Hobart International Airport Pty Ltd v Clarence City Council & Anor; Australia Pacific Airports (Launceston) Pty Ltd v Northern Midlands Council & Anor [2021] HCATrans 160 (12 October 2021)

Last Updated: 13 October 2021

[2021] HCATrans 160

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Hobart No H2 of 2021

B e t w e e n -

HOBART INTERNATIONAL AIRPORT PTY LTD

Appellant

and

CLARENCE CITY COUNCIL

First Respondent

COMMONWEALTH OF AUSTRALIA

Second Respondent

Office of the Registry
Hobart No H3 of 2021

B e t w e e n -

AUSTRALIA PACIFIC AIRPORTS (LAUNCESTON) PTY LTD (ACN 081 578 903)

Appellant

and

NORTHERN MIDLANDS COUNCIL

First Respondent

THE COMMONWEALTH OF AUSTRALIA

Second Respondent

KIEFEL CJ
GAGELER J
KEANE J
GORDON J
EDELMAN J
STEWARD J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION TO BRISBANE, SYDNEY AND MELBOURNE

ON TUESDAY, 12 OCTOBER 2021, AT 10.00 AM

Copyright in the High Court of Australia

____________________

KIEFEL CJ: In accordance with the remote hearing protocol, I will announce the appearances of the parties.

MS K.A. STERN, SC appears with MS L.A. COLEMAN for the appellants in each case. (instructed by Corrs Chambers Westgarth, Tierney Law and King & Wood Mallesons)

MR S.B. McELWAINE, SC appears with MS K. CUTHBERTSON for the first respondents in each matter. (instructed by Shaun McElwaine + Associates)

MR S.P. DONAGHUE, QC, Solicitor‑General of the Commonwealth of Australia, appears with MR C.L. LENEHAN, SC and MS K.E. FOLEY for the second respondent in each matter. (instructed by the Australian Government Solicitor)

KIEFEL CJ: Yes, Ms Stern.

MS STERN: May it please the Court. This appeal raises two key issues. The first is whether the doctrine of privy of contract is engaged in this application for declaratory relief as to the meaning and effect of the lease, given that the applicants seek only to vindicate rights under the contract, and do not rely on any separate legal entitlement or legal wrong. The second is the.....questions of whether, in this case, there is a matter, or the councils have standing, given that the councils are merely seeking to vindicate an expected benefit under a contract between others, and the contracting parties are agreed as to the proper interpretation and effect of the contract. Your Honours, at the outset we observed that success on the second of these issues is not predicated upon success on the first.

If I could take your Honours first briefly to the relevant facts and ask your Honours to go to the joint book of further materials at page 46. There, your Honours will see the details of the claim advanced in the Hobart proceedings – if I can call it that – and your Honours will note for the Launceston proceedings, relevantly identical save that there were different years involved – and that is at page 95.

What your Honours will see is that the claim in these proceedings is for declarations pursuant to section 21 of the Federal Court Act. Firstly – and your Honours will see at paragraph (a) - as to the proper construction of clause 26.2 of the lease; secondly, a declaration that the second respondent is obliged to make payments to the applicant – so that is that the airport lessees as I will refer to the appellants – are obliged to make payments. Your Honours would note that, on any view, that is an application seeking to enforce obligations under the contract to which the councils are not a party. Thirdly, a declaration that the airport lessees have not correctly calculated the amount of each of the ex gratia payments, namely seeking a declaration that the airport lessees have not complied with their obligations under a contract; and, finally, a declaration as to how the payment is to be calculated – again it is a declaration as to the proper construction of the contract.

Then your Honours will note that in addition to the declaratory relief, the councils are seeking further or other consequential relief for the calculation of any shortfall in the ex gratia payment required to be made. Your Honours will note that there is an issue in these proceedings – and I will come to it in more detail later – as to whether this an application to enforce obligations under a contract. We say manifestly having regard to the terms of the relief sought, it is.

Secondly, as to whether or not in this case there would be any order that could be made were the councils to be given the declarations that they seek and exercise liberty to apply to seek to enforce, we say the further relief that would be granted were that to arise would be orders consequential upon the declarations that the council was seeking, namely, that would be orders for payment consistently with the terms of the declarations that are being sought. Really, when one looks at the application, we say there can be no real issue but that this is an application which engages the doctrine of privity of contract.

If I can then ask your Honours to turn through to page 51 of the joint book of further materials. There your Honours will see the characterisation of the dispute and this comes from the statement of claim in the proceedings. Your Honours will see, firstly, at paragraph 4.1 there is a contention that the amounts:

have not been determined and calculated in accordance with clause 26.2(a) –

namely, effectively a declaration that there has been a breach of the obligations under the contract and, secondly, at paragraph 4.2 the dispute goes to the interpretation of the lease.

The only matters that are relied upon in support of this application for relief are matters arising under the contract to which the councils are not a party and the only rights sought to be vindicated by this application are rights which are owed as between the contracting parties. That is an immediate point of distinction between the present cases and cases like CGU or the other insurance cases where the applications seek to vindicate statutory rights to priority. There is nothing analogous to that in the present case. If I could then ask your Honours to go ‑ ‑ ‑

EDELMAN J: Ms Stern, is that right? The language of the Full Court, particularly at paragraphs 177, 178 and 179, talks about the councils as participants deriving benefits under the lease, as participating in the process of receiving benefits, and as being invitees to the contractual relationship. Now, I appreciate that it was not argued that this was a trust of a benefit under the contract, but all of that, that is all the language of trust of a benefit.

MS STERN: Well, your Honour, paragraph 178 and onwards of the Full Court’s judgment is identifying the role of the councils as participants, namely their role which is a notification role, which arises under the terms of clause 26.2(a). There, that notification law, we would say, would be insufficient to found any trust analysis and, indeed, the councils expressly disavowed any reliance upon a trust, and we would say rightly so, because the participation role that is being referred to by the Full Court at paragraph 178 is simply a role which we would say is analogous to that of a valuer or perhaps some other party - a certifier in some construction contracts - who would have a separate role which is independent of the specific contractual obligation, namely, the obligation that is owed by the airport lessee to the Commonwealth to make payment.

Similarly, whilst there is the expected benefit on the part of the councils, we say that is insufficient to manifest any intention sufficient to create a trust of contractual obligations along the lines that was identified, for example, in Trident. So, your Honours, we say that the matters that the Full Court refers to would be insufficient to give rise to a trust of a contractual obligation so as to create a relevant exception to the doctrine of privity.

EDELMAN J: I am sure you will take us to the terms of the contract, but it does seem that there is a lot more that would suggest the inference of a trust than there was in Bahr v Nicolay where two members of this Court found an express trust created by intention.

MS STERN: Your Honour, I will take your Honours to the terms of the lease and, your Honour, it is our submission that here, rather than a trust of contractual obligation, this is a situation where effectively the councils are no more than one would see, for example, in Tweddle v Atkinson or one of the earlier cases, somebody who - one party promised another that there would be a benefit which would be conferred on the third party, but that there is no manifest intention that that would form the basis of a trust. So, your Honour, I will come back to that when I address this in the terms of the lease and I will come to those in a moment.

Before turning to that, if I could ask your Honours to go back to the book of further materials at page 39, and here I am seeking to take your Honours to documents that go to the relative positions of the contracting parties. Your Honours will see here this is a letter from 5 May and it is from Pip Spence of the Department of Infrastructure and Regional Development. It is addressed to Mr Parry, Hobart International Airport Pty Ltd.

This sets out the agreement between the Commonwealth and the airport lessees that the airport lessees will be considered to be completely compliant with the obligations under clause 26.2 if they are to make payment consistent with the methodology set out in the Herron Todd White report, and your Honours may have appreciated that Herron Todd White are valuers who were appointed by the Commonwealth to value the airport sites for the purposes of clause 26.2 of the lease, and your Honours will see the second paragraph:

The Department is confident the revised draft report correctly interprets, and treats all areas of the airport in a manner consisted with, the terms of clause 26.2 –

Then the fourth paragraph:

The Department considers that the review process, which was agreed by both parties prior to commencement, is finalised. Going forward, in the absence of formal agreement between the parties, the Commonwealth intends to consider HIAPL compliant with its lease obligation.

Then your Honours will see at the top of page 40 a letter was written in “similar terms” to the councils. Your Honours will then see the further letter which is from the Minister, the Honourable Mr Darren Chester MP, at page 42 of the joint book of further materials and your Honours will note the second paragraph:

I am advised by my Department that the recent independent review process regarding this matter has established methodology for the determination of ex‑gratia rates which is consistent with the terms of the Hobart Airport Lease.

So your Honours will see that in the case there was indeed complete agreement as between the two parties to the contract, both as to the construction and as to the effect of clause 26.2. If I can then take your Honours to clause 26.2 of the lease – which your Honours will have at page 35 of the joint book of further materials - - -

GAGELER J: Ms Stern, in taking us to that letter, are you seeking to found an argument that the parties have to be subjectively in dispute about legal rights for a matter to arise?

MS STERN: Your Honour, the submission that we make is that no matter arises when there are the two criteria satisfied. The first is that the only interest that the applicant seeks to vindicate is an expected benefit under a contract and, secondly, that the contracting parties are agreed as to the proper interpretation and effect of the contract.

So, your Honour, the answer to that question is where the only interest.....vindicated.....the declaratory relief is a right under the contract, then if the parties to the contract are in agreement as to the construction and effect of the contract, such that there is no controversy, then there can be no matter and no standing. So, your Honour, the answer really is the two criteria.

GAGELER J: All right. You might have to explain then in due course how a matter arises in a class action – where you have an applicant seeking to vindicate rights of persons who the applicant may have no relationship with directly, and who may not even know that they have a claim against the respondent. But do not let me take you out of your course now.

MS STERN: Your Honour, I am perfectly happy to deal with that now because the difference that we would say is there there is a legal right to be vindicated and that is the right – or legal interest in avoiding a wrong – and I want to be cautious because we do not say in every case the applicant has to have a legal right as such, rather we say that the interest that has to be vindicated is either vindication of that legal right or avoidance of a legal wrong. We raise that as we seek to explain the public law cases. But in a class action, whilst the applicant is bringing an action as representative of others, the applicant will also have a legal right to be vindicated or will be bringing a claim seeking to vindicate or right a legal wrong.

So, your Honour.....in that way from the situation here, where the key really to our case is that, in this case, the applicants are nothing more than entities who expected to receive a benefit under a contract between other parties, and they rely on nothing more than that expectation of a benefit.

The critical distinction in that regard – and one can see it clearly from CGU v Blakeley, where the Court relied in its reasoning on the two factors, firstly that the applicants were seeking to vindicate statutory rights to priority under the Corporations Act and more contingently the Bankruptcy Act; and, secondly that the parties to the contract were in dispute. Both those factors were identified as being of critical significance to the analysis of jurisdiction and standing in that case.

If I can turn then back to the terms of clause 26.2 of the lease, which your Honours will have at page 35 of the joint book of further materials, and your Honours will see the heading “Ex Gratia Payment in lieu of Rates and Land Tax”, and there is no dispute here but that rates, as such, are not payable, because the land is Commonwealth land. Your Honours will see that the obligation on the lessee set out in the second line of clause 26.2(a) is to:

promptly pay to the relevant Governmental Authority –

here, the councils:

such amount as may be notified to the Lessee by such Governmental Authority as being equivalent to the amount which would be payable for rates as if such rates were leviable or payable in respect of those parts –

and here is the second important qualification, it is only in respect of those:

parts of the Airport Site:

(i) which are sub‑leased to tenants; or

(ii) on which trading or financial operations are undertaken –

and the key dispute in the case as to construction lies as to what the meaning of the “trading or financial operations” in 26.2(a)(ii) means.

STEWARD J: Ms Stern, and let me know if you are having trouble hearing me, what is the significance of the last sentence of paragraph (a), and in particular, in your view, does (a) create a liability to make the payment, or does (a) only impose on your client an obligation to use reasonable endeavours to enter into an agreement with the councils which would then create the liability to pay the exigible amount?

MS STERN: Your Honour, that point of construction was raised below and our submission is that, firstly - and if I go back one step from your Honour’s question - the obligation to make payment is not of the amount that is notified necessarily, it has to be the amount that relates to the correct areas. So, the obligation is only to pay, provided that the amount relates to the correct areas. Secondly, that to the extent that there is any obligation, the obligation is to use:

reasonable endeavours to enter into an agreement –

But on the facts, your Honour will note that, certainly in the relevant years that are the subject of the councils’ application, the resolution of the amounts that the airport lessees are required to pay has been through the report of Herron Todd White, which was commissioned by the Commonwealth, and so even where there is a contention or a dispute as to whether or not the amount notified correctly reflects the terms of the lease, the payment, as one would expect on any commercial construction, can still be effected, and has been effected, and the lease obligations have been complied with by the parties agreeing as to what the correct payment is, and as to what the correct payment methodology is.

GORDON J: Can I ask a question about that, Ms Stern. It seems to me that there may be a distinction needed to be drawn between the claim period, which is past conduct, and in the letter you took us to from both the Commonwealth Department as well as the Minister. Whether it is looked at in terms of trust or whether it is look at in terms of contractual performance, it said there has been complete performance for the relevant period in issue. So it may very well be, on a trust analysis, the trust has been performed.

If you come to a rateable period, which is a year, is it not that there is a dispute between, in effect, the benefit of the contractual provision, which is the councils and the lessees, about this underlying fact, i.e., what part of the relevant property is subject to trading or financial operations?

MS STERN: Your Honour, can I deal with that in two parts. Yes, there is a dispute ad to what is the meaning of the trading or financial operations and that is a dispute which relates both to the past and as to the future, but, secondly, if I can ask your Honours to go back to page 39 of the joint bundle of further materials, your Honours will see that, as to the future, the Commonwealth indicated – your Honours will see that just below 30 on the left‑hand margin, third line into that paragraph:

the Commonwealth intends to consider HIAPL compliant with its lease obligation should it make payments in lieu of rates . . . on the basis of a valuation and methodology consistent with the revised . . . report.

GORDON J: Yes. My point, though, is the bit which you have left out, which is:

in the absence of a formal agreement between the parties –

being an agreement between the councils and the lessee. In a sense, that is the dispute for the future and the dispute is, I think, correctly identified being the proper construction for present purposes of what is trading or financial operations in respect of the airport site.

MS STERN: Your Honour, there is that dispute ‑ and your Honour rightly identifies it – that could potentially be relevant as to whether or not reasonable endeavours might ultimately produce an agreement, but as between the parties to the lease, there is no dispute as to the proper construction of clause 26.2(a) or, indeed, as to what the trading or financial areas, if I just use that term, are.

STEWARD J: Ms Stern, sorry to interrupt you. Can I ask a more basic question. I am sorry to trouble you in this way, but for the purposes of any future agreement between the councils and the lessees, are those parties free to choose between (i) or (ii) as to what the de facto rateable areas are to be? In other words, does the relief sought here assume an agreement where the parties have already agreed that the rateable areas are to be as determined in (ii)?

MS STERN: Your Honour is referring to clause 26.2(i) or (ii) and it has to be either of those. So if they are subleased or trading or financial operations are undertaken on them, they fall within the ambit of clause 26.2. So it can be either.

STEWARD J: Should we read the “or” as cumulative, that it is both (i) and (ii), or (i) or (ii)?

MS STERN: Your Honour, it has been interpreted as an obligation which would apply as regards the two – well, either/or, so if they:

are sub‑leased –

they are in, or if they are:

on which trading or financial operations –

they are in. I am sorry, your Honour, it is slightly confusing as to alternative or cumulative. In terms of what the relief that is sought, the relief that is sought - and perhaps I could just refer back to this, but if any of your Honours wish to go back it is page 46 of the joint bundle of further materials - is that the declaration, and your Honours will see it in (b) on page 46, that:

the second respondent is obliged to make payments to the applicant pursuant to clause 26.2 of the lease:

(a) calculated in accordance with valuations –

and notified. So the relief that is sought is not that the obligation is to enter into an agreement, or undertake reasonable endeavours to enter an agreement. The relief that is sought is that there is an obligation to make payments consistent with what the councils say should be the interpretation of clause 26.2, and it is in that context that one has to consider the question of whether or not there is standing or a matter, and that is that what the councils are seeking to vindicate is what they say is an obligation on the airport lessees to make payment in accordance with their construction of clause 26.2(a), and that is where we say no, they cannot do that, because that obligation ‑ ‑ ‑

EDELMAN J: Ms Stern, is the effect of your construction that if the letter on page 39, rather than setting out the particular methodology from the valuers that the Commonwealth was adopting, had instead said that the Commonwealth did not propose to enforce the obligations under clause 26.2 in any way, then, even without amounting to a variation of the agreement, the Commonwealth could remove any obligation to make any payments to the council, unilaterally, in that way and there would be no recourse for the councils?

MS STERN: Your Honour, I mean, this really is one of the issues that arises when you have third parties seeking relief under a contract, but what we would say to that is that if there was complete agreement between the councils – between the airport lessees and the Commonwealth that the clause was not to enforced, then, again, that would be a situation in which the councils were not able, themselves, to come to court to seek to vindicate something which is nothing more than an expected benefit.

So yes, it may be in that situation that there would be arguments about waiver or estoppel, or potentially one could raise arguments.....satisfaction, I am not sure, which depend on the facts, but, your Honour, yes, that would be a matter between the contracting parties and, if they were to reach agreement in that way, then we would say no, the councils could not come to enforce the obligation because it is an obligation owed to another.

EDELMAN J: So, if it truly is a contractual obligation between the parties which does not give rise to any trust benefit, or anything like that, why would the final sentence of 26.2 concern the parties in any way? Why would the Commonwealth want an undertaking from the lessees that they will:

use all reasonable endeavours to enter into an agreement with the relevant Governmental Authority -

What is the purpose of having that sentence at all?

MS STERN: Your Honour, we would say that on a commercial construction of clause 26.2, the way that it operates is that there is the obligation and that the lessees have also agreed to seek to reach an agreement with the councils as to how that will be affected, and – for payments. The two are not inconsistent in that – of course it might be that the Commonwealth might, somewhat unexpectedly, say, okay we are no longer going to enforce that clause – if they were not to enforce that clause, they would not be enforcing the promise on the lessee to use reasonable endeavours to enter into an agreement.

So, it is part of the.....way in which the clause operates, but it is not inconsistent with the parties to the lease themselves being able to reach agreement as to how the clause is to be interpreted and, if they are to do so, the fact of the matter is there is no controversy – there is no dispute. That obviously is of significance as regard to ‑ ‑ ‑

GLEESON J: Ms Stern, what do you say is the meaning – or what is the scope of the agreement that is contemplated by the last sentence of 26.2:

an agreement . . . to make such payments.

MS STERN: I anticipate what your Honour is asking is whether that is simply mechanistic or whether it is an agreement as to what the payment shall comprise. Your Honour, our answer to that is that it is an agreement to use reasonable endeavours to reach an agreement which could readily contemplate both the substance – namely what the payment comprises – and the mechanism for the payment.

