Minister for Primary Industries and Energy v Austral Fisheries Pty Ltd
[1993] FCA 46
•19 FEBRUARY 1993
Re: THE MINISTER FOR PRIMARY INDUSTRIES AND ENERGY
And: AUSTRAL FISHERIES PTY LIMITED
No. N G699 of 1992
FED No. 46
Number of pages - 37
Administrative Law
(1993) 112 ALR 211
(1993) 40 FCR 381
(1993) 30 ALD 783 (extract)
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart(1), Beaumont(2) and Hill(2) JJ.
CATCHWORDS
Administrative law - fisheries and fishing rights - implementation of a Plan of Management - whether the determination constituting the implementation was an administrative or legislative act - statutory interpretation - use of a formula for the allocation of quota - formula containing a statistical fallacy that produced an irrational or absurd result - irrationality in the sense of Wednesbury unreasonableness - consequence flowing from such a finding.
Administrative Decisions (Judicial Review) Act 1977
Judiciary Act 1903, s.39B
Fisheries Act 1992, s.7B
Mixnam's Properties Limited v Chertsey Urban District Council (1964) 1 QB 214
Williams v Melbourne Corporation (1933) 49 CLR 142
Arthur Yates and Co. Pty Ltd v The Vegetable Seeds Committee (1945) 72 CLR 37
South Australia v Tanner (1989) 166 CLR 161
Parramatta City Council v Pestell (1972) 128 CLR 305
Nationwide News Pty Ltd v Wills (1992) 108 ALR 681, considered.
HEARING
SYDNEY, 22,23 October 1992
#DATE 19:2:1993
Counsel and Solicitors for the Appellant: Mr R.J. Burbidge QC with
Mr P. Roberts instructed by Australian Government Solicitor
Counsel and Solicitors for the Respondent: Mr T.E.F. Hughes QC with
Mr R. Refshauge instructed by Macphillamy Cummins and Gibson
ORDER
THE COURT ORDERS:
That the appeal be dismissed, with costs, other than the costs of the motion dealt with on 16 February 1993.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
LOCKHART J. I have had the benefit of reading the reasons for judgment of Beaumont and Hill JJ. and agree generally with them and with the orders which they propose. I shall add some observations of my own.
Subordinate legislative bodies can make laws which Parliament has expressly empowered them to make. I respectfully agree with Diplock L.J. in Mixnam's Properties Limited v Chertsey Urban District Council (1964) 1 QB 214 at 237 that:
"The various special grounds upon which
subordinate legislation has sometimes been said to be void - for example, because it is
unreasonable; because it is uncertain; because it is repugnant to the general law or to some other statute - can, I think, today be properly regarded as being particular applications of the general rule that subordinate legislation, to be valid, must be shown to be within the powers conferred by the statute. Thus, the kind of unreasonableness which invalidates a by-law is not the antonym of 'reasonableness' in the sense of which that expression is used in the common law, but such manifest arbitrariness, injustice or partiality that a court would say:
'Parliament never intended to give authority to make such rules; 'they are unreasonable and ultra vires'; Kruse v Johnson per Lord Russell C.J. By-laws have in the past been declared void for 'uncertainty'; see Nash v Finlay and
Attorney-General v Denby. Some doubt is cast on the correctness of 'uncertainty' as a separate ground of invalidity by the speeches in the House of Lords in the recent case of Fawcett Properties Limited v Buckinghamshire County Council; but if the courts can declare
subordinate legislation to be invalid for 'uncertainty' as distinct from unenforceable, as in the case of a clause in a statute to which it is impossible to ascribe a meaning, this must be because Parliament is to be presumed not to have intended to authorize the subordinate
legislation authority to make changes in the existing law which are uncertain."
The judgment of the Court of Appeal of the United Kingdom in Mixnam's Properties was affirmed by the House of Lords, reported at (1965) AC 735.
Delegated legislation is not invalid on the ground of unreasonableness in the sense that the courts may form a different view as to what is reasonable. Unreasonableness in this branch of the law means unreasonable in the sense that "a merely fantastic and capricious by-law, such as reasonable men could not make in good faith" is bad, because delegated legislation of this kind could not be regarded as an exercise of the power conferred upon the subordinate legislative body making the delegated legislation: Slattery v Naylor (1888) 13 App Cas at 452. In Kruse v Johnson (1898) 2 QB 91 Lord RusseLL C.J. said, in a well known passage, at 99-100:
"... I think courts of justice ought to be slow to condemn as invalid any by-law, so made under such conditions, on the ground of supposed unreasonableness. Notwithstanding what Cockburn C.J. said in Bailey v Williamson (1873) LR 8 QB 118 at 124, an analogous case, I do not mean to say that there may not be cases in which it would be the duty of the Court to condemn by-laws, made under such authority as these were made, as invalid because unreasonable. But unreasonable in what sense? If, for instance, they were found to be partial and unequal in their operation as between different classes; if they were manifestly unjust; if they disclosed bad faith; if they involved such oppressive or gratuitous interference with the rights of those subject to them as could find no justification in the minds of reasonable men, the Court might well say, 'Parliament never intended to give authority to make such rules; they are
unreasonable and ultra vires.' But it is in this sense, and in this sense only, as I
conceive, that the question of unreasonableness can properly be regarded. A by-law is not unreasonable merely because particular judges may think that it goes further than is prudent or necessary or convenient, or because it is not accompanied by a qualification or an exception which some judges may think ought to be there. Surely it is not too much to say that in matters which directly and mainly concern the people of the county, who have the right to choose those whom they think best fitted to represent them in their local government bodies, such
representatives may be trusted to understand their own requirements better than judges. Indeed, if the question of the validity of by-laws were to be determined by the opinion of judges as to what was reasonable in the narrow sense of that word, the cases in the books on this subject are no guide; for they reveal, as indeed one would expect, a wide diversity of judicial opinion, and they lay down no principle definite standard by which reasonableness or unreasonableness may be tested."
These views of Lord Russell were approved by Isaacs J. in Ferrier v Wilson (1906) 4 CLR 785 at 801-802.
