CATCHRORDS ADMINISTRATIVE LAW - Two Airlines Agreement - decision of Secretary of Department of Aviation - whether decision vitiated through errors of law - whether decision was an improper exercise of power - applicability and scope of rules of natural justice. Administrative Decisions (Judicial Review) Act 1977: ss. 5, 16. Airlines Agreement Act 1981: Schedule Airlines Equipment Act 1958: ss. 12, 18. ANSETT TRANSPORT INDUSTRIES LIMITED and AUSTRALIAN NATIONAL AIRLINES COMMISSION v. RAE MARTIN TAYLOR and EAST-WEST AIRLINES (OPERATIONS) LIMITED G25 of 1987 LOCKHART J. 14 MAY 1987 SYDNEY STN IED ' > ACCME \~' FcDElAL COURT OF ¢ AUSTRALIA ' PAI CIpat 4 REGIoT + an . / G2 ic SQUTH WALES DIS EGISTRY No. G 25 of 1987 VISION ANSETT TRANSPORT INDUSTRIES LIMITED and First Applicant AUSTRALIAN NATIONAL AIRLINES COMMISSTON Second Applicant RAE MARTIN TAYLOR and First Respondent EAST-WEST AIRLINES (OPERATIONS) LIMITED Second Respondent MINUTES OF ORDER THE COURT ORDERS THAT: The decision of Rae Martin Taylor, the Secretary of the Department of Aviation, made on or about 31 October 1986 under clause 6(1)(c) of the agreement made 28 May 1981 between the Commonwealth of Australia, Australian National Airlines Commission and Ansett Transport Industries Limited that the Secretary was not satisfied that the services operated by East-West Airlines (Operations) Limited between Sydney/Yulara and Yulara/Perth were not predominantly for use for the purpose of the carriage of passengers over separate prescribed routes be quashed; NOTE Rae Martin Taylor, the Secretary of the Department of Aviation, pay two-thirds of the costs of Ansett Transport Industries Limited and the Australian National Airlines Commission of this proceeding; and Otherwise there be no order as to the costs of any party. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. oO ic 177) mad hed 80 STR STR GENERAL DIVISION No. G 25 of 1987 www ww ANSETT _ TRANSPORT. INDUSTRIES LIMITED and First Applicant AUSTRALIAN NATIONAL IRLINES COMMISSTON Second Applicant RAE MARTIN TAYLOR and First Respondent EAST-WEST AIRLINES (OPERATIONS) LIMITED Second Respondent 14 May 1987 REASONS FOR JUDGMENT LOCKHART J. In this latest round of the curial battle for the control of Australia's skies Ansett Transport Industries Limited ("Ansett") and Australian National Airlines Commission ("Australian Airlines") seek a review, pursuant to the Administrative Decisions (Judicial Review) Act 1977 ("the Judicial Review Act"), of a decision of the Secretary of the Department of Aviation, Rae Martin Taylor, made on 31 October 1986. The decision, made pursuant to clause 6(1)(c) of the Two Airlines Agreement of 1981, was (to use the double negative of the clause) that the Secretary was not satisfied that the services operated by East-West Airlines (Operations) Limited ("East-West") between Sydney/Yulara and Yulara/Perth were not predominantly for use for the purpose of the carriage of passengers over separate prescribed routes. 2. Clause 6 of the Two Airlines Agreement provides: "6.(1)(a) The parties shall take all reasonable action within their powers to ensure that the Commission and the Company are the only two operators which provide scheduled domestic passenger air services over trunk routes within Australia. (b) (c) (d) (e) Subject to paragraph (c) of this sub-clause nothing in sub-clause (1)(a) shall prevent other operators from providing scheduled passenger air services over a prescribed route or successive prescribed routes. Where any successive prescribed routes have the effect of linking two trunk route centres that are for the time being trunk route centres for the purposes of sub-clause (1)(e), sub-clause (1)(b) applies unless the Secretary is satisfied that such scheduled passenger air services are not predominantly for use for the purpose of the carriage of passengers over separate prescribed routes and are to a significant extent used or to be used for the purpose of carriage of passengers between two centres that are for the time being trunk route centres for the purposes of sub-clause (l)(e). Without derogating from the objectives of sub-clause (1)(a), the parties acknowledge that nothing in this agreement shall preclude the Commonwealth, the Minister or the Secretary from permitting a passenger operator to develop specialised scheduled passenger air services over trunk routes of a nature which in the opinion of the Minister are not adequately provided for either by the Commission or the Company and for which after receiving a request in writing from the Minister neither the Commission nor the Company has, within a reasonable time, provided a service to the satisfaction of the Minister. For the purposes of this agreement a trunk route is a route linking any two trunk route centres. A trunk route centre shall be any one of the following: Adelaide, Alice Springs, Brisbane, Cairns, Canberra, Coolangatta, Darwin, Gove, Hobart, Launceston, Mackay, Melbourne, Mount Iga, Perth, Proserpine, Rockhampton, Sydney, Townsville and such other centres as the parties hereto shall agree from time to time. 2(a)For the purposes of this agreement a prescribed route is - (1) a route: 3. (a) between a place ina State and another place in that State; (b) between a place in a Territory and another place in that Territory; (c) between a