BHP Billiton Iron Ore Pty Ltd v National Competition Council and Anor

[2008] HCATrans 260

[2008] HCATrans 260

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M17 of 2008

B e t w e e n -

BHP BILLITON IRON ORE PTY LTD

Appellant

and

THE NATIONAL COMPETITION COUNCIL

First Respondent

FORTESCUE METALS GROUP LIMITED

Second Respondent

Office of the Registry
  Perth   No P6 of 2008

B e t w e e n -

BHP BILLITON IRON ORE PTY LTD

First Appellant

BHP BILLITON MINERALS PTY LTD

Second Appellant

and

THE NATIONAL COMPETITION COUNCIL

First Respondent

FORTESCUE METALS GROUP LIMITED

Second Respondent

GUMMOW J
KIRBY J
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 29 JULY 2008, AT 10.27 AM

Copyright in the High Court of Australia

__________________

MR A.C. ARCHIBALD, QC:   May it please the Court, in these appeals I appear for the appellants with my learned friends, MR M.H. O’BRYAN and MR P.D. CRUTCHFIELD.  (instructed by Blake Dawson Lawyers)

MR C.M. SCERRI, QC:   Your Honours, in both appeals I appear with MR I.B. STEWART for the National Competition Council.  (instructed by Clayton Utz)

MR S.J. GAGELER, SC:   If the Court pleases, in each appeal I appear with MR N.J. O’BRYAN, SC and MR J.C. GILES for Fortescue Metals Group Limited.  (instructed by DLA Phillips Fox)

GUMMOW J:   Thank you.  You have an application, Mr Young?

MR N.J. YOUNG, QC:   Yes, your Honour.  I appear with MR P.W. COLLINSON, SC.  We seek to intervene in support of the appellant on behalf of Rio Tinto Limited.  (instructed by Allens Arthur Robinson)

GUMMOW J:   Is that opposed?

MR YOUNG:   No, your Honour.

GUMMOW J:   You did not intervene in the Federal Court.

MR YOUNG:   No, we did not.

KIRBY J:   Does it affect the time estimate that you gave us at the special leave hearing?  You said that this would all be over in a day.

MR YOUNG:   No, it does not, your Honour.  There have been discussions between counsel to that effect.

GUMMOW J:   How long would you need for oral submissions if you were to get leave extended to that?

MR YOUNG:   No more than about 15 minutes, your Honour.

GUMMOW J:   Very well.  As between you and Mr Scerri, Mr Gageler, is there any agreement as to who goes first?

MR GAGELER:   Yes.

GUMMOW J:   We would prefer, actually, to hear from you before we heard from Mr Scerri.

MR GAGELER:   We would prefer it that way as well, your Honour.  The agreement is that I go first.  We were hoping to have half of the time for argument between us.

GUMMOW J:   We will see how things are going at lunchtime.  It is not imperative that we finish today.  If it runs over to some fairly short period tomorrow morning, so be it.

MR GAGELER:   If the Court pleases.

GUMMOW J:   I should have said, Mr Young, you have that leave.  Yes, Mr Archibald.

MR ARCHIBALD:   If the Court pleases, Part IIIA of the Trade Practices Act can be engaged in two ways.  One is by the undertaking process.  The other is by the declaration process.  The undertaking process is dealt with under Division 6, which commences with section 44ZZA, and all that need to be noticed for present purposes is that Division 6 is enlivened when a provider of a service or a person who expects to be the provider of a service, proffers an undertaking to the Commission in connection with that service.  The undertaking may or may not be accepted.  We do not need to address why that may or may not occur, but it is the service that is the subject of the undertaking. 

The second way in which Part IIIA may be engaged is by the declaration process.  The declaration process is dealt with under Division 2 and it is with that process and the subject matter of that process that these appeals are concerned.  Section 44F within Division 2 identifies the enlivening step which is the making of an application to the National Competition Council, the first respondent, seeking a recommendation for declaration.  Again, the subject matter of this enlivening step is a service, a particular service and the application will seek that the service be declared. 

The Council’s function identified in section 44F(2)(b) is to make a recommendation to the designated Minister, which is the Treasurer, either that the service be declared or not be declared.  And the Council under section 44G(2) is precluded from what I’ll call an affirmative recommendation, a recommendation that a service be declared.  Such a recommendation cannot be made unless the Council is satisfied of the six matters set out in the subsection.  The six matters are commonly and conveniently called the declaration criteria.  So if all six are satisfied, it is open to the Council to recommend that a service be declared.

GUMMOW J:   The actual declaration is by the Minister, is it not?

MR ARCHIBALD:   Yes, there is a two‑step process.  The Minister cannot declare unless the Minister receives an affirmative recommendation and so the first step is to secure the Council’s recommendation.  If the Council does not recommend, the matter goes no further, and the Council cannot recommend unless the declaration criteria are satisfied.  Once a declaration is made in favour of declaration, the matter then goes to the Minister.  That is dealt with in section 44H.

GUMMOW J:   That power of the Minister, does that attract the Administrative Decisions (Judicial Review) Act?

MR ARCHIBALD:   I think there are some aspects that can attract the operation of that Act, but the substantive review for which provision is made in section 44H is a review by the Australian Competition Tribunal.

GUMMOW J:   The footing in the Federal Court for this present dispute is 39B of the Judiciary Act?

MR ARCHIBALD:   Yes, effectively.

GUMMOW J:   A matter arising under a Commonwealth statute?

MR ARCHIBALD:   Yes.  So, just noting again for completeness what it is that the Minister does, the Minister is obliged to decide whether to declare the service or not.  Again, under section 44H(4), decision in favour of declaration of a service requires that the Minister be satisfied of the same six matters, the declaration criteria, and a decision is to be made within a stated period.  I am sorry, I think I said the review occurred under section 44H.  It is in fact dealt with in section 44K and it is a merits review.

GUMMOW J:   And from there to the Federal Court on a point of law, I suppose?

MR ARCHIBALD:   Yes.  So the criterion of declaration, as with the criterion of undertaking, is a service and “service” is dealt with in the definition provision of section 44B.  The focus of the Hilmer Report which is frequently mentioned in the materials in these appeals was not a service but the facility and so the focus of the Act is moved somewhat from the facility itself to that which is provided by means of the facility.  That is why I was emphasising the criteria for the two ways in which the parties engaged and why we go to the definition of “service”.

