New South Wales Supreme Court CITATION : McHugh Holdings Pty Limited & Anor v Director General Communities NSW & Anor [2009] NSWSC 1359 HEARING DATE(S) : 03/12/2009 JUDGMENT DATE : 11 December 2009 JUDGMENT OF : Hoeben J DECISION : The summons is dismissed. The plaintiffs are to pay the defendants' costs of the proceedings. CATCHWORDS : ADMINISTRATIVE LAW - premises licensed under Liquor Act 2007 - making of regulation which had effect of adding to conditions under which those premises could operate - judicial review - alleged irrationality in decision-making process leading up to making of regulation - whether irrationality and Wednesbury unreasonableness established - whether decision of Director General subject to judicial review on Wednesbury unreasonableness grounds - whether judicial review of regulation available on Wednesbury unreasonableness grounds. LEGISLATION CITED : Liquor Act 2007 (NSW) Liquor Amendment (Special Licence Conditions) Regulation (No 2) 2009 (NSW) CATEGORY : Principal judgment Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 Alexandra Private Geriatric Hospital Pty Limited v Blewett (1985) 7 FCR 341 Bienke v Minister for Primary Industries and Energy (1996) 63 FCR 567 Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 Hemmes Trading Pty Limited & Ors v State of NSW & Ors [2009] NSWSC 1303 Hot Holdings Pty Limited v Creasy & Ors (1996) 185 CLR 149 CASES CITED : Htun v Minister for Immigration and Multicultural Affairs (2001) 194 ALR 244 at 259 HTV Limited v Price Commission [1976] ICR 170 McGuinness v State of NSW [2009] NSWSC 40; (2009) 73 NSWLR 104 Minister for Primary Industries and Energy v Austral Fisheries Pty Ltd (1993) 40 FCR 381 Mixnam's Properties Limited v Chertsey Urban District Council [1964] 1 QB 214 Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources [2005] NSWCA 10 Oates v Attorney-General for the Commonwealth of Australia [2001] FCA 84 McHugh Holdings Pty Limited - First Plaintiff PARTIES : Toby Robert Wilson - Second Plaintiff Director General, Communities NSW - First Defendant State of New South Wales - Second Defendant FILE NUMBER(S) : SC 30118/2009 COUNSEL : Mr JM Ireland QC/Ms M Allars - Plaintiffs Mr S Lloyd SC/Ms C Spruce - Defendants SOLICITORS : Bruce Stewart Dimarco Lawyers - Plaintiffs IV Knight, Crown Solicitor (NSW) - Defendants THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HOEBEN J Friday 11 December 2009 30118/2009 – McHUGH HOLDINGS PTY LIMITED & Anor v DIRECTOR GENERAL COMMUNITIES NSW & Anor JUDGMENT 1 HIS HONOUR: Nature of proceedings The plaintiffs move by way of summons for the following relief: "1. A declaration that the decision made by the First Defendant, to include The Colombian Hotel, Darlinghurst, of which the Second Plaintiff is the licensee, under the Liquor Act 2007 (NSW) (the Act), in Schedule 4 to the Act as declared licensed premises with a Level 1 licence subject to conditions in clauses 2A, 3, 4, 5, 6, 7 and 7A of Schedule 4, communicated to the Second Plaintiff by the Acting Director General, Mary Darwell, by letter dated 19 November 2009, enclosing a draft of Schedule 4 to the Act (the Decision), is invalid. 2. An order in the nature of certiorari quashing the Decision. 3. A declaration that the Liquor Amendment (Special Licence Conditions) Regulation (No 2) 2009 (NSW) (the Regulation), made by the Governor and published on the NSW legislation website on 20 November 2009 (the Regulation Decision), is invalid to the extent that item 1 of the Regulation includes in Table 1 – "Level 1 Licences", contains in clause 1(2) of the Schedule 4 to the Act, the entry "LIQH40010448 The Colombian Hotel, Darlinghurst". 2 The grounds for review were specified as follows: "1. The Decision is so unreasonable that no reasonable Director General could have reached it, in that in making the Decision the First Defendant: (a) applied a methodology in a manner which involved internal inconsistencies in counting assault incidents, as a consequence of which the Second Plaintiff's licensed premises were categorised as Level 1. … (b) applied a methodology which contained an uncertain and illogical basis for categorising licensed premises when the number of assault incidents had been counted, resulting in unfairness amounting to an abuse of power. 2. The Decision is infected by jurisdictional error in that the First Defendant failed to consider two integers of the Second Plaintiff's application for review, namely that: (a) The Second Plaintiff claimed that the number of assault incidents for E35761043 was one, not four; 3. The Regulation Decision is invalid to the extent that "LIQH40010448 the Colombian Hotel, Darlinghurst" is included in the Table for Level 1 in clause 1(2) of Schedule 4, since the inclusion of that entry in the table is exclusively based on the Decision which is itself invalid." 3 The summons was filed on 26 November 2009 and was heard on 3 December 2009 as an urgent matter. The urgency arose from the fact that the regulation came into effect on 1 December 2009. It is understood that a number of licensees whose premises were included in Schedule 4 to the Act as declared licensed premises as a result of the Regulation, wish to challenge it on various bases. Because the Court is not able to accommodate all of these applications, it is intended that this judgment and that in Hemmes Trading Pty Limited & Ors v State of NSW & Ors [2009] NSWSC 1303 will provide some guidance as to the validity of the regulation. Factual Background 4 The first plaintiff is the owner and operator of hotel premises at 117-125 Oxford Street, Darlinghurst and known as the Colombian Hotel (the Hotel). The second plaintiff is the licensee of the Hotel. The Hotel is the subject of Hotel Licence serial number LIQH40010448. 5 The effect of the regulation on the Hotel is that the licence will become the subject of a 2am lockout condition and the service of alcohol will have to cease 30 minutes before the time when the Hotel is required to cease trading. The Hotel is already the subject of a condition requiring the service of alcohol from 12 midnight to be in a container other than a glass, or breakable plastic container. 6 On 28 September 2009 the second plaintiff received a letter from the Director General of Communities, NSW (Director General) stating that on the basis of Bureau of Crime Statistics and Research Data (BOCSAR) the number of incidents of violence attributable to the Hotel was 24. The letter advised the second plaintiff of the potential consequences under the new system for licensed premises. 