21 Jun 2004

NEAT Domestic Trading and the reach of public law remedies - what was resolved?

by Bill Lane

Particular attention to the possible application of public law remedies remains an important issue in dealing with outsourcing and corporatisation issues.

When a Government official or statutory agency exercises a decision-making power directly affecting the interests of an individual or corporation, the reach of administrative law remedies, such as judicial review, is relatively clear. However, when Governments transfer decision-making responsibilities to ‘outside’ bodies, the applicability of these remedies becomes uncertain. Decisions made by private service providers or corporations established under the Corporations Law (including a Government-owned corporations), may give rise to specific statutory remedies under the Corporations Law and the Trade Practices Act 1974 (Cth). However, the extent to which they are judicially reviewable in accordance with administrative law principles is less certain.

The High Court addressed this issue in NEAT Domestic Trading Pty Limited v AWB Limited [2003] HCA 35. The court considered whether the actions of a trading company, incorporated under the Corporations Law, were accountable according to principles of administrative law which apply to ‘public’ agencies, where the company was performing a regulatory function under a national marketing scheme for wheat.

The court answered the question in the negative. However, three of the four majority judges expressly emphasised that the outcome was tied specifically to the particular facts and legislation before the court and should not to be taken as any kind of answer to the more general question whether public law remedies may be granted against private bodies.

The single desk scheme

NEAT Domestic Trading concerned the wheat marketing scheme established by amendments to the Wheat Marketing Act 1989 (Cth) (the Wheat Act). Under the scheme, responsibility for all commercial aspects of wheat marketing was transferred from a statutory authority to three grower-owned companies established under the Corporations Law of Victoria. One of these, Australian Wheat Board (AWB) was established as a holding company limited by shares. The other two were established as subsidiaries – one was established to conduct domestic wheat trading and the third, Australian Wheat Board International Limited (AWBI) was established to manage wheat pools for export purpose.

Under a "single desk" policy, AWBI was the sole purchaser of bulk wheat from Australian growers and was also singularly responsible for negotiating overseas sales of bulk wheat. Under the scheme, entities other than AWBI could also export bulk wheat if they obtained approval from a new statutory authority, the Wheat Export Authority (WEA). However, by section 57(3B) of the Wheat Act, the WEA could only give its approval after receiving AWBI's consent. In other words, AWBI enjoyed, in effect, a monopoly on the overseas sale of bulk wheat in the sense that it could veto any export request from others.

NEAT Domestic Trading Pty Ltd repeatedly sought approval from WEA for the bulk export of a certain type of wheat, but on each occasion WEA was obliged to withhold its approval because AWBI refused to consent. AWBI's refusals were based upon its adoption and blanket enforcement of a policy of refusing to allow others to engage in bulk exports of wheat. The policy was based on the view that allowing others to engage in bulk wheat exports would be detrimental to growers who delivered their wheat to the National Pool. The policy was intended to preserve the AWBI’s marketing strategy and to maximise returns to the growers.

NEAT challenged AWBI’s refusals before the Federal Court. As part of a two-pronged attack, it brought administrative law judicial review proceedings under the Administrative Decisions (Judicial Review) Act 1977 (Cth) and also sought relief under the Trade Practices Act (TPA).

The success of the TPA action hinged on the success of the administrative law action - NEAT argued that AWBI’s blanket application of a policy of refusing consent was anti-competitive and exclusionary and in breach of section 46 of the TPA. However, whether or not AWBI was in breach of section 46 depended on whether or not its actions were protected by an express exemption against TPA liability conferred by section 57(6) of the Wheat Act for actions "specifically authorised by the Act". This raised the administrative law issue, namely, whether AWBI was exercising a statutory power conferred by section 56(3B) of the Wheat Act when it refused to issue its consent and if so, whether its refusal was an invalid exercise of that power, and thus not "specifically authorised under the Act." NEAT’s principal argument was based upon the ground of judicial review in section 5(2)(f) of the ADJR Act, namely, that the decision was based upon an inflexible application of a policy without regard to the merits.

The lower court decisions

Justice Mathews at first instance took the view that despite AWBI's status as a corporation incorporated under the Corporations Law, it was exercising a statutory power. On that basis, its refusal to consent was at least justiciable under the ADJR Act as a decision "made under an enactment". However, she went on to dismiss the application because NEAT could not make out its grounds of judicial review. With respect to section 5(2)(f) of the ADJR Act ("inflexible application of a policy"), she took the view that AWBI’s charter allowed it to adopt and unswervingly apply a policy to maximise its own commercial interests. So, NEAT was unable to challenge the legitimacy of the considerations underpinning the policy or to demonstrate what matters it should have considered in putting the policy aside.

