Ref. Ares(2022)8842896 - 20/12/2022
THE HIGH COURT
[2001 No. 707 J.R.]
BETWEEN
AER RIANTA CPT
APPLICANT
AND
THE COMMISSIONER FOR AVIATION REGULATION
RESPONDENT
AND
BY ORDER OF THE HIGH COURT
AER LINGUS LIMITED AND RYANAIR LIMITED
NOTICE PARTIES
JUDGMENT of O’Sullivan J. delivered the 3rd of April, 2003.
INTRODUCTION
The applicant (“Aer Rianta”) is the operator of three international airports at
Dublin, Cork and Shannon, and the respondent (“the Commissioner”) is the sole
member of the Commission for Aviation Regulation established by s.5 of the Aviation
Regulation Act, 2001, with the function,
inter alia, of specifying maximum levels of
airport charges that may be levied at the above airports by the applicant.
Such charges were ultimately determined by the respondent in a
“varied
determination” dated the 9th February, 2002, and took the form, where relevant to these
proceedings, of setting a maximum charge or cap per passenger chargeable by the
applicant to the users of the airports which include the notice parties.
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This varied determination is subject to a wide ranging judicial review challenge
in these proceedings. I will refer to the specific challenges being dealt with in this
judgment at a later point.
Following an initial application I delivered judgment on 16th January, 2003, in
which I excluded a number of the challenges sought to be made by the applicant based
on error allegedly made by the respondent in his calculation of the maximum charge.
Subsequently, having held a formal case conference, I made a further ruling
directing certain issues to be tried at this stage of the proceedings and postponing other
issues, designated
“process” issues, relating to alleged want of fair procedures, to a
later stage.
In this judgment, accordingly, I now deal with a number of substantial issues
which are largely, but not exclusively, directed to questions of statutory interpretation
and application.
THE STATUTORY CONTEXT
Because of the nature of the issues now being dealt with it is necessary to set out
in some detail the relevant statutory provisions.
The Air Navigation and Transport (Amendment) Act, 1998
The applicant was established in 1937 as a holding company for the first notice
party and to promote aviation generally. For the first three years flights were from
Baldonnell Co. Dublin until Collinstown Airport, as it was then called, commenced
operations in 1940. In 1950 the applicant was given statutory responsibility to manage
this airport as agent for the relevant government minister and 19 years later took over
the same responsibility in relation to Shannon and Cork airports. Ownership of these
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airports was vested in the relevant minister until 1998. Accordingly in the years prior to
that date the airports were owned by the relevant minister and managed for him as his
agent by the applicant.
The purpose of the Act of 1998 was to bring about a fundamental change by
vesting ownership of the airports in the applicant and reorganising its powers and
duties. Under the Act of 1998 the Minster for Finance is the holder of the share capital
of the applicant.
Section 2 of the Act of 1998 provides the following definitions:
“The word “aerodrome” means any definite and limited area (including water)
intended to be used, either wholly or in part, for or in connection with the
landing or departure of aircraft;
(imported from s.2 of the Air Navigation and Transport Act, 1936).
…
“airport” means the aggregate of the lands comprised within an aerodrome and
all land owned or occupied by an airport authority, including aircraft hangars,
roads and car parks, used or intended to be used in whole or in part for the
purposes of or in connection with the operation of aerodrome;
“airport authority” means the person owning, whether in whole or in part, or
managing, either alone or jointly with another person, an airport;
“airport charges” means –
(a) charges levied in respect of the landing, parking or taking off of aircraft
at an aerodrome including charges for air-bridge usage but excluding
charges in respect of air navigation and aeronautical communications
services levied under section 43 of the Act of 1993,
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(b) charges levied in respect of the arrival at or departure from an airport by
air of passengers, or
(c) charges levied in respect of the transportation by air of cargo, to or from
an airport,
as may be appropriate;
…
“the Authority” means the Irish Aviation Authority;…
“the company” means Aer Rianta, cuideachta phoiblí theoranta;…
“the Minister” means the Minister for Public Enterprise.”
The following sections of the Act of 1998 provide:
“10. – (1) The Minister shall by order appoint a day to be the vesting day for the
purposes of this Act as soon as practicable following the commencement of
this Act.
…
14. – (1) On the vesting day, all lands, which immediately before that day
were–
(a) vested in the Minister or used or intended to be used in connection
with-
(i) a function of the Minister corresponding to a function conferred
on the company by
section 16, or
(ii) the provision of terminal services at an airport,
or
(b) held by the company in trust for the Minster,
5
(which lands comprised the airports known as Dublin Airport, Cork and
Shannon Airport) and all rights, powers and privileges relating to or
connected with such lands shall, without any conveyance or assignment and,
subject to
subsection (2), stand vested in the company for all the estate or
interest therein which immediately before the vesting day was vested in the
Minister but subject to all trusts and equities affecting the lands subsisting and
capable of being preformed.
…
(5) On the vesting day the company shall, in respect of the lands and other
property vested in the company under this section, pay to the Minister for
Finance such amount as the Minister for Finance, with the consent of the
Minister, may determine.
…
16. – (1) The company shall manage and develop the airports vested in it by
section 14 and any other airport that may from time to time be
established or owned by the company pursuant to
subsection (3).
(2) The company shall ensure the provision of such services and
facilities as are, in the opinion of the company, necessary for the
operation, maintenance and development of a State airport, including
roads, bridges, tunnels, approaches, water supply works and water
mains, gas works and gas pipelines, sewers and sewage disposal works,
electric lines, telecommunications facilities, lights and signs, apparatus,
equipment, building and accommodation of whatever kind.
(3) The company may, with the consent of the Minister given an after
consultation with the Minister for Finance and subject to such
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conditions as the Minister may determine, establish a new airport or
become the owner in whole or in part or manager of an existing airport.
…
17. – (1) The company may acquire by agreement or, in accordance with the
Second Schedule, compulsorily, any land, easement, interest in or other
right over land, or any water right, for any one or more of the purposes
described in
section 18.
…
18. – (1) The purposes for which land may be acquired under
section 17 are as
follows:
(a) to extend or develop an airport belonging to the company or
establish and airport;
…
(d) to develop civil aviation at a State airport;
(e) to carry out the principal objects of the company.
…
22. – (1) The company and its subsidiaries shall take such steps as may be
necessary under the Companies Acts to alter their memoranda and
articles of association for the purpose of making them consistent with
this Act.
…
23. – (1) The principal objects of the company shall be, and shall be stated in
its memorandum of association to be –
(a) to own, either in whole or in part, or manage, alone or jointly with
another person, airports whether within the State or not,
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(b) to take all proper measures for the safety, security, management,
control, regulation, operation, marketing and development of its
airports,
(c) to provide such facilities, services, accommodation and lands at
airports owned or managed by the company for aircraft, passengers,
cargo and mail as it considers necessary,
(d) to promote investment at its airports,
(e) to engage in any business activity, either alone or in conjunction with
other persons and either within or outside the State, that it considers to
be advantageous to the development of the company, and
(f) to utilise, manage and develop the human and material resources
available to it in a manner consistent with the objects aforesaid.
…
24. – (1) It shall be the general duty of the company –
(a) to conduct its affairs so as to ensure that the revenues of the
company are not less than sufficient taking one year with another to –
(i) meet all charges which are properly chargeable to its revenue
account,
(ii) generate a reasonable proportion of the capital it requires,
and
(iii) remunerate its capital and pay interest on and repay its
borrowings,
(b) to take such steps either alone or in conjunction with other
persons as are necessary for the efficient operation, safety,
management and development of its airports,
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(c) to conduct its business at all times in a cost-effective manner, and
(d) to regulate operations within its airports.
(2) Nothing in
section 23, this section or the memorandum of
association of the company shall be construed as imposing on the
company, either directly or indirectly, any form of duty or liability
enforceable by proceedings before any court to which it would not
otherwise be subject.
(3) In carrying out its functions, the company shall have regard to –
(a) the development of air transport,
(b) any policy, financial or other guidelines given by the Minister to
the company, in relation to the functions conferred on the company by
or under this Act, and
(c) the safety standards in relation to the operation of aircraft and air
navigation applied and in force by the Authority.
…
38. – (1) The Minister may give a direction in writing to the company
requiring it -
(a) to comply with policy decisions of a general kind made by the
Minister in relation to the functions assigned to the company by or
under this Act, or
(b) to do or refrain from doing anything to which a function of the
company relates, the doing, or refraining from doing of which is, in
the opinion of the Minister, necessary or expedient in the national
interest.
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(2) If the company considers that compliance by it with a direction under
subsection (1) would adversely affect the safety of aircraft it shall so inform
the Minister and the Authority
(3) The Minister shall, in amending or revoking a direction under this
section, have regard to any information received by him or her under
subsection (2).
(4) The company shall comply with a direction under this section.
39. – (1) The company may require the payment to it of airport charges, in
respect of the use of a State airport, at such rates as it may, from time to time,
with the approval of the Minister, determine.
(2) Liability for the payment of any charge payable by virtue of
subsection (1), together with interest on such charges in respect of any period
during which the charges were due but not paid, may be imposed upon the
operator or registered owner of an aircraft, whether such aircraft is registered
in the State or is not so registered, or upon both those persons.
…
42. - (1) The company may make bye-laws in relation to a State airport.
…
(3) Bye-laws under this section may be made for any one or more of the
following purposes, that is to say –
…
(f) the proper management, operation, safety, security and supervision
of an airport or part thereof.
…
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47. – (1) It shall not be lawful for a person to interfere in any way with
anything provided for the purposes of the operation, management or
safety of an airport.
(2) A person who contravenes
subsection (1) shall be guilty of an
offence.”
Aviation Regulation Act, 2001
This act became law on 21st February, 2001 and on the 27th February, 2001, the
respondent was appointed the sole member of the Commission established by section 5.
“Airport”, “airport authority” and
“airport charges” all have the meanings
assigned to them by the Act of 1998.
“Minister” means Minster for Public Enterprise.
“5. – (1) There shall stand established on the establishment day a body to be
known as the Commission for Aviation Regulation or, in the Irish
language, An Coimisiún um Rialáil Eitlíochta to perform the functions
assigned to it under this Act.
…
(4) In carrying out its functions, the Commission shall ensure that all
determinations, conditions attaching thereto, amendments thereof and
requests shall be objectively justified and shall be non-discriminatory,
proportionate and transparent.
6. – Subject to this Act, the Commission shall be independent in the exercise
of its functions.
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7. – The principal function of the Commission shall be to regulate airport
charges and aviation terminal services charges.
…
10. – (1) The Minister may give such general policy directions (including
directions in respect of the contribution of airports to the regions in
which they are located) to the Commission as he or she considers
appropriate to be followed by the Commission in the exercise of its
functions.
(2) The Commission shall comply with any direction given under
subsection (1).
…
32. – (1) In this section and
section 33, “determination” means a
determination under
subsection (2).
(2) Not more then 6 months after the establishment day and at the end of each
succeeding period of 5 years, the Commission shall make a determination
specifying the maximum levels of airport charges that may be levied by an
airport authority.
(3) In a determination the Commission may provide for a different maximum
level of airport charges at different airports.
(4) Where it appears to the Commission that two or more airports are either–
(a) managed by the same airport authority, or
(b) that they are owned by the same person and operate as a group of
airports whose activities are coordinated by that person, any determination in
relation to any one of those airports may be made by reference to the
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aggregate of amounts levied by way of airports charges at that airport and
amounts so levied at the other airports.
(5) A determination shall –
(a) be in force for a period of 5 years, and
(b) come into operation not later than 30 days after the making of such
determination.
(6) A determination may –
(a) provide –
(i) for an overall limit on the level of airport charges,
(ii) for limits to apply particular categories of such charges, or
(iii) for a combination of any such limits,
(b) operate or restrict increases in any such charges, or to require
reductions in them, whether by reference to any formula or otherwise, or
(c) provide for different limits to apply in relation to different periods of
time falling within the period to which the determination relates.
(7) Prior to making a determination the Commission shall –
(a) give notice to any person concerned stating that it proposes to make a
determination,
(b) publish such notice in a daily newspaper published and circulating
in the State, and
(c) specify the period (being not less then one month from the
publication of the notice) within which representations with respect to the
proposed determination may be made by interested parties or the public.
(8) The Commission –
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(a) shall consider any representations which are made under
subsection
(7) and not withdrawn, and
(b) may either accept or reject any representations made under
subsection (7).
(9) On making a determination the Commission shall make a report on the
determination giving an account of its reasons for making that determination
together with its reasons for accepting or rejecting any representations made
under
subsection (7).
(10) A report under
subsection (9) shall be sent by the Commission to the
Minister and to the airport authority concerned.
(11) The Commission shall as soon as may be –
(a) give notice that it has made a report under
subsection (9)
and
(b) make the report available on request to interested parties or to the
public.
(12) A notice under
subsection (11) shall be given by publishing the notice in
a daily newspaper published and circulating in the State and by such other
means as the Commission may determine.
(13) For the purposes of this section, the Commission may request an airport
authority in writing to provide information (including accounts, estimates,
returns, projections or any other records) to it which is in the possession of or
which can be obtained by the airport authority.
(14)
(a) The Commission may on or after the expiration of a period of 2 years
after the making of a determination –
(i) at its own initiative, or
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(ii) at the request of an airport authority or user concerned in respect of
the determination,
if it considers that there are substantial grounds for so doing, review the
determination and, if it sees fit, amend the determination.
(b) An amendment made under
paragraph (a) shall be in force for the
remainder of the period of the determination referred to in
subsection (5) (a).
(c) Subsection 5 (b) and
subsections (7) to
(13) shall apply to an
amendment made under
paragraph (a).
(15) Any airport charges imposed by an airport authority, which are in force
immediately before the establishment day, shall continue in force until any
determination has been made.
33. – In making a determination the Commission shall aim to facilitate the
development and operation of cost-effective airports which meet the
requirements of users and shall have due regard to –
(a) the level of investment in airport facilities at an airport to which the
determination relates, in line with safety requirements and commercial
operations in order to meet current and prospective needs of those on whom
the airport charges may be levied
(b) a reasonable rate of return on capital employed in that investment, in
the context of the sustainable and profitable operation of the airport,
(c) the efficient and effective use of all resources by the airport
authority,
(d) the contribution of the airport to the region in which it is located,
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(e) the level of income of the airport authority from airport charges at the
airport and other revenue earned by the authority at the regulated airports or
elsewhere,
(f) operating and other costs incurred by the airport authority at the
airport,
(g) the level and quality of services offered at the airport by the airport
authority and the reasonable interests of the users of these services,
(h) the costs competitiveness and operational efficiency of airport
services at the airport within respect to international practice,
(i) imposing the minimum restrictions on the airport authority consistent
with the functions of the Commission, and
(j) such national and international obligations as are relevant to its
functions.
34. – Section 39 (1) of the Act of 1998 is amended by the substitution of
“subject to
section 32 of the
Aviation Regulation Act, 2001” for “with
the approval of the Minister”.
…
38. – (1) A person shall not question the validity of a determination, a review
of a determination or a request of the Commission under this Part otherwise
than by way of an application for leave to apply for judicial review under
Order 84 of the Rules of the Superior Courts (S.I. No. 15 of 1986) (hereafter in
this section referred to as “the Order”).”
This section goes on to specify that the judicial review shall be made within a period of
two months from the date of the determination, shall beyond notice to specify parties,
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not be granted unless the High Court is satisfied that there are substantial grounds and
restrict the right of appeal from the High Court decision cases involving points of law
of exceptional public importance or the Constitutionality of any law.
“40.—(1) This section applies to—
(
a) an airport authority to whom a determination under
section 32(2)
applies,
(
b) the Irish Aviation Authority in respect of a determination under
section
35(2), and
(
c) an airport user, being any person responsible for the carriage of
passengers, mail or freight by air to or from an airport, in respect of a
determination under
section 32(2) or
35(2).
(2) The Minister shall, upon a request in writing from a person to whom this
section applies who is aggrieved by a determination under
section 32(2) or
35(2), establish a panel ("appeal panel") to consider an appeal by that person
against the determination.
(3) An appeal panel shall consist of at least 3 but not more than 5 persons
appointed by the Minister, one of whom shall be designated by the Minister to
be the chairperson of the appeal panel.
(4) An appeal panel shall determine its own procedure.
(5) An appeal panel shall consider the determination and, not later than 2
months from the date of its establishment, may confirm the determination or,
if it considers that in relation to the provisions of
section 33 or
36, there are
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sufficient grounds for doing so, refer the decision in relation to the
determination back to the Commission for review.
(6) An appeal panel shall notify the person who made the request under
subsection (2) of its decision under
subsection (5).
(7) An appeal panel, having considered a determination under
section 32(2) or
35(2) and made a decision in respect of it under
subsection (5) and having
notified under
subsection (6) the person who made the request under
subsection (2) of its decision, shall stand dissolved.
(8) The Commission, where it has received a referral under
subsection (5)
from an appeal panel, shall, within one month of receipt of the referral, either
affirm or vary its original determination and notify the person who made the
request under
subsection (2) of the reasons for its decision.
(9) A notice of a decision made under
subsection (8) shall be given by
publishing the notice in a daily newspaper published and circulating in the
State and by such other means as the Commission may determine.
Air Navigation and Transport Act 1936
2. – (1) The expression “the Minister” means the Minister for Industry and
Commerce;
…
37.—The Minister may and any local authority may, with the consent of the
Minister given after consultation with the Minister for Local Government and
Public Health and subject to such conditions as he may impose, establish and
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maintain aerodromes and provide and maintain in connection therewith roads,
bridges, approaches, apparatus, equipment, and buildings and other
accommodation.
…
68.—As soon as may be after the passing of this Act the Minister for Finance
shall, after consultation with the Minister, take all such steps as appear to him
to be necessary or desirable to procure that a limited company (in this Act
referred to as the Company) conforming to the conditions laid down in the
Second Schedule to this Act shall be formed and registered in Saorstát
Eireann under the Companies Acts, 1908 to 1924.
The second schedule made it clear that one of the principal objects of the company was
the holding of shares in Aer Lingus Teoranta.
THE ISSUES TO BE DEALT WITH
By order of 10th December, 2001, Kelly J. granted the applicant leave to bring
judicial review proceedings challenging the determination of the respondent (as it then
was) on several grounds which included; (a) challenging for error, which I have already
ruled cannot be done, (b) challenging the respondent’s interpretation and application of
the relevant Acts, which I am dealing with now, and (c) challenging on the grounds of
alleged want of fair procedures which issues have been postponed.
By a subsequent order McKechnie J. on 4th February, 2002, the notice parties
were joined and by order of Murphy J. on 22nd April, 2002, the applicant was given
leave to challenge the varied determination of 9th February, 2002, on substantially the
same grounds as before.
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As already indicated following my judgment of 16th January, 2003, a formal
case management conference was held at which the principal parties expressed
differing views as to what issues should next be dealt with. I determined that in the
main the proposals identified by the applicant in relation to these issues together with
the relevant materials should be adhered to with the exception of the challenges relating
to alleged want of fair procedures, which should be deferred.
In this judgment, accordingly, I am dealing with twelve issues. The first two of
these relate to the applicant’s allegation that the respondent has no power to review its
capital expenditure programme proposed for the future including the five years affected
by the respondent’s award (issue 1) or in relation to its capital expenditure programme
which was completed, contracted for, or commenced prior to coming into force of the
Act or the appointment of the respondent (issue 2). Between them these two issues took
up most of the time devoted to this section of the case and before identifying the
specific questions which were formulated in a number of different versions and in a
number if different ways it would be useful if I gave a short background introduction as
follows.
The method by which the respondent arrived at a maximum revenue per
passenger chargeable by the applicant, the cap was, broadly speaking, to calculate the
asset base of the applicant at the date of the determination, to adjust that figure for
depreciation, to deduct items not allowable in the Commissioner’s view from that asset
base and to add a figure for allowable capital expenditure for the period of the
determination (the “CAPEX”). The figure thus produced was the regulated asset base
(the “RAB”) of the applicant. The next step was to determine a percentage return
(called the weighted average cost of capital, or “WACC”) on the RAB so as to produce
a figure for an annual return. To this was added a further depreciation figure to
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represent a return to investors and an addition for regular operation expenditure, with a
further addition for regulatory fees and estimated taxation expense so as to arrive at an
assessed total annual expenditure which would have to be paid for out of revenue
resources available to the applicant including the cap.