HAYNE J:   In what sense is the word “service” used when we go to 44B and read:

service means a service provided by means of a facility –

the word “service” where second appearing is used in what sense or with what meaning?

MR ARCHIBALD:   It is used with its ordinary denotation, its meaning in common parlance although within, one might say, generally the commercial context, but it simply means that which provides some benefit or advantage, no doubt, for which there is a need, a perceived need.

HAYNE J:   The closest meaning I could find in the OED seemed to be meaning 23:

Supply of the needs of (persons, occas. of things) ‑

The last example given is Stevenson’s Kidnapped:

On the south shore they have built a pier for the service of the Ferry.

Now, is that the sense in which “service” is used?  If it is not, despite there being, whatever it is, four or five pages of the OED devoted to the word, I do not quite know how it is used. 

MR ARCHIBALD:   That is the meaning which it has, as a perceived need, because it is simply the proffering to those who might take advantage of the service of a particular supposed advantage and if does meet the need, then it will be satisfied by the service.  It is not a technical meaning.  I should draw the Court’s attention to the circumstance that the plural of the noun is defined in section 4 of the Act in a rather more elaborate way.  It is not entirely clear that the plural definition reflects the singular use of the noun here, but there is no friction between the two in our contention.  The definition again is an inclusive definition.  The definition is that:

services includes any rights –

I leave out the parenthetical phrase –

benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce –

and then there are some provisions about what else is included and what is excluded, contract of service, for example.

HAYNE J:   In that sense “services”, I would have thought, was used to refer to the section of the economy as the OED has of the “supplies needs of the consumer but produces no tangible goods”.

MR ARCHIBALD:   Maybe and the plural definition, of course, is no doubt provoked by the expression “goods or services” which appears elsewhere in the Act.  But there is no disharmony between the concepts and advantage responding to need – proffering of advantage responding to need is the essence of the notion of service.

GUMMOW J:   There are various provisions in Part IV which would engage this broader definition of “service”.

MR ARCHIBALD:   Yes, and in Part V.

GUMMOW J:   Yes.

KIRBY J:   Given the importance attached by Justice Greenwood to purpose, do we have available to us the relevant parts of the Hilmer Report?

MR ARCHIBALD:   Yes.  On our list and in our materials we have chapter 11.  We have a folder of our materials if the Court wished a separate working bundle, but the Court no doubt, I think I can see, has available some material.  We have referred to chapter 11, the title to which is “Access to ‘Essential Facilities’” and the most pertinent passage commences at page 250 and continues to the middle of page 253. 

The Hilmer Committee recommended a legislative right of access.  As I have noted already, the subject matter of its recommendation was rather the facility than the service.  The Committee, as the Court will see from the foot of page 250, contemplated that the matter be dealt with administratively by the Minister by reference to three criteria.  Those three criteria are then set out in the ensuing pages and one observes that the Hilmer three criteria are not coincident with the legislated six criteria.  There are some common elements or themes, but they are by no means identical and the Hilmer Committee ‑ ‑ ‑

KIRBY J:   Not necessarily now, but at some stage I would be helped by your analysis of what you say was the purpose of the legislation from an economic point of view.

MR ARCHIBALD:   Yes, we will certainly deal with that, your Honour.  So Hilmer proffered three criteria and as a fourth so‑called criterion contemplated that the ministerial discretion be exercisable only upon the recommendation of an independent body; that is criterion four.

GUMMOW J:   An answer to Justice Kirby’s inquiry may appear in the Hilmer Report itself at page 240, might it not, under the heading the “‘Essential Facilities’ Problem”?

MR ARCHIBALD:   Yes, indeed, as elaborated upon or discussed in the ensuing pages and the discussion on page 251 may have particular significance for the issues here because the discussion at 251 mentions the case of production processes and draws attention to the need to avoid by an access regime the occasioning of undesirable disincentives to investment.

So that unless you protect the production process, you might as economists tend to say chill investment incentives and that will have its own undesirable consequences for the Australian economy.

KIRBY J:   Or the undesirable duplication of facilities as they had in Canada with the two great national railway lines.

MR ARCHIBALD:   Yes, that certainly can be so.  Those are elements we will return to but we accept what your Honour the presiding Judge observes about where one might find in Hilmer the indications of purpose and, generally, while not an exact reflection of the Hilmer concepts, we accept that Part IIIA does pick up themes or elements of the Hilmer Report in this respect, although implemented in somewhat different ways than was the subject of the explicit recommendation of the committee.

GUMMOW J:   Does the Hilmer Report deal anywhere with the prospect of just terms or the necessity for just terms?  I could not find them in the extracts we have.

MR ARCHIBALD:   Not eo nomine at all, I think, but at page 253 and following there is a general discussion of appropriate pricing for access that is afforded.

GUMMOW J:   And in Part IIIA is there such a provision?

MR ARCHIBALD:   There is the saving provision, the safety net provision which is found in section 44ZZN in the Miscellaneous division at the end of the Part.

GUMMOW J:   The payment is by the Commonwealth.

MR ARCHIBALD:   Yes, and otherwise in familiar form.

GUMMOW J:   Thank you.

KIRBY J:   That is because it is the Commonwealth’s imposition by its legislation that affects the acquisition, presumably.

MR ARCHIBALD:   Yes, but the Commonwealth accepts the burden of the compensation as well.

KIRBY J:   It is very generous of the taxpayer.

MR ARCHIBALD:   So “service”, in our submission, has the meaning that has been the subject of discussion.  Again, “facility”, has its common or ordinary meaning, albeit in a commercial context, that that which makes something possible or makes what is possible easier.  Nebulous in articulation in that form but simply reflecting a variety of subject matters which will yield a service of the kind discussed.

HAYNE J:   Is it as general as that or it used in the sense of a physical means for doing something?

MR ARCHIBALD:   There are no indicators of physical limitations on the concept and there is no reason, in our submission, to confine the meaning to that kind of facility which has physical connotations.

HAYNE J:   That, I think, may take the use of the word “facility”, or its more common use “facilities”, beyond, I think, recognised dictionary meanings, Mr Archibald.

MR ARCHIBALD:   The Shorter Oxford certainly is in terms that have as probable limits physical elements, equipment and the like.