As Starke J. observed in Williams v Melbourne Corporation (1933) 49 CLR 142 at 149-150:
"It is well settled that the Court is not entitled to form its own opinion as to the reasonableness of a by-law and if it thinks it unreasonable, though within the scope of the powers granted, to declare it invalid (Slattery v Naylor; Widgee Shire Council v Bonney; and see R. v Broad). Griffiths C.J. said in Widgee Shire Council v Bonney (1907) 4 CLR at 982-983:- 'With regard to the objection that the by-law is unreasonable, I think that since the cases of Slattery v Naylor and Kruse v Johnson it is very difficult to make a successful attack on a by- law on this ground ... The existence of a power and the expediency of its exercise are quite different matters. The question of the
existence of the power can always be determined by a court of law. Thus, in my opinion the expediency of the exercise of a power is not a matter for determination by a court ... It is obvious that the question whether the
circumstances of the locality warrant the exercise of a power is one of expediency and not of competency.' Slattery v Naylor, however, recognizes that 'a merely fantastic and
capricious by-law, such as reasonable men could not make in good faith' would be bad, for such a by-law could not in any proper sense be regarded as an exercise of the power conferred upon the authority making the by-law."
See also to the same effect the judgment of Starke J. in Brunswick Corporation v Stewart (1941) 65 CLR 88 at 97.
In Clements v Bull (1953) 88 CLR 572 Williams A.C.J. and Kitto J., in a joint judgment, posited the test of validity of delegated legislation as being whether there is a "real connection" between the delegated legislation and the purpose for which the regulation making power was conferred by Parliament. Their Honours saw the test of invalidity on the ground that no reasonable mind could justify it as "only a way of stating the conclusion that no real connection with the purposes of the power can be seen" (at 577). See also King Gee Clothing Co Pty Limited v The Commonwealth (1945) 71 CLR 184 per Dixon J. at 194-196; Cooper Brookes (Wollongong) Pty Limited v Federal Commissioner of Taxation (1981) 147 CLR 297 per Mason and Wilson JJ. at 320-1; Nationwide News Pty Limited v Wills (1992) 108 ALR 681 per Mason C.J. at 689; Australian Capital Television Pty Limited v The Commonwealth (No. 2) (1992) 108 ALR 577 per Brennan J. at 609; Pearce, Delegated Legislation, 198-208; and Allan Wharam, Judicial Control of Delegated Legislation: The Test of Reasonableness 1973 36 Mod Law Rev 611.
Delegated legislation may be declared to be invalid on the ground of unreasonableness if it leads to manifest arbitrariness, injustice or partiality; but the underlying rationale is that legislation of this offending kind cannot be within the scope of what Parliament intended when authorizing the subordinate legislative authority to enact laws.
It is with these principles in mind that I approach the question whether clause 11 of the South East Fishery (Individual Transferable Quota) Management Plan 1991 ("the Plan") is invalid. It is obvious that the application of clause 11 of the Plan creates unreasonableness between fishermen who fish in the South Eastern Fishery and leads to the irrational result referred to in the judgments of the learned primary judge (O'Loughlin J.). His Honour said:
"In order to explain the mistake that was made in the formula, it is necessary to bear in mind that its primary objective was to assess, over a specified period, the involvement of an
individual in the particular fishery by having regard to his catch history and financial involvement. This could have best been done by adding the annual factors and expressing the individual's total as a percentage of the industry's total for the same period. Instead a percentage was struck in respect of each year; thereafter those annual percentages were
totalled and divided by the number of years that were involved in the exercise."
Why the market share of each fisherman was taken for each of the five years in question, totalling the annual percentages and dividing the result by five; rather than simply adopting an averaging method, whereby each fisherman's total catch over the whole five year period is expressed as a percentage of the industry's total fleet catch over the same period, is unclear from the evidence. By taking the percentage of each fisherman year by year plainly results in anomalies, especially with respect to low catch years. I am mindful of the fact that any quota system introduced by government will necessarily interfere with the operation of free market forces and will almost certainly create some kind of injustice as between the players in the market, and I take that into account. But clause 11 is so artificial and creates such extraordinary results that I cannot accept it as being within the scope of the statutory powers conferred by the Fisheries Act 1952, in particular s. 7B.
It is plain that the Department of Primary Industries and Energy, when formulating the quota allocation process under the Plan, purported to apply three principles in determining the quota allocation process for the individual transferable quota system, namely:
(a) the process should be as fair and as equitable as possible;
(b) it should most effectively reflect market share for a species over the catch history period; and
(c) it should minimize disruption to the fishery.
These are permissible and worthy objectives, but they were not achieved by clause 11. The adoption of option 25 appears to have taken place very late in the stage of settling the final details of the Plan.
It is only in an extreme case that the Court takes the step of declaring invalid delegated legislation of the kind with which this case is concerned, but in my view this is such a case.
I would dismiss the appeal with costs.
JUDGE2
INTRODUCTION
BEAUMONT AND HILL JJ. This is an appeal, by leave, from a declaration made by O'Loughlin J. that a provision of a management plan purportedly made under the Fisheries Act 1952 ("the Act") was void. The "South East Fishery (Individual Transferable Quota) Management Plan 1991" ("the Plan") was determined by the appellant, the Minister for Primary Industries and Energy, and was notified in the Commonwealth of Australia Gazette on 9 December 1991. By its further amended application for review, the respondent, Austral Fisheries Pty. Ltd. ("Austral"): (a) applied under the Administrative Decisions (Judicial Review) Act 1977 ("the AD(JR) Act") for review of the decision of the Minister on the footing that it involved administrative action and; (b) applied for an injunction under s.39B of the Judiciary Act 1903, on the footing that the Plan was delegated legislation, restraining the Minister from implementing the Plan and a declaration that the Plan was void. Austral, the owner of several vessels to fish for orange roughy, a species of deep sea fish in the waters covered by the Plan, claimed that the Plan adversely affected its business. O'Loughlin J. granted relief under the Judiciary Act in respect of para.11 of the Plan.
THE LEGISLATIVE SCHEME
2. Part II of the Act dealt with the regulation of fisheries. Management plans were dealt with by s.7B:
"7B. (1) The Minister may, by instrument in writing, determine a plan of management for a fishery in proclaimed waters.
