Telstra Corporation Limited v The Commonwealth

Telstra Corporation Limited v The Commonwealth - [2008] HCA 7 - HCA 2008 case summary — Zoe

[22]

The telephone service could once be used only for transmitting sounds. Now, the PSTN and the local loops as part of that network can be used to carry not only telephone communications but also data communications including internet access services.
The local loops in issue in this matter are local loops that are used in two different ways. First, there are "unconditioned local loops" by means of which a supplier of telecommunications services provides services to the end‑user to whose premises the loop is connected. The loops are "unconditioned" in that the electrical characteristics of the loops are not changed by equipment located along the loop. Services using local loops in this way are referred to as "ULLS" ("unconditioned local loop services"). Secondly, there are local loops used for a high frequency unconditioned local loop line sharing service by which one supplier uses the low frequency or "voiceband" part of the frequency spectrum for a voiceband PSTN service to the end‑user's premises, but another supplier uses the high frequency ("non‑voiceband") part of the spectrum for high bandwidth carriage services to those premises. Services using local loops in this way are referred to as "LSS" ("line sharing services").
Both forms of use of local loops require physical connection of the local loop to other equipment of the relevant supplier of telecommunications services. If the local loops are used by a supplier other than Telstra, they are connected to that supplier's equipment. That connection is made in Telstra's local exchange and differs according to which form of use of the local loop is to be made. Telstra emphasised the physical disconnection of the local loop from Telstra's equipment, and its physical connection to the equipment of its competitor. Telstra pointed to these facts as showing that its property had been acquired and that Telstra was deprived of the use of its property for as long as the local loop remained connected to its competitor's equipment.
Before dealing with the legislative provisions and administrative acts that Telstra alleges give rise to acquisitions, it is important to describe some of the steps which preceded the enactment of the telecommunications access regime that is now provided for by Pt XIC of the Trade Practices Act (the part of that Act in which the impugned provisions, ss 152AL(3) and 152AR, appear). In particular, it is necessary to describe how the competitive provision of telecommunications services by Telstra in competition with other corporations has come about. These steps are necessary because they reveal that although it is right to say that Telstra bought and paid for the PSTN, and thus owns it, it has never had rights in respect of the assets of the PSTN of the nature or amplitude which its arguments assumed.

[23]