HAYNE J:   And so does the longer OED.

MR ARCHIBALD:   Often the case.  There is accuracy in brevity in that work.

CRENNAN J:   Certainly “infrastructure facility” as a compound phrase conjures up things like roads and rail tracks ‑ ‑ ‑

MR ARCHIBALD:   Certainly that does, but ‑ ‑ ‑

CRENNAN J:    ‑ ‑ ‑which have an inertness about them.

MR ARCHIBALD:   Infrastructure facility is a species of facility, but the reasons that I am staying with the proposition that it is wider is really grounded in two matters.  One, although we do not need, I think, in this case to look at it closely, it is tolerably clear that the essential facilities doctrine in United States jurisprudence does extend to intangible facilities and the second matter is that one probably has something of an internal indicator in the definition of “service” deriving from paragraph (e), “the use of intellectual property”.  So that the contemplation would be that an intangible facility may consist, certainly in part of intellectual property and we would say there is no reason why it could not be the entirety, perhaps in conjunction with computer software, in conjunction with hardware, for example.  There are those indications, but it probably makes little difference for the purposes of our argument here.

Whether there be or not be physical limitations, the reference to “facility” in the opening words of the definition is entirely general, in our submission.  It is not confined to what are called infrastructure facilities in paragraph (a).  It is not confined to major facilities.  Any facility will do, subject no doubt to a de minimis concept.  But it is general and the associated point is that no feature of the definition of “service” requires that the service have features which would conduce to satisfaction of the declaration criteria.

The question whether a service will satisfy the declaration criteria is separate from and independent of the concept of “service” itself.  No doubt, therefore, there can be a multitude of applications for services which are competent applications because the subject matter answers the description of a service as defined, but those applications, although competent, have low prospects of yielding an affirmative recommendation for declaration.  So that there are strong filtering or screening elements to occur at the stage at which a decision is made as to whether or not to recommend the filter – at least the relevant part of the definition of which I am presently speaking – the filter is not applied or applied strongly at that point.

Of course, if an application is entirely frivolous it may be dealt with peremptorily.  One notices that section 44F(3) allows that:

the Council may recommend that the service not be declared if the council thinks that the application was not made in good faith.

I am sorry, section 44F(3).  There may be a competent application, but not in good faith, may be dealt with in that way.  One does not conflate the question as to what is a service as defined with the question, will the service as defined in fact satisfy or likely satisfy the declaration criteria?

So the opening words – I will call them the prime subject matter of the definition – are broad.  One then has words which include particular subject matters, that is (a), (b) and (c) of the definition.  I will leave (a) for the moment, if I may, but return to it; (b) and (c), in our submission, with tolerable certainty would be included in the prime subject matter of the definition in any event.

GUMMOW J:   Why does not the use of the words “and includes” mean “for example”?

MR ARCHIBALD:   It likely does.  It is illustrative, as we have put it, providing examples, or confirmatory in case any doubt was entertained by any person as to whether the identified matters were or were not within the general conception.  As to (b), we would say it certainly would be and is therefore an example, and so too with (c).  There is nothing in the extrinsic materials that we have found that provides any sure guide as to what has stimulated the inclusion of (b) or (c) or, for that matter, (a) in the definition.  One does note as to (c) that there were already provisions in separate legislation governing at least telecommunications access and there may have been some concept that because that subject matter was dealt with elsewhere it might be thought that that subject matter or cognate aspects were not dealt with by this ‑ ‑ ‑

GUMMOW J:   Do we have a reference to that anterior legislation in the communications field?

MR ARCHIBALD:   I should.  No, not with precision.  As at 1995 it was contained in the Telecommunications Act 1991.  There may have been some other companion legislation.

GUMMOW J:   Yes, we have been down that track.

MR ARCHIBALD:   Try to leave some things behind us, but it is that kind of provision.  I think it is also the case that other particular industries, such as gas or electricity, were also dealt with at the time in other ways but that was largely either through an undertaking or particular State legislation.  Handling and transporting, I cannot really offer anything particularly useful as to why it is there.  Somebody might have thought that facilities were generally thought to be immobile and therefore you want to capture things that move, I do not know.  But they, in our submission, are clearly illustrative and no more, perhaps confirmatory as to (c).

GUMMOW J:   But then we reach the word “but”.

MR ARCHIBALD:   Can I return to (a) before I go to the “but” because some of the arguments about elements of the “but” feed back to the (a) case.  I will not deal with that in great detail at the moment, but we submit that (a) is there again either by way of an example, although perhaps with this matter more likely by way of confirming that the use of, I will call it, the bare infrastructure subject matter, such as the pipeline, the pipeline without the haulage service associated with it, access to the pipeline itself is a service, because making available use of that subject matter can afford advantage or can meet a need in the access seeker.

Now, some may have thought that the pipeline alone was not a service when used, but this section is saying it is.  The Rail Access decision, which is referred to in the materials, confirmed that access to the bare subject matter would rightly be regarded as a service.  So that decision would rather tell us that this provision was there by way of precaution only, not by way of need, and not in fact effecting a substantive extension of that which was captured by the prime definition.

The expression “infrastructure facility” is identifying a species of facility and focusing on that kind of facility which exemplifies the substructure, the underlying structure, which is commonly required for utilities, for community utility services.

CRENNAN J:   Do the tolling arrangements treat the use of the track as falling within (a)?

MR ARCHIBALD:   I think, so far as the evidence shows, they do not seek to identify where, if at all, the subject matter would lie within the conception of Part IIIA.  In other words, the arrangement between the joint venturers is simply saying, “As a matter of arrangements between us, this is what we are doing”.  They do not seek to ascribe for purposes of Part IIIA what is occurring.  Those arrangements of course are occurring entirely voluntarily outside Division 6 and outside Division 2. 

CRENNAN J:   I understand that, but from what you say, they may well conflate (a) and (b) in terms of the approach.

MR ARCHIBALD:   If one was looking at what they had done, they may, or they may ignore (a) and (b) and simply focus on the general conception of a service.  So the burden of our submissions so far is that none of (a), (b) or (c) effect a substantive extension to the primary notion.  Each element is there by way of either illustration or out of an abundance of caution.  They exemplify elements that constitute a service as defined.  Each of them, including (a), is neutral as to ownership.  It could be public or private ownership.  There are no elements in (a), (b) or (c) conveying that the particular subject matter dealt with must be of a major category or a significant category.  Fortescue argue that (a) addresses only major infrastructure facilities.  We say there is no indication of that kind in these provisions.

