Collex Waste Management Pty Ltd v Waste Recycling & Processing Service of NSW [1999] FCA 213

FEDERAL COURT OF AUSTRALIA

Collex Waste Management Pty Ltd v Waste Recycling & Processing Service of NSW [1999] FCA 213 COLLEX WASTE MANAGEMENT PTY LIMITED v THE WASTE RECYCLING AND PROCESSING SERVICE OF NEW SOUTH WALES & ANOR NG 878 of 1998 LINDGREN J 10 MARCH 1999 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 878 OF 1998

BETWEEN: COLLEX WASTE MANAGEMENT PTY LIMITED

ACN 051 316 584

Applicant

AND: THE WASTE RECYCLING AND PROCESSING SERVICE OF NEW SOUTH WALES

First Respondent

THIESS ENVIRONMENTAL SERVICES PTY LIMITED ACN 010 725 247

Second Respondent

JUDGE: LINDGREN J

DATE: 10 MARCH 1999

PLACE: SYDNEY

REASONS FOR JUDGMENT

Introduction 1 By motions brought by notices of motion filed on 30 November 1998, the respondents seek an order striking out certain paragraphs of the statement of claim and an order that the applicant ("Collex") supply further and better particulars. The two motions were heard together.

The statement of claim 2 The following is an account of the statement of claim and does not represent any finding of fact. Numerals in bold indicate numbers of paragraphs of the statement of claim. 3 Collex and the second respondent ("Thiess") conduct the business of providing waste management services (1). The first respondent ("Waste Service") is a corporation constituted by s 7 of the Waste Recycling and Processing Service of New South Wales Act 1970 (NSW) ("the WRAPS Act"), and pursuant to s 17 of that Act conducts in New South Wales the business of establishing and operating waste facilities, and, by virtue of s 8 of the Competition Policy Reform (NSW) Act 1995 (NSW), is subject to the provisions of the Competition Code text (as that term is defined in s 4 of that Act ("the Competition Code")) (2). 4 There is a demand in the municipalities or cities of Hornsby, Hunters Hill, Ku-Ring-Gai, Lane Cove, Manly, Mosman, North Sydney, Pittwater, Ryde, Warringah and Willoughby (called variously "the Northern Sydney Waste Region", the "Northern Sydney Waste Management Region" and the "Northern Metropolitan Region", but abbreviated by me to "the Region") for the provision of waste disposal services with respect to putrescible and other waste (3). (Thiess seeks particulars of this paragraph, and in default, a striking out of it.) 5 Putrescible waste disposal services are demanded in the Region by households; the general populace; the councils of the municipalities and cities mentioned ("the Councils") which provide waste disposal services to households and to the general populace; commercial entities; and contractors which provide waste disposal services to commercial entities (4). (Thiess seeks particulars of this paragraph, and in default, a striking out of it.) 6 The demand of households and the general populace for the disposal of putrescible waste is met by the Councils, which either themselves, or through contractors, collect it from households and public areas and transport it to three waste transfer stations at Artarmon, Belrose and Ryde owned by Waste Services and operated by contractors engaged by it referred to below ("the WS Transfer Stations") (5). 7 The providers of these waste disposal services are the Councils and certain contractors (including Collex) (6). (Thiess seeks particulars of this paragraph, and in default, a striking out of it.) 8 The commercial entities' demand for the disposal of putrescible waste is met by certain contractors which collect it from the commercial entities and transport it to the WS Transfer Stations (7). (Thiess seeks particulars of this paragraph, and in default, a striking out of it.) 9 The contractors which supply the putrescible waste disposal services to the commercial entities are the eight contractors identified in para 8, of the statement of claim which include Collex and Thiess (8). (In its notice of motion Thiess seeks further particulars of this paragraph, and in default, a striking out of it, but this seems to be an error as the correspondence in evidence does not reveal any request for particulars of this paragraph.) 10 The Councils' and contractors' demand for the disposal of putrescible waste is met by, and will until 31 December 2000, be met by Waste Service's provision of the following services: (a) accepting delivery of the waste collected by the Councils and contractors at the WS Transfer Stations; (b) transporting or arranging for the transport of that waste to the putrescible landfills owned by Waste Service at Lucas Heights and Belrose for landfilling; (c) disposing of the waste in those landfills ("waste acceptance transfer and disposal services") (9). (Thiess seeks particulars of this paragraph, and in default, a striking out of it.) 11 By the operation of s 47 of the WRAPS Act, Waste Service is the owner of waste received into the WS Transfer Stations (10). 12 In order that the waste acceptance, transfer and disposal services be provided to the Councils and the contractors, it is necessary that putrescible waste transfer stations situated in the Region be utilised (11). (Waste Service seeks a striking out of this paragraph, or, in the alternative, further and better particulars of it. Thiess seeks particulars of this paragraph, and in default, a striking out of it.) 13 In the alternative, in order that those services be provided to the Councils and the contractors "at a reasonable economic return", it is necessary that access be available to putrescible waste transfer stations situated in the Region (12). (Waste Service seeks a striking out of this paragraph, or, in the alternative, further and better particulars of it. Thiess seeks particulars of this paragraph, and in default, a striking out of it.) 14 Pursuant to s 13 of the Waste Minimisation and Management Act 1995 (NSW) ("the WMM Act"), the Northern Sydney Waste Board ("the Board") was created to manage, in accordance with a "Waste Plan" to be developed and implemented by it, waste disposal services in respect of waste generated in the Region (13). 