FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Qteq Pty Ltd [2025] FCA 371

ORDERS

THE COURT ORDERS THAT:

1.    The parties confer and by 7 May 2025, or such further time as may be allowed, provide by email to the chambers of Justice Bromwich an agreed draft or competing drafts of:

(a)    the terms of the declarations of contravention to be made in accordance with the reasons for judgment;

(b)    an order extending the commencement of the time within which any appeal proceeding is required to be filed in this proceeding to the end of the next business day after the judgment on relief is delivered; and

(c)    procedural orders for the preparation and hearing of the relief phase of this proceeding, including as to evidence, submissions and a joint list of authorities with pinpoint references.

2.    The proceeding be listed for any necessary case management hearing at a time to be fixed in consultation with the parties.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BROMWICH J:

A. INTRODUCTION

1    This is a civil penalty competition cartel case concerning the supply of goods and services to well operators in the coal seam gas (CSG) industry. The Australian Competition and Consumer Commission (ACCC) alleges that, in the two-year period between 27 June 2017 and June 2019, the first respondent, Qteq Pty Ltd, made six attempts either to enter into, or alternatively to induce a competitor or likely competitor to enter into, contracts, arrangements or understandings (CAUs) containing cartel provisions. This is alleged to have been conducted principally via the second respondent, Mr Simon Ashton, Qteq’s Chief Executive Officer (CEO), and later its Executive Chairman. The conduct and intention of Mr Ewan Meldrum, Qteq’s Chief Operating Officer from September 2017 and CEO from January 2019, and Mr Peter Ramsay, Qteq’s technical sales manager, is also relied upon. Mr Ashton is also alleged to have attempted personally to induce each competitor or likely competitor to enter into each alleged CAU.

2    The ACCC’s case is brought under s 76(1)(b) and (d) of the Competition and Consumer Act 2010 (Cth) (CCA). They provide, among other things, that this Court may order a person to pay a pecuniary penalty if satisfied that the person has attempted to contravene a provision of Pt IV of the CCA, or has induced or attempted to induce a person to contravene such a provision. Part IV deals with restrictive trade practices, with the numbering of its relevant provisions having changed on 6 November 2017, part way through some of the events the subject of this proceeding. Accordingly, reference will be made to both sets of provision numbering, using the present tense and singular for both, where relevant.

3    Section 44ZZRJ/45AJ provides that a corporation contravenes that section if it makes a contract or arrangement or arrives at an understanding that contains a cartel provision. Section 44ZZRD(1)/45AD(1) provides that a cartel provision is one that satisfies either the purpose/effect condition set out in subsection (2) or the purpose condition set out in subsection (3) and the competition condition set out in subsection (4). The ACCC mostly relies upon the purpose conditions set out in subparagraph (3)(a)(iii), but also those in subparagraphs (3)(b)(i), (3)(c)(ii) or (v), for which the corresponding competition conditions are paragraphs (4)(c), (h) and (j). Those paragraphs of subs (3) and (4) relied upon are identified in more detail below.

4    All of the alleged cartel conduct took place in relation to the supply of upstream CSG services and related goods. Upstream oil and gas production concerns the discovery and extraction of CSG. This is described in general terms in the following uncontroversial introductory parts of the further amended concise statement, admitted to by the respondents (original emphasis):

The upstream production of oil and gas involves discovering and extracting raw materials from reservoirs beneath the surface of the earth. It is distinct from downstream production, which involves processing and refining the raw materials into usable oil and gas products for distribution to end customers.

Upstream activities include: exploration; drilling wells; well testing (including through a procedure known as drill stem testing); completions of wells after drilling (which involves securing, stabilising and managing the wells); monitoring and measurement or “data acquisition”, and “workover” or maintenance of wells.

Oil and gas producers acquire equipment and services from third party suppliers for the purposes of upstream activities. Relevantly, they acquire permanent downhole gauges and related services (together, gauge works) for data acquisition purposes. Permanent downhole gauges are instruments installed in wells to monitor and measure pressure, temperature, fluid flows and other information. They can be used to control the extraction of water in the production of coal seam gas (CSG).

CSG, also known as coal bed methane, is a form of natural gas extracted from coal seams underground. CSG is described as an unconventional gas because, unlike other natural gases, which flow through the production well to the surface under high pressure, CSG is trapped in the coal seams underground by water pressure. To release the CSG, water must first be pumped out of the coal seam in a controlled fashion using permanent downhole gauges or alternative technologies to monitor water levels and pump rates.

5    It is not in dispute that at all times relevant to this proceeding, Qteq was a supplier of gauge works to the operators of CSG wells, thereby providing subsurface fluid monitoring services, including by the use of permanent downhole gauges (PDHGs). However, there is a live dispute between the parties as to whether Qteq also had the capacity to supply drill stem testing (DST) of CSG wells to such operators, so as to be a likely competitor in relation to such services.

6    The substance of the ACCC’s case is that Qteq, as the incumbent supplier of gauge services to a Shell Plc joint venture business, QGC Pty Ltd, was facing a tender process for the replacement contract for that work. An adverse tender outcome to any marked degree therefore had the potential to affect a major source of Qteq’s revenue. The ACCC alleges that on six occasions spread over the period leading up to, during and following that tender process, Qteq mainly via Mr Ashton attempted, or attempted to induce, the entry into CAUs with competitors or likely competitors containing proposed cartel provisions. The ACCC also alleges that Mr Ashton in his personal capacity attempted to induce the entry into those CAUs. The alleged attempts in general terms are characterised by the ACCC as being aimed to reduce or preclude competition by way of allocating customers (two attempts), structuring the tender bids (one attempt), sharing the market (one attempt) and non-compete agreements (two attempts). Three of those attempts involved a company called Pro-Test Pty Ltd, two of those attempts involved a business called Easternwell and specifically a company within it, Eastern Well Service No 2 Pty Ltd (Eastern Well No 2), and one of those attempts involved a company called Firetail Energy Services Pty Ltd.

7    For the following reasons, I have concluded:

(a)    the three attempt contraventions involving Pro-Test are made out, as alleged by the ACCC, with respect to both Mr Ashton and Qteq;

(b)    the two attempt contraventions involving Eastern Well No 2, as alleged by the ACCC, are made out with respect to both Mr Ashton and Qteq, and the respondents’ reliance on the exclusive dealing exception fails;

(c)    the attempt contravention involving Firetail is not made out, failing with respect to the competition condition.

B. THE ALLEGATIONS

Overview of the ACCC’s case

8    The ACCC’s case is that Qteq was the incumbent contractor to QGC for gauge works, that work being the subject of one of the four tenders QGC released on 24 October 2017. Qteq was also a leading supplier of gauge works to the CSG industry. This work accounted for the majority of its revenue. It had also secured an exclusive supply of QGC’s preferred gauges from Geo Pressure Systems International Inc (GeoPSI). Gauges are installed in CSG wells to monitor water levels and to adjust pump rates. The tender for gauge works gave rise to a concern on Qteq’s part and on the part of Mr Ashton, to protect its market position. That much is not disputed. However, what is disputed is the next step.

9    The ACCC alleges, and the respondents deny, that they had adopted a strategy to neutralise competitive threats posed by the tender process and its outcome by attempting to collude with current or prospective competitors for the supply of gauge works to QGC and other CSG customers, giving rise to the six alleged attempts. The attempts were directed towards three businesses, each of which is discussed further below. It is sufficient to note at this stage that each company operated, or sought to operate, in the CSG industry.

10    As detailed at some length below, the respondents deny aspects of what is alleged to have taken place and characterise other aspects as benign.

11    The six alleged attempts by Qteq, via and also by Mr Ashton, are said to have taken place as follows, each of which is designated with the definition used by the ACCC and given an attempt number for the purpose of these reasons:

(a)    three attempted proscribed arrangements or understandings with Pro-Test:

(i)    between about 27 June and October 2017: Pro-Test 2017 Customer Allocation Understanding (Attempt #1);

(ii)    between about 27 October and 10 November 2017: Pro-Test 2017 QGC Tender Understanding (Attempt #2);

(iii)    on about 24 June 2019: Pro-Test 2019 Market Sharing Understanding (Attempt #3),

also referred to together as the Pro-Test Attempts;

(b)    two attempted proscribed contracts with Eastern Well No 2, an entity within the Easternwell business:

(i)    between about 6 and 17 November 2017: Easternwell 2017 Non-Compete Agreement (Attempt #4);

(ii)    between about 7 December 2018 and 11 February 2019: Easternwell 2018-2019 Non-Compete Agreement (Attempt #5),

also referred to together as the Easternwell Attempts;

(c)    an attempted proscribed arrangement or understanding with Firetail between 19 and 20 September 2017: Firetail Understanding (Attempt #6), also referred to as the Firetail Attempt.

12    The allegation for each of the six attempts, expressed with a degree of abstraction at this stage of these reasons, is set out below. Each is denied by the respondents in every material respect, as to:

(a)    the sufficiency of the evidence relied upon to establish each alleged CAU, including proving the alleged attempt to reach it or induce it;

(b)    the alleged cartel provision, denying that the competition condition or the purpose conditions have been satisfied; and

(c)    in the case of the Firetail Attempt, denying knowledge of facts essential to render any of the foregoing elements, even if otherwise established, unlawful.