CRENNAN J:   I suppose (a) could include privately owned infrastructure in respect of which there had been, say, for argument’s sake, 100 per cent tax deduction. 

MR ARCHIBALD:   Could be that, and that private infrastructure might be modest in dimension or major in dimension.  It could be a private suburban bus operator may have their own terminal and maintenance facilities.  That would answer infrastructure facility in the transport context.  So then we come to the word “but”.

GUMMOW J:   Now, why cannot one read the structure, the geography of the section in a way, means an, for example, (a), (b) and (c), but (d), (e) and (f) are not such examples. 

MR ARCHIBALD:   One can.

GUMMOW J:   But you try to attach, do you not, (d), (e) and (f) to (a), (b) and (c) in some way?

MR ARCHIBALD:   No.

GUMMOW J:   Not to the introductory phrase “means a service”.

MR ARCHIBALD:   No, the contrary.  I think it is to the contrary.  We understand the argument of Fortescue to be that (a), (b) and (c) are immunised from the (d), (e) and (f) qualifications.  We say (d), (e) and (f) qualify everything that precedes the “but”, so it qualifies what I am calling the prime subject matter of the definition.  It qualifies (a), (b) and (c) - (a), (b) and (c) probably add nothing to the prime definition.

GUMMOW J:   But there has to be some relationship in the draftsperson’s head between saying “includes” and then lower down “not include”, you would think; that they are putting in and taking out in relation to the one subject matter, namely, service.

MR ARCHIBALD:   Yes.  So that everything that constitutes a service, whether it be by means of the primary subject matter or by reason of (a), (b) and (c), if they were to expand that concept at all, will be subject to the qualifying effect of (d), (e) and (f).  No Alsatia is afforded by (a), (b) or (c) to the operation of (d), (e) or (f).

CRENNAN J:   There is a sense, is not there, in which it echoes what the distinction you pointed out at 251 of the Hilmer Report.

MR ARCHIBALD:   Yes, it does because at 251 of the Hilmer Report, the committee, using their own approach to these matters, identified that for their part certain subject matters would not end up being declared and the certain subject matters which are most germane for us are those at about point 5 on page 251, “products, production processes or most other commercial facilities”.  In (d) we have “supply of goods” which resonates with products.  In (f) we have the precise phrase used by the Hilmer Committee.  One does not find (e) explicitly dealt with by the committee at page 251 or elsewhere so far as we can identify, but other commercial facilities could well capture a facility constituted entirely or substantially by intellectual property.

HAYNE J:   Well, that hooks it to facility.  Why I began with the understanding of the word “service” is that we begin “a service provided by means of a facility”.  If you understand “service” as supply of the needs of by means of a facility, supply of the needs of, let us leave aside whether that is attaching to persons or things, but supply of the needs of including (a), (b), (c), use, handling, (c) stands apart, but does not include supply, use, use.  Now, it seemed to me on reading your argument that you had to hook (d), (e), (f) back to an understanding of the word “service” and if you did not hook (d), (e), (f) back to an understanding of the word “service”, I was not quite sure where it was except hanging, waving in the breeze.

MR ARCHIBALD:   Well, we accept that.  That is plainly ‑ ‑ ‑

HAYNE J:   Waving in the breeze, perhaps not.

MR ARCHIBALD:   As a matter of syntax that must be so and really as a matter of common sense that must be so.

CRENNAN J:   What Justice Hayne says raises a very interesting point in the hypothetical context of Fortescue getting access on certain terms and so on, the terms providing that Fortescue has access to the railway track in circumstances which do not prejudice anything that BHP is doing; BHP can deliver the same amount of iron ore to the port as they want to or have scheduled to do.  In those circumstances, how would you identify the use of the production process which Fortescue would be making?

MR ARCHIBALD:   It probably does not matter, to answer your Honour’s question, but there is an assumption in your Honour’s proposition that access would not impact upon the achievement of deliveries of ore to port.

CRENNAN J:   Yes.  I am saying, for argument’s sake, imagine that the access arrangements are carefully structured so that there is no prejudice to the commercial activities of the builder of the railway track.

MR ARCHIBALD:   It may not be possible.  There is a lot of evidence about that in the Competition Tribunal but, as I say, I do not ‑ ‑ ‑

CRENNAN J:   But you see what I am saying, Mr Archibald.  I am trying to understand what would be the use of the production process in that context, something which is thrown up, I think, by Justice Hayne’s question to you.

MR ARCHIBALD:   Yes, and I will need to deal with that in detail a little later, but for the moment what we say by way of response to your Honour is that the production process covers on the factual findings everything from mine to port and the factual findings also conclude that the rail, including but not confined to the rail bed are part of the production process, so at the factual level we have the findings which ‑ ‑ ‑

CRENNAN J:   I understand all of that.  I understand the Hematite point step in the process, but what I am saying is access could conceivably be granted on the basis that all that production process from mining to port is not interfered with.

MR ARCHIBALD:   Yes, but the question is, is the service use of that process – part of the process ‑ ‑ ‑

CRENNAN J:   That is what I am asking you.

MR ARCHIBALD:   The factual findings are that the rail, the rail line, is part of the process.  The question then is, does the applied for service constitute use of that process?  The answer is yes, because the rail bed is part of that process.

GUMMOW J:   Yes, but it depends what you mean by part of.  Justice Crennan is very politely pursuing you down that burrow, I think.

MR ARCHIBALD:   Yes, but the part reflects the aspect of the overall production process.  Whether there is in fact interference, simultaneously, with activity which constitutes that process is not the concern of paragraph (f).  Paragraph (f) is concerned with eliminating from the area of service some subject matter.  My steel mill operates five days a week.  I do not run a seven‑day operation.  My steel mill is idle on Saturdays and Sundays, but if the access seeker uses my steel mill on Saturdays and Sundays, it is using my production process.  It is not dislodging me from my use at a particular point of time when I seek to use it.  I am not interfered with in that way.  But, the steel mill is my production process and the applied for service constitutes use of it.

In that sense, interference or not, disruption or not, there is use of the process.  For purposes of production process one asks whose process is it, not whether the access seeker will use it in the same way as the access provider.

