One.Tel Limited v Australian Communications Authority

legislative scheme 6 Part 7 of the Act establishes a "universal service regime", the main object of which is to ensure that all people in Australia have access to telecommunications services, and that losses incurred by universal service providers are shared among the carriers. Part 7 of the Act was repealed upon the commencement in August 1999 of the Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth). However, Part 7 of the Act continues to apply in relation to a levy for a financial year ending on or before 30 June 1999: see Item 23 of Schedule 4 to the Telecommunications Legislation Amendment Act 1999 (Cth). 7 Division 3 of Part 7 enables the Minister to specify a carrier to be a national or regional universal service provider (s 150). The effect of such a declaration is to require that carrier to take all reasonable steps to fulfil the "universal service obligation" so far as it relates to an area (s 151). The universal service obligation is to ensure that standard telephone services, pay phones and prescribed carriage services are reasonably accessible to all people in Australia on an equitable basis (s 149). Division 5 of Part 7 enables the Minister to regulate the charges imposed by the carrier for the provision of those services (ss 172 and 173). 8 Division 6 of Part 7 sets out a scheme under which losses that result to a carrier from supplying services in the course of fulfilling the universal service obligation are shared among carriers (s 138(c); s 177). The scheme involves the aggregated losses being shared among "participating carriers" by reference to their "eligible revenue" for the financial year in question (s 196). 9 The expression "participating carrier" is defined in s 146 as follows: "(1) For the purposes of this Part, a person is a participating carrier in relation to a financial year if the person was a carrier at any time during the financial year. (2) This section does not apply to a person if a person is of a kind declared by the regulations to be exempt from this section." "Carrier" means the holder of a carrier licence (s 7); "carrier licence" means a licence granted under s 56 of the Act (s 7). It follows that GSM was a participating carrier in relation to the financial year ended 30 June 1999. It is the Act, rather than the Regulations, which imposes the burden of contributing to losses incurred by universal service providers on persons who held a carrier's licence at any time during the financial year in question. 10 The expression "eligible revenue" is defined in s 147 as follows: "For the purposes of this Part, the eligible revenue of a participating carrier for a financial year is the amount that, under the regulations, is taken to be the eligible revenue of the carrier for the financial year." 11 The power to make regulations is conferred by s 594(1) which provides: "The Governor-General may make regulations prescribing matters: (a) required or permitted by this Act to be prescribed; or (b) necessary or convenient to be prescribed for carrying out or giving effect to this Act." 12 Within 90 days of the end of a financial year, each participating carrier in relation to that financial year must give the respondent ("the ACA") a written return of the carrier's eligible revenue for that financial year setting out both the amount of eligible revenue as well as details of how that eligible revenue was worked out (s 191). The ACA may enquire into the correctness of the return (s 192) and must make a written assessment for the purposes of Part 7 (s 193) setting out, amongst other things, for each participating carrier: - the carrier's eligible revenue for the financial year; and - the carrier's levy debit under s 196 for the financial year. 13 The levy payable by a participating carrier is worked out by reference to the carrier's eligible revenue expressed as a proportion of the total eligible revenue of all participating carriers (s 196). 14 The levy is imposed under the Telecommunications (Universal Service Levy) Act 1997 (Cth). The levy is due and payable under the Telecommunications Act on the 28th day after the ACA gives a copy of the assessment to the participating carrier (s 203) and may be recovered in any court of competent jurisdiction as a debt due to the Commonwealth (s 204). In any proceeding, the onus of establishing that an assessment under s 193 is incorrect is on the party making that assertion (s 207).

