FEDERAL COURT OF AUSTRALIA

NT Power Generation Pty Ltd v Power & Water Authority [2001] FCA 334

TRADE PRACTICES – alleged misuse of market power contrary to s 46 Trade Practices Act 1974 (Cth) (“Trade Practices Act”) – statutory authority responsible for generation reticulation and supply of electricity in Northern Territory – whether Trade Practices Act before enactment of s 2B by Competition Policy Reform Act 1995 (Cth) (“the Reform Act”) bound that statutory authority.

TRADE PRACTICES - alleged misuse of market power contrary to s 46 of Trade Practices Act – statutory authority owner of electricity infrastructure – statutory authority licensed third party planning to sell electricity into particular market – access to infrastructure of statutory authority necessary to be able to sell electricity into that market – whether decision of statutory authority to refuse access to its infrastructure is a refusal to grant a licence within s 2C(1)(b) of Trade Practices Act – whether decision of statutory authority to refuse access to its infrastructure is in the course of carrying on a business.

TRADE PRACTICES - alleged misuse of market power contrary to s 46 of Trade Practices Act – corporate entity wholly owned subsidiary of statutory authority – corporate entity formed as vehicle to participate in transaction involving establishment of substantial gas pipeline from gas field to principal place of operations of statutory authority – secured supply of gas necessary for operations of statutory authority in supplying electricity – contract with gas suppliers provided corporate entity with right of pre-emption in respect of gas offered to be sold to any third party – whether Trade Practices Act before enactment of s 2B by the Reform Act bound that corporate entity – whether that corporate entity was an emanation of Crown in right of Northern Territory – whether that corporate entity entitled to derivative Crown immunity – whether s 89(2) of Reform Act operates to preserve derivative Crown immunity in respect of the contractual right of pre-emption notwithstanding s 2B of Trade Practices Act.

TRADE PRACTICES – alleged misuse of market power contrary to s 46 Trade Practices Act – statutory authority responsible for generation reticulation and supply of electricity in Northern Territory – statutory authority supplier of electricity to consumers in Northern Territory – statutory authority owner of electricity infrastructure needed to supply electricity – third party licensed to sell electricity to consumers in Northern Territory but refused access to electricity infrastructure to do so – statutory authority and Northern Territory Government decision to refuse access so as to obtain time to formulate and implement access regime – belief that anticipated access regime would produce “more effective” competition than granting access to third party by negotiation – awareness that statutory authority could not compete effectively with third party in market to supply electricity to consumers in Northern Territory in short term – period whilst access regime formulated and implemented also needed to ensure statutory authority competitive when access regime introduced and to secure “level playing field” – whether s 46 prohibits exercise of substantial degree of power in market to refuse access to infrastructure until more effective competition able to be introduced – whether purpose of statutory authority in exercise of substantial degree of power in a market for preventing third party from entering a market or for deterring or preventing third party from engaging in competitive conduct in a market.

CONTRACT – implied terms – grant under statute of licence to generate and sell electricity – grantor statutory authority – licensor owner of electricity infrastructure – access to licensor infrastructure necessary to sell electricity into principal market of licensed area – licensor also seller of electricity – whether terms regarding access may be implied into licence to give it commercial efficacy when licence granted under statute.

CONTRACT – implied terms – written document contains “whole agreement” clause – no application to rectify written document – whether terms may be implied into written document.

CONTRACT – implied terms – grant under statute of licence to generate and sell electricity – licensor owner of electricity infrastructure – access to licensor’s infrastructure necessary to sell electricity into principal market of licensed area – licensor also seller of electricity into that market – licensor and licensee aware of desirability of licensee being given access to licensor’s infrastructure – whether term implied into licence that licensor would give licensee access to its infrastructure – whether terms implied into licence that licensor would do all things necessary to give licensee benefits of licence or would deal fairly and in good faith with regard to performance and implementation of licence.

A New Tax System (Trade Practices) Amendment Act 1999 (Cth)

Competition Policy Reform Act 1995 (Cth) s 89

Northern Territory (Self-Government) Act 1978 (Cth)

Trade Practices Amendment (Telecommunications) Act 1997 (Cth)

Trade Practices Act 1974 (Cth) ss 2A, 2B, 2C, 4(1), 4F, 44M, 44V, 46, 82, 87, 150C, 150G

Competition Policy Reform (Northern Territory) Act 1996 (NT) ss 5, 10, 13, 15, 41

Electricity Networks (Third Party Access) Act 2000 (NT)

Electricity Reform Act 2000 (NT) s 7

Power and Water Authority Act 1987 (NT) ss 4, 9, 10, 14, 14(3A), 14 (3B), 15, 16, 17

Power and Water Authority Amendment Act 1998 (NT)

Power and Water Authority Amendment Act 2000 (NT)

Public Sector Employment and Management Act 1993 (NT) s 17 and s 22(1)

Public Service Act (NT)

The Electricity Act 1978 (NT) ss 3, 14, 15, 25, 27, 29, 30

Utilities Commission Act 2000 (NT)

Water Supply and Sewerage Act 1983 (NT)

Competition Code of the Northern Territory s 82

Smith v Capewell (1979) 142 CLR 509 considered

Fasold v Roberts (1997) 70 FCR 489 considered

Hungier v Grace (1972) 127 CLR 210 considered

R v Toohey; ex parte Northern Land Council (1981) 151 CLR 179 considered

Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 considered

Bradken Consolidated Ltd v Broken Hill Pty Co Ltd (1979) 145 CLR 107 applied

Bropho v State of Western Australia (1990) 171 CLR 1 applied

Bass v Permanent Trustee Company Ltd (1999) 198 CLR 334 applied

Townsville Hospital Board v Townsville City Council (1982) 149 CLR 282 considered

Launceston Corporation v The Hydro-Electric Commission (1959) 100 CLR 654 considered

State Electricity Commission of Victoria v The Mayor, Councillors and Citizens of the City of South Melbourne (1968) 118 CLR 504 distinguished

Grain Elevators Board (Vic) v Dunmunkle Corporation (1946) 73 CLR 70 cited

Inglis v Commonwealth Trading Bank of Australia (1969) 119 CLR 334 applied

State Government Insurance Corporation v Government Insurance Office of New South Wales (1991) 28 FCR 511 considered, applied

Hawthorn Pty Ltd v State Bank of South Australia (1993) ATPR 41-219 cited

R v Eldorado Nuclear Limited (1983) 4 DLR 4d 193 cited

F Sharkey & Co Pty Ltd v Fisher (1980) 50 FLR 130 applied

Computermate Products (Aust) Pty Ltd v Ozi-soft Pty Ltd (1988) 83 ALR 492 distinguished

J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 applied

Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Ltd (1989) 167 CLR 177 applied

Corrections Corporation of Australia Pty Ltd v Commonwealth of Australia [2000] FCA 1280 applied

Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Ltd (1987) 17 FCR 211 cited

Plume v Federal Airports Corporation (1997) ATPR 41-589 distinguished

Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 38 distinguished

Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 considered

Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (trading as Auto Fashions Australia) [2001] HCA 13 applied

Re Queensland Co-operative Milling Association Ltd (1976) ATPR 40-012 considered

Re AGL Cooper Basin Natural Gas Supply Arrangements (1997) ATPR 41-593 considered

ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 applied

Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43 applied

General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 applied

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337 applied

The Moorcock (1889) 14 P.D. 64 cited

Liverpool City Council v Irwin [1977] AC 239 cited

Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 cited

Hart v MacDonald (1910) 10 CLR 417 cited

Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54 considered

Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 applied

BP Refinery Westernport Pty Ltd v Shire of Hastings [1977] 180 CLR 266 applied

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 considered

Service Station Association Ltd v Berg Bennett and Associates Pty Ltd (1993) 45 FCR 84 applied

Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 applied

NT POWER GENERATION PTY LIMITED (ACN 061 314 921) v POWER AND WATER AUTHORITY and GASCO PTY LIMITED (ACN 009 627 801)

D5 OF 1999

MANSFIELD J

3 APRIL 2001

DARWIN

IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY DISTRICT REGISTRY	D 5 OF 1999

BETWEEN:

NT POWER GENERATION PTY LTD

(ACN 061 314 921)

Applicant

AND:

POWER AND WATER AUTHORITY

First Respondent

GASCO PTY LTD

(ACN 009 627 801)

Second Respondent

GASCO PTY LTD

(ACN 009 627 801)

Cross Claimant

NT POWER GENERATION PTY LTD

Cross Respondent

JUDGE:	MANSFIELD J
DATE OF ORDER:	3 APRIL 2001
WHERE MADE:	DARWIN

THE COURT ORDERS THAT:

1. The application be dismissed.

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

IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY DISTRICT REGISTRY	D 5 OF 1999

BETWEEN:

NT POWER GENERATION PTY LTD

(ACN 061 314 921)

Applicant

AND:

POWER AND WATER AUTHORITY

First Respondent

GASCO PTY LTD

(ACN 009 627 801)

Second Respondent

GASCO PTY LTD

(ACN 009 627 801)

Cross Claimant

NT POWER GENERATION PTY LTD

Cross Respondent

JUDGE:	MANSFIELD J
DATE:	3 APRIL 2001
PLACE:	DARWIN

REASONS FOR JUDGMENT

INTRODUCTION

1 This is an application under ss 82 and 87 of the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”) for contraventions of s 46 of the Trade Practices Act, and of the Competition Policy Reform (Northern Territory) Act 1996 (NT) (“the Competition Act”). Section 5 of the Competition Act provides that the Competition Code text applies as a law of the Northern Territory. The Competition Code text so applying is called the Competition Code of the Territory: s 10 of the Competition Act. Relevantly, the Competition Code text is the Schedule version of Pt IV of the Trade Practices Act, and the remaining provisions of the Trade Practices Act, including ss 82 and 87, so far as they relate to the Schedule version of Pt IV of the Trade Practices Act. There is also a claim for damages breach of contract.

THE PARTIES

2 The applicant NT Power Generation Pty Ltd (“NT Power”) was registered on 12 August 1993 under the name Mount Todd Power Pty Ltd. It changed its name on 30 July 1998. It is a wholly owned subsidiary of Power Facilities Pty Ltd (“Power Facilities”) registered on 24 June 1992. Its directors are, and were at material times, Jeffrey William Hutchison (“Mr Hutchison”), John Laurence Roger Bowman (“Mr Bowman”) and Duncan John Mathieson (“Mr Mathieson”).

3 NT Power Group Pty Ltd (“NT Group”) was registered on 9 May 1988. It also is now a wholly owned subsidiary of Power Facilities. Until 30 July 1998, it was at material times called B.B.N.T. Pty Ltd. Its directors also are Mr Hutchison, Mr Bowman, Mr Mathieson and Paul Anthony Edward Everingham (“Mr Everingham”). NT Power Transmission Pty Ltd (“NT Transmission”) was also registered on 9 May 1988. It was first called Exibin Pty Ltd, and then from 17 May 1988 until 20 August 1998 NT Power Pty Ltd. Its shareholders are NT Group, which holds 95 A Class shares and 95 B Class shares and Darnor Pty Limited (“Darnor”) which holds 10 B Class shares.

4 Darnor is a company under the control of the first respondent Power and Water Authority (“PAWA”), to reflect the Northern Territory’s interest in the 132 kV power line from Darwin to Katherine referred to below. Its directors now are Mr Hutchison, Mr Bowman, Mr Everingham and Margaret Patricia Lyons (“Ms Lyons”). Ms Lyons was appointed as a director on the nomination of PAWA. In the period to September 1997, the nominee of PAWA on the NT Transmission board was its then Chief Executive Officer Owen Peake (“Mr Peake”). He was then replaced by Dennis Bree (“Mr Bree”), who was in turn replaced by Ms Lyons.

5 There are two other wholly owned subsidiaries of Power Facilities which feature to some degree in the events to which this action relates. NT Power Operations Pty Ltd (“NT Operations”) was registered on 24 November 1993 under the name Dandenong Power Pty Ltd. Between 6 September 1995 and 24 August 1998 it was known as NT Power (Operations) Pty Ltd. Its directors are also Mr Hutchison, Mr Bowman and Mr Mathieson. Finally, NT Power Easements Pty Ltd (“NT Easements”) was registered on 29 May 1994, and has those same three directors.

6 The parent company, Power Facilities, was registered on 24 June 1992 under the name Goldstick Holdings Pty Ltd. It changed its name on 1 September 1992. Its directors are Alfred James Field (“Mr Field”), Roastern George Bruce Amm (“Mr Amm”), Mr Everingham, and Gabrielle Mary Trainor (“Ms Trainor”).

7 PAWA is a corporation constituted under s 4 of the Power and Water Authority Act 1987 (NT) (“the PAWA Act”). It came into existence on 1 July 1987 as a consolidation of the Northern Territory Electricity Commission (“NTEC”) and the Northern Territory Water Authority. It is the statutory successor of NTEC. It generates electricity and distributes reticulates and sells electricity to consumers in the Northern Territory. There is an issue as to whether, as NT Power alleges, it does so in the conduct of a business and as a trading corporation engaging in trade and commerce so as to attract the operation of the Trade Practices Act and the Competition Code of the Northern Territory. It owns and controls access to the electricity transmission and distribution infrastructure and facilities in Darwin and Katherine and surrounding areas.

8 The second respondent Gasco Pty Ltd (“Gasco”) is a duly incorporated company. It is a wholly owned subsidiary of PAWA. It acquires gas and sells it to PAWA for PAWA to operate its electricity generators. There is an issue on the pleadings as to whether Gasco at material times carried on the business of supplying gas to consumers in the Northern Territory so as to attract the operation of the Trade Practices Act and the Competition Code of the Northern territory.

THE LICENCE

9 The Electricity Act 1978 (NT) (“the Electricity Act”) was first enacted in 1978. Its general purpose is to control the generation and distribution, and the safe use, of electricity in the Northern Territory. It has been substantially amended over time. Section 25 of the Electricity Act provides:

“(1) The Authority [PAWA] may appoint a person who is a party to an agreement with the Authority as a licensee to generate, store, reticulate and sell electricity for use in an area.

(2) A licensee may sell electricity in accordance with the terms of his agreement with the Authority.

(3) Where a licensee breaches a term or condition of an agreement referred to in this section, the Authority may cancel the agreement and withdraw the licence without further notice.”

10 “Licensee” is defined in s 3 to mean a person who generates and sells electricity under an agreement between that licensee and PAWA under s 25.

11 Section 14(4) of the Electricity Act empowers PAWA (but not a licensee) to install electrical reticulation equipment on the premises of a consumer upon terms agreed between PAWA and the consumer. Section 14(5) permits PAWA, or a licensee with the consent of PAWA, to enter into agreements with persons permitting them to resell electricity supplied by PAWA or by the licensee.

12 Part 7 of the Electricity Act deals with offences under that Act. Relevantly for present purposes, s 27(1) prohibits a person from selling electricity, subject to the Act. Section 27(2) permits PAWA to sell electricity. Section 27(3) provides:

“A licensee may sell electricity subject to the terms of the agreement entered into between him and the Authority.”

13 Section 27(4) permits a person to resell electricity where PAWA has entered into an agreement with that person for the resale of electricity, presumably under s 14(5). Section 27(5) permits a person to sell electricity to PAWA.

14 Section 29(1) provides:

“A person shall not –

(a) use, consume, waste or divert electricity generated by the Authority or a licensee; or

(b) use any electrical installation, equipment, apparatus or thing owned by the Authority or a licensee,

except with the consent of the Authority or a licensee.”

15 Section 29(2) provides that a person who is found guilty of an offence against s 29(1) shall pay to PAWA or the licensee such sum as the Court considers reasonable by way of damages.

16 As between NT Power and PAWA the immediate problem is easy to state.

17 NT Power wishes to sell electricity to consumers in the Darwin/Katherine region of the Northern Territory. It claims to be licensed to do so.

18 On 26 June 1998 PAWA licensed NT Power to generate and sell electricity upon terms contained in the licence agreement (“the Licence”). The recital to the Licence is in the following terms:

“PAWA has agreed to licence the Licensee pursuant to sections 25 and 27(3) of the Electricity Act and section 15(2)(d) of the Power and Water Authority Act to generate, store, reticulate and sell electricity in accordance with the terms and conditions of this Deed.”

19 The Licence provided:

“PAWA hereby grants a license (“the License”) to the Licensee, subject to the terms of this Deed, to

(a) sell to any persons situated within the Licensed Area described below electricity which is generated by the Licensee at the Generation Site; and

(b) sell to PAWA electricity which is generated by the Licensee at the Generation Site.”

20 The licensed area is identified as the Northern Territory. The Generation Site is Mount Todd Gold Mine site. The Licence was granted for three years. During the period of the licence, NT Power was to pay to PAWA an annual fee of $10,000.

21 The Licence expressly provided that it was not exclusive. It does not preclude generation, transmission, distribution and sale of electricity within the Northern Territory by PAWA or other licensees to whom PAWA has granted licences under the PAWA Act or the Electricity Act.

22 NT Power has acquired a power generating plant at Mount Todd Gold Mine (the “Mount Todd PS”). It wishes to generate power at that site and to sell the power so generated to consumers within the Northern Territory. It is unable to do so. That is because, with limited exception, the electricity infrastructure in and around Darwin (high voltage and low voltage power lines, relay stations, and the like) are owned by PAWA. PAWA has not agreed to permit NT Power to have access to those infrastructure facilities.

23 NT Power claims that, in a practical sense, the Licence is of no real value.

THE PLEADINGS

24 The claim by NT Power against PAWA is made upon two bases.

25 It is claimed firstly that PAWA has contravened s 46 of the Trade Practices Act and s 46 of the Schedule version of Pt IV of the Trade Practices Act (and so the Competition Code of the Northern Territory) by failing or refusing to supply to NT Power access to PAWA’s infrastructure so as to enable NT Power to sell electricity to persons in the Northern Territory generated by it at Mount Todd PS in accordance with the Licence. The contraventions are also said to arise by virtue of PAWA’s failure or refusal to continue to negotiate with NT Power in relation to it obtaining access to PAWA’s infrastructure. NT Power contends that that conduct on the part of PAWA was engaged in for the substantial purpose of deterring or preventing NT Power from engaging in competitive conduct in the market for the sale and supply of electricity to consumers of electricity in the Darwin-Katherine area. It also contends that PAWA had, and took advantage of, substantial power which it enjoys in the markets which NT Power described either as the market for the transmission and distribution of electricity in the Northern Territory or the separate markets for the transmission of electricity in the Northern Territory and for the distribution of electricity in the Northern Territory.

26 NT Power’s alternative claim against PAWA is that there is implied into the Licence terms that:

(a) PAWA would permit NT Power to have access to and the use of PAWA’s infrastructure on reasonable terms for the purpose of selling electricity to persons in the Northern Territory for the period of and in accordance with the terms of the Licence,

(b) PAWA would do all that was necessary to secure performance of the Licence and in particular to enable NT Power to have the benefit of the Licence, and

NT Power, further submits that PAWA, by refusing to consent to or to permit NT Power to have access to PAWA’s infrastructure, and by refusing to identify terms upon which it will permit NT Power to have access to PAWA’s infrastructure, for the purpose of selling electricity to persons in the Northern Territory in accordance with the Licence, has breached each of those implied terms. PAWA denies those allegations.

27 The claims against PAWA are for injunctive and declaratory relief, designed to secure access to PAWA’s infrastructure, and for damages.

28 NT Power’s claim against Gasco is confined to claims that Gasco has contravened s 46 of the Trade Practices Act and s 46 of the Schedule version of Pt IV of that Act contrary to the Competition Code of the Northern Territory. Gasco is alleged to have contravened those provisions by refusing and continuing to refuse to give an undertaking that it would not exercise the right of pre-emption which it has under cl 2.26 of the Gas Sales and Purchase Agreement dated 28 June 1985 between itself and the Mereenie Producers (as defined below), so as to preclude NT Power from acquiring supplies of gas from the Mereenie Producers to operate the Mount Todd PS. It is alleged that there is a Northern Territory market for the purchase of gas for generation of electricity, and that the Mereenie Producers are the sole suppliers of gas able to supply NT Power for operating Mount Todd PS. Gasco acquires substantially all the gas produced for sale by the Mereenie Producers so it has substantial power in the market for the purchase of gas in the Northern Territory. Its failure or refusal to waive its pre-emptive right was, it is alleged, the exercise of that market power for the purpose of preventing NT Power from entering into the electricity sale (or supply) market or for the purpose of deterring or preventing NT Power from engaging in competitive conduct in that (those) markets by selling electricity to consumers in the Northern Territory in accordance with the licence.

29 NT Power seeks an injunction directing Gasco to forego its right of pre-emption contained in cl 2.26 of the Gas Sales and Purchase Agreement with the Mereenie Producers in relation to any gas offered for sale by the Mereenie Producers to third parties in the Northern Territory, and alternatively offered to NT Power. It also claims damages pursuant to s 82 of the Trade Practices Act and s 82 of the Competition Code of the Northern Territory.

30 Both PAWA and Gasco deny that the Trade Practices Act or the Competition Code text applies to them. PAWA denies that it carries on business as a generator carrier and supplier of electricity to consumers in the Northern Territory, and Gasco denies that it carries on the business of supplying gas to consumers in the Northern Territory. It is not the fact of those activities being carried out which is in dispute, but that the carrying out of those activities is a business, or that either entity is a trading corporation. In the case of PAWA, it claims further that it is an emanation or authority of the Crown in right of the Northern Territory and is entitled to the same immunities as the Crown in right of the Northern Territory. Prior to the commencement of s 2B of the Trade Practices Act (on 20 July 1996) the Trade Practices Act did not apply to the Crown in right of the Northern Territory or to its emanations or authorities. After that time, in respect of the conduct complained of by NT Power, PAWA contends that conduct granting or refusing access to PAWA’s infrastructure does not amount to PAWA carrying on business. Gasco makes similar claims with respect to the conduct alleged against it. It also contends that, upon the introduction of s 2B of the Trade Practices Act by the Competition Policy Reform Act 1995 (Cth) (“the Reform Act”), s 89(2) of the Reform Act by way of a saving or transitional provision protected existing contracts and acts done to give effect to existing contracts so as to preserve its contractual rights and then exercise in any event immunity from the application of the Trade Practices Act if otherwise it applies to Gasco by reason of s 2B. In the alternative, Gasco contends that the same consequences flow by having regard to the Gas Sales and Purchase Agreement as part of an interconnecting series of agreements entered into for the purposes of the Crown in right of the Northern Territory, so that Gasco enjoys derivative Crown immunity, preserved by s 89(2) of the Reform Act, notwithstanding the introduction of s 2B into the Trade Practices Act.

31 The parties are agreed that there is a market for the supply of electricity to persons in the Northern Territory (“the Electricity Supply Market”). It is also pleaded, and admitted, that there is a market for the generation of electricity in the Northern Territory (“the Electricity Generation Market”), a market for the transmission of electricity in the Northern Territory (“the Electricity Transmission Market”), a market for the distribution of electricity in the Northern Territory (“the Electricity Distribution Market”), and a market for the sale of electricity in the Northern Territory (“the Electricity Sale Market”). In the submissions, no real distinction was drawn between the Electricity Supply Market and the Electricity Sale Market. It will not be necessary to refer hereafter separately to the Electricity Sale Market. There is a dispute as to the existence of a market in the Northern Territory for the supply of the service of the use of electricity transmission and distribution infrastructure located in the Northern Territory to persons intending to generate and sell electricity to other persons in the Northern Territory (“the Electricity Infrastructure Market”) – a primary market alleged by NT Power – and (as an alternative to the Electricity Distribution Market and the Electricity Transmission Market) a market for the transmission and distribution together of electricity in the Northern Territory (“the Electricity Carriage Market”). Some of the evidence might indicate that the geographic dimension of the markets – whether those admitted or in dispute – might be more narrowly confined to the Darwin-Katherine area of the Northern Territory. In a practical sense, for the purposes of this proceeding, nothing turns on whether the geographic dimension of the relevant markets in either the whole of the Northern Territory or the Darwin-Katherine area of the Northern Territory. I am therefore content to adopt the geographic market dimension as accepted by the parties.

32 PAWA acknowledges that it controls access to PAWA’s infrastructure and that, without that access, it would in practical terms be impossible to supply or sell electricity to persons in the Darwin or Katherine areas. Thus, it accepts that there are substantial barriers to entry into the Electricity Supply Market in the absence of PAWA’s infrastructure being declared a “service” by the Australian Competition and Consumer Commission (“the ACCC”) under s 44V of Pt IIIA of the Trade Practices Act or by an access undertaking having been given under s 44ZZA or in the absence of PAWA agreeing to a third party having access to its infrastructure. In its defence, it pleads that by reason of the Competition Principles Agreement between the Commonwealth and the States and Territories and dated 25 February 1994 (“the Competition Principles Agreement”), the Northern Territory is obliged to reform all existing legislation that restricts competition by the year 2000. PAWA also acknowledges that it had a substantial degree of power in the Electricity Supply Market. It denies that there is an Electricity Infrastructure Market, or an Electricity Carriage Market.

33 PAWA further acknowledges that in 1998 NT Power sought access to PAWA’s infrastructure, and that it did so for the purpose of selling electricity to persons in the Northern Territory. NT Power has not received that access in accordance with its request, and at material times PAWA has not communicated terms upon which it might agree to NT Power being given that access. PAWA pleads that it had

“deferred any decision in relation to providing such consent to any person pursuant to [ss 14, 25, 27 and 29 of the Electricity Act and ss 14 and 15 of the PAWA Act] pending compliance by the Crown in right of the Northern Territory with its obligations under the Competition Principles Agreement and pending the implementation of policies of the Northern Territory Government with respect to inter alia the access and use of [PAWA’s infrastructure] by persons or entities other than PAWA.”

34 It claims that it intended to, and was taking steps to, comply with its obligations under the Competition Principles Agreement. It denies that its conduct in not providing NT Power with access to its infrastructure, or in not identifying terms upon which it might do so, was for the purpose or purposes alleged by NT Power and proscribed by s 46(1)(b) or (c) of the Trade Practices Act.

35 PAWA and Gasco deny the existence of the alleged market in the Northern Territory for the purchase of gas for the generation of electricity. They claim that the relevant market is one for the purchase of energy fuels. There is, however, no dispute that available fuels other than gas are much more expensive than gas in the Northern Territory, and there would be a significant cost in converting gas fired electricity generators into generators operated by alternative fuel sources. Gasco’s pleading disputes the existence of the “pre-emptive right” in the terms pleaded by NT Power, and denies that Gasco has refused and continues to refuse to give an undertaking that it would not exercise its contractual right of first refusal. It claims that it has told NT Power that it would deal with any offer of gas made by the Mereenie Producers under cl 2.26 of the Gas Sales and Purchase Agreement of 28 June 1985, that is gas which would otherwise be sold to NT Power, as quickly as possible in the circumstances. Gasco on 11 October 1999 provided to the ACCC, and the ACCC accepted, an undertaking (in terms to which it is not now necessary to refer) relating to its exercise of that contractual right. It further denies that it has engaged in any conduct in relation to NT Power in exercise of the alleged market power, or that any conduct on its part is for a purpose proscribed by s 46 of the Trade Practices Act.

BACKGROUND

36 PAWA is a statutory corporation: s 4 of the PAWA Act. It consists of the Chief Executive Officer. The Chief Executive Officer at times material to this application was Mr Peake until July 1997 and then John Gardner (“Mr Gardner”) until 23 November 1998. The Chief Executive Officer is appointed by the Minister under the Public Sector Employment and Management Act 1993 (NT).

37 PAWA’s functions under the PAWA Act and the Electricity Act are extensive. They include responsibility for the generation, reticulation and supply of electricity, the reticulation and supply of water, the disposition of waste water, the acquisition, reticulation and supply of gas, and other services. It is the body which licenses and regulates the generation, transmission and sale of electricity in the Northern Territory.

38 PAWA, in exercising its powers and performing its functions, is subject to the directions of the Minister for Essential Services (s 16 of the PAWA Act). Within a budget approved by the Minister, it must act in a commercial manner. However, it may be directed to provide electricity or other services to certain areas, and may seek and receive from the government subsidies or loans or grants to provide particular services to certain areas (s 17(2) of the PAWA Act). On the evidence, it receives Community Service Obligation payments from the government to provide electricity to remote communities where the generation of power would otherwise be inefficient or uneconomical, and in accordance with government policy it has until recently provided electricity to all consumers in the Northern Territory at about the same tariff regardless of location. The Annual Reports of PAWA reveal that the Northern Territory Government has advanced to PAWA (or earlier to NTEC) very substantial sums annually by way of subsidy, and by way of loan. There is a present indebtedness of PAWA to the Government in excess of $200 million.

39 The PAWA Act also provides for the establishment of the Power and Water Authority Advisory Council (“the Advisory Council”) comprising the Chief Executive Officer and six persons appointed by the Minister to represent community or commercial interests in the Northern Territory. The Council advises the Minister on all matters concerning electricity and water and the provision of sewerage services: s 10 of the PAWA Act. It does not have power to give any direction to PAWA itself.

40 PAWA generates electricity principally at five facilities in the Northern Territory. The main facility is the Channel Island Power Station (“Channel Island”), a short distance south of Darwin. Channel Island has operated for many years. It operates five open cycle gas turbines producing 160mW. Two of those turbines have the capacity to generate a further 32mW by the use of steam from waterheated boilers. There is also an inlet air cooling generating capacity to produce a further 18mW. Katherine Power Station has three gas turbines which generate 19.5mW. There are also power stations at Tennant Creek, Alice Springs and at Yulara. There is also a standby gas generator at Berrimah, with a capacity to generate 30mW. The gas turbines at those power stations and the associated equipment are controlled by PAWA under various agreements, but are not owned by PAWA. All but the power station at Yulara receive gas for the turbines through the Amadeus to Darwin Gas Pipeline.

41 PAWA’s generating capacity, from time to time, is augmented by several independent power producers, generally but not only from power stations constructed to provide electricity to mining operations. Power which is surplus to the requirements of the particular mining operation is available to PAWA. Those power stations are operated at the Pine Creek Mine, the McArthur River Mine, the Cosmo Howley Mine, and now the Yimuyn Manjerr Mine (previously called the Mount Todd Mine). As noted NT Power operates the Mount Todd PS at the Yimuyn Manjerr Mine site. There is also an independent power provider which operates the Brewer Power Station at Alice Springs.

42 There are about 829 kilometres of power transmission lines in the Northern Territory. A power transmission line carries power of 33kV and above. PAWA owns all that transmission line apart from a 300 kilometre section of 132kV transmission line between Darwin and Katherine (“the 132 kV line”).

43 The 132kV line was constructed in 1988 and 1989. It provides the main transmission network between Darwin and Katherine. It links Channel Island, Pine Creek Power Station, Cosmo Howley Power Station, Mt Todd PS, and Katherine Power Station. It enables power generated at Channel Island to meet much of the demand at Katherine. It is owned by Allco Nominees Pty Ltd (“Allco”) as trustee for the NT Power Trust, of which the unit holders are NT Transmission and NT Eastments. As noted above, Power Facilities owns 90.5 per cent of NT Transmission and all of NT Eastments, as well as all of NT Power. The remaining 9.5 per cent of NT Transmission is owned by Darnor. The NT Power Trust has leased the 132kV line to NT Transmission on a long term lease.

44 NT Transmission uses the 132kV line to transmit electricity to and from PAWA under a series of Electricity Sale and Purchase Agreements. PAWA purchases from, and sells to, NT Transmission electricity at supply points and redelivery points along the 132kV line. Within a 50km corridor along the 132kV line, NT Transmission is authorised to sell electricity to non-PAWA customers if the supply is above a certain demand or level, but the corridor excludes customers within a 50km radius of Darwin, within a 20km radius of Katherine and within a 5km radius of Pine Creek.

45 As relevant to this case, in the Darwin and Katherine areas and elsewhere low voltage electricity transmission lines of 22kV or below, substations, and transformers are owned by PAWA. They provide the distribution network for consumers. The distribution network includes the Hudson Creek Substation which delivers electricity to a number of zone substations and, as the voltage is progressively broken down, through a series of pad mounted substations, pole substations and package substations to consumers. It also includes the overhead or underground distribution lines, culminating in the meter box for each individual electricity consumer.

46 For convenience, I shall call the transmission and distribution facilities owned or controlled by PAWA as “PAWA’s infrastructure”.

47 There is located on the 132kV line the Edith River Sub-station. The Mount Todd Mine is roughly twenty kilometres east of that substation. There are two 22kV lines owned by NT Power which run between the Edith River Sub-station and the Mount Todd Substation, adjacent to Mount Todd PS. The Mount Todd PS is gas fired.

