Administrative Law - observations on the proper position to be adopted by a tribunal in proceedings for judicial review of one of its decisions.

Administrative Decisions (Judicial Review) Act 1977

Broadcasting and Television Amendment Act 1985

Broadcasting Legislation Amendment Act 1988

The Queen v Australian Broadcasting Tribunal; Ex parte Hardiman [1980] HCA 13; (1980) 144 CLR 13

Fagan v The Crimes Compensation Tribunal [1982] HCA 49; (1982) 150 CLR 666

the First Appellant: L.T. Grey instructed by

the Australian Government

Solicitor.

Solicitor for J. Griffiths of Messrs.

the Second Appellant: Blake Dawson Waldron.

Counsel and Solicitors for K.R. Handley Q.C. and

the Respondent: J. Gleeson instructed by

Messrs. Minter Ellison.

The respondent pay the costs of the first appellant, Australian Broadcasting Tribunal, of the appeal and of the hearing at first instance; otherwise there be no order as to costs.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

On 16 May 1989, a Judge of this Court (Sheppard J.) ordered that the decision of the Australian Broadcasting Tribunal ("the ABT"), dated 10 August 1988, to grant a commercial FM radio licence to Gosford Communications Limited ("GCL"), be set side and that the matter be referred back to the ABT for further consideration. These orders were made in proceedings for review under the Administrative Decisions (Judicial Review) Act 1977 ("the ADJR Act") instituted against the ABT and GCL by Wesgo Communications Pty. Limited ("Wesgo").

2. On 10 August 1988, the ABT had delivered its report upon an inquiry into the grant of a commercial FM radio licence pursuant to the Broadcasting Act 1942 ("the Broadcasting Act") to serve the Gosford-Wyong area in New South Wales. The ABT's decision was to grant a commercial FM radio licence to GCL for a period of five years from a date to be determined. There is one existing radio licence granted pursuant to the Broadcasting Act in respect of the Gosford-Wyong area, namely, an AM licence held by Wesgo which operates the licence under the call sign 2GO. The Gosford-Wyong area is closely settled and is served by both AM and FM radio stations broadcasting from Sydney and Newcastle as well as by the Wesgo station 2GO. (In some passages in these reasons we use "2GO" to identify the service provided pursuant to the 2GO licence.)

3. Nine applications had been received, including that by GCL. GCL submitted to the ABT that no licence should be granted. For reasons not here material, two of the applicants fell away, and of those remaining, GCL was successful.

4. Wesgo is the respondent in the present appeal which is brought by the ABT and GCL. The appeal is brought from that part of the reasons of the learned primary judge in which he held that the ABT had erred in law in its application of sub-para. 83 (6) (c) (iii) of the Broadcasting Act. The matter is one of statutory construction. It is to be decided with regard to that statute in the form it took before the substantial amendments made by the Broadcasting Legislation Amendment Act 1988. Wesgo unsuccessfully submitted to his Honour that the ABT had fallen into error in other respects. On the present appeal, Wesgo contends that the decision of Sheppard J. should be upheld on one of the grounds upon which it was unsuccessful at first instance; Wesgo submits that it should be held that the ABT failed to take into account depreciation in the assessment of the future "commercial viability" of Wesgo.

5. When the appeal was called on for hearing, the solicitor for GCL, whilst seeking to protect his client's position as to costs, indicated to the Court that counsel for the ABT would have the carriage of the presentation of the argument in support of the appeal. The Court excused the solicitor for GCL from further attendance. As the argument then developed in the submissions of counsel for the ABT and Wesgo, reference was made to a well-known passage in the joint judgment of the High Court on the return of the order nisi for mandamus and prohibition in The Queen v Australian Broadcasting Tribunal; Ex parte Hardiman [1980] HCA 13; (1980) 144 CLR 13 at 35-36; see also the observations of Brennan J. in Fagan v The Crimes Compensation Tribunal [1982] HCA 49; (1982) 150 CLR 666 at 681-682. What is said in those cases as to the proper position to be adopted by a body such as the ABT in proceedings for judicial review of one of its decisions must apply at least as strongly to a case such as the present. This is not a proceeding in the original jurisdiction of the Court, but an appeal in the true sense from a final decision of this Court upon an application for judicial review. In Hardiman's Case, supra, the High Court said that the presentation before it of a case by a tribunal should be regarded as exceptional and that it should "in general, be limited to submissions going to the powers and procedures of the Tribunal". However, in our view, there is substance in the contention by counsel for the ABT that the submissions it presented upon the present appeal were appropriately put, because, at least in large measure, they went to the powers and procedures of the ABT. There were no disputed primary facts.

