Sita Qld Pty Ltd v State of Queensland

[2000] FCA 1616

FEDERAL COURT OF AUSTRALIA

Sita Qld Pty Ltd v State of Queensland [2000] FCA 1616

CONTRACT – formation – whether contract for provision of a subsidy – written oral and implied terms alleged – authority of Minister of the Crown to enter into contract – damages – quantum if contract in existence

Transport Operations (Passenger Transport) Act 1994 (Qld), ss 36, 39, 42, 49, 62, 143B
State Transport Act 1960 (Qld)
Government Owned Corporations Act 1993 (Qld)
Queensland Competition Authority Act 1997 (Qld)

SITA QUEENSLAND PTY LTD (ACN 070 097 219) v STATE OF QUEENSLAND

QG 95 OF 1998

DOWSETT J
13 NOVEMBER 2000
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 95 OF 1998

BETWEEN:	SITA QUEENSLAND PTY LTD (ACN 070 097 219) APPLICANT
AND:	STATE OF QUEENSLAND RESPONDENT
JUDGE:	DOWSETT J
DATE OF ORDER:	13 NOVEMBER 2000
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1.        The application be dismissed.

2.        Damages be fixed at $4,896,214.60

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 95 OF 1998

BETWEEN:	SITA QUEENSLAND PTY LTD (ACN 070 097 219) APPLICANT
AND:	STATE OF QUEENSLAND RESPONDENT

JUDGE:	DOWSETT J
DATE:	13 NOVEMBER 2000
PLACE:	BRISBANE

REASONS FOR JUDGMENT

GENERAL BACKGROUND

1. The applicant sues the respondent for damages for breach of contract.  For present purposes, references to the “respondent” include the Queensland Government, the Department of Transport and Queensland Rail.  For many years, the applicant and other companies through which it claims have operated passenger bus services between Brisbane and the Gold Coast.  The respondent has, from time to time, regulated these services.  Prior to 20 December 1997 the applicant and the respondent were engaged in disputes and/or negotiations concerning the applicant’s operations and associated matters.  One matter in dispute was the validity of certain steps taken by the respondent pursuant to the Transport Operations (Passenger Transport) Act 1994 (Qld) (the “TOPT Act”) and the effects of those steps on the applicant’s business. The second area of difference concerned the level of fares charged by Queensland Rail for passenger services between Brisbane and the Gold Coast. The third area of dispute concerned bus services between Brisbane Airport and the Brisbane Central Business District (“CBD”) and Brisbane Airport and the Gold Coast.

2. On 20 December 1997, Mr Cosimo Sita, a representative of the applicant, met with Mr Vaughan Johnson who was then Minister for Transport in the Queensland Government.  The applicant alleges that at that meeting, agreement was reached, compromising the applicant’s various claims against the respondent in consideration of the respondent agreeing to provide certain commercial incentives to the applicant.  The respondent denies the agreement and pleads that Mr Johnson had no authority to enter into such an agreement.  I will return to these matters at a later stage. 

3. It is necessary, in order to understand much of the evidence in this case, to be aware of the geography of that part of south-east Queensland which lies between Brisbane Airport and the border between Queensland and New South Wales and the history of pubic transport in that area.  Some of what follows may reflect judicial knowledge rather than the evidence, but all of it was assumed in the conduct of the trial.  None of it is likely to be controversial.  Distances should be taken as indicative only.

4. The city of Brisbane lies on the east coast of Australia about 100 kilometres north of the Queensland/New South Wales border.  The Brisbane River flows through the city from west to east.  Brisbane Airport lies in the eastern part of the city and north of the river.  The Brisbane CBD lies west-south-west of the airport.  Immediately to the south of Brisbane is another local government area, Logan City, which is a relatively new residential area containing some industry.  Running along the coast from a point about seventy kilometres south of Brisbane to the Queensland/New South Wales border is a concentrated strip of commercial and residential development constituting the beach resort and local government area known as the city of Gold Coast.  Although this area developed as a beach resort for residents of Brisbane, it has become a national and international resort.  It is relatively close to Brisbane, and therefore to Brisbane Airport (which is both an international and a domestic airport).  Many holiday-makers pass through that airport on their way to the Gold Coast.  Others pass through Coolangatta Airport which is situated at the extreme southern end of the Gold Coast.

5. The road from Brisbane enters the Gold Coast at its northern end and runs more or less parallel to, and close to the coast until it reaches Coolangatta on the border.  The road, of course, continues over the border and through Tweed Heads, a New South Wales beach resort which is, in effect, an extension of the Gold Coast.  This was once the route of the main north-south coastal highway.  As the area developed as a tourist resort and residential area, shopping and entertainment areas were built along this road, leading to substantial congestion.  The combination of local traffic with “through traffic” from and to Brisbane became so great that the highway was re-located so as to by-pass the Gold Coast to the west, away from the resort areas which are naturally located close to the coast.  This by-pass is part of the Pacific Highway which is the main coastal route between Brisbane and Sydney.  Residential areas have also developed to the west of the traditional resort areas.

6. Many years ago there was a railway line from Brisbane to Southport, a commercial centre situated at the northern end of the Gold Coast.  The line then continued to Coolangatta, passing well to the west of most of the resort areas.  For one reason or another, the rail service was discontinued and the line and permanent way removed.  At some stage, possibly in the late 1980s, the respondent determined that it was appropriate to reinstate the rail service, and a new line was constructed following a somewhat different route.  In February 1996, rail services commenced between Brisbane and Helensvale, which lies at the northern end of the Gold Coast, but some kilometres inland from the coast.  (See ex 6.)  The line was subsequently extended to Nerang, an old township to the west of the Gold Coast and about one-third of the way between the northern end of that city and the border.  It was later extended to Robina, which is about half-way between the northern end of the city and the border, and also well to the west.  Prior to the opening of the new railway line, public transport between Brisbane and the Gold Coast was by bus.  With the exception of the new railway line, bus travel is the only form of public transport within the Gold Coast.  That railway line and the Pacific Highway both run through Logan City which is also served by local buses and by buses plying between Brisbane and the Gold Coast.

7. This case concerns the provision of the following bus services:

   ·from Brisbane Airport to Brisbane CBD;

   ·from Brisbane Airport to the Gold Coast;

   ·from Brisbane CBD to the Gold Coast;

   ·from Brisbane to Logan City;

   ·within Logan City; and

   ·within the Gold Coast.

8. I should say by way of explanation that road traffic between Brisbane Airport and the Gold Coast does not usually pass through Brisbane CBD.  Such traffic rather travels over the Gateway Bridge which crosses the Brisbane River from a point quite close to Brisbane Airport on the north bank, but well to the east of Brisbane CBD.  From the southern end of the bridge, a road carries traffic to the Pacific Highway, joining it just south of Brisbane and towards the northern end of Logan City.  For some years now, the highway has been undergoing substantial upgrading.

   TOPT ACT DISPUTE

9. On 7 November 1994 the relevant provisions of the TOPT Act came into force. Prior to that date the provision of passenger bus services within Queensland was regulated pursuant to the State Transport Act 1960 (Qld) (the “Transport Act”) which provided for the issue of licences authorizing the conduct of such services on nominated routes or in prescribed areas. Prior to 7 November 1994 a licence described as “PSL 121” authorized a company called Coachtrans Australia Pty Ltd to conduct scheduled passenger services between Brisbane and the Gold Coast. Another licence, “PSL 146”, authorized a company called Harlingdale Pty Ltd to conduct similar services. The services followed the route of the old highway, entering the Gold Coast at its northern end near to the Biggera Waters Caravan Park and proceeding through the various coastal centres to Coolangatta and into New South Wales. The applicant claimed that these licences had authorized the relevant companies to pick up and set down passengers at various intermediate points, including points within Logan City and the Gold Coast and that after 7 November 1994, services of the kind previously operated pursuant thereto were no longer regulated. In other words, no licence was required for such operation. From 7 November 1994 until 2 October 1995, as it is said, Coachtrans and Harlingdale continued to operate those services in the same way as they had prior to 7 November 1994. On or about 2 October 1995 the applicant acquired the businesses of both Coachtrans and Harlingdale and thereafter operated these services. On 31 October 1995 the relevant government agency purported to transfer PSL 121 and PSL 146 to the applicant although it now seems that these licences no longer had any effect. The applicant has continued to use the name “Coachtrans”. In these reasons, that name is used from time to time to describe the applicant.

10. Section s 42 of the TOPT Act authorizes the chief executive of the Department of Transport to declare that within a particular area, or on a particular route, a bus service may only be provided pursuant to a contract entered into with the Queensland Government. Various criteria are prescribed for the consideration of the chief executive in making such a decision. The purpose of the section appears to be to exclude competition in order to facilitate the provision of bus services which might otherwise be uneconomical. On 9 November 1994 an appropriate declaration was made for the Gold Coast area (the “Gold Coast service contract area”) which included Oxenford, Helensvale and the area from the Biggera Waters Caravan Park south to Coolangatta. On the same day a declaration was made for Logan City (the “Logan service contract area”) which included Springwood, the Logan Hyperdome and Beenleigh. The applicant asserted that both declarations were invalid. For reasons which may have been connected with the applicant’s assertion, the relevant regulations were amended on 24 April 1997. On 2 June 1997 new declarations were made, requiring that any long-distance scheduled passenger service which involved the carriage of passengers:

    ·between points within the Gold Coast service contract area,

    ·between points within the Logan service contract area, and

    ·between any point within the Logan service contract area and Brisbane,

    be performed only pursuant to a service contract.  On 4 June 1997 a further declaration was made to the effect that a service contract was required for any part of a long-distance scheduled passenger bus service between the Logan service contract area and the Brisbane Central Traffic Area via specified routes.  The applicant alleged that these amended regulations and declarations were also invalid.  Alternatively, it alleged that if valid, the various declarations prevented it from providing services which had been lawfully provided by Coachtrans and Harlingdale prior to the acquisition of their businesses by the applicant and by the applicant thereafter.  It claimed compensation.  Whether that claim was based upon legal or moral considerations is not entirely clear.  No convincing legal basis has been advanced in the course of these proceedings.

11. From the applicant’s point of view, the primary effect of the various declarations was to limit its entitlement to pick up and set down passengers within the Gold Coast and Logan City areas in the course of its services between Brisbane CBD, Brisbane Airport and the Gold Coast.  Pursuant to the relevant declaration, the Gold Coast service contract area extended north as far as a line between Helensvale and Oxenford, a township some distance north of Helensvale.  It seems that under the previous legislation the northern end of the Gold Coast for roughly similar purposes had been the Biggera Waters Caravan Park, situated to the east of Helensvale, and very near to the coast.  There was no dispute as to the applicant’s right, when travelling south, to continue to set down passengers at points south of the Helensvale - Oxenford line, provided it had picked them up north of that line.  Similarly, when travelling north, it could pick up passengers south of that line, but could only set them down north of it.  The position may have been more complicated where passengers were picked up or set down in New South Wales, but that is not presently relevant.  The applicant claimed to be entitled to unrestricted pick up and set down between Biggera Waters Caravan Park and the Helensvale - Oxenford line.  The basis of this claim is unclear.  It appears to have been based upon historical practice.  Surfside Bus Lines (the Gold Coast contractor) and the Department of Transport asserted that the declaration had the effect of moving the relevant boundary to the Helensvale - Oxenford line.  The dispute appears to have become more important after the rail service to Helensvale commenced in February 1996, no doubt because of the volume of passenger traffic travelling to and from the Helensvale rail terminus to connect with the rail service.  The Logan City dispute was, to some extent, similar in nature.  The applicant claimed to have been historically entitled to pick up and set down in the Logan service contract area, using buses plying between Brisbane and the Gold Coast.  The respondent eventually asserted that it was no longer entitled to do so.  In both cases, the applicant sought compensation from the respondent.

