Wesgo Communications P/L v Australian Broadcasting Tribunal and Anor

Re: WESGO COMMUNICATIONS PTY. LIMITED
And: AUSTRALIAN BROADCASTING TRIBUNAL and GOSFORD COMMUNICATIONS LIMITED
No. NG1207 of 1988
FED No. 227
Broadcasting

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sheppard J.(1)

CATCHWORDS

Broadcasting - grant by Broadcasting Tribunal of commercial FM radio licence - Tribunal required to consider "commercial viability of the service" provided by existing licensee - meaning of "service" in that context - Tribunal omitted from assessment of viability of existing licensee the provision made by it for depreciation - whether Tribunal omitted relevant consideration from account - whether Tribunal considered question whether "a licence of the kind contemplated by the matters set out in the notice" issued by the Minister "should not be granted".

Broadcasting Act 1942, ss. 4(1) and (6), 25B, 82 and 83

Broadcasting and Television Amendment Act 1985, paras. 5(e) and 32(j)

Note: The amendments made by the Broadcasting Legislation Amendment Act 1988 were not applicable to the circumstances of this case.

HEARING

CANBERRA

#DATE 16:5:1989

Counsel for the Applicant: Mr. S.M. Littlemore

Solicitors for the Applicant: Messrs. Kencalo & Rimes

Counsel for the First Respondent: Mr. L.T. Grey

Solicitors for the First Respondent: Australian Government Solicitor

Counsel for the Second Respondent: Mr. A. Robertson

Solictors for the second Respondent: Blake Dawson Waldron

ORDER

The decision of the Australian Broadcasting Tribunal made on 10 August 1988 to grant a commercial FM radio licence to Gosford Communications Limited be set aside.

The matter be referred back to the Australian Broadcasting Tribunal for further consideration.

The second respondent, Gosford Communications Limited, pay to the applicant, Wesgo Communications Pty. Limited, its costs of the application.

There be no order as to the costs of the first respondent, the Australian Broadcasting Tribunal.

There be liberty to apply.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is one of two applications for judicial review arising from the holding of an inquiry by the Australian Broadcasting Tribunal into the grant of a commercial FM radio licence to serve the Gosford-Wyong area of New South Wales. There is one existing radio licence granted in respect of the Gosford-Wyong area. It is an AM licence and is held by the applicant. The station which operates the licence has the call sign 2GO. Over the opposition of the applicant, the Tribunal decided to grant a commercial FM radio licence to the second respondent ("Gosford Communications").

The Gosford-Wyong area is closely settled. It lies midway between Sydney and Newcastle and is served by both AM and FM radio stations broadcasting from those cities as well as by the applicant's station, 2GO.
The initial question which the Tribunal had to consider was whether to grant a licence at all. At the hearing before the Tribunal, it was the strong submission of the applicant that no licence should be granted. The Tribunal was obliged to consider this threshold question in terms of the matters specified in subsec. 83(6) of the Broadcasting Act 1942 (in the form in which it was at the time the Tribunal dealt with the matter - s. 83 was substantially amended by the Broadcasting Legislation Amendment Act 1988, but the amendments play no part in the present case).
In its then form, the provisions of sub-para. 83(6)(c)(iii) of the Act were as follows:-

"83.(6) The Tribunal shall not refuse to grant a licence to a person unless- ........ ........ ........ ........ ........ .....

(c) in the case of a licence other than a remote licence - it appears to the Tribunal, having regard only to the following matters or circumstances, that it is advisable in the public interest to refuse to grant the licence to the person:

........ ........ ........ ........ ......

(iii) where the service area of the licence overlaps the service area of another licence or other licences - the need for the commercial viability of the service or services provided pursuant to the other licence or other licences;"

The licence here in question is not "a remote licence". The expression "service area" in the paragraph was defined, so far as relevant, in s.4 of the Act to mean, in relation to a licence or the holder of a licence, the area to be served pursuant to the licence. The word "service" itself was not defined. The sub-paragraph applied to the circumstances of this case because the service area of the licence to be granted overlapped the service area of the licence held by the applicant. Of some relevance to the questions to be decided are the provisions of subsec. 4(6) of the Act which provided that a reference in the Act to the provision by a licensee of an adequate and comprehensive service pursuant to a licence was to be read as a reference to the provision by the licensee of an adequate and comprehensive service having regard to five specified matters, including the requirements of the Act and the regulations, the nature of the community to be served pursuant to the licence, and the diversity of the interests of that community. The expression, "adequate and comprehensive service", was not used in subsec. 83(6)(c)(iii), but it was to be found in subsec. 83(5) which, amongst other things, obliged an applicant for the grant of a licence to give an undertaking in writing to the Tribunal that he would provide an adequate and comprehensive service pursuant to the licence, and sub-para. 83(6)(c)(i).
Sub-paragraph 83(6)(c)(i) of the Act, so far as relevant, provided that the Tribunal should not refuse to grant a licence unless it appeared to it that it was advisable in the public interest to refuse to grant the licence because it was not satisfied that the person applying for it had the necessary financial and management capabilities necessary to provide an adequate and comprehensive service pursuant to the licence. The expression "financial capability" was used in relation to the proposed licensee. It should be contrasted with the expression "commercial viability" which was used in relation to the service provided pursuant to the existing licence. Thus the Act referred to the financial capability of applicants and the commercial viability of existing services.
Counsel for the applicant relied on three submissions. Firstly, he claimed that the Tribunal failed to consider the need for the commercial viability of the service provided by it. Rather, so he submitted, the Tribunal considered, not the commercial viability of the service, but the commercial viability of the applicant itself. Secondly, it was submitted that the Tribunal omitted a relevant consideration from account when, in making an assessment of the commercial viability of the applicant as it would be after the new licensee began transmission, it decided to exclude depreciation from the accounts of both the applicant and Gosford Communications. The third submission was based upon para. 83(6)(d) of the Act which provided:-