regional centre and another place in Australia; or (d) over which the Minister has requested in writing the Commission and the Company to provide a passenger air service and neither the Commission nor the Company has within a reasonable time after the making of that request provided that service to the Satisfaction of the Minister; or (41) a route, other than a route referred to in sub-clause (2)(a)(1) over which an operator, other than the Commission or the Company, operated a scheduled passenger air service on 1 July 1980, regardless of whether it was the sole operator of scheduled air passenger services over that route. (b) For the purpose of this agreement a regional centre is a place within Australia which is not for the time being a trunk route centre for the purposes of sub-clause (1)(e)." The decision was preceded by a decision of the former Secretary of the Department of Aviation, Mr. C.W. Freeland, made on 13 August 1985. He stated that he was satisfied that the passenger air services provided by East-West over the successive prescribed routes Sydney/Yulara and Yulara/Perth were not predominantly for use for the purposes of the carriage over those separate prescribed routes and that those services were to a significant extent used for the purpose of the carriage of passengers between the trunk route centres of Sydney and Perth. It will be noted that clause 6(1)(c) has two limbs each of which was answered unfavourably to East-West by Mr. Freeland on 12 August 1985 but the first of which was answered favourably to it by Mr. Taylor on 31 October 1986. Mr. Taylor expressed the view that, as 4. he was not satisfied of the matters specified in the first limb of the Clause, it was unnecessary for him to consider the second limb. Following Mr. Freeland's decision of 13 August 1985 East-West asked him to reconsider, but he refused to do so unless there was Placed before him fundamentally new material. In due course East-West made a further request to the Secretary to reconsider the matter and this was done, culminating in the decision of Mr. Taylor on 31 October 1986. Mr. Taylor succeeded Mr. Freeland as Secretary on 10 February 1986. The Secretary's decision is challenged broadly on two grounds. First it is said that it is vitiated through errors of law and because the making of the decision was an improper exercise of power conferred by the Two Airlines Agreement in the sense contemplated by para. 5(1)(e) of the Judicial Review Act. The second ground is that the Secretary is said to have denied natural justice to Ansett and Australian Airlines in connection with the making of the decision in that neither was given an opportunity to comment on what the Secretary intended to decide or on the matters which he proposed to take into account or on the methodology which he proposed to employ in the exercise which led to his decision. Mr. Taylor furnished a statement, pursuant to s. 13 of the Judicial Review Act, setting out his findings on material questions of fact relating to his decision of 31 October 1986, the evidence or other material on which those findings were based and the reasons for his decision. It is an eight page document. Mr. Taylor made other decisions on 31 October 1981 under clause 6(1)(c) referable to 5. scheduled passenger air services over additional routes to Sydney/Yulara/Perth. Those decisions are not directly relevant for present purposes. Under the heading "FINDINGS ON MATERIAL QUESTIONS OF FACT" in the section 13 statement there are some 17 paragraphs numbered 4 to 20 inclusive. Most of the facts stated in these paragraphs were the same facts as those considered by Mr. Freeland when he made his decision on 13 August 1985. There were, however, new facts which were not before Mr. Freeland, principally the following: - In paragraph 6 reference is made to the fact that East-West now provides three scheduled passenger air services per week over the routes; departing from Sydney and Perth on each Sunday, Wednesday and Friday. Although certain of those facts were before Mr. Freeland, the third such service was not commenced until April 1985 and that fact was not before him. - Paragraph 10 states that East-West adopted the relevant timetable because: (a) of the restrictions on the Yulara airstrip which makes it operationally prudent for the Yulara/Sydney service to operate at night to avoid high temperatures; (b) the curfew at Mascot for both departures and arrivals which limits the time of night at which Yulara can be served; and (c) the demand on the jet fleet during the day which makes off peak night time utilization essential. Although these facts were before Mr. Freeland, Mr. Taylor said in evidence that he made further enquiries and confirmed their accuracy. - Paragraph 14 states: "The general thrust of East-West's advertising and promotional] material appears to be aimed primarily at promotion of tourist travel to Yulara. East-West advised that with certain exceptions it was intended there should be no further advertising of the service between Sydney and Perth", The second sentence is new material which was not before Mr. Freeland. As to the paragraph as a whole Mr. Taylor said that there was additional advertising material which had not been before Mr. Freeland. He said that this material was the most recent available and