FEDERAL COURT OF AUSTRALIA
VID 864 of 2018
Date of judgment:
Date of last submissions:
3 June 2019
National Practice Area:
Commercial and Corporations
Economic Regulator, Competition and Access
Number of paragraphs:
Solicitor for the Applicant:
DLA Piper Australia
Counsel for the First to Fourth Respondents:
Mr NC Hutley SC, Dr RCA Higgins SC, Mr A Barraclough and Mr B Lim
Solicitor for the First to Fourth Respondents:
Counsel for the Fifth to Eighth Respondents:
Mr CA Moore SC, Mr DJ Roche and Mr A D’Arville
Solicitor for the Fifth to Eighth Respondents:
Counsel for the Interested Person:
Mr N De Young
Solicitor for the Interested Person:
Gilbert + Tobin
HV RAIL PTY LTD (ABN 26 615 302 111)
QUEENSLAND LH CO PTY LTD (ACN 620 979 768) (and others named in the Schedule)
DATE OF ORDER:
The Court notes that it has accepted the undertaking of the First Respondent annexed to the Court’s reasons for judgment published on 15 May 2019. A signed copy of the undertaking is attached to these orders as Annexure A.
THE COURT ORDERS THAT:
2. The Applicant pay 50% of the Respondents’ party-party costs of and incidental to this proceeding including reserved costs.
3. The costs referred to in order 2 be awarded in a lump sum pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth).
4. Within 21 days of these orders, Qube Holdings Limited (Qube) make any application concerning the quantum of Qube’s expenses or costs in connection with subpoenas issued to it in this proceeding, such application to be made returnable before a Registrar of this Court and decided by the Registrar.
5. Within 28 days of these orders, the Respondents make any application for the determination of the quantum of the costs referred to in order 2, such application to be made returnable before a Registrar of this Court and decided by the Registrar.
6. If Qube and any of the Respondents make applications in accordance with orders 4 and 5, those applications be heard and determined jointly.
7. Within 35 days of these orders, the parties to any application(s) made in accordance with orders 4 and 5:
(a) provide to the relevant Registrar of this Court agreed proposed orders; or
(b) if agreement cannot be reached, provide to the relevant Registrar of this Court separate proposed orders,
for a timetable for filing material concerning those applications.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
[The order entered is available on the Commonwealth Courts Portal, which attaches the Undertaking]
1 These reasons address:
(a) the form of Pacific National’s undertaking;
(b) costs; and
(c) the confidentiality regime.
2 Let me begin with the undertaking question.
3 The ACCC has sought amendments to Pacific National’s undertaking, but in all the circumstances I do not propose to require Pacific National to make any changes.
4 First, such changes should have been sought earlier. Indeed, on the last day of trial (20 February 2019) I gave the opportunity to the ACCC to say something further if it wished to on the undertaking (see T534 line 33 to T535 line 14) in writing in the following week, an opportunity it took up in submissions dated 25 February 2019, which added to its prior submissions and evidence on the question. No other opportunity was sought.
5 Second, I have now found that the undertaking in the form offered is already suitable, such that in the future world with the ART acquisition and the undertaking as compared to the future world without, there is no likely substantial lessening of competition.
6 Third, the ACCC’s explanation for its proposed amendments is the problematic assertion that they would “enhance transparency and … assist third parties to assess and monitor Pacific National’s compliance”. But there is little explanation as to why any third party monitoring would realistically occur, or how or why any enhanced transparency or third party monitoring would or might affect Pacific National’s operation of the ART, or otherwise affect competition.
7 Fourth, both Dr Kuypers and Mr Nacey gave detailed evidence of all the ways in which they perceived that the undertaking might harm competition. As Pacific National points out, neither witness suggested any amendment of the type sought by the ACCC. Those individuals, who were both highly critical of the undertaking and had actual experience with the ART and in the rail freight industry, did not give evidence supporting the ACCC’s present proposal.
8 Fifth, I agree with Pacific National that the proposed amendments appear to have little, if any, utility. For example, the proposal to make available to third parties requests and other materials concerning variations to the capacity allocation protocol (CAP) is unlikely to achieve anything. Third parties do not participate in the process by which the CAP is varied. Making the materials available to them is unlikely to cause participants in the process to act differently. So too, requiring Pacific National to publish details concerning the Independent Auditor’s independence as proposed is also unlikely to deliver any real benefit. There is already an express requirement that the Independent Auditor be independent. And the undertaking must be posted on Pacific National’s website. Accordingly, potential access seekers will be aware of that requirement.
