FEDERAL COURT OF AUSTRALIA Sita Qld Pty Ltd v State of Queensland [2000] FCA 1616 CONTRACT – formation – whether contract for provision of a subsidy – written oral and implied terms alleged – authority of Minister of the Crown to enter into contract – damages – quantum if contract in existence Transport Operations (Passenger Transport) Act 1994 (Qld), ss 36, 39, 42, 49, 62, 143B State Transport Act 1960 (Qld) Government Owned Corporations Act 1993 (Qld) Queensland Competition Authority Act 1997 (Qld) SITA QUEENSLAND PTY LTD (ACN 070 097 219) v STATE OF QUEENSLAND QG 95 OF 1998 DOWSETT J 13 NOVEMBER 2000 BRISBANE IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 95 OF 1998 BETWEEN: SITA QUEENSLAND PTY LTD (ACN 070 097 219) APPLICANT AND: STATE OF QUEENSLAND RESPONDENT JUDGE: DOWSETT J DATE OF ORDER: 13 NOVEMBER 2000 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application be dismissed. 2. Damages be fixed at $4,896,214.60 Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 95 OF 1998 BETWEEN: SITA QUEENSLAND PTY LTD (ACN 070 097 219) APPLICANT AND: STATE OF QUEENSLAND RESPONDENT JUDGE: DOWSETT J DATE: 13 NOVEMBER 2000 PLACE: BRISBANE REASONS FOR JUDGMENT GENERAL BACKGROUND 1 The applicant sues the respondent for damages for breach of contract. For present purposes, references to the "respondent" include the Queensland Government, the Department of Transport and Queensland Rail. For many years, the applicant and other companies through which it claims have operated passenger bus services between Brisbane and the Gold Coast. The respondent has, from time to time, regulated these services. Prior to 20 December 1997 the applicant and the respondent were engaged in disputes and/or negotiations concerning the applicant's operations and associated matters. One matter in dispute was the validity of certain steps taken by the respondent pursuant to the Transport Operations (Passenger Transport) Act 1994 (Qld) (the "TOPT Act") and the effects of those steps on the applicant's business. The second area of difference concerned the level of fares charged by Queensland Rail for passenger services between Brisbane and the Gold Coast. The third area of dispute concerned bus services between Brisbane Airport and the Brisbane Central Business District ("CBD") and Brisbane Airport and the Gold Coast. 2 On 20 December 1997, Mr Cosimo Sita, a representative of the applicant, met with Mr Vaughan Johnson who was then Minister for Transport in the Queensland Government. The applicant alleges that at that meeting, agreement was reached, compromising the applicant's various claims against the respondent in consideration of the respondent agreeing to provide certain commercial incentives to the applicant. The respondent denies the agreement and pleads that Mr Johnson had no authority to enter into such an agreement. I will return to these matters at a later stage. 3 It is necessary, in order to understand much of the evidence in this case, to be aware of the geography of that part of south-east Queensland which lies between Brisbane Airport and the border between Queensland and New South Wales and the history of pubic transport in that area. Some of what follows may reflect judicial knowledge rather than the evidence, but all of it was assumed in the conduct of the trial. None of it is likely to be controversial. Distances should be taken as indicative only. 4 The city of Brisbane lies on the east coast of Australia about 100 kilometres north of the Queensland/New South Wales border. The Brisbane River flows through the city from west to east. Brisbane Airport lies in the eastern part of the city and north of the river. The Brisbane CBD lies west-south-west of the airport. Immediately to the south of Brisbane is another local government area, Logan City, which is a relatively new residential area containing some industry. Running along the coast from a point about seventy kilometres south of Brisbane to the Queensland/New South Wales border is a concentrated strip of commercial and residential development constituting the beach resort and local government area known as the city of Gold Coast. Although this area developed as a beach resort for residents of Brisbane, it has become a national and international resort. It is relatively close to Brisbane, and therefore to Brisbane Airport (which is both an international and a domestic airport). Many holiday-makers pass through that airport on their way to the Gold Coast. Others pass through Coolangatta Airport which is situated at the extreme southern end of the Gold Coast. 5 The road from Brisbane enters the Gold Coast at its northern end and runs more or less parallel to, and close to the coast until it reaches Coolangatta on the border. The road, of course, continues over the border and through Tweed Heads, a New South Wales beach resort which is, in effect, an extension of the Gold Coast. This was once the route of the main north-south coastal highway. As the area developed as a tourist resort and residential area, shopping and entertainment areas were built along this road, leading to substantial congestion. The combination of local traffic with "through traffic" from and to Brisbane became so great that the highway was re-located so as to by-pass the Gold Coast to the west, away from the resort areas which are naturally located close to the coast. This by-pass is part of the Pacific Highway which is the main coastal route between Brisbane and Sydney. Residential areas have also developed to the west of the traditional resort areas. 6 Many years ago there was a railway line from Brisbane to Southport, a commercial centre situated at the northern end of the Gold Coast. The line then continued to Coolangatta, passing well to the west of most of the resort areas. For one reason or another, the rail service was discontinued and the line and permanent way removed. At some stage, possibly in the late 1980s, the respondent determined that it was appropriate to reinstate the rail service, and a new line was constructed following a somewhat different route. In February 1996, rail services commenced between Brisbane and Helensvale, which lies at the northern end of the Gold Coast, but some kilometres inland from the coast. (See ex 6.) The line was subsequently extended to Nerang, an old township to the west of the Gold Coast and about one-third of the way between the northern end of that city and the border. It was later extended to Robina, which is about half-way between the northern end of the city and the border, and also well to the west. Prior to the opening of the new railway line, public transport between Brisbane and the Gold Coast was by bus. With the exception of the new railway line, bus travel is the only form of public transport within the Gold Coast. That railway line and the Pacific Highway both run through Logan City which is also served by local buses and by buses plying between Brisbane and the Gold Coast. 7 This case concerns the provision of the following bus services: · from Brisbane Airport to Brisbane CBD; · from Brisbane Airport to the Gold Coast; · from Brisbane CBD to the Gold Coast; · from Brisbane to Logan City; · within Logan City; and · within the Gold Coast. 8 I should say by way of explanation that road traffic between Brisbane Airport and the Gold Coast does not usually pass through Brisbane CBD. Such traffic rather travels over the Gateway Bridge which crosses the Brisbane River from a point quite close to Brisbane Airport on the north bank, but well to the east of Brisbane CBD. From the southern end of the bridge, a road carries traffic to the Pacific Highway, joining it just south of Brisbane and towards the northern end of Logan City. For some years now, the highway has been undergoing substantial upgrading. TOPT ACT DISPUTE 9 On 7 November 1994 the relevant provisions of the TOPT Act came into force. Prior to that date the provision of passenger bus services within Queensland was regulated pursuant to the State Transport Act 1960 (Qld) (the "Transport Act") which provided for the issue of licences authorizing the conduct of such services on nominated routes or in prescribed areas. Prior to 7 November 1994 a licence described as "PSL 121" authorized a company called Coachtrans Australia Pty Ltd to conduct scheduled passenger services between Brisbane and the Gold Coast. Another licence, "PSL 146", authorized a company called Harlingdale Pty Ltd to conduct similar services. The services followed the route of the old highway, entering the Gold Coast at its northern end near to the Biggera Waters Caravan Park and proceeding through the various coastal centres to Coolangatta and into New South Wales. The applicant claimed that these licences had authorized the relevant companies to pick up and set down passengers at various intermediate points, including points within Logan City and the Gold Coast and that after 7 November 1994, services of the kind previously operated pursuant thereto were no longer regulated. In other words, no licence was required for such operation. From 7 November 1994 until 2 October 1995, as it is said, Coachtrans and Harlingdale continued to operate those services in the same way as they had prior to 7 November 1994. On or about 2 October 1995 the applicant acquired the businesses of both Coachtrans and Harlingdale and thereafter operated these services. On 31 October 1995 the relevant government agency purported to transfer PSL 121 and PSL 146 to the applicant although it now seems that these licences no longer had any effect. The applicant has continued to use the name "Coachtrans". In these reasons, that name is used from time to time to describe the applicant. 10 Section s 42 of the TOPT Act authorizes the chief executive of the Department of Transport to declare that within a particular area, or on a particular route, a bus service may only be provided pursuant to a contract entered into with the Queensland Government. Various criteria are prescribed for the consideration of the chief executive in making such a decision. The purpose of the section appears to be to exclude competition in order to facilitate the provision of bus services which might otherwise be uneconomical. On 9 November 1994 an appropriate declaration was made for the Gold Coast area (the "Gold Coast service contract area") which included Oxenford, Helensvale and the area from the Biggera Waters Caravan Park south to Coolangatta. On the same day a declaration was made for Logan City (the "Logan service contract area") which included Springwood, the Logan Hyperdome and Beenleigh. The applicant asserted that both declarations were invalid. For reasons which may have been connected with the applicant's assertion, the relevant regulations were amended on 24 April 1997. On 2 June 1997 new declarations were made, requiring that any long-distance scheduled passenger service which involved the carriage of passengers: · between points within the Gold Coast service contract area, · between points within the Logan service contract area, and · between any point within the Logan service contract area and Brisbane, be performed only pursuant to a service contract. On 4 June 1997 a further declaration was made to the effect that a service contract was required for any part of a long-distance scheduled passenger bus service between the Logan service contract area and the Brisbane Central Traffic Area via specified routes. The applicant alleged that these amended regulations and declarations were also invalid. Alternatively, it alleged that if valid, the various declarations prevented it from providing services which had been lawfully provided by Coachtrans and Harlingdale prior to the acquisition of their businesses by the applicant and by the applicant thereafter. It claimed compensation. Whether that claim was based upon legal or moral considerations is not entirely clear. No convincing legal basis has been advanced in the course of these proceedings. 11 From the applicant's point of view, the primary effect of the various declarations was to limit its entitlement to pick up and set down passengers within the Gold Coast and Logan City areas in the course of its services between Brisbane CBD, Brisbane Airport and the Gold Coast. Pursuant to the relevant declaration, the Gold Coast service contract area extended north as far as a line between Helensvale and Oxenford, a township some distance north of Helensvale. It seems that under the previous legislation the northern end of the Gold Coast for roughly similar purposes had been the Biggera Waters Caravan Park, situated to the east of Helensvale, and very near to the coast. There was no dispute as to the applicant's right, when travelling south, to continue to set down passengers at points south of the Helensvale - Oxenford line, provided it had picked them up north of that line. Similarly, when travelling north, it could pick up passengers south of that line, but could only set them down north of it. The position may have been more complicated where passengers were picked up or set down in New South Wales, but that is not presently relevant. The applicant claimed to be entitled to unrestricted pick up and set down between Biggera Waters Caravan Park and the Helensvale - Oxenford line. The basis of this claim is unclear. It appears to have been based upon historical practice. Surfside Bus Lines (the Gold Coast contractor) and the Department of Transport asserted that the declaration had the effect of moving the relevant boundary to the Helensvale - Oxenford line. The dispute appears to have become more important after the rail service to Helensvale commenced in February 1996, no doubt because of the volume of passenger traffic travelling to and from the Helensvale rail terminus to connect with the rail service. The Logan City dispute was, to some extent, similar in nature. The applicant claimed to have been historically entitled to pick up and set down in the Logan service contract area, using buses plying between Brisbane and the Gold Coast. The respondent eventually asserted that it was no longer entitled to do so. In both cases, the applicant sought compensation from the respondent. RAIL FARES DISPUTE 12 Since February 1996 the applicant has been faced with competition from the re-established rail service between Brisbane and the Gold Coast. For whatever reason the Queensland Government has chosen to subsidize that service with the result that its fares are very competitive with bus fares. The evidence suggests that the rail fares have been set on the same basis as applies to rail fares within the Brisbane metropolitan area. The applicant considers that it has lost custom and revenue as a result of this competition. 13 In the early 1990s the Commonwealth and the States reached agreement as to what is known as National Competition Policy. This led to the enactment of federal and state legislation enshrining aspects of that policy. In Queensland, the relevant legislation is the Government Owned Corporations Act 1993 (Qld) (the "GOC Act") and the Queensland Competition Authority Act 1997 (Qld) (the "QCA Act"). These Acts address the subsidization of services provided by government authorities, particularly where competing services are provided by the private sector. As I understand it, there is provision for complaints by such competitors against subsidies, with a mechanism for resolving disputes. It seems that state governments are not bound by the outcome of the dispute resolution process, but the Commonwealth may reduce subventions otherwise payable to a state which fails to meet its obligations pursuant to the inter-governmental agreement. The applicant made a complaint concerning fares on the Brisbane - Gold Coast rail link. The respondent asserted that subsidy of this service was justified by what are called "community service obligations". This term appears to refer to a perceived obligation on government to provide certain services which would not be provided by private enterprise. (See GOC Act, s 121.) I understand that there has been a determination in favour of the applicant, which the respondent has refused to accept. The next step is for the Commonwealth to determine whether or not to withhold funds otherwise payable to the respondent. DISPUTE CONCERING BRISBANE AIRPORT SERVICES 14 The third matter of dispute between the parties concerned the provision of bus services terminating at Brisbane Airport. That airport is owned by the Commonwealth and is managed either by a Commonwealth authority or by a private operator pursuant to a contract with such an authority. Obviously, the manager has control over bus access to the airport. It would not be possible to operate a viable bus service which terminated outside the airport complex as such a terminus would be some kilometres from the airline terminal buildings. Thus the provision of bus services to and from the airport is not solely within the control of the respondent. The applicant had entered into an agreement with the airport authority for the provision of services between the airport and Brisbane CBD and the airport and the Gold Coast. As I have previously explained, these services operated, for substantial portions of their respective lengths, on two distinct routes. The applicant tried for some time to persuade the Queensland Government to make declarations which would have had the effect of giving to the applicant the exclusive right to operate bus services on those routes, particularly the Brisbane Airport – Gold Coast route. THE DOCUMENTS 15 These disputes are recorded in the agreed bundle of documents which is ex 4. I will briefly summarize the more important aspects of those documents. 16 On 2 April 1996 Coachtrans wrote to the Director-General of Queensland Transport. At that time the respondent was seeking to enforce the earlier declarations under the TOPT Act in a way which impinged upon the applicant's operations. In the letter, Mr Sita, on behalf of the applicant, asserted that the Coachtrans services were not subject to the relevant declarations. The problem of competition from the railway was also raised. There was a reference to previous unsuccessful attempts to obtain "gross fare-based subsidy" from the respondent. He said that the applicant could not provide bus services on an economical basis under the current conditions and that such services might be discontinued. It was suggested that the respondent would want them to continue and that continuation might be conditional upon introduction of a subsidy similar to that being paid in respect of rail fares, construction of a transit lane on the Brisbane – Gold Coast highway to facilitate the passage of buses and various other matters. The Minister (Mr Johnson) acknowledged receipt of the letter on 11 April, indicating that the matter was under consideration. 17 On 10 May Coachtrans wrote again concerning both the validity of the TOPT Act declarations and the level of rail fares. The writer referred to "a number of detailed discussions over these pricing issues with Senior Executives from both (Queensland Rail) and (Queensland Transport)." It was suggested that these representatives had been sympathetic to the Coachtrans position. The letter then proposed a subsidy for Coachtrans services between Brisbane and the Gold Coast, including a retrospective subsidy. A substantial amount of financial information was provided. At this stage, departmental officers were considering the possibility of a subsidy, but on 13 June 1996 they recommended to the Minister that it not be paid. 18 On 3 July 1996 Mr Sita again wrote to the Minister. Referring to a meeting on 17 June, he asserted that: At that meeting, Coachtrans and QT were asked to work together to resolve some apparent discrepancies in financial estimates which would allow you to make a decision on the financial hardship claim being made by Coachtrans. 19 It was then asserted that: Since that time, representatives of Coachtrans and QT have worked together to develop a consistent set of financial results which we believe supports the losses claimed in our original submission. In fact, there has been a consistent decline in the financial outlook for Coachtrans with each ensuing week, since the introduction of the Gold Coast Railway. 20 The departmental recommendation to the Minister dated 13 June had firmly recommended against a subsidy. It asserted that Coachtrans' estimates disclosed no significant effect as a result of competition with rail. One would have expected that the departmental officers would have told Mr Sita of this recommendation at the meeting on 17 June. If so, he could not have believed that the government had any intention of offering subsidy. His letter would therefore be, at best, disingenuous. It seems that either the departmental officers did not tell him at the meeting on 17 June of the effect of their recommendations or he was not taking "no" for an answer. In the letter, Mr Sita also requested that the respondent make a declaration under the TOPT Act for the Brisbane - Gold Coast corridor, presumably in the expectation that Coachtrans would be awarded an exclusive contract for that route. 21 In the second last paragraph of the letter, Mr Sita wrote: In view of the ongoing sustained losses, Coachtrans are requesting that you recommend our subsidy proposal to Cabinet as soon as practicable to ensure the ongoing viability of public transport in this high growth corridor. 22 At p 4 of the letter, it was made clear that the subsidy was to enable Coachtrans to charge the same fare as Queensland Rail was charging. This suggests that the subsidy would have been of the same order of magnitude as that discussed at the meeting which occurred on 20 December 1997. The significance of this and of the reference to "Cabinet" will appear in due course. 23 On 13 August 1996 there was a meeting between Mr Sita and Mr Walker, representing Coachtrans and Mr McShea, Executive Director (Public Transport) in the Department of Transport. Mr Sita was again seeking substantial subsidies "to offset losses incurred as a result of the introduction of rail services to Helensvale at a considerably lower fare structure than that of Coachtrans". In a briefing note prepared by Mr McShea following that meeting, he recorded that total revenue delivered by Coachtrans had declined by twenty to twenty-five per cent since the introduction of the Helensvale rail service. He also noted that it had been pointed out to Mr Sita that, although Queensland Rail fare structures were undoubtedly a relevant factor, other factors had also contributed, including Coachtrans' decisions to discontinue student discount fares and to increase the number of services between Brisbane and the Gold Coast. There may be an error in this latter statement. It is difficult to see how increased levels of service could reduce revenue, although it might reduce profits. The point is of no present relevance. Mr McShea advised Mr Sita that the Department was not prepared to support his request for subsidy and invited him to nominate other areas where the Department might be able to assist Coachtrans to continue operations. A number of other matters were discussed. It was agreed that there would be a further meeting in about two weeks to discuss progress in connection with those matters. 24 On 14 August 1996 Mr Sita wrote to the Minister, referring to "numerous meetings with QT and QR officers … concerning the matter raised" in the previous correspondence. He asserted that Queensland Transport officers had "finally acknowledged" that "the vast majority of the $100,000 per month (ie $90,000 plus) revenue losses were attributable to the unfair pricing policy of QR." Mr Sita asserted that Coachtrans representatives had nonetheless been told that financial assistance was unlikely and asked the Minister to reconsider the question. Once again Mr Sita's version of the meeting as conveyed in his letter of 14 August differed in a significant respect from that of the relevant departmental officer, in this case Mr McShea, as recorded in his briefing note. 25 On 10 October 1996 the Minister and various departmental officers met Mr Sita and Messrs Turner and Walker who were consultants to Coachtrans. A note of the meeting appears at pp 37D-G of the agreed bundle. The Minister said that he had perused the available information and that although he was sympathetic to Coachtrans' plight, there was no scope for financial compensation. Various other initiatives were discussed. The Minister indicated that he had not previously known of some of the matters raised at the meeting and that he wished to consider them. He also said that if Coachtrans provided him with any information which was incorrect, he would effectively wipe his hands of the matter. This document appears to have been prepared by somebody on the Coachtrans team. (See final sentence of par 12.) It is important to note that at the meeting, the Minister apparently expressed such firm views. 