This total figure was reduced by the respondent’s estimate of the applicant’s
revenue from its commercial operations and once that overall maximum allowable
revenue figure was established it was divided by the number of passengers (also
estimated) to produce the cap chargeable by the applicant in the first year to which
determination applied being a maximum average revenue per passenger for that year.
Projections forward were made for the balance of the five year period of the
determination which included a deduction calculated by reference to the consumer
price index and by reference to an established formula for airport regulation known as
“the X factor”, which calculation included a reduction in the cap which would
otherwise be chargeable in view of the respondent’s judgment that the applicant could
attain greater efficiencies in Dublin and Shannon airports over the period. Multiple
calculations and assumptions were involved in producing each and every one of the
estimated figures referred to and in several of them there were many sub calculations
and computations before the end figure was computed. This process involved,
furthermore, contributions from several parties each with their own agenda and several
contending for different outcomes. In fact two such caps were fixed by the
determination: a single overall CAP for all passengers passing through the three
imports and a separate “sub-cap” for passengers passing through Dublin alone. The
figure for the Dublin sub-cap was appreciably lower than the overall cap for the three
airports. These caps were €6.34 and €5.38 respectively.
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As stated, part of the exercise carried out by the respondent was to calculate the
asset base of the applicant at the date of the determination and also to calculate a figure
for allowable capital expenditure for the period going forward. As will be seen
hereafter the respondent received information from the applicant in relation to both of
the categories of capital expenditure comprising,
inter alia, a list of projects some of
which had been completed (such as Pier C in Dublin airport) some of which had been
contracted for and others of which were simply planned either for the immediate or the
medium or long term. Some of these projects had already been approved by the
Minister for Public Enterprise either prior to the coming into force of the Act of 2001 or
prior to the appointment of the respondent. Apart from itemising and describing these
projects the applicant also submitted its estimates of costs and it is the total of these
costs which is referred to as the CAPEX (namely capital expenditure).
As part of the process engaged in by the respondent prior to determining the
cap, submissions were also received from other parties including airlines such as the
two notice parties and many others in the wider community such as tourist interests.
Clearly the interests of airlines, for example, could in many cases be opposed to
those of the applicant. The respondent did not automatically accept either the items or
the costings in whole or in part presented to him by the applicant as its CAPEX but
rather reviewed it and in many cases, as will be seen in more detail later, either rejected
it or reduced the amount available or excluded it from his calculations as being
premature. In many instances he expressed the view that the applicant had not justified
the inclusion of a particular project in its programme or the costs claimed for it in
others. He disallowed some of these projects referring to the fact that the airport users
and, in particular, airlines were strongly opposed to them and claimed that they had not
been properly consulted. The respondent employed his own independent consultants,
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Infrastructure Management Group Inc. (IMG), to prepare a CAPEX for the applicant
which, in their opinion would be allowable. This he adopted for his calculation of the
cap.
At this point I am merely concerned with giving an introduction to the first two
questions. In general the first question involves a challenge by the applicant to the
effect that the Commissioner had no jurisdiction to interfere with the applicant’s
CAPEX at all and was obliged to accept it both as to the projects included and the costs
claimed for the purpose of calculating the cap. The second issue concerns the
applicant’s challenge that even if the Commissioner does have such a power in relation
to the applicant’s CAPEX going forward into the future, he does not have a power to
disallow any element of the applicant’s capital expenditure which has already been
spent, is the subject of a contractual commitment or has been approved by the relevant
Minister, either before the introduction of the Act of 2001 or his appointment. A third
issue relates to the applicant’s assertion that if the respondent has such powers he is not
at large but stands in the position of a court reviewing decisions for irrationality in
respect of the applicant’s decisions in relation to their own CAPEX. Alternatively, he
must allow a margin of appreciation and show
“due regard” for these decisions which
he has, allegedly, failed to do. The remaining issues being dealt with in the judgment
are set out in their turn below and need no further introduction at this point.
FORMULATION OF THESE ISSUES
As already indicated the specific grounds of challenge now being dealt with
have been differently formulated by the applicant and are expressed differently
depending on whether one consults the order giving leave to bring the judicial review
23
proceedings, the applicant’s revised list of core issues (following my judgment of 16th
January, 2003) dated 20th January, 2003, the outline written submissions prepared by
the applicant for this section of the case or the written submissions in reply dated 5th
March, 2003. This comment is not intended as a criticism: rather the reverse because
the issues became to some extent simplified and clarified as the proceedings progressed
and it is possible, I think, to identify a dozen questions which, if answered, will respond
to all aspects of the applicant’s challenge. I propose now to set out these questions as
follows:
1. & 2. Does the respondent have power to review the applicant’s CAPEX being
both
(a) The current and future CAPEX and
(b) The “past” CAPEX?
3. If so, is such power of review subject to restrictions such that the CAPEX
can only be reviewed for irrationality? Alternatively, must the respondent
allow a margin of appreciation to the applicant’s CAPEX, or must he have
“due regard” for it in some other way and if any of these restrictions apply,
did the respondent operate the appropriate standard in carrying out his
review?
4. Did the respondent in fact and in practice “disallow” elements of the
applicant’s CAPEX either in whole or in part by discounting these from his
calculations thereby, in effect, subverting the applicant management’s
decision-making jurisdiction?
5. Even if the respondent has a general power to conduct such a review, does
he have power to analyse and eliminate, item by item, the elements in the
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applicant’s CAPEX: in other words to “micro-manage” this aspect of the
applicant’s business?
6. Does the respondent have power to take into consideration matters other
than those specifically identified in s. 33 of the Act of 2001?
7. Specifically, does the respondent have power to insist that the applicant
justifies each element and the costs of each element of its CAPEX so that, if
they fail to do this in the respondent’s judgment, that element will be
excluded for calculation purposes?
8. Does the respondent have power to exclude elements from the applicant’s
CAPEX for alleged lack of consultation with airport users and in particular
airlines including the two notice parties who expressed strong opposition to
such excluded elements?
9. Does the respondent have power to substitute a CAPEX of his own devised
in place of the applicant’s CAPEX and in particular one prepared for him by
independent consultants IMG?
10. Was the respondent obliged to include some facility by way of formula or
otherwise in his calculation to reimburse the applicant for what are
described as exogenous unforeseen costs which will in all probability arise
during the period covered by the determination although not, obviously,
identifiable at the time?
11. Did the respondent comply with a ministerial directive requiring him to
reflect government policy in relation to regional development in his
determination?
25
12. And, finally, was the respondent correct to exclude an up to date passenger
forecast from his varied determination of 9th February, 2002, on the basis
that he had no statutory power to include it?
I propose to take the first two and last three of these questions
seriatim and outline the
arguments made by the parties in relation to each one and then to reach my conclusion
before proceeding to the next group of questions. I will deal with questions four to nine
inclusive as a unit.
1. DOES THE RESPONDENT HAVE POWER TO REVIEW THE
APPLICANT’S CAPEX?
This question identifies the issue in principle and leaves aside specifically the
sub-issue relating to “past CAPEX” and also leaves aside (at least as a matter of
primary emphasis) the related questions as to whether the respondent has power to
micro-manage (or I think the respondent would say micro-analyse) the applicant’s
CAPEX.
Applicant’s Submissions
The lynchpin of the applicant’s argument is grounded in s. 16 of the Act of
1998. This has been quoted
in extenso at the beginning of this judgment but I will
repeat the material portions as follows:
“
16.—(1) The company shall manage and develop the airports vested in it by
section 14 and any other airport that may …be established or owned by the
company …
26
(2) The company shall ensure the provision of such services and facilities as
are, in the opinion of the company, necessary for the operation, maintenance
and development of a State airport, including roads, bridges, tunnels,
approaches …apparatus, equipment, buildings and accommodation of
whatever kind.
(3) The company may, with the consent of the …establish a new airport
…”
The applicant submits that once it has formed the opinion under
subsection (2)
that any service or facility is necessary, it has a positive, unqualified, absolute duty to
ensure the provision of same. This duty is subject to no outside control and in particular
is not subject to any control by the respondent. Section 16 has not been amended
explicitly or by implication by the Act of 2001 and indeed in performing his duties
thereunder the respondent must (under s. 33) aim to facilitate the development and
operation of cost effective airports which meet the requirements of users - effectively
the same objective which has been imposed upon the company under s. 24 of the Act of
1998 which provides, where relevant, that it must take such steps as are necessary for
the efficient operation, safety, management and development of its airports and conduct
its business at all times in a cost effective manner.
The applicant submits that it and it alone has this positive duty and that the Act
of 2001 has not attempted to amend or in any way interfere with s. 16 or with s. 24 and
that it is clear that, under s. 33, the respondent must facilitate the discharge by the
applicant of this duty and the only way he can do this is to accept, without any
reduction, the CAPEX and costing presented to him by the applicant.
Clearly the applicant will not be able to discharge that duty unless it has the
appropriate funds. In determining the cap the regulator opted for what was called the
27
“single till” approach. This is to be distinguished from the dual till approach. The
single till approach means that in calculating the cap the respondent included all the
revenue available to the applicant (in a “single till”) including revenue from its
commercial operations as being revenue which is available to provide funding
generally for the on-going cost of the applicant’s allowable CAPEX. This latter was
calculated only after such commercial revenue had been taken into account so that the
resulting cap was much less than if this revenue had not been so calculated. In other
words, there was only one till into which all of the revenue was calculated and, by
reference to which, only the shortfall after counting in the available commercial
revenue was required to be made up by the cap. The alternative approach - the dual till
approach – would have excluded the commercial revenue with the result that the
amount required to be funded by the cap would have been significantly greater and as a
result the cap itself would have been much greater. The applicant makes the point that
by opting for the single till approach with the consequent reduction in the cap, the
respondent’s determination has put the applicant in the position that it has no funds out
of which to fund its CAPEX other than the cap. Therefore, by removing elements from
the applicant’s CAPEX and thereby declining to provide for the funding thereof, the
respondent has in effect and in reality put the applicant in a position where it is
incapable of carrying out its clear, unqualified, strict statutory duty to ensure the
provision of those very items which it considers necessary under s. 16 of the Act of
1998. This is something he has done without any statutory warrant and he cannot – as
he has tried to do in argument – avoid the inevitable logic of his determination by
simply suggesting that the applicant has other revenue streams out of which
“disallowed” elements of the applicant’s CAPEX can be funded.
28
The result of this is that there is a lacuna in the way the respondent has operated
the Act of 2001. The applicant has a clear statutory objective to manage and develop
airports and to ensure the provisions of services and facilities under s. 16 of the Act of
1998: the respondent in no way accepts that he is obliged to ensure their provisions and
yet he effectively deprives the applicant of the wherewithal to carry out its statutory
duty. This means that the intention of the legislature that these services and facilities be
provided is, thereby, frustrated. This cannot be a true application of the Act of 2001 and
need not be the case if the acts are correctly construed. Clearly the respondent, in
making his calculation, must make provision for the applicant’s CAPEX and its
funding, and there is nothing in the Act of 2001 which precludes this and indeed
everything in that act to support this interpretation.
The board of directors of the applicant are obliged to ensure that its capital is
remunerated. There is no way that they could, as the respondent suggests, decide to
invest in capital projects which have been excluded by the respondent even if they
could persuade some investor to provide the funding, because there is no way that they
could guarantee that the investment would be remunerated by inclusion in a subsequent
determination or that the respondent would change his mind at a later date. Effectively,
by depriving the applicant of the money to carry out its statutory duty, the respondent
has frustrated the applicant’s discharge of same and this cannot have been the intention
of the Act of 2001.
When one looks at s. 33 of the Act of 2001 in greater detail, there is nothing
there which runs counter to this submission. It is clear that the respondent must “aim to
facilitate the development and operation of cost effective airports” (a duty which it
shares with the applicant) and, in doing this, must have regard to the level of investment
in airport facilities at the relevant airport in line, not only with safety requirements, but
29
also, with commercial operations albeit in order to meet the current and prospective
needs of the airlines (upon whom the charges may be levied). He must also have regard
to a reasonable rate of return on the capital employed in that investment; to the efficient
and effective use of all resources; the operating costs of the airport authority and also he
must have due regard to imposing minimum restrictions on the airport authority and to
such national and international obligation as are relevant to its functions. In the latter
context it is clear that the national obligation imposed on the applicant under s. 16 of the
Act of 1998 is a clear unqualified absolute obligation on it to ensure the delivery of the
services and facilities contained in its CAPEX.
Whilst there is, of course, material in s. 33 which obliges the respondent to have
regard also to cost competitiveness and the needs of the users, these cannot – in the
absence of clear explicit statutory language which does not exist – override the stark
unqualified statutory obligation imposed on the applicant under s. 16 of the Act of
1998. To achieve such an amendment of this clear statutory duty would require explicit
and specific language which is simply not present in the Act of 2001.
The suggestion made by the respondent that the cap relates only to a fraction of
the applicant’s income (some 24%) is misleading: the rest of the income is not available
for funding any excluded elements of the CAPEX precisely because the respondent has
opted for the single till approach which means that the cap itself is calculated only to
make up the difference for funding those elements of the CAPEX which the respondent
allowed after these other revenue streams have been taken into account. They are,
therefore, not available to fund disallowed elements of the CAPEX because they are
already, according to his single till calculation, deployed in funding the permitted
CAPEX.
30
In this connection also, the suggestion that more funds will be available to the
applicant if passenger numbers increase or it achieves even greater efficiencies than
those targeted in the respondent’s calculations or through other commercial activities,
are greatly exaggerated because the passenger numbers are already calculated on a
realistic basis; the built in efficiencies are challenging and the other commercial
streams are quite optimistic. The reality is – and this cannot be avoided – that in all
probability the money will not be available to the applicant over the five year period to
fund excluded elements of its CAPEX. Furthermore, the suggestion by the respondent
that this will reduce him to a rubber stamp is exaggerated: there are many elements of
regulation still available to him if the applicant’s CAPEX is effectively “off limits”.
For example, with reference to the formula referred to in the earlier part of this
judgment the respondent has power to assess and review every element going into this
formula with the exception of the applicant’s CAPEX (and in principle also the
applicant’s operating costs (its OPEX). The regulator still has functions in relation to
assessing passenger numbers, the amount of return on capital, the method of calculating
the depreciation of the asset base of the applicant and other relevant elements such as
likely taxation and efficiency. He will require all the statutory aids such as staff and
independent consultants to assist him in carrying out this work even if he must accept
the applicant’s CAPEX. The applicant is not making the same point in relation to its
OPEX in these proceedings simply because the respondent accepted the applicant’s
OPEX for the purpose of his first determination. Nonetheless in principle the OPEX is
just as much off limits to the respondent as is the applicant’s CAPEX because both are
subject to its positive statutory duty under s. 16 of the Act of 1998.
The respondent has attempted to justify his approach to calculating the cap by
reference to his expert evidence that this is a normal way to carry out a regulatory
31
function. It may well be that certain theories or practices of regulation, and in particular
incentive based regulation, do include a power in the regulator to review and exclude
portions of the regulatee’s CAPEX. But this is no argument for the true interpretation
of the statute. One cannot simply argue that because this particular theory of regulation
requires a particular power, it must be in the act. This is to put the cart before the horse.
Clearly it is not in the act, as a perusal of s. 16 of the Act of 1998 which has been left
untouched and unamended, demonstrates. To read such a power into the Act of 2001
simply because it is desirable by reference to one particular theory of regulation is
entirely inappropriate.
Equally wide of the mark is the submission that the ambit of s. 16 (2) is narrow
and does not include runways, terminals and major development projects such as are
included in the applicant’s CAPEX. This argument is based on the inclusion of in s. 16
(2) of the words
“…including roads, bridges, tunnels, approaches…sewers and sewage
disposal works… buildings and accommodation of whatever kind.”
If this argument were correct it would produce the absurdity that there was
statutory power and indeed a duty cast by the Act on the applicant to provide these
ancillary services but no duty to provide runways, terminals and other central
aerodrome facilities. Quite apart from this, this argument ignores the earlier words in
the subsection which impose on the company an obligation to provide
“…such services
and facilities as are, in the opinion of the company, necessary for the operation,
maintenance and development of a State airport.” These words are clearly wide
enough to capture runways and terminals and the list of other relatively minor items are
included to ensure that there could be no argument that they were excluded.
The respondent has argued, further, that s. 37 of the Act of 1936 is the
antecedent of s. 16 (2). Section 37 of the earlier Act is clearly concerned only with
32
minor matters and indeed with matters which may involve cooperation with a local
authority and therefore which are not completely within the jurisdiction of the
applicant.
The applicant argues that in fact the true successors of s. 37 are subs. (1) which
deals with management and development of an airport authority and subs. (3) which
deals with the establishment of a new airport. Certainly it is not overwhelmingly
apparent that the only successor of s. 37 is subsection (2).
The respondent has argued that the applicant’s duty under s. 16 was never
absolute because its power to determine airport charges was itself always subject to the
approval of the minister. It follows, the respondent has argued, that the duty cast upon
the applicant under s. 16 must always have been read as contingent upon the availability
of ministerially approved charges being available to pay for the provision of these
services and facilities. The duty was always qualified and under the Act of 2001 the
respondent has argued that the determination of these charges is now subject to the
imposition by the regulator of the cap under s. 32 of the Act of 2001 which itself must
be calculated by reference to the list of matters to which the respondent has to have due
regard set out in s. 33.
The applicant in response to this argument (which I will elaborate in more detail
when I come to set out the respondent’s submissions) submits that it is based on a
fundamentally flawed understanding of the relationship between the two statutes. It is
true that under the Act of 1998 the Minister had power to approve (or otherwise) the
charges determined by the applicant. He also had power under s. 38 to give directions
of a general kind in relation to the applicant’s functions and of a specific kind in relation
to matters necessary or expedient in the national interest. The Minister, under the Act
of 1998 therefore, had two quite distinct species of function namely a function in
33
relation to charges which has been now assigned to the respondent under the Act of
2001 and a function in relation to general regulation of the applicant’s other duties
which remains with the Minister and has not been assigned to the respondent.
The respondent therefore has a jurisdiction in relation to charges and charges
only which he has inherited from the Minister but he has not inherited the Minister’s
other regulatory functions under s. 38 of the Act of 1998 and he cannot enlarge his
charging responsibilities to encroach upon the latter. It is therefore false for the
respondent to argue that just because he has a power in relation to the applicant’s
charges he can by reference to the matters to be considered as set out in s. 33 operate
this power in a way which effectively carries out regulation, not of charges, but of the
airport itself (which is a function which the minister retains insofar as it is vested in any
body other than the applicant itself). Comparisons with other Irish regulators offer the
respondent no comfort because these regulators have much wider powers than are given
to the present regulator whose power relates to charges and charges only.
The regulator has argued that ten words in the Act of 2001 actually show the
intention of the Oireachtas that the regulator should have the last word in the matter of
charges. The first of these words is “regulate” in s.7 which specifies the regulating of
airport charges as his principal function. The word is not defined further and therefore
includes what is covered by the ordinary meaning of the word. The second word is the
word “reject” in s. 32 (8) of the Act of 2001 which gives the respondent power, having
considered any representation made by the applicant in the context of his determination
process, to “accept or
reject any representation” (emphasis added). It is argued that this
means that if the applicant makes a representation specifying its CAPEX and the
costings, by the inclusion of this word the legislature intended to confer upon the
respondent a power to reject that CAPEX. The final words are contained in s. 34 of the
34
Act of 2001 which provides that the words
“subject to section 32 of the Aviation
Regulations Act, 2001” be substituted for the words
“with the approval of the minister”
in s. 39 (1) of the Act of 1998 so that the latter now reads
“The company may require the payment to it of airport charges, in respect of the
use of a State airport, at such rates as it may, from time to time, subject to
section 32 of the Aviation Regulation Act, 2001, determine.”
The respondent has sought to argue that the effect of the words is to clearly
establish that the respondent has full unqualified jurisdiction to review and disallow any
or all of the applicant’s CAPEX.