13    Even if those hurdles could be overcome by the ACCC, the respondents contend that the joint venture exception applies to Attempt #6 (by the conclusion of the hearing, they did not press this defence in relation to Attempts #1-#3), and the exclusive dealing exception applies to Attempts #4 and #5, noting that they bear the onus of establishing these exceptions.

Attempt #1 (Pro-Test 2017 Customer Allocation Understanding: 27 June–October 2017)

14    The alleged cartel provisions for this attempt are that Pro-Test would not compete for the supply of gauge works to QGC, and Qteq would not compete for the supply of goods or services that Pro-Test supplied to one of its customers, Santos Ltd, alleged to have been advanced by Qteq/Mr Ashton as a quid pro quo. The ACCC’s case is that the attempt to arrive at this understanding (also advanced as an attempt to make an arrangement), or alternatively to induce Pro-Test to do so, arose during the course of discussions between Mr Timothy Dabrowski of Pro-Test and Mr Ashton between about 27 June 2017 and October 2017, and in particular during a dinner on 26 October 2017 at Kingsley’s restaurant in Brisbane.

15    There is a pleading dispute as to whether the ACCC’s case was sufficiently clearly articulated as involving more than one provision, requiring only one side of the quid pro quo pertaining to each provision to be proven, or whether the ACCC was bound as a matter of procedural fairness to establish all aspects of the pleaded cartel provisions, that is, both as to the purpose condition, and, perhaps more importantly, as to the competition condition.

Attempt #2 (Pro-Test 2017 QGC Tender Understanding: 27 October–10 November 2017)

16    The alleged cartel provisions are that Pro-Test would structure its bid for the QGC gauge works tender so as to win only about 15% of the work, not trying to win the contract outright using either GeoPSI gauges or any other gauge, and that Qteq would not compete for the supply of goods or services to Santos, again alleged to have been advanced by Qteq/Mr Ashton as a quid pro quo. The ACCC’s case is that the attempt to arrive at this understanding (also advanced as an attempt to make an arrangement), or alternatively to induce Pro-Test to do so, arose during the course of discussions between Mr Dabrowski and Mr Ashton, during the course of one or more discussions between Mr Dabrowski and Mr Meldrum, and through the provision of a pricing list by Mr Ramsay to Pro-Test in the period between about 27 October 2017 and 10 November 2017.

17    As with Attempt #1, there is a pleading dispute as to whether the ACCC’s case was sufficiently clearly articulated as involving more than one provision, permitting only one side of the quid pro quo to be proven.

Attempt #3 (Pro-Test 2019 Market Sharing Understanding: 24 June 2019)

18    The alleged cartel provisions are that Pro-Test would not supply gauge works and Qteq would not supply DST or completions work, alleged to have been advanced by Qteq/Mr Ashton as a quid pro quo. The ACCC’s case is that the attempt to arrive at this understanding (also advanced as an attempt to make an arrangement) including these cartel provisions, or alternatively to induce Pro-Test to do so, arose during the course of a dinner between Mr Ewan McDonald of Pro-Test and Mr Ashton on 24 June 2019.

19    As with Attempts #1 and #2, there is a pleading dispute as to whether the ACCC’s case was sufficiently clearly articulated as involving more than one provision, requiring only one side of the quid pro quo to be proven, or whether the ACCC was bound as a matter of procedural fairness to establish both sides of that quid pro quo.

Attempt #4 (Easternwell 2017 Non-Compete Agreement: 6–17 November 2017)

20    The alleged cartel provisions are that Eastern Well No 2 and its related companies would not, otherwise than in concert with Qteq, supply gauge installation services to QGC or any other CSG operators, alleged to have been advanced by Qteq or by Mr Ashton on behalf of Qteq as two separate but related cartel provisions. The ACCC’s case is that this attempt to make this contract (pleaded as an agreement as well as a contract, but not as an arrangement or understanding), or alternatively to induce Eastern Well No 2 to do so, arose by way of contract negotiations evidenced by email exchanges and related telephone conversations between Mr Ashton and Mr Kyle Koziol of Easternwell, and internal email exchanges between Mr Ashton and Mr Meldrum, in the period between about 6 to 17 November 2017.

21    There is also a dispute as to whether s 45AC/44ZZRC, which extends the meaning of party for Div 1 of Pt IV, containing s 45AJ/44ZZRJ and other cartel conduct provisions, can be relied upon in an attempt/attempt to induce case brought under s 76 (which is contained in Pt VI).

Attempt #5 (Easternwell 2018-2019 Non-Compete Agreement: 7 December 2018–11 February 2019)

22    The alleged cartel provision are that Eastern Well No 2 and its related companies would restrict or limit the supply of gauge installation services to QGC and would not supply gauge installation services to any other persons. The ACCC’s case is that this attempt to make this contract, or alternatively to induce Eastern Well No 2 to do so, arose by way of contract negotiations evidenced by email exchanges and related telephone conversations between Mr Meldrum and Mr Koziol, and internal email exchanges between Mr Ashton and Mr Meldrum, in the period between about 7 December 2018 and 11 February 2019.

23    As for Attempt #4, there is also a dispute as to whether the extended definition of party in s 45AC/44ZZRC can be relied upon in an attempt/attempt to induce case.

Attempt #6 (Firetail Understanding: 19–20 September 2017)

24    The alleged cartel provision is that Firetail would not supply gauge works in competition with Qteq. The ACCC’s case is that Attempt #6 was an attempt to arrive at this understanding, or alternatively to induce Firetail to do so, and arose during the course of discussions between Mr Mike Wayne of Firetail and Mr Ashton on or about 20 September 2017, as recorded in subsequent email communications in the context of other documentary evidence. Mr Wayne is not a witness for either side.

Timeline overview

25    A high-level overview of the relevant events is useful in understanding the sequence and context of the attempts:

The trial evidence

27    In addition to admissions in the respondents’ concise statement in response, and agreed facts, the ACCC’s case for all six alleged attempts relies upon a substantial volume of documentary evidence, mostly in its own case, but also in the respondents’ case, to establish the contraventions. The evidentiary case advanced by the ACCC for the attempt involving Firetail and the two attempts involving Easternwell is entirely documentary. The case for three alleged attempts involving Pro-Test, in additional to documentary evidence, also relies upon evidence of conversations with Mr Ashton deposed to by Mr Dabrowski and by Mr McDonald, as well as their evidence about collateral events and about some of the documents.

28    The respondents elected not to read either an affidavit affirmed by Mr Ashton or an affidavit affirmed by Mr Meldrum, and accordingly neither did the scheduled cross-examination of either of them take place. The exercise of that forensic right was predictable and even unsurprising. But it is a decision that ended up having adverse consequences.

29    The case for the respondents relied upon the documentary evidence in the ACCC’s case, additional documentary evidence in their own case, their characterisation of the ACCC’s documentary, affidavit and oral evidence, and the evidence in cross-examination of Mr Dabrowski and Mr McDonald.

30    Both sides rely upon contextual evidence and arguments in relation to the key direct evidence, framed differently, and upon inferences to be drawn from the direct evidence. The following is a short summary of key aspects of that evidence:

(a)    what was said in the course of conversations and other communications in the period from 27 June 2017 to December 2019, including in particular what was said by Mr Ashton to Mr Dabrowski in conversations from June to October 2017 (part of the substance of Attempt #1).

(b)    what was said by Mr Ashton to Mr Dabrowski at the dinner at Kingsley’s restaurant in Brisbane on the evening of 26 October 2017, also attended by Mr Meldrum, Mr McDonald and Mr Sadler (part of the substance of Attempt #1);

(c)    what was said in the period between about 27 October and 6 November 2017 by Mr Ashton to Mr Dabrowski during the course of discussions (part of the substance of Attempt #3);

(d)    what was said by Mr Meldrum at, or at a time around, the meeting at Qteq’s offices on 2 November 2017, also attended by Mr Ramsay, Mr Dabrowski and Mr McDonald (part of the substance of Attempt #2);

(e)    what was said by Mr Ashton to Mr McDonald at the dinner the two men attended at the Fantauzzo Hotel in Brisbane on 24 June 2019 (part of the substance of Attempt #3);

(f)    the meaning to be attributed to email communications (including attached draft documents) between Mr Ashton to Mr Koziol in the period between about 6 and 17 November 2017, and as recorded in subsequent internal email communications between Mr Ashton and Mr Meldrum (part of the substance of Attempt #4);

(g)    the meaning to be attributed to the discussions between Mr Wayne and Mr Ashton on about 20 September 2017 as recorded in an email from Mr Ashton to Mr Wayne that night, in the context of an email exchange between them the previous day, 19 September 2017 (the substance of Attempt #6).

C. APPLICABLE LEGAL PRINCIPLES

31    It is common ground that the relevant legal principles are derived from case law as to the operation of the above provisions since their inception in 2009, as well as some of the concepts and terms deployed in competition law more generally since the commencement of the Trade Practices Act 1974 (Cth), which became the CCA, and also more recent single judge consideration of the application of those principles.

