NT Power Generation Pty Ltd v Power & Water Authority & Anor

[2004] HCATrans 47

[2004] HCATrans 047

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Darwin  No D13 of 2003

B e t w e e n -

NT POWER GENERATION PTY LTD

Appellant

and

POWER AND WATER AUTHORITY

First Respondent

GASGO PTY LTD

Second Respondent

McHUGH ACJ
GUMMOW J
KIRBY J
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 10 MARCH 2004, AT 10.03 AM

(Continued from 9/3/04)

Copyright in the High Court of Australia

MR OSLINGTON:   May it please the Court, could I return to the question of the conduct of the trial so far as the allegation of the market in which market power was exercised ‑ ‑ ‑

McHUGH ACJ:   Well, before you do, could I return to the question of time allocation.

MR OSLINGTON:   We have sorted that out, your Honour.  I have accepted two and a quarter hours, the interveners want half an hour, which gives Mr Bannon all afternoon.

McHUGH ACJ:   Yes.  So you will go till quarter past 12.

MR OSLINGTON:   Yes, your Honour.

McHUGH ACJ:   Very well.  Thank you.

MR OSLINGTON:   Or, more accurately, I will have to stop by a quarter past 12.  Your Honour, could I first go to the judgment of Justice Mansfield in paragraph 25 at 3464 of the appeal book, in which his Honour considers the pleadings in the case:

It is claimed firstly that PAWA has contravened s 46 . . . 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 . . . 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 ‑ ‑ ‑

McHUGH ACJ:   I am sorry, what page is that again?

MR OSLINGTON:   Page 3464 in paragraph 25, your Honour.  I have just started reading from about line 35.

McHUGH ACJ:   Yes.

MR OSLINGTON:  

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.

That reflects a section 46 claim by exercising power in the infrastructure market to prevent competition in the sale market.  It also contends that PAWA had and took advantage of substantial power which it enjoys in the markets, which NT Power described as either the market for transmission and distribution of electricity, or the separate markets for the transmission and transmission of electricity in the Northern Territory for the distribution of electricity.  So that identifies substantial power being taken in what, in a shorthand way, I would describe as the infrastructure market.

If one moves to paragraph 314 at 3559 of the appeal book, under the sub‑heading, “The claim against PAWA under s 46”, just above line 30:

Counsel for NT Power contended that, for the purposes of considering the outcome of the claim, it does not really matter whether there are the two separate markets as Professor Teece said, or the one Electricity Carriage Market.  In either event, PAWA has a substantial degree of power in those markets or in that market. 

Later passages of the judgment will reveal the contest about whether there were two separate markets or a single market.  There is a contest between whether there was a separate transmission market, on the one hand, and distribution market, on the other hand, or whether it should be regarded as the one market.  In paragraph 326, at page 3564:

The characterisation of the power by which PAWA controls access to its infrastructure is by no means simple.

So his Honour was focusing on the power in the infrastructure market: 

There is no dispute that the control of that infrastructure is a natural monopoly.  The barriers to entry of another potential supplier of infrastructure services to those wishing to participate in the Electricity Supply Market –

I should just pause here to say, your Honour, the sale market is variously described in the judgment and by the experts as either the sale market or the supply market –

in the Northern Territory are self evident.  It was not a matter upon which expert evidence was necessary to quantify the economic or other costs to doing so, nor to address whether in any event there was any real prospect that the Electricity Supply Market could support more than one provider of infrastructure services.

Then in paragraph 327:

In my opinion, the exercise by PAWA of the power to refrain from giving access to its infrastructure is an exercise of market power rather than the discharge of a regulatory function.

It is plain from a later passage in the judgment that the exercise of the market power his Honour is there referring to is exercise of market power in the infrastructure market, which his Honour later defines in his judgment. 

Moving on to paragraph 337, at 3568, his Honour is then considering the relevant market:

In terms of the relevant product market, and the functional market, I do not think that it is necessary in this matter to determine the competing views of the experts Dr Fitzgerald and Professor Teece as to whether there is one Electricity Carriage Market incorporating both the transmission and distribution networks of PAWA, or separately an Electricity Transmission Market and an Electricity Distribution Market.  That is because I do not consider that the resolution of that issue makes any difference to the outcome of the proceeding.  Whichever view is adopted, in my view the power of PAWA in the market or markets –

namely, the transmission or distribution market or the combined market –

is the same and the conduct in which it engaged in relation to the market or markets is the same.

namely, the transmission or distribution market or the combined market:

is the same and the conduct in which it engaged in relation to the market or markets is the same. 

His Honour is focusing on power in the infrastructure market, and then at 338, in paragraph 339, his Honour said:

For the sake of convenience, and neutrality on that issue –

namely the issue was, whether there are separate markets for transmission and distribution, his Honour said –

I shall call the market or markets for supply of services for the transport of electricity along PAWA’s infrastructure, including its transmission and distribution network, as “the Market”.

Then later, in a number of passages in his Honour’s judgment, his Honour uses “the Market” defined in paragraph 339, for instance, in paragraph 357, at appeal book 3575:

Once that issue is put aside –

namely, the issue concerning section 16, the direction under section 16 –

determining whether PAWA has used its substantial power in the Market in declining to grant NT Power access to its infrastructure is, in my view, straightforward.

So, his Honour is focusing on the exercise of the substantial degree of power in the infrastructure market.  At 3576, just above line 14, his Honour continues his focus of the exercise of a substantial degree of power in “the Market”.  Justice Finkelstein, in the Full Court, was the only member of that court who focused closely on market definition, his consideration of that commencing at about 3656.

McHUGH ACJ:   What paragraph?

MR OSLINGTON:   At paragraph 143.  His Honour made quite a close analysis and it continues over a number of pages, which I do not propose to read to your Honour, but I would ask your Honours to have regard to what Justice Finkelstein said, but in particular at 3657 in paragraph 144 Justice Finkelstein refers to the evidence of the economist:

Dr Fitzgerald said that it is usual to distinguish four markets in the electricity industry –

and he sets them out and points out that although Dr Fitzgerald said usually one identifies four markets in the electricity industry, namely sale, generation, transmission and distribution, that because of the small size of the Northern Territory market it was really appropriate to identify only two markets, one market for sale and generation and another market for transmission and distribution.

Then at 3664, paragraph 157, his Honour having reached a conclusion about the relevant market being what I have described as the infrastructure market, his Honour said:

Now it is necessary to determine whether PAWA used its substantial power in the market (that is the distribution and transmission markets) to refuse to grant NT Power access –

There was no consideration by either Justice Mansfield or by the Full Court of a claim based upon the exercise of substantial power in the electricity sale market.

Indeed, during submissions to the Full Court – and the appeal in that court went for I think at least four days, maybe longer – my learned friend did point out that his pleading that the respondent had a substantial degree of power in the supply market, meaning the sale market, by reason of the fact of controlled entry into that supply market because it owned all the infrastructure, my learned friend went on to say that is a proposition which is plainly correct.  His Honour did not have to decide it because it was not an issue before him because of the way the trial was conducted.  Be that as it may, if the Court was to embark on a different course, we embark on this different course.  If one embraces Queensland Wire there is plainly a substantial degree of power in PAWA in the supply market.

Now, that submission was not developed any further in the Full Court.  It is understandable why the Full Court did not embrace the invitation to that submission, it having been said by my learned friend that the case was not conducted on that basis in the court below.  If it were necessary, and we submit that it should not be necessary for this Court to consider whether a case could be made out or taken advantage of substantial power in the supply market, such a case must fail.  Although a substantial degree of power in the infrastructure market could be used to prevent entry into the supply market, the exercise of that substantial power is an exercise of substantial power in the infrastructure market.

McHUGH ACJ:   Yes, but you turn “infrastructure” into an adjective.  Why would one not look at it as a noun and say its power, or part of its power, in the sale market, the supply market, is a product of its control of infrastructure which prevents other companies from operating in that market, just as in, let us say, the manufacture of bricks.  Somebody has the only brick‑making machine.  Now, there is no market about the sale of brick‑making machines, but it has an asset which allows it to control the market.  It is a barrier to entry because no one else has it.

MR OSLINGTON:   Accepting that, the ownership of the infrastructure is a source of power in the sale market.  Any refusal of access to the infrastructure is conduct taking place in the infrastructure market and is conduct amounting to taking advantage of substantial power in the infrastructure market.  Indeed, to the extent to which there was evidence which may possibly support a case of taking advantage of power in the sale market, there are three somewhat ambiguous passages in Dr Fitzgerald’s report, which I want to take your Honours to ‑ ‑ ‑

CALLINAN J:   Mr Oslington, before you get to that, if you go to page 3559, paragraph 314 in the primary judge’s reasons, which I think was your starting point, that paragraph, if you look at the last sentence on that page:

It then contends that PAWA taking advantage of that market power was for a purpose proscribed . . . namely for preventing the entry of NT Power into the market for the supply of electricity ‑ ‑ ‑

MR OSLINGTON:   “Supply” meaning sale in that context.

CALLINAN J:   Yes.  It could not mean anything else, could it?

MR OSLINGTON:   No.

CALLINAN J:   It seems to me, reading the passages at first sight to which you have referred us – the subsequent passages – that his Honour took the view that it did not matter.  In effect, his Honour was taking the view that has just been put to you by the Acting Chief Justice here.  It does not matter how you put it, it involves an element of supply, inevitably.  There is no doubt, is there, that his Honour was of the view that it was part of or one of the appellant’s contentions that there was a market for supply?  It was a supply market.

MR OSLINGTON:   We do not dispute in this Court that there was a market for the sale or supply of electricity.

CALLINAN J:   And that it was a contention that there was a taking advantage of that market by your client for a proscribed purpose.

MR OSLINGTON:   We do not dispute that in the pleadings there was an allegation that my client ‑ ‑ ‑

CALLINAN J:   It was a contention, according to what his Honour said, more than a pleading.  It seems to me that it was his Honour’s view that it did not matter, but that did not mean that the contention was not being advanced or had been abandoned in any way.

MR OSLINGTON:   With respect, your Honour, the passage in his Honour’s judgment to which your Honour referred is really no more than an account by Justice Mansfield of the allegations of the appellant fitting within the terms of section 46, namely, taking advantage of power in one market for the purpose of deterring or preventing entry in another market.  We accept that during the conduct of the trial before Justice Mansfield, there was no express statement by those appearing for the appellant of an abandonment of the pleading alleging taking advantage of power in the supply market, but that question, in the way in which the trial was conducted, was not an issue before Justice Mansfield, and that was conceded. 

Your Honour, if it had been an issue, it is something which we would have addressed with the benefit of mature consideration and proper preparation rather than attempting to address such an issue on our feet with time constraints – I do not complain about the time constraints, but that is the reality of the position.  It was an issue.  The trial was not conducted on that basis, the notion was floated before the Full Court, but not pursued, and the Full Court proceeded in its consideration of the issues in what we would respectfully submit is a conventional basis, namely, having regard to the manner in which the trial had been conducted.

We would respectfully submit that if we are now required to meet a claim different to that in which a very lengthy trial was conducted and different to that which a relatively lengthy appeal to the Full Court ‑ ‑ ‑

KIRBY J:   Is this point clearly made in your written submissions, because this is something that has arisen in this Court?

MR OSLINGTON:   No, because this has only arisen in this Court, your Honour.

KIRBY J:   Speaking for myself, I think we have to be very careful, as a final court from which there is no appeal, jumping in and dealing with matters on a different basis than has happened below.  It has been known to occur.  So if you want to elaborate this, I will appreciate it if you do so in a written document later so I can reflect on it, with reference to the transcript to demonstrate what you say is the manner in which the matter was tried at first instance, because at first instance there was not a great deal of restriction on time.  The matter went for, I think, 43 days.  It was a very lengthy trial.  We have to be a bit careful that we do not come in after the battle and look at it in an entirely different way.

MR OSLINGTON:   The occasion for my learned friend to raise the point in a notice of appeal to this Court we accept did not arise because my learned friend had won the section 46 point and we raised the section 46 issues in our notice of contention.  I suppose if there was a procedure in the Court to file a document raising contentions in response to the issues raised in the notice of contention, it could have been raised in that way, but that is not the Court’s procedure.

GUMMOW J:   We have written submissions of some length from Mr Bannon in response to your notice of contention.

MR OSLINGTON:   Yes, your Honour.  There is not included in those written submissions an assertion that advantage was taken of substantial power in the electricity sale market.

GUMMOW J:   Your real complaint is that it was made orally yesterday for the first time.

MR OSLINGTON:   Yes, your Honour.

KIRBY J:   Is that not a necessary ingredient in establishing the operation of the section?

MR OSLINGTON:   Whether or not we have substantial power in the sale market?  No, with respect, it is not, your Honour.

KIRBY J:   It is the umbrella above the section:

A corporation that has a substantial degree of power in a market shall not take advantage of that power ‑ ‑ ‑

MR OSLINGTON:   That is right.

KIRBY J:   So that unless that can be established, the appellant cannot succeed.  So it is inherent in the proceeding, is it not?

MR OSLINGTON:   No.  The allegation is and the trial was conducted on the basis that we had a substantial degree of power in the infrastructure market which we took advantage of in order to prevent the appellant entering a different market, namely, the electricity sale market.  Section 46 does not require a consideration of whether or not we had substantial power in the electricity sale market.  It merely requires identification of an electricity sale market and a decision as to whether ‑ ‑ ‑

KIRBY J:   But paragraph (b), which is the one in question, does say expressly, “the entry of a person into that or any other market”.  Your contention is that it was fought on a basis of entry into the infrastructure market.

MR OSLINGTON:   No, entry into the sale market.

KIRBY J:   Well, if that is the case, why was the matter not therefore inevitably the subject of the litigation?  I mean the appellant did not want to become an infrastructure supplier.  It was not suggesting that that was the market it wanted to get into.  It wanted to get into the sale market.

MR OSLINGTON:   Quite.

KIRBY J:   So that it would seem to me that it was inevitably an issue in the litigation.

MR OSLINGTON:   No, with respect, it was not, because the case was put that we used our market power in the infrastructure market to prevent entry into another market, namely, the sale market.  It was pleaded, as I have already accepted, that we exercised a substantial degree of power in the sale market to prevent entry into the sale market, but, in the way in which the case was conducted, that issue was not pursued.  The case was conducted on the basis that the substantial degree of power we exercised was in the infrastructure market ‑ ‑ ‑

McHUGH ACJ:   Well, I think, because your time is somewhat limited, you might proceed and you can provide a document.  But you also ought to provide in that document what prejudice – it seems to me you can hardly deny that you had power in the supply market.  What does it really matter, except for some technical argument, whether you had the substantial degree of power in the supply market or what you call the infrastructure market?

MR OSLINGTON:   It goes, with respect, beyond a technical argument.  It depends on whether one characterises the exercise of power in the infrastructure market as taking advantage of power in the sale market.  Could I just briefly ‑ ‑ ‑

McHUGH ACJ:   No, it is not a question of – sorry.

MR OSLINGTON:   Even accepting we had a substantial degree of power in the sale market because of our ownership of the infrastructure, the conduct we engaged in was to refuse access to the infrastructure market; thus, that was taking advantage of power in the infrastructure market.  We did not have market power in the infrastructure market because of power in the sale market.  Now, power in the infrastructure market, if properly characterised as market power, arose from our ownership and control of the infrastructure.  So any power we took advantage of by refusing access was taking advantage of power in the infrastructure market, not of market power in the sale market.

KIRBY J:   I have Dalgety clearly in my mind, that decision you read to us yesterday, and I am just not entirely clear, taking Justice McHugh’s case of the company with the one brick, mass brick‑making machine, can a would‑be competitor, a wished‑for competitor, say to that company, “You’ve got to allow me a few hours a week to use your machine, because I want to get into that market of mass‑produced bricks”, I would not have thought so.  Dalgety seems to say no. 

MR OSLINGTON:   As does the recent decision of the United States Supreme Court.

McHUGH ACJ:   What about Queensland Wire?

MR OSLINGTON:   Queensland Wire was a different case because in that case, ultimately, their Honours based their decision on the existence of a steel products market of which Y‑bar was only one product and undoubtedly BHP was selling all of its other steel products, so BHP was operating in the relevant market as a supplier of products from its steel mills.  Some members of the Court suggested that the sales between BHP and its subsidiary may be sufficient transactions in any event, even if it should be concluded there was only a Y‑bar market.

Queensland Wire was the case that really brought to prominence and importance in looking at supply‑side substitutability - I am sorry, yes, at supply, rather than demand‑ side substitutability, and that is how they came to identify the existence of the steel products market, because the rolling mills had the capacity of producing a range of steel products, so Queensland Wire is therefore different to Dowling v Dalgety.  It is different from the recent decision of the United States Supreme Court, and it is different from the example of the brickmaker.

KIRBY J:   I will have to read again Queensland Wire and Melway and Boral, but I have always thought that section 46 was designed not to force a party to make available their private property, but to give an answer if, by using their private property they stop another party from getting into a market, as for example, by oversupply of bricks or acting in some bullying manner to prevent another party getting access to a market.  But if they want to buy a mass brick‑making machine, let them buy it themselves.

I may be wrong, but I never conceived that 46 was designed to force a competitor to make available their private property and infrastructure for the benefit of competitors.  That may not be a correct understanding of section 46, and I can see how it could be read broadly to have a different operation, but it is a tremendous intrusion into rights of private property, as distinct from stopping anti‑competitive bullying conduct in the market place, which is a different course.

MR OSLINGTON:   But Queensland Wire, your Honour, was a case in which it was claimed BHP’s market power in either the Y‑bar market or the market for steel products was taken advantage of to deter competition of Queensland Wire in the market for either star pickets or rural fencing.

The Y‑bar was the raw material from which star pickets were manufactured.  The Y‑bar was produced.  It was cut and then to make a star picket you would cut it into lengths and drilled holes in it and treated it in some way.  So Queensland Wire was a case of taking advantage of market power in one market to deter entry in another market, but one important difference between this case and Queensland Wire is that it was held that BHP was a supplier in the market.  Another point of difference is that Queensland Wire concerned a complaint about not selling products produced in the steel mill, or the rolling mill.  It was not a case in which Queensland Wire wanted access to the rolling mill itself to manufacture its own Y‑bar.

I just wanted to very briefly take your Honours to three passages in Dr Fitzgerald’s evidence.  Volume 6 at 1603, at about line 25, Dr Fitzgerald starts his consideration of the relevant markets and concludes that there are really two markets, as I have already described.  Then at line 36 in his analysis of PAWA and Gasgo’s conduct, Dr Fitzgerald says:

By denying NT Power access to its transmission and distribution networks PAWA is leveraging its market power from the carriage market into the supply market.  That is, the refusal to provide transmission and distribution services, for all intents and purposes, locks NT Power out of supplying electricity to end users.  While this may be an understandable response –

et cetera.  Now, by using the word leverage, that is quite consistent with a recognition by Dr Fitzgerald of the effect of section 46, namely, using market power in one market to procure entry into another.  Then at 1631, in the first half of the page, Dr Fitzgerald returns to his comments about leveraging and gives an example of what he means with reference to Queensland Wire.  I do not want to spend time reading it, but just to make these points and refer your Honours to those passages in the transcript.

Dr Fitzgerald returns to his leveraging theme at 1663, under the subheading “PAWA’s Market Power”, just below line 30.  So it is far from clear whether Dr Fitzgerald is in fact asserting market power, or advantage being taken of market power in the electricity sale market, as distinct from describing what section 46 provides, namely, leveraging market power in the infrastructure market in order to deter entry into the sale market.

