NT Power Generation Pty Ltd v Power and Water Authority

[2001] FCA 334

FEDERAL COURT OF AUSTRALIA

NT Power Generation Pty Ltd v Power & Water Authority [2001] FCA 334

TRADE PRACTICES – alleged misuse of market power contrary to s 46 Trade Practices Act 1974 (Cth) (“Trade Practices Act”) – statutory authority responsible for generation reticulation and supply of electricity in Northern Territory – whether Trade Practices Act before enactment of s 2B by Competition Policy Reform Act 1995 (Cth) (“the Reform Act”) bound that statutory authority.

TRADE PRACTICES - alleged misuse of market power contrary to s 46 of Trade Practices Act – statutory authority owner of electricity infrastructure – statutory authority licensed third party planning to sell electricity into particular market – access to infrastructure of statutory authority necessary to be able to sell electricity into that market – whether decision of statutory authority to refuse access to its infrastructure is a refusal to grant a licence within s 2C(1)(b) of Trade Practices Act – whether decision of statutory authority to refuse access to its infrastructure is in the course of carrying on a business.

TRADE PRACTICES - alleged misuse of market power contrary to s 46 of Trade Practices Act – corporate entity wholly owned subsidiary of statutory authority – corporate entity formed as vehicle to participate in transaction involving establishment of substantial gas pipeline from gas field to principal place of operations of statutory authority – secured supply of gas necessary for operations of statutory authority in supplying electricity – contract with gas suppliers provided corporate entity with right of pre-emption in respect of gas offered to be sold to any third party – whether Trade Practices Act before enactment of s 2B by the Reform Act bound that corporate entity – whether that corporate entity was an emanation of Crown in right of Northern Territory – whether that corporate entity entitled to derivative Crown immunity – whether s 89(2) of Reform Act operates to preserve derivative Crown immunity in respect of the contractual right of pre-emption notwithstanding s 2B of Trade Practices Act.

TRADE PRACTICES – alleged misuse of market power contrary to s 46 Trade Practices Act – statutory authority responsible for generation reticulation and supply of electricity in Northern Territory – statutory authority supplier of electricity to consumers in Northern Territory – statutory authority owner of electricity infrastructure needed to supply electricity – third party licensed to sell electricity to consumers in Northern Territory but refused access to electricity infrastructure to do so – whether statutory authority had substantial degree of power in market – consideration of market to supply of electricity to consumers in Northern Territory – consideration of market or markets to supply infrastructure services in Northern Territory – temporal dimension of market – whether intention of Northern Territory Government to establish access regime under Pt IIIA Trade Practices Act for access to electricity infrastructure relevant to market power of statutory authority.

TRADE PRACTICES – alleged misuse of market power contrary to s 46 Trade Practices Act – statutory authority responsible for generation reticulation and supply of electricity in Northern Territory – statutory authority supplier of electricity to consumers in Northern Territory – statutory authority owner of electricity infrastructure needed to supply electricity – third party licensed to sell electricity to consumers in Northern Territory but refused access to electricity infrastructure to do so – statutory authority directed by Minister to refuse access while consideration given to reform of statutory authority and to formulation and implementation of access regime – whether refusal of access amounts to statutory authority taking advantage of substantial degree of power in market.

TRADE PRACTICES – alleged misuse of market power contrary to s 46 Trade Practices Act – statutory authority responsible for generation reticulation and supply of electricity in Northern Territory – statutory authority supplier of electricity to consumers in Northern Territory – statutory authority owner of electricity infrastructure needed to supply electricity – third party licensed to sell electricity to consumers in Northern Territory but refused access to electricity infrastructure to do so – statutory authority and Northern Territory Government decision to refuse access so as to obtain time to formulate and implement access regime – belief that anticipated access regime would produce “more effective” competition than granting access to third party by negotiation – awareness that statutory authority could not compete effectively with third party in market to supply electricity to consumers in Northern Territory in short term – period whilst access regime formulated and implemented also needed to ensure statutory authority competitive when access regime introduced and to secure “level playing field” – whether s 46 prohibits exercise of substantial degree of power in market to refuse access to infrastructure until more effective competition able to be introduced – whether purpose of statutory authority in exercise of substantial degree of power in a market for preventing third party from entering a market or for deterring or preventing third party from engaging in competitive conduct in a market.

CONTRACT – implied terms – grant under statute of licence to generate and sell electricity – grantor statutory authority – licensor owner of electricity infrastructure – access to licensor infrastructure necessary to sell electricity into principal market of licensed area – licensor also seller of electricity – whether terms regarding access may be implied into licence to give it commercial efficacy when licence granted under statute.

CONTRACT – implied terms – written document contains “whole agreement” clause – no application to rectify written document – whether terms may be implied into written document.

CONTRACT – implied terms – grant under statute of licence to generate and sell electricity – licensor owner of electricity infrastructure – access to licensor’s infrastructure necessary to sell electricity into principal market of licensed area – licensor also seller of electricity into that market – licensor and licensee aware of desirability of licensee being given access to licensor’s infrastructure – whether term implied into licence that licensor would give licensee access to its infrastructure – whether terms implied into licence that licensor would do all things necessary to give licensee benefits of licence or would deal fairly and in good faith with regard to performance and implementation of licence.

A New Tax System (Trade Practices) Amendment Act 1999 (Cth)
Competition Policy Reform Act 1995 (Cth) s 89
Northern Territory (Self-Government) Act 1978 (Cth)
Trade Practices Amendment (Telecommunications) Act 1997 (Cth)
Trade Practices Act 1974 (Cth) ss 2A, 2B, 2C, 4(1), 4F, 44M, 44V, 46, 82, 87, 150C, 150G
Competition Policy Reform (Northern Territory) Act 1996 (NT) ss 5, 10, 13, 15, 41

Electricity Networks (Third Party Access) Act 2000 (NT)

Electricity Reform Act 2000 (NT) s 7
Power and Water Authority Act 1987 (NT) ss 4, 9, 10, 14, 14(3A), 14 (3B), 15, 16, 17

Power and Water Authority Amendment Act 1998 (NT)

Power and Water Authority Amendment Act 2000 (NT)

Public Sector Employment and Management Act 1993 (NT) s 17 and s 22(1)
Public Service Act (NT)
The Electricity Act 1978 (NT) ss 3, 14, 15, 25, 27, 29, 30
Utilities Commission Act 2000 (NT)
Water Supply and Sewerage Act 1983 (NT)

Competition Code of the Northern Territory s 82

Smith v Capewell (1979) 142 CLR 509 considered
Fasold v Roberts (1997) 70 FCR 489 considered
Hungier v Grace (1972) 127 CLR 210 considered
R v Toohey; ex parte Northern Land Council (1981) 151 CLR 179 considered
Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 considered
Bradken Consolidated Ltd v Broken Hill Pty Co Ltd (1979) 145 CLR 107 applied
Bropho v State of Western Australia (1990) 171 CLR 1 applied
Bass v Permanent Trustee Company Ltd (1999) 198 CLR 334 applied
Townsville Hospital Board v Townsville City Council (1982) 149 CLR 282 considered
Launceston Corporation v The Hydro-Electric Commission (1959) 100 CLR 654 considered
State Electricity Commission of Victoria v The Mayor, Councillors and Citizens of the City of South Melbourne (1968) 118 CLR 504 distinguished
Grain Elevators Board (Vic) v Dunmunkle Corporation (1946) 73 CLR 70 cited
Inglis v Commonwealth Trading Bank of Australia (1969) 119 CLR 334 applied
State Government Insurance Corporation v Government Insurance Office of New South Wales (1991) 28 FCR 511 considered, applied
Hawthorn Pty Ltd v State Bank of South Australia (1993) ATPR 41-219 cited
R v Eldorado Nuclear Limited (1983) 4 DLR 4d 193 cited
F Sharkey & Co Pty Ltd v Fisher (1980) 50 FLR 130 applied
Computermate Products (Aust) Pty Ltd v Ozi-soft Pty Ltd (1988) 83 ALR 492 distinguished
J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 applied
Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Ltd (1989) 167 CLR 177 applied
Corrections Corporation of Australia Pty Ltd v Commonwealth of Australia [2000] FCA 1280 applied
Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Ltd (1987) 17 FCR 211 cited
Plume v Federal Airports Corporation (1997) ATPR 41-589 distinguished
Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 38 distinguished
Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 considered
Melway Publishing Pty Ltd v Robert Hicks Pty Ltd(trading asAuto Fashions Australia) [2001] HCA 13 applied
Re Queensland Co-operative Milling Association Ltd (1976) ATPR 40-012 considered
Re AGL Cooper Basin Natural Gas Supply Arrangements (1997) ATPR 41-593 considered
ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 applied
Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43 applied
General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 applied
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337 applied
The Moorcock (1889) 14 P.D. 64 cited
Liverpool City Council v Irwin [1977] AC 239 cited
Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 cited
Hart v MacDonald (1910) 10 CLR 417 cited
Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54 considered
Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 applied
BP Refinery Westernport Pty Ltd v Shire of Hastings [1977] 180 CLR 266 applied
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 considered
Service Station Association Ltd v Berg Bennett and Associates Pty Ltd (1993) 45 FCR 84 applied
Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 applied

NT POWER GENERATION PTY LIMITED (ACN 061 314 921) v POWER AND WATER AUTHORITY and GASCO PTY LIMITED (ACN 009 627 801)

D5 OF 1999

MANSFIELD J

3 APRIL 2001
DARWIN

IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY DISTRICT REGISTRY	D 5 OF 1999

BETWEEN:

NT POWER GENERATION PTY LTD
(ACN 061 314 921)
Applicant

AND:

POWER AND WATER AUTHORITY
First Respondent

GASCO PTY LTD
(ACN 009 627 801)
Second Respondent

GASCO PTY LTD
(ACN 009 627 801)
Cross Claimant

NT POWER GENERATION PTY LTD
Cross Respondent

JUDGE:	MANSFIELD J
DATE OF ORDER:	3 APRIL 2001
WHERE MADE:	DARWIN

THE COURT ORDERS THAT:

1.        The application be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY DISTRICT REGISTRY	D 5 OF 1999

BETWEEN:

NT POWER GENERATION PTY LTD
(ACN 061 314 921)
Applicant

AND:

POWER AND WATER AUTHORITY
First Respondent

GASCO PTY LTD
(ACN 009 627 801)
Second Respondent

GASCO PTY LTD
(ACN 009 627 801)
Cross Claimant

NT POWER GENERATION PTY LTD
Cross Respondent

JUDGE:	MANSFIELD J
DATE:	3 APRIL 2001
PLACE:	DARWIN

REASONS FOR JUDGMENT

INTRODUCTION

1. This is an application under ss 82 and 87 of the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”) for contraventions of s 46 of the Trade Practices Act, and of the Competition Policy Reform (Northern Territory) Act 1996 (NT) (“the Competition Act”). Section 5 of the Competition Act provides that the Competition Code text applies as a law of the Northern Territory. The Competition Code text so applying is called the Competition Code of the Territory: s 10 of the Competition Act. Relevantly, the Competition Code text is the Schedule version of Pt IV of the Trade Practices Act, and the remaining provisions of the Trade Practices Act, including ss 82 and 87, so far as they relate to the Schedule version of Pt IV of the Trade Practices Act. There is also a claim for damages breach of contract.

