Telstra Corporation Ltd v Hurstville City Council
[2000] FCA 1887
•21 DECEMBER 2000
FEDERAL COURT OF AUSTRALIA
Telstra Corporation Ltd v
Hurstville City Council [2000] FCA 1887CONSTITUTIONAL LAW - local government charges and rates imposed on broadband cables owned by telecommunication carriers - validity of enabling State legislation - whether charges and rates are duties of excise - whether the imposts are “taxes” - whether they are a levy on “goods” - Commonwealth statutory provision that law of a State has no effect “to the extent to which the law discriminates or would have the effect of discriminating” against telecommunication carriers - whether this provision is effective to exclude State laws authorising imposition of rates and charges - validity of provision - role of explanatory memorandum for Bill - meaning of “discriminates” - whether the State laws discriminate - whether Commonwealth provision effects an acquisition of property other than on just terms.
TELECOMMUNICATIONS - Carriers’ cables installed pursuant to 1991 Telecommunications Act - Extent of immunity to State law provided by transitional provisions in 1997 Act - Whether State laws authorising imposition of rates and charges are laws relating to the occupancy or use of a facility whose construction was authorised under the 1991 Act.
PRACTICE AND PROCEDURE - Jurisdiction of Federal Court to determine State law administrative issues.
ADMINISTRATIVE LAW - Decisions to make charges and declare rates - whether decisions invalidated by extraneous purposes.
Mutual Pools & Staff Pty Limited v Federal Commissioner of Taxation (1992) 173 CLR 450 and Adams v Rau (1931) 46 CLR 572 applied.
Hematite Petroleum Pty Limited v Victoria (1983) 151 CLR 599 and Capital Duplicators Pty Limited v Australian Capital Territory [No.2] (1993) 178 CLR 561 distinguished.
ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (1990) 27 FCR 460 referred to.
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 and Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 considered.
Australian Coastal Shipping Commission v O’Reilly (1962) 107 CLR 46 and
Botany Municipal Council v Federal Airports Authority (1992) 175 CLR 453 distinguished.Western Australia v The Commonwealth (1995) 183 CLR 373, and Mabo v Queensland [No.1] (1988) 166 CLR 186 discussed.
Warringah Shire Council v Pittwater Provisional Council (1992) 26 NSWLR 491 referred to.Constitution - ss51(v) and (xxxi), 90, 109
Telecommunications Act 1997 (Cth) s591, Schedule 3 cll. 44, 60
Local Government Act 1989 (Vic) Part 8
Local Government Act 1993 (NSW) s611
Telecommunications Act 1991 (Cth) s116
Telecommunications (Exempt Activities) Regulations 1991- regs 5, 6
Acts Interpretation Act 1901 (Cth) s15AB
Land and Environment Court Act 1979 (NSW) ss16, 19, 20, 58, 71- 2 -
TELSTRA CORPORATION LIMITED and TELSTRA MULTIMEDIA PTY LIMITED v HURSTVILLE CITY COUNCIL, KOGARAH MUNICIPAL COUNCIL, LEICHHARDT MUNICIPAL COUNCIL, PARRAMATTA CITY COUNCIL, PENRITH CITY COUNCIL, RANDWICK CITY COUNCIL, HORNSBY SHIRE COUNCIL, DRUMMOYNE COUNCIL, BURWOOD COUNCIL, CONCORD COUNCIL, STRATHFIELD MUNICIPAL COUNCIL, BAYSIDE CITY COUNCIL, MORELAND CITY COUNCIL, FRANKSTON CITY COUNCIL and YARRA CITY COUNCIL
NG 1158 of 1998And
OPTUS VISION PTY LIMITED and OPTUS NETWORKS PTY LIMITED v WARRINGAH COUNCIL, RANDWICK CITY COUNCIL, BLACKTOWN CITY COUNCIL and MORELAND CITY COUNCIL
NG 1212 of 1998WILCOX J
SYDNEY
21 DECEMBER 2000
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG1158 of 1998
BETWEEN:
AND:
TELSTRA CORPORATION LIMITED
First Applicantand
TELSTRA MULTIMEDIA PTY LIMITED
Second ApplicantHURSTVILLE CITY COUNCIL
First RespondentKOGARAH MUNICIPAL COUNCIL
Second RespondentLEICHHARDT MUNICIPAL COUNCIL
Third RespondentPARRAMATTA CITY COUNCIL
Fourth RespondentPENRITH CITY COUNCIL
Fifth RespondentRANDWICK CITY COUNCIL
Sixth RespondentHORNSBY SHIRE COUNCIL
Seventh RespondentDRUMMOYNE COUNCIL
Eighth RespondentBURWOOD COUNCIL
Ninth RespondentCONCORD COUNCIL
Tenth RespondentSTRATHFIELD MUNICIPAL COUNCIL
Eleventh RespondentBAYSIDE CITY COUNCIL
Twelfth RespondentMORELAND CITY COUNCIL
Thirteenth RespondentFRANKSTON CITY COUNCIL
Fourteen RespondentAnd
YARRA CITY COUNCIL
Fifteenth RespondentJUDGE:
WILCOX J
DATE OF ORDER:
21 DECEMBER 2000
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The proceeding be dismissed.
2.The applicants, Telstra Corporation Limited and Telstra Multimedia Pty Limited, pay to the respondents their costs of the proceeding.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG1212 of 1998
BETWEEN:
OPTUS VISION PTY LIMITED
First ApplicantOPTUS NETWORKS PTY LIMITED
Second ApplicantAND:
WARRINGAH COUNCIL
First RespondentRANDWICK CITY COUNCIL
Second RespondentBLACKTOWN CITY COUNCIL
Third RespondentAnd
MORELAND CITY COUNCIL
Fourth RespondentJUDGE:
WILCOX J
DATE OF ORDER:
21 DECEMBER 2000
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The proceeding be dismissed.
2.The applicants, Optus Vision Pty Limited and Optus Networks Pty Limited, pay to the respondents their costs of the proceeding.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG1158 of 1998
BETWEEN:
AND:
BETWEEN:
TELSTRA CORPORATION LIMITED
First ApplicantAnd
TELSTRA MULTIMEDIA PTY LIMITED
Second ApplicantHURSTVILLE CITY COUNCIL
First RespondentKOGARAH MUNICIPAL COUNCIL
Second RespondentLEICHHARDT MUNICIPAL COUNCIL
Third RespondentPARRAMATTA CITY COUNCIL
Fourth RespondentPENRITH CITY COUNCIL
Fifth RespondentRANDWICK CITY COUNCIL
Sixth RespondentHORNSBY SHIRE COUNCIL
Seventh RespondentDRUMMOYNE COUNCIL
Eighth RespondentBURWOOD COUNCIL
Ninth RespondentCONCORD COUNCIL
Tenth RespondentSTRATHFIELD MUNICIPAL COUNCIL
Eleventh RespondentBAYSIDE CITY COUNCIL
Twelfth RespondentMORELAND CITY COUNCIL
Thirteenth RespondentFRANKSTON CITY COUNCIL
Fourteen RespondentAnd
YARRA CITY COUNCIL
Fifteenth RespondentNG1212 of 1998
OPTUS VISION PTY LIMITED
First ApplicantOPTUS NETWORKS PTY LIMITED
Second ApplicantAND:
WARRINGAH COUNCIL
First RESPONDENTRANDWICK CITY COUNCIL
Second RESPONDENTBLACKTOWN CITY COUNCIL
Third RESPONDENTand
MORELAND CITY COUNCIL
Fourth RESPONDENT
JUDGE:
WILCOX J
DATE:
21 DECEMBER 2000
PLACE:
SYDNEY
REASONS FOR JUDGMENT
WILCOX J: The questions at issue in these proceedings are, first, whether local authorities in New South Wales and Victoria are entitled to declare and levy rates, or make and levy charges, against telecommunications carriers in respect of the land or airspace occupied by the carriers’ cables; and, second, whether particular resolutions levying rates or imposing charges were validly made.
The issues arise against a background of community concern at the extent of the broadband cabling that was aerially erected in many parts of Australia during the mid-1990s. However, it is not for the Court to evaluate that concern. These cases turn on legal (including constitutional) issues.
These reasons for judgment are structured as follows:
A. The proceedings
(i) The parties paras 4 to 6
(ii) The issues paras 7 to 10
B. The facts
(i) The Telstra network paras 11 to 24
(ii) The Optus network paras 25 to 30
(iii) The cable situation summarised para 31
C. The council resolutions
(i) New South Wales para 32
(ii) Victoria para 33
D. The State legislation
(i) New South Wales para 34
(ii) Victoria para 35 to 36
E. Are the charges and rates duties of excise?
(i) The context of the issue paras 37 to 41
(ii) The applicants’ submissions paras 42 to 57
(iii) The respondents’ submissions paras 58 to 73
(iv) The intervener’s submissions paras 74 to 79
(v) Conclusions paras 80 to 87
F. Do the State laws fall within cl 60 of Schedule 3 to the 1997 Telco Act?
(i) The context of the issue paras 88 to 95
(ii) The applicants’ submissions para 96
(iii) The respondents’ submissions para 97 to 101
(iv) Conclusions paras 102 to 106
G.The application to the State laws of cl 44 of Schedule 3 to the 1997 Telco Act
(i) The context of the issue paras 107 to 111
(ii) The concept of discrimination paras 112 to 116
(iii) The applicants’ submissions paras 117 to 126
(iv) The respondents’ submissions paras 127 to 130
(v) Discussion paras 131 to 160
H.Is cl 44(1) a law under s51(v) of the Constitution upon which s109 may operate?
(i) The context of the issue para 161
(ii) The respondents’ submissions para 162 to 167
(iii) The applicants’ submissions para 168 to 174
(iv) Conclusions paras 175 to 198
I.Is cl 44(1) invalid on the basis that it effects an acquisition of property otherwise than a just terms?
