Australian Competition and Consumer Commission v Baxter Healthcare Pty Limited & Ors

[2007] HCATrans 202

[2007] HCATrans 202

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S56 of 2007

B e t w e e n -

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Appellant

and

BAXTER HEALTHCARE PTY LIMITED

First Respondent

THE STATE OF WESTERN AUSTRALIA

Second Respondent

THE STATE OF SOUTH AUSTRALIA

Third Respondent

THE STATE OF NEW SOUTH WALES

Fourth Respondent

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 15 MAY 2007, AT 10.17 AM

Copyright in the High Court of Australia

__________________

MR L.G. FOSTER, SC:   If the Court pleases, I appear with my learned friends, MR A.I. TONKING and MS J.S. GLEESON, for the appellant.  (instructed by Australian Government Solicitor)

MR D.M. YATES, SC:   May it please the Court, I appear with my learned friend, MR I.S. WYLIE, for the first respondent.  (instructed by Blake Dawson Waldron)

MR R.J. MEADOWS, QC, Solicitor‑General for the State of Western Australia:   May it please the Court, I appear with my learned friend, MS J.C. PRITCHARD, for the second respondent.  (instructed by State Solicitor’s Office)

MR C.J. KOURAKIS, QC, Solicitor‑General for the State of South Australia:   If the Court pleases, I appear with my learned friends, MR G.F. COX and MR S.A. McDONALD, for the third respondent.  (instructed by Crown Solicitor’s Office (SA))

MR M.G. SEXTON, SC, Solicitor‑General for the State of New South Wales:   If the Court pleases, I appear with my learned friends, MR S.J. GAGELER, SC and MS N.L. SHARP, for the fourth respondent.  (instructed by Crown Solicitor for the State of New South Wales)

GLEESON CJ:   Yes, Mr Foster.

MR FOSTER:   Your Honours, this case poses the following question for this Court.  Does the rule of construction or presumption that in construing the Trade Practices Act the provisions of the Act do not apply to the polities constituted by the States and Territories extend or apply in any way to absolve non‑government trading entities from the operation of the Act in circumstances where such trading entities are conducting themselves in and in relation to negotiations for a contract of supply of goods to such governments or in circumstances where such entities enter into and perform contracts for the supply of such goods.

KIRBY J:   Could you explain to me just at the outset how it was that the doctrine of Crown immunity leapt over into the States, which are constitutional entities created by the Constitution of the Commonwealth, and, might I add, as Justice Gummow and I pointed out in Mewett, given that the States at the time of Federation were in a position in Australia where, save for Victoria, the total immunity of the States had been abolished by colonial legislation – that is to say of the colonies?

I mean, we have just gone along for a century with this hypothesis and it is just fundamentally wrong, as far as I am concerned, but it is wrong for a constitutional reason and there is no notice given by any of the parties in this case under the section of the Judiciary Act.  I am just putting you on notice from the beginning, and I have been saying it for a decade, that this is just a completely wrong hypothesis of the Australian Constitution, as Justice Walsh pointed out in Ireland during the time that Ireland was a constitutional monarchy.

MR FOSTER:   Your Honour, the matter to some extent was dealt with Sue v Hill, I think, and it has been assumed ‑ ‑ ‑

KIRBY J:   No, no.  Sue v Hill was not concerned with this issue.  It was raised in Bass v Permanent Trustee and it was first raised in Mewett.  Everyone has been on notice, but, I mean, I would listen carefully for how the solicitors announce their appearance, second, third respondent, fourth respondent.  I just wanted to hear them say I appear for the Crown in right of South Australia or Western Australia or New South Wales.  They did not say that, and they do not appear in that.  They appear for the State of the Commonwealth.  Anyway, I have just indicated to you that it seems so clear to me and nobody else, except Justice Gummow in Mewett, has seen it.

MR FOSTER:   Well, your Honour, if what your Honour is putting to me is correct, of course, then the assumption upon which this case is being conducted of course is wrong and the acceptance of a residual capacity in the qualities represented by the States and the Territories to attract some exemption by the rule of construction has been dealt with in Bradken and so on is wrong.

KIRBY J:   It is a slightly different point and you have made the point in your submissions by talking about an immunity of government in respect of property.  I can understand how that could be developed, but so much of the argumentation is about the Crown that I just find it very awkward to transfer that theory, that principle into the modern role of a State of the Commonwealth of Australia, an independent nation.

MR FOSTER:   We have tried to avoid dragging into this argument the concept of the Crown and the foundation for older views of what Crown immunity might mean and have attempted to deal with the case on the basis that we are looking at a rule of construction as to whether or not a particular statute in a particular respect applies to conduct.

GUMMOW J:   Do you not come to this in your reply?  Is your point not a short one in a way?  The Trade Practices Act, if you read the language, it applies to the Baxter people.  What is it that disapplies it?

MR FOSTER:   Yes. 

GUMMOW J:   Then we get, in amongst other things, into the point Justice Kirby was raising.  It is some flow on of this already flawed motion.

MR FOSTER:   Yes, and, of course, it is not our side of things that brings that forward, but I have to say to the Court that the fundamental constitutional question that Justice Kirby raises with me has not been argued in this case below in that way.

KIRBY J:   You see, if you are talking about a governmental immunity, ultimately you have to get back to the Constitution. You have to get back to an implication in the Constitution affecting the States, which are creatures of the Constitution. They did not exist before the Constitution. They only exist because of the Constitution. If there is a governmental immunity that surrounds them as a State then that is an implied constitutional immunity. That is why I was surprised, if only out of abundant caution, that none of the parties gave notice to the States whose interests might be affected by that view. Anyway, you have not done it. We will just have to plough on on an assumption that I regard as fundamentally flawed.

GLEESON CJ:   Go ahead, Mr Foster.

MR FOSTER:   Thank you, your Honour.  I think I was attempting to articulate what the question was as we saw it, subject of course to what Justice Kirby said to me.  I got to the point of putting the proposition, in effect, that does this, whatever it is, rule of construction or presumption, et cetera, apply in any way to those to whom the Act would otherwise ordinarily apply?

GUMMOW J:   When you say “ordinarily.”

MR FOSTER:   Absence some plea on their part that ‑ ‑ ‑

GUMMOW J:   Ordinarily as a matter of language in the statute.

MR FOSTER:   Yes, and the second part of the question ‑ ‑ ‑

GUMMOW J:   It seems to me it is a question of displacing the ordinary consequences of language.

MR FOSTER:   Precisely, your Honour, particularly after 1995 and the 1995 amendments to this particular statute.

KIRBY J:   But those amendments did not go as far as you would want them to go, did they? I mean, you could have amended - on your theory, the Federal Parliament could have amended the Act to cover, at least arguably subject to the Constitution, a case such as the present.

MR FOSTER:   Could have in terms, yes.  Did not, but the amendments are used by us for a different purpose.  They are used to set a different setting for the Court’s consideration of the tension between, on the one hand, whatever this thing is that might displace the ordinary application of the Act versus the overriding objects of the Act and the concepts that are embodied in the amendments of 1995, including the need to impose legal constraints on economic behaviour on a national basis and the underlying assumptions upon which those amendments were made.  We pray all that in aid in terms of assisting this Court to decide where to resolve the tension between such displacement as might exist on the one hand versus the complete application of the Act untrammelled by any such notion.

GLEESON CJ:   Before the 1995 amendments, the Act in its terms bound the Crown in right of the Commonwealth insofar as it was carrying on a business.

MR FOSTER:   Yes.

GLEESON CJ:   So the 1995 amendments put the Crown in right of the States in the same position as the Crown in right of the Commonwealth in that respect.

MR FOSTER:   Yes, and there were two other things that happened that are relevant.  One is that section 2 was inserted in a form which contains objects.  Prior to the 1995 amendments there was no such statutory prescription.  I will just take your Honours to section 2 which provides that it is a statute of general application for the benefit of all Australians “for the promotion of competition”, et cetera.

GLEESON CJ:   But if the argument against you is correct, if the State of New South Wales carries on a business, it is bound by the Trade Practices Act, but if it procures supply, the people who carry on the business of supplying goods to it are not bound by the Trade Practices Act.

MR FOSTER:   That is the kernel of the case, that is the proposition.  The way in which ‑ ‑ ‑

HAYNE J:   That invites attention to what is the process of reasoning that is masked by the expression “immunity” or the still further expression “derivative immunity”.

MR FOSTER:   Yes, because the Court will have to consider whether one calls it immunity or non-application of the statute to the activities of the Executive.

HAYNE J:   But the statute speaks to corporations relevantly, “A corporation shall not”.

MR FOSTER:   Indeed.

HAYNE J:   Now, you can bridge the gap, it is said, by application of doctrines of immunity or derivative immunity.  Now, what is the process of reasoning?  What are the steps in the process that are to be understood as conveyed by those terms?

MR FOSTER:   Well, the first proposition is what does the Executive Government have which can be built upon?

GUMMOW J:   We are asking you to make Mr Yates’ case.

MR FOSTER:   I know, but I am trying to answer his Honour’s question.  I do not really want to make Mr Yates’ case, but I am trying to assist his Honour.

HAYNE J:   I thought you would promptly set up a straw dummy and knock it down, but there we are, Mr Foster.

MR FOSTER:   As I understand Mr Yates’ case, your Honours, the proposition is that when one construes the statute in accordance with the current thinking of this Court as to how one approaches this so‑called presumption, one comes to the position that the non‑business activity of the governments, the Executive Governments of the States and Territories, is not caught by the Act.  That is the first proposition.  Justice Kirby would say to me that is wrong, but that is the first proposition.

The second one is that if certain of the attributes of the government are going to be adversely affected or impaired by the application of the Act to others, then you, in effect, by way of some kind of blessing extend the non‑application of the Act, which derived from the conclusion in step one, to those with whom the Executive Government deals in order to ensure that the non‑application as far as the Executive is concerned is given full weight.  That is the reasoning as I understand it.

GUMMOW J:   Is it a corollary of it that a training corporation dealing with the Commonwealth would likewise walk outside the Act?

MR FOSTER:   Yes, 2A and 2B for present purposes are identical.  There was one slight difference your Honour will be aware.  One says “so far as” and one says “in so far as” it carries on business, but that is not a difference of substance.  So the answer to your Honour’s question is yes.  Our primary submission is that whatever exemption the Executive of the States and Territories enjoys from this statute is not something that can be bestowed or extended or passed on to a trading corporation at all and it certainly cannot be passed on by the Executive.

KIRBY J:   The argument, as I understand it, good or bad, is that it is not a matter of picking it up and passing it on.  It is that it impinges.

MR FOSTER:   Indeed, but the effect of it is to pass it on and the underlying reasoning that permits that happen is this notion of affecting the legal situation, whatever that may mean.

GLEESON CJ:   It is specifically said to mean not a right or an interest in property, but a freedom to do that which the law does not forbid.

MR FOSTER:   In this case, your Honour, we would analyse it slightly differently.  In our submission, what is being put is that the freedom is a freedom to do that which the law does forbid, at least as to part, accepting of course the Executive is not forbidden from doing anything.  When one focuses on the corporation with whom it is dealing, the proposition does involve an assertion that the trading corporation, which would otherwise have to comply with the Act, is nonetheless allowed not to comply with the Act because to force it to in the circumstances of a case such as this is to give rise to an impairment of the Executive’s freedom, if you like.  The essence of the problem in the present case is that what is put is that the freedom to contract enjoyed by the Executive ‑ ‑ ‑

GUMMOW J:   It is a freedom to contract according to law surely?

MR FOSTER:   Precisely, your Honour, and that is our point.  There is no right in terms of the way in which right is used in some of these authorities on the part of the Executive to behave and treat with, negotiate with and contract with law‑breakers.

GLEESON CJ:   This whole idea of the Executive’s freedom to act is the subject of a paper in the most recent issue of the Law Quarterly Review, the April 2007 issue.  I do not know if you have had a look at that.

MR FOSTER:   I have not, your Honour.  Perhaps someone should.  Nonetheless, the reasoning of the trial judge in this particular case was, in effect, that the freedom to contract being, in effect, a capacity to contract in the same way as any other juristic person would, so held by the primary judge, involved a right to negotiate with, deal with and contract with anyone the Executive chooses to do those things with even if it means doing so with persons who are in contravention of the Act. 

Now, in our submission, that is what this case comes to in the end.  Is the so‑called immunity, if one calls it that, or the non‑application to the Executive to be extended in such a way as to absolve or exempt, if you like, the trading corporation from the ordinary application of the Act according to its terms?  Our submission is no.  What has happened in the reasoning process that has lead to this case coming to this Court is that the focus has been on the words used by Justice Kitto in Wynyard “legal situation”.

KIRBY J:   It is an usually broad expression for his Honour who was always so precise.

MR FOSTER:   Precisely.  I do want to take the court to Wynyard in due course, but his Honour was intending to be broad in an introductory way to set the scene for what it was he was dealing with in that particular case.  “Legal situation” is not a term which carries with it any sensible level of precision at all and, in our respectful submission, it is just the starting point for thinking about how one deals with these various interests of the Crown that might require some sort of additional protection over and above simply saying, well, if it is the Crown itself, we will accord exemption of the Act to the Crown and what is the touchstone or what is the thing that allows one to take the matter a little further?  In our respectful submission, what has happened in this case is that that notion of “legal situation” has been taken as holy writ, has been given a very broad and imprecise meaning and, in particular, has been held to include the freedom to contract, as expressed in the judgment of the primary judge, and lead to a situation where a contracting party such as Baxter in the present case has been held to enjoy utter non-application of the Trade Practices Act to it, and we submit that is just wrong.  One has to draw the line somewhere and, in our submission, the line should be drawn right back where it belongs, which is at the Executive.  And in one sense, your Honour ‑ ‑ ‑

KIRBY J:   Be careful now.

MR FOSTER:   I am going to be, that is why I paused.

KIRBY J:   Otherwise I see section 78B looming.

MR FOSTER:   I know, your Honour, I do not want that.  No one does, I do not think.

KIRBY J:   As far as I am concerned, my duty is to the Constitution. I took an oath in this place that if I cannot solve this problem without having regard to the Constitution, I will not and I do not regard section 78B as stopping me, because my primary duty is to make sure that the Constitution of this country is observed. I mean, I could well understand a doctrine of implied immunity of the States from federal legislation in governmental contracts may be, but that is not how this case is presented. There was a lot of wisdom in what Justice Murphy said in Bradken, that the whole theory of the Crown’s position as the polity derives from ancient times when the Crown was a united notion throughout the empire, but all of that had passed by the time lawyers got to write Bradken.

MR FOSTER:   But if one draws the line at the Executive itself, one can take it back further if one likes, but for present purposes one can leave the line drawn at the Executive itself.  The assumption upon which this case can be considered is that the States and Territories do enjoy some non‑exemption from the Act.  It is important to note that the exemption from the Act, the non-application of the Act insofar as the States and Territories are concerned, is not an all‑encompassing exemption.  It is quite limited.  For example, there is no exemption from Part V.  Now, we are here concerned with Parts IV and VI, the remedies and so on, but there is no exemption from Part V.  So that what we have in section 2B is quite a specific statement that to some extent – the words do say Crown, but the Executives of the States and Territories are bound by this Act insofar as Part IV and, we would submit, Part VI are concerned.

Now, your Honours, the primary judge in effect equated capacity to contract, which is something that we all enjoy, with contractual right as used in some of these cases.  We submit that was wrong.  No one doubts that the Executive has a capacity to contract for the supply of the goods in question in the present case, but that begs the question that is up for consideration here, in our submission, and that was an error that his Honour allowed to infuse into his judgment.

We would submit, however, that even if one takes the view that the freedom to contract with whomever one wants on whatever terms one wants, which includes with law-breakers, is some sort of contractual right, then we nonetheless submit that it is not an interest or an attribute of the Executive which ought to be protected under some kind of notion of extension of this immunity or exemption from the Trade Practices Act.  That is because, in our submission, in a nutshell the Act applies to Baxter.  It is for Baxter to justify why it should not apply and it is not to the point to submit that it would be nice for the State Executives to be able to trade with law-breakers because it might give them some particular advantage on a particular occasion when one is looking at an Act of general application such as the present. 

Now, what is put in the end is this – and, in our submission, it is a very imprecise proposition - that if you have what has been described in some submissions as a close connection between the trading corporation and the Executive, which may take the form of a contract which has been concluded but it may not, it may involve the negotiation for a contract or conduct in relation to such a negotiation or actions in preparation for such a negotiation as well as the making and performance of a contract.  The proposition is, as we understand it, that if there is a sufficiently close connection with the Executive, then this exemption is able to be bestowed by the Executive on those with whom it deals in circumstances where the initial assumption is those people are bound by the Trade Practices Act.

GLEESON CJ:   You may need to be a little more precise in identifying the putative contravention of the law that is involved in this case.

MR FOSTER:   You would.

GLEESON CJ:   In relation to the alleged contravention of section 46, the finding of the trial judge related to one particular incident, did it not?

MR FOSTER:   It did.

GLEESON CJ:   Now, we know that if you are otherwise successful that has to go back for review by the Federal Court, so we are not concerned with that.  But in testing the operation of any doctrine of derivative Crown immunity to the application in this case, you have to begin, do you not, by identifying the alleged contravention?

MR FOSTER:   You do, your Honour, because it is part of the exercise, in effect applying the principles of Bropho to this whole area.

GLEESON CJ:   In relation to the alleged contravention of section 46 found by Justice Allsop, did the contravention consist of entering into a contract or did it consist of pre-contract conduct?

MR FOSTER:   Both.

GLEESON CJ:   What was the pre-contract conduct?

MR FOSTER:   I should correct myself to some extent on that.  His Honour, as you know, found only one section 46 contravention and that is in relation to the drop‑dead Offer 1A in South Australia.  As your Honour correctly puts to me, all of the other conclusions his Honour came to on the competition law matters are under challenge in the Full Court and not decided.  So if one brings them into account, which I would respectfully submit one should, then we are looking at pre‑contractual conduct of a unilateral kind, that is by Baxter, and the consequence of that conduct being the making of the contract and ultimately the performance of the contract.

GLEESON CJ:   What was the precise conduct of Baxter that Justice Allsop found would have contravened section 46 but for this principle that we are considering?

MR FOSTER:   It was offering Offer 1A in circumstances where it refused to give a discount and lining up that offer as a variant of Offer 1 against a bundled pricing arrangement called Offer 2 in circumstances where it, in substance, was deploying its monopoly power in respect of sterile fluids to force the acquisition of the PD fluids to the extent of 95 per cent and thus to inhibit the capacity of the competitors it did have in the PD market from getting involved.

GLEESON CJ:   But section 46 talks about taking advantage of “a substantial degree of power in a market”.  That is the contravention.  Expressed in terms of the statute, what was the contravention of section 46 that was found to have occurred in this case but for the operation of this principle?

MR FOSTER:   Baxter bundling in Offer 2 in such a way as to utilise its market power in the sterile fluids market where it was essentially monopolist and pricing the goods to be supplied which fell within that description attractively, bundling that with the PD fluids where there was competition on condition that the acquiring SPA take at least 95 per cent.

