Commonwealth of Australia v Hooper

[1992] HCATrans 211

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S31 of 1992

B e t w e e n -

COMMONWEALTH OF AUSTRALIA

Applicant

and

JOHN EDWIN HOOPER, (Secretary

for the time being of the

Australian Gas Light Company)

First Respondent

and

THE PIPELINE AUTHORITY

Second Respondent

Application for special leave

to appeal

Hooper 1 3/8/92

MASON CJ
BRENNAN J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 3 AUGUST 1992, AT 10.36 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC: If the Court pleases, I appear with my

learned friend, MR G. RUDGE, for the applicant.

(instructed by the Australian Government Solicitor)

MR A.R. EMMETT, QC:  May it please Your Honours, I appear

with friend, MR A.G. BELL, for the respondent.

(instructed by Minter Ellison)

MASON CJ:  I understand there is to be no appearance for the

second respondent.

MR JACKSON:  Yes, Your Honour. Your Honour, may I hand the

Court copies of an outline of submissions?

MASON CJ: Yes.

MR JACKSON:  Your Honours, the case, it is submitted,

raises and raises directly an important point of

the nature referred to in the outline of

submissions, namely the power of the Commonwealth

to contract in such a way as to bind the

Parliament, at the price of breach of contract, not

to legislate in a particular way.

Your Honours, may I say immediately that the

reasons for judgment in both courts below say that

is not the point in the case but, in our

submission, it is one that is inevitably involved

in the case because the declaration in question was

made in circumstances where the only proposal to

which it could relate was one which was to be

effected by legislation.

Your Honours, may I go, and do so as briefly

as possible, to indicate that that is the issue

which is involved in the proceeding. Your Honours,

the proceeding is concerned with one of the

provisions of a tripartite agreement called the
"1985 Heads of Agreement", the relevant clause

appearing at page 115; it is clause 7.8.

Your Honours will see that it says that:

Subject to rights under existing agreements,

AGL -

my learned friend's client -

shall have first right of refusal to acquire

on terms no less favourable than those offered

to any third party, the pipeline, or any

interest therein, should the Authority decide

to dispose thereof.

Your Honours - I said it was a tripartite
agreement - the parties were AGL, the Pipeline

Authority and the Commonwealth and, Your Honours, I

would refer the Court generally to the terms of the

Hooper 2 3/8/92

Heads of Agreement which appear at page 115 and in

the pages which appear from 111 on. Your Honours,

I do not need to go to the detail of it, but

Your Honours will see that it provides for various

things to be done by AGL, by the Pipeline Authority

and by the Commonwealth.

Your Honours, the Pipeline Authority is a body

corporate and is an authority established by the contained in the application book if Your Honours

need to go to it.

Your Honours, the pipeline, which is the

subject of clause 7.8, was vested in the Authority,

it was not vested in the Commonwealth.

Your Honours, that it is vested in the Authority

appears at page 2, lines 1 to 3, where the primary

judge refers to the fact that:

Pursuant to the provisions of the Pipeline

Authority Act 1973 the Authority was

established to acquire and operate pipeline

systems. It acquired the pipeline in

question.

Your Honours, the pipeline, the property of the

Authority, became one of the objects of a programme

for what, to put it shortly, has been called

privatization, and the Commonwealth invited

proposals to purchase it. Your Honours, the

proposal - and I will come to it in just a

moment - is in the application book and the

proposal for invitations, as it were, recognized

that legislative change would be required to effect

a purchase.

Your Honours, may I go to page 117 of the

document setting out the proposal where the

invitation appears. At page 117, Your Honours,

there is a short version of it and I do not need to

go to the detail of that. May I go to page 119,

and Your Honours will see, at the top of page 119,

the statement that:

The Commonwealth Government has recently

re-affirmed its intention to sell

the ..... pipeline system -

and then, Your Honours, at the bottom of the page

that:

Purchase proposals are invited from any

parties ..... who may wish to acquire -

it. Your Honours, the material for present

purposes commences at the bottom of page 124,

Hooper 3/8/92

paragraph 32, and goes on to the top of the next

page. Your Honours will see there is a reference

to the 1985 Heads of Agreement and then,

Your Honours, I would refer Your Honours to the

whole of the paragraph and in the last sentence of

the paragraph on page 125:

It is proposed that the transfer of ownership

of the pipeline system, and TPA's obligations

to AGL and the gas producers, will be effected

by legislation.