In response the applicant submits that this construction would involve the
amendment
sub silentio of s. 16 (1), s. 16 (2), s. 23 and s. 24 of the 1998 Act, none of
which provisions have in fact been amended by the Act of 2001.
Secondly it is submitted that one would expect a very explicit and clear section
in the Act of 2001 if a radical shift of power such as is now being contended for on
behalf of the respondent was, in fact, intended.
The argument that the respondent’s power derives from his ability to reject any
submission from the applicant founders on the basic principle that a statutory power
cannot be dependent upon whether or not the applicant makes a submission. Nor does
reliance on the word “regulate” assist the respondent in importing into the Act
something which is not there and which runs counter to an explicit provision (s. 16 of
the Act of 1998) which is. The subjection of the applicant’s power to determine
charges to the respondent’s functions under s. 32 means just that, namely that the
respondent can regulate the charges but this cannot be expanded to confer upon him an
ability to regulate the airport which remains with the Minister. Section 33 is clearly
ancillary to s. 32 in that it provides guidance to the respondent as to how he is to carry
35
out his function under that section. It cannot therefore be used as itself an origin and
source of further jurisdiction to regulate airports as distinct from charges. This is true
not just as a matter of form but as a matter of substance. What the regulator has done
has been, as a matter of substance, to deprive the applicant of the capacity to exercise
its clear statutory duty as set out in s. 16 of the Act of 1998. This cannot have been the
intention of the legislature. So far, incidentally, from having paid due regard to the
level of investment in airport facilities as required by s. 33 (a), by depriving the
applicant of the only possible source of funding for its CAPEX, it has paid no regard to
this matter.
Respondent’s Submissions
The respondent began by identifying the foregoing submission as an
absolutist
position, to be distinguished from a secondary or alternative submission of the
applicant, to the effect that even if the respondent had jurisdiction to review the
applicant’s CAPEX this could only be done in a broad brush way and not by way of
analysing item by item the elements in the CAPEX in a way described by the applicant
as “micro-management”. By reference to this latter argument the respondent has no
jurisdiction to exclude any element of the CAPEX which must be treated with due
regard to the applicant’s statutory duties and expertise and can only be reviewed
therefore either generally or on an itemised basis by reference to
Wednesbury principles
of unreasonableness.
I should make it clear that, in the foregoing, I have attempted to summarise the
applicant’s submission only in relation to what the respondent has described as the
absolutist submission and in what immediately follows I will be dealing only with the
respondent’s reply thereto.
36
The respondent accepts that his regulation of airport charges will impact on the
applicant’s plans and makes the point that the applicant’s case, that it has thereby taken
over the management by the applicant of the airports, clearly means that this has been
done
de facto rather then
de jure. De Jure the respondent has clearly done no more then
he is required to do under the Act of 2001.
The respondent relies on the applicant’s own description of the function of a
regulator set out as part of the statutory process leading up to the determination of the
cap. The applicant submitted
“Aer Rianta sees the dominant role of economic regulation as maximising the
welfare of customers and business by balancing overall needs and objectives.
In maximising welfare, regulators act as market surrogate where there is no
effective competition. As market surrogate, the regulator attempts to drive the
economic efficiency that would be delivered if effective competition were
possible. Aer Rianta believes that the best approach to adopt in fulfilling these
aims is incentive based regulation.”
The respondent points out that the latter is something clearly more than simple
price capping. It contemplates a regime which incentifies the regulatee to adopt certain
courses of action and to eschew others. The expert evidence shows that reviewing
CAPEX is normal practice for a regulator, including the reassessment of the value of
previous investments and this includes the placing of reliance by a regulator on an
alternative set of investment calculations to those presented by the regulatee.
The applicant’s contention therefore involves the removal of one familiar tool
from the regulator under the Act of 2001. This is not only surprising but wrong in that
it ignores the existence and rationale of the Act of 2001, the structure and content of that
Act, the precise terms of the Act and in particular s. 33 and finally the explicit amending
37
provisions of section 34. The applicant’s submission also implies that the Act of 1998
overrides the provisions of the Act of 2001. This ignores the history of the Act of 1998,
imposes an unjustifiable interpretation on s. 16 (2) and wholly ignores the ministerial
veto in s.39 of the Act of 1998 which has now been replaced by the regulator’s function
under s. 32 of the Act of 2001. Moreover, the applicant has exaggerated the impact of
the respondent’s determination on its management capacities as it has also exaggerated
its own duties under s. 16 (2) of the earlier Act.
It is accepted that the regulator’s determination was intended to and does have
an impact on the applicant’s business: nevertheless, all the respondent does is to fix a
maximum charge. He cannot require (by court injunction for example) that the
applicant carry out any particular project in its CAPEX or refrain from carrying out
another. The regulator’s cap applies only to about a quarter of the applicant’s income.
Moreover, if the applicant becomes more efficient or improves its profits or if
passenger numbers increase above those predicted, it will retain these revenues.
The applicant never enjoyed an untrammelled right even to decide its own
CAPEX. Prior to the Act of 2001, the applicant’s charges were subject to ministerial
approval. The Minister’s function in this regard was not qualified or restricted in any
respect. This has now been replaced with a sophisticated and carefully engineered
method of reviewing the applicant’s charges. But these were never at the absolute say
so of the applicant. Prior to 1998, the applicant had no power to fix charges: between
1998 and the coming into force of the Act of 2001 it had power to fix charges with the
approval of the Minister. In fact, despite an extensive CAPEX programme in these
years, those charges were not increased so that in practice the applicant’s CAPEX for
those years was not funded from an increase in charges.
38
The Act of 2001 does not take away or cut down an existing function of the
applicant for the simple reason that the applicant never had that function. Its ability to
determine charges was always subject to ministerial approval and is now subject to the
respondent. Nothing has been taken away: simply the identity of the approving person
has been replaced and, indeed, by way of a carefully constructed mechanism rather than
a crude and somewhat unpredictable system so far as the earlier statute went.
The elaborate machinery set out in the Act of 2001 would not be necessary if the
respondent’s power was as limited as the applicant now contends. If it was intended to
exclude the CAPEX from the respondent’s control all that was needed was the deletion
of CAPEX from s. 39 (1) of the Act of 1998 but this was not done. The Act of 2001 sets
up a sophisticated machinery, equips the respondent with staff and independent
advisors, and provides for an elaborate process involving appeal, judicial review,
submissions from interested parties including the applicant and the possibility of an
amended determination.
Crucially s. 32 (8) confers upon the respondent the power to reject
representations with respect to a proposed determination including representations
from the applicant. This power does not depend on the making of these representations:
it is merely reflective of what is entailed in the power to regulate charges and in
particular to do so with reference to the requirements of section 33. If the applicant’s
contentions were correct there could not possibly be a power to reject the applicant’s
representations with regard to a proposed determination insofar as they included a list
of proposed projects in the applicant’s CAPEX and intended costs. This is, in fact,
what the applicant did in this particular instance and the power of the respondent to deal
with it as he has done is clearly conferred in the statutory provision entitling him to
accept or reject these determinations.
39
Furthermore, s. 33 clearly means that in carrying out his function under s. 32 the
respondent must critically evaluate the investment plans of the applicant. It is difficult
to see what the words
“shall aim to facilitate the development and operation of cost
effective airports which meet the requirements of users” and the words
“shall have
regard to –
(a)
the level of investment in airport facilities at an airport to which the
determination relates…”
mean unless they mean that he must have regard to the investment plans of the applicant
so that he can aim to facilitate a cost effective airport and have regard to that level of
investment. He cannot have regard to that level of investment without considering the
elements of the CAPEX.
If the only function that the respondent could carry out in relation to CAPEX
was to fix prices then the Act achieved this in s. 32 and there was no need for section 33.
The introduction of the latter section means, however, that the regulator must have
regard,
inter alia, to the investment plans of the applicant because if he does not do this
he cannot have regard to the matters referred to in s. 33 and in particular subs. (a).
The effect of s. 34 is crucial in the context of the present submission. It makes
the company’s capacity to determine charges
“subject to section 32 of the Aviation
Regulation Act, 2001” - that is subject to a section which explicitly entitles the
respondent to reject anything which the applicant might submit to the respondent in
relation to its CAPEX. This clearly establishes the hierarchy between the respondent
and the applicant: the last word rests with the respondent because he can reject anything
the applicant submits to him in relation to CAPEX.
The applicant’s submission on this point simply ignores this plain amendment
of the Act of 1998. Not only did the applicant never have an untrammelled power to
40
determine its own charges but now that power is subject to an explicit unqualified
power vested in the respondent to reject the applicant’s proposals in this regard.
The history of investment between 1998 and 2001, during which time the
applicant spent some £139 million of capital expenditure without having any increase
in its charges, runs contrary to its submission. These were not funded out of increased
airport charges yet in the applicant’s submission it had a statutory duty not only to
ensure the provision of these facilities but also to ensure that they were funded.
The applicant places heavy reliance on s. 16 (2) of the Act of 1998. It is
misplaced. There is no such absolute duty as is contended for which would in any event
be unique. This Act is similar to other roughly contemporaneous Acts involving the
privatisation of commercial activities hitherto carried on by departments of State.
Sections 23 and 24 which impose general duties are remarkable for the fact that
it is explicitly provided in s. 24 (2) that nothing in s. 23 or s. 24 is to be construed as
imposing on the company either directly or indirectly any form of duty or liability
enforceable by proceedings before any court to which it would not otherwise be subject.
The sections are aspirational only and clearly not intended to impose the type of
unqualified duty now contended for by the applicant as being contained in section 16.
This section is not even located beside the other two.
Section 39 of the Act of 1998 which gave the Minister a power of veto over the
applicant’s charges is fatal to its present submission: it never had the absolute power or
duty now contended for. Moreover, this veto is expressed in absolute terms: no reasons
need be given, there are no guidelines, no time scale and it is not subject to an appeal or
review. Even if s. 16 (2) is given the strong interpretation now contended for by the
applicant it must be qualified by reference to s. 39 and indeed by reference to s. 38
which confers on the Minister a power of direction.
41
With regard to s. 16 itself, it is noteworthy that it is not located in the part of the
Act dealing primarily with the statutory duties of the applicant. Section 16 (1) imposes
a general duty to manage and develop airports and s. 16 (3) a permissive power to
establish a new one. This is the context in which s. 16 (2) must be read. When one
turns to subs. (2) it is noteworthy that there is no reference to runways or terminal
buildings. The reference to buildings and accommodation at the end of the subsection
is clearly to be interpreted
ejusdem generis with what has gone before, namely the list
of relatively incidental and ancillary infrastructure facilities such as roads, bridges,
tunnels, approaches and sewers referred to in the subsection. Furthermore the
predecessor of this section is s. 37 of the Air Navigation and Transport (Amendment)
Act, 1936, which is the first Act dealing with the organisation of airports. This section
(which has already been cited above in this judgment) is clearly concerned with
ancillary facilities which require particular treatment in that they may involve
cooperation with a local authority and this in turn explains why the phrase
“shall ensure
the provision of…” appears in this subsection and not in subsection (1). The business
of managing and developing airports is clearly within the control of the company
whereas the provision of these ancillary services may require cooperation with a third
party. The difference in phraseology is instructive in this context. The introduction of
the phrase
“in the opinion of the company” is intended to confer a broad discretion on
the company in relation to these matters rather than to create an absolute strict statutory
duty as now contended for by the applicant. Its obligation under subs. (2) is no greater
or more mandatory than its duty under subsection (1).
In regard to the latter, however, it is not contended that the applicant has an
untrammelled power or that its management or development of airports cannot be
restricted by economic reality, availability of funds or the amount of finance lenders are
42
willing to pay in advance. The burden of interpretation sought to be imposed by the
applicant on s. 16 (2) is exaggerated and excessive.
The applicant has sought to suggest that the Minister is and continues to be a
regulator of the airport whereas his erstwhile function as regulator of charges is the only
function which has been devolved to the respondent. This is wide of the mark because
the Minister is not a regulator of the airport; he has been given no specific management
function but only a power to make policy decisions of a general kind and specific
decisions only in relation to what is necessary or expedient in the national interest. He
is not a general regulator.
It is clear that the respondent has power to do more than simply impose a simple
cap on the applicant’s charges. Section 33 provides a list of matters to which he must
pay due regard and which clearly mean that the regulator himself must have regard to
the manner in which the airport charges may be spent. He must aim to facilitate the
development and operation of cost effective airports which meet the requirement of
users but he must also have due regard to the level of investment in order to meet the
current and prospective needs of (effectively) the airlines. It is clear that he has power
to incentivise the applicant to achieve these objectives by his determination and clearly
if he is to do this he must have regard to the applicant’s CAPEX and its cost with power
to review it if appropriate.
Aer Lingus’ Submissions
Insofar as directed to this issue Aer Lingus points out that it pays some 45% of
the charges levied by the applicant comprising an average of £27 million per year in the
period 1997 to 2001. It emphasises the role of users as being central to the statutory
scheme set out in ss. 32 and 33 of the Act of 2001. It is submitted that the respondent in
43
having due regard to the matters set out in s. 33 must do this through the lens of the
introductory paragraph because he must aim to facilitate the development and operation
of cost effective airports which meet the requirements of users. It is submitted that
possibly users mean only the airlines and certainly includes them. Airlines as users
have a privileged place in the Act of 2001 as being persons whose needs must be
considered in this context but also specifically it is the current and prospective needs of
airlines that shall be the object of consideration under subss.(a) and (g) of s. 33 and it is
noteworthy that airport users appear to be defined as airlines (see section 40 (1) (C)). If
the applicant’s CAPEX is off limits it is difficult to see how the respondent can consider
the interest of users as identified in the Act of 2001 in a way which satisfies his statutory
duty. This notice party also made further submissions which are in line with those of
the respondent.
Ryanair’s Submissions
The second notice party, Ryanair Limited, made submissions which were
directed primarily to other arguments which will be dealt with later in this judgment. It
emphasised, however, that there was no restriction on the consideration of the
requirements of users to which the respondent is obliged to have regard under s. 33 in
determining the cap and also that the purposive interpretation of the Act of 2001 means
that the respondent should have a completely independent control of the applicant’s
charges. It was submitted that the applicant is not a user and therefore the respondent,
when considering the needs of the users, is not considering the needs of the applicant.
The airlines are users and arguably the only users by reference to section 40 (1) (C).
Even if they are not the only users under the Act, they are clearly in a central position in
the context of the respondent’s functions and it is their needs and not the needs of Aer
44
Rianta (which is not a user) which must be considered and which have, therefore, been
elevated to a position of paramount importance so far as the considerations of the
respondent are concerned when making a determination.
The two Acts can be read harmoniously together: the duty which the applicant
asserts is cast upon it by s. 16 (2) of the Act of 1998 is a duty which was never absolute
and must be read as modified initially by reference to the ministerial power to approve
its charges and subsequently to the respondent’s jurisdiction to set a maximum cap on
these charges having considered the matters set out in section 33. Any reading of s. 31
(2) as is now contended for by the applicant results, therefore, in a distorted reading of
s. 32 (8) and s. 33 of the Act of 2001.
Conclusion
If the respondent has the power to review the applicant’s CAPEX one would
expect to find this in the Act of 2001. Therefore my first port of call in deciding this
issue is to examine that Act. Having done this I will consider the Act of 1998 to see
whether my primary conclusion should be altered in anyway.
As has been made clear the principal function of the respondent is to regulate
airport charges including those of the applicant. The word “regulate” is not defined and
therefore should carry its ordinary meaning. According to the Concise Oxford
Dictionary the word means “control by rule” or “subject to restriction”. There seems to
be nothing in the Act of 2001 to suggest that the word carries a special meaning and in
particular it is not defined. Accordingly the principal function of the respondent is to
control airport charges by rule or subject them to restrictions.
The respondent carries out this function under the provisions of s. 32 of the Act
of 2001. By subs.(2) it is provided that he shall make a determination “specifying the
maximum levels of airport charges that may be levied by an airport authority”.
45
Accordingly the regulation for control or restriction is done by way of specifying
maximum levels of airport charges.
Section 33 of the Act of 2001 provides that, in making a determination, the
respondent “shall aim to facilitate the development and operation of cost effective
airports which meet the requirements of users.” This is the overall objective imposed
on the respondent. So far as it goes, it seems to me to authorise a consideration and
review by the respondent of the proposed and existing CAPEX of a subject airport
operator because the respondent has to aim to facilitate the development of a cost
effective airport as specified. It is clearly within the contemplation of this provision
that the respondent would consider the capital expenditure both past, present and future
in order to see whether it does in fact facilitate that objective. In principle this
overriding objective imposes upon the respondent, in my opinion, a clear duty to aim to
facilitate the development and operation of cost effective airports and this duty is
sufficiently wide to authorise him to discharge it by a consideration of the CAPEX of
the subject airport both past, present and future.
This initial impression is fortified, in my view, by the provisions of s. 33 (a)
which require him in carrying out the foregoing function to have due regard to the level
of investment in airport facilities at the subject airport. The general impression derived
from the introductory overriding duty is given more specific focus by these words. In
my view they make it quite clear that it is the duty of the respondent in making a
determination to have regard to the level of investment in airport facilities (being
investment in the past, present or future) and once again an obvious way in which he
can do this in my view is to review the relevant CAPEX.
This conclusion is not altered, I think, by the particular phraseology of the
subsection or by the standard or criterion by reference to which the respondent is to
46
have due regard being a level of investment “in line with safety requirements and
commercial operations in order to meet current and prospective needs of those on
whom the airport charges may be levied”. It is conceivable that there are methods by
which a respondent could aim to facilitate the development of cost effective airports
and have due regard to the level of investment therein other than by reference to the
relevant operator’s CAPEX, but a simple and obvious way of achieving this is the way
actually selected by the respondent in the present case, namely, by subjecting the
applicant’s CAPEX to review. In my opinion the cited provisions of s. 33 clearly
authorise him to do this.
This conclusion is fortified by the provisions of s. 32 (8) which specifically give
the respondent power to “accept or reject” any representation made by any party in
response to his statutory notice indicating his proposal to make a determination and
inviting such representation. If, as in the present case, the subject airport operator
makes a representation indicating its CAPEX and costings, then clearly under these
provisions the respondent had jurisdiction to reject it. This includes, clearly, a
jurisdiction to review the CAPEX, make an assessment and reject it either in whole or
in part which is in fact what the respondent did in the present case.
Equally clearly the respondent’s jurisdiction to review the applicant’s CAPEX
does not depend on the applicant making any particular representation. Rather his
jurisdiction to reject a CAPEX representation is consistent with, and fortifies, his
jurisdiction which originates in s. 7 and which is qualified and articulated in section 33.
In the event, for example, that no CAPEX representation is made by the subject airport
operator this does not, in my opinion, either deprive the respondent of jurisdiction to
review the relevant CAPEX or exonerate him from his obligation to do so. That
obligation is to be found generally in s. 7 but specifically in s. 32 and in s. 33 (a) as I
47
have indicated. Accordingly, in the unlikely event that a determination is made without
a submission from the subject airport operator, the respondent has, nonetheless, a
specific duty to aim to facilitate the development and operation of a cost effective
airport and in doing so he must have due regard to the level of investment in facilities at
the airport as specified in subparagraph (a). It may be that he can do this otherwise than
by reference to a particular programme of capital expenditure but in any event these
provisions make it quite clear that in carrying out his positive duty he has power to
review the relevant CAPEX.
I must next consider, however, whether, in having “due regard” to the level of
investment, he is obliged to accept that level of investment at the indication of the
applicant both with reference to the past, present and future because of the applicant’s
specific duties under s. 16 of the Act of 1998.
It has been suggested that the clear provisions of s.16 (if such they be) are
somehow diminished because this section is separated from ss. 23 and 24 which deal
with the general duties of the applicant company. Furthermore, it is suggested that the
duties imposed in s. 24 are themselves diminished by reason of subs. (2) which
specifies that nothing in the section shall be construed as imposing any additional duty
or liability on the company which would be enforceable by proceedings in court. I am
not greatly impressed by this submission. Sections 23 and 24 are to be found in Part IV
of the Act of 1998 dealing with administration of the company whereas s.16 is to be
found in Part III which is dealing with the transfer of property and carrying out of works
by the company. Moreover it has been submitted on behalf of the applicant that s.16 is
unique in the sense that there is no section similar to it in other Acts which could be
compared with the Act of 1998 and which do contain provisions similar to ss. 23 and
24.
