CATCHWORDS TRADE PRACTICES - s.46 Trade Practices Act - application for interlocutory injunction - Railways Commission with effective statutory monopoly for transport of goods in regulated geographical areas - Transport Act 1966 - price competition by Commission in non-regulated areas - predatory pricing - abuse of monopoly power - whether Crown instrumentality - whether threshold question - extent of Ministerial control - Government Railways Act (WA) 1904-1982 - serious question to be tried - balance of convenience —- third party rights. Trade Practices Act 1974 s.46 Transport Act 1966 (WA) Government Railways Act 1904 (WA) Bullock v The Federated Furnishing Trades Society of Australasia (1985) 5 FCR 464 at 472 bradken Consolidated Limited v The Broken Hill Proprietary Company Limited (1979) 145 CLR 107 Hughes v Western Australian Cricket Association (Ine) {1986] ATPR 40-676 Murphy v Lush (1986) 60 ALJR 523 Crouch v Commissioner for Railways (Qld) (1985) 62 ALR 1 Townsville Hospitals Board v Council of the City of Townsville (1982) 149 CLR 282, 288 Re Australian Performing Right Association Limited's Reference: Re Australian Broadcasting Commission (1982) 45 ALR 153, 158 Springdale Comfort Pty Ltd v E ectrical Trades Union of Workers (WA Branch) Perth [1986] ATPR 40-694 at 47,623 Re_ Queensland Co-Operative Milling Association Limited (1976) 25 FLR 169 Re Tooth & Co. Limited and Tooheys Limited (1979) 39 FLR 1 at 39 WAG 126 OF 1986 OD TRANSPORT PTY LTD v THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION FRENCH J. PERTH 24 DECEMBER 1986 Suchen Q Se MEA IN THE FEDERAS, COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. WAG 126 of 1986 BETWEEN: OD TRANSPORT PTY LTD Applicant and THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION Respondent MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 24 December 1986 WHERE MADE: Perth THE COURT ORDERS THAT: 1. The motion for interlocutory relief is dismissed. 2. Costs of the motion be reserved with liberty to the Respondent to apply for a final order as to the costs of the motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. = (See also Order 37 rule 2(3).) IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION NO. WAG 126 of 1986 BETWEEN: OD TRANSPORT PTY LTD Applicant and THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION RESPONDENT CORAM; FRENCH J. 24 DECEMBER 1986 REASONS FOR JUDGMENT OD Transport Pty Ltd (the applicant) is a company which, among other things, carries on the business of transporting grain to ports for export, It has carried on this activity, which comprises by far the greater proportion of its business, for some twenty years. The provision of services for the transport of goods in Western Australia is conducted within a regulatory framework created by the provisions of the Transport Act 1966 (WA). The Nature of that regulatory framework will be elaborated later in these reasons. In or about September 1986, tenders having been called by the Minister for Transport, the applicant won a contract for 2. the transport of bulk grain by road from certain nominated recelval points operated by Co-Operative Bulk Handling Limited to Albany and Esperance. One of the unsuccessful tenderers was the Western Australian Government Railways Commission, the respondent in these proceedings. The respondent is said to have what amounts to a statutory monopoly for the transport of grain in certain areas of the State designated by the applicant as "the regulated areas". This monopoly does not exist in other areas which are referred to by the applicant as the "deregulated areas". The parts of the south west of the State to be serviced by the applicant under its contract are all within deregulated areas and are referred to as "the contract areas". The respondent has risen to the challenge posed by its defeat in the tender process by offering to farmers in the contract areas a complete paddock to port road and rail grain transport service. It has priced the total service so offered at levels which effectively undercut the applicant's prices. 3. The applicant says that the prices offered do not reflect fair competitive activity on the part of the respondent. It says that the price of the respondent's service 1s so low that it must be intending to operate the farm to rail head, i.e. the road component, of 1ts service at a loss. This, it contends, amounts to an abuse of market power by the respondent and a contravention of s.46 of the Trade Practices Act. The applicant has instituted an application to this court under the provisions of the Trade Practices Act in which it claims injunctions and damages against the respondent. The application and a supporting affidavit were filed in this Court on the afternoon of Monday, 22 December 1986 and a claim for interlocutory relief, included in the application, was listed for hearing at 3 p.m. on that day. The respondent had on the afternoon of Friday, 19 December, been given a draft of the affidavit to be relied upon by the applicant. Argument on the claim for interlocutory relief proceeded at 3 pm, by which time the respondent had secured representation through the office of the State Crown Solicitor. ' Argument continued on 23 December from 11 a.m. until 3.45 pm. During that time a second affidavit was tendered by the applicant. 4, At the conclusion of the argument I indicated that I would consider the matter overnight and give a decision on 24 December at 3 pm. My decision and the reasons for it were delivered orally on 24 December From a draft which, subject to minor corrections, I now publish. The application raises important questions of law and difficult questions of fact. In the circumstances it is no criticism of counsel and solicitors for the parties to say that the matters of law have not had the degree of comprehensive argument which they plainly deserve. Nor in the circumstances can it be said, that they have received the careful and extended consideration that their final determination in this court will require. As to the questions of fact, the evidentiary material is, as so often is the case in claims for interlocutory relief, scanty and incomplete. It is for such reasons that the court has on previous occasions said that in hearing claims for interlocutory relief it does not decide finally any issue in the case. The views which are expressed at this stage of the proceedings are expressed only for the purpose of deciding the motion. 