"83.(6) The Tribunal shall not refuse to grant a licence to a person unless - ........ ........ ........ ........ ........ .....

(d) it appears to the Tribunal that a licence of the kind contemplated by the matters (other than the outline of the technical conditions proposed to be included in the licence warrant) set out in a notice under paragraph 82(1)(a) or 82A(4)(a) should not be granted."

Paragraph 82(1)(a) of the Act provided that, before a licence was granted, the Minister would publish a notice specifying the category of licence and setting out an outline of the service specification to which the licence was to be subject and the technical conditions proposed to be included in the licence warrant. Paragraph 82A(4)(a) mentioned in para. 83(6)(d) was not relevant to the present case. It was submitted that the Tribunal did not turn its mind to the question whether a licence of the kind contemplated by the matters set out in the relevant notice should not be granted.

The application for review was supported by an affidavit of Mr. B.P. Harvey sworn 5 October 1988. Counsel for Gosford Communications objected to the entirety of this affidavit except for the first two paragraphs in which Mr. Harvey stated his qualifications and experience. I deferred dealing with the objection, but I indicate now that I am satisfied the objection should be upheld. My conclusion in this regard makes no substantial difference to the applicant's ability to rely upon the matters mentioned in the submissions made by its counsel. That is because the matters upon which the applicant relies emerge clearly from the terms of the Tribunal's report which is in evidence. Also in evidence are the transcript of the proceedings before the Tribunal, some of the statements made by witnesses and some of the written submissions made to it, and documents showing the directions given by the Tribunal together with notes of preliminary hearings before it.
The Tribunal's summary of the inquiry, which appears at the commencement of the report, shows that the service proposed was a commercial FM radio licence to serve the Gosford-Wyong area. Nine applications were received including an application from Gosford Communications which became the successful applicant. One of the applicants withdrew its application. Another was found not to be suitable because it did not have "the requisite management capability". It thus failed to meet one of the tests provided for in sub-para. (i)(B) of para. 83(1)(c) of the Act. The Tribunal was thus left to choose one of the seven remaining applicants for the licence. As mentioned, it preferred Gosford Communications. The Tribunal's decision was given on 10 August 1988 which is also the date of its report.
It is necessary to refer to a number of paragraphs of the Tribunal's report. Most of these relate to the applicant's first submission, but some relate only to one or other of the remaining submissions or have relevance to more than one of them. Section 2 of the report comprised the introduction. Paragraph 2.1 referred to the relevant provisions of the Act which were set out in an appendix to the report. The Tribunal continued:-

"As may be seen from this appendix, the important elements to be measured in making a decision are:

........ ........ ........ ........ ........ the need for commercial viability of overlapping services and other public interest considerations which may suggest that a licence should not be granted.

........ ........ ........ ........ ......."

The elements which I have not quoted are not of relevance to the present case.

Section 3 of the report was headed, "SHOULD THE LICENCE BE REFUSED". Paragraph 3.2 began the discussion of commercial viability which extended over the next 10 pages up to and including para. 3.33. In the course of its discussion of the matter the Tribunal referred to the distinction between profitability and viability and to what it had said in this regard in another report dealing with the grant of a radio licence for the Coffs Harbour area (Report No. 268/84 GT(R)). In that report the Tribunal had said:-

"It is also important not to confuse viability with profitability. They are not synonymous. The rate of return on investment

(ROI) is a common measure of company profitability. The effect of treating ROI as the criterion of commercial viability is therefore to equate viability with profitability. Yet trading losses that do not jeopardise the continuing operation of a radio or television station, such as do occur in practice from time to time, are compatible with an assessment that the station, although currently unprofitable, is commercially viable. Further, if the legislature intended that profitability should be protected it can be assumed it would have said so by using the word 'profitability' in s. 83(6)(c)(iii) instead of 'viability'."

Paragraph 3.3 of the subject report opened with the words:-

"On the relationship between commercial viability and a station's ability to provide an adequate and comprehensive service, the Tribunal (in the Coffs Harbour Report) stated (at pages 153-154)."

These words provide an indication of the basis of counsel's first submission. It is to be noted that the Tribunal used the words, "a station's ability to provide an adequate and comprehensive service". Sub-paragraph 83(6)(c)(iii) of the Act, however, directed attention, not to the commercial viability of the station, but to the commercial viability "of the service".

