FEDERAL COURT OF AUSTRALIA

Hamersley Iron Pty Ltd v National Competition Council [1999] FCA 867

TRADE PRACTICES – access to services – application for declaration recommendation of a service – whether rail track service is a “service” within the meaning of s. 44B of Trade Practices Act 1974 (Cth) – whether use of the rail track service would be the use of a production process – meaning of “the use of a production process” – legislative purpose of exclusion of the use of a production process – whether access determination would deprive provider of a protected contractual right – whether protected contractual rights question hypothetical, theoretical, or academic – Trade Practices Act 1974 (Cth), s 44B, subss 44W(1)(c) and (5).

Trade Practices Act 1974 (Cth), Part IIIA, ss 44B, 44F, 44U, 44V and 44W

Federal Court of Australia Act 1976 (Cth), ss 21, 22

HG v R (1999) 160 ALR 554 referred

RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1991) 34 NSWLR 129 applied

Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 79 applied

Federal Commissioner of Taxation v Hamersley Iron Pty Ltd (1981) 12 ATR 429 discussed

Deputy Federal Commissioner of Taxation (Qld) v Stronach (1936) 55 CLR 305 referred

Federal Commissioner of Taxation v ICI Australia Ltd (1972) 127 CLR 529 referred

Rail Access Corporation v New South Wales Minerals Council Ltd (1998) 158 ALR 323 discussed

Mills v Meeking (1990) 169 CLR 214 referred

Project Blue Sky Inc. v Australian Broadcasting Authority (1998) 153 ALR 490 referred

Government Insurance Office (NSW) v R J Green & Lloyd Pty Ltd (1966) 114 CLR 437 referred

State Government Insurance Commission v Steven Bros. Pty Ltd (1984) 154 CLR 552 referred

Commissioner of Taxation v Northwest Iron Co Ltd (1986) 9 FCR 463 discussed

Commissioner of Taxation v Reynolds Australia Alumina Ltd (1987) 18 FCR 29 discussed

Robe River Mining Co Pty Ltd v Federal Commissioner of Taxation (1990) 21 ATR 1068 discussed

Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 discussed

Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 discussed

University of New South Wales v Moorhouse (1975) 133 CLR 1 applied

Bass v Permanent Trustee Co Ltd [1999] HCA 9 (unreported, Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ, 24 March 1999) referred

Re Tooth & Co Ltd (1978) 31 FLR 314 applied

Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297 referred

Oil Basins Ltd v The Commonwealth of Australia (1993) 178 CLR 643 distinguished

Queensland Mines Ltd v Northern Land Council (1990) 68 NTR 1 distinguished

HAMERSLEY IRON PTY LTD (ACN 004 558 276) v THE NATIONAL COMPETITION COUNCIL & ORS

VG 581 of 1998

KENNY J

MELBOURNE

28 JUNE 1999

THE COURT DECLARES THAT:

1.      The Rail Track Service, as defined in Part 3 of the application for a declaration recommendation made pursuant to section 44F(1) of Part IIIA of the Trade Practices Act 1974 (Cth) (“the Act”) by the second to sixth respondents, is not a service within the meaning of section 44B of the Act.

2.      The first respondent does not have power to make a recommendation regarding declaration of the Rail Track Service to the designated Minister pursuant to section 44F(2)(b) of the Act.

THE COURT ORDERS THAT:

1.      The application dated 30 October 1998 be granted to the extent of the declarations made but otherwise be dismissed. 

2.      The matter of the question of costs be adjourned to a date to be fixed.

THE COURT DIRECTS THAT:

1.      The applicant and the respondents file written submissions on the question of costs by 4.30 pm on 9 July 1999.

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

REASONS FOR JUDGMENT

the parties

1                     Hamersley Iron Pty Limited (“Hamersley”), the applicant in this proceeding, operates six mines, all in the Pilbara region in Western Australia.  The mines are at Brockman, Mount Tom Price, Paraburdoo, Channar, Marandoo and Yandicoogina.  Hamersley owns all the mines but Channar.  Channar is sixty per cent owned by Hamersley or Hamersley-related companies and forty per cent owned by a Chinese government entity called the China Metallurgical and Export Company.  All the mines save Channar are linked together and to a port at Dampier by a railway.  There is a twenty kilometre-long overland conveyor belt that takes crushed ore from the Channar mine to be further processed at the facilities at Paraburdoo and then loaded onto trains together with the Paraburdoo material. 

2                     Robe River Mining Co Pty Ltd, Mitsui Iron Ore Development Pty Ltd, North Mining Limited, Nippon Steel Australia Pty Limited and Sumitomo Metal Australia Pty Ltd together carry on business under the registered business name “Robe River Iron Associates”.  That is the registered business name for the unincorporated Robe River Joint Venture.  I refer to the Venture as “Robe”.  Robe operates a mine at Pannawonica, also in the Pilbara.  The mine is linked by railway to port and processing facilities at Cape Lambert.  Robe is planning to develop a new mine at West Angelas.  The proposed West Angelas mine is in the vicinity of Hamersley’s mine at Yandicoogina. 

3                     Hope Downs Iron Ore Pty Ltd holds rights to an undeveloped iron ore deposit at Hope Downs, also in the vicinity of Hamersley’s Yandicoogina mine.  Hope Downs Management Services Pty Ltd (“Hope Downs Management”), a company jointly owned by Hope Downs Iron Ore Pty Ltd and Iscor Australia Pty Ltd, is managing the development of the possible new iron ore mine at Hope Downs.  Yandicoogina is about sixty-five kilometres to the north-east of West Angelas.  Hope Downs Management has approached Hamersley to seek access to its railway for the purpose of ore transportation from Hope Downs. 

4                     At present, Robe has a railway line running from Pannawonica to Cape Lambert.  The line travels north-east and north.  It crosses Hamersley’s railway line travelling south from Dampier to Rosella Siding at what is called the Robe Overpass.  The Hamersley railway line runs from Dampier in the north, south-east under the Robe Overpass, through the Millstream-Chichester National Park, down to Rosella Siding.  From Rosella Siding, the line travels south to Tom Price and on to Paraburdoo.  A spur line travels from Rosella Siding west to Brockman.  Another line travels south-east to Marandoo and on to Juna Downs Station and Homestead Junction.  That line then travels east to Yandicoogina.  The line to which Robe seeks access is the line from the Robe Overpass, south-east down to Rosella Siding, then through Marandoo and Homestead Junction, to a point due north of West Angelas.  West Angelas is in the order of thirty to forty kilometres south of that point. 

robe’s application to the council

5                     On 24 September 1998, Robe made application (“the application”) to the National Competition Council (“the Council”) under s 44F(1) of Part IIIA of the Trade Practices Act 1974 (Cth) (“the Act”) to recommend to the designated Minister (that is, the Commonwealth Treasurer) declaration of a service.  The application identified Hamersley as the provider of the service and the owner of the facility to which the application related (par 2.1).  The application went on to state as follows:

3.2       The service to which [Robe] seeks access is the bulk iron ore rail track transportation service provided by the Hamersley Rail Infrastructure Facility, as defined in part 4 of this application (Rail Track Service).  This should be distinguished from any rail haulage service which may be available in relation to this facility. 

3.3              The Rail Track Service is required for use by both [Robe] trains and by [Robe] hi-rails only over that section of the Hamersley Rail Infrastructure Facility described in part 4 of this application.

The Rail Track Service comprises the use of an infrastructure facility, being the Hamersley Rail Infrastructure Facility mainline, yard track and maintenance support road, including the in-track fault detection and monitoring systems, and the use of a communications service being the train control systems, inclusive of two-way radio.

3.4       The access sought by [Robe] is the use of the Rail Track Service by [Robe] trains laden with iron ore from [Robe’s] West Angelas minesite, travelling from the minesite to [Robe’s]Port Walcott at Cape Lambert, and by empty [Robe] trains on a return journey to the minesite.

…

3.6       [Robe]is not seeking the service provided by the [Hamersley] locomotives, rolling stock or hi-rails.  [Robe]will provide its own locomotives, rolling stock, hi-rails and all necessary operational personnel.

(Hi-rails are road motor vehicles capable of being driven on rail tracks and are used for maintenance purposes.)