HAYNE J:   Well, that then reveals, does it, a tension between understanding “service”, as the supply of the needs of persons, or things, by hypothesis I would have thought supply of the needs of the access seeker and the use of a production process.  How do you resolve the tension?

MR ARCHIBALD:   If I am a tourist operator and I want to run a tourist train along the Mount Newman line my use of the line will not be for my production process purposes.  The use that I wish to make of the line, fastening upon the rail, entails that I use the production process of the provider, notwithstanding that my use is not itself a production process.  As it happens here, the Fortescue use would ‑ ‑ ‑

CRENNAN J:   I understand ‑ ‑ ‑

MR ARCHIBALD:   ‑ ‑ ‑ likely be akin to ours, and therefore probably a production process.  But it does not matter for these purposes whether it is or it is not; the question is, is the use of the service use of the process and Justice Greenwood in the Full Court rightly posed the question “Whose production process is it?” and the answer is that it is ours.  We use it for our production process and the exemption in (f) is not confined to the case in which the access seeker would have as the access seeker’s objective use in the same fashion or of the same quality or character as the access provider’s use.

GUMMOW J:   Now, I think we are back to the point Justice Kirby took up with you some time ago.  Granted all of that, how does that construction fit in with the subject scope and purpose of this part, bearing in mind Justice Crennan’s point that these particulars get sorted out at the later stage when the terms are settled.

MR ARCHIBALD:   Yes, well it is important they do get sorted out at a later stage and not at this stage and the answer is that a number of the purposes lying behind the concepts of the Hilmer Report are dealt with at the declaration criteria stage, but some of them are dealt with in the legislation outside the sphere of administrative discretion and at the definitional stage of what is susceptible of an application.  So it is part of the definition of “service”.

Hilmer thought that all of these things would be dealt with in the Hilmer scheme in the course of the Minister making decisions by way of administrative discretion.  The passage at page 251 involves the observation by the Hilmer Committee that “products, production processes or most other commercial facilities” would not satisfy the declaration criteria, the Hilmer criteria.

But what the legislature does is not deal with this issue at that point, phase two.  It has dealt with it at phase one, the definitional stage, and has embedded the point into the definition of “service”.  The purpose behind that insulation of production process and the other items is to ensure that although competition considerations militate in favour of access, the access that is achievable does not dull or deter desirable and advantageous investment incentives, particularly because of these identified areas of endeavour and, for our purposes, productive activity.  One sees that in Hilmer.  Your Honour the presiding Justice observed that at page 240, in particular within the immediate framework of production processes or most other commercial facilities.  One sees it on page 251 of Hilmer where at about point 7 on the page the committee said:

Moreover, when considering the declaration of an access right to facilities, any assessments of the public interest would need to place special emphasis on the need to ensure access rights did not undermine the viability of long-term investment decisions, and hence risk deterring future investment in important infrastructure projects.  Accordingly, wherever possible, the likely obligations to provide access should be made clear ‑ ‑ ‑

GUMMOW J:   That is right.  That is addressed to the stage of ‑ ‑ ‑

MR ARCHIBALD:   For Hilmer everything was occurring at the administrative discretion stage.  Hilmer did not have a concept of a limiting or a definition as to that which could be made the subject of an application, which would itself filter out substantially.  Hilmer really had a one‑phase process.  The legislation has a two‑phase process.  Part of the filtering is at stage two, but the part with which we are concerned is at stage one.  But the theses underlying the production process notion articulated at page 251 are, in our contention, those that have commended themselves to the legislature in a way in which the legislature has said, “We immunise production processes not in the declaration criteria area, but in the service definitional area”.

GUMMOW J:   The reference to the Telecommunications Act is at page 245, by the way, of Hilmer.

MR ARCHIBALD:   Thank you, your Honour.  So in the balance of that passage at 251, the committee said:

due account of the likely impact on incentives to invest should be made in determining whether or not to create a right of access ‑

That is what the Parliament has done.  The right of access in the sense of that which is a service susceptible of application is configured in a way to exclude the production process.  In tandem with that, the legislature has taken the same indication in the Hilmer Report as to products.  That has become (d), supply of goods.  Once the legislature takes “service” as the criterion, rather than “facility,” once that subject matter is fastened on, there is a need to deal with the risk that the supply of goods would be a declarable service.  So supply of goods is within the exempted area.

Again, the essential facilities doctrine in the United States cases from time to time addressed the question whether the essential facilities doctrine could be stepped around by claiming the product - not access to the facility but access to the product; the Berkey Case is a little bit in that territory but other cases are of that kind too - and access to product was outside the essential facilities doctrine, whatever it is or was, and that theme was picked up by Hilmer and is confirmed by the legislation.

If I return to the intellectual property, instance (e), it may be through the facility consideration or it may be the general concern of the Commonwealth legislature not to erode intellectual property rights through provisions of the trade practices legislation.  For example, section 51(3) immunises intellectual property from Part IV and through (e) here in the same fashion, either by reference to that consideration or some aspect, some possible aspect of facilities, intellectual property is immunised from declaration by this excision in paragraph (e).

CRENNAN J:   That is because they are statutory monopolies, in a sense.

MR ARCHIBALD:   Yes, statutory monopolies which are preserved, not eroded.  But of course if Fortescue’s argument is right, intellectual property rights can be eroded.  Anything in (a), (b) or (c) will not attract the operation of (e) on the Fortescue argument.  So take (c), take a communication service - take the communication service - which might vitally be operated by or driven by or heavily dependent upon intellectual property, the Fortescue argument would mean that access could be had to that communication service with all of its intellectual property; in other words, no carve-out in that case, and hence an erosion of ‑ ‑ ‑

GUMMOW J:   Part III does not get you out of section 46.

MR ARCHIBALD:   No, not at all.  It is the shortcomings of section 46 which the committee observed ‑ ‑ ‑

GUMMOW J:   The patent abuse doctrine is a very lively thing in the United States.

MR ARCHIBALD:   Yes, it is.

CRENNAN J:   Compulsory licensing, I suppose, is the other analogue that Fortescue might point to.

MR ARCHIBALD:   Yes.  The protection of intellectual property is not absolute, but the Parliament has here signified a determination not further to erode the statutory rights accorded to intellectual property, and of course there are some common law rights or equitable rights that attach to intellectual property in its general connotation beyond the statutory protections – there is know-how and things of that kind.

