Lionize Group Pty Ltd v Minister for Transport and Infrastructure

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Application for Judicial Review)
LIONIZE GROUP PTY LTD & ANOR v MINISTER FOR TRANSPORT AND INFRASTRUCTURE & ANOR
[2020] SASCFC 29
Judgment of The Full Court
(The Honourable Chief Justice Kourakis, The Honourable Justice Peek and The Honourable Justice Nicholson)
24 April 2020
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - FAILURE TO OBSERVE STATUTORY PROCEDURE
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - IRRELEVANT CONSIDERATIONS
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - RELEVANT CONSIDERATIONS
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - UNREASONABLENESS
Application for judicial review of the decision of the Minister for Transport, Infrastructure and Local Government (the Minister) consenting to the removal of 120 m of the rail track on the railway line that runs from North Gawler to Penrice in the Barossa Valley (the Barossa Railway Line). That part of the track runs across Kroemer’s Crossing.
The owner of the rail track and all track infrastructure on the Barossa Railway Line leases the rail corridor from the State of South Australia. The Barossa Railway Line was one of the railway lines returned to State control following an agreement between the State and Commonwealth in 1997. The agreement known as the ‘Railways Agreement’ is a schedule to the Non-Metropolitan Railways (Transfer) Act 1997 (SA) (the Act). The lease granted to the owner, referred to in the Railways Agreement as the ‘Ground Lease’, is for a term of 50 years, commencing in 1997. In 2014, the owner ceased operating a train service on the line and none have operated on it since that time.
The first plaintiff is the owner of a building situated adjacent to the Barossa Railway Line, which it purchased as part of a plan to develop a tourism business known as the Barossa Train Wine Project. The second plaintiff is the owner of a train intended to be used in the project.
In August 2019, the Minister called for expressions of interest for the use of the Barossa Railway Line. The second plaintiff, and others, responded to the call. In January 2020, an officer of the Department of Planning, Transport and Infrastructure (the Department) informed the second plaintiff that the Department had determined to abandon the expression of interest process. On 13 March 2020, the Minister announced that the Department would undertake a major upgrade of Kroemer’s Crossing, making no reference to the removal of the rail track. However, on 18 March 2020, the Minister wrote a letter in which he acknowledged that part of the track would be removed.
Clause 9.1(f) of the Railways Agreement provides that ‘Track Infrastructure … will not be removed without the prior written consent of the State’. Section 5(5) of the Act provides that ‘the Minister must not give consent on behalf of the State to the removal of Track Infrastructure in accordance with the terms of clause 9.1(f) … unless the Minister is satisfied that the Track Infrastructure is no longer required for the safe, efficient and effective use of the relevant railway line’.
After this application was brought, the Minister and the owner entered into a Deed of Surrender whereby the owner surrendered that 120 metre part.
The plaintiffs seek orders setting aside the Minister’s decision on the following grounds:
• the Minister did not make a ‘real decision’ in the sense that he adopted an earlier decision purportedly made by the Chief Executive of the Department, without giving the matter any independent thought;
• the Minister took into account irrelevant considerations;
• the Minister failed to take into account relevant considerations;
• the decision was manifestly unreasonable; and
• the Minister misconstrued s 5(5) of the Act.
The plaintiffs also sought declarations that the Deed of Surrender is void.
Held per curiam, dismissing the application for judicial review:
1. The State’s plenary power to enter into a commercial variation of the Ground Lease by way of the Deed of Surrender has not been excluded by clause 9.1(b) of the Railways Agreement but rather endorsed, at least with respect to the present circumstances that fall within placitum (iii) of clause 9.1(b).
2. It follows that the giving of consent by the Minister has been rendered otiose and, irrespective of the proper construction of s 5(5) of the Act, the action for judicial review lacks utility.
3. The parties have seven days from the delivery of these reasons to file and serve written submissions on costs.
Non-Metropolitan Railways (Transfer) Act 1997 (SA) ss 4, 5, sch cll 1, 2, 5, 9, referred to.
Minister for Immigration v Jia Legeng (2001) 205 CLR 507; CREEDNZ Inc v Governor-General [1981] 1 NZLR 172, considered.

LIONIZE GROUP PTY LTD & ANOR v MINISTER FOR TRANSPORT AND INFRASTRUCTURE & ANOR
[2020] SASCFC 29
Full Court: Kourakis CJ, Peek and Nicholson JJ

THE COURT: This is an application for judicial review of the decision of the Minister for Transport, Infrastructure and Local Government (the Minister), made on 20 March 2020, consenting to the removal of a section of the rail track on the railway line which runs from North Gawler to Penrice in the Barossa Valley (the Barossa Railway Line). The consent was given to remove 120 metres of that part of the track on that line, which runs across Kroemer’s Crossing just outside of the town of Tanunda.
One Rail Australia (ORA) is the owner of the rail track and all track infrastructure on the Barossa Railway Line. ORA leases the rail corridor on which the infrastructure rests from the State of South Australia, pursuant to a lease made with the Minister for Transport on 3 August 2007. The Barossa Railway Line is one of a number of railway lines servicing regional South Australia from Adelaide which were returned to State control following an agreement reached between the State and the Commonwealth in 1997. The agreement known as the ‘Railway Agreements’ was made on 30 June 1997 and is a schedule to the Non-Metropolitan Railways (Transfer) Act 1997 (SA) (the Act).
The lease granted to ORA, referred to in the Railways Agreement as the ‘Ground Lease’, is for a term of 50 years, commencing on 7 November 1997. However, in 2014, ORA ceased operating a train service on the Barossa Railway Line. No train has operated on it since that time.