    RAIL FARES DISPUTE

12. Since February 1996 the applicant has been faced with competition from the re-established rail service between Brisbane and the Gold Coast.  For whatever reason the Queensland Government has chosen to subsidize that service with the result that its fares are very competitive with bus fares.  The evidence suggests that the rail fares have been set on the same basis as applies to rail fares within the Brisbane metropolitan area.  The applicant considers that it has lost custom and revenue as a result of this competition. 

13. In the early 1990s the Commonwealth and the States reached agreement as to what is known as National Competition Policy.  This led to the enactment of federal and state legislation enshrining aspects of that policy.  In Queensland, the relevant legislation is the Government Owned Corporations Act 1993 (Qld) (the “GOC Act”) and the Queensland Competition Authority Act 1997 (Qld) (the “QCA Act”). These Acts address the subsidization of services provided by government authorities, particularly where competing services are provided by the private sector. As I understand it, there is provision for complaints by such competitors against subsidies, with a mechanism for resolving disputes. It seems that state governments are not bound by the outcome of the dispute resolution process, but the Commonwealth may reduce subventions otherwise payable to a state which fails to meet its obligations pursuant to the inter-governmental agreement. The applicant made a complaint concerning fares on the Brisbane - Gold Coast rail link. The respondent asserted that subsidy of this service was justified by what are called “community service obligations”. This term appears to refer to a perceived obligation on government to provide certain services which would not be provided by private enterprise. (See GOC Act, s 121.) I understand that there has been a determination in favour of the applicant, which the respondent has refused to accept. The next step is for the Commonwealth to determine whether or not to withhold funds otherwise payable to the respondent.

    DISPUTE CONCERING BRISBANE AIRPORT SERVICES

14. The third matter of dispute between the parties concerned the provision of bus services terminating at Brisbane Airport.  That airport is owned by the Commonwealth and is managed either by a Commonwealth authority or by a private operator pursuant to a contract with such an authority.  Obviously, the manager has control over bus access to the airport.  It would not be possible to operate a viable bus service which terminated outside the airport complex as such a terminus would be some kilometres from the airline terminal buildings.  Thus the provision of bus services to and from the airport is not solely within the control of the respondent.  The applicant had entered into an agreement with the airport authority for the provision of services between the airport and Brisbane CBD and the airport and the  Gold Coast.  As I have previously explained, these services operated, for substantial portions of their respective lengths, on two distinct routes.  The applicant tried for some time to persuade the Queensland Government to make declarations which would have had the effect of giving to the applicant the exclusive right to operate bus services on those routes, particularly the Brisbane Airport – Gold Coast route.

    THE DOCUMENTS

15. These disputes are recorded in the agreed bundle of documents which is ex 4.  I will briefly summarize the more important aspects of those documents. 

16. On 2 April 1996 Coachtrans wrote to the Director-General of Queensland Transport. At that time the respondent was seeking to enforce the earlier declarations under the TOPT Act in a way which impinged upon the applicant’s operations. In the letter, Mr Sita, on behalf of the applicant, asserted that the Coachtrans services were not subject to the relevant declarations. The problem of competition from the railway was also raised. There was a reference to previous unsuccessful attempts to obtain “gross fare-based subsidy” from the respondent. He said that the applicant could not provide bus services on an economical basis under the current conditions and that such services might be discontinued. It was suggested that the respondent would want them to continue and that continuation might be conditional upon introduction of a subsidy similar to that being paid in respect of rail fares, construction of a transit lane on the Brisbane – Gold Coast highway to facilitate the passage of buses and various other matters. The Minister (Mr Johnson) acknowledged receipt of the letter on 11 April, indicating that the matter was under consideration.

17. On 10 May Coachtrans wrote again concerning both the validity of the TOPT Act declarations and the level of rail fares. The writer referred to “a number of detailed discussions over these pricing issues with Senior Executives from both (Queensland Rail) and (Queensland Transport).” It was suggested that these representatives had been sympathetic to the Coachtrans position. The letter then proposed a subsidy for Coachtrans services between Brisbane and the Gold Coast, including a retrospective subsidy. A substantial amount of financial information was provided. At this stage, departmental officers were considering the possibility of a subsidy, but on 13 June 1996 they recommended to the Minister that it not be paid.

1. On 3 July 1996 Mr Sita again wrote to the Minister.  Referring to a meeting on 17 June, he asserted that:

   At that meeting, Coachtrans and QT were asked to work together to resolve some apparent discrepancies in financial estimates which would allow you to make a decision on the financial hardship claim being made by Coachtrans.

2. It was then asserted that:

   Since that time, representatives of Coachtrans and QT have worked together to develop a consistent set of financial results which we believe supports the losses claimed in our original submission.  In fact, there has been a consistent decline in the financial outlook for Coachtrans with each ensuing week, since the introduction of the Gold Coast Railway.

3. The departmental recommendation to the Minister dated 13 June had firmly recommended against a subsidy. It asserted that Coachtrans’ estimates disclosed no significant effect as a result of competition with rail. One would have expected that the departmental officers would have told Mr Sita of this recommendation at the meeting on 17 June. If so, he could not have believed that the government had any intention of offering subsidy. His letter would therefore be, at best, disingenuous. It seems that either the departmental officers did not tell him at the meeting on 17 June of the effect of their recommendations or he was not taking “no” for an answer. In the letter, Mr Sita also requested that the respondent make a declaration under the TOPT Act for the Brisbane - Gold Coast corridor, presumably in the expectation that Coachtrans would be awarded an exclusive contract for that route.

4. In the second last paragraph of the letter, Mr Sita wrote:

   In view of the ongoing sustained losses, Coachtrans are requesting that you recommend our subsidy proposal to Cabinet as soon as practicable to ensure the ongoing viability of public transport in this high growth corridor.

5. At p 4 of the letter, it was made clear that the subsidy was to enable Coachtrans to charge the same fare as Queensland Rail was charging.  This suggests that the subsidy would have been of the same order of magnitude as that discussed at the meeting which occurred on 20 December 1997.  The significance of this and of the reference to “Cabinet” will appear in due course.

6. On 13 August 1996 there was a meeting between Mr Sita and Mr Walker, representing Coachtrans and Mr McShea, Executive Director (Public Transport) in the Department of Transport.  Mr Sita was again seeking substantial subsidies “to offset losses incurred as a result of the introduction of rail services to Helensvale at a considerably lower fare structure than that of Coachtrans”.  In a briefing note prepared by Mr McShea following that meeting, he recorded that total revenue delivered by Coachtrans had declined by twenty to twenty-five per cent since the introduction of the Helensvale rail service.  He also noted that it had been pointed out to Mr Sita that, although Queensland Rail fare structures were undoubtedly a relevant factor, other factors had also contributed, including Coachtrans’ decisions to discontinue student discount fares and to increase the number of services between Brisbane and the Gold Coast.  There may be an error in this latter statement.  It is difficult to see how increased levels of service could reduce revenue, although it might reduce profits.  The point is of no present relevance.  Mr McShea advised Mr Sita that the Department was not prepared to support his request for subsidy and invited him to nominate other areas where the Department might be able to assist Coachtrans to continue operations.  A number of other matters were discussed.  It was agreed that there would be a further meeting in about two weeks to discuss progress in connection with those matters.

7. On 14 August 1996 Mr Sita wrote to the Minister, referring to “numerous meetings with QT and QR officers … concerning the matter raised” in the previous correspondence.  He asserted that Queensland Transport officers had “finally acknowledged” that “the vast majority of the $100,000 per month (ie $90,000 plus) revenue losses were attributable to the unfair pricing policy of QR.”  Mr Sita asserted that Coachtrans representatives had nonetheless been told that financial assistance was unlikely and asked the Minister to reconsider the question.  Once again Mr Sita’s version of the meeting as conveyed in his letter of 14 August differed in a significant respect from that of the relevant departmental officer, in this case Mr McShea, as recorded in his briefing note.

8. On 10 October 1996 the Minister and various departmental officers met Mr Sita and Messrs Turner and Walker who were consultants to Coachtrans.  A note of the meeting appears at pp 37D-G of the agreed bundle.  The Minister said that he had perused the available information and that although he was sympathetic to Coachtrans’ plight, there was no scope for financial compensation.  Various other initiatives were discussed.  The Minister indicated that he had not previously known of some of the matters raised at the meeting and that he wished to consider them.  He also said that if Coachtrans provided him with any information which was incorrect, he would effectively wipe his hands of the matter.  This document appears to have been prepared by somebody on the Coachtrans team.  (See final sentence of par 12.)  It is important to note that at the meeting, the Minister apparently expressed such firm views.

9. On 17 February 1997 a body described as “Queensland Coalition Transport Policy Advisory Committee” made a submission, presumably to the Minister, recommending support of Coachtrans’ position.  The committee’s motivation appears to have been political.  Presumably this was a policy committee established by the National-Liberal Coalition which was then in government, of which government Mr Johnson was a member.  On 16 March 1997 Mr Sita wrote to the Minister, registering his disappointment at the government’s failure to act.  The letter concluded as follows:

   Minister, Coachtrans has been extremely patient considering the time taken for these negotiations and the ongoing losses it has incurred.  The time has come where I have no option but to act.

   As a businessman, I have a responsibility to take action to protect my business.  These actions will take place in the immediate future and include service cuts, staff retrenchments and consolidated legal action.  We will retain the services of a well regarded public relations firm to ensure that the public is fully advised of our plight and the reasons for our actions.

   I regret that this situation has arisen but given the trail of broken commitments, I am left with no option.

10. Clearly, Mr Sita was threatening both legal and political repercussions if his demands were not met.  On 18 March there was another meeting involving the Minister, the Director-General, Mr McShea and Mr Turner, a Coachtrans consultant.  Mr McShea took a minute of this meeting (p 40 of the agreed bundle) in which he recorded that Coachtrans had, for the first time, provided a profit and loss statement.  In the course of the meeting the Minister said that:

    ·it was not sustainable to give special funding to Coachtrans because of the implications for the rest of the state;

    ·it was important that all operators “play the game” in terms of what was expected of them under the TOPT Act;

    ·when Mr Sita purchased Coachtrans he must have been aware of the impact that rail fares would have on the business; and

    ·the Department was still analyzing corridor solutions to improve public transport during the road construction activity.

11. Again, it is relevant to note that the Minister expressed such firm views. The oral evidence suggests that the expression “play the game” related to the continued operation of Coachtrans on the Gold Coast and in Logan, where other companies had contracts pursuant to declarations under the TOPT Act. It seems that the departmental position was that, notwithstanding such contracts, Coachtrans was being permitted to continue to pick up and set down in those areas, provided that such traffic accounted for only a limited proportion of its business and certain fare restrictions were observed. There was some suggestion that these conditions were not being observed. Mr McShea’s minute records that Coachtrans was to calculate the revenue and expenditure figures for two proposed options involving reduced services between Brisbane and the Gold Coast. These figures were to be provided to the Department within the week. There was also to be discussion between Queensland Transport and Queensland Rail “to gauge the likelihood of substituting the late-night train services with buses”. This possibility was being investigated in the expectation that it might benefit both Coachtrans and Queensland Rail.

12. On 27 March the Minister wrote to Mr Sita as follows:

    As I have previously indicated in our discussions, a genuine attempt has been made by Queensland Transport to determine what scope, if any, exists to address the matters you have raised. 

