Re Michael; Ex parte Epic Energy (WA) Nominees Pty Ltd
[2002] WASCA 231
•23 AUGUST 2002
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE FULL COURT (WA)
CITATION: RE DR KEN MICHAEL AM; EX PARTE EPIC ENERGY (WA) NOMINEES PTY LTD & ANOR [2002] WASCA 231
CORAM: MALCOLM CJ
ANDERSON J
PARKER J
HEARD: 21-28 NOVEMBER 2001
DELIVERED : 23 AUGUST 2002
FILE NO/S: CIV 2166 of 2001
MATTER :An application for a writ of certiorari, a writ of prohibition and a writ of mandamus against Dr Ken Michael AM, the Independent Gas Pipelines Access Regulator in Western Australia
EX PARTE
EPIC ENERGY (WA) NOMINEES PTY LTD (ACN 081 609 289)
First ApplicantEPIC ENERGY (WA) TRANSMISSION PTY LTD (ACN 081 609 190)
Second Applicant
Catchwords:
Administrative law - Certiorari, prohibition, mandamus, declaratory relief - Third party access to natural gas pipeline - Assessment for approval by Regulator of proposed access arrangement - Whether Regulator misconceived duty and failed to perform statutory function - Whether Regulator misconstrued Access Code, failed to consider relevant matters, considered irrelevant matters, made findings unsupported by evidence - Declaratory relief granted
Administrative law - Certiorari - "Draft decision" - Detailed statutory stages for decision - Whether application premature - Whether rights sufficiently affected
Statutory interpretation - Tariff for use of gas pipeline by third parties - Owner purchased pipeline before Access Code applied to pipeline - Pipeline purchased from State agency - Purchase by public tender - Whether purchase price relevant to establishment of capital base for calculation of tariff - National Third Party Access Code, 1997, s 2.24(a), s 8.1, s 8.10 and s 8.11
Statutory interpretation - Regulator "must take" into account several factors including owner's "legitimate business interests and investment" in pipeline - Whether factors must be given weight as fundamental elements in decision whether to approve - National Third Party Access Code, 1997, s 2.24
Statutory Interpretation - Access Code stipulates factors to be taken into account by Regulator in assessing whether Access Arrangement satisfies principles in s 3.1 - s 3.20 - By s 3.4 compliance with principles in s8 required - Whether stipulated factors to be taken into account in assessing compliance with s 8 - Whether s 8 self-contained "Code" - National Third Party Access Code, 1997, s 2.24, s 3.4, s 8
Statutory Interpretation - Design of tariff for use of gas pipeline by third parties - Statutory objective that "efficient" costs be recovered - Whether imports notion of "economic efficiency"
Statutory objective of "not distorting investment decisions" in pipeline systems - Whether includes investments made before Access Code applied to a pipeline - National Third Party Access Code, 1997, s 8.1(a), s 8.1(d)
Legislation:
Gas Pipelines Access (Western Australia) Act 1998
National Third party Access Code for Natural Gas Pipeline Systems 1997
Result:
Declarations granted
Category: A
Representation:
Counsel:
First Applicant : Mr C L Zelestis QC & Mr G H Murphy & Mr J A Thompson
Second Applicant : Mr C L Zelestis QC & Mr G H Murphy & Mr J A Thompson
TheIndependent Gas Pipelines Access Regulator: Mr S J Gageler SC & Mr C G Colvin SC
AlintaGas Limited and AlintaGas Sales Pty Ltd : Mr J Gleeson SC & Mr A Willinge
CMS Gas Transmission of Australia : Mr A G Casteldine
Solicitors:
First Applicant : Mallesons Stephen Jaques
Second Applicant : Mallesons Stephen Jaques
TheIndependent Gas Pipelines Access Regulator: Corrs Chambers Westgarth
AlintaGas Limited and AlintaGas Sales Pty Ltd : Blake Dawson Waldron
CMS Gas Transmission of Australia : Minter Ellison
Case(s) referred to in judgment(s):
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Australian Capital Television Pty Ltd v Minister for Transport and Communications & Ors (1989) 86 ALR 119
Australian Lighting and Hardware Pty Ltd v (Falkner) Brightlight Nominees Pty Ltd (1994) 1 VR 553
Bowes v Shand (1877) 2 App Cas 455
Burger King Corporation v Registrar of Trademarks (1973) 128 CLR 417
Clark v Ryan (1960) 103 CLR 486
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389
Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280
Craig v The State of South Australia (1995) 184 CLR 163
General Accident Fire and Life Assurance Corporation Ltd v Commissioner of Pay-Roll Tax (NSW) (1982) 42 ALR 365
Homestake Australia Ltd v Metana Minerals NL (1994) 11 WAR 435
Hot Holdings Pty Ltd v Creasy (1996) 185 CLR 149
K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309
Marine Power Australia Pty Ltd v Comptroller-General of Customs (1989) 89 ALR 561
Metropolitan Gas Co v Federated Gas Employees Industrial Union (1925) 35 CLR 449
Minister for Immigration and Multicultural Affairs v Yusuf (2001) 180 ALR 1
Pepsi 7-Up Bottlers Perth Pty Ltd v Federal Commissioner of Taxation (1995) 62 FCR 289
Queensland Medical Laboratory& Ors v Blewett & Ors (1988) 84 ALR 615
R v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13
R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100
R v Bonython (1984) 38 SASR 45
R v Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322
R v Perry (1990) 49 A Crim R 243
R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327
Rathborne v Abel (1964) 38 ALJR 293
Re Queensland Co-operative Milling Association Ltd
Royal Insurance Australia Ltd v Government Insurance Office of NSW (1994) 1 VR 123
Saraswati v The Queen (1991) 172 CLR 1
Singh v Minister for Immigration and Multicultural Affairs [2001] FCA 389
ULV Pty Ltd v Scott (1990) 19 NSWLR 190
Case(s) also cited:
Ainsworth v The Ombudsman (1988) 17 NSWLR 276
Allnut v Inglis (1810) 12 East 527
Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313
Attorney General (NSW) v Quin (1990) 170 CLR 1
Australian Fisheries Management Authority v P W Adams Pty Ltd (1995) 61 FCR 314
Bank of Toronto v Lambe (1887) 12 App Cas 575
Bannister Quest Pty Ltd v Australian Fisheries Management Authority (1977) 77 FCR 503
BTR Plc v Westinghouse Brake and Signal Company (Australia) Ltd (1992) 34 FCR 246
Clifton v Masini [1967] VR 718
Collector of Customs v Bell Basic Industries Ltd (1988) 83 ALR 251
Corporation of the City of Enfield v Development Assessment Commission (2000) 199 CLR 135
Creasy v Hot Holdings Pty Ltd [1999] WASC 69
D & R Henderson (Manufacturing) Pty Ltd v Collector of Customs (NSW) (1974) 48 ALJR 132
Ex parte MacKaness and Avery Pty Ltd (1943) 43 SR (NSW) 239
Ex parte Waldron [1986] QB 824
Gemsted Pty Ltd v Gosford City Council (1993) 78 LGERA 395
H A Bachrach Pty Ltd v Caboolture Shire Council (1992) 80 LGERA 230
Herbert Adams Pty Ltd v Federal Commissioner of Taxation (1932) 47 CLR 222
Hockey v Yelland (1984) 157 CLR 124
Holt v Cox (1994) 15 ACSR 313
Idoport Pty Ltd v National Australia Bank Ltd (2000) 50 NSWLR 640
Markell v Wollaston (1906) 4 CLR 141
Maunsell v Olins [1975] AC 373
National Competition Council v Hamersley Iron Pty Ltd (1999) 167 ALR 109
Northern Territory of Australia v GPAO (1999) 196 CLR 553
O'Toole v Charles David Pty Ltd (No 2) (1991) 171 CLR 232
P W Adams Pty Ltd v Australian Fisheries Management Authority (1995) 60 FCR 387
Parker & Ors v Anti-Corruption Commission, unreported; FCt SCt of WA; Library No 990162; 31 March 1999
Pollock v Wellington (1996) 15 WAR 1
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Public Service Association (SA) v Federated Clerks' Union of Australia (1991) 173 CLR 132
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177
R v Bouch [1982] 3 All ER 918
R v Milk Board; Ex parte Tomkins [1944] VLR 187
R v War Pensions Entitlement Appeal Tribunal; Ex parte Bott (1933) 50 CLR 228
Rail Access Corporation v New South Wales Minerals Council Ltd (1998) 87 FCR 517
Re Castioni [1891] 1 QB 149
Re Duke Eastern Gas Pipeline Pty Ltd [2001] A CompT 2
Re Monger; Ex parte Dutch [2001] WASCA 220
Re National Market Access Code (1998) ATPR (Com) 50-268
Re New South Wales and the Australian Capital Territory Newsagent Authorisation (1998) ATPR (Com) 50-253
Re Refugee Tribunal & Anor; Ex parte Aala (2000) 176 ALR 219
Re The Medical Board of Western Australia; Ex parte P (2001) 24 WAR 127
Refrigerated Express Lines Pty Ltd (Australasia) v Australia Meat & Livestock Corporation (No 2) (1980) 29 ALR 333
Ricciardello v Caltex Oil (Australia) Pty Ltd [1991] ANZ ConvR 445
Telstra Corp Ltd v Seven Cable Television Pty Ltd (2000) 102 FCR 517
Trade Practices Commission v Ansett Transport Industries Operations Pty Ltd (1978) 20 ALR 31
TXU Electricity Ltd v Office of the Regulator General (2001) 3 VR 93
Yu Feng Pty Ltd v Maroochy Shire Council [2000] 1 Qd R 306
MALCOLM CJ: I have had the benefit of reading in draft the reasons to be published by Parker J. I am in agreement with his Honour's reasons and conclusions. There is nothing which I wish to add. I am prepared to hear further submissions on the precise terms of the declaratory relief required to give effect to his Honour's conclusions.
ANDERSON J: I have had the opportunity of reading in draft the reasons for judgment by Parker J. I agree with his Honour's reasons and with the proposed orders.
PARKER J: This is the return of an order nisi for writs of certiorari, prohibition and mandamus. The order nisi was granted by Templeman J on 28 August 2001.
The first and second applicants Epic Energy (WA) Nominees Pty Ltd and Epic Energy (WA) Transmission Pty Ltd are respectively the owner and operator of the Dampier to Bunbury Natural Gas Pipeline ("DBNGP"). This is a pipeline which is over 1,500 kilometres in length, with associated service delivery pipelines, and which connects the natural gas fields located off the northwest coast of the State with the cities of Perth and Bunbury and other areas of significant gas consumption and major commercial consumers of gas in the southwest of the State. It is the only pipeline available for this purpose.
In these reasons it will usually be convenient and adequate to refer to either or both applicants as "Epic" even though, strictly, a distinction between them and their interests might be apt and more accurate in the particular context.
Relevantly, by virtue of the Gas Pipelines Access (Western Australia) Act 1998 ("the Act") the DBNGP is a pipeline that is a "Covered Pipeline" under the National Third Party Access Code for Natural Gas Pipeline Systems 1997 (the "Code"). The Code was Schedule 2 to the Act when it was first enacted. The Code has since been amended in accordance with the procedure authorised by the Act. The argument and this decision proceeds on the basis of the Code as last amended on 9 November 2000. The Code is applied as a law of Western Australia by s 9 of the Act, it being part of the Gas Pipelines Access Law as provided by s 3(1) of the Act.
The applicants seek relief in respect of a draft decision dated 21 June 2001 of Dr K Michael AM, the Independent Gas Pipelines Access Regulator in Western Australia (the "Regulator"). The draft decision was
in respect of the submission to the Regulator for approval, by the applicants who are "Service Providers" for the purposes of the Code, of a proposed Access Arrangement by which third parties would be permitted rights of access to the use of the DBNGP. A number of third parties, being parties privy to gas transmission contracts with the applicants, were among those who had lodged submissions with the Regulator in respect of the proposed access arrangement.
