FEDERAL COURT OF AUSTRALIA

Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Limited

[2015] FCA 460

THE COURT ORDERS THAT:

Until trial or earlier order the Respondent shall, subject to a berth being available at the Hamilton Island Marina (“Marina”), permit the Applicant to access a berth at the Marina, on the terms set out in paragraphs (a) to (d) below:

(a)    the access to the Marina is only for the purposes of collecting and dropping off passengers who have bookings with the Applicant;

(b)    the Applicant provide to the Respondent a minimum of 2 hours’ notice in advance of the requirement for a berth, such notice to be given between the hours of 8.00am and 5.00pm;

(c)    the Applicant pay to the Respondent, within 14 days from the issue of invoice by the Respondent to the Applicant, the fees referred to above;

(d)    the Applicant otherwise comply with the terms and conditions set out in the document entitled ‘Hamilton Island Marina Rules as at 1 April 2015’ and the ‘Hamilton Island and Dent Island Rules & Regulations November 2014’.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction and summary

1    This is an application by Ocean Dynamics for an interlocutory injunction against Hamilton Island Enterprises. Hamilton Island Enterprises manages Hamilton Island in the Whitsundays. Ocean Dynamics is a tourism business that has been operating in the Whitsundays, with some interruptions, for nearly a decade. Ocean Dynamics’ business has included offering various yachts for charter by members of the public. It currently offers for charter one luxury yacht called Ocean Free, and another vessel.

2    From September 2006 until 31 March 2015, Hamilton Island Enterprises provided berthing facilities for yachts owned by Ocean Dynamics at the Hamilton Island Marina subject to terms including those in a Business Licence Agreement. In 2014 Hamilton Island Enterprises told Ocean Dynamics that the Business Licence Agreement would not be renewed. Hamilton Island Enterprises later said that without the Business Licence Agreement, Ocean Dynamics could not berth any of its vessels at the Marina for commercial purposes. Ocean Dynamics then commenced these proceedings in the Supreme Court of Queensland (later cross-vested to this court). Following some undertakings, and agreement, Hamilton Island Enterprises agreed to provide Ocean Dynamics access to the Marina, on an ad hoc basis, until midnight on 14 May 2015 to allow Ocean Dynamics to honour existing bookings.

3    In the main action Ocean Dynamics seeks various different remedies. It seeks a declaration that there is an agreement in force between the parties entitling Ocean Dynamics to use a berth at the Marina until December 2015. It also seeks an injunction based upon that agreement restraining Hamilton Island Enterprises from preventing its use of a berth until December 2015. And it claims injunctions, damages, and declarations of contravention of provisions of the Competition and Consumer Act 2010 (Cth) and the Australian Consumer Law.

4    Ocean Dynamics now applies for an interlocutory injunction, until trial of the proceedings or earlier order, to restrain Hamilton Island Enterprises from preventing Ocean Dynamics from using a marina berth at the Hamilton Island Marina. At the hearing of this application it relied only upon s 46 of the Competition and Consumer Act. It submitted that it has a prima facie case for an injunction at trial based on a submission that Hamilton Island Enterprises had taken advantage of its substantial power in the marina services market for the proscribed purposes of eliminating or substantially damaging Ocean Dynamics in the luxury yacht charter market, or deterring it from competitive conduct in that market.

5    The terms of the interlocutory injunction initially sought were too wide. Counsel for Ocean Dynamics accepted that its rights could be sufficiently protected by an interlocutory injunction that required Hamilton Island Enterprises to permit Ocean Dynamics to access a marina berth to allow the collection and drop off of passengers. Counsel accepted that this interlocutory injunction would be on conditions and subject to various undertakings including the usual undertakings as to damages. The conditions and undertakings should generally ensure that Ocean Dynamics will comply with the obligations to which it was subject under the Business Licence Agreement as well as the terms and conditions of the Hamilton Island Marina Rules and the Hamilton Island and Dent Island Rules and Regulations.

6    There would be very significant prejudice to Ocean Dynamics if the interlocutory injunction were not granted. Its business, built up over nearly a decade and in which hundreds of thousands of dollars have been invested in marketing, might fail. Its sole director could lose her livelihood. Five employees could lose their jobs. Dozens of customers, including those staying at Hamilton Island, with existing bookings upon which they have based holidays could be disappointed.

7    In contrast, the prejudice to Hamilton Island Enterprises is limited and can be confined. The proposed injunction would have the mandatory effect of compelling Hamilton Island Enterprises to continue a business relationship that it wanted to terminate for reasons (which are a central matter in dispute) that it says are concerned with protecting its goodwill and arising from some late payments of amounts due by Ocean Dynamics. But the evidence currently before me of damage to the goodwill of Hamilton Island Enterprises, past or prospective, is limited. In contrast, Ocean Dynamics has undertaken to be bound by all relevant terms of the former Business Licence Agreement and without the benefits to it of that agreement which might require closer cooperation between the parties.

8    Ocean Dynamics has a prima facie case for an injunction based on the claim that, in broad terms, Hamilton Island Enterprises has taken advantage of its power in the marina services market for the proscribed purposes of eliminating or substantially damaging Ocean Dynamics in the luxury yacht charter market, or deterring Ocean Dynamics from competitive conduct in that market. When that case is considered in the context of the balance of convenience a mandatory interlocutory injunction should be ordered. The interlocutory injunction will be for a limited period. There will be liberty to apply.

