Sea Swift Pty Ltd v Torres Strait Island Regional Council
[2023] QSC 203
•4 September 2023
SUPREME COURT OF QUEENSLAND
CITATION:
Sea Swift Pty Ltd v Torres Strait Island Regional Council [2023] QSC 203
PARTIES:
SEA SWIFT PTY LTD
ACN 010 889 040(applicant)
v
TORRES STRAIT ISLAND REGIONAL COUNCIL
ABN 15 242 645 165(respondent)
FILE NO:
839 of 2023
DIVISION:
Trial Division
PROCEEDING:
Application for Review
ORIGINATING COURT:
Supreme Court of Queensland at Brisbane
DELIVERED ON:
4 September 2023
DELIVERED AT:
Brisbane
HEARING DATE:
17 August 2023
JUDGE:
Applegarth J
ORDER:
Subject to submissions from the parties as to the form of order, it is declared that:
1. The imposition of the Default Maritime Fee evidenced by the 253 Default Maritime Fee invoices dated 21 December 2022 (numbered from INVDMF0001 to INVDMF0253) was beyond the power conferred on the respondent; and
2. The said invoices are invalid.
CATCHWORDS:
ADMINISTRATIVE LAW – JUDICIAL REVIEW – GROUNDS OF REVIEW – GENERALLY – where the applicant is a shipping company that operates in the area governed by the respondent - where the respondent implemented a regime of Maritime Fees for use of its landing facilities - where the respondent’s CEO decided to issue to the applicant 253 Default Maritime Fee (“DMF”) invoices for the period from April 2015 to June 2018 for alleged underreporting of its use of facilities – where the DMF vastly exceeds the standard Maritime Fee for use - where the applicant seeks a declaration that the imposition of the DMF is beyond the power conferred on the respondent and the December 2022 DMF invoices are invalid - where the applicant contends that the imposition of the DMF is not authorised because it is a penalty that is inconsistent with the statutory scheme - where the respondent submits that the DMF is authorised because it is a charge for use of its landing facilities where non-compliance by an operator makes it impossible to accurately calculate the standard Maritime Fees - whether the DMF should be characterised as a penalty or a charge “for” a service or facility - whether the imposition of the DMF was authorised by ss 9 and 262(3)(c) of the Local Government Act (Qld) - whether the imposition of the DMF was authorised by s 10 of the Model Local Law
Constitution of Queensland 2001 (Qld) s 71(1)
Justices Act 1886 (Qld) s 52(1)
Limitation of Actions Act 1974 (Qld) s 10(5)
Local Government Act 2009 (Qld) ss 9, 13(3), 26, 28(2), 262(3)(c),
Penalties and Sentences Act 1992 (Qld) s 5
Penalties and Sentences Regulation 2015 (Qld) s 2, sch 2
Torres Strait Island Regional Council Model Local Law No. 1 (Administration) 2010 ss 2(1), 10, 11, 17-19, 25-29, 35
Torres Strait Island Regional Council Subordinate Local Law No. 1 (Administration) 2013Binsaris v Northern Territory (2020) 270 CLR 549; [2020] HCA 222, cited
Chang v Laidley Shire Council (2007) 234 CLR 1; [2007] HCA 37, cited
Douglas Shire Council v Queensland Ombudsman (2005) 141 LGERA 237; [2005] QSC 207, cited
Morton v Union Steamship Co of New Zealand Ltd (1951) 83 CLR 402; [1951] HCA 42, cited
Ostwald Accommodation Pty Ltd v Western Downs Regional Council [2016] 2 Qd R 14; [2015] QSC 210, cited
Palmer v Australian Electoral Commission (2019) 269 CLR 196; [2019] HCA 24, cited
Sea Swift Pty Ltd v Torres Strait Island Regional Council [2023] QSC 160, cited
Shanahan v Scott (1957) 96 CLR 245; [1957] HCA 4, citedCOUNSEL: E J Longbottom KC, B O’Brien and S Spottiswood, for the applicant
A W Duffy KC and S L Walpole, for the respondent
SOLICITORS: Herbert Smith Freehills, for the applicant
Clyde & Co, for the respondent
On 20 December 2022, the Chief Executive Officer of Torres Strait Island Regional Council (“TSIRC”) instructed the Council’s solicitors to issue Default Maritime Fee invoices to Sea Swift that totalled over $66 million for the period from April 2015 to June 2018. On 21 December 2022, the solicitors issued 253 invoices and gave Sea Swift only a seven-day period to “appeal” them (during which period three public holidays, including Christmas Day, fell).
Sea Swift contends that legislation did not authorise the issuing of Default Maritime Fees. It also contends that the decision to issue the 253 Default Maritime Fee invoices was beyond power and legally unreasonable.
The threshold issue in the case is whether ss 9 and 262(3)(c) of the Local Government Act 2009 (Qld) (“LGA”) authorised the imposition of the “Default Maritime Fee regime” and the Default Maritime Fee (“DMF”) evidenced by the invoices dated 21 December 2022.
Section 262(3)(c) empowers a local government to charge “for a service or facility”.
Sea Swift contends that what TSIRC’s submissions describe as “the DMF regime” and the DMF evidenced by the invoices are not based on its actual or estimated use of the Council’s landing facilities, but are an unauthorised form of penalty for alleged non-compliance with reporting conditions that make hypothetical assumptions about its use of the facilities and disregard evidence of actual use. The DMF also does not account for maritime fees that Sea Swift has paid in respect of the same periods. The fact that the fees have some relationship to the facility because they impose a penalty for alleged non‑compliance with reporting conditions does not mean, on Sea Swift’s case, that they are a charge “for” that facility within the meaning of s 262(3)(c).
TSIRC contends that its DMF regime is a charge imposed “for” using the landing facilities where non-compliance by an operator of its obligation to self-report its use makes it impossible for TSIRC to accurately calculate the standard Maritime Fees that are due to it. It defends the DMF it invoiced as an alternative method for calculating the standard Maritime Fees. Yet, its methodology adopts a hypothetical maximum use rather than the use that is revealed by the timetables, logbooks, consignment notes, and other documents that it and its lawyers analysed before the invoices were issued.
For the reasons that follow, I conclude that the decision to impose a DMF of the kind evidenced by the December 2022 invoices was unauthorised. No resolution of TSIRC authorised a DMF to be calculated on such a basis. Neither by design nor by the process by which the invoices came to be created did the invoiced DMF reflect a methodology to estimate and charge for actual use. The DMFs were based on unrealistic, hypothetical maximum use figures that vastly exceed TSIRC’s detailed analysis of actual use. The DMF evidenced by the December 2022 invoices was imposed as a form of penalty for alleged non‑compliance with reporting conditions. In the circumstances, it was not authorised. In particular, it was not a charge “for a service or facility” that was authorised by s 262(3)(c) of the LGA.
Before I address relevant statutory provisions, I must summarise a large amount of evidence. The hearing on 17 August 2023 occupied only a few hours. The oral evidence occupied only 30 minutes. The parties’ written submissions, however, totalled over 150 pages and the court book consisting of affidavits and other documents runs to 9126 pages.
The Issues
Prior to the hearing the parties agreed the following List of Issues.
1. Did ss 9 and 262(3)(c) of the Local Government Act 2009 (Qld) authorise the imposition of the Default Maritime Fee regime, and the Default Maritime Fee evidenced by the issuance of the Default Maritime Fee invoices dated 21 December 2022? (Grounds 1 and 2).
2. Does the imposition of the Default Maritime Fee fall within the scope of s 10 of the Model Local Law? (Ground 1)
3. If the answer to questions 1 and 2 above is “yes”, then (Ground 2):
(a)did the respondent validly authorise its chief executive officer to issue the Default Maritime Fee invoices?
(b)were the Default Maritime Fee invoices validly issued pursuant to the conditions in the Permits?
(c)were the Default Maritime Fees imposed prospectively?
(d)were the Default Maritime Fee invoices issued in accordance with the criteria for imposition of Default Maritime Fees?
Additional Grounds
4. Was the issuance of the Default Maritime Fee invoices:
(a)legally unreasonable? (Ground 3)
(b)done in breach of an obligation that TSIRC afford Sea Swift procedural fairness in respect of the issuance of such invoices? (Ground 4)
5. Was TSIRC’s decision to prescribe a 7 day ‘appeal right’ in respect of the Default Maritime Fee invoices beyond power, or legally unreasonable? (Grounds 5 and 6).
Relief
6. If Sea Swift succeeds on one or more of the grounds of its application:
(a) should a declaration be made that the Default Maritime Fee invoices are invalid? (Ground 7).
(b) should an order in the nature of certiorari setting the Default Maritime Fees aside be made? (Ground 8).
The parties
The TSIRC governs 15 islands in the Torres Strait. It owns and operates 15 barge ramps and finger jetties at island communities. These landing facilities are the primary means by which fuel, food, passengers and general cargo are transported to and from these island communities.
Sea Swift is an Australian shipping company that operates in Northern Queensland and the Northern Territory. Its operations in the area governed by the TSIRC primarily involve shipping cargo to the islands according to regular scheduled services. It also charters vessels to third parties for infrastructure projects. The CEO of the TSIRC, Mr William, describes Sea Swift as “one of the key logistics providers to residents within the TSIRC’s local government area”.
Sea Swift publishes information on its website and elsewhere about its scheduled services, and details may be obtained from online searches about the voyages it undertook within the TSIRC region between 2015 and 2018. This includes information about the frequency and timing of its voyages, including the vessels involved in those voyages, and the estimated dates and times of their arrivals to various locations. During that period Sea Swift often relied on two to three vessels to service the islands in the Torres Strait. It did not schedule services to every island on a daily basis, nor did it schedule services to every island in every week.
The permit regime
In early 2014, the TSIRC advised operators, including Sea Swift, of its intention to implement a regime of maritime fees and charges for its landing facilities and of those proposed fees. The regime involved permits, with associated fees and charges, for commercial use of landing facilities. Sea Swift was notified of the fees and charges on 5 February 2014. The Maritime Fees imposed on Sea Swift and other commercial operators for the use of landing facilities include the following:
(a)“Harbour Dues”, payable in respect of cargo discharged, loaded or transhipped at a landing facility calculated by reference to the volume or weight of the cargo;
(b)“Tonnage Dues”, payable in respect of each period of 24 hours or part thereof that a vessel occupies a landing facility, and calculated by reference to the size of the vessel; and
(c)“Miscellaneous Dues”, payable in respect of lighting and water used at a landing facility.
These are referred to by the parties as the standard Maritime Fees, and are to be distinguished from the “Default Maritime Fees” that are in contention in this proceeding.
On 19 June 2014, TSIRC advised Sea Swift that, from 1 July 2014, it would be a requirement, in order to lawfully access and use the landing facilities, to hold a valid permit pursuant to Schedule 8 of the Subordinate Local Law No 1 (Administration) 2013 that TSIRC had adopted on 15 July 2013.
