FEDERAL COURT OF AUSTRALIA

TRADE PRACTICES - competition and access– application for a declaration that the provision of the use of an infrastructure facility known as the Hunter Railway Line (part of the New South Wales Rail Network) is a “government coal – carrying service” within s.78 of the Competition Policy Reform Act 1995 (Cth) and therefore incapable of being regarded as a “service” for the purpose of Part IIIA of the Trade Practices Act 1974 (Cth) for a five year period – consideration of Competition Principles Agreement between the Commonwealth of Australia and States and Territories – distinction between use of an infrastructure facility and the handling or transporting of goods and people by such an infrastructure facility – service provided by Rail Access Corporation under Transport Administration Act 1988 (NSW)

Trade Practices Act 1974 (Cth):  s 163A, ss 44F(1) & (2), ss 44H(1) & (9), s 44K(2), s 44S, s 44ZP, s 44ZR

Part IIIA

Competition Policy Reform Act 1995 (Cth):  s 78

Part XIA, Part IIA

Transport Administration Act 1988 (NSW):  s 19A(1), s 19B, s 19C, s 19D(1), s 19E, s 19E(5), s 19G, s 19H, s 19I(2)

Sch 6A

Transport Administration Amendment (Rail Corporatisation and Restructuring) Act 1996 (NSW)

RAIL ACCESS CORPORATION v NEW SOUTH WALES MINERALS COUNCIL LIMITED

NG 472 of 1998

JUDGES:       BLACK CJ, WILCOX & GOLDBERG JJ

PLACE:          SYDNEY

DATE:            9 OCTOBER 1998

THE COURT ORDERS THAT:

1.                  The application be dismissed.

2.         The applicant pay the respondent’s costs of the application including reserved costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

REASONS FOR JUDGMENT

THE COURT:  The respondent, New South Wales Minerals Council Limited, applied to the Australian Competition Tribunal (“the Tribunal”), pursuant to s 44K(2) of the Trade Practices Act 1974 (Cth) (“the Act”), for a review of a deemed decision, under s 44H(9) of the Act, by a designated Minister, the Premier of the State of New South Wales.  The decision was not to declare a railway service known as the Hunter Railway Line (“the Line”) as a service for the purpose of Part IIIA of the Act, contrary to the recommendation of the National Competition Council.  The Line is part of the New South Wales rail network and the applicant, Rail Access Corporation, contended before the Tribunal that it is a “government coal‑carrying service” within the meaning of s 78 of the Competition Policy Reform Act 1995 (Cth).  That section provides:

“(1)     For the period of 5 years after the commencement of section 59, a government coal‑carrying service is not a service for the purposes of Part IIIA of the Principal Act [Trade Practices Act],

(2)               ‘government coal‑carrying service’ means a service of carrying coal by rail, where the provider of the service is a State or a Territory or an authority of a State or Territory.

…”

The applicant said it followed that the Tribunal had no jurisdiction to continue with the hearing and determination of the respondent’s application under s 44K(2) of the Act.

The Tribunal did not rule on the applicant’s contention.  At the suggestion of the parties, it adjourned the hearing of the application for such time as was necessary to allow the applicant to seek a declaration of right in this Court.  The applicant filed an application seeking declaratory relief and this came before Wilcox J.  The parties informed his Honour there was no factual issue between them and that, having regard to the financial implications of the case, it was likely that whatever view he reached would be tested on appeal.  Having regard to those facts, he was invited to consider a reference of the application to a Full Court.  Wilcox J referred the application to the Chief Justice who directed, pursuant to s 20(1A) of the Federal Court of Australia Act, that the matter be heard by the Full Court.  That is how the issue comes before us.

The Commonwealth legislation

On 11 April 1995 the Commonwealth of Australia, the States of New South Wales, Victoria, Queensland, Western Australia, South Australia and Tasmania, the Australian Capital Territory and the Northern Territory entered into the “Competition Principles Agreement”.  By the Agreement the Commonwealth, State and Territory Governments agreed to adopt certain principles of competition policy and to apply competition laws across the public sector.  The Agreement stated the “objective of competitive neutrality policy is the elimination of resource allocation distortions arising out of the public ownership of entities engaged in significant business activities”.  This was to be achieved by the structural reform of public monopolies so as to remove from the public monopoly any responsibility for industry regulation and to introduce competition to markets traditionally supplied by a public monopoly. 

