Ansett Transport Industries (Operations) Pty Ltd v Commonwealth

At all material times, the Commonwealth has owned the business of the Australian National Airlines Commission ("the Commission") carried on under the name of Trans Australia Airlines. The Commonwealth, in relation to that airline, is constitutionally limited to authorizing the operation by the Commission of interstate and territorial air transport. Due to a reference of power by one State and succession to some routes formerly operated by Qantas Airways Ltd., a limited liability company not confined within Australia to interstate operations, the Commission has been enabled to operate some intrastate routes. But, fundamentally, interstate air transport remains its main operation.

Section 92 would disable the Commonwealth by statute or regulation from protecting the Commission from competition in the interstate operations. The decision of this Court in Australian National Airways Pty. Ltd. v. The Commonwealth [28] made that clear. Further, the control of routes, timetables, fares and freights, apart from considerations of the safety of interstate air transport, might well be thought to be constitutionally denied to the Commonwealth. Yet, both because of the situation of the Commission and, indeed, for the public interest, the Commonwealth might feel a compelling need to control the operations of any competitor of the Commission in these respects, particularly a competitor not limited to interstate operations. On the other hand, the Commonwealth might well favour a degree of competition which would not be destructive of either competitor but particularly of the Commission.

It is apparent that the 1952 Agreement sprang from such considerations. The evident support of Australian National Airways which that agreement gave is eloquent of the Commonwealth's desire to maintain competition with the Commission. The covenants on behalf of that airline satisfied the Commonwealth's desire for control. There was at that time a third airline operator on interstate routes but evidently its operations were not so widespread as to constitute either effective competition with the Commission or to be a danger to its continued profitable operation.

However, by 1957, that third operator had become part of the business of Australian National Airways. There were thereafter and up to the present only two operators on the trunk routes of Australia.

By dint of the Agreement of 1957 and the Agreements subsequently made, along with the Airlines Equipment Act 1958, the Commonwealth secured control of routes, timetables, fares and freights, numbers and types of aircraft available to the competitor with the Commission. For its part, the plaintiff forewent its liberty of action in all these respects. The Commonwealth thus fulfilled the two objectives which it must have had, namely, on the one hand, to protect the Commission from the risk of debilitating or annihilating competition from a too powerful operator, too powerful because in possession of more or better aircraft or for other reasons able to step up frequencies or reduce fares and freights, and, on the other, concurrently to maintain the continued existence of a competitor which would furnish desirable competition but be unable to debilitate or destroy the operations of the Commission. The price of these far-reaching advantages was the guarantee of the cost of re-equipment of the plaintiff's airplane fleet, the number or nature of which had come under Commonwealth control.

But, whether by the time that Agreement was made the plaintiff had become stronger as a result of successful operations than the former proprietor had been or because, there being then only two trunk route operators, or because of a combination of both factors, it became, in my opinion, basic both to the attainment of the objects of the Commonwealth and to the willingness of the plaintiff to subject itself to Commonwealth control through the provisions of the Agreement, that thereafter there should be only two airline operators on the trunk routes. My brother Aickin's analysis of the Agreements from 1957 onwards shows that such a conclusion is necessary to explain many of their provisions.

That the Commonwealth has long followed what is compendiously referred to as a "two airline policy" on trunk routes is beyond question. That it obtained great and, indeed, from its point of view, critical advantage from the Airlines Agreements is demonstrable. So much so that those who entered into the Agreement might well have thought that it was unthinkable that the Commonwealth would do anything to jeopardise the continuance of that policy or bring its maintenance into the least hazard. But the parties did not leave the fundamental basis for the making of the Agreement and for its continuance to be established by material drawn from outside the Agreements. The 1957 and 1961 Agreements contained recitals which make it clear to my mind that it was fundamental to the bargains then made that the objective of there being only two airline operators, the Commission and the plaintiff, on the airline trunk routes would be achieved and maintained. This meant, amongst other things, that the plaintiff, having submitted to the close control by the Commonwealth which the Agreements evidence, would not be at risk of an additional competitor placed in the field by the Commonwealth or with its assistance or encouragement.

I agree with the reasons advanced by my brother Aickin for concluding that it would be a breach of the agreement between the plaintiff and the Commonwealth for the Commonwealth by any means within its lawful power to enable a third airline operator to carry for reward on a trunk route. I would prefer, I think, to put the obligation not to do so upon the general rule that a party to a contract made on the footing of the continuance of a state of things may not by any act within its power or control do anything to destroy or relevantly to diminish that situation. But I would accept that the same result may be reached by the implication of a term with both positive and negative obligations to maintain and not to destroy or relevantly alter the basis on which the parties have contracted.

I would add that it is significant in this case that the Agreements have been authorized by the Parliament. There is no question, in my opinion, that the Parliament had constitutional authority to authorize their making. We are not considering an agreement resting merely on the authority of the executive, though I agree with my brother Aickin in thinking that, even if we were, there is no ground for thinking that the Agreements or any of them were beyond the competence of the executive. In that connexion, I would add that I see no breach of s. 92 either in the authorizing of the Agreements or in a refusal to grant a consent to the importation of aircraft or in the maintenance of the two airlines policy.

Lastly, I do not regard the observance of government policy by the Comptroller-General of Customs as any breach of his duty. Indeed, he would be bound, in my opinion, to carry out the communicated policy of government in deciding whether or not to grant his consent to importation. The vesting of a discretion in an official in an area such as the control of entry into Australia of goods or persons does not, in my opinion, give him a power to ignore or to depart from government policy in the exercise of this discretion in relation to such entry.

For all the reasons expressed by my brother Aickin and for those I have expressed, I would overrule the demurrers.

The crucial question in this case, which is one of construction of the Airline Agreements, is one of considerable difficulty. I have been greatly assisted by reading the reasons for judgment prepared by my brother Mason and those prepared by my brother Aickin in which the two possible views are fully examined. In the end I have, with great respect to the opposing opinion, come to the conclusion that it is not possible to construe the Agreements in such a way that it would be a breach of them for the Commonwealth to permit or encourage the importation of the aircraft in question. In expressing this conclusion I do not wish to be thought to accept the argument that if the Agreements were construed in that way they would constitute an invalid fetter on the discretion conferred on the Secretary of the Department of Transport by the Customs (Prohibited Imports) Regulations - the Agreements after all have statutory approval - or that they would contravene s. 92 of the Constitution - Reg. v. Anderson; Ex parte Ipec-Air Pty. Ltd. [29] is opposed to that argument. Nor do I think that it would be wrong for the Secretary, in exercising his discretion under the regulations, to give weight, and indeed conclusive weight, to the policy of the government.

If a term were to be implied it would no doubt be to the effect that the Commonwealth would do whatever it might lawfully do to maintain the position (which has already been secured) that there are two and not more than two operators of trunk route airline services in Australia, or, put negatively, that it would not do anything which would destroy or undermine that position. The width and lack of precision of such a condition is an argument against implying it. Would the Commonwealth be obliged to use its control of foreign exchange to prevent a person who intended to buy an aircraft overseas from doing so? Ought it to amend the taxation laws so as to impose penal taxation on anyone who attempted to operate an airline service on a trunk route? Should it require every person who seeks to import an aircraft of any kind to guarantee that he will never use it or permit it to be used in the operation of an airline service on a trunk route?

The presence of cl. 10 in the 1972 Agreement can be explained in either of two possible ways - it may recognize an obligation of the kind suggested and create exceptions to it, or it may have been inserted out of an abundance of caution to make clear the rights of the Commonwealth in the limited respect with which it deals. The fact that par. (a) of cl. 10 deals with routes that are not trunk routes, and therefore with a situation not within the suggested obligation at all, supports the latter view. The fifth recital in the 1961 Agreement in my opinion indicates the general object of the parties, in the light of which the Agreements must be construed, but does not reveal an intention that the Commonwealth shall be bound to do or not to do any particular act and does not constitute a covenant. The obligations of the Commonwealth are to be found in the operative provisions of the Agreements. Some of these provisions, such as cl. 7(3) of the 1961 Agreement, certainly suggest that it was expected that the plaintiff and the Australian National Airlines Commission would share the traffic on competitive routes, but it does not follow that the Commonwealth was contractually bound to exclude all other competitors, however minor.

The manner in which the statement of claim is pleaded causes difficulties for the plaintiff. It is pleaded in the statement of claim that the Minister had stated that he had approved the import into Australia of the aircraft in question for the carriage of freight between the mainland and Tasmania. It cannot be accepted that every route between the mainland and Tasmania is a trunk route. For example a flight from Melbourne to Burnie, or from Mildura to Launceston, would not appear to answer that description. However, the statement of claim goes on to state that the route between the mainland and Tasmania is a trunk route within the meaning of the Agreements in question. If that were intended to involve the proposition that all routes between the mainland and Tasmania are trunk routes it would be a statement of a conclusion of law and would in any case be prima facie erroneous. Moreover it is not pleaded that the aircraft were not intended to be used on specialist freight and passenger services. On the view that I have taken I need not consider whether these deficiencies in the pleading would be fatal. Nor is it necessary for me to consider what remedies would have been available if it had been held that the Commonwealth had broken or threatened to break its contractual obligation, for that is not a question that arises on demurrer.

The plaintiff, Ansett Transport Industries (Operations) Pty. Ltd., previously known as Australian National Airways Pty. Ltd., seeks relief by way of declarations, injunctions and damages against the defendants in connexion with the proposed importation into Australia of two Carvair aircraft by the third defendant, Air Express Ltd. ("Air Express"), and of two Argosy aircraft by the fourth defendant, Interstate Parcel Express Co. (Australia) Pty. Ltd. ("Ipec"). The plaintiff's case is that the proposed issue by the second defendant, the Secretary of the Department of Transport, of import permits under reg. 4(2) and the Third Schedule of the Customs (Prohibited Imports) Regulations in relation to the four aircraft would constitute or involve a breach on the part of the first defendant, the Commonwealth, of its contractual obligations under agreements made in 1952, 1961, 1972 and 1973 to which the plaintiff and the Commonwealth were parties and which were approved respectively by the Civil Aviation Agreement Act 1952, the Airlines Agreements Act 1961, the Airlines Agreements Act 1972 and the Airlines Agreements Act 1973. The plaintiff claims that by the 1952 Agreement, which was continued by the later Agreements, the Commonwealth contracted with the plaintiff that it would permit only the plaintiff and the Australian National Airlines Commission ("the Commission") to operate airline services for passengers and freight on trunk routes in Australia during the continuation of the Agreements. The plaintiff then contends that the issue of the permits by the second defendant is for the purpose of enabling Air Express and Ipec to carry freight between the mainland and Tasmania, that this is a trunk route, and that the issue of the permits therefore constitutes a breach of contract by the Commonwealth. It is alleged that Air Express holds a charter licence under the Air Navigation Regulations which authorizes it to operate air services on this route and that Ipec is an applicant for an airline licence under the regulations authorizing it to operate on this route. The plaintiff then claims that if the import permits for the four aircraft are granted, the second defendant will be required to issue airline licences to Air Express and Ipec for the route. The unexpressed assumption is that they have applied, or will apply, for such licences. Alternatively, basing its claim on an allegation that the Minister for Transport stated that he had approved the import of the aircraft for that purpose, the plaintiff alleges that the Commonwealth, by encouraging or directing the second defendant to issue the permits, is committing, or threatens to commit, a breach of contract.

The defendants have demurred to the statement of claim on various grounds. The Commonwealth and the second defendant assert that the matters pleaded do not constitute a breach of the Agreements and that, even if there is a breach of threatened breach of the Agreements, the issue of import permits is none the less effective in law. Air Express and Ipec, in addition to taking these grounds, further contend that the discretion of the second defendant under the Customs (Prohibited Imports) Regulations is not restricted or qualified by the Agreements and that they are in any event invalid because they contravene s. 92 of the Constitution.

Although no mention is made of it in the statement of claim, the Civil Aviation Agreement Act 1957 approved the execution of another civil aviation agreement in the form set out in the Schedule to that Act. The Agreement was subsequently executed on 16th December 1957 following the acquisition by Ansett Transport Industries Ltd. ("A.T.I."), which had the controlling interest in Ansett Airways Pty. Ltd. ("Ansett Airways"), of the whole of the issued capital in the plaintiff. Unlike the 1957 Agreement, the four Agreements on which the plaintiff relies were executed before statutory approval was obtained, though in each case the Agreement provided that it should have no force or effect unless and until it was approved by the Commonwealth Parliament.

The Agreements are interrelated in the sense that the later Agreements are supplementary to the first Agreement, though they are not all expressed to be supplementary. Their operation is continued beyond the initial term of fifteen years commencing on 18th November 1952 and the provisions of the first Agreement are extended so as to regulate the operations and air services provided and to be provided by the Commission and by the plaintiff in a more comprehensive way. The Commonwealth and the plaintiff are parties to all five Agreements. Indeed, they are the only parties to the first Agreement which was made on 24th October 1952 and which, unlike the remaining Agreements, was not expressed to be made under seal. The Commission and A.T.I. became parties to all the subsequent Agreements. The duration of the Agreements is currently regulated by cl. 4 of the fourth Agreement made on 21st October 1972, the terms of which are set out in the Third Schedule to the Airlines Agreements Act 1952-1973, which provides that the 1952-1972 Agreement shall continue in force after 18th November 1977 unless and until it is determined in accordance with the provisions of the clause. There follows a procedure for the termination of the Agreement by notice given by the plaintiff or by the Commonwealth. No such notice has yet been given. Clause 13 of the fifth Agreement made on 26th October 1973, which is contained in the Fourth Schedule to the Airlines Agreements Act 1952-1973, which amends the earlier Agreements in respects not presently relevant, provides that the fifth Agreement shall be in operation until 30th June 1978 and as from that date have no further force or effect.

The first Agreement which is now set out in the First Schedule to the Airlines Agreements Act 1952-1973 contains a recital in these terms:

and whereas in order to facilitate trade and commerce among the States, provide for the efficient carriage of mail by air within Australia and assist the defence of the Commonwealth it is expedient in the opinion of the Commonwealth to make provisions for the purpose of ensuring -

(a) the continued existence of the Company, as well as of the Commission, as an operator of airline services within Australia;

(b) the maintenance of competition between the Commission and the Company; and

(c) the efficient and economical operation of air services within Australia;

and whereas for the attainment of those purposes it is necessary to make arrangements for the operation of air services within Australia and to provide assistance to the Company in manner provided in this agreement:

(1.) The Commonwealth will not exercise any of its powers under or by virtue of an Act, including a power to make regulations, so as to discriminate against the Company.