(2) A plan of management for a fishery shall set out -
(a) the objective of the plan of management; and
(b) measures by which the objective is to be attained.
(3) Without limiting the generality of sub-section (2), the Minister may, in a plan of management for a fishery -
(a) determine the manner in which the fishing capacity of the fishery is to be measured; and
(b) determine the fishing capacity, measured in that manner, permitted for the fishery.
(4) Without limiting the generality of sub-section (2), a plan of management for a fishery may make provision for and in relation to -
(a) the granting of licences under sub-sections 9(2) and
(3) in relation to the fishery;
(b) the conditions to which licences granted under sub-sections 9(2) and (3) in relation to the fishery are to be subject; and
(c) the duration, transfer, renewal and variation of licences granted under sub-sections 9(2) and (3) in relation to the fishery.
(5) Where, in a plan of management for a fishery, the Minister determines the fishing capacity permitted for the fishery, then, without limiting the generality of sub-section (2), the plan of management may make provision for and in relation to -
(a) the division of the fishing capacity permitted for the fishery into units (in this section referred to as 'units of fishing capacity');
(b) the allocation to persons of units of fishing capacity in the fishery;
(c) the assignment of units of fishing capacity to boats, and the holding, and cessation of holding, of units of fishing capacity in relation to boats;
(d) requiring units of fishing capacity to be held in relation to boats;
(e) the determination of the number of units of fishing capacity to be held in relation to boats;
(f) the holding of units of fishing capacity that are not assigned to a boat, including the number of such units of fishing capacity that may be held by a person and the period during which such units of fishing capacity may be held;
(g) the duration, variation, re-assignment, transfer, surrender, replacement, renewal of allocation, suspension and cancellation of units of fishing capacity;
(h) the recording of the allocation, assignment, holding, cessation of holding, variation, re-assignment, transfer, surrender, replacement, renewal of allocation, suspension and cancellation of units of fishing capacity and the manner in which such recording is to be evidenced, including the issue, recall and replacement of certificates and other documents evidencing such recording; and
(j) the reconsideration of decisions made under the plan of management.
(6) Such fees (if any) as are prescribed are payable in respect of the allocation, assignment, variation, re-assignment, transfer, replacement, and renewal of allocation, of units of fishing capacity and the issue and replacement of certificates and other documents evidencing the recording of the allocation, assignment, holding, cessation of holding, variation, reassignment, transfer, replacement, and renewal of allocation, of units of fishing capacity.
(7) Regulations made for the purposes of sub-section (6) may specify different fees, or prescribe different methods of calculating fees, in respect of units of fishing capacity included in different classes of units of fishing capacity.
(8) While a plan of management is in force for a fishery, the Minister and the Secretary shall perform their functions, and exercise their powers, under this Act in relation to the fishery in accordance with the plan of management, and not otherwise.
(8A) The Minister and the Secretary shall, in the performance of their functions and the exercise of their powers generally under this Act, have regard to the effects, either direct or indirect, that the performance of the functions and exercise of the powers may have in relation to any plan or plans of management.
(9) In this section -
'decision' has the same meaning as in the Administrative Appeals Tribunal Act 1975;
'fishery' means a class of activities by way of fishing, being a class of such activities that is identified in a plan of management as a fishery to which the plan of management applies.
(10) Without limiting the matters by reference to which a fishery may be identified in a plan of management, those matters include all or any of the following:
(a) a species of fish;
(b) a description of fish by reference to sex or any other characteristic;
(c) an area of waters or of seabed;
(d) a method of fishing;
(e) a class of boats;
(f) a class of persons;
(g) a purpose of activities."
Section 7C provided, inter alia, for the tabling and disallowance of management plans:
"7C. (1) The Minister shall cause to be published in the Gazette, in respect of each determination, notice of -
(a) the fact that the determination has been made; and
(b) the place or places where copies of the determination can be obtained.
(2) A determination may make provision for or in relation to a matter by applying, adopting or incorporating, with or without modification -
(a) a provision of any Act or any regulation made under an Act, of any notice published under section 8 or of any other determination as in force at a particular time or as in force from time to time; or
(b) any matter contained in any other instrument or writing as in force or existing at the time when the determination takes effect.
(3) Section 48 (other than paragraph (1)(a)), 48A, 48B, 49 and 50 of the Acts Interpretation Act 1901 apply to determinations as if, in those sections, references to regulations were references to determinations and references to a regulation were references to a provision of a determination.
(4) Determinations are not statutory rules within the meaning of the Statutory Rules Publication Act 1903.
(5) For the purposes of section 5 of the Evidence Act 1905, a determination shall be deemed to be an order made by a Minister.
(6) A determination shall be deemed to be an enactment for the purposes of the Administrative Appeals Tribunal Act 1975.
(7) In this section, 'determination' means a determination under sub-section 7B(1)."
THE PLAN
4. The objectives of the Plan and the measures for attaining them were:
"Objectives
5. For the purposes of subsection 7B(2) of the Act, the objectives of this plan are -
(a) to achieve a level of parental biomass for each stock in the fishery consistent with optimum sustainable yields for that stock having regard to among other things scientific assessments of the status of that stock; and
(b) to promote optimum utilisation of the resource in the fishery."
"Measures for attaining objectives
6. The principal measures for attaining the objectives specified in paragraph 5 are -
(a) determining the TAC (total allowable catch) for each specified species that may be taken from the fishery;
(b) at the commencement of this plan dividing the TAC for each specified species into units of fishing capacity and allocating those units to individual operators in the fishery; and
(c) exercising the powers in Part III of the Act so as to prevent a person from using a boat, other than in the course of exempt fishing, to take in a season a liveweight of specified species exceeding the quota in relation to the units in respect of that species which are assigned to the boat."
Part 2 of the Plan, headed "Determination of Fishing Capacity", were relevantly as follows:
Total allowable catch
7.1 The TAC for each specified species at the commencement of this plan is that specified in Schedule 3. ...
Total number of units
8.1 The fishery is divided into units for each specified species.
8.2 The Manager may withhold from allocation a proportion of the total number of units for a specified species -
(a) for the purposes of scientific research; or
(b) for the allocation of additional units upon reconsideration of decisions under this plan. 8.3 The total number of units of a specified species available for allocation at the commencement of this plan shall be divided into a number of units available for allocation to those persons eligible for a determination under paragraph 11 in respect of -
(a) otter trawl boats ...
and those numbers shall be specified in the relevant species Schedule.
