Federal Court of Australia|2001-06-01|Before: Sackville J

Australian Communications Authority v Viper Communications Pty Limited (Includes Corrigenda dated 1 June 2001) [2001] FCA 637 (1 June 2001)

Australian Communications Authority v Viper Communications Pty Limited [2001] FCA 637

AUSTRALIAN COMMUNICATIONS AUTHORITY v VIPER COMMUNICATIONS PTY LIMITED

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".

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

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 (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

Australian Communications Authority v Viper Communications Pty Limited

At a glance

Court

Decision date

Before

Source

Judgment (302 paragraphs)

Australian Communications Authority v Viper Communications Pty Limited (Includes Corrigenda dated 1 June 2001) [2001] FCA 637 (1 June 2001)

Parties

Legislation Cited (10)

Cases Cited (20)