Seven Fields Property Pty Ltd v Murray Valley Citrus Board

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

JUDICIAL REVIEW AND APPEALS LIST

S CI 2012 05348

SEVEN FIELDS PROPERTY PTY LTD and WIFFEN HOLDINGS PTY LTD	Plaintiffs
v
MURRAY VALLEY CITRUS BOARD, MINISTER FOR AGRICULTURE AND FOOD SECURITY and STATE OF VICTORIA	Defendants

---

JUDGE:	KYROU J
WHERE HELD:	Melbourne
DATES OF HEARING:	19, 20 and 24 June 2013
DATE OF JUDGMENT:	16 August 2013
CASE MAY BE CITED AS:	Seven Fields Property Pty Ltd v Murray Valley Citrus Board
MEDIUM NEUTRAL CITATION:	[2013] VSC 423

---

CONSTITUTIONAL LAW — Murray Valley Citrus Industry Development Order 2012 (Vic) made under Agricultural Industry Development Act 1990 (Vic) — Clause 19 of Order imposed on growers in the Murray Valley production area covered by the Order a charge of $5.50 per tonne of citrus fruit sold — Murray Valley Citrus Board established by the Order provided services to such growers — Whether the charge was a valid fee for services or an excise duty which the State of Victoria was prohibited from levying pursuant to s 90 of the Commonwealth Constitution — Clause 19 of the Order held to be invalid.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M Moshinsky SC Ms F Gordon	McMahon Clarke
For the First Defendant	Ms K Foley	Maloney Anderson Legal
For the Second and Third Defendants	Mr S McLeish SC, Solicitor General for Victoria Ms K Walker	Victorian Government Solicitor

TABLE OF CONTENTS

Introduction and summary............................................................................................................... 1

Relevant provisions of the Act......................................................................................................... 2

Relevant provisions of the 2012 Order........................................................................................... 5

Predecessors of the 2012 Order and 2012 Board and the making of the 2012 Order............. 8

2012 Board’s projects and their funding sources.......................................................................... 9

2012–2013 Operational Plan and Budget.................................................................................. 9

The 2012 Board’s Objectives...................................................................................................... 13

Objective 1.1: Encourage best practice.............................................................................. 14
Objective 1.2: Provide industry data and information.................................................... 15
Objective 1.3: Promote citrus products............................................................................. 16
Objective 1.4: Encourage risk minimisation..................................................................... 17
Objective 1.5: QFF Contingency......................................................................................... 17
Objectives 2.1 to 2.4 under Goal 2 [Industry leadership]............................................... 21
Objectives 3.1 to 3.4 under Goal 3 [Efficiency and accountability]............................... 22
Grouping the Objectives into activity categories............................................................. 22

Factual issue: Are the 2012 Board’s Objectives ‘services’?........................................................ 23

Factual issue: Did the plaintiffs use or benefit from the 2012 Board’s Services?................. 25

Information, Education and Advice Services......................................................................... 25

QFF Services................................................................................................................................ 26

Maturity Testing Services.......................................................................................................... 28

Other services.............................................................................................................................. 28

This proceeding and the grounds of review............................................................................... 28

Applicable legal principles............................................................................................................. 29

Relevant cases.............................................................................................................................. 29

Cases preceding Airservices Australia v Canadian Airlines......................................... 29
Airservices Australia v Canadian Airlines........................................................................ 36

Summary of essential characteristics and criteria.................................................................. 45

Parties’ submissions......................................................................................................................... 47

Plaintiffs’ primary submissions................................................................................................ 47

State’s submissions..................................................................................................................... 49

2012 Board’s submissions.......................................................................................................... 53

Plaintiffs’ submissions in reply................................................................................................ 53

Decision.............................................................................................................................................. 54

Pre-Airservices position............................................................................................................... 55

Post-Airservices position............................................................................................................. 67

Conclusion................................................................................................................................... 77

HIS HONOUR:

Introduction and summary

The plaintiffs, Seven Fields Property Pty Ltd (‘Seven Fields’) and Wiffen Holdings Pty Ltd (‘Wiffen’), are producers of citrus fruit. Pursuant to cl 19 of the Murray Valley Citrus Industry Development Order 2012 (Vic) (‘2012 Order’), they are required to pay to the first defendant, the Murray Valley Citrus Board (‘2012 Board’), a charge of $5.50 per tonne of citrus fruit produced by them in the Murray Valley area covered by the 2012 Order and sold by them (‘Charge’).

The 2012 Order was made by the second defendant, the Minister for Agriculture and Food Security (‘Minister’), pursuant to the Agricultural Industry Development Act 1990 (Vic) (‘Act’). Section 16(1)(a) of the Act provides that an order made under the Act may confer on a body such as the 2012 Board power to impose ‘charges for services it provides’.

Pursuant to the 2012 Order, the 2012 Board provides what may be described at present as ‘services’[1] to producers of citrus fruit in the Murray Valley production area (‘Producers’). Clause 4 of the 2012 Order defines each of the italicised terms: ‘Murray Valley production area’ (‘Region’) means the rural cities of Mildura and Swan Hill and the local government areas of Balranald, Wentworth and that part of the Shire of Wakool lying west of the Moulamein to Swan Hill road in New South Wales;[2] ‘citrus fruit’ means ‘oranges, grapefruit and mandarins’; and ‘producer’ means, in effect, a person who grows at least 150 citrus fruit-bearing trees in the Region and who is the first seller of the citrus fruit.
[1]The proper characterisation of the Board’s activities is discussed at [71]–[77] below.
[2]The 2012 Order applies in New South Wales as a ‘recognised foundation instrument’ in accordance with pt 3A of the Agricultural Industry Services Act 1998 (NSW). See pt 2 div 3 and pt 4 of the Act and cll 2 and 5 of the 2012 Order. See also the Agricultural Industry Services Amendment (Murray Valley Citrus Industry Development Order) Regulation 2012 (NSW).

There are approximately 379 Producers in the Region with varying numbers of citrus fruit-bearing trees. Some of them operate small hobby farms. The plaintiffs are among the largest Producers. Seven Fields has approximately 284,000 citrus trees for oranges, grapefruit and mandarins. It exports to countries including the United States, China, Korea and Japan, which is its largest export customer. Wiffen has approximately 140,000 citrus trees.

The plaintiffs do not wish to receive any services from the 2012 Board and object to paying the Charge.

The issue in this proceeding is whether the Charge is a fee for such services as the 2012 Board provides to the plaintiffs and other Producers and therefore a valid ‘charge for services’ within the meaning of s 16(1)(a) of the Act.

For the reasons that follow, I have concluded that the Charge is not authorised by the Act and that cl 19 of the 2012 Order is invalid.

Relevant provisions of the Act

Under s 4 of the Act, the producers of a commodity in a particular geographical area may petition the Minister for the making of an order to apply to that commodity and that area. If the Minister is satisfied that the petition represents the views of the majority of the producers of a commodity in an area, the Minister will initiate a consultation process, which is commenced with the preparation of a report.[3] The report must include a draft of the proposed order.
[3]Act s 5.

Pursuant to s 6 of the Act, a public meeting must then be arranged for persons who would be affected by a proposed order, in the area in which the order would apply if made. If the Minister is satisfied that a majority of persons who would be affected by the proposed order support the making of the order, the Minister may direct that a poll be held of producers on the question of whether the proposed order should be made, and invite submissions on the proposed order from persons ineligible to vote in the poll.[4] Voting is compulsory.[5]
[4]Act s 7.
[5]Act s 58(3).

If the majority of votes cast in the poll are in favour of the making of the proposed order, and after considering any submissions on the proposed order, the Minister may make an order in the same or substantially the same terms as the draft order.[6]
[6]Act s 8(1).

Under s 15 of the Act, an order must provide for the functions of the committee. The functions specifically listed in s 15(1) (and s 1(a)) deal with promotion of marketing, conducting research and pest control, and establishing and managing funds. The functions do not include the word ‘services’.

Section 16 of the Act sets out the powers which may be conferred on a committee by an order. As I have already mentioned, s 16(1)(a) provides that an order may confer on a committee the ‘power to impose, in accordance with [the] Act, charges for services it provides’. The order must specify the amount or rate of the first charge to be imposed by the committee and the basis on which it is to be calculated.[7] Section 37(2) provides that a committee that is empowered to impose a charge may do so ‘whether or not the service in question was provided at the request of the recipient.’
[7]Act s 16(2)(a)–(b). The order must also specify the period during which the first charge is to apply, which must not exceed one year: Act s 16(2)(a).

The objectives of a committee are contained in s 35(1) of the Act and are as follows:

(a)to promote the best interests of the industry constituted by the producers and other persons to whom the constituting Order applies; and

(b) to improve the competitiveness of that industry; and
(c)to provide the services offered by the Committee efficiently, effectively and economically.

Under s 39(1) of the Act, a committee is required to establish both a project fund for each project approved by producers, and a general fund. Section 39(2) requires that all charges and other money received by a committee in relation to a project must be paid into the project fund established for that project. All money received by a committee that does not relate to a particular project must be paid into the general fund.[8]
[8]Act s 39(3).

Section 39(4) of the Act provides that money from a project fund may be applied in payment of the expenses of the project for which the fund was established and the remuneration and allowances of the committee and its staff that are referable to that project. Section 39A provides that, with the approval of the majority of votes cast by producers at a general meeting, a committee may transfer money from one project fund to another project fund to meet any shortfall in the latter. At the completion of a project, any surplus money in the project fund established for that project must be transferred to the general fund.

If a committee proposes to impose a charge on producers in a given year, it must prepare an ‘action plan’ including the proposals of the committee for each project that the charge is to finance for that year.[9] The action plan must include a financial budget for each of the proposed projects, including the proportion of the total project cost that is to be funded by a compulsory charge on producers.[10] The action plan and budget for each project must be submitted to the producers of the commodity who will be liable to pay the charge, for approval at a general meeting.[11] A new project which does not form part of an approved action plan must be the subject of a ‘project plan’ (including a financial budget) which also must be submitted to the producers for approval at a general meeting.[12]
[9]Act s 47(1).
[10]Act s 47(2).
[11]Act s 47(3).
[12]Act s 48.

Under s 49 of the Act, a committee must only pay money received from a charge imposed on producers — other than the first charge imposed by the committee — in accordance with:

(a)the recommendations of an action plan in relation to a project that has been approved by the majority of votes cast by producers present or voting by proxy at a general meeting of producers; or
(b)a project plan for a project that has been approved by the majority of votes cast by producers present or voting by proxy at a general meeting of producers; or
(c)section 39A.

Section 54 of the Act deals with the winding-up and dissolution of a committee. On the expiry of an order, a committee must wind-up its affairs. If satisfied that the affairs of the committee are wound-up, the Governor in Council may make an order dissolving the committee. On the publication of such an order in the Victoria Government Gazette:

all money and other assets of the Committee —
(a)shall become the property of bodies or organisations representing producers of the relevant commodity (including bodies or organisations that represent the interests of producers in a participating jurisdiction) in such proportions as the Order specifies; and

(b) shall be dealt with and disposed of as the Minister may direct.[13]

[13]Act s 54(8).

A committee is liable to pay from its funds the remuneration and expenses of a liquidator appointed to wind-up the committee[14] and the Minister’s expenses in conducting a poll.[15]
[14]Act s 54(5).
[15]Act s 58(4).

Section 22 of the Act provides that a committee does not represent, and is not part of, the Crown. However, a committee is subject to the general direction and control of the Minister and any specific written directions given by the Minister.[16]
[16]Act s 46(1).