Case law

32    It is convenient to list alphabetically by defined name the cases relied upon by the parties on the relevant competition cartel and related principles, to facilitate reference to them immediately below and later in these reasons:

BlueScope (No 5):    Australian Competition and Consumer Commission v BlueScope Steel Ltd (No 5) [2022] FCA 1475 (O’Bryan J), noting this decision is the subject of a reserved appeal decision by the Full Court.

Cascade Coal:    Australian Competition and Consumer Commission v Cascade Coal Pty Ltd [2019] FCAFC 154; 374 ALR 90 (Jagot, Beach and Bromwich JJ).

Delta:    Australian Competition and Consumer Commission v Delta Building Automation Pty Ltd [2023] FCA 880 (Bromwich J), noting this decision and the subsequent penalty decision is the subject of a reserved appeal decision.

Egg Corp:    Australian Competition and Consumer Commission v Australian Egg Corporation Ltd [2017] FCAFC 152; 254 FCR 311 (Besanko, Foster and Yates JJ).

Heating Centre:    Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 72; 9 FCR 153 (Lockhart, Wilcox and Pincus JJ).

Hutchinson FCAFC:    J Hutchinson Pty Ltd v Australian Competition and Consumer Commission [2024] FCAFC 18; 302 FCR 79 (Wigney, Bromwich and Anderson JJ), upheld on appeal by the High Court.

Hutchinson HCA:    Australian Competition and Consumer Commission v J Hutchinson Pty Ltd [2025] HCA 10 (Gageler CJ, Edelman, Steward, Gleeson and Beech-Jones JJ).

News v South Sydney:    News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; 215 CLR 563 (Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ).

Olex:    Australian Competition and Consumer Commission v Olex [2017] FCA 222; ATPR 42-540 (Beach J).

Pacific National:    Australian Competition and Consumer Commission v Pacific National Pty Ltd [2020] FCAFC 77; 277 FCR 49 (Middleton, Perram and O’Bryan JJ).

Parkfield:    Trade Practices Commission v Parkfield Operations Pty Ltd [1985] FCA 545; 7 FCR 534 (Bowen CJ, Smithers and Morling JJ).

QCMA:    Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481; 25 FLR 169 (Trade Practices Tribunal: Woodward J, Shipton JA and Prof Brunt).

Rural Press:    Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; 216 CLR 53 (Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ).

SIP Australia:    Australian Competition and Consumer Commission v SIP Australia Pty Ltd [2002] FCA 824; ATPR 41-877 (Goldberg J).

Tubemakers:    Trade Practices Commission v Tubemakers of Australia Ltd [1983] FCA 99; 76 FLR 455; 47 ALR 719 (Toohey J) (both reports are referred to because the subsequent authorities sometimes refer to one of the reports and not the other).

Visy:    Visy Paper Pty Ltd v Australian Competition and Consumer Commission [2003] HCA 59; 216 CLR 1 (Gleeson CJ, McHugh, Gummow and Hayne JJ, Kirby J concurring, Callinan J dissenting).

33    The ACCC has summarised the key relevant principles, without disagreement from the respondents, although they rely upon some additional cases for certain nuances in the application of the principles. The real dispute lies in the application of those principles to the evidence in this case, and ultimately the sufficiency and quality of the evidence having regard to the seriousness of the allegations. The following is drawn from the ACCC’s summary and the cases to which they refer, with some supplementation and adjustment, including by reference to the respondents’ submissions.

Conduct

34    An attempt to contravene or an attempt to induce a contravention requires proof of both conduct and intention: Egg Corp [92].

35    The conduct element requires a step towards bringing about the contravention that is immediately connected with the attempted contravention and not merely remotely connected or preparatory to it: Egg Corp [93], citing Tubemakers FLR 472; ALR 737 and Parkfield 538-539. There is no requirement to prove that the conduct had no reasonable purpose other than the commission of the alleged contravention; it is enough that this is found to be the most probable, applying ordinary reasoning in the application of the civil standard of the balance of probabilities: Delta [53]-[64].

36    To establish an inducement there must be an affirmative or positive act or course of conduct directed to the person who is said to be the object of the inducement: Egg Corp [93] approving SIP Australia [112]. There is no requirement for the inducement to be accompanied by a threat or promise; “mere persuasion” may suffice: Egg Corp [93] approving Heating Centre 164.

37    The contraventions alleged do not include any actual inducement, but rather an attempt to induce. As O’Bryan J pointed out in BlueScope (No 5) at [144], there may be an attempt to induce even if no commitment was sought, the contrary being potentially too rigid and tending to substitute “commitment” for the legislated word “understanding”. It should be noted that BlueScope (No 5) has been appealed to the Full Court, the appeal has been heard, and the decision has been reserved.

Intention

38    The intention element requires an intention to bring about the proscribed result, here a CAU containing a cartel provision: Egg Corp [92], approving Tubemakers FLR 472-473, 479; ALR 737, 743. While the ACCC has to prove that the respondents had knowledge of the essential facts that would have rendered the attempted CAU unlawful, it is not necessary to show that they knew it was unlawful: BlueScope (No 5) [99]. The knowledge required to be proven is actual knowledge, but it is not necessary to prove any knowledge that those facts are “capable of characterisation in the language of the statute”: Rural Press [48].

39    In practice, there is no material difference between the requisite intent attaching to:

(a)    the conduct of attempting to contravene described in s 76(1)(b) of the CCA; or

(b)    the conduct of inducing, or attempting to induce, a contravention described in s 76(1)(d) of the CCA,

because either way the conduct must be intentionally directed to making the contract or arrangement, or reaching the understanding: BlueScope (No 5) [98].

40    The intention alleged and proven will suffice even if achieving the proscribed result is not possible: Tubemakers FLR 472; ALR 737. It follows that it is not necessary for the ACCC to prove that the respondents expected or believed that the attempt would be successful, such that a CAU would eventuate: Egg Corp [92] approving Tubemakers FLR 471-472; ALR 736.

41    The intention of a corporate respondent is to be determined in accordance with common law principles: Tubemakers FLR 476; ALR 740; BlueScope (No 5) [172]. It is sufficient to show that an employee of the corporation having actual or apparent authority to enter into the attempted CAU on the corporation’s behalf held the relevant intention: BlueScope (No 5) [174]. There is no suggestion in this case that Mr Ashton lacked that authority, especially given that he was the CEO or Executive Chairman of Qteq at the relevant times. There is also no suggestion that the intention and conduct of Messrs Meldrum and Ramsay were not attributable to Qteq, acting as its employees in the scope of their actual or apparent authority: s 84(1) and (2), CCA.

42    For the purposes of both elements of an attempt, it is not necessary for the precise terms of a contemplated arrangement or understanding to have been formulated: Egg Corp [94] citing Parkfield 539. Generally speaking, the more advanced the conduct, the more likely it is that the necessary inference of intention will be drawn: Egg Corp [94]. It is not necessary to establish that the respondents expressly sought a commitment from the relevant counterparty to assume some obligation or to conduct themselves in a particular way: BlueScope (No 5) [144]-[148]; Delta [45], [70], [71].

Arrangements and understandings

43    The terms “arrangement” and “understanding” are well established in the authorities, with the term “contract” requiring no explanation, especially in this case where the alleged contract in question for each of the Easternwell Attempts was in writing. While the allegations in this case involve attempts, for a contract or arrangement actually to be made, or an understanding actually arrived at, there must be a meeting of minds or consensus between the parties that they will conduct themselves in accordance with the subject matter of the CAU. For a substantive contravention, a mere expectation, as distinct from an assumption of obligation, assurance or undertaking to act in a particular way, is not sufficient: Egg Corp [95]. There must be communication from one to another of a commitment to act, or refrain from acting, in a particular way; at least to that extent, there must be a “meeting of minds” or “consensus”: Hutchinson HCA [20] (Gageler CJ, Gleeson and Beech-Jones JJ); see also Hutchinson FCAFC [49] (Wigney J), [128], [152] (Bromwich and Anderson JJ).

44    However, with an attempt that point is not reached and therefore there is no requirement that such a meeting of minds or consensus is reached. Accordingly, the dispute tends to turn on how granular the identification of the proposed arrangement or understanding must be to constitute an attempt: Delta [65], [69]-[71], and adopting the statement of principle at [71]:

The relevant test for the conduct element is whether a sufficient step was taken in all the circumstances to take it beyond being merely preparatory. An attempt does not require that the substantive contravention has almost taken place.

45    The existence of an actual arrangement or understanding can be inferred from circumstantial evidence, including the course of dealings between the parties: BlueScope (No 5) [102(f)], [145]-[146]. Necessarily, such inferential reasoning is also available to prove that sufficient progress beyond the merely preparatory has taken place to constitute an attempt or an attempt to induce.

Cartel provisions

46    Section 44ZZRD(1)/45AD(1) provides that a cartel provision is one that satisfies either the purpose/effect condition set out in subsection (2) or the purpose condition set out in subsection (3) and the competition condition set out in subsection (4). The ACCC mostly relies upon the purpose conditions set out in subparagraph (3)(a)(iii), but also those in subparagraphs (3)(c)(ii) or (v), to which the corresponding competition conditions are paragraphs (4)(c), (h) and (j).