(i) The argument para 199
(ii) Conclusions paras 200 to 203
J.Whether the Court has jurisdiction to determine the administrative law issues
(i) The argument paras 205 to 209
(ii) Conclusions paras 210 to 218
K.Whether, as a matter of discretion, the Court ought to exercise its jurisdiction to determine the administrative law issues
(i) The argument paras 219 to 222
(ii) Conclusions paras 223 to 231
L.Extraneous purposes: New South Wales
(i) Legal principles paras 232 to 237
(ii)The Local Government Association
and councils generally paras 238 to 261
(iii) The individual councils’ decisions paras 262 to 303
(iv)The applicants’ submissions paras 304 to 317
(v)The NSW respondents’ submissions paras 318 to 331
(vi)Applicants’ submissions in reply paras 332 to 334
(vii)Conclusions paras 335 to 341
M.Extraneous purposes: Victoria
(i) The applicants’ material paras 342 to 343
(ii) Bayside City Council paras 344 to 359
(iii) Moreland City Council paras 360 to 372
(iv) Frankston City Council paras 373 to 380
(v) Yarra City Council paras 381 to 386
(vi) The applicants’ submissions paras 387 to 395
(vii) The Victorian respondents’ submissions paras 396 to 402
(viii) Conclusions paras 403 to 411
N.Disposition
(i) Liability para 412
(ii) Costs paras 413 to 414
A. The proceedings
(i) The parties
The first proceeding, in point of time, is brought by Telstra Corporation Limited (“Telstra Corporation”) and Telstra Multimedia Pty Limited (“Telstra Multimedia”) – collectively “Telstra” or “the Telstra applicants” - against eleven New South Wales local authorities and four Victorian local authorities. The New South Wales respondents are Hurstville City Council, Kogarah Municipal Council, Leichhardt Municipal Council, Parramatta City Council, Penrith City Council, Randwick City Council, Hornsby Shire Council, Drummoyne Council, Burwood Council, Concord Council and Strathfield Municipal Council. The Victorian respondents are Bayside City Council, Moreland City Council, Frankston City Council and Yarra City Council. The Telstra applicants seek 23 separate declarations, the availability of most of which depends on various arguments concerning the invalidity, or non-application, of the State legislation under which charges have purportedly been made and rates levied: s611 of the Local Government Act 1993 (NSW)(“the New South Wales Act”) and Part 8 of the Local Government Act 1989 (Vic)(“the Victorian Act”). However, the Telstra applicants also allege that, even if the State legislation is valid and applicable, the resolutions of all 15 respondents are vitiated on various administrative law grounds.
The other proceeding is brought by Optus Vision Pty Limited (“Optus Vision”) and Optus Networks Pty Limited (“Optus Networks”), collectively “Optus” or “the Optus applicants”. The respondents are three New South Wales local authorities, Warringah Council, Randwick City Council and Blacktown City Council, and one Victorian local authority, Moreland City Council. The Optus applicants also seek declarations to much the same effect as the declarations sought by the Telstra applicants. The Optus applicants also seek orders quashing resolutions of the various respondents.
In view of the similarity of the issues raised in the two proceedings, it was agreed they be heard together; the evidence in one proceeding being treated as evidence in the other, to the extent of its relevance. The Telstra applicants were represented by Mr R Conti QC, Mr P Hanks QC and Ms K A Rees and the Optus applicants by Mr T F Bathurst QC and Mr S Gageler. Mr F M Douglas QC and Mr K M Connor appeared for the New South Wales respondents in both proceedings, and Dr G Griffith QC and Mr M Connock for all the Victorian respondents. Mr M J Leeming of counsel appeared for the Attorney General of New South Wales, intervening in connection with one of several constitutional issues identified in notices issued pursuant to s78B of the Judiciary Act 1903.
(ii) The issues
As the hearing progressed, many of the issues raised by the applicants were abandoned. By the end of submissions, the following issues remained:
(i)whether:
(a)s611 of the New South Wales Act, to the extent it authorises New South Wales councils to make, levy and recover charges in respect of the possession, occupation and enjoyment of telecommunications cables erected or placed on, under or over a public place; and
(b)Part 8 of the Victorian Act, to the extent it authorises Victorian councils to declare and recover rates and charges on land occupied by telecommunications cables;
[A]imposes a duty of excise contrary to s90 of the Constitution, and is therefore invalid;
[B]is a law of a State that “relates to the occupancy or use of a building, structure or facility”, within the meaning of clause 60 of Schedule 3 to the Telecommunications Act 1997 (Cth) (“the 1997 Telco Act”), and is therefore inapplicable to the subject cables; or
[C]discriminates against a carrier, or carriers generally, contrary to clause 44(1) of Schedule 3 to the 1997 Telco Act.
(ii)If issue (i) [C] is answered in the affirmative, in respect of either s611 of the New South Wales Act or Part 8 of the Victorian Act, whether cl 44(1) is a law that validly operates to prevent such discrimination having regard to:
(a) the extent of the Commonwealth’s legislative powers; and
(b)s109 of the Constitution.
(iii)whether the decision of any one of the New South Wales respondents to make and levy a charge on the applicants was:
(a)taken for a purpose, extraneous to s611 of the New South Wales Act - namely to penalise the installation of above-ground telecommunications cables and discourage further installation of any such cables; or
(b)taken without regard to a relevant consideration which s611(3) required to be taken into account – namely the nature and extent of the benefit enjoyed by the relevant telecommunications carrier; or
(c)so uncertain that it was not a real and genuine exercise of the power conferred by s611;
(iv)whether the decision of any one of the Victorian respondents to declare rates and charges on the land, occupied by the subject cables, was taken for purposes extraneous to Part 8 of the Victorian Act – namely to penalise the installation of above-ground telecommunications cables and encourage the relocation of existing cables, and installation of new cables, underground;
(v)whether the decision of any one of the Bayside, Frankston and Moreland councils to declare a differential rate on “overhead cable land” in 1998-99:
(a)was taken without regard to the considerations prescribed by s161(1)(b) of the Victorian Act; or
(b)imposed a differential that was selected without regard to considerations of fairness, or to amenities provided for, or the demands of, “overhead cable land” and other land.
(vi)whether the Court has jurisdiction to determine issues (iii), (iv) and (v); and
(vii)if so, whether the Court ought to exercise that jurisdiction, having regard to the existence of provisions for challenging the relevant imposts, in both the New South Wales and Victorian Acts.
It will be apparent, first, that there is a considerable variation in the overall importance of the Court’s decision about particular issues and, second, that there is extensive (but not total) overlap between the issues relevant to the New South Wales respondents and those affecting their Victorian counterparts.
In order to understand the first issue, it is necessary to know some facts concerning the telecommunications cable systems. Both sets of applicants furnished detailed evidence about their networks, none of which proved to be contentious. Much of the detail is unimportant. I will attempt a broad summary of that evidence before discussing issue (i). It will also be necessary for me to mention the form of the resolutions of the respondent councils imposing the imposts the subject of these proceedings.
Issues (iii), (iv) and (v) require reference to documents concerning the reaction of councils to the overhead cable rollout, including correspondence between various parties and many reports and resolutions. That material is voluminous. If the applicants succeed in relation to either para [A] or para [B] of issue (i), or para [C] of issue (i) read with issue (ii), or if the respondents make good their arguments under (vi) or (vii), it will not be necessary to go to that evidence.
B. The facts
(i) The Telstra network
Telstra Multimedia is the holder of a carrier licence under the 1997 Telco Act. That licence enables it to use a network unit to supply carriage services to the public: see Part 3 of the 1997 Telco Act. The term “carriage service” is defined by s7 of that Act as “a service for carrying communications by means of guided and/or unguided electromagnetic energy”.
Evidence about the Telstra network was given by Martin Ince, until recently General Manager – Infrastructure Planning of Telstra Corporation. Mr Ince deposed that the network used a variety of delivery mechanisms including cable, radio and satellite transmission. The cable network includes exchange buildings that house the equipment needed for connection of one telephony service to another. Cables emanate from those buildings and connect to other exchanges (“the interexchange network”) or to service customers in the local area (“customer access network”). The interexchange network is now largely comprised of optical fibre cable, nearly all of which is located underground. The customer access network is constituted by cables containing large numbers of twisted pairs, in which copper is the dominant conductor, with associated electronics. The local exchanges in the relevant local government areas were originally constructed for the purpose of telephony but they have been adapted for use in a broader range of communications, including Telstra’s broadband network.
Mr Ince explained that a broadband cable network uses a much wider frequency band than that necessary to transmit ordinary speech telephonically. It comprises links between exchanges, links between exchanges and the customer’s tap off point and links between the customer’s tap off point and the equipment at the customers’ premises. It permits the flow of information for a variety of purposes, including information services and cable television. Mr Ince said Telstra’s broadband network “was designed to make effective use of existing infrastructure, including the existing exchanges, existing underground ducts (originally installed for the telephony network) and existing electricity poles”. He described the factors that led to a detailed design of Telstra’s broadband network and said the network comprised:
“(a) one headend in each capital city;
(b)the installation of nodes in each local exchange;
(c)the use, in the vast majority of cases, of existing optical fibre cables to carry signals from the headend to the local exchanges and from the local exchanges to each hub;
(d)the installation of a number of hubs each servicing approximately 500 dwellings; and
(e)the reticulation of new coaxial cable from the hubs (either underground or aerially) to form the network to which customers may link.”
Mr Ince said the broadband network utilises the existing optical fibre cable in the interexchange network and adds coaxial cable leading into the customer’s premises. “Thus, the broadband network is a hybrid of two types of technologies and is generally known by the name ‘Hybrid Fibre Coax’ (‘HFC’) network’”.
Mr Ince explained the headend is at “the heart of each broadband network”. It is the common point at which the signal contents, from various sources, aggregate and is connected by optical fibre to a number of nodes, all of which are located in existing local exchanges. The nodes, in turn, are connected by optical fibre to hub points, from which coaxial cable runs (typically no more than one kilometre) to the tap off point to the customers’ premises.
Mr Ince said the optical fibre links between the headend and nodes comprise individual fibres selected from the cables that were originally laid down as part of the interexchange voice network; little additional fibre was rolled out. Where additional optical fibre was necessary, it was reticulated in the existing underground ducts that served the voice network.
Mr Ince said Telstra’s hubs are mostly housed underground in a manhole. However, in some high corrosion areas (where there are high alkaline concentrations in the underground table water) hubs may be installed in an above-ground pedestal. In either situation, the coaxial cables emanating from the hub can be reticulated either underground or aerially.
Mr Ince said all the coaxial cables for the HFC network needed to be rolled out; no existing infrastructure could provide the necessary bandwidth. He described the components of the coaxial cables and went on:
“The coaxial component of the network is reticulated from each hub either underground or aerially. In the case of aerial reticulation, existing poles (used for power distribution) are used. In the case of underground reticulation, existing underground pipes and ducts/conduits are used. Aerial reticulation of coaxial cables is generally more rapid, more flexible (in the sense that geographical features are less of a barrier to aerial reticulation when compared to underground reticulation), and involves less physical disturbance from installation (unless the underground cables are able to be fitted into existing ducts and the ground surface is not required to be broken to install the underground cables).