Ever since the permit scheme was introduced, Sea Swift has held a valid permit for use of the landing facilities. Permits have been issued to it for each financial year from 2014/2015 onwards.
Each permit is subject to a number of conditions. They include the following:
“(b)ensure all use of the Facilities is Reported in the prescribed form to [TSIRC]; AND
(c)pay all prescribed fees charged by [TSIRC] in accordance with its Register of Fees and Charges, as amended from time to time by resolution; AND
…
(z)provide [TSIRC] with full details of all vessels using the Facilities; AND
(aa)follow any lawful direction of [TSIRC]; AND
(bb)comply with any lawful future Conditions imposed by [TSIRC] on this Approval, upon written notice to [Sea Swift].”
Each permit issued to Sea Swift advised that it was an offence to not comply with the conditions of the permit and that non-compliance may result in an infringement notice, the issuing of a complaint and summons and/or Council recovering from it the amount that it properly and reasonably incurred in taking required action to remedy the breach.
In September 2014, Sea Swift was advised that it would be required to submit cargo self‑reporting forms each and every Tuesday, using the applicable self‑reporting form, and that the form was to accurately reflect operations for the week, Saturday to Friday, prior to submission. In 2015 and subsequently, however, TSIRC accepted Sea Swift’s monthly self-reporting.
The September 2014 correspondence also advised Sea Swift that “a failure to accurately self-report may result in a breach of Conditions of Prescribed Activity Permit – Moorings and Landings, resulting in fines and/or revocation of Permit”.
In simple terms, the permit system required Sea Swift and other operators to report their use of the Council’s landing facilities in a prescribed form and to do so accurately. Self‑reporting was an integral part of the permit regime because TSIRC does not have the personnel or equipment at each of the landing facilities to enable it to directly monitor vessel movements or use of the landing facilities. Accurate self-reporting is needed so that the TSIRC can accurately calculate the Maritime Fees payable and issue an appropriate invoice.
Possible consequences of non-compliance
If an operator does not report by submitting the applicable self-reporting form or does not report accurately, then TSIRC may do a number of things. These include:
(a)issuing compliance notices in accordance with Model Local Law s 26;
(b)issuing an infringement notice;
(c)issuing a complaint and summons in a Magistrates Court for non‑compliance, with each offence carrying a maximum penalty of $3750 (Model Local Law s 11);
(d)suspending or cancelling the permit (Model Local Law ss 17-19); and
(e)not renewing the permit (Model Local Law s 9).
Another possible course of action open to the Council would be to amend the conditions of the permit or give a lawful direction that required an operator like Sea Swift to submit additional documents and other evidence to justify the contents of a self-reporting form. The documents that such a condition or direction might require would include logbooks, consignment notes and other documents to evidence its use of facilities, including the cargo that was discharged or loaded at an island and the period of time that the vessel occupied a landing facility.
A non-reporting problem in 2014
In late 2014, the TSIRC communicated with Sea Swift about an alleged failure to submit self‑reporting forms over certain periods and requested that it submit self‑reporting forms. In early 2015, Ms Julia Mauro, who has occupied positions as Legal Counsel or as a Senior Legal Officer with the TSIRC, advised the Council’s Executive Manager Corporate Services, Mr McLaughlin, of several potential enforcement options. Mr McLaughlin and Ms Mauro discussed the options that were available to TSIRC in circumstances where operators such as Sea Swift were not submitting self‑reporting forms, as required under a permit. The problem was a failure to self-report, not inaccurate reporting. Without self-reporting forms that identified the vessel using the landing facilities, the type of cargo and the volume and/or weight that was discharged, loaded or trans-shipped at the landing facilities, TSIRC was unable to calculate the Maritime Fees.
On 30 January 2015, Ms Mauro advised Mr McLaughlin of enforcement options in respect of a failure to self-report. They were:
(a)to issue a compliance notice under s 26 of the Model Local Law;
(b)to give the operator a ‘show cause notice’ proposing to suspend, cancel or amend its permit under s 16 of the Model Local Law; and
(c)to impose a fine under s 11 of the Model Local Law with the maximum penalty being 50 penalty units, with Ms Mauro advising that this “option is available if Council considers that the operator has already been given [an] opportunity to remedy the failure to pay”.
Mr McLaughlin and Ms Mauro discussed the possibility of imposing fines for failure to submit self-reporting forms. However, the maximum fine for a failure to comply with the conditions of a permit was 50 penalty units, or $3750 at $75 per unit. A fine at that level would likely be less than the applicable Maritime Fee. They decided it would therefore be unlikely to be effective “in disincentivising non-compliance with the self-reporting requirement”.
A Council meeting in February 2015 directed the CEO and Acting Executive Manager Corporate Services “to discuss and draft letter entailing the maximum charges for seaport charges – issue letter out to carriers endorsing maximum rate for non-reporting”.
On 15 March 2015, Mr McLaughlin asked Ms Mauro to draft a template letter to freight carriers, advising that “as a policy decision, a failure to provide weekly self-reporting shall result in default charging per highest tonnage for vessel in question”.
The charging of a default fee was discussed internally between TSIRC officers in 2015, but its imposition was not the subject of any resolution or direction by the Council. The meeting on 17 and 18 March 2015 was told that a letter, currently in draft form, was nearing completion, and one councillor raised concerns about “the retrospective capture of fees”. The meeting directed the Executive Manager Financial Services and the Executive Manager Corporate Services to “investigate self-reporting strategies in regards to seaport charges”. An action item noted in the minutes was for the two officers “to investigate sample-testing to confirm self-reporting of seaport charges”. In response to the councillor’s inquiry during the meeting, one officer wrote to another “we need to amend the operator permits for the following:
· Enable and identify a default maximum charge if self reporting not received within specified number of days …”
The draft letter to operators was still being refined in late March 2015. On 30 March 2015, Mr McLaughlin emailed Ms Mauro and stated:
“Letter looks fine.
As for Default Maritime Fee where multiple vessels are registered by the operator and we do not know which vessel(s) were used for a give [sic] period, we should invoice maximum Harbour Dues (maximum stops x maximum GRT) + maximum Tonnage Dues for largest vessel. This will likely result in many invoice reversals, but will provide incidentive [sic] for seaswift and toll to report on time. Provide rationale in the letter to how we calculated the Default Maritime Fee.
Send final drafts through.”(Emphasis added).
On 1 April 2015, Mr McLaughlin advised the CEO and others that the default rate will be “grossly arbitrary” and result in Sea Swift being charged in excess of $200,000 per week when it had been paying about $36,000 per month.
On 15 April 2015, TSIRC wrote to Sea Swift advising that the condition of its permit required it to submit self-reporting forms. The letter advised:
“Council invoices its Maritime Fees based on your self-reporting submitted. Self-reporting is not optional. As previously advised, a failure to accurately self-report and/or pay invoices as and when they are due, may result in a breach of your Permit, resulting in fines and/or revocation of Permit.”
The letter attached a table of reporting that was said to have not occurred. It continued:
“Following up missing self-reporting incurs significant administrative resources for our Finance team. To avoid this burden, Council has elected to process a Maritime Fee in default of self-reporting, equal to the maximum fee payable for the vessel in question, per mooring and landing.”
The letter then advised of the Council’s intention:
“Pursuant to conditions (c), (aa) and (bb) of your Permit, Council hereby gives notice of its intention to: -
1. require submission of relevant vessel manifest for the reporting period in question, with each self-reporting form; and
2. impose a Default Maritime Fee for failure to self-report by the due date, equal to the maximum fee payable for the vessel per landing/mooring.
Your Default Maritime Fee shall be $27,104.00 (GST inclusive) per week based on Net Registered Tonnage of the Malu Chief and shall be subject to change with variations to Council's Register of Fees and Charges. This Default Maritime Fee is calculated as follows:
Net Register Tonnage (Malu Chief): 104t
Maximum harbour due rate: x $16.50
Scheduled stops per week (maximum): x 14
Default Harbour Dues: $24,024.00
Rate for vessels 101-1,500 Tonnes: $220.00
Scheduled stops per week (maximum): x 14
Default Tonnage Dues: $3,080.00
Default Maritime Fee per week (GST inclusive): $27,104.00
In the event other vessels are used as an alternative of the abovementioned vessel, the Default Maritime Fee shall be adjusted using the abovementioned calculation.
The new conditions shall apply to your Permit and all self reporting from the date of this correspondence and shall also apply to any missing self-reporting highlighted in the attached table (if applicable).
Where a Default Maritime Fee is imposed, you shall have a period of seven (7) days to appeal in writing addressed to our Debtors team, the invoice upon presentation of a compliant Self-Reporting Form and supporting vessel manifest; appeals made absent this required supporting documentation shall be refused. Appeals received after the seven (7) day period shall not be accepted and payment of the Default Maritime Fee shall be due and payable on Council's invoice terms.”
(Emphasis added).
The Council’s stated concern was the burden that was placed upon it by the absence of self-reporting. The concern at the time was not with inaccurate self-reporting. The DMF that it proposed to impose was for “failure to self-report by the due date”.
The DMF, which was based on net registered tonnage of the Malu Chief, was “subject to change with variations to Council’s Register of Fees and Charges”.
An important fact, which assumes significance when one comes to the calculation of the December 2022 DMF, is that the DMF advised in April 2015 was based on 14 scheduled stops per week (maximum). This seems to assume that Sea Swift’s schedule was for the vessel to visit 14 out of the 15 islands per week, such that it would visit each island, on average, four to five times each month. It also seems to calculate the Default Harbour Dues on the basis that all of the vessel’s cargo at its maximum carrying capacity of 104 tonnes was discharged at each island.
The purpose of the 2015 policy to impose a DMF for failure to self-report
The 15 April 2015 letter from TSIRC to Sea Swift confirms what is apparent from other contemporaneous documents. The DMF policy (in recent times rebadged “a regime”) that Council officers developed in around April 2015 was to address a non‑reporting problem and to create a financial incentive for operators to report. The DMF was not developed to address inaccurate self-reporting. As the 15 April 2015 letter stated, the intention was to impose a DMF for “failure to self-report by the due date”.
The policy was designed to impose a fee equal to the maximum fee payable, based on assumptions that did not match the reality of the number of stops, the tonnage of the vessel being used or the amount of cargo that it discharged or loaded at each landing. The purpose of adopting a maximum fee based on unrealistic assumptions was to induce operators to self-report, and, in doing so, disclose their actual use of facilities during the relevant period. The imposition of a fee for failing to self-report would result in reporting, the issuing of a revised invoice, and the reversal of a DMF invoice.
This is apparent from the email from Mr McLaughlin to Ms Mauro dated 30 March 2015 that I have quoted above.