47    In Visy [7], a majority of the High Court (Gleeson CJ, McHugh, Gummow and Hayne JJ) considered that the word “provision” was used in Pt IV in a comprehensive sense, rather than any technical sense as the word is used in contract law, inviting:

attention to the content of what has been, or is to be, agreed, arranged or understood, rather than any particular form of expression of that content adopted, or to be adopted, by the parties.

48    That approach is especially needed for understandings, for which terms will ordinarily not be set out in any formal way in writing, let alone with the precision of a contract. Section 4(1) provides that, in relation to understandings, provision means “any matter forming part of the understanding.”

Purpose condition

49    The purpose condition relied upon does not need to be the only purpose of the alleged proposed cartel provision, provided it was a substantial purpose: s 4F(1)(a), CCA. Although s 44ZZRD(2)/45AD(2) refers to the purpose of the provision, the relevant purpose is that of the alleged contravener in seeking such a provision: BlueScope (No 5) [110]. Identifying the purpose of a cartel provision requires consideration of the subjective purpose of the parties to the (proposed) understanding, being the end sought to be accomplished, rather than the reason or motive for seeking that end: News v South Sydney [18] (Gleeson CJ); endorsed in Rural Press [66] (Gummow, Hayne and Heydon JJ). The subjective purpose of a provision may be inferred from its manifest effect and other objective considerations: News v South Sydney [18] (Gleeson CJ) and [44] (McHugh J). Where the conduct is part of a wider strategy, the purpose of that strategy can be relevant to determining the purpose of the conduct: Olex [494].

50    In this case, regard may be had to the evidence supporting the existence of a broader strategy alleged by the ACCC as relevant context when considering the subjective purpose of the provision: Olex [494]; BlueScope (No 5) [111]. That said, this aspect of the inquiry remains focused on the subjective purpose, such that the objective purpose should not be given undue significance, though it may nevertheless inform the subjective assessment required: Olex [494].

Competition condition

51    In relation to the competition condition, as O’Bryan J pointed out in BlueScope (No 5) at [124], the meaning of the word “competition” is well-established, if difficult to state in short form. His Honour noted that its meaning has not materially altered since the very first decision of the Trade Practices Tribunal, now the Competition Tribunal, in QCMA. It was expressed by the Tribunal using connotation and example to give a measure of content to the description of this dynamic process, rather than any exhaustive definition: see QCMA 511-512. With that conceptual understanding in mind, the competition condition is expressed as being satisfied if the parties are, or are likely to be, or but for the contract, arrangement or understanding, would be or would be likely to be, in competition with each other in relation to, relevantly the supply, or likely supply, of goods or services the subject of the proposed cartel provision: s 44ZZRD(4)/45AD(4) (a), (b), (c), (h), (j).

52    The essence of actual competition is rivalrous behaviour: Cascade Coal [147]. To be in actual competition, parties must ordinarily be rivals or engage in rivalrous behaviour, or otherwise constrain each other, in respect of the supply or potential supply of the relevant goods or services. While this ultimately occurs in the sphere of a market, no market needs to be identified or delineated to establish actual competition between parties: Olex [489].

53    With particular relevance to the second limb of the competition condition, the likelihood of parties being in competition with each other is a question of fact. “Likely” does not mean “probable” in this context: Pacific National [243]-[246]. In relation to the supply of goods and services referred to in s 44ZZRD(4)(c)/45AD(4)(c), this includes a possibility that is not remote: s 44ZZRB/45AB. Even if that definition of “likely” only applies, as relevant here, to the actual supply of services or the capacity to supply them, a consistent meaning should be given for the likelihood of competition: BlueScope (No 5) [129]-[130]. Likely competition may be established by showing “a real chance” of competition that is “commercially relevant or meaningful”: Cascade Coal [148]. Put another way, to help avoid “likely” being applied in a way that sets too high or too low a threshold, it can be understood in its legislative and historical context as referring to a “real commercial likelihood”: Pacific National [246].

54    It is important not to confuse the assessment of actual competition with the assessment of the related concept of likely competition, as the former may be more confined to an assessment of what is already in place, whereas the latter more readily and additionally encompasses predicting the future, including events that may give rise to, for example, the capacity to compete later rather than immediately. The distinction between existing and likely competition, however, does not necessarily involve bright lines, but often questions of timing and degree.

Defences and exceptions and exceptions

55    In the Easternwell Attempts, the respondents relied upon the exclusive dealing exception contained in s 45AR(1) of the CCA. The principles applicable to that exception are discussed in relation to both of those attempts below.

56    For the Firetail Attempt, the respondents relied on the joint venture defence under s 44ZZRP (now s 45AP) of the CCA. That did not arise for consideration because of the findings made that the attempt was not established by reason of the competition condition not being proven.

D. THE COAL SEAM GAS INDUSTRY

57    By the statement of agreed facts, the parties agreed to the following key background facts about the CSG industry:

Upstream vs downstream production

[8]    In the context of the description of Australia’s oil and gas industry in this SOAF:

[8.1]    ‘Upstream’ activities include exploration drilling and extraction out of oil and gas wells from underground into a processing facility.

[8.2]    ‘Downstream’ activities refer to the refining and processing of oil and gas into a finished product.

Conventional and unconventional wells

[9]    In Australia, there are two types of oil or gas wells: ‘conventional’ wells and ‘unconventional’ wells (such as coal seam gas (CSG) wells).

[10]    A ‘conventional’ well is a well with oil or gas that exists underground as, respectively, liquid or gas in reservoirs, where wellbores are drilled into the reservoir to extract the oil or gas.

[11]    In CSG wells, the gas is bound within the coal seam and does not exist in gaseous form in a subsurface reservoir.

[12]    In CSG wells, the extraction of CSG is preceded by a period in which water is pumped out of the coal seam in a monitored and controlled manner. Pumping out the water causes the coal seams to depressurise and release gas that can then be extracted from the well in gaseous form.

[13]    The pumping of water from the coal seam must be performed in a controlled manner. Under-pumping or over-pumping can disrupt production in a CSG well.

[14]    Controlled pumping of water in a CSG well is achieved by accurate monitoring of the subsurface water level and the rate at which the pumping of that water occurs at the base of the well, which is typically hundreds of metres underground.

Services provided to CSG well operators

[15]    The services provided to CSG well operators include the following upstream activities:

[15.1]    exploration;

[15.2]    drilling wells;

[15.3]    testing of wells (well testing), including through a procedure known as drill stem testing (DST) (see paragraphs 16 to 17 below);

[15.4]    securing, stabilising and managing wells (completions) (see paragraph 18 below);

[15.5]    subsurface fluid monitoring (see paragraphs 19 to 25 below) which includes the supply of permanent downhole gauges (PDHGs); and related installation and maintenance services for PDHGs; (together, gauge works); and

[15.6]    rig workover services or maintenance of wells (see paragraph 26 below).

Drill stem testing

[16]    DST is a procedure to determine the productive capacity, pressure, permeability or extent (or a combination of these) of a hydrocarbon reservoir.

[17]    DST equipment is used during the first stages of well development and is used to test wells in immature or “greenfield” CSG sites.

Well completions services

[18]    Well completions is the process of making a drilled well ready for commercial production of oil or gas. Typically, this involves casing and packing the wellbore and the insertion of tubing through which the gas flows to the surface.

Subsurface fluid monitoring

[19]    Downhole fluid levels, or subsurface water levels, are monitored using a downhole monitoring system. At all relevant times, a component of a downhole monitoring system is a downhole pressure sensor, commonly referred to as a PDHG, which is used for subsurface data acquisition.

[20]    Subsurface data acquisition involves monitoring and measuring pressure, temperature, fluid flows and other information.

[21]    PDHGs are installed in wells to monitor water levels and to adjust pump rates.

[22]    PDHGs measure downhole fluid levels by first measuring the water head pressure either just above or just below the PCP pump, then calculating the liquid head above the gauge and extrapolating that figure to a fluid level.

[23]    PDHGs may be wired or wireless. Wired PDHGs may be:

[23.1]    free-hanging, in that they are attached to a cable that is used to lower the gauge into the well and submerge it below the expected water level so that it can measure the water pressure; or

[23.2]    affixed to the tubing or casing of a well.

[24]    Wired PDHGs are connected to monitoring instruments on the surface that are used to record measurements obtained by the PDHG.

[25]    In addition, the equipment used to pump water out of the CSG production wells includes:

[25.1]    progressive cavity pumps (PCPs), which pump water from the base of the well to the surface;

[25.2]    sucker rods (with a pump rotor and often a paddle rotor), which are conveyed in the well to sit inside the PCP stator. The rods connect all the way to the surface and are connected to a PCP drivehead, which is used to spin the rods and produce fluids up the tubing from the PCP; and

[25.3]    automatic diverter valves (ADVs), which open when the well is shut to divert fine material and prevent its accumulation.

[26]    The components of a fluid level monitoring system, including PDHGs, are usually installed and tested when a CSG well is initially completed or subsequently when rig workover services are being supplied. During the lifetime of a CSG well, the well operator may also require the PDHGs to be retrieved and replaced.

