FEDERAL COURT OF AUSTRALIA Pacific National (ACT) Limited (ACN 48 052 134 362)v Queensland Rail (ABN 47 564 947 264) [2006] FCA 91 SUMMARY PACIFIC NATIONAL (ACT) LIMITED (ACN 48 052 134 362) v QUEENSLAND RAIL (ABN 47 564 947 264) NSD 690 of 2003 JACOBSON J 16 February 2006 SYDNEY 1. In accordance with the practice of the Federal Court in some cases of public interest, the following summary has been prepared to accompany the reasons for judgment delivered today. The summary is intended to assist understanding of the decision of the Court. It is not a complete statement of the conclusions reached by the Court or the reasons for those conclusions. The only authoritative statement of the Court's reasons is that contained in the published reasons for judgment. The published reasons for judgment and this summary will be available on the Internet at www.fedcourt.gov.au. 2. In these proceedings the applicant, formerly known as National Rail Corporation Limited ("NRC"), contended that the respondent, Queensland Rail ("QR") was estopped from interfering with its occupation, management and control of the Acacia Ridge Interstate Container Terminal ("the AR terminal") situated at Acacia Ridge near Brisbane. 3. QR owns the AR terminal but NRC has been in exclusive occupation since April 1993. It went into possession under arrangements which were eventually recorded in a three year lease expiring in April 1996. NRC continued to hold over as a monthly tenant under the expired lease until QR served it with a notice to quit in May 2003. Thereafter, NRC remained in occupation pursuant to an undertaking given by QR not to enforce the notice to quit pending the determination of the proceedings. 4. NRC's estoppel claim had its foundation in an agreement known as the Establishment Agreement ("the EA") entered into in July 1991 between the Commonwealth of Australia and a number of States, including Queensland. The EA provided for micro-economic reform of the rail freight industry in Australia. 5. The EA provided for the State of Queensland to cause its rail authority to transfer ownership or, for so long as NRC continued to conduct national interstate rail freight operations, give a lease or grant access to NRC in relation to particular assets owned by the State and required by NRC. The relevant clause provided that the transfers of ownership, leases or grants of access would be on such commercial terms and conditions as were agreed between NRC and the State. 6. NRC nominated the AR terminal as an asset which it required. However, the three year lease was entered into outside of the terms of the EA. It was not until early 1996 that the parties set about negotiating the terms of a 30 year lease. They had not agreed the terms when QR withdrew its "offer" of a 30 year lease in March 1997. QR offered instead to provide access to the AR terminal, on terms to be agreed, asserting that this was consistent with its obligations under the EA. 7. By the time the negotiations for the 30 year lease had ceased, NRC had incurred expenditure of approximately $17 million on the AR terminal and an amount in excess of $200 million on a capital investment strategy which included integration of the AR terminal in its national rail network. NRC claimed that it would suffer detriment in the form of the inability to recoup these items of expenditure. It also claimed that it would suffer operational detriment in the form of adverse consequences for its rail freight operations if it lost exclusive possession and control of the AR terminal. 8. The estoppel claim failed for a number of reasons. In summary these included:- · The evidence did not make good NRC's contention that it held certain assumptions underlying the estoppel claim; · The terms of the EA did not support the existence of the assumption; · The documentary record before and after the EA did not support the estoppel claim; · The parties proceeded on the basis that they were not bound until a formal contract had been executed, the subject matter of the proposed agreement being a lease of land; · Consistent with the principles stated by Brennan J in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 423, QR had not induced NRC to believe that QR was bound to enter into a lease. QR had therefore not lost its freedom to withdraw from negotiations; · NRC did not rely on the assumptions, nor would it have been reasonable for it to rely on the assumptions in light of the terms of the EA which made any lease subject to agreement on the commercial terms; and · Detriment was not established because QR had offered to provide NRC with access to the AR terminal on terms which enabled NRC to recoup any expenditure not yet recovered; in any event the evidence demonstrated that the expenditure had already been recouped. 9. NRC claimed, in the alternative, that QR had engaged in misleading and deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) ("the Act")or unconscionable conduct under s 51AA or s 51AC of the Act. 10. The failure of the estoppel claim carried with it the failure of the s 52 claim. 11. The unconscionable conduct claim turned largely on steps said to have been taken by QR through middle and upper management to subvert the EA and to secure a competitive advantage for QR at the expense of NRC. There was some overlap between this claim and NRC's claim under s 46 of the Act. 12. The unconscionable conduct claim failed, in particular, in light of NRC's standing as a large, well-managed corporation with a national business. Moreover, the circumstances said to amount to unconscionable conduct under s 51AC did not amount to serious misconduct of the type referred to in the authorities. 13. NRC claimed that the service of the notice to quit constituted abuse of market power by QR in contravention of s 46 of the Act. 14. NRC contended that QR had taken advantage of its market power in two rail infrastructure markets for the purpose of deterring or preventing NRC from engaging in competitive conduct in two downstream linehaul markets. QR's market power was said to arise from its ownership of the AR terminal. 15. NRC's claim under s 46 failed for the following reasons:- · At the time when the notice to quit was given QR did not have market power because it was an owner out of possession which had granted exclusive possession of the AR terminal to NRC; · QR did not take advantage of any market power because it had a rational business explanation for its wish to reclaim possession of the terminal. The rational business explanation was to conduct the AR terminal as a multi-user terminal with access available to all operators who wished to use it on terms to be negotiated with QR; this was believed by QR to be likely to increase the useage of the AR terminal by NRC and other operators. QR also wished to ensure its own access to the AR terminal which it had not been able to achieve with NRC in exclusive possession; and · QR did not have a proscribed anti-competitive purpose within s 46 of the Act. 16.NRC also attacked the terms on which QR offered to provide access to the AR terminal under a draft Terminal Services Agreement as an abuse of market power. This claim failed because the proposed agreement was not an exercise of market power but an attempt to allocate risk between the parties in commercial negotiations. 17.QR brought two cross-claims against NRC. The first was for possession and statutory rental. The failure of NRC's claims resulted in the success of this cross-claim. 18.QR's second cross-claim was for alleged misuse of market power by NRC in failing to give access to the AR terminal, initially to a company known as CRT/Freightcorp ("Freightcorp") and later to QR itself. 19.The claim in respect of Freightcorp failed because the evidence did not establish that NRC could have accommodated Freightcorp without adversely affecting its own national operations. 20.The claim in respect of QR's access applications failed for similar reasons. Expert evidence was called by QR as to the capacity of the AR terminal to accommodate the additional trains at the times and on the days sought by QR. However, the Court had reservations about the reliability of the evidence as to the ability of the AR terminal to accommodate the trains. FEDERAL COURT OF AUSTRALIA Pacific National (ACT) Limited (ACN 48 052 134 362)v Queensland Rail (ABN 47 564 947 264) [2006] FCA 91 ESTOPPEL - conventional estoppel - proprietary estoppel – equitable estoppel – estoppel in pais - claim that respondent estopped from interfering with occupation and control of rail terminal - claim that applicant's occupation of terminal and expenditure on terminal and rail investment strategy was founded on assumption that long term lease would be granted - whether inducement to form assumption – whether assumption relied on - whether reasonable to rely assumption – whether detriment suffered TRADE PRACTICES – misleading and deceptive conduct - claim that respondent made implied representation to applicant that it would act in good faith and take steps necessary to permit applicant to occupy and control terminal – whether representation made – whether reliance – whether causal link between alleged representation and expenditure by applicant on terminal and rail investment strategy TRADE PRACTICES - unconscionable conduct – claim by applicant that respondent's refusal to provide long term lease, giving notice to quit, and pursuing cross-claim are unconscionable – whether applicant at special disadvantage - whether unreasonable or bullying behaviour – whether illegitimate pressure applied TRADE PRACTICES - restrictive trade practices - claim of misuse ofmarket power - owner out of possession – market definition – barriers to entry – whether substantial degree of market power – whether took advantage – whether proscribed purpose – rational business explanation TRADE PRACTICES – restrictive trade practices – cross-claim of misuse ofmarket power – applicant's refusal to grant access - whether taking advantage of market power – whether proscribed purpose National Rail Corporation (Agreement) Act 1991 (Qld) - ss 5, 6 and 7 Property Law Act 1974 (Qld) - ss 129 and 139 Queensland Competition Authority Act 1997 (Qld) Trade Practices Act 1974 (Cth) - ss 46, 51AA, 51AC and 52 Trade Practices (Fair Trading) Act 1998 (Cth) Transport Infrastructure (Railways) Act 1991 (Qld) - s 4(1) Transport Infrastructure Act 1994 (Qld) - s 215 Ansett Transport Industries (Operations) Pty Limited v Commonwealth (1977) 139 CLR 54 cited Attorney-General (Hong Kong) v Humphreys Estate (Queen's Gardens) Limited [1987] 1 AC 114 referred to Austotel Pty Limited v Franklins Selfserve Pty Limited (1989) 16 NSWLR 582 referred to Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 cited Australian Competition and Consumer Commission v Oceana Commercial Pty Limited [2003] FCA 1516 referred to Australian Competition and Consumer Commission v 4WD Systems Pty Limited (2003) 200 ALR 491 applied Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Limited (2003) 214 CLR 51 referred to Australian Competition and Consumer Commission v Safeway Stores Pty Limited (2003) 129 FCR 329 referred to Australian Competition and Consumer Commission v Samton Holdings Pty Limited (2002) 117 FCR 301 referred to Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Limited (2000) 104 FCR 253 cited Baird Textiles Holdings Limited v Marks & Spencer Plc [2001] All ER (D) 352 (Feb) cited Bond Brewing (NSW) Pty Limited v Reffell Party Ice Supplies Pty Limited (unreported, Supreme Court of NSW, Waddell CJ in Eq, 17 August 1987) distinguished Boral Besser Masonry Limited v Australian Competition and Consumer Commission (2003) 215 CLR 374 cited Brambles Holdings Limited v Carey (1976) 15 SASR 270 referred to Branir Pty Limited v Owston Nominees (No 2) Pty Limited (2001) 117 FCR 424 cited Briginshaw v Briginshaw (1938) 60 CLR 336 referred to Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592 referred to Campomar Sociedad Limitada v Nike International Limited (2000) 202 CLR 45 referred to Commonwealth of Australia v Verwayen (1990) 170 CLR 394 cited Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 referred to Crabb v Arun District Council [1976] 1 Ch 179 referred to Equuscorp Pty Limited v Glengallan Investments Pty Limited (2004) 218 CLR 472 referred to Eslea Holdings Limited v Butts (1986) 6 NSWLR 175 referred to Federal Commissioner of Taxation v Whitfords Beach Pty Limited (1982) 150 CLR 355 Jones v Dunkel (1959) 101 CLR 298 referred to Foran v Wight (1989) 168 CLR 385 referred to Generation Pty Limited v Power and Water Authority (2004) 210 ALR 312 referred to Giumelli v Giumelli (1999) 196 CLR 101 referred to Grundt v Great Boulder Pty Limited (1937) 59 CLR 640 referred to Holiday Inns Inc v Broadhead [1974] 232 EG 951 referred to Hope v Bathurst City Council (1980) 144 CLR 1 referred to Hoyts' Pty Limited v Spencer (1919) 27 CLR 133 referred to Hurley v McDonald's Australia Limited (2000) ATPR 41-741 cited Inwards v Baker [1965] 2 QB 29 referred to Ishac v David Securities Pty Limited (No 6) (1992) 7 ACSR 199 referred to Kellow-Falkiner Motors Pty Limited v Nimorakiotakis [2001] ANZ Conv R 230 referred to Krakowski v Eurolynx Properties Limited (1995) 183 CLR 563 cited Landsmiths Pty Limited v Hall (1999) 9 BPR 17,057 cited Legione v Hateley (1983) 152 CLR 406 referred to Long v Piper [2001] NSWCA 342 cited Low v Bouverie [1891] 3 Ch 82 referred to Melway Publishing Pty Limited v Robert Hicks Pty Limited (2001) 205 CLR 1 applied Minister for Immigration and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 referred to Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 referred to Minister for Immigration and Multicultural Affairs v McDade (2001) 109 FCR 137 cited Mobil Oil Australia Limited v Wellcome International Pty Limited (1998) 81 FCR 475 referred to NT Power Generation Pty Limited v Power and Water Authority (2004) 219 CLR 90 distinguished Plimmer v Mayor of Wellington (1884) 9 AC 699 referred to Nigel Watts Fashion Agencies Pty Limited v GIO General Limited (1994) 8 ANZ Ins Cas 61-235 referred to Payne v Parker (1976) 1 NSWLR 191 cited Queensland Wire Industries Pty Limited v Broken Hill Pty Limited (1989) 167 CLR 177 referred to Radaich v Smith (1959) 101 CLR 209 cited Ramsden v Dyson [1866] 1 LRHL 129 referred to Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53 referred to Sebben v Partridge (unreported Supreme of South Australia, Lander J, 20 December 1994) referred to Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596 referred to South Australia v Commonwealth (1962) 108 CLR 130 referred to Standard Chartered Bank Aust Limited v Bank of China (1991) 23 NSWLR 164 referred to Swain v Waverley Municipal Council (2005) 213 ALR 249 referred to Taco Company of Australia Inc v Taco Bell Pty Limited (1982) 42 ALR 177 referred to Tesco Supermarkets Limited v Nattrass [1972] AC 153 referred to Thompson v Palmer (1933) 49 CLR 507 cited Trade Practices Commission v Pioneer Concrete (Qld) Pty Limited (1994) 52 FCR 164 Eastern Express Pty Limited v General Newspapers Pty Limited (1992) 35 FCR 43 Commercial Union Assurance Company of Australia Limited v Ferrcom Pty Limited (1991) 22 NSWLR 389 referred to Transfield Pty Limited v Arlo International Limited (1980) 144 CLR 83 referred to United Dominions Corporation Limited v Brian Pty Limited (1985) 157 CLR 1 referred to Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 cited Winter Garden Theatre (London) Limited v Millennium Productions Limited [1948] AC 173 referred to Wood v City of Melbourne (1979) 26 ALR 430 cited Halsbury's Laws of Australia, Vol 7 Corporations JD Heydon, Trade Practices Law: Restrictive Trade Practices, Deceptive Conduct and Consumer Protection, LBC, Vol 1, Sydney JD Heydon, (2004) Cross on Evidence (7th ed) LexisNexis Butterworth, Sydney P Feltham et al (2004) Spencer Bower's Law Relating to Estoppel by Representation (4th ed) Butterworths, London PACIFIC NATIONAL (ACT) LIMITED (ACN 48 052 134 362) v QUEENSLAND RAIL (ABN 47 564 947 264) NSD 690 of 2003 JACOBSON J 16 February 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 690 of 2003 BETWEEN: PACIFIC NATIONAL (ACT) LIMITED (ACN 48 052 134 362) APPLICANT/CROSS-RESPONDENT AND: QUEENSLAND RAIL (ABN 47 564 947 264) RESPONDENT/CROSS-CLAIMANT JUDGE: JACOBSON J DATE OF ORDER: 16 February 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application be dismissed. 2. The cross-claim under s 46 of the Trade Practices Act 1974 (Cth) be dismissed. 3. The applicant is to deliver up possession of the AR terminal. 4. There is to be a stay of order three in accordance with the respondent's undertaking to the Court. 5. The respondent is entitled to an order for payment of rental in accordance with s 139 of the Property Law Act 1974 (Qld) from the date of expiration of the notice to quit dated 26 May 2003. 6. The parties are to bring in short minutes giving effect to the orders set out above and quantifying the amount payable by the applicant pursuant to order five. 7. Costs reserved pending finalisation of the short minutes of order. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. table of contents 1. Introduction 2. Preliminary Matters The pleaded assumptions and the case sought to be made by PN at the trial The parties to these proceedings and the parties to the EA The corporate state of mind of NRC The corporate state of mind of QR 3. The Factual Matrix Background to the establishment of NRC: The Task Force Report and the Heads of Government Agreement Queensland Cabinet considers benefits of establishing NRFC The Establishment Agreement Special Premiers' Conference The National Rail Corporation (Agreement) Act 1991 (Qld) August 1991 - March 1993: Preparation for the transfer of functions from QR to NRC 2 April 1993: Railway Freight Services Agreement May 1993 - November 1993: State of Queensland defers decision to become a Shareholder of NRC September 1993 - November 1993: NRC remains in occupation under the 4 April 1993 Heads and commencement of expenditure on AR terminal 30 June 1994: NRC defers request for transfer or lease of AR terminal July - November 1994: the emerging significance of the Hilmer Report August 1994 - November 1994: the Proposed Long Term Track Access Agreement May 1995 – September 1995: Disputes over charges for track access and request for long term agreement September 1995: NRC Board Meeting to consider impact of Hilmer Report The East Coast Strategy January 1996 – March 1997: negotiations for a new lease 27 March 1997: the "Change of Position" letter April 1997: NRC approves capital expenditure after the change of position letter July 1997 – April 1998: Further Discussions about a long term lease; QR refuses to reconsider August 1997 - January 1999: NRC continues expenditure on East Coast Strategy November 1998: Freightcorp requests access The Third Amending Agreement August 1999: The George Deutsch Report 7 September 1999: Queensland Transport favours common user facility March 2000: QR concern about hostile purchase of NRC 31 March 2000: QR considers George Deutsch Report August 2000: QR officers' strategise about NRC's proposed lease September 2000: Meeting between Mr Graham and Mr Scheuber; NRC's proposal for long term access October 2000: Mr George's memorandum to Mr O'Rourke; concern about loss of potential bargaining chip November 2000: Further discussions and correspondence about different positions taken by NRC, QR and Queensland Transport Mr Graham's letter of 13 November 2000; no obligation to grant long lease February 2001: Further strategising by QR March 2001: QR Presentation to NRC April 2001: QR briefing paper for Mr Bredhauer Meeting of 10 May 2001 and letters between Mr Graham and Mr Scheuber July 2001: More QR strategising 31 August 2001: QR seeks approval from Queensland Government to terminate NRC's tenancy December 2001: QR's access undertaking February 2002: Completion of sale of shares in NRC; more strategising by QR September 2002: Strategic options for QR December 2002 – February 2003: Preparation for issue of notice to quit May 2003: Notice to Quit served; PN seeks interlocutory injunction and QR gives undertaking 10 November 2003: Access Agreement for nominated network June 2004: QR seeks access to AR terminal 1 January 2005: QR's offer to PN of a Licence The Draft Terminal Services Agreement Amendments to the Draft Terminal Services Agreement on 6 July 2005 4. The evidence of the principal witnesses Mr Graham's evidence Mr Butcher's evidence Mr Hanscomb's evidence Mr O'Rourke's evidence Mr Hearsch's evidence 5. Estoppel The Relevant Principles of Estoppel Contradictory and unclear evidence of the directors defeats the estoppel claim The EA does not support the existence of the pleaded assumptions The documentary record before and after the EA does not establish the estoppel claim The estoppel claim fails because the assumptions are not clear and unequivocal The estoppel claim fails because QR took no part in occasioning any of the assumptions The claim of conventional estoppel fails because there was no assumption of existing facts and on other grounds The equitable estoppel claim based on encouragement and failure to disclose facts The proprietary estoppel claim is distinguishable from the Plimmer line of cases The 1993 Freight Services Agreement does not assist PN's case Whether QR's silence induced NRC to believe that QR had procured a long term lease No reliance on pleaded assumptions It was not reasonable for NRC to rely on the alleged assumptions Detriment: the nature of the detriment claimed by NRC The relevant legal principles of detriment The fundamental reason why detriment has not been established Reliance detriment: expenditure on the AR Terminal and the East Coast Strategy Reliance detriment: lost opportunities Operational Detriment Not unconscionable for QR to depart from assumptions 6. The Misleading Conduct Claim 7. The unconscionable conduct claim The Legislation The conduct claimed to be unconscionable The relevant legal principles of unconscionable conduct Section 51AA is non-enlivened Section 51AC is not attracted 8. PN's claim of misuse of market power Introduction to PN's section 46 claim The Infrastructure Markets The Linehaul Markets Market Power Whether QR has market power in the SG Rail Infrastructure Market Whether QR has market power in the North Coast Rail Infrastructure Market Whether QR has taken advantage: SG Rail Infrastructure Market Whether QR has taken advantage: North Coast Rail Infrastructure Market Whether QR had a proscribed purpose 9. QR's cross-claim under section 46 Market Power Mr McNamara's evidence on the Freightcorp issue Mr Graham's evidence on the Freightcorp issue QR's access applications Mr Merrigan's evidence Professor Ferreira's evidence Mr Lawrence's evidence Conclusion in relation to QR's applications for access 10. Conclusion and orders QR's cross-claim for possession Orders in the Proceedings Schedule 1: Dramatis personae Schedule 2: List of Acronyms Schedule 3: Glossary attachment a: colour plan of ar terminal IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 690 of 2003 BETWEEN: PACIFIC NATIONAL (ACT) LIMITED (ACN 48 052 134 362) APPLICANT/CROSS-RESPONDENT AND: QUEENSLAND RAIL (ABN 47 564 947 264) RESPONDENT/CROSS-CLAIMANT JUDGE: JACOBSON J DATE: 16 February 2006 PLACE: SYDNEY REASONS FOR JUDGMENT 1. Introduction 1 In Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 ("Waltons") at 423, Brennan J pointed to the difficulty of contending for an estoppel against a party's freedom to withdraw from contractual negotiations. His Honour said that it is only if the first party induces the other to believe that the inducer, ie the first party, is already bound and that there is no freedom to withdraw, that it could be unconscionable for the first party to assert an entitlement to withdraw from the negotiations. 2 Notwithstanding this difficulty, the applicant contends that the respondent is estopped from interfering with its occupation, management and control of a parcel of land comprising about 202,000 square metres and known as the Acacia Ridge Interstate Container Terminal ("the AR terminal") near Brisbane in circumstances in which the respondent withdrew from negotiations for a 30 year lease. The respondent owns an adjoining parcel of land comprising about 86,000 square metres. This is known as the Q-link Terminal. I will describe its location at [194]. The respondent conducts rail freight services from the Q-link terminal. The applicant makes no claim to that terminal. These proceedings are concerned solely with the applicant's claim in respect of the AR terminal. 3 The respondent owns the AR terminal, which is an intermodal terminal enabling the transfer of containers between trains and trucks which service the Brisbane area. The applicant went into possession, and assumed the management and operational control, of the AR terminal on 5 April 1993. It has remained in occupation, management and control ever since. It occupied the AR terminal as a monthly tenant under an expired lease from April 1996 until its tenancy was purportedly terminated in May 2003. It remained in occupation thereafter as explained below. 4 The applicant's estoppel claim is based upon fourteen pleaded assumptions which are said to have formed the conventional basis upon which the parties to this proceeding conducted their relations. In final address, four of the pleaded assumptions were not pressed. 5 The applicant contends that the respondent is bound by a conventional estoppel or alternatively a proprietary estoppel or in the further alternative an equitable estoppel said to have arisen from the respondent's encouragement of the applicant to assume control in the expectation that a 30 year lease would be negotiated. 6 Underlying the assumptions is an agreement known as the Establishment Agreement ("EA") entered into between the Commonwealth and a number of the States, including the State of Queensland, on 30 July 1991. It is occasionally referred to in documents as the "Shareholders Agreement". 7 Until 1991, rail freight operations in Australia had been conducted by separate state owned railway companies. Those operations had incurred disastrous losses. The EA was an attempt to achieve micro-economic reform of the rail freight industry. It was an exercise in co-operative federalism. It provided for the incorporation of a single company, in which the governmental parties to the EA may hold shares, to conduct rail freight operations on a commercial basis. The applicant, which was originally named National Rail Corporation Limited ("NRC"), was that company. 8 The State of Queensland did not become a shareholder of NRC but it was subject to an obligation contained in cl 5(6)(a) of the EA to cause its rail authority to transfer ownership of, or for so long as NRC continues to conduct national interstate freight operations, give a lease of, or grant access to NRC in relation to assets owned by its rail authority and used in connection with interstate freight. Queensland Railways was the State of Queensland's rail authority when the EA was executed. Queensland Rail ("QR"), the respondent, is its successor. 9 Clause 5(6)(a) of the EA stated the framework through which the grant of ownership, lease or access rights was to be created. In 1992, NRC identified the AR terminal as an asset required by it in accordance with that framework. Clause 5(6)(a) then provided that the State of Queensland had a discretion as to which of the three stipulated forms of property right would be granted, that is, ownership, lease or access. There is an issue between the parties as to whether the discretion was exercised. 10 The concluding words of cl 5(6)(a) of the EA provided for the transfer of ownership or the grant of a lease or access rights to be on such commercial terms and conditions as were agreed between NRC and the State of Queensland. 11 Apart from the terms of a three year lease, commencing with effect in April 1993, no commercial terms and conditions were agreed. The three year lease was, for reasons dealt with later, a separate arrangement which was put in place outside the terms of the EA. 12 Mr Vincent O'Rourke ("Mr O'Rourke") who was the CEO of the respondent, and of its predecessor Queensland Railways, conceded in cross-examination that the control of the AR terminal which was transferred to NRC in April 1993 was in anticipation of a lease of up to 30 years being negotiated between the parties. Mr O'Rourke also conceded that it was confidently expected between himself and Mr Vince Graham ("Mr Graham") the Managing Director of NRC, that the necessary details for such a lease would be agreed between the parties and put in place. 13 During the term of the three year lease NRC incurred or approved two relevant categories of capital expenditure. The first was an amount of approximately $17 million on upgrading the AR terminal. This expenditure included the construction of new railway track. 14 The second item was an amount of approximately $200 million on what was known as the East Coast Strategy. This was a capital investment strategy for the improvement of NRC's competitiveness in rail freight on the east coast of Australia. It was seen by NRC as an essential part of the establishment of an integrated national rail freight network. It involved the purchase of new locomotives and expansion of existing east coast terminals, including the AR terminal, to cater for the running of longer trains. 15 Between May 1996 and March 1997, NRC and the respondent held negotiations for a long term lease of the AR terminal. The period of the lease, with options, would have provided for a tenure of 30 years. The parties had not reached agreement on a number of essential terms of the lease by March 1997 when the negotiations ceased. NRC conceded that the negotiations which took place up to that time were sincere and were conducted in good faith. 16 On 27 March 1997, Mr O'Rourke wrote a significant letter to Mr Graham. The letter stated that the respondent withdrew its "offer" of a 30 year lease. Nevertheless, Mr O'Rourke stated that the respondent would negotiate in good faith an agreement to permit NRC to have access rights to the AR terminal. This was the first time in the course of the negotiations in 1996 to 1997 that the respondent put forward to NRC a proposal of access rights rather than a long term lease. The letter was referred to during the proceedings as the "change of position" letter. 17 The substance of NRC's claim in estoppel is that NRC and the respondent each assumed, and mutually adopted an assumption, that long term control of the AR terminal was transferred to NRC in accordance with the EA in April 1993 and that this was to continue for so long as NRC conducted national interstate freight operations. It was also said that NRC and the respondent mutually assumed that a long term lease of 20 to 30 years would be negotiated in order to facilitate the transfer of control. NRC's case was that the terms of the lease were subsidiary to control of the AR terminal which passed to NRC in April 1993. Other formulations of the estoppel claim were also pursued. 18 NRC was said to have acted to its detriment in reliance upon these assumptions by incurring the two significant categories of expenditure to which I have referred. NRC also submitted that it was induced by the assumptions to refrain from pursuing political solutions or alternative dispute resolution mechanisms which were available to it. NRC also contended that it would suffer "operational detriment", that is to say, adverse consequences for its rail freight operations in the ways set out at [867] – [868] below. 19 The change of position letter was submitted by NRC to have been an unconscionable departure from the assumptions. However, unlike most estoppel cases in which there is an unequivocal change of position that either is, or is not, unconscionable, these proceedings are complicated by the fact that the alleged departure from the assumption was accompanied by what amounted to an offer to compensate NRC for any detriment. The offer was to negotiate in good faith for access rights in lieu of a lease. 20 Indeed, the offer of compensation for NRC's detriment did not stop with the change of position letter. There have been extensive communications between the parties since March 1997 which bear upon the question of whether any detriment to NRC has been met by offers to provide access. The respondent's most recent offer, made shortly before the commencement of the hearing, and amended during the course of the hearing, is a lengthy Draft Terminal Services Agreement which has not been accepted by NRC. 21 Thus, whilst denying that NRC has made good the basal elements of its estoppel claim, the respondent points to the following proposition stated by McHugh J in Commonwealth of Australia v Verwayen (1990) 170 CLR 394 ("Verwayen") at 501 as a complete answer to the claim:- "Once the detriment has ceased or been paid for, there is nothing unconscionable in a party insisting on reverting to his or her former relationship with the other party and enforcing his or her strict legal rights." 22 NRC puts its claim under both s 52 of the Trade Practices Act 1974 (Cth) ("the Act") and estoppel but similar questions arise in each of the claims. 23 NRC also claims that the respondent has engaged in unconscionable conduct in contravention of ss 51AA and 51AC of the Act. These claims turn largely upon strategies put forward by the respondent's middle management, in particular during 2001, for avoiding any obligations on the State of Queensland under the EA and for the use of the AR terminal as a "bargaining chip" in efforts by the respondent to enter interstate markets for the supply of rail freight services. 24 NRC's other major claim is that the respondent, by giving NRC a notice to quit the AR terminal and claiming possession of it under a cross-claim, has taken advantage of its market power for a proscribed purpose in contravention of s 46 of the Act. 25 This claim was influenced in part by the unique location of the AR terminal and the curious fact that railway track in Queensland is narrow gauge (3 foot 6 inches wide) whereas railway track on the east coast corridor is standard gauge (4 feet 8˝ inches wide). 26 The AR terminal is located between the City of Brisbane and the Queensland/NSW border ("the border"). Rail track from the border to the AR terminal is standard gauge. The respondent owns the track. 27 The rail track running north from the AR terminal to Cairns is narrow gauge. The respondent owns that track. 28 The AR terminal has standard gauge and narrow gauge track. It also has dual gauge track. The AR terminal is the only terminal in Queensland which is capable of servicing substantial volumes of interstate rail freight service into and out of Queensland between standard and narrow gauge. 29 There is standard gauge track from the AR terminal to the Fisherman Islands terminal at the Port of Brisbane (known as the Brisbane Multi-Modal terminal or "BMT") but that track does not extend further along the north coast line to far north Queensland. 30 The AR terminal is therefore an ideal location for the trans-shipment of freight between northern Queensland and the southern states. 31 The respondent is a vertically integrated rail operator. It conducts "above rail" interstate passenger and freight services in Queensland. Since at least early 2005, it has conducted services between Queensland and the Southern terminals. It owns and operates all the "below rail" narrow gauge infrastructure north of the AR terminal. It also owns and operates the infrastructure comprising the standard gauge track in Queensland. 32 NRC contends that since at least 1995 there has been a market for the supply of narrow gauge railway track infrastructure services north of the AR terminal ("North Coast Rail Infrastructure Market") and a market for the supply of standard gauge railway track infrastructure services south of the AR terminal ("Standard Gauge Rail Infrastructure Market"). 33 NRC also contends that QR has a substantial degree of power in each of those markets. 34 NRC further contends that in seeking to resume control of the AR terminal and provide "mere" access rights to NRC, the respondent has taken advantage of its substantial degree of power in each of the infrastructure markets for the purpose of damaging NRC in its provision of rail linehaul services in two other markets. 35 Those other markets are the supply of rail linehaul services on the north cost line between Brisbane and Cairns ("North Cost Rail Linehaul Market") and rail linehaul services on the east coast corridor ("East Coast Rail Linehaul Market"). 36 NRC's claim under s 46 of the Act only bites if its estoppel claim fails. That is to say, it proceeds on the basis that NRC has no legal or equitable right to a 30 year lease and that when the notice to quit was given NRC was in possession of the AR terminal as a month to month tenant holding over under an expired lease. 37 It would be a false dichotomy to suggest that there is a distinction between taking advantage of market power and taking advantage of property rights: see NT Power Generation Pty Limited v Power and Water Authority (2004) 219 CLR 90 ("NT Power") at [125]. Property rights can be a source of market power attracting liability under s 46 of the Act. 38 Nevertheless, NRC's resort to s 46 to support its claim for a 30 year lease would appear to have startling consequences. It would seem to follow from NRC's contentions that an owner of property which is an essential input in a market can be compelled to give a competitor exclusive possession of the property, rather than mere access to it, thereby depriving the owner from having access to the property other than by an application pursuant to Part IIIA of the Act. 39 Unfortunately, my reasons for judgment are long. The factual matrix covers a period of approximately 15 years from 1990 and culminates with the delivery by the respondent of its latest offer of access contained in the amended Draft Terminal Services Agreement on 6 July 2005. 40 The principal witnesses were Mr Graham and Mr O'Rourke, but the dramatis personae is large. I attach to my judgment as Schedule 1 a dramatis personae 41 There were many acronyms and technical terms used to describe features of the rail infrastructure and rail linehaul markets to which I have referred. I attach a list of acronyms at Schedule 2 and a glossary of terms at Schedule 3. 42 NRC was privatised in 2002. Its shares were purchased by a consortium owned by Toll Holdings Limited ("Toll") and Patrick Corporation Limited. The consortium completed the purchase of shares in NRC on 21 February 2002 and its name was thereafter changed to Pacific National (ACT) Limited ("PN"). So far as possible I will refer to the applicant as NRC in all communications and events up to 21 February 2002. I will endeavour to refer to it in all communications and events thereafter as PN. 43 The respondent was established by the Government Owned Corporations (Queensland Rail) Regulation 1995 ("GOC Regulation") with effect from 1 July 1995. It is the successor in law to Queensland Railways: see s 14(1) of the GOC Regulation. I will refer to the respondent as QR. For convenience it may sometimes be necessary to refer to Queensland Railways as QR but it is to be understood that a reference to "QR" in a communication or event prior to 1 July 1995 is to Queensland Railways. 44 QR has two cross-claims against PN. The first is made pursuant to s 46 of the Act. It is, in effect, that PN has taken advantage of a substantial degree of power in the Standard Gauge Rail Infrastructure Market, through its control of the AR terminal, to refuse a number of requests for access made by QR and another company. It is contended that PN was motivated by an anti-competitive purpose proscribed by s 46 of the Act. 45 The second cross-claim made by QR is for possession of the AR terminal. If PN fails in its claim to an entitlement to a 30 year lease or to remain in control of the AR terminal then it would seem to follow that QR must be entitled to succeed in its claim for possession. QR would also succeed in its claim for, what may be described as statutory mesne profits under s 139 of the Property Law Act 1974 (Qld) ("Property Law Act"). The claim is for rental being double the rent which would have been payable immediately before the notice to quit was given. 2. Preliminary Matters The pleaded assumptions and the case sought to be made by PN at the trial 46 I accept QR's submission that NRC's case suffers from the handicap of pleading multiple and conflicting assumptions. 47 I also accept that only four of the pleaded assumptions have any bearing on the case conducted at the trial. These are that:- (1) QR would grant a lease or access to NRC of the AR terminal for so long as NRC carried on the business of interstate rail freight operations in Queensland on a commercial basis, or for at least 30 years. (2) QR would provide NRC with access to the AR terminal in a way which would enable NRC to have the greatest prospect of securing its commercial viability. (3) QR would permit NRC to occupy the AR terminal and to have control of the management and operation for so long as NRC carried on the business of interstate rail freight operations into Queensland, or for at least 30 years. (4) In 1993 QR transferred control of the AR terminal to NRC on the basis that the transfer would be effective for so long as NRC carried on the business of interstate rail freight in Queensland, or for at least 30 years. 48 PN submitted that its case was not that QR promised NRC a long term lease. That seems to be a disavowal of the first pleaded assumption set out above. Notwithstanding this, the four assumptions set out above reflect precisely what was pleaded in the Statement of Claim. 49 Ultimately, PN's case as pressed in final address was that NRC and QR mutually adopted an assumption that control of the AR terminal was transferred to NRC on 5 April 1993 pursuant to the EA, with no "sunset provision". PN's case was that the question of the form of the property rights was merely "formal" and "ancillary" to the control which had already passed. 50 The alleged assumption that control had passed for a period, which may have been in perpetuity, appears to have its foundation in the fourth of the pleaded assumptions set out above. The proposition that property rights were ancillary to control does not seem to have been pleaded. In any event, for reasons given later, it has other difficulties. The parties to these proceedings and the parties to the EA 51 NRC was incorporated on 19 September 1991. NRC was of course not a party to the EA but was established pursuant to it. 52 The Commonwealth Government announced its intention to privatise NRC on 24 November 1996 but privatisation was not effected until February 2002 when the shares were sold to the Toll/Patrick consortium. 53 Queensland Railways was established under the Transport Infrastructure (Railways) Act 1991 (Qld) ("TIR Act"). The TIR Act provided that Queensland Railways' predecessor, the Commissioner of Railways, which was a corporation sole, was continued in existence under the name Queensland Railways: see s 4(1) of the TIR Act. 54 Queensland Railways was a legal entity, separate from the State of Queensland although it was an agency of the Queensland Government: see s 10(c) of the TIR Act. 55 Queensland Railways was not a party to the EA. The State of Queensland is not a party to these proceedings. 56 Queensland Railways was dissolved by Reg 20(1) of the GOC Regulation, which established QR as its successor. 57 QR is a government owned corporation: see Reg 19(2) of the GOC Regulation. Its shares are held equally by the Queensland Treasurer and the Queensland Department of Transport (also referred to as "Queensland Transport" or "QT" in documents). QR is not an agency of the Queensland Government. The corporate state of mind of NRC 58 In Krakowski v Eurolynx Properties Limited (1995) 183 CLR 563 at 582-3, the High Court approved the following statement of principle of Bright J in Brambles Holdings Limited v Carey (1976) 15 SASR 270 ("Brambles") at 279:- "Always, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company." 59 That is not to say that the state of mind to be attributed to a corporation must always be the state of mind of one particular officer: Brambles at 275 per Bray CJ; see also Wood v City of Melbourne (1979) 26 ALR 430 at 447. 60 However, difficulties arise in ascertaining the state of mind of large corporations: Brambles at 275. Different board members may hold different beliefs and it is sometimes possible to look beyond the resolutions of the board to the deliberations of individual board members as well as those of senior management: Ishac v David Securities Pty Limited (No 6) (1992) 7 ACSR 199 at 200-201 per Young J and the authorities there cited. 61 As Bray CJ said in Brambles at 276, a corporation cannot know or believe two contradictory things at once and it is rational belief, not schizophrenia which is to be attributed; see also Halsbury's Laws of Australia, Vol 7 Corporations at [120-3045]. 62 Here, Mr Graham was "closely and relevantly connected" with all decisions taken by NRC in relation to the AR terminal during the period from about six months after the execution of the EA to 21 February 2002 when the shares were purchased by the Toll/Patrick consortium. He was directly responsible for all dealings with respect to the AR terminal during that period. He made the decisions as to what steps should be taken and his recommendations to the Board were accepted by the Board members. There was evidence, in general terms, from a number of Board members, Mr Butcher, Mr Moore-Wilton, Mr Stanko and Mrs Yeoh, that they relied on Mr Graham. 63 Whether NRC's state of mind for the purpose of determining what, if any, assumptions were adopted, is confined to that of Mr Graham is not entirely clear. PN accepted in final address that Mr Graham's state of mind was "paramount". But it submitted that Mr Butcher's assumptions were also relevant because of his regular discussions with Mr Graham. Although PN called evidence from Mr Moore-Wilton, Mr Stanko and Mrs Yeoh, it did not submit that their states of mind were to be attributed to NRC. That is hardly surprising because their assumptions were different from Mr Graham's. However, the same comment applies to Mr Butcher. 64 Mr Graham did not assume that the State of Queensland or QR had any obligation in accordance with the EA to give NRC a long term lease. He believed that the State had a choice but that the minimum content of the State of Queensland's obligations under the EA was to provide access to NRC on terms that ensured NRC's commercial viability. 65 Mr Butcher expected that NRC would receive a long term lease. His understanding was based upon his knowledge of the EA but he did not appreciate that the State of Queensland had a discretion to provide access rather than ownership or a long lease. His belief was also founded upon a conversation held in December 1991 with Mr Hamill, who was then the Minister for Transport of the State of Queensland. 66 Mr Moore-Wilton, Mr Stanko and Mrs Yeoh expected that NRC would have long term control of the AR terminal. They recognised that there would need to be a written agreement reached to give effect to the right of control. 67 PN also called evidence from Mr Hanscomb, a senior executive of NRC, who had, in 1991, assisted Mr Moore-Wilton on the Committee of Officials (which was a Committee established to examine options for the funding of NRC) and assisted in drafting the EA. His expectation was that there would be a lease. I do not consider that his state of mind is to be attributed to NRC within the principle stated in Brambles. His evidence has some bearing on Mr Graham's expectations. The corporate state of mind of QR 68 Mr O'Rourke was the CEO of QR and its predecessor, Queensland Railways. He was closely and relevantly connected with all dealings and decisions in respect of the AR terminal. His state of mind can be treated as that of QR for the purpose of determining what assumptions QR held and he must be taken to have known what was in his mind as CEO of Queensland Railways. 69 The relevant period for determining on what assumptions QR acted and the conduct which is said to have induced NRC to act to its detriment is the period up to March 1997 or perhaps to the date of Mr O'Rourke's letter of 25 March 1998. The other relevant mind of QR in that period was Mr Hearsch. 3. The Factual Matrix Background to the establishment of NRC: The Task Force Report and the Heads of Government Agreement 70 Most of the background to the establishment of NRC is taken from the Report of the National Freight Initiative ("NFI") dated 20 July 1990 and the Report of the National Rail Freight Initiative Task Force dated 21 March 1991. 71 In 1989-90 Australia's interstate rail freight operations incurred an estimated combined loss of $377m. Losses of this magnitude were a recurring feature of the interstate rail freight business. Contributions to the losses varied between different operators. 72 By 1990, governments, industry and the community were no longer prepared to accept these losses and the impositions they placed on the Australian economy. 73 In October 1989, the NFI began to evaluate options for a viable interstate national railway freight business under single management. The NFI was formed by representatives of five government owned railways, the ACTU, BHP, three major freight forwarders and Mr EWA Butcher ("Mr Butcher") representing the Commonwealth Minister for Transport. 74 The objectives of the NFI were to formulate a proposal for the establishment of an efficient national rail freight enterprise providing profitable and competitive interstate services, and thereby to realise gains in economic efficiency. 75 The NFI recommended the establishment of a National Rail Freight Corporation ("NRFC") with Commonwealth and State equity participation. 76 The NFI Report contained the following useful diagram of the proposed national rail freight network, showing inter alia, the terminals and marshalling yards proposed to be under NRFC control:- 77 The NFI's proposal called for an incorporated company integrated across State borders operating at cost levels significantly below those under the then existing fragmented rail systems. 78 A table to the NFI Report listed the main assets owned by rail systems which were used to operate the interstate freight business. The following appeared under the heading "Terminals":- "Queensland Railways … Acacia Ridge (Part)" 79 The reference to "part" was apparently to the interstate intermodal terminal which is the portion of the AR terminal that is the subject of these proceedings. 80 The NFI considered that it was "especially important that the NRFC control all of the terminal facilities it needed to conduct its business". The NFI also stated that the NRFC should control its own operations within freight terminals, that is, shunting, transfers, material handling and documentation. 81 At a meeting of the Australian Transport Advisory Council on 7 September 1990, Commonwealth and State Transport Ministers agreed to establish an independent task force ("the Task Force") to be responsible for developing detailed proposals on a wide range of issues relevant to the establishment of a "fully commercial" NRFC which would operate interstate rail freight services. 82 The Task Force comprised the representatives of the governments of the Commonwealth, NSW, Victoria, Queensland, South Australia and Western Australia as well as representatives of the ACTU. Mr Butcher was the Commonwealth's representative and the chairman of the Task Force. 83 The Task Force issued a report on 21 March 1991. Prior to that date, on 31 October 1990, the Heads of Government of the Commonwealth the States and Territories, signed an historic agreement entitled "Heads of Government Agreement on the National Rail Freight Corporation" ("Heads of Government Agreement"). The signatories included RJL Hawke for the Commonwealth and Wayne Goss for the State of Queensland. 84 The Heads of Government Agreement provided that the Commonwealth, State and Territory Governments agreed to establish an NRFC for the purpose of conducting interstate rail freight operations with a view to it commencing business on 1 July 1991. 85 The various governments agreed under the Heads of Government Agreement that the proposed NRFC would:- · involve Commonwealth, State and Territory equity participation in a company incorporated under the Companies Code; · encompass all the railways' existing interstate freight business; and · have a corporate goal to earn a commercial rate of return on its assets without reliance on government guarantees. 86 The Heads of Government Agreement also provided that the governments agreed that their positions on equity participation and commitment of assets to NRFC would be subject to their consideration of proposals and recommendations to be made by the Task Force. 87 A number of broad conditions were recognised by the governments in the Heads of Government Agreement. They included that the NRFC should be established and operate on a strictly commercial basis with a financially viable corporate plan. 88 The conditions also included the following:- "the NRFC shall have access (by ownership or other appropriate arrangements) to assets, including track infrastructure, necessary to achieve commercial viability." 89 Nearly two weeks earlier, on 19 October 1990, Mr O'Rourke, who was then the Commissioner of Railways, wrote a memorandum to the Director-General of the Queensland Department of Transport expressing Queensland Rail's support for the establishment of NRFC. The memorandum pointed to consequential benefits for QR including elimination of losses on QR's interstate standard gauge rail operations to the border, the possibility of increased traffic on the North Coast line and the improved chance of obtaining Commonwealth funding for the standard gauge connections from Acacia Ridge to Fisherman Islands. 90 The Task Force Report stated that the fundamental question it was required to address was whether or not the NRFC could be commercially viable. It said that its analysis suggested that the NRFC was a marginal prospect commercially. Nevertheless, it said that the NRFC was a considerable improvement over separate interstate rail freight systems. It also said that analysis suggested that NRFC "can be commercially viable" after an establishment phase. 91 The Task Force considered that improvements in productivity and operational efficiency were crucial to NRFC's commercial viability. It said that these improvements required investment in infrastructure, communications and rolling stock as well as changes in work practices. 92 The Task Force proposed:- "… that the NRFC be incorporated on 1 July 1991 and take over all the major capital city interstate rail freight terminals, with effect from 1 October 1991 …" (emphasis added) 93 One of the reasons for this recommendation was that, as the Task Force observed, terminals are critical because they are the main point of contact with customers. 94 The Task Force considered that equity shares for NRFC during its establishment phase (which was thought to be 1992 to 1996) should be, Commonwealth 34%, NSW 29%, Victoria 19%, Western Australia 16% and Queensland 2%. 95 The Task Force also considered that there was a requirement during the establishment phase that NRFC receive financial assistance from its shareholders. This was because NRFC would be taking over five loss making businesses and would be handicapped by past and prospective losses. 96 Bankers' Trust Corporate Finance ("BT") was appointed by the Task Force to assess the commercial viability of NRFC. BT examined anticipated profits and losses over a 15 year period under a number of different assumptions. It is unnecessary to set out the four scenarios posited in BT's calculations. Queensland Cabinet considers benefits of establishing NRFC 97 In a cabinet memorandum apparently dated 15 June 1991, Mr Hamill, who was then the Queensland Minister for Transport, set out a number of issues flowing from the proposed establishment of the NRFC. He referred to the proposed execution of the EA which is detailed below, and said:- "… In terms of assets Queensland will be expected to transfer control of both the interstate portion of the Acacia Ridge freight terminal and the interstate rail corridor between Acacia Ridge and the New South Wales border." 98 Mr Hamill's memorandum also pointed to the benefits for the State of Queensland of being a party to the EA without being a shareholder in it. They included reduction of losses on interstate rail freight as a result of the NRFC attaining the "performance levels" contemplated by the Task Force Report. 99 Two options were proposed by Mr Hamill. The first was that Queensland take equity by transferring control of the required interstate assets to the NRFC. The second was that Queensland have no equity but still transfer control of the relevant assets to the NRFC. In exchange, Queensland would approach the Commonwealth to waive all present and future obligations associated with those assets. 100 On 1 July 1991, the Queensland Cabinet decided that it favoured the State having no equity participation in NRFC but:- "Cabinet considered that Queensland should transfer control of its relevant interstate rail assets to the NRC (to facilitate the establishment of the NRC)." The Establishment Agreement 101 By an agreement made on 30 July 1991 between the Commonwealth and the States of NSW, Victoria, Queensland and Western Australia, the parties agreed to incorporate a public company, having as a principal objective the carriage of interstate rail freight on a national network: see cl 4(1)(a). South Australia acceded to, and became a party to the EA later. 102 Under the EA, the Commonwealth, the State of NSW, the State of Victoria and the State of Western Australia agreed to become shareholders of the company. Those States were defined as "the States". The State of Queensland did not agree to become a shareholder but provision was made for it to become a shareholder in due course, if it elected to do so. The State of Queensland was defined as the "Other State" and was included within the description "the Other States". 103 The States and the Other States had different rights and obligations under the EA. These included the right to appoint directors and the obligation to subscribe funding. Each of the States had that right and that obligation. The Other States did not. 104 Nevertheless, each of the States and the Other States agreed under the EA to cause their respective rail authorities to transfer ownership, give leases or grant access in respect of assets owned or controlled by those rail authorities and used by them in connection with interstate rail freight. I will set out those provisions in some detail later. 105 The EA commenced by reciting that in order to achieve micro-economic reform in the Australian rail industry the Commonwealth, the State and Territory governments had agreed that a company should be established for the purpose of conducting rail freight operations on a commercial basis compatible with the principles set out in the Heads of Government Agreement: see Recital A. 106 Those principles were stated in Recital B which included the following:- "(a) that the Company will:- (i) operate on a strictly commercial basis, with a financially viable corporate plan, and be subject to the Trade Practices Act 1974 (Commonwealth) (ii) have access (by ownership or other appropriate arrangements) to the assets, including track infrastructure, necessary to achieve commercial viability; … (v) provide access on a commercial basis to the NRC network and to terminal facilities for private and public sector operators; …" 107 The Commonwealth, the States and the Other States agreed to take all practical steps to seek the enactment of legislation by their respective Parliaments to approve the EA and to provide for its implementation: see cl 3(1). 108 Clause 4(1), to which I referred above, contained the agreement between the Commonwealth, the States and the Other States for the establishment of the company. Clause 4(1)(b) provided for it to be incorporated under the name "National Rail Corporation Limited". 109 Clause 4(2) provided for the Commonwealth to subscribe for ordinary and convertible shares in NRC and for it to transfer specified numbers of those shares to each of the States. 110 Appointment of directors was dealt with in cl 4(4). During the Establishment Period, which was the five year period commencing on the date of commencement of operations of NRC, there were to be nine directors. Three were to be nominated by the Commonwealth, with one to be Chairperson of the Board. Two directors were to be nominated by each of the States of NSW, Victoria and one by the State of Western Australia. The remaining director, who was to be the Managing Director, was to be appointed by the Board. Mr Butcher was subsequently appointed to be the Chairman and Mr Graham to be Managing Director. 111 If any Other State became a shareholder during the Establishment Period, it had the right to nominate one director: see cl 4(6). 112 Clause 5(1) bound the Commonwealth and the States, to the extent they were able, to procure NRC to, inter alia, commence and conduct national interstate rail freight operations. Their obligations included procuring NRC to:- "take over progressively from the rail authorities of the Commonwealth and the States, in whole or in part, functions of the type listed in Schedule 2 and the management of the associated assets pursuant to the provisions of this Agreement and the agreements entered into pursuant to subclauses 5(3), 5(4) and 5(5)." 113 The functions listed in Schedule 2 included the operation of interstate rail freight terminals and freight terminal management. 114 Clause 5(2) excepted the Other States from the obligation to procure NRC to take over the operations and management of interstate rail freight terminals. The clause provided as follows:- "The Commonwealth, the States and the other States will, and will cause their respective rail authorities to assist the Company, when requested by the Company, to undertake the matters set out in subclause 5(1), except in the case of the other States, in relation to the matters set out in paragraph 5(1)(f)." 