Clause 6(1) of the Agreement provided that, subject to sub‑clause (2), the Commonwealth would put forward legislation to establish a regime for third party access to services provided by means of significant infrastructure facilities where:

“(a)     it would not be economically feasible to duplicate the facility;

(b)     access to the service is necessary in order to permit effective competition in a downstream or upstream market;

(c)           the facility is of national significance having regard to the size of the facility, its importance to constitutional trade or commerce or its importance to the national economy; and

(d)           the safe use of the facility by the person seeking access can be ensured at an economically feasible cost and, if there is a safety requirement, appropriate regulatory arrangements exist.”

As a result of the Agreement, the Commonwealth enacted the Competition Policy Reform Act.  That enactment made substantial amendments to the Act and inserted s 2 which stated that the object of the Act was to:

“enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.”

The Competition Policy Reform Act inserted into the Act a new Part XIA, headed “The Competition Code”.  It also inserted Part IIA, headed “The National Competition Council”.  This Part gave the Council the functions of carrying out research into, and providing advice on, matters referred to it by the Minister.  The Trade Practices Tribunal became the Australian Competition Tribunal. 

Another Part inserted into the Act by the Competition Policy Reform Act was Part IIIA, headed “Access to Services”.  This Part provided a procedure whereby a service can be “declared”, with the result that an interested party can obtain access to the use of that service.  Part IIIA is sometimes said to provide an access regime for essential services, but the expression “essential services” does not appear in the Part.  Section 44B of the Act contains the following relevant definitions:

“‘provider’, in relation to a service, means the entity that is the owner or operator of the facility that is used (or is to be used) to provide the service;

‘service’ means a service provided by means of a facility and includes:

(a)               the use of an infrastructure facility such as a road or railway line;

(b)               handling or transporting things such as goods or people;

(c)               a communications service or similar service;

but does not include:

(d)               the supply of goods; or

(e)               the use of intellectual property; or

(f)                the use of a production process;

except to the extent that it is an integral but subsidiary part of the service.”

The declaration process operates, in general terms, in the following way:

(a)                the designated Minister, or any other person, may apply to the National Competition Council for a recommendation that a particular service be declared – s 44F(1);

(b)               the National Competition Council must make a recommendation to the Minister either that the service be declared or not declared – s 44F(2);

(c)                on receiving a declaration recommendation the Minister must either declare the service or decide not to declare it – s 44H(1);

(d)               the provider or person requesting access can apply to the Australian Competition Tribunal for a review of the Minister’s decision – s 44K.

Once a service is declared, the person requesting access negotiates an access agreement with the provider of the service.  If there is a dispute as to any aspect of access, the Australian Competition and Consumer Commission arbitrates the dispute – s 44S.  A party to such an arbitration can apply to the Tribunal for review of the determination (s 44ZP) and may appeal to this Court on a question of law arising out of the Tribunal’s decision (s 44ZR).

The Competition Policy Reform Act contained a number of transitional provisions, one of which was s 78, set out above.

The New South Wales legislation

As part of the process of implementing the Agreement, the State of New South Wales amended the Transport Administration Act 1988 (NSW).  The amendments, which radically changed the structure of the New South Wales railways, were contained in the Transport Administration Amendment (Rail Corporatisation and Restructuring) Act 1996 (NSW).  The Minister’s Second Reading speech provides a useful background to the amendments.  It reveals that when the Bill was introduced the New South Wales rail system was vested in, and run by, the State Rail Authority.  The State Rail Authority was vertically integrated.  It owned the track and associated infrastructure and operated virtually all the trains.  The Bill proposed to separate the State Rail Authority into four new organisations, each of which would have a different function:

(a)                a reformed State Rail Authority which would operate passenger trains;

(b)               a new freight rail corporation which would conduct freight operations;

(c)                a new corporation called “Rail Access Corporation” which would manage the rail infrastructure; and

(d)               a new commercially oriented railway services authority to provide rail support services.

Only the infrastructure management function was to be free from competition; the other three areas were to be open to competition from new entrants.

In the Second Reading speech the Minister for Transport said:

“The centre piece of the legislation is the creation of an open access regime so that anyone who wishes to operate trains on New South Wales tracks, and who is properly accredited under the Rail Safety Act, may do so.  This will be achieved by establishing, under the State Owned Corporations Act, the Rail Access Corporation, which will be responsible for management, control and maintenance of essential infrastructure and will provide access to all accredited operators on equitable, commercial terms.”

