The media neutral citation for this judgment reads [2000] FCA 637. It should read [2001] FCA 637.

I certify that this is a true copy of the Corrigendum

Australian Communications Authority v Viper Communications Pty Limited [2000] FCA 637

CONSTITUTIONAL LAW -Judicial power of the Commonwealth - Telecommunications Industry Ombudsman scheme - whether Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth) ("Service Standards Act"), s 128, confers judicial power on the Telecommunications Industry Ombudsman ("TIO") in contravention of Chapter III of the Constitution - whether legislation confers power on the TIO to make immediately binding determinations - whether legislation contemplates that the TIO will resolve disputes by applying established principles of law.

CONSTITUTIONAL LAW - Laws imposing taxation - Telecommunications Industry Ombudsman Scheme - whether s 128 of the Service Standards Act contravenes Constitution, s 55 - operational and capital costs of the TIO Scheme are funded by members of Telecommunications Industry Ombudsman Ltd. - whether the legislation authorises the imposition of taxation - whether charges levied on members are "fees for services".

Acts Interpretation Act 1901 (Cth), s 15A.

Australian Communications Authority Act 1997 (Cth), s 14.

Child Support (Assessment) Act 1989 (Cth), ss 93EA, 98B, 98C.

Judiciary Act 1903 (Cth), s 78B.

Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth).

Migration Act 1958 (Cth), s 420(1).

Racial Discrimination Act 1975 (Cth), ss 25Z, 25ZAA, 25ZAB.

Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth), ss 5, 126, 127, 128, 129, 130, 132.

Telecommunications Act 1997 (Cth), ss 7, 16, 86, 87(1), 98(1), 101(1), 102(2), 245(a), 246, 247, 369, 563, 564, 570(1), 571(1), 591.

Telecommunications Act 1989 (Cth), ss 16.

Telecommunications Act 1991 (Cth) s 64(1).

Telecommunications (Consumer Protection Service Standards) Bill 1998.

Telecommunications (General Telecommunications Licences) Declaration (No 2) 1991.

Trade Practices Act 1974 (Cth), s 86A.

Australian Communications Authority v Viper Communications Pty Ltd [2000] FCA 1664, referred to.

Australian Communications Authority v Viper Communications Pty Ltd [2001] FCA 355, referred to.

Brandy v Human Rights and Equal Opportunity Commission [1995] HCA 10; (1995) 183 CLR 245, distinguished.

Air Caledonie International v The Commonwealth (1988) 165 CLR 462, followed.

Attorney-General for the Commonwealth v Breckler (1999) 197 CLR 83, cited.

Harper v Minister for Sea Fisheries [1989] HCA 47; (1989) 168 CLR 314, cited.

Rola Co (Australia) Pty Ltd v Commonwealth [1944] HCA 17; (1944) 69 CLR 185, cited.

Shepherd v Hills [1855] EngR 377; (1855) 11 Ex 55; 156 ER 743, cited.

Mallinson v Scottish Australian Investment Co Ltd [1920] HCA 51; (1920) 28 CLR 66, cited.

Josephson v Walker [1914] HCA 68; (1914) 18 CLR 691, cited.

Byrnes v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410, cited.

Precision Data Holdings Ltd v Wills (1991) 173 CLR 167, cited.

The Queen v Davison [1954] HCA 46; (1954) 90 CLR 353, cited.

The Queen v Hegarty; Ex parte City of Salisbury [1981] HCA 51; (1981) 147 CLR 617, cited.

Whittaker v Child Support Registrar [2000] FCA 173, considered.

Matthews v Chicory Marketing Board [1938] HCA 38; (1938) 60 CLR 263, considered.

Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 177 CLR 480, considered.

MacCormack v Federal Commissioner of Taxation [1984] HCA 20; (1984) 158 CLR 622, cited.

Federal Commissioner of Taxation v Cripps & Jones Holdings Pty Ltd (1987) 76 ALR 619, considered.

Marsh v Shire of Serpentine-Jarrahdale (1966) 120 CLR 573, cited.

Logan Downs Pty Ltd v Queensland [1977] HCA 3; (1977) 137 CLR 59, cited.

Air Services Australia v Canadian Airlines International Ltd (1999) 167 ALR 392, followed.

Telstra Corporation Ltd v Hurstville City Council [2000] FCA 1887, cited.

Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, cited.

Re Palmdale Insurance Ltd (1994) 122 ACTR 33, cited.

Official Trustee in Bankruptcy v Forrest [2000] FCA 907, cited.

Ford's Principles of Corporations Law (10th ed 2001)

Explanatory Memorandum to the Telecommunications Bill 1996

AUSTRALIAN COMMUNICATIONS AUTHORITY v VIPER COMMUNICATIONS PTY LIMITED

AUSTRALIAN COMMUNICATIONS AUTHORITY v ALBURY LOCAL INTERNET PTY LIMITED

1. The respondents pay the applicant's costs in relation to the separate questions determined by the judgment of Mathews J delivered on 22 November 2000.

2. The parties have liberty to apply on three days notice in relation to any further orders that may be required.

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

1 The question before the Court is whether s 128 of the Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth) ("Service Standards Act") and its predecessor, s 246 of the Telecommunications Act 1997 (Cth) ("Telecommunications Act") are invalid on constitutional grounds. These provisions require "eligible carriage service providers" to enter into the Telecommunications Industry Ombudsman scheme ("TIO scheme"), which was legislatively established by Part 10 of the Telecommunications Act and is continued in operation by Part 6 of the Service Standards Act. The TIO scheme is operated by Telecommunications Industry Ombudsman Limited ("TIO Ltd") and the Telecommunications Industry Ombudsman ("TIO").

2 The constitutional questions were raised in the course of two separate proceedings in which the Australian Communications Authority ("ACA") sought to recover pecuniary penalties from, respectively, Albury Local Internet Pty Ltd ("Albury") and Viper Communications Pty Ltd ("Viper"). Albury and Viper (to which I refer collectively as "the respondents") are each internet service providers. The ACA alleged that the respondents had contravened the Telecommunications Act by failing to enter the TIO scheme.

3 The respondents contended, inter alia, that they were not obliged to join the TIO scheme because s 246 of the Telecommunications Act and s 128 of the Service Standards Act were invalid. The respondents argued that the provisions purported to

* confer the judicial power of the Commonwealth on a non-judicial body, namely the TIO, in contravention of Chapter III of the Constitution;

* impose taxation on "eligible carriage service providers" otherwise than in conformity with s 55 of the Constitution; and

* acquire the property of "eligible carriage service providers" otherwise than on just terms, contrary to s 51(xxxi) of the Constitution.

It is fair to say that the third of these contentions was not ultimately pressed.

4 The ACA is the statutory successor to the Australian Telecommunications Authority established by s 16 of the Telecommunications Act 1989 (Cth): see Australian Communications Authority Act 1997 (Cth), s 14. The ACA's powers include instituting proceedings in the Federal Court for the recovery on behalf of the Commonwealth of pecuniary penalties payable by reason of a person's contravention of a "civil penalty provision": Telecommunications Act, ss 570(1), 571(1). The definition of "civil penalty provision" includes s 101 of the Telecommunications Act: see s 7. Section 101(1) requires a "service provider" to comply with the applicable "service provider rules". The service provider rules are set out in Schedule 2 to the Telecommunications Act. They require (cl 1) all service providers to comply with the Telecommunications Act and the Service Standards Act.

5 On 26 May 1999, the ACA served on Albury a written direction pursuant to s 102(2) of the Telecommunications Act. The written direction required Albury to enter into the TIO scheme within twenty-one days of receipt of the direction. Albury subsequently requested the ACA, pursuant to s 247 of the Telecommunications Act (now s 129 of the Service Standards Act), to grant an exemption from the requirements of what was then s 246 of the Telecommunications Act. The ACA refused the request.

6 On 17 September 1999, the ACA gave a written direction to Viper pursuant to s 102(2) of the Telecommunications Act. This direction required Viper to enter into the TIO scheme within fourteen days of receipt. Viper did not respond to the direction.

7 On 16 December 1999, the ACA instituted proceedings in this Court against Viper. The relief claimed by the ACA included an order that Viper pay to the Commonwealth a pecuniary penalty in respect of what is said to be its contravention of s 101(1) of the Telecommunications Act. The ACA alleged that Viper, being a "service provider" for the purposes of the Telecommunications Act, failed to comply with the service provider rules. In particular, it was alleged that Viper failed to join the TIO scheme operated by TIO Ltd.

8 On 13 March 2000, the ACA instituted separate proceedings against Albury. In substance, the ACA's allegations against Albury were the same as those made against Viper.

9 While both proceedings were pending, Viper and Albury purported to apply to join the TIO scheme. Their respective applications made it clear, however, that they were not prepared to become members of TIO Ltd. They each contended that an eligible carriage service provider could comply with the statutory requirements by joining the TIO scheme, but without becoming a member of TIO Ltd.

10 On 12 May 2000, a Judge of this Court (Mathews J) made orders consolidating the two proceedings. Her Honour later made orders for the separate determination of the non-constitutional questions raised by the respondents' contentions. The questions for separate determination were as follows:

1. On the true construction of s 246 [of the Telecommunications Act] and s 128 [of the Service Standards Act] must each eligible service provider become a member of [TIO Ltd]?

2. If question 1 is answered "Yes", then were the applications lodged by [Viper] dated 4 May 2000 and [Albury] dated 2 May 2000 valid applications to enter into the scheme providing for [the TIO] pursuant to s 246 [of the Telecommunications Act] and s 128 [of the Service Standards Act]?

11 In a judgment delivered on 22 November 2000 (Australian Communications Authority v Viper Communications Pty Ltd [2000] FCA 1664 ("ACA v Viper (No 1)"), Mathews J answered the questions as follows:

In her reasons for judgment, Mathews J noted that the effect of the answers was that, subject to the constitutional challenge, the ACA was entitled to the relief it sought against Albury and Viper. She re-listed the matters for argument on the outstanding constitutional issues.

12 The notices required by s 78B of the Judiciary Act 1903 (Cth) were duly served. No Attorney-General sought to intervene in the proceedings.

13 Mathews J heard the argument on the constitutional questions on 15 February 2001 and reserved judgment. On 20 February 2001, her Honour held a hearing to determine whether, assuming the respondents' constitutional challenge failed, each respondent should be ordered to pay pecuniary penalties pursuant to s 570(1) of the Telecommunications Act by reason of its failure to comply with s 101(1) of the Telecommunications Act. Her Honour also reserved judgment on the penalties question.

14 By reason of illness, it became clear that Mathews J would be unable to complete the judgment on the constitutional question prior to her scheduled retirement from the Court on 6 April 2001. With the agreement of the parties, the constitutional question was reargued before me on 20 March 2001. This judgment addresses the constitutional issues.

15 On 5 April 2001, Mathews J delivered a judgment in which she declined to order either respondent to pay a pecuniary penalty: Australian Communications Authority v Viper Communications Pty Ltd [2001] FCA 355 ("ACA v Viper (No 2)"). Her Honour took the view that, in the circumstances, the respondents' contraventions could not be regarded as culpable, since each was motivated by a genuine concern as to the financial and other consequences of membership of TIO Ltd (at pars [50]-[51]). Each respondent had taken steps to join the TIO scheme once her Honour had delivered judgment in ACA v Viper (No 1). Mathews J considered that the imposition of pecuniary penalties would have no real detrimental effect upon others who are or might be in contravention of the legislative scheme (at [50]-[54]-[55]). Mathews J ordered the ACA to pay the respondents' costs relating to the issue of pecuniary penalties.

