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[2003] FCA 447
respondent. The substituted application was dismissed in respect of paragraphs 1 to 4 of the claims for relief, and the applicant’s discovery motion was dismissed; the applicant was ordered to pay the...
The Court treated the 1996 Ordinance as a flexible tariff-setting scheme, not a requirement to work out the precise cost of supplying electricity to every individual customer. A fee could have a reasonable relationship to cost even if it was based on averages, used no single mandated formula, or meant that some customers effectively subsidised others. Because the agreed average cost exceeded the fee charged to Phosphate, and the requested documents were aimed at proving individual actual costs, the Court dismissed the relevant declarations and discovery motion. Other administrative-law challenges were not decided.
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In Phosphate Resources Ltd v The Commonwealth [2003] FCA 447, Phosphate Resources Limited challenged electricity fees charged to it on Christmas Island. The judgment concerned an interlocutory question about the meaning of the Utilities and Services Ordinance 1996 and whether Phosphate needed extensive discovery of electricity-cost records to pursue its claims.
3 cited instruments linked from this judgment.
The Ordinance placed responsibility for supplying specified utilities and services on the Administrator of the Territory. Those included electricity, water, gas, public transport, community health care and education. Under the version of s 4 in force when the determination was made, a fee determination had no effect unless the fee was published in the Gazette and either bore “a reasonable relationship to the cost of supplying the utility or service to a person liable to pay the fee” or was less than that cost. [13]
The Administrator published Electricity Fees Determination No 1 of 1999 on 22 September 1999. The tariff applied to Phosphate was the General Supply commercial low/medium voltage tariff, identified as L2. The judgment records that it was identical to the tariff for regional power systems in Western Australia. [15]-[16] Phosphate received electricity between 11 October 1999 and 11 February 2000. It was invoiced $447,031.20 and paid $333,733.90. [17]
Phosphate argued that the tariff did not satisfy the statutory cost requirement. It sought declarations about what costs could be included and how the reasonable-relationship requirement should operate. In particular, its proposed construction focused on costs attributable to supplying electricity to the particular user, and excluded costs connected with other users or not allocated to any particular person. [11], [19]
The discovery motion sought records including fuel contracts and receipts, power-station payroll and job descriptions, depreciation information, technical plans, and information about the number of users and their demand. [12] The practical question was whether those records were needed to establish actual costs of supplying electricity to Phosphate.
The parties agreed that, between 1 July 1999 and 30 June 2000, the Authority incurred expenses of $5,156,624 and generated 20,127,620 units of electricity. On that basis, the average cost was $0.2562 per unit. The judgment says that this exceeded the fee applicable to Phosphate for the relevant level of usage. [18] French J concluded that the Ordinance did not require the individual actual-cost calculation that Phosphate’s proposed declarations and discovery assumed. The Court therefore dismissed the first four claims for declaratory relief and the discovery motion. [30]-[33]
The decision was not a final determination of every challenge to the tariff. French J expressly noted that the application could continue insofar as it challenged the determination on other administrative-law grounds. [32]
French J started with statutory interpretation: the words of the Ordinance were to be read in context, and where more than one construction was open, a construction advancing the legislative purpose was preferred. [20] The context mattered because s 4 applied across a broad range of utilities and services, not only electricity.