The first-named plaintiff, Lionize Group Pty Ltd (Lionize), is the owner of a building, which was formerly the Chateau Tanunda Railway Station situated adjacent to the Barossa Railway Line. Lionize purchased it as part of a plan to develop a tourism business known as the Barossa Wine Train Project. The second-named plaintiff, Barossa Wine Train Pty Ltd (the Barossa Wine Train Company), is the owner of a train which it intended to use in the project. The Barossa Railway Line had been used by a business of that kind in the past.
In August 2019, the Minister called for expressions of interest for the use of the Barossa Railway Line. The Barossa Wine Train Company, and others, responded to the call.
On 9 January 2020, an officer of the Department of Planning, Transport and Infrastructure (the Department) wrote to the Barossa Wine Train Company, informing it that all of the proposals responding to the expression of interest were found to require substantial support from the Government and that the Department had, therefore, determined to abandon the expression of interest process.
On 13 March 2020, the Minister announced that the Department would undertake a major upgrade of Kroemer’s Crossing by constructing a roundabout (the Kroemer’s Crossing Upgrade). Work was scheduled to commence on 23 March 2020. The announcement made no reference to the removal of the rail track.
However, on 18 March 2020, the Minister wrote to a Mr Leedham, a person interested in the development of tourism in the Barossa Valley, concerning the Kroemer’s Crossing Upgrade. The Minister acknowledged that part of the track of the Barossa Railway Line would be removed and assured Mr Leedham that a report on the removal of the track would be laid before both Houses of Parliament, pursuant to s 5(6) of the Act.
The plaintiffs seek orders setting aside the Minister’s decision on the following grounds:
·the Minister did not make a ‘real decision’ in the sense that he adopted an earlier decision purportedly made by the Chief Executive of the Department (the Chief Executive), without giving the matter any independent thought;
·the Minister took into account irrelevant considerations;
·the Minister failed to take into account relevant considerations;
·the decision was manifestly unreasonable; and
·the Minister misconstrued s 5(5) of the Act.
The first ground arises out of the circumstance that the Minister’s consent for the removal of the track was given after he had announced the Kroemer’s Crossing Upgrade and after consent had purportedly been given by the Chief Executive, who is also the Commissioner of Highways, on 24 February 2020, in the belief that the power to do so had been delegated to him.
On 19 March 2020, Mr Geber, the principal of Lionize and the Barossa Wine Train Company, wrote to the Chief Executive questioning the validity of the decision. The Department then attempted to, but could not, locate a written delegation. Accordingly, by Minute dated 20 March 2020 the Chief Executive recommended to the Minister that he personally grant consent, ‘out of an abundance of caution’.
The Minute informed the Minister that, in January 2020, the Department finalised an evaluation of expressions of interest for operating passenger and tourist rail services on the Barossa Railway Line. The Department had concluded that services of that kind would not return to the Barossa after an ‘impartial evidence-based assessment deemed every proposal to be unviable’.
The Minute referred to the need to improve the safety and access to Kroemer’s Crossing by installing a roundabout and that the upgrade would require the removal of 120 metres of ‘dormant rail infrastructure’ at the intersection.
Accordingly, the Minister was advised that the track infrastructure was no longer required for the safe, efficient and effective use of the railway line.
After Lionize and Barossa Wine Train Company brought this application for judicial review, the Minister and ORA entered into a Deed of Surrender whereby ORA surrendered that 120 metre part of the land rail corridor that traverses the Kroemer’s Crossing. Lionize and Barossa Wine Train Company sought leave to amend their Statement of Grounds to seek declarations that the Deed of Surrender is void.
Section 5(5) of the Act precludes the Minister from exercising his or her contractual power to consent to the removal of any ‘Track Infrastructure’ under the Ground Lease unless the Minister is first satisfied that it ‘is no longer required for the safe, efficient and effective use of the relevant railway line’. It is an essential element of the challenges made by Lionize and the Barossa Wine Train Company to the Minister’s consent, and to the effectiveness of the Deed of Surrender, that s 5(5) of the Act is directed to the present and possible future use of the Railway Line. They contend that s 5(5) of the Act requires the Minister to be satisfied that the Track Infrastructure, which it is proposed to remove, will not be required for the entire period of the Ground Lease.
That construction must be rejected. Section 5(5) conditions the exercise of the contractual power by the Minister to give consent to the removal of Track Infrastructure on his or her satisfaction that it is no longer required for the safe, efficient and effective use of the Railway Line, as at the time of the proposed removal. On that construction, and on the accepted fact that ORA was no longer operating railway services on the Barossa Railway Line, the Minister could not reasonably reach any conclusion other than that the track was no longer required. In addition, the Act did not limit the Minister’s contractual power to enter into the Deed of Surrender. We would, therefore, dismiss the application for judicial review. We elaborate on our reasons below.
