Attorney-General v Waikato Regional Airport Ltd

IN THE COURT OF APPEAL OF NEW ZEALAND

CA 51/01

BETWEEN	THE ATTORNEY-GENERAL ON BEHALF OF THE DIRECTOR-GENERAL OF AGRICULTURE AND FORESTRY
Appellant

AND	WAIKATO REGIONAL AIRPORT LIMITED
First Respondent

AND	SOUTH PACIFIC AIR CHARTERS LIMITED
Second Respondent

AND	PALMERSTON NORTH AIRPORT LIMITED
Third Respondent

Hearing:	13 & 14 November 2001
Coram:	Richardson P Gault J Tipping J McGrath J Anderson J
Appearances:	H S Hancock and G A Stanish for Appellant C S Chapman, D S Gooneratne and M J Bunting for Respondents
Judgment:	27 March 2002

JUDGMENT OF THE COURT DELIVERED BY ANDERSON J

Table of Contents

PARAGRAPH NUMBER

Nature of the appeals [1]

The Biosecurity Act 1993 [3]

International flights from regional airports [13]

The history of charging [19]

The judgment under appeal [44]

Synopsis of appellant’s argument on appeal [68]

Synopsis of respondents’ arguments [84]

Reasons for judgment [85]

     Section 135 [86]

     The first decision [98]

     The second decision [108]

            Retrospectivity [108]

            Irrelevant considerations and factual
                   error [110]

            Consultation [131]

     Restitution [133]

     Discretionary considerations [136]

Result [142]

Nature of the appeals

These appeals are concerned with the validity of charges to the respondents made for border biosecurity services supplied by the Director-General of Agriculture and Forestry (The Director-General) in respect of international flights arriving at Hamilton, Palmerston North and Dunedin airports. After paying for about three years the respondents refused to pay further. They brought proceedings in the High Court for judicial review of the charges for alleged invalidity and for restitution of monies already paid. The appellant counterclaimed for unpaid charges. In a lengthy reserved decision Wild J upheld the claims of invalidity and found the appellant liable to make partial restitution. The counterclaims were dismissed. Eventually judgment in favour of the respondents included declarations of invalidity, quashing orders and sums amounting to $1,299,434, together with costs.
The appellant now appeals against the judgment for the respondents on the claims and the judgment against the appellant on the counterclaims. The respondents cross-appeal against the refusal to grant full restitution of the sums paid.

The Biosecurity Act 1993

Services for biosecurity control at borders and provisions for cost recovery are found in the Biosecurity Act 1993. The Act is not confined to those services provided by the Director-General which were of direct or indirect benefit to the respondents. Its much broader scope is indicated by the Long Title:
An Act to restate and reform the law relating to the exclusion, eradication, and effective management of pests and unwanted organisms.
The Act indicates wide concern for the management of biosecurity risks and dangers in New Zealand. Although the interception and exclusion of risks at the border is of critical importance to national biosecurity, so also are the eradication and management of pests and unwanted organisms. These already exist and undoubtedly will continue to enter New Zealand and require domestic management. The administration of the Act is vastly more extensive than the provision of border services for flights entering New Zealand at the three regional airports in issue. As appears later in this judgment, the nature of the Director-General’s duties and their discharge, the Director-General’s powers and their exercise in terms of s135 of the Act, must be examined in this broad legislative context.
Border control management obviously requires administrative mechanisms for the interception of people and goods arriving from overseas. To this end, s17 makes provision for the mandatory giving of notice of particulars of intended arrival of a craft from outside New Zealand territory. This facilitates the quarantining of craft and inspection for the interception of risks or for appropriate clearances.
Section 17 envisages that except where it becomes impossible or impractical to do so, craft must arrive at a designated port of entry approved as such under the Act. A port of entry may be approved as a place of first arrival under s37, or as a port approved under s37A for the arrival of craft of a particular kind or description or craft arriving for the purpose of that craft. As appears by s37 and s37A, the latter contemplates approval on a craft by craft basis whereas the former provides for approval of a place on a continuing basis, albeit amenable to review in terms of s37B. (The present sections are, for present purposes, materially similar to a former s37 which was repealed in November 1997 by 1997 No 89).
s37     Approval of ports as places of first arrival
(1)     The Director-General may, by written notice to the operator of a port, approve a port as a place of first arrival for all craft or craft of specified kinds or descriptions if satisfied that there are available, and capable of operating to approved standards, all arrangements, facilities (other than office and parking facilities), and systems that the Director-General for the time being reasonably requires, in relation to that port, for the purposes of this Part.
(2)     An approval given under subsection (1) may limit the arrival of craft to arrivals for the purposes specified in the approval.
(3)     The Director-General must, when considering the arrangements, facilities, and systems available at a port in accordance with subsection (1), have regard to—
(a)     The alternative arrangements, facilities, and systems that are or could be made available; and
(b)   The cost to the port operator of each alternative arrangement, facility, and system; and
(c)   The extent to which each alternative arrangement, facility, and system would assist the Director-General in managing the risks associated with the importation of risk goods.
(4) All arrangements, facilities (other than office or parking facilities), and systems required in accordance with subsection (1) are available for use by the Crown at no expense to the Crown.
(5)    The Director-General must,—
(a)   Within 28 days after approving a port in accordance with subsection (1), publish in the Gazette a notice specifying the name of the port, the day on which it was so approved, any limitation on the kind or description of craft for which the port was approved, any limitation on arrivals to specified purposes, and a place where the notice of approval may be inspected; and
(b)     At all reasonable times make the written notice available for inspection at the place specified in the Gazette notice.
(6)     The Director-General must be satisfied of the matters referred to in subsection (1), whether or not all of the arrangements, facilities, and systems are under the control of the operator of the port concerned.
(7)    Before taking any action under this section, the Director-General must consult in accordance with section 37D.
(8) Where approval is declined under this section, the Director-General must give reasons for his or her decision.
(9)    Where a decision under this section is made by a person acting under the delegated authority of the Director-General, the port operator is entitled to have the decision reviewed by the Director-General.
37A     Approval of arrival of craft at port not approved as place of first arrival
(1)     The Director-General may approve the arrival of a craft at a port that is not approved under section 37 as a place of first arrival for any craft, for craft of the kind or description of that craft, or for craft arriving for the purpose of that craft, if—
(a)     A person has requested approval for that craft to arrive in New Zealand at that port; and
(b)     The Director-General is satisfied that the risks associated with the importation of risk goods can be managed by imposing conditions on the arrival of the craft at that port.
(2)     The approval of the Director-General may be given subject to those conditions that the Director-General considers will manage the risks associated with the importation of risk goods.
(3)Before taking action under this section, the Director-General must consult in accordance with section 37D.
37B     Suspension of approval
(1)     If the Director-General is no longer satisfied that the provisions of section 37(1) are being met for a port, the Director-General may,—
(a)   By written notice to its operator, suspend the port's approval under section 37(1) for a specified period or until a specified action is taken; or
(b) By written notice in the Gazette, revoke the port's approval under section 37(1); or
(c)     By written notice in the Gazette and written notice to the port's operator, vary the port's approval under section 37(1) by varying the kind or description of craft for which the port is approved as a place of first arrival, or by varying the purposes of arrival for which the port is approved as a place of first arrival.
(2)     Before taking action under this section, the Director-General must consult in accordance with section 37D.
(3)     In exercising a power under this section, the Director-General must observe the rules of natural justice.
(4)     Where a decision under this section is made by a person acting under the delegated authority of the Director-General, the port operator is entitled to have the decision reviewed by the Director-General.
Transitional approval of a number of ports including five airports was accorded by s184 and the Eighth Schedule of the Act. The airports were Auckland, Wellington and Christchurch International Airports and the RNZAF bases at Whenuapai and Ohakea. Approvals were subsequently given in respect of a number of regional airports including Hamilton, Palmerston North and Dunedin.
At all material times the Director-General provided routine border biosecurity services at the five original airports without charging for them although charges were made on occasions for non-routine services such as those provided out of regular hours.
The Director-General’s duties and powers in respect of cost recovery are found in s135. That section, which raises difficult issues of interpretation as discussed later in this judgment, provides as follows:
135     Options for cost recovery
(1) The Director-General, every other chief executive, and every management agency, (hereafter in this section and in section 136 of this Act referred to as a recovering authority) shall take all reasonable steps to ensure that so much of the costs of administering this Act, including costs incurred as the management agency of a pest management strategy, as are not provided for by money appropriated by Parliament for the purpose are recovered in accordance with the principles of equity and efficiency in accordance with this section and the regulations.
(2)     In determining appropriate mechanisms for the recovery of costs of a particular function or service, a recovering authority shall ensure that there is recovered any amount by which—
(a)     The sum of—
(i)     The costs of the function in the current year; and
(ii) Any shortfall in the recovery of the costs in the preceding year; exceeds
(b)   Any over-recovery of costs in respect of the preceding year.
(3)     A recovering authority may recover costs of administering this Act and performing the functions, powers, and duties provided for in this Act by such methods as he or she or it believes on reasonable grounds to be the most suitable and equitable in the circumstances, including any one or more of the following methods:
(a)     Fixed charges:
(b)     Charges fixed on an hourly or other unit basis:
(c)     Estimated charges paid before the provision of the service or performance of the function followed by reconciliation and an appropriate payment or refund after provision of the service or performance of the function:
(d)     Actual and reasonable charges:
(e) Refundable or non-refundable deposits paid before provision of the service or performance of the function:
(f)     Charges imposed on users of services or third parties:
(g)    In the case only of the Director-General or some other chief executive, liens on property in the possession of the Crown.
Questions of cost recovery have a particular significance in respect of border biosecurity because, in our view, the Director-General is obliged reasonably to provide for achieving the purpose of Part III stated as:
…the effective management of risks associated with the importation of risk goods.
That obligation of the Director-General is to be inferred from such purpose and from the scheme of Part III, which includes the designation of presumptive places of first arrival and the criteria for their approval as such; the obligations on persons in charge of craft; the powers of inspectors; the obligations of persons in respect of disembarkation to biosecurity areas; and the sanctions for compliance with obligations contained in s154. Nor, having approved a place of first arrival can the Director-General evade the provisions for suspension of approval, stipulated by s347, by the expedient of withholding services which could reasonably be provided.
The Director-General cannot choose to avoid the costs of a service he could reasonably provide. Because the duty reasonably to provide services necessarily restricts choices in relation to costs incurred in the administration of the Act, there must be a related significance in respect of statutory options for cost recovery.