7 The letter provided as follows: "On 8 July 2009, the Premier announced a new scheme to regulate licensed premises with high levels of assault incidents. Details of the new scheme are contained in the Fact Sheet. This letter is the BOCSAR notification referred to in that Fact Sheet. On 8 September 2009, the NSW Bureau of Crime Statistics and Research (BOCSAR) released assault incident data for the period 1 July 2008 to 30 June 2009. A total number of 24 assault incidents were recorded in respect of your licensed premises. It should be noted that some premises have more than one entry on the BOCSAR list and where this occurs, these entries have been aggregated. Relevant event numbers are attached . Under the new scheme, a venue with this number of assault incidents would generally be characterised as a Level 1 venue and the corresponding additional special licence conditions would be imposed. Details of the conditions to be imposed for each level are set out in the Fact Sheet. These conditions would be in addition to any other conditions of the licence. However, in categorising a Level 1 or Level 2 venue, the Government will take into consideration any venue safety plan you submit within 28 days of the date of this letter. It will also take into account advice from Police that a particular assault incident should not have been recorded as having occurred on licensed premises, as well as any advice from the Director-General, Communities NSW on any submissions made by you. The procedures for submitting a venue safety plan, meeting with Police to discuss the assault incident data and making submissions to the Director-General, Communities NSW are outlined in the Fact Sheet (refer to the procedure for categorising Level 1 and Level 2 venues. For the purposes of the Fact Sheet, the date of notification is the date of this letter.) A copy of the request for review form is attached . If you do not submit a venue safety plan your premises will be categorised a Level 1 venue by amendment to Schedule 4. A senior NSW Police representative and I will be presenting an information session on the new scheme on Friday, 2 October at 9.30am in the Metcalf Auditorium, Macquarie Wing, State Library of NSW, Macquarie Street, Sydney." 8 Accompanying that letter was a document entitled "Fact Sheet" and a table containing information about 24 assault incidents at the Hotel. The table contained 21 events which referred to 24 incidents. At the bottom of the table the following was set out: "In certain cases, the number of events will not match the number of incidents, as events may have multiple incidents. Also, the COPS events numbers are drawn from the most recent data which, in certain circumstances, may have been updated since the production of the BOCSAR data." 9 The Fact Sheet had a heading "Scheme to Regulate Licensed Premises with High Levels of Assault Incidents" and a further subheading "Details of the New Scheme". The following parts of the Fact Sheet were relied upon in argument and are relevant to the matters under consideration. "The new scheme will primarily be implemented through a regulation which will amend Schedule 4 of the Liquor Act 2007. The next regulation will commence on 1 December 2009. Under this scheme, licensed premises with high levels of assault incidents will be categorised as Level 1, 2 or 3 venues, depending generally on the number of incidents over a twelve-month period. Additional special licence conditions will apply to Level 1 and 2 venues by amendment to Schedule 4. These conditions are in addition to any other conditions to which a licence is subject. Level 3 venues have no additional conditions. All venues subject to the scheme will be given education and support to strengthen their alcohol and security management and, consistent with standard practices, may be included in the routine risk based inspection program. Attachment 1 outlines the number of assault incidents that will generally correspond with each Level and the associated conditions, if any. The Government will generally categorise the licensed premises every 6 months on 1 June and 1 December, commencing 1 December 2009. However, the Government retains the discretion to amend Schedule 4 at any time without following the procedure outlined in this Fact Sheet. Categorisation of a venue will depend primarily on assault incident data released twice yearly by the NSW Bureau of Crime Statistics and Research (BOCSAR). This data is based on assault incidents recorded by the NSW Police Force as having occurred on licensed premises. It should be noted that some premises have more than one entry on the BOCSAR list and where this occurs these entries have been aggregated. However, in categorising a Level 1 or Level 2 venue by amendment of Schedule 4, the Government will also take into consideration any venue safety plan, any advice from Police that a particular assault incident should not have been attributed to a licensed premises and any advice from the Director-General, Communities NSW regarding submissions received from licensed premises disputing data, in accordance with the procedure outlined below. Once a venue is categorised as a Level 1 or 2 venue, it will remain in Schedule 4 for a minimum of 6 months. The Government will generally only consider omitting a venue from Schedule 4 following the BOCSAR notification (see below) and on submission of an appropriate venue safety plan, in accordance with the procedure outlined below. To be considered for omission from Schedule 4, a venue should have fewer than 12 assault incidents and should have an effective venue safety plan. Following release of the BOCSAR data, Communities NSW will provide written notification (the BOCSAR notification) to the following: (a) each licensee whose licensed premises (whether or not listed in Schedule 4) has 8 or more assault incidents attributed to it; and (b) each licensee whose licensed premises is listed in Schedule 4 and has less than 8 assault incidents attributed to it. The procedure for categorising venues, including removing venues from Schedule 4, is outlined below. Procedure for categorising Level 1 and Level 2 venues Your licensed premises will generally be categorised as a Level 1 venue if it has 19 or more assault incidents recorded against it in the data released by BOCSAR on 8 September 2009. It will generally be categorised as a Level 2 venue if it has between 12 and 18 assaults recorded against it. You should comply with the procedure below if your venue has 12 or more assault incidents recorded against in the BOCSAR data (regardless of whether it is currently in Schedule 4) and you wish to meet with Police to discuss the assault incident data, prior to categorisation. … Assault incident data If your licensed premises has 12 or more assault incidents attributed to it in the BOCSAR data, the BOCSAR notification will annexe further information about each assault incident (event number, time and date of incident and incident type). You have an opportunity to discuss the assault incidents attributed to your venue with your Local Area Command. If you wish to do this, you should complete and forward the Request for Review form (attached to the BOCSAR notification) to your Local Area Command as soon as possible after the BOCSAR notification to arrange a meeting ("the review meeting"). You are urged to take any material you believe would be useful to that meeting. At