26 On 17 February 1997 a body described as "Queensland Coalition Transport Policy Advisory Committee" made a submission, presumably to the Minister, recommending support of Coachtrans' position. The committee's motivation appears to have been political. Presumably this was a policy committee established by the National-Liberal Coalition which was then in government, of which government Mr Johnson was a member. On 16 March 1997 Mr Sita wrote to the Minister, registering his disappointment at the government's failure to act. The letter concluded as follows: Minister, Coachtrans has been extremely patient considering the time taken for these negotiations and the ongoing losses it has incurred. The time has come where I have no option but to act. As a businessman, I have a responsibility to take action to protect my business. These actions will take place in the immediate future and include service cuts, staff retrenchments and consolidated legal action. We will retain the services of a well regarded public relations firm to ensure that the public is fully advised of our plight and the reasons for our actions. I regret that this situation has arisen but given the trail of broken commitments, I am left with no option. 27 Clearly, Mr Sita was threatening both legal and political repercussions if his demands were not met. On 18 March there was another meeting involving the Minister, the Director-General, Mr McShea and Mr Turner, a Coachtrans consultant. Mr McShea took a minute of this meeting (p 40 of the agreed bundle) in which he recorded that Coachtrans had, for the first time, provided a profit and loss statement. In the course of the meeting the Minister said that: · it was not sustainable to give special funding to Coachtrans because of the implications for the rest of the state; · it was important that all operators "play the game" in terms of what was expected of them under the TOPT Act; · when Mr Sita purchased Coachtrans he must have been aware of the impact that rail fares would have on the business; and · the Department was still analyzing corridor solutions to improve public transport during the road construction activity. 28 Again, it is relevant to note that the Minister expressed such firm views. The oral evidence suggests that the expression "play the game" related to the continued operation of Coachtrans on the Gold Coast and in Logan, where other companies had contracts pursuant to declarations under the TOPT Act. It seems that the departmental position was that, notwithstanding such contracts, Coachtrans was being permitted to continue to pick up and set down in those areas, provided that such traffic accounted for only a limited proportion of its business and certain fare restrictions were observed. There was some suggestion that these conditions were not being observed. Mr McShea's minute records that Coachtrans was to calculate the revenue and expenditure figures for two proposed options involving reduced services between Brisbane and the Gold Coast. These figures were to be provided to the Department within the week. There was also to be discussion between Queensland Transport and Queensland Rail "to gauge the likelihood of substituting the late-night train services with buses". This possibility was being investigated in the expectation that it might benefit both Coachtrans and Queensland Rail. 29 On 27 March the Minister wrote to Mr Sita as follows: As I have previously indicated in our discussions, a genuine attempt has been made by Queensland Transport to determine what scope, if any, exists to address the matters you have raised. A number of actions have recently been undertaken to address your concerns and these include the following: · assignment of the two service contracts for Coolangatta Airport to your company; · commenced discussion with you to develop a service contract for the Brisbane Airports; · commenced action to develop government funded contract for the Coomera area; · commenced discussion with Main Roads Department regarding the provision of bus only lanes during the Pacific Highway 8 laning construction. You would also be aware that Queensland Rail have recently issued a new timetable and fare structure. However, I regret to inform you that it is not possible to accommodate all of your requests especially in relation to additional funding whether by way of direct subsidy, fares equalisation or a one off compensation payment for revenue lost by your company. I understand that as a commercial entity it is incumbent upon you to operate at a level of service that will allow you to remain financially viable. As you are aware Queensland Transport is currently considering regulatory amendments which would prevent long distance bus operators from picking up and setting down passengers within declared service contract areas or over declared routes. I have asked my Executive Director (Public Transport), Mr McShea to meet with you in the near future to explain proposed regulatory changes which may affect your company. 30 On 2 May Mr McShea sent a memorandum to the Minister concerning the ongoing Coachtrans dispute, including this summary: · Sita Queensland bought Coachtrans in October 1995 in the full knowledge that the Gold Coast rail services would commence early in 1996. · It has failed to put forward any convincing arguments to the effect that the impact of the rail services was: (i) greater than what might reasonably have been expected, or (ii) in some way due to unfair or unlawful behaviour on behalf of QR. · It has also been unable to put forward any compelling public interest case to support its request for financial assistance. · While Coachtrans as a business has been devalued by the commencement of the Gold Coast rail services, presumably this would have been reflected in the price paid by Sita Queensland. · Finally, your letter of 27 March 1997 is by way of confirmation of the advice that I first gave to Mr Cos Sita at a meeting on 14 August 1996 that it was the Department's position that there was no case for any financial support from government. 31 On 2 May the Minister wrote to Mr Sita giving reasons for his decision concerning financial assistance as notified in the letter of 27 March. At p 5 the Minister said: An enormous amount of time and effort by my personal staff and the staff of Queensland Transport and Queensland Rail as well as other government agencies such as Crown Law and Queensland Treasury has been expended on this issue. You have known since 14 August 1996 that Queensland Transport's advice to me was to the effect that there were no grounds to justify the financial assistance you first sought on 10 May 1996. That it has taken to this point for me to reach a similar conclusion is as a consequence of my personal and genuine efforts to ensure that no stone by which my government might have been able to assist your company has been left unturned. I assume as a consequence of my advice to you there will be a need for you to review the services provided on the Brisbane-Gold Coast corridor and perhaps elsewhere to permit your company to remain viable in the longer term. In this regard, I have asked officers of Queensland Transport to make themselves available to assist you in providing information to the public on any proposed changes. In the first instance contact should be made with Mr Allan Parsons. 32 On 17 April Mr Sita had written to Mr Johnson complaining of the proposed new regulations and on 23 June, Mr Parsons and Mr McShea met with Mr Sita concerning a claim for compensation in connection therewith. Mr McShea prepared a note of the meeting which is at pp 60AA-60BB of the agreed bundle. The departmental officers told Mr Sita that they had advice that there was no legal obligation to pay compensation, but that they were prepared to recommend a "one-off" payment for loss of traffic rights which Coachtrans had historically enjoyed in the Logan area. Mr McShea recorded that: I asked Mr Sita that he consider this proposal and that the range of assistance would be between $112,000 and $360,000. I also informed him that even though the Minister could recommend options to Cabinet, any submission would be scrutinised by all other departments including Treasury and as such could be opposed or amended. 33 The reference to a recommendation to Cabinet is of some importance for reasons which will appear hereafter. Mr McShea also recorded that: We advised him that if we couldn't reach agreement then he would have to continue to pursue his separate ways as it would not be possible for us to logically support alternative scenarios. 34 The note of the meeting recorded that Mr Sita was anxious to have a contract for the Brisbane Airport - Gold Coast route because the Federal Airports Corporation had complained about his cutting late-night services. He complained that competition from other operators in peak hours was rendering his own services less viable. The departmental officers agreed to a meeting with him and the airport authority. Mr Sita also referred to the "Brisbane Airport contract". This may have concerned transport between Brisbane Airport and Brisbane CBD. They also discussed local operations within the Gold Coast area, including to and from Coolangatta Airport. 35 On 4 July, Mr Peter McCall, a public relations consultant for Coachtrans, wrote to Mike Stapleton (a senior policy adviser to the Minister), suggesting that the Logan City compensation claim be resolved by reference to an independent third party. The Minister replied on 9 July, saying that the proposal was "worthy of consideration". He suggested that Coachtrans might like to contact Mr McShea with a view to: · selection of a mutually acceptable arbiter from one of the major accounting firms; and · development of a brief acceptable to both parties. 36 The letter then continued: Following resolution of the above to the satisfaction of both parties, and written confirmation from your client of his acceptance of the process, I will give serious consideration to your proposal. 37 On 18 July there was a further meeting between representatives of the Department and Coachtrans, the outcome of which was unsatisfactory to the latter. Mr McCall again wrote to the Minister on 29 July, complaining about the attitude of the departmental representatives. He also indicated that Coachtrans had received advice that the pricing policy adopted by Queensland Rail breached the principles of competitive neutrality prescribed by the GOC Act and/or the QCA Act and that Coachtrans intended to raise the matter with the appropriate authorities. Mr McCall then continued: In view of the above, there is an urgent need to resolve these same, long outstanding issues. I am informed by my client and QT that both have strong legal cases, for the issues of Helensvale, Logan City and the QR pricing issue. Irrespective of the outcome of any legal challenge, it is highly unlikely that the government would escape without serious damage to its credibility as the transport regulator, this is in addition to the legal costs and manpower resources which could be better utilised elsewhere for the public benefit. As QT have already indicated a desire for my client to withdraw from its judicial review action in relation to Helensvale, I think it is about time that some serious negotiations occurred to finalise outstanding matters. Such matters include:- 1. Payment of a reasonable level of compensation in relation to Helensvale and Logan City, which we are happy to have determined by an independent arbiter using sound commercial principles. 2. Issue of an exclusive contract for the Airporter Service between the Brisbane Airport and the Gold Coast (with no subsidy applicable). It should be noted that the Brisbane Airport Corporation Ltd are currently writing to QT seeking the implementation of a wide coverage of services and standards which will necessitate the issuing of such an exclusive contract. 3. Issue of a contract for route services between Brisbane and Coolangatta with subsidy applicable to a competitive neutral position in relation to QR. 4. Finalisation of the Skytrans contract between the Brisbane CBD and the airport. 38 Again the applicant was threatening both legal and political action to achieve its aims. On or about 3 November, Mr McShea sent a memorandum to the Minister referring to a series of meetings with Coachtrans and its representatives concerning the following issues: · Brisbane Airport services; · Gold Coast – Brisbane long distance service; · Brisbane Airport to Gold Coast services; · rail competition and NCP issues; · "compensation" for loss of business at Logan and Helensvale as the result of regulatory changes; and · "compensation" claims in relation to awarding of the Gold Coast urban contract (through judicial review application). 39 It stated: Although the first 4 issues are not resolved negotiations are continuing between QT and Coachtrans on issues (1) to (3) and in relation to (4) Coachtrans has lodged a submission with the Queensland Competition Authority. In relation to (5) and (6) it has always been the contention of the Department and its legal advisers that the Department had no legal grounds or liability to compensate Coachtrans in relation to either of these issues. However, these matters continue to be strongly pursued by Coachtrans. 40 The memorandum concluded with a recommendation that the Department retain an independent valuer to advise it as to the value of any business which Coachtrans may have lost as the result of regulatory changes, such information to be used by the Department in its future dealings with Coachtrans. 41 On 26 November 1997 Mr Owen Rankin, the Minister's chief policy adviser, reported to him the outcome of a meeting between Mr Rankin, Mr McShea, Mr Stapleton and Mr Sita. At the meeting Mr Sita was told that the Department wished to retain an independent adviser to advise as to the amount of any ex gratia payment to be made in relation to the Logan matter and that Coachtrans would be welcome to provide information to that adviser. Mr Sita complained about the viability of Coachtrans' Gold Coast – Brisbane Airport services, claiming that its business was being eroded by small operators who did not have the onerous service obligations which Coachtrans had undertaken. He asked that the corridor be "closed" to give him greater security. It was pointed out to him that this would require a public tender process. Mr Sita said that he would prefer that to the current situation. He said that Coachtrans had an exclusive contract with the Brisbane Airport Corporation, presumably for the provision of coach services to and from the airport. The departmental officers suggested that Coachtrans should take the matter up with the airport authority, presumably to seek enforcement of its right to exclusivity at the airport. Mr Rankin advised the Minister that an exclusive contract for the Gold Coast – Brisbane Airport service could only be awarded if he (the Minister) considered that such a step would achieve certain statutory purposes and that it was unlikely that he could properly form that view. Further, such a step would put four or five existing operators out of business and prevent new operators from entering the market. Mr Rankin reported that progress had been made in establishing appropriate arrangements with Coachtrans for the Brisbane Airport – Brisbane CBD service, although Brisbane Transport (presumably Brisbane City Council) was still to be consulted. 42 On 2 September 1997 the Minister wrote to Mr McCall (ex 9), referring to a meeting on 26 August attended by himself, Mr McCall and Mr Sita. He confirmed the following points of agreement reached at the meeting: 1. Proposal for possible resolution of the Coachtrans issue in relation to Helensvale and Logan City. · It was agreed that the Helensvale issue should proceed to mediation. Mr Sita and Mr McShea to advise the respective legal representatives of this preferred course of action. · Once the outcome of mediation is determined, subsequent courses of action can be evaluated. 2. Issue of exclusive contract for Airport Services (Brisbane Airport and Gold Coast) · Mr McShea advised that the requirement for proceeding with the calling of an exclusive contract would require Ministerial approval under section 36. Due to the nature of the contract public tenders would have to be called. · Mr Sita indicated that he would consider his position and respond accordingly. 3. Request for subsidy to achieving a competitive neutral position in relation to Queensland Rail on the Gold Coast · In light of letters tabled by Mr Sita from the Queensland Competition Authority at the Audit Commission Implementation Office it was agreed this matter should be progressed as a commercial decision by Coachtrans. 4. Finalization of the Skytrain contract · Mr McShea to organize a meeting with Mr Sita, Brisbane Transport and Queensland Transport to confirm final agreement on all conditions of the proposed contract. · Contract to be progressed after this meeting · Contract would be for "walk-up" passengers – in line with other support contracts 43 On 18 September, Mr Sita wrote to Mr McShea concerning the same meeting (ex 10). Concerning services between Brisbane Airport and the Gold Coast, he urged that any tender be a "closed" tender, restricted to those operators presently servicing the route. He indicated that he would prefer that Coachtrans be given the contract without tenders and that, if necessary, the TOPT Act should be amended. 44 This summary of the documentation identifies the state of the matters in dispute between the parties prior to the alleged agreement of 20 December 1997. It is fair to say that the general tone of the departmental and ministerial correspondence was sympathetic to a degree, but it indicated no inclination to accept the proposal for subsidy of the Brisbane – Gold Coast route. There was some inclination towards making an ex gratia payment in connection with the Logan and Helensvale matters but no suggestion that the Minister or the Department might grant an exclusive contract for the Brisbane Airport – Gold Coast route without a public tender process. As at the end of 1997, the applicant's attempts to invoke the National Competition Policy in support of its complaints concerning subsidized competition from Queensland Rail were only in their embryonic stages. In a letter of 4 December 1997 from the Minister to the Queensland Competition Authority, the former took a robust stance, urging that any rail subsidy was justified by the government's community service obligations. (See pp 70A-B of the agreed bundle.) Oral Evidence 45 It is now appropriate to consider the oral evidence. I commence with the evidence of Mr Sita. He was the principal witness called on behalf of the applicant and is a director of that company. He said that the applicant presently operates bus services between Brisbane and the Gold Coast, Brisbane Airport and the Gold Coast and between Brisbane Airport and Brisbane CBD. It also operates charter services between Brisbane and the Gold Coast, scheduled services between Coolangatta Airport and accommodation houses on the Gold Coast and tourist services. 46 In October 1995 the applicant acquired the businesses previously conducted by Coachtrans Australia Pty Ltd and Harlingdale Australia Pty Ltd. It continues to use the name, Coachtrans Australia. Other business names include Get-Around Gold Coast and Get-Around Brisbane. They have depots at Brisbane Airport, Coomera (which is partly-owned by Mr Bill Baumann, a witness called by the applicant) and at Tweed Heads. In due course the applicant received assignments of licenses PSL 146, PSL 121 and PSL 212 as a result of its acquisition of the businesses. Following the acquisitions the applicant's service between Brisbane and the Gold Coast included the pick up and set down of passengers between Biggera Waters Caravan Park and the Helensvale - Oxenford line. It did not otherwise pick up and set down within the Gold Coast service contract area. 47 After commencement of the rail service to Helensvale in February 1996, there was a complaint that the applicant ought not be picking up or setting down at Helensvale because the government's contract with Surfside Bus Lines for the Gold Coast service contract area included Helensvale - Oxenford. Eventually, the applicant discontinued the practice of picking up and setting down at Helensvale. In 1996 it commenced proceedings for review of various decisions pursuant to the TOPT Act, including the letting of the contract for the Gold Coast service contract area. These proceedings were eventually dismissed because they had been commenced out of time. As I have previously observed, new regulations and declarations were made in 1997 which also had the effect of so restricting the applicant's operations. It sought compensation for lost business in the Gold Coast and Logan City areas. Mr Sita said that the applicant negotiated with the respondent for compensation and asserted that they had agreed that the matter be left to independent arbitration. I doubt whether there was any formal agreement to that effect, but it is of no real significance for present purposes. 48 Mr Sita said that when the Helensvale rail service first commenced, the adult fare was $7.00, but numerous concessional and weekend fares were offered at much lower rates. The applicant's fares were much higher, perhaps $10 or $11, although it also offered a range of discounted fares. Mr Sita claimed that as a result of the competitive rail fares, the applicant lost about 30 per cent of its revenue. He complained to the Transport Department, to the Australian Competition and Consumer Commission and in July 1997, to the Queensland Competition Authority, the complaint being that the rail fares were not "competitively neutral". 49 Prior to December 1997, the applicant had been entitled to operate inter-terminal shuttles between the domestic and international terminals at Brisbane Airport, between those terminals and Brisbane CBD and between those terminals and the Gold Coast. Its contract to operate from the airport was an exclusive contract, allowing the applicant to have counters at the international and domestic terminals from which to sell tickets and parking facilities in front of the terminals. It paid 5 per cent commission to the airport authority as a form of rental. Prior to 1994 the right to conduct the service between Brisbane Airport and Coolangatta had been regulated under State law. The applicant or one of its associated companies had held a relevant licence. He claimed that the licence was closely tied to his agreement with the airport authority. As a matter of common sense, that may have been the case, but it is clear that neither the applicant nor either of the other companies had any exclusive right to service the route between the airport and Brisbane CBD or that between the airport and the Gold Coast, save to the extent that such service involved airport access. The evidence indicates that de-regulation had occurred in 1989. (See ex 41, App 1, p 2.) 