BETWEEN : EPIC ENERGY (WA) NOMINEES PTY LTD (ACN 081 609 289)

EPIC ENERGY (WA) TRANSMISSION PTY LTD (ACN 081 609 190)

DR KENNETH COMNINOS MICHAEL WESTERN AUSTRALIAN INDEPENDENT GAS PIPELINE ACCESS REGULATOR

Delegated legislation - Statutory construction power to make regulations necessary or convenient to give effect to act - Whether reasonableness is part of such power - Extent of power

Costs - Regulations allowing recovery of charges - Whether regulation permits recovery of legal costs incurred in judicial proceedings - Inconsistency - Whether regulations inconsistent with Court's power to award costs

Gas Pipelines Access (Western Australia) Act 1996

Gas Pipelines Access (Western Australia) (Funding) Regulations 1999

Supreme Court Act 1935 (WA), s 37

First Plaintiff : Mr C L Zelestis QC & Mr J A Thomson

Second Plaintiff : Mr C L Zelestis QC & Mr J A Thomson

Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564

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

Airservices Australia v Canadian Airlines International Ltd (1999) 202 CLR 133

Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 KB 223

Attorney­General v Wilts United Dairies Ltd (1921) 37 TLR 884

Bond v The Queen (2000) 201 CLR 213

City of Belmont v Link Interiors Pty Ltd [2001] WASC 64

Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280

Commonwealth of Australia v State of Western Australia [1999] HCA 5; (1999) 196 CLR 392

Costa v Shire of Swan [1983] WAR 22

Director of Public Prosecutions South Australia v B [1998] HCA 45; (1998) 194 CLR 566

Director of Public Prosecutions v Brown [1998] VSC 117; (1998) 100 LGERA 181

Gomba (UK) Holdings Ltd v Minories Finance Ltd (No 2) [1992] 4 All ER 588

Gosling v Veley [1847] EngR 232; [1847] 7 QB 406

Hamersley Iron Pty Ltd v Hancock, unreported; SCt of WA (Olney J); Library No 5195; 23 December 1983

Hepples v Commissioner of Taxation (Cth) (No 2) [1992] HCA 3; (1992) 173 CLR 492

Liverpool Corporation v Arthur Maiden Ltd [1938] 4 All ER 200

Luton v Lessels [2002] HCA 13; (2002) 187 ALR 529

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

McLeod v Australian Securities and Investments Commission (2002) 191 ALR 543; [2002] HCA 37

Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611

National Competition Council v Hamersley Iron Pty Ltd (1999) 167 ALR 109

R v Boucher [1995] VicRp 7; [1995] 1 VR 110

R v Orcher [1999] NSWCCA 356; (1999) 48 NSWLR 273

R v Richmond London Borough Council; Ex parte McCarthy and Stone [1992] 2 AC 48

Rouse v IOOF Australia Trustees Ltd (No 3) [1999] SASC 208

South Australia v Tanner [1989] HCA 3; (1989) 166 CLR 161

Utah Constructions and Engineering Pty Ltd v Pataky (1966) AC 629

Willcocks v Anderson [1971] HCA 28; (1971) 124 CLR 293

Wilson Parking (1962) Pty Ltd v City of Perth [1983] WAR 12

Wilson v Anderson (2002) 190 ALR 313

1 The plaintiffs, to whom I will refer as "Epic Energy" are respectively the owner and operator of the Dampier to Bunbury natural gas pipeline. The defendant has been appointed by the Governor to the office of the Western Australian Independent Gas Pipelines Access Regulator. I will now refer to him as "the Regulator".

2 Epic Energy seeks declarations of invalidity or alternatively as to the proper construction of the Gas Pipelines Access (Western Australia) (Funding) Regulations 1999 (WA) ("the funding regulations").

3 By consent, leave is given to the Attorney General for Western Australia to intervene in the proceedings which he does to support the validity of the regulations.

4 The standing of Epic Energy to bring the originating summons is not challenged. Epic Energy has received a number of notices of assessment requiring payment of service charges and standing charges purportedly issued under the funding regulations. Many notices require payment of service charges in respect of legal services provided to the Regulator arising out of an action: Re Dr Ken Michael AM; Ex parte Epic Energy WA Nominees Pty Ltd & Anor [2002] WASCA 231; (2002) 25 WAR 511.