I wish to return to the section 16 direction point and correct something I said yesterday.  I said yesterday that the section 16 point, addressed by Justice Finkelstein, was not the subject of any notice of appeal by the appellant, and that is correct.  The appellant did raise purpose relevant to section 46 in its notice of appeal, but Mr Bannon pointed out to me – and I think this is correct – that the section 46 point was raised on appeal by way of notice of contention.  So, strictly speaking, it probably was not necessary for my learned friend, in his notice of appeal to the Full Court, to challenge the section 16 point if he wished to challenge it.

My learned friend did make a submission in his written submissions, and I think there might have been, having been reminded of that, some oral argument on the section 16 point.  None of that detracts from the submissions we have made supporting the trial judge’s conclusions.  Insofar as the evidence so far considered by your Honours and the parts of the judgment considered by your Honours suggest that the so‑called “direction” may have simply been some form of mechanistic device to perhaps in some way protect Mr Gardner – who, in accordance with the Act, the CEO of PAWA was PAWA – from liability, there are some passages in the judgment which are important, which show that at least from March the government had really decided that it wanted to control whether or not access was given. 

The first passage is in paragraph 102, at 3489.  His Honour is referring to March 1998, bearing in mind the direction was given at the end of August 1998.  Just below line 35:

Mr Gardner referred to the fact that the Northern Territory Government had not decided how any access regime to PAWA’s infrastructure would operate.  He was careful not to commit PAWA in any way.  He said he expected the access regime to be in place by mid 2000.

Then, on the following page, in paragraph 105:

On the question of access to PAWA’s infrastructure, I find that Mr Gardner and Mr Clifford made it clear –

made it clear to NT Power –

that that issue was a matter for the Government, that the resolution of that question depended upon how the Northern Territory Government decided to introduce competition in the power industry to comply with National Competition Policy, and that the stage at which the Government might make such a decision was not then clear but was some time off.

Then in 3491, paragraph 107, his Honour refers to the Treasurer’s budget speech delivered on 28 April 1998, in which the Treasurer announced:

“There will be a comprehensive review of all aspects of the Power and Water Authority commencing in 1998-99.  This will include PAWA’s future direction, its assets and associated replacement and maintenance programs, accounting and costing functions, separation of regulatory and commercial functions and the development of access regimes with accordance with national competition policy requirements.”

His Honour inferred that the announcement reflected cabinet’s decision of 5 March 1998.  Might I pause there.  Your Honour, there was tendered in evidence two volumes of confidential cabinet decisions, which were marked “Confidential”, and in paragraph 64 of his Honour’s judgment, at 3476, his Honour refers to those decisions and his Honour said that he took those confidential cabinet documents into account but refrained from fully describing them because of their confidentiality.  Those cabinet papers were exhibit R59 which are listed in the index to the appeal book, but they have not actually been given to the Court, I understand, because of ‑ ‑ ‑

GUMMOW J:   What do you mean, “given to the Court”?

MR OSLINGTON:   In the same way as the balance of the material referred to in the index to the appeal books was given to the Court.

GUMMOW J:   The record has to come here.

MR OSLINGTON:   It should, your Honour.

GUMMOW J:   Is it here?

MR OSLINGTON:   The record is available.

GUMMOW J:   It is not a question of whether it is available.  Is it in the Court’s custody?

MR OSLINGTON:   It is not, but it will be, your Honour.

GUMMOW J:   Why not?  Who took it on themselves not to send the record to the Court?

MR OSLINGTON:   I can make inquiries about that and give a response to your Honour.

GUMMOW J:   It is in consequence upon the grant of special leave the record comes here.

McHUGH ACJ:   Including the exhibits.

GUMMOW J:   Exactly.

MR OSLINGTON:   I am sorry, your Honour, it may be – and I do not know – that it was part of the full record of the proceedings which the Court has.

KIRBY J:   I am not hearing this, Mr Oslington.  I am not hearing you.

MR OSLINGTON:   It may be that when the full record of the proceedings was delivered to the Court it was included in that.  What I am saying is it is not part of the appeal books.  The index to the appeal books identifies that part of the record which the parties agreed should be before the Court, which does not necessarily comprise the full record of the proceedings.  My learned friend tells me that there is a sealed copy of exhibit R59 with the record of the proceedings before the Court, but multiple copies have not been added to the appeal books which your Honours have, but multiple copies can be made available and, from what your Honour Justice Gummow said, should be made available.

GUMMOW J:   No, I was not suggesting that.  I was suggesting that the record had to come here.  What gets in the appeal book is a matter within the Court’s administration here.

MR OSLINGTON:   Yes.

HEYDON J:   Page 3434 records that exhibit R59 is confidential, is reproduced separately and is provided at the hearing.

MR OSLINGTON:   Yes.

HEYDON J:   It sounds as though it may well be with the Court.

MR OSLINGTON:   It is with the Court, Mr Bannon said, but it is not bound up as one of the appeal books which was given to your Honours.

HEYDON J:   Yes, but not in the sense of NR, that is, not reproduced.

MR OSLINGTON:   Yes.

McHUGH ACJ:   If you want to refer to it, then it ought to be copied and made available to the Court as a confidential document.

MR OSLINGTON:   I do not propose to take your Honours to it.  I just drew your Honours’ attention to part of the foundation for his Honour’s findings in these passages of the judgment to which I am referring, your Honour.  Then, at page 3492, paragraph 111, about line 27:

Mr Gardner said that a formal request for access should be made –

this is what he told NT Power –

and would be addressed, but that the issues were complex for the Government.  PAWA would have to put a recommendation, but there were three options –

and he lists the three options.  At 3493, paragraph 115, at line 44:

In my judgment, NT Power was aware of the public announcement made by the Treasurer of the proposed inquiry into PAWA and of the fact that the Northern Territory would have to address the National Competition Policy as it affected PAWA.  That necessarily involved the possibility of the Government deciding on an access regime which did not involve direct negotiation with NT Power or with any other third party seeking access to PAWA’s infrastructure.  I consider that the course of discussions over the preceding months had also disclosed that position to NT Power, and it had no foundation for claiming that PAWA through Mr Gardner committed itself to negotiate directly with NT Power to resolve TUOS and DUOS charges irrespective of those matters to be addressed by Government.  The final draft memorandum of Mr Gardner of 16 September 1998 upon which he was cross‑examined confirms that he expected PAWA to negotiate with NT Power for the terms upon which it might be given access to PAWA’s infrastructure, but I do not think that it reflects any commitment on PAWA’s part to do so to finality or to do so irrespective of any direction given to PAWA by the Minister under s 16 of the PAWA Act or to do so irrespective of any government decision about an access regime.

Then at page 3496, paragraph 123, his Honour refers to cabinet’s approval of Merrill Lynch to give advice, including advice about access, and that, of course, is the Merrill Lynch advice referred to in the recommendation adopted by the Minister.  At page 3502, paragraph 139, his Honour said:

Mr Gardner, elsewhere in his evidence, made it clear that the question of access was ultimately for the Northern Territory Government.  In my view, the increasing input of and interest of Treasury officers in the performance and operations of PAWA during 1998 tend to confirm that position.  I have held earlier in these reasons that that was the case.

At page 3503, paragraph 143, his Honour refers to seeking the Merrill Lynch advice and recommending deferral of any decision about access.  Then in paragraph 145, on the following page, his Honour refers to the recommendation – recommendation (a), that is – to defer access.

By acceptance of recommendation (a) the government gave a direction to defer access.  The letter which was the subject of recommendation (b) was accepted by his Honour as having the effect of bringing “an end to the discussions about . . . access”.  His Honour said that in paragraph 153 at page 3506 of the appeal book.  Can I hand to your Honours a list of references to Mr Gardner’s evidence, if your Honours feel the need to go to it on this topic.  That brings me to Waters Case (1991) 173 CLR 349. The case considered the operation of section 39 of the Equal Opportunity Act.

GUMMOW J:   The Equal Opportunity Act 1984.

MR OSLINGTON:   The terms of the section are set out in the joint judgment of the then Chief Justice and Justice Gaudron at page 356.  The contention of one party was for a very wide interpretation of the section which, if correct, would have the effect of permitting the Minister to disregard the law in significant respects simply by directing an officer to do an act in which case the act otherwise unlawful would not be unlawful and that wide interpretation was rejected in the judgment of the Chief Justice and Justice Gaudron at 369.  Your Honour, the Acting Chief Justice at page 413 also rejected the wide interpretation.

In our respectful submission, the type of problem which arose in that case is not a problem which would arise through section 16 of the PAWA Act.  One is entitled to presume, as a starting point, in our submission, that the Minister in giving directions under section 16 would at least subjectively intend to confine such directions to lawful directions, in other words, the Minister would not direct PAWA to do something which was unlawful for PAWA to do, unlike the Equal Opportunity Act which seems to contemplate, at least on the construction contended for, would enable the Minister to consciously give a direction for something unlawful to be done perhaps in the belief that what would otherwise be unlawful would not, in fact, be unlawful because of the section in the Equal Opportunity Act.

Second, as a further point of distinction, it would be doubtful if a direction given by the Minister in the Waters Case would be the subject of judicial review because on the wide interpretation it was said that he was entitled to direct the performance of conduct which would otherwise be unlawful because the conduct would, in fact, become lawful.

GUMMOW J:   I am sorry, could you say that again?

MR OSLINGTON:   Yes, on the wide interpretation of Waters, the Minister could quite properly say that by giving a direction for conduct which might otherwise be unlawful he was not giving a direction for the performance of unlawful conduct because what would be thought to be unlawful conduct would be, in fact, lawful because of section 39.

GUMMOW J:   That could work here because the relevant unlawfulness flows from a superior, namely a federal law.

MR OSLINGTON:   But the Minister in the present case, (a) if he gave a direction for the performance for unlawful conduct, could well be vulnerable through an administrative review attack, improper purpose.  Second, the conduct or the direction for unlawful conduct, if given, could possibly expose the Minister himself to liability for the unlawfulness.  So the problem which arose in Waters, in our respectful submission, does not arise in the present case.

GUMMOW J:   May the direction be oral for section 16?

MR OSLINGTON:   The PAWA Act does not ‑ ‑ ‑

GUMMOW J:   No, is there anything in the Interpretation Act (NT) about this question of directions?

MR OSLINGTON:   We will check that, your Honour.  His Honour, in his Honour’s judgment, said there was no procedure laid down for the giving of directions.

GUMMOW J:   Yes, this will not be the only Act that has a provision like section 16 in the Territory.

MR OSLINGTON:   Yes, but it is not necessary to decide in this case whether the direction could be oral, but, in our submission, if it was necessary to decide that question it probably could be in the absence of any legislative or regulatory requirements, or any particular formality.

CALLINAN J:   Mr Oslington, could I ask you about page 3324 in relation to the direction?  That is the legal advice to your client dated 20 August 1998.

MR OSLINGTON:   Page ‑ ‑ ‑

CALLINAN J:   Page 3324, the conclusions in the legal advice which was attached to the recommendation to the Minister.  I was just looking at the last line:

On balance, option a) is recommended if the political imperatives prevent option b).

It rather seems as if that was adopted, that advice you are talking about.  That was adopted because the solicitor’s letter was sent as recommended, which gives a whole air of unreality to the suggestion that the Minister is making a considered direction under the Act.

MR OSLINGTON:   That is only part of the overall advice, your Honour.

CALLINAN J:   It is only part, but a fairly impressive part of it.

MR OSLINGTON:   The political imperatives, I do not think that was explored in the evidence, but the political imperatives would include the imperative to comply with the Competition Principles Agreement, the incentive to do so through what your Honour described as competition dividends in the future.  It would be naïve of me to suggest that any government decision was made in the absence of consideration, at least to a greater or lesser extent, of political imperatives.  Indeed, the purpose for giving the direction was a political imperative and for some reason that purpose ought to be ascribed to PAWA.  It is doubtful whether that would be a relevant purpose within section 46 of the Trade Practices Act.

CALLINAN J:   I just do not know about that at the moment.

MR OSLINGTON:   Well, it is a question which has not arisen, but we would respectfully submit that it is not surprising to find in a briefing paper to the government, being asked to adopt or reject a recommendation, that there is some reference to political imperatives.  Even if there was not, it would be naïve, in our respectful submission, to think that the Minister or the government did not take into account the political imperatives.  I remind your Honour that his Honour the trial judge found that the letter which was sent was understood to be a deferral at least, or a denial of access.  That is what his Honour said in paragraph 153.

CALLINAN J:   You must have waived privilege, did you, in relation to that?

MR OSLINGTON:   Yes.  Privilege was waived of a large number of documents, including exhibit R59 to which I have made reference.

Could I now move on to purpose, your Honour.  To understand the submission we make in this respect, your Honours need to have in mind what the trial judge said about purpose, commencing at paragraph 368 at page 3580.  In making this submission, I would assume, for the sake of argument, that the purpose found by his Honour was, in fact, the purpose of PAWA.  His Honour said:

I find that the decision to decline access to PAWA’s infrastructure, and not to give NT Power the opportunity for such access by indicating terms upon which such access might be granted, at least until 1 April 2000 when the access regime was introduced, was an integral part of the decision to establish an access regime.  That decision was driven by the judgment and belief that the access regime would provide “effective competition”.  Professor Teece said that greater competitive advantages would be achieved by delaying NT Power’s access to the Electricity Supply Market by declining to provide it with services in the Market –

that is, “the Market”, the infrastructure market –

until an access regime were introduced.  He thought that early, and therefore preferential, access to NT Power would or could disadvantage consumers in the Electricity Supply Market as they might enter supply contracts with NT Power at prices above those which might be negotiated in circumstances where there was competitive tendering in a “level playing field”.  The “level playing field”, and therefore the ideal competitive environment, would only be reached when PAWA had had a sufficient time to restructure to overcome its inefficiencies and when the tariff structure had been revised to avoid cross-subsidisation. 

McHUGH ACJ:   Well, is that thinking consistent with the competitive objects of the Trade Practices Act?

MR OSLINGTON:   Yes, an objective to provide effective competition is entirely consistent with the ‑ ‑ ‑

McHUGH ACJ:   What, at some time in the future, so you deprive consumers of benefits now?

MR OSLINGTON:   Yes, your Honour.  One is not looking at a long term in this respect.  One is looking at a relatively short term, and his Honour is saying ‑ ‑ ‑

McHUGH ACJ:   Well, that depends what is a sufficient time for PAWA to restructure to overcome its inefficiencies. 

MR OSLINGTON:   The object was to have an access scheme in place by April 2000.  It was hoped by then that PAWA’s inefficiencies would be overcome and, therefore, PAWA would be an effective competitor, which would result in the level playing field, the most effective competition.  Indeed, his Honour ‑ ‑ ‑

GUMMOW J:   His Honour took up the point the Acting Chief Justice has put to you, at paragraph 375, did he not?  This “Make me virtuous, but not quite yet” argument.

MR OSLINGTON:   Your Honour, we cannot quarrel with the proposition that by denying access the appellant was unable to compete in the electricity supply market, but when one bears in mind that the purpose of section 46 is not to benefit a particular competitor, but to benefit the community or competition as a whole ‑ ‑ ‑

McHUGH ACJ:   Yes, but you have to meet what the judge says at the top of 3583: 

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 ‑ ‑ ‑

MR OSLINGTON:   But, your Honour, if the purpose is to achieve greater competitive advantages through delaying access, despite the fact that it may prevent some competition in the short term, in our respectful submission, such a purpose is not a proscribed purpose within the meaning of section 46, unless one is to construe section 46 that the type of conduct described in 46 is proscribed conduct.

McHUGH ACJ:   I think your argument is confusing motive with purpose.  Your purpose was to prevent them having access, your motive for doing so was that it was in the longer term interests of consumers.  But even if that could be said to be a purpose and not a motive, why are you not within section 46 the moment you have a proscribed purpose, irrespective of if you have some further purpose? 

MR OSLINGTON:   Our purpose was to put in place an access regime to produce effective competition.  A consequence of achieving that purpose was the denial to the appellant of its ability to compete in the market for the short term, but his Honour held that early access by the appellant was thought, by the government or by PAWA, as something which may in fact disadvantage consumers in the electricity supply market.  His Honour said that at 3580, about line 27. 

So, in looking at purpose, if it can be found the purpose was to achieve effective competition, the fact that an incident of achieving that purpose is to deny a particular competitor the opportunity to compete in circumstances in which it was thought by the decision‑maker that consumers may be disadvantaged by allowing early entry, in our respectful submission, it is quite proper to categorise the purpose for the conduct as the purpose, within the meaning of section 46, of putting in place an access regime to achieve effective competition.

In our respectful submission, that purpose is consistent with the type of conduct Justices in Queensland Wire and Melway have said is not caught by section 46.  Giving section 46 a purposive construction, it is not designed to attack conduct which has as its consequence the benefit of a particular competitor but no effect on competition.  The reason or purpose for the denial of access set out by his Honour in paragraph 369 – his Honour said:

The state of knowledge of PAWA (through Mr Gardner or where relevant the Minister or the Northern Territory Government) was not informed at material times by Professor Teece.  But, in general terms, the views expressed by Professor Teece are consistent with the matters which influenced PAWA’s decision which it maintained throughout 1999 not to grant access to PAWA’s infrastructure.

And then in the following paragraph ‑ ‑ ‑

GUMMOW J:   Well, this phrase “sensible competition” ‑ ‑ ‑

MR OSLINGTON:   Yes.

McHUGH ACJ:   It is almost as if a supplier in a market said, “Well, I am not going to supply this person.  I want to prevent the entry of this person into the markets because I think they will fail and it will be to the long term detriment of the consumers.”  On your argument, they would say, “I had no purpose of contravening section 46.  I have this long‑term purpose of acting beneficially to consumers.”

MR OSLINGTON:   It would depend on the case.  It may be an assertion by a person of that being his purpose would not be sufficient.  It may be that even if it was held that the person genuinely believed that is what would be achieved by what he did, that may not be sufficient.  But that is not the present case.  In this case his Honour accepted, first, that that was the purpose of PAWA or the government and, second, his Honour tied in the government or PAWA’s objective with what was established by the expert economist called in the case. 

So the purpose PAWA wanted to achieve, or the government wanted to achieve, was a purpose the validity of which was supported by both economists who were called.  His Honour held in paragraph 370 at page 3581, line 28 that Dr Fitzgerald:

did not gainsay the proposition that the introduction of competition into the Electricity Supply Market would, in the sense of achieving an ideal competitive environment, be better achieved if PAWA was able to compete equally ‑ ‑ ‑

GUMMOW J:   What is this notion of ideal competitive environment?  What are they talking about?  How does that find its way into the Trade Practices Act?

MR OSLINGTON:   In trades practice cases it has become common to rely on economists to assist in the ‑ ‑ ‑

GUMMOW J:   Yes, we know about that.  We have all encountered them.

MR OSLINGTON:   I am not seeking to support that purpose, that being done, but it is something which has been done and economists tend to talk in terms of ideal competitive environments.

McHUGH ACJ:   But your argument amounts to this.  You say, “We had no purpose of preventing the entry of NT into the market”.  How could you possibly say that?  That was your direct immediate purpose, whatever ultimate object.

