The case of Sea Swift Pty Ltd v Torres Strait Island Regional Council [2023] QSC 203 concerned an application for review (Review Application) to the Supreme Court of Queensland (Court) by Sea Swift Pty Ltd (Applicant) against a decision of the Torres Strait Island Regional Council (Council) to issue 253 default maritime fee invoices totalling $66,543,146.37 in December 2022 (DMF Invoices) to the Applicant for a failure to accurately self-report their usage of the Council's cargo ship landing facilities.

The Court found that the Council did not have the power to impose the DMF Invoices and determined the DMF Invoices invalid.

The Applicant is an Australian shipping company, operating and shipping cargo in areas governed by the Council (at [11]). The Council imposes maritime fees for the use of its landing facilities calculated on a usage basis (Standard Maritime Fees) which is reported to the Council through a prescribed cargo self-reporting form (Self-Reporting Form) (at [13]).

Cargo shipping companies are also required to hold a valid Council issued permit, upon which the Council may impose conditions. The Applicant had maintained a permit since the introduction of the permit system in mid-2014 (Permit) (see [14] to [17]).

The Council had experienced issues regarding the failure of cargo shipping companies to self-report and decided to implement a default maritime fee (DMF) regime for "…failure to self-report by the due date" which was designed to impose a fee equal to the maximum fee payable by the largest ship in the cargo ship carrier's fleet as a way to deter non-reporting (see [29] and [37]). The initial DMF was $27,104 (GST inclusive) per week (at [32]). The Self-Reporting Form and DMF were incorporated as a condition on the Permit (at [32]).

After the notification of the DMF regime to cargo shipping companies, the then Council Chief Executive Officer (Former CEO) conceded that the DMF "…is likely to be considered a penalty and unenforceable", but upon the carrier showing evidence of their actual use, the Council is able to "…reverse the [DMF]…and issue a revised invoice for the correct fee…" and that it "…would expect no carrier to ever pay the [DMF]" (at [39]).

The Council was dissatisfied with the Applicant's submissions of the Self-Reporting Form, and in December 2021, applied to the Federal Court of Australia for a preliminary discovery application which sought the discovery of documents from the Applicant to evidence their use of the Council's landing facilities (Preliminary Discovery Proceeding) (at [64]). This resulted in the Applicant producing over 120,000 documents to the Council (Disclosure Documents) (at [65]).

After receiving the Disclosure Documents, the Former CEO instructed the Council's legal representatives to draft the DMF Invoices which were said to be based on the Council's discoveries from the Preliminary Discovery Proceeding, and subsequently delivered to the Applicant on 21 December 2022 for the period from April 2015 to June 2018 (at [67]). The DMF Invoices had a seven day appeal period which spanned two public holidays and a weekend during a period that the Council's offices were closed and the Applicant was operating with only skeleton staff (at [78]). The Applicant then commenced this Review Application.

During the conduct of the Review Application, the Court made a disclosure order requiring the Council to disclose certain categories of documents to the Applicant which evidenced the calculation and formation of the DMF Invoices. The Council claimed legal professional privilege over six of the documents, which lead the Applicant to commence a separate application for resolution on the documents' status in Sea Swift Pty Ltd v Torres Strait Island Regional Council [2023] QSC 160; [2023] 30 QLR (Resolution Application). In the Resolution Application, the Court decided that three of the six documents were covered by a valid legal professional privilege claim, one could be subject to a confidentiality order and be disclosed, and the remaining two were not covered by a valid legal professional privilege claim (Resolution Application at [69]).

The parties agreed the following list of issues (at [9]):

1. Whether the imposition of the DMF regime and DMF Invoices were authorised under section 9 and section 262(3)(c) of the Local Government Act 2009 (Qld) (LGA).

2. Whether the imposition of the DMF regime is within the scope of section 10 of the Torres Strait Island Regional Council Model Local Law No. 1 (Administration) 2010 (Model Local Law).

3. Whether the issuing of the DMF Invoices was legally unreasonable.

4. Whether the seven day appeal right was legally unreasonable.

Section 9(1) of the LGA provides that "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."

Section 262(3)(c) of the LGA provides that powers in support of responsibilities which "…include all the powers that an individual may exercise, including for example…power to charge for a service or facility, other than a service or facility for which a cost-recovery fee may be fixed."

The Court identified the following sub-issues when considering whether the DMF Invoices were authorised (at [152]):

"(a) Is the DMF a penalty for non-compliance with reporting conditions?
(b) Does it depart from, and is it inconsistent with, the scheme that the legislature has adopted to address non-compliance?
(c) Is the DMF 'for' a service or facility?"

The Court determined that the DMF was a penalty, for the reasons that:

1. the Council had ample information to determine actual use from the Preliminary Discovery Proceeding; and

2. "[r]ather than being a fee that reflected or approximated actual use, it was a heavy financial burden imposed for alleged non-compliance with reporting conditions" (at [158]).

