IRS International Pty Limited v ContainerCo (NZL) Limited

[2024] NZHC 3671

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-1074

[2024] NZHC 3671

UNDER

Commerce Act 1986 and Fair Trading Act 1986

BETWEEN

IRS INTERNATIONAL PTY LIMITED

Plaintiff

AND

CONTAINERCO (NZL) LIMITED

First Defendant

QUBE LOGISTICS LIMITED
Second Defendant

METROBOX LIMITED

Third Defendant

SPECIALISED CONTAINER SERVICES (TAURANGA) LIMITED
Fourth Defendant

SPECIALISED CONTAINER SERVICES (CHRISTCHURCH) LIMITED

Fifth Defendant

Hearing:

13 November 2024

Appearances:

J D Every-Palmer KC and J Edwards for Plaintiff D J Cooper KC and S M Singh for First Defendant

R S Reed KC and S C Keene for Second to Fifth Defendants

Judgment:

5 December 2024

JUDGMENT OF O’GORMAN J

This judgment was delivered by me on 5 December 2024 at 10 am pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

…………………………………

IRS INTERNATIONAL PTY LIMITED v CONTAINERCO (NZL) LIMITED [2024] NZHC 3671 [5 December 2024]

Overview

[1]    IRS International Pty Ltd (IRS) seeks an interim injunction against the defendant depot owners, to prevent them from increasing their access levies for allowing outsider technicians to enter the depot and undertake pre-trip inspections (PTI Services) of refrigerated shipping containers (reefers) stored there by international shipping companies.

[2]    PTI Services ensure that a reefer container is ready to be loaded with temperature-sensitive cargo and preserve the quality and integrity of that cargo during voyage. The process involves taking the reefer container from the general stack to the lay-down area within a depot, positioning it so the end fitted with the refrigeration machinery is adjacent to a power wall, plugging it in and setting the required transit temperature. It is then run continuously for sufficient time for any digitally displayed fault codes to be triggered (typically at least three hours for a 20-foot container). The display is monitored and, if a fault is detected, it is moved to another lay-down area to undertake repairs. Once no faults are displayed, the reefer container is ready to be trucked to the customer’s premises for loading cargo.

[3]    The defendant depot owners offer PTI Services on reefers stored in their yards. They compete with the plaintiff for the provision of those services to shipping lines. In broader terms, the first defendant ContainerCo (NZL) Ltd (ContainerCo) also competes with the second to fifth defendants, Qube Logistics Ltd and related entities (together, Qube), as a provider of depot facilities and related services to shipping lines.

[4]    The substantive causes of action allege breaches of ss 27, 30 and 36 of the Commerce Act 1986 (CA) and s 7 of the Fair Trading Act 1986 (FTA). The trial has been allocated four weeks, commencing on 15 February 2027. This hearing is to determine what happens in the meantime (a period that will exceed two years).

[5]    The general principles for determining an application for interim relief are well-settled. The Court must consider:1

(a)whether there is a serious question to be tried;

(b)the balance of convenience; and

(c)the overall justice of granting, or not granting, an interim injunction.

[6]    In Commerce Commission v Viagogo AG, the Court of Appeal described the purpose of an interim injunction as being to improve the chance of the court being able to do justice after a determination of the merits at the trial.2 The basic principle is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other.3

[7]    An applicant for an interlocutory injunction must provide an undertaking as to damages.4 Where there is doubt that the undertaking would be met, security for the undertaking as to damages may be ordered. Otherwise the balance of convenience would weigh heavily against the grant of an interim injunction.5

Facts

[8]    IRS operates at 196 container  depots  throughout  Australasia,  providing  PTI Services, and carrying out repairs on loaded reefer containers. It has provided such services to shipping lines at third party sites for more than 40 years. Prior to 2018, no depot charged IRS any access fee or levy to access customer reefer containers at third-party sites.

1      Intellihub v Genesis Energy Ltd [2020] NZCA 344, [2020] NZCCLR 29 at [23]; and Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR7.53.04].

2      Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [31], quoting National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] UKPC 16, [2009] 1 WLR 1405 at [16] and [17].

3      At [31], quoting National Commercial Bank Jamaica Ltd v Olint Corp Ltd, above n 2, at [16] and [17].

4      High Court Rules 2016, r 7.54.

5      Rotorway Ltd v Sports & Education Corporation Ltd [2024] NZHC 2941 at [47].

[9]    In 2017, there was a workplace death at a site operated by Pinnacle (now Qube Logistics Ltd, one of the Qube group companies). This led to a health and safety review by Pinnacle, and an increased focus on health and safety across the industry.