    A number of actions have recently been undertaken to address your concerns and these include the following:

    ·assignment of the two service contracts for Coolangatta Airport to your company;

    ·commenced discussion with you to develop a service contract for the Brisbane Airports;

    ·commenced action to develop government funded contract for the Coomera area;

    ·commenced discussion with Main Roads Department regarding the provision of bus only lanes during the Pacific Highway 8 laning construction.

    You would also be aware that Queensland Rail have recently issued a new timetable and fare structure.

    However, I regret to inform you that it is not possible to accommodate all of your requests especially in relation to additional funding whether by way of direct subsidy, fares equalisation or a one off compensation payment for revenue lost by your company.  I understand that as a commercial entity it is incumbent upon you to operate at a level of service that will allow you to remain financially viable.

    As you are aware Queensland Transport is currently considering regulatory amendments which would prevent long distance bus operators from picking up and setting down passengers within declared service contract areas or over declared routes.  I have asked my Executive Director (Public Transport), Mr McShea to meet with you in the near future to explain proposed regulatory changes which may affect your company. 

13. On 2 May Mr McShea sent a memorandum to the Minister concerning the ongoing Coachtrans dispute, including this summary:

    ·Sita Queensland bought Coachtrans in October 1995 in the full knowledge that the Gold Coast rail services would commence early in 1996.

    ·It has failed to put forward any convincing arguments to the effect that the impact of the rail services was:

    (i)          greater than what might reasonably have been expected, or

    (ii)in some way due to unfair or unlawful behaviour on behalf of QR.

    ·It has also been unable to put forward any compelling public interest case to support its request for financial assistance.

    ·While Coachtrans as a business has been devalued by the commencement of the Gold Coast rail services, presumably this would have been reflected in the price paid by Sita Queensland.

    ·Finally, your letter of 27 March 1997 is by way of confirmation of the advice that I first gave to Mr Cos Sita at a meeting on 14 August 1996 that it was the Department’s position that there was no case for any financial support from government.

14. On 2 May the Minister wrote to Mr Sita giving reasons for his decision concerning financial assistance as notified in the letter of 27 March.  At p 5 the Minister said:

    An enormous amount of time and effort by my personal staff and the staff of Queensland Transport and Queensland Rail as well as other government agencies such as Crown Law and Queensland Treasury has been expended on this issue.

    You have known since 14 August 1996 that Queensland Transport’s advice to me was to the effect that there were no grounds to justify the financial assistance you first sought on 10 May 1996.  That it has taken to this point for me to reach a similar conclusion is as a consequence of my personal and genuine efforts to ensure that no stone by which my government might have been able to assist your company has been left unturned.

    I assume as a consequence of my advice to you there will be a need for you to review the services provided on the Brisbane-Gold Coast corridor and perhaps elsewhere to permit your company to remain viable in the longer term. 

    In this regard, I have asked officers of Queensland Transport to make themselves available to assist you in providing information to the public on any proposed changes.  In the first instance contact should be made with Mr Allan Parsons.

15. On 17 April Mr Sita had written to Mr Johnson complaining of the proposed new regulations and on 23 June, Mr Parsons and Mr McShea met with Mr Sita concerning a claim for compensation in connection therewith.  Mr McShea prepared a note of the meeting which is at pp 60AA-60BB of the agreed bundle.  The departmental officers told Mr Sita that they had advice that there was no legal obligation to pay compensation, but that they were prepared to recommend a “one-off” payment for loss of traffic rights which Coachtrans had historically enjoyed in the Logan area.  Mr McShea recorded that:

    I asked Mr Sita that he consider this proposal and that the range of assistance would be between $112,000 and $360,000.  I also informed him that even though the Minister could recommend options to Cabinet, any submission would be scrutinised by all other departments including Treasury and as such could be opposed or amended.

16. The reference to a recommendation to Cabinet is of some importance for reasons which will appear hereafter.  Mr McShea also recorded that:

    We advised him that if we couldn’t reach agreement then he would have to continue to pursue his separate ways as it would not be possible for us to logically support alternative scenarios.

17. The note of the meeting recorded that Mr Sita was anxious to have a contract for the Brisbane Airport - Gold Coast route because the Federal Airports Corporation had complained about his cutting late-night services.  He complained that competition from other operators in peak hours was rendering his own services less viable.  The departmental officers agreed to a meeting with him and the airport authority.  Mr Sita also referred to the “Brisbane Airport contract”.  This may have concerned transport between Brisbane Airport and Brisbane CBD.  They also discussed local operations within the Gold Coast area, including to and from Coolangatta Airport. 

18. On 4 July, Mr Peter McCall, a public relations consultant for Coachtrans, wrote to Mike Stapleton (a senior policy adviser to the Minister), suggesting that the Logan City compensation claim be resolved by reference to an independent third party.  The Minister replied on 9 July, saying that the proposal was “worthy of consideration”.  He suggested that Coachtrans might like to contact Mr McShea with a view to:

    ·selection of a mutually acceptable arbiter from one of the major accounting firms; and

    ·development of a brief acceptable to both parties.

19. The letter then continued:

    Following resolution of the above to the satisfaction of both parties, and written confirmation from your client of his acceptance of the process, I will give serious consideration to your proposal.

20. On 18 July there was a further meeting between representatives of the Department and Coachtrans, the outcome of which was unsatisfactory to the latter. Mr McCall again wrote to the Minister on 29 July, complaining about the attitude of the departmental representatives. He also indicated that Coachtrans had received advice that the pricing policy adopted by Queensland Rail breached the principles of competitive neutrality prescribed by the GOC Act and/or the QCA Act and that Coachtrans intended to raise the matter with the appropriate authorities. Mr McCall then continued:

    In view of the above, there is an urgent need to resolve these same, long outstanding issues.  I am informed by my client and QT that both have strong legal cases, for the issues of Helensvale, Logan City and the QR pricing issue.

    Irrespective of the outcome of any legal challenge, it is highly unlikely that the government would escape without serious damage to its credibility as the transport regulator, this is in addition to the legal costs and manpower resources which could be better utilised elsewhere for the public benefit.

    As QT have already indicated a desire for my client to withdraw from its judicial review action in relation to Helensvale, I think it is about time that some serious negotiations occurred to finalise outstanding matters.

    Such matters include:-

    1.Payment of a reasonable level of compensation in relation to Helensvale and Logan City, which we are happy to have determined by an independent arbiter using sound commercial principles. 

    2.Issue of an exclusive contract for the Airporter Service between the Brisbane Airport and the Gold Coast (with no subsidy applicable).  It should be noted that the Brisbane Airport Corporation Ltd are currently writing to QT seeking the implementation of a wide coverage of services and standards which will necessitate the issuing of such an exclusive contract.

    3.Issue of a contract for route services between Brisbane and Coolangatta with subsidy applicable to a competitive neutral position in relation to QR.

    4.Finalisation of the Skytrans contract between the Brisbane CBD and the airport.  

21. Again the applicant was threatening both legal and political action to achieve its aims.  On or about 3 November, Mr McShea sent a memorandum to the Minister referring to a series of meetings with Coachtrans and its representatives concerning the following issues:

    ·Brisbane Airport services;

    ·Gold Coast – Brisbane long distance service;

    ·Brisbane Airport to Gold Coast services;

    ·rail competition and NCP issues;

    ·“compensation” for loss of business at Logan and Helensvale as the result of regulatory changes; and

    ·“compensation” claims in relation to awarding of the Gold Coast urban contract (through judicial review application).

22. It stated:

    Although the first 4 issues are not resolved negotiations are continuing between QT and Coachtrans on issues (1) to (3) and in relation to (4) Coachtrans has lodged a submission with the Queensland Competition Authority.

    In relation to (5) and (6) it has always been the contention of the Department and its legal advisers that the Department had no legal grounds or liability to compensate Coachtrans in relation to either of these issues.  However, these matters continue to be strongly pursued by Coachtrans. 

23. The memorandum concluded with a recommendation that the Department retain an independent valuer to advise it as to the value of any business which Coachtrans may have lost as the result of regulatory changes, such information to be used by the Department in its future dealings with Coachtrans.  

24. On 26 November 1997 Mr Owen Rankin, the Minister’s chief policy adviser, reported to him the outcome of a meeting between Mr Rankin, Mr McShea, Mr Stapleton and Mr Sita.  At the meeting Mr Sita was told that the Department wished to retain an independent adviser to advise as to the amount of any ex gratia payment to be made in relation to the Logan matter and that Coachtrans would be welcome to provide information to that adviser.  Mr Sita complained about the viability of Coachtrans’ Gold Coast – Brisbane Airport services, claiming that its business was being eroded by small operators who did not have the onerous service obligations which Coachtrans had undertaken.  He asked that the corridor be “closed” to give him greater security.  It was pointed out to him that this would require a public tender process.  Mr Sita said that he would prefer that to the current situation.  He said that Coachtrans had an exclusive contract with the Brisbane Airport Corporation, presumably for the provision of coach services to and from the airport.  The departmental officers suggested that Coachtrans should take the matter up with the airport authority, presumably to seek enforcement of its right to exclusivity at the airport.  Mr Rankin advised the Minister that an exclusive contract for the Gold Coast – Brisbane Airport service could only be awarded if he (the Minister) considered that such a step would achieve certain statutory purposes and that it was unlikely that he could properly form that view.  Further, such a step would put four or five existing operators out of business and prevent new operators from entering the market.  Mr Rankin reported that progress had been made in establishing appropriate arrangements with Coachtrans for the Brisbane Airport – Brisbane CBD service, although Brisbane Transport (presumably Brisbane City Council) was still to be consulted.

1. On 2 September 1997 the Minister wrote to Mr McCall (ex 9), referring to a meeting on 26 August attended by himself, Mr McCall and Mr Sita.  He confirmed the following points of agreement reached at the meeting:

   1.Proposal for possible resolution of the Coachtrans issue in relation to Helensvale and Logan City.

   ·It was agreed that the Helensvale issue should proceed to mediation.  Mr Sita and Mr McShea to advise the respective legal representatives of this preferred course of action.

   ·Once the outcome of mediation is determined, subsequent courses of action can be evaluated.

   2.Issue of exclusive contract for Airport Services (Brisbane Airport and Gold Coast)

   ·Mr McShea advised that the requirement for proceeding with the calling of an exclusive contract would require Ministerial approval under section 36. Due to the nature of the contract public tenders would have to be called.

   ·Mr Sita indicated that he would consider his position and respond accordingly.

   3.Request for subsidy to achieving a competitive neutral position in relation to Queensland Rail on the Gold Coast

   ·In light of letters tabled by Mr Sita from the Queensland Competition Authority at the Audit Commission Implementation Office it was agreed this matter should be progressed as a commercial decision by Coachtrans.

   4.        Finalization of the Skytrain contract

   ·Mr McShea to organize a meeting with Mr Sita, Brisbane Transport and Queensland Transport to confirm final agreement on all conditions of the proposed contract.

   ·Contract to be progressed after this meeting

   ·Contract would be for “walk-up” passengers – in line with other support contracts

2. On 18 September, Mr Sita wrote to Mr McShea concerning the same meeting (ex 10). Concerning services between Brisbane Airport and the Gold Coast, he urged that any tender be a “closed” tender, restricted to those operators presently servicing the route. He indicated that he would prefer that Coachtrans be given the contract without tenders and that, if necessary, the TOPT Act should be amended.