Rig workover services

[27]    Rig workover services involve the supply of rigs and crews to workover existing wells by pulling and replacing the completion equipment in the wells to either displace solids (clean out the well) or replace a damaged PCP pump or rods. Workover rigs comprise large capital plant and equipment weighing several hundred tonnes, which are positioned over the well. The rigs also include accommodation and catering for the crew.

(Original emphasis.)

Key entities and people

Qteq

58    The following description of Qteq is drawn from the statement of agreed facts:

On 27 June 2017, Qteq was incorporated by Mr Ashton.

At all relevant times, the eQnomics Group Pty Ltd (TEG) was the majority shareholder and non-trading holding company of Qteq. Mr Ashton controlled TEG.

On 27 July 2017, Qteq entered into a business sales agreement to purchase the business and assets of Welldog from its receiver.

At all relevant times, Qteq supplied gauge works to operators of CSG wells in Australia.

As part of the acquisition by Qteq of Welldog’s assets [see below], Qteq acquired DST equipment. Qteq employed an engineer who was technically trained to perform DST services.

(Original emphasis.)

59    It is also agreed that Qteq was the incumbent supplier of gauge works to QGC at the time of the QGC gauge tender’s release (24 October 2017).

60    The following descriptions of key Qteq figures are drawn from a statement of agreed facts and an agreed dramatis personae:

(a)    Simon Ashton:

•    was a Director of Qteq from 27 June 2017;

•    was Qteq’s Chief Executive Officer from 27 June 2017 to January 2019; and

•    was Qteq’s Executive Chairman from January 2019.

(b)    Ewan Meldrum:

•    worked at Welldog as Regional Manager Asia-Pacific until January 2017;

•    was the Chief Operating Officer of Qteq from September 2017 until January 2019 reporting to Mr Ashton; and

•    was the Chief Executive Officer of Qteq from January 2019.

(c)    Quentin Morgan:

was appointed Chief Innovation Officer of Qteq on 1 August 2017, reporting to Mr Ashton until January 2019 where he reported to Mr Meldrum. Sometime in 2019, that role was renamed to Chief Technology Officer.

(d)    Peter Ramsay:

was, at all relevant times, Qteq’s Technical Sales Manager.

(e)    Gareth Ashton:

was, at all relevant times, Qteq’s General Counsel.

(f)    Stuart McCulloch:

was, from February 2018 to 1 April 2020, Qteq’s Chief Business Development Officer.

Pro-Test

61    Pro-Test Pty Ltd was the subject of two of the alleged attempts by Qteq and Mr Ashton. The following description of the company is agreed between the parties:

Pro-Test was founded in 2009 and is a Queensland-based company that provides products and services to support companies operating in Australia's upstream oil and gas industry.

Pro-Test’s business consists of the following business units:

•    well completions services;

•    gauge works;

•    well testing, including DST and other types of well testing. Pro-Test specialises in open hole well testing; and

•    production technology, which Pro-Test started developing in around 2018. Production technology technically forms part of completions services but focuses on jet pumps.

62    The following descriptions of key individuals at Pro-Test is drawn from a statement of agreed facts and an agreed dramatis personae:

(a)    Ewan McDonald:

•    co-founded Pro-Test in 2009 with Jason Noud; and

•    at all relevant times was, and presently is, an Executive Director of Pro-Test.

(b)    Timothy Dabrowski:

•    worked as a Business Unit Manager at Welldog between 2012 and 2014;

•    was hired by Pro-Test as an Engineering Manager in 2014;

•    was promoted to General Manager of Pro-Test, which was a senior manager role in around 2016;

•    was an Executive Director of Pro-Test from 2017; and

•    was an Alternate Director from 1 February 2018.

(c)    Toby Cook:

was, during the relevant period, the Stakeholder Engagement Manager at Pro-Test.

63    Messrs McDonald and Dabrowski gave evidence in relation to the Pro-Test Attempts. I discuss Mr Dabrowski’s testimony at [115]ff below and Mr McDonald’s at [142]ff below.

64    In addition to the key individuals listed above, two persons from Integrated Oilfield Holdings Pty Ltd (IOH), a significant shareholder in Pro-Test, bear noting (with the following descriptions agreed by the parties):

(a)    Kim Sadler:

was a director of IOH since 14 July 2017.

(b)    Daryl Stilwell:

•    was the Chairman of IOH from March 2020; and

•    a director of IOH from 5 February 2020 to 18 May 2021.

Easternwell

65    Easternwell was a business, which included a company (Eastern Well No 2) that was the subject of two alleged attempts by Qteq and Mr Ashton. The following description of the business is agreed between the parties:

At all relevant times, Easternwell included:

•    Eastern Well Service No 2 Pty Ltd, which was, at all relevant times, a procurement entity for the formerly-named Easternwell business; and

•    Eastern Well Group Operations Pty Ltd, which provided drilling and rig workover services to oil and gas well operators.

During the period from at least 1 July 2017 to at least 30 June 2020, Eastern Well Service No 2 Pty Ltd and Eastern Well Group Operations Pty Ltd were related bodies corporate within the meaning of s 4A(5)(c) of the CCA.

In October 2017, Easternwell was the main well drilling contractor and supplier of rig workover services to QGC.

66    The following descriptions of key Easternwell figures are drawn from a statement of agreed facts and an agreed dramatis personae:

(a)    Kyle Koziol:

•    was the General Manager of the Easternwell Energy business division between 2017 and 2020; and

•    was the General Manager of the Easternwell Minerals business division from the end of 2020.

(b)    David Diete:

was the Purchasing Team Leader for Easternwell at all relevant times.

67    Neither Mr Koziol nor Mr Diete were called to give evidence in the proceedings.

68    In response to a s 155 notice issued by the ACCC, Eastern Well No 2 also identified Brad McCotter, Easternwell’s Supply Chain Manager, and Simon McPaul, Easternwell’s Rig Operations Support – QGC, as persons who had interactions involving Qteq during the relevant period.

Firetail

69    Firetail Energy Services Pty Ltd was the subject of one of the alleged attempts by Qteq and Mr Ashton. It is an agreed fact that Firetail was incorporated in November 2016 by Mr Mike Wayne. Mr Wayne was its managing director at all relevant times. He did not give evidence at trial for either side.

QGC

70    QGC Pty Ltd was a joint venture business operated by Shell Plc. Its release of five invitations to tender for the supply of various components and services for its CSG wells in the Surat Basin is the central context in which the attempts are alleged to have taken place. Those tenders are discussed further at [146]ff below. QGC is not the subject of any of the alleged attempts. At certain points in the evidence QGC is apparently referred to as just Shell.

71    A dramatis personae agreed between the parties names several key figures at QGC in the relevant period:

(a)    Alan Ruff (Wells Operations Manager);

(b)    Martin Gallagher (Contracts and Procurement Manager);

(c)    Siew Weng Lee (Contracts and Procurement Representative);

(d)    Lucy McKee (General Manager, Wells Operations);

(e)    Joanna Groves; and

(f)    Mike Ward.

GeoPSI

72    It is agreed between the parties that Geo Pressure Systems International Inc (GeoPSI) is a Canadian-based technology company that manufactures and supplies PDHGs (GeoPSI gauges). Their gauges are particularly relevant to the Pro-Test Attempts.

73    The parties agree on the following descriptions of GeoPSI’s key figures:

(a)    Cedric Doerksen, GeoPSI’s CEO and President; and.

(b)    Nick Nazarovs, a sales representative for GeoPSI at all relevant times.

74    GeoPSI gauges were the dominant gauge in Australian CSG wells at the time of the Pro-Test attempts, and were the gauge that QGC used at the time it released its tender packages. On 20 September 2017, Qteq entered into a memorandum of understanding with GeoPSI that allowed Qteq to be the exclusive distributor of GeoPSI gauges for the QGC gauge tender. On 31 August 2018, Qteq and GeoPSI entered into an additional agreement under which Qteq became the exclusive Australian supplier of GeoPSI gauges.

Welldog

75    The following description is agreed between the parties:

Until about mid-2017, Welldog Pty Ltd was a company that, amongst other things, supplied gauge works to CSG operators in Australia including QGC (which is a joint venture business operated by Shell Plc), Santos and Origin. Mr Ashton was an investor in Welldog via his shareholding in and directorship of ProX Pty Ltd.

On 20 March 2017, Welldog’s directors appointed external administrators and shortly thereafter ProX appointed receivers and managers to Welldog.

(Original emphasis.)

76    It is agreed that, on 27 July 2017, Qteq entered into a business sales agreement with Welldog to purchase its business and assets from its receivers, including its DST equipment.

77    Welldog had provided gauge works services to QGC before it entered into external administration. That contract was novated to Qteq.

Farley Riggs

78    The parties agree that The Supply Group Pty Ltd (trading as Farley Riggs) is an oilfield equipment supplier, and that Edward Riggs was its Managing Director in the relevant period.

79    After Firetail’s incorporation, its managing director, Mr Wayne, had told others that Firetail had taken over the existing Farley Riggs equipment and contracts.

Key terms

80    It is convenient also to reproduce the following alphabetical list of key terms furnished by the ACCC and agreed to by the respondents, containing the abbreviations that will be used in these reasons.