115 Clause 5(3) provided that, prior to and during the Transition Period, that is the first three year period from the commencement of operations of NRC, the Commonwealth and the States would cause their respective rail authorities to enter into contracts with NRC for the provision of interstate rail freight services to the NRC. The means by which the price of the services was to be determined was set out. 116 Clause 5(4) dealt with the transfer of functions from the Commonwealth and the States to NRC. It provided that the Commonwealth and the States would cause their respective rail authorities to permit NRC to assume performance of the functions related to interstate rail freight of the type listed in Schedule 2. 117 The obligations of the Commonwealth and the States to transfer ownership, give leases or grant access to assets of their rail authorities was contained in cl 5(5). It provided relevantly:- "The Commonwealth and the States shall, or shall cause their rail authorities to transfer ownership of, or for as long as the Company continues to conduct national interstate rail freight operations, give leases of, or grant access to the Company, in relation to any asset, owned or controlled by the Commonwealth or the State or their rail authorities, and used by their rail authorities in connection with interstate rail freight. The Company, in its Corporate Plan, shall identify that a particular asset or class of assets is required by it. The Commonwealth and the States shall have a discretion whether to transfer ownership, give a lease or grant access to the Company in relation to any asset required by it. Transfer of ownership, lease or grant of access shall be given within a reasonable time following the request by the Company to make the asset available. The objective is that all transfers of ownership, leases or grants of access shall be completed before the end of the Transition Period." 118 Clause 5(5) went on, in paragraphs (a) to (d) to set out detailed provisions for the implementation of the specified obligations. Clause 5(5)(b) provided that where the Commonwealth or a Sate did not agree to transfer ownership or enter into a long lease of an asset, the predominant use of which was for interstate rail freight, NRC would be granted access to the asset pursuant to a contract, the terms and conditions of which would be agreed between the NRC and the Commonwealth or the State. 119 The obligation of the Other States to transfer ownership, give leases or grant access to assets used by their rail authorities in interstate rail freight was contained in cl 5(6)(a). It provided:- "The other States shall, or shall cause their rail authorities to transfer ownership of, or for as long as the Company continues to conduct national interstate rail freight operations, give leases of, or grant access to the Company, in relation to any asset, owned or controlled by the other States or their rail authorities, and used by their rail authorities in connection with interstate rail freight. The Company, in its Corporate Plan, shall identify that a particular asset or class of assets is required by it. The other State in question shall have a discretion whether to transfer ownership, give a lease or grant access to the Company in relation to any asset required by it. Transfer of ownership, lease or grant of access shall be given within a reasonable time following the request by the Company to make the asset available. The objective is that all transfers of ownership, leases or grants of access shall be completed before the end of the Transition Period. The transfers of ownership, leases and the grants of access shall be on such commercial terms and conditions as are agreed between the Company and the other State in question." 120 Clause 5(6)(b) provided that until all the transfers of ownership, leases or grants of access under cl 5(6)(a) were completed, the Other States would, or would cause their rail authorities to, enter into contracts with NRC for the provision of interstate rail freight services. The means by which the price for those services was to be determined was set out. 121 Clause 6 dealt with funding. It also made provision for the Other States to become shareholders, with the consequent obligation to provide equity funding. The mechanism for an Other State to become a shareholder was easier depending upon whether it elected to do so during the Transition Period or the Establishment Period. 122 Clause 6(1) specified the initial equity funds which the Commonwealth and the States were bound to contribute. The amounts were $295.8 million for the Commonwealth, $75.6 million for NSW, $35.1 million for Victoria and $8 million for Western Australia. Provision was made for each of those polities to subscribe for convertible shares in NRC in amounts equal to the respective amounts of the initial funding obligations. 123 The Commonwealth and the States also agreed to contribute additional equity funding during the Establishment Period in accordance with their respective proportionate shares specified in cl 6(2). 124 Clause 6(3) to 6(7) made provision for the calculation of the number of ordinary and convertible shares to be issued to the Commonwealth and the States by reference to the value of assets transferred to NRC by way of ownership or long lease. 125 Clause 6(8) made provision for the admission of the Other States as shareholders during the Transition Period. An Other State which elected to become a shareholder during that period was required to contribute a minimum of $5 million in cash for shares and the Commonwealth and the States were bound to pass a resolution for the issue of the shares. The Other State was also then bound to contribute additional equity funding in such proportion as was agreed between the Commonwealth and the States. 126 If an Other State gave notice that it wished to become a shareholder during the last two years of the Establishment Period, the Commonwealth and the States were granted a discretion to pass a resolution for the issue of the shares on such terms and conditions as agreed between themselves and the Other State. 127 If an Other State gave notice after the Establishment Period, it was given the right to purchase shares on the same terms as were offered to third parties: cl 6(10). 128 Provision was made in cl 7 for alternative dispute resolution by conciliation or arbitration. Disputes were defined to include disputes or differences as to the charges and terms and conditions for access to assets pursuant to cl 5(5)(a),(b),(c) and (d) and cl 5(6)(a). 129 Clause 8 of the EA made provision for variation of its provisions by further agreement in writing. Special Premiers' Conference 130 On 30 July 1991, the Heads of Government of the Commonwealth, States and Territories held a conference on a number of matters following which they issued a communiqué setting out the agreed outcome of their discussions. 131 The communiqué referred to the signing, on the day of the conference, of the EA. It recorded that although the State of Queensland did not wish to become an equity participant in NRC, it fully supported the establishment of NRC. 132 The communiqué also recorded that the Queensland Government would contribute assets to NRC and that the Queensland Government was committed to:- "providing the Corporation [ie NRC]with every assistance to enable it to have control over the interstate rail freight network." The National Rail Corporation (Agreement) Act 1991 (Qld) 133 In accordance with its obligations under cl 3(1) of the EA, the State of Queensland enacted the National Rail Corporation (Agreement) Act 1991 (Qld)("NRC Act"). 134 In his Second Reading Speech on the introduction of the National Rail Corporation (Agreement) Bill on 26 November 1991, Mr Hamill said that the State of Queensland would not become a shareholder in NRC but that it assisted in its formation and would transfer "relevant interstate rail assets to the corporation on a long-term lease basis". 135 The NRC Act provides in s 5 that the EA is approved. Section 6 of the NRC Act provides that each party to the EA, and QR, may do anything authorised by the EA and must observe the provisions of the EA that are applicable to it. 136 Section 7 of the NRC Act stipulates that if any shares in NRC are issued to the State of Queensland under the EA, they are to be held by an eligible Minister for the State. 137 The NRC Act was assented to on 9 December 1991, ss 1 and 2 commenced on that date: see s 2, and the remaining provisions commenced on 21 December 1991. August 1991 - March 1993: Preparation for the transfer of functions from QR to NRC 138 One week after the execution of the EA, Mr Richard Price, the Corporate Development Manager of QR, sent a memorandum dated 6 August 1991 to QR's Executive Manager, Strategic Issues. The memorandum was headed "Transfer of Responsibility for Interstate Freight in Queensland to National Rail Corporation." 139 The memorandum attached, amongst other things, a detailed listing of tasks to be performed and issues to be addressed. It also attached a schedule of suggested responsibilities for facilitating the transfer of interstate rail freight operations in Queensland to NRC. 140 The memorandum stated that a copy of the signed Heads of Government Agreement and the Memorandum and Articles of Association for NRC had been received from the Department of Transport. It concluded with the following words:- "This is a major project for QR and the management of the process and the commitment of staff need to be addressed soon." 141 The document listing issues involved in the transfer of interstate rail freight in Queensland to NRC included the following statement:- "It is expected that NRC will want to takeover terminal operations as early as possible but it will be in its financial interests to defer this takeover of functions for 12 months." 142 The reason why the 12 month deferral was said to be in NRC's interests was explained later in the document. It was related to the provision in the EA for pricing of services under cl 5(6)(b) of the EA pending the transfer of ownership or leases or grant of access rights. 143 The issues document also stated that it was suggested to be in QR's interests to arrange the lease of the AR terminal and the border to the AR line as soon as possible so that NRC would be responsible for all costs. 144 One of the issues referred to in the issues document was the Park Road siding which was owned by QR and situated outside of the AR terminal site. The issues paper commented that "[a] short term lease is suggested here to encourage NRC to relocate to Acacia Ridge". 145 The memorandum of 6 August 1991 and its attachments were acknowledged by Mr O'Rourke to have been part of the serious planning work by QR officers concerning the transfer of interstate rail freight in Queensland to NRC. 146 On 15 August 1991, QR established a steering committee, chaired by Mr O'Rourke, to oversee the transfer of interstate freight operations to NRC. The members of the steering committee included Mr John Hearsch, the Group General Manager Freight and Mr Price. 147 The minutes of the first meeting of the Steering Committee, held on 15 August 1991, stated that the General Manager, Express Freight, Mr PJ Case would proceed to investigate and arrange for the transfer of interstate freight terminal functions to NRC and liaise with NRC about timing. It was noted in the minutes that Mr Case would shortly assume responsibility for operations at AR. 148 The minutes also record a decision that QR should aim to have the lease of interstate freight terminals and the track from the border tunnel to Acacia Ridge in place by the date of commencement of operations by NRC. This was to ensure that QR had no responsibility for costs or functions after that date. 149 The Steering Committee established a working group to address all issues affecting freight. Mr Case was appointed as Chair of the working group. He sent a memorandum dated 19 August 1991 to other members of the working group proposing a meeting on 2 September 1991. The other members of the working group included Mr Price and Mr Eades, the General Manager, Property. 150 An attachment to the memorandum of 19 August 1991 recorded a statement that it was doubtful whether NRC would be in a position to assume responsibility for standard gauge operations in Queensland on 1 February 1992. How long QR would continue to carry out those functions under contract to NRC was not then known. 151 The second meeting of the Steering Committee was held on 10 September 1991. Mr Case reported on the progress of the working group. He reported a number of decisions taken by the working group in relation to "lease arrangements". The decisions included that the lease was to relate to the AR terminal and the corridor between AR and the border. Also, a lease valuation was to be carried out to facilitate negotiations with NRC. 152 On 11 September 1991, Mr Tony Drake, Group General Manager, Corporate Services, who was a member of the Steering Committee, sent a memorandum to Mr Eades. Copies of the memorandum were sent to Mr Hearsch and Mr Case. The memorandum stated that a number of decisions had been taken at a recent Steering Committee meeting. These included:- · the lease was to cover the AR terminal, with the exact boundaries to be determined by Mr Case, and south to the border encompassing "the normal rail right of way", but excluding adjoining lands; · the agreement should provide that Queensland Rail could also construct rail facilities within the same corridor; · the lease rental should be for an initial three years with subsequent reappraisal; and · the initial lease rental should cover costs and outgoings with no return on asset values. 153 Mr Eades was also requested in the memorandum of 11 September 1991 to come up with a notional value of AR and the right of way to the border in case that was needed for negotiations with NRC. 154 NRC was incorporated on 19 September 1991. NRC's Articles of Association provided that during the Establishment Period there was no right to transfer shares. After the Establishment Period there were pre-emptive rights in favour of existing shareholders on the transfer of shares to third parties. 155 There were further meetings of the working group in 1991 and 1992 to discuss progress of the various issues to be dealt with in connection with the transfer of responsibility of interstate freight to NRC. 156 On 7 November 1991, Mr O'Rourke wrote to Mr Butcher recommending a number of items of capital expenditure or "deferred maintenance" for NRC. He commented that previously QR had provided insufficient resources for these "essential investments" and that this was "a clear example of why we had to have an NRC!". 157 On 13 December 1991, there was a meeting of QR's Steering Committee. Mr Case put forward at the meeting a draft position paper on the transfer of interstate freight to NRC. The position paper was marked "draft for discussion". 158 Mr Case's draft position paper referred, under the heading of "Contractual/Legal Requirements" to the complexities of rail reserves for which QR did not have clear legal title. Difficulties were envisaged in providing NRC with quiet possession of those areas. Developing survey plans was thought to be impracticable at that stage. 159 The draft position paper proposed that a Heads of Agreement form the basis of the NRC business in Queensland. "Running licences" were to be developed for NRC's operational requirements. Mr Case said that these would guarantee NRC access to the various business areas. Running licences were proposed for areas including the following:- " - Border tunnel to Acacia Ridge - Acacia Ridge (defined area)" 160 NRC produced its first corporate plan on 1 April 1992. The corporate plan identified terminal management at AR as a function or asset to be transferred to NRC during the first year of the Transition Period under the EA. 161 On 23 April 1992, Mr Graham wrote to Mr O'Rourke informing him that NRC's first corporate plan was expected to be sent to shareholders early in the following month. Mr Graham noted that included in the corporate plan, as required by the EA, was a nomination of functions and assets to be transferred to NRC and a proposed timetable for those transfers. 162 Mr Graham also stated that there would be a substantial amount of clarification and negotiation to be undertaken between NRC and QR. He asked Mr O'Rourke to give consideration to nomination of a negotiating team. He said that some of the issues may require discussion with the Queensland government and that he had no objection to a government representative being involved. 163 On 1 July 1992, Mr RG Hartley, the Acting Director-General of the Queensland Department of Transport, wrote to Mr Graham about the division of responsibilities between the Queensland Government and QR. Mr Hartley stated that, as discussions and negotiations develop between NRC and the Queensland Government and its agencies, it was appropriate to provide Mr Graham with "formal advice" on the relevant contact officer for "NRC matters". 164 Mr Hartley indicated that the Policy & Planning Unit of the Department of Transport would handle all "policy issues" such as the State of Queensland becoming a shareholder in NRC and the overall progress of the standard gauge rail link to the Port of Brisbane. The name of a contact officer, Mr J Noye, was supplied. 165 Mr Hartley also stated in the letter that QR would handle all "operational rail issues" and the detailed negotiations on those matters. He said he did not expect there to be operational issues which could not be resolved between NRC and QR but, if a difficulty arose, NRC was to contact Mr Noye who would arrange for the issue to be raised with the Director General and the Minister for Transport. 166 Mr Hartley's letter concluded by stating that the State of Queensland was looking forward to becoming a shareholder in NRC. 167 On 10 July 1992, Mr Graham wrote to Mr O'Rourke informing him that NRC's first corporate plan was approved by its shareholders on that day. The letter invited Mr O'Rourke to attend a meeting in Sydney on 20 July 1992 at which NRC would make a presentation on two matters; firstly, service contracts for the supply of rail services to NRC during the transition period, and secondly, the transfer of functions and selected assets from "the authorities" to NRC. 168 Mr Case attended the presentation made by NRC on 20 July 1992. He reported on it to Mr Hearsch in a memorandum of the same date. The memorandum stated that Mr Affleck of NRC put forward a proposal to progress negotiations with QR on the two matters referred to above. 169 Mr Case's memorandum referred to NRC's proposed timetable which included the formation of three joint working parties to progress transfer of functions, identification of assets and service agreements. He said that NRC would prefer to have a common Heads of Agreement for the service contracts. He also said that the transfer of functions and assets must be completed by the end of the Transition Period. 170 On 28 July 1992, Mr Butcher sent a letter to Mr Hamill referring to a recent indication by Mr Hamill that Queensland was considering taking up equity in NRC. Mr Butcher noted that once funding became available, NRC was willing to recommend to the Commonwealth Minister for Land and Transport that he approve $30 million go towards the construction of standard gauge access at Fisherman Islands, subject to QR and NRC agreeing to the provision by QR to NRC of rail access from the AR terminal to Fisherman Islands for 25 years in particular terms. 171 During July 1992, BHP Engineering Pty Limited was awarded a consultancy brief to prepare a Master Plan for NRC's intermodal container terminals around Australia. A Master Plan strategy for AR was produced in November 1992. It included a proposal for the construction of Track A, to be 1,200 metres long, with construction to be completed by the end of June 1993. 172 On 20 January 1993, Mr Hamill wrote to Mr Butcher. Mr Hamill made reference to a draft Rail Freight Service Agreement which had been submitted by NRC to QR. He went on to refer to the potential for Queensland to become a shareholder in NRC. He said that this was dependent upon NRC contributing $10 million to the establishment of a standard gauge link to Fisherman Islands. Mr Hamill sought clarification of NRC's intentions regarding the contribution. 173 On 2 February 1993, Mr Graham wrote to Mr O'Rourke. The letter commenced by thanking QR for the cooperative manner in which negotiations for the Rail Freight Services Agreement had been conducted. The letter included the following:- "The main purpose of this letter is to make you aware of the next step we wish to take to put in place the transfer of terminal operating functions, which has been mentioned in earlier correspondence. As discussed with your officers, it will be necessary for National Rail and Queensland Rail to negotiate a formal agreement to provide a framework within which we can operate the intermodal freight terminal at Acacia Ridge. Fred Affleck and Simon Hanscomb will be contacting Peter Case in the next few days to commence this process." 174 The letter of 2 February 1993 also noted that the scheduled date for transfer of AR to NRC Management Control was 5 April 1993. Mr Graham said that in order to achieve this, it would be necessary to complete negotiation of a terminal operating agreement. 175 As part of the planned handover, a meeting took place on 25 February 1993 between NRC and QR executives, as well as officers of the State Rail Authority of Queensland. The NRC executives included Mr Fullerton and Mr Hanscomb. The QR executives included Mr Case and Mr Eades. 176 The written notes of the meeting record that the boundaries of the AR terminal and the handover point for NRC trains were still to be determined. 177 On 4 March 1993, Mr Hamill met with Mr Butcher, Mr Graham, Mr O'Rourke, Mr Hartley and two other persons from Mr Hamill's office. There was a discussion about the issue of NRC's proposed $10 million contribution to the construction of the standard gauge rail link to Fisherman Islands. 178 A confidential written note of the meeting recorded that Mr Butcher and Mr Graham made it clear that NRC was prepared to honour its "original intent" to make the $10 million contribution but that this was dependent upon Queensland Rail taking up shares in NRC, and:- "the 'packaging' of that $10 million may need to be reviewed, in order that the NRC executives be seen to honour its fiduciary responsibilities under the Companies Act." 179 On 12 March 1993, NRC's Corporate Services Manager, Mr Simon Hanscomb, wrote to Mr Case. He referred to Mr Graham's letter of 2 February 1993 concerning the transfer to NRC of interstate rail freight functions under the EA and, in particular, the transfer of terminal operating functions to NRC. 180 Mr Hanscomb stated that meetings had been held between the "operations people" of NRC and QR to determine and, where possible, to progress various issues including the terminal area to be controlled by NRC. 181 The letter of 12 March 1993 is important and I will set out the relevant parts of it in full as follows:- "The Company proposes to give legal effect to the terminal take up by: i. a letter setting out the specific functions the Company will assume from 5 April 1993. ii. two commercial leases, one covering plant and equipment and the other land and buildings under which the Company would pay a fair market rent for land and buildings and an annual percentage of the value of plant and equipment. … The leases are to be framed so as to make it explicit that they do not represent a lease for the purposes of asset transfer, lease or access within the meaning of clause 5(5) or clause 5(6) of the Shareholders' Agreement. This approach has been specifically adopted to enable the broader issue of asset transfer etc to be determined at a later date after full and proper consideration by both parties. The separate leases for land and buildings, and plant and equipment are to enable the final resolution of asset transfer issues to occur independently for each class of asset. Please find attached a discussion draft of both lease agreements. … To assist National Rail in progressing the documentation it would be appreciated if you could: · review the attached list of title references and advise whether it is complete or not with regard to your intermodal terminal · advise particulars of any encumbrances affecting the property, in particular could you please supply a list of tenancies including leases or licences. … As the deadline set for terminal takeover is rapidly approaching I would appreciate it if you could give these matters your early attention." (emphasis added) 182 On 22 March 1993, Mr Hanscomb forwarded to Mr Case and two other QR executives a further draft of the leases for the AR terminal and for plant and equipment. 183 The draft agreement for lease contained a recital that the parties had agreed that the function of operating the interstate rail freight terminal at AR would be transferred to NRC from the commencement of the agreement. It also contained a recital that the parties had agreed that for the purpose of undertaking its functions, NRC would be entitled to occupy the terminal and to use the assets and infrastructure associated with it on the terms set out in the agreement but on the basis that the leases were not to be taken as an exercise of or extinguishment of any right under cl 5(6) of the EA. 184 Clause 7 of the draft terminal lease provided that the lease would continue until the first to occur of:- · the expiration of a period of three years from the date of commencement; and · the date on which NRC acquires ownership or is granted a lease or access rights to the AR terminal in accordance with cl 5(6) of the EA. 2 April 1993: Railway Freight Services Agreement 185 On 2 April 1993 NRC and QR entered into the Railway Freight Services Agreement ("1993 Freight Services Agreement") under which QR agreed to provide rail services to NRC. Although the 1993 Freight Services Agreement purports to have been made pursuant to cl 5(3) of the EA, this would seem to be a mistaken reference to cl 5(6)(b). Thus, the purpose of the 1993 Freight Services Agreement was for QR to provide interstate freight services pending the transfer of assets or other grant of rights contemplated by cl 5(6)(a) of the EA. 186 Clause 2 of the 1993 Freight Services Agreement stated that in accordance with the EA, NRC would progressively assume responsibility for interstate rail freight consigned by QR's customers and progressively establish and expand NRC's own business. Clause 2 also stated that NRC's progressive assumption of responsibilities would be effected in accordance with a timetable to be developed co-operatively between NRC and QR. 187 The 1993 Freight Services Agreement applied to any interstate terminal in the State of Queensland, the management or operation of which had not been transferred to NRC in accordance with the EA. It therefore applied to AR. 188 Clause 6 of the 1993 Freight Services Agreement stated that QR would provide NRC with a specified range of terminal services to ensure that freight was properly handled and shipped. 4 April 1993: The Heads of Agreement and the Functions Letter 189 On 4 April 1993, NRC and QR entered into Heads of Agreement for the assumption by NRC of management and operational control of the AR terminal ("4 April 1993 Heads"). The 4 April 1993 Heads were in the form of a letter from NRC signed by Mr Graham on behalf of NRC and by Mr Eades on behalf of QR. 190 The letter commenced with the words "(t)o facilitate the assumption of functions referred to in my letter of the same date …". This was a reference to the "functions letter" to which I will refer below. 191 The 4 April 1993 Heads provided for NRC to enter into possession of the AR terminal as identified in an attached plan ("1993 lease area") pending execution of a lease over the 1993 lease area ("1993 real estate lease") and a lease of plant and equipment at the terminal ("1993 plant lease"). 192 The effect of the 4 April 1993 Heads was that QR agreed to enter into the 1993 real estate lease and the 1993 plant lease substantially in the form of annexures to a negotiation draft of those respective leases dated 4 April 1993 ("negotiation draft"). It was a term of the 4 April 1993 Heads that NRC and QR would enter into the formal leases within a period of 90 days. 193 The 4 April 1993 Heads provided that NRC's use of occupation of the 1993 lease area was to be at a fair market rent. It acknowledged that the final area to be leased was subject to survey. The plan which comprised the 1993 lease area, as contained in the 4 April 1993 Heads, was as follows:- 194 It is difficult to decipher the principle features of the local area from the plan, but I will describe them briefly: · The area of the land to be leased to NRC comprises approximately 202,000 square metres; · The area included various lengths of railway track, referred to in the industry as "roads". These included Interstate Mainline track ("Mainline track") and the marshalling yards, which include six "roads" know as New Crane Roads 1 to 6 ("NC1" to "NC6"). The marshalling yards were used for shunting and reconfiguring trains; · There is a rail mounted gantry which straddles NC1 to NC3 and enables loading and unloading of trains on those roads; · Entry to the leased area is via Kerry Road and a private road at the end of it. A building known as the Administration Building was located near the junction of the terminal entrance and the Mainline track; · Another track known as Track A was constructed by NRC during the term of its lease. That track ran parallel to the Mainline track and was close to it. · There were a number of roads going off the leased area to private sidings located to the east of the leased area (sidings are a term used in the industry to describe a short section of railroad track connected by switches with a main track); · Further to the east was a separate narrow gauge terminal owned by QR and known as the Q-link terminal. The northern end of the Mainline track is generally called the Northern Shunting neck. The southern area is at the Beaudesert Road end. · The concrete areas, adjoining in particular Track A and the Mainline track, are known as hardstand areas. · I will attach, as Attachment A, a plan prepared by QR for the purposes of these proceedings and admitted into evidence without objection. It provides a useful depiction of these principle features of the area which I have described above. 195 The parties agreed in the 4 April 1993 Heads that pending the execution of the first form of the 1993 real estate lease and the 1993 plant lease, the provisions of the annexures to the negotiation draft would apply. 196 The negotiation draft recited that the EA provided for the Commonwealth and the States (including the State of Queensland) to cause their respective rail authorities to transfer ownership of, or give leases or grant access to NRC to assets owned or controlled by them or their rail authorities and used in connection with interstate rail freight in accordance with the principles set out in cl 5(6) of the EA. 197 The negotiation draft also recited that:- "The parties have further agreed that, for the purpose of undertaking its functions, NRC will be entitled to occupy the Terminal and to use the assets and infrastructure associated therewith on the terms set out in this Agreement, but on the basis that this Agreement and any lease entered in accordance with it are not to be taken as an exercise or extinguishment of any right under clause 5(6) of the Shareholders Agreement." (emphasis added) 198 Clause 4.3 of the negotiation draft specifically provided that nothing in the Agreement for lease or the annexed form of leases constituted an exercise of the rights or fulfilment of the obligations under cl 5(6) of the EA and all such rights and obligations were expressly preserved. 199 The negotiation draft defined the "terminal" to mean the land identified in the attached plan. This appears to be the plan of the 1993 lease area shown at [193]. 200 Provision was made in the negotiation draft for determination of the fair market rental value by agreement between the parties or, failing agreement, by the appointment of a valuer. 201 Annexure A to the negotiation draft was the draft 1993 real estate lease. It did not contain a description of the land but the effect of the agreement between the parties was that the land was to be the 1993 lease area, which would be subject to final survey. 202 Clause 7.2 of Annexure A provided for the 1993 real estate lease to continue until the first to occur of:- "(a) the expiration of a period of 3 years from the date of commencement of this Lease; and (b) the date on which the Company acquires ownership or is granted a lease or access rights to the property in accordance with clause 5(6) of the Shareholders Agreement." 203 NRC was to be permitted to hold over after the expiration of the term for a maximum of six months: see cl 7.3. 204 Upon the expiration of the term or the holding over period NRC was required to demolish or remove any structure on the land unless NRC acquired ownership or was given a lease or granted access: see cl 12.5. There was a similar provision in cl 14.2 for the removal of fittings, furniture, plant and equipment. 205 Clause 26.1 provided that:- "Nothing in this Lease affects the obligations of the Rail Authority [(QR)] under the Shareholders' Agreement or the Railway Freight Services Agreement." 206 Upon the expiration of the term referred to in cl 7.2, subject to a maximum holding over of six months, NRC was required to give possession to QR: see cl 27.1. 207 It is unnecessary to refer to the terms of the draft 1993 plant lease in Annexure B to the negotiation draft. 208 Contemporaneously with the execution of the 4 April 1993 Heads, Mr Graham wrote a letter to Mr O'Rourke setting out the functions which NRC would assume on the following day ("functions letter"). The functions letter stated that its purpose was to formally notify QR that NRC would, in accordance with the EA, assume responsibility for the management and operation of the AR terminal on 5 April 1993. 209 The various functions for which NRC was to assume responsibility were specified in schedules to the functions letter. They included operation of all lifting equipment, site security arrangements, maintenance and all "administrative and customer interface functions". 210 NRC commenced interstate freight operations in Queensland on 5 April 1993. Mr Eades reported this fact in a memorandum to Mr O'Rourke, Mr Hearsch and Mr Case. Copies were sent to Mr Drake and to the Manager of Legal Services. 211 Mr Eades reported that he had signed the necessary documents to allow NRC to assume operations and that he had done so with the consent of Mr O'Rourke. Mr Eades stated that the documents which were applicable to QR's relationship with NRC were:- · the EA, under which QR (rather than the State of Queensland) was said to be "an Other state"; · the State NRC legislation, which was apparently a reference to the NRC Act; · "a service agreement signed on 2 April 1993", which was a reference to the 1993 Freight Services Agreement; and · the 4 April 1993 Heads. 212 Mr Eades pointed out in the memorandum that the 4 April 1993 Heads referred to "subsequent documents" which would come into effect after an initial 90 day licence. These documents were the 1993 real estate lease and the 1993 plant lease, in the form of the drafts attached to the negotiation draft. 213 Mr Eades noted that during the 90 day period detailed work would need to be done to determine whether:- "the current licensed area including the building, car park, shunting, necks, Kerry Road extension and corridor to Beaudesert Road are operationally suitable and their construction proposals are to allow an acceptable lease to NRC in the long term." (emphasis added) 214 On 15 April 1993, Mr O'Rourke sent a memorandum to Mr Hamill reporting that NRC had commenced operations at the AR terminal on 5 April 1993. He stated that documentation to allow "the transfer" was in place and that it consisted of an initial 90 day license for the area edged black on an attached plan. This was apparently a reference to the 1993 lease area as shown at [193] above. 215 The memorandum included the following statement:- "At the end of the 90 day period it is anticipated that Queensland Rail and NRC will enter into formal leases for a three year period for both property and plant and equipment. These leases anticipate that NRC may choose to purchase assets or Queensland may become a shareholder in NRC during this period." 216 The "suite" of documents that controlled QR's relationship with NRC was described in the memorandum. The contact officer within QR was stated in the memorandum to be Mr Eades. 217 In an internal NRC memorandum from Mr Hanscomb to Mr Tony Usher dated 23 April 1993, Mr Hanscomb set out a check list of matters to be followed up as a result of the execution of the 4 April 1993 Heads. 218 Mr Hanscomb stated in the memorandum that the 90 day licence period was struck to enable amongst other things, the resolution of issues relating to the shunt neck, the Administration Building and the car park. As to these issues, Mr Hanscomb said that they:- "… are as yet unresolved. It needs to be determined whether we take a lease or licence over these areas and in case of the car park and administration building, over how much. …" May 1993 - November 1993: State of Queensland defers decision to become a Shareholder of NRC 219 On 26 May 1993, Mr O'Rourke signed a submission to the Board of QR seeking approval of a management recommendation that the State of Queensland not become a shareholder of NRC. The recommendation was based upon a cash flow analysis which indicated a potential loss of revenue of approximately $150 million over 20 years if the State of Queensland were to become a shareholder. This was, plainly, a reference to the potential loss of rental income from a 20 year lease. 220 At Mr O'Rourke's request, Mr Price reviewed the quantum of the prospective loss of revenue with a view to a more conservative forecast. The revised figures were provided to Mr O'Rourke and to Mr Hearsch. 221 On 10 August 1993, the Chairman of QR, Mr NH Blunt, wrote to Mr Hamill setting out QR's consideration of the financial impact of the State of Queensland taking shares in NRC. The letter referred to the benefit of NRC's promised $10 million commitment to the Fisherman Islands project but also to the disadvantages of foregone leasing revenue and prospective calls for funds on shareholders, which "appeared likely given that current annual interstate freight losses were in the order of $320 million". 222 The letter included the following assessment:- "Shareholder status would therefore conservatively impose on Queensland, a financial impost of approximately $27m over the next 3 years (discounted over time) and approximately $95m over the next 20 yrs." (emphasis added) 223 The emphasised portion of Mr Blunt's letter was a reference to QR's more conservative assessment of the financial impact of the loss of revenue from a 20 year lease of the AR terminal. 224 The letter concluded with the statement that in view of the analysis of the financial disadvantage, the Board of QR was of the opinion that "from a Queensland Rail perspective the state should not become an equity partner in the NRC". 225 At about the same time, the Board of NRC was also considering the benefits and burdens of securing the State of Queensland as a shareholder. In Mr Graham's Board Paper of 19 August 1993, he referred to the Queensland Government's understanding that NRC would contribute $10 million to Fisherman Islands. He also referred to the benefit of being able to obtain a transfer to NRC of the AR terminal and equipment in return for the issue of shares rather than by way of cash payments. The current value of the AR leases was said to be $600,000 per annum. 226 On 27 August 1993, the Board of NRC authorised Mr Butcher and Mr Graham to negotiate a "package" with the State of Queensland providing for a $10 million contribution to Fisherman Islands and Queensland agreeing to become a shareholder of NRC and provide title to the interstate operations component of the AR terminal. 227 On 13 September 1993, Mr Butcher wrote to Mr Hamill referring to an earlier exchange of letters and a meeting in March 1993 about the Fisherman Islands Project. The letter stated that the Board of NRC recognised the benefits of having NRC as a shareholder. Reference was made to Mr Hamill's letter of 20 January 1993 in which he stated that the Queensland Government's decision to become a shareholder was dependent upon NRC contributing $10 million to the Fisherman Islands Standard Gauge Link Project. 228 Mr Butcher continued by stating that the Board of NRC had authorised Mr Graham and Mr Butcher to negotiate with Mr Hamill to develop a package of arrangements that would provide for a $10 million contribution by NRC to Fisherman Islands in return for equity participation by the State of Queensland in NRC. 229 Mr Butcher then said:- "The package developed would incorporate additional equity consideration for Queensland for the transfer by title or long term lease of the Acacia Ridge interstate terminal. As you are aware we have developed a substantial program of investment to upgrade this terminal to complement the large investment being made on rail infrastructure in the Sydney-Brisbane corridor." (emphasis added) 230 On 12 October 1993, Mr Hamill wrote to Mr Butcher with reference to a meeting which had taken place between them the previous month to discuss issues relating to the question of the State of Queensland taking shares in NRC. Mr Hamill referred to NRC's goodwill and commitment to achieving significant economic reforms in interstate freight operations and resultant benefits for the national economy. 231 Mr Hamill referred in the letter to NRC's commitment to provide $10 million to Fisherman Islands, which was to be made by mid 1994, and to meetings which were to take place between, inter alia, Queensland Department of Transport representatives and NRC representatives, to consider the impact on the State of Queensland of taking equity in NRC. Mr Hamill said he expected to be in a position to advise Mr Butcher of the State of Queensland's position in the next month. 232 On 22 November 1993, Mr Hamill wrote to Mr Butcher advising that the State of Queensland had decided that it would not make a final decision on taking equity in NRC until just prior to February 1996, which was the "deadline" under the EA for taking equity on the terms and conditions which were then current. 233 Mr Hamill stated in the letter that even though the State of Queensland had decided not to take equity at that stage, he reaffirmed the Queensland Government's support for rail reform and for NRC. He said that Mr Butcher could be assured that Queensland, as an "Other State" under the EA would continue to fulfil its obligations and endeavour to assist NRC to achieve its objectives whenever possible. Mr Hamill referred again to the link between NRC's $10 million contribution to Fisherman Islands and the decision of the State of Queensland to become a shareholder in NRC. September 1993 - November 1993: NRC remains in occupation under the 4 April 1993 Heads and commencement of expenditure on AR terminal 234 On 31 August 1993, approximately 2 months after the expiration of the 90 day period contemplated for the execution of the formal lease documents, Mr Jenner, QR's Manager Property Management, wrote to Mr Hanscomb about the delay. Mr Jenner asked Mr Hanscomb to confirm that NRC's continuing occupation was under the terms of the 4 April 1993 Heads. Mr Jenner stated that the delay in finalising the lease was not acceptable to QR. 235 On 10 September 1993, Mr Hanscomb confirmed to Mr Jenner that NRC's occupation of the AR terminal was upon the terms and conditions set out in the 4 April 1993 Heads. 236 Three days earlier, on 7 September 1993, Mr O'Rourke wrote to Mr Graham confirming approval for NRC to undertake "the Stage 1 Development Proposal" as embodied in a Concept Design Report issued in May 1993, which was the construction of Track A. The letter stated that approval was given in accordance with the provisions of the 4 April 1993 Heads and the draft agreement for real estate lease. 237 Mr O'Rourke followed up on his letter of 7 September 1993 in a further letter to Mr Graham dated 23 September 1993. Mr O'Rourke raised with Mr Graham his concern that development not proceed until such time as NRC had the protection of a formal lease, which Mr O'Rourke thought to be imminent. 238 Mr Graham replied to Mr O'Rourke on 4 November 1993. He said that equity funds had been released to enable the works to commence almost immediately, with construction to begin on 8 November 1993. He also said that whilst the lease was not yet signed, there was "agreement in most areas with only the issue of the valuations, now remaining". 239 On 6 November 1993, Mr O'Rourke sent a copy of Mr Graham's letter of 4 November 1993 to Mr Eades and requested his advice. 30 June 1994: NRC defers request for transfer or lease of AR terminal 240 In a Board Paper dated 30 June 1994, Mr Graham sought Board approval to continue the process of acquiring terminal land and ancillary equipment in Alice Springs, Adelaide, Melbourne and Sydney. The Board Paper requested endorsement of the strategy of not seeking the transfer of the AR terminal and ancillary equipment until the Queensland Government decided to take equity in NRC or 6 months before the end of the current lease. 241 The strategy of deferring a request for transfer of the AR terminal and equipment was approved by the Board of NRC at a meeting on 8 July 1994. July - November 1994: the emerging significance of the Hilmer Report 242 In a Board Paper dated 27 July 1994, Mr Graham set out the background to the issue of the Report of the Independent Committee of Enquiry into Australia's National Competition Policy ("the Hilmer Report") and its implications for NRC. Mr Graham said that the Hilmer Report had been handed down in August 1993 and that it would be considered by the Council of Australian Governments ("COAG") on 19 August 1994. Mr Graham stated that the principles for future competition policy recommended in the Hilmer Report included opening up third party access to facilities that are essential for effective competition, eg third party access to rail networks. 243 The Board Paper commented that, for NRC, the most important recommendations in the Hilmer Report were those aimed at fostering competition within areas of Government business organisations, in particular, that Governments should open up, inter alia, rail networks to competition. Mr Graham stated that opening access to the rail network presented threats and opportunities for NRC. He said that the threat of competition had begun to emerge in proposals for new interstate rail services. 244 During late 1994, QR was also giving consideration to the impact of the reforms proposed in the Hilmer Report. In a discussion paper entitled "National Competition Policy, Impact on Australia's Railway Industry", QR commented on the impact of the reforms. The discussion paper stated that the Hilmer Report would have "a profound impact" on economic reform. It said that the impact of the National Competition Reform Bill would be felt across the breadth of Australian industry, not least on the railway industry. August 1994 - November 1994: the Proposed Long Term Track Access Agreement 245 In July 1994, NRC and QR entered into a 90 day interim train Crewing Agreement, effective from 26 July 1994, with a view to entering into a long term Track Access Agreement. 246 On 19 August 1994, Mr Graham wrote to Mr O'Rourke stating that he viewed the proposed Track Access Agreement as the principal agreement covering the long term relationship of NRC and QR. He attached a draft 30 year Track Access Agreement for discussion purposes. 247 The draft Track Access Agreement provided for access rights for train movements of NRC trains as specified in a schedule. Provision was made for additional access rights if the demand for NRC's services increased such that, in NRC's reasonable opinion, it required the scheduling of additional NRC train movements. 248 On 14 September 1994, Mr Hearsch wrote a memorandum to Mr O'Rourke entitled "NRC Long Term Track Access Agreement". Mr Hearsch recommended that in light of the Hilmer Report and the emerging interest of potential third party operators for standard gauge access and QR's own commercial interests in at least part of the rail corridor, an access agreement should be negotiated with NRC. Mr Hearsch recommended that such an agreement should have an initial life of three years with an option for five year extensions. 249 Mr Hearsch commented also on the advantages and disadvantages of the grant of a long term lease over the AR terminal to NRC. He said that any third party operators would need to negotiate with NRC for access and that NRC may seek to discourage interested parties through pricing policies. 250 In a Board Paper dated 26 October 1994, Mr Graham and Mr Hanscomb reported to the Board of NRC on the status of their negotiations with QR. The Board Paper stated that on 11 October 1994, Mr Graham and Mr Hanscomb met with QR's Managing Director and senior executives, namely Mr O'Rourke, Mr Hearsch, and Mr Ken Haase, to discuss a range of issues. 251 The Board Paper records that QR stated:- "its clear intention to remain the owner of the track and infrastructure and as such is only prepared to grant National Rail access rights rather than a long term lease or ownership." 252 The Board Paper also records that QR expressed a strong preference for a term of only three years for a track access agreement in order to preserve QR's flexibility with regard to a number of factors; these included potential third party users and other implications following from the adoption of the recommendations made in the Hilmer Report. 253 NRC's response, as recorded in the Board Paper, was to explain its need for a long term commitment in the order of 20 years. NRC said it required security of tenure to:- " - amortise existing investments such as the $10.3 million upgrade of Acacia Ridge and potential investments such as the proposed $1.5 million sound barrier at the terminal; - support Customer Service Agreements of medium to long term duration; and - support business planning and investment decisions in general." 254 The reference to the $10.3 million upgrade of the AR terminal was to the cost of construction of the track known as Track A. The effect of the evidence was that all of the expenditure occurred between August 1993 and the end of 1995. 255 The minutes of the NRC Board meeting on 4 November 1994 record that it had tabled and noted the Board Paper of 26 October 1994 which set out the current status of negotiations with QR in respect of track access. 256 On 24 November 1994, Mr Hanscomb wrote to Mr O'Rourke seeking his formal commitment to a Services Agreement Stage 2 as outlined at a Railways of Australia Commissioner's meeting held during the previous week. Mr Hanscomb stated that the elements of NRC's proposal were that NRC and QR would identify the limited functions currently performed by QR that would continue to be performed post 1 July 1995 and that commercial terms would be negotiated for those services, including track access and infrastructure. 257 Mr Hanscomb stated in the letter that the initial term for the Track Access Agreement should be only one year duration in order to:- · enable NRC's shareholder governments to consider their response to NRC's decision on nomination of track and infrastructure · enable shareholders to consider their response to access issues in light of legislative or policy changes flowing from the Hilmer Report. 258 The Track Access Agreement was apparently signed on 28 June 1996. May 1995 – September 1995: Disputes over charges for track access and request for long term agreement 259 By letter dated 9 May 1995, Mr Graham wrote to Mr O'Rourke declining to approve payment of a number of invoices totalling almost $17 million for Stage 2 services, including track access charges. Mr Graham said that the charges did not reflect payment under any agreed contract or arrangement for the period in question. He complained that the charges were not commercial from NRC's point of view because they were substantially in excess of NRC's revenue. 260 Mr Graham's letter continued as follows:- "National Rail is currently involved in a major locomotive acquisition program requiring commercial debt to support the locomotive contract. On the basis of the provisional invoices you tabled National Rail has serious concerns with the level of track access charges as well as the security of long term access to Queensland Rail's standard gauge network." 261 He suggested that a meeting take place and said:- "I believe we should also take the opportunity at that meeting to discuss in principle a longer term replacement for the short term lease National Rail has over the Acacia Ridge intermodal terminal and the term of ten years plus ten National Rail has sought for the steel handling area." 262 Mr O'Rourke replied on 2 June 1995, stating that QR was seeking full cost recovery. He said that he and Mr Graham had "different interpretations of what we would both understand to be a commercial arrangement between us". He continued:- "Queensland Rail has been a strong supporter of National Rail from its inception … As a non shareholder we see ourselves in a different position to the shareholding states, and we would like to resolve the issue of Stage II outstandings and to develop a commercial track access arrangement to apply from 1 July 1995." 263 The foreshadowed meeting took place later in June 1995. In a memorandum dated 20 June 1995, Mr Hanscomb recorded that the meeting was attended by Mr Graham and Mr Hanscomb for NRC and Mr O'Rourke and Mr Ian Dobbs for QR. Mr Hanscomb said that they "continued to agree to disagree" about the charges for Stage 2 services. 264 Mr Hanscomb's memorandum continued as follows:- "Long Term Lease of Acacia Ridge The current lease will expire on 4 April 1996 and NR is to advise its intentions by 1 February 1996. We told Vince O that we will be looking for a long term lease (20 years plus) where we are effectively masters of our own domain ie we will want to be fully responsible for every thing in our boundaries, maintenance etc and not have to obtain QR approval for anything we do on the site. QR accepted the principle and said they will be out of most of the admin building shortly and plan to be out of the signals area in the next few years. Derek Harris and John McNamara to review the existing lease and recommend which sections we should seek to renegotiate as part of a long term arrangement. Acacia Ridge Steel Terminal QR remains adamant that it will only offer a ten year lease with a ten year option effectively at its discretion ie its QR's option not NR's." (emphasis added) 265 In a Board Paper dated 19 July 1995 from Mr Graham and NRC's Chief Financial Officer, Mr John Kitney, it was said that Rail Authority leases for terminal facilities were, for the most part, of three to five year duration except for Perth where a 21 year lease of the terminal had been obtained. 266 The Paper stated that it was an operating budget assumption that shareholder terminal leases would be terminated in October 1995 and "equity issued for the asset transferred". The Board Paper was tabled and considered at a meeting on 28 July 1995. 267 On 20 September 1995, Mr Affleck, Acting Managing Director, wrote to Mr O'Rourke stating that NRC appreciated an offer made by QR to withdraw its claim for charges for 1993 – 1994. He said that, however, NRC was unable to agree the remaining claim for 1994 - 1995. He recognised and shared QR's frustration:- "… However, as Vince has previously stated, commercial terms for National Rail means an amount that the Company can reasonably afford, based on the income-earning capacity of the line." 268 Mr Graham gave evidence that he saw the letter on return from leave. 269 In September 1995, Mr Hanscomb provided the NRC Executive with a paper on the progress of the transfer of assets and functions. He reported that the business was not capable of sustaining track access prices significantly above the efficient cost of track maintenance. He also said that negotiations with Queensland, NSW and Victoria were not far progressed but that those states would need to take a realistic approach to track access if east coast rail services were to continue to be viable. September 1995: NRC Board Meeting to consider impact of Hilmer Report 270 In a Board Paper dated 20 September 1995, Mr Graham stated that the directors of NRC had affirmed their desire to hold a one-day meeting to discuss opportunities and threats resulting from the Hilmer Report and the changing transport market. 271 The Board Paper included the following comments under the heading "Short Run Threats":- "It is difficult to envisage a private sector competitor being able to enter any of National Rail's existing markets in the short run given the considerable barriers to entry. These barriers include: - the absence of any defined uniform access arrangements applying to the interstate rail corridors and hence the need for multiple protracted negotiations in an uncertain environment; - the need to procure suitable terminal facilities, qualified and accreditated [sic] train crew and crew facilities at appropriate locations, a locomotive fleet, a wagon fleet, and maintenance facilities; - long term track access rights and supply agreements with customers to justify the substantial investment that would be required to obtain the above. Hence in the short run any direct competition is likely to be restricted to the existing rail authorities. Competition from the rail authorities, if any is likely to be sporadic and targeted at one off or selected opportunities such as Perth bound services. This is because National Rail already effectively controls the majority of suitable resources (ie rolling stock, terminals and crew) and the most desirable train paths (ie departure and arrival times). Nevertheless a number of existing National Rail customers and possibly others are understood to have approached the rail authorities and their government departments over the past 12 months or so seeking prices for various arrangements ranging from access only, through hook and pull services to dedicated trains." 272 Under the heading "Long Run Threats", the Board Paper commented that it was difficult to envisage a private sector market entrant competing with NRC on a large scale national basis in the longer term because of the substantial barriers to entry outlined above, and because the majority of the business was of marginal profitability. The major competitive threat was thought to be from road and possibly sea on the east-west corridor. 273 Reference was also made in the Board Paper to three possible track access scenarios that NRC might face. They were:- · track retained by existing owners or a state based owner such as Railnet in NSW; · track transferred to a national infrastructure authority; or · control of track and responsibility for maintenance transferred to NRC in accordance with EA. 274 Strategies for dealing with the first and second of these three scenarios were set out in the event that NRC had to face them. The East Coast Strategy 275 In a Board Paper dated 6 December 1995, Mr Graham and Mr Hanscomb recommended to the Board of NRC a capital investment strategy to secure the competitiveness and profitability of NRC's east coast services. The strategy comprised the purchase of additional locomotives and wagons to reduce operating costs as well as the expansion of terminals and the construction of passing loops. 276 Essential to the East Coast Strategy was the need for terminals to accommodate 1,500 metre trains which were seen as improving NRC's efficiency. 277 The principal features of the East Coast Strategy were:- · purchase of 40 additional locomotives at a cost of approx $117 million; · purchase of 190 wagons at a cost of $59 million; · construction of passing loops to accommodate 1,500 metre trains between Melbourne and Brisbane at a cost of approximately $15 million with an additional $5 million to be allowed for works potentially required by State Rail for the passage of long trains through the City Rail network; and · terminal expansion work to accommodate 1,500 metre trains requiring expenditure of $15 million at Melbourne, $56 million at Chullora or Enfield and $4 million at the AR terminal. 278 The proposed expenditure totalled in excess of $200 million and was described in the Board Paper as Scenario A. 279 The Board Paper stated that the construction of additional passing loops and additional terminal capacity would enable rationalisation of existing east coast services from 43 to 24 per week. 280 The investment life of the expenditure was set at 15 years being the life of the locomotives which comprised the single largest component in the package. 281 Of the 40 additional locomotives, 25 were attributable to the operations at the AR terminal upon the assumption that those locomotives would be used in train paths which had their origin or destination at AR. 282 The Board Paper included a sensitivity/risk analysis, which included identifying two major risks, not quantifiable, associated with Scenario A. They were:- "- inability or unwillingness of State Rail to agree either in the time frame or ever on the running of long trains through the CityRail network; - State Rail's and PTC's preparedness to let National Rail invest in passing loops on their track in the Sydney-Melbourne corridor. This risk may be ameliorated if the states agree to establish Track Australia. The Board should note that Scenario A does not include any tax deductions or access charge reductions associated with loop investments. The NPV of Scenario A would increase to the extent that such effects materialise." 