5 In supplementary reasons to that decision Re Dr Ken Michael AM; Ex parte Epic Energy WA Nominees Pty Ltd & Anor [2002] WASCA 231(S) at [25] the Court concluded "that the Regulator ought not to be ordered to pay the costs of the other parties in any respect" and, apart from orders not relevant, "the parties should bear their own costs".

6 The Full Court was aware of the present proceedings and at [28] made it clear that it had not sought to determine whether the funding regulations are valid.

The relevant legislation The Gas Pipelines Access (Western Australia) Act 1998 ("the Act")

7 The short title of the Act is to make provision for the regulation of third party access to gas pipeline systems and for related purposes. The Act brings under Western Australian law the National Third Party Access Code for Natural Gas Pipeline Systems ("the Code").

8 It is unnecessary to conduct a general analysis of the scheme of the Act or the Code. In any event such an analysis is amply set out by Parker J in Re Michael; Ex parte Epic Energy. I shall however summarise the provisions of the Act which have a bearing on the issues raised in this application.

9 The Regulator is established under Part 6 Subdivision 2. The Regulator's remuneration and allowances are to be determined by the Governor, subject to the Salaries and Allowances Act 1975 (WA) if that Act applies to the Regulator: s 33. The Regulator is given certain functions and powers: s 36. The Regulator may do all things that are necessary or convenient to be done for or in connection with performance of the Regulator's functions: s 36(3). Public Service officers are to be appointed or made available; and the Regulator may by arrangement make use, either full-time or part-time, of the services of government staff and may engage persons under contracts for services to provide such professional, technical or other assistance as the Regulator considers necessary for the performance of his or her functions: s 42, s 43 and s 44.

10 The Regulator is to have an account at a bank approved by the Treasurer which is to be credited with all funds received by, made available to or payable to the Regulator including:

(i) moneys appropriated by Parliament; and

(ii) fees referred to in section 87; ...": s 45(3).

11 The Regulator may borrow from the Treasurer: s 46. The provisions of the Financial Administration and Audit Act 1985 apply to the Regulator: s 47.

12 The regulation-making power is to be found in Division 4 entitled "Miscellaneous". Section 86 and s 87(1) and (2) are as follows:

The Governor may make regulations prescribing all matters that are -

(a) required or permitted by this Act to be prescribed; or

(b) necessary or convenient to be prescribed for giving effect to the purposes of this Act.

(1) Without limiting section 86, regulations made under that section may make provision for and in relation to the imposition and payment of fees and charges in connection with any matter under this Act, including in connection with the performance of the respective functions of the Regulator, the arbitrator and the Board under this Part.

(2) If it is inappropriate to prescribe a set fee or charge in connection with the performance of a particular function the regulations may provide for the method of calculating the fee or charge, including calculation according to the cost of performing that function. ..."

13 There are three types of financial imposts: standing charges, service charges and fees. Epic Energy does not challenge the fee-setting power but does challenge the standing charges and service charges.

(1) For each quarter during any of which a pipeline specified in Schedule 1 is a covered pipeline, a charge is payable for each specified pipeline in connection with the performance of the functions of the Regulator under Part 6 of the Act.

(2) For each quarter during any of which a pipeline specified in Schedule 1 is a covered pipeline, a charge is payable for each specified pipeline in connection with the performance of the functions of the arbitrator and the Board under Part 6 of the Act.

(3) The charge under subregulation (1) or (2) for a pipeline is to be calculated using the formula -

C is the amount of the core function costs for the quarter;

P is the percentage specified in Schedule 1 for the pipeline. ..."

"'core function costs' means costs incurred in the quarter to which a standing charge relates in connection with the performance of -

(a) the functions of the Regulator under Part 6 of the Act, if the standing charge is under regulation 3(1); or

(b) the functions of the arbitrator and the Board under Part 6 of the Act, if the standing charge is under regulation 3(2),

(c) through the imposition of fees or service charges under these regulations; or

(d) under regulation 9;"

16 The percentage under Schedule 1 for the Dampier to Bunbury Natural Gas Pipeline is 49.90 per cent.

(1) The Regulator may give written notice to a person described in Schedule 2 requiring the person to pay a charge in connection with the performance of the corresponding function described in that Schedule or the doing of anything that was necessary or convenient to be done for or in connection with the performance of that function.