International flights from regional airports

The events with which this proceeding is concerned occurred during the tenure of Dr Russell Ballard as Director-General (1989 to February 1996), Dr Peter O’Hara as Acting Director General (February to August 1996) and Dr Bruce Ross as Director-General (August 1996-).
The airport at Hamilton, operated by Waikato Regional Airport Ltd (“WRAL”) was designated a place of first arrival on 24 July 1994. In August 1994 a private company, Kiwi Travel International Airlines Ltd (“Kiwi Travel”) began charter flights, initially a few each month, between Hamilton and Australia. Border biosecurity was provided by quarantine officers driven down from Auckland as the occasion required. No charges were made for these services.
About mid 1995 Kiwi Travel applied for an international air service licence to the Minister of Transport who is the sole licensing authority under the International Air Services Licensing Act 1947. Such a licence was necessary for the operation of scheduled services, which Kiwi Travel intended to operate between Hamilton and Brisbane three times a week, Hamilton and Sydney twice a week, and Dunedin and Brisbane once a week. The Minister granted a licence on 1 August 1995, subject to a condition which Kiwi Travel accepted that it:
meet any additional border agency costs associated with the operation of services and not met by the airport companies, at least on an interim basis pending a government decision on the funding of border functions at airports other than the current international gateways.
Pursuant to the licence Kiwi Travel began trans-Tasman scheduled flights from and to Hamilton and Dunedin airports. It was soon met with a competitor, the respondent South Pacific Air Charters Ltd trading as “Freedom Air”.
In December 1995 Freedom Air began trans-Tasman charter flights including to and from Hamilton and Dunedin. In April 1996 it extended its operations to Palmerston North Airport, operated by the Third Respondent (PNAL) and discontinued the use of Auckland, Wellington and Christchurch. The number and frequency of its charter flights indicated a necessity for an international air service licence which it sought and on 6 August 1996 was granted. Its licence also contained a condition as to meeting additional border agency costs in the same terms as those accepted by Kiwi Travel.
Shortly afterwards Kiwi Travel failed. It ceased operating in September 1996. Freedom Air continues in operation.

The history of charging

On 28 June 1995 a meeting was convened at the Ministry of Transport to discuss the implications for relevant border agencies of Kiwi Travel’s intended use of Hamilton and Dunedin airports. It was attended by representatives of many agencies concerned with border services, such as Customs, Police, and of course the Ministry of Agriculture and Forestry (MAF). The minutes of that meeting, which mentioned that MAF was not charging for current non-scheduled operation, came to the notice of Mr J Bongiovanni who held the position of National Adviser, Border Inspector, of MAF’s Regulatory Authority (MAFRA).
The function of MAFRA was to set the policies and provide standards in relation to Quarantine Services. MAFRA paid the departmental organisation known as MAF Quality Management (“MQM”) to provide such services out of funds obtained from the Crown. At all relevant times MAFRA paid for services at the three metropolitan airports and the two military airports by way of a formal contract with MQM. The effect of such arrangements was to give MAFRA a large measure of fiscal control, subject to internal negotiation, over the provision of quarantine services.
On 4 July 1995 Mr Bongiovanni sent an e-mail to Mr Neil Hyde, General Manager MAF Quarantine Service (MAFQS) in which he referred to the minutes and stated that he had understood MAF were charging. He had been advising people that this was the case and stated that operations were being charged for in the South Island. He indicated concern at the prospect of allegations of inconsistency being levelled at MAF.
Mr Hyde’s response was to work with Mr Small, his deputy, to formulate cost recovery charges to meet quarantine service costs at Hamilton Airport. Mr Small has deposed that he and Mr Hyde did this against the background of explicit advice from MAF’s regulatory authority that the quarantine service was not government funded for border control services at the new international airports; that until they were funded or other funding decisions were made, such as full cost recovery at all airports, MAF QS must cover its costs as it went along and could not let them accumulate in expectation of some cabinet funding decision. He further deposed that he and Mr Hyde decided to base the charges on the Biosecurity (Costs) Regulations 1993 which contained user pays schedules of charges for a range of imported commodities but does not provide authority to charge for passenger clearance services. Those regulations envisaged cargo rather than passenger services. Nevertheless the regulations seemed to provide an appropriate analogy and the respondents do not argue that the costs eventually charged, if valid, would be excessive or unsuitable. Their challenge is to validity, not quantum or suitability.
On 20 July 1995 Mr Small wrote to Mr B O’Connor, the Chief Executive Officer of WRAL in the following terms:
Dear Sir,
As you will be aware, Government agencies at the New Zealand border are concerned at the proliferation of new international airports which includes Hamilton.
These extra facilities are stretching resources and funding while central Government has a policy of decreasing their budget monetary allocations to the department. The border agencies concerned are approaching the cabinet with a joint paper requesting an increased resource allocation to cover operations such as Kiwi International Airlines.
A development, while the above discussions were taking place, was the Ministry Quarantine Service was informed by the Ministry Regulatory Authority that the Government allocations, through the Authority, only covered the three existing international airports plus RNZAF Whenuapai and Ohakea. This being pursuant to the eighth schedule of the Biosecurity Act 1993. In effect this is interpreted as meaning approved international airports since 1993 are required to fund MAF border operations, either from their revenue or from the international airlines the airport services.
To date, Ministry staff have attended 24 intentional arrivals (excluding medical flights) all in out of normal working hours, at a total outlay of $8601.60, GST inclusive.
This figure is based on 4 staff at $74.60 per staff member (Gazetted overtime rate under the Biosecurity (Cost) Regulations 1993, 2nd schedule) plus 4 staff x 30km at $0.50/km. Total costs per flight is $358.40, GST inclusive.
As you will appreciate, the above charges were not envisaged at the time of the Ministry approval of the international flights. It is requested that urgent consideration be given to payment of these charges. The charges per flight will continue pending the cabinet decision.
Yours assistance in this matter would be appreciated.
Yours faithfully