Telstra’s broadband network involves both aerial and underground reticulation of the coaxial cables. For example, in metropolitan Sydney and Melbourne, approximately one quarter of the coaxial cables are reticulated aerially and approximately three quarters are reticulated underground. The functions and performance of the cables, whether reticulated aerially or underground, are identical.”
Aerial coaxial cable must be supported in span by catenary wire held by bolts secured to poles, which typically also carry electricity conductors and cables, telephony cables and subscriber connections to customer premises and, sometimes, streetlights, street and traffic signs, surveillance equipment and the like. There are agreed clearances of Telstra’s coaxial cable from both power conductors and the ground.
Underground coaxial cables may be reticulated along with other services, such as water, gas, electricity and sewerage. The arrangement and presence of such services is regulated by agreements embodied in industry codes of practice and protocols. It seems Telstra’s underground coaxial network relies primarily on the ducting and access system previously used in connection with the telephony network, with some amplification.
In his affidavit, Mr Ince identified the 15 Telstra nodes situated in the areas of the New South Wales respondents to the Telstra proceeding. He also stated the number of kilometres of underground and aerial coaxial cable in each of the 11 local government areas. They total 2092 and 356 respectively. In the four Victorian local government areas, there are seven nodes, 495 kilometres of underground coaxial cable and 509 kilometres of aerial cable. In oral evidence, Mr Ince said the decision whether to use underground or aerial coaxial cabling was “worked out on a case by case basis” having regard to geographic and topographic factors, the availability of spare duct capacity and the like.
Mr Ince listed the functions of the broadband network: pay television (Foxtel), high speed internet access and some telephony services. He said the network is also capable of providing other services, such as “smart home” services (remote utility meter reading, remote energy and home management systems, home security services and remote monitoring and interaction with elderly people living at home), information services, education and a range of commercial applications. He referred to the likely convergence of functions using digital technology.
In cross-examination by Mr Connor, Mr Ince explained that the ducts used for underground coaxial cables ranged in size from tunnels in the central business districts of Sydney and Melbourne, through which a person could walk, to cables housed in a concrete pipe or directly buried. He agreed that Telstra leases duct space to other carriers. Telstra also leases equipment, with fibre linking, to private individuals, including corporations. However, Mr Ince said that, to his knowledge, Telstra did not lease out individual fibres.
During cross-examination by Dr Griffith, Mr Ince acknowledged that the public switched telephone network (“PSTN”), that existed before the recent HFC rollout, used optical fibre transmission; this continues to be used. Telephony services are not offered over the coaxial network, although there is potential to do this. Mr Ince agreed that “the effect of the broadband rollout to use for pay television and other services has been that there has been a further connection by Telstra with coaxial cable from the hub to distribution throughout the areas where there already is a telephony service distributed by copper wire”. This has been done on a systematic basis; Telstra targets a particular area of about 500 premises and provides service to all the premises within it. Mr Ince also agreed that, prior to the broadband rollout, “by and large” Telstra’s telephony services were being provided underground.
(ii) The Optus network
Optus Networks is also a holder of a carrier licence under the 1997 Telco Act.
Evidence about the Optus HFC network was provided by several witnesses. They included David Leung, Manager of HFC Network Engineering for Cable and Wireless Optus Limited, the holding company of Optus Vision. Mr Leung said that, as at 30 September 1999, Optus operated:
(i) “a national fibre optic backbone stretching through all the major capital cities”, and
(ii)an HFC broadband local access suburban network passing 2.2 million homes, in Sydney, Melbourne and Brisbane, delivering telephone calls and other telephony products, high speed data (interactive) products and pay television products.
Mr Leung said the HFC broadband network rollout commenced in about April/May 1995. As at 1 July 1997, the date of commencement of the 1997 Telco Act, the HFC network system was still in course of construction; it was not finally completed until late 1997 or early 1998. However, construction had been completed by 30 June 1997 in each of the four areas (Warringah, Randwick, Blacktown and Moreland) whose councils are respondents to the Optus proceeding. At that time the Optus HFC cable network provided a local telephone call service, linking either to another Optus subscriber or a Telstra subscriber, some pay television services and high speed data products, only on a trial basis, to schools and a small number of selected customers.
Mr Leung, and other witnesses, described the Optus HFC system in some detail. The main differences between the Optus and Telstra systems are, first, that Optus has only one delivery system (HFC), not the dual systems (PSTN and HFC) operated by Telstra; and, second, that the Optus network overwhelmingly comprises aerial coaxial cables. Mr Leung said that, out of about 20,000 km of coaxial cables, only about 250 km is underground; of 4,700 km of optic fibre cable, only about 320 km is underground. Mr Leung also gave figures for the local government areas controlled by the respondents to the Optus proceeding: Warringah 657.5 km of aerial cable (coaxial and optical fibre) to 17.90 km of underground cable, Randwick 374.7 km of aerial cable and 14 km underground cable, Blacktown 707.4 km of aerial cable and 9.27 km of underground cable, Moreland 582.3 km of aerial cable and 2.1 km underground cable.
Mr Leung said underground installation would have required Optus either to dig its own trenches, and install ducts, pits, pedestals and turrets, in every street in which cables were to be installed or to colocate Optus’ cables and associated facilities with those of Telstra in Telstra’s underground ducts. He asserted both options involved costs at least four to five times greater than those associated with aerial installation. Mr Leung also said the first option would have had a significant environmental impact, because of construction noise and disturbance and severance of tree roots; in relation to the second option, there is often insufficient capacity in the Telstra ducts to take the Optus cable as well.
Mr Leung claimed there were some operational disadvantages associated with underground cabling. However, during the course of his evidence, it became clear that cost saving and speed of rollout were the primary reasons for the decision to use aerial cabling. Mr Leung said Optus did not make progressive decisions, as it went along, as to whether to use aerial or underground cabling in a particular locality; it was decided at the outset “that we would go aerial as much as we can”. That decision was made on financial grounds. Mr Leung was asked why, then, there was some underground cabling. He explained this was lead-in cabling to multiple dwelling units. Mr Leung added that “the network is continually being undergrounded. As the power authorities go underground, we go underground with them.”
The cable situation summarised
At the end of his cross-examination, I invited Mr Leung to check my understanding of the evidence concerning telecommunications cables in Australia. In the course of doing this, he mentioned some additional matters. Taking them into account, he confirmed the following summary:
(i)Before the existence of Optus, there was only one telephone carrier, Telecom;
(ii)Telecom delivered its service by the PSTN system, using copper wires;
(iii)Initially the PSTN system used extensive aerial cabling but it was progressively placed underground;
(iv)Telstra succeeded Telecom and took over the PSTN system;
(v)If Optus had been interested only in providing a telephone service in competition with Telstra, it would have been technically possible for this to be done by using the Telstra PSTN system;
(vi)In that eventuality, Optus would have needed to come to an access arrangement with Telstra. In practice, that would not have happened until the federal government took steps to allow other companies to have access to the PSTN system. This has happened only recently;
(vii)However, Optus was never interested in limiting itself to telephone services; from the outset it was attracted to an HFC network that would enable it to provide pay television and high speed data services, as well as telephony services, on a single cable. For that reason, Optus determined to install its own broadband system.
(viii)From a technical point of view, it would have been possible for Telstra and Optus to share the use of a single broadband system, offering all the services each of them now offers. However, bandwidth restrictions may have forced one or both of them to restrict the number of pay television channels they could provide.
(ix)A new compression technology known as ADSL is being trialed. This technology will probably enable pay television and internet services to be provided over the copper wire system.
C. The council resolutions
(i) New South Wales
The New South Wales respondents all resolved to make a “charge”, at a particular rate per kilometre, for a particular financial year. At this stage, it is not necessary for me to reproduce the text of the resolutions. The charge seems generally to have been imposed on “cabling” or “cables”. Some0times the resolution was limited to cabling over (or under) “Council property”; which includes public streets and reserves. Sometimes the charge applied to both overhead and underground cabling; sometimes only the former. Sometimes the charge was higher for overhead cabling than for underground cabling; for example, several councils charged $1,000 per km for overhead cabling and $500 per km for underground cabling. The financial years covered by the resolutions tendered in evidence were one or both of 1997-98 and 1998-99.
(ii) Victoria
The Victorian respondents declared and levied rates (not charges) on the land occupied by the cables. The rates purported to have been calculated by reference to one of the three bases permitted by s157(1) of the Victorian Act: site value, net annual value or capital improved value.
D. The State legislation
(i) New South Wales
Section 611 of the New South Wales Act reads as follows:
“(1)A council may make an annual charge on the person for the time being in possession, occupation or enjoyment of a rail, pipe, wire, pole, cable, tunnel or structure laid, erected, suspended, constructed or placed on, under or over a public place.
(2)The annual charge may be made, levied and recovered in accordance with this Act as if it were a rate but is not to be regarded as a rate for the purposes of calculating a council’s general income under Part 2.
(3)The annual charge is to be based on the nature and extent of the benefit enjoyed by the person concerned.
(4)If a person is aggrieved by the amount of the annual charge, the person may appeal to the Land and Environment Court and that Court may determine the amount.
(5)A person dissatisfied with the decision of the Court as being erroneous in law may appeal to the Supreme Court in the manner provided for appeals from the Land and Environment Court.
(6)This section does not apply to:
(a)the Crown; or
(b)the Sydney Water Corporation Limited, the Hunter Water Corporation Limited or a water supply authority; or
(c)Rail Access Corporation; or
(d)the owner or operator of a light rail system (within the meaning of the Transport Administration Act 1988), but only if the matter relates to the development or operation of that system and is not excluded by the regulations from the exemption conferred by this paragraph.”
(ii) Victoria
Part 8 of the Victorian Act is headed “Rates and Charges on Rateable Land”. Section 154(1) provides that, except as provided in the section, all land is rateable. Subsection (2) sets out some exceptions. They include land vested in the Crown, a Minister, a council or a public statutory body, being land that is either unoccupied or used exclusively for public or municipal purposes. Section 155 specifies the types of rates and charges that may be declared on rateable land. They include general rates, the type of rates under present consideration. Section 157 gives councils the option of basing their rates on site value, net annual value or the capital improved value system of valuation. In the last case, s161 permits councils to raise its general rates by the application of a differential rate.
It is not necessary to refer to the extensive provisions in Part 8 concerning declaring and recovering rates. However, I note that s156 of the Act imposes primary liability for rates on the owner of the land and s173 deals with the situation where previously unrateable land becomes rateable land.