the review meeting you will have the opportunity to see the relevant records on-screen, discuss them with the Licensing Officer and decide if you still consider an incident should not be attributed to your venue. A report of the review meeting will be completed with you and provided to the Local Area Commander. This process must be completed within 14 days of the date of the BOCSAR notification. Within 72 hours of the review meeting, the Local Area Commander will assess if the specified incidents should be attributed to your venue and you will be provided with a copy of the Commander's assessment ("the assessment notification"). Attached to the assessment will be copies of the relevant records from the COPS database (with any third party personal information and health information deleted) for each incident you have disputed but which the Commander has assessed as being attributable to your premises. There is no need for you to submit an FOI application to obtain this information. A copy of the Commander's report will also be provided to the Director-General, Communities NSW to inform the advice to the Minister for the purposes of this scheme. Where a meeting is held and matters are resolved, the Commander will also advise Communities NSW if there is a change to any data which is attributable to the premises. You will also receive a copy of that advice. In the event that you do not agree with the Local Area Commander's assessment, you may make a submission to the Director-General, Communities NSW, setting out the reasons why you disagree. Your submission, if any, should be provided to the Office of Liquor, Gaming and Racing, Communities NSW … within 14 days of date of the assessment notification. The Director-General will have regard to your submission in providing advice to the Minister for the purpose of this scheme. …" 10 On 7 October 2009 the second plaintiff sent an email to the Commander Surry Hills Local Area Command for a request for review of the number of assault incidents recorded for the Hotel. Fourteen events were referred to. One of those events occurred on 31 October 2008 as a result of which four assault incidents were recorded for the Hotel. 11 On 9 October 2009 the second plaintiff and the General Manager of the first plaintiff attended a meeting with Sergeant Mort of the Surry Hills Local Area Command. During that meeting, a discussion took place concerning the disputed COPS event numbers, as identified in the request for review. At the end of that meeting, Sergeant Mort provided the second plaintiff with a document entitled "Review Process – Outcomes" which was then signed by Sergeant Mort and the second plaintiff. 12 On 15 October 2009 the second plaintiff received from the Commander Surry Hills Local Area Command, Superintendent Donna Adney, an undated document titled "Local Area Commander's Assessment Outcome" relating to the Hotel. The letter stated that she had reviewed the events, the reasons for the Hotel's grievances, the reviewing officer's advice and supporting documentation/evidence. She said that she was satisfied that the Hotel's grievances in respect of four events had merit and that she would recommend the removal of such events from the BOCSAR data attributed to the Hotel. She confirmed the other events and incidents. This meant that 20 incidents of violence were recorded for the Hotel. 13 In relation to the event of 31 October 2008 (E35761043) the basis for the review sought by the plaintiffs was: "It should only be recorded as one assault against the venue not four." When dealing with that event, Superintendent Adney provided the following explanation for rejecting that submission: "E35761043 31.10.2008 at 10:10 assault occurs inside in the Hotel and is directly attributable to the Hotel as the offender is inside the Hotel standing at the bar intoxicated and obstructing bar staff. The RSA monitor (victim) approaches the offender and asks her to move away and is subsequently punched in the jaw. Offender was too intoxicated at the time of the assault to be interviewed by police." 14 Included in that letter from Superintendent Adney was the COPS report in relation to the incident of 31.10.2008. It recorded that the first victim had been punched in the left side of the face by the offender. When a security officer escorted the offender from the Hotel, the offender spat on him. When police arrived a short time later, the offender kicked one of the police officers in the right upper thigh. When the offender was taken to the police station at Surry Hills, she pulled the hair of another police officer. In respect of that event, four incidents were recorded for the Hotel. 15 On 27 October 2009 the second plaintiff caused his solicitors to send a letter to the Director General making submissions following receipt of the Commander's Assessment Outcome. In respect of event E35761043, the submission was: "On the list of alleged assaults that you provided Mr Wilson in your correspondence dated 28 September 2009, there is the event number E35761043. This event occurred on 31 October 2009 at 10.10pm and is recorded as four separate events. This alleged assault should only be recorded once for the purposes of this exercise …" Later in the submissions, the solicitors said: "The Commander has not addressed the Licensee's grievance regarding this alleged assault. There was only one POI, who assaulted a staff member in the first instance, then while restraining the POI, security and police were assaulted. This is only one incident with one POI and four victims and should only be recorded as one incident." 16 On 20 November 2009 the second plaintiff received a letter from the Acting Director General, Communities NSW dated 19 November 2009 as follows: "I refer to the Communities NSW letter of 28 September 2009 regarding the new scheme to regulate licensed premises with high levels of assault incidents. I advise that the categorisation process for the new scheme has been completed and that the Liquor Amendment (Special Licence Conditions) Regulation (No 2) 2009 , which amends Schedule 4 of the Liquor Act 2007, has been made. I attach, for your information, a copy of the contents of Schedule 4 as it will appear after 1 December 2009. However, you should only rely on the official copy of the legislation which will be available at www.legislation.nsw.gov.au. I also advise that 20 incidents have been attributed to your venue. Accordingly, your venue will be included in Schedule 4 as a declared premises with a Level 1 licence. A Level 1 licence is subject to each of the conditions specified in Schedule 4 from 1 December 2009. The conditions are set out at clauses 2A, 3, 4, 5, 6, 7, and 7A. Venue names and attributed assault incident numbers will be published at www.OLGR.nsw.gov.au. Please note that a venue that is the subject of a Level 1 licence is required to select one or more additional security measures from the list prescribed in Clause 2A. Venues must notify the Director-General, Communities NSW, on the approved form (attached), of their selection and how it is proposed to be implemented by 15 December 2009. Under Clause 2A(3) and (4), the Director-General will approve, vary or amend the additional security measures and determine the implementation for the measures following receipt of your notification. The approved form should be completed and provided to the Office of Liquor Gaming and Racing Communities, NSW … I assume that implementation of the venue safety plan is underway. You should review your Venue Safety Plan after three months and again at intervals of at least six months…" 17 In his affidavit the second plaintiff said that as a result of the lockout condition, the gross takings for the Hotel would fall by about $494,000 for the six month period commencing 1 December 2009 and the net profit would fall by about $260,000 for the same period. 