48
In any event if the words in s.16 are clear then by the primary rule of
construction the intended meaning of the section is to be interpreted in accordance with
such clear meaning.
The clear meaning of subs. (1) in my opinion is that there is a positive duty cast
upon the applicant, albeit in general terms, to manage and develop airports vested in it.
This would clearly in a general sense include a duty to propose and articulate a capital
expenditure programme under the general heading of developing the airport.
Subsection (2) again clearly, in my opinion, imposes a positive duty (as distinct
from a power) upon the applicant to ensure the provision of services and facilities
specified in this subsection. An issue has arisen between the parties as to whether these
services and facilities are the relatively subsidiary items such as roads bridges tunnels
and so forth or whether they are the major elements of development in an airport such
as runways and terminals. The applicant submits that the section imposes a duty upon
the applicant to ensure the provision of such services and facilities as are necessary for
the operation, maintenance and development of a State airport including some specified
items. It is clearly necessary, the applicant submits, for the operation, maintenance and
development of a State airport that there be runways and terminals and the reference to
the subsidiary items is merely to ensure that they would not be excluded by being
overlooked. The contrary argument by the respondent is that the list of ancillary and
subsidiary matters is clearly what is intended as the scope of subs. (2) and that the
specific power to provide buildings and accommodation of whatever kind must be read
ejusdem generis with the subsidiary list which proceeds these words. Furthermore, the
antecedent of this section (s. 37 of the Act of 1936) is clearly concerned with matters
which require co-operation between an airport authority and a local authority and this
indicates the scope of the intended subsection as dealing with relatively minor matters.
49
The applicant, in response, points to other portions of s. 37 which deals with major
matters.
In my view by imposing on the applicant in subs. (2) a duty to ensure the
provision of such services and facilities as are (in its opinion) necessary for the
operation, maintenance and development of a State airport, the Oireachtas intended to
impose upon it a duty to provide all such necessary services and facilities, including
runways and terminals, but also including the list of relatively minor matters which
were specified. Subsection (2) seems to me to put flesh, so to speak, on the general
obligation contained in subs. (1) in the context of the provision of services and facilities
which are necessary in pursing the overall objective of managing and developing the
airport identified in subsection (1). The arguments in relation to s. 37 of the Act of 1936
seem to me to be evenly balanced and do not really advance the matter.
I agree, therefore, with the applicant’s contention that s. 16 (2) imposes on the
applicant a duty to ensure the provision of a wide range of services and facilities
including runways and terminals which are, in its opinion, necessary for the operation,
maintenance and development of a State airport.
Clearly the funding for these services and facilities will, or at least may, come,
in whole or in part, from the payment to the applicant of airport charges which it has
power to determine by s. 39 (1) of the Act of 1998. This is not an absolute power: it is
a power to determine these charges “with the approval of the Minister”. The role of the
Minister in approving these charges is not qualified or limited in any way. Clearly if the
Minister did not approve of the proposed charges but reduced them this would impact
on the ability of the applicant to deliver the services and facilities. Is it to be said that
the Minister’s unqualified power of approval is somehow to be curtailed or subjected to
the opinion of the applicant which it must form under section 16 (2)? Such an
50
interpretation would be an impermissible attenuation of the Minister’s power of
approval which clearly includes a power of disapproval in my opinion. Insofar as the
discharge of the applicant’s duties under s. 16 (2) depends upon its determination of
charges then such duty (and its discharge) is in turn contingent upon the approval of the
Minister. This seems to me to be the sensible way to read the two provisions of the Act
of 1998 so as to produce a harmonious result. There is no sense in giving the Minister a
power of approval of charges if all he can be in respect of all or some of them is a rubber
stamp.
The function of controlling the applicant’s airport charges has now been
transferred to the respondent by the Act of 2001. His principal function is to regulate
those charges. It is, in principle, inimical to the concept of regulation that the CAPEX
which is an element going to make up the charges should be beyond the control of a
regulator in a way analogous the repugnancy of the notion that a Minister with power of
approving charges should somehow end up only as a rubber stamp. It is not surprising,
therefore, to find in the Act of 2001 an explicit amendment of the Act of 1998 which
provides that the power of the applicant to determine charges is to be subject to s. 32 of
the Act of 2001. The role of the Minister who had power to approve (and therefore
disapprove) the charges is now replaced by s. 32 of the Act of 2001. Section 32 sets out
the entire mechanism and jurisdiction to be exercised by the respondent in performing
his principal function of regulation. It includes power to specifically reject (or accept)
any representation made by an interested party pursuant to a statutory consultation
process and thereby in explicit terms subjects any determination of charges by the
applicant for the purpose of enabling it to discharge its duty under s. 16 (2) to the
possibility of outright rejection by the respondent.
51
The effect of the relevant statutory provisions, therefore, appears to be that the
respondent, in carrying out his duty of regulating airport charges, has a positive duty to
aim to facilitate the development of cost effective airports and while so doing must have
due regard to the level of investment in the subject airport and is specifically equipped
with a power to reject any proposals in relation,
inter alia, to CAPEX that may be
submitted to him by the operators of that airport. Moreover there is nothing in the
provisions of the Act of 1998 which would upset or overturn this conclusion: rather the
contrary, because the statutory duties to ensure the provision of services cast upon the
applicant in s. 16 (2) and its power under s. 39 to determine charges is specifically made
subject to those general and specific powers of the respondent which include the power
to reject their proposals on CAPEX.
My conclusion on the first question which deals only with the principle as to
whether the respondent has jurisdiction to review the applicant’s CAPEX, therefore is
that he has such a power.
In my opinion the relevant statutory provisions can be read together
harmoniously without straining the language or deviating from the primary rule of
interpretation that the intention of the legislature is to be divined from the words used in
the relevant sections when given their ordinary meaning. There is no need therefore to
refer, or pray in aid, any of the special rules or principles of interpretation which have
been referred to in argument and which are intended to deal with situations where such
a construction may not be immediately apparent.
2. DOES THE RESPONDENT HAVE POWER TO APPLY THE 2001 ACT
RETROSPECTIVELY AND IF HE DOES, DID HE?
52
Prior to the coming into effect of the Act of 2001 (on the 1st of February, 2002)
the applicant had completed or committed itself to a number of projects in its CAPEX.
These can be briefly described as the Shannon Terminal, Pier C, some associated
aircraft stands and a large amount of the CAPEX incurred during the first nine months
of 2001. These have been referred to as “stranded assets” in the submissions.
Some of them were commenced before the vesting day, that is, at a time when
the ownership thereof was vested in the Minister. It will be recalled that after the
vesting day the Minister retained some control (and still does) in that he can give broad
directions as to policy and specific directions in a limited area relating to national
security. These functions were not transferred to the respondent.
Decisions to go ahead with and fund the stranded assets were, accordingly,
taken by the Minister and prior to the coming into existence of the regime operated by
the respondent.
Applicant’s Submissions
The applicant submits that even if (contrary to its primary submissions) the
respondent has a power in general to review its CAPEX and, even if (again contrary to
its further submission) the respondent can do more than simply review the applicant’s
CAPEX decisions for unreasonableness, he has no power to disallow the stranded
assets which have been approved, contractually committed to, commenced or
completed prior to the commencement of the Act of 2001.
This Act is clearly intended to be prospective only and applies to subsequent
airport charges but it is also future looking in that the respondent must aim to facilitate
the development of cost effective airports rather than impugn or disallow it. The rule
against retrospection is a rule of construction comprising a presumption that a statute is
intended to operate prospectively unless otherwise clearly stated. The retrospective
53
operation of an Act has been defined in the words of Craies in
Craies on Statute Law
(7th ed., p.387) and adopted by Chief Justice O’Higgins in
Hamilton v. Hamilton [1982]
I.R. 466 at 474 when it
“takes away or impairs any vested right acquired under existing laws, or creates
a new obligation, or imposes a new duty, or attaches a new disability in respect
of transactions or considerations already past.”
The applicant submits that to construe the Act of 2001 as permitting the
respondent effectively to disregard the stranded assets (for the purpose of calculating
airport charges) is plainly to give that Act retrospective effect. (Pier C and Shannon
Terminal were contracted for and commenced at a time when the applicant was merely
an agent for the Minister who was therefore the undertaker in relation to them). The
applicant continues to have a duty to ensure that its revenue is sufficient to remunerate
this capital outlay. They thus have a reasonable expectation that they will continue to
obtain remuneration for these completed projects which they cannot do if the
respondent disallows them as he has done. By so doing he has clearly impaired a vested
right of the applicant and accordingly the Act of 2001 has been made to operate
retrospectively.
The Minister had exercised a function authorising the stranded assets and now
under the Act of 2001 the respondent purports to take a different view to that of the
Minister, thereby depriving the applicant of its vested right to remuneration. This
clearly imposes a new duty or attaches a new disability in respect of these past
transactions. This could only be done if the jurisdiction so to do was expressed in the
clearest language. In the absence of this language the presumption (which is a strong
one) is that it should not be done and accordingly the disallowance of the stranded
54
assets is
ultra vires. It is the clearest example of the application of the provisions of the
Act of 2001, with operative effect, to past transactions.
The Oireachtas cannot have contemplated, in the Act of 2001, giving the
respondent a power retrospectively to disallow capital projects which have been, as
contemplated by them, specifically allowed by the Minister under the Act of 1998 (and
indeed prior thereto in his further capacity as owner thereof). It is of course the case
that the charges determined by the respondent are prospective: the key point is that the
methodology by which those charges were set by him involved the respondent in
claiming an exercise of power to disallow for the purpose of calculating them past
expenditure which had been occurred under an earlier regime. By doing so he
retrospectively attached to those capital expenditures a disability by stranding the
relevant assets and thereby excluding the possibility of their generating a return on
capital (contrary to a specific duty imposed on the applicant in the Act of 1998). The
new law of 2001 was therefore clearly applied to past events and this means the Act has
been applied retrospectively as identified in the following observation of Barron J. in
O’H v. O’H [1991] I.L.R.M. 108
“In considering whether a statute should be construed retrospectively a
distinction is drawn between applying the new law to past events and taking
past events into account. To do the latter is not to apply the Act
retrospectively.”
To disallow past CAPEX is to apply the new law to past investments: to
recognise the relevant quantum for calculation purposes would be to take them into
account. To do the former is to apply the Act retrospectively and is
ultra vires in the
absence of clear statutory authorisation. To deprive the airport operator for any period
of time of an opportunity of generating return on the capital expended on the stranded
55
assets is to apply the Act of 2001 with a new standard and a new determination as to
their allowance or disallowance with retrospective effect. For the regulator
subsequently to apply a new obligation by reference to a new standard and thereby
deprive the applicant of its vested right to be remunerated in respect of this expenditure
is to fundamentally alter the character and consequences of these past capital
investments and is a clear application of the Act of 2001 with retrospective effect.
The principle would be the same if instead of the regulator it had been the
Minister who did this thereby reversing the earlier decision. That would be a clear
example of retrospective operation.
Furthermore both distinguished regulatory experts have, in their affidavits,
unhesitatingly described the treatment of stranded assets as the “retrospective
disallowance of properly approved investment”: this is one of the few things these
experts agreed on.
The argument by the respondent that there was no retrospective or retroactive
disallowance of the permission for the construction of the stranded assets misses the
point. The complaint was not that there was a disallowance of permission but rather a
determination that past capital expenditure ought not to have been occurred by reason
whereof the applicant was to be penalised in being deprived of a return on this capital
outlay. This is a clear example of an unfair retrospective application of the later Act.
Respondent’s Submissions
The respondent submitted that the applicant’s submissions involved a confusion
between disallowance of a project in the sense of refusing permission to construct it and
disallowance of charges calculated by reference to it. The respondent’s determination
did not retrospectively disallow permission for these projects but only determined
56
whether future charges should be adjusted or increased to pay for them. The problem
therefore did not arise at all.
Furthermore as a matter of fact there had been no increase of the applicant’s
charges between 1998 and 2001 and therefore the respondent did not, by his
determination, take away anything from them because there was nothing to take away.
Furthermore the rule against retrospective application is a presumption against
the retrospective operation of a statute in the absence of clear language to the contrary.
Clearly it is not contrary to this principle if the respondent looks back at the past capital
expenditure of the applicant in order to assess future charges. This is all he did. The
classic example of a retrospective operation is the making criminal of an act which was
not a breach of the criminal law when it was perpetrated (or indeed increasing the
penalty subsequently). Since the respondent did not disallow any element of the
CAPEX there was no question of a retrospective disallowance. In fact what Aer Rianta
had after the regulator’s determination was what they had before, namely an asset and
the knowledge that its capacity to generate a return was dependent on factors over
which the applicant did not necessarily have complete control. In fact after the
respondent’s determination the applicant had some return in respect of the stranded
assets whereas before (in fact) they had none.
Aer Lingus’ Submissions
Submissions on behalf of Aer Lingus were to like effect. An example of true
retrospective operation arose in the case of
In Re Hefferon Kearns Limited (No. 1)
[1993] 3 I.R. 177 which involved the offence of reckless trading which did not exist
prior to that Act. The Act therefore had to be construed in a manner consistent with
Article 15.5 of the Constitution which prohibits the Oireachtas from declaring acts to be
57
an infringement of the law which were not so at the date of their commission. This rule,
which is a rule of interpretation, was explained by Fennelly J. in
Minister for Social
Community & Family Affairs v. Scanlon [2001] 1 I.R. 64 at 88 as follows
“The two essential elements of the rule … are:- firstly, it is designed to guard
against injustice, in the sense that new burdens should not be unfairly imposed
in respect of past actions; secondly, the rule is one of construction, not of law. It
amounts to a presumption against retrospective effect which may be displaced
by the clear words of the statute.”
This was emphasised recently by Keane C.J. in
Murphy v. G.M. [2001] 4 I.R.
113 at 129 and
Grealis v. Director of Public Prosecutions [2001] 3 I.R. 144 at 159
where he emphasised that the rule had no application where the words of the statute
were clear.
The Act of 2001 is clear: it obliged the respondent to make a determination
within six months of the establishment day. He must (under s. 33) have regard to the
matters set out therein and where this section refers to investment no exception is made
in relation to investment incurred prior to the establishment day. This could easily have
been done and given that it was not done the clear intention of the Oireachtas was that
the stranded assets should also be included in the respondent’s calculations. This was
taking past events into account; not applying a new law to them.
Conclusion
In the first place it is clear that the rule against retrospective application is a rule
of interpretation. And that it comprises a presumption that, in the absence of clear
language to the contrary, an Act is to be interpreted as having effect on circumstances
which come into existence after the date of its coming into force. So much is clear from
the authorities already cited.
58
It is equally clear that there are no words in the Act of 2001 to suggest that it
should have retrospective effect. Accordingly the true interpretation of this Act shows
an intention of the Oireachtas that it would operate prospectively only.
A distinction is to be drawn between an Act which operates prospectively in the
sense that it is applied so as to have effect on circumstances which come into existence
after the Act itself comes into operation on the one hand, and on the other, the taking
into consideration by the operator of the Act for purposes of carrying out the relevant
statutory functions thereunder of circumstances which were in existence when the Act
came into operation. This latter activity is perfectly commonplace and can be described
as retrospection in the sense that in the present case the respondent takes into
consideration and looks at elements of the applicant’s CAPEX which because they are
already in existence were the subject of decisions by the applicant and the Minister
which took place before the Act of 2001 came into effect. The applicant takes no
exception to such retrospective scrutiny by the respondent. The point it makes is that
the effect of the determination is to reverse a pre-2001 Act decision by another
authority authorising the construction of the stranded assets together with the necessary
implication that the applicant had a right to be remunerated in respect of this capital
outlay. By disallowing these stranded assets from his calculation this vested right has
been impaired and this is a clearly retrospective application of the Act in breach of the
principles of retrospection. Of course the charges are prospective: but this does not
meet the point, however, according to the applicant, because the methodology by which
the respondent set those charges, involved reversing in effect a pre-2001 Act decision
that these assets would be allowed for the purpose of earning remuneration. The
respondent’s determination attached to this situation a disability and removed a vested
right which was the right of the applicant to expect a return on the capital involved.
59
This was not merely taking past events into account, which is legitimate, but reversed
past decisions which is not.
In my opinion the decision to authorise capital expenditure in the past is
different to the decision taken by the respondent who has to decide (insofar as the
stranded assets are concerned) what impact this expenditure should have (if any) on the
calculation of the cap.
Furthermore I cannot agree that the expectation asserted on behalf of the
applicant that these assets, at all times in the future, will generate a return on the capital
expenditure involved (an expectation founded
inter alia on the applicant’s obligation to
ensure a return on capital) is something which can properly be described as a “vested
right” as that phrase is used in the context of the relevant jurisprudence. The concept of
a
vested right is a right which comprises an immediate fixed right: the concept of an
expectation connotes an assumption in relation to future events. An expectation, no
matter how legitimate (to borrow the word), can never, in my view, amount to a vested
right.
Nor do I think that there is an element of injustice involved in the change of
statutory regime because there could have been no reasonable expectation that the law
in relation to airport charges would always remain the same insofar as it impacted on
the stranded assets.
If the respondent had made a calculation that certain capital assets of the
applicant had prior to the coming into effect of the Act of 2001 earned an excessive
return (with the approval of the Minister) and had proceeded to make a deduction to
disallow the appropriate amount, for example, with reference to the applicant’s airport
charge revenue for the year 1998, then this deduction might well be said to be a
retrospective application of the Act of 2001 and
ultra vires for this reason. This is
60
because it would have, under the guise of prospective charging, actually taken away
something which had already happened namely the receipt of these moneys at a time
when the Act of 2001 did not apply at all. The respondent has no business in
determining airport charges prior to those levied after a month following the 26th
August, 2002. In the foregoing example he would have in fact made such previous
charges his business and in so doing I think could well have acted
ultra vires. But this
is, notably, what the respondent did not do.
His determination clearly applies only prospectively (as is accepted by the
applicant) and in my opinion in making his calculations he did no more than consider
the existing capital expenditure which had already been incurred by the applicant for
the purpose of determining the cap. The subject matter of his decision was the
identification of a maximum airport charge. It was not whether or not a particular piece
of infrastructure should be built and he did not purport to reverse decisions in relation to
this latter category. I do not agree with the applicant’s submission that the
methodology deployed by the respondent in dealing with the stranded assets involved a
disallowance of these assets in a way which involved the retrospective application to
past events of the Act of 2001. On the contrary, in my view all that was done was a
retrospective consideration of these events for the purpose of determining airport
charges with prospective effect.
I should clarify that in reaching this conclusion I am dealing only with the point
relating to retrospective application.
Q. 3-9 THE ALTERNATIVE ARGUMENTS
Applicant’s Submissions
61
The applicant further submits if, contrary to the foregoing, the court holds that
the respondent does have jurisdiction to review its CAPEX both past, present and future
then in doing so he is restrained in a number of ways as follows:
1.
He may only review the CAPEX and projects within it on the grounds of
unreasonableness in the
Wednesbury sense thus giving the applicant a
proper margin of appreciation and thereby having
due regard to the
level of investment in the relevant airports as required by s. 33 (a) as part
of the overall objective of aiming to facilitate their cost effective
development;
2.
He may not micro-manage or micro-analyse the applicant’s CAPEX in
the sense of purporting to disallow individual projects within it as
distinct from imposing an overall cap thereon;
3.
He may not substitute his own CAPEX on the advice of his consultants
(IMG) for that of the applicant;
4.
He may not, without more, exclude projects in the applicant’s CAPEX
on the basis that the applicant has failed to justify them or on the basis
that there has been insufficient consultation with airport users in respect
thereof.
As will be seen the foregoing propositions involve, further, a determination as
to whether the respondent did in fact
disallow the applicant’s CAPEX or any part
thereof and of the issue whether the list of ten considerations set out in s. 33 is an
exhaustive list.