was generally consistent with the statement in paragraph 14. - Paragraph 15 states a range of air fares. Mr. Taylor said that a new range of fares was before hin. - Paragraph 16 provides: "In its Cost Allocation Review of July 1985, the Independent Air Fares Committee indicated, amongst other things, that fares for the routes have been approved on the basis that East-West's through passenger traffic over the routes was predominantly of a 'top up' nature." Mr. Taylor said that this was new material. - Paragraphs 17 and 18 are important and they provide new material. They read as follows: "17. Statistics were provided by East-West on the through and sector passengers carried on the services. These statistics showed, amongst other things, that when the figures for each of the months January to August 1986 are compared with the figures for each of the equivalent months in 1985, the level of sector traffic as a proportion of total traffic carried by East-West has increased markedly. This trend has been maintained despite competition from Ansett's regional airlines ever routes to and from Yulara since August 1985. 18. Since August 1985 Ansett WA has operated a once-weekly Perth/Yulara/Sydney return service, and since April 1986 Air New South Wales has operated a once-weekly Sydney/Broken Hill/Yulara return service." In that part of the section 13 statement headed "EVIDENCE OR OTHER MATERIAL ON WHICH FINDINGS WERE BASED" reference is made to the fact that the findings of fact were based upon various documents including departmental submissions some of which were headed "commercial-in-confidence" and departmental minutes together with attachments. Those attachments include Mr. Freeland's consideration of East-West's services under clause 6(1)(c), correspondence and other papers relating to the status of the services under that clause, extracts from judgments of this Court in earlier cases, a table of East-West's schedules for Sydney/Yulara and Yulara/Perth, East-West's published timetable, tables of East-West's, Australian Airlines' and Ansett's airfares, a table headed "commercial-in-confidence" showing East-West's revenue passengers over the routes Sydney/Yulara and Yulara/Perth from December 1984 to August 1986, certain graphs taken from those statistics, a history of services and fares over the Sydney /Yulara and Yulara/Perth routes marked "commercial-in- confidence" and the file of material available to Mr. Freeland when he made his decision on 13 August 1985. Under the heading "REASONS FOR DECISION" are some eight paragraphs numbered 22 to 29 inclusive. They should be stated in full: "22. Paragraph 6(1)(c) of the Agreement requires that the Secretary must be satisfied as to two matters before the operation of paragraph 6(1)(b) is displaced: (a) that the scheduled passenger air services of East-West which have the effect of linking two trunk route centres are not predominantly for use for the purpose of the carriage of passengers over separate prescribed routes; (b) that those air services are toa significant extent used or to be used for the purpose of carriage of passengers between two trunk centres. 23. Having been asked by East-West to reconsider the views reached by Mr. Freeland, the former Secretary, concerning its operations over the routes, I had regard to all relevant correspondence, documents and other information available to me, including certain particular documentation such as the determination of the former Secretary, the information upon whch that determination was based, further information supplied by East-West following that determination and correspondence from Ansett and Australian Airlines. 24. The starting point of my examination was the position reached by the former Secretary in August 1985 in respect of services over the routes. It was necessary for me to acquire a full knowledge of the information which was before him and to accept the view which the former Secretary had formed for the purposes of paragraph 6(1)(c) of the Agreement. 25. I took the question for me, in reconsidering the issues raised by paragraph 6(1)(c) at the time when I reached the decision in October 1986, to be the same question addressed by the former Secretary in August 1985, and it had to be answered by me in the light of all the information available to me and the circumstances which prevailed at the time of my decision. 9. 26. Given the different facts and circumstances which prevailed at the time of my decision as compared to Ceic} those which prevailed at the time of the former Secretary's decision, the task for me was to decide whether I was satisfied of the existence of the two matters specified in paragraph 6(1)(c). 27. %I took the view that, if I were disposed to a different conclusion to that reached by the former Secretary as to the purpose of the services over the routes, it was not necessary for me to be positively satisfied to the converse of the conclusions reached by hin. 28. Having regard to the foregoing findings of fact and to the evidence upon which those findings were based I reached the conclusion that I was not satisfied that East-West's scheduled passenger air services over the routes were not predominantly for use for the purpose of the carriage of passengers over the separate prescribed routes Sydney/Yulara and Yulara/Perth. 