Firearm Distributors P/L v Robert James Carson & Ors [2000] QSC 159

Acts Interpretation Act ss 23, 24AA, 4

Police Service Administration Act 1990 s 4.10

Weapons Act 1990 s 179

Callisher v Bischoffscheim [1870] LR 5 QB 449

Export Development & Grants Board v EMI (Australia) Ltd (1985) 61 ALR 115

Irvine v Elnon [1806] EngR 315; (1806) 8 East 53

Livingstone v Mayor, Aldermen and Councillors of the City of Westminster [1904] 2 KB 109

Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353

Miles v New Zealand Alford Estate Co [1885] 32 Ch D 266

Minister for Immigration and Ethnic Affairs v Kurtovic [1990] FCA 22; (1990) 21 FCR 193

Mordue v Palmer [1870] 6 LR Ch App 22

Nelungaloo Pty Ltd v The Commonwealth [1947] HCA 58; (1948) 75 CLR 495

Newton, Bellamy and Wolfe v SGIO [1986] 1 Qd R 431

Re 56 Denton Road Twickenham [1953] 1 Ch 51

Reg v Tan [1977] AC 650

Rootkin v Kent County Council [1981] 1 WLR 1186

[1] CHESTERMAN J: Firearm Distributors Pty Ltd ("the plaintiff") is the plaintiff in an action brought against Robert Carson and the State of Queensland ("the State"), and the applicant for the statutory review of a decision made by Mr Carson on 7 May 1999 under the Weapons Act 1990 and the Weapons Regulations 1996. In the action the plaintiff claims that the sum of $1,238,300.00 or such lesser sum as the court determines by way of compensation for the loss of its business. It makes an alternative claim for $971,160.00 pursuant to an agreement made on 22 April 1998. The plaintiff concedes that credit must be given for the sum of $306,160.00 already paid to it. In its application for statutory review it seeks an order setting aside the decision, or alternatively payment of $665,000.00.

[2] For many years the plaintiff carried on the wholesale business of selling firearms and associated products. It resolved to cease trading in the second half of 1996 following restrictions on the type of firearm that could be sold to the public. These restrictions were a social consequence of the murders committed at Port Arthur in April of that year. On 10 May 1996 the Australasian Police Ministers' Council ("the Council") resolved that the manufacture, importation, sale, possession or use of automatic or semi-automatic long arm firearms should be banned. On 16 July 1996 the Council resolved that compensation should be payable to firearms dealers who suffered loss of business by reason of the prohibitions. Amendments made to the Weapons Act by amending Act number 41 of 1996 inserted Part 7 which included s 154. (In Reprint number 3 the Part and Section have been respectively renumbered 8 and 179.) The section provided for payment of compensation to persons obliged to surrender certain types of firearms by reason of the amending legislation. Compensation was to be effected in accordance with regulations. The section is in these terms

"(1) A person who owns a weapon and . . . surrenders it to the Commissioner is entitled to compensation from the State, but only under this section.

(4) Compensation for a surrendered weapon is payable in an amount and in the way prescribed under a regulation.

(5) If a regulation does not provide for the amount of compensation payable for a particular weapon, the regulation may provide for the way in which a dispute about its value is to be decided.

(6) A regulation may also provide for compensation for loss of business in circumstances specified in the regulation."

[3] Part 11 of the Weapons Regulations 1996 is concerned with compensation. Regulation 71 provides

(1) This section applies to a person who is or was a licensed dealer at any time between 10 May 1996 and 30 September 1997.

(2) The person is entitled to compensation for loss of business to the extent the loss is attributable to resolutions of the Australian Police Ministers' Council, made on or after 10 May 1996, about uniform national firearms control.

(3) The Commissioner (of Police) is to decide the amount of compensation payable to the person under this section.

(4) A claim for compensation under this section must be given to the Commissioner no later than 31 March 1998".

It will be noted that s 179 expressly enacts that compensation payable to the owner of a weapon who surrenders it in accordance with the new Part is to be made by the State. Nothing is said in the section or the regulations made pursuant to subsection (6) about the origins of compensation payable to the owner of an affected business. Such an omission seems startling but it must be presumed that the entitlement to compensation fixed by the Commissioner pursuant to the regulation gives rise to a reciprocal obligation on the part of the State to pay it. Slovenly parliamentary drafting is now common.

[4] The plaintiff was a licensed dealer in the relevant period. Its business suffered as a result of the restrictions imposed by the amending legislation on the types of gun that could be sold. Indeed the effect of the restrictions was so severe that, as I mentioned, the plaintiff determined it was no longer worthwhile continuing to trade. It made a claim for compensation within time.