Mr O’Connor replied on 26 July 1995 in terms which included the following:
Obviously the Airport Company will have to meet these costs in future if that is how the rules operate. However, I would ask that you consider the following.
1. That we have an early meeting to discuss the charges that will apply when the proposed 5 days per week operation begin from the 23rd August next. Presumably the charges during normal week day working hours will be different than those applied during weekends at overtime rates.
2. Whilst we accept that there will be ongoing charges in future, subject to whatever Cabinet decisions may be made, we have some difficulty with retrospective charges of which we were unaware of and for which we have made no budgetary provision. Compounding this position is the fact that our annual accounts are now signed off and in audit. As you note in your letter, the charges were not envisaged at the time of approval. If they had been we may well have made different commercial decisions regarding our charges to the charterer or indeed not allowed the venture to proceed. Obviously given appropriate prior notice the Airport Company will budget to fund charges for services it incurs, but the retrospective charges do present us with a significant problem.
I ask that you give the above points consideration, and suggest that we met to discuss the matters further in the interest of continuing the very co-operative relationship we have enjoyed to date.
Thereafter MAF began invoicing WRAL for services, as it later did in respect of Palmerston North Airport; but at Dunedin, by arrangement, the airlines were invoiced directly by MAF.
Mr O’Connor again wrote to MAF on 8 December 1995 in response to intended increases in charges from $358 per flight to $1,119, by reason of a requirement in the MQM Quarantine Service Collective Employment Agreement for a three hour minimum after hours call-out to be paid. Mr O’Connor expressed concern about the increase and its impact on viability, having noted:
In my letter of reply dated 26 July 1995 I point out to Mr Small that had we known that MAF cost recovery would be an issue, we may well have made ‘different commercial decisions’. We did however accept, albeit with some reluctance, a level of charges that we felt were sustainable, pending the outcome of a cabinet decision referred to in Mr Small’s letter.
Mr O’Connor concluded:
I would appreciate your re consideration [sic] of the question of MAF cost recovery both in the terms of this response and also in the terms of Fergus Small’s letter of 20 July 1995, particularly in regard to the ‘pending cabinet decision’. You should note that we took Fergus’ letter to be a guarantee of the level of ongoing charges and consequently planned accordingly, anticipating relief with the outcome of the Cabinet consideration.
WRAL complained to the Minister of Agriculture about the increased fees and in January 1996 the Minister instructed Mr Bongiovanni to ensure that cost recovery charging was being properly made. Up to that stage Mr Bongiovanni had been of the opinion that a correct basis for charging cost recovery existed in s37(1) of the Act.
Mr Bongiovanni sought the opinion of the Crown Law Office which advised him on 12 February 1996 that MAF was not entitled to charge for inspection services on the basis of s37(1) and that further analysis was required to decide whether cost recovery was possible pursuant to s135. MAF’s actions were thought unlikely to be justified under that section since there were no authorising regulations. Further, the differentiation between the principal and regional airports was problematic because of the requirement for accordance with the principles of equity.
Further advice was sought and received on 23 February and 28 March, the last opinion indicating that, whilst s37(1) would not provide a legal justification for costs, s135 would, but that over time the Ministry should in the interests of equity seek to ensure that like users of consumer services such as inspection fees should be treated alike.
On 19 April a meeting of MAF officers devised a set of principles. Following this, Mr Hyde wrote to WRAL, Freedom and Palmerston North Airport Ltd. The letters were in identical terms save for the appropriate references to the identity of the recipient. The following letter to WRAL is typical.
Dear Mr O’Connor
AGREEMENT TO MEET THE COST OF THE CLEARANCE OF OVERSEAS AIRCRAFT AND PASSENGERS AT HAMILTON INTERNATIONAL AIRPOT
The MAF Quarantine Service of the Ministry of Agriculture will provide quarantine clearance services at Hamilton International Airport for aircraft arriving from overseas or a co-terminal flight from a domestic airport. The number of officers to service a flight will be determined by the MAF Quarantine Service depending of [sic] the circumstances and specifications.
Since the costs of this service are not provided for by money appropriated by Parliament for the purpose, these costs will be recovered in accordance with section 135 of the Biosecurity Act 1993. The hourly charge per officer for these services is as already used in the Biosecurity (Costs) Regulations 1993, namely:
In hours $57.40 (incl. GST)
Out of hours $74.60 (incl. GST)
In accordance with section 136 (2) (a) of the Biosecurity Act 1993 where all or part of the charge in [sic] unpaid after 20 working days from the date of invoice a 10% penalty may be charged. The Ministry reserves the right to withdraw all or part of the services should the charges not be paid in full.
Would you please sign and return to me an unaltered copy of this document.
Yours sincerely
Neil H Hyde
National Manager
MAF QUARANTINE SERVICE
I agree to meet the aircraft and passenger clearance charges invoiced by the MAF Quarantine Service as specified above. I have noted the conditions applying to late or non payment of charges.
__________________________
Mr Barry O’Connor
Manager
WAIKATO REGIONAL AIRPORT LTD
Mr O’Connor replied on 11 June in a letter which expressed a number of concerns, including the different approaches taken by MAF to principal and regional airports and what he categorised as confusing and misleading signals given by MAF to WRAL. The letter concluded:
Subject to the above points and comments and without prejudice to the ability of the Airport Company to make further representations at whatever levels are appropriate, Waikato Regional Airport Limited agrees to meet the charges as proposed.
Mr Goodman, the Chief Executive Officer of Palmerston North Airport signed the form of agreement but expressed the qualification:
Palmerston North Airport Ltd reserves the right to seek a review of these charges at a later date.
Freedom Air returned the form of agreement signed and unaltered.
Following the responses to the form of agreement, which Mr Bongiovanni thought resolved the dispute over costs, MAF continued to invoice for services on the basis of the agreement and for about the next two years the recipients continued to pay. But WRAL, in particular, was continuously vexed and frequently complaining. Mr O’Connor instructed solicitors, engaged MAF in correspondence, and pursued redress at a political level.
Eventually, in August 1997, WRAL’s then solicitors wrote advising the Director-General that they had instructions to issue proceedings for judicial review. Before they issued WRAL instructed new solicitors who, on 10 March 1998, wrote to Mr L Fergusson, the Assistant Director-General since 1994. The solicitor’s letter referred to s135 of the Act and pointedly asked:
…whether, and, if so, how, the Director-General applied the principles of equity and efficiency in forming the view that our client should meet the full costs of border control services at Hamilton Airport in each of the three financial years, and copies of any documents relating to that decision-making process.
On 15 December 1997, Cabinet had accepted proposals in a Cabinet Committee Paper for the implementation of a full cost recovery regime for all passenger and aircraft and seacraft clearance services at the national border, to take effect from 1 January 1999 and for current funding arrangements, which included, funding for the three main international airports and full cost recovery at regional airports, to continue until the new regime was implemented. The paper concludes that pending the introduction of full cost recovery as decided by the government, costs should be recovered only from new airports or airlines.
On 9 April Mr Fergusson replied to WRAL’s solicitors in terms declining to provide a written statement of the reasons for MAF’s decision to charge for border control services on the grounds that the request was not made within a reasonable time of the making of the decision and therefore was not authorised by s23 of the Official Information Act 1982. He then submitted a policy discussion paper, dated 13 May 1998 to the Director-General.
Although the discussion paper is lengthy it is necessary to set it out in full because the then Director-General, Professor Bruce Ross, has signed off the paper as “agreed” and the basis for the decision thereby indicated lies within the terms of the document. It reads as follows:

PASSENGER CLEARANCE RECOVERY: NEW INTERNATIONAL AIRPORTS
Purpose
1.The purpose of this paper is to enable you to reconsider current arrangements for the recovery of the costs of providing passenger clearance functions at new International Airports (ie airports other than Auckland, Wellington and Christchurch).

Background
2.Prior to 1994, Government recognised the airports at Auckland, Wellington and Christchurch (the existing airports) as ports of first arrival for commercial flights and provided immigration, customs and quarantine services at the taxpayers expense.
3.In 1994/95, as the result of the adoption of the “open skies” policy, the Government was faced with proposals for the establishment of international flights from a number of regional airports (the new airports).
4.To this point, MAF’s costs of providing passenger clearance at the new airports have been recovered from the airports or airlines (as the case may be). No additional appropriations were provided to cover costs at these airports and Government decided that a cost recovery regime should apply until the issue of passenger clearance costs generally were resolved by Cabinet. (See attached letter from the Minister of Transport to the Minister of Agriculture).
5.Section 135 of the Biosecurity Act provides that:
(1) The Director-General,…shall take all reasonable steps to ensure that so much of the costs of administering this Act…as are not provided for by money appropriated by Parliament for the purpose are recovered in accordance with the principles of equity and efficiency in accordance with this section and the regulations.
(Emphasis added)

Comment
6.In the absence of a Crown appropriation, you are required to recover the costs of passenger clearance in accordance with the principles of equity and efficiency, there being no applicable regulations.
7.There are a [sic] two basic options you could pursue in respect of cost recovery:
Option A
a.You could respread the Crown funding and the incidence of cost recovery over all airports at which international flights arrive; or
Option B
b.You could continue to recover the unappropriated costs from the new airports.

Principles of Equity and Efficiency
8.The principles of equity and efficiency are not defined in the Act. They must therefore be given their commonly accepted definition.
9.Equity relates to fairness, in that like cases and circumstances should be treated in like manner. It also involves a consideration of the beneficiaries of a service and those who generate the risks. Efficiency considerations include the overall costs of the service relative to the benefits and ensuring least-cost production. A further efficiency factor relates to promotion of the efficient use of resources.

Application of principles to options
10. Equity
Option A might at first glance appear the most equitable in that all airports would thereby be treated on the same basis. Turned around, the argument would be that it is inequitable to impose costs on some operations while subsidising the provision of those services to their competitors.
However, from another perspective, the existing airports had been established and set up on the basis of no cost recovery. They could of course have no guarantee that such a situation would continue indefinitely. (Government’s intention was that the provision of funding for passenger clearance be reviewed. That review has resulted in a decision that such costs should be 100% recovered). The existing airports would consider it inequitable that they be required to meet part of the costs of their competitors entry into the market.
Costs should be borne by those who create the risk – international travel benefits specific sectors of the domestic economy, and it would be inequitable for all New Zealanders to pay to manage the negative externality that they generate. Rather, the economic costs of managing the biosecurity risk is [sic] appropriately borne by those who create the risk. As is noted below in the discussion on efficiency the proliferation of new airports both increased the biosecurity risk and imposed additional costs to manage that risk.
There has been a shift in philosophy from Crown funded to individual responsibility and user pays. This approach underpins the cost-recovery policy for border clearance services at regional international airports.
In general terms, New Zealanders benefit from having a country free from serious pests and diseases. However, in terms of least cost supply of this outcome, New Zealanders have choices. One option is to close the borders entirely which would achieve the desired benefit at least direct cost to the taxpayer. The whole economy would of course be affected by such a “fortress New Zealand” policy. In particular those who would suffer from such action include international travellers and those sectors of the domestic economy that benefit from tourism.
All international airports are responsible for some mix of cost-recovery services including standard inspection fees, overtime rates, and/or provision of premises. The new regional airport companies were able to factor the direct costs into operational and financial planning on establishment whereas established airports could not.
It should be noted that the airport companies recover these costs from the airlines, which affects their relative attractiveness as service providers. It should also be noted, that at this point only Waikato is challenging the current arrangements.