6                     The Hamersley Rail Infrastructure Facility, as Robe calls it, is described in part 4 of the application in the following terms:

4.1       The facility used to provide the Rail Track Service is the section of the standard gauge railway line owned and operated by Hamersley which runs approximately 300kms in the Central Pilbara:

(a)        from the existing [Robe] overpass in the Millstream-Chichester National Park, near Emu Siding south through the Hamersley Range to the Rosella siding at the 250KP point of the mainline;

(b)        then eastward from the Rosella siding through the existing railway formation to the [Hamersley] Marandoo minesite; and

(c)        from the [Hamersley] Marandoo minesite out east towards Hamersley’s Yandicoogina deposit, to the point where this line will intersect with the proposed [Robe] rail line extending north from the West Angelas minesite (yet to be constructed) …

…

4.2       This facility includes the following components:

·              all aspects of the standard gauge rail line; including mainline, yard track, passing sidings, culverts, bridges and temporary diversion tracks;

·              the rail line maintenance support road;

·              all signs and signalling on the rail line;

·              the [Hamersley] train control system including two-way radio used by [Hamersley];

·              the in-track fault detection and monitoring systems, built into the railway; and

·              other facilities to provide the Rail Track Service safely.

Details of the mainline and track specifications, maintenance support road, signs and signalling, train control system and track fault detection and monitoring systems are set out in subsequent paragraphs.  In par 4.8, Robe states that it

will provide all locomotives, rolling stock and operational personnel required to run [Robe’s] trains on the Hamersley Rail Infrastructure Facility.  [Robe] will also provide all hi-rails, other vehicles and personnel for maintenance and support of [Robe’s] trains and rolling stock using the rail maintenance support road.  [Robe] will provide its own train control system for all [Robe] trains travelling on [Robe] rail track, and does not seek access to the [Hamersley] train control system in that regard.

7                     In summary, Robe is seeking the Council’s recommendation that it have access to what it terms the rail track service provided by Hamersley by means of a facility owned by Hamersley, including mainline, signalling, control systems, maintenance and protection systems but not including locomotives, rolling stock and operational personnel.  Robe has stated that it intends to use its own rolling stock, et cetera to carry iron ore from its West Angelas mine to processing facilities at Port Walcott. 

the proceeding

8                     In this proceeding, Hamersley principally seeks declarations that (1) the rail track service provided by the Hamersley Rail Infrastructure Facility (as defined in the application) is not a service within the meaning of s 44B of the Act; (2) pursuant to an agreement dated 30 July 1963 known as the Iron Ore (Hamersley Range) Agreement, Hamersley has the right to sole and exclusive possession and control of the Hamersley Rail Infrastructure Facility; and that right is a protected contractual right within the meaning of subss 44W(1)(c) and (5) of the Act; and (3) in consequence of (1) and/or (2), the Council does not have power to accept and consider any submission in relation to the access application, or to make a recommendation regarding the declaration of the rail track service pursuant to s 44F(2)(b) of the Act. 

9                     Subject to what is said below, the evidence in the case consisted of affidavits of (1) Craig William Owen Phillips, sworn 30 October 1998; (2) Michael Hackett, sworn 25 November 1998; (3) Samuel Morris Cossart Walsh, sworn 24 February 1999; and (4) Philip Warren Stern, sworn 24 February 1999.  Objection to admissibility having been taken by the respondents, the applicant did not press paragraphs 7 to 16 (inclusive), 24 and 31 to 34 (inclusive) of Mr Phillips’ affidavit and the last sentence of paragraph 10 of Mr Walsh’s affidavit.  I admitted into evidence Mr Stern’s affidavit and exhibit PWS1, being a report entitled “The Hamersley Production Process”, subject to the respondents’ objection as to the admissibility of the affidavit and the exhibit.  I discuss that objection below.

the legislation

10                  Section 44F and the provisions discussed below are to be found in Part IIIA of the Act.  Subsection 44F(1), pursuant to which Robe made its application to the Council, provides as follows:

The designated Minister, or any other person, may make a written application to the Council asking the Council to recommend under section 44G that a particular service be declared.

The Council is required to inform the provider of the service of its receipt of such an application (unless the provider is the applicant):  s 44F(2)(a).  It is required to recommend to the designated Minister either that “the service be declared; or … that the service not be declared”:  s 44F(2)(b).  Section 44G limits the Council’s power to recommend the declaration of the service.  Section 44G provides that the Council cannot recommend declaration of a service that is the subject of an access undertaking under s 44ZZA.  (Section 44ZZA provides that a person who is, or expects to be, a provider of a service may give a written undertaking to the Australian Competition and Consumer Commission (“the Commission”) in connection with the provision of access to the service.)  Section 44G also denies the Council power to recommend declaration of a service unless it is satisfied of all the matters set out in s 44G(2).  Those matters are:

(a)          that access (or increased access) to the service would promote competition in at least one market (whether or not in Australia), other than the market for the service;

(b)          that it would be uneconomical for anyone to develop another facility to provide the service;

(c)           that the facility is of national significance, having regard to:

(i)                 the site of the facility; or

(ii)               the importance of the facility to constitutional trade or commerce; or

(iii)             the importance of the facility to the national economy;

(d)          that access to the service can be provided without undue risk to human health and safety;

(e)           that access to the service is not already the subject of an effective access regime;

(f)            that access (or increased access) to the service would not be contrary to the public interest.

The Council must also consider whether it would be economical for anyone to develop another facility that could provide part of the service:  s 44F(4).  I am not, of course, concerned in this case with the question whether or not those criteria are or are likely to be satisfied. 

11                  When the Council makes a declaration recommendation, the designated Minister is required either to “declare the service or decide not to declare it”:  s 44H(1).  The Minister’s decision is constrained by the same criteria as constrain the Council:  see, e.g., s 44H(3) and (4).  Provision is made for review of decisions of the designated Minister by the Australian Competition Tribunal (“the Tribunal”):  see, e.g., s 44K, s 44L, s 44O.  If a declaration in respect of a service has been made by the designated Minister and if a third party is unable to agree with the provider on one or more aspects of access to the declared service, either the provider or the third party may notify the Australian Competition and Consumer Commission (“the Commission”) in writing that an access dispute exists:  s 44S.  Provision is made in Subdivision C of Division 3 of Part IIIA for the arbitration of an access dispute.  The parties to such an arbitration are, by virtue of s 44U, the provider, the third party and “any other person who applies in writing to be made a party and is accepted by the Commission as having a sufficient interest”.  Unless it terminates the arbitration under s 44Y, the Commission must make a written determination on access by the third party to the service:  s 44V(1).  Subsections 44V(2) and (3) provides:

(2)          The determination [by the Commission] may deal with any matter relating to access by the third party to the service, including matters that were not the basis for notification of the dispute.  By way of example the determination may:

...

(c)      specify the terms and conditions of the third party’s access to the service;

…

(3)          The determination does not have to require the provider to provide access to the service by the third party.

Section 44W relevantly provides:

(1)     The Commission must not make a determination that would have any of the following effects:

(a)   …

(b)   …

(c)    depriving any person of a protected contractual right;

…

(3)      A determination is of no effect if it is made in contravention of subsection (1).

…

(5)    In this section:

…

“protected contractual right” means a right under a contract that was in force at the beginning of 30 March 1995. 

The matters that the Commission must take into account are set out in s 44X of the Act.  There is provision, in s 44ZP, for review by the Tribunal and provision, in s 44ZR, for appeal by a party to an arbitration to the Federal Court, on a question of law, from the decision of the Tribunal under s 44ZP.

12                  Section 44B defines certain key words and expressions for the purposes of Part IIIA.  It is critical to the outcome of this proceeding.  Section 44B relevantly provides:

In this Part, unless the contrary intention appears: 

…

“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;

…

“third party”, in relation to a service, means a person who wants access to the service or wants a change to some aspect of the person’s existing access to the service. 

The primary issue in this proceeding is whether the “service” in respect of which Robe seeks a declaration recommendation is a “service” as defined in s 44B of the Act.

hamersley’s operations in the pilbara

13                  Hamersley conducts its operations in the Pilbara region pursuant to a number of agreements with the State of Western Australia (“the State”) and certain other parties.  The first such agreement to be made was the Hamersley Range Agreement entered into between the State and Hamersley on 30 July 1963 (“the 1963 State Agreement”).  That agreement was approved by the Western Australian Parliament in the Iron Ore (Hamersley Range) Agreement Act 1963 (WA) and is contained in schedules to that Act.  See also Government Agreements Act 1979 (WA), s 3.

14                  The recitals and structure of the 1963 State Agreement reflect the fact that it was made well over thirty years ago.  The Agreement was to operate in four phases, namely:  Phase 1 – the period from the parties’ execution of the Agreement until the commencement date (as defined); Phase 2 – the period from the commencement date until a plant for secondary processing or an integrated iron and steel industry was established; Phase 3 (if Hamersley commenced secondary processing before establishing an integrated industry) – the period from the commencement of secondary processing until the establishment of an integrated iron and steel industry; and Phase 4 – the period after Hamersley established an integrated iron and steel industry. 