3. This summary of the documentation identifies the state of the matters in dispute between the parties prior to the alleged agreement of 20 December 1997.  It is fair to say that the general tone of the departmental and ministerial correspondence was sympathetic to a degree, but it indicated no inclination to accept the proposal for subsidy of the Brisbane – Gold Coast route.  There was some inclination towards making an ex gratia payment in connection with the Logan and Helensvale matters but no suggestion that the Minister or the Department might grant an exclusive contract for the Brisbane Airport – Gold Coast route without a public tender process.  As at the end of 1997, the applicant’s attempts to invoke the National Competition Policy in support of its complaints concerning subsidized competition from Queensland Rail were only in their embryonic stages.  In a letter of 4 December 1997 from the Minister to the Queensland Competition Authority, the former took a robust stance, urging that any rail subsidy was justified by the government’s community service obligations.  (See pp 70A-B of the agreed bundle.)

   ORAL EVIDENCE

4. It is now appropriate to consider the oral evidence.  I commence with the evidence of Mr Sita.  He was the principal witness called on behalf of the applicant and is a director of that company.  He said that the applicant presently operates bus services between Brisbane and the Gold Coast, Brisbane Airport and the Gold Coast and between Brisbane Airport and Brisbane CBD.  It also operates charter services between Brisbane and the Gold Coast, scheduled services between Coolangatta Airport and accommodation houses on the Gold Coast and tourist services. 

5. In October 1995 the applicant acquired the businesses previously conducted by Coachtrans Australia Pty Ltd and Harlingdale Australia Pty Ltd.  It continues to use the name, Coachtrans Australia.  Other business names include Get-Around Gold Coast and Get-Around Brisbane.  They have depots at Brisbane Airport, Coomera (which is partly-owned by Mr Bill Baumann, a witness called by the applicant) and at Tweed Heads.  In due course the applicant received assignments of licenses PSL 146, PSL 121 and PSL 212 as a result of its acquisition of the businesses.  Following the acquisitions the applicant’s service between Brisbane and the Gold Coast included the pick up and set down of passengers between Biggera Waters Caravan Park and the Helensvale - Oxenford line.  It did not otherwise pick up and set down within the Gold Coast service contract area. 

6. After commencement of the rail service to Helensvale in February 1996, there was a complaint that the applicant ought not be picking up or setting down at Helensvale because the government’s contract with Surfside Bus Lines for the Gold Coast service contract area included Helensvale - Oxenford. Eventually, the applicant discontinued the practice of picking up and setting down at Helensvale. In 1996 it commenced proceedings for review of various decisions pursuant to the TOPT Act, including the letting of the contract for the Gold Coast service contract area. These proceedings were eventually dismissed because they had been commenced out of time. As I have previously observed, new regulations and declarations were made in 1997 which also had the effect of so restricting the applicant’s operations. It sought compensation for lost business in the Gold Coast and Logan City areas. Mr Sita said that the applicant negotiated with the respondent for compensation and asserted that they had agreed that the matter be left to independent arbitration. I doubt whether there was any formal agreement to that effect, but it is of no real significance for present purposes.

7. Mr Sita said that when the Helensvale rail service first commenced, the adult fare was $7.00, but numerous concessional and weekend fares were offered at much lower rates.  The applicant’s fares were much higher, perhaps $10 or $11, although it also offered a range of discounted fares.  Mr Sita claimed that as a result of the competitive rail fares, the applicant lost about 30 per cent of its revenue.  He complained to the Transport Department, to the Australian Competition and Consumer Commission and in July 1997, to the Queensland Competition Authority, the complaint being that the rail fares were not “competitively neutral”.

8. Prior to December 1997, the applicant had been entitled to operate inter-terminal shuttles between the domestic and international terminals at Brisbane Airport, between those terminals and Brisbane CBD and between those terminals and the Gold Coast.  Its contract to operate from the airport was an exclusive contract, allowing the applicant to have counters at the international and domestic terminals from which to sell tickets and parking facilities in front of the terminals.  It paid 5 per cent commission to the airport authority as a form of rental.  Prior to 1994 the right to conduct the service between Brisbane Airport and Coolangatta had been regulated under State law.  The applicant or one of its associated companies had held a relevant licence.  He claimed that the licence was closely tied to his agreement with the airport authority.  As a matter of common sense, that may have been the case, but it is clear that neither the applicant nor either of the other companies had any exclusive right to service the route between the airport and Brisbane CBD or that between the airport and the Gold Coast, save to the extent that such service involved airport access.  The evidence indicates that de-regulation had occurred in 1989.  (See ex 41, App 1, p 2.)

9. Mr Sita was concerned that other operators were being allowed to pick up and set down at the airport, a matter over which the Queensland Government had no control.  He feared that this practice had the potential to destroy his service because “it allowed other operators to come in …”, thus depriving Coachtrans of the business at peak hours which it relied upon to subsidize its off-peak services.  Pursuant to the licence agreement with the airport authority, the applicant was obliged to provide services on a twenty-four hour basis to meet major flights.  He said that when the matter was raised with the government prior to December 1997, “they wanted to go ahead and open-tender the service.”  I take this to mean that Mr Sita had sought some sort of monopolistic right with respect to the Brisbane Airport to Gold Coast service and was told that this could only be offered to him if he were the successful bidder after unrestricted public tender.  Mr Sita indicated that he would prefer a closed tender, presumably involving those presently servicing the route.

10. In August 1997 Mr Sita met with Mr Johnson.  They were both attending a conference at Kooralbyn Resort near Beaudesert, south-west of Brisbane.  According to Mr Sita the Minister “wanted to assure me that he had organized a series of meetings to sort out my problems by Christmas.”  He said that the Minister said words to the following effect:

    I apologize that it’s taking so long.  I’ve organized a series of meetings in order to resolve all these issues, including the rail, and your problem in relation to long-distance – we’re looking at increasing the distance from 40 to 150 so all your problems can be resolved by Christmas.

11. There were subsequent meetings between departmental officers and representatives of the applicant and with ministerial staff but, according to Mr Sita, no further progress was made.  He attended one such meeting on 25 November.  Also present were Mr McCall, Mr Walker, Mr Stapleton, Mr Rankin and Mr McShea.  The meeting was concerned primarily with the issue of compensation for Logan and the Gold Coast and the airport issue, involving both the airport - Gold Coast service and that between the airport and Brisbane CBD.  Other operators were offering competition on both routes.  According to Mr Sita, Mr McShea said that he “wanted to go to open public tender”.  Mr Sita said that he was not happy about that proposal.

12. Following the meeting, Mr Sita was upset and went to see Mr Baumann, his local member, at Parliament House.  It is worth noting that the applicant had acquired the Coachtrans and Harlingdale businesses from Mr Baumann or a company in which he had an interest.  Mr Baumann arranged a brief meeting with the Minister.  Mr Sita said that the Minister commenced the meeting by saying that he was sorry for the dramas, that all matters should have been resolved by now and that they had to be fixed.  Mr Sita then complained about the proposed public tender for the airport services.  He said that they had previously discussed the matter and that there was no reason for open tender.  He asserted that all he wanted was a fair go, including an “independent arbitrator”, presumably to decide the Gold Coast and/or Logan compensation issues.  Mr Sita made reference to the level of rail fares and their effect upon his business.  The Minister said that he wanted to wrap up the whole matter by Christmas.  Mr Sita said that there was no point in going back to the bureaucrats and that he needed to speak to him (the Minister).  The Minister said “Yes, that’s exactly what I’m going to do.  I’m going to take control of this matter”.  He asked Mr Baumann to organize a meeting in the next couple of weeks.  Mr Sita said that he felt that the “bureaucrats” would not assist him because “they were fixed in their mind that anything to help Coachtrans was just out of the question.”  He said to the Minister “This situation really could be easily fixed up, and I want to put something to you.  I want to resolve it and get rid of all our dramas, and it wouldn’t cost an arm and a leg.”

13. This latter observation is of some importance in assessing Mr Sita’s credibility because, as will appear subsequently, the proposal which he wished to put to the Minister could not be so described.  It was, in fact, potentially quite expensive for the government, particularly as it, in effect, owned the railway.  It was agreed that the Minister, Mr Sita and Mr Baumann would meet again to discuss the matter further.  Mr Sita was subsequently told by Mr Baumann that the meeting would take place on 20 December at a restaurant at Jacobs Well.  On that day he and Mr Baumann met at the applicant’s Oxenford depot and drove to the restaurant.  Mr Sita went armed with two documents headed respectively “The Solutions” and “Benefits”.  These two documents appear at pp 124 and 125 of the agreed bundle.  They met the Minister outside the restaurant and went inside.  Other matters were discussed over lunch.  After lunch, they turned to matters of business.  I should say that throughout his evidence, Mr Sita seemed to me to have some difficulty in distinguishing between what he had said and what he had thought.  This difficulty was particularly apparent in the evidence which I will now outline.

14. He claims to have said to the Minister:

    I want to put something to you that will – can resolve all of the matters, all of the dramas that we’ve had, and I believe that it will be in the best interests of not only Coachtrans but the government and the public out there in the corridor.  The way to do that was with a kilometre-based contract and I explained to him the concept of a kilometre-based contract and the benefits one – you know, we could achieve by implementing a contract like that, and I also explained to him that we have a similar contract in Melbourne.  We’ve had one for seven years and now just recently over the last eighteen months its been renewed for a further ten years.  I explained to him we operate sixty-five vehicles there and the age of the fleet and all the benefits that go with a kilometre-based contract, and I tried to give an overall picture, your Honour, of how it would work.  You know, the benefits of it and not only does it rid itself of all the problems of any issues with fellow operators and governments and subsidies and all those types of things, but it could introduce integrated ticketing for the first time.

15. Mr Sita was asked to recount his actual conversation with the Minister and continued:

    … it will introduce … integrated ticketing and we haven’t got that not only in the corridor but anywhere else.  We’d have the same ticketing.  We could, you know, help out people that can’t get to the rail, that need access to these cheap fares that are disadvantaging our community.  If we can do it on the bus and get them on the bus and on to rail or straight through, its going to be of benefit and that revenue could go back to the government with a kilometre-based contract so we could achieve those things.  I explained to him that we could … operate the service as well and we’d been talking about with the Minister for some time on rail replacements because the Minister had informed me that – it was an agreed point that, you know, the rail is good but it’s also very costly and at times … buses can take over that role and I gave the example of a woman travelling at night.  …  they feel much more secure … in a coach than they would with the rail because its so big and things like that.  So the two modes can complement each other … and we agreed that they both should.  I believe its in the best interests of the public as well, and it was the way to go.

16. All of this relates to two different aspects of the rail issue, the first being the very competitive fares charged for rail travel, and the second being the possible substitution of bus services for late night rail services.  It is appropriate at this stage that I summarize the “Solutions” and “Benefits” documents.

17. The “Solutions” document dated 20 December 1997 and headed “Commercial-in Confidence” and “Without Prejudice” provided as follows:

    1.        Route Service

    ·5 + 5 renewable contract with Chief Executive, QT under Section 143(B) of the Transport Operations (Passenger Transport) Act 1994 for Brisbane to Gold Coast route Service.

    ·Minister approves the basis on which the financial assistance is provided in accordance with Section 143(B) and instructs the Chief Executive to enter into this arrangement.

    ·Contract at the market rate of $2.60 per kilometre (CIP annual prices).

    ·All revenue can be paid directly to government.

    ·Route service to operate 40 services each way for M-F 30 services each way per day on Sat/Sun/PH.  (To be reviewed in accordance with demand)

    ·Coachtrans to operate low patronage QR services incl. any extension to Coolangatta.

    2.        Airporter (Gold Coast to Brisbane Airports)

    ·A closed tender of existing operators (only) that are providing scheduled passenger service to the Brisbane Airports.