[10]   The defendants as depot owners and operators have responsibilities under the Health and Safety at Work Act 2015 for their depot premises. As a Person Conducting a Business or Undertaking (PCBU), they are potentially liable, not only in relation to their own staff, but also any third parties temporarily at their depots. The defendants say health and  safety  improvements  have  been  made  since  2017.  Allowing  third parties onto the depot to provide PTI Services causes incremental safety costs (such as induction, registration, briefing and co-ordination) and extra burdens on breakout rooms, toilets and parking. External providers also use infrastructure for PTI Services, such as for moving reefers, and using the lay-down area. The defendants say these types of matters justify an access levy.

[11]   During 2017, there were business dealings between the two defendant groups because Pinnacle and Specialized  Refrigeration  Services  (SRS),  a  provider  of PTI Services in the Pinnacle group, used ContainerCo depots and facilities. In that capacity, Pinnacle and SRS were consulted about ContainerCo’s intention to introduce an annual access fee to external providers of PTI Services. This led Pinnacle to consider charging a similar fee.

[12]   After the above approach, IRS alleges that ContainerCo and the Pinnacle group entered into an arrangement or arrived at an understanding that they would respectively charge an access levy on each reefer container serviced at their depots by an external service provider, and the levy would be for similar amounts.

[13]   In or around April and May 2018, ContainerCo and the Pinnacle group each imposed an access levy on IRS at $3.50 per container:

(a)ContainerCo’s agreement was dated 18 April 2018.

(b)Pinnacle group agreement was dated 8 May 2018.

[14]   On 1 April 2022, ContainerCo increased its levy to $5 per container at depots with no towers and $7 per container at depots with towers on site. By this time, Pinnacle had lost its contract with the shipping line that used SRS for PTI Services at ContainerCo depots. Pinnacle was not notified of the change in ContainerCo fees, and it did not change its own fees.

[15]In 2023, Qube acquired Pinnacle and its subsidiary companies.

[16]   With effect in early 2024, the defendants advised IRS that they were imposing access levy increases:

(a)On 29 November 2023, ContainerCo advised IRS that it was increasing its access levy from $7 (for depots with towers) to $15.50 per container, effective from 1 January 2024 (delayed to 1 February 2024).

(b)On 4 March 2024, Qube advised IRS that it was increasing its access levy from $3.50 to $15 per container, effective from 1 April 2024 (delayed to 15 April 2024).

[17]   On 9 May 2024, IRS filed this interim injunction application. On 14 May 2024, IRS confirmed that, despite the wording of its interim injunction application, it was not seeking to prevent the full access levy from being invoiced during the interim. IRS was only seeking an interim order that the defendants are not to prevent access to IRS’s employees or contractors on the grounds that IRS has not paid access levy amounts above the previously charged rates, namely:

(a)for ContainerCo, above $7 per container; and

(b)for Qube, above $3.50 per container.

Substantive claims

[18]   The plaintiff summarises its four causes of action as follows (grouping the first two together):

(a)The levy was introduced and has been set as a result of collusion in breach of ss 30 and 27 of the CA (causes of action 1 and 2):

IRS alleges that the defendants are monopolists in the market in which IRS provides its PTI Services because, in order to provide those services, IRS must have access to where its customers (the shipping lines) store their reefers. The defendants compete against each other to win business from the shipping lines to provide PTI Services. The plaintiff says the facts support an inference of collusion between the defendants to introduce the access levy or “TAL Fee” and to ensure that it was an “industry standard”.

(b)The levy is an unlawful price squeeze in breach of s 36 of the CA (cause of action 3):

Access to the depots is a “bottleneck” facility (like access to rental car concessions at an airport in Mutual Rental Cars6). The defendants are also vertically integrated — IRS relies on them for access but also competes against them to supply PTI Services. The access levy is a classic “price squeeze” where a vertically integrated company imposes an access charge that squeezes out competitors in the downstream market (as in Data Tails7).

6      Auckland Regional Authority v Mutual Rental Cars (Auckland Airport) Ltd [1987] 2 NZLR 647 (HC) at 680: “… a gateway facility is likely to beget a separate and identifiable geographic market and that exclusion from that market by means of a gateway, prima facie indicates anti-competitive intention”. However, as noted in dictum immediately before that comment, the principle was said to be delimited to “essential facilities” that cannot practicably be duplicated by would-be competitors, such that those in possession of them must allow them to be shared on fair terms.