283 In stating their conclusions, Mr Graham and Mr Hanscomb described Scenario A as conservative. They referred to other major risks including the competitive position of rail over the investment and track access charges. They continued:- "The analysis predicts that the do nothing base case would return an NPV of minus $142 million. If the Board rejects Scenario A it should also reject the base case as an alternative and abandon train operations in the East Coast as soon as practically possible and immediately review the scope and need for terminal operations and investments at the Brisbane, Sydney and Melbourne terminals necessary to support the Steelink and Westlink Service plans." (emphasis added) 284 Mr Graham and Mr Hanscomb concluded by recommending the investment in the East Coast Strategy. Their recommendations were adopted by the Board of NRC at a meeting on 15 December 1995. January 1996 – March 1997: negotiations for a new lease 285 On 9 January 1996, Mrs Jacqueline Fontaine (née Lowes), NRC's Manager, Commercial Agreements, sent a memorandum to Mr Neal Parkinson of Sly & Weigall, NRC's solicitors, attaching a draft letter giving notice of NRC's intention to seek a further lease of the AR terminal. 286 On 10 January 1996, Mrs Fontaine discussed the draft with Mr Parkinson. She made a handwritten note of what she said and of Mr Parkinson's advice. The note was as follows:- "Neal – notification under Shareholders Agreement (1) nominated an intention to terminate (2) do we want to rely only on just lease (no) (3) express choice (a) or (b)- SsA keep it open W/o prejudice under rights of SsA ? 2 stages" 287 Mrs Fontaine gave evidence that the word "no" in brackets after the question numbered (2) was Mr Parkinson's response to Mrs Fontaine's question. The acronym "SsA" was a reference to the EA. 288 The draft letter prepared by Mrs Fontaine was engrossed and sent by Mr Graham to Mr O'Rourke on 31 January 1996. The letter commenced by stating that NRC had a lease of the AR terminal which "conditionally" expired on 4 April 1996. This was a reference to the draft 1993 real estate lease, the formal lease still not having been executed. 289 The letter of 31 January 1996 continued as follows:- "Clause 7.5 of the lease requires National Rail to notify Queensland Rail in writing by 1 February 1996 if it intends to seek a further lease of the property, and I now do so. National Rail's preference is that the lease of the property be for an initial period of twenty (20) years with an option for National Rail to extend that lease term for a further ten (10) years. In meeting this requirement for notice under the lease National Rail does not waive its rights under Clause 5(6)(a) of the Shareholders' Agreement. National Rail will shortly send a draft lease to your Property Division as a basis for the commencement of negotiations." 290 On 27 February 1996, Mr Scheuber wrote to Mr O'Rourke stating that NRC had never identified the property required by it to perform its interstate freight operations in accordance with cl 5(6)(a) of the EA. The letter went on to say that there was no "major objection" to granting NRC a 20 year lease of Acacia Ridge with a 10 year option, provided that NRC complied with its obligation under cl 5(6)(a) "and notify QR accordingly". 291 The final form of the 1993 real estate lease was signed on 26 February 1996. It contained the following provisions "7.1 This Lease commences on 4 April 1993. 7.2 This Lease continues until the first to occur of: (a) 4 April 1996; (b) the date on which the Company acquires ownership or is granted a lease or access rights to the Property in accordance with the Shareholders' Agreement. 7.3 The Company is entitled to continue in occupation notwithstanding any other provisions herein after the expiration of this Lease under the terms and conditions of this Lease provided the Company is not in breach of any of its obligations under this Lease, for a period not exceeding six months unless otherwise agreed or until the date referred to in clause 7.2(b) whichever is the earlier. … 7.5 The Company must notify the Rail Authority in writing by 1 February 1996 of its intention to either: (a) seek a further lease of the Property; or (b) seek to lease or acquire rights over the Property in accordance with the Shareholders' Agreement. … 12.5 At the expiration of this Lease, the Company will subject to clause 7.3, unless otherwise agreed, demolish or remove any structure constructed by it on the Land in accordance with this clause except if the Company acquires ownership of, or is given a lease, or is granted access to the Property under the Shareholders' Agreement. The Company will take reasonable care to minimise damage upon effecting any such removal and shall make good to the Rail Authority any damage caused to the Land by such removal. … 14.2 The Company will, unless otherwise agreed, at the expiration of this Lease or if renewed at the expiration of the further term, remove all such fittings, furniture, plant, equipment, partitions or other articles and assets including Company Fittings except if the Company acquires ownership or is given a lease or is granted access to the Property under the Shareholders' Agreement. The Company will make good any damage caused to the Property by such removal. … 27.1 At the expiration of this Lease subject to clause 7.3 the Company will give possession of the Property to the Rail Authority. … 31.1 The Rail Authority agrees that the Southern Area is and shall be deemed to be used for or in connection with interstate rail freight for the purposes of the Shareholders' Agreement and is subject to its provisions. 31.2 The Rail Authority during the term of this Lease shall not dispose, alienate or otherwise deal with the Southern Area so as to prevent or impede the Company in taking a transfer of or a long term lease of the Southern Area in accordance with the provisions of the Shareholders' Agreement." 292 During March and April 1996, there were discussions between NRC and QR about expenditure of funds on track upgrading. Reference was made to the inadequacy of the existing lease documentation in allocating responsibility for works. 293 On 26 March 1996, there was a meeting between various NRC and QR personnel. This was one of the regular monthly meetings between those parties. The attendees included Mr McNamara of NRC and Mr Haase of QR. Mr McNamara stated at the meeting that he would prefer to have money spent on track maintenance now, rather than wait for a new lease. 294 On 24 April 1996, there was a further meeting between the parties about effort to have "the yard" upgraded. The QR personnel referred, inter alia, to the number of train derailments. The NRC personnel said:- · the general state of the yard was not sufficient to allow present operations without the risk of derailment; · an upgrading program was needed urgently; and · the current leasing arrangements did not clearly define who was responsible to performing the work. 295 On 20 May 1996, Mrs Fontaine wrote to Mr Jenner enclosing a discussion draft of long lease of the AR terminal for review and comment. Mrs Fontaine said that the draft was based on the executed 1993 real estate lease with changes marked up. The draft lease provided for a term of 10 years with an option to review for a further 10 year period. 296 On 14 June 1996, Mr McNamara and other NRC personnel met with a number of QR officers. Mr McNamara reported on the meeting in a memorandum of the same date to Mr Fullerton and others from NRC. He reported that QR was proposing to reduce the area of the long lease by excluding the marshalling area, that is Industrial Roads 5 to 9 to the east of the AR terminal. He said that QR's reasoning was based on NRC requesting a 30 year lease and their concern for third party access. 297 Mr McNamara said in his memorandum that the implications of that proposal were:- · NRC has funded capital works to extend tracks one and two to 1,200 metre and they would be outside the proposed lease area; · NRC had agreed with QR to fund the upgrading of tracks one to nine at a cost of $500,000 and this would be outside the lease area; and · space at AR was at a premium and any reduction in tracks would adversely affect NRC's operations. 298 Mr McNamara recommended in his memorandum that in negotiations with QR, NRC retain the current lease area. He suggested that legal advice on third party access was required. 299 On 18 June 1996, Mr Jenner wrote to Mrs Fontaine in response to her letter of 31 January 1996. Mr Jenner asserted that QR had received no advice or nomination of the property nominated by NRC to be leased to it in accordance with cl 5(6)(a) of the EA. He said that QR considered "the preservation sought by National Rail under cl 5(b)(a) [sic] is not valid". This was presumably a reference to Mrs Fontaine's statement that NRC did not waive its rights under cl 5(6)(a) of the EA. 300 In his letter of 18 June 1996, Mr Jenner said that the discussion draft lease forwarded under cover of Mrs Fontaine's letter of 20 May 1996 was not acceptable to QR. He said that a number of matters needed to be addressed. 301 Mr Jenner pointed out that QR became a government owned corporation on 1 July 1995 and, in accordance with the TIR Act it had identified the 27 hectare site of the AR terminal as "commercial corridor land" which remained in QR's ownership. 302 Mr Jenner said in the letter that the AR terminal was surrounded by "rail corridor" land with no dedicated road access. He said it was proposed that access be by way of an easement over the roadway covered by the 1993 real estate lease which expired on 4 April 1996. He said that the Department of Natural Resources would have to agree to the proposal. 303 Mr Jenner also referred to the Administration Building which he said would be classified as "QR corporate" to be held by QR "in Fee Simple". 304 Reference was also made to the noise barrier constructed by NRC which was said to be on land to be identified as "corridor" land. This would be subleased to QR by Queensland Transport with the head lease held by the Department of Natural Resources. Agreement on the terms of those leases had not been reached. Mr Jenner said that a "sub sub lease to cover the noise barrier will be the most likely eventuality". 305 Mr Jenner said in his letter that QR was addressing a number of operating issues including third party access obligations. He continued:- "The proposed new boundaries of the container terminal include the locomotive provisioning facility and will include 'track No 1' on which NRC propose to store locomotives from time to time. The area outside of the new boundaries, which formed part of the former agreement, has been identified as an asset which should be made accessible to all current and potential standard gauge operators. This area will be covered by an access agreement between National Rail and Queensland Rail. The attached plan is indicative of the proposed terminal lease area. It is however being amended to include track No 1 and provide the necessary 'Corridor' width to accommodate the duplication of the main line. As soon as these adjustments are made I will forward a plan for your consideration. A draft Lease Document is also being prepared for your consideration. To formalise the full relationship at the Acacia Ridge Interstate Freight Terminal between National Rail and Queensland Rail an access agreement which I understand is being negotiated at present, and a service agreement to cover such issues as provision of signalling, maintenance etc, NRC may require Queensland Rail to perform on behalf of NRC, are required to be negotiated and signed at the same time as the lease agreement." 306 Mr Jenner then addressed the area known as the southern area over which NRC held an option under the 1993 real estate lease. He said that if this option was to carry forward to the new lease, QR would seek an option payment for an agreed number of years or an annual rental payment. He concluded that "[f]rom the foregoing it is obvious that there are a number of significant issues that need to be negotiated" and suggested a meeting of representatives of NRC and QR as soon as possible. 307 On 5 July 1996, Mr Jenner sent Mrs Fontaine a proposed lease of the BHP Acacia Ridge site. He said the document would form the basis for negotiation (ie of that area only). 308 On 8 July 1996, Mr Graham wrote to Mr O'Rourke about various issues. He referred to QR's proposal that the marshalling yards be removed from the AR terminal lease area and included as part of a track access agreement so that they would be available to all users. Mr Graham said that NRC was prepared to agree in principle to "this new QR approach". He noted, however, that NRC had spent about $1 million improving the marshalling yards and intended shortly to spend another $500,000. 309 Mr Graham then said that if NRC was to hand back the marshalling yards, it required:- "- repayment of its $1 million in expenditure - an undertaking by QR to complete the necessary works to enhance the efficiency of Acacia Ridge, and - an appropriate reduction in the terminal rent." 310 Mr Graham proposed that, alternatively, NRC could write off the $1 million expenditure and complete the $500,000 upgrade at its expense as part of a package to resolve outstanding issues between the parties about track access charges. 311 On 2 August 1996, Mr Duncan McLeod sent an email to Mr John Fullerton with copies to Mr McNamara and other NRC personnel. He said that QR had declined to convert the short term lease over the marshalling yards to a long lease, preferring instead to give NRC access rights so as to leave the way open for other operators to use the area. 312 Mr McNamara replied on the same day expressing his disappointment. He said that in Brisbane "[w]e continue to operate in a substandard yard and the politics associated with the development of the National Rail lease are going to delay the promised improvements". 313 On 19 August 1996, Mr O'Rourke wrote to Mr Graham attaching a "without prejudice" proposal for the resolution of outstanding issues relating to track access and track access charges. 314 In a Board Paper dated 21 August 1996, Mr Graham recommended that a contingency sum of $300,000 be added to previously approved expenditure of $2.9 million for the construction of locomotive provisioning facility at the AR terminal. The recommendation was endorsed by Mr Fullerton. The approval of the expenditure of $2.9 million had been given at a Board meeting on 2 February 1996. 315 On 23 August 1996, Mr Graham replied to Mr O'Rourke's letter of 19 August 1996. He said that the terms for finalising track access arrangements to 30 June 1996 as set out in the attachment were acceptable, subject to three points of clarification. It is not necessary to set them out. 316 On 2 September 1996, Mr O'Rourke wrote to Mr Graham effectively agreeing to a resolution of all track access issues including the three points of clarification mentioned in Mr Graham's letter of 23 August 1996. The result of this was that NRC and QR agreed to the exclusion of the marshalling yards from the AR terminal lease area in return for a payment of $1.5 million. 317 On 1 October 1996, Mrs Fontaine wrote to Mr Jenner requesting a number of amendments to the terms and conditions of a draft AR terminal lease sent to her by Mr Jenner on 5 July 1996. A substantial number of amendments were proposed. It is not necessary to set them out. The letter concluded with the following penultimate paragraph:- "Please note that the above comments are of a preliminary nature only and the draft has not yet been forwarded to National Rail's legal advisers, who may make further comments in due course." 318 On 24 November 1996, Minister Sharp, the then Commonwealth Minister for Transport, announced the Government's intention to sell its interest in NRC. 319 On 27 November 1996, Mrs Fontaine sent a memorandum to Mr Graham. She stated that all issues requiring resolution for the finalisation of the long term lease of the AR terminal had been discussed with QR but not all issued had been resolved. 320 Mrs Fontaine observed in her memorandum that there were a number of matters that would take "somewhere in the region of 6 months to resolve". These included subdivision of the land and rezoning of the leased area, audit for contamination and similar due diligence enquiries, as well as valuation for rent. 321 The memorandum concluded as follows:- "A draft Agreement for Lease was forwarded to QR on 20 November. I have not yet had discussions with QR in relation to the draft Agreement for Lease, however, I do not anticipate that the document will be difficult to negotiate and obtain agreement on. I think it is realistic to expect that the Agreement for Lease will be agreed before the end of this year." 322 On 10 December 1996, Ms Diana Calvisi, a solicitor in the Corporate Counsel Division of QR, wrote to Mrs Fontaine enclosing 20 pages of amendments to the draft lease which NRC had submitted to QR. It is unnecessary to set out the detailed comments made by QR. Ms Calvisi stated that QR reserved its right to make further amendments to the proposed changes when decisions were made on unresolved issues. 323 In addition to the draft amendments Ms Calvisi stated that there were a number of matters relating to the proposed lease that required clarification and discussion. 324 The first matter was NRC's election under the EA. Ms Calvisi stated:- "As you are aware, the Shareholders' Agreement dated the 30th of July 1991 gives National Rail certain rights in relation to the Acacia Ridge property. Queensland Rail has been proceeding in its negotiations with National Rail at this time on the basis that National Rail's proposal to enter into this proposed lease constitutes National Rail's election under the Shareholders' Agreement. Queensland Rail requires you to confirm in writing that National Rail's intention to enter into this Lease is its intention to lease the property in accordance with the terms of the Shareholders' Agreement." 325 The second matter was the Administration Building. In a letter written in 1994, NRC had agreed to pay $13,000 per annum indexed to the CPI, for 30 years, in addition to the rent payable under the long term lease. These payments were to increase to approximately $32,000 per annum when QR vacated the building. The question which Ms Calvisi raised was, in view of the fact that the proposed lease of the AR terminal was to be for 10 years, how did NRC propose to deal with its commitment to pay rent for the Administration Building for 30 years. Ms Calvisi proposed that the rental payments for the Administration Building be dealt with in a separate deed. 326 The third matter was the encroachment of the Administration Building onto the rail corridor. Ms Calvisi stated that approximately one third of the Administration Building and part of the car park area would encroach onto the rail corridor which was owned by the State of Queensland and that the encroaching part of the Administration Building may, in the future, have to be demolished. She suggested that NRC take a sub sub lease, with the Department of Transport as head lessee and QR as sub lessee, which would be for nominal rent and contain a demolition clause to apply to the encroaching parts. 327 As an alternative to a sub sub lease, Ms Calvisi proposed a licence over the encroaching areas, terminable on short notice. 328 The fourth matter was the possible relocation of the rail corridor. Ms Calvisi stated that it was proposed at some stage in the future to change the location of the rail corridor, particularly if this was requested by NRC. 329 Ms Calvisi said that if this relocation occurred after the lease was registered, the lease could not be amended because it was not possible to amend a registered lease if there were changes in the leased area. She observed that if this happened, it would be necessary to surrender the lease and enter into a new one, and QR would require NRC to pay all the costs of the re-survey and the costs of the surrender of lease, as well as stamp duty on the new lease. 330 On 20 January 1997, Mr Graham reported to the Board of NRC on the results of a strategic review of operations. The report stated that the strategic review had found that the basis of the EA was being abandoned by the parties to the EA in order to give rapid effect to competition principles. The disadvantages said to flow from this included opportunities for new entrants, potentially high track access charges, and most significantly from NRC's perspective:- "the prospect of terminals being vested in the track authorities may cost National Rail the ability to pursue essential product differentiation strategies in the intermodal business." 331 On 30 January 1997, Mrs Fontaine wrote to Mr Jenner commenting upon the matters raised in Mrs Calvisi's letter of 10 December 1996. As to the first matter, that is, "election" under the EA, Mrs Fontaine confirmed that NRC proposed to lease the land on commercial terms in accordance with the EA. As to the three other matters, Mrs Fontaine's comments were to the effect that further discussions should take place. 332 Mrs Fontaine also set out her responses to Ms Calvisi's 20 page list of proposed amendments to the draft lease. Mrs Fontaine agreed with most of the amendments but some were not agreed. One was QR's request for the deletion of an indemnity sought by NRC against claims arising from the condition of the leased premises before the commencement of the long term lease. 333 On 27 February 1997, Mrs Fontaine wrote to Mr Barty of the Queensland Department of Transport setting out a proposal as to how the lease of the AR terminal could accommodate NRC's future plans to identify an alternative location for the rail corridor. 334 Mr Barty replied to Mrs Fontaine on 13 March 1997 that Queensland Transport was investigating the issues raised in her letter. 335 On 20 March 1997, Mr Graham prepared his report for the 66th Board meeting of NRC. Under the heading "Securing National Rail Assets from Shareholders" he referred to the Commonwealth's "equivocation on asset transfer" which he said was contagious, with Victoria also questioning further locomotive transfers, as well as the transfer of the Dynon terminal. The Commonwealth's equivocation and its effect on the NSW and Victorian governments had been the subject of a letter dated 14 March 1997 from Mr Peter Young, the Deputy Chair of NRC, to Minister Sharp. The letter referred to the need to finalise the transfer of assets or long term access to the assets nominated by NRC under the EA. 336 Mr Graham's report of 20 March 1997 also recorded that QR had advised its "reluctance" to enter into a long term lease for the AR terminal. This was apparently a reference to a conversation which had taken place at about that time between Mr Graham and Mr O'Rourke in which Mr O'Rourke had foreshadowed an event which he would formally notify in writing, namely QR's decision not to grant NRC a long term lease over the AR terminal. 337 On 26 March 1997, Mrs Fontaine drafted a letter to Mr Jenner attaching a further draft lease following upon discussions at a meeting of 19 February 1997. 338 Mrs Fontaine gave evidence that the letter was never sent to Mr Jenner, but that the draft letter was an accurate reflection of her position at the time. 339 The draft letter requested Mr Jenner confirm that the rent adjustment required by reason of the exclusion of the marshalling yards from the lease would be backdated to 1 July 1996. 340 Mrs Fontaine also stated in her letter that a number of issues were not yet agreed including:- · the Administration Building on the rail corridor; · the encroachment of the Administration Building; · identification of an alternative rail corridor; · operational and maintenance agreements including noise barrier maintenance; and · various definitions and other clauses. 341 Mr Graham's report to the 66th Board Meeting of NRC was discussed at that meeting which was held on 27 March 1997. Major issues discussed included the need to secure assets from shareholders "in accordance with their undertakings and obligations" under the EA. 342 On 1 April 1997, after the change of position letter, Mr Barty wrote to Mrs Fontaine about the lease. He said that Queensland Transport considered that the new lease was a matter for negotiation between NRC and QR but that there were a number of issues relating to the rail corridor which Queensland Transport wished to have considered. These related mainly to the identification of the new corridor and the alternative access route. 27 March 1997: the "Change of Position" letter 343 On 27 March 1997, Mr O'Rourke wrote to Mr Graham. The letter commenced by referring to recent discussions between them about NRC's "continued use" of the AR terminal. This was a reference to a conversation between Mr O'Rourke and Mr Graham on 20 March 1997 in which Mr O'Rourke foreshadowed QR's change of position on the grant of a lease. 344 In the letter of 27 March 1997, Mr O'Rourke said:- "As previously verbally advised, Queensland Rail has reviewed its position in relation to the long-term future of the terminal. It has now been decided that a long-term lease will not be given to National Rail in view of the strategic importance of the terminal and the need for it to be operated as a common user facility. Accordingly, Queensland Rail withdraws the offer to enter into a lease for a term of 10 years with two options each of 10 years which has been the subject of incomplete negotiations between the parties in recent months." (emphasis added) 345 Mr O'Rourke continued in his letter by stating that QR was prepared to enter into a further lease of the AR terminal for a period of 12 months on the same terms and conditions as the lease of 26 February 1996 subject to a number of matters. These included:- · an agreement by QR to negotiate in good faith an agreement to permit NRC's continued access rights to the terminal (as envisaged in the EA upon the expiration of the lease; · the lease boundaries were to be the same as those in the lease of 26 February 1996 (ie including the marshalling yards); · the rental was to be the same as the lease of 26 February 1996, subject to adjustment. The amount payable under the side agreement for the Administration Building was to continue to be payable by NRC; and · QR was to maintain the rail infrastructure on the leased area. 346 The letter then stated:- "Queensland Rail considers that the proposal contained in this letter reflects the terms of the Shareholders Agreement dated 30 July 1991 and will ensure that National Rail has the necessary access rights to continue its operations at Acacia Ridge." (emphasis added) 347 Mr O'Rourke concluded by stating that upon receipt of NRC's acceptance of the proposal he would forward the lease document for execution. 348 Mr Graham replied to the letter on 16 April 1997. He stated:- "I acknowledge your letter dated 27 March 1997 withdrawing from previously agreed lease arrangements for the Acacia Ridge Terminal. Your reasons for the revised position are difficult to understand given both the strategic status of the Acacia Ridge terminal and its common user status have not changed. National Rail has invested considerable sums of money upgrading the Acacia Ridge terminal in reliance upon Queensland Rail's representation to National Rail as to a long term lease of Acacia Ridge. Acacia Ridge is an essential element of National Rail's integrated national network. To build its network, National Rail has invested further substantial sums to provide competitive rail services on the east coast of Australia. Our agreement on track access and our incomplete agreement to modify our previous written agreement on access to the Fisherman Islands Port have all been on the basis of a long term lease of Acacia Ridge for National Rail. I am now seeking legal advice on your letter and will respond when this advice is available." (emphasis added) April 1997: NRC approves capital expenditure after the change of position letter 349 On 10 April 1997 Mr Graham and Mr Fullerton, in conjunction with NRC's Chief Finance Officer, Mr Kitney, signed a Board Paper for the 67th Board meeting of NRC headed "Financial Arrangements and Management – Long Loops". 350 The purpose of the paper was said to include briefing the Board on new passing loops and extensions required to secure the competitiveness and profitability of NRC's services on the east coast corridor and the western corridor between Melbourne and Adelaide. The Board Paper recommended approval of the commitment of funds for longer loops on the east coast and western corridors, with a total estimate of $22 million. 351 A further Board Paper for the 67th Board Meeting, dated 16 April 1997 and signed by Mr Graham and Mr Fullerton, recommended approval of the construction of operations tracks at Chullora, forming part of the Sydney freight terminal component of the east coast project, at a cost of $15.9 million. 352 Mr Kitney and Mr Graham, signed another Board Paper for the 67th Board meeting entitled "Finance Report for the Nine Months ending 31 March 1997". The Report included a statement that Directors should note that NRC had spent $17 million in works on leasehold improvements at the AR terminal and $15 million on improvements at the Melbourne terminal. It continued:- "Recent correspondence from QR and the PTC indicate that these rail authorities view the terminals as essential facilities. Should the terminals become essential facilities, and National Rail be denied long term exclusive access, the company would be forced to write off some/all of its works investments at these two terminals, rather than accounting for them, as currently, as long term leasehold improvements." (emphasis added) 353 The 67th Board meeting was held on 24 April 1997. The finance report referred to in the previous paragraph, was tabled and noted. The minutes record that until issues concerning long term access to various assets were resolved, it would be prudent for NRC not to commit to new projects. Nevertheless, the proposed expenditure of $22 million on new passing loops and the proposed expenditure of $15.9 million on Chullora were "in-principle supported". July 1997 – April 1998: Further Discussions about a long term lease; QR refuses to reconsider 354 Mr Graham and Mr O'Rourke met on 23 July 1997 to discuss the lease and also to discuss Mr O'Rourke's change of position letter. Mr Graham referred to the meeting in his letter to Mr O'Rourke of 4 August 1997. He continued:- "I understand that Queensland Rail is now agreeable to granting National Rail a long term lease of the terminal for 30 years subject to a right of Queensland Rail to terminate the lease in certain circumstances. Would you please confirm the circumstances in which termination would be required." 355 Mr O'Rourke replied on 21 August 1997. He noted that at the meeting of 23 July 1997 he agreed to consider again the issue of granting NRC a long term lease, subject to a right to terminate. He continued by stating that, however:- "… after carefully considering the issue further, I must advise that QR's position remains unchanged from that as set out in my letter dated 27 March 1997." 356 Mr Graham replied to Mr O'Rourke's letter some two months later, on 16 October 1997. He said that QR's position was of significant concern to NRC. He pointed to the "clear agenda" for micro-economic reform contained in the EA and as part of that agenda, establishment of NRC as an efficient commercial rail company. 357 Mr Graham continued by saying that NRC had made very substantial investments in developing interstate rail transport to and from Queensland including in particular:- · investing over $176.5 million in upgrading rail track between Melbourne and Brisbane; · investing over $18 million on the AR terminal; and · increasing the volume of intermodal and shipping freight to and from Brisbane by over 95%. 358 Mr Graham went on in the letter to say that long term arrangements in relation to terminals were crucial to the objectives for which NRC was established. He said that it was NRC's strong view that a 30 year lease was consistent with QR's obligations under the EA but that he was prepared to accept a short term lease as an interim measure, on the basis that it did not exhaust QR's obligations under the EA. 359 On 21 November 1997, Mr Graham, and NRC's Company Secretary, Mr Roxburgh, prepared a Board Paper for NRC's 74th Board Meeting. The purpose of the Board Paper was to seek agreement on the scope of environmental due diligence associated with terminal acquisition. Notwithstanding Mr O'Rourke's letter of 21 August 1997, and Mr Graham's reluctant acceptance of a "without prejudice" interim short term lease in his letter of 16 October 1997, the Board Paper stated:- "(i)t is envisaged that a long term lease for the Brisbane freight terminal will be in place within the next 12 months…" 360 On 21 January 1998, various personnel of QR's Freight Group, including Mr Hearsch and Mr Case, held a meeting to discuss future strategies in regard to QR's requirements at the AR terminal. The minutes of the meeting noted Mr O'Rourke's letter of 27 March 1997, the meeting between Mr Graham and Mr O'Rourke of 23 July 1997, and the letters of 21 August 1997 and 16 October 1997. QR's preferred option was said to be:- · QR to resume management control of the AR terminal; · QR to ascertain ownership of assets (ie improvements made by QR and NRC respectively) · negotiation for compensation; and · enter into agreement regarding future access rights for NRC. 361 The minutes of the meeting listed a number of advantages of QR managing the terminal. They included QR being perceived as "an honest broker" of the standard gauge terminal by third parties, even if, as was then contemplated, QR were to purchase NRC. The advantages were also said to include "synergies" gained through the operation of narrow and standard gauge terminals. 362 Draft minutes of a meeting of the same personnel on 21 January 1998, which appear to be a draft of the minutes of the meeting referred to above, include the following statement under the heading "Acacia Ridge":- "Potential change of ownership of NRC. If lease goes with sale, QR could find itself at the hands of a hostile competitor." 363 In a discussion paper setting out the results of discussions held on 18 January 1998 and 19 January 1998 between officers of QR's Freight Planning & Research Division and a consultant retained by QR, reference was made to QR's objectives at the AR terminals. These objectives included ensuring QR was in a position to develop an effective standard gauge business, having control of both narrow gauge and standard gauge at AR, and maximising the potential for North Queensland. QR's objectives were also said to include having the AR terminal available as a common user facility, ensuring it is used to the maximum and encouraging others to use it. 364 On 25 March 1998, Mr O'Rourke wrote to Mr Graham referring to NRC's lease of the AR terminal which was said to expire on 31 March 1998. Mr O'Rourke said:- "I wish to advise that Queensland Rail intends to take over the operation and management of the Terminal in the near future and as such is not prepared to enter into a further lease of the terminal and land for any specified period. However, NRC may continue in possession of the terminal after the 31st March 1998 as a tenant from month to month. This tenancy will be on the same terms and conditions as the previous lease that commenced on the 4th April 1993 so far as they are applicable to a monthly tenancy. In particular the rent payable in respect of the monthly tenancy will be the same as presently payable. The boundaries of the land, the subject of this tenancy will be the same as those contained in the original lease. The monthly tenancy may be determined by either party in the manner prescribed by Division 4 of Part VIII of the Property Law Act 1974. As stated previously, it is Queensland Rail's intention to resume the management and control of the Acacia Ridge Terminal. This action is in accordance with the provisions of the Shareholder's Agreement. In particular I would refer you to Clause 5(2) which in so far as 'other States' and therefore Queensland is concerned, specifically excludes any obligation on Queensland's part to cause its rail authority to assist NRC in undertaking functions of the type listed in Schedule 2 and the management of the associated assets. Accordingly, whilst QR will negotiate in good faith long term access arrangements to the terminal for NRC, such access will not include the management and operation of the Terminal nor will it include any lease or any form of tenure giving NRC exclusive possession of the land. It is my belief that the objectives of the Shareholder's Agreement do not necessarily mean that NRC must have a lease of the Terminal area. Giving NRC access is an appropriate way of achieving the objectives of the Agreement within the parameters of Queensland's obligations. In the circumstances of our resuming management of the Terminal there will be a need to identify the assets owned by NRC. Would you please provide details of same as soon as possible so that appropriate arrangements can be made in relation to them." (emphasis added) 365 On 27 March 1998, Mr O'Rourke wrote a separate letter to Mr Graham about access rights. He referred to discussions which had taken place about access to QR infrastructure. He said that interim arrangements were made with a view to developing long term access arrangements to replace the interim measures. Mr O'Rourke stated that:- "… a long term access agreement will require substantial agreement between the organisations on all terms and conditions of access, which include many measures yet to be discussed in detail." 366 Mr O'Rourke went on to say that he was agreeable to working toward an access agreement which matched the arrangements in place with RAC for Sydney to the border. He said that this was subject to the approval of Queensland Transport. 367 On the same day, 27 March 1998, NRC held its 77th Board meeting. The minutes record that Mr Graham advised that he had received a letter from QR advising that QR considered NRC's lease of the AR terminal was to expire on 31 March 1998 and that it would be renewed only on a monthly basis. The minutes record that a meeting with QR was planned in the near future. 368 On 31 March 1998, Mr O'Rourke and Mr Hearsch signed an Information Paper for the Board of QR. The Information Paper included the following statement about the background to the current position with respect to the AR terminal lease:- "As there were poor prospects of achieving early agreement with NRC regarding long term lease conditions for the Acacia Ridge terminal, QR reviewed its strategic position on the matter during late 1996 and early 1997. This took into account the NRC privatisation announcement, the expected emergence of third party operators on the East Coast standard gauge rail network and the increasing likelihood that QR's business and operations would extend into the interstate sphere given the on-going major structural changes and reforms occurring throughout the Australian rail industry. This development was foreshadowed in QR's 1997 Corporate Plan." (emphasis added) 369 The Information Paper then referred, under the heading "Background", to the change of position letter of 27 March 1997 and the discussions and correspondence culminating in the letter of 16 October 1997. 370 The Information Paper went on to describe a meeting between Mr Graham, Mr O'Rourke and Mr Hearsch which had taken place the previous day, 30 March 1998. NRC's response to QR's letter of 25 March 1998, as indicated by Mr Graham at the meeting, was said to be:- · NRC believed it had the right to exclusively occupy and manage the AR terminal, rather than merely access, and this was implicitly provided in the EA; · NRC would not voluntarily relinquish control of the AR terminal which was seen to be integral to NRC's management process and business interests; and · interpretation of the EA was a matter for the Queensland Government, not QR, and NRC intended to seek assurances from the Government. 371 Under the heading "Proposed Action", the Information Paper stated, inter alia,that QR received many enquiries from prospective third party operators and, although the AR terminal had "substantial unused capacity", those operators could not gain access because they would be in competition with NRC. The Information Paper observed that it was QR's intention to operate the AR terminal "as a genuine common user facility …" and went on to say:- "The Acacia Ridge interstate container terminal is an exceedingly strategic and valuable asset which is currently owned and potentially controlled by the Queensland Government, through QR. Acceptance of NRC's position and the subsequent NRC privatisation would almost certainly result in effective control of the terminal passing into interstate or foreign hands. Reversion of control of the terminal to QR would substantially add to the realisable value of QR's own assets should a future Government decide to pursue such a course." (emphasis added) 372 On 15 April 1998, Mr Graham wrote to Mr O'Rourke referring to the letter of 25 March 1998 and to their meeting of 30 March 1998. Mr Graham stated that, as he had commented at the meeting, NRC took the threat by QR to take back possession of the AR terminal as most serious. He said that if NRC lost possession it would seriously threaten NRC's operations to and from Queensland and would adversely affect NRC's overall network operations. He referred to what he had said in his letter of 16 October 1997 that long term arrangements over terminals was crucial to NRC in achieving its objectives. 373 Mr Graham stated in the letter that he rejected QR's reliance on cl 5(2) of the EA. He said that QR had transferred the function of running the AR terminal to NRC in 1993 and it was not open to NRC to take it back. The letter continued:- "Furthermore, since taking over responsibility for the Acacia Ridge terminal, National Rail has expended over $18 million in developing the terminal. This was not a short term investment. It was undertaken by us in good faith on the basis of agreement with Queensland Rail that National Rail's rights under the Shareholders' Agreement were to be recognised in a long term lease of the terminal. In addition National Rail has invested in 40 new locomotives, new wagons and extended crossing loops." (emphasis added) 374 Mr Graham also made reference to the extent to which the AR terminal had been integrated into NRC's operations on the Brisbane/Melbourne corridor. He said that handing over the terminals would cause major disruptions, that NRC could not afford uncertainty about its rights. 375 Mr Graham concluded his letter with the following prophetic remark:- "I urge you to re-consider your position before this matter descends into lengthy and expensive litigation." 376 Mr Graham reported the current situation to the Board of NRC in his Managing Director's Report of 16 April 1998. He said that because of QR's strategic concerns over the future ownership of NRC and QR's own ambitions to become a national operator, QR had advised its intention to take over the operations of the AR terminal. He attached Mr O'Rourke's letter of 25 March 1998 and NRC's "considered legal response" of 15 April 1998. 377 The Board of NRC noted Mr Graham's report of 16 April 1998 and the recent correspondence at its meeting of 24 April 1998. August 1997 - January 1999: NRC continues expenditure on East Coast Strategy 378 In a Board Paper dated 18 August 1997, Mr Graham and Mr Fullerton sought Board approval to finalise "generic funding agreements" with Rail Access Corporation ("RAC") and other companies. RAC is a corporation established by the NSW Government to separate ownership of rail infrastructure from the operation of the rail network and providing for the sale or access to the infrastructure through access agreement individually negotiated with RAC. 379 The Board Paper stated that benefits from the $200 million committed thus far to the East Coast Strategy, by way of investment in terminal extensions, additional locomotives and new wagons, would not be fully realised until train lengths were increased to 1,500 metres. They said that at present train lengths were typically 900 metres but that the Newcastle – Brisbane steel train had recently been extended to 1,200 metres. They also said that approval had been received for the trial operation of a 1,200 metre train on the Melbourne-Brisbane service on a daily basis. 380 The Board Paper stated that the implementation of the strategy for longer trains required agreements with track owners for loops and operational issues as well as funding. One of the obstacles to this was said to be that NRC's Board had deferred approval of the overall investment while there was still uncertainty over the guaranteed availability of train paths for 150 trains, particularly through Sydney. The Paper recommended that specific projects be referred progressively to the Board. 381 A proposed revised strategy for the implementation of long train operations on the east coast and western corridors was noted by the Board of NRC at its meeting of 29 August 1997. The Board resolved that prior to any commitment to long loops with track access providers, a tax ruling be obtained on proposed funding arrangements. 382 In a Board Paper dated 23 October 1997, Mr Graham and Mr Fullerton sought approval in principle for a revised method of funding infrastructure works in NSW for longer trains as part of the East Coast Strategy. The Paper sought in principle approval for arrangements whereby the works would be funded and constructed by the RAC and recovered from NRC by special access charges. This was approved by the Board on 31 October 1997. 383 At a meeting on 30 January 1998, the NRC Board approved loop extensions at a cost of $1.3 million for Gerogery and $1.9 million for Yerong Creek, subject to a risk assessment of NRC's tax exposure for direct funding of these projects. 384 On 27 February 1998, the Board of NRC approved the principle of funding track improvements under which NRC granted a loan to the track owner, and enters into a supplementary Track Access Agreement providing for an additional charge for the use of improved track. 385 In a Board Paper dated 15 April 1998, Mr Graham and Mr Fullerton asked the Board to note a number of matters relating to implementation of the East Coast Strategy. These matters were, inter alia, that the revised operating strategy involved the addition of a third long train service between Melbourne – Sydney – Brisbane each way daily and requiredan investment in extended crossing loops of $4.5 million additional to the $22 million originally proposed. 386 In a Board Paper dated 18 June 1998 and entitled "1998 – 99 Recurrent & Capital Expenditure Budgets", Mr Graham and Mr Kitney reported that, to date, NRC had only one long term track access agreement in place, which was with West Rail in Western Australia. The paper stated that other agreements were subject to negotiation. 387 In a Board Paper dated 19 October 1998, Mr Graham and Mr Fullerton recommended that the NRC Board note the benefits of completing the East Coast Strategy. They referred to the Board's approval of the East Coast Strategy at a cost of over $200 million on 15 December 1995. The Board Paper stated that infrastructure works necessary to implement the strategy, and which were yet to be approved, amounted to $31.5 million. These works comprised:- · Sydney Freight Terminal operational sidings costing $20.1 million; · crossing loop extensions on the Melbourne – Sydney corridor costing $2.7 million; and · crossing loop extensions on the Sydney – Brisbane corridor costing $8.7 million. 388 On 30 October 1998, the Board of NRC resolved that the proposals for the East Coast strategy and Chullora operational sidings be reconsidered at its December 1998 meeting. 389 On 10 December 1998, Mr Graham, Mr Fullerton and Mr Roxburgh recommended that the Board of NRC approve construction of operational sidings at Chullora, forming part of the Sydney Freight Terminal redevelopment component of the East Coast Strategy, at a cost of $14 million. Board approval was given on 29 January 1999. November 1998: Freightcorp requests access 390 On 16 November 1998, Mr Pederson, of Freightcorp, wrote to Mr Graham. He referred to a conversation between Mr Graham and Mr Di Bartolomeo, the Managing Director of Freightcorp, and requested that Mr Graham confirm NRC's "in principle" agreement to allow Freightcorp trains to pass through the AR terminal. 391 On 19 November 1998, Mr McNamara sent an email to Mr Graham, with copies to various NRC personnel, reporting on a meeting held the previous day between Mr McNamara and two officers of Freightcorp. At the meeting, the Freighcorp officers provided details of a service which they proposed for arrival and departure from the AR terminal five times a week. Mr McNamara stated in the email that there would have to be follow up discussions with Freightcorp, QR and Network Access. 392 Mr McNamara also reported on a conversation between himself and Mr Martin Oldfield of QR about Freightcorp's request. The email stated that in the course of this conversation, Mr Oldfield had indicated QR had not agreed to provide drivers/shunters for Freightcorp's "operation" and that he was not going "out of his way to make this operation easy". The email also stated that during the conversation, Mr Oldfield indicated his intention to seek legal advice to determine whether NRC had the right to agree to third party access. 393 Mr Graham responded on 23 November 1998. He asked for advice as to whether NRC's lease from QR required QR's approval for third party access. He said that if there was uncertainty, a letter should be sent to Freightcorp advising them accordingly. Mr Graham also requested Mr Roxburgh develop cost/commercial terms for access by Freightcorp. 394 In a letter to Mr O'Rourke dated 25 November 1998, Mr Graham requested QR's consent to NRC granting Freightcorp access to the leased area. 395 On 18 December 1998, Mr McNamara sent an email to Mr Rick Beckman of NRC regarding Freightcorp, stating that his latest information was that "QR is in no hurry to finalise this matter". He said that QR was awaiting a memorandum of understanding "to be raised by Freightcorp and to be signed off by QR and Freightcorp". He said that without this, the QR managers with whom he was dealing had been instructed not to proceed. 396 On 19 January 1999, QR consented to NRC granting Freightcorp access to the AR terminal, but on the condition that NRC would not confer any rights to Freightcorp which were more extensive than the rights NRC enjoyed. 397 Mr Graham wrote to Freightcorp on 5 February 1999. He stated that NRC did not wish to pursue further negotiations until issues concerning NRC's own security of tenure at the AR terminal were resolved. 398 On 7 June 1999, Mr O'Rourke wrote to Mr Graham to propose that a compromise arrangement which enabled Freightcorp access to the EA Rocke siding, which would have minimal impact on NRC's operations at AR. He proposed that the current boundaries of the lease be amended to exclude the shunt neck, which would enable Freightcorp to access the EA Rocke siding without entering the lease area. 399 Mr Graham's response of 15 June 1999 recorded the steps being taken to facilitate an agreement with Freightcorp for access, but noted NRC's concerns about Freightcorp's shunting plan, which in his view, would disadvantage NRC. He emphasised that from his perspective, the next step was for agreement for a long term lease before any arrangement with Freightcorp could be finalised. 400 Finally, an email from Mr McNamara to Mr Graham dated 20 October 1999 reported that at a meeting held that same day, QR and NRC had agreed that Freightcorp's proposed operating plan was unrealistic, and neither QR nor NRC could cooperate with Freightcorp shunting and preparing their trains during the periods they proposed. The Third Amending Agreement 401 On 22 March 1999, the Commonwealth and the States of NSW, Victoria, Queensland, Western Australia and South Australia entered into an agreement to amend the EA ("Third Amending Agreement"). The purpose of the Third Amending Agreement, as stated in Recital B, was to facilitate the sale by the Commonwealth and the States of NSW and Victoria, of their shares in NRC. 402 The Third Amending Agreement provided that the EA was amended as set out in a schedule. Each of the Commonwealth and the States, including the State of Queensland, agreed to procure that a copy of the Third Amending Agreement be tabled in its Parliament. 403 The schedule to the Third Amending Agreement introduced a definition of "Sale Date" which was defined to mean the date on which the Commonwealth, the State of NSW and the State of Victoria completed the sale of the whole of the issued capital of NRC. 404 Three new clauses were added to the EA, immediately following cl 5(6). They were set out in cl 3 of Schedule 1 to the Third Amending Agreement as follows:- "5(7) (a) Nothing in this agreement entitles the Company to a transfer of ownership or a lease of or access to any assets which the Company has nominated in a Corporate Plan, which have not been transferred or leased to the Company and which comprise "Interstate rail network' or 'Interstate track and related assets' (as each such expression is defined in the ARTC Agreement) nor obliges the Commonwealth, the States or the Other States to transfer ownership of or grant a lease of or access to any such assets. (b) Subclause (a) applies notwithstanding that any such asset has been, or is included in a class of assets which has been, whether before or after the date on which the Third Amending Agreement takes effect, identified in a Corporate Plan as being required by the Company. 5(8) The Commonwealth, the States, the Other States and the Company may by an agreement or agreements in writing between all of them (which may be amended from time to time) conclusively determine: (a) the functions to be transferred to the Company under clause 5(4); (b) the assets to be transferred or leased, or in respect of which access is to be given, to the Company under clauses 5(5) and 5(6) and the terms and conditions of any such transfer, lease or grant of access; (c) the payments to be made by the Commonwealth and the States under clause 5(4)(b); (d) the valuation of assets under clause 6(3); (e) the number of shares to be issued under clauses 6(6)(a), 6(6)(b) and 6(7); and (f) other necessary or incidental matter arising under the Agreement. 5(9) Any agreement entered into pursuant to clause 5.8 shall have effect notwithstanding anything contained in, and to the extent of any inconsistency shall prevail over, a Corporate Plan or any nomination or request signed by or on behalf of the Company." 405 Clause 5 of Schedule 1 of the Third Amending Agreement introduced a new cl 14 to the EA in the following terms:- "On the Sale Date, unless otherwise provided in any agreement in writing between them: (a) neither the Commonwealth, the States nor the Other States shall have any further rights or liabilities under this Agreement; and (b) each of the Commonwealth, the States and the Other States releases the others from all their respective remaining obligations arising or assumed under this Agreement." August 1999: The George Deutsch Report 406 In 1999, NRC and QR jointly retained George Deutsch Consulting Pty Limited ("George Deutsch") to prepare a master plan for intermodal traffic at both the AR terminal and the Q-Link terminal over the next 25 years. The master plan was based upon business forecasts provided by NRC and QR. NRC's current throughput was stated to be 210,000 TEU per annum, with growth to 300,000 TEU forecast over the next 10 years and further growth thereafter of 3% per annum. The term "TEU" is an acronym for "twenty foot equivalent unit". This is the unit of measure used in the rail industry for measuring container sizes (ie all container sizes are broken down to a TEU). 407 QR's throughput was stated to be 110,000 TEU for Queensland Railway Express ("QRX"), which is Toll's North Queensland rail forwarding operation, and 60,000 TEU for other business. Growth of 2.5% per annum was forecast. 408 The George Deutsch report was produced on 31 August 1999. It recommended separate terminals for NRC and QR, with NRC retaining possession of AR and the construction of a new terminal on the site of the existing Q-Link terminal. 409 In George Deutsch's opinion, the AR terminal would be able to cater for NRC's traffic for the next 10 to 15 years with little or no change. 410 The new Q-Link terminal was said to be able to accommodate QR's traffic for the next 25 years. 411 It would be wrong to suggest that the expanded Q-Link terminal recommended by George Deutsch was to be limited to narrow gauge track. Reference was made to QR's requirement that the terminal be dual gauged so that it could, if necessary, carry out or support interstate standard gauge activities in the future. 7 September 1999: Queensland Transport favours common user facility 412 On 7 September 1999, Mr Bruce Wilson, the Director General of Queensland Transport wrote to Mr O'Rourke about a number of issues relating to the AR terminal. The issues included access to the EA Rocke's siding at the AR terminal by Freightcorp and the lease over the AR terminal. 413 Mr Wilson said that the matter required urgent attention, given the limited terminals with standard gauge access. He said that certain parts of the AR terminal and related facilities, in particular the standard and narrow gauge marshalling tracks and related tracks providing connection to the main line should be deemed to be of strategic importance to the State of Queensland in the context of s 215 of the Transport Infrastructure Act 1994 (Qld) ("Transport Infrastructure Act"). 414 Mr Wilson's letter went on to say that responsibility for the management of those facilities should be transferred from QR's Rail Business Group to its Network Access Group ("NAG") which could "without bias, negotiate access with all relevant parties". 415 Mr Wilson also said that Queensland Transport's desired outcome was that the AR terminal be a common user facility and that QR not progress any arrangement which might result in exclusive access. I will set out the whole of the relevant paragraph, as follows:- "Whilst cognisant of Queensland Rail's desires to reach agreement with National Rail in regard to a joint venture facility at Acacia Ridge, it is Queensland Transport's desired outcome that the interstate container terminal at Acacia Ridge be a common user facility under an appropriate management regime, consistent with your advice in our previous discussions. It is requested that Queensland Rail not progress any arrangement for the granting of a long term lease to NR, or any other actions that might result in NR or any other party (including Queensland Rail) having exclusive access to a facility which must be considered of. Strategic importance to the State." March 2000: QR concern about hostile purchase of NRC 416 On 20 March 2000, Mr O'Rourke sent a memorandum to Mr Wilson. The memorandum commenced by stating that NRC's lease at AR expired in 1996 and that it had been on a month to month lease since that time. Mr O'Rourke said that a "stand-off" had existed since QR's announcement in 1998 that it intended to take back management control. 417 Mr O'Rourke went on to say that NRC had approached QR with a view to establishing a long-term arrangement at AR in the context of the impending sale of NRC. He said that NRC had the "clear objective" of securing indefinite access for sufficient capacity to ensure its long-term viability. He also said that growth on the Melbourne – Sydney – Brisbane corridor was critical to NRC's business. 418 Mr O'Rourke continued by saying that QR had made it clear that, as owner of the terminal, it was seeking future options at AR and indeed at key Melbourne and Sydney terminals to facilitate its own national strategy. He said that NRC was reluctant to hand over operational control but was willing to contemplate a joint venture with QR. 419 The memorandum concluded with the following:- "QR expressed its concern at a potential hostile purchase of National Rail (e.g. a Freightcorp/Toll joint venture). QR advised that it would, in principle, be prepared to consider a commercial joint venture. In particular, QR would seek reciprocal access to Southern Terminals, in addition to securing rights to ongoing capacity at Acacia Ridge. Accordingly, QR will progress consideration of a joint venture with National Rail in respect of Acacia Ridge (Standard Gauge Terminal). Such a joint venture would clearly be on a commercial basis and consistent with the Queensland Competition Authority Act and associated regulations." (emphasis added) 31 March 2000: QR considers George Deutsch Report 420 On 31 March 2000, Mr Merrigan, who was then a consultant to QR, produced a review of the George Deutsch Report. He considered that the George Deutsch Report lacked "strategic direction" for QR and that it greatly favoured NRC. 421 Mr Merrigan identified a number of concerns held by QR about the two terminal solution. The concerns included competition from a third party operator at AR. 422 Other considerations identified by Mr Merrigan were that "NRC will not be a player in the long term", that "NRC will not be a terminal operator 10 years out" and that "NRC will not exist 10 years from now". 423 Later in his written review, Mr Merrigan stated, inter alia, that "[i]f NRC no longer exists, it could strategically place QR in a stronger competitive position". August 2000: QR officers' strategise about NRC's proposed lease 424 On 14 August 2000, Mr Daniel Owen, Assistant Secretary, Rail Industry, in the Commonwealth Department of Transport wrote to Ms Helen Stehbens, the Acting Executive Director of the Queensland Department of Transport Land Transport Division. Mr Owens referred in the letter to Ms Stehbens' invitation to NRC shareholders to set out the areas sought by NRC under a long term lease over the AR terminal, together with the proposed terms of the lease. It is apparent that this correspondence was entered into as part of the proposed privatisation of NRC. 425 The tracks nominated in Mr Owens' letter were Track A, NC1 – NC6, Industrial Roads 1 – 2 and the "hard stand" areas, the in-gate weighbridges and the provisioning sheds. The proposed term was 23 years, being the 30 year term proposed in 1993, less the period of occupation to date. 426 On 18 August 2000, Mr David George sent an email to Mr O'Rourke and two other QR officers, including Mr Stephen Cantwell, about a forthcoming QR meeting at which it was apparently planned to discuss the Commonwealth Department of Transport's proposal for a long lease of the AR terminal. 