Telstra Corporation Ltd v Commonwealth of Australia & Ors

[2007] HCATrans 48

[2007] HCATrans 048

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S42 of 2007

B e t w e e n -

TELSTRA CORPORATION LIMITED

Plaintiff

and

COMMONWEALTH OF AUSTRALIA

First Defendant

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Second Defendant

PRIMUS TELECOMMUNICATIONS PTY LIMITED

Third Defendant

OPTUS NETWORKS PTY LIMITED

Fourth Defendant

CHIME COMMUNICATIONS PTY LIMITED

Fifth Defendant

XYZED PTY LIMITED

Sixth Defendant

POWERTEL LIMITED

Seventh Defendant

REQUEST BROADBAND PTY LIMITED

Eighth Defendant

NEC AUSTRALIA PTY LIMITED

Ninth Defendant

MACQUARIE TELECOM PTY LIMITED

Tenth Defendant

AMCOM PTY LIMITED

Eleventh Defendant

ADAM INTERNET PTY LIMITED

Twelfth Defendant

AGILE PTY LIMITED

Thirteenth Defendant

Summons

GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 8 FEBRUARY 2007, AT 12.03 PM

Copyright in the High Court of Australia

MR A.C. ARCHIBALD, QC:   May it please the Court, I appear with my learned friend, MR J.K. KIRK, for the plaintiff Telstra.  (instructed by Mallesons Stephen Jaques)

MR D.M.J. BENNETT, QC, Solicitor‑General of the Commonwealth of Australia:   I appear for the first defendant.   (instructed by Australian Government Solicitor )

MR N.J. YOUNG, QC:   If your Honour pleases, I appear for the second defendant.  (instructed by Australian Government Solicitor)

MR M.J. HOYNE:   If your Honour pleases, I appear on behalf of the third, fifth, eleventh, twelfth and thirteenth defendants.  Mr O’Bryan who is leading in this case is currently before the Full Court, your Honour.  (instructed by Herbert Geer & Rundle)

MR S.J. GAGELER, SC:   If the Court pleases, I appear for the fourth and sixth defendants.  (instructed by Clayton Utz).

MR D.B. GLOUGH:   If the Court pleases, I appear on behalf of the seventh, eighth and ninth defendants.  (instructed by Nicholls Legal)

MS K.M. PETTIGREW:   If the Court pleases, I appear on behalf of the 10th defendant.  (instructed by Gilbert & Tobin)

HIS HONOUR:   So we have appearances for everyone.

MR ARCHIBALD:   Yes, your Honour.  Notices have been given under section 78B to the States and Territories.  The current position is that we have been informed on behalf of the States of Queensland and Tasmania and the Northern Territory that no intervention is contemplated on their behalves.  The position of the other States and the Australian Capital Territory is presently unknown to us.

HIS HONOUR:   Yes, thank you, Mr Archibald.  Could you just tell me, Mr Archibald – you may be the person to ask – is it your understanding that all of the defendants, if they join them as defendants, that all of them are going to be actively adverse to your client’s position?

MR ARCHIBALD:   They will be adverse no doubt.  We would suspect that some of them will not play a substantial part in the proceeding, but we have not been informed of any attitude by any of the respondents in that respect formally.

HIS HONOUR:   Yes, let me ask, is that assumption on my part correct?

MS PETTIGREW:   Possibly, your Honour.  It might be a little bit premature at this stage to give a final indication to the Court.

MR YOUNG:   From my client’s perspective, your Honour, yes, we will be actively adverse.

HIS HONOUR:   All right.  Now, the other thing I wanted to ask, Mr Archibald, and I will then ask if anyone disagrees with it, do you see this matter as involving factual disputes, as distinct from understanding of technical matters, which is a different question?

MR ARCHIBALD:   No, we do not, your Honour.  Two points arise, your Honour may have seen, one we call the acquisition point, the other partial invalidity of Part XIC point. 

HIS HONOUR:   What is the distinction between the two?