the regulations 15 The Regulations are made for the purposes of s 147 of the Act and explain how to work out a participating carrier's eligible revenue for a financial year (Regulation 5). Regulation 8(1) stipulates that the source of a participating carrier's eligible revenue for a financial year is its gross telecommunications sales revenue for the financial year. "Telecommunications sales revenue" means sales revenue earned from an activity in the telecommunications industry. "Telecommunications industry" is defined in s 7 of the Act. Carrying on business as a carrier is included within the definition, but the definition also includes many other activities. 16 Parts 4, 5 and 6 of the Regulations require a participating carrier's eligible revenue for a financial year to be worked out in three stages. 17 Part 4 explains how to work out gross telecommunications sales revenue (Regulation 8(2)). A participating carrier's gross telecommunications sales revenue for a financial year is worked out using the steps in Schedule 1 (Regulation 9). The steps in Schedule 1 differ depending upon whether or not the participating carrier's sales revenue is included in the audited annual consolidated financial statements of an ultimate Australian parent entity. One.Tel's audited annual consolidated financial statements include any revenue of GSM, hence the "steps" in Schedule 1, in their application to GSM, may be summarised as follows: 1. identify the sales revenue for the year ended 30 June 1999 in One.Tel's annual consolidated financial statements; 2. deduct any amount earned from an activity outside the telecommunications industry; 3. add any telecommunications sales revenue not within Step 1, but which would reasonably be described as GSM's telecommunications sales revenue for the financial year; 4. add revenue of an entity declared by the ACA to be a "declared related party" of GSM under Division 3 of Part 4. It was not submitted that these steps were inapplicable by reason of the fact that in the year ended 30 June 1999 GSM did not derive any revenue from any source. If the participating carriers revenue is not included in the audited annual consolidated financial statements of an ultimate Australian parent entity, then in Step 1 the carrier identifies the amount that is described as sales revenue in its annual financial statements. 18 The second stage is to deduct certain amounts from the gross telecommunications sales revenue under Part 5 and Schedule 2 to arrive at the participating carrier's "net telecommunications sales revenue". Briefly and loosely stated, Schedule 2 allows for the deduction from a participating carrier's gross telecommunications sales revenue of:

1. revenue from activities outside Australia and certain other specified activities (Division 3); 2. telecommunications sales revenue earned before the grant of a carrier licence (Division 5 and Telecommunications Participating Carrier (Deductible Revenue) Declaration No 1 of 1999). 19 The third stage is to work out the participating carrier's eligible revenue under Part 6 and Schedule 3. Part 6 includes Regulations 33 and 34 which are as follows: "33(1)After a participating carrier has worked out its net telecommunications sales revenue for a financial year, it must work out its eligible revenue. (2) To do this, the participating carrier may: (a) deduct amounts from its net telecommunications sales revenue; and (b) attribute eligible revenue where it is being worked out on a group basis. (3) This Part explains: (a) how to work out amounts that may be deducted from the net telecommunications sales revenue; and (b) how eligible revenue is to be attributed where it is being worked out on a group basis. Note: A participating carrier is not required to deduct an amount from its net telecommunications sales revenue. 34. A participating carrier's eligible revenue for a financial year is worked out using the steps in Schedule 3." 20 Schedule 3 sets out the following steps for working out a participating carrier's eligible revenue: "Step 1: The participating carrier adds all of the amounts mentioned in Part 6 that it wishes to deduct from its net telecommunications sales revenue. Step 2: The participating carrier deducts the total from its net telecommunications sales revenue. Step 3: If the revenue has been worked out on a group basis, the carrier identifies the amount of eligible revenue that is its own revenue. Step 4: The result is the participating carrier's eligible revenue for the financial year." Part 6 provides for certain deductions, the detail of which is not important for present purposes. In very general terms, Part 6 is designed to allow deductions for amounts paid to other participating carriers, so as to avoid any problem with double counting. 