Those are the considerations which we submit underlie these provisions.  The purpose of the exclusion was dealt with by Justice Kenny in the Hamersley decision at paragraph [46], page 218 of the report.  I had not proposed to take the Court to the passage but there is a good articulation, in our submission, of these elements, which I think I had hoped to have captured in the oral submissions we are making.

KIRBY J:   And within the statement that that was plainly wrong?

MR ARCHIBALD:   It is hard to know what is captured by such a statement.  No doubt it is the ultimate decision that is said to be plainly wrong, but it must entail some of the reasoning.  But certainly I think there is nothing in the reasoning of the primary judge here that would seek to refute with any precision those observations.

GUMMOW J:   What is the particular passage in Justice Kenny’s ‑ ‑ ‑

MR ARCHIBALD:   I had mentioned paragraph [46].

GUMMOW J:   Thank you; yes, that is right.

MR ARCHIBALD:   I think it may spill over into [47] and some of the other surrounding reasoning, particularly the last sentence in paragraph [46] and perhaps all of paragraph [47].

So while competition considerations might suggest that if the declaration criteria were satisfied access was a desirable thing, there are other factors which are present to the mind of the Commonwealth Parliament as to what one does where there are competing considerations and, plainly, Parliament has seen competing considerations in the case of production processes which led the Parliament to put production processes on a line which meant that production processes were beyond susceptibility to access.  That is why it is in the service definition.  The passages in Hilmer show why that might well be so. 

Indeed, in the context of the legislation to which the Court has been drawing the parties attention in the last few days, one can understand why those matters might have been particularly powerful in the deliberations of the Parliament on this matter because one has, over a long period of time, incentives provided by the Commonwealth Parliament, through taxation advantages, encouraging these investment decisions to be made, recognising the difficulties with the Australian economy in a variety of areas, but certainly including the resource area, where stimuli are needed beyond ordinary economic incentives to see projects undertaken and continued and while initial incentives through Division 10 and Division 10AAA had been there for a long time, there was the added impetus from the One Nation statement in 1992 to undertakings particularly in the general infrastructure area. 

So added incentives are present, including for railways, through the development of allowance authority provisions.  Given all those incentives being provided, including recent incentives of a significant kind by the Parliament, one can well understand why the Parliament would say, “at least in particular areas we will not be subverting or undermining those incentives by embarking upon other considerations driven purely by competition considerations”.

KIRBY J:   All of that seems to be against the interpretation you are urging on us.

MR ARCHIBALD:   No, because ‑ ‑ ‑

KIRBY J:  I mean, the size of the nation, the remoteness of many of these resources, the fact that there are facilities in place, the efficient use of those facilities, but under conditions which the Constitution requires should be for just terms, all of these seem to be against your propositions; these broad questions.

MR ARCHIBALD:   Well, no, quite the contrary, in our submission, because the incentives for endeavours of this kind as found in the legislative provisions I have mentioned are of a general kind.  They are across the board, they are not confined to remote areas.  They are not confined to projects of particular dimensions and the like.  The exemptions that we are speaking of in paragraph (f) are again not specific to particular industries or particular sectors of industries operating in particular geographic areas.

KIRBY J:   No, but the bottom line is that the taxpayer has underwritten, if not paid for, these facilities.

MR ARCHIBALD:   Some of them.

KIRBY J:   Therefore the taxpayer or the citizens, the nation, has an interest in their efficient deployment.

MR ARCHIBALD:   Yes, and the learning about access consequences and the materials elsewhere in these disputes point to the inefficiencies that flow from access, not maintenance of efficiency, but inducing inefficiency, and that is the very reason why the Hilmer Committee observed there is disincentive to investment when access is achieved.  If one was equally efficient and one got extra revenue, one could use one’s steel mill in the slack weekend hours as well as the daily shift, the facility owner or operator would welcome access.  He would say, “Here is extra revenue.  I like the extra money.  There is no disadvantage to me.  I will do it, and indeed I will build another mill next door so I can attract others”.

If efficiency flowed from access, there would be no problem, but that is not the case and that is the very reason why Hilmer is observing that access imposes disincentives can have disadvantage consequences for the economy including the general populous who have otherwise, as your Honour Justice Kirby identifies it, assisted some of the industries that ‑ ‑ ‑

HEYDON J:   Does not section 44W meet that problem?

MR ARCHIBALD:   No, because all that does is say that I can still run my 100 tonnes of ore down the line, but whether I can do it as efficiently, flexibly, satisfactory is entirely another matter.  So that I might get my 100 tonnes to port, but I might not get them to port when I need to and it might cost me more to get them there.  I am paying demurrage for vessels that are waiting or the ‑ ‑ ‑

HEYDON J:   I question that construction of 44W.

MR ARCHIBALD:   There may be room for debate but the observation one makes is that those provisions are dealt with beyond the point at which the legislature identified the exemption cuts in. They are phase 2 or even phase 3 because they might be dealt with in the course of an access dispute.  Once one has declaration one does not have agreement.  One may have the access dispute and matters fall to be considered there, but none of the criteria that fall to be considered in Division 3 access disputes and none of the declaration criteria fasten explicitly upon and provide the assurance and protection of the production process.  Different minds coming to the subject might deal with it in different ways but Parliament has taken that subject matter and dealt with it in that fashion.

KIEFEL J:   Mr Archibald, you refer to “the production process”, but the section talks about “a production process”.

MR ARCHIBALD:   Yes.

KIEFEL J:   I take you to refer to the production process as a cumulative number of steps from mine to port.

MR ARCHIBALD:   Not so much a cumulative number of steps but the integrated process, simply fastening on the factual findings, the integrated process whereby there are of course discernibly independent elements but each dovetailed in with the other to respond in a way that conduces to the overall efficiency.

KIEFEL J:   Does your reference to “the production process” in this integrated way, however, assume that each element is itself a production process?

MR ARCHIBALD:   No, it assumes that each – I am really faithful to the factual findings – is a component in what is held by the primary judge to be an overall production process.  His Honour, of course, found a plurality of production processes, but that causes no problem for our argument.  The processes, the subject of his Honour’s finding, were product specific processes.

