Port of Portland Pty Ltd v State of Victoria

[2010] HCATrans 108

[2010] HCATrans 108

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M120 of 2009

B e t w e e n -

PORT OF PORTLAND PTY LTD

Applicant

and

STATE OF VICTORIA

Respondent

Application for special leave to appeal

GUMMOW J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 23 APRIL 2010, AT 10.46 AM

Copyright in the High Court of Australia

MR J.D. MERRALLS, QC:   May it please the Court, I appear with my learned friend, MR S.T. PITT, for the applicant.  (instructed by Mills Oakley Lawyers)

MS C.M. KENNY, SC:   May it please the Court, I appear with my learned friend, MR C.M. ARCHIBALD, for the respondent.  (instructed by the Victorian Government Solicitor)

GUMMOW J:   Yes, Mr Merralls.

MR MERRALLS:   May it please the Court, we say that this matter has the hallmarks of a case for special leave to appeal.  All the criteria, statutory and discretionary, are satisfied.  It involves a question of law of public importance concerning the application of statements about the dispensing power to adjustment provisions in a contract for the sale of public authority assets as part of a privatisation for public utilities where the amount of the adjustment is calculated by reference to a tax liability.

GUMMOW J:   Can you explain one thing about the structure of the proceeding?  Your client paid the tax, is that right?

MR MERRALLS:   Yes.

GUMMOW J:   It does not seek recovery of the tax on some quasi contractual basis?

MR MERRALLS:   No.

GUMMOW J:   What it sues on is 11.4 of the agreement and says ‑ ‑ ‑

MR MERRALLS:   Clause 11.4(b).

GUMMOW J:   Clause 11.4(b).  Not (a)?

MR MERRALLS:   No.  Clause 11.4(b) states the consequence of the state of affairs to which (a) refers not coming into existence.  The undertaking is in (b).

GUMMOW J:   Yes, and your grounds of appeal are limited to 11.4(b) I see.

MR MERRALLS:   Well, they are not actually.

GUMMOW J:   No.  Well, wait a minute.  You have got (a) in there as well?

MR MERRALLS:   The 11.4(a) ground which came from Mr Justice Nettle in the Court of Appeal.  One has the impression that Mr Justice Nettle would have decided in our favour on 11(b) had he not felt constrained by widely expressed dicta in previous cases.  So he came up with a solution which gave us damages for breach of 11(a) which was, as I understand it, I was not in the case below, but I understand it was not part of the argument.

GUMMOW J:   Thank you.

MR MERRALLS:   The case involves a matter of high constitutional principle concerning Article 12 of the Bill of Rights and the underlying concept of the supremacy of Parliament.

GUMMOW J:   Is there anything in the Victorian constitutional arrangements which specifically adopts the Bill of Rights?

MR MERRALLS:   Not constitutional arrangements, statutory arrangements, yes.  It is in the Imperial Acts Application Act.  It is one of the transcribed Acts with habeas corpus and a few other interesting documents of great antiquity.  The question is one in which there is an apparent difference – and I stress “apparent” – between broadly stated dicta of three justices in different cases and what is implicit in a decision of the Full Court in 1923.

GUMMOW J:   This is the Eastern Extension Case.

MR MERRALLS:   The Eastern Extension Case.  The decision of the Court of Appeal was by a majority.  There was unanimity upon the dispensing power point, but the dissenting judge upon the other point, Mr Justice Nettle, as I have mentioned, based his concurrence with the other justices on the dispensing power point on what he regarded as the present state of the authorities.  That phrase appears in paragraph 89 of his judgment on page 64 of the application book.  He refers to the three obiter dicta of Mr Justice Rich, Mr Justice Dixon and Mr Justice Windeyer in three separate cases or as in quite different issues.  The point raised by the present case has never been squarely before the High Court for decision.

Finally, we say that the interests of justice require the consideration by the High Court of the decision of the Supreme Court.  The State has repudiated an obligation under a formal contract for the sale of a public asset.  To put the matter bluntly, it has welshed on clause 11.4(b) of the contract.  The sale occurred as part of the systematic privatisation in the 1990s of public utilities in Victoria.  As your Honour is aware, transport, power, water, ports were all privatised.  In that process the ports of Geelong and Portland passed into private operation.  The legislative framework for the disposal of port assets and port businesses, operations, was established by the Port Services Act 1995. It prescribed the manner in which privatisation was to be achieved and it amended the various port authority Acts to give effect to the process.