8.4 The number of units of a specified species available for allocation at the commencement of this plan in respect of otter trawl boats is equal to the product of -
(a) the total number of units of that species available for allocation in respect of all boats; and
(b) the proportion of the total verified catch of that species of all boats in (a) that are otter trawl boats.
...
Quota in relation to a unit
9.1 The quota in relation to a unit at the commencement of this plan is one kilogram liveweight. 9.2 Where the Minister varies a TAC in respect of a specified species under subparagraph 7.2, the quota in relation to a unit for that species is equal to the varied TAC divided by the total number of units for that species at the commencement of this plan and expressed as kilograms liveweight and rounded to two decimal places. 9.3 A variation to the quota in relation to a unit under subparagraph 9.2 has the same date of effect as the corresponding variation to the TAC.
9.4 The Manager must as soon as practicable notify each unit holder of any change to the quota in relation to a unit and of the day from which that change takes effect. Eligibility for determination
10.1 A determination under paragraph 11 in respect of a specified species may be made to a person who -
(a) at the commencement of this plan is the holder of an endorsed licence;
...
10.2 A relevant boat for the purposes of paragraphs 11, 12 and 13 means -
(a) in the case of a person who qualifies under subparagraph 10.1(a) - the boat in respect of which the endorsed licence is in force; ...
Allocation of units available for assignment 11.1 The number of units of a specified species available for assignment to a person in respect of a relevant boat shall be determined on the basis of -
(a) verified catch; and
(b) boat units; and
(c) a weighing factor given to each of (a) and (b). 11.2 The Manager shall determine in respect of a relevant boat where that boat is an otter trawl boat, the number of units of a specified species available for assignment equal to the result of the formula - ( (ao x TCPCo) + (bo x BUPCo) ) x TUo Where -
ao = a weighting specified in the relevant species Schedule given to verified catch; and
TCPCo (Total catch percentage component) = the sum of catch percentage components for that boat and that species calculated under subparagraph 11.4 for the years defined in the relevant species Schedule; (emphasis added) and bo = a weighting specified in the relevant species Schedule given to boat units; and
BUPCo = a boat unit percentage component calculated under subparagraph 11.6; and
TUo = the number of units of that specified species available for allocation in respect of otter trawl boats as calculated under subparagraph 8.4.
..."
Sub-paragraph 11.4 was relevantly as follows:
"11.4 The catch percentage component for a specified species in respect of a relevant boat for a year is the result of the formula -
X x Z x 100
Y
Where -
X = verified catch of that species by the boat in that year calculated under paragraph 12; and Z = a weighting specified in the relevant species Schedule for that year; and
Y = (a) in respect of an otter trawl boat, the sum of the values of X for all otter trawl boats in respect of which a catch percentage component is calculated for that specified species for that year under this subparagraph;
..."
The relevant species schedule was Schedule 7: "SCHEDULE 7
SPECIFIED SPECIES ORANGE ROUGHY-EASTERN SECTOR 1) In respect of paragraph 8 the total number of Orange roughy - Eastern sector units available for allocation is 7,125,000
2) The qualifying period is from 1 January 1984 to 31 December 1989.
3) In respect of subparagraphs 11.2 and 11.3 the years for which verified catch is used in the calculation of TCPC are the 5 years of the qualifying period having the highest verified catch of the sum of Orange roughy - Western sector and Orange roughy - Eastern sector and Orange roughy - Southern sector by the relevant boat.
4) With respect to subparagraph 11.2:
ao = 0.5; and
bo = 0.5
5) The threshold catch for:
(a) otter trawl boats = 100 kilograms/boat unit; ...
6) With respect to subparagraph 11.4
Z = 0.2"
AUSTRAL'S CHALLENGE
7. Austral did not seek to challenge the TAC fixed for orange roughy. Its complaint was about the size of its quota, that is, the units of fishing capacity allocated to it by virtue of the operation of the provisions of para.11. Austral's contention, upheld by the primary Judge, was that para.11 contained a "statistical fallacy" that produced an "irrational" result, so that consequently, it was void in law. In order to understand the context in which this contention arose, it will first be necessary to mention some of the background facts disclosed in the evidence.
THE BACKGROUND FACTS
8. In early November 1991, a working group, comprising representatives of the Australian Fisheries Service ("AFS") and the State Directors of Fisheries, together with three industry representatives as non-voting observers, was established to consider possible calculation methods or "options" for allocating orange roughy quota. Many options were considered. The working party recommended Option 25, which was described in one of the papers prepared for the working group as follows:
"Years: worst year discarded between 1984 - 1989 Zones: single zone
Catch History Weighting: 50%
Investment Units Weighting: 50%"
No question arises here with respect to investment units. The area of contention is "catch history".
The background to this option was described in an official briefing by Mr. B.J. Scott, the senior officer in the AFS responsible for the development of the individual transferable quota system for management and administration of the South Eastern Trawl Fishery ("SETF"). This briefing was given to an industry workshop held in Canberra between 7 and 10 November 1991 and said, relevantly:
"ALLOCATION
The basic tenants (sic) for allocation were that it should be FAIR
EQUITABLE
MINIMISE DISRUPTION to the operations of those involved in the fishery at that time
In order to achieve these fundamental requisites and after talking to all operators in the fishery it was agreed that instead of using the logbook data we would move to verified catch information for six years ie 1984 to 1989. We also adopted the Market share concept to try to identify each participants involvement over time. ie an operators catch for any one year would be divided by the catch of all other catches for that species and this would be expressed as a percentage or the operators market share for that species for that year. In order to address the problems associated with individual special (sic) a number of generic solutions were invoked. These included taking the five best years of catch as opposed to the six for calculating the market share. This allowed people who had one bad year to be able to eliminate that year for a particular species.
This provided a resolution of a number of the individual problems that were registered with us at the time. Unique solutions were also developed for many of the special groups but at all times the fundamental tenant (sic) of fair and equitable were foremost in the consideration of a particular circumstance.