    If the above arrangements are put in place, all current legal actions in relation to JR and financial damages will be dropped.

    (a)       QCA Complaint withdrawn
    (b)       Trade Practices Act action withdrawn
    (c)       Logan City/Hyperdome compensation action withdrawn
    (d)       Helensvale compensation action withdrawn
    (e)       Five other legal actions withdrawn

18. The “Benefits” document was also dated 20 December 1997, headed “Commercial-in Confidence” and “Without Prejudice”.  The identified benefits were:

    ·An integrated transport solution, including ticketing, sales and marketing.

    ·Cost effective option with buses operating lightly loaded QR services (significant savings to govt).

    ·All passengers in the Gold Coast to Brisbane corridor to be “looked after” with improved accessibility and services levels.

    ·Same fares as rail, so all residents of the corridor receive benefits of CSO’s (not just those who have easy access to rail).

    ·Restores equity, competitive neutrality and accountability into the CSO equation.

    ·Able to accommodate future growth in the corridor.

    ·Will complement the direction of the Busway project & can work with Brisbane Transport in the future to assist with peak hour loading problems at Busway stations.

    ·Viewed as a “positive” step towards improving public transport in conjunction with the Pacific Highway up grading in many areas not easily accessible by rail.

    ·Gets more cars off the road as public transport fares become more affordable.

    ·Sita to invest heavily in ‘state of the art’, highly quality coaches (creating local employment growth in Queensland).

    ·Sita to employ more staff locally in the Gold Coast to Brisbane corridor.

    ·All litigation and QCA action by Coachtrans to be dropped immediately and services operated as required by QT.

19. The proposal emerging from both documents appears to have been that the respondent pay to the applicant a rate per kilometre travelled by its buses on the Brisbane - Gold Coast route.  The applicant was to charge passengers the same fares as were being charged by Queensland Rail.  Fares so received would be passed to the government.  In other words, the government would assume the commercial risk inherent in the applicant’s operation between Brisbane and the Gold Coast.  I will return to the details of the solution and its cost at a later stage.  The proposal that the applicant operates forty services each way, Monday to Friday, and thirty services each way, per day on Saturdays, Sundays and Public Holidays might mean that there would be forty services each way in total on the five working days, but in oral evidence, Mr Sita said that his meaning was that there would be forty services each way per day (TS 454 ll 9-12).  This appears to have been the shared view of the parties as to the meaning of the document.

20. The contract price was to be $2.60 per kilometre.  Assuming a one-way trip of 110 kilometres, this would be $286 a trip with 260 services each way per week.  That totals $148,720 ($286 x 260 x 2) per week, or in excess of $7,700,000 per year.  The cost to the government would be reduced by the amount of fares received, but there was no estimate of this amount in the documents nor, as far as the evidence goes, was any figure mentioned at the meeting.  Presumably the equalization of rail and bus fares would result in the transfer of some patronage to the bus service at the expense of Queensland Rail, but that would have been of no benefit to the government.  There was potential for savings to Queensland Rail in the proposed substitution of bus services for under-patronized rail services, but no relevant figures were given in the documentation or referred to in the evidence.

1. Despite Mr Sita’s enthusiasm, I am unable to see any significant commercial benefit to the government in this proposal, apart from the rail - bus substitution issue and the compromise of the applicant’s claims against the government.  As to the former matter, I have said that there was no attempt at the meeting to put a value on it.  As to the second matter, one can only say that at no stage prior to 20 December had the Minister or anybody else on the government side demonstrated any great concern about the applicant’s claims, other than that they were taking up much of the time of the Minister and the Department.  The proposals did not differ significantly from those previously rejected by both the Minister and the Department.  It is the applicant’s case that the Minister accepted this offer without any further investigation or consultation.

2. At some stage on 20 December Mr Sita handed the “Solutions” and “Benefits” documents to the Minister.  According to Mr Sita, the Minister then considered each matter raised in the “Solutions” document and ticked each in turn.  As each point was considered, the Minister indicated that he understood it.  Mr Sita said that he had previously proposed a rate of $2.75 per kilometre, which was the contracting rate used by Brisbane City Council.  He had reduced it to $2.60 because “I didn’t want to put an offer to the Minister that would in any way be seen as high or exorbitant”.  The Minister said, “It’s a fair rate, it’s a good rate.”  Mr Sita pointed out to the Minister that his solution:

   … gets rid of everything, just wipes out everything, whatever has been in dispute, litigations are just gone, so there’s no more dramas whatsoever and not only would it be good for Coachtrans, but it would be good for Clarks (the Logan contractor), Surfside (the Gold Coast contractor), the government, but more importantly, you know, its for the public and it’s all the ways that we are back getting on with our life and operating public passenger services.

   He said that the Minister said something like “Well, that gets rid of everything.”

3. They then considered the “Benefits” document after which, according to Mr Sita, he said:

   Minister, I don’t mind admitting to you I come from a very religious family – fairly religious family – and we said a prayer today, hoping this meeting would go well. 

4. The Minister responded:

   Your prayers are answered.  We’ve got a deal.

5. They shook hands.  The Minister then said:

   Well now you can sleep at night.  Your family can sleep at night.  Your problems are over.

6. He told Mr Sita to contact Ian Andrew, one of his staff, with a view to implementing the proposal from 1 February.  This is somewhat curious as other evidence indicates that Mr Andrew had been kept out of matters concerning the applicant because he had previously had connections with Coachtrans.  Mr Baumann asked the Minister how he would deal with the bureaucrats.  The Minister said “I’ll be telling them what to do”.  There was further general discussion.  As they were leaving, the Minister said:

   Look, your family can sleep now.  Its all resolved.  Forget about it; its all done.  Its over.  Go and sleep.  We’ll have this in by 1 February.

7. Mr Sita denied that the Minister had said that he would have to discuss the matter with his advisers and obtain Cabinet approval for any arrangement concerning a subsidy.  Following the meeting Mr Sita and Mr Turner, a consultant to the applicant, drafted the letter which appears at p 130 of the agreed bundle.  It is dated 20 December 1997.  They also drafted a document described as “Heads of Agreement”, two copies of which appear at pp 126 and 127.  Mr Sita signed both copies.  He then instructed Mr Turner to confer with Mr Andrew on the following Monday morning.

8. On or about 23 December Mr Sita received a letter from the Minister dated 22 December 1997, two versions of which appear at pp 130A and 130B of the agreed bundle.  One is probably the original of a fax and the other, a copy of the letter sent by mail.  Mr Sita’s letter of 20 December had asserted that “agreement” had been reached.  The Minister’s reply of 22 December did not expressly deny any “agreement”, but its terms were inconsistent with a belief that any enforceable agreement had been reached.  I will return to these matters at a later stage.

9. On or about 6 January Mr Sita received a letter from Queensland Transport bearing that date.  This is at p 131 of the agreed bundle.  Mr Sita replied on 13 January.  I will consider this correspondence in more detail after I have summarized the oral evidence.  At p 131F of the bundle there is a hand-written diary note by Mr Sita, dated 21 January 1998, which recorded that Bruce Wilson, the Director-General of the Department of Transport had telephoned him, advising that “Vaughan (Mr Johnson) will write … a letter to me today (-) beyond his authority (-) take the matter in early Feb for Cabinet meeting – $ the issue.”  In February 1998 Mr Sita was informed that Cabinet had declined his proposal.  This was confirmed by letter dated 5 March (p 159 of the agreed bundle), to which Mr Sita replied by letter dated 17 March (pp 161-163 of the agreed bundle). 

10. In cross-examination Mr Sita agreed that for some time prior to the December meeting, Mr Baumann had been lobbying on his behalf in connection with the dispute. He had asked questions of Mr Johnson in Parliament. Mr Sita agreed that prior to acquiring the Coachtrans and Harlingdale businesses, he had known of the TOPT Act, that the contract for the Gold Coast area had been granted to Surfside Bus Lines and that the contract for Logan City had been granted to Clarks. He also knew that the railway was shortly to open. He had always expected a decline in patronage following that event, but the actual loss was greater than he had expected. He had increased the number of route services in anticipation of the rail competition. At one stage, he was offering 118 services in each direction each day. This was later substantially reduced. He agreed that the Department had pointed out to him that the number of services he was offering and the reduction in student concession fares had contributed to his loss of revenue. He thought that the Department had not fairly considered his complaints of lost business.

11. An unsatisfactory (although minor) aspect of Mr Sita’s evidence was his assertion in cross-examination that prior to the construction of the Helensvale railway station, the applicant’s buses had regularly picked up and set down passengers at a point opposite that station.  This seems inherently unlikely in view of the clear evidence, which appears from ex 6 and the respondent’s witnesses, that Helensvale is some distance from the Brisbane – Gold Coast road, perhaps up to a kilometre away.  There would have been no point in such a detour prior to the opening of the railway station with the opportunities which it offered for providing an interchange service.  I thought Mr Sita’s evidence in this regard was deliberately evasive and designed to re-inforce an impression which he was trying to create, that his service had been in its current form for many years.  This matter is of little relevance in the case save to the extent that it may affect my view of Mr Sita’s credibility.

12. There were other problems with his evidence.  In the course of cross-examination Mr Sita asserted that the respondent had offered him $360,000 by way of compromise of the Logan and Helensvale claims.  Mr McShea’s contemporaneous note of a meeting on 23 June 1997 (pp 60AA-AB of the agreed bundle) suggests that there had been mention of a possible range of compensation without any firm offer.  In the course of cross-examination Mr Sita was asked questions concerning an entry in his diary in blue ink for 23 June 1997 apparently referring to the meeting on that day mentioned above.  It said:

    Without prejudice talk.  Allan/Mick.

13. He agreed that this was a reference to Mr Parsons and Mr McShea, both departmental officers.  Thereafter, in green ink, appear the words and figures:

    140-360, (no legal action) go thru – Cabinet
    Cabinet submission.

14. There is a further notation which I cannot read.  Mr McShea’s file note of the meeting (pp 60AA and 60AB of the agreed bundle) referred to discussions concerning a possible one-off payment to the applicant in respect of lost traffic rights in the Logan area.  A figure of $140,000 was mentioned as a relevant “GFR per annum”, presumably “gross fare revenue per annum”.  There was then reference to the figure of $140,000 multiplied by 3.5 years to which was applied a discount rate of 20 per cent, giving a figure of $360,000.  There was also mention of a figure of $112,000, again calculated by reference to the gross fare revenue of $140,000 per annum.  The note recorded that it was suggested to Mr Sita that the range of any offer would probably be between $112,000 and $360,000 and that he would have to sign an indemnity.  Mr McShea recorded that he had said that although the Minister could recommend options to Cabinet, any submission would be scrutinized by all other departments, including Treasury and could be opposed or amended. 

15. It was suggested to Mr Sita that the file note accurately reflected the substance of the meeting.  Mr Sita agreed that the range of $112,000 - $360,000 had been suggested but denied that he was told at that time that the matter would have to go to Cabinet.  He said that he was told this at some later stage and that he then added the notation in green ink.  He claimed that although such communication was at a much later stage, it in some way related to the meeting of 23 June.  This would not explain the presence of the figures 140 – 360 which are also in green ink and appear to relate, in the case of “140” to his gross fare revenue, and in the case of “360” to the maximum figure which might be offered by way of compensation.  He agreed that he was told at some stage prior to the meeting on 20 December that any question of compensation would have to go to Cabinet.  This is a matter of some importance for present purposes. 