Five days after the Council sent its 15 April 2015 letter to Sea Swift, Mr McLaughlin wrote to other Council officers including the then CEO of TSIRC as follows:
“The questions still remains, would Council seek to enforce the Default Maritime fee in a Court of Law? The answer is maybe for the reason Toll alluded to – it is likely to be considered a penalty and unenforceable. Of course, to establish that such a fee is unfair and unreasonable (and thus a penalty), the carrier must show evidence of such (manifest). Upon sighting the manifest, we are able to reverse the [DMF] at our discretion, and issue a revised invoice for the correct fee; it is a means to an end. I would expect no carrier to ever pay the [DMF], however absent any evidence to the contrary, the fee is reasonable and enforceable and in line with their application for use of every port. I cant (sic) imagine any carrier would withhold their manifest details until litigation is commenced.” (Emphasis added).
This communication discloses that:
· TSIRC officers appreciated that the DMF was likely to be considered a penalty and be unenforceable;
· they did not expect any carrier to actually pay the DMF;
· instead, they expected that the carrier would disclose the vessel’s manifest, resulting in a revised invoice for “the correct fee”.
The DMF and the manner in which it was to be calculated was not the subject of any Council resolution
The imposition of a DMF for failure to self-report, including the basis upon which such a fee would be calculated, was not the subject of any resolution by the TSIRC. The directions given to Council officers at meetings in February and March 2015, which I have quoted above, concerned the drafting of a letter endorsing “maximum rate for non-reporting” and to “investigate self-reporting strategies”. The directions did not state how any “maximum rate” for non-reporting would be calculated.
The February 2015 meeting anticipated a process being developed that would entail a “maximum rate for non-reporting”. It did not state what the maximum charge would be, how any maximum rate for non-reporting would be fixed, and by whom it would be fixed.
The policy reflected in the 15 April 2015 letter did not return to a Council meeting for endorsement, let alone a resolution that specified the basis upon which the DMF was to be calculated, or that a DMF was able to be imposed up to a maximum amount.
As matters transpired, no DMF was adopted and recorded in the Register of Fees and Charges for 2014/2015, which otherwise included maritime fees that specified harbour dues, tonnage dues and miscellaneous fees. Those entries specified amounts and identified the source of authority to impose them as s 262(3)(c). The 15 April 2015 notice to Sea Swift of the Council’s intention to require submission of the relevant vessel’s manifest for the reporting period and to impose a DMF for failure to self-report by the due date was stated to be given pursuant to conditions (c), (aa) and (bb) of Sea Swift’s permit.
TSIRC’s Register of Fees and Charges was updated each financial year. A DMF only appears in the Register of Fees and Charges for the 2017/2018 financial year.
If the directions given at Council meetings in February and March 2015 are equated with decisions to adopt a “DMF regime” (to use a term coined in TSIRC’s submissions), the regime related to non-reporting, not inaccurate or otherwise non‑compliant reporting, which is the subject of the December 2022 decision that is the subject of this proceeding.
Developments in 2016, 2017 and 2018
As noted, the 15 April 2015 letter to Sea Swift advised that the DMF was to be $27,104 per week based upon the net tonnage of the Malu Chief, and set out the basis upon which that amount was calculated.
On 12 September 2016, TSIRC sent a letter to Sea Swift advising Sea Swift of the purported DMF and advising that the “Default Maritime Fee is currently $106,523.90 (GST inclusive) per week based on the Net Registered Tonnage of the SSB 1803” (being, 258 tonnes) and on the basis of 14 scheduled stops per week.
A weekly DMF was stated in the letter, despite the letter indicating monthly reporting from Sea Swift would be acceptable given “operational requirements limiting Sea Swift’s ability to report weekly”. In fact, TSIRC had accepted Sea Swift’s monthly reporting as being acceptable as early as May 2015.
There is no evidence of any resolution authorising the increase in the DMF from $27,104 to $106,523.90 per week.
On 15 November 2016, Sea Swift wrote to TSIRC disputing invoices issued by it that included weekly DMFs for periods in August and September 2016. Sea Swift noted that no DMF was included in the Register of Fees and Charges, and that a review of Council Meeting Resolutions did not show that TSIRC had adopted a DMF as a fee or charge. The letter also noted that TSIRC’s “assumption for calculating the ‘Default Maritime Fee’ is excessive to the extreme”. It assumed that the Sea Swift Barge 1803 delivered 258 tonnes of freight each scheduled stop at 14 stops per week, every week, or 14,448 tonnes of freight per month. Sea Swift’s records were said to show that over the course of the previous three months the average tonnes delivered to the 15 islands was 1640 tonnes per month. This meant that TSIRC’s assumption was 781 per cent higher than the actual freight tonnes delivered.
On 15 November 2016, TSIRC advised that the reporting issue may be resolved where Sea Swift submits reporting that declares both tonnes and cubic metres of general cargo for each period. The Council advised that if reporting was not received, it may seek to enforce DMFs as a condition of Sea Swift’s permit. Two days later, Sea Swift advised TSIRC that the freight tonnes or revenue tonnes that it declared was the greater of tonnes or cubic metres because that is what it charged. It did not weigh and measure each item of freight because to do so would have required additional staff and increased transport rates.
On 3 July 2017, TSIRC advised that the DMF was “currently $109,753.00 (GST inclusive) per week” based on the net registered tonnage of the SSB 1803, with 14 scheduled stops per week.
At a meeting on 27 June 2017, TSIRC had stated that it adopted “in accordance with section 98 of the Local Government Act 2009, the Register of Fees and Charges for the 2017/2018 year”. However, s 98 relates to “cost-recovery fees”, as defined in s 97. TSIRC submits that the absence of the DMF from the Register of Fees and Charges prior to 2017-18 is irrelevant because the DMF is not a “cost-recovery fee” and therefore, not required to be recorded in the Register. It contends that the DMF was imposed under s262(3)(c) of the LGA.
As noted, the Register of Fees and Charges for 2017/2018 for Maritime Fees was the first such register to include any reference to a DMF. It simply stated:
“Default Maritime Fee: Failure of permit holders to submit compliant maritime fees self-reporting may result in a Default Maritime Fee being applied. Please refer to your permit and related correspondence for details.”
Unlike for standard Maritime Fees, the Register did not disclose the amount of the DMF, how it might be calculated, and there is no entry in the column of the Register of Fees and Charges that identified the legislation under which it was imposed.
The permit for each year did not refer to a DMF.
In 2018, a dispute arose between TSIRC and Sea Swift about landings at Hammond Island. Sea Swift explained cross-harbour activity associated with Hammond Island. It and other cross-harbour services were provided by Sea Swift as a loss-making community service with cargo fees not being charged for the activity.
On 29 June 2018, and in relation the 2019 financial year Permit, TSIRC advised Sea Swift that its “Default Maritime Fee is currently $472,032.40 (GST inclusive) per week” based on the net registered tonnage of the Newcastle Bay (1137 tonnes) and 14 scheduled stops per week. Once again, there was no resolution by TSIRC adopting the imposition of a DMF based upon the kind of assumptions noted in the Council’s advice of 29 June 2018.
The emergence of issues about incomplete reporting
Issues had arisen in 2017 about alleged incomplete or incorrect reporting by Sea Swift in respect of fuel cargo. Sea Swift advised TSIRC that it had reported fuel cargo as general cargo. As noted, issues also arose in relation to a cross-harbour cargo service at Hammond Island that Sea Swift had not reported. On 26 June 2018, TSIRC issued a formal compliance notice requiring Sea Swift to provide vessel manifests and other cargo documentation for the final quarter of 2017. Sea Swift instead produced spreadsheets and a statutory declaration. This information was insufficient to enable TSIRC to conduct a proper audit and to verify whether Sea Swift’s self-reports were compliant in accurately reporting its actual use of landing facilities.
As a result of these matters, TSIRC suspected that Sea Swift was not properly complying with its self-reporting obligations under its permit and had a liability to the Council for the standard Maritime Fees and/or the DMFs.
In January 2019, TSIRC engaged Clyde & Co in relation to its dispute with Sea Swift as to unpaid Maritime Fees and DMFs.
By a resolution at its meeting on 21 and 22 April 2021, TSIRC delegated to its CEO its powers in relation to litigating TSIRC’s dispute with Sea Swift. That resolution was in the following terms:
“4. LEGAL-CB-Delegation-SeaSwift Dispute
RESOLUTION:
Moved: Cr Getano Lui; Second: Cr Rocky Stephen
1. That under section 257 of the Local Government Act 2009, Council empower the Chief Executive Officer to: a. decide to enter into any litigation funding agreement to pursue Council’s interest in this dispute;
b. negotiate, execute, discharge, amend and renew any such litigation funding agreement, as the Chief Executive Officer considers appropriate taking into account any advice from Clyde & Co;
c. decide to enter into any client costs agreement with Clyde & Co to pursue Council’s interest in this dispute;
d. negotiate, execute, discharge, amend and renew any such client costs agreement with Clyde & Co as the Chief Executive Officer considers appropriate;
e. provide instructions to Clyde & Co in the litigation of the dispute, including in respect of any settlement negotiations.
2. Council directs the Chief Executive Officer to report periodically to Council on the progress of the matter.” (Emphasis added).
Consent orders in the Federal Court
TSIRC remained dissatisfied with the production by Sea Swift of documents that would enable it to examine the accuracy of Sea Swift’s self-reporting. On 20 December 2021, it applied to the Federal Court for preliminary discovery against Sea Swift. On 28 March 2022, the Court made consent orders to give preliminary discovery of the following categories of documents:
(a)logbooks for relevant vessels operated by Sea Swift in the period from 1 July 2014 through to 30 June 2018;
(b)registration certificates in respect of each of those vessels, or other such documents recording the gross registered tonnage and net registered tonnage of the vessels;
(c)in relation to each use of the landing facilities by those vessels in the period from 1 July 2014 to 30 June 2018:
(i)all consignment notes stored electronically in a freight management system operated by Sea Swift;
(ii)all fuel delivery advices stored electronically;
(iii)extracts of the data containing the freight management and fuel management systems used by Sea Swift that would otherwise be contained in the consignment notes or fuel delivery advices.
As a result, Sea Swift discovered more than 120,000 documents.
Analysis of the documents
TSIRC’s lawyers, Clyde & Co, analysed these and other documents and created schedules that contained information derived from them. The schedules that were developed by it identified 253 alleged instances of non-compliant reporting by Sea Swift for use of landing facilities during the period from 1 July 2014 to 30 June 2018. When Sea Swift requested disclosure of those schedules for the purpose of this proceeding, TSIRC claimed legal professional privilege and this claim was upheld by Kelly J in a recent decision.[1] However, shortly prior to the hearing before me TSIRC waived privilege in respect of the schedules. They are exhibited as 10 pages to the affidavit of Mr William sworn 10 August 2023.