11. Efficiency
It is inherently more efficient to recover costs from a smaller rather than a larger number of players – however that is not a sufficient justification for a decision to support option B. The recovery of part of the costs of the provision of the services at all airports would (if of a sufficient amount – in this case the amount would be insufficient) encourage efficiency in the operation of the airports and airlines (as they relate to the provision of border services) and in the delivery of the services themselves.
The transaction costs associated with re-spreading would be very large relative to the amount of money recovered by the Government, unless the growth in regional airports increased in a totally unexpected way.
The facilities, staff and systems established at Auckland, Wellington and Christchurch have been established for a number of years and the regular flow of aircraft and passengers enable effective and cost efficient services to be maintained on an on-going basis. The services can be tailored to the risks presented by the passengers according to their point of origin.
In contrast, the new airports present a discontinuous flow of passengers and are more difficult to service as a consequence. Thus the Government and MAF were presented with greater risk and less efficient service requirements. It might well have been appropriate to respond that quarantine services would not be extended beyond the established locations. It should be noted in this context that surveillance costs, even in the new cost recovery regime are still taxpayer funded although the risk is exacerbated by every new point of entry. Such a restriction would not be consistent with the open skies policy but it does not follow that the Crown should accept reduced efficiency in the provision of essential biosecurity services.
It would be inefficient for New Zealand to pay for duplication of border clearance services at regional ports when these are currently provided to an adequate level at the main ports. If the new regional international ports bear these costs, then the direct costs of the inefficiency are borne by those responsible for it.
With port companies bearing a proportion of the costs, there is increased incentive to minimise the ongoing cost of supply of border clearance services with potential replication of “best practice” across other port operations resulting in net economic gains.
The recovery of costs only from those considering new investment in new airport facilities (or those who made such investments in light of the governments decision referred to in paragraph 4 above) will encourage rational decision making as to the need for new airports and as to their ability to compete with existing facilities.
Costs of services will be recovered in line with actual and reasonable costs and therefore, is not a tax.

Conclusion
12.In conclusion, on balance, and given that Government has decided on a full cost recovery regime for the provision of these services, I recommend that you agree to continue the current state of affairs whereby costs are recovered only from the new airports or airlines (as the case may be) pending the introduction of full cost recovery as foreshadowed.

Shortly after receiving a copy of the Director-General’s decision the solicitors for WRAL wrote to complain that the decision had been made in breach of the principles of natural justice because WRAL had not been notified of the proposed decision and the matters proposed to be taken into account and given an opportunity to make submissions thereon. The solicitors also claimed that the Director-General had failed to take into account any submissions made previously by their client and concluded with the view that the previous decision to charge WRAL was invalid wherefore all charges paid since July 1995 should be refunded.
The Director-General replied on 9 June 1998 in the following terms:
Cost Recovery: New International Airports
I write in response to your letter dated 28 May 1998.
The re-consideration of the cost recovery regime in respect of international ports and airports focussed on the principles of equity and efficiency. This is in accordance with section 135 Biosecurity Act. In reconsidering the matter the matters raised in correspondence by Waikato Regional airport authority between 1995 and 3 May 1998 were taken into account.
I am more than happy to listen to any further matters that you should wish to raise concerning the issue. I am prepared to reconsider this issue at the beginning of July. Please have any further input you wish to have to me by 3 July 1998. In the meantime the current decision stands.
In agreeing to take this action I am in no way acknowledging any deficiency in my decision of 13 May 1998 or in respect of the decision to charge in 1995. As a new Director-General it is appropriate for me to look afresh at issues which are causing some disharmony and attempt to have those matters resolved.
WRAL’s response was to stop paying and to issue proceedings for judicial review on 18 June 1998. The related proceedings for restitution were issued on 3 November 1998.

Freedom Air stopped paying in February 1999. PNAL followed suit in April 1999. Proceedings by the various parties were eventually consolidated and heard together.

The judgment under appeal

Reflecting an approach taken by the pleadings and by all counsel at trial the Judge held that there were two successive decisions by MAF to recover costs from one or more of the plaintiffs. He identified them as follows:

(a) A first decision made by MAF officials on or about 26 June 1995 to recover the full costs of border control services from all the plaintiffs;

(b) A second decision made by the Director-General on 13 May 1998 to recover (or continue recovering) full costs from new international airports.

The Judge held that the first decision was not made under, nor in accordance with s135 and was therefore invalid. The invalidity arose for two reasons. The first was that the decision had not been made by the Director-General or under proper delegation from him. It had been made by Mr Alexander and/or his superior Mr Bongiovanni. The Judge accepted that formal delegation was not required by s41 of the State Sector Act 1988 nor by s135 of the Biosecurity Act 1993, but considered that the Director-General needed to be involved in the decision-making, not simply aware that it was taking place. He held there was no evidence that the Director-General required the decision to be made, directed who was to make it or had any input into its making. He did not approve it in writing and had only a general awareness that it was made. The Judge considered it important that the decision should be made by the Director-General or someone acting under proper delegation from him in circumstances where money and therefore financial accountability was involved.
The second main reason for holding the decision invalid is that it was based, at least until MAF received legal advice, on s37(1) and was not made in terms of s135. In consequence the principles of equity and efficiency were not addressed, in fact not even mentioned. The result was that the decision was based on considerations which were wrong or irrelevant such as an incorrect assumption that monies appropriated by Parliament were only for the Auckland, Wellington and Christchurch Airports. That meant that Mr Alexander focused only on recovery in respect of the three regional airports and never addressed whether there should be partial recovery from all international airports. Thereafter equity was never properly addressed.
The Judge held that the second decision was, however, a different proposition as it squarely addressed s135 and its requirements. He took as the considerations influencing the decision the content of the discussion paper by Mr Fergusson which the Director-General had endorsed as “agreed”. There was no affidavit from Director-General Ross nor from Dr O’Hara who had been Acting Director-General between February and August 1996.
Wild J was of the view that the Director-General appears to have treated the second decision as validating MAF’s previous cost recovery but held that to allow it to operate retrospectively would be to condone the lengthy period of unlawful cost recovery that had preceded it. However he was not persuaded by a submission that s135(2) requires the Director-General to reconsider annually whether cost recovery for border control services was necessary, and if so, to what extent, and from whom costs should be recovered. In the Judge’s view the subsection imposed an obligation to recover money, not to have regard to who should pay it and in what proportions. Nor did he uphold a submission on behalf of the respondents to the effect that the Director-General had not applied subs (3). The Director-General had taken into account the methods specifically mentioned in that subsection, using a combination of them to effect cost recovery and then using existing levels of charging for comparable services as a reference point to determine reasonableness.
The Judge saw greater cogency in the respondents’ argument that the Director-General had been influenced by extraneous matters which had been adverted to in Mr Fergusson’s discussion paper. Those matters and the respondents’ essential submissions on them were as follows:
[a]It had the false premise that Government had decided to recover costs at regionals until Cabinet decided upon the issue of costs recovery generally. There was no such Government decision.
[b]Parliament had not tagged its appropriation for the metropolitans, but merely for border control services generally. So Mr Fergusson was wrong to refer to “the absence of a Crown appropriation”, only in relation to the regionals.
[c]It was factually incorrect to say that only metropolitans had been set up on the basis of no cost recovery: WRAL had been established and had operated for 6 months before MAF imposed charges, prospectively and retrospectively.
[d]It treated Government policy to move toward full cost recovery as justification for continuing to recover costs only from regionals in the interim.
[e]In analysing equity in terms of risk: persons increasing biosecurity risk should meet the costs of controlling that increased risk.
The Judge considered there was no evidence of any Government decision to recover costs at regionals only until Cabinet decided upon the issue of cost recovery generally. He considered there to be no evidence of any such decision, whether at Cabinet or Ministerial level and found that none had been made. With respect, that was an error on his part. As mentioned earlier in this judgment there had been a Cabinet decision to this effect on 15 December 1997. We note, however, that although Cabinet policy might be a matter for the Director-General to consider in the much broader context of his statutory duties and powers, Cabinet could not displace the provisions of s135.
Wild J did, however, agree with the second criticism concerning Parliamentary appropriations. Whilst there was no increased appropriation of revenue Crown for the purpose of meeting the additional costs of regional border services, neither was there any appropriation of revenue Crown specifically for the principal airports.
The Judge also accepted the respondents’ criticism that Mr Fergusson was factually incorrect in saying that only the metropolitan airports had been set up on the basis of no cost recovery. In fact, that was WRAL’s position also. He thought that Mr Fergusson was confusing establishment with operating costs when he stated that new regional airport companies were able to factor the direct costs into operational and financial planning on establishment whereas established airports could not.
As to Mr Fergusson’s statement that:
the existing airports would consider it inequitable that they be required to meet part of the costs of their competitors’ entry into the market

the Judge thought this an odd distortion of what Mr Fergusson had identified as Option A.

