Applicant v Respondent

1 On 19 October 2004, Smith J made an order under s 21(3) of the Supreme Court Act 1986 that the applicant, Mr Knight, must not commence any legal proceeding without the leave of the Court. Mr Knight has sought leave to commence a proceeding seeking a declaration that the proposed defendant, the Secretary to the Department of Justice ("Secretary") has no power to impose what is described as a levy on the sale of tobacco products in Victorian prisons. The proposed proceeding also seeks a declaration that there is no power for a prison governor to implement such a decision. The application is opposed by the Secretary, on the basis that the proceeding as set out in the originating motion dated 19 May 2011 is foredoomed to fail, and in any event there are discretionary factors why the Court should refuse to grant leave to Mr Knight to commence this proceeding.

2 Mr Knight relies upon affidavits filed on 19 May 2011 and 4 August 2011. The proposed defendant relies upon an affidavit of an officer of Corrections Victoria, Mr Wise, filed 28 July 2011.

3 Section 21(4) of the Supreme Court Act 1986 provides that leave must not be given for a vexatious litigant to commence a proceeding unless the Court is satisfied that the proceedings are not or will not be an abuse of process of the Court. The power to grant leave is discretionary, but the jurisdiction to grant leave is enlivened only if the Court is satisfied that the proposed proceeding is not or will not be an abuse of process of the Court.[1] The onus rests on the applicant for leave to establish that the proceeding will not be an abuse of process.

4 Counsel's submissions on behalf of the Secretary identified the relevant test as follows:

(a) proceedings will be an abuse of process where they are foredoomed to fail;

(b) proceedings will generally be an abuse of process where the use of the Court's procedures is unjustifiably oppressive to one of the parties;

(c) proceedings may be an abuse of process if they are brought after undue delay; and

(d) if the threshold issue of abuse of process is determined in the applicant's favour, additional discretionary factors may be relevant to the grant of leave.

5 I accept the Secretary's formulation of the applicable test.

6 While the onus is on the applicant to establish that the proposed proceeding is not foredoomed to fail, it seems to me that the phrase "foredoomed to fail" means that the applicant has to in effect persuade the Court that he has at least an arguable case.

7 The factual background to this application is not the subject of substantial dispute. It appears that in or about 1993 the Director of Correctional Services (a division within the Department of Justice) determined to impose what was described as a "cigarette levy" upon sales of tobacco sold in prison canteens.[2] The Secretary has not been able to locate most of the documents relevant to the making of that decision. However, a memorandum from the Chairperson of the Smoke Free Environment Task Force to the Director of Correctional Services dated 12 January 1993[3] recommended as follows:

1. That the Office of Corrections establish a similar procedure to that of the State Government and create a levy attached to all tobacco products (cigarettes and tobacco) sold in prisons, increasing them to Recommended Retail Price, an increase of approximately 59 cents at today's prices. This would represent in real terms a 19% increase in cost;
2. That an account be established as a Trust Account, for the specific purpose of providing prisoner programs and facilities to assist with the implementation of the Smoke Restricted Environment Policy;
3. That the Director of Prisons be responsible for the monitoring and control of this account;
4. That this Trust Account be established and facilitated under the guidelines of the Director-General's Rules relating to finance and account procedures.

8 What apparently actually occurred was that rather than imposing a levy[4] which brought the price of cigarettes sold in Victorian prison canteens to the recommended retail price (a 20% margin on the wholesale cost), a decision was in fact taken to only recoup an amount equivalent to half of the retailer's margin, that is, an additional 10% above the wholesale price. While the evidence is not entirely clear on this point, one could reasonably conclude that the decision to impose a levy was based on two policy objectives: first, to bring the cost of cigarettes and other tobacco products in Victorian prisons in line with the price of cigarettes in the community generally and, secondly, to raise funds for the development and delivery of antismoking and quit smoking programs. The policy was implemented in the context of the development of the Smoke-Free Environment Policy which, as implemented over time, imposed increasingly stringent restrictions upon the areas within prisons where prisoners and prison staff could smoke.