[5] At its meeting on 16 July 1997 the Council agreed to a set of resolutions for implementing a national compensation model for those whose businesses had been adversely affected as a result of the 10 May 1996 resolutions. Included were guidelines setting out criteria for eligibility for loss of business compensation and the bases for the calculation of compensation.

The guidelines are quite elaborate but as far as I can see were not given any legislative effect. The Commissioner (and his delegate) who are bound to determine compensation pursuant to reg 71 have acted as though they were obliged to comply exactly with the guidelines. The parties have proceeded on the same basis. The result of blind adherence to the guidelines may be that the Commissioner has not exercised the discretionary power conferred upon him by reg 71(3) but this point is not taken by the plaintiff and the parties were, as I say, content to proceed on the basis that the Commissioner was entitled to, and perhaps obliged to, act according to the guidelines.

[6] The guidelines provided for two valuation models: The "minimum model" and the "valuation model". The latter is applicable to the plaintiff's claim for compensation. The procedure required by the guidelines was that an application for compensation had to be accompanied by a report compiled by an assessor. The report had to calculate compensation in accordance with the appropriate model, and was to include audited financial statements or income tax returns. Assessors were to be appropriately qualified accountants whose reasonable costs for the preparation of the report would be reimbursed as part of the compensation payment. Claims were to be made to the Commissioner who set up a separate secretariat known as Firearms Compensation Project ("FCP") to process them. According to the guidelines all claims for compensation were to be forwarded by FCP to Price Waterhouse who had been retained to advise the Commissioner whether the claim was "fair and reasonable" or, if it was not, what was a fair sum.

[7] The guidelines proceeded to describe in some detail the methodology to be applied in valuing a business.

The determination of value according to the "valuation model" utilised the capitalisation of estimated future maintainable profits. This involves multiplying the earnings of a business by a rate of return ("multiple") which reflects the likelihood that the business will continue to generate those earnings. The assessor was to estimate the future maintainable earnings before interest and tax ("EBIT"). This is the sum that a purchaser would regard as sustainable having regard to historical operating results, non recurring items of income and expenditure and known factors likely to impact on operating performance. The appropriate multiple was to be determined from a consideration of factors affecting the business, such as the extent and nature of competition, the quality of its earnings, its prospects of growth, any licence restrictions on the business, trends in the industry and relevant business risks. The effect on the business of the Council's resolutions were to be disregarded. The multiple applied to the assessed future maintainable EBIT would yield the value of the business.

[8] The plaintiff followed the procedure designated in the guidelines. It retained Mr Hernyk of PBS, a firm of chartered accountants to prepare the assessor's report. The report was compiled in accordance with the detailed provisions of the valuation model. The plaintiff's claim for compensation and accompanying assessor's report was received by FCP and sent on to Price Waterhouse for review. The review process involved correspondence between Mr Kus, the responsible partner at Price Waterhouse, and Mr Hernyk. Mr Kus requested and was given additional information. He and Mr Hernyk debated some aspects of the claim, most notably the choice of multiple to be applied to the figure representing the plaintiff's future maintainable EBIT and the quantum of Mr Hernyk's fee.

[9] Mr Hernyk's report estimated future maintainable EBIT at $266,000.00 to which he applied a multiple of 5.5. On that basis the calculated loss to the business by reason of the restrictions imposed by the resolutions was $1,228,500.00. Mr Hernyk's fees for the preparation of the report were $9,800.

"Further to discussions in relation to both the claim lodged by (the plaintiff) and my fees in preparing the report . . . I advise as follows:

* (The plaintiff) has advised they are willing to agree to a settlement of their claim with an EBIT multiple of 4.5 times giving rise to compensation of $962,500.00 for goodwill.

* I am prepared to discount my fee from $9,800.00 to $7,800.00 . . .

Please advise timing and procedure for settlement of claim as (the plaintiff) is anxious to receive funds."

By an undated letter which must have been written between 15 and 21 April 1998 Mr Kus recommended to Mr Lewis, the manager of FCP, that the plaintiff's claim for compensation be approved in the sum of $962,500.00 for loss of business and $8,660.00 accounting costs (which included an additional amount of $860.00 over the $7,800.00 referred to in Mr Hernyk's letter of 14 April). The letter said

"We have agreed with the (plaintiff's) accountant . . . to use an EBIT multiple prior to the resolutions of 4.5 instead of the . . . use of 5.5. . . . we also agreed . . . that accounting costs of $8,660.00 are appropriate based on work undertaken in preparation of the claim . . ."

