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

[2004] HCATrans 45

[2004] HCATrans 045

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 TUESDAY, 9 MARCH 2004, AT 10.17 AM

Copyright in the High Court of Australia

MR A.J.L. BANNON, SC:   May it please the Court, I appear for the appellant with MR A.A. HENSKENS.  (instructed by Colin Biggers & Paisley)

MR B.C. OSLINGTON, QC:   May it please the Court, I appear for the respondents with my learned friends, MR L.G. FOSTER, SC and MR A.I. TONKING.  (instructed by Noonans)

MR R.J. MEADOWS, QC, Solicitor‑General for the State of Western Australia:May it please the Court, I appear with my learned friend, MR R.M. MITCHELL, on behalf of the Attorney‑General for Western Australia, seeking leave to intervene in support of the respondent.  (instructed by State Solicitor for the State of Western Australia)

McHUGH ACJ:   Mr Bannon, what do you say about it?

MR BANNON:   There may be a timing issue, but we do not think that we have any objection to the States ‑ ‑ ‑

McHUGH ACJ:   Yes.  Mr Oslington? 

MR OSLINGTON:   We regard it as a matter for the Court, if the Court pleases.

McHUGH ACJ:   Yes, you have your leave to intervene, Mr Meadows.

MR C.J. KOURAKIS, QC, Solicitor‑General for the State of South Australia:   If the Court pleases, I appear with my learned friend, MR G.F. COX, for the Attorney‑General for South Australia, seeking leave to intervene.  (instructed by Crown Solicitor for the State of South Australia)

McHUGH ACJ:   Yes, we will make the same order in respect of your client, Mr Kourakis.

MR BANNON:   Perhaps, your Honour, the only aspect in relation to the South Australian position is that they transgress into areas which may not be regarded as particularly pertinent to States’ interests.  There are some wider section 46 issues, but they could be accommodated.

McHUGH ACJ:   Yes, thank you.

KIRBY J:   You can make a lot of noise at the relevant moment.  Make it exciting, just when we need it.

MR BANNON:   I will do my best.

MR N.J. WILLIAMS, SC:   May it please the Court, I appear with MS L. McCALLUM for the Australian Competition and Consumer Commission, seeking leave to intervene.  (instructed by Australian Government Solicitor)

McHUGH ACJ:   Yes.  Your submissions in support of your application for leave to intervene do not comply with the Rules, do they?  They are not signed.

MR WILLIAMS:   Your Honour, a signed copy was filed, as I understand the position.  We certainly signed it.  I apologise if there has been some ‑ ‑ ‑

McHUGH ACJ:   Yes.  You may have your leave, Mr Williams.

MR WILLIAMS:   May it please the Court.

KIRBY J:   We just wanted you to know that we look at these things.

MS N.L. SHARP:   If it pleases the Court, MR S.J. GAGELER, SC appears in this matter and I appear with him on behalf of the Attorney‑General for New South Wales seeking leave to intervene.  (instructed by Crown Solicitor for New South Wales)

McHUGH ACJ:   Yes.  Leave is granted to the Attorney‑General for New South Wales, Ms Sharp.

MS SHARP:   If it pleases the Court.

McHUGH ACJ:   Yes, Mr Bannon.

MR BANNON:   Your Honours, there is a preliminary matter.  There is an amended notice of appeal which we seek leave to file, which is the subject of consent.

McHUGH ACJ:   Yes, very well.  I make an order that the notice of appeal be amended in accordance with the notice of motion.  Have you got copies there?

MR BANNON:   Yes.  It just brings into line submissions with the ‑ ‑ ‑

McHUGH ACJ:   Yes.

MR BANNON:   Your Honours, the first issue which arises on the appeal relates to the correct construction of section 2B of the Trade Practices Act and its equivalent, section 13 of the Competition Policy Reform (Northern Territory) Act (NT). If I could briefly run through some relevant facts and findings which expose the issue. PAWA, the first respondent, conducted a business of supplying electricity to consumers in the Northern Territory. It charged domestic and commercial customers for the electricity delivered to the premises of those customers.

Essential steps in the carrying on of that business included, firstly, the generation of electricity using its own generators or, from time to time, the output of independent generators, transmitting that electricity along high voltage transmission wires or lines from the point of interconnection with the generators into distribution lines, lower voltage lines, through which it was then distributed to the premises of customers and charging a fee to customers for that electricity so delivered.

It is an obvious point, but it is important to note that electricity cannot be supplied otherwise than by transmission and distribution along wires physically linked to the customers’ premises.  What a consumer pays for is for the service of delivery as much‑ ‑ ‑

KIRBY J:   Is that technically correct?  Can you not distribute electricity from a bank of batteries?

MR BANNON:   You cannot get it to the premises otherwise than along physical wires, in the sense that it cannot go through the ether, not like telephonic communications.  One could have a generator on site, an individual consumer, or one could have battery power on site as well.

KIRBY J:    You said there were three independent generators.

MR BANNON:   Yes, I think there were three independent generators who are connected to the system physically.  By that I mean there is a wire or wires going from the generator, independently owned, to a connection point with PAWA’s transmission system and from time to time PAWA augments its own generation capacity by buying the electricity from such independent producers and hence transmitting that electricity ‑ ‑ ‑

KIRBY J:   As part of its grid.

MR BANNON:   As part of its grid, yes.

KIRBY J:   The other two are not concerned in this litigation and never have been?

MR BANNON:   No, though I think there may be three others who from time to time have provided that augmenting capacity, some under longer‑term contracts.  NT Power supplied it intermittently prior to 1998, but has not done so since under that basis.

KIRBY J:   What did you do with your power when it was not being brought into the grid?

MR BANNON:   Originally, the station was set up to service a mine which was adjacent to the generator, originally called the Mt Todd mine.  It changed its name when it reverted control to the local Aboriginal community.  That mine ceased to operate and hence there was a spare capacity in the generator.

GUMMOW J:   What is the date of the change of name?  You can tell us later.

MR BANNON:   Yes, I will find out.

GUMMOW J:   At the time you had the licence you were the Mt Todd Company, were you not?

MR BANNON:   Yes.  I am sorry, the name of the mine changed, the name of the location, not the name of the – the appellant company did not change its name.  I will check precisely what change has occurred.  Hence, the consumer for electricity pays for the service of delivery as much as for the service of generation.  Transmission and distribution of electricity constitutes the supply of the electricity for consumers.  The distribution lines and the vast bulk of the transmission lines were all owned by PAWA.  The charges paid by customers of PAWA represented a return to PAWA on the costs of generating delivery and selling electricity, including the capital cost of its transmission and distribution lines as well as the cost of maintaining those lines.  NT Power was the owner of a generator at Mt Todd, which is located between Darwin and Katherine.  The generator was adjacent to Mt Todd mine and was connected by 22kV lines.

GUMMOW J:   Is the licence we are talking about 26 June 1998?

MR BANNON:   Yes.