As indicated earlier whilst it is possible to identify the foregoing questions as
discrete issues they, or at least some of them, were, in fact, dealt with together at least in
part during the argument. This was because to a certain extent they are organically
62
connected and in what follows I will not attempt a water tight compartmentalisation any
more than did the parties during the hearing.
Irrationality, Due Regard and Margin of Appreciation
The applicant submitted that it was to the applicant and to no-one else that the
Oireachtas had entrusted the development of the relevant airports imposing on it a clear
statutory duty in this regard. The applicant had long experience and expertise explicitly
acknowledged by the respondent who was in turn clearly obliged to have due regard to
the level of investment in the airports under regulation. Moreover it is important to note
that the overall objective of s. 33 which aims to facilitate the development of
cost-effective airports which meet the requirements of users is effectively the same as
the duty imposed on the applicant to develop airports under s. 16 of the Act of 1998 and
to carry out that general duty in a cost effective manner (s. 24 (1) (c) of the same Act).
Whilst the emphasis in the Act of 2001 may also include reference to cost
effectiveness which meets the requirements of users and to having regard to investment
in the context of safety requirements and commercial operations which meet the current
and prospective needs of the airlines, it is quite clear that the respondent is not at large
and is
obliged to have due regard to the actual investment carried out and proposed by
the applicant at the relevant airports. What he did was exactly the reverse: namely he
set up a non-statutory criterion that the applicant would have to
justify its CAPEX and,
in the event that the applicant failed to do this, stated that he was
statutorily bound to
exclude it. Whatever else this is it is not having
due regard to the level of investment in
the relevant airports.
In truth, given the clear and strong statutory duty imposed by the Oireachtas on
the applicant and to which the respondent has to have due regard under s. 33 (i) of the
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Act of 2001, the respondent should approach the applicant’s CAPEX by presuming that
the applicant has complied with the law (not the reverse which is in effect what he has
done) and decide to exclude or reduce the relevant costings only if they are
unreasonable in the
Wednesbury sense. Such an approach is the only one which would
involve having due regard to the applicant’s investment.
What the respondent has done, on the contrary, was to look at each individual
item contained in the applicant’s CAPEX and require the applicant to justify it in the
absence of which he has held himself statutorily bound to exclude it. Apart from
involving an assumption that the applicant has failed to comply with its own statutory
obligation, this approach involves an impermissible
micro-management of the
applicant’s CAPEX. Not only is this
ultra vires the powers of the respondent (the
Oireachtas has given to the applicant and to the applicant alone the decision making
function in relation to what projects are required for the development of the relevant
airports) but when the consequences of this are considered it is apparent why this
should be an impermissible straying by the respondent into the exclusive jurisdiction of
the applicant.
The respondent has opted for the
single-till approach which he is in principle
entitled to do. Having done this, however, he must accept the consequence that there is
no revenue out of which the applicant will be able to fund any portion of its proposed
CAPEX which the respondent has
disallowed. The respondent has included all revenue
streams available to the applicant for the purpose of computing the price cap and
therefore, if the applicant were to embark upon constructing any project which has been
disallowed by the respondent, this can only be at the expense of another project which
has been allowed and in respect of which, therefore, both the applicant and the
respondent agree that it is necessary for the development of the airport.
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No responsible board of management of the applicant could contemplate
authorising a
disallowed project in these circumstances even if they could persuade
some third party to fund it. This is because they would not be able to guarantee any
return on such an investment and it would be in breach of its general obligation under
the Act of 1998 to remunerate its capital and pay interest on and repay its borrowings.
By choosing to adopt the single-till approach and by further engaging in the
micro-management of the applicant’s CAPEX down to items of considerable detail, it
can be seen that the respondent, despite his protestations to the contrary, has effectively
taken management decisions out of the hands of the applicant. This cannot have been
the intention of the Act of 2001 which, whatever about entitling the respondent to
regulate airport charges and thereby qualify (it seems) the applicant’s statutory
obligations under the Act of 1998, it cannot have been the intention of the Act of 2001
that the respondent would become the effective manager of the applicant’s CAPEX,
pre-empting specific decisions in advance and in that regard at least reducing the
applicant’s board to the status of a rubber stamp or, perhaps the proposer of projects. In
fact the respondent went further because, in place of the applicant’s CAPEX to which it
effectively paid no regard, it substituted its own as prepared for it by its independent
consultants IMG. Indeed these consultants, in stating the statutory objective to which
their efforts were directed, actually misstated the regulatory requirements of the Act of
2001 and this is something which in turn has infected the respondent’s determination
with invalidity since he adopted IMG’s alternative CAPEX.
In the course of making his determination the respondent not only required the
applicant to justify its CAPEX on pain of having it automatically eliminated for failure
so to do, but also introduced a further non-statutory criterion, namely consultation with
the airlines. The list of ten matters to which the respondent is obliged to have regard
65
under s. 33 of the Act of 2001 does not include consultation but does include an
obligation to have due regard to the level of investment, in line with safety requirements
and commercial operations, in order to meet the needs of those on whom the airport
charges may be levied – namely the airlines and also a requirement to have due regard
to the level and quality of services offered at the airport by the airport authority and the
reasonable interests of the users of these services. In this way the interest of users are
taken into account by the respondent.
For the respondent to go further and effectively erect consultation into a
criterion by reference to which the applicant’s CAPEX can succeed or fail is to
introduce a non-statutory criterion and to give excessive weight to the views of airlines
which are taken into account in the manner identified in s. 33 and not in the manner
identified by the respondent. Indeed, in some instances, the respondent appears to have
required consensus amongst the airlines in respect of a proposed CAPEX project as a
test by reference to which it could be excluded. It should not be forgotten that s. 33 (i)
requires the respondent to have due regard to “imposing the minimum restrictions on
the airport authority consistent with the functions of the Commission”.
By erecting justification as an additional non-statutory hurdle, the respondent
has clearly failed in his duty to have due regard to the applicant’s level of investment at
the relevant airports. He has had no regard to it by reference to his own non-statutory
criterion. He has thus failed in his statutory duty and his determination is
ultra vires
and should be quashed. Moreover, having adopted the single-till approach he should
not have gone on to micro-manage the applicant’s CAPEX on an item by time basis
because the inevitable result in practice was that he thereby pre-empted the applicant
board’s decision-making function in regard to these items.
66
Specifically with regard to the respondent’s decision to exclude elements of the
applicant’s CAPEX for inadequate consultation it should be noted that about €200
million worth of such CAPEX was excluded in the determination of 26th August, 2002,
notwithstanding that it had been included in the draft determination. It seems that the
respondent took the view that, following representation from airlines after the
publication of the draft determination, he was satisfied that there had been inadequate
consultation in relation to these items and on that basis decided to exclude them. This
could not be a proper exercise of his statutory duty because presumably, in such a
proper exercise, he had already included these items in the draft determination upon the
basis, again presumably, that they satisfied all the s. 33 criteria including that they were
part of a level of investment in the relevant airports which met the current and
prospective needs of the airlines.
It is important to distinguish between the concept of consultation, which is not
included in the Act of 2001, and the concept of satisfying the needs of the airlines which
is. Part of the applicant’s CAPEX which was not made the subject of consultation
might well, nonetheless, satisfy the relevant statutory needs. Presumably the elements
of the applicant’s CAPEX which was included in the draft determination but excluded
in the determination itself had satisfied this statutory requirement. The mere
inadequacy of consultation (which is not accepted) in relation to this could not mean
that these items subsequently and retrospectively failed the test which they had already
passed.
Furthermore s. 33 contains an exhaustive list of the matters to which the
respondent has to have due regard. The draftsman has notably declined to use any
phrase such as, “in particular” or to matters “including the following” or any other such
standard formula.
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The respondent specifically misinterpreted the import of the Act of 2001 when
he said that he regarded himself as statutorily bound to exclude items of the applicant’s
CAPEX which were not justified and thereby precluded him from exercising his
statutory discretion in relation to the applicant’s CAPEX which he was bound to do.
Furthermore he adopted the substitute CAPEX from IMG which, in turn, fell into error
in regard to the statutory requirements when it identified its objective in preparing the
alternative CAPEX as the main purpose of the review of the applicant’s CAPEX was to
satisfy the Commission mandate that “the level of investment in airport facilities at an
airport to which the determination relates be in line with safety requirements and
commercial operations in order to meet current and prospective needs of those on
whom the airports charges may be levied.”
Not only does this objective fail to identify the overriding objective of s. 33
which is to aim to facilitate the development and operation of cost effective airports
which meet the requirements of users but also misstates one out of ten matters to which
the respondent shall have regard – specifying in effect that the level of investment in the
subject airport shall be in line with safety requirements and commercial operations as
identified rather than subject to the overall requirement that this determination shall aim
to facilitate the development and operation of cost effective airports. Furthermore this
identifies only one of ten matters to which the Commission shall have due regard and
thereby fails to consider the other nine and places undue weight on the one identified.
This error further fatally invalidates the Commissioner’s determination.
Respondent’s Submissions
With regard to the applicant’s argument that the Commissioner can only review
the applicant’s CAPEX if unreasonable in the Wednesbury sense, there is simply no
68
justification for such a conclusion in the act. The act does include provision for judicial
review but it is the court which performs this function as one would expect and not the
Commission. Moreover the arguments relating to institutional competence do not
apply because the Commission has available to it all the relevant expertise which the
court does not. This proposition is wholly inimical to the notion of regulation and
would mean that the intention of the Oireachtas was that, in regard to CAPEX, the
regulator would have jurisdiction only on those rare instances when the courts would
find the applicant’s CAPEX unreasonable. With regard to the submission that the
respondent was not entitled to require the applicant to justify its CAPEX and was
entitled to disallow it (for the purpose of regulating the airport charges) by reference to
inadequate consultation, this submission misrepresents the reality of what was done
which was in fact in accord with the requirements of section 33.
If all that the respondent was empowered to do was to place an overall cap on
the applicant’s CAPEX and if he was specifically precluded from engaging in what the
applicant has termed micro-management then there would be no need for the detail set
out in s. 33 and s. 32 (combined with s. 7) would suffice. In fact the requirements of s.
33 show that the respondent is required to have regard to matters of considerable detail
which clearly authorise him to have regard to the individual projects in the applicant’s
CAPEX if indeed they do not oblige him so to do. He is clearly required in aiming to
facilitate the development of cost effective airports to have regard to the level of
investment therein (in line with safety requirements and commercial operations) in
order to meet current and prospective needs of the airlines. It is difficult to see how the
respondent might discharge these statutory functions and obligations without having
regard to the elements in the applicant’s CAPEX and impossible to conclude that
having such regard is specifically excluded.
69
The further indication that the legislators anticipated that the respondent’s
determination will be intrusive and have an impact on the applicant’s CAPEX can be
seen in the elaborate provisions facilitating appeal and time limit on the determination
of five years with the possibility of review after two.
With regard to the argument that the micro-management by the respondent was
prohibited this is clearly related to the consequences alleged to follow from such
micro-management rather than to the concept that the respondent can be criticised for
being able to furnish reasons and explanations as to why and how he has arrived at a
particular cap. The consequences complained of are that the applicant’s board are
effectively pre-empted from taking the relevant decisions given that there will be no
funding available for disallowed projects and also that these will, in all likelihood, not
be included in the RAB for the next determination in five years time. With regard to
this the respondent submitted that the applicant’s board is required under the
respondent’s regime to do no more than face the uncertainty facing any board on a
company whose activities are subjected to ordinary market forces. There is nothing in
the Act which says that the applicant’s board had to be given certainty in regard to
proposed investments. So far is the Act of 2001 from requiring this, it requires, instead,
that the respondent have regard to the many matters set out in s. 33 which clearly
authorise him (if they do not require him) to assess the applicant’s CAPEX in the
detailed micro-managerial way in which he has done.
Section 33 of the Act of 2001 must not be construed as a straight jacket. In
Glencar Exploration Plc v. Mayo Co. Co. [2002]1 I.L.R.M. 481 the Chief Justice, in
the context of a statutory obligation on a planning authority to “have regard to …
policies and objectives …of the Government insofar as they may relate to its functions”
said:
70
“There was no evidence to indicate that the respondents simply ignored the
letter from the Minister for Energy: on the contrary, they adjourned the meeting
at which they were to make the vital decisions so that the Minister’s views could
be considered. The fact that they are obliged to have regard to policies and
objectives of the government or a particular minister, does not mean that, in
every case, they are obliged to implement the policies and objectives in
question. If the Oireachtas had intended such an obligation to rest on the
planning authority in a case such as the present, it would have said so.”
It is noteworthy that in regard to this aspect of the case the decision of the Chief
Justice reversed that of Blayney J. in the High Court who appeared to consider that the
local authority could not be said to have had regard to the relevant policy where its own
policy in the development plan was opposed to it.
It is worthy of note in this context that the views of the House of Lords are
equally disposed to allow a wide margin of discretion to the relevant statutory authority
in a similar statutory context. In
Tesco Stores Ltd. v. Secretary of State for the
Environment [1995] 1 W.L.R. 759 Lord Keith of Kinkel said:
“But it is entirely for the decision maker to attribute to the relevant
considerations, such weight as he thinks fit, and the courts will not interfere
unless he has acted unreasonably in the
Wednesbury sense.”
Lord Hoffman put it more assertively when he said
“The law has always made a clear distinction between the question of whether
something is a material consideration and the weight which it should be given.
The former is a question of law and the latter is a question of planning judgment
which is entirely a matter for the planning authority. Provided that the planning
authority has regard to all material considerations, it is at liberty (provided that
71
it does not lapse into
Wednesbury irrationality) to give them whatever weight
the planning authority thinks fit or no weight at all. The fact that the law regards
something as a material consideration therefore involves no view about the part,
if any, which it should play in the decision-making process.
The distinction between whether something is a material consideration and the
weight which it should be given is only one aspect of a fundamental principle of
British planning law, namely that the Courts are concerned only with the
legality of the decision- making process and not with the merits of the decision.
If there is one principle of planning law more firmly settled then any other, it is
that matters of planning judgment are within the exclusive province of the local
planning authority or the Secretary of State.”
In reliance upon these citations the respondent submits that it is a matter for him
to determine what weight he must attach to the needs of the airlines. Once it is
established that the respondent did have regard to this particular factor then it is a matter
for him and not for the court as to what weight he has attached to it, if any.
In this context it was a perfectly reasonable implementation of his statutory
function to give consideration to the level of consultation conducted by the applicant
with airport users including the airlines in order to ascertain whether its CAPEX met
their needs as identified in the Act.
It was, further, a reasonable implementation of his duty under s. 33 generally in
aiming to facilitate the development of cost effective airports to require the applicant to
justify its CAPEX and thereby demonstrate that it facilitated cost effective airports.
The respondent in further carrying out this part of its function commissioned an
alternative CAPEX from IMG so that in making his determination he should be in a
72
position to aim to facilitate cost-effective airports. He was clearly entitled to prepare his
own CAPEX as the applicant puts it in discharge of his statutory obligation.
Third Party Submissions
On behalf of Aer Lingus, it was submitted that s. 33 made it clear that the
respondent had an obligation to consider the applicant’s CAPEX. Moreover to adopt a
CAPEX which did not take account of airport users was virtually worthless in the
context of section 33.
This party emphasised the other sources of revenue available to the applicant
not included in the single-till. It may make efficiency gains, borrow money, dispose of
surplus assets or develop part of its lands, gain additional rent, sell water, recover
monies for road, bridge and tunnel construction works, secure investment in the airports
and engage in profitable business. It may develop self funding projects and devise new
revenue streams from, for example, vehicle permits, access permits, clamp removals or
such like. The respondent was entitled to require financial analysis and justification
from the applicant so that it could discharge its statutory function and the matters
complained of by the applicant are all matters which the respondent was entitled to have
regard to in discharge of his own statutory functions under section 33.
This party submitted that the consultation engaged in by Aer Rianta was, in its
view, wholly inadequate and the reliance on the applicant’s consultation was an entirely
reasonable method whereby the respondent assessed whether the proposed CAPEX met
the requirements of users as he was required to do. In this context Aer Lingus
submitted that it was not merely lack of consultation upon which the Commission
placed weight but an overwhelming opposition of airport users and specifically airlines
to the applicant’s proposed CAPEX to which regard was had. This was clearly a
73
legitimate way by which the respondent could have had regard to the level of
investment made in order to meet the current and prospective needs of the airlines and
the level and quality of services offered and the reasonable interest of the users of those
services. This was not the imposition of an additional criterion but rather the
implementation by the respondent of the requirements set out in section 33. Given that
this is so, there can be no question of the respondent attaching impermissible weight
because it is up to him and not the court as to what weight he attaches to any particular
statutory criterion.
It was submitted on behalf of Ryanair Limited that s. 33 of the Act of 2001
makes the requirements of users of an airport a paramount consideration in the making
of a determination. The Act of 2001 places no restriction on what are to be the
requirements of users which are to be taken into account by the respondent in carrying
out his function thereunder. Clearly airlines are users and there is an argument (already
detailed earlier in this judgment) to the effect that they are the only users. Even if they
are not the only users it is clear that they are an important and indeed pre-eminent user,
the needs of which must be taken into account by the respondent.
Equally clearly the applicant is not a user in this context and so the weight
attached by the respondent to the needs and consultation with airlines was entirely
justified and within the statutory scheme.
On behalf of Ryanair, it was also submitted that there are revenue streams
available to the applicant outside the single till taken into consideration by the
respondent including aeronautical fees other than airport charges, commercial revenues
such as car parking charges, charges to concessionaires, inter-company loans and
borrowings. Of course the setting of a cap for airport charges will inevitably impact on
the applicant’s business and managerial role. This, one assumes, must have been the
74
intention of the Oireachtas. But this is not the same as to say that the setting of a price
cap involves usurpation of the applicant’s managerial role or functions. All the
respondent does in setting the price cap is to aim to facilitate the development and
operation of cost effective airports: the statutory requirement is not that he ensure that
this happen which would be language more appropriate to the functions of a manager.
The submission that, by requiring the applicant to justify its CAPEX, the
respondent was introducing a fresh and new statutory criterion is to distort the
procedures actually adopted by the respondent. The primary aim of the respondent
must be to facilitate the development of cost effective airports. Clearly under the Act of
2001 the respondent had to consult widely before making a determination in order to
satisfy himself with regard to the matters referred to in section 33. It is to be noted
however that consultation
per se was not the reason why the respondent factored out or
disallowed part of the applicant’s CAPEX. The immediate reason for this was – as
clearly stated by the respondent himself in the reasons given for his determination –
because the respondent found that much of the applicant’s CAPEX was not cost
effective and did not meet the needs of users. It was provided in the determination that
“Airlines expressed a view that this statutory factor (that is section 33 (a)) must
be considered in the context of the overall statutory objective. In particular,
many airlines expressed their concern that the capital expenditure programme
(CAPEX) of Aer Rianta did not and would not meet the needs of users.
Following a careful analysis of the CAPEX at Dublin, Shannon and Cork, the
Commission accepted many of their representations.…The Commission notes
the following in relation to both the previous, as well as current CAPEX, for the
Aer Rianta airports:
• Poor consultation with the users of the airport,
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• Lack of transparency in quality of information provided to users of the
airport, particularly as to planned costs of proposed projects,
• Construction (both past and planned) of facilities that are inefficient
and/or do not meet the requirements of users of the airports in line with
best international practice,
• Inadequate or non existent cost-benefit-analysis or business cases
undertaken to justify the specific CAPEX projects,
• Internal inconsistencies in information supplied by Aer Rianta to the
CAPEX programme.
Therefore the Commission has not relied on the Aer Rianta CAPEX programme
in making its determination on the maximum levels of airport charges, save to
the extent that it identifies necessary compliance/safety projects.
In its draft determination, the Commission had prepared its best estimate
of a CAPEX programme for Dublin, Shannon and Cork airports based on the
information and the documentation it had gathered at that time, referred to in
the draft determination as the recoverable CAPEX programme. Many users
of the airport made representations that elements of the recoverable CAPEX
programme did not meet the requirements of users. The Commission
accepted some of these representations.