21 The question of construction which is at the heart of the present dispute is to be found in Regulations 33(2)(b), and 33(3)(b) and in Step 3 of Schedule 3. The problem lies in identifying when revenue "has been worked out on a group basis". Before embarking on a consideration of that question it is necessary to refer to some other provisions of the Regulations. 22 Part 3 only applies if two or more participating carriers have the same ultimate Australian parent entity, and the entity's audited annual consolidated financial statements include the carriers' sales revenue, with or without including revenue from the other entities. Part 3 explains how these carriers may make calculations required by these Regulations (Regulation 6). 23 Regulation 7 provides as follows: "7(1) Each carrier may make all of the calculations required by these Regulations in its own right, identifying and accounting for its own revenue and deductions in accordance with these Regulations. (2) However, carriers with the same ultimate Australian parent entity may make all of the calculations required by these Regulations on a group basis, identifying and accounting for revenue and deductions as a whole in accordance with these Regulations. Note: Although carriers would be able to make calculations on a group basis, the final stage of the eligible revenue process requires carriers to identify their revenue on an individual basis: see Regulation 39." 24 Division 3 of Part 6 then deals with attribution of eligible revenue between participating carriers where the option permitted by Regulation 7(2) is taken. Regulation 40 provides: "(1) After working out the eligible revenue on a group basis, each participating carrier must state: (a) how much of the eligible revenue is its own eligible revenue; and (b) how much of the eligible revenue is the eligible revenue of the other participating carrier or carriers for which the entity is the parent entity; and (c) how it worked out the amounts. (2) The ACA may, in writing, declare that the eligible revenue of the carrier is to be attributed in a particular way when it is being worked out by the carrier as a member of a group. Note: The ACA will accept an amount as eligible revenue if it was worked out on the basis of a declaration. The ACA cannot guarantee that it will accept an amount as eligible revenue if it was not worked out on the basis of a declaration." 25 GSM gave to the ACA a written return of its eligible revenue for the financial year ended 30 June 1999. In that return gross telecommunications sales revenue was shown as $325 million; net telecommunications sales revenue was shown as $81 million and the eligible revenue identified after making the deductions allowed by Step 1 of Schedule 3 to the Regulations was about $37 million. In purported application of Step 3 of Schedule 3, GSM identified "the amount of eligible revenue that (was) its own revenue" as nil. 26 In correspondence passing between the parties, the ACA has indicated its intention to assess the eligible revenue of GSM for the relevant financial year as $37,387,000. I was informed that that an assessment to that effect would expose GSM to liability for payment of a levy of the order of $500,000.

validity 27 ACA contends that the Regulations, on their proper construction, provide for telecommunications revenue of all companies within a group of companies to be attributed to a carrier within the group. The group telecommunications revenue for the financial year is taken to be the eligible revenue of the participating carrier for that year. If that is the effect of the Regulations, One.Tel contends that the Regulations are invalid, as it is implicit in the legislative scheme dealing with universal service arrangements that eligible revenue will be worked out between carriers on a consistent basis, and that it will relate to revenue attributable to those carriers in their capacity as carriers: ie there must be a rational connection between amounts which are taken to be eligible revenue, and the use or permitted use of a carrier's network. On the ACA's construction of the Regulations, there is included within the compass of eligible revenue, amounts which have been earned completely independently of the participating carrier. The amounts are included simply because they form part of the telecommunications sales revenue of the group of companies of which the participating carrier forms part. 28 It is well settled that a regulation-making power such as the present will not support attempts to widen the purposes of the Act, to add new and different means of carrying them out, or to depart from or vary the plan which the legislature has adopted to attain its ends: Shanahan v Scott (1957) 96 CLR 245 at 250. A regulation may not be inconsistent with the legislation under the authority of which the regulation is made. The ambit of the regulation-making power must be ascertained by the character of the statute and the nature of the provisions it contains. An important consideration is the degree to which the legislature has disclosed an intention of dealing with the subject with which the statute is concerned: "In an Act of Parliament which lays down only the main outlines of policy and indicates an intention of leaving it to the Governor-General to work out that policy by specific regulation, a power to make regulations may have a wide ambit." Morton v Union Steamship Co of New Zealand Limited (1951) 83 CLR 402 at 410. 