GUMMOW J:   Well, that is between Power and Water Authority and Mount Todd Power Pty Ltd.  Is that the right one?

MR BANNON:   Yes.

GUMMOW J:   Volume 5, 1323.

MR BANNON:   That company is the appellant company.  It changed its name.  Yes, I am sorry, your Honour.

GUMMOW J:   Well, tell us when.

MR BANNON:   Yes.  So that there was a connecting line of 22kV, a distribution line, from the generator which then went to what is referred to in the evidence as the 132kV line, which is a transmission line which connects Darwin and Katherine.  That is owned by the company, NT Transmission Pty Limited, in which the majority shareholding is owned by interests associated with NT Power.  The 132kV transmission line was connected at each end to the PAWA system and the PAWA systems then branched out into the areas of Darwin and into the areas of Katherine. 

So when NT Power, prior to 1998, supplied under intermittent arrangements with PAWA its electricity, the physical path of its electricity was from the generator along its own 22kV line into the 132kV line owned by NT Transmission and thence out one or other end to the transmission line of PAWA and then into the grid generally to various customers.

KIRBY J:   Was it taken that your client was supplying Katherine with electricity, was it?

MR BANNON:   No, these were examples before 1998, when we assisted in augmenting PAWA’s generation capacity under a commercial arrangement we had with PAWA.

KIRBY J:   And that was because PAWA needed extra capacity to service Katherine, which was growing?

MR BANNON:   To service Darwin or Katherine.  The evidence suggested there were peak periods from time to time.  PAWA may have a generator which was out of service and so from time to time it would have an intermittent need for extra power.

The appellant was never under any long‑term power supply contract with PAWA.  We were just called in occasionally prior to 1998.  A couple of the other IPPs, as they referred to, independent power producers, had – and we assume still have – longer‑term arrangements to provide that power.  So, in those circumstances, PAWA no doubt was balancing, for example, its need for power, the cost of putting on its own generator, the cost of paying the fee to the IPP against the returns it was going to get from its consumers.  It was a commercial arrangement, or a series of arrangements, which they entered into from time to time.  But for present purposes, the activity of transmitting that electricity, the physical activity, whether it came from us or from another IPP, along its grid system is exactly the same, whether the power comes from its own generator or from one of our generators, and whether or not there was a commercial transaction which says, once it enters the PAWA system, it is owned by PAWA.  The physical activity is the same. 

As has been adverted to, in June 1998 PAWA granted NT Power a licence to generate and sell electricity in the Northern Territory market.  In the first half of 1998 NT Power requested PAWA to transmit and distribute NT Power’s electricity along PAWA’s lines on the basis that NT Power would pay PAWA for the service and on the basis that NT Power would sell that electricity to customers linked to the PAWA system, in competition with PAWA.  The evidence and findings are that there was no other way for NT Power to get its electricity to its prospective customers. 

Negotiations commenced between representatives of PAWA and representatives of NT Power.  There was discussion as to certain technical issues which required resolution and there was discussion as to methods of calculating charges for the provision by PAWA of that service.

Those negotiations were terminated by PAWA in August 1998, pending the outcome of the review of PAWA established by the Northern Territory Government to consider, amongst other things, whether PAWA should be privatised.  The NT Government decided not to privatise PAWA in November 1998, on completion of the review, and announced that it would propose to introduce an access regime for the PAWA network.  In December and following, PAWA maintained its refusal to renew negotiations for the supply of its services to NT Power in anticipation of the access regime.  The access regime was due in 2000 and, as his Honour noted, it provided for staggered access, not immediate access to all customers, in due course.

His Honour found that if the negotiations had not been terminated, the parties would have resolved any technical issues and would have reached agreement on charges for the service, at least by the end of 1998.  His Honour did not have to find what that agreement on charges would have been, because he decided that he did not have to determine damages.

GUMMOW J:   Now, at the end of the day, what is your remedy going to be?  Damages, is it not?

MR BANNON:   Damages.  A declaration, but potentially injunctive relief.

GUMMOW J:   It could not be an injunction, because the ground has shifted within the new system.

MR BANNON:   There could not be an injunction without an additional and separate consideration of the impact of the access regime.

GUMMOW J:   Yes.

MR BANNON:   His Honour specifically did not consider whether the access regime had the effect, or would have the effect – because it was not actually in force at the time of the hearing – of meaning that access only in accordance with the access regime meant there was no misuse of market power.  But that would be an issue which would arise on any further hearing.  It is an interesting question because what we say is the access regime – I do not need to go into it – the access regime said, “You shall give access in these circumstances”.  It did not say, “You shall not give access in any other circumstances”.  It applied both to PAWA or any private operator as well. 

So you could have an interesting question as to whether or not someone insisting on only giving access in accordance with a limited access regime which provided staggered access was nevertheless exercising market power, albeit its market power would necessarily be less but it may still qualify in the threshold.  But yes, your Honour is absolutely right, that has not been resolved.

Importantly, his Honour’s finding that any technical issues would have been resolved – the effect of that is that the PAWA system had sufficient capacity to transmit its own electricity as well as ours, without safety issues or other technical concerns.  So it was not a case in which the monopolist had a system which was only sufficient to accommodate its own purposes.

KIRBY J:   But that finding implies that it had no need of your supplementary power.

MR BANNON:   Certainly for its own purposes, yes.

KIRBY J:   It could use its own property for its own purposes without needing to look outside.

MR BANNON:   Yes, but, in terms of other issues which will no doubt arise, it is of significance that it had spare capacity, in effect.  The system was not operating to its full capacity just to serve the purposes of the owner. 

His Honour found that the termination of negotiations and refusal to renew them constituted a refusal on the part of PAWA to supply transmission distribution services, at least for a significant period.  His Honour found that, in deciding to refuse to supply those services, PAWA was exercising a commercial judgment, not a regulatory judgment, and PAWA was endeavouring to protect its commercial interests by shielding its business from competition until it was in a position to compete.

GUMMOW J:   Where do we find that PAWA had these two heads, one said to be commercial and one said to be regulatory?  It must have some statutory footing.

MR BANNON:   Yes, section 25 of the Electricity Act, as in force 10 March 1993, provided that:

The Authority may appoint a person . . . as a licensee to generate, store, reticulate and sell electricity –

It was under that section that we got our licence and his Honour accepted and we accepted that that was an example of one of the regulatory functions which the Authority had to exercise.

KIRBY J:   The very nature of electricity at high voltage would suggest that you do need a statutory regime of some kind to control its deployment.

MR BANNON:   Certainly to ensure that we were a person responsible enough and skilled enough to engage in the activities of generating, storing, reticulating and selling electricity.  The evidence, and his Honour found that when the PAWA employees considered our section 25 application for a licence, they were careful to put to one side what they regarded as regulatory considerations, namely, whether or not we satisfied what may be regarded as proper regulatory considerations in issuing the licence such as this, and on the other side, commercial considerations, which they regarded as related to whether or not we should get access to their service of transmitting electricity.