   THE PARTIES

2. The applicant NT Power Generation Pty Ltd (“NT Power”) was registered on 12 August 1993 under the name Mount Todd Power Pty Ltd.  It changed its name on 30 July 1998.  It is a wholly owned subsidiary of Power Facilities Pty Ltd (“Power Facilities”) registered on 24 June 1992.  Its directors are, and were at material times, Jeffrey William Hutchison (“Mr Hutchison”), John Laurence Roger Bowman (“Mr Bowman”) and Duncan John Mathieson (“Mr Mathieson”).

3. NT Power Group Pty Ltd (“NT Group”) was registered on 9 May 1988.  It also is now a wholly owned subsidiary of Power Facilities.  Until 30 July 1998, it was at material times called B.B.N.T. Pty Ltd.  Its directors also are Mr Hutchison, Mr Bowman, Mr Mathieson and Paul Anthony Edward Everingham (“Mr Everingham”).  NT Power Transmission Pty Ltd (“NT Transmission”) was also registered on 9 May 1988.  It was first called Exibin Pty Ltd, and then from 17 May 1988 until 20 August 1998 NT Power Pty Ltd.  Its shareholders are NT Group, which holds 95 A Class shares and 95 B Class shares and Darnor Pty Limited (“Darnor”) which holds 10 B Class shares.

4. Darnor is a company under the control of the first respondent Power and Water Authority (“PAWA”), to reflect the Northern Territory’s interest in the 132 kV power line from Darwin to Katherine referred to below.  Its directors now are Mr Hutchison, Mr Bowman, Mr Everingham and Margaret Patricia Lyons (“Ms Lyons”).  Ms Lyons was appointed as a director on the nomination of PAWA.  In the period to September 1997, the nominee of PAWA on the NT Transmission board was its then Chief Executive Officer Owen Peake (“Mr Peake”).  He was then replaced by Dennis Bree (“Mr Bree”), who was in turn replaced by Ms Lyons.

5. There are two other wholly owned subsidiaries of Power Facilities which feature to some degree in the events to which this action relates.  NT Power Operations Pty Ltd (“NT Operations”) was registered on 24 November 1993 under the name Dandenong Power Pty Ltd.  Between 6 September 1995 and 24 August 1998 it was known as NT Power (Operations) Pty Ltd.  Its directors are also Mr Hutchison, Mr Bowman and Mr Mathieson.  Finally, NT Power Easements Pty Ltd (“NT Easements”) was registered on 29 May 1994, and has those same three directors.

6. The parent company, Power Facilities, was registered on 24 June 1992 under the name Goldstick Holdings Pty Ltd.  It changed its name on 1 September 1992.  Its directors are Alfred James Field (“Mr Field”), Roastern George Bruce Amm (“Mr Amm”), Mr Everingham, and Gabrielle Mary Trainor (“Ms Trainor”).

7. PAWA is a corporation constituted under s 4 of the Power and Water Authority Act 1987 (NT) (“the PAWA Act”). It came into existence on 1 July 1987 as a consolidation of the Northern Territory Electricity Commission (“NTEC”) and the Northern Territory Water Authority. It is the statutory successor of NTEC. It generates electricity and distributes reticulates and sells electricity to consumers in the Northern Territory. There is an issue as to whether, as NT Power alleges, it does so in the conduct of a business and as a trading corporation engaging in trade and commerce so as to attract the operation of the Trade Practices Act and the Competition Code of the Northern Territory. It owns and controls access to the electricity transmission and distribution infrastructure and facilities in Darwin and Katherine and surrounding areas.

8. The second respondent Gasco Pty Ltd (“Gasco”) is a duly incorporated company. It is a wholly owned subsidiary of PAWA. It acquires gas and sells it to PAWA for PAWA to operate its electricity generators. There is an issue on the pleadings as to whether Gasco at material times carried on the business of supplying gas to consumers in the Northern Territory so as to attract the operation of the Trade Practices Act and the Competition Code of the Northern territory.

   THE LICENCE

9. The Electricity Act 1978 (NT) (“the Electricity Act”) was first enacted in 1978.  Its general purpose is to control the generation and distribution, and the safe use, of electricity in the Northern Territory.  It has been substantially amended over time.  Section 25 of the Electricity Act provides:

   “(1)The Authority [PAWA] may appoint a person who is a party to an agreement with the Authority as a licensee to generate, store, reticulate and sell electricity for use in an area.

   (2)A licensee may sell electricity in accordance with the terms of his agreement with the Authority.

   (3)Where a licensee breaches a term or condition of an agreement referred to in this section, the Authority may cancel the agreement and withdraw the licence without further notice.”

10. “Licensee” is defined in s 3 to mean a person who generates and sells electricity under an agreement between that licensee and PAWA under s 25.

11. Section 14(4) of the Electricity Act empowers PAWA (but not a licensee) to install electrical reticulation equipment on the premises of a consumer upon terms agreed between PAWA and the consumer. Section 14(5) permits PAWA, or a licensee with the consent of PAWA, to enter into agreements with persons permitting them to resell electricity supplied by PAWA or by the licensee.

12. Part 7 of the Electricity Act deals with offences under that Act.  Relevantly for present purposes, s 27(1) prohibits a person from selling electricity, subject to the Act.  Section 27(2) permits PAWA to sell electricity.  Section 27(3) provides:

    “A licensee may sell electricity subject to the terms of the agreement entered into between him and the Authority.”

13. Section 27(4) permits a person to resell electricity where PAWA has entered into an agreement with that person for the resale of electricity, presumably under s 14(5). Section 27(5) permits a person to sell electricity to PAWA.

14. Section 29(1) provides:

    “A person shall not –

    (a)use, consume, waste or divert electricity generated by the Authority or a licensee; or

    (b)use any electrical installation, equipment, apparatus or thing owned by the Authority or a licensee,

    except with the consent of the Authority or a licensee.”

15. Section 29(2) provides that a person who is found guilty of an offence against s 29(1) shall pay to PAWA or the licensee such sum as the Court considers reasonable by way of damages.

16. As between NT Power and PAWA the immediate problem is easy to state.

17. NT Power wishes to sell electricity to consumers in the Darwin/Katherine region of the Northern Territory.  It claims to be licensed to do so.

18. On 26 June 1998 PAWA licensed NT Power to generate and sell electricity upon terms contained in the licence agreement (“the Licence”).  The recital to the Licence is in the following terms:

    “PAWA has agreed to licence the Licensee pursuant to sections 25 and 27(3) of the Electricity Act and section 15(2)(d) of the Power and Water Authority Act to generate, store, reticulate and sell electricity in accordance with the terms and conditions of this Deed.”

19. The Licence provided:

    “PAWA hereby grants a license (“the License”) to the Licensee, subject to the terms of this Deed, to

    (a)sell to any persons situated within the Licensed Area described below electricity which is generated by the Licensee at the Generation Site; and

    (b)sell to PAWA electricity which is generated by the Licensee at the Generation Site.”

1. The licensed area is identified as the Northern Territory.  The Generation Site is Mount Todd Gold Mine site.  The Licence was granted for three years.  During the period of the licence, NT Power was to pay to PAWA an annual fee of $10,000.

2. The Licence expressly provided that it was not exclusive.  It does not preclude generation, transmission, distribution and sale of electricity within the Northern Territory by PAWA or other licensees to whom PAWA has granted licences under the PAWA Act or the Electricity Act.

3. NT Power has acquired a power generating plant at Mount Todd Gold Mine (the “Mount Todd PS”).  It wishes to generate power at that site and to sell the power so generated to consumers within the Northern Territory.  It is unable to do so.  That is because, with limited exception, the electricity infrastructure in and around Darwin (high voltage and low voltage power lines, relay stations, and the like) are owned by PAWA.  PAWA has not agreed to permit NT Power to have access to those infrastructure facilities.

4. NT Power claims that, in a practical sense, the Licence is of no real value.

   THE PLEADINGS

5. The claim by NT Power against PAWA is made upon two bases.

6. It is claimed firstly that PAWA has contravened s 46 of the Trade Practices Act and s 46 of the Schedule version of Pt IV of the Trade Practices Act (and so the Competition Code of the Northern Territory) by failing or refusing to supply to NT Power access to PAWA’s infrastructure so as to enable NT Power to sell electricity to persons in the Northern Territory generated by it at Mount Todd PS in accordance with the Licence. The contraventions are also said to arise by virtue of PAWA’s failure or refusal to continue to negotiate with NT Power in relation to it obtaining access to PAWA’s infrastructure. NT Power contends that that conduct on the part of PAWA was engaged in for the substantial purpose of deterring or preventing NT Power from engaging in competitive conduct in the market for the sale and supply of electricity to consumers of electricity in the Darwin-Katherine area. It also contends that PAWA had, and took advantage of, substantial power which it enjoys in the markets which NT Power described either as the market for the transmission and distribution of electricity in the Northern Territory or the separate markets for the transmission of electricity in the Northern Territory and for the distribution of electricity in the Northern Territory.

7. NT Power’s alternative claim against PAWA is that there is implied into the Licence terms that:

   (a)PAWA would permit NT Power to have access to and the use of PAWA’s infrastructure on reasonable terms for the purpose of selling electricity to persons in the Northern Territory for the period of and in accordance with the terms of the Licence,

   (b)PAWA would do all that was necessary to secure performance of the Licence and in particular to enable NT Power to have the benefit of the Licence, and

   (c)PAWA would deal fairly and in good faith with NT Power in relation to the performance of the Licence.

   NT Power, further submits that PAWA, by refusing to consent to or to permit NT Power to have access to PAWA’s infrastructure, and by refusing to identify terms upon which it will permit NT Power to have access to PAWA’s infrastructure, for the purpose of selling electricity to persons in the Northern Territory in accordance with the Licence, has breached each of those implied terms.  PAWA denies those allegations.

8. The claims against PAWA are for injunctive and declaratory relief, designed to secure access to PAWA’s infrastructure, and for damages.

9. NT Power’s claim against Gasco is confined to claims that Gasco has contravened s 46 of the Trade Practices Act and s 46 of the Schedule version of Pt IV of that Act contrary to the Competition Code of the Northern Territory. Gasco is alleged to have contravened those provisions by refusing and continuing to refuse to give an undertaking that it would not exercise the right of pre-emption which it has under cl 2.26 of the Gas Sales and Purchase Agreement dated 28 June 1985 between itself and the Mereenie Producers (as defined below), so as to preclude NT Power from acquiring supplies of gas from the Mereenie Producers to operate the Mount Todd PS. It is alleged that there is a Northern Territory market for the purchase of gas for generation of electricity, and that the Mereenie Producers are the sole suppliers of gas able to supply NT Power for operating Mount Todd PS. Gasco acquires substantially all the gas produced for sale by the Mereenie Producers so it has substantial power in the market for the purchase of gas in the Northern Territory. Its failure or refusal to waive its pre-emptive right was, it is alleged, the exercise of that market power for the purpose of preventing NT Power from entering into the electricity sale (or supply) market or for the purpose of deterring or preventing NT Power from engaging in competitive conduct in that (those) markets by selling electricity to consumers in the Northern Territory in accordance with the licence.

10. NT Power seeks an injunction directing Gasco to forego its right of pre-emption contained in cl 2.26 of the Gas Sales and Purchase Agreement with the Mereenie Producers in relation to any gas offered for sale by the Mereenie Producers to third parties in the Northern Territory, and alternatively offered to NT Power. It also claims damages pursuant to s 82 of the Trade Practices Act and s 82 of the Competition Code of the Northern Territory.