The Railways Agreement
Relevantly to this application, clause 1.1 of the Railways Agreement defines the following terms:
…
‘Australian National’ means Australian National Railways Commission a statutory corporation established under the Australian National Railways Act 1917 and continued in existence pursuant to the Australian National Railways Commission Act 1983;
‘Bulk Handling Facilities’ has the meaning given to that expression in section 18a(4) of the Bulk Handling of Grain Act 1955 (South Australia) (each a ‘Bulk Handling Facility’);
…
‘Commonwealth’ means the Commonwealth of Australia as a party to this agreement;
‘Commonwealth Minister’ means the Minister of the Commonwealth for the time being having responsibility for administration of this agreement;
…
‘Effective Date’ means the date on which the Sale Agreement is completed (or such other date as the Commonwealth Minister and the State Minister or their respective delegates may agree in writing);
…
‘Freight Operator’ means the person nominated as the Freight Operator for the purposes of this agreement by notice in writing from the Commonwealth Minister to the State Minister given at any time prior to the Effective Date;
‘Ground Lease’ means a lease by the State to the Freight Operator of the Operational Railways Land containing (subject to clause 9.1) such terms and conditions as the Commonwealth and the State may agree;
…
‘land’ includes:
(a) a legal or equitable estate in land; and
(b) a right, power or privilege over, or in connection with, land
but does not include Track Infrastructure severed from land as contemplated by clause 6.1;
…
‘Operational Railways Land’ means that part of the SAR Land and Commonwealth Railways Land (other than the Leigh Creek Line) which is used on, or intended by the Freight Operator to be used after, the Effective Date in connection with the Railway Services (being the land to be leased to the Freight Operator pursuant to the Ground Lease);
…
‘Railway Services’ means services provided in association with the Operational Railways Land including the handling, storage and carriage of freight by rail (and incidentally by road), the storage, servicing and maintenance of rolling stock, the maintenance and replacement of Track Infrastructure and the maintenance and operation of signalling and communication equipment (but excluding the Passenger Services);
…
‘SACBH’ means South Australian Co-operative Bulk Handling Limited (ACN 007 556 256) a company limited by guarantee;
…
‘Sale Agreement’ means an agreement for the sale by the Commonwealth of its shares in the Freight Operator and the Passenger Operator (or if more than one, each such agreement);
‘SAR Land’ means the estate or interest of Australian National on the Effective Date in the land referred to in recital B (other than Excluded Land);
…
‘the State’ means the Crown in right of the State of South Australia as a party to this agreement;
‘State Minister’ means the Minister of the State for the time being having responsibility for administration of the Rail Safety Act 1996;
…
‘Track Infrastructure’ has the meaning given in schedule 4.
Schedule 4 to the Railways Agreement defines ‘Track Infrastructure’ as follows:
For the purposes of this agreement the expression ‘Track Infrastructure’ means the following improvements, whether or not constituting fixtures at law, owned by Australian National on the Effective Date:
(a) trackwork including without limitation, rail lines, crossing loops, level crossings, sleepers, ballast, fastenings, points, poles, pylons, pipes, drains, structures, supports, overhead lines, buffer stops, posts and signs;
(b) earthworks and formations including cuttings, embankments, tunnels (including any tunnel lighting and ventilation), ditches and retaining walls;
(c) bridges, culverts, overpasses, underbridges, viaducts, jetties and wharves;
(d) signalling and train control and communications systems (including signal boxes, huts and telegraph and transmission lines and instruments) which are necessary for the safe and proper movement of trains;
(e) access roads, approaches, footpaths, gates, cattle stops, and fences; and
(f) buildings and other structures including platforms, railway stations, passenger terminals, freight sheds, freight terminals, roundhouses, workshops and associated buildings.
The Railways Agreement obliges the Commonwealth and the State to enact legislation ratifying the Railways Agreement and authorising the performance of the agreement by their respective Executives.[1] Clause 2.2(c) in particular requires the State to procure legislation authorising it to enter into the Ground Lease with the Freight Operator. It is not clear why it was thought necessary to provide a statutory basis for what would otherwise have been the exercise of the executive power of the State. On the other hand, other obligations imposed on the State such as granting exemptions from State taxation and other laws of general application clearly require a statutory foundation.
[1] Clauses 2.1 and 2.2 of the Railways Agreement provide:
2.1 Commonwealth Legislation
The Commonwealth will take all practical steps to seek the enactment of legislation:
(a) authorising the Commonwealth Minister to approve and enter into this agreement on behalf of the Commonwealth;
(b) authorising the performance and observance of this agreement by the Commonwealth;
(c) making such provision as is necessary or appropriate for the implementation by the Commonwealth of this agreement and the transactions contemplated by this agreement including provisions facilitating:
(i) the termination or variation of the Rail Transfer Agreement;
(ii) the vesting in the State the SAR Land and the Commonwealth Railways Land;
(iii) the vesting in SAGC the Track Infrastructure on the Leigh Creek Line; and
(iv) the issuing of certificates by the Commonwealth Minister and the State Minister or their respective delegates identifying the SAR Land or the Commonwealth Railways Land (or any part thereof).
2.2 State Legislation
The State will take all practical steps to seek the enactment of legislation:
(a) authorising the State Minister to approve and enter into this agreement on behalf of the State;
(b)authorising the performance and observance of this agreement by the State;
(c) authorising the State Minister to approve and enter into the Ground Lease and the Passenger Lease on behalf of the State;
(d) authorising the performance and observance by the State of the Ground Lease and the Passenger Lease;
(e) giving effect for the purposes of the laws of the State (including without limitation the Real Property Act 1886 and the Crown Lands Act 1929) to the transfer to the State of the legal estate in fee simple in the SAR Land and the Commonwealth Railways Land;
(f) authorising the registration of the Ground Lease and the Passenger Lease under the provisions of the Real Property Act 1886;
(g) providing for such exemptions as may be appropriate for the owner or occupier for the time being of the Operational Railways Land from the laws of the State in relation to:
(i) fencing;
(ii) State taxes and charges; and
(iii) municipal rates, taxes and charges;
(h) providing for such exemptions as may be appropriate from the laws of the State in relation to the sale of liquor and the conduct of gaming activities on the Passenger Services;
(i) making such provision as is necessary or appropriate for the implementation by the State of this agreement and the facilitation of the operation of the Railway Services and the Passenger Services including:
(i) varying the Rail Transfer Agreement;
(ii) issuing of certificates by the Commonwealth Minister or the State Minister or their respective delegates as to the identification of the SAR Land and the Commonwealth Railways Land (or any part thereof) for the purposes of the Real Property Act 1886 or otherwise;
(iii) facilitating the severance and separate ownership of the Track Infrastructure from the SAR Land and the Commonwealth Railways Land (including the Leigh Creek Line).