GUMMOW J:   It is really 27, is it not, as well?  That imposes upon selling, upon you selling, I suppose.

MR BANNON:   Yes.

GUMMOW J:   If you get a licence, you can sell.

MR BANNON:   That is right.  Section 27(3) says if you have a licence we can sell “subject to the terms of the agreement”.

GUMMOW J:   But the Authority can sell anyway, under 27(2).

MR BANNON:   Yes, 27(4) might cover us – I was going to say - for augmenting their power, but I am not sure it does.  There is a debate between the parties, resolved in our favour, as to whether or not section 29 involved an exercise of a regulatory power.  We say it did not, for the reasons his Honour gave and for the reasons we have supplemented in our ‑ ‑ ‑

McHUGH ACJ:   Section 25(1) is expressed rather curiously, is it not?

The Authority may appoint a person who is a party to an agreement with the Authority as a licensee –

and then subsection (2) provides:

A licensee may sell electricity in accordance with the terms of [the] agreement –

but the power to sell under 27(1) seems to be a more general power.

MR BANNON:   Yes, although 27(3) again picks up the reference to “the agreement”.

McHUGH ACJ:   What does 25(1) mean, that it is a condition of the grant of a licence that you already be a party to an agreement with the Authority?

MR BANNON:   Certainly the parties approached it on the basis that the two matters would be dealt with at the same time.  The Agreement which was entered into made reference to certain obligations.  It related to complying with safety standards.  It certainly seems to be assumed that the agreement would be used as part of the basis of imposing conditions of the licence.

McHUGH ACJ:   It rather seems to suggest that the Act proceeds from the basis that the Authority will have a monopoly, that it will be the ordinary supplier of electricity in the Territory, but that it may make agreements with certain parties and grants them licences.

MR BANNON:   Yes, that is so, but we went to the hearing and went to PAWA seeking their service of transmitting our electricity on their grid armed with such a licence.  We fully accept that if we had not got that licence, then we could not get through the front door of any provision of the Trade Practices Act.  But they had not granted us the licence which was for the express purpose of generating and selling electricity to any person in the Territory.  We say that served PAWA’s regulatory function in that regard, and it became a question of commercial negotiation in relation to whether they should provide us with the service of transmitting our electricity along their system.  That was the approach his Honour took. 

We had an argument – which we have now abandoned, having regard to our singular lack of success on it – that it was an implied term of the grant of a licence that we should have access to the grid system, but we do not pursue that.  I am not trying to revive it, but that argument was partly engendered by some of the considerations your Honour the Acting Chief Justice has referred to, namely, that in the context where they were the owners of the infrastructure, and that was the necessary ingredient in achieving the functions in the licence, then that would be so.  But, as I say, we do not pursue that point. 

McHUGH ACJ:   I see that section 3 defines “licensee” to mean: 

a person who generates and sells electricity under an agreement between him and the Authority under Part V.

MR BANNON:   Yes.  The other legislation, of course, is the PAWA Act itself, as at 1987, which sets out various functions of the Authority.  Section 14 sets out a list of functions, which includes:

(a)   to supply electricity within or outside of the Territory;

(b)  to plan and co‑ordinate the generation and supply of electricity for the Territory or elsewhere;

(c)   to promote the safe use of electricity;

(d)  to control the supply of electricity;

(e)   to purchase and sell electricity;

. . . 

(h)to advise the Minister on all matters concerning electricity –

et cetera.  Then, under “POWERS”, there is a power:

to do all things necessary or convenient to be done in connection with or incidental to the performance of its functions –

and section 15(2):

(a)  to generate electricity;
(b)  to transmit and reticulate electricity and water;
(c)  to determine the conditions . . . 
(d)  to license persons –

and that would track back to 25.  Other provisions are referred to in passing.  Section 16 deals with the question of ministerial control and ministerial directions.  17(1) provides that:

Subject to this Act and within a budget approved by the Minister, the Authority shall act in a commercial manner. 

KIRBY J:   That provision, 17(1), followed the Hilmer Report and the decision of the inter‑governmental meeting embracing it.

MR BANNON:   I think it preceded the – 1995 was the adoption of the Hilmer reforms, reflected in the Competition Policy Reform Act 1996, but certainly PAWA was treated as one of the businesses referred to in the Competition Principles Agreement as a business which should adopt equivalent taxation.

I was going to take your Honours briefly to the Competition Principles Agreement and some parts of the PAWA annual report which reflect the way it regarded itself as operating as a government business consistently with the Hilmer recommendations.  That is a 1998 report which follows it.  But even before then the Northern Territory Government had established PAWA as an entity subject to the matters in 17 to “act in a commercial manner”.

KIRBY J:   But you have us in the chronicle of facts to that point where the so‑called direction was given to PAWA.

MR BANNON:   Yes.  His Honour found there was a direction given.  We dispute it was a direction, but accepting it was for present purposes ‑ ‑ ‑

KIRBY J:   So you do not pursue in this Court Justice Finkelstein’s criticism of that finding?

MR BANNON:   I am sorry, we do.

KIRBY J:   Because I thought be made some telling points about it.  It does appear as though it was put up as an alternative and they embraced the lesser of the two.  They did not embrace the direction; they embraced the softer option.

MR BANNON:   Exactly.  We do pursue that in this Court and that is set out in our contentions.  We say three things in relation to that.  Firstly, if it is a direction, it does not matter.  Secondly, because it basically is ‑ ‑ ‑

KIRBY J:   But if it is a direction, that would add to the strength of the suggestion that it was part of the regulatory and governmental functions of PAWA.

MR BANNON:   We would submit not, because his Honour found that the decision – his Honour found it was a direction but effectively that was the Minister standing as the decision‑maker on behalf of PAWA and that his Honour’s findings were that that decision was motivated by commercial considerations.  The problem with the regulatory point is that an access regime is established by legislation which was, in fact, brought in by the Northern Territory Government.

What it does is it imposes a regulatory regime in terms of legislation which applies to owners of various facilities, one of which included PAWA, but it was not limited to PAWA.  So that there was no act of PAWA which could be done which could bring in an access regime unless it itself said to the world, published voluntarily a statement that, “We will invite access considerations”.  An access regime could only be put in by the government. 

It would have been open for the government, for example, to pass legislation – and this is contemplated under the Trade Practices Act – which specifically says, for example, PAWA refusing to supply access pending the access regime is something which is excluded from the Trade Practices Act.  Now, that would have been a regulatory act and could not have been the subject of criticism.

KIRBY J:   I think you are getting into argument now, whereas you were giving us a very helpful chronicle.

MR BANNON:   Yes, I will keep going.

KIRBY J:   Maybe I took you off your path.