18 The legislative regime in the Act, applicable to the making of the regulation, is as follows: Section 11(1A): "Schedule 4 (Special licence conditions for declared premises) has effect. The regulations may amend that Schedule (including, without limitation, by adding or removing any relevant licence under that Schedule)." Section 159(1): "The Governor may make regulations, not inconsistent with this Act, for or with respect to any matter that by this Act is required or permitted to be prescribed or that is necessary or convenient to be prescribed for carrying out or giving effect to this Act." 19 The regulation was made in exercise of the power conferred by s 159 so as to engage s 11(1A). As indicated, the regulation took effect on 1 December 2009. Submissions 20 The plaintiffs did not rely upon a lack of procedural fairness. They acknowledged that the procedure laid out in the Fact Sheet was followed by the Director General and the Government. They accepted that they were given an opportunity of making submissions to Sergeant Mort, to the Local Area Commander and ultimately to the Director General. 21 The basis of the plaintiffs' case was this. The BOCSAR data was never designed as part of this new licensing scheme. The BOCSAR data, they submitted, was a collection of crime statistics which were assembled for a number of Government purposes. Their precise purpose was more fully discussed in McGuinness v State of NSW [2009] NSWSC 40; (2009) 73 NSWLR 104. 22 The plaintiffs submitted that the "grievance" procedure outlined in the Fact Sheet was designed to deal with criticisms which had been directed at the use of the BOCSAR data to identify liquor licences which were liable to have special conditions attached to them. They submitted that the procedure in the Fact Sheet enabled licensees to challenge the appropriateness of the BOCSAR data insofar as it applied to their venue. 23 The plaintiffs submitted that as a result of that process, a number of assault incidents would be attributed to a particular venue. It was in reality a scoring system. The plaintiffs submitted that if such a scoring system was going to be used to determine which licences would have special conditions attached to them, then at least internally, i.e. with respect to each particular venue, the scoring system should be consistent and coherent. 24 The plaintiffs submitted that in relation to the Hotel, there was clear inconsistency and incoherence in the way the scoring system had been applied. By reference to the particular events and incidents, some of which the Hotel disputed and some of which they did not, only one incident was recorded for the Hotel whereas it was clear from the COPS reports that there were on occasions multiple victims and potentially multiple incidents. Nevertheless, in relation to every event except that which occurred on 31 October 2008, only one incident was recorded for the Hotel. The plaintiffs submitted that the approach adopted for that event was quite different. Unlike the other events in the COPS reports, 4 incidents were recorded for the Hotel. 25 The plaintiffs submitted that the inconsistency and incoherence in the way in which that event and those incidents had been recorded for the Hotel were such that no reasonable decision-maker could have reached such a conclusion and that clear error in a Wednesbury sense had been demonstrated. This error arose, they submitted, from the failure by Superintendent Adney to properly answer the submission which had been made and the apparent adoption by the Director General of that flawed conclusion. 26 The plaintiffs freely admitted that the problem which they faced was how to fit what they regarded as manifest error into an administrative law framework so as to have the "decision" of the Director General declared invalid and quashed insofar as it affected the Hotel or to have the regulation declared invalid insofar as it affected the Hotel. 27 The issue was important for the Hotel because if the event of 31 October 2008 were treated as a single incident, the number of incidents recorded for the Hotel would fall below 19 so that the Hotel would be treated as a Level 2 venue, and the 2am lockout provisions would not apply. 28 The approach followed by the plaintiffs was to characterise the procedure set out in the Fact Sheet culminating in the decision of the Director General as an adjudicative process undertaken in the exercise of prerogative power. They submitted that its outcome was a decision of an administrative character made by the Director General. That decision was based on an earlier decision which was unreasonable in the Wednesbury sense or was itself unreasonable in that sense. Accordingly, it was liable to be quashed by way of judicial review. 29 The plaintiffs accepted that the decision in relation to the regulation involved a separate exercise of power. The regulation was made by the Governor on advice from the Executive Council and the Minister. Accordingly it was an exercise of power of a legislative character pursuant to s 11(1A) of the Act. The plaintiffs submitted that in the absence of any other indication, it could be inferred that the regulation decision was based on the decision of the Director General. In those circumstances, the plaintiffs submitted that the illogicality and Wednesbury unreasonableness associated with the counting of incidents in respect of the offence of 31 October 2008 also invalidated the regulation decision. 30 In support of their position, the plaintiffs relied upon the analysis of Wednesbury unreasonableness in Alexandra Private Geriatric Hospital Pty Limited v Blewett (1985) 7 FCR 341 (determination by Minister's delegate of a method for the calculation of fees payable to approved nursing homes by the Commonwealth) and Minister for Primary Industries and Energy v Austral Fisheries Pty Ltd (1993) 40 FCR 381 (management plan for a fishery based on statistical fallacy in the formula for calculation of catch history). The plaintiffs also relied upon the statements of principle in Bienke v Minister for Primary Industries and Energy (1996) 63 FCR 567, even though the Full Court in that case declined to find Wednesbury unreasonableness in relation to whether a prawn fishery's plan of management was scientifically flawed. 