E. THE PRO-TEST UNDERSTANDINGS (ATTEMPTS #1, #2 AND #3)

Introduction

81    The ACCC alleges that Qteq (primarily through Mr Ashton) made three attempts to arrive at understandings, or enter into arrangements with Pro-Test, containing cartel provisions, and is therefore liable under s 76(1)(b) of the CCA for attempting to contravene s 45AJ. In the alternative, it alleges two corresponding attempts to induce Pro-Test to arrive at those understandings, rendering it liable to for civil penalties under s 76(1)(d) of the CCA. The ACCC also alleges the Mr Ashton, in his own capacity, attempted to induce Pro-Test to arrive at these understandings or enter into these arrangements.

82    The three sets of contraventions – attempt or attempt to induce – are alleged to have occurred:

(a)    during the period from around 27 June to 26 October 2017 (Pro-Test 2017 Customer Allocation Understanding or Attempt #1);

(b)    during the period from around 27 October to 10 November 2017 (Pro-Test 2017 QGC Tender Understanding or Attempt #2); and

(c)    during 24 June 2019 (Pro-Test 2019 Market Sharing Understanding or Attempt #3),

which are collectively referred to in these reasons as the Pro-Test Attempts.

83    Pro-Test was a competitor to Qteq in the supply of gauge works in the CSG industry, though its business focused on DST and completions work. The central context for Attempts #1 and #2 was the release of the QGC gauge tender, which was a priority for Qteq to win.

84    Attempt #1 is alleged to have occurred through a series of conversations between Mr Ashton and Mr Timothy Dabrowksi, an Executive Director of Pro-Test. The substance of the ACCC’s case is that, in those conversations, Mr Ashton proposed for Pro-Test to not bid for the QGC gauge tender at all.

85    Alleged Attempt #2 immediately followed on from Attempt #1, with Mr Ashton and Qteq appearing to change tactics. The substance of the ACCC’s case is that Mr Ashton had made proposals to Mr Dabrowski that, rather than not bid at all, Pro-Test bid for only about 15% of the scope of work under the QGC gauge tender. This attempt involved a proposal that Qteq provide a tiered pricing for GeoPSI equipment, where a higher price would kick in for products going beyond that limited scope. The conduct and intentions of Mr Meldrum and Mr Ramsay are also relied upon for this attempt.

86    Attempt #3 is distinct, in time and substance, from Attempts #1 and #2. The substance of the allegation is that Mr Ashton made a proposal to Mr McDonald, the founder and an Executive Director of Pro-Test, that Pro-Test not compete for gauge work, and that Qteq would not compete for DST or completions work.

The pleading issue

87    Before turning to the evidence for each Pro-Test Attempt, a dispute as to pleadings must be dealt with. The respondents, by way of an application made during the trial, sought an evidential ruling arising from what may conveniently be described as a pleading issue, noting that in the strict sense there are no pleadings because the proceeding has not been the subject of formal pleading by way of a statement of claim, but rather by way of a concise statement and additionally a statement of case voluntarily furnished by the ACCC, supported by a procedural order to do so. Nothing turns on that distinction, because what matters is whether the respondents have been afforded procedural fairness by being given clear enough notice of the case that they have to meet: see Australian Securities and Investments Commission v National Australia Bank Limited (No 2) [2023] FCA 1118; 171 ACSR 176 [12]-[20] (Derrington J).

88    The respondents raise a pleading issue, which grounds the evidentiary ruling they seek. That pleading issue is whether or not the ACCC is to be held to the cartel conduct allegations as articulated, as the respondents characterise them, in the final version of the ACCC’s concise statement. The respondents were not entirely clear as to the role of the ACCC’s statement of case. In my view, the statement of case was intended to articulate the ACCC’s case more fully and could properly be relied upon to resolve any ambiguity and improve upon the clarity of that case. It is the overall effect of what was conveyed by the ACCC to the respondents as to what their case was that matters.

89    The ACCC contends that there was, fairly read, always an allegation of there being two cartel provisions for each of the alleged Pro-Test Attempts, in the context of s 44ZZRD(1)/45AD(1) of the CCA referring to a single provision of a CAU being a cartel provision. That is, the ACCC contends that it always alleged, in relation to each of the three Pro-Test attempts, two provisions, and that it could succeed by proving one cartel provision, or the other, or both.

90    The parties are implacably divided on the interpretation to be given to the case the ACCC brings in relation to the three Pro-Test Attempts. The ACCC seemed to acknowledge a degree of infelicity in the way in which its allegations were expressed, but says there is no ambiguity when the allegations are read as a whole and not in isolation as it contends the respondents were doing. The respondents’ primary position is that the notice they had of the ACCC’s case aligns with their interpretation of the allegations. In the alternative, the respondents contend that there is at least sufficient ambiguity that this should be resolved in their favour, pointing to this being a civil penalty proceeding. It is not in doubt that genuine ambiguity as to the way in which a case is brought, on a fair reading in all the circumstances, including the totality of the allegations, would tend to favour the more beneficial understanding of what has been alleged, from the perspective of the respondents, to prevail.

91    The way this dispute emerged is that after the ACCC’s oral opening, the respondents sought a ruling pursuant to s 136 of the Evidence Act 1995 (Cth) that the evidence in the proceedings be limited in determining the three Pro-Test alleged attempts as described in the ACCC’s concise statement at [22.2], [22.3] and [22.4] as against Qteq, and read with [23] to apply to Mr Ashton. They sought to restrict the use that could be made of evidence that had been adduced to that point, and an indication as to the use that could be made of evidence yet to be adduced. The application morphed into the quasi pleading dispute identified in the short summary above for the three Pro-Test attempts, namely as to whether the ACCC’s case was sufficiently clearly articulated as involving two cartel provisions for each attempt, permitting either or both to be proven, or whether the ACCC was bound as a matter of procedural fairness to establish both provisions, and accordingly, the corresponding competition condition for each. It is the asserted need to prove the competition condition for both provisions that is at the heart of this dispute.

92    I declined to make the ruling during the trial, in part because it was directed to evidence that had not yet been adduced, but also because the respondents had not identified with sufficient precision any prejudice they would suffer if the application for the s 136 evidence use restriction was deferred to this judgment, as the ACCC contended was the better course.

93    The ACCC correctly points out that there should not be a conflation of what is the case advanced and its proof. The ACCC also points out at a conceptual level, correctly in my view, that there must be proven an agreement or understanding (contract not arising for the three Pro-Test attempts), and that agreement or understanding must include at least one cartel provision. To be a cartel provision, it must satisfy both the purpose condition (a purpose/effect condition not being any part of the Pro-Test Attempts alleged) and the competition condition.

94    Conceptually, in a given case, the ACCC could expressly allege that there was a CAU, that it included a number of provisions, and that each provision was a cartel provision by reason of it satisfying a number of alleged purpose conditions, each with a number of corresponding competition conditions. A case pleaded in that kind of way could succeed if only one alleged provision to the CAU was proven for which only one purpose condition and one corresponding competition condition was proven. The issue is whether, on a fair reading, that was what was conveyed by the concise statement, read in the context of the statement of case and (if needs be) the originating application.

95    As an initial observation, it is not readily apparent why the ACCC would ordinarily be taken to be imposing upon itself a requirement that is not imposed by the CCA to prove the existence of more than one cartel provision, by describing two and saying both had to be established. By contrast, it is readily apparent why the ACCC might choose to allege more than one cartel provision and rely upon each or any of them being established. It is any such single provision for which the purpose (rather than purpose/effect) and competition conditions needed to be satisfied in this case.

96    There was some debate as to whether the quid pro quo nature of the alleged attempts meant that this was an all or nothing case. However, upon reflection and reviewing the transcript of the arguments advanced, I am of the view that that while the allegation for all three Pro-Test attempts is that Qteq via Mr Ashton was proposing a quid pro quo of Qteq not competing in a particular way in relation to Pro-Test’s business in return for Pro-Test not competing in a particular way in relation to Qteq’s business, that did not necessarily entail both provisions being able also to meet the purpose condition and a corresponding competition condition. There could be two provisions, both alleged to be cartel provisions, but only one of them being proven to be a cartel provision. This again brings attention back to whether it was clear enough that this was disclosed to the respondents to be the ACCC’s case.

97    I have concluded that the ACCC did not need to prove both alleged cartel provisions to prove each attempt, and therefore did not need to prove the purpose and competition conditions for both provisions. This accords with the preliminary conclusion I indicated at the trial in favour of the ACCC. The effect of that conclusion is felt most strongly on the question of whether the competition condition was satisfied for each attempt, and only in relation to the second provision relating to DST. That is because each alleged Pro-Test Attempt involved two cartel provisions, one related only to gauge works, and one related to DST with gauge works or completions. It was not disputed that Qteq and Pro-Test were in competition in relation to gauge works, and no denial of that condition was raised in the respondents’ concise response so as to take any issue in that respect. Instead, the question of whether the ACCC needed to prove the purpose and competition condition for each cartel provision alleged assumes significance in relation to the dispute about Qteq and Pro-Test being in competition in relation to DST (discussed in the Competition condition section below).