427 The evidence does not make it plain precisely what position Mr George held in August 2000, as he held various positions during his time at QR, but there was evidence that by October 2000, he was QR's Executive Manager, National Development, and reported directly to Mr O'Rourke. Prior to this he held the position of Group General Manager, Coal and Mainline Freight. 428 Mr George's email of 18 August 2000 attached comments from Mr Neil Buckley who was employed in QR's National Development Unit. Mr Buckley was either the Manager, Business Development or the General Manager, National Development Unit, having changed positions at some time during the period from January 1998 to May 2002. 429 Mr Buckley's email of 18 August 2000 was as follows:- "With respect to the proposal from the Federal Department of Transport, I offer the following comments: - The proposal fails to recognise QR's rights as the lawful owner of the facility and our legitimate commercial interests. Parties need to acknowledge this. - We need to determine what jurisdiction Queensland Department of Transport has in this matter and attempt to get the Federal DOT negotiating with QR to avoid some political deal being done at our expense. Note that the QCA Regulation excludes standard gauge infrastructure from the definition of declared services under the QCA Act. - The money (much of it One Nation funds) that National Rail spent on Acacia Ridge is irrelevant. If they spent money on improvements without tenure that is really their commercial problem. With respect to any negotiated outcome the following issues need to be considered: - QR (or at the very least a JV) to be the manager of the terminal not NR. - QR's rights to access the terminal (including provisioning facilities) to be enshrined. - One road through the industrial yard to be designated as common user. Access to the others will be by negoatiation [sic]. - QR to have reciprocal rights to access southern terminals. - Federal Government should commit the funds to provide the southern connection to Acacia Ridge Yard if they wish to resolve many of the common user access issues. - Existing month to month lease arrangements do not reflect the current value of Acacia Ridge. New prices to be negotiated. 10 year maximum term. - New commercial arrangements with respect to maintenance of the facility would also have to be negotiated with ISG." (emphasis added) 430 Later on 18 August 2000, Mr Cantwell sent an email to Mr George, Mr Buckley and another QR officer, Mr Peter Ellerby. Mr Cantwell said he agreed with Mr Buckley's sentiments but that "we need to think carefully about our response …" He said that appearing to be "bloody minded" would strengthen Queensland Transport's resolve. He went on to say:- "The trick will be to develop a response which either blows their proposal away completely due to its illegality or has the appearance of meeting their requirements but preserves QR autonomy, flexibility etc." (emphasis added) September 2000: Meeting between Mr Graham and Mr Scheuber; NRC's proposal for long term access 431 On 7 September 2000, Mr Graham met with Mr Scheuber, who was then QR's Acting CEO, to discuss NRC's proposal for the future operation and control of the AR terminal. Mr Graham referred to this in his letter to Mr Scheuber of 8 September 2000. He said that QR had a stated preference for managing and operating the AR terminal while providing services to NRC under commercial terms and conditions to be agreed between them. Mr Graham said that NRC, on the other hand, was committed to continue loading and unloading its own trains and providing "interface services" directly to its own customers. 432 Mr Graham went on to say in his letter that, recognising both parties concerns and "probable areas of agreement", NRC proposed the following:- "1. QR and NR enter a long term agreement (23 years) for QR to provide NR with access to the area defined by our current lease, sufficient to service National Rail's current train plan, at existing service quality and at a cost that reflects current operations and NR capital investment in the complex. 2. QR and NR enter into a seven year agreement consistent with the long term access agreement in 1. above to provide for:- 2.1 QR to manage the allocation of access to terminal capacity for a defined area being TRACK A, new crane roads 1-6 and industrial roads 1-4 and hardstand between Track A and new crane road no 1. 2.2 NR is guaranteed access consistent with the long term access agreement outlined in 1. above. 2.3 NR to maintain a right to load, unload and service National Rail trains and provide customer interface services for company customers including current IT and administrative systems and ingates and weighbridges. 2.4 QR to maintain a right to load, unload and service QR trains and provide customers interface services for their own customers. …" (emphasis added) 433 It is not necessary to set out the remaining terms proposed in Mr Graham's letter. His proposal contained a concession by NRC because he did not insist on a lease. Rather, what was put forward was a proposal for long term access by NRC so as to be able to service its current train plan while at the same time reserving to QR the right to load and unload its trains and service its own customers. However, the proposal was rejected by Mr O'Rourke in a letter dated 19 September 2000. 434 Mr O'Rourke's letter of 19 September 2000 commenced by setting out QR's position with respect to the non-declared part of the AR terminal. He said that:- · QR considered the AR terminal to be a strategic asset which was "the gateway to fulfilling our national ambitions" (emphasis added) and the bridge for the gauge change between Queensland and the rest of Australia; · QR had not been allowed to participate in the acquisition of NRC on its privatisation and had little incentive to give away control of its only interstate asset; · QR wished, in the future, to operate its own services at AR "and not be beholden to an unknown potential competitor"; and · QR considered that the AR terminal was inefficiently operated and had spare capacity which was not being used. 435 Mr O'Rourke said in his letter that whilst QR acknowledged NRC's preference to load and unload its own trains, a satisfactory dual or multi-operator arrangement could not be envisaged at the AR terminal. 436 Nevertheless, recognising the need for certainty in the sale of NRC, Mr O'Rourke stated that QR was prepared, inter alia, to:- "- discuss long-term (say 10 years with options to extend) access arrangements on a commercial basis at Acacia Ridge for National Rail or its purchaser; - provide sufficient capacity for the existing level of NRC business …; and - recognise investments by National Rail in terminal improvements … possibly by …QR repaying National Rail for the written down costs…" October 2000: Mr George's memorandum to Mr O'Rourke; concern about loss of potential bargaining chip 437 On 9 October 2000, Mr Wilson wrote to Mr O'Rourke stating that Queensland Transport wished to finalise the issue of control and use of the AR terminal. He described it as "a dominant freight transport node for Brisbane and … the focal point of Queensland's rail linkage with the rest of Australia". He said that there was a "virtual impossibility of the facility being economically duplicated in the foreseeable future". 438 Mr Wilson went on to suggest track access for NRC in the form of a non-exclusive licence. He said that access charges should be on an equitable basis and that access charges should take account of NRC's expenditure on fixed infrastructure at Acacia Ridge since 1993. He also said that he would advise the Commonwealth Department of Transport to the same effect. 439 Mr O'Rourke sent a copy of the letter to Mr George with a copy to Mr Cantwell. The letter seems to have caused considerable consternation within QR, as revealed in Mr George's handwritten memorandum to Mr O'Rourke of 16 October 2000. 440 Mr George's memorandum is important. I will set out in full as follows:- "The attached is in my view 'out of line'. It is fundamentally different to our last discussions with Helen and basically would make Acacia Ridge 'common use'. On this basis the chances are QR would not get any capacity at the terminal – as incumbency will strengthen NR's position and QR would have no greater rights than Freightcorp. Bruce has positioned QR by writing to the Commonwealth. I am checking what powers QT have but neither Steve/myself believe they can get the terminal declared by the corridor assessment process. My recommendation is that you ask Bruce why he has put an unagreed position to the Commonwealth in respect of a QR asset without the politeness to discuss with us in advance. This undermines QR's position re Toll, and takes away a potential equity bargaining chip if it goes ahead. I would welcome the opportunity to discuss." (emphasis added) 441 The references in Mr George's memorandum to "Helen", "Bruce" and "Steve" are to Helen Stehbens and Bruce Wilson of Queensland Transport, and Steven Cantwell. 442 On 20 October 2000, Mr O'Rourke wrote to Mr Dan Hunt, the Acting Director-General of Queensland Transport. He said that QR's position was that with the exception of Industrial Roads 5 to 9 (ie a major part of the marshalling yards) which would be a common user facility managed by QR's NAG, the remainder of the AR terminal would be "[m]anaged and operated as an above-rail facility with access for National Rail developed in commercial arrangement with QR". 443 Mr O'Rourke went on to say:- "I find it difficult that the Commonwealth has been advised of a position as I understand it that the whole of the terminal will be managed as a below-rail common user facility where QR itself might have some difficulty accessing what is its own terminal. It seems ironic to me that the Commonwealth can on one hand exclude QR from participating in the sale of its assets and thus restricting our expansion plans when on the other hand we are advising the Commonwealth that National Rail tenancy will be dealt with as a below-rail common user arrangement. I would like to discuss this matter with you so that QR can establish its future position with some certainty and most especially in view of the advanced QR/TOLL Joint Venture discussions." (emphasis added) 444 Mr Hunt replied to Mr O'Rourke's letter of 20 October 2000 on 30 October 2000. He said that Queensland Transport's position had been consistently stated in earlier correspondence. He also said that the AR terminal was a part of the corridor and was needed because of its strategic importance in the context of s 215 of the Transport Infrastructure Act and because it provides access to many private sidings including QR's. He continued:- "Queensland Transport's desired outcome is a common user interstate rail terminal and establishment of a common user marshalling yard (both standard gauge and Queensland gauge) to be managed by NAG. No party would have exclusive access to a facility of strategic importance to the State and I believe it is in QR's interests to attract as much freight as possible through Acacia Ridge." (emphasis added) 445 Mr O'Rourke sent a copy of Mr Hunt's letter to Mr George with an instruction to follow up the letter with Queensland Transport and discuss. Copies of the letter were also sent to four QR officers including Mr Oldfield and Mr Buckley. In October 2000 Mr Oldfield and Mr Buckley were reporting to Mr George. The copy letter is annotated with handwritten notes which were acknowledged in cross-examination of Mr Buckley to be in Mr George's handwriting. 446 Mr George's notes on the letter stated that QR disagreed with Queensland Transport's desired outcome of a common user interstate rail terminal. As to Mr Hunt's statement that no party would have exclusive access and that it was in QR's interest to attract freight, Mr George stated:- "not necessarily – ignores the strategic importance to QR in negotiations of reciprocal arrangements." (emphasis added) November 2000: Further discussions and correspondence about different positions taken by NRC, QR and Queensland Transport 447 On 6 November 2000, there was a meeting of eight QR personnel including Mr George, Mr Cantwell of the NAG, Mr Drew, who was QR's corporate counsel, Ms Calvisi from legal services and Mr Buckley. 448 The purpose of the meeting was to discuss QR's strategy in preparation for a meeting with Mr Hunt and Mrs Stehbens which had been arranged for 10 November 2000. 449 Notes of the meeting of 6 November 2000 were kept. The notes commence by referring to the different positions taken by NRC, QR and Queensland Transport following recent discussions and correspondence. Queensland Transport's position was said to be that:- · the AR terminal should be common user, managed by QR's NAG; · no party to have exclusive access; and · NRC to be provided access, recognising its historic capacity and prior investment. 450 QR's position was stated to be that:- · QR's above rail group operate the AR terminal; · Industrial Roads 5 – 9 (ie the marshalling yards) be designated common user, to be managed by NAG; · access be provided to NRC for sufficient capacity to handle its existing level of business, but not sterilising its capacity; · there be commercial charges for access, but recognising NRC's prior investment; · the AR terminal not be deemed an essential facility nor be declared for open access; · QR to deal with third parties on a strictly commercial basis; and · QR to be able to use the AR terminal either for equity in an interstate joint venture or "to secure access to ensure reciprocity to southern terminals eg Chullora, Islington etc". (emphasis added) 451 NRC's position was stated to be that it preferred a lease rather than access, that it wished to operate the AR terminal or part of the terminal and that it wanted control of the terminal information system. 452 The notes then referred to discussion at the meeting about the implications and the possibility of the AR terminal being designated as rail corridor or commercial corridor land under s 215 of the Transport Infrastructure Act. The notes record the following:- "QT apparently consider they have the power to designate such a facility as of strategic importance to the State and effectively take control of it. This was clearly not the intent of this section of the Transport Infrastructure Act. QR would argue that the terminal was not of strategic importance to the State as part of a transport corridor. This is because it is non corridor. QR is also unaware of it being in a transport infrastructure strategy. If QT pursued this avenue they would also end up with ownership of a terminal and potential responsibility for reimbursing NRC for their $17m improvements. If this avenue is not pursued by QT, Government (via Treasury) have the power to declare the terminal under the QCA Regulations. As such, QR is vulnerable to QT taking direct action contrary to QR's commercial interests." 453 The notes went on to record that it was decided the best way forward would be to maintain QR's stance that the terminal was non-corridor and:- "Resolutely refuse to have the terminal declared or made a common user facility – and therefore no appeal processes if capacity not available to a third party using reciprocity and our need to have easy access to our own terminal as a rationale." (emphasis added) 454 The notes concluded by stating that QR may not need to brief the Minister if an agreement could not be reached because Queensland Transport was "giving precedence to their regulatory role over their shareholding role". 455 On 10 November 2000, Mr George sent the "final minutes" of the meeting to Mr Scheuber, Mr Cantwell, Mr Buckley and other QR personnel. The "final minutes" were apparently a reference to the notes described above. 456 On 6 December 2000, Mr O'Rourke reported to a QR Board meeting on the results of the meeting of 10 November 2000 between QR and Queensland Transport. His written report stated that a medium term joint position was agreed between QR and Queensland Transport as follows:- · The AR terminal to be operated by QR above rail group; · Industrial Roads 5 to 9 and the southern access road to be common user and subject to access via the NAG; these roads were to be declared strategic rail corridor land under the Transport Infrastructure Act; · QR to provide NRC with commercial access providing sufficient capacity to meet its current requirements; and · QR would negotiate commercially with third parties (and NRC for expansion) for access to the AR terminal. Mr Graham's letter of 13 November 2000; no obligation to grant long lease 457 On 13 November 2000, Mr Graham replied to Mr O'Rourke's letter of 19 September 2000. He said he appreciated Mr O'Rourke's efforts to find a commercially satisfactory outcome but he said that Mr O'Rourke's position did:- "… not meet what we and our shareholders regard as the absolute minimum obligation of both QR and the State under the NRC Establishment Agreement." (emphasis added) 458 Mr Graham went on to refer to the purpose for which NRC was formed, as a commercially viable interstate rail freight business and, paraphrasing from the EA, that it would be given access to interstate rail assets for so long as it continued to operate the business. He said that this did not depend on NRC continuing to be owned by its present shareholders. He pointed out that all of NRC's capital city terminals were integrated into its on-line information system and that the AR terminal "is a fundamental part of this national intermodal logistics operation". 459 Mr Graham's letter continued as follows:- "We accept that, under the Establishment Agreement, QR has no obligation to transfer ownership or grant a long-term lease. What is required however, as a minimum, is access to the nominated area on commercial terms and conditions. So that there is no misunderstanding, I attach a plan which shows this area. Those terms must include the right to operate the nominated part of the terminal to load and unload trains and monitor and control the movement of freight into and out of the terminal area. With QR's concurrence, we have made a substantial capital investment in the facilities necessary for such operations. Access without operational rights is unrealistic and uncommercial, particularly in the context of our now well established intermodal operations. To operate a commercially successful interstate rail freight business on a national basis requires this level of operatorship at all key terminals. It is an integral part of interstate rail freight operations today." (emphasis added) 460 The plan attached by Mr Graham is reproduced below:- 461 Mr O'Rourke sent a copy of Mr Graham's letter of 13 November 2000 to Mr George with a request that they discuss it. He also sent a copy to Mr Scheuber. 462 Mr O'Rourke replied to Mr Graham's letter of 13 November 2000 on 6 December 2000. He said that QR did not agree that NRC had the right under the EA to operate the nominated part of the AR terminal, to load and unload trains and to control the movement of freight into and out of that area. 463 The letter of 6 December 2000 continued as follows:- "As previously advised, QR is prepared to provide access to National Rail. In this context, QR considers that access means "able to be entered, or entered upon'. Taking account of the fact that Queensland is not a Shareholder State, QR believes that National Rail is granted sufficient access, provided it has the right of entry into the terminal, notwithstanding the intention that the terminal management functions are to be performed by QR." (emphasis added) February 2001: Further strategising by QR 464 On or about 13 February 2001, QR produced a discussion paper entitled "Strategic Development Options and Issues for Acacia Ridge". Mr Oldfield and Mr Buckley appear to have been involved in preparing the document because on 13 February 2001, Mr Peter Gardiner of the NAG sent an email to Mr Oldfield, with a copy to Mr Buckley, thanking him for the document. 465 The strategic issues paper stated that in negotiating with NRC, the outcomes that QR might seek, included:- "QR be in a position to use the terminal asset as a lever for entry into the interstate markets, including possible entry into other NRC terminals on a reciprocal basis." (emphasis added) 466 A similar statement appeared later in the paper, to the effect that the AR terminal is a strategic asset for QR because control of it ensures that QR has some bargaining power in future efforts to enter interstate freight markets. 467 QR's legitimate outcomes were said to include being able to operate its own interstate trains, or trains in which it may have an interest, into the AR terminal. 468 NRC's legitimate outcomes were said to include:- · certainty of access; · not disrupting the sale process or devaluing NRC; · control over service quality; · recognition of prior NRC investment at AR; and · ability to expand its business over time. 469 Under the heading "Commercial and Strategic Value", the paper said:- "Given that the NRC terminal is the key to the standard gauge access to Queensland, and that future business aspirations of QR are to go interstate in some form, it clearly makes no sense to give the asset away to a potential competitor, or in any way to lose control of it." (emphasis added) 470 The paper discussed what is called "The Head-On Approach" which was the service of a notice to quit and legal action to recover control of the AR terminal. The pros and cons of this approach were set out. The cons included a concern that a political solution may be imposed because the strategy would devalue NRC for the purposes of the sale process. 471 There was also discussion of a possible joint venture with Toll. The paper commented that such a joint venture could end up controlling and managing both the interstate and intrastate terminals. 472 In his email of 13 February 2001, Mr Gardiner commented that:- "To date, to the best of my knowledge, NRC has not sought to block access to operators seeking access to the leased area, and in fact have been quite cooperative in determining the availability of capacity in the yard. All NRC does ask is that third party operators seeking access to the yard not overly interrupt their existing operations and that some form of commercial agreement is in place between the parties before the commencement of new services. NRC has shown reluctance to let new operators use the marshalling yard, but may be willing to let this occur, provided the above principles can be agreed in the first instance. I would suggest that the inability of new operators to access the yard has been more about the unavailability of suitable schedules between Brisbane and Sydney, and the fact that there a [sic] no suitable common user arrival and departure roads within Acacia Ridge. I suspect that NRC may allow some form of access provide [sic] that suitable arrangements can be put in place." March 2001: QR Presentation to NRC 473 On 8 March 2001, Mr Scheuber wrote to Mr Graham attaching a detailed proposal for access to the AR terminal. Mr Scheuber stated that the regulatory environment and the national rail industry structure had changed dramatically since the EA and, because of this, QR was not able to offer exclusive access. 474 Mr Scheuber attached to his letter a copy of a "QR Presentation to NRC" which was apparently to be made the following day, 9 March 2001. 475 He also attached a draft Terminal Services Agreement. It is not necessary to set out the detail of either of these documents. March 2001: Mr Bredhauer proposes multi-user facility to Mr Anderson 476 On 14 March 2001, Mr Steve Bredhauer, the Queensland Minister for Transport, wrote to Mr John Anderson, the then Deputy Prime Minister and Commonwealth Minister for Transport. Mr Bredhauer stated that his objective was to increase the number of operators using the AR terminal, hence his efforts to secure multi-user access "and to comply with the obligations imposed by the Establishment Agreement". 477 Mr Bredhauer proposed a review of the facility and an interim arrangement for access by NRC. He also said:- "The agreement with QR is for the interim period until the review is completed. For that period, NR should have track access in the form of a non-exclusive licence or similar arrangement that would be made available by QR on a commercial basis. In determining the access charge consideration would be given to whether it is appropriate to take in to account NR's prior investment in fixed infrastructure at Acacia Ridge since its establishment in 1993 or whether it is appropriate that direct compensation be made to NR for those on-site investments. The Establishment Agreement is binding on the parties for its duration. I am of the view that my proposals are within its requirements." 478 Mr Anderson replied on 24 April 2001. He said that he was advised that Mr Bredhauer's proposal was not consistent with the State of Queensland's obligations under the EA. April 2001: QR briefing paper for Mr Bredhauer 479 In April 2001, various QR personnel including Mr Buckley prepared a "background paper" for Mr Bredhauer. It is unnecessary to set out the detail. It is sufficient to say that the paper sought to justify QR's proposal for a multi-user facility at the AR terminal. Drafts of the paper were passed between QR personnel including Mr George and Mr Buckley before the final form was signed off by Mr George. 480 In commenting on one of the drafts Mr George said:- "Are we on strong ground in respect of whether QR has/has not … given encouragement or mutually assumed with NR that, if NR invested capital on site, NR would receive a long term lease. I suspect in the early days there may have been some thinking along those lines?" (emphasis added) Meeting of 10 May 2001 and letters between Mr Graham and Mr Scheuber 481 On 10 May 2001, Mr Graham and others from NRC met with Mr George and others from QR to discuss QR's operational model for the AR terminal. Mr Graham described the meeting in a letter to Mr Scheuber of 15 May 2001. Mr Graham said in the letter that he agreed that operational modelling was essential to understand "the capacity limitations and service quality implications of different operating paradigms for the container terminal". 482 Mr Graham stated in the letter that at the start of the meeting Mr George invited comment on NRC's reaction to the presentation in Brisbane on 9 March 2001, as to which Mr Graham commented:- · NRC nominated the AR terminal in Corporate Plan No 1 in April 1992; · the three year lease was not in substitution for NRC's nomination of the AR terminal; · the Queensland Government's obligation is to provide access to NRC, not necessarily in the form of a lease, but QR agreed to a lease in fulfilment of NRC's nomination; and · access should not be confused with NRC's right of operation. That function was transferred to NRC and agreed in writing on 4 April 1993. (emphasis added) 483 Mr Graham offered, without prejudice, to consider an alternative form of access agreement other than a lease. 484 Mr Scheuber replied on 29 May 2001. He said that QR had not received a copy of NRC's Corporate Plan No 1 "wherein you state you nominated the Acacia Ridge facility". July 2001: More QR strategising 485 By email dated 9 July 2001, Mr Buckley sent a confidential draft negotiation strategy for the AR terminal to Mr Alan Williams of Queensland Transport. The email stated that Mr Buckley was still receiving comments from QR "internal stakeholders" such as NAG, Corporate Counsel, Property, Mainline and Regional Freight, and that he did not have endorsement from the CEO or the Board for the strategy. Nevertheless, it was sent as an "informal" early draft. 486 The draft negotiation strategy included the following outcome to be sought by QR:- "To use the terminal asset as leverage for entry into interstate markets, including possible entry into other NRC terminals on a reciprocal basis." (emphasis added) 487 The draft negotiation strategy also included the following statement:- "Clause 14 of the Third Amendment Agreement to the Establishment Agreement made in 1999 provides that on the sale date unless otherwise agreed by the parties, none of the parties will have any further rights or obligations under the Establishment Agreement. This can be used to QR's/QT's advantage." (emphasis added) 31 August 2001: QR seeks approval from Queensland Government to terminate NRC's tenancy 488 On 31 August 2001, Mr Scheuber wrote to Mr Bredhauer. He referred to an announcement made on 24 August 2001 by the Commonwealth, NSW and Victorian Governments of the combined sale of NRC and Freightcorp. Mr Scheuber said that given QR's strategy to regain control of the AR terminal, he sought to give notice to terminate NRC's monthly tenancy effective from the sale date and:- "withdraw any implied commitment or understanding that proposed new arrangements or grandfathering existing arrangements at the terminal will apply to the new owners." 489 Mr Scheuber's letter was apparently referred by Mr Bredhauer to Mr Wilson, who replied on 26 October 2001. Mr Wilson said that it should be assumed that NRC's access entitlements would apply to the new owners and that Queensland Transport would not support QR:- · giving notice to NRC to terminate the tenancy from the date of sale; or · "reneging" on NRC, or its new owners, having sufficient capacity, provided on a commercial basis, to operate the AR terminal at its pre-sale level of business activity. December 2001: QR's access undertaking 490 By a document published on or about 1 December 2001, QR gave an undertaking for the purposes of the Queensland Competition Authority Act 1997 (Qld) ("Competition Act") providing a framework to manage negotiations with access seekers for rail transport infrastructure on the North Coast Line. 491 The preamble to the undertaking states that it has been prepared in accordance with the Competition Act and that its intention is to ensure that access is negotiated in a competitively neutral environment. 492 The activities which an access seeker may seek to carry out on the rail infrastructure include mainline running of a train from its origin to destination including the use of passing loops and the loading and unloading of trains. 493 Part 3 of the undertaking is headed "Ringfencing Arrangements". It states that QR has established NAG as a business group separate from QR Operational Business Groups. The primary function of NAG is said to be to managing the provision of Below Rail services, including negotiation of access with access seekers and management of access agreements with access holders. 494 Part 4 of the undertaking sets out the process to be followed for requests for access and the negotiation of access agreements. It is not necessary to set out the details. 495 Part 6 of the undertaking deals with pricing principles. It states that QR's primary objective in developing access charges is to achieve revenue adequacy. This is specified as revenue sufficient to achieve full recovery of efficient costs including an adequate rate of return on the value of the assets. 496 Limits on price differentiation are set. QR states that it will not differentiate access charges between access seekers or access holders for the purpose of adversely affecting competition within a relevant market, including for the purpose of preventing or hindering access. 497 Paragraph 6.1.4 of the undertaking states:- "In developing Internal Access Agreements … QR will not establish Access Charges for QR Train Services for the purpose of preventing or hindering access by a third party access seeker into any market in competition with the QR Operational Business Group providing those QR Train services." 498 Part 7 of the undertaking is headed "Capacity Management". It states that QR will perform scheduling, train control and associated services in accordance with the Network Management Principles. These are set out in a schedule. 499 Paragraph 7.4.1 provides that access rights will be allocated to the first access seeker with whom QR can negotiate and execute an acceptable access agreement. 500 Reference Tariff Schedules are set out in Schedule F to the undertaking. The Reference Tariff set out in paragraph 3.1 of Schedule F for a nominated reference train service is extraordinarily complex. February 2002: Completion of sale of shares in NRC; more strategising by QR 501 Completion of the sale of the shares in NRC owned by the Commonwealth, NSW and Victorian Governments took place on 21 February 2002. 502 On 14 February 2002, a week before the completion date, Mr Buckley sent an email to an officer of the Treasury of the Queensland Government stating that QR's objectives at the AR terminal were to:- · achieve a commercial return, including a return on assets; · ensure that capacity throughput was maximised; and · leverage the AR terminal so as to ensure that QR was granted reciprocal assets to interstate terminals on reasonably commercial terms. 503 Mr Buckley said in the email that cl 14 of the Third Amending Agreement provided that on the sale date, unless otherwise agreed by the parties, none of the parties would have any further rights or obligations under the EA. 504 Mr Buckley went on to say that it was QR's intention to negotiate a non-exclusive access arrangement at the AR terminal with NRC, and potentially other operators. He said QR would not countenance any proposal for a long term lease and that QR would be the manager. September 2002: Strategic options for QR 505 In September 2002, QR's NAG produced a discussion paper entitled "Strategic Options for the Management and Operation of the Acacia Ridge Standard Gauge Yard". The paper was dated 12 September 2002 and states that it was prepared by NAG in consultation with the Coal and Freight Services (C&FS), Corporate Counsel and Property sections of QR. 506 The paper commenced by stating that the current strategy for resolution of the question of access was based on QR retaining ownership and regaining management control of the AR terminal. 507 The potential outcomes sought by QR included use of:- "the terminal asset as leverage for Interail's entry into interstate markets, including possible entry into other Pacific National terminals on a reciprocal basis." 508 Interail Australia ("Interail") is QR's interstate rail freight operator. 509 The paper commented that if NAG managed the terminal on an open access basis, reciprocal rights could not be guaranteed. The paper also stated that lack of full operational control over a major freight terminal in the Brisbane area was a "major strategic disadvantage against a competitor like Pacific National" (emphasis added). 510 Reference was made to Queensland Transport's perspective that it was not acceptable for QR to be the terminal operator because of a perception of bias. To overcome this, it was said to be necessary for NAG to manage the terminal. 511 Later the paper recorded that:- "Terminal management is not core business and Network Access does not currently have the skills expertise or systems to manage or operate a container terminal." (emphasis added) 512 The paper contained at least one other acknowledgment of QR's inability to properly manage or operate a terminal. 513 The perspective of C&FS was stated to be that it was strategically important for QR to control at least one major Brisbane Freight terminal. C&FS was not opposed to NAG operating the AR terminal. 514 The paper also contained discussion of Interail's perspectives. These were said to be that without access on commercially acceptable terms, Interail could not operate interstate services to or from Brisbane. From Interail's perspective:- "QR control of the Acacia Ridge interstate terminal could be critical to Interail's national expansion plans. Interail is more likely to negotiate reciprocal rights of access to other interstate terminals if QR can regain control of the terminal." (emphasis added) 515 QR's above rail interests were also said to be control of a major interstate terminal in Brisbane as a "lever for national expansion" and securing access to the AR terminal and the marshalling yards on fair and equitable terms. 516 As to QR's "property interest", that is, ownership of the AR terminal, the following appeared in the paper:- "If QR were simply interested in realising a return from the terminal, then it would be appropriate to lease it to the highest bidder to operate it as they wish. QR would be basically indifferent to who leases the terminal – in fact it would be reasonable to sell it if the maximum value could be extracted from the purchaser. QR's (Interail's) interstate expansion opportunities, together with C&FS' desire to control a major Brisbane terminal, would not benefit from this option." (emphasis added) 517 The conclusion which the paper reached was that QR's strategic ambitions as an interstate non-bulk operator could be achieved if the AR terminal was independently managed. The paper went on to say that it might even be acceptable for PN to operate the terminal under contract to the independent terminal operator. However, no such possibility was reflected in QR's proposed Draft Terminal Services Agreement to which I refer later. 518 The discussion paper's conclusions continued as follows:- "QR's vision/mission could clearly contemplate entering a terminal management/operating business, potentially on a national or global basis. However, it would need to make a significant investment in systems and expertise to be successful in such a venture (its track record in terminal management and operations is poor). On a national basis, Patricks consider their core competence to be terminal management (and they own/manage a number of shipping terminals plus Pacific National has control of every major rail terminal), so we will confront a major grizzly bear if we try to enter that market. Terminal management is a critical component of managing a supply chain; whether that is a shipping terminal, coal terminal or key yards such as Jilalan and Callemondah. The problem eventually becomes one of best managing the capacity available from the facility." (emphasis added) 519 Section 5 of the paper stated that once QR determined whether to be in the terminal management business there would be a range of options available. Seven options were listed ranging from NAG managing the entire facility to various joint ventures. The only options said to be in NRC's interests were retaining the status quo and, possibly, sale of the AR terminal. December 2002 – February 2003: Preparation for issue of notice to quit 520 On 2 December 2002, the Board of QR resolved to endorse a strategy set out in a detailed submission to the Board calling for termination of the PN tenancy and resumption of control by QR. The submission included an "endorsement by Senior Executive/Chief Executive" and was signed by Mr Cantwell, Mr George and Mr Scheuber in late November 2002. 521 The submission set out a background statement referring to the history of the matter from the EA to the sale of NRC. In cross-examination of Mr Scheuber, it was put to him that some of the material in the background statement was inaccurate. I will refer to this later. 522 Reference was made in the background statement to the Third Amending Agreement. It was said that unless NRC finalised a lease or access agreement prior to the sale of NRC, the successful bidder would have no basis for striking a lease or access arrangement other than through commercial negotiation. 523 The submission also stated that undertakings were made to the NRC shareholders, prior to sale, that access to the AR terminal would be provided on a commercial basis and that consideration would be given to recognition of NRC's prior investment. 524 The policy of Queensland Transport was said to be:- "- Ownership of the terminal resides with QR/QT; - Access should be provided to Pacific National including sufficient capacity to conduct their business; - Maximisation of rail freight traffic through the AR facility; - Common user access to the interstate marshalling yard; - Multi-user access to the interstate terminal; - Management and control of the asset by a neutral entity such as …NAG; - Reservation of interstate terminal capacity for interstate traffic; - Access by Third Party Operators to private sidings; and - Servicing of Third Party Operator Train Services." 525 The submission stated that QR needed to manage the AR terminal in order to maximise return, access and throughput. It said that QR may be able to obtain an additional rental yield of $600,000 per annum over the existing rent of $800,000 per annum paid by PN. But it said that the real opportunity for QR was: · facilitation of increased rail freight at the expense of road; · rationalisation of narrow and standard gauge intermodal operations resulting in shunting savings in excess of $3 million per annum; and · avoiding intrastate intermodal terminal capital expenditure in excess of $10 million. 526 Under the heading "Strategy", the submission stated that the probability of reaching a compromise with PN was "negligible given there are no positive outcomes for PN". This was apparently a reference to the options listed in NAG's discussion paper of 12 September 2002 which stated, in effect, that the only positive outcome for PN was retention of the status quo. 527 The proposed strategy was for QR to take control of the existing terminal facility and marshalling yard from PN which would facilitate the establishment of a multi-user terminal. 528 There was also an analysis of risks of the strategy, including what was termed "Government Political Risk". This was said to be that PN may be able to exert pressure on the Commonwealth or State Governments to make QR accept a compromise. 529 At a meeting the QR Board held on 25 February 2003, it was resolved, subject to reviewing a draft business case on QR's proposal for change of control at the AR terminal, to issue a formal notice to quit to PN. 530 The draft business case was prepared by NAG; the document indicated that the contact officer was Mr Ian Wilson. 531 The objectives stated in the draft business case include increasing the return on the AR terminal, changing its control, and utilising the AR terminal in line with QR's business needs and Queensland Transport policy. The document recommends rejection of the current tenancy arrangements with PN because the current rental return is said to be below market value and because it will impede QR's ability to enhance its own operations through the AR terminal. Reference is also made to the difficulty of establishing a common user facility in the marshalling yards under the existing tenancy arrangements. 532 The benefits to QR stated in the draft business case include:- · increasing the return to QR from "its Acacia Ridge assets and consequently reduce the implicit subsidy of NRC"; · using unutilised capacity; · managing the AR terminal as a separate terminal business; · moving existing Moolabin terminal volumes to the AR terminal; and · providing access to QR and third parties. 533 The preferred business case proposed in the document is said to have a value to QR of $27.6 million. 534 The Board resolved that simultaneously with the issue of the notice to quit, an offer was to be made to PN for a 12 month lease or licence, with control during that period, as well as an access agreement to the marshalling yard. 535 The Board of QR also resolved that at the time when the notice was issued, PN would be advised that QR's intention was for the AR terminal to be managed as follows:- · common user facility for the marshalling yards; and · multi-user facility for the balance, with a "transparent access regime" which would accommodate PN "as a core customer with capacity entitlements". 536 The submission to the QR executive, which was endorsed by the Board on 25 February 2003 in the resolutions described above, was signed by Mr Scheuber and Mr Cantwell. May 2003: Notice to Quit served; PN seeks interlocutory injunction and QR gives undertaking 537 QR served a notice to quit on PN on 26 May 2003. The notice purported to terminate PN's tenancy with effect from 4 July 2003. 538 A few days earlier, on 23 May 2003, Mr Scheuber wrote to Mr Stephen O'Donnell, who was then the CEO of PN, foreshadowing the service of the notice to quit. The letter attached an offer to PN of a licence of the AR terminal for a further 12 month period to enable it to manage and operate the terminal during that period. QR confirmed its commitment to work with PN with a view to providing it with access to the terminal. The letter also stated that QR's aims included the eventual establishment of a multi-user terminal providing access on commercial terms 539 On 20 June 2003, PN commenced these proceedings, seeking, inter alia, interlocutory injunctive relief restraining QR from giving effect to the notice to quit. 540 On 13 June 2003, QR agreed to provide the following undertaking to the court, pending the final determination of these proceedings:- "… the Respondent…will not take any steps to give effect to the Notice to Quit dated 26 May 2003 or otherwise take steps to terminate or interfere with the existing occupancy of land described within the lease dated 4 April 1993 between the Respondent and …[NRC] and the existing occupancy and use of equipment described within an Equipment Lease Agreement dated 17 June 1994 between the respondent and… [NRC]." 541 Mr Scheuber reported to the Board of QR on 29 July 2003 that PN had sought injunctive relief. The minutes of the meeting of the QR Board from 29 July 2003 record that:- "Mr Scheuber noted that Toll/Pacific National is QR's single biggest competitor, and questioned whether current competitive strategies remain relevant. In light of this, Mr Scheuber has asked Coal and Freight Services to revisit the whole business strategy in relation to Toll/Pacific National." 10 November 2003: Access Agreement for nominated network 542 On 10 November 2003, QR and PN entered into an agreement entitled "Access Agreement General Freight" ("General Freight Access Agreement"). 543 Under the General Freight Agreement, QR granted non-exclusive rights to PN to operate train services over the nominated network and to provide train control for those train services. 544 The train services were specified in a schedule. They were extensive and covered specified services over the following:- · the border to AR; · AR to Fisherman Islands; · AR to Orrcon Siding (Rocklea); and · Beaudesert Bluemetal Siding to Fisherman Islands. 545 All services were described as "return" or, in the case of the border to AR, northbound and southbound. 546 The nominated network was set out in another schedule which specified the number of the standard gauge line section on which PN would operate the following services:- · the border to AR; · AR to Salisbury; · Salisbury to Yeerongpilly; · Yeerongpilly to Dutton Park; · Dutton Park to Lytton Junction; and · Lytton Junction to Fisherman Islands. 547 The term of the General Freight Access Agreement was expressed to be from 6 October 2003 to 5 October 2008. It contained provision for renewal which required QR to consult in good faith with PN to negotiate an extension or renewal if PN gives 12 months prior notice. 548 A schedule showing the calculation of access and other charges was set out. It contained base access charges and a variable component. June 2004: QR seeks access to AR terminal 549 On 8 June 2004, Mr Buckley wrote to Mr Mark Smith, Manager Access and Infrastructure of PN in relation to three access applications made during 2003 and lodging two further applications for access to the AR terminal. 550 Application 1 was said to have been made on 2 June 2003; it was for three standard gauge services per week on Tuesday, Thursday and Sunday, arriving at 18.30 and departing at 00.30. The train length was 800 metres. 551 Application 2 was said to be dated 25 July 2003; it was for one narrow gauge service per week on Sunday, arriving at 20.00 and departing at 04.30. The length was 650 metres. 552 Application 3 was said to be dated 12 December 2003; it was for access to the shunting ladder of the marshalling yard. Mr Buckley stated his understanding that this request was almost finalised. 553 Application 4 was for a standard gauge service to commence on 1 October 2004 with three services per week. These services were described as an extension of Application 1. The same arrival and departure times and length of trains were specified, but the application sought to add further services to run on Wednesday, Friday and Saturday. 554 Application 5 was for five narrow gauge services per week. It was described as an extension of the service referred to in Application 1. 555 On 5 July 2004, Mr Buckley wrote to Mr Smith complaining about the delay in dealing with the access applications. He said the situation was unacceptable and asked for a response by 9 July 2004. 556 Mr Smith replied to Mr Buckley on 16 July 2004. He said that the access applications involved the introduction of a significant level of operations over and above those currently undertaken. He said that the requests could not be undertaken without extensive investment in the AR terminal which PN was not prepared to make given the existence of the notice to quit. 557 Mr Smith dealt separately with each access application, pointing to the unavailability of excess capacity to meet the request. 558 Mr Buckley responded on 26 July 2004. He requested that Applications 1 and 2 be dealt with as a matter of priority and not in combination with Applications 4 and 5. He pointed to ways in which capacity could be made available to meet those applications. 559 The access issue was still unresolved in September 2004. On 10 September 2004, Mr Smith wrote to Mr Buckley stating that in relation to Application 1, the impediments previously described were still applicable and the investment in the AR terminal would be required. He continued:- "Given the current litigation Pacific National is not in a position to make any such investment outside the scope of some resolution of the litigation. Pacific National is, however, willing to discuss potential resolution of the litigation and to explore significant investment in the terminal in that context." 1 October 2004: North Coast Access Agreement 560 On 1 October 2004, PN and QR entered into an agreement under which QR granted non-exclusive rights to PN for the operation of train services on the North Coast line between Brisbane and Cairns ("North Coast Access Agreement"). The nominated network under the North Coast Access Agreement covered a great number of services on the North Coast Line departing Brisbane from the AR terminal and the Moolabin terminal. 561 The term of the North Coast Access Agreement was 10 years with effect from 7 March 2005 to 6 March 2015. 562 Provision was made for extension or renewal in the same terms as contained in the General Freight Access Agreement. 1 January 2005: QR's offer to PN of a Licence 563 On 1 January 2005, QR offered PN a licence to enter and use the AR terminal (excluding the Administration Building) from 14 March 2005 to 13 March 2006 for an occupation fee of $2,568,500 per annum, payable in equal monthly instalments. Principle features of the licence are as follows:- · Clause 3.2 provides that PN is given a right of occupation in common with any other persons licensed by QR; cl 10.2 provides that QR may grant a license to any other person "as it sees fit" and PN agrees to cooperate in the joint use of the premises; · The licence fee has been calculated without regard to prior works undertaken by PN at the AR terminal (including the works listed at Schedule C of the licence and those identified in the affidavit of Mr Lonergan sworn 21 May 2004). Pursuant to cl 5.2, upon payment by QR to PN of $4,372,000 on the date the licence terminates, PN has no right, title or interest in these prior works; · PN is not to alter the licenced premises or construct any improvement on the licenced premises, nor do anything likely to disturb the efficient operation of the operation of the services or any railway at the AR terminal, nor interfere with QR's operation of rail activities; see cl 8.2 and 8.3.4. Furthermore, cl 14.3 provides that PN is not to damage the licenced premises, nor, in the performance of its works under the licence, cause unnecessary inconvenience to other licensees or disrupt ongoing terminal operations at AR; · Pursuant to cl 11.2, PN is not to make any alternation to installation, ie electrical, communication, access or security installations, on the licensed premises without QR's consent, such consent not to be unreasonably withheld; · Clause 12.9 provides that PN has no claim against QR, nor is PN entitled to terminate the licence solely because services at the AR terminal fail to operate or QR shuts down or removes any services in order to repair, maintain or replace them; and · QR has the right, under cl 13, to terminate the licence on seven days notice if, inter alia, the licence fee is seven days in arrears, if PN fails to observe any covenant contained in the licence, or if the Corridor Access Agreement is terminated for any reason. The Draft Terminal Services Agreement 564 On or about 9 March 2005, QR submitted a draft terminal services agreement to PN ("the Draft Terminal Services Agreement"). 565 The Draft Terminal Services Agreement was expressed to continue for an Initial Term, defined to mean the period from 10 March 2006 to 5 October 2008. 566 Provision was made for a Renewal Term of five years, subject to there being in force a Corridor Access Agreement for a period which includes all of the Renewal Term. 567 Provision was also made for QR to consider any request by PN for a further term beyond the Renewal Term but this was on the basis that QR "may refuse to do so for any reason in its absolute discretion". 568 Clause 4.2 provided for the grant to PN of non-exclusive access rights to the AR terminal and the marshalling yards. 569 Provision was made in cl 5.1 and Schedule 2 of the Draft Terminal Services Agreement for PN to pay QR service charges for the specified services. The charges were calculated on the proviso that the trains not carry in aggregate more than 20,830 TEU per month (ie 249,960 TEU per annum) which was thought to be the extent of usage by PN. Provision was made for PN to apply to QR to increase the aggregate TEU in any month by up to 10%, but QR was to have no obligation to agree to the increase and "may decline to accept that increased amount for any reason in its absolute discretion". 570 Clause 6.7 contained a provision which excluded any obligation on QR to provide services to PN in certain circumstances. The clause was as follows:- "6.7 The Terminal Manager may decline to provide Services (a) Without limiting any other provision of this agreement, the Terminal Manager has no obligation to provide the Services to the Rail Operator in the following circumstances:- (i) if a Train does not arrive or depart during the Permitted Time, or otherwise in accordance with the Timetable, however the Terminal Manager agrees to use its reasonable endeavours to provide the Services in respect of that Train; (ii) if the Rail Operator (or their agents or contractors) have failed to comply with a Law relevant to loading, unloading, or transport of such goods, or have failed to comply with the Terminal Protocols. (b) If the Terminal Manager does not provide the Services in the circumstances referred to in clause 6.7(a), the Rail Operator will comply with the Terminal Manager's directions in relation to removal of the Train or of any goods from the Terminal. (c) Where the Terminal Manager declines to provide the Services in relation to Trains or goods, in accordance with its rights under this agreement, the Terminal Manager will have no liability to the Rail Operator for that action. In addition, the Rail Operator will still be obliged to pay the Service Charges for the Terminal Services." 571 Clause 12.1 provided for QR to be entitled to suspend PN's rights in specified circumstances as follows:- "12. Suspension and termination 12.1 Suspension (a) The Terminal Manager may, by written notice to the Rail Operator, suspend the Rail Operator's rights under this agreement if any of the following occur: (i) the Terminal Manager in its reasonable opinion considers that suspension is required in order to avoid material damage to the Terminal, to the property of any person (including the Terminal Manager's infrastructure or equipment) or injury to any person; (ii) the Terminal Manager is unable to provide access to the Terminal or to supply the Services to the Rail Operator as a result of an Incident; (iii) a Financial Default occurs and continues for 7 days after notice from the Terminal Manager to the Rail Operator providing details of such default; (iv) the Rail Operator fails to comply with clauses 5.7, 8, 9, 11, 14 or 19.4 and such default continues for 7 days after written notice from the Terminal Manager to the Rail Operator providing details of such default; or (v) the Rail Operator fails to perform any other obligation under this agreement and such default continues for 30 days after notice from the Terminal Manager to the Rail Operator providing details of such default." 572 Clause 16 provided that each party must hold confidential to itself the Confidential Information, as defined, and not make use of it other than for the purpose for which it was disclosed. 573 The train services which were the subject of the Draft Terminal Access Agreement were described by reference to a Timetable set out in Schedule 3. The Timetable covered all trains currently operated by PN into and out of the AR terminal. Amendments to the Draft Terminal Services Agreement on 6 July 2005 574 QR submitted an amended Draft Terminal Services Agreement to PN on 6 July 2005. The amendments were intended to meet a number of objections made by PN to the initial draft as raised by Senior Counsel in his cross-examination of QR witnesses. The principal amendments are as follows:- 575 Firstly, in relation to the provision of services to the Rail Operator, cl 6.7(i) has been amended as follows: "Terminal manager agrees to use its reasonable best endeavours to provide the services...". 576 The second principle amendment concerns an alteration to the regime for the maximum monthly TEUs. Schedule 2(a)(i) is amended as follows:- "(a) Services (i) In consideration for payment of the charges referred to in paragraph 1(b) below, the Terminal Manager will during each month of the Term provide the relevant services outlined in paragraphs (A) to (E) below ("Terminal Services") for the relevant specific Trains listed in the Timetable, provided that those Trains do not carry in aggregate during that month greater than 20830 TEU a TEU greater than the TEU for that month as referred to in Schedule 4 ("Allocated Monthly TEU") (subject to paragraph (ii) below and clauses 7.5 and 7.6 of this agreement), and provided that no Train exceeds the maximum length specified for that Train in the Timetable; …" 577 The amendment adding Schedule 4, provides as follows:- Month Allocated Monthly TEU January 17624 February 20444 March 21431 April 21446 May 22054 June 19665 July 21166 August 21583 September 21895 October 22472 November 24005 December 21795 578 As with Schedule 2 in the March draft, the maximum TEU may be increased by 10% if the Rail Operator provides written notice, however a critical difference is contained in the amendments to subsection (ii) of Schedule 2(a), which I shall set out:- "(ii) The aggregate Allocated Monthly TEU of 20,830 referred to in paragraph (i) above Schedule 4 as at the date of this agreement may be permanently increased by up to 10% in any particular month by the Rail Operator by giving the Terminal Manager written notice at least 2 months prior to seeking that increase. Once the Rail Operator has given such a notice, the increased figure will be deemed to be the figure for the aggregate Allocated mMonthly TEU in the relevant month for the purposes of paragraph (i) above, and will also be deemed to be the figure for the aggregate Allocated mMonthly TEU referred to in paragraph (b) (i) below. However, the Allocated Monthly TEU for each month may only be increased under this paragraph (ii) by a maximum of 10% above the TEU for that month listed in Schedule 4 as at the date of this agreement. Any other increase will be dealt with under clauses 7.5 and 7.6 of this agreement." 