(2) The notice referred to in subregulation (1) is to specify -

(a) the amount of the service charge; and

(b) the day on which the notice was issued.

(3) The amount of a service charge is to be an amount equivalent to costs described in subregulation (4) that -

(a) have been incurred by the Regulator; and

(b) are directly attributable to the performance of the relevant function or to the doing of anything that was necessary or convenient to be done for or in connection with the performance of the relevant function.

(4) For the purposes of subregulation (3), the costs are -

(a) costs of consultants or contractors engaged by the Regulator including accommodation costs, travel costs, and equipment costs;

(b) photocopying, mailing, publishing and advertising costs; and

(c) costs associated with public consultation required under the Code.

(5) The Regulator is to provide the person liable to pay a service charge with an itemized account of the costs covered by the charge if the person so requests. ..."

18 The Regulator may recover any unpaid assessment amount or service charge, together with interest, in a court of competent jurisdiction as if it were a debt due to the Regulator; and in any proceedings a certificate purporting to be signed by the Regulator, and specifying an amount as being an assessment amount or a service charge, specifying a person as being liable to pay the amount, and stating that the amount is unpaid, is, without proof of the appointment of the Regulator or of the authenticity of the signature, sufficient evidence of the matters specified or stated: reg 10.

19 The Attorney General, but not the Regulator, raises an argument that declaratory relief should be refused in discretion because it would be open for Epic Energy to challenge a particular notice purporting to impose a charge. It is submitted that the Court should not make declarations as to legal propositions which, while they may form steps in Epic Energy's argument that notices are invalid, or that there is no liability to make payment, do not themselves determine the existence of any right, duty or liability.

20 With all due respect, this argument must be rejected. It is conceded by the Attorney General that it is open for Epic Energy, as service providers liable to pay charges under the regulations, to seek a declaration that the regulations are invalid. The jurisdiction of the Court having been validly invoked, there is no reason why a declaration, if appropriate, should be refused in discretion simply because other proceedings may have been also appropriate. If the regulations are invalid, no other proceedings will be necessary. If the regulations are to be construed in a particular way a binding declaration of right will give guidance to trial courts if particular charges are challenged.

21 Epic Energy poses as the principal issue whether in terms of s 86(b) the Act manifests a purpose that all of the Regulator's costs (including general overhead costs) should be recovered through fees and charges so that the financial burden of the complete costs of the Regulator performing the functions of his office should fall on a particular class of persons. For convenience I shall refer to this as the principle of full cost recovery. Owners of covered pipelines are the persons on whom the burden now falls but Epic Energy's argument extends to other persons.

22 It is submitted that no provision of the Act expressly refers to full cost recovery nor does the Act have this clear implicit purpose.

23 In Marsh v Shire of Serpentine-Jarrahdale [1966] HCA 77; (1966) 120 CLR 572, Barwick CJ, in delivering the judgment, with whom the other justices agreed, stated:

"The question remains one of interpretation of the statute, bearing in mind its relevant purposes and the part the issue of a licence plays in them or with respect to them."

24 In that case the Road Districts Act gave the defendant the power to issue licences for the quarrying of materials. In those circumstances, Barwick CJ did not consider that the statute intended the Shire should aggrandise its own funds or participate financially in the quarrying operation carried on by the licensee, although the Shire could, to some extent, recoup its administrative effort in considering the application of physically issuing the licence.

25 It may be accepted that clear and unambiguous language must be used before a financial burden is imposed. Epic Energy relies on Dowling v Commissioner of Water Resources [1993] 1 Qd R 70 for the adumbration of the principle that clear and unambiguous language in a statute is required to authorise the imposition of charges upon a subject (per Derrington J at line 25, p 78). The issue in this case involves the construction of s 86 and s 87 of the Act. These sections are widely drawn and empower the Governor to make regulations. Parliament contemplated that fees and charges would be raised and paid into a special account not into consolidated revenue. That account would be charged with the expenses which enable the Regulator to operate.