15 Under s 18 of the WMM Act, the Board has the power inter alia to enter into arrangements for carrying out waste disposal services in respect of the waste generated in the Region and to direct the Councils to cause putrescible waste collected from households and public areas to be taken to such putrescible waste transfer stations as it nominates (14). 16 In or about September 1997, the Board issued an invitation for expressions of interest in the provision of waste acceptance, transfer and disposal services for putrescible waste generated within the Region for a minimum period of twenty years commencing on 1 January 2001 ("the Invitation") (15). (Accordingly, these services will replace those provided by Waste Service at present – see para 9 referred to above). 17 The purpose of the Invitation was for the Board to determine which of the proposals submitted would best fulfil its long term requirements for the disposal of such putrescible waste, and, if appropriate, to enable the Board to call for tenders (16). 18 Pursuant to the Invitation: (a) Collex submitted to the Board two expressions of interest, one involving use of a site for putrescible landfill known as Woodlawn, near Goulburn, and the other using a site for that purpose at Muswellbrook; (b) Thiess submitted an expression of interest involving use of such a site near Singleton; (c) Waste Service submitted an expression of interest involving use of such a site near Cessnock; and (d) other parties submitted other expressions of interest (17). 19 On or about 23 April 1998, the Board announced that from the submitted expressions of interest, it had selected a short list of three, being the two expressions of interest of Collex and that of Thiess, and that it would request tenders from them (18). (The failure of Waste Service's expression of interest to gain support meant that the owner of the WS Transfer Stations and existing provider of waste acceptance, transfer and disposal services would not continue to provide those services after 31 December 2000). 20 On or about 24 April, the Board advised Collex and Thiess that it required each of them to make arrangements with Waste Service to use the WS Transfer Stations as part of their tenders (19). (In effect, if Collex or Thiess should prove unable to "do a deal" with Waste Service for the use of the WS Transfer Stations, it could not be the successful tenderer (see below)). 21 On or about 11 July 1998, the Board sent to each of Collex and Thiess an invitation to tender ("ITT") for a contract for the acceptance, transfer and disposal of residual putrescible waste generated in the Region (20). 22 The ITT contained a draft contract which was conditional upon the supposed contractor's reaching agreement with any owner of putrescible waste at the "Collection Point" for acceptance, transfer and disposal of that waste in the manner provided for in the contract within four weeks from the date of contract or such other date as might be agreed between the parties. The expression "Collection Point" was defined to mean any site agreed upon between the Board and the contractor to be used as a putrescible waste transfer station, and, failing agreement, the WS Transfer Stations (21). (The Board later agreed to make the period of four weeks, six months from the date of contract. In substance, the draft contract provides for the contract to be conditional upon the supposed contractor's reaching agreement with Waste Service to use the WS Transfer Stations.) 23 The ITT required that tenders be submitted by 21 August 1998, but on 17 August 1998, at the request of Thiess, the period was extended to 28 August 1998 (22). 24 Collex intends to submit two tenders in conformity with its expression of interest under which it will: (a) accept waste at the WS Transfer Stations or, alternatively, acquire, develop and provide a site at Porters Creek near Ryde as a Collection Point and accept the waste there; (b) contract with a third party to construct and operate a Receiving Rail Depot on land at Clyde; (c) construct and operate a Terminal Rail Depot at one or both of Muswellbrook or Tarago (near the Woodlawn, Goulburn site); (d) construct and operate landfills at one or both of the Woodlawn site and Musswellbrook; and (e) provide or arrange all necessary transport from acceptance of the residual putrescible waste at the WS Transfer Stations to its disposal at the landfill site. (23). 25 Thiess will submit a tender under which it will propose to accept, transfer and dispose of putrescible waste using the WS Transfer Stations as collection points (24). 26 The Board advised that it expected to award a contract to the successful tenderer on 24 September 1998 (25). 27 By reason of the matters alleged in paras 3-25, there is a market in the Region for the supply of the use of putrescible waste transfer stations for the purpose of enabling the user to provide putrescible waste acceptance, transfer and disposal services in the Region (26). (It will be noted that as the owner of the WS Transfer Stations, Waste Service is able to supply to this market at present.) 28 Further, by reason of the same matters, there is a market in the Region for the supply of putrescible waste acceptance, transfer and disposal services (27). (Again, Waste Service, as the owner of the WS Transfer Stations, is in a position to supply to this market at present.) 