All these circumstances are outlined in a paper that was presented to both the SETMAC Liaison Committee and the AFC sub committee which is available for those who wish to examine these issues.
Each species was treated separately.
Basically the allocation was done on the basis of 80% catch history for all Otter Board trawlers that had operated on the traditional species and 20% on units of capacity. This was not the case for the Orange Roughy and the Blue Grenadier species where a 50%/50% split was used. The rationale for the change was that these species are relatively new to the fishery and the traditional fishermen had not operated on these species overtime and that the investment that had been made in the SW sector was designed to utilise the orange roughy resource."
The Minister accepted the working party's recommendation in favour of Option 25.
By letter dated 28 November 1991, Mr. Scott wrote to operators outlining the basis of the quota allocation process. He stated (relevantly):
"There were three major considerations in determining the quota allocation process for the individual transferable quota (ITQ) system about to be introduced in the SETF: . the process should be as fair and as equitable as possible;
. it should most effectively reflect the market share for a species over the catch history period; and . it should minimise disruption to the fishery. Views were sought from all operators in the fishery as to the factors which might be used to determine quota allocation. With catch history and investment (boat units) decided as the two factors to be used in developing an allocation formula, further negotiation led to the catch history period stretching across six years, from 1984 to 1989 inclusive and the use of verified catch history data only.
After further negotiations, catch history and investment were given the following weightings:
. ...
. for otter trawlers a weighting of 80%/20% applies for all species under quota except orange roughy and blue grenadier in which cases the weighting is 50%/50%."
Mr. Scott went on to describe the "catch history component":
"...For each year which could be included in the allocation calculations, the operator's catch was divided by the total of all operators' catches for that species in each year. This was multiplied by 100 to give a percentage representation of that operator's market share of that species in that year.
Example
John Brown caught 20 tonnes of Species X in 1988. The total of all operators' catches of Species X that year was 2000 tonnes.
20 x 100 = 1%
2000
John Brown's market share of Species X in 1988 was 1%. This calculation was made for each operator for each of the five best years of catch history for that species or for each of the years within the catch history period in which he caught that species if the number of those years was less than six.
To ensure equity in the quota allocation process, each year was given equal weighting in the allocation formula. With a total of five years which could be included in the catch history component of the formula, each year was weighted as one-fifth of a whole. The market share from each year was then multiplied by 0.2 to determine its weighting within the catch history period. The results from these calculations were then added together to determine the total market share for the catch history period.
Example
These are the calculations that would apply to John Brown's catch history for Species X to determine his market share for that species:
1984 40 x 100 = 1.14 x 0.2 = 0.23 3500
1985 35 x 100 = 0.97 x 0.2 = 0.19 3600
1987 24 x 100 = 1.00 x 0.2 = 0.20 2400
1988 20 x 100 = 1.00 x 0.2 = 0.20 2000
1989 20 x 100 = 1.11 x 0.2 = 0.22 1800
The sum of these five figures is 1.04. That is, John Brown's market share for Species X over the catch history period is deemed to be 1.04%..."
By letter dated 23 December 1991, the Manager of Shark, Scallop and Southern Trawl Fisheries informed operators of his "final quota determination" for the South East Fishery ("SEF"), to apply from 1 January 1992. Attached to the letter was an explanation, in respect of orange roughy, of Option 25 as follows:
"This Option involves dealing with the orange roughy fishery as a whole for calculating market share and threshold catches and allocating the same percentage share for each Sector. The method of calculating market share, ie, equal representation of each year of the qualifying period (the best five out of six years in the period 1984 to 1989) and the weighting given to catch history and units (50:50) is unchanged.
The effect of Option 25 is to minimise the effect of orange roughy catches in a lightly-fished Sector in a particular year on the overall quota determined for a vessel."
THE REASONING AT FIRST INSTANCE
15. At first instance, Austral challenged the validity of the Plan on several grounds, one of which was upheld by O'Loughlin J. The other grounds are no longer pressed.
His Honour held that the relevant part of the formula in para.11 contained a "statistical fallacy". In arriving at this conclusion, the learned Judge relied on the expert opinion evidence of Dr. D.F. Nicholls, Reader in Statistics and Dean of the Faculty of Economics and Commerce, Australian National University. Dr. Nicholls said that the formula contained a statistical fallacy that produced an "irrational result". His Honour said (at 15-16):
"Although it was argued (for the Minister) that issues of fairness, equity and maintenance of market shares were the criteria that led to the choice of option 25, Mr. Nicholls' mathematical conclusions have not been challenged by (the Minister). I must say that I do not readily comprehend how a statistical fallacy that produces an irrational result could be said to be synonymous with fairness, equity and maintenance of market share."
...
In order to explain the mistake that was made in the formula, it is necessary to bear in mind that its primary objective was to assess, over a specified period, the involvement of an individual in the particular fishery by having regard to his catch history and financial involvement. This could have best been done by adding the annual factors and expressing the individual's total as a percentage of the industry's total for the same period. Instead a percentage was struck in respect of each year; thereafter those annual percentages were totalled and divided by the number of years that were involved in the exercise."
His Honour then referred to Dr. Nicholls' hypothetical example:
"To illustrate the fallacy, let it be assumed that the road deaths over Easter in two successive years are as set out in the following table.
NSW VIC SA Q WA TAS ACT Total Year 1 20 25 10 10 5 3 1 74 Year 2 25 20 10 15 6 3 4 83 Percentage
Increase 25 -20 0 50 20 0 300 12.2% In this hypothetical example, the overall percentage increase in road deaths between the two years is 12.2%. If, however, one averages the percentage increase figures, there is an increase of 53.6%. The figure of 53.6% is quite meaningless. It has no mathematical significance and it has no practical purpose or use whatsoever. Anyone suggesting that the figure of 53.6% was relevant to any question associated with road safety would be relying on a statistical fallacy."
The Judge found that -
"...the formula that appears in clause 11 of the new plan for the allocation of units in the fishery is flawed in a manner that is reflected by this example and that it has produced an irrational result."
