Hawker Pacific Pty Ltd v Freeland, Colin W

[1983] FCA 381

Re: HAWKER PACIFIC PTY. LIMITED
And: COLIN W. FREELAND
And: THE COMMONWEALTH OF AUSTRALIA
And: CIVIL FLYING SERVICES PTY. LIMITED
No. G161 of 1982
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Fox J.

CATCHWORDS

Administrative Law - Case Stated - Contract with Government to supply Aircraft - Whether decision to contract made under enactment - Whether issue of accounting document a decision - Person Aggrieved - Compliance with Finance Regulations and Directions.

Administrative Decisions (Judicial Review) Act 1977.

Audit Act 1901, sections 34, 71 and 72.

Finance Regulations, regs. 48, 51, 52, 52AA, 52A and 127A.

Finance Directions, dir. 12.

HEARING

SYDNEY

#DATE 16:12:1983

JUDGE1

This case concerns the award, by the Commonwealth, of a contract to supply five aircraft. The matter comes before the Court by way of an application under the Administrative Decisions (Judicial Review) Act 1977.

By advertisements in the "Sydney Morning Herald" and the Melbourne "Age" on 17 September 1980 and in the Commonwealth Government Gazette of 23 September 1980, the Department of Transport (now named the Department of Aviation ("the Department") publicly invited registrations of interest by potential suppliers of light twin engine aircraft.

Seven companies responded. Three of these were eliminated by the Department's preliminary evaluations. Four potential suppliers offering a total of eight types of aircraft remained. A "certificate of exemption" purporting to exempt the Department from having to call for tenders publicly (see s.52 of the Finance Regulations) was signed by the Acting Assistant Secretary (Commercial) on 27 October 1981.

The Department then invited the remaining four companies to tender. These included the applicant and the third respondent. Tenders closed on 17 February 1982. The contract was awarded to the third respondent on 22 June 1982. A document called a "purchase order" for the same aircraft, was prepared on the same day.

The applicant complained that the aircraft which the third respondent contracted to supply did not accord in all respects with the specifications in the invitation to register an interest, nor with that respondent's tender.

At an early stage in the applicant's case the parties agreed to submit four questions for separate decision. Although in a form sufficient for the purpose of the proceedings, the questions were not then formulated as a stated case pursuant to Order 29 of the Rules. Following argument upon each question I gave ex tempore answers. The parties have since submitted a document stating substantially the same questions, but in accordance with Order 29. The questions now are:

1. Whether the alleged "decisions" referred to in the applicant's further Amended Application -

(a) To award the contract (being exhibit "E" tendered by the applicant) to the third respondent; or

(b) To issue a purchase order (being exhibit I tendered by the second respondent) to the third respondent are decisions or either of them is a decision of an administrative character under an enactment.

2. Whether the following matters or any one or more of them are sufficient of themselves to make the applicant a "person aggrieved" within the meaning of the Administrative Decisions (Judicial Review) Act:-

(a) That the applicant having by letter dated 13 October 1980 (being exhibit marked "WES1" and referred to in the affidavit of Warwick Edward Slade sworn 8 October 1982 and filed in these proceedings) registered an interest in tendering pursuant to a public invitation so to do (being annexure "A" to the said affidavit of Warwick Edward Slade) was invited to tender for the supply of aircraft; or

(b) That the applicant was one of only four persons invited to tender and did tender for the supply of aircraft after a large number of persons had been invited to register an interest in tendering;

(c) That, as evidenced by the minutes being exhibits "F" and "G" tendered by the applicant and by the minute and Contract Board Business Paper being exhibits 2 and 3 tendered by the second respondent, the applicant's aircraft and the third respondent's aircraft were the only aircraft considered finally as being suitable for the second respondent's purposes.

3. Whether the Certificate of Exemption No. 554 executed on 27 October, 1981, being exhibit 4 tendered by the second respondent, was valid.

4. If the said Certificate of Exemption No. 554 was not valid, whether the procedure adopted by the first respondent or the second respondent its servants and agents in calling for registrations of interest and subsequently inviting in the manner it did (as evidenced by the exhibit marked "WES2" referred to in the said affidavit of Warwick Edward Slade) tenders for the supply of aircraft, constituted the public invitation of tenders within the meaning of the Finance Regulations. Question 1

The applicant argued that both the award of the contract and the issue of the purchase order were decisions of an administrative character under the Finance Regulations.

These Regulations are made under s.71 of the Audit Act 1901 of which sub-section (1)(e) is relevant to this case: "71.(1) The Governor-General may make regulations (not inconsistent with the provisions of this Act) for carrying out the provisions of this Act and in particular for and in relation to - . . .