MR OSLINGTON:   But it was not a proscribed purpose because when one views the ultimate purpose or object, the denial of the appellant into the market, or the deferral of the appellant’s entry into the market, was something which was going to produce greater competitive benefits rather than those benefits which would be achieved by early entry.  Indeed, his Honour commented on the possible disadvantage to consumers.

McHUGH ACJ:   Well, that can be accepted.  It is a matter for you, but this does not seem to me your strongest point.  It is a matter for you how you spend your time, Mr Oslington.

MR OSLINGTON:   Well, your Honour, there are two points I wish to make out of that, and they are fully addressed in our written submissions.  The two points are these.  In our submission, the Court should not hold that there was any proscribed purpose in light of his Honour’s findings.  I would refer your Honour through to paragraph 373 in that respect.

CALLINAN J:   Mr Oslington, that seems to suggest that a party does not have to comply with section 46 until there is an ideal or perfect market operating.

MR OSLINGTON:   No, it is relative, with respect, your Honour.

CALLINAN J:   It is just that you are emphasising delay until the ideal market turned up.

MR OSLINGTON:   It need not be an ideal market, but it is sufficient if greater competitive advantages would be achieved by deferring entry.  Now, whether that results in an ideal competitive environment - perhaps in reality one never gets to an ideal competitive environment, but the importance is that greater competitive advantages would be achieved and, second, that consumers in fact may be disadvantaged through allowing early entry.

CALLINAN J:   In what way were they going to be disadvantaged?  I thought the appellant could offer electricity for much less than the price that was being charged by your client.  In fact, the contracts that it had entered into were for a much lower price, were they not?

MR OSLINGTON:   Those particular consumers may be advantaged in the short term by lower prices.

CALLINAN J:   Why would it only be in the short term?  I do not understand why that is necessarily so.  Once you get in there, once another operator is in there and charging lower prices then you have competition operating.

MR OSLINGTON:   Yes, but if they are tied to longish‑term contracts they are then denied the opportunity of acquiring electricity from any other entrants who take advantage of the access regime.

McHUGH ACJ:   That is a very paternalistic approach.  Surely they can look after themselves as to how long the contracts they enter into, with NT or anybody else.

CALLINAN J:   And they might want to trade off security of supply against an opportunity of getting a lower price in the future.  It is a matter, as the Acting Chief Justice says, for the consumer, for the purchaser.

MR OSLINGTON:   In further answer to your Honour’s question, consumers other than those who are supplied by the new entrant, the appellant, may be disadvantaged in a disincentive on the part of the government to continue subsidising prices to remote communities to the extent to which it had done so.  The financial statements in the annual report, to which reference was made yesterday, show that although a dividend of about $14 million was paid, and as your Honours observed, that was less than the operating profit, the income revealed on those financial statements included well over $50 million by way of community service subsidies.

Now, that would not all be electricity because PAWA is power and water and I think by that stage it might have even had some communication functions.  But, nevertheless, there was very high subsidisation, and when one looks at the balance sheet – I will not take your Honours to it, but at page 1409 of the appeal papers – one will see a long‑term liability of PAWA ‑ ‑ ‑

CALLINAN J:   Mr Oslington, that seems to me to be a direct consequence of competition policy.  It may involve a statutory authority or a government in isolating entirely its subsidisation from its commercial activities, and it may be a very good thing that governments and statutory authorities then have to be very transparent about what is subsidisation, who is subsidising whom, and what profit the authority is genuinely making before it subsidises anybody.  That seems to me to be the whole purpose of so‑called “corporatisation” and competition policy.  Governments can still subsidise and statutory authorities can still subsidise, but, to the extent that they are acting commercially, they have to act in conformity with competition policy and the Trade Practices Act.

MR OSLINGTON:   Yes, and the competition policy the government must act in conformity with is reflected in part through the obligations it has undertaken by entering into the Competition Principles Agreement.  Your Honour, that probably brings me to another point.

GUMMOW J:   Just before you get there, do we yet know the statutory basis for this dividend?

MR OSLINGTON:   I would have to give your Honour a note on that.  I think the accounts are said to be prepared in accordance with section 28 of the ‑ ‑ ‑

GUMMOW J:   That is right.

McHUGH ACJ:   Financial Management Act, I think. 

MR OSLINGTON:    ‑ ‑ ‑ Public Sector Employment and Management Act. 

GUMMOW J:   Well, we need that Act, I guess.

McHUGH ACJ:   It is in there, I think.

MR OSLINGTON:   If your Honours will permit, we can give your Honours a note on that.

GUMMOW J:   Yes, thank you.

MR OSLINGTON:   The dividend in itself is not so important, except that by focusing on the dividend one may get an impression that PAWA, by itself, is able to operate at a profit.  My learned friends have copies of the Act.  Unless your Honours wish me to, I do not propose to spend time on my feet analysing it for the moment.

GUMMOW J:   No, I understand that.

MR OSLINGTON:   My learned friend suggests section 36, but I am wary of – we would like the opportunity of giving your Honours a note if there is anything more than 36.

GUMMOW J:   Thank you.

CALLINAN J:   Was there any evidence whether there was a ministerial direction to pay the dividend?

MR OSLINGTON:   No, but there is evidence somewhere that ‑ ‑ ‑

CALLINAN J:   It would not be unknown for that to happen.

MR OSLINGTON:   There may or may not have been, but there certainly is evidence that the government decided upon electricity prices under the Electricity Act.  In other words, that is something which was not left to PAWA.

CALLINAN J:   It is interesting that section 36 provides that a dividend is going to be paid when: 

the Treasurer is satisfied that there are the resources to pay a dividend or make a repayment of equity –

not whether there is a profit or not.

MR OSLINGTON:   Your Honour, I would prefer not to have to defend the Treasurer’s decision to pay the dividend.  The point I really want to make is that looking at the dividend alone does not properly reflect or give an indication of PAWA’s trading results.

CALLINAN J:   Section 37 is interesting.  The Treasurer can demand a payment “ex gratia”.  It does not even have to be a repayment of equity.

MR OSLINGTON:   I suspect most States, Territories and the Commonwealth would have similar legislation.

CALLINAN J:   I would think so.  I mentioned to Mr Bannon yesterday what happened in Queensland very recently, no doubt under a similar sort of power.

MR OSLINGTON:   I do not think I need to get into that issue.

CALLINAN J:   No, you do not.  I am sorry, it is a distraction.

MR OSLINGTON:   I just wish to illustrate that the amount of the subsidisation, in other words, the ‑ ‑ ‑

CALLINAN J:   But you have to deal, in relation to that, with what Mr Bannon said yesterday when I took this very matter up with him.

MR OSLINGTON:   That the prices paid by the commercial consumers who Mr Bannon’s client wanted to supply at a cheaper price, those prices did not in themselves provide the full subsidy for the extent of community service obligations in supplying electricity to particularly remote areas.  The government had to put in an additional $50 million‑odd, as I say, for both power and water, and I do not think there is a break‑up in that respect, but there is no reason to suppose that the $50 million‑odd relates just to water.  Mr Foster tells me that in exhibit R59, volume 1 at page 72, there is an example of the cabinet approving an increase in electricity tariffs.

HEYDON J:   Did you say page 72?

MR OSLINGTON:   Exhibit R59, which is that confidential exhibit which is ‑ ‑ ‑

GUMMOW J:   Which we do not have at the moment.

MR OSLINGTON:   If your Honours wish those exhibits now, we can make them available.

HEYDON J:   Did you say page 72?

MR OSLINGTON:   Page 72.

McHUGH ACJ:   Of the exhibit or of the ‑ ‑ ‑

MR OSLINGTON:   Of the exhibit.  There are two lever arch folders with the confidential cabinet papers, so it is in the first volume at page 72.  We rely upon the evidence directed to purpose to which I have referred to make two submissions.  I will only state them rather than make a full submission.  First, that the purpose within the meaning of section 46 should be regarded as the government’s purpose to put in place an access scheme to achieve effective competition and, second, the evidence establishes that the purpose in denying access, if that is the purpose which ought to be examined, was not a purpose which advanced competition; it was a purpose which have benefited, or access may have benefited the appellant, may have benefited a few electricity consumers, but beyond that it was something which was probably detrimental to competition and thus not a proscribed purpose within the meaning of section 46.

Your Honours, I should just refer to what Justice Branson said in the Full Court.  Justice Branson dealt with the - at 3641 ‑ ‑ ‑

HEYDON J:   Mr Oslington, we do not seem to have page 72.  Mine jumps from 71 to 211, and the record of the exhibit in the index indicated that only certain pages have been reproduced here.  One of the non‑reproduced ones is 72, but that is a matter for other minds than yours, I think. 

MR OSLINGTON:   Mr Foster will enable me to give your Honour a concise response – I do not want to spend time ‑ ‑ ‑

HEYDON J:   I think other things are more important.

MR OSLINGTON:   Yes.  Could we have leave to add that to ‑ ‑ ‑

GUMMOW J:   Yes.  Your solicitors need to give us page 3016 in volume 11.  The first couple of lines are missing.  It is a rather interesting briefing paper. 

MR OSLINGTON:   Yes, your Honour.  I will have the integrity of the documents and the two folders checked, and ‑ ‑ ‑

CALLINAN J:   This is in volume 11, Mr Oslington, of the record.  We already have it, it is just incomplete.

MR OSLINGTON:   What we seek to get out of the briefing papers, if your Honours do look at them, is support for those findings by his Honour, to which I made reference earlier this morning, about the government essentially having decided to control the question of whether or not access should be granted, and Mr Gardner’s acknowledgment and understanding that that was the case.  Indeed, his Honour accepted Mr Gardner’s evidence in that respect despite the sustained attack during this cross‑examination that it was really he who was making the decision, and not the government.

I was about to turn to Justice Branson’s judgment on section 46, at page 3641, paragraph 108 of her judgment.  Her Honour reached the same conclusion as Justice Finkelstein on the section 46 point, but her Honour does not seem to have adopted the reasons given by Justice Finkelstein.  In particular, I wish to draw your Honour’s attention to line 20, and her Honour said:

For the reasons given above, I am persuaded that Part IV of the TPA is not intended to have an operation that would allow access to Crown infrastructure, at least where the Crown is not already in the business of providing access to the infrastructure.

Just pausing there, that comes very temptingly close to reasoning which says giving section 46 a purposive construction, it does not apply in these situations.  Then her Honour goes on to say:

For this reason, I find it impossible to reconcile the operation of s 46 with the public policy concerns which his Honour found to have motivated PAWA’s decision to refuse to give NT Power access to its electricity infrastructure. 

That would seem to be a reference to those passages of the trial judge’s judgment to which I have just referred. 

Those public policy concerns included protecting PAWA’s marketability and value should it be privatised and the encouragement of genuine and efficient competition in the Northern Territory electricity distribution market in the medium to long term.  In my view, s 46 has not been drafted in a way which allows recognition to be given to public policy concerns of this kind because it was not intended to have any application where such concerns could be operative.

Now, it is true that section 46 has not got provisos such as authorisation proceeding.  Authorisation provisions do.  But the same result is achieved, in our respectful submission, by giving section 46 a purposive construction.

Could I now turn to another question which sometimes arises in section 46 cases, namely, what a person with market power would do in a competitive market.  Justice Finkelstein, in his reasons, constructed a theoretical competitive market comprising a competing set of transmission and distribution lines.  Once that is done, of course, in the absence of any assumptions about restraint, it probably becomes self‑evident that if the appellant had the advantage of going to another infrastructure supplier, if we refused him, the other infrastructure supplier may provide those benefits. 

In our respectful submission, that sort of exercise, in a case such as the present, is of very little utility.  It is a highly artificial exercise.  It was accepted in this case that there was no realistic possibility of alternative transmission lines.  The hypothetical model proposed or postulated by Justice Finkelstein did not include any assumptions about what powers the government might have to regulate or control the sale or electricity.  Why should it be supposed in any such hypothetical model that even if there was a competing set of infrastructure, and if the government was going about introducing access regimes and reforming its monopolies, why the government in those circumstances would not use regulatory powers to control the sale of electricity so as to give itself the same opportunity to become efficient and complete pending the introduction of an access regime that it gave now? 

It is only if you construct such a model and either make no assumptions about any regulatory power the government or PAWA might have to control the sale of electricity, or, if you do make such assumptions, assume that those powers would not be used to achieve a similar result to that which the government wanted to achieve in the present case, that the model might tell you that PAWA would not refuse in that kind of competitive market.

Another possible competitive market one may contemplate is, if one accepts the economists’ view of the potential for transactions as being sufficient to make a market, why would one not postulate the competitive market being the market in which the government monopolist of the infrastructure is putting in place an access regime to produce effective competition?  Thus, there are going to be actual transactions in that market once the access regime is in place.  That is essentially, in our submission, the only realistic type of competitive market which can be postulated.

There may be other cases in which one can postulate with a degree of reality the possibility of a competing supplier or a competing acquirer.  It may be appropriate in that type of case to postulate there is such a person, but in Melway caution was sounded against the assumptions needed to postulate the existence of a competitive market and, in our respectful submission, in a case such as the present it does not serve a very useful purpose in constructing a hypothetical model which includes additional transmission and distribution lines. 

It is not self‑evident, in our respectful submission, that in a competitive environment the government, being the government with regulatory powers, would not be able to act in the same way as it, in fact, acted in the present case unless one makes assumptions about the abandonment by the government of its regulatory powers.  That, in our submission, is an assumption which only has reality if one assumes the abandonment of regulatory powers and its monopolies is in accordance with agreements such as the Competition Principles Agreement and within the time frames contemplated by the Competition Principles Agreement.

The next point I wish to address is the point described, I think, by Justice Finkelstein as discredited in Queensland Wire.  I will deal with this briefly.  We submit, essentially for the reasons given by the Full Federal Court in Queensland Wire, that a market should not be found to exist if there are no transactions simply because there is the potential for transactions in the market.

KIRBY J:   Is that not contrary to what this Court held in Queensland Wire?

MR OSLINGTON:   In Queensland Wire there is dicta by at least three, if not four, members of the Court that the economists’ view of the potential for transactions is sufficient for a market to exist.  But when one examines the individual judgments in Queensland Wire, it can be seen that most, if not all, Judges ultimately based their judgment on the existence of a steel products market, namely, a market comprising all of the products coming out of BHP’s rolling mill, including Y‑bar, and it was accepted that BHP sold all of those steel products.  So, in fact, the market in which the decision in Queensland Wire was ultimately based was a market in which there were transactions, although I accept there is strong dicta accepting the economists’ view that a transactionless market can exist.  Indeed, I accept – my own expert in this case, Professor Teece, expressed the traditional economists’ view.  So the submission I put was contrary to the opinion of my own expert which, of course, is not binding on the Court.

KIRBY J:   I am just reflecting on the fact that the dicta made their way up into a holding in the Commonwealth Law Reports ‑ ‑ ‑

MR OSLINGTON:   It has.

KIRBY J:    ‑ ‑ ‑ and I rather thought it has been given the status of holy writ unless it has been qualified by what followed in Melway or Boral.

MR OSLINGTON:   I accept it has generally been accepted, but on a proper reading of the decisions it would be seen that, ultimately, most members of the Court based their decision on the steel products marketed although it is clear that a number of members of the Court would have been prepared to have based their decisions on a market because of the potential for transactions.  Some members of the Court also, it seems, would have been willing to base their decision on the existence of a market because BHP sold the Y‑bar to its subsidiary and that was sufficient to be a transaction.

KIRBY J:   This strikes me as Trade Practices Act lore and I just do not see why we have to resolve it in this case.

MR OSLINGTON:   Your Honours do not need to resolve it in this case if the case can be resolved in PAWA’s favour on some other ground.  If it cannot be resolved in PAWA’s favour on some other ground we rely on ‑ ‑ ‑

KIRBY J:   As far as I am concerned, this is just another statute of the Parliament of the Commonwealth to be applied according to its language and purpose.  We are not going to treat it as having lore hanging all over every word.  This is what has happened to this Act, unfortunately.

MR OSLINGTON:   When one looks at what is said about markets in the Act, there is nothing in the Act saying that a market is a place of close potential competition even if there is no actual competition in the market.  When one looks at the word “market” and its ordinary English meaning, that does not conjure up an image of something in which there are no transactions.  Indeed, if one said, “Here is a market because there is the potential for transactions”, one would intuitively say, “No, that is a potential market.  That is not a market.  It will become a market if and when there are transactions”.

The next point I wish to address is our contention on the section 2B issue, namely, our contention that even if, contrary to the findings in our favour so far, PAWA did carry on a business nevertheless, the refusal of access to the infrastructure was exempted because of section 2C(1)(b), namely, the refusal was the refusal of a licence, “licence” being defined in section 2C(3) as meaning:

a licence that allows the licensee to supply goods or services.

The appellant already has a licence entitling it to sell electricity.  It wanted access to the infrastructure to allow it to supply that electricity to consumers in the Darwin and Katherine area.  His Honour rejected our argument in this respect at 3549 of the appeal book, commencing at paragraph 289.  Essentially, his Honour seems to have thought that our construction or our application of the exception 2C(3) would water down the apparent scope of section 2B but, in our respectful submission, that is the very purpose of the exception in section 2C, and although his Honour accepted that the word “licence” would ordinarily mean “permission” or “consent” ‑ ‑ ‑

GUMMOW J:   It is permission or consent to do something which is otherwise wrongful as against the licensor.

MR OSLINGTON:   Yes, your Honour, and section 29(4) of the Electricity Act is set out in the judgment and it makes it an offence to use the infrastructure without consent.  The terms of section 29 of the Electricity Act are set out in the judgment in paragraph 14.

GUMMOW J:   Yes.  There is a debate between you about the construction of 29(1) in relation to the facts of the case, is there not?  I think there is a debate between you and Mr Bannon as to what 29(1) means and the extent to which it would be engaged by what his client was seeking to do.

MR OSLINGTON:   Yes, but it is a debate about use which – and I do not complain about this but it has developed for the first time in this Court – if one looks through the statement of claim, the word “use” is constantly used as descriptive of what the appellant wants to do.  True enough, one can categorise what the appellant wants as the provision by us of a service, but that service involves the use of our infrastructure to carry the appellant’s electricity.

So far as any need for formality is concerned, in our written submissions we have referred to the various steps which needed to be taken in order to consider the grant of a licence.  Those steps not only involve assessment of the capacity of the line, when electricity is going to be carried, charges known as TUOS and DUOS; of particular importance is a requirement that the appellant obtain a source of back‑up power, and the back‑up power needs to be obtained from PAWA.

McHUGH ACJ:   But may there not be a more general answer in your submission other than that put by the learned trial judge, and that is that all 2C is saying is that, for the purposes of sections 2A and 2B, you are not carrying on a business simply because you refuse licences or you grant licences or you vary licences.  But if you fail on the other point, then you are carrying on a business and 2C has nothing to say.

MR OSLINGTON:   Your Honour, there is no real dichotomy between a public authority carrying on a business under one guise and exercising a licence power under another guise.  There is no doubt that PAWA is carrying on a business in selling electricity.

McHUGH ACJ:   Yes, but it is not alleged against you that you are carrying on a business because you granted, revoked, suspended or varied licences.  It is said you carried on a business for other reasons.

MR OSLINGTON:   Yes, but we say, as an alternative argument, that if we were otherwise carrying on a business of providing a service of carrying other people’s electricity over our lines, our refusal to do so ought to be categorised as the refusal of a licence.