In other words, catering for the slightly different product that met different customer specifications and came from different mines but quite explicitly - and I will the Court the references a little later – each of the processes was a process that started at mine and finished at port so the circumstance that his Honour found more than one process did not mean that his Honour was slicing them to say there is a process at port, there is something in railing and there is another process at mine.  It was not a conclusion of that kind at all.  My use of the process was really the relevant process being for construction purposes a production process.

KIEFEL J:   Why is not the question posed by the definition simply whether or not the railway facility is or is not a production process?  Why does one have to go further than that?

MR ARCHIBALD:   I am not sure that one does because here no question arises as to whether the production process is a subsidiary part of the service.  If that question arose one would need to go further but it is common ground that that question does not arise so we do not need to worry about the qualifying words to (d), (e) and (f).  It is enough to see if it is within (f).  If is clear, in our submission, that the subject matter of the service is use of the railway lines, Mount Newman and Goldsworthy, and so the only question is whether the service constitutes the use of the production process.  The service is not the railway line, the facility, but the use of it, so the question resolves as your Honour formulated it.  Really, the answer to that is a factual answer which was given by the primary judge and confirmed by the Full Court.

The reason we lost in the Full Court was not that the use of our railway line was not the use of a production process.  The reason we lost in the Full Court was that the Full Court said, “Your railway line is only part of your production process and the protection afforded by paragraph (f) extends only to the case where the service is the whole of your production process”.  But for that point, we would not be here.

KIEFEL J:   You do not take the Full Court to say that the use of the railway line produces nothing?

MR ARCHIBALD:   No.  The Full Court accepted the primary judge’s findings that the use of the line was the use of our production process.  They rejected the primary judge’s conclusion that that use did not fall within (f) because the railway line was not itself transformative.  They positively rejected the primary judge.  So the fact that the railway line produced nothing if that were the fact ‑ ‑ ‑

KIEFEL J:   But it is not quite the same thing.  Producing nothing and not being transformative is not exactly the same thing.  That I think was a distinction that the Full Court might have been making.

MR ARCHIBALD:   In our submission, no.  None of the parties were contesting, save two irrelevant respects, the findings of the primary judge.  There is some evidence about what happens on the rail anyway.  Apart from the making up the recipe point, which means that the rails ‑ ‑ ‑

KIEFEL J:   That is an issue of timing, is it not, timing of different ingredients?

MR ARCHIBALD:   It is sequencing enforcing.  “I need at port today a type 3 body of ore, cargo.  To get type 3 instead of getting ore from this mine or this mine, I need to get it from another mine or I need to mix it and I have not got enough of this grade, so I adjust my railings”, all of that ‑ ‑ ‑

KIEFEL J:   But nothing happens to it while it is on the railway line.

MR ARCHIBALD:   Well, it is not transformed in the sense of – I mean a few more fines might be generated because of the jostling, but I do not think that is transformative in any relevant sense.  That is so, but the further grinding and blending is done by equipment at port.  But it is the integral character and a not bare transportation but juggled transportation to yield what is needed at port.

GUMMOW J:   At some stage does each joint venturer take its severed portion of production or is the production sold by all joint venturers and the proceeds divided between them?

MR ARCHIBALD:   The export product is sold as a cargo and cargoes are dealt with on the basis other than the separate streams to which the joint venturers would be entitled.  So everything goes out in the vessel.  Of course, depending what the product is ‑ ‑ ‑

GUMMOW J:   So these people have to be very careful they are not partners, do they not?

MR ARCHIBALD:   One always has an eye on that point, but some cargoes might reflect Goldsworthy venture.  Some cargoes might reflect Mount Newman venture.  There may be some refinements within that, but it is not as though at port there is a pile for Mitsui and a pile for BHP and they go their separate ways, nothing of that kind.  So while the activities at port involve something of a different quality to what is happening with the rail, the whole on the factual findings is an integral part of an overall process from mine to port, including railing.

It is really no different from the mining cases which are mentioned in the submissions.  Nothing happened to the bauxite on its conveyor belt at Worsley when it travelled 50‑odd, I think, kilometres along the conveyor belt.  Nothing happened to the slurry in the pipeline between Savage River and the shore in the Northwest Iron Case, but, as the court has concluded there what was happening was not mere transportation, what was happening was not transportation independently of the mining operation; what was happening was integral to the mining operation and the process.

Of course, at least in economic terms, location of subject matter can itself be value transformative – is value transformative.  In other words, mere moving subject matter in economic terms transforms it because a tonne of ore in the – if I can use a colloquialism – the back of beyond is one thing, but a tonne of ore beside a port with a vessel there is entirely another.  So the movement itself has productive significance.

CRENNAN J:   It makes it a commodity.  I was just saying the movement in itself results in it becoming a commodity, value added in that respect.

MR ARCHIBALD:   Yes, something that is valueless out there, out back, is valuable beside the vessel exactly.  So, those are features that attend what is happening and what does happen.  Where one is considering perhaps the fourth of the Fortescue answers to our case, Fortescue are saying in respect of that answer, “Look there is a production process at mine, there is a production process at port, but in between there is just transportation separate from and discrete from the production processes and you should lose on that score”.  I will return to that point a little later, but apart from anything else that proposition is entirely dependent, in our contention, upon the factual findings and is at odds with the factual findings which would deny that there are separate processes with transportation in between.

For the moment I was seeking to address the construction elements of paragraph (f) and I have sought to identify the purpose associated with those.  That purpose would and does require that whatever it is that answers the description, whatever subject matter responds to the concept of production process is excised from the reach of a declarable service and that is so whether it is a substantial railway line in a remote region in Western Australia or a modest production process in a bakery in Geelong.  Each is the production process and the legislative criterion for purposes of excision from the definition does not seek to differentiate or to fasten upon qualities which might suggest a stronger or weaker case for exclusion, the one to the other.

The tempering element that the definition builds in is in the concluding qualification to (d), (e) and (f).  The effect of those words being, in our submission, to modify the exemptions in the case in which the subject matter is integral, but subsidiary to the service.