7      Telecom Corporation of New Zealand Ltd v Commerce Commission [2012] NZCA 278 at [2]: “A price squeeze occurs when a dominant vertically integrated supplier sets prices in the upstream wholesale market in a manner that prevents equally or more efficient competitors from profitably operating in the downstream retail market”. In that case, one of the appeal issues at [125]–[143] was whether the High Court had found an obligation to supply (equivalent to the essential facilities doctrine). At [132], the Court of Appeal found no such error, because the High Court did not hold that Telecom had an obligation to supply independent of a s 36 counterfactual analysis. The Court also considered the Efficient Component Pricing Rule (ECPR), concluding at [80]–[88] that the validity of ECPR as a pricing model depends on its underlying assumptions, and it does not necessarily provide a safe harbour — ECPR is not, by itself, sufficient to ensure efficiency.

(c)The access levy is unconscionable in breach of s 7 of the FTA (cause of action 4):

IRS says the reasons for introducing, and then increasing, the access levy have been inconsistent, and it has been applied discriminatorily and unfairly. The access levy was first allegedly imposed to cover health and safety costs, but the reasons have since expanded to include recouping for infrastructure, which cannot be justified. It does not occur at any other depots throughout Australasia.

Competition law — legal principles

Market definition

[19]   Central to competition law claims under ss 27 and 36 is the definition of the relevant “market” or “markets”. Section 3(1A) of the CA states:

Every reference in this Act, except in section 36A, to the term market is a reference to a market in New Zealand for goods or services as well as other goods or services that, as a matter of fact and commercial common sense, are substitutable for them.

[20]   To delineate a market in any given case, the Court must select what emerges as the clearest picture of the relevant competitive process in the light of commercial reality and  the  purposes  of  the  law.8  Accordingly,  the  parameters  depend  on  the competition concerns, the sources and potential effect of market power, and structure of the industry concerned.9 This typically proceeds with an analysis of various dimensions:

(a)the products supplied and purchased (the product dimension);

(b)the geographic area from which the products are obtained, or within which the products are supplied (the geographic dimension);

8      Commerce Commission v Air New Zealand Ltd [2011] NZHC 1285, (2011) 9 NZBLC 103,318 at [124].

9      Todd Pohokura Ltd v Shell Exploration NZ Ltd [2015] NZCA 71 at [176].

(c)the level in the supply chain at which the parties operate (the supply chain level dimension);

(d)the different customer types (the customer dimension); and

(e)the time period within which the market operates (the time dimension).

[21]   Defining a market narrowly tends to make competition law breaches more likely. Too narrow a delineation may well create the appearance of more market power than in fact exists, and too broad a delineation may well create the appearance of less market power than in fact exists.10 For example, in Tru Tone Ltd v Festival Records Retail Marketing,11 retailers argued that each Top 50 album constituted a separate and unique market, in which the defendant distributor had the exclusive rights in New Zealand. The Court rejected a single-album market. The relevant market was held to be the New Zealand album market, in which the defendant competed with other distributors both for the acquisition and retention of rights to artists and labels and in the promotion of labels, artists and albums.

Section 27 — substantially lessening competition

[22]   Section 27 prohibits entering into and giving effect to arrangements or understandings that have the purpose, effect or likely effect of substantially lessening competition in a market.

[23]   To assess whether parties have entered into an arrangement or arrived at an understanding, the ultimate inquiry is focused on concepts of consensus and expectation. A finding that there was a consensus giving rise to an expectation that the parties would act in a certain way necessarily involves communication among the parties of the making of a commitment.12 A mere expectation (as distinct from an assumption of obligation, assurance or undertaking to act in a particular way) is

10     New Zealand Magic Millions Ltd v Wrightson Bloodstock Ltd [1990] 1 NZLR 731 (HC) at 748−749.

11     Tru Tone Ltd v Festival Records Retail Marketing Ltd [1988] 2 NZLR 352 (CA).

12     Lodge Real Estate Ltd v Commerce Commission [2020] NZSC 25, [2020] 1 NZLR 238 at [53]−[54].

insufficient.13 If a consensus involves the parties independently deciding to act in a certain way and independently forming an expectation that others will act in a similar way (conscious parallelism or following), then there is no arrangement.14

[24]   To breach s 27 the lessening of competition involved must be “substantial”, which is defined to mean “real or of substance”.15 New Zealand courts have usually adopted a counterfactual test to determine whether there is, or would be, a substantial lessening of competition, comparing the future state of competition with and without the impugned conduct.16

Section 30 — price fixing

[25]   Section 30 of the CA prohibits cartel arrangements, including price fixing. Section 30 provides that no person may:

(a)enter into a contract or arrangement, or arrive at an understanding, that contains a cartel provision; or

(b)give, or require the giving of, a covenant that contains a cartel provision; or

(c)give effect to a cartel provision.