6. We turn to consider the principal relevant provisions of the Broadcasting Act. A commercial licence shall not be granted except to a company formed within the limits of the Commonwealth or a Territory and having a share capital: sub-s. 81 (3). The ABT may grant a licence upon such conditions, and in accordance with such form, as it determines: sub-s. 81 (1). Every licence granted under the Broadcasting Act shall be subject to the provisions of the Act and those provisions are deemed incorporated in the licence as terms and conditions of the licence: s. 129. In determining the conditions upon which a licence is to be granted, the ABT "shall have due regard to the need for the commercial viability of the broadcasting services provided pursuant to other licences having service areas that overlap the service area of the licence": sub-s. 81 (2). This provision is of some significance in construing sub-para. 83 (6) (c) (iii), the terms of which we set out hereafter.

7. The proposed licence in question was not a "remote licence" within the meaning of the Broadcasting Act. This is of importance only to appreciate the terms of the central provision involved in this litigation, sub-s. 83 (6). So far as is relevant, this provides (with emphasis supplied):

"83.(6) The Tribunal shall not refuse to grant a

licence to a person unless -

(a) the person has failed to give

an undertaking in accordance

with sub-section (5);

(b) the Tribunal is satisfied that the

grant of the licence would be contrary

to a provision of this Act;

(c) in the case of a licence other than

a remote licence - it appears to

the Tribunal, having regard only

to the following matters or

circumstances, that it is advisable

in the public interest to refuse to

grant the licence to the person:

(i) it is not satisfied that

the person -

(A) is a fit and proper person

to hold the licence;

(B) has the financial, technical

and management capabilities

necessary to provide an adequate

and comprehensive service pursuant

to the licence or, in the case of

a re-broadcasting licence or a

re-transmission licence, to provide

the service to which the licence

relates; and

(C) is otherwise capable of complying

with the conditions of the licence;

(ii) where -

(A) the licence is a commercial

licence whose service area

is not a metropolitan service

area; and

(B) the service area of the licence

overlaps the service area of

one or more licences of a kind

to which sub-sub-paragraph (A) applies,

the need to avoid undue concentration of

influence, whether direct or indirect, on

the person and on the company or companies

holding the other licence or licences;

(iii) where the service area of the licence

overlaps the service area of another

licence or other licences - the need for

the commercial viability of the service

or services provided pursuant to the

other licence or other licences;

(d) it appears to the Tribunal that a licence of

the kind contemplated by the matters (other

than the outline of the technical conditions

proposed to be included in the licence

warrant) set out in a notice under paragraph

82 (1) (a) or 82A (4) (1) should not be granted."

8. Sub-section 4 (4) of the Broadcasting Act provides that for the purposes of that statute, "an area shall be taken to overlap another area if the first-mentioned area is wholly or partly co-extensive with, or is within, the other area". The expression "service area" is relevantly defined in sub-s. 4 (1) as meaning "the area to be served pursuant to the licence". The expression "service" is not the subject of any separate definition, although it is a term used in a number of provisions of the Act. Two of these require further mention. Sub-section 83 (5) provides as follows:

"83. (5) An applicant for the grant of a

licence shall, before the licence is

granted, give an undertaking in

writing to the Tribunal that he will,

if the licence is granted to him -

(a) comply with the conditions of

the licence; and

(b) in the case of a licence other

than a re-broadcasting licence

or a re-transmission licence -

(i) provide an adequate and

comprehensive service

pursuant to the licence; and

(ii) encourage the provision

of programs wholly or

substantially produced

in Australia and use,

and encourage the use

of, Australian creative

resources in and in

connection with the

provision of programs."