5. The admissibility of evidence at the final hearing 15 regulated by rules which are not the same as those applicable at the interlocutory stage. What is accepted then as evidence before the court may be different from that which is admitted for the purposes of these proceedings - Co-Operative Bulk Handling Limited v Waterside Workers Federation of Australia (1983) 51 ALR 79, 87 per Lockhart J., Barneys Blu-Crete Pty Ltd v Australian Workers Union (1979) 43 FLR 463, 465-66 per Northrop J. It is now well established that an applicant for unterlocutory relief must satisfy the court that there is a serious question to be tried and that the balance of convenience favours the grant of the relief - Epitoma Pty Ltd v Australasian Meat Industry Employees' Union (No.2) (1984) 54 ALR 730 at 734 in the judgment of the Full Court. See also Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJR 425 (Gibbs CJ), Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJR 283 at 284 (Brennan J.), State of Queensland v Australian Telecommunications Commission (1985) 59 ALR 243 at 244 (Gibbs CJ) and Castlemaine Tooheys Limited v State of South Australia (High Court Unreported Decision of Mason ACJ. delivered 3 October 1986). It is also I think, appropriate to say that the two necessary conditions for the grant of interlocutory relief are not independent of each other:- '\ 6. ",.ean apparently strong claim may lead a court more readily to grant an injunction when the balance of convenience 1s fairly even. A more doubtful claim (which nevertheless raises "a serious question to be tried") may still attract interlocutory relief if there 1s a marked balance of convenience in favour of 1t." - Bullock v The Federated Furnishing Trades Society of Australasia (1985) 5 FCR 464 at 472 per Woodward J., Smithers and Sweeney JJ agreeing. Counsel for the respondent raised at the outset what he described as a threshold question, a question, he said, which went to the jurisdiction of the court to entertain this application. It was his submission that the respondent is a servant or agent of the Crown in right of the State of Western Australia. If that characterisation be correct in relation to the conduct complained of, then the Trade Practices Act has no application to the respondent for it does not bind the Crown in right of the State - Bradken Consolidated Limited v The Broken Hill Proprietary Company Limited (1979) 145 CLR 107. It, was further submitted for the respondent that the court could not, on a claim for interlocutory relief, deal with the jurisdictional issue as it would deal with the other questions before it in such a case. The Court, it was said, is obliged to resolve the jurisdictional issue at this stage of the proceedings and cannot limit itself to a consideration whether a serious question of law arises in that regard. 7. As a proposition of universal application that 1s not correct. Some questions which go to the jurisdiction of the Court May require extensive factual enquiry before they are resolved. According to the circumstances of the case it may be a desirable and practical course to adjudicate at the outset upon a jurisidictional question as a preliminary issue, but that is not the only way in which"jurisdiction may be determined. In Hughes v Western Australian Cricket Association (Inc) {1986} ATPR 40-676, the applicant instituted proceedings against the Western Australian Cricket Association (Inc) and a number of district cricket clubs together with the Cricket Council of Western Australia. The application invoked the jurisdiction of . this Court under s.86 of the Trade Practices Act and alleged a contravention by the respondents of s.45 of that Act. The contravention was said to have been associated with a decision to prevent the applicant from playing in grade cricket matches. An interlocutory injunction was granted restraining the respondents from taking action to interfere with the eligibility of Hughes for selection in certain grade matches. 8. Upon an application for extension of the injunction it was contended for the respondents that they were not corporations un the constitutional sense necessary to attract the application of the Trade Practices Act and that there was therefore no jurisdiction in the Federal Court to deal with any part of the applicant's claim. Although the application for an extension of the injunction was refused, the refusal was based upon the futility of continuing such relief by reason of factors which are not material for present purposes. Toohey J. did however hold that there was a serious question to be tried. The jurisdictional and constitutional issue of the proper characterisation of the respondents was part of that question. In refusing to grant the injunction his Honour said at 47,471:- "In summary then I accept that the causes of action pleaded raise a serious question to be tried. However I am of opinion that an extension of the injunction should be refused. Because I am of that view, I think it undesirable to express views about complex questions of law and fact, which views are more appropriately expressed in the context of a substantive hearing." It may be that 1n some cases the question of jurisdiction 1s predominantly one of law. 9. Certainly as put by counsel for the respondent, the character of the respondent is a matter to be determined entirely by reference to the statute by which 1t is established, namely the Government Railways Act 1904. It can be accepted that where a straight forward question of law arises at an interlocutory stage, it will in most cases, be proper to decide it then and there. In fact it has been said to be a general rule that such questions should be so decided - Karaguleski v Vasil Bros. & Co. Pty Ltd (1981) 1 NSWLR 267. Where however time does not permit a proper consideration of questions of law at the interlocutory stage, then the court should not decide them - Hortico (Australia) v Energy Equipment Co. (Australia) (1985) 1 NSWLR 345. ' In Murphy v Lush (1986) 60 ALJR 523 the High Court held, inter alia, that a serious question arose as to the validity -of the Parliamentary Commission of Enquiry Act 1986 but on the balance of convenience would not grant an interlocutory injunction restraining the Commission from proceeding with its enquiry into the conduct of his Honour the late Mr Justice Murphy... Determination of the character of a public corporation aS an agent or servant of the Crown may in some cases be a straightforward process. 