We do not say – well, firstly – and I think I should probably make this clear now – we do not say that that last sentence of clause 26.2 gives the councils any right to be vindicated. In that way, that is an important distinction between this case and a case like CGU v Blakeley, but also an important distinction between this case and how the case of Aussie Airlines was analysed both by Justice Lockhart and then, as that was interpreted by Justice Nettle in CGU, namely, that there, there was a legal right to be vindicated, and that was – Justice Lockhart, I think, described it as the right to carry on business.

But there, there was a provision in the lease that compelled Qantas to grant a sublease and we say that the reasonable endeavours obligation in the last sentence of clause 26.2 falls well short of that form of obligation – it does not compel the airport lessees to enter into an agreement and it does not give the councils any contingent right that they seek to vindicate.

KEANE J: Ms Stern, is your submission in relation to the last sentence of 26.2(a) that even if reasonable endeavours are made and no agreement is entered into between the council and the lessee, that, in that event, the earlier provisions of 26(a) just have no effect at all?

MS STERN: No, your Honour. Our submission is, even when there is no agreement and, indeed, even where the amount notified does not reflect the proper construction then, as has happened here repeatedly year on year, there remains an obligation on the airport lessees to make ex gratia payments in lieu of rates, and that is what the airport lessees and the Commonwealth are agreed has been done and will continue to be done compliantly with the obligations under the lease if the airport lessees continue to make payments consistent with the methodology that was set out in the Herron Todd White report.

STEWARD J: Ms Stern, could I ask you this, and perhaps trying to understand your argument, absent an agreement between the lessee and the council, the council has no entitlement at law to be paid. So that is the first proposition.

MS STERN: Yes, your Honour.

STEWARD J: Unless such an agreement is entered into your case, as I understand it, is that the council as an outsider never has anything more than an expectancy of a benefit which may or may not accrue to it. So is that your case?

MS STERN: Yes, your Honour, that is exactly our case.

STEWARD J: Thank you.

MS STERN: I am grateful for your Honour’s clarification.

EDELMAN J: Ms Stern, does that mean that until an agreement is entered into between the lessee and the relevant councils, the Commonwealth is in the position of effectively administering any payments that are required to be made, administering in the way that it has gone about it by obtaining valuer’s reports and so on?

MS STERN: Your Honour, as a matter of practice or history, that is what happened in that the airport lessees raised a concern about this and the council proposed that the way forward would be that the council would instruct Herron Todd White to conduct a valuation and significantly, your Honours, the council instructed Herron Todd White what areas to value. So the council instructed the valuers as to what areas fell within (i) and (ii) of clause 26.2.

Your Honour’s question goes a little further than that in asking whether it is for the Commonwealth to administer. What we would say is it is an obligation that the lessees owe to the Commonwealth, namely the obligation to pay. Just as easily it could have been the lessees who proposed a solution or proposed to the Commonwealth that they would instruct a valuer and, indeed, for one of the years the lessees in fact instructed Herron Todd White, rather than the Commonwealth.

So it does not require that the Commonwealth administer the obligation as such. The simple fact of it is, unless there is an agreement entered into between the councils and the airport lessees, the obligation is one which the airport lessees owe to the Commonwealth and not to the councils, and the councils have ‑ ‑ ‑

EDELMAN J: Does that not mean, really, that the effect then of the reasonable endeavours clause or the purpose of the reasonable endeavours clause is to effectively release the Commonwealth from any concern in maintaining, administering or deciding upon the appropriateness of any amount that is being paid?

MS STERN: Your Honour, there would be a question whether, even if an agreement was entered into, there would still potentially be issues between the Commonwealth and the airport lessees as to what is required for compliance. So it does not release the Commonwealth from the obligation because the Commonwealth remains the person to whom the obligation in clause 26.2(a) is owed and that obligation would not be truncated by any agreement between the airport lessees and the councils.

Equally, your Honour, the presence of that clause could stand against any construction of clause 26.2(a) as intending to confer trust because the presence of that clause suggests that the only rights or obligations owed to the councils would be if – and it is not required; it would be an “if” – an agreement were, in fact, entered into between the airport lessees and the councils.

KIEFEL CJ: Ms Stern, if clause 26.2 provided that the lessees pay the sums to the Commonwealth, would a trust arise then?

MS STERN: I am sorry, your Honour; I did not catch the end of ‑ ‑ ‑

KIEFEL CJ: If clause 26.2 provided that the lessees pay the amount there described to the Commonwealth, would a trust then arise in relation to the councils?

MS STERN: Your Honour, it would not be a trust of a contractual obligation because the contractual obligation would be one just to make payment to the Commonwealth. Whether there might ‑ ‑ ‑

KIEFEL CJ: As you read clause 26.2 now, there is clearly intended to be a benefit to the councils. Would you agree?

MS STERN: Your Honour, yes. It clearly contemplates that money will be paid to the councils consistent with its terms.

KIEFEL CJ: It is a term of a contract for the benefit of a third party, which, in States like Western Australia and Queensland, third parties can actually enforce, but we do not have that here. Really my question is directed to your contention that there is not a manifest intention to create a trust and all I am seeking to say is would that problem be removed if there was a mechanism by which the amount was paid in the first place to the Commonwealth, who then paid it to the councils?

MS STERN: Yes, your Honour. If the term of the obligation was simply upon the airport lessees are required to pay a sum of money to the Commonwealth, then in contractual terms one simply would not be in the area of looking at the trust analysis because there would be an enforceable obligation under the contract to pay money to the other party to the contract.

Whether there might then be a trust which arose between the Commonwealth and the councils would really be a separate question, which would not turn on, or would not be something which would impact upon the contractual obligations of the airport lessees.

KIEFEL CJ: Except that the – it would be a little clearer, perhaps, that the councils could enforce the trust.

MS STERN: Well, that would be a matter to consider whether or not there was an intention to create a trust as between the Commonwealth and the councils. It would not be a trust of a contractual obligation, which is really the analysis that has been focused upon in cases like Trident. So the question really would be, then, whether or not one would, as a matter of trust law, say that that is either an implied trust or some form of other trust that would arise separately between the council and the Commonwealth.

EDELMAN J: It is very hard to see how, if the Commonwealth had undertaken to receive money on behalf of the councils, that there would not be a trust of the money that would be held by the Commonwealth, and if that is so, it is only a small step to say the Commonwealth here is not undertaking to hold any money for the councils, but it is undertaking, effectively, to administer the 26.2(a)(i) and (ii) obligations - unless and until reasonable endeavours have been fulfilled to enter into an agreement.

MS STERN: Well, your Honour, our response to that – obviously if there was the language that your Honour has suggested, then that may be different, but just looking at the clause as it stands, we say the question that your Honours would ask is whether, having regard to the clause as a whole, the intention as between those parties was to create a trust such that there would, in effect, be – councils would have some beneficial interest in the obligation as such, and we say when you look at the last sentence that stands against that because it suggests that the parties’ intention was that if there were to be any kind of obligation owed to the councils that would be the subject of the reasonable endeavours obligation leading to an agreement entered into and the fact of that inclusion of the last sentence of clause 26.2 stands against the trust analysis.

Your Honour, we would say that the mere fact that there is a contract that contemplates that money will be paid by one of the contracting.....to a third party, of itself does not establish, is not sufficient to show that there was an intention to create a trust and ‑ ‑ ‑

KEANE J: Ms Stern, why would not one read the last sentence of 26.2(a) as indicating that the value of that provision to the Commonwealth is that it ceases to have responsibility for the administration of the clause where the parties made an agreement because in such a case the councils then get legal rights fully enforceable in the usual way, whereas prior to that the Commonwealth is involved inextricably in the administration of a provision, the benefit of which is plainly for the councils. What the Commonwealth gets out of performance of that last sentence is the Commonwealth gets off the hook as administrator and the councils get fully enforceable legal rights. Why would not one look at it that way?

MS STERN: Your Honour, the difficulty we would say with that analysis is that the obligations that the airport lessees owe to the Commonwealth remain, irrespective of whether or not there is any agreement entered into between the airport lessees and the relevant council. So the analysis that your Honour suggests would have resonance were it the case that the obligation that the airport lessees owed to the Commonwealth is only until such time as they enter into an agreement with the councils. But that is not the way the clause operates. The clause operates such that there is an extant and continuing obligation as between the airport lessees and the Commonwealth and there is also the reasonable endeavours clause or the reasonable endeavours sentence at the clause.

GORDON J: Ms Stern, the way that Justice Keane just put it to you is maybe informed also by subclause (c) which seemed to be in similar terms to (a) without the reasonable endeavours clause. So it is clear in that situation that there is no – the Commonwealth is in a different position under (c) than it is under (b).

MS STERN: Your Honour, yes, and there is – (b) is there would be money that would be payable to the Commonwealth, and (c) is taxes and stamp duty, payroll tax, et cetera which would be imposed on a governmental authority. Your Honour is quite right, there is no reasonable endeavours obligation at the end, but the key submission we make in this regard is simply that the obligation under 26.2(a) is neither conditions upon nor, if you like, truncated were it the case that there were an agreement entered into between the airport lessees and the councils.

KIEFEL CJ: Ms Stern, do you agree that the Commonwealth could enforce the reasonable endeavours clause against the lessees?

MS STERN: Yes, your Honour.

KIEFEL CJ: And on whose behalf would it be enforcing it?

MS STERN: The Commonwealth would be doing it on the Commonwealth’s behalf as the other contracting party.

KIEFEL CJ: Although it receives no benefit from it except a non‑administration benefit?

MS STERN: There could be benefits to the Commonwealth and it is the Commonwealth who is the party to whom the obligation is owed. Your Honours, in this regard there is some relevance as to the intention of the parties underlying clause 26.2(a) and the rates equivalent payments.

In particular, that is probably seen most clearly at page 95 of the appeal book as reflected in the judgment of the Full Court. Your Honours will see at page 95, paragraphs 12 and 13 of the judgments of the Full Court. That sets out that the Commonwealth’s concern, which underlay the inclusion of clause 26.2(a) – seen clearly at paragraph 13 – stems from a principle of competitive neutrality, namely, to ensure that competition was maintained and not undermined as between those who would be leasing premises on the airport land where rates would not be payable, as against those who may be leasing on other land, if we use the Hobart example, within Hobart, where rates would be payable.

The concern did not stem from a concern to ensure that the councils were receiving money. The concern of the Commonwealth was to maintain competitive neutrality. That is significant because it shows that the Commonwealth interest in administering this clause, clause 26.2 of the lease, is an interest in maintaining competitive neutrality and they have that continuing interest, even if it were to reach an agreement with the airport lessees, and that is a significant factor which would be relevant as to whether or not there would be inferred an intention to create a trust.,

Also it goes to – your Honour Justice Keane was identifying the Commonwealth’s interest in having the clause administered, but the Commonwealth’s interest is in having the clause administered in a way that the Commonwealth wants it administered, namely to maintain competitive neutrality.

STEWARD J: Ms Stern, just so I understand that, you say that the benefit to the Commonwealth is compliance with the competition principles agreement. Is that how it is put?

MS STERN: Not necessarily with compliance with the competition principles agreement but that the benefit to the Commonwealth is in having a clause that maintains competitive neutrality and your Honour is quite right that that was reflected in the competition principles agreement but rather goes beyond that.

There has been no issue in these proceedings but that that was the benefit sought to be given to the Commonwealth by the inclusion of clause 26.2 in the lease. So it was to ensure that there was competition as between businesses operating from an airport site and businesses operating off an airport site. That gives the Commonwealth a continuing interest in the clause, irrespective of what the position is as between the airport lessees and the councils.

If I could take your Honours, still in the appeal book, to pages 101 and 102. Your honours will see there paragraph 35 right at the bottom of page 101. There the councils’ position in these proceedings is that, as one sees at the second and third line on page 102:

they are not asserting any statutory entitlement . . . nor do they claim that the benefit of a contractual promise was held on trust for them.

They are just seeking:

declaratory relief on the basis that they are directly and financially concerned in the correct interpretation the leases, and the application the leases -

So that is the position of the councils in the proceedings, and that is the basis upon which the proceedings have been here debated.

If I could turn then from the terms of the lease and the factual background to two preliminary submissions we seek to make as to matter and standing, and your Honours should have our outline of oral argument, and these are referred to in paragraphs 3 to 6 of our outline of oral argument.

The first preliminary submission we make is that whilst there is obviously overlap between the questions of matter and standing, the requirement of standing has continuing significance, whether that is as an element of whether there is a justiciable controversy, or as a separate requirement.

Your Honours, in that regard, we draw your Honours’ attention, and firstly your Honours will see this, the extract in paragraph 46 of our written submissions‑in‑chief at page 15, to the statement from the then Chief Justice French in Kuczborski v Queensland [2014] HCA 46; (2014) 254 CLR 51 at paragraph 5, that:

an affirmative answer to the question – is there a matter? - may not be sufficient to answer the question whether the plaintiff has standing.

Secondly, and if I could ask your Honours to go to the decision of the judgment of this Court in Truth About Motorways v Macquarie, that your Honours will have at volume 4, tab 26, page 1132 of the joint book of authorities, I wanted to take your Honours to page 611, in particular paragraphs 45 to 46 in the judgment of Justice Gaudron and in paragraph 45 Justice Gaudron is identifying that neither:

“judicial power” nor the constitutional meaning of “matter” dictates that a person who institutes proceedings must have a direct or special interest in the subject matter . . . “questions of ‘standing’, when they arise, are subsumed within the constitutional requirement of a ‘matter’.” This does not mean that, for the purposes of Ch III, questions of standing are wholly irrelevant.

Her Honour identifies that there may be cases where, absent standing, there is no justiciable controversy, and identifies in particular an example that:

a court could not make a final and binding adjudication with respect to private rights other than at the suit of a person who claimed that his or her right was infringed.

Your Honours, we rely upon that for two reasons. Firstly, it is the recognition that questions of standing or sufficient interest remain of significance to the question of whether or not there is a matter, but secondly, the recognition that when one is looking at adjudications with respect to private rights, the court would find that there was no justiciable controversy where the application is brought other than at the suit and the claims his or her right was infringed. That is of course what we would say is precisely this case, in that the councils do not seek to vindicate any right of their own, nor do they contend that any right of theirs was infringed in any way.

If I could ask your Honours then, whilst your Honours have this case to hand, to turn back please to page 602, paragraph 17, which is in the joint judgment of Chief Justice Gleeson and Justice McHugh. Your Honours will see there a reference to Phelps v Western Mining Corporation, but in particular we rely upon the description of section 52 of the Trade Practices Act that is being referred to:

to protect the public from being misled or deceived. An application for injunctive relief –

under the Trade Practices Act as:

one for the protection of the public interest.

That is relevant to our second preliminary submission, namely that, when one is looking at the approach taken to the question of standing to seek declaratory relief in public law cases, the analysis of the sufficient interest test which has been applied is predicated upon the declaration seeking to vindicate a public right or to protect.....harm to the public interest or a public wrong, or to constrain exercises of executive power within its proper bounds and that is - - -

GLEESON J: Ms Stern, clause 26.2 can readily be characterised as designed to pursue a public interest, at least in the sense that it is designed to achieve competitive neutrality.

MS STERN: Your Honour, in that regard, we draw a distinction between a public right, or a public duty, and something like clause 26.2, which is included in a private agreement, but which has a policy concern, which is one that the Commonwealth was seeking to advance. So, in that regard ‑ ‑ ‑

GLEESON J: Is it really a public agreement when it is an agreement that is created pursuant to a statute? Does “private agreement” mean anything more than agreement?

MS STERN: Your Honour, the distinction that I would be drawing as between, for example, a planning agreement or something of that nature.....sometimes sees as an exercise of particular statutory rights, we would say perhaps the word “private” is otiose but it is a contract – it is a lease that gives rights to private rights and in that sense we would say there is a very real distinction between obligations under that lease and obligations, for example, under section 52 – or what was section 52 of the Trade Practices Act which is being referred to in paragraph 17 that I have just taken your Honours to.

GAGELER J: Ms Stern, are you able to articulate the distinction upon which you rely between “public” and “private”?

MS STERN: Your Honour, the distinction that we rely upon is a distinction which rests upon what is the predicate or the underlying context within which the declaration is sought. Our submission is that you cannot have standing to seek a declaration unless you are seeking to vindicate some right which may be actual or contingent, or right some wrong that is legally recognised.

GAGELER J: The distinction goes back to the Chancery Division case of Boyce I think around the turn of the 20th century. That may not be the origin, but it is normally associated with that. Even in that case the distinction was perhaps a little blurred and perhaps this case shows that the distinction is difficult to maintain.

MS STERN: Your Honour, there will always be cases where it is difficult to articulate whether one is looking at the private or the public, but that does not matter for our argument. What our argument is, is that when one is looking at whether there is standing to seek declaratory relief or whether there is a matter, to use the Australian constitutional framework, one has to look to see whether there is some legally recognised right or wrong to be vindicated.

Your Honour, we say that if one is looking at, for example, Truth About Motorways or a number of public law cases, that which is sought to be vindicated is the avoidance of a public wrong of a sort that is legally recognised, and that may be the distinction between this case and the.....responded to your Honour Justice Gleeson’s question.

EDELMAN J: Ms Stern, is the distinction that you are relying upon really the same one as Lord Wilberforce made in Gouriet’s Case and Justice McHugh in Bateman’s Bay described as a foundational principle, which is that public rights are rights that are enforced for the benefit of the public generally, not for the benefit of the individual, and usually those rights then have to be enforced via a related proceeding or through the Attorney‑General because they are rights for the benefit of the public at large. Is that essentially the distinction you are drawing?

MS STERN: Your Honour, yes, it is exactly the distinction we are drawing, and when one looks at the cases, what one sees is that there are private law cases like Russian Commercial and Industrial Bank or Forster v Jododex, seen in that category too where you are having a declaration sought which is unquestionably between individuals who have legally recognised rights that they are seeking to vindicate, and the questions in those cases are whether or not declaratory relief should be awarded when there are other forms of relief that may be thought to be more proper.

So one looked at the different form of proceedings. In the Russian Commercial and Industrial Bank or in Forster v Jododex the question was whether or not this was an issue that should be determined by the mining warden. Then when one came to the public law context, the question was whether or not the vindication of public rights of itself was sufficient when one was looking at an action by a member of the public, as opposed to by the Attorney‑General.

It was in that context, where there was no question but that, as your Honour Justice Edelman just identified, that there were rights to be vindicated in the public interest, the question was whether any member of the public could seek to vindicate those rights, or whether there was a need for something greater, and that was where the sufficient interest test came in. So one had the real interest test that was identified in cases like the Russian Commercial Bank and Forster v Jododex in the private law, or more private law contexts, and then in the public law context.

But the interest in vindicating those rights, and I have always identified there would be two ways in which one might have sufficient interest to vindicate public rights, that might be when there was an actual private right of the individual engaged, or the second was where there would be a sufficient interest, and that really underlies the analysis of Justice Heydon in Edwards v Santos, but that ‑ ‑ ‑

GORDON J: Before we get to that case, could we just go back to this passage in 17 that you took us to in Justice Gaudron’s judgment in Truth About Motorways, because it seems as though, absent the question of standing, it determines that there is a justiciable matter, and it does so by linking the ability to obtain the declaration with the ability to apply for injunction for relief in order to ensure that the court is not making:

a declaration of the law divorced from any attempt to administer that law”.

