Brockman Iron Pty Ltd v The Pilbara Infrastructure Pty Ltd
[2015] WASC 223
•22 JUNE 2015
BROCKMAN IRON PTY LTD -v- THE PILBARA INFRASTRUCTURE PTY LTD [2015] WASC 223
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 223 | |
| Case No: | CIV:2641/2014 | 24 FEBRUARY 2015 | |
| Coram: | CHANEY J | 22/06/15 | |
| 17 | Judgment Part: | 1 of 1 | |
| Result: | No jurisdiction to grant injunction Action dismissed | ||
| B | |||
| PDF Version |
| Parties: | BROCKMAN IRON PTY LTD THE PILBARA INFRASTRUCTURE PTY LTD |
Catchwords: | Railways Access to railway Publication of prescribed information Injunction Jurisdiction to grant injunction Whether conduct for which a remedy is available by way of arbitration |
Legislation: | Commercial Arbitration Act 2012 (WA) Criminal Code (WA), s 177, s 178 Economic Regulation Authority Act 2003 (WA) Interpretation Act 1984 (WA) Railway (Access) Act 1998 (WA), s 4, s 9, s 20, s 36, s 37 Railway (Access) Code 2000 (WA), s 2A, s 3, s 6, s 7, s 7A, s 7C, s 8, s 9, s 13, s 14, s 15, s 18, s 24, s 25, s 26, s 32, s 33, sch 2, sch 3 |
Case References: | The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [No 2] [2014] WASC 345 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
THE PILBARA INFRASTRUCTURE PTY LTD
Defendant
Catchwords:
Railways - Access to railway - Publication of prescribed information - Injunction - Jurisdiction to grant injunction - Whether conduct for which a remedy is available by way of arbitration
Legislation:
Commercial Arbitration Act 2012 (WA)
Criminal Code (WA), s 177, s 178
Economic Regulation Authority Act 2003 (WA)
Interpretation Act 1984 (WA)
Railway (Access) Act 1998 (WA), s 4, s 9, s 20, s 36, s 37
Railway (Access) Code 2000 (WA), s 2A, s 3, s 6, s 7, s 7A, s 7C, s 8, s 9, s 13, s 14, s 15, s 18, s 24, s 25, s 26, s 32, s 33, sch 2, sch 3
Result:
No jurisdiction to grant injunction
Action dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr K J Mony De Kerloy & Ms C L Di Russo
Defendant : Mr B Dharmananda SC & Mr C P K Russell
Solicitors:
Plaintiff : Herbert Smith Freehills
Defendant : Allen & Overy
Case(s) referred to in judgment(s):
The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [No 2] [2014] WASC 345
1 CHANEY J: The defendant, the Pilbara Infrastructure Pty Ltd (TPI) has constructed, and owns and operates, a railway in the Pilbara region of Western Australia. The railway, and associated port infrastructure facilities, serve the requirements of Fortescue Metals Group Ltd (FMG) for the delivery of iron ore product from various FMG mines in Port Hedland. The Railways (Access) Act 1998 (WA) (the Act) was enacted to establish a rail access regime that encourages the efficient use of, and investment in, certain railway facilities including the railway line owned and operated by TPI. The plaintiff, Brockman Iron Pty Ltd (Brockman), is a proponent seeking access to part of the defendant's railway line under the Railways (Access) Code 2000 (WA) (the Code).1
2 In these proceedings, Brockman claims an injunction against TPI under s 37(1) of the Act requiring TPI to amend or replace certain information which it is required to publish under s 7A of the Code concerning the available capacity of each route of its railway line. The defendant filed a chamber summons seeking determination of a preliminary issue. That issue is whether the conduct of which Brockman complains is conduct for which a remedy by way of arbitration is available under the Code. If so, then an injunction under s 37(1) of the Act is not available. These reasons deal with that preliminary issue.
3 In order to understand the parties' contention on this point, it is necessary to examine the relevant provisions of the Act and the Code.
Railways (Access) Act 1998 (WA)
4 The main object of the Act is set out in s 2A. It is to establish a rail access regime that encourages the efficient use of, and investment in, railway facilities by facilitating a contestable market for rail operations.