16. As with many other aspects of his evidence, I found Mr Sita’s evidence concerning the meeting of 23 June to be most unconvincing.  It had the ring of spontaneous invention about it.  Had he heard at some later stage of the possibility that the matter might have to go to Cabinet, there is no sensible reason for his going back to the note of the earlier meeting and making a notation there.  Further, there would have been no reason to add the figures 140 – 360 at that stage.  It is important to note that as explained by Mr McShea, they did not describe a range (which was $112 - $360,000), but rather the highest figure in the range and a critical figure in the calculation process.  It is more likely that they were his contemporaneous notes of what was being said rather than a subsequent recollection of an “offer” actually made.  I have no hesitation in rejecting Mr Sita’s evidence as to this notation in his diary.  I infer that it was a more or less contemporaneous note of proceedings at the meeting on 23 June.  He also denied being told that he would be required to give an indemnity in exchange for any payment as alleged in the note.  It seems likely that something was said about legal action as the notation “no legal action” appears in his diary.  He said that he also made that entry at a later stage, but I again reject that evidence.  He denied that other entries in Mr McShea’s file note accurately reflected the discussions at the meeting.  It seems most unlikely that Mr McShea would have gone to the trouble of falsifying such a file note, either at the time of the meeting or at any time thereafter.  Mr McShea has given evidence, and I saw no reason to doubt his honesty or reliability.  It is also of some significance that Mr Sita’s note referred to “Cabinet submissions”, suggesting that as early as June 1997, he had been told that any compensation payment would have to be approved by Cabinet as Mr McShea had recorded.

17. A further difficulty arises out of Mr Sita’s evidence concerning the attitude of the Minister to the problems which Coachtrans claimed to be experiencing in connection with the Brisbane Airport - Gold Coast route.  It was put to Mr Sita that the Department had, during 1996 and 1997, consistently indicated that there was nothing which could be done to assist him.  Mr Sita asserted that this was the Executive Director’s position rather than the Minister’s.  It was put to him that the Minister had taken a similar position.  Mr Sita conceded that this may have been the case.  This attempt to distinguish between the Minister’s position and that of the departmental officers was a common motif in Mr Sita’s evidence, but there is little in the evidence to support his view that the Minister was not party to the conduct of his departmental officers.  With the exception of his alleged conduct on 20 December, the Minister appears always to have acted on their advice.  I will return to this matter at a later stage.

18. Mr Sita was cross-examined concerning ex 9, a letter dated 2 September 1997 from Mr Owen Rankin, the Minister’s chief policy adviser, to Mr McCall, the applicant’s public relations consultant. The letter referred to a meeting on 26 August, apparently between Mr Rankin and Mr McShea, representing the respondent, and Mr Sita and Mr McCall representing the applicant. The letter recorded that the claim for compensation in connection with Helensvale and Logan City was to proceed to mediation. As to services between Brisbane Airport and the Gold Coast, Mr McShea advised that an exclusive contract could only be granted pursuant to a declaration by the Minister under the TOPT Act and after a public tender process. Mr Sita said that he would consider his position and respond. According to the letter, the dispute concerning rail fares was left to be determined “as a commercial decision by Coachtrans”, apparently meaning that Coachtrans would be left to enforce such rights as it had under the National Competition Policy legislation. Finally, as to the Skytrain contract, there was to be a meeting with Brisbane Transport to confirm an agreement which had been reached. This letter suggests that at the meeting, most of the matters in dispute had been considered and future steps for resolution identified. In particular, it seems that the Minister’s chief political adviser was satisfied to leave the claim concerning rail subsidy to be resolved by the Queensland Competition Authority.

19. Exhibit 10, a letter of 18 September from Mr Sita to Mr McShea, appears to deal with the same meeting.  In the fourth paragraph Mr Sita says that he had indicated that he would consider his position as to the proposal to call public tenders for the Brisbane Airport - Gold Coast route.  Nonetheless, under cross-examination concerning ex 9, he said that he would not have needed to consider his position.  Mr Sita’s letter of 18 September certainly suggests that Mr Rankin’s letter of 2 September (ex 9) accurately sets out what happened at the meeting.  It is clear from ex 10 that Mr Sita understood that the departmental position was that there would have to be a public tender for any exclusive contract on the Brisbane Airport - Gold Coast service.  Curiously, Mr Sita initially seemed not to recall the meeting of 26 August but eventually accepted that he must have been present.

20. In the course of cross-examination Mr Sita agreed that he had attended a meeting on 30 September 1997 with Messrs McShea, Rankin, Stapleton and Gralton. He agreed that the following accurately records part of the proceedings at that meeting

    In anticipation of a resolution through mediation, the Department would contact Ernst & Young, previously agreed as impartial arbitrators, to alert them to the fact that we may be calling upon them soon to seek their assistance in calculating an ex gratia payment in relation to Logan and/or Helensvale.  At the same meeting Mr McShea indicated that if there were to be any exclusive contract between Brisbane Airport and the Gold Coast the Department’s legal advice was that it should go to public tender to protect operators’ interests as well as ensuring that the process could not be subsequently overturned. 

21. At some stage he was told that an exclusive contract could only be awarded after a determination pursuant to s 36 of the TOPT Act.

22. Mr Sita attended another meeting on 25 November 1997.  The document at pp 67 and 68 of the agreed bundle appears to be a note of that meeting prepared by Mr Rankin.  Mr Sita agreed that at the meeting he was told that the Department intended to engage Ernst & Young to advise concerning a possible ex gratia payment in connection with the Helensvale and Logan matter.  However Mr Sita disagreed with the proposition that he had been told that the matter would be determined by the Minister or Cabinet.  He said that he was pressing for arbitration of the claim.  The question of exclusive rights between Brisbane Airport and the Gold Coast was again raised.  He was told that a public tender process would be necessary.  Mr Sita said that he would rather take that risk “or pack up shop if necessary rather than gradually go broke”.  He agreed that it had been suggested to him that he might like to take the matter up with the airport authority with a view to enforcing the applicant’s exclusive rights under its agreement with that body. 

23. Following this meeting Mr Sita met with the Minister at Parliament House as I have previously explained. Mr Sita agreed that he was aware that before any declaration could be made pursuant to s 36 of the TOPT Act, it would have been necessary that a competition impact statement be prepared for the purposes of the National Competition Policy.

24. One isolated passage in the cross-examination gives some indication of the nature of the applicant’s case.  It appears at p 427 ll 14-18.  Mr Hanson asked:

    You’re not serious, are you?  That he (the Minister) sat there and committed the government to millions of dollars in this informal fashion?

25. The answer was:

    Yes, he did do that, and it wasn’t a case of committing to millions of dollars, your Honour.  It was a case of putting in a world-class system into the corridor that wouldn’t cost an arm and a leg.

26. As I have said, the assertion that the applicant’s proposal would not have involved the government in expending millions of dollars is untenable.  Quite apart from the figures which appear in the “Solutions” document, the evidence of another of the applicant’s witnesses, Mr Walker, demonstrates as much.  I will deal with that evidence at a later stage.

27. Mr Sita initially denied that he had ever been told or understood that any subsidy would have to be approved by Cabinet.  He was referred to p 28 of the agreed bundle, which is the concluding page of the letter dated 3 July 1996 from Coachtrans to the Minister, in which the former asked that the Minister recommend to Cabinet that Coachtrans receive a subsidy.  It seems that the subsidy under consideration was at least $1.2 million per annum.  This is the figure discussed on p 7 of the letter as the likely loss in the absence of subsidy.  Mr Sita claimed that the letter had been drafted by Mr Walker in consultation with departmental officers, but it is difficult to avoid the conclusion that he must have been then aware of the unremarkable proposition that a subsidy of such magnitude would require Cabinet approval.  Indeed, Mr Sita eventually agreed that he had this understanding.  (See TS 429 ll 10-13.)  He also said (TS 375 ll 10-13) that he was told prior to 20 December that any proposed compensation payment would have to be approved by Cabinet.  Apparently in justification of his assertion that Cabinet approval was not necessary for such expenditure, he asserted that the decision to build the new railway line between Brisbane and the Gold Coast had not been approved by Cabinet.  The assertion is of no relevance for present purposes other than as it affects Mr Sita’s credit.  It appears to have been based upon ex 15 which outlines the history of the development of the new railway line, or so the applicant suggested in argument.  To say the least, Mr Sita was disingenuous to suggest that this offered any support for the view that a subsidy of the kind he was seeking would not require Cabinet approval.

1. Exhibit 47 is a calculation by Mr Thomsett in which, adopting the applicant’s figure of 1.6 as the elasticity of demand (which figure he actually rejects), he calculates a predicted increase in patronage of 28.39 per cent resulting from a 17.73 per cent fare reduction.  He then performs the necessary calculations to predict the GST effect on gross fare revenue (GFR).  This shows a percentage reduction in patronage of 12.37 per cent, yielding a net gain, after introduction of GST, of 16.02 per cent.  Using the figure of 15,701 (rounded off to 16000 in the above table) as the applicant’s present monthly patronage, he calculates an increase of 2,515.  Given that there are presently twelve services per day in each direction, an overall total of 720 services per month, this shows an increase of about 3.5 passengers per service.  However, in ex 47, Mr Thomsett appears to have mistakenly treated the figure of twelve services per day as being the total number when in fact there are twelve services per day in each direction.  This error led him to calculate the increase in the number of passengers per service as 7.  In his evidence, he made it clear that such a figure would not be sufficient to justify an increase in service.  He was not challenged on this evidence in cross-examination.  Thus an increase of 3.5 would also not justify any increase.  Obviously, if Mr Thomsett’s chosen figures for elasticity of demand are used, the projected increase is even smaller. 

2. Mr Davis criticized Mr Thomsett’s general approach on three related bases which are probably different ways of stating the same proposition.  The first is that there is no reason to assume that market-place conduct in the Sydney metropolitan area would be the same as that on the Gold Coast.  The second point is that there is no reason to assume that in all cases covered by the Sydney survey, there was an alternative rail service available in the event that bus fares increased.  Thirdly, the statistical evidence relied upon in calculating the elasticity of demand figures may not have involved a choice between different modes of transport.  It may also have involved choice between taking a trip and not taking a trip.  Those criticisms have some merit.  On the other hand, the strength of Mr Thomsett’s approach is that it is based on empirical information as to consumer choice. As to the GST point, the applicant points out that there is a deficiency in the logic of Mr Thomsett’s argument.  Rail fares have presumably also increased to reflect GST.  Thus the introduction of GST would not be likely to result in a redistribution of passengers between modes of transport.  Of course it might lead some passengers to choose not to travel at all, but this is unlikely in the case of commuters who, according to Mr Davis, are the main component of potential passengers.

3. Mr Davis’s approach was quite different.  His report (ex 46) consists of a document dated August 1999, presumably a report produced for some other purpose, to which have been added three further sheets.  Mr Davis seeks to derive a “generalized cost” for any journey by attributing dollar costs to aspects of the journey in addition to the actual fare.  Thus a notional cost is ascribed to the time taken to walk to the station or bus stop, time spent waiting for the chosen mode of transport and time taken on the journey.  To the extent that motor cars are used, the cost of such transportation is also taken into account, as is the cost of feeder transport used to get to a railway station.  As I have observed, a proportion of all travellers are described as either car captives or public transport captives.  At p 4 of the report, Mr Davis asserts of the remainder that:

   The remainder of users will choose a mode based on the difference in the generalised cost function between public transport and private vehicle use.  The greater the difference between the generalised cost of public transport and the private vehicle users, the fewer the users and vice-versa. 

