not possible to precisely define the content of “judicial power” (Precision Data Holdings Ltd v Wills [1991] HCA 58; 173 CLR 167 at 188-189 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ), but it is possible to identify its core characteristics. It is also possible to identify exercises of power that are plainly non-judicial. One example is that the judicial power of the Commonwealth does not extend to the giving of advisory opinions: In re Judiciary and Navigation Acts [1921] HCA 20; 29 CLR 257 at 265-267 per Knox CJ, Gavan Duffy, Powers, Rich and Starke JJ (Re Judiciary Act). Instead, the jurisdiction of this Court is confined to the determination of controversies known as “matters”. This notion has constitutional dimensions, but is also incorporated into statute as a precondition to this Court’s jurisdiction.
In the present case, the primary judge required original jurisdiction to hear and determine the Councils’ applications. Section 19(1) of the FCA Act provides that this Court has such original jurisdiction as is vested in it by laws made by the Commonwealth Parliament. Relevantly for the present case, and subject to further matters discussed below, the primary judge derived his original jurisdiction to decide the Councils’ applications from the Judiciary Act. As can be seen from the chapeau to s 39B(1A), the crystallisation of original jurisdiction requires there to be a “matter”:
Original jurisdiction of Federal Court of Australia
Scope of original jurisdiction
…
(1A) The original jurisdiction of the Federal Court of Australia also includes jurisdiction in any matter:
(a) in which the Commonwealth is seeking an injunction or a declaration; or
(b) arising under the Constitution, or involving its interpretation; or
(c) arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter.
…
(See Hooper v Kirella Pty Ltd [1999] FCA 1584; 96 FCR 1 (Hooper) at [41]-[44] per Wilcox, Sackville and Katz JJ.)
The nature of a “matter” has been discussed by the High Court on numerous occasions. A convenient starting point is the observation by the plurality of French CJ, Kiefel, Bell and Keane JJ in CGU Insurance Limited v Blakeley [2016] HCA 2; 259 CLR 339 (CGU) at [27] that the requirement for a “matter” has two elements: the “subject matter” element and the “justiciability” element.
For the purposes of the invocation of the Federal Court’s original jurisdiction under s 39B(1A) of the Judiciary Act, the “subject matter” element is satisfied by establishing that the subject matter of “all claims made within the scope of the controversy” (Fencott v Muller [1983] HCA 12; 152 CLR 570 (Fencott) at 603 per Mason, Murphy, Brennan and Deane JJ) is one that satisfies at least one of the descriptions in ss 39B(1A)(a), (b) or (c). In the present case, the primary alleged source of jurisdiction is s 39B(1A)(c), namely a matter “arising under any laws made by the Parliament”. The satisfaction of that test was a subject of dispute between the parties in the present case (as considered from [168] below).
The “justiciability” element of a “matter” requires “a justiciable controversy, identifiable independently of the proceedings which are brought for its determination and encompassing all claims made within the scope of the controversy”: Fencott at 603, cited in CGU at [30]; see also Palmer v Ayres [2017] HCA 5; 259 CLR 478 (Palmer) at [24] per Kiefel CJ, Keane, Nettle and Gordon JJ. There must accordingly be a “controversy”, which must be “real and immediate”: Re McBain; Ex parte Australian Catholic Bishops Conference [2002] HCA 16; 209 CLR 372 (Re McBain) at [242] per Hayne J. As noted above, abstract or hypothetical questions cannot found a “matter”.
Discerning the scope of the controversy for these purposes contains an “evaluative element” (CGU at [30]), as evident from the following passage of Mason, Murphy, Brennan and Deane JJ in Fencott at 608:
What is and what is not part of the one controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships. The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues in controversy are defined and the claims for relief are set out.
(See also Hooper at [52]-[54].)
In addition to the existence of relevant disagreement, the existence of a “matter” requires there to be “some immediate right, duty or liability to be established by the determination of the Court”: Re Judiciary Act at 265, cited in, amongst other authorities, Palmer at [27] per Kiefel, Keane, Nettle and Gordon JJ. Moreover, there must be an appropriate remedy available to the moving party: Truth About Motorways Pty Ltd v Macquarie Infrastructure Management Ltd [2000] HCA 11; 200 CLR 591 (Truth about Motorways) at [48]-[49] per Gaudron J; ReMcBain at [244] per Hayne J. As Gleeson CJ and McHugh J expressed in Abebe v The Commonwealth [1999] HCA 14; 197 CLR 510 (Abebe) at [31], “[i]f there is no legal remedy for a “wrong”, there can be no “matter””.