The Court considered that some services could be measured relatively readily, such as electricity by units of energy, while others could not be assessed in the same way. The provision therefore had to work across the whole range listed in s 3. French J considered it should allow flexibility in an administrative process involving multiple factors, different users and different circumstances. [21]
A further feature was that the Ordinance contemplated tariffs. The Administrator was not required to make an individual determination for every user. Publication and commencement provisions indicated a prospective, ongoing tariff, and the scheme allowed different fees for different localities or circumstances. [24] The judgment also noted that the statute did not expressly require different tariffs to reflect only differences in the cost of supply. For example, a policy objective for one area might be supported through cross-subsidisation by other users. [24]
Against that background, French J rejected the idea that the statutory reference to the cost of supplying a utility “to a person” necessarily meant the exact cost of supply to each specific user. The nature of some services in s 3 showed why such a reading would be problematic: individual costs might not be capable of calculation without evaluative choices about allocating costs. [25]
The Court also addressed the possibility that individual costs could, in theory, be calculated. Even on that assumption, s 4(2)(b) did not require the decision-maker or the Court to ascertain them. The provision asked whether the fee bore a reasonable relationship to cost, or was below cost. It did not prescribe how the fee had to be calculated. The outcome had to be reasonable in light of the tariff process and the range of users and periods to which a tariff applied. [26]
This did not mean that any charge would qualify. French J identified an outer limit: a fee so disproportionate to, or so disconnected from, any concept of cost of supply could lack the required reasonable relationship. [27] But the statutory test allowed a range of considerations, including average costing and cross-subsidisation. [27]
The evidence about average cost then applied the construction to the case. The agreed average cost per unit exceeded the fee applicable to Phosphate. The Court concluded that the fee met the relevant statutory condition and that actual individual supply costs did not need to be established. [18], [30] Since the discovery request was directed to those individual costs, and the defence did not plead that the Administrator had calculated the fee by reference to actual costs, the Court found no properly joined issue justifying that discovery. [31]
The judgment describes the legal position under the version of s 4 in force when the Administrator made the 1999 determination. Under that version, s 4(2)(b) set two alternative conditions: the fee had to bear a reasonable relationship to supply cost, or be less than supply cost. [13], [23] The Court treated this condition as protective of users, while emphasising that its terms did not express a precise calculation method. [23], [26]
For this version of the Ordinance, Phosphate Resources explained that the statutory test did not necessarily require individual cost accounting. It treated a tariff as capable of being assessed by reference to average costs and permitted a reasonable range of approaches to cost allocation, including arrangements that resulted in cross-subsidisation. [24]-[27] The case therefore concerned how to interpret the statutory condition, not a general rule that all tariffs based on averages must be valid.
The judgment also records a legislative change. The Utilities and Services Amendment Ordinance 2001 replaced the earlier s 4(1) and (2) with a new scheme. The amended provision made the fee the Administrator determined and notified in the Gazette, or, if no determination was made, the fee or charge applicable under an applied law and notified in the Gazette. [14] French J observed that the constructional question in the case could not arise under the Ordinance as it then stood. [14]
The decision should therefore be read with attention to the statutory version being applied. The Court interpreted the earlier cost-based validity condition. It did not construe the amended provision as a general statement about cost recovery, nor did it decide what requirements might apply under other legislation or on other administrative-law grounds. The judgment itself leaves the possibility of other challenges open. [32]
At [21], French J says the cost criteria must be capable of applying across a range of utilities and services, and should allow flexibility in a multi-factorial administrative process. In plain English, a test written to cover electricity, housing, health care and education should not automatically be read as requiring one narrow accounting method suitable only for metered electricity.
At [24], the Court describes the determination as a prospective and ambulatory tariff, rather than an individual fee assessment for each customer. It also notes that different fees for different areas or circumstances were permitted, without an express rule that every difference must track a difference in supply costs. This explains why the Court considered broader policy choices and cross-subsidisation compatible with the statutory setting.
At [25], the Court rejects the proposition that “cost of supplying” necessarily means the actual cost for each particular user. The point is not that user-specific costs can never matter. It is that the statutory words, read in their context, do not make such calculations mandatory.
At [26], the Court states that actual costs need not be ascertained and that the provision does not require a particular formula. In plain English, the statutory question was not “Did the Administrator use the correct cost-accounting equation?” The question was whether the resulting fee had the required reasonable relationship to cost, taking account of the tariff scheme.
At [27], French J explains that average costs may include costs attributable to different classes of users and that one user may, in effect, subsidise another without automatically breaking the connection with costs. But the passage also recognises a limiting principle: a fee that is grossly disproportionate to or unconnected with supply costs may not have the required relationship.
At [30], the Court applies this reasoning to the agreed evidence. Because the average cost per unit exceeded the fee charged to Phosphate, French J considered the statutory condition satisfied. This was a conclusion about the issue and evidence before the Court, not a blanket approval of any tariff below an average-cost figure.
At [32], the Court makes clear that other grounds of challenge remained. In plain English, Phosphate lost the particular construction and discovery dispute, but the Court did not treat that as resolving every possible objection to the determination.
The reasoning is most directly relevant where legislation creates a prospective tariff for a utility or service, sets a cost-related condition for the fee, and applies across multiple classes of users or circumstances. The judgment specifically concerns the earlier version of s 4(2)(b) of the Christmas Island Ordinance. Its reasoning may be informative where statutory wording and scheme are materially similar, but the decision does not establish that identical principles apply under differently worded statutes.