5 The Code was established pursuant to a requirement found in s 4 of the Act for the responsible Minister to establish a Code to give effect to the Competition Principles Agreement made on 11 April 1995 by the Commonwealth, States and Territories. The Code is subsidiary legislation within the meaning of the Interpretation Act 1984 (WA).2 Part 3 of the Act deals with the regulator, being the Economic Regulation Authority established by the Economic Regulation Authority Act 2003 (WA). Section 20 provides that the regulator is responsible for monitoring and enforcing compliance by railway owners with the Act and the Code. Various powers to obtain information, books and records from a railway owner, to retain documents, and to enter premises are conferred on the regulator by the provisions of pt 3 of the Act.
6 Enforcement is dealt with in pt 5 of the Act. Section 36 provides that the obligations imposed by the Code are enforceable either by arbitration under the Code, or under s 37 'as the case may require'. A breach of those obligations does not give rise to an action for damages. Section 36(2) of the Code provides that Criminal Code s 177 (which creates a crime of disobeying a public statute) and s 178 (which creates a crime of disobeying a lawful order, under a public stature) do not apply to the obligations under the Code.
7 Section 37 of the Act provides:
37. Injunctions
(1) The Supreme Court may grant an injunction in such terms as the Court thinks fit if it is satisfied that a person -
(a) has engaged in conduct that amounts to a breach of the Code; or
(b) is proposing to engage in conduct that would amount to such a breach,
other than conduct for which a remedy by way of arbitration is available under the Code.
(2) An application for an injunction under subsection (1) may be made by -
(a) the Regulator; or
(b) a person to whose proposal under the Code for access the conduct or proposed conduct relates.
The Railways (Access) Code 2000 (WA)
9 The issues in these proceedings arise in relation to the requirement for certain information to be published by a railway owner. The obligation arises under s 7A(1) of the Code which states:
7A. Information to be published in hard copy format
(1) The railway owner in relation to a part of the railways network to which this Code applies must make a publication containing the required information available for purchase in hard copy format.
11 Schedule 2 identifies the information required to be published including a map of the geographic description of the network, a map of the routes and configuration of each route, the train control systems operating on the network, and a summary of improvements and capital works proposed to be carried out in certain stipulated periods. In addition, cl 4 of sch 2 requires:
4. For each route section, details of the following -
(a) the track diagrams and type of track;
(b) the length;
(c) the curves and gradients;
(d) the operating gauge;
(e) the location and length of passing loops;
(f) the track and formation characteristics;
(g) the running times of existing trains;
(h) the maximum axle loads and maximum train speeds;
(i) the permanent speed restrictions;
(j) the rolling stock dimension limits;
(k) the indicative maximum train lengths;
(l) the total gross tonnage of all trains operated during a period provided for by section 7D;
(m) subject to any exemption under section 7B, the total tonnage of freight carried on all trains operated during a period provided for by section 7D;
(n) the communication systems;
(o) the available capacity.
capacity, in relation to a route, means the number of rail operations that can be accommodated on the route during a particular time having regard to -
(a) the characteristics of the route;
(b) the length of the rolling stock comprising a train that can be operated on the route, and the speed at which it can be operated;
(c) the requirements of -
(i) the railway owner’s safety standards under section 9 of the Rail Safety Act 1998; or
(ii) any written law;
and
(d) the technical requirements for the relevant rolling stock.
13 Section 7C requires a railway owner to review, and amend or replace the information published under s 7A. Section 7C(2) provides:
7C. Information to be kept up-to-date
...
(2) A review, and any necessary amendment or replacement, under subsection (1) must be carried out -
(a) as often as is necessary to ensure that the information remains reasonably up-to-date at all times; and
(b) in any case, at not less than 2 yearly intervals starting with the end of the second calendar year following the commencement of the Railways (Access) Amendment Code 2009 section 7. (footnotes omitted)
15 In order to understand the role of arbitration under the Code, it is necessary to trace through the steps which lead to arbitration.