15                  There was uncontested evidence as to Hamersley’s operations in the Pilbara, provided in an affidavit sworn by the Managing Director Operations at Hamersley (Mr S M C Walsh).  In his affidavit, Mr Walsh verified a memorandum on Hamersley’s operations which, so he deposed, had been prepared for the purpose of the proceeding.  There was also an affidavit on the subject sworn by a business analyst (Mr P W Stern).  For reasons which appear below, I have not relied on Mr Stern’s affidavit in the following account of Hamersley’s operations in the Pilbara.

16                  Hamersley sells two products, namely, lump (sized at between -31.5mm +6.3mm) which is suitable for direct charging to a blast furnace, and fines (sized at -6.3mm) for sintering to produce artificially constructed lump.  Until shipment of product from Yandicoogina in January 1999, Hamersley generally sold only one lump and one fines product, referred to by Hamersley as “DSO” or “Direct Shipping Ore”.

17                  According to Mr Walsh, the geology in the Pilbara is complex and the quality of iron ore in the area is variable, particularly in relation to levels of iron, alumina, silica and phosphorus.  Mr Walsh said, at par 1.8 of his memorandum, that:

[e]ach of [Hamersley’s] mines produces ore of different average grades and none produces an average grade complying with the specifications of Hamersley DSO lump or fines product.  The average grade of lump and fines at Tom Price exceeds the specifications and the average grade produced from each of the other mines is lower.  Consequently, it is necessary for these lower grade ores to be blended in varying proportions with the higher grade ore mined at Tom Price.

Variations from the maximum content for impurities and the minimum content for iron can attract penalties (and, sometimes, bonuses). 

18                  The production of Hamersley’s export product involves the following basic steps:  (1) drilling and blasting; (2) removal of waste; (3) collection of ore; (4) trucking of ore to the crushers; (5) crushing; (6) screening; (7) concentration (in some cases); (8) stockpiling and blending at mine; (9) reclaiming ore; (10) railing of ore to the port; (11) stockpiling and blending at port to achieve export product grade; (12) reclaiming; and (13) re-screening (of lump). 

19                  Ore is blended first at the mine to ensure that it is of one grade.  That grade is not export grade.  Rather, it is the grade required for contribution to a particular “batch” of export product.  As part of the batch system used by Hamersley, each mine is given its own target for each run of ore that is to be contributed to a batch of export product, to be assembled, say, over a seven-day period.  The chemical composition of ore mined and railed from a mine at any one time differs from ore mined and railed from the same mine at another time, and from ore railed and mined from different mines.  The export product is assembled at the port at Dampier, either at East Intercourse Island or Parker Point.

20                  In practice, the target for each mine is arrived at after a centralised Batch Planning Team (“BPT”) has decided on the optimal production for each mine and prescribed a recipe (i.e., grade, tonnage and type of ore from each mine) required for making stockpiles at the port at Dampier.  A recipe is determined by reference to numerous factors, including the resources available at each mine, costs, grade and characteristics of available mining blocks, shipping requirements, maintenance impacts, maintaining a balance between mines within the context of the annual plan, prolonging the life of the mine at Mount Tom Price, ensuring no more than twenty per cent Marandoo ore is in each batch, and the tonnage and grades of fines re-screened during the lump ship loading process. 

21                  The batch system is a relatively recent innovation at Hamersley.  According to Mr Walsh:

The essence of the batch system … is the operation of Hamersley’s mines as one single unit.  This is referred to as the “one mine policy”, where each mine is treated as though it were a pit within the same mine and the activity within each pit (or mine) is co-ordinated with the activity in all other pits (or mines) to provide ore which is fed into conveying systems (including the railway) for blending at the port to create Hamersley’s export product.  [Memorandum, par 2.9]

The introduction of an integrated approach to planning has led, so Mr Walsh said, to cost reductions in the order of $80 million per annum.

22                  The railway line (mostly, single track with passing sidings at about twenty kilometre intervals) is built to carry heavy loads.  Hamersley’s standard ore train (or consist) is two kilometres in length with a gross train weight of about 27,000 tonnes.  The rail system and the train scheduling and rescheduling that it permits is critical to the efficacy of the batch system.  Train schedules are fixed to meet the requirements for each batch.  Each batch has a different recipe and requires a different number of trains from each mine, depending on ore grade, mine resources, where the ore is to be stockpiled at the port, and other factors.  The order of train arrivals is controlled to complete the making of a port stockpile to meet the specifications for Hamersley’s export product.  The blending and stockpiling is monitored as it occurs:  trains can (and are) rescheduled to meet batch needs as they arise.  In other words, the rail system is operated so that the train-loads from the different mines of different grades of ore arrive at the port in a planned sequence to facilitate stockpiling and blending operations at the port, to produce export product ready for loading onto vessels.

23                  Stockpiles at the port are blended in accordance with the recipe for each batch.  Blending is achieved by carrying ore from rail wagons to a stockpile and then “chevron stacking, with full face reclaiming”.  “Chevron stacking”, so Mr Walsh said, “involves dropping the ore on the centre line of a [chevron-shaped] stockpile while continuously moving along the length of the stockpile, in either direction”.  Full face reclaiming ensures that average stockpile grade with minimum variability is loaded onto ships.  The blended lump product is screened during ship-loading. 

24                  The foregoing description of the batch system leaves out of account the mine at Yandicoogina.  The ore being mined at Yandicoogina is pisolitic ore from which only fines are currently produced.  Yandicoogina ore is not blended with ore from other mines.  Since the grade of Yandicoogina ore varies widely within the ore body itself, however, successive train loads of Yandicoogina ore are blended at the port in order to meet export grade specification. 

25                  In relation to the basic physical steps involved in the production of Hamersley’s export product (outlined in the paragraphs above), Mr Walsh stated at par 1.6 of his memorandum that:

Each of these steps is undertaken by Hamersley as part of a single, fully integrated operation:  none of these steps takes place independently of each prior and subsequent step.  These processes are carried out with the sole objective of delivering into the ship Hamersley export product which has been blended to contract specifications.

Hamersley, so Mr Walsh stated, operates its mines, its railways and its port as one production unit dedicated to producing Hamersley export product at the port.

Admissibility of Mr Stern’s evidence

26                  As I have already noted, Hamersley also sought to rely on the evidence of Mr P W Stern, a business analyst.  The respondents challenged the admissibility of that evidence.

27                  By a letter of instruction dated 1 October 1998, Hamersley’s solicitors asked for advice on “whether or not the Hamersley railway forms a part of ‘a production process’ and is therefore excluded from the definition of ‘service’ under section 44B” of the Act.  A memorandum accompanying the letter stated that an opinion was sought regarding whether the transportation of iron ore on the [railway line] involved the use of a production process.  That was, so Mr Stern deposed, the matter addressed in his report. 

28                  The report identified two criteria as being relevant to that inquiry:  first, whether the activity has as its objective the production of a finished product and, secondly, whether the activities that produce the finished product are part of an integrated systematic series of actions.  Applying those criteria, the report concluded:

In our opinion the Hamersley railway is an integral part of Hamersley’s iron ore production process and, accordingly, the transportation of iron ore on Hamersley’s railway involves the use of a production process.  Our reasons for this conclusion are as follows. 

(A)       In conjunction with other activities that transport and transform raw material, the rail system creates a product to specification at the port

(B)        The rail system is integrated with those mine and port activities that are directed at the production of a finished product

(B1)        in an operational sense, rail system activities are managed on an integrated, continuous, intensive basis with those mine and port activities which are directed at the production of a finished product

(B2)        in a strategic context, the rail system is central to the decisions necessary to optimise activities that contribute to the production of a finished product at minimum cost and to provide the flexibility to meet market opportunities

We conclude that Hamersley’s production process encompasses activities from the drilling and blasting of material at the mines through to the creation of a finished product, ready to be loaded onto ships at the port.  The railing of iron ore is one of those activities.  For iron ore fines product, production is complete when the stockpiles have been “assembled” to product specification at the port.  For iron ore lump product, production is complete following lump re-screening at the port. 

29                  The respondents submitted that Mr Stern’s evidence was inadmissible because, first, it did not sufficiently differentiate between the assumed facts upon which the opinion was based and the opinion in question:  see HG v R (1999) 160 ALR 554 at 562-3 per Gleeson CJ.  I reject that submission.  I accept the respondents’ further submission, however, that the evidence was inadmissible to the extent that it dealt with the ultimate legal issue in the case:  see, e.g., RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1991) 34 NSWLR 129 at 130-1 and Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 79 at 83-4 per Lindgren J.  Moreover, the report suffered from a number of defects, which were outlined by the respondents in argument.  In consequence, to the extent that the report was admissible, I would attribute little weight to it.

the questions in the case

30                  There are two principal questions in this case.  They are: 

(1)       Is the service to which access is sought in the application by Robe to the Council a “service” within the meaning of s 44B of the Act? 