[26]   A “cartel provision” is defined in s 30A(1) to be a provision, contained in a contract, arrangement, understanding, or covenant that has the purpose, effect, or likely effect of one or more of the following in relation to the supply or acquisition of goods or services in New Zealand:

13 At [41].

14 At [57].

15     Commerce Act 1986, s 2(1).

16     Matthew Barber (ed) Commercial Law in New Zealand (online looseleaf ed, LexisNexis) at [33.10].

(a)price fixing;

(b)restricting output; and

(c)market allocating.

[27]   Price fixing is defined in s 30A(2) to mean fixing, controlling or maintaining the price (or any discounts, allowances, rebates or credit) of goods or services supplied or acquired by the parties in competition with each other.

[28]   Price fixing may exist from an arrangement or understanding about one pricing component, even when the size of the adjustment is not set in definite terms:

(a)In Commerce Commission v Caltex NZ Ltd, an agreement between competitors to stop offering free car washes bundled with petrol was held to amount to “controlling” and therefore price fixing.17

(b)In Lodge Real Estate Ltd v Commerce Commission, when faced with a price increase for listing on Trade Me, competing real estate agencies reached a consensus about adopting a default vendor-funded model. The Supreme Court held that this was price fixing because “controlling” may occur when the arrangement in question has the purpose or effect of “restraining a freedom that would otherwise have existed as to the price to be charged”.18

(c)In Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd, an arrangement relating to fuel surcharges permitted the airlines to derive additional revenue. By agreeing the surcharges, they could increase overall charges without competing in relation to that increase, which constituted price fixing.19

17     Commerce Commission v Caltex NZ Ltd (1999) 9 TCLR 305 (HC) at 311.

18     Lodge Real Estate Ltd v Commerce Commission, above n 12, at [146].

19     Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd [2016] FCAF 42, (2016) 244 FCR 190 at [567].

Section 36 — market power

[29]   Section 36 of the CA originally regulated the conduct of persons who occupied a “dominant position in a market”. In 2001, the threshold was lowered to a person with “a substantial degree of power in a market”. It prohibited such a person from taking advantage of that power for a proscribed purpose. “Taking advantage” was assessed against a hypothetical counterfactual of how they would have behaved in a workably competitive market.20

[30] Major amendments to s 36 took effect on 5 April 2023. Section 36 now prohibits a person or firm with a substantial degree of market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in that market or any other market. Section 36 now aligns with the Australian misuse of market power test in s 46(1) of the Competition and Consumer Act 2010 (Cth) (as amended in 2017).

[31]   There is no case law applying the new test in s 36, but the key terms are familiar to the extent that they also arise under s 27.

[32] The first case under the new Australian provision involved allegations that a port company (Tasmanian Ports Corporation Pty Ltd, (TasPorts)) engaged in conduct to prevent a provider of marine pilotage and towage services from entering the market.21 In 2021, TasPorts settled the claim with the Australian Competition and Consumer Commission, agreeing that it had contravened s 46(1) of the Competition and Consumer Act (Cth) by engaging in conduct that had the likely effect of substantially lessening competition in the markets for towage and pilotage services in northern Tasmania. A declaration was made by consent, recording that a breach arose from maintaining to Grange Resources Ltd (Grange) that it was required to pay a new “marine precinct tonnage charge” (MPTC) for vessels calling at Port Latta, in circumstances where:

20 Commerce Commission v Telecom Corporation of New Zealand Ltd [2011] NZSC 111, [2011] 1 NZLR 577 at [42]; and Turners and Growers Ltd v Zespri Group Ltd (2011) 13 TCLR 286 (HC) at [341]–[345].

21 Australian Competition and Consumer Commission v Tasmanian Ports Corporation Pty Ltd

[2021] FCA 482, discussed in Commercial Law in New Zealand, above n 16, at [35.1.1].

(a)TasPorts first sought the MPTC from Grange after Grange had notified TasPorts that it would cease acquiring marine services from TasPorts at Port Latta and begin acquiring those services from Engage Marine;

(b)there was a real commercial likelihood if Grange agreed to pay the MPTC that this would have the effect of raising Grange’s future costs of acquiring services from Engage Marine compared with if there had been no MPTC;

(c)TasPorts did not, without Grange’s agreement, have a legal right to require Grange to pay the charge; and

(d)TasPorts sought to impose the MPTC without having conducted a full assessment of the costs to TasPorts of providing the services that TasPorts would need to provide at Port Latta in order to perform its responsibilities.

Fair Trading Act — legal principles

Unconscionable conduct

[33]   Following amendments that took effect on 16 August 2022, s 7 of the FTA prohibits a person in trade from engaging in conduct that is unconscionable. “Unconscionable” is  not  defined  in  the  FTA.  However,  ss  7  and  8  are  based on provisions in the Australian Competition and Consumer Act 2010, so Australian cases will be relevant.