[1]Sea Swift Pty Ltd v Torres Strait Island Regional Council [2023] QSC 160.
The December 2022 decision to issue DMF invoices
In the same affidavit Mr William states that on 20 December 2022 he instructed Clyde & Co to issue DMF invoices on behalf of TSIRC. This instruction followed his consideration of the summary of findings contained in the four schedules prepared by Clyde & Co. He said that he was satisfied on the basis of the schedules that there were 253 instances of non-compliant reporting by Sea Swift during the period between 1 July 2014 and 30 June 2018. Mr William’s affidavit does not identify any other specific information that he relied upon in reaching what the parties describe as “the DMF Invoice Decision”. Nor did his oral evidence.
The schedules list the total number of calls made by the relevant vessel to a certain island in a certain month. For instance, the first entry reports that the Malu Chief called to Yam Island a total number of five times in April 2015. The schedules do not disclose how many times Sea Swift reported visiting each island in the relevant months. However, Mr Hope of Sea Swift mentions in his affidavit that Sea Swift had self-reported four visits to Yam Island in April 2015.
Most of the entries in the schedule that Mr William relied upon in deciding to issue the DMF invoices record that the total number of calls to an island each month numbered five or six.
The schedule does not state what the standard Maritime Fee would have been for the number of calls that were made or what standard Maritime Fees had been paid for the calls Sea Swift reported each month.
According to Mr William’s affidavit, the decision to issue the DMF invoices and a letter of demand based on them was to enable proceedings to be commenced in the Federal Court “for recovery of the standard Maritime Fees and, alternatively, the Default Maritime Fees”. TSIRC’s submissions state that these documents were issued as a step towards commencing proceedings in the Federal Court for recovery of both unpaid standard Maritime Fees and the DMFs arising from Sea Swift’s underreporting of its use of the landing facilities. Those proceedings have not been commenced for reasons that include this application for review. TSIRC has indicated to Sea Swift that it will not seek to take steps under the DMF invoices, such as issuing statutory demands. It says that the DMF invoices were issued “solely as a demand for payment, so as to enable a private law action in debt for recovery of Default Maritime Fees to be made in the Anticipated Substantive Proceedings”.
Mr William deposes that TSIRC imposed the “Default Maritime Fee regime” in 2015 and that it was imposed “as a condition on the permit issued to vessel owners and operators”. His affidavit describes the DMF regime that the TSIRC imposed in 2015 as follows:
“The Default Maritime Fee was to apply in circumstances where a vessel owner/operator failed to submit accurate self-reporting forms and did not, on issuance of that Default Maritime Fee provide sufficient documentation to successfully refute the assertion that it had under-reported. In those circumstances, a Default Maritime Fee would apply. The Default Maritime Fee is still currently in place today as the system for recourse in the event any vessel owner or operator fails to comply with its self-reporting obligations.”
In any event, the DMF regime that was imposed in 2015 concerned a failure to report by lodging self-reporting forms as required by a permit, not the lodging of inaccurate self-reporting forms.
DMF invoices and other invoices issued to Sea Swift between 2015 and 2018
During each month of the period that is in contention in this proceeding, namely the period between 1 April 2015 and 30 June 2018, Sea Swift always submitted a reporting form. TSIRC issued numerous invoices to Sea Swift and received payments. Some DMF invoices were reversed or credited back to Sea Swift.
The issuing of the December 2022 DMF invoices
TSIRC did not consult with Sea Swift, or cause its lawyers to consult Sea Swift’s lawyers, before Mr William gave the instructions on 20 December 2022 to issue the DMF invoices. Mr William did not think such consultation was necessary because Sea Swift was aware that TSIRC suspected that it had been engaging in non‑compliant self-reporting in breach of its obligations under the permits. He did not consider it necessary to provide Sea Swift with a further opportunity to be heard, prior to giving instructions to issue the invoices. He likens this to the usual process in issuing invoices for charges: for instance, it would not be usual for TSIRC to provide a person with an opportunity to be heard prior to issuing a rates notice.
The timing of the issuing of the DMF invoices, which advised that they were subject to a seven-day appeal period, could have been better. It was hardly the kind of Christmas present that Sea Swift’s staff or its lawyers would have been expecting.
At 11.13 pm on 21 December 2022, TSIRC’s lawyers, Clyde & Co, sent an email to Sea Swift’s lawyers issuing the 253 DMF invoices along with a letter of demand for payment. The base of each invoice noted:
“IMPORTANT
You have seven (7) days from the date of this invoice to appeal. To appeal, please email [email protected] or [email protected], quote this invoice number and provide:
(i) a compliant Maritime Fees Self-Reporting Form (Cargo) for the relevant reporting month;
(ii) the supporting vessel manifest for the relevant reporting month; and
(iii) any other documentation said to invalidate the issuance of the Default Maritime Fee, for TSIRC’s consideration.
Appeals made absent this required supporting documentation shall be refused. Appeals received after the seven (7) day period shall not be accepted and payment of the Default Maritime Fee shall be due and payable on Council’s invoice terms.”
The seven-day appeal period mentioned in the invoices expired on Wednesday 28 December 2022. During that seven-day period fell Christmas Day (Sunday 25 December), Boxing Day (Monday 26 December) and a Christmas Day Public Holiday (Tuesday 27 December). During that period, Sea Swift was operating with only “skeleton staff”. As might have been expected, offices were closed over the Christmas/New Year period. TSIRC’s own office was closed between 23 December 2022 and 3 January 2023. Mr Hope of Sea Swift deposes that the seven-day period was an “impossible time period” in which to “analyse and respond to the matters raised” in the DMF invoices.
The summary tables prepared by Clyde & Co that were attached to its letter of demand detail the actual number of calls Sea Swift made to moorings and/or landing facilities, as evidenced by logbooks and other documents. The DMF invoices, however, are not based on actual landings.
The 253 DMF invoices span the period between 1 April 2015 and 30 January 2018. Each includes GST (a matter that was subsequently accepted by TSIRC to be in error) and each imposes DMFs comprising “Default Harbour Dues” and “Default Tonnage Dues”.
In each invoice:
(a)the “Default Harbour Dues” are calculated by multiplying the net registered tonnage of a vessel (for example, the Malu Titan at 174 tonnes) by the maximum harbour due rate (for example, $28.85) by a maximum number of scheduled stops per month, namely 60.67;
(b)the “Default Tonnage Dues” are calculated by multiplying a rate of vessel (for example, “Rate of Vessel 101-1,500 Tonnes: $396.20”) by a maximum number of scheduled stops per month, namely 60.67.
The invoices for the 2015 financial year calculated Default Harbour Dues based on the net registered tonnage of the Malu Chief vessel (at 140 tonnes). The 2016 invoices were based on it and other vessels, as were the invoices for the 2017 and 2018 financial years.
The 253 DMF invoices claimed DMFs in the sum of $66,543,146.37. They were said to be supported by the information contained in the logbook extracts provided as part of discovery in the Federal Court proceedings.
The summary table provided to Sea Swift by Clyde & Co detailed, among other things, each invoice number, the month, the vessel used to calculate the DMF (and its net registered tonnage), the harbour due rate, the tonnage due rate, the DMF imposed and the “Total Calls (as per logbooks produced in the Preliminary Discovery Proceeding)”. Clyde & Co noted in its covering letter of demand that it “compared the logbooks dating from 1 July 2014 to 30 June 2018 that Sea Swift provided as part of the Discovery Documents, against what was self-reported by Sea Swift previously.” The comparison was said to evidence “numerous instances of under-reporting of calls” by Sea Swift to landing facilities. They were said to evidence “253 inaccurate/non-compliant self-reporting forms” during the four-year period. The attached summary table was said to detail “the actual number of calls Sea Swift made to our client’s moorings and/or landing facilities as evidenced by the logbooks”. IT did not state the number of calls that were self-reported by Sea Swift where instance of under-reporting was detected.
Differences between earlier DMF invoices and the December 2022 DMF invoices
The DMF invoices issued in December 2022 imposed GST on rates described as “GST inclusive”. TSIRC has now conceded that this resulted in Sea Swift being overcharged $6,049,376 and that Sea Swift may “disregard that additional GST component of each [DMF] invoice”.
There is an additional and crucial difference between the December 2022 DMF invoices and the advice given by TSIRC on 15 April 2015 as to the calculation of a DMF. As earlier quoted, that letter advised that the DMF was GST inclusive, and per week, based on the net registered tonnage of a certain vessel and “14 scheduled stops per week”. That seems to refer to a total of 14 stops per week to all of the islands that the vessel was scheduled to visit in a week.
By contrast, the December 2022 DMF invoices adopt a maximum number of 60.67 stops per island per month in the calculation of the DMF invoices.
The uncontested evidence is that 60.67 stops per month to each island is not reflective of reality and is likely impossible in practice.
TSIRC appears to have imposed DMFs on the basis of alleged non-compliant reporting, without regard to and in disregard of the actual extent of the alleged underreporting. For example, if Sea Swift reported four visits to an island in a certain month, but its records revealed that there were five, then the DMF invoice would not be a fee for the additional stop or a fee for the month calculated on the basis of five stops, giving credit for the amount previously paid for four stops. It would be an additional invoice calculated on the basis of 60.67 stops at that island, that month.
The DMF invoices do not reflect Sea Swift's actual use of TSIRC's landing and mooring facilities and do not account for those fees invoiced to and paid by Sea Swift for the relevant month. Sea Swift’s submissions give the following example. If there was one declared call by the Malu Titan vessel to Yam Island in a month in the 2016 financial year, the actual tonnage dues payable in respect of that one visit would be $220 including GST (in the absence of there being any undeclared cargo).
The DMF, however, is calculated on a hypothetical scenario where, for the month, vessel and island in question, Sea Swift visited the island 60.67 times and fully unloaded its cargo each time at the maximum scheduled rate for cargo. This hypothetical scenario does not reflect reality in any of the cases of alleged non‑compliant reporting. The Default Harbour Dues and the Default Tonnage Dues for the island for the relevant month assume 60.67 stops.
Importantly, the December 2022 invoices, in adopting a figure of 60.67 stops per island per month, does not reflect the number of actual stops recorded in the summaries that were prepared by Clyde & Co, and upon which Mr William relied in instructing that firm to issue the DMF invoices. The analysis that was undertaken and relied upon to issue the DMF invoices indicates that the total calls made by Sea Swift’s vessels to the 15 islands each month did not, in most cases, exceed five stops per island, per month. This accords with other evidence that Sea Swift provides “a regular weekly service, visiting 14 of the 15 landing facilities to receive and deliver cargo”. In some months some of the islands, particularly Saibai Island and Hammond Island, were the subject of 10 to 14 calls. However, there are only nine such occasions.