31 The plaintiffs submitted that in accordance with the analyses and the statements of principles in those cases, the inconsistency and illogicality of the approach to counting incidents in respect of the event of 31 October 2008 invalidated the decision of the Director General and the decision relating to the regulation. 32 In relation to Ground 1(b), the plaintiffs submitted that the new scheme described in the letter of 28 September 2009 and the Fact Sheet was itself uncertain. The source of that uncertainty arose from the Fact Sheet which they had received which referred to premises being categorised as a Level 1 venue if it had "more than 19 assault incidents" whereas other documents referred to categorisation at Level 1 if a venue had 19 or more assault incidents. 33 The plaintiffs submitted that this left venues with 19 assault incidents recorded against them in an uncertain position. As a result the new scheme created an uncertain and illogical basis for the review process and for the decisions which were to provide the foundation for the regulation decision. 34 To support that proposition the plaintiffs relied upon HTV Limited v Price Commission [1976] ICR 170. In that case the United Kingdom Price Commission issued two inconsistent rules about interpretation of legislation relating to the inclusion of tax payments as an item of costs charged by television program contractors. The Court of Appeal held that it was unfair, in the sense of an abuse of power, for the Commission to engage in this inconsistent approach to the legislation. 35 In relation to Ground 2(a), the plaintiffs submitted that when an application comes before a decision-maker, the decision-maker has to have regard to all elements of the application. In respect of the event of 31 October 2008, the issue raised by the plaintiffs was that only 1 assault incident should be recorded against the Hotel, not 4. That issue was not addressed by Superintendent Adney. In her explanation for her decision she referred to the first assault incident but not to the others. The Director General appeared to have followed the same approach. 36 The plaintiffs submitted that the error in such an approach could be seen by reference to decisions made in relation to protection visas. Where such applications were made on the basis of political opinion and religion, both elements should be considered and determined. The plaintiffs referred to the observation of Allsop J in Htun v Minister for Immigration and Multicultural Affairs (2001) 194 ALR 244 at 259 [42] where his Honour said: "It was not a failure merely to attend to evidence, even probative evidence, and by such route commit a factual error. It was a failure to deal with one part of the claim for asylum on the basis of his imputed political opinion." 37 The defendants submitted that the plaintiffs were in reality making a form of ultra vires submission in relation to the regulation. They submitted that what the plaintiffs were really submitting was that the effect of the regulation was so unreasonable that it could not be regarded as falling within the contemplation of the legislature when it passed the Act enabling the making of the regulation. The defendants submitted that this was the basis of the decisions in the Alexandra Private Hospital and the Austral Fisheries cases. They submitted that there was no recognised basis for holding that delegated legislation was ultra vires because of an alleged flaw in the advice given to a Minister who in turn gave advice to the Executive Council who gave advice to the Governor who made the regulation. They submitted that the plaintiffs' submission in this regard was without precedent and novel. 38 The defendants accepted that there was a form of "unreasonableness" ground of review available in relation to delegated legislation. They submitted that this was not a separate ground of review. It was a form of ultra vires as indicated and it was only available in an "extreme case" (Austral Fisheries per Lockhart J at 384). In that case Lockhart J cited with approval Diplock LJ's statement in Mixnam's Properties Limited v Chertsey Urban District Council [1964] 1 QB 214 (at 237) that: "… the kind of unreasonableness which invalidates a by-law is not the antonym of "reasonableness" in the sense in which that expression is used in the common law, but such manifest arbitrariness, injustice or partiality that a court would say: "Parliament never intended to give authority to make such rules; they are unreasonable and ultra vires". 39 The defendants submitted that the regulation was clearly within power. The effect of the regulation was to add certain licences to Schedule 4. That was precisely what s 11(1A), in terms, empowered the Governor by making a regulation, to do. That effect did not demonstrate the manifest arbitrariness or injustice to which Diplock LJ referred. The defendants submitted that they were unaware of any authority that supported a proposition that it was permissible to look behind the regulation and seek to invalidate it by challenging the reasonableness of an administrative step carried out by a public servant that preceded the making of the regulation. 40 The defendants submitted that it was the operation of the delegated legislation that was relevantly unreasonable in Austral Fisheries and which made the plan beyond the power conferred. The "statistical fallacy" identified in that case affected the operation of the delegated legislation. The defendants submitted that neither Austral Fisheries, nor the other fishery cases, supported the view that delegated legislation which operated in a manner within power should be held to be invalid because of an alleged flaw in advice from a public servant that played a role leading to the making of the delegated legislation. 