Clause 5 of the Railways Agreement provides for the transfer from the Commonwealth to the State of the land comprising the rail corridors:
5.1 Agreement to Transfer
The Commonwealth agrees that it will transfer or will procure the transfer to the State on the Effective Date of:
(a) the SAR Land (other than any Excluded Land)
(b) the Commonwealth Railways Land (other than any Excluded Land).
…
We observe here that the ‘Effective Date’ is the date on which the Commonwealth was to settle on the sale of its shares in the Freight Operator and Passenger Operator. That is of some importance because it reveals that one of the purposes of the Railways Agreement was the privatisation of railways services on the transferred railway lines. In order to achieve that privatisation, and the transfer of the rail corridors to the State, it was necessary for a Ground Lease to be agreed, between the Commonwealth and the State, which would be acceptable to the ultimate owner of the shares in ORA.[2]
[2] That owner of the shares in ORA came to be Genesee and Wyoming Australia Pty Ltd, the shares in which are now owned by Majuare Infrastructure and Real Assets.
Clause 9 of the Railways Agreement made provision for terms which were to be included in the Ground Lease:
9.1 Ground Lease
The State agrees that it will on the Effective Date sign and deliver to the Freight Operator the Ground Lease. The Ground Lease will contain such terms and conditions as may be agreed between the parties, including provisions:
(a)     for an initial term of 50 years;
(b)     entitling the State to terminate the lease in respect of all or any part of the Operational Railways Land if:
(i) the lessee becomes insolvent;
(ii) within the first 5 years of the term of the lease the lessee fails to provide for a continuous period of six months the minimum services nominated by the lessee and specified in the lease; or
(iii) the Operational Railways Land or that part ceases to be used for Railway Services for a continuous period of eighteen months;
(c)     for the transfer to the State at its option of the Track Infrastructure on any part of the Operational Railways Land in respect of which the lease has terminated:
(i) where that termination occurs within 5 years of the commencement of the lease, at no consideration; and
(ii) in any other case, at valuation on the basis of continued railways usage;
(d)     for rental to be charged:
(i) for rail corridors, at a nominal rent; and
(ii) for other land, at a nominal rent for the first 5 years and at commercial rates thereafter;
(e)     for the excision from the Operational Railways Land of any land which is or subsequently becomes a Bulk Handling Facility so as to facilitate the lease of that land to SACBH; and
(f)      that the Track Infrastructure on that land will not be removed without the prior written consent of the State.
…
The following may be observed about clause 9. First, the parties referred to in the opening lines of the clause are the State and the Commonwealth, which entities, as we have seen, are defined in the Railways Agreement by reference to their capacities as parties to the Railways Agreement. Moreover, it was necessary in order to achieve the privatisation objective to which we earlier referred that the Commonwealth and the State agree on terms of a Ground Lease which may be acceptable to the prospective purchaser of the Freight Operator shares. It is for that reason that, by the opening lines of clause 9.1, the State agrees to deliver the Ground Lease to the Freight Operator on the Effective Date.
Secondly, it is to be noted that clause 9.2 is in the nature of a Heads of Agreement on the important conditions that are to be included in the Ground Lease, the precise terms of which would be agreed before the Effective Date.
Thirdly, we observe that clause 9.1(f) does not prescribe any circumstances in which the consent to remove Track Infrastructure must be given or withheld.
Finally, we observe that clause 9.1(f) is ambiguous. It may refer only to the land ‘which is or subsequently becomes a Bulk Handling Facility’ identified in the immediately preceding clause 9.1(e), or it might refer to the whole of the demised land.
We set out clause 9.2 of the Railways Agreement, which relates to the Passenger Terminal Site Lease, only because it may assist with the proper construction of the expression ‘that land’ in clause 9.1(f):
The State agrees that it will on the Effective Date sign and deliver to the Passenger Operator the Passenger Terminal Site Lease. The Passenger Terminal Site Lease will contain such terms and conditions as may be agreed between the parties, including provisions:
(a)     for an initial term of 50 years;
(b)     entitling the State to terminate the lease in respect of all or any part of the Keswick Passenger Terminal Land if:
(i)the lessee becomes insolvent; or
(ii)the Keswick Passenger Terminal Land or that part ceases to be used for Passenger Services for a continuous period of eighteen months;
(c)     for the transfer to the State at its option of the Track Infrastructure on any part of the Keswick Passenger Terminal Land in respect of which the lease has terminated:
(i)where that termination occurs within 5 years of the commencement of the lease, at no consideration; and
(ii)in any other case, at valuation on the basis of continued railways usage;
(d)     for rental to be charged at a nominal rate for the first 5 years (or for so much of this period as the specified services continue to be provided) and at commercial rates thereafter; and
(e)     that the Track Infrastructure on that land will not be removed without the prior written consent of the State.
Given the use of the same expression ‘that land’ in clause 9.2(e), even though clause 9.2 does not include an analogue of clause 9.1(e), and having regard to our conclusion on the proper construction of s 5(5) of the Act, we will proceed on the premise, without deciding, that the expression ‘that land’ in clause 9.1(f) refers to the whole of the demised land.