The facts for the purposes of this application

9    There is considerable dispute about key facts relevant to this application. As I explain later in these reasons, these disputes cannot be determined on this interlocutory application. Apart from affidavits annexing correspondence between the parties, the primary evidence relied upon by Ocean Dynamics were two affidavits from Ms Lewis (the director of Ocean Dynamics). The primary evidence relied upon by Hamilton Island Enterprises was two affidavits from Mr Bourke (the Chief Executive Officer of Hamilton Island Enterprises) and an affidavit from Mr Boyd (the General Manager, Retail, Activities, and Marina at Hamilton Island).

10    Ocean Dynamics was incorporated on 24 March 2006. It is a tourism business that provides marine services in the Whitsundays. Ms Lewis has always been the sole director of Ocean Dynamics. Her husband is the chief executive officer. There are five other staff. The annual turnover is around $2 million.

11    Ocean Dynamics currently owns two vessels including the luxury charter yacht, Ocean Free. It provides boat charter services, both bareboat and skippered, at four locations in the Whitsundays: Hamilton Island; Hayman Island; Daydream Island; and Airlie Beach (mainland). Although Ocean Free is sometimes berthed at the other three locations, it is primarily berthed at Hamilton Island. The Hamilton Island airport is the main point of entry to the Whitsundays region and a major access hub. The only other airport in the region – Proserpine Airport – is 40 minutes’ drive from Airlie Beach and is impractical and inconvenient for use for charter operations to and from Hamilton Island.

12    Ocean Dynamics’ luxury charter boat business in the Whitsundays focuses upon luxury day charters ($3,500 to $5,000) for residents and guests on Hamilton Island, Daydream Island, and Hayman Island. Ms Lewis estimates that over the last 5 years, about 70% of the luxury charter boat business out of these three islands has been provided by Ocean Dynamics and another business called Alani Charters. Ms Lewis says that the other 30% is by other operators. Importantly, one of those other operators is said to be Hamilton Island Enterprises.

13    Hamilton Island is a privately run island. It is run by Hamilton Island Enterprises. It was common ground that the position of Hamilton Island Enterprises is that it is the long term lessee of Hamilton Island.

14    For visitors arriving at and departing from Hamilton Island, there are two safe points of sea access. One of those is a jetty adjacent to the airport. That jetty has been used by Ocean Dynamics, by contractual and ad hoc arrangements with Hayman Island Enterprises, to provide transfer services to guests between Hamilton Island and Hayman Island. Ms Lewis says that the jetty can only be used for short term operations and that it cannot be used for a whole day or overnight berthing.

15    The second safe point of access is the Hamilton Island Marina. The Marina includes a large number of short and long term berthing options for different sized vessels and it contains a barge jetty and a fuel jetty.

16    Ms Lewis says that Ocean Dynamics cannot transport customers to or from Hamilton Island by sea without access to the Marina or the jetty. She says that there are reasons why it is unsafe and impractical for Ocean Dynamics to anchor in the waters around the island and transport guests on small tender vessels. These reasons are the presence of elderly guests, children, significant luggage, and the possibility of bad weather. There is dispute about this. Mr Bourke says that on a dozen occasions each year cruise ships visit Hamilton Island and passengers, including the elderly and children, are safely transferred ashore on tenders.

17    On 1 September 2006, Ocean Dynamics entered a five year Business Licence Agreement with Hamilton Island Enterprises. It was expressed to conclude on 31 August 2011. On 19 June 2012, the parties entered into a new Business Licence Agreement which expired on 31 March 2015. It was not renewed.

18    The Business Licence Agreements were also described as “concessionaire agreements”. They provided various benefits to Ocean Dynamics and subjected Ocean Dynamics to various obligations. The benefits included (i) the ability for Hamilton Island guests to charge charter boat cruises on their room account, (ii) marketing and promotion of Ocean Dynamics’ business on Hamilton Island, and (iii) subsidised staff accommodation, ferry transfers and discounts at outlets on the island. The obligations included matters such as reporting requirements, indemnity for legal proceedings, and a base management fee.

19    Concurrently with the Business Licence Agreements, Mr Bourke also describes obligations upon Ocean Dynamics arising from a Marina Licence Agreement. Clause 7 of the Marina Licence Agreement includes a prohibition upon “any form of commercial activity including but not limited to charter cruises or any other form of activity for profit unless authorised in writing by the Licensor”. That authorisation in writing came from the Business Licence Agreements. Those agreements had licensed Ocean Dynamics to carry on the business of “luxury power vessel charters”. It appears that one of the issues at trial will be the notification given to Ocean Dynamics about clause 7 and whether the Marina Licence Agreement included the term in clause 7. Another issue appears to be whether the Marina Licence Agreement was a monthly or an annual licence (which Ocean Dynamics says would only conclude in December 2015). These matters were not the subject of submissions on this application.