50 Mr Sita was concerned that other operators were being allowed to pick up and set down at the airport, a matter over which the Queensland Government had no control. He feared that this practice had the potential to destroy his service because "it allowed other operators to come in …", thus depriving Coachtrans of the business at peak hours which it relied upon to subsidize its off-peak services. Pursuant to the licence agreement with the airport authority, the applicant was obliged to provide services on a twenty-four hour basis to meet major flights. He said that when the matter was raised with the government prior to December 1997, "they wanted to go ahead and open-tender the service." I take this to mean that Mr Sita had sought some sort of monopolistic right with respect to the Brisbane Airport to Gold Coast service and was told that this could only be offered to him if he were the successful bidder after unrestricted public tender. Mr Sita indicated that he would prefer a closed tender, presumably involving those presently servicing the route. 51 In August 1997 Mr Sita met with Mr Johnson. They were both attending a conference at Kooralbyn Resort near Beaudesert, south-west of Brisbane. According to Mr Sita the Minister "wanted to assure me that he had organized a series of meetings to sort out my problems by Christmas." He said that the Minister said words to the following effect: I apologize that it's taking so long. I've organized a series of meetings in order to resolve all these issues, including the rail, and your problem in relation to long-distance – we're looking at increasing the distance from 40 to 150 so all your problems can be resolved by Christmas. 52 There were subsequent meetings between departmental officers and representatives of the applicant and with ministerial staff but, according to Mr Sita, no further progress was made. He attended one such meeting on 25 November. Also present were Mr McCall, Mr Walker, Mr Stapleton, Mr Rankin and Mr McShea. The meeting was concerned primarily with the issue of compensation for Logan and the Gold Coast and the airport issue, involving both the airport - Gold Coast service and that between the airport and Brisbane CBD. Other operators were offering competition on both routes. According to Mr Sita, Mr McShea said that he "wanted to go to open public tender". Mr Sita said that he was not happy about that proposal. 53 Following the meeting, Mr Sita was upset and went to see Mr Baumann, his local member, at Parliament House. It is worth noting that the applicant had acquired the Coachtrans and Harlingdale businesses from Mr Baumann or a company in which he had an interest. Mr Baumann arranged a brief meeting with the Minister. Mr Sita said that the Minister commenced the meeting by saying that he was sorry for the dramas, that all matters should have been resolved by now and that they had to be fixed. Mr Sita then complained about the proposed public tender for the airport services. He said that they had previously discussed the matter and that there was no reason for open tender. He asserted that all he wanted was a fair go, including an "independent arbitrator", presumably to decide the Gold Coast and/or Logan compensation issues. Mr Sita made reference to the level of rail fares and their effect upon his business. The Minister said that he wanted to wrap up the whole matter by Christmas. Mr Sita said that there was no point in going back to the bureaucrats and that he needed to speak to him (the Minister). The Minister said "Yes, that's exactly what I'm going to do. I'm going to take control of this matter". He asked Mr Baumann to organize a meeting in the next couple of weeks. Mr Sita said that he felt that the "bureaucrats" would not assist him because "they were fixed in their mind that anything to help Coachtrans was just out of the question." He said to the Minister "This situation really could be easily fixed up, and I want to put something to you. I want to resolve it and get rid of all our dramas, and it wouldn't cost an arm and a leg." 54 This latter observation is of some importance in assessing Mr Sita's credibility because, as will appear subsequently, the proposal which he wished to put to the Minister could not be so described. It was, in fact, potentially quite expensive for the government, particularly as it, in effect, owned the railway. It was agreed that the Minister, Mr Sita and Mr Baumann would meet again to discuss the matter further. Mr Sita was subsequently told by Mr Baumann that the meeting would take place on 20 December at a restaurant at Jacobs Well. On that day he and Mr Baumann met at the applicant's Oxenford depot and drove to the restaurant. Mr Sita went armed with two documents headed respectively "The Solutions" and "Benefits". These two documents appear at pp 124 and 125 of the agreed bundle. They met the Minister outside the restaurant and went inside. Other matters were discussed over lunch. After lunch, they turned to matters of business. I should say that throughout his evidence, Mr Sita seemed to me to have some difficulty in distinguishing between what he had said and what he had thought. This difficulty was particularly apparent in the evidence which I will now outline. 55 He claims to have said to the Minister: I want to put something to you that will – can resolve all of the matters, all of the dramas that we've had, and I believe that it will be in the best interests of not only Coachtrans but the government and the public out there in the corridor. The way to do that was with a kilometre-based contract and I explained to him the concept of a kilometre-based contract and the benefits one – you know, we could achieve by implementing a contract like that, and I also explained to him that we have a similar contract in Melbourne. We've had one for seven years and now just recently over the last eighteen months its been renewed for a further ten years. I explained to him we operate sixty-five vehicles there and the age of the fleet and all the benefits that go with a kilometre-based contract, and I tried to give an overall picture, your Honour, of how it would work. You know, the benefits of it and not only does it rid itself of all the problems of any issues with fellow operators and governments and subsidies and all those types of things, but it could introduce integrated ticketing for the first time. 56 Mr Sita was asked to recount his actual conversation with the Minister and continued: … it will introduce … integrated ticketing and we haven't got that not only in the corridor but anywhere else. We'd have the same ticketing. We could, you know, help out people that can't get to the rail, that need access to these cheap fares that are disadvantaging our community. If we can do it on the bus and get them on the bus and on to rail or straight through, its going to be of benefit and that revenue could go back to the government with a kilometre-based contract so we could achieve those things. I explained to him that we could … operate the service as well and we'd been talking about with the Minister for some time on rail replacements because the Minister had informed me that – it was an agreed point that, you know, the rail is good but it's also very costly and at times … buses can take over that role and I gave the example of a woman travelling at night. … they feel much more secure … in a coach than they would with the rail because its so big and things like that. So the two modes can complement each other … and we agreed that they both should. I believe its in the best interests of the public as well, and it was the way to go. 57 All of this relates to two different aspects of the rail issue, the first being the very competitive fares charged for rail travel, and the second being the possible substitution of bus services for late night rail services. It is appropriate at this stage that I summarize the "Solutions" and "Benefits" documents. 58 The "Solutions" document dated 20 December 1997 and headed "Commercial-in Confidence" and "Without Prejudice" provided as follows: 1. Route Service · 5 + 5 renewable contract with Chief Executive, QT under Section 143(B) of the Transport Operations (Passenger Transport) Act 1994 for Brisbane to Gold Coast route Service. · Minister approves the basis on which the financial assistance is provided in accordance with Section 143(B) and instructs the Chief Executive to enter into this arrangement. · Contract at the market rate of $2.60 per kilometre (CIP annual prices). · All revenue can be paid directly to government. · Route service to operate 40 services each way for M-F 30 services each way per day on Sat/Sun/PH. (To be reviewed in accordance with demand) · Coachtrans to operate low patronage QR services incl. any extension to Coolangatta. 2. Airporter (Gold Coast to Brisbane Airports) · A closed tender of existing operators (only) that are providing scheduled passenger service to the Brisbane Airports. If the above arrangements are put in place, all current legal actions in relation to JR and financial damages will be dropped. (a) QCA Complaint withdrawn (b) Trade Practices Act action withdrawn (c) Logan City/Hyperdome compensation action withdrawn (d) Helensvale compensation action withdrawn (e) Five other legal actions withdrawn 59 The "Benefits" document was also dated 20 December 1997, headed "Commercial-in Confidence" and "Without Prejudice". The identified benefits were: · An integrated transport solution, including ticketing, sales and marketing. · Cost effective option with buses operating lightly loaded QR services (significant savings to govt). · All passengers in the Gold Coast to Brisbane corridor to be "looked after" with improved accessibility and services levels. · Same fares as rail, so all residents of the corridor receive benefits of CSO's (not just those who have easy access to rail). · Restores equity, competitive neutrality and accountability into the CSO equation. · Able to accommodate future growth in the corridor. · Will complement the direction of the Busway project & can work with Brisbane Transport in the future to assist with peak hour loading problems at Busway stations. · Viewed as a "positive" step towards improving public transport in conjunction with the Pacific Highway up grading in many areas not easily accessible by rail. · Gets more cars off the road as public transport fares become more affordable. · Sita to invest heavily in 'state of the art', highly quality coaches (creating local employment growth in Queensland). · Sita to employ more staff locally in the Gold Coast to Brisbane corridor. · All litigation and QCA action by Coachtrans to be dropped immediately and services operated as required by QT. 60 The proposal emerging from both documents appears to have been that the respondent pay to the applicant a rate per kilometre travelled by its buses on the Brisbane - Gold Coast route. The applicant was to charge passengers the same fares as were being charged by Queensland Rail. Fares so received would be passed to the government. In other words, the government would assume the commercial risk inherent in the applicant's operation between Brisbane and the Gold Coast. I will return to the details of the solution and its cost at a later stage. The proposal that the applicant operates forty services each way, Monday to Friday, and thirty services each way, per day on Saturdays, Sundays and Public Holidays might mean that there would be forty services each way in total on the five working days, but in oral evidence, Mr Sita said that his meaning was that there would be forty services each way per day (TS 454 ll 9-12). This appears to have been the shared view of the parties as to the meaning of the document. 61 The contract price was to be $2.60 per kilometre. Assuming a one-way trip of 110 kilometres, this would be $286 a trip with 260 services each way per week. That totals $148,720 ($286 x 260 x 2) per week, or in excess of $7,700,000 per year. The cost to the government would be reduced by the amount of fares received, but there was no estimate of this amount in the documents nor, as far as the evidence goes, was any figure mentioned at the meeting. Presumably the equalization of rail and bus fares would result in the transfer of some patronage to the bus service at the expense of Queensland Rail, but that would have been of no benefit to the government. There was potential for savings to Queensland Rail in the proposed substitution of bus services for under-patronized rail services, but no relevant figures were given in the documentation or referred to in the evidence. 62 Despite Mr Sita's enthusiasm, I am unable to see any significant commercial benefit to the government in this proposal, apart from the rail - bus substitution issue and the compromise of the applicant's claims against the government. As to the former matter, I have said that there was no attempt at the meeting to put a value on it. As to the second matter, one can only say that at no stage prior to 20 December had the Minister or anybody else on the government side demonstrated any great concern about the applicant's claims, other than that they were taking up much of the time of the Minister and the Department. The proposals did not differ significantly from those previously rejected by both the Minister and the Department. It is the applicant's case that the Minister accepted this offer without any further investigation or consultation. 63 At some stage on 20 December Mr Sita handed the "Solutions" and "Benefits" documents to the Minister. According to Mr Sita, the Minister then considered each matter raised in the "Solutions" document and ticked each in turn. As each point was considered, the Minister indicated that he understood it. Mr Sita said that he had previously proposed a rate of $2.75 per kilometre, which was the contracting rate used by Brisbane City Council. He had reduced it to $2.60 because "I didn't want to put an offer to the Minister that would in any way be seen as high or exorbitant". The Minister said, "It's a fair rate, it's a good rate." Mr Sita pointed out to the Minister that his solution: … gets rid of everything, just wipes out everything, whatever has been in dispute, litigations are just gone, so there's no more dramas whatsoever and not only would it be good for Coachtrans, but it would be good for Clarks (the Logan contractor), Surfside (the Gold Coast contractor), the government, but more importantly, you know, its for the public and it's all the ways that we are back getting on with our life and operating public passenger services. He said that the Minister said something like "Well, that gets rid of everything." 64 They then considered the "Benefits" document after which, according to Mr Sita, he said: Minister, I don't mind admitting to you I come from a very religious family – fairly religious family – and we said a prayer today, hoping this meeting would go well. 65 The Minister responded: Your prayers are answered. We've got a deal. 66 They shook hands. The Minister then said: Well now you can sleep at night. Your family can sleep at night. Your problems are over. 67 He told Mr Sita to contact Ian Andrew, one of his staff, with a view to implementing the proposal from 1 February. This is somewhat curious as other evidence indicates that Mr Andrew had been kept out of matters concerning the applicant because he had previously had connections with Coachtrans. Mr Baumann asked the Minister how he would deal with the bureaucrats. The Minister said "I'll be telling them what to do". There was further general discussion. As they were leaving, the Minister said: Look, your family can sleep now. Its all resolved. Forget about it; its all done. Its over. Go and sleep. We'll have this in by 1 February. 68 Mr Sita denied that the Minister had said that he would have to discuss the matter with his advisers and obtain Cabinet approval for any arrangement concerning a subsidy. Following the meeting Mr Sita and Mr Turner, a consultant to the applicant, drafted the letter which appears at p 130 of the agreed bundle. It is dated 20 December 1997. They also drafted a document described as "Heads of Agreement", two copies of which appear at pp 126 and 127. Mr Sita signed both copies. He then instructed Mr Turner to confer with Mr Andrew on the following Monday morning. 69 On or about 23 December Mr Sita received a letter from the Minister dated 22 December 1997, two versions of which appear at pp 130A and 130B of the agreed bundle. One is probably the original of a fax and the other, a copy of the letter sent by mail. Mr Sita's letter of 20 December had asserted that "agreement" had been reached. The Minister's reply of 22 December did not expressly deny any "agreement", but its terms were inconsistent with a belief that any enforceable agreement had been reached. I will return to these matters at a later stage. 70 On or about 6 January Mr Sita received a letter from Queensland Transport bearing that date. This is at p 131 of the agreed bundle. Mr Sita replied on 13 January. I will consider this correspondence in more detail after I have summarized the oral evidence. At p 131F of the bundle there is a hand-written diary note by Mr Sita, dated 21 January 1998, which recorded that Bruce Wilson, the Director-General of the Department of Transport had telephoned him, advising that "Vaughan (Mr Johnson) will write … a letter to me today (-) beyond his authority (-) take the matter in early Feb for Cabinet meeting – $ the issue." In February 1998 Mr Sita was informed that Cabinet had declined his proposal. This was confirmed by letter dated 5 March (p 159 of the agreed bundle), to which Mr Sita replied by letter dated 17 March (pp 161-163 of the agreed bundle). 71 In cross-examination Mr Sita agreed that for some time prior to the December meeting, Mr Baumann had been lobbying on his behalf in connection with the dispute. He had asked questions of Mr Johnson in Parliament. Mr Sita agreed that prior to acquiring the Coachtrans and Harlingdale businesses, he had known of the TOPT Act, that the contract for the Gold Coast area had been granted to Surfside Bus Lines and that the contract for Logan City had been granted to Clarks. He also knew that the railway was shortly to open. He had always expected a decline in patronage following that event, but the actual loss was greater than he had expected. He had increased the number of route services in anticipation of the rail competition. At one stage, he was offering 118 services in each direction each day. This was later substantially reduced. He agreed that the Department had pointed out to him that the number of services he was offering and the reduction in student concession fares had contributed to his loss of revenue. He thought that the Department had not fairly considered his complaints of lost business. 72 An unsatisfactory (although minor) aspect of Mr Sita's evidence was his assertion in cross-examination that prior to the construction of the Helensvale railway station, the applicant's buses had regularly picked up and set down passengers at a point opposite that station. This seems inherently unlikely in view of the clear evidence, which appears from ex 6 and the respondent's witnesses, that Helensvale is some distance from the Brisbane – Gold Coast road, perhaps up to a kilometre away. There would have been no point in such a detour prior to the opening of the railway station with the opportunities which it offered for providing an interchange service. I thought Mr Sita's evidence in this regard was deliberately evasive and designed to re-inforce an impression which he was trying to create, that his service had been in its current form for many years. This matter is of little relevance in the case save to the extent that it may affect my view of Mr Sita's credibility. 73 There were other problems with his evidence. In the course of cross-examination Mr Sita asserted that the respondent had offered him $360,000 by way of compromise of the Logan and Helensvale claims. Mr McShea's contemporaneous note of a meeting on 23 June 1997 (pp 60AA-AB of the agreed bundle) suggests that there had been mention of a possible range of compensation without any firm offer. In the course of cross-examination Mr Sita was asked questions concerning an entry in his diary in blue ink for 23 June 1997 apparently referring to the meeting on that day mentioned above. It said: Without prejudice talk. Allan/Mick. 74 He agreed that this was a reference to Mr Parsons and Mr McShea, both departmental officers. Thereafter, in green ink, appear the words and figures: 140-360, (no legal action) go thru – Cabinet Cabinet submission. 75 There is a further notation which I cannot read. Mr McShea's file note of the meeting (pp 60AA and 60AB of the agreed bundle) referred to discussions concerning a possible one-off payment to the applicant in respect of lost traffic rights in the Logan area. A figure of $140,000 was mentioned as a relevant "GFR per annum", presumably "gross fare revenue per annum". There was then reference to the figure of $140,000 multiplied by 3.5 years to which was applied a discount rate of 20 per cent, giving a figure of $360,000. There was also mention of a figure of $112,000, again calculated by reference to the gross fare revenue of $140,000 per annum. The note recorded that it was suggested to Mr Sita that the range of any offer would probably be between $112,000 and $360,000 and that he would have to sign an indemnity. Mr McShea recorded that he had said that although the Minister could recommend options to Cabinet, any submission would be scrutinized by all other departments, including Treasury and could be opposed or amended. 76 It was suggested to Mr Sita that the file note accurately reflected the substance of the meeting. Mr Sita agreed that the range of $112,000 - $360,000 had been suggested but denied that he was told at that time that the matter would have to go to Cabinet. He said that he was told this at some later stage and that he then added the notation in green ink. He claimed that although such communication was at a much later stage, it in some way related to the meeting of 23 June. This would not explain the presence of the figures 140 – 360 which are also in green ink and appear to relate, in the case of "140" to his gross fare revenue, and in the case of "360" to the maximum figure which might be offered by way of compensation. He agreed that he was told at some stage prior to the meeting on 20 December that any question of compensation would have to go to Cabinet. This is a matter of some importance for present purposes. 77 As with many other aspects of his evidence, I found Mr Sita's evidence concerning the meeting of 23 June to be most unconvincing. It had the ring of spontaneous invention about it. Had he heard at some later stage of the possibility that the matter might have to go to Cabinet, there is no sensible reason for his going back to the note of the earlier meeting and making a notation there. Further, there would have been no reason to add the figures 140 – 360 at that stage. It is important to note that as explained by Mr McShea, they did not describe a range (which was $112 - $360,000), but rather the highest figure in the range and a critical figure in the calculation process. It is more likely that they were his contemporaneous notes of what was being said rather than a subsequent recollection of an "offer" actually made. I have no hesitation in rejecting Mr Sita's evidence as to this notation in his diary. I infer that it was a more or less contemporaneous note of proceedings at the meeting on 23 June. He also denied being told that he would be required to give an indemnity in exchange for any payment as alleged in the note. It seems likely that something was said about legal action as the notation "no legal action" appears in his diary. He said that he also made that entry at a later stage, but I again reject that evidence. He denied that other entries in Mr McShea's file note accurately reflected the discussions at the meeting. It seems most unlikely that Mr McShea would have gone to the trouble of falsifying such a file note, either at the time of the meeting or at any time thereafter. Mr McShea has given evidence, and I saw no reason to doubt his honesty or reliability. It is also of some significance that Mr Sita's note referred to "Cabinet submissions", suggesting that as early as June 1997, he had been told that any compensation payment would have to be approved by Cabinet as Mr McShea had recorded. 