[11] On 21 April 1998 Mr Lewis wrote to the plaintiff

"I wish to advise that the loss of business compensation claim lodged by you has been reviewed by Price Waterhouse. Following a detailed review of your claim in accordance with the national loss of business guidelines, Price Waterhouse has recommended that an amount of $971,160.00 be paid. Would you please advise if you accept the amount of $971,160.00 as recommended by Price Waterhouse as compensation for loss of business value.

If you do not agree with the Price Waterhouse recommendation, you are invited to make submissions to the Queensland Police Service outlining the areas of disagreement and the reasons for such disagreement. Any such submissions must be made within the perimeters of the loss of business compensation guidelines . . .

If you are in agreement with the . . . recommendation, please advise my office in writing . . . and action will be taken to consider your loss of business payment for approval. Once the payment has been approved, the appropriate Deed of Discharge will be forwarded for your signature."

[12] On the same day the plaintiff wrote to FCP to "confirm that (the plaintiff) accepts the amount of $971,160.00 as recommended by Price Waterhouse as compensation for loss of business value".

Also on that day Mr Lewis wrote to Mr Carson, the Director of Administration within the Queensland Police Service, who was delegated pursuant to s 4.10(1) of the Police Service Administration Act 1990 to make the decision required by reg 71(3) of the Weapons Regulations. Mr Lewis recommended the sum of $971,160.00 be paid to the plaintiff for loss of business compensation. Mr Carson approved the payment in written form which he signed.

"I acknowledge receipt of your letter of 21 April 1998. It is noted that the compensation amount of $931,160.00 recommended by Price Waterhouse is acceptable to you. This payment has now been approved, pending the provisions outlined in this letter.

The Queensland Police Service is . . . now able to start processing the payment due to you. . . . this letter explains the procedure for payment.

You will need to sign the enclosed Deed of Discharge and fill in the required information on the Deed's Schedule . . .

The Deed is a legal document covering the conditions under which you accept payment for loss of business compensation. In summary, in signing the Deed you have agreed that you . . . are not entitled to make another claim . . . you understand that both the Queensland and Commonwealth Governments have the right to examine your business records . . . you are liable to pay the Queensland Police Service payment for . . . compensation if you have not complied with the conditions set out in the Deed . . .

1. You complete and return the enclosed Deed before 15 June 1998 . . .

2. Upon receipt of the completed Deed the Queensland Police Service will process payment for an amount equal to the cash component of your loss of business value claim . . ."

[13] Price Waterhouse came to doubt the accuracy of part of the factual basis which underlay Mr Hernyk's assessment of value. Concern was raised by information conveyed to Price Waterhouse in a claim for compensation by one of the plaintiff's competitors. There followed internal deliberation by Price Waterhouse, communication between it and Mr Lewis, and between it and the plaintiff. The upshot was that on 1 June 1998 Mr Lewis wrote to the plaintiff

"I refer to the . . . compensation claim . . . I must now advise that the decision of the Commissioner dated 22 April 1998 is revoked. The reason for this revocation is that the Queensland Police Service has now been made aware of certain information which will require us to review the claim further. This information relates to the impact of the timing of the cessation of your . . . distributorship . . . and influence this had on sales and margins. . . . Price Waterhouse has been requested to reconsider the claim in light of this information . ."

Following their reconsideration Price Waterhouse wrote to Mr Lewis on 17 August 1998 to recommend approval of the sum of $306,160.00 comprising $297,500.00 for the value of lost business and $8,660.00 for accounting costs. The reduction in compensation for the lost value of the business was a result of reducing the multiple from 4.5 to 2. No reduction was made to the future maintainable EBIT. On 27 August 1998 Mr Lewis wrote to the plaintiff to inform it of the Price Waterhouse recommendation and provide a brief explanation for the variation from the figure previously recommended for compensation. The plaintiff was asked to advise whether it accepted the amount of $306,160.00. If it did not it was invited to make submissions "outling the areas of disagreement and the reasons for such disagreement". The plaintiff did not accept the reduced figure and explained why. It requested that Price Waterhouse's recommendation be reviewed by officers of the Department of Treasury. This was done but neither Price Waterhouse nor Treasury saw fit to change the revised recommendation. On 7 May 1999 Mr Carson wrote to the plaintiff

"I refer to the loss of business compensation claim . . . As you are aware . . . the assessment of your loss of business compensation claim by Price Waterhouse has been reviewed by Queensland Treasury . . . Treasury is of the view that the Price Waterhouse recommendation is fair and reasonable . . . Having considered your claim . . . I have determined that (the plaintiff) be paid an amount of $306,160.00 as compensation for the loss of business.

[14] In the action the plaintiff claims that it made an enforceable contract with the State for the payment of the amount of compensation first recommended by Price Waterhouse. It claims this amount pursuant to the contract or as damages for breach of it. The alternative claim is based upon an argument that reg 71(3) is invalid and that in consequence it is entitled to an amount of compensation assessed by the court. The amount claimed was the value assessed by Mr Hernyk.