29. Having taken the view stated in paragraph 28 on the matter specified in sub-paragraph 22(a), it was not necessary to consider the matter specified in sub-paragraph 22(b)." Ansett called Mr. Taylor as its witness. He gave evidence about his decision including the matters which he took into account and the principles which he applied in making it. When considering the matter he had before him at all relevant times a copy of at least clause 6(1)(c) of the Two Airlines Agreement. He obtained advice within the Department including legal advice. He formed a view about the proper interpretation and application of clause 6(1)(c) and considered the matter over a period of some months before making his decision on 31 October 1986. He did not seek to paraphrase the clause or substitute synonyms for its more important words. He simply applied its language to the matter in hand. He even attended the Public Library in Sydney and consulted dictionaries, but did not find his labours rewarding. 10. Mr. Taylor took the view that the first limb of clause 6(1)(c) was concerned essentially with the purpose of the scheduled passenger air services in question and the second limb with what is basically a statistical analysis of passengers carried on the service and a judgement by him as to its significance. Mr. Taylor took as his starting point the finding of Mr. Freeland on 31 August 1985 in respect of the services over the relevant routes. He familiarised himself with the methodology employed by Mr. Freeland. He examined the material which had been before Mr. Freeland together with all the new material and he formed his own view on that material as a whole; what he described as an "expanding body" of evidence. He did not undertake what he described as a "reconciliation" of the new material with the old material which had been before Mr. Freeland. He simply used Mr. Freeland's material as his point of commencement and, based on the further facts which he had and the additional enquiries which he made, he reached the decision now under challenge. It was submitted by counsel for Ansett, whose submissions were adopted by counsel for Australian Airlines, that the Secretary, when making his decision under clause 6(1)(c) of the Two Airlines Agreement, erred in law in that he misinterpreted the clause by considering not only the then current airline services, but looked at trends, tendencies or stated intentions of East-West not yet manifested in the actual purpose for which the services in question were being used at the time of his decision. This submission found its genesis in paras. 5(1)(f) and (j) of the Judicial Review Act. It was said to be impermissible to make future predictions about ll. something not yet established. Reliance was placed upon the observations of Kitto J. in Shire of Perth v. O'Keefe (1964) 110 C.L.R. 529 especially at p. 534 where, in a different context of town Planning by-laws, the expression "purpose of use" was construed by his Honour as referring not in a subjective sense to indicate the object in the minds of particular individuals, but rather in an objective sense to the end which is seen to be served by a particular use. It was submitted that clause 6(1)(c) requires the Secretary to be satisfied about the actual purpose of the Sydney/Yulara/Perth services at the time of his decision and not otherwise. Yet, it was submitted, the Secretary regarded East-West's statement of intention to provide a service on that route in which through traffic was incidental to sector traffic as sufficient to establish the actual purpose of the services at the time the Secretary made his decision. It was also submitted (having regard to paras. 5(1)(e) and 5(2)(a) and (b) of the Judicial Review Act) that the Secretary took irrelevant considerations into account and failed to take relevant considerations into account. A further submission was made that there was no material on which the Secretary could reasonably be satisfied that the relevant purpose of the Sydney/Yulara/Perth services had been achieved (paras. 5(2)(h) and 5(3)(a) of the Judicial Review Act). Evidence of East-West's intention with respect to the use of the Sydney/Yulara/Perth service is, in my opinion, relevant to the enquiry as to purpose under clause 6(1)(c). A decision under that clause operates prospectively in that it affects the particular routes on which services may be provided by particular operators. The services are not static. They are developing services in which trends 12. may be apparent and the Secretary is entitled to have regard to then. The relevant services are those provided by a particular airline. Although the Secretary's enquiry under clause 6(1)(c) is directed to services presently conducted by an airline there is no reason why he should not examine the airline's proposals for the future use or purpose of its services. The airline's intentions may, in some cases, be critical so I see no reason why they should be excluded from the area of enquiry. The Secretary enquired into the objective question of purpose but took into account the relevant matter of East-West's intention as well as various other matters. Indeed the matters which he took into account included the following: - the manner in which services provided by East-West operated; - East-West's timetables over the relevant routes and the reasons for them; - the mode of promotion of the services; - a comparison between through and sector traffic; - the fare structures of East-West; - the procedures adopted by East-West in reserving seats for sector passengers in preference to through passengers; - the impact of Ansett's competition provided by its operating divisions over the routes or similar routes namely Sydney/Yulara/Perth and Sydney/Broken Hill/Yulara; and - the former Secretary's decision and the facts then before hin. None of the matters that Mr. Taylor took into account were irrelevant. Nor were there any relevant, or at least materially relevant, considerations that he omitted from his deliberations. 