Therefore the Commission has revised its recoverable CAPEX
programme for the final determination. It retains all projects deemed by the
Commission to be necessary for safety or compliance. In addition, it also
includes those projects required to increase needed capacity at the airports,
but only those in line with the interest of users…”
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This party submitted that it is clear from the foregoing that the issues of poor
consultation and inadequate information and indeed the failure by the applicant to
justify parts of its CAPEX is embedded in the main statutory criteria referable to the
question of cost effectiveness and the requirements of users and has not been, as
contended by Aer Rianta, erected into a new and unauthorised criterion invented by the
Commission. The consultation issue has to be seen in its proper context which is that
referred to in the citation from the reasons given by the Commission itself in its
determination and this clearly shows the decision to have been taken by reference to the
correct statutory criteria.
Conclusions
I can find no warrant in the language of the Act of 2001 to support the
proposition that the respondent may only interfere with the applicant’s CAPEX insofar
as he finds it to be unreasonable in the
Wednesbury sense. No such limitation appears
attached to the concept of regulation itself in section 7. The language of s. 33 requires
the respondent to aim to facilitate the development of cost effective airports which meet
the requirements of users and this insofar as the subject airport’s CAPEX is involved
gives the respondent a far more intrusive relationship to it than that connoted by the
concept of irrationality review.
He must, in my view, test and measure the CAPEX by reference to this overall
aim and this in turn involves assessing whether the CAPEX or any particular element in
it is conducive to that aim. If the applicant’s submission on this point is correct then he
must simply pass through the CAPEX unless he finds it irrational regardless of whether
it facilitates such an aim or not. Such an interpretation would require specific language
which is not present. On the contrary, in my view, the respondent when dealing with an
77
applicant’s CAPEX
shall aim in the manner specified and
shall have regard to the ten
matters listed in section 33. The manner in which he carries out his duties insofar as the
applicant’s CAPEX is concerned is set out comprehensively, albeit in fairly general
language, in s. 33 which requires him to carry out an assessment and evaluation of the
CAPEX by reference to the statutory criteria.
In this regard it is worth noting that the duty performed by the applicant in
carrying out its functions under s. 16 and ss. 23 and 24 of the Act of 1998 is a different
duty to that carried out by the respondent when carrying out his function under s. 32 of
the Act of 2001. Clearly it makes sense that the legislature would have required the
respondent under s. 32 to have regard to many of the matters which have a close
relationship to the management and development of a subject airport but it is for the
purpose of a distinctly different function albeit closely linked.
The respondent is not carrying out the self same statutory function as is carried out by
the applicant under s. 16 of the Act of 1998. Once again it would have required specific
statutory language, which is absent, in order to achieve this result.
What the applicant does under s. 16 is manage and develop airports and in doing
this shall ensure the provision of certain specified services and facilities which are
necessary for the operation, maintenance and development of same. What the
respondent does under s. 32 of the Act of 2001 is make a determination specifying
maximum levels of airport charges. The two functions are brought into harmony with
one another by the statutory requirement that the respondent shall have regard to
several matters listed in s. 33 of the Act of 2001 and specifying in s. 34 that the
applicant’s power to determine charges is subject to the function of the respondent. The
fact that the two functions are brought into harmony does not mean, however, that they
are the same, nor does the fact that the respondent’s function is intended and will
78
inevitably impact quite intrusively, as may be, upon the discharge of the applicant of its
functions. To that extent the latter’s statutory duties are qualified but once again they
remain the duties of managing and developing airports, not regulating airport charges
and the respondent’s function remains the duties of regulating maximum levels of
airport charges, not managing and developing airports. To achieve another result
would require different statutory language which is not present.
There is nothing in principle, therefore, inimical to the concept that the
respondent should conduct an item by item analysis of the applicant’s CAPEX with
power to review, disallow or reduce it if this is the method by which he intends to carry
out his functions under section 33. The fact that this may impact intrusively on the
management function of the applicant is to be expected. It does not mean however that
the applicant is relieved of its function: merely that the latter is qualified by reference to
the available funding: no court would construe the duty of the applicant under the Act
of 1998 as requiring it to do something which is impossible or to spend money which it
does not have.
In my view there is a specific duty on the respondent to review a subject
airport’s CAPEX. This applies even if the subject airport fails to provide information in
relation to such CAPEX or insufficient detail for the purpose of the respondent’s
analysis. The duty still remains on the applicant to aim to facilitate the development
and operation of a cost effective airport and to have due regard to the level of
investment in such airport in line with the statutory requirement. That is his duty and he
must carry it out in my view even if the information given him by the subject airport is
inadequate. Clearly if the subject airport provides relevant information this is
something to which the respondent shall have due regard but in the absence of such
79
information or inadequate information he still has to have due regard to the statutory
objective.
It is submitted by the applicant that in making his determination in the way he
did the respondent actually trespassed into the area of management which is the sole
prerogative of the applicant’s board. By getting into the detail of the individual items
contained in the CAPEX and purporting to allow or disallow or reduce the costs in
relation to these items the applicant says that the respondent’s decision has pre-empted
and shackled their management function for the reasons already cited in the earlier part
of this judgment. The respondent accepts that his decision will have an impact on
theirs. This is intended and not surprising. But he says he does not manage and has
argued that the applicant is free to develop its own CAPEX subject only to his
determination in relation to maximum levels of airport charges.
As already stated, in my opinion the respondent was, if not obliged, certainly
authorised by the specific provisions of s. 33 to carry out an item by item analysis and
review of the applicant’s CAPEX with power to allow, disallow or reduce same. Again
already as stated, I do not think that this means that he was carrying out management
and development functions as identified in s. 16 of the Act of 1998. It may well be that
the applicant’s board will feel itself constrained by the respondent’s methodology and
the information they have in relation to his approach to their CAPEX but this does not
mean that it is his decision rather then theirs to carry it out or not to carry it out.
Nor does this mean that they are reduced to the function of a rubber stamp. The
respondent and the notice parties have suggested various other revenue streams which
may be available to the applicant and whilst I think that these arguments fail to fully
take into account the effect of the single till approach adopted by the respondent it
remains the case that it is the board of the applicant and not the respondent which will
80
continue to manage and develop the airport forward into the period affected by this
determination. The respondent’s decision no more deprives them of that duty and
power than would a total collapse in passenger numbers due to some unforeseen world
catastrophe resulting in the annihilation of their revenues from airports charges. So far
from the language in the Aviation Regulation Act, 2001 supporting the applicant’s
contention in this regard it seems to me to go powerfully in the opposite direction.
The respondent has a duty to aim to facilitate the effect of cost effective airports
which meet the requirements of users and must have regard to the level of investment in
those airports in line with the statutory objectives. He must have regard to the level and
quality of services at the airports and the reasonable interests of the users of these
services. He must have regard to the cost, competitiveness and operational efficiency
of the airport services with respect to international practice. This list of matters to
which the respondent is obliged to have regard, in my view, clearly authorises him to
conduct the detailed review of the applicant’s CAPEX which he has done in this case: I
do not say that he is obliged to adopt this item by item method in order to discharge his
statutory obligation but I do say that in carrying out this item by item review he is
clearly doing what the Oireachtas intended him to do under the characterisation of
determining maximum airport charges and not under the characterisation of managing
and developing an airport.
The nomenclature is unimportant: clearly it is possible to describe what the
respondent did in relation to the new terminal at Cork for example as a disallowance:
the issue is not whether he did or did not disallow the terminal or indeed what the word
might mean. The issue is whether what he did was within his powers (and it was) and
whether this amounted to a usurpation of the applicant’s management function (and it
did not).
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The applicant further submits that in relying upon the airlines’ allegation that
there was inadequate consultation with them by the applicant in relation to its CAPEX,
he is actually introducing a new statutory criterion by reference to which he then
proceeds to exclude and disallow portions of the applicant’s CAPEX. It is submitted
that the true position is that he had already included some £200 million worth of the
applicant’s CAPEX in the draft determination and must therefore have already
concluded at that point that such items had satisfied the various statutory criteria set out
in section 33. Following the publication of the draft determination, it is submitted, the
various airlines complained about the level of consultation and this was used by the
respondent to remove £200 million worth of the CAPEX from his final determination.
These items cannot have been removed from the category of items which meet the
statutory criteria simply because it was subsequently shown that there was not adequate
consultation in relation to them (this is contested by the applicant). Clearly they can
satisfy the needs of the airlines even if there was no consultation.
The respondent in publishing the draft emphasised that it was just that and was
subject to review. Furthermore in the determination the respondent in giving his
reasons for justifying it referred to the view expressed by the airlines that the
applicant’s CAPEX would not meet their needs. This
primary submission was
accepted in part by the respondent. The reasoning then proceeds to note certain points
in relation to previous and current CAPEX which are clearly secondary reasons and
which include poor consultation with users of the airport and also inadequate or
nonexistent cost-benefit-analysis or business cases undertaken to justify specific
CAPEX projects. The determination then proceeds to say that
therefore the
Commission has not relied on the Aer Rianta CAPEX programme save to the extent
that it identifies necessary compliance/safety projects. It is also clear, as I will point out
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in a moment, that the respondent, having reached this conclusion, decided to subject the
applicant’s CAPEX for further analysis to its independent consultants IMG and
ultimately adopted the latter’s alternative CAPEX for the purposes of his
determination.
Whilst of course it is true to say that the concept of consultation is not identical
with the concept of meeting the needs of airlines or the reasonable interests of airport
users, the two concepts are clearly intimately related. If, due to consultation, the
airlines and users are unanimous in approval this would clearly greatly assist the
respondent in reaching a decision that the approved project satisfied the statutory
criteria. Equally, if there was strong opposition this would, as his counsel submitted,
induce him reasonably to take a hard look at the project involved. The applicant
submits, however, that the respondent did not even take a “hard look” at projects which
he deemed not to have been justified by the applicant but rather regarded himself, as he
stated, as statutorily bound on this basis alone to exclude it from his calculation.
At this point I wish to distinguish my findings in relation to the
consultation
element of this submission and the
justification element. In relation to the former it
does seem to me that the reasoning offered by the respondent in his determination,
which I cited at some length in my account of the submission made on behalf of
Ryanair, places the acceptance by the respondent of the claimed inadequate
consultation in its proper statutory context, because the respondent gives as his reason
for refusing many items of capital expenditure programme included in the draft
determination, the fact that they would not meet the needs of the users - a conclusion
which he reached, it is true, following their claims that there had been insufficient
consultation in relation to them. However in my view he was perfectly entitled to
83
conclude in that context that the identified projects did not meet the needs of the users
and for this reason to exclude them. This is a clear adherence to the statutory scheme.
Rather different considerations apply to his treatment of the failure of the
applicant to justify the inclusion of certain items in its CAPEX. In this regard the
respondent did specifically say in his reason for rejecting submissions by the applicant
in Part II of the reasons given for his determination that he regarded himself as
statutorily bound to exclude items which the applicant had not justified. (I note, as
well, that this non-justification is also referred to by the respondent in the same context
as the inadequate consultation namely as a list of noted elements given following the
primary determination that the CAPEX was excluded because it did not meet the needs
of users.) However it must be acknowledged that the respondent has misstated the
effect of the statutory provisions when he described himself as statutorily bound to
exclude items of the applicant’s CAPEX which the applicant had failed to justify. I
have already said that in my opinion, regardless of the fact as to whether the applicant
submitted a CAPEX or did or did not submit adequate information in relation thereto,
the respondent had an independent obligation to consider the matters identified in s. 33
which included aiming to facilitate the development of cost effective airports and
having due regard to the level of investment therein. I do not think he can be relieved of
this duty simply because the applicant fails to justify elements of its CAPEX.
Accordingly I now turn to see whether this description by the respondent
himself which suggests that, contrary to the foregoing, he abandoned the exercise of his
statutory discretion, once the applicants failed to justify its CAPEX, is an accurate
description of what actually happened.
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A description of how the applicant’s CAPEX was treated is to be found in the
third affidavit of the respondent and the first affidavit of Jorge Gonzalez sworn
respectively on the 28th and 29th January, 2002.
The respondent in his affidavit says he first met employees of IMG on 23rd
February, 2001, and discussed with them the proposed methodology and list of
information required from the applicant in respect of CAPEX. On 20th and 23rd April a
similar meeting reviewed information provided by the applicant in response to a first
request for information and it was decided that a new list of information was required.
On 21st May, there was a meeting to discuss IMG’s review of the applicant’s proposed
CAPEX. More information was anticipated from the applicant on 24th May. On 11th
June, 2001, IMG presented the respondent with initial results of its review of the new
CAPEX information provided. It was agreed that IMG would provide a report by 22nd
June, so that the respondent could review and comment on it before the draft report on
24th June, for inclusion in the draft determination (which was published on 26th June).
The further review of IMG’s work was done on the 20th July, 2001, and on 30th July,
IMG were briefed as to what work was expected of them following receipt of the final
statutory representations. They discussed,
inter alia, the need to generate a new
recoverable CAPEX for the final determination. There was another review of IMG’s
work on 6th August, 2001, and this meeting largely consisted of an analysis of all items
in the applicant’s and respondent’s recoverable CAPEX – description, justification,
cost, inclusion, exclusion, inclusion at a later stage. The respondent was presented with
the latest results of IMG’s recoverable CAPEX and there were discussions regarding
reasons for allowing modifying or disallowing any CAPEX items. This discussion
included consideration of the submissions made by the applicant and other bodies in
response to the draft determination. There was a final meeting in respect of CAPEX on
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20th and 21st August, 2001, where the subject was the content and results of the final
review of the applicant’s CAPEX. The respondent undertook a line by line review of
the recoverable CAPEX proposed by IMG. He also reviewed items for inclusion in the
final IMG CAPEX report. At that meeting the respondent decided that he would “use
as (his) recoverable CAPEX for the purposes of (his) determination the recoverable
CAPEX now contained in the IMG report included in the report on reasons for the
determination.”
Also in the same affidavit the respondent gives a history of the response by the
applicant to the statutory request for information issued by the respondent. The
applicant’s response to the first statutory request provided some documentation and
noted that certain documentation was designated as confidential and noted that
“financial analysis performed to justify investment” was “not in existence”. Therefore
in respect of future capital expenditure totalling in excess of £1.351 million there was
no documentation in existence relating to financial analysis of that expenditure. In
relation to financial analysis to justify past capital expenditure a one page memorandum
without any accompanying documentation was submitted which did refer to specific
projects. Further information was indeed furnished by the applicant but on 24th May,
2001, it insisted once again that it would be seriously prejudicial to the applicant if the
information provided in respect of planned capital expenditure were to be published at
this level of detail. The respondent had, therefore, to consider how to protect the
applicant’s confidentiality on the one hand and on the other how he could publish in the
draft determination sufficient material to achieve transparency and to enable
representations to be made by interested parties in a meaningful way.
The respondent had received from IMG a recoverable CAPEX based on the
applicant’s CAPEX which identified individual projects and was now asked to
86
aggregate these so that each individual project and its cost could not be identified. On
14th June, 2001, it emerged from a telephone call that the applicant did prepare financial
analysis of certain projects in its CAPEX programme which had been asked for on two
previous occasions but not supplied. The respondent wrote expressing concern and
demanding the information. Under pressure, the applicant furnished the information
which provided a financial analysis only of certain projects and not others. The
respondent refers to an averment in an affidavit sworn by Mark Foley on behalf of the
applicant to the existence of formal appraisal including relevant cost benefit analysis
and/or business cases prior to CAPEX projects being formally approved by its board
and notes that he has never seen any such analysis despite the making of several
statutory requests for information.
Following the publication of the draft determination, the applicant made a
detailed representation to the respondent on 26th July, 2001. This contained CAPEX
information which differed in some respects substantially from that already provided.
In summary, therefore, whilst the applicant submitted information on CAPEX on five
occasions that information contained some inconsistencies, did not provide a full cost
benefit analysis of all elements of the CAPEX nor did it appear to justify all elements of
the applicant’s CAPEX programme. Furthermore following the publication of the draft
determination the respondent received a large number of representations from
interested parties including a number of the airlines who expressed the view that the
applicant’s CAPEX did not and would not meet the needs of users. They also criticised
the lack of consultation engaged in by the applicant.
This was taken seriously by the respondent and on 10th August, 2001, he wrote
to the applicant and referred to its representation on 26th July, 2001, which stated that
for all major capital projects general consultation was carried out and specific working
87
groups were set up. The respondent requested the applicant to provide this information
because there was an issue on this subject between the users and the applicant.
Publication of the draft determination was the first time that the airlines had seen any
detail of the applicant’s CAPEX albeit in an aggregated form. The respondent was now
approaching the deadline for publication of his determination. At the request of the
applicant, however, he extended the deadline for the applicant submitting information
on consultation to 20th August and on that date the applicant provided the information.
Having considered this information and also information from other interested parties,
the respondent concluded that the consultation process engaged in by the applicant in
relation to its proposed CAPEX with users of the airport had been poor. He therefore
took the view that the users’ comments about the recoverable CAPEX should be
considered very seriously indeed and fully taken into account in deciding upon the
recoverable CAPEX. He took this view in light of his statutory obligations. In his
affidavit he says
“Had the views of users and in particular those on whom the airport charges
may be levied been taken into account then I would not necessarily have
attached such weight to their criticism of the proposed CAPEX since I would
have assumed that CAPEX had been arrived at following a consideration of the
users’ views. However where I had formed the view that consultation with
users was poor I gave great weight to the views of users. In this regard I gave
instructions to IMG to attach significant weight to the views of users in coming
up with a recoverable CAPEX.”
In his affidavit Jorge Gonzalez, vice-president of IMG, says that his company
reviewed the applicant’s proposed five year CAPEX programme taking into
consideration the statutory obligations of the respondent, and in particular the
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obligation on the respondent to have due regard to the level of investment in airport
facilities at an airport to which the determination relates, in line with safety
requirements and commercial operations in order to meet current and prospective needs
of those on whom the airports’ charges may be levied. He further says that IMG’s
review of the applicant’s CAPEX proceeded from an initial assumption that IMG
would accept the metrics (scale, timing and cost) of the applicant’s CAPEX
programme, subject to justification of the need for each component and verification of
its cost. It became clear that there were difficulties with the information provided by
the applicant in light of which the respondent concluded it could not rely exclusively on
the applicant’s information in deciding whether or not all of the proposed expenditure
should be included by the respondent when calculating the level at which maximum
charges should be set. It was decided to take into account the applicant’s CAPEX as its
initial starting point and analyse whether that CAPEX programme could be objectively
justified.
In carrying out this process each and every project included in the applicant’s
proposed CAPEX programme was scrutinised in the same way. The first step was to
review all relevant information that had been provided on the project by the applicant
through its response to the respondent’s information request. The need for the project
was then determined by classifying the project within any of the six investment drivers
identified by IMG and if the project was deemed to be driven by safety and compliance
issues its need was established based on the requirement set by the Irish Aviation
Authority or any other agency with jurisdiction on the subject.
If the project was classified as being required by any other driver, IMG first
reviewed the applicant’s information on the project and ascertained whether it provided
any form of justification that could be verified.
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If information was lacking, as was the case in many instances, IMG proceeded
to review any relevant information associated with the project from third party sources.
IMG then proceeded to analyse whether the project could be objectively justified.
IMG gave the applicant’s CAPEX programme the benefit of the doubt and
made every effort to justify each project through the use of industry practice and
standards. Due to the lack of information provided by the respondent of the need to
meet capacity demand, IMG developed a detailed demand/capacity study, a copy of
which was included in Appendix V of the determination. The demand capacity study
carried out by IMG was based on the applicant’s own air traffic forecast. Where it was
considered that the project was required, IMG then established what a reasonable
amount of capital expenditure on that project would be, with reference to the
information provided by the applicant, third parties and industry standards. In the
absence of satisfactory information from the applicant, it was difficult to verify the need
for any proposed investment, its timing and sometimes its cost, and how it would
impact upon the level and quality of services at the airport.