10. The characterisation of the Commissioner for Railways of the State of Queensland which was raised in Bradken Consolidated Limited v Broken Hill Proprietary Company Limited (supra) was such a case. Indeed his character as an agent of the Crown was conceded. A powerful factor in favour of that characterisation and the concession was the language of s.8 of the Railways Act 1914-1976 (Qld) which provided:- "The Commissioner, representing the Crown, shall be a corporation sole by the name of "The Commissioner of Railways" and by that name shall have perpetual succession and an official seal which shall be judicially noticed, and shall be capable in law of suing and being sued, and shall have power to take, purchase, sell, exchange, lease, and hold land, goods, chattels and other property. The Commissioner, as such corporation, for all the purposes of any act, shall have and may exercise all the powers, privileges, rights, and remedies of the Crown." The nature of the Commissioner as an instrumentality of the Crown in right of the State of Queensland was reinforced by | the decision of the High Court in Crouch v Commissioner for Railways (Qld) (1985) 62 ALR 1, a case which was not cited in argument nor referred to in the oral delivery of these reasons. The provision in the Government Railways Act 1904 (W.A.) by which the Respondent is established, provides inter alia:- "8(1) For the purposes of this Act there shall be constituted a Commission under the name of The Western Australian Government Railways Commission. li. (2) The Commission shall be the permanent head of the Department, and, subject to the Minister except as provided in section 73 of this Act, shall be responsible for the administration of this Act. (3) The Commission shall consist of one person appointed by the Governor as Commissioner of the Western Australian Government Railways." There is, in the Act, no express legislative statement of the status of the respondent as an agent of the Crown. Counsel for the respondent nevertheless contends that by reason of various factors which can be determined upon an examination of the Act, it is plain that the respondent is an agent or servant of the Crown. The respondent is subject to extensive ministerial control in many of its activities. Examples of this control include:- 1. That it is responsible for the administration of the Act subject to the Minister (s.8(2)). . 2. That it may with the approval of the Minister make additions and improvements to any railway (s.14). 3. That it may with the approval of the Minister from time to time fix scales of charges relating to various services including carriage of goods and passengers (s.22). 4. Certain classes of contract the performance of which is likely to extend over 20 years must be ratified by the Minister before they can take- effect (sub-s.28(2)). 12. In Part IV of the Act relating to finance and accounts there are a number of provisions relied upon by the respondent as indicative of its status as an agent of the Crown. Its general borrowing powers are subject to the approval of the Minister. (s.54B) Where money standing to the credit of the respondent is insufficient at any time to meet expenditure incurred or proposed to be incurred by it in the performance of its functions, the Treasurer of the State 1s empowered to approve borrowings by the respondent from the Public Account of such amounts as_ the {Treasurer approves on such conditions as to repayment and payment of interest as he imposes. The power of the respondent to borrow moneys by the issue and sale of debentures or by the creation issue and sale of inscribed stock is subject to the approval of the Governor.(s.54F) ~—. " \ . - All moneys received by the respondent by way of rents tolls fares freights carriage fine or penalties or otherwise accruing from a railway are to be paid into the Public Account and form part of Consolidated Revenue (s.60). A power to lease railway property is conferred by s.62 but can only be exercised with the approval of the Governor. 13. The leasing of unused land or buildings is subject to ministerial approval. The extent of potential Ministerial control over the respondent in relation to the conduct complained of by the applicant, cannot be readily ascertained on the materials presently before the Court. The exercise by the respondent of its power to cause goods for conveyance by railway to be collected from places outside the limits of a railway (para. 28(1)(a)) and its power to enter into and perform contracts -for that purpose (para. 28(1){e)) is not necessarily subject to such control. Subsection 28(2) of the Government Railways Act provides:- "No contract made by the Commission pursuant to the powers conferred by subsection (1) of this section, the performance of which appears likely at the time of the execution of the contract to extend over a-period of . more than five years shall take or have effect unless ~ (a) being a contract the performance of which appears to be likely to extend for a period of twenty years or less, it is ratified by the Minister; or (b) in any other case, it is laid before each House of Parliament as though it were in fact a regulation to which the provisions of section 36 of the Interpretation Act 1918, applied and neither House ~ of Parliament passes a resolution disallowing the contract, of which resolution notice is given, within 14 sitting days (whether or not those days or some of them, do not occur in the same session of Parliament or during the same Parliament as that in which the contract is laid before such House) ." 14. There 1s nothing to suggest that the contracts in this case are of the class contemplated by sub-s.