Counsel relied on amendments made to s. 83 in 1985 which he contended were intended to bring about a substantial change in the Tribunal's approach. The amendments were effected by the Broadcasting and Television Amendment Act 1985, para. 32(j). Previously the paragraph had read:-

"(iii) where, in the opinion of the Tribunal, in the area to be served in pursuance of the licence, satisfactory reception is being obtained of programs from one or more broadcasting or television stations - the need for the commercial viability of that station or those stations;"

The expression used was, "the need for the commercial viability of that station" as distinct from, "the commercial viability of the service ... provided pursuant to the other licence ..." The amending Act introduced the definition of "service area" to which I have earlier referred; see para. 5(e) of the Broadcasting and Television Amendment Act 1985.

The Bill for the 1985 amending Act was introduced into the Senate on 28 May 1985 by Senator Grimes. On the question of service and service area, he said (Hansard, Proceedings of the Senate, 28 May 1985, p 2642):-

"The Bill changes the basis of the legislation from technology to service. From its inception the Broadcasting and Television Act 1942 has been a technology based act directed towards licensing and regulating various classes of radio, and later television, stations, each defined by reference to their technical characteristics; that is, the stations themselves, not the services they provide are licensed. It has become apparent, however, that placing legislative emphasis upon licensing broadcasting (Radio and Television) services for defined areas will remove unintended planning impediments, simplify and make more coherent the provisions of the Act, and facilitate the introduction of legislative provisions for new services arising from new technology including satellite technology. The cornerstone of the service-based concept for planning and licensing is the service area for a licence; that is, the area containing communities which the Licensee is authorised to serve. From the licensing viewpoint, whether the broadcasting service is delivered by means of one transmitter, or a combination of transmitters, will be largely irrelevant. Emphasis will be placed upon the nature and purpose of the licensed service and the nature and interests of the communities in the service area. These concepts are already present in the licensing requirements of the Australian Broadcasting Tribunal. Broadcasting transmission facilities needed to provide adequate reception within the service area will be authorised merely as technical conditions on the operation of the transmission facilities. This change in the concept of licensing will remove the present duplication of planning and licensing procedures which places an unnecessary administrative burden on licensees, the Australian Broadcasting Tribunal, and my department. For example, under present arrangements, where a licensed station needs subsidiary transmitters to improve reception within its determined service area, translator station licence applications must be invited by the Minister and considered by the Tribunal. The existing Act in some circumstances prohibits translators even within a licensee's service area. This Bill allows changes to a licensee's transmitters to be authorised by the Minister as part of the technical conditions associated with the licence."

These statements were relied upon by counsel for the applicant to emphasize the substantial change which the 1985 amending Act was intended to achieve. Counsel said that the Tribunal should have exercised substantial care before applying, without qualification, to the present case what it had said in the Coffs Harbour case because that case had been determined in 1984 prior to the amendments effected by the 1985 amending Act coming into force.
I do not find it necessary to quote the passage from the Coffs Harbour report referred to by the Tribunal in para. 3.3 of its report in the present case. It is sufficient to say that, as one would expect, there are frequent references in it to commercial viability in the context of a broadcasting station's viability as distinct from the viability of the service which it provides. The importance of this from the applicant's point of view was said to be that the Tribunal under the former legislation had felt free to take the view that, so long as an existing station remained viable, it did not matter that, in the event that a new licence were granted, the existing station would not be able to provide as adequate and comprehensive a service as previously because of the service being provided by the new station. Thus, in its Coffs Harbour report, the Tribunal had said, "It might be a different service, but this does not make it necessarily inadequate or not comprehensive when judged in terms of the Act." The Tribunal added that this would accord with the Tribunal's primary duty to act in the public interest.
Having considered the relationship of commercial viability to profitability, the Tribunal went on in para. 3.4 to deal with the distinction which there is between financial capability and commercial viability.
Again it referred to its Coffs Harbour report. There it had made the point that financial capability applied to the licensee (that is, the applicant for a licence) whilst commercial viability applied to the station. It did not draw attention, however, to the change in the legislation which directed it to consider the commercial viability of the service rather than the station.
In para. 3.5 the Tribunal referred to what it had said about this matter in its report on the grant of a third television licence for Perth (Report No. 310/84 (G)T). Amongst other things, the Tribunal had said that the effective operation of a commercial station in accord with its obligations required the acquisition or replacement of equipment, programs, staff and other human, technical and creative resources necessary to maintain the required standard of service; see sub-para 3.5j of the Gosford-Wyong report. With sub-para. 3.5j should be read sub-para. 3.5k which was as follows:-

"k Commercial viability depends on the availability of the funds necessary for the resources mentioned in the preceding paragraph. Those funds will ultimately come from shareholders, or other investors, such as lenders, who are motivated by their expectations of future benefits."

The sub-paragraphs have a relevance for the applicant's argument based on the omission of depreciation from account as well as for its first submission.