(2)       If an access determination under s 44B of the Act were made that required Hamersley to provide access to the service to Robe, would that determination deprive Hamersley of a protected contractual right within the meaning of subs 44W(1)(c) and (5) of the Act? 

is hamersley’s rail track service a “service” in respect of which access may be declared?

31                  Hamersley submitted that the rail track service to which Robe sought access is not a “service” within the meaning of s 44B of the Act because the service (i.e., the use of the railway line) involves the use of a production process. 

“Production process”

32                  What is meant by the expression “production process” in the definition of “service” in s 44B of the Act?  The expression is not defined in that provision.  According to the Oxford English Dictionary, the word “production” means, amongst other things,

1a.  The action of producing, bringing forth, making, or causing; the fact or condition of being produced.

The Macquarie Dictionary defines “production” more simply, as “the act of producing; creation; manufacture” and it defines “process” as “a systematic series of actions directed to some end”.  The Oxford English Dictionary defines the word “process” as, amongst other things,

6.      A continuous and regular action or succession of actions, taking place or carried on in a definite manner, and leading to the accomplishment of some result; a continuous operation or series of operations.  (The chief current sense). 

The term “production process” ordinarily means, I think, the creation or manufacture by a series of operations of some marketable commodity.

33                  Judicial analyses of related expressions support this view.  In describing “the product” of mining operations (as it happened, in relation to Hamersley’s then mining operations in the Pilbara), Brooking J said, in Federal Commissioner of Taxation v Hamersley Iron Pty Ltd (1981) 12 ATR 429 at 444, that the product was not each fragment of ore, but rather the bulk iron ore in manageable lumps.  “Mining operations,” his Honour said at 442,

end when the ore is in manageable lumps; but the product is iron ore in manageable lumps.  The product of these mines is to be viewed, not as a multitude of fragmentary objects, but as a commodity – iron ore – torn from the earth in vast quantities; and crushed so that it may be carried away; and sold in bulk; and transported in bulk carriers.  The product is the bulk; it is the bulk that is drilled and sampled and blasted and loaded and hauled and crushed and screened and sampled again and weighed and sold by the tonne in vast quantities.

Lush J, with whom Kaye J agreed, adopted a similar approach:  12 ATR at 440.  That approach was in keeping with such cases as Deputy Federal Commissioner of Taxation (Qld) v Stronach (1936) 55 CLR 305 at 312 per Dixon J and 314 per McTiernan J and Federal Commissioner of Taxation v ICI Australia Ltd (1972) 127 CLR 529 at 565, 567-8 per Barwick CJ, 569 per McTiernan J and 582-3 per Gibbs J. 

34                  The expression “production process” in the definition of “service” in s 44B of the Act means, in my view, a series of operations by which a marketable commodity is created or manufactured.  Hamersley’s production process in the Pilbara extends, on this view, from its commencement of mining operations at the mines to the completion of the product that it sells, namely, export product.  There was no evidence to show that Hamersley produces a marketable commodity at an earlier stage. 

The service the subject of the application

35                  The critical question is whether the “service” in respect of which Robe seeks a declaration recommendation is or involves the use of Hamersley’s production process.  (It was not suggested by any party that any other production process might be involved.)  The answer depends in part on the “service” sought.  Robe submitted that the only service that it seeks is the use of the mainline (and associated infrastructure).  That is, it did not seek any other service, such as those constituted by the transportation of ore, the blending of different ores, or the assembling of port stockpiles.  Robe submitted that, having regard to that fact, the service that it seeks to have, by means of Hamersley’s railway line, is relevantly different from any service provided, by means of the line, to Hamersley.  The service was relevantly different, so Robe submitted, because Robe would be using the line, at different times, to carry its own rolling stock and locomotives, under the control of its own employees, in order to transport its own ore from its own mine to its own port.  It followed, so Robe submitted, that Hamersley’s existing and future concurrent use of the railway, as an integral part of its production process or otherwise, was irrelevant.  I do not accept that submission. 

36                  The definition of “service” in s 44B of the Act makes it clear that a service is something separate and distinct from a facility:  Rail Access Corporation v New South Wales Minerals Council Ltd (1998) 158 ALR 323 at 330.  Let it be accepted that the one facility may provide a number of different kinds of “service”, as well as a number of different instances or occasions of the same kind of service, within the meaning of the definition in s 44B.  Yet it does not follow that Robe seeks a service relevantly different in kind to that provided to Hamersley by means of Hamersley’s railway line.  The service that Robe seeks is the use of Hamersley’s railway line and associated infrastructure.  The service that the provider (Hamersley) provides, in this case to itself, is the use of its railway line and associated infrastructure, i.e., the use of a permanent way laid with rails of steel forming a track, on which run rolling stock, locomotives and like vehicles:  see “railway” as defined in the Macquarie Dictionary or “rail” as defined in the Oxford English Dictionary at 4a.  Robe seeks the same kind of use (or service), by means of the same railway line (or, more precisely, by means of a length of the same railway line), as Hamersley does.  The service provided to Hamersley and the service sought by Robe can be characterised as different only by reference to the different operational ends to which each of Hamersley and Robe would put the service.  In the present case, the railway line is the facility by means of which a service is provided (i.e., the use of the line).  That service is the same service, irrespective of the identity of the owner of the rolling stock and locomotives that are run on it and the operational ends served by running the rolling stock and locomotives over it. 

The Rail Access Case

37                  The Rail Access Case does not, I think, assist the respondents.  The issue in that case was whether Rail Access Corporation (a mere rail track owner) provided a “government coal-carrying service” within the meaning of s 78 of the Competition Policy Reform Act 1995 (Cth) (and thus fell outside Part IIIA of the Act).  The Rail Access Corporation did not itself carry coal or offer such a service.  Rather, it owned the line that was being use by Freight Rail Corporation for the purpose of carrying coal by rail.  There was, the Full Court held, a distinction between the service provided by Rail Access Corporation (making available the railway track) and that of Freight Rail Corporation (transporting coal).  But, in that case, unlike this, there were two separate providers, each providing a different service, in the case of Rail Access, by making available its railway track and, in the case of Freight Rail, by using its rolling stock, freight terminals, et cetera to transport coal over the track made available to it.  The Full Court said at 330-31:

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 Pt 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.  But when the [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.

38                  The last observation was directed to the situation where the service to which access is sought is, in effect, a combined service, as for instance, a freight service in which the rolling stock and locomotives are owned by one person and the railway line owned by another.  No such issue arises in this case.  Hamersley makes available the use of the line to itself – for, amongst other ends, transporting ore.  Robe seeks to have the line made available to it – for, amongst other ends, transporting ore.  True it is that Hamersley, the owner and operator of the railway line, not only provides the service of making available the use of the permanent way (to itself), but also provides (to itself) a means of carrying or transporting ore.  The fact that it provides this second service (to itself) is not to the point, however, because (as the respondents’ counsel emphasised, although for a different reason) Robe was not seeking access to that second service.  Only the first mentioned service (being provided by Hamersley to itself) is sought by Robe.  That is the service that must fall within the definition of “service” in s 44B of the Act before Robe can succeed on the application it makes to the Council. 

The object of Hamersley’s use of the railway line

39                  What is the relevance, if any, of the operational ends of Hamersley’s use of its railway line?  The respondents submitted that Hamersley’s own use of its railway line is irrelevant, because that use forms no part of the service sought by them.  That submission is, it seems to me, accurate to a limited extent only.  Thus, I accept that the ultimate issue is the correct characterisation of the service (or use of the railway line) sought by Robe.  I do not accept, however, that the operational ends that Hamersley meets by its use of the railway line are immaterial.  Those ends, or the uses to which Hamersley puts its use of the line, are relevant, in my view, to the question whether the service Robe seeks is or involves the use of a production process.  For present purposes, the definition of “service” in s 44B provides, in substance, that “service” means a service provided by means of a facility but does not include the use of a production process (except to the extent that it [the use of the process] is an integral but subsidiary part of the service).  That is, where a service involves the use of a production process and that use of the process is a non-subsidiary part of the service, it will not fall within Part IIIA.  That exemption to the exclusion was not relied on by the respondents:  if the “service” sought by Robe involved the use of Hamersley’s production process, then the use of the process would necessarily be a non-subsidiary part of the service, because the service is wholly within the production process.  In the present case, the critical question is whether the use by Robe of the railway line (and associated infrastructure) that Hamersley owns and operates would involve the use of a production process, namely, that utilised by Hamersley to manufacture its export product. 