9 Let me turn to the question of costs.
10 Four issues arise in respect of costs: (a) which parties are entitled to be paid their costs of the proceeding, including the ACCC’s application for interlocutory injunctions determined on 13 August 2018; (b) the basis on which those costs are to be paid; (c) the quantum of costs to be paid; (d) Qube’s position concerning the costs of the subpoenas.
11 I have already ordered that the ACCC pay the respondents’ costs in respect of the abandoned allegations concerning the alleged Principal Understanding and the purpose of the TSS.
12 In respect of the remaining allegations concerning the likely effect of the TSS and ART acquisition, Pacific National and Aurizon say that the ACCC has failed. They submit that the ACCC should accordingly pay their costs in respect of those allegations in accordance with the ordinary rule that costs follow the event. Further, they say that the fact that the undertaking was offered unconditionally on the final day of the trial is not a circumstance that would warrant departure from the usual order. I will return to these questions later.
13 Further, in respect of the ACCC’s application for interlocutory injunctions, I ordered that the parties’ costs of, and incidental to, that application be their costs in the cause. Accordingly the costs of the interlocutory proceeding correspond with the suggested final order for costs in the action. Therefore the respondents say that the ACCC should pay the respondents’ costs of and incidental to the proceeding including the application for interlocutory injunctions.
14 Further they say that there is no reason related to the interlocutory application to depart from the usual rule that the costs of the proceeding follow the event, nor to revisit the order that costs be in the cause. I should say now that I agree with the respondents’ position.
15 Further, the respondents accept that costs should be awarded on a party-party basis. I do not need to say anything further on that question.
16 Further, the respondents submit that if the parties are unable to agree on the quantum of costs payable, that quantum should be determined using the Court’s lump-sum procedure. I agree that the lump-sum procedure ought to be used unless some characteristic of the proceeding makes it unsuitable. But there is no such characteristic here. Moreover, the lump sum procedure will avoid the time, trouble and expense of a contested taxation. I will permit such a procedure to be used in the present case, but with a Registrar of this Court to be deployed for that purpose.
17 Further, I agree with the respondents that their costs will include any amount that they pay to Qube in respect of Qube’s expenses or costs of complying with the subpoenas issued to Qube. I propose to make orders first, for Qube to make any application concerning those expenses or costs, and second, for the ACCC and the respondents to propose a timetable for filing material concerning the quantification of the lump sum.
18 Further, if there is a dispute concerning the quantum of expenses or costs payable by the respondents to Qube, and a dispute concerning the quantum of costs payable by the ACCC to the respondents, the most efficient course is likely to be for those disputes to be determined jointly. The orders that I will make provide for such a joint determination by a Registrar of this Court.
19 Let me turn then to the issues that I need to determine, being whether I should accept the respondents’ submission that each should have all their party-party costs or whether I should accept the ACCC’s submission that:
(a) first, I should make no order in favour of the third, fourth and eighth respondents; and
(b) second, that the remaining respondents should only have 30% of their costs.
20 The ACCC submits that its claims against the third, fourth and eighth respondents were withdrawn in the further amended originating application by reason of the fact that the QIB was sold to Linfox following the successful application by the ACCC for an injunction requiring the relevant respondents to continue to operate the QIB, and that therefore there was no longer an issue about whether the acquisition by the third and fourth respondents of the QIB would breach s 50 of the Competition and Consumer Act 2010 (Cth) (CCA). It says that because that issue was not adjudicated upon, there should be no order as to the third, fourth and eighth respondents’ costs.
21 I do not accept this submission which glosses over some of the detail, including for example, that the ACCC claimed that the eighth respondent was a party to the Principal Understanding, which claim was not withdrawn until 12 February 2019. Further, I have already ordered the ACCC to pay the costs thrown away by reason of its amendments to its claims. In any event, all issues in the claims against the third and fourth respondents also arose in the claims against the first and second respondents. The ACCC’s withdrawal of the relevant claims had no effect on Pacific National’s costs overall.