Relevant provisions of the 2012 Order

The 2012 Order was made on 18 June 2012 and came into effect on 27 July 2012. Clause 3 of the 2012 Order provides that the purpose of the 2012 Order is:

to set up a Committee, to be known as the Murray Valley Citrus Board, to collect and administer charges applied to citrus fruit producers in the Murray Valley production area for defined industry functions.

The 2012 Board is established by cl 6 of the 2012 Order. The following functions of the 2012 Board are set out in cl 12(1):

(a)[to] plan, fund and facilitate the conduct of citrus research and development services;
(b)[to] facilitate the adoption and commercialisation of the results of citrus research and development services;
(c)[to] plan, fund and facilitate the conduct of market development services; and
(d)[to] plan, fund and facilitate the conduct of citrus pest and disease management or control measures to increase or maintain access of citrus fruit to domestic and export markets;
(e)to establish and manage funds to compensate producers for costs incurred in controlling or eradicating pests and diseases of citrus fruit; and
(f)to establish and manage a general fund and project funds for the purposes of the Act.

Two observations may be made about cl 12(1) of the 2012 Order. First, only paras (d) and (e) refer to the defined term ‘citrus fruit’. The clause contains three references to the generic term ‘citrus’. Secondly, cll 12(2) and (3) define the phrases ‘research and development’, and ‘market development’, which precede the word ‘services’ in cl 12(1), by reference to ‘citrus products’ and ‘the citrus industry’ rather than by reference to ‘citrus fruit’.[17] This suggests that the 2012 Order permits the 2012 Board to use money raised from collection of the Charge to fund research and development and market development in relation to products other than the ‘citrus fruit’ in respect of which the Charge is levied.
[17]Clause 12(2) does not refer to ‘citrus fruit’ at all while cl 12(3) contains one reference to that term.

Under cl 13 of the 2012 Order, titled ‘Powers of the Board’, the 2012 Board may:

(a)impose a charge on all producers for services it provides;
…
(c)exempt by written notice, either conditionally or unconditionally, a person or class of persons from compliance with some or all of the requirements of this Order.

Clauses 14 to 19 of the 2012 Order deal with a charge imposed by the 2012 Board and provide as follows:

14.A charge determined in accordance with the Act is payable by producers at the time of delivery of citrus fruit which has been sold to the receiver of the fruit, or by alternative arrangement as agreed to by the Board and a producer.
15.The charge is to be collected by the receiver of the citrus fruit and paid directly to the Board, or collected and paid in accordance with an alternative arrangement agreed to by the Board and a producer.
16.Charges collected by the receiver for payment to the Board are payable on terms determined by the Board.
17.Charges paid by a producer direct to the Board are payable on terms determined by the Board.
18.The charge imposed by the Board must not at any time during the term of the Order exceed the rate of $7.00 per tonne of citrus fruit.
19.The charge in the first year of the Order shall be $5.50 per tonne of citrus fruit or an amount not exceeding $7.00 per tonne which is approved at a general meeting in accordance with Division 3 of Part 3 of the Act.

Clause 22 of the 2012 Order provides that voting at general meetings of Producers shall be on the basis of one vote for each Producer.

Pursuant to cl 27 of the 2012 Order, a Producer who contravenes cll 14 and 15 relating to the payment of a charge imposed by the 2012 Board is liable to a penalty of not more than 20 penalty units.

As a general meeting of Producers did not approve another charge in accordance with cl 19 of the 2012 Order, the Charge remained at $5.50 per tonne for the 2012–2013 financial year.[18]
[18]No record of a resolution of the 2012 Board to impose a charge of $5.50 per tonne of citrus fruit for the 2012–2013 financial year was tendered in evidence. As the plaintiffs did not invite me to conclude that no such resolution was made by the 2012 Board and did not seek to attach any significance to whether the 2012 Board did or did not do so, I need not decide whether the 2012 Board made such a resolution or draw any adverse inferences against the 2012 Board.

Predecessors of the 2012 Order and 2012 Board and the making of the 2012 Order

The 2012 Order was preceded by two similar orders made under the Act: the Murray Valley Citrus Industry Development Order 2004 (Vic) and the Murray Valley Citrus Industry Development Order 2008 (Vic) (‘2008 Order’). The 2008 Order, which had a term of four years commencing on 1 July 2008, also established a Murray Valley Citrus Board (‘2008 Board’).

In October 2011, in anticipation of the expiration of the 2008 Order on 30 June 2012, the chairman of Sunraysia Citrus Growers Inc — a voluntary association of which neither plaintiff is a member — petitioned the Minister for the making of an order under s 4 of the Act.

On 13 February 2012, the Department of Primary Industries (now the Department of Environment and Primary Industries) (‘Department’) wrote a letter to all producers affected by the 2008 Order. The letter dealt with the proposal to make a new order and enclosed a report on that proposal and a draft of the proposed order. The Department received 33 submissions in response to the proposal, 23 of which supported the proposal, nine of which opposed the proposal, and one which was ambivalent.

One of the nine submissions in opposition to the proposal that the Department received was from Seven Fields. In that submission, which was dated 15 March 2012, Seven Fields also requested that it be excluded from the scope of the proposed order if it were made. This request was not granted.

The statutory consultation process culminated in a poll of producers who would be affected by the proposed order. Each producer with at least 150 citrus fruit-bearing trees in the Region was entitled to one vote, regardless of the volume of production or the number of citrus trees above 150. A majority of producers voted in favour of the proposed order (151 of the 257 valid votes cast). The plaintiffs voted against the proposed order.

The Minister granted a request from the Mid-Murray Citrus Growers Association Inc — whose members are producers of citrus fruit in an area known as the ‘Barham-Murrabit area’ to the east of the Region — that its members be excluded from the scope of the proposed 2012 Order. As the production area covered by the 2012 Order does not include the Barham-Murrabit area, it is smaller than that covered by the 2008 Order.

On 17 July 2012, Wiffen requested that it be excluded from the scope of the 2012 Order. That request was not granted.

2012 Board’s projects and their funding sources
2012–2013 Operational Plan and Budget

The 2008 Board was dissolved on 7 March 2013 pursuant to an Order in Council published in the Victoria Government Gazette on that day (‘Dissolution Order’). The moneys held by the 2008 Board — an amount of $965,049 — were distributed pursuant to the Dissolution Order. The 2012 Board received 92.5% of the moneys ($892,670), to be used for the purposes of carrying out its functions under the 2012 Order and discharging any outstanding liabilities of the 2008 Board. The Mid-Murray Citrus Growers Association Inc received the remaining 7.5% of the moneys, to be used for market development and citrus pest and disease control measures for the benefit of its members. All other assets of the 2008 Board became the property of the 2012 Board to be used for the purpose of carrying out its functions under the 2012 Order.

The 2012 Board receives income from multiple sources, including: the Charge; cash reserves it ‘inherited’ from the 2008 Board; interest on cash reserves; grants; revenue from the sale of orange juice and other products at promotional events such as regional shows; and revenue from the sale of finished goods such as ‘Net Bags’.[19] The 2012 Board’s total expected income for the 2012–2013 financial year was $999,080, of which $673,200 (or 67%) was expected to come from the Charge; $54,000 (or 5.5%) was from interest; $99,780 (or 10%) was a grant from Horticulture Australia Ltd (‘HAL’)[20] for Industry Project CT09044 shown on Table 2 at [44] below; $4,000 (or 0.5%) was a grant from the Victorian Government for the Horticultural Industry Network (‘HIN’) Project;[21] $5,900 (or 0.5%) was from the sale of products; and $162,200 (or 16.5%) was from the sale of finished goods.[22]
[19]The 2012 Board is the licensed owner of a barcode required to be used by supermarkets. It sells Net Bags with the barcode woven into them to Producers and packers of citrus fruit.
[20]HAL is a not-for-profit industry-owned company that conducts research development services for horticulturalists.
[21]See [68(c)] below.
[22]The plaintiffs submitted that the amount of $162,200 is a gross sales figure which does not take into account the cost of goods sold. As nothing turns on this issue, I need not make a finding on it.

As part of its budget consultation process, the 2008 Board sent to all growers of citrus fruit in the Region a draft operational plan and budget for the 2012–2013 financial year under cover of a letter dated 19 June 2012. In the covering letter, the 2008 Board stated that, under the draft operational plan and budget, ‘59% of total expenditure is directly spent on growers, a further 23% spent on our industry and 18% directed towards corporate governance.’ The operational plan and budget were finalised after two consultation meetings and a more detailed budget was also prepared.

The final version of the operational plan and budget for the 2012–2013 financial year (‘Operational Plan and Budget’) was in the form of a table which listed three ‘Goals’, 13 ‘Objectives’ (‘Objectives’) and seven ‘Industry Projects’ (‘Industry Projects’). Various ‘strategies’, ‘actions’ and ‘results’ were recorded in respect of each Objective. Goal 1 was accompanied by the heading ‘Our Growers’. It stated, ‘[w]e will assist growers to be sustainable and achieve profitable returns’, and had five Objectives numbered 1.1 to 1.5. Goal 2 was accompanied by the heading ‘Our Industry’. It stated, ‘[w]e will provide industry leadership and work in partnership with other bodies for development and profitability’, and had four Objectives numbered 2.1 to 2.4. Goal 3 was accompanied by the heading ‘Our Organisation’. It stated, ‘[w]e will be an efficient, accountable and professional organisation’, and had four Objectives numbered 3.1 to 3.4.

According to the evidence of Mr Hugh Flett, the CEO of the 2012 Board who had also been the CEO of the 2008 Board, funding from outside sources which is provided specifically to meet an Objective is allocated solely to that Objective. The balance of the cost of each Objective is paid for from money collected from the Charge, cash reserves and interest on cash reserves, on an equal percentage basis.

The Operational Plan and Budget described the Charge as a ‘levy’ and, in addition to ‘HAL’ and ‘HIN’, used the initialism ‘QFF’ (Queensland Fruit Fly). It also stated that the phrase ‘Other Income’ includes interest and income from sales and promotional events.

Set out below in Table 1 are the 13 Objectives and the total budget and funding for each Objective, as described in the Operational Plan and Budget:

TABLE 1

Objectives

Total Budget

Funding

1.1     Encourage greater uptake of best practice and innovative technology $217,442
Levy: $80,444
External (HAL): $99,780
Other Income: $15,523
Reserves: $21,695

1.2     Provide high quality industry data and information to assist growers assess opportunities and make informed business decisions

$138,099

Levy: $94,417
Other Income: $9,858
Reserves: $33,824

1.3     Promote citrus products to maximise grower returns

$61,651

Levy: $42,150
Other Income: $4,401
Reserves: $15,100

1.4     Encourage risk minimisation

$71,057

Levy: $45,846
External (HIN): $4,000
Other Income: $5,073
Reserves: $16,138

1.5     QFF Contingency

$153,000

Levy: $104,605
Other Income: $10,922
Reserves: $37,473

2.1     Facilitate/support market development and maintenance

$50,340

Levy: $34,417
Other Income: $3,594
Reserves: $12,329

2.2     Instigate relevant research and development for industry adoption

$12,848

Levy: $8,784
Other Income: $917
Reserves: $3,147

2.3     Liaise with other industry organisations to maximise outcomes and efficient use of resources

$74,814

Levy: $51,150
Other Income: $5,341
Reserves: $18,323

2.4     Promote industry awareness of required management and accreditation systems

$117,264

Levy: $80,172
Other Income: $8,371
Reserves: $28,721

3.1     Provide effective leadership and advocacy

$28,586

Levy: $19,544
Other income: $2,041
Reserves: $7,001

3.2     Focusing on customer satisfaction

$39,644

Levy: $27,104
Other Income: $2,830
Reserves: $9,710

3.3     Provide timely and effective communication and facilitate opportunities for grower input

$46,636

Levy: $31,885
Other Income: $3,329
Reserves: $11,422

3.4     Maintain excellence in corporate governance

$77,054

Levy: $52,682
Other Income: $5,501
Reserves: $18,872

Total

$1,088,435

[Charge] $673,200

According to Table 1, of the 2012 Board’s total budgeted expenditure of $1,088,435 in 2012–2013, $673,200 (62%) was to be funded from the Charge, $99,780 (9%) by HAL, $4,000 (0.5%) by HIN, $77,701 (7%) from ‘other income’, and $223,755 (21.5%) from reserves.