78 A further difficulty arises out of Mr Sita's evidence concerning the attitude of the Minister to the problems which Coachtrans claimed to be experiencing in connection with the Brisbane Airport - Gold Coast route. It was put to Mr Sita that the Department had, during 1996 and 1997, consistently indicated that there was nothing which could be done to assist him. Mr Sita asserted that this was the Executive Director's position rather than the Minister's. It was put to him that the Minister had taken a similar position. Mr Sita conceded that this may have been the case. This attempt to distinguish between the Minister's position and that of the departmental officers was a common motif in Mr Sita's evidence, but there is little in the evidence to support his view that the Minister was not party to the conduct of his departmental officers. With the exception of his alleged conduct on 20 December, the Minister appears always to have acted on their advice. I will return to this matter at a later stage. 79 Mr Sita was cross-examined concerning ex 9, a letter dated 2 September 1997 from Mr Owen Rankin, the Minister's chief policy adviser, to Mr McCall, the applicant's public relations consultant. The letter referred to a meeting on 26 August, apparently between Mr Rankin and Mr McShea, representing the respondent, and Mr Sita and Mr McCall representing the applicant. The letter recorded that the claim for compensation in connection with Helensvale and Logan City was to proceed to mediation. As to services between Brisbane Airport and the Gold Coast, Mr McShea advised that an exclusive contract could only be granted pursuant to a declaration by the Minister under the TOPT Act and after a public tender process. Mr Sita said that he would consider his position and respond. According to the letter, the dispute concerning rail fares was left to be determined "as a commercial decision by Coachtrans", apparently meaning that Coachtrans would be left to enforce such rights as it had under the National Competition Policy legislation. Finally, as to the Skytrain contract, there was to be a meeting with Brisbane Transport to confirm an agreement which had been reached. This letter suggests that at the meeting, most of the matters in dispute had been considered and future steps for resolution identified. In particular, it seems that the Minister's chief political adviser was satisfied to leave the claim concerning rail subsidy to be resolved by the Queensland Competition Authority. 80 Exhibit 10, a letter of 18 September from Mr Sita to Mr McShea, appears to deal with the same meeting. In the fourth paragraph Mr Sita says that he had indicated that he would consider his position as to the proposal to call public tenders for the Brisbane Airport - Gold Coast route. Nonetheless, under cross-examination concerning ex 9, he said that he would not have needed to consider his position. Mr Sita's letter of 18 September certainly suggests that Mr Rankin's letter of 2 September (ex 9) accurately sets out what happened at the meeting. It is clear from ex 10 that Mr Sita understood that the departmental position was that there would have to be a public tender for any exclusive contract on the Brisbane Airport - Gold Coast service. Curiously, Mr Sita initially seemed not to recall the meeting of 26 August but eventually accepted that he must have been present. 81 In the course of cross-examination Mr Sita agreed that he had attended a meeting on 30 September 1997 with Messrs McShea, Rankin, Stapleton and Gralton. He agreed that the following accurately records part of the proceedings at that meeting In anticipation of a resolution through mediation, the Department would contact Ernst & Young, previously agreed as impartial arbitrators, to alert them to the fact that we may be calling upon them soon to seek their assistance in calculating an ex gratia payment in relation to Logan and/or Helensvale. At the same meeting Mr McShea indicated that if there were to be any exclusive contract between Brisbane Airport and the Gold Coast the Department's legal advice was that it should go to public tender to protect operators' interests as well as ensuring that the process could not be subsequently overturned. 82 At some stage he was told that an exclusive contract could only be awarded after a determination pursuant to s 36 of the TOPT Act. 83 Mr Sita attended another meeting on 25 November 1997. The document at pp 67 and 68 of the agreed bundle appears to be a note of that meeting prepared by Mr Rankin. Mr Sita agreed that at the meeting he was told that the Department intended to engage Ernst & Young to advise concerning a possible ex gratia payment in connection with the Helensvale and Logan matter. However Mr Sita disagreed with the proposition that he had been told that the matter would be determined by the Minister or Cabinet. He said that he was pressing for arbitration of the claim. The question of exclusive rights between Brisbane Airport and the Gold Coast was again raised. He was told that a public tender process would be necessary. Mr Sita said that he would rather take that risk "or pack up shop if necessary rather than gradually go broke". He agreed that it had been suggested to him that he might like to take the matter up with the airport authority with a view to enforcing the applicant's exclusive rights under its agreement with that body. 84 Following this meeting Mr Sita met with the Minister at Parliament House as I have previously explained. Mr Sita agreed that he was aware that before any declaration could be made pursuant to s 36 of the TOPT Act, it would have been necessary that a competition impact statement be prepared for the purposes of the National Competition Policy. 85 One isolated passage in the cross-examination gives some indication of the nature of the applicant's case. It appears at p 427 ll 14-18. Mr Hanson asked: You're not serious, are you? That he (the Minister) sat there and committed the government to millions of dollars in this informal fashion? 86 The answer was: Yes, he did do that, and it wasn't a case of committing to millions of dollars, your Honour. It was a case of putting in a world-class system into the corridor that wouldn't cost an arm and a leg. 87 As I have said, the assertion that the applicant's proposal would not have involved the government in expending millions of dollars is untenable. Quite apart from the figures which appear in the "Solutions" document, the evidence of another of the applicant's witnesses, Mr Walker, demonstrates as much. I will deal with that evidence at a later stage. 88 Mr Sita initially denied that he had ever been told or understood that any subsidy would have to be approved by Cabinet. He was referred to p 28 of the agreed bundle, which is the concluding page of the letter dated 3 July 1996 from Coachtrans to the Minister, in which the former asked that the Minister recommend to Cabinet that Coachtrans receive a subsidy. It seems that the subsidy under consideration was at least $1.2 million per annum. This is the figure discussed on p 7 of the letter as the likely loss in the absence of subsidy. Mr Sita claimed that the letter had been drafted by Mr Walker in consultation with departmental officers, but it is difficult to avoid the conclusion that he must have been then aware of the unremarkable proposition that a subsidy of such magnitude would require Cabinet approval. Indeed, Mr Sita eventually agreed that he had this understanding. (See TS 429 ll 10-13.) He also said (TS 375 ll 10-13) that he was told prior to 20 December that any proposed compensation payment would have to be approved by Cabinet. Apparently in justification of his assertion that Cabinet approval was not necessary for such expenditure, he asserted that the decision to build the new railway line between Brisbane and the Gold Coast had not been approved by Cabinet. The assertion is of no relevance for present purposes other than as it affects Mr Sita's credit. It appears to have been based upon ex 15 which outlines the history of the development of the new railway line, or so the applicant suggested in argument. To say the least, Mr Sita was disingenuous to suggest that this offered any support for the view that a subsidy of the kind he was seeking would not require Cabinet approval. 89 On a number of occasions it was pointed out to Mr Sita that his proposal to the Minister at the Jacobs Well meeting was entirely inconsistent with the latter's previous decisions and with views expressed to him (Mr Sita) by the Department. Mr Sita offered the opinion that the risk of the applicant's discontinuing its comprehensive bus service between Brisbane and the Gold Coast was sufficient political incentive for the Minister to overrule such decisions and views. In the course of cross-examination he also asserted that the agreement was to be for five years with an option to renew for five years "in perpetuity", dependent only upon performance. (See TS 448 ll 11-24.) If anything, this makes even more unlikely his assertion of immediate and unqualified acceptance of the proposal by the Minister. Mr Sita said that he understood that any legal problems relating to the need for a public tender on the Brisbane - Gold Coast route were to be sorted out by the lawyers. 90 Curiously, on 23 December 1997, after the meeting with the Minister, Mr Sita wrote to Mr Bruton at Ernst & Young concerning the basis for compensation in connection with the Logan City problem. The letter (ex 14) is quite inconsistent with a belief that the matter had been resolved and suggests that he still expected Ernst & Young either to decide the matter or to give advice as to the appropriate level of compensation. The only explanation offered by Mr Sita for writing the letter was that he had written it so as not to alert the "bureaucrats" to his agreement with the Minister for fear that they would take any opportunity to "destroy the deal". As, according to Mr Sita, the agreement was to be implemented by 1 February, it is difficult to see how it would have been possible to keep the officials in ignorance of it for any significant period of time. He also said that he wished "to expose the situation of the brief in regard to the compensation issue". Neither explanation makes any sense. The letter is quite inconsistent with the suggestion that there had been a previous agreement resolving all matters in dispute between the parties. As I have previously observed, Mr Sita's evidence often seemed to reflect his hopes rather than his recollection of events. Exhibit 17 contains a further letter to Ernst and Young dated 12 January 1998 which demonstrates that Mr Sita considered the issue of compensation to be alive even at that stage. 91 I have previously mentioned the witness, William Francis Baumann, a member of the Queensland Parliament and the person from whom the applicant acquired the businesses which it presently operates. His electorate is Albert, which covers the area from Beenleigh south to central Nerang. He takes the National Party whip, as does Mr Johnson. Prior to December 1997, Mr Baumann had been lobbying Mr Johnson and the Department in connection with Mr Sita's problems. He had a number of meetings with Mr Johnson concerning these matters. He recalled the November meeting between Mr Sita, the Minister and himself. It occurred in the cafeteria at Parliament House. He said that Mr Sita had been to see departmental officers but the meeting had been "disastrous". Mr Baumann therefore organized the meeting with the Minister. Mr Sita was accompanied by Mr Walker. Mr Baumann met them, took them to the cafeteria and then asked the Minister to join them. He briefed the Minister on Mr Sita's disappointment at the outcome of the earlier meeting. The major issues were the question of a licence for the Brisbane Airport – Gold Coast route and the Department's view that a tender process was necessary. The applicant's claims for compensation in connection with Helensvale and Logan were also discussed. Mr Baumann recalled the Minister saying that he had "had enough of the nonsense". Towards the conclusion of the meeting the Minister suggested that they have a further meeting at which Mr Sita could present him with his ideas in proper form, which might lead to a solution to the problem. I formed the impression that Mr Baumann's recollections of the meeting at Parliament House were to some extent intermingled with his recollections of the conversations which occurred at the subsequent meeting. 92 Mr Baumann and Mr Sita travelled together to the restaurant at Jacobs Well and met the Minister there. At some stage prior to their arrival, Mr Sita had shown Mr Baumann the "Solutions" and "Benefits" documents. These documents were given to the Minister at the meeting, and discussion ensued between him and Mr Sita. Mr Baumann also made some comments. He said that the Minister said of a process called "cost recovery" that "it sounded like a great idea". He said on numerous occasions that the Minister was anxious to resolve the matter. At one stage Mr Baumann asked him, "Well, how are you going to handle your bureaucrats?" To which the Minister allegedly replied, "I'll bloody well tell them what's going to happen." A passage of some importance appears at TS 533 ll 9-24 as follows: (Mr Conrick): Can you recall any other specific items that were discussed as between you and the Minister or matters in which you made observations? --- I was just very hopeful and I had expressed it to the Minister, I don't know whether once or a dozen times, that a result was forthcoming, that, you know, I understood to the best of my ability that the Minister did have special powers available to him that he could direct a result and that upon his examination and consideration of the fact perhaps he would be able to go forward to the bureaucrats there and most certainly have something of a common sense nature come forward out of it all that would see a resolution to everybody's concerns, I guess. And when did you say that? --- Well, look I, to be honest, I said it several times during the course of different meetings. Again, I had expressed sentiment along those lines at this particular meeting at Jacobs Well. The Minister had assured me that he would be able to have a resolution to the problem by some date, I don't know. It was early in February, anyway, maybe 1 February. 93 Mr Baumann said that they discussed the various points raised in the "Solutions" and "Benefits" documents, the Minister raising queries and ticking the points as they proceeded through the list. He said of those documents (at TS 534 ll 5-9): This document that's here, the nucleus of it was available, I think, for quite some months or even years prior to this actual thing being compiled into a written form and presented to the Minister. The ideas had been discussed times previous and various comment had been made times previously. 94 In relation to the various dot points which appear in the "Solutions" document Mr Baumann said of the fifth point (concerning frequency of route services) that Mr Sita had at some stage indicated his concern that he would not be able to continue operating services and that he would have to cut both services and staff. The Minister told him not to do that because "there would be a solution forthcoming". It is not clear whether this was said at the Jacobs Well meeting or on a previous occasion. As to the question of the Gold Coast – Brisbane Airport service and the need for public tender, Mr Baumann indicated that he did not think that it was fair and equitable to go about tendering in that way. He thought the Minister had agreed to this. As to the point concerning "the five plus five renewable contract" Mr Baumann said that he himself was not happy with this proposal, thinking that Mr Sita would need at least a "seven plus seven" term. He said that "The issuing of the contract was a priority and the Minister was going to fix that as well." It is not entirely clear, but this seemed to relate to the Brisbane – Gold Coast service. He said (at TS 537 ll 9-14): You know, the Minister had indicated his acceptance at some point in here of the solutions and the benefits that he could see flowed from the suggestions here and his support for it and the fact that he would go forward with it and progress the damn thing and have a solution on the table by early February, I think. It might even have been 1 February. 95 That language is inconsistent with there having been any contractual consensus. He was asked about the second dot point concerning ministerial approval of the basis for financial assistance pursuant to the TOPT Act and said: Well, I think it was somewhere towards the conclusion of the actual meeting, your Honour, that the Minister had advised Mr Sita to go forward with this to some of his advisers or others to have the matter progressed the following Monday, I think it was, after the meeting had occurred. 96 This also falls short of evidencing an enforceable contract. Concerning the rate of $2.60 per kilometre, he said that the Minister said that it "sounded like a good deal". It is possible that this remark may have related to the whole proposal. At TS 541 ll 3-8 he said: Well, it was – it was, you know, the Minister had indicated that – that at the end of all this with – that this would be a good idea that they get rid of the nonsense that was the legal actions, etcetera, and that Cos could quite happily go home and enjoy Christmas with his family in the knowledge that the problems were fixed and that was it sort of thing. 97 Again, there is nothing suggestive of a contract. He also remembered a discussion concerning the "Benefits" document. He said that the Minister had agreed that the various transport media should be operating on a "level playing field", presumably a reference to the fare structures. At TS 543 ll 2-12 he said: Once the conversation, once these had been studied then everybody was happy, I guess, with the to and fro'ing over the dot points, we then proceeded, I think to break up the meeting and that's at – its about at that point where I recall the Minister saying to Mr Sita, "You can go home rest assured your problems are solved. You go home to the family and have a nice happy Christmas". Words to the effect of, "It's a deal", and they shook hands and I think we virtually just went our separate ways. 98 Mr Baumann could not recall any mention of Cabinet at the meeting, but he recalled Mr Sita being told that the proposal and other documentation should be taken on Monday to the Minister's senior policy adviser. He also remembered Mr Sita mentioning prayers for a successful outcome and the Minister replying, "Look, your prayers have been answered, and you go home and have a happy Christmas with your family". He said that he was disappointed when Mr Sita received the letter of 21 January 1998 (p 132 in the agreed bundle). He had not previously understood that the matter had to go to Cabinet. He expressed his disappointment to Mr Johnson. 99 In the course of cross-examination Mr Baumann said (TS 565 ll 5-19) that the Minister had indicated that he considered that Mr Sita had been treated in a way which put him into an intolerable situation. At TS 572 ll 3-9 this passage appears: (Mr Hanson): Was it represented to Mr Johnson on that day at Parliament House that Mr Sita had something new to put to him? --- Not really. I think it was going to be presented in a form that was able to be, you know, taken to Cabinet or whatever or spoken to his other colleagues with. I don't know but the Minister had asked that it be put in a more concise – you know, rather than discussion, verbal discussion, that it be put on paper and that it could be digested. 100 At TS 572 l 10 he was asked: And taken to Cabinet? --- Not necessarily. He didn't suggest that it would be taken to Cabinet. Why did you just say something about taking it --- ? --- My assumption --- Please let me ask the question. We will get on a lot faster if you let me ask the question before you start to answer? --- Very well. Why did you just mention something about it going to Cabinet when we were talking about the meeting at Parliament House? --- Well, my assumption only, your Honour, that he would take it somewhere and discuss it and so be it. You knew very well that something of this magnitude would have to have Cabinet approval, didn't you? --- No, I did not. 101 After some debate at TS 573 ll 16-18 this passage appears: (Mr Hanson): Which is correct, Mr Baumann? You believed that a deal of this magnitude would need Cabinet approval or you didn't believe that to be the case? --- No, I didn't believe that it would need Cabinet approval. Sorry? --- I did not believe that it would need – I had no indication that it would be going to Cabinet at all – or understanding. Why did you mention it then five minutes ago? --- I beg your pardon? Why did you mention five minutes ago something about putting it in a form to be taken to Cabinet? --- No, well, I didn't. That was quite – I had no idea where he was going with it your Honour. You would have to assume being the humble backbencher that he would take it somewhere, probably department first I would imagine, I don't know, or his advisers, whatever. But as you will see in my evidence he indicated that he was going to fix the problem so to me he was going to take the documents somewhere and tell somebody what they would do to fix it. 102 These passages reflect a serious inconsistency on a substantial matter. At TS 572 ll 3-9 Mr Baumann clearly indicated a belief, derived from the meeting at Parliament House, that Mr Johnson was asking Mr Sita to prepare a document to be taken to Cabinet, or at least for discussion with "other colleagues". Obviously, such an intention would have been inconsistent with any expectation that a contract would be made at the meeting on 20 December. When his attention was drawn to this aspect of his evidence, Mr Baumann sought to depart from it, asserting that he had not expected that the proposals to be put to Mr Johnson at the meeting at Jacobs Well would have to go to Cabinet. 103 Notwithstanding this inconsistency, I felt that Mr Baumann's evidence as to events at the two meetings was the most reliable of the versions from the three principal witnesses. It did not contain the large volume of opportunistic invention which marked Mr Sita's evidence. He also had a better recollection than did Mr Johnson. Nonetheless, his evidence lacked precision in vital areas. At various stages, Mr Baumann suggested that in his recollection of events, he was not necessarily able to distinguish between numerous occasions on which he had been involved in discussions concerning Mr Sita's problems. His evidence of the meetings in November and on 20 December was quite vague and described wide-ranging discussion of numerous issues without any overall outcome, save for the suggestion (TS 543 l 8) that the Minister said "Words to the effect of, 'It's a deal'." Mr Baumann did not set the immediate context in which this statement was made. With the exception of that one phrase, his evidence does not disclose unequivocal acceptance of an offer. Words of reassurance, no doubt, come easily to a politician, and the word "deal" is not necessarily indicative of an intention to enter into contractual relations. The overall effect of Mr Baumann's evidence, particularly when one has regard to the passage in cross-examination concerning Cabinet approval to which I have referred, is that the purpose of the meeting at Jacobs Well, as arranged at the November meeting, was not to provide an opportunity for final agreement, but rather to provide an opportunity for Mr Sita to put his case and to persuade the Minister as to its merits, with the expectation that the matter would then go to the Department for consideration, and probably to Cabinet. (See also TS 533 ll 9-24 cited above.) Of course, that expectation would not exclude the possibility that the parties subsequently decided to contract with immediate effect, but their conduct must be assessed having regard to it. After all, the applicant's case is that the conversations on 20 December should be considered in the light of previous discussions including those at the November meeting. (See Statement of Claim, sub-par 72D(5).) 