McHUGH ACJ:   That is the point, is it not?  You seek to look at each individual transaction, whereas what section 2C(1)(b) is referring to is a compound conception, that is: 

granting, refusing to grant, revoking, suspending or varying licences – 

It says, well, that does not constitute carrying on a business, and if that is all your opponent had to rely on, then you would be in business in this Court.  But your opponent does not rely on the fact that you could create licences, et cetera, as carrying on a business.  He relies on other factors.

MR OSLINGTON:   This does not go to the question of whether we are carrying on a business.  2C goes to the question of whether the refusal of access to the infrastructure is the refusal of a licence.  That is the point which we seek to make.

McHUGH ACJ:   Well, at the moment – and you will no doubt develop it in the time that you have left – it seems to me an irrelevant proposition.  You have to look at the opening words: 

For the purposes of sections 2A and 2B, the following do not amount to carrying on a business –

MR OSLINGTON:   Yes, but section 2C(1)(a)(iii), in our submission, presupposes that but for their existence the conduct complained of would be insofar as the Crown carries on a business, but if the conduct complained of is the grant or refusal of a licence, that conduct is not insofar as the Crown carries on a business.

McHUGH ACJ:   This is just another application of your basic proposition and its conduct that ‑ ‑ ‑

GUMMOW J:   Yes, you have tried to feed back section 46 into 2B and 2C, I think.  It is not talking about conduct.  We went through this yesterday.

MR OSLINGTON:   The activity complained of in the present case is the activity of refusing access.

GUMMOW J:   That is not the question.  The question is whether this strange doctrine of so‑called Crown immunity applies or has been lifted.

MR OSLINGTON:   Section 2C commences with subheading “Activities that are not business”.  So it focuses on activities and the activity, relevantly, in the present case is the activity of refusing access to the infrastructure, and that is what we seek to categorise as a licence.  Your Honour, I notice the time.  I just want to say something very briefly about Gasgo, but primarily we would need to rely on our written submissions and the submissions made by the interveners on what I will describe in a shorthand way as derivative Crown immunity.

Your Honours will notice in our written submissions we also have a notice of contention point concerning Gasgo.  We contend, because of the control of Gasgo by the Northern Territory Government and in accordance with cases such as the Townsville Hospitals Case, that it should be held that Gasgo is directly entitled to the immunities of the Crown.  His Honour dealt with that argument and rejected it.  I do not think the Full Court dealt with that argument, but we have a contention in that respect.

Might I just make one point concerning the Bradken point.  In our submission, there is no logical basis for confining prejudice to the Crown to prejudice arising out of a prejudice to contracts, contractual rights or property.

GUMMOW J:   There is really because these days, at any rate, the zeitgeist does not favour these immunities.  That is the message in Bropho.  If it has not yet been decided that it is broader than the way Justice Kitto said, the present approach to these things would not favour an extension.

MR OSLINGTON:   In Bradken in the joint judgment of the Chief Justice and I think Justice Wilson their Honours spoke of prejudice to contracts, arrangements or understandings, and the relationship of the Crown with Gasgo in this case concerning the gas supply would fall within at least an arrangement or understanding but, secondly, when one thinks about it, the consequences of being denied contractual rights or property rights are more often than not financial consequences.  If that is so, what reason in logic is there for confining the prejudice to prejudices arising out of interference with contractual or property rights?

McHUGH ACJ:   I suppose the answer is that in so many areas of law the law has drawn a distinction between direct interference with legal rights and interference with the economic consequences or advantages that flow from the possession of those rights.  As to the latter, in most areas of law, the law has not regarded interference with those advantages as being relevant.  I mean, there are economic torts which cover that sort of situation, but there are many areas of law that you just do not get off the ground by saying, “Well, what happens here affects my economic consequences indirectly, therefore, I have a cause of action”.

MR OSLINGTON:   One is not looking at any prejudice to Gasgo, of course.  One’s focus is on the prejudice to the Crown.

McHUGH ACJ:   I appreciate that, but your proposition must come to this, that prejudice, for the purpose of this doctrine, includes not only commercial prejudice, but probably political, or even social prejudice.

MR OSLINGTON:   I do not need to go that far in the present case.

McHUGH ACJ:   I know you do not for the purpose of this case.

MR OSLINGTON:   I am seeking ‑ ‑ ‑

GUMMOW J:   But once you get outside the notion of property the other considerations all blend together because this is the Executive Government we are talking about, not a trading corporation.

MR OSLINGTON:   I do not want to duck the argument, but I am going to start losing friends at the Bar table.  Your Honour, I want to make that point, and no doubt it will be developed to some extent by my learned friends.  We obviously rely upon what we have said in our written submissions filed in this Court, which I have not fully repeated.

McHUGH ACJ:   Yes, thank you, Mr Oslington.  Yes, Mr Meadows.

MR MEADOWS:   May it please the Court, there are two issues on which we wish to address short submissions to the Court.  The first is as to the meaning of the phrase “carries on a business” in section 2B of the Trade Practices Act.  Our contention is that those words mean that a State carries on business only to the extent to which it engages in the commercial sale and acquisition of goods and services, and that the Act only applies to them insofar as they carry out that activity.

GUMMOW J:   Is there any support in that judgment of Justice Finn in the Village Building Case?

MR MEADOWS:   Yes there is, your Honour.

GUMMOW J:   Was there an appeal in that, do you know?  It may be too soon to know.

MR MEADOWS:   I do not know.  It is a very recent decision.

GUMMOW J:   Yes.

McHUGH ACJ:   Yes, 25 February, I think.

GUMMOW J:   Paragraph 90 of his judgment.

MR MEADOWS:   Yes, your Honour.  You will notice that emphasis is given to the word “only”.  That, of course, is a reference to section 2A, but if one goes to section 2B one sees the words “so far as”.  Our submission is that the term “business” must take its meaning from its context.  As Chief Justice Mason and Justices Gaudron and McHugh said in Australian Industrial Relations Commission; Ex parte Australian Transport Officer’s Federation (1990) 171 CLR 216 at page 226:

Of all words, the word “business” is notorious for taking its colour and its content from its surrounding . . . Its meaning depends upon its context.

Then they went on to speak of the expression “the business of government”.  However, in the context of the Trade Practices Act, in our submission, the word “business” has a different meaning, otherwise the relevant provisions of the Trade Practices Act would be applied to the whole range of governmental activities such as the provision of health, education and community welfare services.  It is quite plain that the Act is not intended to have that ‑ ‑ ‑

GUMMOW J:   Tertiary education is not a service in the traditional sense any more.

MR MEADOWS:   Well, some aspects of it are, we would submit.  Indeed, there is no question that a State, or the Crown, whichever term one wants to use, has the ability to engage in the business of providing education services, but we would submit that it is only when it does that that the Trade Practices Act has any application to the State.  This is clear, we would submit, from the Minister’s second reading speech, which was referred to yesterday, and if I could take you to page 2436, and the second column on that page - this is the second reading speech in the Senate, where the Bill was initiated, you can see the Minister says:

In sectors such as education, health, welfare, community services and labour market programs where the public sector has, and will continue to have, a dominant role, the relevance of competition policies will be limited to those circumstances where enterprises are engaged in business activity.  In most cases where this is an issue at all, this is a small part of their overall role, or ancillary to the provision of core services.

GUMMOW J:   What date is that?

MR MEADOWS:   That is on 29 March 1995.

McHUGH ACJ:   Times have changed.  A different Federal Government has a different attitude to these matters ‑ ‑ ‑

MR MEADOWS:   It is the same Act, your Honour.

McHUGH ACJ:   I know.

MR MEADOWS:   And so we would submit it should provide some guide in terms of section 15AB of the Acts Interpretation Act.  But it is the next paragraph which I wanted to direct attention:

For instance, government schools are not normally engaged in business activity.  While they may be seen as competing with private schools (for students), this is not competition to earn revenue and profits, and is therefore not a ‘business’ activity to which the competitive neutrality principles apply.  Similarly, these reforms will not be relevant to public hospitals treating public patients or providing in‑house hospital services, but may be relevant where those hospitals are treating private patients or operating commercial cleaning services.  In these areas a public hospital would be directly competing with private firms.

So we would say that it is plain from that that we are here talking about the business activities of a State in the real sense of that term.  We also would submit that one needs to look at this question against the constitutional background under which the Trade Practices Act was enacted, and also the background for section 2B.  That directs attention to first of all, the corporations power and to the provisions relating to trading and financial corporations, and to the trade and commerce power.  We would submit that when one has regard to that ‑ ‑ ‑

KIRBY J:   The definition of “corporation” - in 2B, it talks of authority of State or Territory.

MR MEADOWS:   It does, and if one looks at section 4, you can see a definition of “authority”, which includes:

(a)  a body corporate established for a purpose of the Commonwealth by or under a law of the Commonwealth or a law of a Territory -

Sorry, I was reading “authority of the Commonwealth”.  I should go back to the previous paragraph, “authority, in relation to a State or Territory” means you have:

(a)  a body corporate established for a purpose of the State or the Territory -

et cetera and includes, you will note in paragraph (b):

an incorporated company in which the State or the Territory, or a body corporate referred to in paragraph (a), has a controlling interest –

which, of course, would embrace Gasgo.  If one goes back to 2B, you can see that it talks about the Crown carrying on a business “either directly or by an authority of the State or Territory”.  Could we point out as well that in Bass v Permanent Trustee Co Ltd 198 CLR 334 at 349 the Court referred to activities “engaged in solely for traditional governmental purposes” standing outside the ambit of the term “business” in section 2A of the Trade Practices Act, which, of course, applies to the Commonwealth.

While section 6(2) of the Act extends the operation of the relevant provisions in reliance on interstate and international trade and commerce, that concern again is with the activity of trade and commerce in the business sense.

CALLINAN J:   In the speech in the Senate to which you referred us there is express reference to the application of the new part at page 2438 – express reference to access to electricity grids.  What could be clearer than that there was an intention that this would apply to the business as a business of running electricity grids?  It is under the heading “Access” on page 2438, first column.

MR MEADOWS:   Yes, there is a reference to Part IIIA of the Act which, as we point out in our submissions, creates a regime under which access to public utilities can be obtained.  What is being sought to be done here is to rely on section 46, rather than Part IIIA of the Act, in order to gain access to these facilities.

So if I could just come to conclude this point.  Our submission is that section 2B only applies the relevant provisions of the Act to a State or Territory so far as the State or Territory engages in a regular course of conduct consisting of the commercial supply or acquisition of services and where, as here, the State is merely maintaining infrastructure for its own exclusive use, it is not carrying on a business for the purposes of section 2B of the Act.

McHUGH ACJ:   Does that submission of yours reject the narrow construction given to 2B in J.S. McMillan?  Your proposition seems to go beyond that.

MR MEADOWS:   Our proposition does go beyond that.  The other issue I was proposing to deal with was the issue of so‑called derivative Crown immunity, but I see that my time has expired and this is an issue which is going to be dealt with by other interveners, perhaps I should leave it to them.  May it please the Court.

McHUGH ACJ:   Thank you, Mr Solicitor.  Yes, Mr Solicitor for South Australia.

MR KOURAKIS:   If the Court pleases.  Can I address the section 2B issue first.  In my submission, the conclusion of the court below as to the application of section 2B depends on the proposition most obviously apparent at paragraphs 87 and 88 of Justice Branson’s reasons, that the Act only applies to the operations that give the government enterprise its character as a business.  That construction, limiting the application of the Act to its operations which give it that character, does not result in the immunity for anti‑competitive conduct described by Justice Finkelstein at paragraphs 135 and 136.  To use those examples, exclusive dealing in gas acquisition is conduct within that area of operation that gives PAWA its character as a business in that context.

Your Honours, the textual basis for the limitation in 2B, in my submission, sufficiently appears from the words “so far as”.  The construction has a desirable policy advantage in that it avoids arbitrary results depending on who holds the particular infrastructure.  If the transmission networks were held by a State authority, other than the authority that dealt in electricity, there could be no question of section 2B applying.  It would strictly be a licensing arrangement. 

Whatever in the end the result of the construction of 2B in this case, an area that the State submits plainly needs to be avoided and is best left for another day is the question of State contracts which purchase goods or services for use in both business and non‑business enterprises.  That raises, in my submission, different questions, and no construction of section 2B should preclude an argument as to the circumstances in which that ‑ ‑ ‑

GUMMOW J:   What would be an example, Mr Solicitor?

MR KOURAKIS:   If medical supplies were purchased both for a public hospital and a private hospital, the application of the Act to that contract.  It ought not be assumed that the Act would apply simply because some goods and services were purchased in that contract for a business use, because to do so would extend 2B into the area in which it was not meant to go, that is, the non‑business operations.

Your Honours, as to purpose, his Honour the Chief Justice in the Rugby League Case observed that the characterisation of an end as a motive or purpose or effect will depend on the legislative and other contexts.  In this case, the legislative context includes the regulatory powers of PAWA and the factual context includes a decision to make a natural monopoly ‑ the transmission system – open to competition.

GUMMOW J:   Why is it a natural monopoly?  There has never been a natural monopoly in the United States.

MR KOURAKIS:   Your Honour, I use that term in this sense, that it is unlikely, because of the sunk cost, for it to be duplicated, and because the costs of supply to individuals are likely to decrease proportionately as more customers are brought on, because of the size of that capital expenditure. 

Now, your Honours, the experience in the States of New South Wales, Victoria and South Australia as to the regulatory regimes that are necessary to provide for sustainable competition to that sort of natural monopoly are complicated and extensive.  If, in this case, using this as the context against which to assess purpose, the Minister was entitled to license or not license persons to have access, and the Minister decided that until the access regime was established it would not grant any licence, so as to ensure that the access regime was not compromised – the one that was finally settled on ‑ in my submission, one would say, without any difficulty, that his or her purpose was to provide for a sustainable, competitive access regime to that natural monopoly.

McHUGH ACJ:   You keep talking about – you use this term “natural monopoly”.  You might as well say the same thing about railways in this country, but it would come as a bit of a surprise to Commodore Vanderbilt and Mr Harriman and other railway barons in the United States, railways galore that were owned by private enterprises.

KIRBY J:   You are speaking in the context of Australia with its history, smaller population and scattered communities and the capital cost of setting up railways.

GUMMOW J:   The Constitution was worried about railways and the Interstate Commission was going to keep an eye on them under section 104 of the Constitution. It made special provision about rates that could be charged.

KIRBY J:   It is nice to hear the Interstate Commission mentioned.

MR KOURAKIS:   Your Honours, I will not advance that.  Can I move to the question of derivative immunity.  Your Honours, the derivative immunity, in my submission, includes protection of the interests which a government or the Crown has in contracts other than those contracts to which it is a party.  If the application of a statute will avoid or compromise the rights of a person, who has in a separate contract, contracted ‑ ‑ ‑

GUMMOW J:   Now, what do you mean by avoid or compromise?

MR KOURAKIS:   If, for example, the rights and obligations are unlawful and set aside, whether or not an injunction would go, even if damages were simply awarded.  But if the effect of that is to compromise the capacity of that party to discharge his or her obligations under a contract with the Crown, then, in my submission, an interest of the Crown has been affected.  That is the ratio of the decision of the Court of Appeal in the Re Telephone Apparatus Manufacturers Case.

KIRBY J:   What is that decision? 

MR KOURAKIS: Your Honour, that decision is reported at [1963] 1 WLR 463.

GUMMOW J:   We referred to it in Bass, did we not?

MR KOURAKIS:   Yes.  Your Honours, it was accepted in Bradken; its authority has not been doubted.  The government in England entered into a contract with a number of manufacturers to supply telephone equipment.  It provided that they were to set up a committee that would select which of the manufacturers would supply.  The agreement between the manufacturers as to how they would allocate the work was challenged as anti‑competitive.  It was held that the Crown had a sufficient interest in the functioning of that agreement because, if that agreement was unlawful, the capacity of the manufacturers to discharge their obligations to the Crown would be adversely affected.

Your Honours, in this case, at paragraph 270 of the learned trial judge’s reasons, it appears that Gasgo had acknowledged that it held the benefit of the relevant agreements with the Mereenie producers for and on behalf of the predecessor to PAWA, and PAWA took that corporation’s – it was NTEC – took its proprietary interests.  In my submission, if it is the case that Gasgo in fact held the benefit of those agreements for and on behalf of PAWA, then that is clearly a case in which the Crown or government would have an interest in Gasgo’s contracts that would be protected.

Your Honours, finally, can I deal with section 46.  In my submission, taking advantage of market power for a proscribed purpose implies participation or at least an intention to participate in the market or potential market in which the power is held.  It is not sensible to speak of a corporation taking advantage of market power for a proscribed purpose if that corporation is not participating and has no intention to participate in the market.

In my submission, that construction is supported by (4)(c) which defines power, in the context of 46, to mean power as an acquirer or seller of goods.  In my submission, the word “potential” should not easily be read into that.  It may be that it extends to someone who intends to and is about to become a buyer or seller, but together, the terms of 46(1) and (4)(c) imply at least participation or an intention to participate.

That proposition is not inconsistent with Queensland Wire.  It can stand with acceptance of potential markets.  Queensland Wire, as my learned friend Mr Oslington has submitted, was, in any effect, decided by Justices Mason and Wilson at 192 and Justice Toohey at 211 on the basis of participation in a steel products market and although Justices Deane and Dawson thought that there was a Y‑bar market they based then founded their decision on the existence of a wider steel products market in which BHP was participating and held market power.

GUMMOW J:   Is there anything in the cases on section 2 of the Sherman Act which sheds light one way or the other on this issue?

MR KOURAKIS:   Your Honour, only the discussion in Verizon itself and it was to that that I was going to take your Honours.

GUMMOW J:   That is a slightly different question, is it not?

MR KOURAKIS:   Your Honour, I am afraid I might not have understood your Honour’s question in that case.

GUMMOW J:   About this market.

MR KOURAKIS:   No, your Honour, I do not know.  I understand the question, but I do not know.  Your Honours, at pages 7 and 8 the policy reasons ‑ ‑ ‑

GUMMOW J:   In other words the economists’ view of market.

MR KOURAKIS:   As to that, no, not that I know of, your Honour.

GUMMOW J:   There must be somewhere.

MR KOURAKIS:   Yes.  Your Honours, the policy reasons at pages 7 and 8 of the judgment in Verizon as to why monopolisation statutes should not apply to a case where a monopolist is not engaging in a market are equally good in Australia.  Towards the foot of page 7, Justice Scalia refers to the opportunity to charge monopoly prices, at least in the short term, being the incentive which attracts investment and business acumen.  If the entrepreneurial’s own assessment of possible profits is replaced by a more limited reasonable rate of return to be determined by courts under section 46, it would, as Justice Scalia observes on the next page, page 8, turn courts effectively into central planners.

On the other hand, if the corporation has already engaged in the market, the price at which a party ought to be entitled to access can be determined by reference to those other goods in the market or to its early participation in it, without involving what, in my submission, are legislative and policy questions as to what the appropriate rate of return is to attract the investment that is thought, for policy reasons, to be desired within an area.

Your Honours, more fundamentally, applying 46 in these circumstances would simply encourage disaggregation so that, again, separate entities would hold the monopoly infrastructure whilst others took part in other parts of the business and activity.  There is no policy reason, in my submission, to support that intervention which would lead to that result.

Your Honours, can I just give your Honours references to two articles which discuss those policy questions.  They are both in successive articles in (1994) 17 University of New South Wales Law Journal 1, two successive articles.  If the Court pleases.