26 Section 86 is a comprehensive grant of power to make regulations for purposes of the Act. Section 87 is an express power in amplification, not in derogation from s 86.

27 The structure of s 87, so far as is relevant to the Regulator, gives a clear indication of cost recovery in s 87(2). As I explain later, s 87 may import a requirement of reasonableness into the costs but there is no express or implied prohibition against full cost recovery in s 87(2).

28 The Regulator's functions are particularised in the Act and the Code. It may be difficult to relate some functions directly to a covered pipeline in any particular quarter. That is no reason to read s 87 restrictively. During such quarters the Regulator is performing a function for a covered pipeline by the very act of existence and availability. Epic Energy argues that the persons on whom the regulations in fact seek to impose the costs are not the persons who benefit from the Regulator's functions. In one sense that is so in that Epic Energy does not obtain a direct service or advantage in return for payment of a standing charge. However, in a wider sense, Epic Energy does benefit from the performance of the Regulator's functions because through the scheme set out by Act and Code, Epic Energy is allowed to compete under the Code. I favour the wider sense.

29 Section 87 is a specific grant of power to make regulations for fees and charges in connection with the performance of the functions of the Regulator. The functions of the Regulator are set out in the Act and Code and may be conveniently related to the principles delineated in the preamble. There is no implied limitation in s 87. While there is no express purpose that the charges set shall be commensurate with the operating costs of the Regulator neither is there such a prohibition. Parliament might appropriate all, some, or none, of the amount necessary for the Regulator to perform the function of office. The power to receive appropriations: s 45 and to borrow funds: s 46, are facilitative powers. They are not inconsistent with full cost recovery. Once it is accepted that s 86 and s 87 between them contain a grant of power to make regulations for the raising of charges it is difficult to see how there should be implied into that grant a limitation on the extent of the charges. In the regulation of what is ultimately a commercial market for gas, there is good reason why Parliament authorises the Executive to make regulations providing that the burden of regulation should not fall upon taxpayers but be passed onto licensees, users and consumers.

30 It is further argued that the Act does not identify any persons or class of persons from whom the costs are to be recovered, nor does it specify criteria to be applied in allocating the totality of the burden of the Regulator's costs. However, the owner of a covered pipeline is entitled to take certain matters, including charges, into account when making a calculation of the reference tariff. This makes it possible to discern an intention to distribute the burden of the Regulator's costs over a broad base of pipeline users and consumers.

31 The Act would not support the type of charge imposed in Marsh v Shire of Serpentine-Jarrahdale where a type of commercial profit was sought by the Shire. The nature of the fee or a charge under the Act is such that there is some nexus to the Regulator's functions. The structure of the regulations is such that the fees and charges contemplated would not extend beyond full cost recovery but are appropriate for full cost recovery.

32 I accept that the power of the Executive to make regulations enabling full cost recovery must be found in the statute: Commonwealth & The Central Wool Committee v Colonial Combing, Spinning & Weaving Co Ltd [1922] HCA 62; (1921-22) 31 CLR 421. In this case the Act satisfies that requirement. The power is to make regulations necessary and convenient for giving effect to the purposes of the Act

33 Finally I note that the regulations cannot inform the content of the power: Jackson v Hall [1980] AC 845; Shanahan v Scott [1957] HCA 4; (1956) 96 CLR 245 at 250; and Morton v Union Steamship Co of New Zealand Ltd [1951] HCA 42; (1951) 83 CLR 402 at 410.

34 I have reached this conclusion on the construction of s 86 and s 87 without recourse to the second reading speech. Recourse to that speech would confirm that the intention of the Minister was to enable full cost recovery.

35 Although I cannot discern from the purposes of the Act, an intention to recover costs of a particular type, full or otherwise, conversely there is nothing which evinces an intention not to permit full cost recovery. Epic Energy's principal argument on the invalidity of the regulations as failing to permit full cost recovery fails. As Parliament has granted wide and general regulation-making power, I hold that the funding regulations are within power and valid.

The "Standing charges": Funding regulations reg 3

36 Standing charges are imposed under reg 3 and it is now appropriate to return to that regulation and the definition of "core function costs".