29 It is common ground that the ambit of regulation-making power is subject to two limiting principles. The first is that the power must not be exercised in a manner which is arbitrary, capricious or unreasonable. The second is that the power must not be exercised in a manner which is disproportionate to the attainment of the objects for which it is conferred. 30 "Unreasonableness" (and the concepts of arbitrariness or capriciousness which are included therein) in this context, means that "the regulation is so oppressive and capricious that no reasonable mind can justify it": Qui v Minister for Immigration & Multicultural Affairs (1994) 55 FCR 439 at 446. It needs to be borne in mind that the fundamental issue is one of power, not expediency: Williams v Melbourne Corporation (1933) 49 CLR 142 at 149-150. In Minister for Primary Industries & Energy v Austral Fisheries Pty Ltd (1993) 40 FCR 381, Lockhart J emphasised at 384 that it is only in "an extreme case" that delegated legislation would be declared invalid on this ground. 31 As to the second principle, if the regulation-making power is purposive, the substantive operation of delegated legislation must be capable of being reasonably considered to be appropriate and adapted to achieve the purpose prescribed by the legislation pursuant to which the regulation is made. This requires that there is a reasonable proportionality between the object or purpose and the means adopted to achieve or procure it: Minister of State for Resources v Dover Fisheries Pty Ltd (1993) 43 FCR 565 at 584. 32 If the subject matter of the statutory power cannot be described as purposive, then the question is whether there is a real and substantial connection between the delegated legislation and the subject matter of the grant of power. It is not sufficient that there be merely some connection between the delegated legislation and the subject matter of the regulation-making power. The connection must be so direct and substantive that the regulation is seen really to satisfy one of the descriptions by reference to which the regulation-making power is conferred: Dover Fisheries at 584-585. 33 Where no reasonable mind could justify the delegated legislation by reference to the purposes of the power, or the subject matter of the power, the conclusion is that there is no real connection between the delegated legislation and the power: Dover Fisheries (supra) 584-585, in which case there is invalidity. In Williams v Melbourne Corporation (supra) at 155, Dixon J put the matter in this way: "To determine whether a by-law is an exercise of a power, it is not always enough to ascertain the subject matter of the power and consider whether the by-law appears on its face to relate to that subject. The true nature and purpose of the power must be determined, and it must often be necessary to examine the operation of the by-law in the local circumstances to which it is intended to apply. Notwithstanding that ex facie there seemed a sufficient connection between the subject of the power and that of the by-law, the true character of the by-law may then appear to be such that it could not reasonably have been adopted as a means of attaining the ends of the power. In such a case the by-law will be invalid, not because it is inexpedient or misguided, but because it is not a real exercise of the power." 34 In South Australia v Tanner (1988-1989) 166 CLR 161 the majority said of the reasonable proportionality test of validity that: "it is not enough that the Court itself thinks the regulation inexpedient or misguided. It must be so lacking in reasonable proportionality as not to be a real exercise of the power" (at 168). In Tanner's case, Brennan J dissented in the result, but not in principle. At 179 his Honour said: "Moreover, it must be steadily borne in mind that the fulfilling of the statutory object is a limitation on the power to make the regulation. A regulation which is so widely drawn as needlessly to embrace a field of operation which is quite unconnected with the statutory object cannot reasonably be adopted in exercise of a power so limited." 35 The fundamental question is whether the delegated legislation is within the scope of what the Parliament intended when enacting the statute which empowers the subordinate authority to make certain laws: Dover Fisheries (supra) at 577.