Relevantly to this application, the Ground Lease included the following terms and conditions:
6.2Use
The Lessee has the exclusive right to use, occupy and enjoy the Land during the Term but subject to the terms of this Lease and to the following:
6.2.1 during the five (5) years following the Commencement Date the Lessee must carry on Railway Operations on and from the Land in accordance with the Minimum Service Requirements set out in Schedule 4, and thereafter the Lessee must continue to use the land for Railway Operations;
…
6.2.3 the Lessee must not take any action or knowingly allow any action to be taken during the Term which will interrupt the linear continuity of any Rail Corridor;
…
6.2.6 the Lessee must not remove any item of Track Infrastructure from the Land other than pursuant to an order issued by an Authority or in compliance with the Lessee’s repair, maintenance and replacement obligations under this Lease, or with the prior written consent of the Lessor, which must not be unreasonably withheld; it is acknowledged that it is not unreasonable for the Lessor to withhold consent or to impose conditions if the Lessor reasonably believes that removal would;
(a)have a significantly adverse effect on continuation of Railway Operations; or
(b)have a significantly adverse effect on regional economic or employment conditions.
The Lessor must provide written reasons if the Lessor withholds consent or imposes conditions as to the basis of that decision.
…
6.2.8 the Lessee must exercise reasonable care in its use and maintenance of the Land to avoid reasonably foreseeable injury to persons or property.
6.3Maintenance of land
The Lessee must, to the extent necessary to avoid nuisance to neighbouring properties, to safeguard public safety and to maintain the Lessee’s ability to conduct Railway Operations:
6.3.1 (Land) keep the Land (including fences) in good condition and free of fire hazards and vermin in all respects (including, without limiting the preceding requirements, grass cutting and weed control and repairing and maintaining as required any damage caused by fire, flood, lightning, storm, war or any act of God);
6.3.2 (Lessee’s Property) keep the Lessee’s Property clean and in good repair and condition;
6.3.3 (remove refuse) remove all refuse from the Land regularly;
6.3.4 (cleaning) keep any buildings on the Land clean and in good condition; and
6.3.5 (damage) as soon as practicable repair any damage to the Lessee’s Property or the buildings on the Land.
Section 4 of the Act provides:
4—Railways Agreement
(1)     The Minister’s execution of the Railways Agreement on behalf of the State is authorised and ratified.
(2)     The Railways Agreement is binding on the State.
(3)     The Minister and other instrumentalities and agencies of the State are authorised and required to do anything necessary to give effect to the Railways Agreement.
Section 5 of the Act provides:
5—The Ground Lease and Passenger Facilities Lease
(1)     The Minister is authorised to approve and enter into the Ground Lease and the Passenger Terminal Site Lease on behalf of the State.
(2)     The Ground Lease and the Passenger Terminal Site Lease are, when executed on behalf of the State, binding on the State.
(3)     The Minister must, within six sitting days after executing the Ground Lease or the Passenger Terminal Site Lease, have copies of the lease laid before Houses of Parliament.
(4)     The Minister and other instrumentalities and agencies of the State are authorised and required to do anything necessary to give effect to the Ground Lease and the Passenger Terminal Site Lease.
(5)     The Minister must not give consent on behalf of the State to the removal of Track Infrastructure in accordance with the terms of clause 9.1(f) or 9.2(e) of the Railways Agreement unless the Minister is satisfied that the Track Infrastructure is no longer required for the safe, efficient and effective use of the relevant railway line.
(6)     The Minister must, as soon as practicable after giving a consent in the circumstances described in subsection (5), prepare a report on the matter and have copies of the report laid before both Houses of Parliament.
The proper construction of s 5(5) of the Act
It can be accepted for the purposes of this application that the Minister’s satisfaction under s 5(5) of the Act must be based on reasonable grounds.
On an ordinary reading of s 5(5), it speaks continuously to the present use of the relevant railway lines as at the time of the occasion on which the Minister is required to give, or withhold, consent on behalf of the State. The Minister must, at that time, be satisfied that the Track Infrastructure, which the Freight Operator proposes to remove, is ‘no longer required’ for the present ‘safe, efficient and effective use of the relevant railway line’.
The context in which s 5(5) of the Act was enacted supports that construction. We observe that sub-s (5) is in terms directed, relevantly to this application, to clause 9.1(f) of the Railways Agreement. Of course, in a strict legal sense, the Minister’s consent is not given in accordance with the terms of clause 9.1(f) of the Railways Agreement but in accordance with those terms of the Ground Lease which reflect that clause. Nonetheless, the Railways Agreement, which is incorporated as a schedule to the Act, provides the context for the proper construction of sub-s (5).
Clause 9.1(b)(iii) of the Railways Agreement provides that the Ground Lease will include a term entitling the State to terminate it in respect of the whole or any part of the Operational Railways Land that has not been used for railway services for a continuous period of 18 months. On the termination of the Ground Lease over the whole or any part of that land, the State, unconstrained by any limits imposed by the Act, may ‘at its option’, pursuant to that term of the Ground Lease incorporating the provision contemplated by clause 9.1(c), decline to require the Freight Operator to transfer any, or any part, of the Track Infrastructure. The Freight Operator would then be free to remove it.
The Ground Lease may, in accordance with the terms contemplated by the Railways Agreement, be terminated in whole, or in part, well before the expiry of its 50 year term. To construe s 5(5) of the Act as requiring the infrastructure to be kept in place so that the railway line might be safely and efficiently used for the entire term of the Ground Lease would only encourage its early termination.
Moreover, having regard to the Railways Agreement as a whole, the primary purpose of clause 9.1(f) is to protect the interest of the State as against the Freight Operator. It does so first by ensuring that the Track Infrastructure remains in place so that, should the Ground Lease over the Operational Railways Land, or any part of it, be terminated, the State will be in a position to seek a transfer of the Track Infrastructure to it.
The second purpose of the term of the Ground Lease contemplated by clause 9.1(f) is to ensure that the Freight Operator does not maximise its profits whilst it operates freight services by running down the Track Infrastructure. For so long as the infrastructure remains in place, the Freight Operator will be obliged to maintain it, if not by the ordinary terms which might be expected to be agreed in the Ground Lease, by other statutory and general law duties.