KIRBY J:   Is there any discussion in the specialist literature of this particular case, the present case, that you are aware of?

MR KOURAKIS:   No, not that I am aware of, your Honour.  If the Court pleases.

McHUGH ACJ:   Yes, thank you.  Yes, Mr Gageler.

MR GAGELER:   Your Honours, our intervention is limited to the health within proper limits of the principle in Bradken.  It is dealt with fairly thoroughly in our written submissions.  We wish orally only to emphasise two points and to add one.  The first point of emphasis, your Honours, is that the recognition that the term “Crown” is nothing more than a metaphor for the State or the Executive Government of the State is not new, and can be traced much further back than the dicta of Lord Diplock, extracted by Justice Finkelstein at paragraph 160.

GUMMOW J:   We went into this in Sue v Hill.

MR GAGELER:   Yes, and for present purposes in the discourse of the relevant principle may we refer your Honours to two of the cases in paragraph 12 of our written submissions, Wynyard Investments (1955) and Roberts v Ahern (1904), where the Crown is described in the current terms.  Your Honours, it goes back earlier than that.  One can look at Mersey Docks v Cameron (1865) 11 HLC 443 at 508, that is 11 ER 1405 at 1430, where Lord Cranworth spoke in similar terms.

KIRBY J:   The problem with continuing to use the expression, it seems to me, is a failure to come to grips with the constitutional status of Commonwealth, State, Territory.

MR GAGELER:   It may have problems, your Honour.  I am not seeking to defend it.  I am simply seeking to say that it has been there for a very long time and it has co‑existed quite happily with the discourse on the scope of the immunity.

KIRBY J:   Mr Gageler, there are a lot of things in the law that are there for a very long time.  Sometimes you have to get rid of them, if they are wrong.

MR GAGELER:   I was going to refer your Honours to ‑ ‑ ‑

GUMMOW J:   It comes from the failure of the common law to have a notion of the State.

MR GAGELER:   It may well do so.

GUMMOW J:   We went into all this in Sue v Hill at great length.

MR GAGELER:   Yes.

KIRBY J:   Also, a failure to read to the Constitution.

GUMMOW J:   But the Constitution did solve the problem, as Sir Owen Dixon worked out ‑ ‑ ‑

MR GAGELER:   Yes, I know.  I am not disputing any of that, your Honour.

GUMMOW J:   You are not disagreeing with any of it?

MR GAGELER:   No, I am just adding a footnote.

GUMMOW J:   You seek to defend your continued use by your parliamentary draftsmen of this antique and inaccurate expression in the legislation of your State.

MR GAGELER:   If it is there, it has to be interpreted.

GUMMOW J:   Yes.

MR GAGELER:   Your Honours, that brings me to the second point of emphasis and that is that the understanding that to say that a statute does not bind the Crown is to say, in a shorthand way, that the statute does not in its legal operation prejudice – meaning alter or impair –  the legal interests of the Crown.

GUMMOW J:   Yes.  Now, your paragraph 15 – are you coming to that?

MR GAGELER:   Yes, but after I do paragraph 10.

GUMMOW J:   Very well.

MR GAGELER:   Your Honours, it is also not new.  The language is usefully explained in Lord Denning’s judgment in the Court of Appeal in the Scheepvaart Case.  It is referred to in paragraph 10 of ‑ ‑ ‑

GUMMOW J:   It went to the House of Lords.

MR GAGELER:   It went to the House of Lords, but his Lordship’s discussion in the Court of Appeal is quite illuminating where his Lordship traced the relevant language back to a case in 1561.  In our submission, your Honours, the relevant legal test of prejudice to interest is that which was articulated by Justice Kitto in Wynyard Investments.

Now, your Honours, if authority is necessary for the proposition that prejudice to mere economic interest is insufficient, one could get it negatively from what Justice Kitto said, one can get it positively from the decision in Wirral Estates v Shaw [1932] 2 KB 247 where the argument presented to and rejected by the Divisional Court at pages 250 to 251 was one purely of economic prejudice to the interests of the Crown. That was said not to be sufficient to invoke Crown immunity and that decision was upheld by the Court of Appeal.

GUMMOW J:   What is the citation of the Court of Appeal, Mr Gageler?

MR GAGELER:   It follows immediately on from the Divisional Court.  Your Honours might note that Wirral Estates was referred to with approval in Bradken 145 CLR 107 at 137 in the judgment of Justices Mason and Jacobs. Well, I am ready for paragraph 15, your Honour. I was not going to add anything to paragraph 15 ‑ ‑ ‑

GUMMOW J:   Well, it just seemed to be in the second sentence you translate the right into a freedom ‑ ‑ ‑

MR GAGELER:   Yes.  I do not think I have done that unilaterally.  Your Honours, in the  ‑ ‑ ‑

GUMMOW J:    ‑ ‑ ‑ which is always an adventurous step.

MR GAGELER:   Well, one, if we are correct in identifying the existence of a single presumption, rather than two presumptions, as has been suggested in some of the more recent dicta in the Court, then the single presumption of a statute not binding the Crown obviously includes within it the notion that the statute does not inhibit the Crown in the conduct of its activities, so in that sense the notion of freedom is already there.  But in this more derivative sense, your Honours, we have referred to Re Telephone Apparatus Manufacturers’ Association and that was a case in which the application of the restrictive Trade Practices Act to a contract between Crown contractors, inter se, to which the Crown was not a party was held, in the language of Lord Justice Harman, at page 477, the reference that we have given in paragraph 15, to do two things.

One, it frustrated in whole or in part the Crown agreement.  That was sufficient in itself, in our submission, to bring it within the principle, but it also interfered with the freedom of contract to the Crown and, in our submission, that also is sufficient.

GUMMOW J:   That is the question.  What “frustrate” means, too, is a question as well.

MR GAGELER:   I think it is clear enough that his Honour had in mind legal frustration and inability to perform the contract because of the illegality.

GUMMOW J:   …..Lord Justice Harman.

MR GAGELER:   Your Honours, I wanted to add one further point briefly.  The additional point, if I may, is to deal with the submission of the ACCC at pages 51 to 52 of the transcript which is that section 2B, if it does not entirely kill Bradken, then at least cuts off both of its limbs.  Your Honours there are two relevant aspects of section 2B.  One is its terminology and the other is its limited reach and to say that an Act binds the Crown in particular limited respects is to confirm necessarily by

implication that the Act does not otherwise bind the Crown.  What it means to say ‑ ‑ ‑

GUMMOW J:   Sorry, could you just say that again, Mr Gageler?

MR GAGELER:   Yes.  What I said, your Honours, is that to say that an Act binds the Crown in particular limited respects is to confirm necessarily and by implication that the Act does not otherwise bind the Crown.  I do not wish to go into exactly the limits of section 2B, but where we are left is that there is a recognition that, at least in some respects, the Trade Practices Act does not bind the Crown.  What it means to say that an Act, in particular this Act, does not bind the Crown is the topic that was addressed in Bradken and for which it, in our respectful submission, remains authority.  If the Court pleases.

McHUGH ACJ:   Thank you, Mr Gageler.  Mr Bannon, 2.15 to 4.15 will be sufficient for your purposes?

MR BANNON:   Yes, it will.

McHUGH ACJ:   Yes, very well, the Court will adjourn until 2.15.

AT 12.50 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

McHUGH ACJ:   Yes, Mr Bannon.

MR BANNON:   Thank you, your Honour.  Your Honours, can I begin by identifying what issues are before this Court on the questions of markets and market power, firstly, by going to volume 1 in the pleadings.  Page 52, paragraph 4 sets out the asserted markets.  The wording is:

At all material times –

which covers any period of time relevant to these proceedings –

there existed in the Northern Territory markets:

(a)  for the supply of electricity –

the so-called supply market.  That allegation was admitted.  The reference for that is page 69.

(b)  for the supply of the service of the use of electricity transmission and distribution infrastructure –

et cetera.  The infrastructure market, that is denied at the same reference.  Then the four markets again, introduced by the words, “at all material times”.  Generation, transmission, distribution, those three are admitted.  Over the page, (d), the so-called “Carriage Market”, which is a combination of transmission, distribution, not admitted, and (e), sale market, admitted.  Then the next question is, what is market power?  If one turns to 54 ‑ ‑ ‑

KIRBY J:   Just pause there.  What do you say that tenders as the issue, that is to say whether there was a market in the transmission of electricity?

MR BANNON:   What those pleading issues resolve is any question as to whether the potential transaction point from Queensland Wire arises in this Court, because the trial judge in the Full Court decided the case, inter alia, on the basis of admitted markets, markets which were admitted to exist at all material times.  So the point that they could not have existed if there had not been actual transactions in those markets is not available for consideration.  That is the first point.  It was raised by my learned friend in a way I will describe, but only in relation to the one market he seriously disputed, which was the so‑called electricity infrastructure market.  I will come to that in a moment.  So that is the first point of our pleading.

Secondly, in terms of market power, at page 54, by way of introduction, paragraph 12 pleaded the existence of certain barriers to entry into the supply market or sale market.  There was a partial admission, at page 70, paragraph 12(a), which was to the effect that there were substantial barriers to entry into the electricity supply market in the absence of a declaration or, rather, matters which did not exist.  Then, going back to page 55, paragraph 15 pleaded that the authority had a substantial degree of market power in the electricity supply market – referred to interchangeably as the “sale market” in the judgment.  That was admitted, at least, relevantly, in part, at page 70 of the appeal book:

As to paragraph 15:

(a)  they admit that PAWA has and at all material times has had a substantial degree of market power in the Electricity Supply Market – 

So it has never been an issue that they had market power in that market.  Then, at the bottom of page 55, the allegation is made by the appellant that they had a substantial degree of power in each of the other markets.  That allegation was denied at page 71, but I pause to comment that in no part of that denial, or in any other part of the pleading, was reliance placed on section 46(4)(c) in support of a contention that unless you were an active supplier of goods or services, you could not have power in any market.  I will come back to the significance of that in a moment.

If I could then turn to the judgment on this question.  In volume 13, page 3467, paragraph 31 of the judgment, his Honour at the beginning of that paragraph records the agreements or admissions which I have just referred to and then records, at about point 25 of the appeal book, no distinction ‑ ‑ ‑

KIRBY J:   All of this is an accurate record, is it?

MR BANNON:   Yes.  His Honour says:

no real distinction was drawn between the Electricity Supply Market and the Electricity Sale Market –

and, hence, he will only refer to it as the supply market.  His Honour records the fact that there was a dispute:

as to the existence of a market in the Northern Territory for the supply of the service of the use –

et cetera – those words – and a dispute as to the electricity carriage market.  Then if one goes to page 3560 ‑ ‑ ‑

HEYDON J:   If I could just interrupt, that is slightly strange because paragraph 15 alleged substantial power in the electricity supply market or the electricity sale market.  The first was admitted and the second was denied.  The judge says at line 23:

no real distinction was drawn between the Electricity Supply Market and the Electricity Sale market.

MR BANNON:   By way of submissions his Honour is referring to ‑ ‑ ‑

GUMMOW J:   In the submission.

HEYDON J:   Who gave up on what question, then?

MR OSLINGTON:   Your Honour, we accept that the trial was conducted on the basis of there being no real distinction between ‑ ‑ ‑

KIRBY J:   You had better put this in.  If this is an acceptance it had better be recorded.

MR OSLINGTON:   We accept the trial was conducted on the basis that what was called “the supply market” and what was called “the sale market” was really the same market.

KIRBY J:   That is to say the supply and sale to consumers, that is the end of the process.  The generation, the supply to the grid, the distribution by the grid ultimately reaches a point of supply and sale to consumers.  That is what his Honour said was really the one market.

MR BANNON:   Yes.

KIRBY J:   Well, that figures, that seems correct.  That is to be distinguished from the high voltage wires that precede all of that.

MR BANNON:   Yes, but bearing in mind as I endeavoured to explain yesterday morning, it is a fairly artificial distinction because the distribution wires go to the door of the premises.

KIRBY J:   Yes, but there is, at least potentially, a very big distinction.  One thing is a national or integrated State or Territory system with huge edifices that deface the landscape, the other is just a little wire that goes from a telegraph pole, if at all, underground nowadays.

MR BANNON:   The economists treated them as separate markets and the parties fell into line with that, subject to the relatively minor disputes outlined here.

KIRBY J:   The respondent says it never was in the market for the high voltage distribution.

MR BANNON:   Yes.

CALLINAN J:   And a wholesale as well as a retail sale market though, is it not?

MR BANNON:   Yes.  I think the supply market was treated as wholesale and retail.  Then to the extent that there was a dispute on that so‑called “infrastructure services market”, it is adverted to at paragraph 315 of the judgment at page 3560 and the contention there is a contention which related to an assertion that because of a lack of transactions there was no market or markets for the supply of access to the infrastructure.  The point we make there is that reflects the one disputed market, the language to describe the one disputed market, but it was not said to be by his Honour a withdrawal of the admissions of the existence of those markets and no application for withdrawal of those admissions has ever been made.

In confirmation of that, if one turns to the notice of contention before this Court which commences at page 3735 of volume 13, but at 3737, paragraph 5, one sees that, to the extent absence of transactions is relied upon, that reliance is limited to the cases of two markets so there described, those being the only two markets in respect of which a dispute was maintained on the pleadings ‑as to the first, a denial, and as to the second, non‑admission.  The next point is that the judgment proceeded on the basis that the findings applied equally to the admitted markets as well as the disputed markets.

KIRBY J:   I am sorry, but bear in mind you have lived with this through 44 long days of trial and so on.

MR BANNON:   In hot conditions.

KIRBY J:   As far as 5 is concerned, does that not, therefore, tender to us the issue which is there in 5 on which you can perhaps make a submission based upon the findings of fact at both levels below, but which is still before this Court?

MR BANNON:   One could but it serves no utility, for the reason I am about to demonstrate, namely, that the findings of the learned trial judge, which the Full Court supported, on the existence of market power and use, applied equally to markets which are admitted as well as to the markets which were disputed, that dispute never having been resolved.  So that before the Court are findings that there was a substantial market power in admitted markets in respect of which one does not have to consider whether they existed because of absence of transactions, and so the occasion to reconsider the Queensland Wire question does not arise.

KIRBY J:   You say it is enough for the application of 46 and for it to bite, in this case, that you have established the necessary markets and that is enough, that is it.

MR BANNON:   They have admitted it and, in fact, it has so bitten and no further biting is to be done by us or the Court.  Just to support that last proposition, at 3568 – it is a passage my learned friend has taken your Honours to, but the effect of that passage is to say, because everything is the same, whichever way you treat the markets, I do not need to resolve the question, my views are going to be the same, whether I am dealing with admitted markets or disputed markets, and that leads his Honour to deal with the question in the way his Honour does at paragraph 339 over the page with his defined term of “the Market”, hence the Queensland Wire point does not arise. 

Next, his Honour found that there was a substantial market power held by PAWA in each of what his Honour described as compendiously the market, which embraced the admitted markets.  That finding appears at 3573.

GUMMOW J:   Paragraph?

MR BANNON:   Paragraph 353.  It begins using that defined term, which embraces, just to emphasise again, what I will describe as the transport sections the market.  The conclusion appears at the foot of that paragraph, over the page, or during the course of that paragraph.

HEYDON J:   Line 43.

MR BANNON:   Yes, thank you, your Honour.  I am sorry, yes, it is, thank you.  That was a finding which was maintained by the Full Court.  Justice Lee even did not seek to disturb that one.  To the best of our recollection, that finding was not the subject of any contest by the respondents in the Full Court.  But whether it was or was not, it is not an issue raised on the notice of contention in this Court. 

Again, if one goes to the notice of contention to make good that point, starting at 3735, ground 1 deals with the licence issue; ground 2 policy/purpose issues; ground 3 the section 16 point and the variants of it; ground 4 property rights; ground 5 we have looked at; ground 6 is compendious but a summary; then ground 7:

should have found that:

(a)  PAWA did not take advantage of market power in either of the transmission or distribution markets for the purpose of preventing –

et cetera.  But there is no ground of contention which asserts that the finding of the existence of a substantial degree of power in the market was in issue before this Court.  I am reminded the only question which was raised on this issue in the Full Court was Professor Teece’s temporal dimension point. 

They accepted that there was a substantial degree of market power, but only if one took what they said was an inappropriately short‑run look, that they had to take into account the potential for the access regime in due course, and that long‑run temporal dimension meant that they did not have a substantial degree of market power.  But, importantly, they did not assert in the Full Court that there was no substantial degree of market power because PAWA was not an active supplier of goods or services in any of the admitted markets, and they do not assert that in the notice of contention.  Our submission is 46(4)(c) is not an issue before this Court, and never has been, in the way it is now sought to be relied upon.

Its first appearance in pieces of paper in relation to this appeal is in the submissions on the contentions, in paragraph 25, which appears under a heading of taking advantage, causation, that is, raising the question of causal connection.  So it is in that context only that the point is sought to be raised, but our short point is, it is not open to be raised.

Now, what is the significance of all of that?  It was only in the context of a debate about section 46(4)(c) – the discussion between the Acting Chief Justice and my learned friend – that the question arose as to whether or not there had been a taking advantage of power in the sales market.  The question arose in the context where my learned friend was putting forward the proposition that (4)(c) meant you needed, in effect, to be an active supplier in a market; PAWA was not, in the transmission and distribution markets; therefore (4)(c) meant it could not have had a substantial degree of market power. 

The short answer is, not open for consideration, but that is the context in which it arose.  What we say, moreover, substantively, if PAWA is entitled to raise that issue in this Court, firstly, on the proper construction of 46(4)(a) – sorry, I keep saying (4)(a), it is (4)(c) – it does not dictate that in order to have power in a market, one must be an active supplier.  Rather, it simply identifies the character or capacity in which the entity has the market power.  I will develop that in a moment.

KIRBY J:   But you would not need 46(4)(c) to do that.  It is obviously there to do something extra.

MR BANNON:   Section 46(4)(c) has been in the Act in various forms since 1977.  The history of it is outlined in the Full Federal Court’s decision in Queensland Wire (1987) 17 FCR 211 at 214. It was amended in 1986 to add the reference to “acquirer”, to make it clear that the capacity in which one can have the market power was not simply as a supplier but also as an acquirer – an addition described by one text writer as perhaps an overly cautious approach, but that is the purpose we submit it serves. It existed in its present form in Queensland Wire.  No one ever suggested in Queensland Wire that that was an answer to no market, or that was the reason why there was no market point.  I will develop that a bit more in a moment.

Secondly, if my learned friend is entitled to raise this 46(4)(c) issue in the way in which he now seeks to raise it, we say it is open to this Court to characterise what occurred as a taking advantage of market power which was admitted to exist in the electricity sales market.  I will develop that in a moment as to what occurred at trial and whether there was any impediment to that characterisation now taking place.

Firstly, on the construction of 46(4)(c) it has two aspects.  It starts:

(4)In this section:

. . . 

(c)a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market.

The first point to note is, the only reference to “conduct” in this section appears in subsection (3).  It was not entirely clear to me whether or not my learned friend was suggesting that (4)(c) dictated that to be a taker of advantage of market power you had to be an active supplier in a market.  If that position was being put forward, (4)(c) does not admit of that interpretation.  Subsection (4)(c), to the extent that it refers to conduct, is only referring to conduct which is referred to in the section.  The language of subsection (1) is “take advantage of”, not “conduct”.

GUMMOW J:   Yes that is right.  So you are saying that (4)(c) is exegetical of 46(3)?