GLEESON CJ:   Was the contravention Baxter taking advantage of its substantial degree of power in the market for saline fluids generally for the purpose of eliminating or substantially damaging a competitor in another market, that is to say the market for PD products?

MR FOSTER:   Yes.

GLEESON CJ:   If, contrary to what your opponents assert, Baxter took advantage of its substantial degree of power in the saline fluids market for the purpose of eliminating or substantially damaging a competitor in the PD market, what does that have to do with the immunity of the Executive Government?

MR FOSTER:   We say nothing.  They put the proposition that the Executive is entitled on an idiosyncratic basis and without regard to any of the exigencies of the Trade Practices Act to decide for itself from time to time whether particular anti‑competitive conduct is to its advantage.  In this particular case one can point to the pricing and see what I have described as an idiosyncratic advantage, but that is not sufficient, with respect, to invoke some extension of the principle, whatever it may be, that exempts the Executive from the operation of the Act.

GLEESON CJ:   But if Baxter did what it did at the request or at the encouragement of the Executive Government, I understand how that fact might go to whether one of the elements of the offence was made out.  It might go to the element of purpose.

MR FOSTER:   Indeed.  It might go to taking advantage.  That is the second mistake his Honour made because his Honour somehow thought that answering the question of whether or not this was solicited, called for, asked for, requested, all the words that appear throughout the submissions – there are many of them – somehow is relevant to deciding the question of whether or not this so-called immunity extends to Baxter.  In our submission, it has nothing to do with it.  It makes no difference whatsoever whether Baxter did this unsolicited or solicited.

As a secondary point, which is not our main point on that, we have challenged those findings in the Federal Court on the basis that his Honour’s description of the way in which this process went forward went too far.

KIRBY J:   Yes, but would we really want to get involved in that?

MR FOSTER:   This Court cannot get involved in whether we are right about that but it is important to know that it is under challenge.  We are happy to argue the case here on the basis that his description of what occurred is accurate.

KIRBY J:   If it did originate in the State and the Executive offices of the State, then at least arguably I can understand from an economic point of view if you apply an economic analysis that it did so for reasons of economic advantage which the State, through its officers, saw to be to its benefit and therefore it ought not to have a federal law coming crashing down and saying you cannot do that if that is part of the privilege and liberty of the State to act in that manner.

MR FOSTER:   We have two answers to that.  One is that logically is not correct but, secondly and more importantly, we put this, that one of the things that happened in 1995 as part of this package of reforms was that section 51 of the Trade Practices Act was what one might call “beefed up” relevantly and that is in this respect, that section 51 allows a State legislature, a Territory legislature – not the Executive – to expressly confer exemption from the Act on trading corporations, for example.

If there was, as your Honour Justice Kirby puts to me, a proper and legitimate economic basis for the States conducting themselves vis‑a‑vis Baxter in a way which either required or at least fairly met the description of “solicited” an anti‑competitive response or anti‑competitive conduct, the Trade Practices Act, which is the only thing we are concerned with here, expressly contemplates that possibility for that reason, and there is a specific regime and mechanism set out in section 51 which has to be followed in order to produce that result, the critical point being that whatever “legal situation” might mean or whatever it is that one looks at, the States in the form of the Executive as confronting when they come to deal with someone like Baxter, the one thing that they must be held to need to take into account is the terms of the Act and the terms of the Act include section 51.

Section 51 requires a specific reference to the Trade Practices Act, specific exemption and it is for a limited period of time.  Most importantly of all, section 51 requires that it is the legislature who decides the high question of economic principle, if you like, not the Executive in some idiosyncratic way.  It is important to remember if the Executive gets the capacity, as seems to be advanced against us, to bestow this exemption on those with whom it deals, where is the restriction, in principle, as to who it is within the Executive who makes that decision?  It could be anyone and it could be for any reason.  It is not a principled position at which to draw a line.

KIRBY J:   Yes, but we have here three Solicitors‑General of the States and therefore one can assume that it has been passed upon by the appropriate authorities of the Executive Government of each of the States.  You joined the States in your application.

MR FOSTER:   We did.

KIRBY J:   You did not seek and do not seek any remedies or orders against the States.

MR FOSTER:   No.

KIRBY J:   Why did you join them?

MR FOSTER:   I think because there was an issue that arose during the trial – and I might need some help on this – as to whether or not, because there was to be some impact before the trial – but as to whether or not, because there was to be some effect on these contracts perhaps, some of which were still on foot, that the States, in respect of whom contractual interests as a matter of contract might be affected, needed to be parties and notice was given and some turned up and some did not.

KIRBY J:   I asked the question because at least theoretically the Trade Practices Act is for the protection of the States so that they will not be the subject of collusive tendering or of monopolistic practices that deprive the States and the citizens of Australia in the States of the disadvantages which the Act says are to be for the welfare of Australians, that is generally.

MR FOSTER:   Indeed.

KIRBY J:   Here we have the States coming along, three of them, to tell the Court that they really do not want to protect themselves or their citizens from the operation of a law which is designed for the welfare of all Australians by promoting competition.

MR FOSTER:   Without being unkind to why they are here ‑ ‑ ‑

KIRBY J:   Do not trouble about that.

MR FOSTER:   It is simply an opportunistic defence of a particular set of transactions which they saw at the time, and obviously still see, to have been to their advantage.

CRENNAN J:   What about if the encouragement or soliciting of anti‑competitive conduct is not driven just by financial considerations.  What about a purchasing officer who says, “We are going to encourage bundling because more renal patients are going to have whatever fluids they require because we simply will get more product for our money”?  In other words, they are not simply trying to save money; they are working off limited budgets and they are encouraging anti‑competitive conduct for, in their eyes perhaps, net public benefit.  I am not saying the evidence showed that, but I am just asking you the question.

MR FOSTER:   There are two answers, I think, your Honour.

CALLINAN J:   Particularly when the States have responsibility for health.  There is no ‑ ‑ ‑

MR FOSTER:   It is a shared responsibility.

CALLINAN J:   Yes, but there is nothing in section 51 about health, is there?

MR FOSTER:   No.

CALLINAN J:   It is a shared responsibility by choice of the Commonwealth, not by what section 96 grants.  Do we know how the Commonwealth does it?

MR FOSTER:   I do not, other than at a general level.  I do not know, your Honour, but I assume that is probably right.

KIRBY J: We are back to the Constitution.

MR FOSTER:   We are.

CALLINAN J:   It is very important arising out of Justice Crennan’s question really.  It may be very, very much in the public interest as a policy consideration that the States can do this.

MR FOSTER:   It is a question ultimately of weighing up the exigencies of the Trade Practices Act in all its glory – and I will come back to that in a moment – versus whether or not some extension of a judge‑made rule should be entertained in circumstances where the capacity for the States in effect to confer the necessary exemption is in section 51.  So the first answer we make is this, that there is no gloss on the Trade Practices Act, and this Court said that in NT Power very, very clearly.  There is no gloss.  If you are in breach of section 46, if you are doing it for good reason, it does not matter.  If you are in breach, you are in breach.  A misconceived good reason is not good enough. 

Secondly, it may be in the example your Honour Justice Crennan put to me that there is no breach of sections 46 or 47 because there is not a taking advantage perhaps or there is not the prescribed purpose and the matter would fall to be decided according to the terms of the section.

GLEESON CJ:   The essence of a breach of 46 is using market power to damage a competitor.

MR FOSTER:   It is.

GLEESON CJ:   The fact that you are doing something at the solicitation or even for the benefit of the State might be very relevant to the factual question whether you have the prescribed purpose.

MR FOSTER:   I agree, your Honour.

GLEESON CJ:   But if you begin with the hypothesis that you have the purpose of damaging a competitor and you are taking advantage of your market power to damage a competitor, then that is the beginning point for the question whether there is something about the fact that you are dealing with the State that deprives that conduct of what would otherwise be its quality.

MR FOSTER:   Yes.

GLEESON CJ:   Suppose the State of New South Wales decided that in the interests of encouraging small business they would promote orderly marketing in the supply of stationery to government departments and they said, “The members of the Stationers Association should get together and agree between themselves on the prices at which they’ll tender and in the interests of encouraging small business we will then allocate orders between them on an equitable basis”.  What would be the consequences of that under the Trade Practices Act if the suppliers of stationery got together and agreed on price fixing?

MR FOSTER:   It would be a breach.  It is not a bad example because one can conceive of a number of levels of government at which a decision like that could have been made.  It could have been a small economic decision made at local level by some very junior official of the Executive.  If our opponents are right, that does not matter because that official can, in effect, make a decision which stands as a foundation for an absolution of what would otherwise be the breach of the Act.

GLEESON CJ:   I took the example of price fixing because you are not there complicated by questions of purpose.

MR FOSTER:   All of the conditions in the section, yes.  In principle there may be conduct which might otherwise be attached by the Act which the State legislature for good reason takes the view should be accepted.  The Act accommodates that in section 51.  There is no need or any reason for the courts through judge-made rules to conjure up some other basis for dealing with that problem.  Indeed, it is quite contrary to the Act when one has regard to section 51 and to the general objects of the Act and to the way in which this Court has held that Bropho should be applied.  By the way, in respect of Bropho, it is our submission that the 1995 amendments are caught by the reasoning in Bropho, although this is a 1974 Act which predates it, that the Court should view those amendments in the light of what has been said in Bropho.

The primary judge’s finding about Offer 1A is in volume 4 of the appeal books at page 1116.  Of course, it is only one paragraph, paragraph 597, but it follows on from reasoning that is otherwise in the judgment.  Then if the Court goes to page 1143 in the same volume, his Honour expands on that finding slightly in the context of the immunity question.  In addition, could I give the Court a reference ‑ ‑ ‑

HAYNE J:   Sorry, what paragraph at 1143 are you particularly referring to?

MR FOSTER:   Paragraph 698, your Honour.

HAYNE J:   Thank you.

MR FOSTER:   I am sorry, your Honour.  Could I give the Court a reference to and perhaps take the Court briefly to where this Offer 1A and so on is to be found, because it does bear a little scrutiny.  Could your Honours go to volume 2 of the appeal books at 471.  That is the request by the South Australian SPA for Baxter to make Offer 1A.  Then at 473 to 475 there is Offer 1A.  Then in the same volume there is a good deal of correspondence back and forth internally in the South Australian bureaucracy.  The final recommendation appears at 556 through to 579.  In particular, at section 4.3.2 on page 563 through to 567 there are comments on the circumstances which the SPA found itself in at that time which are hardly consistent, we would submit, with the Executive falling over itself to have this particular bundle situation.

GLEESON CJ:   Was Offer 1A accepted?

MR FOSTER:   No.

GLEESON CJ:   Was this an attempt?

MR FOSTER:   It was.  It was conduct constituted by the refusal ‑ ‑ ‑

GLEESON CJ:   I am sorry.  I am still trying to understand what was the conduct in contravention of section 46?  What was the conduct that constituted ‑ ‑ ‑

MR FOSTER:   It was making Offer 1A in the terms it was made.

GLEESON CJ:   Does making an offer constitute taking advantage of something if the offer is not accepted?

MR FOSTER:   Yes, that was the allegation and that was the finding.

HEYDON J:   Mr Foster, I would be assisted if you could tell me the hierarchy of your arguments because if the breach of section 46 that was found as distinct from the many that were not found rests simply in something that is non-contractual, then on one construction of Justice Kitto’s approach the case in that respect can be decided quite neatly.

MR FOSTER:   It can.

HEYDON J:   One of the things that worries me is that the Full Court has not dealt with the reciprocal complaints of the parties about Justice Allsop on the substantive questions as to whether the Act has been contravened.  We are perhaps being asked to decide some academic questions about Executive immunity.

MR FOSTER:   Your Honour, the hierarchy of the argument in principle is that we attack the whole idea that you can use this immunity or non‑application of the Act as a platform for exempting trading corporations from the Trade Practices Act and that is one. 

HEYDON J:   That is your preferred position?

MR FOSTER:   That is number one.

HEYDON J:   That involves overruling Bradken?

MR FOSTER:   It does.

HEYDON J:   And how many other cases?

MR FOSTER:   On that point, only other cases in other places.  This Court in NT Power did not ‑ ‑ ‑

HEYDON J:   In one of the other places the law has lasted for 800 or 900 years.

MR FOSTER:   Your Honour, in respect of a contract, in respect of a contracting party, which is all that Bradken is about, the only case that really provides any foundation for it is Telephone Apparatus and that is a very old English case at a time when the level of regulation and interest by the national legislature in anti-competitive conduct was much more primitive.

HEYDON J:   That is the first plank.  What is the fallback position?

MR FOSTER:   The fallback position is that one can separate out conduct which is not constituted by making and performing a contract from conduct which is outside those two things either before or even after, I suppose, but certainly before.  Focus on that in terms of the statute, sections 46 and 47, it is a unilateral matter, does not involve the Crown at all and invoke Part VI against the contravening party to the extent that one can making due allowance for the precise decision in Bradken.

HEYDON J:   So far as contracts had been made nothing could be done about them, but so far as injunctions could be obtained to stop future negotiations, they could be granted and penalties could be granted for past negotiations.

MR FOSTER:   Indeed.

HEYDON J:   That would just involve really a sort of reading down of Bradken possibly if not ‑ ‑ ‑

MR FOSTER:   Well, a confining of Bradken to its own facts.

KIRBY J:   Where in that hierarchy does your frontal attack which comes at the end of your written argument on Bradken fit in?

MR FOSTER:   At the beginning because, your Honours, we submit that that is the principled solution to the problem.

KIRBY J:   But the problem with that, and I am not going to keep repeating this, is that if you want a frontal attack on Bradken, you have to have an alternative theory of that governmental immunity which belongs to the States of the Commonwealth and that theory must find its source in the Constitution and that is not a matter that has been the subject of notices nor of written argument in this Court. Is that not correct?

MR FOSTER:   Well, with respect, we have assumed for the purposes of the argument that the State Executives and Territory Executives enjoy non‑application of the Act insofar as their non‑business activities are concerned.  The case has not been put on the basis your Honour is putting it to me.

GLEESON CJ:   In one sense that is just a proposition of construction of section 2A and 2B of the Act.

MR FOSTER:   That is the way it has been put and it does proceed, as your Honour has taxed me with this morning, with the proposition that there is something that remains in the nature of an immunity after the enactment of section 2B.

KIRBY J:   Precisely, and 2B is an Act of the Federal Parliament, but the States are also provided for in the Constitution. Getting back to Justice Callinan’s point, any provision of the federal Trade Practices Act must be conformable to the role of the States as envisaged by the Constitution without reviving the implied immunities of the States but respecting, as Melbourne Corporation requires, that in certain aspects of their activities they will have an immunity from federal law making.

MR FOSTER:   Well, your Honour, I do not think I can advance the position beyond what I have put to your Honour, which is that it has been the assumption, the starting point as it were, for the argument that there is something there in the nature of an immunity which survives section 2B and it can be expressed really as the non‑business activities of the Crown itself, of the State Executives themselves, of which this case is an example.

KIRBY J:   You say that whatever any constitutional immunity might be of a State, it is of the core governmental functions of the State and not of a transaction with a private corporation for the supply of goods to State hospitals, that that is just a business‑type activity that would not fall within any constitutional immunity?

MR FOSTER:   We are bound by the admission we made below which is that section 2B did not attach to this activity directly.

KIRBY J:   Does that imply that you wish you had not made that admission?

MR FOSTER:   Your Honour is asking me?

KIRBY J:   Well, I am asking your client through you.

MR FOSTER:   We made the admission advisedly and it stands there, so there is nothing to be said about it really other than it is there.  It would be arguable, one would have thought, that the procurement of these fluids for public hospitals by the State SPAs was indeed a business activity of the State Executive but we cannot go back on that admission, and that is where the matter stands.  Therefore, the starting point to the argument in the end is that there is some residual immunity or exemption that is applicable.

If your Honours go to page 505 in volume 2 of the appeal books, this is a draft of the section concerning IV fluids and renal products that ultimately found its way into the final recommendation, the reference to which I gave your Honours a few moments ago.  I am taking your Honours to this in order to point out that when one looks at the material on page 505 between lines 30 and 40, one sees that the total price for the bundled offer, Offer 2, was 4.474 million and the IV fluids component of that was 3.155 million, but that in both Offers 1 and 1A the total price was 5.892 million and the IV fluids component was 4.5 million which was more than the total of Offer 2, the bundled offer. 

That in tabular form points up the complaint that the Commission had about this conduct, because the proposition being put forward by Baxter was that if you take the bundle you can get it for less than you have to pay for the IV fluids if you do not.  In addition, may I give your Honours a reference in the primary judge’s reasons at volume 4 of the appeal book at 1039 and following for the next few pages, which again is an expansion on his Honour’s approach to this problem in relation to Offers 1 and 1A.

In our submission, your Honours, the State Executives and the Territory Executives were compelled to deal with Baxter upon the basis that Baxter should comply with the Trade Practices Act and there should be no cutting back or impingement upon that proposition.  The Act itself does not give to the Executive on any sensible construction the capacity to bless and provide absolution for the conduct of trading corporations merely because those corporations are dealing with governments of States and Territories and, in our submission, it would be contrary to the correct approach to this rule of construction which the Court has articulated most recently in Bropho for the Court to give such an extended application for the benefit of Baxter.

KIRBY J:   Can I ask a machinery question.  You have set out a statement of – this is a very fact‑rich case.

MR FOSTER:   It is.

KIRBY J:   It is very detailed and we have to be careful we do not get swamped in the facts.

MR FOSTER:   I have tried not to do that, your Honour.

KIRBY J:   You have set out a statement of the facts.  Baxter have set out what they say is an elaboration because they contend you did not give enough of the detail.

MR FOSTER:   Yes.

KIRBY J:   You do not appear to have replied to that statement of the facts.  Can we proceed on the assumption that the core facts necessary to tender the legal questions are those which you have set out in your statement of the facts and which Baxter have qualified and which you do not cavil with?

MR FOSTER:   Subject to one thing, and that is in this area of characterising the so-called solicitation or calling for or encouragement.  Much of what Baxter has done in its statement of facts is to give a lot of references to material, both in the primary judge’s reasons and in some material to support those reasons, which go to that question.  We do not cavil with the fact that those references were made or that they are accurate.  We cavil with the proposition that they amount to the kind of level of encouragement that his Honour found and we ‑ ‑ ‑

KIRBY J:   Is that a ground of appeal in this Court?

MR FOSTER:   No, your Honour, because the Full Federal Court has not decided it.  As your Honour knows, the Full Federal Court only decided the so-called Crown immunity question.

KIRBY J:   I am just trying to get clear what is the factual foundation upon which this Court is asked to deal with the issues and the grounds of appeal.

MR FOSTER:   I am attempting to answer that by putting this to your Honour, that our statement is correct, theirs is correct, it has a complexion.  They are entitled to put it.  I am not cavilling with that, but it is a complexion with which we disagree but in respect of which we have no findings from the Full Federal Court.  We have dealt with this in our submission in reply in paragraphs 1 really through to 5, but particularly in paragraphs 1 to 4, but otherwise your Honour can assume that which your Honour has put to me.