MR BANNON:   No, your Honour.  I was up to the point where I was referring to his Honour’s finding that PAWA exercised a commercial judgment, not a regulatory judgment, and the effect of his finding was that PAWA was endeavouring to protect its commercial interests by shielding its business from competition until it was in a position to compete.  If I could take the Court to those findings in volume 13, firstly, at page 3565, paragraph 327, where his Honour said:

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.  That conduct is not designed to achieve, by regulation, any specific public purpose ‑ ‑ ‑

GUMMOW J:   Where does this dichotomy come from, between the exercise of market power and the discharge of a regulatory function?  Where does it come out of the Trade Practices Act?

MR BANNON:   It does not.  I am somewhat coy, because there is a decision which is referred to, Plume v FAC, in which an argument advanced on behalf of FAC, which I represented, was accepted, or at least interpreted – perhaps, no doubt, correctly – as being an exercise of regulatory power, not being an exercise of market power.  But the dichotomy is not there.  It was taken up in Stirling Harbour by a Full Federal Court.  Justice Carr said it was a distinction without a difference, in dissent.

GUMMOW J:   We have to have citations for these cases.  It seems to run through these judgments.

MR BANNON:   Yes, I will do that in due course.  They do, perhaps, more arrive on the notice of contention, whenever the appropriate time is.  We accept, your Honour, that this distinction really does not exist between a regulatory power and a market power.

KIRBY J:   May it not come up in that provision of the Trade Practices Act, section 3, is it not, that talks of the engaging in commercial or business activity where the Crown  ‑ ‑ ‑

MR BANNON:   Yes.  If one fits within a section 2C exclusion, a government business is not exposed to the provisions of the Act in relation to that particular activity.  Looking more widely, section 46 simply talks about market power, and it is quite conceivable that market power could be constituted by a statutory power.  That is what Justice Carr found in the Bunbury Case.  But the real question is, is it likely that in competitive conditions one would exercise that power in the same way? 

Now, if it is in truth a statutory or regulatory power, one would expect that even in competitive conditions the same considerations which would govern the exercise of a statutory power should also govern that party exercising the power, whether it is competitive or not competitive.  So, in that circumstance, that would be the usual reason why, if it is a regulatory power in that sense, it will not be the exercise of market power.  But as a per se difference or distinction, it involves an error of principle. 

Coming back to paragraph 327, the second sentence:

That conduct is not designed to achieve, by regulation, any specific public purpose of the legislature identified in the legislation.  The maintenance and operation of PAWA’s infrastructure is clearly one of its functions, and its conduct in doing so clearly serves the public interest.  But the issue of access to PAWA’s infrastructure for the purpose of enabling third parties to participate in the Electricity Supply Market is not one which is dealt with by an express licensing power.  The Electricity Act and the PAWA Act were not intended to provide the regulatory framework by which the Northern Territory Government, in relation to access to PAWA’s infrastructure, would give effect to its obligations under the Competition Principles Agreement.  I do not therefore consider that it enhances the characterisation contended for by PAWA to discern that the question of access to PAWA’s infrastructure was a matter which was determined by the Northern Territory Government when addressing those obligations, and in the light of them. 

It refers to the two cases which I was referring to: 

Unlike both Plume and Stirling, PAWA is not merely the monopoly supplier of infrastructure services but is a participant in the Electricity Supply Market. 

Then:

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 . . . It was in a position to charge for those services.  Subject to the access regime which came into force on 1 April 2000, it was able to charge a fee for those services which did not necessarily reflect a fee which represented a normal return on its capital investment.  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.  In making the decision whether to grant access, it was a commercial judgment rather than a regulatory judgment which was being made.

And then next over to 3580, among the findings of purpose at paragraph 368 ‑ ‑ ‑

KIRBY J:   The problem with regarding it as a dichotomy is that one could well understand a complex of reasons behind the decision.  For example, if the Minister or PAWA or both came to the view that you were cherry picking, and their obligation was to supply electricity throughout the whole of the Northern Territory, including to remote districts where you could not possibly justify it on a purely commercial basis, then it might be partly commercial to protect the infrastructure of PAWA, but it might be partly governmental or regulatory to ensure that it was done on an equitable basis for all the citizens and users in the Northern Territory, and therefore, you get a complex of reasons which are partly regulatory and partly commercial mixed up.

MR BANNON:   The use of the word “regulatory” does cause problems.

KIRBY J:   Well, use the word “governmental”.  As one of the law Lords said, “Don’t use this ‘Crown’ business”, which I must admit - it was Lord Diplock in Town Investments, that the use of “the Crown” has complicated things and I would say especially in the Australian constitutional setting.  Use “governmental” rather than “regulatory”.  You could well understand a governmental interest in the Northern Territory, with its remote and isolated communities, taking the view it is against the interests of the whole of the Territory to permit a cherry picker to come in and just say, “Well, we will grab the cherries from Darwin, and leave it to you to supply the most remote Aboriginal communities”. 

MR BANNON:   Without dealing with that comprehensively, because it arises a bit later, if I just make these brief points.  Firstly, if one had a private operator who had this infrastructure and was aware that it was an access regime on the horizon, that private operator could say, “If I let somebody in here” - and an inefficient one, which PAWA was, that was the big problem, because it could not compete without suffering losses.  There is a big difference between having an efficient incumbent and an inefficient one.  But a private one may say, “Well look, I think it will actually be better for the Territory generally if we wait for this access regime, so I am not going to let anybody in in the meantime, and by the way, and significantly, I won’t suffer losses in the meantime”.  Now, to say that one is thinking of wider interests, but while protecting one’s own business, does not really advance the position in terms of section 46.

Secondly, the government launched this entity as a business.  It was operating a business.  It had the power to exercise its regulatory powers in the sense of legislative powers, to govern the situation, and it chose not to do so.  It chose to use a business, to achieve a result, ie a business in the sense of making a decision in the course of that business not to allow access, then it suffers the consequences of the act. 

Then at page 3580, or paragraph 368, of the judgment, in these three paragraphs, down to 370, his Honour deals with questions of purpose.  In the first sentence he refers to:

the decision to decline access . . . 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 –

who was the expert called on behalf of PAWA –

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 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 this is important to appreciate –

and therefore the ideal competition 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.

So, in other words, the problem was not trying to avoid a herd.  The real problem was that they did not want early access because PAWA would not provide effective competition because PAWA was inefficient and that it wanted to become efficient, not under the glare or burning iron of competition but in its own good time.  Now, quintessentially, we say, that the Trade Practices Act is designed to prevent incumbents doing that.  The legislature thinks that competition is the best way to drive efficiency.  Then it says:

Early access granted to NT Power would, in addition, further disadvantage PAWA because NT Power might “cherry pick” the larger consumers leaving PAWA with its inefficient cost structure but with diminished revenue and the ongoing obligation of servicing the smaller customers and those in remote localities.  In other words, it would have to supply that segment of the Electricity Supply Market which required greater expense to service.

The state of knowledge of PAWA . . . was not informed at material times by Professor Teece.  But, in general terms, the views expressed by Professor Teece are consistent . . . The minute of Mr Clarke . . . which is quoted earlier in these reasons, in my view reflects PAWA’s reasons for the ongoing refusal . . . 