Two of these, AlintaGas Limited and AlintaGas Sales Pty Ltd (together "Alinta"), were granted leave to appear on the hearing in this Court in opposition to the application. Another, CMS Gas Transmission of Australia, appeared, but at its request was excused from further participation in the argument. The Regulator also appeared but, having regard to his statutory role and the principle in R v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13 at 35 – 36, his appearance by counsel was limited to adducing evidence and making submissions as to the proper construction of the Code and the procedures of the Regulator.
By the order nisi, certiorari is sought to quash the draft decision of the Regulator together with prohibition to prevent the Regulator proceeding further with the draft decision. Mandamus is sought to direct the Regulator to consider again Epic's proposed Access Arrangement for the DBNGP according to law. Further, or alternatively, declarations are sought. The same extensive and detailed grounds are advanced in respect of each form of relief sought.
It is not necessary to set out the grounds in full. The following incomplete summary of the nature of the issues raised will serve as an indication which is adequate for present purposes. Epic contends, reflecting the grounds in the order nisi, inter alia that the Regulator:-
•misconstrued the Code in many identified respects, in particular with respect to s 2.24 and its intended application within the Code and the weight which should be given to the factors it identifies, and also, with respect to s 8, especially s 8.1, s 8.10 and s 8.11;
•erred in law by failing to take into account many particularised matters which were relevant, and by failing to give to a number of them effect as fundamental factors as the Code required; and
•further erred in law by taking into account a number of irrelevant considerations and by reaching conclusions which were unsupported by any evidence;
with the consequence that the Regulator misconceived his duty and failed to perform his statutory function.
In his draft decision of 21 June 2001, with particular reference to the determination of the reference tariffs which would govern what might be charged by Epic for the "service" of transmitting natural gas for third parties utilising the DBNGP, the Regulator proposed to adopt an initial Capital Base for the DBNGP in the order of $1.234 billion. The first applicant had, however, purchased the DBNGP at a price of some $2.407 billion in March 1998. Before that the DBNGP had been publicly owned by the Gas Corporation of the State pursuant to the Gas Corporation Act 1994. Its sale was by competitive public tender which was conducted in accordance with the Dampier to Bunbury Pipeline Act 1997, an Act which dealt specifically with the process for the sale of the DBNGP. The proceeds of the sale were for the benefit of the State, being shared between the Gas Corporation, the Consolidated Fund and a trust account established pursuant to the 1997 Act, in accordance with ministerial direction, as contemplated by the 1997 Act; see s 8 and s 45.
If implemented in the final decision of the Regulator, the adoption of an initial Capital Base in the order of $1.234 billion in the calculation of the reference tariffs would seriously adversely affect the financial return Epic would receive from third parties in respect of their access to the use of the pipeline. The difference between the Capital Base figure proposed by the Regulator, and the purchase price paid of $2.407 billion, in the determination of the charges which Epic might make for the use of the DBNGP is so significant, it is submitted, as to threaten the viability of Epic's operations. Hence the significance of this application.
Epic contends in essence that in adopting an initial Capital Base in the order of $1.234 billion, the Regulator has misconstrued the Code. The Regulator does not agree and advances a different view of the true construction of the relevant provisions. Alinta takes yet a third position about the construction of the Code, although one which to a substantial degree accords with the view of the Regulator.
The Act
By the preamble to the Act it is recited that:
"The Council of Australian Governments agreed, in February 1994, to general principles of competition policy reform to enable third parties, in particular circumstances, to gain access to essential facilities.
The Council of Australian Governments, as part of that commitment to reform, agreed to more specific proposals for the development of free and fair trade in natural gas.
The Commonwealth, the States of New South Wales, Victoria, Queensland, South Australia, Western Australia and Tasmania, the Northern Territory and the Australian Capital Territory agreed in November 1997 to the enactment of legislation in the Commonwealth and those States and Territories so that a uniform national framework applies for third party access to all gas pipelines that –
(a)facilitates the development and operation of a national market for natural gas; and
(b)prevents abuse of monopoly power; and
(c)promotes a competitive market for natural gas in which customers may choose suppliers, including producers, retailers and traders; and
(d)provides rights of access to natural gas pipelines on conditions that are fair and reasonable for the owners and operators of gas transmission and distribution pipelines and persons wishing to use the services of those pipelines; and
(e)provides for resolution of disputes."
The uniform national framework to which the Council of Australian Governments ("COAG") agreed in November 1997, as recited in the preamble, is the Code. It was pursuant to the November 1997 agreement by all Australian Governments that the Act was enacted in this State. Corresponding enactments have been enacted by all the other Australian Parliaments, so that it is now the case that the Commonwealth, the States and the Territories are all scheme participants within the meaning of s 3 of Schedule 1 of the Act. By this means there is substantially corresponding legislation in force throughout Australia, its coastal waters and to some degree extra-territorially; see s 6 and s 7 of the Act. The legislation including the Code binds the Crown in its various Australian capacities so far as the legislative capacity of each enacting Parliament permits; see the Act s 5.
The Code itself describes its objective as the establishment of a framework for third party access to gas pipelines that meets criteria which are expressed in identical terms to subparagraphs (a) – (e) in the third paragraph of the preamble quoted earlier. By s 1 the Code is limited to pipelines used for the haulage of natural gas. Pursuant to s 1 there are listed in Schedule A to the Code those natural gas pipelines in Australia that were to be a "Covered Pipeline" from the date of the commencement of the Code. Section 1 also provided that other pipelines might become "Covered", by decision of the relevant Minister, after application and after a recommendation to the relevant Minister is made by the National Competition Council established pursuant to s 29A of the Trade Practices Act 1974 (Cth).
The first of the Acts to implement the Code was the Gas Pipelines Access (South Australia) Act 1997 which received Royal Assent on 18 December 1997. The South Australian Act did not come into operation, however, until the Gas Pipelines Access (Commonwealth) Act 1998 (Cth) received Assent, which was on 30 July 1998. The (Western Australian) Act completed its parliamentary passage on 23 December 1998, and received Royal Assent on 15 January 1999. Its operation commenced on 9 February 1999 pursuant to Proclamation.
An issue in this application is whether terms or phrases used in the Code were intended by the legislature to be interpreted and applied in special technical senses used in the field of economics and, if so, what was the accepted meaning of those words or phrases. For this purpose it is usual to have regard to usage at the date of enactment of legislation, ie 15 January 1999 for the (WA) Act. In this particular case, however, as the Australian legislatures were enacting essentially uniform legislation pursuant to intergovernmental agreement, the more relevant date would appear to be that on which the first of the implementing Acts was enacted. For our purposes this was the South Australian Act so that the relevant date is 18 December 1997. For this reason I will proceed on the basis that for this purpose regard should be had to usage as at 18 December 1997. I would note, however, that the evidence relevant to this issue, which was led before the Court, and which I will consider later in these reasons, does not establish that the position was materially different as at 15 January 1999.
The Regulator
The Regulator holds office pursuant to s 27 of the Act. In accordance with s 36(1)(a) the Regulator has the functions which are conferred on a "local Regulator" under the Gas Pipelines Access (Western Australian) Law, which comprises Schedule 1 to the Act and the Code. The Regulator is the "relevant Regulator" for the purposes of the Code in respect of the DBNGP as it is situated in Western Australia. The Regulator is to approve "Access Arrangements" for the DBNGP for the purposes of the Code. An Access Arrangement may be described as a statement of the policies and conditions which apply to third party access to a Covered Pipeline. The Code requires that there be an Access Arrangement for each Covered Pipeline. That Access Arrangement must be approved by the relevant Regulator. An Access Arrangement is required by s 3 of the Code to include a reference tariff policy which describes the principles that are to be used to determine a reference tariff (s 3.5), and also a reference tariff for each "service" that is likely to be sought by a significant part of the market for which the pipeline caters (s 3.3). In this context a reference tariff is in effect the charge for a reference service.
It is the scheme of the Code, however, that a reference tariff, although approved by the Regulator, is not necessarily binding between the service provider and a prospective user of the service. They are free to negotiate and reach agreement on the terms governing the access of that prospective user to the pipeline. If they are unable to agree on one or more aspects of the terms of access the disputed matters may be referred to an arbitrator, relevantly the Western Australian Gas Disputes Arbitrator, an office created by s 62 of the Act, in accordance with s 6 of the Code. By s 6.18 the Arbitrator must not make a decision, however, that requires a service provider to provide, or the prospective user to accept, a reference service at a tariff other than the reference tariff provided by the Access Arrangement which the Regulator has approved. Further, the arbitrator must not make a decision which is inconsistent with the Access Arrangement; see also s 6.13. In this way, subject only to contrary agreement, a reference tariff in an Access Arrangement is ultimately binding on the service provider and a prospective user.
In view of some issues raised by Epic, it is to be noted that by s 37 of the Act the Regulator is independent of direction or control by the Crown in the performance of the functions of the Regulator.
Interim Access Arrangements
At the time of the sale of the DBNGP to Epic on 25 March 1998, pursuant to the Dampier to Bunbury Pipeline Act 1997 (WA), there was implemented pursuant to that Act an interim third party access regime for the DBNGP. This was substantially the same as had applied to the DBNGP pursuant to the Gas Corporation Act 1994. The Gas Transmission Regulations 1994 and The Gas Referee Regulations 1995 provided much of the detail of that regime. Access contracts which had already been entered into under that regime were preserved, the interests of the State being transferred to Epic on the sale. Pursuant to s 95 of the Act, those existing Access Arrangements were taken to be an approved Access Arrangement under the Code until 1 January 2000, but Epic was required to submit to the Regulator a proposed Access Arrangement under the Code and applicable Access Arrangement information; see s 95(3). On 15 December 1999 Epic formally submitted to the Regulator its proposed Access Arrangement and applicable Access Arrangement information. By s 7 and s 8 of Schedule 3 to the Act the existing Access Arrangement continues to operate, beyond 1 January 2000, as a transitional access scheme until Epic's proposed Access Arrangement under the Code is approved. That is the present position. It was pursuant to this history that the draft decision of the Regulator, which is the subject of this application, came to be given on 21 June 2001.
Draft decision – prerogative relief
The procedure by which a proposed Access Arrangement must be submitted to the Regulator and may be approved by the Regulator is set out in s 2 of the Code. Epic, as the service provider, must first submit a proposed Access Arrangement to the Regulator pursuant to s 2.2. This must be accompanied with Access Arrangement information which is to enable users and prospective users to understand the derivation of the elements of the proposed Access Arrangement and to form an opinion as to its compliance with the Code: see s 2.6, s 2.7 and Attachment A. The Regulator must publish notice of the proposed Access Arrangement and request submissions, as well as informing all interested parties known to the Regulator; s 2.10.
The Regulator must then consider any submissions received, s 2.12, and after considering those submissions the Regulator must issue a "draft decision" which either proposes to approve the Access Arrangement or proposes not to approve the Access Arrangement. In the latter case, the Regulator is required in the draft decision to state the amendments (or the nature of the amendments) which "would have to be made to the Access Arrangement in order for the … Regulator to approve it"; s 2.13.
By s 2.14 the Regulator is required to provide a copy of the draft decision to the service provider, those who made submissions, and any person who requests a copy, and request further submissions from those to whom the draft decision is provided by a date specified by the Regulator. The Regulator must consider any submissions received by that date.