11. Both PAWA and Gasco deny that the Trade Practices Act or the Competition Code text applies to them. PAWA denies that it carries on business as a generator carrier and supplier of electricity to consumers in the Northern Territory, and Gasco denies that it carries on the business of supplying gas to consumers in the Northern Territory. It is not the fact of those activities being carried out which is in dispute, but that the carrying out of those activities is a business, or that either entity is a trading corporation. In the case of PAWA, it claims further that it is an emanation or authority of the Crown in right of the Northern Territory and is entitled to the same immunities as the Crown in right of the Northern Territory. Prior to the commencement of s 2B of the Trade Practices Act (on 20 July 1996) the Trade Practices Act did not apply to the Crown in right of the Northern Territory or to its emanations or authorities. After that time, in respect of the conduct complained of by NT Power, PAWA contends that conduct granting or refusing access to PAWA’s infrastructure does not amount to PAWA carrying on business. Gasco makes similar claims with respect to the conduct alleged against it. It also contends that, upon the introduction of s 2B of the Trade Practices Act by the Competition Policy Reform Act 1995 (Cth) (“the Reform Act”), s 89(2) of the Reform Act by way of a saving or transitional provision protected existing contracts and acts done to give effect to existing contracts so as to preserve its contractual rights and then exercise in any event immunity from the application of the Trade Practices Act if otherwise it applies to Gasco by reason of s 2B. In the alternative, Gasco contends that the same consequences flow by having regard to the Gas Sales and Purchase Agreement as part of an interconnecting series of agreements entered into for the purposes of the Crown in right of the Northern Territory, so that Gasco enjoys derivative Crown immunity, preserved by s 89(2) of the Reform Act, notwithstanding the introduction of s 2B into the Trade Practices Act.

12. The parties are agreed that there is a market for the supply of electricity to persons in the Northern Territory (“the Electricity Supply Market”).  It is also pleaded, and admitted, that there is a market for the generation of electricity in the Northern Territory (“the Electricity Generation Market”), a market for the transmission of electricity in the Northern Territory (“the Electricity Transmission Market”), a market for the distribution of electricity in the Northern Territory (“the Electricity Distribution Market”), and a market for the sale of electricity in the Northern Territory (“the Electricity Sale Market”).  In the submissions, no real distinction was drawn between the Electricity Supply Market and the Electricity Sale Market.  It will not be necessary to refer hereafter separately to the Electricity Sale Market.  There is a dispute as to the existence of a market in the Northern Territory for the supply of the service of the use of electricity transmission and distribution infrastructure located in the Northern Territory to persons intending to generate and sell electricity to other persons in the Northern Territory (“the Electricity Infrastructure Market”) – a primary market alleged by NT Power – and (as an alternative to the Electricity Distribution Market and the Electricity Transmission Market) a market for the transmission and distribution together of electricity in the Northern Territory (“the Electricity Carriage Market”).  Some of the evidence might indicate that the geographic dimension of the markets – whether those admitted or in dispute – might be more narrowly confined to the Darwin-Katherine area of the Northern Territory.  In a practical sense, for the purposes of this proceeding, nothing turns on whether the geographic dimension of the relevant markets in either the whole of the Northern Territory or the Darwin-Katherine area of the Northern Territory.  I am therefore content to adopt the geographic market dimension as accepted by the parties.

13. PAWA acknowledges that it controls access to PAWA’s infrastructure and that, without that access, it would in practical terms be impossible to supply or sell electricity to persons in the Darwin or Katherine areas. Thus, it accepts that there are substantial barriers to entry into the Electricity Supply Market in the absence of PAWA’s infrastructure being declared a “service” by the Australian Competition and Consumer Commission (“the ACCC”) under s 44V of Pt IIIA of the Trade Practices Act or by an access undertaking having been given under s 44ZZA or in the absence of PAWA agreeing to a third party having access to its infrastructure. In its defence, it pleads that by reason of the Competition Principles Agreement between the Commonwealth and the States and Territories and dated 25 February 1994 (“the Competition Principles Agreement”), the Northern Territory is obliged to reform all existing legislation that restricts competition by the year 2000. PAWA also acknowledges that it had a substantial degree of power in the Electricity Supply Market. It denies that there is an Electricity Infrastructure Market, or an Electricity Carriage Market.

14. PAWA further acknowledges that in 1998 NT Power sought access to PAWA’s infrastructure, and that it did so for the purpose of selling electricity to persons in the Northern Territory.  NT Power has not received that access in accordance with its request, and at material times PAWA has not communicated terms upon which it might agree to NT Power being given that access.  PAWA pleads that it had

    “deferred any decision in relation to providing such consent to any person pursuant to [ss 14, 25, 27 and 29 of the Electricity Act and ss 14 and 15 of the PAWA Act] pending compliance by the Crown in right of the Northern Territory with its obligations under the Competition Principles Agreement and pending the implementation of policies of the Northern Territory Government with respect to inter alia the access and use of [PAWA’s infrastructure] by persons or entities other than PAWA.”

15. It claims that it intended to, and was taking steps to, comply with its obligations under the Competition Principles Agreement. It denies that its conduct in not providing NT Power with access to its infrastructure, or in not identifying terms upon which it might do so, was for the purpose or purposes alleged by NT Power and proscribed by s 46(1)(b) or (c) of the Trade Practices Act.

16. PAWA and Gasco deny the existence of the alleged market in the Northern Territory for the purchase of gas for the generation of electricity. They claim that the relevant market is one for the purchase of energy fuels. There is, however, no dispute that available fuels other than gas are much more expensive than gas in the Northern Territory, and there would be a significant cost in converting gas fired electricity generators into generators operated by alternative fuel sources. Gasco’s pleading disputes the existence of the “pre-emptive right” in the terms pleaded by NT Power, and denies that Gasco has refused and continues to refuse to give an undertaking that it would not exercise its contractual right of first refusal. It claims that it has told NT Power that it would deal with any offer of gas made by the Mereenie Producers under cl 2.26 of the Gas Sales and Purchase Agreement of 28 June 1985, that is gas which would otherwise be sold to NT Power, as quickly as possible in the circumstances. Gasco on 11 October 1999 provided to the ACCC, and the ACCC accepted, an undertaking (in terms to which it is not now necessary to refer) relating to its exercise of that contractual right. It further denies that it has engaged in any conduct in relation to NT Power in exercise of the alleged market power, or that any conduct on its part is for a purpose proscribed by s 46 of the Trade Practices Act.

    BACKGROUND

17. PAWA is a statutory corporation:  s 4 of the PAWA Act.  It consists of the Chief Executive Officer.  The Chief Executive Officer at times material to this application was Mr Peake until July 1997 and then John Gardner (“Mr Gardner”) until 23 November 1998.  The Chief Executive Officer is appointed by the Minister under the Public Sector Employment and Management Act 1993 (NT).

18. PAWA’s functions under the PAWA Act and the Electricity Act are extensive.  They include responsibility for the generation, reticulation and supply of electricity, the reticulation and supply of water, the disposition of waste water, the acquisition, reticulation and supply of gas, and other services.  It is the body which licenses and regulates the generation, transmission and sale of electricity in the Northern Territory.

19. PAWA, in exercising its powers and performing its functions, is subject to the directions of the Minister for Essential Services (s 16 of the PAWA Act).  Within a budget approved by the Minister, it must act in a commercial manner.  However, it may be directed to provide electricity or other services to certain areas, and may seek and receive from the government subsidies or loans or grants to provide particular services to certain areas (s 17(2) of the PAWA Act).  On the evidence, it receives Community Service Obligation payments from the government to provide electricity to remote communities where the generation of power would otherwise be inefficient or uneconomical, and in accordance with government policy it has until recently provided electricity to all consumers in the Northern Territory at about the same tariff regardless of location.  The Annual Reports of PAWA reveal that the Northern Territory Government has advanced to PAWA (or earlier to NTEC) very substantial sums annually by way of subsidy, and by way of loan.  There is a present indebtedness of PAWA to the Government in excess of $200 million.

20. The PAWA Act also provides for the establishment of the Power and Water Authority Advisory Council (“the Advisory Council”) comprising the Chief Executive Officer and six persons appointed by the Minister to represent community or commercial interests in the Northern Territory. The Council advises the Minister on all matters concerning electricity and water and the provision of sewerage services: s 10 of the PAWA Act. It does not have power to give any direction to PAWA itself.

21. PAWA generates electricity principally at five facilities in the Northern Territory.  The main facility is the Channel Island Power Station (“Channel Island”), a short distance south of Darwin.  Channel Island has operated for many years.  It operates five open cycle gas turbines producing 160mW.  Two of those turbines have the capacity to generate a further 32mW by the use of steam from waterheated boilers.  There is also an inlet air cooling generating capacity to produce a further 18mW.  Katherine Power Station has three gas turbines which generate 19.5mW.  There are also power stations at Tennant Creek, Alice Springs and at Yulara.  There is also a standby gas generator at Berrimah, with a capacity to generate 30mW.  The gas turbines at those power stations and the associated equipment are controlled by PAWA under various agreements, but are not owned by PAWA.  All but the power station at Yulara receive gas for the turbines through the Amadeus to Darwin Gas Pipeline.

22. PAWA’s generating capacity, from time to time, is augmented by several independent power producers, generally but not only from power stations constructed to provide electricity to mining operations.  Power which is surplus to the requirements of the particular mining operation is available to PAWA.  Those power stations are operated at the Pine Creek Mine, the McArthur River Mine, the Cosmo Howley Mine, and now the Yimuyn Manjerr Mine (previously called the Mount Todd Mine).  As noted NT Power operates the Mount Todd PS at the Yimuyn Manjerr Mine site.  There is also an independent power provider which operates the Brewer Power Station at Alice Springs.

23. There are about 829 kilometres of power transmission lines in the Northern Territory.  A power transmission line carries power of 33kV and above.  PAWA owns all that transmission line apart from a 300 kilometre section of 132kV transmission line between Darwin and Katherine (“the 132 kV line”).

24. The 132kV line was constructed in 1988 and 1989.  It provides the main transmission network between Darwin and Katherine.  It links Channel Island, Pine Creek Power Station, Cosmo Howley Power Station, Mt Todd PS, and Katherine Power Station.  It enables power generated at Channel Island to meet much of the demand at Katherine.  It is owned by Allco Nominees Pty Ltd (“Allco”) as trustee for the NT Power Trust, of which the unit holders are NT Transmission and NT Eastments.  As noted above, Power Facilities owns 90.5 per cent of NT Transmission and all of NT Eastments, as well as all of NT Power.  The remaining 9.5 per cent of NT Transmission is owned by Darnor.  The NT Power Trust has leased the 132kV line to NT Transmission on a long term lease.

25. NT Transmission uses the 132kV line to transmit electricity to and from PAWA under a series of Electricity Sale and Purchase Agreements.  PAWA purchases from, and sells to, NT Transmission electricity at supply points and redelivery points along the 132kV line.  Within a 50km corridor along the 132kV line, NT Transmission is authorised to sell electricity to non-PAWA customers if the supply is above a certain demand or level, but the corridor excludes customers within a 50km radius of Darwin, within a 20km radius of Katherine and within a 5km radius of Pine Creek.

26. As relevant to this case, in the Darwin and Katherine areas and elsewhere low voltage electricity transmission lines of 22kV or below, substations, and transformers are owned by PAWA.  They provide the distribution network for consumers.  The distribution network includes the Hudson Creek Substation which delivers electricity to a number of zone substations and, as the voltage is progressively broken down, through a series of pad mounted substations, pole substations and package substations to consumers.  It also includes the overhead or underground distribution lines, culminating in the meter box for each individual electricity consumer.