O'Loughlin J. then addressed the question whether the Plan was administrative or legislative in character. After referring, in particular, to the provisions of ss.7B and 7C of the Act and to the decisions of French J. in Azevedo v Secretary, Department of Primary Industries and Energy (1992) 35 FCR 284 and of Heerey J. in Secretary, Department of Primary Industries and Energy v Collins (1992) 106 ALR 351 (at 357), his Honour concluded that the Plan was delegated legislation and not administrative action.
The Judge then considered whether there had been an "unreasonable" exercise of power. After referring to the discussion by Lord Diplock in Council of Civil Service Unions v Minister for the Civil Service (1985) 1 AC 374 and, in particular, "irrationality" in the sense of "Wednesbury unreasonableness" (Associated Provincial Picture Houses Ltd. v Wednesbury Corporation (1948) 1 KB 223) and to observations of Lord Scarman in Nottinghamshire County Council v Secretary of State for the Environment (1986) AC 240 (at 247-8), his Honour said (at 30-32):
"The exact number of boats that trawl for orange roughy in the fishery was not established. However, it was agreed that there were about 50 to 60. In a comparison of their 1991 and 1992 quotas, every boat, bar one, had its quota reduced: the quota of that one boat was increased to over double its previous annual catch...which meant one of 50 or 60 boats being entitled to approximately 18% of the TAC. Prima facie, there does not appear to be any reason for such a result; prima facie the utilization of option 25 was not only 'outrageous in its defiance of logic', it also would have created a deep sense of injustice. Mr. Scott in his evidence maintained his support for option 25; he was given every opportunity to explain it or justify it. In my opinion he was unable to do so. His evidence was: '... what did lead you to support option 25?...Well, we had three fundamentals that we were trying to develop and one was that we wanted to develop a fair and equitable
distribution and the other one was that we wanted to get as close as we could, as we stated right from the very beginning, to have a look at how close they could get to market share. What had been market share over the period of time. And they were the three, sort of basic tenets that we were looking at and so as a consequence we tried to do that. The other thing was that we wanted consistency through the whole of our operation if that was at all possible and so that was why we felt that the principles were the ones that we had to develop and apply those principles so that we would have very little subjectivity in our decision making.
And with the advantage of hindsight did option 25 serve those objectives?... I think it did. When you take it in the broad I think it did. Well, there's been a suggestion made that the boat Santo Rocco Di Bagnara was a glaring example of a departure from an equitable result because it, on the application of option 25's formula, came out a lot better than it had been under the pre-existing regime. Knowing that do you still adhere to the view that the objectives to which you've referred are achieved by option 25?... Taken in the broad context I do. I think that what we were looking at was that the - was the period of time that we were given which was up until 89, to have a look at the catches up until that period of time it did achieve those objectives. ...'
This evidence leaves me quite unsatisfied and causes me to revert to my original proposition - prima facie, there does not appear to be any reason for the adoption of option 25. When as here, it produces such an absurd result, doubling one man's quota and giving him 18% of the TAC whilst reducing everybody else's, there is justification for judicial intervention to redress an understandable sense of injustice.
...
In Kruse v Johnson ... Lord Russell of Killowen C.J. ... instanced certain examples where a court might interfere to condemn by-laws; one such example which could be appropriate to the facts of this case was where the by-laws '...were found to be partial and unequal in their operation as between different classes'. Those views were approved by Isaacs J. in Ferrier v Wilson...."
THE MINISTER'S GROUNDS OF APPEAL
21. In seeking to challenge his Honour's declaration that para.11 of the Plan was void, the Minister contends that the Court erred in the following respects:
(1) in assuming that assessment of individual involvement was "best" done "by adding the annual factors and expressing the individual's total as a percentage of the industry's total for the same period";
(2) in finding or assuming that evidence of difference between results derived from the application of the formula in para.11 of the Plan and another formula was evidence of irrationality;
(3) in relying on Dr. Nicholls' statistical illustration;
(4) in finding that a "mistake" had been made in the formula in para.11;
(5) in making the following findings of fact in respect of which there was no evidence or the evidence was to the contrary:
(a) that in 1991 fishing boats had been allocated a quota for orange roughy;
(b) that in 1992 every boat bar one had its quota for orange roughy reduced;
(c) that in 1992 one boat was entitled to approximately 18% of the TAC; and
(6) in applying the "Wednesbury" principle as the test for validity.
AUSTRAL'S NOTICE OF CONTENTION
22. For its part, Austral now contends that his Honour should not have held that the making of the Plan, or at least para.11, was the enactment of delegated legislation rather than an administrative decision.
CONCLUSIONS ON THE APPEAL
23. It is convenient to deal with Austral's contention before turning to the Minister's appeal.
(a) Was the determination of the Plan legislative or administrative?
24. In Queensland Medical Laboratory v Blewett (1988) 84 ALR 615, Gummow J. said (at 634):
"...a decision made under an enactment of the Parliament by a Minister or his delegate under statutory power may be essentially legislative in character in a direct and immediate rather than in any incidental sense. And such a decision will be excluded from review under the ADJR Act as much as if it had fallen within the direct terms of exclusion of decisions, under an enactment, by the Governor-General in Council. Hence, the necessity for some criterion to mark the legislative from the administrative or judicial. In seeking those criteria, one bears in mind the remarks of Professor Freund, repeated by Dixon J. in Dignan's case... as to finding in loose terms and unascertainable standards, refuge from thought and expression. In Commonwealth v Grunseit... Latham C.J. said: 'The general distinction between legislation and the execution of legislation is that legislation determines the content of a law as a rule of conduct or a declaration as to power, right or duty, whereas executive authority applies the law in particular case.' See also Arnold v Hunt..."
In Collins' case, above, Heerey J. held that a fishery management plan had the force of law. His Honour said (at 356-7):
"The starting point is the proposition that the plan has the force of law. So much was conceded by counsel for the respondent, although their argument sought, unsuccessfully to my mind, to avoid the consequences which necessarily follow. Parliament clearly intended that a plan of management determined by the minister under s 7B should create detailed rights and obligations in relation to a fishery. Particular reference in this regard might be made to subss (4), (5), (6) and (7). The provisions of the Acts Interpretation Act 1901 concerning tabling before and disallowing by parliament are to apply. Thus a plan of management stands on quite a different legal footing from policy statements or guidelines. The minister and the secretary, like all other citizens, are bound by the law contained in a plan of management just as they are by the law in the Act itself.