104 Mr Baumann made it clear that his recollection of both meetings was somewhat vague. I thought, too, that such particularity as there was had the odour of re-construction about it. Without wishing to be unduly critical, I formed the view that he was generally well-inclined towards the applicant, either because its business was of importance to his electorate or because he had sold that business to it. I infer that he, too, was anxious to see Mr Sita's hopes realized. That point of view, coupled with his tendency to re-construct, leads me to have reservations about his reliability as a witness. 105 Mr Peter McDougall Turner is a transport consultant. On 20 December, he and Mr Sita drafted documents for presentation to the Minister's staff on the following Monday, including the Heads of Agreement and the letter dated 20 December from Coachtrans to the Minister. They also prepared a draft reply by the Minister. Mr Turner saw Mr Andrew on the following Monday. He claimed that Mr Andrew told him that the Minister had indicated that he was glad that the whole matter had been resolved. Mr Andrew flipped through the Heads of Agreement, and they then considered the draft reply, making some changes to it. The matter was left on the basis that the amended draft would be retyped by Mr Andrew's staff and signed by the Minister. The draft was not available in evidence, but at TS 598 ll 25 –599 l 2, this passage appears: (Mr Lucarelli): Just in broad terms, tell his Honour what the thrust of the letter was, or, the best you can remember, what the letter did? --- Yes. It was the letter to Coachtrans confirming that the meeting had taken place, confirming the resolve to finalize all outstanding matters, and making a reference to the fact that he would be issuing instructions to – I think it was the Director-General – to put matters in place to get it done. 106 Mr Turner subsequently saw the Minister's letter of 22 December which is document 130A in the bundle. He said that it was similar to the draft letter left with Mr Andrew save for the third paragraph. He considered that in the draft, the "thrust" of the approach was that the Minister would instruct the Director-General "to take certain action" rather than "to investigate the implementation of these measures as soon as possible" (TS 600 ll 2-7). His perception was that the Director-General was to be instructed to implement the Heads of Agreement, although he did not think that the words "Heads of Agreement" were in the draft (TS 601 ll 1-9). In cross-examination (TS 607 ll 20 - TS 608 l 10) Mr Turner agreed that he had made a previous statement concerning the meeting with Mr Andrew in which he had said that Mr Andrew "confirmed that he had received advice from the Minister regarding the meeting and commented that he was pleased that the whole matter was finally going to be resolved." This differs from Mr Turner's evidence-in-chief in which he suggested that Mr Andrew had reported that the Minister had said that he was glad that the whole matter "has been resolved". In that previous statement Mr Turner also said that Mr Andrew had advised "that the Minister would not be prepared to sign the Heads of Agreement until he'd received legal advice on the document." (See TS 608 ll 20-23.) This position was adopted by the Minister in his letter of 22 December (pp 130A-B of the agreed bundle) where he indicated that the Heads of Agreement would have to be examined by the legal advisers to ensure "its appropriateness". 107 Mr Turner agreed that he had communicated with Mr Baumann concerning the Minister's letter of 22 December, suggesting that somebody in the Minister's office had altered the draft reply "to reflect a degree of ambiguity" (TS 610 ll 1 – 611 l 3 and ex 24). He informed Mr Baumann that "the legal people have advised it does not give Cos (Mr Sita) sufficient comfort to withdraw current legal action". He attached three possible draft letters from Mr Johnson to Mr Sita, presumably as proposed responses which would be acceptable from the applicant's point of view. In the first draft, he deleted reference to obtaining legal advice prior to execution of the Heads of Agreement. He also substituted for the reference to the Director-General investigating implementation, an instruction to that official to "put in place arrangements to finalize the Heads of Agreement … and the contracts referred to in (Mr Sita's) letter dated December 20, 1997, by February 1, 1998." 108 In the second option, Mr Turner proposed that Mr Johnson write: I wish to confirm that I have instructed my Director-General … to put in place arrangements to finalize the Heads of Agreement by 15 January 1998 and the contracts referred to in your letter dated December 20, 1997, by February 1, 1998. 109 In the third option, it was proposed that the Minister write: Further to my letter of 22 December 1997 confirming our agreement on Saturday 20 December 1997, I wish to confirm the following: (i) I have instructed my Director-General … to implement the agreed measures by 1 February 1998. (ii) I have asked my legal advisers to confirm your draft Heads of Agreement document or amend same to ensure conformity with legal processes, but retaining the spirit and intent of our agreement. (iii) I intend to execute a final Heads of Agreement document by 15 January 1998 so that contracts between Sita Queensland Pty Ltd and the Director General, Queensland Transport, can also be executed concurrently with the 1 February implementation date. (iv) Sita Queensland Pty Ltd will withdraw all current legal action and its complaint against Queensland Rail with the Queensland Competition Authority and any claim for financial damages in respect of Helensvale and Logan City at such time as the final Heads of Agreement document is executed on 15 January 1998. 110 Clearly, Mr Turner and, I infer, Mr Sita wished to induce the Minister to write an evidence-making letter which would confirm the existence of an agreement following the meeting of 20 December. It says little for Mr Sita's opinion as to the Minister's commitment that he and Mr Turner should have felt the need to create such evidence. Had Mr Sita considered that Mr Johnson was firmly committed to the alleged agreement, he would surely have had no reason to believe that he would so quickly depart from it. It is also surprising that Mr Turner considered that Mr Baumann would be able to induce the Minister to sign one of the three draft letters, notwithstanding the cautionary note sounded in the letter dated 22 December, actually sent by Mr Johnson. All of this may simply reflect Mr Sita's belief that the Department was unduly obstructionist in matters involving the applicant and likely to seek to persuade the Minister to resile from the alleged agreement. Nevertheless, one might have expected Mr Sita and his advisers to be rather less concerned than they apparently were, had they really believed that the proposal put to Mr Johnson made good sense from the government's point of view and that he had been persuaded to that view. If the proposal was as attractive to the government as Mr Sita suggested in his evidence, then it should have been capable of withstanding departmental criticism. It is curious, too, that there should have been so much urgency about facilitating resolution of the matter after 20 December. This is particularly so when one considers the time of year at which these events occurred. 111 Mr Ross Evan Walker is a management consultant with previous experience in the Department of Transport. At all relevant times, he was, and is now a consultant to the applicant. He was present at the Parliament House meeting in November 1997. He said that the Minister said that he regretted that Mr Sita was not satisfied with the outcome of the meeting with the officials and that he was also frustrated with the amount of time that was being taken to sort out the matters in question. The Minister was sympathetic to the idea that the Brisbane Airport – Gold Coast service not be put out to public tender and that Mr Sita's operation should be protected from what were called "ankle biters", operators who offered peak hour services but did not cover the off-peak periods as the applicant was required to do. He also showed enthusiasm for the proposal that the applicant operate bus services in lieu of rail services in off-peak periods. Mr Walker said that the Minister indicated an intention to resolve the matters in dispute between the Department and the applicant and to this end, asked Mr Baumann to organize a further meeting at Jacobs Well. He said at TS 620 ll 8-11 that Mr Sita said: Look Minister, when I come to that meeting I will want to have something to put on the table that will help resolve all these outstanding issues and, you know, so we can get rid of all the complaints and the Competition Authority. 112 In cross-examination Mr Walker agreed that he had been responsible for drafting the letter of 3 July 1996 (pp 21-28 of the agreed bundle). He said that the reference on p 28 to Cabinet approval of a proposed subsidy may have been inserted at the request of departmental officers. He said that he did not understand such a subsidy to involve millions of dollars. When cross-examined about the proposal put at the meeting of 20 December, he said that it would not have involved millions of dollars because of the fares to be recovered from passengers. However he eventually offered the view that the likely cost to government was about $1 million per annum after allowing for fares received. 113 Mr Michael Joseph McShea gave evidence for the respondent. He is presently the Executive Director (Public Transport) in the Transport Department. As I have previously indicated in my examination of the agreed documents, Mr McShea was responsible for at least some of them. Very little of his oral evidence had much relevance to the major issues in this case. It may have some marginal relevance to issues of quantum. I turn to the evidence of Mr Johnson, the former Minister. 114 Mr Johnson became Minister for Transport in late February 1996. Shortly thereafter he became aware of the matters involving Mr Sita and the applicant. Prior to December 1997 he had spoken to Mr Sita on four or five occasions, including one occasion at a transport function at Kooralbyn. He had no recollection of the subject matter of that discussion, suggesting that they may have only "touched base". He also remembered a meeting in the cafeteria at Parliament House at which Mr Baumann was present. He recalled Mr Baumann telling him that Mr Sita was not making progress with departmental officers and urging him to become more involved in the matter. He said that his policy advisers and departmental officers were "at all times … certainly at the fore of any discussions with Mr Sita." He said that the meeting at Jacobs Well was instigated by Mr Baumann although he could not remember who had suggested the venue. 115 In November 1997 he knew that there had been numerous discussions between his ministerial staff and departmental officers on one side and Mr Sita on the other. He also said that Mr Andrew (one of his advisers) had been deliberately excluded from these dealings because of his prior association with the applicant. As at November 1997 he understood Mr Sita's gravest concerns to be the question of pick up and set down in the Beenleigh and Logan areas and his claim to a sole contract with respect to the Brisbane Airport – Gold Coast route. He was also concerned about competition from Queensland Rail. Mr Johnson said that he had some sympathy for Mr Sita. 116 The meeting at Jacobs Well lasted a couple of hours. Mr Johnson had "a few beers". There was social discussion, particularly about families and boxing, an interest which the Minister shared with Mr Sita. He received certain documents from Mr Sita. He recalled that there were two such documents. He thought that one outlined benefits and one outlined solutions. He took the documents with him when he left the meeting and gave them to somebody, probably his driver, to give to his policy officers. Mr Johnson and his wife were returning to Longreach on the following day for the Christmas break, and so he was not to be in his Brisbane office for some time. He said that at the meeting, they discussed the points in the documents, "some of them probably more at length than others." He recalled marking the points as they were discussed. 117 The specified rate of $2.60 per kilometre was discussed. The Minister said in evidence that he had no idea of the ruling rates for such services and that trucking rates, with which he had some familiarity, were different from the rates which were discussed at the meeting. He agreed that there was discussion concerning the provision of bus services between Brisbane and the Gold Coast and the possibility of substituting bus services for some rail services. He also recalled discussion concerning the Brisbane Airport – Gold Coast route and that Mr Sita wanted a sole contract for this route. He said that he considered that totally unacceptable because of the other operators "within that corridor". He denied having said that there should not be a public tender process for that route, either at the meeting at Parliament House or at the meeting at Jacobs Well. His main concern was the other operators. This is such an obvious concern that I am inclined to accept him on this point, notwithstanding the vagueness of his evidence in other respects. He had no recollection of saying that the rail replacement services were "costing me an arm and a leg". The competition from Queensland Rail was discussed. This was an integral part of the subsidy issue. At some stage they shook hands. Mr Sita said that he was pleased that the Minister had been able to come down and have a meeting with him. The Minister responded that "I'm here to uphold my end of the deal, and that's exactly what we're doing here today". He said that he did not use the expression "You've got a deal" or "We've got a deal" but that he did say something like: I'd upheld my end of the obligation to come here. That was my agreement: to be there to listen to what Mr Sita had to say in conjunction with Mr Baumann, and if I can say, this was a – as I said earlier, your Honour, - this was a discussion as a social and an informal discussion about five days before Christmas. 118 This may have meant that he had undertaken to Mr Baumann and to Mr Sita to give the latter an opportunity to put his case and that he had met this undertaking by coming to the meeting at Jacobs Well. He agreed that Mr Sita had said that he was a religious man and that he had prayed that morning before coming to see him, hoping that there would be an outcome. The Minister said that he had said that he, too, was religious and that Mr Sita's prayers had been heard. He said, "I'm here to listen to you and hopefully we can – that is the reason why I came to try and get a resolve or have a listen to what he had to say and hopefully down the line get a resolve to the problems he was encountering." He was asked if he had said anything to the effect of "Your prayers are answered; you can go home and sleep. Tell your family not to worry." He said he could not recall the exact words, but he recalled saying something to the effect of "You can rest, we'll work this through," or something like that. He thought that he would have said that Cabinet would have to approve the proposal and that he would also have said something about discussing the matter with the Department and his "top policy people". He did not remember Cabinet being mentioned in the earlier discussion at Parliament House. 119 He thought that on the following Monday he would have spoken to somebody in his office concerning the documents which he had received from Mr Sita. He may have told Mr Sita to contact somebody in his Department. He thought that he would have told Mr Stapleton of his ministerial staff to discuss the matter with Mr McShea and other departmental officers. As to the letter of 22 December, different copies of which are at pp 130A and 130B of the agreed bundle, Mr Johnson said that the version at p 130A bears a signature made using a rubber stamp and that at p 130B bears his "hand signature". He thought that the copy dated 22 December 1997 was probably a copy of the letter which was posted. The letter had been faxed to him in Longreach before it was sent. 120 In the course of cross-examination he denied having said at the meeting in November that Mr Sita "ought be able to get the contract for Brisbane Airport", presumably meaning Brisbane Airport to the Gold Coast. As to the question of open tender, he believed that he would have said that the matter had to go through appropriate channels, including Cabinet. He could not deny that he may have said at the November meeting that the Helensvale line was costing him "millions". He agreed that there was also a problem with public safety on late night trains and at railway stations, that running off-peak trains was "hideously expensive" and that running replacement bus services during low patronage periods would save money. He discussed these matters with Mr Sita. It was suggested that this was in March 1997. Mr Johnson was unable to remember the date. He was referred to the minutes of the meeting of 18 March 1997 which is at p 40 of the agreed bundle. They record that the Minister expressed firm views concerning aspects of Mr Sita's problem, including the view that special funding to Coachtrans was not sustainable because of its implications for the rest of the state. The minutes also record his concern that all operators "play the game". As I have said, this appears to have been a reference to disputes about whether or not Coachtrans was acting in accordance with the Department's view as to the conditions upon which it was permitted to pick up and set down in Logan. The minutes record that the Minister observed that Mr Sita must have been aware, when he purchased Coachtrans, of the likely impact of rail fares and that the Department was still analyzing "corridor solutions" to improve public transport during road construction activities, presumably on the Gold Coast highway. 121 I draw attention to these matters at this stage because there is implicit in much of the applicant's case, an assertion or assumption that Mr Johnson was not really familiar with many of these issues or that he and the Department were not at idem concerning them. There is much to suggest that the applicant hoped that it might get a different decision from Mr Johnson if he were isolated from his departmental and, perhaps, ministerial staff. It is clear, however, from these minutes, that he had expressed firm views concerning some of the issues involving Mr Sita and the applicant. Those views may have been based upon advice, but nonetheless they were views which he expressed. Mr Johnson agreed in cross-examination that he had sympathy for Mr Sita concerning the question of transit passengers between Brisbane and Logan, the Brisbane Airport – Gold Coast contract and the Queensland Rail operation and that for this reason, he had agreed to meet Mr Sita at Jacobs Well. 122 In the course of cross-examination Mr Johnson said that he could not remember whom he had spoken to in his Department following the meeting of 20 December, but that he had spoken to somebody on either 23 or 24 December. In other parts of his cross-examination it appears that he cannot recall whether he actually spoke to anybody at that time (TS 787). He agreed that he would have received Mr Sita's letter of 20 December and the Heads of Agreement prior to signing the letter of 22 December. At TS 799-800 Mr Johnson offered some explanation for Mr Andrew's involvement in the matter notwithstanding the general policy of excluding him from matters concerning the applicant. It appears that Mr Johnson's other ministerial staff members may have been away at the relevant time. 123 I should say something about one other aspect of the cross-examination which appears at pp 802 et seq. Counsel for the applicant took the rather unusual course of suggesting to Mr Johnson that the applicant's account of part of the conversation which occurred at Jacobs Well, as set out in par 72 of the statement of claim, particularly at sub-par (2)(c), was correct. Mr Johnson's response was somewhat equivocal although he agreed that those passages were "pretty close to the mark". He also agreed that he could not deny that the words set out in sub-par (2)(d) had been said. However this evidence has to be seen in the context of his evidence as a whole. It is obviously difficult to know precisely what is meant by the assertion "pretty close to the mark". This is particularly so when one keeps in mind his more explicit statements as to some aspects of the conversation. 124 In the agreed bundle are extracts from Hansard and various Cabinet submissions relating to the subsidy of other bus services in Queensland. I do not understand their relevance. The respondent seemed to suggest that the Minister had adopted a particular practice with respect to other subsidies to bus operators. That has no relevance for present purposes. Mr Johnson thought that in his discussion with Mr Sita he may have referred to a Cabinet submission concerning bus services in Western Queensland. 125 At this point it is convenient to point out that pursuant to an Executive Council minute dated 29 August 1996, the Minister could authorize the incurrence of liability for expenditure up to $1 million pursuant to any contract. The minute appears at pp 37A – 37C of the agreed bundle. There was some dispute as to its precise meaning, but I have little doubt on that score. 126 Mr Johnson was a relatively unsatisfactory witness, although I do not mean that in any critical sense. His recollection of the November and December meetings was simply very vague. To some extent, this may be attributable to a perception at the time that he was simply listening to Mr Sita's proposals without any intention of acting upon them until he had received appropriate advice. I considered him to be a truthful witness, but truthfulness does not make up for lack of recollection. It seems likely that the Minister had a positive view of Mr Sita's proposals, or at least that his view was not negative. They were immediately referred to the ministerial staff and departmental officers. At some stage it became clear to the Minister and to those advising him that it was beyond his authority to agree to the proposals. This must have occurred prior to the message from Mr Wilson of 22 January, a note of which appears in Mr Sita's diary. This does not necessarily mean that the Minister had previously intended to agree to the proposals on his own authority, although that is one available inference. As I have demonstrated, there is reason to believe that both Mr Sita and Mr Baumann understood that the matter would have to go to Cabinet. The Minister was presumably also aware of the limitations on his own authority. 127 Two other witnesses gave evidence, Mr Thomsett and Mr Davis. However their evidence related primarily to the issue of quantum and should be considered separately. I will return to it at a later stage. Subsequent Documentary Evidence 128 At this stage it is appropriate to consider in detail the documentary evidence created on and after 20 December. In doing so it is useful to have regard to the applicant's statement of claim, particularly par 72, where it is alleged that the agreement between the parties was partly in writing, partly oral and partly to be implied. The written part is said to be contained in the "Solutions" document (see par 72B). The "Benefits" document is not pleaded as constituting part of the agreement, although a copy is attached to the statement of claim. Paragraph 73 sets out further alleged terms. The basis of such allegation is not entirely clear. The particulars suggest that it is based on a combination of the written, oral and implied terms alleged in par 72, together with the necessity "to give business efficacy to the settlement agreement", ministerial powers and certain statutory provisions. 