579 Reference is also made in Schedule 2(a)(i) to cl 7.5 and 7.6, which have been added to the July draft. Clause 7.5 relates to additional monthly throughput, and provide as follows:- "7.5 Additional Monthly Throughput (a) Upon written request by the Rail Operator given prior to 1 July each year during the Term (but not more than once in each calendar year), the Rail Operator may request the Terminal Manager provide Terminal Services for Additional Monthly Throughput for the remaining months of the Term commencing 1 January of the following year or such later date nominated by the Rail Operator. For the avoidance of doubt, a written request by the Rail Operator may not seek to reduce the Allocated Monthly TEU. The rights under this clause 7.5 are in addition to the rights to increase the Allocated Monthly TEU in paragraph 1(a)(ii) of Schedule 2. (b) If, in the Terminal Manager's reasonable opinion when having regard to: (i) the existing capacity of the Terminal; (ii) the Terminal Manager's existing or likely future commitments to other users of the Terminal (including Queensland Rail and its Related Bodies Corporate); (iii) the Additional Monthly Throughput requested by the Rail Operator; and (iv) the extent to which the Terminal Services and the Terminal Manager's other operations in the Terminal can be carried out efficiently; an Expansion is required in order to enable the Terminal Manage to provide Terminal Services for the Additional Monthly Throughput, clause 7.6 shall apply. (c) If, in the Terminal Manager's reasonable opinion having regard to: (i) the existing capacity of the Terminal; (ii) the Terminal Manager's existing or likely future commitments to other users of the Terminal (including Queensland Rail and its Related Bodies Corporate); (iii) the Additional Monthly Throughput requested by the Rail Operator; and (iv) the extent to which the Terminal Services and the Terminal Manager's other operations in the Terminal can be carried out efficiently, an Expansion is not required in order to enable the Terminal Manage to provide Terminal Services for the Additional Monthly Throughput requested, the Terminal Manager will agree to provide Terminal Services for the Additional Monthly Throughput. (d) If the Terminal Manager does agree to provide Terminal Services for Additional Monthly Throughput pursuant to clause 7.5I the Allocated Monthly TEU for the remaining months of the Term will be deemed to be permanently increased by the relevant Additional Monthly Throughput for the purpose of this agreement, including paragraphs 1(a)(i) and 1(b)(i) of Schedule 2. However, paragraph 1(a)(ii) of Schedule 2 will no longer apply to any Allocated Monthly TEU that has been increased under clause 7.5(c)." (emphasis added) 580 Clause 7.6(a) provides that the Terminal manager must, at its own cost and expense, carry out expansion of the Terminal to enable the manager to provide terminal services for the relevant additional monthly throughput. If required to expand, the terminal manager must do so in a competent and professional manager, to the standard required by any relevant laws. 581 Clause 7.6(c) provides that, subject to cl 7.6(a), the terminal manager is to consult with the rail operator in relation to the manner and cost of the expansion, but ultimately, the manner in which the expansion is undertaken is at the terminal manager's absolute discretion. 582 The terminal manager is under no obligation to undertake an expansion if it is unreasonable or uneconomic, and this is defined in cl 7.6(e) as follows:- "An Expansion will be unreasonable or uneconomic for the purposes of 7.6(d) where: (i) in order to undertake the Expansion it is necessary for the Terminal Manager to make use of land other than that on which the Terminal is located; (ii) the Terminal Manager is, despite its reasonable endeavours, unable to procure a relevant Approval; (iii) the Expansion would create capacity significantly in excess of the Additional Monthly Throughput requested by the Rail Operator and the requirements of other users; (iv) there is insufficient time for the Terminal Manager to complete the Expansion prior to the date by which the Additional Monthly Throughput is required; (v) the Rail Operator and other users have not entered into agreed and binding commitments to use the capacity (including capacity created by the Expansion) of the Terminal (such commitments to include agreement as to the price to be paid for all Terminal Services following an Expansion); (vi) having regard to the commitments referred to in subparagraph (v) above, in the Terminal Manager's reasonable opinion the Terminal Manager will not achieve a rate of return over the useful life of any capital investment necessary to fund the Expansion equal to or greater than 15% per annum; (vii) having regard to the commitments referred to in subparagraph (v) above, the use of the Terminal Manager's funds for the Expansion is not, in the Terminal Manager's opinion, economically justifiable; or (viii) the Expansion is, in the Terminal Manager's opinion, other wise uneconomic or unreasonable." (emphasis added) 583 Finally, cl 7.6(f) provides that:- "Upon completion of an Expansion, the Allocated Monthly TEU for the remaining months of the Term will be deemed to be permanently increased by the relevant Additional Monthly Throughput, for the purposes of this agreement, including paragraphs 1(a)(i) and 1(b)(i) of Schedule 2. However, paragraph 1(a)(ii) of Schedule 2 will no longer apply to any Allocated Monthly TEU that has been increased under this clause 7.6." (emphasis added) 4. The evidence of the principal witnesses Mr Graham's evidence 584 Mr Graham was Managing Director of NRC from 1 February 1992 to 21 February 2002. He had overall responsibility for the business operations of NRC and provided the Board of NRC with advice on strategic issues affecting NRC. 585 Mr Graham gave evidence about the interstate freight market and the establishment of NRC, including his understanding of the objectives of NRC and the means by which these objectives were pursued. He gave an account of the nature of communications between NRC, the Queensland Government and QR, and in particular, the negotiations between NRC and QR over the transfer of control and access rights to AR. 586 Prior to commencing with NRC in 1992, Mr Graham was Chief Operating Officer of the NSW State Rail Authority for nearly four years, and believed he had developed a good understanding of the interstate freight market. He said that from 1987, the rail market's share in interstate freight slowly declined and by 1992, his view was that the rail industry was dominated by unreliable rail services and high cost structures. 587 Mr Graham's evidence was that the interstate freight market was highly competitive, with road transport being the key competitor to rail. He understood that the key reason for establishing the NRC was to develop a national interstate rail system which was operated on a commercially viable basis, so as to compete successfully with road transport. Mr Graham formed this understanding through his reading of the EA, the NRC Act and the Task Force Report, coupled with his discussions with Mr Butcher shortly after he commenced work with NRC. 588 In his opinion, in order for NRC to achieve this objective, it had to offer competitive services on each rail corridor, increase reliability of its services, improve efficiency, and decrease costs. Mr Graham described the range of significant financial and operational improvements which he believed NRC needed to address in pursuit of these goals. His evidence was that only because NRC had acquired control of key rail terminals in Victoria, NSW and Queensland, including AR, was it successful in achieving each of these goals. 589 Mr Graham gave evidence that shortly after he commenced with NRC in 1992, he and Mr Butcher had meetings with all the parties to the EA and their respective rail authorities to discuss the objectives of NRC. A primary purpose of these meetings was to identify the assets and functions which would be transferred to NRC, and determine how they would be transferred so that the Corporate Plan could be developed. From February 1992 to April 1993, Mr Graham was involved in determining which assets and functions NRC would nominate for transfer. 590 From the outset, and indeed at all relevant times, Mr Graham's understanding of the EA was that any access rights granted to NRC pursuant to the EA would be for a long time, if not permanently. He understood that it was for NRC to nominate to the State of Queensland any assets owned or controlled by the State or QR which was required by NRC. He also understood that the State of Queensland had a discretion as to how it provided long term access, that is to say by way of ownership, lease or an access agreement. He understood the discretion had not been exercised at any time during his period in office at NRC. 591 Mr Graham's evidence was that although the State of Queensland had a choice as to the form of access rights which were granted:- "the minimum to which NRC was legally entitled was access for as long as NRC conducted national interstate rail freight operations on terms that ensured NRC's commercial viability." 592 He acknowledged in cross-examination that the minimum content of the State of Queensland's obligations did not require the grant of a long term lease. But he said that the access rights granted must contain all the elements necessary to ensure NRC's viability. 593 Mr Graham accepted that it was a matter of policy for the State of Queensland, rather than QR, as to whether ownership would be transferred, or a lease or access rights granted. He did not recall considering whether the decision would be made by the State or by QR but he was of the view that in a practical sense the negotiations were undertaken with QR. He expected that the State of Queensland would cause QR to fulfil the State's obligations under the EA. 594 Mr Graham gave evidence under cross-examination that NRC's investment in the AR terminal was made on the strength of something more fundamental than his personal assumption about the effect of the EA. He said the decision to invest was based on rights embodied in legislation passed by the Queensland Parliament, that is to say, the NRC Act, given effect by QR and acted upon in every respect by QR from early 1992 until the change of position letter in March 1997. He also relied on discussions with Mr Hamill. 595 Mr Graham did not depart from this evidence at any time in cross-examination. He accepted that his recollection of discussions with Mr Hamill was very general. But he emphasised that nothing was said by Mr O'Rourke or Mr Hamill between 1992 and March 1997 which was inconsistent with his understanding of QR's obligations under the EA. It is plain from his evidence that he did not rely on any statement by Mr Hamill that if the State of Queensland did not become a shareholder it would nevertheless give a long term lease to NRC. He simply could not recollect the detail of his conversations with Mr Hamill. He relied on "something far more fundamental" namely the commitment made by the State of Queensland in the EA. 596 It was put to Mr Graham that the improvements to the AR terminal were made at a time when NRC's only rights were those set out in the 1993 real estate lease. Mr Graham did not accept that this reflected the total position, because sitting behind the investment was "the very fundamental undertaking" in the EA of long term access. 597 When it was put to him that he was willing to proceed with the investments notwithstanding that a long term lease was not in place, Mr Graham replied:- "I did not see any substantial risk associated with the actions that we were undertaking. This lease provided a three-year term. A three-year term in isolation was not a sound basis for proceeding with the investment. The reason that I'm keen to proceed with the investment is again not based on the tenure of the lease, it's based on the very unequivocal undertaking, in my view, at that time of the Queensland Government in the Establishment Agreement to provide long-term access to the facility, and if we were to deliver on the objectives of our shareholding and getting on and expanding the capacity of the Acacia Ridge terminal, which was constraining our business voltage and was vitally important to us." (emphasis added) 598 Later in his cross-examination Mr Graham referred to the "unequivocal commitment" of the Queensland Government in the EA for long term access. He described the EA as the foundation of long term certainty and he referred again to the complementary legislation in the NRC Act. 599 Mr Graham made it plain that NRC did not consider that the three year term of the 1993 real estate lease was in substitution for the rights and obligations contained in the EA. 600 Mr Graham agreed that his understanding, namely that the State of Queensland had committed to ensuring that NRC would be provided with access in a way which would make it commercially viable, came from his reading of the EA. He said that this understanding dated from early 1992, and gave the following evidence in cross-examination:- "But, equally, you had not discussed with Mr Hamill or Mr O'Rourke or anyone else from the government whether they agreed with your reading of the Establishment Agreement in that way? --- No, I hadn't discussed whether they agreed with my reading, that's correct. So essentially you were relying on your own reading of the Establishment Agreement as to the long-term rights NRC would have had at Acacia Ridge? --- And remain happy to do so." 601 Mr Graham accepted that access on terms that ensured NRC's commercial viability did not necessarily involve NRC being in control of the AR terminal. Such access could be satisfied in other ways, eg guarantees as to capacity, price and service quality. It was for this reason that he was prepared to negotiate such an agreement in September 2000, so long as NRC's requirements as to capacity, cost and service quality were assured. 602 The following exchange took place in cross-examination:- "I wasn't asking you about what the lease contained, I was asking about NRC's policy. Isn't it right it was NRC's policy to wish to only take a short-term lease over Acacia Ridge outside the provisions of the Establishment Agreement so that the question of what rights would eventually be transferred under the Establishment Agreement, be it ownership, lease or access, could be put off to the future?---I don't think it's fair to simply ascribe the desire for a short-term lease just to National Rail. The policy position of National Rail, as I recall it at the time, was that we were not prepared to accept a short-term lease substituting for the longer term obligations to provide lease or access under the Establishment Agreement. I believe there were also matters at the time within the Queensland Environment ­­…" (emphasis added) 603 It was put to Mr Graham that NRC hoped to enter into a short term lease in the expectation that the State of Queensland might become a shareholder, thus providing ownership or a lease of the AR terminal without the payment of money. Mr Graham did not agree that there was a hope or expectation but he acknowledged the benefits of having the State of Queensland as a shareholder. He accepted that there would be a saving of $600,000 per annum in rent (as it was in August 1993). 604 Mr Graham's evidence was that notwithstanding the absence of a long term lease, the bulk of NRC's investment of about $200 million in the East Coast Strategy was made on the "very clear representations of both the Queensland Government and Queensland Rail to that point in time". Underlying this was the "absolute long-term commitment of the Queensland Government embedded in the [EA]". He made it clear, as he did when describing other investments in the AR terminal, that NRC was relying on the future exercise of the discretion under cl 5(6)(a) of the EA. 605 Even though some further expenditure on the East Coast Strategy was approved by the Board of NRC after the change of position letter, Mr Graham's evidence was that the expenditure had to be viewed "against the backdrop of the unequivocal commitment" of the Queensland Government to the establishment and viability of NRC. 606 Mr Graham said that the commitment of the Queensland Government to long term access, as contained in the EA, was a sufficient justification for further expenditure even after Mr O'Rourke's letter of 15 April 1998 stating that QR intended to take control of the AR terminal. 607 Mr Graham described the features of the AR terminal which made it of strategic importance to NRC and an integral part of the East Coast Strategy. 608 When the dispute arose with QR, NRC did not give consideration to the construction of an alternative terminal. Mr Graham said he could vaguely recall considering, in the late 1990s, a Greenfield site south of Acacia Ridge. But it was only a vague recollection. 609 Mr Graham was taken in cross-examination to the Board Papers in which the implications of the Hilmer Report were considered. He said that the issue of third party access had been recognized in the Heads of Government Agreement some years before the Hilmer Report. But he accepted that by 1997 there was a very real possibility that third parties wished to use NRC's track for the purposes of interstate rail freight between Brisbane and Sydney and Brisbane and Melbourne. 610 Mr Graham's evidence was that loss of control of the AR terminal would have a substantial adverse impact on NRC's business. He referred to the integration of NRC's terminals and the IT system which enabled NRC to track the location of a customer's container anywhere in the NRC system. 611 Mr Graham seemed to me to be a reliable witness. I accept his evidence, subject to any specific observations stated below. Mr Butcher's evidence 612 The effect of Mr Butcher's evidence was that he appreciated that the State of Queensland had not exercised its discretion under cl 5(6)(a) of the EA. In cross-examination he accepted that at the relevant time, he had not appreciated the fact that the EA provided for the granting of mere access. His evidence was that he could not recall any discussions with QR or the State of Queensland which contemplated mere access. 613 Mr Butcher gave oral evidence of a conversation with Mr Hamill that took place on 18 December 1991. He understood that Mr Hamill was speaking on behalf of the State of Queensland. It was Mr Butcher's understanding that Mr Hamill's statement that there would be a long term lease was an indication of Mr Hamill's present intention about how the State of Queensland might exercise its discretion at some future time. 614 Mr Butcher gave evidence that he had met with Mr O'Rourke on three or four occasions in 1992 – 1993. He said he could not recall the specific words spoken at the meetings but he believed that Mr O'Rourke was "fully supportive of NRC and its assumption of control of the terminal". 615 His understanding of the EA was that it provided for the parties to allow NRC to operate its own terminals and that the EA provided for NRC to take over all terminals, whether in a State or an Other State, ie Queensland. As previously mentioned, he was not aware at any relevant time that the grant of access rights was an available option for the State of Queensland. 616 Mr Butcher was an honest witness. His lack of knowledge of the access option affects PN's case but it does not adversely affect Mr Butcher's credit. Mr Hanscomb's evidence 617 Mr Hanscomb gave evidence that his note of 20 June 1995, in which he said that "QR accepted the principle" of a long term lease, accorded with his recollection of the conversation at that meeting. 618 It was put to Mr Hanscomb in cross-examination that this note merely stated NRC's preference; he resisted this suggestion, and said that Mr O'Rourke had accepted the principle that QR would grant a long term lease. 619 Mr Hanscomb was involved in the negotiation of the three year lease. He said that in negotiating it, the parties were "in effect" negotiating the terms of the long term lease. But he accepted that this was never expressly stated in the negotiations. Nor could he identify any piece of correspondence in which that was said. 620 Mr Hanscomb was not an entirely satisfactory witness. He tended to be dismissive of the cross-examiner. His stated understanding of the effect of the EA was, in part, at odds with the views expressed by him in a contemporaneous paper. Nevertheless, I would accept much of his evidence, although in the end it was of marginal relevance because his state of mind was not to be attributed to NRC. Mr O'Rourke's evidence 621 Mr O'Rourke was CEO of Queensland Railways from 1 July 1991 to 1 July 1995 when he became CEO of QR. He held that position until his retirement on 15 December 2000. He had a long career in the railway industry, particularly with the State Rail Authority of NSW, and was the Queensland Commissioner for Railways from 8 October 1990 until his appointment the following year as CEO of Queensland Railways. 622 Mr O'Rourke was the NSW representative on the NFI Committee in 1990. He was familiar with, and supported, the recommendations of the Task Force Report produced in early 1991. 623 After the delivery of the Task Force Report, Mr O'Rourke sat on the Committee of Officials along with, among others, Mr Moore-Wilton, which considered the equity and funding arrangements for the NRC. 624 Mr O'Rourke was aware of the massive losses being incurred nationally on the interstate freight business at the time of the Task Force Report. However, he said that Queensland's deficit was quite small, probably only in the order of $12 million to $13 million per annum. This was because Queensland had only a small interstate freight business based upon its 100 kilometres of standard gauge track from the AR terminal to the border. 625 At the time when the EA was signed, Mr O'Rourke was "supportive of the NRC concept". He believed that NRC would be the operator of the national interstate rail freight business and that it would control the assets of the business, including railway tracks and terminals. 626 As to the assets of the business in Queensland, Mr O'Rourke believed that the AR terminal and the standard gauge track to the border would be identified by NRC as the assets it required to conduct the business. He apparently held this belief on the basis of his reading of the EA and his knowledge of the background to it. 627 Mr O'Rourke believed, when the EA was executed, that those assets would be made available to NRC by sale, lease or a grant of access. He said that it was only from about April 1993 that he turned his mind to the question of which form of rights would be provided. He considered that NRC's use of the assets would be on commercial terms agreed between NRC and Queensland Railways. He did not hold the view that access would be given on terms which ensured NRC's commercial viability. 628 He conceded in cross-examination that the corporate thinking of QR in August 1991 was that QR would deal with NRC's eventual tenure by a long term lease. 629 Mr O'Rourke also conceded in cross-examination that the three year lease was merely a transitional arrangement and that it was clear on 4 April 1993 that after the transition period there would be a long lease or perhaps ownership. As I said in the introduction, he conceded that in April 1993, control of the AR terminal was transferred in anticipation of a lease of up to 30 years being negotiated. 630 The concession that the three year lease was transitional had to be drawn from Mr O'Rourke in a way which did him no credit. Eventually he accepted that it was nonsense to suggest that the three year lease was seen by NRC and QR as NRC's eventual form of tenure. However, later in his evidence he sought to return to "the nonsense" that the three year lease was all that NRC wanted. 631 This evidence adversely affected Mr O'Rourke's credit. I do not consider that he was a dishonest witness but time and again concessions had to be prised from him. He was not an open and forthcoming witness and this is a matter which I will take into account in making findings on the estoppel question and in deciding whether QR was actuated by a proscribed purpose under s 46 of the Act. 632 After some prodding, Mr O'Rourke agreed that in the period up to March 1997 he expected that NRC and QR would have reached agreement on the terms of a long term lease. This evidence must be taken to have been in the period from early 1996, when the negotiations commenced, to March 1997 when they ceased. 633 In cross-examination, Mr O'Rourke gave the following evidence on that issue:- "Because, as you then saw the matter, there was no doubt that however much country had to be covered, two parties – QR and NRC – intent on there being a long-term lease at Acacia Ridge terminal, run by railway people, would reach agreement; that was your view in the end, wasn't it? --- Yes, we'd reach agreement. … And, so far as you were concerned, on the sole condition that QR remained willing to grant a long-term lease, that was your view, wasn't it, that you expected these things to be agreed right up until 20 March 1997; isn't that right? --- Until some time around that time, yes." 634 Mr O'Rourke conceded that in February 1996 QR had no major objection to the grant of a 30 year lease to NRC. He put forward three reasons for QR's change of position in March 1997. 635 The first was that the exclusive nature of a lease left no flexibility for QR or other operators to access the AR terminal. This was referred to as the issue of third party access. 636 Eventually, Mr O'Rourke conceded that the issue of third party access did not affect his willingness to agree to a 30 year lease during 1996. This was so even though QR had considered offering competing services on standard gauge track from 1995. 637 The second reason was the advent of the Hilmer Report and the emerging issue of competition policy. But this was known before March 1997, and in early 1996 when there was no major objection to a long lease. So too was the strategic importance of the AR terminal, in the light, inter alia, of a report obtained from Mercer Management Consulting in 1994. 638 The third reason was the announcement in November 1996 that NRC would be privatized. Mr O'Rourke said that this was the catalyst for the decision not to proceed with a long term lease. 639 Mr O'Rourke said, in this regard, that it was the prospect of NRC falling into the hands of "someone we didn't know at Acacia Ridge" which drove the decision. It could be in the hands of a "foreigner" or someone from interstate. 640 Moreover, the new owner of NRC may have been a significant competitor of QR. Mr O'Rourke eventually conceded this in the following passage of cross-examination:- "It was a misleading answer you most recently gave. The earlier long answer that I read was, in fact, an honest revelation of why you reneged: You didn't want a new owner of NRC to be a significant competitor of QR; is that right? That's what you swore earlier? --- Yes." 641 His evidence on this issue was usefully summed up in the following exchange, although not without some previous skirmishing:- "Does it not follow from what you have told his Honour over the last hour or so that in late 1996/early 1997 you came to the decision that there was such a high prospect of QR wanting to compete south on standard gauge in rail freight that it should avoid the disadvantage of not controlling Acacia Ridge and deprive its competitor NRC of the advantage of controlling the Acacia Ridge terminal, and thus that you should withdraw the offer of the long-term lease? --- Yes." 642 Prior to March 1997, Mr O'Rourke had given instructions to negotiate for a long term lease because he understood this was Queensland Government policy. He accepted that the negotiations for a long lease which commenced in early 1996 went forward because that was the policy of the Queensland Government, through Mr Hamill as the responsible Minister. In fact, Mr Hamill ceased to be Queensland Minister for Transport in February 1995. 643 In the course of his evidence on QR's change of position, Mr O'Rourke was at pains to say that a long term access agreement would not disadvantage NRC. This was because of his insistence that QR would operate the AR terminal as a multi-user terminal, not a common user terminal. 644 Common user and multi-user terminals both provide for the operation of a terminal in a way which permits more than one train operator to access the terminal for the purpose of loading and unloading trains. The distinction between common user and multi-user is that, under the latter, access is upon such terms as may be negotiated with the owner. Common user provides for such access as may be made available pursuant to rights granted by law, eg under the Competition Act. 645 Mr O'Rourke's evidence about the desire for a multi-user terminal, operated by QR, was contrasted with his concession that underlying the regime proposed in the reforms recommended by the NFI and the Task Force was that NRC would have terminal control. 646 He was cross-examined closely about the views expressed in the strategy papers and memoranda written by QR middle management, including Mr George. 647 Mr O'Rourke did not appear to recollect those documents but he accepted that QR considered control of the AR terminal to be a "bargaining chip" in negotiations with other entities. 648 Mr O'Rourke also accepted that the concept of a bargaining chip was another reason for refusing NRC a long-term lease. He conceded that his views about a multi-user terminal were at odds with those of the Queensland Transport, which at that time wished to see the AR terminal conducted on a common user basis. Mr Hearsch's evidence 649 Mr Hearsch was employed by QR, and previously by Queensland Railways and the Commissioner for Railways, from 3 January 1991 to 1 May 1998. His position throughout that period was Group General Manager-Freight. He was responsible for the operation and marketing of the freight business, and managing the assets of that business as it was conducted by QR and its predecessors. The assets for which he was responsible up to 5 May 1993 included the AR terminal. He reported directly to Mr O'Rourke. 650 Mr Hearsch read the Task Force Report and considered that it made sense, if NRC was to be viable, for it to be vertically integrated. Thus it would run trains, manage the terminals and control the tracks on which the trains ran. 651 From at least October 1991, Mr Hearsch knew that the parties to the EA had agreed that NRC would have access to the assets, including track infrastructure, necessary to achieve commercial viability. And he knew this access was to be provided for so long as NRC continued to conduct national interstate rail freight operations. 652 Mr Hearsch also knew, from at least October 1991, that the Queensland Government's support for the establishment of NRC meant that QR would provide access to the physical assets required to run the network including the AR terminal. 653 From at least April 1992, Mr Hearsch understood that NRC would take over the management of all interstate intermodal terminals around Australia. He was aware by November 1992 of NRC's plans for development of the AR terminal and that the costs involved would be in the vicinity of $10 million. 654 Mr Hearsch did not have direct involvement in the negotiation of the terms under which NRC went into possession of the AR terminal on 5 April 1993. But he believed that NRC would be in possession for the long term. He did not expect that QR would remove NRC at the end of the three year term. 655 In September 1994, Mr Hearsch was opposed to the grant of a 30 year standard gauge track access agreement to NRC. He communicated this view to Mr O'Rourke. 656 He was not directly involved in the negotiations for a long term lease of the AR terminal in 1996, but he was aware of the issues on which there was disagreement between the parties. 657 Mr Hearsch was strongly of the view that the letter of 27 March 1997 should be sent and he discussed his view with Mr O'Rourke before the change of position letter was dispatched. He said that he advised Mr O'Rourke of a number of reasons for the change of position based on his belief that "the fundamental rules of the game" had changed. 658 Mr Hearsch's reasons reflected those given by Mr O'Rourke. In cross-examination he conceded that one consideration was that NRC under new non-government ownership would constitute a hostile competitor to QR. His denial that the reason why QR wanted to take back control of the AR terminal was to prevent effective control passing into interstate or foreign hands was at odds with the information paper he signed on 31 March 1998. 659 Although Mr Hearsch conceded that one of QR's key objectives in early 1998 was to maximize the potential for its narrow gauge and standard gauge business, he said there were wider considerations involved. 660 He pointed in particular to QR's desire to increase the entire railway market share of business on the rail corridor passing through AR, not just QR's share. He said that this was unlikely to be achieved under an exclusive lease to NRC and he referred to the difficulties encountered by other operators in obtaining access to the AR terminal. 661 Mr Hearsch said that in coming to the view that NRC should not have a long term lease he had no intention to harm NRC or to "fundamentally undermine" its business. He denied that he had any intention to prevent or restrict NRC in its freight business, or that NRC would be excluded from the AR terminal. 5. Estoppel The Relevant Principles of Estoppel 662 In the Verwayen at 409, Mason CJ described estoppel as a label which covers a complex array of rules spanning various categories. I do not need to set out all of the rules because PN confined its case to three categories. In doing so, PN recognised that the question of whether there is a "single overarching doctrine" or "a general doctrine of estoppel by conduct" was left open by the High Court in Giumelli v Giumelli (1999) 196 CLR 101 ("Giumelli") at [7]. 663 The three categories for which PN contended were conventional estoppel, proprietary estoppel, and according to PN's written submissions:- "an estoppel in pais in the nature of an equitable estoppel, arising by virtue of encouragement, inducement, acquiescence and failure to disabuse." 664 PN relied on the words of Mason and Deane JJ in Legione v Hateley (1983) 152 CLR 406 ("Legione") at 430 to support the formulation of the third category. In the passage to which PN referred, their Honours said that estoppel in pais includes common law estoppel comprising conventional estoppel and estoppel by representation. They also said that it includes "the overlapping equitable doctrines of proprietary estoppel and estoppel by acquiescence or encouragement". 665 The last mentioned words appear to be a reference to the form of estoppel stated in Ramsden v Dyson [1866] 1 LRHL 129 ("Ramsden v Dyson") at 170. That is to say, it refers to an equitable estoppel arising from an expectation created or encouraged by the words or conduct of the party against whom the estoppel is raised. This form of estoppel includes failure to disabuse a party where the person estopped has knowledge of the other party's intention to act upon the expectation: see Crabb v Arun District Council [1976] 1 Ch 179 ("Crabb") per Lord Denning MR at 189. 666 It follows from the description of estoppel in pais in Legione at 430 and from the three categories propounded by PN, that each of the categories put forward is a species of estoppel in pais. 667 Without endeavouring to discuss the many and varying observations that have been made in the cases, I will attempt to state the essential propositions which flow from the cases and which underlie the determination of the present proceedings. 668 I will enumerate the propositions as follows:- (1) The object of estoppel in pais is to prevent an unjust or unconscionable departure by one person from an assumption adopted by another as the basis of an act or omission which, unless the assumption is adhered to, would operate to the other's detriment: Thompson v Palmer (1933) 49 CLR 507 ("Thompson") at 547 per Dixon J; Grundt v Great Boulder Pty Limited (1937) 59 CLR 640 ("Grundt") at 674 per Dixon J; Legione at 430 – 431; Waltons at 413 per Brennan J; Verwayen at 409 per Mason CJ and at 500 per McHugh J. (2) Whether a departure from an assumption is unjust depends upon the part taken by the person sought to be estopped in occasioning the adoption by the other party of the assumption: Thompson at 547 per Dixon J; Grundt at 675-676; Legione at 431 – 432; Waltons at 404 per Mason CJ, Wilson J; Verwayen at 444 per Deane J and at 500 per McHugh J. (3) Accordingly, the reference to an "unjust" departure is not a charter for idiosyncratic concepts of justice and fairness: Legione at 431. That is to say, it requires the party asserting the estoppel to prove that the other party caused him or her to adopt the assumption. (4) The party asserting an estoppel must establish that he or she has relied upon the assumption and that detriment flows from the reliance; that is to say, if the assumption were not adhered to: Grundt at 674 – 675; Waltons at 413 and Verwayen at 415. (5) It may be possible to divide detriment into the "narrower" and "broader" sense, although this approach, which was stated by Mason CJ in Verwayen at 415, really points to the distinction between reliance and detriment. The narrower sense is reliance on the assumption, whilst the broader sense is the detriment which flows from reliance on the deserted assumption. It is avoidance of the broader or "real detriment" flowing from reliance, from which the law seeks to protect the party who has changed his or her position: Grundt at 674 per Dixon J; Verwayen at 415 per Mason CJ. (6) It is only when the party sought to be estopped wishes to disavow the assumption that an estoppel arises and the question of detriment then falls to be considered: see P Feltham et al (2004) Spencer Bower's Law Relating to Estoppel by Representation (4th ed) Butterworths, London at [V5.9] and Grundt at 674-675. (7) Although detriment in the broad sense is required to found an estoppel, the remedy the law provides will often be closer in scope to the detriment suffered in the narrower sense, that is to say, reliance: Verwayen at 415 – 416 per Mason CJ. (8) Avoidance of the detriment may require the party estopped to make good the assumption but this will depend on all the circumstances including the consideration that no more may be required than is necessary to avoid the detriment: see the discussion of Verwayen in Giumelli at [40] – [48]. (9) The burden of proof of reliance and detriment lies upon the person asserting an estoppel: Thompson at 549 per Dixon CJ and Verwayen at 416 per Mason CJ. Dixon J's reference in Thompson at 549 to the shift of the burden of proof cannot have been intended to negate the principle stated by his Honour later in that paragraph, ie that the burden lies with the plaintiff. It can only have been intended to be a reference to the shifting evidentiary burden once some evidence of detriment is established: see J D Heydon (2004) Cross on Evidence (7th ed) LexisNexis Butterworth, Sydney at [7205], [7225]. (10) Estoppel by convention requires proof of an assumption adopted by the parties as the conventional basis of their relationship: Thompson at 547; Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 ("Con-Stan") at 244. (11) The proposition that the necessary foundation for an estoppel by convention must be an assumed state of facts presently in existence, as stated by the High Court in Con-Stan at 244 – 245, has been qualified by later authority. The assumed state of affairs may extend to an assumption of law: Eslea Holdings Limited v Butts (1986) 6 NSWLR 175 at 186-189 per Samuels JA; Waltons at 415 and Verwayen at 413 per Dixon J, 445 per Deane J, and at 501 per McHugh J. (12) An estoppel by convention, unlike estoppel by representation, depends upon mutual assumptions. It is consensual in nature and is founded upon an agreed or mutually assumed state of facts (or law): Con-Stan at 244. (13) Conventional estoppel does not extend to assumptions concerning future matters. But an assumption as to a future right may found an equitable estoppel, in particular a promissory estoppel: Waltons at 398 – 399 per Mason CJ and Wilson J and 459 per Gaudron J and Verwayen at 499 – 500 per McHugh J. (14) The necessary elements of equitable or promissory estoppel are stated in the following passage from the judgment of Brennan J in Waltons at 428 – 429:- "In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise." (15) In order to found an estoppel between parties who are in contractual negotiations, it is necessary for the party asserting the estoppel to prove that the other party induced him or her to believe that the other's freedom to withdraw has gone; that is to say, there must be an expectation that the other party is bound to proceed. This is reflected in the first of the six principles stated by Brennan J above and in the decision of the Privy Council in Attorney-General (Hong Kong) v Humphreys Estate (Queen's Gardens) Limited [1987] 1 AC 114 ("Humphreys"). (16) The adoption of any assumption or expectation by the party asserting the estoppel must be reasonable in all the circumstances: Waltons at 406 per Mason CJ and Wilson J, Verwayen at 414 per Mason CJ and at 445 per Deane J and Standard Chartered Bank Aust Limited v Bank of China (1991) 23 NSWLR 164 at 180 per Giles J. (17) A representation or conduct relied upon as founding an estoppel must be clear and unambiguous: Legione at 435 – 437, Foran v Wight (1989) 168 CLR 385 at 410 – 411 per Mason J, and Mobil Oil Australia Limited v Wellcome International Pty Limited (1998) 81 FCR 475 ("Mobil Oil") at 513 per Lockhart, Lindgren and Tamberlin JJ; see also Spencer Bower's Law Relating to Estoppel by Representation at [V111.4.1]. (18) A corollary of the requirement of certainty is that it is a necessary element of the principle that the defendant has created or encouraged an assumption that "a particular legal relationship" or "interest" would arise or be granted: Mobil Oil at 513. (19) A pre-existing contractual relationship is not, under Australian law, a prerequisite to the application of the doctrine of promissory estoppel: Waltons at 399 – 403 per Mason CJ and Wilson J and 428 – 429 per Brennan J and Verwayen at 455 per Dawson J. (20) A person who is led to believe that he or she will be granted an interest in land and who acts to his or her detriment in that belief will be entitled to an interest in the land in accordance with the following statement of principle enunciated by Lord Kingsdown in his dissenting judgment in Ramsden v Dyson at 170:- "If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation created or encouraged by the landlord that he shall have a certain interest, takes possession of such land with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation." (21) Lord Kingsdown's statement of principle was approved by the Privy Council in Plimmer v Mayor of Wellington (1884) 9 AC 699 ("Plimmer") at 710 and again in Humphreys at 121: see also the analysis of the authorities by Priestley JA in Austotel Pty Limited v Franklins Selfserve Pty Limited (1989) 16 NSWLR 582 ("Austotel") at 604 – 610. Priestley JA's distillation of the principles has been accepted as cogent: Mobil Oil at 512. (22) Subject to a qualification stated below, it is not necessary that the interest to the secured under the Ramsden v Dyson or Plimmer principle be expressly stated or that the terms of the arrangement or understanding to secure that interest be sufficiently certain to be enforceable as a contract. The Court must look at the circumstances of each case to determine the form of relief: Plimmer at 713 – 714, Inwards v Baker [1965] 2 QB 29 at 37, and Austotel at 607 – 610 per Priestley JA. (23) The qualification is that where the parties have not reached agreement as to the contractual terms necessary to establish the interest in the land, the Court will exercise caution in coming to a conclusion that it would be unconscionable to prevent a party from insisting upon its strict legal rights: Austotel at 585 – 586 per Kirby JA and at 620 – 621 per Rogers AJA. Contradictory and unclear evidence of the directors defeats the estoppel claim 669 There are two striking deficiencies in the evidence called by PN to support the estoppel claim. First, neither Mr Graham nor any of the directors gave clear evidence that he or she held the four critical assumptions, which I have set out at [47], in the terms pleaded in the statement of claim. I will refer to the deficiencies in more detail below. 670 Second, as I have already mentioned, there are inconsistencies between the various assumptions said to have been held by Mr Graham, as managing director, and the board members who were called. It is true that Mr Graham was far more relevantly connected with the day to day dealings with QR in relation to the AR terminal than were Mr Butcher and the other board members. But it was the board which made the ultimate decisions to incur the expenditure on the AR terminal and the East Coast Strategy, not Mr Graham: cf Brambles. 671 This of course is not a case in which a party seeks to impose liability upon PN for the civil wrongs of its servants or agents. In those cases the law is concerned with the search for the "directing mind and will" of the company: Tesco Supermarkets Limited v Nattrass [1972] AC 153 ("Tesco") at 170 – 171. In Tesco, Lord Reid said that normally the board of directors, the managing director and perhaps other senior officers speak and act as the company; see also per Viscount Dilhorne at 187 and see Federal Commissioner of Taxation v Whitfords Beach Pty Limited (1982) 150 CLR 355 at 370. 672 Here the question is whether there has been an unjust departure by one person, that is to say QR, "from an assumption adopted by another [ie NRC]" as the basis for NRC's decision to make the investment decisions to which I have referred: see Thompson at 547. 673 Thus, although as I have said at [62], Messrs Butcher, Moore-Wilton and Stanko and Mrs Yeoh gave evidence in general terms that they relied on Mr Graham, it seems to me to be necessary to look at the evidence of their deliberations to see whether this was consistent with the approach taken by Mr Graham. I do not consider that reliance in general terms can be sufficient in circumstances where the individual directors gave evidence of their own approaches to the matter. 674 This immediately exposes the difficulty of the different and contradictory assumptions entertained by those directors who gave evidence. There were other directors who did not testify. It must be inferred that their evidence would not have assisted: Jones v Dunkel (1959) 101 CLR 298 ("Jones v Dunkel"). 675 What emerges is that Mr Graham's assumptions were quite different from those of the other directors and there were differences between the beliefs and assumptions of Messrs Butcher, Moore-Wilton and Stanko and Mrs Yeoh. 676 Mr Graham and Mr Stanko (and perhaps Mrs Yeoh) were the only directors who were aware that one of the options available to the State of Queensland was the grant of access rights. But Mr Graham and Mr Stanko differed in their beliefs. Mr Graham accepted that the State's minimum obligation was to provide access rights, although he believed in effect that the rights would be perpetual, and on terms that ensured NRC's commercial viability. 677 Mr Stanko, on the other hand, believed that a long term lease was the most likely option but he recognised that the State of Queensland had a discretion to grant access rights on commercial terms. However, access on commercial terms lies in stark contrast to perpetual access on terms which would ensure NRC's commercial viability. 678 Mr Butcher was quite unaware that access was an available option. His expectation that there would be a long term lease is inconsistent with Mr Graham's evidence. Mr Graham did not broach the question of a long term lease until his letter of 9 May 1995 and, even then, only "in principle". I am prepared to find that at the meeting between the parties in June 1995, Mr O'Rourke said he accepted the principle of a 20 year lease, but any expectation Mr Graham obtained as a result of the meeting was dependent upon the outcome of negotiations. 679 Mr Moore-Wilton expected NRC would have long term control of the AR terminal but his evidence was that he did not discuss with either Mr Hamill or Mr O'Rourke the form of the long term arrangements. Nor did he give evidence of any expectation of the form of the arrangements arising from discussions with Mr Graham or at board level. 680 Mrs Yeoh's evidence was very general and I have serious doubts as to whether she applied her mind to the possibility that QR had a discretion to confer access rights. She understood that NRC had control of the terminal and that the EA provided a mechanism for NRC to obtain the necessary rights. However, she was not clear as to what form the arrangements would take. 681 It is true that Mrs Yeoh said in cross-examination that she was aware that the State had a discretion to grant access. However, when she was pressed on this topic she appeared to me to resile from any such understanding of the effect of the EA. 682 Thus, what I am left with is a set of inconsistent assumptions held by some of the relevant board members and a total absence of evidence to establish that, when approving the relevant items of capital expenditure, NRC held any of the critical assumptions. 683 The closest PN came to proving any of the four assumptions was in the evidence of Mr Graham. I refer in particular to his evidence that the decision to invest was made upon the basis of the State of Queensland's commitment in the EA (later embedded in the NRC Act) under which he said the minimum to which NRC was entitled was access for as long as it conducted interstate freight and on terms that ensured NRC's commercial viability. This evidence is in similar terms to the second and third of the critical assumptions, though a gloss has been added in the pleaded assumption. 684 The second assumption refers to enabling NRC "to have the greatest prospect of securing its commercial viability". This would impose less stringent obligations on QR than terms which "ensured" NRC's commercial viability. 685 The third assumption, which apparently builds on the second, speaks of occupancy of the AR terminal and of NRC's control and management. However, Mr Graham accepted that access on terms which ensured NRC's commercial viability, an interpretation of NRC's rights which he drew from the EA, did not necessarily involve NRC being in control of the AR terminal. Moreover, the concluding words of the pleaded assumption "or for at least 30 years" are not reflected in Mr Graham's evidence. 686 Accordingly, I find that Mr Graham did not hold the third pleaded assumption. 687 The emphasis in Mr Graham's evidence on access, and his recognition that this option was available under the EA, was inconsistent with an assumption that QR would grant a lease as stated in the first assumption. Insofar as the first assumption speaks of access rather than a lease, it is said to have been assumed that access would be on commercial terms. But this begs the question as to what they were. It is plain that the terms were never agreed. 688 Mr O'Rourke's statement to Mr Graham at the meeting in June 1995 that he accepted the principle of a 20 year lease could not have founded an assumption of a perpetual lease in the terms pleaded in the first assumption. The same comment applies to Mr O'Rourke's concession in cross-examination that the corporate thinking of QR in 1991 was that NRC's eventual tenure would be a long term lease. Nor could Mr Butcher's expectation of a long term lease, or Mr Stanko's belief that a long term lease was the most likely option, prove the existence of the first assumption. 689 The fourth pleaded assumption, namely that in 1993 QR transferred control of the AR terminal effectively in perpetuity or for at least 30 years, was apparently based upon Mr Graham's evidence about the handover on 5 April 1993. He said that the nomination of NRC to operate and control the AR terminal occurred without "any sunset provisions" in the mind of either NRC or QR. 690 But this falls far short of the fourth pleaded assumption. In any event, it ignores entirely the fact that the handover of management and control referred to in "the functions letter" of 4 April 1993 must be construed in its context. The terms of the handover cannot be divorced from the contractual arrangements for a proposed three year lease recorded in the 4 April 1993 Heads. 691 I do not see how control of the AR terminal could exist independently from the contractual arrangements for possession. 692 It is true that the functions letter states that NRC would, in accordance with the EA, assume responsibility for the management and operation of the AR terminal. But NRC could not manage or operate the facility without a contractual right to do so. The EA did not provide such a right. It paved the way for a right of management and control through the grant of ownership or a leasehold interest, or perhaps through access, but that was on commercial terms and conditions to be agreed in the future. The functions letter did not contain those terms. It could not, without more, have conferred a right to perpetual management or control. In my opinion, Mr Graham could not have assumed that control was handed over in perpetuity as contemplated by the fourth assumption. 693 It follows that of the four pleaded assumptions, only the second assumption finds any support in the evidence. But the only evidence to support it was that of Mr Graham and his approach was inconsistent with that of the other directors. In my opinion this does not establish that NRC adopted the assumption as the basis for the relevant actions within the principle stated by Dixon J in Thompson. 694 In any event, the inconsistent evidence of Mr Graham and the other directors indicates that no clear or unambiguous assumption was held by NRC. Even if Mr Graham's belief was the only state of mind attributable to NRC within the principle stated in Brambles, so that his state of mind was that of NRC, the estoppel claim fails for other reasons stated later. The EA does not support the existence of the pleaded assumptions 695 Assuming I am correct in reaching the conclusion that PN has not proved that the relevant persons held the alleged assumptions, it is unnecessary to examine the extensive documentary record to see whether the documents give rise to an inference that NRC did in fact hold those assumptions. In any event, in my opinion, the documents do not support such a finding. 696 Plainly, the critical document is the EA. It laid down the legal framework agreed between the Commonwealth and the States for the establishment of NRC as a government owned corporation to conduct rail freight operations on a national integrated rail network. 697 One of the principles upon which NRC was established was stated in the EA to be that NRC would have access, whether by ownership or other arrangements, to assets including track infrastructure, which must have included terminals such as the AR terminal, necessary to achieve commercial viability: see EA Recital B(a)(ii). 698 The terms of the EA could, if supported by necessary evidence from the relevant minds on behalf of NRC, give rise to a "legitimate expectation" that the State of Queensland and QR would act conformably with the terms of the EA: see, in a different context, Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273. 699 However, any evidence given by the directors of NRC as to their expectations based upon reading the EA would have to be tested against the proper and ordinary construction of the EA. This is because of the principle stated in [668-(16)] that the adoption of any assumption by the party asserting the estoppel must be reasonable. 700 QR submitted that the EA was a political agreement not intended to create legal relations: see eg South Australia v Commonwealth (1962) 108 CLR 130 ("Railways Standardisation Case") at 140, 148, 149, 150 and 153-154. There is considerable force in this submission. Mr Hanscomb acknowledged that the EA was a mixture of commercial arrangements and political imperatives. However, PN does not seek to enforce the EA. Rather, PN contends that the EA engendered assumptions founding an estoppel. 701 It is unnecessary for me to decide whether a political agreement is capable of providing the foundation for a claim in estoppel. I consider it unlikely to be so capable in the absence of a representation or other conduct which could have been relied upon. But even if the terms of the EA could give rise to an estoppel, the claim fails because PN's evidence of the assumptions said to arise from a reading of the EA rests upon two misconceptions. 702 First, "access" in cl 5(6)(a) is not to be given a meaning equivalent to "control" or "exclusive possession". To do so would be to construe "access" as conferring rights equivalent to a lease. That cannot be correct because cl 5(6)(a) specifically distinguishes between ownership, lease and access. It follows that "access" must import something different from the rights which would flow from a lease. 703 The fundamental right given by a lease is a right of exclusive possession: Radaich v Smith (1959) 101 CLR 209 at 222. The nature of access contemplated by cl 5(6)(a), in order to distinguish it from a lease, must be a right of non-exclusive possession. But what is plain from the clause is that the grant of access is to be on commercial terms and conditions agreed between the parties. The extent of the rights of access would be a matter of construction of those terms, as agreed: Winter Garden Theatre (London) Limited v Millennium Productions Limited [1948] AC 173. 704 This approach to construction of cl 5(6)(a) is supported by other provisions of the EA. The word "access" appears in other parts of the EA. Recital B(a)(ii) speaks of access to assets. The term "assets" is defined in cl 1 to mean any real or personal property. This implies access to a wider range of assets than the access referred to in Recital B(a)(v) which is access to the NRC network and terminal facilities. 705 The words of Recital B(a)(ii) are "access by ownership or other appropriate arrangements". This connotes a full range of possibilities which may extend from ownership (that is, an interest in the land) to something in the form of a contractual licence. 706 The word "access" also appears in cl 5(5). Clause 5(5)(a) deals with the grant of NRC's access to an asset, the predominant use of which has not in the past been, and which will not in the future be, for interstate rail freight. The nature of the access suggested by this clause is shared or non-exclusive use. 707 In my view, the word "access" should be construed consistently throughout the EA. There is nothing to suggest that the nature of the access contemplated by cl 5(6)(a) is different from the meaning of the term elsewhere in the EA. It is non-exclusive access and does not carry with it a right to control, although it would be open to the parties to negotiate a form of access carrying with it some element of control in accordance with the concluding words of cl 5(6)(a). 708 The second misconception is to be found in Mr Graham's evidence that, under the EA, the minimum right to which NRC was entitled was access for so long as NRC conducted national interstate rail freight operations on terms that ensured NRC's commercial viability. 709 This is based upon a misinterpretation of Recital B(a)(ii) which Mr Graham apparently seeks to then read into cl 5(6)(a). 710 Recital B(a)(ii) says nothing of the terms on which NRC is to have access. True, it speaks of commercial viability. However, it merely states that NRC is to have access to assets, including track infrastructure, necessary to achieve commercial viability. It therefore deals with the type of assets to which NRC is to have access. The commercial terms, as I have already said, are to be agreed between the parties. This is clear from the concluding sentence of cl 5(6)(a). 711 There is nothing in cl 5(6)(a) which provides that the terms are to ensure NRC's commercial viability. Indeed, there is nothing in the EA to that effect. It would be extraordinary if there was because it would be tantamount to requiring the State of Queensland to underwrite the commercial existence of NRC's operation of the AR terminal. 712 Even if Recital B(a)(ii) has the meaning suggested by Mr Graham's evidence, it would be wrong to construe the recital as over-riding the operative provisions of cl 5(6)(a): Ansett Transport Industries (Operations) Pty Limited v Commonwealth (1977) 139 CLR 54 at 73. 713 Mr Graham's evidence of his understanding of the EA, to the extent that it was inconsistent with the proper construction, was not reasonable and could not found an estoppel. 714 Clause 5(6)(a) makes it plain that it was for NRC to identify particular assets, as it did in relation to the AR terminal, and that the State of Queensland had a discretion as to the form of property rights to be granted. It could choose between ownership, lease or access. It was then for the parties to negotiate commercial terms and conditions for the grant of those rights. The grant of rights could not be complete until the negotiations were completed. 715 Even if I were to accept that the discretion was exercised so that NRC expected that a particular legal relationship would exist, QR was free to withdraw unless it induced NRC to assume that QR was bound to proceed. 716 It is unnecessary for me to decide whether there was ever an exercise of the discretion conferred by cl 5(6)(a). The evidence of Mr Bredhauer suggests that there was a positive exercise of the discretion in favour of access rather than ownership or leasehold. If there was an exercise of the discretion, it has not been clearly established. I would infer that Queensland Transports's acceptance of QR's decision to give a notice to quit implies a positive exercise of the discretion by 26 May 2003. But PN's case was that the rights flowing to it from estoppel took effect before the change of position letter in March 1997. In my opinion, QR has not proved that the discretion was exercised before that date. The documentary record before and after the EA does not establish the estoppel claim 717 Mr Butcher and Mr Moore-Wilton spoke in their affidavits of understandings obtained from reports carried out before the execution of the EA, including, in particular, the Task Force Report. 718 It is true that the Task Force Report proposed that NRC "take over" major capital city interstate terminals. But it says nothing of the form of property rights to be granted or the terms under which they were to be granted. 719 The short answer to the status of documents such as the Task Force Report and the Heads of Government Agreement is that they were superseded by the EA. In an estoppel case, it is possible to put forward an understanding based on communications which preceded the execution of a written agreement: cf Hoyts' Pty Limited v Spencer (1919) 27 CLR 133; see Waltons at 399 – 403. But it seems to me that here any understandings or assumptions based on pre-contractual reports or heads could not be reasonable. 