application of principles 36 As earlier indicated, an element of the universal service regime is that losses which result from supplying services in the course of fulfilling the universal service obligation ("USO losses") are to be shared among carriers (s 138(c)). The means adopted by the legislature to attain that objective is to share the losses of universal carriers in a financial year among all of the persons who were carriers in that financial year in proportion to "eligible revenue". "Eligible revenue" is a concept created by the Act, which is to be given content by the Regulations. Because the concept is created by the Act, and because it is an amount which is "taken to be" the eligible revenue of a participating carrier, the concept of eligible revenue is not confined to revenue in fact received by a participating carrier. "Eligible revenue" is, or is analogous to, a "statutory fiction" (cf Muller v Dalgety & Co Limited (1909) 9 CLR 693 at 696), the purpose of which is to assist in the effectuation of the legislative policy to which I have already referred. The applicant accepts that the language of s 147, insofar as it describes eligible revenue as "the amount that, under the regulations, is taken to be the eligible revenue", is intended to confer an extremely wide discretion as to the amounts that may be included under the Regulation. 37 The legislative intention that the regulation-making power in its relevant operation is to have a broad ambit is confirmed by the Explanatory Memorandum for the Telecommunications Bill 1996, which became the Act. In referring to cl 142, which became s 147, the Explanatory Memorandum states: "Clause 142 gives the Government wide discretion in defining what constitutes 'eligible revenue'. Because eligible revenue is the amount 'taken' to be eligible revenue, it is not restricted to revenue received by a participating carrier. It may include any amounts, including revenue received by persons other than the carrier. Amongst other things, this wide-ranging approach has been taken to avoid disputes as to what can and cannot be treated as eligible revenue and to provide a means of addressing tactics to avoid levy, for example by minimising eligible revenue by engaging in transfer pricing. Should participating carriers seek to minimise levy by diverting revenue to related service provider operations, such revenue will be able to be included under the regulations. Similarly, revenue paid to an infrastructure owner, rather than a participating carrier that is a nominated carrier in relation to the infrastructure, could be included in 'eligible revenue'. It is envisaged that eligible revenue may, for example, include - but need not be limited to - revenue from charges for services such as connection, line rental, calls, leased lines and providing access to carriers and service providers. It is also intended that, for clarity, the regulations would specify that certain amounts (eg perhaps revenue earned from investments outside of Australia) are not 'eligible revenue'." (emphasis added) Calls can be provided and charged for both by a carrier and a carriage service provider. 38 The Explanatory Statement issued in relation to the Regulations contains the following: "The Government's approach in developing the definition of 'eligible revenue' has been to develop a definition which broadly spreads the burden of USO contributions across the telecommunications industry, is transparent, and makes use of readily accessible data, is administratively simple and competitively neutral, both between carriers and between carriers and non-carriers with whom they compete." 39 The Regulation Impact Statement attached to the Explanatory Statement includes the following: "... because 'eligible revenue' is being used to determine USO contributions which are a tax, there is incentive for carriers to minimise their revenue and thus their contributions. To discourage and, if necessary, address this problem, the starting point for defining eligible revenue will be the consolidated annual financial statements of the ultimate reporting entity into which the carrier is consolidated. This means all relevant revenue will be captured from the start. From this amount, inappropriate revenue will be able to be deducted. This approach will also ensure reliable and comprehensive audit trails are maintained. The ACA will also be able to declare additional revenue streams where it is necessary to deal with avoidance strategies." 40 The legislative scheme is not expressed in terms of the USO losses being borne across the telecommunications industry, that being an industry which includes, but extends beyond the activities of carriers. The legislative scheme is more specific - USO losses are to be borne by carriers in the proportion which a carrier's eligible revenue for the year in question bears to the total revenue for all carriers. If the Regulations involve a departure from, or variation of the legislative plan, then they would be invalid: Shanahan v Scott (supra). However, the Regulations do provide for a determination of eligible revenue, which has the practical effect that USO losses are shared among participating carriers. 41 The starting point for a consideration of the validity of the Regulations is the determination of the true nature and purpose of the regulation-making power: Tanner (supra) at 164. For the Regulations to be valid, there must be a sufficient connection between the likely practical operation of the Regulations and the achievement of that purpose. 