Your Honours, I do not propose to go back into the factual detail beyond what we have written.  If one looks at what we have written, what the first respondent has written and what the Full Court wrote, there is sufficient there for the Court to look at the question of principle.

KIRBY J:   Thank you.

MR FOSTER:   Could I take your Honours to Wynyard (1955) 93 CLR 376. The majority comprised Justices Williams, Webb and Taylor whose reasons commence at 381 where their Honours encapsulated the facts, then at 382 commenced their reasons relevantly, and then at 385 and again 387 to 388 decided the case, in effect, in favour of the immunity. However, in NT Power it is the reasoning of Justice Kitto who dissented in this case that has attracted the Court, in our respectful submission, and indeed probably in McNamara as well.  Justice Kitto’s reason commence at 391.  It is to be noted that Justice Fullagar agreed with him.  In the middle of 392 his Honour commenced the process of reasoning by observing that the premises were prescribed premises and says this in the middle of the page:

It is clear, therefore, that if the commissioner is bound by s 62 the magistrate’s order was wrongly made and the order nisi for prohibition should have been made absolute.  The commissioner, however, contends that the Crown is not bound by s 62 and that as a consequence he himself is not bound by it.  That the Crown is not bound is clear, for s 5 specifically provides that . . . Whether the asserted consequence –

and his Honour means by that whether the Commissioner is bound –

follows is the question we have to consider. 

A little further down, about five lines:

It is, of course, quite common, where some immunity or advantage is claimed for an individual or a body by reference to a special position which the law records to the Crown, to speak of the individual or body as being or not being the Crown.  This use of language is open to the objection that not only is it for obvious reasons technically inexact but it tends to obscure the real nature of the problem.  The Sovereign alone is the Crown.  In this country where questions concerning the Monarch personally can seldom arise, the Crown normally means the Sovereign considered as the central government of the Commonwealth or a State.  Ordinarily, therefore, to hold that a given statutory provision binds the Crown is to hold that it operates to destroy or curtail some interest or purpose of the Sovereign as so considered.  Where the immunity is claimed by a subject of the Crown –

and the Commissioner is such a person –

whether an individual or a corporation, the question to be decided, whatever may be the language in which for convenience it may be expressed, cannot really be whether the subject is within a class of departments . . . generically (and loosely) described as the Crown.

So his Honour is coming to grips with the question of subjects which are not themselves the Crown.  His Honour goes on:

It must always be whether the operation of the provision upon the subject would mean some impairment of the existing legal situation of the Sovereign.

That is the phrase that has found its way into his Honour’s judgment and indeed into NT Power.  His Honour then refers to Handel’s Case and the facts of that case and about ten lines from the bottom of that page said this:

But the point of general importance, upon which there was unanimity as I read the judgments, was that the decision must depend upon an ascertainment of the effect which the taxing of the income would have upon interests or purpose of the Sovereign.  The nature of the relation between the official himself and the Crown – whether he was a servant, or an agent or occupied some other position – was considered only in the course and for the purpose of determining that crucial matter.

The cases in which a statutory provision not binding on the Crown must be denied an incidence upon a subject of the Crown because that incidence would be in legal effect –

and that is important, not practical effect but in legal effect –

upon the Crown fall into a few broad classes.

Then his Honour articulated what those classes were and, in our respectful submission, none of them encompass a position of a contractor or a party looking for a contract in a commercial context or a trading corporation, as is in the present case.  The first is the “servant or agent of the Crown”.  That is the first five lines on page 394:

Next there is the class of cases in which a provision, if applied to a particular individual or corporation, would adversely affect some proprietary right or interest of the Crown –

not this case -

And finally there is an anomalous class of cases where a provision creating a liability by reference to the ownership or occupation of property would, in its application in respect of certain kinds of property, impose a burden upon the performance of functions which, though not performed by servants or agents of the Crown, are looked upon by the law as performed for the Crown.

Not this case.

KIRBY J:   Can I just ask a technical question.  You are reading from a dissenting opinion.

MR FOSTER:   I am.

KIRBY J:   Was either the majority view similar in the principles but different in the application or does the NT Power Case or any other case indicate that this Court now accepts the statement of Justice Kitto as a correct statement of the governing law?

MR FOSTER:   It is not quite as clear as the dichotomy between those two positions, but Justice Kitto explained the basis for this immunity in greater detail and in a different way from the majority and he came to a different conclusion.

KIRBY J:   It often happens if you explain it in more detail and you are going to reach a different conclusion.  That is why you are doing it in more detail.

MR FOSTER:   In this Court in McNamara and NT Power, in our submission, clearly stated it preferred this reasoning process to that of the majority.

HEYDON J:   Mr Foster, on page 394 you read what Mr Justice Kitto said:

would adversely some proprietary right or interest of the Crown, legal equitable or statutory –

and you said that was not this case.

MR FOSTER:   Yes.

HEYDON J:   Let us say this case turned on interference with an actual completed contract.  Would you say that is outside the words “proprietary right”?

MR FOSTER:   Yes, because his Honour was using “proprietary right” in a different sense, in a sense of property.

HEYDON J:   So you submit, do you, that so far as NT Power said that Mr Justice Kitto’s principle applied to proprietary, contractual and other legal rights and interests and not otherwise, that was wrong?

MR FOSTER:   A couple of things.  It was said in relation to a set of facts which made it obiter, secondly, in relation to a set of facts which in the use of the word “contractual” probably had a significance other than what is now being looked at.  Thirdly, if I have to it was wrong, but there is a way of dealing with that which I would like to explain to the Court later on if I may, but at this stage they are the three things we say about that.

HEYDON J:   If you enter a contract with someone, do you not create a chose in action, a benefit of which you own?

MR FOSTER:   Yes.

HEYDON J:   Is that not proprietary?

MR FOSTER:   It can be, yes.  What I am putting to your Honour is that when his Honour used that expression here he did not mean that.

HEYDON J:   Why not?

MR FOSTER:   Because he cited Wirral Estates v Shaw which was a landlord and tenant case.  He was clearly talking about property rights.

HEYDON J:   Just demonstrate that textually, if you would.  Just explain to me precisely why we are to construe the word “proprietary” there as meaning “proprietary (not merely contractual)”?

MR FOSTER:   It is simply that “proprietary right or interest”, legal, equitable or statutory, in company with a reference to Wirral Estates v Shaw and accommodating the need, as his Honour did, to deal with property – that is Crown property – should be seen by this Court as a reference to property rights.  It is not a statute, your Honour.  I am attempting to put a complexion on the words which I am, but it is of course open to read those words in the way your Honour is putting to me.

HEYDON J:   Let us forget Wirral Estates and let us forget Mr Justice Kitto – he is just a Judge.  What in principle is the reason why your argument in one manifestation of it accommodates proprietary rights but not contractual rights?

MR FOSTER:   In principle, because there was long history of authority that is to the effect that if the Crown’s property is affected in the sense of property, real property or personal property, and not mere contractual rights adversely in circumstances where it enjoys the immunity, then the authority makes clear that that affectation will not be countenanced and the New Zealand cases referred to, I think, by the Full Court are cases such as that.

HEYDON J:   Is this a common law rule you are talking about?

MR FOSTER:   Yes.

HEYDON J:   So you appealed earlier in your argument a number of times, as it were, to the absurdity of having a ban on Baxter doing things, as it were, mutually with a government, an executive, and the absurdity of the government having some position which reflects back on Baxter so as to give it immunity.  You do not feel any absurdity where, for example, a right in property passed in an asset under a contract induced by a breach of sections 46 or 47?

MR FOSTER:   I may well, your Honour, but rather than, as it were, attack the whole doctrine, we are here to deal only with the Trade Practices Act and I have confined the proposition to the Trade Practices Act.  His Honour here at page 394 is dealing with the common law.  It may be just as absurd but I do not need to go that far in the argument that I am putting to the Court.

HEYDON J:   Is it clear that if the Commission won on all of its arguments of substance for breaches of the Act, it would all relate to negotiations as distinct from completed contracts?

MR FOSTER:   I think we have added in – I will have it checked but I think we have added in claims ‑ ‑ ‑

HEYDON J:   So your claims for relief are always in a kind of formulaic alternative.  In the first declaration, conduct in negotiating and entering, that is true of all claims for relief in relation to section 46.

MR FOSTER:   Yes.

HEYDON J:   But it seems that this Offer 1A violation turns only on conduct engaged in the course of negotiation.

MR FOSTER:   It does.

HEYDON J:   Is that true of all claims that you are presently still trying to succeed in?

MR FOSTER:   I would like to come back to your Honour on that because I have a feeling that it is substantially true but there may be some relief sought against Baxter in respect of the contract.  I just would like to have it checked, but in the greater part, the answer to your Honour’s question is yes.

KIRBY J:   I suppose that historically this came about in part out of the dignity and magnificence of the Crown and the Parliament could only impinge on that if it did so clearly, but also out of the constitutional principle that you would not burden the Treasurer of the Crown because it had to go through, after the constitutional developments, the unseemly and difficult and nuisance function of raising the money from Parliament and that that would be a reason behind some of these principles that Justice Kitto is expressing.

MR FOSTER:   It would.

KIRBY J:   That is an argument against you.

MR FOSTER:   Maybe.

KIRBY J:   Because if it is to protect the Treasurer of the Crown, the Crown is entitled to act subject to any clear statute in the way that it likes.  Query whether that was inherited by the States.

MR FOSTER:   And query whether it is relevant to the Trade Practices Act in circumstances where post-1995 we have an Act of general application considered on the national basis for the economic benefit of the country as a whole, including the States, may I add, contrary to perhaps their perceptions from time to time as to what their best interests might be in looking at the long-term big picture.  None of that intrudes itself into what Justice Kitto was dealing with here, and that is why I have taken the Court to these passages, to put them in their proper setting and to see how they come forward into the modern context in NT Power and in this case with which the Court is now dealing.  His Honour goes on and in the last paragraph on page 394 makes a “further general remark”, and that is all it is.  But he does focus on legal effect and he comments that shorthand expressions may be misleading.  Over the page his Honour focuses by reference to Victorian Railways Commissioners v Herbert to the need to focus on the particular inquiry in the particular case.  Then his Honour goes on to deal with the particular facts of the case in front of his Honour and then in the middle of 395 had this to say:

But the immunity of the Crown can never inure for the benefit of a subject.  Whoever asserts it must assert it on behalf of and for the benefit of the Crown.

KIRBY J:   That does not help you here because we know the Crown so‑called turns up and supports it, supports Baxter.

MR FOSTER:   It does not matter that they turn up and support it, your Honour.  The question is what is the principle?  They may be very misguided in their support currently for this position.  Could I simply give your Honours a reference to the ‑ ‑ ‑

KIRBY J:   They will generally be in a better position to judge what their interests are than you are.

MR FOSTER:   Not necessarily, your Honour.  For example, what would they know, one may ask rhetorically, about the extent to which collusion had occurred as between potential tenderers?

KIRBY J:   One would draw an inference here that, as it happened or as alleged to have happened in a number of States, that they would have a pretty good idea by now even if they did not know earlier.

MR FOSTER:   And they are still here.  Well, that may be, your Honour, but one does not get much from the fact that they are still here, with respect.  Could I give your Honours reference to the balance of the pages.  It is 396 about point 6 on the page to 398 and then at 400 through to 402 and I will not read those to your Honours.  I will just leave those with your Honours.  Unless your Honours wish me to, I do not propose to go to Bradken.  It has been referred to considerably in the written submissions.  I am happy to if your Honours would wish but I thought I would move to NT Power.

KIRBY J:   Well, you are asking us to disagree with it.

MR FOSTER: Yes. I will take your Honours to it then. I am happy to do that. It is in – well, not so much disagree with it, but to regard it as out of date. It is 145 CLR 107. In a sense, the case the can be divided up into two because the first question was did this ‑ ‑ ‑

GUMMOW J:   It is not a very good report.  If you look at the order at the end on page 141, we do not know the text of paragraph 34, do we?

MR FOSTER:   No.

GUMMOW J:   We know 6(a) and 6(b) because they are set out at 131, I think.

MR FOSTER:   No, and we did actually at the request ‑ ‑ ‑

GUMMOW J:   It is a question of trying to deduce what 34 is saying perhaps from page - I think it is 123.

HAYNE J:   Yes, page 123 at about point 5 to point 7.  That is the best you can do.  I have sent for the file but the file will take some time to produce apparently.  It is in archives.

GUMMOW J:   But what we can get out of it, I think, is that the Commissioner was not one of the objects of these injunctions.

MR FOSTER:   No, he was not.  In fact, they tried to discontinue against the Commissioner and we are not allowed to ‑ ‑ ‑

HAYNE J:   But that then takes you to the fact that the critical reasoning in the judgments of Acting Chief Justice Gibbs is to be found at page 123 in about the last 10 lines on page 123:

Those injunctions, if granted, will affect the Commissioner . . . In other words, if the remedies sought . . . the Commissioner will be prejudiced by the operation of the Trade Practices Act just as much as if its provisions had been directly enforced against him.

That word “prejudiced” seems to carry a bit of freight and it may be compared with Justices Mason and Jacobs at 137 to 138, where at 137 they say at about line 8:

To strike down the contracts arrangements or understandings alleged would affect the exercise by the Commissioner for Railways, representing the Crown, of a right to enter into such contracts arrangements or understandings –

and expanding it, and a right –

to obtain finance in the manner alleged. 

Now, again, with respect to their Honours, that manner of expression wraps up in the statement of conclusion a proposition about the content of the right.

MR FOSTER:   Yes.

GUMMOW J:   One has to add to that the lament by Justice Stephen at the top of page 128 as to the paucity of the argument.

MR FOSTER:   There was a paucity of the argument.

GUMMOW J:   At about line 15:

The Court not having had the benefit of full argument on the point from both sides of the record, I would have wished –

et cetera.

HAYNE J:   One is left with an impression of argument proceeding without close analysis of the content of the right that one finds reflected in the reasons.

MR FOSTER:   In those passages your Honour has drawn to my attention, yes.

KIRBY J:   Is there any discussion in the case about the extension of the so‑called immunity of the Crown to the vast plethora of modern statutory authorities?  I mean, would it, for example, in the federal sphere apply to the privatised wheat board or all the other modern emanations of governmental power?

MR FOSTER:   I think the answer to that question is that there is a reference to section 2A of the Trade Practices Act at 116, but, of course, that is ‑ ‑ ‑

KIRBY J:   This is a problem because what began as something protecting the King in his council, with the expansion of governmental activity in the 19th and 20th century, is now going to affect anything that impinges on the activities of the whole range of governmental bodies, which is a huge expansion of immunity from federal law if that is what is involved.

MR FOSTER:   There is another passage, which is not a detailed discussion, relevant to what your Honour asked me at 127 in the judgment of Justice Stephen, the second-last paragraph.

KIRBY J:   I begin to see why the States are here.

MR FOSTER:   That passage introduces a discussion in his Honour’s judgment about difficulties that arise because we have a federation, over the page, and his Honour at 129 literally in a few lines at about point 7, having decided that the Act did not bind the Commissioner, had this to say:

Once this be concluded it follows that the Act will not only not apply directly to the Commissioner but will also not apply so as to prejudice its interests when in contractual relationship with parties to whom the Act clearly applies or when otherwise interested in transactions affecting those parties.

He cites Telephone. 

KIRBY J: A modest view of the doctrine is, it being a rule of interpretation, that you can deal with this in your federal legislation but you have to be clear. You have to do it clearly and explicitly. Then if you do, subject to the Constitution, that is it. You have not done it here. You have narrowed your exception to the doctrine.

MR FOSTER:   The burden of our submission is that times have changed.  When one looks at the 1995 changes to the Trade Practices Act, what one finds is an utterly different landscape from what was before the Court in 1979.  The very cursory conclusions reached by their Honours without the benefit of the kind of argument that perhaps the Court should have had in different circumstances should not carry the weight, with respect, that it might otherwise.  The critical differences are the incremental extension of the Act in terms to the States and Territories in 2B, the beefing up of section 51 and the inclusion in section 2 of “object”, making clear that this statute is to have the far-reaching effect that we contend for.

HEYDON J:   Section 2 is just motherhood, is it not? 

MR FOSTER:   It is, but it was not there in 1979.

HEYDON J:   Yes.  All right.  We can leave it out of account.  Section 51 before 1995 and in 1979, if I am not mistaken, did have provisions saying that the States could enact their way out of the Trade Practices Act.

MR FOSTER:   It did but not in the same terms.

HEYDON J:   So that is immaterial.  No, but you could do it just as you can now.

MR FOSTER:   If I can put it this way, it was not as clear as it is now in terms of how you do it.  There was always going to be an argument about whether you had done it effectively having regard to 51.

HAYNE J:   Leaving aside these injunctions to be modern that you would urge upon us, the essence of the argument understood at first instance in this case against you is recorded at page 1134, paragraph 662 and the epitome of the argument there recorded is the argument that harks back to the right analysis – analysis by reference to rights – to be found in the passages in Bradken that I had earlier referred to.

MR FOSTER:   Yes.  That is the essence of it.

HAYNE J:   That is an argument, be it good, be it bad, which is traced back from Bradken back into Justice Kitto in Wynyard, is it not?

MR FOSTER:   But not in respect of contracts and not in respect of contracts with trading corporations of the kind that we have here and certainly not in respect of conduct, unilateral, regulated by sections 46 and 47.

GLEESON CJ:   Does that expression “right, power and capacity” mean anything more than freedom?  What does it mean to say that someone has a right to enter into any kind of contract he wants?  Is that different from saying so long as the law does not proscribe it, you are free to enter into any kind of contract you like?

MR FOSTER:   Where are those words, precisely, your Honour?

GLEESON CJ:   At page 1134, paragraph 662, line 2.

MR FOSTER:   Your Honour, the test is really this, that the capacity is one thing, the right or the power might be another, but be it a composite expression or separated out, the proposition is that it can enter into any contract it wishes subject to the simple circumstance that the party with whom it is contracting cannot be in breach of the Act in a way which infects the formation of a contract.

GLEESON CJ:   Since 1995 and subject to any more fundamental arguments that are not being dealt with here, is there any relevant different between the position of what the Act calls the Crown in right of the Commonwealth and what the Act calls the Crown in right of the States?

MR FOSTER:   I do not think so, your Honour.

GLEESON CJ:   Then take an activity of the Commonwealth Government that might be thought to lie at the centre of government power, defence procurement, is the effect of the doctrine of immunity or the principle of immunity that in the area of defence procurement contracts people who deal with the Commonwealth Government, arms suppliers, for example, are not subject to the Trade Practices Act because the Commonwealth Government in the area of defence procurement has the right, power and capacity to enter into any kind of contract it wants?

MR FOSTER:   In our submission, it does not make any difference.  If the party with whom it is dealing is otherwise susceptible to regulation by the Act, then it is.  It does not constitute prejudice of a protectable kind, to pick up the words from Bradken.

GLEESON CJ:   Presumably when you came to apply section 76(1)(c) of the Act, if somebody complained that the defence authorities and the Executive Government had aided, abetted, counselled or procured a contravention of Part IV, this principle of immunity would be an answer to that, would it not?