(2). Ministerial control of the scales of charges made by the respondent 1s provided for in s.22 as already noted but is subject to the following proviso as set out in that section:- "Provided, however, that the Commission, or any officer of the department duly authorised by the Commission, may from time to time fix special scales of charges to be paid ain lieu of the ordinary charges upon special occasions, or for such times and in respect of such railways or parts of a railway as it thinks fit: Provided also that the powers conferred upon the Commission by this section may, from time to time, be exercised by the Governor, and any charges, conditions, and regulations fixed or imposed by the Governor shall supersede the charges, conditions or regulations fixed or imposed by the Commission." It does not appear from the materials before the Court nor has the Court been informed whether in fixing the prices it } has for the provision of farm to port grain transport services in the deregulated areas, the respondent has exercised an independent discretion or acted under a Ministerial or gubernatorial approval. The answer to that question may be a matter of some significance to the determination of the jurisdictional point made by the respondent. For a public corporation may be given the immunities and privileges of the Crown for one purpose and not for another. - wee we 15. Townsville Hospitals Roard v Council of the City of Townsville (1982) 149 CLR 282, 288 per Gibbs CJ, Murphy, Wilson and Brennan JJ. agreeing. If the respondent were, in the impugned conduct, exercising an independent discretion not subject to Ministerial control then it may not have been acting as an agent of the Crown. It was submitted for the applicant that there is in the Government Railways Act no express statement that the respondent is the agent of or represents the Crown in right of the State of Western Australia. That this is a relevant factor in the determination of the characterisation of a public corporation is borne out by the judgment in the Townsville Hospital Board case at 291 where it was said by the Chief Justice:- "Tt has more than once been said in this Court that "there is evidence of a strong tendency to regard a statutory corporation formed to carry on _ public functions as distinct from the Crown unless Parliament has by express provision given 1t the character of a servant of the Crown": Launceston Corporation v Hydro Electric Commission (1959) 100 CLR 654 at 662; State Electricity Commission (Vict) v City of South Melbourne (1968) 118 CLR 504 at 510. All persons should prima facie be regarded as equal before the law, and no statutory body should be accorded special privileges and immunities unless it clearly appears that it was the intention of the legislature to confer them. It is not difficult for the legislature to provide in express terms that a corporation shall have the privileges and immunities of the Crown, and where it does not do so it should not be readily concluded that it had that intention." 16. In the case of the Townsville Hospital Board, the Board was subject to Ministerial approval in relation to the borrowing of money or the making of financial arrangements for the purposes of proposed works but was not subject to such controls in respect of the conduct of the works. In this regard Gibbs CJ. said at 291:- "The fact that a number of ministerial approvals must be obtained if the Board needs to borrow or raise money or make financial arrangements for the purposes of a proposed work does not indicate that the Board in . carrying out the work is acting for the Crown. The Board cannot be directed to do the work, and if it does borrow or raise money for the purpose the Board and not the Crown is liable in case of default. Although in some respects a Hospital's Board is subject to stricter controls than those which governed the statutory bodies in Metropolitan Meat Industry Board v Sheedy (1972) AC 899; Grain Elevators Board (Vict) Vv Dunmunkle Corporation (1946) 73 CLR 70 and the Gladstone Town Council v Gladstone Harbour Board (1964) Qd.R. 505, there is in my opinion no ground of distinction between the present case and those cases." In Re Australian Performing Right Association Limited - Reference: Re Australian Broadcasting Commission (1982) 45 ALR 153, Sheppard J. said that the question whether the Australian. " Broadcasting Commission was an instrumentality or agency of the Crown was to be decided by a consideration of the relevant statutory provisions with a view to determining Parliament's intention as to what the position was to be. While assistance could be found in a multiplicity of cases decided in Australia and in England, in the end it was a matter of looking to the words which Parliament had used. 17. As his Sonour said at 167:- "The authorities do provide indications of the type of consideration which will point, or not point, to a particular body being the Crown or one of its agencies. But because each case depends on 1ts circumstances, there is no clear guiding principle or rule." In my opinion it would be quite inappropriate for the Court on the materials presently before it and within the present time constraints to attempt definitively to resolve the question of the proper characterisation of the respondent in relation to the conduct complained of by the applicant. In my opinion there is, in connection with the status of the respondent in soliciting and entering into the relevant contracts, a serious question to be tried as to whether or not it acted as an agent of the Crown in right of the State in so doing. With regard to the alleged contravention of s.46 of the Trade Practices Act it is necessary first to mention the rage _sractices act a regulatory framework relating to the transport for reward of goods within the State of Western Australia. The Transport Act 1966 provides a scheme for the licencing of "commercial goods vehicles". A commercial goods vehicle is defined in sub-s.4(1) of the Act as follows:- "Commercial Goods Vehicle" means a vehicle other than a vehicle propelled by animal or human power, only, operating or used or intended to be used, on roads or streets for the transport of goods and includes any such * 13. vehicle so used or operated or used or intended to be used by or on behalf of the Crown for the carriage of goods for hire or reward and whether 1n connection with a railway or not." The licensing authority 1s the Commissioner for Transport constituted under the Act. His licensing powers with respect to commercial vehicles and the