The Judge also agreed with the respondents’ fourth criticism. First, it was the Director-General’s obligations of equity not the metropolitan airport’s perceptions of it which were relevant. Second, the Government intention was to move towards one hundred per cent cost recovery from all airports and it would make more sense and involve no inequity for the metropolitans to meet some of the costs of services provided to them in the meantime. The Judge considered the Director-General’s reasoning to be erroneous and illogical on those aspects.
As to the proposition that costs should be borne by those who create the risk the Judge accepted that this argued against rather than for continuing cost recovery only from regionals. There was evidence from Director-General Ballard that the major international airports, particularly Auckland and Christchurch, had arrivals from high risk destinations. The respondents’ argument that this suggested that a greater part of the cost of border control services should be recovered from the high risk-creating metropolitans, rather than no costs at all, was accepted by the Judge.
Wild J found that these various matters amounted to irrelevant considerations which had materially affected the Director-General’s decision because they effectively excluded the metropolitans from the Director-General’s consideration. He upheld two further criticisms of a general nature made by the respondents. The first is that the second decision was a rationalisation of or justification for the status quo, rather than a genuine and open minded attempt to make a decision in terms of s135. Further, the decision’s focus on an interim position obscured if not avoided, a decision on the merits.
The Judge then began an examination of the affidavit of Mr P J Farley, a consulting financial and policy analyst called in aid by the Director-General. The evidence expressed opinions upon what a proper application of the principles of equity and efficiency involved. Although accepting, as did counsel, Mr Farley’s qualifications the Judge disagreed with much of the opinion which did not dissuade him “from the view that the second decision is erroneous, illogical and inadequate, and cannot stand”. Overall the Judge concluded that the Director-General had failed to exercise his discretion lawfully in making his first and second decision.
The respondents had further argued that the Director-General had failed to act in accordance with natural justice in making his second decision. The argument was founded on an alleged legitimate expectation of consultation before the second decision was made and a failure to meet that expectation.
The Judge found that the Director-General did have a duty to consult because a legitimate expectation had been created by the extensive interchange between the parties, in terms of correspondence and meetings; WRAL’s understanding that the Director-General’s first decision was an interim one; and an assertion by MAF officials to WRAL that lines of communication would be improved.
Wild J further held that there had not been consultation which sensibly envisaged the Director-General making Mr Fergusson’s discussion paper available to WRAL for comment before a decision was made upon it. WRAL could have made comments in the nature of the criticisms advanced in the course of argument in the proceedings.
The Judge held that the second decision ought to be quashed also on that ground of breach of natural justice. The appropriate remedy in terms of the application for judicial review was a declaration of invalidity and orders quashing the decisions.
The Judge held that the contractual arrangements made by the Director-General were not ultra vires but that did not render the charges valid. This led to the issue whether the respondents could recover monies paid.
There were two bases upon which restitution might be given. The first was the principle elucidated in Woolwich Building Society v Inland Revenue Commissioners [1993] AC 70 (HL). The second was the doctrine of colore officii.
Ultimately the Judge found that Woolwich was not apt because its principle contemplated an absence of consideration whereas in the present case consideration in the form of border services had been provided.
More appropriate in the Judge’s view was the doctrine of colore officii which the Judge noted had been neatly summarised by Skerrett CJ in Julian v Mayor of Auckland [1927] NZLR 453 at 458 in these terms:
Where the plaintiff is entitled to have some service performed or act done upon payment of a fee, and that service has been performed or the act done, accompanied by the demand of an illegal or illegally excessive fee. In such circumstances the payment is held not to be voluntary, and the money recoverable as having been in substance exacted from the defendant colore officii.
The Judge was of the view, however, that it would be unjust not to allow MAF to obtain a reasonable portion of payments. Section 135 was enacted specifically to enable MAF to recover any shortfall in Crown funding appropriated for the enforcement of the Biosecurity Act. There were also public policy considerations in allowing restitution from a “user pays” organisation. He felt that careful attention was also required to the distinction between cases where there was no lawful authority at all for a demand and cases where such authority did exist but was not used correctly. He concluded that he ought “require MAF to refund…as payments extracted colore officii the amounts…paid to MAF in so far as they were excessive”.
Various defences advanced on behalf of the Director-General having been rejected, the outcome was, as already noted, a combination of declarations of invalidity, quashing of the two decisions, partial restitution and interest, and costs.

Synopsis of appellant’s arguments on appeal

Counsel for the appellant submitted that the Judge was wrong to find that the first decision was invalid because it had not been made by the Director-General. He pointed to Mr Bongiovanni’s evidence on affidavit that:
During the period I was in regular contact with Dr Russ Ballard, Director-General until the end of February 1996, his interim successor the Acting Director-General Dr Peter O’Hara and then the new Director-General Professor Bruce Ross who took up the position in August 1996. I was also in contact with the Minister of Agriculture who was kept informed on cost recovery issues.
He could also point to the following portions of Dr Ballard’s affidavit, appearing in paragraphs [18] and [25].
[18] I was aware from the outset and approved of cost recovery being made at Hamilton which was, as already indicated, consistent with government policy and economic restraints. It was also my responsibility under the annual purchase agreement which I entered into with the Minister and under the Biosecurity Act to ensure costs were recovered where appropriate.
[25] However I definitely considered and approved the issue of cost recovery at Hamilton on a continuing basis at various times when it was being implemented. I was regularly briefed by my staff on the subject from the beginning of these additional Transtasman services and approved the action taken at each stage in terms of cost recovery. I was also satisfied that MAF’s appropriations in the years concerned did not contain any funding for provision of services at the regional airports and could not be stretched to do so without compromising New Zealand’s biosecurity. Likewise I was satisfied that the charging was made in accordance with the principles of equity and efficiency as already discussed.
Counsel submitted that realistically, in a busy Department, subordinate officers are trusted by the CEO to keep him or her informed through the various stages of a decision-making process. This gives the CEO the opportunity to intervene if necessary but preserves the CEO’s accountability for the decisions that are eventually taken. This seems to be a submission that the Director-General’s knowledge and approval of what his subordinates were doing amounts to a decision by him.
As to the finding that there was an erroneous view that monies appropriated by Parliament were for Auckland, Wellington and Christchurch, counsel submitted that it would be unrealistic to expect in matters of public finance that Departmental officers would necessarily understand all the constitutional subtleties of the appropriations process. Counsel also criticised an observation made by the Judge as to how the Government’s action in not increasing appropriations might be interpreted, such observation being in response to an opinion expressed by Mr Warren, Chief Accounting Officer of the Treasury, on behalf of the Director-General.
Counsel submitted that the second decision was lawful. In his submission it was apparent from the terms of the Policy Discussion Paper that the Director-General had taken into account the relevant issues including the principles of equity and efficiency. Further evidence, especially that of Mr Warren, established that in policy and economic terms the approach taken by the Director-General was not unreasonable in the administrative law sense and the High Court had erred in substituting its own views on equity and efficiency and on economics and policy for those of the authorised decision-maker.
Concerning the question of consultation, counsel submitted that the Director-General discharged such an obligation both prior to the date the second decision was made and subsequently by offering, on 9 June 1998, to reconsider that decision on receipt of submissions.
If any aspect of the decision-making procedure was at fault, which counsel said was not the case, in his view the remedy granted to the respondents of refunding a substantial part of the charges previously paid and excusing them from payment of unpaid accounts for services requested to that date was an excessive, disproportionate and wrongful exercise of the Court’s power to grant relief. He submitted that the Court had disregarded or placed insufficient weight on the factors, that the respondents were professionally managed commercial companies who had requested services in writing fully knowing that they were required to pay for them. Further, the price charged for the services was reasonable and the respondents had budgeted to recover the charged amounts from the operating revenues and largely did so by on-charging their customers.
Specific aspects of the judgment were criticised by counsel such as the Judge’s regarding MAF’s practice of not recovering costs in respect of the airforce bases as particularly relevant to cost recovery at regional airports. The effect of counsel’s submission is that there was not adequate comparability to justify a finding of relevance.
Concerning the Judge’s finding that successive MAF officials had taken the view that costs should be recovered only from the regionals in the interim, counsel submitted that there was no evidence that the two Directors-General had approached their decisions on the basis that the Government had removed MAF’s discretion on cost recovery at international airports. Counsel says the Judge was wrong also to hold that initially WRAL’s position was that it had been set up on the basis of no cost recovery. The effect of counsel’s submission is if that was WRAL’s assumption it was not one which MAF should have been held to have induced or represented would be the case merely because it had helpfully met the costs of servicing non-scheduled Trans-Tasman flights occurring relatively infrequently between August 1994 and July 1995. On the contrary, in counsel’s submission, WRAL was alert to the possibility that MAF might require cost recovery because its agreement with Kiwi Travel envisaged that possibility.
Continuing his critical dissection of the judgment, counsel took issue with the Judge’s rejection of Mr Fergusson’s statement that only the metropolitan airports had been set up on the basis of no cost recovery. He referred to the longstanding status of those airports and submitted that in terms of the equity and efficiency of a cost recovery regime it may be regarded as inequitable and inefficient that a new entrant with no track record should immediately be placed in the same position as an airport or airline which had shown years or decades of commitment to the Trans-Tasman service.
Counsel submitted that it was relevant to equity that airport companies do or can recover costs from airlines, just as it was relevant that Kiwi Travel and Freedom Air had each undertaken, as a condition of their Air Services Licence that they would meet all relevant costs. As to the argument that the major metropolitan airports represented a greater risk, counsel submitted it was relevant that the three metropolitan airports were New Zealand’s air transport infrastructure and therefore a fundamental part of the country’s social and economic fabric.