Declaratory relief
Federal Court’s statutory power
This Court must possess legal power to grant the particular form of relief sought by a party. This requirement will inform, but is conceptually distinct from, the jurisdictional issues discussed above: Harris v Caladine [1991] HCA 9; 172 CLR 84 at 136 per Toohey J; Minister for Immigration and Multicultural and Indigenous Affairs v B [2004] HCA 20; 219 CLR 365 at [6] per Gleeson CJ and McHugh J; CGU at [25] and [31] per French CJ, Kiefel, Bell and Keane JJ. Of course, the requirement for the Court to possess power to award the relief is separate from the question as to whether the party is entitled to that relief in the circumstances of a particular case (which is discussed further below).
In the present case, the Councils primarily seek the award of declaratory relief in respect of the interpretation and application of the leases. Broadly defined, a declaratory judgment is “a formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs”: Lord Woolf and Woolf J, Zamir & Woolf’s The Declaratory Judgment (Sweet & Maxwell, 4th ed, 2011) (Zamir & Woolf’s The Declaratory Judgment) p 1. Such relief “conclusively” establishes the situation it declares to exist between the parties: Parramatta City Council v Sandell [1973] 1 NSWLR 151 at 167 per Hutley JA.
For the historical development in England and Australia as to availability of declaratory relief, see Young PW, Declaratory Orders (Butterworths, 1984) (Young’s Declaratory Orders) Ch 3; Heenan EM, “History of Declaratory Relief – A Distinct Remedy Beyond Equitable Affiliations” in Dharmananda K and Papamatheos A (eds), Perspectives on Declaratory Relief (The Federation Press, 2009) (Heenan’s History of Declaratory Relief) pp 51-88; Zamir & Woolf’s The Declaratory Judgment, Ch 2; Heydon JD, Leeming MJ and Turner PG, Meagher’s Gummow & Lehane’s Equity: Doctrines & Remedies (5th ed, LexisNexis Butterworths, 2015) (Equity: Doctrines & Remedies) pp 610-614 and Aronson M, Groves M and Weeks G, Judicial Review of Administrative Action and Government Liability (6th ed, Thomson Reuters, 2017) (Judicial Review of Administrative Action) pp 952-955.
Today, the source of power to award declaratory relief may derive, where applicable, from a superior court’s inherent jurisdiction (Ainsworth v Criminal Justice Commission [1992] HCA 10; 175 CLR 564 (Ainsworth) at 581-582 per Mason CJ, Dawson, Toohey and Gaudron JJ) or statute. There is also debate (which is unnecessary to address in the present case) as to whether declaratory relief derives from equitable jurisdiction, or if it is simply a statutory remedy that happens to have enjoyed a close association with the Court of Chancery: see Zamir & Woolf’s The Declaratory Judgment at pp 135-138; Heenan’s History of Declaratory Relief at pp 79-80 and 83-88; Donaldson G, “Discretion in Declaratory Relief” in Dharmananda K and Papamatheos A (eds), Perspectives on Declaratory Relief (The Federation Press, 2009) pp 123-128 and Equity: Doctrines & Remedies at p 610.
Moreover, the Federal Court does not possess an “inherent” (in the sense of non-statutory) jurisdiction: VTAG v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 91; 141 FCR 291 at [30] per Heerey, Finkelstein and Lander JJ, citing DJL v Central Authority [2000] HCA 17; 201 CLR 226 at [25] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; see also Pasini v United Mexican States [2002] HCA 3; 209 CLR 246 at [94] per Kirby J; although cf Aussie Airlines at 414 (where Lockhart J appeared to equate the Federal Court with a superior court that has “inherent power to grant declaratory relief”). The Federal Court’s authority to grant declaratory relief must instead be sourced from Commonwealth statute: see French RS, “Declarations: Homer Simpson’s Remedy – Is There Anything They Cannot Do?” in Dharmananda K and Papamatheos A (eds), Perspectives on Declaratory Relief (The Federation Press, 2009) p 42.
This Court’s primary source of power is the FCA Act. Relevantly, to the extent that this Court is otherwise vested with jurisdiction (Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56; 201 FCR 378 (MSY Technology) at [8]-[9] and [21] per Greenwood, Logan and Yates JJ), s 21 of the FCA Act empowers the Federal Court as follows:
21 Declarations of right
(1)The Court may, in civil proceedings in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed.