16 The Code deals with the mechanism for dealing with proposals for access to a railway.
17 Section 7 of the Code enables some preliminary enquiries to be made by a person interested in making a proposal for access. Section 7(1) provides:
7. Preliminary information
(1) An entity that is interested in making a proposal in respect of a particular route may ask the railway owner in writing to provide it with -
(a) an initial indication of -
(i) the current available capacity of that route; and
(ii) the price that the entity might pay for access; and
(iii) the terms, conditions and obligations that the railway owner would want to be included in any access agreement;
and
(b) any update of the required information, as defined in section 6, that is reasonably available to the railway owner; and
[(c) deleted]
(d) the origin and destination of any train paths proposed by the railway owner for the route.
19 Section 9 requires that the railway owner must respond to a proposal within seven days and must inform the proponent of the railway owner's requirements under s 14 and s 15 as well as provide certain financial information for the purpose of negotiations, although they are not bound by any estimates during those negotiations.
20 Section 14 entitles the railway owner to require the proponent to demonstrate its managerial and financial ability to carry on the proposed rail operations.
21 Section 15(1) provides:
15. Proponent must show that its operations are within the capacity of the route or expanded route
(1) The railway owner is entitled to require a proponent to show that, having regard to the capacity of the route and any information provided to the proponent under sections 6 and 7 -
(a) the proposed entry time onto and exit time from the route to which the proposal relates; and
(b) the speed and length of rolling stock proposed to be used in operations on the route,
either -
(c) can be accommodated on the route; or
(d) if section 8(4) applies, could be so accommodated if the extension or expansion, or both, specified for the purposes of section 8(4) were undertaken by the railway owner.
23 Section 18(3) provides:
18. Sufficiency of information under sections 14 and 15
...
(3) If a proponent -
(a) has received notice under this section that the railway owner is not satisfied as to -
(i) the matters mentioned in sections 14 and 15; or
(ii) any particular matter;
and
(b) considers that the notice is not justified,
the proponent may notify the railway owner that there is a dispute between them as to whether the requirements of sections 14 and 15 have, or any particular requirement has, been met.
25 Where a proponent has notified the railway owner under s 18(3) that there is a dispute between them, then s 25 provides that the proponent is then 'in dispute with the railway owner'. In that circumstance, s 26 enables the proponent to refer the dispute to arbitration. In that event, the regulator is to appoint one or more persons from a panel established under s 24 to act as arbitrators, with the Commercial Arbitration Act 2012 (WA) applying to the arbitration.7
26 Where the parties are in dispute by reason of a notification under s 18(3), s 32 provides that the arbitrator's determination 'may declare that the requirements of sections 14 and 15 have been met, or any particular requirement has been met, as the case may require'. In other words, the arbitrator may declare that the proponent has shown that its proposed use of the railway can be accommodated on the route.
The alleged breach
27 These proceedings were commenced by originating summons on 28 November 2014. The originating summons identified the conduct, said to be a breach of TPI's obligations under s 7C of the Code, as being a failure 'to amend and replace the required information published by the defendant under section 7A of the Code of the available capacity of each route section of the defendant's railway line (item 4(o) of Schedule 2 to the Code) so as to ensure that the available capacity of such route sections is stated correctly and accurately and remain reasonably up to date at all times'.
28 Filed with the originating summons was an affidavit of Graeme Carlin dated 25 November 2014. That affidavit annexed correspondence between the solicitors for the parties, including a letter dated 16 September 2014 from Herbert Smith Freehills (HSF), the solicitors for the plaintiff, to Allen & Overy (A & O), solicitors for the defendant, attaching a report entitled 'Analysis of TPI railway travel times and capacity' prepared by Mr Brock Reynolds of the TSG Consulting (Reynolds report). The Reynolds report made reference to the definition of 'capacity' found in the Code. It continued:
From a technical perspective, a railway's capacity is the maximum flow of traffic across the railway over a defined time period. It can be measured in terms of the maximum possible number of trips or paths across a critical piece of track or, with information on train length and wagon loads, as a maximum quantity of iron ore that can be transported.
In this report, railway capacity is defined as the maximum quantity of ore that the railway is capable of delivering from the mines to the ports over a one-year period (throughput), measured in millions of tonnes per annum (Mt/a). This includes traffic in both directions; empty trains to the mine and loaded trains to the port. It also makes an allowance for the background traffic and maintenance activities required to support the train movements. This definition is consistent with the abovementioned definition of capacity provided by the Railways (Access) Code 2000.