In the present case, the plan was part of the law which the AAT had to apply in considering whether the decision made was, on the material before the tribunal, the correct or preferable one."
In Azevedo's case, above, French J. said (at 299-300):
"The question remains whether a plan of management made under the Fisheries Act attracts the application of s 46 of the Acts Interpretation Act and thus of the general provisions of the Act including ss 8 and 8A. Section 7B of the Fisheries Act requires that the determination of a plan of management be by instrument in writing. The word 'instrument' as used in s 46 of the Acts Interpretation Act is not defined except to the extent that it includes rules, regulations and by-laws. The ordinary English meaning in this context is 'a formal legal document whereby a right is created or confirmed, or a fact recorded; a formal writing of any kind, as an agreement, deed, charter, or record, drawn up and executed in technical form': Shorter Oxford English Dictionary. It may be debatable whether a plan of management could be said to have a direct legal effect in the way that regulations or by-laws do. Its principal legal consequence is that it circumscribes the exercise of the powers and functions of the Minister and Secretary not of its own force but by virtue of s 7B(8) and (8A) of the Fisheries Act. Nevertheless, in my opinion, the statutory requirement that a determination be made by instrument in writing and the ordinary meaning of the word 'instrument' require that a plan of management under the Fisheries Act be considered as an instrument for the purposes of s 46 of the Acts Interpretation Act."
More recently, in Latitude Fisheries Pty. Ltd. v The Minister, (1992) 110 ALR 209, French J. said (at 228):
"A determination under s.7B is not a policy statement. In ... (Collins), Heerey J. observed that a Plan of Management stands on quite a different legal footing from policy statements or guidelines. I respectfully agree with his Honour's view in this regard which accords with the opinion I expressed in (Azevedo) ... On the other hand a determination is not a species of regulation or by-law creating rights and duties by virtue of a general statutory authority delegating a law making power to the Minister. Whether it falls within the wider concept of delegated legislation at all may be debateable. In Pearce - Delegated Legislation in Australia and New Zealand (1977) it is suggested that delegated legislation can be defined as 'instruments that lay down general rules of conduct affecting the community at large which have been made by a body expressly authorized so to act by an Act of parliament' (pp 1-2). Accepting the limitations of that definition and the uncertain boundaries of executive and legislative activity which are pointed out in the text, it may be doubtful whether a determination under s.7B of the Fisheries Act 1952 is properly described as delegated legislation. The provisions of the Act by which it is deemed to be an order for one purpose and an enactment for another, and the application of provisions of the Acts Interpretation Act 1901 specifically relating to regulations suggest that while the determination is so regarded for some purposes, that characterisation is not of general application."
French J., after referring to the decision at first instance in the present matter, went on to say (at 229):
"In the Second Reading Speech for the Fisheries Legislation Amendment Act 1985 by which s.7B was introduced into the Fisheries Act 1952 it was said that management plans would 'have the force of law' (H. Of R. Deb 17.4.85 p 1289). The problem of classification perhaps points up the difficulty adverted to by Professor Pearce in separating legislative and executive action where the two areas of official conduct meet. In the end, I think the better course in most cases is probably to eschew the taxonomic debate and focus upon identification of the rights, duties, powers and privileges which arise as a result of the determination of the Plan."
In his work, Delegated Legislation (1977), Professor Pearce said (at para.2):
"As far as judicial review of delegated legislation is concerned, the principles adopted by the courts when considering the validity of such legislation are, for all practical purposes, the same as those used for judicial review of executive action. The terminology is sometimes a little different - the notions of jurisdiction and error of law are not applied to delegated legislation - but the general doctrine of ultra vires is adopted in like manner in regard to delegated legislation as it is to executive action. Hence there is no need to attempt fine distinctions between the two types of activity for the purposes of judicial review."
In Arthur Yates and Co. Pty. Ltd. v The Vegetable Seeds Committee (1945) 72 CLR 37, Dixon J. said (at 80):
"For the purpose of such a provision as s.5(4) of the National Security Act 1939-1943, the orders here in question may be considered to be of a legislative and not of an executive character, though strangely enough it nowhere appears whether they were so dealt with under that sub-section. But to say that, for the purpose of a requirement that they be laid before the Houses of Parliament, the orders are of a legislative character will shed no light upon the question whether the purpose animating them or their corporate author is a ground of invalidity. Indeed I do not think that in English law such a question will be found ever to be solved by ascertaining whether, upon a correct juristic analysis, the power should or should not be described as legislative. It will depend rather upon the nature of the authority in whom the power is reposed and upon the measure and extent of the power, its subject matter and its limitations and the conditions in or upon which it is exercisable."
In our opinion, these observations are applicable in the present case. It is true that if the jurisdiction of the Court to entertain this matter depended solely upon the provisions of the AD(JR) Act, it would be necessary to determine whether there existed a decision of an "administrative character" within the meaning of that legislation. But, as has been noted, the Court's jurisdiction under s.39B of the Judiciary Act was also invoked and it is accepted that this jurisdiction permits, in an appropriate case, judicial review of both administrative and legislative action. We propose then to embark upon an inquiry of the kind described by Dixon J., noting that his Honour's reference to the nature of the authority in whom the power is reposed must now be viewed in the light of modern authority (see South Australia v Tanner (1989) 166 CLR 161 per Brennan J. at 174; see also Minister for Foreign Affairs and Trade v Geraldo Magno (Full Federal Court, unreported, 26 November 1992, per Gummow J. at 26).
(b) Was para. 11 of the Plan void?
32. As has been noted, the Minister may determine a fishery management plan (s.7B(1)), setting out its objectives and measures by which they are to be attained (s.7B(2)). In a plan, the Minister may determine the manner in which the fishing capacity of the fishery is to be measured and determine that capacity (s.7B(3)). A plan may provide, inter alia, for the grant and transfer of licences in relation to the fishery (s.7B(4)). Where the Minister determines fishing capacity, the plan may provide for the division of the fishing capacity into units, their allocation to persons and their assignment to boats; and the plan may also require units to be held in relation to boats (s.7B(5)).