(2.) The Commonwealth will during the continuance of this agreement accord to the Company substantially equal treatment with the Commission in relation to the grant of import licences and the allocation of airport facilities.

By other clauses the Commonwealth agreed to provide financial assistance by way of guarantee to the plaintiff (cl. 3), to provide a share of air mail equal to the Commission's share of that mail (cl. 5), and to ensure that business transacted on Commonwealth Government warrant in respect of the carriage of passengers and freight is freely available to the Commission and to the plaintiff (cl. 6). For its part, the plaintiff entered into certain commitments: to pay air route charges (cl. 4); to review with the Commission air routes, timetables, fares and freights in respect of routes on which both the Commission and the plaintiff operate services so as to avoid unnecessary overlapping of services and wasteful competition, and to provide the most effective and economical services with due regard to the interests of the public and to bring earnings into a proper relation to overall costs (cl. 7(1)).

These provisions indicate that, in accordance with the recital, it was the object of the parties to the Agreement to ensure the continued existence of the plaintiff as an operator of airline services in Australia, along with the Commission, the maintenance of competition between the plaintiff and the Commission and the efficient and economical operation of air services in Australia. To achieve this object the Commonwealth agreed to provide financial assistance to the plaintiff, to accord to it equal treatment with the Commission in various important respects, and to refrain from discriminating against it, thereby putting it in a more competitive position vis-à-vis the Commission and terminating or diminishing certain commercial advantages which the Commission had enjoyed to the detriment of the plaintiff and which had diminished its capacity to compete with the Commission.

There is nothing in all this to suggest that the Commonwealth expressly or impliedly agreed to create a duopoly in favour of the plaintiff and the Commission by engaging not to permit other operators to provide air or airline services on trunk routes. Neither the continued existence of the plaintiff as an operator, nor the maintenance of competition between the two airlines nor the efficient and economic operation of air services on trunk routes necessarily implies the total exclusion of other operators. It is common knowledge that Ansett Airways at that time operated airline services on trunk routes in competition with the Commission and the plaintiff. It is patently obvious that the Commonwealth did not by the first Agreement assume an obligation to exclude Ansett Airways from trunk route airline services and the bizarre allegation in the statement of claim (par. 3) that the Commonwealth did assume such an obligation is quite misconceived.

Although it is not made clear in the statement of claim the plaintiff's case really rests on the later Agreements.

It was the second Agreement, that made in 1957, which marks the advent of the so-called "Two Airline Policy". It contains the following recital:

and whereas one of the objects of the parties to this agreement is to secure and maintain a position in which there are two, and not more than two, operators of trunk route airline services, one being the Commission, each capable of effective competition with the other, and the parties intend that this agreement shall be construed having regard to that object. The operative provisions of the Agreement do not contain a covenant in terms of the recital. The Agreement provides for the extended application of the rationalization provisions of the 1952 Agreement, for a continuing review of air routes, timetables, fares, freights and other related matters on which the Commission and any one of the other airline operators operate or propose to operate so as to avoid unnecessary overlapping of services and wasteful competition, to provide the most effective and economical services and to bring earnings into a proper relation with overall costs (cl. 1). It also provides for the establishment of a Rationalization Committee, chaired by a nominee of the Minister to be known as the Co-ordinator whose decision on any disputed question of rationalization should be final and binding on the airline operators (cll. 3 and 4). By cl. 5 Ansett Airways, which had been an airline operator on trunk routes in competition with the plaintiff, agreed that it would as soon as practicable, and in any case within twenty-five months, cease to operate airline services. The consequence of the acquisition by A.T.I. of the plaintiff's issued capital and of cl. 5 of the Agreement was to bring about a situation in which two airlines, instead of three, would operate trunk route services. An object of the parties, as expressed in the recital, was "to secure and maintain this position". A.T.I. continued to participate in the operation of these services through its new acquisition, the plaintiff, instead of Ansett Airways.

The third Agreement, that made in 1961, which is set out in the Second Schedule to the Airlines Agreements Act 1952-1973, contains a recital in the same terms as that already quoted from the second Agreement. Again there is no covenant in terms of the recital. The Agreement regulates the acquisition by the Commission and the plaintiff of turbo-jet aircraft and the financing of the acquisition of such aircraft (cll. 3 and 4). It imposes an obligation on the Commission and the plaintiff to comply with Pt IV of the Airlines Equipment Act 1958 and it continues to subject them to the obligations imposed by s. 13 (a), (b), (c) and (d) of that Act notwithstanding that all moneys in respect of which guarantees have been given have been repaid (cl. 7 (1)). The Commonwealth engages to ensure that the Minister will exercise his powers under Pt IV of the Airlines Equipment Act 1958 during the period of the Agreement (cl. 7 (3)). It contains provisions regulating the rationalization of air services similar to, but more comprehensive than, those contained in the second Agreement (cl. 10). It makes similar provision for a Rationalization Committee (cll. 11 and 12) and goes on to provide that if the Commission or the plaintiff was dissatisfied with a decision of the co-ordinator, it may bring the matter before the Arbitrator, a person appointed by agreement between the Commission and A.T.I., his decision being final and binding on the parties (cl. 13).

The Airlines Equipment Act 1958 authorized the giving by the Commonwealth of substantial financial assistance to the Commission and to the plaintiff to enable them to purchase aircraft and other equipment, the Commission and the plaintiff assuming certain obligations on their part. Part IV ensures that the two airlines do not provide excess capacity and that the acquisition of additional aircraft will be permitted only if a need for the equipment is demonstrated. The Part appears to contemplate that each airline would carry one-half of the traffic on competitive routes and that they would be approximately equal in quantity and quality of equipment (s. 12). It imposes obligations on each airline not to purchase, lease or otherwise obtain the use of any aircraft unless the Minister certifies the aircraft capacity is suitable; it obliges each airline to furnish traffic information to the Minister as required and to comply with certain directions of the Minister (s. 13).

The fourth Agreement, that made in 1972, is supplemental to the 1952 Agreement and should be read and construed as forming part of that Agreement as extended and affected by the 1961 Agreement (cl. 3 (1)). It contains provisions designed to diminish the impact of parallel scheduling by the two airlines which enable the co-ordinator and, if appropriate, the arbitrator, to ultimately determine the timetables in accordance with which, subject to the approval of the Director-General, the air services of the two airlines are to be operated (cl. 5). Both the Commission and the plaintiff undertake to maintain airline services to all places to which they operate such services at the date of the agreement for so long as the revenue from the particular service exceeds the direct operating costs of the service (cl. 6). Both the Commission and the plaintiff undertake to investigate and keep under review the introduction of promotional fares for the purposes of stimulating traffic and increasing returns (cl. 7), and to investigate, keep under review and to implement appropriate measures to stimulate and promote the development on a sound and economic basis of the carriage of freight by air (cl. 8). Clause 10, to which the plaintiff attaches much importance, is in the following terms:

The parties acknowledge that nothing in the 1952-1972 Airlines Agreement shall preclude the Commonwealth, the Minister or the Director-General from permitting the holder of an airline or charter licence to develop -

(a) air services on routes other than trunk routes; or

(b) specialist freight and passenger services (including low-cost inclusive tours) of a nature which in the opinion of the Minister are not adequately provided for either by the Commission or the Operating Company,

consistently with the object of the parties to the 1952-1972 Airlines Agreement to secure and maintain a position where there are two and not more than two operators of trunk route airline services, one being the Commission, each capable of effective competition with the other.

The plaintiff relies on cl. 10 of the fourth Agreement, along with the recitals in the second and third Agreements, to support the implication for which it contends. The expression "trunk routes" which appears in cl. 10 of the fourth Agreement and elsewhere in the agreements is not defined anywhere. It must be taken to mean "principal air routes". Undoubtedly it includes air routes between capital cities, e.g. Melbourne-Hobart. It also includes, in my opinion, routes between a capital city and a major city in another State, more particularly when that city lies between two capital cities and serves as an intermediate port of call between the two capitals, e.g. Melbourne-Launceston.

The allegation in the statement of claim that Air Express and Ipec intend to use the aircraft, once they are imported, between Tasmania and the mainland is somewhat vague. It has been submitted that it constitutes a deficiency in the statement of claim. I do not agree. As I read the allegation, it is that the aircraft will be used on a route between Tasmania and the mainland and that this route is a trunk route.

Although it does not dispose of the whole of the plaintiff's case for relief, there is one irrefragable answer to the suggested implication of a broad term that the Commonwealth would not permit a third party to operate trunk route airline services and it is to be found in the daunting presence of s. 92 in the Constitution. The irony of this case is that the plaintiff, which owes its continued participation in interstate air transportation to the freedom of trade which s. 92 guarantees, a freedom which it so successfully invoked in Australian National Airways Pty. Ltd. v. The Commonwealth (the Airlines Case) [30] , now seeks to deny that very freedom to others. This is by the way, for the point to be made is that the Airlines Case decided that a law providing for the establishment of a monopoly involving an absolute prohibition against the entry of others into the activity of interstate air transportation for reward contravened s. 92. And if a law establishing a monopoly is obnoxious, so also is a law establishing a duopoly if it involves without more an absolute prohibition against the entry by others into the field.

It was not suggested that the term sought to be implied by the plaintiff extends to the imposition on the Commonwealth of an obligation not to introduce, initiate or support legislation which would permit third parties to operate airline services on trunk routes, as for example by amending the Customs (Prohibited Imports) Regulations. The decision of the Court of Appeal in William Cory & Son Ltd. v. London Corporation [1] appears to suggest that such a covenant would be invalid because it constitutes an attempt to fetter the future exercise of a power to make regulations in the public interest.

In this case it is sufficient to say, without making any comment on William Cory & Son Ltd. v. London Corporation [1] , that it would be strange indeed if by a process of implication alone the Commonwealth was to become subject to an obligation not to make or support an alteration in the law no matter that the alteration was conceived to be in the public interest and in conformity with the spirit of s. 92. Clause 10 (1) of the first Agreement contains an express covenant that the Commonwealth will not exercise its regulation-making powers so as to discriminate against the plaintiff, but this covenant is in limited terms and its performance would not precipitate any collision or conflict with considerations of public interest and public safety which require to be taken into account in an exercise of the regulation-making power.

The presence of cl. 10 (1) of the first Agreement and the considerations already mentioned indicate there is no basis for implying a covenant which would impose an additional and unexpressed obligation on the Commonwealth not to alter the law. If a term is to be implied at all it is one which takes effect subject to the laws governing air transportation as they exist from time to time, that is, a term imposing an obligation on the Commonwealth with respect to what it may do in conformity with the framework of Commonwealth law as it is enunciated by the Constitution and by the relevant legislation.

Even the implication of a term so limited indirectly encounters the shoals of s. 92. Regulations 198 and 199 of the Air Navigation Regulations which govern the grant and refusal of airline licences have been expressed with the constitutional guarantee very much in mind, or to use the words of Kitto J. in Airlines of New South Wales Pty. Ltd. v. New South Wales [No. 2] [2] , "to accommodate the licensing system to s. 92". Regulation 199 (2) requires the second defendant (in whom the discretion, formerly vested in the Director-General of Civil Aviation, is now reposed), where the proposed service is an interstate service, to issue a licence unless the applicant has not complied with, or has not established that he can comply with, the regulations or with any direction or order given or made thereunder relating to the safety of the operations. The second defendant is bound to deal with an application for an airline licence faithfully in conformity with reg. 199 (2) and no term could be implied which would impose on the Commonwealth an obligation to act in disregard of that sub-regulation. In this respect a contractual obligation not to permit third parties to engage in interstate transportation stands in no different position from the Government policy which was held to be an extraneous and inadmissible consideration in relation to the Director-General's exercise of discretion under reg. 199 (2) (Reg. v. Anderson; Ex parte Ipec-Air Pty. Ltd. [3] ). Enough has been said to indicate that a provision in the absolute terms proposed by the plaintiff could not be implied without involving a collision between the suggested contractual obligation and the law, a consequence that cannot have been intended by the parties.

1. (1965) 113 C.L.R. 54, at p. 112. 2. (1965) 113 C.L.R. 177.

It is necessary now to consider whether there is a sound basis for the implication of a less stringent term, a term which would not involve any collision with the law but which would, nevertheless, impose an obligation on the Commonwealth through the second defendant to refuse the grant of import permits for the four aircraft, as, for example, a term that the Commonwealth would, so far as it lies within its power conformably with the law, do all acts necessary or convenient to attain the expressed object of the Agreements.

No doubt it is correct to say that, where in the recitals to a deed or an agreement it is acknowledged that the parties have agreed to do, or will do, certain acts, a promise to do those acts will be read into the agreement in the absence of an express promise to that effect. Then, there being no indication of a contrary intention, it may be safely inferred that the absence of a contractual provision was due to oversight or inadvertence. This is brought out in the judgment of Lord Denman C.J. in Aspdin v. Austin [4] , where he speaks of the courts in these circumstances having "inferred" a covenant to do the acts.

1. (1844) 5 Q.B. 671, at p. 683 [114 E.R. 1402, at p. 1407].

However, the setting in the present case is less favourable to such an approach. In the first place, neither the recital in the second and third Agreements, nor the provisions of cl. 10 in the fourth Agreement, acknowledge an agreement or an intention to do certain acts. What they evidence is that one of the objects of the parties is to secure and maintain a particular position. The existence of this acknowledgment would provide invaluable assistance in resolving doubts as to the construction of particular provisions in the Agreement, this being the purpose of the recital as its very terms make clear, thereby enabling the court to find in favour of that construction which is consistent with the object of the parties as it has been expressed. But it is quite another matter to say that the recital should be used so as to import into the Agreement a provision in terms of the expressed object.

A recital which expresses the object of the parties, as distinct from the terms of an agreement, is open to the construction that the parties intended to secure the announced object by means of the express provisions contained in the agreement and not otherwise. It is reasonable to suppose that their agreement is limited to the specific stipulations set out in the contract and that they did not intend to be bound by other and unexpressed stipulations even though the stipulations would or might enhance the attainment of the object. It would be a bold step to infer from the mere presence of the recital that the parties, to use and adapt the words of Denman C.J. in Aspdin v. Austin [5] , were impliedly covenanting "for every act convenient or even necessary for the perfect attainment of" that object.

1. (1844) 5 Q.B., at pp. 683-684 [114 E.R., at p. 1407].