The case is particularly relevant when a party argues that a tariff is invalid because it was not calculated using the actual cost of supplying the service to that individual customer. French J held that this was not a necessary construction of the provision considered. [25]-[26]
It is also relevant where the tariff uses average costs or allocates common costs across users. The judgment says those features do not, by themselves, remove a reasonable relationship to cost. [27] A party relying on the case would still need to confront the Court’s stated outer limit: a fee may fail the requirement if it is so disproportionate to, or unconnected with, any concept of supply cost that the relationship cannot reasonably be maintained. [27]
The case also bears on discovery disputes. Where discovery is sought solely to determine individual actual costs, but the statutory construction does not make those costs decisive and the pleadings do not put the Administrator’s actual cost calculations in issue, the judgment supports the view that such discovery may not be warranted. [31] Its procedural reasoning depends on the pleaded issues and the particular construction adopted; it is not a universal rule against cost-related discovery.
Finally, the judgment may be relevant when tariffs are adapted from another jurisdiction or system. French J said that using the Western Australian regional power tariff was not necessarily fatal, because sufficiently similar supply conditions might make it a proper and rational basis for the fee. [28] The Court did not decide that the conditions were, in fact, sufficiently similar. It said the source of the tariff did not itself establish invalidity under the statutory test.
The supplied judgment does not identify any later decisions applying, distinguishing, approving or rejecting Phosphate Resources. It contains no subsequent case history, and the materials provided do not support claims about how later courts have treated it.
Within this judgment, French J does refer to the amended version of s 4, but that is a legislative development rather than later judicial treatment. The 2001 amendment replaced the cost-based conditions at issue with a different mechanism for identifying the applicable fee. [14] French J observed that the particular constructional question could not arise under the amended text. [14]
Accordingly, the judgment provides an interpretation of the former statutory provision and a record of the subsequent statutory amendment, but no basis for describing the case’s later precedential reception. Any research account of later treatment would require subsequent judgments or other legal sources beyond this judgment.
The judgment expressly leaves open whether the 1999 determination could be challenged on other administrative-law grounds. [32] It does not identify or determine those grounds. It would therefore be inaccurate to treat the dismissal of the first four declarations as a final ruling on every aspect of the determination’s validity.
The Court did not decide whether the conditions of electricity supply on Christmas Island were sufficiently similar to those in regional Western Australia to make the borrowed tariff a proper and rational basis. It said that this might be so, and that the use of the Western Australian tariff would not itself be fatal. [28] The actual basis for the Administrator’s determination was also unknown to the Court. [28]-[29]
The judgment identifies a limit to the reasonable-relationship test but does not specify a numerical threshold for disproportionality. It says only that there may be a fee so disproportionate to, or unconnected with, any concept of supply cost that it lacks the required relationship. [27] The precise point at which that occurs would depend on the statutory context and evidence in a later case.
The Court also did not decide all possible questions about how common costs may be allocated among users. It held that the Ordinance did not require the individual-cost construction advanced by Phosphate and that average costs and cross-subsidisation could be compatible with a reasonable relationship. [25]-[27] It did not prescribe a particular accounting method, allocation rule or evidentiary test for future determinations.
Finally, the judgment’s construction depended on the earlier wording of s 4(2)(b). The 2001 amendment changed the statutory scheme, and the Court stated that this constructional question could not arise under the amended text. [14] The decision should therefore be used with care where a later dispute concerns different statutory language.
