BHP Petroleum Pty Ltd v Balfour

High Court of Australia|1987-07-01|Before: Mason CJ, Gaudron JJ, Marks J, Brooking JJ

For the reasons already given, valves U.V.6192 and U.V.6204 could not constitute the well-head. In these circumstances it would ordinarily be appropriate to set aside the determination of the Designated Authority and remit the matter to him for further consideration. However, having regard to the way in which the matter was argued before Marks J. and what was said on the hearing of this appeal, it is clear that no valves could properly have been selected as the relevant valve station other than those on the Christmas tree. As between those valves, the financial implications are minimal.

In the circumstances, the proper course is to allow the appeal from the Full Court of the Supreme Court of Victoria and to dismiss the appeal to that Court from the judgment of Marks J. The effect of doing so is to uphold the decision of Marks J. giving judgment for the appellants for the overpayment made by them, together with interest on that amount.

Court of Victoria dated 8 April 1986 be set aside and in lieu thereof order that the appeal to that Court be dismissed with costs. And further order that the order of Marks J. dated 8 February 1985 be restored.

High Court of Australia Mason CJ Brennan, Deane, Toohey and Gaudron JJ BHP Petroleum Pty Ltd v Balfour (F.C. 87/023) [1987] HCA 22

Section 5(2) of the Royalty Act determines the royalty rate payable and it does so by reference to petroleum recovered, being a percentage of the value of that petroleum at the well-head. That approach is consistent with the general understanding of royalty: see Stanton v Federal Commissioner of Taxation [1955] HCA 56; (1955) 92 CLR 630, at pp 641- 642. Expressed in this way, the royalty is something capable of being and is to be determined objectively. Section 5 does not refer to an opinion of the Designated Authority and ss 8, 9 and 10 do not convert the objective ascertainment of the value of petroleum at the well-head into an exercise of discretion by the Designated Authority. The purpose of these sections is clear enough. It is to permit agreement if such can be reached and, in the absence of agreement, to provide the means whereby the components of s 5(2) can be determined without the need for litigation or arbitration. The task of the Designated Authority is to determine the relevant fact, that is, to fix upon a valve station which fairly accords with the description of well- head. That task is not performed if the Designated Authority fixes upon a valve station which, though it does not fairly accord with the description of well-head, yields what is thought to be an appropriate component for calculation of royalty. To approach the task in that way is to misunderstand the question which s 8 requires the Designated Authority to answer. The approach to be adopted can be expressed by using the words of Lord Diplock in In re Racal Communications Ltd [1980] UKHL 5; (1981) AC 374, at pp 382-383 where after referring to Anisminic Ltd v Foreign Compensation Commission [1968] UKHL 6; (1969) 2 AC 147, his Lordship said:

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