Apart from cl. 10 of the fourth Agreement, the indications are that the express stipulations are exhaustive. The Agreements are formal, comprehensive and detailed. They contain express covenants on the part of the Commonwealth, on the part of the Commission and by the parties generally. What is more, they contain an express promise dealing with the specific subject matter, that is, a promise on the part of the Commonwealth that it will not exercise any of its powers so as to discriminate against the plaintiff and that it will accord to the plaintiff substantially equal treatment with the Commission in relation to the grant of import licences and the allocation of airport facilities (cl. 10 of the first Agreement). And no convincing hypothesis has been advanced to explain why the parties would have omitted to include an express covenant in the terms now under consideration had they intended the Commonwealth to be bound by such a stipulation.

On the contrary the possible consequences of contravening s. 92 and the problems associated with the implication of a covenant which attempts to impose an obligation on the Commonwealth not to alter the law and not to permit other operators to import aircraft for use on trunk route airline services provide a formidable reason for doubting the claim that the parties intended to import a covenant of the kind pleaded or of the kind now under consideration. I have already referred to the question whether the executive government can by contract fetter its power to make regulations. A similar question arises in relation to the making of a contract which attempts to fetter the exercise of a discretionary power conferred by statute or regulation. There is a general principle of law that a public authority cannot preclude itself from exercising important discretionary powers or performing public duties by incompatible contractual or other undertakings (Ayr Harbour Trustees v. Oswald [6] ).

A somewhat similar principle seems to have been expressed in relation to government contracts in Rederiaktiebolaget Amphitrite v. The King [7] where Rowlatt J. acknowledged that the government can bind itself through its officers by commercial contract but went on to say "it is not competent for the Government to fetter its future executive action, which must necessarily be determined by the needs of the community when the question arises. It cannot by contract hamper its freedom of action in matters which concern the welfare of the State". This statement has been criticized on the ground that it is expressed too generally and so it is. (See Sir William Holdsworth, A Casebook on Constitutional Law, Law Quarterly Review, vol. 45 (1929), pp. 166-167; H. Street, Governmental Liability (1953), pp. 98-99; J. D. B. Mitchell, Contracts of Public Authorities (1954), pp. 57 et seq.; P. W. Hogg, The Doctrine of Executive Necessity in the Law of Contract, Australian Law Journal, vol. 44 (1970), p. 154; E. Campbell, Agreements about the Exercise of Statutory Powers, Australian Law Journal, vol. 45 (1971), p. 338; J. E. Richardson, The Executive Power of the Commonwealth in Commentaries on the Australian Constitution (ed.) L. Zines, pp. 76-80).

Public confidence in government dealings and contracts would be greatly disturbed if all contracts which affect public welfare or fetter future executive action were held not to be binding on the government or on public authorities. And it would be detrimental to the public interest to deny to the government or a public authority power to enter a valid contract merely because the contract affects the public welfare. Yet on the other hand the public interest requires that neither the government nor a public authority can by a contract disable itself or its officer from performing a statutory duty or from exercising a discretionary power conferred by or under a statute by binding itself or its officer not to perform the duty or to exercise the discretion in a particular way in the future. To take an example related to this case: the Commonwealth could not, by making a contract with an airline company whereby it promises that the Secretary of the Department of Transport would not for the next fifteen years issue to other airline companies import permits for aircraft, fetter the future exercise by the Secretary of the discretion conferred upon him by the Customs (Prohibited Imports) Regulations. The Secretary must at all times deal with applications for import permits in accordance with the law; if he considers that, in conformity with government policy, the public interest calls for the importation of the aircraft, he should grant the application notwithstanding that the Commonwealth has entered into a contract which provides to the contrary. To hold otherwise would enable the executive by contract in an anticipatory way to restrict and stultify the ambit of a statutory discretion which is to be exercised at some time in the future in the public interest or for the public good.

It has been held that a resolution or undertaking by trustees that they will never in the future exercise powers in relation to certain land, powers which under the statute they might exercise at any time in the future, was incompatible with the statutory purpose for which the land was acquired and was therefore not binding on the trustees (Ayr Harbour Trustees v. Oswald [8] ; see also Paterson v. Provost of St. Andrew's [9] ; and British Transport Commission v. Westmorland County Council [10] ). It was with respect to cases of this class that Lord Birkenhead said in Birkdale District Electric Supply Co. Ltd. v. Southport Corporation [11] : "if a person or public body is entrusted by the Legislature with certain powers and duties expressly or impliedly for public purposes, those persons or bodies cannot divest themselves of these powers and duties. They cannot enter into any contract or take any action incompatible with the due exercise of their powers or the discharge of their duties."

1. (1883) 8 App. Cas. 623. 2. (1881) 6 App. Cas. 833. 3. [1958] A.C. 126. 4. [1926] A.C. 355, at p. 364.

Furthermore it has been decided in town planning cases that a local or planning authority cannot by contract fetter in an anticipatory way its future discretion to approve or reject applications after proper consideration in accordance with the prescribed procedure (Ransom & Luck Ltd. v. Surbiton Borough Council [12] ; see also Southend-on-Sea Corporation v. Hodgson (Wickford) Ltd. [13] ; Rocca v. Ryde Municipal Council [14] ).

1. [1949] Ch. 180, at pp. 195, 198. 2. [1962] 1 Q.B. 416. 3. [1962] N.S.W.R. 600.

It has also been decided that an agreement unauthorized by statute on the part of a Minister for the grant of an interest in Crown lands is invalid, in particular where it constitutes an anticipatory fetter on the discretion which the Minister is required to exercise at a later stage of the statutory procedure. In Cudgen Rutile (No. 2) Pty. Ltd. v. Chalk [15] the Judicial Committee held that if certain authorities to prospect issued under the Mining Acts of Queensland contained an agreement by the Minister to grant mineral leases, that agreement was not authorized by the statutes which required a series of steps to be taken, decisions to be made and discretions to be exercised, before the Minister was empowered to grant a lease. Fundamental to the decision was the proposition that the Crown cannot contract for the disposal of Crown lands without statutory authority and that the agreement in question was not authorized because it was an anticipatory fetter on the exercise of a discretion which, according to the statute, had to be exercised in the public interest at the end of the prescribed procedure. To the same effect was Watson's Bay and South Shore Ferry Co. Ltd. v. Whitfeld [16] , a decision on the Crown Lands Consolidation Act, 1913 N.S.W., which was referred to with approval in the Cudgen Case [15] .

1. [1975] A.C. 520. 2. (1919) 27 C.L.R. 268. 3. [1975] A.C. 520.

The decisions to which I have referred are all cases in which the contract or undertaking held to be invalid was one to which the repository of the power or discretion was a party. The contract or undertaking was therefore an anticipatory fetter by that person on his future exercise of the statutory power or discretion. At the same time because the contract or undertaking was not one authorized by the relevant legislation, or was incompatible with it, the contract or undertaking was invalid or ultra vires.

Different considerations will apply when the contract is one to which the government is a party and the contract relates to the grant of a licence or privilege which under the law depends upon the exercise of a statutory discretion by an officer who is not a party to the contract. In these cases at least it has been suggested that the free and unfettered exercise of the discretion is sufficiently preserved if the validity of the contract is upheld, provided that it is enforceable only by way of action for damages and not by order or injunction. Such an outcome, it is said, would work a reasonable compromise between the desirability of recognizing the binding nature of contracts and the need to preserve the free and unfettered exercise of the discretion. The assumption which underlies this approach is that the contract is one which the government is authorized to make, that it is not expressly or impliedly prohibited by statute or, if you like, incompatible with the statute. The contract might, like the agreements in this case, be made with express statutory approval. In this event an undertaking that the discretion will be exercised in a particular way and a potential liability for damages for its breach, though they may or will cause the repository of the discretion to exercise it in the particular way promised, have statutory backing with the consequence that the contract stands on a more secure footing.

Where statutory approval for the making of the contract exists and the contract contains an undertaking that the statutory power will be exercised in a particular way, there is no room for the notion that the undertaking is invalid on the ground that it is an anticipatory fetter on the exercise of a statutory discretion. The contract, assuming it to be within constitutional power, is valid and the undertaking is free from attack. There is in such a case the initial question: Does the statute which approves the making of the contract expressly or impliedly amend, for the purposes of the contract, the pre-existing law providing for the exercise of the discretion? The statute may impose on the repository of the discretion a duty to exercise it in conformity with the undertaking or it may leave him with a discretion to arrive at some other result. If it be the former, then the contracting party may be able to compel the government and the person in whom the discretion is vested, though it has been relevantly converted into a duty, to comply with the undertaking. If it be the latter, then the undertaking if it is enforceable will be enforceable by an action for damages only.

It will be perceived from what I have written that in my opinion the doctrine that an agreement of the kind in question may constitute an anticipatory fetter on the exercise of a statutory discretion is closely connected with the question whether the agreement is authorized by statute, or is prohibited by, or incompatible with it. If the agreement is authorized, then it is valid, and any breach of the undertaking it contains will be enforceable by damages but only when the effect of statutory approval is to convert the discretion into a duty will it be enforceable specifically.

The existence of the statutory approval in the present case does not enlarge or narrow the ambit of the discretion which is conferred by the Customs (Prohibited Imports) Regulations on the Secretary of the Department. Neither the statutes nor the agreements make any reference to that discretion. It is altogether too much to suggest that there is an implied amendment of the regulations brought about by an implied and unexpressed covenant in the agreements adopted and enacted sub silentio by the approving statutes. The statutory approvals in my opinion do no more than satisfy the condition which is contained in the various agreements and, accordingly, make the agreements contractually binding on the Commonwealth.

What I have said on this aspect of the case relates to the question whether an express covenant of the kind now under consideration would be valid and whether, if valid, it could be enforced specifically as well as by an action for damages. However, the considerations to which I have adverted have another relevance because they supply an additional reason why a covenant of this kind should not be implied in the agreements. These considerations all go to show why the Commonwealth would not lightly enter into a covenant the performance of which depends upon the exercise in the future of a statutory discretion in a particular way only, regardless of unforeseeable circumstances which might arise in the future, calling for a different exercise of the discretion. In this connexion it is instructive to refer to Commissioners of Crown Lands v. Page [17] where the Court of Appeal held that it could not have been intended by the parties to a lease that the covenant for quiet enjoyment "would extend to prevent the future exercise by the Crown of powers and duties imposed upon it in its executive capacity by statute". Devlin L.J. said [18] :

When the Crown, or any other person, is entrusted, whether by virtue of the prerogative or by statute, with discretionary powers to be exercised for the public good, it does not, when making a private contract in general terms, undertake (and it may be that it could not even with the use of specific language validly undertake) to fetter itself in the use of those powers, and in the exercise of its discretion. Commissioners of Crown Lands v. Page, like the Amphitrite Case [19] , arose out of the exigencies of war and involved the requisition of property, the question being whether entry pursuant to the requisition constituted a breach of the implied negative covenant for quiet enjoyment on the part of the Crown as landlord. It is therefore a very different case from the present case. Nevertheless, it indicates that, in the absence of specific words, an undertaking which would affect the exercise of discretionary powers to be exercised for the public good, should not be imputed to the Commonwealth. See also Board of Trade v. Temperley Steam Shipping Co. Ltd. [20] . 1. [1960] 2 Q.B. 274. 2. [1960] 2 Q.B., at p. 287. 3. [1921] 3 K.B. 500. 4. (1926) 26 Ll.L.R. 76; aff. (1927) 27 Ll.L.R. 230.

I come now to cl. 10 of the fourth Agreement. It draws a distinction between "air services" and "airline services", a distinction which is to be discerned elsewhere in the agreements. "Air services" is an expression of wide generality, apt to include as well as airline services, services which do not form part of regular public transport operations, e.g. operations in which aircraft are used for private operations, aerial work operations and charter operations (see reg. 191 of the Air Navigation Regulations). "Air services" is defined by cl. 15 (3) of the fourth agreement to mean "air services for which an airline licence is held", but it is so defined only for the purposes of cl. 10 of the third Agreement. On the other hand, "airline services" is a much narrower expression, denoting regular public transport operations. Its meaning is to be gathered from the Air Navigation Regulations, as the reference in cl. 10 to the holder of an "airline licence or charter licence" so plainly indicates. By reg. 5 (1) "airline" is defined to mean "the operator of a regular public transport service". By reg. 198 an aircraft is not to be used in regular public transport operations except under the authority of and in accordance with an airline licence. It is significant that a charter licence does not authorize the holder to engage in charter operations on two or more occasions within any period of four weeks over a route or section of a route on which the regular public transport service is operating without the special authorization of the Secretary of the Department of Transport. It follows then that the object as expressed in the recitals to the second and third Agreements and in cl. 10 relates to airline services on trunk routes in the sense already described. The provision of services pursuant to a charter licence, though it would amount to the provision of air services, does not constitute the provision of airline services.

With this in mind it is necessary now to look at par. (b) of cl. 10. If it is to be read as applying to specialist services on trunk routes there is a possible difficulty in saying that the holder of a licence could be permitted to develop such services "consistently with the object of the parties to secure and maintain a position where there are two and not more than two operators of trunk route airline services ". One avenue of escape from this difficulty would be to say that par. (b) relates not to airline services but to charter services, or at least services other than airline services. However, the opening words of cl. 10 contemplate that the holder of an airline licence may be permitted to develop the services mentioned in par. (b). The true answer to the difficulty lies in the circumstance that the stated object was not the only object of the parties. It is described in the recitals as "one of the objects of the parties". And it will be recalled that one of the purposes of the first Agreement was expressed as "(c) the efficient and economical operation of air services within Australia". The coexistence of more than one object or purpose necessarily contemplates some compromise between them. The development of specialist services by a third operator on a trunk route as a contribution to the efficient operation of air services in Australia as provided for by cl. 10 may be permitted "consistently" with the object as expressed in the recitals and in the clause itself if either the Commission or the plaintiff does not in the opinion of the Minister adequately provide for such specialist services. Paragraph (b) must be read as having an application to trunk routes as well as other routes. Were it not so, the paragraph would be superfluous because par. (a) is large enough to embrace specialist services on routes which are not trunk routes.

Now that these problems have been answered, the question is: Why was cl. 10 inserted in the fourth Agreement? One explanation is that it provided an exception from, or a qualification of, an obligation otherwise imposed upon the Commonwealth, thereby impliedly acknowledging the existence of that obligation. The force of this explanation is reinforced by the absence of other circumstances which would make the inclusion of the clause necessary. The other hypothesis is that the parties for more abundant caution intended to set at rest any doubts that might exist as to the capacity of the Commonwealth, the Minister and the Director-General to permit the developments mentioned in the clause. The other factors which I have discussed, in particular the absence of any explanation for the failure to include an express covenant in the agreements in the terms suggested and the formidable legal problems which such a covenant would generate, indicate in my opinion that this second hypothesis is to be preferred.