27. For convenience, I shall call the transmission and distribution facilities owned or controlled by PAWA as “PAWA’s infrastructure”.

1. There is located on the 132kV line the Edith River Sub-station.  The Mount Todd Mine is roughly twenty kilometres east of that substation.  There are two 22kV lines owned by NT Power which run between the Edith River Sub-station and the Mount Todd Substation, adjacent to Mount Todd PS.  The Mount Todd PS is gas fired.

2. The Mount Todd PS was constructed by Pegasus Gold Australia Pty Ltd (“Pegasus”) the then operator of the Mount Todd Mine in 1996. It is an LM 6000 power station with a claimed generation capacity of 35.5 mw or an annual energy production of about 310 GWh. A new 22kV line was necessary to secure a back up power supply from the 132kV line. The Mount Todd PS was commissioned on 16 September 1996. NT Power agreed with Pegasus that it would operate and maintain the Mount Todd PS. NT Power also entered into the Electricity Sales and Purchase Agreement of 2 September 1996 for the supply of electricity as required from PAWA to NT Power, and for PAWA to purchase as it required surplus electricity generated at the Mount Todd PS. On 9 September 1996, PAWA acting under s 25 of the Electricity Act and s 15(2)(d) of the PAWA Act, licensed NT Power to sell to Pegasus electricity generated at the Mount Todd PS (or electricity purchased from PAWA), and to sell electricity generated there to PAWA.

3. There are presently two commercial gas fields supplying gas in the Northern Territory.  Both are in the Amadeus Basin in the southern part of the Territory.  The Mereenie gas and oil field is operated by a consortium of mining companies called “the Mereenie Producers”, now under the management of Santos Ltd (“Santos”).  The Palm Valley gas field is operated also by a consortium of mining companies called “the Palm Valley Producers”, also now under the management of Santos.  Gas from those two gas fields is used only in the Northern Territory, and principally by PAWA to generate electricity at its power stations.  Pipelines connect those two fields and Alice Springs, and there is a pipeline running from the Amadeus Basin through Tennant Creek and Katherine to Darwin (“the Gas Pipeline”).

4. The Gas Pipeline is operated by NT Gas Pty Ltd (“NT Gas”), in which Darnor has a small shareholding.  The largest shareholder is AGL Pipelines (NT) Pty Ltd (“AGL”).  The operations of the Gas Pipeline are regulated by a Shareholders Agreement and by a Unit Holders Agreement (the unit holders being unit holders in the Amadeus Gas Trust).

5. On 28 June 1985 the Mereenie Producers and Gasco entered into the Mereenie Gas Purchase Agreement (“the 1985 Mereenie Gas Sales Purchase Agreement).  It has been modified by later agreements.  It will be necessary to refer to that agreement in detail later in these reasons.  It provides for the sale of gas from the Mereenie Producers to Gasco, including terms as to price and volume.  The volume of gas to be supplied is, broadly, to meet PAWA’s requirements to generate electricity in and for the Northern Territory.  Clause 2.26 of the 1985 Mereenie Gas Sales and Purchase Agreement gives Gasco a pre-emptive right in relation to the sale of gas by the Mereenie Producers to customers other than Gasco, so that Gasco may purchase gas offered to a third party by the Mereenie Producers at the price offered to that third party.  That clause of the 1985 Mereenie Gas Sales and Purchase Agreement is a significant element in NT Power’s claim against Gasco in this proceeding.

6. On 28 June 1985 the Palm Valley Producers also entered into a sale and purchase agreement with Gasco, called the Palm Valley Gas Sales and Purchase Agreement.  It is relevantly in the same terms as the 1985 Mereenie Gas Sales and Purchase Agreement.  It also contains a pre-emption clause (cl 2.26) in the same terms as cl 2.26 of the 1985 Mereenie Gas Sales and Purchase Agreement.

7. The Northern Territory Government guarantees the payment by Gasco of its liabilities to the Mereenie Producers and to the Palm Valley Producers.

8. The 1985 Mereenie Gas Sales and Purchase Agreement and the Palm Valley Gas Sales and Purchase Agreement were part of a wider series of agreements entered into at that time.  Under a separate Gas Sale Agreement, also dated 28 June 1985, Gasco onsells gas purchased from the Mereenie Producers or the Palm Valley Producers to NT Gas for the purposes of its operation of the Gas Pipeline and to supply the gas to PAWA.  The gas is then transported along the Gas Pipeline to Channel Island, or by spur lines to other power stations as required.  The Gas Pipeline was constructed by NT Gas under an agreement with NTEC, the ancestor of PAWA, also dated 28 June 1985.  Upon the completion of its construction, the Gas Pipeline was sold to the bank consortium which financed its construction.  The Gas Pipeline was then re-leased by that group to NT Gas.  It is not necessary to explore the finer details of that agreement.  There is a spur gas pipeline from Edith River to Mount Todd which is under the control of AGL.

9. On 2 September 1996, PAWA and NT Power entered into an Electricity Sales and Purchase Agreement.  At the time the Mount Todd Mine was operated by Pegasus.  As the Mount Todd PS had surplus generating capacity, NT Power agreed to sell the electricity generated at Mount Todd PS beyond the requirements of the mine operator to PAWA.  In November 1997, Pegasus ceased operating the Mount Todd Mine.  It lay dormant for some time.  From about late July or early August 1999, General Gold Resources NL (“GGL”) assumed control of the Mount Todd Mine.  It renamed the mine the Yimuyn Manjerr Mine.  Its electricity requirements are met by power generated at Mount Todd PS by NT Power.

10. Whether or not the occasion of the cessation of mining operations by Pegasus at Mount Todd Mine was the event which precipitated action on the part of NT Power, by late 1997 NT Power had formed the plan of generating electricity at Mount Todd PS to sell to the general public, including, and focussed on, commercial users of electricity in the Darwin and Katherine areas in competition with PAWA.  That plan is the genesis of the present proceeding.

11. Coincidentally, PAWA was addressing the implications of the National Competition Policy.  Following upon the August 1993 report “National Competition Policy – Report by the Independent Committee of Inquiry” (AGPS, Canberra, 1993), the Competition Principles Agreement and the Conduct Code Agreement also dated 25 February 1994 were each entered into by the Commonwealth and each of the States and Territories.

12. In accordance with those agreements, the Northern Territory enacted the Competition Act, and parallel legislation was passed in the other States and in the Australian Capital Territory. The Trade Practices Act was amended, inter alia, by adding Pt XIA called ‘The Competition Code’ by which s 150C defines ‘The Competition Code’ as consisting inter alia of the Schedule version of Pt IV of the Trade Practices Act and the remaining provisions of that Act so far as they would relate to the Schedule version if it were substituted for Pt IV. Its provisions operate concurrently with the Competition Act: s 150G. That amendment was effected by the Reform Act. The Reform Act also introduced ss 2A, 2B and 2C into the Trade Practices Act. They came into operation on 20 July 1996. Sections 2B and 2C are relevant to the defence that the Trade Practices Act and the Competition Act do not apply to PAWA or to Gasco in respect of the conduct which is the subject of this proceeding.

13. The Reform Act also introduced “Pt IIIA – Access to Services” into the Trade Practices Act. Part IIIA of the Trade Practices Act was introduced to implement cl 6(1) of the Competition Principles Agreement. It does this by presenting legislation to establish a regime for third party access to services provided by means of significant infrastructure facilities, so as to permit effective competition in a downstream or upstream activity. As noted elsewhere in these reasons, pursuant to s 44M of the Trade Practices Act, the Northern Territory has submitted a regime for access to PAWA’s infrastructure to the National Competition Council for declaration as an effective regime: see cl 6(2) of the Competition Principles Agreement. Clause 6(4) identifies the principles to be incorporated into any such access regime.

14. Clause 5 of the Competition Principles Agreement obliged all signatory governments to embark upon review of legislation, with the guiding principle that legislation should not restrict competition unless it were demonstrated that the benefits of the restriction to the community as a whole outweigh the costs, and that the objectives of the legislation can only be achieved by restricting competition.  The Northern Territory (and all signatories) were obliged to develop a timetable by July 1999 for the review and, where appropriate, for reform of all existing legislation that restricts competition by the year 2000.

15. In accordance with its obligations under the Competition Principles Agreement, the Northern Territory developed and kept under consideration a timetable to review its legislation to determine whether there were provisions which restricted competition, and to address whether any legislative amendment was necessary to relieve that restriction.  Included in the legislation under review were the PAWA Act and the Electricity Act.  Within PAWA, the need to review that legislation was recognised.  On the evidence, the review of those two pieces of legislation did not progress quickly.  Nevertheless, I accept the evidence of the Under Treasurer Kenneth Bruce Clarke (“Mr Clarke”) and of Michael Clifford (“Mr Clifford”), an officer of Treasury, that some work had been undertaken in that regard during 1997.  I will refer to that work later in these reasons.

THE COURSE OF EVENTS

1. This section of the reasons for decision records my findings on the course of events from late 1997 until early 2000.  It incorporates findings relevant to the consideration of the particular issues raised by the parties, and addressed later in these reasons.  There are further particular findings made in those sections of the reasons.

2. Much of the evidence relating to the course of events is uncontentious. There is no real dispute about the terms of the written communications between the parties, or the occasions of their meetings. There is some disagreement about what was said at certain meetings. Where it has been necessary to resolve those conflicts, I have set out my findings and, to the extent necessary, the particular factors which led to those findings. There is also no real contest about most of the steps in the course of events taken by NT Power, or by PAWA or Gasco or the Northern Territory Government and its officers. The real factual contest lies in the reasons for certain action taken by PAWA and Gasco. That aspect is considered in detail when addressing NT Power’s claims based on s 46 of the Trade Practices Act and the Competition Act. Consideration of the expert evidence, particularly that of Professor Teece and Dr Fitzgerald, is also dealt with in that section of my reasons.

3. Parts of the evidence were accepted by the parties as confidential, either because it related to sensitive commercial matters or to matters which were properly the subject of governmental confidentiality.  Rather than add at the end of these reasons a set of findings on confidential matters, I have endeavoured to make my findings in a way that does not disclose such confidential information.  To a small extent, that has resulted in the findings in this section of my reasons being a little more general than might otherwise have been the case.  I do not think that that generality, where it occurs, interrupts the sequence of the findings.

4. There was extensive oral evidence given by officers of NT Power, and by officers or former officers of the Treasury Department of the Northern Territory Government and of PAWA, as well as expert evidence. I do not find it necessary to comment on each of those witnesses individually. I have referred to those parts of their evidence which I have found helpful in the findings I have made, including where appropriate particular reference to their evidence. I am satisfied that each of the witnesses was endeavouring to be truthful in the evidence given, although perhaps not surprisingly I think certain of the evidence was skewed by the approach of the particular witness, or by the witness being required to revisit a process of consideration some time after the event, and to express that process of consideration in terms applicable to the questions raised by s 46 of the Trade Practices Act. In some cases, the cross-examination on those lines produced answers which I did not find particularly helpful either because I felt that the witness was reconstructing that process of reasoning rather than reporting the actual process of reasoning, or because the witness had not in fact applied a process of reasoning which lent itself to being tied to concepts which s 46 of the Trade Practices Act dictates.