MR FOSTER:   Insofar as the servant or agents of the Executive were concerned, yes. 

GUMMOW J:   So does not the Act cope with the situation so far as the Executive Government is concerned?

MR FOSTER:   As far as the Executive is concerned, yes.  But notwithstanding the way in which Baxter, in effect, pleaded its relationship here, for or on behalf of – this is not a case of Baxter procuring fluids for the States as a servant or agent.  It is a contracting commercial entity for the supply.

GUMMOW J:   Yes, I understand that.

MR FOSTER:   The real question is, how far does this go, if it goes anywhere beyond the three broad classes dealt with by Justice Kitto?

GUMMOW J:   When we are talking about the right of the Commonwealth, a contract and this, that and the other fashion, we are really talking about its Executive power under Section 61 of the Constitution, are we not?

MR FOSTER:   Yes.

GUMMOW J:   And insofar as the Trade Practices Act has this, that or the other operation on what is said to be this right, the Trade Practices Act is a law under 51(xxxix) which picks up the Executive power.

MR FOSTER:   Yes, but the Act does not deal with at all, in a way which accommodates the primary judge’s conclusion, the question of what you do with the commercial trading entity, the supplier.  It simply does not touch it.  You cannot get this protection out of the Act as a matter of construction.

GLEESON CJ:   But you could still have today the same problem that existed in the Telephone’s Case.  The people in the Executive Government concerned with defence procurement, theoretically, could say to manufacturers of weapons, “You people go away and agree between yourselves by way of collusive arrangement on the terms on which you will tender to us and then we will deal with you according to your agreement”.  Question, where would that leave the people who complied with that request or instruction?  We know that reading together 2A and 76 you could not prosecute the defence authorities for that, but where does it leave the people that they have told to go away and make a collusive arrangement?

MR FOSTER:   It leaves them vulnerable if they do that.

GUMMOW J:   Vulnerable to an injunction by a competitor who is not part of the club.

MR FOSTER:   Yes, and, as your Honours are putting to me, that is a harder example for us because one intuitively might think, well, this is at the heart of what the government ought to be able to do without regulation, but it is still to be tested against the principle and one can think of other examples which are further along the spectrum and the question is, how do you resolve the principle?  What is the principle?  How does it get resolved in the application of this Act?

Your Honour Justice Heydon asked me a question about the impact of our application on the conduct constituted by entering into and performing the contract.  In volume 1 of the appeal books at pages 16, 17 and 18, paragraphs 21, 22 and 22(a) do in terms apply to performance and the making of the contract, but paragraphs 21 and 22 are confined to section 47, not 46, and 22(a) is no longer relevant as it related to contracts which have been fully performed and had been, with the exception of Western Australia, fully performed at the time judgment was delivered.

HEYDON J:   Yes, but my problem is this, pages 1 to 19 set out very wide orders.

MR FOSTER:   Yes.

HEYDON J:   There was success of a very limited kind in relation to section 46 and success of a limited kind in relation to section 47.  You challenged Justice Allsop’s failure to grant you a wider ‑ ‑ ‑

MR FOSTER:   All of that.

HEYDON J:   All of that.  Now, does one have to work out for oneself whether, if a notional Full Court in the future, assuming one got back to Full Court, accepted all of your arguments, it would affect only making offers to enter a contract and injunctions against entering into a contract, or would it also affect giving effect to an existing contract?  In other words, have any contracts been made pursuant to this section 46 and section 47 conduct?  Because if they have not been made, the case can be decided on – remember we were looking at Mr Justice Kitto and working out how much had to be demolished and you were saying nothing has to be demolished on one ‑ ‑ ‑

MR FOSTER:   Some contracts were made but they have been exhausted by performance.

HEYDON J:   So if you were totally successful, the courts would not be interfering with any contracts at all?

MR FOSTER:   Not now.

HEYDON J:   So to say anything about the impact of Justice Kitto’s test, whether it applies to contracts and whether the law is correctly stated, would be to answer an academic question in this case?  There is no need to try and answer it now if it is difficult to do so, but the matter can be examined in detail at lunchtime.

MR FOSTER:   It can be, but I would put this to your Honour, that I think the proposition is that interference by reasoning which affects the making and the performance of these contracts, even though it may not sound in relief, will have a prejudice on the capacity of the States to ‑ ‑ ‑

HEYDON J:   Yes, that is more or less the way Bradken reasoned it, but Bradken may have been too wide in that respect.  Bradken could be narrowed down to that limited extent.  If there are no contracts affected, that is one approach.  If contracts are affected, then a more radical question is being asked of the Court, more radical than ‑ ‑ ‑

MR FOSTER:   If and when it goes back to the Full Federal Court, there are no contracts on foot now which were the subject of any relief sought in the application.  I think that probably answers your Honour’s question.

GUMMOW J:   Can you just explain to me again, paragraph 21 on page 16, that is rooted in section 47, is it?

MR FOSTER:   Yes, your Honour.

GUMMOW J:   And 22?

MR FOSTER:   Yes.

GUMMOW J:   Only 47?

HEYDON J:   Or is the position that the conduct there described can actually be both section 46 conduct and section 47 conduct?

MR FOSTER:   Yes.

GUMMOW J:   So in sections 46 and 47?

MR FOSTER:   Yes.

GUMMOW J:   For both?  For 21 and 22?

MR FOSTER:   For 22.  I am not sure about 21, really, your Honour.  I suppose it is arguable.  I am not sure if it was constructed with that in mind but ‑ ‑ ‑

HEYDON J:   Paragraph 21 is directed to section 47.  Is it not asking for an injunction which goes beyond the Act?  There is no reference to any purpose of substantially lessening competition, is there?

MR FOSTER:   No.  Your Honour meant by that a reference to 46?

HEYDON J:   I am just posing for consideration, whether the paragraph 21, injunctions, if they are based on section 47, are seeking injunctions against conduct which is not in breach of the Act.  They do, however, in line 3 speak of the continuation of “a substantial degree of power” which is not a section 47 test, it is a section 46 test.

GUMMOW J:   Perhaps you had better check that over lunchtime.

MR FOSTER:   I think I had better, your Honour.

GUMMOW J:   We need to be quite clear, I think.

MR FOSTER:   Indeed.  Could I simply give the Court a reference to some passages in  McNamara (2005) 221 CLR 646 without taking the Court to that judgment, as to the consideration of Wynyard.  I wish to give the Court a reference to paragraphs 18 which is at page 654, 20 at 654, 25 at 655 to 656 and 32 at 657 to 658 and then at paragraphs 38 through to ‑ ‑ ‑

KIRBY J:   Paragraph 37 actually quotes the passage from Justice Kitto.

MR FOSTER:   It does – really to 54 which is pages 660 through to 666 and 64 in the judgment of Justice Hayne on page 668.  Could I take the Court to NT Power (2004) 219 CLR 90. There are some earlier paragraphs dealing with the statutory background which I just wish to give the Court a reference to, at paragraphs 14 through to 29 at pages 101 to 104; at paragraph 66 on page 116 and paragraphs 68 to 72 on pages 117 to 118; and then could I give a reference to paragraphs 137 and 138 on pages 139 and 141 and finally 147 at 144 and 152 to 153 at 145 to 146 and then take the Court to page 146 commencing at paragraph 154 which deals with the question that was before the Court in that case concerning Crown immunity.

KIRBY J:   Where are you reading?

MR FOSTER:   I am not reading at the moment, your Honour, but I will from paragraph 154 on page 146.  The facts of NT Power relevantly for the consideration of Gasgo are important in looking at what this Court had to say about these matters.  The gas supply agreements had been entered into in 1985 between Gasgo and Mereenie gas suppliers.  They were arrangements or contracts which at the point of formation were perfectly legal and not open to challenge.  The complaint that was made against Gasgo was that it had refused to give an undertaking to NT Power which was the commercial competitor of PAWA, the electricity generator, not to exercise its – that is Gasgo’s - pre-emptive right in respect of additional gas that might become available from the Mereenie suppliers so that NT Power would be able freely to negotiate for that gas.  So the complaint was Gasgo failed to give an undertaking not to exercise that pre-emptive right. 

That was a matter which arose in 1997 when the facts in the broad became an issue in NT Power, that is NT Power wanted to generate electricity in the Territory, sought access to the grid owned by PAWA and also sought this undertaking from Gasgo.  So it was in those circumstances that the Court was considering whether or not firstly Gasgo had itself the benefit of this exemption from the Act and, if it did not, whether by dint of some arrangement involving the Executive of the Territory it could extend the umbrella of this protection the Territory Government itself had.  The Court in NT Power held that firstly, Gasgo being a trading corporation, not being a servant or agent or indeed the Executive of the Territory, simply did not have the benefit of this exemption from the Act.  Secondly, the Court held that because there was no contract here to which the Executive of the Territory was a party, then Bradken simply was not enlivened.  So Gasgo missed out.  So that is quite a different case on the facts from the present case.  The way in which the Court made observations about Wynyard and these principles, in our respectful submission, has to be viewed in the light of what those facts were.

HEYDON J:   Is NT Power not in your favour?

MR FOSTER:   It is.

HEYDON J:   Every word of NT Power is in your favour as long as there are no contracts being affected by the remedies sought in this case.

MR FOSTER:   But I want to take it further.

HEYDON J:   Invitations to take it further will not necessarily be granted.

MR FOSTER:   I understand that, your Honour.  I accept everything your Honour puts to me about it being in my favour in respect of ‑ ‑ ‑

HEYDON J:   Unless you wish to contend that there is something fundamentally wrong with Justice Kitto’s judgment in Wynyard and the whole matter should be restated on some new principle.  Sometimes this petty little case we are considering now, a case like it, could only be decided one way by a complete reconsideration of principle, but paragraph 170 of NT Power indicates that it is not necessary to go beyond that paragraph to decide the case in your favour, does it not?

MR FOSTER:   I accept that.  Nonetheless, as your Honour knows ‑ ‑ ‑

HEYDON J:   You are the Australian Competition and Consumer Commission.

MR FOSTER:   We are.

HEYDON J:   I know that you will be here forever and it will be in your perpetual interest to have arguments of the type that the first respondent has been advancing against you, and the other respondents, squashed.  They will not necessarily be squashed if it is about as important as having a seminar about it at a law school.

MR FOSTER:   I understand that, your Honour, and of course it is not for us to do other than make submissions in an endeavour to seek to have that very result, but if the Court is of the view that it is not necessary in this case to go beyond what has already been said, in particular, the paragraph your Honour has drawn my attention to, in order to deal with this case, then ‑ ‑ ‑

GUMMOW J:   The trouble is, if we can get on with it, the States say this right which they reaped back in Bardolph’s Case to enter into any contract they want to include negotiation and you have to meet that.

MR FOSTER:   It does and we do by concentrating on the proposition that sections 46 and 47 concentrate on unilateral conduct. 

GUMMOW J:   Put particularly clearly perhaps by New South Wales in paragraph 5.11 and following.

MR FOSTER:   If that submission is of interest to the Court, then of course we have to confront the matter at the level at which we are preferably confronting it because that is, in effect, equating the negotiations for a contract in principle in the same place as a concluded contract.  Could I deal with NT Power in this way because I am conscious of the time.  What was said that might be seen to elevate a mere contractual right to the same class or significance as the sorts of matters Justice Kitto was talking about by reference to the literal reading of paragraph 170 ought to be viewed, one, in the light of the facts of that case and, two, in the following way. 

It was not intended, with respect, to encompass within that expression a contract the genesis of which is tainted by the contravention because in NT Power there was an existing contract which was perfectly okay in its terms and up until that point in its performance but it became a problem, theoretically, when the undertaking not to exercise the pre‑emptory right was refused, that that conduct might constitute a breach of section 46.  Assuming PAWA had been party to that contract, if there was an interference with that existing contract in those circumstances, that may well be the type of right that does get protection under this extension of the so-called immunity, maybe.  We do not accept that, but that may be what is a limited extension.  In our submission, it does not justify the application of this extension to contracts, the genesis of which or the very reason for their existence ‑ ‑ ‑

KIRBY J:   I am sorry, I did not hear that, the genesis of which?

MR FOSTER:   Or the very reason for its existence is borne out of contravening conduct.

HEYDON J:   What about proprietary rights whose creation has been borne out of contravening conduct?

MR FOSTER:   In our submission, in principle should not get protection.

KIRBY J:   Yes, but Mr Yates in a plaintiff submission at the special leave hearing says, well, what can Baxter do?  The States come along and they say we want to deal on this basis and if that is what the States do, what can a corporation do in that situation?

MR FOSTER:   The States did not require that the corporation breach the law.  The States required that they submit an offer in certain terms.  That of itself, properly understood in the circumstances of this case, did not require a contravention.  There was plenty of room for Baxter to put in an answer to these various tenders that complied with the law.  That is really quite an important factor in this case.  It may be at some stages, as his Honour the Chief Justice put to me, that if there is no way out in the defence procurement example put to me, that in terms the requirement of the polity is that the Act be breached, that might throw up a different question but that is not the case here.

GLEESON CJ:   It might throw up a factual question of purpose in a particular case, if purpose is relevant, although it could hardly ever be relevant to price fixing.

MR FOSTER:   Your Honour, in our respectful submission, at the end of the day these questions of what about the good things that can be done in breach of the Act can simply be solved by applying the Act according to its terms and in deploying section 51.  They should not be solved by the enlivening of an ancient doctrine beyond where it was ever intended to go and the exploitation of that doctrine against the common sense and fundamental precepts of an Act such as the Trade Practices Act.

KIRBY J:   But that tends to leave very little space for any Crown, State governmental immunity in the case of a subordinate polity in Australia as against the federal law.  What is left in your theory?

MR FOSTER:   The Crown itself is exempted from the application of the Act.

KIRBY J:   No, that is not just the Queen.  What is it?

MR FOSTER:   No, the State Executive, except insofar as it carries on business.

KIRBY J:   Why is running a hospital not carrying on a business?

MR FOSTER:   That is a good question, your Honour.

KIRBY J:   And getting what on the whole are thought to be good financial arrangements with a reputable and major and, in some cases, only supplier in the nation?  Why is that not ‑ ‑ ‑

MR FOSTER:   Your Honour, it is a factual question and it was a question that was not open for consideration in the courts below because of the admission made by the Commission, my client, that they were not carrying on business in respect of this particular activity.  If one assumes for the moment that that was a correct admission, it does tend to throw up the incongruity between activities of this kind which are very close, as your Honour puts to me, to a business activity and yet because section 2B does not bite it, not only does the Executive obtain exemption from the Act but those with whom it deals to some degree unspecified, really, get the

blessing of exemption conferred by the mere fact of coming into contact with the Executive.

KIRBY J:   Yes, but that heart‑rending submission sort of falls on the rock, does it not, that if you wanted a wider immunity you could have widened section 2B in terms, explicitly, to catch a case like this.

MR FOSTER:   No it does not, because it leaves to the Executive or the polity a “narrowish”, if a can call it that, area of immunity, but it does not say anything about at all what the content of that might mean in the dealings of the immune polity with commercial third parties.  It does not say anything about that at all.  It does not resolve the question.

KIRBY J:   The problem is that the Federal Parliament has moved into this territory on certain assumptions, for example, that the Crown is in some way involved and that there is an immunity which, on a proper constitutional analysis, may not be correct.  At least that is a problem that I have.  If that is so, then the duty is to try to interpret what the Federal Parliament meant in enacting as it did and it does seem to accept that there is an immunity and it moves to repair and confine that, but not in a way that is specific to this particular case.  Well, why should this Court try to fix it all up and why not leave it to the Federal Parliament which has the power?

MR FOSTER:   It is quite specific to this case insofar as the polity is concerned.  It is only ever to do with the polity.  The one thing section 2B does not say anything about really, is the position of someone such as Baxter.  It is all left up in the air.  Your Honour, with respect, the rule of construction as reflected in the decision in Bradken is a judge‑made rule.  It has its fount in the court.

Your Honours, I think I have probably covered the points I wanted to cover.  May I simply stop now and come back to the one matter that has been left outstanding, if that is convenient?

GLEESON CJ:   Certainly.  Thank you, Mr Foster.  Yes Mr Yates.

MR YATES:   Your Honours, I wish to address oral submissions on three areas principally.  The first area concerns the scope and reach of the Act as a matter of construction.  The second matter is concerning what interests were seen in Bradken as being adversely affected if the Act applied to the non‑governmental party.  The third matter is what the legal situation of the States was in the present case, and how that situation would be affected if the Act applied to the impugned conduct.

Now, your Honours, just dealing with the first of those matters, the scope and reach of the Act, it is clear that in Bradken the Court by majority decided that the Act did not bind the Crown in right of a State because of the broad rule of construction that legislation does not bind the Crown in any right unless there are express words or a necessary implication to that effect.  Now, although in 1990 ‑ ‑ ‑

KIRBY J:   How does one interpret the use of the word “Crown” in that context?  It is there, it is in the statute and so the problem arises.  How does one interpret it?  Obviously, it is not just the Queen personally. 

MR YATES:   No, that is so, your Honour.

KIRBY J:   It is not just the Executive Government in its high governmental activities of the kind mentioned in the Melbourne Corporation Case.  How far does it go?  Does it go to privatise governmental activities, every agency?

MR YATES:   No, that is so, your Honour.

KIRBY J:   It is not just the Executive Government in its high governmental activities of the kind mentioned in the Melbourne Corporation Case and how far does it go?  Does it go to privatise governmental activities?  Every agency?

MR YATES:   Your Honour, that would be a question to be determined by a case by case basis, depending on the facts.  The limits of it are not certain and certainly they are in Bradken.  It was regarded as being the Executive of the State and the Crown was regarded as being the Crown in relation to each polity in the federation.

KIRBY J:   In that case it was the Commissioner of Railways.

MR YATES:   That is so, your Honour.

KIRBY J:   In this case, is it the State purchasing authority?  Is that the manifestation of the State or Crown that is involved?

MR YATES:   Yes, it was, your Honour.  There were various departmental arrangements in place which varied from State to State as to what each department was called and the case did not focus on the detail of that as a matter of fact for two reasons.  The first reason was that there was a concession on the pleadings that the State was not carrying on a business or any business, and the second reason is that it was convenient in those circumstances to simply refer to these bodies as State purchasing authorities by a generic expression.  The intricacies of it were not examined in any particular detail, although one would see reference to the various departments and committees and so forth in the facts and sometimes in the reason for judgment.

KIRBY J:   Is there anywhere where that is conveniently collected, the variation as between the different purchasing arrangements within the States?

MR YATES:   I do not believe it is, your Honour.  I can certainly check.

KIRBY J:   It is not a statutory authority, as I understand.

MR YATES:   I think in relation to New South Wales my recollection is that there was a State Contracts Control Board.

KIRBY J:   Set up within the Executive Government?