There is, on the view which I take of the Agreements, no basis for holding that they contravene s. 92. They do not require the Commonwealth or the second defendant to act inconsistently with the section or to consider applications for airline licences otherwise than in accordance with the provisions of reg. 199 (2). For that matter, they do not impose an obligation on the Commonwealth to refuse applications for import permits under reg. 4 (2) of the Customs (Prohibited Imports) Regulations. Even if they did impose such an obligation it would involve no contravention of s. 92 because importation is antecedent to, and forms no part of, interstate trade. As Kitto J. said in Reg. v. Anderson; Ex parte Ipec-Air Pty. Ltd. [21] :

The executive action complained of in the present case is a refusal to lift a prohibition upon the doing of something (importation) which is itself altogether apart from inter-State trade. Even if the executive action had been the imposition of a prohibition instead of a refusal to lift a prohibition, the case would have been concluded by the sentence I have quoted from the judgment in Grannall v. Marrickville Margarine Pty. Ltd. [22] . Under reg. 4 (2) the prohibition operates on importation, not on interstate trade, and that is the end of the matter, even if the motive for imposing the prohibition or, as here, for refusing to relax the prohibition is a desire to exclude a person from engaging in interstate trade. 1. (1965) 113 C.L.R., at p. 193. 2. (1955) 93 C.L.R. 55, at p. 78.

In expressing this view I have assumed that s. 92 would strike down the provisions of an agreement which prohibited or interfered with interstate trade, in particular where that agreement was conditioned on the existence of statutory approval. The statute by approving an agreement which required the Commonwealth to interfere with the freedom of interstate trade would itself infringe s. 92, thereby leaving that agreement without statutory approval, at least to the extent to which its provisions ran counter to s. 92. It has been said from time to time that the section guarantees freedom from executive as well as legislative acts: James v. Cowan [23] ; James v. The Commonwealth [24] ; the Airlines Case [25] ; The Commonwealth v. Bank of New South Wales [26] ; Wilcox Mofflin Ltd. v. New South Wales [27] ; Boardman v. Duddington [28] .

1. (1932) 47 C.L.R. 386, at pp. 393-397. 2. (1936) 55 C.L.R. 1, at p. 56. 3. (1945) 71 C.L.R., at pp. 90-91. 4. (1949) 79 C.L.R. 497, at p. 635; [1950] A.C. 235, at p. 305. 5. (1952) 85 C.L.R. 488, at p. 522. 6. (1959) 104 C.L.R. 456, at p. 469.

However, according to the interpretation which I have placed upon the Agreements, the plaintiff has failed to make out the implied covenant which is essential to its success. On this ground the demurrer must be allowed. Quite apart from this ground the plaintiff's case for relief as pleaded is deficient in that it has not negatived the possibility that the air services proposed to be operated by the third and fourth defendants are specialist air services which fall within par. (b) of cl. 10 and therefore fall within the category of air services which the second defendant may permit the holder of an airline licence or a charter licence to develop in accordance with the provisions of that clause.

Even if the Agreements cast an implied obligation on the Commonwealth not to grant import permits for the four aircraft, for reasons which I have expressed earlier, this will not entitle the plaintiff to relief by way of injunction restraining the issue of the permits, even if it could result in an award of damages.

In conclusion, in view of the arguments which were advanced, I should make some comments on the Customs (Prohibited Imports) Regulations. The discretion to relax the prohibition imposed by reg. 4 (2) against the importation of aircraft is vested in the Secretary of the Department of Transport. The nature of that discretion was examined in Reg. v. Anderson; Ex parte Ipec-Air Pty. Ltd. [29] where a majority of the Court held that the sub-regulation in conjunction with the Third Schedule created a duty to consider an application [30] ; see Murphyores Incorporated Pty. Ltd. v. The Commonwealth [31] . In Reg. v. Anderson; Ex parte Ipec-Air Pty. Ltd., it will be recalled, different conclusions were expressed by the members of the Court as to the Director-General's decision. Kitto J. (with whom Menzies J. agreed) conceded that general government policy was a relevant matter to be taken into account, but went on to hold that the Director-General did not arrive at a decision of his own and that he merely obeyed "an ad hoc pronouncement from the Government as to the direction in which he ought to decide the matter" [32] . Taylor and Owen JJ. also considered that the Director-General was entitled to take into account the policy laid down by the government but concluded that in truth the decision was that of the Director-General, not that of the government [33] . Windeyer J. said that "the only consideration by which the Director-General could properly have been guided was the policy of the Government" [34] , and went on to say [35] :

The Director-General is the officer whose written permission must be produced to the Customs. But in my opinion that does not mean that he is to grant or refuse permission according to some view of his own, giving weight or no weight as he chooses to the policy of the Crown. On the contrary, I think his duty is to obey all lawful directions of the Minister under whom he serves the Crown. 1. (1965) 113 C.L.R. 177. 2. (1965) 113 C.L.R., at pp. 188-189. 3. (1976) 136 C.L.R. 1, at pp. 17-18. 4. (1965) 113 C.L.R., at p. 193. 5. (1965) 113 C.L.R., at p. 200. 6. (1965) 113 C.L.R., at p. 204. 7. (1965) 113 C.L.R., at p. 206.

With great respect, I am unable to agree with this view. The Regulations vest the discretion in the Secretary of the Department; they therefore contemplate a decision by him. If in truth he is bound as a matter of law to accept a direction from his Minister it cannot be said that the decision is his decision; it then becomes the decision of the Minister. Unquestionably, important considerations of aviation policy are relevant to the exercise of the discretion in the sense that most, if not all, imports of aircraft take place within a framework of established government policies, some relating to aviation and others relating to finance and economics. It is to be expected that the Secretary will, before making his decision, if he does not already know them, ascertain what are the government policies which happen to be relevant to the application before him. Moreover, it is to be expected that he will have regard to any relevant government policy, nevertheless deciding for himself whether the existence of the policy is decisive of the application. Whether it is so decisive will depend upon the nature and terms of the policy and the circumstances of the particular case. But I cannot think that this means that the Secretary is entitled to abdicate his responsibility for making a decision by merely acting on a direction given to him by the Minister.

Apart from the observations of Windeyer J. the authorities give no support to the notion that a Minister can, without statutory authority, direct an officer in whom a statutory discretion is reposed, how he will exercise that discretion. The observations of Evatt J. in Reg. v. Mahony; Ex parte Johnson [36] are in my opinion quite opposed to the notion that an administrative officer vested with a discretionary power "could allow the Executive or any other person to exercise it for him".

Here all that emerges is that the exercise of the discretion is in conformity with a policy enunciated by the Minister or with a policy of which the Minister approves. If the policy were inconsistent with the contractual obligations of the Commonwealth, contrary to the view which I have expressed, even if it could give rise to a liability in damages, it could not ground relief by way of injunction.

The plaintiff seeks to spell out of the Agreements approved by the Civil Aviation Agreement Act 1952 and by the Airlines Agreements Acts of 1961, 1972 and 1973 an obligation on the Commonwealth of Australia during the operation of the agreements not to do any act which would enable any person other than the plaintiff or Australian National Airlines Commission ("the Commission") to operate a trunk route airline service within Australia and to do everything within its power to exclude other operators. The Agreements expire during 1977, although their operation is continued until ended in accordance with their terms.

The plaintiff seeks to prevent the third and fourth defendants, Air Express Ltd. and Interstate Parcel Express Co. (Aust.) Pty. Ltd. ("Ipec"), from importing two aircraft each. It also seeks to have the second defendant, the Secretary of the Department of Transport, enjoined from giving permission to import the aircraft and to have the Commonwealth enjoined from directing or encouraging him to give the permission. Importation of aircraft is prohibited by regulations made under s. 50 of the Customs Act 1901-1973, which provides:

(1) The Governor-General may, by regulation, prohibit the importation of goods into Australia.

(2) The power conferred by the last preceding sub-section may be exercised -

(a) by prohibiting the importation of goods absolutely;

(b) by prohibiting the importation of goods from a specified place; or

(c) by prohibiting the importation of goods unless specified conditions or restrictions are complied with.

(3) Without limiting the generality of paragraph (c) of the last preceding sub-section, the regulations -

(a) may provide that the importation of the goods is prohibited unless a licence or permission to import the goods has been granted as prescribed by the regulations; and

(b) may provide that a licence or permission so granted may be subject to conditions or requirements to be complied with by the person to whom the licence or permission is granted, either before or after the importation of the goods in respect of which the licence or permission has been so granted.

Regulation 4 (2) of the Customs (Prohibited Imports) Regulations provides - The importation into Australia of the goods specified in the second column of the Third Schedule to these Regulations is prohibited unless the conditions, restrictions or requirements specified in the third column of that Schedule opposite to the description of the goods are complied with. The Third Schedule is headed "Goods the Importation of which is Prohibited unless Specified Conditions, Restrictions, or Requirements are Complied With". Item 1 under the heading "Descripton of Goods" is "Aircraft, airframes and aircraft engines" and opposite, under the heading "Conditions, Restrictions and Requirements", is "The importer shall produce to the Collector the permission in writing of the Secretary of the Department of Transport to import the goods" (see Statutory Rule No. 23 of 1977).

The plaintiff contends that the Customs Act (including the regulations under it) has been impliedly amended by the Airlines Agreements Acts to the extent necessary to enable the alleged obligation to be carried out. The plaintiff seeks in effect to treat the regulation as having a further implied condition, restriction or requirement prohibiting importation of aircraft if this would enable any one other than the plaintiff and the Commission to operate a trunk route airline service. The implication is of course inconsistent with the language of the regulation which specifies the applicable conditions. The plaintiff claims the implication is necessary to enable the Commonwealth to carry out its obligation because the Secretary is bound (by reason of s. 92 of the Constitution) to issue the necessary licences to enable the third and fourth defendants to operate interstate trunk airline services upon application by them, unless they have not complied with the regulations or with any directions or order thereunder relating to the safety of operations (reg. 199 (2) of the Air Navigation Regulations (see the Ipec Case; Reg. v. Anderson; Ex parte Ipec-Air Pty. Ltd. [37] ).

The plaintiff contends also that, even if there is power to allow importation of aircraft which would enable those defendants to conduct a trunk route airline service, there is (arising from the Airlines Agreements Acts) a policy binding upon the government to do all it can to stop those defendants or any other person from getting into a position where they may claim the right to operate the interstate trunk route airline service.

The plaintiff claims that if the Secretary, in exercising his discretion under the Regulations, is required or entitled to take into account government policy, then the alleged obligation requires that the government direct or do all it can to persuade the Secretary not to give permission and not to direct or endeavour to persuade him to give such permission.

The plaintiff does not claim that the obligation is expressed in the Airline Agreements, but seeks to imply it from parts of the Agreements (these are set out in detail in other judgments). My conclusion is that there is no such obligation. Where the Agreements purport to impose an obligation, they do so in clear terms (as in cl. 10 (1) of the First Agreement (1952) in which the Commonwealth promised not to discriminate against the plaintiff and to accord it substantially equal treatment with the Commission in relation to the grant of import licences and the allocation of airport facilities). The expression of these promises tells strongly against the implication of the wider promise that the plaintiff claims. A specific obligation of the Commonwealth in respect of permits to import aircraft should not be spelt out of words in a recital stating a general purpose or aim when the subject of imports is dealt with specifically.

The obvious reason that the promise claimed was not expressed (and should not be implied) is that no government would be expected to make a promise which would prevent the exercise of governmental powers across such a broad and indefinite field that it would amount to a far-reaching abdication of governmental responsibility. The Agreements should not be construed to contain an unexpressed obligation that would put the government and future governments of Australia in a position of subservience to the plaintiff. In some of its aspects, the obligation claimed conflicts with fundamental concepts of our framework of government.

If the plaintiff's argument is correct, the consequences are extraordinary. Aircraft are necessary but not sufficient to enable a trunk route airline service to operate. Spare parts, fuel, telephonic and other communication services and pilots are also necessary. The Commonwealth would be obliged to use every one of its powers to prevent anyone (other than the plaintiff and the Commission) from being able to operate such an airline service. The plaintiff conceded that the Commonwealth would be obliged not to encourage manufacture of aircraft in Australia which could enable any other person to operate such an airline service and would be obliged to use all its powers to prevent manufacture which could lead to this result. The plaintiff suggested that the Commonwealth might be debarred from using the regulation-making power granted by the Customs Act (or any other Act) to alter regulations to permit the importation of aircraft if this would enable another person to operate a trunk route airline service. Other examples can easily be imagined. The plaintiff would be able to veto action which the government considered was in the national interest.

The plaintiff's argument that, even if the government is not subject to a statutory duty, it is bound to a particular policy (in the nature of a contractual obligation), assumes that this policy can be enforced by this Court. There is no reason why government policy should not be at variance with contractual obligations. It sometimes is. It would be inconsistent with the separation of powers if the judicial branch of government were to give orders to the executive branch on government policy and on what directions or encouragement the executive branch should give to the members of the public service on matters of government policy.

The plaintiff conceded that the Secretary could quite properly issue permits if the aircraft were intended to be used for private purposes, or other than on trunk routes, or for specialist freight services in accordance with cl. 10 (b) of the Fourth Agreement on trunk routes. In my view, the Secretary can also properly issue permits even if the aircraft are intended to be used for trunk route airline services.

In the Ipec Case [38] there was a division of opinion on whether the Director-General of Civil Aviation should exercise the same power to permit the importation of aircraft quite independently of any direction by the Minister or consideration of government policy. Under s. 64 of the Constitution, the Minister is appointed to administer the Department. The system of responsible government which is reflected in ss. 61 and 64 of the Constitution contemplates (if it does not require) that executive powers and discretions of those in the departments of the executive government be exercised in accordance with the directions and policy of the Minister. Unless the language of legislation (including delegated legislation) is unambiguously to the contrary, it should be interpreted consistently with the concept of responsible government. It would be inconsistent with that concept for the secretary or any officer of a department to exercise such a power or discretion contrary to the Minister's directions or policy (provided of course these are lawful). It is not for the officer to distinguish between "government policy" and the Minister's policy. The duty of those in a department is to carry out the lawful directions and policy of their Minister. It is the Minister who is responsible to the government and the parliament for the directions and policy.