MR ARCHIBALD:   Well, analytically they are stepping stones, but we say the two services that generate this controversy, the unconditioned local loop service being the first and the line sharing service being the second, are services of a kind distinct from most of the wholesale services which Telstra provides which, by reason of their nature, generate an acquisition when they become subject to the standard access obligations.  In order to demonstrate the acquisition aspect of the matter, which I would call the first point, all one needs to do, as we contend, is to understand the nature of the service which really involves just basic facts of, I suppose you would call them, an engineering kind which, as we would understand, are not really susceptible of controversy.

We have sought to set out in our affidavit material what we say are the relevant facts.  It may be on reflection we might add a few here and there, but we do not see that they ought to generate controversy.  Such additional facts as the defendants may suggest bear upon the matter are again, as we would apprehend, likely to be insusceptible of controversy in themselves.  So it is really a matter of putting forward before the Court in the proceeding the matters that bear upon the character of these services.

Then as to what I call a separate point, but a second aspect perhaps, the invalidity point, that flows really again from the features of the provisions in Part XIC which bear upon the determination of pricing and upon the non‑engagement, as we contend, of the safety net provision, section 152EB.  So very little, if any, facts would be involved there and again the facts, as we would conceive them, would not be controversial.

HIS HONOUR:   Yes, thank you, Mr Archibald.  Mr Gageler, I guess you are probably the main private party who is in opposition.

MR GAGELER:   Yes.  Your Honour has seen what I have raised in my written submissions.

HIS HONOUR:   Which I understand is not really disagreeing with what has just been said.

MR GAGELER:   Not at all, but simply flagging that in relation to Mr Archibald’s second point or second aspect of the case we would see a likely necessity for the Court to be informed of certain characteristics of the telecommunications market and of certain economic characteristics of the particular assets that are used to deliver these services.  What the case really comes down to is this.  Mr Archibald says, as we best understand his pleadings, that the acquisition of property occurs at the point at which the standard access obligation comes into existence.  That is when a request is made.  At that point the standard access obligation is one to provide the service on such terms as are agreed or, failing agreement, on such terms as may be determined in an arbitration. 

It seems to us that what he needs to be saying to make out his point that acquisition of property otherwise than on just terms occurs at that point is that the outcome of an arbitral determination is necessarily one that does not provide just terms or, putting it another way, that the arbitral regime taken as whole does not provide just terms.  The arbitral regime is one that requires the Commission to take into account a variety of factors including matters of economic efficiency, the long-term interests of end users, the legitimate business interests of Telstra, et cetera.  All of that is very much in an economic setting that needs a little bit of fleshing out, your Honour.  We think in principle it ought be able to be the subject of a case stated in the sense ‑ ‑ ‑

HIS HONOUR:   Not a demurrer.

MR GAGELER:   Well, if there are inadequate ‑ ‑ ‑

HIS HONOUR:   Demurrer is a much more attractive procedure from my point of view ‑ ‑ ‑

MR GAGELER:   May I say, if there were an adequate pleading ‑ ‑ ‑

HIS HONOUR:   ‑ ‑ ‑ as it forecloses haggling sessions between the Bar table.

MR GAGELER:   Your Honour, we do not want to be difficult, but your Honour may have seen from my written submissions that in declaring the service in the first place to make a standard access obligation applicable at all the Commission goes through a process of public consultation and reporting, which in these particular cases were very lengthy processes, and produced a report about whether or not the declaration for service was in the long-term interest of end users.  In the course of doing so it produced a great deal of economic analysis.  It is likely for our part that some of the basic economic building blocks that are set out in those public reports would need to be placed before the Court.

HIS HONOUR:   As what, constitutional facts of some sort?

MR GAGELER:   Yes.

HIS HONOUR:   Indicating what?

MR GAGELER:   Indicating the nature of, may I put it this way, the economic rather than simply the technical characteristics of the assets that are being regulated and the way in which the potential use of those assets by an entity in the position of Telstra can impact upon the market.  We are very much concerned, your Honour, to put it in sort of jargon, with the regulation of infrastructure assets with natural monopoly characteristics, which is a field of regulation known around the world.  So, your Honour, where I come down to is to say we think in principle that the case ought be able to be dealt with by way of either a demurrer with an adequate pleading or a case stated, but we do see the need to include within the pleading or the agreed facts some broader characteristics of the market and of these particular assets.