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REASONS FOR JUDGMENT Introduction 1 One of the statutory responsibilities of the Administrator of the Christmas Island Territory is the supply of various utilities and services on the Island including water, gas and electricity. The Administrator is also required to determine the fees to be charged to the users of those utilities and services. In 1999, it was a requirement of the Utilities and Services Ordinance 1996 that the fees imposed bore a reasonable relationship to the cost of supply of the utilities and services to persons liable to pay the fee and, alternatively, that the fees were less than the cost of supply. 2 Phosphate Resources Limited ("Phosphate"), which operates a mine on Christmas Island, says that electricity charges raised against it for 1999 and 2000 do not meet either of these alternative requirements. It claims a declaration that the determination of the fees, upon which the charges to it were based, was invalid. As an interlocutory measure it has sought extensive discovery going to the costs of supplying electricity in the Territory. The question whether such discovery should be ordered depends ultimately upon the construction of the Ordinance. In particular it depends upon whether it is necessary in deciding upon the validity of the determination, to know what were the actual costs of supply to the relevant users in the period for which charges based upon that determination were raised. 3 For the reasons which follow I have concluded that it is not necessary to ascertain the actual costs of supply of utilities or services to specific users. Declaratory relief directed to throw-up that question should be refused as should the discovery order which has been sought. Factual and Procedural History 4 Phosphate is a company incorporated in Western Australia which operates a mine site on Christmas Island. It is supplied with electricity for that purpose by the Christmas Island Power Authority ("the Authority") which is responsible for the generation, distribution and regulation of the supply of electricity in the Territory. The Authority is part of the administration of the Territory. The statutory responsibility for the supply of electricity and the fixing of charges to users is vested in the Administrator of the Territory pursuant to ss 3 and 4 of the Utilities and Services Ordinance 1996. 5 Pursuant to s 4 of the Ordinance the Administrator made a determination for the supply of electricity which was published in the Government Gazette of the Territory on 22 September 1999. On 27 July 2001, Phosphate filed an application in this Court naming the Commonwealth and the Administrator as respondents. The application was made pursuant to s 39B(1) and (1A)(c) of the Judiciary Act 1903 (Cth). Phosphate sought a declaration that the determination of 22 September 1999 was invalid and an order that mandamus issue to the Administrator requiring him to determine a fee in accordance with s 4 of the Ordinance. 6 A substituted application filed on 10 October 2002 seeks a variety of declarations relating to the proper construction of the Ordinance. At the heart of the application is the contention that the Ordinance, as it stood when the determination was made, required, as a condition of validity of the determination, that the fee charged had a "reasonable relationship" to the cost of supplying electricity to a person liable to pay the fee. The fee charged to Phosphate was said not to bear the requisite relationship to the cost of supply. In particular it is said that the fees charged were based upon the fees for electricity supplied by a regional power system under the Electricity Corporation (Charges) By-Laws 1996 (WA). 7 The application and the statement of claim were the subjects of a strike out motion which was dismissed on 20 September 2001. Orders were made at that time for discovery by agreed categories. An amended application and amended statement of claim were filed, by consent on the following day. A defence was filed on 28 September. Directions were given on 3 December giving leave to further amend the application and the statement of claim. The matter was listed for trial from 8-11 April 2002. However, on 26 March 2002, because of an ongoing dispute as to the scope of discovery, the trial dates were vacated by consent by Lee J and further orders made in relation to discovery. Directions were given on 17 June 2002 for a conference of experts to try to resolve the discovery dispute. The dispute arose out of the applicant's contention that it was entitled to the discovery of documents relating to the cost of supplying electricity to persons in the Christmas Island Territory. On 16 July 2002, the respondents were required to give a summary of the categories of costs incurred in the operation of the Christmas Island power station between 1998 and 2000 inclusive and the total cost in each category. A summary was filed on 2 August 2002. On 21 August 2002, a consent order was made that the applicant's file and serve any request for the documents in each category stating their nature. A request was filed on 3 September 2002. 8 On 1 October 2002, an order was made requiring the applicant to formulate either a preliminary question or a claim for declaratory relief that might enable issues affecting the scope of discovery to be resolved. On 8 October 2002, orders were made including an order that: "The question whether the claims for the declarations sought in paragraphs 1 to 4 of the Substituted Application should be heard and determined separately and, if so, whether such relief should be granted be set down for hearing on 16 December 2002 at 10.15am." A direction was also given that the applicant file its motion for discovery in terms of the request filed on 3 September 2002 and that the motion be made returnable on 16 December 2002. The parties were required to file an agreed statement of facts. 