The expression "an adequate and comprehensive service pursuant to the licence" has to be read with sub-s. 4 (6). This provides:

"4. (6) A reference in this Act (other than

section 18A) to the provision by a

licensee of an adequate and

comprehensive service pursuant to a

licence shall be read as a reference

to the provision by the licensee of

an adequate and comprehensive

service, having regard to -

(a) the technical conditions of

the licence warrant;

(b) the requirements of this Act

and the regulations;

(c) the nature of the community to

be served pursuant to the licence;

(d) the diversity of the interests

of that community; and

(e) the nature of any other broad-

casting services (including

broadcasting services provided

by (the Australian Broadcasting

Corporation) or (the Special

Broadcasting Service)) having

service areas that overlap the

service area of the licence."

9. Section 123 contains complex provisions as to the keeping of accounts. It is sufficient for present purposes to set out the text of sub-s. 123 (1):

"123. (1) The holder of a licence (other than a

re-broadcasting licence or a

re-transmission licence) shall -

(a) compile and maintain, in a

recognized business or

commercial form, financial

accounts in respect of the

service provided pursuant to

the licence;

(b) make those accounts available for

inspection by the Tribunal or an

authorized officer as required;

(c) furnish to the Tribunal,

within 6 months after 30 June

in each year -

(i) an audited balance-

sheet and profit and

loss account in respect

of the service provided

pursuant to the

licence, in a form

approved by the

Tribunal, for the year

ending on that 30 June;

and

(ii) a statutory declaration

stating the gross

earnings in respect of

the licence during that

year; and

(d) keep such records in respect

of the service provided

pursuant to the licence as the

Tribunal from time to time

directs and supply copies of

those records to the Tribunal

as required."

We draw attention to the use in sub-s. 123 (1) of the expression "the service provided pursuant to the licence".

10. The service area of the licence which the ABT proposed to grant to GCL overlapped the service area of the licence held by Wesgo. Accordingly, sub-para. 83 (6) (c) (iii) of the Broadcasting Act provided that the ABT should not refuse to grant the licence to GCL, inter alia, unless it appeared to the ABT that it was advisable in the public interest to refuse to grant the licence having regard to the need for the commercial viability of the service provided pursuant to the licence held by Wesgo.

11. Wesgo succeeded in its submission to his Honour that the ABT failed to consider the need for the commercial viability of the service provided by Wesgo and erred by considering not the commercial viability of the service, but the commercial viability of Wesgo itself, irrespective of the service it provided pursuant to the licence for 2GO.

12. In its report, the ABT repeated what had been said in an earlier report in another matter. The reasoning in the passage quoted by the ABT was attacked by Wesgo. The passage included the following:

"Section 83 (6) (c) (iii) of the Act does

not require the Tribunal to interpret

this provision in such a way that it acts

as a bar to further entry, once any

station is established within a market.

If the evidence showed that the overall

level of service within a service area

would improve upon the grant of a

licence, there is a prima facie case for

the Tribunal to grant the licence.

Although the existing station might be

able to show that it would not be able to

provide as adequate and comprehensive a

service, nevertheless it is likely it

would still be providing an adequate and

comprehensive service, having regard to

the new station's service. It might be a

different service, but this does not make

it necessarily inadequate or not

comprehensive when judged in terms of the

Act. This would accord with the tribunal's

primary duty to act in the public interest."

The ABT considered certain financial evidence and concluded that "the commercial viability of both stations is reasonably assured".

13. In his judgment, Sheppard J. set out as follows the successful submission of Wesgo:

"What (Wesgo) submitted was that, in

order properly to apply what the relevant

part of s. 83 required, one needed to

consider the service which was in fact

being provided by the broadcaster in

existence at the time that the decision

was made and determine whether it was

advisable in the public interest to

refuse to grant a new licence, having

regard to the need for the service which

the existing broadcaster was providing.

In other words, what (the ABT) was

required to concentrate on was the likely

effect of the new or additional licence

on the viability of the existing service,

that is, of (Wesgo) on the basis that it

continued to provide that service. It

was not correct for (the ABT) to

concentrate on the continued commercial

existence of the existing broadcaster,

irrespective of the service it provided.

To put it another way, the question was

whether the existing broadcaster would

remain a commercially viable undertaking

if it went on providing the service after

the new licence was granted as it was

providing before that occurred.