Section 28(2) of the LGA prevents the Council from imposing a penalty of greater than 850 penalty units or $63,750 at $75 per penalty unit (at [155]). However, the DMF was set at "…$106,523.90 per week from 12 September 2016, $109,753.00 per week from 3 July 2017 and $472,032.40 per week from 29 June 2018" (at [155]).

As the DMF imposed a penalty much higher than that authorised under the law, the Court noted the power to do things that are "necessary or convenient" does not confer a power to depart from or vary a scheme that the legislature has adopted (at [160]).

The Court did not accept that the DMF is a charge for a service or facility as it is a charge imposed when the Council is unable to accurately calculate the Standard Maritime Fee, which adopts a different methodology for determining use (at [169]).

The DMF was designed as a proxy for the Standard Maritime Fee in circumstances in which it could not properly be calculated (at [171]).

The Court noted that if the DMF was intended to approximate actual use and being "for" the use of the facility then it might have connection to section 262(3)(c) of the LGA (at [171]). However, the DMF is not designed to reflect actual use, rather it is imposed for non-compliance with reporting requirements (at [171]).

The Court concluded that the DMF is not "necessary or convenient" in terms of section 262 of the LGA, read in light of section 9 of the LGA (at [172]). The Court noted the that DMF is a financial penalty which is inconsistent with the legislated scheme that provides for the imposition of a penalty up to a maximum amount (at [172]). The Court added that the DMF was purposely developed to "…not reflect actual use…" but as an incentive for operators to report actual use (at [174]).

The purpose of the Model Local Law is to "…provide a legal and procedural framework for the administration, implementation and enforcement of the local government's local laws, subordinate laws and specified regulatory powers under legislation, and to provide for miscellaneous administrative matters" (at [145] and section 2(1) of the Model Local Law).

The Model Local Law provides for the granting of an approval for a "prescribed activity", which includes "commercial use of local government controlled areas", being the cargo ship landing facilities in this case (at [146]).

Section 10(1) of the Model Local Law provides that an approval may be granted on conditions the Council considers appropriate, and section 10(2) of the Model Local Law provides that the conditions must relevantly:

"(a) be reasonably necessary to ensure that the operation and management of the prescribed activity will be adequate to protect public health, safety and amenity and prevent environmental harm; and
(b) be consistent with the purpose of any relevant local law.
…"

The Applicant submitted that the Council was not authorised to impose conditions it "considers appropriate" in accordance with section 10(1) of the Model Local Law since the conditions were inconsistent with a statutory scheme, namely exceeding the maximum penalty allowed under the LGA (at [179]).The Council submitted that the DMF was imposed by way of condition on the Permit, and that section 10 of the Model Local Law empowers the Council to grant approval on conditions (at [183]).

For similar reasons that were given in addressing the authorisation of the DMF under the LGA, the Court found that the DMF departs from the provisions of the Model Local Law, especially in connection with the maximum penalty for not complying with a condition of approval (at [184]).

The Court noted that if the condition had not been an authorised condition it would have been a "non-standard condition" which would have required the provision of an information notice, which was not issued (at [186]).

The Court concluded that the imposition of the DMF did not fall within section 10 of the Model Local Law (at [187]).

As the Court had previously found that the DMF Invoices were not authorised, the Court considered that it was unnecessary to decide the issue of legal unreasonableness concerning the issuing of the DMF Invoices (at [210]).

However, the Court did note in the context of the legal unreasonableness claim that the DMF Invoices equated to the Applicant having made "…60.67 scheduled stops to each island per month" during the period for which the DMF Invoices were issued, when the average for the Applicant was "…roughly equivalent to 56 stops per month for all 15 islands" (see [204] and [95]). The Court noted that if the Council's contention was that the DMFs were based on the Council's best estimate of actual usage, including the number of stops at each island each month, then the figures adopted by the Council could not be justified (at [205]).

However, the Court noted that if the "…DMFs were in the nature of a penalty (as [the Court has] found them to be), then the fact that they were calculated on the basis of hypothetical, maximum figures is unremarkable and would not render them legally unreasonable" (at [207]). If the DMF Invoices were a penalty, it would not be unreasonable to greatly exceed actual use in order to impose such a penalty (at [209]).

The Court found the inclusion of a seven day appeal period was unreasonable in the legal sense, given the timing of the DMF Invoices' delivery and the substantial steps that were required to be completed within the seven day period (at [240]).

The inclusion of a seven day appeal period affected the validity of the decision to issue the DMF Invoices. The Court noted that "…severance of that seven-day period would not save the invoice from invalidity" (at [241]). Severance would change the DMF Invoices from having an "inadequate appeal period" to having "no appeal period" (at [241]).

The Court declared that the imposition of the DMF Invoices was beyond the power of the Council and the DMF Invoices are invalid.