Sub-paragraph 3.5m of the report was as follows:-

"m For the sake of completeness, it should be added that the Tribunal does not accept the argument of the incumbents (that is the applicant here) that the reference in the Act to the need for commercial viability prohibits it from making decisions which could jeopardise the commercial viability of existing stations. If that jeopardy were likely, it could be necessary to explore the degree of likelihood, and to balance that degree against other public interest factors."

Although the sub-paragraphs of para. 3.5 summarized what the Tribunal had said in the Perth report, it seems clear that the various matters which were stated were intended by the Tribunal to apply to its consideration of the matter before it, that is, the Gosford-Wyong matter.

In para. 3.6 further reference was made to commercial viability and what had been said about that matter in the Perth report. The matter was further discussed in paras. 3.7 and 3.8 which were as follows:-

"3.7 Commercial viability falls short of profitability in that only cash expenditure is met from revenue over time, rather than in each year (external funding may be required to meet shortfalls in particular years). While these two terms can apply to the station or service, financial capability applies to the licensee or applicant. Basically, financial capability means command of the financial resources (through equity capital or loans) necessary to provide an adequate and comprehensive service. These financial conditions are related. After an initial period of viability, a station may achieve profitability - an eventual outcome of which promoters have to convince investors to obtain the finance necessary to provide an adequate and comprehensive service. 3.8 What the legislation indicates to licensees is that while due regard will be paid to their need for viability, it is not intended to either underwrite or restrict their profitability. A licensee's profitability will depend entirely on the quality of its programming and on its management. If these are poor, the licensee may be unprofitable; if they are superior, it may earn great profits. The outcome is determined by the market and the licensee's performance."

Paragraph 3.8 concluded the Tribunal's consideration of the general matters guiding it in its task of determining commercial viability. In para. 3.9, under the heading, "EXPENDITURE ITEMS AND COMMERCIAL VIABILITY", the Tribunal considered a number of particular matters including depreciation and amortisation. Of these matters the Tribunal said:-

"Depreciation and amortisation provisions are not cash expenditure and generally would not appear to affect viability. Depreciation provides for recovery of the capital cost of equipment, fixtures and buildings, and reflects the fact that eventually they will have to be replaced. Amortisation provisions relate to write-downs of the value of goodwill or the licence and, as indicated above, appear outside the concept of viability."

The Tribunal went on to consider the comparative financial performance of radio station 2GO (that is, the applicant's station). In para. 3.10 the Tribunal said that the financial performance of 2GO had declined significantly over the five years 1982-83 to 1986-87 compared with that of the larger cities, New South Wales and the Australian Capital Territory, group in which it was included in the Tribunal's statistics. The detail of what these statistics disclosed was stated. In para. 3.11 the Tribunal said that a major factor in 2GO's poor performance was that, over the five year period mentioned, broadcasting revenue increased by only 3.1 per cent per annum. Excluding 2GO, the average station in the Wesgo (i.e. the applicant's) group increased revenue by 9.4 per cent. This matter was further developed in paras. 3.12 and 3.13.
The Tribunal then considered commercial viability in the context of there being two licences. Its heading, which introduced this matter, was, "COMMERCIAL VIABILITY AND TWO STATIONS". The Tribunal first dealt with market revenue. It made the assumption that the new station would commence transmission on 1 July 1989. After analyzing some figures and drawing some conclusions, it formulated a table of estimated revenue for the years 1987-88 to 1993-94. The figures were expressed in what the Tribunal described as 1987-88 dollars. The tabulation showed that there would be a market revenue of $3.8 million for the 1988-89 year and that this would all be received by 2GO because the new station would not begin transmission until 1 July 1989. The tabulation then assumed the value of market revenue for the succeeding years. It postulated a figure of $6.37 million for the 1993-94 year. This, it assumed, would be shared equally between 2GO and the new station. On that basis 2GO's revenue would be of the order of $.65 million less than it was for the 1987-88 year and $.8 million less than the projection for the 1988-89 year. By the 1991-92 year the Tribunal assumed that the two stations would be sharing revenue equally and it continued that assumption for the remaining years of the table.
The Tribunal next turned its attention to expenses and formulated a tabulation projecting estimated expenses for the same years as had been selected for its projections of revenue. In order to arrive at a satisfactory comparison, the Tribunal selected the projected expenditure of Gosford Communications, ("GCL"), which was the successful applicant. The Tribunal's conclusions were that in all years in which the two stations operated, 2GO's expenses would be greater than those of GCL. Thus in the 1992-93 and 1993-94 years, the expenses incurred by 2GO were projected to be $2.5 million and $2.52 million; whilst the expenses of GCL were projected to be $2.18 million and $2.12 million respectively.
In para. 3.26 the Tribunal tabulated the estimated surpluses or deficits of the two stations. In every year there was a surplus for each station except for the first two years of GCL's operation when it was thought its operations would result in a deficit. 2GO's surplus for the 1987-88 year was shown as $1.23 million and was projected for the 1988-89 year to be $1.39 million. Thereafter its projected surplus fell until it reached $.4 million in the 1991-92 year. By 1993-94 it was projected to have risen again but only to $.66 million. The Tribunal concluded that "the commercial viability of both stations (was) reasonably assured". The emphasis is mine.
The final matter dealt with by the Tribunal was profitability. The Tribunal referred to its earlier discussion and said that "profitability is a much higher standard than commercial viability because profitability requires achievement of a rate of return on investment, as well as revenue sufficient to meet cash expenditure. The Tribunal therefore is not required to have regard to the profitability of licensees." In para. 3.28 the Tribunal said that only 2GO's and GCL's annual depreciation provisions needed to be deducted "from the viability assessment at Table 3 above for an estimate of profitability". Table 3 was the last of the tables to which I have referred, namely, the table showing estimated surpluses or deficits. Paragraph 3.28 went on to give the figures for annual depreciation for each of the two stations and a further table showing estimated total profitability was appended to it. What was done was to write back into the figures the amount of the depreciation which had been deducted from the expenses before deficits or surpluses were calculated. This had the effect of further reducing the amount of the surplus in each year but still showed that each of the stations (after GCL's first two years of operation) was expected to operate at a profit.
The Tribunal concluded its treatment of the question of commercial viability in para. 3.33 in which it said:-