20    There is a strong conflict in the evidence concerning the reason why the Business Licence Agreement was not renewed. That conflict cannot be resolved on this interlocutory application. Counsel for Ocean Dynamics submitted that there was a prohibited purpose that motivated the decision by Hamilton Island Enterprises not to renew the Business Licence Agreement as well as the refusal by Hamilton Island Enterprises to allow Ocean Dynamics access to the Marina for commercial purposes on any terms. That prohibited purpose was said to be a proscribed purpose including the purpose of eliminating or substantially damaging a competitor of Hamilton Island Enterprises in the market for luxury yacht charters.

21    Ocean Dynamics rely on the following matters from Ms Lewis’ evidence for this inference of purpose:

(1)    A conversation (which is disputed) on 21 October 2014 in which she says that either Mr Bourke or Mr Boyd told her that Hamilton Island Enterprises would not renew Ocean Dynamics’ Business Licence Agreement and that the reason for the non-renewal was that Hamilton Island Enterprises had its own vessel under construction.

(2)    An email sent to Ms Lewis on 23 March 2015 from Mr Boyd, the General Manager Retail, Activities and Marina at Hamilton Island saying, in part, that “As confirmed in our meeting of 21 October [2014], Hamilton Island has a new strategy moving forward on how we deliver luxury vessel charters including the refurbishment of our own vessel Pebble Beach, and a new on order Palm Beach 55. Accordingly we will have no further need for Ocean Dynamics services post March 31, 2015”.

(3)    Ms Lewis’ evidence that Hamilton Island Enterprises offers the same luxury charter boat service on the Pebble Beach boat, and will offer the same service on the Palm Beach 55 boat, as Ocean Dynamics offers on its luxury yacht. This is also disputed. Mr Bourke says that Pebble Beach is used only for the VIP and qualia guests at Hamilton Island.

22    There are other matters in Ms Lewis’ affidavit which, if accepted, are potentially capable of supporting the inference she seeks. These matters are also disputed. For the purposes of this application, counsel for Ocean Dynamics did not seek to rely on any of those matters. For the purposes of this application it suffices to assess Ocean Dynamics’ case in relation to the inference sought by reference only to the three matters above. In contrast with the inferences which Ocean Dynamics invite, Mr Boyd says that his email was concerned only with a new strategy for the “qualia” guests of Hamilton Island (guests of its luxury hotel). He says that the “refurbishment” was simply a reference to the repair of a faulty gearbox until a replacement vessel was available. And he says that, contrary to his email, Hamilton Island Enterprises has not yet placed an order for a new purpose built Palm Beach 55 vessel. He says that discussions with the builder are ongoing. Mr Bourke also disputes the terms of the conversation that Ms Lewis says that she had with him and Mr Boyd. Mr Bourke’s evidence is broadly consistent with that of Mr Boyd.

23    Mr Boyd says that the only reason why Hamilton Island Enterprises decided not to renew the Business Licence Agreement with Ocean Dynamics was due to commercial difficulties that Hamilton Island Enterprises had in dealing with Ocean Dynamics. He said that his preference was only to work with third party charter boat operators who were already licensed to operate from the Marina and with whom Hamilton Island Enterprises had a better working relationship. The difficulties to which Mr Bourke refers in his dealing with Ocean Dynamics include late payment by Ocean Dynamics of invoices sent to it and problems with the services that Ocean Dynamics provided to the guests of Hamilton Island Enterprises who booked through Hamilton Island Enterprises tour desk or hotel receptions. The evidence of these problems was of the failure of Ocean Dynamics to provide food and beverage for a charter booking of 22 people, and a number of strong complaints in an email from a particular event coordinator including inadequate communication from Ocean Dynamics.

24    Whether the inference that Ocean Dynamics seeks should be drawn from Ms Lewis’ evidence (if accepted) will depend on a close consideration of all of the evidence. It will be affected by an assessment of the demeanour of witnesses including in cross-examination. It suffices to say that I am satisfied that there is a real prospect that this inference could be drawn at trial. I do not accept the submission by senior counsel for Hamilton Island Enterprises that the evidence is “feather light”. In particular, Mr Boyd’s evidence about his intended meaning of the words used in the email does not explain why he said that Hamilton Island’s “new strategy” in relation to its vessels had the effect “accordingly” that Hamilton Island Enterprises “will have no further need for Ocean Dynamics’ services post March 31, 2015”.

Principles concerning mandatory interlocutory injunctions

25    The court has power to grant interlocutory relief under s 23 of the Federal Court of Australia Act 1976 (Cth) and, in this case, by s 80(2) of the Competition and Consumer Act.

26    The principles concerning interlocutory injunctions were not in dispute. They were clearly set out by the Full Federal Court in Samsung Electronics Co Limited v Apple Inc [2011] FCAFC 156; (2011) 217 FCR 238. Where an interlocutory injunction is sought in respect of private rights, it is necessary to identify the legal or equitable rights which are to be determined at the trial and in respect of which the final relief is sought (Samsung, 256 [52]). There are two questions:

(1)    has the applicant established a prima facie case (in the sense that if the evidence remains as it is there is a probability that at the trial of the action the applicant will be held entitled to relief); and

(2)    does the balance of convenience and justice favour the grant of an injunction or the refusal of that relief?

27    The balance of convenience includes a consideration of whether the refusal of the injunction would have the effect that the applicant will suffer irreparable injury for which damages will not be adequate compensation (Samsung, 259-260 [61] – [63]).