The plaintiff asserted that the two defendant companies were entitled under s. 92 of the Constitution to establish interstate trunk airline services and claimed that the government must carry out its obligation (implied from the Airlines Agreements) by preventing them from getting into the position to claim their entitlement. For the reasons I gave in Buck v. Bavone [39] , I am not satisfied that s. 92 confers the freedom which founds such an entitlement. This does not mean that there is no guarantee of freedom of intercourse in the Constitution. Perhaps I should explain this briefly, even though it is not necessary for this case. In my opinion the concept of the Commonwealth and the freedom required for the proper operation of the legislative, executive and judicial branches in the democratic society contemplated by the Constitution necessitate the implication of such a guarantee (see Crandall v. State of Nevada [40] ; Slaughter-House Cases [41] ; R. v. Smithers; Ex parte Benson [42] ; Buck v. Bavone [43] ).

1. (1976) 135 C.L.R. 110. 2. (1867) 6 Wall. 35 [18 Law. Ed. 745]. 3. (1872) 16 Wall. 36 [21 Law. Ed. 394]. 4. (1912) 16 C.L.R. 99. 5. (1976) 135 C.L.R., at p. 136-137.

Elections of federal Parliament provided for in the Constitution require freedom of movement, speech and other communication, not only between the States, but in and between every part of the Commonwealth. The proper operation of the system of representative government requires the same freedoms between elections. These are also necessary for the proper operation of the Constitutions of the States (which now derive their authority from Ch. V of the Constitution. From these provisions and from the concept of the Commonwealth arises an implication of a constitutional guarantee of such freedoms, freedoms so elementary that it was not necessary to mention them in the Constitution (see United States v. Guest [44] ; Shapiro, Commissioner Welfare of Connecticut v. Thompson [45] ). The freedoms are not absolute, but nearly so. They are subject to necessary regulation (for example, freedom of movement is subject to regulation for purposes of quarantine and criminal justice; freedom of electronic media is subject to regulation to the extent made necessary by physical limits upon the number of stations which can operate simultaneously). The freedoms may not be restricted by the Parliament or State Parliaments except for such compelling reasons.

1. (1965) 383 U.S. 745, at pp. 757-758 [16 Law. Ed. 239, at pp. 248-249]. 2. (1968) 394 U.S. 618, at pp. 632-633 [22 Law. Ed. 2d 600, at p. 614].

The plaintiff (Ansett Transport Industries (Operations) Pty. Ltd.) in this action claimed relief against the first two defendants the Commonwealth of Australia and Mr. C. C. Halton (the Secretary of the Department of Transport), who were the only defendants in the action as it was originally constituted. It sought declarations and injunctions designed to prevent what it claimed were threatened and intended breaches of certain agreements to which it and the Commonwealth were parties, although in most of the agreements there were also other parties. The agreements may conveniently be called collectively the "Airlines Agreements" and are now to be found set out in the First, Second, Third and Fourth Schedules to the Airlines Agreements Act 1952-1973 ("the Act"). The threatened act which it is claimed would constitute a breach of those agreements is, so far as the Commonwealth is concerned, the causing, permitting or urging the second defendant to issue documents signed by him comprising "permission in writing" within the meaning of Item 1 of the Third Schedule to the Customs (Prohibited Imports) Regulations. Such documents would be necessary to enable the third defendant to import two Carvair aircraft and to enable the fourth defendant to import two Argosy aircraft. The threat relied upon was a statement made by the Minister for Transport in the House of Representatives that he had approved the import into Australia of two Carvair aircraft for the third defendant and two Argosy aircraft for the fourth defendant for the carriage of freight between the mainland and Tasmania.

The third and fourth defendants (Air Express Ltd. and Interstate Parcel Express Co. (Australia) Pty. Ltd.), the intending importers of the aircraft, were subsequently joined as defendants and certain consequential alterations were made in the statement of claim, but no relief is claimed against either of them. The Commonwealth and the second defendant demurred to the statement of claim on the ground that it showed no cause of action. The third defendant delivered a defence to the statement of claim notwithstanding the absence of any allegations therein against it and also demurred. The fourth defendant likewise delivered a defence and was subsequently given leave to demur. It is not necessary to specify the detailed grounds of the demurrers.

At the hearing of the demurrers the Solicitor-General for the State of Tasmania also appeared pursuant to s. 78A of the Judiciary Act, as inserted by s. 17 of the Judiciary Amendment Act 1976.

The central question in this action turns upon the proper construction and operation of the Airlines Agreements as set out in the Schedules to the Act. The First Schedule sets out the 1952 Agreement which is an agreement of 24th October 1952 between the Commonwealth and the plaintiff (then named Australian National Airways Pty. Ltd.). It has been amended by subsequent agreements but, unless otherwise indicated, references to it are to its present form.

The recitals to the 1952 Agreement are of some importance and are as follows:

whereas the Australian National Airlines Commission constituted under the Australian National Airlines Act 1945-1947 of the Commonwealth (in this agreement called "the Commission") and the Company are the major operators of airline services in Australia for the transport of passengers and goods:

and whereas in order to facilitate trade and commerce among the States, provide for the efficient carriage of mail by air within Australia and assist the defence of the Commonwealth it is expedient in the opinion of the Commonwealth to make provision for the purpose of ensuring -

(a) the continued existence of the Company, as well as of the Commission, as an operator of airline services within Australia;

(b) the maintenance of competition between the Commission and the Company; and

(c) the efficient and economical operation of air services within Australia;

and whereas for the attainment of those purposes it is necessary to make arrangements for the operation of air services within Australia and to provide assistance to the Company in manner provided in this agreement:

The Agreement is expressed to have no force or effect and not to be binding until it is approved by Parliament and to come into force upon the date when it is so approved. It was approved by the Civil Aviation Agreement Act 1952 (No. 100 of 1952) which came into operation on 18th November 1952. That Act by s. 3 approved the Agreement as set out in the Schedule and by s. 4 it authorized the Commonwealth to give such guarantees and make such advances on loan as were provided for in the Agreement. Section 5 provides that the Australian National Airlines Commission constituted under the Australian National Airlines Act 1945-1947 ("the Commission") should do all such things as the Agreement provides that the Commission shall do. That Agreement is expressed to run for a period of fifteen years and accordingly would, but for subsequent agreements and legislation, have expired on 18th November 1967. It was however extended for a further period of ten years by the 1961 Agreement which came into operation on 27th October 1961 pursuant to the provisions of the Airlines Agreements Act 1961 (No. 70 of 1961). By the 1973 Agreement which came into operation on 12th December 1973, pursuant to the Airlines Agreements Act 1973 (No. 178 of 1973), it was agreed that the 1952-1972 Airlines Agreement should continue in force after 18th November 1977 unless and until determined in accordance with that clause. That clause enables the plaintiff to terminate the Agreement at any time after 31st December 1977 by giving notice in writing taking effect not less than five years after the giving of the notice. The Commonwealth may terminate the Agreement by giving notice after 31st December 1977 to take effect not less than five years after the giving of the notice, but shall not give such notice unless the consent of both Houses of the Parliament expressed by resolution has first been given to the termination of the Agreement. Accordingly, the Agreements have a minimum life of a further five years after 31st December 1977.

In the 1952 Agreement there are a number of provisions which are of some significance for present purposes. The material clauses may be summarized as follows:

Clause 3 provides for the Commonwealth at the request of the plaintiff to guarantee the repayment to the Commonwealth Bank of certain borrowings by the plaintiff to enable it to purchase aircraft. It also provides that if, after the commencement of the Agreement, the Commission is authorized to purchase certain aircraft, the Commonwealth will facilitate the borrowing of such amounts as may be required by the plaintiff for the purchase of an equal number of similar aircraft.

Clause 5 provides that the Commonwealth will take steps to ensure that the plaintiff will share substantially equally in the carriage of airmail.

Clause 6 provides that the Commonwealth will take the necessary steps to ensure that the business transacted on Commonwealth Government warrants in respect of passengers or freight is freely available to both the Commission and the plaintiff and that the holder of a warrant is to have a free choice as to which service he will use.

Clause 7 (1) (deleted in 1961) provided for rationalization of various matters in respect of routes which the plaintiff and the Commission were operating at the commencement of the Agreement.

Clause 8 provides that the Commission and the plaintiff are, before purchasing aircraft from the Commonwealth or any authority of the Commonwealth, to apply to the chairman appointed under cl. 14 for a certificate of approval.

Clause 9 provides that the chairman is to grant certificates of approval under cl. 8 so that available aircraft shall be equally divided between the Commission and the plaintiff.

Clause 10 provides that the Commonwealth is not to exercise any of its powers under any Act, including the power to make regulations, so as to discriminate against the plaintiff and will during the period of the Agreement give the plaintiff substantially equal treatment with the Commission in relation to the grant of import licences and the allocation of airport facilities.

Clause 11 contains various undertakings by the plaintiff, e.g. to retain for use in its air services in Australia all aircraft purchased with moneys borrowed by it and guaranteed by the Commonwealth and all aircraft purchased or hired in accordance with cll. 8 and 9, not to sell or charge those aircraft without the consent of the Commonwealth and to operate efficient air services within Australia and conduct its operations in a businesslike and economical manner.

Clause 12 contains provisions with respect to states of emergency which enable the Minister to request the plaintiff to make its aircraft available for use by the Commonwealth.

The 1952 Agreement was followed by the 1957 Agreement which was made on 16th December 1957 between the Commonwealth, the Commission, the plaintiff (under its former name), Ansett Airways Pty. Ltd. and Ansett Transport Industries Ltd. (A.T.I.) and approved by the Civil Aviation Agreement Act 1957 (No. 86 of 1957) which came into operation on 12th December 1957. Although the 1957 Agreement is no longer in operation, having been brought to an end by the 1961 Agreement, it is desirable to refer to it because it is the origin of certain provisions now in the 1961 Agreement and of the "two airlines policy". It recited that A.T.I. had purchased all the issued shares in the plaintiff and had the controlling interest in Ansett Airways Pty. Ltd. The fourth, fifth and sixth recitals were as follows:

and whereas one of the objects of the parties to this agreement is to secure and maintain a position in which there are two, and not more than two, operators of trunk route airline services, one being the Commission, each capable of effective competition with the other, and the parties intend that this agreement shall be construed having regard to that object:

and whereas the parties to this agreement are desirous to extending certain of the provisions of the Civil Aviation Agreement as to rationalization of services to certain other routes:

and whereas the parties to the Civil Aviation Agreement are desirous, as part of the steps referred to in clause 7 of that agreement, to review and to keep under review at all times during the continuance of the Civil Aviation Agreement air routes, timetables, fares and freights and other related matters in respect of certain routes, and for the purpose of this agreement of establishing a committee as set out in this agreement:

Clause 1 provided that the Commission, the plaintiff and A.T.I. and "all airline companies or firms in which Ansett Transport Industires Ltd. has a controlling interest (all of which Commission, companies and firms are in this agreement collectively referred to as "the airline operators") will take immediate steps to review and will keep under review at all times during the continuance of this agreement air routes, timetables, fares and freights and other related matters in respect of routes (in addition to the routes specified in sub-cl. (1.) of cl. 7) " of the 1952 Agreement "on which both the Commission and any of the other airline operators operate, or propose to operate, so as to avoid unnecessary overlapping of services and wasteful competition, to provide the most effective and economical services with due regard to the interests of the public and to bring earnings into a proper relation to over-all costs."

Clause 2 provided that the provisions of cl. 7(2), (3) and (4), and cl. 14 of the 1952 Agreement should apply in respect of cl. 1 of this Agreement in the same way as they apply to cl. 7(1) of the 1952 Agreement.

Clause 3 set up a Rationalization Committee to be constituted by a member nominated by the Minister, to be known as the co-ordinator, a member nominated by the Commission, and a member nominated by the plaintiff.

Clause 4 dealt with the functions of the Rationalization Committee and provided that where the airline operators concerned are unable to agree on any matter arising under cl. 7(1) of the 1952 Agreement, or cl. 1 of the 1957 Agreement the matter is to be referred to the Committee. If the members appointed by the Commission and the plaintiff were, after such consideration, still unable to agree then the co-ordinator was to decide the matter and his decision was final and binding subject to sub-cl. (4). By sub-cl. (4) any party to a matter decided by the co-ordinator may elect to have it decided by the "Chairman" appointed in pursuance of cl. 14 of the 1952 Agreement.

Clause 5 provided as follows: "As soon as practicable, and in any case not later than twenty-five months after the date of this agreement, Ansett Airways Proprietary Limited will cease to operate airline services and will not, during the continuance of this agreement resume the operation of an airline service or services."

Clause 6 provided as follows: "Ansett Transport Industries Limited will do everything within its power to ensure that the airline companies or firms in which it has a controlling interest will do all such acts and things as this agreement provides that they will do and that those companies and firms will not do anything inconsistent with the provisions or purposes of this agreement."

There intervened between the 1957 Agreement and its successor, the 1961 Agreement, the passing of the Airlines Equipment Act 1958 to which reference is made in the 1961 Agreement. The expression "the Company" is defined as meaning "Ansett Transport Industries Limited, and includes every company or firm in which Ansett Transport Industries Limited has from time to time a controlling interest and which owns or operates aircraft". That Act deals in Pt II with borrowings by the Commission for the purchase of Lockheed Electra aircraft. It deals in Pt III with "Financial Arrangements in relation to Australian National Airways Proprietary Limited and certain other Companies". By s. 8 it provides that "In order to further the objects and purposes referred to in the recitals to the Agreement approved by the Civil Aviation Agreement Act 1952, the Treasurer may, on behalf of the Commonwealth, at the request of Ansett Transport Industries Limited and subject to the conditions required by this Part" guarantee the repayment of certain loans for the purpose of enabling A.T.I. or the plaintiff to purchase certain Lockheed Electra aircraft and certain Fokker Friendship aircraft. The required conditions are set out in ss. 9 and 10.

Part IV deals with "Rationalization of Aircraft Fleets". It contains in s. 11 a definition of aircraft capacity. "Competitive route" is defined as meaning "a route over which air services are operated both by the Commission and by the Company", and "non-competitive route" is defined as meaning any other route. Under s. 12 the Minister is, from time to time and in relation to a specified future period, to estimate the total traffic on each of the competitive routes, the non-competitive routes of the Commission and the non-competitive routes of the plaintiff and he shall "determine the maximum aircraft capacity of the aircraft required by the Commission and the Company respectively for the purposes of - (i) carrying one-half of the total traffic estimated by the Minister in respect of the competitive routes; and (ii) operating its services on non-competitive routes."