Mr. Gonzales then refers to the fact that in publishing the draft determination
the respondent was anxious that interested parties and the public would be able to
provide as full a submission as possible and, with that in mind, IMG provided an annex
setting out the recoverable CAPEX. Because of the applicant’s insistence that much of
this information was confidential, the information had to be published in aggregated
ways so that it did not set out in detail the applicant’s categories of CAPEX. Following
publication of the draft determination, new information was provided by the applicant
and also from representations made by interested parties and members of the public. In
view of the users’ opposition to the CAPEX and the respondent’s instructions as to the
weight to be attached to that opposition in view of the lack of consultation engaged in
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by the applicant as well as the further analysis that the representations prompted, the
recoverable CAPEX ultimately decided upon differed significantly from that set out in
the draft determination.
From the foregoing it can be seen that, far from regarding himself as statutorily
bound to exclude items in the applicant’s CAPEX which the applicant had failed to
justify, the evidence is that every facility and benefit of the doubt was given by or on
behalf of the respondent to the applicant’s CAPEX starting with IMG’s initial
assumption that it would accept the metrics (scale timing and cost) of the applicant’s
CAPEX programme subject to justification of the need for each component and
verification of its cost. Each and every project included was analysed in a step by step
process described in the affidavits and it is also clear that the recoverable CAPEX
programme prepared by IMG was prepared on the basis of its analysis from this
favourable starting point of the applicant’s CAPEX. The CAPEX programme included
in the final determination of 26th August, 2001, was completed after detailed and
repeated review by the respondent in light of information relating to consultation
(which the respondent considered was poor) and inadequate justification which came to
light in some instances after the publication of the draft determination. It is clear,
therefore, that despite the misdescription by the respondent in his own reasons included
for rejecting Aer Rianta’s submission in relation to the CAPEX to the effect that he
regarded himself as statutorily bound to exclude items of the applicant’s CAPEX which
the applicant failed to justify, the respondent gave the true description of his application
of the statutory provisions when giving his reasons for making his determination (Part I
of CP8 /2001) as distinct from his reasons for rejecting Aer Rianta’s submissions (Part
II) under the heading “statutory factors” where he said
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“In particular, many airlines expressed a concern that the capital expenditure
programme (CAPEX) of Aer Rianta did not and would meet the needs of users.
Following a careful analysis of the CAPEX at Dublin, Shannon and Cork, the
Commission accepted many of these representations.”
This (namely that CAPEX would not meet the needs of users) is the
respondent’s reason for rejecting the applicant’s CAPEX and it is clearly squarely
within the provisions of section 33. In my view it would be a distortion of the process
actually engaged in by the respondent as described in the affidavits referred to, to
characterise it as has indeed the respondent himself at one point in Part II of CP8/2001
as a process whereby the respondent regarded himself as statutorily bound to exclude
the elements of the applicant’s CAPEX which had not been justified by the applicant.
This is clearly not the way in which the respondent proceeded and to rely on this
misdescription of the procedure would, in my opinion, result in an erroneous
conclusion that the respondent had acted
ultra vires his powers. The respondent was
obliged,
inter alia, to assess whether the applicant’s CAPEX met the needs of the
airlines and the reasonable interests of the users of airport services and this he clearly
did in the process described in the affidavits referred to above.
Whilst issue was taken on behalf of the applicant (primarily in the affidavits
sworn by Margaret Sweeney on 12th June, 2002, and by Cathal Guiomard on 12th April,
2002), with much of the substance in the conclusions of the respondent in relation to
CAPEX, and whilst the account given by him and Jorge Gonzalez was adversely
commented upon and subjected to doubt especially by Ms. Sweeney, it remains clear
that so far from regarding himself as statutorily bound to disallow the applicants’
CAPEX unless justified, the respondent’s account given in these affidavits, which is
substantially at variance with that description, is how it was dealt with in practice.
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Accordingly what initially appears to be a worrying self-description by the respondent
of this part of his process giving rise to an implication that he failed to exercise his own
judgment and his own assessment as required to do by the statute turns out in reality to
be a misdescription and when the process adopted by the respondent is subjected to
closer scrutiny, it is clear that the respondent did in fact exercise his own judgment and
make his own assessment in relation to the applicant’s CAPEX in a manner which
complied with his statutory duty.
The applicant has submitted, further, that by adopting IMG’s alternative
CAPEX which was itself based, according to IMG’s own statement, on misdescription
of the relevant statutory objections, the respondent himself acted
ultra vires. In the first
place, it should be noted that the primary work which IMG was required to do was
indeed an analysis of the applicant’s CAPEX. Whilst the overall objective required of
the respondent in s. 33 is set out in the first three lines thereof it may well be thought
that subpara. (a) is the one which deals most specifically with the CAPEX. In this
context it is not entirely wide of the mark for IMG to identify this as the
particular
statutory objective to which they had regard in their work. More importantly, in my
opinion, the respondent himself in giving his report of the reasons for his determination
sets out at the very forefront of this document the primary objective as it set out in the
first three lines of section 33. It would be a distortion, I think, to conclude that the
respondent failed to aim to facilitate the development and operation of cost effective
airports which meet the requirements of users when this is in fact what he sets out as the
primary statutory objective to which he had regard. In my view the applicant has not
made out a case to the contrary effect.
Q. 10 EXOGENOUS UNFORESEEN COSTS
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Applicant’s Submissions
These are costs imposed upon Aer Rianta from an outside agency which by
definition cannot be specifically predicted or calculated at the time of the making of the
determination. The example used in the submissions was security costs imposed on
Aer Rianta which it is obliged to incur. It appears to be accepted that some such
exogenous unforeseen costs will, in all probability, be incurred during the lifetime of
any five year period. In these circumstances the applicant contends that the
determination should have provided a mechanism for dealing with these costs if and
when they arise and that the determination is invalid for failing so to do. The applicant
points out that it made a submission prior to the making of the determination to the
effect that compliance with the statutory requirements and in particular s. 33 (a), (b), (f)
and (j) can only be achieved by making such a provision. Under these provisions, the
respondent is required to have regard to the level of investment in airport facilities
which, by definition, will include such costs (the appropriate mechanism will be
“triggered” only if and when such costs are incurred) and a reasonable rate of return on
such capital employed. Moreover, the respondent is obliged to have regard to the
operating and other costs incurred by the airport authority and to national and
international obligations which are relevant. The applicant relied on an example where
the U.K. regulator allowed 95% of such costs, holding back 5% presumably as a way of
incentivising the regulated airports to achieve economies. No objection could be taken
to such a reduction but every objection is taken to making no provision whatsoever for
these costs given that they will in all probability arise. The making of a nil allowance is
incompatible with the obligations imposed on the respondent under section 33.
The reasons given by the respondent for refusing to make any allowance do not
bear analysis in the submission of the applicant. These reasons are that cost pass
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throughs are fundamentally at variance with the principle of cost effectiveness, and
foreseen changes are provided for whereas unforeseen changes may constitute
substantial grounds for reviewing the determination (in two years time). The applicant
submits that these reasons may support a reduced allowance but cannot support a
decision that the applicant should absorb the entire burden of such costs. Cost
effectiveness could have been provided for by allowing a percentage: the argument
does not support a complete disallowance. A complete disallowance cannot be the
discharge by the respondent of his obligation to have due regard to the level of
investment (which
ex hypothesi include these costs), a reasonable rate of return on the
capital employed, the operating and other costs incurred, and national and international
obligations which are relevant. It is surely fundamentally mistaken of the respondent to
argue that it was under no obligation, statutory or otherwise, to provide for the recovery
of unforeseen exogenous costs as has been done.
Respondent’s Submissions
The respondent submitted that, absent s. 33, its determination on this aspect
could only be challenged by reference to
Wednesbury criteria. Clearly it gave
consideration to this question and has adduced its own reasons and clearly in the
respondent’s submissions there is no question of
Wednesbury unreasonableness.
The additional duties which s. 33 might impose on the respondent, as contended
for by the applicant, must be seen against the overriding statutory objective of
facilitating the development and operation of cost effective airports meeting the
requirements of users. In this context none of the specific paragraphs referred to by the
applicant is capable of imposing upon the respondent a mandatory duty to provide for
these costs (as distinct from having due regard to the relevant criteria) which are not
95
even identified or mentioned in the statutory objectives. The respondent accepted that
he was obliged to have due regard to these costs given that they were mentioned in the
applicant’s submission, but not necessarily to provide for them.
The court is entitled to test whether such due regard was had by the respondent,
but with regard to the substantive result, may only interfere with it on
Wednesbury
principles. The applicant is in effect requiring the court to review the substantive
decision in this respect otherwise than by reference to
Wednesbury principles. The
reasons given in the statutory documentation must be considered. In its report dated
26th August, 2001, on the reasons for its determination the respondent made it clear that
he had due regard to the applicant’s safety compliance obligations under national and
international obligations: separately with regard to security, immigration and health and
safety requirements - these are evolving and could be the subject of change during the
period of the determination: changes in compliance obligations required over the next
five years, the effects of which are quantifiable, have been allowed but, in relation to
cost pass throughs for security, the Commissioner decided that inclusions would be
fundamentally at variance with the statutory objective of cost effective airports. He
noted, further, that the applicant is planning to reorganise its use of human resources in
the discharge of compliance obligation in respect of fire and security. This is likely to
lead to costs savings. He also noted that after two years, if there was a material change
in respect of its compliance obligations, this could constitute substantial grounds
leadings to a review of the determination.
In light of the specific reasons published the respondent argues that it is clear
that he did have due regard to the question of how exogenous unforeseen costs are to be
dealt with. Clearly he has reasons (which were given) for his determination and
therefore there can be no question, it is submitted, of a
Wednesbury review. Equally it
96
is clear that he did have due regard to the relevant factors which included that all
existing and foreseeable changes in compliance obligations had been provided for and
it is not necessarily the case that such increases in costs are always passed on to
customers, for example airlines, which had to incur higher security costs following
September 11th and have not necessarily increased their fares but have made cost cuts
elsewhere.
The respondent submits that it is also relevant that the applicant has never given
any indication of the magnitude of these exogenous costs or defined what it considers
are included in this definition; moreover, it did not appeal this decision to the appeal
panel and its example from the U.K. has not been supported with sufficient detail.
Conclusion
I have already referred to the observations of the Chief Justice in
Glencar
Exploration Plc v. Mayo Co. Co. [2002] 1 I.L.R.M. 481 and to the observations in
particular of Lords Hoffman and Keith of Kinkel in
Tesco Stores Limited v. Secretary of
State for the Environment [1995] 1 W.L.R. 759 above, indicating how the courts
construe a statutory obligation on a decision maker to have regard to certain matters
defined in the statute. It is, in short, a matter for the decision maker to determine what
weight should be attached to the relevant statutory objectives and indeed in Lord
Hoffman’s view it is for the decision maker to decide to give them “whatever weight
the planning authority thinks fit or no weight at all”.
In my opinion it is clear that the reasons given by the respondent for his decision
in this matter clearly preclude any possibility of arguing that his conclusions are
irrational. It is not irrational, in my opinion, for someone in the position of the
respondent to say, in effect, that given the overriding objective to aim to facilitate the
development of a cost effective airport, given that exogenous unforeseen costs are not
97
necessarily passed on by the persons primarily responsible (for example by airlines to
their passengers), given also the fact that there is a mechanism for a review of this
decision in two years time and given its opinion that pass throughs are inherently
inimical to the principle of cost effectiveness that there should be no mechanism in the
initial determination for such a pass through. In my view this is clearly a rational
conclusion and cannot be impugned on
Wednesbury grounds.
Does it, however, show that the respondent had “
due regard” to the matters
identified by the applicant in argument? Is the applicant entitled to say, as it has, that no
regard was paid to these matters, for example, to the operating and other costs incurred
by the applicant or the national and international obligations which are relevant to the
respondent’s function? The respondent has specified that it has built into its
determination a calculation in respect of identified exogenous costs. With regard to
unforeseen exogenous costs it has indicated that changed costs for the applicant may
provide substantial grounds for review. I think this is an important feature in the
respondent’s thinking because it shows that this is not a determination in regard to these
costs once and for all and for all time. It seems, rather, that the respondent’s attitude is
that given its overriding statutory objective to aim to facilitate the development and
operation of cost effective airports and given its opinion that pass throughs are at
variance with the principle of cost effectiveness (they provide no incentive to the
airport operator to manage a cost increase in the most efficient manner possible) I think
it is perfectly reasonable for the respondent and in compliance with his statutory duties
under s. 33 to effectively adopt a wait and see attitude and specifically keep the door
open to the possibility of a review in two years time.
Given the jurisprudence I find it impossible to say that the respondent has not
had due regard to the various statutory objectives in light of its own stated reasons for
98
making no provision in its initial determination. The applicant submits, however, that
the objective of incentivising cost effective airports could equally be attained by
allowing a percentage (say 90%) of these unforeseen costs but that to disallow them
entirely involves ignoring (paying no regard to) the statutory objectives identified in
argument. This submission seems to me to ignore the overall approach of the
respondent in this context and in particular his submission that such cost increases are
not necessarily passed on to customers and also his clear indication that an increase in
such costs might well trigger a review in two years’ time.
I am unable to agree with the applicant’s submission that an obligation to have
due regard to the various matters identified in argument means or amounts to an
obligation to make provision for this particular element of unforeseen costs. The fact,
therefore, that no provision has been made in the determination under challenge does
not of itself mean that there has been a failure to comply with the statutory objective.
For these reasons the respondent’s decision cannot be challenged on this ground.
Q.11
MINISTERIAL POLICY DIRECTION
The background to this issue is that on 16th August, 2001, the Minister under s.
10 of the Act of 2001 gave the Commission a direction “that the Commission make
every reasonable effort to ensure that its final determination reflects the important
emphasis which the Government has placed on balanced regional development”.
Section 10 where relevant provides
“
10.—(1) The Minister may give such general policy directions (including
directions in respect of the contribution of airports to the regions in which they
are located) to the Commission as he or she considers appropriate to be
followed by the Commission in the exercise of its functions.
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(2) The Commission shall comply with any direction given under
subsection
(1).”
The direction already quoted came as the conclusion to a two page letter
addressed to the Commissioner by the Minister. In the course of that letter she wrote
“As I, indeed the Oireachtas in general, regarded the issue of the contribution of
the airports to their regions, as being of particular importance, a separate
obligation in respect of this matter was inserted in the list of regulatory
objectives in section 33, to which the Commission was required to have regard.
I wish to advise you that I have decided that it is appropriate at this juncture to
give you a direction under section 10, so that as you reflect on your conclusions
on the proposed price cap determination, you are aware of the purpose and
intent of Government Regional Development Policy.”
She then drew the Commissioner’s attention to the two relevant policy
documents as follows
“1. The National Development Plan – 2006 (NDP)
…
“The fostering of balanced regional development” is one of the four
national objectives identified in the plan. Specifically, the plan states
that it is the Government’s objective to achieve more balanced regional
development in order to reduce the disparities between and within
regions and to develop the potential of the regions to “contribute to the
greatest possible extent to the continuing prosperity of the country.”
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The government considers that our airports have a key role to play in
supporting the national objectives of the plan.
2.
National Spatial Strategy:
In order to bring together the various elements of regional policy and to
achieve the necessary balance in accordance with the principles of
economic competitiveness and sustainable development, the Minister
for the environment was mandated to prepare a National Spatial
Strategy (NSS) which would translate the broad approach to regional
development into a more detailed blue print for spatial development.
One of the key principles to be achieved under the strategy is the
creation of the right conditions for balanced regional development to
take place by developing the potential of areas in the regions to create
and sustain economic strength in a structured way. In that regard you
are referred to the “scope and delivery” document which is available on
the Department of the Environment’s website.”
These introductory paragraphs were then followed by the direction which I have
already quoted.
For the purpose of considering the arguments, which I will outline in a moment,
I have been furnished with and have carefully considered both of these documents
where relevant to the issues raised by the applicant.
In the determination, as will already have been seen, the respondent fixed a
general overall cap which applied to all three airports in the sum of €6.34 and an
individual sub-cap for Dublin in the sum of €5.38.
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Applicant’s Submissions
The applicant submits that the Commissioner failed to comply with the
direction in two regards: firstly, he disallowed a £73 million new terminal project for
Cork and allowed instead only a £36 million extension and secondly, by so arranging
the caps as to confer a significant advantage on Dublin, his decision was entirely
inconsistent with the objective and so far from reducing the disparities between and
within regions and developing the potential of regions, it in fact contributed to widening
those disparities and hindering such development.
The Commissioner is obliged to comply with s. 10 – it is a mandatory duty cast
upon him and can be distinguished from his obligations under s. 33 which are merely to
have regard to the statutory objectives which include at (d) “the contribution of the
airport to the region in which it is located”. It is not sufficient for the Commissioner to
have regard to the directive or to the contribution of the airport to the region in which it
is located: rather he is under a strict statutory obligation to comply with the direction.
This he clearly failed to do, and it is of no avail to the respondent in this particular
context to pray in aid the jurisprudence and principles which apply to his s. 33 (d)
obligation.
Moreover, the direction requires the respondent to “make every reasonable
effort to ensure” that his determination reflects Government policy as identified. He
must, in short, deliver: it is not sufficient that he merely takes this policy into
consideration.
Given this direction, it was perverse for the respondent to fix a cap for Dublin
airport which is considerably lower then the cap applying to all three. He cannot on any
basis be said to have made every reasonable effort to ensure that this determination
complies with the ministerial direction.
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The respondent’s submission that he is free to have regard to the direction and,
by implication, to determine what weight to give it is wide of the mark: he is not so free.
He
must comply with it and his non-compliance has been misinformed by his
misunderstanding of the nature of his legal obligation.
It is accepted that there may be a range of determinations which would have
complied with the ministerial direction. But the determination actually made is outside
that range because it is clearly inconsistent with the direction itself. The respondent
appears to have regarded the idea that Dublin would subsidise the regions as something
objectionable. However, s. 33 clearly contemplates that he would consider airports, in
the plural, together, and this clearly permits subsidisation as does s. 32 (4) under which
it is clear that the respondent may consider several airports in the aggregate – a course
he has chosen to adopt in the present determination. Any suggestion that the Act of
2001 prevented the respondent from permitting the applicant so to conduct his business
as to subsidise costs at one airport from income at another, is unsustainable.
In argument it appeared that the respondent was contending that Dublin also is a
region but this contention ignores the direction to achieve “balanced regional
development” when the whole purpose of government policy is to address imbalances
in development and to reduce disparities in the regions. The context (identified in the
National Spatial Strategy) is to achieve economic competitiveness and sustainable
development and therefore, the whole purpose of government policy is to address
imbalances in development and reduce disparities between regions such as the disparity
which exists in favour of the greater Dublin area region, which is not sustainable in the
long term and the consequent need to develop the other regions so that they can achieve
economic competitiveness with the greater Dublin region. To make a decision which
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accentuates that imbalance is simply inconsistent with that policy and therefore fails to
comply with the direction.
Respondent’s Submissions
The Minister’s is a
general policy direction and does not dictate any specific
outcome. The respondent clearly has a wide discretion as to how he may comply with
it. The wording of this general direction requires merely that he “make every
reasonable effort” to ensure that his determination reflects the important emphasis that
government policy has placed on balanced regional development in light of the
identified documents. Clearly there may be a number of reasonable views as to how he
should comply with this direction.
The respondent has set out in detail how he has done this. He summarises the
direction, refers to his review of the two documents, identifies two objectives namely
first, the need to provide Dublin with sufficient resources to provide for its continued
infrastructural development to deal with congestion and bottlenecks and second, the
need to ensure that Shannon and Cork can develop strong and sustainable economic
growth and therefore further develop as regional gateways. The respondent has said
that the first of these objectives is met by providing Dublin with a separate price
determination, thereby preserving the particular place allocated to it in the documents
and also ensuring that development at Dublin will not be restricted by a cross subsidy to
Shannon or Cork and further states his belief that the second objective is met by both
the individual price determination on Dublin and the overall price determination for all
three airports, which approach will ensure that development at Shannon and Cork will
be sustainable in line with the interplay of market forces, location and accessibility and
also ensures that Shannon and Cork will both have adequate resources for development
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while providing the applicant with the maximum flexibility possible as to the
implementation of an appropriate development strategy.
