Issue 76 April 2004

LOCAL GOVERNMENT BRIEFLY

Rating of Telecommunication Carriers is Discriminatory

On 28 April 2004, the Full Court of the High Court of Australia handed down the final decision in the case of Bayside City Council v Telstra Corporation Limited [2004] HCA 19; (appeal from Telstra & Optus v Hurstville City Council & Others (2002) 118 FCR 198).

A Brief History

Legal proceedings were initiated by Telstra and Optus in response to councils in New South Wales imposing an annual charge, pursuant to Section 611 of the Local Government Act 1993, and Victorian councils imposing rates, pursuant to Part 8 of the Local Government Act 1989, upon the aerial and underground cables of the carriers. These proceedings were to challenge the legal validity of these financial imposts.

In the first instance, Wilcox J decided in favour of the councils and held, amongst other things, that Clause 44 of Schedule 3 to the Telecommunications Act 1997 did not override the rating and charging provisions of the respective Local Government Acts.

Telstra and Optus appealed to the Full Court of the Federal Court and the decision, on 4 April 2002, was that the appeal by the carriers be allowed and the order of the Primary Judge, Wilcox J, be set aside. The Court declared that the respective New South Wales and Victorian Local Government Acts discriminated, or had the effect of discriminating, against the carriers and to that extent were inconsistent with Clause 44(1) of Schedule 3 to the Telecommunications Act and hence invalid pursuant to Section 109 of the Constitution.

Appeal to the High Court

The Bayside City Council, Moreland City Council, Warringah Council and Hurstville City Council appealed the decision of the Full Court of the Federal Court in the Full Court of the High Court. The appeal raised the following questions for determination by the High Court:

• within the meaning of Clause 44(1) of Schedule 3 to the Telecommunications Act, does Part 8 of the Victorian Local Government Act and/or Section 611 of the New South Wales Local Government Act discriminate, or have the effect of discriminating against, carriers?
• is Clause 44(1) a valid exercise of the power conferred on the Commonwealth Parliament by Section 51(v) of the Constitution? and
• is Clause 44(1) invalid because it intrudes into State power and infringes the implied limitation on federal legislative power inherent in the Constitution by virtue of the federal structure?

The majority of the Full Court of the High Court dismissed the appeal with costs and upheld the declaration made by the Full Federal Court.

The provisions of the Telecommunications Act that were considered by the High Court were those contained within Part 24 – ‘Carriers Powers and Immunities’ and Division 7 of Part 1 of Schedule 3 – ‘Exemptions from State and Territory Laws’. The most relevant provision, being Clause 44(1)(a) which provides:

“a law of a state or territory has no effect to the extent to which the law discriminates, or would have the effect (whether direct or indirect) of discriminating, against a particular carrier, against a particular class of carriers, or against carriers generally”.

Clause 44 does not operate to provide a direct exemption for telecommunications carriers from Local Government rates or charges. Rather, it provides a general exemption that is dependent upon the application of State or Territory legislation.

When questioning whether or not the provisions of the respective Local Government Acts were discriminatory, within the meaning of Clause 44(1)(a), the High Court noted that it was sufficient if:

“that discrimination involves adverse treatment that is differential by reference to an appropriate standard of comparison”.

Where a certain kind of differential treatment is put forward as the basis of a claim for discrimination, the Court may be required to examine the relevance, appropriateness or permissibility of some distinction by reference to which such treatment occurs, or by reference to which it is sought to be explained or justified. Consideration of discrimination involves a comparison and, in the selection of comparable cases, a judgment may be influenced strongly by the particular contexts in which the issue arises and questions of degree may be involved.

The basis for the claim of discrimination by Telstra and Optus was in a comparison between, on the one hand, the charges and rates imposed and levied in respect of the Telstra and Optus cables and, on the other hand, the treatment of facilities, which are installed or operated above, on or under public land by utilities or other comparable uses of such space in the respective States.

The majority referred to the case of Victoria v The Commonwealth (the Payroll Tax Case) (1971) 122CLR 353, where Gibbs J stated that it is in the nature of taxing statutes that not all tax payers are treated with absolute equality. The fact that some taxpayers enjoy exemptions that are not available to others does not necessarily involve discrimination. In the present case, however, the discrimination arose due to the general pattern of state legislative treatment of facilities and the exemptions from rating in respect of their facilities.

With the assistance of the Explanatory Memorandum to the Telecommunications Act, the Court held that the kind of discrimination with which Clause 44 is concerned is the subjection of carriers to a burden of a kind to which others in a similar situation are generally not subject. Such a similar situation includes the use of public space for the installation and maintenance of facilities such as cables, pipes, ducts and conduits. Throughout New South Wales and Victoria there is a clear general pattern of exemptions applicable to other public utility services, with the exception in New South Wales of gas pipelines. As a result, the subjection of Telstra and Optus to rates or charges in respect of their cables is discriminatory, within the meaning of Clause 44.

The appellant local authorities questioned why Clause 44 would prevail over the laws that authorised the charges and rates, rather than the laws that granted the exemptions. The Court stated that Clause 44 refers to laws that discriminate, or have the effect of discriminating, against carriers being of no effect, rather than laws that confer favourable treatment upon others. Whilst the existence of these favourable laws may give rise to the laws allowing the imposition of charges and rates being discriminatory, they did not themselves discriminate, or have the effect of discriminating against carriers under the Telecommunications Act. It can, therefore, be considered that if such exemptions were not provided to other public utilities, then the application of the relevant provisions of the Local Government Acts would not amount to discrimination against telecommunications carriers and the imposition of rates and changes would be valid.

Finally, the Court held that Clause 44(1) was a valid exercise of the power conferred on the Commonwealth Parliament by Section 51(v) of the Constitution and did not intrude into State power or infringe the implied limitations on federal legislative power inherent in the Constitution. Further, because Clause 44 was enacted under a valid exercise of federal power, Section 109 of the Constitution was engaged. The Local Government Acts were held to be inconsistent with Clause 44 and, therefore, inoperative pursuant to Section 109 of the Constitution.

The essence of this decision is that councils are unable to impose and recover rates and charges in respect of the occupation of public land by licensed telecommunications carriers that have the benefit of Clause 44 of Schedule 3 to the Telecommunications Act, unless there is a shift in the current Federal or State legislative positions. Whilst the South Australian Local Government Act 1999 was not specifically considered by the High Court, our State legislation provides similar exemptions to public utilities sufficient to render the reasoning of the High Court indistinguishable. As a result, Australia is now out of step with other overseas jurisdictions where rates and charges are properly recoverable in such circumstances.

For further information about issues covered in this article, please contact either
Michael Kelledy on + 61 8 8210 1237 or email mkelledy@normans.com.au or Emmalene Gottwald on + 61 8 8210 1256 or email egottwald@normans.com.au

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