Sub-section (2) sets out the matters to which the Minister is to have regard in making the estimates and determinations under sub-s. (1). Under s. 13 certain obligations are incurred by the plaintiff and the Commission on the giving of the guarantees referred to in s. 8. The obligations are that each of them should not provide, on competitive routes, air services capable of performing a number of revenue traffic ton-miles in excess of the aircraft capacity specified by the Minister, should comply with directions given by the Minister as to the disposal of excess aircraft, and also should not purchase, lease or otherwise obtain the use of aircraft unless the Minister has certified in writing that in his opinion the obtaining of the aircraft would not result in the Commission or "the Company" having the use of any aircraft in excess of the aircraft required to provide the aircraft capacity determined under s. 12. Under s. 15 it is provided "the Minister shall not, in the exercise of his powers under this Part, unfairly discriminate in favour of the Commission or the Company as against the other".

The 1961 Agreement is set out in the Second Schedule to the Act and came into effect on 27th October 1961 pursuant to the Airlines Agreements Act 1961. It was made between the same parties as the 1957 Agreement, save that Ansett Airways Pty. Ltd. was not a party to it. The 1961 Agreement recites the making of the 1952 Agreement and the passing of the Civil Aviation Agreement Act 1952. The third, fourth, fifth and sixth recitals to the 1961 Agreement are as follows:

and whereas following the acquisition by Ansett Transport Industries Limited of all the issued shares in Australian National Airways Proprietary Limited it became desirable to make further provision with respect to the operation of air services within Australia:

and whereas by an agreement (in this agreement called "the Civil Aviation Agreement 1957") made the sixteenth day of December, One thousand nine hundred and fifty-seven between the Commonwealth, the Commission, Ansett Transport Industries Limited, Australian National Airways Proprietary Limited and Ansett Airways Proprietary Limited in the form set forth in the Schedule to the Civil Aviation Agreement Act 1957 additional arrangements including the establishment of a Rationalization Committee were agreed:

and whereas one of the objects of the parties to this agreement is to secure and maintain a position in which there are two, and not more than two, operators of trunk route airline services, one being the Commission, each capable of effective competition with the other, and the parties intend that this agreement shall be construed having regard to that object:

and whereas in order to further the purposes and objects referred to in the recitals to the Civil Aviation Agreement 1952 the parties to that agreement consider that it is desirable to extend its term for a period of ten years:

Clause 3 deals with the acquisition of turbo-jet aircraft by the Commission and the plaintiff.

Clause 4 provides for the provision of guarantees by the Commonwealth of certain borrowings by A.T.I. and the plaintiff, and cl. 5 places a time limit on the provision of guarantees by the Commonwealth under the 1952 Agreement.

Clause 6 provides that A.T.I. will not in certain circumstances request a guarantee under s. 8(1)(b) of the Airlines Equipment Act 1958.

(1) Subject to the next succeeding sub-clause, the Commission and the Company shall during the continuance of this agreement be bound by the provisions of Part IV. of the Airlines Equipment Act 1958 and shall continue to be subject to the obligations specified in paragraphs (a), (b), (c) and (d) of section 13 of that Act notwithstanding that all moneys in respect of which guarantees have been given under section 8 of that Act have been repaid.

(2) The obligation specified in paragraph (c) of section 13 of the Airlines Equipment Act 1958 shall not apply to aircraft with an all-up weight of less than twenty thousand pounds (20,000 pounds).

(3) The Commonwealth will ensure that the Minister will exercise his powers under Part IV. of the Airlines Equipment Act 1958 during the period of this agreement.

Clause 8 deals with air navigation charges and taxes on aviation fuel.

Clause 9 (1) provides that cll. 4, 7 and 14 of the 1952 Agreement and the whole of the 1957 Agreement shall cease to have force and effect upon the commencement of the 1961 Agreement. Subclause (2) provides in substance that current decisions of the previous rationalization bodies are to remain in force.

Clause 10 then deals with rationalization in somewhat more elaborate terms than the previous agreements. It is as follows:

In order to avoid unnecessary overlapping of services and wasteful competition, to provide the most effective and economical services with due regard to the interests of the public and to bring earnings into a proper relation to overall costs, the Commission and the Company will keep under review at all times during the continuance of this agreement the following matters in relation to air services within Australia and the Territories between Australia and the Territories and between the Territories: -

(b) the aircraft types and aircraft capacity used on those air services;

(c) proposed variations in the levels of fare and freight rates;

(d) the industry passenger load factor and freighter load factor necessary to permit profitable airline operations by the Commission and the Company in relation to particular periods on specified groups of competitive routes; and

(e) any other matters effecting the efficient and economical operation of those air services.

Clause 11 deals with the Rationalization Committee and its procedure.

Clause 12 deals with functions of the Committee in much the same way as in the 1957 Agreement. It provides that if the Commission and the plaintiff are unable to agree on any matter referred to in cl. 10, the matter in dispute may be referred to the Committee. The Committee is then to consider the matter and if members nominated by the two operators are still unable to reach agreement, the co-ordinator is to decide the matter and to give his reasons in writing.

Clause 13 provides for a person to be called the "Arbitrator" who is to be appointed by agreement between the Commission and A.T.I. or in default of agreement is to be a Justice of a federal court other than the High Court made available under arrangements with the Attorney-General. The clause provides for procedure and gives the arbitrator the same powers as the co-ordinator.

By cl. 14 the Commission and the plaintiff are each to give effect to and to take no steps inconsistent with an agreement arrived at under cl. 10 or under cl. 12, a final and binding decision of the co-ordinator and a decision of the arbitrator.

Ansett Transport Industries Limited will do everything within its power to ensure that the companies or firms in which it has from time to time, whether directly or indirectly, a controlling interest will do all such acts and things as this agreement and the Civil Aviation Agreement 1952 as affected by this agreement provide that they will do and that those companies and firms will not do anything inconsistent with the provisions or purposes of those agreements.

Clause 20 extends the 1952 Agreement for a further period of ten years (i.e. to 18th November 1977) and provides that the 1961 Agreement shall be read and construed as forming part of the 1952 Agreement as extended and as affected by the 1961 Agreement.

Clause 23 provides that an obligation, prohibition or limitation imposed on A.T.I. shall severally bind or apply to A.T.I. and each and every company or firm in which that company has from time to time, whether directly or indirectly, a controlling interest.

It is thus apparent that the 1957 Agreement proved to be of an interim nature. It dealt with the situation which arose upon A.T.I. acquiring the whole of the issued shares in the plaintiff. At that time another company under the control of A.T.I., namely Ansett Airways Pty. Ltd., also operated airline services within Australia. The 1952 Agreement had dealt amongst other things with the rationalization of the airline services of the Commission and the plaintiff in respect of routes on which both were operating services at the date of the commencement of that Agreement, i.e. 18th November 1952. The 1957 Agreement contained a recital in the form now contained in the fifth recital to the 1961 Agreement, relating to the "two airline policy". It provided in cl. 5 that as soon as practicable and in any event within a period not exceeding twenty-five months Ansett Airways Pty. Ltd. would cease to operate airline services and that it would not during the continuance of that Agreement, resume the operation of airline services. The 1957 Agreement was expressed to continue in force until the termination of the 1952 Agreement. In addition, A.T.I. was bound to do everything within its power to ensure that airline companies or firms in which it had a controlling interest would do all such acts and things as the Agreement provided that they should do and that those companies would not do anything inconsistent with the provisions or purposes of the Agreement. It extended the rationalization procedure established in 1952 to air routes in addition to those specified in the 1952 Agreement cl. 7 (1), namely to those upon which both the Commission and any one of the other "airline operators" (as defined) operated or proposed to operate. This was of course part of the change necessary to give effect to the policy of two and not more than two operators of trunk route airline services. After the period specified for the closing down of the operations of Ansett Airways Pty. Ltd. the 1961 Agreement was made. It brought the 1957 Agreement to an end but like obligations and a somewhat re-arranged and extended rationalization system was substituted.

The 1961 Agreement was followed by the 1972 Agreement made on 21st October 1972 between the Commonwealth, the Commission, A.T.I. and the plaintiff which is referred to in the Agreement as "the Operating Company". It was approved and authorized by the Airlines Agreements Act 1972 (Act No. 129 of 1972). It contains a number of recitals of which the first and second are in the same form as the recitals to the 1961 Agreement. The third recital substantially corresponds with the fourth recital in the 1961 Agreement. The fourth recital recites the making of the 1961 Agreement. The fifth, sixth and seventh recitals refer to the previous Agreements. Finally, it is recited that the parties are prepared to agree to the further continuance of the Agreements upon certain terms as set out.

Clause 3 of the 1972 Agreement provides that it is supplemental to the 1952 Agreement and shall be read and construed as forming part of the 1952 Agreement as extended and affected by the 1961 Agreement, and that they are together to be known as the 1952-1972 Airlines Agreement.

Clause 4 provides for the continuance of the 1952-1972 Airlines Agreement after 18th November 1977 in the terms already set out above, i.e. that it may be terminated only by notice given after 31st December 1977 taking effect not less than five years after the giving of the notice.

Clause 5 deals with "parallel scheduling", by the two airlines and gives the Minister certain powers with respect thereto.

For the purpose of providing for the maintenance and encouragement of rural air services, the Commission and the Operating Company each undertakes -

(a) that it will maintain airline services to all places to which it operates airline services at the date of this Agreement for so long as the revenue from the particular service exceeds the direct operating costs of that service; and

(b) that it will not cease to operate a service except after prior consultation with the Director-General with a view to the replacement of the service by an air service

conducted by the holder of a charter licence to whom approval has been given to operate a regular public transport service in accordance with regulation 203 of the Air Navigation Regulations.

Clause 7 imposes an obligation on the Commission, A.T.I. and the plaintiff to investigate and keep under review promotional fares.

Clause 8 contains an obligation on the Commission, A.T.I. and the plaintiff to investigate and keep under review the stimulation and promotion of carriage of freight by air.

The parties acknowledge that nothing in 1952-1972 Airlines Agreement shall preclude the Commonwealth, the Minister or the Director-General from permitting the holder of an airline or charter licence to develop -

(a) air services on routes other than trunk routes; or

(b) specialist freight and passenger services (including low-cost inclusive tours) of a nature which in the opinion of the Minister are not adequately provided for either by the Commission or the Operating Company,

consistently with the object of the parties to the 1952-1972 Airlines Agreement to secure and maintain a position where there are two and not more than two operators of trunk route airline services, one being the Commission, each capable of effective competition with the other.

Schedule 4 to the Airlines Agreements Act 1952-1973 contains a further Agreement made between the same parties on 26th October 1973 and which came into operation on the passing of the Airlines Agreements Act 1973 (No. 178 of 1973) on 12th December 1973. This Agreement deals only with the recovery by the Commonwealth of the costs of the provision of facilities properly attributable to civil air transport and with the adjustment of fares by reason of such additional charges. None of its provisions is in any way material to the present problem.

Although the 1957 Agreement ceased to have any operation in 1961, it is necessary to refer to it to obtain an understanding of the Airlines Equipment Act 1958. That Act is based on the assumption that at the date of its enactment (10th October 1958) the "two airlines" policy was already in operation. It does not directly appear whether the obligation of Ansett Airways Pty. Ltd. to cease to operate airline services, and of A.T.I. to ensure that it did so, had been performed, but the time specified had not yet expired. However the practical situation was that the airline operations of the plaintiff and of Ansett Airways Pty. Ltd. were being conducted by companies each of which was controlled by A.T.I. and that under cl. 1 of the 1957 Agreement the rationalization procedures applied to all airline companies or firms in which A.T.I. had a controlling interest. The provisions of s. 13, read with the definitions of competitive route in s. 11 and of the Company in s. 4 show that the Minister was under s. 12 to determine the maximum aircraft capacity of the aircraft required by the Commission and "the Company" (i.e. A.T.I. and all airline companies and firms in which it had a controlling interest) respectively, for the purpose of carrying one-half of the total traffic estimated by the Minister in respect of the competitive routes. That exercise would be pointless, and the provisions of s. 13 dependent upon it, equally pointless, unless there were a "position in which there are two, and not more than two, operators of trunk route airline services "

The relevant recital to the 1957 Agreement was included in the recitals to the 1961 Agreement. Moreover cl. 7(3) of the 1961 Agreement provides that "The Commonwealth will ensure that the Minister will exercise his powers under Part IV. of the Airlines Equipment Act 1958 " That clause is to continue, like the rest of the 1961 Agreement until 1977, i.e. for the balance of the then extended term of the Agreements. It too would be pointless if there were more than two operators of trunk route airline services. The provisions of cll. 10 to 14 (inclusive) of the 1961 Agreement appear to me also to proceed upon the basis that there are only two operators of trunk route airline services.

It would require no express agreement to produce the result that nothing in the 1952-1972 Airlines Agreement would prevent the Commonwealth, the Minister or the Director-General from permitting the development of air services on routes other than trunk routes consistently with the object of the parties to that Agreement. However for the Commonwealth, the Minister or the Director-General to permit other operators to develop "specialist freight and passenger services" on trunk routes would not be consistent with the object of the parties as expressed in the relevant recital to the 1961 Agreement, unless some special provision declared it to be so. The effect of cl. 10(b) of the 1972 Agreement is in my opinion to declare that for the Commonwealth, the Minister or the Director-General to permit the development by other operators of specialist freight and passenger services on trunk routes where the Minister holds the required opinion shall be consistent with the object of the parties as stated in the relevant recital, notwithstanding that without such agreement it would not be consistent with that object. The use of the word "acknowledge" does not in this context mean that the clause merely records the previously existing situation. Paragraph (a) may be assumed to be related to routes which are not trunk routes, though subject to "rationalization", but it provides for a modification of the objective of the plaintiff and the Commission under cl. 11 (1) (c) of the 1952 Agreement to "conduct its operations in a businesslike and economical manner". Paragraph (b) is on its face recording a change which is to operate for the future as the use of the word "shall" makes clear. To this extent the object of the parties is therefore modified and the operational situation may thereafter be changed by permission of the Commonwealth, the Minister or the Director-General without departure from the continuing joint objective. Clause 10 thus recognizes that the object of the parties as stated in the recital cannot be modified without agreement, and that there were at that time two, and only two, operators of trunk route airline services.