37 Put simply, the argument of Epic Energy is that the standing charge only become payable by a covered pipeline in each quarter if the Regulator has performed a function in respect of that pipeline. Epic Energy concedes that any performance of the Regulator's function would be sufficient to justify a standing charge and there is no necessity for any proportion between the function and the charge in order to justify the charge.

38 I can see no good reason why the regulations should be so construed. On the contrary, there are many practical reasons why such a construction would lead to considerable difficulty. However, to return to reg 3, it is noted that a charge is payable for "each specified pipeline". The criteria for the payment of the charge is a quarter during which a pipeline specified in Schedule 1 is a covered pipeline. Once a pipeline is a covered pipeline, then a standing charge is payable in connection with the performance of the Regulator's functions under Part 6. It makes little sense to set out percentages otherwise. The notion of "core function costs" suggests that they are costs which are incurred by the Regulator whether or not specifically in connection with a particular covered pipeline. The regulations refer to Part 6 of the Act.

39 Within Part 6, headed "Functions and Powers", s 36 enumerates functions of the widest character, many of which do not involve direct performance in connection with a particular covered pipeline.

40 As the Act permits full cost recovery of the Regulator's functions, I do not construe reg 3 as being read so as to require a connection between the performance of a function and the imposition of a charge.

"Service charges": Funding Regulations reg 5

41 Unlike reg 3, reg 5 does require a connection between the performance of a function and the imposition of a charge.

42 Epic Energy argues that on the proper construction of reg 5(3) and (4), it is only reasonable costs that are attributable to matters which are reasonably necessary or convenient to be done. Only such reasonable costs may be the subject of a service charge.

43 The words "necessary or convenient" have long been construed to import an objective standard of reasonableness. Abson v Fenton (1822-23) 1 Barne & Cress 195 is an early example, where Abbott CJ, delivering the judgment of the Court in deciding whether a road built under a necessary and convenient power, had to be built in a certain location held that the test was whether the direction chosen had been such as a person of reasonable and ordinary skill and experience would have selected beforehand. Significantly he noted at 20:

"... This view of the subject will, on the one hand, exclude all wanton, capricious, and causeless injury ...".

44 I regard the importation of a concept of reasonableness into a power to do all things necessary or convenient as long settled; see also Esmonds Motors Pty Ltd v Commonwealth of Australia [1970] HCA 15; (1970) 120 CLR 463 per Barwick J at 466-467.

45 The Regulator does not really take a contrary position. The Regulator accepts the importation of reasonableness into the construction of reg 5 but submits that the charges do not have to be reasonably related to the performance of the functions in relation to the person being charged or that the charge must be for an amount that is reasonable.

46 The Regulator accepts that the regulations import the following:

• the charge must reflect the costs actually incurred by the Regulator;

• the charge must reflect costs incurred by the Regulator acting reasonably in the performance of functions under the Act;

• the charge must be reasonably connected with the performance of functions under the Act.

47 The Regulator submits that there is no requirement to construe the regulations as requiring the following additional elements:

• the charge must be reasonably related to the performance of the functions in relation to the person being charged; or

• the charge must be for an amount that is reasonable.

49 Regulation 5(4)(a) contemplates that there will be costs of consultants or contractors and that those costs will include accommodation, travel and equipment costs. Regulation 5(5) requires the Regulator to provide the person liable to pay a service charge with an itemised account of the costs covered by the charge if the person so requests, evincing an intention that the costs should be able to be scrutinised by the person ultimately to pay them, namely Epic Energy. There is no reason for reg 5(5) unless in turn Epic Energy could challenge some costs as unreasonable.

50 There are additional reasons why I would infer a requirement of reasonableness into the costs which are to be converted into service charges. Although regulations are subject to scrutiny by Parliament, the actual costs cannot be scrutinised by Parliament. Nor need they be scrutinised elsewhere. The Regulator may have no particular interest in scrutinising costs if they can be passed on by raising a service charge. Although the Regulator and Attorney General pointed generally to the provisions of the Financial Administration and Audit Act 1985 which of course is binding on the Regulator, they did not point to any specific provision which dealt with this issue beyond the requirement to eliminate waste and inefficiency. However, the Regulator may be acting efficiently by receiving a bill and directly raising a service charge. Nor would such an action result in the waste of public moneys.