Set out below in Table 2 are the seven Industry Projects and the 2012 Board’s financial contribution for each of them, as described in the Operational Plan and Budget.

TABLE 2

Industry Projects

Total [2012 Board] Contribution

CT09044 — Helping Murray Valley citrus growers thrive in an ever changing environment by addressing regional and national issues (Existing Project, with HAL) $58,571

CT10006 — Post Harvest Program $20,000

CT10021 — Managing Citrus Gall Wasps in southern citrus regions (Existing Project, with HAL) $34,257

MT10019 — Improving market access for the Greater Sunraysia horticultural production area (Existing Project, with HAL) $69,212

CT10030 — Extension of citrus practices to maximise marketable fruit size and economic returns through on-farm trials (Existing Project, with HAL) $25,554

CT10031 Tri-state Fruit Fly Area Freedom Awareness Program (Existing Project, with HAL) $11,961

CT12001 — Helping Murray Valley citrus growers thrive in an ever changing environment by addressing regional and national issues (Existing Project, with HAL)

Pending Approval

[Total]

[$219,555]

According to Mr Flett, the ‘Total Budget’ for each Objective in the Operational Plan and Budget includes an estimate of the salary costs of the 2012 Board’s six staff who are involved in meeting each Objective, based on staff timesheets.[23] The budgeted expenses for each of the Objectives also contains an item for overhead operating expenses such as advertising, interest, rent, consultants’ fees, utilities charges, motor vehicle expenses, postage, printing, insurance and the cost of complying with statutory requirements (including Board member salaries and audit fees). As some expenses cannot be specifically attributed to the individual Objectives, each Objective is assigned a percentage of the overhead operating expenses based on the work hours attributed to each Objective.
[23]This is in accordance with s 39(4) of the Act. See [15] above.

Mr Flett stated that the 2012 Board’s projects are implemented over the course of a financial year whereas the Charge is paid during the citrus fruit season. Accordingly, in some cases, payment for a project from the Charge may predate the implementation of a project whereas in other cases payment may postdate such implementation. In other words, the timing of payment of the Charge and the provision of a service may not coincide.

The Operational Plan and Budget was approved by a majority of voting Producers at a meeting on 11 September 2012. Each Producer was entitled to one vote. A poll was taken in respect of each of the 13 Objectives.

The 2012 Board’s Objectives

At the hearing of the proceeding, the 2012 Board submitted that the services that it provided to Producers for the Charge are to be found in its 13 Objectives and seven Industry Projects. It sought to identify those services not only by reference to its activities but also to those of the 2008 Board. This was because, so it was said, the continuity in the activities of the two bodies and the 2012 Board’s short life meant that consideration of its activities in isolation would provide an incomplete perspective.

I permitted Mr Flett to give evidence about the activities of both bodies so that the 2012 Board’s activities could be considered in the context of the 2008 Board’s activities. However, the question of whether the Charge is a fee for services must be answered solely by reference to the services provided by the 2012 Board in the 2012–2013 financial year. This is because any services that were provided by the 2008 Board were paid for by the growers who were charged the levies imposed by the 2008 Board. Put another way, as the 2012 Board — a body that was established in July 2012 — collected the Charge from Producers in the 2012–2013 financial year purportedly for services provided to those Producers, the Charge cannot be ‘for’ services that were provided by a different legal entity in a previous financial year and that were paid for by levies imposed on growers who are not now all Producers.[24]
[24]As discussed at [34] above, members of the Mid-Murray Citrus Growers Association Inc were covered by the 2008 Order but are not covered by the 2012 Order.

Set out below is a summary of the 2012 Board’s activities in relation to its 13 Objectives which I have based principally on Mr Flett’s evidence.

Objective 1.1: Encourage best practice

The 2012 Board’s activities in relation to Objective 1.1 are:

(a) The 2012 Board researches and gathers information and disseminates it to Producers in many ways. It intends to produce a weekly newsletter (‘Newsletter’), two magazines called ‘Citrep’ and five technical bulletins.

(b) The 2012 Board organises Citrus Information Technology Transfer (‘CITT’) group meetings on industry topics. The meetings often involve a presentation by a specialist speaker on a particular topic. Producers are invited to attend the meetings but the meetings are open to, and attended by, government representatives and other citrus industry organisations such as commercial fruit packing houses, growers from outside the Region, consultants and suppliers. Mr Flett acknowledged that some workshops or courses that the 2012 Board conducts are specifically directed at employees of commercial packing houses.

(c) The 2012 Board organises Best Practice Farm Walks and Field Days. These are days where Producers can attend to observe horticultural practices first-hand.

(d) The 2012 Board maintains a comprehensive website (‘Website’) on which Producers can access continually updated information on subjects such as nutrition, irrigation, varieties and production of citrus, pests, spraying, supermarket specifications, information relating to export of fruit and planting statistics. The Website is accessible by the public and there was no evidence that it has a separate section that is accessible only by Producers. The Website contains a section titled ‘Packer Resources’ which is ‘specifically for citrus packing sheds’. The commercial packing houses provide packing services for ‘citrus fruit’ grown in the Region as well as outside the Region. The packing services are not confined to oranges, grapefruit and mandarins.

Objective 1.2: Provide industry data and information

The 2012 Board’s activities in relation to Objective 1.2 are:

(a) The 2012 Board makes available to Producers an annual ‘Crop Forecast Booklet’, which forecasts crop volumes and provides details of citrus plantings in the Region. The forecasts are also made available to peak industry bodies such as Citrus Australia Ltd to collate with forecasts from other areas. According to Mr Flett, commercial packing houses, as well as growers, of citrus fruit have an interest in the forecasts.

(b) The 2012 Board’s industry development officer and field officers attend individual Producers’ properties and educate them on the export requirements of different countries.

(c) The 2012 Board conducts courses for Producers and commercial packing houses on recognising blemishes and grading fruit.

(d) In June 2013, the 2012 Board, in conjunction with other horticultural industry bodies, contributed to the funding for a visit to Australia by a representative of the Japanese Ministry of Agriculture, Fisheries and Forests (‘Japanese Representative’). During the visit, the Japanese Representative inspected the Region in relation to fruit fly for the purpose of deciding whether to recommend to the Japanese Minister that Japan should accept fruit from the Region.

(e) During the peak harvest time for citrus (late April to late December), the 2012 Board obtains information on the domestic market on a weekly basis and disseminates this to Producers by email, post and facsimile to enable them to make decisions on the harvest and the sale of citrus.

(f) Producers are able to contact officers of the 2012 Board at any time to ask questions, seek advice or obtain information. The 2012 Board receives numerous requests for information by telephone and by email on a daily basis.

(g) Organising CITT group meetings, as to which, see [51(b)] above.

Objective 1.3: Promote citrus products

The 2012 Board’s activities in relation to Objective 1.3 are:

(a) The 2012 Board undertakes various activities to promote uptake of citrus. For example, the 2012 Board attends regional shows and other events, such as the Harvest Picnic at Hanging Rock, and usually has a stand at those events.

(b) The 2012 Board intends to provide funding for in-store supermarket demonstrations for independent stores.

(c) The 2012 Board has a representative on the Melbourne Citrus Committee (‘MCC’) and provides funding to it. The MCC is comprised of people such as agents and wholesalers and conducts promotions in conjunction with the Melbourne Market Authority. The promotions include the Fruits in Schools Program and a direct promotion with Victorian Little Athletics.

Objective 1.4: Encourage risk minimisation

The 2012 Board’s activities in relation to Objective 1.4 are:

(a) The 2012 Board develops practices on matters such as pest and disease management, occupational health and safety, water availability and environmental requirements, and disseminates information on these matters to Producers in the manner set out under Objective 1.1.

(b) The 2012 Board helps Producers to identify assistance and funding opportunities such as flood relief funding and productivity enhancement programs.

(c) The 2012 Board advocates the interests of Producers, as and when required, in relation to water policy and other governmental policies with the aim of preventing adverse governmental policies being made.

Objective 1.5: QFF Contingency

Before discussing the 2012 Board’s activities in relation to Objective 1.5, it is necessary for me to provide some background to the fruit fly problem and its management.

The native Queensland fruit fly is common in northern Australia. Fruit fly is a major problem for growers of citrus and other fruit because fruit flies damage fruit and an outbreak can lead to the loss of export markets on a region-wide basis. Accordingly, fruit fly outbreaks can have not only a significant impact on an individual grower’s ability to sell fruit, but they can also have a wider impact on the industry in a particular region.

The presence of fruit fly in the Region has increased in recent years. In 2011 there were approximately 20 fruit fly outbreaks. During the 2012 citrus season there were approximately 34 outbreaks. In order to keep the Region free from fruit fly, the Victorian and New South Wales Governments (in a joint initiative with industry) declared the Greater Sunraysia area to be a ‘pest free area’, which means that restrictions apply to bringing fruit into the area and taking fruit out of the area. When the Department is satisfied that a specified area is free of QFF outbreaks, it can certify that the area has ‘fruit fly free status’ (‘FFF status’).

In evidence in chief, Mr Flett said that FFF status has significant advantages for citrus growers. When growers do not have FFF status for their area, the citrus they produce has to undergo additional treatment before sale, namely, ‘cold treatment’ for the export market and ‘dip treatment’ for the domestic market. Cold treatment involves storing the fruit at a temperature of 2–3 degrees Celsius for a specified period of time and costs about $4.00 per carton (there are 55 cartons per tonne of citrus). Dip treatment involves a post-harvest dipping of the fruit in dimethoate or fenthion, which costs approximately $2.00 per carton. According to Mr Flett, the cost to growers of losing FFF status would be very significant. In cross-examination, Mr Flett stated that, because of fruit fly outbreaks, notwithstanding that overseas countries may recognise the pest free area, they may still require that fruit exported to them be cold treated. This is currently the case with Japan and the United States.

Mr Flett gave evidence that the majority of countries to which citrus fruit is exported, including the United States, Japan, Thailand, Indonesia and Hong Kong, recognise fruit fly free areas.

FFF status is effectively the result of two functions, namely, management and eradication. The Department is responsible for management, which involves (among other things):

(a) Monitoring fruit fly, including laying and inspecting fruit fly bait traps.

(b) Supplying, maintaining and servicing fruit deposit bins on the roads leading into the pest free area.

(c) Conducting road blocks to inspect vehicles entering the pest free area for fruit.

(d) Conducting awareness programs.

(e) Providing Interstate Certificate Assurance Accreditation to growers (which is needed to move fruit from the area).

Historically, 90% of the cost of fruit fly management has been funded by the Department, with the remaining 10% funded by industry. In 2012–2013, the 2012 Board paid $69,212 to the Department as its contribution to the cost of management. After 2012–2013, the Department will only meet 30% of the cost of management, with the remaining 70% being funded equally between the citrus, table grapes and summer fruit industries. It is anticipated that the 2012 Board’s contribution to management of fruit fly in the 2013–2014 financial year will be in the vicinity of $139,500, the majority of which will be funded from the Charge.