42 In its application to s 147, the true nature and purpose of the power is the prescription of a factor - eligible revenue - which is to be the reference point by which USO losses are to be shared among carriers pursuant to Part 7 of the Act. The determination of eligible revenue has a consequential effect in determining the levy payable under Part 7A of the Act (which deals with the national relay service to provide access to a standard telephone service for the deaf or hearing or speech impaired). It was not suggested by either party that this consequential effect was relevant to the resolution of the present problem. 43 The concept of eligible revenue of a carrier may embrace revenue derived by the carrier, as well as revenue derived by others. Insofar as revenue derived by the carrier is concerned, it would be open to the Government to prescribe, for example, the actual gross revenue of a carrier, from whatever source, as its eligible revenue. In my view, there is no implication in the statutory scheme that eligible revenue must be confined to revenue derived from carrying on business as a carrier. No violence is done to a statutory scheme for sharing of USO losses among carriers, by a prescription that the losses shall be borne in the proportion which a carrier's actual gross revenue for the relevant year bears to the total gross revenues of all carriers for that year. 44 The postulated example may not be a very good method of allocating USO losses among carriers, but it cannot be said that it is so oppressive or capricious that no reasonable mind could justify it. 45 If the concept of eligible revenue, in its application to revenue derived by a carrier, is not confined to revenue derived from, or related to, carrying on business as a carrier, then it should follow that revenue derived by others might permissibly be included within a carrier's eligible revenue, even if the revenue is not derived from or related to the conduct of the carrier's business as a carrier. 46 There are various ways in which a supposed limitation on the power to prescribe "eligible revenue" flowing by implication from the legislative scheme might be formulated. But in my view, the legislature has chosen to leave it to the Government to give content to a statutory fiction, and thus to provide the reference point by which the legislative end of sharing USO losses among carriers is to be accomplished. The permissible means for the achievement of that end are not confined by particular implications within the statutory scheme, but by the general limitation that the regulation-making power is confined to the making of regulations which fulfil the statutory objective: Tanner at 179. 47 One.Tel's submissions proceeded upon the basis that the touchstone of validity of a regulation made under s 594 of the Act for the purposes of s 147, is that the regulation provides a reasonable means of, or a rational basis for, attributing revenue to a participating carrier in its capacity as a carrier. I do not agree. In my view the submission is incorrectly focused, and fails to pay sufficient regard to the fact that "eligible revenue" is a statutory fiction, rather than a label applied to revenue which has some particular factual connection with a carrier. The touchstone of validity is that the regulation must give content to the concept of eligible revenue such that it operates as a reference point by which USO losses are allocated between carriers on a consistent basis and which cannot be condemned as irrational, absurd or ridiculous, or so devoid of any plausible justification that no reasonable body of persons could have concluded that it was within the legislative contemplation that USO losses might be shared between carriers in that way (cf Wouters v Deputy Commissioner of Taxation (NSW) (1988) 84 ALR 577 at 584. 48 There is a real and substantial nexus between the exercise of the regulation-making power, and the achievement of the purpose for which that power was conferred. The Explanatory Statement to the Regulations asserts: "The purpose of the accompanying [Regulations] is to set out what is to be taken to be eligible revenue for the purposes of section 147 of the Act." That is achieved by the prescription of a methodology for working out a participating carrier's eligible revenue, a purpose which is expressly acknowledged in the terms of Regulation 5. Accordingly, there is a real and substantial connection between the content of the regulations and their intended purpose. Accordingly, the Regulations are a valid exercise of the regulation-making power unless either of the constraints which ordinarily attend the exercise of such a power is established. 49 Matters of impression and degree are involved in the resolution of such issues. I have already referred to the cautious approach adopted by courts in determining the issue of unreasonableness, arbitrariness or capriciousness to avoid a court being impermissibly drawn into the assessment of the fairness or expediency of the regulation under review. I do not think it can be said that the Regulations are unreasonable in the sense of being so oppressive and capricious that no reasonable mind could justify apportioning USO losses between carriers in proportion to the carrier's telecommunications revenue, or, where the carrier is a member of a group, in proportion to the telecommunications revenue of all of the companies in that group. That is particularly so in a case such as the present, where the regulatory scheme was adopted after consultation with the industry. 