Before Federation, the telephone services that then existed in Australia were provided by the colonial governments. Section 69 of the Constitution provided for the transfer to the Commonwealth of the posts, telegraphs and telephone departments of the public service in each State and one of the heads of legislative power of the Parliament enumerated in s 51(v) is power to make laws with respect to "postal, telegraphic, telephonic, and other like services". From Federation until June 1976, the Commonwealth owned Australia's PSTN, and the Commonwealth operated that network through the Postmaster‑General's Department.
The Post and Telegraph Act 1901 (Cth) ("the 1901 Act") specified[1] a number of colonial statutes which ceased to apply to the postal and telegraphic services of the Commonwealth. Among them was The Post and Telegraph Act 1893 (WA), s 65 of which conferred an "exclusive privilege" upon the Postmaster‑General of that colony. This provision was adapted as s 80 of the 1901 Act which included in the subject‑matter of the exclusive privilege of the Commonwealth Postmaster‑General the erection and maintenance of telegraph lines and the transmission of telegraphic and telephonic communications.
The issues in this litigation arise against a legislative background of relaxation of the public monopoly position for which s 69 of the Constitution and the 1901 Act provided.
The 1901 Act was repealed in July 1975 by the Postal and Telecommunications Commissions (Transitional Provisions) Act 1975 (Cth) ("the Transitional Provisions Act")[2]. Pursuant to s 29 of the Transitional Provisions Act, the relevant Minister of State, the Postmaster‑General, transferred the assets constituting the PSTN, owned by the Commonwealth and "held or used in connection with, or arising from, the undertakings of the Postmaster‑General's Department", to the body then called the Australian Telecommunications Commission. The Australian Telecommunications Commission was established by s 4 of the Telecommunications Act 1975 (Cth) ("the 1975 Telecommunications Act"). It was established[3] as a body corporate but it was subject to ministerial direction[4].
Section 94 of the 1975 Telecommunications Act, in broad terms, provided that persons other than the Australian Telecommunications Commission were not to construct, maintain or operate telecommunications installations. Section 71 obliged the Commission to pay to the Commonwealth "at such times, and by such instalments, as the Treasurer from time to time determines" the difference between the amount determined by the Treasurer that "should, in his opinion, be taken to be the value of the rights, property and assets vested in the Commission" by s 29 of the Transitional Provisions Act and the amount determined in the same manner as the sum of the amounts of liabilities assumed by the Commission. The total value of assets was determined by aggregating budget appropriations for telecommunications since 1901. The resulting debt was about $4 billion.
From 1 January 1989, the Australian Telecommunications Commission was preserved and continued in existence as a body corporate under the name of the Australian Telecommunications Corporation[5]. The Corporation remained subject to ministerial direction.
In November 1991, Telstra was incorporated under the Corporations Law of the Australian Capital Territory as a company limited by shares. Telstra was then called Australian and Overseas Telecommunications Corporation Limited and became the successor of the Australian Telecommunications Corporation. Section 11 of the Australian and Overseas Telecommunications Corporation Act 1991 (Cth) ("the AOTC Act")[6] operated with effect from 1 February 1992, and vested all the property and rights of the Australian Telecommunications Corporation (as well as the property and rights of another entity - OTC Limited) and certain liabilities in Telstra. Thus, from 1 February 1992, the assets of the PSTN were vested in Telstra, and Telstra became responsible for the balance of the debt that had been fixed under the 1975 Telecommunications Act.
When Telstra was incorporated, and at the time the assets of the PSTN were vested in Telstra, the Commonwealth was Telstra's sole shareholder. Section 8 of the AOTC Act provided that the Commonwealth "must not transfer any of its shares" in Telstra and that neither the Commonwealth nor Telstra was to do anything to cause or contribute to the Commonwealth no longer holding and controlling the exercise of voting rights attaching to the voting shares in Telstra. Telstra was subject to ministerial direction[7], but s 26 of the AOTC Act provided that Telstra was taken not to have been incorporated or established for a public purpose or for a purpose of the Commonwealth, was taken not to be a public authority or an instrumentality or agency of the Crown and was taken not to be entitled to any immunity or privilege of the Commonwealth "except so far as express provision is made by this Act or any other law of the Commonwealth, or by a law of a State or of a Territory, as the case may be".
The PSTN was vested in Telstra, with effect from 1 February 1992, against a legislative background of which the most prominent feature was the Telecommunications Act 1991 (Cth) ("the 1991 Telecommunications Act"). Subject to some exceptions that are not now important, the 1991 Telecommunications Act commenced on 1 July 1991[8] and all of its provisions had commenced before the PSTN was vested in Telstra.
One of the stated objects of the 1991 Telecommunications Act was "creating a regulatory environment for the supply of telecommunications services which promotes competition and fair and efficient market conduct"[9]. Part 8 of the 1991 Telecommunications Act (ss 136‑172) was directed to that end. It provided for access by "carriers" (holders of either a general telecommunications licence in force under Pt 5 of that Act or a public mobile licence in force under that Part)[10] to networks and services of other carriers. Telstra was one such carrier[11]. The object of Pt 8 of the Act was described[12] as being:

[72]

If a person required to comply with standard access obligations and an access seeker do not agree on terms and conditions, the first of the alternative methods of determination that may be engaged hinges about "an access undertaking" which, in effect, is a statement by a carrier or carriage service provider of the terms and conditions on which it will make its services available. Those terms and conditions must be approved by the ACCC or the Australian Competition Tribunal under Div 5 of Pt XIC (ss 152BS‑152CGB) before the undertaking is effective.
The second method is engaged if either there is no access undertaking or the undertaking does not specify terms and conditions about a particular matter. In either of those events the terms and conditions are to be determined by the ACCC under Div 8 of Pt XIC (ss 152CL‑152EB). Division 8 of Pt XIC deals with the arbitration of disputes about access. In finally determining a dispute about access the ACCC must take into account a number of matters specified in s 152CR(1), and the ACCC may take into account any other matters it thinks relevant. The matters which must be taken into account are, in substance, the six matters specified in s 152AH(1), together with a seventh consideration: "the value to a party of extensions, or enhancement of capability, whose cost is borne by someone else".
The considerations identified in both s 152AH and s 152CR include promoting the long‑term interests of end‑users as well as "the legitimate business interests" of the carrier or provider. There may be cases, then, in which the application of the statutory considerations would require the ACCC to fix terms and conditions which differ from those that would be fixed in arm's length bargaining by two commercial parties concerned only for their individual legitimate business interests.
That this may be the consequence of applying these provisions is reinforced by consideration of the relevant statutory objects. All of the provisions that have been mentioned (ss 152AL(3) and 152AR, the validity of which is challenged, and ss 152AH, 152AY and 152CR) take their place in Pt XIC of the Trade Practices Act. Part XIC of the Trade Practices Act was inserted in that Act by the Trade Practices Amendment (Telecommunications) Act 1997 (Cth) ("the 1997 Trade Practices Act"). The Telecommunications Act 1997 (Cth) ("the 1997 Telecommunications Act") was enacted shortly before the 1997 Trade Practices Act. The 1997 Telecommunications Act provided[18] that the main object of that Act, when read together with Pts XIB and XIC of the Trade Practices Act, is to provide:

[91]

Telstra submitted that s 152EB does not save the impugned provisions (ss 152AL(3) and 152AR) from invalidity. The argument proceeded by the following steps. First, it was said that the relevant acquisitions "occur by the imposition of the [standard access obligations] on carriers [or] providers pursuant to s 152AR". Secondly, those obligations come into operation when a service provider makes the relevant request, and thus the acquisitions effected by the standard access obligations occur as soon as the relevant request is made. (As Telstra rightly pointed out, upon making the request, the access seeker has an enforceable right[20] to use the relevant loop.) Thirdly, Telstra submitted that s 152EB should be read as engaged only in respect of determinations that effect an acquisition, and that the only relevant determinations are those identified by s 152CL: determinations made by the ACCC under Div 8. Thus, so the argument concluded, s 152EB did not speak to any acquisition effected by s 152AR because the relevant acquisition is effected by the access seeker's request engaging the standard obligations under s 152AR, not by any determination which the ACCC makes under Div 8.
Telstra's submissions about s 152EB should not be accepted. The submissions depend upon reading the expression in s 152EB(1)(a) "a determination would result in an acquisition of property" as confined to determinations which effect an acquisition. The provision should not be construed so narrowly.
Access disputes may relate to the terms and conditions on which a carrier or provider is to comply with standard access obligations (s 152CM(1)) or to "one or more aspects of access" to a declared service in respect of which one or more standard access obligations apply (s 152CM(2)). Defining access disputes in these ways, in which the engagement of standard access obligations is a necessary element, is not consistent with treating acquisitions effected by the standard access obligations as a class distinct from acquisitions effected by a determination. Drawing a distinction of that kind was a critical step in Telstra's argument but both text and context deny its validity.
Section 152EB(1)(a) does not refer to acquisitions that are effected by a determination. Paragraph (a) of s 152EB(1) invites attention to whether a determination results in an acquisition of property and par (b) amplifies the premise upon which the obligation to pay compensation is imposed by reference to the determination being otherwise invalid "because a particular person has not been sufficiently compensated". Given first, that the determinations to which s 152EB is directed are determinations of access disputes and second, that access disputes are defined by reference to compliance with standard access obligations, the distinction upon which Telstra's argument about s 152EB depended should not be drawn.
Telstra's central complaint in this litigation was that compliance with its standard access obligations in respect of either ULLS or LSS would see it deprived of the use of those local loops and that it would not be recompensed for that loss of use at a level that amounts to just terms. The ultimate measure of the compensation Telstra could receive for providing access to the local loops to an access seeker would be compensation fixed in accordance with Div 8 in resolving a dispute about the terms and conditions on which Telstra would comply with its standard access obligations. Considered in the context of the whole of Pt XIC, s 152EB should be read as imposing on the Commonwealth an obligation to pay compensation if the resolution of an access dispute in accordance with Div 8 would result in an acquisition otherwise than on just terms. And that outcome of acquisition otherwise than on just terms is the outcome which Telstra asserts follows from it being required to comply with standard access obligations in respect of the local loops in issue in this case.
It follows that if, as Telstra alleges, s 152AL(3) and s 152AR do effect an acquisition of property, just terms for that acquisition are afforded by the operation of s 152EB and Telstra's allegations of invalidity fail. It is nonetheless important to go on to consider whether, apart from s 152EB, there would be an acquisition of property otherwise than on just terms.