Included in those reasons was the desire, in the interests of what Mr Clarke called “sensible competition”, to have time for PAWA to operate in a more economic and efficient way.  The fear was not simply that PAWA would not then compete effectively with NT Power, but that its inability to do so in the short term . . . would mean that its operating losses would impose a greater burden upon the Northern Territory community –

that is, shareholders –

as it would require further subsidy or would require a significant increase in tariffs to domestic customers.  Dr Fitzgerald –

who was the expert called on behalf of the NT Power, economic expert –

referred to that consideration as PAWA endeavouring to protect its commercial interests.  Although his use of that expression was criticised in submissions, I think that the criticism is not really warranted.  His description of these considerations, in context, is not unfair.

Then could I just go back to that the minute of Mr Clarke of 15 December 1998 which is referred to.  That appears in 3513 of the judgment, which is paragraph 171.  This is a memorandum from Mr Clarke, who sat on the advisory board of PAWA, to the Treasurer – he has also worked in the Treasury Department.  The memorandum refers to the NT Power proposal.  It was described as power facilities from time to time in various correspondence.  About four paragraphs in:

The problem for the Territory is that we are not yet in a position where competition can sensibly occur.  Prices for our major commercial customers are currently well above costs –

that is, inefficient; that is super‑competitive pricing we say –

which means large commercial customers are cross subsidising smaller customers including households.  Were competition to occur immediately, Power Facilities could “cherry pick” the large customers, leaving PAWA with much the same overall costs but a dramatic reduction in revenue.

These losses would have to be met by the Territory community in one form or another whether by increased prices or higher taxes.  The Government has taken the view this would not be in the public interest.

. . . 

The Government has announced a strategy for achieving this . . . 

·commercial tariffs are to be progressively aligned to costs,

·this reduction in tariffs will be paid for by cost reductions within PAWA –

et cetera.  His Honour says in paragraph 172 of the judgment that that reflected the PAWA state of mind.

The cherry picking would not occur, of course, if they realigned their tariff, which is something they could easily do, but because they were so inefficient in realigning the tariffs they would suffer losses.  His Honour also found that PAWA had a substantial degree of power in various markets and made a deliberate and conscious use of its market power in refusing to supply because it was aware of its own efficiency and hence inability to compete.  That appears at page 3575 of the judgment, at paragraph 357. 

In the context of dealing with whether or not there was a taking advantage of a market power, leaving aside for present purposes the first three sentences, his Honour says:

Until August 1998, as I have found, NT Power and PAWA were each considering the issue of PAWA granting to NT Power access to its infrastructure.  There were different perceptions as to how rapidly those discussions might proceed to agreement, and as to the complexity of the issues required to be resolved before those discussions reached fruition.  PAWA and the Northern Territory Government were aware that, in the longer term, the Competition Principles Agreement required that PAWA’s functions be reviewed.

GUMMOW J:   I am sorry to interrupt you, but this Competition Principles Agreement which is a defined term in the Trade Practices Act now, do we have the text of it anywhere in these materials?

MR BANNON:   Yes, I will go to it, your Honour, fairly shortly too.

GUMMOW J:   Okay.

MR BANNON:  

They were aware that PAWA was not operating to a level of efficiency which would enable it to compete in the Electricity Supply Market with a new entrant, such as NT Power.  They were aware that such competition, if introduced, would be likely to result in certain of the larger commercial acquirers of electricity in that market obtaining supplies of electricity from an independent power producer, partly because of the existing tariff structure and partly because PAWA was not then in a condition where it could compete efficiently in that market.  They were aware that such competition could not be effectively introduced without NT Power having access to PAWA’s infrastructure.  And they were aware that the grant of access to PAWA’s infrastructure at that point would therefore be likely to result in PAWA’s revenue being reduced in significant measure without any correspondent reduction in its operating costs.  In my judgment, the significance of those matters in the course of negotiations between March and July 1998 was progressively appreciated by PAWA through Mr Gardner, and by Mr Clarke.  The letter from solicitors for NT Power of 17 August 1998 probably brought focus to that appreciation.  It identified 1 October 1998 as the date upon which NT Power proposed to enter the Electricity Supply Market.  It needed to acquire services from PAWA in the Market to be able to do so.  That letter led to the recommendations made to the Treasurer and to the Minister for Essential Services on 21 August 1998, and their acceptance of the recommendations.  The subsequent minute of Mr Clarke to those Ministers of 24 August 1998 specifically recognised that access to PAWA’s infrastructure was a necessary step in NT Power being able to participate in the Electricity Supply Market.  Those matters all resulted in PAWA determining to refuse NT Power access to its infrastructure, at least for a significant period.  In my view, its decision to do so was made by taking advantage of its market power.  It was made in the appreciation of the existence of that market power, and of the capacity to exercise that market power –

And then it deals with other conclusions in relation to absence of market power.  Sorry, your Honour Justice Gummow, that date of change of name appears in paragraph 2 of the judgments ‑ ‑ ‑

GUMMOW J:   Yes, thank you, Justice McHugh found that.

MR BANNON:   It is against that background the question arose in the proceedings whether PAWA had contravened section 46 of the Trade Practices Act or clause 46 of the Competition Code, as applied as a law of the Territory by section 5 of the Competition Policy Reform Act.  Section 46 and clause 46 are in the same terms.  His Honour, having found that PAWA was an emanation of the Crown in the right of the Northern Territory ‑ ‑ ‑

GUMMOW J:   What does that mean? “Crown in the right of the Northern Territory”, some emanation of the self‑government legislation, is it? I know they want to make themselves sound grand up there. It is just an Act under 122 of the Constitution.

MR BANNON:   I do not know the answer to your Honour’s question and I will try and avoid it simply by saying, whatever be ‑ ‑ ‑

GUMMOW J:   You mean the government of the Northern Territory, as Justice Kirby was putting to you with the reference to Lord Diplock.

MR BANNON:   Yes.

KIRBY J:   Justice Finkelstein collects the authorities in England on this at paragraph 160, which is at 36645 of the appeal book. 

MR BANNON:   Thank you, your Honour. 

KIRBY J:   There is lot to be said, especially in Australia, where we have a constitutional entities rule; we have Territories, we have States, we have the Commonwealth.  It was a natural inflexibility of the mind of people coming from the colonies to think of them as manifestations of the Crown, but it is about time, 100 years later, we grew up.  Justice Gummow and I said something like that in Newington.  I will keep saying it until I leave this place.  Unfortunately, statues have been drafted on the assumptions of the old way of looking at things and we have to give them meaning.

MR BANNON:   Yes, and section 2B, your Honour, used the expression “the Crown” itself.

KIRBY J:   Exactly.  We just have to somehow make it all make sense.

MR BANNON:   Having regard to the finding that, however expressed, the Northern Territory government was not bound – or PAWA was not bound by the Act, a finding which we do not take issue with, the question is whether section 46, or clause 46, applied by virtue of section 2B or section 13 of the Northern Territory Act, which is in the same terms, which extended the operation of Part IV to the Crown “so far as the Crown carries on a business”. 