Your Honours, I should say, simply by way of

clarification, that the reference .to "TPA's

obligations to AGL" is not, as we would understand
it, intended to cover clause 7.8, but what is being
spoken of at page 125 is a transfer of ownership of
the pipeline system and other obligations are the

subject of that reference.

BRENNAN J:  How does the Commonwealth propose to acquire the

pipeline?

MR JACKSON: It does not, Your Honour.

BRENNAN J: It belongs to it already?

MR JACKSON:	It belongs to the Authority, Your Honour.
BRENNAN J:	Does it belong to the Commonwealth?
MR JACKSON:	Your Honour, in one sense, yes, because the

Commonwealth established the Authority.

BRENNAN J: So, 5l(xxxi) does not apply?

MR JACKSON: It may, Your Honour, it is possible. It

depends, and I do not mean to be evasive in saying

~hat. What I was going to say was this:

Your Honour, it may be that the nature of the right

which AGL has is one which, subject to the terms of	particular legislation, if taken away would result	in there being, to put it shortly and inexactly, a
right to compensation pursuant to section 51(xxxi).
What I mean by that more exactly is to say that the
legislation would have to make provision for that if there was an acquisition falling within that
provision, Your Honour. But, Your Honour, it may
be that the manner in which it is effected is
something that does not result in there being an
acquisition of property in terms of
section 5l(xxxi). It would depend on the terms of
the legislation.

Your Honours, that is the short position. It

may be, it may well be, but on the other hand it

may not be the case. Your Honours, what I was

Hooper 4 3/8/92

going to say was this: that the proposal for

disposal by legislation was the only proposal in question and, Your Honours, it was recognized at the hearing that the method of disposition which

was proposed would involve legislation to effect a

transfer.

Your Honours, may I take you very briefly to three passages which indicate that that is so. In

the judgment of the primary judge at page 11,

lines 1 to 9, and in particular lines 5 to 9. At

page 12, line 21 through to page 13, line 9 and,

Your Honours, at page 23, lines 8 to 11. So,

Your Honours, it was clear that the proposal which was contemplated was a proposal for the enactment

of legislation which would have the effect in

question.

Your Honours, as I submitted at the start of

my submissions, the Chief Justice in his reasons

for judgment eschewed the suggestion that the

Commonwealth could not legislate to effect a

disposition, but he yet proceeded to declare the

rights of AGL in circumstances where the only

proposal was the proposal for vesting by

legislation.	Your Honours, may I elaborate upon
that by taking Your Honours to two passages.	The

first is at page 26, line 21 through to page 27,

line 9. The second, Your Honours, is at page 28,

line 22 going through to page 29, line 2 and,

Your Honours, one goes then to the terms of the

declaration and the terms of the declaration appear

at page 29, line 25 going over to the top of the

next page, where it was held that AGL was entitled, as against both the Commonwealth and the Authority,

to the declaration in question.

Your Honours, there was no suggestion in the

case for sale or disposition in any manner other

than by legislation and, Your Honours, one asks in
those circumstances what was the point of the

declaration.

BRENNAN J: But the argument is that in the exercise of a

discretion it ought not to have been made.

MR JACKSON:  Your Honour, that is an aspect of it but it

goes to a matter anterior to that in a sense

because the view taken appears to have been, or the

view underlying the declaration is essentially,

that the declaration would be effective against the

Commonwealth but, Your Honours, if the declaration

was to be effective against the Commonwealth, the declaration was being made in circumstances where

the only operation that the declaration could have

would be in relation to a proposal which was a

proposal to legislate. So, what Your Honour puts

Hooper 3/8/92

to me is correct but, Your Honour, the case is not

one where it is just a question of the granting of

relief. It is relief, the underlying part of which

involves a larger question.