The purpose of s 5(5) of the Act is to ensure that the Minister protects the State’s interest by exercising his or her power to consent to the removal of Track Infrastructure only when the removal would not compromise the safe, efficient and effective use to which the railway line is then being put. It prevents the Minister from consenting to the Freight Operator running down the Track Infrastructure necessary for the line’s safe, efficient and effective use whilst it continues to generate income by operating a railway service on it. If, as is the case here, the Freight Operator ceases operating for more than 18 months, the State’s interest is protected by the power to terminate the Ground Lease and, at its option, require the Track Infrastructure, which has been maintained to the standard necessary for the line’s safe, efficient and effective use, be transferred to it. On such a transfer, another operator might be found. However, there is no statutory obligation on the Minister to terminate the Ground Lease or to require the transfer of the Track Infrastructure.
The construction we would give s 5(5) of the Act is further supported by the unlikely consequence of the plaintiffs’ construction. It is unlikely that Parliament intended that Track Infrastructure could not be removed for the entire period of the Ground Lease, even after the track has not been used for several decades. There may be good reasons not to terminate the Ground Lease despite a termination of freight services, but at the same time to remove Track Infrastructure, which is not needed whilst services are discontinued in order to achieve another public or governmental purpose. Improving road safety is perhaps the paradigm case.
On the construction we give s 5(5) of the Act, the Minister, knowing that the Barossa Railway Line was not being used, must necessarily have been satisfied that the Track Infrastructure and in particular the rail track that crossed over Kroemer’s Crossing was no longer required. On a proper construction of s 5(5) of the Act, the only decision that the Minister responsible for the administration of the Act could reasonably make is that that track was no longer required for the safe, efficient and effective use of the railway line.
Other matters
The Minister contends that neither Lionize nor the Barossa Wine Train Company have standing to challenge the Minister’s decision. It contends that s 5(5) of the Act was no more than an intra-governmental accountability arrangement between the Executive and the Parliament. We reject that construction. If that were Parliament’s purpose, the reporting obligation imposed by s 5(6) of the Act was sufficient. On the tabling of the report, Parliament could hold the Minister to account on the floor of Parliament for the decisions the Minister had made. The particularity of the proscription enacted by s 5(5) of the Act is strongly suggestive of a public law limitation on what would otherwise be an unfettered exercise of the Minister’s contractual powers.
The Minister contends, in the alternative, that neither Lionize nor the Barossa Wine Train Company have a greater interest than the general public. Having regard to our conclusion on the proper construction of s 5(5) of the Act, it is not necessary to determine that issue.
Nor is it strictly necessary to determine the other administrative law challenges made by Lionize and the Barossa Wine Train Company. We, nonetheless, make the following observations.
We acknowledge that in practical terms, it would have been politically embarrassing for the Minister not to give the consent which his Chief Executive had already purported to give and which was necessary to undertake the Kroemer’s Crossing Upgrade the Minister had already announced publicly. However, it is inevitable that the exercise of contractual powers by a Minister will be influenced by governmental policy. Parliament can be taken to have contemplated that the Minister would exercise the power expediently and in the context of existing government policy. In particular, Parliament is unlikely to have intended to preclude the Minister from personally deciding whether the s 5(5) condition was satisfied if he or she had adopted a whole of government or departmental policy which depended on removing, or not removing, the infrastructure.[3]
[3] Minister for Immigration v Jia Legeng (2001) 205 CLR 507 at [63], [102], [104] (Gleeson CJ and Gummow J), [187] (Hayne J).
Moreover, the application of the bias principle of procedural fairness to decisions made pursuant to s 5(5) of the Act is problematic. The plaintiffs do not contend that the Minister was bound to afford them, or anyone else, procedural fairness. Nor do they contend that the Minister has deliberately ignored the test imposed by s 5(5) of the Act. This ground of review alleges, in effect, that the Minister did not address the condition imposed by s 5(5) of the Act at all, or that if he did, his decision to upgrade Kroemer’s Crossing left him incapable of making any decision that would compromise that project.
In the ordinary course, the Minister is likely to have known all of the information contained in the Minute well before he received it. The plaintiffs’ contention assumes that the Minister had not formed an opinion on whether the track was needed for the safe, efficient and effective use of the line before he and his Department decided to upgrade Kroemer’s Crossing. The Minister’s written consent may well record a state of satisfaction that was reached on the evidence, and without bias, actual or apprehended, at that earlier time. It should not be supposed that Parliament intended to preclude the formation of an opinion on the condition imposed by s 5(5) of the Act before the written consent was formally given.[4]
[4] CreedNZ Inc v Governor-General [1981] 1 NZLR 172 at 179 (Cooke J).
Be that as it may, on the assumption that the relevant time for the purpose of this application is the moment when the Minister gave consent on 20 March 2020, the plaintiffs have not shown that the Minister, by reason of the circumstances on which they rely, was so committed to the position that the track was not necessary for the safe, efficient and effective use of the railway line that he was incapable of reaching the opposite conclusion if the evidence demanded it. Of course, as it turns out, for the reasons we have given, the undisputed facts demanded the conclusion he reached on the construction we give to s 5(5) of the Act.

We also observe that it does not follow that because the Minute to the Minister referred to the Kroemer’s Crossing Upgrade that the Minister took that into account in determining whether or not the Track Infrastructure was required for the safe, efficient and effective use of the railway line. It would have been artificial to present the question of consent to the Minister without its proper context. Logically, whether or not the Track Infrastructure was necessary for the safe, efficient and effective use of the railway line was a question of fact, not connected with the purpose for which it was sought to remove Track Infrastructure.