4. A diagram (fig 1 on p 4) appears to suggest that car captives and public transport captives each represent 20 per cent of the market.  However a reading of part 2 of the report, headed “Methodology” suggests that such percentages are probably assumed as examples rather than based upon actual evidence.  Mr Davis’s evidence at TS 921-922 similarly suggests that the graph is merely an “hypothesised transformation curve”.  The curve appears to plot the percentage of travellers choosing a particular mode of transport against the “negative and positive values” of that mode. 

5. In effect the report seeks to compare and contrast the various alternative methods of travel from the Gold Coast to Brisbane, using generalized cost as the basis of comparison.  It is concerned with passengers commencing journeys on, and returning to the Gold Coast rather than with passengers commencing in, and returning to Brisbane.  In one part of the report, there is a consideration of what would be entailed in reaching different final destinations in Brisbane after travelling to the CBD, but that is of only marginal relevance for present purposes.  In compiling the report, 624 points in the Gold Coast area are chosen as originating points for a journey to Brisbane CBD.  Estimates are then made of time involved in travelling from each such point to join the competing transport modes, waiting and travelling to Brisbane.  These figures are then converted into generalized costs.  There are no generalized cost calculations for private transport to and from Brisbane.  The report compares only the Coachtrans bus service and the Queensland Rail service on this basis.  The latter service may be utilized in three different ways:

   ·by the passenger travelling with a Surfside Bus Line feeder bus to a station;

   ·by the passenger walking to a station; and

   ·by the passenger travelling by car to a station.

6. Each is considered to some extent in the report.  The use of motor vehicles driven by a train passenger is facilitated by the provision at stations of free car-parking facilities which are apparently considered to be secure.  At p 6 of ex 46 Mr Davis observes that:

   Private vehicle travel is the dominant form of transport for trips in the (Gold Coast – Brisbane) corridor.

7. At p 8, he says:

   The ability to drive and park freely at the Gold Cost railway station enables a far greater level of access than is the case for walking to these stations and represents a considerable competitive advantage for Queensland Rail over alternative modes of transport.

8. At p 12, he observes:

   The provision of free parking at QR stations is a significant competitive advantage to QR.

9. I have previously referred to Mr Davis’s evidence concerning the predominance of commuters amongst users of public transport in the Brisbane – Gold Coast corridor and his view that the public transport market “is almost certainly limited to providing trips to and from the Brisbane CBD”.  His reason for the latter conclusion was that “travel to points other than the CBD results in a large generalized cost increase greatly limiting the competitiveness of both the Coachtrans and QR service for these trips”.  This appears to be a reference to the discussion in Part 6 of his report of other alternative destinations to which a passenger might travel after arriving at Brisbane CBD.  However ex 46 identifies a market for passengers travelling from the Gold Coast to the Logan/Redlands area and to the southern parts of the Brisbane metropolitan area and return.  These two categories accounted for 5.9 per cent of the 122,540 commuters in 1996, or 7230 potential commuter passengers.  Mr Davis’s view that passengers would not travel to Brisbane CBD and then travel on to other destinations with public transport does not exclude the possibility that commuters travelling to Logan/Redlands or to the southern parts of Brisbane might use public transport not involving travel to Brisbane CBD.  However he seems to have treated such potential passengers as irrelevant for present purposes. 

10. Exhibit 6 demonstrates that Queensland Rail provides services to some parts of those areas.  It would appear that Coachtrans also does so.  Nothing was said about such services in evidence or in addresses.  Whilst judgment was reserved, the parties were asked to make submissions on this point.  The applicant submitted that it would draw passengers travelling to and from such areas but conceded that the figure of about 4,000 constituted “the major part of the pool from which it would draw passengers”.  Apart from anything else, this demonstrates that one cannot assume that Queensland Rail is in direct competition with the applicant for all of the former’s passengers.  The applicant’s case, as conducted, appears to be primarily concerned with the carriage of passengers between the Gold Coast and Brisbane CBD.  Its market is therefore effectively limited to the 4,043 commuters referred to at p 10 of ex 46, with such increases as may have occurred as a result of population growth and other occasional traffic.  Mr Davis indicated that the commuter figure had not increased significantly between 1991 and 1996.  It is therefore difficult to conclude that it has increased significantly since 1996 in the absence of any evidence to that effect.

11. A further general criticism of Mr Davis’s approach is that his concentration upon the distribution of potential passengers in the Gold Coast area excludes any consideration of preferences likely to be demonstrated by passengers commencing their journeys in Brisbane.  There is some evidence which suggests that in 1994/95, roughly half of Coachtrans’ passengers on the Brisbane – Gold Coast route commenced at each end.  (See p 19 of the agreed bundle.)  The applicant submits that no such inference can be drawn from that document and that:

    … the majority of its patrons are residents on the Gold Coast.  In the morning peak, the majority of its patrons are commuters travelling north to the Brisbane CBD, (although … some are commuting to Beenleigh, Logan City or Mt Gravatt) and the opposite occurs in the evening peak.

12. The exercise conducted by Mr Davis in identifying typical starting points for Gold Coast passengers would be quite irrelevant in the case of Brisbane passengers as it bears no relationship either to their points of departure and ultimate return in Brisbane or to their likely destinations on the Gold Coast.

13. As I have said, Mr Davis seeks to compare the generalized cost of a journey to the Brisbane CBD using each mode of transport.  In a series of maps, he seeks to describe the areas in which each enjoys an advantage over the other.  Figure 12 depicts these areas, assuming that prospective rail passengers walk to the station and that fares are equal.  It indicates that in areas near to the coast (and therefore near to the bus route) Coachtrans has a significant advantage over Queensland Rail as it also does in most areas north of the Gold Coast area.  Queensland Rail has an advantage in areas to the west of the Gold Coast, near to the railway line.  Figure 13 demonstrates the respective advantages of the two carriers, assuming motor vehicle access to railway stations and equal fares.  It demonstrates a clear overall advantage to Queensland Rail in all areas other than some small areas between Helensvale and Coomera.  Figure 14 assumes access to railway stations using Surfside feeder buses and equal fares.  It shows a clear advantage to Queensland Rail in the western areas of the Gold Coast, but a clear advantage to Coachtrans along the coastal strip and in northern areas.  The distribution is somewhat similar to that which appears in fig 12.  Figure 15 compares generalized costs, assuming current fare structures and walking access to the railway.  This shows an increased advantage to Queensland Rail as compared to that disclosed in fig 12, but again Coachtrans maintains its advantage in the coastal areas of the Gold Coast and in some other areas. 

14. Figure 16 compares generalized costs, assuming current fare structures and access to Queensland Rail stations using Surfside feeder buses.  This particular calculation has been based upon the cost of an “Individual Surfside and QR Ticket”.  Figure 17 performs the same exercise using the cost of a “Combined Single-Use Surfside/QR Ticket”.  This shows only marginal changes in the relative advantages enjoyed by the two carriers.  Figure 18 performs the same exercise using the cost of a “Combined Multi-Use Surfside/QR Ticket”.  This shows a slight increase in the advantage enjoyed by Queensland Rail.  The different tickets presumably have different costs, resulting in different generalized costs.  Figures 16, 17 and 18, which assume current fare structures and Surfside feeder bus access to Queensland Rail stations, all show distinct additional advantage to Queensland Rail compared to the situation which prevails where fares are equal (fig 14).  The major difference occurs in the coastal strip of the Gold Coast where Coachtrans has a marked advantage if fares are equal.

15. Figure 13 demonstrates a marked advantage to Queensland Rail in almost all areas where motor vehicle access to stations is assumed, even with equal fares.  The reason for this advantage appears from a comparison of figures 7, 8, 9, 10 and 11 which show total travel time to Brisbane CBD from the Gold Coast and points north for various modes of transport as follows:

    Figure 7 – Walk access to Coachtrans bus stops;
    Figure 8 – Walk access to Queensland Rail stations;
    Figure 9 – Surfside feeder bus access to Queensland Rail stations;
    Figure 10 – Private vehicle travel to Queensland Rail stations; and
    Figure 11 – Private vehicle travel.

16. Figure 11 demonstrates that a traveller using a private motor vehicle will take less than 100 minutes from all points and less than 80 minutes from almost all points.

17. Figure 7 shows that from almost all points, the total time for the trip with Coachtrans will be in excess of 110 minutes and from most points, it will be in excess of 120 minutes.

18. Figure 10 shows that assuming private car access to stations, all points are within 120 minutes of Brisbane, and most are within 100 minutes.

19. Thus Queensland Rail, assuming car access to stations, has a distinct time advantage over Coachtrans. 

20. I turn to the three additional pages prepared by Mr Davis for the purposes of this case.  The two maps demonstrate the relative advantage of each carrier, assuming Surfside feeder bus access to stations and using generalized cost as the basis of comparison.  One map assumes current fare structures and the other, equal fares.  They demonstrate that with equal fares, Coachtrans would have a significant advantage along the coastal strip (where the population is quite dense) and a greater advantage in the area north of the Gold Coast.  With the current fare structure, Queensland Rail enjoys a marked advantage in all areas other than that north of Helensvale.  Mr Davis has reduced the maps into numerical form using census figures.  The result is contained in the table on the third additional page.  It indicates that the total population is 347,129.  This figure is distributed amongst amongst four categories of relative advantage with the following results:

Category	Current Fare Structure		Equal Fare Structure
Advantage to Coachtrans	29252	8.4%	147430	42.5%
Marginal Advantage to Coachtrans	49795	24.8%	62594	18.0%
Marginal Advantage to QR-Surfside	67511	19.4%	35614	10.3%
Advantage to QR-Surfside	200571	57.9%	101491	29.2%

1. The percentages under the heading “Current Fare Structure” total more than 100 per cent but in any event, the more relevant figures appear under the heading “Equal Fare Structure”.  They suggest that Coachtrans has a relative advantage amongst 60.5 per cent of the population as opposed to Queensland Rail’s advantage (with Surfside feeder buses) amongst 39.5 per cent.

2. As I have previously mentioned, Mr Davis stresses in his report that the market for public transport in the Brisbane – Gold Coast corridor is probably limited to a very small number, namely those commuting to the CBD.  These potential passengers total only 4,043 out of this total of 397,129.  There is no evidence as to whether one may assume that the 4,043 are distributed equally throughout the whole of the Gold Coast area.  I would be inclined to assume to the contrary.  If a person lives on the Gold Coast and works in Brisbane, it seems more likely that he or she would live to the west and therefore nearer to the railway line, rather than near the resort areas on the coast.  However, as I have said, there is no evidence on this point, and it is unprofitable to speculate. 

3. A further difficulty with Mr Davis’s report is that it is not always clear whether he is discussing the Gold Coast area (ie south of the Helensvale – Oxenford line) or the whole area between the border and Logan City.  The maps suggest the latter approach as does the reference on p 3 to the “Gold Coast – Albert” area.  However the census figures on p 10 are followed by the statement:

   This would establish a considerably small market in terms of travel from the Gold Coast core to the Brisbane CBD.

4. The area north of Helensvale could hardly be described as at the “core” of the Gold Coast.  I have tried to keep this possible inconsistency in mind in my consideration of Mr Davis’s reports.

5. A more serious criticism of the report is the absence of any assignment of population numbers to categories of relative advantage as between Coachtrans and Queensland Rail, assuming motor vehicle access to railway stations.  If a potential passenger has access to a motor vehicle, is willing to use it to travel to the station and will, if he or she does so, find that the generalized cost of travelling to and from Brisbane is less than if he or she uses some other mode, then the assumption must be that such a passenger will adopt the former mode unless he or she is a public transport captive.  Although no table has been produced, it is clear from figure 13 that it would demonstrate an overwhelming advantage to Queensland Rail in all areas, with the exception of small pockets north of Helensvale.  This leads to the inference that from an economic point of view, only those who are public transport captives would choose to travel with Coachtrans.  There is no evidence as to the percentage of the market who may be so described although, as I have pointed out, it is assumed to be 20 per cent in the diagram which is figure 1 in Mr Davis’s report (ex 46).