It is necessary to consider what is the contractual operation or effect of the provisions to which I have referred in the preceding two paragraphs. It is in effect argued that these provisions, taken with the recitals and the general scheme of the Airline Agreements as a whole, produce the result that there is an implied term that the Commonwealth will itself "secure and maintain" the position referred to in the recital. If it were so formulated I would not read it as requiring the Commonwealth to take any step outside its constitutional powers. Neither statute nor agreement may do that, and it could not be a breach of any agreement for it to fail or refuse to take any such step. Such an undertaking would require the Commonwealth to do no more than take such steps as were lawfully, including constitutionally, open to it to achieve and maintain the objective in question.

I would prefer to express the position by saying that the circumstances mentioned in the paragraphs referred to above, including the particular clauses of the Agreements in the context of the Agreements as a whole, demonstrate that the parties were contracting, at least from 1961 onwards, on the common understanding that the position then prevailing would continue during the term of the Agreements and that the common objective of the parties would continue to be as stated. For one party to bring that situation to an end otherwise than in accordance with the Agreement is a breach of such a contract. This is a position analagous to that described in the speech of Lord Atkin in Southern Foundries (1926) Ltd. v. Shirlaw [46] :

The arrangement between the parties appears to me to be exactly described by the words of Cockburn C.J. in Stirling v. Maitland [47] : "If a party enters into an arrangement which can only take effect by the continuance of an existing state of circumstances"; and in such a state of things the Lord Chief Justice said: "I look on the law to be that there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative." That proposition in my opinion is well established law. Personally I should not so much base the law on an implied term, as on a positive rule of the law of contract that conduct of either promiser or promisee which can be said to amount to himself "of his own motion" bringing about the impossibility of performance is in itself a breach. 1. [1940] A.C. 701, at p. 717. 2. (1864) 5 B. & S. 840, at p. 852 [122 E.R. 1043, at p. 1047].

The general proposition stated by Lord Blackburn in Mackay v. Dick [48] appears to me helpful in the present situation. He there said:

I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. 1. (1881) 6 App. Cas. 251, at p. 263.

If the matter be approached by asking whether the implication of a covenant by the Commonwealth to take such steps as lay within its power to achieve and maintain the relevant position is necessary to give business efficacy to the 1952-1961 Agreement the same result follows. The considerations to which I have referred in dealing with the obligation not to take any steps which would or would be likely to bring to an end the situation upon which the Agreement, including the obligations under it with respect to the Airlines Equipment Act, has operated from 1961 lead in my opinion to the conclusion that the implication is necessary in the sense recognized by the authorities.

The statements of the tests of whether or not a term or covenant should be implied are numerous and wellknown. I would refer to the well-known observation of Jordan C.J. in Heimann v. Commonwealth of Australia [49] as a sufficient example. All agree that the principle is difficult to apply in any individual case and that little assistance is to be derived from terms implied in one contract in determining whether terms are to be implied in another. This is particularly so where the contract under consideration is, as this Agreement is, sui generis. Many cases, and most submissions, on this topic contain statements to the effect that, if the parties really intended to be bound by a suggested term it would have been very easy for them to have expressly included it in the written contract. For my own part I find such a statement unhelpful for, it is equally applicable to every case where the point has arisen, whether the court has implied a term or has refused to do so.

It is not necessary to decide in this case whether the 1952-1961 Agreement is properly to be called a "deed". Moreover it is clear that a term of an agreement executed under seal amounts to a covenant - see Norton on Deeds, 2nd ed. (1928), p. 533 and see also pp. 215, 537-539 where examples are given of cases which establish that a recital in a deed may imply a covenant but show that in every case it must be plain upon the whole deed that it was so intended. See also per Malins V.C. in Jackson v. North Eastern Railway Co. [50] . For present purposes there is no material difference between deeds properly so called and contracts merely in writing.

I am therefore of opinion that under the Airlines Agreements 1952-1972 there is an obligation on the Commonwealth derived from the Agreements and the surrounding circumstances not to do any act which would bring to an end the position established by the time of the 1961 Agreement, namely that there were two and no more than two trunk route airline services. The obligation may be expressed positively by saying that there is an implied covenant by the Commonwealth that it will take all steps which it lawfully and constitutionally may to maintain that situation. There are plainly some steps which would tend to that end but which lie outside Commonwealth power. It would be fanciful to suppose a common intention that the Commonwealth should be bound to do that which was contrary to s. 92.

It is easy to suggest some examples of steps within the power of the Commonwealth to which this obligation would extend: not itself to set up a third trunk route airline service, not to provide assistance to an intending third operator by way of providing finance or the supply of aircraft. The present proceeding relates to another example which in the light of the argument requires further analysis.

It is to be observed that the expression "trunk route airline services" in the recital is not defined anywhere in the Agreements, nor in any legislation. In the 1972 Agreement it is provided in cl. 15 that in cl. 10 of the 1961 Agreement (as affected by the 1972 Agreement) the expression "air services" is to mean air services for which an airline licence under the Air Navigation Regulations is or has been held during the currency of the 1952-1972 Airlines Agreement by both the Commission and the "Operating Company". That definition suggests that the expression "trunk route airline services" as used elsewhere has a different meaning. Indeed it seems clear that it must have a somewhat wider meaning because as time goes by trunk route airline services may have a larger content than those for which licences are or have been held at any particular time during the currency of the Agreement. Once airline licences under the Air Navigation Regulations are granted to the Commission or the plaintiff in respect of a new route, being a trunk route, the operations on such a route would become subject to the rationalization procedures in cl. 10 of the 1961 Agreement. No doubt the expression "trunk route" is not a precise one, the exact limits of the content of which cannot be defined with precision at any particular time. It is probably derived from the distinction between trunk and branches familiar in a botanical sense and its derivative application in relation to railways and roads. Generally speaking it is an expression which will probably not be difficult to apply in any particular instance, though it may be difficult to define.

To understand the plaintiff's fears that it will suffer damage if the announced intention of the Minister to permit the importation of aircraft for use on trunk route airline services, it is necessary to refer to the Customs Act 1901-1973 and regulations made thereunder, and to the Air Navigation Regulations.

(1) The Governor-General may, by regulation, prohibit the importation of goods into Australia.

(2) The power conferred by the last preceding sub-section may be exercised -

(a) by prohibiting the importation of goods absolutely;

(b) by prohibiting the importation of goods from a specified place; or

(c) by prohibiting the importation of goods unless specified conditions or restrictions are complied with.

(3) Without limiting the generality of paragraph (c) of the last preceding sub-section, the regulations -

(a) may provide that the importation of the goods is prohibited unless a licence or permission to import the goods has been granted as prescribed by the regulations; and

(b) may provide that a licence or permission so granted may be subject to conditions or requirements to be complied with by the person to whom the licence or permission is granted, either before or after the importation of the goods in respect of which the licence or permission has been so granted.

Regulation 4 (2) of the Customs (Prohibited Imports) Regulations provides as follows:

The importation into Australia of the goods specified in the second column of the Third Schedule to these Regulations is prohibited unless the conditions, restrictions or requirements specified in the third column of that Schedule opposite to the description of the goods are complied with. Item 1 of the Third Schedule is described in column 2 as "Aircraft, airframes and aircraft engines". In the third column, opposite Item 1, the following was, until 1st March 1977, set out: "The importer shall produce to the Collector the permission in writing of the Director-General of Civil Aviation to import the goods". That regulation and Item 1 of the Third Schedule have been in that form from 1956 until after the commencement of the present proceedings. Some doubt existed whether the reference to the "Director-General of Civil Aviation" should be read as a reference to the Secretary of the Department of Transport, since at the date of the issue of the writ there was no longer a separate Department of Civil Aviation, and no longer a Director-General of Civil Aviation. We were informed by the Solicitor-General for the Commonwealth on the opening day of the hearing that on 1st March 1977 there had been an amendment made to the regulations by omitting from Item 1 in the Third Schedule the words "Director-General of Civil Aviation" and substituting the words "Secretary to the Department of Transport" and that that regulation had been notified in the Gazette on 2nd March 1977. Accordingly, the significance of the reference to the Director-General no longer had any relevance and was not thereafter relied upon by any party.

The Air Navigation Regulations, regs 198 and 199 (2) provide as follows:

198. An aircraft shall not be used in regular public transport operations except under the authority of and in accordance with a licence (in these Regulations referred to as an "airline licence") issued by the Director-General.

(2) Where the proposed service is an interstate service, the Director-General shall issue an aerial work, charter or airline licence, as the case requires, unless the applicant has not complied with, or has not established that he is capable of complying during the currency of the licence with, the provisions of these Regulations, or of any direction or order given or made under these Regulations, relating to the safety of the operations.

Regulation 197 provides that aircraft may not be used in charter operations without a licence.

The plaintiff therefore says that, if the third and fourth defendants are able to import suitable aircraft, they will then be entitled as of right to a charter licence or an airline licence to carry freight on trunk routes between places in Victoria and places in Tasmania subject only to satisfying the requirements as to safety set out in reg. 197 (3) and reg. 199 (2), and thus break down the two airline policy.

Thus the provisions of the Customs (Prohibited Imports) Regulations provide another example of a step which the Commonwealth may lawfully refrain from taking, which if taken would or might prejudice or bring to an end the situation where there are two and not more than two operators of trunk route airline services. Aircraft are and were at the time of all these Agreements prohibited imports. That prohibition could at all material times be removed in respect of particular aircraft by the production of "permission in writing signed by the Director-General of Civil Aviation" (now the Secretary of the Department of Transport). If the Commonwealth were to take any step to procure, persuade or encourage the Secretary of the Department to sign such a document in respect of aircraft intended to be used in trunk route airline services as it otherwise lawfully might, it would amount to an endeavour, contrary to its obligation under the Agreements, to bring to an end the existing situation upon which those Agreements are based, or alternatively a breach of the obligation to maintain the "two airline policy". There could be no question of such a negative obligation being outside Commonwealth power.

The validity of those provisions of the Customs Act and of the Customs (Prohibited Imports) Regulations, as well as those provisions of the Air Navigation Regulations was established by the decision of this Court in Reg. v. Anderson; Ex parte Ipec-Air Pty. Ltd. [51] ("the Ipec Case").

A number of arguments were advanced against the making of any implication. The Solicitor-General argued that no reliance had been placed on cl. 10 of the 1972 Agreement in the statement of claim and it is not pleaded that the Minister did not entertain the relevant opinion under cl. 10. It seems to me that this argument is misconceived. If in fact there is an obligation or an implied term of the kind to which I have referred, cl. 10 operates by way of an exception and indeed it is expressed in a manner appropriate to an exception. It would not be appropriate to plead in a statement of claim that an exception did not operate. It would be appropriate to rely upon cl. 10 by way of a defence, under which it might be established that the Minister entertained the relevant opinion and that the service for which the Minister proposed to permit importation was of the kind specified. The Commonwealth also relied upon the provision in cl. 10 of the 1952 Agreement that the Commonwealth would during the Agreement give "the Company substantially equal treatment with the Commission in relation to the grant of import licences and the allocation of airport facilities". It was argued that it would be contrary to the ordinary rules of construction to imply a term about importation where the contract expressly dealt with one aspect of it. So it might be, if the term to be implied related to import licences only, but it does not. The term which I consider to be implied in the 1952-1961 Agreement is of a general character, namely that the Commonwealth is obliged to do nothing to disturb the existing situation in which there were two and not more than two operators of trunk route airline services and to secure and maintain that position. What is necessary to comply with that obligation will depend upon the particular circumstances prevailing from time to time and may in some circumstances operate on matters, such as importation of aircraft, which are the subject of other provisions, so long as there is no conflict. It is an obligation which has a variable content and a wide operation. In the present case the obligation operates so as to oblige the Commonwealth not to permit, encourage or facilitate the granting of permission to import, which would operate to lift the general prohibition of the importation of aircraft, so as to enable a third operator to commence trunk route airline services.

It was argued that the 1957 Agreement is inconsistent with the notion that the parties are contractually bound to permit two and not more than two airlines and that the recital to that Agreement and the same recital in the 1961 Agreement does no more than indicate the purpose of the Agreement for the guidance of the Rationalization Committee in the allocation of routes and so forth between the two companies. In my opinion the recital has no direct relevance, and certainly does not have exclusive relevance, to the activities of the Rationalization Committee. It is, I think, plain upon the face of the recital that it is not concerned with guidance to the Rationalization Committee. The guiding principles for the Rationalization Committee are "to avoid unnecessary overlapping of services and wasteful competition, to provide the most effective and economical services with due regard to the interests of the public and to bring earnings into a proper relation to overall costs". Clause 10 is quite plainly concerned with the rationalization of the operations of the two airlines and the Committee has no power or authority to deal with any other airline. Accordingly there is no means by which its activities could secure and maintain a position in where there were two and not more than two operators of trunk route airline services and such a policy would give no guidance in the manner in which they were to avoid unnecessary overlapping of services and wasteful competition between these two airline services or provide the most efficient, effective and economical services with due regard to the matters referred to in cl. 10. The obligation on the Rationalization Committee to keep under review the industry/passenger load factor and freight/load factor necessary to permit profitable airline operations by the Commission and the Company makes it clear that the Committee is concerned only with the operations of those two airline operators. This is entirely consistent with the recital, but the recital does not aid the Committee in the performance of its function.

Reliance was placed upon the fact that the recital speaks of two operators each capable of effective competition with each other, but it does not follow that there are not to be other persons engaging in air services. This gives no weight to the fact that there are to be "not more than two" and that what the Agreement is dealing with is trunk route airline services only. That provision in itself plainly contemplates that there will, or at least may, be other operators conducting air or airline services which do not answer that description and their position not dealt with at all. It does make express provision in cl. 10 for other operators to operate aircraft in certain circumstances on some trunk line air routes which are "competitive routes" as defined. In understanding the application of the definition of competitive services one has to bear in mind the limited area or limited range of services which the Commission was authorized to operate under the Australian National Airlines Act 1945, i.e. in substance interstate and territorial services. There was thus from the beginning a wide area of possible airline services which were right outside the operation of the Airlines Agreements.

It was argued that no covenant could be implied inconsistent with cl. 10. No doubt that is correct as a general proposition, but it does not appear to be relevant on the question of whether there is to be implied an obligation on the part of the Commonwealth to secure and maintain the situation described in the recital. What I have indicated above is in no way inconsistent with cl. 10. It is a covenant which is implicit in cl. 10 and on which cl. 10 operates by way of partial proviso or exception. Moreover, it is difficult to see what purpose cl. 10 serves if there is not an obligation upon the Commonwealth to secure and maintain the position of two and not more than two operators. It is a proviso that, notwithstanding the existence of such an obligation, the Minister may permit specialist freight and passenger services of a nature which in the opinion of the Minister are not adequately provided by either the Commission or the plaintiff, and this could be on trunk routes. Accordingly express reference is required to preserve compatability with the recital.