The Port Services Act provided for the Crown to acquire an absolute interest in land which, although remaining Crown land, had been vested in the various port authorities, including the Port of Portland Authority.  It was a curious notion.  The land, although it remained Crown land, was vested upon trust for purposes – one of these funny government public trusts – but it provided for the Crown to acquire an absolute interest and empowered the Governor in Council, on the recommendation of two Ministers on behalf of the Crown, to grant to the authority or any other person for an estate in fee simple any unalienated land which had previously been vested in the port authority.

The Port of Portland Authority Act 1958 was amended to forbid the sale by the authority of any land without the Treasurer’s approval and to require the authority, if directed to do so by the Treasurer, to sell any part of the assets, undertaking or business to a specified person or body at a specified price and in accordance with specified conditions. Such a direction was given by Mr Stockdale, the Treasurer at the time. The Port of Portland land and undertaking was sold pursuant to that power. The contract of sale contained clause 11.4, in Part 11, which was headed “Adjustments”. The other provisions of Part 11 were conventional outgoings adjustments.

GUMMOW J:   The agreement was not scheduled to any statute, was it?

MR MERRALLS:   No, it was not.  It was pursuant to a statutory power.  It was annexed or referred to in the direction given by the Minister.

GUMMOW J:   Is that direction in evidence?

MR MERRALLS:   I believe it is in evidence.  It is not before the Court.  I have a copy of it.  I can read it if your Honour requires me to do so.

GUMMOW J:   No, I understand.

MR MERRALLS:   I am sorry, it is.  It is tab C.  I had forgotten that.  It was not going to be.  It is in tab C of the materials.

GUMMOW J:   Yes, you have got the direction.

MR MERRALLS: Yes. The authority was required to deal with the proceeds of sale as directed by the Treasurer. That is prescribed by section 42(2B) of the Port Services Act which specifies three purposes; to discharge liabilities, to defray expenses and to make payments into the consolidated fund.  That is the legislative framework in which the asset sale came into agreement.  The applicant will contend, if special leave is granted, that clause 11.4(b) was not void as a dispensation from the Land Tax Act but was a permissible adjustment of the purchase price on a sale of public assets measured by reference to a tax liability.  Alternatively, it will contend that if parliamentary authority is required for clause 11.4, it was given by sections 4A and 17E(1) of the Port of Portland Authority Act in conjunction with the Treasurer’s direction under section 4A(1).

GUMMOW J:   Was this particular point of statutory authorisation traced back to the Authority Act?  Was that in play below?

MR MERRALLS:   What was which in play?

GUMMOW J:   The tracing back of authority to the Authority Act itself as a statutory endorsement of what happened.

MR MERRALLS:   Yes, I believe that was argued, yes.  I can go through the ‑ ‑ ‑

GUMMOW J:   It has never been asserted, has it, that the direction itself was ultra vires in any way?

MR MERRALLS:   No, and I doubt whether it would have been in anybody’s interests to do so.  I can take your Honours through the labyrinthine provisions of the ‑ ‑ ‑

GUMMOW J:   Just pardon me a minute.  I think we would be assisted if we heard from Ms Kenny.

MR MERRALLS:   If your Honour pleases.

MS KENNY:   Your Honours, there are just two matters that I have to correct in my learned friend’s submissions.  The first related to the question that your Honour Justice Gummow asked about whether the tax was paid by the applicant.  The answer to that question is that half the tax was paid by the applicant in relation to the port lands which were called Barton Place and the remaining part of the tax was paid by the tenants.  The second question, your Honours, relates to my learned friend’s putting, in his words, bluntly that the State had actually welshed on its promise.

GUMMOW J:   I thought that might provoke you.

HAYNE J:   I thought it was designed to provoke you.

MS KENNY:   That, of course, is not the case, your Honour.  The State did enact legislation in accordance with the promise.  The State contends it did so successfully and that will be the subject of the notice of contention which will be filed, your Honour, if the appeal proceeds.

GUMMOW J:   What would the notice of contention be?

MS KENNY:    Your Honour, the Court of Appeal found, as your Honours would be aware, that the State was unsuccessful in amending the legislation as contemplated by clause 11.4(a) of the agreement.  The State says, your Honours, that the State did, in fact, amend legislation.  It enacted section 2(2) of the Valuation of Land Act which was intended to exclude from site value the value of port improvements which would then be the subject of assessment for land tax purposes.