720 Queensland Cabinet's decision of 1 July 1991 that the State of Queensland should transfer control of its relevant interstate rail assets to NRC, might have provided the foundation for an assumption that this would be acted upon. However, none of the NRC directors said they relied on it. In any event the decision says nothing of the terms on which any transfer was to take place. 721 What is plain from the documents is that from the time of execution of the EA, QR and NRC were working toward the progressive handover of control of operations at the AR terminal to NRC. Working groups were established by both of the parties and the documents indicate that there was an expectation that a lease would be negotiated. The terms were to be a matter for negotiation. There was much to be sorted out. 722 Whatever terms NRC and QR may have had in mind up to March 1993, the position changed with Mr Hanscomb's letter to QR of 12 March 1993. The letter foreshadowed the framework which was subsequently documented in the 4 April 1993 Heads. 723 In particular, Mr Hanscomb's letter stated that NRC proposed, inter alia, a short term lease of the AR terminal. He said that this approach was adopted to enable the "broader issue of asset transfer" to be determined later. There can be no doubt that this proposal was put forward for NRC's benefit to give it the necessary time to seek to persuade the State of Queensland to become a shareholder. That would have enabled NRC to obtain a lease of the AR terminal without having to fund rental payments. There was nothing sinister about this. It was commercial good sense because the EA provided in cl 6(3) for the issue of shares to the value of an interest in the assets transferred whether by way of ownership or long lease. 724 Although the 4 April 1993 Heads do not say so specifically, it is clear that, when those documents were executed, the State of Queensland had not exercised a discretion as to the form of property rights to be granted to NRC. 725 It is also plain that even after the 4 April 1993 Heads were executed, QR and the State of Queensland expected that in due course QR and NRC would enter into a 20 year lease. 726 This can be seen from Mr O'Rourke's consideration in May 1993 and August 1993 of the advantages and disadvantages of the State of Queensland becoming a shareholder of NRC. Shareholding would have carried with it the loss of revenue from a lease of the AR terminal calculated over a period of 20 years. What QR expected and indeed recommended to the State of Queensland was that the State should not become a shareholder so that QR could obtain the financial benefit of a 20 year lease to NRC. 727 NRC's strategy of deferring a request for the grant of a long term lease was implicit in the provisions of the 4 April 1993 Heads. This was again endorsed by the Board of NRC on 8 July 1994 when it approved Mr Graham's recommendation. 728 By October 1994, QR appears to have had misgivings about the grant of a long term lease. NRC's Board Paper of 26 October 1994 records that QR was only prepared to grant access rights rather than ownership or a long term lease. QR's position seems to have been dictated by considerations flowing from the Hilmer Report and the emerging interest of potential third party operators. Mr Hearsch referred to this in a memorandum to Mr O'Rourke dated 14 September 1994. 729 QR's change of heart about a long term lease had apparently disappeared by June 1995 when Mr O'Rourke accepted the principle of a 20 year lease in his meeting with Mr Graham and Mr Hanscomb. 730 Negotiations for a long lease were introduced by Mr Graham's letter to Mr O'Rourke of 31 January 1996. The letter makes it plain that Mr Graham did not consider that QR was bound to enter into a lease. It commenced by acknowledging the provisions of the three year lease (which in fact had not then been executed) which required, in cl 7.5, notification of NRC's intention to seek a further lease after the expiration of the three year term. The letter stated NRC's intention to seek a further lease and expressed a preference for a term of 20 years with an option for a further 10 years. NRC's "non-waiver" of its rights under the EA does not detract from the proposition that the parties were embarking upon negotiations for a long lease. 731 No doubt at that time both parties reasonably expected that such a lease would be negotiated. Mr Scheuber expressed QR's position in his letter to Mr O'Rourke of 27 February 1996 stating that there was no "major objection" to such a lease. 732 Negotiations commenced with the delivery by Mrs Fontaine of a draft lease to Mr Jenner on 20 May 1996. The correspondence between the parties shows that they were proceeding on the ordinary assumption that the parties were not bound until a formal contract had been drawn up and executed, the subject matter of the proposed agreement being a substantial lease of land: Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 ("Commonwealth Games Case") at 548, Long v Piper [2001] NSWCA 342 at [48] – [55], Landsmiths Pty Limited v Hall (1999) 9 BPR 17,057 at [9]; see also Branir Pty Limited v Owston Nominees (No 2) Pty Limited (2001) 117 FCR 424 at [365] and the authorities there cited. 733 The correspondence between Mrs Fontaine and Mr Jenner in the period from June 1996 makes it plain that there were substantial issues on which the parties had yet to reach agreement when QR withdrew its offer of a long term lease in the change of position letter. Mrs Fontaine's confidence expressed in her memorandum of 27 November 1996 that it was realistic to expect agreement by the end of 1996 may not have been misplaced. However, there was nothing in the correspondence which revealed any intimation by QR that it was already bound or that it had lost its freedom to withdraw from the negotiations. 734 I reject Mr Hanscomb's evidence that in negotiating the three year lease the parties were "in effect" negotiating the terms of the long lease proposed by NRC. That proposition is quite inconsistent with what took place when the parties set about negotiating the long lease in 1996. I am entitled to have regard to this: see Commonwealth Games Case at 547 – 548. 735 I also reject Mr Walker's submission that clauses in the three year lease "dovetail" with the proposed long lease so as to suggest that the long lease was on the same terms. He put that proposition to Mr O'Rourke who accepted that there was "dovetailing", but not the wider proposition. In my view it is plain that cl 31.2 of the three year lease merely recognised the prospect of a long lease. The clause cannot have had the effect of binding the State of Queensland to cause QR to enter into a long lease on the terms of the three year lease, or indeed at all. The estoppel claim fails because the assumptions are not clear and unequivocal 736 In my summary of the relevant legal principles I referred at [668-(17)] to High Court and Federal Court authority for the proposition that a representation or conduct founding an estoppel must be clear and unambiguous. 737 The principle may be traced to a decision of the English Court of Appeal in Low v Bouverie [1891] 3 Ch 82. Bowen LJ explained it as follows at 106:- "Now, an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed." 738 It seems to me to follow that, whatever species of estoppel falls for consideration, the assumption which is said to have been engendered must be clear and unambiguous. 739 I have drawn attention to the different assumptions held by Mr Graham and the other directors because, at very least, this must negate the requisite elements of clarity and certainty. 740 This observation is not confined to the evidence adduced in support of the estoppel claim. In my opinion the four pleaded assumptions, even if supported by evidence in those terms, all lack the necessary clarity and certainty to found an estoppel. 741 The first assumption is that QR would grant a lease or access "for so long as NRC carried on the business of interstate rail freight operations in Queensland" on a commercial basis, or for at least 30 years. The extent of any such business and the degree of repetition or continuity of the requisite activity are not spelled out: Hope v Bathurst City Council (1980) 144 CLR 1 at 8 and United Dominions Corporation Limited v Brian Pty Limited (1985) 157 CLR 1 at 15. Although the period of the lease or access was said to be for 30 years, the terms were to be on a commercial basis. That expression cannot have the requisite degree of certainty absent the agreement of the parties as to the content of the terms. 742 The second assumption is that QR would provide access "in a way which would enable NRC to have the greatest prospect of securing its commercial viability". This expression is inherently unclear and uncertain. 743 The third and fourth assumptions suffer from the same vice as the first; namely, that the control was to be for so long as NRC carried on the business of interstate rail freight in Queensland. The alternative term of the period of control, namely "at least 30 years" would of itself have provided certainty, but it is at odds with the potentially indefinite duration of "for so long as NRC carries on the business". The estoppel claim fails because QR took no part in occasioning any of the assumptions 744 As Dixon J said in Thompson at 547, whether a departure from an assumption is unjust depends upon the part taken by the person sought to be estopped in occasioning the adoption by the other party of the assumption. 745 Even if the assumptions propounded by PN are capable in their terms of giving rise to an estoppel, the claim fails because QR did nothing to occasion or cause the adoption of the assumption. 746 Mr Graham formed his assumptions based upon his reading of the EA. He did not put forward any positive statement or conduct by Mr O'Rourke or, to the extent that Mr Hamill's conduct is, or may, be relevant, any positive statement or conduct of Mr Hamill. Instead he emphasised that nothing said by either of those persons in the period from 1992 to March 1997 was inconsistent with Mr Graham's understanding of the EA. 747 Failure to disabuse may, in some circumstances, create or encourage an expectation: Crabb at 188 – 189. But this head of equity usually depends upon proof that the owner of the property seeks to take unconscionable advantage of another by allowing the other to spend money on the property in the belief, known to the owner, that the person expending the money will enjoy a benefit over the property: Holiday Inns Inc v Broadhead [1974] 232 EG 951 ("Holiday Inns") discussed by Priestley JA in Austotel at 607 – 608 and 610. 748 There is nothing in the evidence in the present case to suggest that QR knew that NRC was expending money on or in relation to the AR terminal in the belief that NRC would obtain what, according to the pleaded assumptions, would have amounted to a perpetual lease on terms that guaranteed the ongoing commercial existence of NRC. 749 In short, there was nothing that required QR to disabuse Mr Graham, or the other NRC directors, of any misconception they might have had about the effect of the terms of the EA. 750 To the extent that there were any communications with Mr Graham or Mr Butcher about the offer of a lease, they could not have engendered an expectation in the terms set out in the first pleaded assumption. 751 Mr Butcher gave evidence of discussions with Mr Hamill and Mr O'Rourke which post-dated the EA. Mr Hamill's statement, though made on behalf of the State of Queensland, was capable of engendering an expectation as to how QR would act. But a statement that there would be a long term lease was too uncertain to establish any expectation of perpetuity. Nothing was said about the terms. It must be construed as preparedness to enter into a lease on terms to be agreed. 752 Mr Butcher's evidence that Mr O'Rourke was "fully supportive of NRC and its assumption of control of the NRC terminal" is even more vague. 753 Mr O'Rourke's statement at the meeting in June 1995 that QR accepted the principle of a 20 year lease cannot have occasioned an assumption in the terms put forward by PN. The claim of conventional estoppel fails because there was no assumption of existing facts and on other grounds 754 Conventional estoppel requires an assumed state of existing facts or an assumed state of law or of mixed fact (ie existing facts) and law: see the authorities referred to at [668 –(10) and (11)]. 755 I said at [690] – [692] that PN has failed to establish that control of the AR terminal was transferred on the basis that the transfer would be effective for so long as NRC carried on interstate freight business. 756 I have come to this view because on 4 April 1993, the parties entered into written agreements which provided, inter alia, for them to enter into an agreement for lease of the AR terminal for a term of three years. The transfer of control under the functions letter could not have existed independently of the terms of the lease. 757 Where the parties have entered into a written agreement, the Court will ordinarily hold them to the rights and obligations they have assumed under it. The law allows for exceptions but they must be proved according to established legal categories: Equuscorp Pty Limited v Glengallan Investments Pty Limited (2004) 218 CLR 472 at [35]. 758 Mr Graham's evidence that there was no "sunset" provision on the transfer of control is at odds with the written agreements. Substantially greater and more precise evidence would have been required to establish any reasonable argument to the effect that the transfer of control was assumed to be for a longer period than the term of the lease. 759 Even if Mr Graham had an assumption that NRC would continue in possession and control of the AR terminal for a period beyond the expiration of the three year lease, that was not an assumption of existing fact. 760 Mr O'Rourke's evidence was that control was transferred to NRC in April 1993 in anticipation of a lease of 30 years being negotiated between the parties. I have little doubt that Mr Graham held a similar assumption. But that is not an assumption that control had been transferred under the EA and that this was to continue for so long as NRC conducted national interstate freight operations. 761 A conventional estoppel must be mutual: see Con-Stan at 244. At most, there was a mutual assumption of Mr Graham and Mr O'Rourke that control had been transferred for three years in anticipation of a lease of up to 30 years being negotiated. That is not an assumption of existing fact. If it can found an estoppel at all, it can only be a promissory estoppel: see [668-(13)], which I address below at [771]. The equitable estoppel claim based on encouragement and failure to disclose facts 762 The high water mark of this claim is Mr O'Rourke's concession that control was transferred to NRC on 5 April 1993 in anticipation of a 30 year lease being negotiated. 763 The climate of goodwill which then existed between the parties, and the perception amongst all concerned that micro-economic reform of the rail freight industry was to be effected, suggests that Mr Graham and Mr Butcher held a similar assumption. 764 I said at [748] that the claim fails because QR did not know that NRC was spending money in the belief that it would obtain a perpetual lease. But the claim based upon anticipation of a 30 year lease also fails to satisfy the necessary elements for an estoppel. 765 At its highest, Mr O'Rourke's concession, and my view that Messrs Graham and Butcher held a similar assumption, establishes no more than a belief by all concerned that there would be negotiations. That claim runs headlong into the difficulty raised by the Privy Council in Humphreys and reiterated by Brennan J in Waltons. A hope or expectation that an agreement will be reached is not enough. The party asserting an estoppel must go further. 766 The principles are summed up in the following passage from the judgment of Brennan J in Waltons at 423:- "Parties who are negotiating a contract may proceed in the expectation that the terms will be agreed and a contract made but, so long as both parties recognize that either party is at liberty to withdraw from the negotiations at any time before the contract is made, it cannot be unconscionable for one party to do so. Of course, the freedom to withdraw may be fettered or extinguished by agreement but, in the absence of agreement, either party ordinarily retains his freedom to withdraw. It is only if a party induces the other party to believe that he, the former party, is already bound and his freedom to withdraw has gone that it could be unconscionable for him subsequently to assert that he is legally free to withdraw." 767 As I understand PN's claim under this head, it is that QR was under a duty to inform NRC that it did not intend to proceed with the negotiations. The argument is built upon QR's knowledge that NRC was spending large sums on, or in relation to, the AR terminal. 768 However, I cannot see that this claim has any foundation. PN fairly and properly conceded that the negotiations for a new lease in 1996 were conducted in good faith by QR. The position might have been different if QR had not negotiated in good faith because an argument would then have been available that QR had resiled from an assumption which might, at least on one view, have been created by it. But that is not the case here. The assumption was that QR would negotiate in good faith for a 30 year lease. That was what took place, albeit the parties were still at odds on a number of fundamental issues when QR had a change of heart. 769 It was a change of position that QR was entitled to take. As Mr Graham frankly acknowledged, he proceeded on the basis that the State of Queensland had yet to make a choice under cl 5(6)(a) of the EA and it was open to the State to choose access in lieu of a lease. 770 The State did not refuse to negotiate entirely. Acting through QR, it said in Mr O'Rourke's change of position letter of 27 March 1997 that it was prepared to negotiate in good faith to permit NRC to have continued access rights to the AR terminal as envisaged in the EA. 771 In their submissions in reply, the applicant observes that QR's submissions on estoppel proceed as if the applicant's case was that QR promised NRC a long term lease. The applicant resists such a suggestion; it was correct to do so. Mr Graham did not point to any promise made to him by Mr O'Rourke, other than his agreement to the principle of a 20 year lease. Mr Graham was unaware of Mr Hamill's statement made to Mr Butcher in December 1991 that a long term lease would be granted. 772 I have already said that Mr Hamill's statement was too vague to give rise to the claim put forward by PN. Moreover, Mr Butcher conceded that he took Mr Hamill's statement as no more than a statement of present intention about how the State of Queensland might exercise its discretion in the future. 773 Finally, I will address Mr George's comment on QR's April 2001 briefing paper which I set out at [480]. Mr George questioned whether QR may have encouraged NRC to assume that if it invested capital at the AR terminal it would receive a long term lease. The document was not admitted as proof of the fact and it is plain that Mr George was merely raising a question. He referred to a suspicion of "some thinking" in the early days, that is, prior to his arrival on the scene. 774 The proposition that there might have been encouragement of the type mentioned by Mr George was not put to Mr O'Rourke. There is nothing in the document which gives rise to a Jones v Dunkel inference by reason of QR's failure to call Mr George. The present case is in no way analogous to the position in Bond Brewing (NSW) Pty Limited v Reffell Party Ice Supplies Pty Limited (unreported, Supreme Court of NSW, Waddell CJ in Eq, 17 August 1987), where the tenant of a hotel acted upon an assumption that the landlord would not terminate a lease without paying to the tenant a reasonable sum for the value of the goodwill. His Honour found that the landlord knew this to be so, and that detriment was clearly established. None of these elements are demonstrated in these proceedings: see also Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Limited (2003) 214 CLR 51 ("Berbatis") at [57] per Gummow and Hayne JJ. The proprietary estoppel claim is distinguishable from the Plimmer line of cases 775 It may be that under the broader view of estoppel explained by Priestly JA in Austotel it is not necessary that the interest to be secured has been expressly indicated. I do not need to consider this question although I would observe that the Full Court in Mobil Oil was of the view that it is a necessary element of the principle that the person sought to be estopped has created or encouraged an assumption that "a particular legal relationship" or "an interest" would be granted: see at 513. 776 What distinguishes the present case from the conclusion reached by Priestly JA in Austotel is that his Honour was of the view that the party sought to be estopped was certain to proceed with the lease and had so represented to the party asserting the estoppel: see at 613. 777 Priestley JA was there applying, although distinguishing on the facts, the principle stated by the Privy Council in Humphreys. His Honour's approach also reflects the principle stated by Brennan J in Waltons which I have set out at [766] above. 778 In the present case the point had not been reached in the negotiations at which either party intimated to the other that it was unconditionally bound. It is clear from the correspondence with Mrs Fontaine that the parties were still in negotiations. 779 The position which had been reached when QR withdrew its offer was recorded in Mrs Fontaine's letter of 30 January 1997 to Mr Jenner. She agreed to most but not all of the 20 pages of draft amendments proposed by Ms Calvisi. Further discussions were to take place in relation to three issues of principle raised by Ms Calvisi. 780 There was nothing in the correspondence or in the evidence called by PN at the trial to suggest that there was an intimation by QR to NRC that QR had lost its freedom to withdraw. The 1993 Freight Services Agreement does not assist PN's case 781 PN submitted that the entry into the 1993 Freight Services Agreement by NRC and QR involved an assumption by the parties that a transfer of the rights of terminal management had already taken place under cl 5(6)(a) of the EA. 782 This assumption was said to have been revealed in two ways. First, in the terms of cl 5(6)(b) of the EA, in particular in the opening words of that clause:- "Until all the transfers of ownership, leases or grants of access pursuant to subclause 5(6)(a) are completed." 783 Second, the assumption was said to appear from a number of clauses of the 1993 Freight Services Agreement, in particular, cl 1.2(s), 1.1(w), 2.1, 2.2 and 4.1. 784 I reject this submission for three reasons. First, it is based on a misreading of cl 5(6)(a) and 5(6)(b). The submission turns on the proposition that cl 5(6)(a) carried with it a right of exclusive control. 785 It did not carry such a right because, as I have already said, a distinction is to be drawn between the concepts of "lease" and "access". 786 Second, the opening words of cl 5(6)(b) did not carry with them the necessary pre-condition that the State must already have exercised its discretion as to the form of property rights to be granted under cl 5(6)(a). All that cl 5(6)(b) dealt with was the contractual situation which was to apply until ownership was transferred or a lease or access rights were granted. There may, or may not, have been the exercise of a discretion by the State under cl 5(6)(a). 787 Third, the clauses of the 1993 Freight Services Agreement relied upon by PN do not reveal the assumption contended. It is true that cl 2.1 and 2.2 provide for NRC to progressively assume responsibility for interstate rail freight. But that cannot carry with it an assumption that management or control of the AR terminal had been transferred, let alone in perpetuity or for a period of 30 years. Whether QR's silence induced NRC to believe that QR had procured a long term lease 788 At the heart of PN's case was the proposition that QR was aware that NRC was spending substantial amounts of money on the AR terminal and the East Coast Strategy, yet it stood by and said nothing to suggest that it would not grant a long term lease until 27 March 1997. 789 It is plain that QR was aware from at least September 1993 that NRC was proposing to spend substantial amounts of money on upgrading the AR terminal as part of a program of investment in relation to operations on the east coast corridor. This appears from a number of contemporaneous records. 790 On 13 September 1993, Mr Butcher wrote to Mr Hamill stating, inter alia, that Mr Hamill was aware of NRC's substantial program of investment to upgrade the terminal to complement the investment being made on rail infrastructure on the Sydney-Brisbane corridor. It is true that this letter was not sent to QR but other correspondence leads to the inescapable inference that Mr O'Rourke was aware of NRC's plans. 791 In particular, there was correspondence dated 7 September 1993, 23 September 1993 and 4 November 1993 which shows that Mr O'Rourke was aware of the planned expenditure to upgrade the AR terminal. 792 Moreover, NRC's Board Paper of 26 October 1994 reporting on negotiations between Mr Graham and Mr Hanscomb with Mr O'Rourke and others, suggests that NRC communicated to QR the level of its existing investment on the AR terminal in an amount in excess of $10 million. 793 Furthermore, Mr Graham's letter of 9 May 1995 makes reference to NRC's major locomotive acquisition program requiring commercial debt to support the investment. 794 In my view it was perfectly plain to QR that these were not short term investments. However, it is quite another thing to say that QR's silence gave rise to a promise of a long term lease. Nor could silence by QR give rise to an expectation by NRC that QR had agreed or would agree to a lease effectively in perpetuity or even for 30 years. 795 At most, QR's silence in the face of its knowledge of the proposed investments, gave rise to an expectation that there would be negotiations for a long term lease. For reasons which I have already given I do not consider that this gave rise to any of the species of estoppel contended for by PN. No reliance on pleaded assumptions 796 Since I am satisfied that NRC did not hold any of the pleaded assumptions I do not need to consider the issue of reliance. If NRC did not hold the assumptions it could not have relied on them. Nevertheless, I will deal briefly with some of the arguments which were addressed. 797 Evidence of reliance was given by Mr Graham and Mr Butcher as well as by the other directors who were called. There was also evidence relevant to the issue of reliance from Mr Hanscomb and Mr Fullerton. 798 Mr Graham said in his evidence in chief that if he had received QR's letter of 27 March 1997 prior to making recommendations for expenditure on the AR terminal or the East Coast Strategy, he would not have recommended that the expenditure be made, at least until the issue of QR's change of position had been resolved. 799 Mr Graham conceded in cross-examination that there were time pressures to implement the terminal improvements needed to implement the micro-economic reforms contemplated by the EA. He explained that this involved the operation of longer trains to reduce costs and increase efficiency which required, inter alia, the construction of Track A at the AR terminal. 800 QR submitted that in light of the urgency and in light of what was said to be a concession by Mr Graham, I should find that "NRC would have had to spend the money in any event". QR referred to Mr Graham's evidence that if NRC was using the AR terminal "and if we wanted to adapt it to NRC's operations, we would have had to spend money". 801 In my view, this was not a concession by Mr Graham that he would have recommended expenditure on the AR terminal regardless of any views he held about NRC's security of tenure. 802 The whole thrust of Mr Graham's evidence was that the decision to invest was based on rights he believed to be embodied in the EA and in the NRC Act. He believed that those instruments gave NRC long term security of tenure, albeit that the minimum content of it was not necessarily by way of leasehold but by means of access. 803 It would be commercially naďve to suggest that Mr Graham would have gone ahead without some such belief or, at very least, a confident expectation that long term security of tenure would flow from the commitments made in the EA. Mr Graham impressed me as an experienced and competent chief executive. I do not consider that he would have gone ahead on any other basis. 804 The difficulty, however, for NRC is that Mr Graham's expectations are not supported by the express terms of the EA or, at very least, they were dependent upon the outcome of further negotiations. Given that there was a strong climate in favour of micro-economic reform and governmental support for the concept of NRC, Mr Graham's confidence was not misplaced. But that is quite different from reliance upon the assumptions put forward by PN as the foundation for the estoppel claim. 805 The same may be said of Mr Graham's evidence about the investment in the East Coast Strategy. It is true that Mr Graham conceded that there were risks attached to the investment. The risks were identified in the Board Paper of Mr Graham and Mr Hanscomb dated 6 December 1995. Mr Graham conceded that the effect of his recommendation to the Board was that NRC either pursue the East Coast Strategy or get out of the business on the east coast. 806 It is also true that Mr Graham conceded that he would have considered the investment in the East Coast Strategy even if another party was operating the AR terminal, at least if those operations were consistent with "the long-term viability" of NRC's business. 807 But these concessions must be viewed against Mr Graham's evidence of his assumptions about the effect of the EA. I do not consider that he would have recommended the investment come what may. I have taken into account the fact that further investments were made even after the change of position letter. The explanation for this seems to be that they were part of a strategy which had already been adopted and put in place. In any event, there was a belief, which seems to have been supported by the contemporaneous correspondence, that some suitable arrangement would be arrived at, albeit not necessarily in the form of a leasehold tenure. 808 I do not propose to set out the evidence of reliance given by Mr Butcher and the other directors or such concessions as they made in cross-examination. Although they approached the issue differently from Mr Graham, in my opinion it would be wrong to proceed on the basis that they would have approved the investments absent a belief about what flowed from the EA. Of course, as I have been at pains to stress, that is not reliance on the pleaded assumptions. 809 I do not consider that the evidence of Mr Hanscomb or Mr Fullerton adds to or alters the views I have reached. 810 Finally, a striking aspect of the documentary record is the absence of contemporaneous documents which suggest reliance on the EA to give rise to enforceable legal rights. This is most notable around the time of the change of position letter and at the time of QR's final statement of its position in its letter of 25 March 1998. 811 Even before the change of position letter, Mr Graham referred in a Board Paper of 20 January 1997 to the possibility of the EA being abandoned. He said the prospect of terminals being vested in track authorities may cost NRC the ability to pursue essential features of its intermodal business. 812 This theme was followed up in the Board Paper of 31 March 1997 which said that if NRC was denied long term exclusive access to the AR terminal it would be forced to write off works investments. 813 Nor was there any protest in NRC's Board minutes of 27 March 1998 which acknowledged receipt of QR's letter of 25 March 1998. 814 The closest reference to a claim of reliance was in Mr Graham's letter of 15 April 1998. He said that the expenditure on the AR terminal was undertaken in good faith on the basis of an agreement with QR that NRC's rights under the EA were to be recognised in a long term lease. 815 But this was a reference to Mr O'Rourke's agreement to the principle of such a lease in June 1995. That could not have amounted to reliance because the "agreement" was required to be formalised in a written document. 816 It seems to me that a consideration of the extensive documentary record suggests that whether or not the EA was a political agreement, QR and NRC proceeded on that basis. The underlying thrust of the documentary record, and indeed of Mr Graham's oral evidence was that there would be a political solution to the impasse. Reliance on legal rights was not an issue. 817 QR submitted that NRC was relying upon a favourable exercise of the discretion conferred by cl 5(6)(a) of the EA as to the form of property rights. QR emphasised that this depended upon a commitment to be made by the State of Queensland rather than by QR. 818 I did not find this submission to be attractive, bearing in mind the relationship between the State of Queensland and QR. It is true that the State is not a party to the proceedings but Queensland Railways was an agency of the Queensland Government and QR is a government owned corporation. Nevertheless, in view of the terms of cl 5(6)(a) of the EA, NRC could reasonably have assumed that the State of Queensland would have caused Queensland Railways or QR to give effect to the exercise of its discretion. 819 NRC also contended that it relied upon the pleaded assumptions in deciding to integrate the AR terminal into its national network. The same findings apply to this as to the decisions to invest in the AR terminal and the East Coast Strategy. It was not reasonable for NRC to rely on the alleged assumptions 820 Perhaps the most fundamental of the many deficiencies in PN's estoppel claim is that it was simply not reasonable for NRC to rely on any of the alleged assumptions. 821 Whatever view any of the directors held of the strength of the commitment of the State of Queensland flowing from cl 5(6)(a) of the EA, the clause stated in plain terms that the transfer or grants of rights would be on such commercial terms and conditions as were agreed between the NRC and the State. 822 It was crystal clear from this that the parties, that is to say NRC and QR, must have proceeded on the ordinary assumption that the subject matter of the proposed agreement, being a substantial lease of land, or perhaps substantial and complex access rights, the parties were not bound until a formal contract had been executed. I referred to the authorities at [732] above. 823 This approach to the question of whether negotiations between parties gave rise to a tenancy by estoppel was adopted by the Victorian Court of Appeal in Kellow-Falkiner Motors Pty Limited v Nimorakiotakis [2001] ANZ Conv R 230 at 233 – 234. 824 NRC, as a well resourced, commercially sophisticated rail operator, advised by competent and experienced solicitors, must have know that it could not reasonably rely upon rights under a lease, or rights of access or management or control of the terminal in the absence of a written agreement. That is precisely what the last sentence of clause 5(6)(a) contemplated. 825 The position is effectively captured in the following passage from the judgment of Mance LJ in Baird Textiles Holdings Limited v Marks & Spencer Plc [2001] All ER (D) 352 (Feb) at [94]:- "As I have already said, the fact that there was never any agreement to reach or even to set out the essential principles which might govern any legally binding long-term relationship indicates that neither party can here objectively be taken to have intended to make any legally binding commitment of a long-term nature, and the law should not be ready to seek to fetter business relationships with its own view of what might represent appropriate business conduct, when parties have not chosen, or have not been willing or able, to do so in any identifiable legal terms themselves. These considerations, in my judgment, also make it wrong to afford relief based on estoppel, including relief limited to reliance loss, in the present context." As Mance LJ observed at [95] – [96], even if the recognised principles of estoppel are "fertilised" by a broader approach exemplified in cases such as Holiday Inns, those cases are explained on the basis that the parties envisaged that rights already existed or they intended them to be created by contract. 826 What is important, as Mance LJ noted at [96], is that the question is ultimately one of risk. In the present case it is plain in my view that NRC was willing to run the risk of making investments in, and in relation to, the AR terminal without its rights being recorded in an agreement. That appears most clearly in correspondence dated 7 September 1993, 23 September 1993 and 4 November 1993 between Mr O'Rourke and Mr Graham. In the last mentioned of those letters, Mr Graham indicated a willingness to proceed with expenditure notwithstanding that the terms of the three year lease had not been finalised. 827 The same approach appears in relation to expenditure incurred after June 1995. There was agreement to the principle of a long lease but nothing more. So too in the negotiations that took place between May 1996 and the change of position letter. The correspondence shows that agreement had not been reached. 828 The dispute resolution provision in cl 7 of the EA does not provide an answer. That clause provided for "any dispute or difference whatsoever arising in connection with this agreement" to be first the subject of conciliation between the parties to the dispute and, if not resolved, to be submitted to arbitration. A dispute or difference included a dispute or difference as to:- "(f) the charges and terms and conditions for access to assets pursuant to … subclause 5(6)(a)." 829 NRC and QR were, of course, not parties to the EA. But in any event, the submission of a dispute to arbitration under this clause could not resolve the question of whether the rights to be granted were to be lease or access. Nor did it provide a means of settling what the area of the lease or access rights would be or the totality of the terms and conditions of the lease or access rights. 830 Not surprisingly, NRC did not seek to invoke the dispute resolution clause when it received the change of position letter or thereafter. 831 Commercially, the decision to proceed with the expenditure was probably entirely well founded. That is not for me to determine. But even assuming it was, that cannot leave the door open for the assertion of an estoppel where NRC was aware that no legally binding agreement had been entered into, or at least where there was nothing to induce NRC to believe that QR had lost its freedom to withdraw. 832 Even if the investment decisions were made upon the basis of Mr Graham's understanding of the rights created by the EA, that did not provide a reasonable foundation for reliance on the assumption. His understanding was either incorrect or, at most, based upon an interpretation which constitutes only one available view. He did not put his interpretation to QR prior to NRC making the investments. Nor did NRC inform QR that it was only proceeding upon the basis that the EA entitled it to a long term lease or long term control. Detriment: the nature of the detriment claimed by NRC 833 The findings which I have made about the absence of a proper basis for the claim of estoppel make it unnecessary to consider the question of detriment. However, it is convenient that I make findings about the principal issues which arise under this head. 834 NRC contends that it will suffer three categories of detriment if QR is permitted to depart from the assumption. The first category is said to be unrecouped expenditure on the AR terminal and the East Coast Strategy. The second is said to be the loss of a number of opportunities. As I understood it, only two were pressed by PN in final address. They were the loss of an opportunity to obtain the assistance of the Queensland Government in securing a long term lease and the loss of an opportunity to invoke the dispute resolution processes contained in the EA. 835 The third category, operational detriment, involves the fulfilment of expectations. It is an aspect of the broader category of detriment referred to in Verwayen. The relevant legal principles of detriment 836 Three principles should be added to those which I included in my summary of the relevant legal principles of estoppel at [668-(5) – (9)]; see also propositions (5) and (6) in Brennan J's summary of the principles of equitable estoppel set out at [668–(14)]. 837 First, the party asserting an estoppel must prove it would suffer a detriment if the "estopped" party is permitted to resile from the assumption. This is an essential element of an estoppel claim whether in common law or equity: Grundt at 674. 838 Second, the detriment which is to be established must be of a real or serious nature. If the alleged detriment is a lost opportunity, it must be one which is real and not theoretical: Minister for Immigration and Multicultural Affairs v McDade (2001) 109 FCR 137 at [28], per Carr, Lindgren and Katz JJ; Nigel Watts Fashion Agencies Pty Limited v GIO General Limited (1994) 8 ANZ Ins Cas 61-235 at 75,644 per Kirby P and at 75,654 per Handley JA. 839 Third, the principles of equitable estoppel are concerned with satisfaction of the minimum equity necessary to do justice. Equitable estoppel is intended to relieve against the detriment suffered and not to make good an expectation: see the Full Court's discussion of the principles stated in Verwayen in Mobil Oil at 516 – 517. 840 Fourth, once the detriment has ceased or been paid for, there is nothing unconscionable in a party insisting upon the enforcement of its strict legal rights: Verwayen at 501. The fundamental reason why detriment has not been established 841 This case is to be distinguished from all of the proprietary estoppel, or estoppel by acquiescence, cases because from the time when QR sought to resile from the alleged assumptions, it offered to negotiate to provide access rights in accordance with the EA. 842 In particular, from the time of the offer of the Terminal Services Agreement in Mr Wilson's seventh affidavit, there was a specific offer of terms which in my view cannot be said to be uncommercial. It seems to me that for PN to succeed in establishing the necessary detriment I would have to be satisfied that the terms offered by QR are so unreasonable that they could not possibly satisfy any rights which might be embedded in the broad terms of cl 5(6)(a) of the EA. In particular, I would have to be satisfied that the proposed Terminal Services Agreement does not confer upon PN the ability to recoup any detriment suffered by the withdrawal of the offer of a long lease. 843 It must be borne in mind that QR has amended the terms of the proposed Terminal Services Agreement to meet some of the objections raised by PN in cross-examination of Mr Wilson. It is also to be borne in mind that QR has undertaken to keep the offer open until 90 days after the delivery of my judgment. 844 Although it is true that the term or period of the amended Draft Terminal Services Agreement is not for so long as NRC continues to carry on interstate freight operations, I do not think that this is an answer to QR's contention that the amended Draft Terminal Services Agreement will overcome any detriment suffered by the withdrawal of the "offer" of a long term lease. Nor is PN's objection that the extensions of the term be at QR's discretion. 845 What seems to me to be the decisive answer to the estoppel claim put by PN is that under the amended Draft Terminal Services Agreement, any detriment alleged by PN will cease for reasons set out below. That is to say the detriment, if any, will cease or be paid for within the principle stated by McHugh J in Verwayen. 846 Even if PN has not recouped the initial expenditure on the AR Terminal or on the East Coast Strategy, it will have ample opportunity to do so under the Terminal Services Agreement. It should be noted that the proposed Terminal Services Agreement incudes an offer by QR to expand the size of the terminal to add two parcels of land comprising an additional 3.25 hectares. This will enable QR to expand the capacity of the AR terminal so as to accommodate PN's existing profitable level of throughput with some increases as envisaged in the latest draft of the Terminal Services Agreement. It must be borne in mind that NRC has already had more than eight years to recoup any detriment said to have been occasioned by QR's change of position in March 1997. Reliance detriment: expenditure on the AR Terminal and the East Coast Strategy 847 PN called evidence from its Financial Controller, Mr Gilchrist. His evidence was that between 1 July 1993 and 30 June 2004, NRC had made a net benefit from its operation of the AR terminal of $104 million before tax and depreciation. He agreed that in calculating the net benefit it was appropriate to disregard depreciation. 848 Mr Gilchrist also gave evidence that, for the period from 1 July 1995 to 30 June 2004, the net benefit from NRC's national intermodal business, before tax and depreciation, was $410 million. 849 PN also provided expert evidence from Mr Wayne Lonergan. In his first report Mr Lonergan accepted that Mr Gilchrist's method of calculation was reasonable but he came to the view that between 1 July 1992 and 30 June 2002, NRC national operations incurred an overall loss of $12 million. This figure was arrived at after taking depreciation into account. However, QR's expert Mr Bryant, took issue with some aspects of Mr Lonergan's methodology including his failure to add back depreciation. 850 Mr Gilchrist's concession in cross-examination, which in my opinion was properly made, that depreciation must be excluded from the calculation, left PN clearly exposed to a submission that it had more than fully recouped both categories of expenditure said to found the estoppel claim. The relevant amounts said to have been expended were $16.6 million on the AR terminal and approximately $401 million on the East Coast Strategy, although the latter amount must be reduced because some of the expenditure was for locomotives not related to the AR terminal. 851 But even taking PN's evidence of expenditure on these two categories at its highest, it is plain that Mr Gilchrist's concession constituted a major hurdle, if not the death knell of the estoppel claim. 852 Notwithstanding this, PN filed a third report of Mr Lonergan which stated that Mr Gilchrist's answers to cross-examination did not provide a reliable or accurate basis from which an opinion can be formed as to the detriment or benefit derived by PN. 853 Mr Lonergan pointed to the revenue and expense lines of Mr Gilchrist's calculations. As to the revenue, Mr Lonergan said that the figures include bulk coal grain and steel carrying operations, none of which, based on his instructions, related to PN having access to or control of the AR terminal. As to the calculation of expenses, Mr Lonergan considered that Mr Gilchrist's calculations did not deal appropriately with interest. 854 Quite apart from the fact that Mr Lonergan's third report adopted a completely different approach and methodology to his previous report, there are a number of serious difficulties with his evidence which cause me to reject it. First, Mr Lonergan did not identify which costs were fixed and which were variable. Second, PN failed to discharge the onus of adducing evidence of all the costs of operations on the East Coast corridor. I could not be satisfied that Mr Lonergan's evidence matched the whole of PN's expenditure with the whole of its revenue. This criticism is directed at PN rather than Mr Lonergan. PN carried the evidentiary onus on this issue: Swain v Waverley Municipal Council (2005) 213 ALR 249 at [17], [151] – [155]. 855 The evidence of QR's witness, Mr Bryant, is to be preferred, notwithstanding that both experts are well qualified. 856 The short answer to Mr Lonergan's attempt to offer a different approach to interest costs is that his first report was based on actual interest costs whereas his third report looked at interest in the nature of opportunity costs. A calculation of whether expenditure has been recouped is not concerned with lost opportunity costs. Accordingly, Mr Lonergan's approach to this issue in his third report was irrelevant to the issue at hand. 857 There are two further reasons why PN has failed to establish reliance detriment. First, PN continues to own the locomotives and other assets acquired by the expenditure on the East Coast Strategy. PN has the ability to continue to use those assets. 858 Second, in its offer of a licence to PN of the AR terminal, QR has offered to compensate PN for the written-down value of the improvements to the AR terminal carried out by NRC during the period of the three year lease and in the periodic tenancy which was in place following upon the expiration of the three year lease: see [563] above and see also the definition of "payout amount" and cl 5.2 of the draft licence. Reliance detriment: lost opportunities 859 There is no doubt that Mr Hamill was a strong supporter of the concept of NRC and that he favoured the grant of a long term lease. Moreover, Mr O'Rourke conceded that he gave instructions in 1996 for negotiations to take place for a long lease because he believed that was Government policy. He also conceded, as I have previously noted, that he expected a long term lease would have been negotiated if the negotiation process had continued. 860 But the suggestion that NRC lost the opportunity to apply political pressure to the then Queensland Government to obtain what NRC apparently considered to be its rights under the EA must be rejected. The opportunity was, at most, theoretical. It cannot be accepted as a real opportunity within the principles stated in the authorities. 861 There are a number of reasons for this. First, any suggestion that a sitting government would act, or be likely to act, in a particular way based upon expressions of a particular point of view must usually be rejected. Although his Honour was dealing with principles of administrative law, it seems to me that what Gummow J said in Minister for Immigration and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 at 207 – 211 applies equally in the present context. A discretion conferred by statute is to be exercised on a proper understanding of what the statute requires and, ordinarily, is not to be confined by a statement or decision which forecloses the discretion. 862 It seems to me to follow from this that any suggestion of a lost opportunity to obtain the benefit of Mr Hamill's support cannot be an opportunity which the law would recognise. 863 Second, there is nothing to suggest that a long lease would have been negotiated in the available time. It took nearly three years for the parties to agree the final terms of the three year lease that was the subject of the 4 April 1993 Heads. The good faith negotiations for a new lease which commenced in May 1996 had not culminated in an agreement after about 10 months of negotiations. 864 Thus, there is nothing to suggest that, even if Mr Hamill had given QR a direction to enter into a new lease, the terms would have been agreed between the parties within the available time frame or at all. It was for QR to negotiate commercial terms acceptable to it, as was recognised by cl 5(6)(a) of the EA. 865 The claim of lost opportunity to apply political pressure is, to borrow from the words of Starke J in Thompson at 528, at best "wholly speculative and conjectural" and affords "no solid basis" for concluding that NRC acted to its detriment. 866 The same may be said of the suggestion that NRC lost the opportunity to avail itself of the alternative dispute resolution provisions of cl 7 of the EA. Not only did NRC fail to invoke the clause, but as I have already said, the clause did not provide a mechanism for determination of the form or the terms of the rights to be accorded to NRC. Operational Detriment 867 There were three species of operational detriment identified by PN. The first was generalised evidence of the adverse effect on future operating conditions at the AR terminal given, in particular, by Mr Fullerton. The second was said to be the comparison between PN's existing cost of operations and the price to be charged by QR under the Terminal Services Agreement. This proposition was put to QR's CEO, Mr Scheuber, in cross-examination. 868 Third, in his fourth report Mr Lonergan made a comparison between present operating conditions extending through to 2023 or 2026 and the less favourable conditions which Mr Lonergan assumed would apply under the Terminal Services Agreement. 869 I will deal with each of these species of detriment in turn. 870 Mr Fullerton was an argumentative witness who was an advocate in the case for PN. I would not accept his evidence unless it was corroborated or supported by objective fact. 871 Of course, as Mr Scheuber fairly conceded, the loss of operational control would be a "huge" disadvantage to PN. That is because loss of operational control would deprive PN of the convenience of flexibility which necessarily follows from exclusive possession and control. It would also, in a general sense, bear upon the synergies flowing from NRC's integrated operations. Mr Graham referred to this in the evidence which I summarised at [610]. 872 But this generalised approach to the question cannot be determinative. What was required was a fair and reasonable comparison between the benefits and burdens of the amended Terminal Services Agreement on the one hand and the status quo on the other. 873 Three clauses call for consideration. Clause 3 deals with the term of the amended Terminal Services Agreement. The initial term is for approximately two and a half years, to 5 October 2008. Renewal for a period of five years is conditional upon the existence of a Corridor Access Agreement for the full renewal period. Since QR owns the rail track from the border to the AR terminal, it would be under an implied duty to cooperate with PN in the grant of a Corridor Access Agreement: Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596 at 607. 874 It is true that, under cl 3.2, extensions beyond the Renewal Term are in the discretion of QR. But there is nothing to suggest that QR would refuse to extend the agreement to PN which would, at least on the existing evidence, be its largest customer. Moreover, a refusal may trigger a claim of contravention of s 46 of the Act, although, of course, that would depend upon the factual circumstances at the time of any refusal. 875 PN will lose some flexibility in its ability to handle late trains. The wording of cl 6.7(a)(i) of the amended Draft Terminal Services Agreement is awkward, but in my opinion it imposes a positive obligation upon the Terminal Manager to do what is reasonable in the circumstances to provide services: Transfield Pty Limited v Arlo International Limited (1980) 144 CLR 83 ("Transfield") at 101. In my view, the alteration to the clause in the draft of 6 July 2005 to replace "reasonable endeavours" with "best endeavours" does not affect the scope or content of the obligation prescribed by the clause. 876 Clause 7.5 and Schedule 2 of the amended Draft Terminal Services Agreement make provision for the allocation of capacity to PN for increases in the allocated monthly TEU. Schedule 4 lists the allocated monthly TEU which varies according to seasonal use. The total annual allocation is approximately 235,000 TEU, which is equal to PN's throughput for the year ended 30 June 2004, as stated in Mr Lawrence's evidence. However, Mr Lawrence said that he expected throughput of 270,000 to 280,000 TEU for the year ending 30 June 2005. 877 Schedule 2 provides for an automatic and permanent increase of 10% in the allocated monthly TEU upon notice to the Rail Operator. This would enable PN to come close to the anticipated 2005 throughput. 878 However, expansion beyond the 10% figure is conditional upon the Terminal Manager determining, in its reasonable opinion, whether, having regard to the demands upon the AR terminal, an expansion of its capacity is required. If the Rail Operator forms the opinion that it is, PN must effectively underwrite a return on QR's capital improvements of 15% per annum. 879 These provisions are complex. They limit PN's existing flexibility and bind it to pay for increased capacity once notice is given, even if thereafter the additional capacity is not required. 880 Nevertheless, the amended Draft Terminal Services Agreement appears to provide for PN to be able to meet, or come close to meeting, its anticipated throughput in the volume handled in the current year. The terms of the EA said nothing about the question of improvements to the AR terminal to meet future increases in the capacity. In my view, these are matters for commercial negotiations between the parties. They do not occasion any detriment which might be necessary to support an estoppel claim. 881 In my opinion, a fair and reasonable analysis of the amended Draft Terminal Services Agreement demonstrates that it meets any claim of operational detriment put forward by PN. In my view the concerns expressed by Mr Fullerton were exaggerated. It is true that the automatic 10% increase in monthly TEU does not quite cover PN's throughput for 2005, but both parties have acknowledged that if PN's claim fails there would be further negotiations. I would confidently expect that the difference between the parties on this issue could/can be accommodated. 882 Mr Griffin, who was NRC's internal audit manager for a number of years, conceded that the operational concerns which he expressed in his evidence could be alleviated by the terms of the contractual relationship with the terminal operator and a spirit of cooperation. He also agreed that it would be possible for PN's computer system to interface with that of the terminal operator. This meets the complaint made by Mr Graham referred to at [610] and others, of the supposed adverse impact on the computerised efficiencies of an integrated network. 883 The evidence of the current General Manager of the AR terminal, Mr Bainbridge, did not establish operational detriment. He said in his affidavit that an obligation on NRC to cooperate with other users of the AR terminal, which flows from non-exclusive use, is, in concept, "unobjectionable". It is true that all the details of how the cooperation would be achieved may not be spelled out but that is not the point. Once the concept of cooperation is conceded, it cannot be accepted that the loss of exclusive control carries with it the operational detriment of which Mr Fullerton complained. 884 Moreover, Mr Bainbridge conceded that PN does not have a contingency plan, such as moving to another terminal, if it loses these proceedings. Instead, he said that the parties will engage in further negotiations. This is PN's position notwithstanding what are said to be the dire consequences of loss of operational control. In my view, these concessions negate any possible assertion that loss of operational control will occasion the substantial operational detriment of which PN complains. 885 Indeed, it has been NRC's stance since the dispute arose in 1997 that no consideration was given to the possible construction of an alternative terminal. Mr Graham had no real recollection of pursuing such a course: see [608] above. 886 That the loss of operational control would not have the disastrous consequences pointed to by Mr Fullerton is in my opinion supported by Mr McNamara's evidence. Mr McNamara impressed me as a fair and truthful witness. His contemporaneous notes set out the disadvantages to NRC which he believed would follow from loss of operational control but he considered that these issues could be overcome by cooperation between the parties. 887 At the heart of the suggestion of operational detriment was said to be a comparison between the price of the QR offer and the costs to PN under the status quo. This was put to Mr Scheuber in cross-examination and accepted by him although he said it was necessary to look at the terms as a whole. 888 To make good this proposition it was necessary for NRC to adduce evidence of its own costs on matters such as lifting operations. There was evidence in a report from KPMG of 25 May 2004, to which Mr Bainbridge referred, that PN's costs were $57 per TEU. QR's offer of $55 per TEU compared favourably with this. Mr Bainbridge referred to PN's offer to QR of $44 per TEU, but he did not know PN's present costs of lifting per TEU. 889 Mr Bainbridge's inability to provide evidence of PN's current lifting costs leads to the inevitable conclusion that PN failed to make good the proposition that QR's offer compares unfavourably with the status quo. 890 Furthermore, Mr Lonergan in his fourth report contrasted a rate of $44 per TEU, which he assumed to be PN's current cost of lifting, with the $55 rate proposed by QR. Mr Lonergan followed this analysis in his comparison of the present operating costs with what he assumed to be the less favourable position under the Draft Terminal Services Agreement. For reasons set out above, this assumption in relation to PN's current lifting costs was not made good. 891 Mr Lonergan's fourth report was adversely affected by this, along with other unproved or wrong assumptions. In particular, Mr Lonergan assumed that there would be a range of percentages of lost business as a result of less attractive operating conditions. These assumptions were not proved. The report does not establish operational detriment. Not unconscionable for QR to depart from assumptions 892 The absence of detriment precludes unconscionability. In any event, the offer of non-exclusive access is within the range of possibilities provided for in cl 5(6)(a) of the EA. QR offered to negotiate for long term access when it sent the change of position letter. It maintains a willingness to ensure efficient management of the AR terminal and a desire to maximise rail freight at the expense of road. Whether it will be able to achieve its aims is not to the point. I am not able to say that it will not. It is sufficient to say that, in my view, it is bona fide in its intention. 