By contrast, the December 2022 DMF invoices use 60.67 stops per island, per month. That number does not accord with Sea Swift’s scheduled services to the islands, and the analysis undertaken by Clyde & Co of 126,000 disclosed documents, including logbooks, or other evidence about the frequency with which Sea Swift visits the islands. Moreover, the DMF invoices assume that in each month, Sea Swift, in visiting an island 60.67 times, fully unloaded its cargo each time. This is an assumption which does not reflect reality. It could not be regarded as a genuine estimate of the number of stops to each island each month, or the volume of cargo that would be loaded or unloaded at each stop.
In summary, the assumption made of 60.67 stops to each island each month during the relevant period seems to be about 12 times the average number of calls actually made to many islands each month, based upon the summary table that was prepared by Clyde & Co after reviewing Sea Swift’s logbooks and other information.
Before issuing the December 2022 DMF invoices, TSIRC did not advise Sea Swift or Sea Swift’s legal representatives that it was planning to depart from the assumptions contained in earlier advices about the number of assumed stops per week or per month. As noted, TSIRC’s letter of 15 April 2015 advised of a DMF based on a total of 14 stops per week for all of the islands. Fourteen stops per week to all islands is roughly equivalent to 56 stops per month for all 15 islands. This equates to less than four visits per island per month, on average. The figure of four is to be contrasted with the figure of 60.67 per month, which is arrived at by multiplying 14 stops per week by 52 and dividing by 12.
This order of difference was brought to the attention of Mr William under cross‑examination. For instance, he accepted that there was a difference of 12 times between the total of five calls to Yam Island in April 2015 that was recorded in the schedule he relied on and the 60.67 stops at that island in April 2015 in the DMF invoice that totalled $117,457.12 before the addition of GST.
Given the assumptions adopted in December 2022, it is unsurprising that the DMF invoices in December 2022 generate vastly greater amounts than the amounts that would have been produced had the DMF methodology advised in earlier correspondence been adopted. The December 2022 DMF invoices are vastly in excess of the amounts that were invoiced to Sea Swift and paid by them. For example, in the 2018 financial year, Sea Swift paid invoices in the amount of approximately $1,103,388 (including GST) to TSIRC for maritime fees. The DMF Invoices issued in respect of the same period total approximately $21,257,065.
The December 2022 DMF invoices also are vastly different in amount to occasional DMF invoices that had been issued in the past. This is further proof that the methodology used to calculate a DMF in December 2022 was different to an earlier methodology.
The December 2022 DMF invoices are in addition to standard fees
The purpose of the DMF that was introduced in 2015 was to prompt the provision of a report and supporting documents that would enable an invoice that reflected actual use to be issued, where upon the DMF invoice would be withdrawn.
The December 2022 DMF has a different character. It is in addition to invoices for standard Maritime Fees that have been issued and paid for Sea Swift’s use of facilities. The DMF purports to impose a fee in addition to the fee to which TSIRC is entitled for actual use, including invoices that it has issued and received payment in respect of. The December 2022 DMF invoices do not give credit for payments that have been received for use of facilities over the relevant period. They are on top of, not in substitution for, invoices that have previously been issued.
The fact that the December 2022 DMF invoices are not based upon TSIRC’s own analysis of use, as summarised in the tables prepared by Clyde & Co on its behalf, demonstrates that they were not an attempt to arrive at a fee based upon evidence or an estimate of actual use. They were not based on scheduled services, logbooks, cargo manifests or other documents that were included amongst the 126,000 documents that were disclosed to TSIRC. Information available to the TSIRC and its lawyers about scheduled services and information provided in all of the documents disclosed to it and its own analysis show that the figure of 60.67 visits per island per month is divorced from reality about actual use. The assumption that the vessel unloaded or loaded all of its cargo at each island does not reflect actual operations.
An alternative methodology to arrive at Sea Swift’s actual use of facilities?
TSIRC submits that the DMF is not a different type of fee to the standard Maritime Fee and that it is “better viewed as an alternative methodology for calculating the standard Maritime Fees” in circumstances where Sea Swift’s non‑compliance with its self-reporting obligations does not allow TSIRC to accurately calculate the standard Maritime Fees. In the light of the evidence that I have discussed at length, the submission that the December 2022 DMF is simply “an alternative methodology for calculating the standard Maritime Fees” that Sea Swift is obliged to pay is unconvincing.
TSIRC further submits that the methodology “is based upon a hypothetical maximum use of the Landing Facilities by Sea Swift and is the best approximation of the use of the Landing Facilities that TSIRC can determine in circumstances where Sea Swift has not properly complied with its self-reporting obligations”. However, the TSIRC methodology adopts a hypothetical maximum use based upon assumptions that are purely hypothetical and inconsistent with TSIRC’s own analysis of use. The DMF under challenge in this proceeding cannot be descried as “the best approximation” of Sea Swift’s actual use of the facilities. The DMFs issued in December 2022 effectively ignored TSIRC’s own analysis and estimate of actual use.
TSIRC’s submissions point to the fact that the DMF is based upon the same components as the standard Maritime Fees which, as earlier noted, consist of harbour dues payable in respect of cargo and tonnage dues payable in respect of the period that a vessel occupies a landing facility, calculated by reference to the size of the vessel. However, this does not mean that the methodology used to generate the December 2022 DMF invoices is a methodology to arrive at an accurate estimate of actual use.
In summary, TSIRC and its lawyers generated invoices in December 2022 for DMFs that did not attempt to arrive at an accurate estimate of actual use. They adopted a hypothetical maximum use that did not reflect TSIRC’s best approximation of the use of its facilities. The DMFs adopted a maximum use that was completely hypothetical and disregarded evidence in its possession about actual use and its analysis of more than 120,000 documents. Those documents were disclosed to it to enable it to arrive at an estimate of actual use and the volumes of cargo that were loaded or unloaded. Rather than being based upon an estimate or rough calculation of the amount of cargo that was loaded or unloaded on each of the occasions when there was alleged inaccurate reporting, the DMF adopts the unrealistic hypothesis that a vessel fully unloaded all of its cargo at each stop as it went from one island to the next, and that on each occasion it carried the maximum amount of cargo that it could carry (the vessel’s net registered tonnage).
The DMF imposed in December 2022 was not TSIRC’s best approximation of the use of landing facilities in circumstances where Sea Swift had not properly complied with its self‑reporting obligations. It was the imposition of a default charge that was completely divorced from the vast amount of information that TSIRC had obtained and analysed about Sea Swift’s actual use.
The contention that the DMF evidenced by the December 2022 invoices reflects an alternative methodology for calculating standard Maritime Fees is unconvincing and not supported by the evidence. Rather than being a best approximation of actual use, the TSIRC purported to impose a fee that was based on hypothetical, maximum figures that vastly exceeded what TSIRC understood to be Sea Swift’s actual use of the facilities over the relevant period.
Some basic questions
The first ground of Sea Swift’s application is that the imposition of a DMF is beyond the power conferred on TSIRC by the LGA and/or the Model Local Law and Subordinate Local Law. Its case is that the fee, how it is calculated and the criteria for its imposition, are not found in or supported by any power in those laws. They also contend that these things are not found in or supported by any resolution of the TSIRC or any condition in the relevant permits.
Sea Swift claims a number of declarations in the alternative. The first is a declaration that “the establishment and/or imposition of a Default Maritime Fee was beyond the power conferred on the respondent”. Other alternative declarations relate to the TSIRC’s decision to issue the 253 DMF invoices.
The parties agree that the first issue for the Court’s determination is this:
“Did ss 9 and 262(3)(c) of the Local Government Act 2009 (Qld) authorise the imposition of the Default Maritime Fee regime, and the Default Maritime Fee evidenced by the issuance of the Default Maritime Fee invoices dated 21 December 2022?”
In considering that issue of legal authority, it is important to clarify what TSIRC contends was authorised. Was it:
(a)a fee or charge, in particular, a DMF; or
(b)a “regime” that somehow permitted such a fee to be imposed?
If it was a regime, then one needs to be clear about by whom, when, and in what form the “regime” was established, including which resolution of the TSIRC or other decision established it.
As discussed, the policy or regime that was developed in 2015 was one about non‑reporting, whereas the December 2022 decision to impose DMFs and issue DMF invoices was about a different matter, namely a concern about inaccurate reporting. Is the regime that is said to have been instituted by the Council in 2015 the same regime that was used in making the decision on 20 December 2022? If so, how can the differences in the nature of the DMFs between 2015 and 2022 and their maximum hypothetical use factors be explained?
If the regime that was instigated in 2015 was a policy that envisaged Council officers developing a form of charge that would be imposed at their discretion for a failure to self-report, then any decision or direction by the Council meeting that the officers should develop and issue a letter that foreshadowed “maximum charges for seaport charges” and that adopted a “maximum rate for non-reporting” did not itself impose a fee or charge. The nature of the fee, how it would be calculated, and the maximum rate were left to Council officers to develop.
The difference between a Council as an elected body imposing a fee or charge and a Council officer deciding what that fee or charge should be, is not a matter of semantics. A simple analogy may suffice. Suppose a Council lawfully imposes a fee or charge for motorists who use a Council car parking facility. The system involves a pay-and-display ticket system. In support of the policy and to enforce payment of the charge the Council may resolve to impose another fee that is payable for users of the facility who fail to display a ticket. The fee might be set at a certain figure or might be fixed by reference to the maximum fee that would be payable if the vehicle were parked for a certain number of hours. If that level of fee was not thought to be sufficient to compel compliance with the pay-and-display system, then the Council might, within limits imposed by law, impose a penalty for individuals who fail to pay and display. The penalty might be set at a figure that vastly exceeded the amount that the individual would have been required to pay for parking all day. It would not be regarded as a fee for the use of the Council’s car park for the number of hours that the car was parked there. It would be in the nature of a penalty for having failed to pay the prescribed parking fee and display the ticket.
A Council officer who decided to impose a fee for non-compliance might be said to be imposing a fee. However, it was the Council that imposed the fee for defaulters and the officer who implemented or enforced the scheme.
In Ostwald Accommodation Pty Ltd v Western Downs Regional Council,[2] Jackson J noted that a local government’s express powers “include the legislative power to make and the executive power to enforce any local law”. A local law is made by passing a resolution at a meeting of councillors.[3]
[2][2016] 2 Qd R 14; [2015] QSC 210 at [24].
[3]At [27].
These observations distinguish between the power of a local government to enact a measure, including a fee or charge, and the enforcement of such a measure by officials.
A council may direct its officers to take measures to enforce an existing policy, including a policy that lawfully requires individuals to pay a fee or charge for using a council facility. A decision that existing rules about the use of council facilities should be better enforced so as to achieve their purpose and to collect validly imposed fees and charges is one thing. Council officers who are directed to enforce such rules may have at their disposal a variety of lawful powers, including the power to issue an infringement notice or to recover a penalty for an offence. That kind of enforcement process is entirely different to one which purports to allow a council officer to decide that a fee or charge should be imposed for non-compliance, and to then devise the basis upon which the fee or charge would be arrived at.