E. Are the charges and rates duties of excise?
(i) The context of the issue
Section 88 of the Constitution required that uniform duties of customs be imposed within two years of the establishment of the Commonwealth. By s90, on the imposition of uniform duties of customs, the power to impose duties of excise (amongst other things) became exclusive to the Commonwealth Parliament. Since that date, any State legislation that purports to impose an excise duty is, to that extent, invalid. As Barwick CJ commented in Western Australia v Hamersley Iron Proprietary Limited [No.1](1969) 120 CLR 42 at 56:
“… the vesting of exclusive power in the Commonwealth Parliament to impose duties of excise obviously precludes any State Parliament from imposing duties upon the production or manufacture of goods anywhere within the Commonwealth.”
The applicants contend that, to the extent they authorise the making and levying of charges, or the declaring and levying of rates, each of s611 of the New South Wales Act and Part 8 of the Victorian Act imposes a duty of excise and is invalid. Both the New South Wales and Victorian respondents dispute their imposts are excise duties. They are supported by the intervener, the New South Wales Attorney General.
In considering the applicants’ contention, it is not to the point that, in each State, the relevant provisions are contained in statutes having an operation and significance going beyond the imposition of financial burdens on telecommunications carriers. In Western Australia v Chamberlain Industries Pty Limited (1970) 121 CLR 1 at 14, Barwick CJ said it is not necessary that the whole of a particular Act be characterised as an excise Act:
“… the question is whether the tax as it is, and in the circumstances in which it is, imposed by the Act is a duty of excise: it is not a question as to the nature of the Act which imposes the tax.”
So the question, in relation to each State Act, is whether the impost is a duty of excise.
The elements of a duty of excise were described by Dixon J in Parton v Milk Board(Victoria) (1949) 80 CLR 229 at 258-260. First, it must be a tax; that is, a compulsory exaction for public purposes, not being a fee for services. Second, it must be a tax on goods. Third, the tax must be levied on the goods in the process of their manufacture or before their sale to home consumers. However, it is not necessary that the tax be levied directly on the manufacturer. As Dixon J said at 260:
“A tax upon a commodity at any point in the course of distribution before it reaches the consumer produces the same effect as a tax upon its manufacture or production.”
There is no dispute in the present case as to the continuing correctness of Dixon J’s description of an excise duty. Nor is there any dispute that, if the imposts are taxes levied on “goods”, the levy takes effect before the goods reach home consumers. The issues, in relation to the s90 point, are, first, whether the imposts are taxes and, if so, whether they are a levy on “goods”; or, as it is put in some of the cases, on a commodity.
(ii) The applicants’ submissions
Counsel for Telstra point out that “commodity” is a term of wide import. The Macquarie Dictionary defines the word as: “a thing that is of use or advantage” or “an article of trade or commerce”. Other dictionaries provide similar definitions. Although counsel did not cite dictionary definitions of “goods”, that term has a similar meaning. For example, the Macquarie Dictionary speaks of “possessions, esp. movable effects or personal chattels” and “articles of trade; wares; merchandise, esp what has been transported by land”. Counsel for Optus quote the comment by Mason CJ, Brennan and McHugh JJ in Mutual Pools & Staff Pty Limited v Federal Commissioner of Taxation (1992) 173 CLR 450 at 454:
“In the context of ss.55 and 90 of the Constitution, the reference to goods as the subject of the tax must be understood in its widest sense. An excise embraces a tax on commodities produced as well as a tax on manufactured articles, … In conformity, with this understanding of the concept of excise, the word ‘goods’ is defined to include ‘commodities’. In determining whether particular objects are properly described as ‘goods’ or ‘commodities’, it may be useful to consider whether they are saleable. Although many objects which are unsaleable are not properly described as ‘goods’ or ‘commodities’, some objects are properly so described even though they are not saleable. Hence the production by shorthand writers of transcripts was held not to amount to the production of goods because they were not brought into existence for sale as a commodity, but for the purpose of enabling employers to have the benefit of services given in the course of a skilled vocation. On the other hand, reinforced concrete piles manufactured under a bridge-building contract for incorporation into the structure of a particular bridge across a bay, though plainly not saleable on the market, were held to be manufactured articles, and thus goods, before they lost that character upon being incorporated into the structure and forming part of the realty.”
I have omitted their Honour’s case references.
In the same case, at 467, Dawson, Toohey and Gaudron JJ said:
“`Goods’ is not a word of precise meaning but, in the context of excise duties, it signifies articles of commerce or things which, even if not saleable or without any discernible sale value, may be the subject of trading or commercial transactions.”
Counsel for both sets of applicants emphasise that s90 is a Constitutional provision; accordingly, it is appropriate for the Court to construe the section in a wide and flexible manner, taking account of technological changes. Counsel refer to what was said on that subject by Dixon J in Australian National Airways Pty Limited v The Commonwealth (1945) 71 CLR 29 at 81 and by Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ in Grain Pool of Western Australia v Commonwealth of Australia [2000] HCA 14 at para [22]; 170 ALR 111 at 118.
Counsel say this approach is exemplified, in relation to s90, by Hematite Petroleum Pty Limited v Victoria (1983) 151 CLR 599. In that case the High Court, by majority (Mason, Murphy, Brennan and Deane JJ, Gibbs CJ and Wilson J dissenting), held that State legislation imposing licence fees in respect of three pipelines, that were continuously used for the purpose of carrying (respectively) crude oil, liquefied petroleum gas and natural gas from Longford in Gippsland, where they were separated into those components, to their places of distribution near Melbourne, contravened s90 of the Constitution and was invalid. The licence fees were fixed but substantial ($10 million per annum for each pipeline).
At 628 Mason J traced the development of meaning of the word “excise”. He noted the High Court had rejected “the narrow view” that excise was confined to taxes upon production and manufacture; instead the Court “has adopted the broader view that it extends to taxes upon commodities to the point of receipt by the consumer”. However, his Honour pointed out that “the Court has from time to time insisted that there must be a strict relationship between the tax and the goods in order to constitute a tax on goods”. After referring to discussion in the authorities about the meaning of that requirement, Mason J said at 632:
“That the object of the power was to secure a real control over the taxation of commodities provides strong support for a broad view of what is an excise, one which embraces all taxes upon or in respect of a step in the production, manufacture, sale or distribution of goods, for any such tax places a burden on production. A tax on goods sold, like a tax on goods produced, is a burden on production, though less immediate and direct in its impact. It is a burden on production because it enters into the price of the goods - the person who is liable to pay it naturally seeks to recoup it from the next purchaser. As the tax increases the price of the goods to the ultimate consumer, and thereby diminishes or tends to diminish demand for the goods, it is a burden on production.”
Mason J went on to say that “it is enough that the tax is such that it enters into the cost of the goods and is therefore reflected in the prices at which the goods are subsequently sold. It is not necessary that there should be an arithmetical relationship between the tax and the quantity or value of the goods produced or sold”. At 634 his Honour said the significant features of the fee in issue were:
“(1)that it is levied only upon a trunk pipeline, i.e. the gas and fuel Corporation pipeline, the Gas Liquids pipeline and the crude oil pipeline, through which flow the entirety of the hydrocarbons recovered from the Bass Strait fields;
(2)that it is a fee payable for permission to operate a pipeline for which the plaintiffs otherwise hold a permit to own and use;
(3)that the fee is a special fee which is extraordinarily large in amount, having no relationship at all to the amount of the fees payable for other pipeline operation licences – the fee payable for a trunk pipeline is $10,000,000 whereas the fee payable for any other pipeline is $40 per kilometre; and
(4)that the fee is payable before an essential step in the production of refined spirit can take place – the transportation of the hydrocarbons from Longford to Long Island Point where the refinery is situated.”
Mason J explained, at 634-635:
“The coexistence of these features indicates that the pipeline operation fee payable by the plaintiffs is not a mere fee for the privilege of carrying on an activity; it is a tax imposed on a step in the production of refined petroleum products which is so large that it will inevitably increase the price of the products in the course of distribution to the consumer. The fee is not an exaction imposed in respect of the plaintiffs’ business generally; it is an exaction of such magnitude imposed in respect of a step in production in such circumstances that it is explicable only on the footing that it is imposed in virtue of the quantity and value of the hydrocarbons produced from the Bass Strait fields. To levy a tax on the operation of the pipelines is a convenient means of taxing what they convey for they are the only practicable method of conveying the hydrocarbons to the next processing point.”
At 640 Murphy J pointed out that the challenged fees are imposed “on the crude oil and liquefied petroleum gas pipelines which run from one part of the plaintiffs’ plant … to another”. He said:
“There is no practical possibility these pipelines can be used other than for the transportation of hydrocarbons. Transportation by pipeline is thus an integral step in the production process.”
Brennan J expressed views similar to those of Mason and Murphy JJ. At 658 his Honour said:
“Where a tax which takes the form of a licence fee is exacted not in respect of a business generally but in respect of a particular act done in the business, it is a tax upon the doing of that act; where that act is a step in the production, manufacture or distribution of goods, a tax upon that step is burden upon production, manufacture or distribution. And that is so whether or not the tax is calculated upon the quantity or value of the goods produced, manufactured or distributed.”
For Deane J the critical matter was the particularity of the impost. He said at 667-668 it could not, as a matter of substance, “be seen as a general tax imposed upon the operation of pipelines generally. It is a particular tax imposed upon the operation of each of the specifically identified pipelines”. He said at 668:
“The magnitude of the tax and its recurrent nature as a revenue outgoing make inevitable the conclusion that the tax is an indirect one in the sense that it will be, and is intended to be, regarded as a component of the costs and expenses of manufacture or production which will, subject to the vagaries of market conditions, be passed down the line to the consumer.”
There are obvious similarities between the facts in Hematite and those of the present cases. Counsel for both sets of applicants rely heavily on that authority; indeed, they go so far as to submit it is determinative of the present cases. I will return to that submission. First, I should mention the most recent High Court decision regarding s90: Ha v New South Wales (1998) 189 CLR 465. That case involved tobacco licence fees calculated by reference to the value of tobacco sold in a period preceding the licence period. By majority (Brennan CJ, McHugh, Gummow and Kirby JJ, Dawson, Toohey and Guadron JJ dissenting), the Court held the fees were duties of excise and invalid. At 499 the majority said:
“Therefore we reaffirm that duties of excise are taxes on the production, manufacture, sale or distribution of goods, whether of foreign or domestic origin. Duties of excise are inland taxes in contradistinction from duties of customs which are taxes on the importation of goods. Both are taxes on goods, that is to say, they are taxes on some step taken in dealing with goods.”