[15] The alternative claim can be disposed of quickly and it is convenient to do so first. The plaintiff's argument is that "compensation" has a fixed meaning in the law: See eg Nelungaloo Pty Ltd v The Commonwealth [1947] HCA 58; (1948) 75 CLR 495 at 571. The sub-regulation disregards this established concept and empowers the Commissioner to fix, as a matter of caprice, the amount of compensation to be paid to the owner of a business devastated by the changed legislative regime. The argument continues that a regulation which confers a power to act arbitrarily must be invalid.

[16] There is no warrant for reading reg 71(3) in this way. Its natural construction is that the Commissioner is to decide what is fair recompense for the loss of business suffered by a claimant and in doing so is to afford procedural fairness to the State which must pay the compensation and to the claimant who is to receive it. The Commissioner will, in the exercise of the power, receive information provided by claimants and the State, and is required to act upon that information to derive an amount which is compensation properly understood. I can see nothing uncertain or arbitrary about the operation of the regulation.

[17] The plaintiff's primary claim for breach of contract appears to be soundly based. Although the legislative scheme for the award of compensation is tersely expressed there is nonetheless a discernible regime. A claimant who satisfies the statutory criteria could apply for compensation which was to be awarded in a sum ascertained by the Commissioner. The claimant has a statutory right to be paid the compensation so fixed. It was a right which, like many others, could be the subject of compromise. The correspondence does, I think, establish an agreement between the State, acting through the agency of FCP, to pay $971,160.00 in return for which the plaintiff gave up its right to have the Commissioner adjudge that it was entitled to a higher amount.

[18] The language of the correspondence which is set out in paragraphs 10, 11 and 12 of these reasons points naturally to the formation of a contract of a well known kind. It is no different in principle to an agreement to compromise a claim the subject of litigation or arbitration. The plaintiff had conferred on it a statutory right to compensation and to the adjudication of the quantum of its claim by the Commissioner who was appointed by the regulation for that purpose. The right was compromised by the State on whom was imposed the obligation to pay compensation. There was a dispute about the amount properly payable and an offer to settle the dispute by the payment of a sum less than the amount claimed. Agreements for the compromise of rights or claims, other things being equal, give rise to enforceable contracts.

[19] Mr Carson and the State argue that there was no contract because

(b) There was no intention to create legal relations

(c) Any agreement depended upon the unfulfilled condition that the Deed of Discharge be completed and executed.

[20] The promise to pay the agreed amount of compensation was, I think, supported by consideration moving from the plaintiff. It gave up its right to claim compensation in excess of the agreed sum. That this amounts in law to valuable consideration is clear. See eg Newton, Bellamy and Wolfe v SGIO [1986] 1 Qd R 431 at 444; Callisher v Bischoffsheim [1870] LR 5 QB 449 at 452; Miles v New Zealand Alford Estate Co [1885] 32 ChD 266 at 291.

[21] There is no substance in the contention that the plaintiff and FCP, on behalf of the State, did not intend to create legal relations. The subject matter of the agreement and the mode of dealing with both indicate the parties intended their agreement to be of binding effect. It is hard to imagine the State agreeing to pay almost $1,000,000.00 pursuant to an arrangement that was not intended to be legally binding. Moreover it was a term of the agreement that payment be conditional upon the execution of the deed which was described in the correspondence constituting the agreement as "a legal document covering the conditions under which you accept payment".

[22] The agreement appears to fall within the second category of contract discussed by the High Court in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360-361:

" . . . a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document . . . this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement."

Such a case is "fundamentally different" from " . . . cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own." The present is not a case of a contract "involving the possibility of new terms, or the modification of those already discussed" so that it could be seen that the parties were "still in a train of negotiation". The point of distinction is whether an agreement is a completed bargain or merely a provisional arrangement which contemplates the formation of a complete contract in the future. See Sinclair, Scott & Co Ltd v Naughton 1929 43 (CLR) 310 at 317 and 325.

[23] The letter of 22 April 1998 from Mr Lewis to the plaintiff makes it clear that the execution of the deed was a condition precedent to payment, not a condition on which the existence of the agreement depended. The letter recites that payment of compensation "has now been approved" and that the process of payment could commence. It went on to explain "the procedure for payment", in which context it was said the plaintiff would "need to sign the enclosed Deed of Discharge". It is to be noted that the terms of the agreement do not appear in the deed which cannot therefore be the mechanism by which the parties agreed to be bound. Rather recital D notes that the plaintiff and the State "have agreed that the (plaintiff) will be paid a sum of money . . . on the terms of this Deed". The prior and separate existence of the agreement is expressly recognised. The point of the deed is to secure for the State (and the Commonwealth Government which was the ultimate source of the compensation funds) an explicit discharge from any further claims for compensation made by the plaintiff or any person associated with it.