[34]   Section 8 sets out a non-exclusive list of matters to which the Court may have regard, including (among other things):

(a)the relative bargaining power of the person engaging in the conduct (the trader) and any person (whether or not an identified individual) who is disadvantaged, or likely to be disadvantaged, by the conduct (an affected person);

(b)the extent to which the trader and an affected person acted in good faith; and

(c)whether, taking account of the particular characteristics and circumstances of an affected person, the affected person or the affected person’s representative was reasonably able to protect the affected person’s interests.

[35]   Although uncommon, there are examples in Australia of an unconscionable conduct claim being brought concurrently with a competition law claim for the same conduct — the policy underlying the two pieces of legislation is related.22

Serious issue to be tried

[36]   The defendants’ position is that the substantive claims lack merit. They say this is so clear that I should find there is no serious issue to be tried, at least in respect of the allegations of collusion:

(a)The only evidence supplied in support of the first cause of action — the allegation of cartel conduct — is tentative, hearsay, and circumstantial. The Commerce Commission has been provided with the allegations, investigated, and found no evidence in support.

(b)The second, third and fourth causes of action all rely on the premise that it is anti-competitive for the defendants to charge the access fees. That is not seriously arguable because:

(i)The relevant market would not be defined as narrowly as each container depot (the geographic dimension). With any broader definition of market, the defendants do not have a substantial degree of market power, and in any event the shipping lines

22 See Damiano Fritz “Two sides of the same coin: Reigniting the interface between Australian competition and consumer protection law” (2022) 29 CCLJ 201 at 217218, referencing Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427, (2006) 236 ALR 665, which includes an allegation of price fixing.

have countervailing market power and the potential for new entry also constrains them.

(ii)Charging an access levy does not have, nor would it likely have, the effect of substantially lessening competition in the market (a fee has been charged since 2018 and strong competition remains).

(c)In any event, the access levies are fair. The defendants need to provide services to facilitate useful and safe access to IRS. The access levies are the price properly charged for these services.

(d)The plaintiff is time-barred from pursuing any allegation that the defendants breached ss 27 or 30 by conduct prior to 9 May 2021 (three years before this proceeding was filed). Section 82(2) of the CA requires an action to be commenced within three years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered. The allegation of collusion relies on conduct in 2018. The plaintiff’s affidavits say they suspected collusion in 2018 but decided not to pursue the matter. The defendants say this bars the plaintiff from relying on that conduct now, with any recent conduct simply constituting (if anything) lawful following.

[37]   Contrary to the defendants’ position, I accept there is a serious issue to be tried. In an interim injunction hearing of this type, the Court cannot resolve conflicts of evidence on affidavits as to facts on which the claims may ultimately depend.23

(a)I do not accept that the allegations of collusion are unarguable. At trial, even if direct evidence is unavailable, it may be possible to infer an infringing contract, arrangement or understanding from circumstantial evidence, so long as the Court is mindful of the seriousness of the

23 Blue Bubble Alliance Ltd v Taxis Palmerston North Ltd [2019] NZHC 1970 at [17], referencing American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 407; Health Club Brands Ltd v Colven Botany Ltd [2013] NZHC 428 at [9]; and Villa Maria Wines Ltd v Montana Wines Ltd [1984] 2 NZLR 422 (CA) at 425.

allegations and assesses the alternative potential explanation of non-infringing parallelism.24 Even putting to one side the allegations of a witness with only indirect involvement, the timing, closely matched amounts and commercial impact of the access levy changes in 2018 and in 2024 (relative to the cost of PTI Services) call for further explanation. One potential inference about the defendants’ incentives and ability to impose the increase (in contrast with others in Australasia) is a consensus expectation that this would not cost them competitively and/or that they have market power. The fact that the Commerce Commission has investigated and taken no action indicates their view that the disclosed emails would not constitute sufficient evidence on their own, but I still do not regard that as conclusive. There are many instances in which a private action by a competitor has gone on to succeed despite such circumstances. So long as there is a proper basis for the claim to proceed (which I find there is), the plaintiff is entitled to procedures such as discovery and ultimately to witness cross-examination to advance its case.