Smoking within any prison building is now banned, except where exceptional circumstances exist, and prisoners and prison staff are only permitted to smoke in open air areas designated by the prison's general manager. This policy is set out in the Commissioner's requirement "Smoking in Prison". This Commissioner's requirement was originally introduced in April 2004. Private prison operators are expected to have reference to the Commissioner's requirements in operating and managing private prisons.

10 It appears that following the publication of the Commissioner's requirement in 2004 the amount of the levy was increased such that the price of all tobacco products sold within the Victorian prison system was equivalent to the recommended retail price of cigarettes sold at retail outlets within the broader community. It appears that the private sector manager of the Port Phillip Prison, of which Mr Knight is currently resident, adopted a similar policy to that applicable in publicly managed prisons. However, while the proceeds of the levy from tobacco sales in publicly managed prisons is deposited into a central account, the proceeds of the sale of tobacco products sold within Port Phillip Prison are deposited into a bank account described as the "Prisoner's Amenity Account".

11 It is not clear how much money is raised by the levy or the precise manner in which the funds are utilised. Mr Wise deposed that he has been informed by the General Manager of Port Phillip Prison that the money held in the Prisoner Amenity Account is only used to fund the cost of smoking cessation programs, program material and nicotine patches for participants. Mr Knight disputes that the funds are utilised for such programs, and holds the view that the funds raised by the levy are likely to be well in excess of what is required to fund the programs he has observed are in place. However, for the purposes of the current application it is not necessary to form even a preliminary view of the merits of that submission.

12 Mr Knight's own personal history and circumstances are matters of relevance to the current application, particularly in respect to the question of his standing to bring the proposed proceeding. Mr Knight deposes that he has been incarcerated within the Victorian prison system since 1987. On 10 November 1988 he was sentenced to a term of life imprisonment with a minimum nonparole period of 27 years. His earliest eligibility date for release on parole is 8 May 2014. Since 1993, when the levy was introduced, he has been placed as follows:

13 It is relevant for the purpose of the current application that Pentridge Prison, the Metropolitan Reception Prison and Barwon Prison are or were all publicly managed prisons, while Port Phillip Prison is managed by G4S Custodial Services Pty Ltd ("G4S"). The general manager of Port Phillip Prison is an employee of G4S, but is the governor of the prison for the purposes of s 21 of the Corrections Act 1986 ("Act"). Mr Knight deposes that he has been a regular smoker since the age of 16. He has purchased cigarettes and tobacco on a weekly basis from prison canteens since he was incarcerated in August 1987. He estimates he spends approximately $80 to $90 each week on cigarettes and tobacco. He first became aware of the existence of the levy on or about 10 February 1997 when he received a letter from the then Chief Executive Officer of the Public Correctional Enterprise in response to a complaint he had lodged regarding canteen prices. He has made a number of complaints to the Ombudsman regarding the levy between 1997 and 2006 and to the Auditor-General between 2003 and 2006. He filed the originating motion in this proceeding on 3 March 2011.

14 In short, Mr Knight's case is that the decision by an unknown officer of the Department of Corrections in 1993 to price the sale of tobacco products in prisons in such a manner that would add 10% to the wholesale cost of those products (and subsequent decisions to increase the levy so that the sale price reflected the recommended retail price of tobacco products) is not authorised by the general power conferred upon the Secretary or Governor of a prison[6] by s 21 of the Act to discharge their responsibilities for the "management, security and good order of the prison and the safe custody and welfare of the prisoners". Mr Knight contends that the established authorities show that the power to impose a levy or other financial burden is one which must be expressly conferred by statute, and the Secretary cannot rely upon the broad and general powers and duties conferred by s 21 of the Act as a source of power to impose the levy.