Counsel for Telstra submit that, although the subject rates and charges “take the form of charges on the cables, as a matter of substance (they) are charges on the content and encoded signals delivered by means of the cables”. They say that, as was the case with the pipeline in Hematite, the cables:
“(a)are an essential step in the movement of the content and signals into consumption; and
(c)do not serve any purpose other than the delivery of the content and the signals.”
Counsel say the case is to be distinguished from the payment of rates on land occupied by a factory; Telstra’s HFC network “is the only means by which the commodities may be distributed and the rates and charges are made and levied in both New South Wales and Victoria by reference to the length of the cables”. There is, therefore, they say “a real and direct connection between the rates and charges and the distribution of commodities in this case, which would not be present in the levying of … a rate on land used for industrial purposes.”
Turning to the question whether the rates and taxes constituted a tax on “goods”, or a “commodity”, counsel for Telstra argue they “impose a burden on the distribution, and therefore on the production, of the Foxtel content, internet content … and the signals which convey that content to customers”. Counsel say that both the content and signals “are things which are of use or advantage, and are articles of trade or commerce”. They refer to Logan Downs Pty Limited v Queensland (1977) 137 CLR 59 and Capital Duplicators Pty Limited v Australian Capital Territory [No.2] (1993) 178 CLR 561. Counsel submit:
“In principle there is no reason why the meaning of ‘goods’ in the present context should not extend to electrical signals passing along coaxial cables whether laid underground or erected overhead, or to the content conveyed by means of those signals regardless of whether the mechanism of distribution is described as a ‘service’ or as a ‘product’.
The content delivered via Telstra’s HFC Network is properly to be equated with content delivered via older and more familiar delivery mechanisms. For example, there is no relevant difference between a video program distributed via the HFC network and a video distributed, as in the Capital Duplicators case, … by means of a video cassette. Similarly, there is no relevant difference between a written document (such as a book, paper or article) distributed electronically via the Internet, and a written publication distributed in paper form via a bookshop. The form of distribution does not matter – what matters is the thing being distributed.”
Referring to the statements in Mutual Pools set out in paras 42 and 43 above, counsel for Optus note that electricity has been held to fall within a definition of “goods” that included “any form of tangible personal property”: see State Electricity Commission of Victoria v Federal Commissioner of Taxation (1999) 99 ATC 5007 at paras 23 (Heerey and Merkel JJ) and 54 (Carr J). Heerey and Merkel JJ said:
“The qualifier ‘tangible’ primarily has the effect of excluding choses in action. Clearly electric power is something subject to the dominion of United. It can be transported from place to place. It can be bought and sold.”
Counsel also refer to a decision of the Judicial Committee of the Privy Council, The Noordam [1920] AC 904, in which it was held that bearer bonds and securities seized from a steamship were “goods” within the meaning of a war-time Order in Council.
(i) The respondents’ submissions
Counsel for the New South Wales respondents argue that s611 of the New South Wales Act does not provide for the exaction of taxes but for the making of charges to compensate local authorities for the occupation of their land. They refer to the history of the legislation.
Section 105 of the Local Government Extension Act 1906 provided:
“(1)A council may make a fair rental charge upon persons who have laid or erected, or may, with the council’s permission, lay or erect, pipes, wires, cables, or rails, on, under, over, or through the public and other places under the control of the council. This subsection shall not apply to the Crown.
(2)If any dispute arises as to the amount of such rental charge, such dispute shall be finally settled by the decision of the nearest court of petty sessions. Such charges may be made, levied, and recovered by a council as rates.” (Counsel’s emphasis)
Following the repeal of the Local Government Extension Act, an identical provision was included (as s209) in the Local Government Act 1906. However, the High Court held that a provision in this form did not enable a local authority to make a charge where the right to occupy did not derive from it: see The Australian Agricultural Co v Newcastle City Council (1910) 10 CLR 391 and Katoomba Municipal Council v The Katoomba and Leura Gas Company Limited (1917) 23 CLR 292. The principle applied by the High Court was stated by Griffith CJ in The Australian Agricultural Company case at 401-402:
“In my opinion each of the phrases ‘a fair rental charge’, ‘with the council’s permission,’ and ‘under the control of the council,’ suggests prima facie that the charge is to be made in respect of, and as consideration for, a concession made either by the council itself or by some other agency of the Government to whose rights it has succeeded with regard to the control of public places, and not in respect of the occupation of a public place by persons who have laid and who use the rails &c., in the exercise of a proprietary right, to which the council’s right of control is itself subject. The words ‘with the council’s permission’ seem to imply that the subject matter of the enactment is something of such a nature that where there is a council it cannot originate or be continued without their permission, or, in other words, that the act spoken of is one done with reference to a public place which is at the time of doing the act under some control other than that of the person doing it. This prima facie view is strongly supported by a consideration of the history of the law relating to municipalities. By the Act of 1867, which was in force until the Act of 1906, rates were imposed in respect of the occupation of land. Persons, therefore, who occupied part of the soil of a street by rails or pipes were rateable in respect of that occupation. But by the Act of 1906 rates were imposed in respect of ownership and not of occupation. It followed that persons so occupying the soil of streets were no longer rateable in respect of their occupation, and were not rateable at all in respect of the land so occupied, unless they were also the owners of the soil, which in most cases would not be the case. And, even if they were, the ownership in the case of an unconditional dedication of a highway is not beneficial, and the rateable value of the land would be nil. Sec. 209 was, therefore, as was indeed contended by counsel on both sides, enacted to deal with the case. If, however, as in the present case, the land on which the rails are laid is the subject of beneficial ownership in the persons using the rails, they are rateable in respect of it as owners, and there is no apparent reason why they should pay a double charge.”
Apparently as a result of these decisions, s209 was amended in 1917 so as to substitute for the word “rental”, in subs (1), the word “annual” and to make subs (2) refer to “such rent or charge”, rather than “such rental charge”.
The Local Government Act 1906 was repealed and replaced by the Local Government Act 1919. Section 171 of that Act was similar in effect to s209 of the 1906 Act. It also referred to a “fair annual charge” and provided that, in the case of dispute, the amount of the charge should be determined by a court of petty sessions. The new section specified: “The fair annual charge shall be based on the nature and extent of the benefit enjoyed by the person concerned”.
There are reported cases in which judges of the Land and Valuation Court of New South Wales considered the principles applicable to determination of the nature and benefit derived from occupation of the relevant pipe, wire, pole, cable, tunnel or structure: see Australian Gas Light Company v Glebe Municipal Council (1922) 6 LGR (NSW) 39, Australian Gas Light Company v Annandale Municipal Council (1947) 16 LGR (NSW) 173 and Australian Gas Light Company v Ashfield Municipal Council (1951) 18 LGR (NSW) 236.
Counsel for the New South Wales respondents point out that s611 of the current Act retains the essential features of its predecessors since 1917. The section empowers councils to make “an annual charge” on the person in possession, occupation or enjoyment of a rail etc, but only if the rail etc., is “laid, erected, suspended, constructed or placed on, under or over a public place”. In other words, say counsel, the charge is a fee for occupying public land or public airspace. The section does not use the word “fair” but the annual charge is required “to be based on the nature and extent of the benefit enjoyed by the person concerned”. Moreover, in the event of a grievance about the amount of the charge, this matter is to be determined by the Land and Environment Court of New South Wales. Counsel suggest these features are inconsistent with the notion that the charge is a tax.
Further, counsel for the New South Wales respondents dispute that the charge applies to “goods” or “commodities”. They point out that the subject cables are used in connection with what are called “telecommunications services”, in both the 1997 Telco Act and its predecessor, the Telecommunications Act 1991. They say this terminology coincides with that used in s51(v) of the Constitution, the foundation for both Acts. It will be recalled that s51(v) refers to “postal, telegraphic, telephonic and other like services”. In their written submissions, counsel say:
“What is being done with the cables is that they are being utilised for the provision of communications services. The atmosphere is used in the same way when television or radio programs are broadcast. The viewing of a broadcast television program is of the same nature as viewing a pay television program where the communication is by cable. It is merely the medium through which the electromagnetic wave travels that is different. Indeed, it is possible to have a pay television system which utilises the atmosphere as the medium through which the electromagnetic wave passes rather than a cable. The fact that the Applicants’ cables are used for the purpose of pay television and that they constitute a different medium does not change the nature of what is occurring to that of the distribution of a ‘good’ or ‘commodity’.
The standard form of agreements between the Applicants and their customers pursuant to which the cables are used and revenue is derived by the Applicants are also replete with references to ‘services’ … Significantly, the term ‘commodities’ first appears in the Applicants’ statements of claim and the affidavits of their witnesses.
The revenue received is for the provision of wider services and not merely the delivery of a good even if the intangible concept of data could sensibly be described as a ‘good’ or ‘commodity’ – see the terms of the agreements.
When one examines what is occurring at a physical level, a cable does not ‘convey goods’ in the way that a pipe conveys oil or gas. Significantly the subject changes form – from a sound or an image into data at the transmitting end, and onto an electric current or an electromagnetic wave in the form of a variation in its amplitude or frequency (analogue) or continuity (digital). The variation is understood by the receiving device which ‘reads’ the variation and creates sound or images at the receiving end.
The supply of electricity is also quite different to the supply of telecommunications facilities even though the same transmission medium may be used eg a wire. Electricity is used in the form in which it is conveyed. Electric current or electromagnetic radiation used for the purpose of telecommunications are not consumed as electricity or electromagnetic radiation.”
Counsel for the New South Wales respondents seek to distinguish Hematite on two bases. First, they say this is not a case where the exaction “is of such magnitude … that it is explicable only on the footing that it is imposed in virtue of the quantity and value of the hydrocarbons produced from the Bass Strait fields”: see Mason J quoted at para 48 above. Nor is it a particular tax imposed on particular pipelines: see per Deane J at para 51 above. Counsel point out that s611 is a provision of general application that has existed, in this or similar form, since 1906.
Counsel’s second point of distinction fastens on what the customer receives. The Hematite pipelines conveyed what were admittedly goods: crude oil, liquefied petroleum gas and natural gas. They were received in the same form as they were transmitted and were useful in that form. By contrast, say counsel, a pay television subscriber receives from a broadband cable only the right to view a video. The customer receives neither the video itself, as a tangible item of property, nor the intellectual property rights in the contents of that video. That which is received is similar in nature to what is obtained by a person viewing a movie in a cinema or a video that has been rented from a video shop. The viewer receives a service, not goods. Counsel make similar observations about the benefits subscribers receive from telephony and internet services.