(b)The statement of claim seeks declarations about the legality of charging any access fee. However, the claim is drafted broadly enough to catch the imposing of access levies higher than a fair amount, and the interim injunction order made by Moore J on 13 August 2024 focused on not denying access for non-payment of any 2024 increases to the access levy.25 That remains my focus for the interim injunction application.  In any event:

(i)Contrary to the defendants’ expert evidence, the plaintiff has its own expert economist expressing his view that the markets should be defined narrowly. Faced with this conflicting evidence, I consider there is a real possibility that the competitive processes calling for examination in this case involve the ability of shipping lines to seek a competitive supply

24     Commerce Commission v Caltex New Zealand Ltd, above n 17, at 314.

25     IRS International Pty Ltd v ContainerCo (NZL) Ltd [2024] NZHC 2266.

of PTI Services where their reefers are stored. In any event, the plaintiff also relies on expert evidence that it would succeed in its competition claims with regional markets (because the defendants between them have substantial market power, particularly in Auckland and Tauranga, and new entry is difficult and not sufficiently timely26). Even without applying any “essential services” doctrine or finding an obligation to supply access per se, ss 27 and 36 can apply to prevent an access levy from being imposed with a purpose or effect of deterring or driving out competition, as demonstrated by Australian Competition and Consumer Commission v Tasmanian Ports Corporation Pty Ltd.27 In my view, the competition analysis by the defendants fails to give sufficient weight to the role of the shipping lines as another party in the relevant market or markets, including whether their existing terms with depot owners allow the imposition of extra access levies, given that there has been a long history of such customers having the option of using independent PTI Service providers. These disputed market definition and competition dynamic issues are incapable of determination in an interim injunction context.

(ii)The question is not just whether any access fee would substantially lessen competition, but whether the access fee sought to be imposed in 2024 would have that effect. That is a more than 200 per cent increase, at levels that are significant relevant to the value for the PTI Services themselves. The fact that there has been competition before the change cannot prove that there will be competition after it.

26 See similar considerations in Commerce Commission v New Zealand Bus Ltd (2006) 3 NZCCLR 111 (HC) at [161]–[182], upheld in New Zealand Bus Ltd v Commerce Commission [2008] 3 NZLR 433 (CA) at [100]–[102].

27  Australian Competition and Consumer Commission v Tasmanian  Ports Corporation Pty Ltd,  above n 21, although I acknowledge this was a settlement and not fully argued. See also n 7 above.

(c)Whether the access levies are fair is an intensely factual issue, on which I have insufficient evidence to reach any conclusions on an interim basis. I acknowledge the assertion that both defendant groups made independent assessments with regard to the Efficient Component Pricing Rule (ECPR).28 If that is the case, then the coincidence of identical, then near-identical, pricing imposed at substantially the same times will require further exploration. In my view, the analysis will also need to account for the shipping lines being the primary customers who contract for the infrastructure costs and related services that they intend to obtain while their reefers are located at the depots.

(d)I do not accept that the time bar issues are so clear cut. The defendants still assert that there is no evidential basis for believing there was any collusion, and that none in fact existed. If so, then the plaintiff can hardly be expected to have discovered it already.

[38]   For the above reasons, I conclude there is a serious issue to be tried. Therefore, the determinative factors will be balance of convenience and overall justice considerations.

Balance of convenience and overall justice

[39]   The plaintiff submits that the overall balance of convenience and interests of justice favour the application being granted for the following reasons:

(a)IRS is stuck in the middle, dictated to by the large depots and the shipping lines. The shipping lines are now refusing to pay the levy at all unless it is within their respective agreements with the defendants.

(b)If IRS increases its prices to cover the levy, then IRS’s pricing will no longer be competitive as a PTI Service provider. If IRS must pay the full levy in the interim (throughout the period prior to trial), then:

28     See n 7 above.

(i)it will have short-term cash flow problems;

(ii)it will not be financially viable for IRS to continue to offer  PTI Services in New Zealand through to the substantive hearing;

(iii)if IRS exits the market for PTI Services, expert technicians will need to be redeployed or made redundant, assets will be sold and it is highly unlikely IRS will be able to re-enter the market for PTI Services;

(iv)IRS will suffer loss on exiting the New Zealand market; and

(v)IRS will therefore, effectively, be deprived of the opportunity to have its claims heard and determined in Court.

(c)Even if IRS were prepared to accept the financial risk until the substantive trial, the impact of the levy being charged in the interim would result in a significant change to the market, meaning it would be difficult to restore IRS to its current position if it were to win at the trial. To survive during the interim period, IRS would be unable to compete with the defendants to win new business given the pressure on its margins. IRS would need to be more defensive and focus on retaining current customer volumes and forego competing for new work. Shipping lines looking to “test” the market would be deprived of choice of provider. It would be difficult to calculate IRS’s loss of profits from these lost opportunities.

(d)There is a very substantial public interest in preventing conduct that presents a real risk of substantially lessening competition. Interim injunctions have been used to protect market competition pending trial in circumstances of alleged anticompetitive mergers and alleged passing off.