(2)A suit is not open to objection on the ground that a declaratory order only is sought.
It is clear from the terms of s 21 of the FCA Act that declaratory relief may be awarded regardless of whether or not any consequential relief is or could be claimed by the applicant: see Aussie Airlines at 414, and the authorities cited therein. In relation to s 21 generally, see MSY Technology at [8]-[11].
The word “right” in the expression “declarations of right” in s 21(1) is used in a sense that is “wide and loose”: Sankey v Whitlam [1978] HCA 43; 142 CLR 1 (Sankey) at 23 per Gibbs ACJ (writing in the context of s 75 of the Supreme Court Act 1970 (NSW)). In Sankey, Gibbs ACJ stated that the word “right” “includes what might more precisely be described as privileges, powers and immunities”. (In relation to the breadth of this concept generally, see Judicial Review of Administrative Action at pp 956-960.) And, as Foster J observed in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) FCR 89 at 108, “[t]o the extent that the appropriate form of relief in a particular proceeding is declaratory relief, that relief must, as a matter of interpretation, qualify as being a “binding declaration of right”…”.
In the present case, the controversy centres on the interpretation and application of the leases. Each of these leases was granted pursuant to s 22 of the Transitional Act (the terms of which were extracted above at [16]). See also cl 1.1 of the leases (extracted above at [19]). In these circumstances, and as was explained above at [141]-[142], it is not to the point that the Councils do not allege that they possess enforceable rights under the leases. Instead, it is sufficient that the subject matter of the claims made in the controversy pertain to such rights. This is consistent with the statement of Latham CJ in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; 70 CLR 141 at 154 (as quoted in CGU at [28] per French CJ, Kiefel, Bell and Keane JJ) that “a matter may properly be said to arise under a federal law if the right or duty in question in the matter owes its existence to federal law or depends upon federal law for its enforcement” (emphasis added). On this basis, although the Councils are not claiming, or aiming to secure, a legally enforceable right created under federal law (cf, for example, Federal Capital Commission v Laristan Building & Investment Co Pty Ltd [1929] HCA 36; 42 CLR 582 at 585-586 per Dixon J and Australian Solar Mesh Sales Pty Ltd v Anderson [2000] FCA 864; 101 FCR 1 at [17] per Burchett J, with Wilcox and Tamberlin JJ agreeing), the subject matter of the controversy in the present case nevertheless owes its existence to Commonwealth legislation.
The Councils raised other grounds in support of the existence of a justiciable federal controversy. They claimed that s 39(1B) of the Judiciary Act was satisfied on one or more of the following alternative bases:
(1)the controversy raised by the Councils required the primary judge to determine whether the phrase “trading or financial operations” in cl 26.2 of the leases is to be read so as to exclude the provision of “aeronautical services and facilities” as set out in reg 7.02A of the Airports Regulations 1997 (Cth); or
(2)citing Oliver v Nine Network Australia Pty Ltd [2019] FCA 583 at [16] per Lee J, whether the ability to sue the Lessees arises under, and depends on, their existence as a body pursuant to the Corporations Act; or
(3)that the “fire service contribution” argument raised by the Councils (which is outlined in a different context below at [184]-[187]) gives rise to a matter arising under the Constitution, or involving its interpretation, for the purposes of s 39(1A)(b) of the Judiciary Act.
It is unnecessary to form a view on these alternative bases for the crystallisation of federal jurisdiction. Given the leases, which were granted pursuant to federal law, are the primary subject of the claims under the present controversy, the proceedings commenced by the Councils in this Court constituted matters arising under laws made by the Commonwealth Parliament for the purposes of s 39B(1A)(c) of the Judiciary Act.
Quality of the Councils’ interests in the declaratory relief
The next focus is the character of the Councils’ interests in the declaratory relief sought (the terms of which were set out above at [34]). As can be seen from those terms, each declaration broadly relates to the construction and application of cl 26.2 of the leases.
Before assessing the character of the Councils’ interests in obtaining the declaratory relief, it is necessary to briefly address the Lessees’ contention that the Councils’ submissions in this respect have deviated from those advanced before the primary judge.
New grounds on appeal?