The central facts about Hamersley’s production process

40                  I have already set out the facts concerning Hamersley’s operations in the Pilbara in some detail because, in my view, the outcome of this case necessarily turns on them.  In summary, the central facts are the following.

(1)        Hamersley’s railway line carries locomotives, consists and like vehicles between Hamersley’s mines and the port at Dampier; 

(2)        Ore of differing grades, composition and quantities is carried in the consists that run along the line; 

(3)        The grades, composition and quantities of ore carried in the consists (from each mine to the port) are pre-determined by the BPT in accordance with a “recipe” that the BPT formulates for making a particular batch of export product;

(4)        The consists carrying the ore are run over the line in a planned sequence as part of making up the recipe for a particular batch and as part of blending and stockpiling operations;

(5)        (Save for Yandicoogina) by virtue of the batch system Hamersley’s mines operate as if each were a pit within a larger mine;

(6)        Although not blended with ore from other mines, ore from Yandicoogina is subject to essentially the same process.  (The respondents did not submit that ore from Yandicoogina was subject to a relevantly different production process.);

(7)        Each step in the production process, including the use of the railway line for the carriage of ore in accordance with a recipe for a batch of product, is part of a highly integrated operation designed to make the export product; and

(8)        The export product is brought into being at the port at Dampier after all blending and stockpiling operations are complete.

41                  Hamersley’s use of its railway line (and associated infrastructure) is, it seems to me, one in a series of operations that result in the creation of its export product.  (Nothing turns in this analysis on the fact that Robe seeks access to a part of the length of the railway line and not to the whole of the length of the line.)  By the use of its railway line (and associated infrastructure) it does not merely convey ore by rail from mine to port, it makes up the recipe that it has formulated for the creation of a particular batch of its product.  The making-up of a recipe for a batch of product depends on the line being made available (by Hamersley) for Hamersley’s use.  That is the effect of the undisputed evidence.  It follows from this that Hamersley’s use of its railway line is an integral (indeed, essential) operation in Hamersley’s production process.  That is, by virtue of the operations carried on by Hamersley in the Pilbara, Hamersley’s use of the railway line is an operation upon which other operations necessarily depend for the creation of its export product.  (In this connection, I emphasise that I am not concerned with the application of the exemption from the exclusion; rather, I am concerned with the operation of paragraph (f) of the exclusion.)

42                  The respondents submitted that it was not enough, for these purposes, that Hamersley’s use of its railway line was integral to Hamersley’s production process.  They submitted that nothing less than the use of an entire production process would take the relevant service out of the regime of Part IIIA.  If this were not so, the respondents submitted, odd results would follow:  an operation integral but subsidiary to a production process would fall outside Part IIIA, although the whole process would lie within that Part to the extent that it was an integral but subsidiary part of the service.  I doubt whether it is entirely apt to refer to a step in a production process as “integral but subsidiary”.  Be that as it may, there is, I think, nothing very remarkable in Parliament providing that a service that involves the use of entire production process or an operation integral (and, possibly, essential) to that process falls outside Part IIIA, unless the whole process or operation is integral but subsidiary to the relevant service.  The exception from the exclusion is directed to the “integral but subsidiary” nature of the process to the service, not to the integral but subsidiary nature of an operation to the process. 

43                  It may be that the expression “the use of a production process” in par (f) of the definition of “service” in s 44B does not include operations that are integral but subsidiary to a production process.  For the purpose of this proceeding, I do not need to decide whether an operation must be both integral and essential (or integral and non-subsidiary) to fall within the exemption in par (f).  It suffices in this case that Hamersley’s use of its railway line is an integral and essential operation in its production process.

44                  Further, I do not accept the respondents’ submission that the exclusion was directed solely to the circumstance where the applicant for a service, here Robe, sought the use of a production process with a view to the production of something.  That would, it seems to me, be an unduly restrictive interpretation of the exclusion.

The purpose of the exclusion

45                  In construing par (f) of the exclusion in the definition of “service” in s 44B, it is relevant to consider the purpose of that exclusion, by reference to, amongst other matters, the purpose of Part IIIA as a whole.  Cf Mills v Meeking (1990) 169 CLR 214 at 233-5 per Dawson J, and Project Blue Sky Inc. v Australian Broadcasting Authority (1998) 153 ALR 490 at 511.

46                  As a result of the “Competition Principles Agreement” entered into on 11 April 1995 by the Commonwealth of Australia, the States, the Australian Capital Territory and the Northern Territory, the Commonwealth enacted the Competition Policy Reform Act 1995.  That Act introduced Part IIIA, headed “Access to Services”, into the Trade Practices Act 1974 (Cth).  As already noted, Part IIIA provides for a procedure whereby a service can be “declared”, with the result that an interested party can obtain access to the use of that service.  In argument, the respondents emphasised that:

The legislative intent [of Part IIIA] was to maximise the efficient utilisation of infrastructure of national importance and avoid wasteful duplication for the purpose of stimulating fair competition in the marketplace … subject to fair and appropriate terms and conditions.

That was, I accept, very largely the rationale of the report made in 1993 by the National Competition Policy Review, chaired by Professor Fred Hilmer (“the Hilmer Report”):  see especially chapter 11, “Access to ‘Essential Facilities’”.  The Hilmer Report formed the basis of consultations with Governments and the public which ultimately resulted in the Competition Policy Reform Act.  The Hilmer Report noted, amongst other things, that “[f]ailure to provide appropriate protection to the owners of … facilities [by means of which services to third parties were to be provided] has the potential to undermine incentives for investment”:  chapter 11, p 248.  The Report contemplated that “products, production processes or most other commercial facilities” would fall outside the access regime:  chapter 11, p 251.  The exclusion of those things was to be effected by administrative processes.  It seems, however, that this last-mentioned aspect of the recommendations of the Hilmer Report was not adopted by Parliament.  Amongst other things, the supply of goods, the use of intellectual property and the use of a production process were expressly excluded from Part IIIA by legislation, rather than by administrative discretion (except to the extent that any of those “services” was an integral but subsidiary part of [another] service provided by means of a facility).  The purpose of the exclusion was, it seems, to permit appropriate utilisation of certain infrastructure by third parties and, at the same time, protect the viability of investments made by those who had invested in, for example, the processes of production. 

47                  On the one hand, it would, it seems to me, defeat the purpose of the exclusion to construe par (f) in the definition of “service” as applicable only to the situation where the service to which access is sought involves the use of the entirety of the production process and as not extending to the situation where the service involves the use of an operation integral and essential to the production process.  On the other hand, it would not, I think, defeat the purpose of Part IIIA to construe the exemption as extending to an operation integral and essential (or non-subsidiary) to a production process, as the Hilmer Report envisaged:  see chapter 11, p 251. 

48                  In relation to cognate questions, the courts have, as the applicant’s counsel submitted, adopted a similar approach to that which I adopt in this case.  I recognise, of course, that all the cases to which I refer below turn on their own facts and on statutory provisions different from Part IIIA of the Act.  Accordingly, they are of only limited assistance.  The cases do emphasise, however, that in determining whether an exclusion such as that in s 44B is applicable, one must have regard to the actual operation of the activities in question, considered as a whole.  The question of characterisation is, in this sense, one of fact and degree. 

49                  The expression “use of a production process” is broad and general. By way of example, the expression “use of” as it appeared in the Motor Vehicles (Third Party) Insurance Act 1942 (NSW) fell for consideration in Government Insurance Office (NSW) v R J Green & Lloyd Pty Ltd (1966) 114 CLR 437.  In connection with that expression, Barwick CJ observed at 444 of that case that “one should not be seeking subtleties but rather applying broad and practical conceptions”. Although made in a quite different context, that observation is apposite in connection with the expression “the use of” in par (f). 

50                  Bearing in mind, then, the desirability of a broad, practical conception (whilst acknowledging that it is not to be elevated into a universal rule:  cf State Government Insurance Commission v Steven Bros. Pty Ltd (1984) 154 CLR 552 at 555), it can be said, I think, that the words “use of” ordinarily import the idea of employing, applying, operating or exploiting the thing used:  see definition of “use” in the Oxford English Dictionary and in the Macquarie Dictionary.  That which may be used may be a concrete object (such as a tool or machine), or land (including roads), or an abstract idea, or a person, or, as in this case, a process directed to some end.

51                  To use a production process, then, is, in some way to employ, apply or exploit a process directed to production.  Most commonly, a user makes use of a production process to create the product or products which the process of production is designed to create.  That is not, however, the only sense in which a user can be said to engage in “the use of a production process”.  Someone may use a production process by incorporating it into another process or operation.  To use a production process may not only involve incorporating it into a larger operation; it is also possible to “use a production process” by using (employing, applying, exploiting) part of that process.  That is, the use of a production process extends, in my view, not merely to the use of the whole process but also to the use of any operation (or step or procedure) that is integral (and perhaps essential or non-subsidiary) to that process as a whole.  In this case the use of the railway is integral and essential to the highly integrated series of operations that constitute Hamersley’s production process.