The trial judge and all the judges of appeal accepted that PAWA carried on a business of generating and supplying electricity and that it used its transmission and distribution lines as part of the means of conducting a vertically integrated business.  I will just take your Honours to the references to those findings.  First, in the trial judge’s judgment, 3528, volume 13, paragraph 222,  The opening line describes it as “a vertically integrated business”.  Then at page 3554, in paragraph 302 of the judgment:

Until that approach, PAWA was not in any sense trading or attempting to trade in the service of providing access to its infrastructure.  It was simply using its infrastructure as part of the means of conducting the business of generating and supplying electricity.

Then Justice Lee, at 3608, in paragraph 7 of his Honour’s judgment:

The facilities owned by the Crown for the generation, transmission and distribution of power were, to that point, dedicated exclusively to the commercial activities engaged in by PAWA, namely, the business carried on of the sale of power.

Then in Justice Branson’s decision, 3634, paragraph 87 of her Honour’s judgment:

PAWA operates a vertically integrated enterprise in which it purchases gas, generates electricity, transmits electricity and finally sells that electricity.  In one sense, PAWA’s “business” could be characterised as the totality of these activities.

In paragraph 89, her Honour says:

It seems clear that PAWA carries on a business to the extent that it sells electricity.  It is a player in the market . . . However, even if it be accepted that PAWA carries on a business so far as the first and the last activities of its vertically integrated enterprise are concerned, this is not alone sufficient to demonstrate that the totality of PAWA’s enterprise constitutes the carrying on of a business.

GUMMOW J:   Why does it have to be the totality?

MR BANNON:   It does not, we submit.  Our submission, as we said in our outline, is simply this:  they are carrying on a business.  One asks, is this a business activity, or is it outside the business activity?  If it is a business activity, it is caught by 2B.  It is as simple as that.

McHUGH ACJ:   If the majority judgments are right, other provisions in the Trade Practices Act, 45 and 47, cannot apply to it, I take it.

MR BANNON:   Yes, sections 45 and 47 are good examples because you will never have a situation where you could say entering into a 45‑type agreement or a 47 agreement is part and parcel of one’s business.  In their nature they are one‑off type agreements.  Section 50 is another example.  Section 50, which is also caught up by 2B, is acquisitions of property or companies and shares which result in a lessening of competition.

By its nature no one engages in that activity on a regular basis, but it is plain that that sort of activity is quintessentially the sort of thing which might be relevant to a government business which, generally speaking – or many of them do have characteristics which give them a substantial degree of monopoly power.  So what the minority in the majority have done have added a lawyer of complexity to the expression “carrying on of the business” which has the effect of depriving it of its natural effect.

GUMMOW J:   The reason why 2B is drafted that way, to some extent, reflects 2A, which has been there since when?

HEYDON J:   Since 1977.

GUMMOW J:   Yes, as Justice Heydon says.

MR BANNON:   Yes.  It was there at the time of Bradken.

GUMMOW J:   The wording is slightly the same but it is obviously designed to carry over into 2B that the Commonwealth subjected itself to 2A, plus the consideration that this is just a Territory; it is not a State.

MR BANNON:   Yes.

GUMMOW J:   Justice Branson talks about difficulties of dealing with States or something.  It has nothing to do with ‑ ‑ ‑

MR BANNON:   Yes, it does not arise.  What we say is the effect of his Honour’s factual findings may be characterised this way, that PAWA gave consideration as to whether it should obtain a return on its infrastructure over and above the return it was already getting by supplying electricity for reward in the form of a fee for transmitting NT Power’s electricity.  He came to the decision that its commercial interests were better served by declining to provide that service on the basis that it would suffer a loss of business by enabling NT Power to compete for that very business.  It is a quintessential business decision.   It is the sort of decision that a private operator would make protecting revenue. 

Another way of looking at it is the trial judge having found the decision was not a regulatory decision – leaving aside the problems with that – it must, almost necessarily, fall into the category of a business decision or a business activity.  The finding of regulatory decision, that is that it was not an exercise of regulatory power, was not disturbed on the appeal.  It was upheld on the appeal.  Even Justice Lee did not, as we read it, seek to disturb that finding.

Now, as I say, Justice Finkelstein said this was a business decision.  It was in the course of carrying on the business and that is all that section 2B required and we endorse what his Honour said and the reasons for saying so.  The trial judge, as we say, started off by posing a test of it is in the course of carrying on the business but – and this appears at 3550, paragraph 290.  If one looks at the second sentence:

It is necessary for s 2B to apply relevantly that the conduct complained of be engaged in the course of PAWA carrying on its business.

Now, that is harmless enough and it is probably right, but by the time his Honour comes to apply it to the particular facts something goes wrong, with respect, we say.  If one goes to 3552, paragraph 296, his Honour says:

The issue therefore is whether PAWA’s conduct in declining from August 1998 to provide NT Power with access to its infrastructure and in declining to indicate to PAWA terms upon which it would be prepared to grant that access was actively engaged in carrying on a business.

McHUGH ACJ:   But there is a difference, is there not, between conduct engaged in the course of carrying on a business, which you do not criticise, I take it ‑ ‑ ‑

MR BANNON:   That is right.

McHUGH ACJ:   ‑ ‑ ‑ and a proposition that the conduct itself must be a business.

MR BANNON:   Yes, and it is that layer which was endorsed by the trial judge and by Justice Branson and with the agreement of Justice Lee, which we say is not there.

McHUGH ACJ:   It stems from McMillan, does it not?

MR BANNON:   McMillan, I think, is perhaps – the answer to that is either yes or secondly, Justice Emmett has been misinterpreted.  I advance the second possibility, because his Honour was concerned as to whether or not a decision to sell a business was in the course of carrying on the business, the conduct in selling a business.  Now, there would be much to be said for the view that if you decide in the course of a business to sell a business, the implementation of that decision is still part of the carrying on of the business.  Just as in Whitford’s Beach, steps taken in the commencement of the carrying on of the business is the carrying on of a business.

But leaving aside the application of his Honour’s reasoning to the facts, to the extent his Honour said it has to be in the course of carrying on a business, as a statement of principle that does not offend, but that seems to have been interpreted by Justice Mansfield and the majority in this Court as somehow or other meaning you have to - the conduct must be the business which is being engaged in, so extra ‑ ‑ ‑

GUMMOW J:   McMillan is in 77 FCR 337?

MR BANNON:   Yes, if I could just go to that now.

GUMMOW J:   This is selling off the Government Printer.

MR BANNON:   Yes. 

McHUGH ACJ:   Page 356 is the relevant passage.

MR BANNON:   Yes, at point B:

A possible construction of s 2A is that, once it is accepted that the Commonwealth is carrying on a business, the Trade Practices Act applies to all conduct connected in some way with that business.  That is to say, s 2A has the effect that the Commonwealth is deemed to be a corporation, and the limiting expression “in so far as” does no more than place a limitation on the activities which are deemed to be those of the corporation. 