13. It is important to bear in mind that the task of this Court is to correct errors of law if they are found in the decision-making process or otherwise to correct decisions that are vitiated in any of the other respects to which the Judicial Review Act is directed. What the Secretary engaged in was essentially a task of finding facts, forming opinions and exercising judgements. Although he adopted certain formulae or tests rather than others, it is not for the Court to say which is the preferred test provided none of them are impermissible in law. These attacks on the Secretary's decision are not established. I pass then to the question of natural justice. Ansett and Australian Airlines challenge the Secretary's decision on the further ground that they should have been given an opportunity to comment on his provisional views and the methodology which he proposed to adopt in reaching his decision. Failure to give them that opportunity was said to be a denial of natural justice. The general principles applicable to cases of this kind are to be found in many cases, but the following passage from the judgment of Mason J. in Kioa v. Minister for Immigration & Ethnic Affairs (1985) 62 A.L.R. 321 at pp. 345-7 is particularly relevant to this case: "It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or the legitimate expectation of a benefit, he is entitled to know 14. the case sought to be made against him and to be given an opportunity of replying to it... The reference to 'right or interest' in this formulation must be understood as relating to personal liberty, status, preservation of livelihood and reputation, as well as to proprietary rights and interests. The reference to 'legitimate expectation' makes it Clear that the doctrine applies in circumstances where the order will not result in the deprivation of a legal right or interest. Take, for example, an application for a renewal of a licence where the applicant, though he has no legal right or interest, may nevertheless have a legitimate expectation which will attract the rules of natural justice ... The expectation may be based on some statement or undertaking on the part of the authority that makes the relevant decision... Alternatively, the expectation may arise from the very nature of the application ... or from the existence of a regular practice which the person affected can reasonably expect to continue... The expectation may be that a right, interest or privilege will be granted or renewed or that it will not be denied without an opportunity being given to the person affected to put his case. ... It has been said on many occasions that natural justice and fairness are to be equated: ... And it has been recognized that in the context of administrative decision-making it is more appropriate to speak of a duty to act fairly or to accord procedural fairness. .... The law has now developed to a point where it may be accepted that there is a common law duty to act fairly, in the sense of according procedural fairness, in the making of administrative decisions which affect rights, interests and legitimate expectations, subject only to the clear manifestation of a contrary intention... But the duty does not attach to every decision of an administrative character. Many such decisions do not affect the rights, interests and expectations of the individual citizen in a direct and immediate way. Thus a decision to impose a rate or a decision to impose a general charge for services rendered to ratepayers, each of which indirectly affect the rights, interests or expectations of citizens generally does not attract this duty to act fairly. This is because the act or decision which attracts the duty is an act or decision: ... which directly affects the person (or corporation) individually and not simply as a member of the public or a class of the public. An executive or administrative decision of the latter kind is truly a 'policy' or 'political' decision and is not subject to judicial review ... 