In relation to eradication, up until 2011, the cost of eradication was met by the Department. When a fruit fly is detected, all fruit trees and similar plantings within a 1500 metre radius of the detected fruit fly are sprayed with chemical. Prior to 2011, the Department would enter upon land within that radius and conduct the spraying. In October 2011, following consultation with the Department, the 2008 Board committed to supply all Producers with an eradication chemical, ‘Naturalure’, instruct them how to apply it and encourage them to use it. Following that commitment, when there is an outbreak of fruit fly, the Department is only required to spray chemical on fruit trees grown on non-commercial land such as peri-urban backyards and hobby farms.

When a fruit fly outbreak occurs, the following takes place:

(a) The Department advises the 2012 Board of the outbreak and of the Citrus Grower ID Numbers (‘ID numbers’) falling within a 1500 metre radius of the outbreak. The Citrus Grower ID Database is a database that the 2012 Board provides to the Department for that purpose.

(b) The 2012 Board then identifies the Producers whose ID numbers have been provided by the Department.

(c) The 2012 Board then notifies those Producers by email or fax of the outbreak, the need for ‘Naturalure’ to be sprayed and when and where the Producers can collect it from the 2012 Board. The 2012 Board has purchased and stockpiled ‘Naturalure’ and provides it to those Producers without any fee in addition to the Charge. If part of a Producer’s citrus property is within the 1500 metre radius, the 2012 Board provides chemical to spray the Producer’s entire citrus plantings, even though some of the plantings are outside the 1500 metre radius. The Producer then applies the chemical to his or her citrus trees.

(d) The 2012 Board provides a fact sheet detailing how to apply the chemical and conducts training courses on the application of the chemical.

(e) The 2012 Board makes sure all of the Producers in the 1500 metre radius have collected the chemical.

(f) The Department’s compliance officers ensure that the affected Producers have applied the chemical. If the 2012 Board becomes aware that a Producer has not applied the chemical, it notifies the Department.

As a result of the 2012 fruit fly outbreaks, the 2012 Board provided 121 Producers with approximately 14,000 litres of ‘Naturalure’. In the 2013–2014 financial year, the 2012 Board will no longer be providing the chemical to Producers.

Mr Flett expressed the opinion that if Producers were not required to participate in the eradication program and receive assistance by way of the supply of ‘Naturalure’ from the 2012 Board, then the Region would ultimately lose its FFF status.

It can be seen from [55] to [64] above that the 2012 Board’s activities in relation to Objective 1.5 are:

(a) The 2012 Board matches the Producers to the ID numbers supplied by the Department, notifies them of a fruit fly outbreak and the need to apply ‘Naturalure’ and advises them where the chemical can be collected. The 2012 Board also provides a fact sheet on how to apply the chemical.

(b) The 2012 Board supplies ‘Naturalure’ to Producers with citrus fruit-bearing trees within a 1500 metre radius of a fruit fly outbreak, without any fee in addition to the Charge. The 2012 Board makes sure all affected Producers collect the chemical and notifies the Department of any Producers who have not applied the chemical.

(c) The 2012 Board conducts training courses on the application of the chemical.

(d) The 2012 Board partly funds the Department’s costs of managing the fruit fly problem.

The 2012 Board has established a QFF Contingency Fund to fund the activities to which reference is made at [66] above.

Objectives 2.1 to 2.4 under Goal 2 [Industry leadership]

The 2012 Board’s activities in relation to Objectives 2.1 to 2.4 are:

(a) The 2012 Board provides a maturity testing service for Producers whereby they can bring in citrus samples to be tested in accordance with the national minimum maturity standards for their brix (sugar content), acid, brix/acid ratio and juice content. The testing — which is provided without any fee in addition to the Charge — enables Producers to determine the time to harvest citrus.

(b) The 2012 Board makes financial contributions to projects, such as those in Table 2 at [44] above, which it believes would be of benefit to Producers.

(c) The 2012 Board consults with other horticultural industry bodies. For example, it is part of the HIN[25] which is run by the Department and its representatives attend the National Fruit Fly Strategy Meetings which are convened by the Office of the Chief Plant Health Protection Officer. These activities enable the 2012 Board to gather information for dissemination to Producers and to advocate for them to protect their interests.

[25]See [37] above.

Objectives 3.1 to 3.4 under Goal 3 [Efficiency and accountability]

The 2012 Board’s activities in relation to Objectives 3.1 to 3.4 relate to the manner in which it conducts its operations to achieve the other Objectives efficiently, professionally and with accountability.

Grouping the Objectives into activity categories

In my opinion, the Objectives can be grouped in the following activity categories:

(a) Information, Education and Advice Activities: This category encompasses Objectives 1.1, 1.2, 1.4 and parts of Objectives 1.5 and 2.1 to 2.4.[26]
[26]See [51]–[52], [54], [66(a)–(b)] and [68 (c)] above.

(b) Promotional Activities: This category encompasses Objective 1.3.[27]
[27]See [53] above.

(c) QFF Activities: This category encompasses Objective 1.5.[28]
[28]See [66] above.

(d) Advocacy Activities: This category encompasses Objective 1.4 (in part).[29]

(e) Project Finance Activities: This category encompasses Objectives 1.2 (in part),[30] 1.3 (in part),[31] 1.5 (in part)[32] and 2.1 to 2.4 (in part),[33] and the Industry Projects listed in Table 2 at [44] above.

(f) Maturity Testing Activities: This category encompasses Objectives 2.1 to 2.4 (in part).[34]

[29]See [54(c)] above.

[30]See [52(d)] above.

[31]See [53(b)–(c)] above.

[32]See [61], [66(d)] above.

[33]See [68(b)] above.

[34]See [68(a)] above.

Factual issue: Are the 2012 Board’s Objectives ‘services’?

A factual issue that requires consideration is whether the activities of the 2012 Board which are funded by the Charge are properly characterised as ‘services’. This issue arises from the nature of those activities and the use of nomenclature other than ‘services’ in the 2012 Order and the 2012 Board’s key documents, including, in particular, the Operational Plan and Budget.

Although s 16(1)(a) of the Act and cl 13(a) of the 2012 Order refer to the imposition of a charge ‘for services’, cl 3 of the 2012 Order states that the purpose of the 2012 Board is ‘to collect and administer charges applied to [Producers] for defined industry functions.’ As appears from [22] above, cl 12(1) sets out what are described as six ‘functions of the [2012] Board’. The word ‘services’ appears in the description of only three of the functions and then only in connection with defined terms that are not confined to ‘citrus fruit’ grown in the Region.[35]
[35]See [23] above.

This lack of emphasis on services is consistent with the Act, which focuses not on the identification of services to be provided, but on projects to be implemented. The word ‘services’ does not appear at all in the functions set out in ss 1(a) and 15(1) of the Act. Section 39, which deals with payments in and out of the Board’s funds, refers to projects rather than services. Section 47(1) provides that the Board’s annual action plans must specify ‘each project that the charge is to finance or partially finance for that year.’ Section 49 provides that money received from a charge can only be used in accordance with an action plan or project plan that has been approved by producers.

The Operational Plan and Budget uses the headings ‘Goal’, ‘Objectives’, ‘Strategies’, ‘Actions’, ‘Results’ and ‘Industry Projects’. The word ‘program’ is sometimes used under the headings ‘Strategies’, ‘Actions’ and ‘Results’. The word ‘service’ appears only once, namely, under Industry Project ‘CT1006 – Post Harvest Program’. However, rather than describing a service for Producers, it describes ‘a diagnostic service for packers’.[36]
[36]See [199] below.

As for the other activities of the 2012 Board that are set out in the Operational Plan and Budget, those that come closest to the conventional notion of a fee for services provided directly to the payer are maturity testing,[37] the provision of the chemical ‘Naturalure’ to eradicate QFF[38] and the advisory and training components of Objectives 1.1,[39] 1.2[40] and 1.4.[41] Other activities could be said to constitute services provided collectively to Producers. However, there is a real issue as to whether activities such as participation in meetings of industry bodies and internal administration and corporate governance can be described as services.
[37]See [68(a)] above.
[38]See [66(b)] above.
[39]See [51(b)] above
[40]See [52(b), (f)] above.
[41]See [54(b)] above.

The 2012 Board’s role in relation to Objective 1.5, which deals with management and eradication of the QFF, includes a substantial financing role. The primary responsibility for managing and eradicating QFF lies with the Department, and a key responsibility of the 2012 Board is simply to pass through funds collected from the Charge to the Department. Likewise, the 2012 Board’s involvement with the Industry Projects is largely a financing role.

Notwithstanding the above considerations, I will treat the 2012 Board’s activities as services. In the discussion that follows, I will use the following definitions:

(a) ‘Information, Education and Advice Services’: this encompasses the ‘Information, Education and Advice Activities’ to which is reference is made at [70] above.

(b) ‘Promotional Services’: this encompasses the ‘Promotional Activities’ to which reference is made at [70] above.

(c) ‘QFF Services’: this encompasses the ‘QFF Activities’ to which reference is made at [70] above.

(d) ‘Advocacy Services’: this encompasses the ‘Advocacy Activities’ to which reference is made at [70] above.

(e) ‘Project Finance Services’: this encompasses the ‘Project Finance Activities’ to which reference is made at [70] above.

(f) ‘Maturity Testing Services’: this encompasses the ‘Maturity Testing Activities’ to which reference is made at [70] above.

(g) ‘2012 Board’s Services’: this encompasses all of the services in (a) to (f) above.

Factual issue: Did the plaintiffs use or benefit from the 2012 Board’s Services?

The plaintiffs’ case is that they do not wish to use the 2012 Board’s Services, that they have not done so and that, therefore, the Charge is not a fee for any services provided to them by the 2012 Board.

It is convenient at this point to consider the evidence about whether the plaintiffs have used the 2012 Board’s Services and whether any of the 2012 Board’s Services have conferred any benefit on the plaintiffs. Most of the evidence in the plaintiffs’ case was adduced by Seven Fields. Consequently, there are some gaps in the evidence relating to Wiffen. However, the parties agreed that the proceeding should be determined on the basis that Wiffen’s position was not so different from Seven Fields’ position as to affect the outcome.

Information, Education and Advice Services

The undisputed evidence in relation to the Information, Education and Advice Services was as follows:

(a) Seven Fields does not consult the Website and does not have regard to the notices that the 2012 Board sends, but goes directly to the source, the Department.

(b) Representatives of the plaintiffs attended some CITT group meetings prior to 1 July 2012 but have not attended any meetings since that time.[42]

(c) Representatives of Seven Fields emailed the 2008 Board seeking information on a number of occasions. However, they have emailed the 2012 Board on only one occasion (on 28 August 2012, Seven Fields sought a map of the fruit fly hot spot areas).

[42]The evidence was unclear as to whether a representative of one of the plaintiffs attended one of the CITT meetings since 1 July 2012. I find that no such attendance occurred. However, even if there had been such an attendance, for the reasons set out at [175] below, the outcome of this proceeding would be the same.

QFF Services

Mr Gregory McMahon, the managing director of Seven Fields, gave the following evidence in chief about the 2012 Board’s role in relation to QFF. While FFF status is valuable, the fact that the Region may be in a fruit fly free area does not necessarily mean that citrus fruit grown in that area does not need to be treated. Some countries, such as Japan, do not recognise a pest free area and therefore require imported fruit to be cold treated. In the 2012 season, virtually all of Seven Fields’ fruit was packed in Mildura, which is not in a fruit fly free area. Accordingly, all Seven Fields’ fruit for sale in the domestic market was dip treated (at no cost) and all the fruit that was exported to a country that requires fruit fly treatment was cold treated at a cost of approximately 95 cents per carton.