Under s 2.15A the service provider may then resubmit a revision of the Access Arrangement incorporating or substantially incorporating the amendments specified by the Regulator in the draft decision, or otherwise address the matters the Regulator had identified in the draft decision as being the reasons for requiring the amendments specified by the Regulator. The Code then provides by s 2.16 that the Regulator must next issue a "final decision" which either approves the Access Arrangement, or a revised Access Arrangement submitted under s 2.15A, or does not approve the Access Arrangement. If the Arrangement is not approved, the Regulator must state in the final decision the amendments that would have to be made to the Access Arrangement in order for the Regulator to approve it, and the date by which a (further) revised Access Arrangement must be resubmitted. That final decision is required to be provided to the service provider and persons who had made submissions. By s 2.16A, however, the Regulator may only approve a revised Access Arrangement, which has been submitted pursuant to s 2.15A, if the Regulator is satisfied that the revision incorporates or substantially incorporates the amendments specified by the Regulator in the draft decision, or otherwise addresses to the Regulator's satisfaction the matters identified by the Regulator in the draft decision as being the reasons for requiring the specified amendments.
If the "final" decision of the Regulator does not approve the Access Arrangement the service provider may submit yet another revised Access Arrangement by the date specified by the Regulator in the final decision. In that event, the Regulator must issue a "further final decision". If the Regulator is satisfied that that the revised Access Arrangement incorporates the amendments specified by the Regulator in the final decision, or otherwise addresses to the Regulator's satisfaction the matters identified by the Regulator in the final decision, the Regulator may approve the revised Access Arrangement in the further final decision. In any other case the Regulator must issue a further final decision that does not approve the revised Access Arrangement.
By s 2.20 of the Code, in a case where the service provider does not submit a revised Access Arrangement following the final decision of the Regulator, or where the Regulator does not approve the revised Access Arrangement, the Regulator is required to draft and approve its own Access Arrangement instead of the Access Arrangement proposed by the service provider. Where the Regulator drafts and approves his own Access Arrangement there is a right to have the decision of the Regulator reviewed by the Western Australian Gas Review Board established pursuant to s 50 of the Act. Subject to that, the Regulator's decision to approve an Access Arrangement has effect on the date specified by the Regulator.
Epic contends that in the draft decision the Regulator, in particular, fell into jurisdictional error by misconstruing the Act and the Code with the result that he misconceived the nature of the function he was performing and was led to identify wrong issues and ask wrong questions which affected the Regulator's decision: Craig v The State of South Australia (1995) 184 CLR 163 at 179; Minister for Immigration and Multicultural Affairs v Yusuf (2001) 180 ALR 1 at [82]. With particular regard to s 2.24 of the Code, it is submitted that where the Regulator is required in exercising a statutory power to take into account or to give effect to a specified matter, he is required to give weight to that matter as a fundamental element in making the determination; R v Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322, R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327, Queensland Medical Laboratory& Ors v Blewett & Ors (1988) 84 ALR 615. A failure to do so, it is submitted, arising from a misconstruction of the statute, constitutes jurisdictional error. While there is a live issue as to the true effect of s 2.24, I do not understand there to be serious dispute between the parties as to these principles.
It is clear that the ultimate decision of the Regulator in this case will directly affect the rights of Epic in the relevant sense. There is a difference between the parties, however, whether the application is premature, even if there is substance in Epic's contentions. It is argued against Epic that the Regulator's decision is but a draft decision.
It is important, however, not to be misled by the statutory term "draft". While the relevant provisions of the Code contemplate a draft, a final and even a further final decision, as well as an Access Arrangement drafted by the Regulator himself, these are all steps in a carefully regulated decision making process. In a case such as the present, where the Regulator, in a draft decision which proposes not to approve the Access Arrangement, identifies amendments which are required to the Access Arrangement in order for the Regulator to approve it, those amendments appear to have continuing force to the end of the process, unless the Regulator is later satisfied that those amendments have been incorporated by amendment, or that the reasons for requiring the amendment have been otherwise addressed. Obviously, in the present case, Epic may put further submissions and submit further material to the Regulator with a view to trying to persuade the Regulator that the matters identified by the Regulator as requiring amendment have been satisfactorily addressed. Nevertheless, it is clear that unless Epic is successful in persuading the Regulator in this respect, the expectation must be, given the Code provisions, that the Access Arrangement will not eventually be approved.
In the present case, where the essential issue is a fundamental difference between the view of the Regulator and Epic as to the true interpretation of material provisions of the Code, the likelihood is obviously strong that the position of the Regulator revealed in the draft decision may well prevail to the end of the decision making process. Unless the issues of statutory interpretation can be resolved, the processes of further submission and further decision seem unlikely to offer the prospect of any material change of position by the Regulator.
Given the very particular statutory scheme for decision making provided by s 2 of the Code, the draft decision of the Regulator the subject of this application appears to have a sufficient connection with the ultimate decision so as to be seen as affecting the rights of Epic, in the sense considered in Hot Holdings Pty Ltd v Creasy (1996) 185 CLR 149 at 159 – 165. Hence, although the considerations may be somewhat finally balanced in the particular circumstances presented by this case, there would be sufficient justification, even at this stage, for a grant of certiorari if Epic's primary contentions on the merits are made good.
The position with respect to prohibition is clearer. For the reasons indicated, it can be reasonably anticipated, or there is at least a real likelihood, that the Regulator will act in accordance with his views indicated in the draft decision in reaching his ultimate decision. These are said to involve jurisdictional error; see R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 at 119. If Epic's contentions on the merits are made good prohibition is available.
As I understand the submissions of the parties no issue is raised against the availability of mandamus, at least if certiorari is granted.
Nevertheless, even if some or all of the relief sought may be technically available, there may be reason at this stage of the process to hold back from granting prerogative relief as a matter of discretion. The Regulator is a public official seeking to perform a statutory function. By his counsel he readily undertakes to accept and act in accordance with any decision as to the issues in this case. This may be a sufficient remedy should material error be found in the draft decision. The further stages of the statutory decision making process may well provide an adequate opportunity to again seek prerogative relief should this expectation not be realised.
Further, declaratory relief is sought as an alternative remedy. It may be granted in these proceedings: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581, 582. I do not understand the Regulator or Alinta to contend that declaratory relief is not available.
The question of relief will be considered further, having regard to these principles, in light of the precise nature of the issues to be dealt with later in these reasons and the effect of any relevant error identified.
The Code provisions
Earlier in these reasons I have indicated the general nature and purpose of the Act which was to give effect to the Code which established a national access regime for selected natural gas pipeline systems. Earlier in these reasons I have set out the preamble to the Act. Apart from the preamble there are no particular provisions of the Act itself which are critical to the issues in this case. The main argument centres on the Code itself.
I have already outlined sufficient of the provisions of the Code which deal with the procedure by which a service provider must submit a proposed Access Arrangement to the Regulator for approval. The following provisions of the Code deal with the process, relevant to the present case, by which the Regulator reaches a decision whether or not to approve a proposed Access Arrangement.
Section 2.24 of the Code is a critical provision for the purposes of this application. It provides:
"2.24The Relevant Regulator may approve a proposed Access Arrangement only if it is satisfied the proposed Access Arrangement contains the elements and satisfies the principles set out in sections 3.1 to 3.20. The Relevant Regulator must not refuse to approve a proposed Access Arrangement solely for the reason that the proposed Access Arrangement does not address a matter that sections 3.1 to 3.20 do not require an Access Arrangement to address. In assessing a proposed Access Arrangement, the Relevant Regulator must take the following into account:
(a)the Service Provider's legitimate business interests and investment in the Covered Pipeline;
(b)firm and binding contractual obligations of the Service Provider or other persons (or both) already using the Covered Pipeline;
(c)the operational and technical requirements necessary for the safe and reliable operation of the Covered Pipeline;
(d)the economically efficient operation of the Covered Pipeline;
(e)the public interest, including the public interest in having competition in markets (whether or not in Australia);
(f)the interests of Users and Prospective Users;
(g)any other matters that the Relevant Regulator considers are relevant."
Section 2.25 also provides that the Regulator must not approve an Access Arrangement, any provision of which would "deprive any person of a contractual right in existence prior to the date the proposed Access Arrangement was submitted …".
Section 3 of the Code deals with the content of an Access Arrangement. There are 36 subsections. Those identified in s 2.24 are the first 20 of these subsections. A reference to the headings within s 3 in respect of these first 20 subsections is enough to provide a general understanding of their subject matter. The headings are – Services to be offered (s 3.1 – s 3.2); Reference tariffs and reference tariff policy (s 3.3 – s 3.5); Terms and conditions (s 3.6); Capacity management policy (s 3.7 – s 3.8); Trading policy (s 3.9 – s 3.11); Queuing policy (s 3.12 – s 3.15); Extensions/expansions policy (s 3.16); and Review and expiry of the Access Arrangement (s 3.17 – 3.20). It is clear from the Code and the nature of an Access Arrangement that an Access Arrangement may deal with a number of matters beside those that are dealt with in s 3.1 to s 3.20. Whatever else an Access Arrangement may provide, however, it is clear from the first sentence that it must contain at least the elements dealt with in s 3.1 to s 3.20 and satisfy the principles that are set out in those subsections.
It is with s 3.3 to s 3.5 that this application is next directly concerned. These deal with Reference Tariffs and Reference Tariff Policy and provide:
"3.3An Access Arrangement must include a Reference Tariff for:
(a)at least one Service that is likely to be sought by a significant part of the market; and
(b)each Service that is likely to be sought by a significant part of the market and for which the Relevant Regulator considers a Reference Tariff should be included.
3.4Unless a Reference Tariff has been determined through a competitive tender process as outlined in sections 3.21 to 3.36, an Access Arrangement and any Reference Tariff included in an Access Arrangement must, in the Relevant Regulator's opinion, comply with the Reference Tariff Principles described in section 8.
3.5An Access Arrangement must also include a policy describing the principles that are to be used to determine a Reference Tariff (a Reference Tariff Policy). A Reference Tariff Policy must, in the Relevant Regulator's opinion, comply with the Reference Tariff Principles described in section 8."
With respect to s 3.3 – s 3.5 it may be said that, in this case, the essential service is the transportation of gas in the DBNGP. As gas is transported by the pipeline to a variety of destinations there is scope for transportation to one location to be designated as a different service from transportation of gas to another destination. In this case there has not been a competitive tender process for the determination of a reference tariff, so that part of s 3.4 may be put aside. What is critical to the submissions of the parties is the requirement in s 3.4 that an Access Arrangement and any reference tariff included in an Access Arrangement must, in the Regulator's opinion, "comply with the Reference Tariff Principles described in section 8". Section 3.5 contains a similar provision with respect to a reference tariff policy.
Section 8 of the Code is headed "Reference Tariff Principles. The most material provisions are as follows:
"General Principles
8.1A Reference Tariff and Reference Tariff Policy should be designed with a view to achieving the following objectives:
(a)providing the Service Provider with the opportunity to earn a stream of revenue that recovers the efficient costs of delivering the Reference Service over the expected life of the assets used in delivering that Service;
(b)replicating the outcome of a competitive market;
(c)ensuring the safe and reliable operation of the Pipeline;
(d)not distorting investment decisions in Pipeline transportation systems or in upstream and downstream industries;
(e)efficiency in the level and structure of the Reference Tariff; and
(f)providing an incentive to the Service Provider to reduce costs and to develop the market for Reference and other Services.
To the extent that any of these objectives conflict in their application to a particular Reference Tariff determination, the Relevant Regulator may determine the manner in which they can best be reconciled or which of them should prevail.
8.2The factors about which the Relevant Regulator must be satisfied in determining to approve a Reference Tariff and Reference Tariff Policy are that:
(a)the revenue to be generated from the sales (or forecast sales) of all Services over the Access Arrangement Period (the Total Revenue) should be established consistently with the principles and according to one of the methodologies contained in this section 8;
(b)to the extent that the Covered Pipeline is used to provide a number of Services, that portion of Total Revenue that a Reference Tariff is designed to recover (which may be based upon forecasts) is calculated consistently with the principles contained in this section 8;
(c)a Reference Tariff (which may be based upon forecasts) is designed so that the portion of Total Revenue to be recovered from a Reference Service (referred to in paragraph (b)) is recovered from the Users of that Reference Service consistently with the principles contained in this section 8;
(d)Incentive Mechanisms are incorporated into the Reference Tariff Policy wherever the Relevant Regulator considers appropriate and such Incentive Mechanisms are consistent with the principles contained in this section 8; and
(e)any forecasts required in setting the Reference Tariff represent best estimates arrived at on a reasonable basis.