(e) the purchase of chattels and other property for or by the Commonwealth; . . . "

The relevant Finance Regulations are Regulations 51, 52, sub-regulations (2), (3) and (4) of Regulation 52AA and Regulation 52A:

"51.(1) Subject to any Act making provision with respect to contracts for supplies and to regulation 52AA of these Regulations, where -

(a) any supplies the estimated cost of which exceeds $200 are required;

(b) there is no existing contract between the Commonwealth and a supplier under which the supplies so required can be obtained; and

(c) the supplies are not obtained under a contract between a State and a supplier, at least three representative quotations for the supplies shall, whenever possible, be obtained unless tenders are publicly invited. . . .

(3) Where the estimated cost of any supplies exceeds $200 but does not exceed $500, a quotation obtained under this regulation in respect of the supplies may be oral or in writing, but, in the case of an oral quotation, the details of the quotation shall be recorded in the appropriate Departmental file.

(4) Where the estimated cost of any supplies exceeds $500, each quotation obtained under this regulation in respect of those supplies shall be in writing. 52.(1) Subject to any Act making provision with respect to contracts for supplies and subject to the next succeeding regulation, contracts shall not be entered into, and orders shall not be placed, for supplies the estimated cost of which exceeds $10,000 unless tenders have first been publicly invited for those supplies. 52AA. . . .

(2) Where the Secretary certifies that compliance with regulation 51 of these Regulations, or with the last preceding regulation, in respect of supplies of a kind specified in the certificate is, having regard to the nature of the supplies and to the established practices in a profession, business, trade or industry connected with the supply of supplies of that kind, impracticable or inexpedient, regulation 51 of these Regulations or the last preceding regulation, as the case may be, does not apply to supplies of that kind.

(3) The next succeeding sub-regulation applies to supplies of the following kinds:

(a) metals for use in the manufacture, by or on behalf of the Commonwealth, of coins, medals, medallions, plaques and other like objects at a mint;

(b) supplies relating to the defence of the Commonwealth;

(c) supplies for the Department of Housing and Construction;

(d) supplies obtained by or on behalf of the Administrator of the Territory of Christmas Island in connection with the administration of the Territory; and

(e) supplies approved, or to be obtained, by the Purchasing Division of the Department of Administrative Services or by a Tender Board of a Department.

(4) Where the Secretary, or an officer authorized by him by instrument in writing for the purpose, certifies, in respect of particular supplies, being supplies of a kind to which this sub-regulation applies, that compliance with regulation 51 of these Regulations, or with the last preceding regulation, is, by reason of the urgency with which those particular supplies are required, the sources of those particular supplies or otherwise, impracticable or inexpedient, regulation 51 of these Regulations or the last preceding regulation, as the case may be, does not apply to those particular supplies. 52A.(1) Where a Requisition for supplies has been approved by the person or persons to whom it had been submitted for approval under regulation 48, the Permanent Head shall issue a Purchase Order in accordance with Form 13 in respect of the supplies specified in the Requisition.

(1A) It shall be sufficient compliance with the requirements of sub-regulation (1) if an authorized officer issues the Purchase Order therein referred to.

(2) Unless the Minister otherwise approves, Purchase Orders shall be prepared in triplicate and shall be numbered consecutively.

(3) A Purchase Order shall not be issued except in accordance with the Requisition as approved." Question 1(a) - The Awarding of the Contract

The Finance Regulations provide various conditions precedent that need to be satisfied before a contract can be awarded. The power to contract is an inherent prerogative or governmental power which is regulated by those Regulations (notably Regulations 51 and 52). The decision to award a contract is an exercise of this power and is therefore not made under an enactment (see New South Wales v. Bardolph (1934) 52 C.L.R. 455 at 474-475, 496 and 508).

Compliance with the Regulations is but a step leading to the awarding of the contract. I do not accept the applicant's proposition that because the Regulations regulate the power to contract they were the source of a "valid power" to contract.

I answer question 1(a) - No.
Question 1(b) - The Issue of the Purchase Order

Regulation 52A provides that the Permanent Head "shall" issue a purchase order after a requisition for supplies has been approved. It was submitted that its issue was purely mechanical and therefore that no relevant decision was involved. The use of the word "shall" does suggest that this is the case. It is also clear that the purchase order is an accounting document for the purposes of the Audit Act, see s.34 (by virtue of s.71 of the Audit Act the Finance Regulations are "for carrying out the provisions of" the Act).

While a purchase order is a document addressed to the intended supplier, and may be the document on which he acts, it does not follow that the person who signs it or authorises its issue, is the person who makes the decision that the goods be purchased. Regulations 48 and 52A indicate the contrary. It does not seem to me possible, by referring to documents brought into existence to implement the order, to escape the fact that the order is part of an exercise of the prerogative.

I answer question 1(b) - No.
Question 2

The provisions of the Administrative Decisions (Judicial Review) Act 1977 dealing with the requirement that an applicant be a "person aggrieved" have been widely construed on numerous occasions. It is trite law that the applicant must suffer as a result of the decision complained of beyond the suffering of an ordinary member of the public. The mere fact that the applicant and the third respondent were business competitors does not make the former a "person aggrieved".