BRENNAN J: But, what is the large question: that if the

Commonwealth has power to legislate in a fashion

that will destroy a contractual right, that no declaration of the contractual right should be

made?

MR JACKSON:  No, Your Honour, the point is this: that

clause 7.8 should not have been construed in such a

way as to cast on the Commonwealth an obligation,

the consequence of legislating against which would

be that it was a breach of contract, or possible

breach of contract for it to do so.

BRENNAN J: But why cannot - - -

McHUGH J:  I do not know that it is a matter of the

construction of the contract, is it? Supposing the

Commonwealth let a property to somebody for

20 years and then wanted to legislate and put them

out. What is the difference in principle between

that case and this case?

MR JACKSON:  Your Honour, there may not be any difference in

principle, but it is a question of what the result
in both the cases should be, and the result in both

the cases, in our submission, is that whilst it may

be that the effect of the legislation is to give

rise effectively to a rightful compensation

pursuant to section Sl(xxxi), to put it shortly,

but it is not a breach of contract for the

Commonwealth so to legislate.

BRENNAN J:  But it may be a question of validity of the

legislation. If there is a contractual right which

the Commonwealth extinguishes by the legislation,

or more accurately passes to another via the

legislation, without making provision for just

terms, then is it not important to know whether

there is any property which is thus being acquired

otherwise than on just terms to determine the

question of validity?

MR JACKSON:  Your Honour, there is, in the sense that one is

looking to see what is the property which is being acquired by the Commonwealth but, Your Honour, the property that would be acquired by the Commonwealth

in the present case, we would submit, if that were

so, would be relevantly - apart from the pipeline

itself - such right as was had as against the

Pipeline Authority. But, Your Honour, the notion that the executive government can bind the

Parliament in such a way that when the Parliament

Hooper 6 3/8/92

legislates in a particular way - and if I could

just leave aside the just terms question for a

moment - that the Parliament is thereby in some way

in breach of contract is one, we would submit, that

cannot be sustained.

McHUGH J: Parliament is not in breach of contract, but does

the declaration do anything more than declare what

the existing common law rights of the parties are

at the present time?

MR JACKSON:  Your Honour, it is a question of what the content of them is. Your Honour, it is right to

say, in one sense, it does no more than that but if

one looks at what that is, what it means is that

one has a situation where the declaration has been

made that the Commonwealth is under an obligation

to AGL. If one looks at the content of the

obligation in the light of the case it could only

have been an obligation not to dispossess by

legislation AGL except at the price of being in

breach of contract.

BRENNAN J: Non constat that if it dispossesses it by

legislation it is a breach of contract. It does

not follow that because there is an existing

contractual obligation that the passage of

legislation amounts to a breach of the contract.

MR JACKSON:  Your Honour, we would accept, with respect, and

adopt the proposition, that if there had been some

matter other than the proposal to legislate, which

was the subject of the case then what Your Honour

puts to me may well have been right, but the

proposal was simply that there be an enactment

which would effect a vesting of the property.

Your Honour, that is what the case was about.

McHUGH J: The declaration has got two dimensions. It has

got a moral dimension, has it not, because it declares that the Commonwealth made a binding

promise in favour of AGL, and it has a legal

dimension in that for the purposes of Sl(xxxi) it

declares what AGL's rights are.

MR JACKSON:  Your Honour, if one takes the moral dimension,

there are two moral dimensions. One might be to

look at it from the point of view of private law,

and one could adopt what Your Honour put to me.	On
the other hand, the other moral dimension is a

moral dimension of the nation as a whole and if the

true situation be that the executive does not have

power to enter into agreements which bind the

Parliament then, Your Honour, the larger morality

would be the morality whic-h would be germane.

Hooper 7 3/8/92

McHUGH J: That is the point I have some difficulty in

following because your argument seems to me to

lead to the conclusion that the executive can never

enter into a binding contract if it would interfere

with the Parliament's right, or it might affect the

Parliament's right, to legislate in respect of that contract.