According to the Lessees, the Councils’ submissions at trial with respect to standing focussed upon the financial benefits the Councils expected to accrue under cl 26.2(a) of leases, but grounds 1 to 3 of the Councils’ notices of appeal (extracted above at [42]) attach additional significance to the act of notification by the Councils under cl 26.2(a) (which is further discussed below). Even though the Councils accept that the focus of their arguments on appeal in support of standing have shifted, or at least expanded, beyond that advanced at trial, it may be that this shift or expansion is better characterised as the Councils continuing to pursue the same ground argued at trial, albeit expressed differently on appeal: NAJT v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 134; 147 FCR 51 at [74] per Hill J (albeit dissenting on the facts).
In any event, to the extent that leave is required, we would grant leave for the Councils to refine their standing argument for the following reasons. First, as alluded to above, the relevant overarching ground advanced by the Councils—that they have standing—has not changed on appeal. Second, the question whether the Councils had given notice of the appropriate amounts in accordance with cl 26.2 of the leases was in issue on the pleadings before the primary judge. Third, as will be discussed below, the existence of the notification mechanism is relevant to one of the core questions relevant to the question of standing, which is the quality of the Councils’ interests in the declaratory relief sought. That enquiry was prominent in Aussie Airlines, which was the matter of debate before the primary judge. Fourth, and finally, the refinement to the Councils’ standing argument has merit. As now considered, the notification mechanism was an important feature of the leases for the purposes of determining the present case.
Characterisation of the Councils’ interests in relief
Although the leases do not refer to the Councils by name, the Councils, each being a “Governmental Authority” as defined under the leases, are clearly intended to be participants, and (where applicable) derive benefits, under the leases. As can be seen from sub-clauses 26.2(a), (b) and (c) respectively, the payment mechanisms under those provisions each activate where “Rates”, “Land Tax” and “Taxes” are not otherwise payable because the “Airport Site” is owned by the Commonwealth. Although the terms of the leases do not state it, this is due to the concern to implement “competitive neutrality” between private businesses and businesses that, but for the governmental policy, would derive public advantages (as explained above at [12]-[13]).
Where the rates, land tax and taxes are not payable due to ownership of the relevant Airport by the Commonwealth, this triggers the obligation for each Lessee to promptly pay to the relevant Council certain amounts (as calculated by reference to the terms of cl 26.2). This clearly contemplates that each Council will financially benefit from the leases in the applicable circumstances. But the Councils’ connection with the leases does not end there. The leases also contemplate the Councils participating in the process of receiving those benefits. In particular, the chapeau to cl 26.2(a) expresses that the amount payable by a Lessee to the relevant Council in lieu of rates “may be notified to the Lessee” by the relevant Council. And the final sentence of cl 26.2(a) additionally requires each Lessee to “use all reasonable endeavours to enter into an agreement” with the relevant Council “to make such payments” (albeit there is only one occasion, of limited duration, upon which this occurred in practice: see above at [23]-[24]). As a result of these contractual features, the Councils, as they submitted, are invitees, not invaders, to the contractual relationship between the Commonwealth and the Lessees.
Even disregarding any financial benefit to be derived from the operation of the leases, it is clear from these contractual powers and obligations how declarations directed to the interpretation and application of cl 26.2(a) would aid the Councils. As the payment mechanism under that sub-clause empowers a Council to notify the relevant Lessee that an amount is payable under that provision, then the interpretation and application of cl 26.2(a) is clearly of utility for the purposes of the Council accurately stating the amount payable. This is so regardless of whether the notification mechanism is the means by which the substantive payment obligation is imposed on the Lessees, or whether it is merely a procedural action required by the leases (an issue on which we do not express a view).
Moreover, as the payment mechanism under cl 26.2(a) requires the Lessees to use all reasonable endeavours to enter into agreements with the Councils regarding the making of such payments, any declaratory relief in respect of the leases may well substantially aid the Councils in the course of negotiating the terms of those agreements with the respective Lessees (which is relevantly analogous to the circumstances considered in Aussie Airlines and Edwards). Obtaining a judicial determination as to the areas of the Airport site to which the calculations apply, and whether the Lessees are required to make payments in accordance with the valuations undertaken by the relevant Valuer-General, might realistically influence and, potentially, substantially enhance the Lessees’ negotiating position in respect of the formation of those agreements.