matters that he 1s required to take into account in the grant of such licences are set out in ss. 33 to 42 of the Act. It is not appropriate at this stage for the Court to embark upon a detailed analysis of the provisions of the Act under' which the operations of commercial goods vehicles are limited and regulated. It 1s sufficient to say that the applicant contends and- it is not contested for present purposes, that the licensing provisions have been so implemented as to give'effect to a policy of regulation which confers an effective monopoly on _ the respondent in the transport of grain in certain areas designated as the "regulated areas". Mr H. Croxon a director of the applicant, in an affidavit sworn and filed on 22 December 1986 outlined the framework in the following terms:- (a) The State is notionally divided into two areas one 19. in which grain must be transported by rail in accordance with the policy of€ the Department of Transport under the Transport Co-Ordination Act 1966 as amended. This is an area in which rail transport is available. This area is commonly known in the industry as the "Regulated Area". [In the second area known as the "Deregulated Area" the Department of Transport issues licences for transport to anybody who wishes to transport grain. (b) In Regulated areas grain may only be transported to ports: (i) from the farm to the port by a farmer's own vehicle; or (ii) from the farm to a "rail bin" operated by Co-Operative Bulk Handling Limited ("CBU") by a farmer's own vehicle or contractor's vehicle (rail bins are bins which although not on a railhead are routed to rail) and then by contractors employed by the Respondent ("Westrail") to a railhead.and by rail to ports; (iii)from the farm to a railhead by a farmer's own vehicle or contractor's vehicle and then by rail to a port. (The vast majority of grain shifted from farm to the railhead is via the farmer's own vehicle.) (c) In Deregulated areas, grain may be transported:- (i) by a farmer or contractor; (ii) by a farmer to an "off rail" roadbin operated by CBH and thence to the ports by a contractor under a contract with CBH. (This is the service which OD provides)." Mr Croxon went on to say that the Department of Transport of Western Australia periodically invites tenders from contractors for the haulage of grain in deregulated areas by road from the off rail roadbins operated by CBH to the ports. [In September 1986 the applicant tendered for contracts to haul grain from a number of off road railbins in deregulated areas near the 20. south east coast of Western Australia between the ports of Albany and Esperance. Although the affidavit indicated that the tenders are unvited on behalf of Co-Operative Bulk Handling Limited the Conditions of Tender and Conditions of Contract embodied in them suggest that the contracts entered into by the applicant were contracts with the Minister for Transport for the State of Western Australia. The applicant affirmed its acceptance of the contracts on 10 October 1986. Their period depended upon the area to be served and varied from two to five years. Following information given to the applicant on Friday, 12 December 1986 it made enquiries which led to the discovery that the respondent was approaching farmers in the deregulated- areas offering to haul grain from their farms to ports at rates only Marginally higher than rates charged by the respondent to haul grain by rail from the nearest railhead to 'those ports. Le The respondent publishes a newsletter or journal known as "The Monthly Notice". In the November edition of The Monthly Notice was an article entitled "Round One to OD - But Its Not Over Yet". In that article 1t was said:- "Westrail is "fighting back" to win new grain tonnages in areas where a trucking company has won all 21. the contracts to haul grain from offrail bins. The OD Transport company's contract covers the entire Lakes District and Great Southern. Westrail has now initiated a major campaign in these areas to transport grain from paddock to port. Westrail Managing Director Bruce Sutherland, said the grain would normally be road hauled to Esperance or Albany from the bins won by OD Transport. "It is our intention to transport the grain by road and rail from the growers' paddocks to the port at Albany", Mr Sutherland said. "We expect some 40,000 tonnes of additional grain this year. A team of Westrail salespeople and operations officers has canvassed every .farmer in the target areas. There is strong support for this novel scheme. We will win the tonnage by going into the paddocks at harvest time and by passing the off rail bins. Farmers see the scheme as an attractive alternative. Our rates will be highly competitive", he said. As pointed out in the October Monthly Notice, the OD contract has great implications for Westrail's grain business everywhere, OD submitted rates between 15% and 20% below the freight rates which applied during the 1985/1986 grain season." According to Croxon's affidavit, in addition to offering its paddock to port service, the respondent's prices' for transporting grain from railbins in those parts of the regulated areas which are adjacent to deregulated areas containing CBH "off rail" bins served by the applicant are significantly lower than prices charged by it for a similar service in other parts of the regulated areas. In a supplementary affidavit filed on 23 December 1986 Croxon spoke of enquiries which had been made by a Mr Gillespie, 22. the manager of the applicant's Esperance branch on the evening of 22 December. Mr Gillespie had telephoned a number of farmers in the deregulated area to ascertain the prices which' the respondent's agents had quoted for transporting grain from their farms to port by road and rail by passing the off rail road bins. Some four prices were obtained in this way, giving the rate per tonne of grain for transport from the farms to Albany. This was set out in tabular form in the affidavit and compared with the rail to port rate published by the respondent in the Government Gazette of 5 December 1986. Such publication, it will be recalled, is required under s.22 of the Government Railways Act 1904. For completeness the respondent's rates for cartage from off rail bin to port are also set out in the table. No Farmer Distance