MR JACKSON: Well, Your Honour, that is a submission which

we would make, that it cannot bind future

Parliaments.

McHUGH J: That means the Commonwealth can never be bound by

contract, does it not?

MR JACKSON:  No, it does not, Your Honour. Your Honour, all

one is saying is that the executive cannot

ultimately bind the Parliament. There is no doubt

the executive can enter into agreements that bind

the Commonwealth and the Parliament may bring those

agreements to an end. If it does so, it does so at

the price of, perhaps, paying just terms pursuant

to section Sl(xxxi). It may be that there are

other demands on morality, if I can use that

expression, that the Commonwealth satisfies but,

Your Honour, the proposition that I am putting in

that regard is not one that is really very novel.

May I take Your Honours for just a moment to the case which may be shortly described as

Thomson's case, (1948) 77 CLR 1. Could we give

Your Honours some copies of that.

BRENNAN J:  Mr Jackson, could I just clarify one point. You

are not challenging the fact that, as at this

moment, the relationship between AGL and the

Commonwealth is as declared?

.

MR JACKSON:  I am, Your Honour. It depends what Your Honour

means by relationship. More points had been

contested at earlier points in the case.	We do not
contest now, and did not contest in the Court of

Appeal, a proposition which had been contested

earlier, namely that the Commonwealth was not a

party to the agreement. Your Honour, in the end,

the argument which was sought to be advanced, and
the argument which we will seek to advance, is that

if one has three persons who are parties to an

agreement, it does not mean that each person who is

a party to the agreement is bound by every clause
of the agreement in the sense that some clauses may

not be germane to that person •

When one comes to clause 7.8, we were

submitting, and we wish to submit, that clause 7.8 is concerned only with the position as between the

authority on the one hand and AGL on the other, and

Hooper 3/8/92

that the proposition which I have been seeking to

advance to Your Honours concerning the ability of

the Commonwealth to bind the Parliament is a matter

which would militate against the notion that the

Commonwealth was bound by the terms of clause 7.8.

Your Honour, that is where one ultimately comes to in relation to the argument.

BRENNAN J: That is a question of construction to start

with.

MR JACKSON:  Yes, Your Honour.

BRENNAN J: Then, on the question of construction, is there

a question as to whether or not the Commonwealth

had guaranteed the performance of the contract by

AGL?

MR JACKSON:	Your Honour, that itself is the answer to the question in a sense rather than the question, if I
might say so, with respect, because the question
is, we would submit, whether that part of the
document is one which casts an obligation of the
kind in question on the Commonwealth. We would
submit that it is one that does not.
BRENNAN J:	I think there must be a confusion of thought

then, in that event, must there not? The question

is whether or not the Commonwealth is the guarantor

of AGL's contractual obligation under clause 7.8,

or whether the Commonwealth has bound itself in

some way as a principal party under clause 7.8.

MR JACKSON:  Or whether the Commonwealth has anything to do

with, in effect, clause 7.8, Your Honour.

BRENNAN J:  Now, as I understand it, the declaration relates

to the Commonwealth's obligation as a guarantor.

Is that not right?

MR JACKSON: With respect, Your Honour, no. What is said is

that - if I could go first to the terms of the

declaration itself, at page 29, Your Honours.

Your Honours, the form. of declaration is that, at

the bottom of page 29:

the plaintiff is entitled as against the first

defendant and the second defendant to a right

of first refusal -

and, Your Honours, the essence of the decision of

the primary judge is, if I could put it in a

shorter form, taken up in the reasons for judgment

in the Court of Appeal, and Your Honours will see

that at page 46. It is in the passage between

lines 5 and 23 and, Your Honours, what was said was

that:

Hooper 3/8/92

the words might be read:

"as referring to, and being satisfied by, a

plan of the Commonwealth -

and, Your Honours, I shall not read it out, but it

does not seem, really, to partake of the quality of

guarantor.