28    The two questions are not independent (Samsung, 261 [67]). The more that the balance of convenience supports a respondent, and the more serious the consequences for a respondent, the stronger will be the prima facie case that the applicant may need to establish to support an interlocutory injunction. Conversely, in a case like this where the balance of convenience strongly favours the applicant, then the strength of the prima facie case required to support the interlocutory injunction diminishes.

29    Although the court will often examine the strength of a case for an interlocutory injunction, the court will not normally “undertake a preliminary trial” and will rarely attempt to resolve disputes of fact: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618, 622 (Kitto, Taylor, Menzies, and Owen JJ) quoting Linfield Linen Pty Ltd v Nejain (1951) 51 SR (NSW) 280, 281 (Roper CJ in Eq). And the extent to which the court will consider the merits of disputes as to legal issues will depend on the circumstances of the case. There is no inflexible rule (Samsung, 260 [64]).

30    There has been conflict in the authorities about whether these principles should apply equally to mandatory interlocutory injunctions. As I explained in JTA Le Roux Pty Ltd v Lawson (No 2) [2013] WASC 373 [15] – [23], I consider that the same principles should apply.

31    There are a number of authorities which suggest that different tests could apply depending on whether the interlocutory injunction is mandatory or prohibitory: Australian Airlines Commission v Commonwealth (1986) 17 FCR 445, 451 – 452; Midland Milk Pty Ltd v Victorian Dairy Industry Authority (1987) 82 ALR 279, 291; Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Ltd [1991] 1 Qd R 301, 304; 314 – 315; Storm Financial Ltd v Commonwealth Bank of Australia [2008] FCA 1991 [5]; Ryan v Electricity Networks Corporation [2009] FCA 734; (2009) 185 IR 201, 203 [7]; BGC Construction Pty Ltd v Minister for Works [2009] WASC 398 [19]; Parmalat Australia Pty Ltd v VIP Plastic Packaging Pty Ltd [2013] FCA 119; (2013) 210 FCR 1, 11 [17].

32    These authorities generally followed comments of Gibbs CJ sitting at first instance in the High Court of Australia in The State of Queensland v Australian Telecommunications Commission (1985) 59 ALR 243, 245. The Chief Justice quoted from Halsbury's Laws of England and from Megarry J and said that a mandatory interlocutory injunction will not normally be granted; the court should have a “high degree of assurance” that following a final contested hearing the result would be no different to the result if the injunction were issued. It might be doubted whether Gibbs CJ intended that these remarks be taken as a general rule. In any event, the remarks were, however, qualified by his Honour’s observations (which do not appear to have been intended to be exhaustive) of various circumstances in which a mandatory interlocutory injunction might be granted.

33    The better approach is, as Kiefel J has explained, that the classification of an injunction as 'mandatory' should not automatically attract a requirement that the Court should have further confidence in the correctness of the order: Racecourse Totalitzators Pty Ltd v Totalisator Administration Board of Queensland (1995) 58 FCR 119, 123. The focus should be on the effect of the proposed order. A prohibitory injunction is capable, in some cases, of having a more serious effect on the parties than a mandatory one. There can also be a fine line between an order which requires something to be done and an order which prohibits something from being done; sometimes the former can be re-characterised as the latter. Merely characterising an interlocutory order as “mandatory” should not invite a different approach.

34    Nevertheless, there will often be characteristics of a mandatory interlocutory injunction that weigh against making such an order. One of those characteristics is the potential for mandatory orders to interfere with a person’s liberty to a greater degree than a prohibitory order. Another is where an interlocutory mandatory injunction will have the effect that a defendant who has raised a triable issue will be deprived, by a mandatory order, of a full hearing of the issue if the effect of that mandatory order is final determination of the proceedings: NWL Ltd v Woods [1979] 1 WLR 1294, 1307 (Lord Diplock); Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533, 536 (McLelland J); Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 81-84 [65]-[72] (Gummow & Hayne JJ); Yara Australia Pty Ltd v Burrup Holdings Ltd [2010] FCA 1273; (2010) 80 ACSR 641, 652-653 [79]-[85] (Barker J); ACCC v Allphones Retail Pty Ltd (No2) [2009] FCA 17; (2009) 253 ALR 324, 329 [27]-[31] (Foster J).

35    When the particular circumstances of any mandatory interlocutory injunction are scrutinised these concerns might not always apply, or their force might be diminished. In Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, 503, Gummow J said that mandatory interlocutory injunctions are more likely to issue when the order requires a defendant to revert to a course of conduct which was pursued before the occurrence of the acts or omissions which provoked the litigation. In that case, Gummow J granted mandatory interlocutory orders requiring the respondent to restore disconnected telephone services in circumstances in which the disconnection of those services was likely to injure the goodwill of the business. Similarly, in TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2013] NSWSC 1375, Robb J granted a mandatory interlocutory injunction that required the defendant to continue to supply parts and services to the plaintiff as it had done in the ordinary course of business since 2008.

36    It is pertinent that the terms of the interlocutory injunction sought by Ocean Dynamics in this case are crafted so that they are less onerous on Hamilton Island Enterprises than the terms upon which Ocean Dynamics and Hamilton Island Enterprises have dealt with each other since.