His Honour rejects that, we would submit, not for very persuasive reasons.  His Honour gives an example at C to D as to why that would be so.  I suppose to the extent that the statement of principle ‑ ‑ ‑

GUMMOW J:   Counsel for the applicant is putting the argument.  He might have known what he was talking about, too.

MR BANNON:   Yes, absolutely.

GUMMOW J:   Here on the authorship of section 2A. 

MR BANNON:   He is flushed with the apparent revival of Gates v City Mutual, as a result of a recent decision of this Court.  Perhaps the only criticism of the statement of that principle in B is the use of the words “in any way connected”.  If the statement was “in the course of” or “in relation to” or “for the purposes of” then that would not offend in any way at all.  But in any event, when his Honour comes down to point E:

I consider that that expression signifies that the Commonwealth is to be bound only where the conduct complained of is engaged in, in the course of carrying on the business. 

That is a test which happily accommodates our position here.  But his Honour there was then having to deal with this situation of what his Honour regarded as the difficulty of a decision and implementation of a decision to end the business as not being in the course of the business.  As I say, minds might radically differ as to whether or not that is a correct application by his Honour of his Honour’s own statement of principle.

GUMMOW J:   Where is the actual passage where his Honour decided the particular case that he had before him?

MR BANNON:   At B, on page 357.

McHUGH ACJ:   Well it is at E, is it not, 356 E, “I consider that that expression signifies”?

MR BANNON:   That is the statement of principle.

McHUGH ACJ:   Yes.

MR BANNON:   But that statement of principle on its own ‑ ‑ ‑

GUMMOW J:   It does not get you far without a concrete example.

MR BANNON:   Yes, I suppose that is right.  But his Honour goes to apply that, to say it at point B, on 357 in the case, where it is accepted that the government was carrying on a government printing business.  A decision to sell it is a one‑off decision and coming at the end of the business is not in the course of the business. 

GUMMOW J:   It is in the course of ending a business ‑ ‑ ‑

MR BANNON:   Yes, that is why I say that the statement of principle to say that the requirement to be in the course of the business does not really offend us.  The application of it might leave one to think differently.

McHUGH ACJ:   Now, what do you say about government‑run institutions that charge fees for services?  Take schools, universities, hospitals.  How do they fit in?  Does the Trade Practices Act apply to them, or do you characterise the enterprise in some way that takes them out of business?  What do you say about that class of case?

MR BANNON:   If they are carrying on a commercial business, the fact that they may also have an activity in there which might be regarded as, not a business function but some sort of government‑type activity ‑ ‑ ‑

McHUGH ACJ:   Well, take a university which may be charging $20,000 or $30,000 a year in fees.  Does the Act apply to them?

MR BANNON:   I would have thought so.  It competes with institutions all around Australia.

McHUGH ACJ:   It competes with Bond University, I suppose.

MR BANNON:   Absolutely.

GUMMOW J:   They are encouraged to compete for fee‑paying students, are they not, these days?

MR BANNON:   Absolutely.  It might have been a bit different when it was all free, but now that they charge – and, I think, perhaps it is a matter of record, one sees that steps seem to be taken to attract and charge more to certain students who can apparently afford it.

McHUGH ACJ:   This must apply to hospitals?

MR BANNON:   It would apply to hospitals as well.

McHUGH ACJ:   Schools?

MR BANNON:   Yes.  The second reading speech of 2B, which I am going to go to, recognises that it would.  It says, in effect, you can ring fence it ‑ ‑ ‑

McHUGH ACJ:   I just had some recollection that the Ministers thought they were outside of it.  I have not read it for some time.

MR BANNON:   Yes.

CALLINAN J:   Mr Bannon, what about the other functions of the Authority under section 14, which include evaluation of needs and the control and supply of electricity?  Now, that is an appropriate State or Territory function.

MR BANNON:   Yes.

CALLINAN J:   Purchasing and selling electricity may be no more than an aspect of the control of the supply of electricity and the furtherance of the other conventional State activities of a generating authority for which section 14 makes provision.

MR BANNON:   It is undoubtedly true that PAWA has some functions which would not be described as business functions.

CALLINAN J:   I understand that.  What I am really querying – and I do not know the answer to it at this stage – is how you can divorce and treat as discrete any one function of the Authority.

MR BANNON:   I think the answer partly lies in the express covering by the legislature of government businesses, which, if one took a very broad view, one could conclude the very fact that a government in exercise of its powers – peace, good government and welfare – has deemed it appropriate to engage in a business or set up an authority, is in some way or another endeavouring to serve a wider government purpose.

CALLINAN J:   You may not be able to answer this and it may not even be relevant because it is a factual matter.  Was there any evidence about whether this Authority qualified for competition dividends, for example, or sought to obtain competition dividends?

MR BANNON:   Is your Honour referring to payments under the Competition Principles Agreement?

CALLINAN J:   Yes, that is the shorthand term, is it not, competition dividends?  Am I wrong about that?

MR BANNON:   It may well be – I am not sure myself, your Honour, but certainly the Territory, as a party to the Competition Principles Agreement, needed to follow certain timetables in order to receive grants under that.

CALLINAN J:   Is there evidence of that matter anywhere in these 13 volumes?

MR BANNON:   There may be some, but it would be ‑ ‑ ‑

CALLINAN J:   It may throw some light upon what they were doing, and it may throw some light upon the way in which the Authority Act ‑ ‑ ‑

MR BANNON:   I do propose to go to the Competition Principles Agreement to show your Honour there were certain things which were required to be done.

CALLINAN J:   Was there evidence whether the Authority did them?

MR BANNON:   Yes – at least, the government was proposing to do certain things.  One of the things which recent legislation, which is now in, did was to remove the regulatory functions from the Authority and make it a pure business.  That was in fulfilment of one of the obligations under the Competition Principles Agreement.  When I say “obligations”, if you wanted to keep your money that you got from the Federal Government, you had to follow the guidelines in the Competition Principles Agreement.

CALLINAN J:   This may have been touched upon in that water pollution case where the water authority, the irrigation authority, was ‑ ‑ ‑

KIRBY J:   Puntoriero, was it not?

CALLINAN J:   I am not too sure that there was not some reference to this sort of situation there, and to the so‑called corporatisation of government authorities and their undertaking of activities on a commercial‑type basis.

MR BANNON:   Yes, I will look at that over lunch, your Honour.  We rely on the factual findings that, his Honour said, they were not exercising any regulatory function.  They were carrying on a business.  One has to give sense to section 2B in the light of the reason it was brought in, and one cannot say it does not apply simply because one can infer that, in doing the business they were doing generally, it helped the government.

CALLINAN J:   I do not know whether that factual finding is an entirely clearly, exclusively, factual finding, is it?  It is a mixed question of law and fact.

MR BANNON:   I accept that there is a potential for that, yes.

CALLINAN J:   There may be, I do not know.