It also follows from our conclusion, in [42] above, that the Minister’s decision was not manifestly unreasonable.
The effect and validity of the Deed of Surrender
Considered in isolation, the Deed of Surrender operates as a fresh agreement between the State and ORA dehors the Ground Lease and has the effect of a variation of the Ground Lease. As a matter of contract law, there is nothing to prevent the two parties to the Ground Lease from reorganising their contractual arrangements in this way.
The effect of the Deed of Surrender, if valid, is to excise the relevant land from the land captured by the Ground Lease, that is, to alter the content of the Operational Railways Land the subject of the Ground Lease. If so, s 5(5) of the Act will have no operation or work to do with respect to the Track Infrastructure on that land. Section 5(5) constrains the giving of the Minister’s consent to the removal of ‘Track Infrastructure in accordance with the terms of clause 9.1(f)’ of the Railways Agreement.
The entry into the Deed of Surrender, if valid, renders otiose the Minister’s decision to grant consent for the removal of the relevant Track Infrastructure. In short, the Deed of Surrender has the effect of removing the 120 metres in issue from the Operational Railways Land as defined for the purposes of the Ground Lease and, therefore, the requirement for consent set out in clause 9.1(f) of the Railways Agreement would not apply to it. It would follow that the added requirement imposed by the State legislature in s 5(5) of the Act, which only operates with reference to the terms of clause 9.1(f), also will have no work to do.
However, the question arises as to whether the Deed of Surrender was validly entered into.
The only objection can be whether the State had power to enter into such a deed. Ordinarily, the State has a plenary power to enter into a commercial transaction unless that power has been lawfully constrained in some way, in particular by legislation.
As we have seen by s 4(2) of the Act, the Railways Agreement is binding on the State.
By clause 9.1 of the Railways Agreement, the State agreed with the Commonwealth that it would sign and deliver to the Freight Operator – and by implication enter into – the Ground Lease. The State also agreed that the Ground Lease will contain such terms and conditions agreed between the parties, including provisions of the nature set out in placita (a) to (f) of clause 9.1.
The Ground Lease is defined in clause 1.1 of the Railways Agreement to mean:
… a lease by the State to the Freight Operator of the Operational Railways Land containing (subject to clause 9.1) such terms and conditions as the Commonwealth and the State may agree.
The Operational Railways Land, as defined, includes that part of the Commonwealth Railways Land, as defined, that was used on, or was intended to be used by the Freight Operator after, the Effective Date. The Operational Railways Land includes that portion of the land containing the 120 metres of track in issue. It follows that the requirement under clause 9.1 of the Railways Agreement to enter into the Ground Lease, which is binding on the State, was one to enter into a lease of land that included the 120 metres in issue.
According to clause 9.1, the State bound itself to the Commonwealth to sign and deliver to the Freight Operator such a Ground Lease, that is, a lease of the Operational Railways Land including the 120 metres.
However, by entering into the Deed of Surrender so as to excise the 120 metres of land from the Ground Lease, the State did not breach clause 9.1. Clause 9.1, according to its express terms, was complied with at the time the Ground Lease was entered into. Nevertheless, the effect of the Deed of Surrender is to cause the State to now be a party to some other form of Ground Lease, in particular, the one that would now subsist following an excision of the 120 metres of land pursuant to the Deed of Surrender. A question therefore arises as to whether the State retained the authority or power to have done so either pursuant to or dehors the Railways Agreement.
On one view, the State always retained its plenary power to enter into a contractual variation with ORA. However, by exercising that power by entering into the Deed of Surrender, it may have breached its contractual obligations owed to the Commonwealth. If so, and if that is all, Lionize would have no standing to attempt to interfere. Alternatively, the entry into the Deed of Surrender falls within the authority of, and obligation assumed by the State under, clause 9.1 of the Railways Agreement and there has been no breach. Either position would see the State succeed irrespective of the proper construction of s 5(5) of the Act.
However, the plaintiffs contend that, on the proper construction of the Railways Agreement and the Act, the State has had its plenary power to enter into a contractual variation with ORA constrained. If so, judicial review proceedings would lie with respect to the validity of its entry into the Deed of Surrender.
In our view, the State’s plenary power has not been constrained by the legislative framework. However, and in any event, the entry into the Deed of Surrender does not offend clause 9.1 of the Railways Agreement.
By placitum (iii) of clause 9.1(b) of the Railways Agreement, the State is obliged (to the Commonwealth) to include in the Ground Lease such terms and conditions as may be agreed between the parties:
entitling the State to terminate the [Ground Lease] in respect of all or any part of the Operational Railways Land if: … the Operational Railways Land or that part ceases to be used for Railway Services for a continuous period of eighteen months.
(Emphasis added)
The circumstances of the present matter insofar as the 120 metres of Track Infrastructure in issue are concerned fall within placitum (iii). Further, clause 9.1(c) requires the inclusion of provisions for the transfer to the State of Track Infrastructure:
… on any part of the Operational Railways Land in respect of which the [Ground Lease] has terminated …
(Emphasis added)
The notion of terminating part of a contract including a lease of land is foreign to the law of contract. Where a right to terminate a contract arises (upon breach or following fulfilment or non-fulfilment of a relevant condition) the contract as a whole is either terminated, that is, all future obligations owed by the parties brought to an end or it is affirmed notwithstanding the existence of the right to terminate. As such, the use by the legislature of the language ‘terminate the [Ground Lease] in respect of … any part of the Operational Railways Land’ (that is, the demised land) is infelicitous.[5]
[5] Clause 9.1(b) of the Railways Agreement.