The terms of the interlocutory injunction sought by Ocean Dynamics

37    Although Ocean Dynamics has three causes of action which it asserts in its statement of claim, it relies only on one legal right in support of its application for an interlocutory injunction. That is the allegation that Hamilton Island Enterprises has violated, and without an injunction will continue to violate, s 46 of the Competition and Consumer Act.

38    A consideration of whether an interlocutory injunction should issue to restrain conduct which could potentially violate s 46 requires consideration of the form of the injunctive relief. The form of relief sought is bound up with the consideration of the application of the legislation and with a consideration of the balance of convenience. Further, any injunction must be expressed in terms which will enable Hamilton Island Enterprises to know the form of conduct which would expose it to breach of the court order: Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1, 26 [60] (Gleeson CJ, Gummow, Hayne and Callinan JJ).

39    The terms of the interlocutory injunction sought by Ocean Dynamics are conditional upon Ocean Dynamics giving various undertakings including the usual undertaking as to damages. The additional undertakings which were raised during the course of the oral argument, and to which Ocean Dynamics properly did not object, require Ocean Dynamics to pay to Hamilton Island Enterprises a monthly fee of $1,666, and a commission in the amount of 5% of the gross revenue for charters and services where the pick-ups or drop-offs are from the Marina, and to comply with almost all the obligations to which it was subject in the Business Licence Agreement save for those which are not sufficiently clearly expressed. Each of these matters requires Ocean Dynamics to perform duties to which it would have been subject under the Business Licence Agreement that Hamilton Island Enterprises says it required before permitting Marina access on commercial terms. In addition, Ocean Dynamics offers an undertaking to continue the current arrangement by which it pays a berthing fee of $105 per hour for any berthing at the Marina. None of the undertakings requires any particularly close cooperation between the parties.

40    Upon these undertakings, the proposed restraint would compel Hamilton Island Enterprises to do as follows:

subject to a berth being available at the Marina, permit the Applicant to access a berth at the Marina, on the terms set out in paragraphs (a) to (d) below:

(a)    the access to the Marina is only for the purposes of collecting and dropping off passengers who have made charter bookings with the Applicant;

(b)    the Applicant provide to the Respondent 4 hours’ notice in advance of the requirement for a berth (together with details of the passengers being picked up or dropped off, and the amount of the relevant gross revenue being paid for that charter or service);

(c)    the Applicant pay to the Respondent, within 14 days from the issue of invoice by the Respondent to the Applicant, the fees referred to above;

(d)    the Applicant otherwise comply with the terms and conditions set out in the document entitled ‘Hamilton Island Marina Rules as at 1 April 2015’ and the ‘Hamilton Island and Dent Island Rules & Regulations November 2014’.

Prima facie case

41    Section 46(1) provides as follows:

A corporation that has a substantial degree of power in a market shall not take advantage of that power in that or any other market for the purpose of:

(a)    eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;

(b)    preventing the entry of a person into that or any other market; or

(c)    deterring or preventing a person from engaging in competitive conduct in that or any other market.

42    It is common ground that Ocean Dynamics must establish three essential elements to demonstrate a contravention of s 46. These are:

(1)    that it has a substantial degree of power in the market;

(2)    that it has taken advantage of that power; and

(3)    that it has taken advantage of that power for a proscribed anti-competitive purpose in s 46(1)(a) to (c) above.

43    Each of these three elements must be connected because s 46 requires “not merely the co-existence of market power, conduct, and proscribed purpose, but a connection such that the firm whose conduct is in question can be said to be taking advantage of its power”: Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1, 21 [44 (Gleeson CJ, Gummow, Hayne and Callinan JJ).

(i) Whether Hamilton Island Enterprises has a substantial degree of power in a market

44    In order to assess whether a corporation has a substantial degree of power in a market it is necessary to determine the relevant market. As Deane J said in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, 195, a market “should, in the context of the Act, be understood in the sense of an area of potential close competition in particular goods and/or services and their substitutes”.

45    Section 4E of the Competition and Consumer Act provides that unless the contrary appears “market means a market in Australia and, when used in relation to any goods or services includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services”.

46    In Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158, 174, French J said the following of the concept of a “market” (see also SPAR Licensing Pty Ltd v MIS QLD Pty Ltd (No 2) [2012] FCA 1116; (2012) 298 ALR 69, 81 [43] (Griffiths J)):

In competition law it has a descriptive and purposive role. It involves fact finding together with evaluative and purposive selection. In any given application it describes a range of economic activities defined by reference to particular economic functions (eg manufacturing, wholesale or retail sales), the class or classes of products, be they goods or services, which are the subject of those activities and the geographic area within which those activities occur. In its statutory setting the market designation imposes on the activities which it encompasses limits set by the law for the protection of competition. It involves a choice of the relevant range of activity by reference to economic and commercial realities and the policy of the statute. To the extent that it must serve statutory policy, the identification will be evaluative and purposive as well as descriptive.