Form of Regulation
8.3Subject to these requirements and to the Relevant Regulator being satisfied that it is consistent with the objectives contained in section 8.1, the manner in which a Reference Tariff may vary within an Access Arrangement Period through implementation of the Reference Tariff Policy is within the discretion of the Service Provider. For example, a Reference Tariff may be designed on the basis of:
(a)a 'price path' approach, whereby a series of Reference Tariffs are determined in advance for the Access Arrangement Period to follow a path that is forecast to deliver a revenue stream calculated consistently with the principles in this section 8, but is not adjusted to account for subsequent events until the commencement of the next Access Arrangement Period;
(b)a 'cost of service' approach, whereby the Tariff is set on the basis of the anticipated costs of providing the Reference Service and is adjusted continuously in light of actual outcomes (such as sales volumes and actual costs) to ensure that the Tariff recovers the actual costs of providing the Service; or
(c)variations or combinations of these approaches.
Total Revenue
8.4The Total Revenue (a portion of which will be recovered from sales of Reference Services) should be calculated according to one of the following methodologies:
Cost of Service: The Total Revenue is equal to the cost of providing all Services (some of which may be the forecast of such costs), and with this cost to be calculated on the basis of:
(a)a return (Rate of Return) on the value of the capital assets that form the Covered Pipeline (Capital Base);
(b)depreciation of the Capital Base (Depreciation); and
(c)the operating, maintenance and other non-capital costs incurred in providing all Services provided by the Covered Pipeline (Non-Capital Costs).
IRR: The Total Revenue will provide a forecast Internal Rate of Return (IRR) for the Covered Pipeline that is consistent with the principles in sections 8.30 and 8.31. The IRR should be calculated on the basis of a forecast of all costs to be incurred in providing such Services (including capital costs) during the Access Arrangement period.
The initial value of the Covered Pipeline in the IRR calculation is to be given by the Capital Base at the commencement of the Access Arrangement Period and the assumed residual value of the Covered Pipeline at the end of the Access Arrangement Period (Residual Value) should be calculated consistently with the principles in this section 8.
NPV: The Total Revenue will provide a forecast Net Present Value (NPV) for the Covered Pipeline equal to zero. The NPV should be calculated on the basis of a forecast of all costs to be incurred in providing such Services (including capital costs) during the Access Arrangement Period, and using a discount rate that would provide the Service Provider with a return consistent with the principles in sections 8.30 and 8.31.
The initial value of the Covered Principle in the NPV calculation is to be given by the Capital Base at the commencement of the Access Arrangement Period and the assumed Residual Value at the end of the Access Arrangement Period should be calculated consistently with the principles in this section 8.
The methodology used to calculate the Cost of Service, an IRR or NPV should be in accordance with generally accepted industry practice."
"8.6In view of the manner in which the Rate of Return, Capital Base, Depreciation Schedule and Non Capital Costs may be determined (in each case involving various discretions), it is possible that a range of values may be attributed to the Total Revenue described in section 8.4. In order to determine an appropriate value within this range the Relevant Regulator may have regard to any financial and operational performance indicators it considers relevant in order to determine the level of costs within the range of feasible outcomes under section 8.4 that is most consistent with the objectives contained in section 8.1."
"Principles for Establishing the Capital Base
8.8Principles for establishing the Capital Base for the Covered Pipeline when a Reference Tariff is first proposed for a Reference Service (ie, for the first Access Arrangement Period) are set out in sections 8.10 to 8.14."
"Initial Capital base – Existing Pipelines
8.10When a Reference Tariff is first proposed for a Reference Service provided by a Covered Pipeline that was in existence at the commencement of the Code, the following factors should be considered in establishing the initial Capital Base for that Pipeline:
(a)the value that would result from taking the actual capital cost of the Covered Pipeline and subtracting the accumulated depreciation for those assets charged to Users (or thought to have been charged to Users) prior to the commencement of the Code;
(b)the value that would result from applying the "depreciated optimised replacement cost" methodology in valuing the Covered Pipeline;
(c)the value that would result from applying other well recognised asset valuation methodologies in valuing the Covered Pipeline;
(d)the advantages and disadvantages of each valuation methodology applied under paragraphs (a), (b) and (c);
(e)international best practice of Pipelines in comparable situations and the impact on the international competitiveness of energy consuming industries;
(f)the basis on which Tariffs have been (or appear to have been) set in the past, the economic depreciation of the Covered Pipeline, and the historical returns to the Service Provider from the Covered Pipeline;
(g)the reasonable expectations of persons under the regulatory regime that applied to the Pipeline prior to the commencement of the Code;
(h)the impact on the economically efficient utilisation of gas resources;
(i)the comparability with the cost structure of new Pipelines that may compete with the Pipeline in question (for example, a Pipeline that may by-pass some or all of the Pipeline in question);
(j)the price paid for any asset recently purchased by the Service Provider and the circumstances of that purchase; and
(k)any other factors the Relevant Regulator considers relevant.
8.11The initial Capital Base for Covered Pipelines that were in existence at the commencement of the Code normally should not fall outside the range of values determined under paragraphs (a) and (b) of section 8.10.
Initial Capital Base – New Pipelines
8.12When a Reference Tariff is first proposed for a Reference Service provided by a Covered Pipeline that has come into existence after the commencement of the Code, the initial Capital Base for the Covered Pipeline is, subject to section 8.13, the actual capital cost of those assets at the time they first enter service. A new Pipeline does not need to pass the tests described in section 8.16."
Section 8 of the Code contains altogether 49 subsections. In addition to the subsections quoted above provisions are made under the following headings which provide a sufficient indication of their subject matter – Initial Capital Base – After the Expiry of an Access Arrangement, New Facilities Investment, Forecast Capital Expenditure, Capital Contributions, Surcharges, Capital Redundancy, Rate of Return, Depreciation Schedule – Cost of Service, Application of Depreciation Principles to the IRR/NPV Methodology, Non-Capital Costs, Allocation of Revenue (Costs) between the Services, Allocation of Revenue (Costs) between Users, Prudent Discounts, Use of Incentive Mechanisms, and Certain Reference Tariff Principles Not Subject to Periodic Review. By s 8.49 it is provided that the Regulator may determine its own policies for assessing whether a reference tariff meets the requirements of this section 8.
In the present case Epic chose to approach the matter of Total Revenue in its proposed Access Arrangement by using the Cost of Service methodology, which is the first of the three methodologies dealt with in s 8.4. In accordance with that methodology, as provided by s 8.4, the Total Revenue was to be calculated on the basis of a return "on the value of the capital assets that formed the Covered Pipeline (Capital Base)", that Capital Base being depreciated, and by allowing for operating, maintenance and other non-capital costs. It is the value of the capital assets that formed the DBNGP, ie the Capital Base, that is the point of dispute on which this application focuses.
By s 8.8 the principles for establishing the Capital Base when, as in this case, a reference tariff is first proposed for a reference service, are set out in s 8.10 to 8.14. Of these, s 8.10 and s 8.11 provide the principles for establishing the initial Capital Base for a pipeline that was in existence at the commencement of the Code, which is the case for the DBNGP. It was constructed in 1984 by instrumentalities of the State. It should be noted, however, that by s 8.12, in the case of a new pipeline that is constructed after the Code comes into existence the Capital Base is "the actual capital cost" at the time the pipeline first enters service.
The Capital Base as so determined, together with the Rate of Return, Depreciation and Non-Capital Costs, leads to a determination of Total Revenue. Section 8.6 has the effect of ensuring that one single figure or value is arrived at for the Total Revenue.
Three further matters are to be noted. "Asset" is a defined term. The definition is extensive and need not be set out as all parties accept that it clearly extends to cover the DBNGP pipeline as purchased and now owned by the first applicant and operated by the second applicant. Secondly, by s 10.8 of the Code "Total Revenue" has the meaning given in s 8.2. Essentially, as provided by s 8.2(a), the Total Revenue is the revenue to be generated from sales (or forecast sales) of all services over the Access Arrangement period. Thirdly, s 8.4 provides that the Capital Base, as calculated in the Cost of Service methodology, is also expressly utilised in each of the other two methodologies. As a consequence no direct assistance is to be gained for present purposes from a consideration of those other methodologies.
Code Section 2.24 – "Must take into Account"
It is in the context of the provisions set out above that the issues in this application arise. It is convenient, at the outset, to deal with the construction of the third sentence of s 2.24. This provides that in assessing a proposed Access Arrangement the Regulator "must take the following into account". What follows in s 2.24 are the factors identified in par (a) to par (g).
Epic submits that the third sentence of s 2.24 requires that the Regulator take into account and give them weight as fundamental considerations each of the factors in par (a) to par (g). Against this it is submitted that all that is required is for the Regulator merely to consider those factors.
The submissions of the parties in this regard proceeded by analogy with legislative requirements such as "must have regard to" or "shall have regard to". The researches of counsel had not identified any decision in which the precise phrase used in s 2.24 had been the subject of judicial consideration. In R v Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 the question arose in the context of a statutory requirement that a departmental head "have regard to costs necessarily incurred" when determining the scale of fees. At 329 Mason J (Gibbs J concurring), said:
"When sub-s(7) directs the Permanent Head to 'have regard to' the costs, it requires him to take those costs into account and to give weight to them as a fundamental element in making his determination. There are two reasons for saying that the costs are a fundamental element in the making of the determination. First, they are the only matter explicitly mentioned as a matter to be taken into account. Secondly, the scheme of the provisions is that, once the premises of the proprietor are approved as a nursing home, he is bound by the conditions of approval not to exceed the scale of fees fixed by the Permanent Head …. In the very nature of things, the costs necessarily incurred by the proprietor in providing nursing home care in the nursing home are a fundamental matter for consideration."
In the R v Toohey & Anor; Ex parte Meneling Station Proprietary Limited & Ors (supra) the issue arose in the context of s 50 of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) which, in subsection (3), required that the Commissioner in making a report in connection with a traditional land claim "shall have regard to the strength or otherwise of the traditional attachment by the claimants to the land claimed, and shall comment on" each of a number of matters. At 333 Gibbs CJ observed:
" … the section draws a clear distinction between those matters to which the Commissioner 'shall have regard' and those upon which he 'shall comment'. When the section directs the Commissioner to 'have regard to' the strength or otherwise of the traditional attachment by the claimants to the land claimed … it requires him to take those matters into account and to give weight to them as a fundamental element in making his recommendation. (His Honour referred to R v Hunt). When the section directs him to comment on the matters mentioned in pars (a) to (d) of sub-s(3), it requires him to remark upon those matters and to express his views upon them. The change in language is so significant that notwithstanding the difficulties of the section I find it impossible to reach any conclusion other than that a significant change of meaning is intended, and that the matters which form the subject of the comment are not matters to which the Commissioner is bound to have regard in making his recommendation."
However, as Sackville J observed in Singh v Minister for Immigration and Multicultural Affairs [2001] FCA 389 at [54] the expression "have regard to" is capable of different meanings, depending on its context, and
" … can simply mean to give consideration to something (Shorter Oxford English Dictionary). In this sense a direction to a decision-maker to have regard to certain factors may require him or her merely to consider them, rather than treat them as fundamental elements in the decision-making process."
In that case, the learned Judge was persuaded that the requirement in s 54(1) of the Migration Act 1958 (Cth) that the Minister, in determining a visa application, must have regard to all the information in the application, did not require the Minister to take into account the information in the application as a fundamental element in the decision-making process because at [57]:
"It could hardly have been contemplated by the drafters that every piece of information selected for mention by an applicant, no matter how marginal its relevance to the issues to be determined, must be treated by the decision-maker as a 'fundamental element' in making the determination."