15 In answer to the Secretary's submission that the proposed proceeding would be foredoomed to fail on the grounds of the applicant's delay in seeking to impugn the relevant decision or decisions, Mr Knight contends that the proposed cause of action is ongoing in that the levy continues to be imposed, and in any event, as a nonlegally qualified person he only became aware of the potential scope to challenge the validity of the decision or decisions in recent times.

16 The issues for determination in this application is whether:

(a) Mr Knight has established to the Court's satisfaction that his proposed proceeding is not an abuse of process in that it is either foredoomed to fail or is otherwise an abuse of process, and

(b) there are other discretionary matters which would either persuade or dissuade the Court from granting leave.

17 Two matters are particularly relevant to both the question of whether the proposed proceeding is an abuse of process and the discretion as to whether to grant leave to proceed: the question of Mr Knight's delay in bringing the proceeding, and Mr Knight's standing to bring the proceeding. Mr Knight's delay in making this application is relevant to the question of whether the proceeding would be foredoomed to fail given the time limits imposed on bringing proceedings for judicial review under Order 56 of the Rules, and because the question of whether declaratory relief ought to be granted is a discretionary matter for the Court.

18 As for the question of standing, while Mr Knight has indicated that if his application for leave to proceed is successful he will seek to join G4S to the proceeding as a defendant, the current form of the proposed proceeding nominates only the Secretary as a defendant, and Mr Knight has not been a resident of a publicly managed prison for over four years. As such the questions of delay and standing are intertwined. If the decision sought to be impugned is the decision to originally impose the levy in 1993, Mr Knight's case that he has standing would be stronger as he was then, and was for many subsequent years, resident in publicly managed prisons. If the decision complained of is the 2004 decision to increase the amount of the levy, Mr Knight would have a similar argument with respect to standing. However, if he is challenging the Secretary's decision to continue to impose the levy upon sales in publicly managed prisons, Mr Knight's claim to standing is diminished.

19 Therefore, the question of delay, standing, and the identification of the relevant decisions and the proper parties to the proceeding are all matters which cause difficulties for Mr Knight in successfully prosecuting the proceeding. Also, the authorities give substantial weight to the Secretary's contention that s 21(1) of the Act confers very wide powers upon the Secretary and prison governors to make decisions for the welfare of prisoners.[7]

20 However, the existence of difficulties and hurdles does not mean a proceeding is foredoomed to fail, in the sense that it is hopeless. Mr Knight's contention is that there is long established authority for the contention that a public authority may only impose a financial burden if expressly and unambiguously empowered to do so by the legislature. In particular, he relies upon statements to that effect in the following cases: AttorneyGeneral v Wilts United Dairies Ltd,[8] Marsh v Shiare of SerpentineHarrandale,[9] Carbines v Powell,[10] Commonwealth and anor v The Colonial Combing, Spinning and Weaving Co Ltd,[11] and Congreve v Home Office.[12] Given that s 21(1) is expressed in general terms, and no other section of the Act expressly empowers the Secretary or a prison governor to impose surcharges or levies on items sold to prisoners from prison canteens, he submits that the Secretary and her predecessor have acted beyond power in deciding to impose, and in continuing to impose the levy.

21 Mr Knight also submitted that the decision of Bell Bros Pty Ltd v Shire of Serpentine-Tarrahdale,[13] which held that a public authority was obliged to refund the proceeds of an excise that had been imposed without the requisite legislative authority, boosted his position with respect to his standing to bring the proceeding against the Secretary, because as a former resident of publicly managed prisons, he may have a claim for reimbursement should the Court find that the levy was unlawfully imposed. Finally, in respect of the issue as to whether any delay should weigh against the granting of leave to proceed, he submitted that, apart from his own particular circumstances, if the imposition of the levy is unlawful, it is no proper answer that it should continue to be collected just because it had taken some time for someone to challenge it.