Mr William’s first affidavit gives his understanding that the TSIRC in 2015 imposed a “Default Maritime Fee regime” to ensure that operators such as Sea Swift paid for their use of the landing facilities when they failed to submit compliant self‑reporting forms. For the reasons that I have given, this may be an ambiguous description of a regime that was concerned with non-reporting by a failure to submit forms, rather than inaccurate reporting. In any event, Mr William’s understanding was that the DMF was imposed as a condition of the permit and was to apply in circumstances where an owner or operator failed to submit accurate self-reporting forms and did not, on issuance of a DMF invoice, provide sufficient documentation to successfully refute the assertion that it had underreported. In those circumstances, a DMF would apply.
Mr William observes that the DMF is still currently in place as a system for recourse in the event any vessel, owner or operator fails to comply with its self‑reporting obligations. However, if that is so, then the regime has changed in the respects I have earlier described. It has evolved to apply to operators who submit self-reporting forms that are alleged to be inaccurate. Unlike the 2015 DMF, the December 2022 DMF is not something that is issued as a prompter for the vessel operator to provide sufficient documents after a failure to report, and to ensure that an invoice is issued based on those documents and accurate information about use. After all, TSIRC had 126,000 documents about use. The DMF invoices that were issued in December 2022 were in the nature of penalties for non-compliance.
Like any penalty, the DMF’s existence may be said to provide an incentive to comply. However, the DMF that was imposed in December 2022 was not a substitute for standard Maritime Fees in circumstances in which self-reporting by Sea Swift was inaccurate or incomplete. It was a fee for non-compliance. It was a fee to penalise Sea Swift for alleged non-compliance, not a fee for use of a facility.
A regime or a rule?
A regime may be defined as “a prevailing order or system of things”[4] or as “a method or system of government”.[5]
[4]Australian Concise Oxford Dictionary (5th ed, 2012) meaning (2). See also Macquarie Concise Dictionary (6th ed, 2013) meaning (2) “a ruling or prevailing system”.
[5]Australian Concise Oxford Dictionary (5th ed, 2012) meaning (1). See also Macquarie Concise Dictionary (6th ed, 2013) meaning (1) “a mode or system of rule or government”.
The system by which standard Maritime Fees are imposed based on components calculated by reference to the net weight of a vessel and the amount of cargo that is discharged or loaded at a landing might be described as a fee regime for use of landing facilities. There is, however, no issue about the TSIRC’s imposition of a standard Maritime Fee or the basis upon which it is calculated.
In its affidavit evidence and in its submissions, TSIRC refers to “the Default Maritime Fee regime”. Therefore, this phrase is part of the first issue for my decision. The phrase is imprecise. It seems to be used to describe a policy or a system to impose a DMF based on maximum use assumptions. It is not used in the sense of a system that consists of a fee promulgated by elected councillors that can be found in a table or some other document that states the circumstances in which it is payable and the basis upon which it is calculated.
The decision in December 2022 to impose DMFs on Sea Swift might be said to be implementing a policy or regime that was adopted by the TSIRC in 2015. This is the way Mr William describes it. However, the policy that was adopted in 2015 was not reflected in a DMF that could be found in a Register of Fees and Charges. Instead, it was introduced, so far as Sea Swift was concerned, by the letter it received in April 2015 advising it of the basis upon which the fee would be calculated.
The distinction between a regime and a rule should not be blurred. A council officer who issues an infringement notice may be said to be implementing a regime or enforcing a rule. The legal issue, however, is the source of the officer’s authority to issue an infringement notice and the legal basis for the rule that is alleged to have been infringed. Similarly, a council officer who imposes a fee or charge for use of a council facility, if challenged, must be able to identify the legal authority by which the fee or charge was created.
In deciding to impose a DMF for 253 instances of alleged non-compliance with Sea Swift’s reporting obligations, Mr William did not decide to impose a regime. He decided to impose a fee: a Default Maritime Fee.
What legal authority did the Council have to introduce such a fee? When and how was it introduced?
The threshold question of authority is answered by TSIRC by submitting that the imposition of the DMF evidenced by the December 2022 invoices was authorised by ss 9 and 262(3)(c) of the LGA. To determine the threshold issue of legal authority I will summarise, as briefly as possible, the relevant provisions.
Did ss 9 and 262(3)(c) of the LGA authorise the imposition of the DMF?
This question simplifies the threshold question formulated by the parties and referred to at [9]. The simplified question does not refer to “the Default Maritime Fee regime” because of the ambiguity of that phrase. The simplified question is capable of referring to the DMF that was imposed by the letter of 15 April 2015 and by subsequent letters that advised its amount, and it also may refer to the DMF evidenced by the December 2022 invoices. It is the latter fee and the decision to issue invoices reflecting it that is the focus of this proceeding. That is the DMF to which the following discussion is principally directed. That discussion, however, has implications in relation to the authorisation of earlier DMFs, including the one advised on 15 April 2015.
Statutory framework
A local government is an elected body that is charged with the good rule and local government of a part of Queensland allocated to the body. [6]
[6]LGA s 8; Constitution of Queensland 2001 (Qld) s 71(1).
Section 9 of the LGA provides that a “local government has the power to do anything that is necessary or convenient for the good rule and local government of its local government area” but that it “can only do something that the State can validly do”. The notes to s 9 refer to s 262.
Section 262 provides:
“262 Powers in support of responsibilities
(1) This section applies if a local government is required or empowered to perform a responsibility under a Local Government Act.
(2) The local government has the power to do anything that is necessary or convenient for performing the responsibilities.
(3) The powers include all the powers that an individual may exercise, including for example -
(a) power to enter into contracts; and
(b) power to acquire, hold, deal with and dispose of property; and
(c) power to charge for a service or facility, other than a service or facility for which a cost-recovery fee may be fixed.” (Emphasis added).
Chapter 4 of the LGA is entitled “Finances and accountability”. Part 1 of the Chapter is entitled “Rates and charges”. Part 2 is entitled “Fees”. Within Part 2 of Chapter 4, s 97 provides for “cost-recovery fees”.
Section 98 provides that a local government must keep a register of “cost-recovery fees”. It is unnecessary to set out the definition of a “cost-recovery fee” as contained in s 97(2). In simple terms, it is a fee for matters such as issuing or renewing a licence, giving information, seizing property or animals, or performing some other responsibility. A cost-recovery fee must not be more than the cost to the local government of taking the action for which the fee is charged.
The standard Maritime Fee is not a cost-recovery fee. It is a charge for use of a facility.
The present issue is whether the DMF is a “charge for a service or facility” and therefore within the power referred to in s 262(3)(c).
The powers referred to in s 262 given to a local government to do anything that is “necessary or convenient for performing” its responsibilities under a Local Government Act should be viewed in the context of s 9 of the Act. That section refers to the power to do anything that is necessary for the good rule and local government of the local government area. As Jackson J explained in Ostwald Accommodation Pty Ltd v Western Downs Regional Council:[7]
“The local government’s express powers include the legislative power to make and the executive power to enforce any local law that is necessary or convenient for the good rule and local government of its local government area, within specified limits and subject to procedural requirements.”
[7][2016] 2 Qd R 14; [2015] QSC 210 at [24].
Jackson J also stated:[8]
“The legislative function of a local government is conferred by the power to make any local law that is necessary or convenient for the good rule and government of its local government area. A local law is made by passing a resolution to make it at a meeting of councillors.” (Emphasis added).
[8]At [27].
A “local law” is a law made by local government and, unless there is a contrary intention in the LGA, a “local law” includes a reference to a “Subordinate Local Law” and a “local law that incorporates a Model Local Law”.[9]
[9]LGA ss 26(2) and (3).
A “Model Local Law” is one approved by the Minister, by gazette notice, as being a local law “suitable for incorporation by all local governments into their local laws”.[10]
[10]LGA ss 26(7) and (8).
A “Subordinate Local Law” is a “local law” that is “made under a power contained in a local law” and “provides for the detailed implementation of the broader principles contained in the local law”.[11] A “Subordinate Local Law” is also described as one that is “subordinate to the local law under which it is made”.[12]
[11]LGA s 26(5).
[12]LGA s 26(6).
A local government is empowered to “make and enforce any local law” that is “necessary or convenient for the good rule and local government of its local government area”, but must not make a local law that “sets a penalty of more than 850 penalty units for each conviction of failing to comply with a local law”.[13]
[13]LGA s 28.
The following model and subordinate local laws are relevant to the present dispute:
· the Torres Strait Island Regional Council Model Local Law No. 1 (Administration) 2010 (the “Model Local Law”) which was adopted by resolution on 17 August 2010; and
· the Torres Strait Island Regional Council Subordinate Local Law No. 1 (Administration) 2013 which was adopted by resolution on 16 July 2013 and which has since been replaced by Subordinate Local Law No. 1 (Administration) 2019 (the Subordinate Local Law).
The purpose of the Model Local Law is to “provide a legal and procedural framework for the administration, implementation and enforcement of the local government’s local laws, subordinate local laws and specified regulatory powers under legislation, and to provide for miscellaneous administrative matters”.[14]
[14]Model Local Law, s 2(1).
The Model Local Law provides for the granting of an approval for a “prescribed activity”, which includes “commercial use of local government controlled areas”. There is no contest that each of the landing facilities are “local government controlled areas”.
Section 10(1) of the Model Local Law provides that an approval may be granted on conditions the local government considers appropriate. Section 10(2) provides that the conditions imposed must:
“(a)be reasonably necessary to ensure that the operation and management of the prescribed activity will be adequate to protect public health, safety and amenity and prevent environmental harm; and
(b)be consistent with the purpose of any relevant local law.”
TSIRC may, by subordinate local law, prescribe conditions that must be imposed on an approval or that will ordinarily be imposed on an approval.
Section 35 of the Model Local Law states that if a local law provides for payment of a fee, and does not itself fix the amount of the fee, the fee is to be fixed by resolution under the LGA, Chapter 4, Part 2.
The parties’ submissions on ss 9 and 262(3)(c) of the LGA
TSIRC submits that the DMF regime is properly characterised and construed as a charge for a service or facility, and therefore it is authorised by s 262(3)(c), read in the light of the plenary power conferred upon it by s 9.
Sea Swift submits that the imposition of a DMF is not authorised by any power, including the power to do things “necessary or convenient” in ss 9 and 262, or the power to charge for a service or facility.
According to Sea Swift, the DMF is a penalty for alleged non-compliance that far exceeds the maximum penalty for non-compliance, and therefore is inconsistent with the statutory scheme for enforcement. It submits that the powers in s 262 to do things that are “necessary or convenient” do not authorise the establishment of new and different means or to depart from the plan that the legislature adopted. It also argues that the DMF is not “necessary or convenient” because powers and measures exist to address non-compliance. Finally, the power in s 262(3)(c) to charge “for” a service or facility does not apply. According to Sea Swift, the DMF is not a charge for using landing facilities, it is a heavy financial burden for alleged non-compliance with a penalty that bears no relationship to actual use.