"3.33 In view of the above, the Tribunal considers that the commercial viability of 2GO Gosford will not be adversely affected by the introduction of a competitive service. The Tribunal finds therefore that a licence of the kind contemplated in the Minister's notice of 13 May 1988 should be granted in the public interest."

The kernel of the applicant's first submission was that the Tribunal concentrated its attention on the commercial viability of the applicant's station, 2GO, and not on the commercial viability of the service which it provides. At first sight, one might think, as counsel for both respondents submitted, that there is no real distinction and that, in any event, once one speaks of commercial viability one must be using the expression in the context of a commercial undertaking whose viability is in question. Support for that view is to be found in the judgment of Wilcox J. in Our Town FM Pty. Limited v. Australian Broadcasting Tribunal (1987) 77 ALR 577 where his Honour said (p 587) that, in order to provide a television service, one must operate a television station. A station was only operated so as to provide a service. The words were thus interchangeable. What his Honour said needs to be read with the facts of the Our Town case in mind and in the context of the form of the report there under consideration, particularly para. 3.6 thereof and the submissions made about it.
On analysis, the position is not as straightforward as the submissions made by counsel for the respondents would have it. What the applicant submitted was that, in order properly to apply what the relevant part of s. 83 required, one needed to consider the service which was in fact being provided by the broadcaster in existence at the time that the decision was made and determine whether it was advisable in the public interest to refuse to grant a new licence, having regard to the need for the service which the existing broadcaster was providing. In other words, what the Tribunal was required to concentrate on was the likely effect of the new or additional licence on the viability of the existing service, that is, of the applicant on the basis that it continued to provide that service. It was not correct for the Tribunal to concentrate on the continued commercial existence of the existing broadcaster, irrespective of the service it provided. To put it another way, the question was whether the existing broadcaster would remain a commercially viable undertaking if it went on providing the service after the new licence was granted as it was providing before that occurred.
In the submission of counsel for the applicant, it was abundantly clear from the way in which the Tribunal approached the matter that it at no time turned its mind to the correct question. It looked at the matter only from the point of view of the commercial viability of the company which operated the service and concluded that the company would remain viable, but only if it changed the nature of its operations to accommodate the substantially reduced revenue which it would receive as a consequence of having to share the total available revenue with the new station. The Tribunal's extensive reference to earlier decisions all made under earlier legislation coupled with its failure to turn its attention to the expression, "commercial viability of the service", demonstrated, in counsel's submission, that the Tribunal both took an irrelevant consideration into account and failed to take a relevant consideration into account. The irrelevant consideration was the commercial viability of the station and the relevant consideration was the commercial viability of the service.
In my opinion, there is substantial force in the submission. But I would not lightly conclude that the Tribunal overlooked the provisions of the legislation which bound it in the task which it had to perform. Unless there are manifest signs that the Tribunal disregarded the terms of the statute, I would not take the view that it has been guilty of such a serious error as counsel's submission involves. The Tribunal appears to have been well aware of the provisions of the legislation. It annexed a copy of the relevant sections to its report. These included a quotation of the relevant sub-paragraph of s. 83. In para. 2.1 of the report, the Tribunal stated its perception of the more important matters which it was obliged to consider. They included the need for the commercial viability of overlapping services; I refer to so much of para. 2.1 as has earlier been quoted. Furthermore, the Tribunal's attention was expressly drawn to the change in the form of the legislation. The matter was the subject of submissions by counsel for the applicant before the Tribunal; see pp 25-27 and pp 774 et seq. of the Tribunal's transcript.
But, notwithstanding my readiness not to read the Tribunal's decision otherwise than constructively and certainly not to read it with any hypercritical eye for error, there are problems about the substance of the way in which the Tribunal arrived at its decision. Sub-paragraph 83(6)(c)(iii) required the Tribunal, not only to determine whether the existing service would be commercially viable if an additional licence for the area were granted; that was but one part of the question which the sub-paragraph raised for its consideration. What it was obliged to do was to ask itself whether it was satisfied that it was advisable in the public interest to refuse to grant a new licence, having regard to the need for the commercial viability of the existing service. It could take the view, if the facts of a given case suggested it should, that there was no need for the commercial viability of the existing service. Or it could take the view that, although there was such a need, it was not satisfied that it was advisable in the public interest to refuse to grant a new licence. In a given case these may be difficult questions to answer. The problem I have is that I cannot find them addressed in what may be described as the decision-making paragraphs of the Tribunal's reasons.
I have considered whether what the Tribunal said in sub-para. 3.5m earlier quoted did not indicate that it was following the right course. It was there said that the Tribunal did not accept the argument of the applicant that the reference in the Act to the need for commercial viability prohibited it from making decisions which could jeopardize the commercial viability of existing stations. It further said that, if that jeopardy were likely, it could be necessary to explore the degree of likelihood and to balance that degree against other public interest factors. But that sub-paragraph was intended to summarize what the Tribunal had said about the matter in the Perth report at a time when the Act was in a different form. Furthermore, the very paragraph referred to "the commercial viability of existing stations", not "services". In the subsequent paragraphs of Section 3 of the report, the Tribunal continued to refer to the commercial viability of the applicant as an entity and not the commercial viability of the service which the applicant's undertaking provided. For its purposes, it was sufficient to conclude that that entity would remain commercially viable notwithstanding the impact of the competition which would come about when the new licensee began transmission. The fact that it might not be able to provide as adequate and comprehensive a service as before was not to the point so long as the service which it did provide was sufficiently adequate and comprehensive to meet the requirements of the Act.
In my opinion that was not the correct way to approach the matter. What the Tribunal was required to do was to look at the matter as if the new licence were granted, but the existing licensee, that is, the applicant, continued to provide the service it had provided when it was the sole licensee for the area. The Tribunal was required to ask itself whether the applicant, providing that service, would remain a commercially viable undertaking once the new licensee began transmission. If it would not, the Tribunal was required to go to the next question, namely, the need for that commercial viability to continue. In other words, looking at the matter from the point of view of the public interest, was there a need for the existing service to be maintained or was the public interest sufficiently served by a less comprehensive service which was nevertheless adequate and comprehensive? Even if the Tribunal determined that there was a need for the existing service to continue, it was still open to it to conclude that a new licence should be granted because it was not advisable in the public interest to refuse to grant the licence.
I have considered whether the need for the commercial viability of the service, as distinct from the station, may not have been the matter which, in substance, the Tribunal dealt with. There is some support for this view in the fact that the Tribunal, in order to project the applicant's anticipated expenditure, appears to have taken as a guide the expenses which it might be expected to incur if it continued to provide the existing service. During the argument, I discussed this matter somewhat inconclusively with counsel for Gosford Communications. But what tells against the acceptance of this as an explanation for what occurred is the Tribunal's express adoption in para. 3.3 of its report of what it had said in its Coffs Harbour report, namely, that commercial viability should not enable a station providing a very comprehensive service to keep out a competitor solely by arguing that it would no longer be able to provide the service at its then level, notwithstanding that its service would still meet the conditions of its licence and be adequate and comprehensive, having regard to the service to be provided by the new station. Plainly the Act, in the form it was after the 1985 amendments, permitted the Tribunal to reach that conclusion. But it was not open to it to do so by having regard only to the commercial viability of the service as distinct from the station. It could only do so if it expressly decided that, although the existing service would no longer be viable and although there was a need for it to continue, it was nevertheless in the public interest to grant an additional licence for the area. That is not the way the Tribunal went about its task. If it had followed the correct course, its decision may have been the same or it may not have been. One cannot say.