[24] It may be observed that the parties to the deed were the plaintiff, the State and the Commonwealth of Australia. This I think makes it impossible for the deed to have been intended to be the means by which the parties made their agreement. The Commonwealth was not a party to the agreement. Nor is it mentioned in the statutory framework for claiming compensation. There is no suggestion that FCP was acting for the Commonwealth as an undisclosed principal. The deed differs materially from the agreement by the addition of a party. Therefore it appears it was not meant to be the concluded form of the agreement. The deed and the agreement have distinct existences and are meant to fulfil different functions. That of the deed was to release the State and the Commonwealth from any further claims.

[25] The plaintiff cannot recover the money due under the contract because it has not fulfilled a condition precedent to the State's obligation to pay. The plaintiff has not executed the deed nor has it completed the schedules. It is, though, clear that the State has repudiated the agreement. It denies that it is bound by its terms and, indeed, denies the existence of the agreement. In the circumstances the plaintiff is entitled to an award of damages for breach. The completion and execution of the deed is not a necessary prerequisite to the plaintiff's entitlement to such an award. The statement of claim though economically drafted just includes a claim based on repudiation.

[26] The compensation agreed was $971,160.00. A lesser sum of $306,160.00 was paid on 7 June 1999. I give judgment for the plaintiff against the second defendant in action 6883/1999 for the sum of $665.000.00. I order the second defendant to pay interest on the sum of $971,160.00 at 10 per cent. per annum for the period 22 May 1998 to 7 June 1999 and interest at the same rate on the sum of $665,000.00 from 7 June 1999 until it is paid. I have made the commencement date for the payment of interest 22 May 1998 on the basis that a month would have elapsed before the deed was executed and payment made.

[27] It is unnecessary to consider the application for a statutory order to review because of the plaintiff's success in its action, but because the matter was fully argued I will express an opinion which may save further litigation and expense in the event that my opinion as to the contract does not prevail.

[28] The administrative decision attacked is that made by Mr Carson on 7 May 1999 determining the amount of compensation to be $306,160.00. The decision is said to be unlawful because Mr Carson had previously determined the amount of compensation to be the higher sum of $971,160.00 and reg 71(3) did not empower him to make a subsequent determination. He was, it is said, functus officio after the first determination.

[29] There is no doubt that Mr Carson, as the Commissioner's delegate, decided the amount of compensation payable to the plaintiff on 21 April 1998. The fact that the plaintiff had agreed the amount of compensation with FCP, on behalf of the State, does not alter the character of Mr Carson's act. He fixed the amount by reference to the agreement of the parties which followed Price Waterhouse's advice that the amount was appropriate. In form Mr Carson approved Price Waterhouse's recommendation that compensation of $971,160.00 be paid, but in substance he decided that that was the proper amount and in so doing exercised the power conferred by reg 71(3).

[30] Thirteen months later he exercised the power again to decide that the plaintiff should receive less than a third of the amount originally assessed as fair recompense for the loss of its business. The defendant relies upon ss 23(1) and 24AA of the Acts Interpretation Act ("Interpretation Act") as empowering Mr Carson to make the subsequent decision. Section 23(1) provides that

"If an Act confers a function or power on a person or body, the function may be performed, or the power may be exercised, as occasion requires."

"If an Act authorised or requires the making of an instrument or decision -

(a) The power includes power to amend or repeal instrument or decision; and

[31] Section 4 of the Interpretation Act however, provides that

"The application of this Act may be displaced, wholly or partly, by a contrary intention appearing in any Act."

According to Gummow J in Minister for Immigration and Ethnic Affairs v Kurtovic [1990] FCA 22; (1990) 21 FCR 193 at 211:

" . . .there was "an inconvenient common law doctrine of somewhat uncertain extent to the effect that a power conferred by statute was exhausted by its first exercise": . . . however, s 33(1) of the Acts Interpretation Act 1901 (Cth) (which was modelled upon s 32(1) of the Interpretation Act 1889 (UK)) provides that where an Act confers a power or imposes a duty, then unless the contrary intention appears, the power may be exercised and the duty shall be performed "from time to time as occasion requires". But in any given case, a discretionary power reposed by statute in the decision maker may, upon a proper construction, be of such a character that it is not exercisable from time to time and it will be spent by the taking of the steps or the making of the statements or representations in question, treating them as a substantive exercise of the power. The result is that when the decision maker attempts to resile from his earlier position, he is prevented from doing so not from any doctrine of a estoppel or, but because his power to do so is spent and the proposed second decision would be ultra vires. The matter is one of interpretation of the statute conferring the particular power in issue."