MR YATES:   I do not know, your Honour.  Once again, it was not explored in the evidence so I am not quite sure as to the manner of its constitution or the source of its constitution but also there were various committees and other bodies referred to.  Your Honours, in relation to that broad and general principle that I was talking about in Bradken that was applied, the Court in Bropho v Western Australia in 1990 of course subjected that principle to extensive analysis but in doing so it did not overrule Bradken as an authority on the Act.  Indeed, the majority Justices stressed that the effect of their decision was not to overturn the settled construction of particular existing legislation.

The authority of Bradken, your Honours, included the corollary that where the Act does not bind the Crown, it also should not be given an operation that would affect prejudicially the interests of the Crown in relation to transactions to which the Crown was party.  The authority of the majority decision in Bradken was unimpeached at the time that section 2B of the Act was enacted and the majority decision was at that time the settled and authoritative statement of the scope and reach of the Act as it involved the States.

We submit it should be accepted that the insertion of 2B into the legislation was not intended by the legislature to alter the settled view as to the scope and reach of the Act to the States and Territories other than by the specific permissive words of section 2B.

Thus, we would submit, that the effect of 2B is that certain provisions of the Act apply to a State or Territory when it is carrying on a business but not otherwise.  In effect, it carves out an exception to the position as stated by the majority in Bradken so that when a State or Territory is not carrying on a business the Act does not apply to it nor does it have an operation that would prejudicially affect its interests – that is to say the State’s or the Territory’s interests – in relation to transactions to which it is a party.  At that point, your Honour, it is convenient to have regard to what interests were seen in Bradken as being effective.  Your Honours will note from the passages ‑ ‑ ‑

KIRBY J:   That has a huge implication though.  It means every little tin‑pot contract that a State enters into, big and tiny, walks straight out of the Trade Practices Act for this purpose.

MR YATES:   I accept what your Honour says when the State ‑ ‑ ‑

KIRBY J:   And not only that, but every corporation that deals with the State walks straight out of the beneficial purposes of the Trade Practices Act, which is for all Australians, according to the preamble.

MR YATES:   That is so, your Honour, but Parliament’s intention is expressed through section 2B that the Act is only to apply to the States or a Territory when carrying on a business.  Of course it is otherwise when the State is carrying on a business.

Your Honours, in relation to the interests that were seen in Bradken as being affected, your Honours will recall from looking at the case this morning that the question was whether the Act applied to consensual conduct to which the Commissioner for Railways was a party so as to support the granting of injunctive relief and the injunctive relief was to restrain the corporate respondents from giving effect to the provisions of certain contract arrangements or understandings to which the Commissioner was a party and that was in relation to the purchase of equipment for the railway.

The second group of injunctions was to restrain the corporate respondents from engaging in the practice of exclusive dealing and your Honours will see that most clearly at page 123 point 5 of the reasons of Acting Chief Justice Gibbs, a passage to which Justice Hayne directed attention this morning.  May I invite your Honours to go to that page at point 5.  We see that:

The first two claims are for injunctions to restrain the respondent companies concerned from giving effect to the provisions of contracts . . . The third and fourth claims are for injunctions restraining certain of the respondent companies from engaging in the practice of exclusive dealing, which, according to the points of claims, consists in providing, or agreeing to provide, finance and/or financial assistance to the Commissioner on certain conditions.

So for some reason or other in the formulation of the case the exclusive dealing was treated somewhat differently than being contracts, arrangements or understandings.  Of course, as your Honours will be aware, exclusive dealing conduct is not predicated on the existence of a contract or arrangement or understanding or, indeed, any enforceable right at all.

It is clear, we would submit, that the Court saw the issue, at least the majority of the Court, as being one wider than whether the Act applied to affect prejudicially the States’ contractual rights.  If I could invite the Court to go to page 124, at about point 9, which is about six lines or so from the bottom of the page, Acting Chief Justice Gibbs said:

To hold that the Trade Practices Act applies to transactions which the respondent companies have made with the Commissioner, so as to frustrate those transactions, would be to give that Act an operation which would affect prejudicially the interest of the Crown.  Since the Trade Practices Act does not bind the Crown, it does not have that effect.

His Honour, we would submit, was careful in his use of the word “transactions” which echoed what his Honour had also said at page 112, four lines from the bottom of the page:

All the relief sought, if granted, would have invalidated, in whole or in part, a transaction to which the Commissioner was a party.

Similar words are used by the other Justices in the majority.  Justice Stephen at page 125 at about point 7, towards the end of the first paragraph of his Honour’s reasons, said:

What is left is the question whether Commonwealth trade practices legislation is to be interpreted as applicable to practices said to have been engaged in, in relation to a contract to which the Commissioner for Railways for the State of Queensland is a party.

GLEESON CJ:   How did they deal with arrangements or understandings as distinct from contracts?

MR YATES:   Your Honour, that is not clear on the reasons.  I think it is fair to say that their Honours slipped into a shorthand expression of simply referring to “the contract”.

GLEESON CJ:   What, in your submission, would be the position?  If you had an Executive Government that was a party to an arrangement or an understanding but not a contract, would the application of the Act to that affect relevantly an interest?

MR YATES:   Yes, I submit that it would, your Honour.

GLEESON CJ:   Why?

MR YATES:   Simply because it would be a right which the polity has to engage in certain conduct and ‑ ‑ ‑

GLEESON CJ:   Right or freedom?

MR YATES:   I think I can accept that the word “freedom” is an apposite expression in this context because it is a freedom from the lawful constraint that would otherwise be exercised upon the State or other persons so that, although it is apt to refer to it as a freedom, nevertheless, it goes to a matter of capacity under a particular law and so it is also apt to refer to it as a right or an interest and, we would submit, a legal right or legal interest.

GLEESON CJ:   But by hypothesis you have no contractual right, you have no chose in action.  What is the nature of the legal interest you have when you enter into an understanding?

MR YATES:   Your Honour, I can accept that the legal interest would not be characterised as a proprietary right or to give rise in a chose in action but the focus of the Act here is on conduct and it is the capacity to engage in conduct free from the constraint of the Act that can be seen, we would submit, as being an interest of a legal kind.  It may not be an enforceable interest ‑ ‑ ‑

HAYNE J:   But no matter whether you class this as right or freedom, the application of the term is conclusive of the question, is it not?

MR YATES:   That is so, your Honour.

HAYNE J:   It is conclusive of the question because you are dealing either with a bilateral arrangement but focusing only on the position of one of the parties.  If you say that one of the parties to a bilateral arrangement has a freedom to do something, are you confining attention only to the position of that person or are you saying something, which you seem to be saying, about the position of the opposite party?  If it is a unilateral piece of conduct, the actor whose conduct is in issue is not the Executive Government.

MR YATES:   Your Honour, the reason for classifying it as an interest or a right is to determine whether the immunity applies to the Crown firstly because obviously it is the Crown’s immunity that is called into question.  The focus is to ask whether that right or that interest is prejudicially interfered with if in fact the conduct of another is in effect interfered with by an application of the Act to that other.  So the focus always must come back to the right or interest of the party for whose immunity the immunity exists. 

In this case of course, it is always the Crown; it is not Baxter’s immunity.  As I will come on to submit to your Honours, the restraint upon Baxter would interfere, we submit, prejudicially with that capacity or entitlement of the State when not carrying on a business to engage in certain conduct, including the procuring or the inducement of particular conduct which of itself may contravene the Act.

GLEESON CJ:   Is that a convenient time, Mr Yates? 

MR YATES:   It is, thank you, your Honour.

GLEESON CJ:   We will adjourn until 2.15.

AT 12.44 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

GLEESON CJ:   Yes, Mr Yates.

MR YATES:   Thank you, your Honours.  Just prior to the luncheon adjournment I had made a submission to your Honours that it was clear that the majority in Bradken saw the issue as one being wider than whether the Act applied to affect prejudicially the States’ contractual rights.  I had referred your Honours to passages from the judgment of Acting Chief Justice Gibbs and Justice Stephen.  Can I complete that by giving the following reference to your Honours in relation to Justices Mason and Jacobs.  At page 136 of the report abridging to page 137 your Honours will see a heading that their Honours had inserted in their reasons:

If that is not the legislative intention, does such a contract arrangement or understanding as is alleged with the Crown in right of the State of Queensland or the provision of finance and/or financial assistance to that Crown on the conditions alleged fall within the prohibitions contained in ss. 47 and 47 of the Trade Practices Act?

Of course, lower down in a passage to which your Honours have already been taken, four lines down, their Honours said:

To strike down the contracts arrangements or understandings alleged would affect the exercise by the Commissioner for Railways, representing the Crown, of a right to enter into such contracts arrangements or understandings and to obtain finance in the manner alleged.

GUMMOW J:   Just look, Mr Yates, at page 111.

MR YATES:   Yes, your Honour.

GUMMOW J:   Do you see the last sentence in what is reported as Mr Masterman’s argument?

MR YATES:   Yes, your Honour.

GUMMOW J:  

We concede that the Commissioner is an instrumentality or agent of the Crown and wish to discontinue and proceed only against the other respondents.

MR YATES:   Yes, your Honour.

GUMMOW J:   That seems to have provoked some response.  All the Court had before it, do not forget, was a removal of a couple of pleas.  You see that at the bottom of page 108?

MR YATES:   Yes.

GUMMOW J:   There is the defence.

MR YATES:  Yes, your Honour.

GUMMOW J:   Then on the application of the Commissioner so much as raised by those two pleas.  Then they get here, then they found counsel wants to discontinue.

MR YATES:   Yes, although their Honours were reluctant to allow that to happen.

GUMMOW J:   Yes, indeed.

MR YATES:   Yes, that is so, your Honour.  Having taken your Honours to those passages, similar circumstances are at play in the present case in that what is sought to be restrained, for example, was the offering to enter into, entering into and giving effect to contracts, arrangements or understandings and your Honours best see that at page 17 of the appeal book, at paragraph 22 of the amended application.

Can I take your Honours to that particular paragraph because, as we understand it, the difference between the relief sought in paragraph 22 and the relief sought in paragraph 21 is that paragraph 22 is contingent upon there being a “Sterile Fluids Market” as opposed to separate markets referred to in paragraph 21 and, as events turned out, the learned primary judge found that there was a Sterile Fluids Market as opposed to the separate markets referred to in paragraph 21.  So it would seem ‑ ‑ ‑

KIRBY J:   There is no challenge to his Honour’s definition of the markets?

MR YATES:   No, there is not your Honour.

GUMMOW J:   So it looks like 22 or nothing.

MR YATES:   Yes, 22 or nothing, your Honour.  We would see 22 as seeking to apply to conduct which would seek to satisfy both sections 46 and 47 although, insofar as section 47 is concerned, the relief that was sought was not contingent upon there being the finding of a particular purpose or a particular effect and there may have been difficulties with the injunction being sought in those terms in relation to conduct characterised as being exclusive dealing.  But nevertheless, as your Honours see,  although there is a reference to a contract arrangement or understanding, quite clearly the injunction is directed towards conduct including making any offer to enter into a contract arrangement or understanding. 

Having taken your Honours to that, it is reasonably clear, we would submit, that the relief being sought, certainly by way of injunction, is aligned to that being sought in Bradken in the sense that, so far as exclusive dealing was concerned, there was an injunction to restrain the corporate respondents from engaging in exclusive dealing.

As your Honours will be well aware, the definition of “exclusive dealing” is not predicated on the existence of a contract but does include in terms the making of offers to supply goods or services at a particular price on the condition referred to in the definition of “exclusive dealing”.  In that sense the relief being sought relevantly in the present case is covering very similar circumstances to the relief that was being sought in Bradken insofar as the exclusive dealing was concerned. 

Before passing from the report of Bradken, may I deal with one matter which is that there was mention of a foreshadowed amendment in Bradken concerning what was generally described as pre‑contract conduct.  It is made clear, your Honours, on page 113 of the report in the judgment of Acting Chief Justice Gibbs at about point 4 that the pre-contractual conduct referred to was conduct “in which the Commissioner played no part”.

GUMMOW J:   Yes.  We have an advantage over you, we have read the transcript of argument. 

MR YATES:   I see, your Honour.

GUMMOW J:   The new case was to be a conspiracy but the Commissioner was not to be one of the conspirators and counsel hoped that would overcome his troubles.

HAYNE J:   The problem went away if counsel discontinued against that which was arguably the Crown.  The Court took a different view.

MR YATES:   Yes.  Certainly, your Honours, in the present case, as in Bradken, it cannot be said that the conduct engaged in, his conduct in which the States played no part, quite clearly the conduct in the present case was one in which the State was intimately involved in each case.

GLEESON CJ:   What do you mean by “involved”?

MR YATES:   In the sense, your Honour, that the States, as his Honour found, structured the invitation to tender and were in complete control of the tender including its terms and conditions, what products would be included in the tender, whether bundling of products was allowed which was simply just the name for contracts in which one form of sterile fluid was supplied with another form of sterile fluid ‑ ‑ ‑

GLEESON CJ:   Suppose there was a contravention of section 46 as found by Justice Allsop in relation to that Offer 1A, what was the States’ involvement in that?

MR YATES:   The involvement, your Honour, was to request that an invitation to offer, on a particular basis, be taken up and that was to supply all the sterile fluids except for the peritoneal dialysis fluids.  That, of course, was still bundling although not bundling as referred to in the pleading because the pleading when it referred to bundling was with sterile fluids and peritoneal dialysis fluids.

GLEESON CJ:   But if there was a contravention of section 46 – and we know that you argue against that – it consisted in taking advantage of market power for the purpose of damaging a competitor.  What was the State’s involvement in that?

MR YATES:   Your Honour, can I correct one matter.  The purpose that his Honour found was not the purpose in section 46(1)(a) but in fact the purpose in section 46(1)(c).  If your Honours would go to ‑ ‑ ‑

GLEESON CJ:   For the purpose of preventing a person from engaging in competitive conduct.

MR YATES:   Yes, and the specific factual matter which his Honour found characterised it to section 46(1)(c) was that at page 1119 of the appeal book in paragraph 610.  I should say by way of explanation that here his Honour was not, certainly in terms, speaking about Offer 1A, but this is the only part of his Honour’s reasons where he made a finding as to purpose in relation to section 46(1)(c).  Your Honours will have observed from the immediately preceding paragraph that his Honour was satisfied that a purpose within 46(1)(a) was not made out on the evidence.  In paragraph 610 his Honour states that the:

purpose within s 46(a)(c) is more problematic.  If s 46(1)(c) is directed to deterring or preventing Fresenius or Gambro or anyone else from engaging in conduct at any time in the PD market, I do not think Mr Lee or anyone else at Baxter had such a purpose.  Fresenius and Gambro (as well as B. Braun and Abbott) were large worldwide concerns.  Just as Baxter did not have a purpose to damage or eliminate them, it did not have a purpose to deter or prevent them from trying to gain sales in Australia by undertaking conduct in Australia, such as by submitting competing tenders.  Baxter’s purpose was to bid in such a way as would prevent rival bids in the PD market being “competitive”, that is likely to succeed over Baxter’s bid.

Just pausing there, your Honours, what the States were doing was inviting the States to put in their best bids to win the tender.  So in a sense, your Honour, the involvement in relation to the conduct which his Honour did find to contravene section 46 was in fact conduct that was responsive in the sense that a particular bid was asked for and it was made and of course, all along the States were seeking to exhort the tenderers to put in their best bids ultimately with a view to winning the tender.  That is what was on offer to the States.

GLEESON CJ:   Two sentences further on his Honour says:

That the approach was encouraged or tacitly or expressly approved by the SPAs is not to the point.

What do you say about that?

MR YATES:   We submit that it really was to the point.  I mean, I accept that we have this finding against us, your Honour, but there is nothing I can do about that, but to see it in its proper factual setting, we would submit that the bid was encouraged or approved and showed that it was responsive to what the States were asking, or what South Australia in this case was asking Baxter to do.  His Honour made a further finding at paragraph 698 of the reasons at page 1143 that:

A bid was called for.  One was given.  It may have disappointed SA.  But it was a response to the request.

GLEESON CJ:   It was not a part of your case, was it, that South Australia was proposing to your client that it should abuse its market power?

MR YATES:   Not in such bland terms, your Honour, but what South Australia, along with the other States in respect of their respective invitations, was doing was saying to bidders put in your best bid because what is on offer is at least the prospect of an exclusive supply contract.

GLEESON CJ:   If Justice Allsop was right, the breach of section 46 occurred before the State became a party to any contract.

MR YATES:   That is so, your Honour.

GLEESON CJ:   How then does Bradken touch that?  You had a completed contravention of section 46 with no contract agreement or arrangement between the State and your client.

MR YATES:   Your Honour, Bradken touches it in the sense that in relation to the conduct, particularly the exclusive dealing conduct, it did not matter whether there was a contract arrangement or understanding.  It was part of the consensual arrangements between the State and Bradken that finance would be provided.  So it is conditioned not so much on the making of an agreement, but on the fact that there was consensual behaviour that involved that conduct and that is where, we would submit, in the present case we are not arguing for an extension of Bradken, that the conduct really falls within the contemplation of what the majority found in Bradken, namely, that there was an interference with the transaction or the interference with the freedom of the State to enter into arrangements to suit its purposes.

Your Honours, that does bring me on to submitting to your Honours what was the legal situation of the States and Territories in the present matter.  I have already touched on this matter so in order to complete the submission I will try and avoid repetition.  We would submit that the Act regulates the capacity and entitlement of persons to engage in conduct, that is the starting proposition.  Where a State or a Territory is not carrying on a business it is unfettered in relation to the constraints upon conduct contained in Part IV and related provisions so that where a State or a Territory is not carrying on a business, it has the capacity and the entitlement to enter into contracts which have the purpose or effect of substantially lessening the competition.  It has the capacity or entitlement to engage in exclusive dealing conduct both generally and where the exclusive dealing is tainted with the purpose or effect of substantially lessening the competition.  And so, too, the State or the Territory can procure conduct that would be prescribed by the Act as well as induce conduct that would be prescribed by the Act.

If the State is prepared to engage in such conduct, it may be because it perceives its financial, administrative and governmental interests to accord with that course.  The State’s legal capacity is otherwise, of course, when it is carrying on a business and so the Act has a differential application to a State or Territory depending on whether or not it carries on a business.  Whether or not it is carrying on a business affects legally its capacity to engage in conduct regulated by the Act.  That is the legal situation of the States and Territories.

Can I once again remind the Court of the primary judge’s findings concerning the tender process and the conformity of Baxter’s bids to that process which we have set out in paragraphs 43 to 49 of our written submissions and I will not repeat that.  May I give the Court a reference to part of the transcript in relation to the position of South Australia which is to be found in volume 2 of the appeal books at page 339 at line 34, may I just read this to your Honours.  This question arose in the cross‑examination of Mr Battersby who was the servant within South Australia who was coordinating the tender.  He was asked:

Q.       The working group recognised, didn’t it, that offers which covered a range of products was a common industry marketing practice and it was its view that there was scope within the tender documents to allow it from the so-called bundled offers?

A.       The department’s view, and the evaluation team’s view, was that in the broader pharmaceuticals industry dealing with all products, this was not unusual, although not necessarily all that common, and it was through this process an invitation for those people who wanted to make an offer on that basis to do so, but it would be at the discretion of the department on whether it considered that it was interested or not.