22 I will not carve out the third, fourth and eighth respondents from my orders. But of course in determining quantum, no duplication of costs will be permitted. These respondents should only have their costs to the extent not otherwise incurred by the other respondents and only for maintaining their defences until such time as the relevant claims against them were abandoned or discontinued.
23 Let me deal with the next issue. In terms of the percentage of costs to be awarded, the respondents seek 100%, the ACCC suggests 30%, but I consider 50% to be appropriate.
24 First, the ACCC won on market definition, which occupied a considerable amount of trial time.
25 Second, the ACCC lost on the TSS question.
26 Third, the parties had mixed success on the s 50 question. Let me elaborate.
27 First, Pacific National made it clear at various stages through the trial that it would not offer an undertaking unconditionally, and would only offer an undertaking if I first concluded that the ART acquisition otherwise contravened s 50. Accordingly, the Pacific National parties put the ACCC to its proof about whether the ART acquisition would contravene s 50 without the unconditional undertaking until the last day of trial, when for the first time Pacific National offered the undertaking on an unconditional basis.
28 Further, on my findings, the ACCC was justified in seeking to restrain Pacific National and the second respondent from completing the ART acquisition, and in seeking declarations against all the remaining respondents that the ART acquisition would breach s 50 of the CCA, at least until when the undertaking was given unconditionally. Moreover, the ACCC was entitled to seek to restrain the ART acquisition so as to protect the public interest at least until the last day of the hearing, by which time most of the costs of the proceeding had been incurred in any event.
29 Further, I agree with the ACCC that the question of whether the costs of the trial would have been avoided had Pacific National proffered an unconditional undertaking to me earlier is beside the point. An unconditional undertaking was not proffered to me earlier. And without the unconditional undertaking, I would have found that Pacific National’s proposed conduct in completing the ART BSA would have contravened s 50.
30 Further, I agree with the ACCC that although the Principal Understanding claims were withdrawn and the ACCC did not succeed on its s 45 claims, much of the evidence relating to those claims, particularly in respect of market definition, the height of barriers to entry, the significance of the ART, and the ability and incentive of a vertically integrated operator to discriminate, also related to the s 50 claim. Of course a precise arithmetical apportionment of the costs on the issues that were confined solely to the Principal Understanding and s 45 claims is not feasible.
31 In all the circumstances I consider it to be just that the ACCC pay 50% of the respondents’ costs including reserved costs.
32 Finally, let me turn to the question of confidentiality.
33 The ACCC submits that the confidentiality regime should be maintained for a period of 10 years so that third parties are unable to access information which is subject to confidentiality orders. It says that it is in the public interest to encourage market participants to assist the ACCC. It says that the assistance of market participants and third parties is critical to the efficacy of the ACCC’s role in undertaking merger investigations and litigation. It says that the disclosure of third party confidential information provided to the ACCC for the purposes of a merger investigation is likely to erode confidence in the ACCC’s ability to protect confidential information in this context and creates a real risk that the ACCC will be unable to obtain sufficient accurate information to make informed decisions in the future. It says that the risk is particularly acute in this case, given that much of the confidential information was provided by customers of the Pacific National parties, including as to whether and to what extent they can acquire services in substitution for services provided by the Pacific National parties.
34 But I would note that orders have already been made for the protection of confidential information of parties and third parties which were made with the consent of all parties during the course of the proceedings, and which preserved confidentiality for 5 years. The 5 year period was proposed by the ACCC. The ACCC now seeks to resile from that consent position without addressing any substantive submissions to the need to double the time period for any specified item or category of information. Rather, the ACCC has advanced generalised policy statements that, if correct, would apply in every case. In my view and as Aurizon points out, the matters identified by the ACCC do not engage with the type of information that needs to be protected or why 10 years is required as opposed to 5 years. No compelling reason has been demonstrated for departing from the position which the ACCC adopted at the hearing.
35 I will leave the current confidentiality regime in place. Of course, the ACCC can make further application in 5 years for any necessary extension if it can then be justified.
36 In summary, I will make orders to reflect the above reasons.
VID 864 of 2018
QUEENSLAND PUD CO PTY LTD (ACN 620 981 606)
AURIZON HOLDINGS LIMITED (ACN 146 335 622)
AURIZON OPERATIONS LTD (ACN 124 649 967)
AURIZON TERMINAL PTY LTD (ACN 145 991 555)
AURIZON PROPERTY PTY LTD (ACN 145 991 724)