That, in effect, is what gives rise to that aspect of it. Then one sees, in the next sentence, that it is because Parliament has conferred standing that one gets this potential for the controversy and the need for determining it. Is that not, in effect, a better way to look at standing in this context as well?

MS STERN: Well, your Honour, yes, but focusing on paragraph 17, which I think is the paragraph that your Honour was referring to, the key thing in paragraph 17 from that perspective really is that if one looks, five to six lines down:

What is sought to be established by the determination of a court is a violation by the respondent of a statutory norm of conduct, and the existence of a duty or liability.

So certainly, your Honour, there the question or, in Truth About Motorways, the key question related to the statutory conferral of standing, and whether that was valid. That was in a context where there was already an underlying precept, namely, that there was a question of violation of a public duty or a liability. So the question of standing was to be considered on the premise that there was the public right or duty, if one can frame it in that way, and the real question was whether Parliament could validly confer standing on someone who did not themselves have any direct interest in that particular right or duty.

So it still fits with the underlying analysis of declaratory relief as focusing upon the vindication of rights, and the key point we make in that regard is that when one is looking at the present case, one cannot jump straight to looking to whether or not the councils have an interest more than another member of the public because one has not already established that there is some right or duty to be vindicated or some legally‑recognised wrong which forms the subject matter of the proceedings.

That is why I have raised this as a preliminary submission, not because we are saying that public law and private law are inherently different or that the sufficient interest test may not apply but comprehending that to have a sufficient.....also be seeking to vindicate some right or interest, but simply to indicate that the fact that in a public law context the courts speak of the sufficient interest test or the real interest test, applying the test from Forster v Jododex, they apply that in a context where it is well recognised and established by authority that the declaration is sought to vindicate a public right, very much in the sense that your Honour Justice Edelman put to me a moment ago, when one goes back to Lord Wilberforce in Gouriet and Justice McHugh in Bateman’s Bay.

In that way, we are not saying let us divide the law inherently between private and public. We are just saying in both you have to identify some right or legally recognised wrong and here there simply is none.

I have identified a number of references in our outline of oral submissions and I do not need to take your Honours to those, but I simply wish to make the submission that, when your Honours look at those authorities, your Honours will see specific identification of there being a public duty or to prevent the violation of a public right or to enforce the performance of a public wrong and that that is the specific context within which those cases have to be seen.

GORDON J: I do not want to detain you on this aspect, but is that right in relation to Edwards v Santos, especially at paragraph 37, where Justice Heydon said:

The plaintiffs have a sufficient interest to make –

what he would describe as claims for declaratory and injunctions:

because success in those claims would advance their interests in the negotiations which the parties were contractually obliged to conduct.

They were not tied at all to any alleged lack of power in the Minister.

MS STERN: Your Honour, in relation to Edwards v Santos, if I could go to that now in the light of your Honour’s question - your Honours have Edwards v Santos at tab 16 in volume 3 of the joint book of authorities, starting at page 627. The fact that Edwards v Santos is of significance in relation to your Honour’s question in that the question that the declaration went to was whether or not the petroleum licence was void, namely, whether or not the Minister had the power to grant the petroleum licence or to renew it from time to time and the plaintiff’s interest in future negotiations was of no relevance to the right as such, that went solely to the question of their interest.

If I could take your Honours to page 435, that is PDF 15, it starts at paragraph 36, in his Honour Justice Heydon’s judgment, and your Honours will see at the bottom of that page, in paragraph 37, where his Honour is describing the jurisdiction to grant a declaration, the last two lines:

The plaintiffs are claiming that the petroleum defendants had no right to apply to the Minister under s 40 of the Petroleum Act because the –

Authority to – I do not know what the “P” is right now, but:

the ATP had ceased to be valid. The plaintiffs are claiming that there is no power in the Minister to grant a “production licence” ie lease, under s 40 –

So the claim was to ‑ ‑ ‑

GORDON J: Sorry, Ms Stern, it is the next bit over the page that sets out the claim, which here might be referable to the bit about the contract, and then they say:

The plaintiffs have a sufficient interest to make those claims, because success in those claims would advance their interests in the negotiations –

It is not tied to the lack of power.

MS STERN: Well, your Honour, the reason I went back to paragraph 37 is because the analysis of Justice Heydon was that – it started by analysing what was the subject of the declaration, that is, that it goes to a matter of public power, and then went on to consider the conventional question, namely whether or not these plaintiffs had sufficient interest to seek a declaration.

So, the analysis of whether or not these plaintiffs had sufficient interest was one which was, if you like, the second step, having already identified what the right that was involved was, which is what is identified in page 435 to 436, and what your Honours see at the fifth line of page 436 is:

These claims are not outside the Federal Court’s jurisdiction to grant declaratory and injunctive relief. The plaintiffs have a sufficient interest to make those claims –

So, your Honour, what we say in relation to Edwards v Santos, and why we say that the Full Court erroneously placed reliance on Edwards v Santos is because Edwards v Santos was a case in which there were public rights, or public duties in issue, namely, the ambit of the authority of the Minister to grant production licences, and that is what is identified first by his Honour, and it is after that that his Honour then analyses whether or not the plaintiffs had sufficient interest, and then identified that they did have sufficient interest, because their interest was greater than that of other members of the public, and it is in that context that his Honour then referred to Aussie Airlines.

So we say that when one looks at Edwards v Santos it falls squarely within the ambit of what I have described as claims which are sought to vindicate public rights or to enforce the ambit of public powers, so therefore we have already crossed the first threshold, and one then needs to ask, consistent with how the Court has approached these cases where they were considering how the equitable remedies of injunction and declaration could apply in a public law context, once you have gone past the question of it is to enforce or vindicate a right, then one has to say, well, does this member of the public have standing, and that is addressed by asking whether or not the interest is greater than that of other members of the public. Your Honours, I note the time.

KIEFEL CJ: Yes, Ms Stern. That might be a convenient time for our morning break.

AT 11.19 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.19 AM:

KIEFEL CJ: Yes, Ms Stern.

MS STERN: Your Honour, can I check whether I am pixilated for your Honours because your Honours are certainly pixilated for me. I am perfectly content to go ahead.

KIEFEL CJ: No, you are not pixilated. You are a little blurred, but you cannot see us very clearly?

MS STERN: No, your Honours are equally – probably “blurred” is the better way of describing it.

KIEFEL CJ: Is it sufficient for your purposes or would you like us to stand down to see if we can clarify it a little bit?

MS STERN: No, your Honour, it is certainly sufficient for my purposes but if I have any difficulty hearing, I will certainly raise that in due course.

KIEFEL CJ: Yes, please feel free to do so.

MS STERN: Thank you, your Honour. I wonder if I could start by responding to your Honour Justice Edelman’s question raising whether there would be an inferred trust along the lines recognising Bahr v Nicolay. We would say here one would not fall within the ambit of what was identified by Chief Justice Mason and Justice Dawson at page 618 of Bahr v Nicolay, where it was said that:

If the inference to be drawn is that the parties intended to create or protect an interest in a third party and the trust relationship is the appropriate means of creating or protecting that interest or of giving effect to the intention –

What we would say here is that something different from simply a contract that confers a benefit on the third party and that in the light of the terms of clause 26.2(a) as a whole, there is no inference to be drawn that the Commonwealth and the airport lessees intended to create or protect an interest in the councils, rather ‑ ‑ ‑

EDELMAN J: Ms Stern, were not the Chief Justice and Justice Dawson talking about an inference that arises sometimes on little more than the fact that the contract intended to confer a benefit on a third party? In the sentence before the sentence from which you read, they described how:

“It is difficult to understand the reluctance which courts have sometimes shown to infer a trust in –

cases where the contracts confer a benefit upon a third party.

MS STERN: Your Honour, yes, but their Honours were not identifying that that of itself will necessarily lead to an inference that the parties intended to create a trust and that is really the question, whether, when one looks at the clause as a whole, one would draw the inference that there was an intention to create an interest in the councils as opposed to confer benefit. In light of the terms of the clause as a whole, including the “reasonable endeavours” sentence at the end of clause 26.2(a), we would say that no such inference should be drawn.

Your Honour, we do also rely in that regard on the surrounding circumstances and the agreement and the finding of both his Honour the primary judge and the Full Court here that the rationale for including this provision was that of competitive neutrality, rather than creating an interest in the councils. That is the response we have in relation to whether or not, contrary to the position of the parties here, your Honours will find that there was inferred trust along the lines of Bahr v Nicolay.

If I can turn now to what we say are the errors in the Full Court in the judgment below and ask your Honours to go to the joint appeal book page 126, paragraph 90. This is the first error that we have identified relevant to our first ground of appeal and the first of the issues I identified and that is finding that the doctrine of privity of contracts not engaged where a third party seeks declaratory relief and finding that “privity” is not the correct prism in those circumstances. Your Honours will see in paragraph 90 that it is found that the restriction inherent in the doctrine of privity of contract:

refers to the direct enforcement of obligations arising under the contract pursuant to a right of action derived from that contractual relationship –

and relates only to:

an “executory judgment” -

At paragraph 91 over the page, there is then the key finding of the Full Court that:

Where a third party to a contract seeks to obtain a declaration in respect of the interpretation or application of that contract, the third party is not seeking to sue “on” or “upon” the contract in the sense necessary to engage the doctrine of privity . . . the third party’s entitlement to seek and obtain declaratory relief does not derive from any cause of action arising pursuant to the contract, but instead derives from the relevant declaratory jurisdiction . . . that benefit is not “based on” the contract in the sense necessary to engage the doctrine of privity of contract.

Your Honours, we criticise that and say that it is erroneous for a number of reasons, which I will come to but, in particular, because there is nothing in the authority of this Court that suggests that privity should be limited such that it would not apply to the declaratory relief that is sought in this case which, as I indicated earlier, is manifestly seeking to enforce obligations under the contract and secondly that it ignores that aspect of declaratory relief, which is that, as identified in a case of this Court in Royal Insurance Co v Mylius [1926] HCA 49; (1926) 38 CLR 477, that every declaration carries with it liberty to reply.

So, the distinction between something which – relief which is capable of enforcement is, we would say, a false distinction in any event. It is somewhat ironic that the Full Court concluded that, in the last three lines of that paragraph 91 that:

benefit is not “based on” the contract in the sense necessary to engage the doctrine of privity –

in circumstances in which the Full Court then held that the heart of the subject matter of the controversy for the purpose of whether or not there was a matter was the contractual rights of the lessees and the Commonwealth.

So, if I could ask your Honours then to turn through to paragraphs 142 and 143 at page 144 of the appeal book. This is what was identified as the subject matter of the controversy by the Full Court and what we say is the second key error that the Full Court made and that is in identifying that paragraph 142 that:

The heart of the subject matter of the controversy is therefore the leases, and, in particular, the rights and liabilities attaching to the payment mechanism prescribed by cl 26.2.

Therefore, it was the “legally enforceable rights, duties and liabilities” of the contracting parties that formed “the dispute presently before this Court”. It is that that the Full Court relied upon as satisfying the justiciable controversy requirement of the tripartite analysis of whether or not there is a matter.

So there we say – and this to some extent responds to a question your Honour Justice Gageler put to me earlier as to whether or not it matters that the contracting parties are in dispute. Here, where there is no dispute as to any right, duty or liability as between anyone to or from whom those are owed, we say there can be no matter, and that is because the only right, duty or liability that is sought to be vindicated is one about which there is no dispute as between those parties who have that or from whom that legal obligation, duty or right is owed.

GAGELER J: How do you then explain a case like Mellifont where the parties no longer are in real dispute about a right or duty?

MS STERN: Well, your Honour, that in a sense is similar to how the court approached the case in the Ashmere Cove Case, and I will come to that in a moment. It is Employers Reinsurance v Ashmere Cove, where it was identified that there was a controversy which was constituted by a dispute as to rights and liabilities through correspondence, even though those parties were not actively seeking to litigate those rights or duties in court. I will have to come back to your Honour in relation to specifically to Mellifont. I will have to look at the case again. But it is certainly the analysis – and I will take your Honours in a moment to Ashmere Cove.

In Ashmere Cove, the Full Court identified the controversy as arising out of the usual exchange of correspondence where there was a dispute as to the ambit of the insurance – .....obligation as between the insured and the insurer, but in a – we say, and I will have to look again at Mellifont, as I have indicated, your Honour, that where there is no controversy at all as between those who have the legal rights and indeed the subject of the proceedings, and it is only those legal rights that are being relied upon, then, we say, there can be no matter.

The key element as regards the approach actually taken by the Full Court to what they say is ensuring there was only permissible and not impermissible interference in the contract can be seen in paragraph 144, which is at page 145, and it is the last four lines of paragraph 144, and that is:

by reference to the quality of the third party’s interest –

One thing significant about the approach that the Full Court took is that, having found that privity was not engaged by the application, we say wrongly, the court then in effect put privity to one side in its analysis, so it is quite right that the court recognised that the councils did not themselves have any legal rights, but the sole conditions that the court identified had to be satisfied went to quality of interest in the relief sought, and then later, the connection with the agreement.

But in looking at the sole - the sufficiency of the third party’s interest, paragraph 145, the court referred to sufficient or real interest test, but then in paragraph 147, at page 146 of the appeal book, the court identified that a real interest would include a right under a contract, that is the third to fourth line, but then said:

the underlying interest need not be an enforceable legal right or liability –

and at paragraph 148 identified that the focus must be, then, in:

identifying what the third party stands to gain from the declaratory relief . . . assess what foreseeable legal, commercial or other practical consequences, if any, flow from third party obtaining the relief –

We say that is a key error, namely, in not identifying whether or not there is any legal right or interest to be vindicated. Your Honours will then see the complete translation of the test which has been, or the approach that has been taken, in public law at the top of the next page, page 147 of the appeal book:

it will be relevant to assess whether the applicants for relief have an interest that is greater than that of other members of the public –

and then, paragraph 149, that identified that:

where a third party to a contract seeks declaratory relief . . . the third party will ordinarily possess a requisite interest in such relief where the award of the relief would substantially aid the party in the course of future legal or commercial negotiations, whether or not those negotiations are closely proximate to the subject matter of the contract in question.

We say here, not only is the error of principle that I have identified, but the bar is being set as low as one could possibly imagine in that the question of whether or not an applicant for relief has an interest over and above other members of the public we say is entirely inapposite as a threshold for determining whether or not a third party can seek relief in relation to a contractual obligation, as is the question whether or the award of relief might help someone in future legal or commercial negotiations, and that the approach of the Full Court has led to firstly enormous uncertainty as to who might be able to come to court to seek a declaration in relation to your contractual obligations or your contractual rights, but also that there is a complete lack of coherence, we say, in that the approach does not look in any sense upon the objective intention of the parties to the contract.

So where one looks at cases involving statutory rights to seek relief which have been given to third parties, that focus is upon the objective intention of the parties to the contract and in some jurisdictions it requires an intention to confer a legal right, or to confer a right to enforce, I should say. In other contexts it is identified as a contractual intention to confer that benefit.

Here, it is simply looking at whether or not that declaration could give rise to some sort of practical benefit in the future, and we say that is simply too low a bar and it also suffers from the flaw of completely sidestepping any consideration of whether or not there is any right to be vindicated by the application for declaratory relief. Paragraph 151, page 148 of the appeal book, is where the court identifies that:

In addition to identifying foreseeable benefits . . . it will also be relevant to assess the strength of the connection –

Here again we say the Full Court erred in its approach and in particular here we would say the connection between the councils and the lease involved really only two matters: one, that they would be the recipient of the money under clause 26.2; and secondly, their notification role. We say those two factors of themselves would not be sufficient to confer an entitlement to seek relief by way of declaratory relief in circumstances where there is no right to be vindicated.

The final passage I want to take your Honours to is at page 157 of the appeal book, paragraph 183, and your Honours will see the ultimate conclusion was that the declaratory relief was “of ‘real’ commercial and practical interest” by reason of the two factors:

participation in the payment mechanism . . . and the plausibly foreseeable (and not speculative) benefits that the Councils are likely to receive –

So the upshot of the Full Court’s analysis is that one need not have any right or legally recognised interest to vindicate in seeking relief. All one needs to show is that there will be some foreseeable, practical or financial benefit and that, in effect, if you like the new privity of contract of any real significance, since it will be possible in almost any case to seek declaratory relief and then to seek to enforce the declaration, further liberty to apply a mechanism. If I can then turn very briefly just to summarise the submissions we make in relation to why we say privity is engaged and I will just try to do ‑ ‑ ‑

GLEESON J: Ms Stern, would it not be fair to say that there is a third connecting factor which is the last sentence of 26.2(a), in that there is this prospect of entering into an agreement with the lessee?

MS STERN: Your Honour, yes and that, I anticipated was what the Full Court was referring to as the “plausibly foreseeable” and not “speculative benefits”, namely, that it may assist in future negotiations, but that again is – firstly, we would say that falls well short of any kind of legal right to be vindicated and, of course, we do not say that the legal right has to be extant at the time that the application is made because that is clear from cases like CGU, where there are the statutory rights that were relied upon in the Court’s analysis, but we say, given the ambit of the reasonable endeavours of the obligation that really is nothing less than a potential benefit to negotiations in the future.

Really, the Full Court appears to have relied in that regard very much on Edwards v Santos and we say that, in that regard, the Full Court erred because Edwards v Santos was a case that was already articulated. That was a case where the rights to be vindicated were the public law rights or the ambit of the power to grant the petroleum licence. So the Court has as it were sidestepped that and found that just the interest in negotiation of itself would be sufficient to give rise to the matter.

Very briefly, if I can articulate the submissions we make as to privity. First we say that as a matter of principle there is no basis for the distinction between declaratory relief and other forms of relief as regards the operation of the doctrine of privity.

Second, we say that when one looks at the jurisprudence in this Court ‑ and it is largely set out in our written submissions at pages 5 to 7, between paragraphs 17 and 20 ‑ we say that jurisprudence that speaks in terms of enforcement or seeking to obtain the benefits of the contract applies equally to application for declaratory relief in this case as it would to other forms of relief.

Thirdly, we say that the analysis of the Full Court is inconsistent with the judgments of this Court in the case of CGU v Blakeley [2016] HCA 2; (2016) 259 CLR 339. If I can take your Honours to it, it is at tab 13, volume 3 of the joint book of authorities. Before I take your Honours through specific paragraphs of the judgments of both the plurality and Justice Nettle, we say that there are three key factors which underlie the findings of both the plurality and Justice Nettle that there was a matter in that case as between the liquidators of Akron and the insurers, none of which factors are present in the claim by the councils in this case.

The first was that the insurers in that case had refused the claim, when the directors had sought to claim under the policy, so there was a controversy as to those legal rights. Second, there were existing proceedings on foot and an extant controversy to which it was sought to join the insurers and the Court found that the controversy as a whole was a justiciable controversy.