BRENNAN J:	I see.
MR JACKSON:	Your Honours, that is why, and I do not suggest

that the case does not, in a sense, have a slightly messy aspect but the messy aspect comes about, with

respect, because what, we would submit, is

inevitably involved in the declaration and in the

course taken by the court is one that the courts below have declined to accept as being involved.

Your Honours, I was going to go to Thomson's

case, (1948) 77 CLR 1. Your Honours, the relevant

passages are to be seen in the reasons for judgment

of Chief Justice Latham and of Justice Dixon.	May
I go, Your Honours, first to page 17 at about
point 6 in the judgment of Chief Justice Latham

and, Your Honours, perhaps I could say about the

passages to which I wish to refer, that the effect

of those passages is that the executive cannot bind

the Parliament in a way that would result in its

enactments being a breach of contract and,

Your Honours, I am putting it a little

inaccurately, but if Parliament legislates
inconsistently to such a contract it is not a

breach of contract. Your Honours, page 17, about

point 6, in the passage commencing:

Parliament may, by a law with respect to a

matter which is within its powers -

and, Your Honours, I would refer particularly to the last few lines on that page, and the passage

paragraph on to page 18, about point 3 - and I	goes on, Your Honours, through the whole of that
would refer particularly to the observation
at about point 2 on page 18:

It is perhaps unnecessary to add that

discharged means put an end to and does not

mean broken.

Your Honours, at page 25, about point 2 - - -

MASON CJ: But this proposition would never have been an

issue in the case, would it, Mr Jackson?

MR JACKSON:  Your Honour, we were endeavouring to put it in

issue in the Court of Appeal. Your Honour, I had

Hooper 10 3/8/92

not indicated to Your Honours where the Court of

Appeal's decision on the point was but,

Your Honours, we were seeking to say that one

should not interpret clause 7.8 in such a way as to

bind the Commonwealth in relation to the matter in

question because to do so would effectively be to

place a fetter, the nature of the fetter being the

potentiality of the Commonwealth being in breach of

contract, on the Parliament's power to legislate.

MASON CJ: That is a different proposition from this one, is

it not?

MR JACKSON:  Your Honour, the two are related. Your Honour,

the point I am seeking to make out of this is

really in answer, with respect, to what was put to

me by Justice McHugh concerning the fact that the

Commonwealth may be bound not to legislate in a

particular way in breach of contract, that the

passages to which I am referring indicate that it

would not be a breach of contract for the

Parliament to legislate inconsistently with the

contract.

Mc.HUGH:	I must say I was surprised that you took us to this
case in support of your argument rather than the standard cases like Ansett or the Birkenhead
Corporation case.
MR JACKSON:	Your Honours, those cases in the main, if I may

say so with respect, deal with the question of the

power of the executive to bind the Commonwealth.

Now, Your Honours, that is speaking of the

executive binding, as it were, the executive

government and, no doubt, it is a question, if the power being exercised is a statutory power, of the

ambit of the particular power. Does it permit such

a contract? If it does, it does. But,

Your Honours, those cases are not concerned with the next question which is a larger question and

one anterior to it, and that is whether the

executive can enter into an agreement which has the

effect that the Parliament is bound either not to

legislate in a particular way or, if it does, its

legislation having the consequence of it being a

breach of.contract by the executive.

McHUGH J:  You are trying to push this case beyond the

boundaries of anything that has ever been said on

the subject-matter. It comes, in the end, it seems
to me, that your proposition amounts to the fact

that no contract can ever be binding on the

Commonwealth.

MR JACKSON:  With respect, Your Honour, that is right if one

is speaking about the Commonwealth in both its

capacities, that is to say both the legislative and

Hooper 11 3/8/92

the executive capacity. If one is speaking about

the executive capacity, I do not put that
proposition at all, with respect. The point we are

seeking to make is that is what has happened in the

particular case has been that the contract has been

interpreted in such a way that it places on the

Commonwealth Parliament an obligation not to legislate in a particular way except at the price

of making the Commonwealth in breach of contract.

BRENNAN J: Except at the price of the Commonwealth

providing for just terms for the acquisition of the

right provided for in clause 7.8.