9 A minute of a proposed preliminary question for determination was filed by the respondents in the following terms: "What is the proper method or formula to be used to calculate 'the cost of supplying a utility or service to a person liable to pay' within the meaning of section 4(2)(d) of the Utilities and Services Ordinance 1996 (CI)." 10 The applicant seeks to resolve the issues relevant to the scope of discovery which it seeks by seeking declarations in terms of declarations 1 to 4 in its substituted application. If successful, it seeks orders for discovery in terms of its notice of motion. The First Four Declarations Sought by the Applicant 11 The first four declarations sought by the applicant in its substituted application are: "1. A declaration against the First and Second Respondents that, for the purposes of section 4(2)(b) of the Utilities and Services Ordinance 1996 (Cl) (Ordinance), "the cost of supplying a utility or service to a person liable to pay" the fee imposed by section 4(1) of the Ordinance (Fee), means costs: (a) incurred by the Second Respondent in making provision for the supply and use of a utility or service; and
(b) which would not be incurred unless the utility or service was supplied to the particular person liable to pay the Fee, or which otherwise relate to the supply of the utility or service to that person. 2. A declaration against the First and Second Respondents that, for the purposes of section 4(2)(b) of the Ordinance, "the cost of supplying a utility or service to a person liable to pay" the Fee does not include costs incurred by the Second Respondent in making provision for the supply and use of a utility or service which: (a) relate to the supply of the utility or service to a person who is not liable to pay the Fee; or (b) do not relate to the supply of the utility or service to any particular person. 3. A declaration against the First and Second Respondents that, for the purposes of section 4(2)(b) of the Ordinance where the Fee is not less than the cost of supplying the utility or service to a person liable to pay the Fee, a "reasonable relationship" between the Fee and the cost of supplying a utility or service to a person liable to pay the Fee, will depend upon the extent to which the Fee is to recover the costs incurred by the Second Respondent: (a) in supplying a utility or service to a particular person liable to pay the Fee or which otherwise relate to the supply of the utility or service to that person; and (b) which do not relate to the supply of the utility or service to any particular person, but which may be reasonably allocated to the particular person liable to pay the Fee. 4. A declaration against the First and Second Respondents that, for the purposes of section 4(2)(b) of the Ordinance, where the Fee is not less than the cost of supplying the utility or service to the person liable to pay the Fee, there will not be a "reasonable relationship" between the Fee and the cost of supplying a utility or service to a person liable to pay the Fee, if the Fee also recovers costs incurred in supplying a utility or service to a person who is not liable to pay the Fee or which otherwise relate to the supply of the utility or service to such a person." The Discovery Sought by the Applicant 12 The scope of the discovery sought by the applicant appears from the orders sought in its motion of 10 October 2002: "(i) Any contract pursuant to which fuel was supplied for the purposes of generating electricity at the Christmas Island Power Station (Power Station) during the period between 22 September 1999 and 3 August 2001; (ii) Copies of all receipts for fuel supplied for the purposes of generating electricity at the Power Station during the period between 22 September 1999 and 3 August 2001;
(iii) A pay-roll list for each month of all persons employed at the Power Station during the period between 22 September 1999 and 3 August 2001;
(iv) A duty statement, job description form or like document for each person employed at the Power Station during the period between 22 September 1999 and 3 August 2001;
(v) An asset register, depreciation schedule or other like document recording the depreciation for each asset used in the Power Station during the period between 22 September 1999 and 3 August 2001;
(vi) All documents, including but not limited to technical plans, drawings, specifications, manuals and operating procedures, relating to:
(b) the design and capacity of the electricity transmission and distribution network on Christmas Island;
to the extent that such documents are necessary for a qualified electrical engineer to understand the operations of the Power Station and the distribution of power from the Power Station during the period between 22 September 1999 and 3 August 2001. (vii) In relation to the period between 22 September 1999 and 3 August 2001, such documents as are necessary to show, or to allow a qualified electrical engineer to determine: (a) the total number of electricity users on Christmas Island; (b) the Applicant's maximum demand for power from the Power Station in the shortest intervals for which such information is available (eg on a 15 minute cycle); (c) the maximum demand for power from the Power Station by each of the other electricity users, in the shortest intervals for which such information is available." Statutory Framework - The Utilities and Services Ordinance 1996 13 The Utilities and Services Ordinance 1996 confers upon the Administrator responsibility for the supply of utilities and services. Section 3 of the Ordinance provides: "The Administrator may make provision for the supply and use of any of the following utilities and services: (a) water; (b) electricity; (c) gas; (d) drainage and sewerage; (e) refuse removal; (f) public transport; (g) community health care; (h) education; (i) community