48 The Mount Todd PS was constructed by Pegasus Gold Australia Pty Ltd (“Pegasus”) the then operator of the Mount Todd Mine in 1996. It is an LM 6000 power station with a claimed generation capacity of 35.5 mw or an annual energy production of about 310 GWh. A new 22kV line was necessary to secure a back up power supply from the 132kV line. The Mount Todd PS was commissioned on 16 September 1996. NT Power agreed with Pegasus that it would operate and maintain the Mount Todd PS. NT Power also entered into the Electricity Sales and Purchase Agreement of 2 September 1996 for the supply of electricity as required from PAWA to NT Power, and for PAWA to purchase as it required surplus electricity generated at the Mount Todd PS. On 9 September 1996, PAWA acting under s 25 of the Electricity Act and s 15(2)(d) of the PAWA Act, licensed NT Power to sell to Pegasus electricity generated at the Mount Todd PS (or electricity purchased from PAWA), and to sell electricity generated there to PAWA.

49 There are presently two commercial gas fields supplying gas in the Northern Territory. Both are in the Amadeus Basin in the southern part of the Territory. The Mereenie gas and oil field is operated by a consortium of mining companies called “the Mereenie Producers”, now under the management of Santos Ltd (“Santos”). The Palm Valley gas field is operated also by a consortium of mining companies called “the Palm Valley Producers”, also now under the management of Santos. Gas from those two gas fields is used only in the Northern Territory, and principally by PAWA to generate electricity at its power stations. Pipelines connect those two fields and Alice Springs, and there is a pipeline running from the Amadeus Basin through Tennant Creek and Katherine to Darwin (“the Gas Pipeline”).

50 The Gas Pipeline is operated by NT Gas Pty Ltd (“NT Gas”), in which Darnor has a small shareholding. The largest shareholder is AGL Pipelines (NT) Pty Ltd (“AGL”). The operations of the Gas Pipeline are regulated by a Shareholders Agreement and by a Unit Holders Agreement (the unit holders being unit holders in the Amadeus Gas Trust).

51 On 28 June 1985 the Mereenie Producers and Gasco entered into the Mereenie Gas Purchase Agreement (“the 1985 Mereenie Gas Sales Purchase Agreement). It has been modified by later agreements. It will be necessary to refer to that agreement in detail later in these reasons. It provides for the sale of gas from the Mereenie Producers to Gasco, including terms as to price and volume. The volume of gas to be supplied is, broadly, to meet PAWA’s requirements to generate electricity in and for the Northern Territory. Clause 2.26 of the 1985 Mereenie Gas Sales and Purchase Agreement gives Gasco a pre-emptive right in relation to the sale of gas by the Mereenie Producers to customers other than Gasco, so that Gasco may purchase gas offered to a third party by the Mereenie Producers at the price offered to that third party. That clause of the 1985 Mereenie Gas Sales and Purchase Agreement is a significant element in NT Power’s claim against Gasco in this proceeding.

52 On 28 June 1985 the Palm Valley Producers also entered into a sale and purchase agreement with Gasco, called the Palm Valley Gas Sales and Purchase Agreement. It is relevantly in the same terms as the 1985 Mereenie Gas Sales and Purchase Agreement. It also contains a pre-emption clause (cl 2.26) in the same terms as cl 2.26 of the 1985 Mereenie Gas Sales and Purchase Agreement.

53 The Northern Territory Government guarantees the payment by Gasco of its liabilities to the Mereenie Producers and to the Palm Valley Producers.

54 The 1985 Mereenie Gas Sales and Purchase Agreement and the Palm Valley Gas Sales and Purchase Agreement were part of a wider series of agreements entered into at that time. Under a separate Gas Sale Agreement, also dated 28 June 1985, Gasco onsells gas purchased from the Mereenie Producers or the Palm Valley Producers to NT Gas for the purposes of its operation of the Gas Pipeline and to supply the gas to PAWA. The gas is then transported along the Gas Pipeline to Channel Island, or by spur lines to other power stations as required. The Gas Pipeline was constructed by NT Gas under an agreement with NTEC, the ancestor of PAWA, also dated 28 June 1985. Upon the completion of its construction, the Gas Pipeline was sold to the bank consortium which financed its construction. The Gas Pipeline was then re-leased by that group to NT Gas. It is not necessary to explore the finer details of that agreement. There is a spur gas pipeline from Edith River to Mount Todd which is under the control of AGL.

55 On 2 September 1996, PAWA and NT Power entered into an Electricity Sales and Purchase Agreement. At the time the Mount Todd Mine was operated by Pegasus. As the Mount Todd PS had surplus generating capacity, NT Power agreed to sell the electricity generated at Mount Todd PS beyond the requirements of the mine operator to PAWA. In November 1997, Pegasus ceased operating the Mount Todd Mine. It lay dormant for some time. From about late July or early August 1999, General Gold Resources NL (“GGL”) assumed control of the Mount Todd Mine. It renamed the mine the Yimuyn Manjerr Mine. Its electricity requirements are met by power generated at Mount Todd PS by NT Power.

56 Whether or not the occasion of the cessation of mining operations by Pegasus at Mount Todd Mine was the event which precipitated action on the part of NT Power, by late 1997 NT Power had formed the plan of generating electricity at Mount Todd PS to sell to the general public, including, and focussed on, commercial users of electricity in the Darwin and Katherine areas in competition with PAWA. That plan is the genesis of the present proceeding.

57 Coincidentally, PAWA was addressing the implications of the National Competition Policy. Following upon the August 1993 report “National Competition Policy – Report by the Independent Committee of Inquiry” (AGPS, Canberra, 1993), the Competition Principles Agreement and the Conduct Code Agreement also dated 25 February 1994 were each entered into by the Commonwealth and each of the States and Territories.

58 In accordance with those agreements, the Northern Territory enacted the Competition Act, and parallel legislation was passed in the other States and in the Australian Capital Territory. The Trade Practices Act was amended, inter alia, by adding Pt XIA called ‘The Competition Code’ by which s 150C defines ‘The Competition Code’ as consisting inter alia of the Schedule version of Pt IV of the Trade Practices Act and the remaining provisions of that Act so far as they would relate to the Schedule version if it were substituted for Pt IV. Its provisions operate concurrently with the Competition Act: s 150G. That amendment was effected by the Reform Act. The Reform Act also introduced ss 2A, 2B and 2C into the Trade Practices Act. They came into operation on 20 July 1996. Sections 2B and 2C are relevant to the defence that the Trade Practices Act and the Competition Act do not apply to PAWA or to Gasco in respect of the conduct which is the subject of this proceeding.

59 The Reform Act also introduced “Pt IIIA – Access to Services” into the Trade Practices Act. Part IIIA of the Trade Practices Act was introduced to implement cl 6(1) of the Competition Principles Agreement. It does this by presenting legislation to establish a regime for third party access to services provided by means of significant infrastructure facilities, so as to permit effective competition in a downstream or upstream activity. As noted elsewhere in these reasons, pursuant to s 44M of the Trade Practices Act, the Northern Territory has submitted a regime for access to PAWA’s infrastructure to the National Competition Council for declaration as an effective regime: see cl 6(2) of the Competition Principles Agreement. Clause 6(4) identifies the principles to be incorporated into any such access regime.

60 Clause 5 of the Competition Principles Agreement obliged all signatory governments to embark upon review of legislation, with the guiding principle that legislation should not restrict competition unless it were demonstrated that the benefits of the restriction to the community as a whole outweigh the costs, and that the objectives of the legislation can only be achieved by restricting competition. The Northern Territory (and all signatories) were obliged to develop a timetable by July 1999 for the review and, where appropriate, for reform of all existing legislation that restricts competition by the year 2000.

61 In accordance with its obligations under the Competition Principles Agreement, the Northern Territory developed and kept under consideration a timetable to review its legislation to determine whether there were provisions which restricted competition, and to address whether any legislative amendment was necessary to relieve that restriction. Included in the legislation under review were the PAWA Act and the Electricity Act. Within PAWA, the need to review that legislation was recognised. On the evidence, the review of those two pieces of legislation did not progress quickly. Nevertheless, I accept the evidence of the Under Treasurer Kenneth Bruce Clarke (“Mr Clarke”) and of Michael Clifford (“Mr Clifford”), an officer of Treasury, that some work had been undertaken in that regard during 1997. I will refer to that work later in these reasons.

THE COURSE OF EVENTS

62 This section of the reasons for decision records my findings on the course of events from late 1997 until early 2000. It incorporates findings relevant to the consideration of the particular issues raised by the parties, and addressed later in these reasons. There are further particular findings made in those sections of the reasons.

63 Much of the evidence relating to the course of events is uncontentious. There is no real dispute about the terms of the written communications between the parties, or the occasions of their meetings. There is some disagreement about what was said at certain meetings. Where it has been necessary to resolve those conflicts, I have set out my findings and, to the extent necessary, the particular factors which led to those findings. There is also no real contest about most of the steps in the course of events taken by NT Power, or by PAWA or Gasco or the Northern Territory Government and its officers. The real factual contest lies in the reasons for certain action taken by PAWA and Gasco. That aspect is considered in detail when addressing NT Power’s claims based on s 46 of the Trade Practices Act and the Competition Act. Consideration of the expert evidence, particularly that of Professor Teece and Dr Fitzgerald, is also dealt with in that section of my reasons.

64 Parts of the evidence were accepted by the parties as confidential, either because it related to sensitive commercial matters or to matters which were properly the subject of governmental confidentiality. Rather than add at the end of these reasons a set of findings on confidential matters, I have endeavoured to make my findings in a way that does not disclose such confidential information. To a small extent, that has resulted in the findings in this section of my reasons being a little more general than might otherwise have been the case. I do not think that that generality, where it occurs, interrupts the sequence of the findings.

65 There was extensive oral evidence given by officers of NT Power, and by officers or former officers of the Treasury Department of the Northern Territory Government and of PAWA, as well as expert evidence. I do not find it necessary to comment on each of those witnesses individually. I have referred to those parts of their evidence which I have found helpful in the findings I have made, including where appropriate particular reference to their evidence. I am satisfied that each of the witnesses was endeavouring to be truthful in the evidence given, although perhaps not surprisingly I think certain of the evidence was skewed by the approach of the particular witness, or by the witness being required to revisit a process of consideration some time after the event, and to express that process of consideration in terms applicable to the questions raised by s 46 of the Trade Practices Act. In some cases, the cross-examination on those lines produced answers which I did not find particularly helpful either because I felt that the witness was reconstructing that process of reasoning rather than reporting the actual process of reasoning, or because the witness had not in fact applied a process of reasoning which lent itself to being tied to concepts which s 46 of the Trade Practices Act dictates.

66 I have placed considerable weight on contemporaneous documents when making my findings. The reason for that is obvious. Their spontaneity is likely to enhance their reliability, particularly where the issue concerns the state of mind or the intentions of PAWA or Gasco. There are two reservations to that approach, one of which to some degree also relates to the evidence of Mr Hutchison. He was the principal witness for NT Power.

67 Mr Hutchison is an electrical engineer. He is the chief executive officer of NT Power, and of Power Facilities. He has had long and continuous experience in electricity generation and supply. In 1978 he started work for NTEC, soon after it was created. Prior to that time, responsibility for the supply of electricity in the Northern Territory lay with an instrumentality of the Commonwealth Government. In 1978, the Commonwealth electricity assets in the Northern Territory were vested in NTEC. In 1980, he was appointed the general manager of NTEC. At that time, NTEC operated the Stokes Hill Power Station which was oil-fired. It was decommissioned when Channel Island was established. Mr Hutchison remained in that position until the end of 1981. He then took up a series of positions in private industry operating within his area of expertise. In 1993, as a result of a takeover, his then employment was transferred to NT Transmission as its chief executive officer. He assumed that role also with NT Power upon its registration.

68 Mr Hutchison is obviously well qualified and capable in his field of expertise. I formed the clear impression that he is an achiever. He aims to get things done quickly. He is inclined to attribute to others consensus with his views when that consensus does not really exist. He has a forceful personality. It is easy to understand that, in the face of his assertions or proposals, those with whom he was dealing might adopt a cautious rather than a confrontational approach and would avoid making a clear commitment to him. For his part, I think Mr Hutchison tended to take that caution or diffidence as acquiescence in his proposal or suggestion, and tended then to proceed as if the proposal or suggestion should be acted upon. In my view, Mr Hutchison was prone to read into others diffidence or caution, and the absence of a forceful rejection of his suggestions or proposals, acquiescence to those suggestions or proposals. Although I have no doubt that he was an honest witness, the tendency to read more into comments made at meetings so as to discern acquiescence or consensus where none existed makes me cautious about accepting as reliable his version of certain conversations.

69 Mr Hutchison also had the practice, promptly after a meeting, of sending to those present minutes of that meeting, sometimes by way of a confirmatory letter, and sometimes with the proposition that failure to correct that version of the meeting would result in its being accepted as correct. I well understand his reasons for doing so, but I think that his versions of such meetings conveyed in that manner sometimes were incomplete because he was mainly concerned with recording those parts of the meeting which best served his purposes. As I have said, that is not due to any conscious attempt to put a “spin” on events in a misleading way, but probably because he was rather single-minded and very focussed on achieving his or NT Power’s objectives. Sometimes, also for similar reasons, those communications recorded a greater degree of accord than was really the case.

70 The other reason for approaching with caution certain of the communications is that I think that some of the communications or documents were written with a careful eye to their significance to these proceedings. It is clear that the parties were conscious of the possibility of proceedings from at least August 1998. They had each engaged solicitors by that time. Some subsequent documents, not unsurprisingly, to some degree, lack the spontaneity of earlier documents. They are more cautiously expressed. They are not, in any sense, inaccurate or unreliable for that reason but I have considered them in the context that the parties may have been conscious of their potential ‘strategic’ significance to these proceedings. That is not the case with all documents created after August 1998, but it is a consideration I have had in mind when considering the documentary material generally. Both Mr Hutchison and Mr Clarke are clearly very intelligent men. The documents for which they were each responsible in the period on and from August 1998 fall into the category of documents which I have addressed in that light, notwithstanding that they are not under the hand of the respective solicitors for the parties. I have no doubt that each was aware of the potential significance to these proceedings of documents generated by them or under their direct control.

71 Following the Competition Principles Agreement, the Northern Territory duly developed a program to implement the National Competition Policy. On 26 July 1995 the Department of the Chief Minister advised all departments (including PAWA) of the general steps necessary to comply with that Policy. Chandra Seneviratne (“Mr Seneviratne”) an officer of PAWA in 1995 commenced work to analyse PAWA’s costs, and processes were put in place to review the PAWA Act and the Electricity Act. The target of the year 2000 to have in place any necessary legislative amendments was understood and work was progressing, albeit slowly in 1995-1997, to meet that target date.

72 Mr Clifford is the Manager, Economic Services, of PAWA. His duties have included dealing with the issue and administration of licences for the sale of electricity in the Northern Territory. He prepared an internal memorandum dated 8 October 1996 raising issues for PAWA’s detailed consideration relating to the National Competition Policy. A lengthy discussion paper of 16 January 1997 also raised issues of an access regime for PAWA’s infrastructure. There were other steps taken within PAWA to which I need not refer. In October 1997 Mr Clifford allocated an officer to work full time on evaluating and recommending a regime for access to PAWA’s infrastructure.

73 On 9 December 1997, Mr Clifford sent a memorandum to the Deputy Under Treasurer regarding third party access to PAWA’s infrastructure. He anticipated the prospect of an approach by a third party for such access, and discussed four options for providing access. He sought Treasury Department’s views on certain matters relating to the prospect of PAWA providing third party access to its infrastructure. The fact of potential competition to PAWA in the supply of electricity in the Darwin-Katherine area was recognised in PAWA’s 1997 Strategic Marketing Plan, dated 1 October 1997. I find that the prospect of such competition was also recognised by the Treasurer of the Northern Territory at a social occasion on about 18 August 1997, at which, with Mr Hutchison, Mr Matheson and Mr Everingham present, the suggestion of NT Power extending the 132vK line south of Darwin to Tindal Air Base was discussed. In that discussion, the Treasurer expressed some concern that NT Power would “pick the eyes out of our customers” and leave the less profitable clients to PAWA. I do not think that that discussion is of any great significance, apart from showing the awareness of the Treasurer to the potential for competition with PAWA.

74 Once NT Power commenced operating the Mount Todd PS from about September 1996, Mr Hutchison was directly involved in its operations. One activity explored by NT Power in early 1997 was the supply of electricity from Mount Todd PS to the Union Reefs Mine of Acacia Resources Pty Ltd (“Acacia”). That involved transmitting power along the 22kV line to the Edith Creek Substation and then along the 132kV line. The passage of electricity in that manner is called “wheeling”. To explore that proposal, it was necessary to calculate a wheeling charge for use of that transmission line or TUOS (an acronym for transmission use of system) charge. The acronym for the use of distribution facilities is DUOS (distribution use of system). There were communications between Mr Hutchison and Mr Peake on that topic in March 1997. Acacia decided to acquire its electricity requirements from PAWA rather than NT Power, so those discussions on the TUOS charge did not come to finalisation. NT Power anticipated having electricity generating capacity in excess of the needs of Pegasus at the Mount Todd Mine from full loading of the LM6000 gas fired generator. Mr Hutchison raised with Mr Peake the possibility that NT Power would seek to extend the 132kV line to enable it to sell electricity to the Department of Defence at Tindal Air Base south of Katherine, including the construction of a generating plant at Manton with an LM2500 gas turbine generator. He also raised that prospect with the Treasurer at a meeting on 13 June 1997.

75 NT Power was also seeking to explore the sale of its anticipated surplus electricity output from the Mount Todd PS in other ways. It raised with PAWA and with the Northern Territory Government in about June 1997 the possibility of “partnering” with PAWA in the suggested development of a power station at Manton and the extension of the 132kV line to Tindal Air Base. Allied with the supply of electricity to Tindal Air Base through the new infrastructure under contemplation, supply to one or two proposed new mining ventures in the area was also under consideration. It is not necessary to refer to the detail of that proposal. In the result, nothing came of that proposal.

76 There was over the same period contemporaneous discussions between NT Transmission, Power Facilities, PAWA and the Northern Territory Government concerning the possible refinancing of the 132kV line, and the terms upon which that might occur. That topic was partly interwoven with the discussion on the other matters referred to above. Those decisions did not proceed entirely to NT Power’s satisfaction. By letter from the Treasurer dated 18 December 1997, those discussions with NT Power to refinance the 132kV line came to an end.

77 In a letter from NT Power to the Treasurer and to the Minister for Resource Development dated 5 November 1997, concerning the progress of those negotiations, NT Power claimed that it

“has recently received a number of inquiries from PAWA customers (including the Department of Defence and the Hoteliers’ Association) seeking the opportunity to obtain lower tariffs than their existing arrangements.”

I find that that letter was prompted, at least in part, by the knowledge of NT Power that Pegasus would soon cease to operate the Mount Todd Mine.

78 In November 1997, NT Power was informed that Pegasus was to cease operating the Mount Todd Mine. An Administrator was appointed to Pegasus on about 15 November 1997. That had two practical consequences. First, the generating capacity of the Mount Todd PS would no longer be required for the Mount Todd Mine, at least unless and until the mine resumed operations, so the full use of the Mount Todd PS required that its power output be sold elsewhere. Secondly, the prospect of NT Power acquiring ownership of the Mount Todd PS from Pegasus at an acceptable price assumed a dimension it had not previously enjoyed. That was an entitlement which arose under the agreement between NT Power and Pegasus for the operation of Mount Todd PS. Subsequently, NT Power acquired Mt Todd PS from Pegasus on 3 April 1998. Mr Hutchison and Mr Amm looked at a range of options at that time. They included buying and onselling Mount Todd PS either to PAWA or to some other third party (there is apparently an international market) or selling the electricity generated at Mount Todd PS to consumers of electricity in the Northern Territory. In the longer term, there was also the prospect of the Mount Todd Mine reopening.

79 John Gardner (“Mr Gardner”) was the Chief Executive Officer of PAWA from 15 September 1997 to about the end of November 1998. He replaced Mr Peake. He had previously worked as Deputy Under Treasurer. During his tenure with PAWA, he was also chairman and managing director of Darnor and of Gasco.

80 The Minister for Essential Services, Mr Eric Poole, was the minister responsible for PAWA during Mr Gardner’s tenure and the person who, under s 16 of the PAWA Act, was capable of giving directions to PAWA.

81 Mr Gardner attended a meeting with Mr Amm, Mr Hutchison, Mr Clifford, Michael Chan (“Mr Chan”) and others on 4 December 1997. That was shortly after Pegasus had ceased to operate the Mount Todd Mine. NT Power called that meeting to discuss how it might use the Mount Todd PS. The options discussed included PAWA purchasing and relocating the LM6000 generator to the Channel Island, and PAWA purchasing from NT Power the electricity output from Mount Todd PS. Mr Gardner did not perceive from that meeting the possibility of NT Power selling electricity to consumers in the Darwin-Katherine area. I accept the evidence of Mr Gardner (and others) that PAWA did not express any firm preference at that meeting. It was proposed to receive a written proposal from NT Power or Power Facilities for consideration. At the end of that meeting, a private exchange took place between Mr Amm and Mr Gardner, at which Mr Amm ‘threw into the ring’ the possibility of Mount Todd generating power to supply consumers in the Darwin area. Issues concerning the grant of a licence, access to PAWA’s infrastructure, or access regimes were not discussed.

82 NT Power contends that a PAWA Management Board meeting of 17 December 1997 decided upon the policy that PAWA would negotiate terms with any third party requiring access to PAWA’s infrastructure to enable third parties to compete with PAWA in the supply and sale of electricity in the Darwin-Katherine area. I do not accept that, as claimed, that was PAWA’s policy from that date. The PAWA Management Board, on the evidence, was a group of PAWA employees who did not have the power or function of deciding upon such matters. That responsibility lay with PAWA, that is Mr Gardner as its Chief Executive Officer, or with the Minister for Essential Services by direction under s 16 of the PAWA Act, or ultimately with the Northern Territory Government. None of those persons had made any such decision. The PAWA Management Board had no status under the PAWA Act. I accept Mr Gardner’s evidence that he had made no such decision, and would not have done so without consultation with the Minister. The issue was of sufficient moment that I am satisfied also that the Minister would have made no such decision without Cabinet approval. Subsequent events demonstrate that that was the procedure adopted when the Northern Territory resolved upon its access regime. Neither of the officers of PAWA who are recorded as present at that meeting and who gave evidence (Mr Clifford and Mr Chan, in addition to Mr Gardner) claimed that that meeting laid down a policy of and for PAWA or that those present at that meeting as a group had power to do so. In fact, Mr Clifford continued to work on options for PAWA’s anticipated access regime thereafter.

83 It should be noted, however, and it was indeed not in dispute, that soon after his appointment as Chief Executive Officer of PAWA, Mr Gardner formed the view that PAWA had a number of serious operational inefficiencies, and that as a consequence its ability to compete with a third party supplier of electricity to consumers in the Darwin-Katherine area would be inhibited. There were other factors, too, which he regarded as inhibiting its ability to compete with a third party supplier. In December 1997 he prepared an Operational Assessment explaining in detail his reasons for concluding that PAWA’s structure and operational arrangements “are inadequate for it to effectively protect and enhance its position in a competitive market place. It is not necessary to set them out here. The Operational Assessment commented that

“It is clear that, before real competition arises, the Authority must drive the change from within.”

84 It recommended separation of PAWA’s regulatory and energy development and supply activities. That Operational Assessment was submitted to Cabinet for its meeting on 5 March 1998 when, as noted below, Cabinet approved a major review of PAWA.

85 By January 1998, NT Power had formed the intention of acquiring the Mount Todd PS. It wished to operate the LM6000 at full capacity and to sell the electricity generated to PAWA or to its own customers.

86 By letter dated 8 January 1998, NT Power put a proposal to PAWA, involving NT Power upgrading at its cost the 22kV line between the Mount Todd Substation and the Edith River Substation to a 132kV line, and as to the terms on which it would sell the electricity then generated to PAWA. By separate letter of the same date to PAWA, NT Power proposed that its existing licence to sell electricity (to Pegasus or to PAWA) be amended to authorise the sale of electricity generated at Mount Todd PS to any customer at Mount Todd (presumably any new mine operator) and to “any customer on the interconnected electrical system”. It suggested other amendments to the licence agreement as well.

87 That request was followed by a further request to PAWA by letter dated 19 January 1998 in the following terms:

“Mount Todd Power Pty Ltd (MTP) holds a license to sell electricity in the area of the Mount Todd Goldmine Site (Goldmine) pursuant to a deed with the Authority dated 9 September, 1996.

MTP wishes to expand its above license to sell electricity generated by the gas fired power station at the goldmine to any person who is able to take supply whether utilising the 132kV Darwin-Katherine transmission line or otherwise, from the generator.

The period of the license should be unlimited.

We would appreciate your approval within 14 days.”

88 On 19 January 1998, NT Power also sent to PAWA (Mr Clifford) its proposal following the meeting on 4 December 1997. It focussed principally on selling to PAWA the Mount Todd PS electricity output, but it also included a proposal for the sale of the Mount Todd PS including the LM6000 generator.

89 Mr Clifford had referred to him for attention both NT Power’s letter of 19 January 1998 seeking to vary its licence so that it could sell electricity to any person who could take supply from the 132kV line or otherwise for an unlimited period, and its letter of 19 January 1998 offering to sell to PAWA electricity generated at Mount Todd PS surplus to the mine’s requirements and upon specified terms, and offering to sell the Mount Todd PS. He appreciated that the application for a licence was the first application to PAWA which was not site specific or customer specific.

90 Mr Clifford was aware of the need to recognise PAWA’s role as industry regulator as distinct from its commercial operations. He did not see, as regulator, that there were grounds upon which PAWA could refuse that licence. He regarded PAWA’s commercial interests as a matter not relevant to whether the licence sought should be issued. Moreover, he regarded as a matter not relevant to whether the licence should be issued that NT Power might or might not be able to supply electricity generated by it to consumers in the Darwin-Katherine area. That is, NT Power’s own assessment of its market to sell electricity generated and sold under licence was a matter for it. He shared those views with Mr Gardner.

91 He considered then s 25 of the Electricity Act and s 15(2)(d) of the PAWA Act as identifying or limiting the criteria relevant to whether the licence sought should be granted. He was aware that NT Power already had an agreement to sell power to PAWA from the Mount Todd PS from time to time, and a licence to sell power to Pegasus and to PAWA. He regarded it as having the technical expertise and the facilities to generate and sell electricity. He saw no reason to question its financial resources or commitment. He identified no other consideration which he regarded as relevant and which militated against the grant of the licence sought. In reaching that view, he specifically addressed the possibility of inconsistency between the licence now sought and the rights which NT Transmission enjoyed in the “mandated area” being the area within fifty kilometres of the 132kV line.

92 Mr Clifford was responsible for imposing and fixing the licence fee of $10,000 per annum. It was not fixed by reference to any past experience or by reference to any existing guideline or policy. In a sense, it was a rough figure only, intended by him to cover regulatory and administration costs including consideration of the application, preparation of documents, legal advice and the like. He had regard to the licence fees imposed by other regulatory authorities in other States in reaching the figure of $10,000. I accept that, in his process of consideration of the licensee application, he acted in good faith and endeavoured to and did eschew from consideration PAWA’s commercial interests or issues relating to whether NT Power, if licensed, would be able to secure access to PAWA’s infrastructure. I saw no reason to doubt any of Mr Clifford’s evidence. It was given with an economy of expression, and cautiously, but I was impressed with his frankness and directness in responding to questions.

93 Mr Clifford also addressed NT Power’s offer to sell electricity to PAWA contained in its letter of 19 January 1998. He formed the view that, upon its terms, that offer should not be accepted as it was not commercially warranted.

94 On 30 January 1998, PAWA by letter indicated that it was not interested in acquiring Mount Todd PS itself, nor in acquiring electricity there generated upon the terms proposed. That letter referred to “a number of concerns with the technical operation of such an arrangement in terms of resulting system stability”.

95 NT Power nevertheless sought to maintain negotiations on those fronts. At a meeting on 6 February 1998, the Chief Executive Officer of PAWA said that one matter to be resolved, if access to PAWA’s infrastructure was to be given to enable NT Power to sell electricity beyond the present scope of its licence, would be the quantification of TUOS and DUOS charges. At that meeting, Mr Gardner also signalled the prospect of PAWA’s functions as an industry regulator and as a public utility providing electricity, water and sewerage services being separated in some way. Mr Clifford attended that meeting with Mr Chan and Mr Gardner. Mr Hutchison and Mr Mathieson represented NT Power.

96 I find that operational and technical issues arising out of the proposed introduction of electricity into the 132kV line in the quantities then suggested were then discussed, as well as the price at which NT Power might sell electricity to PAWA. I also find that Mr Garnder at that meeting did not say (as claimed by Mr Hutchison) that the NT Power price of supply was “cheap”. Having regard to Mr Clifford’s role and involvement in the analysis of the price of the NT Power officer, it is likely that Mr Gardner would first have sought Mr Clifford’s further advice before making any such comment and that Mr Clifford would have noticed specifically if his Chief Executive Officer had made such a comment which may not have accorded with his views. Mr Clifford confirmed that no such comment was made. That is consistent also with the ministerial briefing note of 18 February 1998 prepared by Mr Clifford, but under the hand of Mr Gardner, reporting on NT Power’s proposal.

97 PAWA’s letter dated 10 February 1998 to NT Power reflected that notional separation of functions. It relevantly said:

“As you are aware, the Authority is currently considering a request from your associated company, Mount Todd Power, for a license to generate and sell electricity. The Authority, in its role of regulator, foresees no impediment to the issue of the required licence at this stage. The licencee will of course be required to adhere to or comply with any conditions and regulations which may attach to the licence.

In exercising such a licence, the Authority presumes the establishment of access arrangements to the 132 kV transmission line between Darwin and Katherine.

The potential use of the 132kV line has focussed the Authority’s attention on the Agreements which exist between the Authority, NT Power and others. The Authority particularly notes that third party use was not specifically contemplated in the 132 kV line Agreements and has sought expert legal opinion on the matter.

Following advice to us, the Authority wishes to advise NT Power that any proposal for use of the line by any third party would necessarily require:

a) a reduction of current and future charges for the Authority’s use of the line;

b) no diminution or impact on of (sic) the Authority’s use of current or future capacity of the line and;

c) acceptance by NT Power of all technical and operational risks associated with the access of the facility by any third parties.

The Authority expects that NT Power will be required to formally consider access arrangements as due course. Before any commercial arrangements are made with any party, might we suggest that NT Power meet with PAWA, to canvass the issues outlined, with the view to negotiation of acceptable contract variations and revised pricing arrangements.

The Authority looks forward to meeting NT Power in the near future to discuss these matters.”

98 In my judgment, that letter is significant to NT Power’s claims to have implied into the Licence terms relating to the grant of access to PAWA’s infrastructure or to facilitating that access. The letter puts NT Power on notice that although NT Transmission effectively controlled access to the 132kV line, NT Power should not assume it should automatically get access to that transmission line simply because it is a related company to NT Transmission. Access to the 132kV line by NT Power was necessary before electricity generated at the Mount Todd PS could be supplied to residents of Darwin and Katherine. The next step was access to PAWA’s infrastructure. I consider the letter clearly identifies questions of access to infrastructure as being distinct from questions relating to whether a licence to generate and sell electricity should be issued. Despite that letter, NT Power appears to have assumed that it would get access to the 132kV line at no cost, even until the late stages of the hearing. By separate letter of the same date, PAWA rejected the revised offer of NT Power to supply and sell electricity generated at Mount Todd PS to PAWA itself.

99 Mr Clifford had been involved on behalf of PAWA with the implementation of the Competition Principles Agreement from at least 1986. He accepted that PAWA’s infrastructure would have to become the subject of an access regime, and he acknowledged that PAWA had not progressed the implementation of any such access regime much by the time NT Power in January sought the extended licence. He had, however, identified the issues and in general terms the steps necessary to address them, and had allocated an officer to work towards that end from October 1997. He had received a working paper from that officer on 10 November 1997, and planned to make a report or recommendation from PAWA for Cabinet. In part of the early months of 1998, he was on leave. It was during his absence that Cabinet resolved to undertake the Scoping Study referred to below.

100 Mr Clifford, I accept, regarded NT Power’s request for a licence as different because it was the first licence request which was not site specific or customer specific. He knew NT Power would have to get access to the 132kV line through negotiations with NT Transmission, and to PAWA’s infrastructure through negotiations with PAWA (or under an access regime under Pt IIIA of the Trade Practices Act.) He knew it would require secure backup power. And he knew that those steps might involve technical as well as commercial issues. All of those matters he considered should be divorced from whether or not the licence sought should be granted. He arranged for the Solicitor for the Northern Territory to prepare the proposed licence. The three year period was fixed because he considered that PAWA’s regulatory function was likely to be transferred to an independent regulator within that time frame, and that the independent regulator have the opportunity to revisit that licence and its terms.