Paddock to Published Applicant's Farm to Rail Port Rate Railhead Rate from - Head (km) Quoted to rate + normal Off Farmer by ($/tonne) - rail road bin Respondent to Port "$/tonne) 1. AW & D.M. 50 $17.50 $15.97 " $19.81 Fretwell (Lake Varley) 2. J.R. & G. 30 $17.50 $15.97 $17.88 Garlick (Lake King) 3. EG & AJ 58 $17.50 $15.97 $20.15 Richardson Mount Sheridan 4. R&L 30 $17.10 $15.97 $20.15 Porter {provided Mount Sheridan all grain £rom farmer's carthead 7 ee eur BRT SE an 2 ne oem erste ee penne eR FEY PORTED FI oe Lyeeean 23. On this basis, according to Croxon, the cartage which is being charged by the respondent for transport from the farm to the railheads is $1.53 per tonne. He expressed the view, based he said on 17 years experience in the grain carting industry and his knowledge of current operating costs, that this rate is well below the actual cost to cart grain by road over the distances specified. Further information supplied to Croxon by the manager of the applicant's Albany branch after telephoning farmers and ascertaining rates offered by the respondent for its paddock to port service yielded further information as to the respondent's rates which was also embodied in a table.- No. Farmer Distance Paddock to Published Applicant's Farm to Port Rate Railhead Rate from Railhead Quoted to Rate Normal off (km) Farmer by ($/tonne) rail road bin Respondent to port. ($/tonne) , 1. JG & GC 18 $13.00 $12.34 $14.99 Smith 2. MK &M | ; Solley 48 $13.00 $12.34 $14.99 3. P. Shiner 60 $13.00 $12.34 $14.99 4. RA 80 $13.50 $12.34 $16.63 5. RH Townsend 85 $13.50 $12.34 $16.63 In addition to offering the paddock to port service, the respondent's prices for transporting grain from railbins in those 24. parts of the regulated areas adjacent to the deregulated areas containing CBH "off rail" bins served by the applicant, are said by Croxon to be significantly lower than prices charged by the respondent for a similar service in other parts of the regulated areas. A chart was produced to 1llustrate the point. A copy of that chart which was exhibit "HWJC7" to Croxon's affidavit is annexed to these reasons. Prima facie the chart does indicate generally lower rates charged by the respondent for the transport of grain from railbins in those parts of the regulated areas adjacent to deregulated areas containing offrail bins served by the applicant. Caution has to be exercised in drawing inferences from the global price charged by the respondent for its paddock to port service where those inferences relate to the apportionment of a part of that price to the farm to railhead segment of the journey. Prima facie it is the whole journey which has to be considered rather than particular components of it and it may be the case that the respondent is subsidising the road component from profits made on the rail component. That is presently a matter of speculation in the absence of any evidence on the point. It is however a matter to be borne in mind in considering the allegation that the respondent is engaging in what amounts to predatory pricing of the road component of the service that it offers to farmers. rms 6 mrerens ee at Tatar TITS i k r ; ; ¥ F b L The preceding narrative to the applicant's contention that the respondent is engaging in 25. conduct in contravention of s.46 of the Trade Practices Act. In the parts which are material for present purposes s.46 provides:- "46(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of - (a) (b) (c) (3) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; preventing the entry of a person into that or any other market; or deterring or preventing a person from engaging in competitive conduct in that or any other market. In determining for the purposes of this section the degree of power that a body corporate or bodies corporate has or have in a market, the Court shall have regard to the extent to which the conduct of the body corporate or of any of those bodies corporate in that Market is constrained by the conduct of - - (a) (b) (4) (a) competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or persons to whom or from whom the body corporate or any of those bodies corporate supplies or requires goods or services in that market. In this section - a reference to "power" is a reference to market power; 1s by way of Factual background 26. (b) a reference to a "market" 1s a reference to a market for goods or services; and (c) a reference to "power" in relation to, or to conduct in, a market 1s a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market. (7) Without in any way limiting the manner in which the purpose of a person may be established for the purposes of any other provision of this Act, a corporation may be taken to have taken advantage of its power for a purpose referred to in subsection (1) notwithstanding that, after ali the evidence has been considered, the existence of that purpose is ascertainable only by inference from the conduct of the corporation or of any other person or from other relevant circumstances." This section in its present form, reflecting significant amendments implemented by the Trade Practices Revision Act 1986, has not yet been the subject of extensive judicial exegesis although some discussion of it appears in the judgment of Wilcox J. in Warman International v Envirotech Australia Pty Ltd [1986] ATPR 40-714. I therefore limit myself to considering whether or not a serious question arises in relation to the allegation that the respondent has engaged in conduct in contravention of the section. For a serious question to be raised there must be some evidence going to each of the elements making up a cause of action under the section - See Springdale Comfort Pty Ltd v Electrical Trades Union of Workers (WA Branch) Perth [1986] ATPR 40~694 at 47,623 per Toohey J., Flower Davies Wemco Pty Ltd v The Australian weerss 27. Builders' Labourers Federated Union of Workers (WA Branch) (unreported French J. 3/12/1986). Those elements are for present purposes:- i. The characterisation of the respondent as a corporation. 2. The characterisation of the respondent as a supplier of services in a market for those services. 3. The possession by the respondent of a substantial degree of power in that market. 4. The characterisation of the applicant as a competitor of the respondent in that or any other market. 