housing; (j) marine traffic facilities; (k) marine harbour facilities; (l) airport facilities." At the relevant time s 4, which provides for the imposition of fees, was in the following terms: "4(1) There is imposed on a person a fee in relation to: (a) the provision, by the Administrator, of a utility to the person; or (b) the use, by the person, of a service provided by the Administrator; being the fee determined by the Administrator, from time to time, to be the fee applicable to the utility or service. (2) A determination is of no effect in relation to any particular fee unless: (a) notice of the fee is published in the Gazette; and (b) the fee bears a reasonable relationship to the cost of supplying the utility or service to a person liable to pay the fee, or is less than the cost of supplying the utility or service to the person. (3) A determination may, in relation to a utility or service that is supplied in different localities or in different circumstances, fix different fees. (4) The amount of a fee is a debt due to the Commonwealth. (5) A notice under subsection 4(2) must specify a date, not being a date earlier than the date of publication of the notice, as the date on which the fee commences to apply, and may: (a) specify the manner in which a fee is to be paid; and (b) specify a date or period before the end of which a fee must be paid." 14 The Utilities and Services Ordinance 1996 was amended by the Utilities and Services Amendment Ordinance 2001 (No 1) which substituted for the existing s 4(1) and (2) a new s 4(1), (2) and (2A) which reads as follows: "4(1) There is imposed on a person a fee in relation to: (a) the provision, by the Administrator, of a utility to the person; or (b) the use, by the person, of a service provided by the Administrator. (2) The fee is: (a) the fee that is: (i) determined by the Administrator, from time to time, to be the fee applicable to the utility or service; and (ii) notified in the Gazette; or (b) if no determination is made under subparagraph (a)(i) in respect of the utility or service, the fee or charge (if any) that is: (i) applicable to the utility or service under an applied law; and (ii) notified in the Gazette. (2A) A determination must specify the date on which the fee commences to apply, and may specify: (a) the manner in which the fee is to be paid; and (b) a date or period before the end of which the fee must be paid." The constructional question that has arisen in this case could not arise under the Ordinance as it now stands. The Electricity Fees Determination No 1 of 1999 15 The relevant determination is the Electricity Fees Determination No 1 of 1999 as published in the Government Gazette of the Territory of Christmas Island on 22 September 1999. Clauses 1 and 2 deal with the citation and commencement of the determination. Clause 3 provides: "3(1) The fees for the connection of electricity supply, the supply of electricity and ancillary purposes are set out in the Schedule." Clause 3(2) contains definitions, none of which is relevant for present purposes. Clauses 4 to 6 inclusive deal with eligibility for particular tariffs which are not material. Clause 7 fixes the period for payment of the fees and clause 8 the consequences of non-payment. Clause 9 is concerned with rebates and reduced fees. 16 Item 1 of the Schedule to the Determination concerns fees for connection and disconnection of electricity supplied and Item 2 relates to meter testing fees. Item 3 sets out fees for the supply of electricity. It is an agreed fact that the particular fee in the Determination which applied to Phosphate was that contained in Item 3.1 of the Schedule. That was the tariff for General Supply (commercial) (Low /Medium voltage - L2). It was expressed thus in the Determination: "3.1 The tariff for General Supply (commercial)( Low/Medium voltage - L2) is: A fixed charge at the rate of 24.31 cents per day Metered consumption at the rate of 15.98 cents per unit for the first 822 units per day 20 cents per unit per day for units exceeding 822." This tariff imposed fees identical to those charged under the Tariff for Regional Power Systems designated Tariff L2 and entitled "General Supply Low/Medium Voltage" applicable in Western Australia in 1999. The fees chargeable for regional power systems in Western Australia were set out in the Electricity Corporation (Charges) By-Laws 1996 made pursuant to the Energy Corporations (Powers) Act 1979 (WA) and amended by the Electricity Corporation (Charges) Amendment By-Laws (No 2) 1998. Supply and Charges Incurred 17 It is agreed between the parties that Phosphate was supplied with electricity by the Administrator between 11 October 1999 and 11 February 2000. As appears from admissions in the pleadings, Phosphate received accounts for electricity supplied in the period which amounted to $447,031.20. Of this sum it paid $333,733.90 in satisfaction of the amount claimed. Proceedings have been commenced in the District Court in the name of the Commonwealth to recover the difference, being the amount of $113,297.30 together with interest. The fee applicable to Phosphate under the 1999 Determination was 24.1 cents per day plus 15.98 cents per unit for the first 822-kilowatt hours and 20 cents per unit thereafter. 