In the submission of counsel for (Wesgo),

it was abundantly clear from the way in

which (the ABT) approached the matter

that it at no time turned its mind to the

correct question. It looked at the

matter only from the point of view of the

commercial viability of the company which

operated the service and concluded that

the company would remain viable, but only

if it changed the nature of its

operations to accommodate the sub-

stantially reduced revenue which it would

receive as a consequence of having to

share the total available revenue with

the new station. (The ABT's) extensive

reference to earlier decisions all made

under earlier legislation coupled with

its failure to turn its attention to the

expression, 'commercial viability of the

service', demonstrated, in counsel's

submission, that (the ABT) both took an

irrelevant consideration into account and

failed to take a relevant consideration into

account. The irrelevant consideration

was the commercial viability of the

station and the relevant consideration

was the commercial viability of the

service."

Later in his reasons for judgment, his Honour said:

"(N)otwithstanding my readiness not to

read (the ABT's) decision otherwise than

constructively and certainly not to read

it with any hypercritical eye for error,

there are problems about the substance of

the way in which the Tribunal arrived at

its decision. Sub-paragraph 83 (6) (c)

(iii) required (the ABT), not only to

determine whether the existing service

would be commercially viable if an

additional licence for the area were

granted; that was but one part of the

question which the sub-paragraph raised

for its consideration. What it was

obliged to do was to ask itself whether

it was satisfied that it was advisable in

the public interest to refuse to grant a

new licence, having regard to the need

for the commercial viability of the

existing service. It could take the

view, if the facts of a given case

suggested it should, that there was no

need for the commercial viability of the

existing service. Or it could take the

view, although there was such a need, it

was not satisfied that it was advisable

in the public interest to refuse to grant

a new licence. In a given case these may

be difficult questions to answer. The problem

I have is that I cannot find them addressed

in what may be described as the decision-making

paragraphs of (the ABT's) reasons."

14. His Honour decided that the ABT had proceeded in its reasons on the footing that it was sufficient to conclude that Wesgo would remain commercially viable notwithstanding the impact of the competition which would come about when the new licensee began transmission; the circumstance that Wesgo might not be able to provide as adequate and comprehensive a service as before was treated as not being to the point, so long as the service which Wesgo did provide was sufficiently adequate and comprehensive to meet the requirements of the Act. His Honour then continued:

"In my opinion that was not the correct

way to approach the matter. What (the

ABT) was required to do was to look at

the matter as if the new licence were

granted, but the existing licensee, that

is, the applicant, continued to provide

the service it had provided when it was

the sole licensee for the area. (The

ABT) was required to ask itself whether

(Wesgo), providing that service, would

remain a commercially viable undertaking

once the new licensee began transmission.

If it would not, (the ABT) was required

to go to the next question, namely, the

need for that commercial viability to

continue. In other words, looking at the

matter from the point of view of the

public interest, was there a need for the

existing service to be maintained or was

the public interest sufficiently served

by a less comprehensive service which was

nevertheless adequate and comprehensive?

Even if (the ABT) determined that there was

a need for the existing service to continue,

it was still open to it to conclude that

a new licence should be granted because it

was not advisable in the public interest

to refuse to grant the licence."

15. His Honour concluded that, if the ABT had followed the correct course, its decision might have been the same or it might not have been; one could not say. It followed that his Honour upheld the submission of Wesgo on this issue, and ordered that the matter go back to the ABT to be heard and determined again.

The Construction of sub-s. 83 (6) of the Broadcasting Act

16. In our view, the ABT did not fall into error in the passage, quoted earlier in these reasons, in which it dealt with the correct construction of sub-para. 83 (6) (c) (iii) of the Broadcasting Act.

17. The central expression is "the need for the commercial viability of the service or services provided pursuant to the other licence or other licences". Before us, neither the ABT nor Wesgo contended for a construction which would involve a consideration of the commercial viability of the licensee company, seen as an entity conducting operations which might go beyond the provision of services pursuant to the licence in question.

18. Rather, the contention of the ABT was that what was involved was a consideration of the need for the commercial viability of the licensee company in respect of the service provided pursuant to the licence. In this regard, it will be recalled that s. 123 of the Broadcasting Act would oblige the holder of the licence in question to compile and maintain in a recognised business or commercial form financial accounts in respect of the service provided pursuant to the licence, and also to keep such records in respect of the service provided pursuant to the licence as the ABT from time to time directed.