As the Solicitor-General for the Commonwealth acknowledged, his argument necessarily involved the proposition that the Commonwealth could now authorize a third trunk route airline operator without breach of the Agreement and leaving the Airlines Equipment Act in a situation in which it could scarcely operate at all. The express requirement of cl. 7 that "The Commonwealth will ensure that the Minister will exercise his powers under Part IV. of the Airlines Equipment Act " is not reconcilable with the proposition that consistently with the Agreement the Commonwealth could itself set up a third airline.

It was argued for the third defendant that there was in fact no competition between its operations and those of the Commission and the plaintiff and it was asserted that although it held a charter licence it was not an applicant for an airline licence and it was asserted that the statement of claim was defective in that it did not allege any matters necessary to show or support any allegation with respect to airline licences. In my opinion these arguments misconceive the position. It may well be that the statement of claim is neither as precise nor as detailed as might have been desirable, but the matter was fully argued and it is undesirable that the case should go off on what are in the end no more than verbal criticisms of the formulation of the statement of claim. What the statement of claim appears to me to allege is that, once the aircraft are imported into Australia, the third and fourth defendants will be entitled as of right to a licence to conduct interstate operations under whatever kind of licence they may seek to obtain, including an airline licence, that the third defendant already holds a charter licence which permits him to operate "air services" over the trunk routes comprised in the mainland to Tasmania routes, and that the fourth defendant is an applicant for a charter or an airline licence for these trunk routes. It does not appear to me to matter that the third defendant is not alleged to be an applicant for an airline licence because it is alleged that the charter licence permits it to operate "air services" on the trunk routes. It was further alleged by the third defendant that this allegation necessarily meant that the third defendant's operations came within cl. 10 of the 1961 Agreement. It does not appear to me that this is so.

For the third defendant it was also argued that the Agreements cannot be so construed as to require the total prohibition of all imports of aircraft, or of all aircraft that might possibly be used in airline services. This argument misconceives the nature of the Agreements and of the allegations. The implied term sought to be established is one to "secure and maintain a position in which there are two, and not more than two, operators of trunk route airline services". These must be interstate or territorial services because the Commission is (so far as material) limited in its powers to the conduct of such services. The implied term is not directly concerned with the importation of aircraft, but, if as I think it is to be implied in the terms of the recital, then occasions may arise, of which this is one, in which approving, permitting or encouraging the lifting of the prohibition on the importation of aircraft may, depending on the purpose for which it is intended they should be used, constitute a breach of the obligation to secure and maintain the position. What the Minister said is that he "had approved the import into Australia of two Carvair aircraft for the third named defendant and two Argosy aircraft for the fourth named defendant for the carriage of freight between the mainland and Tasmania" and it must be accepted that routes between the mainland and Tasmania include trunk routes within the meaning of the Agreement. This does amount to an allegation that the Minister has approved and will therefore arrange or procure or direct the issue of the relevant "permission in writing" for the importation of aircraft to be used for that purpose. The statement of claim effectively alleges, though not in express terms, that the aircraft are to be imported for the operation of a trunk route airline service within the meaning of the Agreement. It may be that, if facts other than those alleged in the statement of claim come to be investigated, the allegation of fact may not be made out, perhaps because the conditions of cl. 10 of the 1961 Agreement are shown to be fulfilled. But those are matters which cannot be investigated upon demurrer. The only questions which do arise are whether there is an implied term as alleged and if so whether permitting or procuring permission for the importation of aircraft for the carriage of cargo on trunk routes, by an "airline service" within the meaning of the implied term, would constitute a breach of the Agreement. It is not open on demurrer proceedings to say that that is not what the third and fourth defendants intend to do. I do not think that the argument is assisted by an endeavour to equate the expression "trunk route airline services" as used in the Agreement with one or other of the "operations" or "air service operations" for which licences are required as a division of the expression "air transport" used in reg. 191.

The words used in the Agreement do not apply only to one particular category of licence capable of being issued under the Regulations. It does not matter that each of the third and fourth defendants may hold licences of some particular kind or be applicants of licences of some other kind.

If upon its proper construction the statement of claim includes an allegation that the Minister had approved the importation of the aircraft for the carriage of freight upon trunk routes between the mainland and Tasmania, meaning thereby the carriage of freight in the conduct of a "trunk route airline service", then it does not matter what licences or operations the third and fourth defendants may already have or contemplated acquiring or ultimately find they need. It is clear that under the Air Navigation Regulations those operations could not be conducted without a licence and it is equally clear that being interstate operations the Director-General would be obliged to issue the appropriate licences subject only to compliance with safety requirements. If there is more to what the Minister said than that, or if it was qualified in some way or if he had formed the relevant opinions under cl. 10, then upon the trial of the action it might be shown that no breach of contract had been threatened.

In my view the statement of claim does contain sufficient allegations for the substantial questions raised by the demurrers to be dealt with and in my opinion the deficiencies in expression should not prevent those questions being dealt with. It is true that the argument revealed that there are other issues between the parties which cannot be dealt with on demurrer but that is no reason for not dealing with those that can.

A separate argument was raised by the third and fourth defendants and by the Solicitor-General for Tasmania that s. 92 of the Constitution could be relied upon to defeat the operation of the Agreements and the legislation. It was argued that if the Agreement contains the implied term alleged then it would not be competent to the Parliament to approve such an Agreement because the term would be contrary to s. 92 and accordingly the Act approving the Agreement would be invalid. It was said that the Agreement would require the Commonwealth to exercise its powers to maintain a position in which there were two and not more than two operators of interstate airline services and that that would be contrary to s. 92. The argument involved the proposition that the Parliament cannot approve an agreement which obliges the Commonwealth, where an interstate operation exists, to use a different power (i.e. the customs power) for the purpose of preventing such an operation commencing or continuing. Such legislation would, it is said, be discriminatory against interstate operations. This argument misconceives both the nature of the contractual situation as at 1961 and of the implied term (according to the way the matter is regarded). On the former view the Commonwealth is required to do no more than maintain the existing situation, the continuance of which involves no conflict with s. 92. The latter involves an obligation to do no more than it can lawfully and effectively do, which does not include anything which is contrary to s. 92. The Solicitor-General for Tasmania argued that the recent decisions in North Eastern Dairy Co. Ltd. v. Dairy Industry Authority (N.S.W.) [52] ; S.O.S. (Mowbray) Pty. Ltd. v. Mead [53] and Perre v. Pollitt [54] required a re-examination of the Ipec Case [55] and that those decisions demonstrated that the Ipec Case was wrongly decided. It was also said that a monopoly in interstate trade is clearly invalid and that, if an executive discretion is required by some external requirement, such as a contract, to be exercised in a particular manner against freedom of interstate trade, then s. 92 must apply so as to prevent that result. It was also said that this was discrimination against interstate trade and accordingly directness of the operation of the law on interstate trade was not an essential requirement.

1. (1975) 134 C.L.R. 559. 2. (1972) 124 C.L.R. 529. 3. (1976) 135 C.L.R. 139. 4. (1965) 113 C.L.R. 177.

It does not seem to me that those decisions reflect in any way upon the decision in the Ipec Case [55] . The most that can be said is that the mode of expression of some of the observations in that case may not conform to that in the more recent cases and their reasoning. The Ipec Case is however authority for the proposition that the importation of goods into Australia (being goods intended to be used in or for the conduct of interstate trade) is anterior to the commencement of interstate trade and is not part of interstate trade; that decision does not seem to me to be in any way contrary to the cases referred to. The contrary proposition seems to me to be itself contrary to the underlying requirement of s. 92 itself. The operative provisions of s. 92 are dependent upon the introduction of uniform duties of customs. The imposition of customs duty on goods at a rate which would be commercially "prohibitive" would have the same operation in fact as an express prohibition of the import of those goods. The reference to introduction of uniform customs tariffs demonstrates that for the purposes of s. 92 importation cannot be part of interstate trade for otherwise s. 92 itself would contain internal contradictions which cannot have been intended.

Two matters remain for consideration. The first is that such an implied term would fetter the future exercise of the Commonwealth's executive power, even to the extent of requiring it to exercise or refrain from exercising a regulation-making power derived from statute. I do not consider that an agreement authorized by statute, as these Agreements are, can be said to impose some impermissible restraint on the executive power. It is plain that even without statutory authority the Commonwealth in the exercise of its executive power may enter into binding contracts affecting its future action. There has so far been no occasion in this Court to consider whether the doctrine stated in so sweeping a manner by Rowlatt J. in Rederiaktiebolaget Amphitrite v. The King [56] has any application in Australia. The distinction sought to be drawn in that case and in Commissioners of Crown Lands v. Page [57] between "discretionary powers of the Crown to be exercised for the public good" and the exercise by the Crown of its executive power to enter into "commercial contracts" is not one which leaps to the eye. If it is intended to be no more than an aid to construction, it would be easier to reconcile with principle. However that may be, the case of contracts specifically authorized by statute cannot be affected by any such supposed lack of executive authority.

1. [1921] 3 K.B. 500, at p. 503. 2. [1960] 2 Q.B. 274.

In the ordinary way one might well hesitate before regarding a contract by the executive government to use, or not to use, a regulation-making power granted by statute as enforceable against the Crown, but no such hesitation would be called for if such a contract were specifically authorized by statute, which may pro tanto restrict the previous regulation-making power. Clause 10 of the 1962 Agreement provides an example of such an obligation. This is not to say that a regulation made in breach of such an obligation would necessarily be invalid, though that is one possibility. These questions do not arise in this case and it is not necessary to express any concluded view on them.

The other matter is the nature of the Commonwealth's power, and of the authority of the Director-General or the Secretary of the Department of Transport as the case may be under the Customs (Prohibited Imports) Regulations. Differing views were expressed on this matter in the Ipec Case [58] . Kitto J. (with whom Menzies J. agreed) took the view that the Director-General had simply sought the direction of the Minister as to what he should do and automatically to obey it. He said that [59] : "It may be conceded that where the law confers a power of discretionary decision upon an officer of the civil service in his official capacity Government policy is not in every case an extraneous matter which he must put out of consideration. Indeed, Evatt J. thought that such a case existed in R. v. Mahony; Ex parte Johnson [60] . I express no opinion as to whether the relevant provisions of the Customs (Prohibited Imports) Regulations provide another instance." The other members of the Court however took a different view, but there is also some difference between Taylor and Owen JJ. on the one hand and Windeyer J. on the other. Taylor and Owen JJ. said [61] :

It should perhaps be added that while we think that the evidence shows that in considering the prosecutor's application for permission to import aircraft the Director-General took into account the policy laid down by the Government, we are unable to accept the view that this was not a matter proper to be considered by him nor, with respect, do we agree with the conclusion reached by Kitto J. that the refusal to grant the permission sought was, in truth, not the decision of the Director-General but that of the Government. Windeyer J. said that [62] : Then it is said that the Director-General refused a permit for importation simply because the Minister made known to him that it would be against Government policy to allow the prosecutor to import aircraft for the purpose it proposed. Whether or not the evidence shows this convincingly, I shall assume it to be so. I make this assumption the more readily because, with all respect for those who take a different view, I think that the only consideration by which the Director-General could properly have been guided was the policy of the Government. He is by the Public Service Act made the permanent head of the Department of Civil Aviation, a duly constituted Department of State. The responsible Minister is the Minister for Civil Aviation. The Director-General's function in giving permission, pursuant to the Customs Regulations, for the importation of aircraft is an administrative one which he performs by virtue of his office. He is not like a person charged with a duty of determining some question of fact or a person required himself to exercise a discretion according to defined criteria or guided by defined considerations.

That view is, as I have said, that the Director-General must have regard to the policy of the Government and must exercise his functions accordingly. In considering whether to allow aircraft to be imported it is not only the quality and characteristics of particular aircraft that are in question. The Department of Civil Aviation is concerned with more things than ensuring the airworthiness of aircraft. And the Parliament can if it wishes use its constitutional power of customs control of exports and imports to enable the Executive to pursue economic policies that it considers conduce to the welfare of the Commonwealth. That, among other things, is what as I understand the matter the Customs Regulations, made pursuant to the authority of Parliament, do.

There is therefore a majority for the view that it was proper for the Director-General to take into account governmental policy, though no doubt on matters of safety he could properly confine himself to his own or his department's expert knowledge. Indeed apart from such technical matters, it is hard to see what relevant matters there would be save government policy on imports of aircraft and imports generally. 1. (1965) 113 C.L.R. 177. 2. (1965) 113 C.L.R., at pp. 192-193. 3. (1931) 46 C.L.R. 131, at p. 145. 4. (1965) 113 C.L.R., at p. 200. 5. (1965) 113 C.L.R., at pp. 204, 205-206.

It is clear from these citations that, although the discretion is that of the Secretary of the Department of Transport, it is not one to be exercised entirely according to his personal views. Government policy, and particularly that applicable to matters within the scope of his Department must in every case be a matter for his serious consideration. Moreover the Minister or the cabinet may properly indicate to him what government policy is in relation to imports of aircraft generally or to the importation of particular aircraft. There is nothing improper in the Minister requesting him to act in a particular manner or seeking to influence or persuade him to act in a particular manner, nor is there any failure of duty by the head of a department of government in acting in accordance with such a request. In many matters of policy it might indeed be the duty of the Secretary to act in accordance with the policy of the government of the day. It is however not necessary in the present case to resolve the conflict of opinion in the Ipec Case [63] on this matter for, although there is no majority for any one view, there is at least a majority which goes as far as what I have said above.

In conformity with the views which I have expressed above it would be a breach of contract for the Commonwealth to direct or procure the Secretary to grant permission for the importation of aircraft intended for use by the third defendant, to fail to use its best endeavours to persuade or procure the Secretary not to relax the existing prohibition in this case, unless further facts should emerge at the trial indicating that such a failure was not a breach of contract. If the only relevant fact in respect of breach is the announcement of the Minister, it would constitute a breach or a threatened breach of contract in accordance with the views which I have expressed above in relation to the contract.

Since the matter must, on the view which I have taken, proceed to trial to resolve issues of fact, it is not necessary or appropriate at this stage to indicate the precise remedy which would fit the circumstances if the plaintiff is successful at the trial of the action.