“Outsider” councils fly high in High Court decision: ‘direct and far-reaching ramifications’ give rise to relief

In March 2022, the High Court determined that “direct and far-reaching ramifications” of a contractual agreement between the government and two of Tasmania’s major airports gave reason to an order for declaratory relief that was sought by local councils, an “outsider” to the contract.

The High Court of Australia found that the councils each had a “substantial” and “distinctive” interest in seeking relief regarding the construction of [the contract] which was squarely within the scope of the third-party’s interest. Under the relevant clause, they were “active participants in the process established under that clause for the making of ex-gratia payments by the [airports] to the councils”.

The matter revolved around a continuing debate between Clarence City Council and Northern Midlands Council regarding the sum of substitute rate-payments owed by operators of Hobart Airport and Launceston Airport. The Commonwealth had entered leases with the airport operators 24 years prior in a bid to privatise Australia’s federal airports. Seeking to reduce the inequity that came from the airports on Commonwealth land resulting in not being required to pay council rates or state land tax. This new “level playing field” was facilitated by the inclusion of a clause in the contract that required the lessees to pay the applicable council a “notional” equivalent to the rates that would have been payable elsewhere.

A dispute as to the approach used to calculate such rates arose in 2014, when Tasmania’s Valuer-General conducted a revaluation. The Valuer-General provided that airports had to calculate the sum payable with the inclusion of land used as part of their ‘trading or financial operations’, such as departure lounges and check-in facilities, significantly increasing the amounts payable by the lessees to the councils. In a bid to remedy the lessees’ objections to the Commonwealth engaged an independent valuer who decided not to apply a value to the common user-areas.

The councils rejected this valuation and filed proceedings against the government, pursuing declaratory relief concerning the proper construction of the clause and the lessees’ obligations to make payments. They contended that the entirety of the airports was ‘rateable’ except for the areas occupied by the Commonwealth, or which comprise runways, taxiways, aprons, roads, vacant land, buffer zones and grass verges. The airports and the Commonwealth submitted that trading or financial operations were not intended to apply.

The Federal Court dismissed the application on the basis the councils lacked standing, but the Full Court in 2020 overturned the decision. Siding with the councils, the High Court majority considered that “the rights, duties and liabilities in dispute are private law rights, duties and liabilities of the Commonwealth and the lessees under the leases”, but nonetheless regarded the exceptional circumstances of the “outsider” councils to warrant relief. “The proper construction of the words ‘trading or financial operations’ in [the disputed clause] is of real practical importance to the councils, given their role under the leases.” The High Court held that the councils also “have real commercial interest in the relief. The meaning of the words ‘trading or financial operations’ … will bear upon the calculations made by the councils as to the quantum of the amount notified by the councils… hav[ing] direct far-reaching ramifications for the financial position of the councils.”

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