Fordham & Anor v Evans

[1988] HCATrans 97

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M22 of 1988

B e t w e e n -

ROBERT CLIVE FORDHAM and THE

STATE OF VICTORIA

Applicants

and

GARETH EVANS

First Respondent

BHP PETROLEUM PTY LTD

Second Respondent

ESSO EXPLORATION & PRODUCTION

AUSTRALIA INC

Third Respondent

OIL BASINS LIMITED

Fourth Respondent

Fordham

Application for removal

MASON CJ

BRENNAN J

DEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 MAY 1988, AT 9.32 AM

Copyright in the High Court of Australia

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MR H.C. BERKELEY± QC, Solicitor-General for Victoria: If the

Court p eases, I appear with my learned friend,
MR B.J. SHAW, QC, and with us our learned friend,

MR M. ADAMS, for the applicants and for the

Attorney-General for the State of Victoria. (instructed

by the Victorian Government Solicitor)

MR G. GRIFFITH, §C, Solicitor-General for the Cormnonwealth:

If the ourt pleases, I appear with MR H.R. SORENSEN, for the first defendant. (instructed by the Australian

Government Solicitor)

f1R K.M. HAYNE, ~C: If the Court pleases, I appear with my

learne friend, MR J. JUDD, on behalf of the second

and third respondents. (instructed by Middletons

Oswald Burt)

MR R. MERKEL, QC:  If the Court pleases, I appear with my learned

friend, MR N. YOUNG, on behalf of the fourth respondent.

(instructed by Arthur Robinson & Hedderwicks)

MASON CJ:	Mr Solicitor?
MR BERKELEY:	Your Honour, this matter raised originally

under the PETROLEUM (SUBMERGED LANDS) ACT 1967 and

PETROLEUM (SUBMERGED LANDS)(ROYALTY) ACT 1967, and

without going into the complicated provisions of

those Acts may I say, simply, that under the Acts

oil as at the wellhead and he does that if there is any dispute in accordance with

it is the duty of the State Minister to supervise value of the

the payment of royalty by the oil producers in Bass

directions which the Cormnonwealth Minister is

entitled to give to him, and that is the way in which

he exercises his powers.

This Court decided in BHP V BALFOUR that when

the Minister determines the value he has to determine

the real value, not what he thinks is the value.	Now,
for the purposes to the - put very simply, there is
no market at the wellhead	so what is done is to
take the value at - - -

MASON CJ: Longford.

MR BERKELEY:  Yes, Your Honour. And work backwards and deduct

from that the expense of getting - well, it is past

~ongford - and deduct from it the expense of bringing

it to market. Now, one of the procedures which has

to be carried out to bring it to market is to

stabilize the oil. It comes out of the ground at

pressures of up to 1500 pounds per square inch because

there is a lot of gas in it. Usually it is stabilized

right next to the wellhead but in the case of under

sea wells it has to be transported to land and that is

done at Longford. There is a plant there, 60 hectares

in area.

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MASON CJ: Is it necessary to traverse all this in order to

introduce us to the constitutional question?

MR BERKELEY:  Going to it very briefly, Your Honour. But,

anyway, the process of stabilization is subject to
duty under the EXCISE TARIFF ACT, that is the process of
getting the gas out of it and that takes place at

Longford. So, therefore, it is one of the expenses

of getting the product from the wellhead to the

market. For some years now the amount of excise that

is paid by the producer to the Commonwealth Government

has been deducted from the market value for the purpose
of getting to the wellhead value. The State Minister

has now been advised that the EXCISE ACT or the

relevant parts of it,are ultra vires the Commonwealth

so he therefore communicated with the producer and

said he was not going to deduct that any longer. He

informed the Commonwealth Minister what he proposed

to do. The Commonwealth Minister disagreed and

directed him to include the excise. That then came on

for review at the instance of the State Minister in

the Federal Court under the ADMINISTRATIVE DECISIONS

(JUDICIAL REVIEW) ACT and there were some preliminary

points raised which were found against us and that

brought us to the constitutional point; that is the

validity of the EXCISE ACT. For that purpose the

Attorney-General seeks to have the cause removed in

this Court for this Court can decide the constitutional

point.

It is contemplated that the whole cause will be

removed into this Court because if the points are

decided in our favour that would be the end of it.	If
it is decided against us, 0it'ia. -cootenplated the Court

would then remit the matter back to the Federal Court

to deal with it in accordance with the judgment of this

Court. At the request to the Commonwealth, the

Commonwealth suggested that we amend the relevant ground

which is ground 8 of the application by adding certain

words which we are happy to do, and I understand from

my learned friends at the bar table that amendment can

be made by consent.

MASON CJ: Now, whereabouts do we find - - -

MR BERKELEY:  It is in the application book, Your Honour, at

page 11; that is, at the bottom of the page.	Ground 8
says:

The decision was wrong in. law in that it

directed

that is the Commonwealth Minister's decision -

the first Applicant to reach an agreement

which is contrary to law by reason of the

first Applicant in reaching such agreement

being required or directed to take into

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account excise duties imposed by the

Commonwealth of Australia pursuant to

the EXCISE TARIFF ACT.