Concerning an observation by the Judge that the focus on the interim position obscured if not avoided a decision on the merits, counsel submitted that this was using hindsight to criticise the decisions which, at the time they were made, focused on the facilities the regional airports needed to provide to be acceptable as international airports. Counsel was concerned that the Judge rejected Mr Farley’s evidence notwithstanding that it was unchallenged by cross-examination and was supported by his qualifying experience and expertise.
On the matter of consultation counsel submitted that there was nothing in s135 which required consultation although other sections of the Act did so require. WRAL’s objections had been expressed repeatedly and comprehensively. Although there are public law principles about consultation which might apply to different subject matter such as civil liberties or the requisitioning of property or human rights, such principles might be less apt in cases of disputes about money. The respondents, commercial operations which had previously agreed to fund the activities in question, ought not now be entitled to go back on that arrangement and obtain public funding. In any event, the Director-General’s obligations were sufficiently met by the offer on 9 June 1998 to listen to WRAL and reconsider the issue. WRAL did not take up that offer.
Counsel also submitted that the remedy was excessive and disproportionate. If the decisions were defective they should not be quashed and any remedy should be prospective. Nor is restitution available because the existence of consideration renders the Woolwich principle inapplicable and colore officii does not apply because there was an absence of relevant compulsion. But if any restitutionary remedy should be awarded it should be only partial or else the respondents would be unjustly enriched. Thus the cross appeal should be dismissed. Indications for such a discretionary response would be the unfairness of the respondents recovering from public funds the cost of public services which they had requested and consumed; the respondents’ delay in bringing litigation and the injustice of allowing the respondents to be reimbursed for costs which they had already recovered or had had the opportunity to recover from airlines or passengers.
Counsel’s argument on the Woolwich principle followed the finding, favourable to the appellant, that the principle did not apply because there had been provision of consideration. As to the colore officii cases counsel relied on the opinions expressed in Mason & Another v New South Wales (1959) 102 CLR 108, that payments demanded colore officii are regarded by the law as being made under duress and that exactions colore officii are a form of extortion. Counsel submitted that in this case there was no element of duress or extortion. At the most the respondents could point to what was categorised as a threat by MAF to withdraw its services if the plaintiff did not pay. Counsel submitted that s135 necessarily implies an option to discontinue services from the duty to take all reasonable steps to recover costs. He also submitted that under s136 MAF is empowered by statute to discontinue the supply of services in the event of non-payment. Next, the discontinuance of services in the event of non-payment was made known to the respondents at the outset as a condition of the provision of services. It was not introduced as a threat at a later date. In the case of Freedom, that respondent itself undertook to pay for services in the event that the airport companies did not do so.
Counsel submitted that the respondents should not gain a windfall. For these reasons the appeal should be allowed either entirely or on the alternative limited basis suggested and the cross appeal should be dismissed.

Synopsis of respondents’ arguments

The respondents’ arguments are conveniently summarised in counsel’s written submissions in the terms set out hereunder:
Summary
1.   Once the Director-General (“DG”) has approved an airport as a place of first arrival pursuant to s 37(1) it stands, so far as the Biosecurity Act 1993 is concerned, on precisely the same basis as airports deemed to approved and listed in the eighth schedule of the Act. It is necessarily implicit in the Act that the DG must supply biosecurity services as required at all airports approved as places of first arrival unless or until approval is suspended or revoked pursuant to s 37B.
2.   The DG’s right to make a charge for the provision of such services arises under s 135 or not at all. The DG has no power to make “contracts” for payment of these services beyond what may be charged under s 135. The DG’s reliance on the “contracts” (and other communications) is an attempt to “pull himself up by his own bootstraps” and is misconceived. The “contracts” (and other communications) are irrelevant.
3.   The DG’s decisions to impose cost recovery charges on the respondents were ultra vires because:
(a)There were no costs of administering the Biosecurity Act not provided for by money appropriated by Parliament in accordance with s 4 of the Public Finance Act 1989.
(b)Alternatively to (a), in enacting s 135 Parliament reserved to itself the power to determine the extent of costs to be recovered but has not yet done so.
(c)Section 135 only allows recovery of costs in accordance with the regulations but there is no relevant regulation.
(d)A true construction of the words “equity and efficiency” precludes the differential cost recovery regime that the DG has sought to impose on the respondents.
4.   Alternatively, the DG’s second decision of 13 May 1998 was
(a)Invalid because the DG gave material weight to irrelevant considerations and did not take into account material relevant considerations.
(b)Invalid for failure to observe natural justice and
(c)Unable retrospectively to legitimise charges imposed before that date.
5.   Further or alternatively the DG’s ‘decision’ of 26 June 1995 was:
(a)Ultra vires because it was not made by the DG;
(b)Invalid because the decision makers made two fundamental errors of law; and
(c)Invalid because the decision makers gave material weight to irrelevant considerations and did not take into account material relevant considerations.
6.   For one or more of the foregoing reasons the DG has not now and never has had any legal basis for recovery of border control services from the respondents. In the absence of such a right the DG’s counterclaim must fail.
7.   Similarly, since the DG has not now and never has had a valid legal basis for imposing a charge, the charges that were in fact paid to the DG must be refunded.
(a)Since the services were required to be provided, there can be no consideration for them;
(b)The charges were extracted under various forms of duress including illegal threats not to provide the services if the charges were not paid;
(c)It is not necessary that the respondents should have protested vociferously or at all, but in any event they did protest;
(d)The DG can not establish good faith because he had throughout been advised that the charges were at best of doubtful validity but decided to take his chances rather than going to the trouble of properly complying with the requirements of s 135.
(e)The “passing on” defence is not available as a matter of law and
(f)Alternatively to (f) [sic] the DG bears the onus of establishing the passing on defence and has not discharged the onus of demonstrating to the court that the respondents’ “bottom line” would be better off if the charges are fully recovered as against the position that the bottom line would have been in had the charges not been illegally levied in the first place.
8.   The respondents’ cross-appeal should succeed because:
(a)There was no valid basis for imposing a charge so the submissions in the previous paragraph apply to all amounts paid by the respondents;
(b)There is no justification for allowing the DG to retain that which he hypothetically could have charged without objection either because it offends principle or because there was no evidence that the DG would have imposed an unobjectionable charge on all airports (indeed, the evidence is to the contrary).
(c)Since there is no evidence that the DG intends to take any steps to recover from the metropolitan airports pro rata charges corresponding to those that Wild J allowed him to retain in respect of the respondents, the effect of Wild J’s decision is to perpetuate the inequity and inefficiency of differential charging. The lesser amount of the differential charge cannot cure its objectionable nature.
(d)The appropriate course for the court to take is to allow the respondents full recovery and leave the DG to revisit s 135 if he wishes to do so.

Reasons for judgment

It is now common ground that s37, both before and after the 1997 Amendment, does not invest the Director-General with the power to charge for services. To the extent that it prohibits expense to the Crown it does so in respect of arrangements, facilities (other than office and parking facilities), and systems that the Director-General for the time being reasonably requires, in relation to a relevant port for the purposes of Part III of the Act. The power to charge is accorded by s135 which, as previously mentioned, raises difficult issues of interpretation.

Section 135

Included in those issues is the reference in subs (1) to:
so much of the costs…as are not provided for by money appropriated by Parliament for the purpose.
These words must have a more restricted meaning than appears at first blush. Section 4(1) of the Public Finance Act 1989 provides:
4 Appropriation required
(1) No expenditure of public money shall be made other than in accordance with an appropriation by an Act of Parliament.
The elementary constitutional principle of Parliamentary regulation of public monies is plainly not displaced by s135 taken as a whole and in its own statutory context. The words in issue in s135 are premised on the governmental practice of requiring the Cabinet’s authority before any monies appropriated by Parliament for any purpose are spent by Departments. Within the terms of the authority of the appropriation, and subject to restraints of the terms of the Biosecurity Act, the Cabinet decides when and how appropriated monies may be spent. To the extent that costs of administering the Act are now “provided for” by this governmental allocation the Director-General is required by s135 to take all reasonable steps to recover the difference between what is referred to as Revenue Crown and the total appropriation.
Thus the respondents’ submissions noted in para [82] as 3(a) and (b) are unavailing.
That duty of recovery imposed on the Director-General, unsurprisingly, is not absolute but is subject to qualifications under the section. It is confined to the taking of all reasonable steps; it does not go beyond accordance with principles of equity and efficiency; it must accord with the section and any regulations.
We do not accept the submission for the respondents that because there are no regulations dedicated to border control passenger clearance the Director-General cannot validly recover costs for such services. The existence, not the absence of regulations qualify the power. The Director-General’s duty cannot be constrained by a regulatory void. The reference to regulations obviously envisages any relevant regulations. This disposes of the respondents’ written submission 3(c) which in oral argument counsel seemed disinclined to press with rigour.
The expression “principles of equity and efficiency” is not defined in the Act. In the context of a statutory provision for cost recovery, principles of equity contemplate that the costs should in general be met by users or beneficiaries of a function or service having regard to the extent or benefit of their use. Principles of efficiency contemplate that costs should be recovered by a method that minimises the cost of recovery to all parties. In our view the particular qualification indicates a Parliamentary intention that the Director-General’s duty to recover costs does not require him to act inequitably or inefficiently.
There may be differing opinions as to whether the Director-General has met his obligations under s135(1) but the breadth of the Director-General’s statutory functions and the scope for quite subjective perceptions in the application of principles of equity and efficiency would make it very bold to hazard an opinion from the perspective of a self-interested party. Subsection (1) prescribes a duty, not a power. A pervasive feature of the proceeding has been the examination of the validity of the exercise of the power by reference to the legislative constraints on the Director-General’s public duty. One need only ask, rhetorically, whether a person charged for the provision of a service could avoid liability on the basis that the Director-General’s charges were inefficient, say inefficiently too low, or arguably more efficiently recovered by invoicing in a different way. The answer must obviously be in the negative. The metes of the Director-General’s duty are not the exact bounds of his power.
The power to charge, distinct from the duty of recovery, is accorded by s135(3) in which the conditions of the exercise of that power are different from the qualifications on the Director’s duty. The constraints on the power are a combination of subjective and objective features. Subjectively the Director-General must believe a method to be the most suitable and equitable in the circumstances; objectively, the belief must be based on reasonable grounds. The composite test recognises the realities of administering a complex Act with important objectives.
In this case the charges claimed from the respondents appear to be a combination of the methods inclusively permitted by s135(3):-
(a)Fixed charges;
(b)Charges fixed on an hourly or other unit basis;
(d) Actual and reasonable charges; and, significantly,
(f) Charges imposed on users of services or third parties.
Thus, the question of the validity of the charging relates not to objective consideration of equity and efficiency, but to whether, in seeking to recover the costs of administering the Act and performing the functions, powers and duties provided by the Act, the Director-General believed on reasonable grounds that the recovery method, i.e. charging the respondents for the services they used, and the nature of the charges, was the most suitable and equitable in the circumstances.
It is emphasised that the respondents were charged for services provided to them, because the litigation shows the facility with which the debate can focus on other services, albeit of the same category, provided to other users. The respondents have not been charged for services which they did not use. The core of their grievance is that other users of similar services, provided at other places, have not been charged. It is open to the Director-General, under s135, consistent with principles of equity, to decide that costs of new services should not be recovered from those whose costs were being incurred as a result of facilities established on the basis of different policies.