Rail Access Corporation was to be subject to an access regime that would set out the rules under which access was to be made available to its railway track and infrastructure.  Rail Access Corporation was to own all the railway infrastructure that was classed as essential under Australian competition policy.  This included the track itself, supporting structures, signalling systems, overhead electrical power supply systems and trackside fencing.  The freight rail division of the State Rail Authority was to become a State‑owned corporation called “Freight Rail Corporation”.  It would focus on the carriage of freight.  Its assets would comprise its rolling stock, freight terminals, fuelling stations, some sidings and other lay over areas.  Freight Rail Corporation, like the reformed State Rail Authority, was to negotiate access charges directly with the Rail Access Corporation.  However, the Minister added, “the opportunity will also be available to major owners and forwarders of freight to negotiate directly with the Rail Access Corporation for train paths”.

The Rail Access Corporation was established by s 19C of the Transport Administration Act.  Section  19D(1) provided its principal objectives.  They include:

“(a)     to hold, manage and establish efficient, safe and reliable rail infrastructure facilities, and

(b)           to promote and facilitate access to the NSW rail network in accordance with the NSW Rail Access Regime, and

(c)           to be a successful business …

…”

Section 19A(1) of the Transport Administration Act defined “NSW rail network” as meaning:

“the railway lines vested in or owned by Rail Access Corporation (including passing loops and turnouts from those lines and loops associated rail infrastructure facilities that are so vested or owned).”

Section 19B of the Transport Administration Act provided for the “NSW Rail Access Regime”.  It relevantly provided as follows:

“(1)     In this Part in Schedule 6A, NSW Rail Access Regime means an access regime established from time to time by the Minister and approved by the Premier for the purposes of implementing a Competition Principles Agreement in respect of third party access to the NSW rail network by persons as rail operators, including the use of such rail infrastructure facilities that are vested in or owned by Rail Access Corporation as are necessary for the safe operation of rolling stock on that network.

(2)               The portfolio Minister may, by order in writing, direct that facilities specified in the order that are vested in or owned by Rail Access Corporation be treated as rail infrastructure facilities for the purposes of this Act and an access regime established under this section.

(3)               An access regime established in accordance with this section may, in respect of the carriage of coal, provide for special access pricing principles during the period that a government coal‑carrying service is, by section 78 of the Competition Policy Reform Act 1995 of the Commonwealth, not a service for the purposes of Part IIIA of the Trade Practices Act 1974 of the Commonwealth.  Those special access pricing principles may continue, for the whole or any part of that period, the level of prices applicable to those services before the establishment of that access regime.

…”

By s 19E of the Transport Administration Act the principal functions of Rail Access Corporation are:

“(a)     to hold, manage and establish rail infrastructure facilities on behalf of the State, and

(b)     to provide persons with access as rail operators to the NSW rail network.”

Schedule 6A of the Transport Administration Act made Rail Access Corporation the owner of all rail infrastructure facilities.

Section 19E(5) of the Transport Administration Act provided:

“In exercising its functions, Rail Access Corporation must act in accordance with the NSW Rail Access Regime.”

Section 19G of the Transport Administration Act provided for the establishment of the Freight Rail Corporation whose principal objectives were set out in s 19H.  They included:

“(a)     to operate efficient, safe and reliable rail freight services, and

(b)           to be a successful business and, to this end:

(i)                 to operate at least as efficiently as any comparable businesses, and

(ii)               to maximise the net worth of the State’s investment in the Corporation ...

…”

Section 19I(2) of the Transport Administration Act provided that the principal function of Freight Rail Corporation “is to operate rail freight services”. 

In accordance with s 19B of the Transport Administration Act, the NSW Rail Access Regime was established by the Minister for Transport with the approval of the Premier and promulgated in the New South Wales Government Gazette on 23 August 1996.  By that Regime, Rail Access Corporation is to permit access to the New South Wales rail network, subject to limitations stated in the Regime, by entering into agreements with prospective rail operators.  Clause 8.1 of the Regime provides that Rail Access Corporation must:

“(a)     promote and provide Access consistent with the Regime; and

(b)     use all reasonable endeavours to accommodate the requirements of Rail Operators seeking Access.”