6. These figures, when considered in combination, demonstrate a difficulty in the applicant’s case.  For ease of calculation I round off the relevant figures, treating Mr Davis’s estimate of the size of the market in 1996 as 4,000 rather than 4,043 and the distribution between Coachtrans and Queensland Rail, assuming equal fares, as 60/40.  For the sake of demonstration I will also assume the percentage of public transport and car captives as 20 per cent in each case.  If the total market is 4,000 and the percentage of public transport captives is 20 per cent, then only 800 people will not use motor cars in order to access Queensland Rail stations.  That is the maximum number of passengers who may choose to travel with Coachtrans.  Of that 800, assuming equal fares, 60 per cent will find it more economical to travel with Coachtrans, that is 480 out of the total of 800.  I assume that each commuter travels each way on every working day of the month, on average, twenty-two days, save when on annual leave.  On a monthly basis that shows 21,120 passengers (480 x 2 x 22).  On an annual basis, assuming four weeks’ annual leave, it shows 230,400 passengers (480 x 2 x 5 x 48).  The applicant’s present monthly figure is 16,000 passengers, showing an annual figure of 192,000.  On this hypothetical basis, the applicant is carrying 5,000 fewer passengers per month than Mr Davis’s figures might suggest, but on an annual basis the figure is only 38,000 below the predicted number.

1. Because the applicant claims entitlement to subsidy on a “mileage” basis it is the number of bus trips, not the number of passengers which is critical to the level of subsidy.  Thus it is necessary to calculate the extent to which such an increase in passenger numbers would be likely to result in the government permitting service levels beyond those currently prevailing.  Unfortunately, there is very little evidence demonstrating how such an increase in passenger numbers might be expected to affect such levels.  As far as I am aware, there is no evidence as to bus capacity.  In the course of oral submissions the applicant suggested that its buses carry forty-five or forty-eight passengers.  (See TS 1099 ll 23 and 24.)  In submissions provided since the completion of the hearing, the respondent has asserted a bus capacity of “in excess of fifty passengers”.  The applicant has responded, asserting a bus capacity of forty-three with a limited number of coaches carrying up to forty-eight.  Submissions are no substitute for evidence.  I can do little more than assume a bus capacity of somewhere between forty-three and in excess of fifty. 

2. Even if I had that information, I have no way of calculating the point at which an increase in passenger levels should result in an increase in service levels.  Obviously, average passenger levels alone will not be decisive.  At peak hours it will be no comfort to disappointed customers to be told that they may travel at an earlier or a later time on a bus which is largely empty.  Similarly, it will be no answer to a person who wishes to travel early in the morning or late in the evening that there are many buses travelling at peak hours.  An operator, in this case the applicant, must meet both the high levels of demand at peak hours and reasonable expectations as to service in off-peak hours.  The applicant did not deal with this problem to any extent in its evidence.  Mr Thomsett asserted that even an increase of seven passengers on average would not justify an increase in service levels.  He did not tell me his basis for this view, but he is experienced in the area and there was no challenge to his evidence in this regard.  In the absence of such challenge or other evidence, I accept that an average increase of that order would not justify an increase in service levels, but that does not fix the point at which a greater average increase in passenger levels should be taken as indicating the need for an increase in service levels.

3. The applicant’s services are provided on seven days per week at the rate of twelve services each way per day.  Thus the total number in a thirty day month would be 720.  The applicant’s current monthly patronage level of 16,000 therefore represents an average number of passengers of 22.2.  The predicted passenger level (assuming equal fares) of 21,120 passengers per month, shows a notional average number of passengers per trip of 29.33, or slightly over 7 more than at present.  On an annual basis, with 230,400 passengers per year carried on 8,760 bus services and allowing for four weeks’ leave, the figure is 26.3, an increase of fewer than 5 passengers per trip.  Given Mr Thomsett’s evidence, these figures would not justify an increase in service levels.

4. I readily concede the artificiality of these calculations.  They fail to take into account at least the following considerations:

   ·population increase since the 1996 census;

   ·passengers travelling from the Gold Coast to Logan/Redlands or southern parts of Brisbane, but not to the CBD;

   ·non-commuter passengers;

   ·passengers originating in Brisbane rather than at the Gold Coast;

   ·the distribution of public transport captives as compared to the geographical distribution of the Gold Coast population as a whole;

   ·the “inertia” of passengers, meaning their reluctance to change established habits concerning modes of transport; and

   ·non-economic motives for choice.

5. I have little evidence as to the likely effects of these various factors on any prediction of the effect of a fare reduction on service levels.  My calculations also assume three matters which probably cannot be realistically assumed.  The first is that 20 per cent of potential passengers are public transport captives.  If the figure is lower than this (as I suspect) then the figures will be even more unfavourable to the applicant because it will be sharing a smaller market.  Secondly, these figures assume that public transport captives make rational decisions based on economic considerations as between travelling by bus or travelling by rail when it is quite clear that they do not do so.  If they made such decisions, they would not be categorized as public transport captives.  Thirdly, I have assumed that commuters and public transport captives are equally distributed across Mr Davis’s 640 points. 

6. Nonetheless, the calculations are substantially based on Mr Davis’s model.  They appear to lead to the conclusion that current service levels are adequate to meet the demand for bus transport even assuming equal fares.  Although in submissions made while this matter has been reserved, the applicant has sought to change its position to some extent, it has generally adhered to Mr Davis’s approach.  In those submissions, the applicant also sought to avoid the consequences of the relative advantage held by Queensland Rail where passengers use car access to stations.  It submitted that this did not lead to an inference that non-fare considerations may have caused potential passengers to prefer Queensland Rail to Coachtrans because, it was submitted, most of Coachtrans’ passengers must previously have walked to bus stops and so would not have used cars.  The argument appears to be that Coachtrans passengers generally lived so close to the bus stops that they would not have driven to them.  This suggests an assumption that potential passengers choose between modes of access to the ultimate long distance carrier rather than between “overall transport products”;  in other words, that they choose to walk and take the bus rather than to drive and take the train for reasons associated with the initial modes of transport rather than for reasons relating to the cost and quality of the trip as a whole.  Although some passengers may prefer to avoid changing modes of transport from car to train, there has been no attempt to quantify that part of the market.  It seems likely that most passengers consider the advantages and disadvantages of the whole trip rather than those of only part of it.

7. The point of Mr Davis’s study is that it is cheaper for almost all people, in terms of generalized cost, to take the car to the station and then to catch a train.  For most people, it is also quicker in absolute terms.  His model assumes rational choice based on economic considerations.  The applicant cannot reasonably expect that those consequences of Mr Davis’s model which are favourable to its case will be accepted and the unfavourable consequences rejected, nor can it avoid those unfavourable consequences by asserting, in the absence of evidence, that its passengers “did not and do not access Coachtrans services by private motor vehicle”.  Whatever they may have done before February 1996 when there was no choice, the assumption underlying Mr Davis’s report is that, given the opportunity, most people will make a rational choice between available modes based on economic factors (including time).  An available choice is using a motor vehicle for part or all of the journey.  If Mr Davis’s calculations of cost are realistic, this may even extend to acquiring a vehicle.  In the end, I consider that Mr Davis’s model, taken at face value, offers no support for the applicant’s claim that its loss of patronage since 1996 is substantially attributable to Queensland Rail’s fare levels.  The loss of patronage and resulting reduction in service levels is substantially attributable to advantages inherent in the rail service.  These are probably location, speed and car parking facilities.  In any event, the model fails to take account of numerous factors which appear to be relevant to an informed prediction of passenger response to fare reduction. 

8. This leads me to have resort to Mr Thomsett’s model, flawed though it may be.  As I have said, it has the considerable merit that at least it is based upon preferences expressed by potential public transport users.  Common sense dictates that had the fares been equal after 1 February 1998, the present level of bus usage would probably have been higher than it now is, and Mr Thomsett concedes as much.  It is also possible that with equal fares, population increase would have caused some increase in usage in the period between that date and February 2003 when the “contract” would have expired.  Despite Mr Thomsett’s calculations, I am inclined to think that with equal fares, some of the passengers who left Coachtrans for Queensland Rail may not have done so and that more new passengers (resulting from population increase) may have come to Coachtrans.  For present purposes, I can do little better for the applicant than to infer that had fares been equalized, the level of usage between 30 April 2000 and 31 January 2003 would probably have been somewhat higher than it presently is, or will be.  That increased level would probably have justified a level of services higher than that presently in force.  I can be no more precise than to say that there is some significant prospect that it would have justified one more trip per day in each direction.  There is also a possibility that the level of services could have been reduced for reasons other than fare-based competition from the railway, although that is not very likely.  It is a bare contingency, and I do not think that any substantial allowance ought be made for it.  It is little more than a guess, but I fix the prospects of such increased service levels at 80 per cent.  This will be best accommodated by assuming a level of services of 25.6 per day (12 services per day in each direction (24) + (1 x 80% x 2)) for the period after 1 May 2000. 

9. I adopt the method of calculation used in Annexure C to ex 43 and by Mr Thomsett in ex 39 to calculate damages from 1 May 2000 as follows:

   1 May 2000 – 30 Jun 2000                 

   Distance travelled (110 km x 25.6 x 61)  =         171,776 km

   Subsidy @ $0.50/km   =         $85,888

   Adjusted for CPI  =         Not appropriate
   Adjusted for present value  =         Not appropriate

   1 Jul 2000 – 30 Jun 2001

   Distance travelled (110 km x 25.6 x 365)  =         1,027,840 km
   Subsidy @ $0.50/km   =         $513,920
   Adjusted for CPI - $513,920 x 1.028  =         $528,309.76
   Adjusted for present value - $528,309 x .9423 =         $497,826.28

   1 Jul 2001 – 30 Jun 2002

   Distance travelled (110 km x 25.6 x 365)  =         1,027,840 km
   Subsidy @ $0.50/km  =         $513,920
   Adjusted for CPI - $513,920 x 1.03  =         $529,337.60
   Adjusted for present value – $529,337 x .888   =         $470,051.78

   1 Jul 2002 – 31 Jan 2003

   Distance travelled (110 x 25.6 x 215)  =         605,440 km

   Subsidy @ $0.50/km  =         $302,720
   Adjusted for CPI - $302,720 x 1.0175            =         $308,017.60

   Adjusted for prevent value - $308,017 x .8368            $257,749.12

   TOTAL               =                   $     85,888.00
     497,825.28
     470,051.78
          257,749.12

   $1,311,515.10

   Plus
   Damages to 30 April 2000           3,584,699.50
     $4,896,214.60

   Some allowance should be made for interest.  It is not necessary that I do so at this stage.

   ORDERS

10. The application will be dismissed.  I fix damages at $4,896,214.60.  I will hear further submissions as to the formal orders and as to costs.  I will also entertain any application for further findings of fact.

I certify that the preceding two hundred and two (202) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Associate:

Dated:             13 November 2000

Counsel for the Applicant:

Mr N Lucarelli QC

Mr M Conrick

Solicitor for the Applicant:

Freehills

Counsel for the Respondent:

Mr R V Hanson QC

Mr P Flanagan

Solicitor for the Respondent:

Crown Law

Date of Hearing:

13 - 15 June 2000

21 – 30 June 2000

Date of Judgment:

13 November 2000