52                  It was a similar integration of activities to produce a marketable product which led a Full Court of this Court to conclude that the transportation of ore slurry through a pipeline was part of a taxpayer’s “mining operations” within the meaning of s 122(1) of the Income Tax Assessment Act 1936 (Cth):  see Commissioner of Taxation v Northwest Iron Co Ltd (1986) 9 FCR 463.  In that case, the use of the pipeline was held to be essential to the completion of the end product.  Lockhart J, with whom Bowen CJ and Toohey J agreed, said at 9 FCR 475:

It is not different in essence from a necessary conveyor line conveying material from one section to another within a mining complex. 

…

Practical and businesslike considerations clearly lead to the conclusion that the whole of the relevant operations of the taxpayer to the final stage where the pellets emerge are part of its mining operations.  Although at first sight it may seem somewhat incongruous that a pipeline, extending for some 85 kilometres … , is part of the taxpayer’s mining operations, the apparent incongruity disappears when the role of the pipeline is considered in the context of the taxpayer’s activities as a whole. 

53                  In Commissioner of Taxation v Reynolds Australia Alumina Ltd (1987) 18 FCR 29, Beaumont J (with whom Burchett J agreed) held that the use of a conveyor system to carry bauxite from mine to refinery was within the expression “mining operations”, as that expression was used in item 14(1) of Schedule 1 of the Sales Tax (Exemptions and Classifications) Act 1935 (Cth) and the conveyor was, in consequence, exempt from sales tax.  This followed from the fact that not only was the conveyor physically proximate to the mine, but, more particularly for present purposes,

the conveying of the product is part of a single, integrated operation which commences at the surge pile and continues until the product is dumped and then blended at the stockpiles at the refinery.  Given this proximity and this integration, any attempt to fragment the respondents’ activities into a number of distinct compartments must run the risk of producing an artificial and unrealistic result:  18 FCR at 35.

54                  In Robe River Mining Co Pty Ltd v Federal Commissioner of Taxation (1990) 21 ATR 1068, a case also involving, amongst other things, item 14(1) of Schedule 1 of the Sales Tax (Exemptions and Classifications) Act 1935, Lee J rejected the respondent’s submission that mining operations ceased upon the delivery of ore to railway trucks and that the conveyance of ore from the mines was to be characterised as mere “transportation” and not a “mining operation”.  Lee J held, at 1081, that:

[i]rrespective of the distance traversed by the railway [which was considerable], the two important features are the entire integration and co-ordination of the activities at the mine site, on the railway, and at the crushing and blending site … and the exclusive possession of the entire property granted to the joint venturers for the sole purpose of carrying out that integrated operation. 

In that circumstance, so his Honour held, the transportation of ore from Pannawonica to Cape Lambert for crushing remained part of the mining operation, notwithstanding that incidentally it also may have been part of the means of transporting ore for shipment:  21 ATR at 1078.

55                  The uncontested evidence of Mr Walsh makes it plain, in my view, that, by virtue of the highly integrated nature of Hamersley’s operations in the Pilbara, Hamersley operates its railway line, not simply for transporting ore from mine to port (as the respondents would have it), but also as a necessary component of an integrated set of operations which constitute its production process. 

56                  The purposes of the income tax deductions discussed in Northwest Iron and the sales tax exemptions discussed in Reynolds and Robe Mining are the same (or very similar), namely, to encourage the production of minerals in Australia:  see 9 FCR at 473 and 18 FCR at 35.  That is, of course, a different purpose from that of the exclusion in par (f) of the definition of “service” in s 44B of the Act.  The purpose of excluding “the use of a production process” is, it seems, to preserve the viability of investments in production processes.  That purpose is, however, not so dissimilar from that of the provisions discussed in Northwest Iron, Reynolds and Robe Mining as to make the approach adopted in those cases inappropriate for this case.

57                  Counsel for the respondents relied on the extensive administrative criteria set out in, for example, s 44G(2), s 44H(4), s 44V(2), s 44W(1) and s 44X of the Act, in support of a submission that the production process exclusion should be narrowly construed.  The interests of Hamersley (and others like it) were, the respondents submitted, fully protected by the application of these administrative considerations.  That submission is not, I think, to the point, because it fails to take account of the fact that Parliament has deliberately excluded from the Part IIIA regime the use of a production process except to the extent that the use of the process is an integral but subsidiary part of the service sought.  Had Parliament thought the administrative criteria to which the respondents referred were sufficiently protective, then, presumably, it would not have excluded the use of a production process from the Part IIIA regime, as in fact it has done. 

58                  Counsel for the respondents further submitted that Parliament could not have intended to require the Council to make a potentially complex factual enquiry before satisfying itself that it had jurisdiction under Part IIIA in respect of an application for a declaration recommendation.  Accordingly, so the respondents submitted, the expression “the use of a production process” meant “the use of an entire production process” and not merely the use of an operation integral to it.  The fact is, however, that Parliament has specifically limited the matters with which the Council can deal.  On any view, the Council is obliged to satisfy itself that the “service” to which access is sought does not include any matter in paragraphs (d), (e) and (f) of the definition of service, including “the use of a production process”.  Some preliminary factual enquiry, which may, depending on the circumstances, raise complex issues, is unavoidable.  The “mining operations” cases are a salutory reminder that Parliament has not infrequently called on administrative officers and bodies to make enquiries of that kind before exercising power. 

59                  As already noted, the respondents expressly disavowed reliance on the exception to the exclusions.  That is, they did not submit that if the “service” to which Robe sought access involved the use of a production process, then use of that process was to an extent an integral but subsidiary part of the service, thereby allowing them access to the service.  Accordingly, I do not discuss that matter. 

60                  For the reasons given, I would make the declarations sought by the applicant in paragraphs 1 and 3 of its application.

the status of the “protected contractual rights” issue

61                  In the second limb of its case, the applicant submitted that any determination by the Commission requiring Hamersley to provide access to the service sought by Robe would necessarily deprive it of “a protected contractual right” within the meaning of subss 44W(1)(c) and (5) of the Act.  The seventh respondent (with some support from the first respondent) submitted that, as a matter of discretion, declaratory relief (and in the first respondent’s case, ancillary injunctive relief) ought not to be granted.  For the reasons given below, I think that there was much merit in that submission.  Accordingly, although the protected contractual rights issue was argued in some detail by Hamersley and Robe (and, to a lesser extent, Hope Downs), I refrain from expressing any view on the issue.  Not only is it unnecessary to do so because of the conclusion I have reached on the “service” issue but, had I reached the contrary view on the “service” issue, I would, as a matter of discretion, have declined declaratory (and ancillary injunctive) relief on the second limb of the case.  I set out below why I would not have granted that relief in any event. 

62                  I set out briefly some of the matters relevant to the protected contractual rights issue, in order to explain how the issue is said to arise, the parties’ respective contentions, and why determination of the issue sought to be raised would be premature.

63                  As already noted, Hamersley conducts its operations in the Pilbara pursuant to agreements with the State of Western Australia, including the 1963 State Agreement and special leases.  Pursuant to cl 9(1)(a) of the 1963 State Agreement, the State agreed to grant Hamersley a mineral lease for iron ore.  Pursuant to cl 9(1)(b), the State also agreed to grant Hamersley “in fee simple or for such terms or periods and on such terms and conditions” as shall be reasonable

for nominal consideration – townsite lots; at peppercorn rental – special leases of Crown lands within the harbour area the townsites and the railway; and

at rentals as prescribed by law or are otherwise reasonable – leases rights mining tenements easements reserves and licences in on or under Crown lands

under the Mining Act 1904 and the Jetties Act 1926 or under the provisions of the Land Act … as [Hamersley] reasonably requires for its works and operations hereunder including the construction or provision of the railway wharf roads airstrip water supplies and stone and soil for construction purposes… .

64                  Pursuant to cl 10(1) of the 1963 State Agreement, Hamersley agreed to

construct install provide and do all things necessary to enable it to mine from the mineral lease to transport by rail to [Hamersley’s] wharf and to commence shipment therefrom in commercial quantities at an annual rate of not less than one million (1,000,000) tons of iron ore … . 

Pursuant to par (c) of cl 10(1), Hamersley undertook to construct a standard gauge railway from the mining areas to the wharf.  In this connection, it is relevant to note that Hamersley also undertook, in cl 10(2)(a),

to the extent that it can do so without unduly prejudicing or interfering with its operations … [to] transport the passengers and carry the freight of the State and of third parties on the railway subject to and in accordance with by-laws (which shall include provision for reasonable charges) … PROVIDED THAT in relation to its use of the said railway [Hamersley] shall not be deemed to be a common carrier at common law or otherwise. 