15. Where the decision in question is one for which provision is made by statute, the application and content of the doctrine of natural justice or the duty to act fairly depends to a large extent on the construction of the statute. In Mobil Of] Aust Pty. Ltd v. FC of T (1963) 113 CLR 475, Kitto J pointed out (at pp 503-4) that the obligation to give a fair opportunity to parties in controversy to correct or contradict statements prejudicial to their view depends on 'the particular statutory framework'. What is appropriate in terms of natural justice depends on the circumstances of the case and they will include, inter alia, the nature of the inquiry, the subject matter, and the rules under which the decision-maker is acting ... In this respect the expression 'procedural fairness' more aptly conveys the notion of a flexible obligation to adopt fair procedures which are appropriate and adapted to the circumstances of the particular case. The statutory power must be exercised fairly, that is, in accordance with procedures that are fair to the individual considered in the light of the statutory requirements, the interests of the individual and the interests and purposes, whether public or private, which the statute seeks to advance or protect or permits to be taken into account as legitimate considerations ... When the doctrine of natural justice or the duty to act fairly in its application to administrative decision-making is 30 understood, the need for a strong manifestation of contrary statutory intention in order for it to be excluded becomes apparent. The critical question in most cases is not whether the principles of natural justice apply. It is: what does the duty to act fairly require in the circumstances of the particular case?" The Secretary's decisions under clause 6(1)(c) are under an agreement of a special kind. It is a critical part of the system by which the Federal Government regulates domestic airlines in Australia. The other integers in the system are the Airlines Equipment Act 1958, the Independent Airfares Committee Act 1981, the Customs (Prohibited Imports) Regulations and the Airlines Agreement Act 1981 which authorised the Two Airlines Agreement. The Air Navigation Act 192¢ 16. and the Air Navigation Regulations are also part of the Federal regulatory system of airlines. The Secretary's decision is of an administrative character as it was made under the Two Airlines Agreement which is, by definition under sub-s. 3(1) of the Judicial Review Act, an "enactment": see Ansett Transport Industries Limited v. Taylor (Lockhart J., umreported, 23 December 1986) and Taylor v. Ansett Transport Industries Limited, (Full Court of the Federal Court, unreported, 23 April 1987). Decisions under clause 6(1)(c) may affect rights, interests and liabilities and give rise to legitimate expectations in the sense of which the High Court spoke in Kioa. The Two Airlines Agreement and the Airlines Equipment Act ("the Equipment Act") are intertwined. Decisions under clause 6(1)(c) of the Two Airlines Agreement may directly affect traffic estimates and capacity determinations made under ss. 12 and 18 of the Equipment Act. In the case of 3. 18, para. 18(4)(h) expressly requires that, when making estimates of traffic and determining aircraft capacity in relation to regional operators, the Minister shall have regard to: "the operation of paragraph 6(1)(c) of the agreement referred to in section 5 of the Airlines Agreement Act 1981" (i.e. the Two Airlines Agreement). The decisions also affect traffic estimates and capacity determinations of the two major airlines under s. 12 of the Equipment Act because the decisions will affect the right of regional operators to provide services over successive prescribed routes and therefore affect the distribution and extent of their traffic. 17. Decisions pursuant to clause 6(1)(c) are relevant to the estimates of traffic to be made by the Minister under both ss. 12 and 18. The effect under s. 18 is obvious, but it is also relevant to s. 12 because the Minister, when estimating traffic and making capacity determinations with respect to the two major airlines, must take into account the traffic of regional operators. This is a necessary part of the exercise to which the section is directed and will have an impact upon the traffic estimates and capacity determinations for the two major airlines. Also, para. 12(2)(q) of the Equipment Act requires the Minister to have regard to "any services operated otherwise than by the Commission or the Company". Traffic estimates and capacity determinations may have a real effect upon the disposition of aircraft by airlines with excess capacity and the acquistion of aircraft by airlines to ensure maximum capacity (ss. 13 and 19 of the Equipment Act). Clause 6(1)(c) decisions also, of course, directly affect competition between airlines over successive prescribed routes. The routes in question in this case are an excellent example. In my opinion a clause 6(1)(c) decision may result in the diminution or enlargement of the rights or interests of the three airlines in the broadest sense of these expressions as used in the cases and even in the narrower sense of proprietary rights and interests. The three airlines also may have legitimate expectations which will attract the duty of the Secretary to act fairly. The expectations arise from the circumstances to which I referred earlier. 