101 On 18 February 1998, Mr Gardner sent a briefing paper to the Minister, duly noted by the Minister. It reported on the rejection of the offers of NT Power of 19 January 1998 as neither offer was commercial, and of the revised offer of NT Power because

“… it did not overcome the practical issues of transporting bulk power to Darwin over an already limited transmission system …[which] could result in greater line losses and place very heavy reliance on a single circuit line for a significant amount of Darwin’s power.”

It then referred to the licence application, with the comment:

“Under the competition rules, the Authority cannot refuse to issue the licence to sell electricity, however there would have to be some negotiation over the conditions that may attach to the licence.”

102 The Operational Assessment of PAWA reported upon by Mr Gardner in December 1997 had not gone unremarked. It led to the Under Treasurer Mr Clarke seeking further comments. On 5 March 1998 Cabinet resolved that a major review of PAWA should be undertaken. Neither the decision, nor the Cabinet Paper in the light of which the Cabinet decision was taken, made any reference to NT Power’s application for a licence, or to its wish to sell power to PAWA.

103 In the meantime, Mr Hutchison was pressing to follow up the earlier discussions. That led to a meeting on 16 March 1998. It was attended by Mr Hutchison and Mr Matheson of NT Power and Mr Gardner and Mr Clifford and another officer of PAWA. I accept Mr Gardner’s evidence that there was a formal break in the course of that meeting so as to isolate PAWA’s role as regulator from its commercial activities. That is confirmed by Mr Clifford’s evidence and by his notes. Mr Gardner referred to the fact that the Northern Territory Government had not decided how any access regime to PAWA’s infrastructure would operate. He was careful not to commit PAWA in any way. He said he expected the access regime to be in place by mid 2000. It is common ground that the discussions included recognising the need to fix or agree upon TUOS and DUOS charges, and other possible technical obstacles to NT Power being given access to PAWA’s infrastructure. I accept Mr Hutchison’s evidence that the possibility of an interim pricing arrangement for TUOS and DUOS was discussed, with prices to be adjusted after the final prices were agreed. However, I do not accept that PAWA proposed or agreed to enter into any such interim arrangement at that meeting, or agreed that such an interim arrangement would be entered into. I prefer the evidence of Mr Gardner and of Mr Clifford on that particular topic. Although the differences in the evidence were not great, generally speaking I prefer their evidence for reasons already given. Mr Hutchison’s evidence on that particular topic is, in my view, an illustration of his tendency to take more from a particular communication than it really warranted. It follows that I reject the contention for NT Power that the meeting was separated into two sections to reflect the fact that PAWA recognised that it could not impose terms of the licence which were directed to PAWA improving the commercial terms on which it could use the 132kV line.

104 Towards the conclusion of that meeting Mr Gardner agreed that PAWA would allow NT Power to explore with PAWA the technical and pricing issues relating to third parties getting access to PAWA’s infrastructure. That was in response to an invitation by Mr Hutchison to that effect, as I think he saw continued involvement as a way of keeping on the pressure for access being granted. In my judgment, that meeting clearly indicated to PAWA (although it apprehended the position anyway) that NT Power sought access to PAWA’s infrastructure as a step in the fulfilment of its plan to sell electricity to consumers in the Darwin-Katherine area, and as following on from the grant of a licence to sell electricity anywhere within the Northern Territory. That is in accordance with the acknowledgment in the pleadings. That is not the same as NT Power claiming that access to PAWA’s infrastructure was part and parcel of the grant of the proposed licence, that is that the grant of the licence naturally carried with it access to PAWA’s infrastructure.

105 On the question of access to PAWA’s infrastructure, I find that Mr Gardner and Mr Clifford made it clear that that issue was a matter for the Government, that the resolution of that question depended upon how the Northern Territory Government decided to introduce competition in the power industry to comply with National Competition Policy, and that the stage at which the Government might make such a decision was not then clear but was some time off. I am aware that, in his evidence, Mr Gardner gave inconsistent answers about his understanding of NT Power’s plans at this stage. One explanation for that inconsistency, as NT Power submitted, is that he was prevaricating in an attempt to give evidence favourable to PAWA’s position rather than his real recollection of events. I have given careful consideration to that submission.

106 With the benefit of having seen Mr Gardner give evidence, and in the light of the evidence from Mr Clifford which I accept and which is consistent with Mr Gardner’s evidence in essential respects, I do not think Mr Gardner was attempting to mislead me. In my judgment, certain of his answers demonstrate that in 1998 when the relevant events were unfolding he had not fully thought through the implications of the matters PAWA was required to address. That is not surprising, as they were complex and multi-layered. When pressed in evidence to layers of complexity he had not really thought through at the time, I think he tended to reconstruct. I have, therefore, when considering his evidence, treated it with caution and tended to seek from other sources confirmation of his evidence on critical issues. In most cases that confirmation was available.

107 On 28 April 1998, the Treasurer of the Northern Territory, Mr Reid, delivered the budget speech. He announced then that there would be a comprehensive review of PAWA. It was in the following terms:

“There will be a comprehensive review of all aspects of the Power and Water Authority commencing in 1998-99. This will include PAWA’s future direction, its assets and associated replacement and maintenance programs, accounting and costing functions, separation of regulatory and commercial functions and the development of access regimes with accordance with national competition policy requirements;”

I infer that that announcement reflected Cabinet’s decision of 5 March 1998.

108 On 7 May 1998 PAWA sent a draft licence agreement to NT Power for its consideration. It recorded the proposal to licence NT Power pursuant to ss 25 and 27(3) of the Electricity Act and s 15(2)(d) of the PAWA Act to generate at Mount Todd PS and to store, reticulate and sell electricity. It was to be a licence to sell electricity generated at Mount Todd PS to any person within the Northern Territory, including PAWA, for a period of three years and subject to an annual licence fee of $10,000 per annum. It imposed on NT Power the obligation of ensuring Mt Todd PS operated in accordance with good industry practice, and PAWA if necessary could give directions to achieve that end. It provided that the licence and the “applicable legislative provisions mandatorily applicable hereto constitute the entire agreement” between NT Power and PAWA.

109 NT Power, by facsimile of 11 May 1998, queried the legislative authority to impose a period for the licence, and a licence fee, and the considerations giving rise to the three year period proposed and the amount of the proposed licence fee.

110 PAWA responded on 12 May 1998. The licence fee, it said, was to cover administrative costs. Mr Clifford’s evidence, as previously discussed, was that that figure was not calculated by reference to any particular experience of PAWA or any actual estimate of any administrative costs likely to be incurred in supervising the licence. The term was fixed because PAWA expected to be divested of its regulatory functions within that period in accordance with the programme for the implementation of the National Competition Policy. A new independent industry regulation should have the opportunity of revisiting the terms of any such licence.

111 On 25 May 1998, a further meeting took place between Mr Hutchison and Mr Gardner and Peter Caldwell (“Mr Caldwell”) then the Deputy Under-Secretary of Treasury. That meeting concerned both the proposed refinancing of the 132kV line, and the issue of NT Power getting access to PAWA’s infrastructure. Mr Gardner said that a formal request for access should be made and would be addressed, but that the issues were complex for the Government. PAWA would have to put a recommendation, but there were three options: the declaration of the service, the provision of an access undertaking to the ACCC, or by direct negotiation. I accept Mr Gardner’s evidence that he did not say “You’ve got your licence and access. Now you’ll have to deal with me”. At that meeting they discussed the quantification of TUOS and DUOS charges to be charged by PAWA for access to PAWA’s infrastructure and the quantification of the TUOS charge to PAWA in respect of the 132kV line.

112 I also find that PAWA at that time was still doing what was clearly preliminary work on access regimes. The further consultation with NT Power which Mr Gardner invited was because he thought that its input might help in PAWA’s thinking. He was aware that PAWA’s asset and costing systems were not adequate to make any accurate assessment of an access charge. It is also the case that PAWA was in fact discussing with NT Power issues relating to access to its infrastructure for the purposes of providing that access to NT Power at some time. I do not consider that it was not intending at some point, subject to any government decision, to agree to that access. It is not inconsistent with PAWA’s position that it was mindful of the fact that the Government would ultimately be involved in any decision.

113 In accordance with that discussion, on 28 May 1998 NT Power formally asked PAWA to advise it as to its proposed TUOS and DUOS charges for access to PAWA’s infrastructure.

114 As the text of that letter has some significance to my consideration of NT Power’s claim that there should be implied certain terms into the Licence relating to the way PAWA should address giving access to its infrastructure to NT Power, I note that that letter contained the following:

“As discussed and agreed we would wish to formally request that PAWA advise us of the network charge that would be applied to Mt Todd Power Pty Ltd for wheeling electricity across the PAWA network.

It is recognised that the issue of the 132kv transmission system refinancing is still unresolved, and will require further discussion, and therefore the network charge for this line cannot be resolved at this point in time.

Recognising that there are a number of options open to the refinancing of the 132kv transmission system, there would be value in having a meeting in Darwin on June 5 1998 and I would appreciate if you could arrange with Peter Caldwell to be present as he indicated a joint approach may have some merit.

115 NT Power contends that, by that stage but particularly as a result of the discussion on 25 May 1998, PAWA was committed to providing NT Power with access to PAWA’s infrastructure upon terms to be negotiated and agreed. It further contends that that commitment was not expressed to be, and was not, subject to any decision of the Northern Territory Government as to how an access regime might be implemented. I do not accept that that was the case. Whilst it is correct that, as far as NT Power was concerned, it hoped and perhaps expected that it would secure access to PAWA’s infrastructure on terms to be negotiated and agreed, I do not consider that there were circumstances which gave rise to an enforceable obligation to do so on the part of PAWA. In my judgment, NT Power was aware of the public announcement made by the Treasurer of the proposed inquiry into PAWA and of the fact that the Northern Territory would have to address the National Competition Policy as it affected PAWA. That necessarily involved the possibility of the Government deciding on an access regime which did not involve direct negotiation with NT Power or with any other third party seeking access to PAWA’s infrastructure. I consider that the course of discussions over the preceding months had also disclosed that position to NT Power, and it had no foundation for claiming that PAWA through Mr Gardner committed itself to negotiate directly with NT Power to resolve TUOS and DUOS charges irrespective of those matters to be addressed by Government. The final draft memorandum of Mr Gardner of 16 September 1998 upon which he was cross-examined confirms that he expected PAWA to negotiate with NT Power for the terms upon which it might be given access to PAWA’s infrastructure, but I do not think that it reflects any commitment on PAWA’s part to do so to finality or to do so irrespective of any direction given to PAWA by the Minister under s 16 of the PAWA Act or to do so irrespective of any government decision about an access regime.

116 In June 1998, Mr Hutchison prepared a business plan for NT Power. There was, at that time, the anticipation of NT Power obtaining a licence to sell, and then selling, electricity generated at Mount Todd PS into the Darwin market. He at least thought that, with that opportunity, NT Power might become a public company. The document was essentially a statement of the history and current status of NT Power’s operations at Mount Todd PS and of the state of the Australian electricity industry including the national electricity market. It then projected NT Power’s capacity to secure and hold a significant percentage of the Darwin-Katherine Electricity Supply Market in a period of a few years, as he considered its costs to be much less than those of PAWA. NT Power would therefore secure that market share by price competition. The document identified a number of prospective customers, including within the hotel industry and the Defence Department and other potential customers. That Business Plan acknowledged that the then capacity of the two 22kV transmission lines between Mount Todd and Edith River was limited to 20 megawatts, so it was likely that that line would need to be upgraded to 132kV transmission capacity. The capital cost was said to be $6 million. That would be required promptly if the mine were to reopen and required electricity again.

117 On 4 June 1998, Mr Hutchison and Mr Amm had a video conference conversation with Mr Bree, an officer of the Northern Territory Government. He sought to brief Mr Bree on the steps necessary for TUOS and DUOS to be determined. He also set up within NT Power structures to ensure adequate information was acquired and retained about potential customers and their electricity supply needs and load profiles, stand by power support from PAWA and generation loss and its consequences and how to handle such matters, metering of NT Power’s customers, the optimum operation of the LM6000 generator at Mount Todd PS and its care and maintenance, and the steps necessary to determine and then measure TUOS and DUOS charges.

118 On 24 June 1998, Mr Hutchison followed up the invitation made at the meeting on 25 May 1998. His facsimile to Mr Gardner of 9 June 1998 was in the following terms:

“Following our meeting in your offices on May 25, 1998 and my subsequent letter to PAWA requesting advices as to the TUOS and DUOS charges, that would be applied to Mt Todd Power Pty Ltd for the transmission of electricity across PAWA’s assets.

As we are meeting again on June 12 1998 in your offices I was wondering if you could have anything developed at this stage as it would be beneficial if I could view your proposal prior to our meeting and hence be able to advance the discussion on these charges during my visit.”

119 I regard that communication as an illustration of Mr Hutchison, no doubt conscientiously, pushing PAWA into the realms of specific discussion on TUOS and DUOS charges on the assumption that agreement in principle existed to give NT Power access to PAWA’s infrastructure. I find that PAWA had not intended to have made, and had not made, any such commitment. There is of course nothing wrong in Mr Hutchison trying to achieve NT Power’s objectives in that way; it may well have been in its interests to do so. But, in my judgment, PAWA had not then determined to proceed in that way and it had not committed itself to NT Power to do so. He was told by Mr Gardner that PAWA had not further advanced the quantification of its claims for TUOS and DUOS charges, as PAWA was then undertaking a full review of its operations and that the review could take some three months. Mr Hutchison offered to provide information and a framework for calculating the TUOS and DUOS charges.

120 It was followed by a meeting of 24 June 1998. The fact that PAWA was to take steps to determine TUOS and DUOS charges was acknowledged, and Mr Hutchison offered “assistance” in that process. The possibility of an interim arrangement was raised. An internal meeting in the form of a workshop then took place on 1 July 1998. It was coordinated by Mr Seneviratne. It touched upon the information required, the technical aspects of access, the commercial aspects of access, the sources for cost information and the means of progressing the issues. It was in anticipation of the “workshop” which took place on 15 July 1998.

121 In the meantime, Treasury was addressing the implementation of the review of PAWA. In May and June 1998 proposals were sought from consultants to assist in the first “Scoping Study” stage of a review of the need for long term ownership of PAWA and of policy or regulatory changes in the electricity, water and sewerage industries in the Northern Territory. It was planned for the Scoping Study to commence by late June 1998 and to be completed by the end of August 1998.

122 For that purpose, a PAWA Review Committee (“the PAWA Review Committee”) was established comprising Mr Clarke, Mr Caldwell, Linda MacKenzie, Paul Emery and Karen Walsh (all representatives from Northern Territory Treasury) and Mr Gardner and Alan Tregilgas (representatives of PAWA). It held its first meeting on 15 May 1998 and met on an ad hoc basis during the balance of 1998.

123 On 29 June 1998 Cabinet approved the appointment of a consortium comprising Merrill Lynch International (Australia) Limited and Fay Richwhite Australia Limited to undertake the Scoping Study proposed (“the Scoping Study”). It was acknowledged that NT Power was pressing PAWA for access to its infrastructure to sell electricity generated at Mount Todd PS to consumers in the Darwin-Katherine area in competition with PAWA. Mr Clarke says that the advice of the consultants was sought in relation to that question also. Mr Clarke and Mr Gardner both appreciated that if NT Power were able to do so in the short term, that competition would be to the detriment of PAWA partly because of its operating inefficiencies and partly because of the “flat” tariff structure imposed by government. That appreciation was so realistic as to lead to the preparation of an internal document identifying PAWA’s principal clients and their electricity needs, and an assessment of the prospects of each of those clients choosing to acquire power from NT Power.

124 In addition, in response to the momentum which NT Power was successfully building up to secure access to PAWA’s infrastructure, PAWA had engaged an independent consultant Michael Kain (“Mr Kain”) to undertake some work on behalf of PAWA towards determining appropriate access charges. On 1 July 1998 the internal PAWA workshop took place to consider the information which PAWA needed to progress its consideration of appropriate access charges for access to its infrastructure, and the technical and commercial issues which also needed to be addressed. Officers within PAWA had a series of internal communications on those topics. It is clear that they understood that NT Power was pushing for access to PAWA’s infrastructure. It is also clear that they appreciated that such access, if granted, would impact adversely upon PAWA’s commercial interests. They were also, to varying degrees, aware of the need to adhere to or to implement National Competition Policy.

125 A significant meeting took place then on 15 July 1998. Mr Hutchison and Mr Freeman were present from NT Power and Trevor Horman (“Mr Horman”), Mr Chan, Mike Ashton (“Mr Ashton”) and Mr Seneviratne from PAWA. The PAWA representatives represented various technical expertise within PAWA. I was impressed with the evidence of each of those four PAWA officers. They were frank and forthright. I have no hesitation in accepting their evidence generally, including as to events which transpired at that meeting.

126 After an initial presentation by Mr Hutchison, the meeting concerned issues perceived by PAWA as relevant to PAWA granting access to NT Power to PAWA’s infrastructure. The issues included the consideration of how TUOS and DUOS charges might be determined. There is not really any dispute that the discussion recognised the need to identify what parts of PAWA’s infrastructure fell within its transmission network and what parts fell within its distribution network. It was then necessary to identify the PAWA assets within those networks and to determine a value for them. The basis of valuation was itself a matter which had to be addressed. It was also acknowledged that it was necessary to determine the operating and maintenance costs of operating PAWA’s network, and to determine the basis upon which those costs would be allocated amongst the users of PAWA’s infrastructure, including potentially NT Power. The process was a complex one, and likely to take some time.

127 Mr Freeman for NT Power proposed that NT Power would accept a preliminary estimate of TUOS and DUOS charges, to be adjusted when the process was finally completed, as a means of progressing its early access to the PAWA infrastructure.

128 Mr Chan raised certain technical issues. They included the consequences of the Mount Todd PS generating capacity being lost or “down” for a period and, in that event, the protocol for any load shedding; ie. whose and which customers would be temporarily deprived of power. He also raised the issues of determining how Mount Todd PS generation capacity was to be regulated and monitored to ensure that it met the customer load of NT Power, and of accurate metering especially when PAWA was providing power to NT Power’s customers while Mount Todd PS was not generating power. Mr Ashton also raised an issue as to system stability in relation to the LM6000 generator used at Mount Todd PS when feeding electricity into the system (although, as was pointed out at that meeting, the LM6000 had been installed and operating since November 1996 and had previously supplied electricity into the system when it was purchased by PAWA). PAWA tabled a substantial document, being a draft Technical Code, for consideration in establishing the technical arrangements for network interconnections.

129 Following that meeting, Mr Hutchison, on 15 July 1998, wrote to Mr Horman purporting to record in some detail the discussions and outcome of that meeting. His letter, in relation to TUOS and DUOS charges including the suggestion by NT Power of an interim arrangement, concluded

“The meeting considered these points raised and in broad terms had no major difficulty but PAWA would wish to evaluate the concept.”

130 His letter also invited comment, in the absence of which it “will be taken as accurate and reflecting the issues raised”. On 29 July 1998 he wrote further to PAWA responding to the technical issues raised by Mr Chan.

131 PAWA, through Mr Horman, responded to the letter of 15 July 1998 by letter dated 27 July 1998. His response indicated clearly that the PAWA officers attending the meeting on 15 July 1998 did not expect it to progress even to any tentative conclusions. He said:

“We must emphasise that we went in to (sic) the discussion believing that it was a workshop to express ideas and have them discussed in an open and frank environment with the objective of facilitating progress towards the determination of network charges.”

132 He pointed out that the topic was “new territory” for them and that the PAWA officers were desirous of taking on board all available knowledge and experience in progressing the development of network charges. He made some other comments to correct or place a different emphasis on the version of the meeting presented by Mr Hutchison.

133 It is clear that no agreement about TUOS and DUOS charges was reached at the meeting on 15 July 1998. No one claims that it was. But it is also clear that NT Power then expected the matter to progress quickly. It could not see why some form of interim arrangement was not able to be put in place in the short term. It expected a further meeting of the technical group on 27 July 1998, but that meeting did not proceed. Mr Hutchison attempted unsuccessfully to speak to Mr Gardner to rearrange that meeting. He perceived that Mr Gardner was endeavouring to avoid that contact.

134 NT Power contends that the technical issues surrounding load shedding, customer load following, systems stability, and backups or stand by power were all effectively resolved at that meeting. There were, it submits, no ongoing concerns of PAWA officers as to those matters and that the only outstanding issue by the end of July 1998 was the price PAWA would charge for access to its infrastructure. In my judgment, those technical issues remained unresolved by the end of July 1998. At the meeting, and subsequently in NT Power’s letter of 29 July 1998, NT Power provided its suggestions or responses in relation to those issues. It no doubt regarded those suggestions and responses as straightforward, and easy to implement. I accept that Mr Hutchison believed that those responses adequately dealt with PAWA’s concerns, and that PAWA should have adopted them. However, I am of the view that the PAWA officers at that meeting did not in fact agree that NT Power’s suggestions or responses were adopted, and that they wished to give further consideration to them after the meeting. There was no subsequent communication accepting those suggestions or responses. That is not to conclude that, in some or all respects, the outstanding technical issues could not have been resolved in the reasonably near future. Indeed, it is implicit in the legislation enacted by the Northern Territory in 2000 (referred to elsewhere in these reasons) which established an access regime, that either those technical concerns were by then overcome or that there were methods in place by which they could readily be overcome.

135 On 4 August 1998 a meeting took place between officers of Treasury, PAWA, Gasco and the consultants together with solicitors. It is a meeting upon which NT Power places considerable significance. Its stated objective was to “determine large commercial, legal and contractual issues that may affect the potential change in ownership of PAWA”. Those present were aware that one option for the Northern Territory Government, which was to be the subject of consideration in the Scoping Study, was the possible sale of PAWA to private interests. There was a report prepared of the meeting. There was broad discussion on a range of issues affecting PAWA and its possible sale. One topic discussed concerned Mount Todd PS. The version of that report which was settled by Mr Caldwell of Treasury is in the following terms, so far as it touches on NT Power:

“Some concern was raised that the Mount Todd power station had the potential to operate as a rival power generation and distribution supplier (to that of PAWA). It was however agreed that this would be a complex issue and that PAWA had the capacity to block such a move or at least delay it, and to gain benefit from the necessary access arrangements. The Mount Todd power station has been purchased by Power Facilities (NT) Pty Ltd through Mt Todd Power Pty Ltd. Power Facilities owns 95% of NT Power (the operator of the 132Kv line), with Darnor owning the other 5%.

The potential remains that the mine may reopen; with no gas agreement in place and an outstanding debt of some $3 million; it was suggested that the opportunity may exist for PAWA to supply the mine site with power, or at least backup and standby power.

It was agreed that the Mt Todd/NT Power issue was a difficult one, however may have its up-sides for PAWA.”

[The reference to NT Power is to NT Transmission and to Mt Todd Power Pty Ltd is to NT Power].

136 Mr Clarke was not at that meeting, although he said initially that he had been because he recalled the nature of the discussion recorded. I accept that he did not attend the meeting, but received information about its deliberations. He did not dispute that the general tenor of that record reflected his views. However, he did not agree with the use of the word “block” in that record, even though it was true that he did not want PAWA to give NT Power access to its infrastructure at that time. He explained that the discussion concerned whether or not PAWA should continue at that time to negotiate with NT Power with a view to endeavouring to provide access to PAWA’s infrastructure, and the implications to the possible sale of PAWA or the price that might be obtained for it. He denied that his intention, or that of Treasury, was to keep NT Power out of the market to supply electricity to consumers in the Darwin-Katherine area or to provide PAWA with the opportunity of revising and implementing its commercial strategies so that it could compete with other suppliers of electricity in that market, that is (in the vernacular) while PAWA got its act together. NT Power contends that the events at that meeting demonstrate clearly that PAWA then decided to no longer progress its negotiations about access to PAWA’s infrastructure, that is to “block” NT Power from competing with PAWA in the market for the supply of electricity in the Darwin-Katherine area, and that it did so for a purpose proscribed by s 46 of the Trade Practices Act. PAWA acknowledges that the meeting recognised that PAWA had the capacity to prevent or delay NT Power from supplying electricity to consumers in the Darwin-Katherine area through denying access to PAWA’s infrastructure. It contends, however, that the meeting does not reveal the purpose of the Northern Territory Government or of PAWA in deciding to deny access to PAWA’s infrastructure to NT Power.

137 NT Power referred to a particular passage in the evidence of Mr Gardner, which it contended encapsulated his approach at the time. That transcript reads:

“Your key concern, in relation to any question of access to the PAWA network, throughout 1998 was that access should not occur in such a way as would unfairly disadvantage PAWA. That’s right, isn’t it? ---That’s true, unfairly.

And you wanted PAWA to be in a position to fairly compete with any new competitor, if there was going to be any access?---Within the terms of the company’s policy requirements.

Yes, and throughout 1998 you didn’t think PAWA was in a position to compete with third parties, did you?---That was my view.

And your concern in any consideration you gave to questions of access was ensuring that access did not occur until PAWA was in a position to compete?---That was the advice I gave government early in 1998.”

138 PAWA notes in particular his use of the word “unfairly”. It contends that Mr Gardner was simply recognising the need for significant reform before PAWA could compete, consistently with the intent that

“competition in the medium to long term is best fostered by allowing the existing monopoly supplier time to rid itself of a tariff structure dictated by social/political considerations and other structural and cultural anomalies characteristic of government owned monopoly suppliers.”

139 Mr Gardner, elsewhere in his evidence, made it clear that the question of access was ultimately for the Northern Territory Government. In my view, the increasing input of and interest of Treasury officers in the performance and operations of PAWA during 1998 tend to confirm that position. I have held earlier in these reasons that that was the case. The fact that PAWA could not compete effectively in an open market because of the Government imposed framework in which it operated over many years was also recognised by Mr Clarke. That framework included the cross-subsidisation tariff policy imposed by Government and the system of imposing Community Obligation Payments to secure services to remote or small communities. It does not emerge from the evidence that PAWA’s general operational inefficiencies were the consequence of specific government directions.

140 PAWA’s submission, in somewhat colourful language, was that the Northern Territory wanted to open the door to competition gradually, permitting entry in an orderly and efficient manner, but NT Power wanted to knock the door down.

141 The matter was not progressing with the expedition which NT Power wished. Consequently, its solicitors on 17 August 1998 wrote to PAWA, principally to secure some agreement on TUOS and DUOS charges. The letter asserted that NT Power had committed itself to distribute power in the Northern Territory by 1 October 1998, so that it was necessary for the TUOS and DUOS charges to be established expeditiously. It reiterated the proposed methodology for fixing those charges as proposed at the meeting on 15 July 1998, and that NT Power would agree to interim charges which erred on the high side of what it regarded as the potential charges. The letter concluded:

“On our instructions however it appears that this relatively simple process of fixing TUOS and DUOS is being used in an attempt to stall our client’s commencement date and consequently competition for PAWA.

We write to you on our client’s instructions to draw these matters to your attention and request that as regulator of the industry you advise within the next few days of a projected time frame for the fixing of the TUOS and DUOS charges.

We understand from a technical point of view that if the charges are not fixed by 1 October, our client can use the network anyway and pay the estimated charges into a trust account but there seems no reason why by (sic) such a commercially untidy arrangement should have to be adopted with so much time available.

Because of the unique situation in the Northern Territory where you are both regulator and generator/distributor our client has kept the ACCC informed of these matters and so out of courtesy we are forwarding a copy of this letter to it.

We are also forwarding a copy of the letter to the Minister for Resources and Energy.

Having regard to the urgency of the matters set out above we would ask that you respond to this letter within seven (7) days.”

142 On 19 August 1998, advice was sought from the consultants preparing the Scoping Study as to the desirability of that report being considered before giving access to PAWA’s infrastructure to NT Power.

143 On 20 August 1998, Merrill Lynch responded to that request for advice. The fact of seeking that advice, and the nature of the response, is said by NT Power to be irrelevant. I ruled that that material might at least go to the question of the purpose of PAWA in the exercise of its (alleged) market power. The response of 20 August 1998 was to the effect that it would be premature for the Government to make any decision concerning access principles before it had had the opportunity of reviewing:

“… the Scoping Study and determin[ing] its position with respect to the future of PAWA and more generally the provision of electricity and water/sewerage services in the Territory.”

144 It pointed out that it was not practicable to assess the appropriate charges for access to PAWA’s infrastructure until a comprehensive review of PAWA’s existing cost structure and capital base had been undertaken, and values established for its distribution and transmission assets, as well as the need to address “substantive technical issues” including backup arrangements and network ancillary services. The consultants had not been asked to do that work, but suggested it be undertaken. They thought that that work could be completed by the end of 1998.

145 At the same time, Treasury and PAWA reported to the Treasurer and to the Minister for Essential Services on the letter from solicitors for NT Power. That memorandum recommended, inter alia, that the Minister

“agree that PAWA should defer the establishment of access arrangements for the above until the outcome of the PAWA Review is decided by Cabinet, but continue the technical background work to develop an appropriate access regime for the Territory; and …”

146 It explained the background to the request of NT Power, including the grant of the Licence and subsequent discussions regarding access to its infrastructure. It referred to the “complex and strategic” nature of the issues involved, and the advice both of the consultants and of PAWA’s solicitors to the effect that a decision on whether to grant access to NT Power should be deferred.

147 Mr Clarke and Mr Gardner sent a further minute to those Ministers on 24 August 1998. It recommended that they note NT Power’s request to gain access to PAWA’s infrastructure, and that its stated purpose is to “poach” PAWA’s largest customers. In other communications, the proposed provision of services by the supply of electricity to PAWA’s larger customers was called “cherry picking”. It noted the steps necessary before NT Power could provide that service, and the difficulties it would confront in doing so.

148 Clearly, from information received about approaches to PAWA’s customers and about approaches to Santos to secure gas supplies to operate the Mount Todd PS, that intention by NT Power was seen as a genuine and real one.

149 That minute identified that, for NT Power to fulfil its intention, NT Power would have to secure gas supplies from the Mereenie Producers (as the Palm Valley Producers had no capacity to provide any additional supply) and secure its transportation. Messrs Clarke and Gardner pointed out that Gasco had the first right of refusal on any sales, and that any gas supply was likely to be interruptable and that a longer term than one year was likely to be needed for the upgrading of the Mereenie gas treatment plant for any confirmed gas supply. On the issue of gas supply and transportation, in addition to the two matters referred to, it also indicates that both Santos and NT Gas may seek to recover from NT Power, as part of any new supply or transportation contract, restitution for significant losses sustained when Pegasus ceased operating the Mount Todd Mine. It also points out that the Darnor appointed director on the Board of NT Gas had to vote in favour of the “necessary new investment” for NT Gas to be able to supply transportation of gas.

150 The memorandum also identifies the need for NT Power to upgrade the 22kV line between Mount Todd and Edith River at considerable cost, to obtain access to the 132kV line (which it assumes will require agreement on commercial and technical terms), and to secure contracts to supply electricity to customers in the Darwin-Katherine area. It also recognises that NT Power would have to obtain access to PAWA’s infrastructure, requiring agreement on commercial and technical terms still to be negotiated, and to contract with PAWA for stand by or backup supply of electricity. It referred to NT Power’s letter of 17 August 1998 as

“… just the beginning of detailed negotiations on terms that would be required, eg. how much electricity, time of day, amount of notice.”

151 The commentary was in the following terms:

“All along, the Group has taken a “take it or leave it” approach to their plans. There are very many technical issues and commercial issues that need to be addressed to PAWA’s satisfaction to ensure no risk occurs to the integrity of supply to PAWA’s customers. To date, many of these items have been treated somewhat superficially by the Group.

For public safety, reliability and commercial reasons, it would be inappropriate for PAWA to accept the Group’s position, without settling every detail involved. For example, the Mt Todd generator at full operation would add 15% to the Darwin/Katherine system. The loss of this amount would require very careful management or else the entire system could fail.

James Noonan is providing further legal advice on the issues. The Merrill Lynch and Fay Richwhite advice remains relevant that we should not agree to any deal with the Group before consideration of their Scoping Study.

As a final observation, it seems plausible that the Group are trying to put pressure on Government by claiming that the only impediment to customers getting much cheaper electricity is the attitude of PAWA and PAWA’s inefficiency. Moreover, it seems that the Group may be positioning itself to be the only bidder to buy PAWA at the Group’s price. Obviously, if PAWA is to be sold, the best outcome in terms of sale price and future electricity prices would come from a competitive sale.”

152 PAWA’s response by letter from its solicitors of 26 August 1998 was in a form approved by those Ministers. It indicated that the issue of access to PAWA’s transmission and distribution network was, inter alia, presently the subject of a policy review by PAWA and Government. It referred to unresolved technical issues, as well as the unresolved access charges, which it disputed were easy of resolution. It also asserted that PAWA had not agreed to permit NT Power to have access to PAWA’s infrastructure, with only the issue of TUOS and DUOS charges to be resolved.