47    The evaluative nature of the exercise of definition of a market is necessarily imprecise. That imprecision can be demonstrated by the by the different approaches taken in Queensland Wire Industries Pty Ltd. At first instance, Pincus J identified six possible markets (the final two of which were admitted): (i) steel to manufacturers for use in making wire; (ii) steel to manufacturers for use in making fence posts; (iii) Y-bar to manufacturers for use in making fence posts; (iv) steel wire and steel fence posts by wholesalers to retailers; (v) steel wire by wholesalers to retailers; and (vi) steel fence posts by wholesalers to retailers: Re Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Ltd (Unreported, Federal Court of Australia, Pincus J, 2 September 1987). In the High Court, it was held that the respondent had a substantial degree of market power in the market for “the production of steel and steel products” (192 (Mason CJ and Wilson J), 197 (Deane J), 211(Toohey J)). Dawson J simply concluded that the respondent had a substantial degree of market power however widely the market was drawn (201). The High Court held that this market power had been used to prevent the appellant’s entry into the star post picket market. In the course of characterising the market, Deane J emphasised the value judgments involved in the exercise of characterisation and added that the “economy is not divided into an identifiable number of discrete markets into one or other of which all trading activities can be neatly fitted” (196).

48    Counsel for Ocean Dynamics submitted that there are two relevant markets:

(1)    The market for access to marina services at a marina adjacent to a commercial airport in the Whitsundays. Counsel submitted that marina services were the services of berthing, and associated services such as fuelling, and chandlery services commonly performed at a marina. This was the market in which Ocean Dynamics submitted that Hamilton Island Enterprises exercised a substantial degree of power.

(2)    The market for provision of luxury yacht charters. Ocean Dynamics submitted that Hamilton Island Enterprises had taken advantage of its power in the marina services market (ie the market in (1)) for the proscribed purposes (eliminating or substantially damaging, or deterring from competitive conduct) in relation to Ocean Dynamics as a competitor in the luxury yacht charter market.

49    Senior counsel for Hamilton Island Enterprises submitted that there are insufficient facts from which to draw a conclusion about the markets in (1) or (2). It is certainly accurate that on the facts before the court, and in the absence of any expert evidence, a conclusion cannot be reached with great confidence that the market in (1) or (2) was delineated in the way that counsel for Ocean Dynamics submitted. For instance, as counsel for Ocean Dynamics accepted, it is possible that the market for access to marina services would be concerned with any marina services in the Whitsundays rather than marina services at a marina adjacent to a commercial airport in the Whitsundays. But the provision of each of the marina services and the luxury yacht charters must have occurred within a market. There are facts before the Court from which the evaluative exercise can be undertaken in drawing the boundaries of that market, on a very limited and preliminary assessment.

50    The facts before me on this application from which a market can be characterised, and market power assessed, were necessarily limited in the circumstances in which this application was brought. But it could hardly be expected, for instance, that Ocean Dynamics would have called expert evidence on this interlocutory application. On the limited facts, it suffices to say that there is a prima facie case that each of the markets are properly characterised in the terms above at (1) and (2). Senior counsel for Hamilton Island Enterprises did not suggest any alternative characterisation of the markets in which the services in (1) and (2) were provided.

51    One definition of market power in a market was given by Dawson J, quoting Kaysen and Turner, in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, 200. That definition was endorsed by Gleeson CJ, Gummow, Hayne and Callinan JJ in Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1, 21 [42]: “A firm possesses market power when it can behave persistently in a manner different from the behaviour that a competitive market would enforce on a firm facing otherwise similar cost and demand conditions”.

52    On the facts before me Hamilton Island Enterprises has a substantial degree of power in the market in (1). Indeed, it is a monopolist in that market. If the market in (1) is more broadly characterised, such as one for marina services in the Whitsundays generally, again on the limited facts before me there would remain a prima facie case that Hamilton Island Enterprises would have a substantial degree of power in that market. It appears that Hamilton Island Enterprises is one of only five suppliers in that market. It was submitted by counsel for Ocean Dynamics, without demur, that two of the other marinas are on the mainland (Port Airlie and Abel Point) although there was no evidence of the latter. And the evidence suggested that there are also berthing possibilities at Hayman Island, Daydream Island. But the evidence also suggests that the Marina on Hamilton Island is very large and has the advantage of close proximity to the Hamilton Island airport.

(ii) Whether Hamilton Island Enterprises has taken advantage of its power in the market

53    The next question is whether there is a prima facie case that Hamilton Island Enterprises has taken advantage of its power in the market for marina services as that market is described above. Section 46(6A) of the Competition and Consumer Act provides that

In determining for the purposes of this section whether, by engaging in conduct, a corporation has taken advantage of its substantial degree of power in a market, the court may have regard to any or all of the following:

(a)    whether the conduct was materially facilitated by the corporation’s substantial degree of power in the market;

(b)    whether the corporation engaged in the conduct in reliance on its substantial degree of power in the market;

(c)    whether it is likely that the corporation would have engaged in the conduct if it did not have a substantial degree of power in the market;

(d)    whether the conduct is otherwise related to the corporation’s substantial degree of power in the market.

This subsection does not limit the matters to which the court may have regard.

54    Further, the phrase “take advantage” does not require hostile intent. Rather it is concerned with competition which “by its very nature is deliberate and ruthless. Competitors jockey for sales … the purpose provisions in s 46(1) are cast in such a way as to prohibit conduct designed to threaten that competition”: Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, 191 (Mason CJ and Wilson J).

55    However, it can be dangerous to proceed too quickly from a finding about purpose to a conclusion about taking advantage: Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1, 18-19 [31] (Gleeson CJ, Gummow, Hayne and Callinan JJ). The example given in that case was where the purpose relied upon was s 46(1) was the relatively narrow one of deterring a person from engaging in competitive conduct in a market.