Counsel for the Victorian respondents concede that rates declared under ss 158, 159, 162 and 163 of the Victorian Act are capable of amounting to taxation. However, they say, they are taxes on the ownership or occupation of rateable land; they are land taxes. Counsel say that, although the concept of “goods” is broad, for excise duty purposes, the High Court has held that duties of excise do not include an impost on the provision of services – see Adams v Rau (1931) 46 CLR 572 at 578-579 – or a tax that comes within other well-known forms of taxation, such as land tax: see Mutual Pools at 454 and 468. Counsel point to the comment by the majority Justices in Ha at 499: “Duties of excise are inland taxes in contradistinction from duties of customs which are taxes on the importation of goods”. Building on that comment, they say:
“Duties of excise may only be imposed on things which can in principle be the subject of duties of customs; that is, things which are capable of being imported or exported. The separation of taxes on ‘goods’ (customs or excise) and taxes on land is therefore immutable.”
Counsel say no question arises as to whether what is transmitted through the Telstra and Optus cables constitutes “goods”, so as to be capable of being the subject of an excise duty:
“The rates are simply not, either in form or in substance, a tax on that information. Rates would be payable on the space occupied by a cable even if no information at all were to pass through it; and the amounts or rates and changes are in no way related to the volume or value of information transmitted by the cables. If one assumes that the ‘content’ transmitted via the cables constitutes ‘goods’, there is in truth no relevant distinction between the present rates and rates imposed on the land occupied by a factory which produces goods. An impost which depends on ‘the length of the cables’ is relevantly identical to an impost which depends on the space occupied by a factory. In both cases the rate is a cost which must be borne by the producer or distributor, but there is not a sufficient relationship between the rate and the quantity or value of any goods to make it a tax ‘on’ those goods.”
Counsel for the Victorian respondents argue “there is no support in the authorities for the view that information passed along a cable constitutes goods in the relevant sense. Every decision in which an impost has been found to constitute a duty of excise concerned the production or distribution of some physical commodity”. They refer to Pont Data Australia Pty Ltd v ASX Operation Pty Ltd (1990) 21 FCR 385 in which I had to determine whether encoded electrical impulses were “goods” within the meaning of the Trade Practices Act 1974. That Act defined goods so as to include “gas and electricity”. At 421 I said:
“It is doubtful whether anyone hearing the word ‘goods’, in normal parlance, would readily think of electrical impulses. The word generally refers to tangible and visible objects; although it is notable that both the Oxford English Dictionary and the Macquarie Dictionary define ‘goods’ or ‘goods and chattels’ as referring merely to ‘movable property’, without further limitation. But whatever the ordinary meaning of the word, there is here a statutory definition which defines the word – in an inclusive, rather than exclusive, manner – so as to include electricity. It cannot, I think, be doubted that, as Parliament intended the word ‘goods’ to be understood as including electricity, it also intended it to include encoded electrical impulses’.”
When the matter went on appeal, a different senior counsel appeared for Pont Data. He abandoned the argument successfully put by his predecessor and conceded that encoded electrical impulses were not included within the definition of “goods”: see ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (1990) 27 FCR 460. The Full Court accepted that concession, commenting at 468 that “it does not follow from the inclusion of electricity in the definition that it should be read as if there was a further inclusion, by way of extension of the ordinary meaning of ‘goods’, so as to draw within the definition encoded electrical signals”.
The point for present purposes is that, in Pont Data, everybody agreed that, in the absence of a statutory definition ordaining otherwise, even electricity was not “goods”; and it was held that, even where a definition included electricity, the word still did not include encoded electrical impulses, which are, perhaps, analogous to the electromagnetic waves which (with light) flow through the Telstra and Optus cables.
Counsel for the Victorian respondents submit:
“Describing the information which is transmitted through the cables as ‘content’ cannot convert it into a commodity comparable to, for example, hydrocarbons or chicory. That ‘content’ is not used or enjoyed by its purchasers in the form in which it is transmitted and is far removed in character from the marketable commodities which constitute goods in the accepted sense. Indeed, subscribers do not pay to have particular quantities or shipments of ‘content’ sent to them; rather, they pay for the right to use equipment which decodes the signals that pass along the cables and converts them into pictures and sounds. The transmission of the electronic impulses to a subscriber constitutes an element of the provision of a ‘service’, both as a matter of ordinary language and in the terms of s.51(v) of the Constitution. No amount of progressive interpretation can convert that provision into a supply of goods so as to attract s.90.”
(ii) The intervener’s submissions
Counsel for the intervener, the New South Wales Attorney General, points out it is common ground between the principal parties that the practical operation of the law, as well as its form, must be examined; this was the reason why the Hematite licence fees were held to be excise duties. He says it is possible to identify goods on which the rates and charges are imposed; namely the optical fibre and coaxial cables owned and installed by the applicants; but these are not goods in the chain of production between manufacturer and consumer. He suggests it was for this reason that the applicants found it necessary to put a case based on the proposition that the electromagnetic signals, or the information they convey, constitute goods; the flaw in that case is that neither the electromagnetic signals nor the information are “goods” within the meaning of s90.
In relation to that submission, counsel for the intervener relies primarily on Adams v Rau, in which it was held that shorthand transcripts of judicial proceedings were not “goods” for the purposes of sales tax legislation. At 578-579 Gavan Duffy CJ, Starke J, Dixon J and McTiernan J said:
“In this case we cannot think that the description ‘manufacture or production of goods or commodities’ can properly be applied to any part of the business or operations in which the shorthand writers engage. The work they are required to perform is to make a record of judicial proceedings, or some other oral transaction, and to provide transcripts of the record to the persons concerned therein. The service which they perform cannot first be disintegrated and then part of it examined while the rest is excluded entirely from consideration. Doubtless the transcript ‘produced’ by the typist from the shorthand writer’s dictation is a new entity, and is not the same thing as the pieces of paper on which it was made. Doubtless it is capable of sale. But it is brought into existence, not for sale as a commodity, but for the purpose of enabling the employers to have the benefit of services given in the course of a skilled vocation. The fact that some part of the remuneration is determined by the number and length of the transcripts does not necessarily mean that they are sold as commodities for a price, but only that in fixing the reward for the services the fact is recognized that the transcript shows how much oral matter has been taken in shorthand and how much shorthand has been transcribed. It would be a misuse of English to describe a shorthand writer’s employment as the manufacture and production of transcripts.”
See also per Evatt J at 579. In Mutual Pools (in the passage quoted at para 42 above), Mason CJ, Brennan J and McHugh J referred to Adams v Rau in a manner suggesting they viewed it as continuing to be good law.
Counsel for the intervener also cites St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481 at 492-493 in which Sir Iain Glidewell, sitting in the English Court of Appeal, held that a computer disk was within a definition of “goods” in United Kingdom legislation but a computer program was not.
Counsel for the intervener distinguishes Hematite on the basis that it involved hydrocarbons, which are unquestionably “goods”. He also distinguishes Capital Duplicators. Rebutting a suggestion by applicants’ counsel that there is no difference between receiving a video film over the broadband network or from a truck driving along a council road to deliver video cassettes, counsel for the intervener points out that, in the latter case, the customer receives a thing, an article that might be the subject of a trading or commercial transaction; in the former case, the customer receives only the opportunity to view the video.
Counsel for the intervener relies on Pont Data. He says that, if it is correct to say that encoded electrical impulses (that is, pulses of electricity) are not “goods”, then the position must be a fortiori in relation to signals transmitted, on the evidence, by light - in the case of the optic fibre cables - and by electromagnetic waves – in the case of the coaxial cables. Neither light nor electromagnetic waves are tangible; they have no permanence and dissipate rapidly outside the environment of the cable.
Finally, counsel submits it is irrelevant that the information transmitted through the cables may be the subject of intellectual property; the concept of “property” is wider than “goods”. Counsel comments this is doubtless why the guarantees in s51(xxxi) and s114 of the Constitution protect “property”, not merely “goods”. However, s90 refers only to “goods”.
(v) Conclusions
On this aspect of the case, the submissions made on behalf of the respondents and the intervener are to be preferred to those of the applicants.
On the question whether the imposts constitute a tax, there may be a distinction between the New South Wales situation and that applying under the Victorian legislation. Counsel for the Victorian respondents concede that Part 8 of the Victorian Act authorises the imposition by councils of rates and charges that may properly be called a “tax”. No such concession is made by counsel for the New South Wales respondents in relation to charges under s611 of the New South Wales Act. This is understandable.
Rates declared and recovered under Part 8 of the Victorian Act are calculated by reference to the value of the rated land. The value of land primarily depends on market factors. The value may have little or no relationship to the practical benefit (if any) enjoyed by the owner or occupier of the land; perhaps this is particularly true of an occupier of a cable or pipeline. So it is natural to regard rates declared under the Victorian Act as a tax on the land itself. Moreover, Part 8 of the Victorian Act applies to all land, other than public land that is either unoccupied or used exclusively for public purposes. Importantly, it applies to private “land”, including a privately owned pipe or cable laid even through a privately held parcel of freehold or leasehold land. There is no element of compensation for the use of publicly owned land.
By contrast, s611 of the New South Wales Act applies only to specified types of installations “erected, suspended, constructed or placed on, under or over a public place”; it does not apply to installations in or over privately owned land. So it is possible to see the section as one designed to obtain public compensation for the use, by a particular occupier, of public space. That view of the section is consistent with its history, recalling that the earliest ancestor of the section referred to a “fair rental charge”. It is also consistent with the command of subs (3) that the charge “is to be based on the nature and extent of the benefit enjoyed by the person concerned”. That command is reinforced by subs (4) which enables an independent authority, the Land and Environment Court, to resolve any dispute about the appropriate amount of the charge. Having regard to all these features, I do not think a charge made under s611 of the New South Wales Act may properly be described as a tax.
However, whether or not that view is correct, and accepting that rates declared under the Victorian legislation constitute a tax, it seems to me that, in neither case, is there a tax on “goods”. I accept the submissions on that matter made by counsel for the respondents and the intervener.
If it is correct to say that, in the absence of a special statutory definition, electricity is not “goods”, then a fortiori light and electromagnetic waves are not goods. And it is even more difficult to say that information constitutes “goods”. To provide information is to provide a service. That was the point made in Adams v Rau; it applies equally to this case.
It is not to the point to contend, as do counsel for Telstra in submissions in reply, that the light and electromagnetic waves convey data prepared specifically for commercial purposes; data that is made available to customers on payment of a fee. That is true, but it merely means the information has commercial value. It remains information, not goods.
The applicants’ argument that the rates and charges imposed by the respondents infringe s90 of the Constitution must be rejected.