CALLINAN J:   What page, I am sorry?

MR YATES:   I am sorry, your Honour, that was page 339 and I was reading from line 34.

CALLINAN J:   I have found it, thank you.

MR YATES:   Then over at page 340 at line 47:

Q.       I take it that, Baxter having been the sole supplier of products under the 1995 arrangements, the department wanted to know as part of this tender process what Baxter’s prices would be for the future supply of those products on the same basis on which it had previously contracted?
A.       Yes, recognising that there was a degree of leakage that was, I understand, permitted previously, but it may not have been encapsulated in any contractual arrangements.

Q.       In other words, Baxter had been supplying on a particular basis for a number of years to South Australia at certain prices, and in relation to, to use that terrible expression, going forward with the 2000 tender, the department wanted to know what prices Baxter could offer for the same kind of arrangement?
A.       And other firms in the market, yes.

So, despite what may be said about the behaviour or the conduct, it was clearly in the contemplation in relation to South Australia and the other States as well that what was sought to be elicited was at least an offer which was on the same basis upon which Baxter had previously been contracting with the States, and that is so say the so‑called bundled contract.

Your Honours, to restrain Baxter from offering to enter into an arrangement with the State by making the tender offer that was a conforming response within the contemplation of the State would be to impair the State’s lawful capacity under the Act when not carrying on a business to procure or induce such bids and be a party to such transactions.  So too would be to punish Baxter specifically to deter it or more generally to deter others from making similar offers.

It would be an interference with the State’s lawful exercise of its right and power to engage in this conduct and to procure it.  It would be in effect a use of the Act to remove that capacity and entitlement to engage in the conduct and in effect substitute it for the lack of capacity and entitlement that the Crown had or the State had when it was carrying on a business.

KIRBY J:   Your voice is beginning is take on an edge of outrage, but the whole purpose of this Act is to stop corporations like you engaging in this conduct for the benefit of all Australians.

MR YATES:   I was not seeking to voice any outrage, your Honour, but the fact was that the States not carrying on a business here had that freedom to act different from the freedom that the State would have had if it was carrying on a business.

KIRBY J:   What is wrong with saying the Act will not be construed to impinge on the States and no remedies can be sought or given against the States, but insofar as a corporation gets itself involved and dirties its hands in this business, then it is subject to the operation of the Act, which is what the Act on its face says.

MR YATES:   Because, your Honour, that would be in effect to apply the Act to the States in the sense that the States’ ability to be able to procure or induce or ask for those bids, the bids that it wants and it would like to consider accepting, would in fact ‑ ‑ ‑

KIRBY J:   All of this stands on the pin of Crown immunity doctrines which were developed in far centuries for the purpose of protecting the sovereign in counsel and all of this is imported on that theory that that is the way this Act has to be interpreted.

MR YATES:   Yes, it is, your Honour.  I mean, I have to fess up to that.  That is precisely the position. 

KIRBY J:   There is an air of unreality about all this.

MR YATES:   I submit not, your Honour, because in a practical sense, if the State is entitled under the Act to engage in particular conduct and to procure others to engage in particular conduct, then in a very practical way, by restraining the offers that have been asked for, in fact, the States capacity to behave in that way is effectively removed.  It is completely taken away from it.  That is why we submit that the corollary that was applied, for example, by Acting Chief Justice Gibbs in Bradken is relevant, because if the Act does not apply to the State, then it should not be given an

application which would otherwise affect the State or impair its interests because that would be effectively to apply the Act to the State.

Now, your Honours, that is, so far as the first respondent is concerned, where the issue in this case turns.  It is whether the immunity, of course, is attractive in relation to those circumstances, we submit, circumstances not unlike those in Bradken, closely similar circumstances we would submit.  Now, your Honours, that is ‑ ‑ ‑

CALLINAN J:   If Bradken still applies, you would never get to the position that you get to in Bradken because there would not be any negotiations that could lead to a concluded contract.

MR YATES:   That is right, your Honour, because those negotiations would be stultified.

CALLINAN J:   Is that not right?

MR YATES:   That is so, because that is what the appellant seeks in this case.

CALLINAN J:   Yes, that is what I mean.

MR YATES:   No, there is no doubt about that, your Honour and so the State would never be in a position to exercise those capacities under the Act.

CALLINAN J:   It would just be a question at what point perhaps anterior to the conclusion of the contract you go.

MR YATES:   That is so, your Honour, but of course the special circumstance in this case is that the bids that were made were not uninvited, they were not spontaneous.  The tender process was never dictated by Baxter.  The tenders were called at a time in circumstances and upon terms which the States themselves determined and the conduct was a direct response to that and permitted and encouraged.

CALLINAN J:   Could the States have legislated their way out of this under – was it section 51(1)(b)?

MR YATES:   That is possible, your Honour, to ‑ ‑ ‑

CALLINAN J:   Assuming they had to do that?

MR YATES:   That was what I was going to say, your Honour.  The assumption is that, in fact, the Act does apply whereas there is an anterior question which is, does the Act apply?

CALLINAN J:   Yes, but assuming it did, then that possibility exists.

MR YATES:   That possibility exists under section 51.  Your Honours, before sitting down may I just address one final point and that is this, that it is put in the appellant’s submissions that the only rights to be protected in this case are those that are legally enforceable rights.  It is not clear what is precisely captured by that expression.  It does not appear to find any expression or have any foundation in the cases but it has this problem and the problem is it provokes an anterior inquiry in each case whether in fact the rights are enforceable according to the particular circumstances that might be applying at a particular point in time.  So apart from having no foundation in the cases, it would not be really a workable tool for the Court because of that anterior inquiry that would have to be engaged in on each occasion.

KIRBY J: You have not in your written submissions and you do not in your oral submissions seek to support the immunity of which you take or seek to take the benefit on the foundation of any argument based on the federal Constitution or any implication of the Constitution?

MR YATES:   No, we have not, your Honour.  We have not.

HAYNE J:   Just before you sit down, Mr Yates, still staying with Bradken, my immediate observation of the points of claim which may have to be revised on looking at it further rather suggests that the points of claim are structured as a cascade, agreement is pleaded, the same terms are then said to be an arrangement, then the same terms are said to be an understanding and the relief that is claimed is cast in terms of agreement, arrangement or understanding.  When you go to the report of the case you see that there were complaints under section 45 and also complaints under section 47 but again it would seem likely that the section 47 conduct is a particular statutory characterisation of identical conduct which is put at its primary level as a section 45 breach.

MR YATES:   Yes, that is not apparent from the report.

HAYNE J:   Now, it may be that after argument is concluded the parties might, subject to what other members of the Court say, want to consider that and put in a note about it but at least that is my first impression and that much of what appears in the case takes on a rather different light when you see that what was really at stake was an agreement.  They were trying to restrain the Commissioner, counsel tried to get out that by saying, “I

discontinue against the Commissioner.”  “No, you don’t” was the judicial repost and hence Bradken takes on the form in its reasons that it does but these are matters that you may perhaps wish to later ask for leave to submit a note about.

MR YATES:   I am grateful for that indication, your Honour.  May it please the Court.

GLEESON CJ:   Thank you, Mr Yates.  Yes, Mr Solicitor for Western Australia.

KIRBY J:   I suppose I should call you Mr Crown.

MR MEADOWS:   I am happy for the title that I bear, your Honour, although I am here representing the Crown in the right of Western Australia, as section 2B describes it.  First, may I adopt what my learned friend Mr Yates has said, with one qualification and that is that we do not suggest that this is a case about the immunities of the Crown.  It may be that the provisions of section 2B have their genesis in some concept of that kind, but our contention is that this is simply a matter of statutory construction and giving effect to the intention of the legislature that the Act does not bind the Crown in the right of the States if they are not engaged in business.

GLEESON CJ:   Carrying on a business.

MR MEADOWS:   Yes.

KIRBY J:   Why is not carrying on hospitals carrying on a business?

MR MEADOWS:   We could get into an argument about that, your Honour, but that has been conceded that in the provision of public health hospitals, the State is not carrying on business.  In order to enter into a contract arrangement or understanding or any other arrangement which might be caught by the Trade Practices Act, a State will have to engage in or be party to conduct with another party.  If that conduct is conduct which would otherwise be proscribed by the Trade Practices Act, that cannot affect the contract arrangement or understanding which is ultimately entered into by the State.

The consequence of that is that if the conduct of the other party is also not proscribed by the Act because otherwise, as my learned friend Mr Yates has said, if it had that effect it would result in the State being precluded from engaging in or being party to such conduct when the Act itself evinces an intention that the State should be able to do that without offending against or contravening the Act.

In our submission, section 2B should be viewed in the light of this Court’s decision in Bropho in this way, that at that time the legislature was not only aware of the decision in Bradken and its effect that the Crown in right of a State was not bound by the Trade Practices Act and that third parties dealing with a State were insulated from the Trade Practices Act when dealing with the State, but also that if the legislature wanted to create a different situation, that is whereby a State would be bound by the Trade Practices Act, it had to clearly indicate that that was the case in the Act.

So that when it came to enacting section 2B and, for that matter section 2C, it was open to the legislature, subject to whatever constitutional limitations might have been applicable, to say that the Act applied to the States.  Instead of that it limited itself to making the Act applicable to the States only when carrying on business.

KIRBY J:   Was that amendment explained?  Was that nuance explained in the Minister’s second reading speech in support?

MR MEADOWS:   Yes, your Honour, it was.  If I could simply refer your Honour to, first of all, the second reading speech by the Assistant Treasurer, Mr Gear, which is attached to our submissions.  At page 2794 of the Hansard of the House of Representatives of 30 June 1995, and this is at page 2798, the first column on that page and the paragraph beginning at the bottom of that column:

Another major extension of coverage which is achieved by the bill is the removal of ‘shield of the Crown’ protection from state and territory government businesses.  A state or territory government department or authority, which represents the Crown, will now be required to comply with part IV of the Trade Practices Act to the extent that it carries on a business.

Certain forms of government activity, such as taxing, licensing . . . are unlikely ever to be legally construed as ‘business’.  To avoid any doubt, provisions have been included which expressly indicate that such activities do not amount to business.  Similarly, it is not legally possible for an individual entity to carry on business with itself -

and so on.

KIRBY J:   Would you just give me that page reference again?

MR MEADOWS:   It is at page 2798, Hansard, House of Representatives ‑ ‑ ‑

KIRBY J:   Yes, I have the Hansard.

MR MEADOWS:   If I could also refer to the explanatory memorandum, which is also attached to our submissions, this is the explanatory memorandum which was given to the Senate and this is at page 44 with reference to clause 76 of the Bill where reference is made to the “Insertion of new section (2B” and I direct the Court’s attention to paragraph 325 and on page 45, paragraph 329.

GLEESON CJ:   Mr Solicitor, exactly who is protected by section 2B(2)?

MR MEADOWS:   I suppose I could be glib by saying the Crown in the right of the State or Territory.

GUMMOW J:   Yes, that is what prompted the question.  No doubt, the Queen, who else?

MR MEADOWS:   We would say the Executive Government of the State of Western Australia.

GLEESON CJ:   What would you mean by that? 

MR MEADOWS:   That would mean the Governor in Western Australia and the Governor‑General at the Commonwealth level although this relates to States or Territories.

GLEESON CJ:   No, there is a corresponding provision in 2A.

MR MEADOWS:   Yes.

GLEESON CJ:   Apart from the Governor‑General and the Governor, who gets the benefit of section 2A(2)?

MR MEADOWS:   In constitutional theory the Executive Government operates through the Governor or the Governor‑General.

GLEESON CJ:   Does a Minister get the benefit of it?

MR MEADOWS:   Yes, we would say so, as a Minister who advises the Governor in ‑ ‑ ‑

GLEESON CJ:   And what about the head of a department?

MR MEADOWS:   Once again, the department is part of the Executive Government of the State which ‑ ‑ ‑

GLEESON CJ:   What about all public servants?

MR MEADOWS:   Yes, equally so. 

KIRBY J:   It is getting bigger and bigger.

MR MEADOWS:   They are all part of the Executive Government, your Honour.

KIRBY J:   Statutory agencies subject to the Minister’s responsibility to Parliament?

MR MEADOWS:   It would depend on the nature of the agency, your Honour, but certainly in some instances.

KIRBY J:   What was the agency of the State Purchasing Authority in Western Australia?

MR MEADOWS:   It was an arm of the Health Department.

KIRBY J:   Was it a statutory body or simply a departmental committee?

MR MEADOWS:   I am instructed, no.  It was simply a body within the Health Department which was involved in procurement.

KIRBY J:   Created out of the Executive power entirely.

MR MEADOWS:   Yes, your Honour.

KIRBY J:   Not under any statutory authority.

MR MEADOWS:   Except that the Health Department operates under the Health Act, but it is just a department of the State.

GUMMOW J:   The Queensland Commissioner for Railways?

MR MEADOWS:   I think the Commissioner was a statutory corporation.

GUMMOW J:   A statutory corporation solely.

KIRBY J:   Do we have reference to the statutory structure of the Health Department and the way it is set up in Western Australia?

MR MEADOWS:   There is no evidence in this case about that.

KIRBY J:   But this is a matter of public record if it is a statutory ‑ ‑ ‑

MR MEADOWS:   Your Honour was asking me the questions and I was answering them.  It was not in issue that the purchasing authority here was anything other than – I am trying to think of a word that does not have agency, entity or – yes a division of the Executive Government.

GUMMOW J:   In subsection 2B(3) “authorities of the State” are taken out and then there is a definition of “authority” in 4(1) which would look to bodies corporate, I think.  It looks like the Commissioner would be in.

MR MEADOWS:   I beg your pardon, your Honour?

GUMMOW J:   If the Commissioner for Railways is a corporation sole, he would be in, would he not?  He would not have the protection ‑ ‑ ‑

MR MEADOWS:   From prosecution, your Honour.

GUMMOW J:   Yes, that is right.

MR MEADOWS:   In terms of section 2B(1), of course, there would be protection in the sense that there would not be a contravention committed by that authority if it engaged in some prescribed conduct.

GUMMOW J:   The point is that when we say “bind the Crown” there is not only an ambiguity in “the Crown”, there is an ambiguity in “bind” because the Trade Practices Act is like an octopus really.

MR MEADOWS:   Yes, I appreciate that.

GUMMOW J:   There are all sorts of rights and liabilities and enforcement mechanisms that are established, and they can operate differentially.

MR MEADOWS:   I accept that, your Honour, but our proposition is that the intention of 2B is that the Act is not to apply to the Executive Government of a State.  My learned friend, Mr Yates, made the point and we would say, very appositely, that Bradken’s Case is really about the remedy that was involved in that case.  It was a case about seeking an injunction, an injunction against a party which, if granted, would have affected the contractual rights of the State.  We would submit that this is such a case.

GUMMOW J:   It is really a case on section 80.  The relevant binding is section 80.

MR MEADOWS:   Yes, your Honour.

KIRBY J:   Is that what you are defending here?  The right of the State through its purchasing authority to contract with whoever it wants without being impeded by the Trade Practices Act, even though on one view the Trade Practices Act offends the interests of consumers in the State, and perhaps the State itself by obliging the corporations that deal with the State and its purchasing authorities to conform to basic requirements of competition in the marketplace that secures the best prices for the products that the State acquires, purchases.

MR MEADOWS:   That is one view of the position, your Honour.  From the State’s point of view where it has substantial market power of its own as a consumer, it would see itself as perhaps being advantaged by being able to require suppliers to enter into what would otherwise be proscribed or to engage in what would otherwise be proscribed conduct.

KIRBY J:   But the State would not really know if it does not open up its market to competitors, at least in those areas of products which are susceptible to competition, as was the case with the dialysis product.

MR MEADOWS:   Well, it does engage in competitive tendering by having a tendering process and all suppliers were in a position where they could have tendered for this contract.

KIRBY J:   I may not fully understand the facts here, but did the State open up – did it get bids for the dialysis product from the competitors that were – as I understand it there were two competitors in Australia that were willing to bid for that product.

MR MEADOWS:   Yes, it did, your Honour, and it is mentioned in the evidence but perhaps I could get my learned junior to turn that up.  As I was putting to the Court, Bradken was a case about the effect of the remedy and we say that this is such a case.  A question was asked this morning about why were the States joined.  The fact is that the States applied to be joined because they became aware of these proceedings and the relief which was being claimed and the relief which is currently claimed and which was originally claimed clearly affected the contractual rights of the State in terms of the agreement which it had entered into with Baxter.

Our contention is that if the relief sought by the appellant was to be granted it would create a situation where the State would be effectively precluded from engaging in conduct which the Act would permit it to do simply because other parties with whom the State would wish to deal would not be able to engage in that conduct.

KIRBY J:   The State is making contracts all the time with millions of people, natural and statutory, and if your theory of the extent of the State immunity is correct, it takes a huge swag of operations outside the apparent ambit of the federal statute which attaches principally to constitutional corporations.

MR MEADOWS:   If I could come back to it, we do not say this is a case of Crown immunity.  We say it is a case of simply giving effect to the intention of the legislature that the States, if not carrying on a business, are not or do not fall within the prescriptions of the Trade Practices Act.

KIRBY J:   You, like the first respondent, make no reliance on any constitutional implication of the immunity of the State, as such, from the reach of the Trade Practices Act?

MR MEADOWS:   Perhaps I could say not in this case, your Honour.  We do not see that it is necessary to advance any argument in that area given the confines of this litigation.  So if we look at the relief which is sought by the appellant, and your Honours have already been taken to it, but one can see that if – this is at page 16 of appeal book 1.  You have already been taken to paragraphs 21 and 22 relating to the injunctions which are sought, but also you need to consider the declarations which are also being sought which go back, beginning at – right to the beginning of the application where various declarations are sought.

Now, the effect of those declarations would be to render the conduct which is there referred to as amounting to a contravention of the Act.  So far as the State itself is concerned, we are left with paragraph 22(a) where an order is sought which effectively reconstitutes the contract which the State had with Baxter, requiring Baxter to continue to supply on the same terms, but varying the terms otherwise. 

The effect of paragraph 22 is dealt with by his Honour Justice Allsop at first instance at appeal book 4 at page 1140 in paragraphs 682 to 685.  This starts at page 1139.  I simply draw that to your Honours’ attention to show that the relief sought there would have resulted in a completely different arrangement under which the fluids were to be supplied to the State.  So we say that that relief, had it been granted, would have clearly affected the legal situation of the State in the manner in which Justice Allsop outlines in those paragraphs.

My learned friend, Mr Foster, has made the point that these contracts are exhausted, which so far as Western Australia is concerned is almost the case in that, although the term of the contract has expired, it is still running on in respect of the sterile fluids aspect of the contract, but I understand that that will come to an end at the end of this month, but that is just by the by.  In terms of that relief, if a further contract were to be entered into in similar terms, then quite clearly it would impair the ability of the State to enter into a contract in like terms.

GUMMOW J:   But these findings could have a future life, could they not, under section 83?

MR MEADOWS:   Absolutely, your Honour, and, as I say, impair the ability of the State to engage in or be a party to the conduct which is said ‑ ‑ ‑

GUMMOW J:   They would be prima facie evidence of the facts.