6. The Misleading Conduct Claim 893 This can be dealt with shortly. The failure of the estoppel claim carries with it the dismissal of the claim under s 52 of the Act. However, there were some nuances in the s 52 claim which I should address briefly. 894 The s 52 claim was pleaded in [83] of the 4th Further Amended Statement of Claim. It stated that in the circumstances which prevailed at the time of the establishment of QR on 1 July 1995, and in the light of subsequent circumstances pleaded in various paragraphs of the statement of claim, there was:- "… an implied representation on the part of the Respondent to the Applicant at all times on and after 1 July 1995 and before 27 March 1997 that the Respondent would act in good faith and take all steps necessary or expedient to permit the Applicant to occupy the Acacia Ridge Terminal in consideration for the payment by the Applicant to the Respondent of a fair market rent for the premises and on other reasonable commercial terms, and to permit the Applicant to exercise unfettered control of the management and operation relating to interstate rail freight operations at the Acacia Ridge Terminal, for so long as the Applicant carried on the business of interstate rail freight operations into Queensland on a commercial basis or alternatively for a period of at least 30 years." 895 Whether conduct amounts to a representation is a question of fact to be determined against the background of all the surrounding circumstances: Taco Company of Australia Inc v Taco Bell Pty Limited (1982) 42 ALR 177 at 202; Campomar Sociedad Limitada v Nike International Limited (2000) 202 CLR 45 at [100]. The conduct must be considered as a whole: Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592 at [39]. 896 Quite apart from the extraordinarily wide and open ended nature of the alleged representation, two considerations seem to me to be decisive. First, QR's conduct in the period from 1 July 1995 is to be assessed against the background of Mr Graham's letter of 9 May 1995 and the meeting of June 1995. Mr Graham's letter proceeded on the basis that there was to be a meeting to discuss, in principle, replacement for the short term lease. Mr O'Rourke agreed to the principle of a long term lease at the ensuing meeting. How an agreement to the principle of such a lease gave rise to an implied representation by QR that it would take all necessary steps to cede unfettered control of the AR terminal for a period which may have continued in perpetuity was not explained. 897 There was nothing in the negotiations which took place in the period from May 1996 to March 1997 to suggest a representation in the terms pleaded in the statement of claim. All that was demonstrated by the evidence during that period was that they may or may not agree on the final terms. The agreement by the parties to excise the marshalling yards from the lease indicates this and it demonstrates that the conduct is inconsistent with the representation alleged. 898 I referred to the agreement to excise the marshalling yards at [316]. NRC received payment of $1.5 million for this. Its contention that there was a representation of perpetual control of the whole of the AR terminal is totally inconsistent with this. The representation is said to have been in respect of the whole of the AR terminal. 899 Nor was there any evidence from any director of NRC to found a representation in the terms pleaded by PN. 900 Even if the matters referred to in [262] of PN's written submissions are within the pleading, which in my opinion they are not, the matters adverted to do not give rise to an implied representation in the terms alleged. Twelve factual circumstances were relied upon. I do not propose to repeat them. 901 The twelfth of these matters was that QR had reservations from about 1994 as to whether NRC should be granted a long term lease. This proposition is supported by the documents I referred to at [248] – [252]. But these reservations were abandoned when QR embarked upon the good faith negotiations for a long lease in 1996. PN's concession that the negotiations were held in good faith is a complete answer to the proposition. The other matters have been dealt with sufficiently in what I have already said. 902 It follows that there cannot be said to have been reliance or any causal link between the alleged representation and the expenditure on the AR terminal or the East Coast Strategy. It should also be noted that much of the expenditure on the AR terminal had been incurred before 1 July 1995. 903 It is unnecessary to consider the claim for relief under s 87 which is dependent upon a finding of contravention of s 52 of the Act. I should add that the claim for damages under s 82 was barred by s 82(2), the proceedings having been commenced more than six years after the cause of action is said to have accrued with the change of position letter. 7. The unconscionable conduct claim The Legislation 904 PN claimed that QR engaged in certain conduct, defined in the statement of claim as "the relevant conduct", in contravention of ss 51AA or 51AC of the Act. 905 Section 51AA of the Act provides that a corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. 906 Section 51AC provides that a corporation must not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person or corporation (other than a listed public company), or the acquisition or possible acquisition of goods or services from such a person or corporation, engage in conduct that is in all the circumstances "unconscionable". 907 Without limiting the matters to which the Court may have regard in determining whether the corporation has contravened the stipulated prohibition, the Court may have regard to a series of factors listed in s 51AC(3). 908 Section 51AC(5) provides that a person is not to be taken to engage in unconscionable conduct by reason only of the commencement of legal proceedings in relation to the supply or possible supply or acquisition of the goods or services. 909 Sections 51AC(9) and (10) limit the application of the section to the supply or acquisition of goods or services at a price which does not exceed $3 million. The conduct claimed to be unconscionable 910 The relevant conduct, that is, the conduct claimed to be unconscionable, is defined in [110] of the Statement of Claim. It comprises:- · the letters of 27 March 1997 and 25 March 1998 refusing to enter into a long term lease; · allowing NRC to remain in possession of the AR terminal as a periodic tenant holding over under the expired three year lease from 1998 to May 2003; · giving the notice to quit on 26 May 2003; and · pursuing the cross-claim for possession. 911 I do not see how QR's conduct in allowing NRC to remain in possession of the AR terminal for a period of five years or the pursuit of a cross-claim could amount to unconscionable conduct under s 51AA. 912 Nor could those acts be unconscionable under s 51AC. In addition, s 51AC provides that the Court may not have regard to conduct engaged in before the section commenced, although it may have regard to circumstances existing before the date of commencement. The section came into operation on 1 July 1998 when the Trade Practices (Fair Trading) Act 1998 (Cth) was proclaimed. Accordingly, the letters of 27 March 1997 and 25 March 1998 could not amount to unconscionable conduct under s 51AC. 913 It follows that the only pleaded conduct to which s 51AA could apply is the refusal to enter into a long lease as stated in the letters of 27 March 1997 and 25 March 1998 and the notice to quit given on 26 May 2003. The only pleaded conduct to which s 51AC could apply is the notice to quit. The relevant legal principles of unconscionable conduct 914 Although there was some difference of opinion between the justices of the High Court in Berbatis as to the reach or breadth of s 51AA, it clearly involves taking improper advantage of a person at a disadvantage in circumstances where equity would intervene: Australian Competition and Consumer Commission v 4WD Systems Pty Limited (2003) 200 ALR 491 ("4WD Systems")at [180] per Selway J. 915 In my opinion the effect of what was said in Berbatis by Gleeson CJ at [7] – [14], and by Gummow and Hayne JJ at [55] – [58],is that two criteria must be established. The first is that the plaintiff was in a position of special disadvantage, whether by reason of illness, ignorance, inexperience, impaired facilities, financial need or other circumstances affecting its ability to conserve its own interests. 916 The second criterion is that the defendant took advantage of the plaintiff's disability or special disadvantage. 917 Their Honours made it clear in the passages to which I have referred that a person is not in a position of special disadvantage simply by reason of inequality of bargaining power: see also Australian Competition and Consumer Commission v Samton Holdings Pty Limited (2002) 117 FCR 301 ("Samton")at [50] per Gray, French and Stone JJ. 918 The ambit of s 51AC is wider than that of s 51AA; it is not limited to equitable doctrines or common law principles of unconscionability: see Berbatis at first instance, (2000) 96 FCR 491 per French J at [24], and 4WD Systems at [183]. 919 The categories of unconscionable conduct may not be closed but the authorities give some guidance as to the type of conduct which must be demonstrated so as to fall within the "unconscionable" label. What is required is "serious misconduct or something clearly unfair or unreasonable". The term "unconscionable" imports "a pejorative moral judgment": Hurley v McDonald's Australia Limited (2000) ATPR 41-741 ("Hurley")at [22] per Heerey, Drummond and Emmett JJ, and Australian Competition and Consumer Commission v Oceana Commercial Pty Limited [2003] FCA 1516 at [336] per Kiefel J. 920 In order to establish that conduct is unconscionable under s 51AC, it is necessary to do more than show that the conduct contravenes s 52 of the Act or is otherwise in breach of the provisions of that legislation: 4WD Systems at [185]. 921 Morally unacceptable conduct in the form of unreasonable, unfair, bullying and thuggish behaviour amounts to unconscionable conduct within s 51AC: Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Limited (2000) 104 FCR 253 ("No-Knead") at [51] per Sundberg J. His Honour said that a refusal to supply or to negotiate constituted unconscionable conduct where the refusal amounted to intimidation or the application of illegitimate pressure on the other party to do something which the party applying the pressure had no entitlement to have done. Section 51AA is non-enlivened 922 Neither of the elements of unconscionable conduct within the meaning of the unwritten law has been proved. First, the proposition that NRC was in a position of special disadvantage needs only to be stated to be rejected. NRC was, and remains, a large corporation with a very substantial business. It was, and is, well and capably managed and it had the support of Commonwealth and State Governments. It had access to and relied upon legal advice from prominent and very competent firms of solicitors. Any suggestion that it was incapable of looking after its own interests must be firmly rejected. 923 Similarly, any suggestion that QR unconscientiously took advantage of a disability or special disadvantage of NRC in 1997 and 1998 or in giving the notice to quit to PN in May 2003 cannot be accepted. 924 It is true that NRC was, as from 1997, in a weaker bargaining position than QR because it had failed to secure a long term lease when it may well have had the opportunity to do so prior to entering into the 4 April 1993 Heads. But NRC deferred the possibility of realising that opportunity in the hope that the State of Queensland would become a shareholder. This would have been to NRC's commercial advantage. It cannot, by putting itself in a weaker bargaining position with QR, be heard to complain that QR's refusal to grant a lease and the giving of a notice to quit some five years later amounted to unconscionable conduct in accordance with equitable principles. Section 51AC is not attracted 925 As I have said above, the only conduct falling within the definition of "the Relevant Conduct" which is said to attract the operation of s 51AC is the giving of the notice to quit on 26 May 2003. 926 On that date PN was holding over under the terms of the expired three year lease. It was a month to month tenant, whose tenancy could be terminated by one month's notice in writing: s 129 Property Law Act. Thus, the question which arises is whether, by giving the notice to quit, which it was entitled to do under the law, QR engaged in conduct that was, in all the circumstances, unconscionable. 927 Other than pointing to circumstances which I found do not amount to an estoppel, PN pleads in [135] of the Statement of Claim that the giving of the notice to quit was unconscionable conduct having regard to seven pleaded facts, matters and circumstances. These are apparently said to be relevant to the decision to give the notice to quit. 928 The seven pleaded circumstances are:- (1) adopting a narrow interpretation of "access" in cl 5(6)(a) of the EA as meaning track access, contrary to NRC's interpretation; (2) adopting the view that after the privatisation of NRC, none of the parties to the EA would have any further rights or obligations under it; (3) QR seeking to take advantage of its ownership of the AR terminal by using it as bargaining chip for future efforts to enter the interstate freight market; (4) misrepresenting to the Queensland Department of Transport that there had been major obstacles on agreeing to the terms of a long term lease of the AR terminal; (5) QR's appreciation of the fact that it had significant bargaining strength in its dealings with NRC; (6) purporting to rely upon the need for the AR terminal to be operated as a multi-user facility when, in truth, QR's objectives were said to be furtherance of its interstate freight ambitions; and (7) failure to engage in any genuine attempt to negotiate QR's assertions that it required long term control. 929 The short answer to the claim under s 51AC is that none of the matters raised by PN could amount to unconscionable conduct within the meaning of that term. 930 There is nothing to suggest serious misconduct of the type described by the Full Court in Hurley. There is no suggestion of unreasonable or bullying behaviour or any attempt to apply illegitimate pressure of the kind referred to by Sundberg J in No-Knead. This is hardly surprising given the identity of the parties. 931 Even if QR misrepresented the true position to Queensland Transport, as Selway J said in 4WD Systems at [185], this is not sufficient to constitute unconscionable conduct. 932 The other matters complained of go to what was said to be QR's attempt to subvert the effect of the EA or to the claim of abuse of market power. 933 But unmeritorious negotiating positions could not, without more, amount to unconscionable conduct. At very least, it was necessary for PN to demonstrate that QR's behaviour was unreasonable in the sense stated in No-Knead and that the conduct was in fact carried out. Mr Scheuber disavowed any suggestion that unmeritorious behaviour took place. I accept his denial. 934 I have rejected the claim of abuse of market power in dealing with PN's claim under s 46 of the Act. The same matters relied upon to support a claim of unconscionable conduct must suffer the same fate. 8. PN's claim of misuse of market power Introduction to PN's section 46 claim 935 PN contends that QR's conduct, firstly in its refusal to grant PN a long term lease of the AR terminal and, secondly, in issuing PN with the notice to quit on 26 May 2003, amounts to a taking advantage by QR of its market power in two rail infrastructure markets for the purpose of deterring or preventing PN from engaging in competitive conduct in two downstream linehaul markets. 936 Rail infrastructure is an input into the delivery of downstream services including rail freight by rail operators. PN and QR compete in the downstream markets. The gravamen of PN's claim is that the AR terminal is an essential input for the delivery of the services in the downstream market. There is no access agreement or regime in place for the AR terminal, although there is a statutory access undertaking given by QR for access to the rail track that serves one of the downstream markets, that is to say the North Coast Line between the AR terminal and Cairns. 937 PN contends that QR's purpose in refusing to grant a lease and in issuing the notice to quit is an exclusionary one within the prescribed purposes stated in ss 46(1)(a) and (c). PN's expert economist, Mr Ergas, has described the exclusionary market power in issue in these proceedings as the denial of an essential input by QR to one of its rivals, namely PN. He states that the exclusionary conduct at issue is an attempt to raise a rival's costs by foreclosing it from access to the AR terminal which he describes as "controlled" by QR as a vertically integrated firm. 938 In support of its contention of QR's proscribed purpose, PN relies upon a variety of circumstances. These include the timing of the change of position letter approximately four months after the announced privatisation of NRC, Mr O'Rourke's concession in cross-examination that he did not want to see the AR terminal in the hands of a hostile competitor, and the large number of strategy papers to which I have already referred in which QR middle and upper management stress the competitive advantages flowing from control of the AR terminal. 939 Although PN did not plead in its statement of claim that the Draft Terminal Services Agreement, as amended by the offer dated 6 July 2005, constituted an abuse of market power, this issue was debated between the expert economists. Mr Ergas claimed that the offer amounted to a taking advantage of QR's market power because only a firm with substantial market power could make such an offer. There was debate about a number of clauses in the draft offer. 940 QR's expert economist, Mrs Smith, was of the view that the Draft Terminal Services Agreement did not constitute taking advantage of market power. The Infrastructure Markets 941 Mr Ergas points to "the distinct functional separation" between rail infrastructure markets and rail linehaul markets. He considers that there is a product market for the supply of two categories of rail infrastructure, namely narrow gauge rail infrastructure services and standard gauge rail infrastructure services. These are separate from the downstream markets for the provision of rail linehaul services on narrow gauge and standard gauge tracks. 942 Mrs Smith agrees that there are separate rail infrastructure markets for narrow gauge, on the north coast, and standard gauge to the border and beyond. She agrees that the downstream markets for the provision of linehaul services are separate from the infrastructure markets. 943 The narrow gauge rail infrastructure includes narrow gauge track and associated services for the operation of the track. 944 PN defined the North Coast Rail Infrastructure Market in its statement of claim as access to the narrow gauge infrastructure comprising the AR terminal and the track on the North Coast Line to Cairns. 945 The experts agree that the North Coast Rail Infrastructure Market includes rail infrastructure inside narrow gauge freight terminals to the extent that the infrastructure gives access to the North Coast Line. The only difference between them seems to be that Mr Ergas may confine the specified terminals to the AR terminal whereas Mrs Smith would include other terminals in the Brisbane area. Mr Ergas makes it clear that he rejects a dual gauge definition as too narrow, and prefers "rail infrastructure markets" including rail freight terminals. 946 There are other terminals in the Brisbane area servicing narrow gauge track. They include the Moolabin terminal, the Brisbane Multi-Modal Terminal ("BMT") located at Fisherman Islands, QR's Q-Link terminal at Acacia Ridge, the Clapham yard, the EA Rocke siding at QR, and a substantial number of private sidings. 947 PN contends that the other narrow gauge terminals are inferior to the AR terminal, principally because of their size and location at varying distances from the infrastructure located inside the AR terminal. However, it is significant that in March 2005, a subsidiary of PN signed an agreement with QR to run PN's narrow gauge operations from the Moolabin terminal. 948 The AR terminal is used for a variety of services other than the transhipment of containers between narrow gauge and standard gauge. In particular, it is used for the transfer of containers to and from trucks servicing the Brisbane area. 949 According to Mr Ergas, in 2003 only about 7% of the containers arriving at the AR terminal by standard gauge were transhipped from narrow to standard. Mrs Smith's evidence, though to similar effect, was objected to and treated as an assumption. Nevertheless, there is no real difference between the experts and the assumption may be taken to have been established. 950 Mr Ergas is of the view that there is a separate market for the supply of standard gauge rail infrastructure services on the facilities comprised in the AR terminal. 951 Mrs Smith agrees that there is a separate market but she considers that the BMT should be included. Mrs Smith suggests that Southern terminals located near Melbourne should also be included but I do not accept that the southern terminals are close substitutes. 952 The market for the supply of standard gauge infrastructure services is defined in the statement of claim as the Standard Gauge Rail Infrastructure Market. It is sometimes called the SG Rail Infrastructure Market. It comprises, at least, access to the standard gauge infrastructure located at the AR terminal which gives access to the standard gauge rail track running from Acacia Ridge to the border and beyond. 953 In comparison to the AR terminal, the BMT has significant disadvantages because of its inferior location and increased costs of operation. Trains arriving or departing from the BMT on standard gauge that require access to the AR terminal have to be shunted across 340 metres of track within the AR terminal. 954 In summary, I accept that there are separate infrastructure markets for access to the infrastructure on the narrow gauge and standard gauge lines. 955 Mrs Smith proceeded on the assumption that the infrastructure market for access to narrow gauge, that is to say the North Coast Rail Infrastructure Market, is not confined to the AR terminal. In her opinion, it includes the other terminals in the Brisbane area to which I referred at [946]. It is to be noted that these terminals include Moolabin, from which PN is now conducting narrow gauge services. 956 Much was said by PN about the disadvantages of Moolabin, notwithstanding its own use of that terminal. But Mr Ergas conceded that Moolabin was an alternative to the AR terminal for operation on the North Coast Line. Mrs Smith's views that Moolabin was an alternative were based on her assumption, which appears to be well placed in spite of PN's protestations to the contrary, that Moolabin is suitable. 957 It seems to me that Mrs Smith's view is correct. There was nothing to suggest that the other terminals were not close substitutes for the provision of narrow gauge services, particularly in light of PN's use of Moolabin. As Mrs Smith says, it is not necessary for rivals to use the AR terminal to operate an efficient linehaul service on the narrow gauge line. 958 I am, however, prepared to proceed on the basis that the infrastructure market for standard gauge services is confined to access to the AR terminal and to the East Coast line. I am inclined to the view that the unsuitability of the BMT confines the terminals to but one, namely the AR terminal. 959 The infrastructure at the AR terminal, for present purposes, may be said to be:- · the points and track infrastructure which at an operational level control access to standard and narrow gauge loading and unloading facilities; · the container terminal area including roads and facilities for loading, unloading and storing containers; and · the marshalling yards used for assembling trains. The Linehaul Markets 960 The primary customers of rail linehaul services are freight forwarders who provide transport to businesses that generate freight. They make significant investment in assets specifically for rail transport, including containers and technology. These sunk costs make it harder for them to switch to road in the face of a small but significant price increase in rail freight rates. 961 Mr Ergas and Mrs Smith agreed that road and rail are not close substitutes from the perspective of freight forwarders. That is not to say that road may not be a threat to rail in the longer term. 962 The experts agree that there are two separate downstream markets for the provision of rail linehaul services on narrow and standard gauge track. The existence of the linehaul market described in the statement of claim as the North Coast Rail Linehaul Market, that is for the provision of rail freight services on the North Coast Line, is admitted on the pleadings. 963 The existence of the linehaul market described as the East Coast Rail Linehaul Market is not admitted on the pleadings. The difference between the parties seems to be that QR seeks to include access to the terminal in the standard gauge linehaul market to Sydney and Melbourne rather than as a part of the infrastructure market. 964 However, I am entitled to proceed on the basis stated in the points of agreement and disagreement, notwithstanding the debate about its status. In the result, I am of the view that access to the AR terminal is not part of the linehaul market. 965 In summary, I find that there are two relevant linehaul markets. The first is the North Coast Rail Linehaul Market which is a market for the supply of rail linehaul services on the narrow gauge rail infrastructure between Brisbane and Cairns. 966 The second is the market described as the East Coast Rail Linehaul Market which is a market for the supply of rail linehaul services on the standard gauge rail infrastructure on the East Coast of Australia, including the track between Brisbane and the border. Market Power 967 Market power may be defined as the ability of a firm to raise prices above supply costs without rivals taking away customers: see Queensland Wire Industries Pty Limited v Broken Hill Pty Limited (1989) 167 CLR 177 ("Queensland Wire")at 188 and 200. Market power is not confined to the ability to influence prices; it may be manifested in practices directed at excluding competition, such as exclusive dealing or refusal to supply: Queensland Wire at 200. 968 In Melway Publishing Pty Limited v Robert Hicks Pty Limited (2001) 205 CLR 1 ("Melway") at [43] the majority justices observed that the notion of market power as the capacity to act in a manner unconstrained by the conduct of competitors is reflected in s 46(3). The absence of constraint from customers is also a relevant matter. Matters of degree are involved: Boral Besser Masonry Limited v Australian Competition and Consumer Commission (2003) 215 CLR 374 ("Boral") at [121] per Gleeson CJ and Callinan J. 969 The circumstances which may give rise to the absence of competitive constraint on a corporation are diverse. They are not confined to the matters identified in s 46(3): see Trade Practices Commission v Pioneer Concrete (Qld) Pty Limited (1994) 52 FCR 164 ("Pioneer Concrete") at 172-173 and 176; see also Boral at [168] per Gaudron, Gummow and Hayne JJ. 970 The primary consideration in determining market power is whether there are barriers to entry into the relevant market: Pioneer Concrete at 173, citing Eastern Express Pty Limited v General Newspapers Pty Limited (1992) 35 FCR 43 ("Eastern Express") at 62-63 per Lockhart and Gummow JJ. 971 A corporation will have a substantial degree of power in the market if it has a considerable or large degree of power: Eastern Express at 63. 972 In JD Heydon, Trade Practices Law: Restrictive Trade Practices, Deceptive Conduct and Consumer Protection, LBC, Vol 1, Sydney at [5.40], the learned author observes that s 46(1) is not concerned with a firm moving toward possession of a substantial degree of power in a market but only with a firm which has already gained possession of a substantial degree of power. This is because abuse of monopoly power consists of a corporation with the requisite degree of power taking advantage of it for a proscribed purpose. Unless the power presently exists there is nothing of which it can be said the corporation has taken advantage. Whether QR has market power in the SG Rail Infrastructure Market 973 Both expert economists agreed that access to the AR terminal is necessary for someone to compete effectively on the East Coast Linehaul Market and that whoever controls access to and use of the AR terminal has a substantial degree of power in the SG Rail Infrastructure Market. 974 But it does not follow that QR had, at the time of the impugned conduct, a substantial degree of power in the market for providing access to the relevant infrastructure at the AR terminal. This is because QR ceded exclusive possession to NRC on 5 April 1993 and, since that date has been an owner without any right to possession or control of the AR terminal. 975 NRC went into exclusive possession in 1993, initially under the terms of the 4 April 1993 Heads and thereafter on the terms of the three year lease eventually signed on 26 February 1996. NRC then held over, with QR's consent under the terms of the expired lease until the notice to quit was issued on 26 May 2003. Thereafter PN remained in exclusive possession pursuant to QR's undertaking to the Court given on 13 June 2003. 976 During the period of PN's exclusive possession QR has itself been unable to obtain access to the AR terminal pursuant to requests made to PN. 977 In my view it follows that, subject to considering Mr Ergas' views about QR's powers as an owner out of possession, QR cannot be said to have had a substantial degree of power in the SG Rail Infrastructure Market at the time of the impugned conduct. 978 The reason for this is quite straightforward. QR owned the relevant infrastructure, but the terms of NRC's occupation, that is to say as a tenant with the right of exclusive possession and control, was inconsistent with the existence of market power residing in QR. The market is for the supply of access to the infrastructure. QR had no powers in that market. It had no ability to ask, let alone raise, prices for the supply of that service: Queensland Wire at 188 and 200. 979 Alternatively, any power arising from QR's ownership of the AR terminal was constrained by the grant of exclusive possession to NRC: Melway at [43], Boral at [121], and Pioneer Concrete at 172-173 and 176. 980 Mr O'Rourke considered that there is a barrier to entry in the infrastructure market because of the cost and logistical difficulties of building an alternative terminal. But I do not consider that to be decisive in the present case because the question here is whether QR had market power at a time when NRC was in exclusive occupation. 981 The position in the present case is quite different from that which existed in NT Power. There, the owner of electricity and distribution infrastructure which refused access to a competitor was held to have a substantial degree of power in the market for transmission and distribution of electricity. The owner was held to have taken advantage of its power for a proscribed purpose. 982 However, by contrast with the present case, the market power of the infrastructure owner in NT Power derived from its ownership and control of the infrastructure. The majority justices said at [63] that the critical fact underlying the owner's market power was its control of the infrastructure; see also at [114]. 983 Mr Ergas sought to overcome this difficulty in PN's case by arguing that QR had market power by reason of its ability as owner to refuse to grant a lease and to thereby undermine PN's security of tenure. This, he said, could increase PN's costs by reducing its ability to invest in improvements to the AR terminal which would increase PN's costs on the East Coast Line, thereby giving exclusionary market power to QR. 984 Mr Ergas added to this that if PN does not have secure long term leasing arrangements the effect is to threaten investment security and impede it from operating efficiently, forcing it to have higher costs and, in turn, raising rival's costs. 985 After some debate, Mr Ergas accepted that his argument was based on economic theory or, as he called it, economic analysis. He was unable to point to any assumption of fact that there was a need for further investment, that rivals' costs had been raised, or that efficiency had been impeded. 986 In my view Mr Ergas' argument is pure economic theory unsupported by the facts of the case. 987 The two critical time periods are March 1997 to March 1998 when QR refused to grant a long term lease and May 2003 when the notice to quit was given. In the first of those periods NRC was under the stewardship of Mr Graham. He held an assumption that NRC was entitled to a minimum level of security of access in accordance with the EA. But from at least 25 March 1998, NRC's insecurity of tenure must have been apparent to him. Notwithstanding this, Mr Graham gave no evidence that NRC's insecure tenure impeded its efficiency or raised costs. 988 Nor was any such evidence given by PN's financial controller, Mr Gilchrist, or its General Manager, Intermodal, Mr Bainbridge. 989 Accordingly, I am entitled to infer that their evidence would not have assisted PN on this issue: Commercial Union Assurance Company of Australia Limited v Ferrcom Pty Limited (1991) 22 NSWLR 389 ("Ferrcom") at 418. 990 Moreover, the effect of the evidence on the question of the capacity of the AR terminal is inconsistent with Mr Ergas' theory. It is clear from the evidence of Mr Lawrence, the AR terminal manager, that PN has been able to extract additional capacity through the adoption of more efficient management practices without the need for additional investment. These practices included the 3-stacking of containers in lieu of the previous 2-stacking method, thereby increasing storage space. 991 Mr Lawrence's evidence was that the throughput of the AR terminal for the year ended 30 June 2004 was 230,000 TEU. He said he expected the volume to increase to about 280,000 TEU for the year ended 30 June 2005. This illustrates the fact that capacity was not fully utilised. 992 Mr Lawrence said he was not an expert in judging the maximum capacity of the AR terminal. Nevertheless, it seems to me that the effect of concessions made by him is that there would be some additional capacity available to be extracted over and above 280,000 TEU through further refinements in management practices. 993 It is clear to me from the evidence of Mr Lawrence and from the evidence of PN's divisional Marketing Manager, Mr Griffin, that PN has conducted its operations at the AR terminal to suit its own interests as the operator of a national freight network without the constraints pointed to in Mr Ergas' theory. 994 Mr Griffin said that PN has been able to conduct its operations at the AR terminal in a way that meets its own priorities as a train operator even if this is an inefficient use of the AR terminal as a stand alone facility. Mr Lawrence said that he would do whatever was in his power to accommodate PN's trains, and to change his practices to achieve that end. 995 The only evidence to which PN pointed to support a finding that it was unwilling to make investments in the terminal consisted of two documents which were not admitted as proof of the facts. The documents were two letters from Mr Mark Smith, Manager Access and Infrastructure of PN to Mr Buckley dated 16 July 2004 and 10 September 2004 and an open offer to settle the proceedings under cover of a letter from PN's solicitors dated 24 June 2005. 996 The effect of the statements in the documents relied upon by PN was that access to QR could not be given without increasing the capacity of the terminal which PN would not do while its tenure was insecure. These statements go no way to proving the assumptions made by Mr Ergas. 997 Mr Ergas' evidence on this topic shows that he was an unsatisfactory witness. He was an articulate, if somewhat wordy exponent of economic theory, but he was ultimately an advocate for PN's case. 998 On the other hand, Mrs Smith seemed to me to be a witness who strove to answer questions fairly without acting as an advocate for QR. For the most part, but subject to some exceptions, I would accept her evidence. 999 Mrs Smith's evidence was that QR does not possess substantial power in the SG Rail Infrastructure Market because PN controls the AR terminal. I accept her evidence on this topic. 1000 This is sufficient to dispose of PN's claim under s 46. However, I will briefly address a number of other arguments that were put. 1001 QR argued that a distinction is to be drawn between refusal to grant a lease and refusal to grant long term access. It pointed to evidence given by Mrs Smith of the danger of running the two concepts together. 1002 It submitted that QR's ability to refuse to grant a lease was independent of any question of power in the market for supplying access to standard gauge trains. 1003 I reject this submission which rests on a highly artificial distinction between two types of property rights. As owner, QR refuses to grant a long term lease to PN and seeks to recover possession, although it has offered long term access to PN. Mrs Smith accepted that this is conduct in relation to a market for which the AR terminal is an influential circumstance. 1004 QR also submitted that it was not a supplier of the relevant service, namely access. It pointed to the statement in NT Power at [115] that s 46(4)(c) provides that the relevant power is supplier power or acquirer power. It submitted that QR was not a supplier of access, that service being supplied by PN through its existing control of the AR terminal. 1005 In NT Power at [115] the majority justices were merely identifying "the character or capacity in which the corporation has whatever market power it has". They distinguished this from other forms of power such as that of a financial institution. 1006 This leaves open the possibility that in certain circumstances an owner whose market power derives from its capacity as owner may have "supplier power" in the sense referred to by McHugh ACJ, Gummow, Callinan and Heydon JJ in NT Power. However, in the present case, it seems to me that without any right of possession, and in circumstances in which QR's own requests for access has been refused, it cannot be said that it has the requisite capacity. 1007 A further question arises on the pleadings. It is whether QR has market power in the SG Rail Infrastructure Market by reason of its control of the track from the AR terminal to the NSW border. However, I accept QR's submission that this is a false issue because there is no complaint that QR has sought to injure NRC as a competitor by denying or restricting its access to the track. 1008 Accordingly, I do not need to consider QR's submission that there are various constraints on the power. Nevertheless, I would observe that there is considerable force in Mr Ergas' argument that a self imposed constraint is no constraint at all. This seems to me to answer QR's submission that the East Coast Line is administered by QR's NAG in the same way as the infrastructure on the North Coast Line which is the subject of a statutory undertaking. I doubt that the NAG is truly ringfenced as contended by QR. 1009 The evidence demonstrates that the NAG has been intimately involved in QR's plans to retake position of the AR terminal; see eg the discussion paper produced by NAG in consultation with C&FS on the subject of "Strategic Options for the Management and Operations of the Acacia Ridge Standard Gauge Yard" to which I referred at [505]. Whether QR has market power in the North Coast Rail Infrastructure Market 1010 There are two reasons why QR did not, at the relevant times, have market power in the market for access to narrow gauge infrastructure. 1011 First, for the reasons given in relation to the SG Rail Infrastructure Market, QR's ownership without any right to possession or control, did not give it any power in the market described as the North Coast Rail Infrastructure Market. 1012 Second, I accept Mrs Smith's opinion that even if QR had control of the AR terminal it would not confer exclusionary market power on it because of the constraints arising from the existence of other narrow gauge terminals in the Brisbane area. I referred to those terminals at [946]. 1013 The evidence establishes that PN has supplied rail linehaul services on the North Coast Line since March 2005, even though it still controlled the AR terminal. The fact that PN commenced operating narrow gauge rail freight services from Moolabin at a time when it had a choice of operating from the AR terminal suggests that Moolabin is a suitable facility from which to conduct rail linehaul services on the North Coast Line. 1014 Mr Ergas eventually conceded that even if QR controlled the AR terminal he could not conclude that this conferred market power on it in the North Coast Rail Infrastructure Market. 1015 Mr Ergas' answers to questions put to him about the suitability of Moolabin as an alternative terminal show the lengths to which he was prepared to go to argue PN's case. I will set out the relevant portion of the transcript as follows:- "Yes. You refer to the fact that PN itself has commenced running its narrow gauge linehaul operation from Moolabin as suggesting that Moolabin may well be a competitive alternative to Acacia Ridge, don't you? --- I believe that Moolabin is an alternative, whether it's a close alternative that would provide an equally effective springboard, that is a matter of fact which I don't really have all of the elements to determine. No. You have to arrive at the position that on what you know you can't conclude that ownership of Acacia Ridge would give market power in respect of the north coast rail infrastructure market? --- I believe it would, but I don't have all the elements of fact that would allow me to, in the current situation, demonstrate that conclusion. You can't form that belief, can you, given the concessions you've made about not having sufficient facts? Once you know that there are other competing terminals, you know that PN itself has commenced its operations from Moolabin rather than Acacia Ridge, before you could conclude that control of the Acacia Ridge would give market power in the north coast rail infrastructure market, you would have to conclude that the control of Acacia Ridge was such that the others were not relatively competing terminals, and you don't have enough information to form that view? --- I believe that to be the case. I believe that there are issues in respect of Moolabin, in particular, and I believe that those issues would be material issues going forward. Please answer my question. Unless you had sufficient information about the other terminals to conclude that an owner or controller of Acacia Ridge raising the price there would not lose customers to the other terminals, you could not conclude that control of Acacia Ridge gives market power in the north coast rail infrastructure market? --- Yes. Can we turn, please, to the – just before we move from the north coast market – therefore you can't reach a view on the information you have at the moment that QR does have market power in the north coast infrastructure market? --- That's correct." 1016 I reject PN's submission that Moolabin is not a suitable terminal from which to operate on the North Coast Line and that it is only a short term expedient. Mr Bainbridge, who is responsible for PN's operations on the North Coast Line, did not address the suitability of the Moolabin terminal. I am entitled to infer that his evidence would not have assisted PN: Ferrcom at 418. 1017 As with the SG Rail Infrastructure Market, the suggestion that QR has market power in the North Coast Rail Infrastructure Market by reason of its ownership of the narrow gauge track is a false issue. There is no complaint that QR has denied NRC access. 1018 In any event, the narrow gauge track has been declared under Reg 4 of the Queensland Competition Authority Regulations 1997 (Qld). QR has given an access undertaking which has been approved under the Competition Act. The undertaking constrains QR in negotiating to provide access. The intent of it is to ensure that access is negotiated in a competitively neutral environment. NRC has been given access pursuant to the North Coast Access Agreement referred to in [560]. 1019 I accept Mrs Smith's evidence that QR is constrained in respect of any market power it would have over the tracks by reason of the declaration and the undertaking. 1020 Mr Ergas' opinion is that QR has market power by reason of its ownership of the track but that the declaration and the undertaking go to the question of whether it has taken advantage of the power. However, that view seems to me to be contrary to the authorities referred to above, in particular Melway at [43], Boral at [121], and Pioneer Concrete at 172 -173 and 176. Whether QR has taken advantage: SG Rail Infrastructure Market 1021 It is unnecessary for me to answer this because I have come to the view that QR did not have market power. Nevertheless, I will deal with this question briefly. 1022 Section 46 requires the co-existence of market power, taking advantage and proscribed purpose: Melway at [44] and Boral at [120]. 1023 Whether a firm has taken advantage of market power is often a difficult question to answer. This may be because the words "take advantage" have been equated with "use": see Queensland Wire at 191, 194, 202 and 213 – 214; but the word "use" does not capture the full meaning of "take advantage": Boral at [279]. 1024 The following ten principles emerge from Queensland Wire and the trilogy of cases which have explained the proper approach to construction:- (1) what is involved in answering the question of whether a firm has taken advantage of market power is the sufficiency of the connection between the market power and the conduct complained of: Melway at [44] and [67]; Boral [120] and [170]; Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53 ("Rural Press") at [51]. McHugh J has said that a causal connection is required: Boral at [279]. (2) if the impugned conduct has a rational business explanation, that is a factor which points against the existence of a relevant connection between the market power and the conduct: Melway at [67]; Boral at [170]. (3) the words "take advantage" do not encompass conduct which has the purpose of protecting market power but no other connection: Rural Press at [51]. (4) in deciding whether a firm has taken advantage, is it relevant to ask how it would have behaved if it lacked power and whether it could have behaved in the way it did in a competitive market: Melway at [52] and [61]; Rural Press at [52]. (5) it may be proper to conclude that a firm is taking advantage of market power where it does something that is materially facilitated by the existence of the power: Melway at [51]; Rural Press at [53]. (6) McHugh J has said that the conduct must have given the firm an advantage it would not have had in the absence of market power: Boral at [279]. (7) the test may be whether the conduct was necessarily an exercise of market power: Melway at [68]. (8) one of the difficulties in determining what constitutes taking advantage stems from the need to distinguish between monopolistic practices and vigorous competition: Queensland Wire at 202. (9) the purpose of s 46 is the promotion of competition; it is concerned with the protection of competition, not competitors: Queensland Wire at 191 and 194; Boral at [87], [160], [164] and [260]; Melway at [17]. (10) it is dangerous to proceed from a finding of proscribed purpose to a conclusion of the existence of a substantial degree of market power, which can be taken advantage of; to do so will ordinarily be to invert the reasoning process: Boral at [123], [194]. 1025 As Heerey and Sackville JJ pointed out in Australian Competition and Consumer Commission v Safeway Stores Pty Limited (2003) 129 FCR 329 ("Safeway") at [339], in answering the question of whether a firm has taken advantage of market power it is necessary to look not only at what the firm did but why the firm did it. That is why a business rationale for the conduct, to which I referred in the second principle above, independent of the question of market power, is relevant to determining the sufficiency of the connection. That is what lies at the heart of the assessment of whether the firm has taken advantage. 1026 In the present case it is necessary to consider QR's rationale for refusing to grant a long term lease to NRC in 1997 and 1998 and for its service of the notice to quit on PN in May 2003. 1027 QR's business rationale for its conduct in 1997 and 1998 was not as fully developed as that which more clearly emerged in documents recording its objectives in giving the notice to quit. Nevertheless, documents exist which, when read in the light of oral testimony, explain why QR changed its position with respect to the grant of a long term lease to NRC in 1997 and why it maintained that stance in 1998. The documents were not admitted as proof of the facts but, insofar as they state QR's objectives, they must be accepted as containing such statements, unless challenged by PN. 1028 PN accepted that Mr O'Rourke and Mr Hearsch were the witnesses whose evidence was relevant to QR's purposes in its 1997/1998 conduct. 1029 It is to be noted that at the outset, Mr O'Rourke stated in his letter of 27 March 1997 that the AR terminal was of strategic importance and that there was a need for it to be operated as a common user facility. 1030 Mr Walker attacked this as a false justification in his cross-examination of Mr O'Rourke. He put to Mr O'Rourke that the issue of third party access was not a major obstacle to the grant of a 30 year lease during 1996. 1031 Mr O'Rourke did not handle this line of cross-examination well. He was troubled by the obvious tension between his insistence on third party access rights as an actuating motive and the proposition that third party access rights would, as a matter of law, equally bind QR as owner or NRC as long term lessee. 1032 It is true that Mr O'Rourke eventually conceded that his change of position in early 1997 was driven by the desire to avoid the disadvantage of not controlling the AR terminal and by the wish to deprive its competitor, NRC, of that advantage; see passage at [641]. The timing of the change of position letter, some four months after the Government's announced privatisation of NRC, underscores the truth of that concession. 1033 But it would be wrong to proceed on the basis that QR's sole rationale was to deprive NRC of control of the AR terminal. Moreover, as I have been at pains to stress, from the outset, QR stated, without qualification, that it was prepared to negotiate in good faith for access to NRC. 1034 Although, as I have said, Mr O'Rourke was not an open and forthcoming witness, I accept his evidence that third party access was an important issue. He said, and I accept, that the exclusive nature of a lease to NRC would have left no flexibility for QR or other operators to access the AR terminal. 1035 This position does not conflict with Mr O'Rourke's expressed fear of the AR terminal falling into the hands of a hostile competitor. He made it clear in conceding his fear that this was brought about by the prospect of QR wanting to compete for business on the standard gauge track south from Brisbane. He pointed to the consequent need to avoid the disadvantage of being at the mercy of QR's competitor, and what the law would grant to QR by way of access. 1036 Mr O'Rourke's evidence of the reasons for his change of position in early 1997 is corroborated by documents which began to emerge in 1998 and by the evidence of Mr Hearsch. 1037 It is clear from the minutes of a meeting of QR's Freight Group of 21 January 1998, to which I referred at [360], that a business rationale, other than mere injury to its competitor, underlay the refusal to grant a lease. 1038 The business advantages stated in the minutes of 21 January 1998 included QR being perceived as an "honest broker" of the standard gauge terminal. That followed upon QR's previous combative stance in opposing third party access to Carpentaria Transport. But this was followed by a change of heart and a perceived need on QR's part to see the AR terminal administered by an apparently neutral party, albeit that the NAG was itself a division of QR. 1039 The other business advantages pointed to in the minutes of 21 January 1998 included synergies from the operation of narrow and standard gauge terminals. 1040 An information paper dated 31 March 1998, signed by Mr O'Rourke and Mr Hearsch, explained the change of position on the lease as taking into account the expected emergence of third party operators on the standard gauge line as well as the increased likelihood that QR would extend its operations into "the interstate sphere", that is to say the standard gauge line south to Sydney and Melbourne. The paper referred to the major structural changes and reforms taking place in the industry. This was a reference to the Hilmer Reforms and their consequences; see [368]. 1041 Those considerations were borne out in a memorandum from Mr O'Rourke and Mr Hearsch to the Queensland Minister of Transport dated 1 April 1998. The memorandum stated that QR received many enquiries from prospective third party operators to run containers to southern ports. It stated that although the AR terminal still had substantial unused capacity, those operators could not gain access as they would be in competition with NRC. The memorandum stated that:- "QR's intention is to operate the terminal as a genuine common user facility in line with its own container terminal developments elsewhere throughout Queensland." 1042 Mr Hearsch's evidence, which I accept, was that the reasons underlying QR's decision to take back control of the AR terminal were wider than merely maximising revenue and return on its assets. He emphasised QR's concern about increasing the use of rail facilities generally, not solely by QR but also by NRC and other organisations. 1043 Mr Hearsch also explained the reasons for refusal of a long term lease to NRC as based upon a concern about the undesirability for any party to have exclusive use of the AR terminal under a lease which had made it extremely difficult in a practical sense for others to gain access. 1044 In this regard, Mr Hearsch pointed out that several potential or existing third party operators had actively sought access but that NRC had done virtually everything in its power to impede access, notwithstanding what was required under the EA. 1045 This evidence illustrates the artificiality of the concession extracted from Mr O'Rourke that no matter who controlled the AR terminal, that entity was bound by law to give access to third parties. It shows that notwithstanding Mr O'Rourke's concessions on this topic, his insistence upon third party access as a relevant consideration was consistent with the objective facts. 1046 Thus, the business rationale for QR's refusal to grant a lease in 1997 and 1998, insofar as it relates to operations on the standard gauge network comprise the following elements:- · avoiding the disadvantage of having the AR terminal controlled by a competitor; · running the AR terminal as a common user facility so as to secure access for QR and third parties; · by securing access for itself, ensuring that QR would be able to run trains on the standard gauge line south to Sydney and Melbourne; · increasing the volume of usage of the AR terminal for rail transport. Generally, thereby securing its long term potential as against other modes of transport, in particular, road; and · "synergies" from the operation of narrow and standard gauge terminals. 1047 Commencing in the year 2000, QR's business rationale was more fully expressed in documents. 1048 In his memorandum of 20 March 2000 to Mr Bruce Wilson of Queensland Transport, Mr O'Rourke referred to the place of the AR terminal in facilitating QR's own national strategy. He said that QR would seek reciprocal access to southern terminals in addition to securing its own capacity at the AR terminal; see [418] – [419] above. 1049 In his oral evidence Mr O'Rourke accepted that QR considered control of the AR terminal to be a bargaining chip for negotiations for access to Southern Terminals and that this was a reason for refusing a long term lease. 1050 QR's emphasis upon control of the AR terminal as a bargaining chip or leverage for entry into southern terminals was a continuing theme in strategy papers throughout the years from 2000 to 2002; see eg [440], [465], [486] and [514]. 1051 The benefit of being able to secure reciprocal rights was referred to by Mr Buckley in his email of 18 August 2000. The email also stated that other benefits of control included the fact that existing monthly lease payments by NRC did not reflect the current value of the AR terminal. 1052 Mr Buckley was cross-examined quite vigorously about the strategy of using the AR terminal as leverage to secure access to southern terminals. The vigour of the cross-examination was no doubt increased by the fact that Mr Buckley was an unsatisfactory witness who prevaricated about whether QR's strategy included the concept of leverage into southern terminals. It is plain that it did. Yet Mr Buckley was decidedly uncomfortable in conceding it. He seemed to think that the concession would be adverse to QR's case. But his discomfort was misplaced. In my view, access to southern terminals was a legitimate part of QR's business rationale for regaining control of the AR terminal. 1053 In his letter of 19 September 2000 to Mr Graham, Mr O'Rourke described the AR terminal as the gateway to fulfilling QR's national ambitions. His reference to not being beholden to an unknown potential competitor emphasised QR's desire to have security of access to its own terminal. 1054 The letter of 19 September 2000 also records QR's belief that NRC was not operating the AR terminal efficiently, in particular that it was not utilising the AR terminal's available capacity; that is to say that NRC was not interested in maximising the usage of the AR terminal. 1055 There was further reference to the use of the AR terminal as a potential equity bargaining chip in Mr George's memorandum of 16 October 2000. This memorandum is important because it records the desire to prevent the AR terminal from being conducted as a common user facility. This disclosed the preferred strategy of conducting it as a multi-user facility. The explanation for this was the desire to avoid the vagaries of determining access rights according to law, instead ensuring that QR was in a position to bargain with others for such access rights as QR was prepared to offer by way of commercial agreement. 1056 Mr O'Rourke recognised the difficulties that QR might have in accessing the AR terminal under a common user regime in his letter of 20 October 2000 to Mr Hunt. 1057 Mr George returned to the theme of opposing common user in favour of multi-user, and the benefits flowing from this, in his notes on the letter of 30 October 2000 from Mr Hunt to Mr O'Rourke. 1058 QR's consternation that the AR terminal not be declared common user appears in graphic detail in the notes of the meeting of 6 November 2000. The reciprocity theme, that is leverage into southern terminals, was again mentioned. 1059 The strategic issues paper of 13 February 2001 also emphasised leverage for entry into southern terminals. It said that control of the AR terminal gave QR bargaining power in its efforts to enter interstate markets. It described the AR terminal as the "key to the standard gauge access to Queensland". 1060 The leverage theme was again referred to in Mr Buckley's emails of 9 July 2001 and 14 February 2002. The latter email also referred to the objectives of achieving a commercial return and ensuring that throughput at the AR terminal was maximised. 1061 There was more of the same in QR's strategy paper of 12 September 2002, prepared by QR's supposedly ringfenced NAG in consultation with the C&FS division. That paper also stated that the NAG did not currently have the skills or systems to manage the AR terminal and that if QR were simply interested in obtaining a return on its property investment it would be appropriate to lease it to the highest bidder. 1062 The last mentioned comment emphasises that QR's objective was not merely to obtain a return on the AR terminal as a property investment. 1063 The paper of 12 September 2002 also shows that QR was aware that resuming control of the AR terminal was contrary to PN's interests. The only course that would have been favourable to PN was continuation of the status quo or grant of a long term lease. 1064 The 12 September 2002 paper contains a graphic recognition by QR of its own shortcomings in terminal management, describing its track record as poor. 1065 The Board submission of 2 December 2002 seeking approval for the termination of PN's tenancy puts forward four significant matters in support of the proposal. These were, first, increasing the revenue by $600,000 per annum over the existing rental; second, increasing rail freight business at the expense of road; third, rationalising narrow and standard gauge operations with savings of $3 million per annum; fourth saving $10 million capital expenditure on intrastate operations at Moolabin; see [525]. 1066 Those four business objectives were reiterated by QR in its draft business case in support of the resolution to issue the notice to quit. In addition, the draft business case stated that continuation of the existing tenancy arrangements with PN would impede QR's ability to enhance its own business operations through the AR terminal. Reference was made to the establishment of a multi-user facility at the AR terminal with common use for the marshalling yards; see [531] – [535]. 