It should be noted that from a technical perspective, railway capacity can refer to 'choke capacity' or 'economic capacity', as defined below.
• Choke capacity is the point at which adding trains to the network no longer results in an increase in the predicted tonnes delivered by the system. Choke capacity is a technical maximum that does not account for the economic considerations associated with purchasing new trains. As the throughput approaches choke capacity, congestion and delays increase exponentially and the number of trains required increases asymptotically. Railways rarely run at choke due to the costs of this congestion.
• Economic capacity is the point at which it is more economical to install additional capacity by adding track infrastructure rather than extra trains. While this is typically used in vertically integrated systems by explicitly trading off the costs of track infrastructure and trains, it is also applied in regulated multi-user heavy haul railways such as those in Queensland and New South Wales. Economic capacity lies at a point somewhere lower than choke.
29 Adopting certain assumptions, the report then applies those assumptions in a simulation model and concludes that the estimated choke capacity of the TPI railway is between 202 and 221 Mt/a, being a result greater than the 175 Mt/a required to accommodate the tonnage sought by Brockman. At cl 4.2 of the report, it is noted that the accuracy of the model's prediction is dependent on the quality and validity of its data, logic and assumptions. It asserts that, in the absence of information from TPI, assumptions are being made for the key model inputs of scheduled maintenance, unscheduled delays, acceleration and deceleration delays and service train frequency.
30 On the basis of the Reynolds report, HSF, in its letter of 16 September 2014, asserted that the findings differ significantly from the information previously published by TPI under s 7A of the Code, and called on TPI to amend or replace the information.
31 In October 2014, TPI published amended s 7A Code information under the heading 'Available Capacity'. That document identified a nameplate capacity of 155 million tonnes per annum which was fully utilised by TPI based on it being the user of, and entity carrying on, rail operations using a 'Run-When-Ready' system.
32 The October s 7A publication led to a supplementary analysis being undertaken by TSG which concluded that the TPI railway had an estimated choke capacity of 204 Mt/a, greater than the 175 Mt/a required to accommodate the 20 Mt/a sought by Brockman.
33 The demand by Brockman for TPI to correct its s 7A information occurred in the context of Brockman having submitted the proposal for access of 15 May 2013, which was the subject of Edelman J's earlier decision. Following receipt of Brockman's access proposal, TPI wrote to Brockman on 22 May 2013 pointing out the requirement for Brockman to satisfy TPI in relation to matters set out in s 14 and s 15 of the Code, and giving notice under s 18 of the Code that it was not satisfied that the information in the access proposal was sufficient for the purposes of s 14 and s 15. HSF responded on behalf of Brockman by a letter dated 13 September 2013. Brockman advised that it was preparing a response in relation to satisfaction of the requirements of s 14 and s 15 of the Code, and threatened proceedings under s 37 of the Act if the information required by the Code was not provided. A response to that request for information was provided by TPI to Brockman with a cover letter dated 27 September 2013.
34 On 22 January 2015, A & O, on behalf of TPI, provided an updated publication under s 7A of the Code (January 2015 s 7A publication). As to available capacity, the January 2015 s 7A publication referred to the nameplate capacity of 155 Mt/a, and contained a table as to the available capacity on each route section within TPI's railway. That table showed no available train paths per day available in relation to four of the six route sections, 9.1 train paths per day in relation to route section 1, 1.8 train paths per day in relation to route section 6.
35 Against that background, Brockman filed the points of claim in these proceedings identifying more precisely the nature of its claim. In par 13 of the points of claim, it is claimed that the January 2015 s 7A publication did not contain a statement of the available capacity of the TPI railway at all, or alternatively contained an inaccurate or incorrect statement of the available capacity 'in that the capacity of the TPI railway is, in fact, at least 200 million tonnes per annum and the available capacity of the TPI railway is in fact not less than 45 million tonnes per annum'. As a result, it is alleged that TPI engaged in conduct in breach of s 7A and s 7C of the Code, in that it did not publish a reasonably up-to-date, accurate and correct statement of the available capacity of the TPI railway.