[32] In Rootkin v Kent County Council [1981] 1 WLR 1186 Lawton LJ saw a difference between cases in which a citizen is entitled to payment upon the adjudication of a claim by a local authority, and cases in which a local authority is given a discretion in given circumstances to make a payment or confer a benefit. In the latter, but not the former, a decision when made can be changed or revoked subsequently. See at 1195. This case is of the first type.

[33] The cases, I think, do establish that where the power conferred by statute is to make a decision with respect to the award of financial recompense in specified circumstances the power is exercisable only once. The subject matter of the decision does not permit successive exercises of the power. The statute conferring the power contains an intention inimicable to the operation of s 23(1) or s 24AA of the Interpretation Act.

[34] The plaintiff in Livingstone v Mayor, Aldermen and Councillors of the City of Westminster [1904] 2 KB 109 occupied a parochial officer as surveyor. The London Government Act 1899 allowed for the transfer of powers and officers from parochial councils to a new local government authority established by the Act. The legislation provided that an officer who suffered any pecuniary loss by the abolition of his office should be entitled to compensation paid by the local authority to which his office was transferred. Every person entitled to compensation had to deliver to the council a claim setting out details of past emoluments. The claim was to be considered by the council which had to "assess the just amount of compensation". Mr Livingstone made a claim pursuant to which the council resolved to pay him about £518 a year. The central government which was ultimately responsible for the payment objected to the assessment, though not for some time. Consequently the council passed a second resolution rescinding the earlier assessment and reducing the plaintiff's compensation by about £90 a year. Buckley J said (p 120)

" . . . it is said that on November 20 1902 the Council rescinded that resolution. The plaintiff argues that they had no power to do so. In my opinion the plaintiff is right. So soon as the resolution of August 1901 was validly passed, there arose an obligation . . . to pay . . . I find no power in the Council to go back and relieve themselves from an obligation thus rendered binding upon them".

[35] In Re 56 Denton Road Twickenham [1953] 1 Ch 51 was a case which arose out of the bombing raids on London in 1940. The War Damage Act 1943 created the War Damage Commission and empowered it to pay compensation to property owners who had suffered loss from enemy action. The legislation provided for a regime of claims, assessments and awards. On 12 November 1945 the Commission informed the property owner that, if she agreed, she would be paid an amount equivalent to the cost of restoring her house. She agreed. On July 15 1946 the Commission determined that the property owner should be paid the value of the property. The resulting figure was considerably less than that awarded for the cost of rebuilding. Vaisey J accepted as correct the submission

"That where Parliament confers upon a body such as the War Damage Commission the duty of deciding or determining any question, the deciding or determining of which affects the right of the subject, such decision or determination made and communicated in terms which are not expressly preliminary or provisional is final and conclusive, and cannot in the absence of express statutory power or the consent of the person or persons affected be altered or withdrawn by that body."

"I think that the contrary view would introduce a lamentable measure of uncertainty, and so much disturbance in the minds of those unfortunate persons who have suffered war damage that the Act cannot have contemplated the possibility of such vacillations as are claimed to be permissible in such a case as the present."

[36] This observation affords a compelling foundation for thinking that decisions of the type here in question are not amenable to the process of reconsideration and reversal contemplated by ss 23(1) and 24AA of the Interpretation Act. Those provisions impose no time limit upon their exercise. It would be nonsense to talk of a right to claim compensation, or an entitlement to be paid, if a determination could be recalled at any time so that money paid (and no doubt spent) becomes a debt recoverable by the State.

[37] It is to be remembered that when Livingstone and Re 56 Denton Road Twickenham were decided the English Acts Interpretation Act contained a provision similar to s 23(1).

[38] Further authority is found in the decision of the Full Federal Court, Export Development Grants Board v EMI (Australia) Ltd (1985) 61 ALR 115. The Export Development Grants Board was empowered to make payments to exporters as an incentive to develop that aspect of trade. The Board determined the amount to be paid each year. A determination was made in respect of one year, but later when a determination was made for a subsequent year the Board thought that the first amount was too high. It deducted the amount it thought excessive from the amount of the later determination. The court held it had no power to vary the initial grant.