153 I accept that the effect of the letter of 26 August 1998 was to bring an end to the discussions about the terms upon which NT Power might be granted access to PAWA’s infrastructure, at least for the time being. In practical terms, that meant that NT Power was not granted access to PAWA’s infrastructure at that time or until, and under the terms, of the access regime introduced on 1 April 2000. It also signalled that PAWA would not indicate to NT Power the terms upon which PAWA would grant access to its infrastructure, at least until the access regime was disclosed.

154 Perhaps not surprisingly, the solicitors for NT Power responded on 1 September 1998 joining issue with all those responses. That letter concluded with the claim that the Licence itself carried with it the right of access to PAWA’s infrastructure, as well as claiming that all discussions had proceeded on the basis of such access, and that representations had been made as to the right of such access.

155 Mr Clarke’s expressed reasons for deferring any action in developing and formulating an access regime with respect to PAWA’s infrastructure at this point were that, to advance the negotiations would require extensive research and consultation with a number of government departments, industry experts, and prospective users of PAWA’s assets. It was logical to defer that extensive work until the Northern Territory Government, following the receipt and consideration of the Scoping Study, decided whether to privatise PAWA. He was also concerned that giving access to PAWA infrastructure to NT Power prior to the final decision by Government on a general access regime might complicate any future privatisation of PAWA or reduce its value on a sale.

156 Mr Gardner’s expressed reason for declining NT Power access to PAWA’s infrastructure at the time was

“… to allow to the Northern Territory Government and to PAWA a reasonable opportunity to obtain and consider Merrill Lynch and Fay Richwhite’s report; to resolve one way or the other the privatisation issue; to investigate other electricity markets and access regimes; to consider the interests of consumers of electricity in the Northern Territory and the taxpayers of the Territory the most appropriate regime and charges whereby access would be granted; to formulate such a regime and charges; and to implement them in an orderly, reasonable and fair fashion so as to provide a fair and rational basis for competition in the electricity market in the Northern Territory; and, by doing all these things, to implement in the most appropriate way the aims and objectives of National Competition Policy.”

He considered that NT Power had erroneously assumed, as the text of its letter suggested to him, that NT Power was in a “quasi-power pooling arrangement” with PAWA. He did not regard any such relationship as existing.

157 NT Power contends that those documents should lead to the inference that PAWA’s purpose (and that of the relevant Ministers in giving the direction sought) was to prevent NT Power from entering the market to supply electricity to consumers in the Darwin-Katherine area, and that Mr Gardner as PAWA had that proscribed purpose in being party to those memoranda. It contends that there was but a charade of obstacles to the grant of access to PAWA’s infrastructure, when the reality was that it had been decided not to provide access to PAWA’s infrastructure so as to prevent or deter NT Power from competing in that market.

158 I do not accept that the position is as clear as NT Power contends. I consider separately, and later in these reasons, whether PAWA’s conduct at this point amounts to a contravention of s 46 of the Trade Practices Act. At this point it is sufficient to record my finding that I do not consider that PAWA through its officers was deliberately creating artificial obstacles to or reasons why NT Power should not be given access to its infrastructure. As already noted, I have no doubt that Messrs Horman, Chan, Seneviratne and Ashton were honest and genuine in their dealings with NT Power. In August 1998, when it became more apparent to Mr Gardner and to Mr Clarke that it was necessary or desirable to decide whether to call a halt (at least for a time) to the ongoing negotiations and discussions with NT Power, due to wider strategic and commercial considerations, or to refer to the responsible Minister that issue for decision, those outstanding issues of concern to PAWA officers remained to be addressed. The fact that those issues were referred to in the letter from PAWA’s solicitors of 26 August 1998 did not constitute any element of charade on its part.

159 Nevertheless, it is clear that the potential impact upon PAWA’s commercial operations of giving NT Power access to its infrastructure at that time was also a matter which they clearly understood. To the extent that the communications to the Ministers did not expressly say so, I infer also that the Treasurer and the Minister for Essential Services equally understood that NT Power would be likely, if given access to PAWA’s infrastructure at that time, to secure a significant percentage of PAWA’s market for the supply of electricity and that NT Power’s likely customers were the larger commercial enterprises. PAWA, by reason of its tariff structure whereby commercial customers cross-subsidised domestic customers, could not have competed effectively on price. The tariff structure would have had to have been altered, probably to reduce PAWA’s operating revenue from the supply of electricity, if those more profitable and larger customers were not to be lost to PAWA. The Treasurer recognised that position in a radio interview on 31 August 1998 when he said:

“We’ve got to take into account the public good, bearing in mind that the public owns the power and water authority. We don’t want to see companies moving in, taking out the more profitable customers from the power and water authority and leaving the taxpayer with the unprofitable parts of the operation which they would have to operate at a higher cost because you wouldn’t have the more profitable customers in the business circuit that the power and water authority currently has.”

and later

“But if we can find a way to introduce a cheaper form of electricity generation … but it has to meet the need the needs of all consumers. We don’t want some sectors of the community being disadvantaged because a company comes in and takes the more profitable operational areas and whilst that might be good for the consumers that they would supply it would be disastrous for those that had to meet the higher costs because they were being supplied by a less efficient operator.”

160 The Treasurer made it clear that there were more processes to be undertaken by the government and by PAWA before the issue of access to NT Power, and to other potential third party suppliers of electricity, was determined by the Northern Territory Government. His media release of 2 September 1998 also referred to numerous technical and legal issues to be resolved.

161 The position at September 1998, from the point of view of the Northern Territory Government, and PAWA, was assessed by Mr Clarke on 4 September 1998. The options were:

(1) to continue negotiations with NT Power with a view to agreeing terms for its access to PAWA’s infrastructure, with the risk of significant commercial detriment to PAWA as well as possibly compromising the options of selling PAWA or of introducing “logical commercial” restructure of the electricity industry presumably including an access regime;

(2) to acquire from NT Power its electricity output from the Mount Todd PS or the Mount Todd PS itself (but to that point the offers by NT Power were regarded as uncommercial); or

(3) to defer any further negotiations on access with NT Power, so that it could not enter the market for some time, having regard also to other “barriers” to its entry into that market including the difficulty of getting gas from the Amadeus field unless the Northern Territory Government permits it (presumably by not exercising its pre-emption right under the 1985 Mereenie Gas Sales and Purchase Agreement) and during that time an access regime could be established.

162 A ministerial memorandum from Mr Clarke and Mr Gardner to their respective Ministers of 2 September 1998 noted that NT Power had recently sought assured supplies of gas from the Amadeus oil and gas field, but that there were likely obstacles to that gas being available in the short term or at a competitive price, including due to Gasco’s right of pre-emption.

163 It is not necessary to refer in as much detail to the internal communications of Ministers, Mr Clarke and Mr Gardner or other officers of PAWA in the succeeding months. The position is that they were of the same mind that NT Power should not be permitted to have access to PAWA’s infrastructure for the time being, particularly when it had not yet been decided whether PAWA would be sold. The decision on that would follow receipt and consideration of the Scoping Study. In addition, they wished to have the opportunity to put in place a formal access regime, and to have the opportunity of restructuring the tariffs charged by PAWA, and introducing other efficiencies into its operations. They all regarded NT Power as endeavouring to secure a status as a competitor in the market for the supply of electricity in the Darwin-Katherine area ahead of, and to the detriment of, those processes and of other third parties who might wish to enter that market.

164 On the evidence, there seems to have been little communication between PAWA and NT Power then for some time. From September 1998, NT Power set about seeking customers to purchase electricity generated by Mount Todd PS. It “secured” a number of potential customers, some of which executed written agreements for the supply of electricity and some of which indicated informally an agreement to acquire electricity from NT Power. Mr Hutchison was confident that had NT Power access to PAWA’s infrastructure from 1 October 1998 or from 1 January 1999 it would have been able to sell electricity to the extent of its annual generating capacity at Mount Todd PS. It proposed to offer to sell electricity to commercial customers at a significant percentage less than the prices of PAWA, although a direct comparison is difficult because of PAWA’s structured pricing tariffs. In that period, PAWA and the Northern Territory were first awaiting, and then considering, the Scoping Study. Within PAWA, however, the latter months of 1998 were a period of significant activity.

165 In October 1998 the Scoping Study was provided to the Northern Territory Government. It identified ways in which PAWA could become more efficient. The process of government consideration in response to that report is identified first by the announcement by the Treasurer to Parliament that a major review into PAWA was nearly complete. He said

“The consultants are to brief Cabinet on the review later this month. The bottom line is that costs have to be reduced to enable tariffs to be reduced, especially for commercial customers. If this does not occur, competitive pressures will result in PAWA losing business and therefore jobs. ...”

and in relation to publicity concerning the current claim by the applicant, he added:

“The Government will ensure that any changes occur in a timeframe which will allow the process to be properly managed. Consultation will, of course, be widespread and properly managed once the basic directions have been set.”

166 A ministerial statement by the Treasurer was made on 1 December 1998. It reported that a comprehensive strategy had been developed to put PAWA in a sustainable position for the long term, as the Government had decided to provide PAWA with “an opportunity to realise sufficient savings by its own means”. He said that would enable desired cost savings to be met with a smaller loss of employment positions than with privatisation. He said that efficiencies amounting to almost $30 million per year would need to be realised if PAWA was to become truly competitive and to be able to reduce electricity charges to consumers. He identified a key issue as the mismatch between costs and tariffs for commercial customers. He expressed the fear that those tariff mismatches could result in alternative suppliers entering the market and “cherry picking” the larger commercial customers. PAWA sales revenue would fall dramatically but its largely fixed costs would not reduce much, and prices for domestic consumers would have to go up or Government subsidy to PAWA would be necessary. Consequently, he said the Government had a comprehensive strategy to put PAWA in a sustainable position for the long term. Tariffs for commercial customers were to progressively become cost reflective over the next three years, with reductions commencing on 1 April 1999. A three year program of cost reductions was to commence immediately to fund the tariff reductions. PAWA was to be exposed to increasing levels of competition as the tariff reductions are implemented. Over time, private businesses were to be able to compete for progressively more customers. PAWA’s regulatory functions were to be transferred to another agency. He said:

“It will take some time to develop and implement the appropriate regulatory arrangements and it will probably be 2-3 years before the process is complete. As well as exposing PAWA to competition, appropriate arrangements will have to be put in place to ensure standards of service are not compromised and PAWA is not penalised by having to be the provider of last resource. The regulatory arrangement will include the development of an access regime so that an independent power producer could have access to the transmission and distribution systems.”

167 On 23 November 1998, Mr Gardner ceased as Chief Executive Officer of PAWA. He was replaced by Barrie Chambers (“Mr Chambers”).

168 On 3 December 1998, the Chairman of NT Power Mr Everingham and Mr Hutchison met Mr Chambers in an endeavour to secure progress in its claim for access to PAWA’s infrastructure. The meeting was followed up by a letter of 4 December 1998, demanding speedy resolution of NT Power’s claims, inter alia, for “formal confirmation of access (implied by the licence)” and for fixing of TUOS and DUOS charges. Those communications did not result in any outcome satisfactory to NT Power.

169 These proceedings were commenced on 12 March 1999.

170 The Scoping Study of 16 October 1998 was considered by Cabinet on 26 October 1998. It is not necessary to identify its specific recommendations. It confirmed that which, at least intuitively, was well known to Treasury and to PAWA that PAWA was not then in a position to compete in the market for the supply of electricity services due to the tariff structure, whereby commercial consumers of electricity in effect subsidised domestic consumers, and due to the level of its operating costs and its overall financial performance. On 2 November 1998, a joint public statement by the Treasurer and the Minister for Essential Services confirmed the need for major restructuring of PAWA. The Scoping Study was further considered by Cabinet on 23 November 1998 and on 15 December 1998. Following the meeting on 2 November 1998, the Treasurer and the Minister for Essential Services announced in general terms action which was to be taken with respect to PAWA. The Treasurer’s statement was called ‘Planning for Growth’.

171 In the meantime NT Power was exploring further the prospect of selling the electricity generated at Mount Todd PS to PAWA. By letter of 11 December 1998, it proposed doing so upon certain terms with the electricity supplied to be provided to the Palmerston area. On 15 December 1998, Cabinet decided to reject that proposal. That followed a memorandum from Mr Clarke to the Treasurer of the same date. Mr Gardner had ceased by then to be the Chief Executive Officer of PAWA, from 23 November 1998. He had been replaced by Mr Barrie Chambers. Mr Clarke’s memorandum, relevantly, read:

“You are undoubtedly aware of proposals to supply power to the Darwin region by a company (Power Facilities) headed by Mr Paul Everingham.

Power Facilities have been players in the NT electricity market for some time as operators of the 132kV transmission line from Darwin to Katherine. They have also reportedly purchased the Mt Todd Power Station for a relatively low price and the 132kV transmission line for which the NT Government (via PAWA) is contracted to meet certain minimum costs.

This puts Power Facilities in a position where it could conceivably supply electricity to the Darwin/Katherine region.

The problem for the Territory is that we are not yet in a position where competition can sensibly occur. Prices for our major commercial customers are currently well above costs which means large commercial customers are cross subsidising smaller customers including households. Were competition to occur immediately, Power Facilities could “cherry pick” the large customers, leaving PAWA with much the same overall costs but a dramatic reduction in revenue.

These losses would have to be met by the Territory community in one form or another whether by increased prices or higher taxes. The Government has taken the view this would not be in the public interest.

Don’t get me wrong. We want competition on the basis that competition will drive down costs. However, competition needs to be introduced in an orderly way that does not leave Territory residents worse off.

The Government has announced a strategy for achieving this in the Treasurer’s second Planning for Growth Statement of 1 December 1998. In particular

· commercial tariffs are to be progressively aligned to costs,

· this reduction in tariffs will be paid for by cost reductions within PAWA,

· an appropriate regulatory framework is being developed to allow competitors access to the electricity network and to ensure competition is effective in pushing overall industry costs down, not up.

These three strategies will mean competition can progressively be introduced without causing huge losses to PAWA and hence the community at large.

The issue of ensuring overall industry costs go down, no up, is particularly important given the relatively small size of the Territory system. The Territory is quite different to the States where there are interconnections between States, let alone towns and cities. This means achieving economies of scale is not a problem down south, but it is here. We have to have a framework for electricity supply that facilitates competition but prevents fragmentation. This is one of the issues being worked on right now.”

172 That memorandum describes the import of the Treasurer’s statement about restructuring PAWA and tariff re-setting of 1 December 1998. It also, in my judgment, reflects the state of mind of PAWA (through Mr Gardner to 23 November 1998) and of the Northern Territory Government in relation to the implementation of the National Competition Policy and to NT Power’s request for access to PAWA’s infrastructure. No Minister of the Northern Territory Government gave evidence. That is not a matter of which I am at all critical. But, to the extent that the Northern Territory Government either collectively or through the responsible Minister, the Minister for Essential Services, was the guiding mind in PAWA’s response to NT Power’s request for access to PAWA’s infrastructure, it is necessary to infer from other evidence the state of knowledge and the reasons for the action or inaction of the Government or the Minister. I do so having regard to the information which is before me as to the state of knowledge of PAWA through its officers, particularly at relevant times Mr Gardner, and of other government officers particularly Mr Clarke as the Under Treasurer. I also reach that conclusion having regard to the terms of communications to the Treasurer and to the Minister for Essential Services from their principal officers. I have also, of course, had regard to other documentary and oral evidence, and the inherent probabilities arising from the course of events.

173 NT Power also sought to rely upon internal Treasury and PAWA memoranda of other officers, particularly of Mr Caldwell, to advance its claim that the reasons for the decision for not granting access to PAWA’s infrastructure were more venial. I have considered that additional material, but it does not lead me to any different finding about the state of knowledge or the state of mind of those Ministers or of the Northern Territory Government. The views of individual officers within PAWA or within Treasury are not necessarily reflective of the views of PAWA or of the Under Treasurer or of the Government.

174 It will be necessary later in these reasons to consider in greater depth the reasons for decisions taken by PAWA, or by the Minister for Essential Services or the Treasurer or the Northern Territory Government when I address the claim by NT Power based on s 46 of the Trade Practices Act.

175 It is desirable, before doing so, to turn attention back a little to record my findings about NT Power’s attempts to secure gas supplies to enable it to operate the Mount Todd PS, and as to its dealings with Gasco. Those findings are relevant not just to NT Power’s claim against Gasco, but also to its claim for damages. It would not have been possible for NT Power to commence supplying electricity from Mount Todd PS to consumers in the Darwin-Katherine area without an adequate supply of gas to operate the LM6000 generator. It contends that it could have been in that position by 1 October 1998, although it acknowledged 1 January 1999 was a more realistic target as events unfolded. It is also convenient to record my findings about the reopening of the mine, now called the Yimuyn Manjerr Mine, in 1999, and of the arrangements NT Power made or had available to it to increase its generating capacity at Mount Todd PS.

176 NT Power through Mr Hutchison recognised the need to secure supplies of gas, preferably on a non-interruptible basis, at least by August 1998. In addition, he recognised that NT Power would require some arrangement with PAWA for the supply by PAWA of backup electricity in the event that Mt Todd PS was not operating, whether due to breakdown or maintenance or (as soon appeared as another contingency) if the supply of gas was interrupted.

177 On 14 August 1998, NT Power wrote to PAWA to determine the charges PAWA would impose to supply electricity to NT Power to on supply to its customers in the Darwin-Katherine market in the event that Mount Todd PS was off line. The letter acknowledged that that may occur through maintenance requirements, failure of the gas supply, or breakdowns of the Mount Todd PS.

178 In late August 1998 Mr Hutchison made contact with Santos again, on behalf of the Mereenie Producers, to secure supply of gas. As he then pointed out, the gas NT Power would be using would be that which would otherwise be used by PAWA for the generation of electricity to be sold into the Darwin-Katherine market. He also resumed dealings with the operators of the two gas pipelines (from Amadeus Field to Darwin, and from that line to Mount Todd PS), namely NT Gas and AGL.

179 Santos representatives met with NT Power representatives apparently for the first time on 28 August 1998, in relation to securing supply of gas to Mount Todd PS from 1 October 1998. The Santos representative told them the request was belated, that is that a longer lead up time was desirable. He told them of the existing supply contract with Gasco under the 1985 Mereenie Gas Sales and Purchase Agreement including the pre-emptive right, and that a firm supply arrangement could not be made until Gasco waived its pre-emption right or, in respect of particular supply, chose not to exercise it. He noted also that Gasco sales were significantly higher in 1998 than in the previous year. That is consistent with other evidence that the demand for electricity in the Northern Territory was increasing, and indeed increasing beyond that which had been budgeted. In confirmation of that fact, on 19 November 1997 Gasco had entered into a supplementary Gas Sales and Purchase Agreement with the Mereenie Producers for the supply of additional gas from that field. He noted also that the Mereenie Producers required significant quantities of gas themselves for re-injection to support oil production. The Santos representative also told NT Power that a plant upgrade was scheduled to be on line on 1 February 1999, but the increased gas flow to result was largely committed to Gasco, to their existing other customers, and to their own needs. The supply of a secured or non-interruptible gas supply might therefore involve further wells and further plant capacity. In addition, once any formal request from NT Power was received, there would need to be a technical and commercial review, review of plant capacity, and then board approval.

180 As noted earlier, Mr Hutchison stressed that as NT Power would be competing with PAWA, and in essence supplying the same market, so that the gas then sought by NT Power would be gas which would not then be required or used by PAWA for the generation of electricity.

181 On 31 August 1998, NT Power wrote formally seeking a secured supply of gas from the Mereenie Producers. Santos responded on 11 September 1998 with an indicative offer, with the proviso that any change in NT Power’s requirements might require additional plant capacity and so revised terms. Santos indicated that it could not make a formal proposal unless and until Gasco had waived its pre-emptive right or had elected not to exercise it in respect of a particular offer of gas. As the offer to Gasco which was required to be made involved a thirty day response period, Santos pointed out that the suggested 1 October 1998 commencement date “could be unlikely”. It also added the further time reservation that authorisation of the proposed supply agreement might be sought from the ACCC, and that process itself might take some months.

182 There is no evidence of NT Power responding promptly.

183 AGL responded positively in relation to transmission of gas in the Mount Todd Lateral Pipeline, as did NT Gas in relation to the transmission of gas in the Gas Pipeline on 8 October 1998. NT Gas said that its response was subject to the gas being in substitution for gas which would be otherwise used by PAWA to generate electricity. That is because the gas carrying capacity of the Gas Pipeline would be put at stress if the overall volume of gas to be transported was increased significantly.

184 In the meantime, General Gold Resources NL (“GGL”) was contemplating acquiring Mount Todd Mine and reopening it. In August 1998, GGL undertook negotiations with NT Power to explore securing electricity on acceptable terms from Mount Todd PS if the Mount Todd Mine were to re-open. GGL at that time was still in the process of determining whether to acquire and operate the mine. GGL wished to secure a reliable power supply on commercially acceptable terms before finalising its tender for the mine. Two issues affecting NT Power’s putting forward a fixed proposal were uncertainty about the price at which it could obtain gas, and uncertainty about the extent to which it could use the LM6000 at full capacity by selling electricity generated which was surplus to the mine’s requirements to PAWA or to other customers using PAWA’s infrastructure. Those negotiations did not progress until February 1999.

185 A further meeting of representatives of the Mereenie Producers with Mr Hutchison took place on 9 October 1998. The NT Power target supply date then was December-January 1999, and it wanted to pay the same price that PAWA (through Gasco) paid to the Mereenie Producers. NT Power was also having problems resolving with NT Gas issues about transportation of gas, in particular as to price. At the time, the Administrator of Pegasus was seeking to sell Mount Todd Mine, and it was expected that the mine would resume operations under another owner in late 1999. That would increase NT Power’s gas requirement. Matters discussed appear largely to have been going over ground sown in earlier communications. The representative also indicated that the Mereenie Producers had excluded from their planning the potential supply of gas to Mount Todd PS to service the electricity demands of the mine once it had closed, and that the previous supply of that gas when Pegasus was operating the mine would not automatically be available. If the requirement of NT Power was for firm supply, requiring additional plant and development, the planning of that upgrade would take a considerable time and there would be at best a sixteen month lead time from gas sales contract execution until available plant capacity.

186 Again, NT Power did not immediately press the issue. It wrote to Santos on 14 December 1998 acknowledging the meeting on 9 October 1998. Other issues had delayed its response. It proposed to submit a formal request soon thereafter.

187 NT Power was understandably concerned that Gasco might exercise its pre-emptive right so as to procure the gas which otherwise would have been sold and supplied to NT Power by the Mereenie Producers. The potential exercise of that pre-emptive right was an impediment to NT Power being assured of gas supplies and so of being able confidently to contract to supply electricity to customers, or to GGL.

188 By letter of 24 December 1998, NT Power sought from Gasco

“a written undertaking that you will not exercise your pre-emptive right against our Company or alternatively that Gasco will supply gas to our Company on the same terms as it supplies to PAWA.”

189 It sought a response by 10 January 1999. By letter of 9 January 1999, Gasco responded through its solicitors. The response was in the following terms:

“Gasgo Pty Limited’s directors will fully discharge their duty to act in the interests of shareholders at all times.

Further, if Gasgo does receive a notice from the Mereenie Producers regarding its rights under the 1985 contract it will deal with it as quickly as possible in the circumstances then applicable having regard to shareholder interests, the public benefit and other relevant considerations.

Contrary to your letter, we are advised that no formal offer has been made by Santos and further that, only a few weeks before your letter to our client, your company wrote to the Mereenie Producers apologising for the delay in providing further detail of its requirements. On the information available to us your company’s requirements are yet to be resolved and detailed negotiations have not yet commenced.”

190 NT Power has not otherwise received from Gasco either the undertaking it sought or the offer to sell NT Power gas upon the terms it requested.

191 The finalised expression of NT Power’s gas requirements was made in its letter to Santos of 15 January 1999. It sought an uninterrupted supply of a quantity of gas at a specified average daily consumption rate, with an increase to a specified quantity in the next three years. It sought a response by 23 January 1999, and then proposed to meet “to finalise price and documentation”. The proposed timetable imposed, given the elapse of time, and the apparently ingenuous expectation of prompt final negotiations, is an indication of Mr Hutchison’s preparedness to ‘barge through’ without recognising the difficulties which had been conveyed to him by representatives of the Mereenie Producers. It appears that nothing developed from that particular request in the time nominated by NT Power or for some time thereafter.

192 On the evidence, the Mereenie Producers were about to complete a plant upgrade to ensure for Gasco a gas supply which was uninterruptible up to its then anticipated requirements. All the deliverable gas was being supplied to PAWA, with a small amount for re-injection. Interruptible supply might have been available to NT Power beyond that. The Mereenie Producers’ policy is to install firm gas producing capacity only when the gas is contracted to be bought.

193 The negotiations between NT Power and GGL with respect to Mount Todd PS supplying electricity to the mine, if it reopened, were also revived in February 1999. On 19 February 1999, a confidentiality undertaking was entered into so that negotiations could progress. GGL on 15 March 1999 specifically raised concerns about NT Power’s access to gas supplies to fuel the LM6000, although Mr Hutchison had previously informed it in unduly confident terms of letters of offer for supply from Santos and of gas and transportation from AGL and NT Gas. A media release of 12 March 1999 by the Minister for Essential Services had prompted GGL to raise that issue.

194 General Gold Operations Pty Ltd was appointed as operator of the Mount Todd Mine on behalf of GGL and the other members of that mining consortium on 18 March 1999. It assumed negotiations with NT Power for the supply of electricity to operate the mine. By letter of 24 March 1999, it sought to finalise negotiations with NT Power, but subject to NT Power having a backup supply agreement with PAWA and arrangements satisfactory to GGO for the supply and transport of gas to fuel the Mount Todd PS.

195 The plan of NT Power was to increase its generating capacity at Mount Todd PS. Mr Hutchison arranged for enquiries to be made for additional generators. On 17 March 1999, NT Power paid to secure options over two Frame 5 GE Gas Turbines, for a period of two months. The options were extended by two further terms of two months for further payments and thereafter every two months. If NT Power had access to PAWA’s infrastructure, it proposed to purchase those two turbines. The purchase price at 16 March 1999 was substantial. Mr Hutchison also claims that, had access to PAWA’s infrastructure been granted in July or August 1998, NT Power would have commenced generating electricity for public consumers from 1 October 1998. In that event, Mr Hutchison claims that that additional generation capacity would have been acquired by about that date rather than March 1999. They would then have been commissioned by 1 March 1999.

196 NT Power’s generation capacity at Mount Todd PS would then have increased from 35.5 megawatts to 63.1 megawatts from 1 March 1999. The maximum claimed generation capacity of the LM6000 is 300 gigawatt hours per annum, and at an expense of a claimed $150,000 to upgrade the 22kV line and transformers, could have been transmitted into the 132kV line and then to PAWA’s infrastructure by 1 March 1999.

197 NT Power then intended to combine cycle the LM6000 with the two Frame 5 Gas Turbine generators. It is claimed that by 1 March 2000 the generation capacity would have been an additional 105 gigawatt hours per annum. That level of transmission, it is acknowledged, would have required upgrade of the 22kV line between Mount Todd and Edith River to a 132kV line at a cost of some $2.1 million.

198 Following decisions of the Northern Territory Government in December 1998, Mr Clarke established the committee for the development of Territory regulatory regime for electricity water and sewerage services (“the Regulatory Committee”). It first met on 22 January 1999. It comprised persons from the Treasury and from PAWA. Its role was to develop a regime for economic regulation involving a Utilities Commissioner, and the opening up of non domestic electricity customers to competition, and secondly the separation of the remaining regulatory and policy functions within PAWA. There is no reason not to accept that the processes of the Regulatory Committee are not accurately recorded, or that it was not performing its functions conscientiously.

199 The Regulatory Committee decided that development of an access regime should be a high priority, with a target of September 1999 to enable a trial run before commencement of competition in 2000. Treasury was to prepare a discussion paper, and PAWA to prepare a paper on options for the opening of the electricity market, energy planning and increments to a capacity “including the technical issues involved”. It was also conscious of the need to preserve services to remote communities at proper levels and at reasonable cost. That work progressed conscientiously throughout 1999.

200 On 21 April 1999 NT Power representatives and PAWA representatives met to discuss the availability of backup power from PAWA. A representative of GGO was also present. One issue which arose was whether the supply agreement between NT Power and Pegasus was still in force, despite the appointment of an Administrator.

201 On 10 May 1999, the Administrator of Pegasus formally notified NT Power of the sale of the mine. He gave consent to the variation of the Electricity Purchase and Sale Agreement of 2 September 1996 between NT Power and PAWA to support the mine by the onselling of backup power supplied by PAWA to NT Power so that onselling could be to GGR rather than Pegasus. The negotiations with GGO were continuing. NT Power put forward a final form of the proposed agreement on 17 June 1999. AGL did likewise on 8 July 1999. On 9 July 1999, NT Gas put forward its final transportation of gas proposal to NT Power. The Yimuyn Manjerr Gold Mine was then expected to commence operations on 1 August 1999.

202 The Mount Todd Mine resumed operations under the management of GGO, and under the name the Yimuyn Manjerr Mine. On 1 September 1999 NT Power contracted with GGO to supply electricity to the mine. It had continued its negotiations with the Mereenie Producers in the meantime.

203 The Mereenie Producers met with NT Power in furtherance of negotiations on 30 April 1999. NT Power had then a clear picture of the requirements of GGO when the Mount Todd Mine re-opened. NT Power sought gas supplies for that purpose. It had not pursued its request for gas supplies in respect of the generation of electricity at Mount Todd PS beyond the requirements of the mine until the determination of its claim in this action. It sought a very prompt response. It was told that that deadline would not be met, that the Mereenie Producers may seek ACCC authorisation for any agreement with consequent and not inconsiderable delay, that there were issues of plant and field capacity so that probably interruptible supply only could be provided and firm supply requiring plant upgrade could take up to twenty months. The provision of an interruptible supply available from about the end of July 1999 was generally accepted informally as the realistic outcome.

204 It was also indicated that the Mereenie Producers would require some guarantee of NT Power’s obligations under any gas sales and purchase agreement. That issue subsequently loomed large.

205 Reference was also made to the need to provide to Gasco the right of pre-emption.

206 There was an exchange of correspondence about the details of that meeting. Mr Hutchison put his version (a simplified one) on 4 May 1999, requesting confirmation within two days. Santos responded on 11 May 1999. It pointed out that the Mereenie Producers’ present field deliverability was fully committed to gas sales and re-injection. Further drilling was being undertaken. Its present plant upgrade was to meet current commitments. Augmentation of capacity was likely to require a minimum of fourteen months. NT Power therefore had little option but to accept an interruptible supply. Santos also pointed out the need for the Producers to make a technical evaluation of NT Power’s requirements with a view to preparing a detailed commercial proposal, and that any agreement may require ACCC authorisation. NT Power accepted that interruptible supply to resume electricity generation for GGO. It pressed for finalisation. The exchange of correspondence is vigorous.

207 By letter of 11 June 1999 Santos conveyed to NT Power its proposed draft Gas Sale Agreement for the supply of the required gas over three years. The “offer’ was subject to Gasco declining to accept the gas under its pre-emption right. The proposal was discussed at a meeting on 15 June 1999. In its terms, it was not acceptable to NT Power. In particular, NT Power regarded as “draconian” the requirement for an independent guarantee of NT Power’s obligations under the proposed agreement, and the need for ACCC authorisation, and the provisions dealing with the consequences of any finding of any breach of the Trade Practices Act by the proposed agreement, and as to the price. Subsequent written and oral communications took place. They concerned inter alia price, the guarantee, deliverability, and the need for authorisation.

208 In anticipation of agreement, Santos by letter of 30 June 1999, notified Gasco of the proposed agreement with NT Power and offered to sell to Gasco the gas the subject of the proposed agreement in accordance with cl 2.26 of the Mereenie Gas Purchase Agreement dated 28 June 1985. That offer concerned only gas which the Mereenie Producers were proposing in July 1999 to supply and sell to NT Power as an interim measure whilst negotiations about the long term supply and sale of gas continued. On 1 July 1999 Gasco formally waived its right to acquire that gas. Nevertheless, NT Power declined to accept that gas at the price at which it was offered. A further meeting took place on 6 July 1999 to discuss outstanding issues, but in particular price. Thereafter further exchanges of correspondence took place. Negotiations progressed, and ultimately agreement was reached on a short term and interruptible supply of gas.