50 In the present case, the regulation-making power is not directly expressed in purposive terms. Notions of proportionality are not of much, if any, assistance in a case such as the present, where the primary question is whether the regulation fulfils the statutory objective of the prescription of a benchmark by reference to which USO losses are to be shared among carriers. 51 One.Tel submits that the arbitrariness of the result produced by the practical application of the Regulations is illustrated by its own circumstances. The telecommunications sales revenue of the group was earned wholly independently of GSM. If GSM had not become a carrier within the financial year, the telecommunications sales revenue of the group would not have been brought into account at all. On the operation attributed to the Regulations by the ACA, the whole of the revenue must be brought to account merely because GSM was part of the same group. That is despite the fact that GSM had no network during the relevant period. However, it is the legislature which imposed responsibility for USO losses on participating carriers, and it is the Act (s 146) rather than the Regulations, which confers the status of a participating carrier on a person who was a carrier at any time during the financial year. 52 Reliance was placed by way of analogy on the decision of the Administrative Appeals Tribunal of the Australian Capital Territory in Re Commonwealth Bank of Australia & Commissioner for ACT Revenue (1998) 48 ALD 710. That case concerned the construction and validity of a determination made under a provision of the Taxation (Administration) Act 1987 (ACT) empowering the Minister to determine "the amount of tax, duty or licence payable under a relevant tax law" including the Stamp Duties and Taxes Act 1987 (ACT). The determination in question fixed the amount of stamp duty on the transfer of marketable securities consisting of shares in the capital of the company "holding land situated in the Territory" as if it involved the transfer of a proportion of the land so held. The Tribunal construed the references to the "holding" of land in that determination as being limited to the holding of land beneficially and so as to preclude land held by a company on trust. The Tribunal concluded that to construe the determination otherwise would have led to invalidity. The basis of the Tribunal's decision was that it is inherent in the concept of stamp duty that the duty should be of some proportionality to the value of the interest transferred by the relevant transaction. That being so it was not open to the Minister to fix upon a method of calculating the amount of duty by reference to some matter that bears no relationship at all to the value of the shares. However, in my view that decision is of no assistance in the resolution of the present problem because, unlike a stamp duty, eligible revenue is a statutory fiction which is to be given content by the Regulations. It does not contain inherent limitations of the type that were found to be implicit in the concept of stamp duty. 53 Accordingly, I conclude that it has not been demonstrated that the Regulations are invalid.

construction 54 One.Tel submits that the word "group" has its ordinary meaning of referring to any number of related companies, and the expression "worked out on a group basis" refers to the calculations required by the Regulations whenever the starting point is the audited annual consolidated financial statements of the participating carrier's ultimate Australian parent entity. On this construction, in One.Tel's submission, Step 3 of Schedule 3 allows a participating carrier, in every such case, to identify from the total result under eligible revenue of the group, that part which is the participating carrier's own eligible revenue. 55 There are a number of problems with this construction. First, there would be no purpose in commencing the steps with consolidated revenue figures if, at the conclusion of the process, revenue other than that of the participating carrier is to be excluded from the calculation. Second, Part 3, and Division 3 of Part 6, of the Regulations contain specific provisions as to accounting for revenue "on a group basis" which are only applicable where two or more participating carriers have the same ultimate Australian parent entity. That is inconsistent with the proposition that revenue is worked out on a group basis whenever the starting point is audited consolidated financial statements of the ultimate Australian parent entity, even if only one participating carrier is involved. Third, Division 3 of Part 6 includes Regulation 40. The effect of Regulation 40 is that once eligible revenue is worked out on a group basis, where there are two or more participating carriers that eligible revenue can be apportioned between the participating carriers. The sum of the eligible revenue of the participating carriers will equal the telecommunications revenue of the group. On One.Tel's construction, if there is only one participating carrier, then telecommunications income of group companies (except to the extent to which it is income of the participating carrier) will not be included in the eligible revenue of any participating carrier. 