MR JACKSON:	Your Honour, that, in effect, goes without saying if there is such a right.
BRENNAN J:	The proposition that there is legislation which amounts to a breach of contract or puts the
executive government in a breach of contract is a
novelty for which I would have thought there is no
authority at all, but that is not to say that there
cannot be an antecedent contractual obligation on
the part of the Commonwealth which the Parliament
must either provide for just terms if it is going
to extinguish it, or else otherwise find some head
of power which does not involve acquisition.
MR JACKSON:	Your Honour, with all agreements entered into

by the Commonwealth the need to provide for just

terms in appropriate cases falling within the terms

of section Sl(xxxi) - and, Your Honour,

section Sl(xxxi) performs an important function, it

covers a field, no doubt, but the field is one

defined by the terms of section Sl(xxxi), and

Your Honours will recall the cases dealing with the

question whether sterilization is acquisition, and

so on. So, Your Honours, it is an important thing,

I would not doubt that for a moment, but having

said that, Your Honours, the point we would seek to

make is that one should not interpret a clause

like clause 7.8 as doing more than that.

Your Honours, what has been said, in effect,

in the declaration is that clause 7.8 creates a

binding obligation in circumstances where the

declaration is directed to a situation where what

is contemplated is legislation. Your Honours, what is contemplated is not some other proposal, it is a

proposal for legislation.

BRENNAN J: Legislation which will extinguish the declared

right.

MR JACKSON:  Your Honour, when one says extinguish, it may

be extinguished, bring it to an end, make it no

Hooper 12 3/8/92

longer capable of operation, yes. But,

Your Honour, that is what it is.

McHUGH J: Supposing the Commonwealth granted somebody a

lease to drill oil off the coast of Australia for

20 years, you would have to say that that could not

validly bind the Commonwealth because the

Commonwealth might want to terminate it.

MR JACKSON:  Your Honour, that in a sense has happened in

the area between Australia and Timor, and

Your Honours, I am sure, will one day have to deal

with that in the not too distant future.

McHUGH J:  Nobody disputes that the Commonwealth can by

legislation say that what is a breach of contract

is not a breach of contract but subject to paying

just terms for the acquisition of the product.

MR JACKSON: 

Your Honour, we do not debate that; I mean we

do not suggest that is not so, but that is not
really the particular case, with respect.
Your Honours, the approach taken by the Court of

Appeal - may I take Your Honours to that very

briefly. Your Honours, I should say I had not

quite concluded with taking Your Honours to the

references in Thomson's case.  May I just give

Your Honours the references. Page 25 point 2 to page 25 point 7; 28 point 3 to 28 point 5 - - -

McHUGH J: They are in your written submissions.

MR JACKSON:  Yes, Your Honour - and 31 point - yes,

Your Honour, they are. Your Honours, the

Court of Appeal dealt with the matter at page 47,

line 21 through to page 48, line 3, and then,

Your Honours, the next two pages.

Your Honours, the result, in our submission,

of the decision, is that the executive has bound

Parliament - the result of the decision in this

case - not to legislate in a particular way except

on pain of being in breach of contract and,

Your Honours, we would submit the ability of the
Government to do that is an important question and,

Your Honours, if one treats the issue as settled

by, for example, Thomson's case, the present

decision represents a departure from that of such a

nature that special leave should be given on that

ground. Your Honours, those are our submissions.

MASON CJ: Thank you, Mr Jackson. The Court need not

trouble you, Mr Emmett.

MR EMMETT:  May it please the Court.

Hooper 13 3/8/92

MASON CJ:	The Court is not persuaded that the decision of the Court of Appeal is attended with sufficient
doubt to justify the grant of special leave to
appeal.  The application is, therefore, refused.
MR EMMETT:	I am instructed to ask for costs, Your Honour.
MASON CJ:	You do not oppose costs, Mr Jackson?
MR JACKSON:	No, Your Honour.
MASON CJ:	The application is refused with costs.

AT 11.11 AM THE MATTER WAS ADJOURNED SINE DIE

Hooper 14 3/8/92