In addition to these indirect benefits, the Councils also stand to potentially obtain direct financial benefits from the declaratory relief. The Councils have already received payments from the Lessees under cl 26.2 of the leases in respect of the disputed years. However, if the declaratory relief sought is granted by this Court, and the Lessees comply with the terms of that relief, then the Councils stand to gain financially. According to the Councils’ amended statements of claim at trial, the Hobart Lessee stands to gain $1,755,034.38, and the Launceston Lessee stands to gain $1,797,752 (each calculated up to 30 June 2018), if their calculation methodology is adopted instead of that applied by the Commonwealth and the Lessees: see Primary Judgment at [16]-[19].
In this regard, although the Councils do not have a legally enforceable right to receive these benefits under the leases, the Councils’ practical expectation is that the Commonwealth, as a model litigant, will abide by the terms of any declaration of law: see, for instance, Hamersley Iron Pty Ltd v National Competition Council [2008] FCA 598; 247 ALR 385; (2008) ATPR 42-234 at [133] per Weinberg J. Although the litigants that the Councils require to exhibit model behaviour (ie in order for the Councils to obtain a financial gain) would not appear to be the Commonwealth, and would appear instead to be the parties who are contractually obliged to make the payments (ie the Lessees), it is relevant that the Commonwealth might withdraw their objection to the Councils’ methodology for calculating the relevant payments, which might at least have indirect practical consequences advantageous to the Councils.
In the circumstances described above, the declaratory relief sought by the Councils is of “real” commercial and practical interest to the Councils. This is due to the Councils’ participation in the payment mechanism prescribed in the leases and the plausibly foreseeable (and not speculative) benefits that the Councils are likely to receive from obtaining the relief. In this respect, although the declaratory relief sought by the Councils in the present case is not as critical to the Councils’ core operation as the relief sought by the applicant in Aussie Airlines, the analysis in the present case is materially similar to that undertaken by Lockhart J in that case. Both the applicant in Aussie Airlines, and the Councils in the present case, were third parties to the contracts in question, but nonetheless the applicant in Aussie Airlines had, and the Councils in the present case have, a sufficient interest to seek declaratory relief in respect of the interpretation and application of those contracts.
Statutory consequences regarding fire service contribution
The Councils advanced a further basis for establishing standing in the present case. According to the Councils, this basis was not pleaded, but was raised with the primary judge, and the Lessees engaged with it. Very broadly, the Councils argue that they have standing to seek declarations in respect of the meaning of cl 26.2 of the leases in reliance upon statutory consequences. The alleged path to reach this conclusion is complex. The Councils contend, in slightly more specific terms, that a “fire services contribution” (for context, see s 93A of the Local Government Act 1993 (Tas) and Div 3 of Pt VI of the Fire Service Act 1979 (Tas)), which is a component of rates notices issued by the Councils, is properly characterised as a fee for service, and not a tax, and therefore the exception in s 4(5) of the Commonwealth Places (Application of Laws) Act 1970 (Cth) does not apply, such that s 4(1) of that latter Act operates to make the Valuation of Land Act 2001 (Tas) applicable to each Airport site.
Although the primary judge made incidental reference to the issue of whether the fire service contribution was levied by the Councils as a fee for service or a tax (Primary Judgment at [8]), the Councils contend under the sixth ground of their notices of appeal that the primary judge overlooked the Councils’ contention that these matters supported the Councils’ standing to seek declaratory relief in the present case.
The Commonwealth and the Lessees each argue that, although the question of whether the fire service contribution was a fee for service or a tax was raised before the primary judge, the Councils’ reliance on that matter in respect of standing constitutes a new ground that requires leave to advance on appeal. In any event, the Commonwealth and the Lessees submit that the Councils’ argument in this regard has no merit. According to both of those parties, the fire services contribution is a tax (and not a fee for service) and, even if that is incorrect, the Councils have otherwise not advanced cogent reasons as to why the fact that the contribution is a fee for service would assist them to establish standing to seek declarations as to the meaning of cl 26.2 of the leases. In particular, the Lessees observe that cl 26.2(a) has no application to statutory rights or powers, but operates only where the statutory power to impose rates does not arise. As such, according to the Lessees, if the Councils’ characterisation of the fire services contribution as a fee for service is correct, then there could be no recourse to the payment “in lieu of” that rate under cl 26.2(a).
Given the Councils’ fire service contribution argument on appeal was not the subject of substantive oral argument from the Commonwealth and the Lessees, and given the Councils’ standing to seek declaratory relief can be established on the basis considered above (resulting from the Councils’ more direct interests in the application of the leases), it is unnecessary to form a view on the merits of the Councils’ fire services contribution argument under their sixth ground of appeal.