65                  Special leases were granted to Hamersley for, amongst other things, the provision of a railway.  In particular, special lease 3116/4984 (“the special lease”) relates to the railway line and associated facilities from the Robe overpass to Rosella Siding.  (The applicant did not pursue its submissions with respect to a second special lease (3116/11869), which related to the rail corridor from Rosella Siding to Juna Downs.)  The demise under the special lease was subject to a number of reservations in the State’s favour.  In particular, cl 3(1) of the special lease, which is mentioned in the discussion below, read:

(1)     That it shall be lawful at all times for [the State] (subject to the provisions of the [State] Agreement and in particular [clause 9(4)(b)] –

(i)            to grant to the State of Western Australia or to the Commonwealth of Australia easements (including easements without dominant tenements) or rights over the demised premises for any public purpose or purposes approved by the State of Western Australia (including the building of roads and the installation and construction of water pipe lines telephone communications and other essential services);

(ii)          to require [Hamersley] to consent to the granting of such easements (including easements without dominant tenements) or rights in or over the demised premises as may from time to time be reasonably necessary for the overall development of the demised premises or for the overall development or use of the surrounding lands; and

(iii)        to use or permit the use of the demised premises as is reasonably necessary for the overall development or use of the demised premises or for the overall development or use of the surrounding lands

PROVIDED ALWAYS that no such grant requirement use or permission to use shall be made if such grant requirement use or permission to use (as the case may be) would unduly prejudice [Hamersley] or unduly interfere with the operations of [Hamersley] under the [State] Agreement.

66                  By cl 2(1) of the special lease, the State promised nonetheless that Hamersley “shall peaceably hold and enjoy the demised premises during the … term [of the special lease] without interruption”.

The parties’ respective contentions

67                  Hamersley submitted that the rights it holds in relation to the land comprising the portion of its rail corridor from the Robe overpass to Rosella Siding and in relation to the rail facilities constructed on the land are “protected contractual rights” conferred under the 1963 State Agreement and the special lease.

68                  It was Hamersley’s primary submission that the bundle of rights granted to it by the 1963 State Agreement and the special lease conferred a right of exclusive possession in respect of the land comprised in the rail corridor.  The rail facilities constructed on the land were, so Hamersley submitted, to remain Hamersley’s sole property during the term of the Agreement.  In the alternative, Hamersley submitted, it either enjoyed “the exclusive right of use of the rail track and associated infrastructure”, or it was protected against “the existence of any third party rights or access which might cause undue prejudice or undue interference with Hamersley’s operations”.  In the last mentioned case, it was said that the access sought by Robe would constitute just such undue prejudice or undue interference with Hamersley’s operations.  The truth of that proposition depends, so it seems to me, on matters of fact and degree, determinable, partly at least, only by reference to a determination, if any, made by the Commission under s 44V, and the conditions attaching to any such determination. 

69                  In response, Robe submitted that, properly construed, the expression “protected contractual right” did not refer to leasehold rights, but to rights pertaining to the use of the relevant facility or infrastructure asset.  Section 44W(1)(c) was intended, so Robe submitted, to prevent a person from being deprived of a right to use a facility (or obtain a service provided by means of a facility) which arose under a contract in force at 30 March 1995.  Robe submitted further that neither the 1963 State Agreement nor the special lease granted Hamersley exclusive use of the railway line and, as Robe was seeking no more than to have the use of the rail facilities during specific periods, to be negotiated, it could not be said that Robe would deprive Hamersley of any protected contractual right, whether in respect of the rail facilities or leasehold interest in the land.  Again, it seems to me that the strength or weakness of these submissions would be better assessed by reference to a determination, if any, made by the Commission under s 44V and, in particular, by reference to the terms and conditions, if any, imposed by the Commission as part of any grant of access to any third party. 

70                  Robe also relied on reservations in the State Agreement which contemplated some qualified interference with Hamersley’s operations and, in particular, conferred rights upon the State with respect to the land and facilities, including rights with respect to further development, as well as with respect to the carriage of freight on the railway for third parties:  cf cl 3(1)(ii) and (iii) of the special lease and cl 10(2)(a) of the 1963 State Agreement.  Once again, however, it seems to me that the effect of those provisions upon any protected contractual rights issue is properly assessed by reference to any determination made by the Commission.

71                  Those reservations (particularly, in cl 3(1)(ii) and (iii) of the special lease and cl 10(2)(a) of the 1963 State Agreement) are, however, of some significance for another reason.  Having regard to the possible interests of the State, including those in respect of its rights under the 1963 State Agreement and the special lease, there is, it seems to me, at least a possibility that the State might apply, under s 44U, to be made a party in any arbitration of an access dispute between Hamersley and Robe.  Similarly, the possibility that as yet unknown parties might also make such an application to be joined cannot be discounted.  Whether or not such applications would be made, and the consequences of the State or another party so doing, cannot now be known.  There is also a possibility, so the seventh respondent submitted, that if the State were to become a party in any arbitration, then it would be open to the Commission to make a determination upon condition that the State act, under powers conferred by the 1963 State Agreement and the special lease (as, for example, under special lease cl 3(1)(ii) and (iii)), so as to permit access of the kind Robe or, indeed, another party might seek.  Were that possibility realised, the protected contractual rights issue would, at the least, be recast in a very different form from that now presented to the Court. 

Circumstances in which declaratory relief may be granted

72                  The Court has, plainly enough, jurisdiction to grant declaratory and associated injunctive relief:  see Federal Court of Australia Act 1976 (Cth), ss 21 and 22 and Trade Practices Act 1974 (Cth), s 163A.  Relief of the kind sought is, however, discretionary. 

73                  As Mason CJ, Dawson, Toohey and Gaudron JJ said in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582, the grant of declaratory relief

is confined by the considerations which mark out the boundaries of judicial power.  Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions.  The person seeking relief must have ‘a real interest’ and relief will not be granted if the question ‘is purely hypothetical’, if relief is ‘claimed in relation to circumstances that [have] not occurred and might never happen’ or if ‘the Court’s declaration will produce no foreseeable consequences for the parties’.  [Footnotes omitted]

Earlier, in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8, Gibbs J said, after referring to the width of the discretion:

It does, however, seem to me that the Scottish rules summarised by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448, should in general be satisfied before the discretion is exercised in favour of making a declaration: 

‘The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, someone presently existing who has a true interest to oppose the declaration sought.’

Beyond that, however, little guidance can be given.  As Lord Radcliffe said in Ibeneweka v Egbuna [1964] 1 WLR 219 at 255: 

‘After all, it is doubtful if there is more of principle involved that the undoubted truth that the power to grant a declaration should be exercised with a proper sense of responsibility and a full realisation that judicial pronouncements ought not to be issued unless there are circumstances that call for their making.  Beyond that there is no legal restriction on the award of a declaration’. 

74                  The relevant consideration in relation to the protected contractual rights issue is the reluctance of courts to grant declaratory relief claimed in relation to circumstances that have not occurred and might never happen:  see, e.g., University of New South Wales v Moorhouse (1975) 133 CLR 1 at 10 per Gibbs J.  As a general rule, the power to make a declaration will not be exercised when a court is called on to answer a question that is purely hypothetical.  In Moorhouse, Jacobs J described, at 133 CLR 24, the limitation thus:

A declaration of right based on facts found in the particular case can certainly be made but it is not permissible to make a declaration of right which amounts to a conclusion of fact from a hypothetical or assumed state of facts and thereby to enunciate or declare a rule of apparently general application as though it were a declaration of applicable law.  A declaration of right based on hypothetical or assumed facts may be made when the assumed facts can be certainly and exhaustively stated and when the conclusion flowing therefrom is truly a conclusion of law but not when it is itself a conclusion of fact.

This constraint upon the availability of declaratory relief has recently been reaffirmed by the High Court of Australia in Bass v Permanent Trustee Co Ltd [1999] HCA 9 (unreported, Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ, 24 March 1999) at par 47.  In summary, a declaration will not, according to the High Court, be granted in respect of a question which is “not a real question” in the sense that it is “hypothetical or academic”:  see Bass, par 47. 

Is the protected contractual rights issue hypothetical, theoretical or academic?