(e)The shipping lines (and their customers) will ultimately bear the consequences of the 2024 increases, given they will be deprived of:

(i)after-hours repair services;

(ii)access to the leading technicians and levels of service;

(iii)the ability to choose their own PTI Service provider; and

(iv)a number of them will be vulnerable to fees and prices imposed by the defendants — they would, in effect, be “held hostage”.

(f)Under the proposed terms of the injunction, IRS would continue to pay the existing levies ($7 and $3.50 respectively). Damages relating to the 2024 increases, not being recovered until after the substantive hearing, will be readily quantifiable. They are currently being invoiced to IRS.

(g)Damages will be payable, either by:

(i)IRS meeting the damages award; or

(i) the parent of  IRS,  Daikin  Industries  Ltd  (Daikin),29  being willing to meet the award by way of security, should the Court consider this necessary.

(h)The defendants are large, well-resourced businesses. Both defendants have provided evidence that they are in strong financial positions. There is therefore no real prejudice to the defendants in granting the injunction.

29     Daikin is listed on the Tokyo Stock Exchange and has a market capitalisation of more than NZD 69 billion.

[40]   The defendants argue the opposite, and say the overall balance of convenience and interests of justice favour the application being denied:

(a)Faced with a request for security for the undertaking, IRS now admits that it could pay and continue to operate, although it would be taking a risk in the meantime. The financial risk of being wrong must be borne by one party or the other, regardless.

(b)IRS says there would be irreversible market changes if the interim orders were not granted. However, those would be choices (risk mitigation strategies in case IRS loses). IRS could choose to pay the access levies and keep its prices as they are, if it is confident of its position.

(c)IRS says that it is “sufficiently profitable across its other business lines” to meet a liability for damages if the injunction were granted but IRS loses at trial. It must follow that IRS can afford to fund the cost of paying but not passing on the access levies pending trial. That is simply a cashflow issue, which IRS’s evidence shows it can manage.

(d)If IRS is ultimately successful, then it will be compensated by way of damages, which the defendants have proven they can pay.

(e)The status quo is that the defendants, as with any business, can charge what they want for their services and that IRS can only obtain those services by paying the price set. The Court should be cautious about granting a mandatory injunction that interferes with this freedom of contract, even on an interim basis.30

30     McDonald Motors Ltd v Christchurch International Airport Ltd (1991) TCLR 407 (HC) at 15–16.

(f)Granting an interim injunction that artificially restrains the price the defendants can charge IRS has market consequences too. Allowing IRS to provide services without facing fair cost allocations allows IRS to undercut the defendants’ prices, resulting in market share changes that will be hard to quantify and reverse.

(g)If the defendants are not allowed to charge users for their services and infrastructure, they will have less funding and less incentive to invest in the necessary infrastructure, to the detriment of all customers.

[41]   My assessment is that the overall balance of convenience and the interests of justice favour granting the interim injunction application, on the basis that security is provided by or on behalf of the plaintiff:

(a)The financial amounts at stake in the interim injunction application are estimated to be approximately [redacted], in terms of the invoiced effect of the 2024 increases up until January 2028, based on recent volumes continuing. That is the amount of the 2024 increases that IRS expects it will be invoiced prior to trial, but which it refuses to pay because it contends those increases are unlawful and unconscionable and cannot be passed on to its shipping line customers.

(b)If I am minded to require it, counsel for the plaintiff confirmed that Daikin is prepared to pay the amount of [redacted] as security into Russell McVeagh’s trust account, with any resulting interest also held as security.

(c)On the other hand, even though it is financially equivalent, the plaintiff’s counsel advised me that Daikin is not prepared to pay the corresponding sum to IRS, to support full payment of the invoices as they fall due (in other words, covering the disputed 2024 increase component). This is even though IRS will be able to claim back reimbursement from the defendants if those increases are held to be unlawful or unconscionable.

(d)IRS says its competitive decisions for trading between now and the trial depend on whether it is required to pay the invoices in full. It says that if the interim injunction is not granted, then IRS’s pricing will no longer be competitive as a PTI Service provider, and it may need to exit the market because it cannot tolerate that risk. Of course, such a step would have corresponding implications for IRS’s income and the strength of its undertaking as to damages.

(e)It is difficult to analyse the above position of both Daikin and IRS, given that the distinctions appear irrational. The risk of the substantive outcome does not change depending on the interim orders. The value of the proposed security is financially equivalent to payment of the disputed 2024 increases. Parties should not be permitted to game the interim position by making distinctions without a difference.