The notice of contention will say – it will be contended by the State that the Court of Appeal was wrong in finding that that legislation did not meet the purposes specified by clause 11.4(a).  To investigate that argument, your Honours, it would be necessary to refer the Court to some legislation which the Court of Appeal referred to in the course of the judgment, but other obscure sections of the Land Tax Act and the Valuation of Land Act which were not referred to by the Court of Appeal but which we say are critical to the State’s contention that the legislation which was enacted did satisfy the purposes required by clause 11.4(a).  So if the appeal proceeds, your Honours are going to be taken to some fairly obscure pieces of legislation which have not yet been ruled upon by the Court of Appeal.

GUMMOW J:   That does not intimidate us.

MS KENNY:   No, but it is necessary to point it out, your Honour.  Can I then turn, your Honours, to the questions of the validity of clause 11.4 of the agreement?

GUMMOW J:   Yes.

MS KENNY:   We have some fairly short points to raise about this.  As your Honours are aware, the Court of Appeal unanimously found that clause 11.4 was unenforceable, specifically unenforceable, and in doing so they applied what we say are fundamental public law principles explained in the considered dicta of Justice Rich in Magrath v Commonwealth, of Justice Dixon in Thompson’s Case and of Justice Windeyer in Placer Development v The Commonwealth.  None of the principles, your Honours, or their application to this case are in doubt.  The Court of Appeal found that clause 11.4(a) was invalid because it contains a fetter by the Executive on the exercise of legislative power.  The court found that clause 11.4(b) was invalid because it was ‑ ‑ ‑

GUMMOW J:   But Mr Merralls says it was a fetter by the Executive in exercising a power conferred by statute.  He looks to the direction, which refers to the agreement, and the direction itself is linked back to the statute.

MS KENNY:   No, that is not so, your Honour, and this was deal with by the Court of Appeal.  The Port of Portland Authority Act enabled the Treasurer of Victoria to direct the Port of Portland Authority, who was the vendor, to sell its assets. It did not direct the Treasurer of Victoria to enter into a separate promise for the purchaser, which of course it did in clause 11.4, and it did not direct the Treasurer of Victoria to grant an extension from land tax. The type of authorisation which you find in section 4A(1) of the Port of Portland Authority Act is ruled on by Justice Dixon in Thompson’s Case.  Justice Dixon made it quite clear that that sort of authorisation ‑ ‑ ‑

GUMMOW J:   You may be right about this, Ms Kenny, but at the moment it makes life very complicated for commercial enterprises dealing with the State, does it not, who have got to understand all of this?

MS KENNY:   No, not really, your Honour, because there is ‑ ‑ ‑

GUMMOW J:   They are not dealing just with the State, they are dealing with some multi-headed entity.

MS KENNY:   Your Honour, what we say to that is that the constitutional principles which were relied on by the court to impugn the validity of clause 11.4 is not in doubt.  Now, if the Executive wanted to exempt the applicant from land tax, all it had to do was to get statutory approval for that exemption, and it did not do that.  How you proceed in these matters, your Honours, is not in doubt.  In fact, in the Ansett Case, of course, the Ansett agreements were the subject of statutory approval and that is the normal way in which you proceed.

We say that it really does not cause any difficulty for prospective people dealing with the State not to have a clause like this enforced.  It is a very unusual clause, we would say, your Honour.  It clearly did not have statutory approval and it clearly was impugned on fundamental principles relating to the paramountcy of Parliament and the inability of the Executive to fetter the future exercise of legislative power.  The other point that I wanted to make, your Honour, is that my learned friend said that there was some doubts about these principles and how they would operate in this case caused by the Eastern Extension Case, but it is quite clear, your Honours, that the Eastern Extension Case ‑ ‑ ‑

GUMMOW J: We should indicate that is in 33 CLR 426.

MS KENNY:   Yes.  The Eastern Extension Case, your Honours, which was decided some years before the three authorities to which I have referred was dealing with a different matter.  It was not concerned with the validity of the agreement in that case, it was concerned with the construction points.  It was concerned with whether the colonial agreements granted an exemption from land tax or were properly construed as a liability to repay.  All of the judges in that case made it quite clear that they were not concerned with the validity of the agreement and whether it could be enforceable.