F. Do the State laws fall within cl 60 of Schedule 3 to the 1997 Telco Act?
(i) The context of the issue
The Telecommunications Act 1991, the predecessor of the 1997 Telco Act, made provision for the licensing of carriers and dealt with their obligations and reserved rights: see Parts 5 and 6 of the 1991 Act. Part 7 was headed “Carriers’ Powers and Immunities”. It included s116, which read as follows:
“(1)The regulations may provide that specified carriers may engage in specified exempt activities despite specified laws of a State or Territory.
(2)A regulation in force because of subsection (1) has effect, according to its tenor, because of this subsection.
(3)It is the Parliament’s intention that, where a regulation in force because of subsection (1) entitles a carrier to engage in specified exempt activities despite specified laws of a State or Territory, nothing in the regulation or in this section is to affect the operation of any other law of a State or Territory, so far as that other law is capable of operating concurrently with this Act.
(4)Nothing in this section affects the liability of a carrier to taxation under a law of a State or Territory.”
The term “exempt activities” was defined in s5 of the 1991 Act as:
“an activity, or conduct, engaged in in the course of, for the purposes of, or otherwise in connection with:
(a)installing, maintaining or operating a telecommunications network; or
(b)without limiting paragraph (a), supplying, installing, maintaining or operating a facility;”
The word “facility” was defined to include “any part of the infrastructure of a telecommunications network”. The parties agree it includes the cables the subject of these proceedings.
Regulations were made pursuant to s116 of the 1991 Act. They were called the Telecommunications (Exempt Activities) Regulations 1991. Regulation 5 specified a number of activities. They included the construction by a carrier of a facility (sub reg (a)(iii)), the maintenance, repair, refurbishment, alteration or demolition by a carrier of a facility (subreg (b)(iii)) and the installation, certification, operation, repair or removal, by a carrier, of a line, being part of a carrier’s telecommunications network (subreg (c)(iii)). Under s5 of the 1991 Act, the word “line” includes a cable intended for use in connection with carrying communications by means of guided electromagnetic energy.
Regulation 6 provided that, for the purposes of s116(1) of the Act:
“a carrier may engage in the exempt activities set out in regulation 5 despite a law of a State or Territory about:
…
e) the powers and functions of a local government body;
f) the use of land;
g) tenancy;”
It is agreed between the present parties that all the cables the subject of the challenged rates and charges were installed:
(i) during the period of operation of the 1991 Act; and
(ii)pursuant to the authority and exemptions that Act conferred, either directly or by regulations made under that Act.
Part 7 also included Division 3 (s127A to s135), dealing with carriers’ powers to enter land. Those powers included the power, for purposes connected with the supply of a telecommunications service, to “construct a facility on, over or under any land” (s129 (1)(a)) or “attach a facility to any building or other structure” (s129(1)(b)).
The 1991 Act was replaced on 1 July 1997 by the 1997 Telco Act. That Act contains Schedule 3, effect to which is given by s484 of that Act.
Schedule 3 of the 1997 Telco Act is entitled “Carriers’ powers and immunities”. Part 1 of the Schedule (cll 1 to 55) contains general provisions, apparently designed to enable the installation of telecommunications facilities on or over private land. Part 2 of the Schedule (cll 56 to 61) contains transitional provisions. These provisions were apparently thought necessary because of the repeal of the 1991 Telecommunications Act. This Part contains cl 60 which reads:
“A law of a State or Territory that relates to:
a)the standards applicable to:
(i)the design; or
(ii)the manner of the construction;
of a building, structure or facility; or
b)the approval of the construction of a building, structure or facility; or
c)the occupancy, or use, of a building, structure or facility; or
d)the alteration or demolition of a building, structure or facility;
does not apply to a building, structure or facility that is owned or operated by a carrier to the extent that the construction, alteration or demolition of the building, structure or facility was or is authorised by:
e)section 116 of the Telecommunications Act 1991; or
f)Division 3 of Part 7 of the Telecommunications Act 1991; or
g)a repealed law of the Commonwealth.”
(ii) The applicants’ submissions
A paper prepared, at about that time, by another Frankston Council officer claimed this council “first thought of using a rating system to provide a deterrent for carriers in the deployment of aerial infrastructure.”
Frankston Council was one of the councils involved in the rate initiative launch on 23 June 1997. Councillors were informed of the launch and the “three basic principles for pursuing the rating of carriers” set out in para 351 above. Shortly before 23 June, the councils had received legal and valuation advice about the new system. That advice was included in a report to a Frankston Council meeting of 30 June 1997 at which it was resolved:
“A. That Council support the notion of striking a supplementary rate for Telecommunications for the 1997/98 financial year
…
C. That Frankston City, in consultation with other Councils, develop a consistent valuation methodology for the Telecommunications rate and report back to Council with these findings prior to striking the rate.”
The report discussed by Frankston Council on 30 June 1997 included these statements:
“The Carriers will probably challenge the striking of the rate and imply that a new rate will push up the price of their services. However, there is already a cost to the community generated by the carriers activities, such as the loss of amenity to our streets caused by additional aerial cabling, the additional cost of street tree maintenance, the devaluation of road reserves created by damage caused by the activities of carriers.
In addition, like all private enterprises, the cost of using land and infrastructure owned by other entities is something that needs to be accounted for in the costing of their service delivery. On the other hand Council is responsible for ensuring the community as a whole benefits from the rates collected from carriers for their use of public land.”
The remainder of 1997, and the first few months of 1998, were spent in developing a valuation methodology. This was done in conjunction with other councils, and with expert valuation advice. A report was received in April 1998 and a supplementary valuation return, effective at 1 July 1997, was supplied in May. It was formally received by council at a meeting held on 26 May 1998.
A covering report to council referred to the CORE group of councils having the prime aim “to ensure that whenever possible all private enterprises pay their ‘fair share’ of rates and charges to local Councils.” The report also noted the possibility, in future years, of rating the overhead component as a higher differential rate “to compensate for the detriment to the visual amenity of the municipality”.
Pursuant to the council resolutions of 26 May 1998, rate notices for the 1997-98 financial year were issued on 27 May.
On 30 June 1998 Frankston Council resolved to adopt a differential rate for 1998-99, the overhead rate being about three times that of the underground rate.
(v) Yarra City Council
As will be apparent from earlier references, Yarra City Council was actively involved in the campaign against the rollout of aerial cable.
On 2 May 1997, Prue Digby, Chief Executive Officer of Yarra Council, wrote to other councils suggesting it was “an opportune time to address rating of communications carriers”. Ms Digby said:
“The concept of a Council charging a rate for their overhead cables is an effective and legitimate strategy for raising funds to achieve the long term vision of may Councils. In the short term pursuit of this strategy will help ensure that carriers such as Optus and Telstra will act in a more responsible manner.”
Ms Digby convened a breakfast meeting for 8 May 1997.
This initiative resulted in the obtaining of legal and valuation advice which was considered at a meeting of representatives of six councils held on 17 June 1997. It seems that meeting gave rise to the “new rating initiative” that was launched, with the participation of the mayor of Yarra, on 23 June 1997.
Yarra City Council was one of the councils that developed the valuation methodology used in the supplementary valuation returns, effective from 1 July 1997, supplied to participating councils in May 1998. It seems Yarra Council adopted its supplementary valuation return shortly before 27 May 1998, the day on which it forwarded 1997-98 rate notices to telecommunications carriers.
On 1 July 1998 the mayor of the City of Yarra issued a media release announcing service of the rate notices. He said:
“If a community asset (public land) is being used for private profit, the community has a right to a reasonable payment for the use and maintenance of its asset (public land or space) ... Optus Vision and Telstra/Foxtel have been getting a free ride at the expense of other business and household ratepayers”.
On 27 August 1998 Yarra Council issued a Valuation and Rate Notice to Telstra for 1998-99. Yarra did not apply differential rating.
(vi) The applicants’ submissions
Counsel for Telstra direct attention to s6 of the Victorian Act detailing the purposes of a council. That section reads:
“Purposes of a Council
6. (1) The purposes of a Council are--
(a) to provide for the peace, order and good government of
its municipal district ; and
(b) to facilitate and encourage appropriate development of
its municipal district in the best interests of the
community; and
(c) to provide equitable and appropriate services and
facilities for the community and to ensure that those
services and facilities are managed efficiently and
effectively; and
(d) to manage, improve and develop the resources of its
district efficiently and effectively.(2) It is the intention of Parliament that the provisions of this
Act be interpreted and every function, power, authority,
discretion and duty conferred or imposed by or under this or
any other Act on a Council be performed or exercised so as to
give effect to the purposes and objectives of Councils.”Section 7 sets out objectives of a council, to achieve its purposes.
Counsel for Telstra argue:
“s6(2) does not mean that every power given to a council can be used for every purpose or objective listed in ss6 or 7. It means only that, where there is a link between the relevant power and a purpose or objective, the power is to be construed and exercised so as to advance that purpose or objective.”
As previously noted, Part 8 of the Act confers on councils the power to make and levy rates and charges on land. Counsel for Telstra say this is connected with the objective stated in s7(h) of the Act:
“To raise funds for local purposes by the equitable imposition of rates and charges and by obtaining borrowings and grants;”
Counsel for Telstra note that each of the four Victorian respondents was a member of CORE. On the basis of that fact, they submit the four councils “acted in concert with each other”; “their common knowledge and common purpose must inform any consideration of the evidence in the context of this claim for review that each of the Victorian councils acted for an extraneous purpose”. Counsel contend the documents tendered in evidence demonstrate that the Victorian respondents “made and levied the rates and charges for a number of purposes” namely:
“(a) to provide a deterrent to the carriers in deploying aerial infrastructure;
(b) to respond to community concern in respect of the rollout of overhead telecommunications cable and its effect on visual amenity;
(c)to encourage telecommunications carriers to place their cables underground;
(d)to make a public statement that commercial enterprises which profit from the use of public land ought to pay for that privilege on a ‘user pays’ principle; and
(e)to raise funds for local purposes including, in particular, money to carry out a program of undergrounding the overhead cables.”
Counsel contend those purposes were not authorised by the legislation. They argue that, as in the New South Wales Act, each part of the Victorian Act deals with a discrete matter; the power of Victorian councils to make and levy a general rate may be exercised only for the purpose of raising funds to be used for “local purposes”. Counsel suggest the finance purpose of Part 8 is demonstrated by the detailed provisions in that Part regarding the preparation and publication of budgets and recovery of unpaid rates and charges.
Counsel say that, even if the councils were anxious to raise funds from the rating of cables, their purposes were mixed. They refer to ten documents in which references are made to deterring telecommunications carriers from erecting aerial cables, responding to community concern over the visual damage occasioned by aerial cables, and the like. None of the ten documents emanated directly from a council meeting, or is proved to have been placed before a council meeting.