[92]

It is well established that s 51(xxxi) of the Constitution is concerned with matters of substance rather than form and that "acquisition" and "property" are to be construed liberally[21]. Moreover, "acquisition" is to be understood in the "compound conception, namely, 'acquisition‑on‑just‑terms'"[22].
In the present case it is also useful to recognise the different senses in which the word "property" may be used in legal discourse. Some of those different uses of the word were identified in Yanner v Eaton[23]. In many cases, including at least some cases concerning s 51(xxxi)[24], it may be helpful to speak of property as a "bundle of rights". At other times it may be more useful to identify property as "a legally endorsed concentration of power over things and resources"[25]. Seldom will it be useful to use the word "property" as referring only to the subject‑matter of that legally endorsed concentration of power.
These considerations are important in the present matter because of the differing emphases given by the parties to features of the facts of the present matter. As noted earlier, Telstra emphasised the physical disconnection of the local loops from its equipment and the physical connection of those loops to a competitor's equipment as indicating that there had been an acquisition of property. These physical acts indicated, so Telstra submitted, that Telstra was deprived of the use of the local loops in question. It submitted that it "owns" the infrastructure but loses "control of and the ability to use the infrastructure in respect of which the right" is granted to the other service provider.
By contrast, some of the defendants sought to shift the focus of argument from the physical steps taken of connection and disconnection of elements of an electrical circuit to whether it could be said that a competitor took "possession" of loops made available by Telstra in compliance with its standard access obligations. In this respect the Commonwealth and the ACCC emphasised that it is Telstra that must undertake all physical connections to the local loop and that it is Telstra that installs, repairs and maintains the loop and it follows, so it was submitted, that Telstra retains "possession" of the loop. Other defendants sought to emphasise whether and when Telstra might supply any of the telecommunications services required by the end‑user to whose premises the loop in question was connected. And in this last respect, emphasis was placed upon the fact that it is the end‑user's choice of carrier which determines whether a particular telecommunications carrier seeks to use a local loop for voiceband or non‑voiceband communications. End‑users can and do change carriers and so long as the end‑user chooses not to deal with Telstra, Telstra has no use for the local loop that is connected to that end‑user's premises. These aspects of the matter were emphasised in aid of the proposition that steps taken to comply with Telstra's standard access obligations were too transient to amount to an acquisition of property.
All of these attempts at characterising the legal consequences of the engagement of Telstra's standard access obligations may be understood as attempts at comparing the differences between the "legally endorsed concentration of power" over a local loop before and after an access seeker requests the use of that loop. Each form of summary characterisation sought, directly or indirectly, to draw analogies with other, more familiar forms of dealing with property. In particular, Telstra's repeated references to exclusion from use of the local loops may be understood as inviting comparison with the use that may be made of land or a movable chattel but it may also be understood as presupposing both desire and the ability to make some alternative use of the item in question.
It is not productive to analyse analogies of the kind just identified with a view to identifying the extent to which they are apt. And it is not useful to attempt to resolve the constitutional issues which are presented by applying descriptive expressions of the kinds deployed in argument ("Telstra ... loses control of and the ability to use the infrastructure"). Especially is this so where the defendants submit, as they did, that the rights in issue in this case, rights of use of local loops, were statutory rights inherently susceptible of change, that there was no compulsory acquisition and that there was "no deprivation of the reality of proprietorship" of the local loops.
Each of these branches of the defendants' arguments sought to invoke particular elements of the long line of cases in this Court in which s 51(xxxi) has been considered. At times argument proceeded as if discrete exceptions to the application of s 51(xxxi) can be identified as established in those decisions. So to approach the application of s 51(xxxi) may invite error. Rather than begin from some constructed taxonomy of rule and exceptions to a rule, it is necessary to begin by recognising the force of the observation by Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ in Victoria v The Commonwealth (Industrial Relations Act Case)[26] that:

[95]