If taken literally, the Minister's power to provide in a plan for the allocation of units may be thought to be unlimited. However, on three bases, as a matter of statutory interpretation, the scope of the power cannot be unrestricted.
First, in the absence of an explicit contrary provision, s.7B(5) should be interpreted so as not to "result in an operation...which in (the Court's) opinion is capricious and irrational", per Mason and Wilson JJ. in Cooper Brookes (Wollongong) Pty. Ltd. v. Federal Commissioner of Taxation (1981) 147 CLR 297 at 321. As their Honours point out (at 320), referring to observations by Professor Pearce and R.S. Geddes in Statutory Interpretation in Australia, this approach reflects the rule of common sense (rather than law) that it is not to be expected that Parliament intends legislation to operate in a capricious and irrational way.
Secondly, a determination of a plan will be beyond power if it "could not be justified on any reasonable ground", per Menzies J. in Parramatta City Council v Pestell (1972) 128 CLR 305 at 323. Menzies J. went on to say (also at 323):
"There is, however, a world of difference between justifiable opinion and sound opinion. The former is one open to a reasonable man; the latter is one that is not merely defensible - it is right. The validity of a local rule does not depend upon the soundness of a council's opinion; it is sufficient if the opinion expressed is one reasonably open to a council."
Thirdly, as Mason C.J. said in Nationwide News Pty. Ltd. v Wills (1992) 108 ALR 681 (at 689):
"...this court has held that, in characterising a law as one with respect to a permitted head of power, a reasonable proportionality must exist between the designated object or purpose and the means selected by the law for achieving that object or purpose. The concept of reasonable proportionality is now an accepted test of validity on the issue of ultra vires... It is a test which governs the validity of statutes as well as that of regulations. So, in Castlemaine Tooheys Ltd v South Australia,... in deciding whether a law was appropriate and adapted to the protection of the environment, in which event the law would have been valid, it was necessary to consider whether the adverse or extraordinary consequences of the law were disproportionate to the achievement of the relevant protection."
See also The Commonwealth v Tasmania (1983) 158 CLR 1 per Deane J. at 260; South Australia v Tanner, above, at 165 per Brennan J. at 178; Australian Capital Television Pty. Ltd. v Commonwealth of Australia (No. 2) (1992) 108 ALR 577 per Brennan J. at 609; Minister for Foreign Affairs and Trade v Magno, above, per French J. at 30 and Einfeld J. at 41.
In ascertaining for present purposes the true scope of s.7B and, in particular s.7B(5), it must be borne in mind that the relevant power is one of allocation. The Macquarie Dictionary meanings of "allocate" include -
"1. to set apart for a particular purpose; assign or allot: to allocate shares..."
The Macquarie definitions of "allocation" include -
"1. The act of allocating; apportionment."
It follows, in our view, that s.7B(5) contemplates a process of apportionment of units between operators, so that, for instance, it would be beyond power for a plan to provide that there be no apportionment at all. It further follows, in our opinion, that the apportionment contemplated by s.7B(5) must reflect a method that is not capricious and irrational. At the same time, it is not for the Court to devise a method of allocation which appears fairer than that adopted in a plan. As Isaacs J. said in Ferrier v Wilson (1906) 4 CLR 785 at 801:
"A Court is not at liberty to declare a regulation or by-law invalid on the ground of unreasonableness merely because the Court may think it could be more fairly framed, so as to bear with less hardship on those affected. Such considerations are here entrusted to high public functionaries, and although the ultimate power of supervision remains in the Court, it is only for the purpose of confining the rule making power within the limits of its jurisdiction, and not for correcting any possible unwisdom in its determinations."
The relevant principles in this area are well summarised by Paul Walker in "Irrationality and Proportionality" in Judicial Review (1992) (ed. by Supperstone and Goudie) as follows (at 121):
"Reasonable people may differ about moral standards, and about the rigour with which logic must be applied. An assertion that a decision is illogical or fails to meet moral imperatives must be weighed against the needs of good administration, recognising that administrators will sometimes find themselves confronted with a Gordian knot, and must not shirk from applying a common sense solution. Only if the solution strays so far from logic or accepted moral standards that no reasonable administrator could have thought it right will it be condemned as irrational. This involves a value judgment by the court: but it is a judgment of a very limited kind.
The fact that the test is so stringent places a high burden upon an applicant. This does not mean, however, that an administrative body may render itself immune from judicial review on rationality grounds by simply asserting that it weighed all relevant factors and formed its own value judgment."
See also comments in three articles in the Federal Law Review (1991) Vol 20 No. 1: Peter Bayne, "The Court, the Parliament and the Government - Reflections on the Scope of Judicial Review" 1 at 36; John McMillan, "Developments under the ADJR Act: The Grounds of Review" 50 at 57; and Mr. Justice Gummow "Reflections on the current operation of the ADJR Act" 128 at 132.
The method adopted in the Plan will only be beyond the scope of s.7B(5) if no reasonable person could ever have devised it. This is a stringent test, but the learned primary Judge concluded that, in the present circumstances, it had been satisfied. It is now common ground that some of the illustrations given by his Honour were not sustainable, yet as we read his reasons, his Honour's judgment was that, as a matter of principle, the method of allocation provided for in the Plan was fundamentally flawed by virtue of the "statistical fallacy" inherent in its operation. It is pertinent to note here that, in the area of ultra vires, the facts "(are) not ascertained as though (they) were...mere issue(s) between the parties" (per Brennan J. in Tanner's case at 179).
In substance, the Judge held that the relevant provisions of the Plan were capricious and irrational, such that no reasonable person could ever have devised it. This was an extreme conclusion. But it was justified on the expert evidence of Dr. Nicholls. We are not persuaded that, in principle, his Honour was wrong in that conclusion. In the absence of evidence or a process of reasoning to propound any rational basis to warrant the adoption of a statistically flawed formula for the calculation of catch history over the five year period, it was, we think, reasonably open to his Honour to conclude that the relevant provisions of the Plan were beyond power and thus void. No case for interfering with that conclusion has, in our view, been made out.
We would dismiss the appeal, with costs, other than the costs of the motion dealt with on 16 February 1993.
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