Sea Swift Pty Ltd v Torres Strait Island Regional Council

This case concerned “standard Maritime Fees” imposed by the respondent for the use of its barges and jetties on various islands in the Torres Strait. Each month, the applicant was required to self-report its usage of the various barges and jetties operated by the respondent. To incentivise compliance with the system of self-reporting the respondent imposed “Default Maritime Fees” payable upon failure to self-report. The respondent issued invoices to the applicant totalling $66 million for Default Maritime Fees. The applicant contended that the imposition of the Default Maritime Fees was beyond power or legally unreasonable. The Court held that the respondent had no power to impose the fees in the manner that they were imposed.

Applegarth J

4 September 2023

The Default Maritime Fee

The applicant, Sea Swift Pty Ltd, is a shipping company. [11]. The respondent, the Torres Strait Island Regional Council (“TSIRC”) governs 15 islands in the Torres Strait. [10]. TSIRC operates 15 barge ramps and finger jetties on these various islands. [10]. Since at least 2014, Sea Swift has used two to three vessels to service the various islands governed by the TSIRC. [12].

In 2014, TSIRC imposed a permit scheme for the use of its landing facilities. [13]. It was a requirement to lawfully access TSIRC’s landing facilities that Sea Swift hold a valid permit. [15]. The conditions of the permit included payment of all prescribed fees in accordance with TSIRC’s Register of Fees and Charges, and compliance with any lawful future condition imposed by TSIRC on the permit. [16]. Permit holders were required to pay “standard Maritime Fees” for use of the landing facilities. [13]. These fees were calculated based on inter alia the size of the relevant vessel and the amount of cargo loaded or unloaded at each landing facility. [13]. To allow TSIRC to calculate the amount of the standard Maritime Fees, permit holders were required to self-report their use of the landing facilities. [16], [18]. Sea Swift paid approximately $36,000 per month in standard Maritime Fees. [29].

In late 2014, TSIRC became concerned that permit holders were failing to submit self-reporting forms. [23]. To address this problem, a Council meeting in early 2015, directed TSIRC’s CEO to draft a letter “entailing the maximum charges for seaport charges – issue letter out to carriers endorsing maximum rate for non-reporting”. [27].

In accordance with this instruction, in April 2015, TSIRC issued a letter advising Sea Swift that where it failed to submit a self-reporting form by the due date a “Default Maritime Fee” (“the DMF”) would be imposed. [32]. A DMF was to be calculated for each of Sea Swift’s vessels. [32]. It was calculated by assuming that the vessel visited 14 landing facilities each week and unloaded its maximum carry capacity at each landing facility. [32], [35]. This calculation would result in Sea Swift paying over $200,000 per week if it failed to self-report. [29]. Notably, no council resolution was passed approving of the DMF, and the DMF was not included in the council’s schedule of fees and charges in any year except the 2017/18 financial year. [41], [45].

Issue of Invoices

In 2017, TSIRC became concerned that Sea Swift was inaccurately self-reporting. [60]. TSIRC passed a resolution delegating power to its CEO to investigate and litigate a dispute with Sea Swift about the inaccurate self-reporting. [63]. In March 2022, TSIRC used preliminary discovery processes in the Federal Court to discover more than 120,000 documents held by Sea Swift about its use of the landing facilities. [64]. TSIRC and its lawyers analysed these documents and identified 253 instances of alleged non-compliant reporting from 1 July 2014 to 30 June 2018. [66]. For example, in April 2015, Sea Swift reported that its vessel Malu Chief called to Yam Island four times, when it in fact called on the island five times. [67]–[68]. This under-reporting would have resulted in a slight underpayment of standard Maritime Fees.