Counsel for Telstra also contend it was an improper purpose for the Victorian councils to seek to raise revenue that might be used to assist the undergrounding of cables..
Optus does not put any separate submission in relation to the extraneous purposes of Moreland City Council, the only Victorian council against whom it proceeds. Optus adopts Telstra’s submissions.
(vii) The Victorian respondents’ submissions
Counsel for the Victorian respondents made some comments about CORE. They noted that, in 1996, “there was great concern in relation to the Telstra and Optus cable rollout”. They mentioned four primary concerns:
“(a) duplication of cables given the limited sharing of facilities;
(b)the impact of substantial and extensive aerial infrastructure on matters such as visual amenity, aesthetics and vegetation;
(c)widespread community concern and dissatisfaction associated with the labyrinth of aerial infrastructure;
(d)the failure to lay cables underground.”
Counsel mentioned the litigation that occurred in Victoria, as in New South Wales, when councils attempted to prevent or control the cable rollout. Counsel went on:
“The cable roll out was, of course, a new issue facing local governments and a matter which councils were required to consider and respond to in the context of their overall local government purposes, objectives, functions and responsibilities. Because the concern was shared by most (if not all) municipalities, a cooperative approach was taken by a number of councils. One of the primary issues councils were obligated to explore was the rating issue.”
Counsel then referred to a number of documents prepared in connection with the CORE campaign, or by council officers. Counsel claim these documents demonstrate the interest of councils in developing a rating regime for telecommunications carriers that would be “equitable and appropriate”. Counsel observe there was a strong feeling that it was inappropriate for privately owned bodies to have free use of public land for commercial purposes. This feeling extended, in Victoria, to the free use of street cabling by the recently-privatised electricity companies.
In dealing with the allegation of improper purposes, counsel for the Victorian respondents acknowledge “that one of the matters taken into account and considered when exploring the rating issue was the community desire to minimise aerial infrastructure and encourage the undergrounding of cables”. But they contend that was “a perfectly proper and appropriate matter for a local government to consider when faced with this new issue”.
Counsel say the purposes for which the rating power may be used include:
“(a)the purpose of raising revenue for one or more of the purposes or objectives referred to in sections 6 and 7 of the Victorian Act;
(b)the purpose of raising revenue in order to carry out one or more of its functions;
(c)to ensure that the rating provisions are applied to those subject to their terms”;
Counsel submit that, even if it was demonstrated that the substantial purpose of levying the rates was to encourage underground cabling, and to obtain revenue that might be used to assist future underground cabling, these would not be extraneous purposes. Counsel point to the purposes of a council, set out in s6(1) of the Act. Counsel also mention council’s objectives and functions. They say there is no basis for Telstra’s submission that the power to make and levy a general rate may be used only for “the narrow purpose of raising funds.” This is particularly true of a differential rate, in relation to which s161(2)(a) of the Act requires council to “specify the objectives of the differential rate which must be consistent with the equitable and efficient carrying out of the Council’s functions.”
Counsel for the Victorian respondents reply to their opponents’ suggestion of improper behaviour, in “acting in concert”, by saying their clients’ behaviour is merely an example of councils fulfilling the objective in s(b) of the Act: “To co-ordinate with other public bodies to ensure that services and facilities are provided and resources are used effectively and efficiently”.
(v) Conclusions
Many of my observations in relation to the New South Wales respondents apply equally to the argument that the decisions of the Victorian councils are invalidated by reason of their pursuit of extraneous purposes. As in the case of the New South Wales councils, there is no evidence of anything that occurred during the course of debate at any of the council meetings at which consideration was given to the imposition of the subject rates. Some officers’ reports are in evidence. Where it is established that a particular report was before a particular council during the meeting at which a particular resolution was passed, it may be inferred that the contents of the report were taken into account by those members of council who assented to the resolution. However, as I pointed out in para 335 above, it does not follow that all (or any) of the matters mentioned in the report actuated any particular councillor, still less council as a whole, to make any particular decision.
All four councils were involved in CORE. However, the evidence does not establish that any CORE campaign material was endorsed by any council. I accept that individual councillors are likely to have come across some of the CORE campaign material; or, at least, to have been familiar with the sentiments expressed by CORE. The evidence shows that statements made on behalf of CORE were widely publicised. However, that does not mean it is proper to attribute to any particular councillor, or body of councillors, all (or any) of the views expressed by CORE.
As in the case of the New South Wales respondents, I prefer to decide this issue on a more fundamental basis than the applicants’ difficulty in proving the purposes underlying the relevant resolutions. I do not accept the applicants’ submission that the power of a Victorian council to declare rates on rateable land is a discrete power divorced from its other functions.
There are at least two problems about the applicants’ arguments. First, s6(2) of the Victorian Act proclaims the intention of the Victorian Parliament that “every function, power, authority, discretion and duty conferred or imposed by or under this or any other Act on a Council be performed or exercised so as to give effect to the purposes and objectives of Councils.” The functions, powers, authorities and duties conferred by the Act include the function of levying rates under Part 8 of the Act. The purposes of the Act include the “good government” of the municipal district (s6(1)(a), the encouragement of “appropriate development” of the district (s6(1)(b)) and the efficient and effective management, improvement and development of the district’s resources (s6(1)(d)). All these statements of purpose are relevant to the proper management of public land, such as streets, the control of infrastructure development on that land and its maintenance for public use and enjoyment. Further s7(a) makes it an objective of council to “facilitate the involvement of members of the community … in the development, improvement and co-ordination of local government” and s7(d) sets an objective to “represent and promote the interests of the community and to be responsive to the needs of the community”. The effect of these provisions, read with s6(2), is that, in exercising their powers, the respondent councils were obliged to listen to members of the community, promote the interests of the community and be responsive to community needs. If there was concern within the community about the proliferation of overhead cables resulting from the broadband rollout, this was a matter that the councils were obliged to take into account in determining whether or not, and if so how, to exercise powers given to them by the Act.
The second difficulty about the applicants’ argument is that it assumes the councils had a discretion whether or not they would rate the cables. It seems to me that assumption is incorrect. Section 154(1) of the Act provides that “all land is rateable”, other than land caught by the exceptions referred to in s154(2). It is now conceded by Telstra and Optus that the cables are “land”, within the meaning of s154(1), and that none of the exceptions in s154(2) applies. It follows that the cables are rateable. Section 155 gives a council a discretion as to the type of rates and charges it will declare in respect of any particular year; and s157 allows the council to choose its system of valuation. However, as I understand the scheme of the Act, if a council decides to declare a general rate for a particular year, using a particular system of valuation, that decision applies to all rateable land within the municipal district. The members of council need have no intention concerning, or even knowledge of, land burdened by the rate. The resolution applies, by force of the Act itself, to each parcel of rateable land (s154) and the owner of each parcel of rateable land (s156).
In a Further Memorandum of Advice, furnished to the Victorian respondents on 13 August 1997, Mr Stuart Morris QC said:
“If a telecommunications carrier occupies rateable land, the carrier should be rated; as should all other carriers or relevant occupiers of rateable land”.
I understand this to have been intended as a statement of law, not advice about policy. On that understanding, I agree.
The comments made in the last two paragraphs do not apply to a council’s decision to impose a differential rate. Section 161 of the Act applies to rateable land in respect of which the council has declared a general rate, under s155 of the Act, and elected, under s157, to use the capital improved value system. In such a case, the council may declare a differential rate for particular land, but only if the rate complies with the requirements of s161(2). Necessarily, the council will need to consider the “types or classes of land” to which the differential rate will apply, although not necessarily the particular parcels of land..
As I previously indicated, I do not propose to deal with the applicants’ challenge to the decisions of three councils (Bayside, Moreland and Frankston) to declare differential rates, for the year 1998-99, over the “land” constituted by the cables. So I make no comment about the application of s161 in these cases. I mention the section only to recognise that it operates as an exception to the general principle, earlier mentioned, that a resolution to declare a rate affects all rateable land within the municipal district regardless of councillors’ knowledge about, or attitudes to, particular parcels of land or their owners. A complaint of extraneous purpose really needs to be directed to the resolution declaring the rate for the year, not to a resolution to receive a supplementary valuation in order that council officers may go through the mechanical processes of levying (s158(3)) and collecting (ss 167-181) the rate.
The challenge to the decision of the Victorian councils, in relation to improper purpose, must fail.
N. Disposition
(i) Liability
In para 231 above, I indicated that the only substantial issues I would determine would be issues (i), (ii), (iii)(a) and (iv), as identified in para 7. I have decided each of those issues adversely to the applicants. It follows that each proceeding ought to be dismissed. As I have elected, in the exercise of my discretion, not to determine issues (iii)(b), (iii)(c) and (v), my order of dismissal will not preclude those issues being considered by a court or tribunal of competent jurisdiction.
(ii) Costs
During the course of their submissions, counsel for the Victorian respondents drew attention to the abandonment of many of the grounds of challenge pleaded against their clients by the applicants. Counsel suggested that, even if they failed in relation to a surviving ground, their clients should have the benefit of a costs order in respect of the abandoned grounds. Furthermore, counsel for both sets of respondents take the position that, if the applicants are successful on one ground, but not all grounds, the Court should take into account the applicants’ limited success in determining what proportion of their costs should be allowed against the respondents.
Having regard to my conclusion that both proceedings should be dismissed, these complications do not arise. It is appropriate for me to make a general order for costs in favour of the respondents in each matter. I mention the matters raised by counsel only against the possibility of a different view being taken on appeal about one or more of my conclusions.
I certify that the preceding four hundred and fourteen (414) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox. Associate:
Dated: 21 December 2000
Counsel for the Telstra applicants: Mr R Conti QC, Mr P Hanks QC and
Ms KA ReesSolicitors for the Telstra applicants: Mallesons Stephen Jacques Counsel for the Optus applicants: Mr T F Bathurst QC and
Mr S J GagelerSolicitors for the Optus applicants: Gilbert and Tobin
Counsel for the New South Wales respondents: Mr F M Douglas QC and
Mr K M ConnorSolicitors for the New South Wales respondents: Deacons Counsel for the Victorian respondents: Dr G Griffith QC and Mr M Connock Solicitors for the Victorian respondents: Maddock Lonie & Chisholm Counsel for the Attorney General
of New South Wales:Mr M J Leeming Solicitor for the Attorney General
of New South Wales:Crown Solicitor for New South Wales Dates of hearing: 26-27 April 2000;
2, 4, 5 May 2000Date of judgment: 21 December 2000
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