In this context, Alinta relied on Rathborne v Abel (1964) 38 ALJR 293 where the issue was whether, in the determination of the fair rent of prescribed premises under the Landlord and Tenant (Amendment) Act 1948-1961 (NSW), the current capital value of the premises might properly be taken into account even though this was not among a list of matters that by s 21(1) the Board was "to have regard to", and even though it was regarded by the members of the Court as "truly material to the fairness of a determination", per Kitto J at 301. As is apparent from the reasons of Barwick CJ at 295 there was a marked contrast between earlier legislation which for this purpose prescribed what his Honour described as almost a mechanical process of calculation, and the scheme of the 1948 Act which was to give a wide discretion "doing no more than to require the Tribunal, the Board, 'to have regard to' a number of matters, which include 'the justice and merits of the case' and 'the circumstances and conduct of the parties'". The generality of such matters and the breadth of discretion which they contemplated, together with the contrast with the previous legislation, were clearly factors which persuaded the Court that the specified matters were not intended implicitly to exclude a factor which was truly material or necessarily central to the legislative task in question. The decision in Rathborne v Able is strongly influenced by the particular statutory scheme which had a "rather different scope and purpose" from the present Code, to borrow the words and view expressed by Gummow J of Rathborne v Able in Australian Capital Television Pty Ltd v Minister for Transport and Communications & Ors (1989) 86 ALR 119 at 145. In that case, in the context of s 94M(1) of the Broadcasting Act 1942 (Cth), in respect of the matters which the Minister was required "to have regard to" when considering whether or not to approve a television license, Gummow J was persuaded that the matters specified were required to be taken into account by the Minister and to be given weight as fundamental elements in his decision. His Honour reached a similar view of the requirement in the Schedule to the Health Insurance Act 1973 (Cth) that the Minister's Advisory Committee "shall have regard to" certain matters when undertaking a general or fee review in Queensland Medical Laboratory & Ors v Blewett & Ors (supra) at 623.
It is clear that an expression such as "have regard to" is capable of conveying different meanings depending on its statutory context. In s 2.24 the phrase "must take the following into account" is apt to convey as an ordinary matter of language that the Regulator must not fail to take into account each of the six matters stipulated in (a) to (f), and by (g) any other matter the Regulator considers relevant. If anything, "take into account appears, as a matter of language, little different from "have regard to". Indeed, in R v Hunt the expression "have regard to" was understood as requiring that the specified matters be taken into account. The matters specified in (a) to (f) appear, by their nature, to be highly material to the task of assessing a proposed Access Arrangement, given the legislative purpose and objects of the Act and the Code in this regard. It is difficult to conceive that it could have been intended that the Regulator might decide to give no weight at all to one or more of the factors stipulated in s 2.24(a) to (f). In my view, in the context of the Act and the Code, the Regulator is required by s 2.24 to take the stipulated factors into account and to give them weight as fundamental elements in assessing a proposed Access Arrangement with a view to reaching a decision whether or not to approve it.
A similar issue arises with respect to s 8.10 which requires that factors (a) to (k) "should be considered in establishing the initial Capital Base" for a pipeline. Given the scheme of s 8 with respect to the Total Revenue and the relevance to that of the Capital Base, and the nature of the factors identified in s 8.10, including (k) which enables the Regulator to also consider any other factor the Regulator considers relevant, I am persuaded that the Regulator is required by s 8.10 to take into account factors (a) to (k) and to give weight to them as fundamental elements in his decision in establishing the initial Capital Base.
Code Section 2.24 – First and Third Sentences
Contrary to the submissions of Epic and the Regulator, Alinta contends that the first sentence of s 2.24 stands apart from, and is to be applied independently of, the third sentence and par (a) to par (g). As I understand the submission, Alinta reads the first three sentences as though they were independent and in effect sequential in their commands to the Regulator. On this view, by the first sentence, the Regulator must first consider s 3.1 to s 3.20. Only if the Regulator is satisfied that the Access Arrangement contains the elements and satisfies the principles in s 3.1 to s 3.20 need the Regulator proceed any further. If the Regulator is so satisfied and continues on to consider the other aspects of the proposed Access Arrangement (other than the s 3.1 – s 3.20 elements and principles), it is then that the command of the second sentence of s 2.24 applies to preclude a refusal of approval solely for the reason indicated. Having satisfied the command of the first sentence, and heeding that of the second, the Regulator may be called on, in Alinta's submission, to exercise discretion as to whether or not to approve the proposed Access Arrangement. It is in the exercise of the Regulator's discretion in this general respect that the factors in par (a) to par (g) are to be taken into account by the Regulator. The effect of this submission is that the factors in s 2.24(a) to (g) are never to be taken into account by the Regulator as he considers s 3.1 to s 3.20 for the purposes of the first sentence.
In my view this is a strained approach to the construction of s 2.24 and it gives rise to difficulty. As a matter of ordinary construction of the language of the section there is no reason to treat the three sentences as dealing with distinct processes or involving sequential stages. On its most natural reading, in my view, the section is dealing with a single process to be undertaken by the Regulator to decide whether or not to approve a proposed Access Arrangement. The process appears to be naturally and sensibly described as an "assessment" as indicated by the third sentence. In carrying out that assessment process the Regulator may only approve if certain matters are satisfied (first sentence), may not refuse approval solely because of other matters (second sentence), and must take into account factors (a) to (g) (third sentence). No obvious difficulty is presented by such a construction.
A significant difficulty presented by Alinta's contended construction, however, arises from the content of s 3.1 to s 3.20. Many of these subsections require evaluation, the exercise of judgement, the formation of opinion, or other exercises of discretion by the Regulator. Examples include what is practicable and reasonable (s 3.2); whether the terms and conditions of an Access Arrangement are reasonable (s 3.6); the duration of the Access Arrangement (s 3.18); whether mechanisms to address the risks of incorrect forecasts should be included where the duration is more than 5 years; and, if so, what mechanisms (s 3.18). In the exercise of such discretions it is clear the Regulator needs policy guidance. An obvious purpose and function of s 2.24(a) to (g) is to provide that guidance. Yet on Alinta's submission that could not occur and the Regulator would be forced to resort to such guidance as he could glean from the scope and objects of the Act.
Section 3.13 provides that a Queuing Policy inter alia "must accommodate, to the extent reasonably possible, the legitimate business interests of the Service Provider and of Users and Prospective Users, and generate, to the extent reasonably possible, economically efficient outcomes". Section 3.14 further enables the Regulator to require the Queuing Policy to deal with any other matter the Regulator thinks fit "taking into account the matters listed in s 2.24". It is submitted that this offers support for Alinta's submission that the s 2.24 factors have no application to s 3.1 to s 3.20, because otherwise the express reference to s 2.24 in s 3.14 would be unnecessary and s 3.13 overlaps with s 2.24(a) and (f). To the extent that this is the case I do not see this to be a telling consideration. Section 3.13 in particular is modifying the emphasis of s 2.24 in respect of Queuing Policy, and s 3.14 is reaffirming that s 2.24, without that modification, applies to the discretion to be exercised under s 3.14.
In my view, contrary to Alinta's submission, the legislative intention appears to be clear that in assessing a proposed Access Arrangement, which includes the consideration of s 3.1 to s 3.20 for the purposes of the first sentence of s 2.24, the Regulator is required to take into account, in the sense indicated earlier, the factors set out in s 2.24(a) to (g).
It does not follow from this, however, that those factors are intended to be, or are capable of being, applied to every issue presented by s 3.1 to s 3.20. The precise nature of the elements and principles set out in s 3.1 to s 3.20 will determine whether there is scope for the application of the s 2.24(a) to (g) factors to guide the exercise of discretion by the Regulator in his assessment.
These views appear to accord with the submissions of Epic and the Regulator.
Application of s 2.24 Factors to s 3.4 and s 3.5
It is as at this point that the submissions of Epic and the Regulator diverge. The Regulator contends that s 3.4, and also s 3.5, do not call for the exercise of discretion by the Regulator. Hence, there is no scope for the application to them of the s 2.24(a) to (g) factors. In the Regulator's submission, the only issue posed by s 3.4 is whether a proposed Reference Tariff "complies with the Reference Tariff Principles described in section 8". The same issue is posed by s 3.5 with respect to the Reference Tariff Policy included in the proposed Access Arrangement.
The Regulator submits that the s 8 Principles produce a single Total Revenue figure from which is derived a single dollar value for each reference tariff. There is no range of possible outcomes and no discretionary element in respect of which the Regulator could apply the s 2.24(a) to (g) factors. All that s 3.4 requires, it is submitted, is a 'yes' or 'no' answer.
There are difficulties in the way of accepting this submission. First, there appears to be a misconception, implicit in elements of the Regulator's submission, which, in effect, involves a barrier being drawn between s 3.4 and s 3.5, as being within the reach of the first sentence of s 2.24, and s 8, as beyond its reach. The "Reference Tariff Principles described in section 8" are expressly the subject of both s 3.4 and s 3.5. By express reference those principles are incorporated into s 3.4 and s 3.5. While drafting convenience has led to those principles being described in s 8, the effect of s 3.4 and s 3.5 is as though the s 8 principles were set out fully in each of those subsections.
Secondly, a consideration of s 3.3, s 3.4 and s 3.5 reveals that they involve much scope for discretion in the assessment of interrelated matters which may well bear directly on a proposed reference tariff, even one expressed as a single dollar value. As an example, from s 3.3 there must be a determination by the Regulator of which services warrant a reference tariff. In this case the proposed Access Arrangement designated transport from Dampier to Perth as one service. Transport from Dampier to the industrial area of Kwinana, which is a little south of Perth, was proposed to be the subject of a different service. The Regulator's draft decision proposed that transport from Dampier to Kwinana (which would include Dampier to Perth) would be one service. Such a decision, pursuant to s 3.3, both involves and gives rise to a number of interrelated issues under the s 8 Principles. These are likely to affect directly the single dollar value (if it is so expressed) for that service. The Regulator must form an opinion as to these for the purposes of s 3.4. Further, s 3.4 requires the Regulator to form an opinion as to the compliance of the whole of proposed Access Arrangement, as well as each proposed reference tariff, with the s 8 Principles. Likewise, s 3.5 requires the Regulator to form an opinion as to the compliance of the proposed reference tariff policy with the s 8 Principles.
Thirdly, while a reference tariff for a particular service may be expressed as a single dollar value, that is not necessarily the case pursuant to the s 8 Principles. Section 8.3 provides an indication of the way in which the reference tariff policy may lead to variations in the actual dollar value of a reference tariff during an Access Arrangement period. It also reveals that a tariff may be adjusted during the Access Arrangement period, either according to predetermined events, or having regard to actual progressive outcomes, or a combination of these approaches. In many cases the decision to express a tariff in a single dollar value will involve the discretionary rejection of such possibilities. It is also the case that those aspects of a reference tariff and a reference tariff policy that are concerned with the allocation of Total Revenue between a number of services, or between a number of users of a reference service, provide examples of the range and potential complexity of issues the Regulator may be required to consider to form an opinion as to compliance with the s 8 Principles, even though he is assessing an Access Arrangement, such as the present one, which proposes a number of reference tariffs each expressed as a single dollar value. There are many more examples of this nature.
These considerations tell powerfully, in my view, against acceptance of the Regulator's submission that there is no scope for the application of the s 2.24(a) to (g) factors to the Regulator's task as he considers the principles set out in s 3.4, ie compliance with the s 8 Principles, for the purposes of the first sentence of s 2.24.
Code: Section 2.24 and section 8
The Regulator's task under s 3.4 relevant to the present application, is to form an opinion whether the reference tariffs in the proposed Access Arrangement comply with the Reference Tariff Principles described in s 8. It is necessary, therefore, to consider those Principles in s 8 which are relevant to this application to determine to what extent, if at all, the factors in s 2.24(a) to (g) could be applied and, ultimately, to what extent they are intended by the Code to be applied to the relevant s 8 Principles. In this respect, as has been indicated, both the Regulator and Alinta submit that the s 2.24(a) to (g) factors are not intended to have any application whatever to any part of s 8, whereas Epic submits they are intended to apply at every point of s 8 which calls for the exercise of discretion by the Regulator. In this case, in Epic's submission, that includes the process for the establishment of the initial Capital Base for the DBNGP pursuant to s 8.10 and s 8.11.