HIS HONOUR:   All right.  Now, does anyone on Mr Gageler’s side of the record disagree with what he has been saying?

MR HOYNE:   Your Honour, we agree that the matter should be capable of proceeding by stated case.  We would think a demurrer would not be appropriate.  The reason is that ultimately the Court will need to know the precise engineering facts, if I can call it that, concerning these loops and the alleged acquisition.

HIS HONOUR:   Yes, I think that is probably right.  Mr Solicitor?

MR BENNETT:   Your Honour, we are a little cynical about the ability of the parties to agree on a special or stated case.  We think if there is one, we submit it should be a special case rather than a stated case so that inferences of fact can be drawn at the hearing if necessary.

HIS HONOUR:   Special cases are becoming increasingly unattractive to the Bench, I can tell you, after my colleague Justice Hayne’s experiences.

MR BENNETT:   We think that the pleadings are the best way in the first instance for fleshing out the issues ‑ ‑ ‑

HIS HONOUR:   Yes, I think so too.

MR BENNETT:   ‑ ‑ ‑ between the parties and seeing if there is a factual dispute.  One minor matter is that if there are to be pleadings so that there needs to be a response to a statement of claim or if there is to be a stated or special case so that there is to be a response to a first draft by the plaintiff, in either case we would submit that four rather than two weeks is the appropriate time to allow the defendants.

HIS HONOUR:   Yes. 

MR YOUNG:   Your Honour, we do not specifically disagree with anything that has been said.  What I do need to bring to your attention, however, is that the amount of what we say is at least missing information at this point in time is very large.  So the amount of information that would have to be ‑ ‑ ‑

HIS HONOUR:   What do you mean “missing information”?  We are just construing some sections in the statute.

MR YOUNG:   That is quite right, but in terms of the affidavit material that has been put forward as to what is said to suggest the acquisition of property, et cetera, we say that there is a lot more factual information that goes in.  Now, it may be the case that that can all be agreed, but there is significant more factual ‑ ‑ ‑

HIS HONOUR:   If it is not agreed, it will all go up to the Federal Court, which will not suit any of you really.

MR YOUNG:   Yes, I understand that.

HIS HONOUR:   There are a number of public companies here and you have a big interest in getting this case resolved by the ultimate authority in the judicial structure as soon as possible.

MR YOUNG:   That is quite so, your Honour.

HIS HONOUR:   Very well.  Yes, Mr Archibald, what do you say is the moment of acquisition, if I can use that expression?

MR ARCHIBALD:   It is the moment of the request by the access seeker in respect of a declared service.

HIS HONOUR:   Which section do we ‑ ‑ ‑

MR ARCHIBALD:   Section 152AR(3).  The section is cast in terms of an immediate and unconditional compulsion to supply the active declared service to the service provider.

HIS HONOUR:   Is that backed by any offence provision?

MR ARCHIBALD:   I am not sure that it is.  I think it is the case that the licence that the carriage service ‑ ‑ ‑

HIS HONOUR:   You are at risk of…..your licence, I suppose.

MR ARCHIBALD:   There will be a condition of a licence acquiring, but probably somewhere in the myriad of provisions either in this Act or back somewhere in the Telecommuncations Act there may be some contravention provision.  In the event, if there is any hindering activity, or allegedly hindering activities, then there are provisions in Division 10 of this part which deal with the ability for interested parties to make applications to the Court and the like.  So there are enforcement provisions independently of any question of contravention provisions.

HIS HONOUR:   The statutory just terms requirements is ‑ ‑ ‑

MR ARCHIBALD:   Is section 152EB and it is engaged if a determination would result in an acquisition, but the criterion of 152AR(3) is not a determination.

HIS HONOUR:   Yes, I see.  Thank you.  What I would propose at the moment is to direct that as to so much of the cause which seeks declaratory relief – and one sees that at the moment on page 8 of the application to show cause, paragraph 4, the declarations of invalidity there.  In respect of so much of the cause as seeks declaratory relief the following steps are to be taken, that the plaintiff file and serve a statement of claim.  How long do you need for that?  You may have to flesh it out I think somewhat.