The applicant further submits that there has been no objection to his
determination by the Minister and this in the context that the direction was given some
ten days before that determination was due to be made. Moreover no group has
appealed it.
The respondent submits that it is clear that he did give considerable attention to
the direction and to both relevant documents and further submits that once this has been
established a court can interfere with it only if it is irrational in the
Wednesbury sense.
Clearly there is no evidence of this. By challenging this decision by way of judicial
review rather than by way of appeal the applicant must, accordingly, establish that there
is only one
right way to implement the ministerial direction and that the respondent has
not achieved it. Indeed if there were to be only one right way then this could have been
much more clearly expressed in the legislation.
With regard to the element of this argument that the respondent by allowing
only an extension of the existing terminal at Cork rather than allowing for a new one
has failed to comply with the direction, the respondent submitted that he has not been
given leave to advance this ground in the appropriate order. Accordingly the court
should not now concern itself with this particular proposition.
Conclusion
Before I consider the substance of this submission I think I should first deal with
the last point referred to above.
In the order of Murphy J. of 22nd April, 2002, the applicant was given liberty to
amend its statement grounding application for judicial review, which now included a
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claim for a declaration at para. 16 that the determination failed to have any or any
proper regard to the provisions of s. 10 of the Act of 2001, the direction of the Minister
for Public Enterprise thereunder and s. 33 (b) of the Act of 2001. Ground 14 is relied
upon to support this relief. 14.1 recites the obligations under s. 33 (d) and also under s.
10 and includes reference to the specific direction. 14.2 asserts that the implementation
of the maximum charges allowed “would result in a significant reduction in the number
of passengers per annum at both Cork and Shannon airport” and para. 14.3 asserts that
no reasonable regulator “could have determined charges … of this nature, consistent
with the statutory obligation and direction referred to herein.”
There is no reference in this pleading to the specific point that the respondent
failed to allow a new terminal as distinct from an extension of an existing one as a basis
on which to ground the claim for the declaration. In my opinion the applicant has not
been given leave to base its claim for this relief on this particular ground and
accordingly I decline to consider it.
Turning to the generality of the submission it does seem to me that there is a
clear distinction between the character of the obligation cast upon the respondent in s.
33 (d) whereunder he is obliged to have
due regard to the contribution of the airport to
the region in which is located, on the one hand, and on the other the obligation cast upon
him under s. 10 which requires him to
comply with the direction. In this context I do
not agree with the submission of the respondent that the cases in relation to
“due
regard” obligations are of relevance to my consideration of the respondent’s obligation
under section 10. On the contrary, I think a clear distinction should be made between
them. I agree with the applicant’s submission that under s. 10 the respondent must
comply with the direction and whilst there may be a choice and a variety of ways in
which he can achieve this, I do not think that the true test as to whether he did so
106
(assuming it is established, as it has been, that he considered the direction and the
relevant documents referred to) is whether his decision can be faulted on the grounds of
irrationality alone. I think the test is simply whether he has complied with the direction,
which is a ministerial direction, that he make every reasonable effort to ensure that his
final determination reflects the important emphasis which the government has placed
on balanced regional development. If I conclude that he has made every reasonable
effort to achieve this then he has complied. If I conclude that he has not, then he has
not, no matter how rational his own thought processes and procedures may have been.
Having said this, it is also clear that the ministerial direction itself is cast in the
language of generality. The obligation cast upon the respondent is to make every
reasonable effort: it is not an obligation to achieve a particular result or to aim for a
policy objective in a particular way. Indeed given the wide language of s. 10 itself,
which refers to making a
general policy direction, a specific direction might well be
open to question.
I also think it is true to say that a court, when considering whether or not there
has been compliance with such a generally worded direction in respect of which both
sides agree there is no black and white answer, must accord to the respondent a measure
of deference or a margin of appreciation if only for the fact that the respondent has
available to him a level of economic and other relevant advice which is not available to
the court. By this I mean that if I, myself, were to conclude, having read the relevant
documents, that if I were the regulator I would comply with it in a way other than the
regulator has done I must not proceed to say that therefore the regulator has not
complied. Both parties agree there may be different ways in which compliance can be
achieved and it is not for me, I think, to gainsay this or to conclude that a particular way
chosen by the respondent does not amount to compliance unless I am clearly satisfied
107
on this point. This does not mean, however, that I cannot be satisfied unless I am also
satisfied that the determination is itself irrational.
It seems to me that the detailed three page account of his reasons given by the
respondent on this topic bears – certainly on a first reading – all the hallmarks of a
careful balanced and considered response to the Minister’s direction. His obligation
under s. 10 is clearly identified as are the two relevant national documents. The
respondent then proceeds to say that he undertook an intensive review of both of these
and had to determine how the objective of balanced regional development could be
integrated into his final determination. This, it is noted, must still achieve the statutory
objective (of regulation) whilst having due regard to the statutory factors set out in
section 33.
A more detailed account of the contents of the National Development Plan is set
out and it is noted that this plan seeks to promote two types of policies simultaneously,
namely the addressing of urban congestion and general bottle necks to growth,
particularly as regards economic and social infrastructure and human resources, and
secondly the policy of further developing counterbalances to Dublin, relieving pressure
on the capital and its hinterland and distributing growth more widely throughout the
region. The respondent says that in his final determination he has attempted to promote
both policies to the extent that it furthers the statutory objective by ensuring that Dublin
has sufficient resources to relieve congestion and bottlenecks while also providing
Shannon and Cork with the necessary resources to develop as counterbalances to
Dublin. He specifically says that preferring one policy at the expense of the other
would be at variance with the National Development Plan.
The respondent goes on to say that the plan identifies particular means of
fostering balance to regional development by calling for focused development at
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regional gateways at a limited number of strategically placed centres and acknowledges
that he must have consideration in his final determination for these focused
development regional gateways. These are self selecting gateways in the interplay of
market forces location and accessibility. It is stated that the respondent should not
undermine the position of regional gateways by facilitating the development of
inefficient infrastructure which cannot be sustained in the medium to long term.
Turning to the scope and delivery document of the National Spatial Strategy the
link of the latter with the National Development Plan is noted. This envisages
continued economic growth for the south and east and the border, midlands and western
region but also (as does the National Development Plan) sees the need for greater
infrastructure development in Dublin: hence the need to combine two objectives
namely to provide Dublin with sufficient resources to provide for its continued
infrastructure development and secondly the need to ensure that Shannon and Cork can
develop strong and sustainable economic growth and therefore further develop as
regional gateways. I have already referred to the conclusions of the respondent as to
how, in his opinion, these two objectives can be integrated into his determination.
It seems to me, in argument, that the applicant’s submission included the
proposition that in order for the applicant to derive maximum revenue from the caps
identified by the respondent, it is compelled by the way the determination has been
framed, to levy airport charges at Shannon and Cork which are significantly higher than
those which can be charged in Dublin. This means, the submission runs, that Shannon
and Cork are disadvantaged by comparison with Dublin and indeed this is true to such
an extent that the evidence shows that the applicant has not been able to charge the full
amount at Shannon and Cork because of its strong conclusion that if it does it will loose
passengers at these airports – the very thing, its says, the National Development Plan is
109
aimed at avoiding. This seems to boil down to a submission that no airport charge
arrangement dictated by the respondent which involves the applicant having to charge
more at Shannon and Cork than at in Dublin can amount to a compliance with the
ministerial direction, given that the purpose of the direction is to favour Shannon and
Cork at the expense of Dublin.
It seems to me that, on the other hand, the regulator’s view is that, in order to
comply with both objectives which he has identified and published in his reasons for his
determination and which include providing Dublin with the necessary resources to
develop its infrastructure so as to avoid congestion and bottlenecks, it is appropriate
that there should be a separate price determination for Dublin and that Dublin should
not be restricted by cross-subsidising Shannon and Cork.
Perhaps it is over simplistic to say that in the view of the applicant, compliance
with the ministerial direction can only be achieved by a price arrangement which
inevitably means that charges in Shannon and Cork will (in the case of a full
implementation of the allowed expenditure) always be cheaper than in Dublin, whereas
in the view of the respondent, his determination must reflect the two objectives of
ensuring that Dublin will not be hampered by cross-subsidisation in its need to provide
infrastructure to avoid bottlenecks and congestion together with a second objective to
ensure that regional gateways (which are self-selecting locations) will be able to secure
the necessary resources to develop as counterbalances to Dublin.
No attack was made by the applicant on the respondent’s reasoning process
insofar as it identified these twin objectives. Moreover having considered the relevant
documentation his summary and analysis appear to me to be justified. In those
circumstances, and bearing in mind that both parties agreed that there may be different
ways of achieving compliance with the ministerial direction, I cannot say that it is clear
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that the respondent has failed to comply with the direction. Accordingly in my view the
applicant is not entitled to the declaration sought in this regard.
Q.12
UPDATED PASSENGER ESTIMATES
The background to this issue is as follows:
In his determination of the 26th August, 2001, the respondent said that in his
formula he intended to use the centre line forecast for passenger growth provided by
Aer Rianta. He subsequently discovered that this was not done due to an oversight and
communicated with the appeal panel in this regard. The panel stated that the
respondent should review its treatment of passenger numbers and this the respondent
decided to do, thereby varying his original determination to correct this oversight by
introducing the correct (centreline) passenger forecast number as given by the
applicant, instead of the erroneous figure which had been used through the oversight.
By the time the respondent came to make his varied determination, these
original centre line figures had become out of date by reference to a number of factors
which included the subsequent impact of foot and mouth disease, the decline in the
world economy and the impact on air passenger numbers of the terrorist attacks of
September 11th. Accordingly, an argument was advanced that the originally intended
centre line passenger forecast numbers should be replaced by more up to date figures
which would take into account these factors.
There were various contentions made on either side on the merits of this
argument but it was agreed at the hearing before me that the issue boiled down to one
simple point of statutory interpretation: namely whether the respondent was correct in
interpreting the relevant statutory provisions as precluding him from taking into
account events which occurred after the 26th August, 2001, the date of his original
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determination. At issue is simply this single point of statutory interpretation and
nothing else.
The relevant provisions from the Act of 2001 are
“40. – (5) An appeal panel shall consider the determination and, not later than 2
months from the date of its establishment, may confirm the determination or, if
it considers that in relation to the provisions of
section 33 … there are sufficient
grounds for doing so, refer the decision in relation to the determination back to
the Commission for review.
…
(8) The Commission, where it has received a referral under
subsection (5) from
an appeal panel, shall, within one month of receipt of the referral, either affirm
or vary its original determination and notify the person who made the request
under
subsection (2) of the reasons for its decision.”
In giving its reasons for its varied determination the respondent said with regard
to the review which it carried out of the matters referred back to it by the appeal panel
“In carrying out the review, the Commission has not taken into account facts
which came into being or events which occurred after the making of the original
determination.”
It was accepted by the parties at the hearing before me that this refers to the
view taken by the respondent on the relevant statutory provisions that he was not
authorised thereby to introduce passenger forecast numbers which came into existence
after that date.
Applicant’s Submissions
112
On behalf of the applicant it was submitted that the respondent had originally
intended to use passenger forecast numbers which were credible: in error he used the
incorrect numbers. When it came to correcting the error, however, the originally
intended numbers had lost all credibility and it was clearly not the intention of the
legislature that such figures would be used; in the circumstance that the respondent
decided to review the original determination, the original determination did not stand
and therefore the original centre line figures did not stand. By substituting a new
determination it was clearly intended that he would have statutory jurisdiction to
include in this exercise a substitution of the original figures. It can never have been the
intention of the legislature that the respondent would be forced to use a figure which he
knew was “wrong”. This he has done because of his view of the law which was,
therefore, clearly mistaken. No interpretation of the law can require such an irrational
approach; the irrationality of the respondent’s approach is underlined by the fact that a
few weeks later an up to date passenger centreline forecast was used in the respondent’s
determination and report on aviation terminal service charges reflecting a five per cent
reduction in traffic from the earlier (2001) figure. These two determinations were made
within three weeks of each other and highlight the irrationality of the respondent’s
interpretation. It is accepted that passenger forecast figures will always be subject to
updating and change: in the present case, however, the figures actually used were
clearly erroneous by reference to an external set of objectifiably verifiable factors and
therefore the appropriate updated figures should have been used.
The refusal of the respondent to use these figures was clearly in breach of his
duties under s. 33, which included an obligation to have regard to a reasonable rate of
return on the capital employed which can only be properly calculated by reference,
inter alia, to appropriate passenger forecast figures.
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Furthermore, it is an absurd construction of the relevant statutory provisions to
read them as requiring the respondent to use passenger numbers known to be obsolete.
Moreover, it is absurd that in “correcting” admittedly erroneous numbers, the
respondent should use “correct” numbers which were known to be false. If the
respondent was indeed correcting the numbers then up to date numbers should have
been used as envisaged apparently by the appeal panel.
Section 40 (8) entitles the appeal panel to send the determination back “for
review” and enables the respondent to “vary” its original determination. These powers
are not limited and should not be construed so as to bring about an absurd result.
Moreover this runs counter to the much eulogised system in the 2001 Act for “running
repairs” extolled, in particular, by the respondents in their submission to the court.
Furthermore, the varied determination is unlawful because it fails to take into
account a relevant consideration, namely, updated reliable figures. Moreover it is
invalid because based upon an error of law, namely, an erroneous interpretation of the
statute.
Finally leave was granted to advance this argument and has not been excluded
by the judgment of the court delivered on the 16th January, 2003, as contended for by
the respondent.
Respondent’s Submissions
In the order giving leave to bring judicial review proceedings of Murphy J.
dated 27th April, 2001, an order of
certiorari quashing the determination is sought on
the grounds,
inter alia,
that the determination of the respondent to use centreline
forecast figures which were out of date was unreasonable, no adequate reason has been
advanced for this decision and the respondent failed to take an account of a relevant
114
factor in arriving at the decision namely the revised passenger figures. It is submitted
that those grounds were excluded by the judgment which I delivered on the 16th
January, 2003: moreover the declarations relating to alleged procedural defects in the
varied determination which were allowed in the order of the 26th April, 2002, make no
reference to the challenge in relation to the revised passenger forecast figures and
therefore under the existing jurisprudence (
McNamara v. An Bord Pleanála [1995] 2
I.L.R.M. 125 and
Keane v. An Bord Pleanála [1997] 1 I.R. 184), the applicant may not
now introduce a new ground outside the relevant statutory two month period.
Without prejudice to the above, it is submitted that the respondent acted
lawfully. Section 40 (8) provides that the respondent on a referral back to it from an
appeal panel shall
“either affirm or vary its original determination” . The use of this
phrase shows that the respondent must consider only its original determination and
consider whether it should be affirmed or varied and also shows that, of necessity, it is
precluded from taking into account any factual occurrence that took place subsequent to
that determination.
The general scheme of the Act is also relevant because it is clear that there is
provision for a review two years after the original determination if substantial grounds
justify it and such grounds clearly
are matters which may come into existence after the
date of the original determination. In this context the power of the respondent is to
amend the determination as distinct from its power to
vary it on a reference from an
appeal panel. The use of two different words indicates two different kinds of review.
Furthermore subs. (7) – (13) show that, in making a determination, there is a
strict requirement that the respondent would notify the public and permit
representations which must be considered and reasons must be given for its
determination. No such requirements exist in relation to the s. 40 (8) procedure when
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the respondent receives a referral back from an appeal panel. This shows that new
matters will not be taken into account at this stage (as distinct from at the two year
review stage) in respect of which the public would under the policy of the act have a
right to make submissions.
The view of the Act taken by the respondent is justified by the consideration that
all production figures are likely to become obsolete and inaccurate by reference to later
events. Moreover if one were to permit the introduction of up to date figures at the
stage of reviewing the original determination then the question arises where would one
stop? On a practical basis as intended by the legislature this was never intended.
Furthermore to introduce up to date passenger figures would allow subsequent
events to alter the determination in a random manner which lacks consistency. Such
alteration would appear to depend on whether a new factual situation was raised by an
appellant and if so whether the appeal panel decided to refer it back and if so whether
the respondent decided to vary the determination. Other new factual situations may not
have gone through this process and would thereby be excluded, thus producing an
imbalanced or partial view.
Moreover, one particular figure cannot be separated from the overall. For
example, the introduction of a change in passenger forecast might affect CAPEX or
commercial revenue and operating costs. If only passenger figures had been referred to
the respondent (as in this case), would the respondent be able to consider these other
issues which were not referred back? Or if he could, would his jurisdiction extend to
taking account of further new factors in relation to those other matters, even though it
did not have the information gathering powers available to it in the event of the original
determination. The applicant’s submission takes no account of the question of how the
respondent would inform himself of these relevant matters.
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Indeed the applicant has not informed the court of how far in its view the
original passenger numbers are inaccurate and obsolete.
The respondent adopted different passenger numbers in relation to its Irish
Aviation Authority determination because that original determination was adopted six
months after the determination in the present case.
Moreover the Supreme Court, in its general jurisprudence, has adopted the view
that the power of the court to receive new evidence on appeal is discretionary and
should be admitted where a serious injustice would be suffered by a plaintiff.
Conclusion
I am unable to agree with the respondent’s submission that my judgment of the
16th January, 2003, has precluded the applicant from raising this point. It appears to me
that the clear proposition alleged by the applicant that the respondent had failed to take
into account a relevant factor, namely, the revised passenger figures was itself
sufficient to cover this point and has nothing to do with the grounds based on alleged
irrationality for computational error. Accordingly, I propose to consider the
submission.
The arguments on both sides of this issue are forceful and impressive. It is
forceful and impressive for the applicant to say that it is irrational and absurd for the
respondent to use an avowedly obsolete figure for its passenger forecast. It is equally
forceful and impressive for the respondent to say that if post determination material is
to be considered on one topic, in principle all topics should be open for consideration in
order not to produce an imbalance and that, furthermore all estimates are inherently
prone to prove inaccurate in the event.
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The question for decision is whether the statutory provisions should be
construed as precluding or not precluding the respondent from considering post
determination information on a review by him on a reference back by the appeal panel.
An appeal can be taken by an airport authority or an airport user in the limited
sense of (effectively) an airline. Accordingly the scope of the appeal panel’s
jurisdiction is limited, potentially, to grievances by either an airport authority or
airlines. Within that, the scope of appeals seems to be unlimited and the procedure to
be adopted is to be determined by the appeal panel itself, subject, of course, to the
limitation that it must either confirm the determination or refer “the decision in relation
to the determination” back to the Commission for review within two months from the
date of its establishment. What is referred back to the Commission, therefore, is a
decision which has aggrieved either an airline or an airport authority or both.
On receipt of this referral back, the Commission appears to be also at large save
only that it has one month to either affirm or vary its original determination (and notify
the appellant of its reasons).
The language of s. 40 (8) to the effect that the Commission shall “either affirm
or vary its
original determination” (emphasis added) is crucial to the point at issue.
One could legitimately ask what the difference would be if the word “original” had
been omitted. What meaning should the court ascribe to the use of this word? It seems
to me that it connotes an intention to refer the respondent backwards in time to the date
of its determination rather than to some or any information or event which came into
existence after that date. It may well be that the reason for this provision is to avoid the
difficulties and anomalies identified by the respondent in its submission. Equally it is
fair to say that if post-determination events rendering pre-determination events obsolete
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cannot be taken into account at this stage by the respondent then that too many produce
an anomalous result. Either way, it seems, there will be difficulties.
Having said that, I must look at the words actually used. In my opinion the
word “original” in the phrase “original determination” connotes an intention that on
review the respondent shall consider only information which was available at the time
of the determination and not subsequently.
It would seem, accordingly, that post-determination facts and events can only
be dealt with on review after two years or in a subsequent determination rather than by
way of appeal. Such a conclusion seems to me to be consistent with the overall
approach of the Act of 2001 which is to provide intermittent quinquennial
determinations, with interim reviews if there are substantial grounds for them, and with
periods of relative stability or relative predictability in the interim. In my view,
therefore, the respondent was correct in taking the view that he was precluded by statute
from considering the updated passenger forecast numbers.
Insofar as the issues raised in this judgment are concerned, accordingly, I
decline to grant the applicant the reliefs sought.
Document Outline