The questions raised by the parties’ submissions on the threshold issue concerning ss 9 and 262(3)(c) of the LGA are as follows:
(a)Is the DMF[15] a penalty for non-compliance with reporting conditions?
(b)Does it depart from, and is it inconsistent with, the scheme that the legislature has adopted to address non-compliance?
(c)Is the DMF “for” a service or facility?
[15]For present purposes, I do not distinguish between the DMF that was notified by letter or the DMF that is evidenced by the December 2022 invoices, because Sea Swift contends that both are a penalty and TSIRC contends that neither are.
Is the DMF a penalty?
Earlier I reached the conclusion that it is. It is convenient to summarise at this point my reasons for that conclusion.
The DMF was conceived as a measure to “effectively disincentivise” non‑compliance with an obligation to report. The maximum penalty for an offence was regarded by Council officers as inadequate. The DMF that was initiated in 2015 and any DMF advised in subsequent correspondence exceeded the maximum penalty allowed by law. A local law must not set a penalty of more than 850 penalty units for each conviction of failing to comply with the local law.[16]
[16]LGA s 28(2).
At the relevant time, the maximum amount for a penalty unit for an offence against a local law made by TSIRC was $75.[17] Subsection 28(2) of the LGA would, therefore, operate to prevent TSIRC making a local law that set a penalty of more than 850 penalty units or $63,750. The DMF, however, was set at $106,523.90 per week from 12 September 2016, $109,753.00 per week from 3 July 2017 and $472,032.40 per week from 29 June 2018.
[17]Penalties and Sentences Act 1992 (Qld) s 5(1)(b); Penalties and Sentences Regulation 2005 (Qld) s 2, sch 2.
The DMF was not a methodology to estimate actual use. It was not based on assumptions that reflected any approximation of historical or actual use. Its hypothetical maxima exceeded by many times what the TSIRC understood or knew about use. Because those hypothetical figures vastly exceeded the actual use that would be reported and documented by the operator, TSIRC officers in 2015 did not expect operators to pay the DMF. They appreciated that the DMF was a penalty and probably unenforceable, and that to prove this the operator would report their actual use. The DMF penalty fee invoice would then be withdrawn, and an invoice issued based on actual use.
The DMF evidenced by the December 2022 invoices was imposed in addition to standard Maritime Fees that have been invoiced and paid. Past payments are not accounted for by way of a deduction to arrive at a supposed or approximate figure for use.
A DMF was imposed in December 2022, despite TSIRC having ample information to determine actual use. Rather than being a fee that reflected or approximated actual use, it was a heavy financial burden imposed for alleged non-compliance with reporting conditions. It was a penalty.
Does the penalty depart from, and is it inconsistent with, the statutory scheme?
The DMF imposes a much higher penalty than that imposed under the law.
The power to do things that are “necessary or convenient” does not confer a power to depart from or vary a scheme that the legislature has adopted.[18]
[18]Shanahan v Scott (1957) 96 CLR 245 at 250; Morton v Union Steamship Co of New Zealand Ltd (1951) 83 CLR 402 at 410; Binsaris v Northern Territory (2020) 270 CLR 549at 583[100]; [2020] HCA 22 at [100].
For the reasons that I have given, the DMF evidenced by the December 2022 invoices adopts a different methodology or, at least different assumptions, to earlier, notified DMFs. However, I consider it inappropriate to engage further with the arguments about retrospectivity. One reason is that there is uncertainty and dispute as to whether the imposition of the DMF, or what TSIRC would describe as the establishment of the DMF regime, was an act or resolution of the Council exercising the plenary powers granted to it by s 9 in something resembling an exercise in law-making or a measure undertaken by Council officers as part of a process of enforcing the existing rules about fees for use of landing facilities. My earlier conclusion that the DMF was not authorised makes it unnecessary to address the issue of retrospectivity.
Were the DMF invoices issued in accordance with the criteria for imposition of DMFs?
If the authority to issue the December 2022 invoices had its source in the 15 April 2015 letter, or even in the directions given by the Council to officers in February or March 2015, then the criteria for its imposition was a failure to report. This emerges from the minutes of February 2015 and the terms of the 15 April 2015 letter. Subsequent letters in 2016 and 2017 referred to a DMF being applied “in default of compliant self-reporting”. It is sufficient to observe that if the criteria that the Council authorised in 2015 for the imposition of a DMF was a failure to self-report, then the December 2022 invoices do not apply this criteria. Significantly, in all the instances covered by the DMF invoices, Sea Swift submitted self-reporting forms. Therefore, the DMF invoices necessarily were issued for non-compliant or inaccurate self-reporting, not for a failure to self‑report.
Was the issuance of the DMF invoices legally unreasonable?
The parties devoted substantial written submissions to this issue. Because it is unnecessary for me to decide the point, I do not propose to address the law governing the concept of “legal unreasonableness” or all of the arguments.
Sea Swift makes a variety of complaints, some of which do not support a case of legal unreasonableness. A mistaken inclusion of GST is one. Arguments about whether Sea Swift was the agent or owner of the Fourcroy vessel is another. An error in adopting the gross registered tonnage, rather than the net registered tonnage, of a certain vessel for certain invoices would not qualify as a decision that was legally unreasonable. It was simply a mistake.
The more substantial legal unreasonableness arguments concern the adoption of hypotheticals that Sea Swift vessels made 60.67 scheduled stops to each island per month. Sea Swift argues that TSIRC had no intelligible basis for adopting that figure and therefore the calculation of the DMF invoices lacked any evident or intelligible justification and were capricious or irrational. Emphasis is placed on the fact that TSIRC had evidence of and analysis of actual use and therefore no occasion existed to impose a DMF that is supposed to apply when a standard Maritime Fee cannot be calculated. Next, the difference between the actual use known to TSIRC as at 20 December 2022 and the assumed use reflected in the DMF invoices made the adoption of those assumptions capricious and legally unreasonable.
If the DMFs were intended to be TSIRC’s best estimate of actual usage, including the number of stops at each island each month, then the figures adopted by it could not be justified. For the reasons already canvassed, they did not reflect reality and vastly exceeded the figures that TSIRC’s lawyers had produced as a result of analysing more than 120,000 documents.
If, however, the DMFs were in the nature of a penalty (as I have found them to be), then the fact that they were calculated on the basis of hypothetical, maximum figures is unremarkable and would not render them legally unreasonable.
An associated point that Sea Swift raises on the question of legal unreasonableness is that the criteria for their imposition are difficult to discern and that, unlike the 2015 DMF, the DMF evidenced by the December 2022 invoices do not relate to a failure to self‑report. This gives rise to an argument that the lack of clarity concerning the criteria adopted for the imposition of the DMF and the lack of forewarning about it, mean that the DMF evidenced by the December 2022 invoices was arbitrarily imposed.
TSIRC responds that the argument about 60.67 visits is misconceived. The DMF assumes 14 stops per week as one of its inputs, as set out in the 15 April 2015 letter. The 60.67 figure is the equivalent of 14 stops per week over 52 weeks, divided by 12 to arrive at a monthly number. That does not, however, meet Sea Swift’s point concerning the difference between 2015 and 2022, with the 2015 assumption being a total number of 14 visits to all islands per week. More generally, TSIRC again submits that the DMF was an alternative methodology and is not invalidated by any difference between that methodology and what Sea Swift now contends was its actual use.
In simple terms, Sea Swift submits that the DMF evidenced by the December 2022 invoices are legally unreasonable because they make no attempt to reflect actual use and, instead, adopt assumptions about use that TSIRC knew did not match reality. However, if Sea Swift is correct, as I have found it is, in describing the DMFs as penalties rather than estimates of actual use, then the relevant exercise of power was not one that aimed to impose a DMF and issue invoices to reflect actual use. On that view, it would not be unreasonable to greatly exceed actual use in order to impose a penalty.
I have found that the DMF evidenced by the invoices were not authorised. In the circumstances, it is unnecessary to decide the issue of legal unreasonableness concerning the issuing of the invoices.
Were the DMF invoices issued in breach of an obligation to accord procedural fairness?
Again, it is unnecessary to resolve this issue. I shall, however, make a few observations.
Sea Swift is correct that the decision to issue the December 2022 DMF invoices had the ability to affect its interests. This argument is not met by TSIRC’s arguments that it did not intend to take any further steps other than commencing the proceedings in the Federal Court, that the invoices are analogous to a letter of demand, and that they had no significance. They amounted to the assertion of a debt due and owing for more than $66 million. The making of those demands would need to be reflected in Sea Swift’s accounting and reports. The presence of such a massive claim, even if disputed, would have an effect upon its financial affairs, and its attractiveness to a potential lender or buyer.
The issuing of the December 2022 DMF invoices to Sea Swift differs from the ordinary process of issuing an invoice for rates. A council like the TSIRC is not obliged to give procedural fairness to citizens before it sends notices for rates or other fees and charges. The basis upon which rates are struck is a matter of public record.
Importantly, the December 2022 DMF invoices purported to impose a DMF on a different basis to that previously notified. TSIRC did not notify Sea Swift of its intention to do so or afford any opportunity to respond.
In my view, TSIRC should have at least notified Sea Swift that it intended to impose a DMF on a different basis to that previously notified to it and advised of that basis.
Was the decision to prescribe the seven-day “appeal right” in respect of the DMF invoices beyond power or legally unreasonable?
There is a strong argument that the creation of a seven-day appeal notice period is unauthorised and its creation does not accord with the processes envisaged by the LGA, including resort to a compliance notice procedure in accordance with s 26 of the Model Local Law. If, however, the prescription of an appeal period beyond which further matters would not be considered was authorised, then given the matters that were required to be undertaken within the appeal period, it was entirely unreasonable for invoices giving only a seven day period to be issued at the time they were. The timing made it impossible for Sea Swift to provide the required information within seven days. TSIRC’s arguments that Sea Swift must have been aware of the extent of its non‑compliant self-reporting as a result of the conduct of the proceedings in the Federal Court is no answer to the argument that the seven-day appeal right was illusory, arbitrary, capricious and lacking any justification in the circumstances.
It is unnecessary to decide whether the invalidity of the seven-day appeal right would otherwise affect the validity of the invoices, because I have already found that the invoices were invalid. However, there is something odd about the proposition that the severance of an appeal provision that was designed to protect Sea Swift allows an invoice that contains no appeal period to stand.
Relief
Sea Swift is entitled to declaratory relief. The parties’ submissions canvassed an issue concerning an additional order in the nature of certiorari. However, counsel for Sea Swift did not press that form of relief.