MR BANNON:   As your Honour Justice Gummow mentioned a moment ago, the starting point is section 2A of the Act.  In relation to that, can I refer your Honours to the decision in Bass v Permanent Trustee (1999) 198 CLR 344 at 354. At paragraph 23 in the joint judgment, there was discussion looking at various provisions of the Act to determine whether the intention was it would apply to the State of New South Wales, the Court having been invited, notwithstanding Bradken, to consider that question.  In paragraph 23, it said:

The conclusion that the word “person” in ss 6(3) and 75B(1) –

which deals with accessorial liability –

does not extend to the Commonwealth body politic, of itself, tells strongly against its extending to the bodies politic constituted by the States.  Of greater significance, however, is the consideration that if the word “person” did extend to a State, the Act’s application would not be confined, as it is in the case of the Commonwealth, to its business activities –

McHUGH ACJ:   We are starting to slow down a bit in this case.  You still have a fair way to go, have you not?

MR OSLINGTON:   Yes.  I was trying to finish addressing on the PAWA Act.  Could I ask your Honours to go to the 1994 Act, which contains the amendments to, in particular, sections 5 and 6.  Section 5:

The Authority shall consist of the Chief Executive Officer.

For relevant purposes, that was Mr Gardner.  Section 6:

(1)  The powers and functions of the Authority under this or any other Act shall be exercised and performed by the Chief Executive Officer.

(2)  Any act, matter or thing done in the name of, or on behalf of, the Authority under this or any other Act by the Chief Executive Officer, or with the authority of the Chief Executive Officer, shall be deemed to have been done by the Authority.

That makes it clear that the Chief Executive Officer has the power to exercise and carry out the functions in section 14 and that PAWA shall consist of the Chief Executive Officer.  Superimposed on that are directions given under section 16.  In our submission, for the reasons I will not repeat, once the section 16 has validly been given to defer access to PAWA, namely, Mr Gardner, he had no relevant purpose – he had no function to perform other than to comply with the section 16 direction.

CALLINAN J:   Mr Oslington, it may be one thing to advise the Minister pursuant to 14(1)(h) of the Act and an altogether different to solicit from him or her a direction to do something that the Authority has already decided it wants to do.

MR OSLINGTON:   In making that recommendation, the CEO was performing ‑ ‑ ‑

CALLINAN J:   Do you say he was acting under section 14(1)(h)?

MR OSLINGTON:   Yes, your Honour.

CALLINAN J:   Was he doing that or was he soliciting a direction?

MR OSLINGTON:   No, he was making a recommendation in the light of the advice received from Merrill Lynch.  It was Merrill Lynch who gave the advice to defer access.  The recommendation referred to the ‑ ‑ ‑

CALLINAN J:   Yes, but Merrill Lynch does not make the decision.  The Chief Executive makes a decision to adopt wholly or in part the advice of Merrill Lynch.  Merrill Lynch does not determine what the Authority is to do.

MR OSLINGTON:   But the Chief Executive took on board the Merrill Lynch advice in performing his function under section 14(1)(h) in giving the advice, by way of recommendation, to defer access.  It was then up to the Minister whether or not he should accept that advice.

CALLINAN J:   Was the Authority obliged under the Act to seek advice or to seek the Minister’s opinion or directions before it decided whether to give access or not?  Was it a decision that could have been made without reference to the Minister at all?

MR OSLINGTON:   The references to Mr Gardner’s evidence which I will supply tomorrow will make it clear that Mr Gardner in 1998 regarded the question of access or no access as being one for the government to make.

CALLINAN J:   It is not, with respect, an answer to my question.  My question is whether, as a matter of law, this decision could have been made by the Executive, that is, by the Authority, without reference to the Minister at all?  Is there any lawful impediment to the Authority doing that?

MR OSLINGTON:   Absent a section 16 direction, there would not seem to be, your Honour.

CALLINAN J:   What determines whether the Authority should or should not seek the concurrence of the Minister to a step or a course which it may lawfully undertake itself?

MR OSLINGTON:   That would be a matter for the CEO to make in the circumstances of any particular decision he needed to make and Mr Gardner’s evidence makes it clear that he, being conscious of the potential impact of the Competition Principles Agreement and the government’s ‑ ‑ ‑

CALLINAN J:   Political sensitivities.

MR OSLINGTON:   No, it was in recognition that the Minister could give directions and in recognition by Mr Gardner that the government regarded that matter as of importance.

CALLINAN J:   But the Minister can act independently of any advice or recommendation at all.

MR OSLINGTON:   He can, your Honour.

CALLINAN J:   The Minister could have intervened and said, “No matter what view the Authority had formed about access, you are not to give access”.

KIRBY J:   He could not do that contrary to the law of the Northern Territory.

MR OSLINGTON:   No.

CALLINAN J:   What law of the Northern Territory would it infringe?

MR OSLINGTON:   We would submit it would not, your Honour.

KIRBY J:   Did not the legislation that had been adopted in the Northern Territory in relation to the competition policy bind the Minister?

MR OSLINGTON:   Define the Minister?

HEYDON J:   Bind.

MR OSLINGTON:   Bind the Minister.

KIRBY J:   It bound everybody, it was part of the law.

MR OSLINGTON:   Even assuming it bound the Minister, the Minister would not, in giving the direction, contravene section 46, with respect.

HEYDON J:   Might that be a secondary violation?  You say no, because there is no primary offender. 

MR OSLINGTON:   That is so, your Honour.  Of course, that kind of case was never put.  A suggestion was made that perhaps liability might attach through Mr Gardner making a recommendation, but, again, that sort of case was not put.  The case was that PAWA had the relevant purpose, and the ponit I am seeking to make, with reference to the PAWA Act and with reference to his Honour’s finding about the direction, is that PAWA can have no purpose other than to comply with the direction.

McHUGH ACJ:   Now, how are you going for time?  How much longer are you going to take, Mr Oslington?

MR OSLINGTON:   I would hope to finish by lunch tomorrow.

McHUGH ACJ:   What about you, Mr Bannon?

MR BANNON:   Very briefly in reply on business ‑ ‑ ‑

GUMMOW J:   We have not heard you on a fair amount of this.

MR BANNON:   No, that is right.  I would not think I would be much less than two hours, if at all.

McHUGH ACJ:   Well, I think we will sit at 10.00 tomorrow.  It is just possible there might be some delay.  Three of us have to sit at 9 o’clock tomorrow morning to hear an application.  You had two days allotted for this case and I want the case to finish within the two days, so I want the parties, including the intervenors, to agree on a timetable.  If you cannot, we will agree for you.

KIRBY J:   The Acting Chief Justice made it clear on the special leave that you would not have three days.  I think that was asked and you were told you could have two.

MR BANNON:   Yes, I appreciate that.  I would be confident that I could address the notices of contention issue relatively succinctly.

McHUGH ACJ:   We will adjourn until 10 o’clock tomorrow.

AT 4.16 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 10 MARCH 2004