Thirdly, the rights which were sought to be vindicated by the declaration were the rights of the liquidators under section 562 of the Corporations Act, and section 117 of the Bankruptcy Act because if the insurers were liable under the policy, then the liquidators would have a right of priority over the insurers if they succeeded in the claim. The first paragraph I want to take the Court to is ‑ ‑ ‑

KEANE J: Ms Stern, does not that just mean – your last point – whether or not the statutory provisions would give relief depended upon getting to first base, that is to say getting a settled and authoritative understanding of what the contract actually meant? Is that not what the councils are concerned with in this case – just getting to first base to establish what the contract actually means?

MS STERN: Your Honour, that is.....relevance of the statutory right. It was that in that applicants sought to vindicate that legal right, so they were not seeking to enforce the obligations under the insurance contract, they were seeking to vindicate statutory rights, and that was the explanation for why the case did not stand against the doctrine of privity of contract.

So, as your Honour, with respect, accurately identifies, for the purpose of vindication of those legal rights under the Corporations Act or more contingently, the Bankruptcy Act, the understanding of the insurance contract was necessary. The Court drew a distinction between a case where a declaration was sought to vindicate the rights under the contract by a third party and that case where the declaration was sought to vindicate rights under the Corporations Act to priority.

If I could take your Honours then to page 356, paragraph 42 in the judgment of the plurality, and this is referring back to an analysis of the respective judgments in the case of Interchase Corporation v FAI General Insurance Company Ltd. What the plurality identified, in particular starting from the last two lines on that page in paragraph 42 is:

For the purposes of determining whether there is a “matter” . . . approach adopted by Davies JA is to be preferred. It reflected a recognition of the reality of the plaintiff’s interest which was not to be confined by a requirement that the plaintiff demonstrate a claim for vindication of an existing legal right against the insurer.

I take your Honours to this because it is a passage that has been relied upon against us, but the right that was being relied upon in the Interchase Case as in CGU was the statutory right to priority under section 562 of the Corporations Act.

What is most significant about that passage in the judgment of the plurality are the words “existing” before “legal right”, and “against the insurer”, and that was because the plurality found that the right to priority under section 562, which was not existing as at the date of the application for the declaration, and it also was not a right directly against the insurer as such, was that you do not have to have – be seeking to vindicate something in existence, or something which is directly a right that you have as against another party, as such.

Rather, it is sufficient if it is a legal right that you are seeking to vindicate, which will – vindication of which depends, as your Honour Justice Keane identified, upon the granting of the declaratory relief as to the meaning of the contract. The key to the plurality’s analysis is then to be found at page 363 at paragraph 64 to 66, or PDF 25 if anyone is working from electronic copies, and this is where the Court analysed the question, or the plurality analysed whether or not there was:

a justiciable controversy between the Akron liquidators and CGU.

Bearing in mind that the liquidators were claiming against the insured, and CGU was the insurer. The first matter that is identified as being of significance, your Honours will see in paragraph 65, second line in:

Crewe Sharp had made a claim against CGU under the policy and CGU had declined that claim.

So that is the first matter, is the denial, namely, the dispute. The second matter is identified at paragraph 66, namely that is that the rights under section 562 of the Corporations Act and section 117 of the Bankruptcy Act. Then there is the key passage, and this really is the response to your Honour Justice Keane’s question, at paragraph 67:

their claim does not depend upon any incursion upon principles of contract law or privity of contract. They are not claiming as a party to the insurance contract nor as persons otherwise entitled to the benefit of that contract.

An immediate point of distinction between this case and CGU, but their claim is based on the legal consequence.....562 of the Corporations Act, and:

That legal consequence –

about seven lines into paragraph 67:

would be the bringing into existence, in favour of the Akron liquidators, of a right to the proceeds of the insurance policy payable to Crewe Sharp in respect of its liability to Akron.

Then, again, the key passage:

The interest upon which the claim for declaratory relief is based and CGU’s denial of liability under the policy are sufficient to constitute a justiciable controversy . . . involving a question arising under a law of the Commonwealth. Because of these statutory provisions, it is the Akron liquidators who stand to benefit . . . from the making of the declaration sought.

So the key analysis there, as I indicated earlier, rests on factors which are decidedly absent in the present case and they were key to the analysis of the plurality.

The second matter that we place express reliance upon, the first few lines in paragraph 67 at page 363, is that the claim does not depend upon any incursion into principles of contract or privity. If the Full Court were correct that an application for declaratory relief of itself does not engage the doctrine of privity of contract, then there would be no reason for the plurality to have stated as it did then that the claim did not depend upon incursions into principles of contract law, because that simply would not be a relevant matter. So we say that the identification there of the reasons why there was no incursion upon the doctrine of privity of contract stands against the conclusion of the Full Court that privity of contract was not engaged.

Justice Nettle delivered a separate judgment. If I can ask your Honours first to go to page 369 at paragraph 90 in respect of Justice Nettle’s judgment, and your Honours will see there the identification of the justiciable controversy at paragraph 90 and it is identified that that is:

the dispute between the liquidators and the directors. There is also a controversy between the directors and the insurer as to whether the insurer is liable –

and it all forms part of a single controversy. So again, that is an important point of distinction between that case and the present. If I could ask your Honours then to turn to page 370, PDF 32, paragraph 92. Again, Justice Nettle, as did the plurality, analyses whether contractual privity precludes the claim and again Justice Nettle, unlike the Full Court in this case, does not say there is no issue because privity does not apply at all. Rather, the analysis is that this is something which requires separate consideration. His Honour refers to an observation from Justice Ormiston in the CE Heath Case that:

it is not ordinarily appropriate to permit an outsider to seek declaratory relief regarding the meaning and effect of a contract –

which is precisely what has been done here, and says:

Up to a point, that is correct.

That is a clear finding that privity of contract is engaged in applications for declaratory relief. There is then the references to Meadows and to Gouriet. Then at paragraph 96 at page 371 Justice Nettle finds that:

Australian authority largely accords with Meadows.

Your Honours will see the extract from the judgment of Lord Justice May that is immediately above that and identifies that:

Generally speaking it may be correct to say that an outsider has no standing to seek a declaration about the meaning and effect of a contract –

Again, that is clearly identifying relevance of privity. It then says that it:

depends on what is meant by an “outsider” and upon the circumstances in which the parties . . . have chosen, or been influenced, not to raise an issue.

If I could just pause there, to the extent that that factor is relevant and it may be relevant to whether or not there is an exceptional circumstance – we fully accept that – here the parties to the contract have chosen or have been influenced not to raise the issue because they are in complete agreement. That is certainly a difference from what one would see in some of the insurance ‑ or what your Honours would see, I should say, in some of the insurance cases where, for example, there is an entirely insolvent insured who is not taking an active stance in the litigation by reason of their financial position.

GORDON J: Can you just address that in the context of what his Honour goes on to say at paragraph 102, where he identifies what, in effect, is a specific exception, which I think I took you to earlier by reference to the decisions of Aussie Airlines and Edwards.

MS STERN: Your Honour, yes, and I am grateful to your Honour for raising that, but what is significant – and this is the last seven lines of paragraph 102 – his Honour says:

where a claimant has a real commercial interest in establishing the claimant’s legal status or entitlement in relation to proposed commercial conduct ‑

and that is absolutely critical because his Honour does not say “where a claimant has a real commercial interest in the declaration sought”. It is specifically identified as being a real commercial interest in establishing the claimant’s legal status or entitlement and that is clearly showing – and Justice Nettle’s footnote of Aussie Airlines is there – that what was critical about Aussie Airlines and what is being identified there by Justice Nettle is that the declaration in Aussie Airlines went to Aussie Airlines’ legal status or entitlement, namely, its legal entitlement to a sublease and to carry on its business.

That was reflected also in the language in Aussie Airlines that one will see. Perhaps I could go to the right now, if I could. Aussie Airlines your Honours will have at volume 5, tab 30, page 1285. At page 414, in the judgment of Justice Lockhart, the court agreed and your Honours will see at letter B:

For a party to have sufficient standing to seek and obtain the grant of declaratory relief it must satisfy a number of tests ‑

Your Honours will see that it has identified the second sentence of the first bullet point:

There must be a real question involved, and the declaratory relief must be directed to the determination of legal controversies ‑

There is the word “legal” there. Then your Honours will see at page 415, in the third last paragraph on the page between letters F and G, his Honour identifies, last sentence:

Without subleases, Aussie Airlines will be denied a right to carry on the business which it seeks to carry on.

That then refers back to the terms of the lease, and your Honours will see that extracted at page 407 of the report, at the start of Justice Lockhart’s judgment, that the terms of the leases in that case were provisions which compelled:

both airlines to provide subleases to new entrants to the domestic aviation industry –

So what one sees, both in the way in which Justice Nettle analysed Aussie Airlines and in the language used by Justice Lockhart in determining that Aussie Airlines had standing to seek the declaration, was the language of legal status or entitlement, to use Justice Nettle’s language, or what Justice Lockhart said, which was the right to carry on business, which clearly referred back to the compulsion that, if they had the legal status of new entrants, that the airlines would be required to grant them a sublease, and that would then in turn give them, is the way in which the right to carry on their business arose.

So the analysis in Aussie Airlines is one which expressly focuses upon a right, as such, and in that way stands against the reliance that was placed on it in the present case, namely, the Full Court have relied on Aussie Airlines to the effect that, if you are seeking a declaration about the meaning of a contract to which you are not a party, it is sufficient if you have a practical or commercial or financial interest, but that ignores the analysis of Justice Lockhart and, indeed, is inconsistent with the way in which ‑ ‑ ‑

GORDON J: Can I raise one aspect about that. If you pick up these ideas out of CGU and see the proposed commercial conduct being the negotiation to agree the basis on which the council would give the notification to the lessees, and one identifies – a negation which is inevitable, it is going to happen, it has to happen at some level ‑ is it not the legal controversy between them about the extent to which the airport, put in neutral terms, is commercial in a specific year? And is that not a controversy that is capable of determination?

MS STERN: Well, your Honour, there is no controversy at the moment arising out of any extant agreement between the ‑ ‑ ‑

GORDON J: But this is dealing with this proposed commercial conduct, it is dealing with the controversy in the future, and we know that there is going to be a negotiation for the future, and we know that there is an existing dispute between the councils and the lessees about a fact, a fundamental fact, or the basis upon which the councils would give notification to the lessees. Is that not able to be determined?

MS STERN: Well, your Honour, we say that falls short of a legal right to be vindicated, and that, when one looks at the way in which the claim is put here, and the terms of clause 26.2(a), that falls short of what is the legal right to priority under section 562 of the Corporations Act in CGU, and it also falls well short of what was identified in Aussie Airlines. So we accept, and your Honour, we would not dispute that the declaration, if it were granted, may be something which could be relevant to future negotiations, but we say to say that that of itself, namely, it may be influential in future negotiations, is something which is a significant jump in the law over and above the current state of the law.

GORDON J: I think the difficulty I have, at least with the form, the way in which the relief, or the claim for the relief, has been formulated, is that it is extraordinarily broad and not specific. So put that to one side for the moment, if you realise that each rateable year is a new year in which the notification would be given, then it seems to me that there is at least some specificity and some limit upon which the declaration could be sought, if it was able to be sought, and the terms upon which the clear identification of what is the controversy between the lessees and the council. As I said to you earlier on, I think there is probably a distinction to be drawn between the past and the future, given the way in which the parties have conducted themselves, which is a separate question.

MS STERN: Your Honour, yes, and obviously the declaration as to the past can have no possible relevance in relation to any future negotiations, et cetera. The declaration as to the proper construction is, we say, based upon no right that is legally recognised other than an attempt to rely upon the rights under the contract. It really goes to what is legally recognised or not, and we say ‑ ‑ ‑

STEWARD J: So, Ms Stern, just circle back, just so I understand. You are saying that unless and until there is a contract between the council and the airports, the councils do not have a legal entitlement, and they do not have a legal status for the purposes of this contract, what they have is a hope or expectancy that they will get some money. Is that how you put it?

MS STERN: Your Honour, yes, and that ties in with the way in which the Full Court analysed it, namely, if it is something you think might benefit some future negotiations, that is sufficient, and we say, no it is not. And in some way, your Honour Justice Steward has identified precisely a distinction that has been drawn in some of the English cases, and in particular one of the cases that is referred to in the authorities is the case of Mercury v Director General of Telecommunications, and there what was identified is that the interpretation of.....contract would have relevance to the way in which another contract would operate. And in those circumstances, the right to be vindicated is the right under the contract to which the applicant was a party.

But your Honour Justice Gageler asked me a question about whether it is essential that the parties to the contract are in dispute, and in a case such as that, in the Mercury Case, obviously, that is.....case, so there is no justiciable controversy requirement such as one has for the latter in Australia. But there that might be a theoretical example where, if there is a dispute between parties to contract A as to what contract B means, and contract B is in some way incorporated into the contract between the parties before the court, that might be a situation where one could seek relief in relation to the proper construction of the anterior contract, but that would be because there was a dispute as to legal rights to be vindicated.

I am not sure if your Honour has asked me a question, but I am certainly not hearing it. I can see Justice Gageler’s ‑ ‑ ‑

GAGELER J: I am sorry, I wanted to ask you about an Australian case referred to in the same footnote in Justice Nettle’s judgment in CGU that you drew the reference to Aussie Airlines from. It is Edwards v Santos. In the paragraph referred to by Justice Nettle, paragraph 38, Justice Heydon proffers an explanation of Aussie Airlines. The reference is (2011) 242 CLR 421 at paragraph 38. His judgment was agreed in by other members of the Court. How do you reconcile your explanation of Aussie Airlines with that explanation of it?

MS STERN: Your Honour, we rely upon the submissions that I have made earlier that that part of the analysis in Aussie Airlines was analysing – I am sorry, in Edwards v Santos from Justice Heydon was analysing whether or not the sufficient interest test was satisfied when Justice Heydon had already identified that the plaintiffs were claiming, namely the subject matter of the claim went to the power of the Minister to grant a production licence.

So it was an analysis of sufficient interest which was or followed on from by way of, as it were, a second.....after Justice Heydon had already identified that there was the legal right then, the public law right to ensure that the Minister was only acting within the bounds of the power to grant a production licence. That is also consistent with the way in which Justice Nettle then analyses those two cases because that paragraph 102 in CGU v Blakeley at page 373, the footnote is, as I indicated earlier, it is a footnote to a proposition that:

where a claimant has a real commercial interest in establishing the claimant’s legal status or entitlement –

It is that which is important because it is the legal status or entitlement. It is not sufficient that there just be some commercial financial negotiating position which may be benefited by the grant of the declaratory relief, and for that reason ‑ ‑ ‑

EDELMAN J: So Aussie Airlines also reduces to a case which is concerned at its core with public rights in that sense.

MS STERN: Your Honour, I would not characterise it as a case concerned with public rights. I would characterise it as a case where there was a right to a sublease under the head lease if the status of being a new entrant, which is what the declaration went to – and the declaration in that case just went to status, not to the effect of the agreement as such ‑but it was a commercial and practical interest in the determination of a contingent legal right.

EDELMAN J: But would that not then mean that Justice Heydon, on your approach, is conflating two different questions, one question being whether a member of the public has an interest above any other member of the public to vindicate a public right which you say Edwards is about and the separate question, which Aussie Airlines is about, which, if you accept does not involve a public right, is a question about whether or not there is any right – interest – legally recognised that can be enforced.

MS STERN: Your Honour, what we say is that, in both the public law and the private law context, one has to firstly have a right to be vindicated – or a legally recognised wrong to be remedied as such – and that may be satisfied by the public law rights that I have been describing along the lines of what was identified by Justice Heydon in Edwards v Santos, and one sees it in Truth About Motorways and other cases I have referred to.

But, equally, that is something that might be satisfied by private law rights such as, for example, under section 562 of the Corporations Act in CGU and in the insurance cases, or the right to carry on business that was identified by Justice Lockhart in Aussie Airlines. Equally, that is consistent also with the Russian Commercial and Industrial Bank Case, namely, even though unquestionably the courts had – the parties had rights to be vindicated – the court still analysed whether there was a real interest in the declaration being granted.

So, your Honour, we do not necessarily say the two are diametrically opposed or diverge. It is more that in both the public and private law cases, one has to first identify that which is capable of a legal remedy and really that, in a sense, goes back to the Abebe sense of there has to be some legally recognised wrong. That could be something as a matter of public law, or it could be something as a matter of private law, but it is an anterior requirement – before one goes on to consider the sufficient interest.

What one sees in particular in the cases in the public law context with the later cases is that one already really has the public law context established and so one does not see the court articulation that public law wrong or right separately to the sufficient interest. That largely goes back to the historical context whereby when it was sought to avail oneself of equitable remedy in a public law context, it was the assumed substratum that there was some public role indicated and the question really was, what do you have to show to be able to avail yourself of the equitable remedies in that context.

That really is also why the fact that there may be some cases that are somewhat of a hybrid between public law and private law in no way undermines our argument. It just requires one to focus on what right there is to be vindicated. The Commonwealth rely, for example, on M61. Indeed, Ainsworth would be another case but there, there was an obligation to accord procedural fairness, which of course is a public law right or obligation to be vindicated, which would give rise to a public wrong.

Your Honours, the final case that I wanted to address is the case of Ashmere Cove because some reliance has been placed on Ashmere Cove both by the Full Court and in submissions against us. I should use the full name – it is Employers Reinsurance Corporation v Ashmere Cove Pty Ltd, which your Honours will find at volume 5, tab 33, page 1333. That was another of the insurance disputes where there was, as it were, a tripartite controversy. There are three matters, in our submission, again, that are relevant to the analysis in Ashmere Cove.

If I can address those first before going to the specific paragraphs. The first, there was an extant controversy in that case between the investors and the responsible entity, who was the insured entity, and the ultimate conclusion was that the dispute between the investors and the insurers was all part of a single controversy of which that was a component.

The second key aspect of that case is that the court found no inference should be drawn that there was no longer any dispute between the insured and the insurer. The third is that, in that case, the analysis of the interest to be vindicated focused upon the steps that the investors could take to secure the benefits of an indemnity, namely the legal rights under section 562 of the Corporations Act. The key analysis of the controversy, your Honours will find at page 410, paragraph 51 of the judgment of the court. Your Honours will see there the finding that:

The core of the justiciable controversy is the dispute between the Investors and KMF –

which was the insured entity, and then, halfway down that paragraph, your Honours will then see reference also – about five lines under that:

On any view, the controversy constituted by the exchange of correspondence between the liquidator of KMF and the Investors formed part of the single controversy arising out of the Investors’ claims against KMF.

Your Honours, it appears that there is probably a typo there, namely where it says:

On any view, the controversy constituted by the exchange of correspondence between the liquidator of KMF and the Investors –

probably should be “the Insurers” because it was the correspondence that is referred to in the judgment is correspondence between the liquidator and the insurers. Then it has identified that:

The success of the Investors’ claims is an essential prerequisite to the determination of any claim by KMF for indemnity . . . the liquidator’s request that the Insurers agree to indemnify KMF arises out of the same substratum –

So, that is the first element that differs from the present case, that is the same as the CGU Case, namely that there was a tripartite dispute, which constituted a justiciable controversy. That is made abundantly clear by paragraph 54 at the bottom of the page where it was found that the claims were:

part of the same single justiciable controversy -

The second key element your Honours will find at paragraphs 53 to 54, which is the interest of the investors included the ability to take advantage of the right to priority under section 562 of the Corporations Act, and there are also other provisions that are identified that the investors could invoke. The third key element can be found in paragraph 61, at page 411, namely what was said to be the inference, that:

there is no longer any dispute –

and found that the proper inference was that there was a dispute. So in that case, again, we say there is no support for the conclusion of the Full Court in this case, and that is because the elements that were critical to the analysis of the court in Ashmere Cove are simply not found on the facts of the present case and, secondly, because the court identified there as being a single justiciable controversy as to legal rights and entitlement under
section 562 the case provides no support for the Full Court’s reliance upon it.