5. I have placed considerable weight on contemporaneous documents when making my findings.  The reason for that is obvious.  Their spontaneity is likely to enhance their reliability, particularly where the issue concerns the state of mind or the intentions of PAWA or Gasco.  There are two reservations to that approach, one of which to some degree also relates to the evidence of Mr Hutchison.  He was the principal witness for NT Power.

6. Mr Hutchison is an electrical engineer.  He is the chief executive officer of NT Power, and of Power Facilities.  He has had long and continuous experience in electricity generation and supply.  In 1978 he started work for NTEC, soon after it was created.  Prior to that time, responsibility for the supply of electricity in the Northern Territory lay with an instrumentality of the Commonwealth Government.  In 1978, the Commonwealth electricity assets in the Northern Territory were vested in NTEC.  In 1980, he was appointed the general manager of NTEC.  At that time, NTEC operated the Stokes Hill Power Station which was oil-fired.  It was decommissioned when Channel Island was established.  Mr Hutchison remained in that position until the end of 1981.  He then took up a series of positions in private industry operating within his area of expertise. In 1993, as a result of a takeover, his then employment was transferred to NT Transmission as its chief executive officer.  He assumed that role also with NT Power upon its registration.

7. Mr Hutchison is obviously well qualified and capable in his field of expertise.  I formed the clear impression that he is an achiever.  He aims to get things done quickly.  He is inclined to attribute to others consensus with his views when that consensus does not really exist.  He has a forceful personality.  It is easy to understand that, in the face of his assertions or proposals, those with whom he was dealing might adopt a cautious rather than a confrontational approach and would avoid making a clear commitment to him.  For his part, I think Mr Hutchison tended to take that caution or diffidence as acquiescence in his proposal or suggestion, and tended then to proceed as if the proposal or suggestion should be acted upon.  In my view, Mr Hutchison was prone to read into others diffidence or caution, and the absence of a forceful rejection of his suggestions or proposals, acquiescence to those suggestions or proposals.  Although I have no doubt that he was an honest witness, the tendency to read more into comments made at meetings so as to discern acquiescence or consensus where none existed makes me cautious about accepting as reliable his version of certain conversations.

8. Mr Hutchison also had the practice, promptly after a meeting, of sending to those present minutes of that meeting, sometimes by way of a confirmatory letter, and sometimes with the proposition that failure to correct that version of the meeting would result in its being accepted as correct.  I well understand his reasons for doing so, but I think that his versions of such meetings conveyed in that manner sometimes were incomplete because he was mainly concerned with recording those parts of the meeting which best served his purposes.  As I have said, that is not due to any conscious attempt to put a “spin” on events in a misleading way, but probably because he was rather single-minded and very focussed on achieving his or NT Power’s objectives.  Sometimes, also for similar reasons, those communications recorded a greater degree of accord than was really the case.

9. The other reason for approaching with caution certain of the communications is that I think that some of the communications or documents were written with a careful eye to their significance to these proceedings.  It is clear that the parties were conscious of the possibility of proceedings from at least August 1998.  They had each engaged solicitors by that time.  Some subsequent documents, not unsurprisingly, to some degree, lack the spontaneity of earlier documents.  They are more cautiously expressed.  They are not, in any sense, inaccurate or unreliable for that reason but I have considered them in the context that the parties may have been conscious of their potential ‘strategic’ significance to these proceedings.  That is not the case with all documents created after August 1998, but it is a consideration I have had in mind when considering the documentary material generally.  Both Mr Hutchison and Mr Clarke are clearly very intelligent men.  The documents for which they were each responsible in the period on and from August 1998 fall into the category of documents which I have addressed in that light, notwithstanding that they are not under the hand of the respective solicitors for the parties.  I have no doubt that each was aware of the potential significance to these proceedings of documents generated by them or under their direct control.

10. Following the Competition Principles Agreement, the Northern Territory duly developed a program to implement the National Competition Policy.  On 26 July 1995 the Department of the Chief Minister advised all departments (including PAWA) of the general steps necessary to comply with that Policy.  Chandra Seneviratne (“Mr Seneviratne”) an officer of PAWA in 1995 commenced work to analyse PAWA’s costs, and processes were put in place to review the PAWA Act and the Electricity Act.  The target of the year 2000 to have in place any necessary legislative amendments was understood and work was progressing, albeit slowly in 1995-1997, to meet that target date.

11. Mr Clifford is the Manager, Economic Services, of PAWA.  His duties have included dealing with the issue and administration of licences for the sale of electricity in the Northern Territory.  He prepared an internal memorandum dated 8 October 1996 raising issues for PAWA’s detailed consideration relating to the National Competition Policy.  A lengthy discussion paper of 16 January 1997 also raised issues of an access regime for PAWA’s infrastructure.  There were other steps taken within PAWA to which I need not refer.  In October 1997 Mr Clifford allocated an officer to work full time on evaluating and recommending a regime for access to PAWA’s infrastructure.

12. On 9 December 1997, Mr Clifford sent a memorandum to the Deputy Under Treasurer regarding third party access to PAWA’s infrastructure.  He anticipated the prospect of an approach by a third party for such access, and discussed four options for providing access.  He sought Treasury Department’s views on certain matters relating to the prospect of PAWA providing third party access to its infrastructure.  The fact of potential competition to PAWA in the supply of electricity in the Darwin-Katherine area was recognised in PAWA’s 1997 Strategic Marketing Plan, dated 1 October 1997.  I find that the prospect of such competition was also recognised by the Treasurer of the Northern Territory at a social occasion on about 18 August 1997, at which, with Mr Hutchison, Mr Matheson and Mr Everingham present, the suggestion of NT Power extending the 132vK line south of Darwin to Tindal Air Base was discussed.  In that discussion, the Treasurer expressed some concern that NT Power would “pick the eyes out of our customers” and leave the less profitable clients to PAWA.  I do not think that that discussion is of any great significance, apart from showing the awareness of the Treasurer to the potential for competition with PAWA.

1. Once NT Power commenced operating the Mount Todd PS from about September 1996, Mr Hutchison was directly involved in its operations.  One activity explored by NT Power in early 1997 was the supply of electricity from Mount Todd PS to the Union Reefs Mine of Acacia Resources Pty Ltd (“Acacia”).  That involved transmitting power along the 22kV line to the Edith Creek Substation and then along the 132kV line.  The passage of electricity in that manner is called “wheeling”.  To explore that proposal, it was necessary to calculate a wheeling charge for use of that transmission line or TUOS (an acronym for transmission use of system) charge.  The acronym for the use of distribution facilities is DUOS (distribution use of system).  There were communications between Mr Hutchison and Mr Peake on that topic in March 1997.  Acacia decided to acquire its electricity requirements from PAWA rather than NT Power, so those discussions on the TUOS charge did not come to finalisation.  NT Power anticipated having electricity generating capacity in excess of the needs of Pegasus at the Mount Todd Mine from full loading of the LM6000 gas fired generator. Mr Hutchison raised with Mr Peake the possibility that NT Power would seek to extend the 132kV line to enable it to sell electricity to the Department of Defence at Tindal Air Base south of Katherine, including the construction of a generating plant at Manton with an LM2500 gas turbine generator.  He also raised that prospect with the Treasurer at a meeting on 13 June 1997.

2. NT Power was also seeking to explore the sale of its anticipated surplus electricity output from the Mount Todd PS in other ways.  It raised with PAWA and with the Northern Territory Government in about June 1997 the possibility of “partnering” with PAWA in the suggested development of a power station at Manton and the extension of the 132kV line to Tindal Air Base.  Allied with the supply of electricity to Tindal Air Base through the new infrastructure under contemplation, supply to one or two proposed new mining ventures in the area was also under consideration.  It is not necessary to refer to the detail of that proposal.  In the result, nothing came of that proposal.

3. There was over the same period contemporaneous discussions between NT Transmission, Power Facilities, PAWA and the Northern Territory Government concerning the possible refinancing of the 132kV line, and the terms upon which that might occur.  That topic was partly interwoven with the discussion on the other matters referred to above.  Those decisions did not proceed entirely to NT Power’s satisfaction. By letter from the Treasurer dated 18 December 1997, those discussions with NT Power to refinance the 132kV line came to an end.

4. In a letter from NT Power to the Treasurer and to the Minister for Resource Development dated 5 November 1997, concerning the progress of those negotiations, NT Power claimed that it

   “has recently received a number of inquiries from PAWA customers (including the Department of Defence and the Hoteliers’ Association) seeking the opportunity to obtain lower tariffs than their existing arrangements.”

   I find that that letter was prompted, at least in part, by the knowledge of NT Power that Pegasus would soon cease to operate the Mount Todd Mine.

5. In November 1997, NT Power was informed that Pegasus was to cease operating the Mount Todd Mine.  An Administrator was appointed to Pegasus on about 15 November 1997.  That had two practical consequences.  First, the generating capacity of the Mount Todd PS would no longer be required for the Mount Todd Mine, at least unless and until the mine resumed operations, so the full use of the Mount Todd PS required that its power output be sold elsewhere.  Secondly, the prospect of NT Power acquiring ownership of the Mount Todd PS from Pegasus at an acceptable price assumed a dimension it had not previously enjoyed.  That was an entitlement which arose under the agreement between NT Power and Pegasus for the operation of Mount Todd PS.  Subsequently, NT Power acquired Mt Todd PS from Pegasus on 3 April 1998.  Mr Hutchison and Mr Amm looked at a range of options at that time.  They included buying and onselling Mount Todd PS either to PAWA or to some other third party (there is apparently an international market) or selling the electricity generated at Mount Todd PS to consumers of electricity in the Northern Territory.  In the longer term, there was also the prospect of the Mount Todd Mine reopening.

6. John Gardner (“Mr Gardner”) was the Chief Executive Officer of PAWA from 15 September 1997 to about the end of November 1998.  He replaced Mr Peake.  He had previously worked as Deputy Under Treasurer.  During his tenure with PAWA, he was also chairman and managing director of Darnor and of Gasco.

7. The Minister for Essential Services, Mr Eric Poole, was the minister responsible for PAWA during Mr Gardner’s tenure and the person who, under s 16 of the PAWA Act, was capable of giving directions to PAWA.

8. Mr Gardner attended a meeting with Mr Amm, Mr Hutchison, Mr Clifford, Michael Chan (“Mr Chan”) and others on 4 December 1997.  That was shortly after Pegasus had ceased to operate the Mount Todd Mine.  NT Power called that meeting to discuss how it might use the Mount Todd PS.  The options discussed included PAWA purchasing and relocating the LM6000 generator to the Channel Island, and PAWA purchasing from NT Power the electricity output from Mount Todd PS.  Mr Gardner did not perceive from that meeting the possibility of NT Power selling electricity to consumers in the Darwin-Katherine area.  I accept the evidence of Mr Gardner (and others) that PAWA did not express any firm preference at that meeting.  It was proposed to receive a written proposal from NT Power or Power Facilities for consideration.  At the end of that meeting, a private exchange took place between Mr Amm and Mr Gardner, at which Mr Amm ‘threw into the ring’ the possibility of Mount Todd generating power to supply consumers in the Darwin area.  Issues concerning the grant of a licence, access to PAWA’s infrastructure, or access regimes were not discussed.