41 While the defendants were not able to refer to a case which was directly on point, they relied upon what they regarded as an analogous principle, i.e. the principle applicable to administrative decisions where advice was given to a Minister and that advice was wrong. They submitted that putting aside legal error which affected the decision, such wrong advice did not per se render the decision invalid. The defendants relied upon the comments of Lindgren J in Oates v Attorney-General for the Commonwealth of Australia [2001] FCA 84 at [133] where his Honour said: "133 In any event, even if I thought the statement was an inadequate summary account of the effect of the correspondence, that inadequacy would not vitiate the decision of the Attorney to make the Request. While I infer, even in the absence of a statement of reasons for his decision to make the Request, that the statement attacked was one consideration to which the Attorney had regard, in the absence of a statement of reasons I do not know what significance, if any, the statement had. There is authority, drawn from another area, suggesting that the supposed inadequacy of the statement not vitiate the Request unless it amounted to a fraud upon the Attorney: see the warrant cases, Lego Australia Pty Limited v Paraggio (1994) 52 FCR 542 at 555, 569; Dunesky v Elder (1994) 54 FCR 540; Puglisi v Australian Fisheries Management Authority (1997) 148 ALR 393 (FCA/Hill J) at 400; Malubel Pty Ltd v Elder (1998) 88 FCR 242 at 259-261. No doubt the Departmental officers might have provided a more ample submission to the Attorney. They might have attached all the correspondence to their memorandum so that the Attorney could make his own assessment of the position. Alternatively, they might have stated in the memorandum that through his solicitors, Mr Oates had been corresponding on the subject of conditions on which he might be prepared to return voluntarily; … The statement that Mr Oates had refused to return voluntarily was made in good faith by persons who did not derive any advantage from it, and any inadequacy in it was due to inadvertence. In deciding whether to make the Request, the Attorney was not, in my opinion, bound to have regard to the consideration whether Mr Oates was willing to return voluntarily (there is no basis in the provisions or purpose of the Act for concluding that he was so bound). In all these circumstances, in my opinion, Mr Oates is not entitled to relief. " 42 The defendants submitted that the original list of licences in Schedule 4 was based on BOCSAR data. The list at that time was placed in the Act without the affected licensees having any opportunity to comment on the data collected by BOCSAR. The defendants submitted that it was difficult to see how an "unreasonableness" argument could be sustained which contended that Parliament could never have intended the Governor on the advice of the Minister to rely upon BOCSAR data because of alleged weaknesses in it or inconsistencies in it, when Parliament had itself chosen to act on that precise database when the original list was inserted in the Act. 43 For those reasons, the defendants submitted that no basis had been established for a declaration that the regulation was invalid. 44 The defendants submitted that orders 1 and 2 in the Summons concerning the validity of the "decision" of the Director General to include the Hotel in Schedule 4 of the Act and the quashing of that decision were fundamentally misconceived. 45 The defendants submitted that there was no such "decision". At most the Director General had provided advice or made a recommendation to the Minister. The Director General had no power to decide to include the Colombian Hotel in Schedule 4 of the Act. She could not, and did not, make a decision to do so. Had she purported to do so, the decision would necessarily have been ineffective. The defendants submitted that the Hotel was included in Schedule 4 by reason of the making of the regulation, not by reason of any advice provided by the Director General to the Minister. 46 The defendants submitted that in order to have standing, the plaintiffs had to identify an exercise of power by the Director General that "affected the plaintiffs' rights". The Director General's decision did not affect the plaintiffs' rights. The defendants relied upon the following statements of principle in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564. That case concerned the members of a Cabinet subcommittee seeking the advice of the Criminal Justice Commission with respect to the implementation of a Cabinet decision to introduce poker machines into the State. The Commission produced a report which reported adversely on the appellants, without the appellants being made aware that such an inquiry was being carried out and without the appellants being made aware of what matters had been alleged against them. The appellants sought relief by certiorari against the Commission. At 580 the majority said: "The function of certiorari is to quash the legal effect or the legal consequences of the decision or order under review. The report made and delivered by the Commission has, of itself, no legal effect and carries no legal consequences, whether direct or indirect. It is different when a report or recommendation operates as a precondition or as a bar to a course of action, or as a step in a process capable of altering rights, interests or liabilities. A report or a recommendation of that kind may be quashed, that is to say its legal effect may be nullified by certiorari. But the Commission's report is not in that category. The report may bear upon the appellants' prospects of obtaining licences under the Gaming Machine Act 1991 for that Act, … makes reputation a matter to be taken into account in determining whether a licence should be granted. However, like the report considered in R v Collins; Ex parte ACTU-Solo Enterprises Pty Ltd , the report does not "legally affect … rights", for it may be that the appellants will be granted such licence or licences under the Gaming Machine Act as they request "even … in direct opposition to any recommendations [made] in it" by the Commission. There being no legal effect or consequence attaching to the report, certiorari does not lie to correct the failure of the Commission to comply with its duty to proceed in a way that was fair to the appellants." 47 The defendants submitted that in the present case the advice of the Director General was a step in the procedure set out in the Fact Sheet but it was not a step in the making of the regulation required by the Act or any other law. The advice of the Director General had no legal effect itself. The Minister was not obliged to follow it. The defendants submitted that a declaration was ultimately a declaration of rights and that the Director General's advice did not change or affect any rights. Consequently, certiorari was not available. 48 The defendants also relied on Hot Holdings Pty Limited v Creasy & Ors (1996) 185 CLR 149. This case related to whether certiorari lay in respect of a preliminary decision by a mining warden in relation to exploration licences. At 159 the majority said: "Consideration of the requirement for certiorari that the impugned decision determines questions affecting rights, on occasion has been confused with a distinct body of principle. This concerns the existence of a requirement of procedural fairness. The conceptual distinction is neatly illustrated in the decision of this Court in Ainsworth v Criminal Justice Commission. In that case it was held that there had been a failure to observe the requirements of procedural fairness but, nevertheless, certiorari did not lie because no legal effect or consequence attached to the report in question. … Thus, for certiorari to issue, it must be possible to identify a decision which has a discernible or apparent legal effect upon rights. It is that legal effect which may be removed for quashing. This formulation