The trial judge’s answer to the administrative law challenge spelt failure for the TPA action because AWBI’s decisions were thereby "specifically authorised by the Act" and thus fell within the exemption conferred by section 57(6) against TPA liability (NEAT Domestic Trading Pty Ltd v Wheat Export Authority (2000) 64 ALD 29.)

The Full Federal Court (Justices Heerey, Mansfield and Gyles) dismissed NEAT’s appeal. All three judges agreed with the trial judge that AWBI was free to adopt and apply the policy. However, Justice Heerey went further – contrary to the views of the trial judge, he declared that AWBI’s actions in refusing to consent were outside the province of administrative law altogether because it was not performing an ‘administrative Governmental function’ when it refused to consent to NEAT’s applications to expert bulk wheat. He based this on the distinction between WEA as statutory authority and AWBI as an independent company, incorporated under the Corporations Law (NEAT Domestic Trading Pty Ltd v Australian Wheat Board Ltd [2001] FCA 1178).

The High Court decision

NEAT’s appeal to the High Court was also rejected. By a 4 to 1 majority, the court followed the reasoning of the Full Federal Court in emphasising that the AWBI’s commercial charter meant that it was free to adopt and systematically apply a policy designed to maximise its own commercial interests and was not required to consider matters other than this.

However, despite the clear result in the High Court, an interesting point of difference emerged between the majority judges of the High Court on an important point. This was whether AWBI was exercising a statutory power in refusing to consent to NEAT's application to export wheat. This question had received diametrically opposed answers from Justice Mathews at first instance and Justice Heerey in the Full Federal Court.

In a joint opinion by Justices McHugh, Hayne and Callinan., these judges favoured the approach taken by Justice Heerey in the Full Federal Court. In their opinion, judicial review as a public law remedy was simply not available to challenge AWBI's refusal to consent because, unlike the WEA, its powers and obligations did not derive from the Wheat Act but were regulated by the applicable companies legislation (here, the Corporations Law of Victoria). Apart from emphasising that the Wheat Act was neither the express nor the implied source of AWBI’s power to refuse consent, they also referred to the fact that AWBI did not owe its existence to the Wheat Act but derived it status as an entity incorporated under the Corporations Law.

In sharp contrast, the other majority judge, Chief Justice Gleeson, adopted the view expressed by the trial judge. In his opinion, despite its status as a corporation incorporated under Corporations Law, AWBI's power to consent derived from the Wheat Act so that it was, in substance, exercising a statutory power. In his view, AWBI’s functions under the Act were connected with the national interest so that it could not be said to be only representing private interests. Justice Kirby, in dissent, also took this view, although his conclusion is based upon more fundamental considerations. In his opinion, bodies established by Government for particular purposes exercise public powers, irrespective of what form they take so that they must remain accountable to the norms and values of public law. In his view, the executive branch of Government cannot avoid judicial scrutiny for lawfulness by outsourcing or privatising its actions.

The question whether or not AWBI had exercised a statutory power has important consequences beyond the context of NEAT. It relates directly to the broader issue as to the circumstances in which private bodies (such as corporations) exercise "public" powers, especially when they perform functions akin to those performed by AWBI under the scheme.

Before NEAT, the Full Federal Court dealt with a partly similar situation in General Newspapers Pty Ltd v Telstra Corporation (1993) 117 ALR 629. The court declined to hold that a decision to enter a contract by Telstra, as a Government owned company incorporated under the Corporations Law, was amenable to judicial review under the ADJR Act. However, there are significant differences between the two cases. General Newspapers involved a relatively straightforward decision by a Government owned corporation to enter into a contract with a preferred supplier of services following a tender process. On the other hand, NEAT involved a trading corporation controlled by a class of shareholders as participants in the industry (wheat growers). As well as this, the decision by the company was, arguably, made in the performance of a regulatory function which the Government had conferred on it under a national legislative marketing scheme.

In conclusion, NEAT does not allow for easy predictions. As indicated earlier, there was a difference of view amongst the majority High Court judges on a central issue relating to the exercise of statutory power. In addition, it is difficult to discern any unified theme or approach, given that the majority was at pains to point out that its decision was confined to the particular facts. This means that particular attention to the possible application of public law remedies remains an important issue in dealing with outsourcing and corporatisation issues.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.