In this case business competitors registered their interest and were then selectively invited to tender for the aircraft contract. Only four persons were so invited. Questions 2(a) and 2(b) differentiate between the invitation to tender and the submission of a tender. It seems clear as a matter of practical consideration, that the applicant was a "person aggrieved", at least by virtue of its submission of a tender. The cost of tendering and the volume of documentation alone indicate this.

In the circumstances I also regard the applicant's claim to be a "person aggrieved" as being supported by its receipt of an invitation to tender. The selective invitation initiated the applicant's commitment to prepare a tender and placed it far beyond the position of a member of the public. At the later stage referred to in question 2(c) only aircraft proposed by the applicant and the third respondent were considered.

I answer question 2(a) - Yes.

I answer question 2(b) - Yes.

I answer question 2(c) - Yes.
Question 3

In the circumstances, this question does not arise. It was, however, argued before me, and I expressed views upon the matters raised or matters in similar terms, at the conclusion of argument. I shall therefore discuss these matters.

The certificate of exemption (exhibit 4) was granted pursuant to sub-reg. (4) of Regulation 52AA which applies to supplies specified in sub-reg. (3) of that Regulation. It was challenged on the basis that:

(i) it did not refer to "particular supplies"; and

(ii) it did not state the reasons for certification; and

(iii) the supplies were not approved by a Tender Board of the Department.

The applicant submitted that the certificate must refer to a particular aircraft and not aircraft of a kind. The argument was based on the proposition that sub-reg. (2) of Regulation 52AA refers to "supplies of a kind" and therefore where sub-reg, (4) refers to "particular supplies" a greater degree of specification was required. I find no difficulty with that initial proposition.

However, the applicant suggested that the Department would have to specify the particular aircraft they wanted, without publicly calling for tenders, before a certificate exempting the Department from calling public tenders could be issued. This suggestion is quite circuitous and is opposed to the spirit of the basic requirement in Regulation 52 that there be public tenders.

The detailed recommendations set out in the document before the certificate listed eight aircraft and specified that they achieve certain altitude, payload and purpose requirements. They went far beyond specifying aircraft of a kind in a generic sense. The certificate clearly relates to those specifications and on this question they should be read together. To my mind the certificate was of sufficient particularity to satisfy Regulation 52AA(4).

By s.72 of the Audit Act the Regulations may authorise persons there specified to give "directions" to officers in relation to any of the matters for which regulations may be made. Regulation 127A(1) does just that with respect to the Minister or Secretary of the Department of Finance. In this case para. 12 in Part 25 of the Finance Directions (in evidence as exhibit "B") is as follows:

"Certificate of Exemption from Tenders and Quotations (Finance Regulation 52AA(4))

12. The reason(s) for seeking a dispensation from the requirement either to obtain representative quotations or publicly invite tenders, shall be clearly stated in writing by the recommending officer and contracts shall not be signed or orders placed until the certificate is given. If the authorised person gives the requested certificate, he shall clearly state on the papers the reason(s) which have satisfied him that he should so certify."

The certificate is found at the foot of p.3 of exhibit

"CERTIFICATE OF EXEMPTION NO. 554 In accordance with Finance Regulation 52AA(4) I hereby grant a Certificate of Exemption from the invitation of public tenders. (Sad. T.M. Wheeler) A/Assistant Secretary (Commercial) 27 October 1981" Counsel for the applicant submitted that the certificate contains no reasons and therefore is in breach of direction 12. Regulation 127A(5) is relevant in determining the consequences. Counsel was not, however, prepared to contend that invalidity of the certificate resulted; the irregularity was used "in aid of the general argument". In the circumstances, no final decision is required from me, although I incline to the view that invalidity did not result. Direction 12 deals with internal administrative procedures and should probably be understood as directory only (see Hatton v. Beaumont (1977) 2 N.S.W.L.R. 211 per Hope J.A. at 215).

Regulation 52AA(4) only applies if one of the paragraphs of sub-reg. (3) is satisfied. Paragraph (e) of that sub-regulation is the only relevant paragraph. It refers to "supplies approved, or to be obtained, . . . by a Tender Board of a Department". The Department has no Tender Board so called. It does have a Contract Board.

Having regard to the evidence of the affidavit of Mr. Charles Ross Groat and the annexures thereto, I conclude that, for the purposes of Regulation 52AA(3)(e), the Contract Board was a Tender Board.

I answer question 3 - Does not arise.

Question 4

This question does not arise, although it was submitted by both parties that if I answered Question 3 in accordance with the views I have expressed, the answer should be - No. It is not necessary to say anything further.

My answers to the questions posed for separate decision are therefore:

Question 1(a) - No. 1(b) - No. Question 2(a) - Yes. 2(b) - Yes. 2(c) - Yes. Question 3 - Does not arise. Question 4 - Does not arise.