encompasses two broadly typical situations where the requirement of legal effect is in issue: (1) where the decision under challenge is the ultimate decision in the decision-making process and the question is whether that ultimate decision sufficiently "affects rights" in a legal sense; (2) where the ultimate decision to be made undoubtedly affects legal rights but the question is whether a decision made at a preliminary or recommendatory stage of the decision-making process sufficiently "determines" or is connected with that decision." At 162 the majority said: "Thus, in the words of Steven J, one must ask whether there is a decision which constitutes some condition precedent to the exercise of power which will affect legal rights." And at 164 they said: "If Thomas J had been there indicating that, as the authorities now stand, a report which may be taken into account by an ultimate decision-maker sufficiently affects legal interests for certiorari, then, with respect, we would disagree. That conclusion would not be in accordance with the authorities to which we have referred. Certainly, Ainsworth may have been decided differently, because bodies acting under other legislation may well have been entitled to take into account the report of the Criminal Justice Commission in making a decision affecting legal rights. However, Thomas J indicates that certiorari lies where a preliminary decision must be taken into account by a body entrusted with the power to make a decision directly determining legal rights. We agree with that conclusion. That this was the point which his Honour sought to make is evident when he later said: "A line needs to be drawn between the "purely recommendatory" decisions and those which are regarded as having a sufficient effect upon the rights of an individual. In the former category there may fall Royal Commissions and recommendations which are not conditions precedent to the making of a final decision and which the final decision making body may ignore." If the final decision making body is not obliged to take the recommendation into account then certiorari will not lie." 49 The defendants submitted that for those reasons the advice provided by the Director General did not, and could not, alter the plaintiffs' rights. At its highest, they submitted, it was likely to influence the Minister. They submitted that it was an entirely novel proposition to suggest that the thinking processes that lead to a public servant providing advice to a Minister, who then advised the Executive Council, which then advised the Governor, who then makes a regulation, were amenable to judicial review. 50 The defendants submitted that insofar as the plaintiffs sought a declaration of invalidity, it was not meaningful to talk about the Director General's advice being "invalid". "Invalid" meant of no force or effect. The advice of the Director General, the defendants submitted, never had any force or effect in the first place – it was only ever an advice. 51 The defendants submitted that even if the advice to the Director General were amenable to judicial review, and even if the making of the regulation was open to judicial review, the plaintiffs' claim for relief would still fail for failure to establish that Wednesbury unreasonableness existed. For the plaintiffs to succeed they had to establish that the approach and advice of the Director General was not capable of rational explanation. 52 The defendants submitted that the procedure set out in the Fact Sheet used as its start point the BOCSAR data for the hotel. It then provided a methodology for persuading the Local Area Commander to adjust downward that data. A further opportunity was then given to make submissions to that effect to the Director General. 53 Inherent in that process was the fact that different police officers entering data into the COPS system might characterise incidents differently. It would be open to the Local Area Commander and/or the Director General to characterise separate assaults sharing some common feature as only one "assault incident". The defendants submitted that this would be a rational approach. They submitted that it did not follow, however, that if such an approach were not followed, that this indicated irrationality. Whether the Local Area Commander or the Director General formed a view that it was appropriate to count four assaults as four separate incidents or not, was a question of fact and degree and a matter of judgment. 54 The defendants submitted that the characterisation of how many assault incidents were to be attributed to a particular event was not a question of mathematics. It was a judgment on which reasonable minds might differ. It was a question of fact. 55 They submitted that the adoption of a broad-brush approach was not irrational. Nor was it irrational for the Director General to adopt a generous view in relation to some events, where assault incidents had been undercounted in the BOCSAR data, but to refuse to adjust the assessment of other assault incidents which had been fully counted in the BOCSAR data. Consideration 56 The plaintiffs' case depends upon the Court finding that the Director General's apparent refusal to treat the event of 31 October 2008 as one assault incident rather than four was unreasonable and illogical in the Wednesbury sense. Lord Diplock has described a decision as Wednesbury unreasonable where it: "Is so outrageous in its defiance of logic or accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it" ( Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374). That is a difficult test to satisfy. 57 The plaintiffs submit that the unreasonableness and illogicality in the Director General's "decision" arises from the different way in which incidents and events attributed to the Hotel have been treated. They point to a number of events which potentially could have been characterised as giving rise to more than one assault incident but were not so reported in the BOCSAR data. They were recorded as one assault incident only. In the case of the event of 31 October 2008, the BOCSAR data recorded four assault incidents. I have concluded for a number of reasons that there is no "unreasonableness" or illogicality in the apparent advice of the Director General and that this fundamental premise has not been made out by the plaintiffs. 58 The plaintiffs' argument fails to properly understand the methodology set out in the Fact Sheet. The start point for making a determination about the Hotel was the BOCSAR data. Much of that data favoured the plaintiffs for the reasons referred to, i.e. that on a number of occasions one assault incident was recorded when there was a potential for more. The Fact Sheet stated that the purpose of any submissions was to enable a venue owner to contend that "an incident should not be attributed to your venue". There was no suggestion that in the course of discussions with the Local Area Command there would be any increase in the number of assault incidents beyond that recorded in the BOCSAR data. The only issue to be discussed was whether "an incident should not be attributed to the venue". The particular venue at that stage had the advantage of any undercounting which had taken place when the BOCSAR data was produced. It follows that any inconsistency between that BOCSAR data which favoured the venue and data which did not, did not properly arise for consideration. 