56    Counsel for Ocean Dynamics emphasised that his submission concerning the taking advantage of power by Ocean Dynamics was not solely based upon the failure by Hamilton Island Enterprises to renew the Business Licence Agreement. His submission was that the taking advantage involved the refusal by Hamilton Island Enterprises to allow Ocean Dynamics access to the Marina on any terms at all. Senior counsel for Hamilton Island Enterprises accepted that Hamilton Island Enterprises intended to exclude Ocean Dynamics, on any terms, from access to the Marina on commercial purposes from 20 May 2015 onwards.

57    I accept that there is a prima facie case that this conduct by Hamilton Island Enterprises involved the taking advantage of its power in the market submitted by counsel for Ocean Dynamics. In particular, it is arguable that it was unlikely that Hamilton Island Enterprises would have refused the access if Ocean Dynamics could easily have procured other marina access elsewhere that would have been as satisfactory for commercial purposes in the market. It is also arguable that it was unlikely that Hamilton Island Enterprises would have refused access if it did not have a substantial degree of power in the market for marina services and that the refusal of access to Ocean Dynamics was otherwise related to the corporation’s substantial degree of power in the market.

(iii) Whether the taking advantage of the power was for a proscribed purpose

58    As mentioned, Ocean Dynamics relies upon the two proscribed purposes in s 46(1)(a) and s 46(1)(c). The prohibited purpose need not be the only purpose for which the corporation acts. Section 4F(1)(b) of the Competition and Consumer Act provides that “a person shall be deemed to have engaged or to engage in conduct for a particular purpose or a particular reason if (i) the person engaged or engages in the conduct for purposes that included or include that purpose … and (ii) that purpose or reason was or is a substantial purpose or reason”.

59    In s 46(7), the Competition and Consumer Act provides, in part, that a corporation may be taken to have taken advantage of its power for a proscribed purpose “notwithstanding that, after all the evidence has been considered, the existence of that purpose is ascertainable only by inference from the conduct of the corporation or of any other person or from other relevant circumstances”.

60    Senior counsel for Hamilton Island Enterprises also accepted that if the inference were drawn that Hamilton Island Enterprises exercised its power in the market for marina services for a proscribed purpose then it would not be a defence that the exercise of that power was occasioned by the terms it created for its own licence agreements for access to Hamilton Island over which it was a long term lessee. This concession was properly made. In NT Power Generation Pty Ltd v Power and Water Authority [2004] HCA 48; (2004) 219 CLR 90, 136 [125], McHugh A-CJ, Gummow, Callinan and Heydon JJ said that “to suggest that there is a distinction between taking advantage of market power and taking advantage of property rights is to suggest a false dichotomy, which lacks any basis in the language of s 46 … property rights can be a source of market power attracting liability under s 46”.

61    Senior counsel for Hamilton Island Enterprises submitted that no inference could be drawn that any market power had been exercised for a proscribed purpose. I have already explained in paragraph 24 above why I do not accept that Ocean Dynamics’ case concerning the inference it seeks from the facts is “feather light”. It is also noteworthy that Ocean Dynamics said that the substantive reason given by Hamilton Island Enterprises for its refusal of commercial access to Ocean Dynamics on any terms is not genuine. Hamilton Island Enterprises says that it refused commercial access to Ocean Dynamics on any terms because Ocean Dynamics no longer has a Business Licence Agreement (owing to its goodwill concerns) and that the Marina Licence Agreement prohibits “any form of commercial activity including but not limited to charter cruises or any other form of activity for profit unless authorised in writing by the Licensor”. But Mr Bourke describes bareboat charters based in Airlie Beach that are permitted by Hamilton Island Enterprises to use the Marina apparently without a Business Licence Agreement. Further, Mr Bourke describes cruise companies and a “number of other charter companies” which are permitted to move customers from the airport wharf to their charter boat for commercial purposes, which might be a use of the Marina, again apparently without a Business Licence Agreement. There are also examples given by Ms Lewis of two vessels berthed at the Marina that are using the Marina for commercial purposes without a Business Licence Agreement. Mr Bourke’s evidence is that he was unaware that these two vessels were using the Marina for commercial purposes and that he has commenced an investigation.

The balance of convenience

62    The prejudice that will arise if an interlocutory injunction is not granted is substantial. Most of the matters concern prejudice for which damages would not be an adequate remedy.

63    First, Ms Lewis says, and for the purposes of this application I accept, that Ocean Dynamics’ luxury charter business might no longer be viable if it is unable to access the berthing facilities at Hamilton Island. It is possible that the business would have to cease. There is some doubt about the financial evidence underlying this assertion (in particular the proportion of Ocean Dynamics’ total annual revenue that is comprised by its luxury yacht business as disclosed to Hamilton Island Enterprises) and it appears that Ocean Dynamics’ business of passenger transfers from Hamilton Island to Hayman Island is not threatened as it does not use the Marina. But I accept that the reputational damage to the business from the inability to accept bookings from travel agents and Hamilton Island residents would be irreparable and may contribute to the feared outcome of failure of the business.