209 On 13 September 1999, NT Power entered into a gas supply agreement with the Mereenie Producers for the supply of a quantity of gas. It was only a short term supply agreement. Gasco waived its pre-emption rights in respect of that supply of gas. NT Power also entered into gas haulage agreements with NT Gas and AGL on that date. Those agreements were interim arrangements only until 1 January 2000. As an efficiency measure, until the mine’s demands increased upon the commencement of its operations, NT Power bought electricity from PAWA to meet the mine’s needs in the early stages. Mount Todd PS supplied the mine’s requirements then from 23 September 1999. After that date, in September 1999 it supplied quantities of electricity to PAWA on three occasions without any apparent difficulty.

210 In the period from June 1998 to March 1999, NT Power embarked upon a program of approaching significant commercial users of electricity in the Darwin and Katherine areas to secure customers. It entered into a number of provisional contracts, and received considerable interest from many others. That is not surprising, given its offer to supply and sell electricity at a price significantly lower than the tariff of PAWA. In March 1999, due to its then uncertainty about when it would be able to commence supplying electricity to consumers, as its immediate prospects of obtaining access to PAWA’s infrastructure were uncertain, it ceased pursuing potential customers for electricity generated at Mount Todd PS.

211 On 1 June 1999, PAWA contracted to purchase a new LM6000 generator for Channel Island to increase its electricity generating capacity. There is no submission that it was improper for PAWA to have done so, although NT Power observes that it had offered to sell to PAWA its LM6000 at Mount Todd PS and that that offer had been rejected. The generating capacity of the new generator at Channel Island was about the same as the LM6000. I do not regard the purchase by PAWA of that additional generator as being other than a proper commercial decision.

212 During 1999, whilst developing its access regime, PAWA also set about entering into long term electricity supply contracts with some of its major customers. In large measure, I think that that conduct was a response to the loosening of the tariff structure announced in December 1998. There may also have been an element of endeavouring to tie up major customers before NT Power was permitted to enter the market. To that extent, I think the decision to enter into those contracts was driven by officers in PAWA below the Chief Executive Officer Mr Chambers, and I do not consider that that conduct was at the direction or with the knowledge of the Northern Territory Government or of the Treasurer or the Minister for Essential Services. That conduct, in my view, is only of peripheral relevance to the principal issues in this proceeding. It may have some significance to the damages to which NT Power claims to be entitled.

213 On 14 September 1999, Cabinet decided upon the revised industry, regulatory and network access arrangements to apply to the electricity supply industry in the Northern Territory. That was the culmination of the work of the Regulatory Committee under Mr Clarke’s leadership during 1999.

214 On 25 November 1999, a package of legislation was introduced into the Northern Territory Legislative Assembly: the Electricity Bill 1999, the Utilities Commission Bill 1999, the Electricity Networks (Third Party Access) Bill 1999 and the Power and Water Authority Amendment Bill (No 2) 1999. Mr Tregilgas, on 20 November 1999 was appointed interim Utilities Commissioner. In that capacity he caused Information Circular No 1 entitled “Competition in Electricity Supply: A Guide for Contestable Customers” to be published. That Circular reflects in general terms the nature of the proposed reforms, as well as certain views on the relevant market. As that Circular indicates, the electricity supply industry in the Northern Territory comprises three sectors: generation, retail supply and networks. It is contemplated that those who generate electricity (other than PAWA) will be able to sell the electricity generated to retail suppliers including PAWA or to obtain a retail licence and to sell direct to users. Retail suppliers are contemplated as those who will buy electricity from generators (or produce it themselves) and then on-sell it to electricity customers. The service of selling electricity to electricity consumers was to be restricted to certain “eligible” consumers. It was intended that all retail suppliers licensed to sell electricity in the Northern Territory would have equal rights of access to PAWA’s infrastructure, or to other infrastructure such as the 132kV line. The Northern Territory Government was to retain ownership of its generation facilities and its transmission and distribution network and its retail supply business operated by PAWA. Its generation and retail supply businesses were to be in competition with others, but it will effectively maintain the PAWA infrastructure as a monopoly supplier.

215 In March 2000 the proposals passed into law: the Electricity Reform Act 2000 (NT), the Utilities Commission Act 2000 (NT), the Electricity Networks (Third Party Access) Act 2000 (NT) and the Power and Water Authority Amendment Act 2000 (NT).

216 Section 7 of the Electricity Reform Act 2000 (NT) provides for the Minister to appoint an electricity safety regulator. The functions of the electricity safety regulator are to monitor and regulate safety and technical standards of electrical installations, and to perform other functions under the Electricity Reform Act 2000 (NT). These arrangements are designed to ensure the safe use of facilities. That is to comply with the obligation to prepare and make publicly available a technical code that is to include safety considerations arising from third party use of the electricity network.

217 The Electricity Networks (Third Party Access) Act 2000 (NT) sets out a framework for negotiations to proceed under the Northern Territory Access Regime. The NT Access Regime contemplates the following:

· An application to the network provider setting out the nature and extent of the access required.

· A prompt initial response, including advice on the timing and cost incurred by the network provider in making a preliminary assessment, in making an offer and in negotiating an access agreement.

· The preliminary assessment, if required by the access application, must state whether there is sufficient spare capacity or whether the electricity network will have to be augmented to provide the services sought, and must also state whether it is likely that any connection equipment will have to be installed or upgraded to provide the connection services sought.

· The network provider must make an access offer within a specified period thereafter to provide the access applicant the network access services requested, including information as to the proposed terms and conditions.

· The access applicant then has thirty days to accept the network provider’s offer.

· If the network provider and the access applicant enter into an access agreement, that constitutes the granting of access.

218 The regime uses reference tariffs to establish the maximum tariff that the network provider can charge for a standard network access service and a reference point for use in determining the maximum tariff to apply to new or non standard network access services. In that event the tariffs are to be commercially negotiated. In addition, the actual network tariffs are matters for commercial negotiation within the published maximum pricing schedules. The Utilities Commission is given the role of ensuring that the proposed reference tariffs and access network usage tariffs of PAWA comply with principles laid down in the Code. Those principles of price regulation are to ensure that PAWA does not extract monopoly rent, that there is competition in upstream and downstream markets, and an efficient and cost effective regulatory environment.

219 The National Competition Council in its discussion paper describes the matter as follows:

“The NT regime uses the accrual building block approach methodology to determine the revenue cap. This approach calculates an annual revenue cap maximum (the maximum allowable revenue) to be earned by the network provider from prices and charges for network access services as the sum of an allowable return on capital, an allowable return of capital and an allowable return of non capital cost.”

220 There is a dispute resolution process in relation to terms of access. The process is described in the Utilities Commission Act 2000 (NT). It creates the Utilities Commission to regulate the monopoly elements of designated industries in the Northern Territory. It is independent from Government with respect to regulatory determinations that directly affect network users or individual contestable customers. It is charged with verifying, and if appropriate intervening, to ensure that access prices and underlying cost structures are fair and reasonable, and to assure the market on those matters. PAWA Networks will not be able to provide preferential treatment to its other business areas where they are in competition.

221 The Utilities Commission is also given the power, if bilateral negotiations do not reach an appropriate agreement, at the request of the access applicant, to refer the dispute to arbitration by an independent arbitrator. Matters which the Utilities Commission has already determined, such as the weighted average cost of capital, will not be subject to arbitration. The Utilities Commission otherwise may attempt to settle a dispute by conciliation, but then it may appoint an independent arbitrator to resolve the issue. The Utilities Commission is responsible for providing independent and authoritative advice on matters such as pricing, network access, service quality and security of supply. It is also responsible for regulating the wholesale energy prices charged by PAWA Generation for “out of balance energy” provided when keeping the power system in balance. Out of balance energy involves electrical energy despatched by generator into the power system but has the effect of meeting any mismatch between the transfer of electrical energy into and out of the electricity network.

222 Under the legislative package, PAWA is to remain as a vertically integrated business albeit operating “separately” in the generation, networks and retail business units. It is to be known as PAWA Generation, PAWA Networks and PAWA Retail. PAWA Generation is maintained as a single business unit, utilising its present generation capacity. The dispatch and system control functions stay with PAWA under PAWA Network’s umbrella. PAWA Networks is not to be established as a separate entity. Competition in the retail sector is achieved by allowing large volume customers to choose their preferred supplier. Contestability is progressively to be extended to other customers. Other customers for the time being will continue to be supplied only by PAWA Retail. The Northern Territory Government does not consider that it is feasible to extend choice of supply to residential and small business customers. It also considers that it is not feasible to establish a wholesale electricity pool, such as that which functions in the national electricity market in South-Eastern Australia. Thus new entrants, whether third party generators or retailers, will be obliged to use bilateral contracts to arrange the supply of electricity to electricity consumers.

223 It is intended that PAWA will continue to compete with access applicants in generation and retail activities. The structure “ring-fences” PAWA’s three activities, and establishes a regulator charged with monitoring and enforcing compliance by PAWA with the provisions of the legislation. Access applicants must have sufficient information that prices and underlying cost structures are fair and reasonable so as to be able to confidently enter into negotiations.

224 The effect of the access code is that there will be about 185 contestable customers with a load level of 750 megawatt hours per annum by 1 April 2002. All other electricity users “the non contestable or franchise customers” will continue to be supplied by PAWA retail. The retail prices will be regulated by the NT Government, through an electricity pricing order issued by the relevant Minister.

225 The Utilities Commission also controls the price that PAWA Networks may charge retailers, generators or individual contestable customers for the use of the network. It determines an annual revenue cap (the maximum revenue that the network provider is allowed to raise during a financial year from specified network access services) on PAWA Network’s total revenue. It has responsibility for overseeing PAWA’s application of principles for settling reference tariffs (the maximum tariff to apply in a particular year with respect to specific individual standard network access services, as set out in a pricing schedule to be published by PAWA Networks). For succeeding years the revenue cap will be increased by the consumer price increase, and decreased by an efficiency gain factor. The Utilities Commission must approve the pricing schedule published by PAWA Networks with respect to network access services. Within those schedules the tariffs and charges to apply to a particular network user’s connection to and use of the electricity network are to be matters for commercial negotiation between the network user and PAWA Networks. They must be within the annual revenue cap limit set by the Utilities Commission and subject to Utilities Commission approved reference tariffs.

226 The determination of contestable customers is a progressive one. It provides qualifications for contestable customers as follows:

1 April 2000 4 GWH electricity consumption per annum

1 October 2000 3 GWH

1 April 2000 2 GWH

1 April 2002 750 MWH.

227 In effect, a consumer who takes more than four gigawatt-hours of electricity from a particular supply point in a consecutive twelve month period since 1 July 1998 satisfies the minimum customer load level at a single site to qualify as a contestable customer from 1 April 2000. The number of contestable customers will therefore increase over time. The consumption to make a contestable customer can be determined by reference to actual total power consumption or expected total power consumption at a particular site during a consecutive twelve month period after 1 April 2000, provided that customer either did not consume electricity at that sight before 1 July 1998, or there has been a relevant expansion of business causing the estimate to be increased.

228 Contestable customers are given a two year period before they are obliged to commit to entering the contestable market. Once they do so, they will be obliged to negotiate with a retail supplier, whether PAWA or some other retail supplier. Contestable customers who wish to enter into the market will need to negotiate a contract with a licensed retail supplier or directly with a generator. The contestable customer, in deciding whether and how to deal with a generator or retail supplier, will need to decide “the preferred balance between price and risk”. The supplier will be required to supply all of the electricity needs at a single site. That is, there will be only one electricity supplier for each site. The customer will need to inquire about stand by power arrangements that the supplier has in place in case of “outages” from their primary power source, and to address the reliability standards required.

229 On 30 November 1999, the Chief Minister on behalf of the Northern Territory Government applied to the National Competition Council for a recommendation on the effectiveness of the Northern Territory Electricity Networks (Third Party Access) Code. The effect of the recommendation, if granted, is that the Code is certified as an effective regime pursuant to Pt IIIA of the Trade Practices Act for a minimum period of four years. As is customary, the National Competition Council commenced a public consultation process. In early December 1999, it published an issues paper entitled “The NT Access Regime for Electricity and Works” inviting submissions to the National Competition Council by 4 February 2000. The National Competition Council, under s 44M(4) of the Trade Practices Act must apply the relevant principles set out in the Competition Principles Agreement in deciding whether to recommend to the Minister for financial services and regulation that the proposed access regime is effective. The relevant principles are set out in clauses 6(2) - 6(4) of the Competition Principles Agreement. In September 2000, the National Competition Council published a draft recommendation in respect of the access regime.

230 The Interim Utilities Commission, in January 2000, issued a discussion paper on “Determining Network Revenue Caps” to potential new suppliers including a draft determination of the “parameters” that determined the weighted average cost of capital as well as canvassing definitional and measurement issues associated with a financial data underlying the calculation of revenue caps. He also issued a licensing manual to spell out the safety, prudential, capability and other conditions to be met for the various types of licences, and describing the licensing process and fees and such matters. Those papers were the subject of submissions from interested parties. They were then to be the subject of discussion and consideration.

231 On 21 February 2000 the Interim Utilities Commissioner proposed to issue a “Network Revenue Caps” determination, and to issue an approval of PAWA network’s “Network Pricing Principles” statement. Those steps are all subject to the approval of the Utilities Commission.

232 On 6 March 2000, PAWA Network’s approved network tariffs and charges to apply between 1 April and 30 June 2000, and PAWA Generation’s approved ‘out of balance’ energy charges for the same period were to be published. The Utilities Commission was to receive for its consideration licence applications made under the provisional regime in force. It was contemplated that the Utilities Commission would issue all retail, network and generation licences effective to commence on 1 April 2000.

233 NT Power and PAWA and Gasco all accept that, as the National Competition Council has not yet made a recommendation that the access regime established by that package of legislation is an effective access regime under s 44M of the Trade Practices Act, that legislative package does not directly affect the entitlement of NT Power to the relief claimed in this proceeding if otherwise it establishes that entitlement. Moreover, as NT Power’s claim relates to periods prior to 1 April 2000 when that access regime came into force, it does not affect the claim of NT Power in this proceeding.

234 It is an interesting question whether, if and when that access regime is declared an effective access regime, that declaration would affect in any way the entitlement of NT Power to continuing relief (if it is otherwise established). That question would throw up for determination NT Power’s claim that it can maintain its claims based upon s 46 of the Trade Practices Act and s 46 of the Schedule version of Pt IV of the Trade Practices Act adopted by the Competition Act in any event. In the circumstances I do not presently have to decide that question.

235 As noted below, one contention of PAWA does indirectly raise the question of the applicability of s 46 to PAWA’s conduct in declining NT Power access to its infrastructure where the Northern Territory Government has become a party to the Competition Principles Agreement and is progressively fulfilling its obligations under that Agreement. It was not contended that those facts, of themselves, excluded the application of s 46 to PAWA and to Gasco if they were not entitled to the immunity of the Crown in right of the Northern Territory (that is, accepting that the Trade Practices Act did not apply to the Crown) or to the extent that s 2B of the Trade Practices Act operated so as to apply the Trade Practices Act to the Crown and its emanations. Those issues were discussed by Professor W Pengilly in “The National Competition Policy Draft Legislative Package: The Proposed Access Regime” (1995) 2 (3) CCLJ 244 and by A Abadee in “The Essential Facilities Doctrine and the National Access Regime: A Residual Role for Section 46 of the Trade Practices Act?” (1997) 5(1) TPLJ 27.

CONSIDERATION OF SUBMISSIONS

236 In the case of NT Power, the application of the Trade Practices Act to PAWA and to Gasco is quite straightforward. It is not primarily concerned that PAWA or Gasco may be an emanation of the Crown, although it claims that neither entity enjoys that status. It relies on s 2B of the Trade Practices Act in that event. Section 2B provides that Pt IV of that Act, which includes s 46, binds the Crown in right of the Northern Territory “so far as the Crown carries on a business, either directly or by an authority of the Territory”. Section 2C(1)(b) relevantly provides that, for the purposes of s 2B, the granting or refusing to grant a licence does not amount to carrying on a business. NT Power accepts that. Section 2C(2) makes it clear that the exclusion of certain activities from those amounting to the carrying on of a business is not exhaustive. But the activities of PAWA, it contends, go well beyond the granting or refusing to grant a licence to supply goods or services. “Goods” is defined in s 4(1) to include gas and electricity. “Business” is defined in s 4(1) to include a business not carried on for profit. “Business” is not otherwise defined in the Act, except to the extent that s 2C provides that certain activities do not amount to the carrying on of a business. Whether or not a business is being carried on is a question of fact, having regard, for example, to the nature of the activities carried out, and their continuous or repetitive character: Smith v Capewell (1979) 142 CLR 509; Fasold v Roberts (1997) 70 FCR 489. System and regularity need not, however, connote a business: Hungier v Grace (1972) 127 CLR 210 at 217.

237 Section 4 of the Competition Act provides that the Competition Code text, that is the Competition Code of the Northern Territory, applies as a law of the Northern Territory. Section 8(1) provides that the Competition Code of the Northern Territory applies to and in relation to persons carrying on business within the Northern Territory, or to bodies corporate incorporated or registered under a law of the Northern Territory, or to persons ordinarily resident in or otherwise connected with the Northern Territory.

238 Section 13 of the Competition Act effectively reflects s 2B of the Trade Practices Act. It provides:

“The application law of this jurisdiction binds (so far as the legislative power of Legislative Assembly permits) the Crown in right of this jurisdiction and of each other jurisdiction, so far as the Crown carries on a business, either directly or by an authority of the jurisdiction concerned.”

239 Section 15 is in terms which, relevantly, mirrors the provisions of s 2C of the Trade Practices Act. It provides relevantly:

“(1) For the purposes of sections 13 and 14, the following do not amount to carrying on a business:

(a) imposing or collecting - -

…

(iii) fees for licences;

(b) granting, refusing to grant, revoking, suspending or varying licences (whether or not they are subject to conditions);

…

(2) Subsection (1) does not limit the things that do not amount to carrying on a business for the purposes of sections 13 and 14.”

240 Subsection (3) defines “licence” as a licence to supply goods or services.

241 Counsel did not contend that s 13 of the Competition Act exposed either PAWA or Gasco to any liability which did not arise under ss 2B of the Trade Practices Act. The arguments were presented on the assumption that the obligations imposed by those alternative routes was co-extensive. In those circumstances, for the sake of convenience and brevity, I refer hereafter to the claims of NT Power founded upon ss 2B and 46 of the Trade Practices Act without repeating reference to s 13 of the Competition Act and to s 46 of the Schedule version of Pt IV of the Trade Practices Act, which is part of the Competition Code of the Northern Territory.

242 PAWA, NT Power contends, carries on the business of the generation, transmission, distribution, and supply of electricity in the Northern Territory. Gasco, NT Power contends, carries on the business of the acquisition and sale of gas in the Northern Territory. Thus, it is argued, s 46 of the Trade Practices Act and the Competition Act apply to the conduct of PAWA and Gasco if NT Power establishes the conduct that each of those entities is alleged to have engaged in amounts to the carrying on of a business.

243 PAWA and Gasco submit that the Trade Practices Act does not apply to them in the present circumstances so that NT Power’s claim under that Act must fail in any event.

244 Clearly, the Northern Territory is a distinct manifestation of the Crown. It was granted self-government by the Northern Territory (Self-Government) Act 1978 (Cth): see s 5. That status is recognised in R v Toohey; ex parte Northern Land Council (1981) 151 CLR 179 per Gibbs CJ at 184, per Aicken J at 265-266 and per Wilson J at 279, and in Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 (Bowen CJ, Morling and Beaumont JJ) (“Burgundy Royale”).

245 The Crown and its instrumentalities are only bound by statute where that statute is expressly said to apply to the Crown or its instrumentalities or where it does so by necessary implication: Bradken Consolidated Ltd v Broken Hill Pty Co Ltd (1979) 145 CLR 107 (“Bradken”); Bropho v State of Western Australia (1990) 171 CLR 1 (“Bropho”); Bass v Permanent Trustee Company Ltd (1999) 198 CLR 334 (“Bass”). In Bropho, the Court indicated that the legislative intention must, however, be determined in a contemporaneous setting. Their Honours (Mason CJ, Deane, Dawson, Toohey, Gaudron and McHugh JJ) said at 19:

“It is simply to point to the fact that the historical considerations which gave rise to a presumption that the legislature would not have intended that a statute bind the Crown are largely inapplicable to conditions in this country where the activities of the executive government reach into almost all aspects of commercial, industrial and developmental endeavour and where it is a commonplace for governmental commercial, industrial and developmental instrumentalities and their servants and agents, which are covered by the shield of the Crown either by reason of their character as such or by reason of specific statutory provision to that effect, to compete and have commercial dealings on the same basis as private enterprise. It is in that contemporary context that the question must be asked whether it is possible to justify the preservation in our law of an inflexible rule which, in the absence of express reference, requires a reading down of the general words of a statute to exclude the Crown (and its instrumentalities and agents) unless it is “manifest from the very terms of the statute” that it was the legislative intent that the Crown should be bound and which, in ascertaining whether such a legislative intent is manifest, allows account to be taken of the purpose of the statute only if it is possible to affirm that that purpose must be “wholly frustrated” unless the Crown is bound.”

246 It is a matter of discerning the legislative intent: Bropho at 23.

247 In Bradken it was held that, as the Trade Practices Act stood at the time relevant to that decision, it did not bind the Crown in right of a State. That position was affirmed in Bass. In Burgundy Royale, it was held that the Trade Practices Act as then in force did not bind the Northern Territory. Accordingly, the Trade Practices Act binds the Crown only by reason of ss 2A and 2B, and to the extent that those sections operate. Section 2B is relevant for present purposes.

248 The two issues then necessary to address are whether PAWA and Gasco fall within the aegis of Crown immunity, and if they do whether s 2B operates so as to extend the application of the Trade Practices Act to them in the present circumstances.

Is PAWA within the immunity of the Crown?

249 On the first question, the question of whether a body is an emanation of the Crown is to be decided by the intention of the legislature determined from the relevant legislation. In Townsville Hospital Board v Townsville City Council (1982) 149 CLR 282 (“Townsville”) Gibbs CJ (with whom the other members of the Court agreed) said at 289:

“The answer to the question must in the end depend upon the intention to be derived from the statute under which the body in question is constituted.”

250 Moreover, as counsel for NT Power pointed out, the Court should not too readily conclude that a particular statutory body has the immunity of the Crown where the legislative instrument creating that statutory body has not expressly expressed that intention. In Townsville, Gibbs CJ at 291 expressed that proposition in the following terms:

“It has more than once been said in this Court that “there is evidence of a strong tendency to regard a statutory corporation formed to carry on public functions as distinct from the Crown unless parliament has by express provision given it the character of a servant of the Crown”: Launceston Corporation v. Hydro-Electric Commission (1959) 100 C.L.R. 654, at p. 662; State Electricity Commission (Vict.) v. City of South Melbourne (1968) 118 C.L.R. 504, at p. 510. All persons should prima facie be regarded as equal before the law, and no statutory body should be accorded special privileges and immunities unless it clearly appears that it was the intention of the legislature to confer them. It is not difficult for the legislature to provide in express terms that a corporation shall have the privileges and immunities of the Crown, and where it does not do so it should not readily be concluded that it had that intention.”

251 I was referred to a number of decisions which, it was contended, should signal the way in which I should determine PAWA’s status. Launceston Corporation v The Hydro-Electric Commission (1959) 100 CLR 654 (the “HEC case”) concerned the status of the Hydro Electric Commission established as an independent statutory corporation under the Hydro-Electric Commission Act 1944 (Tas). At issue was whether it was liable to pay rates levied by the City of Launceston. The Court (Dixon CJ, Fullagar, Menzies and Windeyer JJ) concluded that it was, as it did not fall within the exemption from paying rates enjoyed by the Crown. The Court at 660 set out

“… to ascertain the relationship of the commission to the Crown and the extent to which the commission has powers and directions exerciseable independently of the control of the Executive Government.”

252 The Court had regard, inter alia, to the limited extent to which the commission is subject to ministerial control and the extent to which otherwise it enjoyed an independent discretion in its decision making, the fact that its employees were not civil servants, the fact that its property was not Crown property, the absence of any express provision declaring that the commission was an emanation of the Crown and (at 662) noting in that regard the “strong tendency” to regard a statutory corporation formed to carry on public functions as being distinct from the Crown in the absence of such express provision. The provision that the Commission “may for and on behalf of the State” do certain things did not, in the context of the legislation, do more than

“… emphasise that the commission is a public authority with public purposes, as distinct from a private undertaking engaged upon a merely commercial enterprise, and that its powers are to be exercised for the good of the State” (at 661)

253 Counsel for NT Power also referred to State Electricity Commission of Victoria v The Mayor, Councillors and Citizens of the City of South Melbourne (1968) 118 CLR 504, again a case concerning the liability of an electricity commission to pay rates. I do not think that that decision is of especial significance in this matter. Barwick CJ, McTiernan, Taylor and Menzies JJ, with whom Owen J agreed, regarded particular provisions of the State Electricity Commission Act 1958 (Vic) as being inconsistent with the contention that lands held by the Commission were the property of the Crown, so as to be exempt from rates. It was not therefore necessary to attempt a detailed examination of the nature and significance of the relationship between the Commission and the Executive Government (see at 509). The decision in that case, and in the HEC case, reflected the Courts’ earlier decision in Grain Elevators Board (Vic) v Dunmunkle Corporation (1946) 73 CLR 70.

254 Bradken concerned the relationship of the Commissioner for Railways of the State of Queensland to the Crown. That statutory entity was expressly stated by s 8 of the Railways Act 1914 (Qld) to represent the Crown and to have the same rights and privileges as the Crown. Gibbs CJ at 115 also had regard to the extent of control of the Crown over the activities of the Commissioner for Railways, and that it has always been recognised that the conduct of railways is a function of the governments of the States. As counsel for NT Power pointed out, in the face of s 8 of the Railways Act 1914 (Qld), counsel for the applicant in that case in effect acknowledged that the Commissioner for Railways was entitled to the immunity of the Crown (at 111).

255 Counsel also referred to Townsville which concerned whether the Hospitals Board in its redevelopment of the hospital was bound to comply with building bylaws. The Court examined the Hospitals Act 1936 (Qld) in concluding that the Hospitals Board was bound to comply with the building bylaws, notwithstanding that the Executive Government had to authorise its borrowing and its entering into the development contract, and that the relevant Minister had given those authorisations. Gibbs CJ, with whom the other members of the Court agreed, said at 291:

“The Hospitals Act does not expressly provide that a board shall have the privileges and immunities of the Crown when engaging in building operations, and in my opinion it does not impliedly so provide. The fact that a number of Ministerial approvals must be obtained if the Board needs to borrow or raise money or make financial arrangements for the purposes of a proposed work does not indicate that the Board in carrying out the work is acting for the Crown. The Board cannot be directed to do the work, and if it does borrow or raise money for the purpose, the Board and not the Crown is liable in case of default.”

256 The significance of the degree of control able to be exercised by the Crown over the activities of a statutory authority is underpinned, in my view, by the observations of Kitto J in Inglis v Commonwealth Trading Bank of Australia (1969) 119 CLR 334 at 337-338 where his Honour said:

“The decisive question is not whether the activities and functions with which the respondent is endowed are traditionally governmental in character, though their possession of a traditional or generally accepted governmental character may well help in the ascertainment of the legislative intention. The question is rather what intention appears from the provisions relating to the respondent in the relevant statute : is it, on the one hand, an intention that the Commonwealth shall operate in a particular field through a corporation created for the purpose; or is it, on the other hand, an intention to put into the field a corporation to perform its functions independently of the Commonwealth, that is to say otherwise than as a Commonwealth instrument, so that the concept of a Commonwealth activity cannot realistically be applied to that which the corporation does?”

257 The extent of control able to be exercised by the Crown is a significant indicator whether the particular government intends itself to operate through the statutory corporation. For example, in State Government Insurance Corporation v Government Insurance Office of New South Wales (1991) 28 FCR 511 the absence of any real legal autonomy on the part of the Government Insurance Office was a significant feature of the legislation then under consideration (per French J at 557), as it was in Hawthorn Pty Ltd v State Bank of South Australia (1993) ATPR 41-219 per O’Loughlin J at 41,026.

258 I have referred earlier in these reasons to some features of the PAWA Act. I shall endeavour not to repeat them. For the purposes of considering this submission, however, I note that PAWA was established under s 4 of the PAWA Act as a body corporate, effectively as the “same body corporate” as NTEC and that PAWA adopted its property, debts and liabilities, and its contracts. There is no provision in the PAWA Act expressly providing that PAWA is to be afforded the privileges and immunities of the Crown.

259 PAWA consists of its Chief Executive Officer (s 6(1)) and his acts, or acts under his authority are to be the acts of PAWA. The use of the common seal of PAWA is however subject to regulations made under s 26 of the PAWA Act. The Chief Executive Officer is a public servant appointed under the Public Sector Employment and Management Act 1993 (NT), and its employees are also public servants. Section 22(1) of the Public Sector Employment and Management Act 1993 (NT) provides that the Chief Executive Officer is subject to the direction of the relevant minister, namely the Minister for Essential Services. There is in s 16 of the PAWA Act provision that PAWA is subject to the directions of the Minister. That control is not limited in its terms, but applies to PAWA generally “in the exercise of its powers and the performance of its functions”. The control over PAWA’s activities is also, in my view, illustrated by s 17 which directs PAWA to act in a commercial manner “[s]ubject to this Act and within a budget approved by the Minister …”. Section 17(2) contemplates that the Minister will or may direct that PAWA provide services to particular areas, and for dedicated funding to be provided for that purpose.

260 The direction implicitly contemplated by s 17(2) extends to the principal functions of PAWA under s 14 of supplying electricity gas water and sewerage services. It also extends to both domestic and non-domestic services, so it clearly contemplates such direction beyond the provision of services to remote localities or small communities. The capacity to direct the provision of such services is, in my view, an indication of PAWA being susceptible of being the means or part of the means of implementing governmental policy. The PAWA Advisory Council established under s 7 of the PAWA Act constituted of the Chief Executive Officer and nominated persons representing community and commercial interests, which meets inter alia when directed by the Minister (s 9(1)), advises the Minister “on all matters concerning electricity and water and the provision of sewerage services”, s 10. It is not an advisory body to PAWA, but part of the process by which the Minister is advised about matters within PAWA’s functions, and apparently to assist the Minister in the exercise of the power to give directions under s 16 or in other respects. That process, by which community and commercial interests are given a role in informing or advising the Minister on matters which the Minister might address, or wishes to address, in relation to PAWA’s performance of its functions also demonstrates in my view that the ministerial control to which PAWA is subordinate under the PAWA Act concerns matters of general governmental policy and its implementation. That is also apparent from the specific provision in s 15(2) that PAWA’s powers to determine tariffs fees and charges for the supply of electricity water or gas or the provision of sewerage services is subject to any Act or instrument of a legislative or administrative character relating to them. Section 30 of the Electricity Act expressly empowers the Minister to fix and vary tariffs. On the evidence, the Northern Territory Government fixes the tariffs which PAWA may charge for the supply of electricity to consumers, and has imposed by that process a governmental policy about the cross-subsidisation of tariffs between commercial and domestic consumers. In 1998, tariff alterations were the subject of specific decision by Cabinet. Tariffs, as in force from time to time, must be gazetted: s 15(4) of the PAWA Act.

261 The expression of PAWA’s functions is also relevant to determine the legislative intention as to its character. In relation to electricity, they include not just the supply of electricity but also the planning and coordination of its generation and supply, its safe use, and the setting and enforcement of safety standards for electrical installation and equipment and for electrical workers or contractors: s 14(1) of the PAWA Act. Those functions also include in s 14(1)(j):

“to evaluate the present and future needs of the Territory … in respect of fuel, energy and power for the purpose of generating electricity.”

262 PAWA’s functions in relation to water and sewerage services include the assessment, management and development of water resources; s 14(2)(b). It is also charged with advising the Minister on all matters concerning electricity, water and the provision of sewerage services: s 14(1)(h) and s 14(2)(c). The Power and Water Authority Amendment Act 1998 (NT) provided by s 14(3A) that PAWA might undertake the function of providing communications facilities and services, or other facilities or services, but it could do so only with the approval of the Minister: s 14(3B). Those functions are generally functions of a nature traditionally performed by governments, or are functions which are directed to assisting the Northern Territory Government in the development or implementation of policies or matters concerning the supply of electricity, water and sewerage services to the residents of the Northern Territory. They are, in my view, indicative of an intention on the part of the Northern Territory Government to provide or carry out functions which it regards as governmental functions through PAWA, so that PAWA is intended to be an instrument of the Northern Territory Government.

263 The fact that PAWA is exempted from local government rates, charges and taxes: s 19(1) of the PAWA Act, and that its employees or agents are not personally liable for acts or defaults done or omitted to be done in good faith for PAWA or for the purposes of the PAWA Act: s 20, are also some indication as to the character intended for PAWA.

