FEDERAL COURT OF AUSTRALIA

Pacific National (ACT) Limited (ACN 48 052 134 362)v Queensland Rail (ABN 47 564 947 264) [2006] FCA 91

SUMMARY

PACIFIC NATIONAL (ACT) LIMITED (ACN 48 052 134 362) v QUEENSLAND RAIL (ABN 47 564 947 264)

NSD 690 of 2003

JACOBSON J

16 February 2006

SYDNEY

1. In accordance with the practice of the Federal Court in some cases of public interest, the following summary has been prepared to accompany the reasons for judgment delivered today. The summary is intended to assist understanding of the decision of the Court. It is not a complete statement of the conclusions reached by the Court or the reasons for those conclusions. The only authoritative statement of the Court’s reasons is that contained in the published reasons for judgment. The published reasons for judgment and this summary will be available on the Internet at www.fedcourt.gov.au.

2. In these proceedings the applicant, formerly known as National Rail Corporation Limited (“NRC”), contended that the respondent, Queensland Rail (“QR”) was estopped from interfering with its occupation, management and control of the Acacia Ridge Interstate Container Terminal (“the AR terminal”) situated at Acacia Ridge near Brisbane.

3.                  QR owns the AR terminal but NRC has been in exclusive occupation since April 1993. It went into possession under arrangements which were eventually recorded in a three year lease expiring in April 1996. NRC continued to hold over as a monthly tenant under the expired lease until QR served it with a notice to quit in May 2003. Thereafter, NRC remained in occupation pursuant to an undertaking given by QR not to enforce the notice to quit pending the determination of the proceedings.

4. NRC’s estoppel claim had its foundation in an agreement known as the Establishment Agreement (“the EA”) entered into in July 1991 between the Commonwealth of Australia and a number of States, including Queensland. The EA provided for micro-economic reform of the rail freight industry in Australia.

5. The EA provided for the State of Queensland to cause its rail authority to transfer ownership or, for so long as NRC continued to conduct national interstate rail freight operations, give a lease or grant access to NRC in relation to particular assets owned by the State and required by NRC. The relevant clause provided that the transfers of ownership, leases or grants of access would be on such commercial terms and conditions as were agreed between NRC and the State.

6.             NRC nominated the AR terminal as an asset which it required. However, the three year lease was entered into outside of the terms of the EA. It was not until early 1996 that the parties set about negotiating the terms of a 30 year lease. They had not agreed the terms when QR withdrew its “offer” of a 30 year lease in March 1997. QR offered instead to provide access to the AR terminal, on terms to be agreed, asserting that this was consistent with its obligations under the EA.

7.             By the time the negotiations for the 30 year lease had ceased, NRC had incurred expenditure of approximately $17 million on the AR terminal and an amount in excess of $200 million on a capital investment strategy which included integration of the AR terminal in its national rail network. NRC claimed that it would suffer detriment in the form of the inability to recoup these items of expenditure. It also claimed that it would suffer operational detriment in the form of adverse consequences for its rail freight operations if it lost exclusive possession and control of the AR terminal.

8. The estoppel claim failed for a number of reasons. In summary these included:-

·        The evidence did not make good NRC’s contention that it held certain assumptions underlying the estoppel claim;

·        The terms of the EA did not support the existence of the assumption;

·        The documentary record before and after the EA did not support the estoppel claim;

·        The parties proceeded on the basis that they were not bound until a formal contract had been executed, the subject matter of the proposed agreement being a lease of land;

·        Consistent with the principles stated by Brennan J in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 423, QR had not induced NRC to believe that QR was bound to enter into a lease. QR had therefore not lost its freedom to withdraw from negotiations;

·        NRC did not rely on the assumptions, nor would it have been reasonable for it to rely on the assumptions in light of the terms of the EA which made any lease subject to agreement on the commercial terms; and

·        Detriment was not established because QR had offered to provide NRC with access to the AR terminal on terms which enabled NRC to recoup any expenditure not yet recovered; in any event the evidence demonstrated that the expenditure had already been recouped.

9. NRC claimed, in the alternative, that QR had engaged in misleading and deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) (“the Act”)or unconscionable conduct under s 51AA or s 51AC of the Act.

10. The failure of the estoppel claim carried with it the failure of the s 52 claim.

11. The unconscionable conduct claim turned largely on steps said to have been taken by QR through middle and upper management to subvert the EA and to secure a competitive advantage for QR at the expense of NRC. There was some overlap between this claim and NRC’s claim under s 46 of the Act.

12. The unconscionable conduct claim failed, in particular, in light of NRC’s standing as a large, well-managed corporation with a national business. Moreover, the circumstances said to amount to unconscionable conduct under s 51AC did not amount to serious misconduct of the type referred to in the authorities.

13. NRC claimed that the service of the notice to quit constituted abuse of market power by QR in contravention of s 46 of the Act.

14. NRC contended that QR had taken advantage of its market power in two rail infrastructure markets for the purpose of deterring or preventing NRC from engaging in competitive conduct in two downstream linehaul markets. QR’s market power was said to arise from its ownership of the AR terminal.

15. NRC’s claim under s 46 failed for the following reasons:-

·        At the time when the notice to quit was given QR did not have market power because it was an owner out of possession which had granted exclusive possession of the AR terminal to NRC;

·        QR did not take advantage of any market power because it had a rational business explanation for its wish to reclaim possession of the terminal.

The rational business explanation was to conduct the AR terminal as a multi-user terminal with access available to all operators who wished to use it on terms to be negotiated with QR; this was believed by QR to be likely to increase the useage of the AR terminal by NRC and other operators.

QR also wished to ensure its own access to the AR terminal which it had not been able to achieve with NRC in exclusive possession; and

·        QR did not have a proscribed anti-competitive purpose within s 46 of the Act.

16. NRC also attacked the terms on which QR offered to provide access to the AR terminal under a draft Terminal Services Agreement as an abuse of market power. This claim failed because the proposed agreement was not an exercise of market power but an attempt to allocate risk between the parties in commercial negotiations.

17. QR brought two cross-claims against NRC. The first was for possession and statutory rental. The failure of NRC’s claims resulted in the success of this cross-claim.

18. QR’s second cross-claim was for alleged misuse of market power by NRC in failing to give access to the AR terminal, initially to a company known as CRT/Freightcorp (“Freightcorp”) and later to QR itself.

19. The claim in respect of Freightcorp failed because the evidence did not establish that NRC could have accommodated Freightcorp without adversely affecting its own national operations.