51 The fact that the costs cannot be scrutinised by Parliament provides a further reason for construing the regulations as implicitly invoking a notion of reasonableness into the service charges.

52 There is an illustration to support this conclusion. Consultants' fees include fees by legal practitioners certified under the Legal Practitioners' Act. The Regulator's position in respect of such fees is set out in a letter from the Regulator's solicitors to Epic Energy:

"Dear Sir

SERVICE CHARGES FOR ASSESSMENT OF DBNGP ARRANGEMENT

I refer to your facsimile letter of 11 December 2001.

Your letter refers to sections 65(2) and 68A of the Legal Practitioners Act 1893 (WA) ('LPA'). Those provisions do not have any application to the service charge notices issued under regulation 5(2) of the Gas Pipelines Access (Western Australia) (Funding) Regulations 1999.

Our accounts to OffGAR are legally distinct from the service charge notices issued by the Regulator. Epic is not responsible in law for payment of our accounts nor a person against whom we could enforce payment of our accounts. Accordingly, Epic is not a 'person or party charged' within section 68A of the LPA.

Yours faithfully

Caroline Brown

Partner"

53 This letter speaks eloquently of the attitude of the Regulator as to scrutiny of the reasonableness of any account, correct though the contents may be.

54 There is no particular pressure on the Regulator to undertake a taxation of costs if the Regulator is simply able to pass on the costs, without scrutiny, to Epic Energy. However, a construction of reg 5 which imports a requirement of reasonableness into the service charges may cause the Regulator to invoke such procedures or risk the consequence that a court will hold the service charge is not for the performance of a function that was necessary or convenient.

55 It is hardly to be supposed that Parliament intended services rendered to a government agency would be free from scrutiny simply because all costs would be directly passed on to a third party for payment. Such a construction would not promote the purpose of good governance, whereas a requirement for reasonableness would.

56 A construction to import a requirement of reasonableness would not create any particular difficulty or confusion. The Regulator has power to recover the service charge as a debt. In appropriate cases, the question of the reasonableness of the service charge would be determined by a court of competent jurisdiction as to the true extent of the debt.

57 For these reasons I construe reg 5 as importing a concept of reasonableness into the service charges as follows:

• the charge must reflect the costs actually incurred by the Regulator;

• the charge must reflect costs incurred by the Regulator acting reasonably in the performance of functions under the Act;

• the charge must be reasonably connected with the performance of functions under the Act;

• the charge must be reasonably related to the performance of the functions in relation to the person being charged; or

• the charge must be for an amount that is reasonable.

The funding regulations and costs in judicial proceedings

58 Epic Energy submits as a separate contention that s 86 and s 87 do not authorise the imposition of charges for the recovery of costs incurred by the Regulator in relation to judicial review proceedings.

59 The jurisdiction to order costs is contained within the Supreme Court Act Part 3 entitled "Jurisdiction and law". In sub-part (3) "Miscellaneous rules of law":

(1) Subject to the provisions of this Act and to the Rules of Court and to the express provisions of the Local Courts Act 1904, or any other Act, the costs of and incidental to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the Court or Judge, and the Court or Judge shall have full power to determine by whom or out of what estate, fund, or property, and to what extent such costs are to be paid."

60 Epic Energy argues that s 86, s 87 of the Act and reg 5 of the regulations do not manifest an intention to affect or subvert any exercise of judicial power in relation to costs.

61 It is a rule of law that the costs of all proceedings in the Supreme Court shall be in the discretion of the Court or Judge. Rules of Court, particularly O 66, provide comprehensively for the manner in which the discretion might be exercised. A statute must expressly modify or oust the general discretion given to the Court or a Judge as to costs. Costs orders are made in the administration of justice. Any discretion to award costs is necessarily exercised on a case by case basis.

62 The exercise of the discretionary power was considered in De L v The Director General New South Wales Department of Community Services [1997] HCA 14; (1997) 190 CLR 207. In the course of their judgment the court said at 221:

"The power to provide costs is an important one designed to ensure that a court may protect a successful party against the substantial burden of costs which could otherwise render its success nugatory. The crushing burden of costs might be a disincentive to parties prosecuting just and lawful arguments in this court."