The Full Court relied upon this case as showing that there can be a justiciable controversy even if there is no dispute between the parties to the contract. For a start, that was not the conclusion of the Full Court, but secondly, the reason why the Full Court in paragraph 50 at page 410 in the third line said:

Even of it is correct that the parties to the Policy are no longer in dispute there may still be a single justiciable controversy involving –

the three parties. So the court was not saying you can have a justiciable controversy where there is no dispute as to legal rights and entitlement. Rather the court held that even if the insured and the insurer were not in dispute, there was still the single justiciable controversy and that clearly included rights which the investors could vindicate, including under section 562 of the Corporations Act.

Your Honours, I do not intend to go any further through the matters that we have set out in our written submissions. Given the time, unless there is any further matter upon which I could assist, those are the submissions on behalf of the Airports, may it please.

KIEFEL CJ: Yes, thank you, Ms Stern. Mr McElwaine, do you wish to take up the few minutes before the luncheon adjournment?

MR McELWAINE: Chief Justice, the arrangement is that Mr Solicitor will speak first for the respondents.

KIEFEL CJ: I see, thank you. Mr Solicitor.

MR DONAGHUE: Your Honour, if it is convenient to the Court, I will because I think we are a little pushed for time with what everybody wants to say.

KIEFEL CJ: Yes, that is what I thought.

MR DONAGHUE: Your Honours, the Commonwealth proposes to focus in oral submissions on the constitutional requirement that there be a matter and the related requirement - the issue arising under grounds 3 and 4 of the notice of appeal and the related requirement that an applicant for relief have standing to obtain the kind of relief sought, that arising under ground 2 and the relationship between those two concepts.

I do not propose to address on the relevance or otherwise of the doctrine of privity of contract in the context of a claim for declaratory relief about the meaning of the contract. We have addressed that in writing and I rely on our submissions and I understand that the councils are going to focus particularly on that issue. So, given time constraints, we are content to say nothing further about that. Depending on how I go as to time, I might say something very brief about EB 9.

Your Honours, in our submission, the starting point, looking at the matter requirement, is the evident reality that this matter was in federal jurisdiction. That was so for two reasons: one, the Commonwealth was named as a party, so 75(iii) was engaged; and, two, and this was determinative of the jurisdictional question in the Federal Court, it was held that the matter arises under a Commonwealth law, thereby engaging jurisdiction under 39B(1A)(c) because the subject matter of the dispute involved a lease. So they were federal jurisdiction because of 75(iii) and 76(ii) of the Constitution.

That being so, obviously there needed to be a matter and, as this Court has long held, that requires there to be a controversy about rights, duties or liabilities to be resolved by the application of judicial power.

If the Commonwealth had instituted the exact same proceeding that the council has instituted, seeking declaratory relief as to the meaning - the proper interpretation of clause 26.2 of the lease, there could be no question that that proceeding would have involved a matter.

GLEESON J: Mr Donaghue, could the Commonwealth have done that in circumstances where it apparently agrees with the lessee as to the interpretation of the lease?

MR DONAGHUE: Your Honours, Justice Gleeson’s question anticipates where I am coming to about this because the issue in this case, in our submission, is about the controversy part of the familiar formulation that there has to be a controversy about rights, duties, liabilities, et cetera, to be resolved.

The applicant’s case here is really not that the subject matter of the dispute does not involve the determination of rights, duties or liabilities. It does involve the liability of one party to the lease, the airport corporations to make payments pursuant to clause 26.2. The issue underlying the airports’ argument, the appellants’ argument, is about whether the applicant for relief had a sufficient interest to do so.

To answer your Honour Justice Gleeson’s question, if the Commonwealth had brought such a proceeding, there would have been room for argument about whether there really was a controversy there and whether there was a proper contradictor such that the declaratory jurisdiction would properly be engaged.

But in our submission, the real gravamen of the issue raised by the appellants’ case is not so much about the existence of the legal rights or interests to be resolved but about whether the council was entitled to seek to have them resolved. So, when our friend said, as my learned friend said repeatedly this morning, there is an absence of a right to be vindicated, and your Honours repeatedly heard the submission there is no right to be vindicated, in our submission, that is just plainly not the case.

The subject matter of this litigation is whether or not there is a duty to make payments of a particular amount under clause 26.2 of the lease. There is a right to be vindicated. The question, which is a question normally analysed through the lens of standing, although as I will develop there is a relationship between standing and matter, but the question really is as to the adequacy of the councils’ interest to engage the judicial power of the Commonwealth to determine the rights of the Airport Corporations under the lease.

EDELMAN J: If that submission is correct, then the identity of the Commonwealth as a party to the contract does not really matter. That submission would be correct in any contract where a benefit is conferred upon a third party, and the parties to the contract were in agreement about the meaning of the contractual provision, but the third party disputed the meaning of the contractual provision under which the third party would receive the benefit.

MR DONAGHUE: Yes, your Honour. The legal question to be resolved, if where it is in the exercise of federal jurisdiction, and, obviously, one could be for circumstances unrelated to the Commonwealth, but if one was in the exercise of federal jurisdiction and there needed to be a matter, and a third party brought a claim of that kind, the determinative question is, in our submission, do they have a sufficient – a real interest – to seek the declaratory relief.

If they do have a real interest to seek the declaratory relief, then, in my submission - and I realise I need to develop this, but in my submission they have standing and that aspect of the standing inquiry being incorporated within or subsumed within the matter issue, there is also a matter because there is a judicial controversy as to the applicants’ entitlement to that relief. Your Honours, I see the time. I am going to develop that by reference to a number of cases.

KIEFEL CJ: Thank you, Mr Solicitor. The Court will now adjourn until 2.15.

AT 12.47 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

KIEFEL CJ: Yes, Mr Solicitor.

MR DONAGHUE: Thank you, your Honour. Your Honours, in our submission, the decision of this Court in Truth About Motorways v Macquarie Infrastructure stands squarely in the path of the applicants’ proposition that the requirement that there be a justiciable controversy means that the legal rights or duties or liabilities of the applicant for relief must be affected by the grant of that relief.

In our submission, that case establishes that it is enough to satisfy the matter requirement in Chapter III that the grant of relief in the proceeding will determine the rights, duties or liabilities of one of the parties to the proceeding, often the respondent; here the airport corporations.

To make that good, can I ask your Honours to turn to that case. It is in volume 4, tab 26, (2000) 200 CLR 591. If your Honours start with the headnote, it is a convenient place to see the legislative provisions that were in issue. There was a challenge to two provisions of the Trade Practices Act. Both were identified in the first paragraph of the headnote:

Section 80 of the Trade Practices Act 1974 (Cth) conferred power . . . to grant an injunction . . . on the application of the Australian Competition and Consumer Commission or any person, it was satisfied that a person had engaged in conduct that constituted a contravention of certain provisions, which included –

section 52. The other provision was 163A, providing that “a person may institute a proceeding” seeking a declaration in relation to the effect or operation. So any person or a person were empowered to bring proceedings of the kind there identified.

The applicant, Truth About Motorways, commenced proceedings against the manager of some unit trusts, alleging contraventions of the Trade Practices Act and seeking declaratory relief. That applicant did not claim to have suffered any loss or damage by reason of the conduct of the unit trusts, claimed no special interest in the subject matter of the proceeding, but instead simply relied on the open standing provisions as they were referred to in sections 80 and 163. The unit trust responded to that proceeding by challenging the validity of sections 80 and 163A on the basis that the provisions – and you can see this on the bottom of the first page of the headnote:

in the absence of a direct or special interest, there was no justiciable controversy with respect to which jurisdiction could be conferred or invested in a court under Ch III –

So the argument was you cannot have an open standing provision. The applicant needs to have an interest in the relief that is to be granted in order for there to be a justiciable controversy. That argument was unanimously rejected by the Court in Truth About Motorways and the case, in our submission, establishes that you do not need the applicant to have an interest in the relief that is sought in order to satisfy the matter requirement.

Can I take your Honours to the key passages starting with the joint judgment of Chief Justice Gleeson and Justice McHugh at paragraph 16, which starts on 601, but if your Honours could go to 602 and look at the second half of that paragraph, their Honours are summarising there the argument that was advanced, the essence of the argument being that:

there is no “matter”, and the purported conferment of jurisdiction is therefore invalid ‑ ‑ ‑

because, it was submitted:

there is no justiciable controversy . . . said to follow from the absence of any direct or special interest of the applicant in the subject matter -

Your Honours have already been taken to paragraph 17. It is discussing section 52 which of course, as your Honours know, is a provision that is commonly raised in litigation between private litigants. It was described as a public provision. In a sense that is true. It creates a “norm of conduct”, but it is a norm of conduct that is frequently the subject of controversy between private parties in the course of commercial disputes.

The point that is being made in the middle of paragraph 17 is that what was sought by the determination of the Court is to establish “a violation by the respondent of a statutory norm”. Now that, in our submission, is one way of establishing the rights of one of the parties, the respondent, by showing that they breached a statutory provision, but one could equally say the violation by the respondent.....that would be to determine the rights, duties or liabilities of a party to litigation.

It would not be, as the Court continues in 17, to make a declaration divorced from the administration of the law. It is justiciable in character, et cetera. Now, if your Honours then go on to paragraph 20 where their Honours, in effect, summarise their conclusion, they emphasise again, in our submission, in very clear language, that there does not need to be a:

private right, or special interest, of the applicant –

at stake in order for there to be a justiciable controversy. Now, of course ‑ ‑ ‑

GORDON J: Mr Solicitor, can I ask two questions about that. I had understood paragraph 20 to be saying that there were two elements to the justiciable controversy. There was the claim of the violation, which Parliament had conferred standing on the person in respect of, and second, there was a “claim for remedies of the kind provided by the Act”. It was the two limbs that gave rise to that conclusion, as borne out by some of the paragraphs you have taken us to before. Am I wrong about that?

MR DONAGHUE: No, your Honour, there needs to be a legal right, interest or liability to be determined. On the facts of this case that was sourced in statute but, in my submission, it need not have been. It was here, but the gravamen of the argument in Truth About Motorways was, as one can see from paragraph 20, the argument that there was no justiciable controversy and that did not depend upon the character of the right that was in issue. The problem was said to be that, because the applicant did not have a private right or interest in whether or not that legal right or interest was upheld, that there could not be a controversy there.

Of course, on the facts of this case, the second element your Honour refers to, the statutory conferral of a right to standing, was important because it was the thing that was said to have been done invalidly, and we have no equivalent to that here. But, in our submission, all that means is that, on the facts of this case, the council needs to satisfy whatever the applicable standing rule is. So, the standing rules have not been changed by Parliament to, in effect, allow anyone to have standing.

We accept, and the councils accept, that they need to clear the standing hurdle, and they do not have the assistance that was present in Truth About Motorways, but the point that we are seeking to draw from the case, consistently with the first sentence of paragraph 20, is that, from the perspective of whether there is a matter or not, it simply is not the case that the applicant needs to have an interest in the relief that is granted.

So when our friends say there has to be the vindication of a right of the applicant, they are advancing a proposition that cannot stand consistently with the decision in Truth About Motorways. If one goes to Justice Gaudron’s judgment then, starting at paragraph 44, her Honour makes the same point, having started textually to ‑ ‑ ‑

EDELMAN J: Mr Solicitor, when you say cannot stand with Truth About Motorways, is the appellants’ argument not that Truth About Motorways is explained as a case involving a public right for which the parties had some interest in enforcing?

MR DONAGHUE: Your Honour, I think it is fair to say that our friends attempts to explain the case away in that manner. In our submission, though, to assert that the applicant had some interest in enforcing it is to deny the point of the provision which was to grant to anyone, whether or not they had an interest, the capacity to bring the proceeding. The Court answered that in a way that drew upon the breadth of kinds of matter that are embraced within sections 75 and 76, drawing no distinction between whether they were of a private or public law character.

There are quite a number of references, for example, to habeas corpus and prohibition as remedies that can be granted in circumstances where there is no interest in the applicant in the grant of that relief to make good the proposition that there is no impediment arising from Chapter III on the bringing before the courts of controversy where the applicant has no interest at all in the result. If that can be done validly then, in our submission, it must follow that Chapter III does not require the applicant to have an interest.

There is still a requirement for the applicants to have an interest under the standing rules and I will come to that. So, absent a statutory modification of the kind we had in Truth About Motorways, then there is a standing question to be answered, but the matter requirement, the subject of grounds 3 and 4, does not do the work that the appellant asserts that it does. So one sees Justice Gaudron, in the second half of paragraph 44, saying:

there is no basis for concluding that either the concept of “judicial power” or the constitutional meaning of “matter” dictates that a person who institutes proceedings must have a direct or special interest in the subject matter of those proceedings -

not qualified in any way by reference to “in public law or in private law”. There just is no such requirement.

GORDON J: I am sorry to raise this again, but is that not because that follows on from paragraph 25, where her Honour identifies the relevant orders sought, which picks up Justice Edelman’s point – that is, that they were in effect the vindication or enforcement of public rights, i.e., declaration that it engaged in conduct and corrective advertising, giving rise to conduct which was, in effect, preventative rather than curative.

MR DONAGHUE: Your Honour, those were the facts of that particular case, but on those facts it was said sections 80 and 163 are entirely invalid. In our submission, there are many contexts within which section – the public/private distinction, and I will develop this also, is not a sufficiently stable one to be constitutionalised in the way that our friends are suggesting, as if there are different principles for the two areas.

Very commonly, section 52 will be alleged to be contravened by one person’s commercial dealings with another person and to assert that that involves public rights – this case, on its facts, was perhaps more public than many cases involving section 92 might be, but the Court’s ruling on the validity of these provisions was not confined to the particular facts that were in issue in play. The Court’s reasoning is explaining why there is no constitutional impediment to allowing any person, even if they have no interest, to seek a judicial remedy.

Now, Justice Gaudron explains that in what we respectfully submit is a helpful discussion following the paragraphs upon which our friends relied. You were taken to paragraph 45, talking about questions of standing being subsumed within a matter, and I need to – we agree with that, and I am going to develop some submissions about that in just a moment. There is then the paragraph that our friends relied particularly upon, in paragraph 46, starting with the proposition that:

There may be cases where, absent standing, there is no justiciable controversy.

Again, we agree, for reasons I will come to. Her Honour gives an example of that as:

a court could not make a final and binding adjudication with respect to private rights other than at the suit of a person who –

claims the right. That is really at the beginning of a discussion where, to understand the point her Honour is making, you need to read from 46 through to 50. The points that her Honour is explaining in that section of the reasons concern the relationship between the particular relief that is sought, and the interest that is necessary in an applicant for that relief, all premised on the proposition in 46, particularly at the end of 46, that:

there may be no justiciable controversy because there is no relief that the court can give to enforce the right, duty or obligation in question.

So if there is no relief that can issue, then no matter, but her Honour then explains, by reference to Justice Aickin in ACF, the interest required varies with the relief claimed:

What is required is that the plaintiff’s interest should be one related to the relief claimed.

That, at the end of 47, is said to disclose:

the significance of standing to the existence of a matter –

and at 48 is the key proposition:

There is no matter within the constitutional meaning of that term unless there is a remedy available at the suit of the person instituting the proceedings in question.

At 49:

Absent the availability of relief related to the wrong which the plaintiff alleges, no immediate right, duty or liability . . .

Provided there is a remedy which is appropriately related to the wrong –

no Chapter III problem.

EDELMAN J: Mr Solicitor, do you accept the correctness of the first sentence in paragraph 48?

MR DONAGHUE: Yes, I do, your Honour.

EDELMAN J: Does that not then mean that, not necessarily as a matter of order, but as a matter of logic, Mr McElwaine’s submissions really come before yours, because if the appellant has no right to obtain relief in the form of a declaration, then there would be no matter?

MR DONAGHUE: Your Honour, I am about to – that is so. That is so, but Mr McElwaine’s submissions, as I understand it, are going to focus particularly on the privity concept and, in our submission, the privity concept says nothing about the availability of declaratory relief, which is why we have ordered things as we have.

In our submission, when one goes back to 46 in light of the discussion that follows about the focus on the interest of the plaintiff in the particular relief claimed, 46 takes on a different complexion, because her Honour nowhere there makes any reference to declaratory relief, and it is plainly ordinarily the case that in litigation about private rights, where ordinary relief, damages, specific performance, et cetera, are sought, the entitlement to that relief, the entitlement to the remedy depends on the person claiming the relief having a cause of action.

That is why Justices Gaudron, Gummow and Kirby in Bateman’s Bay, in a passage that her Honour cited in her judgment, and that Justice Gummow quotes at paragraph 92, their Honours said:

“In private law there is, in general, no separation of standing from the elements in a cause of action.”

Again, we take no issue with that. But in a case, as in this case, where declaratory relief is sought, if the party can establish the entitlement to declaratory relief then, in our submission, they have an interest of the only kind that they need in order to satisfy the matter requirement, because they have an interest that entitles them to the particular relief that is sought. As long as the plaintiff has an entitlement to the particular relief sought, there is no Chapter III impediment.

Justice Gummow’s analysis is perhaps the most detailed on this point, and I will not detain your Honours on it for too long, but starting at paragraph 76 on page 622, his Honour, summarising the argument, notes at the end of paragraph 76:

This attack is mounted on the ground that there is no “justiciable controversy” and no “matter” . . . it was said to be a fatal defect . . . that there was no requirement of mutuality or reciprocity of right and liability between parties.

There is no such requirement –

His Honour then traces the history of various forms of proceeding and relief over quite a number of pages in his judgment, up to about paragraph 99, including discussing habeas, and quo warranto and prohibition, and at 99, at the end of that discussion, his Honour concludes that:

at the time of the adoption of the Constitution . . . there was no single theory as to what always would be required to render competent the institution of proceedings . . . no general rule which prescribed the adequacy in any given case of the connection between the instituting party and the subject matter –

and at 100, that that suggests:

considerable caution in extrapolating to Ch III generally narrow rules of standing –

in what, as his Honour emphasises at the end of the paragraph, was intended to be a “comprehensive” and wide term. Then at paragraph 122, the most important paragraph in his Honour’s reasons for present purposes - this is near the bottom of page 637:

Ch III does not impose a universal requirement for adjudication under it of mutual or reciprocal relations between right and duty, power and liability . . . The notion of “standing” is an implicit or explicit element in the term “matter” throughout Ch III, identifying the sufficiency of the connection between the moving party and the subject matter of the litigation. However, it would be an error to attribute to this notion a fixed and constitutionally mandated content across the spectrum of Ch III.