18. It is no answer to assert that clause 6(1)(c) is but a clause in an agreement which does not expressly provide machinery for ensuring that the airlines have a right to be heard; especially since two of the three parties to the agreement are Ansett and Australian Airlines. It is true that it is an agreement; but for the reasons already given it is an agreement of a special kind. The agreement does provide in clause 7 for the appointment of an arbitrator to arbitrate certain matters including passenger revenue load factors and aircraft utilisation in the event that Ansett and Australian Airlines cannot agree on these matters. Clause 7 also provides that in reaching a decision on any of those matters the arbitrator shall have regard to submissions of both airlines and may seek information from and have regard to the Secretary or any other person that' the arbitrator considers appropriate. But this cannot be called in aid of the proposition that the absence of express provision in clause 6 to act fairly demonstrates that the parties did not then have any such requirement in mind. What clause 7 provides is no measure of what clause 6 does not provide. Each is concerned with different subject matter to the other. Nor does anything turn on the circumstance that the source of the obligation of the Secretary to act fairly is consensual. The critical consideration is that a clause 6(1)(c) decision can affect the rights and interests of each airline. The question in this case is not whether the principles of natural justice apply to the making of clause 6(1)(c) decisions, but what does the Secretary's duty to act fairly require in all the circumstances? 19. The content of the rules of natural justice varies according to the terms of the enactment (in this case the Two Airlines Agreement itself), the nature of the decision, the nature of the rights and interests and legitimate expectations of the parties: see Kioa (supra) at p. 347. A useful starting point is what I said in my judgment on 15 September 1986: "In my opinion clause 6(1)(c) does not require the Secretary to continually monitor the activities of regional operators where their scheduled passenger services are over successive prescribed routes that have the effect of linking two trunk route centres. It must be remembered that the Secretary is not himself a party to the agreement. He is designated by the parties to perform the tasks mentioned in the clause. The clause envisages that the Secretary will consider the two matters to which it refers if and when facts and circumstances are brought to his attention by Ansett, TAA, the Department of Civil Aviation or other department or instrumentality of the Commonwealth or by any other person. It is for the Secretary to decide when the occasion has arisen for him to embark upon the inquiry to which the clause is directed. It is important that questions of the construction and operation of the agreement, and the statutory and regulatory provisions which together constitute the current arrangements by which the Federal Government regulates the domestic air transport industry, be decided sensibly in accordance with the language of the provisions and with a view to making the system embodied in them work effectively. In my opinion it would be contrary to the language and purpose of clause 6 for it'to be construed so as to impose upon the Secretary the task of a continuous inquiry into the two matters to which it refers." No statement of the content of the duty can be made in any definitive sense to cover all possible occasions on which the Secretary embarks on a clause 6(1)(c) exercise. I confine myself to the facts of this 20. case, though some of my observations may have more general application. The Secretary is not required to conduct his enquiry under Clause 6(1)(c) as if it were a formal court hearing. Indeed it is important not to import curial procedures into the administrative process to which clause 6(1)(c) is directed. The critical point is that each of the airlines that may be affected hy clause 6(1)(c) decisions (that is each of the three airlines in the present case) must be given an opportunity to consider and deal with (whether by furnishing factual material or by making comments to the Secretary) matters which may affect its rights and interests in the enquiry, especially those adverse to it and which the Secretary proposes to take into account or not to take into account, as the case may be, in deciding the questions which arise in the enquiry. It is not necessary that the airlines, as Brennan J. stated in Kioa (supra) at p. 380: ",.- be given an opportunity to comment on every adverse piece of information, irrespective of its credibility, relevance or significance. Administrative decision-making is not to be clogged by enquiries into allegations to which the repository of the power would not give credence, or which are not relevant to his decision or which are of little significance to the decision which is to be made. Administrative decisions are not necessarily to be held invalid because the procedures of adversary litigation are not fully observed. As Lord Diplock observed in Bushell v. Environment Secretary, supra, at p 97: 'To 'over-judicialise' the enquiry by insisting on observance of the procedures of a court of justice which professional lawyers alone are competent to operate effectively in the interests of their clients would not be fair." 21. Nor is it necessary that any invitation of the Secretary to each airline to contribute material or comment be formal. Officers of the Department of Aviation and executives of the airlines see each other fairly frequently. They Know each other. Formality is not required. However, justice demands that they have a chance to contribute their views to the benefit of the airline concerned, the Secretary