56 All of these factors tend against the construction for which One.Tel contends. On this approach, when Schedule 3 Step 3 refers to eligible revenue that is "its own" revenue, the reference is to "its own eligible revenue" as referred to in Regulation 40(1)(a). The steps in the Schedules are often supported by a specific regulation, which is summarised in the Schedule. 57 Where a company is a member of a group, Part 4 and Schedule 1 mandate the use of group sales figures as the starting point for the calculation of eligible revenue of the participating carrier. The consequence is that the eligible income of a participating carrier who is a member of a group will be the amount of the total income of the group from telecommunications sources. When the Regulations are considered as a whole, it can be seen that Part 3, and Division 3 of Part 6, are intended as an amelioration of that regime where there are two or more members of the group who are participating carriers. In that circumstance they can allocate the eligible income of the group between them. It would be inconsistent with such a regime, if the group had only one participating carrier, to allow something less than the eligible income of the group to be attributed to that carrier. 58 An issue arises as to whether Regulation 7(1) indicates or requires a contrary conclusion. Where there are two or more participating carriers in the group, each carrier may make all of the calculations required by the Regulations in its own right, identifying and accounting for "its own revenue and deductions in accordance with these regulations". 59 In ACA's submission, if a participating carrier elected to proceed under Regulation 7(1), Part 4 would still have the result that the starting point for the calculation is the consolidated financial statements of the parent. If that were so (and I cannot see why it is not) then Regulation 7(1) proceeds upon the assumption that there is something in the Regulations which will allow the carrier to account for its own revenue and deductions, because that is something which may be done "in accordance with these Regulations". 60 That tends to suggest that Step 3 of Schedule 3 is not confined to the case where two or more carriers elect to proceed under Regulation 7(2), but would include the case in which each carrier seeks to proceed under Regulation 7(1). There is no provision in the Regulations other than Step 3 of Schedule 3 which enables a carrier to extract "its own revenue" from revenue which has been worked out on a group basis. 61 If Step 3 of Schedule 3 is applicable where a carrier elects to proceed under Regulation 7(1), then revenue may be worked out on a group basis in cases other than those falling within Regulation 7(2) and Division 3 of Part 6. That suggests that revenue is worked out on a group basis wherever the commencing point is the audited annual consolidated financial statements of the ultimate Australian parent entity. 62 To my mind, the Regulations are confusingly drafted in this respect, a confusion which is not ameliorated by the Explanatory Statement. In the end I have come to the conclusion that the expression "on a group basis" in Step 3 of Schedule 3 should be construed consistently with the balance of the Regulations, as Regulation 7(2), 39(2) and 40(1) give a specific description of when revenue is calculated "on a group basis", which would not include the case where there is a single participating carrier in the group, or the case in which two or more participating carriers elect to proceed under Regulation 7(1). I come to that conclusion because the factors which point in that direction are more powerful than the factors which point in the opposite direction. 63 The practical implication of that conclusion may be that there are no circumstances in which an election under Regulation 7(1) would rationally be made where there are two or more participating carriers in a group. However, a contrary conclusion may lead to the practical result that there would be no circumstances where an election would rationally be made under Regulation 7(2) where there are two or more participating carriers in a group. 64 The conclusion which I have reached gains some reinforcement from the provisions of Part 4 Division 3 with respect to revenue of a declared related party. A concern expressed in the Explanatory Statement was that measures such as splitting and diversion of income might be employed in order to avoid the intended operation of the levy. Part 4 Division 3 addresses that problem, but excludes group companies from the notion of a declared related party. The assumption is, as the Note to Regulation 10 makes plain, that the sales revenue of group companies, will already be included in the calculation of eligible revenue pursuant to Schedule 1. On One.Tel's construction, the Regulations would not contain any anti-avoidance provisions in relation to group companies although it is in this situation that income splitting and diversion are most likely to occur.

Conclusion 65 The application is dismissed with costs. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.

Counsel for the Applicant: Mr S Gageler, Mr M Henry

Counsel for the Respondent: Mr A Robertson SC, Mr J Griffiths

Solicitor for the Respondent: Australian Government Solicitor