The first decision

As previously mentioned, Wild J held that the first decision was invalid for two reasons, one being that it was not a decision made by the Director-General nor under proper delegation from him. The Judge held that although formal delegation was not required by s41 of the State Sector Act 1988, nor by s135 of the Biosecurity Act 1993, the Director-General needed to be involved in the decision-making, not simply aware that it was taking place. The Judge held that there was no evidence that the Director-General required the decision to be made, directed who was to make it or had any input into its making. The Judge thought it significant that the Director-General was involved in the second decision and the critical importance to MAF and the public revenue of cost recovery underlined the need for the Director-General to be involved.
Section 41 of the State Sector Act 1988 provides:
41     Delegation of functions or powers
(1)   The chief executive of a Department may from time to time, either generally or particularly, delegate to any other person (being a chief executive or a member of the senior executive service or an employee) any of the functions or powers of the chief executive under this Act or any other Act, including functions or powers delegated to the chief executive under this Act or any other Act:
Provided that the chief executive shall not delegate any functions or powers delegated to the chief executive by a Minister without the written consent of that Minister, or any functions or powers delegated to the chief executive by the Commissioner without the written consent of the Commissioner.
(2)    In any case where the chief executive has, pursuant to subsection (1) of this section, delegated any functions or powers to any person, that person may, with the prior approval in writing of the chief executive, delegate such of those functions or powers as the chief executive approves to any other person (being a member of the senior executive service or an employee) or to the holder for the time being of any specified office in that Department.
(3)    Subject to any general or special directions given or conditions imposed by the chief executive, the person to whom any functions or powers are delegated under this section may exercise those functions or powers in the same manner and with the same effect as if they had been conferred on that person directly by this Act and not by delegation.
(4)    The power of the chief executive to delegate under this section—
(a)   Is subject to any prohibitions, restrictions, or conditions contained in any other Act in relation to the delegation of the chief executive's functions or powers; but
(b)     Shall not limit any power of delegation conferred on the chief executive by any other Act.
(5)    Every person purporting to act pursuant to any delegation under this section shall, in the absence of proof to the contrary, be presumed to be acting in accordance with the terms of the delegation.
(6)   Any delegation under this section may be made to a specified person or to persons of a specified class, or to the holder or holders for the time being of a specified office or specified class of offices.
(7)   No such delegation shall affect or prevent the exercise of any function or power by the chief executive, nor shall any such delegation affect the responsibility of the chief executive for the actions of any person acting under the delegation.
The decision that WRAL would be charged, as distinguished from the rates or criteria for charges seems to have been made by Mr Bongiovanni. He deposes:
In early 1995, I learned Kiwi could become a scheduled service, with four flights per week and larger passenger numbers through use of large wide-bodied aircraft. I advised MQM Auckland that there was no funding available to meet this increased service, that it was not provided for in MAF’s border service appropriations from the Government and that if the service was provided, it would have to be cost recovered.
That led to Mr Hyde and Mr Small working out the criteria for charges. Mr Bongiovanni deposed that he “had kept the Director-General (or Acting Director-General) at the time informed of the basis of MAF’s cost recovery and he had approved of it”.
At the time the decision was made and for about a year thereafter the Director-General was Dr Russell Ballard who has deposed as follows:
24.I have been asked by MAF’s Office Solicitor (following inquiries by WRAL’s solicitors) whether there is any document formally recording my approval as Director-General to the recovery of border control charges at Hamilton Airport; in particular recording steps taken leading to a decision under a specific part of the Biosecurity Act. I do not, after this length of time, recollect the existence or not of any such document.
25.However I definitely considered and approved the issue of cost recovery at Hamilton on a continuing basis at various times when it was being implemented. I was regularly briefed by my staff on this subject from the beginning of these additional Transtasman services and approved the action taken at each stage in terms of cost recovery. I was also satisfied that MAF’s appropriations in the years concerned did not contain any funding for provision of services at the regional airports and could not be stretched to do so without compromising New Zealand’s biosecurity. Likewise, I was satisfied that the charging was made in accordance with the principles of equity and efficiency as already discussed.
26.I cannot put a date on such approvals; it was rather an ongoing matter working with MAFRA who attended to the details of implementation in conjunction with MAF Quarantine Service. My policy advisers were also involved in briefings on this subject. Similarly I gave regular briefings to the Minister of Agriculture who was well informed on what was happening.

We are not persuaded that the Judge was wrong in finding that the first decision was not made by the Director-General nor under a delegation from him. It was made by Mr Bongiovanni and was efficacious because of the fiscal control MAFRA had over the provision of quarantine services. In such an area of policy one might have expected, had there been in fact a delegation, some contemporaneous or consequential writing indicative of delegation. So also might one have expected something in writing evidencing consideration by the Director-General of the policy issues.
The then Director-General deposed that he was briefed at various times but he cannot be specific as to dates, even approximately, and there seem to be no briefing documents or memoranda indicating the extent of his attention to the issue. He also deposes that he was satisfied that the charging was made in accordance with the principles of equity and efficiency but his satisfaction must have occurred later than about February 1996 because until then it was thought that the authority to charge was found in s37, not s135 of the Act. Moreover, it is one thing generally to know what is happening. It is another thing again to determine or authorise it in terms of the statutory power.
In our view s135, read as a whole, envisages that a decision such as that under consideration, should be made by the Director-General or by his delegate. It is the Director-General who has the duty under subs (1); subs (2) envisages a determination by a recovery authority, here, the Director-General, relating to mechanisms for the recovery of costs; subs (3) contemplates a subjective belief by him. It is understandable and appropriate that this should be so; understandable because of the fiscal imposition on subjects by a department of state; appropriate because the subject’s entitlement to challenge the impost by way of judicial review would be trammelled if the Court were to be satisfied by the type of undocumented, imprecise, generalisations presented here in support of the contention that the Director-General made the first decision.
If the decision had been made pursuant to proper delegation we would not have considered it invalid on the second ground. Those reasons relate to persons other than Mr Bongiovanni and did not inform his decision. It does not seem from his affidavit that he considered the Parliamentary appropriation to be specifically attached to the Schedule 8 Airports. We interpret his position to be that because funding had been on the basis of the cost of providing services at the existing places of first arrival; and more services would have to be provided and therefore more costs incurred because of the advent of scheduled services at WRAL; and no further funds would be available to meet the increased costs; that additional cost would have to be recovered. That reasoning does not indicate an error of fact on Mr Bongiovanni’s part. The reasons for his decision lie in his affidavit and include economic constraints, knowledge of Government policies, previous special arrangements in respect of charter flights out of Queenstown, for example, where approval for a charter was always on the basis that the charterer would agree to fund the cost of border clearance; and the likelihood that airlines or airport companies would or could pass on the charges to customers.
Nor do we consider it beyond the Director-General’s power now to impose charges, retrospectively, for the services which have been provided if a valid decision to that effect were made in accordance with s135 of the Act. As will be apparent from our reasons for judgment in respect of the second decision, the same charges as were imposed in fact could have been validly imposed by the Director-General.

The second decision

Retrospectivity

We cannot agree with Wild J’s assumption that the decision of 13 May 1998 was intended by the Director-General to have retrospective effect. The nature of the decision and the reasons for it lie within the boundaries of Mr Fergusson’s letter which recommended that the Director-General agree to continue the current state of affairs whereby costs are recovered only from the new airports or airlines (as the case may be) pending the introduction of full cost recovery. There is no suggestion that the Director-General was being asked to agree to charge retrospectively, although if it so purported then for reasons previously mentioned in this judgment it may have been competent to do so.
Wild J rejected the arguments on behalf of the respondent in respect of s135(2) and s135(3). The particular arguments were not pursued on appeal and need not be considered.