MR ARCHIBALD:   Yes, 14 days, your Honour.

HIS HONOUR:   Is that realistic?  I am not urging you to drag your feet but ‑ ‑ ‑

MR ARCHIBALD:   Yes, 14, your Honour.  We will subject ourselves to the discipline.

HIS HONOUR:   That would take us to the 22nd.  You were saying, Mr Solicitor, for a defence?

MR BENNETT:   Your Honour, four weeks, 28 days.

HIS HONOUR:   Four weeks.  When would that bring us to? 

MR BENNETT:   To 22 March.

HIS HONOUR:   To 22 March.  I think I would make it 16 March, that is for any defence and demurrer or defence, and then bring it back to me in Canberra on Tuesday, 20 March at 4.00 pm.

MR BENNETT:   Your Honour, there is one remote possibility, and I hope it is a remote possibility, and that is in the statement of claim it may be difficult to plead to without particulars.

HIS HONOUR:   Yes, that is right.

MR BENNETT:   If there is a need for us or any of the defendants to seek particulars, it will be necessary to have some machinery under which the timetable can be extended to allow that to occur.  That perhaps could be liberty to apply or an earlier mention date, whichever your Honour prefers.

HIS HONOUR:   The alternative might be to bring it back earlier, after the statement of claim is on the table I think.  At the moment the statement of claim is going on by the 22nd.  Well, it could come back to me on Monday, the 26th.  That might be better.

MR BENNETT:   Of February?

HIS HONOUR:   Yes. 

MR BENNETT:   Your Honour, my only concern about that is that, first, it may be unnecessary and, secondly, it gives us a very short time to decide if we need particulars, basically a weekend.

HIS HONOUR:   Yes.  What day was it going to come back?

MR ARCHIBALD:   On 20 March.

HIS HONOUR:   One of the things that worry me is that this will come a large firm bonanza and there will be requests for particulars that would fill a book which I am not going to allow.

MR ARCHIBALD:   We would hope that we do not have to come back before we get a defence, your Honour, but one of the dangers is that if we were to come back and they were not before the Court, the draft particulars or draft request, then the occasion might miscarry because it may be a very long list, conceivably, as your Honour says, and it would be undesirable to be speaking about matters in the air when, if your Honour were to have seen the requests on paper, your Honour might have said they are impermissible.

HIS HONOUR:   That is right, yes.

MR ARCHIBALD:   So we rather hope that the matter will not arise at all and we would hope that we could have directions for, as your Honour is indicating, a statement of claim and defences and only in the event that some matter does arise should we come back before the Court in the meanwhile.  But if we are to come back, as I say, it needs to be on defined material.

HIS HONOUR:   Yes, all right.  Is there anything you want to say, Mr Gageler?

MR GAGELER:   No, your Honour, I sought really in writing and orally to flag what we see as the big issue, and the big issue is, why does section 152 ‑ ‑ ‑

HIS HONOUR:   That is a legal issue.  That does not seem to me to be productive of ‑ ‑ ‑

MR GAGELER:    Well, no, it needs to be addressed at a factual level as well.  Why does section 152AY(2) not provide just terms in respect of these services?  That is the issue and I am sure it will be adequately addressed in the pleadings.

HIS HONOUR:   Thank you.  Mr Young.

MR YOUNG:   I have nothing to add, your Honour.

HIS HONOUR:   All right.  This is what I propose.  With respect to so much of the cause that seeks declaratory relief:

1.On or before 22 February 2007 the plaintiff file and serve a statement of claim;

2.Defences and demurrers and, in lieu thereof, any request for particulars be filed and served on or before 16 March 2007;

3.Stand the cause over for further directions at 4.00 pm on Tuesday, 20 March 2007 before me in Canberra;

4.        Costs of today be costs in the cause.

Is there anything else?  I will now adjourn.

AT 12.32 PM THE MATTER WAS ADJOURNED
UNTIL TUESDAY, 20 MARCH 2007