"It is apparent that when the Board performs its function of determining whether a claimant has an incentive grant entitlement and, if so, the amount of that entitlement, certain consequences follow. The claimant, as a matter of law, becomes entitled to be paid a grant equal to the amount of the entitlement so determined . . . this is in the relevant sense a final and not a provisional legal entitlement . . . the proposition that by Board reassessment the legal entitlement of a claimant . . . can be taken away and the Commonwealth, without any knowledge or action on its part, can suddenly be placed in a position where it has wrongly paid away moneys . . . is a bold one. There is certainly nothing in the Act which suggests the Board has such a power and nothing in the Act to deal with the consequences if such a power be exercised. . . . reference was made to the Acts Interpretation Act 1901, s 33 (1) . . . the suggestion appears to be that the Board may exercise the power to make a determination . . . as often as occasion may require . . . it is plain that the structure of the Act is inconsistent with the existence of such a general power to reassess. In our opinion a contrary intention appears in the Act."

[39] A similar approach is apparent in the judgment of the House of Lords Reg. v Tan [1977] AC 650. The respondents bought two jade pendants on a trip to China, paying £8,300 for them. On their return to Britain a customs officer valued them at £50 pounds and assessed customs duty accordingly. The assessment was made without any active misrepresentation by Mrs Tan. She either said nothing or said that she did not know what they were worth, but she did not misrepresent their value. The House of Lords held that in the absence of misrepresentation or fraud departmental officers could not reassess the amount of customers duty, and that when the duty assessed was paid no further demand for additional payment could be made.

[40] These decisions, and some others, were discussed by Professor Enid Campbell in an article, "Revocation and Variation of Administrative Decisions" published in 1996 22 Monash University Law Review p 30. Professor Campbell noted (at 49) that:

"There are many cases in which courts have asserted or assumed that a valid and perfected decision of an administrative character which affects individual rights or liabilities cannot be revoked or altered by the decision maker unless there is statutory authority (express or implied) to revoke or alter the decision. This general rule has been applied even where the decision has been based on some error of fact or has been sought to be reopened after discovery of fresh evidence. Valid and perfected decisions which courts have held to be irrevocable, in the absence of statutory authority to rescind or vary them, have included decisions about compensation or other monetary grants payable under legislation . . .".

Having discussed the cases she continues (at 53):

"The general legal principle which, in my opinion, should be adopted and applied, is that, where a valid administrative determination is made in respect of a person's rights, entitlements or liabilities, that determination cannot, in the absence of fraud or misrepresentation, be rescinded or varied by the decision maker on the ground of error of fact on the part of the decision maker, except possibly with the consent of the party or parties affected."

In my opinion the cases do support Professor Campbell's opinion. In two of them, Livingstone and Export Grants Board, a factor in the reasoning was that the legislation in question provided a procedure to be followed if a mistake had been made in the initial determination. This feature supported the conclusion that the legislation intended that the power to make decisions did not extend to multiple determinations. That feature is absent from reg 71 which is exceptionally sparse in content. Nevertheless the underlying reasoning made explicit by Vaisey J, and adverted to by Gummow J and Lawton LJ is, that where a power is adjudicative in nature, affecting rights or liabilities, it can only be exercised once. Such a view would accord with the law relating to arbitral awards and judicial pronouncements. The common law very early insisted that an arbitrator could not vary or recall an award. The rule was very strict. See for example Irvine v Elnon [1806] EngR 315; (1806) 8 East 53 at 54 per Lord Ellenborough CJ:

"The arbitrator's authority, having been once completely exercised pursuant to the terms of the reference, was at an end, and could not be revived again even if the purpose of correcting a mistake in calculation of figures . . . such mistakes might and include the essential merits of the case."

In Mordue v Palmer [1870] 6 LR Ch App 22 at 31 Mellish LJ said:

"I think the result of the cases at law is, that when an arbitrator has signed a document as and for his award, he is functus officio, and he cannot of his own authority remedy any mistake."

See also Halsbury's Laws of England 4th ed vol 2 para 613. The same rule holds true for courts. Once the process of adjudication is complete, and the judgment is "passed and entered" or "taken out", a judge cannot reconsider or alter it. Legislation allows a judge or arbitrator to correct accidental errors but this does not affect the underlying notion which is, I think, that decisions which adjust rights between contestants, are not amenable to fluctuation.

[41] The decision in question is of this kind. The power conferred by reg 71(3) is of such a nature that the presumption found in ss 23(1) and 24AA is rebutted. The power of reconsideration or revocation is inconsistent with the requirement that a decision awarding a finite sum for compensation in respect of a definite loss be made. The process requires finality.