In the particular circumstances of this case it is of especial importance, in undertaking that task of understanding the operation of the relevant provisions, to recognise that the particular provisions of Pt XIC that are impugned in this litigation must not be divorced from their statutory context, and must not be understood in isolation from the history of the provision and regulation of telephone and telecommunications services in Australia.
There are three cardinal features of context and history that bear upon the constitutional issues which are raised. First, the PSTN which Telstra now owns (and of which the local loops form part) was originally a public asset owned and operated as a monopoly since Federation by the Commonwealth. Second, the successive steps of corporatisation and privatisation that have led to Telstra now owning the PSTN (and the local loops that are now in issue) were steps which were accompanied by measures which gave competitors of Telstra access to the use of the assets of that network. In particular, as noted earlier in these reasons, the step of vesting assets of the PSTN in Telstra, in 1992, was preceded by the enactment of the 1991 Telecommunications Act. At all times thereafter Telstra has operated as a carrier, first under the 1991 Telecommunications Act, and later under the 1997 Telecommunications Act, within a regulatory regime by which other carriers have the right to interconnect their facilities to Telstra's network and to obtain access to services supplied by Telstra, and Telstra has like rights with respect to other carriers. Telstra has never owned or operated any of the assets that now comprise the PSTN except under and in accordance with legislative provisions that were directed to "promoting ... competition in the telecommunications industry generally and among carriers"[29] and sought to achieve this goal by "giving each carrier the right ... to obtain access to services supplied by the other carriers"[30]. And the third feature of context and history which is of cardinal importance is that in 1992, when the assets of the PSTN were vested in Telstra, Telstra was wholly owned by the Commonwealth.
When proper account is taken of these three considerations, it becomes apparent that Telstra's argument that there is an acquisition of its property otherwise than on just terms is, as Dixon J said in British Medical Association v The Commonwealth[31], "a synthetic argument, and ... unreal". The argument is synthetic and unreal because it proceeds from an unstated premise that Telstra has larger and more ample rights in respect of the PSTN than it has. But Telstra's "bundle of rights" in respect of the assets of the PSTN has never been of the nature and amplitude which its present argument assumes. Telstra's bundle of rights in respect of the PSTN has always been subject to the rights of its competitors to require access to and use of the assets. And the engagement of the impugned provisions (ss 152AL(3) and 152AR) does not impair the bundle of rights constituting the property in question in a manner sufficient to attract the operation of s 51(xxxi)[32].
Telstra succeeded to the ownership of the assets comprising the PSTN under legislative arrangements which may be described (not inaccurately) as requiring Telstra and its predecessors to buy, and pay for, those assets. It was not (and could not be) suggested that vesting those assets (and the associated liability to pay for the assets) in Telstra was other than a transfer of the assets to be held and used in accordance with and subject to the then regulatory regime contained in the 1991 Telecommunications Act. And it was not (and could not be) said that any question of acquisition of property was presented by the legislation which vested the assets in Telstra. Those assets were held by a Commonwealth statutory corporation and had previously been held directly by the Executive Government. The 1991 laws vesting the PSTN and other assets in Telstra, and establishing a regulatory regime providing for access by Telstra's competitors to Telstra's network and services, were not laws with respect to the acquisition of property. In so far as those laws dealt with matters of property, they effected alterations in the property interests of, on the one side, a Commonwealth statutory corporation and, on the other side, a corporation wholly owned by the Commonwealth. It matters not that the latter corporation was taken not to have been incorporated or established for a public purpose or a purpose of the Commonwealth, was taken not to be a public authority or an instrumentality or agency of the Crown and, subject to some exceptions whose content is not now important, was not entitled to any immunity or privilege of the Commonwealth. What is important is that the rights in the assets vested in Telstra were rights to use the assets in connection with the provision of telecommunications services but those rights were always subject to a statutory access regime which permitted other carriers to use the assets in question.
The subsequent repeal of the 1991 Telecommunications Act and enactment of the 1997 Telecommunications Act altered the regulatory regime in various ways but in one critical respect the regulatory regime did not change. Under the 1997 Telecommunications Act, as under the earlier legislation, other participants in the telecommunications market have access rights to Telstra's network. The legislative provisions for exercise of those rights effect no acquisition of Telstra's property in the local loops in issue.
The questions reserved should be answered accordingly. No separate argument having been directed to any provision of Pt XIC other than the two impugned provisions, the questions asking about invalidity of other provisions of that Part should not be answered. The questions should therefore be answered:

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