MR MEADOWS:   Yes, your Honour.  In terms of relief, we would submit that it is also important to appreciate that not only will a contravention of the Trade Practices Act give rise to the risk of proceedings being taken for a contravention or proceedings being taken for an injunction under that Act, but it also has consequences at common law in that if the conduct in question is proscribed by the Trade Practices Act, it would render that contract unenforceable. 

If I could refer, if I could, to the case of Carlton United Breweries Limited v Castlemaine Tooheys Limited (1986) 161 CLR 543, that was a case where a contravention of the Trade Practices Act was pleaded by way of a defence.  It was sought to strike out that plea on the basis that the Trade Practices Act created a code, that the Federal Court had exclusive jurisdiction and that you could only bring proceedings under the Act.  It was argued by counsel, Mr A.M. Gleeson, QC, I see, that the ordinary common law ‑ ‑ ‑

GLEESON CJ:   He would do anything for money, Mr Meadows.

MR MEADOWS:   This is at page 547:

The ordinary common law consequence of making a contract in the face of a statutory prohibition against making the contract is that no action will lie on it in a court administering the common law.

GLEESON CJ:   I thought we dealt with this in a case two or three years ago.

GUMMOW J:   SST Consulting 80 ALJR 1190.

MR MEADOWS:   May it please your Honour.

GUMMOW J:   Is there any reference to Carlton there?  I think there is.

MR MEADOWS:   At all events, the ratio of Carlton United is at pages 554 to 555 where that submission was upheld, that the normal consequences attaching to illegality would follow. So, if it be the case that because the conduct of Baxter was prescribed by sections 46 and 47 of the Trade Practices Act, that would leave the State in a position where it had an unenforceable contract. 

The consequences of that, of course, would be that specific performance and other forms of equitable relief might not be available.  In that respect, if I could refer to Meagher, Gummow and Lehane in the fourth edition of their work on equity at page 655 and also to the case of Ewing v Osbaldiston (1837) 40 ER 561. We have provided a copy of that judgment to your Honours which effectively decides that where you have an illegal contract the court will not intervene to provide relief by the way of specific performance. The relevant part of the judgment is at pages 572 to 573.

GLEESON CJ:   When you say this is a question of construction I suppose it is a question of construction of the whole Act rather than 2B because 2B says it does bind in certain ways.

MR MEADOWS:   It does, yes.

GLEESON CJ:   The proposition for which you contend appears to be that the Act does not bind anybody if that would have an effect on the Crown in right of the State.

MR MEADOWS:   If it has the effect of making the Act apply to the State.

GLEESON CJ:   That is the question.  What kind of effect upon the State involves making the Act apply to the State?

MR MEADOWS:   One would be that you finish up with an unenforceable contract, two would be that no party would engage in or negotiations with the State which would involve conduct which the State is not proscribed from engaging and that is really where Bradken came from, that if you granted an injunction against the party who had dealt with the State you were effectively applying the Trade Practices Act to the State.

Just to answer Justice Kirby’s question about whether other parties were invited to and did tender, the document is at appeal book 3, page 849 where you will see the recommendations as to the preferred proponent and perhaps the particular detail that your Honour was looking for can be seen at pages 864, 865 and following.  You can see that there were three tenderers.  May it please the Court.

GLEESON CJ:   Thank you, Mr Solicitor.  Mr Solicitor for South Australia.

MR KOURAKIS:   If the Court pleases, can I make some brief submissions firstly on the question of the relief.  My learned friend, Mr Meadows, has taken your Honours to that part of the application that sought declarations.  It is those paragraphs 9 to 20 that in particular seek a declaration that supply pursuant to the contracts was unlawful and it is because those declarations are pursued irrespective of whether the injunctions or applications for injunctions are still in play that there remains a live question as to the contracts and whether conduct pursuant to contracts with the Executive Government comes within the scope of the substantive provisions of the Trade Practices Act and unless and until those declarations are withdrawn or not proceeded with that question remains a live question.

Your Honours, on the question of relief more generally can I make this submission, that the application of the Trade Practices Act to the Crown and the construction of its provisions arises both when considering remedy provisions like section 80, but also importantly when considering the proper construction of the substantive provisions, the norms of conduct in the Act.  Yes, plainly it is the case that section 80, for example, might be read so that the word “person” there appearing is read down not to include the Crown where section 80 ‑ ‑ ‑

GUMMOW J:   Exactly.  That seems to me the real question.  There is a declaration power in 163, is there not?

MR KOURAKIS:   Your Honour, of the Trade Practices Act section, I think it is not 163, but shortly after.  Sorry, it is, section 163A I am told.

GUMMOW J:   Section 163A.

MR KOURAKIS:   Yes.  Your Honours, the reason I raise this point is simply to make the point that a question of construction about the general word “person” arises in remedy provisions, but it also arises in construing the general words found in the substantive provisions and at both levels there is a rule of statutory construction that says that the general words would be read down unless a contrary intention appears and that was the effect of Bropho that I will come to in a moment.

KIRBY J:   What is the Crown of which you are speaking here in the context of South Australia?

MR KOURAKIS:   The Executive Government, its servants and agents.  The rule of construction extends to the Executive Government going down from the governor, Executive Council and its servants and agents.

KIRBY J:   Is there a purchasing authority in the State of South Australia?

MR KOURAKIS:   Yes, your Honour.

KIRBY J:   What did the evidence reveal about that or is it in statute?

MR KOURAKIS:   Your Honour, it is in statute and it is the State Supply Act 1985 and it sets up a procurement board, a State supply board that vets tenders and procurements and there is a division of authority between the relevant departments of the government that actually purchase and use the materials.

GUMMOW J:   Does the board have a distinct legal personality?

MR KOURAKIS:   No, your Honour, I do not think it does.  I am told it is a statutory authority, your Honour.  I was not sure that it was, in fact, incorporated.  Yes, it is ‑ ‑ ‑

KIRBY J:   If it is a statutory authority created by Parliament, why is it the Crown?

MR KOURAKIS:   There were a number of provisions throughout the Act, your Honour, that provides that it is an agency of the Crown, holds property on behalf of the Crown. 

GUMMOW J:   Just tell me about the incorporation.

MR KOURAKIS: It is section 6(2) of the State Supply Act 1985.

GUMMOW J:   We had better be supplied with that.

MR KOURAKIS:   Yes, I will make those provisions available.

GUMMOW J:   What does it say?

MR KOURAKIS:   The Act generally?  It constitutes the board, as I have just said, it incorporates it, it provides that the board can give directions to the departments of the government about procurement, set limits on the levels of delegations and ultimately give advice to the relevant authority to procure or at certain levels of procurement make the procurement itself.

KIRBY J:   So we have the interaction between the federal Trade Practices Act and the State Supply Act?

MR KOURAKIS:   Yes.

CALLINAN J:   Does it insist upon any sort of competitive tender process?

MR KOURAKIS:   It makes provision for the board to put those codes or provisions or directions in place.

CALLINAN J:   As a matter of obligation or ‑ ‑ ‑

MR KOURAKIS:   No, the board is simply given an authority to give directions about how those things occur.

GUMMOW J:   Do not glide away.  What about section 2B(3) of the Trade Practices Act?

MR KOURAKIS:   Yes, your Honour, that will only apply to the board insofar as the board carries on a business.  If it carries on a business, the Act will apply to it and because it is a corporation subsection (3) might mean that it is subject to criminal penalty.

GUMMOW J:   It looks like it is set up to carry on a business, I would have thought.

MR KOURAKIS:   Your Honour, engaging in trade or commerce is different from carrying on business and the provision, for example, of health services through public hospitals was accepted in this case and, in my submission, for good reason that that is not the carrying on of a business.

GUMMOW J:   We are worried about buying these items of equipment and treatment.

MR KOURAKIS:   Your Honour, that is trade or commerce but it is not carrying on a business.

GUMMOW J:   That phrase “carrying on a business” is a chameleon.  Plenty of cases say that, in the tax area in particular.

MR KOURAKIS:   Its colour in this case has been determined and the relevant procurement was not in the course of carrying on a business.

CALLINAN J:   It is one aspect of it, governing the State.  In order to govern the State, it has to carry out its obligations to the people of the State and that means that it acquires goods and services.  It does not mean it is carrying on business.

MR KOURAKIS:   No, that is right.

KIRBY J:   Well, that may be, it may be so, but it is carrying it on in the guise or in the personality of a creature made by Parliament, not something created by the Executive Government within the Executive Government.

MR KOURAKIS:   That is so.  Your Honours, the reason for that and creating some formal structure between the Minister directly and procurement or a chief executive officer and procurement of large amounts of money is a matter of prudential management.

GLEESON CJ:   Was this common to all of the three States that we are concerned with here, that they had a body corporate?

MR KOURAKIS:   Your Honour, New South Wales has put in provisions about their particular statutory structure and I cannot recall exactly how it compares with ours and as to Western Australia’s, I do not know.

KIRBY J:   I think we were told by Mr Solicitor for Western Australia that it nestles comfortably within the Executive Government of the State, but in your case it is a creature made by Parliament.  It is made by the Queen in Parliament.  It is not nestling comfortably in the bosom of the Crown.  It has its own separate statutory personality.

MR KOURAKIS:   Yes, but it is an instrumentality of the Crown, funded by the Crown, its procurements are funded ‑ ‑ ‑

KIRBY J:   Is there a case that says ‑ ‑ ‑

MR KOURAKIS:   Not that I am aware of.

KIRBY J:   I suppose the Commissioner of Railways in New South Wales was commissioned by the State Railways Act or the Railways Act of New South Wales?

MR KOURAKIS:   Your Honour, these questions will depend on the particular statutory background and construct and what happened in Wynyard and then in McNamara shows how that might change.  Your Honours, just returning to make a basic point about all of this, and it is the point really that my learned friend, Mr Meadows, has made, but can I make it by going to the decision in Bropho (1990) 171 CLR 16.

KIRBY J:   You did not seem to want to tarry over the State Supply Act.

MR KOURAKIS:   No, your Honours do not have that before you and it is a matter that your Honours will be helped with the actual provisions, but can I say that in this particular case, despite the involvement of the board, the ultimate contract was entered into with a government department, the Department of Health.  As I mentioned earlier, the role of the board is to set out certain prudential guidelines and provide advice on procurement but in this case the contract was in fact made by the Department of Health.

KIRBY J:   By the way, the appellant has put before us a memorandum which you will have seen indicating what has happened in a number of countries of the common law and there is a reference to Justice Story in the United States soon after the independence of that country, but this is a problem which I know has arisen in all ex‑colonies.  It has arisen in India, it has arisen in Singapore, it has arisen in lots of countries.  We do not have any material on what has happened in other countries except for the case in Ireland that I have mentioned where a view was taken that it was incompatible with the nature of the Irish State to have this immunity.  Do you know of any other ‑ ‑ ‑

MR KOURAKIS:   No, I cannot help your Honours any further on that, but I was going to make the submission – and I will in a moment – that the rationale for the rule or continuing utility of the rule, or purpose recognised by Justice Story, is one that continues to apply, and it is one for which we contend but, your Honours, at page 16 in Bropho ‑ ‑ ‑

GUMMOW J:   Wait a minute, if you are going to invoke Justice Story, you have to start thinking about section 64 of the Judiciary Act which is the elephant in the room in Bropho.

MR KOURAKIS:   Yes.  Your Honours, we are not dealing here with any question of substantive immunity of the Crown.  We are dealing purely with a question ‑ ‑ ‑

GUMMOW J:   That is this weasel word “immunity”, you see.

MR KOURAKIS:   In my submission, the reason I go to page 16 is simply to make the point that we are dealing with purely a matter of statutory construction, one which the Commonwealth or State legislature can deal with by express provision.  As their Honours in Bropho observed, there are some grounds ‑ ‑ ‑

KIRBY J:   It is a statutory construction question which, at least as far as I am concerned, appears to be posited on a false assumption about the constitutional character of a State under the Constitution of the Commonwealth of Australia.

MR KOURAKIS:   Your Honour, the Court in Bradken dealt with that constitutional position and the continued relevance of the common law rule to the States and I will come back briefly to that in a moment.

KIRBY J:   With respect, not very satisfactorily.

GUMMOW J:   No, it was not satisfactory because on the assumption that the Queensland Commissioner for Railways was the State, Bradken indubitably was an action in federal jurisdiction.  Why then do you give some special position to that litigant and not treat the case as one between subject and subject?

MR KOURAKIS:   Your Honour, because section 64 is subject to a contrary intention.  If the Trade Practices Act does not apply the substantive provisions, its substantive provisions, to the Commissioner or any other part of the Executive, then section 64 will not change the effect and Parliament’s intention in the Trade Practices Act.

GUMMOW J:   It is a bold submission about section 64.

HEYDON J:   Why do you say it gives way to a contrary intention?  It says “shall as nearly as possible be the same”.  Are those the words on which your submission depends?

MR KOURAKIS:   Yes, and your Honour, if there is a separate statutory enactment that does not bind the Crown that says in the Trade Practices Act, natural persons or private persons shall be bound, the Crown is not, then section 64 will not work to change that expression of parliamentary intention and parliamentary provision in the Trade Practices Act.

KIRBY J:   I suppose you would say that whatever the true constitutional position, where the Federal Parliament in the Trade Practices Act referred to the Crown in right of the State, that that should be read as the State if you take the view that that is the constitutional polity that is being referred to.

MR KOURAKIS:   Yes, I am sorry, your Honour, I am not sure that I have heard the first part of that ‑ ‑ ‑

KIRBY J:   I just have a fundamental problem of the Crown in right of the State. The State of the Commonwealth is not the Crown. It is not mentioned in the Constitution. The Crown is mentioned in the Constitution throughout it, but not in the context of the States of the Commonwealth.

MR KOURAKIS:   Your Honour, in Bradken, Acting Chief Justice Gibbs referred to the expression used by Chief Justice Dixon, I think in Farley, that the result of the Constitution is to have two governments under the Crown in the one Territory and that was one of the bases upon which he proceeded to accept and hold that the common law presumption about statutes not binding the Crown, or being construed not to bind the Crown, applied equally to the Crown of the legislature that enacted the statute and to the States.

KIRBY J:   I promise not to say it again, but all of that is 19th century thinking of the indivisible Crown of the British Empire.  It is not the States of the Commonwealth of Australia.

MR KOURAKIS:   Your Honour, the same reason that the principle is a convenient principle, that it is a principle that works in the interests of brevity, as their Honours observed in Bropho, applies equally to the Commonwealth and the State or the Crown Executive Government of the legislature that enacts the statute or another one.  It is simply a basis upon which that – what is sometimes referred to as the dialogue between Parliament and courts proceeds on this question in this country and it does aid brevity, allows the Parliament not to have to go through and enact a number of subsections every time it makes a general provision applicable to its subjects, knowing that this rule has a certain content that has been applied.

The reason for starting with that presumption is explained by his Honour Justice Story in a passage that was set out in Roberts v Ahern, again in Bradken, and again in the Commonwealth of Australia v The State of Western Australia.  I might take your Honours to that decision, that is Commonwealth v State of Western Australia (1999) 196 CLR 392. The particular passage from the judgment of his Honour Justice Story that I had in mind is set out at page 410 in the judgment of your Honour the Chief Justice and Justice Gaudron in paragraph 35.

Your Honours, essentially it is this that the policy reasons and objectives of making a norm of conduct apply to the subjects of the Executive Government may be very different to those that would be achieved if it was applied to the Government and I might add to that, of course, that the Executive Government is answerable to Parliament for the way in which it exercises any freedom of movement or conduct that the presumption allows it and that is an ongoing rationale of the rule.

Your Honours, whilst we are at that page of Commonwealth v Western Australia, can I take your Honours to paragraphs 33 and 34 because importantly those paragraphs discern in this question of the presumption really two presumptions that are very close, that resemble each other, but are in fact different.  The first presumption is that the statute will be construed so as to not apply to the Executive Government in the conduct by it or its officers – that is the presumption in paragraph 33.  It is a presumption that might be described as one that reads statute so that the freedom of conduct of the Crown and its servants in that capacity, that is in furtherance of governmental functions, is preserved and Roberts v Ahern is a classical case of the presumption working there to preserve that.

Paragraph 34 is a slightly different one and that is concerned with the construction of statutes so that the Crown is not divested of its property, rights, interests or prerogatives.

GLEESON CJ:   Now, that is the one we are concerned with, is it not?  According to the footnote, that is the one that was applied in Bradken and In re Telephone Apparatus Manufacturers.

MR KOURAKIS:   Yes.  Your Honours, in there lies a difficulty because of the very observations about the fact that arrangements do not involve any legal right as such.

GLEESON CJ:   Also in there lies a difficulty in the word “divest”.

MR KOURAKIS:   Yes.  But, your Honours, this case can be analysed by reference to paragraph 34, in my submission, because ultimately the impugned conduct is in fact the making of contractual offers.  The making of contractual offers involves the exercise of a legal power, not just the question of being free to contract.  The contractually competent person makes an offer that is recognised by the law of contract to comply with its requirements and formalities.  The making of the offer in fact is the exercise of a legal power.  That person’s position, at least contingently, is immediately changed and will be changed definitively if the offer is accepted.

GLEESON CJ:   Does that apply to arrangements and understandings?

MR KOURAKIS:   If the arrangement or understanding has reached the point of a contractually binding or at least capable of being binding offer being made, yes it does.

GLEESON CJ:   What if not and it is in contravention of the Trade Practices Act?

MR KOURAKIS:   Your Honour, if that is the case, I cannot identify a legal power or right that is involved in the arrangement, but the submission that is being made is that if the statute is construed to apply to that pre‑contractual conduct, it rather makes useless any residual operation of the presumption in terms of preserving or exempting the statute’s application to the contract itself.  It is that argument from absurdity or utility that is primarily pressed and I adopt the submissions that have been made about that as well.

I do in addition to those general submissions about pre‑negotiation contracts make the particular point that making a contractual offer is the exercise of a legal power.  His Honour Justice Kitto, particularly at the foot of page 396 in Wynyard, expressly includes legal powers along with rights and interests as matters to which the presumption goes, that is the statute will be presumed not to compromise, impair the exercise of a legal power. 

Now, your Honours, in my submission, plainly the words of his Honour Justice Kitto are not to be approached as if they were statute.  An emphasis on either just the broad expression “legal situation” is perhaps as wrong as emphasis on Justice Kitto’s reference to “proprietary rights or interests”.  At the foot of page 396, in my submission, one gets a fuller idea of what his Honour Justice Kitto had in mind at least.  In my submission, the making and acceptance of contractual offers entering into contracts falls within it.

Your Honours, can I just expand on that point really by reference to a provision that in a sense is a summary of section 47 in this case.  Section 47 effectively prohibits a person from negotiating or making an anti-competitive agreement with another person and, your Honours, it is clear that the presumption would work to read down the word “person” first appearing, that is, the Executive Government itself, would not be construed as coming within the provision if it itself engages in that conduct.  The relevant question here, relevant to section 47, is whether the word “person” second appearing also excludes the Crown, that is, whether, for example, a corporation is not within section 47 if the person with which they are negotiating, to whom they are making the offers, is the Crown? 