63 In that case a regulation under the Family Law (Child Abduction Convention) Regulations (Cth) provided that a person who held a particular office should not be made subject to any order to pay costs in relation to exercising the powers of that office. The court construed the regulation-making power under the Family Law Act, s 111B(1) as conferring a power to make regulations which are not consistent with any act of the Parliament in force at the time when the regulations are made (per Brennan CJ, Dawson J at 212). The other judges, Toohey, Gaudron, McHugh, Gummow and Kirby JJ in a joint judgment, concluded at 222:

"... it is, in our view, impossible to treat reg 7 as manifesting an intention to derogate from the broad power to award costs conferred on this Court by s 26 of the Judiciary Act. ..."

64 Neither s 86 or s 87 of the Act expressly provide for costs incurred in legal proceedings. The effect of an unconstrained construction of s 86 and s 87 in relation to legal costs is amply illustrated in the present case. Epic Energy took action against the Regulator seeking certiorari. In the event, although it did not succeed in obtaining prerogative relief, it did obtain the benefit of declaratory orders. The Court considered that the Regulator had not strayed beyond the proper role of a statutory authority so the Regulator incurred no liability to pay Epic Energy's costs. However, no doubt because Epic Energy had in fact significantly succeeded, Epic Energy was not ordered to pay the Regulator's costs. The relevant order of the Court was that each party should bear its own costs.

65 That curial order would be substantially frustrated if s 86 and s 87 of the Act were construed as permitting the Regulator to pass on his legal costs by purporting to raise service charges in respect of them.

66 The position is further illustrated by a hypothetical example. Suppose the Regulator so misconducted litigation as to cause the Court to order the Regulator to pay the costs of a party who owned a covered pipeline.

67 It would be absurd if the Regulator, after paying such costs under court order, could then turn around and claim back both those costs and also the Regulator's costs.

68 While this example might be met with an answer that in some way the Regulator's expenses were not then reasonably necessary or convenient, the better view is that Parliament did not intend that the powers under s 86 and s 87 of the Act should extend power to the Regulator to recover costs in judicial proceedings other than in a manner authorised by the Court under the Supreme Court Act s 37 and the Rules of the Supreme Court. To so extend the Regulator's power would make the funding regulations inconsistent with the Supreme Court Act s 37.

69 It is not to the point to say that curial discretion may be exercised without interference. There would be a practical derogation of the Court's power if the effect of the regulation is to permit the Regulator effectively to make nugatory a binding curial order.

70 I do not construe s 86 and s 87 as intending to interfere with the curial discretion as to costs. I hold that reg 3 and reg 5 do not extend to a grant of power to the Regulator to recover costs, however incurred, in legal review proceedings in the Supreme Court, except pursuant to an order of the Court.

71 Epic Energy's argument on full cost recovery fails. Epic Energy has also failed to persuade me that standing charges must be related to performance of the Regulator's function in connection with a covered pipeline in any particular quarter before they can be imposed. I therefore decline to make declarations 1, 2, 3, 4 and 5 of the amended originating summons dated 17 July 2003.

72 I am persuaded that reg 5 should be construed as containing a requirement of reasonableness. I will make declarations 6 and 8. I am also persuaded that the regulations should not be construed so as to require the payment of legal costs incurred in judicial review proceedings. I am prepared to make declaration 7.

(a) A declaration that insofar as regulations made under s 86 and pursuant to section 87(1) or (2) of the Act make provision for the imposition and payment of a fee or charge in connection with the performance of a particular function by the Regulator, by prescribing a method of calculating the fee or charge according to the cost of performing that function, such regulations may only prescribe a method of calculating the fee or charge according to costs of a type which are reasonably necessary or convenient for performing that function.

(b) A declaration that, on the proper construction of reg 5(3), (4), the costs referred to in reg 5(3), (4) may only be reasonable costs of a type which it was reasonably necessary or convenient for the Regulator to incur.

(c) A declaration that regulations made under s 86 and pursuant to s 87(1) or (2) of the Act may not impose a fee or charge according to the costs of or incidental to the Regulator participating in judicial review proceedings in the Supreme Court, which costs shall be in the discretion of the Court or Judge, and the Court or Judge shall have full power to determine by whom or out of what estate, fund, or property, and to what extent such costs are to be paid.