The difficulty is that the Tribunal has quoted so much from earlier decisions which were based on the former legislation and, at the same time, has not in terms addressed itself to the words used in the new, that it would be drawing too long a bow to conclude that the Tribunal was in fact directing itself in accordance with the terms of the form of the section which applied at the time it decided the matter.
Counsel for Gosford Communications attempted to overcome the problem with which he was confronted by a reference to the submissions made by counsel for the applicant about the matter when it was before the Tribunal. Undoubtedly, counsel for the applicant made a strong submission to the Tribunal that, unless it was persuaded that the service then provided by 2GO would remain as it was, no new licence should be granted. Counsel for Gosford Communications said that this submission was clearly wrong in so far as it suggested that it was not open to the Tribunal to grant an additional licence notwithstanding that that would involve a reduction in the standard or quality of the existing service provided by the applicant. That is, of course, true. But I do not read what counsel for the applicant said to the Tribunal as restricted to this matter. He plainly made the submission which is here relied upon and then endeavoured to persuade the Tribunal that it should not grant a new licence because the evidence established quite clearly that that would be at the expense of the commercial viability of the existing service.
In the result I have reached the conclusion that the first submission should be upheld. The matter must go back to the Tribunal to be heard and determined again.
Notwithstanding my conclusion in that regard, I should deal with the remaining submissions. The first of these was the omission of depreciation from the projected expenses of the two stations in reaching a conclusion as to their ultimate viability.
The Tribunal's treatment of depreciation was undertaken in relation to the question of the commercial viability of the applicant, not the service, in the event that a new licence was granted. Counsel for the applicant relied on that matter in support of his first submission. When he came to his second submission, however, he met the Tribunal on its own ground. He said that, if the correct question were whether the applicant would remain commercially viable after the grant of a second licence, it was wrong to omit depreciation from account in the assessment of the applicant's future commercial viability. To omit it, so he submitted, was to omit a relevant consideration from account.
Earlier I referred to sub-para. j of para. 3.5 in which the Tribunal said, correctly in my respectful opinion, that the effective operation of a commercial station required the acquisition or replacement of equipment, programs and technical resources necessary to maintain the required standard of service. Yet in para. 3.9 it was said that depreciation (and amortisation provisions) were not cash expenditure and would not appear to affect viability.
An indication of the Tribunal's thinking behind this statement is to be found in the opening sentence of para. 3.7 which I have earlier quoted. It was there said that commercial viability fell short of profitability in that only cash expenditure was met from revenue over time rather than in each year. I agree that, generally speaking, cash expenditure is usually met from revenue. But to make that statement in the absolute terms which the Tribunal used does not take account of provisions made in accounts for items such as depreciation or for liabilities which will or may arise in the future. In reality those provisions may not be separately identifiable as being comprised in any particular assets such as bank accounts or investments. But the making of them, and their identification in the accounts, tells anyone looking at the assets of the undertaking that such provisions have been made for particular purposes and that the assets of the undertaking may have to meet expenditure in relation to the particular item which is the subject of the provision - in the case of depreciation, the replacement, for example, of buildings, plant and equipment. In practice the total cost of re-equipping a broadcasting station may not come from this source. This, I think, is what led the Tribunal to say what it did. The cost of the replacement of any major item of plant or equipment is more likely to come from the raising of share or loan capital than from reserves which include a provision for depreciation. One reason for this is the likelihood that the replacement cost will exceed the amount of any reserve. Another is the understandable reluctance a licensee would have to dispose of any capital asset, such as a building or an investment, for this purpose. The more likely course would be to issue further shares or to borrow.
I think the Tribunal thought that to include depreciation in its projection of future expenses might involve an element of double counting. It began with the premise that the station was properly equipped at the commencement of the period it selected. If, over the selected period, there was the need to replace equipment, the replacement cost would come, not from revenue, but from additional loan or share capital. It was thus irrelevant to include depreciation for the purpose of determining whether an existing licensee, such as the applicant here, would remain viable. For the purposes of determining financial capability, it would have been necessary to ascertain whether capital for re-equipment could be raised. But, as the Tribunal said, it was not concerned with the financial capability of the applicant. That was not a matter which it was appropriate for it to take into account in relation to an existing licensee as distinct from an applicant for a licence or for the renewal of a licence. I refer to the earlier mentioned contrast between sub-paras. (i)(B) and (iii) of para. 83(6)(c).