On 20 December 2022, the CEO of TSIRC instructed lawyers acting for TSIRC to issue DMF invoices in relation to the 253 instances of non-compliant reporting. [67]. As a result, 253 DMF invoices were issued in the sum of just over $66 million. [83]. Unlike the DMF calculation described above, these invoices calculated the DMF on the assumption of 14 visits per week (or 60.67 per month) to every landing facility that the vessel in fact called on. [89]. The invoices gave Sea Swift only seven days to appeal the invoices and required that Sea Swift produce evidence of its actual use of the landing facilities in any appeal. [77].

Sea Swift challenged the validity of the DMF and the 253 invoices.

Relevant Legislation

Under s 9 Local Government Act 2009 (“LGA”), a “local government has the power to do anything that is necessary or convenient for the good rule and local government of its local government area”. [132]. Under s 262(3) LGA, the power under s 9 includes all powers that an individual may exercise including the power to “charge for a service or facility”. [133]. Notably, under the LGA, local governments cannot make local laws with a maximum penalty of more than 850 penalty units (which at the relevant time amounted to $63,750) [154]–[155].

In addition, s 10 Torres Strait Island Regional Council Model Local Law No. 1 (Administration) 2010 (“The Model Local Law”) allows the TSIRC to grant approvals on conditions the local government considers appropriate, where those conditions are consistent with any relevant local law. [147].

Validity of the Invoices

Sea Swift contended that the DMF was not consistent with s 262(3) LGA because it was not a charge “for” the use of the landing facilities, but was instead, in the nature of a penalty for non-compliance with the reporting regime. [150]. The court accepted this submission. The assumptions used to calculate the DMF, were out of all proportion with any conceivable actual use of the landing facilities, and this was known to TSIRC based on the documents disclosed by Sea Swift, referred to above. [156]. In addition, the 253 invoices did not account for payments already made by Sea Swift in respect of standard Maritime Fees. [157].

The court also accepted that imposition of a penalty in the nature of the DMF was inconsistent with the statutory scheme. [168]. The DMF far exceeded the maximum penalty that TSIRC was empowered to impose under the LGA. [159]. The power to do things that are “necessary or convenient” under ss 9 and 262(2) LGA does not allow TSIRC to depart from the statutory scheme. [161]. Further, given that the DMF was a penalty for non-compliance with the self-reporting regime, it was not a fee or charge “for” a service or facility within the meaning of s 262(3)(c). [170].

For similar reasons, s 10 of the Model Local Law did not support the imposition of the DMF. [187]. TSIRC argued that payment of the DMF was a condition of Sea Swift’s permit to use the landing facilities. [180]. The court rejected this argument. [187]. Given the inconsistency between the DMF and the LGA, the imposition of the DMF could not be considered by TSIRC to be an appropriate condition of the permit, as required by s 10 of the Model Local Law. [184].

On that basis, his Honour held that the invoices requiring payment of the DMF were invalid and gave declaratory relief setting them aside. In obiter, his Honour determined two additional issues. First, TSIRC did not pass a resolution concerning the local law. Instead, in effect, it allowed the CEO of TSIRC to determine how the DMF should be calculated and imposed. [191]. His Honour doubted whether the power to impose fees and charges could be delegated in that way. [232]. In any event, His Honour held that the resolution to allow the CEO to conduct litigation against Sea Swift was insufficient to delegate the power to impose the DMF. [233].

Second, if DMF was charged “for” the use of the facilities, the assumptions it made about hypothetical maximum use could not be supported. On that basis, his Honour would have held that the invoices were capricious and legally unreasonable given what TSIRC knew about Sea Swift’s actual use of the landing facilities. [238].

Third, providing only a seven day period to appeal the invoices was also legally unreasonable given the substantial steps that were required to respond to the invoices. [216], [240]. As such, it gave merely an illusory right of appeal. [216]. This problem could not be resolved by severance of the seven-day appeal period from the remainder of the invoice, as the effect of doing so would be to take away any right of appeal. [241]. As such, TSIRC’s failure to provide for a longer period to appeal the invoice would also have resulted in the invalidity of the invoices. [241].

L Inglis