64    Secondly, this effect on the business of Ocean Dynamics is in the context of a business built up and operated, with some breaks, over nearly a decade. It is a business in which hundreds of thousands of dollars have been invested in marketing with media outlets, travel agents and long term clients. And it is in the context of a business which is apparently the livelihood of its proprietor, Ms Lewis.

65    Thirdly, the balance of convenience also requires consideration of the effect on third parties of the grant or withholding of relief. The weight to be given to the interests of third parties will vary according to the circumstances: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1, 41-43 [65]-[66] (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ).

66    In this case, it is likely that there will be significant prejudice to third parties. One group of third parties who will suffer prejudice is the five employees of Ocean Dynamics who may be made redundant. Another group of third parties who will be prejudiced is those who have existing bookings with Ocean Dynamics. The precise extent of that prejudice is difficult to assess. Ms Lewis says that Ocean Dynamics has long standing bookings, including with some customers who have made bookings for the same dates every year for 7 years. Assuming that Ocean Dynamics intends to maintain the safety concerns that it raises about transferring these customers to Hamilton Island by tender, it is likely that the bookings of nearly two dozen third parties (some of whom are groups of people) with Ocean Dynamics could no longer be fulfilled.

67    Against the prejudice to Ocean Dynamics and the prejudice to third parties, Hamilton Island Enterprises essentially claims that the grant of an injunction would prejudice it by conferring “an illegitimate advantage on [Ocean Dynamics] in allowing it to conduct its charter business free from the obligations imposed on other charter businesses operating from Hamilton Island, which are subject to business licence agreements and the relevant terms, conditions and restrictions arising therefrom”.

68    The short, partial, answer to this assertion is that the grant of access to Ocean Dynamics is appropriately made subject to the same obligations imposed on other charter businesses in the Business Licence Agreements. Apart from several clauses which are insufficiently clear to be plainly expressed in a court order or undertaking, Ocean Dynamics did not object to undertakings in terms of all the relevant obligations in the Business Licence Agreement. This has the effect of continuing the arrangements that existed for the benefit of Hamilton Island Enterprises from 2012 until 31 March 2015 and, on slightly different terms, from 2006. Ocean Dynamics also does not seek to take advantage of some of the corresponding benefits in the Business Licence Agreement (described at paragraph 18 above) in circumstances in which those rights might have required greater co-operation and closer involvement between the parties. It seeks only the limited benefit of continued access to the Marina and on an ad hoc rather than a permanent basis, continuing the access that existed from 2006 (although for some periods, including between January and November 2013, Ocean Free did not occupy a berth in the Marina under the Business Licence Agreement).

69    Another partial answer to the asserted prejudice by Hamilton Island Enterprises is that this matter should be able to be programmed efficiently to a trial. Programming orders will now be made to move the matter to a trial no later than November or December.

Conclusion

70    Ocean Dynamics has a prima facie case that Hamilton Island Enterprises has infringed, and would be infringing, s 46(1) of the Competition and Consumer Act by its refusal to grant Ocean Dynamics access to the Hamilton Island Marina on any terms. There are weaknesses in Ocean Dynamics’ case. For the purpose of this interlocutory injunction application the legal and factual issues have only been considered at the high level of a prima facie case. It is also unclear whether Ocean Dynamics’ claim at trial for an injunction (unspecified) under s 80 of the Competition and Consumer Act seeks a permanent, mandatory injunction existing indefinitely into the future, binding the parties to do business with each other. It may be that such an injunction, even subject to carefully crafted conditions, would not be the appropriate remedy at trial. For instance, it may be that if a contravention of s 46 is found then any injunction ordered at trial might be limited to a “springboard” period, analogous to that in the context of confidential information, to allow Ocean Dynamics to adjust its business so that its vessel could berth at alternative locations: United States Surgical Corporation v Hospital Products International Pty Ltd [1983] 2 NSWLR 157, 228 – 233 (the Court). It is possible that such a period might even have expired by the time of trial later this year. But these will be matters for evidence and submissions at trial. It suffices to say that I am satisfied that Ocean Dynamics currently has a prima facie case of an entitlement to an injunction to restrain Hamilton Island Enterprises from preventing Ocean Dynamics from accessing the Marina on commercial terms.

71    On the evidence before me, the balance of convenience significantly favours the grant of the interlocutory injunction until trial. An important element in that calculus is that there is no basis in the evidence to conclude that the parties will not act in a dignified and proper, commercial manner. Indeed, there is every indication that they will continue to act in a commercial and sensible manner. Although the parties are now locked in litigation, their conduct, through counsel, during the hearing involved co-operation to identify those duties owed by Ocean Dynamics under the 2012 Business Licence Agreement and the formulation of undertakings by Ocean Dynamics to comply with those duties. Nevertheless, both parties will have liberty to apply in the event that circumstances change so substantially as to alter the calculus of assessment of the balance of convenience in light of the prima facie case demonstrated by Ocean Dynamics.

72    When the prima facie case is assessed in light of the balance of convenience, an interlocutory injunction should issue, even taking account some weaknesses in the prima facie case. However, tight programming orders should be made to move this matter to trial no later than December this year to minimise the term of operation of this interlocutory injunction pending determination of final relief.

73    An injunction will be granted broadly in the terms set out in paragraph 40 above although I will hear now from the parties about the precise wording.

Associate:    

Dated:    14 May 2015