The point his Honour is making is what you need by way of sufficient connection between the moving party and the subject matter varies depending on the relief. If this had been a claim where the council had sought damages for non‑payment under clause 26.2, this would be a totally different case and privity would obviously be front and centre. But damages were not sought and a claim for declaratory relief requires a different kind of interest on the part of the applicant for that relief than a claim for damages under the contract.

GORDON J: Does that explain his next sentence where he ties it back to the whole purpose of the legislation and the remedy?

MR DONAGHUE: In my submission, yes. His Honour is recognising the flexibility here that is inherent within Chapter III and saying that because Parliament had defined the circumstances in which there was an entitlement to the remedy under the Trade Practices Act, there was no Chapter III difficulty. The applicant was entitled to the relief sought. Parliament was able to modify what was necessary and had done so there. It has not done so here, but the Council meets the requirements for the existence of standing to claim declaratory relief, for reasons that I will come to shortly.

I will not take your Honours to them, but if I could ask you to note Justice Hayne’s reasons at 183, Justice Kirby at 152 and Justice Callinan at 203 to 204, all to the same effect. In my submission, it is then perhaps necessary, having established that Chapter III does not mandate, to use Justice Gummow’s language:

the sufficiency of the connection between the moving party and the subject matter –

it is necessary to address what the Court means in its repeated statements to the effect that questions of standing are subsumed within the constitutional requirement that there be a matter. The Court has said that many times and your Honours have seen some of the statements to that effect in Truth About Motorways. It said it in Plaintiff S10, in Pape, in Croome v Tasmania, in Bateman’s Bay, in Abebe, so there are many references to that effect.

In analysing what that means, in my submission it is helpful to turn to Justices Gaudron and Gummow’s judgment in Re McBain [2002] HCA 16; (2002) 209 CLR 372 which your Honours have in volume 4, tab 23, and when your Honours have it, to turn to paragraph 62. I should note perhaps here, your Honours, that this is an area in which there is happily some agreement between the parties because our friends rely upon this analysis at paragraph 44 of their written submissions.

What one sees in paragraph 62 is their Honours identifying a mode of analysis that they describe as a tripartite inquiry for determining – identifying a matter. Step 1 identified a subject matter of the determination of the proceedings. That step seems to have been understood, for example, in CGU at paragraph 27, as focusing on the subject matter head of jurisdiction under section 75 or 76 of the Constitution. Certainly CGU at 27 points in that direction, and here, as I have already indicated, 76 in particular was the relevant subject matter.....arising under federal law because the lease owes its existence to federal law.

Second in the tripartite inquiry – “the identification of the right, duty or liability to be established in each proceeding” – here, in our submission, the Full Court, at paragraph 142 in a paragraph to which Ms Stern took your Honours, identified the right, duty or liability correctly as the liability of the airports to make payments under clause 26.2. What is in issue is the interpretation of that clause imposing on the airport corporations a liability to pay the relevant amount to the councils.

Third, “the identification of the controversy between the parties . . . for the quelling of which the judicial power of the Commonwealth is invoked”, in our submission, it is at this limb of the tripartite inquiry that questions of standing can be said to be subsumed into matter requirement and the reason we make that submission is because, while it is true that, as the courts often explain, a matter exists independently from the legal proceedings concerning the matter, the matter nevertheless does not exist entirely in the abstract because, as your Honours have just seen, there cannot be a matter without there being a legal remedy for the wrong.

That explains, in our submission, why it has been said, including for example, in Abebe at paragraph 31 by Chief Justice Gleeson and Justice McHugh, that the matter has meaning only in the context of a legal proceeding.

A different way of putting it might be to say that it is only once a person actually commences a proceeding that the justiciable controversy is crystallised by a claim by a particular plaintiff for relief of a particular kind. Once one can see that claim being made, it becomes meaningful to ask: does the plaintiff have the interests that they need to pursue that claim? If they do, the justiciable controversy is the controversy between the plaintiff and the respondent as to whether or not the relief claimed can be granted.

That is perhaps a long-winded way of saying that the answer to the third limb of the tripartite inquiry is that there will be, at least ordinarily, a controversy if the party who has sought the relief has standing to seek that relief. You answer the tripartite inquiry by answering the standing question.

GAGELER J: Mr Solicitor, can I ask about this tripartite inquiry. Their Honours were careful to frame it in the context of the litigation before them. For my own part, I think it would be unfortunate if a constitutional question got shoehorned into a necessarily sequential inquiry without making sure what the first limb is about.

MR DONAGHUE: Your Honour, I am not proposing this as a constitutionally mandated analysis or anything of that kind. Their Honours, a sentence or two on, say all of these inquiries are aspects of the basal inquiry, “is there a matters in the sense required by Chapter III”, and I accept that that is so.

But the reason I have taken the Court to it is because – while the Court has often said that questions of standing are subsumed in a Chapter III context into whether there is a matter or not – the Court has not often explained how or why those questions intersect in that way.

If one goes right back as far as In re Judiciary and Navigation Acts, one sees the Court referring to a justiciable controversy about rights, duties and liabilities, and what I am proffering to the Court is an analysis that says, looking at that kind of formulation, how does one identify a justiciable controversy. That is, in my submission, at the heart of what a standing inquiry is about because a standing inquiry is ultimately about, does the.....have enough of an interest to generate a controversy with the person against whom the relief is sought.

So, I am inviting your Honours to ally that word – whether you put it in a tripartite inquiry or not – but that phrase, “justiciable controversy” – by reference to standing‑type rules so that if you have standing, you have a controversy. Of course, that carries with it that the kind of interest you need to have a controversy changes depending on the relief that you seek.

GAGELER J: Mr Solicitor, would another way of putting the argument – perhaps just a variation of it - be, you might have a controversy, but it is the standing to seek the relief that provides the justiciability bit of a justiciable controversy about existing legal rights.

MR DONAGHUE: Yes, your Honour. I accept that that is another reasonable way of putting the point. I was about to say that we would not submit that the only way that you can have a controversy is where you have commenced proceedings by a party with standing. That would be sufficient, in my submission, but you do find cases from time to time where there is factually a controversy between the parties, but the court still finds that one of those parties does not have standing.

So, a recent example might be Zhang, in this case, where you had a.....who wanted to say that a particular provision of a foreign interference offence was invalid, but that provision had not yet engaged in relation to him, so that he did not have standing to raise the point because his interest had not yet been affected.

So, in circumstances where there is a factual argument between people of a kind that would meet the ordinary description of controversy about a position of legal rights, duties and liabilities, there might be a matter, but the Court might still say in some circumstances, you do not have standing. Kuczborski is an example of that, and that, in my submission, is what Chief Justice French was explaining in paragraph 5 of Kuczborski, when his Honour said:

an affirmative answer to the question – is there a matter? – may not be sufficient to answer the question whether the plaintiff has standing.

Mr Kuczborski wanted to challenge a sentencing provision. He was held not to have standing to do so despite the ‑ ‑ ‑

GORDON J: Mr Solicitor, I am sorry to put this in a blunt.....but is not this whole set of submissions anything more than what either Justices Gaudron or Gummow said in Truth About Motorways, that there can be no fixed rules in a sense of a fixed order of rules or a fixed set of considerations and that the whole point of it is that it adjusts and it adapts according to the circumstances and the facts of the case, the identification of what the rights might be and it is a process which involves consideration of all of those things?

MR DONAGHUE: Your Honour, again it is no part of my task to try to straitjacket the Court’s analysis. What I am endeavouring to do is to offer a.....that explains how the standing rules intersect with the matter rules. Primarily, for the purpose of making this point – and it is the point that Justice Gaudron and Justice Gummow made in Truth About Motorways, that the nature of the relief sought is critical. So, however you wanted to frame or structure the analysis, the nature of the relief sought is critical.

That is why our friends, with great respect, pay insufficient attention to the fact that the only relief sought in this case is declaratory relief because most – their submissions talk generally about enforcing the contract, but that is not a helpful concept because the ways in which relief might be sought very heavily control both the standing and matter questions.

That is why, in our submission, ultimately it is a distraction to focus here on the fact that there is not a dispute between the parties to the contract because that assumes that the justiciable controversy has to be a controversy between the parties to the contract. But the justiciable controversy, in our submission, is between the party with an interest to seek declaratory relief and the party against whom that relief is sought.

As long as your Honours are satisfied that the councils had standing to seek the relief they sought, there is a justiciable controversy quite irrespective of whether or not the parties to the contract are or are not in agreement. That is really the essence – I will not take your Honours to it in light of the time – but that is the essence of the point that the Full Federal Court decided in Ashmere Cove. In Ashmere Cove at paragraph 49 of their Honours’ reasons, their Honours said:

The flaw in the Insurers’ approach to the constitutional issue is that it assumes that the boundaries of the “justiciable controversy” in the present case are determined by the contractual relationship -

That is the same kind of assumption as is being made here. The boundaries of justiciable controversy are not determined by that relationship, they are determined by the interest that gives the councils the entitlement to seek declaratory relief, and the airport corporations opposition to the grant of that relief.

Your Honours, I have said something brief about the bright line public law/private law distinction. That line was very bright in our friend’s written submission. It seems to be somewhat less sharp following the oral submissions this morning which do not seek to demarcate – or it seemed to us – did not seem to demarcate as strictly between those two areas of law, as had been the case in writing.

Nevertheless, we maintain the submission we made in writing that that distinction is not a stable or appropriate distinction for constitutional purposes. In our submission, the facts of this case provide a very good example of why because, whilst there is a dispute about the.....of a contract, it is a contract to which the Commonwealth of Australia is a party. It is of a more public character than most contracts.

This particular contract has a statutory foundation in section 22(1) of the Airports (Transitional) Act 1996. It is a contract in the relevant clause that contemplates ex gratia payments, as they are called, being paid to.....creature of statute, the local council, this time a creature of statute under the relevant Tasmanian local government legislation, also giving it a more public character than is ordinarily the case, and it is a contract that, at least to some extent, embodies a government policy that there should not be distortion created by the operation of 114 of the Constitution and the immunity from taxes that arises by reason of the airports being situated on Commonwealth land in a Commonwealth place.

So, all of those factors go to show, in our submission, or to illustrate that it is hard to draw bright lines between public law and private law such that the law should be developed in a way that.....a distinction between those two categories.

Your Honours have heard about the policy being implemented by clause 26.2 and the connection to the natural competition principles. It might be worth ensuring that your Honours appreciate that the policy underlying the requirement that the airports pay rates to the council is actually quite a lot older than that.

The councils have given your Honours a book of further materials which contains within it some of the older airport leases. If I could invite your Honours to turn, in that book to tab 7 and then to go to page 187, using the page numbers at the top in the middle of the page. This is a contract from 1987, so eight years before the national competition policy, and you will see in clause 5.4 ‑ ‑ ‑

EDELMAN J: Sorry, Mr Solicitor, working electronically, which electronic document is this?

MR DONAGHUE: It is number 7, I think, your Honour. Hopefully, it is the lease between the Commonwealth of Australia and Australian National Airlines Commission Launceston, dated 31 December 1987. In the councils’ book of further materials. It starts at page 161 of that book.

EDELMAN J: Thank you.

MR DONAGHUE: Then if your Honours could turn to page 21 of that document, 187 of the book, your Honours should see 5.4 headed “Rates and Taxes”. This is the predecessor provision, again concerning the payment of local government and other rates. It is interesting to note that the way that the regime used to work is that if rates – and reading from about four lines down:

If any Rates and Taxes are not leviable or payable because the Land is Crown land or a Commonwealth place or because the Lessor is immune . . . the Lessee shall pay or cause to be paid such amounts as may from time to time be notified –

So that is the same:

as if such Rates and Taxes were leviable or payable –

But here it then differs:

in the event of any failure of the Lessee to pay or cause to be paid any such amount on being so notified the Lessor –

so apparently discretionary:

as an act of grace –

and this seems to be the source of the “act of grace”‑type language that one sees in the current version:

pay the amount thereof to the –

council:

whereupon the Lessee shall pay or cause to be paid such amount to the Lessor upon demand as additional rent.

So the way it seems to work under the old regime was the same structure, the airport was to pay the money, or the airport operator should pay the money to the councils, but if they did not, it was up to the Commonwealth to decide whether or not the payment would be made as an act of grace payment to the councils, and if it was, then the Commonwealth could get the money back, as rent, from the airport operators.

Viewed against that background, it certainly appears to be the case that clause 26.2 of the new agreement, the new leases, considerably strengthened the position of the councils as it had previously existed. So I go to that for two purposes, one to indicate that this general policy arrangement has quite an element of..... There is a letter somewhere in the books that indicates that it was an arrangement of long standing, even in 1987, although quite what “long standing” means is not revealed, but also, so that your Honours can see contextually the backdrop against clause 26 emerged.

Your Honours can I turn then to the standing question more squarely, and away from..... Here we think our friend’s case has evolved a little over the course of the day. In writing there was a.....and one saw this, for example, in paragraph 32 of their written submissions. There was an argument that the real interest test one sees in Forster v Jododex and Russian Commercial Bank was a test that was only applicable in the public law context and not applicable in the present case.

We responded to that by saying well, actually, Russian Commercial Bank was a private law case about whether or not bank loan was repayable in rubles or pounds sterling. So the very foundation for the real interest‑type test was a contractual dispute, not a public law dispute.

We also gave your Honours a reference to Smethurst, where the Chief Justice and Justices Bell and Keane emphasised that in the field of public law equitable remedies were subject to the same considerations as apply in any other field. So, it is not a promising foundation for there being different rules for declaratory relief in public and private law.

It is not clear to us that the applicants still maintain a strict.....of that kind between the applicable principles, but instead it appears to be put that a real interest for the purpose of obtaining declaratory relief depends upon the vindication of a legal right of the applicant for relief. That submission just cannot stand with Aussie Airlines and with this Court’s interpretation and endorsement of Aussie Airlines in Edwards v Santos.

Can I start with Aussie Airlines [1996] FCA 813; (1996) 68 FCR 406 and invite your Honours to turn to it. It is in volume 5, tab 30. Your Honours are generally familiar with the background of this case, arising in the context of the end of the two‑airline policy. Qantas and Ansett at that time were the main operators. They were the holders of the long‑term leases at airport facilities. The leases contained provisions requiring the airlines to provide subleases to new entrants – that is, the leases.

The source of the obligation to allow new entrants was an obligation imposed on the leases between the Federal Airports Corporation and the airlines themselves. I emphasise that and I will explain why I emphasise that point in a moment. The dispute involving Aussie Airlines was because it wanted a sublease from Qantas on the ground that it was a new entrant. Qantas denied that it was a new entrant. The Federal Airports Corporation disagreed.

So there was a dispute between the two parties to the lease in that case and it seems that our friends rely on the existence of that dispute as in some way explaining the outcome in the case. In our submission, when one looks at the reasoning in the case, it does not depend on that at all.

Aussie Airlines, the non‑party to the leases, seeks a declaration as to the proper interpretation of the leases. It seeks a declaration that it is a new entrant. There was a dispute about whether it had standing to claim declaratory relief as to the proper interpretation of that lease, a dispute not relevantly distinguishable from the kind of disputes that your Honours now see, as in this case a dispute about the interpretation of a lease between different parties. The reasoning is at 415 to 416 and your Honours have seen parts of it already, critically starting at 415D with Justice Lockhart speaking for the court, saying:

I do not find it necessary to determine whether Aussie Airlines does have enforceable rights under the head leases.

The case was not decided on the basis that Aussie Airlines had a right under the lease. Then his Honour explains there are two reasons why it is not necessary to deal with that question, the second being that:

it is plain, for other reasons, that Aussie Airlines has the requisite interest to support its right to obtain the declaration sought –

Why is that? Well, that risk what is explained in the next paragraph in the middle of the page just under E:

The resolution of the question whether Aussie Airlines is “a new entrant . . . is of real practical importance –

practical importance:

to Aussie Airlines . . . It is not a mere hypothetical question.

It has far‑reaching ramifications for Aussie Airlines. Now, the line at the end of this paragraph is the line that Ms Stern emphasised this morning:

Without subleases, Aussie Airlines will be denied a right to carry on the business which it sees to carry on.

It was said this case is consistent with the appellants’ analysis because there was a right to carry on the business. But if your Honours pause to ask what was the source of that right, the answer that the appellant gave was the lease. The source of the right for Aussie Airlines to carry on its business was a lease to which it was not a party. If that is a right of the kind necessary then one might ask, we submit, with some force, why does not 26.2 of the current leases confer a right of the same kind? But the truth of the matter is that the case does not turn on the existence of a right, as Justice Lockhart expressly explained. It turns on the fact that Aussie Airlines had a real practical interest, or “a real commercial interest” is the phrase used in the very next sentence from the one I was just emphasising:

Aussie Airlines has a real commercial interest in obtaining or being refused the declaration.

It was the real practical interest or the real commercial interest that explained why the airline was entitled to a declaration as to the proper interpretation of a contract to which it was not a party, exactly the same as this case.

Ashmere Cove at paragraph 52 refers with approval to Aussie Airlines, so there are a couple of cases in the Full Federal Court to that effect, but more importantly in this Court Edwards v Santos likewise endorses and, indeed, applies the same tests as your Honours have just seen Justice Lockhart articulating there.

Edwards v Santos we accept is a factually quite different case to the present, but the factual difference does not matter because the case is important because of the legal analysis and, in particular, the endorsement of the reasoning process one sees in Aussie Airlines. If I could just briefly sketch how the issue arose for your Honours, in Edwards v Santos.

The plaintiffs had pursued, and they were pursuing a native title claim in respect of land in Queensland and New South Wales. The Queensland land included land over which two companies had been granted authorities to prospect under the Queensland Act, the Petroleum Act. The holder of an authority to prospect had a statutory entitlement to apply for a petroleum lease under section 40, so that is what is said to be the public law background here.

The companies, the two companies, had entered into indigenous land use agreements under the Native Title Act with representatives of the relevant indigenous people, and those agreements, those land use agreements, had a term of five years. Importantly, for the present purposes, they included a requirement to negotiate the terms of any new indigenous land use agreements, so there was a contractual obligation on the companies to negotiate with the relevant indigenous peoples, and that requirement to negotiate is, we submit, analogous to what one sees in the last sentence of 26.2(a) that your Honours discussed with our friends this morning.

During the course of those negotiations about the new agreement, a dispute arose as to whether or not the companies were correct in contending that their petroleum leases – sorry, that the grant of a petroleum lease would be a pre‑existing rights‑based act under the Native Title Act, and it was that claim arising in the course of the dispute about - or the negotiations about a new agreement that caused the native title claimants to apply for a declaration.

So, they sought the declaration as to whether or not the leases would be a pre‑existing rights‑based act because of the effect that the answer to that question would have on the negotiations in which they were engaged with the companies that had entered into the previous indigenous land use agreement.

It was in the context of that factual background that the Court held that the native title claimants did have standing to apply for the relevant declarations, Justice Heydon’s judgment being the judgment of the entire Court. If your Honours could turn to paragraph 34, which is where the relevant discussion starts, his Honour makes the important point that there were two ways:

The plaintiffs could have established standing . . . The first way was to vindicate an enforceable right of their own.