And what we wish to add to that are these words:

the EXCISE TARIFF ACT 1921 alternatively,

so much of the Act as is contained in

section 6B, 6C and 6D is not a valid law

of the Commonwealth. Further, so much of

the Act as authorizes the making of

by-laws 97, 99 and 108 is not a valid law

of the Commonwealth. Further, and

alternatively, none of the said by-laws

is validly made pursuant to the said Act

or at all.

It really states what our argument is but we apply

for that amendment and, as I say, I understand it can

be made by consent.

Now, I am prepared to elaborate on the

constitutional - - -

MASON CJ:	We have got to remove the matter first, have we rot, before we can make an amendment to the application
which is currently in the Federal Court.

MR BERKELEY: Yes, Your Honour, but I read that out because

it puts the point. I can elaborate on it

in this way, Your Honour: the rate of tax on the
process of stabilization is graduated and it varies

from nothing to 79 per cent of the value of the oil

stabilized. The rate which applies depends upon the

area in which the oil is produced, that is to say,

if - those areas are called prescribed production

areas. And if the total oil produced from a prescribed

production area is less than 5 million litres per annum

there is no duty and if it is between 5 and 10 million

.	litres per annum then the process of stabilization is taxed 5 per cent of the value of the oil stabilized.
And it goes up in steps up to 79 per cent.

Now, the point about that is that under the

EXCISE TARIFF ACT the Minister has power to declare

what is a prescribed production area and that is

defined in, for instance, section 6B(l) and also in

. like terms in section 6C and 6D and that says a:

"prescribed production area" means a

petroleum production area prescribed

by Departmental By-laws (which,

without limiting the generality of the

foregoing, may be a relevant

accumulation, a well, an oilfield or a

gas field.

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So, it is apparent that the Minister has power to

make either big production areas or little production

areas. He could say one well was a production area;

he could say part of a well was a production area

because one well may tap into a number of reservoirs

which are one above the other and each tapping into a

reservoir can be one production area and, in fact,

that is what has been done in ·the by-laws. You can

have a number of wells tapping into one reservoir.

Or you could say all the wells in one oilfield were a

prescribed production area or you could say, collectively,

a number of oilfields were one prescribed production -

all those things appear in the by-laws.

So that what the Minister has power to do is

by making larger or smaller production areas he can

favour a production in some States as against

production in other States and he can treat production

in some States differently.

MASON CJ:  I think we can relieve you of the labour of going

through this, Mr Solicitor. The Court is prepared to

make an order for removal of this matter.

MR BERKELEY: Yes, Your Honour.

MASON CJ:  I take it that from what you have told us that there

is no opposition to the application?

MR BERKELEY:  I have no idea, Your Honour.

MASON CJ: Well, perhaps we ought to find out at this stage if

there is any opposition to it.

MR BERKELEY: Yes, Your Honour.

MR GRIFFITH:  Your Honour, the view of the first respondent is

merely one limited to form and we are grateful to my

learned friend foreshadowing to the Court that on

remov~l he would intend to apply to amend ground 8 of

the application which does seem to spell out the issue

of _arising under the CONSTITUTION. We would, of course,

contemplate, Your Honours, that that would be the issue

to be set down for hearing before the Court and it may
well be, Your Honours, that on removal there would be

some issues of fact, particularly arising on a recently

filed affidavit,which appears on page 102 and following

of the application book, of Mr Spence. And our

contemplation, Your Honour, is that upon removal

the parties would endeavour to agree with facts and

. whatever the outcome of that, Your Honours, we would

contemplate there would be a directions hearing so

that there could be specific questions stated to the

Court, one would hope, by agreement.

MASON CJ: Yes, so that the issues of fact could be agreed or

resolved and a question stated for the determination

of the Full Court.

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MR GRIFFITH: Yes, Your Honour. And then, Your Honour, the

matter could proceed for hearing on that issue
and, as my learned friend indicated, the rest of the

case could abide the result.

MASON CJ: Yes. Very well, Mr Solicitor. And what about

Mr Hayne and Mr Merkel?

MR HAYNE:  If che Court pleases, we have nothing to say about

removal. We support what my learned friend for the

Connnonwealth says about the procedure that now

should be followed.

MASON CJ: Yes; and Mr Merkel?

MR MERKEL:  We support the removal and are in agreement with

the procedure.

MASON CJ: Yes. Mr Solicitor, the Court will make an order

for removal as sought.

MR BERKELEY: If Your Honour pleases.

MASON CJ:  I take it there is no objection to the Court granting

leave to amend?

MR BERKELEY: That is by consent, Your Honour.

MASON CJ:  By consent, very well. And we grant leave to amend

the grounds in the manner indicated.

AT 9.44 AM THE MATTER WAS ADJOURNED SINE DIE

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