Discretion to refuse relief
It was also contended that that there exists an accord and satisfaction arising in both appeals, and an estoppel arising in the Launceston appeal. As a result, it was said that this Court was deprived of a justiciable controversy. The Lessees (as relevant) contended that these arguments were also reasons why the Court should, in the exercise of its discretion, decline to grant the Councils the declaratory relief sought. This argument was reflected in the third ground of the Lessees’ notices of contention (as extracted above at [44]).
As explained above at [67]-[75], the concepts of standing and remedial discretion in respect of the award of declaratory relief are difficult to disentangle. We accept that there may be circumstances where an applicant for declaratory relief has sufficient standing to seek such relief, but that, even if the terms of the declaration sought accurately stated the relevant legal state of affairs, it would nonetheless be against the interests of justice to award that relief in the circumstances of the case. Accordingly, the accord and satisfaction and estoppel arguments raised by the Lessees will be relevant to the question as to whether declaratory relief ought be issued by the primary judge. But that is hardly a striking proposition given the breadth of considerations that may inform the exercise of the court’s discretion: see above at [70]. The court’s discretion to award declaratory relief is directed by the interests of justice. As expressed by Neuberger J (as his Lordship then was) in Financial Services Authority v Rourke [2001] EWHC 704 (Ch); [2002] CP Rep 14 at 18 (as quoted in Equity: Doctrines & Remedies at p 630):
… when considering whether to grant a declaration or not, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration.
(We agree with the view of the authors of Equity: Doctrines & Remedies (at p 630), though, that this statement should not be taken to exhaustively state the considerations relevant to the exercise of the court’s discretion: ibid.)
As noted above, the only basis upon which the primary judge dismissed the Councils’ applications was that they lacked standing to seek declaratory relief. The primary judge did not form a view on whether the terms of the declaration sought by the Councils accurately state the relevant legal state of affairs. Accordingly, the primary judge never reached the stage of having to consider, and exercise, his Honour’s discretion as to whether declaratory relief ought be granted in the present case. Thus, the “evidential base established at trial” (Hannover Life Re of Australasia Ltd v Dargan [2012] NSWCA 185 at [24] per Barrett JA) is incomplete. In these circumstances, it is, as the Commonwealth and Councils submit, unnecessary, and indeed inappropriate, to determine how the Lessees’ arguments regarding accord and satisfaction and estoppel would influence the exercise of the primary judge’s discretion in the present case.
CONCLUSION
We conclude that a “matter” exists before the Court in respect of both proceedings, and the Councils correspondingly have standing to seek the declaratory relief sought in respect of the interpretation and application of the leases. In summary, this is because, first, a justiciable controversy exists between, on one hand, the Councils and, on the other hand, the Commonwealth and the Lessees and, second, the Councils have a requisite interest in the declaratory relief sought, which, if granted, would be of real commercial and practical importance to them. On these bases, both the justiciability and subject matter elements of a “matter” are satisfied. Finally, as the leases owe their existence to federal law, the “matter” is one arising under laws made by the Commonwealth Parliament, and therefore is within the scope of this Court’s jurisdiction to determine.
We accordingly allow the Councils’ appeals and dismiss the Lessees’ notices of contention. It is unnecessary, however, to determine the third ground of the notices of contention, which contended that the Court should decline to exercise its discretion to grant the declaratory relief sought. Although the Councils have standing, it remains to be determined whether the Councils are entitled to the declaratory relief sought in the circumstances of the present case. The proceedings will be remitted to the primary judge to determine that question.
For the reasons expressed above, we make the following orders in each proceeding:
1.The appeal is allowed.
2.The second respondent’s notice of contention is dismissed.
3.The orders made by the primary judge on 24 September 2019 be set aside.
4.The proceeding be remitted to the primary judge for final determination.
5.By 4.00 pm on 14 days after date of this judgment, the parties are to file orders by agreement in respect of the costs of the application and cross-claim previously heard by the primary judge, and the costs of the appeal and the notice of contention heard by the Full Court, or, if no agreement is reached, written submissions (of no more than five pages) as to the appropriate orders in respect of these matters. The issue of costs will then be determined on the papers.
I certify that the preceding one hundred and ninety-three (193) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jagot, Kerr and Anderson. Associate:
Dated: 6 August 2020
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