In my opinion, it would be open to a tribunal, such as the Tribunal here, to adopt the approach I have outlined. I say that, notwithstanding that there is involved the construction of an expression ("commercial viability") used in a statute. In the context in which it appeared in the Act, the word "viable" was used in relation to an immaterial thing or concept and meant workable or practicable, especially from an economic or financial point of view; see The Oxford English Dictionary (2nd ed., 1989). The primary meaning of viable is capable of living or able to maintain a separate existence. The dictionary meanings to which I have referred indicate the meaning which "viability" had in the context in which it was used. The meaning itself may be a question of fact, but the proper construction of a provision of a statute is a question of law; see Hope v. Bathurst City Council (1980) 144 CLR 1 per Mason J. (as he then was) at p 7.
But, although there was involved a question of statutory construction, and thus a question of law, I think the Tribunal was entitled, in making an assessment of commercial viability in a given case, to determine for itself how it would go about its task. So long as what it did was capable of yielding a conclusion about commercial viability which was open on the material which the Tribunal had before it, a court exercising the supervisory jurisdiction which is exercised by this Court should not interfere.
Notwithstanding the reference made by counsel for the applicant to certain statements and written submissions which were before the Tribunal, there is no indication that the Tribunal had before it any compelling opinion from an accountant that an assessment of commercial viability made without taking depreciation into account was so unsound that no person acting reasonably could follow such a course. Unless there were an opinion which compelled that conclusion, the Tribunal was entitled to act as I believe it did. There was no material of that kind tendered to the Tribunal or this Court.
Subject to one further matter, I have accordingly reached the conclusion that the applicant's second submission should be rejected. That matter concerns the question whether the Tribunal gave any reasons, or any adequate reasons, for omitting depreciation from account. The Tribunal was required to give reasons, not only for its decision, but also for its findings; see paras. (d) and (e) of subsec. 25B(1) of the Act. This question has occasioned me a degree of difficulty. I confess that my explanation of why I think the Tribunal omitted depreciation from account involves a degree of conjecture and surmise. What concerns me is that I may not have divined the Tribunal's real reason for omitting depreciation from its assessment of the applicant's future expenditure for the purpose of determining its commercial viability. If I am wrong, it is not possible to say why depreciation was omitted, notwithstanding that there may have been a very good reason for excluding it.
In the end one must make a judgment whether sufficient reasons have been given. Provisions such as are contained in the two paragraphs of subsec. 25B(1) of the Act, particularly subsec. 43(2) of the Administrative Appeals Tribunal Act 1975, have been referred to in a number of judgments of this Court. What the Court requires is that, in relation to matters of importance, the reasoning process of the Tribunal emerge sufficiently to show how it was that the finding or decision in question was arrived at. Accordingly, the question is whether there is a sufficient indication of the Tribunal's reasons for omitting depreciation from its assessment of the projected expenditure of the applicant in future years.
The key to the Tribunal's approach is its reference to cash expenditure in paras. 3.7 and 3.9 earlier quoted together with its statement in sub-para. 3.5k, when read with sub-para. 3.5j (both also earlier quoted), that commercial viability depends on the availability of the funds necessary for the acquisition and replacement of equipment and other items. One might wish that the Tribunal's reasoning process had emerged with a greater degree of clarity, but I think that the better view is that it appears sufficiently so that the Tribunal has not failed to comply with the relevant paragraphs of subsec. 25B(1) of the Act to which I have referred.
In the result, the second submission made by counsel for the applicant is rejected. There were other submissions relied upon by counsel for Gosford Communications in opposition to the submission, but, in the circumstances, it is unnecessary to deal with these.
It remains to consider the applicant's submission based on para. 83(6)(d). The essence of the submission was that, either the Tribunal had not turned its attention to this paragraph at all, or that such consideration of the matters referred to in it as was given to them treated the paragraph as connected with the matters of commercial viability and public interest.
Paragraph 83(6)(d) was said to differ from para. 83(6)(c) in that it did not in terms require any consideration of the public interest. I agree that there is no mention of public interest in para. (d). But I find difficulty in accepting the view that it would be wrong for the Tribunal to have regard to any public interest factor in applying the paragraph. This appears to have been the view of Forster J. in T.V.W. Enterprises Limited v. Australian Broadcasting Tribunal (1985) 61 ALR 79 where his Honour said (pp 93-4):-