MR BANNON:   Exactly, insofar as it refers to conduct.  Perhaps over and above that, one should also bear in mind the terms of section 4(2)(b), which makes it clear that conduct includes not doing things.

GUMMOW J:   Yes. 

MR BANNON:   The other pertinent reference in (4)(c) is obviously to power, and that is a term used in 46(1).   It is our submission, perhaps mentioned before, that it does not mean that only an active supplier has market power.  Rather, it means that market power may reside in an entity in its capacity as a supplier.  As I say, no mind in Queensland Wire appears to have suggested that (4)(c) had the construction which my learned friend seeks to put on it.  We submit it does not readily admit of that construction, in any event.

“Market power”, the authorities tell us, arise from, primarily, barriers to entry and, quintessentially, 46 is directed to cases of a firm which ceases or refuses to supply and hence, at least, in that particular transaction, is not an active supplier and may well be not an active supplier at all.  It would severely curtail the operation of section 46 if it was limited to the circumstances where somebody with undoubted market power had to actually have started supplying before it could be involved in a contravention.

A simple example could obtain in this case.  Let it be assumed that as we stand here now, PAWA opens its doors for the first time to the world and announces it will receive expressions of interest to use its transmission and distribution services.  If, in the course of receiving those applications, it refuses to deal with some but accepts others for an inappropriate purpose, before it has delivered any service to anybody it would be a remarkable result that section 46, which would recognise, we would submit, but before the interpretation of 4(C) that PAWA had a substantial degree of power in that market, did not contravene the section by refusing to deal with somebody unless and until it had first dealt with somebody else. 

His Honour, as it turns out, the learned trial judge, did make reference to 46(4)(c) but not in the context of a debate of the type we are having now.  It appears in 3565 of the appeal book, paragraph 327 of the judgment, at line 25, about halfway through the paragraph, his Honour said:

Whether the relevant functional market be the Electricity Carriage Market, or the Electricity Transmission Market and the Electricity Distribution Market, PAWA is a monopoly supplier of services in the market ‑

His Honour was plainly referring to each of those markets where it is accepted there were no transactions with third parties, see section 46(4)(c).  The first point to note is it was not said to be raised in a contest as to its meaning and I do not think there is any dispute between my learned friend and myself at this point.

GUMMOW J:   What paragraph are you reading from at the moment?

MR BANNON:   Paragraph 327, about halfway through.  Secondly, his Honour takes the view, necessarily, the construction of 46(4)(c) for which we contend that one has to come to it and, with respect, his Honour’s approach was correct.

GUMMOW J:   What was 46(4)(c) in its original form, do you know?

MR BANNON:   I have copies of the Queensland Wire Full Court decision I can hand up.  At 214, the various forms are set out.

HEYDON J:   Substantially, to control a market.

MR BANNON:   Yes.

GUMMOW J:   Yes, that is right.

MR BANNON:   And then the second version of the 1977 amendments, subsection 4 is the equivalent.

HEYDON J:   But then when the 1986 amendments came along I think the explanatory memorandum, convincingly or not, contended that the amendments were designed to lower the threshold test. 

MR BANNON:   Yes.

HEYDON J:   If it is convincing then I suppose it supports your cause, generally.

MR BANNON:   Yes.  That is what we say on the construction of 46(4)(c).  Secondly, to the second point of 46(4)(c), if the 46(4)(c) point had been raised either by way of specific defence or even in submissions before his Honour, it firstly could have been addressed by his Honour but, secondly, the appellant’s focus on identifying a market in which there are undoubtedly transactions for the purpose of power would have been keen, at least in the alternative.

My learned friend referred to a debate in the transcript in the Full Court and a statement I made then that the trial was conducted on the more limited issue and we could have relied on market power in the sales market if they had raised the issue. The debate there was in response to what we perceived as our learned friend’s attempt to raise the Queensland Wire “no market” issue in relation to admitted markets because if that had been allowed to have been raised then that would have been a matter which would have focused attention on the sales market as at least an available alternative.

If I could come then to the point as to the way in which the trial was conducted on this issue, our submission is it was open to his Honour to find that the authority took advantage of its power in the electricity sale or sales market as well as its power in the transmission and distribution markets.  Further, we say, that is the substantive effect of his findings, in any event, and it is a small step but an open step, more importantly for this Court, to characterise the conduct of the authority in that way if the issue is really a live one.

It was open to his Honour to make those findings because paragraph 25 of the pleadings, to which reference has been made, included that allegation.  It was never withdrawn.  In fact, paragraph 25 took the form in which it did as a result of an amendment midway through the trial, 12 days into the hearing - midway is probably an overstatement.  The date of filing or leave is at page 51.  The date of commencement of the trial is at 137 of – perhaps I do not have to go there.

What happened at the trial was this.  After all the evidence which either party had wished to call on any issue, in final address I made submissions in support of taking advantage of power in the transmission and distribution market.  I did not address a submission in support of taking advantage of power in the sales market.  I did not withdraw or abandon that allegation.  To the extent I indicated in the Full Court that the trial was conducted on the basis of limited issues I was referring to precisely the course of events which I have just outlined, albeit in a concertinaed and more compressed fashion.

As I understand from discussions with my learned friend, what I have just outlined as to what happened at the trial is not in dispute, but I accept that I limited my submissions to one of those various ways which was open to be put, but the case was not opened and nothing was said during the course of the trial in any way which limited the options.  We do rely on the fact that Dr Fitzgerald’s report refers to the leveraging of power in the transmission markets into the sales market as demonstrating his view that that was a relevant market power for consideration.

My learned friend has given some of those references.  Could I just give these additional references.  Perhaps I could just go to them very quickly, if I may.  Volume 6 at page 1603, at point 35 Dr Fitzgerald identifies two relevant product markets.  The second one is what he called the carriage market.  The first one is market of supply which he incorporated the generation in but, importantly, the sale end.  Over the page at 1604, at line 10, he said:

PAWA has market power in both of the identified electricity markets, although to varying degrees.

Then at 1604.40, he said:

By denying NT Power access to its transmission and distribution networks PAWA is leveraging its market power from the carriage market into the supply market –

which, if I may say so, with the greatest respect, is effectively the point which the Acting Chief Justice was making to my learned friend during the course of that discussion.  The next reference is at 1631.10, at the top of the page:

In this case the existence of market power in at least one market (ie, the carriage market) gives a vertically integrated corporation the power to control the competitive situation at another market level (ie, the supply market) and leveraging may occur.

The last reference in 1663.35:

Nowhere in his statement does Dr Teece dispute the existence of PAWA’s market power over the transmission and distribution functions.  Yet it is principally this market power that is being leveraged upstream and downstream to reduce competition and deter entry by NT Power.

Why did I limit the submissions without abandoning the other ones? 
The answer is this, that Dr Teece effectively accepted that there was market power in the transmission and distribution markets.  He resisted steadfastly – notwithstanding the admission in the pleading – that the market power in the sales market – there were admissions on the transmission and distribution markets, no allegation was made on the pleadings of the type 46(4)(c), or a “no transaction” point could have been made on the admitted pleadings.  A very simple way for the trial judge to resolve it is on admitted pleadings, where there plainly was a substantial degree of market power and plainly taking advantage. 

If they had said then this argument on 46(4)(c), minds would have been focused and concentrated to take a line which may have involved further debate, but would have solved this particular problem.  But the short point is, all evidence had finished on the pleadings which contained the allegations, and anybody who wished to raise any issue by way of evidence on those matters – it was open to do so. 

Furthermore, when one looks at his Honour’s judgment and the process of reasoning, his Honour effectively deals with the matter, a matter of substance, in that way, and this is really a demonstration of the potential artificial distinction to be drawn in terms of whether you are taking advantage of one power or another, having regard to the fact that the critical underlying factual setting which gave power in both markets was its control of the infrastructure.

At 3564, in paragraph 326, a passage which has been read to your Honours recently by my learned friend, can I emphasise this.  His Honour in that passage is dealing with the electricity supply market and without saying so in so many words in that sentence: 

It was not a matter upon which expert evidence –

his Honour is effectively saying that, by reason of the control of the infrastructure, there was market power in the electricity supply market.  That is the leveraging point: 

could [not] support more than one provider of infrastructure services. 

When his Honour goes over at 3565, at paragraph 327, the opening lines, “exercise of market power” proceed after the last market which has been discussed, which is the electricity supply market.  At line 25, the statement I have read before:

PAWA is a monopoly supplier of services in the market:  see s 46(4)(c) of the Trade Practices Act.  It was in a position to charge for those services . . . There is no evidence that, in its negotiations up to August 1998, PAWA through its officers intended to do otherwise than negotiate a proper fee but the capacity to do so existed by reason of its power in the market or markets.

Then if your Honour turns to 3568, just to go back to a passage I took you to before, in paragraph 337 the lack of distinction which his Honour draws as affecting the process of reasoning between each of those markets applies equally if one plugged in, as one of the various markets, in that paragraph, sales market.  The process of reasoning, the relevant factual material is all the same.

One can make the same comment about the process of reasoning in the paragraph which is 357 of the judgment, and in particular, that part which is about the paragraph specifically dealing with use of market power, page 3576 of the appeal book.

KIRBY J:   In 328, immediately after the much read 327, the judge deals with Dalgety.

MR BANNON:   I will come to Dalgety.

KIRBY J:   You will.  I am glad of that.

MR BANNON:   The last point to be made on this is that the reasoning in paragraph 357 applies equally if one plugged in the word “sales market”.  In particular, on page 3576, line 25, his Honour said:

It was made in the appreciation of the existence of that market power, and of the capacity to exercise that market power to decline access to its infrastructure.  It was only by virtue of its control of the Market -

One would just add after there, “including sales market” ‑

and the absence of other suppliers in the Market -

The term “market” could apply to “sales market” -

that PAWA could in a commercial sense withhold access –

So for those reasons, if our learned friend is allowed to raise this point, and if it is necessary to go to it, it was open to his Honour to make the finding by reference to the sales market and it is open to this Court to do so.  At the end of the day, it is simply a recharacterisation or perhaps a refinement of the characterisation of the same conduct based on the same factual material.

HEYDON J:   Mr Oslington also had a slightly different point which led us into this fascinating piece of history.  He said you have to concentrate in 2B on the words “so far as the Crown carries on a business”.  You had to actually match impugned conduct against the question whether the Crown was carrying on business in that little area.

MR BANNON:   Yes.

HEYDON J:   He said wide pleadings, narrow case.  If you fail on this, on your contentions which you have been advancing since lunchtime, have you any answer to that argument, any independent answer to that argument?

MR BANNON:   Yes, that is that our general solutions on the constructions of 2B are divorced from - we say, one looks at section 2B and finds out whether there is a business, say the provisions apply and thereafter one continues.  You do not do the reverse process which is what my learned friend says.  You look at the conduct and then you consider the conduct by reference to individual activity.  In other words, the business is a connecting factor which exposes persons operating that business in relation to all its activities ‑ ‑ ‑

GUMMOW J:   It lifts what otherwise would be a complete veil.

MR BANNON:   Exactly, but there ‑ ‑ ‑

GUMMOW J:   Through this doctrine, this principle of construction about immunity.

MR BANNON:   Yes, the second substantive answer on that, in any event, is to say this.  To the extent one looks at the alleged contravention and compares that with the conduct or perhaps the object or construction of 2B, here you have a situation on the way his Honour expressly decided it, the conduct, albeit in one market - sorry, whether the use of market power in one market is directed to preventing competition in another market in which they carried on business on any view.

Section 46 expressly catches the use of market power in one market to stop competitive behaviour in another market.  So that my learned friend’s point, to the extent he relies upon it, we would submit is support for our proposition that this is exactly the type of conduct, if one goes to the provision, which should be caught because it is directed to and has the effect of lessening competition in an area where the government, on any view, is dealing with consumers.

Could I then come to the section 16 direction.  We make a number of points, the first of which is it is not a direction.  With respect, we say Justice Finkelstein’s reasoning is apposite.  It was raised, as is now conceded, as an issue before the Full Court and is raised before this Court.

GUMMOW J:   Yes, but it is said that Justice Finkelstein did not have regard to cross‑examination of ‑ ‑ ‑

MR BANNON:   Yes.  The cross‑examination does not affect the conclusion, for the reasons that I will endeavour to demonstrate.  I say, firstly, that we support I think a comment which fell from your Honour Justice Callinan – Mr Noonan’s letter of advice expressly recognised potential political consequences of a direction per se.  They are understandable because what it means is it is not – you do not have a situation where an entity which – a statutory corporation which has been set up expressly to carry on business in a commercial manner, with all the mission and the vision statements designed to improve efficiency.  You set this up no doubt under some blaze of publicity, but at least preaching to the world that it is doing its job, and you have the potential publicity of a ministerial direction taking over, in effect, what is meant to be a business activity operating in a commercial manner.

KIRBY J:   Yes, but it is left to the Minister to decide, in the minute.

MR BANNON:   Yes, but the potential political significance of being a direction, we would submit, is recognising the documents and hence language is used carefully to ensure that it does not use the word “direction”.  As a matter of ordinary English, if you agree with another person that somebody should do something, that is an agreement which is to be distinguished from agreeing with another person that that person must do something.  It is advisable, but it is not essential.

KIRBY J:   Could you just explain to me how the direction becomes relevant to the section 46 question?  Is it under “shall not take advantage of that power” or is it under “purpose” or is it under both?  That if you are acting on a statutory obligation, you are not to be taken as taking advantage of your power, or not doing it for the proscribed purpose.

MR BANNON:   Certainly we understood the submission to be directed to purpose.  I am not sure it was directed to “taking advantage”, but we can deal with that if need be.

HEYDON J:   But in logic it could work for that.  If you are just like an automaton compelled to do something, you are not bringing the substantial market power into it.

MR BANNON:   Yes, that may be so.

KIRBY J:   Or, putting it rather more kindly to the respondent, if you are acting according to law under an obligation imposed upon you by a statute which is lawful and somehow takes prominence over section 46, so be it.  That is what you are doing.  You are not then in breach of section 46.

MR BANNON:   Yes.

KIRBY J:   Is that how it works, is it, the interaction of the Territory law and the federal statute?

MR BANNON:   That is how our learned friends put it.  We say a number of things in response to that, on the assumption it is a direction, to which I will come back to in a moment.  They succeeded in arguing that they were the so‑called emanation of the Crown.  In other words, they and the Crown were, in effect, at one.

The Crown was, by its authority, carrying on a business.  It hardly lies in a party who succeeds in making that allegation to say our purpose was directed by some independent body who we were simply following.  You cannot both be the emanation of the Crown and seek to distance yourself, in effect, from the board of directors.

GUMMOW J:   There is an internal management rule involved here, by analogy, really ‑ ‑ ‑

MR BANNON:   It would be like the CEO saying “It wasn’t me”, or “The company did not do it, but the board of directors did it”.

KIRBY J:   No, but there is a distinction between the CEO and the company, or Authority, on the one hand, and the Minister on the other and the Minister has powers under the statute law of the Northern Territory. 

MR BANNON:   There are two issues to be identified.  One is, is this conduct of the Authority ‑ ‑ ‑

KIRBY J:   I realise that.  The first is, is it a direction, and the second is, if it is a direction, can it supervene section 46?

MR BANNON:   Even if you assume it is a direction, the question is, is it conduct of the Authority and undoubtedly it must be conduct of the Authority.  The question is, was that conduct engaged in for a particular purpose?  It was undoubtedly engaged in, and it undoubtedly had market power, and it undoubtedly, using the Queensland Wire test and Melway test, took advantage of it.  The only question is, what was its purpose in doing that?  The evidence and his Honour’s findings make it clear that the purpose of the Minister and the government and PAWA were the same, that is, to restrict competition.  So there is no element or part of section 46 which enables them to escape, even if it is a direction. 

HEYDON J:   Do you contend that the dealings before 26 August reveal that the executives were, in effect, asking the Minister for something, whether it was a direction or simply some less formal mandate ‑ ‑ ‑

MR BANNON:   Yes.

HEYDON J:    ‑ ‑ ‑ and that behind the Minister’s mind, there lies the mind of the executives.  The executives procure him to do it.  It is not a question, quite apart from the other argument you are advancing at the moment, it is not a question of two entirely independent entities of which one is ‑ ‑ ‑

GUMMOW J:   No, they were talking about seeking a direction from the Minister; advising the Minister to give them a direction.

MR BANNON:   They solicited - whatever it was, they solicited ‑ ‑ ‑

KIRBY J:   Yes, but bureaucrats are not answerable to the people.  Ministers are, under our democratic theory.  That does tend to concentrate the mind of a minister.  I mean, we cannot ignore the way our system is supposed to operate.  If Ministers make the wrong decision, they can be sacked. 

MR BANNON:   His Honour made findings that the PAWA executive’s purposes and the government’s purposes were at one, and that the government – his Honour made findings that the government Minister was made aware of why they were doing what they were doing, and why they needed to do what they were doing.

HEYDON J:   One form of Mr Oslington’s argument is they may have been at one, but the Minister just had the power and he did it.  He is not caught by the Act, or at least no case against him has been run.  They are not caught by the Act because what happened was his act.  But that is a rather strict approach to the events.  You invite a look at the substantive effect of the ‑ ‑ ‑

MR BANNON:   That is so, and this direction would not have happened unless it was solicited if it was a direction, one may infer.  My friend says this case was not run or pleaded to say it was a soliciting act.  This defence was not pleaded.  This came up really as a bit of evidence - you will not find in the defence that they said that they acted simply in accordance with the directions.  It is not there.  What they said was, in their defence, by way of positive defence, that PAWA deferred for a certain purpose, and that appears at 72 of the pleadings, in volume 1.

So far as Mr Gardner is concerned, can we give your Honours this reference - volume 7 of the appeal book, 1819.  He sets out in paragraphs 52 to 54 in his statement his reasons and purposes for doing what he did.  Of the various reasons and purposes which he identified, not one of them included “I did it because I was told to do it”.

GUMMOW J:   Whereabouts is this?

MR BANNON:   At page 1819, paragraph 52.  Paragraph 52 says, “I instructed James Noonan” to send that letter, that is JEG9.  That happens to be the letter which was the response after the recommendations and 54. “My purposes” are set out in 54 and following.

KIRBY J:   Can we have a little sneak look at the words that have been omitted?

MR BANNON:   Yes.  It is not in evidence, but even if one does, that is the effect of ‑ ‑ ‑

KIRBY J:   It does seem to be saying what the respondent has been saying.

MR BANNON:   But the effect of that is to say in his answers in cross‑examination and evidence‑in‑chief is what one might expect to say that ‑ ‑ ‑

KIRBY J:   Yes, but frankly, Mr Bannon, I do not care.  PAWA may have had its purposes and they were commercial purposes and it is entitled to have those purposes, but a Minister – if you like, a Minister of the Crown – takes the responsibility under a statute which gives him that power for political reasons to give a direction – assume it to be a direction.

MR BANNON:   But if the subject of the direction ‑ ‑ ‑

KIRBY J:   They are two separate things.  The Authority is going along trying to look after its commercial backside.  The Minister is making his decisions on the basis of his political accountability.  The statute gives him that power and he is accountable to the people of the Northern Territory for that decision.

MR BANNON:   Yes, but the findings were he had the same purposes.

GUMMOW J:   Yes, and if the direction is given under the Act the purpose of the person giving the direction becomes, by force of the Act, the purpose of PAWA, full stop.