(f)Despite those concerns, I am persuaded that these are practical problems faced by IRS. Whether mathematically rational or not, a separate legal entity parent is entitled to choose to support its subsidiary on one basis (security for a claim alleging competition law breaches that might have multi-jurisdictional precedent implications across the group), and not another (trading support for regular invoice payments).

(g)Accordingly, I accept that the plaintiff will be able to meet any damages claim if unsuccessful (particularly with the benefit of the security that has been offered by its parent for the outcome of the litigation), but its assessment of interim trading risks and cashflow would be different if the injunction is not ordered.

(h)Meanwhile, the defendants do not financially depend on immediate payment of the 2024 increases. They have operated until this year without them, and there is no suggestion that the delay in receiving payment (if successful) would impact their ability to continue trading. By continuing to provide PTI Services, it is the plaintiff that takes the risk that the full invoiced amount is payable. If the defendants are right,

there will be no free-riding for those supplies (the substantive outcome will be a finding that the invoiced amounts are payable in full), so the defendants will have no right to seek damages based on a different expected market impact. Security provided by Daikin will adequately protect the defendants’ position.

(i)I consider the impact on non-parties and the public interest to be important. To my mind, the shipping lines could reasonably expect that the status quo prior to the 2024 changes should continue in the interim, so that they have ongoing access to existing after-hours repair services and their choice of PTI Service provider at agreed standing rates,31 at least through the duration of their existing arrangements with the depot owners. This best preserves the current competitive position and will not lead to short-and medium-term employment disruptions that could become structural if skilled technicians might move offshore.

(j)I have considered arguments that the injunction orders amount to a mandatory injunction. I do not find those arguments compelling. The defendants are only precluded from denying access for non-payment of any invoiced increases in access levies beyond their 2023 rates. The defendants may continue to invoice, but enforcing payment for the increases is deferred until the merits are determined (a purely financial impact, for which they will have security). Otherwise, the basis on which the defendants provide access, and their ability to deny access on non-financial grounds (such as for health and safety reasons) remains unchanged.

(k)In my view, the balance of the defendants’ arguments (artificially restraining price, incentives to invest) confuse the interim position with the substantive outcome.

31     See McGruddy v Spotless Facility Services (NZ) Ltd [2020] NZHC 2471 at [77].

[42]   Overall, I consider that granting the injunction in the terms set out below best improves the chance of the Court being able to do justice after a determination of the merits at the trial. There is no basis for believing that it will cause irremediable prejudice to the defendants (given security for the underpayments). Conversely, failing to grant the orders would lead to cash flow risks and pressures that might cause the plaintiff to exit the market prior to trial, to the detriment of its employees and the shipping lines.

Suppression

[43]   Suppression orders were sought in respect of the name of the plaintiff’s witness who has made factual allegations of collusion, along with orders for sealing of the Court file. The evidence is not confidential as against the other parties, so the question is only relevant in terms of public access.

[44]   I am not satisfied that such orders are necessarily appropriate. Rather, I consider that the position is already adequately protected by the Senior Courts (Access to Court Documents) Rules 2017. Under those rules, the balancing exercise for assessing a non-party application depends on the particular stage of the proceedings and the reasons for the request. Parties are given notice of any application to search the Court file and the opportunity to object. There is no such issue requiring determination now, since I have not referred to the witness’s name in this judgment (it is immaterial).

Result

[45]   I require security for the plaintiff’s undertaking as to damages in the sum of [redacted] to be paid into Russell McVeagh’s trust account by 5 pm on 16 December 2024, receipt of which Russell McVeagh must confirm to the defendants. That sum must be placed in an interest-bearing account, to be held as security for the plaintiff’s undertaking as to damages, and only disbursed in accordance with a Court direction in this proceeding.

[46]   Subject to the plaintiff’s undertaking as to damages and payment of security as set out above, I order that, until the substantive determination of this proceeding or further order of the Court, the defendants must not:

(a)take any steps to enforce payment of any increase in the defendants’ fees to IRS above the previously charged rates of $7 per reefer for ContainerCo and $3.50 per reefer for the Qube Group; or

(b)prevent IRS from having access to the defendants’ container depots for the purpose of servicing its customers’ reefers, if the reason is solely non-payment of any increased fees that fall within the scope of subpara (a) above.

[47]   IRS is entitled to costs. If costs cannot be agreed, memoranda may be filed by IRS within 10 working days of the delivery of this judgment, and by the defendants within 10 working days thereafter. I will then determine costs on the papers.

O’Gorman J

Solicitors/Counsel:

Russell McVeagh, Auckland

J D Every-Palmer KC, Wellington Dentons, Auckland

D J Cooper KC, Auckland Webb Henderson, Auckland R S Reed KC, Auckland