1067 The submission to QR's Board meeting of 25 February 2003 at which it was resolved to issue the notice to quit recommended that there be a transparent access regime which would accommodate PN as a core customer. 1068 Although it was put to Mr Scheuber in cross-examination that some of the background statements in the Board submission were inaccurate, I do not think that anything turns on this; see [521]. What seems to me to be important is that it was not put to Mr Scheuber in cross-examination that any of the matters which grounded the business rationale for the decision were misplaced or were not genuinely part of the rationale. 1069 PN submitted that the repeatedly declared multi-user objective cannot detract from the substantial character of QR's conduct which involved the calculated consequence of damaging NRC as a known competitor. That was not an attack on the existence of multi-user as a plank of QR's business objectives. In any event, for reasons stated elsewhere, I reject the submission that it was QR's aim to damage NRC otherwise than through ruthless competitive behaviour inconsistent with the objectives underlying s 46. 1070 I do not consider that Queensland Transport's initial preference for common user, which it subsequently abandoned in favour of multi-user, supports PN's submission. 1071 Mr Scheuber was taken to the draft business case in cross-examination. At first, he could not recall having seen the document but the effect of his evidence was that he acknowledged that it was the document endorsed by the Board of QR at its meeting on 25 February 2003. 1072 Significantly, Mr Scheuber said in cross-examination that QR believed in February 2003 that the rental paid by PN was below commercial rent. As I have said, nothing was put to him to challenge the existence of the other elements of the business strategy as part of QR's business rationale. 1073 It follows that I find that QR's business rationale for the issue of the notice to quit included the four matters listed in the board submission of 2 December 2002 and endorsed on 25 February 2003. 1074 Other elements of the business rationale were: first, QR's belief that the AR terminal was underutilised and not efficiently managed by PN. Mr Scheuber gave evidence to this effect which I accept. This is related to the objective of increasing use of the AR terminal, at the expense of road, thereby increasing QR's return on the asset. 1075 Second, and finally, quite plainly, QR sought to be in a position to use the AR terminal as an equity bargaining chip or leverage for entry to southern terminals. This goes some way to explain its obsession with the concept of multi-user in preference to common user. 1076 Thus, the six elements which I have identified formed QR's business rationale for its decision to issue the notice to quit. 1077 In my opinion, it follows that QR had a rational business explanation for the impugned conduct, that is to say the refusal to grant a long term lease in 1997/1998 and the issue of the notice to quit in May 2003. I identified at [1046] the five elements of the business rationale for refusing to grant a lease. 1078 As Heerey J said at first instance in Boral, this is a factor which points against a finding that the conduct constitutes taking advantage of market power: see (1999) 166 ALR 410 at 440. His Honour's views were adopted in the High Court: see [150] and [170]. 1079 It seems to me that these were matters of commercial judgment which, when considered in the light of QR's continuing offer of access to PN and its proposed conversion of the AR terminal to a multi-user facility, suggest that this was not an exercise of market power or a taking advantage of it. 1080 Mr Ergas considered the question of how QR would behave in a competitive market by assuming that QR would provide PN with a 30 year lease because PN is a more efficient terminal operator than QR and, accordingly, it would be more profitable for QR if PN controls the terminal. He criticised QR's conduct as irrational in a competitive market and supported his argument by reference to various hypothetical examples. 1081 The effect of Mr Ergas' counterfactual was that, without a substantial degree of market power, no firm would, as a matter of commercial judgment, take the course which it did. Instead, he argued that as a matter of judgment, QR would grant PN a 30 year lease because this was the most profitable outcome in a competitive market. 1082 But, in my opinion, Mr Ergas' argument is flawed for at least four reasons. 1083 First, Mr Ergas made his own assessment of who would be the most efficient operator of the AR terminal on scant information. It is true that there are internal QR documents which recognise its perceived shortcomings as a matter of historical fact. However, as Mrs Smith points out, entrants often lack expertise at the time of entry; what is important is whether the new entrant will have sufficient time to become established. It is to be noted that QR has committed to engaging an appropriately qualified intermodal rail terminal expert during the twelve month transition period prior to QR resuming control, as well as PN terminal staff who may become redundant. 1084 Second, as Mr Ergas conceded in cross-examination, it was not his perception of who would be the most efficient operator that was critical; rather it was a question of the owner's belief of what would be the most profitable course. He added the rider that the owner's belief would have to be a reasonable one. But there is nothing to suggest that QR's belief is not. In the end its business judgment may or may not be correct. But courts do not lightly ignore the evidence of honest businessmen on matters of business judgment. 1085 Third, Mr Ergas did not take into account the whole package of business advantages identified by QR. He failed to consider elements such as QR's desire for certainty of access to the AR terminal. 1086 Fourth, there were a number of errors in Mr Ergas' assumptions which adversely affected the cogency of his analysis. For example, he wrongly assumed that the AR terminal was already operated as a multi-user facility and he assumed that QR would discriminate against PN. 1087 Mrs Smith's counterfactual assumed that QR would be likely to require PN to give up control of the AR terminal if it expected a greater profit in the long term by doing so. 1088 PN criticised Mrs Smith's approach as based on faulty assumptions, including an assumption that there are several terminals equivalent to the AR terminal for standard gauge. That criticism is well placed but I accept the general effect of her approach which is plainly consistent with objective facts. As McHugh J said in Boral at [260], a rational business firm seeks to maximise profit and to increase its share of the market. That is the obvious explanation of QR's conduct. 1089 There is a further reason why Mr Ergas' approach must be rejected. It is to be found in the reasons of the High Court in Queensland Wire and the trilogy of cases which explain the full impact of that decision. 1090 As Mason CJ and Wilson J said in Queensland Wire at 191, the operation of s 46 is predicated upon an assumption that competition is the means to protect the interests of consumers. Competition is by its nature deliberate and ruthless. All of the majority justices in Boral pointed out that s 46 is concerned with promoting competition, not protecting competitors: see [87], [160], [164] and [260]. Injuries to rivals are a necessary bi-product of vigorous competition. 1091 PN's approach is fundamentally flawed because it has at its heart the protection of its own position as a competitor of QR, not the interests of competition. It seeks to advance its own private interests over that of the public interest in promoting competition. It fails to distinguish between monopolistic practices which are prohibited and vigorous competition which is not: Queensland Wire at 202 per Dawson J. 1092 Moreover, the suggestion that QR took advantage of market power is at odds with three further principles which emerge from the authorities. First, I do not see how it can be said that to obtain possession with a view to converting the AR terminal to a common user facility as was sought in 1997-98 or a multi-user facility in 2003, was facilitated by the existence of the power: Melway at [51] and Rural Press at [53]. 1093 Second, I do not see that QR's desire to run the AR terminal as a common user or multi-user facility gave it an advantage it would not have had in the absence of market power: Boral at [279]. 1094 Third, QR's conduct cannot be said to have been "necessarily" an exercise of market power: Melway at [68]. 1095 I will deal briefly with Mr Ergas' contention that a number of the clauses of QR's open offer in the Draft Terminal Services Agreement, as amended on 6 July 2005, constituted a misuse of market power. Mr Ergas argued that only a firm with market power could make such an offer. He argued that in a competitive market, confronted by such an offer, the firm would go elsewhere. 1096 Mr Ergas' attack focussed upon three clauses of the draft document (as amended) which I have set out above. They are: first, the provision dealing with late trains contained in cl 6.7; second, the provision for PN to be able to increase the monthly throughput in the capacity of the AR terminal, in addition to the right to a 10% increase in the allocated monthly TEU provided for in cl 1(a)(ii) of Schedule 2. The provision for additional throughput is found in cl 7.5, which includes in cl 7.5(d) the notion of a deemed permanent increase with resulting increased costs for PN. 1097 The third clause attacked by Mr Ergas was cl 7.6. This also deals with additional capacity and provides, in effect, for PN to underwrite the cost of any expansion works required to carry the additional throughput. A hurdle rate of 15% is set. 1098 Mr Ergas said that these clauses discriminated against PN with no offsetting benefits. He said that they would have the effect of raising rivals' costs. He also said that the deemed permanent increase in capacity in cl 7.5(d) was a harsh allocation of risks, that the risk of expansion was borne entirely by PN, and that the hurdle rate of return of 15% was higher than the rates allowed by regulators. 1099 Mrs Smith's evidence was that it is somewhat hazardous to pick out individual clauses of a proposed contract and then seek to comment on them. This is because they are part of an overall framework of commercial negotiations between parties, as to which some outcomes on some clauses will be good for one party whereas on other clauses the result will not be as good. This is plainly right. As Mrs Smith said, it is the cut and thrust of everyday business activity. 1100 The effect of Mrs Smith's evidence on the three clauses which were debated was that these provisions did not manifest exclusionary practices but were, rather, an attempt to allocate risk between the parties as part of ordinary business negotiations. She also pointed to the business rationale underlying the clauses. She pointed to the reasonable degree of flexibility contained in the clauses, thereby balancing the interests of the parties. 1101 As to cl 7.5 and the cap on monthly throughput, Mrs Smith said that capacity will usually be a trade-off between the competing objectives of the terminal owner and the user. The terminal user will wish to have maximum capacity but if demand fluctuates, the owner will be left with unused capacity and diminished profits. Mrs Smith considered that cl 7.5(d), though not perfect, was a reasonable attempt to deal with the problem. She said that a cap on capacity was consistent with prudent business practice because QR wanted to be able to supply the contracted amount. 1102 Mrs Smith considered that cl 7.6, which deals with expansion of the terminal to meet additional capacity, was part of the same problem as was raised by cl 7.5. She saw it as a reasonable attempt to align the competing interests of the terminal owner and the terminal user. 1103 In my opinion Mrs Smith's approach is to be preferred to that of Mr Ergas. Although she accepted the principle that conduct which has the effect of raising rivals' costs may constitute exclusionary conduct which constitutes taking advantage, she did not accept that the clauses in question had that effect. 1104 It is unnecessary to add to what I have set out above about Mrs Smith's views on cl 7.5 and 7.6. However, I will refer briefly to the business rationale and construction of cl 6.7. 1105 The proper construction of cl 6.7 seems to me to impose an obligation on QR to use reasonable endeavours to provide services for late trains: see Transfield at 101. The proper construction of the clause is not controlled by the heading. The clause is not clearly expressed but the agreement to use "best endeavours" must be seen as a proviso to the opening words of cl 6.7(a)(i) which appear on their face to deny such an obligation. 1106 The business rationale for the clause is the efficient operation of the AR terminal, whilst at the same time making provision for QR to use reasonable endeavours to service PN's late trains. 1107 In summary, it is my opinion that even if QR had a substantial degree of power in the market at the time of the impugned conduct, it did not take advantage of the power. Whether QR has taken advantage: North Coast Rail Infrastructure Market 1108 For the same reasons as were given in respect of the SG Rail Infrastructure Market, QR did not take advantage of any market power in the market for providing terminal access to narrow gauge trains. 1109 Although many of the business advantages identified in relation to the SG Rail Infrastructure Market related to standard gauge service, the overall business rationale related to the AR terminal as a whole. QR saw a greater benefit in seeking to generate profits for itself by operating the AR terminal as a common or multi-user facility, in particular in securing access for standard gauge services and rationalising services between standard and narrow gauge, than renting the AR terminal to PN under a long term lease. Whether QR had a proscribed purpose 1110 In view of my earlier findings, it is unnecessary to deal with the question of purpose but I will do so briefly. 1111 Purpose involves the notion of an intention to achieve the result spoken of in one or other of ss 46(1)(a), (b) or (c): Queensland Wire at 214 and Melway at [31]. In the present case, PN contended that QR's purpose was to damage NRC or to deter it from engaging in competitive conduct in the East Coast Rail Linehaul Market: s 46(1)(a) and/or (c), or to prevent NRC or Toll from entering the North Coast Rail Linehaul Market or from engaging in competitive conduct in that market: s 46(1)(b) and/or (c). 1112 In making a finding of purpose the Court is not so much concerned with the search for the "directing mind and will" of the corporation; it is concerned with inferences from the conduct of the corporation and of any other relevant person as well as other relevant circumstances: Safeway at [342] – [343]. 1113 An inference of proscribed purposes is to be drawn on the balance of probabilities, after giving due weight to the rule in Briginshaw v Briginshaw (1938) 60 CLR 336: see Safeway at [341]. 1114 The matters which I took into account in finding that QR had a legitimate business rationale for the impugned conduct point against a finding of proscribed purpose. 1115 PN submitted that a proscribed purpose was to be inferred from a number of relevant circumstances. PN relied in particular on evidence which disclosed that it was QR's intention, from the time of the announcement of NRC's privatisation, to prevent a hostile or unfriendly acquirer of NRC from enjoying long term exclusive occupancy. PN also relied on evidence which showed an appreciation by QR that NRC would be worse off as a result of loss of control of the AR terminal. 1116 It is true that Mr O'Rourke conceded that QR's change of position in early 1997 was actuated in part by a desire to deprive its competitor, NRC, of the advantage of controlling the AR terminal. 1117 Mr O'Rourke was also aware of the power conferred on whoever controlled the AR terminal. And he knew that this was a power in relation to behaviour in a competitive market. He knew that by denying NRC exclusive control of the AR terminal, QR would be in a position to give to others no greater access than the law required. 1118 Mr O'Rourke also conceded that he appreciated that control of the AR terminal would be an advantage for a competitor such as NRC and a corresponding disadvantage for QR. He knew that there was a world of difference between controlling the AR terminal and merely having access to it. 1119 Mr Scheuber saw the opportunity that QR had, as owner of the AR terminal, to use that asset to enhance its prospects of taking business away from competitors including NRC. A prime consideration informing QR's thinking was its ownership of the AR terminal. Regaining control of the AR terminal would deprive NRC as QR's main competitor, of the "huge" advantage conferred by control of the AR terminal when trying to operate a national rail network. 1120 Mr Scheuber was also aware that depriving NRC of control would deny it the business advantage of seeking to match its future growth with capacity because it would have to deal with QR for access. 1121 There is also ample documentary evidence to which I have previously referred which shows that QR well knew that if QR regained management control of the AR terminal, NRC would lose the substantial advantage of control. To that extent, QR knew that NRC would be worse off than under the status quo and worse off than it would have been through the grant of a long term lease. 1122 PN also relied extensively on the wealth of documentary material to which I have previously referred in relation to QR's intention to use its ownership and control of the AR terminal as a bargaining chip for entry into southern terminals. 1123 But it seems to me that there are four essential reasons why PN has failed to establish that QR was actuated by a proscribed purpose. 1124 First, there are constant reminders in the authorities that competition is a ruthless process. As Mason CJ and Wilson J said in Queensland Wire at 191, competitors always try to injure each other by taking away sales and these injuries are the inevitable result of the competition that s 46 is designed to promote. In Boral at [88], Gleeson CJ and Callinan J pointed to the danger of confusing aggressive intent with anti-competitive behaviour: see also per Gaudron, Gummow and Hayne JJ at [160] and per McHugh J at [279]. 1125 In my opinion, the matters relied upon by PN to support a finding of proscribed purpose fail to distinguish between aggressive competitive intent and the anti-competitive behaviour which constitutes the proscribed purposes stated in s 46. 1126 Second, to establish a proscribed purpose according to the test stated by the High Court, it was necessary for PN to prove that QR had the intention of disadvantaging NRC in the manner alleged. It seems to me to follow that it was for PN to prove that QR's aim was to deprive it of control of the AR terminal for the purposes stated in s 46(1)(a) and (c). I would therefore need to be satisfied that the aim of the exercise was to disadvantage NRC in that way by taking back control. 1127 However, in my view, taking back control of the AR terminal was necessary for QR to achieve its own corporate purposes. Regaining control was therefore a consequence of the exercise, rather than the actuating motive. This was the effect of the evidence of Mr O'Rourke, Mr Scheuber and Mr Hearsch. There is nothing in the documentary evidence which suggests otherwise. 1128 Third, in my view, QR's longstanding offer to grant access rights to NRC and its desire to establish a common user or multi-user facility at the AR terminal are inconsistent with the purposes for which NRC contends. This distinguishes the case from NT Power, where the infrastructure owner appreciated the existence of its market power and of the capacity to exercise that power to deliver access to the infrastructure: see NT Power at [150]. 1129 Fourth, although they post date the impugned conduct, the General Freight Agreement of 10 November 2003 for access to the East Coast Line, and the North Coast Access Agreement of 1 October 2004 for access to the North Coast Line, are inconsistent with the suggestion of proscribed purposes. 1130 In cross-examination of Mr Merrigan it was suggested that certain observations in his report of March 2000 revealed a purpose of eliminating NRC as a competitor. He was taken to his remarks that NRC would not be a player in the long term and that this would be to QR's competitive advantage; see [422] – [423]. Mr Merrigan said that this was a reference to NRC ceasing to exist as such after privatisation. There is force in Mr Walker's proposition that this was "meritless fencing". But I do not see that the comments of a consultant to QR, without more, are sufficient to give rise to an inference of proscribed purpose. 9. QR's cross-claim under section 46 1131 QR claims that NRC has breached s 46 of the Act by refusing a number of applications for access to the AR terminal. The access applications fall into two categories. The first category consists of applications made by CRT/Freightcorp during 1998 and 1999. I set out some of the correspondence commencing at [390]. It is unnecessary to supplement it. 1132 The second category consists of seven access applications made by QR during 2003 and 2004. I set out the details of applications 1 to 5 and some of the relevant correspondence at [549] to [559]. I will supplement that material, to the extent necessary, below. 1133 QR claims that NRC has market power in the SG Rail Infrastructure Market by reason of its control of the AR terminal and its control of the majority of the paths for rail tracks between Melbourne, Sydney and Brisbane. QR alleged that NRC took advantage of its power in the market for a number of proscribed purposes. 1134 The proscribed purposes are said to be preventing QR from entering into, or engaging in competitive conduct in the East Coast Rail Linehaul Market and substantially damaging QR, and preventing CRT/Freightcorp from entering that market. 1135 The question whether NRC took advantage of market power, and whether it did so for a proscribed purpose, in respect of the Freightcorp requests, turns on the evidence of Mr McNamara who was at the relevant time NRC's regional manager, Queensland . The issue was also addressed in cross-examination of Mr Graham to which I will refer later. 1136 The question of taking advantage and proscribed purpose in relation to the access applications made by QR are more complex. Those questions turn in part upon whether I accept the evidence of two experts called by QR to support its contention that there was capacity in the AR terminal to accommodate the access sought by QR. The experts were Mr Merrigan and Professor Ferreira. 1137 NRC contends that it did not refuse the applications. Whether or not that is so does not seem to me to matter because it is common ground that, with one exception, the access applications were not granted. The substantial reason given by NRC for its failure to grant access was that access would require additional capacity at the AR terminal and it did not wish to pursue negotiations whilst NRC's own tenure issues were unresolved. 1138 QR contends that the reason given was not correct, though not deliberately so, and that this indicated that NRC took advantage of market power for a proscribed purpose. Market Power 1139 NRC admitted that it controlled the majority of the contracted train paths on the East Coast Line. Evidence was given by Mr Buckley, which, on this point I accept, that the market for carriage of freight by rail between Brisbane and Sydney/Melbourne has been dominated by NRC, with QR's market share standing at about 5%. NRC's share at the relevant times stood at approximately 95%. 1140 Mr Ergas accepted that, subject to two considerations, NRC's control of the AR terminal gave it market power in the relevant infrastructure market. The two considerations were the threat of QR building an alternative terminal, or extending the Q-Link terminal to accommodate standard gauge. The second was said to be the need for NRC to utilise land owned by QR adjoining the AR terminal in order to expand capacity. 1141 As to the possibility of QR constructing an alternative terminal, Mr Ergas pointed to documents which he said, from "distant memory" suggested that this was a credible possibility. He accepted that for this consideration to be a constraint it would need to be both credible and to have been believed as such by NRC. 1142 There was consideration in the George Deutsch Report in 1999 of the possibility of converting the Q-Link terminal to accommodate standard gauge. QR submitted that the George Deutsch Report did not contemplate the use of standard gauge track. However, this is not borne out by the terms of the document which states that the tracks could be dual gauged. As I said earlier, the George Deusch Report states that the Q-Link terminal could, if necessary, support interstate standard gauge activities. 1143 However, apart from the George Deutsch Report, there is no suggestion in the evidence of the possibility of QR constructing an alternative terminal. Indeed, Mr Buckley's evidence, which I accept in the absence of cross-examination, was that QR does not believe that its current activities justify such an expenditure. 1144 It was not put to any of the QR directors or other relevant QR witnesses that QR had the intention of constructing an alternative terminal. Nor was it suggested that QR had ever made such a threat. There was no evidence from directors or senior officers of NRC that NRC believed that such a threat existed. 1145 Accordingly, I reject the suggestion made by Mr Ergas that the threat of QR constructing an alternative terminal was a credible one and that it was believed as such by NRC. In short, it was pure economic theory unsupported by any evidentiary basis. 1146 So too was Mr Ergas' suggestion of a possible constraint arising from the need to utilise QR's land to expand NRC's operations. It is true that Mr Lawrence's evidence was that in 2004 the AR terminal was operating at full capacity. But he accepted that this was wrong. Nevertheless, I accept that he believed that the AR terminal was operating at near full capacity although with scope to change practices to accommodate more traffic for NRC if the need arose. 1147 But it does not follow that the need for additional land constituted a constraint upon NRC which precludes a finding that it lacked market power. I do not consider that NRC developed that proposition through witnesses of fact or in documentary evidence to lead to such a finding. There was nothing to suggest that NRC saw the need for additional land as an urgent matter at the time when the impugned conduct occurred. I reject the suggestion that it constituted a relevant constraint. 1148 Mrs Smith's evidence was the control of the AR terminal by NRC gave it control of an essential input for the supply of rail linehaul services on the East Coast Line thereby giving it exclusionary market power. I accept her evidence. Mr McNamara's evidence on the Freightcorp issue 1149 The correspondence relating to the Freightcorp access request which I have set out at [391] – [397] does not disclose the reasons why access was not granted. The reasons, given in other correspondence, were to the effect that the proposed times were not compatible with NRC's operations and that there was a lack of capacity to accommodate Freightcorp. 1150 Mr McNamara's affidavit evidence was that he believed that the Freightcorp trains could have been accommodated. He said that there was sufficient capacity for that purpose. 1151 In his oral evidence in chief, Mr McNamara said that he was not "going to go out of my way to foster competition" and that, since he had not received any specific advice to enable access to proceed, he "chose to delay the process as long as I could". 1152 He was then asked by Mr O'Donnell how he delayed the process. Mr McNamara's answer was that NRC went into committee processes wherever various concerns about access for Freightcorp were discussed. He also said that he reported to Mr Fullerton and Mr Graham but he received no direction to speed up the process. 1153 In cross-examination by Mr Walker, Mr McNamara agreed that the committee processes were genuine and that they were appropriate to deal with the applications on their merits. He added that NRC could have worked faster but he agreed that he did not deal dishonestly with the applications. He agreed that the committee deliberations were not "some fake process". He added that he was supporting NRC's position in the marketplace. 1154 In re-examination Mr McNamara said he was protecting NRC's revenue by delaying competition. 1155 Mr McNamara seemed to me to be an honest witness but the apparent force of his evidence in chief must be read in the light of the concessions made in cross-examination. In my view, the effect of his evidence in chief and in re-examination was to put his own interpretation on the facts. It is true that NRC was not in a hurry to deal with the applications but it does not necessarily follow that it exploited the position for its own advantage. 1156 The concept of taking advantage has no moral overtones, but it would be a large step to say that the proper use of committee processes to deal with considerations such as track access amounts to the use of market power contemplated by s 46. In some circumstances resort to a committee may be a façade for denial of supply or inordinate delay. I am not satisfied that this is what occurred here. 1157 I accept that in a competitive market NRC would have provided access to Freighcorp if it had the capacity to do so. However, capacity is a somewhat flexible concept. In the present context it seems to me that it was for QR to establish that NRC could have accommodated the Freightcorp requests without adversely affecting its own operations. I am not persuaded that Mr McNamara's evidence establishes this. I do not doubt that his belief about NRC's capacity was genuinely held but it is plain that the ultimate question was not for him to decide. It was to be dealt with by the committee process, properly established for that purpose. 1158 I do not consider that this constitutes a sufficient connection to amount to taking advantage within the principle stated by the High Court in Melway and Boral. 1159 Nor do I consider, in light of the concessions made by Mr McNamara in cross-examination, that NRC engaged in the conduct for a proscribed purpose. Mr Graham's evidence on the Freightcorp issue 1160 Mr Graham accepted that Freightcorp was the first competitor to emerge as a result of the Hilmer reforms. He was asked whether it would be fair to characterise NRC's response as being one of making things difficult for Freightcorp. He replied:- "No more than Freightcorp's response for our request for access to Cook's River was to make things difficult for us." 1161 Mr Graham went on to deny that NRC's response was to make it difficult for Freightcorp to get access to the AR terminal. He said that "both parties acted in their own commercial interests at the time, no more no less". 1162 I do not consider that this evidence, particularly when read in light of Mr McNamara's evidence about the committee process, establishes a purpose of preventing Freightcorp from entering the market. QR's access applications 1163 QR's access application 3 was granted in March 2004 and an agreement for access was signed in June 2004. 1164 On 29 October 2004, QR wrote to NRC stating that, since NRC failed to grant access applications 1, 2, 4 and 5, despite the passage of many months, QR did not press those applications. They were replaced by two new applications described as applications 6 and 7. 1165 Application 6 was for standard gauge services arriving during the day and departing at night as well as a number of narrow gauge services in essentially the same terms as requested in applications 1, 2 and 5. 1166 The application was for, firstly, six standard gauge services (up to 800 metre train length) arriving on Monday at 04.30 and departing 23.00; arriving Tuesday – Sunday at 11.30 and departing at 23.00. Secondly, six narrow gauge services (up to 600 metre train length) arriving Monday – Saturday at 20.00 and departing at 04.00. 1167 Application 7, which was an alternative to application 6, was a stand-alone request for standard gauge services in the same terms as the request for six standard gauge services contained in application 6. 1168 QR contended that, in failing to grant the applications, NRC made untrue statements about the lack of capacity of the AR terminal to accommodate the trains. This was at the heart of QR's case that NRC has taken advantage of its market power for a proscribed purpose. 1169 In considering the correctness or otherwise of NRC's assertions about lack of capacity, it is necessary to ask whether the evidence of Mr Merrigan and Professor Ferreira established that the AR terminal had the capacity to accommodate the trains at the times stated in the applications. It is not a question of the capacity of the AR terminal generally. 1170 In my opinion the evidence of Mr Merrigan and Professor Ferreira had severe limitations which I will address below. Mr Merrigan's evidence 1171 Mr Merrigan approached the question of whether NRC could accommodate the additional trains having regard to the operations of the AR terminal as a stand-alone operation. He accepted that different considerations apply when looking at the matter from the point of view of an overall network operation conducted on a national basis. 1172 Mr Merrigan conceded that it was perfectly reasonable for NRC, operating a national network, to regard its current management of the AR terminal as a management method which used up the capacity entirely. 1173 Mr Merrigan went on to say that, for the period up to 9 March 2005, the way in which NRC was using the AR terminal exhausted the capacity which might otherwise be available to third party users. He agreed "that anybody in National Rail who took the position that there was no capacity available for other users would be speaking reasonably". 1174 I accept the concessions made by Mr Merrigan but I have considerable reservations about the reliability of his evidence as to the ability of the AR terminal to accommodate the additional trains. 1175 First, Mr Merrigan failed in his affidavits to disclose his prior involvement with this matter in a number of respects. He failed to disclose his involvement in the preparation of the George Deutsch Report, an involvement which he initially denied and later conceded, albeit reluctantly. He also failed to disclose in his affidavits the extent of his prior involvement with QR in particular in its response to the George Deutsch Report. 1176 Second, Mr Merrigan did not observe the operations of the AR terminal during the peak periods of October, November and December. Instead, he based his assessment on data from observations during non-peak periods, which suggested greater availability for new trains and more freight. 1177 Third, there was some confusion in Mr Merrigan's evidence as to the number of days on which additional trains could be accommodated. He changed from five nights a week to three nights a week and then sought to return to five nights. 1178 Fourth, some of the additional trains could only be accommodated if substantial operational changes and physical alterations were made at the AR terminal. Professor Ferreira's evidence 1179 Professor Ferreira's analysis was based on computer modelling. He used a tool he developed to estimate maximum capacity at the terminal, which he named the "Intermodal Terminal Capacity Analysis Tool" ("ITCAT"). He did not carry out the task of assigning specific trains to specific lengths or locations of track. Instead, he proceeded on the basis that there was an aggregated length of track of 3,600 metres available and he identified windows of opportunity for his proposed trains at times which he assumed to be off-peak. 1180 However, it seems to me that this analysis has a number of shortcomings. In particular, Professor Ferreira acknowledged that he did not test for feasibility of implementation of his proposed services by following through how there might be effects or influences from other train services and on the interdependence of other resources at the AR terminal, such as storage capacity. 1181 He acknowledged that in practice the critical terminal services are interdependent and that he had left this out of his first report. His supplementary report failed to overcome this defect. Mr Lawrence's evidence 1182 QR relied on a number of apparent concessions made by Mr Lawrence in cross-examination to support its argument that the statements made in Mr Smith's letters, rejecting access, were not correct. 1183 First, QR pointed to a statement in Mr Smith's letter of 16 July 2004 that NRC did not have sufficient capacity due to the loading of the copper train. This was said to be incorrect and to have been acknowledged as such by Mr Lawrence. 1184 Mr Lawrence conceded that the copper train occupied only about 270 metres, leaving another 900 metres of vacant track. However, I do not consider that Mr Lawrence went on to concede that the loading of the copper train was not an impediment to the introduction of the new service. His answers on that topic were equivocal but he did not prevaricate. Mr Lawrence was an honest witness who made concessions on various matters when it was appropriate to do so. 1185 It was put to Mr Lawrence that the statements in Mr Smith's letter to the effect that NRC did not have capacity due to loading of the copper train, were incorrect. The effect of Mr Lawrence's evidence is that he resisted that proposition. I accept his evidence. He was the source of the information in Mr Smith's letter. It is therefore not to the point that Mr Smith was not called. 1186 Second, QR relied on Mr Lawrence's concession that since July 2004, QR has been able to process additional trains totalling about 3,500 metres in length. However, that concession does not establish that NRC would have been able to accommodate the new QR services at the times and on the days that QR has sought access. The additional 3,500 metres of trains did not coincide with the times sought in QR's access applications. 1187 QR seems to accept this, but relies on Mr Lawrence's evidence that he would do anything to accommodate NRC's trains; therefore NRC could similarly change its practices to accommodate QR's trains. I do not accept that it follows that NRC would have been able to accommodate QR, given the national basis of NRC's network operations. 1188 Third, QR submitted that despite sworn evidence in his affidavit that the AR terminal was operating at almost full capacity, Mr Lawrence conceded that this evidence was badly wrong. However, the submission overstates Mr Lawrence's evidence. His answer was that it was badly wrong "on the way we were working, yes". This was a reference to the fact that since September 2004, NRC introduced some operational reforms including 3-stacking of containers, apparently taking into account suggestions made by Mr Merrigan. 1189 In my view, Mr Lawrence's concession was nothing more than an acceptance of the proposition that he was able to extract additional capacity from the AR terminal. It does not establish the untruth of Mr Smith's statement in the letter of 16 July 2004 and subsequent correspondence that the AR terminal did not have the capacity to accommodate the particular services at the times sought by QR. 1190 It follows that I am not satisfied that the statements made in the relevant letters were incorrect. Moreover, I am not satisfied that the statements were made otherwise than honestly in good faith. It is true that Mr Smith was not called to give evidence, although a belated attempt was made to re-open to rely on his affidavit. But it is unnecessary for me to make a finding that his evidence would not have assisted; cf Sebben v Partridge (unreported Supreme of South Australia, Lander J, 20 December 1994). In that case, Lander J was of the view that a Jones v Dunkel inference was available where a defendant was not called, an unsuccessful attempt having been made to reopen after close of the defendant's case. 1191 However here, Mr Lawrence was the source of the relevant information in the letters and in any event, QR disavowed any suggestion that the statements were made dishonestly. In these circumstances, I do not consider that Mr Smith's evidence would have elucidated this particular matter: see Payne v Parker (1976) 1 NSWLR 191 at 201 per Glass JA. Conclusion in relation to QR's applications for access 1192 I am not satisfied that NRC's consideration of QR's access applications involved anything other than a fair consideration of them on their merits, notwithstanding that NRC's responses were based on an erroneous assumption as to the overall capacity of the terminal. I do not consider that NRC was guilty of undue delay or obfuscation, as was suggested by QR. 1193 Accordingly, I have come to the view that NRC's failure to grant the access applications did not amount to taking advantage of market power. The relevant connection between NRC's market power and the impugned conduct was not, in my opinion, established. 1194 Nor am I satisfied that NRC's purpose in failing to grant the access applications was a proscribed purpose in contravention of s 46. Its purpose was the protection of the integrity of its national network. The position is not entirely analogous with that which arose in Rural Press. Nevertheless, in my view, so long as NRC gave proper consideration to the access applications, which in my opinion it did, its purpose cannot be said to be to have been to prevent QR from engaging in competitive conduct in the relevant market. 10. Conclusion and orders QR's cross-claim for possession 1195 It follows from my rejection of PN's estoppel claim and from my rejection of the claims of misleading conduct, unconscionability and breach of s 46, that QR is entitled to an order for possession. There is to be a stay of the order in accordance with the undertaking given by QR to the Court. 1196 It also follows that QR is entitled to an order for payment by NRC of additional rent pursuant to s 139 of the Property Law Act. Orders in the Proceedings 1197 The orders I will make are as follows:- 1. That the application be dismissed. 2. That QR's cross-claim under s 46 of the Trade Practices Act 1974 (Cth) be dismissed. 3. An order for PN to deliver up possession of the AR terminal. 4. That there be a stay of order three in accordance with QR's undertaking to the Court. 5. That QR is entitled to an order for payment of rental in accordance with s 139 of the Property Law Act 1974 (Qld) from the date of expiration of the notice to quit dated 26 May 2003. 6. The parties are to bring in short minutes giving effect to the orders set out above and quantifying the amount payable by PN pursuant to order five. 1198 It seems to me that costs must follow the event on both the application and the cross-claims. However, if necessary, I will hear brief argument when the short minutes are handed up. I certify that the preceding one thousand nine hundred and ninety eight (1198) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. Associate: Date: 16February 2006 Counsel for the Applicant: Mr B Walker SC with Mr A Leopold, Mr I Tonking and Mr R Foreman Solicitor for the Respondent: Clayton Utz Counsel for the Respondent: Mr B O'Donnell QC with Mr L Kelly Solicitor for the Respondent: Allens Arthur Robinson Date of Hearing: 14 – 17, 21 – 24, 31 March; 1, 6 – 8, 11 – 15, 18 – 19, 21, 26 – 28 April; 8, 11 – 14 July; 1, 3 – 4, 8, 18 – 19, 22 – 24 August 2005 Date of Judgment: 16 February 2006 Schedule 1: Dramatis personae Affleck, Fred From at least April 1989:Assistant General Manager, Corporate Relations / Corporate Affairs, Australian National. From at least March 1992 – March 2000:General Manager, Corporate Affairs, NRC. Anderson, John March 2001: eputy Prime Minister and Commonwealth Minister for Transport Bainbridge, Philip February 2004 to date: General Manager, Intermodal, PN. Barty, Robert Mid 1990s: Officer, QT Blunt, NH April 1997:Transport Analyser,Queensland Transport Bredhauer, Stephen 29 June 1998 – 12 February 2004: Queensland Minister for Transport and Main Roads. Buckley, Neil 1992-1998: various commercial and managerial positions with QR. January 1999 – May 2002: Manager Business Development and subsequently General Manager, National Development Unit, QR. May 2002 – April 2003: General Manager, Interail (now known as QR National Pty Ltd). April 2003 – June 2004: General Manager, Mainline Regional Freight, QR. July 2004 to December 2004: General Manager Containerised Freight, QR. December 2004 to date: General Manager Business Development, QR. Butcher, Edward September 1990: Chairman of the National Rail Freight Initiative Task Force. September 1991 – February 1997: Chairman, NRC. Calvisi, Diana Solicitor, Corporate Counsel Division, QR Cantwell, Stephen Group General Manager, Network Access Group, QR Case, Peter 1991 – June 1994: General Manager Express Freight, QR. June 1994 – April 1998: General Manager Freight Operations, QR. Di Bartolomeo, Lucio 1 July 1996 – February 2002: Managing Director, Freight Rail Corporation (FreightCorp). Drake, Tony Group General Manager, Corporate Services, QR Group General Manager, Infrastructure Services, QR Drew, David Manager, Legal Services Division, QR Corporate Counsel, QR Company Secretary Eades, David June 1990 – September 1997: General Manager, Property, QR. Reported to Tony Drake, Group General Manager, Corporate Services until 1994. After that time, reported to Bob Scheuber. June 1996 – January 1997: seconded by QR to the Queensland Department of Housing. January 1997 – July 1997: headed up a Corporate Review Team to investigate costs and overheads at QR. Ellerby, Peter Senior Policy Advisor Queensland Department of Transport Strategic Issues Group, Network Access Group, QR Network Access Manager, QR General Manager, Business Development Network Access, QR Fontaine August 1995 – August 1996: Business Development Officer, NRC. (née Lowes), Jacqueline August 1996 – June 1997: Manager Commercial Agreements, NRC. June 1997 – November 1998: Manager Commercial, NRC. Fullerton, John August 1992 – March 1995: Chief Maintenance Engineer, NRC. March 1995 – 1997: General Manager Customer Service, NRC. 1997-2002: Chief Operating Officer, NRC. 2002-2004: Divisional General Manager (Operation Services), PN. September 2004 – date: Chief Executive Officer of FreightLink Pty Limited. Gardiner, Peter Manager Marketing & Planning, Network Access, QR George, David QR executive holding various positions, including:- Executive Manager, Strategic Issues Group General Manager, Coal and Mainline Freight Group General Manager, Coal & Freight Services Executive Manager, National Development Gilchrist, Timothy 21 February 2002 to date: Accountant, Financial Controller, PN. Graham, Vincent 1 February 1992 – 21 February 2002: Managing Director of NRC. Griffin, Paul January 1998 – March 2000: Regional Manager for Victoria, NRC. March 2000 – July 2002: General Manager Intermodal, NRC. July 2002 to date: Divisional Marketing Manager, Intermodal, PN. Haase, Ken General Manager, Express Freight, QR Hamill, David 7 December 1989 – 21 February 1995: Queensland Minister for Transport and Minister Assisting the Premier for Economic and Trade Development. 29 June 1998 – 22 February 2001: Queensland State Treasurer. Hanscomb, Simon May 1992 – July 1994: Manager, Corporate Services, NRC. July 1994 – February 1995: General Manager, Corporate Development, NRC. February 1995 – June 1996: General Manager, Business Development, NRC. July 1996 – July 1998: General Manager, Marketing, NRC. Harris, Derek From at least August 1993 – January 1994: Manager (Rail Policy Development), Department of Transport, NRC. From approximately 1 February 1994 – March 1995: Senior Corporate Affairs Officer, NRC. From approximately 29 March 1995 – October/November 1997: Manager (Asset and Function Transfer), NRC. From approximately December 1997 – September 1998: Business Development Manager, NRC. From at least 15 May 2001: Manager (Freight Strategy), Rail Infrastructure Corporation. Hearsch, John May 1983 – January 1991: Chief General Manager Transport Operations, V-Line. July 1989 – January 1991: General Manager Country Passenger Services, Public Transport Corporation. January 1991 – May 1998: Group General Manager, Freight, QR. During that time, reported directly to Vince O'Rourke. May 1998 to date: Consultant, John Hearsch Consulting Pty Ltd. Hunt, Dan From at least September 1993: Senior Policy Advisor, QT. From at least February 1995: Director (Policy and Planning), QT. From at least September 1996 – October 2000: Executive Director (Transport Coordination and Rail, Ports and Aviation), QT. From at least October 2000 – at least August 2001: Acting Director General, QT. Jenner, Thomas Late 1970s: Property Division, QR. Early 1990s -1998: Manager – Property Management, QR. 1998 to date: Property Consultant with General Outdoor Advertising. Kitney, John Mid 1990s: Chief Financial Officer, NRC Lawrence, Michael May 1999 – April 2001: Acting Terminal Manager, Acacia Ridge, PN. April 2001 to July 2005: Terminal Manager, Acacia Ridge, PN. McLeod, Duncan 1993 – 1998: Executive Engineer Track Development, NRC. 1998 – 2002: Manager Infrastructure and Access, NRC. February 2002 to date: Manager, Infrastructure Resources, PN. McNamara, John October 1992 – January 1995: Queensland Account Manager, NRC. January 1995 – February 2000: Regional Manager – Queensland, NRC. October 2003 to date: General Manager – Intermodal, CRT Group Pty Ltd. McNamara, Noon June 2002 (approx) to date: Manager, Performance and Research, Operations Services Division, PN Merrigan, Garry January 1992 – April 1993: Terminal Manager of the Acacia Ridge Terminal. April 1993 – April 1994: Terminal Manager of all QR terminals. April 1994 – June 1999: Regional Manager, Melbourne, NRC. September 1999 – 2000: Employed by QR on a contract basis. Late 2000 to date: Consultant, GTM Nominees Pty Ltd. Moore-Wilton, Maxwell 1990-June 1991: NSW representative on the National Rail Freight Initiative Task Force; Member of the Committee of Officials. 1992-1995: Director of NRC. Oldfield, Martin Manager, Planning and Research Freight National Development Unit O'Rourke, Vincent 1954 – late 1990: employed by State Rail Authority of NSW in a variety of positions. 8 October 1990 – 1 July 1991: Queensland Commissioner for Railways. 1 July 1991 – 30 June 1995: Chief Executive Officer, Queensland Railways. 1 July 1995 – 15 December 2000: Chief Executive Officer, QR. Owen, Daniel October 2000: Assistant Secretary, Rail Industry Land Transport Division, Commonwealth Department of Transport Parkinson, Neal From at least December 1992 – September 1995: Partner, Sly and Weigall. From approximately September 1995 – December 1999: Partner, Deacons Graham and James. From approximately August 2000 – 20 July 2001: Partner, Minter Ellison. During which period Neal Parkinson was a principal provider of legal services to NRC. Price, Richard Corporate Development Manager Manager Corporate Services Chief Management Accountant Roxburgh, Ian 1989-1990: Director, Rail Policy, Commonwealth Department of Transport. 1990-1991: Senior Adviser, National Rail Freight Initiative Task Force. October 1991- 21 February 2002: Company Secretary, NRC. Scheuber, Robert Employed by QR since November 1974. February 1990 – June 1995: Assistant Commissioner (Finance and Administration), Group General Manager (Financial Services) and Group General Manager (Finance and Information Services), QR. January 1995 – December 2000: Deputy Chief Executive, QR. 16 December 2000 to date: Chief Executive Officer, QR. Sharp, John Mid 1990s: Commonwealth Minister for Transport Smith, Mark February 2002 – 1 July 2005: Manager Access and Infrastructure, PN. Stanko, Steve April 1992 – August 1997: Director of NRC. Stehbens, Helen From at least August 1995: Principal Policy Advisor, Rail and Port Authority Policy, QT. From at least September 1998: Acting Executive Director (Transport Coordination and Logistics), QT. From at least January 1999 – August 2003: Director, Acting Executive Director and then Executive Director (Rail and Port Authority) QT. From at least December 2003: Acting Executive Director (Transport Coordination and Logistics), QT. Williams, Alan From at least March 2000 – May 2001: Director (Transport Economics and Strategy). From May 2001- at least June 2002: Director (Transport Economics and Aviation), QT. Wilson, Bruce From at least April 1998 – October 2002: Director General of Transport, QT. Wilson, Ian July 1998 – July 1999: Principal – Venture Strategist within the Venture Strategy Unit of the Strategic Issues Group, QR. July 1999 – December 2000: National Logistics Manager – National Development Unit, QR. January 2001 – December 2001: Regional Manager – North Queensland ,QRX. January 2002 – August 2002: Transport Manager – Queensland, Patrick Logistics. August 2002 – February 2003: Manager – Terminals Development, QR Network Access Group (NAG). February 2003 to date: Manager, Terminal Access Services, QR Network Access Group (NAG). Yeoh, Barbara August 1993 – February 2002: Director of NRC. Young, Peter Mid 1990s: Deputy Chair, NRC Board Schedule 2: List of Acronyms AR Acacia Ridge BMT Brisbane Multi-Modal terminal BT Bankers' Trust Corporate Finance C&FS Coal and Freight Services section of QR COAG Council of Australian Governments CRT CRT Freight Group Pty Limited EA Establishment Agreement NAG Network Access Group NFI National Freight Initiative NPV Net Present Value NRC National Rail Corporation NRFC National Rail Freight Corporation PN Pacific National (ACT) Limited QR Queensland Rail (or, prior to 1 July 1995, Queensland Railways) QRX Queensland Railway Express QT Queensland Transport RAC Rail Access Corporation TEU Twenty foot equivalent units Schedule 3: Glossary 1993 lease area The area of the AR terminal which the 4 April 1993 Heads provided for NRC to enter into possession. A plan of the area appears at [193]. 1993 plant lease The lease over the lease of plant and equipment at the AR terminal referred to in the 4 April 1993 Heads. 1993 real estate lease The lease over the 1993 lease area referred to in the 4 April 1993 Heads. 4 April 1993 Heads Heads of Agreement for the assumption by NRC of management and operational control of the AR terminal which NRC and QR entered into on 4 April 1993. Above rail Services provided to the operations of trains, and is to be contrasted with below rail services (defined below). These services include line haul, train configuration, crewing, rostering and crew management, train quality control, locomotive and wagon management including but not limited to booking, scheduling, supply and provisioning and bogey exchange and other gauge transhipment. Administration Building Building used for administrative purposes at the AR terminal; located near the junction of the entrance to the AR terminal and the Mainline track. AR terminal Acacia Ridge Interstate Container Terminal; the area of the AR interstate container terminal occupied by NRC. Below rail Services provided in respect of physical track and associated infrastructure such as signalling equipment including train control and scheduling. It is to be contrasted with above rail services (defined above). Change of position letter Letter of 27 March 1997 from Mr O'Rourke to Mr Graham indicating QR's change of position, withdrawal of offer of 10 year lease. Committee of Officials Committee established to examine options for the funding of NRC. Common user terminal Access to a terminal is made available to all parties (including the owner) pursuant to rights granted by law, eg under Part IIIA of the Act. It is to be contrasted with a multi-user terminal (defined below). Competition Act Queensland Competition Authority Act 1997 (Qld) Corridor Access Agreement An agreement negotiated between a rail operator and the owner of the track to garner access to train paths; such an agreement is necessary for a rail operator to run a train service into a terminal. East Coast Rail Linehaul Market Market for rail linehaul services on the east coast corridor. East Coast Strategy NRC's capital investment strategy to secure the competitiveness and profitability of NRC's east coast services. Establishment Agreement ("EA") Agreement entered into in July 1991 between the Commonwealth of Australia and a number of States, including Queensland. The agreement provided for micro-economic reform of the rail freight industry in Australia. It is occasionally referred to in documents as the "Shareholders Agreement". Establishment Period A term used in the EA to refer to the five year period commencing on the date of commencement of operations of NRC. Functions letter Letter of 4 April 1993 detailing the terminal management functions which NRC would assume at the AR terminal on 5 April 1993. General Freight Access Agreement Agreement dated 10 November 2003 in which QR granted PN access to nominated track. George Deutsch George Deutsch Consulting Pty Limited. Retained in 1999 by NRC and QR to prepare a master plan for intermodal traffic at both the AR terminal and the Q-Link terminal over the next 25 years. GOC Regulation Government Owned Corporations (Queensland Rail) Regulation 1995 Heads of Government Agreement Agreement signed by the Heads of Government of the Commonwealth the States and Territories on 31 October 1990 regarding the establishment of the National Rail Freight Corporation. Hilmer Report Report on the Independent Committee of Enquiry into Australia's National Competition Policy, handed down in August 1993. Interail QR's interstate rail freight operator. Mainline Track A standard gauge rail track running on the East Coast Corridor to AR. Sometimes referred to as the Interstate Mainline Track. Marshalling yards An area at AR used for shunting and reconfiguring trains which was controlled by NRC under the three year lease. Multi-user terminal Access to a terminal to third parties is upon such terms as may be negotiated with the owner. It is to be contrasted with a common user terminal (defined above). Narrow gauge Railway track 3 ft 6 inches wide, used in Queensland. Network Access Group A business group within QR said to be separate from QR Operational Business Groups, with the primary function of managing the provision of Below Rail services in Queensland, including negotiation of access with access seekers and management of access agreements with access holders. ("NAG") North Coast Access Agreement Agreement dated 1 October 2004 in which QR granted PN non-exclusive access to operate train services on the North Coast line nominated track. North Coast Rail Infrastructure Market Market for the supply of narrow gauge railway track infrastructure services north of the AR terminal. North Cost Rail Linehaul Market Market for the supply of rail linehaul services on the north cost line between Brisbane and Cairns. NRC Act National Rail Corporation (Agreement) Act 1991 (Qld) Q-Link terminal QR's narrow gauge terminal at AR. Queensland Railway Express Toll Holding's North Queensland rail forwarding operation. Queensland Transport Queensland Department of Transport. rail corridor Strip of land at AR, extending from main line track to Kerry Road. The corridor is owned by the State of Queensland, controlled by Queensland Transport, and subleased to QR; a portion of the Administration Building encroaches on this corridor. Rail Access Corporation A corporation established by the NSW Government to separate ownership of rail infrastructure from the operation of the rail network and providing for the sale or access to the infrastructure through access agreement individually negotiated with RAC. ("RAC") sidings A term used in the rail industry to describe a short section of railroad track connected by switches with a main track. Standard gauge Railway track 4 ft 8˝ inches wide, used on the East Coast Corridor. SG Rail Infrastructure Market Market for the supply of standard gauge railway track infrastructure services south of the AR terminal. Steering Committee Established by QR to oversee the transfer of interstate freight operations to NRC and chaired by Mr O'Rourke. the Act Trade Practices Act 1974 (Cth) the border Queensland/NSW border. the Other States A term used in the EA to refer to those states that did not agree to become shareholders of NRC. the relevant conduct A term defined by PN in its statement of claim to refer to certain conduct which PN claims that QR engaged which was unconscionable. the States A term used in the EA to refer to the shareholders of NRC under the EA, being the Commonwealth, NSW, Victoria and Western Australia. the Task Force An independent task force responsible for developing detailed proposals on issues relevant to the establishment of a "fully commercial" NRFC. Third Amending Agreement Agreement to amend the EA, entered into by the Commonwealth and the States of NSW, Victoria, Queensland, Western Australia and South Australia on 22 March 1999. TIR Act Transport Infrastructure (Railways) Act 1991 (Qld) Track A A rail track constructed by NRC during the term of its lease which runs parallel to the Mainline track and is close to it. Transition Period A term used in the EA to refer to the first three year period from the commencement of operations of NRC. Transport Infrastructure Act Transport Infrastructure Act 1994 (Qld) twenty foot equivalent unit ("TEU") The unit of measure used in the rail industry for measuring container sizes (ie all container sizes are broken down to a TEU). attachment a: colour plan of ar terminal The attached colour plan of the AR Terminal constitutes Attachment A to the judgment, referred to at [196]. The plan was admitted into evidence on 14 March 2005 as Exhibit 2.