In cross-examination, Mr McMahon accepted that, where the management of the QFF problem in the Region results in a declaration that it is a pest free area,[43] the declaration is valuable to Producers because some export countries will rely on the declaration and waive cold treatment for citrus fruit. However, the countries to which Seven Fields exports — Japan, the United States, China and Korea — have adopted protocols that require cold treatment. Accordingly, in those countries, pest free area status does not obviate the need to incur cold treatment costs and provides no benefit to Seven Fields. Mr McMahon did not know the reason why these countries adopted these protocols notwithstanding that the Region is currently not experiencing a QFF outbreak and is therefore a pest free area. For the last few years, Seven Fields has been cold treating citrus fruit it has exported to its largest customer, Japan, despite the Region being a pest free area. This was because practical considerations required Seven Fields to use packing houses located in the Region but outside the pest free area.
[43]It appears that Mr McMahon may have meant a declaration that the Region had acquired FFF status.

In re-examination, Mr McMahon explained that exporters in a country that has a pest free area have a general competitive advantage over exporters in countries that do not have such an area, but in practical terms, in the last several years, the existence of such an area in the Region has not offered Seven Fields any benefit at all in terms of the cost of exporting.

Mr McMahon said that Seven Fields has never been provided with the chemical ‘Naturalure’ by the 2012 Board or its predecessors. Mr McMahon would not use the chemical because he does not believe that it is effective to eradicate fruit fly.

In cross-examination, Mr McMahon said that information about fruit fly outbreaks emanates from the Department and the 2012 Board passes it on to Producers as a ‘post box service’. Seven Fields prefers to go directly to the source, the Department.

I accept all of Mr McMahon’s evidence. To the extent that his evidence was inconsistent with the evidence of Mr Flett in relation to the use of the 2012 Board’s Services by Seven Fields and whether Seven Fields has benefitted from those services,[44] I prefer the evidence of Mr McMahon. This is because Mr McMahon had precise and detailed knowledge of Seven Fields’ business and was a confident and impressive witness.
[44]Mr Flett’s evidence is summarised at [50]–[69] above.

Mr Brian Charles, a director of Wiffen, gave evidence that Wiffen has never been ‘supplied with chemical’ by the 2012 Board or its predecessors.

Maturity Testing Services

The undisputed evidence was that the plaintiffs used the 2008 Board’s maturity testing service prior to 1 July 2012. Since 1 July 2012, Seven Fields has obtained these services from a provider other than the 2012 Board. There was no evidence that Wiffen has ever used the 2012 Board’s maturity testing service.

Other services

In cross-examination, Mr McMahon stated: ‘We don’t use the [2012] Board’s services.’ There was no specific evidence about Wiffen’s use of, or benefit from, any of the Board’s other services.

This proceeding and the grounds of review

After the 2012 Order came into effect on 27 July 2012, on 15 August 2012, the 2012 Board wrote to the Producers stating that it was compulsory for them to pay the Charge and that if they did not do so, the 2012 Board would pursue legal action to recoup the moneys owing.

Seven Fields has paid to the 2012 Board, under protest, the sum of $50,970.42 that was due in accordance with the 2012 Order.[45] Wiffen has not submitted a return or made any payment to the Board under the 2012 Order.
[45]This payment was made on 7 November 2012. It is not clear whether it represents the entire amount of the Charge due for the 2012–2013 financial year.

As the plaintiffs are among the largest Producers, in combination, they are liable to pay a sizeable proportion of the total revenue of $673,200 that the 2012 Board expected to earn from the Charge in 2012–2013.[46]
[46]In their oral submissions, the plaintiffs stated that their combined liability of about $100,000 was about 15% of the total Charge for 2012–2013. According to Mr Flett, Producers with 150 citrus fruit-bearing trees were not liable to pay ‘a great deal of money’ in respect of the Charge.

In this proceeding, the plaintiffs seek a declaration that the 2012 Order is invalid because it purports to empower the 2012 Board to impose charges on Producers which are not ‘charges for services’ the Board provides within the meaning of s 16(1)(a) of the Act, and are not otherwise authorised by the Act.

Alternatively, if the 2012 Order is not invalid, the plaintiffs seek a declaration that the Act is invalid because it purports to authorise the imposition of duties of excise contrary to s 90 of the Commonwealth Constitution.

Applicable legal principles

It was common ground between the parties that, in order for the plaintiffs to obtain relief, it was sufficient for them to establish that the Charge could not be characterised as a ‘fee for services’ in the constitutional sense, without having to establish that it was an excise duty within s 90 of the Commonwealth Constitution.[47] This is because if the Charge were not a fee for services it would be a tax and would fall outside the power conferred by s 16(1)(a) of the Act irrespective of the class of tax. On the other hand, if the Charge were a fee for services, it could not be a tax of any class.[48]
[47]Section 90 of the Commonwealth Constitution has the effect that the Commonwealth Parliament has exclusive power to impose duties of customs and excise.
[48]Section 53 of the Commonwealth Constitution provides that a proposed law shall not be taken to impose taxation ‘by reason only of its containing provisions for the imposition … of fees for … services under the proposed law.’

The High Court has considered the essential characteristics of a fee for services and the criteria for distinguishing a fee for services from a tax, on numerous occasions. The leading cases that are most relevant to this proceeding are discussed below. The discussion of the cases is followed by a summary of those essential characteristics and criteria.

Relevant cases
Cases preceding Airservices Australia v Canadian Airlines

Matthews v Chicory Marketing Board[49] involved a challenge to the validity of s 32 of the Marketing of Primary Products Act 1935 (Vic) (‘1935 Act’) which authorised the Chicory Marketing Board to impose levies on producers of chicory and to apply the money raised to pay expenses, repay advances to the Chicory Marketing Board, create an insurance fund and improve the quality of chicory. The Chicory Marketing Board imposed a levy on producers of £1 for every half acre of land planted with chicory. A majority of the High Court (Rich, Starke and Dixon JJ, Latham CJ and McTiernan J dissenting) held that the levy was an excise duty and that s 32 of the 1935 Act was invalid.
[49](1938) 60 CLR 263 (‘Matthews’).

Although Latham CJ dissented, the following statement of what constitutes a tax, namely, ‘a compulsory exaction of money by a public authority for public purposes, enforceable by law, and ... not a payment for services rendered’,[50] has been generally accepted by the High Court as a test of what prima facie constitutes a tax. However, the statement is not an exhaustive definition.[51]
[50]Matthews (1938) 60 CLR 263, 276.
[51]Air Caledonie International v Commonwealth (1988) 165 CLR 462, 466–8 (‘Air Caledonie’).

Parton v Milk Board[52] concerned the validity of a levy that was imposed on ‘dairymen’ pursuant to s 30 of the Milk Board Act 1933 (Vic) (‘1933 Act’) and associated legislation. The legislation established a Milk Board and conferred upon it extensive powers and responsibilities in relation to the supply of milk in Melbourne. The legislation also created a fund from which the expenses of the Board were paid. Section 29 of the 1933 Act required the Milk Board to prepare annual estimates of the probable expenditure to administer that Act and carry out its functions. Section 30(1)(a) provided that, towards the expenditure so estimated, contributions had to be made to the fund by ‘dairymen’ and milk depots at a rate determined by the Milk Board but not exceeding a quarter of a penny per gallon of milk sold or distributed in the ‘metropolis’.
[52](1949) 80 CLR 229 (‘Parton’).

Rich and Williams JJ, in a joint judgment, and Dixon J held that the levy was an invalid excise. Latham CJ and McTiernan J dissented on the basis that, although the levy may have been a tax, it was not an excise. Only Dixon and McTiernan JJ discussed the distinction between a tax and a fee for services and whether the levy was a fee for services. They both concluded that the levy was not a fee for services.[53]
[53]See also the observation of Rich and Williams JJ: Parton (1949) 80 CLR 229, 251.

McTiernan J stated that the levy was ‘a forced contribution to the government for public purposes’ and that the objects of the legislation were ‘directed to the general welfare rather than to the performance of services for the sellers and distributors who may be required to contribute.’[54]
[54]Parton (1949) 80 CLR 229, 268.

Dixon J’s reasons for concluding that the levy was not a fee for services were as follows:

It is an exaction for the purposes of expenditure out of a Treasury fund. The expenditure is by a government agency and the objects are governmental. It is not a charge for services. No doubt the administration of the Board is regarded as beneficial to what may loosely be described as the milk industry. But the Board performs no particular service for the dairyman or the owner of a milk depot for which his contribution may be considered as a fee or recompense. … The purposes for which the money is expended are extensive and cover not only all the activities in which the Board may engage, including the compensation of dairies whose licences are cancelled and promotion of milk consumption, but also subventions contributed towards the cost of the measures taken under the Milk and Dairy Supervision Acts to improve the quality of milk in Melbourne.[55]

[55]Parton (1949) 80 CLR 229, 258–9.

In Swift Australian Company Pty Ltd v Boyd Parkinson,[56] the High Court considered whether reg 53 of the Slaughtering Regulations 1953 (Qld) constituted an excise. Regulation 53 set out charges payable by abattoirs, slaughterhouses and butcher’s shops ‘for the purpose of defraying the expenses of inspection of meat for sale and of carrying [the Slaughtering Act 1951 (Qld)] into effect’.
[56](1962) 108 CLR 189 (‘Swift’).

Dixon CJ, Kitto, Taylor, Menzies and Windeyer JJ held that the charge was an invalid excise. McTiernan J dissented on the question of whether the charge was an excise but held that it was not a fee for services; rather, it was a payment for the right to conduct the relevant business.[57] Owen J did not decide whether the charge was an excise or a fee for services.
[57]Swift (1962) 108 CLR 189, 206.

Dixon CJ (with whom Kitto and Windeyer JJ agreed) concluded that the charge was not a fee for services because it was ‘not payable in respect of any particular service but generally for the purpose of defraying expenses’ and because ‘the expenses [were] not merely those of inspecting meat but those of carrying the Act considered as a whole into effect, that is to say, for administration expenses generally.’[58] His Honour observed that the charge was payable into Consolidated Revenue and was not ‘directed by law into any particular fund the expenditure of which [was] limited even to the administration of the Act.’[59]
[58]Swift (1962) 108 CLR 189, 200.
[59]Swift (1962) 108 CLR 189, 200–1.

Menzies J (with whom Taylor J agreed) concluded that the charge could not be justified as an inspection fee because the purposes for which it was payable included the carrying of the Slaughtering Act 1951 (Qld) into effect.[60]
[60]Swift (1962) 108 CLR 189, 222.

In Harper v Victoria,[61] the High Court considered the validity of provisions of the Marketing of Primary Products Act 1958 (Vic) that required all eggs for sale by retail in Victoria to be graded for quality and stamped and which empowered the Egg and Egg Pulp Marketing Board to fix and charge a fee to defray its expenses for grading and stamping eggs. McTiernan, Taylor, Menzies and Owen JJ held that the fee was not an excise but a fee for services rendered because its purpose was not to raise revenue but to defray the cost of providing the grading and stamping services,[62] and the fees actually charged bore a relationship to the expenditure incurred in providing the services.[63] Barwick CJ did not decide this issue.[64]
[61](1966) 114 CLR 361 (‘Harper’).
[62]Harper (1966) 114 CLR 361, 377 (McTiernan J), 378 (Menzies J).
[63]Harper (1966) 114 CLR 361, 378 (Taylor J), 378–9 (Menzies J), 382 (Owen J).
[64]Harper (1966) 114 CLR 361, 376.