264 PAWA is the authority responsible for the administration of the Electricity Act. That Act is the vehicle by which the Northern Territory Government regulates the use and sale of electricity in the Northern Territory. In the performance of its functions under the Electricity Act, PAWA by s 25 is given the power of licensing persons to generate, store, reticulate and sell electricity, and by s 26 to set standards of safety, including by bylaws. Section 32 of the Electricity Act protects PAWA or a licensee of PAWA from liability for damages arising out of a failure to supply electricity.

265 There was, prior to the PAWA Act, an administrative unit within the meaning of the Public Service Act (NT) known as the Northern Territory Water Authority. It administered the Water Supply and Sewerage Act 1983 (NT) for the Northern Territory Government. Upon the PAWA Act coming into force, its functions powers assets and liabilities were taken over by PAWA, and PAWA by s 32 of the PAWA Act was indemnified by the Northern Territory Government against liabilities incurred by the Northern Territory Water Authority.

266 Counsel for NT Power contended that the fact that the PAWA Act binds the Crown: s 27, the fact that the functions of its Chief Executive Officer may be delegated: s 13, and the absence of any express provisions stating that PAWA is an emanation of the Crown or indemnifying PAWA generally from liability, together with the direction in s 17(1) that, subject to the Act and within the budget approved by the Minister, PAWA must act in a commercial manner, point to the conclusion that PAWA is not an emanation of the Crown entitled to its privileges and immunities. I have balanced those considerations against the matters already referred to and which, in my judgment, point to the opposite conclusion.

267 I have come to the conclusion that, by reason of the matters referred to above, PAWA was established for the purposes of providing on behalf of the Northern Territory Government the services of electricity, water, gas and sewerage services. In performing those functions, PAWA is subject to the control of the Minister in all significant respects. Its provision of those services, although intended to be effected in a commercial manner, represents the provision of what in the Northern Territory at least are traditional government services, that is services which the Northern Territory Government for many years has seen as part of its obligations to provide to the community. The Northern Territory Government, apart from the general control over PAWA’s activities referred to, also has specific powers to determine tariffs and to direct the provision of services for particular Executive purposes. I accordingly conclude that PAWA was intended by the Northern Territory Government to be the instrument by which it operated in the field of providing electricity, water, gas and sewerage services.

268 In my view, PAWA is entitled to the same immunity as the Northern Territory Government. Accordingly, subject to considering the operation of s 2B of the Trade Practices Act, I do not consider that s 46 of the Trade Practices Act applies to PAWA.

Is Gasco within the immunity of the Crown?

269 The claim that Gasco also is entitled to the immunity of the Crown is expressed on a different basis. Gasco was incorporated on 19 June 1985, shortly before the series of agreements relating to the construction of the Amadeus to Darwin Gas Pipeline in 1985, including the Mereenie Gas Sales and Purchase Agreement of 28 June 1985. I accept that it was formed as the vehicle for NTEC (and hence PAWA) to participate in that transaction. PAWA holds all the shares in Gasco, and under its Articles of Association the Northern Territory Government can call a general meeting of Gasco and can appoint or remove its directors: Articles 44(a) and 69 respectively.

270 Participation in the gas pipeline project was clearly a decision of the Northern Territory Government. The Government provided guarantees to secure the construction of the pipeline. The agreements by Gasco to take the gas to be supplied by the Mereenie Producers and by the Palm Valley Producers was an integral part of the package of agreements. The Northern Territory Government guaranteed the due payment by Gasco of monies payable for the purchase of gas under an Indemnity and Underwriting Agreement of 28 June 1985. Gasco then sells the gas to NT Gas to transport along the pipeline, and virtually all of that gas is then sold to PAWA to generate electricity. Subsequently, the Northern Territory Government from time to time has provided indemnities in support of Gasco’s obligations or to its directors. Gasco on 28 June 1985 acknowledged its status to NTEC, namely that it had the benefit of the several agreements “for and on behalf of and for the benefit of” NTEC.

271 Thus, it is contended, the Northern Territory Government intended to purchase gas for the generation of electricity through the medium of Gasco as its “alter ego” rather than that Gasco would function as an acquirer and supplier of gas independently of NTEC and the government. No direct authority was put forward to support the proposition that an incorporated or registered company can, by having regard to the purpose of those responsible for its incorporation or registration, attract Crown immunity. In State Government Insurance Corporation v Government Insurance Office of New South Wales (1991) 28 FCR 511, the Court had to address the claim to Crown immunity claimed by the Government Insurance Office of New South Wales (a body established by s 3 of the Government Insurance Act 1927 (NSW)) and its wholly owned corporate subsidiaries GIO Holdings Ltd and GIO Life Ltd. French J at 559 noted that, although it was not contended that those subsidiaries were agents or instrumentalities of the Crown, there was “at least a respectable argument to the effect that they are.” See also R v Eldorado Nuclear Limited (1983) 4 DLR 4d 193.

272 In my judgment, Gasco is not entitled to Crown immunity as an emanation of the Crown. It is a separate legal entity. The Northern Territory Government, in fulfilling its purpose of participating in that 1985 package of agreements to secure the Gas Pipeline, chose not to utilise a body separately established by statute. The utilisation of an incorporated body for that purpose does not disclose any express intention on the part of the Northern Territory Government to extend to that corporate vehicle its own Crown immunity. I do not consider that that intention is necessarily to be drawn from the decision to participate in those transactions through Gasco. The control that the Northern Territory Government has over Gasco, through the ability to call a general meeting is no greater than that of any other large shareholder of a corporation, although Article 44(a) provides that the “indirect” shareholder (indirect in the sense that the shareholder is NTEC) may act directly rather than through NTEC or later PAWA. The power to appoint or remove directors without the necessity of a general meeting is not a routine provision. Apart from allowing the “indirect” shareholder to achieve what the shareholder may achieve, its relevant feature is that directors may be appointed or removed without the need for a general meeting. In circumstances where there is but one shareholder, I do not think that that feature demonstrates the intention on the part of the Northern Territory Government to extend its Crown immunity to Gasco. On the other hand, the directors of Gasco have the normal functions and responsibilities of directors of a corporation to its shareholders (and to others). There is no direct entitlement to instruct Gasco through its officers or its directors to act in a particular way or to take a particular decision; the shareholder’s sanction is the calling of a general meeting or the removal and replacement of directors.

273 The acquisition of a resource to support the traditional activity of government (at least in the Northern Territory) of the generation and supply of electricity is not, for that reason, itself a traditional activity of government. In fact, until the mid 1980s Channel Island operated as an oil fired power station. The 1985 package of agreements was to secure the supply of gas, a much cheaper fuel, to operate Channel Island with generators fired by gas. In that context, the guarantees given by the Northern Territory Government do not indicate any intention on its part about extending its Crown immunity to Gasco, but are part of the commercial commitment necessary to obtain the gas resources to operate Channel Island. Gasco, in practical terms, may need to seek from its “shareholder” support for its proposed commercial transactions because persons dealing with it may require that support or indemnity, and the Northern Territory Government may refer to Cabinet any such request, but in a legal sense Gasco is not constrained in its commercial activities by any direct control from government.

274 Gasco submitted, alternatively, that it was entitled to derivative Crown immunity because the interests of the Northern Territory Government would be prejudiced by the application to Gasco of s 46 of the Trade Practices Act, which does not bind the Northern Territory Government (subject to the consideration of s 2B of that Act). The relevant prejudice is said to be “the impairment of the existing legal situation of the Crown”, namely financial prejudice, presumably by the potential inability to exercise the pre-emptive right in cl 2.26 of the 1985 Mereenie Gas Sales and Purchase Agreement and the consequential need to seek additional supplies of gas in a competitive market where those gas supplies are or may be constrained by available reserves or deliverable quantities.

275 In Bass at 354 the majority (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ) referred to the principle, as applied in Bradken, as being

“the common law rule that a statute is not to be construed as divesting the Crown of its property, rights, interests, or prerogatives in the absence of express words or necessary implication to that effect.”

276 In this matter, the question is whether the Trade Practices Act should be construed so as to prevent the application of s 46 to Gasco in the circumstances complained of by NT Power because its application would divest the Crown in right of the Northern Territory Government of its property rights interests or prerogatives. In F Sharkey & Co Pty Ltd v Fisher (1980) 50 FLR 130 at 150 Sheppard J said the test was whether the legislation affected

“… that arrangement by the granting of the injunctive relief which the applicants claim would be indirectly to affect the freedom of the Crown to do what it has done.”

277 The relief sought against Gasco in this matter depends upon whether the claim against PAWA succeeds. If it does, NT Power claims against PAWA damages for having been deprived of access to PAWA’s infrastructure from 1 October 1998 and injunctive and declaratory relief. In that event, the amount of damages awarded against PAWA would depend upon the extent to which NT Power was able to secure gas supplies to operate the Mount Todd PS, and if I were to find that Gasco acted in breach of s 46 of the Trade Practices Act in refusing to waive its pre-emptive right or in failing to acknowledge that it would not do so, then to some extent the damages NT Power claims would be awarded against Gasco. Such an award of damages would not be one for which in law the Northern Territory Government or PAWA would be liable. However, the relief sought against Gasco includes the claim that it be ordered to forego the right of pre-emption in cl 2.26 of the 1985 Mereenie Gas Sales and Purchase Agreement in relation to any gas offered for sale by the Mereenie Producers to NT Power or to third parties in the Northern Territory. The effect of such an order would be to dismantle the security of gas supply which the Northern Territory Government procured through NTEC and Gasco in 1985 as part of the package of securing the Amadeus to Darwin Gas Pipeline, and upon which the Northern Territory Government through PAWA converted Channel Island and the other power stations PAWA operates to gas fired power generation plants. On the evidence, the cost of re-converting Channel Island (or for that matter Mount Todd PS) to generation by liquid fuel would be quite uneconomic. In that regard I accept in particular the evidence of the Mechanical Engineering Consultant Anthony Bodsworth (“Mr Bodsworth”). In addition, the evidence indicates clearly that the deliverable gas from the Mereenie and Palm Valley Fields is presently restricted to that sufficient to meet PAWA’s needs but without any reliable surplus availability. I have referred to that evidence earlier in these reasons. It is confirmed by the Consultant Petroleum Engineer David Heron (“Mr Heron”), who also explained that their major offshore gas sources are some years off realisation as suppliers of deliverable gas to the Northern Territory, and that to increase production of gas from the Mereenie gas and oil field would require further significant capital expenditure and would take many months. That, too, is consistent with the evidence from the Mereenie Producers through their documents. The order sought against Gasco would, therefore, have the effect of exposing PAWA, and indirectly the Northern Territory Government, to having to renegotiate through Gasco for supplies of gas beyond those presently contracted even though, on the evidence, its demand for gas is increasing as the electricity usage in the Northern Territory increases. The value to the Northern Territory Government of PAWA’s securing through Gasco the benefit of cl 2.26 of the 1985 Mereenie Gas Sales and Purchase Agreement would be lost. In the light of my finding that PAWA is an instrumentality of the Crown in right of the Northern Territory, I regard that prejudice to be one which leads to the conclusion that Gasco at material times is itself entitled to the immunity of the Crown from the application of s 46 of the Trade Practices Act. Perhaps more correctly stated, I conclude that on its proper construction, and subject to consideration of the operation of s 2B of the Trade Practices Act, s 46 of the Trade Practices Act does not apply to Gasco in respect of it having entered and it enjoying the benefit of cl 2.26 of the 1985 Mereenie Gas Sales and Purchase Agreement.

278 I consider that the relief sought falls within the words of Stephen J in Bradken at 129:

“Once this be concluded [that the Trade Practices Act did not bind the Crown] it follows that the Act will not only not apply directly to the Commissioner but will also not apply so as to prejudice its interests when in contractual relationship with parties to whom the Act clearly applies or when otherwise interested in transactions affecting those parties.”

279 Mason and Jacobs JJ at 138 expressed similar views.

280 It follows, in my judgment, that neither PAWA nor Gasco can be liable for the alleged contraventions of s 46 of the Trade Practices Act, even if they are otherwise made out, unless the Trade Practices Act applies to them by reason of s 2B or if the Competition Act applies to them, having regard to s 13 of the Competition Act.

The application of s 2B to PAWA

281 Section 2B of the Trade Practices Act was part of the raft of amendments introduced by the Reform Act. It has since been amended by the Trade Practices Amendment (Telecommunications) Act 1997 (Cth) and by A New Tax System (Trade Practices Amendment) Act 1999 (Cth) but not in respects material to the present proceedings. NT Power contends, and PAWA and Gasco dispute, that its effect is to apply to all their activities. PAWA and Gasco submit that the immunity from operation previously enjoyed by the Northern Territory extended and continued to extend to them as they fell within the aegis of that immunity in relation to the conduct alleged by NT Power.

282 Section 2B(1) relevantly provides:

“The following provisions of this Act bind the Crown in the right of … the Northern Territory …, so far as the Crown carries on a business either directly or by an authority of the … Territory;

(a) Part IV;

…

(b) the other provisions of this Act so far as they relate to the above provisions.”

and “authority” in relation to a Territory is defined in s 4(1) to mean

“(a) a body corporate established for a purpose of the … Territory by or under a law of the … Territory; or

(b) an incorporated company in which the … Territory, or a body corporate referred to in paragraph (a), has a controlling interest;”

283 It is clear that PAWA is a body corporate established for a purpose of the Northern Territory under the PAWA Act. It is also clear that Gasco is an incorporated company in which PAWA, as a body corporate itself falling within par (a) of the definition of “authority”, has a controlling interest. Each entity is therefore an “authority” for the purposes of s 2B of the Trade Practices Act.

284 The conduct of PAWA about which NT Power complains occurred after the commencement of s 2B of the Trade Practices Act. The clear intention of s 2B is, therefore, that the Trade Practices Act applies to PAWA’s activities relevant to this proceeding, provided that, and to the extent that, PAWA is carrying on a business.

285 PAWA’s contention is that it does not carry on a business in respect of the conduct of which NT Power complains. That is because the conduct complained of falls within an activity which expressly does not amount to carrying on a business, or because in any event the conduct complained of is conduct constituting part of its regulatory functions under the PAWA Act and the Electricity Act rather than the conduct of a business, or that it is simply not carrying on a business in relation to the conduct complained of.

286 Section 2C(1) of the Trade Practices Act list a number of activities which do not amount to carrying on a business. Section 2C(1)(b) lists the activity of

“granting, refusing to grant, revoking, suspending or varying licences (whether or not they are subject to conditions)”

and s 2C(3) defines “licence” as meaning:

“A licence that allows the licensee to sell goods or services.”

287 Gas and electricity is included in the definition of “goods”: s 4(1).

288 The conduct of PAWA of which NT Power complains is PAWA’s refusal to consent to NT Power having access to PAWA’s infrastructure for the purpose of selling electricity to consumers in the Northern Territory, and its refusal to identify terms upon which PAWA will consent to NT Power having access to its infrastructure for that purpose.

289 Although the expressions “licence” and “consent” may be interchangeable in certain circumstances (see eg. the definition of “licence” in The Macquarie Concise Dictionary, 1988, at 555 and the discussion of Sheppard, Spender and Gummow JJ on the significance of the wording in s 2(1) of the Copyright Act 1912 (Cth) in Computermate Products (Aust) Pty Ltd v Ozi-soft Pty Ltd (1988) 83 ALR 492 at 494-495), in my view the term “licence” in s 2C(1)(b) of the Trade Practices Act carries the sense of a formal authorisation by a public authority to sell goods or services. It may be unhelpful to paraphrase the definition of “licence” in the Trade Practices Act, but I think the expression in its context conveys something more than “consent”. Section 2C(1)(b) is expressed in terms applicable to formal regulatory processes, including the reference to granting, revoking and suspending licences. The wide meaning of “licence” for which PAWA contends is one which does not lie readily with those processes. That wide meaning would also, in the case of “government” businesses, apply to many if not most routine decisions or processes in the operations of those businesses so as to substantially water down the apparent scope of s 2B. The regulatory functions of PAWA in the licensing of persons to generate, store, reticulate and sell electricity is provided in s 25 of the Electricity Act. PAWA licensed NT Power under that section in terms of the Licence. Indeed, it is not without irony that PAWA for the purposes of this submission contends for the wide meaning of the term “licence” when it elsewhere seeks to assert that its act of licensing NT Power on 28 June 1998 was quite discrete from any question of access to its infrastructure, in particular in response to the claim of NT Power that certain terms relating to access to its infrastructure should be implied into the Licence.

290 The parties’ submissions accepted that the relevant activity of PAWA which is said to constitute the carrying on of business by PAWA relates to its infrastructure. It is necessary for s 2B to apply relevantly that the conduct complained of be engaged in the course of PAWA carrying on its business.

291 NT Power contends that PAWA’s relevant business is, or includes, that of providing electricity transmission and distribution services, which it provides to itself “in its retail guise”. Both Professor Teece and Dr Fitzgerald agreed that there were markets to which those activities were relevant. In the case of Professor Teece, there were separate markets for the provision and use of the transmission infrastructure, and for the provision and use of the distribution infrastructure, whereas Dr Fitzgerald regarded them as one electricity carriage market. On the view of either, PAWA supplies the services of transmission and distribution of electricity through the network, although the sole user of those services until 1 April 2000 has been PAWA. The 132kV line is also part of the transmission network for the provision of electricity by PAWA south of Darwin. In that case the provider of the transmission service is NT Transmission and the acquirer of that service is PAWA.

292 NT Power also points to the fact that PAWA in its 1998 Annual Report refers to the transmission and distribution facilities as “business products” and the use of those facilities as “electricity transmission services” and “commercial services”. The evidence shows that PAWA has a sophisticated system for deciding which generators available to it are to be used, and to what extent, to meet electricity demands from short period to short period and what those processes require.

293 J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 (“McMillan”) concerned s 2A of the Trade Practices Act. That is the provision which indicates the extent to which that Act applies to the Commonwealth and to Commonwealth authorities. Section 2A(1) is relevantly in the same terms as s 2B(1). It has the same limitation as s 2B(1), namely that the application of that Act is only in so far as the Crown carries on business, either directly or by an authority. McMillan concerned the sale by tender by the Commonwealth of the assets and commercial operations of the Australian Government Printing Service (“AGPS”). The AGPS itself was found to have been carrying on the business of publishing, printing and distributing government information. It was alleged that the Commonwealth contravened s 52 of the Trade Practices Act in the course of the tender process. Although the Court found that that conduct in the course of the tender process was in trade and commerce, and was misleading, the application failed. That was because the conduct of the Commonwealth in issuing the request for tender and in dealing with prospective tenderers was not actively engaged in carrying on the business of publisher, printer and distributor of government information. Emmett J at 353-357 reviewed a number of decisions concerning the expression “carrying on business” and I am content to adopt his Honour’s views by reference to that discussion. His Honour found that the particular activity of selling the assets and business of AGPS was conduct divorced from the carrying on of the AGPS business, and was engaged in by officers of the Commonwealth who had nothing to do with its day to day running.

294 It may be assumed, for present purposes, that the Northern Territory through PAWA carries on the business of generating and selling electricity. In the course of conducting that business, it uses its infrastructure. In McMillan at 356, Emmett J referred to and rejected a construction of s 2A (which would apply equally to s 2B) that, once it is accepted that the Commonwealth is carrying on a business, the Trade Practices Act applies to all conduct connected in some way with that business. He concluded that the limiting expression “in so far as the Commonwealth carries on a business”:

“… signifies that the Commonwealth is to be bound only where the conduct complained of is engaged in, the course of carrying on the business. In other words, persons dealing with the Commonwealth in relation to the actual conduct of a business will have the same protection as when dealing with a private trader who is carrying on such a business but will not have protection when entering into other dealings with the Commonwealth. That appears to me to be consistent with the reason for the introduction of s 2A as explained by the Minister on the second reading of the Bill for the amendment which introduced s 2A (House of Representatives, Debates, 3 May 1977, p 1447) as follows:

“Government Commercial Operations

I announced last December that the Government had decided in principle that its commercial operations should be subject to the same restraints of the Trade Practices Act as apply to like operations of private enterprise. I then informed this House that the Government was studying the detailed implementation of this decision. This Bill gives effect to that decision in clause 4 which provides that the Act is to apply to all business undertakings of the Commonwealth Government and its authorities.” ”

295 I respectfully agree with his Honour’s reasons for rejecting that construction of s 2A. I think those considerations are equally applicable to s2B.

296 The issue therefore is whether PAWA’s conduct in declining from August 1998 to provide NT Power with access to its infrastructure and in declining to indicate to PAWA terms upon which it would be prepared to grant that access was actively engaged in carrying on a business.

297 As the helpful analysis of Emmett J illustrates, the term ‘business’ may include a business not carried on for profit: s 4 of the Trade Practices Act. The expression “carrying on business” normally signifies a course of conduct involving the performance of a succession of acts rather than one solitary transaction: per Gibbs CJ in Smith v Capewell (1979) 142 CLR 509 at 517. Emmett J continued at 354:

“However, mere repetitiveness is not sufficient to constitute carrying on of a business. System and regularity are involved in the carrying on of the business but it does not necessarily follow that one who has transactions of the same kind systematically or regularly is carrying on a business in those transactions. The example of regular deposits to a bank account is sufficient to explain that proposition. Absence of a system and regularity might deny that a business is being carried on but the presence does not necessarily establish that it is: see per Barwick CJ in Hungier v Grace (1972) 127 CLR 210 at 217.”

298 NT Power contends that the absence of any process whereby PAWA had in the past provided access to its infrastructure to third parties is not adverse to its contention in the present circumstances. PAWA has provided access to its infrastructure to itself, for the purpose of the supply and sale of consumers of electricity in the Darwin and Katherine areas. It draws some analogy with the circumstances which obtained in Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Ltd (1989) 167 CLR 177 (“Queensland Wire”) where BHP manufactured and sold Y bars to a wholly owned subsidiary but not to third parties.

299 I do not consider that that analogy is applicable in the present circumstances. PAWA generates and sells electricity for the purposes of the Northern Territory Government. It does so using assets, including generators and its infrastructure. Its use of those assets for the purpose of conducting the business of generating and selling electricity is not itself the conduct of the business of acquiring those assets or the business of providing either to itself or to third parties access to those assets. The ownership and use of PAWA’s infrastructure by PAWA is not in respect of the carrying on of business by PAWA in the provision of access to its infrastructure, but is for the fulfilment of PAWA’s function of planning and coordinating the generation and supply of electricity in the Northern Territory: see s 14(1)(b) and (d) of the PAWA Act. It may be that, by the establishment of PAWA Networks as part of the legislative and administrative changes implemented to commence from 1 April 2000 including the Electricity Networks (Third Party Access) Act 2000 (NT), PAWA may now carry on business as a supplier of access to its infrastructure. It is not necessary to decide that question. It does not fall for decision in this proceeding.

300 Section 29 of the Electricity Act makes it an offence to make use of PAWA’s infrastructure without its consent. PAWA contends that that provision provides a further reason why its refusal to give NT Power access to its infrastructure is not an activity in which PAWA carries on business. It submits that the giving of consent to use its infrastructure is a regulatory function, rather than one involving carrying on business. I do not think that s 29 assists PAWA in that manner. It contemplates that PAWA may consent to the use of its infrastructure, but really it appears to me more to be a provision directed to prevent tampering with any part of PAWA’s infrastructure than with the wider question of general access to PAWA’s infrastructure. It is also not in terms similar to the licensing provision in s 25 of that Act. Section 29 does to some extent reinforce the fact that PAWA’s infrastructure is an asset used by it in fulfilling its functions under the PAWA Act to plan and control and provide the generation and supply of electricity in the Northern Territory.

301 In Corrections Corporation of Australia Pty Ltd v Commonwealth of Australia [2000] FCA 1280, Finkelstein J found that the Commonwealth was not carrying on business in operating an immigration detention centre, or in inviting and processing proposals from persons to provide it with services at its detention centres. His Honour said at [16]:

“In this case, by the Request for tenders and the processing of the proposals that were submitted in response, the Commonwealth was seeking to find an appropriate person who would provide it with services at its detention centres; however, it was not itself attempting to trade in goods or provide any services. So it would always be difficult to characterise the tender process as a business. It is in any event difficult to see how the process of selecting a person to provide services to the Commonwealth can be described as conduct that has a commercial flavour, when looked at from the point of view Commonwealth (sic). As in J S McMillan Pty Ltd, the conduct is quite distinct from any business.”

302 In this matter, I think the position is also clear. The topic of access to PAWA’s infrastructure was raised by NT Power. As I have found elsewhere, NT Power recognised that it needed access to PAWA’s infrastructure to sell electricity to consumers in the Darwin and Katherine areas, in addition to being licensed to do so. Until that approach, PAWA was not in any sense trading or attempting to trade in the service of providing access to its infrastructure. It was simply using its infrastructure as part of the means of conducting the business of generating and supplying electricity. The approach of NT Power, and the discussions that then ensued for a few months, do not alter the view which I have formed that PAWA’s use of its infrastructure was not at any time material to this proceeding the conduct of a business involving granting or negotiating to grant access to its infrastructure. Nor do I consider that the fact that PAWA from time to time purchased electricity from NT Power or other independent power producers and used its infrastructure to “wheel” that electricity to consumers, or the fact that PAWA from time to time contracted to NT Power or to others work involving repair and maintenance of part of PAWA’s infrastructure, illuminate the question which s 2B requires to be addressed.

303 I therefore conclude that the application of the Trade Practices Act to the Northern Territory “in so far as” it carries on a business does not extend to PAWA in relation to its conduct in refusing to grant access to its infrastructure to NT Power in August 1998 and thereafter or in refusing to indicate to NT Power the terms upon which it would grant access to its infrastructure to NT Power at that time.

The application of s 2B to Gasco

304 Gasco claims that it is not subject to s 46 of the Trade Practices Act despite s 2B for a different reason. The claim against Gasco arises from its alleged refusal to give an undertaking that it will not exercise the right which it has under cl 2.26 of the 1985 Mereenie Gas Sales and Purchase Agreement, in the face of the request from NT Power of 24 December 1998. It contends that s 89(2) of the Reform Act preserved that agreement, and things done to give effect to that agreement, as if s 2B had not been enacted.

305 Section 89 of the Reform Act provides:

“(1) Subsections (2) and (3) apply in deciding whether a person has contravened Part IV of the Principal Act at any time after the commencement of the amendments made by Division 1 of this Part.

(2) Existing contracts, and things done to give effect to existing contracts, are to be disregarded to the same extent that they would have been disregarded if the amendments made by Division 1 of this Part (other than section 86) had not been made.

(3) If an existing contract is varied on or after the cut-off date, then things done to give effect to the varied contract are not to be disregarded under subsection (2) unless they would have been disregarded under the contract as in force immediately before the cut-off date.

(4) The amendments made by Division 1 of this Part (other than section 86) do not make unenforceable a provision of an existing contract that was not unenforceable immediately before the commencement of those amendments.

(5) In this section:

“cut-off date” means 19 August 1994;

“existing contract” means a contract that was made before the cut-off date.”

306 Clearly the 1985 Mereenie Gas Sales and Purchase Agreement was made before the cut-off date.

307 NT Power contends that s 89 of the Reform Act does not protect Gasco in seeking to preserve the power to exercise the contractual right given under cl 2.26 of that Agreement. The preservation of that contractual right does not necessarily mean that Gasco, whenever offered the option of acquiring gas offered to a third party, will exercise that contractual right by acquiring that gas. In fact, as noted earlier, on the occasion in late 1999 when it was given the opportunity to exercise its pre-emptive right in respect of gas offered to NT Power for operating Mount Todd PS to supply electricity to the Yimuyn Manjerr mine, it did not acquire that gas. NT Power’s two responses to the apparently clear effect of s 89 of the Reform Act are:

(1) that s 2B(1) of the Trade Practices Act, introduced by s 81 of the Reform Act, was repealed and replaced by s 3 and Sch 1 cl 1 of the Trade Practices Amendment (Telecommunication) Act 1997 (Cth), and that s 89 of the Reform Act does not apply to protect contracts, or things done to give effect to contracts in existence before 19 August 1994 to which s 2B otherwise applies because s 89 of the Reform Act relates only to s 2B as it stood before it was replaced, and

(2) that the exercise of a pre-emptive right does not amount to the giving effect to a contract, as that expression in s 89 of the Reform Act should be confined to the potential application of s 45 of the Trade Practices Act because the term “give effect” is particularly apposite to that section.

308 I do not consider that either of those responses are correct. The first depends upon the legislative intention in the repeal and re-enactment of s 2B(1) of the Trade Practices Act. As noted earlier, s 2B(1) as introduced by the Reform Act provided:

“Part IV, and the other provisions of this Act so far as they relate to Part IV, bind the Crown in right of each of the States, of the Northern Territory and of the Australian Capital Territory, so far as the Crown carries on a business, either directly or by an authority of the State or Territory.”

309 The terms of s 2B(1) as now in force, introduced in 1997, appear to extend the application of the Trade Practices Act, but they do not alter the application of Pt IV of that Act to the Crown. There is no reason to think that the protection offered to contracts entered into prior to 19 August 1994 granted when s 2B was first introduced by the Reform Act was intended to be removed by s 2B being repealed and re-enacted in 1997. Moreover, if NT Power is correct, the protection which s 89 offers to existing contracts would be preserved but limited to contracts with the Commonwealth or its emanations in the light of the terms of s 2A, as s 2A as introduced by the Reform Act was not amended in 1997. Again there is no reason to think that the legislature intended by the repeal and replacement of s 2B(1) by the Trade Practices Amendment (Telecommunications) Act 1997 (Cth) to discriminate between the position of the Commonwealth on the one hand, and that of the States and Territories on the other. Such discrimination, quite apart from not being intended, would be contrary to the Competition Principles Agreement itself. Finally, I observe that the legislative scheme to implement the Competition Principles Agreement included the implementation of the Competition Act in the Northern Territory (and in the other States and the Australian Capital Territory). Section 41 of the Competition Act, although worded somewhat differently from s 89 of the Reform Act, is clearly intended to achieve the same result in so far as s 13 of the Competition Act applies (in terms similar to s 2B) the Competition Code (including the Schedule version of Pt IV of the Trade Practices Act) to the Crown in right of the Northern Territory. It would not be consistent with the integrity of the legislative compact if that harmony were to have been diminished by the repeal and re-enactment in 1997 of s 2B(1) of the Trade Practices Act in relevantly the same terms as it was when first introduced (at least so far as s 46 of the Trade Practices Act may apply).

310 In my judgment, the wording of s 89(2) is not apposite only to relate to conduct which might otherwise constitute a contravention of s 45 of the Trade Practices Act. NT Power refers to the expression “give effect to” as indicating that intention. But s 89(1) is not limited to contraventions of s 45 of the Trade Practices Act. It applies to contraventions of Pt IV of that Act, including s 46. There is no reason in principle why the preservation which s 89 of the Reform Act effects should be limited in its scope to contraventions of s 45 only. It is clearly intended to preserve from the application of the Trade Practices Act extended, inter alia, by s 2B contracts made before 19 August 1994 and things done to give effect to such contracts. It is evident that the legislature as a matter of policy, by intending the application of the Trade Practices Act to the Crown as effected by ss 2A and 2B, accepted that it should not render unlawful or unenforceable contracts entered into prior to a certain date or things done to give effect to those contracts. That intention should be given effect in relation to the potential operation of s 46 of the Trade Practices Act as well as s 45.

311 To prevent Gasco from being entitled to exercise the pre-emptive right in cl 2.26 of the 1985 Mereenie Gas Sales and Purchase Agreement would, in my view, be a failure to give effect to s 89(2) of the Reform Act. In deciding whether Gasco has contravened s 46 of the Trade Practices Act in the manner alleged, it is necessary to have regard to cl 2.26 of that Agreement. That is an essential step in the contention of NT Power. If s 2B had not been introduced into the Trade Practices Act, I have concluded that Gasco would not have been liable to NT Power on the basis alleged because of its entitlement to Crown immunity in the relevant respect. Section 89(2) directs that, in determining NT Power’s claim, the 1985 Mereenie Gas Sales and Purchase Agreement should be disregarded to the same extent as if s 2B had not been enacted. It is also a step in NT Power’s contention that Gasco should inform NT Power, but more importantly the Mereenie Producers, that it waives its entitlement to receive notification of any offer of gas to NT Power or to a third party. Alternatively, NT Power claims that Gasco should indicate in some formal way that, if given notice of a proposed offer of gas to NT Power or to a third party, it will not exercise the right to acquire that gas. That is expressed in the amended Statement of Claim as a failure to give an undertaking that it would not exercise the pre-emptive right. Its failure to agree to do so is an element of its conduct said to amount to a contravention of s 46 of the Trade Practices Act. In my judgment compliance with cl 2.26 of that Agreement by the Mereenie Producers and Gasco’s receipt of and consideration of the offer made to NT Power or to a third party, and its response to the Mereenie Producers, are all things done to give effect to the 1985 Mereenie Gas Sales and Purchase Agreement. I consider that s 89(2) directs that those things are all to be disregarded in considering NT Power’s claim that Gasco has contravened s 46 of the Trade Practices Act as if s 2B had not been enacted. The consequence is that, in my judgment, NT Power cannot make out its claim against Gasco in the circumstances as pleaded.