I shall hear the parties as to the form of relief. Paragraph 1 of the application for review seeks a declaration “that the establishment and/or imposition of a Default Maritime Fee was beyond the power conferred on the Respondent”. I am disposed to grant that declaration to that effect and to further declare that the DMF invoices dated 21 December 2022 are invalid. Since the dispute centres on a DMF evidenced by those invoices the first declaration should be worded something like:
“It is declared that the imposition of the Default Maritime Fee evidenced by the 253 Default Maritime Fee invoices dated 21 December 2022 (numbered from INVDMF0001 to INVDMF0253) was beyond the power conferred on the respondent.”
I shall hear the parties as to the form of declaratory relief and any submissions as to costs. However, my provisional view is that, Sea Swift having enjoyed substantial success, the costs of the proceeding should follow the event.
Summary and Conclusion
The DMF that was conceived in 2015 was intended to operate as a penalty for a failure to report.
No resolution of the local government in 2015 prescribed how the penalty would be calculated or fixed any maximum. Instead, officers of TSIRC developed a policy by which a new fee would penalise an operator for failing to report and thereby create an incentive for the operator to comply with the condition to report.
Rather than approximate or estimate the standard Maritime Fee, the DMF about which Sea Swift was advised on 15 April 2015 was calculated on the basis of the Malu Chief making 14 visits to islands each week and discharging or loading an assumed cargo of 104 tonnes (the vessel’s net registered weight) at each stop. The assumption that it would load or unload all of its cargo at each stop was unrealistic and, along with other assumptions, the DMF constituted a penalty.
No DMF was adopted by TSIRC it its Register of Fees and Charges at the time, and even in 2018 the Register did not itself prescribe the fee’s components, state how it would be calculated, or fix its maximum amount.
The 15 April 2015 letter stated that a DMF of $27,104 for 14 stops per week was imposed pursuant to conditions (c), (aa) and (bb) of the permit. Subsequent letters in 2016 and 2017 advised of different amounts based on larger vessels than the Malu Chief and increased harbour dues and tonnage dues. They still were based, however, on a total of 14 scheduled stops per week or about 60 stops per month to all of the islands. DMF invoices in 2016 and 2017 reflected this methodology.
The DMF evidenced by the December 2022 invoices was fundamentally different to the earlier DMFs. The DMF that Mr William decided on 20 December 2022 to impose:
· was not for a failure to submit a self-reporting form;
· did not assume a total of 14 stops per week or about 60 stops per month at all islands;
· was imposed for each island that was the subject of inaccurate reporting, and assumed that the vessel visited that island 60.67 times in the relevant month;
· was calculated on the basis of 60.67 landings on that island in the relevant month.
The December 2022 DMF, in adopting those figures and assumptions about the amount of cargo that was loaded or unloaded at each stop, did not reflect the abundant evidence and information that was known to TSIRC and its lawyers about the actual number of stops on each island each month, the duration of each stop, the amount of cargo that was discharged, landed or trans-shipped, or the nature of the cargo.
The December 2022 DMF was a penalty for alleged non-compliance with reporting conditions, not a charge for using facilities. Because it was not a charge “for” facilities, it was not authorised by s 262(3)(c) of the LGA.
The imposition of such a penalty for contravention of reporting conditions departs from, and is inconsistent with, the statutory scheme by which financial penalties for breach are imposed and the maximum permitted amount of a penalty. The amount of the penalty imposed by the DMF exceeded the maximum penalty permitted by s 28(2) of the LGA and by s 11 of the Model Local Law.
The December 2022 DMF was not a “prescribed fee” charged by TSIRC in accordance with its Register of Fees and Charges, and therefore condition (c) of each permit did not oblige Sea Swift to pay it.
The December 2022 DMF was imposed without lawful authority, and therefore any direction to pay it was not a “lawful” direction under condition (aa) or a “lawful” future condition of the kind envisaged by condition (bb) of a permit.
The power granted by ss 9 and 262 of the LGA to create a fee or charge is conferred on an elected body: a local government. I doubt whether the power to create a fee or charge can be delegated to a Council employee, including a CEO, leaving such an employee, rather than the elected local government, to decide whether and when the fee will be imposed, its criteria, the mechanism for its calculation or its maximum amount.
In any event, the April 2021 TSIRC resolution that delegated to the CEO the power to instruct Clyde & Co in the litigation of a dispute with Sea Swift did not confer on Mr William a power to decide what the DMF should be, the methodology for its calculation or its maximum amount.
Neither the DMF imposed by correspondence in 2015, 2016 or 2017 nor the different DMF evidenced by the December 2022 invoices attempted to estimate the standard Maritime Fee that would be payable in the event of timely or accurate self-reporting. It was not an approximation of the fee that would be imposed for use. It was a penalty.
If, however, the DMF had been intended to operate as a proxy for, or best estimate of what the standard Maritime Fee would be in circumstances where accurate reporting details were not available to calculate that fee, no occasion existed in December 2022 to impose such a DMF for that purpose. By then TSIRC had analysed the information it required to invoice for standard Maritime Fees. The December 2022 DMF was imposed as a penalty to be paid in addition to any standard Maritime Fee that was due and any that had been paid in respect to the relevant period. It was a penalty, not a substitute for the standard Maritime Fee.
If the purpose of TSIRC, or more precisely its CEO, in December 2022 had been to impose a substitute charge “for” Sea Swift’s use of its facilities as a means of recovering unpaid standard Maritime Fees that were due to it, then the decision to impose the DMF that was evidenced by the December 2022 invoices was legally unreasonable and invalid. The person or persons who decided that the DMF should be calculated on the basis of 60.67 visits each month to an island and the other assumptions embedded in the schedules prepared by Clyde & Co are unknown. The rationale for calculating a DMF based on the methodology adopted in the schedules is unclear.
What is known, however, is that the DMF that Mr William decided to impose, based on those schedules, adopted figures that vastly exceed what he, Clyde & Co and TSIRC knew to be the actual use of landings and the cargo that was landed on the relevant island each month. If the DMF was intended to be TSIRC’s best approximation of what the standard Maritime Fee would have been if accurate information had been reported to it, then it was capricious to adopt, for example, a figure of 60.67 stops a month, when the number of stops to that island in that month was known to be five.
Had I been required to, I would have found the decision to issue the invoices in the stated amounts capricious, given what was known by TSIRC about actual usage, and legally unreasonable.
The fact that the December 2022 DMF was charged on a different basis to earlier DMFs and had legal effect as a demand for payment of a debt that was due and owing in accordance with the terms of the invoice probably required TSIRC to give notice to Sea Swift of the new methodology, so that Sea Swift could make submissions about its legal validity. In the circumstances, Sea Swift probably was denied procedural fairness, but it is unnecessary to decide the point.
The inclusion of a seven-day “appeal period” was unreasonable in the legal sense, given the timing of the invoice’s delivery and the substantial steps that were required to be completed within the seven-day period. Allowing only seven days in the circumstances lacked an evident and intelligible justification. It gave an appeal period that was illusory.
The inclusion of that seven-day appeal period affected the validity of the decision to issue such an invoice. The severance of that seven-day period would not save the invoice from invalidity. Severance would change the invoice from one that provided an inadequate appeal period to one with no appeal period at all.
The answer to the first question for determination resolves the proceeding. TSIRC lacked legal authority to impose the December 2022 DMF. The lack of authority to impose the December 2022 DMF renders the decision to invoice Sea Swift for such a DMF invalid and of no legal effect. Declarations will be made to the effect that:
· the imposition of the DMF was beyond the power conferred on TSIRC; and
· the December 2022 DMF invoices are invalid.
Postscript: a dispute that should be resolved without delay
The Court has decided a legal question about the validity of the December 2022 Default Maritime Fee as evidenced by the 253 DMF invoices. Its task is not to resolve a commercial dispute or give legal advice about the possible legality of a retrospective default fee or the form it might take.
The parties are in dispute over 253 alleged instances of inaccurate self-reporting by Sea Swift and the standard Maritime Fees that Sea Swift owes because of underreporting its use of TSIRC’s facilities. The quantum of that claim will be a matter for the Federal Court to decide if the parties cannot agree about it.
The costs to date of litigating disputes between the parties about underreporting and the Default Maritime Fees must be enormous. To support its pending claim in the Federal Court, more than 126,000 documents were disclosed by Sea Swift and analysed by TSIRC and its lawyers at great cost. This proceeding must have come at a great additional cost to the parties.
I make no comment about what might have been done better in the past by a party or both parties to ascertain the true extent of Sea Swift’s underreporting and the consequential financial cost to a local government that relies on fees and charges to service its communities. These comments are directed to the future.
The dispute between the parties calls for an early mediated resolution. Mr William and TSIRC, presumably believing that the DMF regime was valid, made an extraordinarily large demand on Sea Swift. The demand may have been intended to bring Sea Swift to the settlement table. In any event, the parties should settle their differences before more money is spent on litigation.
Sea Swift provides an essential service to 15 communities in the Torres Strait, and in doing so it is obliged to pay fees, charges and any validly imposed penalties. TSIRC relies on fees and charges to provide services to the communities it governs. To be viable, Sea Swift must seek to recover from its customers the fees and charges that it pays TSIRC.
The people of the Torres Strait are among the financially poorest people in our State, but in other ways are very rich. Their small island communities have relatively low crime rates.[29] The communities of the Torres Strait are culturally rich and cohesive. They are an example for other places that are afflicted by crime, unhappiness and social division.
[29]Z Staines and J Scott, ‘Crime and colonisation in Australia’s Torres Strait Islands’ (2020) 53(1) Australian & New Zealand Journal of Criminology 25: J Scott, Z Staines and J Morton, ‘Crime rates and justice innovations in the Torres Strait Islands’ (Briefing Paper No 5, Queensland University of Technology, July 2020): S Scopelianos, D Carrick and A Barraud, ‘How the Torres Strait’s culture, geography and colonial experience is shaping crime and justice’, ABC News (online, 19 June 2021)
The remarkable and admirable citizens of these communities, like the shipping company that services their communities, can spend their finite financial resources on better things than lawyers and litigation funders. With all due respect, the litigation funder is not supporting TSIRC’s litigation as an act of charity or out of love for the people of the Torres Strait. It conducts a commercial enterprise and funds litigants who are unable to fund expensive litigation themselves. The highly qualified lawyers who conduct these cases are entitled to be paid well for their services.
My encouragement for the parties to submit to early mediation is not intended to deprive lawyers of work or a litigation funder of its slice of any eventual court award in favour of TSIRC. It is intended to ensure that the parties’ financial resources are preserved; in Sea Swift’s case so it can deploy its resources on servicing the communities for an affordable price, and in the case of TSIRC on the welfare of the remarkable people that it governs.
I will ask the parties when I deliver these reasons why the dispute should not be promptly mediated, either by agreement or a direction from this Court or the Federal Court.
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