19. On the other hand, it was submitted for Wesgo that what was involved was a consideration of the need for the commercial viability of a service by the continuation by the licensee of a service with the existing programming.

20. In our view, the submissions of counsel for the ABT should be accepted. The expression "the need for the commercial viability" of a service appears in several provisions of Part IIIB of the Broadcasting Act. It is to be found both in sub-s. 83 (6) and in sub-s. 81 (1). In s. 81, the ABT is concerned with the determination of conditions upon which a licence is to be granted or renewed; in s. 83, the ABT is concerned with the antecedent question of whether a licence should be granted at all. Thus, the ABT may decide that it is not advisable in the public interest to refuse to grant a licence, having regard to the need for the commercial viability of existing services, but, nevertheless, in determining the conditions upon which the new licence is to be granted, the ABT shall have regard to the need for commercial viability of the services in the area to be served by the new licence.

21. Again, during the currency of a licence, when dealing with variation and revocation of conditions or the imposition of new conditions, the ABT must have "due regard to the need for the commercial viability of the broadcasting services provided pursuant to other licences having service areas that overlap the service area of the licence": sub-s. 85 (2). As we have pointed out, the term "service area" is defined in sub-s. 4 (1), relevantly as meaning "the area to be served pursuant to the licence". Further, sub-s. 86 (11B) obliges the ABT, when dealing with applications for renewal of licences, to have regard to the need for commercial viability of the service provided pursuant to the existing licence. Finally, sub-s. 86A (4) obliges the ABT, when dealing with renewal of supplementary licences, to have due regard to the need for the commercial viability of broadcasting services provided pursuant to licences having services that overlap the service area of the licence in question.

22. As we have already indicated, it also has to be borne in mind that s. 123 of the Broadcasting Act obliges the holder of licences such as those involved in the present case, to compile and maintain financial accounts in respect of the service provided pursuant to the licence.

23. In our view, when in sub-s. 83 (6) the legislature directed the attention of the ABT to the need for the commercial viability of the service or services provided pursuant to other licences, it was dealing with a practical question which turned upon the financial feasibility of the operations conducted by the relevant licensee with respect to the relevant service. In one sense, it is true, as Wesgo emphasised, that the service comprises the programmes that are broadcast. But the provision of the service is both the object of the activities of the licensee, and at the same time an integral part of them, such that the programmes do not stand apart from the general conduct of the operations of the licensee pursuant to the licence. It is too limited a reading of the expression in sub-s. 83 (6) "the commercial viability of the service . . . provided pursuant to the other licence . . .", to treat it as referring merely to the programme material provided to the listening public in the service area.

24. An applicant for a grant of a licence is obliged by sub-s. 83 (5) to give an undertaking in writing to the ABT that if the licence is granted, it will provide an adequate and comprehensive service pursuant to the licence; that reference is to be read having regard, inter alia, to the nature of the community to be served pursuant to the licence, the diversity of the interests of that community, and the nature of any other broadcasting service with service areas that overlap the service area of the licence (sub-s. 4 (6)). In that setting, the term "service pursuant to the licence" may well involve questions going to the programme material provided to the listening public in the service area.

25. But sub-s. 83 (6) assumes the giving of such an undertaking as to the provision of an adequate and comprehensive service, and goes on to provide that the ABT shall not refuse to grant a licence unless it appears to it that it is advisable in the public interest to refuse a grant, having regard, inter alia, to the need for the commercial viability of the service or services provided pursuant to the other licence or other licences with service areas which overlap that of the applicant. It does not follow that the concepts attending the use of the expression "an adequate and comprehensive service pursuant to the licence" in sub-s. 83 (5), also provide a guide to the meaning of the expression "the need for the commercial viability of the service or services provided pursuant to the other licence or other licences" in sub-s. 83 (6). In this latter sub-section, attention is directed to the need for commercial viability. The programme material does not stand apart from the general conduct of the operations of the licensee. What is involved is a practical test designed to enable the ABT to look at the provision of the relevant service by a particular licensee, and to consider if it is commercially viable or not in the sense of financially sustainable. Merely to look at the programmes without regard to the person who broadcasts them, in our view, says nothing of any assistance as to the financial sustainability.