[42] The exception recognized by the cases that a decision induced by fraud or misrepresentation may be reconsidered would appear, on principle, to be valid. Such a decision is not a proper exercise of the power so that a subsequent decision is, in reality, the first exercise of the power authorised by the statute. It is not necessary to consider the point because it is not relied upon by Mr Carson or the State in their defence of the plaintiff's claim or of the application for statutory review. It is probably appropriate to say something about it because the first decision was made in the mistaken belief that the plaintiff, when compensation was determined, still held a distributorship from an American weapons manufacturer. This is the matter referred to in Mr Lewis' letter of 1 June 1998 (see para 13). In fact the distributorship had been terminated by the manufacturer at the end of June 1997, some thirteen months after the Council's resolutions, but prior to the award of compensation.

[43] The mistake does appear to have been material. Compensation was to be awarded for the loss of business occasioned by the Council's May 1996 resolutions. At that time the plaintiff held the distributorship. In the second half of 1996, while it held the distributorship, the plaintiff resolved to cease trading because of the difficulties posed by the resolution. An essential element in the valuation was the future maintainable EBIT, which in turn depended largely upon the plaintiff's prospects of maintaining its distributorship or a similar distributorship. The prospect that the distributorship might be lost, was taken into account. The fact that the risk allowed for subsequently became an actuality should not have affected the valuation. Especially when the loss of the distributorship occurred after the plaintiff had resolved to stop trading and, consequently did not attempt to restore the relationship or gain a replacement. This reliance upon hindsight led Mr Carson, and the State, to repent of the initial assessment. It was erroneous and may account for the defendant's relying only upon the provisions of the Interpretation Act to justify what Lord Wilberforce described as "after taking half a pound of flesh (asking) for more". (1977 AC 667.)

[44] It is not clear from the authorities whether "fraud or misrepresentation" where it operates to allow a decision to be re-opened is limited to fraudulent misrepresentations or whether an innocent misstatement will suffice. On the basis that a mistake as to the facts is not sufficient to overcome the prohibition against re-making decisions it may well be that an innocent misrepresentation is not enough. The word "misrepresentation" should perhaps be understood as referring to fraudulent misrepresentation and "fraud" as referring to dishonesty of a more general kind, so that only conduct of that kind will vitiate a decision and allow the power to be exercised afresh.

There is no question of dishonesty on the part of the plaintiff. Mr Broadfoot's evidence is clear that the director's statements about its status as a distributor were genuinely believed to be true. Indeed this is not really a case of misrepresentation but rather of mistake. There was a conflict in the evidence available to Mr Carson and to Price Waterhouse. They had other information contradicting the plaintiff's statements. They made such enquiries as they thought fit and found, as a fact, that the plaintiff remained a distributor. They were wrong but the mistake seems to be in that category which, according to the authorities, cannot support a reconsideration of the decision.

[45] It being my opinion that the decision of Mr Carson made on 7 May 1999 was beyond power because he had exercised, once and for all, the authority conferred on him by reg 71(3) it might have been appropriate to make an order giving effect to his decision of 21 April 1998. Such a course is within the purview of s 30(1)(d) of the Judicial Review Act. However I have given substantive relief to the plaintiff in the other proceedings so that the appropriate remedy pursuant to the Judicial Review Act would be an order that Mr Carson's decision of 7 May 1999 be set aside.

[46] It is not necessary to consider the other grounds on which the plaintiff sought judicial review. They were, in effect, that Mr Carson had not afforded the plaintiff natural justice in his reconsideration of the assessment of compensation and that the second decision was legally erroneous. I indicate, for what the opinion might be worth, that the plaintiff made out both arguments. The reconsideration was occasioned by the belief that the loss of distributorship was relevant and that the initial assessment was vitiated by the mistaken belief that the distributorship had continued to the time of the assessment. I have indicated enough to show that I disagree with that view. More to the point the process of valuation adopted by Mr Carter to adjust for the mistake was erroneous in point of principle. I accept without reservation the opinion of Mr Green on the point. The result is that the assessment was affected by an error of principle which produced a legally unreasonable decision: one "so unreasonable that no reasonable person could have made it". Moreover the decision appears to have been influenced strongly by the belief that the plaintiff would have lost its distributorship irrespective of the May 1996 resolution. This was a crucial consideration. The only basis for it was an assertion by a competitor of the plaintiff's which itself held a distributorship from the same manufacturer. The assertion was made in support of its own claim for compensation. The clear implication was that the competitor would have enjoyed increased business because of the loss of competition. This intelligence was never conveyed to the plaintiff who was deprived of the opportunity of answering it. The fact that Mr Carson's concerns were, in general terms, intimated to the plaintiff is not sufficient to overcome the denial of natural justice.

[47] It is not necessary to expand upon these themes. For the reasons I have expressed there will be judgment for the plaintiff on its claim in the terms I have outlined. The application for statutory review should result in an order that the first defendant's decision of 7 May 1999 be set aside.