16 Mathews J recounted the history of the TIO scheme in her reasons for judgment in ACA v Viper (No 1), at [18]-[30]. What follows is in part adapted from her Honour's reasons.

17 Part 5 of the now repealed Telecommunications Act 1991 (Cth) ("1991 Act") established a system for licensing general telecommunications carriers. Section 64(1) of the 1991 Act empowered the Minister to declare, inter alia, that all general telecommunications licences were subject to specified conditions. By the Telecommunications (General Telecommunications Licences) Declaration (No 2) 1991, the then Minister imposed the following licence condition:

"Industry Ombudsman

4.1 A licensee must, in association with other carriers, enter into, and comply with, an Ombudsman scheme, providing for investigation in relation to complaints by consumers about all matters relating to service, billing and the manner of charging for telecommunications services."

18 The scheme implemented pursuant to the Minister's declaration had three components. On 11 June 1993, TIO Ltd was registered in the Australian Capital Territory as a company limited by guarantee. Its objects, specified in cl 2 of the Memorandum of Association, were (and still are) as follows:

"The objects of TIO Limited are to establish a telecommunications industry ombudsman scheme and to appoint a Telecommunications Industry Ombudsman with power on behalf of TIO Limited:

(1) to receive, investigate, make determinations relating to, give directions relating to and facilitate the resolution of:

(a) complaints as to the provision or supply of (or the failure to provide or supply) carriage services by a member of TIO Limited, other than complaints in relation to the general telecommunications policy or commercial practices of such a member;

(b) complaints from owners or occupiers of land in respect of which a holder of a carrier licence under the Telecommunications Act 1997 has exercised its statutory powers as a carrier, where the carrier is a member of TIO Ltd, other than complaints in relation to the policy or commercial decision of a carrier to exercise its statutory rights as a carrier in relation to that particular land; and

(c) such other complaints as may by agreement with the complainant, be referred to the Telecommunications Industry Ombudsman by a member of TIO Limited; and

(2) to exercise such jurisdiction, powers and functions as may be conferred by or under any legislation or instrument."

The initial subscribers to TIO Ltd were Telstra Corporation Ltd ("Telstra"), and Vodafone Pty Ltd ("Vodafone"), Optus Networks Pty Ltd and Optus Mobile Pty Ltd ("Optus").

19 The second component of the TIO scheme was a Council. The Articles of Association of TIO Ltd (Article 12.1) required the Board of TIO Ltd to establish a Council, initially comprising seven persons. According to the Telecommunications Industry Ombudsman Constitution ("TIO Constitution") (cl 9.2), the Council was to act as an intermediary between the TIO and the Board and was to be responsible for overseeing the TIO scheme.

20 The third component of the scheme was the TIO. TIO Ltd's Articles of Association (Article 12.8) provided that the TIO was to operate in accordance with, and observe the roles, functions, powers and obligations set out, in the TIO Constitution. I shall refer in more detail later to the TIO Constitution.

21 The enactment in 1997 of the Telecommunications Act constituted the first legislative recognition of the TIO scheme. According to the Explanatory Memorandum to the Telecommunications Bill 1996, Part 10 of the Bill was intended to require

"carriers and certain carriage service providers to enter into a Telecommunications Industry Ombudsman scheme which is a central element of the self-regulatory arrangements for the telecommunications industry provided for by the Act.

The TIO was previously dealt with in clause 4 of the Telecommunications (General Telecommunications Licences) Declaration (No 2) of 1991. The TIO scheme is intended to provide customers with an independent complaint handling mechanism after they have taken up their complaints with the respective carrier or carriage service provider and failed to resolve them. It is expected that the TIO scheme will continue to operate along current lines, however the detail of its operation is effectively a matter for the members of the scheme...".

22 Part 10 of the Telecommunications Act, as enacted in 1997, significantly altered the structure of the TIO scheme. In consequence of amendments to the Telecommunications Bill 1996 introduced in the course of its passage through Parliament, the TIO scheme was extended beyond carriage service providers supplying a standard telephone service or a public mobile telecommunications service, to those providing a carriage service enabling end-users to access the Internet. This was achieved by including Internet service providers within the definition of "eligible carriage service provider" in s 245(a) of the Telecommunications Act. Membership of the TIO scheme became compulsory for carriage service providers unless exempted by the Australian Communications Authority ("ACA"): ss 246, 247.

23 Part 10 of the Telecommunications Act (ss 244-251) was repealed as from 2 August 1999 by the Telecommunications Legislation Amendment Act 1999 (Cth) ("Telecommunications Amendment Act 1999"). Part 10 was, however, re-enacted as Part 6 of the Service Standards Act (ss 126-133). The only significant amendment to the legislative scheme was the introduction of s 128(3) of the Service Standards Act, which states that there is only one TIO scheme, namely that operated by TIO Ltd. According to the Explanatory Memorandum accompanying the Telecommunications (Consumer Protection Service Standards) Bill 1998, s 128(3) was inserted into the legislation in order to remove the possibility that a rival Ombudsman scheme might be established.

24 The TIO's Annual Report 1999-2000 notes (at 2) that membership of the TIO scheme increased from 866 to 991 during that year. Internet service providers made up 85.9 per cent of the membership. During the 1999-2000 year, the TIO recorded 54,400 complaints. Of these, 92.5 per cent related to telephone services and only 7.5 per cent related to Internet access services.

25 The Annual Report 1999-2000 explains (at 20) the approach taken by the TIO to the complaints resolution process:

"Through its emphasis on providing free, independent, just, informal and speedy resolution of complaints, the TIO aims to assist the consumer by providing an accessible, non-bureaucratic alternative dispute resolution forum.

The TIO is able to assist consumers who have been unable to resolve complaints directly with carriers, telephone service providers or Internet Service Providers (ISPs). As an office of last resort, the TIO provides consumers and small businesses with an alternative to the court system, when other avenues for dispute resolution have been explored but have failed to provide a resolution.

The TIO strives above all for an independent and just approach to complaint resolution. The TIO's independence means that it is able to investigate each individual complaint on its merits, seeking the perspectives of both sides and forming a view as to the most reasonable outcome on the basis of the information provided. The TIO aims to achieve a resolution based on what is fair and reasonable, rather than on strictly legal grounds.

To assist in reaching such an outcome to a complaint investigation, the TIO asks the consumer and the TIO member to demonstrate good faith in their approach. The attitudes of the complainant and the member, their good faith and willingness to acknowledge the other's perspective play a critical role in achieving a result which is acceptable to both parties."

26 The following account of the legislation refers to the provisions in Part 6 of the Service Standards Act. The position prior to 2 August 1999 was of course governed by the equivalent provisions in Part 10 of the Telecommunications Act. The Telecommunications Act, other than Part 10 and other provisions repealed by the Telecommunications Amendment Act 1999, remains in force. References in this part of the judgment to provisions of the Telecommunications Act are to those continuing substantially unaffected by the Telecommunications Amendment Act 1999.

27 Section 101(1) of the Telecommunications Act provides that a

"service provider must comply with the service provider rules that apply to the provider."

The definition of "service provider" in s 86 includes a "carriage service provider". Both Albury and Viper are "carriage service providers" within the definition in s 87(1): see ss 7 (definition of "carriage service"), 16.

28 For the purposes of the Telecommunications Act, the "service provider rules", relevantly, are the "Standard service provider rules" set out in Schedule 2 to the Act: s 98(1). Clause 1 of the service provider rules is as follows:

"1. Compliance with this Act

(1) A service provider must comply with this Act.

(2) In this clause:

this Act includes the Telecommunications (Consumer Protection and Service Standards) Act 1999 and regulations under that Act."

29 If a service provider has contravened or is contravening a service provider rule, s 102(2) of the Telecommunications Act empowers the ACA to give the service provider a written direction

"requiring the provider to take specified action directed towards ensuring that the provider does not contravene the rule, or is unlikely to contravene the rule, in the future."

The service provider must not contravene the direction: s 102(4).

30 Part 6 of the Service Standards Act is headed "The Telecommunications Industry Ombudsman". Section 126 sets out a "simplified outline" of Part 6:

* Certain carriers and carriage service providers must enter into the Telecommunications Industry Ombudsman scheme.

* The membership of the scheme must be open to all carriers and carriage service providers.

* Carriers and carriage service providers must comply with the scheme.

31 The key provision is s 128. It provides as follows:

"128 (1) Each carrier and each eligible carriage service provider must, in association with other carriers and other eligible carriage service providers, enter into a scheme providing for a Telecommunications Industry Ombudsman.

(2) The scheme is to be known as the Telecommunications Industry Ombudsman scheme.

(3) To avoid doubt, there is only one Telecommunications Industry Ombudsman scheme, namely, the scheme operated by Telecommunications Industry Ombudsman Limited (ACN 057 634 787).

(4) The scheme must provide for the Telecommunications Industry Ombudsman to:

(a) investigate; and

(b) make determinations relating to; and

(c) give directions relating to;

complaints about carriage services by end-users of those services.

(5) The following is an example of such a complaint: a complaint about billing, or the manner of charging, for the supply of carriage services.

(6) The scheme must not provide for the Telecommunications Industry Ombudsman to investigate complaints about:

(a) the levels at which tariffs are set; or

(b) the content of a content service.

(7) The membership of the scheme must be open to all:

(a) carriers; and

(b) carriage service providers."

32 It will be seen that s 128(1) refers to an "eligible carriage service provider". This term is defined in s 127(a)(iii) to include

"(a) a carriage service provider who supplies...

(iii) a carriage service that enables end-users to access the Internet...".

The expression "carriage service" is defined to mean

"a service for carrying communications by means of guided and/or unguided electromagnetic energy":

see Service Standards Act, s 5(1); Telecommunications Act, s 7. It is not in dispute that Albury and Viper are "eligible carriage service providers" within the meaning of s 127(a)(iii) of the Service Standards Act.

33 Section 129(1) of the Service Standards Act empowers the ACA to declare in writing that a specified carrier or eligible carriage service provider is exempt from the requirement in s 128(1). Section 129(2) specifies the criteria to which the ACA must have regard in deciding whether to grant an exemption. The criteria include the extent to which the carrier deals with residential customers or the proprietors of small businesses. Before making a declaration under s 129(1), the ACA must consult the TIO: s 129(4).

34 Section 130(1) empowers the ACA to give a carriage service provider a written notice directing the provider to enter the TIO scheme. The provider must comply with the direction: s 130(2).

35 Section 132 is as follows:

"A carrier or carriage service provider who is a member of the Telecommunications Industry Ombudsman scheme must comply with the scheme."

36 Part 30 of the Telecommunications Act provides for the Federal Court to grant injunctions in relation to contraventions of that Act or the Service Standards Act: s 563. Section 564(2) of the Telecommunications Act provides for "performance injunctions" as follows:

"(2) If:

(a) a person has refused or failed, or is refusing or failing, or is proposing to refuse or fail, to do an act or thing; and

(b) the refusal or failure was, is or would be a contravention of this Act;

the Federal Court may, on the application of the Minister, the ACA or the ACCC, grant an injunction requiring the person to do that act or thing."