This difference of approach to the construction of the Code is of critical importance to the parties. Section 2.24(a) is relied on by Epic as the most clear recognition in the Code that Epic's actual investment in the DBNGP, ie the purchase price of $2.407 billion, must be taken into account by the Regulator when he assesses Epic's proposed Access Arrangement, including the establishment of the initial Capital Base pursuant to s 8.10 and s 8.11. The submissions of both the Regulator and Alinta would preclude s 2.24(a) having any application to the establishment of the initial Capital Base, or to any other matter within s 8.
When s 8 is considered for its general effect, it is immediately apparent that s 8.1 contains principles which are a statement of the objectives which are to guide the design of a reference tariff and a reference tariff policy. This feature, together with the apparently comprehensive statement of relevant principles that are to be found in s 8.1 to s 8.49, are suggestive of an essentially self-contained and exhaustive statement of principles relevant to reference tariffs and reference tariff policies. Section 8.2 identifies factors of which the Regulator "must be satisfied" in determining to approve a reference tariff and a reference tariff policy. All but one of these factors require consistency with the principles "contained in" s 8; that of course appears to include the general principles in s 8.1 which identify the objectives for the design of a reference tariff and a reference tariff policy. If this be correct, the pervasive influence of s 8.1 is illustrated when it is realised that each of s 8.2(a) to (d) deal with matters that are also the subject of specific principles in s 8. Section 8.2(a) is concerned with Total Revenue to which the principles in s 8.4 to s 8.37 apply; s 8.2(b) concerns the allocation of revenue between services which is the subject of s 8.38 to s 8.41; s 8.2(c) concerns the allocation of revenue between users which is the subject of the principles in s 8.42 and s 8.43; and s 8.2(d) concerns incentive mechanisms to which s 8.44 to s 8.46 relate. At many other points in s 8 there are other express references to consistency with the principles in s 8 or with the objectives contained in s 8, eg s 8.3, s 8.6, s 8.22, s 8.31 and s 8.38. Entirely absent from s 8 is any reference to the s 2.24(a) to (g) factors.
There are many points, however, at which the principles enunciated in s 8 call for evaluation, the exercise of judgement, the formation of opinion and other exercises of discretion by the Regulator. With particular reference to the establishment of the initial Capital Base for a Covered Pipeline that was in existence at the commencement of the Code, s 8.10 and s 8.11 provide ready examples of this. While s 8.10(a) and (b) specify two valuation methodologies, s 8.10(c) requires the Regulator to consider other well recognised valuation methodologies. Further, s 8.10(d) requires the Regulator to weigh the advantages and disadvantages of each methodology. Even were the task of the Regulator simply to strike a value for the pipeline, the evidence discloses that each of the s 8.10(a) and (b) methodologies is considerably influenced by subjective and discretionary factors, s 8.10(c) involves potentially a selection from range of methodologies, each of which influenced by further subjective and discretionary factors, and s 8.10(d) clearly calls for evaluation and judgement.
The task of the Regulator under s 8.10 appears not to be simply one of valuation, however, despite the reference to value in s 8.4(a). It is described in s 8.8 and s 8.10 as "establishing" the Capital Base. The factors identified in s 8.10(e) to (j) require the Regulator to consider a variety of other considerations, including the basis on which past tariffs have been set; the historical returns to the service provider from the pipeline; the reasonable expectations of persons under the regulatory regime that applied to the pipeline prior to the commencement of the Code; and the price paid for any asset recently purchased. These various factors bring into account a number of matters which are not directly related to the value of the pipeline in the ordinary sense, and which by their nature require the consideration of disparate issues which may well tend in different directions. The process is more than one of mere valuation. There is, necessarily, a discretionary evaluation of what weight should be attached to each of these factors in the ultimate establishment of the Capital Base. Factor (k) enables the Regulator to take into account any other factor which the Regulator considers relevant, which in itself requires further evaluation and discretionary judgement by the Regulator.
Further, notwithstanding the variety of values and other factors which s 8.10 requires to be considered, there is the principle stated in s 8.11 that the initial capital base "normally should not fall outside the range of values determined under" s 8.10(a) and (b). There is obvious tension between the requirement of s 8.10 to consider factors (c) to (k) in establishing the Capital Base and the provision in s 8.11 that, normally, the resulting Capital Base should not fall outside the range determined under factors (a) and (b). The process clearly involves the exercise of discretion in the weighing of divergent considerations.
Hence, in seeking to give effect to s 8.10 and s 8.11, the Regulator will be in need of guidance as to how and with what purpose he should evaluate and weigh the diverse factors in reaching a decision as to the initial Capital Base. In the absence of express statutory provision in this regard one would normally turn to the general policy and objects of the Act for such guidance. Within s 8, however, s 8.1 contains a statement of principles which define the objectives of s 8 with respect to reference tariffs and reference tariff policies. This suggests prima facie that it is the objectives in s 8.1 which should guide the Regulator in the exercise of discretion for the purposes of s 8.10 and s 8.11. As the initial Capital Base is one element of the calculation of the Total Revenue, s 8.2(a) also offers some confirmation of the view that s 8.1 should guide the Regulator in the exercise of discretion for the purposes of s 8.10 and s 8.11.
The submissions of Epic, however, involve the proposition that the Regulator is required, by virtue of the first sentence of s 2.24 and s 3.4 and s 3.5, both to take into account the factors in s 2.24(a) to (g) and to seek to achieve the objectives in s 8.1 when establishing the initial Capital Base, and more generally when dealing with a reference tariff and a reference tariff policy. While in some respects the s 2.24 factors bear some relationship to the objectives in s 8.1, in each such respect they differ in their precise formulation. In other respects there are clear differences. This will be considered further later in these reasons. The differences are such, however, that an attempt by the Regulator to apply both to his task under s 8.10 and s 8.11, and more generally to other aspects of s 8, would appear to be fraught with considerable difficulty. Indeed, on the submissions of the Regulator and Alinta the two are fundamentally inconsistent, but that is an issue to which I shall turn shortly. Even if that not be so, however, the application of both to the one task does not suggest itself to be practical, or to have been likely to have been intended, given the differences between the s 2.24 factors and the s 8.1 objectives.
Section 8.6 recognises that the manner in which the initial Capital Base may be determined involves various discretions. Similarly, discretions are involved in the other components relevant to the calculation of the Total Revenue. By virtue of this, s 8.6 recognises it is possible that a range of values may be attributed to the Total Revenue. Should that occur, in order to determine "an appropriate value within this range", the relevant Regulator may have regard to financial and operational performance indicators to determine which value within that range "is most consistent with the objectives contained in s 8.1". While this does not require that, in exercising the discretions to establish the initial Capital Base, the Regulator must have regard to s 8.1, s 8.6 does suggest that, at the end of the process of which the establishment of the initial Capital Base is a part, s 8.1 is the controlling provision rather than s 2.24(a) to (g).
The submissions of the parties have identified other provisions of the Code which may have some bearing on the question whether s 2.24(a) to (g) was intended to apply to s 8, whether in conjunction with or notwithstanding s 8.1.
Section 2.46 is a provision dealing with the approval by the Regulator of proposed revisions to an Access Arrangement. It is to similar effect as s 2.24, except that in assessing the proposed revisions, in addition to the s 2.24 factors the Regulator must take into account the provisions of the Access Arrangement. Section 2.47 complements s 2.46 to similar effect as s 2.25 complements s 2.24. While s 2.46 raises the same constructional issues as s 2.24 it does not afford any additional assistance in the resolution of those issues.
By s 3.17, in approving a revisions submissions date in an Access Arrangement and a revisions commencement date, the Regulator "must have regard to the objectives in" s 8.1. Section 3.18 confirms that the Regulator may approve an Access Arrangement longer than 5 years "having regard to the objectives of" s 8.1. These may be seen as an example of issues where the s 2.24 factors and the s 8.1 objectives are each to be applied to the one issue, which would support Epic's position. Alternatively, these subsections may be seen as requiring regard to the s 8.1 objectives, rather than the s 2.24 factors, for the particular issues identified in those subsections. My tentative view would favour the second for these. As no particular issue arises in this case concerning the application of s 3.17 or s 3.19, it is preferable that no final view be offered. At best for Epic, however, as s 3.17 and s 3.18 are somewhat equivocal, they do not offer any clear assistance for present purposes.
Particular emphasis is placed on s 6.15 by Epic. This subsection provides guidance for an arbitrator under the Code (in Western Australia the Western Australian Gas Disputes Arbitrator: see s 62 of the Act) when a dispute arises between a prospective user and the Service Provider as to the terms and conditions of access. The arbitral procedure is available on notice to the arbitrator by either party and is binding. Section 6.15 requires an arbitrator to apply the provisions of the Access Arrangement for the Covered Pipeline. In addition the arbitrator "must take into account" factors (a) to (h) which replicate or substantially replicate the factors (a) to (f) of s 2.24, although not the general public interest limb of s 2.24(e). In addition, s 6.15(b) and (c) deal specifically with the costs to the Service Provider of providing the disputed access, and the economic value to the Service Provider of any investment the prospective user has agreed to make. With these two additions, which are relevant to the particular case being arbitrated, the requirement that the arbitrator must take into account essentially the s 2.24 factors in determining an access dispute is submitted by Epic as revealing that the s 2.24 factors where intended to be relevant to all aspects of an Access Arrangement, including a reference tariff and a reference tariff policy. The apparent force of this argument appears to be negated, however, by s 6.18. This precludes the arbitrator from making a decision which is inconsistent with the Access Arrangement (which of course contains the reference tariff policy and the reference tariff), or which requires the Service Provider to provide, or the user or prospective user to accept, "a Reference Service at a Tariff other than the Reference Tariff". The effect of s 6.18 is to heavily qualify the scope for decision by an arbitrator. Rather than supporting Epic's position it appears to insulate a reference tariff approved by the Regulator from any arbitral review.
It is also instructive to note that s 3.4, which requires the Regulator to be satisfied of compliance of an Access Arrangement and any reference tariff with the reference tariff principles described in s 8, contemplates an alternative method of determination of a reference tariff. That is a competitive tender process as outline in s 3.21 to s 3.26. If regard is had to those provisions it can be seen that by s 3.28(b) the Regulator must be satisfied that the tender approval request is an appropriate mechanism "for ensuring that reference tariffs achieve the objectives in s 8.1". And by s 3.33(c) the Regulator must be satisfied that reference tariffs determined in accordance with the tender process "achieve the objectives in s 8.1". This tends to offer further confirmation of the view suggested by the structure of s 8 that a reference tariff, as well as a reference tariff policy, should be designed with a view to achieving the objectives in s 8.1. If that be correct it would also indicate that the s 8.1 objectives should guide the Regulator, where necessary, in his consideration of s 8.10 and s 8.11.
Before reaching a final view on this issue, however, it is necessary to consider whether treating the principles reflected in the objectives in s 8.1 as guiding the Regulator's evaluation of the matters contained in s 8.10 and s 8.11, leads to inconsistency or incongruity or otherwise commends a different construction. Much of what follows will be relevant to that enquiry. Subject to that significant issue, my tentative view is to favour the construction that it is s 8.1, rather than s 2.24(a) to (g), which is intended by the Code to guide the Regulator in the establishment of the initial Capital Base insofar as s 8.10 and s 8.11 require the exercise of discretion by the Regulator.