Logan Downs Pty Ltd v Queensland[65] concerned a challenge to the validity of s 7 of the Stock Act 1915 (Qld) (‘1915 Act’) which authorised the relevant Queensland Minister to levy annual assessments, at rates to be fixed by him or her, on owners of cattle, horses, sheep and swine. Section 6(5) of the 1915 Act required moneys raised to be paid into a ‘Stock Fund’ which was to be applied in defraying the costs of administering the 1915 Act and in providing animal husbandry services. The animals for which husbandry services could be provided were not confined to cattle, horses, sheep and swine. Assessments were made at specified rates per head of cattle, horses, sheep and swine. A majority of the High Court (Barwick CJ and Stephen and Mason JJ, Gibbs, Jacobs and Murphy JJ dissenting) held that an assessment levied under s 7 of the 1915 Act was an excise duty and that, accordingly, the section was to that extent invalid.
[65](1977) 137 CLR 59 (‘Logan Downs’).

Although Gibbs J dissented on the ultimate question of whether an assessment under s 7 of the 1915 Act was an excise duty, he said that there was no doubt that s 7 imposed a tax and did not involve a payment for services rendered.[66] His Honour said:

It is clear that the expenses incurred in the execution of the Act may have no relation whatever to the stock in respect of which an assessment may be made under s 7. For example, the … husbandry services provided out of the Fund may not in fact benefit in any way a particular owner of stock who pays the levy.
…
The amount levied does not purport to be, and is not in fact, a payment for services rendered to the person required to pay it. The Stock Fund is no doubt applied for purposes which are beneficial to farmers and graziers generally, but no particular service or benefit need be rendered to any owner of stock who is required to pay an assessment, and if, by coincidence, the person liable to pay an assessment has been rendered some service under the Act, the assessment is not payable because that service has been performed, and bears no necessary relation to the expenditure incurred in providing that service.[67]

[66]Logan Downs (1977) 137 CLR 59, 63.

[67]Logan Downs (1977) 137 CLR 59, 62–3.

In General Practitioners Society v Commonwealth,[68] the High Court held that s 16C(2) of the Health Insurance Act 1973 (Cth) was not invalid pursuant to s 55 of the Commonwealth Constitution, which requires that laws imposing taxation must deal only with the imposition of taxation. Section 16C(2) provided that, where a doctor who wished to become an approved pathology practitioner gave to the relevant Commonwealth Minister a written undertaking ‘together with a fee of $10 or of such other amount as is prescribed’, the Minister could either accept the undertaking or refer to a committee the question of whether the undertaking should be accepted. The money raised was paid into Consolidated Revenue. The Court held that the fee was a fee for services rather than a tax.
[68](1980) 145 CLR 532 (‘General Practitioners’).

Gibbs J, with whom Barwick CJ, Stephen, Mason, Murphy and Wilson JJ agreed on this point, said the following about the fee:

[I]t is a fee for services. It is the price which a medical practitioner, who seeks to become an approved pathology practitioner, must pay for the purpose of having his undertaking considered by the Minister, and either accepted or referred for inquiry and report to a Medical Services Committee of Inquiry. In other words, it is a charge for the services performed in dealing with the application. The fact it is paid into Consolidated Revenue does not prevent it from being a fee for services. The nature of such a payment is not determined by what is done with it after its receipt. Further, the fact that the service for which the fee is charged is one which the practitioner is in effect compelled to obtain does not … alter the character of the fee or convert it into a tax. An exaction may properly be characterized as a licence fee notwithstanding that the licence is one that must necessarily be obtained and the same is in my opinion true of a fee for services; fees charged for compulsory licences, or for holding plants or animals in quarantine, might provide examples.
The amount of an exaction may … be relevant to the question whether it is a fee for services, since an exaction may be so large that it could not reasonably be regarded as a fee. … If s 16C(2) were construed as meaning that there was no limit to the amount of the fee that might be prescribed, it might well follow that the Health Insurance Amendment Act 1977 would be an Act imposing taxation and that the remaining provisions of that Act would be invalid. What is to be prescribed under s 16C(2) is clearly the amount of a fee — the section expressly so indicates — and unless the words of the section were unambiguous the Court would not ascribe to them a meaning which enabled so large an amount to be prescribed that the exaction could properly be described as a tax with the consequence that the other provisions of the amending statute became invalid. … In my opinion the intention that can be gleaned from the provisions of s 16C(2) is that the amount to be prescribed shall be such that the amount payable remains a fee. In the present case no amount has been prescribed, and the amount of $10 is not so large as to give the exaction the character of a tax.[69]

[69]General Practitioners (1980) 145 CLR 532, 561–2.

Gibbs J stated that the word ‘rendered’ in the phrase ‘payment for services rendered’ that was used by Latham CJ in Matthews must have been intended to include ‘to be rendered’.[70] Aickin J also agreed that the fee was a fee for services. His Honour said that the charge of $10 was ‘almost nominal’ and, as such, fell within the concept of a fee rather than a tax.[71]
[70]General Practitioners (1980) 145 CLR 532, 561.
[71]General Practitioners (1980) 145 CLR 532, 571.

Air Caledonie International v Commonwealth[72] involved a challenge to the validity of s 34A of the Migration Act 1958 (Cth) (‘1958 Act’) which imposed an obligation on passengers travelling to Australia on an overseas flight to pay what was described as a ‘fee for immigration clearance’. The fee was payable by international airline operators regardless of whether they collected the fee from their passengers. Section 34A did not identify any services to be provided to any passenger and empowered the Executive to fix the fee. In the context of deciding whether s 55 of the Commonwealth Constitution was engaged, the High Court considered whether s 34A imposed a fee for services rather than taxation.
[72](1998) 165 CLR 462.

In a joint judgment, the Court (Mason CJ and Wilson, Brennan, Deane, Dawson, Toohey and Gaudron JJ) stated the following in relation to the expression ‘a payment for services rendered’ in the test set out in Matthews:

[A] compulsory and enforceable exaction of money by a public authority for public purposes will not necessarily be precluded from being properly seen as a tax merely because it is described as a ‘fee for services’. If the person required to pay the exaction is given no choice about whether or not he acquires the services and the amount of the exaction has no discernible relationship with the value of what is acquired, the circumstances may be such that the exaction is, at least to the extent that it exceeds that value, properly to be seen as a tax.
…
In one sense, all taxes exacted by a national government and paid into national revenue can be described as ‘fees for services’. They are the fees which the resident or visitor is required to pay as the quid pro quo for the totality of benefits and services which he receives from governmental sources. It is, however, clear that the phrase ‘fees for services’ in s 53 of the Constitution cannot be read in that general impersonal sense. Read in context, the reference to ‘fees for services’ in s 53 should, like the reference to ‘payment for services rendered’ in the … judgment of Latham CJ in Matthews v Chicory Marketing Board, be read as referring to a fee or charge exacted for particular identified services provided or rendered individually to, or at the request or direction of, the particular person required to make the payment.[73]

[73]Air Caledonie (1988) 165 CLR 462, 467, 469–70 (citations omitted). The Court added the words ‘at the direction or request of’ to the words ‘rendered to’ that were used by Gibbs CJ in Logan Downs: see at 467.

The Court held that the immigration clearance fee was a tax and that s 34A of the 1958 Act was invalid for three main reasons. First, the fee was not for the provision or rendering of services to, or at the request or direction of, a passenger. Secondly, it was not possible to find in s 34A any identification of particular services provided or rendered to an individual passenger for which the fee could relevantly be regarded as a quid pro quo. Thirdly, the moneys raised by the fee were used to pay general administrative costs and overheads of the relevant Commonwealth department. The Court expressed the third reason in the following terms:

the moneys intended to be raised by the purported impost were not related to particular services to be supplied to particular passengers but were intended to provide, when paid into consolidated revenue, a general off-setting of the administrative costs of certain areas of the relevant Commonwealth Department, including, for example, the administrative costs involved in maintaining facilities for the issue of visas in overseas countries and ‘general administrative overheads’.[74]
[74]Air Caledonie (1988) 165 CLR 462, 470.

Airservices Australia v Canadian Airlines

In Airservices Australia v Canadian Airlines International Ltd,[75] the High Court considered the validity of charges imposed by the Civil Aviation Authority (‘CAA’), the predecessor of Airservices Australia, upon airlines pursuant to the Civil Aviation Act 1988 (Cth) (‘1988 Act’). Under the 1988 Act, the CAA was required to perform various functions relating to civil aviation including to ensure safety. The 1988 Act required the CAA to operate on a commercial basis and to apply a ‘user pays’ principle to the provision of services. The CAA was obliged to prepare a corporate plan and, in doing so, to consider a number of matters, including the need to earn a reasonable rate of return on its assets and the Commonwealth’s expectation that it would be paid a reasonable dividend by the CAA.
[75](1999) 202 CLR 133 (‘Airservices’).

At this point it is necessary for me to consider the expert evidence of Mr Gavan Dwyer, an economist employed by the Department, who was called by the State. The plaintiffs strongly criticised Mr Dwyer’s evidence on the basis that he was not independent of the Department and he frankly acknowledged that he had not fully complied with the Court’s Expert Witness Code of Conduct. While the plaintiffs’ criticisms have merit, there is a more fundamental problem with Mr Dwyer’s evidence from the State’s perspective, namely that it does not assist the State’s case.

Mr Dwyer’s evidence was based on the facts set out in Mr Flett’s affidavit of 25 January 2013 and was to the following effect:

(a) Some of the 2012 Board’s Services have the underlying characteristics of ‘public goods’ which economists define as being both ‘non-excludable’ (individuals cannot be excluded from using the good, irrespective of whether they pay for it) and ‘non-rival’ (use of the good by one or more individuals does not diminish the amount of the good available for use by others). Examples of public goods are free-to-air television and street lighting.

(b) In the absence of market intervention, public goods are not provided or are under-provided. This is because the non-excludable and non-rival nature of public goods means that consumers are able to ‘free-ride’ by consuming the good without having to pay for it. This has the effect that individuals are unlikely to provide the good as they cannot exclusively capture the benefits of that provision. A compulsory levy scheme of the type set out in the Act overcomes this problem by requiring all individuals who will or may use a public good to contribute to meeting the cost of its provision.

(c) The concept of ‘spillover effects’ describes a situation where one person’s actions affect others by creating costs or benefits which go unpriced. Market intervention, such as through a body like the 2012 Board, can reduce negative spillovers and increase positive spillovers.

(d) Certain goods — which do not meet the definition of public goods — may be under-provided in the absence of market intervention because they are costly to provide or involve risks. These ‘private’ goods can be provided by an industry body such as the 2012 Board to all possible users of those goods at a comparatively lower cost than the private sector by taking advantage of ‘economies of scope’. Economies of scope comprise economies of size and other aspects such as technology.

(e) Objectives 1.1 and 1.2: The information disseminated by the 2012 Board via its Newsletter, Website, Crop Forecast Booklet and other distribution channels is non-excludable and non-rival to Producers; it therefore has public good characteristics and the 2012 Board can take advantage of economies of scope. The absence of industry-wide information can have negative spillovers such as market volatility. Visits by the Japanese Representative can have non-excludable and non-rival benefits for all growers if the visits increase access to the Japanese market. The training that the 2012 Board provides at CITT meetings and other forums may have aspects which are excludable and therefore it is not a public good, but there may be an economies of scope rationale for the 2012 Board to provide the training.

(f) Objective 1.3: Levy-funded generic commodity promotion is non-excludable and non-rival and can be a useful strategy to increase demand and price in domestic markets with substantial net benefits to industry. The potential for ‘free-riding’ means that voluntary generic promotion is unsustainable.

(g) Objective 1.4: By raising the awareness of public policy makers on issues affecting the Murray Valley citrus industry, the 2012 Board may create non-rival and non-excludable benefits for all growers.