Irrelevant considerations and factual error

The substantial basis upon which the Judge found the second decision invalid was that it was materially affected by irrelevant considerations and in particular those referred to at para [49] herein.
But those considerations are a paraphrase of essential passages in Mr Fergusson’s letter and not replications of them. The paraphrases are subtly but significantly inaccurate. Before moving to a consideration of them we note a factual error by the Judge. As previously mentioned, there had been a Cabinet decision on 15 December 1997 concerning cost recovery on an interim basis.
Mr Fergusson’s letter stated:
No additional appropriations were provided to cover costs at these airports.
The respondents argued at trial that the Director-General believed that Government had made a policy decision that money voted by Parliament was to be allocated only to the Eighth Schedule Airports. That does not fairly represent Mr Fergusson’s statement which was literally correct. It suggested that increased costs had not been matched by increased appropriations.
Next, as mentioned, Mr Fergusson’s statement that “Government decided that a cost recovery regime should apply until the issue of passenger clearance costs generally were resolved by Cabinet” was essentially correct.
Mr Fergusson advised the Director-General that “in the absence of a Crown appropriation, you are required to cover the costs of passenger clearance in accordance with the principles of equity and efficiency, there being no applicable regulations”.
This was said to be a wrong statement but we cannot agree. Again it is exactly the situation envisaged by s135(1).
There was a challenge, on the grounds of factual error, to the statement “However, from another perspective, the existing airports had been established and set up on the basis of no cost recovery”.
The statement attributed to Mr Fergusson in the submissions was “only existing airports had been set up on the basis of no cost recovery”. The significance of that challenge was that WRAL had been established and had operated for six months before MAF imposed charges. That submission is attenuated when the particular statement is read correctly. At its highest the statement might be interpreted as an indication that the regional airports had not been set up on the basis of no cost recovery but even then this statement would have been correct. The evidence shows that when pursuing international servicing capability WRAL knew of the possibility that charges would be made for border control services and charges were already being made when PNAL began international operations. Both Kiwi and Freedom were aware of the possibility if not likelihood as evidenced by the terms of their licences and undertakings they gave to the air licensing authority.
Wild J thought that an approach of this nature confused establishment with operating costs but such a view overlooks the relevant establishment costs, namely those associated with border control.
As to the expected interim nature of the regional airport charges Wild J perceived an illogicality on the part of the Director-General because it seemed to him to make more sense and involve no inequity to require the metropolitan airports to meet some of the costs of services provided to them during the expected interim.
In our opinion it was entirely open to the Director-General to take the view that having regard to all the other considerations it was not inequitable nor unsuitable to continue the status quo pending the implementation of a Government policy for full cost recovery. In such matters the relevant test is not whether a Court thinks something would be better but whether the decision-maker was entitled to come to the view he did. The scope of the services provided by MAF and the supervisory responsibilities of the Director-General necessarily involve a comprehensive view, greater than the microcosm of charges, reasonable in quantum, being made for biosecurity border control services at the regional airports.
Concerning Mr Fergusson’s comment that “costs should be borne by those who create the risk”, Wild J accepted a submission on behalf of the respondents that logically this suggested that a greater part of the cost of border control services should be recovered from the high risk creating metropolitans rather than no costs at all.
Both the argument and the Judge’s acceptance of it give insufficient recognition to the considerations which as a whole informed the Director-General’s decision. In this particular part of his letter Mr Fergusson is expressing an economic principle and he goes on to observe that the proliferation of new airports both increased the biosecurity risk and imposed additional costs to manage that risk. In our opinion it was fairly open to the Director-General in terms of the principles of equity to have regard to the fact that the regional airports had generated new risks involving additional management costs in circumstances where public funding had not been commensurately increased.
The Judge further held that the letter’s focus on an interim position obscured, if not avoided, a decision on the merits. He saw force in the point made on behalf of the respondents that more than five years after full cost recovery from WRAL began in 1995 on an interim basis the regime remained in place. In our view it was wrong to criticise the decision on the basis of hindsight.
The Judge then went on to consider the evidence of Mr Farley and found himself not dissuaded thereby from his view that the second decision was “erroneous, illogical and inadequate, and cannot stand”.
It is not necessary for this Court to review the Judge’s dissection of Mr Farley’s evidence because he was not influenced by it and the respects in which this Court differs from the judgment render it unnecessary to do so. We do, however, caution against the risk of a judicial assumption of a statutory power of decision vested in another. A Court may review for validity but merit, particularly in areas of policy, is for the decision-maker.
In summary, the paper which informed the Director-General’s second decision:

outlined the background to the existing arrangements for cost recovery for passenger clearance functions at the regional airports;
identified the Director-General’s statutory obligation in respect of costs recovery;
described two options for cost recovery, namely respread funding and recovery over all airports, or continue to recover only from new airports;
described aspects of equity and efficiency;
discussed equitable consideration;
discussed efficiency considerations;
concluded that on balance the current state of affairs should continue until the advent of a foreshadowed cost recovery regime.

There might be room for differences of opinion about some or all of the matters discussed in the letter but it cannot be said that the basis of the Director-General’s decision, and consequently the decision itself, is invalidated by irrationality or material errors of fact.
In this case there is no justification for believing that the Director-General did not consider that the most suitable and equitable method of recovering border security costs in respect of the regional airports was by way of the charges which he approved. The Court is entitled to consider whether he had reasonable grounds for such belief. In all the circumstances, particularly the information and advice contained in Mr Fergusson’s letter, read as a whole and not selectively, it could not be said that he did not have reasonable grounds for that belief.
Subject to the issue of fairness in making that decision without advising the respondents of his intention so to do the appeal in respect of the second decision ought succeed.

Consultation

It will be recalled that the Judge held the Director-General had a duty to consult WRAL before making the decision because a legitimate expectation of consultation had been created by the prior communication between the parties. Given such duty of consultation there was a requirement for the Director-General to make Mr Fergusson’s letter of 13 May available before he decided upon it.
We cannot agree with that finding. The decision continued the status quo with the intention that it should apply on an interim basis. MAF was intending to continue the supply of services on the same cost basis as had obtained for some three years. We do not accept that the beneficiaries of the services had any reasonable expectation that the charges would not be continued without consultation. The situation may possibly have been different if the Director-General had made a decision which increased the respondents’ obligations in circumstances where it would be unjust, by reason of intended reliance on the status quo, to do so without consultation. But here there is effectively a decision not to discontinue the status quo, with no suggestion of the respondents having been disadvantaged by a reliance upon a representation that this would not happen without consultation. The only material difference in the circumstances was that now the charges were valid whereas previously they had been imposed otherwise than pursuant to a valid decision, albeit tolerated expediently. The appellant must succeed on this aspect of the appeal also and is entitled to judgment on its counterclaim for unpaid charges rendered pursuant to the second decision.

Restitution

There is an issue whether the Judge was wrong in ordering restitution of monies paid pursuant to the first decision, as contended by the appellant and in confining his order to only partial restitution, as contended by the respondents.
We would not think it appropriate or necessary to invoke the principle exemplified by Woolwich Building Society v Inland Revenue Commissioners [1993] AC 70 to hold that the respondents could be entitled to restitution of the monies paid in consequence of the first decision if they were illegally demanded and paid involuntarily. There would be sufficient authority in the doctrine of colore officii. As noted by Wild J, that principle has been expressed in New Zealand in Julian v Mayor of Auckland [1927] NZLR 453 at 458 as applicable to cases:
where the plaintiff is entitled to have some service performed or act done upon payment of a fee, and that service has been performed or the act done, accompanied by the demand of an illegal or illegally excessive fee. In such circumstances the payment is held not to be voluntary, and the money recoverable as having been in substance exacted…colore officii.
Expecting the situation to apply on an interim basis the respondents understandably found it expedient to pay. It cannot be said that they were charged validly in part and invalidly as to excess, which seems to underlie the Judge’s approach to partial restitution. Nor would it be necessary to achieve a just result by way of partial restitution since it is still within the power of the Director-General to make a valid decision about charging for the past services. It is indeed the availability of such power which brings us to a consideration of discretionary withholding of relief.

Discretionary considerations

We think it unrealistic to suppose that, fortified by this Court’s findings as to the validity of the second decision and an entitlement to impose charges retrospectively, the Director-General would not validly reimpose the same charges in respect of the services provided before 13 May 1998. A declaration of invalidity and order for restitution would merely prompt an unnecessary accounting exercise with no consequential change in the position of the parties. The ancient principle that the law requires no one to do that which is vain and ineffectual – lex neminem cogit ad vana seu inutilia – is apt.
Further, there is no issue about the reasonableness of the amounts actually charged nor the quality of the services provided. The respondents accepted the charges as an incident of their own commercial activity.
The decision in issue is not vulnerable on its merits but on the basis that although generally acquiesced in by the Director-General the charges were not imposed pursuant to the exercise by him of the statutory power to charge. That omission can be remedied without delay.
Accordingly, as a matter of discretion we determine that declaratory relief should be withheld. We decline formally to declare that the charges made under the first decision are unlawful. An essential requirement for restitutionary relief is thereby removed.
The appeal succeeds in its entirety and the cross-appeal fails. The Director-General is entitled to retain the charges which have been paid and to recover the charges which have been unpaid.
But the appellant should not have costs in this Court nor in the High Court because it is the beneficiary of an indulgence in terms of the discretion, and because the litigation may well have been avoided or reduced if MAF and the Director-General had been more careful in respect of procedures for the imposition of the charges. The denial of costs is admonitory.

Result

i The declaration and other orders made in the High Court in the judgment                  appealed from are each quashed.
·     Judgment shall be entered in the High Court for the appellant on both the respondents’ claims and the appellant’s counterclaims, except as to costs which should lie where they fall.
·     The costs of the appeals and cross-appeals shall lie where they fall.

Solicitors

Crown Law Office, Wellington for Appellant
Buddle Findlay, Wellington for Respondents

Table of Contents
PARAGRAPH NUMBER
Nature of the appeals	[1]
The Biosecurity Act 1993	[3]
International flights from regional airports	[13]
The history of charging	[19]
The judgment under appeal	[44]
Synopsis of appellant’s argument on appeal	[68]
Synopsis of respondents’ arguments	[84]
Reasons for judgment	[85]
Section 135	[86]
The first decision	[98]
The second decision	[108]
Retrospectivity	[108]
Irrelevant considerations and factual error	[110]
Consultation	[131]
Restitution	[133]
Discretionary considerations	[136]
Result	[142]

[2002] NZCA 61

27 March 2002