18 It is an agreed fact that between 1 July 1999 and 30 June 2000 the Authority: (a) incurred total expenses of $5,156,624; (b) generated 20,127,620 units of electricity (each unit being 1 kilowatt/hour) It follows and is agreed on that basis that the average cost of each unit generated by the Authority in this period was $0.2562. This represented the total expenses divided by the number of units generated. The average cost per unit of electricity generated by the Authority over that period being $0.2562 exceeded the fee applicable to Phosphate if Phosphate used more than 2.5218 units per day. Phosphate, it was said, used more than that number of units of electricity per day on each day between 1 July 1999 and 30 June 2000. The average cost of each unit was therefore less than the fee charged to Phosphate in the relevant period. The Applicant's Contentions 19 The constructional questions thrown up by the applicant's submissions may be summarised thus: 1. Whether the "costs of supplying the utility or service to a person" referred to in s4(2)(b) of the Ordinance refers to the actual cost of supplying a utility or service to the particular person charged and excludes the costs of supplying to other users and general overheads. 2. Whether the "reasonable relationship" to costs referred to in s 4(2)(b) requires that the fee charged for the utility or service be based upon the actual cost of its supply to that person plus a reasonable proportion of the general overhead costs of supplying the electricity excluding any element of the costs of supply to another person. Counsel for Phosphate submitted that the fee charged to a user may recover all direct and indirect costs fairly attributable to supplying that particular user but may not recover any costs fairly attributable to supplying another user. The Construction of the Utilities and Services Ordinance 20 The Ordinance, as a statutory instrument, is to be construed according to the established rules of statutory interpretation. These take as their starting point the meaning of the words of the Ordinance read in context. Where more than one construction is open that which advances the legislative purpose is to be preferred. 21 As appears from s 3 the Ordinance is concerned with the supply and use of a wide variety of utilities and services. It is necessary in considering the fee setting provision, s 4, to bear in mind that it provides for the imposition of fees right across that range of utilities and services. The supply of water, gas and electricity to consumers can be measured relatively easily by reference to units of volume and energy respectively. The supply of other services referred to in s 3 may not so readily be calculated. The alternative criteria which appear in s 4(2)(b) must therefore be capable of application to the variety of utilities and services contemplated in s 3. To the extent that their language allows they should be construed to permit flexibility of application in a multi-factorial or polycentric and, in my opinion, largely non-justiciable administrative decision making process. 22 Whenever the Administrator provides a utility or service to a person there is imposed upon the person by s 4(1) a liability to pay a fee in relation to that utility or service. The liability is further defined by s 4(4) which makes the "amount of a fee" a debt due and payable to the Commonwealth. The fee imposed is "the fee determined by the Administrator, from time to time, to be the fee applicable to the utility or service". The word "fee" seems to be used in two different senses in s 4. The first refers to the tariff determined by the Administrator. The second refers to the charge actually levied upon a person to whom the relevant utility or service is provided. The conflation of these two ideas imbues s 4 with a degree of conceptual confusion which does not assist in its construction. 23 Section 4(2) sets out conditions of the validity of the Administrator's Determination. The first such condition is publication of a notice of the fee in the gazette - a procedural requirement. The second is that: "the fee bears a reasonable relationship to the cost of supplying the utility or service to a person liable to pay the fee, or is less than the cost of supplying the utility or service to the person." This necessary condition is an expression of two alternative conditions either one of which must be satisfied for the Determination to be effective. Section 4(2) is, in a broad sense, protective of users. It constrains the power of the Administrator in making a fee determination by requiring notice to be given of his or her determination and by setting limits, not expressed with precision, upon the fees which may be fixed. The alternative conditions to s 4(2)(b) are not, as a matter of strict logic, mutually exclusive. But the natural sense of the paragraph and its protective purpose suggest they should be so read. So where a fee is less than the cost of supplying the utility or service that fact is sufficient to satisfy the protective requirement in s 4(2). Where a fee exceeds that cost it must bear "… a reasonable relationship" to it. 24 It is plain from the terms of the Ordinance that the Administrator is not required to make and notify individual fee determinations for individual users. The notice requirement and the necessity to prescribe its date of commencement indicate that the fee determination is prospective and ambulatory. It is a tariff. The determination may fix different fees or tariffs for different localities and different communities. These variations are not in terms required to reflect differences in the cost of supplying different locations or supplying under different circumstances. It may be, for example, that a welfare or like public policy objective would inform a determination for one area that is effectively cross-subsidised by other users. 25 The "cost of supplying the utility or service to a person liable to pay the fee" is a defining element of the constraint upon the tariff fixing function defined by s 4(2)(b). In the context in which it appears, which relates to the fixing of a tariff, this cannot be read as a reference to the cost of supplying the service to each particular user even if that were capable of calculation. The very nature of some of the utilities and services to which s 4(2) applies suggests that such individual calculation is simply not possible without discretionary or evaluative elements of cost allocation. The application of s 4 to services such as public transport, community health care, education and community housing illustrates the point. 