(h) Objective 1.5: QFF control mechanisms that prevent pest outbreaks and achieve FFF status are a public good in the sense that they provide non-rival and non-excludable benefits — such as access to markets, reduced treatment costs and better quality — to all growers of citrus fruit and other fruit in the relevant region. Individual growers have weak incentives to consider the interests of other growers when managing fruit fly on their own land. In the absence of industry-wide action — including provision of subsidised chemicals — there can be negative spillovers such as pest outbreaks and loss of reputation.

(i) Objective 2.1: Maturity testing can assist in ensuring that more uniform quality of product is sold, thereby improving the reputation of the product and increasing demand at the industry level. These benefits are non-excludable and non-rival. The absence of maturity testing can lead to negative spillovers, such as loss of product reputation.

In my opinion, if the 2012 Board’s Services are to be treated as public goods as suggested by Mr Dwyer, this would serve only to highlight the lack of a nexus between the Charge paid by an individual Producer and any value to that Producer from the provision of the 2012 Board’s Services. Contrary to Mr Dwyer’s evidence that the compulsory levy scheme embodied in the Act overcomes free-riding because all individuals who will or may use a public good are required to contribute to meeting the cost of its provision, the evidence establishes that:

(a) the plaintiffs, as Producers, pay the Charge based on the sale of their oranges, grapefruit and mandarins but do not use the 2012 Board’s Services;

(b) many of the 2012 Board’s Services are used by persons other than Producers free of charge;

(c) some of the 2012 Board’s Services benefit products in the Region other than those in respect of which the Charge is imposed, namely, oranges, grapefruit and mandarins; and

(d) some of the 2012 Board’s Services have benefits extending beyond the Region.

The result is that there is no necessary connection between the payers of the Charge and the users or beneficiaries of the 2012 Board’s Services. The absence of that connection precludes the Charge being characterised as a fee for services even if the 2012 Board’s Services can be classified as public goods. While such a classification may serve to provide an economic rationale for the compulsory levy scheme embodied in the Act, it does not have the effect of conferring on the Charge the character of a fee for services.

The fact that the payers of the Charge are a defined and known group but the users and beneficiaries of the 2012 Board’s Services are not, supports the characterisation of the Charge as a tax which pays for services that have a public benefit component rather than a fee for services provided to the payers.

The matters discussed above mean that the 2012 Board’s submission that the Charge is exacted for private purposes rather than public purposes, is unsustainable. While it may be accepted that the 2012 Board’s Services are primarily directed to benefitting Producers, the nature of those services and the manner in which the 2012 Board delivers them mean that the services are not confined to the defined and known group that pays for them. As I have demonstrated, some of the 2012 Board’s Services are made available to, or provide benefits for, the horticultural industry and the public generally. In any event, as the State and the 2012 Board properly conceded, even if I were to find that the Charge was not exacted for public purposes, that would not necessarily mean that it was a fee for services rather than a tax.

Post-Airservices position

In my opinion, the clarification of the law in Airservices does not alter the conclusion that the Charge is not a fee for services.

As demonstrated at [141] above, nothing in Airservices has affected the ongoing applicability of the definition of a fee for services in Air Caledonie. It follows that, as the Charge does not satisfy that definition, it is not a fee for services.

If one looks beyond the definition in Air Caledonie and considers the other criteria for determining whether a charge is a fee for services, it is readily apparent from the analysis of Airservices at [116] to [139] above that the discussion of those criteria at [181] to [209] above is unaffected by Airservices. The only exception is the criterion dealing with the need for a discernible relationship between the amount of a charge for services and the value of those services to the payer of the charge that was articulated in Air Caledonie. As discussed at [147] above, Airservices held that, where the enabling legislation permits and certain conditions apply, the relationship between the charge and the value of the services may be between the total revenue earned from all users of the services and the total cost of providing those services.

In order to determine whether the attributes of the Charge are sufficiently analogous to the attributes of the CAA’s charges in Airservices so as to require a conclusion that the Charge is a fee for services, it is necessary to compare those attributes and to analyse the individual approaches adopted by the judges in Airservices.

The first issue to be considered is whether the Act permits the relationship between the Charge and the value of the 2012 Board’s Services to be between the total revenue earned from all Producers and the total cost of providing the 2012 Board’s Services. In Airservices, s 67 of the 1988 Act expressly required a relationship between the CAA’s charges and the expenses incurred in providing the CAA’s services, which the High Court held could operate at an aggregate level rather than at the level of an individual user of the CAA’s services. By contrast, there is nothing in the Act — or indeed the 2012 Order — which expressly refers to a relationship between the Charge and the 2012 Board’s Services at any level.

Although the High Court in Airservices placed significant reliance on the terms of s 67 of the 1988 Act in support of the Court’s conclusion that the CAA’s charges were a fee for services, I do not believe that the absence of a provision such as s 67 in the Act or the 2012 Order is determinative of the question of whether the Charge is a fee for services. What is of critical importance is the discussion in Airservices of the attributes of the CAA’s charges which persuaded the High Court that those charges were fees for services.

At [125] above, I set out the attributes of the CAA’s charges which Gleeson CJ and Kirby J relied upon to conclude that those charges were fees for services. Set out below are those attributes and my conclusions as to whether they apply to the Charge:

(a) The CAA’s charges were not imposed to raise revenue. At [185] above, I concluded that it could not be inferred that the Charge was imposed for the predominant purpose of raising revenue.

(b) The CAA’s charges were undoubtedly charges for the provision of services. Based on the fact that their Honours distinguished Air Caledonie on the basis that, in that case, no services were provided to the person paying the impugned charge,[150] it is clear that their Honours meant that the CAA’s charges were for the provision of services to the airlines that paid those charges. In the present case, although the 2012 Board used the money collected from the Charge to provide the 2012 Board’s Services, the plaintiffs did not use any of the 2012 Board’s Services in return for paying — or being liable for — the Charge.
[150]See [124] above.

(c) The CAA’s charges were imposed to recover the cost of providing the CAA’s services across the entire range of users. In the present case the Charge was imposed to recover the cost of providing the 2012 Board’s Services whether or not the Producers who paid the Charge used or benefitted from those services.

(d) The charges for categories of services were reasonably related to the expenses incurred in relation to the matters to which the charges related. This statement reflects the High Court’s interpretation of s 67 of the 1988 Act and has no direct bearing on the present case. Further, unlike Airservices, detailed economic evidence was not presented before me which dissected the single global rate levy of $5.50 per tonne of citrus fruit sold into components of revenue per category of service that were each reasonably related to the expenses incurred by the 2012 Board in providing each category of the 2012 Board’s Services. In any event, for the reasons discussed at [186] to [188] above, I will not treat this attribute as indicating that the Charge is not a fee for services.

(e) The CAA’s services were, of their nature, part of an activity which must be highly integrated in order to be effective. For the reasons discussed at [188] to [189] above, the 2012 Board’s Services were discrete and there was no evidence that they must be highly integrated in order to be effective.

(f) There was a rational basis for such discrimination between users of the CAA’s services as existed. This statement must be considered in the context of the fact that, in Airservices, airlines paid the CAA’s charges only when, and to the extent to which, they used those services. The users of and the payers for the CAA’s services were a single group (the airlines). To the extent that the CAA’s services provided ‘collateral’ benefits to other persons (such as passengers), those benefits arose from the use of the services by a paying airline rather than independently of such use.

In the present case, the issue was not so much that there was discrimination between users but that all Producers had to pay a single global rate levy irrespective of the extent to which, if at all, they used any of the 2012 Board’s Services. In Airservices, while there was cross-subsidisation within the user and paying group, there was no subsidisation of any organisation that did not pay the CAA’s charges (although passengers and the public may be said to benefit from air safety). In relation to the 2012 Board’s Services, there was cross-subsidisation of non-paying users by payers who were non-users (the plaintiffs) and by payers who were users. Clearly, cross-subsidisation was not confined within the paying group, the Producers. Further, as non-payers are able to use some of the 2012 Board’s Services independently of a use by a Producer, non-payers derived benefits by directly using the 2012 Board’s Services rather than simply as an incident of a Producer using those services.

No explanation was provided as to why the Charge is levied on the basis of the weight of the citrus fruit rather its value, given that a tonne of oranges is unlikely to have the same value as a tonne of mandarins or grapefruit. Further, different types of oranges may sell for different prices per unit of weight. If a Producer sold only one of the citrus fruit varieties that had a lower price per unit of weight than other citrus fruit varieties, the imposition of a uniform levy per unit of weight would have a relatively more adverse financial impact on that Producer.

In my opinion, the matters discussed at [173] to [215] above together with the discussion of the attributes in paras (b), (c), (e) and (f) above negate the characterisation of the Charge as a fee for services.

At [127] above, I set out three conditions that Gaudron J, with whom Hayne J substantially agreed, stated must be satisfied in order for a charge imposed in a commercial context to constitute a fee for services notwithstanding that the charge applied differently to different users and reflected neither the cost nor the value of the particular service rendered. Set out below are those conditions and my conclusions as to whether they are satisfied in relation to the Charge:

(a) The charge is levied only against persons who use the services. This condition is not satisfied in relation to the Charge because the Charge is levied on all Producers irrespective of whether or not they use the 2012 Board’s Services.

(b) The charge is levied against all users of the services. This condition is not satisfied in relation to the Charge because users of the 2012 Board’s Services, other than Producers, are not required to pay the Charge.

(c) There is a commercial justification for discriminating between different users. In relation to this condition, I refer to my observations at [216(f)] above.

At [128] above, I set out the attributes of the CAA’s charges which Gaudron J, with whom Hayne J substantially agreed, relied upon to conclude that those charges were fees for services. Set out below are those attributes and my conclusions as to whether they apply to the Charge:

(a) The CAA’s services clearly had a commercial value and were to be provided on a commercial basis. Her Honour’s reference to the CAA’s services being provided on a commercial basis was to the provisions of the 1988 Act which required the CAA to provide its services on a commercial basis and to apply a user pays principle. There are no equivalent provisions in the Act. However, s 35(1)(c) of the Act requires the 2012 Board to provide its services ‘efficiently, effectively and economically.’ Also, it can be accepted that at least some of the 2012 Board’s Services had a commercial value.

(b) The CAA’s services were levied at a rate calculated to defray the cost of those services together, only, with a profit to cover future infrastructure requirements and to satisfy the Commonwealth’s commercial expectations with respect to its capital investment. Unlike the CAA, the Board did not receive any capital from the Commonwealth (or the State) and, unlike the 1988 Act, the Act does not contain provisions requiring the 2012 Board to pay a dividend to the Commonwealth (or the State). There was no evidence that the 2012 Board had high fixed costs or extensive capital assets; most of its costs were variable. As discussed at [188] above, I am prepared to assume that the money collected from the Charge will not exceed the total cost of providing the 2012 Board’s Services.

(c) The CAA’s services were provided commercially and not as part of a regulatory scheme. This also applies to the 2012 Board’s Services.

In my opinion, the matters discussed at [173] to [215] above together with the discussion of the conditions at [218] above negate the characterisation of the Charge as a fee for services.

At [136] above, I set out the attributes of the CAA’s charges which McHugh J relied upon to conclude that those charges were fees for services. Set out below are those attributes and my conclusions as to whether they apply to the Charge:

(a) The CAA’s services were provided by a statutory authority which had as one of its statutory functions the provision of those services or services of that general type. In the present case, neither the Act nor the Order identified the 2012 Board’s Services as services that the 2012 Board was required to provide. However, the 2012 Board’s Services are not inconsistent with the types of services that the Act contemplated that a body such as the 2012 Board may provide.