312 For those reasons, I consider that the claims by NT Power against PAWA and Gasco for contravention of s 46 of the Trade Practices Act must fail. That leaves for consideration its claim against PAWA based upon PAWA’s alleged breach of terms which NT Power claims should be implied into the Licence.

313 However, before considering that claim, and in case I am wrong in the conclusions I have reached, I propose to address also the substantive arguments in relation to the alleged contraventions of s 46 as if Pt IV of the Trade Practices Act applied to both PAWA and Gasco.

The claim against PAWA under s 46

314 NT Power’s submission concerning PAWA based upon s 46 of the Trade Practices Act is as follows. PAWA is a corporation that has a substantial degree of power in the Electricity Carriage Market (that is the market for the transmission and distribution of electricity in the Northern Territory) or alternatively in both the Electricity Transmission Market and the Electricity Distribution Market in the Northern Territory. As noted, there was a dispute between Dr Fitzgerald who gave evidence at the request of NT Power and Professor Teece who gave evidence at the request of PAWA as to whether there was in the Northern Territory an Electricity Carriage Market or two separate markets for the transmission of electricity and the distribution of electricity. Counsel for NT Power contended that, for the purposes of considering the outcome of the claim, it does not really matter whether there are the two separate markets as Professor Teece said, or the one Electricity Carriage Market. In either event, PAWA has a substantial degree of power in those markets or in that market. From 26 August 1998, the date of the letter from PAWA’s solicitors to NT Power’s solicitors, PAWA has refused to provide NT Power with access to PAWA’s infrastructure, and has declined to indicate terms upon which it would be prepared to provide such access. Thus, PAWA has taken advantage of the power it enjoys in those markets or in that market. It then contends that PAWA taking advantage of that market power was for a purpose proscribed by s 46(1)(b) and (c), namely for preventing the entry of NT Power into the market for the supply of electricity to persons in the Northern Territory and for deterring or preventing NT Power from engaging in competitive conduct in the market for the supply of electricity to persons in the Northern Territory.

315 PAWA first contended that because it had never sold access to its infrastructure to a third party for the purpose of a third party supplying and selling electricity to consumers in the Northern Territory, there had not been and was not at any material time a market or markets for the supply of access to PAWA’s infrastructure. That contention seeks to adopt the reasoning of the Full Court of this Court (Bowen CJ, Morling and Gummow JJ) in Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Ltd (1987) 17 FCR 211. That contention was rejected by the High Court in Queensland Wire and it is not necessary, in that circumstance, to do other than to note it and to reject it.

316 PAWA’s principal submission was that, however the relevant market or markets are defined in relation to its functional, geographic and product elements, the temporal dimension of the market or markets are significant. That is because PAWA, although it operated as a natural monopoly in the Electricity Transmission Market and the Electricity Distribution Markets, was constrained by the access regime proposed to be introduced (and in fact introduced) in April 2000. The proposal for a legislative access regime to PAWA’s infrastructure was announced by the Northern Territory Government on 1 December 1998. PAWA claimed that the consequence of that announced intention, which was in implementation of obligations under the Competition Principles Agreement, was to cause any market power PAWA enjoyed to have “evaporated”. PAWA’s conduct in the period from late August 1998 until 1 April 2000 was therefore constrained by the potential competition to occur from 1 April 2000. Its conduct in refusing to grant access to its infrastructure to NT Power from 26 August 1998 was not in the exercise of its market power but for the purpose of ensuring that there would be efficient and effective competition in the market or markets for access to PAWA’s infrastructure only by the access regime to be introduced by the Northern Territory Government. It was necessary for PAWA to refuse NT Power having access to its infrastructure in the meantime, because an efficient and effective access regime would be likely to be prejudiced or compromised by granting access to its infrastructure to NT Power before the access regime was in place. The premise underlying that contention is that s 46 should be construed so as to entitle PAWA to have refused access to its infrastructure so that, in the longer term, “effective competition” could be introduced. Accordingly, if PAWA’s purpose was to enhance competition in the longer term, inter alia, by refusing access to its infrastructure in the shorter term, that purpose was not one proscribed by s 46(1)(b) or (c) of the Trade Practices Act. Independently of that contention PAWA contended that its refusal to grant access to its infrastructure to NT Power was not by taking advantage of market power but by exercising a regulatory function. As a further alternative, PAWA contended that its refusal to grant access to its infrastructure to NT Power was not by taking advantage of market power, but by exercising its proprietary rights over its infrastructure by refusing to divest itself of any of those proprietary rights.

317 It is convenient to deal with those two alternative contentions first.

318 The claim that, however one defines the market and PAWA’s power in that market, its refusal to grant access to its infrastructure was only an exercise of regulatory power is based upon its role as the public authority responsible for the administration of the Electricity Act. That Act regulates the use and sale of electricity in the Northern Territory, and PAWA’s functions include planning and coordinating the generation and supply of electricity for the Northern Territory: see s 14(1)(b) and (d) of the PAWA Act. PAWA also referred to the provisions of s 14(3A) and (3B) of the PAWA Act, added by the Power and Water Authority Amendment Act 1998 (NT).

319 Section 14(3A) and (3B) provide:

“(3A)Subject to subsection (3B), the Authority has the functions of –

(a) providing communications facilities and services; and

(b) providing other facilities and services.

(3B)The Authority may only provide a particular kind of facility or service under subsection (3A) –

(a) if the provision of the facility or service is consistent with the requirement that the Authority act in a commercial manner; and

(b) with the approval of the Minister.”

320 I do not consider that those provisions assist in charactering the nature of the power or function PAWA was exercising when it refused to grant NT Power access to its infrastructure. In my judgment, the amendment which then gave PAWA the function of “providing other facilities and services” was not intended to relate to providing access to PAWA’s infrastructure. If it had been so intended, I consider that the amendment would have made it much clearer. The question of access to PAWA’s infrastructure is not one which the legislature would have expressed only as subordinate to that of providing communications functions and services by including it only in the general way that s 14(3A)(b) provides. The Second Reading Speech of the Minister for Essential Services (Hansard, 22 April 1998, p 1015) refers specifically to PAWA’s desire to tender to supply as a service provider for the high-capacity fibre-optic cable network to service customers in the Darwin area through its ducts and tunnels. It refers to PAWA already having an access regime for its ducts and tunnels so that other tenderers for that project might have the opportunity of competitive tendering. There was no amendment to s 14(1) of the PAWA Act, at the time when s 14(3A) and (3B) were introduced. Section 14(1) describes PAWA’s functions in relation to electricity. Those functions, as expressed, are sufficiently wide to encompass the issue of access to PAWA’s infrastructure subject to some specific Ministerial control (cp. s 14(3B)). In my view, an intention that access to PAWA’s infrastructure should be subject to specific Ministerial direction would more appropriately have been expressed by amendment to s 14(1) in some form.

321 The characterisation of PAWA’s conduct in refusing access to its infrastructure as regulatory rather than the exercise of market power is said to derive support from the decisions of O’Loughlin J in Plume v Federal Airports Corporation (1997) ATPR 41-589 (“Plume”) and of French J in Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 38 (“Stirling”). Stirling was affirmed on appeal: (2000) ATPR 41-783 (“the Stirling appeal”). In Plume, O’Loughlin J pointed out at 44,131 that

“The power with which s 46 is concerned is an economic market power and there must be a causal connection between the exercise of that power and the conduct that is the subject of complaint …

In addition there is the obligation on a complainant to establish a causative link between the exercise of the market power and the proscribed conduct.”

322 His Honour concluded at 44,132 that the conduct of the Federal Airport’s Corporation in licensing one entity only to provide a transport shuttle service between Alice Springs and the Alice Springs Airport was not the exercise of an economic market power, but the use of a regulatory power designed for the benefit of the members of the public who have occasion to use the facilities of that airport. He also concluded that its purpose was not to take advantage of any market power with a proscribed objective. The reason for granting the sole licence was to achieve the orderly regulation of an important business activity and the provision of a satisfactory public service. It regarded the exclusive licence as necessary to ensure a commercially viable and efficient shuttle bus service. A by-law prohibited the supply of that service except under licence from the Federal Airports Corporation.

323 Stirling concerned an exclusive licence to provide towage services in the Port of Bunbury. The grant of that licence was attacked, inter alia, as constituting a contravention of s 46 of the Trade Practices Act. French J in Stirling found that the Port of Bunbury could support only one provider of towage services, that is that it was a material monopoly. His Honour concluded at [124] in relation to the claim based on an alleged contravention of s 46 of the Trade Practices Act:

“It has been said that the exercise of a statutory power in the public interest is not the exercise of market power which is necessarily economic in nature or origin – Plume v Federal Airports Corp (1997) ATPR 41 589 at 44,131 (O’Loughlin J). That is to be distinguished from the case where economic power derives from a statutory monopoly – OD Transport Pty Ltd v Western Australian Government Railways Commission (1986) 13 FCR 270. In my opinion the BPA contention is correct that the exercise by it of a statutory power to licence the provision of towage services in the Port of Bunbury is not an exercise of market power but rather the discharge of a regulatory function conferred upon it by the legislature in the public interest. That said, the fact that the conduct of a statutory body is supported by statutory authority will not necessarily take it out of the scope of s46. Without exploring the limits of the exempting characteristic it is sufficient in my opinion to say that the grant of a statutory licence under an express power granted by the Parliament is well within it.”

324 That conclusion was upheld by the Full Court in the Stirling appeal, per Burchett and Hely JJ at 41,227 [72]. Their Honours noted in the course of their reasons on that aspect that the Bunbury Port Authority was not itself a participant in the market for the supply of towage services for the Port of Bunbury. They also concluded at 41,227 [73]:

“Further, the grant of the exclusive licence is not to prevent entry, eliminate or damage a competitor or prevent competitive conduct. The purpose of the tender process is to create competition for the market of a kind that allows all interested parties to participate. We agree with the primary judge’s conclusion that, in any event, BPA is not offering an exclusive licence for any of the proscribed purposes under s 46. No error has been demonstrated in relation to his Honour’s conclusion.”

325 Carr J at 41,282-3 [112-113] dissented on the question whether the Bunbury Port Authority, when granting the exclusive licence, was exercising regulatory rather than market power, although his Honour agreed that the purpose for offering the exclusive licence was not a proscribed one.

326 The characterisation of the power by which PAWA controls access to its infrastructure is by no means simple. There is no dispute that the control of that infrastructure is a natural monopoly. The barriers to entry of another potential supplier of infrastructure services to those wishing to participate in the Electricity Supply Market in the Northern Territory are self evident. It was not a matter upon which expert evidence was necessary to quantify the economic or other costs to doing so, nor to address whether in any event there was any real prospect that the Electricity Supply Market could support more than one provider of infrastructure services. PAWA’s direct licensing power in s 25 of the Electricity Act relates to the generation, storage reticulation and sale of electricity for use in an area. Under s 29(1)(b) of the Electricity Act, no person may

“use any electrical installation, equipment, apparatus or thing owned by the Authority or a licensee”

except with the consent of PAWA or a licensee. The granting or withholding of its consent might be said to be the exercise of a statutory power in the public interest. However, as I have elsewhere observed, in my judgment s 29 is concerned with protecting PAWA or a licensee from misuse of its infrastructure or misappropriation or misuse of electricity (for which s 29(1)(a) provides). Section 29 creates an offence for such conduct, and fixes a penalty. The consent for which it provides is no doubt intended to encompass a variety of circumstances in which PAWA or a licensee might wish to permit persons to have access to infrastructure, such as repair or maintenance, measurement, upgrading and the like. It is also of significance that it protects both PAWA and licensees, and provides for PAWA or a licensee to give the consent contemplated.

327 In my opinion, the exercise by PAWA of the power to refrain from giving access to its infrastructure is an exercise of market power rather than the discharge of a regulatory function. That conduct is not designed to achieve, by regulation, any specific public purpose of the legislature identified in the legislation. The maintenance and operation of PAWA’s infrastructure is clearly one of its functions, and its conduct in doing so clearly serves the public interest. But the issue of access to PAWA’s infrastructure for the purpose of enabling third parties to participate in the Electricity Supply Market is not one which is dealt with by an express licensing power. The Electricity Act and the PAWA Act were not intended to provide the regulatory framework by which the Northern Territory Government, in relation to access to PAWA’s infrastructure, would give effect to its obligations under the Competition Principles Agreement. I do not therefore consider that it enhances the characterisation contended for by PAWA to discern that the question of access to PAWA’s infrastructure was a matter which was determined by the Northern Territory Government when addressing those obligations, and in the light of them. Unlike both Plume and Stirling, PAWA is not merely the monopoly supplier of infrastructure services but is a participant in the Electricity Supply Market. Whether the relevant functional market be the Electricity Carriage Market, or the Electricity Transmission Market and the Electricity Distribution Market, PAWA is a monopoly supplier of services in the market: see s 46(4)(c) of the Trade Practices Act. It was in a position to charge for those services. Subject to the access regime which came into force on 1 April 2000, it was able to charge a fee for those services which did not necessarily reflect a fee which represented a normal return on its capital investment. There is no evidence that, in its negotiations up to August 1998, PAWA through its officers intended to do otherwise than negotiate a proper fee but the capacity to do so existed by reason of its power in the market or markets. In making the decision whether to grant access, it was a commercial judgment rather than a regulatory judgment which was being made. In my judgment, the decision of PAWA to refuse to grant access to its infrastructure to NT Power was an exercise of power in the relevant market or markets, rather than an exercise of regulatory power.

328 The characterisation of PAWA’s conduct in refusing to provide to NT Power access to its infrastructure as an exercise of PAWA’s rights as the owner of that infrastructure, and not in the exercise of market power, is a seductive one. It is said to derive some support from the decision of Lockhart J in Dowling v Dalgety Australia Ltd (1992) 34 FCR 109. His Honour found that the respondents in that case did not have a substantial degree of power in the relevant market, notwithstanding their control of the Goondiwindi Saleyards. The applicant, a licensed auctioneer and stock and station agent, failed in his bid to secure an order that he be permitted to conduct auction sales of livestock at those saleyards. Counsel for PAWA referred to the following passage in his Honour’s reasons (at 145-146):

“The respondents have not used or taken advantage of market power. The respondents are not in the business of granting licences or leases of saleyards. They are in the business of providing livestock selling services. They own as equal shares as tenants in common a valuable asset, being the Goondiwindi Saleyards, and they have exercised rights that flow from their ownership of the yards and from the agreement with respect to membership of the Association. They have declined to make available to Mr Dowling a valuable asset of theirs to advantage him as a competitor. In my opinion, they have not taken advantage of their market power for a substantial purpose of deterring or preventing Mr Dowling from engaging in competitive conduct in the relevant market.”

329 However, in the immediately preceding passage his Honour, after referring to Queensland Wire, accepted that

“… the ownership of the land upon which the Goondiwindi Saleyards are erected and the rights which flow from that ownership … are rights which may themselves give rise to or cause a degree of market power to come into existence. But the conduct of the respondents in choosing to exercise their rights the way they did could not be said to be conduct that they would be unlikely to engage in or could not afford for commercial reasons to engage in, if they were operating in a competitive market.”

330 As I understand his Honour, he did not conclude that the existence of proprietary rights over an asset could not give rise to a substantial degree of power in a market, or that the exercise of those rights could not amount to the exercise of that market power. His Honour’s conclusion in this part of his judgment was that, in the circumstances, the conduct complained of did not in fact amount to the respondents exercising the rights they enjoyed for a proscribed purpose. Indeed, the final sentence of the passage quoted above refers to “their market power” so as to suggest that the proprietary rights did (or were assumed to) give rise to a degree of power in a relevant market.

331 In Queensland Wire, Dawson J clearly contemplated that the exercise of contractual or other rights may constitute taking advantage of substantial power in a market. He said at 202, in addressing whether a person has engaged in monopolistic practices:

“Nor is it helpful to categorize conduct, as has been done, by determining whether it is the exercise of some contractual or other right. [references omitted] The fact that action is taken pursuant to the terms of a contract has no necessary bearing upon whether it is the exercise of market power in contravention of s 46.”

332 In my judgment, PAWA’s contention seeks to read into s 46 more than its clear words. There is no express requirement that the potential supplier of goods or services in a market “is in the business of providing goods or services in that market” (to quote a passage from PAWA’s written submission). The reference by Lockhart J in Dowling to the fact that the respondents were not in the business of granting licences or leases of saleyards was, in my view, simply a reference to a finding of fact in that particular matter which, together with other facts, led his Honour to conclude that their conduct was not for a purpose proscribed by s 46. I do not think that that case supports the contention that s 46 requires the potential supplier of goods or services to be in the business of supplying those goods or services as a necessary element to there being the exercise of substantial power in a particular market. In Queensland Wire, Mason CJ and Wilson J said at 191:

“The question is simply whether a firm with a substantial degree of market power has used that power for a purpose proscribed in the section, thereby undermining competition …”

333 Dawson J at 200 said:

“But the existence of or non-existence of sales of a product cannot conclude whether a market exists or not. It must be sufficient to constitute a market that there is a product for exchange, regardless of whether exchange or negotiation for exchange has actually taken place.”

334 In this matter, as I have found, both PAWA and NT Power recognised from at least early 1998 that there was likely to be negotiation for NT Power to have access to PAWA’s network, and from March 1998 there were negotiations which I have found to be genuinely conducted on the part of PAWA’s officers, as well as on the part of NT Power, with a view to resolving the technical concerns of PAWA and with a view to agreeing the terms upon which NT Power might be given access to PAWA’s infrastructure.

335 I consider that the conduct of PAWA in refusing to grant NT Power access to its infrastructure, even if it be the exercise of property rights by PAWA, may nevertheless constitute the exercise of a substantial degree of power in a market by PAWA so as to attract the operation of s 46 of the Trade Practices Act. Whether or not it does so requires consideration of the claims of NT Power and of the principal issues raised by PAWA in response.

336 The starting point for considering NT Power’s claim against PAWA for contravention of s 46 of the Trade Practices Act is to identify the market in which PAWA is said to have a substantial degree of market power: Queensland Wire, per Mason CJ and Wilson J at 187.

337 In terms of the relevant product market, and the functional market, I do not think that it is necessary in this matter to determine the competing views of the experts Dr Fitzgerald and Professor Teece as to whether there is one Electricity Carriage Market incorporating both the transmission and distribution networks of PAWA, or separately an Electricity Transmission Market and an Electricity Distribution Market. That is because I do not consider that the resolution of that issue makes any difference to the outcome of the proceeding. Whichever view is adopted, in my view the power of PAWA in the market or markets is the same and the conduct in which it engaged in relation to the market or markets is the same. In addition, the reason or reasons why it engaged in that conduct is the same. There is no evidence to suggest that PAWA treated the question of access to its infrastructure differently in relation to what Professor Teece called its transmission assets from the way in which it treated the question of access to the assets which Professor Teece described as its distribution assets.

338 In PAWA’s consideration, the question of access was treated as one issue although it separately addressed the TUOS and DUOS charge quantification, and the technical issues about which it was concerned in part related separately to the transmission assets and to the distribution assets. PAWA, in its submission urging the conclusion that there are separate markets for the supply of transmission services and for the supply of distribution services, pointed to the evidence that on both the demand side and on the supply side transmission services are not substitutable for distribution services. It submitted that the justification for the existence of separate markets for transmission and distribution services is because of the potential for sales of transmission and distribution services, presumably separately. That theoretical possibility did exist. However, both PAWA and NT Power regarded the question of access as one to be resolved as a package, and PAWA’s reasons for refusing access to its infrastructure related to the request for access to its infrastructure generally and not separately to its transmission assets and its distribution assets.

339 For the sake of convenience, and neutrality on that issue, I shall call the market or markets for supply of services for the transport of electricity along PAWA’s infrastructure, including its transmission and distribution network, as “the Market”.

340 The geographical boundaries of the Market are acknowledged to be the Northern Territory, although as I observed earlier in these reasons, there is evidence upon which the geographical boundaries of the Market might be confined to the Darwin-Katherine region. Whichever area is the true geographical boundary, the outcome of NT Power’s claim under s 46 would be the same.

341 There is, however, a significant issue as to what PAWA called the “temporal dimension” of the Market. NT Power’s submission is straightforward. At August 1998 and at material times thereafter, by virtue of its monopoly status, PAWA had a substantial degree of power in the Market. In refusing NT Power access to the Market, PAWA took advantage of that power. It was only by virtue of its control of the Market, and the absence of other suppliers of services in the Market, that PAWA could sensibly refuse, and in a commercial sense could afford to refuse, to grant access to its infrastructure and to decline to negotiate with NT Power to that end and to specify any terms upon which it would grant such access. If PAWA lacked that market power, that is if it were operating in a competitive environment, it is very unlikely that it would simply have refused to deal with NT Power in relation to access to its infrastructure and allow NT Power to procure access from a competitor. NT Power then contends that PAWA engaged in that conduct for the purposes proscribed by s 46(1)(b) and (c).

342 PAWA stresses the need to determine a temporal dimension of the market, because it is necessary, it contends, to have regard to actual and potential transactions involving the provision of services in the Market to determine the extent of PAWA’s power in the Market. In this matter, there was in August 1998 an access regime somewhere on the distant horizon and on 1 December 1998, following the statement of the Treasurer, a clear indication that PAWA was to be given the opportunity of reforming itself to a more efficient and commercially run business and that an access regime was to be developed as part of the regulatory reform proposed so that independent power producers could have access to PAWA’s infrastructure. The Minister said that

“It will take some time to develop and implement the appropriate regulatory arrangements, and it will probably be two to three years before the process is complete.”

343 PAWA contends that the prospect of the access regime relevantly constrained PAWA’s power in the Market. Upon the basis of that prospect, PAWA contends that at material times it did not have market power and that any market power PAWA previously enjoyed “had evaporated”.

344 In Queensland Wire at 188, Mason CJ and Wilson J described market power in the following terms:

“Market power can be defined as the ability of a firm to raise prices above the supply cost without rivals taking away customers in due time, supply cost being the minimum cost an efficient firm would incur in producing the product.”

345 At 188-189 their Honours drew attention also to s 46(3) of the Trade Practices Act, which requires consideration of

“the extent to which the conduct of [the respondent] in that market is constrained by the conduct of … competitors, or potential competitors …”

in determining the degree of market power.

346 Deane J at 195 said that ‘market’ should be understood, in the context of the Act, in the sense of an area of potential close competition in particular goods and/or services and their substitutes. In Queensland Wire, Dawson J, in a passage cited with approval by the majority in Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (trading as Auto Fashions Australia) [2001] HCA 13 (“Melway”), said at 200:

“The term “market power” is ordinarily taken to be a reference to the power to raise price by restricting output in a sustainable manner. … But market power has aspects other than influence upon the market price. It may be manifested by practices directed at excluding competition such as exclusive dealing, tying arrangements, predatory pricing or refusal to deal: … The ability to engage persistently in these practices may be as indicative of market power as the ability to influence prices. Thus Kaysen and Turner define market power as follows:

“A firm possesses market power when it can behave persistently in a manner different from the behaviour that a competitive market would enforce on a firm facing otherwise similar cost and demand conditions.” (Kaysen and Turner, Antitrust Policy (1959), p. 75).”

347 In Melway, there was no issue before the High Court that the appellant had substantial market power in the relevant market.

348 PAWA referred to the oft quoted passage in Re Queensland Co-operative Milling Association Ltd (1976) ATPR 40-012 at 17,247 (“QCMA”) where the Trade Practices Tribunal (Woodward J and Drs Shipton and Brunt, Members) said:

“… a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive.”

349 It contended that the reference to “the long run” reflected the need, as explained by Professor Teece, to have regard to potential competition in defining the market. Dr Fitzgerald did not disagree with that proposition. Where the difference between experts arose was whether the time dimension should be extended to encompass the implementation of the proposed access regime.

350 The passage in QCMA to which I have referred was discussed by the Tribunal (Lockhart J and Drs Brunt and Aldrich Members) in Re AGL Cooper Basin Natural Gas Supply Arrangements (1997) ATPR 41-593 at 44,210. The Tribunal there said of the expression “the long run”:

“Yet we recall that the phrase “the long run” is to be read in a special technical sense as referring not to a span of years but to “operational time” as explained in Telecom Corporation of NZ Ltd v Commerce Commission (1991) 3 NZBLC ¶99-239 at 102, 363:

“We include within the market those sources of supply that come about from redeploying existing production and distribution capacity but stop short of including supplies arising from entirely new entry. Thus ‘the long run’ in market definition does not refer to any particular length of calendar time but to the operational time required for organising and implementing a redeployment of existing capacity in response to profit incentives.”

351 In this matter, in my judgment, PAWA’s infrastructure constitutes a natural monopoly. Indeed, it was not suggested by Professor Teece or by Dr Fitzgerald that there would ever be another entity providing services in the Market. There is no suggestion of any credible threat of entry into the Market by another competitor. The purpose of the then proposed access regime was to facilitate competition in the Electricity Supply Market by enabling the entry of competitors into that market. Those prospective competitors would require the supply of services from PAWA in the Market, but would not become competitors of PAWA in the Market. They would become competitors of PAWA in the Electricity Supply Market. It was in the Electricity Supply Market that consumers were to become contestable.

352 The effect of the access regime, ultimately introduced on 1 April 2000, was to dictate to PAWA how it should exercise its power in the Market. Until that time, in my judgment, PAWA had no real impediment to how it exercised its power in the market. In a practical sense, there was no operational time within which any potential supplier of services in the Market could organise and implement its provision of services in the Market. Nor was there any operational time within which potential acquirers of services in the Market, that is those wishing to supply services in the Electricity Supply Market, could organise and implement their acquisition of services in the Market. They simply had to wait until the proposed access regime came into force. The time period then for an entity such as NT Power being in a position to acquire the right to utilise PAWA’s infrastructure under the access regime for the purpose of selling electricity in the Electricity Supply Market would be quite short. In my judgment, the technical issues which PAWA up to July 1998 required to be resolved would have been capable of satisfactory resolution within a period of several months. The process of identifying PAWA’s assets, and then resolving upon the proper basis for their valuation and valuing them, and then of determining the proper return on capital which should be sought and of other operating costs to be recovered, and finally of calculating the amount of those costs, the TUOS and DUOS, would also have taken some time. The period of time so involved is relevant to the amount of PAWA’s damages, but I do not propose to determine that period precisely in these reasons as it is not necessary to do so. It is sufficient for present purposes to indicate my conclusion that those processes would have taken no longer than a further period of several months from August 1998. I am not persuaded in the circumstances of this matter that that time frame is relevant to determining the temporal dimension of the Market, but if that sort of process does assist in determining the operational time by which, in a contestable market for services in the Market, a potential acquirer would or might require to be able to acquire those services or a potential supplier of services in the Market would or might require to be able to supply those services, then it is a period significantly shorter than the period from August 1998 to April 2000. And, on the evidence, PAWA’s difficulty in arriving at TUOS and DUOS charges more speedily is probably itself a feature of its monopoly status as it had no competitive pressure on it to address, or to be in a position to address, such charges or the technical issues which its officers identified by reason of its status in the Market.

353 In the present circumstances, the Market was not in any sense contestable. The entry process and costs to a potential competitor for supplying services in the Market would be prohibitive, even if there were means by which transmission and distribution networks could physically be established on or within the land required to do so. The sunk costs would be very great. As I have noted, no party contended that there was any impetus which would provide a stimulus for competitive outcomes in the supply of services in the Market, other than the prospect of an access regime. The access regime was expected to make sections of the Electricity Supply Market contestable, and to impose terms upon which PAWA could supply services in the Market. It would not make the supply of services in the Market contestable. That is, it was anticipated that in a non-contestable market, there was anticipated to be some regulatory intervention. Until that time, in my judgment PAWA had a substantial degree of power in the Market. I do not consider that the prospect of regulatory intervention in the foreshadowed time span in 1998 of two to three years leads to the opposite conclusion. I think that the time span in which the existence of market power should be determined does not extend to that period when regulatory intervention on the supply side might be imposed. The “forward perspective” does not, in my judgment, extend that far. In the period up to that time, and indeed for the preceding period (but relevantly from about December 1997 when both PAWA and NT Power focussed upon the prospect of NT Power obtaining access to PAWA’s infrastructure), PAWA had substantial power in the Market. It was not constrained by the anticipated access regime from refusing to deal with NT Power (one of the manifestations of market power referred to by Dawson J in Queensland Wire) until 1 April 2000. In that regard, I note also the observations of Mason CJ and Wilson J in Queensland Wire at 190.

354 In the light of that conclusion, I do not need to further consider the implications of the access regime introduced in fact from 1 April 2000. The competitive integrity of that scheme was not an issue in these proceedings. However, the significance of that access scheme may have been relevant to NT Power’s claims to damages, and to whether it should be entitled to injunctive relief. It may be that the exercise of its functions under the access regime, from 1 April 2000, is not or could not qualify as the exercise of market power in the Market, but is the exercise of a regulatory power or the exercise of a function in accordance with regulation: cp. Stirling and Plume. As I indicate below, I do not need to address and do not address the question of the relief to which NT Power claims to be entitled if it were to have succeeded in its claims.

355 PAWA contended that its decision in August 1998 to refuse to grant access to its infrastructure to NT Power was not an exercise of its market power. The decision to refuse that access was made by the Minister for Essential Services on 21 August 1998 by adopting the recommendation to that effect made by Mr Gardner and the Acting Under Treasurer Mr Henry. That recommendation was to “defer the establishment of access arrangements” until Cabinet decided on action in relation to PAWA following the Scoping Study. Although the acceptance of that recommendation was not expressed in terms of a direction given under s 16 of the PAWA Act, in my view it had that status. There is no other procedure established under the PAWA Act by which the Minister could control the operations of PAWA. As a matter of practice, as the communications between PAWA and the Minister demonstrate, the procedure of a minute from the Chief Executive Officer and his response by endorsement on that minute was the normal means by which the Minister (where he considered it appropriate) gave directions under s 16 of the PAWA Act. There is no evidence to indicate any other means by which directions under s 16 were given.

356 I do not think it follows that the implementation by PAWA of that direction was not, or could not be, the exercise of market power. The direction was given pursuant to a statutory power, by virtue of which effectively the decision-maker on behalf of PAWA was the Minister. But the existence of that decision-making structure did not impose any obligation upon the Minister that PAWA should act in a certain way. The ability of PAWA to act to refuse access to its infrastructure was one which existed, in a commercial sense, by reason of its power in the Market. In my judgment, it is erroneous to characterise the decision by PAWA, through the Minister, to refuse access to its infrastructure as the exercise of a regulatory power, so that PAWA was simply complying with the law.

357 Once that issue is put aside, determining whether PAWA has used its substantial power in the Market in declining to grant NT Power access to its infrastructure is, in my view, straightforward. I am mindful of the majority views in Melway at [46]–[52] commenting upon the reasoning in Queensland Wire concerning whether the respondent had taken advantage of its power in the market. In this case, I think the direct evidence is sufficient to reach that conclusion. Until August 1998, as I have found, NT Power and PAWA were each considering the issue of PAWA granting to NT Power access to its infrastructure. There were different perceptions as to how rapidly those discussions might proceed to agreement, and as to the complexity of the issues required to be resolved before those discussions reached fruition. PAWA and the Northern Territory Government were aware that, in the longer term, the Competition Principles Agreement required that PAWA’s functions be reviewed. They were aware that PAWA was not operating to a level of efficiency which would enable it to compete in the Electricity Supply Market with a new entrant, such as NT Power. They were aware that such competition, if introduced, would be likely to result in certain of the larger commercial acquirers of electricity in that market obtaining supplies of electricity from an independent power producer, partly because of the existing tariff structure and partly because PAWA was not then in a condition where it could compete efficiently in that market. They were aware that such competition could not be effectively introduced without NT Power having access to PAWA’s infrastructure. And they were aware that the grant of access to PAWA’s infrastructure at that point would therefore be likely to result in PAWA’s revenue being reduced in significant measure without any corresponding reduction in its operating costs. In my judgment, the significance of those matters in the course of negotiations between March and July 1998 was progressively appreciated by PAWA through Mr Gardner, and by Mr Clarke. The letter from solicitors for NT Power of 17 August 1998 probably brought focus to that appreciation. It identified 1 October 1998 as the date upon which NT Power proposed to enter the Electricity Supply Market. It needed to acquire services from PAWA in the Market to be able to do so. That letter led to the recommendations made to the Treasurer and to the Minister for Essential Services on 21 August 1998, and their acceptance of the recommendations. The subsequent minute of Mr Clarke to those Ministers of 24 August 1998 specifically recognised that access to PAWA’s infrastructure was a necessary step in NT Power being able to participate in the Electricity Supply Market. Those matters all resulted in PAWA determining to refuse NT Power access to its infrastructure, at least for a significant period. In my view, its decision to do so was made by taking advantage of its market power. It was made in the appreciation of the existence of that market power, and of the capacity to exercise that market power to decline access to its infrastructure. It was only by virtue of its control of the Market, and the absence of other suppliers in the Market, that PAWA could in a commercial sense withhold access to its infrastructure: cp. Mason CJ and Wilson J in Queensland Wire at 192. If PAWA were operating in a competitive market for the supply of access services, it would be very unlikely that it would have been able to stand by and allow a competitor to supply access services in the Market from a competitor. There is no element of predatoriness or moral blameworthiness in determining whether an entity has taken advantage of a substantial power in a market: Queensland Wire.