9. NT Power contends that a PAWA Management Board meeting of 17 December 1997 decided upon the policy that PAWA would negotiate terms with any third party requiring access to PAWA’s infrastructure to enable third parties to compete with PAWA in the supply and sale of electricity in the Darwin-Katherine area.  I do not accept that, as claimed, that was PAWA’s policy from that date.  The PAWA Management Board, on the evidence, was a group of PAWA employees who did not have the power or function of deciding upon such matters.  That responsibility lay with PAWA, that is Mr Gardner as its Chief Executive Officer, or with the Minister for Essential Services by direction under s 16 of the PAWA Act, or ultimately with the Northern Territory Government.  None of those persons had made any such decision.  The PAWA Management Board had no status under the PAWA Act.  I accept Mr Gardner’s evidence that he had made no such decision, and would not have done so without consultation with the Minister.  The issue was of sufficient moment that I am satisfied also that the Minister would have made no such decision without Cabinet approval.  Subsequent events demonstrate that that was the procedure adopted when the Northern Territory resolved upon its access regime.  Neither of the officers of PAWA who are recorded as present at that meeting and who gave evidence (Mr Clifford and Mr Chan, in addition to Mr Gardner) claimed that that meeting laid down a policy of and for PAWA or that those present at that meeting as a group had power to do so.  In fact, Mr Clifford continued to work on options for PAWA’s anticipated access regime thereafter.

10. It should be noted, however, and it was indeed not in dispute, that soon after his appointment as Chief Executive Officer of PAWA, Mr Gardner formed the view that PAWA had a number of serious operational inefficiencies, and that as a consequence its ability to compete with a third party supplier of electricity to consumers in the Darwin-Katherine area would be inhibited.  There were other factors, too, which he regarded as inhibiting its ability to compete with a third party supplier.  In December 1997 he prepared an Operational Assessment explaining in detail his reasons for concluding that PAWA’s structure and operational arrangements “are inadequate for it to effectively protect and enhance its position in a competitive market place.  It is not necessary to set them out here.  The Operational Assessment commented that

    “It is clear that, before real competition arises, the Authority must drive the change from within.”

11. It recommended separation of PAWA’s regulatory and energy development and supply activities.  That Operational Assessment was submitted to Cabinet for its meeting on 5 March 1998 when, as noted below, Cabinet approved a major review of PAWA.

12. By January 1998, NT Power had formed the intention of acquiring the Mount Todd PS.  It wished to operate the LM6000 at full capacity and to sell the electricity generated to PAWA or to its own customers.

13. By letter dated 8 January 1998, NT Power put a proposal to PAWA, involving NT Power upgrading at its cost the 22kV line between the Mount Todd Substation and the Edith River Substation to a 132kV line, and as to the terms on which it would sell the electricity then generated to PAWA.  By separate letter of the same date to PAWA, NT Power proposed that its existing licence to sell electricity (to Pegasus or to PAWA) be amended to authorise the sale of electricity generated at Mount Todd PS to any customer at Mount Todd (presumably any new mine operator) and to “any customer on the interconnected electrical system”.  It suggested other amendments to the licence agreement as well.

14. That request was followed by a further request to PAWA by letter dated 19 January 1998 in the following terms:

    “Mount Todd Power Pty Ltd (MTP) holds a license to sell electricity in the area of the Mount Todd Goldmine Site (Goldmine) pursuant to a deed with the Authority dated 9 September, 1996.

    MTP wishes to expand its above license to sell electricity generated by the gas fired power station at the goldmine to any person who is able to take supply whether utilising the 132kV Darwin-Katherine transmission line or otherwise, from the generator.

    The period of the license should be unlimited.

    We would appreciate your approval within 14 days.”

15. On 19 January 1998, NT Power also sent to PAWA (Mr Clifford) its proposal following the meeting on 4 December 1997.  It focussed principally on selling to PAWA the Mount Todd PS electricity output, but it also included a proposal for the sale of the Mount Todd PS including the LM6000 generator.

16. Mr Clifford had referred to him for attention both NT Power’s letter of 19 January 1998 seeking to vary its licence so that it could sell electricity to any person who could take supply from the 132kV line or otherwise for an unlimited period, and its letter of 19 January 1998 offering to sell to PAWA electricity generated at Mount Todd PS surplus to the mine’s requirements and upon specified terms, and offering to sell the Mount Todd PS.  He appreciated that the application for a licence was the first application to PAWA which was not site specific or customer specific.

17. Mr Clifford was aware of the need to recognise PAWA’s role as industry regulator as distinct from its commercial operations.  He did not see, as regulator, that there were grounds upon which PAWA could refuse that licence.  He regarded PAWA’s commercial interests as a matter not relevant to whether the licence sought should be issued.  Moreover, he regarded as a matter not relevant to whether the licence should be issued that NT Power might or might not be able to supply electricity generated by it to consumers in the Darwin-Katherine area.  That is, NT Power’s own assessment of its market to sell electricity generated and sold under licence was a matter for it.  He shared those views with Mr Gardner.

18. He considered then s 25 of the Electricity Act and s 15(2)(d) of the PAWA Act as identifying or limiting the criteria relevant to whether the licence sought should be granted. He was aware that NT Power already had an agreement to sell power to PAWA from the Mount Todd PS from time to time, and a licence to sell power to Pegasus and to PAWA. He regarded it as having the technical expertise and the facilities to generate and sell electricity. He saw no reason to question its financial resources or commitment. He identified no other consideration which he regarded as relevant and which militated against the grant of the licence sought. In reaching that view, he specifically addressed the possibility of inconsistency between the licence now sought and the rights which NT Transmission enjoyed in the “mandated area” being the area within fifty kilometres of the 132kV line.

19. Mr Clifford was responsible for imposing and fixing the licence fee of $10,000 per annum.  It was not fixed by reference to any past experience or by reference to any existing guideline or policy.  In a sense, it was a rough figure only, intended by him to cover regulatory and administration costs including consideration of the application, preparation of documents, legal advice and the like.  He had regard to the licence fees imposed by other regulatory authorities in other States in reaching the figure of $10,000.  I accept that, in his process of consideration of the licensee application, he acted in good faith and endeavoured to and did eschew from consideration PAWA’s commercial interests or issues relating to whether NT Power, if licensed, would be able to secure access to PAWA’s infrastructure.  I saw no reason to doubt any of Mr Clifford’s evidence.  It was given with an economy of expression, and cautiously, but I was impressed with his frankness and directness in responding to questions.

20. Mr Clifford also addressed NT Power’s offer to sell electricity to PAWA contained in its letter of 19 January 1998.  He formed the view that, upon its terms, that offer should not be accepted as it was not commercially warranted.

21. On 30 January 1998, PAWA by letter indicated that it was not interested in acquiring Mount Todd PS itself, nor in acquiring electricity there generated upon the terms proposed.  That letter referred to “a number of concerns with the technical operation of such an arrangement in terms of resulting system stability”.

22. NT Power nevertheless sought to maintain negotiations on those fronts.  At a meeting on 6 February 1998, the Chief Executive Officer of PAWA said that one matter to be resolved, if access to PAWA’s infrastructure was to be given to enable NT Power to sell electricity beyond the present scope of its licence, would be the quantification of TUOS and DUOS charges.  At that meeting, Mr Gardner also signalled the prospect of PAWA’s functions as an industry regulator and as a public utility providing electricity, water and sewerage services being separated in some way.  Mr Clifford attended that meeting with Mr Chan and Mr Gardner.  Mr Hutchison and Mr Mathieson represented NT Power.

23. I find that operational and technical issues arising out of the proposed introduction of electricity into the 132kV line in the quantities then suggested were then discussed, as well as the price at which NT Power might sell electricity to PAWA.  I also find that Mr Garnder at that meeting did not say (as claimed by Mr Hutchison) that the NT Power price of supply was “cheap”.  Having regard to Mr Clifford’s role and involvement in the analysis of the price of the NT Power officer, it is likely that Mr Gardner would first have sought Mr Clifford’s further advice before making any such comment and that Mr Clifford would have noticed specifically if his Chief Executive Officer had made such a comment which may not have accorded with his views.  Mr Clifford confirmed that no such comment was made.  That is consistent also with the ministerial briefing note of 18 February 1998 prepared by Mr Clifford, but under the hand of Mr Gardner, reporting on NT Power’s proposal.

24. PAWA’s letter dated 10 February 1998 to NT Power reflected that notional separation of functions.  It relevantly said:

    “As you are aware, the Authority is currently considering a request from your associated company, Mount Todd Power, for a license to generate and sell electricity.  The Authority, in its role of regulator, foresees no impediment to the issue of the required licence at this stage.  The licencee will of course be required to adhere to or comply with any conditions and regulations which may attach to the licence.

    In exercising such a licence, the Authority presumes the establishment of access arrangements to the 132 kV transmission line between Darwin and Katherine.

    The potential use of the 132kV line has focussed the Authority’s attention on the Agreements which exist between the Authority, NT Power and others.  The Authority particularly notes that third party use was not specifically contemplated in the 132 kV line Agreements and has sought expert legal opinion on the matter.

    Following advice to us, the Authority wishes to advise NT Power that any proposal for use of the line by any third party would necessarily require:

    a)a reduction of current and future charges for the Authority’s use of the line;

    b)no diminution or impact on of (sic) the Authority’s use of current or future capacity of the line and;

    c)acceptance by NT Power of all technical and operational risks associated with the access of the facility by any third parties.

    The Authority expects that NT Power will be required to formally consider access arrangements as due course.  Before any commercial arrangements are made with any party, might we suggest that NT Power meet with PAWA, to canvass the issues outlined, with the view to negotiation of acceptable contract variations and revised pricing arrangements.

    The Authority looks forward to meeting NT Power in the near future to discuss these matters.”

25. In my judgment, that letter is significant to NT Power’s claims to have implied into the Licence terms relating to the grant of access to PAWA’s infrastructure or to facilitating that access.  The letter puts NT Power on notice that although NT Transmission effectively controlled access to the 132kV line, NT Power should not assume it should automatically get access to that transmission line simply because it is a related company to NT Transmission.  Access to the 132kV line by NT Power was necessary before electricity generated at the Mount Todd PS could be supplied to residents of Darwin and Katherine.  The next step was access to PAWA’s infrastructure.  I consider the letter clearly identifies questions of access to infrastructure as being distinct from questions relating to whether a licence to generate and sell electricity should be issued.  Despite that letter, NT Power appears to have assumed that it would get access to the 132kV line at no cost, even until the late stages of the hearing.  By separate letter of the same date, PAWA rejected the revised offer of NT Power to supply and sell electricity generated at Mount Todd PS to PAWA itself.

26. Mr Clifford had been involved on behalf of PAWA with the implementation of the Competition Principles Agreement from at least 1986.  He accepted that PAWA’s infrastructure would have to become the subject of an access regime, and he acknowledged that PAWA had not progressed the implementation of any such access regime much by the time NT Power in January sought the extended licence.  He had, however, identified the issues and in general terms the steps necessary to address them, and had allocated an officer to work towards that end from October 1997.  He had received a working paper from that officer on 10 November 1997, and planned to make a report or recommendation from PAWA for Cabinet.  In part of the early months of 1998, he was on leave.  It was during his absence that Cabinet resolved to undertake the Scoping Study referred to below.

1. PAWA’s contention then is that its purpose in refusing access to its infrastructure to NT Power from August 1998 was to enhance competition, and that the refusal of access was a means to that end. Consequently, it contends, it has not contravened s 46 of the Trade Practices Act because its subjective intention was to protect the interests of consumers; it would defeat the legislative purpose of s 46 if, notwithstanding that intention, it was found to have contravened s 46.