MR BANNON:   With respect, that is it.

McHUGH ACJ:   The issue is whether the corporation has taken advantage of its power.  I would have thought that if somebody who has market power goes to the Minister and says, “Minister, give me a direction to use my market power”, then that party has taken advantage of its market power.

MR BANNON:   Yes.  With respect, we agree.

KIRBY J:   The future programs of Yes, Minister will be completely different because this is shifting the ultimate responsibility to the officials instead of where, in our democratic theory, it is and belongs with the Ministers.

MR BANNON:   Yes.

GUMMOW J:   The Minister is still answerable for giving the direction.  The question is, does the unfortunate third party lose its capacity to rely on section 46?

KIRBY J:   Yes, but we read section 46 against the background of our constitutional theory, which is that Ministers make decisions.

GUMMOW J:   But what I have just said is conformity with it.  The Minister has a big political problem on his hands back in the House.  The aggrieved party has a good action under the Trade Practices Act.

KIRBY J:   Quite.  This is all the more reason why he takes the responsibility.

MR BANNON:   The significance of the failure of the reasons to identify this is that there is no causal connection between something which he describes as a direction.  The effect of his cross‑examination is to say, “I thought that is what they wanted”.  Now, it is not uncommon for people responding in this situation to be concerned to do what other people want.  Could I just add these other brief points, none the worse for that, hopefully.  Firstly, the terms of the direction, in any event, are limited in duration if it is a direction.  The terms of it say up until the consideration by the Government of the PAWA scoping study.  His Honour found that that had finished by December.  That is 3512, paragraph 170 of his Honour’s judgment.  In other words, even if it is a direction, contrary to everything we say, it still does not get them where they need to go because the declining of access continued after December and they explained why they did not bother pleading it.

McHUGH ACJ:   The case would be different if, for instance, PAWA were all set to give access and suddenly they got a direction from the Minister that you were – you would be in a different game. 

MR BANNON:   Exactly, with respect, yes.  Justice Finkelstein also referred to the Public Service Act, at 3650, and there is a provision in there ‑ we will hand up copies to your Honour – which says a person in Mr Gardner’s position must comply with the direction.  It is the Public Sector Employment and Management Act (NT).

GUMMOW J:   What section, Mr Bannon?

MR BANNON:   Section 22.

GUMMOW J:   That is what I have been looking for.

MR BANNON:   There are breaches of discipline in section 49, summary dismissal.  The short point is, a direction is a serious matter and one would be entitled to have certainty about it, precisely what one is being directed to do, because the risk of breach of it – and if one can pray in aid the interests of employees or persons in the public service responsible to Ministers, they are entitled to as much clarity as is warranted.  The simple use of the word “direction”, pursuant to a section, is the least of the employee’s or the officer’s entitlements.

KIRBY J:   Perhaps things are done differently in a direction in Washington and a direction in Seattle. 

GUMMOW J:   Are you saying that section 22 is an additional source of power to section 16?

MR BANNON:   Yes.

GUMMOW J:   But the authority would have been there anyway, under 22.

MR BANNON:   That is right.  That brings me to the next issue, which is property rights and Dalgety.

KIRBY J:   You said you were going to say something on the assumption that it is a direction.  Is there anything else you want to say on that basis?

MR BANNON:   No, I think I have addressed what I wanted to say on that, namely, partly adopting the reasons ‑ ‑ ‑

KIRBY J:   Did you want to say anything on Waters?

MR BANNON:   Yes, I did.  Having regard to his Honour’s findings that the government was aware of the reasons and objects of the conduct, his Honour’s finding that there was a knowing taking advantage of market power at 3508 and 3575 of the appeal book, this could not be seen as anything else as a direction to breach the Act.  We rely on ‑ ‑ ‑

KIRBY J:   This would have been, if it were a direction, a breach of the Act, and therefore if there be any ambiguity one should not assume that the Minister would knowingly, deliberately, give a direction that was contrary to law.

MR BANNON:   Yes.

HEYDON J:   His knowledge does not really come into it, does it?  I mean, one would make that assumption, but people are always breaking the Trade Practices Act without intending to or being aware of the fact that they are.

MR BANNON:   It raises the bar as to whether or not one concludes, with a sufficient degree of comfort, that it was a direction, with respect.  Of course, there is accessorial liability as well, to which the individual would be potentially exposed.

HEYDON J:   All the individual need know is the material facts constituting the contravention.

MR BANNON:   In this case? 

HEYDON J:   In any case under the Trade Practices Act.

MR BANNON:   In this case, Mr Noonan’s advice specifically adverted to the Trade Practices Act. 

HEYDON J:   Well, except he said it probably was not contravened.  It is a possibility.

MR BANNON:   The only way to have a clear answer on this is to have a direction.  That is what the effect of his advice was.  They did not have a direction and, what is more, when they wrote to the other side, you would think if Mr Noonan thought his advice had been carried through – or if both of them thought that – their absolute complete answer to any section 46 claim, the best card they had to play, they did not even refer to it in the response to my client’s solicitors, to say, “Guess what, it doesn’t matter, here’s a direction”.  That is pretty conclusive evidence as to whether anyone thought it was a direction.

GUMMOW J:   Now, going to the Dalgety stockyard.

MR BANNON:   Yes, before I actually go to that decision could I start with this submission made in Queensland Wire (1989) 167 CLR 177 at 181 by counsel for BHP.

GUMMOW J:   He lost.

MR BANNON:   If your Honour is expecting me to agree with that out loud ‑ ‑ ‑

GUMMOW J:   He is not here today.

MR BANNON:   I have no idea what your Honour is talking about.  The submission was – no doubt he was induced to put this by one of his juniors:

The appellant’s object is to have the respondent make over to it part of its business of manufacturing steel fence posts.  At present, the respondent uses all the Y‑bar it produces.  Is it supposed to produce more Y‑bar than it needs in order to assist the appellant to go into the business of manufacturing fence posts and take a profit at that level of the business? 

I have not put that question with the vigour and emphasis which undoubtedly it was put. 

The problem arises from forcing a vertically‑integrated manufacturer to supply intermediate product to a would‑be competitor.

The effect of the decision was that a party in the BHP decision was required to use, in effect, or at the risk of a damages claim, its own production facilities which it spent good money on to produce Y‑bar for somebody who it did not want to produce Y‑bar for at all.

One then goes to Melway.  Melway was, of course, an unsuccessful claim, but the claim in Melway – and this was never the subject of any adverse comment – was, in effect, Melway should use its printing presses and its distribution systems and its office stationeries and its office premises to provide directories to somebody it did not want to provide directories to.  Now, that case did not succeed for different reasons, but nobody suggested that it was an interference with property rights of Melway and nobody suggested that the Act does not have that impact. 

The Act, almost by definition, requires people to do what they do not want to do who are in business.  When I say “requires people to do what they do not want to do”, it is not a mere state of mind.  They have to use resources which they have otherwise invested in to do what they do not want to do.  They have to part with property, potentially, which they own, which absent the Trade Practices Act they could say, “I own this.  I will do with it what I want”.

KIRBY J:   Well, a question arises in my mind as to whether behind the post‑Queensland Wire decisions in Melway and Boral is an attempted answer to the question on page 181 of Queensland Wire.  Instead of the Court drawing the line which was proposed by counsel there, which I can understand and which does seem to be consonant with the recent decision of the Supreme Court of the United States.

MR BANNON:   I will come to that decision, but one has to focus on the words of our statute.  There are elements which one methodically or with more vigour works through.  If one establishes the existence of market power, one simply asks, “Was advantage taken of that for the appropriate purpose?”  There are no words in the section which say, “This does not apply if you are using property rights”. 

Justice Lockhart, with respect, put his finger on it because properly analysed the way he analysed it was not simply a question of property rights, you ask the question, “Would a person with those property rights have exercised them differently in a competitive market?”  If I could go to Dalgety to make good that point ‑ ‑ ‑

GUMMOW J:   The applicant appeared in person too.

MR BANNON:   Yes.  Can I start with Dalgety (1992) 34 FCR 109. At 141, about the second complete paragraph on the page, about point 3 of the way down:

There is a high level of competition in the relevant market in this case.

The market having previously being described as a market for providing livestock selling services, from memory – “provision of livestock selling services”, yes.  

It is only when for some reason it is not rational or possible for new entrants to participate in the market that a corporation can have market power.

And that refers to barriers to entry.  There is an initial barrier of entry, getting a licence.  The applicant was – halfway down the paragraph – had a licence.  Indeed, he had a bit of market share as well.  At the bottom of that page it says:

Mr Dowling could establish rival saleyards in the Goondiwindi district if he had sufficient capital; but his means do not allow him to do so as the capital cost involved is considerable . . . But this would not be a barrier to an agent with more substantial funds than Mr Dowling has.  Mr Dowling can sell his client’s cattle and sheep at the Goondiwindi Saleyards using the services of one of –

the other yards.  In short, his Honour found that there was not a high barrier to entry such as to constitute market power.  One then goes to 143, about the middle of the page, there are findings as to purpose:

It is plain, as found earlier, that the purpose of each respondent . . . was:

(a)  not to share an asset, being the land on which the Goondiwindi Saleyards were built and the Saleyards themselves, including goodwill that may attach thereto, with persons who had no proprietary interest in that asset; and

(b)  not to allow competition in the Saleyards additional to the competition between the three respondents themselves.

I am satisfied that the dominant intent of each respondent was to use their valuable asset as they thought fit and not to share it with persons who had no proprietary interest in it.

And at the foot of that paragraph:

The purpose of not allowing additional competition would amount to a purpose of deterring a person from engaging in competitive conduct . . . for the reasons that I gave earlier in relation to s 45, in my view, Mr Dowling has not established that this purpose was a substantial purpose.

Then at the foot of the page:

The respondents argued that they did not take advantage of any market power which they have and that any advantage which they took was that derived from a right of ownership –

and that paragraph continues over the page.  Then the next complete paragraph:

If a corporation has market power which causes it to exercise rights which it would not exercise under competitive conditions then the exercise of those rights is the exercise of market power –

and we fully adopt that statement –

and it is this consideration which runs through the judgments in Queensland Wire –

and it is set out there.  Then the next complete paragraph:

However, there is a distinction between the exercise of rights of the kind that are exercisable only in non‑competitive conditions and the exercise of rights which come into existence and would be exercisable in competitive conditions but which may establish a framework or base that may lead to the establishment of a substantial degree of power in a market –

An example of copyright and drawings is given, and a passage from Justice Heydon’s work is set out.  Then at 145 the critical passage, if I could go to it, the bottom of the page:

In my opinion the ownership of the land upon which the Goondiwindi Saleyards are erected and the rights which flow from that ownership and from membership of the Association are rights which may themselves give rise to or cause a degree of market power to come into existence ‑

Pausing there, property rights do give market power, potentially –

But the conduct of the respondents in choosing to exercise their rights the way they did could not be said to be conduct that they would be unlikely to engage in or could not afford for commercial reasons to engage in, if they were operating in a competitive market . . . The respondents have not used or taken advantage of market power.  The respondents are not in the business of granting licences or leases of saleyards.  They are in the business of providing livestock selling services.  They own as equal shares as tenants in common a valuable asset, being the Goondiwindi Saleyards, and they have exercised rights that flow from their ownership of the yards . . . They have declined to make available to Mr Dowling a valuable asset of theirs to advantage him as a competitor.  In my opinion, they have not taken advantage –

et cetera ‑ ‑ ‑

KIRBY J:   Can you not say here, equally, that this respondent is not really in the business of providing its extremely valuable infrastructure to people like you who want to cherry pick on its product?

MR BANNON:   The key to understanding that passage flows from the earlier part.  When his Honour says they are not in the business of licensing their yards, they are in the business of livestock agents competing against other livestock agents, what his Honour is saying is to the extent that they use yards, it is an adjunct to their business, the primary business of which is livestock agents.  If it was a competitive environment, ie, there are other yards, would there be a logical reason why someone who establishes a group of agents as one yard is their yards, “Come here, sell well”, would want to entice other agents who have other yards on the assumed competitive condition to come and also sell at their yards.  It would be like auction houses - Raine & Horne, L.J. Hooker – groups of agents get together and use certain auction rooms.

KIRBY J:   I do not see that it is all that different from putting up an infrastructure to serve all the people of the Northern Territory, including those who might not be served on a purely economic or competitive basis, on a tit for tat foundation and then somebody comes in and says, “Well, we demand to have access and we will just pick and choose our clients”.

MR BANNON:   The difference is his Honour is asking a statutory question and answering it in that context.  He is asking, would, in a competitive situation, these individuals have exercised their property rights differently?  His Honour is not saying because they are property rights in a competitive situation they would have been entitled to ‑ ‑ ‑

KIRBY J:   It is a bit artificial, Mr Bannon, because if you are going to have a competitive market, Dalgety’s will readjust itself and it will make its stockyards available for all and sundry to come along.  It depends on how far you take your hypothesis of competition.

MR BANNON:   That would be an open conclusion as a factual matter if it was not a conclusion which his Honour came to.  The important point is his Honour came to that conclusion not because of some in‑principle view about exercise of property rights but on the facts of that case, having regard to the nature of the business.  If you had a competitive situation there is no reason which would compel as a matter of commercial reasoning for a group of agents who thought they had set up goodwill at a particular yards without other competitive yards to say, “Come over here as well”.  In fact, on the contrary, they would be like lawyers.

McHUGH ACJ:   To prove a breach of 46 you have to do a lot more than show that you had property rights which could have been used to the advantage of the competitor.

MR BANNON:   Yes.

McHUGH ACJ:   The competitor has to show that your property right gives rise to market power and you have taken advantage of those property rights for a proscribed purpose, such as deterring the entry of the person.  As I think Justice Dawson pointed out in Queensland Wire, the fact that you are acting pursuant to a contract is no answer to an argument that you are in breach of section 46.

GUMMOW J:   That is why I think 51(3) does not exclude 46.

MR BANNON:   Yes.

GUMMOW J:   I mean, the intellectual property rights under 51(3), they do not let you out of 46.

MR BANNON:   Yes, you can still be exposed to the patent situation ‑ ‑ ‑

GUMMOW J:   Yes, and that is making your property right available.

MR BANNON:   Yes, perhaps that, with respect, is earlier.

GUMMOW J:   So I do not think his Honour’s proposition is exclusively, exhaustively correct, given the structure of the Act.

MR BANNON:   No.  We would say in fairness to his Honour, his Honour asked the right question and did not pose some property right test and he was just applying the facts.  To the extent it is interpreted differently then it is, with respect, wrong.

GUMMOW J:   There is a whole body of case law in the United States about forcing people to grant patent licences because of the abuse of the monopoly.

MR BANNON:   Yes.  Can I then deal briefly with that US decision and draw attention to some parts of it.  This is the Verizon Case.  At page 7 of the report under the heading “III” the terms of section 2 of the Sherman Act are set out and it says:

“monopolize” or “attempt to monopolize”.  Ibid.  It is settled law that this offense requires, in addition to the possession of monopoly power in the relevant market, “the willful acquisition or maintenance of that power ‑ ‑ ‑

GUMMOW J:   Just stopping there for a minute, you have to understand that reading section 2, people go to prison.

MR BANNON:   Yes, they do.

GUMMOW J:   If you are going to have a fully‑fledged essential facilities doctrine you are going to ‑ ‑ ‑

MR BANNON:   You want to be clear on what it is.

GUMMOW J:   That is right, and they do go to prison too, from time to time.

McHUGH ACJ:   And as this case itself shows, they tend to read down the antitrust aspects if the industry itself is federally regulated.

MR BANNON:   The sentence after the reference to the passage is how it is interpreted.  The mere position of monopoly ‑ ‑ ‑

GUMMOW J:   What the Acting Chief Justice says is right, is it not?  It is underlined by the very first paragraph in Justice Scalia’s reasons.

MR BANNON:   Yes.  On page 7 it says:

The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free‑market system.

So one could not get anything further from our Act.

GUMMOW J:   Yes.  In this sense, we have Part IIIA, which is a rough analogue to what he is talking about the 1966 system in the United States, but our Part IIIA preserves expressly, does it not, Part IV?

MR BANNON:   That is right, exactly.

GUMMOW J:   They do not seem to have that and that is what this case is about.

MR BANNON:   And the reliance on the existence of the regulatory access seems to be a policy approach, virtually, from the court, I say to the extent that it is and that we do not think there is a need to extend the Act.

GUMMOW J:   Yes.  Our legislators thought about it and they put a provision in Part IIIA.  In the United States they did not and this is the response.

MR BANNON:   Can I just give this reference, on page 11, for what it is worth, there is a reference to the essential facilities doctrine.  It does not say it does not exist.  They just say they do not need to decide whether it does exist or it does not exist.

McHUGH ACJ:   But, see, the US view comes out very clearly on page 11 just above the heading of “IV” where Justice Scalia says:

The 1996 Act’s extensive provision for access makes it unnecessary to impose a judicial doctrine of forced access.

MR BANNON:   Yes.  It is almost like a policy consideration.

McHUGH ACJ:   Yes.

KIRBY J:   It would not be the first time in this area.

MR BANNON:   They are very express about it.  My short point is this has nothing to do with 46 and does not help an analysis.

KIRBY J:   The only way in which an analogous principle comes in is if you take the view that it is not taking advantage of its power for a particular purpose in respect of a particular market, it is simply using its own property as it is entitled to do by law, but that was the plea that was put in Queensland Wire and the question then is, to what extent is Justice Finkelstein right that Queensland Wire is dead but not buried?

MR BANNON:   He is not right on that at all.  Melway would have been a good opportunity to do that.  The criticism of Queensland Wire in Melway was simply that minds might differ as to the application of the accepted principles to the facts of that case, in particular, whether it would have made absolute commercial sense in a competitive environment for BHP to supply Y‑bar to a competitor.  Now, one can understand there may be a different view in relation to that in a competitive environment because BHP is an efficient operator, you would assume.

McHUGH ACJ:   If you take the example I gave this morning, if you have a brick plant which would be very expensive for anybody else to buy but you are using it at full capacity, it would be very difficult to make out a case that you are taking advantage of your market power for a proscribed purpose.  But if, on the other hand, you happen to have two brick plants and one of them is just standing there idle, then you would say ‑ ‑ ‑

MR BANNON:   That is absolutely right and that is why I emphasised yesterday that this is not a case in which they had a lack of capacity.  His Honour found that there was a capacity and it did not involve technical issues.  If they had said to us, “We would love to do it but there are technical problems and that is the reason why you cannot come in”, no section 46 case.

KIRBY J:   Even if you write 100 letters in the brick industry saying you are trying to bump some people out of the industry, that does not necessarily show you are in breach of section 46.  I will say no more about that.

GUMMOW J:   You are in a happier position though, in a way, because your remedy is a damages remedy, not an injunctive remedy.

MR BANNON:   Certainly.  We fully accept the extent to which any injunctive remedy can be made, if at all.  It is something which awaits debate which has not been had but, yes, primarily, the first step is breach.

KIRBY J:   These events have not been overtaken by steps in the Northern Territory for the privatisation of the electric authority? 

MR BANNON:   Firstly, I am not familiar with what has in fact happened, but certainly the access regime is in place.  I am not sure to what extent it has ever been accessed. 

KIRBY J:   Are we all really spending two days of our lives – and you all, your time – on a costs question, or not?

MR BANNON:   No, absolutely not.  There is a damages claim ‑ ‑ ‑

McHUGH ACJ:   Damages.