The expression "this Act" is defined to include the Service Standards Act and the regulations made thereunder: s 564(4).

37 The key features of the TIO scheme are contained in the Memorandum and Articles of Association of TIO Ltd. The following account is based on the Memorandum and Articles in force on 15 November 1999. While they have been subsequently amended, none of the amendments is material to the constitutional questions.

38 The objects of TIO Ltd, stated in cl 2 of the Memorandum, have already been set out ([18] above). They include the establishment of a TIO scheme and the appointment of a TIO with power to act on behalf of TIO Ltd. The TIO is to have power on behalf of TIO Ltd to receive, investigate, make determinations relating to, give directions relating to and facilitate the resolution of complaints as to the provision or supply or the failure to provide or supply, carriage services by a member.

39 A person is eligible to be a member of TIO Ltd only if the person is a carrier, a carriage service provider or a "carriage service intermediary" (Article 3.1). An application for membership must be accepted by TIO Ltd if the applicant is required by the Telecommunications Act to participate in a TIO scheme, the application is in the prescribed form and any fees determined by the TIO under Article 4.1 are paid (Article 3.4).

40 The business, affairs and property of TIO Ltd are managed by a Board (Article 10.1). The Board consists of up to eight directors (Article 9.1). Of these, five are appointed by Telstra, Optus and Vodafone, while carriage service providers and other members elect two directors (Article 9.2). The Board must appoint an independent director (Article 9.3).

41 As already noted, the Board is required to establish a Council comprising nine members, of whom four must be members of TIO Ltd, four are from user and public interest groups and one is an independent Chairman (Article 12.1). Three of the four members drawn from TIO Ltd are representatives of Telstra, Optus or Vodafone, while one is elected by other members (Article 12.2). The Council's functions include recommending to the Board the appointment of a person as TIO (Article 13.1).

42 The costs of operating the TIO scheme are borne by the members of TIO Ltd. Article 4 deals with "Annual Volume Related and Operating Costs":

"4.1 Each Member agrees to pay such annual Volume Related Costs and Operating Costs as are determined by the Ombudsman as being applicable to the Member in four tranches at three monthly intervals (or such other times as determined by the Board).

4.2 The annual Volume Related Costs and Operating Costs shall be based on the amount required to fund the Budget for the relevant year.

4.3 Volume Related Costs applicable to a Member are:

(a) those costs which directly relate to the number and relative cost of complaints registered by the Ombudsman against the Member in each quarterly period; and

(b) any additional costs relating to legal, technical or accounting advice incurred by the Ombudsman in investigating a complaint against the Member.

4.4 Operating Costs applicable to a Member are those overhead costs which:

(a) are based on the Member's estimated percentage share (in accordance with a formula unanimously approved by the Board from time to time) of the total number of complaints (in accordance with a formula unanimously approved by the Board from time to time) registered by the Ombudsman in the previous quarter; and

(b) do not include any part of the costs in article 4.3(b)."

43 The Ombudsman is required to estimate a Member's Volume Related and Operating Costs in advance each quarter (Article 4.5). The Member's Costs are due and payable by the member 30 days after notification of the amount to be paid (Article 4.6).

44 Article 6.1 empowers the Board to impose special levies:

"6.1 The Board may at any time and from time to time obtain money for the purposes of TIO Limited in addition to the annual Volume Related Costs and Operating Costs by raising a special levy from the Members or a particular class of Member. Special levies shall be funded by the Members on the basis of each Member's percentage share (in accordance with a formula approved unanimously by the Board from time to time) of the total number of complaints (in accordance with a formula approved unanimously by the Board from time to time) registered by the Ombudsman in the previous quarter."

45 The Board is also empowered to obtain money for the purpose of on-going capital expenditure, such expenditure to be funded by the members on the same basis as special levies (Article 6.2). As and when further "applicants" become members of TIO Ltd they must "contribute towards capital expenditure as determined by the Board" (Article 6.3).

46 Articles 12.8 and 12.9 refer to the TIO Constitution:

"12.8 TIO Limited shall operate in accordance with and observe the roles, functions, powers and obligations set out in the Telecommunications Industry Ombudsman Constitution annexed to these Articles ("Constitution") for the time being in force and as that document may be modified or amended from time to time.

12.9 In becoming a Member of TIO Limited each Member agrees:

(a) to be bound by and observe the terms of the Constitution; and

(b) that any amendments to the Constitution shall be made in accordance with the terms of the Constitution for the time being in force."

47 The TIO Constitution defines the functions (cl 3), jurisdiction (cl 4), procedures (cl 5) and powers (cl 6) of the TIO. It also deals with the process for amendment (cl 11.2).

48 Clause 3.1 provides that the functions of the TIO include the following:

"(1) to investigate, make determinations relating to, and give directions relating to, complaints about carriage services by end-users of those services;

(2) to exercise any functions conferred on the TIO by an industry code or industry standard in accordance with The Telecommunications Act 1997; and

(3) to exercise any other functions conferred on the TIO under any legislation...".

Clause 3.1 also states "[b]y way of example" that the TIO's functions

"include to receive, to investigate and to facilitate the resolution of:

(a) complaints about billing, or the manner of charging, for the supply of carriage services;

(b) complaints as to the provision or supply of (or the failure to provide or supply) carriage services by a member...;

(c) such other complaints as may, by agreement with the complainant, be referred to the TIO by a member."

"(a) Complaints may be made to the TIO by end-users of carriage services and by persons directly affected by the provision or supply of (or the failure to provide or supply) such services by scheme members.

(b) ....

(c) ....

(d) The focus of the TIO scheme is on individual complaints which may be oral or in writing.

(e) A complaint must have arisen from events which became known to the complainant less than one (1) year prior to the complaint. However, the TIO has a discretion in relation to a complaint which has arisen from events which became known to the complainant between one (1) and two (2) years prior to the complaint."

49 Clause 4.1 provides that "for further guidance" the functions of the TIO include, but are not limited to

"investigating and facilitating the resolution of complaints as to the following

* the standard telephone service;

* the provision of access to the Internet or another public electronic communications network (including complaints relating to billing for such a service);

* public mobile telecommunications services...;

* fault reporting and repair and maintenance services;

...".

50 Clause 4.3 states that the functions of the TIO do not extend to complaints relating to a number of matters. The matters which are excluded include

"(j) matters which are specifically under consideration by the Australian Communications Authority, the Australian Competition and Consumer Commission or any court or tribunal, or which have been considered by way of those bodies previously...".

51 Clause 5 specifies the procedures that the TIO must adopt. Clause 5.1 states as follows:

"The TIO, in handling complaints, must pursue the objective of `fair, just, economical, informal and expeditious' resolution. In consultation with the Council, the TIO is responsible for developing procedures which best achieve this objective. However, these procedures must include the following:

(a) The TIO on receiving a complaint, will verify with an officer designated by the member concerned whether the member has had the opportunity to consider the complaint;

(b) The TIO may proceed to investigate the complaint only after the member has had this opportunity, subject to reasonable time limits to avoid undue delay in dealing with the complaint, and after the member has been notified that the TIO intends to investigate the complaint;

...".

52 Clause 6.1 is important since it provides for decisions made by the TIO to be binding upon members. It provides as follows:

"After completion of an investigation and in the absence of a conciliated settlement of a complaint, the TIO shall resolve a complaint:

(a) (i) by making a determination that the member the subject of investigation pay compensation to a complainant,

(ii) by directing a member to provide a carriage service,

(iii) by directing a member not impose or amend a charge in relation to a service,

(iv) ...,

(v) by directing a member to include or omit an entry in any electronic or printed directory,

(vi) by directing a member to supply goods or services the subject of the complaint or undertake any necessary corrective or other work to resolve the complaint,

(vii) ...,

(viii) ...,

(ix) by directing a member to do, not to do, or to cease doing, an act,

provided that the total of such determinations or directions in relation to an individual complaint are not to exceed in value $10,000; or

(b) by dismissing the complaint.

All decisions by the TIO under paragraph 6.1 shall be automatically binding upon members. However, the complainant may elect whether or not to accept the decision of the TIO within twenty-one (21) days of the TIO's decision. If the complainant accepts the decision of the TIO, the complainant shall fully release the member from all claims, actions etc in relation to the complaint. In the event that the complainant does not accept the decision of the TIO, the complainant may pursue his or her remedies in any other forum the complainant may choose and the member is then fully released from the TIO's decision." (Emphasis added.)

53 The TIO is also authorised to make recommendations in relation to complaints up to a value of $50,000 (cl 6.2). The member is "obliged to consider whether or not to give effect to any such recommendation". Where a complaint involves in excess of $50,000, the TIO may exercise "arbitration powers" if both parties agree (cl 6.5).

54 The TIO is to provide "only such written reasons as give effect to any decision...under [cl] 6.1": (cl 6.3).

55 The TIO has a discretion to decline to investigate a complaint if, in its opinion, the complaint is frivolous or vexatious, or an investigation is not warranted: (cl 6.7) Clause 6.7 further provides that the TIO

"may also decline to investigate a complaint where, under paragraph 6.8(b) inter alia, the complaint is more conveniently or effectively dealt with by the Australian Communications Authority, the Australian Competition and Consumer Commission, the courts or any other body."

Clause 6.8(a) deals with the case where the member considers that the complaint raises an "important or novel point of policy or law". In such a case, if the member institutes legal proceedings before the TIO makes its determination and agrees to pay all legal costs incurred by the complainant, the TIO ordinarily will not proceed with the complaint. Clause 6.8(b) provides that where the TIO forms the view that a complaint could have been made or could have been more conveniently dealt with by another body and the complainant consents to the complaint being referred to the other body, the TIO may decide not to investigate the complaint any further. It will be seen that cl 6.8(b) does not expressly refer to courts and applies only where the complainant consents to a referral of the complaint. It is not clear whether the discretion conferred on the TIO by cl 6.7 (in the paragraph which cross-refers to cl 6.8(b)) is to be exercised only with the consent of the complainant.

56 Clause 11 of the TIO Constitution addresses the relationship between the Council, the Board and the TIO. It also provides the mechanism for amendment of the TIO Constitution:

"11.1 The Board is responsible for the formal administration of the Company, the Telecommunications Ombudsman Limited, and exercises final authority in relation to the financial affairs of the Company. These matters are most appropriately exercised by Directors. Responsibility for complaint handling, policy matters and the day to day administration of the TIO scheme rests with the Council and the TIO, and not the Board.

11.2 From time to time, the efficacy of the TIO Constitution will need to be reviewed. It is the role of the Council, in consultation with the TIO, to prepare recommendations for amendments of the TIO Constitution. Final authority for approval of amendments to the TIO Constitution rests with the Board after consultation with the Federal ministers responsible for communications and consumer affairs policy."

57 The respondents submitted that s 128 of the Service Standards Act, and its predecessor, s 246 of the Telecommunications Act, are invalid because the TIO scheme vests the judicial power of the Commonwealth in a non-judicial body (the TIO), in contravention of Chapter III of the Constitution. Mr Leeming, who appeared on behalf of the respondents, placed considerable reliance on the decision of the High Court in Brandy v Human Rights and Equal Opportunity Commission [1995] HCA 10; (1995) 183 CLR 245. In that case, the Court held that certain provisions of the Racial Discrimination Act 1975 (Cth) were invalid because they purported to vest judicial power in a non-judicial body (the Commission), contrary to Chapter III of the Constitution. According to Mr Leeming, the TIO scheme is substantially on all fours with the arrangements struck down in Brandy.