29 Waste Service is the only entity supplying putrescible waste acceptance, transfer and disposal services in the Region (29). Waste Service owns all putrescible waste transfer stations in the Region, namely the WS Transfer Stations (30). There are no other sites within the Region which will become available for use as putrescible waste transfer stations before 24 September 1998 (31). Collex gives the following particulars: " Particulars (a) Collex has carried out substantial enquiries over a substantial period of time to identify appropriate sites. (b) Collex has identified only one site, the Porters Creek site, being land adjacent to the Ryde Transfer Station (one of the WS Transfer Stations) as a site which might be developed as a transfer station. Ryde Council, the owner of this site, has indicated that it may call for expressions of interest about this site early in 1999. (c) The Porters Creek site even if available for lease or purchase, would not be given Development Consent before 28 August 1998. (d) Development consent and building consent is required under planning legislation to construct and operate a putrescible waste transfer station. Any site identified and acquired may not attract development consent particularly given the adequacy of the existing WS transfer stations to serve the needs of the Northern Sydney Waste Region. (e) Waste Services has sought to cause Ryde Council to transfer the Porters Creek land to Waste Services without calling expressions of interest. Requests made by John Cook on behalf of Waste Services to Bernie Murphy and then Tony Reed on behalf of Ryde Council in the period from early 1996 to the present." 30 Further, or in the alternative to para 31, no other sites within the Region can be acquired and converted for the purpose of being used as putrescible waste transfer stations at a cost which will enable the acquirer to use such a site in connection with the supply of putrescible waste transfer and disposal services (32). By reason of the matters pleaded in paras 29-32, Waste Service has a substantial degree of market power in the market pleaded in para 26, and further, or in the alternative, in the market pleaded in para 27 (33). 31 Many times between June 1997 and 4 August 1998 Collex requested Waste Service to discuss with it Collex's using the WS Transfer Stations in connection with Collex's expression of interest, and subsequently, Collex's tender (35). But Waste Service did not enter into such discussions, and instead entered into discussions with Thiess in relation to Thiess's use of the WS Transfer Stations in connection with Thiess's tender (36). By 15 July 1998, Waste Service refused to discuss with Collex the possibility of its using the WS Transfer Stations (particulars of the "refusal" are given) (37). If Waste Service had not been the owner of the only putrescible waste transfer stations in the Region, it would not have refused to enter into discussions with Collex but would, instead, have held discussions with both Collex and Thiess (38). 32 By reason of these matters, Waste Service's refusal to discuss with Collex the possibility of its using the WS Transfer Stations constituted a taking advantage by Waste Service of its market power pleaded in para 33 (39). 33 Waste Service refused to discuss with Collex the possibility of Collex's using the WS Transfer Stations for the purpose of preventing Collex from entering into the market pleaded in para 27 (40). Particulars of the "refusal to discuss" are given by cross reference to para 37. (Waste Service seeks an order striking out this paragraph, or, alternatively, an order for particulars of it.) 34 Further, Waste Service refused to discuss with Collex the possibility of Collex's using the WS Transfer Stations. This refusal was aimed at deterring Collex from engaging in competitive activity in connection with future tendering for contracts to supply waste acceptance, transfer and disposal services in relation to waste generated in areas outside the Region (41). (Again, Waste Service seeks an order striking out this paragraph, or, in the alternative, an order for particulars of it.) 35 In the premises, Waste Service's refusal to discuss with Collex the latter's use of the WS Transfer Stations constituted conduct in contravention of s 46 of the Competition Code (42). 36 Paragraphs 43 to 47 plead a contract, arrangement or understanding between Waste Service and Thiess (called, in the statement of claim, "the Strategic Alliance") which included a provision that Waste Service would give Thiess, to the exclusion of Collex, sufficient access to the WS Transfer Stations to enable Thiess to submit to the Board, in response to the ITT, a tender including a statement that an agreement fulfilling the condition of the draft contract had been concluded by Thiess with Waste Service (44). (Apparently (the position if not clear) Thiess seeks particulars of para 44, and in default, a striking out of it.) This provision had the purpose, or would be likely to have the effect, of substantially lessening competition in the market referred to in para 26 (45). (Apparently (the position is not clear) Thiess seeks particulars of para 45, and in default, a striking out of it.) It is further pleaded that by reason of these matters Waste Service and Thiess contravened s 45 (2) (a) (ii) of the Competition Code (46) and that Thiess will give effect to that provision by notifying the Board, either in its tender or otherwise, that it has entered into an agreement which satisfies the terms of the draft contract in contravention of s 45 (2) (b) (ii) of the Competition Code (47).