36 Brockman contends that an arbitrator has no power to order correction of the published information and thus the remedy it seeks is not available by way of arbitration.
TPI's contentions
37 TPI contends that the standing of a person other than the regulator to make an application under s 37 of the Act is constrained in two ways. First, it must be a person who has made a proposal under the Code for access to a railway line. Second, the conduct said to be a breach must relate to the proposal for access. I agree that those limitations on standing arise on the plain words of s 37(2).
38 TPI then contends that the relationship between Brockman's proposal and the publication of information as to capacity is that the question of capacity is central to Brockman's access proposal. TPI contends that any question of capacity is necessarily a matter of judgment and opinion taking account of those factors identified in the definition of 'capacity' in s 3 of the Code. It contends that the Code contemplates that opinions as to capacity may differ, and that the information published in compliance with cl 4(o) of sch 2 of the Code is necessarily only the railway owner's opinion as to available capacity. In support of that proposition, TPI points to s 7(1) of the Code which enables an entity interested in making a proposal for access to ask a railway owner to provide, amongst other things, an 'initial indication' of the current available capacity of the route. It also relies on s 15 which provides for the proponent to show that its proposed use can be accommodated on the route 'having regard to the capacity of the route and any information provided to the proponent under ss 6 and 7'. Section 18 then requires notice to the proponent in the event that the railway owner is not satisfied with 'the proponent's opinion' that the information given under s 14 and s 15 is sufficient. Section 18 then enables the proponent, if it considers that that notice is not justified, to notify the owner that there is a dispute. The existence of that dispute then entitles the proponent to refer the dispute to arbitration.8 Under s 32 of the Code, a remedy flowing from arbitration is a declaration that the requirements of s 14 and s 15 have been met.
39 TPI relies on these provisions as showing that the questions of capacity, being questions ultimately of opinion, are matters to be determined by arbitration.
Is Brockman's remedy available by way of arbitration?
40 In order to construe s 37(1) of the Act, it is helpful to identify conduct for which a remedy by way of arbitration is available. The starting point is that it must be conduct that amounts to a breach of the Code because it is necessarily a subset of the conduct referred to in s 37(1)(a) or (b).
41 Arbitration is available to a party that is in dispute with the railway owner.9
42 An entity is in dispute with the railway owner if the entity has made a proposal for access, the proposal complies and the entity has complied with the Code and one of three situations exists.
43 The first of those situations is that the railway owner has refused to negotiate on the proposal as required by s 13 of the Code.
44 The remedy where the dispute concerns a refusal to negotiate (which is a breach of s 13 of the Code which provides that the railway owner 'must negotiate in good faith') is found in s 33. Sections 33(2) and (3) provide:
(2) The determination -
(a) may deal with any matter relating to use by the other party of railway infrastructure, including matters that were not the basis for the party’s request for arbitration; and
(b) may contain any direction to the railway owner or the other party that is necessary for the purposes of paragraph (a).
(3) Without limiting subsection (2), the determination may do one or more of the following -
(a) require the railway owner to allow the other party to use railway infrastructure;
(b) require the other party to use, and pay for, railway infrastructure;
(c) specify the terms and conditions on which the other party may use railway infrastructure;
(d) subject to subsection (4), require the railway owner to extend or expand a route or the associated railway infrastructure, or to do both.
46 The second situation which renders an entity in dispute with the railway owner is that with which we are concerned in this case. That is where, having been notified by the railway owner that it is dissatisfied as to the information provided for the purposes of s 15, it is open to the proponent to notify the railway owner that there is a dispute and proceed to arbitration.
47 As noted above, the remedy available by way of arbitration is a declaration that the requirements of s 14 and s 15 have been met. In substance, that is a declaration, relevantly for present purposes, that the proponent has shown that the proposed use of the railway by the proponent can be accommodated. It is necessarily implicit in that regime that an issue for determination in the arbitration is which of the parties' competing opinions as to capacity is to be preferred. Also implicit is the proposition that the railway owner's opinion as to capacity, which presumably will be the capacity published by it in accordance with s 7A of the Code, is incorrect or inaccurate. Again, there is no specific remedy through arbitration to require a specific breach of the Code to be rectified. Rather, the remedy (relevant for present purposes) following arbitration is directed to the substantial issue of capacity.