So if the service that is sought includes a production process but it is subsidiary to that service, then the fact that it is a production process component will not attract the operation of the exemption.  That is the mechanism that Parliament has seen as the appropriate way of ensuring that the exemption does not operate in an excessive way.  So if my transportation service includes provision of some consumables I am supplying goods, but the supply of goods is auxiliary, though integral, and not accepted and so with the other cases.  If my intellectual property is but a minor portion of my communication service, subsidiary only, the exemption (e) is not attracted and likewise with my production process.  If my railway facilities include repair shops with rail making or rail repairing elements, rivets and the like, auxiliary although a production process, auxiliary to the service, the exemption will not be attracted. 

So in that fashion the legislature may be seen to have arrived at the subject matter of a declarable service which had the configuration meeting the legislative purposes and objectives, very wide in some respects with exemptions in some other respects, but leaving intact a subject matter apt for being scrutinised by reference to the declaration criteria.  Now, in those circumstances one then scrutinises the reasons why it is said against our contentions and against the background of the factual findings, one scrutinises why it is said that non constat the application for declaration was a competent application. 

GUMMOW J:   Just before you get to that, Mr Archibald, am I right in thinking that the statute law in Western Australia produces the results still that there is a peppercorn rent?

MR ARCHIBALD:   Yes.  So far as the evidence goes, this material was not before the Full Court of the primary judge. 

GUMMOW J:   I am looking at clause 8(1)(b) of the Mount Newman agreement, which is scheduled to the statute of Western Australia of 1964.

MR ARCHIBALD:   Yes.  There have been some subsequent agreements which bear upon it.

GUMMOW J:   Anyhow, there is no need to answer now.

MR ARCHIBALD:   No, I will have it checked, but I think certainly so far as this material is concerned, the conclusion should be that the peppercorn rental provision remains.  I do not think any of the later arrangements have interfered with that, but I will have it checked and we can inform the Court if the case is otherwise.  This is, as we have said, another example of incentives being provided in one way or another to help investment decisions to be made with some greater comfort than would otherwise exist.  That is the whole basis of the manifold State agreements that one sees in Western Australia.

GUMMOW J:   Yes, that is right, and I am wondering whether the legislation, as it were, severs the railway from the land notionally in some special regime or whether there are Crown leases over which the railway runs?

MR ARCHIBALD:   There were certainly leases.  The whole of the railway corridor is the subject of Crown leases.  I think we made this point in one of our responding submissions, or perhaps it is found in some of the Rio Tinto material.  The way in which these arrangements are made is by way of Crown lease.  Of course, the Crown leases cover some of the area at the port, town sites and the railways.  The railway is erected, constructed on the Crown lease and if the lease came to an end, then no doubt the railway would go with it, subject possibly to a tenant’s fixtures exception.

GUMMOW J:   Yes, that is what I am curious about.

MR ARCHIBALD:   I do not think there is any special legislation about it.  The general provisions of property Acts, I cannot remember if they pick up Crown leases or whether they are confined to private leases, but that would all be part of the hazard that the enterprise would take into account in making its initial and its ongoing investment decisions.  I spoke earlier of Commonwealth incentives through Commonwealth mechanisms.  States also provide incentives of which this arrangement is an illustration.

GUMMOW J:   In some States, may be in Western Australia, there would have been a State – monopoly might not be the word – over railway construction, might there not?

MR ARCHIBALD:   Yes, depending upon the time at which one is looking.

KIRBY J:   By the way, I notice that in the Iron Ore (Mount Newman) Agreement Act 1964 the actual terms of the agreement which is scheduled to the Act does not appear to be in the form of a Crown lease but rightly, in my view, in the form of a lease with the State which is a constitutional entity in Australia.

MR ARCHIBALD:   Yes.  If your Honour the presiding Judge was looking at the Goldsworthy – I am not sure which Act your Honour had – but in the Goldsworthy Agreement in clause 10E ‑ ‑ ‑

GUMMOW J:   That is the First Schedule to the Act?

MR ARCHIBALD:   Yes, your Honour, the First Schedule.  The effect of a determination of the lease is dealt with and improvements ‑ ‑ ‑

GUMMOW J:   The State gets it without compensation.

MR ARCHIBALD:   Yes.  So it is positively dealt with.

GUMMOW J:   Thank you. 

MR ARCHIBALD:   The answers suggested to the proposition that in light of the circumstances the application of Fortescue is not a competent application include two construction issues and two issues which are really grounded in the evidence.  The two construction issues seem to be the newly ventured immunity of (a) to (c) services from the qualifying effect of (d) to (f) and the other one is part of the production process point.

As to the first of those arguments, Fortescue has placed some store upon the proposition that the infrastructure facility referred to in paragraph (a) is a core or central area of concern for access purposes and one should therefore be inclined to the view that such a service was, I think the adverb is, incontestably part of the service, which is to say, never subject to the production process exception.

That stepping‑off point is unsound, in our contention, for the subject matter of paragraph (a) captures any infrastructure facility.  The concept of a major or a significant infrastructure facility is an unwarranted gloss.  The argument fastened upon observations made at page 251 in the Hilmer Report to the effect that major infrastructure facilities would become the subject of the postulated access regime, but the passage at page 251 is addressing which of the candidate facilities would likely satisfy the Hilmer declaration criteria, not addressing the question which infrastructure facilities could be the subject of a competent application, and of course Hilmer was looking at facilities, not services, in any event.  So the argument seeks to feed into paragraph (a) of the definition matters that are germane not at the phase one stage of the legislation but germane at the phase two stage of the legislation.

I do not know whether I have answered your Honour’s question about where we agree or disagree.  Just one final point; it illustrates the use point.  Mr Archibald says well, there is a road and if you use part of the road you are using the road.  That is true.  If the road is within an industrial complex and it is being used as part of the productive process, the owner is using it as part of the productive process.  But if I seek access of the road for sightseeing or tourism, you focus on that and say if I walk along the road or take my dog for a walk along the road, am I using a productive process?  Clearly not.  It is a bit like is it an elephant or is it not an elephant, as Justice Middleton said.

KIRBY J:   But he also said in the same breath – no, I think it was Justice Middleton – that it is a dangerous thing to take that test.

MR SCERRI:   He did.  It was his Honour Justice Middleton.  They are really all the points I wanted to add, your Honours, unless there are any other specific questions.

GUMMOW J:   Thank you.

MR SCERRI:   If the Court pleases.

GUMMOW J:   We will adjourn until 10.00 am tomorrow.

AT 4.16 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 30 JULY 2008