There is, however, one significant exception to this general tentative proposition which should be stated immediately. The last paragraph of s 8.1 recognises that the objectives (a) to (f) in s 8.1 may conflict in their application to a particular reference tariff determination, in which event the Regulator may determine the manner in which they can best be reconciled or which of them should prevail. Contrary to the submissions of the Regulator and Alinta, the discretionary task of seeking to reconcile conflicting objectives within s 8.1, and even more significantly of determining which of them should prevail, cannot be decided by reference to s 8.1 itself. Of necessity, the Regulator must have guidance outside of s 8.1 in exercising those discretions. In this regard it appears from the structure and provisions of the Code that have been canvassed that s 2.24(a) to (g) would most naturally guide the Regulator in the exercise of these discretions, and was intended to do so. That is, in exercising the discretions contemplated by the last paragraph of s 8.1 the Regulator should take into account the factors in s 2.24(a) to (g). I will return to the implications of this later in these reasons. Were that not so, inevitably the Regulator would need to have regard to the general scope and objects of the Act, as revealed by the preamble, in exercising the discretions contemplated by the last paragraph of s 8.1.
Interpretation of the Code – General Provisions
I turn now to a range of issues as to the true interpretation of particular provisions of the Code. This is done for two principal reasons. First, whether from a true understanding of its terms, inconsistency or incongruity or some other matter will shed further light on whether the s 2.24(a) to (g) factors were intended to apply to s 8.10 and s 8.11 and, if so, how they are reconciled with s 8.1. Secondly, to better understand how the Code is intended to deal with a case, such as the present, in which the Service Provider has purchased a Covered Pipeline and seeks to have the purchase price paid for the pipeline established as the initial Capital Base for the purposes of the Access Arrangement for the pipeline. There are, however, many issues which have been raised which must be considered before those two matters can be dealt with directly.
By s 3(3) and s 25 of the Act the provisions of the Interpretation Act 1984 (WA) apply for the purposes of the Act but do not apply to the Code. Provisions in the appendix to Schedule 1 of the Act and in s 10 of the Code itself deal with the interpretation of the Code. Nevertheless, whether by virtue of the Interpretation Act or these special interpretative provisions, it is provided that a purposive interpretation is to be preferred to any other. By virtue of the special interpretative provisions consideration may be given to extrinsic material if a provision of the Code is ambiguous or obscure or if the ordinary meaning leads to a result that is manifestly absurd or unreasonable. Extrinsic material may also be used to confirm that the meaning of a provision is the ordinary meaning. In determining the ordinary meaning regard would normally be had, of course, to the ordinary meaning conveyed by a provision having regard to its context and to the scope and purposes of the Code.
Relief
For the reasons indicated in my view Epic has made good a case which in law could support the grant of the prerogative relief claimed and, in the alternative, declaratory relief.
Epic submits that the draft decision should be quashed and the Regulator should commence afresh his assessment of the proposed Access Arrangement. This would afford to Epic the maximum opportunity to reinforce its case to the Regulator and the full measure of the procedural stages provided by the Code. This process would, however, extend the time necessary for the Regulator's assessment and ultimate decision in respect of the proposed Access Arrangement and thereby extend the period during which Epic would enjoy the continued advantage of the tariffs established under the former regime.
Given the unusual nature of the assessment and approval process established under s 2 of the Code and, in particular, the provision for further submissions following a draft decision and the further stages of the decision making process thereafter, the interests of Epic, as well as the other affected parties, would appear to be sufficiently protected by limited declaratory relief, which together with this decision will further guide the Regulator and the parties, and otherwise by allowing the process for which s 2 makes provision to continue. In these circumstances, as a matter of discretion, it is my view that a grant of prerogative relief is unnecessary.
This view is reached in the particular circumstances of this case and especially having regard to the public statutory function of the Regulator and the unequivocal indication by counsel for the Regulator that he would act, in his ongoing assessment of the proposed Access Arrangement, in accordance with the decision of this Court in this application.
In this respect I proceed on the basis that, following the delivery of this decision, the Regulator will no doubt allow the applicants and other affected parties a reasonable time to prepare and provide to the Regulator submissions, which have regard to these reasons for decision and their effects on the matters identified in the draft decision as being the reasons for requiring amendments to the proposed Access Arrangement. While the procedural outcome might not in every respect be ideal, it should enable the interests of the applicants and other affected parties to be adequately protected, without undue interference with the course of the assessment and approval process for which s 2 makes provision.
Without attempting a final or precise formulation of declaratory relief at this stage, in my view, it would be appropriate for declarations to be made that:-
•The Regulator's determinations of Reference Tariffs and of the initial Capital Base of the DBNGP in his draft decision are affected by errors of law and require reconsideration.
•The factors in s 2.24(a) to (g) of the Code are relevant to, and are to be given weight as fundamental elements in, the Regulator's assessment of the proposed Access Arrangement, including the issue whether the Regulator is satisfied that the proposed Access Arrangement contains the elements and satisfies the principles set out in s 3.1 to s 3.20.
•The factors in s 2.24(a) to (g) should guide the Regulator, in determining, if necessary, the manner in which the objectives in s 8.1(a) to (f) can best be reconciled or which of them should prevail.
•It is open to the Regulator, pursuant to the objective provided by s 8.1(d), to take into account the actual investment of Epic in the DBNGP when designing a Reference Tariff and a Reference Tariff Policy, including in that context the establishment of the initial Capital Base of the DBNGP.
•The purchase of the DBNGP by Epic on 25 March 1998, the circumstances of that purchase including the price paid, and any value according to a recognised asset valuation methodology which may be revealed by the price paid in those circumstances, are matters which the Regulator may properly take into account in determining, for the purposes of s 8.11, whether the initial Capital Base for the DBNGP should fall outside the range of values determined under s 10(a) and (b).
•For the purposes of s 8.10 and s 8.11, and in particular s 8.10(c), (d) and (j), it is not the meaning and effect of the Code that only "efficient" capital investment, or that only "regulated revenues", are to be taken into account; nor that the initial Capital Base should represent a value "that is consistent with future regulated revenues and efficient capital investment".
There may be one or more further matters which the parties consider to be so critical to the interpretation of the Code in this case as to warrant a specific declaration.
Decision
For these reasons, in my view, the applicants should be granted declaratory, but not prerogative, relief.
I would grant leave to apply, on notice, as to the precise terms of the declaratory relief and as to any other matter thought to warrant a declaration.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE FULL COURT (WA)
CITATION: RE DR KEN MICHAEL AM; EX PARTE EPIC ENERGY (WA) NOMINEES PTY LTD & ANOR [2002] WASCA 231 (S)
CORAM: MALCOLM CJ
ANDERSON J
PARKER J
HEARD: 21-28 NOVEMBER 2001,& 28 NOVEMBER 2002
DELIVERED : 23 AUGUST 2002
SUPPLEMENTARY
DECISION :20 DECEMBER 2002
FILE NO/S: CIV 2166 of 2001
MATTER :An application for a writ of certiorari, a writ of prohibition and a writ of mandamus against Dr Ken Michael AM, the Independent Gas Pipelines Access Regulator in Western Australia
EX PARTE
EPIC ENERGY (WA) NOMINEES PTY LTD (ACN 081 609 289)
First ApplicantEPIC ENERGY (WA) TRANSMISSION PTY LTD (ACN 081 609 190)
Second Applicant
Catchwords:
Administrative law - Declaratory relief - Form of orders - Costs
Legislation:
Nil
Result:
Declarations granted
Costs orders made
Category: A
Representation:
Counsel:
First Applicant : Mr C L Zelestis QC & Mr J A Thompson
Second Applicant : Mr C L Zelestis QC & Mr J A Thompson
TheIndependent Gas Pipelines
Access Regulator : Mr C G Colvin SC & Mr S R Adams
AlintaGas Limited and
AlintaGas Sales Pty Ltd : Mr A C Willinge
Solicitors:
First Applicant : Mallesons Stephen Jaques
Second Applicant : Mallesons Stephen Jaques
TheIndependent Gas Pipelines
Access Regulator : Corrs Chambers Westgarth
AlintaGas Limited and
AlintaGas Sales Pty Ltd : Blake Dawson Waldron
Case(s) referred to in judgment(s):
BTR Plc v Westinghouse Brake and Signal Co (Aust) Ltd (1992) 34 FCR 246
Otter Gold Mines Ltd v Australian Securities Commission & Beaconsfield Gold NL (1997) 25 ACSR 382
Our Town FM Pty Ltd v Australian Broadcasting Tribunal (No 3) (1987) 77 ALR 609
R v Australian Broadcasting Tribunal; Ex Parte Hardiman (1980) 144 CLR 13
Case(s) also cited:
Australian Competition & Consumer Commission v Goldy Motors Pty Ltd (2001) ATPR 41-801
Du Toit v Vale & Anor (1993) 9 WAR 138
Fagan v Crimes Compensation Tribunal (1982) 150 CLR 666
Geographical Indications Committee v O'Connor (2000) 32 AAR 169
Moore's (Wallisdown) Ltd Pensions Ombudsman [2002] 1 All ER 737
National Competition Council v Hammersley Iron Pty Ltd (1999) 167 ALR 109
O'Toole v Charles David Pty Ltd (1990) 171 CLR 232
P & C Cantarella Pty Ltd v Egg Marketing Board (NSW) [1973] 2 NSWLR 366
R v Board of Visitors of Dartmoor Prison; Ex Parte Smith [1987] QB 106
R v Inner London North Coroner; Ex parte Touche [2001] 2 All ER 752
Riverina Broadcasters (Holdings) Pty Ltd v Australian Broadcasting Tribunal (1992) 28 ALD 813
Ruddock v Vardarlis (2001) 115 FCR 229
JUDGMENT OF THE COURT: Reasons for decision were delivered in this matter on 23 August 2002.
Supplementary submissions were heard on 28 November 2002 concerning the precise form of the declaratory relief which should be granted and the question of costs. These supplementary reasons deal with those issues.
Declaratory relief
At par 223 of the reasons for decision six declarations were proposed by the Court. Subject to minor drafting matters there is no issue raised by the parties about these six declarations.
The reasons foreshadowed, however, that the parties might identify further matters which were so critical in this case as to warrant a specific declaration.
The Independent Gas Pipelines Access Regulator in Western Australia ("the Regulator") has proposed that there should be three additional declarations. AlintaGas Limited and AlintaGas Sales Pty Ltd (the "Alinta parties") propose an additional declaration, substantially in similar terms to one of the three proposed by the Regulator. The applicants are opposed to each of these proposals.
The six declarations identified in the reasons dealt in various ways with actual errors of significance which had been identified in the draft decision of the Regulator.
The additional declaration which is proposed by both the Regulator and the Alinta parties concerns s 8.10 of the National Third Party Access Code for Natural Gas Pipeline Systems (the "Code") and would be to the effect that:
"The factors in s 8.10(a) to (k) are relevant to, and are to be given weight as fundamental elements in, the establishment of the initial Capital Base for the Pipeline."
Such a declaration is in accordance with the views of the Court and reflects the conclusion reached in the principal decision at par 56. It was a live issue between the parties whether on its true interpretation the factors in s 8.10(a) to (k) were required to be given weight as fundamental elements. Some of the six declarations proposed by the Court dealt with other aspects of the factors in s 8.10. Another of them deals with the factors in s 2.24(a) to (g) of the Code. We accept that in the absence of this proposed further declaration there is some potential for confusion arising from the declaration with respect to the factors in s 2.24(a) to (g). There is sufficient justification, therefore, for a declaration as proposed by the Regulator and the Alinta parties.
The other two declarations sought by the Regulator each concern the interpretation of the Code. However, rather than being directed to an error of the Regulator in his draft decision, the object of these two further declarations appears essentially to provide additional and more specific guidance to the Regulator as he revisits his assessment of the applicants' proposed Access Arrangement, pursuant to the decision of this Court and the further requirements of the Code.
We accept that it would be open to the Court to make declarations dealing with the proposed two additional subject matters. The appropriateness of doing so at this stage of the process in which the Regulator is engaged is in issue.