59 In relation to the Hotel, the COPS report of the event of 31 October 2008 established a number of matters. The first was that the POI was intoxicated and that her state of intoxication had occurred as a result of her drinking at the Hotel. Due to her intoxication, she perpetrated at least four assaults, two within the Hotel, one just outside the Hotel and one at the police station. As a matter of factual causation, all of the assault incidents could be properly attributed to the POI's state of intoxication. 60 When the Hotel's solicitors made submissions in relation to this incident, they argued that since there was only one POI and four victims, only one incident should be attributed to the hotel. That was an approach to attribution which was open to the Director General to make but she was not obliged to do so. It was just as open to follow a factual causation approach and regard the event as giving rise to four assault incidents. In fact one might think that the latter approach was more logical than that suggested by the hotel's solicitors. 61 Given the methodology outlined in the Fact Sheet, while it was not open to the Director General to reconsider the BOCSAR data so as to increase the number of incidents attributed to the Hotel, it was certainly open to her to look at the facts of a particular event and to conclude that in conformity with the BOCSAR data and COPS report, there were four separate assault incidents and they were properly attributable to the Hotel. Not only does such an approach not get close to Wednesbury unreasonableness, it was an approach which was fully consistent with the methodology set out in the Fact Sheet. Such an approach did not involve any statistical fallacy, nor was it the product of a statistically flawed formula. I have concluded that the plaintiffs have failed to establish the first step in their argument, i.e. that the "decision" or advice of the Director General was irrational or unreasonable in the Wednesbury sense. 62 This finding is sufficient to dispose of the plaintiffs' claim. In deference to the submissions put in relation to the other issues, I propose to deal briefly with them. 63 I agree with the defendants' submission that orders 1 and 2 in the Summons are misconceived. There was no "decision" as such by the Director General. At most she provided advice or a recommendation. The Fact Sheet clearly identifies the function of the Director General as "providing advice to the Minister". 64 That being so, the advice or recommendation by the Director General did not affect the plaintiffs' rights in the relevant sense. The distinction was made clear in Ainsworth and Hot Holdings. The advice of the Director General had no legal effect of itself. Moreover, the Minister was not obliged to follow it. It follows from those cases and from the defendants' analysis that there was no relevant decision to be declared invalid and that certiorari was not available in respect of the Director General's advice or recommendation. 65 As the defendants accepted, the regulation itself was susceptible to challenge on the broad ultra vires basis which was identified in the Alexander Private Hospital and Austral Fishery cases. There "unreasonableness" was a basis for setting aside those regulations. 66 The difficulty for the plaintiffs is that in those cases and the other cases to which the Court was referred, the "unreasonableness" was in the operation of the regulation not in the process leading to advice which in turn, led to the making of the regulation. In that regard, the analogy drawn by the defendants with the situation of incorrect advice being given to a Minister, such as was described by Lindgren J in Oates, has force. 67 In any event, for the reasons already discussed the advice or recommendation by the Director General was not "unreasonable" in the relevant sense and so the issue does not properly arise for decision. 68 The issue raised by Ground 1(b) does not arise. Whereas the Fact Sheet originally sent to the plaintiffs was incorrect in that it referred to "more than 19 assault incidents", that error was corrected within 24 hours. It is clear from the submissions made on behalf of the plaintiffs and from correspondence, that they clearly understood that the Hotel would be exposed to Level 1 classification if 19 or more assault incidents were attributed to it. As a matter of fact, the uncertainty referred to in the plaintiffs' submissions simply did not exist. 69 The plaintiffs' submissions in respect of Ground 2(a) were directed at the apparent failure of Superintendent Adney to address the specific complaint made concerning the event of 31 October 2008. Even if that complaint were made out, and the decision of Superintendent Adney was subject to judicial review on that basis, the submission in respect of Superintendent Adney's approach was put fully and in considerable detail to the Director General. There is no evidence to support an inference that the Director General in providing her advice to the Minister failed to have regard to that part of the submission made by the plaintiffs to her. 70 In this matter both sides accepted that in accordance with the observations of Spigelman CJ in Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources [2005] NSWCA 10 where a decision is irrational, illogical or not based on findings or inferences of fact supported by logical grounds, it may be set aside. The plaintiffs' claim has failed because they did not establish the basic premise that the "decision" (or more accurately the advice on which the decision was based) was irrational, illogical and not based on findings or inferences of fact supported by logical grounds. 71 While acknowledging the legal basis for this application, it should be noted that the real issue was the plaintiffs' dissatisfaction with the refusal by the various persons who participated in the evaluative process to accept their submission concerning the event of 31 October 2008. There was, in my opinion, a real overlap in this matter between the legality/merits dichotomy, which is so important in the Australian approach to administrative law. The difficulty for the plaintiffs arose from the blurring of that distinction in their attempt to elevate a merits issue to a question of law. 72 For the reasons set out above, the plaintiffs' claim fails and the summons should be dismissed. 73 The orders which I make are as follows: (i) The summons is dismissed. (ii) The plaintiffs are to pay the defendants' costs of the proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.