58 Mr Leeming pointed to a number of factors which indicate that the TIO exercises the judicial power of the Commonwealth:

* Membership of the TIO scheme is compulsory for all carriers and eligible carriage service providers. They are bound by determinations of the TIO under the TIO scheme.

* The TIO decides controversies between complainants and members. The TIO does so by applying legal principles to the facts as ascertained by it. The fact that the TIO is free to adopt informal procedures is not to the point. In substance, it tries actions for breach of contract or for civil wrongs. This is a function that, as Brandy confirms, is exclusively judicial in character.

* A determination made by the TIO is final and unappealable. It cannot be subject to collateral attack in the courts.

* A determination made by the TIO creates an immediately enforceable liability in the carrier concerned. Indeed, if anything, the TIO's determination can more readily be said to create an immediately enforceable liability than the determinations of the Commission at issue in Brandy.

* In substance the TIO scheme abrogates each carrier's basic right to have disputes determined by courts and substitutes an inferior regime of unmeasured and unchallengeable determinations.

59 The respondents' second constitutional contention was that s 128 of the Service Standards Act and its predecessor are laws "imposing taxation" within s 55 of the Constitution. The first paragraph of s 55 of the Constitution provides as follows:

"Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect."

Since it was common ground that s 128 is contained in an Act which deals with matters other than the imposition of taxation (see Air Caledonie International v The Commonwealth (1988) 165 CLR 462, at 471-472, per curiam), it follows, according to Mr Leeming, that s 128 contravenes s 55 of the Constitution and is of no effect.

60 Mr Leeming submitted that the requirement that members of TIO Ltd contribute to the costs and capital expenditure of TIO Ltd, as well as pay special levies, is the imposition of a tax for the purposes of s 55 of the Constitution. He relied on the following contentions:

* The requirement is a compulsory exaction of money (the compulsion deriving from s 128). The exaction is enforceable by law, since the articles of association constituted a statutory contract between members by virtue of s 140 of the Corporations Law.

* The exaction is imposed for a public purpose, namely the creation and maintenance of a complaints resolution mechanism for users of telecommunications services. The fact that the exaction is neither collected by a public authority nor paid into Consolidated Revenue is irrelevant to the question of whether it is a tax.

* The exaction is not a payment for services rendered to the members of TIO Ltd, since the recipients of the services are not the members but the end-users of telecommunications services.

61 The Solicitor-General for the Commonwealth, who appeared with Dr Griffiths for the ACA, observed that the authorities recognised that the dichotomy between judicial and non-judicial power is elusive. He submitted that the determinations made by the TIO fell into the "grey area" of powers that are judicial if entrusted to a court but non-judicial if entrusted to a non-judicial body, such as the TIO.

62 The Solicitor-General identified several features of the TIO scheme that, so he argued, negate the contention that judicial power of the Commonwealth has been conferred on the TIO:

* The determination of a complaint by the TIO does not involve the application of pre-existing legal principles to the facts as found, but the resolution of complaints by conciliation or the creation of new rights according to the TIO's assessment of what is just and reasonable in all the circumstances. In support of this submission, the Solicitor-General pointed out that the TIO in practice (as explained in its Annual Reports)

"aims to achieve a resolution based on what is fair and reasonable, rather than on strictly legal grounds".

* Although cl 6.1 of the TIO Constitution provides that all decisions are automatically binding upon its members, the TIO has no power to enforce its own determinations. According to the Solicitor-General, determinations are enforceable only on application to the Federal Court by the ACA or the Minister, or in the Supreme Court at the suit of other members of TIO Ltd. In either case, the Court would have an opportunity to review the determination. It follows, so the Solicitor-General contended, that a determination by the TIO is neither immediately enforceable nor enforceable in the same sense as the determination of the Commissioner in Brandy.

* While recognising that service providers are required to form TIO Ltd and to comply with the TIO scheme, the critical details of the TIO scheme are to be found in the Memorandum and Articles of TIO Ltd and the TIO Constitution. These, it was argued, are properly characterised as private not public law instruments. Accordingly, on principles discussed in Attorney-General for the Commonwealth v Breckler (1999) 197 CLR 83, a determination by the TIO is not the exercise of the sovereign power to quell controversies which is the hallmark of judicial power.

* Under the TIO Constitution, a TIO member can pre-empt a TIO determination by instituting legal proceedings and the TIO is excluded from determining a complaint if legal proceedings have already been instituted. The primacy given to legal proceedings and the TIO's discretion not to investigate a complaint that is more appropriately dealt with by another body indicate that the TIO does not exercise judicial power.

63 The Solicitor-General conceded that if s 128 of the Service Standards Act imposes taxation, the provision is contained in legislation which deals with matters other than the imposition of taxation. The Solicitor-General also accepted that the financial impositions on members of TIO Ltd bear some of the characteristics of taxation. In particular, he recognised that:

* the obligation to pay the impositions is compulsory;

* the obligation is enforceable by law, since TIO Ltd's Articles constitute a statutory contract under the Corporations Law and, in any event, either the Minister or the ACA can take proceedings in this Court to enforce the obligation;

* the purpose underlying the impositions is a public purpose, in the sense that the impositions are levied in the public interest;

* the impositions do not constitute a penalty; and

* the payments to be made by each member are not arbitrary, but are determined according to a methodology or formula prescribed in, or authorised by, the articles (Articles 4.3, 4.4, 6.1 and 6.2).

64 Nonetheless, the Solicitor-General submitted that the respondents' reliance on s 55 of the Constitution was misplaced, for two principal reasons.

65 First, it was said that even if the charges imposed on members of TIO Ltd constitute "taxation", they are not imposed by "laws" within the meaning of s 55. According to the Solicitor-General, the direct source of the obligation of members to pay the impositions is not s 128 of the Service Standards Act, but the Articles of Association of TIO Ltd. He pointed out that s 128 does not in terms purport to impose any liability to pay charges or fees. He also contended that the fact that the Articles of Association are enforceable as a statutory contract does not confer on them the status of a "law" imposing taxation for the purposes of s 55 of the Constitution.

66 Secondly, it was argued that the relevant impositions constitute "fees for services" and thus are outside the constitutional concept of "taxation". The Solicitor-General contended that, contrary to the respondents' submissions, the charges relate to services actually provided to the members of TIO Ltd who are required to pay them. He identified the relevant services as those which provide members with an informal, economical and speedy means of resolving disputes with customers. Further, he maintained that there is a discernible and reasonable relationship between the charges imposed under TIO Ltd's Articles of Association and the cost or value of the services provided to members. The charges are not imposed to raise revenue, but to defray the cost of providing services.

67 The Solicitor-General also contended that the requirement that service providers join TIO Ltd can be seen as the price they must pay for the privilege of conducting their operations in an industry having a clear public interest component. He maintained that the charges were similar to the licence fees for the taking of abalone upheld in Harper v Minister for Sea Fisheries [1989] HCA 47; (1989) 168 CLR 314.

68 As might be expected, the parties did not disagree as to the principles to be applied in deciding whether s 128 of the Service Standards Act, or its predecessor, contravene Chapter III of the Constitution. Rather, the disagreement concerned the operation of the TIO scheme and the significance, for the purposes of the Chapter III question, of particular features of the scheme. I therefore commence by examining the key features of the scheme.

69 The TIO scheme is unusual. Entry into the scheme is compulsory for carriers and eligible carriage service providers (to whom I refer as "service providers") unless they are declared to be exempt by the ACA: Service Standards Act, ss 128(1), 129(1). The scheme is identified in the Service Standards Act (s 128(3)) as the TIO scheme, but the legislation does not specify either the powers of the TIO or the structure of the scheme. Rather, the legislation states, in very general terms, the matters for which the TIO scheme must provide. Section 128(4) of the Service Standards Act merely states that the scheme must provide for the TIO to investigate, make determinations and give directions relating to complaints about "carriage services". The legislation does not specify the nature of the "determinations" or "directions" to be made by the TIO. Nor does it specify the manner in which the TIO is to undertake its investigations or the extent to which it is to explain (if at all) the reasons for making determinations or giving directions. The structure and operation of the scheme are to be determined by a corporation, the members of which are service providers (with the initial subscribers, Telstra, Vodafone and Optus, playing a particularly influential role in the corporation's management). It is therefore necessary to examine the Memorandum and Articles of TIO Ltd and the TIO Constitution to ascertain how the TIO scheme actually works.

70 Neither party's submissions addressed the questions of construction to which s 128(4) gives rise. The submissions tended to assume that the structure and operation of the TIO scheme are more or less settled by the current terms of the Memorandum and Articles of TIO Ltd and of the TIO Constitution. This assumption overlooks the fact that cl 11.2 of the TIO Constitution authorises the Board of TIO Ltd to approve amendments to the Constitution. Except for procedural requirements, the TIO Constitution does not impose any specific constraints on the Board's power of amendment. There may be an implied constraint that any amendment must not alter the nature of the TIO scheme to such an extent that it no longer complies with the requirements (minimal though they may be) of the Service Standards Act. But any such implied constraint still leaves considerable scope for the TIO scheme to be amended. Accordingly, the starting point must be the proper construction of Part 6 of the Service Standards Act, in particular s 128.

Enforceability of Determinations and Directions

71 Since the parties' written submissions did not focus on the construction of s 128 of the Service Standards Act, they did not specifically address whether s 128(4), on its proper construction, requires that any "determinations" or "directions" made by the TIO must be binding on service providers. The word "determination" is capable of meaning an authoritative and final decision. Depending on the context, however, it is also capable of referring to a non-binding decision. This was the meaning of the word in s 252(1) and (2) of the Racial Discrimination Act 1975 (Cth), as it stood prior to the amendments which gave rise to the challenge resolved in Brandy: see Brandy, at 266, per Deane, Dawson, Gaudron and McHugh JJ. It is, perhaps, difficult to construe the word "directions" in s 128(4) of the Service Standards Act as encompassing a non-binding decision. But even if s 128(4) contemplates that determinations and directions made by the TIO will "bind" service providers, a further question arises as to what this means.

72 It must be remembered that the fact that a determination is said to be "binding" does not necessarily mean that it is the product of the exercise of judicial power, nor that the determination can be directly enforced by the party apparently intended to benefit from it. In Rola Co (Australia) Pty Ltd v Commonwealth [1944] HCA 17; (1944) 69 CLR 185, Latham CJ observed (at 197) that:

"the word `binding' is used in more than one connection and...is not a word limited to the description of obligations created by judicial action. A man is `bound' by a statute which applies to him: he is `bound' by a contract which he makes; he is `bound' by an award of an arbitrator pursuant to a submission by him: he is `bound' by an industrial award which applies to him."

Thus, on the assumption that s 128(4) of the Service Standards Act requires the TIO scheme to provide that determinations are to be binding on members, it is necessary to examine in what sense the determinations are "binding".