5. The taking advantage by the respondent of that power for the purpose of eliminating or substantially damaging the applicant in that or any other market. As to the first element, I have already taken the view that there is a serious question to be tried. The second element requires the definition of a relevant market for the provision of services. In this regard I refer to - the approach to market definition expounded by the Trade Practices Tribunal in Re : Queensland Co-Operative Milling Association . Limited (1976) 25 FLR 169. At 190 the Tribunal said:- "We take the concept of a market to be basically a very simple idea. A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them. (If there is no close competition there is of course a monopolistic market). Within the bounds of a market there 1s substitution —- substitution between one product and another, and 23. between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and_= sellers amongst whom there can be strong substitution, at least un the long run, if given a sufficient price incentive. Let us suppose that the price of one supplier goes up. Then on the demand side buyers may switch their patronage from this firm's product to another or from this geographic source of supply to another. As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance and cost and price incentives. 7m rer whew It 1s the possibilities of such substitution which set the limits upon a firm's ability to "give less and charge more". Accordingly, in determining the outer boundaries of the market we ask a quite simple but fundamental question: If the firm were to "give less and charge more" would there be, to put the matter colloquially, much of a reaction? And if so, from whom? in the language of economics the question is this: From which products and which activities could we expect a relatively high demand or supply response to price change, i.e. a relatively high cross elasticity of demand or cross elasticity of supply?" pS ese T en fae 'cate denar eeenaaiattn aemameame i at oe Se reek ST ET In Re Howard Smith Industries Pty Ltd (1977) 28 FLR 385 at 394 the Tribunal said in connection with a market for services . in relation to s.50 of the 1974 Act:- - ~ AS SS "From the point of view of buyers, a market represents a - range of goods or services which are good substitutes for one another in satisfying the buyers requirements of a particular type. If thére is a variation in the relative prices of the goods or services offered for sale in a given market, then buyers can be expected a readily to switch their custom from one seller to E another or from one product to another." The principles enunciated in these two decisions were adopted by Northrop J. in Trade Practices Commission v Ansett "4 ie: ii . Ta" kere 1 Trails osm % Saket Transport Industries (Operations) Pty Ltd (1973) 32 FLR 305 at 312. FLR 1 at 39 the Trade Practices Tribunal chaired by Keely J. out six principles to be taken into account in approaching the 29. In Re Tooth & Co. Limited and Tooheys Limited (1979) 39 task of market delineation. Identification of the area or areas of close competition of relevance for the applications. Recognition of the fact that such competition may proceed through substitution in demand or supply and that the market should comprehend the maximum range of business activities and the widest geographic area within which if given a sufficient economic incentive, buyers can switch to a substantial extent from one source of supply to another and sellers can switch to a substantial extent from one production plan to. another. Market definition should be basically concerned with substitution possibilities in the longer run, the market being the field of actual or potential rivalry between firms. Recognition of the fact in defining the outer boundaries of the market that at its extremities there is such a break in substitution possibilities that firms within its boundaries would collectively possess substantial market power. Recognition that the field of substitution is not necessarily homogeneous but may contain within its sub-markets wherein competition is especially close or especially immediate. In defining the market reference should be made to the relevant product or service, the appropriate functional levels and the geographic scope of the market in recognition of its multidimensional character. 30. In the present case the applicant contends that the market in which the respondent has a substantial degree of power is defined geographically by reference to the regulated areas in which it has a statutory monopoly. It 1S said to be projecting 1ts power ainto the deregulated areas for the purpose of eliminating or substantially damaging the applicant, which is its competitor in the market defined by reference to those areas. It may be that in the end the appropriate market will be defined by reference to the market for the transport of grain within geographical boundaries encompassing both the regulated and deregulated areas, In that respect Mr Croxon in his affidavit deposed that Westrail's share of the market of transporting grain in Western Australia is approximately 73%. Presumably, although it was not made clear, that is a reference to the percentage by weight of all grain transported in Western Australia that is transported by Westrail. In further clarification of the position of the applicant in the deregulated areas, Mr Croxon said:- "Traditionally the deregulated market for the transport of grain to ports has been divided into three sections:- (i) transport of grain from farms to CBH offrail bins; (ii) transport of grain from farms to ports direct by road; (111) the transport of grain from CBH offrail bins to ports." 