129 Following the alleged agreement, Mr Sita wrote the letter of 20 December (p 130 of the agreed bundle). The letter asserts the following agreement: (i) Route services – contract the Coolangatta – Brisbane services on a klm based contract. Government to retain all fare box revenue received. Coachtrans to charge equivalent QR/Surfside (co-ordinated fares), and (ii) Airporter service from Coolangatta to Brisbane Airports – issue a closed tender to existing operators (only) who are currently providing scheduled passenger services to the Brisbane airport. 130 The letter then continues: As per your request, we will be contacting your office on Monday December 22 to ensure that as per your instructions, arrangements are being put in place to finalise the abovementioned contracts by February 1, 1998. 131 The last-mentioned paragraph suggests that there was at most an agreement to agree, with the actual terms still to be drafted, it being expected that they would be in place by 1 February. However the next paragraph asserts that the applicant will withdraw current legal action and acquire new vehicles "On the basis of our agreement reached today". 132 Many of the more precise terms contained in the "Solutions" document do not appear in this letter. I include in particular the "5 + 5 renewable contract", the "market rate of $2.60 per kilometre", the frequency of route services and the reference to buses replacing low patronage rail services. 133 The Heads of Agreement which were taken to Mr Andrew on Monday 22 December also departed substantially from the "Solutions" document and from the terms mentioned in the letter of 20 December. The following points should be noted: · The "Solutions" document provided for a "5 + 5 renewable contract". As I have pointed out the letter of 20 December made no reference to a term. The Heads of Agreement referred to "Five year contract with the right of first offer of any renewal of the contract in perpetuity subject to satisfactory performance". In other words, the Heads of Agreement conferred no right to renew, merely a right of first refusal "in perpetuity subject to satisfactory performance". · The "Solutions" document provided for "40 services each way for M-F 30 services each way per day on Sat/Sun/PH. (To be reviewed in accordance with demand)" (emphasis added). The Heads of Agreement provided for "40 services each way per weekday dayand 30 services each way on Saturdays, Sundays and Public Holidays" (emphasis added). It may be that the requirement for forty services each way, Monday to Friday as referred to in the "Solutions" document was intended to refer to forty services per day. However the deletion of the reference to review in accordance with demand is a significant departure from the terms of that document. Obviously enough, the applicant would be willing to run as many services as it could, given that the government was to pay at a fixed rate per kilometre and take the gross amount received by way of fares. In those circumstances, the right to review was of considerable importance. · The Heads of Agreement provided that "All fare [sic] charged are to be competitively neutral with Queensland Rail fares". This provision did not appear in the "Solutions" document although it was implicit in the "Benefits" document. (See dot point 4.) However, as I have pointed out, that document is not pleaded as part of the contract. · The "Solutions" document provided for Coachtrans to operate low-patronage rail services, including any extension to Coolangatta. The Heads of Agreement made provision for such services but said nothing about extending such services to Coolangatta. Further, the "Solutions" document made no reference to how the parties would determine when Coachtrans would be obliged to undertake this duty. The Heads of Agreement sought to remedy this deficiency by providing that it be "as instructed by the Minister … or his delegate". · In the "Solutions" document, the reference to the rate of $2.60 per kilometre was followed by the parenthetical phrase "CIP annual prices". The applicant alleges in sub-par 73(d)(iii) of the statement of claim that this meant that the rate was to be increased to reflect movements in the Consumer Price Index. This is a reasonable construction of the "Solutions" document, but there was no reference to such increases in the Heads of Agreement. · As to the airport services, the "Solutions" document provided for "a closed tender of existing operators (only) that are providing scheduled passenger services to the Brisbane Airports". The Heads of Agreement required that those eligible to tender should be persons "currently providing regular advertised timetabled services (ie not demand responsive services)". There was an additional requirement that the tender be for the provision of services to meet "every arrival and departure of every major airline (ie twenty-four hours per day, seven days per week)". This provision did not appear in the "Solutions" document. Such a requirement would probably favour the applicant in its tender, for the evidence suggests that it was the only operator then providing services on this basis. The Heads of Agreement also provided that the tender be for a five year contract, again with the right of "first offer of any renewal of the contract in perpetuity subject to satisfactory performance". This requirement was not contained in the "Solutions" document. 134 Clearly, the Heads of Agreement differed substantially from the agreement allegedly reached on 20 December. If Mr Johnson had agreed to the "Solutions" document in toto, as is alleged by Mr Sita, it is odd that he did not say so in the letter of 20 December. I also have difficulty in understanding why, if there had been agreement on 20 December, he would have produced the Heads of Agreement document with terms differing substantially from those allegedly agreed. All of this suggests that Mr Sita considered that there was room for further negotiation after 20 December. That does not necessarily mean that there was no earlier agreement, but it suggests that conclusion. 135 Although the variations between the "Solutions" document on the one hand and the letter of 20 December and the Heads of Agreement on the other are surprising, the applicant's conduct in drafting a letter for the Minister's signature, and then seeking to participate in its re-drafting was extraordinary. It suggests that Mr Sita and/or his advisers considered that they had very good relations indeed with the Department or with somebody in it, or perhaps in the Minister's office. The applicant argued that Mr Andrew's involvement in the drafting exercise indicated that he had received instructions from Mr Johnson which were consistent with Mr Sita's account of the meeting of 20 December. This was the point of Mr Turner's evidence concerning his joint drafting operation with Mr Andrew on the morning of 22 December. The thrust of his evidence was that they had produced a draft which was more favourable to the applicant than was the letter eventually signed by Mr Johnson and sent on 22 December. I am invited to infer that the draft was consistent with Mr Johnson's instructions to Mr Andrew and that somebody, perhaps departmental officials, had intervened to prevent this letter from being sent. The probative value of all of this depends upon my acceptance of the evidence of Mr Turner as to the content of the undisclosed draft. I am simply unwilling to accept that evidence. His and Mr Sita's enthusiasm to obtain from Mr Johnson a letter which could be seen as a firm commitment to the applicant suggests that they did not believe that Mr Johnson was irrevocably committed to the applicant's proposal. I do not overlook the possibility that commercial prudence may have caused them to be so importunate in their quest for written confirmation of the alleged agreement, but subsequent events suggest that this was not the case. The events of 22 December lead me to have grave doubts concerning Mr Turner's evidence. 136 The applicant did not respond to the Minister's letter of 22 December (pp 130A and B of the agreed bundle). This is surprising in view of its content. Mr Turner said that he wrote to Mr Baumann concerning the letter, but one would have expected the applicant to have written to the Minister or to the Department complaining of the alleged change of position. There was nothing in the letter of 22 December which was consistent with an existing contract. I have previously referred to the letter of 23 December to Ernst and Young (ex 14) and observed that it appears to be inconsistent with a belief that a binding agreement had been reached. Mr Gralton's letter of 6 January (p 131 of the agreed bundle) is almost agonizing in the care with which it avoids reference to any existing agreement. It appears to have been prompted by the reference in the second-last paragraph of the applicant's letter of 20 December to the acquisition of new vehicles. The applicant's response, dated 13 January, (p 131A of the agreed bundle) to the letter of 6 January is also inconsistent with any belief in the existence of a legally binding agreement. Notwithstanding the reference to "the agreement with the Minister", it reflects the possibility suggested in the letter of 6 January that the applicant may yet not have the benefit which it sought in the meeting of 20 December. The reference to "the new proposal" in par 2 is also significant. Mr Gralton's letter of 15 January (p 131B of the agreed bundle) also made no suggestion of an agreement. The applicant did not respond. 137 On 21 January the applicant was informed by letter that the matter would have to go to Cabinet. Even in his reply of 22 January Mr Sita said only that: However, in my view I would like to think that we have already reached an agreement and resolved our differences. Further, I have always considered the agreement equally binding upon both Coachtrans and the government, subject, of course, to the necessary legalities. 138 This is a curious paragraph in that Mr Sita does not initially assert an agreement but only that he "would like to think" that there was an agreement. In the next sentence he asserts a binding agreement "subject to the necessary legalities". 139 Following his being advised of Cabinet's rejection of his proposal, Mr Sita wrote on 17 March 1998 (p 161-163 of the agreed bundle) asserting that there was an "agreement reached between us at our meeting of 20 December 1997". Even in this letter, after asserting that Mr Johnson had said "We've got a deal", it was conceded that he had also said "that all of these matters would be resolved by 1 February 1998". This suggests that there were matters still requiring resolution. In the seventh paragraph on p 2 of the letter Mr Sita said: Your subsequent letter, received at my office on 22 December 1997, also confirmed our agreement and that it would be implemented by 1 February 1998. 140 This is an untenable construction of the letter of 22 December in which Mr Johnson observed that certain "initiatives" would "receive immediate attention" and that he would instruct the Director-General to "investigate the implementation of these measures as soon as possible". The Minister had also written: … before any consideration could be given to signing the Heads of Agreement document drafted by your office, it would need to be examined by my legal advisers to ensure its appropriateness. 141 He had also written: You may now be assured that the outstanding matters affecting your operation are being addressed and will be resolved by February 1, 1998. 142 To suggest that this letter confirmed an agreement suggests that Mr Sita's understanding of the meaning of the word "agreement" does not reflect its meaning for the purposes of the law of contract. Findings 143 Ultimate findings as to the credibility of witnesses and as to the events which occurred on 20 December 1997 must depend upon the whole of the evidence in the case. Given the generally unsatisfactory nature of the oral evidence, it must be assessed in light of the documentary evidence and of those aspects of the evidence about which there is little or no dispute. It is evident from what I have already said that in most respects, the "objective" evidence is unfavourable to the applicant's case. Indeed, it is difficult to see how the applicant could succeed on any basis other than that mentioned previously, namely that Mr Johnson, when isolated from his advisers, was inclined to agree to matters to which he would not have agreed had he enjoyed the benefit of their advice. There are five main aspects of the objective, or largely undisputed evidence which militate against the applicant's case. They are: · The dealings between the applicant and the government prior to 20 December 1997 as disclosed in the correspondence and in the various diary notes demonstrate that the Minister and the Department had consistently rejected the thrust of the applicant's proposal of 20 December, save that an ex gratia payment had been considered in connection with lost patronage in the Gold Coast and/or Logan areas. I should say in this regard that where there is any dispute between the evidence of Mr Sita on the one hand and that of departmental staff, ministerial advisers or the Minister on the other, I prefer that of the latter persons to that offered by Mr Sita. My reasons for this preference are to be found elsewhere in this judgment. The alleged agreement was not substantially different from proposals which had been advanced as far back as 2 April 1996 (pp A5-A10 of the agreed bundle). Although I suspect that Mr Johnson may, at the meeting of 20 December, have appeared to be more favourably inclined towards those proposals than he had previously been, it seems unlikely that he would have simply forgotten the advice which he had been given and the views which he had previously expressed concerning proposals which would involve the government in substantial expenditure. · The prior documentation demonstrated at least the possibility that Cabinet approval would be needed for some of the proposals. Mr Sita acknowledged in the course of his cross-examination that he was aware prior to 20 December that approval of any subsidy and of any proposed compensation payment would be necessary. Although Mr Baumann was somewhat equivocal about the matter, his belief appeared to be that any proposal would be taken to Cabinet or at least discussed with the Minister's "colleagues". There was no suggestion that Mr Johnson was unaware of the limitations upon his own authority. In those circumstances it is difficult to accept that these men expected, at the meeting on 20 December, that the proposal contained in the "Benefits" document would be adopted on that day in such a way as to bind the government or that they would have suggested that course. · The circumstances of the meeting on 20 December 1997 were, to say the least, inappropriate for the final resolution of a dispute of the kind apparently existing between the applicant and the respondent. The prior documentation demonstrates the complexity of the issues and in particular, of the financial considerations relevant to any decision concerning the applicant's proposals. For Mr Sita or Mr Baumann to suggest that in those circumstances they reasonably expected the Minister to make a decision without further reference to his ministerial and departmental staff is, in my view, disingenuous. To choose a social occasion and a social setting as appropriate to the resolution of such a dispute may not be unprecedented, but it suggests a very relaxed approach to the business of government, an approach which had not been demonstrated in the previous dealings between the applicant on the one hand and the Minister and his departmental and personal staff on the other. · The terms of the "Solutions" document were such that it would be unlikely that a rational person in the position of the Minister would agree to them in the circumstances of the meeting on 20 December. The extent of the likely financial commitment of the government pursuant to the route service proposal was simply unknown. The rate of $2.60 per kilometre, as I have demonstrated, could result in a maximum annual liability of almost $8 million. It is true that the government was to receive fare revenue collected by the applicant, but there is nothing in the "Solutions" document to suggest how much that might be, nor is there any suggestion that the matter was discussed in the course of the meeting. It may be that it would be possible to identify such a figure from the earlier documentation, but there is no suggestion that this happened on 20 December. We know that the Minister had been advised previously of the difficulties pursuant to s 143B of the TOPT Act and of the need for open tenders in the event that an exclusive contract was to be granted in connection with the Brisbane Airport – Gold Coast service. Whilst Mr Sita may have been of the view that such legal niceties could be sorted out by the lawyers, it seems unlikely that the Minister would simply have set aside the advice which he had previously received. · Finally, the correspondence after 20 December failed to reflect accurately the terms allegedly agreed at the meeting on that date. Further, the applicant failed to contradict correspondence from the Minister and from the Department which indicated that there was something less than a binding agreement in existence. 144 All of these matters, taken together, point strongly in the direction of there having been no agreement reached on 20 December. Against this body of evidence there is only the oral evidence of Messrs Sita and Baumann, supported to such extent as it arguably may be by some loose remarks made by Mr Johnson in the course of his evidence. The thrust of his evidence was to contrary effect. I have already explained my reasons for treating the evidence of Messrs Sita and Baumann as less than convincing on the question of the alleged agreement. When that evidence is taken in the context of the five matters outlined above, I conclude that I cannot be satisfied on the balance of probabilities that any agreement was reached on 20 December 1997. The consequence of this is that the applicant must fail in its claim. 145 In any event, it is clear that pursuant to the alleged agreement, the government would have incurred a liability well in excess of $1 million. I have previously demonstrated that at face value, the subsidy pursuant to the "Solutions" document would amount to almost $8 million a year, although fares collected by the applicant would, to some extent, have reduced the actual financial obligation. Nonetheless, the government's prima facie liability was for the full amount. In any event, the "agreement" was for at least five years, and on the uncontested evidence of the applicant's own witness, Mr Walker, even with the receipt of fare revenue, the exposure would have been $1 million per annum. In those circumstances Mr Johnson had no authority to enter into such a contract. For that reason, too, the applicant must fail. Quantum 146 The applicant claims only for the allegedly lost subsidy. No claim has been made arising out of the alleged agreement concerning the airport service. Further, no attempt has been made to quantify the value to the applicant of the various claims which it offered to compromise in consideration of the Minister's acceptance of the proposal. The respondent has not asserted that any award should be reduced to reflect the value to the applicant of those claims which it was at liberty to pursue after it purported to terminate the alleged agreement. 147 The applicant claims that from the proposed date of implementation of the alleged agreement and for five years thereafter, it was entitled to operate services between Brisbane and the Gold Coast, receiving government subsidy in the amount stipulated and accounting to the government for all fares received. It also claims an entitlement to an extension of the contract. It is pleaded that fares were to be the same as those charged for "the rail service" (statement of claim, sub-par 73(b)(iii)). The trial was conducted upon the basis that the relevant fare was that for a trip between Brisbane and an unidentified point on the Gold Coast and vice versa. It is a little difficult to find evidence supportive of such a term. There is nothing in the particulars contained in par 72 of the statement of claim which would support it. There is a reference in the "Benefits" document to "same fares as rail", but as I have said, that document is not pleaded as part of the contract. I will, however, assume for present purposes that the alleged contract contained such a term. 148 As the applicant asserts that it was to be subsidized on a "mileage" basis, an important aspect of the calculation of damages is the number of bus services which would have been provided had the agreement been performed. According to the applicant, the respondent was entitled to fix that level, but it had to act "reasonably" in so doing. Given that the respondent had a substantial investment in the rail service, it would have been quite unreasonable by any standards for it to subsidize the applicant's operation in the way alleged. Thus the application of a test of "reasonableness" to this peculiar arrangement poses serious problems. However, assuming the existence of the contract as pleaded, it may be arguable (as the applicant asserts) that the level of service should have been responsive to demand. 149 The actual level of demand for the applicant's services has been declining since the commencement of the rail service to Helensvale, with substantial declines following that event and the more recent extensions to Nerang and Robina. The applicant's case is that had it received the subsidy, it would have reduced its fares to the same levels as those being charged by the railway, and that this would have resulted in its maintaining, or perhaps increasing its level of patronage. Thus the level of services would have continued at that prevailing at the date of the agreement or may have increased. Exhibit 46 contains a report prepared by the witness, Rex Davis in which he records that at the date of the report (August 1999) Coachtrans was operating twenty-two trips each way per day. (See p 6.) I was told in the course of the trial that the present level of services is twelve trips each way per day. These figures show a remarkable decline from the level prescribed in the "Solutions" document which reflected that which was then prevailing. I should add that there is evidence to the effect that reducing transport service levels will itself result in reduction in patronage, presumably because the truncated service will meet the needs of fewer potential passengers. There is no evidence which assesses this effect in quantitative terms for present purposes, but it must be kept in mind in considering the decline in patronage and level of services. 150 Although much of what follows assumes that passengers make rational economic choices when selecting an appropriate mode of transport, it was generally conceded that this is not always so. Potential passengers may have rational or irrational preferences not directly related to matters of economics. Further, the services offered by competing modes are not precisely the same. For example, the Coachtrans service offers a single mode of transport to Brisbane from various points along the coastal strip. Passengers living within walking distance of a bus stop need not change their mode of transport (other than from foot to bus) during the journey. Some passengers will be within walking distance of a railway station and will have this same opportunity. For other passengers, it will be necessary that they change modes of transport. The evidence indicates that Surfside provides a feeder service from various points on the Gold Coast to the three railway stations. Each station has a substantial car-parking facility which passengers may use free of charge. It is therefore possible for potential passengers to drive to the station and park conveniently. Bus passengers do not have this opportunity. One assumes that other passengers are driven to the station by family members or by friends. No doubt some bus passengers also adopt that practice. It is suggested that some passengers prefer to avoid changes in modes of transport. 