The first of these two proposed additional declarations would declare that the Regulator should be guided by the objectives in s 8.1(a) to (f), rather than the factors in s 2.2(a) to (g), insofar as s 8.10 and s 8.11 require the exercise of discretion by the Regulator. It was not the case, however, that the draft decision revealed any error on the part of the Regulator by virtue of an application of s 2.24(a) to (g) in the exercise of discretions arising under s 8.10 and s 8.11. Indeed, as the principal reasons have made clear the core submission of the applicants that the Regulator was in error in failing to have resort to the factors in s 2.24(a) to (g) to guide the exercise of discretion pursuant to s 8.10 and s 8.11 was rejected.
The proposed declaration accords with the view expressed in the reasons for decision at par 84. It was there expressed tentatively, and subject to an exception which forms the basis of one of the declarations proposed by the Court. The reason for the tentative expression was the need, at that point of the reasons, to consider further issues. This was done, and nothing in that further consideration provided a basis for questioning the correctness of the view expressed at par 84. Nevertheless, this issue is one which the Regulator did not directly deal with in the draft decision as the view he took of s 2.24 led him along a quite different line of reasoning.
Given the detailed and complex process of decision-making which the Regulator must follow by virtue of the requirements of s 2 of the Code, of which the draft decision is but the first stage, it appears to us that it would be undesirable in the present case to seek to anticipate the Regulator's consideration of this aspect of his eventual decision-making. The reasons of this Court will be available to the Regulator and in our view this aspect of the case is best left without express declaration at this point.
It should be noted that in support of this proposed declaration it was contended by the Regulator that a declaration was desirable because it appeared that there was some potential difference between the applicants and the Regulator which might usefully be quieted before it became a real issue. The submissions we heard in this respect did not sufficiently disclose the true nature of any apprehended difference and it appeared to us that it was clearly preferable that, rather than seeking to anticipate differences that need not necessarily become material, the Regulator should be left to reconsider his draft decision in light of our reasons for decision and the further submissions he will receive from the parties before him.
The third declaration proposed by the Regulator appears to be an attempt to bring together a number of passages of the principal reasons to comprehend in one declaration the overall nature of the process contemplated and required by the Code which leads to the establishment of the initial Capital Base. The declaration does not deal with any directly identified error on the part of the Regulator in his draft decision. It is thus, in our view, a matter in respect of which there is no demonstrated need for a declaration. The discussion of this general issue in the principal reasons of this Court will be available to the Regulator. Further, the draft declaration may well suffer from a tendency to focus too narrowly, so as to create the impression that it is solely for the Regulator to establish the initial Capital Base. It is to be borne in mind that s 8 of the Code, in particular, is setting out principles which inter alia are to guide the applicants when they first seek to establish an Access Arrangement, as well as the Regulator when he comes to assess the Access Arrangement proposed by the applicants. The initial Capital Base is but one element relevant to an Access Arrangement.
In these circumstances we are of the view that it would be preferable not to make the proposed declaration.
Costs
The applicants seek an order for their costs to be paid by both of the Alinta parties and by the Regulator. The Alinta parties submit that they were necessary and proper contradictors and that the position and arguments which they raised were reasonable, with the consequence that they should not be ordered to pay any costs. Alternatively, the Alinta parties submit that they should bear a significantly lower proportion of any costs awarded, especially because they were not originally parties and only became parties on 12 September 2001. They also submit that there is no reason why the Regulator should not be ordered to pay at least some of the costs of the applicants. It is the submission of the Regulator that he ought not to be required to pay any of the costs of the applicants, but that the Alinta parties might properly be ordered to pay some or all of the costs of the applicants.
Obviously, there are a number of competing issues relevant to costs which require to be weighed in the present case. In particular, it is to be borne in mind that the Regulator is performing a statutory function in the public interest and, as was noted at par 8 of the principal reasons, the Regulator limited his role before the Court to adducing evidence and making submissions confined to the proper construction of the Code and the procedures of the Regulator. This was in accordance with the principle identified in R v Australian Broadcasting Tribunal; Ex Parte Hardiman (1980) 144 CLR 13 at 35-36. In such circumstances it has been held in a number of cases that no order should be made as to costs against the statutory functionary; BTR Plc v Westinghouse Brake and Signal Co (Aust) Ltd (1992) 34 FCR 246 at 265-6 and 279, Otter Gold Mines Ltd v Australian Securities Commission & Beaconsfield Gold NL (1997) 25 ACSR 382 at 393 and Our Town FM Pty Ltd v Australian Broadcasting Tribunal (No 3) (1987) 77 ALR 609 at 612. In this respect we are not persuaded that the decisions in these cases should properly be regarded as reflecting settled principle. Rather they are examples of the exercise of the general discretion as to costs in the particular circumstances of each of those cases. Nevertheless, it appears that in each case the statutory function of the party, and the limited role played by the party in the proceedings, was seen to be of determinative significance in the exercise of discretion.
It is submitted in this case that the Regulator went beyond merely dealing with the proper construction of the Code and procedures, in that he sought to adduce evidence of an expert, and may be said by this and by the nature of some of the submissions he advanced to have in truth contested the case of the applicants. The Regulator did tender expert evidence, and make submissions in furtherance of this evidence, but this was essentially directed to a variety of issues relevant to the construction of the Code. Part of this evidence was held inadmissible, but that did not alter the purpose for which the evidence was sought to be adduced. On balance we are not persuaded that the manner in which the Regulator conducted its case before the Court caused it to stray outside the limited role that was appropriate to its statutory function in accordance with the principle enunciated by the High Court in the Hardiman decision.
It is true that the Regulator has an ongoing interest, both in this case and more generally, in securing the decision of the Court as to a number of very difficult questions of interpretation of the Code which were ventilated in this case. That is a consideration likely to be true of many bodies charged with the performance of statutory regulatory functions of this nature. We are not persuaded that this consideration is of compelling force in the present case.
In our view, this is a case in which the course taken by the Regulator in limiting his role in the proceedings in accordance with the Hardiman principle ought to be accorded significant weight, to the extent that it would be inappropriate in our view to make an order for costs against the Regulator.
The applicants were formally successful in their application for relief. It is not the case, however, that they succeeded on every point. Indeed, substantial and significant aspects of the case they presented before us were unsuccessful. Further, in part, the applicants succeeded on bases they did not advance.
Although not parties at the commencement of these proceedings, both the Alinta parties filed a notice of intention to appear on 12 September 2001. Thereafter, their role was that of a true opponent of the applicants, both Alinta parties having a clear and significant commercial interest in the success of the case which they presented and in the failure of the case which the applicants presented. While the Alinta parties were successful in some of their arguments they too failed in a number of respects.
In the course of submissions as to costs some stress was placed on the question of expert evidence. It was contended by the Alinta parties that the applicants were unreasonable in their approach to the efforts of the Regulator and the Alinta parties to adduce expert evidence, with the consequence that a considerable time was devoted to that issue. In our view, the expert evidence which was in the end admitted from all three parties was of assistance in the determination of the issues for decision. It is true that, in part, the evidence which the Regulator and the Alinta parties sought to adduce was not admitted and other parts were admitted only on a limited basis. It cannot reasonably be said, however, that the position taken by the applicants was unreasonable, given the basis of the objection taken and the success which the applicants had in securing the rejection of significant portions of the evidence of the Alinta parties and the Regulator, and the limited basis upon which other parts of that evidence was admitted. We would not treat the matter of expert evidence as material to the determination of costs in this case.
For these reasons we have concluded that the Regulator ought not to be ordered to pay the costs of the other parties in any respect. The two Alinta parties jointly should meet two-thirds of the costs of the applicants incurred by the applicants from 12 September 2001, including any reserved costs. Otherwise, the parties should bear their own costs.
The applicants' costs for these purposes should be taxed as upon a trial of an action, there being a certificate for second counsel, but not for a third, and such costs should be taxed without regard to the limits that would otherwise be applicable upon taxation. In our view, these orders are appropriate having regard to the extent and complexity of the issues involved.
One further issue is raised by the applicants. An order is sought, it is said pursuant to s 37(1) of the Supreme Court Act 1935, that the costs to be paid by the Alinta parties should be borne by the those parties and not by the applicants. At first sight, the purpose and meaning of such an order is not clear. In support of the submission it was contended that there may be scope, by virtue of charges that might be levied on the applicants under The Gas Pipelines Access (Western Australia) (Funding) Regulations 1999, for the burden of costs ordered to be paid by the Alinta parties in some way to find their way back to the applicants. Those regulations entitle the Regulator to recover certain costs. It should be noted that the submission was directed both to any costs that were ordered to be paid by the Regulator as well as by the Alinta parties. We are told that separate proceedings are already under foot challenging the validity of charges which have been purportedly levied by the Regulator against the applicants in this matter.
In our view, it would be inappropriate to make any such order. The order determines, as between Alinta and the applicants, the obligation of Alinta to meet a proportion of some of the costs of the applicants. If there is a statutory scheme pursuant to which the burden of the costs so ordered to be paid by Alinta might come to be reflected in whole or part in charges levied under the regulations, it appears to us, that is a matter for the operation of those regulations. Should they have the effect that is suggested, it would not be appropriate for this Court to seek to frustrate their operation. We should make it clear that we have not sought to determine whether the regulations have that effect nor, if that be so, whether in this respect the regulations are valid. They are not issues for determination at this time.
Orders
For these reasons there should be declaratory relief in the following terms:
1.The determinations of Reference Tariffs and of the initial Capital Base of the Dampier to Bunbury natural gas pipeline ("Pipeline") made by the Independent Gas Pipelines Access Regulator ("Regulator") in his draft decision ("Draft Decision ") issued on 21 June 2001 are affected by errors of law and require reconsideration by the Regulator according to law.
2.The factors in s 2.24(a) to (g) of the National Third Party Access Code for Natural Gas Pipeline Systems ("Code"), as applied in Western Australia by s 9 of the Gas Pipelines Access (Western Australia) Act 1988 ("Act"), are relevant to, and are to be given weight as fundamental elements in, the Regulator's assessment of the proposed Access Arrangement, including the issue whether the Regulator is satisfied that the proposed Access Arrangement contains the elements and satisfies the principles set out in s 3.1 to s 3.20.
3.The factors in s 2.24(a) to (g) should guide the Regulator in determining, if necessary, the manner in which the objectives in s 8.1(a) to (f) can best be reconciled or which of them should prevail.
4.The factors in s 8.10(a) to (k) are relevant to, and are to be given weight as fundamental elements in, the establishment of the initial Capital Base of the pipeline.
5.It is open to the Regulator, pursuant to the objective provided by s 8.1(d), to take into account the actual investment of the first applicant in the pipeline when designing a Reference Tariff and a Reference Tariff Policy, including in that context the establishment of the initial Capital Base of the pipeline.
6.The purchase of the pipeline by the first applicant on 25 March 1998, the circumstances of that purchase including the price paid, and any value according to a recognised asset valuation methodology which may be revealed by the price paid in those circumstances, are matters which the Regulator may properly take into account in determining, for the purposes of s 8.11, whether the initial Capital base for the pipeline should fall outside the range of values determined under s 8.10(a) and (b).
7.For the purposes of s 8.10 and s 8.11, and in particular s 8.10(c), (d) and (j), it is not the meaning and effect of the Code that only "efficient" capital investment, or that only "regulated revenues", are to be taken into account; nor that the initial Capital Base should represent a value "that is consistent with future regulated revenues and efficient capital investment".
We further order that:
8.AlintaGas Ltd and AlintaGas Sales Pty Ltd do jointly pay two-thirds the applicants' taxed costs of these proceedings which were incurred after 12 September 2001, including any reserved costs.
9.In relation to the taxation of the applicants' costs:
(a)the applicants be allowed the costs of 2 counsel;
(b)the applicants' costs shall be taxed as upon a trial of an action;
(c)the limits that would otherwise be applicable upon the taxation shall not apply.
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