The later judgment of Justice Dixon in Thompson’s Case makes it quite clear, your Honours, that any contractual attempts to refund tax is unenforceable.  In the passage set out in the President’s judgment at page 40 of the application book Justice Dixon says:

The imposition of a tax necessarily involves an intention that when levied it shall not become repayable.  Any liability ex contractu to repay it in substance, whether as damages, indemnity or recoupment, must be dissolved by force of the statute.

So we say, your Honours, that the principles which were applied to ‑ ‑ ‑

GUMMOW J:   You might be right about all of this, Ms Kenny.  The question is, is it so clear that there should not be a grant of special leave?

MS KENNY:   We say it is, your Honour.  We say it is abundantly clear, that there is no doubt about the principles that were applied.  The only real point that my learned friend can point to is the Eastern Extension Case which was not dealing with the validity of the agreement and must be seen, as the Court of Appeal said, to be overtaken by the later cases.  I also wanted to say something about my learned friend’s contention that clause 11.4(b) of the agreement, which promised a refund of tax, is properly construed as an adjustment to the purchase price.  We say, your Honours, that that characterisation is just simply wrong.  If it was an adjustment for purchase price, you would expect that to be reflected in the agreement and it is not.

HAYNE J:   There is reference at 11.4(b) to an allowance, is there not, “shall allow or refund”?

MS KENNY:   Yes, your Honour, but ‑ ‑ ‑

HAYNE J:   The language of allowance is the language apposite to adjustment at completion, I think, and the language of refund is apposite to what happens if events come to pass after completion.

MS KENNY:   Certainly, your Honour.  I do not take issue with that, but your Honour has to appreciate that the adjustment that is being referred to, one, is an adjustment for land tax, has nothing to do with the purchase price and, secondly, is an adjustment by the State of Victoria.  It is not an adjustment by the vendor who would be the recipient of the purchase price.

HAYNE J:   Who was the vendor?

MS KENNY:   The vendor was the Port of Portland Authority.  It is a tripartite agreement, your Honour.  Clause 11.4 was a separate agreement by the State of Victoria.  It does not mention purchase price.  It is couched in terms of an indefinite obligation so that it would extend well beyond the completion dates mentioned in the agreement.  Of course, if the Port of Portland Authority wanted to indemnify or give an adjustment for tax, it could have done so by way of an indemnity, but the parties chose not to proceed in that way.  It is simply wrong to read clause 11.4 as anything than what it is, which is an adjustment for land tax by the State of Victoria improperly agreeing to refund tax which is being levied under an Act of Parliament.

Your Honours, I think I have dealt with the question of the parliamentary authority for clause 11.4 and I will not repeat what I said.  I would simply say this, your Honours, that in the applicant’s outline and, indeed, this morning, the applicant does not point to any error by the Court of Appeal in the conclusions it reached that clause 11.4 does not have statutory approval.  It simply repeats the point which was rejected by the Court of Appeal.

The only other question, your Honours, which I want to mention is the question of whether clause 11.4(a) is enforceable by a suit for damages.  The only member of the Court of Appeal to say that it was was Justice Nettle.  The majority of the Court of Appeal said that to allow damages which were measured by the amount of tax overpaid by the applicant because the amendments were not introduced would simply achieve the same results impermissibly contemplated by clause 11.4(b).

In our submission, your Honour, Justice Nettle’s view is unlikely to prevail on appeal.  It is quite clear from the authorities that a fetter on legislative power is invalid per se.  Perhaps it is trite to say that if the promise is invalid per se it creates no binding legal obligation which can be enforced by an action for damages.  We think that the majority view of

Justice Nettle is unlikely to prevail on appeal.  I think they are the only matters, unless ‑ ‑ ‑

GUMMOW J:   Thank you, Ms Kenny.  We do not need to hear you in reply, Mr Merralls.  There will be a grant of special leave in this matter.  Are we right in thinking that it is probably a day and a half case?  It is more than day.

MR MERRALLS:   I should think so, your Honour, yes.

GUMMOW J:   Ms Kenny?

MS KENNY:   Yes, your Honour, we think so.

GUMMOW J:   So there will be a grant of leave as indicated and the estimated time is one to two days.  We will take a short adjournment.

AT 11.13 AM THE MATTER WAS CONCLUDED