151 It is also said that there is a somewhat imprecise preference amongst public transport users for rail travel, perhaps because the trip itself is likely to be more comfortable and/or less likely to be interrupted by traffic. There may also be an attraction in passing through rural or semi-rural areas as opposed to driving along a major highway. No attempt was made to quantify this preference for rail. It is accepted that some passengers are either "car captives" or "public transport captives". The former group consists of people who will, under any circumstances, use their motor cars. The latter group comprises people who will, under any circumstances, use public transport, perhaps because they do not drive or for environmental, or other reasons. These qualitative variables inevitably make it difficult to predict the effects of fare variations on the conduct of potential passengers. Both sides have sought to do this, but in quite different ways. I will come to those approaches in a moment. 152 Fortunately, the parties have reached a degree of consensus concerning the measure of damages. Exhibit 51 indicates that damages for the period from 1 February 1998 to 30 April 2000 have been agreed in the amount of $3,584,699.50. I understand that 1 February 1998 was chosen as the commencing date because Mr Johnson allegedly undertook to implement the agreement with effect from that date. I am not aware of the reason for choosing 30 April 2000 as the terminating date. I must quantify damages incurred since 30 April 2000 and to be incurred hereafter. In the course of argument, counsel for the applicant sought to rely upon certain assumptions said to be implicit in the agreed figure for the purpose of calculating subsequent loss, implying that the respondent had accepted the correctness of those assumptions. I do not understand the respondent to accept that position and so I cannot proceed on that basis. However ex 51 does identify certain other agreed facts. It is agreed that: · damages should be calculated at the rate of fifty cents per kilometre; I understand that this reflects no allowance for contingencies; · the distance to be travelled on each one-way trip between Brisbane and the Gold Coast is 110 kilometres; · "the appropriate net present value discount is 6.12%"; and · "the CPI multiplier as set out in the Sims Lockwood report of 22 June 2000" (ex 43) is appropriate for present purposes. 153 The critical issues which remain for determination are: · whether or not the applicant is entitled to recover damages upon the basis that the alleged contract would have been extended for any further period after the expiry of the first five year period; and · the level of services which would probably have been provided after 30 April 2000 had the respondent not repudiated the "contract". An extended term 154 The expression "5 + 5 renewable contract" in the "Solutions" document suggests an intended extension of the term, but it does not indicate which party was to have the benefit of the "option" or the circumstances in which it was to be exercisable. For this reason, I consider that any "option" would have been void for uncertainty. It may be that this uncertainty would result in any "contract" being void, depending upon whether the "option" was severable. For present purposes I am willing to assume that it was severable. I should add that if the respondent had any discretion as to the exercise of such an option, it would clearly have declined to renew. I base this view upon the respondent's conduct since early 1998. 155 The applicant sought to avoid the problem of uncertainty by pleading that the term was "for a period of five years commencing on 1 February 1998 ("the first five year period") and thereafter renewable in the same manner as a service contract under the TOPT Act would be renewable ("further renewed term") … ." In argument reliance was placed upon s 62 of the TOPT Act which provides: Offer of new service contract 62.(1) This section applies if the chief executive – (a) decides a service contract holder's performance under a service contract (the "existing contract") has been satisfactory; and (b) proposes to offer a new service contract for the same kind of service provided under the existing contract, at the end of its term, for the same, or substantially the same, service contract area or route. (1A) The chief executive must, by written notice, invite the holder to offer, whether by tender or in another way, for the new service contract. (2) The chief executive may invite offers from the public or someone else only if the holder – (a) refuses the invitation; or (b) fails to respond to the invitation within a time (of at least 60 days) allowed by the chief executive; or (c) fails to make an offer that is acceptable or, despite section 59, is substantially acceptable. (3) This section does not apply to the holder of a service contract that states that this section does not apply to it. 156 The meaning of the term "acceptable offer" is complicated by the provisions of s 59, but for present purposes, it is not necessary that I consider that section. Section 62 does not confer a right to a new term, but rather a right to a new contract in the event that the serving contractor's performance has been satisfactory and the chief executive proposes to offer a new service contract of substantially the same kind and in substantially the same area. In that case, the contractor is entitled to submit an offer which will be accepted if it is "acceptable". It is quite clear that in the present case, the government would have had no interest whatsoever in granting a new contract, and so it is difficult to see how s 62 can, in the circumstances, operate to confer any benefit upon the applicant. 157 There is a further reason why the section does not apply, but it is a little difficult to explain. The applicant relies upon s 39 of the TOPT Act as the statutory authority for the award of a service contract. Section 39 is found in Part 1 of Chapter 6 of the Act. It provides that such a contract may be awarded in respect of various categories of service, including "another category of public passenger services prescribed by regulation" (subs 39(e)). In the applicant's written submissions it is pointed out that by regulation pursuant to that paragraph, long-distance scheduled passenger services have been so prescribed. It appears to be common ground that the description "long-distance scheduled passenger service" appropriately describes the applicant's operation on the Brisbane – Gold Coast route. Elsewhere in its written submissions, the applicant asserts that Part 2 of Chapter 6 does not apply to long-distance scheduled passenger services. That this is so appears from s 49 which provides that "This part applies only to scheduled passenger services." Although one might have expected that expression to include long-distance scheduled passenger services, the applicant points out that the expression "scheduled passenger service" is expressly defined in sch 3 to exclude them. Part 2 contains an "administrative regime" for approval of funding to operators which may not have been observed in the present case. It is for this reason that the applicant was at pains to demonstrate that Part 2 did not apply to its proposed services. 158 The present relevance of all this is that s 62, upon which the applicant seeks to rely to give meaning to the "option" is also in Part 2 of Chapter 6. Thus it does not apply to a long-distance scheduled passenger service or, presumably, to a service contract entered into in connection with such a service. I proceed upon the basis that there was no valid "option to renew" or enforceable "right of first refusal". Damages should therefore be limited to the five year term commencing on 1 February 1998. Level of services 159 I turn to the second question, namely the likely level of services after 30 April 2000. As I have said, inherent in the applicant's case is the proposition that the government, in exercising its power to fix service levels under the alleged contract, had to act reasonably and that this test dictated that it have regard to demand for bus transport. Both the applicant and the respondent led expert evidence which sought to identify the likely level of demand for bus services had there been parity of pricing as between Queensland Rail and the applicant on their respective Brisbane - Gold Coast services. In many ways the theoretical evidence on both sides was less than convincing. I will deal with that evidence in more detail presently. Apart from the expert evidence, some hard factual evidence may be gleaned from what was said by the various witnesses and from the documentation. This may be of significance for present purposes. Unfortunately, this evidence emerged in an haphazard way, apparently almost by accident. Much of it is to be found in the evidence of Mr Thomsett who is the Manager (Special Projects) in the Public Transport Division of the Department of Transport. 160 He gave evidence (TS 835 ll 10-16) that based upon the applicant's own figures, its clientele dropped from 30,000 per month before opening of the rail extension to Nerang to 20,000 thereafter, and to 15,000 per month after opening of the Robina extension. At TS 837 ll 25-29 Mr Thomsett also said that after opening of the Helensvale station, the applicant's patronage dropped by 25 per cent. At TS 838 ll 15-25 he said that prior to that opening, Coachtrans was carrying 800,000 passengers per year which was reduced in the first year after such opening to 600,000. In its first year, that is from February 1996 to February 1997, the railway line carried 1.2 million passengers, indicating that the total number of passengers on public transport between Brisbane and the Gold Coast had increased to 1.8 million. In other words one million passengers chose to take rail transport although they had not previously used the applicant's services. The railway service also apparently attracted 200,000 passengers away from Coachtrans. These inferences do not take account of any natural increase in the size of the travelling public. At TS 871 ll 10-15 Mr Thomsett also said that there had been a collapse in demand for bus services "from 30,000 when the deal was done with the Minister a month to 15,000 – or 32,000 to 16,000 now", that is between December 1997 and mid-2000. 161 It is a little difficult to identify the precise dates of the extensions of the railway line to Nerang and Robina. In ex 15, a letter dated 20 February 1998 from Queensland Rail to the chief executive of the Queensland Competition Authority, it is asserted (par 10) that the line to Nerang was opened in December 1997. In ex 40, the Queensland Rail submission to the Queensland Competition Authority which appears to be undated, it is said that "services to Robina are planned to commence in May 1998". At TS 694 Mr McShea suggested that as at January 1998, extensions to Nerang and Robina were still "in the future". That appears to have been at least partially incorrect. I assume that the other dates mentioned above are more or less accurate. Although the information is incomplete, and there are some minor inconsistencies, the available figures can be summarized as follows: Date Number of Passengers Total Coachtrans Railway Before February 1996 800,000 per year - 800,000 After February 1996 600,000 per year 1,200,000 per year 1 1,800,000 December 1997 384,000 ? ? May 1998 192,000 2 ? ? Presently 192,000 2 2,000,000 2,192,000 1 For reasons which will appear when I address the evidence of Mr Davis, it should not be assumed that all rail passengers are also potential bus passengers. The increase in the total number of passengers on public transport which accompanied the opening of the railway line also suggests otherwise. 2 Mr Thomsett identified the alternative figures of 15,000 or 16,000 passengers per month as being the level of patronage both after opening of the Robina extension, and at the present time. It is probable that the decline was spread over the period from May 1998 until trial. It does not matter for present purposes. I have adopted the figure of 16,000 rather than that of 15,000. 162 The evidence indicates that the number of services provided by Coachtrans has declined as follows: December 1997 40 services each way per week day; 30 services each way per day on weekends and public holidays. August 1999 22 services each way per day (see ex 46, p 6). Presently 12 services each way per day. 163 Other potentially useful information appears in Mr Davis's report (ex 46) and in his oral evidence. He said (TS 934 ll 1-33) that the 1996 census had disclosed that 4,023 people commuted from the Gold Coast to the Brisbane CBD for work and that this figure "is the size of the weekly commuter, the daily commuter market. It is very small." This figure had not changed since 1991. He also said that "There are more people for example that go from the Gold Coast to work in the Logan/Redland industrial areas than go to the CBD … ." He said that of the 4023, "… some are car captives and some are public transport captives. Some within that public transport captives [sic] would be bus captives and some would be rail captives." This evidence appears to have been a slightly imperfect recollection of information which appears in ex 46 (p 10). It is there recorded that the 1996 census showed that of the 122,540 workers then living at the Gold Coast, only 3.3 per cent, or 4,043 travelled to the Brisbane CBD to work. A further 3.4 per cent travelled to Logan/Redlands, and 2.5 per cent travelled to the southern, outer part of Brisbane. On p 12 in par 1, under the heading "Key Findings", it is asserted that: The public transport market is almost certainly limited to providing trips to and from the Brisbane CBD. … The main component of journeys made on Coachtrans or QR services would be journey to work based and with occasional/recreational/tourist travellers. Therefore despite voluminous traffic in the Brisbane – Gold Coast corridor, the number of overall trips that could possibly be made on public transport is limited. 164 In the final paragraph on that page Mr Davis observes: Given that the travel market between the Brisbane CBD and the Gold Coast is small as shown by the journey to work data from the 1996 census, the effect of the lower fares and other QR arrangements, was bound to have a significant effect on the number of patrons using the Coachtrans travel option. 165 I turn now to the different approaches taken by Messrs Thomsett and Davis. Mr Thomsett had regard to surveys in the Sydney metropolitan area which revealed what is called the "elasticity of demand" for bus services. It is sufficient for present purposes to say that this figure reflects the relationship between variations in fare levels for bus services and levels of consumption of such services. Mr Thomsett inferred from the applicant's material that reduction of its fare levels to those of Queensland Rail would have involved a reduction of 17.73 per cent (TS 832 ll 1-12 and ex 38). The elasticity of demand for a fare reduction of that order is said to be either –0.357 or –0.382. If one multiplies the percentage fare variation by the elasticity of demand, the product is the predicted percentage variation in demand. This exercise indicates a predicted increase of 6.33 or 6.77 per cent. Thus it is Mr Thomsett's prediction that a decrease in fares of 17.73 per cent will produce an increase in patronage of something under 7 per cent. 166 Mr Thomsett was not strongly wedded to the figures for elasticity of demand which he had derived from the relevant surveys. He conceded that other studies had yielded other figures. He rejected anything higher than 1. Curiously, the applicant suggested that a figure of 1.6 might be appropriate. I will return to that figure at a later stage. A further point made by Mr Thomsett was that with the introduction of the Goods and Services Tax, there has been an increase in public transport fares, with an impact upon patronage. In other words, the GST has, and will continue to discourage some people from using public transport. Mr Thomsett considered that the likely impact could be assessed using the elasticity of demand figures previously mentioned. He suggested that the loss of patronage after the introduction of the tax in the middle of this year would probably have negatived any increase in the applicant's patronage levels as a result of the notional reduction in fares which I have been discussing. 167 Exhibit 47 is a calculation by Mr Thomsett in which, adopting the applicant's figure of 1.6 as the elasticity of demand (which figure he actually rejects), he calculates a predicted increase in patronage of 28.39 per cent resulting from a 17.73 per cent fare reduction. He then performs the necessary calculations to predict the GST effect on gross fare revenue (GFR). This shows a percentage reduction in patronage of 12.37 per cent, yielding a net gain, after introduction of GST, of 16.02 per cent. Using the figure of 15,701 (rounded off to 16000 in the above table) as the applicant's present monthly patronage, he calculates an increase of 2,515. Given that there are presently twelve services per day in each direction, an overall total of 720 services per month, this shows an increase of about 3.5 passengers per service. However, in ex 47, Mr Thomsett appears to have mistakenly treated the figure of twelve services per day as being the total number when in fact there are twelve services per day in each direction. This error led him to calculate the increase in the number of passengers per service as 7. In his evidence, he made it clear that such a figure would not be sufficient to justify an increase in service. He was not challenged on this evidence in cross-examination. Thus an increase of 3.5 would also not justify any increase. Obviously, if Mr Thomsett's chosen figures for elasticity of demand are used, the projected increase is even smaller. 168 Mr Davis criticized Mr Thomsett's general approach on three related bases which are probably different ways of stating the same proposition. The first is that there is no reason to assume that market-place conduct in the Sydney metropolitan area would be the same as that on the Gold Coast. The second point is that there is no reason to assume that in all cases covered by the Sydney survey, there was an alternative rail service available in the event that bus fares increased. Thirdly, the statistical evidence relied upon in calculating the elasticity of demand figures may not have involved a choice between different modes of transport. It may also have involved choice between taking a trip and not taking a trip. Those criticisms have some merit. On the other hand, the strength of Mr Thomsett's approach is that it is based on empirical information as to consumer choice. As to the GST point, the applicant points out that there is a deficiency in the logic of Mr Thomsett's argument. Rail fares have presumably also increased to reflect GST. Thus the introduction of GST would not be likely to result in a redistribution of passengers between modes of transport. Of course it might lead some passengers to choose not to travel at all, but this is unlikely in the case of commuters who, according to Mr Davis, are the main component of potential passengers. 169 Mr Davis's approach was quite different. His report (ex 46) consists of a document dated August 1999, presumably a report produced for some other purpose, to which have been added three further sheets. Mr Davis seeks to derive a "generalized cost" for any journey by attributing dollar costs to aspects of the journey in addition to the actual fare. Thus a notional cost is ascribed to the time taken to walk to the station or bus stop, time spent waiting for the chosen mode of transport and time taken on the journey. To the extent that motor cars are used, the cost of such transportation is also taken into account, as is the cost of feeder transport used to get to a railway station. As I have observed, a proportion of all travellers are described as either car captives or public transport captives. At p 4 of the report, Mr Davis asserts of the remainder that: The remainder of users will choose a mode based on the difference in the generalised cost function between public transport and private vehicle use. The greater the difference between the generalised cost of public transport and the private vehicle users, the fewer the users and vice-versa. 170 A diagram (fig 1 on p 4) appears to suggest that car captives and public transport captives each represent 20 per cent of the market. However a reading of part 2 of the report, headed "Methodology" suggests that such percentages are probably assumed as examples rather than based upon actual evidence. Mr Davis's evidence at TS 921-922 similarly suggests that the graph is merely an "hypothesised transformation curve". The curve appears to plot the percentage of travellers choosing a particular mode of transport against the "negative and positive values" of that mode. 171 In effect the report seeks to compare and contrast the various alternative methods of travel from the Gold Coast to Brisbane, using generalized cost as the basis of comparison. It is concerned with passengers commencing journeys on, and returning to the Gold Coast rather than with passengers commencing in, and returning to Brisbane. In one part of the report, there is a consideration of what would be entailed in reaching different final destinations in Brisbane after travelling to the CBD, but that is of only marginal relevance for present purposes. In compiling the report, 624 points in the Gold Coast area are chosen as originating points for a journey to Brisbane CBD. Estimates are then made of time involved in travelling from each such point to join the competing transport modes, waiting and travelling to Brisbane. These figures are then converted into generalized costs. There are no generalized cost calculations for private transport to and from Brisbane. The report compares only the Coachtrans bus service and the Queensland Rail service on this basis. The latter service may be utilized in three different ways: · by the passenger travelling with a Surfside Bus Line feeder bus to a station; · by the passenger walking to a station; and · by the passenger travelling by car to a station. 172 Each is considered to some extent in the report. The use of motor vehicles driven by a train passenger is facilitated by the provision at stations of free car-parking facilities which are apparently considered to be secure. At p 6 of ex 46 Mr Davis observes that: Private vehicle travel is the dominant form of transport for trips in the (Gold Coast – Brisbane) corridor. 173 At p 8, he says: The ability to drive and park freely at the Gold Cost railway station enables a far greater level of access than is the case for walking to these stations and represents a considerable competitive advantage for Queensland Rail over alternative modes of transport. 174 At p 12, he observes: The provision of free parking at QR stations is a significant competitive advantage to QR. 175 I have previously referred to Mr Davis's evidence concerning the predominance of commuters amongst users of public transport in the Brisbane – Gold Coast corridor and his view that the public transport market "is almost certainly limited to providing trips to and from the Brisbane CBD". His reason for the latter conclusion was that "travel to points other than the CBD results in a large generalized cost increase greatly limiting the competitiveness of both the Coachtrans and QR service for these trips". This appears to be a reference to the discussion in Part 6 of his report of other alternative destinations to which a passenger might travel after arriving at Brisbane CBD. However ex 46 identifies a market for passengers travelling from the Gold Coast to the Logan/Redlands area and to the southern parts of the Brisbane metropolitan area and return. These two categories accounted for 5.9 per cent of the 122,540 commuters in 1996, or 7230 potential commuter passengers. Mr Davis's view that passengers would not travel to Brisbane CBD and then travel on to other destinations with public transport does not exclude the possibility that commuters travelling to Logan/Redlands or to the southern parts of Brisbane might use public transport not involving travel to Brisbane CBD. However he seems to have treated such potential passengers as irrelevant for present purposes. 