That seems to be the way that the appellants say you have to establish standing. But it is not the way that standing was established:

The second was to attack the claim by the petroleum defendants of a right which interfered with the plaintiffs’ interests -

not legal rights or enforceable legal rights. When his Honour then analyses this at paragraphs 37 and following - and your Honours have been taken to this so I will not take you through it all again, but your Honour Justice Gordon emphasised the key passages in the second half of paragraph 32 - Justice Heydon held that:

The plaintiffs have a sufficient interest to make those claims, because success in those claims would advance their interests in the negotiations which the parties were contractually obliged to conduct –

just as here there is a contractual obligation to conduct the negotiations under the last clause. They had standing because they had an interest in the question of whether it was valid that was greater than of other members of the public, so that test has been criticised by our friends, but it is the test that this Court unanimously applied in determining the standing question. It had “foreseeable consequences” – this is at the end of 37:

by allowing them to continue the process of negotiating the new ILUA armed with knowledge of the correct legal position -

exactly the same as is the case here. Then in 38, the first half of paragraph 38 summarises Aussie Airlines including identifying, in the second sentence:

An applicant claiming to be a “new entrant” was held to have standing –

not for the reasons that the applicant says, but held to have standing:

even though it was not found to have rights under the head leases -

directly contrary to what was put to your Honours this morning. The tests were:

not “hypothetical”, it was of “real practical importance” to the applicant, the applicant had “a real commercial interest” -

and then in the next sentence, his Honour formulates on the facts the conclusion applying those tests:

So here, whether or not the plaintiffs have rights enforceable –

Clearly, not turning on that fact:

the question whether the ATP is valid is not hypothetical, it is of real practical importance to the plaintiffs, they have a real commercial interest in the relief -

So, not only is Aussie Airlines generally endorsed but the Court applies tests for standing to seek declaratory relief in exactly the same terms as the Full Court had formulated them in Aussie Airlines.

GAGELER J: Mr Solicitor, I wanted to ask what is, I think, just a conceptual question and that is, how do we think of the source of this standing requirement that his Honour links back to Onus v Alcoa? It cannot be a constitutional requirement because Truth About Motorways tells us that Parliament could give open standing. Is it somehow to be read into sections 19 and 20 of the Federal Court Act, or is it judge‑made law that takes as its starting point those provisions?

MR DONAGHUE: In my submission, the latter, your Honour. So it is judge‑made law governing the entitlement to the relief sought. Where it is damages or specific performance it might be completely judge‑made law. Where it is a declaration it will be the way the principles have been developed by the courts as to the circumstances in which the declaration can properly be made under section 21 of the Federal Court Act, all subject to Parliament’s modification as Truth About Motorways tells us, but in our submission, the requirement is whatever courts have held is the necessary interest to obtain the relief sought, unless Parliament has changed the position. That is how we submit it should be analysed.

GORDON J: So, building on from that, which is the question I wanted to ask, is there a distinction then to be drawn here on the facts – and you may not want to answer this, Mr Solicitor – between the past being the claim period here where the Commonwealth has said that performance is both complete and lawful, and the future?

MR DONAGHUE: In my submission, analytically, your Honour, I think the answer is no because the Commonwealth’s position – the Commonwealth is somewhat caught in the middle in all of this. The dispute, the justiciable controversy as I have analysed it, or it is submitted your Honours should analyse it, is a dispute between the councils and the airports. The Commonwealth’s position does not matter as to the existence of that dispute.

So that if the councils have disagreed with the Commonwealth and, indeed, with the airport corporation, and indeed, the Commonwealth as a matter of substance disagrees with the councils as to the proper interpretation of the clause but, in our submission, that does not mean that the councils lack a real interest in the correct interpretation of that clause and, in my submission, they can therefore do so across both past and the future.

KIEFEL CJ: Mr Solicitor, would it have been open to the Commonwealth, even in light of their general agreement with the airport authorities, in view of the dispute between the airport authorities and the councils, for the Commonwealth to have brought proceedings and joined the councils to those proceedings as parties and then – leave aside the question whether they then stand back and allow the resolution of the dispute, but just as a matter of mechanics, would that have been possible?

MR DONAGHUE: Analytically, your Honour, I think the answer is yes, because the Commonwealth clearly has a legal interest, a justiciable interest in the correct interpretation of its contract. There would be a question as to the existence of a controversy but for the councils, but if the councils were joined to the proceeding in the way that your Honour has identified, then there would be - and that, in my submission, would be an understandable position in light of the significant role accorded to the councils under clause 26.2 - there would not have been a difficulty with the contradictor so analytically, in my submission, that would have been an available course and it would ‑ ‑ ‑

EDELMAN J: Mr Solicitor, can I just ask you – you said a moment ago, I think with some force, that the answer to the source of the standing requirement is that it is effectively a judge‑made requirement which depends upon the entitlement to the relief sought. Does that not mean, however, that the public/private distinction does become of much more importance than you had initially submitted because, of course, we have, in relation to the availability of declarations, a considerable body of law about when a relator proceeding can be brought and that the relator proceeding relates to public matters, not private rights, and that different circumstances govern when declarations can be brought in relation to private rights.

MR DONAGHUE: Your Honour, to the extent that the judge‑made law does draw a distinction in terms of the entitlement to the relief sought, I accept that there is force in what your Honour has said but, in my submission, while there are suggestions in some of the cases, and I think Justice McHugh in Bateman’s Bay might be an example that your Honour mentioned this morning, who suggested a stricter distinction, the other judgments, particularly the plurality judgment in Bateman’s Bay, would not support the idea that there are different principles governing the availability of declaratory relief in those situations.

In the public law context, the relevant interest is often called a sufficient interest, but in that context, your Honour, if anything - and this is perhaps one peculiarity of the way the argument has developed, is that the cases historically emphasised a stricter rule for obtaining declaratory relief in public law than in private law in the sense that it was historically said, well, it is the Attorney‑General who has the role in enforcing public rights, and it was then voiced in the line of cases that followed that started to extend that role to private individuals in circumstances where they could demonstrate an interest of a sufficient kind, the height of that bar, having seemingly lowered over time, if I might proffer that observation.

But, here, our friends I think flip it on its head by suggesting that there is a higher bar for a declaration in relation to private rights than there are in relation to public. In our submission, really the public/private distinction is not a helpful one, for reasons I have already touched on, and a case like Aussie Airlines, a case like Edwards v Santos, are cases that to some extent might be said to straddle that divide.

This case also straddles the divide and in this case, like those cases, a real commercial interest or a real practical interest is sufficient to obtain a declaration. So I would not endorse the distinction but, to the extent that the distinction exists in a case of this kind, it is sufficiently governed by the existing authorities for your Honours to be confident that as long as the councils had a real practical interest, then they were entitled to relief.

That, your Honours, is exactly what the Full Court did. The Full Court in this case, in our submission, got the analysis exactly correct. Applying Aussie Airlines, applying Edwards v Santos, they found that the councils had a real or sufficient interest in the interpretation of clause 26.2. That conclusion was reached at 183 of the Full Court’s judgment. Ms Stern has already taken your Honours through most of the relevant passages, but at 148 to 149 you see the court applying Aussie Airlines. At 152 the interest was identified, noting the role that clause 26 gave to the councils.

The Full Court as we read their reasons focused principally on two matters as demonstrating the real commercial interest or the real practical importance. One was the receipt of the money, the financial interest in the receipt of funds under clause 26.2, which the reasons tell us at 181 to 182, there is about $1.7 million in back payments claimed, so that is obviously a significant commercial interest. Then there is the position going forward, as Justice Gordon has emphasised in turning on the correct interpretation of the “trading or financial operations” words. So that was one basis, particularly at 181 to 182.

The other basis was the very active role given to the councils of the participant in the contractual process which caused the Full Court to hold that the councils were “invitees, not invaders”, at 177 to 178, and that was really for three reasons: one, as recipients of payments; two, as the party that was obliged to notify the lessee of the relevant amounts; and three, because it was the party on the other end of the obligation of the airports to use reasonable endeavours to make an agreement.

So, in our submission, those factual conclusions appropriately applied the correct legal test and the appeal should be dismissed. Your Honours, unless the Court has anything further, those are my submissions.

KIEFEL CJ: Thank you, Mr Solicitor. Yes, Mr McElwaine.

MR McELWAINE: .....Chief Justice. Your Honours should understand that the mechanism of clause 26.2 worked entirely satisfactorily between 1998 and 2013 and what the councils did is they calculated the equivalent amounts, they notified the equivalent amounts in the form of a rates notice and the amounts were properly paid.

What led to the disputes, your Honours, was a substantial re‑evaluation in the 2013 year. From that point in time, the councils were active participants in the disputes as between themselves and the Commonwealth, and themselves and the lessees, and they were drawn into various proposals to resolve the disputes, including the appointment of HTW as the valuers – and I must correct something that our learned friend, Dr Stern, said earlier – I am sure it was a slip of the tongue – it was not the councils that provided the instructions to the valuers, it was the Commonwealth. A significant point of dispute in the instruction process is the Commonwealth instructed the valuer to exclude the common user facilities.

Your Honours have been taken to an early example of the leases, whereby this problem just did not arise, because historically, under the two‑airlines policy, one half of each terminal was leased to Qantas and the other half to Ansett. They had leases and they were obliged by the leases to make the rental payments. Where there is a significant departure from that is that the leases no longer exist and the airports, in alignment with their business model, have moved to common user facilities. So, the dispute about trading or financial operations centres upon the common user facilities.

Another aspect of the dispute is how is the amount to be calculated. Three valuers gave evidence at the trial as to the methodology to be applied and they differed markedly in their approaches. Your Honours, we have listened intently to the questions about a trust – it was not pleaded, it has not been raised by the councils to date, but.....a University of Wollongong v Metwally problem because all of the evidence relevant to inferring a trust is documentary. It is all before this Court.

In the break, we have looked carefully at what Chief Justice Mason and Justice Dawson said in Bahr v Nicolay [1988] HCA 16; 164 CLR 604, and we would submit that it is open in accordance with the analysis in Bahr v Nicolay, particularly at pages 617 to 619, to infer a trust of the promise, and that would also be consistent with what Justice Deane stated in Trident, 165 CLR from pages 147 to 148. But beyond that, we are not able to develop that submission because it is this Court that has only raised the point.

KEANE J: Mr McElwaine, whatever the juridical classification one might apply, if one simply looks at clause 26, and notes the various features of it, which indicate that it is a provision for the benefit of the councils in relation to which the Commonwealth has an administrative role, whether or not one places the label of trust – or even constructive trust – in relation to the scheme of that provision, one can, by looking at the provision and its terms, see the nature of the interest that the councils have under that provision, and the strength of that interest.

MR McELWAINE: We would accept that, your Honour. May I emphasise this. The councils’ level of participation – and I use that word broadly – in the methodology of clause 26 is that it must be the amount that would be equivalent to any other ratepayer, so, it is calculated in accordance with what would be the ordinary mechanism applicable to any land, were it not for the fact that it is Commonwealth land – that is step 1.
Step 2 is there is a notification obligation. We say difficulty arises at step 1 because of the dispute as to what the clause means.

EDELMAN J: Mr McElwaine, just before you move on to the next point, do I understand the historical materials correctly, at least from the Solicitor‑General’s submissions, that the evolution of this provision was such that, prior to its current form, the Commonwealth was in a position whereby it could demand the payment of the money and then recoup that from the corporations?

MR McELWAINE: Correct, your Honour, that was the mechanism in each of the three early leases that were before the primary judge, and which we have included in the councils’ book of additional materials.

EDELMAN J: Is there any difference between that structural mechanism and the approach that the Chief Justice put to the appellant involving payments made to the Commonwealth which are to be held on trust?

MR McELWAINE: None that we can see, your Honour. Could I now go to my outline, and I am conscious of the ‑ ‑ ‑

STEWARD J: Before you move on, Mr McElwaine, I am terribly sorry to interrupt, just with the pre‑existing regime, my understanding was that the Federal Airports Commission, as the owner of the airports, paid the amount equivalent to rates, and then they closed the Federal Airports Commission down and created individual companies for each airport.

MR McELWAINE: Not quite, your Honour.

STEWARD J: I was going to say, and the Commission recovered that payment from the people it subleased to.

MR McELWAINE: That is broadly in accordance with our understanding, although under the leases to which the Court was taken by the Solicitor, there was a payment mechanism straight to the councils, but your Honour is quite correct. There is a step that we have overlooked, and it occurred because of a change in policy, and I think a change in government at the federal level in that there was first a decision that the airports would be leased to Commonwealth‑owned companies, and a change in position whereby it was then decided that the airports could be leased to Commonwealth‑owned companies or privately‑owned companies.

The background to that is in the early part of the Full Court’s decision, particularly, I think, at paragraph 10, there is a reference to the second reading speech, which has not found its way to this Court, but one can see the background on policy change in the second reading speech that is referred to – yes, it is paragraph 10 of the Full Court decision. One will find the historic information there.

Could I now deal with the.....core function is privity, and I will hopefully stay in accordance with our propositional outline. We do not apprehend there to be any difficulty with the proposition that, if the councils had a cause of action, we would not be having an argument about standing. That is the point that Justice Gummow made in Truth About Motorways, tab 26 at paragraph 92.

It is also common ground that the fact the councils do not have a cause of action is not fatal. It is well established on the authorities that declaratory relief can be sought without a cause of action and, indeed, that is replicated in section 21 of the Federal Court of Australia Act.

That begs the question, in our submission, how does the privity principle operate in a case where the applicant need not have and does not assert a cause of action? For the answer to that, may we take the Court to what Sir Anthony Mason said in the article that is in the joint book of authorities at tab 44, volume 6, page 88. It is the paragraph under the heading “The Nature of the Privity Rule” where his Honour articulates the proposition that it is essentially negative:

prevents a third party from obtaining a right or benefit –

in that it denies:

to a stranger not only a right to sue on the contract, but also a right to take advantage -

That, in our submission, is the proper conception of the privity rule, that is it bars assertion of a cause of action to sue on or upon a contract in order to enforce it.

We also draw the Court’s attention to, separately, the reasons of Justice Brennan and Justice Deane in Trident, which is tab 25 of the materials, volume 4 of the court book. Could I go first to what Justice Brennan had decided at page 134 of 165 CLR. Your Honours, there is a rather long passage that starts at the first line of page 134 – it is about eight lines from the bottom, the sentence commencing “To admit a third party’s right”.

What we infer that his Honour meant was that privity essentially operates to deny assertion of a right that is not to be found in the contract in favour of the third party. Over the page, at page 136, it was put slightly differently by Justice Brennan, in the first full paragraph on that page, about halfway through, just before the quote where one sees the sentence:

It would not be a right to sue on a cause of action vested in the promisee; it would be a right to sue on a cause of action vested in the third party. Such a right to sue is a new substantive right.

To the same effect is the reasoning of Justice Deane at page 143 – it is in the middle of page 143 – where he refers to what Chief Justice Barwick had said in Coulls, and the next sentence:

As those explanations make clear, the rule of privity is not properly to be seen as a rule of exclusion of rights of action which would otherwise exist.

Ergo, we say, it is a bar where someone asserts a new cause of action and much to the same effect is the last paragraph at page 144.

If we are right about that, your Honours, then it must be that privity operates differently in this type of case, because it cannot bar a cause of action where none is asserted. So, we frame our submission in accordance with the reasoning of the Full Court, particularly at paragraphs 91 to 93, that it is primarily, sometimes centrally, relevant to the sufficient interest question.

Their Honours were entirely cognisant of the difficulty that would ordinarily arise if privity is just cast aside and is not a consideration at all. What is clear from their Honours’ reasoning is that the first question is, well, if there is no privity, one should be very cautious in concluding that a non‑party has standing to agitate a dispute about the interpretation or application of a contractual provision.

What then should be or is the privity rule - it is surprising that Dr Stern has not really touched on this at all. We say that the rule is as formulated by Chief Justice Barwick in Coulls, which is tab 14 in the authorities. It is 119 CLR, it is volume 3 of the authorities, and it is at page 478, your Honours. It is the first full paragraph commencing on that page with “It must be accepted”, that is, that a non‑party must not himself sue upon a contract so as to directly enforce the obligations of the contract.

Now, despite the divergent views that emerge from Trident, the central concept of enforcement is to be found in each of the separate decisions of each Justice of this Court, and we have, at proposition 7, given the page references to that. So if the object of the declaratory relief is not to enforce the payment observation, there is, as we submit the Full Court correctly concluded, no privity problem.

Now, our friend, Dr Stern, took the Court in some detail to the declaratory relief which was sought. The problem with the way in which the primary judge proceeded is he dismissed the entire claim without interrogating whether one or more of the passages might infringe – one or more of the declaratory relief sought might infringe the privity rule.

This case requires the making of somewhat detailed findings of fact in accordance with the pleadings, and the pleadings are set out comprehensively in the decision of the primary judge at appeal book pages 14 through to 17. To address the question that Justice Gaudron has put a number of times, it may be, Justice Gaudron, that if we ever get to the merits of this case ‑ ‑ ‑

KIEFEL CJ: That is Justice Gordon, Mr McElwaine.

MR McELWAINE: Justice Gordon, I apologise. But if we ever get to the merits of this, depending upon what factual findings are made, it will confine and perhaps refine the extent of the declaratory relief that is sought. There is another aspect to Justice Gordon’s question, and that is, do we draw a distinction between the past and the future?

The past is very much covered by two defences that have been advanced by the lessees and which have not been resolved. The first is the accord in satisfaction defence, which is common to the proceedings, and the second is the estoppel defence, which is only raised in the Launceston proceeding. Resolution of those defences or contentions may well preclude the councils, ultimately, from making contentions about the past, but would not, in our submissions, affect the future.

Much reliance is placed in the written submissions for the appellants on EB 9 & 10 in the New South Wales Court of Appeal, or Royal Insurance in this Court. I want to say a little bit about EB 9 & 10 [2018] NSWCA 288; 98 NSWLR 889, which is tab 32 of the authorities, volume 5, I am told. If your Honours turn to paragraph 4 of the decision of Acting Justice of Appeal Barrett, he sets out, at page 892 of the report, the particular statutory provision that applied under the Strata Schemes Management Act, that is, section 226.

In broad terms, the issue before the court was only one about costs, and it is whether the applicant should have borne the costs of the proceeding despite success in the proceeding, because the applicant had another pathway, that is, to an adjudication, under the scheme of the Act. What was said about section 226 appears at paragraph 17, that is, that the section:

recognises that a lot owner may have . . . both rights and remedies that arise or exist apart from the 1996 SSM Act –

and that both kinds of remedies may be pursued, and then the analysis is from paragraph 33 at page 899 of the report. The important paragraph for present purposes is paragraph 35. His Honour makes the quite correct statement in the third sentence of paragraph 35 that ordinarily, a declaration – the person who has the benefit of a declaration cannot resort to coercive relief, but then turns his attention to subsequent coercive relief that might be procured. That is certainly so where the applicant has a cause of action that may anchor subsequent coercive relief.