73 In his written submissions on behalf of the respondents, Mr Leeming contended that determinations or directions of the TIO are "immediately binding". The submissions did not analyse in detail how the TIO's determinations or directions might be enforced. It seemed to be suggested, however, that because cl 6.1 of the TIO Constitution provides that a decision of the TIO is "automatically binding" on a service provider member, a complainant in whose favour a determination requiring the payment of compensation has been made, can sue the service provider to recover the compensation as a debt. It also seemed to be suggested that the court hearing the claim would be unable to go behind the TIO's determination.

74 Mr Leeming resiled somewhat from these propositions in oral argument. He accepted that, even if the complainant could sue the service provider, there would be circumstances in which the service provider could challenge the determination on which the claim was founded. Specifically, Mr Leeming accepted that "collateral" challenges could be mounted where:

* the TIO's determination exceeds its jurisdictional limit of $10,000 (cl 6.1(1));

* the TIO fails to follow the procedures laid down by the TIO Constitution (cl 5.1); or

* the TIO makes some clear error of fact or law apparent on the face of its determination (although he suggested that a challenge on this ground would almost inevitably face difficulties because the TIO is not required to explain its reasoning process (cl 6.3)).

Mr Leeming maintained that, subject to these qualifications, the complainant can institute enforcement proceedings in a court with the consequence that a determination by the TIO is binding and enforceable in the sense used by the High Court in Brandy.

75 In some circumstances, a duty created by statute can be enforced by an individual for whose protection the legislation is enacted. For example, if a statute creates a duty or obligation to pay money, an action ordinarily lies for its recovery. Where the obligation is to pay a liquidated sum, an action in debt is appropriate: Shepherd v Hills [1855] EngR 377; (1855) 11 Ex 55, at 67; [1855] EngR 377; 156 ER 743, at 747; Mallinson v Scottish Australian Investment Co Ltd [1920] HCA 51; (1920) 28 CLR 66, at 70-71. On the other hand, as Isaacs J observed in Josephson v Walker [1914] HCA 68; (1914) 18 CLR 691, at 701, if

"statute creates a new right and specifies the remedy, that remedy is exclusive. The natural presumption to begin with is that Parliament in creating the novel right attaches to it the particular mode of enforcement as part of its statutory scheme. To that extent the enactment is a code."

See also Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410, at 421, 425-426, per Brennan CJ, Dawson and Toohey JJ.

76 The respondents' submissions appeared to assume that s 132 of the Service Standards Act confers a right on a "successful" complainant to enforce a determination or direction in his or her favour directly against a service provider. It is difficult to see why this is so. Section 132 merely says that a service provider who is a member of the TIO scheme must comply with the scheme. The section does not say that a complainant can take proceedings to enforce a determination requiring a service provider to pay compensation. Much less does it say that a complainant can take proceedings to enforce other kinds of determinations or directions that do not involve the payment of compensation.

77 In my opinion, the reason why s 132 does not confer a right of action on a complainant is clear enough. Part 30 of the Telecommunications Act provides the means whereby the ACA (among others) can enforce a determination or direction made by the TIO against a service provider. Section 564(2) of the Telecommunications Act provides for the Federal Court to grant a "performance injunction" requiring a person to do an act or thing necessary to remedy a contravention of the Telecommunications Act or the Service Standards Act. A service provider who is a member of the TIO scheme and who refuses or fails to comply with a determination or direction made by the TIO, contravenes s 132 of the Service Standards Act and therefore may be the subject of proceedings for a performance injunction under s 564(2) of the Telecommunications Act.

78 It is plain that an application for a performance injunction is available where a service provider contravenes the service provider rules. This follows both from the broad language of s 564(2) and from the terms of s 564(3) of the Telecommunications Act. The latter states that the ACA is not entitled to apply for an injunction in relation to a contravention of the service provider rules insofar as the rules relate to s 369 (which deals with Rules of Conduct about dealings with international telecommunications operators). This express exclusion reinforces the view that other contraventions of the service provider rules can be the subject of an application for a performance injunction.

79 As has already been noted, Part 31 of the Telecommunications Act provides pecuniary penalties for contraventions of "civil penalty provisions", including s 101 of the Telecommunications Act. Thus a service provider who fails to comply with the applicable service provider rules also may be ordered by the Federal Court to pay a pecuniary penalty to the Commonwealth: s 570(1).

80 The scheme of the legislation seems to me to be that enforcement of determinations or directions made by the TIO is not to be left to individual complainants, but is entrusted to the ACA or the other authorities, including the Minister, mentioned in s 564(2) and 571(1) of the Telecommunications Act. The legislative policy doubtless reflects the view that it is inappropriate for retail customers or small businesses to have any responsibility or entitlement to take legal proceedings to enforce determinations or directions made against service providers.

81 If this analysis is correct, the means of enforcing a "binding" determination or direction made by the TIO is by an application for a performance injunction under s 564(2) of the Telecommunications Act or, more indirectly, by the imposition of a civil penalty pursuant to s 570(1). The grant of a performance injunction is clearly not "automatic". Section 564(2) confers a discretionary power upon the Court to grant an injunction requiring the relevant person to do an act or thing. In the case of a service provider who refers or fails to comply with a determination or direction made by the TIO, there could be many reasons why the Court would decline to grant a performance injunction. Among these are likely to be the circumstances identified by Mr Leeming (see [74] above). But these by no means constitute an exhaustive catalogue of the circumstances which would influence the Court to decline to grant an injunction at the suit of the ACA.

82 As the Solicitor-General pointed out, proceedings under Part 30 of the Telecommunications Act may not be the only means of enforcing a determination or direction made by the TIO. The Memorandum and Articles of TIO Ltd constitute a contract between the company and each member and between a member and each other member: Corporations Law, s 140. Thus TIO Ltd itself, or another member of the company, might be able to take action to enforce the determination or direction pursuant to the statutory contract. But such proceedings could not be brought by the complainant, who is an outsider so far as the statutory contract is concerned: Ford's Principles of Corporations Law (10th ed 2001), par [6.040]. Furthermore, the member would be entitled to resist the claim on any grounds available under the statutory contract. And, to the extent that TIO Ltd or another member seeks orders in the nature of specific performance or mandatory injunctions, they would not be entitled to such relief as of right.

83 It is a curious feature of Part 6 of the Service Standards Act that it does not address the question of how the TIO is to go about making determinations or giving directions. Section 128(5) gives examples of the kinds of complaints for which the TIO scheme must provide, but s 128 affords no guidance as to the TIO's decision-making processes. In particular, s 128 says nothing about whether the TIO must apply what might be described as the judicial method to the resolution of complaints. To adopt the language used in Brandy, s 128 of the Service Standards Act does not say whether the TIO is or is not confined to "applying the relevant principles of law to the facts as found" (at 258, per Mason CJ, Brennan and Toohey JJ) or to "determin[ing] existing rights and duties...according to law" (Brandy, at 268, per Deane, Dawson, Gaudron and McHugh JJ).

84 In my view, the meagre statutory guidelines do not require TIO Ltd to implement a scheme in which the TIO is limited to making binding determinations or directions by applying settled legal principles to the facts of particular cases. The legislation seems to me to contemplate that in some circumstances at least the TIO will create norms to resolve a particular dispute or class of dispute. It must be remembered that s 128(4)(a) requires the TIO scheme to provide for the TIO to investigate complaints, a function that is not readily compatible with the exercise of the judicial power of the Commonwealth. Moreover, the criteria governing applications for exemption from directions to join the TIO scheme (ss 129(2), 130(3)) demonstrate that the TIO scheme is intended, in particular, to provide a swift, cheap and effective dispute resolution mechanism for residential customers and proprietors of small businesses. Clearly enough, Parliament contemplated that the TIO scheme would deal with a large volume of consumer complaints, the vast majority of which would involve relatively small sums (in money or money's worth). Parliament must also have contemplated that there would be a great variety of complaints, many of which would not be susceptible to swift and inexpensive resolution if there were a rigid requirement that legal principles be applied to the facts. In these circumstances, the general language of s 128 of the Service Standards Act does not suggest that the TIO was intended to be confined to a "judicial" approach to the making of determinations or directions.

85 This conclusion is consistent with the intention expressed in the Explanatory Memorandum to the Telecommunications Bill 1996, that the TIO scheme would continue to operate along its then current lines. According to the TIO's Annual Report 1995/1996 (the last complete year prior to the enactment of the Telecommunications Act), the TIO had established a time frame of twenty-eight days to deal with "Complaints" and a goal of ninety days for the resolution of "Disputes" (that is, "Complaints" unresolved by conciliation, mediation or negotiation). While relatively few determinations were made by the TIO in the 1995/1996 year, it is clear that many complaints related to matters that would be difficult to resolve by the application of established legal norms. These included complaints about delays by carriers in providing billing information and problems associated with "backbilling" (where a carrier is unable to bring all call charges to account within the relevant billing period and subsequently issues a bill to cover those calls) and with lack of portability of telephone numbers (notwithstanding that customers apparently had no legal entitlement to portability).

86 This does not necessarily mean that, if the TIO Constitution were to be amended so as to instruct the TIO simply to disregard any applicable legislative or common law norms when making determinations, the TIO scheme would nonetheless comply with s 128(4) of the Services Standards Act. The statutory criteria might not be that elastic. Moreover, there are likely to be some complaints that can be resolved in a straightforward manner, by ascertaining the customer's rights under the applicable terms and conditions of the supply agreement. Even so, the TIO scheme does not contravene s 128(4) of the Service Standards Act merely because it authorises the TIO to make determinations or give directions otherwise than by applying legal principles to the facts as found.

87 It follows from what I have said that the current terms of the Memorandum and Articles of TIO Ltd and of the TIO Constitution are less important to the Chapter III question than the proper construction of Part 6 of the Service Standards Act. If it matters, however, I think that the TIO Constitution recognises, implicitly if not explicitly, that the TIO will make many, if not all determinations and directions otherwise than by applying legal principles to the facts of the particular case.

88 The functions of the TIO are wide. They include investigating and making determinations relating to complaints about carriage services by end-users (TIO Constitution, cl 3.1(1)). Individual complaints may be initiated informally and indeed do not even have to be in writing (cl 3.2(d)). The illustrations given in the TIO Constitution show that the scheme is intended to cover an extremely wide range of consumer complaints (cl 3.1, 4.1). Many of these complaints will not readily be capable of resolution by what might be described as the judicial method. The need to adapt the TIO's decision-making processes to the diversity of complaints consumers can be expected to lodge with the TIO is reflected in the wide variety of directions that the TIO can give to service providers (cl 6.1). These provisions indicate that the TIO Constitution contemplates that the TIO will take a flexible approach to the resolution of complaints and will be free to create norms to resolve particular disputes or classes of disputes.

89 I should record that the Solicitor-General submitted that cl 5.1 of the TIO Constitution is inconsistent with the TIO being bound to resolve disputes by applying established legal principles to the facts of each case. Clause 5.1, it will be recalled, requires the TIO to pursue the objective of "fair, just, economical, informal and expeditious" resolution of complaints. Language of this kind is not, however, unusual: see, for example, Migration Act 1958 (Cth), s 420(1). It is used in the TIO Constitution in the context of specifying the procedures to be followed by the TIO. For this reason, I am not inclined to think that cl 5.1, of itself, establishes that the TIO is not to be confined to applying legal principles to the facts of individual cases. But, as I have explained, other provisions in the TIO Constitution lead to the same conclusion.