176 Exhibit 6 demonstrates that Queensland Rail provides services to some parts of those areas. It would appear that Coachtrans also does so. Nothing was said about such services in evidence or in addresses. Whilst judgment was reserved, the parties were asked to make submissions on this point. The applicant submitted that it would draw passengers travelling to and from such areas but conceded that the figure of about 4,000 constituted "the major part of the pool from which it would draw passengers". Apart from anything else, this demonstrates that one cannot assume that Queensland Rail is in direct competition with the applicant for all of the former's passengers. The applicant's case, as conducted, appears to be primarily concerned with the carriage of passengers between the Gold Coast and Brisbane CBD. Its market is therefore effectively limited to the 4,043 commuters referred to at p 10 of ex 46, with such increases as may have occurred as a result of population growth and other occasional traffic. Mr Davis indicated that the commuter figure had not increased significantly between 1991 and 1996. It is therefore difficult to conclude that it has increased significantly since 1996 in the absence of any evidence to that effect. 177 A further general criticism of Mr Davis's approach is that his concentration upon the distribution of potential passengers in the Gold Coast area excludes any consideration of preferences likely to be demonstrated by passengers commencing their journeys in Brisbane. There is some evidence which suggests that in 1994/95, roughly half of Coachtrans' passengers on the Brisbane – Gold Coast route commenced at each end. (See p 19 of the agreed bundle.) The applicant submits that no such inference can be drawn from that document and that: … the majority of its patrons are residents on the Gold Coast. In the morning peak, the majority of its patrons are commuters travelling north to the Brisbane CBD, (although … some are commuting to Beenleigh, Logan City or Mt Gravatt) and the opposite occurs in the evening peak. 178 The exercise conducted by Mr Davis in identifying typical starting points for Gold Coast passengers would be quite irrelevant in the case of Brisbane passengers as it bears no relationship either to their points of departure and ultimate return in Brisbane or to their likely destinations on the Gold Coast. 179 As I have said, Mr Davis seeks to compare the generalized cost of a journey to the Brisbane CBD using each mode of transport. In a series of maps, he seeks to describe the areas in which each enjoys an advantage over the other. Figure 12 depicts these areas, assuming that prospective rail passengers walk to the station and that fares are equal. It indicates that in areas near to the coast (and therefore near to the bus route) Coachtrans has a significant advantage over Queensland Rail as it also does in most areas north of the Gold Coast area. Queensland Rail has an advantage in areas to the west of the Gold Coast, near to the railway line. Figure 13 demonstrates the respective advantages of the two carriers, assuming motor vehicle access to railway stations and equal fares. It demonstrates a clear overall advantage to Queensland Rail in all areas other than some small areas between Helensvale and Coomera. Figure 14 assumes access to railway stations using Surfside feeder buses and equal fares. It shows a clear advantage to Queensland Rail in the western areas of the Gold Coast, but a clear advantage to Coachtrans along the coastal strip and in northern areas. The distribution is somewhat similar to that which appears in fig 12. Figure 15 compares generalized costs, assuming current fare structures and walking access to the railway. This shows an increased advantage to Queensland Rail as compared to that disclosed in fig 12, but again Coachtrans maintains its advantage in the coastal areas of the Gold Coast and in some other areas. 180 Figure 16 compares generalized costs, assuming current fare structures and access to Queensland Rail stations using Surfside feeder buses. This particular calculation has been based upon the cost of an "Individual Surfside and QR Ticket". Figure 17 performs the same exercise using the cost of a "Combined Single-Use Surfside/QR Ticket". This shows only marginal changes in the relative advantages enjoyed by the two carriers. Figure 18 performs the same exercise using the cost of a "Combined Multi-Use Surfside/QR Ticket". This shows a slight increase in the advantage enjoyed by Queensland Rail. The different tickets presumably have different costs, resulting in different generalized costs. Figures 16, 17 and 18, which assume current fare structures and Surfside feeder bus access to Queensland Rail stations, all show distinct additional advantage to Queensland Rail compared to the situation which prevails where fares are equal (fig 14). The major difference occurs in the coastal strip of the Gold Coast where Coachtrans has a marked advantage if fares are equal. 181 Figure 13 demonstrates a marked advantage to Queensland Rail in almost all areas where motor vehicle access to stations is assumed, even with equal fares. The reason for this advantage appears from a comparison of figures 7, 8, 9, 10 and 11 which show total travel time to Brisbane CBD from the Gold Coast and points north for various modes of transport as follows: Figure 7 – Walk access to Coachtrans bus stops; Figure 8 – Walk access to Queensland Rail stations; Figure 9 – Surfside feeder bus access to Queensland Rail stations; Figure 10 – Private vehicle travel to Queensland Rail stations; and Figure 11 – Private vehicle travel. 182 Figure 11 demonstrates that a traveller using a private motor vehicle will take less than 100 minutes from all points and less than 80 minutes from almost all points. 183 Figure 7 shows that from almost all points, the total time for the trip with Coachtrans will be in excess of 110 minutes and from most points, it will be in excess of 120 minutes. 184 Figure 10 shows that assuming private car access to stations, all points are within 120 minutes of Brisbane, and most are within 100 minutes. 185 Thus Queensland Rail, assuming car access to stations, has a distinct time advantage over Coachtrans. 186 I turn to the three additional pages prepared by Mr Davis for the purposes of this case. The two maps demonstrate the relative advantage of each carrier, assuming Surfside feeder bus access to stations and using generalized cost as the basis of comparison. One map assumes current fare structures and the other, equal fares. They demonstrate that with equal fares, Coachtrans would have a significant advantage along the coastal strip (where the population is quite dense) and a greater advantage in the area north of the Gold Coast. With the current fare structure, Queensland Rail enjoys a marked advantage in all areas other than that north of Helensvale. Mr Davis has reduced the maps into numerical form using census figures. The result is contained in the table on the third additional page. It indicates that the total population is 347,129. This figure is distributed amongst amongst four categories of relative advantage with the following results: Category Current Fare Structure Equal Fare Structure Advantage to Coachtrans 29252 8.4% 147430 42.5% Marginal Advantage to Coachtrans 49795 24.8% 62594 18.0% Marginal Advantage to QR-Surfside 67511 19.4% 35614 10.3% Advantage to QR-Surfside 200571 57.9% 101491 29.2% 187 The percentages under the heading "Current Fare Structure" total more than 100 per cent but in any event, the more relevant figures appear under the heading "Equal Fare Structure". They suggest that Coachtrans has a relative advantage amongst 60.5 per cent of the population as opposed to Queensland Rail's advantage (with Surfside feeder buses) amongst 39.5 per cent. 188 As I have previously mentioned, Mr Davis stresses in his report that the market for public transport in the Brisbane – Gold Coast corridor is probably limited to a very small number, namely those commuting to the CBD. These potential passengers total only 4,043 out of this total of 397,129. There is no evidence as to whether one may assume that the 4,043 are distributed equally throughout the whole of the Gold Coast area. I would be inclined to assume to the contrary. If a person lives on the Gold Coast and works in Brisbane, it seems more likely that he or she would live to the west and therefore nearer to the railway line, rather than near the resort areas on the coast. However, as I have said, there is no evidence on this point, and it is unprofitable to speculate. 189 A further difficulty with Mr Davis's report is that it is not always clear whether he is discussing the Gold Coast area (ie south of the Helensvale – Oxenford line) or the whole area between the border and Logan City. The maps suggest the latter approach as does the reference on p 3 to the "Gold Coast – Albert" area. However the census figures on p 10 are followed by the statement: This would establish a considerably small market in terms of travel from the Gold Coast core to the Brisbane CBD. 190 The area north of Helensvale could hardly be described as at the "core" of the Gold Coast. I have tried to keep this possible inconsistency in mind in my consideration of Mr Davis's reports. 191 A more serious criticism of the report is the absence of any assignment of population numbers to categories of relative advantage as between Coachtrans and Queensland Rail, assuming motor vehicle access to railway stations. If a potential passenger has access to a motor vehicle, is willing to use it to travel to the station and will, if he or she does so, find that the generalized cost of travelling to and from Brisbane is less than if he or she uses some other mode, then the assumption must be that such a passenger will adopt the former mode unless he or she is a public transport captive. Although no table has been produced, it is clear from figure 13 that it would demonstrate an overwhelming advantage to Queensland Rail in all areas, with the exception of small pockets north of Helensvale. This leads to the inference that from an economic point of view, only those who are public transport captives would choose to travel with Coachtrans. There is no evidence as to the percentage of the market who may be so described although, as I have pointed out, it is assumed to be 20 per cent in the diagram which is figure 1 in Mr Davis's report (ex 46). 192 These figures, when considered in combination, demonstrate a difficulty in the applicant's case. For ease of calculation I round off the relevant figures, treating Mr Davis's estimate of the size of the market in 1996 as 4,000 rather than 4,043 and the distribution between Coachtrans and Queensland Rail, assuming equal fares, as 60/40. For the sake of demonstration I will also assume the percentage of public transport and car captives as 20 per cent in each case. If the total market is 4,000 and the percentage of public transport captives is 20 per cent, then only 800 people will not use motor cars in order to access Queensland Rail stations. That is the maximum number of passengers who may choose to travel with Coachtrans. Of that 800, assuming equal fares, 60 per cent will find it more economical to travel with Coachtrans, that is 480 out of the total of 800. I assume that each commuter travels each way on every working day of the month, on average, twenty-two days, save when on annual leave. On a monthly basis that shows 21,120 passengers (480 x 2 x 22). On an annual basis, assuming four weeks' annual leave, it shows 230,400 passengers (480 x 2 x 5 x 48). The applicant's present monthly figure is 16,000 passengers, showing an annual figure of 192,000. On this hypothetical basis, the applicant is carrying 5,000 fewer passengers per month than Mr Davis's figures might suggest, but on an annual basis the figure is only 38,000 below the predicted number. 193 Because the applicant claims entitlement to subsidy on a "mileage" basis it is the number of bus trips, not the number of passengers which is critical to the level of subsidy. Thus it is necessary to calculate the extent to which such an increase in passenger numbers would be likely to result in the government permitting service levels beyond those currently prevailing. Unfortunately, there is very little evidence demonstrating how such an increase in passenger numbers might be expected to affect such levels. As far as I am aware, there is no evidence as to bus capacity. In the course of oral submissions the applicant suggested that its buses carry forty-five or forty-eight passengers. (See TS 1099 ll 23 and 24.) In submissions provided since the completion of the hearing, the respondent has asserted a bus capacity of "in excess of fifty passengers". The applicant has responded, asserting a bus capacity of forty-three with a limited number of coaches carrying up to forty-eight. Submissions are no substitute for evidence. I can do little more than assume a bus capacity of somewhere between forty-three and in excess of fifty. 194 Even if I had that information, I have no way of calculating the point at which an increase in passenger levels should result in an increase in service levels. Obviously, average passenger levels alone will not be decisive. At peak hours it will be no comfort to disappointed customers to be told that they may travel at an earlier or a later time on a bus which is largely empty. Similarly, it will be no answer to a person who wishes to travel early in the morning or late in the evening that there are many buses travelling at peak hours. An operator, in this case the applicant, must meet both the high levels of demand at peak hours and reasonable expectations as to service in off-peak hours. The applicant did not deal with this problem to any extent in its evidence. Mr Thomsett asserted that even an increase of seven passengers on average would not justify an increase in service levels. He did not tell me his basis for this view, but he is experienced in the area and there was no challenge to his evidence in this regard. In the absence of such challenge or other evidence, I accept that an average increase of that order would not justify an increase in service levels, but that does not fix the point at which a greater average increase in passenger levels should be taken as indicating the need for an increase in service levels. 195 The applicant's services are provided on seven days per week at the rate of twelve services each way per day. Thus the total number in a thirty day month would be 720. The applicant's current monthly patronage level of 16,000 therefore represents an average number of passengers of 22.2. The predicted passenger level (assuming equal fares) of 21,120 passengers per month, shows a notional average number of passengers per trip of 29.33, or slightly over 7 more than at present. On an annual basis, with 230,400 passengers per year carried on 8,760 bus services and allowing for four weeks' leave, the figure is 26.3, an increase of fewer than 5 passengers per trip. Given Mr Thomsett's evidence, these figures would not justify an increase in service levels. 196 I readily concede the artificiality of these calculations. They fail to take into account at least the following considerations: · population increase since the 1996 census; · passengers travelling from the Gold Coast to Logan/Redlands or southern parts of Brisbane, but not to the CBD; · non-commuter passengers; · passengers originating in Brisbane rather than at the Gold Coast; · the distribution of public transport captives as compared to the geographical distribution of the Gold Coast population as a whole; · the "inertia" of passengers, meaning their reluctance to change established habits concerning modes of transport; and · non-economic motives for choice. 197 I have little evidence as to the likely effects of these various factors on any prediction of the effect of a fare reduction on service levels. My calculations also assume three matters which probably cannot be realistically assumed. The first is that 20 per cent of potential passengers are public transport captives. If the figure is lower than this (as I suspect) then the figures will be even more unfavourable to the applicant because it will be sharing a smaller market. Secondly, these figures assume that public transport captives make rational decisions based on economic considerations as between travelling by bus or travelling by rail when it is quite clear that they do not do so. If they made such decisions, they would not be categorized as public transport captives. Thirdly, I have assumed that commuters and public transport captives are equally distributed across Mr Davis's 640 points. 198 Nonetheless, the calculations are substantially based on Mr Davis's model. They appear to lead to the conclusion that current service levels are adequate to meet the demand for bus transport even assuming equal fares. Although in submissions made while this matter has been reserved, the applicant has sought to change its position to some extent, it has generally adhered to Mr Davis's approach. In those submissions, the applicant also sought to avoid the consequences of the relative advantage held by Queensland Rail where passengers use car access to stations. It submitted that this did not lead to an inference that non-fare considerations may have caused potential passengers to prefer Queensland Rail to Coachtrans because, it was submitted, most of Coachtrans' passengers must previously have walked to bus stops and so would not have used cars. The argument appears to be that Coachtrans passengers generally lived so close to the bus stops that they would not have driven to them. This suggests an assumption that potential passengers choose between modes of access to the ultimate long distance carrier rather than between "overall transport products"; in other words, that they choose to walk and take the bus rather than to drive and take the train for reasons associated with the initial modes of transport rather than for reasons relating to the cost and quality of the trip as a whole. Although some passengers may prefer to avoid changing modes of transport from car to train, there has been no attempt to quantify that part of the market. It seems likely that most passengers consider the advantages and disadvantages of the whole trip rather than those of only part of it. 199 The point of Mr Davis's study is that it is cheaper for almost all people, in terms of generalized cost, to take the car to the station and then to catch a train. For most people, it is also quicker in absolute terms. His model assumes rational choice based on economic considerations. The applicant cannot reasonably expect that those consequences of Mr Davis's model which are favourable to its case will be accepted and the unfavourable consequences rejected, nor can it avoid those unfavourable consequences by asserting, in the absence of evidence, that its passengers "did not and do not access Coachtrans services by private motor vehicle". Whatever they may have done before February 1996 when there was no choice, the assumption underlying Mr Davis's report is that, given the opportunity, most people will make a rational choice between available modes based on economic factors (including time). An available choice is using a motor vehicle for part or all of the journey. If Mr Davis's calculations of cost are realistic, this may even extend to acquiring a vehicle. In the end, I consider that Mr Davis's model, taken at face value, offers no support for the applicant's claim that its loss of patronage since 1996 is substantially attributable to Queensland Rail's fare levels. The loss of patronage and resulting reduction in service levels is substantially attributable to advantages inherent in the rail service. These are probably location, speed and car parking facilities. In any event, the model fails to take account of numerous factors which appear to be relevant to an informed prediction of passenger response to fare reduction. 200 This leads me to have resort to Mr Thomsett's model, flawed though it may be. As I have said, it has the considerable merit that at least it is based upon preferences expressed by potential public transport users. Common sense dictates that had the fares been equal after 1 February 1998, the present level of bus usage would probably have been higher than it now is, and Mr Thomsett concedes as much. It is also possible that with equal fares, population increase would have caused some increase in usage in the period between that date and February 2003 when the "contract" would have expired. Despite Mr Thomsett's calculations, I am inclined to think that with equal fares, some of the passengers who left Coachtrans for Queensland Rail may not have done so and that more new passengers (resulting from population increase) may have come to Coachtrans. For present purposes, I can do little better for the applicant than to infer that had fares been equalized, the level of usage between 30 April 2000 and 31 January 2003 would probably have been somewhat higher than it presently is, or will be. That increased level would probably have justified a level of services higher than that presently in force. I can be no more precise than to say that there is some significant prospect that it would have justified one more trip per day in each direction. There is also a possibility that the level of services could have been reduced for reasons other than fare-based competition from the railway, although that is not very likely. It is a bare contingency, and I do not think that any substantial allowance ought be made for it. It is little more than a guess, but I fix the prospects of such increased service levels at 80 per cent. This will be best accommodated by assuming a level of services of 25.6 per day (12 services per day in each direction (24) + (1 x 80% x 2)) for the period after 1 May 2000. 201 I adopt the method of calculation used in Annexure C to ex 43 and by Mr Thomsett in ex 39 to calculate damages from 1 May 2000 as follows: 1 May 2000 – 30 Jun 2000 Distance travelled (110 km x 25.6 x 61) = 171,776 km Subsidy @ $0.50/km = $85,888 Adjusted for CPI = Not appropriate Adjusted for present value = Not appropriate 1 Jul 2000 – 30 Jun 2001 Distance travelled (110 km x 25.6 x 365) = 1,027,840 km Subsidy @ $0.50/km = $513,920 Adjusted for CPI - $513,920 x 1.028 = $528,309.76 Adjusted for present value - $528,309 x .9423= $497,826.28 1 Jul 2001 – 30 Jun 2002 Distance travelled (110 km x 25.6 x 365) = 1,027,840 km Subsidy @ $0.50/km = $513,920 Adjusted for CPI - $513,920 x 1.03 = $529,337.60 Adjusted for present value – $529,337 x .888 = $470,051.78 1 Jul 2002 – 31 Jan 2003 Distance travelled (110 x 25.6 x 215) = 605,440 km Subsidy @ $0.50/km = $302,720 Adjusted for CPI - $302,720 x 1.0175 = $308,017.60 Adjusted for prevent value - $308,017 x .8368 $257,749.12 TOTAL = $ 85,888.00 497,825.28 470,051.78 257,749.12 $1,311,515.10 Plus Damages to 30 April 2000 3,584,699.50 $4,896,214.60 Some allowance should be made for interest. It is not necessary that I do so at this stage. Orders 202 The application will be dismissed. I fix damages at $4,896,214.60. I will hear further submissions as to the formal orders and as to costs. I will also entertain any application for further findings of fact. I certify that the preceding two hundred and two (202) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. Associate: Dated: 13 November 2000 Counsel for the Applicant: Mr N Lucarelli QC Mr M Conrick Solicitor for the Applicant: Freehills Counsel for the Respondent: Mr R V Hanson QC Mr P Flanagan Solicitor for the Respondent: Crown Law Date of Hearing: 13 - 15 June 2000 21 – 30 June 2000 Date of Judgment: 13 November 2000