2. NT Power’s response is simply that good or bad intentions behind a ‘purpose’ to refuse access to the Market or to inhibit competitive activity in the Electricity Supply Market are irrelevant to whether s 46 has been contravened. So much is clear. Queensland Wire decided that there was no element of predatory or reprehensible conduct required to constitute a contravention of s 46. It equally follows, in my view, that there is no exemption from the application of s 46 that PAWA’s conduct may have been driven by good or exemplary motives about achieving in the longer term an ideal competitive Electricity Supply Market.

3. In my view, the factors which influenced how PAWA acted at material times must be assessed simply against the words of s 46. The desired end of PAWA was, I accept, as its written submissions claims:

   “… an overriding desire to encourage genuine and efficient competition in the medium to long term.”

   This was to be achieved by introducing competition through the access regime to produce benefits to consumers, but to do so gradually so as to allow time to eliminate or reduce tariff mismatches and poor work practices within PAWA.

4. Section 4F(1)(b) provides that a person is deemed to have engaged in conduct for a particular purpose if the person engaged in that conduct for purposes that included that purpose, and that that purpose was a substantial purpose.

5. Section 46(1)(b) is contravened, in the light of my earlier conclusions, if PAWA refused NT Power access to its infrastructure for the purpose of preventing NT Power from entering into the Market as an acquirer of services or into the Electricity Supply Market. Section 46(1)(c) is contravened if PAWA’s refusal was for the purpose of deterring or preventing NT Power from engaging in competitive conduct in the Electricity Supply Market. I do not see the need to separately consider those two provisions. In the light of my findings of fact, notwithstanding my acceptance of the “higher” long term intention of PAWA, I consider that a substantial purpose of PAWA’s refusal was to deter or prevent NT Power from participating in either of those markets until it introduced an access regime. That was the particular means by which the ultimate desired end was, in part, to be achieved. But it was a real consideration in achieving that ultimate end that NT Power not be able to participate in the Electricity Supply Market in competition with PAWA until some future time. I think it imposes a gloss on the wording of s 46 to admit of a qualification that an immediate purpose for conduct which might otherwise contravene s 46 does not do so where the motive for the conduct is the judgment that the longer term interests of consumers would be better served by delaying competition in the market, or where the ultimate or wider purpose (of which the conduct concerned is but one step) is to introduce competition another way. Section 46, in my view, must simply be allowed to operate upon its own terms.

6. For those reasons, if I had determined that the conduct of PAWA of which NT Power complains is vulnerable to the application of s 46, I would have determined that NT Power would succeed in establishing the contravention alleged.

7. In view of my conclusion about the operation of s 89 of the Reform Act in relation to NT Power’s claim against Gasco, I do not need to address the claim against Gasco for contravention of s 46.

   The claim based on terms implied in the Licence

8. NT Power claims that by virtue of the grant of the Licence on 26 June 1998, there was implied into the terms of the Licence three particular terms.  They are

   (a)that PAWA would give access to and use of its electricity transmission and distribution infrastructure on reasonable terms

   (b)that PAWA would do all things necessary to enable NT Power to have the benefit of the licence, and

   (c)that PAWA would deal fairly and in good faith with regard to the performance and implementation of the licence.

9. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337, Mason J said at 346:

   “The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract.  In each case the problem is caused by a deficiency in the expression of the consensual agreement.  A term which should have been included has been omitted.  The difference is with rectification the term which has been omitted and should have been included was actually agreed upon; with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it – it is not a term that they have actually agreed upon.  Thus, in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it.  Rectification ensures that the contract gives effect to the parties’ actual intention; the implication of a term is designed to give effect to the parties’ presumed intention.”

10. As Mason J points out, the implication of a term in a contract is to give effect to the presumed intention of the parties in circumstances where the parties have not turned their minds to the need to express that term.  That rationale underlies the approach of the Courts to implying a term into a contract to give it business efficacy:  eg. The Moorcock (1889) 14 P.D. 64 per Bowen LJ at 68. It also reflects circumstances where the courts have implied a term into a contract because it is so obvious that it goes without saying, provided of course that it reflects the presumed intention of both parties: eg. Liverpool City Council v Irwin [1977] AC 239 per Lord Cross at 258 and per Lord Edmund-Davies at 266. See also per Stephen J in Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 at 13; and per Isaacs J in Hart v MacDonald (1910) 10 CLR 417 at 431.

11. In my view, there are three substantial hurdles to NT Power succeeding in this aspect of its claim.  The first is that, on the evidence, I am not satisfied that the terms which NT Power seeks to contend are implied into the Licence are terms which the parties failed to direct their minds to and to make explicit provision for.  Indeed, in my judgment, the evidence points clearly to the fact that NT Power, particularly through Mr Hutchison, was aware of the need to procure access to PAWA’s infrastructure to be able to sell electricity into the Darwin-Katherine area, and did not raise that with PAWA as a requirement to be dealt with when the Licence was granted.  NT Power was provided with a copy of the draft licence on 7 May 1998.  It had an opportunity to consider the Licence.  It made representations, both in writing and orally, to PAWA about the terms of the proposed licence querying in particular the licence fee and the period for which the licence was to operate.  Moreover, in its facsimile to PAWA of 28 May 1998, and in its meeting with PAWA officers on 25 May 1998, it specifically requested PAWA to address the amount of the TUOS and DUOS charges which PAWA would impose or seek to impose for access to PAWA’s infrastructure.  From PAWA’s viewpoint also, Mr Clifford acknowledged in his evidence that he was aware that, notwithstanding the grant of the Licence, the question of access to PAWA’s infrastructure would also arise and have to be dealt with separately.  He expressly raised the question of access charges in respect of the 132kV line by correspondence with NT Power on 10 February 1998.  It was plain from the terms of that letter that PAWA was addressing the issue of access charges, and did not consider them as having been dealt with in the process of granting the licence.  It is true that the matter raised by PAWA concerned the 132kV line operated by NT Transmission rather than by PAWA.  But conceptually, the same issue arises in relation to access to PAWA’s infrastructure.  That correspondence isolates the issue of licensing from the commercial issue of access to infrastructure.  That, too, is consistent with what I have found to have been the clear tenor of the conversation at the meeting on 16 March 1998 at which Mr Gardner on behalf of PAWA made it clear that the meeting should be divided into two phases, to separate PAWA’s role as regulator in considering the terms of and the grant of the Licence as sought on the one hand, and its role respecting its commercial interests both in relation to its use of the 132kV line and the terms upon which it would continue to be granted that use, and its provision of access to PAWA’s infrastructure on the other.  It is also consistent with NT Power’s letter of 28 May 1998 which, in my view, treats issues concerning access to PAWA’s infrastructure as discrete from the terms of the proposed licence.

12. In my judgment, NT Power seeks to have implied into the Licence terms which it should not be presumed that NT Power and PAWA would have agreed upon had they turned their minds to those topics.  The failure specifically to address those topics in the Licence is not a consequence of a failure to have directed their minds to those topics at all and by oversight to have made no explicit provision for them.  It was a conscious decision by NT Power and PAWA not to raise those matters in the Licence agreement for the reason that, as I accept, the grant of the Licence was part of the regulatory function of PAWA distinct from its commercial function as a generator and provider of electricity into the Northern Territory.

13. The second substantial hurdle facing NT Power derives from the nature of the “contract”. The Licence recited that it was to be granted under ss 25 and 27(3) of the Electricity Act and s 15(2)(d) of the PAWA Act. Section 15(2)(d) of the PAWA Act empowers PAWA to licence persons for the purposes of generating and selling electricity. Section 25 of the Electricity Act authorises PAWA to appoint a person who is a party to an agreement with PAWA as a licensee to “generate, store, reticulate and sell” electricity in an area. Section 27(3) authorises a licensee to sell electricity pursuant to the terms of a licence, notwithstanding s 27(1) which otherwise prohibits a person from selling electricity. Although PAWA took the step of submitting to NT Power a draft of the proposed licence agreement, and considered its submissions thereon, the document is in character a licence permitting conduct which otherwise would be prohibited under the Electricity Act. The Licence was issued in response to a request made by NT Power on 19 January 1998. It is not, in a real sense, an agreement reached between parties involving an exchange of promises or of other consideration. It is an authorisation granted by PAWA in exercise of a statutory function. As it happens, PAWA is also the owner of PAWA’s infrastructure but that in my view is a feature of PAWA which is distinct from its regulatory role under the Electricity Act. I do not consider that the nature of the Licence is such that the Court should presume that PAWA as regulator intended to provide access to its infrastructure to NT Power by reason of the performance of its statutory function in response to a request for a licence, or that NT Power intended or expected that as a term of the Licence it would receive access to PAWA’s infrastructure. No authority was identified by counsel in which a court has implied terms of the general tenor of those alleged upon the grant of a licence pursuant to a statutory function and responsibility. In Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54 there are, in quite different circumstances, shades of judicial caution in implying into a commercial contract terms which might intrude upon or fetter the future exercise of government policy: see per Murphy J at 86.

14. The third reason why, in my judgment, there is a substantial hurdle to the claim based upon terms sought to be implied in the Licence also derives from some observations of Mason J in Codelfa, again at 346, where his Honour said:

    “For obvious reasons the Courts are slow to imply a term.  In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made.  The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue.  And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.”

15. The Licence contains a “whole agreement” clause in par 14.  It provides:

    “This Deed (unless amended by written instrument duly executed by both parties) and the applicable legislative provisions mandatorily applicable hereto constitutes the entire agreement between the Licensee and PAWA and supersedes the Licence to Sell Electricity between Power and Water Authority and Mount Todd Power Pty Ltd dated 9 September 1996 and the parties acknowledge that the Licence to Sell Electricity between Power and Water Authority and Mount Todd Power Pty Ltd dated 9 September 1996 is terminated.”

16. That clause, in my judgment indicates that the parties have actually agreed upon the terms the totality of which they intended to address.  Indeed, the draft licence agreement sent to NT Power on 7 May 1998 contained a “whole agreement” clause in a somewhat abridged form.  It was subsequently altered to expressly refer to the previous licence dated 9 September 1996 including that it is terminated.  The draft proposed licence was sent to NT Power for its consideration and comment.  NT Power made written and oral representations as to the terms of the proposed document, and signified its concurrence with the proposed terms.  NT Power executed the document as a party to it, and on 26 June 1998 attended what it regarded as a formal settlement of the application for the licence, including the taking of congratulatory photographs as a mark of the significance of the occasion.  There is, by virtue of that alteration, and the course of negotiations, reason to think that that “whole agreement” clause was one of which both parties were clearly and firmly aware when the Licence was granted on 26 June 1998.

17. The significance of a “whole agreement” or “entire agreement” clause appears clearly from the decision in Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 per Latham CJ at 357-358 and per Dixon J at 363. Dixon J referred to such a provision in an agreement as effectually excluding an implied condition. Rich J agreed with the judgment of Dixon J.