Clause 8.2 of the Regime provides:

“The Corporation must not engage in the business of the transportation of freight or passengers for reward.  For the avoidance of doubt, the Corporation may undertake Rail Operations for the purposes of inspecting or maintaining the Rail Infrastructure Facilities”.

The expression “Rail Infrastructure Facilities” is defined in s 19A(1) of the Transport Administration Act as follows:

“rail infrastructure facilities:

(a)               includes railway track, associated track structures, over track structures, cuttings, drainage works, track support earthworks and fences, tunnels, bridges, level crossings, service roads, signalling systems, train control systems, communication systems, overhead power supply systems, power and communication cables, and associated works, buildings, plant, machinery and equipment, and (subject to section 19B(2)),

(b)               does not include any stations, platforms, rolling stock, maintenance facilities, office buildings or housing, freight centres or depots, private sidings and spur lines connected to premises not vested in or owned by Rail Access Corporation.”

The facts

The respondent is seeking access to the Hunter Railway Line for the carriage of coal.  The Line is uncontroversially defined as follows:

“3        The Hunter Railway Line comprises the facilities as defined in ‘Schedule 1: Facilities’ of the NSW Rail Access Regime within the section of the NSW railway line network bounded by the:

(a)               coal rail unloading and ship loading terminals at Port Waratah and Kooragang Island, Newcastle;

(b)               coal rail unloading terminal at Eraring Power Station, approximately 30 rail kilometres south of Newcastle;

(c)                coal rail loading terminal at Ulan coal mine near Gulgong, approximately 275 rail kilometres west of Newcastle; and the

(d)               coal rail loading terminal at the Vickery and Gunnedah coal mines near Gunnedah, approximately 320 rail kilometres northwest of Newcastle.

including, inter alia, all RAC-owned, controlled or operated branch railway lines, spurs, loops, sidings and the like connected to the mainline between and adjacent to the above terminals and used for the carriage of coal."

The Line is a service provided by Rail Access Corporation.  It is used by Freight Rail Corporation, as part of the New South Wales rail network, to operate rail freight services that include the carrying of coal.

The legal issue

The question in this case is whether provision by Rail Access Corporation of the use of the Line is a “government coal‑carrying service”, within the meaning of s 78 of the Competition Policy Reform Act, and therefore incapable of being regarded as a “service” for the purpose of Part IIIA of the Act for the period of five years from the commencement of Part IIA of the Act on 6 November, 1995.  In considering this issue, it is important to note the applicant, Rail Access Corporation, does not itself carry coal by rail or offer such a service.  Indeed, it is precluded from doing so by clause 8.2 of the NSW Rail Access Regime. 

Nonetheless, the applicant submits the service which is sought to be declared is a “government coal-carrying service”.  It argues the Line is owned by the New South Wales Government (as is common ground) and the Line fulfils the function of carrying coal.  The applicant says that, in order to provide a service of carrying coal, it is necessary to provide two things:

·                    the means to carry the coal – the rolling stock; and

·                    the provision of a permanent way over which the rolling stock can travel.

It is said by the applicant, therefore, it is providing a service of carrying coal; without the provision of the permanent way over which the rolling stock can travel coal cannot be carried by rail.

Alternatively, the applicant submits, an entity that owns and controls the rail network and infrastructure, and is prepared to allow other persons to use it by their rolling stock, provides a service of carrying coal by rail; it provides the rail network and infrastructure that is an integral part of the process by which coal is carried by rail.

The respondent says this submission ignores the implications of the definition of “service” in s 44B of the Act.  It will be recalled that definition refers to a “service provided by means of a facility” and includes:

“(a)     the use of an infrastructure facility such as a … railway line;

(b)     handling or transporting things such as goods

…”  (our emphasis)

The respondent says the Line is an “infrastructure facility”; so the definition contemplates that a “service” within the meaning of the definition may amount simply to the provision of use of the Line.  The handling or transporting of goods (including coal) may also amount to a service, and this is the service provided by Freight Rail Corporation; but that is a different service.  The respondent does not seek access to the service that consists of the handling and transporting of coal but only to the service constituted by provision of use of the infrastructure facility itself.

Conclusions

The respondent’s submissions must be accepted.  The applicant’s submission confuses and elides the separate services provided by Rail Access Corporation and Freight Rail Corporation.  Before the 1996 New South Wales legislation took effect, the State Rail Authority owned and managed both the railway line infrastructure and the freight carrying service which used that infrastructure but the 1996 New South Wales amending legislation separated those services and functions.