358 The object of s 46 is to protect the interests of consumers, not the private interests of particular persons or corporations: per Mason CJ and Wilson J in Queensland Wire at 191; Gleeson CJ, Gummow, Hayne and Callinan JJ in Melway at [17].

359 PAWA’s contention is that it declined to grant access to its infrastructure to NT Power ultimately because it believed that more effective competition would be gained and greater benefit to consumers would be secured if that access was delayed until an access scheme was in place. It thought that the delay in providing access to its infrastructure until the access scheme was in place would better ensure benefits to consumers. Thus, it contends, its purpose in refusing access to its infrastructure in August 1998 and until April 2000 was to achieve “the most effective competition”. It contends that that is not a purpose proscribed by s 46(1)(b) or (c) of the Trade Practices Act, but serves the object of s 46. The consequence of giving effect to that purpose was that access to its infrastructure which was sought by NT Power was refused for a period. PAWA contends that that is a consequence of the giving effect to its legitimate purpose, and a means by which that legitimate purpose was achieved, and not the exercise of its substantial power in the Market for the purpose of preventing the entry of NT Power into the Electricity Supply Market or to deter or prevent NT Power from engaging in competitive conduct in the Electricity Supply Market.

360 In the shorter term, also, PAWA contends that its purpose in refusing access to PAWA’s infrastructure was also to enable the Northern Territory Government to receive and consider the Scoping Study. One possible option that the Scoping Study might address was the privatisation of PAWA. The provision of access to PAWA’s infrastructure would open the Electricity Supply Market and potentially affect the saleability of PAWA.

361 In Melway, the majority (Gleeson CJ, Gummow, Hayne and Callinan JJ) referred to the relationship between the two aspects of the prohibition in s 46, namely taking advantage of a substantial degree of power in a market and the purpose for which that power was exercised. Their Honours pointed out at [31] that there are cases in which it is dangerous to proceed too quickly from a finding about purpose to a conclusion about taking advantage. The contention of PAWA is that the Court should be cautious about proceeding too quickly from a finding about taking advantage to a conclusion about purpose.

362 The majority in Melway at [31] also noted that “purpose” in s 46 involves intention to achieve a result. There was a challenge to the decision of the learned trial judge, which was upheld by the Full Court of this Court, that the refusal to supply in the circumstances of that case was for a proscribed purpose. The High Court did not ultimately disturb that finding of fact. However, the majority made comments when addressing that contention which are relevant to the present contention. Their Honours said at [36]:

“Melway was found to have had a number of legitimate commercial reasons for desiring to maintain its wholesale distribution system, and restricting competition between its wholesale distributors was part of that system, as the explanation of the refusal to supply acknowledged. That did not make the findings as to proscribed purpose inevitable, but having been made in the Federal Court, it is difficult to disturb them at this stage.”

and at [38]:

“It should be added, however, that it is not the case that the adoption by a manufacturer, whether with or without a substantial degree of market power, of a system of distribution involving what are sometimes called vertical restraints necessarily manifests an anti-competitive purpose of the kind referred to in s 46. When regard is had to the state of competition in the relevant market, the purpose may be pro-competitive. For example, competition in the retail market may be fostered by inhibiting the engagement in certain conduct by wholesalers or other “middle men”. Or there may be explanations of the arrangements which justify the conclusion that restricting competition was no part, or no substantial part, of the purpose of the manufacturer. Melway sought to persuade the Federal Court that this was such a case, but failed to do so.”

363 The focal point of debate in Melway was whether, accepting that the conduct in issue was for a proscribed purpose, the conduct (a refusal to supply to a potential wholesaler) amounted to taking advantage of market power for the proscribed purpose. The circumstances of that case led the majority to conclude at [68] that the maintenance of the distribution system under consideration was not necessarily an exercise of market power, and that the decisions appealed from had erroneously drawn the contrary conclusion that it was an exercise of market power.

364 The purpose to which s 46 refers is to be ascertained subjectively rather than objectively: ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 per Lockhart, Gummow and von Doussa JJ at 474-475; Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43 per Lockhart and Gummow JJ at 66. Their Honours there said:

“ ‘Purpose’ in s 46 is not concerned directly with the effect of conduct, but with ‘purpose’ in the sense of motivation and reason, although, as mentioned earlier, purpose may be inferred from conduct [references omitted].”

365 I consider that the passages in Melway to which I have referred above confirm that approach. General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 points out that often the circumstances will indicate that a substantial purpose may be discerned by inference from objective circumstances, as well as from evidence of particular witnesses, and even if a particular witness gave evidence of an additional subjective reason for engaging in certain conduct. That approach recognises the effect of s 46(7) and s 4F(1)(b) of the Act. See per Davies and Einfeld JJ at 187. Gummow J did not address that issue in that decision.

366 In this matter, in addition to my findings under the heading ‘The Course of Events’ I accept that PAWA through Mr Gardner and through the Minister for Essential Services decided in August 1998 to cease dealing with NT Power on the topic of access to PAWA’s infrastructure because PAWA wished to defer that issue until the Northern Territory Government had had the opportunity of considering the Scoping Study. Part of the reason for that desire was to avoid allowing access to PAWA’s infrastructure, and so any significant competition in the Electricity Supply Market, as NT Power’s immediate participation in the Electricity Supply Market would be likely to adversely affect PAWA’s marketability or the amount which would be received for PAWA if it were privatised. I also accept PAWA’s contention that PAWA through Mr Gardner, and through the Northern Territory Government which at Cabinet level was considering PAWA’s position, also determined to implement a regime for access to PAWA’s infrastructure. That decision was announced publicly on 1 December 1998, although in general terms there was a commitment to some form of access to PAWA’s infrastructure by the Northern Territory becoming a party to the Competition Principles Agreement. It was a topic on which PAWA had been working, although with no great urgency, from 1997. As part of that decision, it was decided to maintain the refusal of access to PAWA’s infrastructure until the access regime was in place.

367 No Minister gave evidence, and the views of Mr Clarke and Mr Gardner are not themselves evidence of the views of any Minister or of the Northern Territory Government as to the reason why certain action was or was not taken. However, the detailed views of Mr Clarke and Mr Gardner were conveyed to their respective Ministers by departmental minutes. I have also had the benefit of seeing the relevant Cabinet minutes and Cabinet papers. There is some evidence of the views of the Treasurer and of the Minister for Essential Services in their public statements. I have no difficulty, on the whole of the evidence, in making findings of the state of mind of those Ministers, and where appropriate of the Northern Territory Government, and of their reasons and motives for the actions and decisions of PAWA for which they were responsible. In relevant respects, I think those views and reasons accord with the stated views and reasons in particular of Mr Clarke as expressed in minutes he provided, and as explained in his evidence. I accept his evidence in its significant respects. Mr Gardner’s general views and reasons on the significant matters were consistent with those of Mr Clarke.

368 I find that the decision to decline access to PAWA’s infrastructure, and not to give NT Power the opportunity for such access by indicating terms upon which such access might be granted, at least until 1 April 2000 when the access regime was introduced, was an integral part of the decision to establish an access regime. That decision was driven by the judgment and belief that the access regime would provide “effective competition”. Professor Teece said that greater competitive advantages would be achieved by delaying NT Power’s access to the Electricity Supply Market by declining to provide it with services in the Market until an access regime were introduced. He thought that early, and therefore preferential, access to NT Power would or could disadvantage consumers in the Electricity Supply Market as they might enter supply contracts with NT Power at prices above those which might be negotiated in circumstances where there was competitive tendering in a “level playing field”. The “level playing field”, and therefore the ideal competition environment, would only be reached when PAWA had had a sufficient time to restructure to overcome its inefficiencies and when the tariff structure had been revised to avoid cross-subsidisation. Early access granted to NT Power would, in addition, further disadvantage PAWA because NT Power might “cherry pick” the larger consumers leaving PAWA with its inefficient cost structure but with diminished revenue and the ongoing obligation of servicing the smaller customers and those in remote localities. In other words, it would have to supply that segment of the Electricity Supply Market which required greater expense to service.

369 The state of knowledge of PAWA (through Mr Gardner or where relevant the Minister or the Northern Territory Government) was not informed at material times by Professor Teece. But, in general terms, the views expressed by Professor Teece are consistent with the matters which influenced PAWA’s decision which it maintained throughout 1999 not to grant access to PAWA’s infrastructure. The minute of Mr Clarke to the Chief Minister of 15 December 1998, which is quoted earlier in these reasons, in my view reflects PAWA’s reasons for the ongoing refusal to provide access to its infrastructure to NT Power.

370 Included in those reasons was the desire, in the interests of what Mr Clarke called “sensible competition”, to have time for PAWA to operate in a more economic and efficient way. The fear was not simply that PAWA would not then compete effectively with NT Power, but that its inability to do so in the short term (that is, for a period of one year of so) would mean that its operating losses would impose a greater burden upon the Northern Territory community as it would require further subsidy or would require a significant increase in tariffs to domestic customers. Dr Fitzgerald referred to that consideration as PAWA endeavouring to protect its commercial interests. Although his use of that expression was criticised in submissions, I think that the criticism is not really warranted. His description of these considerations, in context, is not unfair. It is in part a semantic dispute as he did not gainsay the proposition that the introduction of competition into the Electricity Supply Market would, in the sense of achieving an ideal competitive environment, be better achieved if PAWA was able to compete equally in that market. He agreed that the purpose of an access scheme is to produce efficient competition in the Electricity Supply Market, although it may be assumed that he was referring to an access scheme declared as an effective access regime, by addressing the relevant principles in the Competition Principles Agreement: ss 44M and 44V of the Trade Practices Act. I think that assumption also underlay Professor Teece’s views.

371 PAWA’s contention then is that its purpose in refusing access to its infrastructure to NT Power from August 1998 was to enhance competition, and that the refusal of access was a means to that end. Consequently, it contends, it has not contravened s 46 of the Trade Practices Act because its subjective intention was to protect the interests of consumers; it would defeat the legislative purpose of s 46 if, notwithstanding that intention, it was found to have contravened s 46.

372 NT Power’s response is simply that good or bad intentions behind a ‘purpose’ to refuse access to the Market or to inhibit competitive activity in the Electricity Supply Market are irrelevant to whether s 46 has been contravened. So much is clear. Queensland Wire decided that there was no element of predatory or reprehensible conduct required to constitute a contravention of s 46. It equally follows, in my view, that there is no exemption from the application of s 46 that PAWA’s conduct may have been driven by good or exemplary motives about achieving in the longer term an ideal competitive Electricity Supply Market.

373 In my view, the factors which influenced how PAWA acted at material times must be assessed simply against the words of s 46. The desired end of PAWA was, I accept, as its written submissions claims:

“… an overriding desire to encourage genuine and efficient competition in the medium to long term.”

This was to be achieved by introducing competition through the access regime to produce benefits to consumers, but to do so gradually so as to allow time to eliminate or reduce tariff mismatches and poor work practices within PAWA.

374 Section 4F(1)(b) provides that a person is deemed to have engaged in conduct for a particular purpose if the person engaged in that conduct for purposes that included that purpose, and that that purpose was a substantial purpose.

375 Section 46(1)(b) is contravened, in the light of my earlier conclusions, if PAWA refused NT Power access to its infrastructure for the purpose of preventing NT Power from entering into the Market as an acquirer of services or into the Electricity Supply Market. Section 46(1)(c) is contravened if PAWA’s refusal was for the purpose of deterring or preventing NT Power from engaging in competitive conduct in the Electricity Supply Market. I do not see the need to separately consider those two provisions. In the light of my findings of fact, notwithstanding my acceptance of the “higher” long term intention of PAWA, I consider that a substantial purpose of PAWA’s refusal was to deter or prevent NT Power from participating in either of those markets until it introduced an access regime. That was the particular means by which the ultimate desired end was, in part, to be achieved. But it was a real consideration in achieving that ultimate end that NT Power not be able to participate in the Electricity Supply Market in competition with PAWA until some future time. I think it imposes a gloss on the wording of s 46 to admit of a qualification that an immediate purpose for conduct which might otherwise contravene s 46 does not do so where the motive for the conduct is the judgment that the longer term interests of consumers would be better served by delaying competition in the market, or where the ultimate or wider purpose (of which the conduct concerned is but one step) is to introduce competition another way. Section 46, in my view, must simply be allowed to operate upon its own terms.

376 For those reasons, if I had determined that the conduct of PAWA of which NT Power complains is vulnerable to the application of s 46, I would have determined that NT Power would succeed in establishing the contravention alleged.

377 In view of my conclusion about the operation of s 89 of the Reform Act in relation to NT Power’s claim against Gasco, I do not need to address the claim against Gasco for contravention of s 46.

The claim based on terms implied in the Licence

378 NT Power claims that by virtue of the grant of the Licence on 26 June 1998, there was implied into the terms of the Licence three particular terms. They are

(a) that PAWA would give access to and use of its electricity transmission and distribution infrastructure on reasonable terms

(b) that PAWA would do all things necessary to enable NT Power to have the benefit of the licence, and

379 In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337, Mason J said at 346:

“The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract. In each case the problem is caused by a deficiency in the expression of the consensual agreement. A term which should have been included has been omitted. The difference is with rectification the term which has been omitted and should have been included was actually agreed upon; with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it – it is not a term that they have actually agreed upon. Thus, in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it. Rectification ensures that the contract gives effect to the parties’ actual intention; the implication of a term is designed to give effect to the parties’ presumed intention.”

380 As Mason J points out, the implication of a term in a contract is to give effect to the presumed intention of the parties in circumstances where the parties have not turned their minds to the need to express that term. That rationale underlies the approach of the Courts to implying a term into a contract to give it business efficacy: eg. The Moorcock (1889) 14 P.D. 64 per Bowen LJ at 68. It also reflects circumstances where the courts have implied a term into a contract because it is so obvious that it goes without saying, provided of course that it reflects the presumed intention of both parties: eg. Liverpool City Council v Irwin [1977] AC 239 per Lord Cross at 258 and per Lord Edmund-Davies at 266. See also per Stephen J in Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 at 13; and per Isaacs J in Hart v MacDonald (1910) 10 CLR 417 at 431.

381 In my view, there are three substantial hurdles to NT Power succeeding in this aspect of its claim. The first is that, on the evidence, I am not satisfied that the terms which NT Power seeks to contend are implied into the Licence are terms which the parties failed to direct their minds to and to make explicit provision for. Indeed, in my judgment, the evidence points clearly to the fact that NT Power, particularly through Mr Hutchison, was aware of the need to procure access to PAWA’s infrastructure to be able to sell electricity into the Darwin-Katherine area, and did not raise that with PAWA as a requirement to be dealt with when the Licence was granted. NT Power was provided with a copy of the draft licence on 7 May 1998. It had an opportunity to consider the Licence. It made representations, both in writing and orally, to PAWA about the terms of the proposed licence querying in particular the licence fee and the period for which the licence was to operate. Moreover, in its facsimile to PAWA of 28 May 1998, and in its meeting with PAWA officers on 25 May 1998, it specifically requested PAWA to address the amount of the TUOS and DUOS charges which PAWA would impose or seek to impose for access to PAWA’s infrastructure. From PAWA’s viewpoint also, Mr Clifford acknowledged in his evidence that he was aware that, notwithstanding the grant of the Licence, the question of access to PAWA’s infrastructure would also arise and have to be dealt with separately. He expressly raised the question of access charges in respect of the 132kV line by correspondence with NT Power on 10 February 1998. It was plain from the terms of that letter that PAWA was addressing the issue of access charges, and did not consider them as having been dealt with in the process of granting the licence. It is true that the matter raised by PAWA concerned the 132kV line operated by NT Transmission rather than by PAWA. But conceptually, the same issue arises in relation to access to PAWA’s infrastructure. That correspondence isolates the issue of licensing from the commercial issue of access to infrastructure. That, too, is consistent with what I have found to have been the clear tenor of the conversation at the meeting on 16 March 1998 at which Mr Gardner on behalf of PAWA made it clear that the meeting should be divided into two phases, to separate PAWA’s role as regulator in considering the terms of and the grant of the Licence as sought on the one hand, and its role respecting its commercial interests both in relation to its use of the 132kV line and the terms upon which it would continue to be granted that use, and its provision of access to PAWA’s infrastructure on the other. It is also consistent with NT Power’s letter of 28 May 1998 which, in my view, treats issues concerning access to PAWA’s infrastructure as discrete from the terms of the proposed licence.

382 In my judgment, NT Power seeks to have implied into the Licence terms which it should not be presumed that NT Power and PAWA would have agreed upon had they turned their minds to those topics. The failure specifically to address those topics in the Licence is not a consequence of a failure to have directed their minds to those topics at all and by oversight to have made no explicit provision for them. It was a conscious decision by NT Power and PAWA not to raise those matters in the Licence agreement for the reason that, as I accept, the grant of the Licence was part of the regulatory function of PAWA distinct from its commercial function as a generator and provider of electricity into the Northern Territory.

383 The second substantial hurdle facing NT Power derives from the nature of the “contract”. The Licence recited that it was to be granted under ss 25 and 27(3) of the Electricity Act and s 15(2)(d) of the PAWA Act. Section 15(2)(d) of the PAWA Act empowers PAWA to licence persons for the purposes of generating and selling electricity. Section 25 of the Electricity Act authorises PAWA to appoint a person who is a party to an agreement with PAWA as a licensee to “generate, store, reticulate and sell” electricity in an area. Section 27(3) authorises a licensee to sell electricity pursuant to the terms of a licence, notwithstanding s 27(1) which otherwise prohibits a person from selling electricity. Although PAWA took the step of submitting to NT Power a draft of the proposed licence agreement, and considered its submissions thereon, the document is in character a licence permitting conduct which otherwise would be prohibited under the Electricity Act. The Licence was issued in response to a request made by NT Power on 19 January 1998. It is not, in a real sense, an agreement reached between parties involving an exchange of promises or of other consideration. It is an authorisation granted by PAWA in exercise of a statutory function. As it happens, PAWA is also the owner of PAWA’s infrastructure but that in my view is a feature of PAWA which is distinct from its regulatory role under the Electricity Act. I do not consider that the nature of the Licence is such that the Court should presume that PAWA as regulator intended to provide access to its infrastructure to NT Power by reason of the performance of its statutory function in response to a request for a licence, or that NT Power intended or expected that as a term of the Licence it would receive access to PAWA’s infrastructure. No authority was identified by counsel in which a court has implied terms of the general tenor of those alleged upon the grant of a licence pursuant to a statutory function and responsibility. In Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54 there are, in quite different circumstances, shades of judicial caution in implying into a commercial contract terms which might intrude upon or fetter the future exercise of government policy: see per Murphy J at 86.

384 The third reason why, in my judgment, there is a substantial hurdle to the claim based upon terms sought to be implied in the Licence also derives from some observations of Mason J in Codelfa, again at 346, where his Honour said:

“For obvious reasons the Courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.”

385 The Licence contains a “whole agreement” clause in par 14. It provides:

“This Deed (unless amended by written instrument duly executed by both parties) and the applicable legislative provisions mandatorily applicable hereto constitutes the entire agreement between the Licensee and PAWA and supersedes the Licence to Sell Electricity between Power and Water Authority and Mount Todd Power Pty Ltd dated 9 September 1996 and the parties acknowledge that the Licence to Sell Electricity between Power and Water Authority and Mount Todd Power Pty Ltd dated 9 September 1996 is terminated.”

386 That clause, in my judgment indicates that the parties have actually agreed upon the terms the totality of which they intended to address. Indeed, the draft licence agreement sent to NT Power on 7 May 1998 contained a “whole agreement” clause in a somewhat abridged form. It was subsequently altered to expressly refer to the previous licence dated 9 September 1996 including that it is terminated. The draft proposed licence was sent to NT Power for its consideration and comment. NT Power made written and oral representations as to the terms of the proposed document, and signified its concurrence with the proposed terms. NT Power executed the document as a party to it, and on 26 June 1998 attended what it regarded as a formal settlement of the application for the licence, including the taking of congratulatory photographs as a mark of the significance of the occasion. There is, by virtue of that alteration, and the course of negotiations, reason to think that that “whole agreement” clause was one of which both parties were clearly and firmly aware when the Licence was granted on 26 June 1998.

387 The significance of a “whole agreement” or “entire agreement” clause appears clearly from the decision in Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 per Latham CJ at 357-358 and per Dixon J at 363. Dixon J referred to such a provision in an agreement as effectually excluding an implied condition. Rich J agreed with the judgment of Dixon J.

388 Putting aside those general difficulties, which I think clearly lead to a conclusion on this issue adverse to NT Power, it is desirable nevertheless to address the issues as presented by NT Power. In BP Refinery Westernport Pty Ltd v Shire of Hastings [1977] 180 CLR 266 at 283 the “template” for the circumstances in which a term may be implied into an instrument was expressed in the joint speech of Viscount Dilhorne, Lord Simon of Glaisdale, and Lord Keith of Kinkel in the following terms:

“… for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

389 In support of the claim that the Court should imply into the Licence a term that PAWA would give access to PAWA’s infrastructure on reasonable terms, NT Power refers to the fact that in 1996 it was granted a licence for a period of ten years to supply and sell electricity to Pegasus at the Mount Todd Mine, and to PAWA. In effect, it contends, it has surrendered that licence and procured a new licence for three years for an annual fee of $10,000 so that it could supply and sell electricity into the Northern Territory market in general. The only way in which it could get the benefit of the Licence, and achieve its purpose of selling and supplying electricity into the Northern Territory market is if PAWA were to give it access to PAWA’s infrastructure upon reasonable terms. It makes the same comments with respect to the other proposed implied terms.

390 In my judgment the terms of the Licence are not such as to require the implication of a term that PAWA would give access to PAWA’s infrastructure to NT Power on “reasonable terms”. Although it is a requirement of the “template” that the term to be implied must be reasonable and equitable, for otherwise the Court would not presume that to have been the intended agreement of the parties, the fact that the term sought to be implied may from one point of view or indeed from both points of view be seen to be reasonable and equitable is not a sufficient reason to imply that term into the contract. The proposed term is not necessary to give business efficacy to the licence. Indeed, as PAWA pointed out to NT Power, and as NT Power itself was aware from other communications, PAWA in providing the licence was not purporting to act in its commercial interests at all but was purporting to fulfil its role and responsibility as a regulator of the electricity supply industry under the PAWA Act and under the Electricity Act. The recital to the licence itself refers specifically to those legislative sources of power. It is not necessarily a function of a regulator of an industry to ensure that an entity licensed to provide services or goods within an industry should be able to do so effectively and economically. Commercial considerations relevant to the licensee are not necessarily or generally relevant to the licensor/regulator, except to the extent that the economic stability of the licensee or proposed licensee is itself a matter of relevance to whether the licence should be granted. Economic stability in those circumstances is sometimes of significance to the licensor, because the licensor may be charged with ensuring a sufficient and adequate supply and continuous supply of those goods or services to a particular market or markets. For that reason alone, I do not think that the term sought to be implied is necessary to give business efficacy to the Licence. Indeed, as I have mentioned above, the nature of the Licence itself and the legislative structure in which it was granted does not lend itself to a test of business efficacy in any event. That fact, in my view, is almost acknowledged by NT Power in its preparedness to separately negotiate with PAWA as a commercial operator in respect of access to the PAWA infrastructure. The Licence itself is effective in its terms. How it is used commercially is a separate and distinct question. In addition, in this particular matter, even if one were to subsume together the commercial and regulatory functions of PAWA, the term sought to be implied is not necessary to give business efficacy to the Licence. That is because NT Power, in any event, was able to sell and supply electricity to the operator of the Mount Todd Mine, and to PAWA. By arrangement with NT Transmission, it could also sell and supply electricity to other entities within the franchise free zone of fifty kilometres either side of the 132kV line, subject to the terms upon which that right had been granted to NT Transmission, and subject to NT Transmission’s consent. The ultimate fulfilment of the commercial expectations of a licensor is not a factor which falls within the requirement of giving of the Licence business efficacy.

391 As I have observed above, the parties should not be presumed to have intended to have agreed upon the term which is sought to be implied, because they each recognised the need independently of the Licence to reach an agreement on that very matter. That is another way, I think, of expressing the third criterion in the “template” for implying a term into a contract, namely that it must be so obvious that it goes without saying. In this particular matter, that clearly was not the case. No such presumption should be assumed, where the evidence shows that the intention of the parties is to the contrary. They did not overlook the topic, but each recognised that it would be dealt with separately by a commercial negotiation. I am also not satisfied that the proposed clause is capable of clear expression. As expressed, and as the evidence shows, the determination of “reasonable terms” is not one which is readily enforced. The fact that the parties have spent a considerable period of time and evidence in the course of this hearing endeavouring to demonstrate what those reasonable terms are indicates the difficulty and the uncertainty of such a clause. It is common ground, as evidenced in part by Mr Hutchison’s offer of help at the meeting on 25 June 1998, that PAWA had a considerable amount of work to do before it would be in a position to determine with any degree of commercial confidence what was an acceptable access charge. That involved the process of identifying all of PAWA’s distribution and transmission assets, determining the basis upon which they should properly be valued, and those values, and determining then a proper commercial return for the use of those assets to a party having access to them, as well as addressing technical concerns relating to such matters. As I have found elsewhere in these reasons, the concerns of PAWA’s technical officers for the implications to the system’s stability and in other respects of the possible flow of up to 35kw of electricity from Mount Todd PS into the Darwin transmission and distribution network were genuinely held concerns and ones which those officers wished to resolve before that access was permitted.

392 For similar reasons, I do not think that there should be implied into the Licence a term that PAWA would do all things necessary to enable NT Power to have the benefit of the licence. The reasoning relating to the role of PAWA as regulator, and to the absence of any foundation to presume any such intention on the part of the parties supports such a conclusion. Furthermore, even if those obstacles were overcome, it is difficult to give any meaningful content to an implied term that PAWA would do all things necessary to enable the applicant to have the benefit of the licence. Counsel for NT Power did not indicate with any precision the content of that obligation. In Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, Mason J said at 607:

“It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that parties’ obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.”

393 In this matter, the grant of the Licence was itself the performance of the “contract” on the part of PAWA. There were no more acts which it was then required to do to complete the grant of the Licence or to ensure that the Licence was effective. It was effective in its terms. What NT Power seeks to do is to imply that it was entitled to a benefit under the Licence for which the Licence did not provide, namely access to PAWA’s infrastructure, and that PAWA would somehow take steps to ensure that NT Power received the benefit of the Licence by having access to that infrastructure. In addition, I do not think that the claimed term is sufficiently clear as to be one which “it goes without saying” that both parties would be presumed to have agreed upon. Nor, in a practical sense, is it so clear as to be enforceable. PAWA had many calls upon its resources. Not the least of those calls concerned its regulatory functions, and its functions as a supplier of electricity to the Northern Territory market. It was involved in 1998 with consideration of drafts of and providing information to Merrill Lynch for the Scoping Study. It was obliged pursuant to the Competition Principles Agreement and the timetable for its implementation to have addressed by the end of 2000 questions of access, in a form acceptable to the National Competition Council. In those circumstances, an obligation to “do all things necessary to enable the applicants to have the benefit of the Licence”, ie. to have access to its infrastructure upon terms which are not specified, involves a commitment which in my view in a practical sense would be unenforceable.

394 The third term sought to be implied is that PAWA would deal fairly and in good faith with regard to the performance and implementation of the Licence. The applicant contends that, because PAWA is a Government authority, the Court should readily imply a term that PAWA will deal with NT Power fairly and in good faith.

395 For the purposes of considering that claim, I am prepared to assume that in Australian law the Court will imply into the terms of a commercial contract that one party is obliged to act in good faith towards the other during the currency of, and in the performance of, the contract. I do not, however, consider that that assumption is necessarily well-founded: see Gummow J in Service Station Association Ltd v Berg Bennett and Associates Pty Ltd (1993) 45 FCR 84 at 91-98. His Honour concluded, after reviewing authorities, that there is no binding authority that there should be implied into every contract as a matter of law a term that each party to a contract will act in good faith and with fair dealing in its performance and enforcement of the contract. In Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 132-133, Kirby P also expressed some doubt as to the accuracy of that proposition. However, even assuming it to be correct, I do not think that that is of assistance to NT Power in the present circumstance. That is partly for the reasons which I have already given, namely the nature of PAWA as regulator in granting the Licence and that, on the facts as I have found them, there is no scope for a finding of a presumed intention on the part of the parties that PAWA would deal fairly and in good faith with regard to the performance and implementation of the licence by somehow co-operating in providing to NT Power access to its infrastructure. It is also because the Licence itself involves giving permission to NT Power to do something which otherwise s 29 of the Electricity Act prohibits it from doing.

396 The Licence, having been granted, operates of its own force. It does not oblige PAWA to do anything further. Under the Licence PAWA had no continuing obligations, to the performance of which could be attached an obligation to perform those duties in good faith or in a particular manner. It is not reasonable, nor is it so obvious that it goes without saying, that the grant of the Licence required PAWA to do anything further in relation to access to its infrastructure. That could not be suggested in relation to other licences granted by PAWA to third parties or to NT Power. The fact that the Licence was in respect of a wider geographic area than previous licences does not make self-evident the converse of the position in respect of the other licences. I have found that NT Power and PAWA did not expect that access to PAWA’s infrastructure would flow from the grant of the Licence. They each regarded it as an independent step which was required to be addressed. There was, therefore, no necessity to give the Licence business efficacy to imply a term that PAWA would deal further with NT Power at all in relation to the Licence. It was mutually expected that NT Power and PAWA would have some discussions regarding the terms of access to PAWA’s infrastructure, but in my view that was an activity which was entirely extraneous to the Licence. Nor, in my judgment, is the proposed term one which is capable of clear expression and enforceable.

397 Where there is a particular contractual obligation to be carried out, the means by which it is to be carried out may be enforced by requiring that it be carried out in good faith. Where there is no particular contractual obligation to be carried out, an obligation to act “in good faith” in a vacuum is not one which can give rise to an obligation to provide a particular additional service (access to PAWA’s infrastructure) upon certain terms or in a certain manner or within a certain time limit or to negotiate with respect to that service in good faith. In my judgment it would only be if the Licence itself provided for the obligation to provide access to PAWA’s infrastructure by a certain date that the obligation to negotiate in good faith could be found. The obligation as claimed that PAWA would deal “fairly” with NT Power with regard to the “performance and implementation of the licence” is far too vague.

398 Accordingly, in my judgment, NT Power’s claim based upon terms to be implied in the Licence must fail.

CONCLUSION

399 For the reasons expressed above, I have reached the view that NT Power’s claim against PAWA and against Gasco must be dismissed. In the light of that conclusion, I do not need to address the complex factual and legal issues relating to NT Power’s claim for damages, or its claim for declaratory or injunctive relief. I also do not consider it necessary to give any separate reasons for decision or to make any order in relation to Gasco’s cross-claim against NT Power.

400 I order that the application be dismissed.

I certify that the preceding four hundred (400) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate:

Dated: 3 April 2001

Counsel for the Applicant and Cross Respondent:	I Barker QC A Bannon SC A Henskens

Solicitors for the Applicant and Cross Respondent:	Colin Biggers & Paisley by their agents Cridlands

Counsel for the Respondents and Cross Claimant:	B Oslington QC L G Foster SC J Nicholas A Tonking M Grant

Solicitors for the Respondents and Cross Claimant:	James Noonan

Dates of Hearing:	3, 4, 5, 6, 9, 10, 11, 12, 14, 16, 17, 18 and 19 August 1999; 20, 21 and 24 September 1999; 11, 12, 13, 14, 18, 19, 20, 21 and 22 October 1999; 1, 2, 3, 4, 5, 8, 9, 10, 11, 24 and 25 November 1999; 1, 2, 3, 14, 15, 16, 17, 18, 21, 22, 23 and 24 February 2000; 6, 7, 8, 9 and 10 March 2000

Date of Judgment:	3 April 2001

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