18. Putting aside those general difficulties, which I think clearly lead to a conclusion on this issue adverse to NT Power, it is desirable nevertheless to address the issues as presented by NT Power.  In BP Refinery Westernport Pty Ltd v Shire of Hastings [1977] 180 CLR 266 at 283 the “template” for the circumstances in which a term may be implied into an instrument was expressed in the joint speech of Viscount Dilhorne, Lord Simon of Glaisdale, and Lord Keith of Kinkel in the following terms:

    “… for a term to be implied, the following conditions (which may overlap) must be satisfied:  (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

19. In support of the claim that the Court should imply into the Licence a term that PAWA would give access to PAWA’s infrastructure on reasonable terms, NT Power refers to the fact that in 1996 it was granted a licence for a period of ten years to supply and sell electricity to Pegasus at the Mount Todd Mine, and to PAWA.  In effect, it contends, it has surrendered that licence and procured a new licence for three years for an annual fee of $10,000 so that it could supply and sell electricity into the Northern Territory market in general.  The only way in which it could get the benefit of the Licence, and achieve its purpose of selling and supplying electricity into the Northern Territory market is if PAWA were to give it access to PAWA’s infrastructure upon reasonable terms.  It makes the same comments with respect to the other proposed implied terms.

20. In my judgment the terms of the Licence are not such as to require the implication of a term that PAWA would give access to PAWA’s infrastructure to NT Power on “reasonable terms”.  Although it is a requirement of the “template” that the term to be implied must be reasonable and equitable, for otherwise the Court would not presume that to have been the intended agreement of the parties, the fact that the term sought to be implied may from one point of view or indeed from both points of view be seen to be reasonable and equitable is not a sufficient reason to imply that term into the contract.  The proposed term is not necessary to give business efficacy to the licence.  Indeed, as PAWA pointed out to NT Power, and as NT Power itself was aware from other communications, PAWA in providing the licence was not purporting to act in its commercial interests at all but was purporting to fulfil its role and responsibility as a regulator of the electricity supply industry under the PAWA Act and under the Electricity Act.  The recital to the licence itself refers specifically to those legislative sources of power.  It is not necessarily a function of a regulator of an industry to ensure that an entity licensed to provide services or goods within an industry should be able to do so effectively and economically.  Commercial considerations relevant to the licensee are not necessarily or generally relevant to the licensor/regulator, except to the extent that the economic stability of the licensee or proposed licensee is itself a matter of relevance to whether the licence should be granted.  Economic stability in those circumstances is sometimes of significance to the licensor, because the licensor may be charged with ensuring a sufficient and adequate supply and continuous supply of those goods or services to a particular market or markets.  For that reason alone, I do not think that the term sought to be implied is necessary to give business efficacy to the Licence.  Indeed, as I have mentioned above, the nature of the Licence itself and the legislative structure in which it was granted does not lend itself to a test of business efficacy in any event.  That fact, in my view, is almost acknowledged by NT Power in its preparedness to separately negotiate with PAWA as a commercial operator in respect of access to the PAWA infrastructure.  The Licence itself is effective in its terms.  How it is used commercially is a separate and distinct question.  In addition, in this particular matter, even if one were to subsume together the commercial and regulatory functions of PAWA, the term sought to be implied is not necessary to give business efficacy to the Licence.  That is because NT Power, in any event, was able to sell and supply electricity to the operator of the Mount Todd Mine, and to PAWA.  By arrangement with NT Transmission, it could also sell and supply electricity to other entities within the franchise free zone of fifty kilometres either side of the 132kV line, subject to the terms upon which that right had been granted to NT Transmission, and subject to NT Transmission’s consent.  The ultimate fulfilment of the commercial expectations of a licensor is not a factor which falls within the requirement of giving of the Licence business efficacy.

1. As I have observed above, the parties should not be presumed to have intended to have agreed upon the term which is sought to be implied, because they each recognised the need independently of the Licence to reach an agreement on that very matter.  That is another way, I think, of expressing the third criterion in the “template” for implying a term into a contract, namely that it must be so obvious that it goes without saying.  In this particular matter, that clearly was not the case.  No such presumption should be assumed, where the evidence shows that the intention of the parties is to the contrary.  They did not overlook the topic, but each recognised that it would be dealt with separately by a commercial negotiation.  I am also not satisfied that the proposed clause is capable of clear expression.  As expressed, and as the evidence shows, the determination of “reasonable terms” is not one which is readily enforced.  The fact that the parties have spent a considerable period of time and evidence in the course of this hearing endeavouring to demonstrate what those reasonable terms are indicates the difficulty and the uncertainty of such a clause.  It is common ground, as evidenced in part by Mr Hutchison’s offer of help at the meeting on 25 June 1998, that PAWA had a considerable amount of work to do before it would be in a position to determine with any degree of commercial confidence what was an acceptable access charge.  That involved the process of identifying all of PAWA’s distribution and transmission assets, determining the basis upon which they should properly be valued, and those values, and determining then a proper commercial return for the use of those assets to a party having access to them, as well as addressing technical concerns relating to such matters.  As I have found elsewhere in these reasons, the concerns of PAWA’s technical officers for the implications to the system’s stability and in other respects of the possible flow of up to 35kw of electricity from Mount Todd PS into the Darwin transmission and distribution network were genuinely held concerns and ones which those officers wished to resolve before that access was permitted.

2. For similar reasons, I do not think that there should be implied into the Licence a term that PAWA would do all things necessary to enable NT Power to have the benefit of the licence.  The reasoning relating to the role of PAWA as regulator, and to the absence of any foundation to presume any such intention on the part of the parties supports such a conclusion.  Furthermore, even if those obstacles were overcome, it is difficult to give any meaningful content to an implied term that PAWA would do all things necessary to enable the applicant to have the benefit of the licence.  Counsel for NT Power did not indicate with any precision the content of that obligation.  In Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, Mason J said at 607:

   “It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract.  It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that parties’ obligations and are not fundamental to the contract.  Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit.  In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.”

3. In this matter, the grant of the Licence was itself the performance of the “contract” on the part of PAWA.  There were no more acts which it was then required to do to complete the grant of the Licence or to ensure that the Licence was effective.  It was effective in its terms.  What NT Power seeks to do is to imply that it was entitled to a benefit under the Licence for which the Licence did not provide, namely access to PAWA’s infrastructure, and that PAWA would somehow take steps to ensure that NT Power received the benefit of the Licence by having access to that infrastructure.  In addition, I do not think that the claimed term is sufficiently clear as to be one which “it goes without saying” that both parties would be presumed to have agreed upon.  Nor, in a practical sense, is it so clear as to be enforceable.  PAWA had many calls upon its resources.  Not the least of those calls concerned its regulatory functions, and its functions as a supplier of electricity to the Northern Territory market.  It was involved in 1998 with consideration of drafts of and providing information to Merrill Lynch for the Scoping Study.  It was obliged pursuant to the Competition Principles Agreement and the timetable for its implementation to have addressed by the end of 2000 questions of access, in a form acceptable to the National Competition Council.  In those circumstances, an obligation to “do all things necessary to enable the applicants to have the benefit of the Licence”, ie. to have access to its infrastructure upon terms which are not specified, involves a commitment which in my view in a practical sense would be unenforceable.

4. The third term sought to be implied is that PAWA would deal fairly and in good faith with regard to the performance and implementation of the Licence.  The applicant contends that, because PAWA is a Government authority, the Court should readily imply a term that PAWA will deal with NT Power fairly and in good faith.

5. For the purposes of considering that claim, I am prepared to assume that in Australian law the Court will imply into the terms of a commercial contract that one party is obliged to act in good faith towards the other during the currency of, and in the performance of, the contract.  I do not, however, consider that that assumption is necessarily well-founded:  see Gummow J in Service Station Association Ltd v Berg Bennett and Associates Pty Ltd (1993) 45 FCR 84 at 91-98. His Honour concluded, after reviewing authorities, that there is no binding authority that there should be implied into every contract as a matter of law a term that each party to a contract will act in good faith and with fair dealing in its performance and enforcement of the contract. In Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 132-133, Kirby P also expressed some doubt as to the accuracy of that proposition. However, even assuming it to be correct, I do not think that that is of assistance to NT Power in the present circumstance. That is partly for the reasons which I have already given, namely the nature of PAWA as regulator in granting the Licence and that, on the facts as I have found them, there is no scope for a finding of a presumed intention on the part of the parties that PAWA would deal fairly and in good faith with regard to the performance and implementation of the licence by somehow co-operating in providing to NT Power access to its infrastructure. It is also because the Licence itself involves giving permission to NT Power to do something which otherwise s 29 of the Electricity Act prohibits it from doing.

6. The Licence, having been granted, operates of its own force.  It does not oblige PAWA to do anything further.  Under the Licence PAWA had no continuing obligations, to the performance of which could be attached an obligation to perform those duties in good faith or in a particular manner.  It is not reasonable, nor is it so obvious that it goes without saying, that the grant of the Licence required PAWA to do anything further in relation to access to its infrastructure.  That could not be suggested in relation to other licences granted by PAWA to third parties or to NT Power.  The fact that the Licence was in respect of a wider geographic area than previous licences does not make self-evident the converse of the position in respect of the other licences.  I have found that NT Power and PAWA did not expect that access to PAWA’s infrastructure would flow from the grant of the Licence.  They each regarded it as an independent step which was required to be addressed.  There was, therefore, no necessity to give the Licence business efficacy to imply a term that PAWA would deal further with NT Power at all in relation to the Licence.  It was mutually expected that NT Power and PAWA would have some discussions regarding the terms of access to PAWA’s infrastructure, but in my view that was an activity which was entirely extraneous to the Licence.  Nor, in my judgment, is the proposed term one which is capable of clear expression and enforceable.

7. Where there is a particular contractual obligation to be carried out, the means by which it is to be carried out may be enforced by requiring that it be carried out in good faith.  Where there is no particular contractual obligation to be carried out, an obligation to act “in good faith” in a vacuum is not one which can give rise to an obligation to provide a particular additional service (access to PAWA’s infrastructure) upon certain terms or in a certain manner or within a certain time limit or to negotiate with respect to that service in good faith.  In my judgment it would only be if the Licence itself provided for the obligation to provide access to PAWA’s infrastructure by a certain date that the obligation to negotiate in good faith could be found.  The obligation as claimed that PAWA would deal “fairly” with NT Power with regard to the “performance and implementation of the licence” is far too vague.

8. Accordingly, in my judgment, NT Power’s claim based upon terms to be implied in the Licence must fail.

   CONCLUSION

9. For the reasons expressed above, I have reached the view that NT Power’s claim against PAWA and against Gasco must be dismissed.  In the light of that conclusion, I do not need to address the complex factual and legal issues relating to NT Power’s claim for damages, or its claim for declaratory or injunctive relief.  I also do not consider it necessary to give any separate reasons for decision or to make any order in relation to Gasco’s cross-claim against NT Power.

10. I order that the application be dismissed.

I certify that the preceding four hundred  (400) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate:

Dated:             3 April 2001

Counsel for the Applicant and Cross Respondent:

I Barker QC

A Bannon SC

A Henskens

Solicitors for the Applicant and Cross Respondent:

Colin Biggers & Paisley

by their agents

Cridlands

Counsel for the Respondents and Cross Claimant:

B Oslington QC

L G Foster SC

J Nicholas

A Tonking

M Grant

Solicitors for the Respondents and Cross Claimant:

James Noonan

Dates of Hearing:

3, 4, 5, 6, 9, 10, 11, 12, 14, 16, 17, 18 and 19 August 1999;

20, 21 and 24 September 1999;

11, 12, 13, 14, 18, 19, 20, 21 and 22 October 1999;

1, 2, 3, 4, 5, 8, 9, 10, 11, 24 and 25 November 1999;

1, 2, 3, 14, 15, 16, 17, 18, 21, 22, 23 and 24 February 2000;

6, 7, 8, 9 and 10 March 2000

Date of Judgment:

3 April 2001