75                  As I have in part already said, Hamersley submitted that (1) it had a bundle of rights containing, amongst other things, a right to exclusive possession of the railway corridor and infrastructure within it; (2) that it would necessarily be deprived of that right in the event an access determination were made; (3) that there was, therefore, no discretionary impediment to the grant of declaratory relief; and (4) on the contrary, it should not needlessly incur the substantial cost of opposing a futile process.  I do not accept those submissions.  As the scheme of Part IIIA shows and s 44V(3) highlights, no question as to Hamersley’s deprivation of protected contractual rights may ever arise, if only because there may be no determination ever made to grant access to the service to any third party.

76                  In my view, the protected contractual rights issue is, essentially, academic.  That is so, in my view, because, under the Act, the question of protected contractual rights does not arise until the Commission conducts an arbitration under Subdivision C of Division 3 of Part IIIA.  It is, I think, virtually impossible to predict with any confidence whether or not the Commission will ultimately be obliged to conduct such an arbitration, still less just what issues might be raised before the Commission in such an arbitration, and even less just what determination the Commission might make. 

77                  An arbitration can not occur until:  (a) the Council has made a recommendation to the designated Minister (s 44F(2)); (b) the Minister has declared the service under s 44H(1); (c) any review of that declaration has been conducted (s 44K); (d) the party requiring access to the service and the provider have considered whether they can agree upon the terms of access to the service; (e) the parties have been unable to agree on such access; and (f) the party requiring access or the provider has notified the Commission that an access dispute exists (s 44S).  An arbitration is then conducted by the Commission, upon which the Commission must make a written determination on access by the third party to the service (s 44V(1)). 

78                  If the Council were to decide not to recommend a declaration, or if the Minister declines to grant a declaration with respect to the service, or if a view adverse to Robe prevail on review, then the question of protected contractual rights will prove to have been an academic one.  Moreover, circumstances may well change over the time that the processes required by the Act are completed, in consequence either of the steps required to be taken under the Act or of other factors.  It may be that Hamersley or Robe (or some other participant in the process) is persuaded to adopt a different view in consequence of a declaration recommendation made by the Council, a Ministerial decision, or a decision on review.  There is also the possibility that negotiation between the parties may prove fruitful.  It is impossible, I think, to assess the degree of likelihood of any of these matters. 

79                  There are other uncertainties too which, in my view, make the question academic.  Although the Commission is bound to make a determination under s 44V, subs 44V(3) makes it plain that third party access to the service is not automatic.  That is, subs 44V(3) provides that the Commission “does not have to require the provider to provide access to the service by a third party”.  Further, the Commission has very considerable latitude with respect to the determination that it may make.  It is not limited to the matters which were the basis for notification of the dispute:  s 44V(2).  The terms and conditions of third party access to the service may prove especially significant in relation to the question of “protected contractual rights”, more particularly as the protected contractual rights issue is one of the matters which the Commission is bound to take into account when making an access determination:  see s 44W(1)(c). 

80                  It is necessary to bear steadily in mind that the protected contractual rights constraint referred to in s 44W(1)(c) is a constraint on the Commission in making a determination.  The same or similar constraint is not imposed on the Council in making a declaration recommendation under s 44F(1) or on the Minister in making a declaration with respect to a service under s 44H.  Those considerations emphasise that it would not ordinarily be until the Commission makes a determination that the question of protected contractual rights could arise.  (I say “ordinarily” because there may be circumstances where the question properly arises before this point.  Those circumstances are not, however, shown in the present case.)  Further, it is relevant to observe that provision is made in s 44ZP for review by the Tribunal of a Commission determination and in s 44ZR, for appeal from the Tribunal’s decision to this Court, on a question of law.

81                  For the sake of completeness, I mention too that I entertain some doubts about the effectiveness of the declaratory relief sought.  The making of any such declaration may have doubtful significance for the Council or for the Minister as neither is obliged by the Act to have regard to the protected contractual rights issue.  The position would seem to be no less equivocal for the Tribunal on a review under s 44K.  If the procedures under Part IIIA were to proceed (and in the absence of an injunction it seems they may), what would be the position of a party subsequently joined under s 44U(c) of the Act?  Bearing in mind subss 44V(1) and (3), would the Commission proceed to make a determination?  The making of a mere declaration in the terms sought may not, even in practical terms, terminate the process under Part IIIA.  None of these questions needs to be answered on this occasion.  They merely illustrate the undesirability of declaratory relief at this stage.

82                  It is true, as Hamersley submits, that “mere futurity” does not establish that a question is hypothetical in the relevant sense:  see Re Tooth & Co Ltd (1978) 31 FLR 314 at 332 per Brennan J and Bass, par 47.  The courts have, from time to time, declared that conduct which has not taken place will not be in breach of a contract or a law:  cf Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297 at 305 per Barwick CJ and Bass, par 47.  Cases of this kind seek to establish a right that is denied by another.  That is not this case.  This is not a case where the applicant claims an intention to pursue a course of conduct and the question is, on ascertained or agreed facts, whether that conduct will be lawful.  This is a case where the facts that could give rise to a question as to whether Hamersley had been deprived of protected contractual rights have not occurred and no reasonable view can be taken as to the likelihood of them occurring.  That circumstance deprives the question Hamersley would have the Court answer of the immediacy and reality sufficient to justify a grant of declaratory relief:  cf Re Tooth & Co Ltd (1978) 31 FLR at 333-4 per Brennan J.

83                  The protected contractual rights question suffers from the same or a very similar lack of immediacy and reality as the question raised in Re Tooth & Co Ltd.  The question in that case was whether, upon facts stated for the proceeding, Tooth’s proposed conduct would contravene s 47(9) of the Act.  A Full Court of this Court (constituted by Bowen CJ, Franki and Brennan JJ) held that declaratory relief ought not, as a matter of discretion, to be granted, principally because the question would not arise at all if the Trade Practices Tribunal were to grant relevant authorisations and the likelihood of it so doing was unknown:  31 FLR 314 at 327 per Bowen CJ and Franki J and 334 per Brennan J.

84                  In support of its submission that its application for declaratory relief was neither theoretical nor academic, Hamersley relied on the decision of Dawson J in Oil Basins Ltd v The Commonwealth of Australia (1993) 178 CLR 643.  That case was clearly very different from this:  cf 178 CLR at 649-50.  Hamersley also relied on the decision of Angel J in Queensland Mines Ltd v Northern Land Council (1990) 68 NTR 1.  The facts of that case were not relevantly lacking in immediacy and reality.  The plaintiff held a special mineral lease that lay within the area of an exploration licence, which was also held by it.  It had a uranium processing plant within the special minerals lease.  If it found uranium under the licence, it intended to process it in the plant.  The plaintiff and the defendant were in controversy over the question whether, if uranium were found suitable for mining, could the plaintiff make application under s 46 of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth).  Section 46 provided for the settlement of any dispute between the parties, in relation to such things as processing at a plant, by conciliation or arbitration.  The plaintiff contended (and the defendant denied) that the plaintiff might avail itself of that provision.  Angel J held that, in the circumstances of the case, declaratory relief was available.  The essential facts were known, including the fact that the plaintiff intended to conduct its future activities in the way proposed.  His Honour said at p 8:

It seems to me the issues in this case are not merely abstract or hypothetical and that a declaration would have utility.  The elements of utility and reality are present here; the plaintiff does intend to conduct its future activities in a particular way.  Whether s 46 will apply to the plaintiff’s proposed conduct affects its present and immediately proposed activities.  The plaintiff has formulated a definite course of action for the future, that is to retain and maintain the … plant, explore [under the licence], if economically feasible to mine any discovery, and process such discovery at the … plant.  The legal position apropos any future processing at the … plant practically affects both its future operations on [the exploration licence] … and the retention and future use of the … plant and [special mineral lease] area.  If the defendant is correct, in the absence of its agreement, the plaintiff shall have to dismantle the … plant and reinstate the [special mineral lease] area and thereafter apply for an exploration licence of the [special mineral lease area] and ultimately re-establish the … plant or some substitute.  Such a drastic consequence calls for an early determination as to whether the defendant can be required to ‘agree’ via arbitration.  In my opinion the present case does call for appropriate declaratory relief sufficient to clarify the parties’ rights and obligations with respect to conciliation and arbitration in the absence of reaching agreement as to the future use of the … plant.

85                  The case was an unusual one and is distinguishable from the present case.  In the present case few of the facts which would give rise to the question Hamersley would raise are known (that is, whether the relevant administrative decisions adverse to the applicant will be made) and it is impossible to predict with confidence what course is likely to be taken by the Council, the Minister, the Tribunal, or the Commission, not to mention other parties interested in the matter. 

86                  For the above reasons, if I were of the view that the service to which Robe sought access was a “service” within the meaning of s 44B of the Act, I should not then be disposed to grant declaratory relief on the second limb of Hamersley’s case, i.e., in relation to the protected contractual rights issue.

Associate:

Dated:              28 June 1999