Exclusion of the TIO from Determining a Complaint

90 According to the Solicitor-General, one of the indicia suggesting that the Service Standards Act does not confer judicial power on the TIO is the fact that the TIO Constitution precludes the TIO from determining a complaint if legal proceedings have already been instituted. A number of provisions in the TIO Constitution address the relationship between the TIO and the courts.

91 The TIO Constitution provides that the functions of the TIO do not extend to complaints relating to "matters which are specifically under consideration by...any court or tribunal, or which have been considered by any of those bodies previously" (cl 4.3(j)). The scope of this provision is not entirely clear, although it would seem that the TIO is not automatically deprived of jurisdiction where a service provider institutes legal proceedings against a complainant after the latter has lodged a complaint with the TIO (see cll 6.7, 6.8(a)(iii), 6.8(b)). It is clear, however, that the TIO will not have jurisdiction to determine a complaint which is lodged at a time when legal proceedings in respect of the same matter are pending between the service provider concerned and the complainant.

92 Clause 6.7 confers a discretion on the TIO to decline to investigate a complaint where "under [cl] 6.8(b)...the complaint is more conveniently or effectively dealt with by...the courts". The scope of cl 6.7 is not entirely clear, since cl 6.8(b) does not expressly refer to courts and, in any event, the provision confers a discretionary power not to investigate a complaint only where, inter alia, the complainant consents to the matter being referred to another body. It seems that cl 6.7 is intended to allow the TIO to decline to investigate a complaint if the complainant decides to initiate legal proceedings during the currency of the complaint, although this may not be its only effect.

93 Finally, cl 6.8(a) provides a mechanism for bringing the determination process by the TIO to a halt, when the member institutes legal proceedings on an "important or novel point of policy or law". The member must agree to pay the complainant's costs and the TIO retains a residual discretion to proceed with the complaint if, for example, delay would cause hardship to the complainant.

94 Mr Leeming did not suggest that any of these provisions takes the TIO Constitution outside the scope of s 128 of the Service Standards Act. It would seem to follow that Mr Leeming accepted that the Service Standards Act contemplates that the TIO may be precluded from dealing with a complaint that is already the subject of court proceedings and that, at least in some circumstances, the TIO may be given a discretion not to pursue complaints where the member institutes legal proceedings after a complaint has been lodged.

DOES SECTION 128 CONFER JUDICIAL POWER ON THE TIO?

95 The general principles concerning the nature of "the judicial power of the Commonwealth", as that expression is used in s 71 of the Constitution, are not in doubt. The difficulties usually arise in the application of the principles to particular legislation.

96 It is axiomatic that it is not possible to offer an exhaustive definition of judicial power: Precision Data Holdings Ltd v Wills (1991) 173 CLR 167, at 188-189, per curiam; Brandy, at 267, per Deane, Dawson, Gaudron and McHugh JJ. This has led to acceptance of the principle that some functions have a "double aspect": that is, "when performed by a court [they] constitute the exercise of judicial power but, when performed by some other body, do not": Brandy, at 267; The Queen v Davison [1954] HCA 46; (1954) 90 CLR 353, at 368-369, per Dixon CJ and McTiernan J; The Queen v Hegarty; Ex parte City of Salisbury [1981] HCA 51; (1981) 147 CLR 617, at 628, per Mason J.

97 There are, nonetheless, some functions that are regarded as exclusively within the province of the judicial power and thus cannot be entrusted to a non-judicial body. The point was put this way by Mason CJ, Brennan and Toohey JJ in Brandy (at 258-259):

"Although many decision-making functions may take their character as an exercise of judicial, executive or legislative power from their legislative setting, the character of the decision-maker and the nature of the decision-making process, some decision-making functions are exclusive and inalienable exercises of judicial power. As Dixon CJ and McTiernan J observed in R v Davison [at 369]:

`The truth is that the ascertainment of existing rights by the judicial determination of issues of fact or law falls exclusively within judicial power so that the Parliament cannot confide the function to any person or body but a court constituted under ss 71 and 72 of the Constitution.'

In that statement, the expression `judicial determination' means an authoritative determination by means of the judicial method, that is, an enforceable decision reached by applying the relevant principles of law to the facts as found.

Thus, it has always been accepted that the punishment of criminal offences and the trial of actions for breach of contract and for wrongs are inalienable exercises of judicial power. The validity of that proposition rests not only on history and precedent but also on the principle that the process of the trial results in a binding and authoritative judicial determination which ascertains the rights of the parties. So, when A alleges that he or she has suffered loss or damage as a result of B's unlawful conduct and a court determines that B is to pay a sum of money to A by way of compensation, there is an exercise of judicial power. The determination involves an exercise of such power not simply because it is made by a court but because the determination is made by reference to the application of principles and standards `supposed already to exist'. And the determination is binding and authoritative in the sense that there is what has been described as an immediately enforceable liability of B to pay A the sum in question." (Citations omitted.) (Emphasis added.)

98 The joint judgment of Deane, Dawson, Gaudron and McHugh JJ pointed out (at 268) that not every binding and authoritative decision made in resolving a dispute constitutes the exercise of judicial power. Their Honours said that an

"important element which distinguishes a judicial decision is that it determines existing rights and duties and does so according to law. That is to say, it does so by the application of a pre-existing standard rather than by the formulation of policy or the exercise of administrative discretion." (Emphasis added.)

Even this criterion, however, is not conclusive since, as their Honours noted, the exercise of arbitral (non-judicial) powers may also involve the determination of existing rights and obligations.

99 The joint judgment of Deane, Dawson, Gaudron and McHugh JJ also identified at 268):

"one aspect of judicial power which may serve to characterise a function as judicial when it is otherwise equivocal. That is the enforceability of decisions given in the exercise of judicial power."

This does not mean that it is essential to the exercise of judicial power that the relevant decision-making body should be called upon to execute its own decision. Brandy itself demonstrates this proposition. Sections 25ZAA and 25ZAB of the Racial Discrimination Act 1975 (Cth) required determinations of the Human Rights and Equal Opportunity Commission to be registered in the Federal Court. Subject to a limited review process, registration automatically had the effect of making the determination binding upon the parties and enforceable as an order of the Court. It was held that the Commission's determinations constituted an exercise of judicial power notwithstanding that it had no power to enforce its own determinations. What was significant in Brandy, however, was that the legislation itself gave the determination, upon registration, the effect of an order of the Federal Court. Nothing the Federal Court did had that effect: see at 270.

100 In my opinion, despite the respondents' reliance on Brandy, the principles formulated and applied in that case do not support their contention that s 128 of the Service Standards Act purports to confer judicial power on the TIO. There are two critical distinctions between the scheme of Part 6 of the Service Standards Act and the provisions held in Brandy to contravene Chapter III of the Constitution.

101 First, determinations made by the TIO are not automatically enforceable, whether by registration in a court or otherwise. As I have also explained, determinations of the TIO, although expressed to be "binding" on the service provider, can be enforced only by proceedings taken in a court. The ACA (among others) may apply for a performance injunction pursuant to s 564(2) of the Service Standard Act requiring the service provider to comply with a determination. Alternatively, the TIO may be able to take action against the service provider to enforce the determination pursuant to the statutory contract constituted by the Memorandum and Articles of TIO Ltd. In either case the determination of the TIO is not immunised from "collateral challenge" on any one of a number of grounds: see Attorney-General v Breckler, at 111-112, per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ. It follows that an "independent exercise of judicial power [is] required to give effect to a determination": Brandy, at 261, per Mason CJ, Brennan and Toohey JJ. This constitutes a decisive distinction between the present case and Brandy.

102 Secondly, as I have explained, s 128 does not require the TIO to resolve complaints by making determinations on the basis of the application of principles of law to the facts as found. Section 128 contemplates that the TIO will be free to create norms to resolve a particular dispute or class of dispute. In turn, the TIO Constitution allows the TIO to take this approach in making determinations or giving directions in order to resolve complaints. The present case is therefore different from Brandy, where it was held that the Commission had to decide controversies between the parties by determining rights and duties based on existing facts and the law as set out in Part II of the Racial Discrimination Act: see at 269, per Deane, Dawson, McHugh and Gaudron JJ; see also at 259, per Mason CJ, Brennan and Toohey JJ.

103 These two distinguishing features of the legislation have the consequence that the decision-making functions conferred on the TIO by or under the authority of s 128 of the Service Standards Act do not constitute "exclusive and inalienable exercises of judicial power": Brandy, at 258. The functions must take their character from that of the body to which they are entrusted. Since the TIO is not a court, the functions conferred on it by or under the authority of s 128 are not judicial. It follows that s 128 of the Service Standards Act does not contravene Chapter III of the Constitution.

104 It will be seen that I have reached this conclusion independently of the Solicitor-General's argument that the primacy given to court proceedings by the TIO Constitution shows that the TIO does not exercise judicial power. The Solicitor-General in support of this contention invoked certain observations made by Drummond J in Whittaker v Child Support Registrar [2000] FCA 1773. In that case, his Honour was concerned with the power of a Registrar of the Family Court, pursuant to ss 98B and 98C of the Child Support (Assessment) Act 1989 (Cth) ("Assessment Act"), to make a determination to depart from an administrative assessment of child support for which a parent or carer of a child was liable. The Registrar could decline to make a determination if he or she considered that the issues raised by the application were too complex to be dealt with under the Assessment Act and could recommend that the application be made to a court: s 93EA. Drummond J said (at [29]) that the Registrar's power to decline to make a determination was

"a powerful indication against the Registrar's power being characterised as judicial. One feature always present in judicial power (subject only to the ancillary power to postpone by adjournment the time for making the decision) is the duty to make a binding decision. The right to avoid making a decision is wholly foreign to judicial power."

105 The course of authority in Chapter III of the Constitution invites caution before endorsing unqualified propositions about the indispensable characteristics of judicial power. It is by no means clear, for example, that a power to avoid making a binding decision in a particular case is necessarily "wholly foreign to judicial power": cf Trade Practices Act 1974 (Cth), s 86A; Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) (conferring power, in certain circumstances, to transfer proceedings to other courts). Nonetheless, the fact that a body can decline to make a binding decision in relation to a dispute because a court is or may become seized of the dispute is an indication that the body is not exercising judicial power.

106 As Mr Leeming seemed to accept, there is nothing inconsistent with s 128 of the Service Standards Act for the TIO to be granted a discretionary power to decline to make a determination in respect of a complaint which the TIO considers is more appropriately dealt with by a court. This, in my view, is a further indication that s 128 of the Service Standards Act does not confer judicial power on the TIO. For the reasons I have given, however, it is not necessary to rely on the TIO's discretionary power to avoid making a determination on a complaint in order to conclude that s 128 of the Service Standards Act does not infringe Chapter III of the Constitution.

107 The documentary evidence explained how the TIO scheme is funded in practice. According to the Annual Reports of the TIO for the years 1998-1999 and 1999-2000, the TIO has four levels of complaint classifications. Prior to 1 July 1999, the levels were known respectively as "Enquiry", "Consultation", "Complaint" and "Dispute". An "Enquiry" was defined as a query resolved immediately or within one working day. "Consultations" and "Complaints" required members to respond to the TIO's request for information within a set time frame. Disputes were dealt with by the Deputy Ombudsman personally and had varying time frames, depending on their complexity. On 1 July 1999, the terms used to describe the various levels of complaints were changed to "Level One", "Level Two", "Level Three" and "Level Four", respectively (see Annual Report 1998-1999, at 36).