Your Honours, in my submission, the prohibition on a corporation from making an offer to the Crown is tantamount in legal effect for legal reasons the same as prohibiting the Crown from accepting such an offer.  The Crown cannot exercise the power to bind itself and others to a new set of legal rights and obligations if the offer is not made to it in the first place and prohibition against a corporation is precisely that.  To take the defence procurement example that your Honour the Chief Justice mentioned, on the ACCC’s construction these sections would apply to an agreement between the Minister for Defence and some Australian manufacturers on the basis that they will be the exclusive source of military equipment or hardware if they develop the capabilities so that Australia can develop its own defence capability, and then they give them an exclusive term for five years.

An international cartel arms dealer could make use of the Act construed as the ACCC contend, and say, “Well, look, the Commonwealth is immune, the Minister for Defence cannot be the subject of an action, no injunction would be brought against – no application would be brought against him, no penalties sought against him or her, but the local Australian manufacturers are nonetheless prohibited from even negotiating, making arrangements to enter into such an agreement, and proceedings can be brought against them.” 

Now, if the Court pleases, that effectively destroys the capacity of the Executive Government to discharge its functions because it effectively destroys their legal power to accept offers of that sort.  On a State level the same reason can be applied to an example of a State Department of Health coming to an arrangement with doctors to ensure that doctors remain available in a country town, in a country hospital, and it is the same sort of consideration that applies there.

GUMMOW J:   On this question of as nearly as possible, in Asiatic Steam in 96 CLR 397 at 427 Justice Kitto said:

if, in its original setting any provision of that law was so expressed as not to apply to the Crown, s. 64 nevertheless explicitly makes it applicable, as completely as possible, to the determination of the rights of the Commonwealth or State –

et cetera.  Therefore, in the Commonwealth v Miller the question was, well, what do you do about the Commonwealth giving discovery?  The answer the Court gave was you make the affidavit supplied by a suitable officer of the Commonwealth.  That is the idea as nearly as possible.  There is no difficulty in hooking this up.

MR KOURAKIS:   Your Honours, it still must remain a question of construction of both provisions together, but if that construction that is given paramountcy to section 64 prevails, it would effectively destroy the presumption which the Court in Bradken assumed continued and in Wynyard.

GUMMOW J:   We looked at that tobacco case from Western Australia, BAT.

MR KOURAKIS:   Yes.  Your Honours, that was the application of the constitutional provisions to the right to proceed with respect to a cause of action that was otherwise available.  This question goes to the question of construction, that is, what does the law provide for in the first place?  In fact, your Honour observed before lunch ‑ ‑ ‑

GUMMOW J:   It bears upon Bradken.  It does not bear upon this case because the relevant assertion of a special position paradoxically is not by the State.

MR KOURAKIS:   Yes, if your Honour pleases.  The anterior question is always, when one asks whether the Crown ‑ ‑ ‑

GUMMOW J:   It is the paradox that makes one wonder.

MR KOURAKIS:   Yes.  Your Honours, can I return to the question of Bradken and the absence of detail about the pleadings causes a difficulty and that has been observed, but subject to what might be discovered in the archives, can I make this submission.  What was removed was a question that arose on the pleadings.  As your Honour Justice Hayne has observed, the pleadings may well have been drawn in a way that had a cascading effect from contract down to understanding, they might have compacted it all within the same paragraph, but the fact remains that what was pleaded was in the alternative, contracts, arrangements and understandings.

The decision of the Court was that the defence relying on the presumption was a good defence to the entire claim, that is, insofar as it pleaded an arrangement and an understanding as well as a contract and what is more, that it was a good defence to that part of the relief that was limited to relief against the respondents other than the Commissioner.

Your Honours, that is the authority for which it stands.  There is nothing in Bradken that allows it to be confined on a construction of its reasons and what was referred to it.

HAYNE J:   Mr Solicitor, the point that I would be grateful for assistance about is whether when you go to the transcript in Bradken, when you go to the pleadings in Bradken, you find anything approaching the particularity of treatment of the matter that is implicit in the submission you have just made.  The point I raised earlier in argument was that my first impression of the papers that I have looked at so far is that it was the very antithesis of that particularity.

MR KOURAKIS:   Your Honour, whatever the level of detail of the attention, whatever level of attention was given, the ultimate decision is that.  Now, whether the matters that your Honour has raised or any others go to the question of whether the decision ought to be overruled is another matter, but, in my submission, what it stands for is clear.  It applies to non‑legally binding arrangements and to claims for relief based on those things directed to persons other than the Commissioner, and the decision is that the construction of the Trade Practices Act means that that conduct by non‑Crown parties is not amenable to the provisions of the Act.

Now, your Honours, there is an alternative basis on which, in my submission, Bradken can be supported, even accepting that an arrangement does not involve a legal right or interest, and that is by reference to the first limb identified by your Honour the Chief Justice and Justice Gaudron in Commonwealth v Western Australia, that limb of the presumption that preserves the freedom of the conduct of the Executive and its agents in furtherance of governmental functions.

Your Honours, if there is a provision that says, “No person shall negotiate to supply pharmaceuticals on an anti‑competitive basis”, then everyone agrees that the word “person” first appearing again does not include the Crown.  But whether the person with whom the negotiation is conducted also is read to exclude the Crown is yet another question.  In my submission, again, one would read the word “person” second appearing in such a provision, to exclude the Crown.  As trite as it is, it takes two persons to negotiate.  A prohibition against private persons negotiating with the Crown is in legal effect and for legal reasons a prohibition against the Executive Government negotiating with private persons.  It does not change that analysis or detract from it in any way if the government itself, the Crown itself, is not liable to penalty or relief.

HAYNE J:   Is the logical consequence of your submission that persons dealing with the Executive are not bound by the provisions of the Trade Practices Act regardless of whether the State Executive would wish that they were?

MR KOURAKIS:   Your Honour, the question does not depend on the wishes of ‑ ‑ ‑

HAYNE J:   Just so, does it not follow that the consequence is that those who deal with the State Executive do so freed from any restraint presented otherwise by the Trade Practices Act?

MR KOURAKIS:   If the general provisions of the Trade Practices Act have to be read down to preserve that freedom of conduct covered by the first presumption, the answer is yes, but that will depend on the provision and whether it can be read down and whether it is necessary to to preserve the freedom of action of the Crown.  The section 46 case mounted in this very case is an illustration of the difficulty that might arise.  Section 46 is not a section that can be read down by reference to the word “person” or the phrase “property of the Crown”. 

The general provisions in section 46 simply take advantage of market power.  The degree to which the presumption for which we contend can read down those general words “take advantage of market power” to exclude offers made by a corporation to the Crown, is the question in this case.

GLEESON CJ:   But on your submission, assertions of encouragement or solicitation or approval by the State of what is being done may be relevant to factual issues about taking advantage of or purpose, but they are irrelevant to questions of Crown immunity.

MR KOURAKIS:   Your Honour, there are submissions that have been made that rely on them and I do not want to detract upon it, but on the submission I make it is unnecessary to show that encouragement.

GLEESON CJ:   Unnecessary and irrelevant?

MR KOURAKIS:   Yes, on the submission I am making now, yes, but as I say, I do not detract from the submissions made by others or the judgment where that is relied on and the reasons for that, but on the submission I make, the approach for which I am now contending is that the question is to be determined on a construction of the conduct in fact within the terms of the Act.  That construction will require, at least as a presumption, that it exclude conduct which would affect the freedom of conduct and discharge of governmental functions by the Crown, and if in so excluding that conduct it also excludes conduct engaged in by others in what might be described as bilateral conduct, then that is the effect of the statute and it is not a question of the State Executive granting dispensations around the place by what it encourages.

Your Honours, just in closing, can I take your Honours to volume 2 of the materials just to make the point about the process.  I take your Honours to the documents that show the process contract of which we had spoken in our written submissions.  The request for tender starts at 364, but the invitation to tender appears in paragraph 1 at the top of page 366.  If your Honours go to page 377 your Honours will see under the heading, “Alternative Complying Tenders” tenders that vary to some extent from the invitation that I just took your Honours to are invited.  Next, if your Honours go to page 393 your Honours will see there the offer by the Executive Government to enter into a process contract with anyone who provides a tender.

That contract in terms of the obligations of the government is fairly bare.  It is simply to evaluate the tenders but implied into that would be some elements of fairness, the content of which is unclear, but at least there is that offer to enter into the process contract.  Then, your Honours, at page 431 your Honours will find Baxter’s tender.  Now, by entering into that tender Baxter has entered into the process contract of which I speak.  At

pages 447 and 448 there is an express entry into the process contract.  That is particularly at page 448. 

Now, your Honours, it was after that first tender and the making of the process contract that the offer which constituted the section 46 contravention was made and made in the way shown at pages 471 and 473 that I think my learned friend Mr Foster took your Honours to.  The point I simply wish to make is that plainly then this offer was an offer made pursuant to, in giving effect to, the process contract.  If section 46 is construed – in terms of the conduct, this is the only actual conduct with Baxter that constituted the contravention.  It was conduct in a certain context that made it a taking advantage of power, but the actual conduct was simply the making of the offer and, on the basis of the submissions I have already made, it is conduct then that the presumption would require be excluded from the substantive provisions of the Act because, if it were not, it would detract, impair the legal rights of the Crown under the process contract.  If the Court pleases.

GLEESON CJ:   Mr Solicitor for New South Wales.

MR SEXTON:   If the Court pleases.  There has been some discussion of the entity which negotiated with Baxter on behalf of the State of New South Wales.  In our written submissions there is an annexure which deals with the relevant statutory provisions, but your Honours also have, I think, the relevant regulation which is the Public Sector Management (Goods and Services) Regulation 1995.

KIRBY J:   Is there anything in the Act itself that is relevant?

MR SEXTON:   Only the regulation making power.  The Act was the Public Sector Management Act 1998.  Your Honours will appreciate that both the Act and the regulations have been overtaken by later statutory provisions but they are relevant for the time.  Your Honours, clause 5 of the regulation says that:

(1)There is established by this Regulation a State Contracts Control Board.

(2)The Board represents, and is an agency of, the Crown.

I think Justice Allsop notes that at one point in his judgment, although he otherwise refers to it as an SPA along with the other State bodies.

KIRBY J:   I think we are going to see a lot of the Crown being brought out, dusted off and used again in State legislation, particularly following the view taken concerning the corporations power.

MR SEXTON:   That may be so, your Honour.

KIRBY J:   Indeed, I think it has already happened. 

MR SEXTON:   There has been legislation in New South Wales, your Honour, yes, in relation to employees at various bodies. 

KIRBY J:   It may strengthen the power of the Crown in Australia.

MR SEXTON:   It is just the status of the employees, that is all, your Honour.  Can I just note for your Honours as well that clause 4 of the regulation sets out the objects of the regulation and clause 4(a) is to establish the basis on which the public service acquires goods and services or disposes of goods so as to maximise value for money and advantage for the public service within a framework of probity and fairness to suppliers.

KIRBY J:   Does it say anything about consumers, hospital patients, who ultimately bear the costs of these services generally or their insurers?

MR SEXTON:    I will take your Honour to a passage about what we say is the context of the patients in this, shortly.  The regulation deals with a whole range of aspects of the tender process and the supply process.  I will not take your Honours to those in details but your Honours have copies of that material.  On the general issue in the case, your Honours, we say, along with the others on our side I think, that it is a question of the construction of the Trade Practices Act and of section 2B in particular.  We say that section 2B, when it was enacted in 1995, assumed the result in Bradken so that it cut back on an existing situation where there was a total non‑applicability of the trade practices legislation to the States and, we would say, in the light of Bradken, because of the consequences for the States, to parties contracting or negotiating with them. 

That was the situation prior to 1995 and when section 2B was introduced it cut back on that position, that is, it applied the legislation in certain circumstances, but only in circumstances where the State carried on a business.  It is in that context that we would answer the Chief Justice’s question, the Chief Justice’s question being, what does it have to do with the Executive Government of the State if Baxter, for example, puts an offer to it that contravenes section 46 or, presumably, section 47 of the Trade Practices Act?”  We would say that the answer to that is that if the Trade Practices Act applies to that conduct on the part of Baxter, then effectively the State cannot enter into the kinds of contracts that were entered into in this case and that will be the result for the States.

Can I take your Honours to two very brief passages on that subject which I think your Honours have already been referred to.  One is in Bradken at 137 where Justices Mason and Jacobs said:

To strike down the contracts arrangements or understandings alleged would affect the exercise by the Commissioner for Railways, representing the Crown, of a right to enter into such contracts arrangements or understandings and to obtain finance in the manner alleged.

So their Honours were looking at the consequences there for the Crown in the right of State of Queensland of the application of the Trade Practices Act to the conduct of the other party to the negotiations effectively with the State Government.  We would also refer to a passage in Wynyard by Justice Kitto which is at page 393 at about point 2 where his Honour said:

Ordinarily, therefore, to  hold that a given statutory provision binds the Crown is to hold that it operates to destroy or curtail or impair some interest or purpose (Bank voor Handel en Scheepvaart N.V. v. Administrator of Hungarian Property) of the Sovereign as so considered.

So the words there “destroy or curtail or impair some interest or purpose . . . of the Sovereign” and that seems to us what would happen in this case if the Act were applied to the conduct in question.  The appellant, the ACCC, conceded, I think, acknowledged in the course of argument this morning that there was some immunity or, perhaps putting it more precisely, some non‑applicability of the legislation in relation to the States embodied in section 2B.  We would ask what the extent of that non‑applicability could be if it did not effectively cover contractual negotiations with those supplying goods and services to the State in the kinds of circumstances that are set out in these proceedings.  In other words, what would be left effectively for the States if the non‑applicability did not extend to cover the kinds of negotiations that took place here?  So that when it is conceded that there is some aspect of non‑applicability, it is very difficult to see what it could be in the light of my learned friend’s other submissions.

Your Honours, there is one further matter which was raised by Justice Kirby, the question of the patients.  If I could take your Honours to page 1027 of the appeal book.  It is at paragraph 217 of the judgment of Justice Allsop, and I do not think there is any dispute about these factual matters in his Honour’s judgment where he says there that:

It appears that there was a substantial difference in cost between Baxter’s item-by-item offers (with so called “cherry pick” prices) and Baxter’s bundled offers.  For example, total IV solutions under Offer 1 would cost $7,764,024 in the first year whereas under Offer 5 they would only cost only approximately $5,011,764.

In a situation where it is acknowledged that the State was not carrying on a business, and we would say that that was concession that was rightly made where this is the conduct of the public hospital system, what the States are doing are providing services to persons, in this case particularly to patients, and this was a situation where what that example indicates is that it was a question of whether more services could be supplied for a particular amount than if the contract was negotiated in a different fashion and arrived at with a different price. 

So that, in our submission, that is an indication here of the fact that there is a real issue as to the amount of services that can be provided by the States in these kinds of circumstances and it indicates why in the context of section 2B there is an important distinction between the carrying on of a business and the provision of public services and that when ‑ ‑ ‑

KIRBY J:   Could you answer this question?  It looks to an outsider this is a cosy deal between a large State for its convenience and a large corporation for its advantage and profit to the neglect of the power and force of the market which the hypothesis of the Trade Practices Act works to the advantage of the ultimate consumer.  Now, Mr Solicitor for South Australia says, well, the flaw in that reasoning from an economic point of view is that the State is a big player and has its own powers of monopoly or oligopoly in the market and therefore it can work its own levers and that is what it wants to be left to be able to do.  Is there any other or better answer than that?

MR SEXTON:   We say that ‑ ‑ ‑

KIRBY J:   You say that is enough.

MR SEXTON:   No, we say it is enough, your Honour.  But the point that I was just making is that the ACCC puts this on the basis of a value, an inherent value in competition generally and for perhaps consumers on a nationwide basis.  We understand that argument.  But in this particular case the provision of services to patients, there was simply going to be more products available and more services available for a lesser amount of money than if these contracts could not have been negotiated in this way.  So in an economic sense, one might way up those two competing values or interests, but really we would say it comes back to the question of construction of the legislation and that is why I say that in the situation where the States are not carrying on businesses that there is a real conceptual distinction between those two kinds of conduct.

GLEESON CJ:   The problem as the first Trade Practices Commissioner used to point out, was that once you get rid of a competitive environment, the value that it is likely to prevail is people’s desire for a quiet life.

MR SEXTON:   Well, I can understand, your Honour, why someone in that position – and I am not being critical – wants to have a universal application but it is really a question of where I started was to say that we say that there are certain assumptions in section 2B.  Now, they may be right or wrong in an economic sense.  The reality is, of course, that the Commonwealth Parliament can amend section 2B at any time if it takes that

view.  The question is what view did it take when it enacted it, we say, and we say that it made certain assumptions and that one of those assumptions was what the apparent result – we note what Justice Hayne says about Bradken in the course of argument ‑ ‑ ‑

HAYNE J:   Can I just play out that assumption for a moment with you in the context of 47(2) of the Act, which you would need before you, and the facts of Bradken.  If you go to 47(2), an aspect of the facts in Bradken was that the allegation was that BHP was alleged to have offered to supply services, namely finance, on condition that the person to whom BHP supplied the services, the Commissioner, did not acquire goods, steel or rolling stock and other steel products from competitors of BHP or its related corporations.  That was the allegation.  Who knows how it ever came out.  What is the construction of section 47 that you say reflects this assumption that we find in 2B.  How do you wrestle with the words, Mr Solicitor?  You have to say, have you not, that the person who is receiving this offer to supply services, if it is the Executive Government, what?  Where do you go from there?

MR SEXTON:   In this case, your Honour ‑ ‑ ‑

HAYNE J:   No, no, grapple with my example, not this case, grapple with my example and tell me how you construe 47 consistent with this assumption.  You may be able to, but I need to know how.

MR SEXTON:   Your Honour, what we say is implicit in 2B is that it allows the State, firstly, to accept an offer in the terms that your Honour puts, and it allows it to negotiate to the point of offer and acceptance.

HAYNE J:   I do not think that is grappling with the construction problem.  Perhaps it is, but it does not strike me instantly that it is.

GLEESON CJ:   Mr Solicitor, would you like to come back to us in the morning?

MR SEXTON:   I am not sure if my friend has much, but I am really finished, I think, your Honour.  I was just about to finish, and so it may be that I am not sure ‑ ‑ ‑

MR FOSTER:   I do not wish to reply, if the Court pleases, because we take the view that the matter ‑ ‑ ‑

KIRBY J:   You will have to come to the microphone.  It will not otherwise be heard or recorded.

MR FOSTER:   I am so sorry.  If my learned friend has finished, I can indicate to the Court I do not wish to reply.

GLEESON CJ:   All right, we can finish now, Mr Solicitor.  Go ahead ‑ ‑ ‑

MR SEXTON:   I have finished, if the Court pleases, yes.

GLEESON CJ:   We will adjourn our decision in this matter, and we will adjourn until 10.15 am tomorrow.

AT 4.18 PM THE MATTER WAS ADJOURNED