3i. He said that the applicant had won by competitive tender the entire business represented in paragraph (111). This constitutes approximately 45% of the market of transporting grain in the deregulated areas. The applicant competes with other carriers for the remaining business through the categories mentioned in paragraphs (i) and (1i). There are approximately six principal carriers and a varying number of small carriers competing for that business. The applicant's share of that business is usually less than 50%. In my opinion there is evidence that the respondent has a substantial degree of power in a market for the provision of services for the transport of grain to ports, whether that market be defined only by reference to the regulated areas or by reference to the regulated and' deregulated areas. Given the uncertainty as to the nature of the contracts entered into by the applicant pursuant to the tender, there is correspondingly some uncertainty as to the functional. definition of the market in which it operates. Accepting however that the applicant is a competitor of the respondent in the deregulated areas, the question follows whether the respondent has taken advantage of its market power for the purpose of eliminating or substantially damaging the applicant either in the market defined geographically by reference to the State of Western Australia or by reference to the deregulated areas. The applicant contends that it has, in a way analogous to the conduct of the Victorian Egg Marketing Board in Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd (1978) 20 ALR 129. toe menprmevpepmeneesere nee eamen 32. The evidence that the conduct complained of constitutes a taking advantage by the respondent of its market power 1s rather scanty. Such an inference may depend upon further evidence as to whether the pricing structure adopted by Westrail in its paddock to port service in the deregulated areas, is somehow supported by its monopoly position in the regulated areas. In my opinion the most that can be said on the evidence before me at this point 1s that such an inference 1s open on the evidence but it is not the only anference. It may be the case for example that the respondent is simply subsidising the road component of its package offered to farmers out of profits earned on the rail component. Such a situation could well cast its conduct in a light different from that for which the applicant contends. As to the purpose of its conduct, it is plain enough that the respondent intends to win from the applicant at least a proportion of its market share in the deregulated area. On the evidence as it presently stands. however, it is, questionable whether it is a purpose of the respondent to > eliminate or substantially damage the applicant. On the issue of balance of convenience, the applicant contends that the grain harvest is about to begin in the contract' areas. It 1s pointed out that the respondent's stated intention is to win business hauling up to 40,000 tonnes of grain in these areas which would result in a direct loss to the applicant. Ata conservative estimate it is said the loss of revenue would marr ORR FORT CETTE RIT I TE 33. approximate $400,000.00 for the present grain harvest. The future ramifications for the applicant's business and the farming community are said to be serious. If the respondent 1s allowed to pursue its policies then, says the applicant, it will eventually eliminate competition by road haulage contractors in the deregulated areas and extend the area of its monopoly. The application is said to be one of extreme urgency because farmers are currently making their final preparations for the grain harvest and any delay in obtaining the relief sought from the Court, will enable the respondent to continue its heavily promoted campaign to solicit business away from the applicant. The Court was however informed by counsel for the respondent that the soliciting phase of the respondent's campaign was over and that contracts had been entered into and cartage was to commence. The applicant seeks interlocutory relief restraining the respondent until the hearing of the substantive proceedings or until further order of the Court, from supplying or offering to supply transport services at prices lower than a level calculated by reference to inter alia, the sum of the actual cost of transporting grain from farms to railheads and the prices charged by the respondent as published in the Government Gazette of Western Australia on 5 December 1986 for transporting grain from railheads to ports. 34. In my Opinion the grant of the interlocutory relief sought would effect a substantial disruption in existing arrangements between the respondent and those farmers with whom it has contracted. It would result in those farmers having to pay a higher price than is presently the case for the transport of their grain to port. On the other hand as the applicant conceded, it is able to be compensated by damages in the event that the interlocutory relief is not granted and it succeeds on the substantive hearing. In considering whether or not in this case to grant the interlocutory relief sought, it is necessary to bear in mind not only the interests of the parties to the application but also the adverse impact upon third parties and the public interest. It is plain that there would be an immediate adverse impact on third parties if the interlocutory relief were granted. Adopting as I do the approach enunciated by Woodward J. in Bullock v (The Federated Furnishing Trades Society of Australasia (1985) 5 FCR 464 at 472, I am of the opinion that although the applicant has raised serious questions to be tried, its case is, on the evidence presently before me, not one that could be described as strong. € " In the circumstances I would require a marked balance of convenience in favour of the applicant before granting the "KE Tina mee eee: ¢ sy E t \ gi = TRS Rg Seeds ee a, sy pa Mae Ea TE ys Ta, re 35. interlocutory relief that 1s sought... That marked balance of convenience does not exist. Indeed in my opinion, the balance of convenience in this case lies against the applicant when regard is had not only to the position of the respondent but also to that of third parties likely to be effected by the restraints sought. In the circumstances I will dismiss the motion for interlocutory relief. I certify this and the thirty four (34) preceding pages to be a true copy of the Reasons for Judgment of His Honour Mr Justice French. Associate : Date : Niza December 1986 4a aT tay pent pare ne J er Seren A wt'E S 5 ym eh oS amend ra — oe Ot a ' « 49S wis woe Pera Tey Counsel for the Applicant : N. McKerracher instructed by Robinson Cox Counsel for the Respondent : Mr G. Tannin instructed by the State Crown Solicitor Dates of hearing : 22, 23 and 24 December 1986