himself and in the end the public interest which requires that the regulation of Australian airlines be administered fairly and efficiently. The circumstances of the present case leave me toa conclude that, once the Secretary decided to consider the matters arising under clause 6(1)(c) with reference to the routes Sydney/Yulara and Yularla/Perth, fairness required that all interested parties should have been given an opportunity to submit material and comment from time to time as the occasion required. This should have been part of the administrative process in the course of the ebb and flow of communication between officers of the Department and executives of the airlines. The interested parties for present purposes are each of the three airlines. The content of the Secretary's duty to act fairly must be determined in the context that certain of the material before the Secretary for consideration is commercially confidential such as the material provided by East-West. Any such material would be advantageous to any competitor and therefore damaging to the airline who submitted the material. It is plain that during the continuing communication between the airlines and the Department, not only with reference to the decision presently under review, but generally, much confidential information is imparted to the Secretary by each airline. The protection of that information from disclosure to competitors is essential to the proper working of the administrative process. 22. Although neither Ansett nor Australian Airlines can have access to East-West's confidential material which it gave to the Secretary, I am not persuaded that material or comment which either of the two major airlines will give or make to the Secretary will be minimal or of little value. Questions concerning the methodology adopted by the Secretary for comparing figures for through and sector traffic (as distinct from the figures themselves which would appear to be in the confidential domain); the relevance and significance of seasonal factors; and the effect upon East-West's services, Sydney/Yulara and Yulara/Perth, of services provided by operating divisions of Ansett in competition to those operated by East-West are some of the matters which legitimately call for input from Ansett and Australian Airlines if they wish to participate. The fact that confidential material is involved in the decision-making process under clause 6(1)(c) does not negate the application of the rules of natural justice; rather it narrows the field of their operation. Ansett and Australian Airlines should have been given an opportunity to present material and make comments to the Secretary in the course of his determination under clause 6(1)(c) in the present case. His failure to give them that opportunity was to deny them natural justice. I should say in conclusion that it is manifest from the evidence before me that the Secretary performed his task in this case diligently and conscientiously, but the law requires that fairness be observed and this now must be done. 23. The decision of the Secretary made on 31 October 1986 is quashed. On the question of costs, Ansett and Australian Airlines have succeeded on the issue of natural justice, but otherwise have failed. East-West is a respondent to this proceeding and supported the Secretary's decision. The decision is, however, that of the Secretary. A proper order for costs is that the Secretary pay two-thirds of the costs of Ansett and Australian Airlines of this proceeding. East-West should not be ordered to pay the costs of any other party, but should bear its own costs. 1 certfy thet tis acc Rueben -\ue \22) precedes "ap-. 6 2c tt eoty re the og - Rear -. *s". oteoon ct lis Honour an é ct Lor et 7 fy Mr Sustee (eee? why pele' aad" Associate os , Dated: \W mead ASS) ote, Counsel and Solicitors for J.D. Merralls Q.C. with J. Karkar, Ansett Transport Industries and J.G. Santamaria instructed by Limited Messrs. Arthur Robinson & Hedderwicks Counsel and Solicitors for J.I. Fajgenbaum Q.C. with D. Beach the Australian National instructed by Messrs. Phillips Fox Airlines Commission Counsel and Solicitors for D. Graham Q.C. with J.E. Middleton Rae Martin Taylor instructed by the Australian Government Solicitor Counsel and Solicitors for W. Martin instructed by Messrs. East-West Airlines (Operations) Corrs Pavey Whiting & Byrne Limited Date of Hearing 27 and 28 April 1987 Date of Judgment 14 May 1987 «\ FEDERAL COURT OF AUSTRALIA SoV™ Ayepheret AM. DISTRICT REGISTRY Sree evese Tey DIVISION eeeceosreseseoseece - No of Action me.}n.. of 98... TITLE OF ACTION ary Beckovpr Este, 2.0, Yedy |. QIpsord i pet Bacteopiny Lees HVe CL, Wehaw $073 5 Ew parte G. Baltaln § Sw § Ora f Kentcts Pfc, Date(s) of hearing ax! see eeeeoee eeeeeee Date judgment delivered. Vol +] 47. .. 23,24,25,26,3) Manr'87 Uh, Bp 87" - . Counsel and we BAL Sa. Paw. QS, ete oe. Seeeeee Solicitors for nae Sate Team home tea tame . . . . . . . . . . . . . + e| ° . . . * . . . . . . . . . . . . . . . Giver, Tries, orf... Mealy. 4G bocce cccccecececcceceuceneees Cr ee ee eee ee Ce wT RTs, Wetting tee Pretverctt. (spots AREY. Stent Migs ccc cece Signed 2p TT TT wee e ce nacece eee ' (Associate) Dates ceccccevsevccserves (NOTH: To be despatched 'to Principel Registry, Sydney for on-forwarding to law publishers)