22 Counsel for the Secretary in her written submissions accepted that there is a principle that any compulsory exaction or appropriation of money by the executive, whether Commonwealth or State, must be authorised by legislation. However, she submitted that despite the reference in documents prepared by officers of correctional authorities to a tobacco "levy", the practice of pricing tobacco products in a manner equivalent to the prices at which tobacco products are available to the general community does not fall into the established definition of what constitutes a tax, being

A compulsory exaction of money by a public authority for public purposes, enforceable by law and ... not a payment for services rendered.[14]

23 Counsel for the Secretary submitted that as the decision of a prisoner to purchase cigarettes was an entirely voluntary transaction, it thereby lacks the necessary element of compulsion to fall within the accepted definition of a tax. The funds raised are not for public purposes, and in any event they could better be characterised as a fee for service (the relevant services being the tobacco cessation programs and products provided to smokers within Victorian prisons). In any event, regardless of the characterisation of the levy, s 20(2) and s 21(1) of the Corrections Act provide full authority for the implementation of the Secretary's tobacco pricing policy. In his written submissions filed 22 November 2011, Mr Knight submitted in response that the levy could not be categorised as a "fee for service", or a "voluntary transaction", because prisoners who smoke have no choice but to purchase cigarettes and tobacco from prison canteens.

24 The submissions contended for on behalf of the Secretary regarding the proper characterisation of the levy and the breadth of the powers conferred upon the Secretary and prison governors by s 21(1) of the Act may well be correct. It may also be that Mr Knight's delay in bringing the proceeding, and the beneficial intent and impact of the programs said to be funded by the levy may influence a court's discretion to decline to grant relief. However, it seems to me that the position is not clear cut, and therefore, it could not be said that the proceeding is foredoomed to fail, or is otherwise an abuse of process.

25 Further, there are no relevant matters which would cause me to exercise my discretion to refuse leave. While there are some issues about Mr Knight's standing, the appropriate contradictors, and proper particularisation of the decisions sought to be impugned, these are all matters which could be dealt with procedurally, or, in the case of standing, by full argument at trial. In any event, these matters are outweighed by the fact that if there is at least a real argument that the Secretary and prison governors are acting beyond their lawful authority in imposing and collecting the levy, then that argument should have the opportunity to be fully ventilated before the Court.

26 Accordingly, I will allow Mr Knight's application for leave to bring the proposed proceeding. I will hear from the parties in relation to the form of orders and directions for the further conduct of the proceeding.

I certify that this and the 9 preceding pages are a true copy of the reasons for Judgment of Daly AsJ of the Supreme Court of Victoria delivered on 29 November 2011.

[1] Phillip Morris Limited v AttorneyGeneral Victoria [2006] VSCA 21; (2006) 14 VR 538.

[2] The evidence is that at least a substantial proportion of tobacco products purchased by the Victorian Government for sale in prison canteens are purchased at wholesale prices.

[3] Exhibit "RJW-05" to the affidavit of Roderick John Wise sworn 28 July 2011.

[4] The Secretary contends that the amount recouped from tobacco sales over and above the amount equivalent to the actual cost of purchasing tobacco products is not, in substance, a tax or a levy. The use of the term "levy" in these reasons is used for convenience only and does not amount to any finding or preliminary view as to the character of the amount recouped by reason of what the Secretary contends is merely a "pricing policy".

[6] By reason of s 17 of the Corrections Act 1986, the Secretary of the Department of Justice has the same powers and functions as the Governor of a prison.

[7] See Binse v Williams and anor [1998] 1 VR 381 and Kaufman v Smith [2001] VSC 420.

[8] (1921) 37 TLR 884; (1922) 38 TLR 780.

[9] [1966] HCA 77; (1966) 120 CLR 572.

[10] [1925] HCA 16; (1925) 36 CLR 88.

[11] [1922] HCA 62; (1922) 31 CLR 421.

[12] [1976] QB 629.

[13] [1969] HCA 63; (1969) 121 CLR 137.

[14] Air Caledonie International v The Commonwealth (1988) 165 CLR 462.