48 The third situation which renders the parties in dispute is where they have entered into negotiations but they have failed to reach agreement within the required time or have determined that the negotiations have broken down. The remedies available from arbitration are those prescribed by s 33(2) and (3). The third situation does not appear to involve any conduct which might amount to a breach of the Code and which might enliven any action under s 37 of the Act.
49 It follows from that analysis that none of the remedies available by arbitration are directed to rectification of the conduct which gives rise to the dispute. Rather, arbitration addresses the substantive issues concerning access to the railway. Having regard to the scheme of the Act and the Code, 'conduct for which a remedy by way of arbitration is available under the Code', must, in order to give the words a purpose, be a reference to conduct in relation to an issue which is susceptible to a remedy by way of arbitration.
50 In substance, what Brockman seeks in these proceedings is a determination that the opinion expressed in the Reynolds report, and the supplementary report, as to the capacity of the TPI railway should be accepted, and should be reflected in TPI's published s 7A information. As can be readily appreciated from the extracts of the Reynolds report to which I refer above, determination of 'capacity' necessarily involves an opinion formed having regard to those matters set out in the definition of 'capacity' in s 3 of the Code, but also to a series of assumptions and inputs. Whether the relevant capacity to accommodate an access proposal should be based upon choke capacity or economic capacity (as those expressions are explained in the Reynolds report) would appear to be a matter which may be disputed.
51 The Act contemplates such disputes. It provides a mechanism whereby the opinions of the railway owner and a proponent for access can be exchanged, and the question resolved by arbitration. Despite the assertion in the points of claim that the January 2015 s 7A publication either did not contain a statement of the available capacity at all, or alternatively contained an inaccurate and incorrect statement, the evidence demonstrates that it is the latter alternative upon which the case must necessarily be based. There is a statement of available capacity contained in the January 2015 s 7A publication both in terms of Mt/a and available train paths per day on different segments. The Reynolds report measures capacity by reference to Mt/a. It cannot be said that the January 2015 s 7A publication did not contain a statement of available capacity, in the sense of Mt/a, of the TPI railway. Had there been no information published by TPI under s 7A of the Code, then I accept that it would be open to a proponent for access to seek injunctive relief under s 37 of the Act to require publication of the required information. That is not, however, the situation in this case.
52 Brockman contends that the requirement contained in s 7C of the Code to keep the information reasonably up-to-date 'at all times' necessarily connotes a requirement that the information published under s 7A and s 7C is accurate and correct. Thus, it contends, if information is not 'accurate and correct' then the railway owner is in breach of those sections such as to attract the operation of s 37. TPI contends that, because the question of capacity is a matter of opinion on which minds might differ, the publication of information as to capacity comprising the railway owner's opinion on that question cannot be a breach of the Act even if that opinion is ultimately found to be incorrect. It is not necessary to resolve this question in the context of these proceedings. The question of whether or not TPI is in breach does not fall for determination in the context of the preliminary question of jurisdiction. That question turns upon whether, even if there is a breach, a remedy by way of arbitration is available. In my view, because the issue arises in the context of the question of capacity so far as it relates to Brockman's access proposal, it is conduct for which a remedy by way of arbitration is available under the Code.
53 It follows that the jurisdiction to grant an injunction in the terms sought by Brockman does not arise under s 37(1) of the Act.
54 It follows that there should be an order that the action be dismissed.
1 Brockman was found to have made a valid proposal for access to TPI's railway by Edelman J in The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [No 2] [2014] WASC 345. That decision is the subject of an appeal which has not yet been determined.
2Railways (Access) Act 1998 (WA) s 9(1).
3Railway (Access) Code 2000 s 7(2).
4Railway (Access) Code 2000 s 8(3).
5Railway (Access) Code 2000 s 8(4).
6Railway (Access) Code 2000 s 18(2).
7Railway (Access) Code 2000 s 26.
8Railway (Access) Code 2000 s 26.
9Railway (Access) Code 2000 s 26(1).
0
1
6