26 Let it be assumed, on the other hand, that there is a precise measure of the "cost of supply" applicable to each of the utilities and services referred to in s 3 which, in theory, would allow the actual cost of supply to an individual user to be calculated. The terms of s 4(2)(b) do not require that actual cost to be ascertained. It is sufficient to establish either that the fee charged bears a reasonable relationship to it or that it is less than the cost. The requirement of a reasonable relationship to the cost of supply does not simply define some permissible range of charges above a theoretically ascertainable figure. It is sufficient that the relationship between the fee as determined and the cost of supply is reasonable having regard to the nature of the determination process and the range of cases to which it must apply both between different users and at different times for the same use. The "reasonable relationship" does not impose a requirement to adopt any formula for calculation of the fee provided the outcome can said to be reasonable having regard to the cost. This leaves little scope for challenging the quantum of the determination. The variety of ways in which a fee might be supported as falling into a "reasonable relationship" to the cost of supply reflects the discretionary and polycentric character of the determination process. 27 If a fee were to be set by reference to the average cost of the units of the utility supplied, such a fee would not be open to attack as lacking "a reasonable relationship" to the cost of supplying the relevant utility to a person liable to pay the fee. The importation into such a formula of costs attributable to different classes of users does not rob the resultant fee of the attribute that it bears a reasonable relationship to costs. The fact that, on a fee charged by reference to averaged costs, one user may, in effect, be cross-subsidising others does not place the fee in other than a reasonable relationship to costs. For what is reasonable may encompass a wide range of considerations. At the limits there will be a test of proportionality implied by use of the word "reasonable". That is to say, there may be a fee determined which is so disproportionate to, or so unconnected with, any concept of cost of supply that it can be said to lack the requisite reasonable relationship. 28 In the present case the basis of the Administrator's determination is not known, although it appears that at least, in respect of the fee applicable to Phosphate, the relevant tariff has been taken from that imposed on general users of low to medium voltages in regional power systems in Western Australia. That would not be fatal to validity under s 4(2)(b) of the Ordinance. It may well be the case that sufficient similarities exist between the conditions of supply to users in Christmas Island and in regional Western Australia that this is a proper and rational basis upon which to determine the applicable fee. 29 In the end however it is not necessary, for the purpose of determining whether the conditions imposed by s 4(2)(b) are satisfied, that the Court ascertain the actual basis of the determination of the fees adopted by the Administrator. It is sufficient that they bear a "reasonable relationship" to the cost of supply. It is conceivable that a fee fixed by some random process might in some cases satisfy that condition albeit the determination might be reviewable on other grounds. 30 In this case it is common ground that the fee fixed in relation to Phosphate was less than the average cost to the Authority of providing the electricity used by Phosphate. A fee calculated according to the average cost would have had a reasonable relationship to cost. In my opinion it cannot be said that the fee actually charged to Phosphate, whatever the basis of its calculation, failed to meet the first of the alternative necessary conditions in s 4(2)(b) of the Ordinance. It is not necessary, in reaching that conclusion, to ascertain, on any basis, the actual cost of supply of the relevant utility to the user on whom the fee is imposed. It is sufficient that the fee bears a reasonable relationship to the cost which criterion is met if the fee is less than the average cost of supplying that utility. It follows that I am not prepared to make any of the declarations sought by Phosphate which depend upon constructions of the section inconsistent with that approach. 31 The discovery orders sought all go to ascertaining the actual cost of the supply of electricity to Phosphate. Given my conclusions and the absence of any contention in the defence that the Administrator calculated the fee by reference to the actual cost of supply, there is no issue properly joined in the pleadings which would warrant the orders sought in any event. 32 This does not mean that the application fails in so far as it seeks to challenge the determination on other administrative law grounds.
Conclusion 33 For the preceding reasons, I will dismiss the application in relation to the first four claims for declaratory relief and also dismiss the motion for discovery. I certify that the preceding thirty three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.
Associate: Dated: 13 May 2003 Counsel for the Applicant: Mr MH Zilko SC and Mr JA Thomson
Counsel for the Respondents: Mr AA Jenshel Solicitor for the Respondents: Australian Government Solicitor
Phosphate Resources Ltd
The Commonwealth
The substituted application was dismissed in respect of paragraphs 1 to 4 of the claims for relief, and the applicant’s discovery motion was dismissed; the applicant was ordered to pay the respondents’ costs of that motion, other costs were reserved, and the application was listed for directions on 3 June 2003.