However, the result sought to be achieved will be effected by the surrender of that part of the Operational Railways Land with respect to which the Ground Lease is no longer to apply, giving rise to a variation of the Ground Lease. By removing a defined part from the demised land under the Ground Lease, the parties’ future leasehold obligations vis a vis each other will be brought to an end with respect to that defined part. The surrender of the defined part by the lessee to the lessor will restore the lessor’s ownership rights in that defined part untrammelled by the terms of the lease (but subject to any terms appurtenant to the surrender) and effectively achieves a termination of the lease in that respect.
The parties to the Ground Lease, itself, recognised this conceptual issue and distinction. The Ground Lease contains detailed provisions regulating the termination of the Ground Lease (clauses 9 and 10) including provisions addressing placita (i), (ii) and (iii) in clause 9.1(b) of the Railways Agreement. However, there is no express reference to termination of the lease with respect to part of the Operational Railways Land.
Rather, the Ground Lease contains detailed provisions permitting the variation of the demised land (and identifying the circumstances in which it might occur) by way of the surrender by the lessee of part of the demised land (clause 4). Thus clause 4.1.1 of the Ground Lease provides:
The area of the Land[6] may be increased or reduced from time to time in accordance with the provisions of this clause 4.
(Footnote added)
The provisions of clause 4 are very detailed. However, placitum (iii) of clause 9.1(b) of the Railways Agreement has been addressed. Clauses 4.2.1 and 4.2.3 of the Ground Lease provide as follows:
4.2.1If immediately prior to the issue of a Surrender Notice Railway Operations have not been conducted on a portion of the Land, for a continuous period of eighteen months during the Term and have not been recommenced … then
…
4.2.3the lessor may require the Lessee to surrender the Lease in respect of that portion of the Land.
[6] ‘Land’ is defined in clause 1.1.17 of the Ground Lease to mean ‘the land described in Schedule 1 as amended from time to time by mutual agreement …’.
Clause 4.2.6 of the Ground Lease provides that in these circumstances, the lessor may compulsorily acquire the relevant Track Infrastructure on terms thereafter provided for.
It is clear that the Railways Agreement between the Commonwealth and the State contemplated that notwithstanding use of the terminology ‘termination’, the Ground Lease would include provisions dealing with the surrender of part of the demised land, being provisions of the nature of those included in the Ground Lease. We do not stay to set out all of the relevant provisions governing surrender or variation of the demised land; they are necessarily very detailed and attempt to deal with many variables as appropriate or fair to both sides. However, they are unwieldy and not necessarily appropriate to a situation where both parties to the lease might agree on an outcome without the need to abide by the complex processes involved. The surrender provisions of the Ground Lease operate so as to:
(i)set timeframes for Surrender Warning Notices and Surrender Notices;
(ii)establish requirements for notices of valuation and conditions of transfer;
(iii)establish valuation dispute procedures; and
(iv)provide for hazard removal obligations.
The State concedes that a purpose of the Deed of Surrender is that the parties to it wished to avoid the time consuming and costly requirements of effecting a surrender in accordance with the terms of the Ground Lease, in circumstances where the parties have been able to agree a surrender outcome without needing or wishing to follow those requirements.
Whilst the Deed of Surrender also contains a number of machinery provisions and provisions for the mutual protection of the parties, the nub of the parties’ agreement, relevant for present purposes, is in clauses 2.1, 2.2, 2.6 and 2.8.
2.1ORA and the Minister acknowledge that all Track Infrastructure on the Surrendered Land at the date of this deed is the property of ORA.
2.2By this deed with effect on and from the Surrender Date:
2.2.1 ORA irrevocably surrenders to the Minister all of its rights under the Lease with respect to the Surrendered Land; and
2.2.2 ORA transfers to the Minister all of its rights with respect to and ownership of the Track Infrastructure on the Surrendered Land, other than the Signalling Equipment, as at the Surrender Date.
…
2.6ORA and the Minister agree that the surrender of ORA’s rights pursuant to this deed is not made pursuant to the terms of the Lease and the provisions of this deed override the provisions of the Lease.
…
2.8With effect on and from the Surrender Date the Surrendered Land is not a part of the ‘Land’ for the purposes of the Lease and the Lease is taken to have been varied accordingly.
It is likely that the parties to the Deed of Surrender have done nothing more nor less than what might have been achieved by following the procedure in clause 4 of the Ground Lease. However, and in any event, the Deed of Surrender simply operates as a variation of the Ground Lease with respect to the demised land, as any act of surrender of part of the demised land will do, and, in the present circumstances, is within the authority conferred by placitum (iii) of clause 9.1(b) of the Railways Agreement, as was clause 4 of the Ground Lease. Whilst clause 9.1 of the Railways Agreement expressly refers to the need for provisions entitling the State to terminate the Ground Lease in respect of any part of the Operational Railways Land in the circumstances of placitum (iii), that intent has been achieved by the surrender provisions in the Ground Lease in its original form and as varied by the Deed of Surrender.
The State’s plenary power to enter into a commercial variation of the Ground Lease by way of the Deed of Surrender has not been excluded by clause 9.1(b) of the Railways Agreement but rather endorsed, at least with respect to the present circumstances that fall within placitum (iii) of clause 9.1(b).
It follows that the giving of consent by the Minister has been rendered otiose and, irrespective of the proper construction of s 5(5) of the Act, the action for judicial review lacks utility.
Conclusion
Leave is given to the plaintiffs to file the Third Statement of Grounds, however, the application for judicial review and associated declarations is dismissed.
The parties have seven days from the delivery of these reasons to file and serve written submissions on costs.

[2020] SASCFC 29

24 April 2020

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Judicial Review

Standing

Costs

Procedural Fairness