98    It is convenient first to reproduce or refer to the relevant parts of the documents containing the ACCC’s allegations, being the final versions of the originating application, concise statement and statement of case, as well as the respondents’ concise response. The final versions of the ACCC’s documents are all dated 15 September 2023. The paragraphs in question did not change as a result of the amendments that were made, such that it does not matter which version is considered. For that reason, it is not necessary to refer by name to amended versions of these documents.

99    The concise statement relevantly alleges (emphasis added by the combination of bold, italics and underlining, to distinguish this from the emphasis already present in the document):

(a)    at [2]:

In the period between [27 June 2017] and June 2019, Qteq made six attempts either to enter into, or alternatively to induce a competitor to enter into, a contract, arrangement, or understanding containing one or more cartel provisions. In each of those cases, Ashton attempted to induce Qteq’s competitors to enter into the relevant contract, arrangement or understanding.

(b)    at [22]:

The attempts involved Qteq proposing:

22.1    …

22.2    during the course of discussions between Ashton and Dabrowski between [June] and October 2017, including at a dinner on 26 October 2017, an arrangement or understanding with Pro-Test, including a provision whereby Pro-Test would not compete for the supply of gauge works to QGC and Qteq would not compete for the supply of goods or services to Santos Ltd (Pro-Test 2017 Customer Allocation Understanding); [being Attempt #1]

22.3    during the course of discussions between Ashton and Dabrowski, and then Meldrum and Dabrowski, between around 27 October 2017 and 6 November 2017, and by the issuing of a quote from Ramsay to Dabrowski on 10 November 2017, an arrangement or understanding with Pro-Test, including a provision whereby Pro-Test would structure its bid for the QGC gauge works tender so as to win only around 15 percent of the work and Qteq would not compete with Pro-Test for the supply of goods or services to Santos (Pro-Test 2017 QGC Tender Understanding); [being Attempt #2]

22.4    on or around 24 June 2019, during the course of discussions between Ashton and McDonald, an arrangement or understanding with Pro-Test, including a provision whereby Pro-Test would not supply gauge works and Qteq would not supply drill stem testing or completions work (Pro-Test 2019 Market Sharing Understanding); [being Attempt #3]

22.5    …

22.6    …

(c)    at [23]:

Ashton, in his personal capacity, attempted to induce each of the above contracts, arrangements or understandings referred to in paragraphs 22.1 to 22.6 above.

(d)    at [24]:

Each proposed contract, arrangement or understanding referred to in paragraph 22, contained one or more provision(s) having a cartel purpose or purposes, as follows:

24.1    [the purposes, by reference to particular provisions of the CCA, are then identified in subparagraphs 24.1 to 24.6]

100    While it is true that there is some infelicity in expression at [22], in that the use of “and” between the two restraints sought to be imposed as alleged in [22.2], [22.3] and [22.4] may possibly have been read as requiring both to be established if those subparagraphs were read in isolation, they are not to be read in that artificial way, but in context. Paragraph [22] was topped and tailed by [2] and [24], respectively. That is, it was made clear in the second paragraph of the concise statement that the ACCC was making an allegation in relation to each alleged attempt, including relevantly and in particular the three Pro-Test Attempts, by which reliance was placed on one or more cartel provision. Thus, only one such provision had to be proved to be a cartel provision. That did not preclude alleging that a provision was a cartel provision even if that was not ultimately proven. This was reinforced and stated even more starkly and proximately under the heading referring to the primary legal grounds for the relief sought, by the terms of the chapeau to [24], namely that each proposed CAU referred to in [22] “contained one or more provision(s) having a cartel purpose or purposes”. They combine to indicate that the use of “and” in [22.2], [22.3] and [22.4] was to identify two provisions either of which could be proven, or both could be proven. That is, both were alleged, but only one had to be proven.

101    This interpretation of the concise statement accords with common sense and a clear understanding of the terms and structure of s 44ZZRD/45AD. There is no apparent reason for the ACCC to burden itself with having to, as opposed to endeavouring to, prove that both provisions were cartel provisions. That said, it undoubtedly would have been better and clearer for the ACCC to avoid this issue arising in the first place by using “and/or” between the two cartel provisions alleged in [22.2], [22.3] and [22.4]. But such counsel of perfection is not required provided there is sufficient clarity on an overall reading of the concise statement, aided or reinforced by (but not expanded by) the terms of the originating application, and, more importantly, the statement of case.

102    This interpretation of the concise statement is also consistent with the originating application for Attempt #1 and Attempt #3, but less so for Attempt #2. For Attempt #1 and Attempt #3, the declaration sought refers to “provisions” in the plural form, and does not include any suggestion of conjunction by the use of an “and” between them. For Attempt #2, the declaration sought refers to “provision” in the singular, but again does not include any suggestion of conjunction by the use of an “and” between the two aspects. In my view, a fair reader would more likely regard the singular “provision” for Attempt #2 as a typographical error. Overall, the originating application supports the interpretation I have given to the concise statement, but again it would have been better for this to have been more explicit.

103    The respondents’ concise response, dated 7 March 2023, prior to the initial version of the ACCC’s statement of case dated 2 May 2023, was apparently carefully drafted, and done so in a way that did not overtly expose this issue, in that:

(a)    At [2] it is stated:

In response to paragraph 2 of the Concise Statement, the Respondents deny that they made any attempts to enter into, or induce a competitor to enter into, a contract, arrangement or understanding containing a cartel provision.

(b)    At [37] it is stated:

Qteq denies making any of the attempts alleged in paragraph 22 of the Concise Statement.

(c)    At [38] it is stated:

Mr Ashton denies attempting to induce any of the understandings or agreements alleged in paragraph 22 of the Concise Statement.

(d)    There is no pleading to the chapeau to [24], but only to the subparagraphs.

104    The ACCC’s written articulation of its case did not stop with the concise statement. It voluntarily provided a statement of case, reinforced by a procedural order to provide it, to which no response was required. This enabled any concerns held by the respondents to be addressed. While a letter in response was provided by the respondents, which resulted in some amendments, there was no evidence that there was any reaction to the following relevant parts of the statement of case which in plain terms reinforces my interpretation of [22.2], [22.3] and [22.4] of the concise statement provided by [2] and [24] of that document:

(a)    In relation to Attempt #1, [55]-[58] describe the alleged conduct, which includes articulating what Mr Ashton is alleged to have proposed, and [59]-[67] describe the alleged contraventions. Paragraph 62 makes it abundantly clear, by express words, that the attempted understanding, if arrived at, would have contained “one or more cartel provisions” within the meaning of s 44ZZRD(1), going on to list ways in which the purpose and competition conditions were met. The phrase “one or more” is repeated for the purpose condition, but not for the competition condition. This is a reflection of the available competition conditions in s 44ZZRD(4) not being abstract requirements, but rather, as relevant here, expressly tethered to the purpose condition in s 44ZZRD(3). Once the case involved one or more purpose conditions, correspondingly there had to be one or more competition conditions.

(b)    The same reasoning applies to Attempt #2 (especially via [77]) and Attempt #3 (especially via [88]).

105    I am comfortably satisfied that the concise statement in its own terms at [22.2], [22.3] and [22.4], when read with [2] and [24] of that document, makes it sufficiently clear that the ACCC’s case was that each of the three Pro-Test Attempts was alleged to have included two provisions, and that the proof of either one, or both, as a cartel provision was to be relied upon. This conclusion would have been more finely balanced, if consideration had been confined to the concise statement, but I would still have arrived at this conclusion. However, I am fortified in this conclusion because this interpretation is supported, and the necessary provision of procedural fairness to the respondents is made more clear, by the terms of the originating application, and supported even more strongly by the statement of case. It follows that I find in favour of the ACCC on this pleading issue, and therefore necessarily refuse the application for a s 136 restriction on the evidence adduced on these three attempts. I have not made any formal order to this effect, but would be willing to do so if this is sought to be taken further and such an order is necessary.

Witness testimony

106    I commence the consideration of the evidence for the Pro-Test Attempts with a general assessment of the witnesses who were called by the ACCC, and an evaluation of the impact of the witnesses who were not called by the respondents, starting with the latter because it informs the assessment of the former.

Mr Ashton and Mr Meldrum

107    The affidavits of the key prospective witnesses for the respondents, Mr Ashton and Mr Meldrum, though included in the Court Book, were not read. Neither man gave evidence, despite:

(a)    the considerable body of evidence adduced by the ACCC about what they had said and done, especially Mr Ashton; and

(b)    significant reliance being placed upon the filed evidence that was not read in the respondents’ opening written submissions (and in the ACCC’s opening submissions).

108    The respondents did not provide a witness alternative to the accounts given by Mr McDonald and especially by Mr Dabrowski, relying instead upon their cross-examination and other documentary evidence to challenge the ACCC’s case.

109    The respondents did not offer any explanation for not calling Mr Ashton or Mr Meldrum. Nor did they resist the ordinary and natural adverse inference being drawn from the absence of that evidence in accordance with established authority, that their evidence would not have assisted their case. However, they did emphasise the well-known limitations in drawing such an inference, especially that the absence of evidence does not become evidence of the opposite. The respondents’ decision not to adduce their evidence was an understandable forensic choice, given the wealth of evidence on which each was likely to have been cross-examined, especially for Mr Ashton.