108 The fees charged to each member of TIO Ltd depend on the number and nature of complaints made against that member. The table below sets out the fees charged to members:

109 The Annual Report for 1999-2000 records the following information:

"Revenue from complaint fees is used to fund the costs of operating the TIO's investigations area. These expenses include salaries for investigative staff, free-call telephone charges and half of overhead costs such as rental of office premises, stationery and other general operating items.

If a member incurs complaint fees, it is also required to contribute a proportion of the TIO's overhead costs. These costs include marketing and promotions, computer systems and other general operating items. The proportion of complaint handling fees attributed to a member determines the proportion of overhead expenses the member must pay. For example, if a member incurs 5% of the total complaint handling fees, it pays 5% of the overhead costs. Capital expenditure is quantified separately in the business plan and is funded in the same way as overhead costs.

The TIO Board may also obtain funds from members by raising a levy to finance special projects such as consultants' reports. To raise a special levy, the TIO will make a request to the Board for funding over and above the current annual budget. Special levies are a rare occurrence as all expenditure is usually quantified in the business plan.

Members receive quarterly invoices for complaint handling fees incurred in the current quarter based on the actual number of complaints logged against them (including a proportion of overheads and capital expenditure), plus an estimated amount for changes expected to be incurred in the next quarter. Each quarter a reconciliation of actual charges against estimated is completed.

During 1999-2000, less than one-quarter of TIO members had complaints logged against them, and accordingly less than one-quarter of members were required to contribute funds to the TIO.

...

The TIO's funding system has been adjusted in recognition that the majority of members are now small businesses. From 1 July 1999, the TIO waived all charges (including overhead and special levy) for the first four Level 1 complaints per quarter received for each member."

110 The Annual Report 1999-2000 also notes (at 48) that during the year the TIO received a total of 67,761 "contacts". This figure included 13,361 enquiries which did not lead to a complaint, leaving 54,400 "complaints" to be investigated by the TIO. The mix of complaints showed a pattern of a slight decrease in Level 1 complaints offset by an increase in the more complex complaints. The increasing complexity of complaints was said to be reflected in the time taken to resolve them. The average time taken to resolve a Level 2 complaint increased from 27.5 days in 1998-99 to 39 days in 1999-2000. Level 3 complaint resolution times increased from 44 to more than 56 days in the same period. On the other hand, Level 4 complaints, of which 36 were resolved in 1999-2000, were finalised on average after 116 days, a decrease from the average of 166 days in 1998-99.

111 In Air Caledonie v The Commonwealth, the High Court pointed out (at 468) that ss 53, 54 and 55 of the Constitution must be read together. Section 53 limits the power of the Senate in relation, inter alia, to proposed laws "appropriating revenue or moneys" or "imposing taxation". Such proposed laws may not originate in or be amended by the Senate. Section 53 provides that

"...a proposed law shall not be taken to appropriate revenue or moneys, or to impose taxation, by reason only of its containing provisions for the imposition or appropriation of fines or other pecuniary penalties, or for the demand or payment or appropriation of fees for licences, or fees for services under the proposed law..."

Section 54 imposes constraints on a proposed law appropriating money:

"The proposed law which appropriates revenue or moneys for the ordinary annual service of the Government shall deal only with such appropriation."

"Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect."

112 As the Court in Air Caledonie v The Commonwealth observed (at 471), the first paragraph of s 55 contains two limbs. The first consists of the "mandatory injunction" that laws imposing taxation deal only with the imposition of taxation. The second limb specifies the consequences of a breach of the first limb, namely that any provision in such laws dealing with a matter other than the imposition of taxation is of no effect. The Court noted that an "obvious purpose" of the requirement in the first paragraph of s 55

"was to confine the impact of the limitations upon the Senate's powers with respect to proposed taxing laws to provisions actually dealing with the imposition of Taxation, that is to say to prevent `tacking'".

113 The Court in Air Caledonie v The Commonwealth also pointed out (at 468) that, when ss 53, 54 and 55 are read together:

"it is apparent that references in ss 53 and 55 to a law or laws `imposing taxation' must be given a constant meaning. That being so, the provision in s 53 that `a proposed law shall not be taken...to impose taxation, by reason only of its containing provisions...for the demand or payment...of...fees for services under the...law' must be treated as indirectly applicable to confine the content of the references to `[l]aws imposing taxation' and the `imposition of taxation' in the first paragraph of s 55."

114 The foundation statement of the characteristics of a tax for the purposes of s 55 of the Constitution is often taken to be that of Latham CJ in Matthews v Chicory Marketing Board [1938] HCA 38; (1938) 60 CLR 263, at 276, namely "an exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered". The High Court has since held, however, that this statement cannot be regarded as an exhaustive definition of a tax: Air Caledonie v The Commonwealth, at 467; Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 177 CLR 480, at 500, per Mason CJ, Brennan, Deane and Gauldron JJ. For example, a tax is not a penalty and cannot be arbitrary: MacCormack v Federal Commissioner of Taxation [1984] HCA 20; (1984) 158 CLR 622, at 639, per Gibbs CJ, Wilson, Deane and Dawson JJ. The High Court has also held that Latham CJ's statement in Matthews v Chicory Marketing Board must be qualified in a number of respects. Some of these qualifications explain the concessions made by the ACA in the present case.

115 It is not essential to the concept of a tax that the exaction should be by a public authority: Tape Manufacturers v The Commonwealth, at 501. Thus a levy imposed for public purposes by a non-public authority acting pursuant to a statutory authority may be a tax: ibid. It follows that the mere fact that TIO Ltd is not a public authority does not prevent a charge levied on members from being classified as a tax if it otherwise satisfies the constitutional requirements. Nor is it essential to the concept of a tax that the exaction be paid into Consolidated Revenue. A law which levies an exaction on one group in the community to be expended for the benefit of another (such as a law imposing a "royalty" on vendors of blank tapes, with the proceeds payable to a "collecting society" the members of which are copyright owners) may be a tax: Tape Manufacturers v The Commonwealth, at 504. Accordingly, the fact that the charges levied on members of TIO Ltd are not paid into Consolidated Revenue is not fatal to the contention that s 128 of the Service Standards Act is a law imposing taxation.

116 The High Court has also taken a broad view of what constitutes a "public purpose". The expression is not to be equated to "governmental purpose": Tape Manufacturers v The Commonwealth, at 504. A legislative solution to a "complex problem of public importance is of necessity a public purpose": id, at 505. Thus legislation providing for the relief of necessitous farmers or compensation for a group of copyright owners serves a public purpose: ibid. Doubtless, as the ACA conceded, legislation establishing a complaints mechanism for users of telecommunications services can be regarded as serving a public purpose.

THE SERVICE STANDARDS ACT DOES NOT IMPOSE TAXATION

117 Notwithstanding that the charges levied on members of TIO Ltd have some of the characteristics of taxation, I think that there are two reasons why s 128 of the Service Standards Act is not a law imposing taxation for the purposes of s 55 of the Constitution.

118 First, in my opinion, neither s 128 of the Service Standards Act, nor any other provisions of Part 6 of the Act, can be construed as imposing taxation or authorising the imposition of taxation on members of TIO Ltd. The respondents' submissions did no more than assert that s 128 of the Services Standards Act should be construed in this manner; they offered no explanation as to why the construction should be adopted. Indeed, as I have observed, very little attention was paid in argument to questions of construction of the legislation.

119 Part 6 of the Service Standards Act makes no mention of the means by which the TIO scheme is to be funded. Much less does it explicitly confer power on TIO Ltd to impose a "tax" on its members. Section 128 merely sets out in general terms a number of requirements for the TIO scheme, none of which addresses the question of how TIO Ltd is to finance its activities. Section 132 merely directs that a service provider is to "comply with the scheme" without identifying the components of the scheme. That question is left to the Memorandum and Articles of TIO Ltd or, perhaps, to the Board of the company.

120 In these circumstances, I find it difficult to understand how the general statements in s 128 or s 132 of the Service Standards Act can be read as authorising TIO Ltd to impose charges that fall within the constitutional conception of a tax. Legislation should not lightly be construed as authorising a non-public corporation (albeit performing some "public functions") to impose taxation on a class of persons, in this case its members (who have no choice but to become members). In the absence of any clear indication that this was the intention of Parliament, the legislation should not be read as having this effect.

121 Moreover, to interpret Part 6 of the Service Standards Act as authorising the imposition of a tax would expose the legislation as a whole (see Air Caledonie v The Commonwealth, at 471-472) to the risk of invalidity. Independently of s 15A of the Acts Interpretation Act 1901 (Cth), to which neither party referred, orthodox principles of interpretation dictate that s 128 of the Service Standards Act should be interpreted in a manner that avoids the risk of constitutional invalidity, unless Parliament has clearly expressed a contrary intention. These principles of interpretation were applied in Federal Commissioner of Taxation v Cripps & Jones Holdings Pty Ltd (1987) 76 ALR 619. There the Full Court of the Federal Court interpreted ambiguous legislation as allowing a taxpayer to challenge an ingredient of liability to a tax, in order to avoid the possibility that the legislation might otherwise be held unconstitutional as an "uncontestable tax": at 628-629, per curiam.

122 An issue may arise as to whether a particular charge levied on members of TIO Ltd by or under the authority of the Articles is itself authorised by Part 6 of the Service Standards Act: cf Marsh v Shire of Serpentine-Jarrahdale [1966] HCA 77; (1966) 120 CLR 572. It is not, however, necessary for the purposes of the present case to consider the consequences if a particular charge were found to be unauthorised by the legislation. The respondents have not pleaded or argued that the particular charges levied on them were not authorised by Part 6 of the Service Standards Act.

123 The second reason why the charges actually levied on TIO members do not constitute taxation for the purposes of s 55 of the Constitution is that, in my opinion, they should be characterised as "fees for services". In Air Caledonie v The Commonwealth, the Court noted (at 467) that Gibbs J in Logan Downs Pty Ltd v Queensland [1977] HCA 3; (1977) 137 CLR 59, at 63, had made explicit what was implicit in the reference to fees for services by Latham CJ in Matthews v Chicory Marketing Board:

"namely, that the services be "rendered to" - or (we would add) at the direction or request of - `the person required' to make the payment".

The Court in Air Caledonie v The Commonwealth also pointed out that the negative attribute of a tax - "not a payment for services rendered" - was merely an example of special kinds of exactions, such as a charge for the use of property or a fine or penalty, which may not constitute taxation despite having the positive attributes mentioned by Latham CJ.

124 In Air Caledonie v Commonwealth, the Court (at 467-470) explained further the concept of "fees for services":

"[A] compulsory and enforceable exaction of money by a public authority for public purposes will not necessarily be precluded from being properly seen as a tax merely because it is described as a `fee for services'. If the person required to pay the exaction is given no choice about whether or not he acquires the services and the amount of the exaction has no discernible relationship with the value of what is acquired, the circumstances may be such that the exaction is, at least to the extent that it exceeds that value, properly to be seen as a tax.

...