MR BANNON:    ‑ ‑ ‑ which could be huge, depending on what would have happened but for this.  In other words, in a world without, all sorts of things may have been happening well before this, and, in terms of setting, what can go forward in the future, too – it may also be of high significance. 

Could I just make one more point on this property rights point, the position is that, as we said in our written submissions – I will not repeat it ‑ in the opening part of our contentions, we do not use their property.  We do not run into their factory and watch our electricity running along the wires.  We are physically connected already, and have been.  They control the system.  They are providing us with a service of transmitting and distributing our electricity.  We have given some references to the evidence; they have a control system, which watches to make sure that everything happens. 

We are not picking up a piece of equipment at all.  They are providing us a service, a transport service.  If you had a transport company which had a substantial degree of market power and, in breach of section 46, refused to provide us with transport services, and if we were successful, the effect of it would be, either by way of injunction or damages, that somebody would have been required or should have used their own property, their vehicles, to take on our goods to transport them somewhere.

KIRBY J:   Is this point that, unlike Queensland Wire, where they had to have all sorts of intrusions – and, theoretically, Melway – here, all that had to happen was that a switch had to be pulled? 

MR BANNON:   Yes, and the system managed, as well. 

KIRBY J:   And it had been done before, in the sense that they had taken it when it suited them ‑ ‑ ‑

MR BANNON:   That is right, albeit under an arrangement where the property and the electricity transferred.

McHUGH ACJ:   It is interesting that although the Full Court of the Federal Court was reversed in Queensland Wire, the Full Court left open the position of monopolies of electric power, transport, communications, and put them to one side, that they may fall within the essential facility.

MR BANNON:   And there is reference, I think, to electricity infrastructure in that joint judgment, as well, in the High Court – Justice Mason – the approach which, in relation to property rights, was the same, in effect, as Justice Mansfield and the learned trial judge applied, and Justice Finkelstein, and we commend those reasons to the Court.  Taking advantage – well, we rely on what we put in writing on that.  This is a very direct example of taking advantage. 

There is one typographical error in our submissions, which I should correct.  In our submissions on contentions, page 19, paragraph 60, second line, “An alternative approach is the direct approach of Deane J in Queensland Wire, referred to without apparent approval” – it should be “with” apparent approval.  There is one other typo, if I may, of some significance.  Page 16, on another topic, paragraph 48, the very last line, “ensuring an ultimately competitive market and another of keeping PAWA” – it should be “NT Power”.  I think it actually says “PAWA” in Justice Finkelstein’s judgment, but it is obviously typographical in both cases. 

So this is a very direct example.  The alternative competitive market which my learned friend sought to postulate was really an alternative non‑competitive market.  He was postulating a market in which the government would regulate control so that there would not be competition.  That is not posing the question which Queensland Wire and Melway suggested.  Indeed, although the judgments below did not deal with this, if one wanted to get a really practical example of a competitive market in this industry, a practical example would assume that there was an access regime in place, in which case they would obviously have to give us access.

Just on section 2B, I think…..on those issues and I do not want to say anything more.   Could I just comment briefly on a submission made by the learned Mr Solicitor for Western Australia which made reference to construing section 2B by reference to a source of power being corporations or trade and commerce.  Section 2A, of course, is a forerunner to that which was not in anyway so constrained ‑ ‑ ‑

GUMMOW J:   That applies to Part V.

MR BANNON:   Yes, and, secondly, 2B was inserted in a way which was consistent throughout the States, in respect of which the States and Territories plainly had power.

McHUGH ACJ:   Section 2A uses the term “applies”, does it not, and 2B “binds”?

MR BANNON:   Yes.  Subject to any matter the Court may raise, the last ‑ ‑ ‑

GUMMOW J:   You have to tell us about licences, have you not, or you have done that?

MR BANNON:   Yes, I will.

GUMMOW J:   And derivative immunity.

MR BANNON:   Yes.  Licences, there are a number of points we make and they are in our written contentions, but, firstly, the only licence point put against us relates to section 29.  As a factual matter, we do not use the infrastructure.  They provide us with a service.  That is one simple answer to it.  Secondly, the licence provision says it must be a licence which allows somebody to sell goods or services.  It is under 2C:

licence means a licence that allows the licensee to supply goods or services.

We already had a licence which allowed us to supply goods or services, namely, the section 25 licence.  What we were looking for was additional services which would enable us to give effect to that licence. 

GUMMOW J:   Yes.  It seems to assume that there is a legal impediment to the supply or the provision of service without the licence.

MR BANNON:   That is so.

GUMMOW J:   You say that had already been removed, you could not give effect to the permission you had without something more.

MR BANNON:   That is right.  His Honour found that they were perfectly entitled to charge us a fee to provide the service if they wanted to.  I think I referred to that a number of times - paragraph 327, that is the commercial judgment paragraph, 3565 of the appeal book, about line 30.  I will not go back to that.  We further endorse the reasoning process of the learned trial judge which says, “licence as used” in that context, concedes of a formal regulatory‑type process and there is no such power which can be identified which fit within that category.  Lastly, we also would adopt the approach suggested by the Acting Chief Justice that the lines from the section are really the wrong way around.  We are not saying that they are carrying on the business of licensing which is the business in respect of which we seek the provisions to apply. 

KIRBY J:   Mr Bannon, I do not understand that last point.

MR BANNON:   We are not saying that the business which they carried on in respect of which we say 2B applies was the business of granting licences or not granting licences.

HEYDON J:   Are you going to another subject?

MR BANNON:   Yes.

HEYDON J:   Can I just ask this question?  There seems to be a large gap in the transcript.  On 11 November there was an adjournment until the 24^th and 25^th for interlocutory hearings but the judge said the trial would resume on 1 February next year and apparently the case was heard on 1^st, 2^nd, 3^rd, 14^th, 15^th, 16^th and 17^th, but for all that period there seems to be no transcript until lunchtime on the 17^th.  Was there something happening in that period that was not important?

MR BANNON:   On those days - not all the transcript has been included.

HEYDON J:   It is not a slip.  It is a conscious process of selection.  We can be confident that we have all the materials in the 13 volumes that are needed to decide the case.

MR BANNON:   Yes.

HEYDON J:   It is not a very confident answer.

MR BANNON:   Presumably the transcript will just record “Yes” to that.

KIRBY J:   I think we said something on the special leave to omit some parts of the transcript that were not relevant, maybe things going to damages.

MR BANNON:   Yes.  There are issues going to damages and there is a lot of evidence about gas which the parties, in their wisdom, hopefully correctly thought did not bear on the issues here and would have significantly ‑ ‑ ‑

KIRBY J:   I would hate to miss out on anything ‑ ‑ ‑

MR BANNON:   Yes.  That may actually have related to a very diverting argument about access to Crown privilege documents.

HEYDON J:   In that period?

MR BANNON:   Certainly say there are days, many days, spent in Darwin on a number of issues of this case which one attempts to not remember with perhaps vividness.  “Derivative immunity”, we rely on what we said before.  Nothing which ‑ ‑ ‑

HEYDON J:   Mr Oslington did not address oral argument on this.

MR BANNON:   No.

HEYDON J:   Have you dealt with what he said in writing in writing?

MR BANNON:   Yes.  I was not going to say anything more in relation to what any of the States have said, because to the extent that one understands what has been put particularly for New South Wales, a legal right test does not fall in this category here, does not apply.  Whatever be the outer bounds of it, the test applied by Justice Mansfield, we say, was too wide.

Could I then just do a couple of matters.  Your Honour Justice Heydon enquired about the equivalent speech in the House of Representatives.  Can I hand up copies of that.  They have been marked in the same way with the same numbering as the earlier version.  There are some very slight differences in sentences, but I do not think – none in relation to the numbered paragraphs.

HEYDON J:   Does the explanatory memorandum say anything additional?

MR BANNON:   The one I have seen is a one‑page document which said very little.  We will provide that as well.  The only matter worthy of note in that was it was specifically said 2B was going to not become operative for 12 months in order to enable people to get their houses in order.

KIRBY J:   Justice McHugh tells me that there are, in fact, some articles on this case in the specialised literature.  I will track them down if I am not helped, but if there are any such articles that you know of.

McHUGH ACJ:   Well, the Trade Practices Law Journal, Volume 11, September 2003 issue has an article called “Who Turned The Lights Out” and the Australian Business Review has two or three articles as well.

MR BANNON:   There is no end to the number of times Mr Foster will go into print. 

KIRBY J:   Well, I think you should know that I will be looking at these, so that if you want to say anything about them ‑ ‑ ‑

McHUGH ACJ:   And the case is discussed in Australian Business Review, volume 29, I think. 

KIRBY J:   It is often helpful to get commentaries from people who are looking at these issues from an operational view of the Act, and maybe from a little bit more – from an economic point of view – than we lawyers tend to, so I do try to read these articles. 

MR BANNON:   Yes.  Your Honour Justice Callinan asked, was there any evidence about the competition dividend being paid.  It does appear in the confidential volumes, which I think have now been provided to the Court.

GUMMOW J:   We still do not know the legal source of it, other than that rather strange Act that was handed up.

CALLINAN J:   There is quite a good summary of the arrangements in a memorandum by one of the unit directors to the advisory board, called the management board.  I have just forgotten the page, but I have it somewhere. 

MR BANNON:   I thought we might have answered that question in relation to power under the Financial Management Act.

GUMMOW J:   Yes, but that just talks about government business divisions.

MR BANNON:   Yes, the competition dividend would be different.

GUMMOW J:   It does not talk about dividends.  Yes, it does – yes, you are quite right.

MR BANNON:   Well, there are two things.  One is a dividend dragged out of hollow logs from government businesses, the other one is the money coming from the Federal Government because they have been well behaved in complying with their obligations under the Competition Principles Agreement.

CALLINAN J:   But even New South Wales, under threat of ‑ ‑ ‑

MR BANNON:   Yes, exactly, that issue was considered in New South Wales.

GUMMOW J:   I can assume that PAWA is a government business division, can I, for the Financial Management Act?

MR BANNON:   Yes, I think it says so in the annual report.

GUMMOW J:   Thank you. 

McHUGH ACJ:   Justice Mansfield’s decision is shortly discussed in a long article by Daniel Clough, “Misuse of Market Power” (2001) 29(4) ABLR 311.  The discussion starts on page 336.

MR BANNON:   That reference, at least to the evidence related to the competition dividend, appears in the confidential cabinet minute, R59.  Can I give these references:  pages 211 through to 217, in particular, at 214.  There is an attachment which discusses the matter, as well.  May it please the Court. 

GUMMOW J:   So what order would you seek at the end?

MR BANNON:   That the appeal be allowed, that the matter be remitted to the trial judge ‑ ‑ ‑

GUMMOW J:   To the trial judge, not the Full Court?

MR BANNON:   No, because damages issues need to be determined and also the form of any declaration and/or if the question – to explore whether there is any need or basis on which any injunctive relief could be support.  I think his Honour – the orders would be the appeal be allowed with costs, notice of contention dismissed with costs and also we ask that the costs of the hearing before Justice Mansfield be paid by the respondents as well and remitted for consideration.

KIRBY J:   You are asking us to set aside the Full Court’s order?

MR BANNON:   Yes.

KIRBY J:   And then to set aside Justice Mansfield’s order making the order that the Full Court ought to have made to remit the matter to the trial judge or to the Federal Court to deal with it?

MR BANNON:   Yes.  We stand by the orders we sought in paragraph 52 of our written submissions.

McHUGH ACJ:   Have you anything to say about the orders that are sought, Mr Oslington?

MR OSLINGTON:   Subject to the question of costs of the trial which ought to be determined, in our submission, by the trial judge, which he has not done yet.  There has not been an application, or costs have not been determined yet.  So that should be left to the trial judge, in our submission, if the appeal was allowed.

McHUGH ACJ:   Yes, thank you.

CALLINAN J:   What I was thinking of is the document at page 3012 and following pages which seem to summarise the arrangements, I would have thought non‑controversially.  That is actually a document of the first respondent, I think.  There is a passage at page 3016, line 15 which might well help your case somewhat, Mr Bannon.

MR BANNON:   Yes.

CALLINAN J:   It is an interesting document actually.

MR BANNON:   Yes.  We have not troubled to take the Court to a lot of the underlying documents which go to purpose but ‑ ‑ ‑

CALLINAN J:   But it also picks up the history.

MR BANNON:   Yes.

CALLINAN J:   And in summarising the arrangements it also gives you an insight into the purpose and thinking because there was obviously a full understanding of the proposed regime.

MR BANNON:   Yes.  We resisted the temptation to take your Honours to, for example, the famous “road block” document.  That word was used to describe the strategy which is to be put in place to prevent our efforts ‑ ‑ ‑

CALLINAN J:   What page is that?

MR BANNON:   The dog‑eared page of Mr Henskens’ copy.

KIRBY J:   Such documents did not have very much effect in Boral.

CALLINAN J:   He has probably been tugging your gown to get you to refer to it, Mr Bannon, in the last day and a half.

MR BANNON:   Predatory prices are a very difficult area, your Honour Justice Kirby.

KIRBY J:   I just hope to find a neutral path through this Act.

MR BANNON:   Well, there is a new version of the Act coming.

KIRBY J:   Well, there is talk about it.

MR BANNON:   We will provide the reference before 4.15.

GUMMOW J:   Thank you.

MR BANNON:   If it please the Court.

McHUGH ACJ:   Yes.  The Court will adjourn until 10.00 am tomorrow.  I am sorry, Mr Oslington.

MR OSLINGTON:   I would like to say a couple of things, your Honour.

McHUGH ACJ:   Yes.  Well, strictly you have a ‑ ‑ ‑

MR OSLINGTON:   A reply to the submissions on the contention.

McHUGH ACJ:   Contention, yes.

MR OSLINGTON:   That is what I wish to deal with.  First, my learned friend’s submissions on the proper construction of section 46(4)(c).  My learned friend seeks to construe that the subsection, insofar as it refers to conduct, as applying only to subsection (3), that being the only subsection in section 46 in which conduct is expressly referred.

The Trade Practices Act originally did have a definition of “conduct” in it which had been repealed by the time of the events giving rise to this action.  I confess, if I did at one stage know what the definition was, I have forgotten what it was.  But there is no definition of “conduct” in the Act now.

McHUGH ACJ:   I thought it still did have.  Is it not 4(2)?

MR OSLINGTON:   I am sorry, I was looking at the Act when my friend made the submission.  It has been taken out of section 4.  I am sorry, there is a definition of “conduct”, of “engaging in conduct”, in section 4(2)(a):

a reference to engaging in conduct shall be read as a reference to doing or refusing to do any act, including the making of, or the giving effect to –

et cetera.  In our respectful submission, that definition ought to either apply or be a strong guide to the interpretation of the word “conduct” in subsection (4)(c).  If it is not, “conduct” in (4)(c) ought to be given its ordinary meaning and taking advantage of power in a market for a particular purpose is ordinarily described as “conduct”.  So there is no reason why the conduct referred to in subsection (4)(c) does not refer to the “conduct” of taking advantage of market power described in section 46(1).

Second, my learned friend said that if reliance had been placed on subsection (4)(c) at the trial – and I cannot recall subsection (4)(c) being specifically relied upon – he might have taken a different course.  He said he might have taken a different course because relying on the sale market as the market in which a substantial degree of power was exercised would have overcome the absence of PAWA being a supplier.  But, of course, there is no doubt that the absence of transactions in the market was relied upon for our submission that there was no market relying upon the decision of the Queensland Full Court.  That is something specifically dealt with by Justice Mansfield in his judgment and that was, essentially, “no supplier, no transaction” points, which did not provoke my learned friend to conduct the trial differently.

Secondly, our reliance on Dowling v Dalgety did not simply rely upon a submission that property rights were taken advantage of and we do not need to go that far in this case.  When Dowling v Dalgety is examined, Justice Lockhart based his decision not only on the fact that property rights were being used in that case but also the fact that – and this is prominent in his judgment – the stock and station agents who owned the properties had never been in the business of granting rights over the sale yards.  So, again, that was a point clearly taken at the trial relying upon the absence of any supply by PAWA.

KIRBY J:   That theory does not seem to have had a very easy passage in Queensland Wire.

MR OSLINGTON:   No, it does not, but I am really addressing my learned friend’s point that he might have taken a different course if we had relied on (4)(c).  Subsection (4)(c) is simply relied upon as a further reason why PAWA needs to be a supplier in the relevant market before liability can attach.  Reliance on PAWA as a supplier was clearly taken in our market point and was clearly taken in the Dowling v Dalgety point, but that did not provoke reliance by the appellant on advantage being taken of market power in the sale market.  There is undoubtedly a good reason for that, because although PAWA’s ownership of the infrastructure may have been a source of market power to PAWA in the sale market, in refusing access it was taking advantage of market power, if it was market power, in the infrastructure market and not the sale market.  In other words, it was leveraging.

McHUGH ACJ:   But (4)(c) does not require you to be an actual supplier, does it?  Is it not concerned to emphasise that market power is supplier power or purchaser power and, in particular, it is directed against any notion that financial power in a market might be a breach of section 46.  That would have very considerable problems for financial institutions in terms of exercising their securities, in terms of granting loans and so on.

MR OSLINGTON:   The definition of “supplier” in the Act does not sit happily with the notion of a potential supplier.  “Supply” is defined in section 2:

supply, when used as a verb, includes:

(a)  in relation to goods – supply (including re‑supply) by way of sale, exchange, lease, hire or hire-purchase; and
(b)  in relation to services – provide, grant or confer;
and, when used as a noun, has a corresponding meaning, and supplied and supplier have corresponding meanings.

McHUGH ACJ:   Yes, but it must be the supply of goods or services.  So we are talking about PAWA as a supplier of goods and services, as opposed to a person who is a financier who may have power over a particular market.

MR OSLINGTON:   “Services” is defined.

McHUGH ACJ:   Well, there is no doubt that in many situations the Act would apply to finances.  There is no doubt at all about that.

MR OSLINGTON:   But the definition specifically refers to contracts “between a banker and a customer” and a contract “in relation to the lending of moneys”.

McHUGH ACJ:   Yes, that can be accepted, but the point I am putting to you is that it is either as a supplier, its power as a supplier.  So it is in your character as a supplier that breaches section 46, not some other character that an entity or a corporation may have, as a financier ‑ ‑ ‑

MR OSLINGTON:   That, with respect, is the point we make, that PAWA is not a supplier of infrastructure services.

McHUGH ACJ:   I know you do. 

MR OSLINGTON:   That is what we want to say about clause (c) and also properly covers what we wanted to say about Dowling v Dalgety.  We do not contend, or we do not need to contend in this case at least, that taking advantage of property rights simpliciter is not taking advantage of market power.  We rely on the reasoning in Dowling v Dalgety that taking advantage of property rights, when the property has never been leased out, made available to others, is not taking advantage of market power unlike in Queensland Wire, where the majority held that the output of the rolling

mills had been sold by BHP.  That being the market, the Court ultimately based its decision on a market in which BHP was a supplier.  Those are the submissions in reply we wish to put, your Honour.

McHUGH ACJ:   Yes, thank you, Mr Oslington.

MR BANNON:   As to references - at 2491 of the “road block” document and 2549 to the “pre‑emptive strike” document.

McHUGH ACJ:   Thank you, Mr Bannon.  The Court will adjourn until 10.00 am tomorrow.

AT 4.09 PM THE MATTER WAS ADJOURNED