26. We have reached these conclusions upon a consideration of the Broadcasting Act as it stood at the relevant time, after the amendments effected by the Broadcasting and Television Amendment Act 1985. Before the amendment effected to s. 83 by this statute, the relevant expression read "the need for the commercial viability of that station" as distinct from "the commercial viability of the service . . . provided pursuant to the other licence . . .". The amending Act introduced the definition of "service area" to which we have earlier referred. Wesgo sought to gain some support by the adoption of the term "service" in lieu of "station". We accept the submission of the ABT that the amendment to sub-para. 83 (6) (c) (iii) was not designed to effect any relevant substantive change to the law; rather, it was a consequential amendment designed to adjust the terms of the Broadcasting Act, consequent upon the change of the basis of licensing from single "stations" (which referred to physical structures) to "service areas", that is to say, in relation to a licence, the area to be served pursuant to the licence.

27. It remains to consider Wesgo's submission that it should have been held by his Honour that the ABT wrongly had failed to take into account depreciation in the assessment of the future "viability" of 2GO.

28. Wesgo's submission on this matter was that, even if the ABT did not err in its general approach to the question of 2GO's commercial viability, it nevertheless took a mistaken view as to matters which necessarily needed to be considered in determining whether 2GO would, in fact, remain commercially viable after the grant of a new licence. The mistake was said to be the failure to take depreciation into account. It was submitted for Wesgo that, if the correct question was whether 2GO would remain commercially viable after the grant of a licence to GCL, it was wrong to omit depreciation from account in assessing the station's future commercial viability. To disregard depreciation, so it was submitted, was to disregard a relevant consideration.

29. In our opinion, his Honour was correct in finding that the ABT was not obliged, as a matter of law, to make an allowance for depreciation when assessing the future commercial viability of 2GO.

30. It is plain from the ABT's reasons that it did not ignore the fact that buildings, plant and equipment utilized in the business of providing a commercial radio service are subject to depreciation. The ABT drew a distinction between the profitability of a station (the term used by the ABT) and its commercial viability, observing that a station may be currently unprofitable but, nevertheless, commercially viable. It pointed out that shareholders and other investors in radio stations are likely to include in their decisions about maintaining or increasing their investments, not only the short-term level of likely profit, but also the prospects of appreciation in the value of the tangible assets and goodwill of the station. It also made the point that the question of the profitability of a station could not be considered in isolation from the eventual sale value of the licence and that it would be inconsistent with commercial reality to consider it in such isolation. It said that the reality is that broadcasting licences are valuable. It made assessments of the future profitability of 2GO on the assumption that it would be trading in competition with a new licensee. The assessments were made on two bases, one making no allowance for depreciation and the other making such an allowance. The ABT thought 2GO would remain profitable on both bases, albeit less profitable after making an allowance for depreciation.

31. It was submitted for Wesgo that such provision as the ABT did make for depreciation allowed only for depreciation based on historical cost of plant and equipment; and that such an allowance would not be sufficient to ensure the commercial viability of 2GO because, in an economy experiencing continuous inflation, mere recovery through depreciation of the historical cost of plant and equipment would not generate funds necessary for the replacement of such plant and equipment when it became worn out or obsolete. But his Honour pointed out that in practice the total cost of re-equipping a broadcasting station would be unlikely to come from a provision for depreciation. He said that the cost of replacement of any major item of plant or equipment would more likely come from the raising of share or loan capital than from a depreciation reserve, if only for the reason that the replacement cost would be likely to exceed the amount of any reserve.

32. It is impossible to say that the ABT erred in law in considering the extent, if any, to which an allowance for depreciation should have been made in the calculations which led it to conclude that Wesgo's service would remain commercially viable if a new licence were granted. The views which it expressed on the matter of depreciation were open to it and do not reflect any error of law. We agree with the primary Judge that the ABT was entitled, in making its assessment of the future commercial viability of 2GO, to determine for itself how it should go about its task. His Honour was of the opinion that so long as what the ABT did was capable of yielding a conclusion about commercial viability which was open on the evidence before it, this Court exercising the supervisory jurisdiction of the ADJR Act should not interfere. We share his Honour's opinion on this matter.

33. In the result the appeal should be allowed and the orders made by the primary judge should be set aside. The respondent should pay the costs of the appeal, and of the hearing at first instance.