"Although as I have said s. 83(6)(d) lays down no criteria as to the reasons which may lead the Tribunal to refuse to grant a licence and although the matters set out in s. 83(6)(c) are qualified by the phrase 'in the public interest' the Tribunal is obliged to act in the public interest (Re Australian Broadcasting Tribunal; Ex parte 2HD Pty. Ltd.

(1979) 144 CLR 45). This being so the criteria implicit in the section must include, if not be governed by, the public interest."

What Forster J. said in that case was followed by Muirhead J. in T.V.W. Enterprises Limited v. Australian Broadcasting Tribunal (1986) 64 ALR 279 at p 287.

I was invited by counsel for the applicant to refuse to follow the views of Forster and Muirhead JJ. I have given the matter some consideration and have taken especially into account the contrast between the two paragraphs, one referring expressly to public interest and the other not. I see the force of this point, but I think the better view, bearing in mind the nature and purpose of the Tribunal's functions, is that the conclusion reached by Forster J. is, with respect, correct. Certainly I have not sufficient doubt about the correctness of it to express a contrary view to those expressed by Forster and Muirhead JJ.
Once one takes the view, as I have, that public interest considerations do play a part in relation to the paragraph, the submission made by the applicant that the Tribunal gave the matter no consideration at all must fail. This is because some of the words of the paragraph are in fact mentioned in para. 3.33 of the Tribunal's report which I have earlier quoted. I do not repeat what was there said. But, in summary, the Tribunal concluded that the commercial viability of the applicant would not be adversely affected by the introduction of a competitive service. The last sentence of the paragraph said, "The Tribunal finds therefore that a licence of the kind contemplated in the Minister's notice ... should be granted in the public interest." (The emphasis is mine). The words, "a licence of the kind contemplated in the Minister's notice", plainly come from the paragraph and show that the Tribunal was well aware that it had to consider it. For reasons earlier given, its reference to the public interest at the end of the paragraph was a reference it was entitled to make.
The remaining submission made by counsel for the applicant was that the final sentence of the paragraph amounted to a non sequitur and showed that the Tribunal had intermingled the questions which were raised for its consideration under para. (d) with those specified in para. (c). The submission is based on the use of the word "therefore" in the sentence. One can understand the submission, but I think that to give effect to it would involve the adoption of a pedantic approach which this Court has always discouraged.
For the reasons given above I have reached the conclusion that the third submission relied upon by the applicant should be rejected.
It follows that the first submission relied upon by counsel for the applicant is upheld. The remaining submissions have failed. It will be ordered that the decision of the Tribunal dated 10 August 1988 be set aside and the matter referred back to the Tribunal for further consideration. Gosford Communications is to pay the applicant's costs of the application. There will be no order as to the costs of the Tribunal. There will be liberty to apply.

[1989] FCA 227

16 MAY 1989