In one sense, all taxes exacted by a national government and paid into national revenue can be described as `fees for services'. They are the fees which the resident or visitor is required to pay as the quid pro quo for the totality of benefits and services which he receives from governmental sources. It is, however, clear that the phrase `fees for services' in s 53 of the Constitution cannot be read in that general impersonal sense. Read in context, the reference to `fees for services' in s 53 should, like the reference to `payment for services rendered' in the above-quoted extract from the judgment of Latham CJ in Matthews v Chicory Marketing Board, be read as referring to a fee or charge exacted for particular identified services provided or rendered individually to, or at the request or direction of, the particular person required to make the payment."

125 The decision in Air Caledonie v The Commonwealth itself was that an immigration clearance fee was held to be a tax so far as it related to passengers who were Australian citizens. Since a citizen had the right to re-enter the country without the need for any "clearance", a requirement that he or she submit to administrative procedures at the end of a journey could not be seen as the provision or rendering of services to that citizen (at 470).

126 As was observed by Gaudron J in Air Services Australia v Canadian Airlines International Ltd (1999) 167 ALR 392, at 423, it follows from Air Caledonie v The Commonwealth that:

"[f]or an exaction to constitute a fee for service, some service must actually be provided to the person liable to pay. It is not sufficient that the charge be levied to defray the expenses of an authority charged with the performance of functions which benefit the class of persons from whom it is exacted."

127 In my view, the charges levied on members of TIO Ltd are in respect of services provided to the members liable to pay those charges. The TIO's functions, broadly speaking, are to investigate, facilitate the resolution of and, if necessary, determine complaints made by end-users about the supply of, or charges for, carriage services supplied by members (see TIO Constitution, cl 3.1). It is true that not all members wish to receive the TIO's services and that not all complaints will be resolved to the satisfaction of the particular member concerned. Nonetheless, it can fairly be said that each member who is the subject of a complaint receives a service, namely a facility for the investigation, resolution and determination of complaints against that member. In the absence of such a facility, the member itself would have to deal with and resolve complaints made by end-users or face the expense and inconvenience of other dispute resolution mechanisms available to customers.

128 As Mr Leeming pointed out, the TIO's services benefit the end-users of carriage services. This is recognised, for example, in the TIO's Annual Report 1999-2000, which states that the "TIO aims to assist the consumer by providing an accessible, non-bureaucratic alternative dispute resolution forum". But the fact that the TIO scheme assists consumers does not mean that the services are provided or designed exclusively for the benefit of consumers. The "alternative dispute resolution forum" constitutes a service both to customers and to service providers.

129 The fact that the service providers have no practical choice but to join the TIO scheme and to accept the dispute resolution mechanism provided by the TIO does not deprive the charges levied on members of TIO Ltd of the character of "fees for services". As the analysis in Air Caledonie v The Commonwealth shows, a compulsory exaction can still constitute a fee for services. So in Air Services v Canadian Airlines the airlines had no "practical choice" but to use and pay the charges for the air traffic, rescue and fire fighting services provided by Air Services Australia: see at 413, per Gleeson CJ and Kirby J. Nonetheless, the charges imposed on the airlines were held to be fees for services and not taxes.

130 The final issue is whether the charges levied on members of TIO Ltd have the necessary relationship with "the value of what is acquired", so as to satisfy the test stated in Air Caledonie v The Commonwealth. In Air Services v Canadian Airlines, McHugh J identified (at 463-464) two propositions underlying the requirement that there be a discernible relationship between the value of the particular service received and the amount of the exaction. The first is that the absence of such a relationship suggests that there is a revenue-raising purpose behind the exaction. It follows, as his Honour pointed out, that "the presence of a discernible relationship negatives the inference that the charge was imposed for a revenue-raising purpose". The second proposition is that the operation of the market (his Honour presumably meant a competitive market) generally means that there will be a relationship between the value of a service provided by the private sector and the fee imposed for that service. But where services are provided by a "public authority with a natural monopoly" it may be difficult to levy a price which exhibits a discernible relationship to the value of the services provided to a particular user on a particular occasion. For this reason, his Honour expressed the view (at 464) that

"[w]here services are provided by a public authority with a natural monopoly and where the statutory context and the surrounding circumstances otherwise fail to indicate a revenue-making purpose for a charge, the lack of a discernible relationship between the value of a particular service received on a particular occasion and the amount of the charge for that service does not necessarily indicate that the charge has the character of a tax."

"in characterising a charge as a fee for services or taxation, it is legitimate to take account of the changing circumstances of government which are exemplified by the devolving of functions from government departments to statutory authorities or other corporate bodies which, under the terms of their enabling statutes, have a monopoly on the provision of a certain service and are directed by the legislature to provide those services on a `user pays' basis. Charges by such authorities and bodies should be seen as essentially cost driven, imposed on users for the purpose of reimbursing the cost of services provided. They should not be approached as if they were imposed simply to raise revenue for the general government of the country."

131 In the present case, there is no suggestion that the purpose of the charges levied on members of TIO Ltd is to raise revenue for the Commonwealth. Indeed, there is no suggestion that the purpose of the charges is anything other than to fund the TIO scheme, including its overhead costs. Moreover, the Articles of TIO Ltd make it clear that Volume Related Costs levied on each member are directly related to

* the number and relative cost of complaints registered against that member in a particular period (Article 4.3(a)), and

* any additional costs incurred by the TIO in investigating a claim against that member (Article 4.3(b)).

Similarly, Operating Costs attributable to a member are calculated by reference to the members' percentage share of total complaints (Article 4.4).

132 The evidence, scanty as it is, shows that the charges that have actually been levied on members have been determined by reference to the resources required by the TIO scheme to resolve complaints made by consumers. Further, I infer that the charges have been assessed by reference to the average costs of processing complaints in each of the four categories identified in the Annual Reports. There is a clear, although necessarily imprecise relationship between the charges imposed on a member and the cost of processing and resolving complaints made against that member.

133 In Air Services v Canadian Airlines, the Court held that the various charges levied on airlines did not lose their character as fees for services merely because some airlines paid more than the cost of the particular services they used. Gleeson CJ and Kirby J identified (at 414) the following factors as important to this conclusion:

"* the charges were not imposed to raise revenue;

* the charges were undoubtedly charges for the provision of services and facilities;

* the charges were imposed to recover the cost of providing such services and facilities across the entire range of users;

* the charges for categories of services were reasonably related to the expenses incurred in relation to the matters to which the charges related;

* the services and facilities were, of their nature, part of an activity which must be highly integrated in order to be effective;

* there was a rational basis for such discrimination between users as existed."

134 The present case is not identical to the charges levied in Air Services v Canadian Airlines. In particular, one class of "users" of the dispute resolution services provided by the TIO, namely end-users of carriage services, are not required to contribute to the costs of providing those services. Subject to this qualification, the factors identified by Gleeson CJ and Kirby J in substance apply to the charges levied on members of TIO Ltd. Moreover, the discrimination between service providers and customers seems to me to have a "rational basis" having regard to the objective of establishing a scheme which provides (in the language of the Annual Report 1999-2000) an "accessible, non-bureaucratic alternative dispute resolution forum" for consumers of telecommunication services. In my view, the charges in the present case have a sufficient relationship with the value of particular services provided to members to characterise them as fees for service and not taxes.

135 I should add that the remarks of McHugh J in Air Services v Canadian Airlines suggest that the absence of a "discernible relationship" between the value of a particular service and the amount of the charges for that service does not necessarily indicate that the charge is a tax. It is not necessary to pursue that question further in the present case.

136 The respondents accepted that s 591 of the Telecommunications Act, which confers a right to compensation on just terms in the event that the legislation otherwise contravenes s 51(xxxi) of the Constitution, constitutes a complete answer to so much of the respondents' constitutional challenge as is based on s 51(xxxi): see Telstra Corporation Ltd v Hurstville City Council [2000] FCA 1887, at [199]-[203]. I was invited, nonetheless, to determine, in some way not fully explained, the extent to which the validity of the charges levied on members of TIO Ltd depend for their validity on s 591 of the Telecommunications Act. I find that I am able to resist that invitation.

137 The ACA submitted that, if it succeeded on the constitutional question, the respondents should be ordered to pay its costs in respect of so much of the proceedings as do not relate to a penalty hearing. As I have already noted, Mathews J, in her judgment of 5 April 2001, ordered that the ACA pay the respondents' costs of the penalty hearing. The costs of the hearing on the separate questions determined in her Honour's judgment of 22 November 2000 have not yet been dealt with by orders of the Court.

138 There is some force in the ACA's submissions. The circumstances of the present cases are, however, unusual. In consequence of Mathews J's judgment of 5 April 2001, the ACA failed in its application for pecuniary penalties to be imposed on each of the respondents. The respondents indicated to the Court on 29 November 2000 (after her Honour's judgment of 22 November 2000 had been delivered) that they would not pursue the constitutional questions if the ACA did not seek to impose any penalties on them. The ACA continued, however, to seek penalties.

139 It is true that the ACA has been ordered to pay the respondents' costs of the hearing relating to pecuniary penalties. It is also true, as the ACA has pointed out, that it is possible that the respondents may have pursued the constitutional questions in an attempt to avoid liability for costs incurred in the proceedings prior to 29 November 2000. Nonetheless, the fact that the ACA decided to pursue its ultimately unsuccessful claim for penalties in the face of the respondents' stated position, is in my view a significant factor in relation to costs.

140 A further factor to bear in mind is that the proceedings were not instituted by the respondents and the constitutional issues they have raised cannot be characterised as frivolous. Moreover, the challenge has raised questions that have implications for TIO Ltd and its members, the TIO and users of carriage services: see Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, at 91, per Gaudron and Gummow JJ; at 127, per Kirby J (and see at 80-81). I do not think this factor warrants an order for costs being made against the ACA on the constitutional question, but it adds force to the respondents' contention that they should not be ordered to pay the costs of the constitutional challenge.

141 It seems to me that in view of the factors I have mentioned, notwithstanding the ACA's success on the constitutional challenge, the appropriate course is that there be no order for costs in relation to the questions determined by this judgment. The position is, I think, different with respect to the costs of the separate questions determined by Mathews J on 22 November 2000. The respondents should pay the costs of the ACA in relation to the separate questions determined by the judgment of Mathews J delivered on 22 November 2000.

ADDITIONAL COSTS OF THE HEARING OF 20 MARCH 2001

142 Mr Leeming submitted that, if the respondents were ordered to pay the ACA's costs of the constitutional challenge, the Court should grant a costs certificate in respect of the proceedings pursuant to s 10(3) of the Federal Proceedings (Costs) Act 1981 (Cth), limited to the additional costs of the hearing on 20 March 2001, occasioned by Mathews J's illness. Since I have not ordered the respondents to pay the ACA's costs of the constitutional challenge, the submission need not be addressed. If it were to be considered, it would raise a question as to whether the "hearing of the proceedings in [this] court [was] discontinued" within the meaning of s 10(3): see Re Palmdale Insurance Ltd (1994) 122 ACTR 33; cf Official Trustee in Bankruptcy v Forrest [2000] FCA 907.

143 The respondents' constitutional challenge to s 128 of the Service Standards Act fails. I make no order as to costs in respect of the constitutional challenge. I order the respondents to pay the ACA's costs of the separate questions determined by Mathews J on 22 November 2000. In case any further orders are required to dispose of the proceedings, I shall grant the parties liberty to apply.

I certify that the preceding one hundred and forty-three (143) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice SACKVILLE .