The definition of “service” in s 44B of the Act makes clear that a service is something separate and distinct from a facility.  It may, however, consist merely of the use of a facility. The definition of “service” distinguishes between the use of an infrastructure facility, such as a road or railway line, and the handling or transporting of things, such as goods or people, by the use of a road or railway line.  The fact that one service provider, such as Freight Rail Corporation, is using the railway line infrastructure facility made available to it by Rail Access Corporation for the purposes of carrying coal by rail does not mean Rail Access Corporation is carrying on, or is the provider of, a service of carrying coal by rail.  There is a clear distinction, enshrined in the Transport Administration Act and confirmed by the NSW Rail Access Regime, between the service provided by Rail Access Corporation and the service provided by Freight Rail Corporation.  Freight Rail Corporation provides the service of transporting coal.  Rail Access Corporation provides to Freight Rail Corporation the different service of making available the infrastructure facility which is necessary to enable Freight Rail Corporation to provide the transportation service. The respondent is seeking access to the service provided by Rail Access Corporation, not the service provided by Freight Rail Corporation. 

We have mentioned the applicant’s argument that the mere provision of access to its railway lines constitutes the “service of carrying coal by rail” within the meaning of s 78(2) of the Competition Policy Reform Act because its rails carry the rolling stock (provided by others) that carry the coal.  We consider this a strained and artificial interpretation of the expression used in s 78.  As s 78(1) exempts a government coal‑carrying service from being a service for the purposes of Part IIIA of the Act for the relevant period of five years, the word “service” in s 78(1) and (2) must be understood in the light of the definition of that word contained in s 44B of the Act.  As we have noted earlier, that definition distinguishes between the use of an infrastructure facility such as a road or railway line and the handling or transporting of goods and people.  In our view the owner or provider of the rail network or permanent way who does not also provide the means of carrying or transporting the coal does not provide the service of “carrying coal by rail”; that owner or provider only provides the service of use of the permanent way.  The fact that the rails owned by Rail Access Corporation ultimately bear the weight of the coal being carried along them by others does not mean Rail Access Corporation provides the service of carrying coal by rail.

There may be a difficulty in Part IIIA of the Act as a result of the terms of the definition of “provider” in s 44B.  Although the definition of “service” makes clear that the service may be provided by a means other than the mere use of an infrastructure facility, the definition of “provider” draws in the owner or operator of the facility that is used to provide the service.  Thus when the National Competition Council receives an application under s 44F(1) of the Act to recommend under s 44G that a particular service be declared, it is required by s 44F(2) to tell the provider of the service, that is to say the owner or operator of the facility that is used to provide the service, that it has received the application.  However, that owner or operator may not necessarily be the person who in fact provides the relevant service. 

If this difficulty exists, it need not be resolved in this proceeding because it does not require the conclusion that the provider of the service referred to in s 78(2) of the Competition Policy Reform Act must necessarily be the owner or operator of the infrastructure without which the person providing the service of carrying or transporting coal by rail cannot carry out that service.  In our view the provider of the service of carrying coal by rail, referred to in s 78, is not the owner of the infrastructure but rather the provider of the coal carrying service; in this case Freight Rail Corporation.

It is said the object of s 78 of the Competition Policy Reform Act 1995 was to remove government coal‑carrying services from the ambit of Part IIIA of the Act for five years and effectuation of that object should not be affected by the manner in which the State of New South Wales chose to restructure its railway system.  However the language of s 78 is unambiguous, as is the language of the Transport Administration Act.  Further, the conclusion which we have reached is consistent with the policy objectives to be derived from the Competition Policy Reform Act, the Trade Practices Act and the Transport Administration Act.  The permanent way is to be open to competition between train operators and access is to be given to it for that purpose.  Government coal‑carrying services are to be protected from competition for the five year period.  But it is Freight Rail Corporation, not Rail Access Corporation, which is to be protected from competition.  This is the result of the restructuring effected by the New South Wales legislation.

The fact that the restructuring was effected to implement the Competition Principles Agreement, which was also the genesis of Part IIIA of the Act and s 78, does not entitle us to reject what we regard as the plain meaning of s 78.  To do so would be to ignore not only the restructuring achieved by the amendments to the Transport Administration Act but also to give to the expression “coal-carrying service” an interpretation it does not bear.

The application will be dismissed with costs.

Associate:

Dated:              9 October 1998