The proposition that one can obtain a declaration where one does not have the cause of action, and then obtain subsequent coercive relief, we submit, is inconsistent with what was said in Smethurst v AFP at paragraph 76, where the issue was whether an injunction could be obtained, and the short answer was, well, no, from Chief Justice Kiefel and Justice Keane, because there is no cause of action. The same reasoning applies in these cases, in our submission.

There can be no doubt that the Full Court correctly understood the distinction between executory and declaratory relief, at paragraphs 90 to 92 of its decision. What seems to have been overlooked in the argument is that in CGU, the contracting parties were ultimately not in dispute. Although there was a denial of liability by CGU, by the time the case had reached the Victorian Court of Appeal, and then later in this Court, if your Honours – I am sorry, I am chopping and changing, I am now going to CGU, which is tab 13.

Your Honours will see at paragraph 53 that leave to appeal was sought from the Court of Appeal of Victoria by the contention that there is no jurisdiction to entertain the “suit of a stranger” where the parties:

will not pursue any claim relating to rights or duties under that contract.”

Then by the time the matter reached this Court, at paragraph 59, it was plainly put at the end of ground 2 that the parties were not “themselves in dispute”. So, CGU is an example of a non‑party seeking declaratory relief, which was necessarily anterior to reliance on section 562 or prospective reliance on section 117 of the Bankruptcy Act, seeking anterior declaratory relief about whether the policy responds by way of an indemnity on the facts sought to be proved in the main proceeding.

As we have also noted in our submissions, the UK decision in Milebush is another example where the parties to the agreement were not disputants. There, one of the councils adopted an entirely neutral position. We also draw attention – if I can just stay with CGU for one further moment – to paragraph 26 in the plurality reasons, after the reference to re Judiciary and Navigation Acts, the sentence commencing “An entitlement to claim declaratory relief” and on the next sentence:

The declaration itself may assume that description where it concerns a real controversy -

Now, this is not to say, and one notices in the reply submissions of the appellant, that it is contended that if privity is irrelevant, then it is said that Aussie Airlines is wrongly decided. We do not say privity is irrelevant. The Full Court did not say privity is irrelevant. In fact, the Full Court said the first port of call in these types of cases is to be wary if there is no privity on the sufficient interest inquiry.

The Full Court comprehensively focused on the nature and quality of the interest of the applicants at paragraphs 144, essentially through to and including 153. That, in our submission, is consistent with the analysis in Aussie Airlines. The only difference between these cases and Aussie Airlines is the point made by the primary judge that in Aussie Airlines there was a heated dispute between some of the contracting parties.

Yes, that is a factual reference, but it is not a distinction at the level of principle, to use the language employed by the Full Court. There is no reason, in our submission, why the sufficient interest question turns on that factual difference where, in cases such as these, to use the words of Justice Nettle in CGU, these councils are not outside insurance.

The contracting parties in this case did not reserve for themselves the mechanism for the calculation, determination and payment of the equivalent amounts. They were happy to leave that to a third party on the assumption, a reasonable and safe one, that the third party would actually burden itself with undertaking the calculation in order to obtain the benefit. So the third parties here, they are not invaders, there is no incursion, they are not invaders, they are participants in a process that the contracting parties, we submit, must be taken to have assumed will be correctly undertaken, and that can only be in accordance with the objective meaning of their contract. It matters not that they are subjectively in dispute.

Now, there is an obvious weakness in the councils’ cases. It is open to the contracting parties to vary the leases to accord with their subjective understanding. That is an obvious weakness in our case, but that has never been contended, and that has not been raised as a defence at any point in these proceedings.

Can I next deal with ground 2 of the appeal. Meadows is a case which - it has been said in the United Kingdom that things have moved on since the analysis in Meadows, and in our written case we have set out in some little detail the authorities to that effect. If one examines Woolf and Woolf, it cannot be attributed solely to a change in the wording of the procedural rules to delete the reference to a right.

There is good reason for distinguishing Meadows, because it is inconsistent with Aussie Airlines. We of course accept that Justice Nettle said that the analysis in Meadows largely accords with Australian law. We apprehend that his Honour had in mind primarily the decision in CE Heath, in particular the decision of Justice of Appeal Ormiston. Of course, the plurality in CGU characterised Justice Ormiston’s decision as adopting a somewhat reductionist approach. But even if we focus on the separate reasons of Justice Nettle, as his Honour begged the question, well, who is an outsider, in no sense of that term can the councils be regarded as outsiders in these cases.

EDELMAN J: Mr McElwaine, the cases to which you – the English cases to which you refer, the Rolls‑Royce Case and the Milebush Case that you say show that English law has moved on since Meadows, are they not affected by the existence of the Contracts (Rights of Third Parties) Act in England?

MR McELWAINE: Perhaps, your Honour. Your Honour will recall – your Honour probably knows better than I do, section 7 of that Act
effectively says, well, the Act only bites if the common law does not otherwise provide a remedy. So it has left in place the common law, and it simply supplements the common law where the privity rule would otherwise operate to deny a cause of action. So it has relevance despite the legislative change.

But, as we have also said in our submissions, the present problem would not arise in many jurisdictions, including Western Australia, Queensland and the Northern Territory because, by statute, the councils now have, in those jurisdictions, a right of action, if they satisfy the statutory requirements, of course, which leads me to the notices of contention.

Ms Cuthbertson will deal with exceptional circumstances. If I could simply deal with whether privity should be confined. Your Honours, if “privity” has the much broader meaning contended for by the appellants, that is, it operates in relation to a contract, and the appellants do not ever explain precisely what is meant by that, then there is good reason to bring it back into alignment with the formulation of Chief Justice Barwick in Coulls.

That formulation did not cause any difficulty between 1966 and the present cases. There is very considerable criticism of the privity rule, and we have said there is other academic material that supports the privity rule, but if one focuses on the fundamental justification for the privity rule, that is, that it gives effect to the contract between two parties, then it does not harm the privity rule in these types of cases to say, well, giving effect to the contract of these parties is giving effect to the fact that these parties have invited a non‑party to participate in an aspect of their contract, and on that basis, the privity rule – sorry, the freedom of contract rule, is not fundamentally and mortally wounded by confining privity to an action to directly enforce the benefit of a contract.

One might criticise the way in which some of the grounds for relief were framed in this case, but if our learned friend is correct, and if there might be some mechanism which we do not understand and the appellants have not attempted to explain what enforcement would look like subsequent to these declarations, but let it be hypothetically assumed that some enforcement step might be open at some time in the future, that is the point in time to examine these cases through the lens of privity.

Unless there any questions, I will quickly move my seat and Ms Cuthbertson will address you on exceptional circumstances.

KIEFEL CJ: Yes, thank you. Yes, Ms Cuthbertson.

MS CUTHBERTSON: Thank you, your Honours. Your Honours, this aspect of the notice of contention relates to the original ground 5 of the appeals to the Full Court of the councils, and if the Full Court was, in fact, incorrect in concluding that the doctrine of privity is not the correct prism through which to assess the councils’ standing, it is nevertheless the case that the doctrine does not foreclose the councils’ claims that they may have and do have such standing.

In support of that submission, we rely on what Justice Nettle said in CGU at paragraph 96, and that is at tab 13, third volume of the appeal book. There he explained that there are exceptions when – and that was in the context of having referred to the decision of Lord Justice May in Meadows, where the Lord Justice described, at page 309 of that decision, and that decision is found at volume 5 of the book of authorities at tab 36, where he referred to:

perhaps in exceptional circumstances –

standing arising despite the absence of privity. The councils submit, on the notices of contention, that the circumstances in these cases do amount to exceptional circumstances, or the exceptions to which – exceptions to the statement made by Lord Justice May in Meadows.

That is not, however, what his Honour found – the primary judge found. In his analysis one party would appear to be required to be able to establish a right outside of the contract itself together with.....such as the statutory right under section 562 of the Corporations Act or the analogous provision under the Bankruptcy Act, and also would appear to have required that the parties to the contract themselves be in some form of disagreement about the interpretation of it. So much is apparent from his Honour’s decision at paragraphs 57 to 59, and those are found at pages 225 to 226 of the core appeal book.

In our submission, neither of the decisions – neither the decision in Meadows or in CGU compel that conclusion or compel a conclusion that the exceptions be so confined. Lord Justice May did not attempt to define the limits of what those exceptional circumstances might be. In that case his Honour said that there were no such circumstances as the Meadows liability depended on its contract of reinsurance with the insurer, rather than - and where the liability of the insurer pursuant to the contract of the insurance was being vigorously defended.

So, there was no suggestion in that case that the contract of insurance between ICI and ICB, so between the insurer and the bank required Meadows participation, for example, or in any way directly referenced the reinsurance contract or the reinsurer.

The plurality in CGU did not reference the decision at all in Meadows, in their decision. Where his Honour Justice Nettle at paragraph 96 described Australian authority as largely being in accordance with Meadows, it is our submission that somewhat falls short of the complete embrace of the proposition put by Lord Justice May in Meadows.

Similarly, there is a hint of reservation in his discussion of Appeal Justice Ormiston’s decision in CE Heath where he talks about - at paragraph 92 of CGU describes it as being correct “Up to a point”. In the context of those decisions and the submissions that the absence of contractual privity deprived CGU and the liquidator of the character of adversaries, with the result that the there was no justiciable controversy, his Honour focused at paragraph 96 on what was meant by an outsider, and of course he did so, not applying the lens of privity.

He focused there upon the circumstances in which the parties to the contract – also focused on the circumstances in which the parties to the contract had been influenced or chosen not to raise an issue. But his analysis did not stop there. He continued beyond that, at paragraph 99, when discussing the conflict of authorities, observing that the declaration need not be determinative and the issue directly affecting a:

property, a legal right or an obligation of the claimant.

He also stated that it depended on the circumstances, and that circumstances would be sufficient if a party seeking a declaration would receive a benefit or advantage over and above that of an ordinary citizen.

More importantly, his Honour, in very unqualified terms, accepted the reasoning of Justice Lockhart in Aussie Airlines, and your Honours have already been taken to that passage in his Honour’s decision at paragraph 102 of CGU. He also approved Edwards v Santos and, of course, Justice Heydon in that case fully embraced the reasoning in that case, that, in those cases it was accepted that a claimant may have standing if they have a real commercial interest and there is a real controversy with some contradictor, not necessarily between the parties themselves to the contract.

So, it is our submission that it is quite clear from those authorities that there is - that a source of right outside of the contract is not an essential matter in order to establish exceptional circumstances, and so much was the case in Aussie Airlines. Nor is it necessary that the parties to the contract be in conflict.

None of the analysis of his Honour Justice Lockhart’s decision in Aussie Airlines references the existence of the dispute between the Federal Airports Corporation and Qantas when assessing or analysing his reasoning. On that basis, it is our submission that the primary judge was wrong to distinguish Aussie Airlines in that way and find that there were no exceptional circumstances as a result of the absence of that controversy.

We also submit that his Honour was wrong to end his consideration of the relevant factors with those two matters, that is, the absence of the source of a right outside of the contract, and the absence of a dispute between the parties to the contract themselves. In our submission, it logically follows that the whole of the circumstances need to be considered when assessing whether or not there are exceptional circumstances which find – are a basis for finding that standing exists.

In our submission, the factors identified by the Full Court at paragraphs 177 to 183 of that decision - and they are found at pages 156 to 158 of the appeal book, those, in summary, reference the participation in the contractual mechanism, the commercial benefits that may flow from the obtaining of declaratory relief and by the operation of that clause in the contract.

The agreement with the lessee is contemplated by the leases, so the need for the lessees to engage in reasonable endeavours to reach agreement with the councils. There is clear utility in enabling the councils to properly calculate the amounts to be notified to the airport owners, and the likely impact on the parties to the leases, particularly the Commonwealth, which is required to act as a model litigant, and those are a very brief summary of the factors that were identified by the Full Court as being relevant to their considerations in relation to standing.

In addition, I refer your Honours to paragraph 40 of our written submissions where we set out some further factors that are relevant, for example, the background to the protracted dispute, which my learned friend, Mr McElwaine, has already adverted to in his submissions. The utilisation of the current methodology by the Commonwealth and the lessees in determining the amount to be paid is not one that is contemplated on the face of the leases, either, that is, they.....their own valuation and calculate the amounts themselves, and then pay that to the councils, as opposed to responding to a notice.

The other relevant factor, of course, is the term left to run on the leases. So not only the pattern of conduct for some 25 years, and then the change of approach in relation to how to make those payments to the council, there is the 25‑odd years left on the leases, together with a further term of 49 years, if the option is taken up by one or other of the lessees. All of those factors, in our submission, constitute exceptional circumstances.

I want to briefly address the appellants – paragraph 13 of the appellants’ reply submissions where they invite the Court to take account of the circumstances in which the parties have chosen not to raise an issue, of course, referencing his Honour Justice Nettle’s comments in paragraph 96 of CGU.

The councils do not ignore that factor, but say that the parties, on the face of the circumstance that now exist, or.....utilising a methodology that is contrary to the established practice, predating the leases and the previous 20‑plus years of operation of those leases, in a manner that, as I have already said, removes the role of the councils in the calculation and notification, and would appear to be run counter to the obvious claim which clause 26.2(a) is required to be utilised.

The airports’ reluctance to have the meaning of clause 26.2(a) considered, and to paraphrase Justice Heydon in Santos at paragraph 29 of that decision, does suggest that, despite their professed confidence that they are complying with its terms, sits uncomfortably with their obligation to engage in reasonable endeavours to enter into agreement with the councils, where a declaration would clearly likely enable the entry into such an agreement and resolution of the controversy between the councils and airports about how clause 26.2 is required to operate.

So, in those circumstances, it is submitted that they are exceptional and warrant a conclusion that the councils have standing to seek the declaratory relief as to the meaning of clause 26.2(a) of each of the leases. Those are my submissions, unless I can assist the Court in any way.

KIEFEL CJ: Yes, thank you, Ms Cuthbertson. Ms Stern, do you have a reply?

MS STERN: Yes, thank you, your Honours. The first submission I make is that given that no submissions have been addressed to the point to date in these proceedings at all, if your Honours were minded to find for the respondents to the appeal on the basis of the trust point, we would seek leave to put on further written submissions dealing with.....contention, and whether or not this would be an appropriate case – a proper case in which the Court recognised a trust.

But in relation to that we do observe very briefly that there is nothing in the councils’ book of further materials at PDF 96, which was the previous lease between the Commonwealth and Ansett, nor in the current lease which suggests any intention to.....an interest in the councils and, indeed, the previous arrangement set out at PDF 96 in the previous lease between the Commonwealth and Ansett is one in which the Commonwealth would pay the amount if the lessees did not and then the Commonwealth would recover the money from the airport – or Ansett.

We say there is nothing about that which is consistent with a trust arrangement. Indeed, it is almost the antithesis of that, given that the payment would be made directly by the Commonwealth and then the money would be recovered.

If I can then turn to the exceptional circumstances submissions and the notice of contention. Your Honours will be aware that in terms of what are or are not exceptional circumstances one finds that in Australian law in only two places. The first is in paragraph 96 of CGU and the reference to Meadows, and in particular the statement of Lord Justice May in Meadows. Justice Nettle identified that Australian authority accorded with Meadows and in that context it is relevant that Meadows was a case where a reinsurer sought declaratory relief in relation to the insurer’s obligation under a contract of insurance. The court found that the reinsurer did not have interest by reason of privity of contract.

Now, one can see the nature of the reinsurer’s interest which fell short of the exceptional circumstances requirement in that case. There is clearly a financial interest, there is clearly an interest that would go to the reinsurer’s own settlement between it and the insurer, and we would say that there is nothing in the interest of the councils in the present case that would go beyond the nature of the interest that was found not to constitute exceptional circumstance in Meadows and which was then accepted as being a correct statement, largely, of Australian law by Justice Nettle.

The second place where one will find an exceptional circumstance, or an exception to privity of contract is in the judgments of Chief Justice Mason and Justice Wilson in Trident, and there, as your Honours will be aware, in the particular context of a policy of insurance a narrow, confined and specific exception to the doctrine of privity was identified. Your Honours will see at page 123 of the Commonwealth Law Reports in that case, the factors which were relevant, and they were an identified injustice:

failure to give effect to the expressed intention of the person who takes out the insurance but also from the common intention of the parties and the circumstance that others, aware of the existence of the policy, will order their affairs accordingly.

There was an identification of whether other doctrines provided “adequate protection”. Then over the page at page 124, the specific matter that was identified was:

many sub‑contractors will assume that such an insurance is an effective indemnity in their favour and that they will refrain from making their own arrangements -

We say the vague.....practical or financial interest, in this case, again falls well short of that and, indeed, would not constitute the same character of confined and wilful exception that was recognised in that case.

To the extent that the councils rely upon the English authority, it is difficult to see how that assists. In particular, the first case which is the case of Milebush Properties that was relied upon, your Honours, I do not need to go to that but is volume 6, tab 37. That is a case where the primary judge refused to grant a declaration and the Court of Appeal found that that was correct and the reason why that was correct was because the remedy of judicial review was an appropriate means of vindicating the rights. So that case certainly does not provide any support for the arguments of the council.

The case of Rolls‑Royce v Unite the Union [2009] EWCA Civ 387; [2010] 1 WLR 318, which your Honours have at volume 5, tab 39 of the authorities, also does not provide any support for the councils’ case. That was a case which concerned an application for direct declaratory relief relating to a collective agreement which was unenforceable, but which would impact upon employment agreements between the employer, Rolls‑Royce, and the employee.

Again, the facts of that case do not provide any support for the arguments in this case. But more particularly, paragraph 120 in the dissenting judgment of Lord Justice Aikens, which has subsequently been identified as correctly stating the law, a number of requirements for the grant of declaratory relief were set out, the second of which was that:

There must, in general, be a real and present dispute between the parties before the court as to the existence of extent of a legal right between them.

So, to the extent that the law may have moved on since Meadows, it has not moved on in a way that would avail the councils in the present case.

The third matter, by way of replying very briefly in relation to Aussie Airlines, that was a case that came before the Full Court on separate questions. The separate question raised standing, but not whether or not there was a matter. In that case, there was a clearly a justiciable controversy, in any.....the dispute between the contracting parties.

Finally, if I can deal with Truth About Motorways very briefly, simply to make two very short points. The first is, your Honours would be aware, and we have referred to them in our submissions, of repeated references in that case to there being a public role to the public nature of the duty that was the subject matter of the declaratory relief and, secondly, to draw your Honours’ attention to paragraph 50 in the judgment of Justice Gaudron to the earlier authority of this Court in Abebe and the focus on the wrong to be remedied.

The difficulty in this case is that there is a disjunct between the remedy of a declaration and what is asserted to be the legal wrong in that the legal wrong that is relied upon is one which, if there were one, would only arise between the contracting parties. That, again, is the reason why - for reasons I advanced in my submissions in‑chief, there is a real difficulty in this case as regards the identification of a matter consistent with the authority of this Court. Your Honours, those are the only matters I wanted to raise by way of reply.

KIEFEL CJ: Thank you, Ms Stern. The Court reserves its decision in this matter and adjourns to 10.00 am tomorrow.

AT 4.13 PM THE MATTER WAS ADJOURNED