(b) The position of the CAA in providing its services approximated that of a natural monopolist. In the present case there was no evidence that the position of the 2012 Board in providing its services approximated that of a natural monopolist. The evidence of Mr Dwyer only went so far as stating that some of the 2012 Board’s Services had the underlying characteristics of public goods. Mr Dwyer’s evidence is discussed at [204] to [208] above.

(c) The CAA was (at least impliedly) directed under the 1988 Act to recover the costs of providing the CAA’s services from the users of those services. In the present case, the Act contemplates that the 2012 Board’s Services will be funded primarily from money paid by Producers in respect of the Charge whether or not they requested or used those services and whether or not anybody else used or benefitted from those services.

(d) The CAA exhibited a large degree of financial independence from the executive government and was intended to operate on a commercial basis. In the present case the Board was subject to the general and specific directions of the Minister. While the 2012 Board enjoyed some financial independence from the executive government in that it set its own budget which received approval from Producers, some aspects of the 2012 Board’s expenditure were dictated by government policy. For example, the Department unilaterally increased the industry’s contribution to the costs of managing the QFF problem from 10% to 70%.[151] In relation to whether the 2012 Board was intended to operate on a commercial basis, I refer to my observations at [219(a)] above.
[151]See [61] above.

(e) The CAA’s pricing structure which gave rise to the lack of a discernible relationship between the value of the CAA’s services provided on a particular occasion and the charge levied for those services was a reasonably and appropriately adapted means of achieving a legitimate public purpose (other than revenue raising) which was related to the functions, powers or duties of the CAA. The references to a legitimate public purpose and the functions, powers and duties of the CAA are informed by the nature of the CAA’s services which, at their core, involved the governmental responsibility of ensuring air safety. The 2012 Board’s Services, on the other hand, are said by the 2012 Board to be directed to assisting the businesses of growers of particular types of citrus fruit in a limited geographical area.[152] While I have found that the 2012 Board’s Services have a public benefit component,[153] those services are not quintessentially governmental in the same way as air safety.
[152]See [168] above.
[153]See [207]–[209] above.

Furthermore, it has not been demonstrated why it is reasonable or appropriate for the plaintiffs to pay the Charge even though they do not use the 2012 Board’s Services or why growers of other citrus fruit, commercial packing houses and other participants in the citrus industry should be able to utilise the 2012 Board’s Services without having to pay the Charge.

(f) The lack of a discernible relationship arises from commercial factors related to implementing the ‘user pays’ principle of public policy by a body which is financially separate from the government. In the present case, the Charge does not give effect to a user pays policy because Producers must pay the Charge whether or not they use the 2012 Board’s Services and because persons other than the Producers who pay the Charge may utilise the 2012 Board’s Services. A statutory scheme such as that embodied in the 2012 Order which compels payment of a compulsory levy to fund services independently of any use of those services by the payer of the levy is the antithesis of a user pays system, particularly when it permits persons who do not pay the levy to use or benefit from those services.

(g) The CAA’s pricing structure does not arise from a revenue-raising purpose. In relation to this attribute, I refer to the observations I made at [185] above.

In my opinion, the matters discussed at [173] to [215] above together with the discussion of the attributes in paras (b) to (f) above negate the characterisation of the Charge as a fee for services.

At [139] above, I set out the attributes of the CAA’s charges which Gummow J relied upon to conclude that those charges were fees for services. Set out below are those attributes and my conclusions as to whether they apply to the Charge:

(a) The incident which triggered the liability of a particular user to pay each of the CAA’s charges was a step in the provision of a service to that user. In the present case, the Charge was paid according to the weight of the citrus fruit upon sale by a Producer irrespective of whether or not any of the 2012 Board’s Services were provided to that Producer.

(b) Each of the CAA’s services was part of a set or network of integrated or interconnected services which were made available by the CAA to a user group, the integration or interconnection arising from the cost structure of the CAA and the network of aerodromes to which the services related. For the reasons discussed at [188] to [190] above, the 2012 Board’s Services were discrete and independent. It cannot be said that each of the 2012 Board’s Services was part of a set or network of integrated or interconnected services. Nor can it be said that those services were made available only to a confined user group comprising the Producers who paid the Charge, as other growers of citrus fruit and other participants in the citrus industry could utilise the 2012 Board’s Services free of charge. I note also that, even though the CAA’s services were integrated and interconnected, there were distinct charges for distinct services, whereas the 2012 Board levied a single global charge for all its services.

(c) The CAA provided its services in circumstances where it would not have recovered its total costs for the services if it had charged the marginal cost for particular services to all users. In the present case, there was no evidence that this attribute applied to the 2012 Board’s Services.

(d) The CAA set the rate for each of its services by reference to each particular user’s economic capacity to pay, however, the rate obliged each user to pay at least marginal cost for the provision of the service on a particular occasion. In the present case, there was no evidence that this attribute applied to the 2012 Board’s Services.

(e) The provision of the CAA’s services was in discharge of functions conferred on the CAA by the 1988 Act. In relation to this attribute, I refer to my observations at [221(a)] above.

(f) The CAA was expected to generate revenue from the user group in order to cover its costs of providing its services. In relation to this attribute, I refer to my observations at [221(c)] above.

(g) Each of the CAA’s charges was a reasonably and appropriately adapted means of achieving a legitimate public purpose, other than revenue raising, related to the functions of the CAA. In relation to this attribute, I refer to my observations at [221(e)] above.

(h) The functions of the CAA to which the public purpose relates, were substantially and directly for the benefit of the user group subject to each of the charges. In relation to public purposes, I refer to my observations at [221(e)] above. The 2012 Board’s Services were primarily, but not exclusively, directed at benefiting Producers. However, whereas the airlines in the ‘user group’ in Airservices only paid the CAA’s charges on each occasion that they used the CAA’s services, the Producers are required to pay the Charge based on the weight of citrus fruit upon sale rather than on the basis of individual uses of the 2012 Board’s Services. Unlike Airservices — where airlines had to use the CAA’s services whenever their aircraft came to Australia because of the nature of the airlines’ operations and the composition of the CAA’s services — in the present case the ‘user group’ is not co-extensive with the ‘payer group’ or even the ‘industry group’.[154] Producers could conduct their businesses without using the 2012 Board’s Services, and those services were not tailored exclusively for use by Producers.[155] There is no ‘direct’ relationship between payment of the Charge and the receipt of a benefit from use of the 2012 Board’s Services.

[154]See [216(f)] above.

[155]See [190]–[201] above.

In my opinion, the matters discussed at [173] to [215] above together with the discussion of the attributes in paras (a), (b) and (e) to (h) above negate the characterisation of the Charge as a fee for services.

The above comparison between the attributes of the CAA’s charges and those of the Charge highlights how significantly different they are and why Airservices is distinguishable.

To the extent that the State’s submissions suggested that Airservices supports the proposition that a charge imposed on an industry group for services provided to that industry group can constitute a fee for services even though a particular member of the industry group does not use or benefit from the services, I reject that suggestion. There is nothing in Airservices or any other case that supports that proposition.

As I have already explained, the test for establishing a fee for services in Air Caledonie has not been abrogated by Airservices. The clarification of the law that was provided in Airservices related principally to the requirement that there be a discernible relationship between the impugned charge and the value of the services provided. Although Airservices can be said to have expanded the circumstances in which that requirement can be satisfied, for the reasons discussed at [210] to [226] above, those circumstances do not extend to confer on the Charge the status of a fee for services.

Conclusion

My conclusion that the Charge is not a fee for services does not mean that any provision of the Act is invalid. This is because s 16(1)(a) of the Act is limited to empowering bodies such as the 2012 Board to impose charges for services they provide. There is nothing in this section which authorised the 2012 Board to impose charges that did not constitute fees for services.

My conclusion that the Charge is not a fee for services necessarily means that cl 19 of the 2012 Order is invalid. This is because, in the absence of a contrary decision by a general meeting of Producers, cl 19 enables the 2012 Board to charge each Producer $5.50 per tonne of citrus fruit sold in circumstances where such a payment would not be for the 2012 Board’s Services for that Producer.

It was common ground that if the Charge was not a charge for services provided by the 2012 Board for the purposes of s 16(1)(a) of the Act, no other provision of the Act would authorise the Charge. It was also common ground that nothing in s 12 of the Act would prevent this Court from declaring cl 19 of the 2012 Order invalid in the event that I concluded that the Charge was not authorised by s 16(1)(a) of the Act.

A question remains, however, as to whether any other provision of the 2012 Order, or indeed the 2012 Order as a whole, is invalid. It may be, as the plaintiffs suggested, that cl 18 is invalid insofar as it is to be construed as providing only one means of charging for the 2012 Board’s Services, namely, a single global rate based on the weight of citrus fruit sold. As these issues were not the subject of detailed submissions by the parties, I will adjourn the further hearing of the proceeding to give the parties an opportunity to make further submissions on them and on the form of the order the Court should make.

---

Objectives	Total Budget	Funding
1.1 Encourage greater uptake of best practice and innovative technology	$217,442	Levy: $80,444 External (HAL): $99,780 Other Income: $15,523 Reserves: $21,695
1.2 Provide high quality industry data and information to assist growers assess opportunities and make informed business decisions	$138,099	Levy: $94,417 Other Income: $9,858 Reserves: $33,824
1.3 Promote citrus products to maximise grower returns	$61,651	Levy: $42,150 Other Income: $4,401 Reserves: $15,100
1.4 Encourage risk minimisation	$71,057	Levy: $45,846 External (HIN): $4,000 Other Income: $5,073 Reserves: $16,138
1.5 QFF Contingency	$153,000	Levy: $104,605 Other Income: $10,922 Reserves: $37,473
2.1 Facilitate/support market development and maintenance	$50,340	Levy: $34,417 Other Income: $3,594 Reserves: $12,329
2.2 Instigate relevant research and development for industry adoption	$12,848	Levy: $8,784 Other Income: $917 Reserves: $3,147
2.3 Liaise with other industry organisations to maximise outcomes and efficient use of resources	$74,814	Levy: $51,150 Other Income: $5,341 Reserves: $18,323
2.4 Promote industry awareness of required management and accreditation systems	$117,264	Levy: $80,172 Other Income: $8,371 Reserves: $28,721
3.1 Provide effective leadership and advocacy	$28,586	Levy: $19,544 Other income: $2,041 Reserves: $7,001
3.2 Focusing on customer satisfaction	$39,644	Levy: $27,104 Other Income: $2,830 Reserves: $9,710
3.3 Provide timely and effective communication and facilitate opportunities for grower input	$46,636	Levy: $31,885 Other Income: $3,329 Reserves: $11,422
3.4 Maintain excellence in corporate governance	$77,054	Levy: $52,682 Other Income: $5,501 Reserves: $18,872
Total	$1,088,435	[Charge] $673,200

Industry Projects	Total [2012 Board] Contribution
CT09044 — Helping Murray Valley citrus growers thrive in an ever changing environment by addressing regional and national issues (Existing Project, with HAL)	$58,571
CT10006 — Post Harvest Program	$20,000
CT10021 — Managing Citrus Gall Wasps in southern citrus regions (Existing Project, with HAL)	$34,257
MT10019 — Improving market access for the Greater Sunraysia horticultural production area (Existing Project, with HAL)	$69,212
CT10030 — Extension of citrus practices to maximise marketable fruit size and economic returns through on-farm trials (Existing Project, with HAL)	$25,554
CT10031 Tri-state Fruit Fly Area Freedom Awareness Program (Existing Project, with HAL)	$11,961
CT12001 — Helping Murray Valley citrus growers thrive in an ever changing environment by addressing regional and national issues (Existing Project, with HAL)	Pending Approval
[Total]	[$219,555]

[2013] VSC 423

16 August 2013