110    The seminal High Court decision on the drawing of such inferences, Jones v Dunkel [1959] HCA 8; 101 CLR 298, at 320-321 (Windeyer J) quoted with approval the statement of principle in the then current edition of Wigmore on Evidence. As the careful application of that principle is of some importance in this case, those adopted, approved and much-applied principles bear repeating:

The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which made some other hypothesis a more natural one than the party’s fear of exposure. But the propriety of such an inference in general is not doubted.

111    The respondents did not suggest I could not, or should not, draw the natural Jones v Dunkel inference that Mr Ashton and Mr Meldrum were not called to give evidence because, on balance, it would not have assisted their case overall. However, the available reasoning process goes somewhat further than that as has been addressed in many cases since Jones v Dunkel. As noted with particular clarity in Weissensteiner v The Queen [1993] HCA 65; 178 CLR 217, in a passage of general application despite arising in a criminal proceeding, Mason CJ, Deane and Dawson JJ said at 227:

… it has never really been doubted that when a party to litigation fails to accept an opportunity to place before the court evidence of facts within his or her knowledge which, if they exist at all, would explain or contradict the evidence against that party, the court may more readily accept that evidence. It is not just because uncontradicted evidence is easier or safer to accept than contradicted evidence. That is almost a truism. It is because doubts about the reliability of witnesses or about the inferences to be drawn from the evidence may be more readily discounted in the absence of contradictory evidence from a party who might be expected to give or call it.

112    The respondents cautioned against applying the reasoning in Weissensteiner, because unlike that case, this was not a case involving information peculiarly known to either Mr Ashton or Mr Meldrum. While that is true in significant respects, it is far from universally true, and in any event that is not the limit of the principle stated in the passage from Weissensteiner reproduced above. The express reasoning available to be applied is that doubts raised about the reliability of witnesses called by the ACCC, namely Mr McDonald, and even more importantly, Mr Dabrowski, may be more readily dispelled when not contradicted by the most obvious source, such as the counterparty to important communications; and available inferences may more readily be drawn. That said, not every aspect of the evidence of Mr McDonald and Mr Dabrowski was capable of being contradicted by evidence, as opposed to ordinary challenge by cross-examination. Those aspects of evidence must be evaluated without that assistance.

113    Whether Mr Ashton did or did not make the statements attributed to him by Mr Dabrowski and Mr McDonald is foundational to the ACCC’s case for all three Pro-Test Attempts – Attempts #1, #2 and #3. The relevance of the evidence that Mr Meldrum could have given was likely to have been limited to Pro-Test Attempts #1 and #2.

114    It is with the application of the rule in Jones v Dunkel, and also applying the additional reasoning in Weissensteiner reproduced above, that I turn to the evidence of Mr Dabrowski and Mr McDonald.

Mr Dabrowski

115    Mr Dabrowski joined Pro-Test from Welldog as an Engineering Manager in 2014. He became Pro-Test’s General Manager in 2016. In 2017, and at all other times relevant to this proceeding, he was an Executive Director of Pro-Test reporting directly to the board of its parent company. This was especially so with Mr McDonald stepping back from Pro-Test’s day-to-day operations in this period. At the time Mr Dabrowski gave evidence at the trial, he had left to become the chief operating officer for OnSpec DAQ, a company that is owned by a related entity to Pro-Test, or at least was in the process of being acquired at the time that Mr Dabrowski and Mr McDonald made their statements.

Motivation for reporting Qteq to the ACCC

116    The substance of the respondents’ central contention going to credit and reliability is an allegation that Mr Dabrowski had reported what he said had taken place to the ACCC in order to intimidate or take revenge against Qteq for legal claims it brought against Pro-Test in 2020. This allegation carries with it at least an implied suggestion that Mr Dabrowski’s allegations were, to his knowledge, false, and that his account44 of them in evidence was of the same character. It certainly was relied upon to cast doubt on his credibility. The evidence relied upon to impeach his evidence collaterally in this way requires careful consideration.

117    On 28 July 2020, Qteq’s lawyers sent a letter addressed to the directors of Pro-Test, and also addressed to the email addresses of Mr McDonald and Mr Dabrowski, alleging that four of its former employees who had become employees of Pro-Test had infringed Qteq’s intellectual property rights and misused its confidential information. The letter stated that those former employees had also been written to separately, enclosing copies of those letters. Mr Dabrowski was taken to that letter in cross-examination and asked to respond to the suggestion that he had been concerned about the allegations. He responded by saying that he had not at all been concerned and did not think they would be hard to refute, a stance he repeated in later parts of his cross-examination.

118    Mr Dabrowski said in cross-examination that, until he was later confronted with evidence provided by Qteq’s lawyers to the contrary, he believed that Pro-Test had not copied Qteq’s confidential information for its training manual on PDHG installation. Even after later seeing evidence of such copying – which he described as annoying because it could so easily have been avoided – he only thought Qteq’s claims had limited substance. At the time he gave oral evidence, he maintained that he did not understand why the training manuals that had been copied were confidential information given they were disseminated broadly through the industry and had been inherited by Qteq from Farley Riggs through Welldog in the first place. He also said that he saw no problem with Pro-Test employing the four former Qteq staff as he had received legal advice that the restraint clauses in the Qteq employment contracts would not be applicable to the staff they hired, due to their lack of knowledge of intellectual property, absence of contact with Qteq clients and employment level. He viewed Qteq’s objection to their employment as hypocritical as it had hired staff from Pro-Test.

119    Mr Dabrowski said in a portion of his 20 May 2021 witness statement which was read to him that he considered Qteq’s claims to be “unfounded”. The respondents contend that that portion of Mr Dabrowski’s statement is inconsistent with his evidence in this Court. I do not agree. The burden of his evidence was that the decision by Pro-Test to settle with Qteq was a commercial one, rather an admission of liability, at least of any real substance. He went no further than to concede that a relatively confined and technical breach of copyright might have occurred in copying some of the text from the training materials that Qteq had inherited. He said that Pro-Test had paid to have those materials re-written with the help of a consultant. An attempt to have him recant on this evidence by reference to a document that was shown to him in accordance with the procedure dictated by s 44 of the Evidence Act failed.

120    Mr Dabrowski in cross-examination was also taken to a chain of three emails he had sent to himself on 29 July 2020, the day after he received the letter from Qteq’s lawyers. Those emails recorded his thoughts about the allegations made in that letter and about a dinner meeting he had with Mr Ashton and Mr Meldrum. They included notes of the meeting in which he described them as engaging in anti-competitive conduct. In evidence he said that he thought this comment might have been based on something that Mr Richard Duffy (Pro-Test’s Chief Operating Officer) had said to him about what to watch out for, rather than being a reflection of his own understanding of competition law at the time. He stood by a statement in a supplementary affidavit to the effect that he had not appreciated that something Mr Ashton had said on 26 October 2017 (at the Kinglsey’s dinner – discussed in relation to Attempt #1 below) might be against the law until November 2020.

121    Mr Dabrowski’s consistent account is that he had contacted the ACCC as a defensive measure for Pro-Test, which did arise out of the 28 July 2020 letter, but not in the way that the respondents contended. He said in cross-examination that at some point in November 2020, Pro-Test sought legal advice in relation to the claims brought by Qteq, after initially considering them to be baseless. He later found out that there was some limited foundation for aspects of the copyright allegations. That advice raised, to Mr Dabrowski’s way of thinking, the possibility that Pro-Test could be legally liable for anti-competitive conduct due to Mr Dabrowski’s role in conversations with Mr Ashton, described in more detail below. On Mr Dabrowski’s account, there was a concern at Pro-Test that Qteq wanted to “take us down by any means possible”, and he had contacted the ACCC to seek immunity for a potential allegation of anti-competitive conduct. This is consistent with his initial email to the ACCC’s cartel immunity email address on 2 December 2020, which reads in part:

My call [to the ACCC cartel immunity hotline] was in relation to applying for immunity in regard to involvement in cartel behaviour. However, I note that I’m unsure whether I have indeed engaged in this behaviour so the application for immunity is a preventative measure at this point in time.

122    In his evidence in cross-examination, Mr Dabrowski referred several times to the conditions for Pro-Test receiving immunity, which required him to be truthful and cooperative with the ACCC. Because the ACCC found that Mr Dabrowski and Pro-Test had not breached the CCA, ultimately neither was given immunity. I infer that he was likely referring to conditions of achieving what is known as a “marker” from the ACCC, being a very well-known regulator designation for a person who reports cartel conduct first, and is thereby given priority, if not exclusivity, for any grant of immunity. Such a person may then then be eligible for conditional immunity if they have breached the CCA and provide sufficient information to the ACCC in its investigation: see the publicly available ACCC immunity and cooperation policy for cartel conduct (October 2019) p. 11 [47]-[55].

123    Mr Dabrowski also gave evidence in cross-examination that he was concerned throughout the investigation process that he or Pro-Test would be charged for cartel conduct. The burden of his evidence was that this situation was not good for anyone, that he thought he would be defending a case next to the respondents, and that the grant of immunity would not help Pro-Test’s business.

124    The dispute between Qteq and Pro-Test arising from the claims made in the 28 July 2020 letter was settled in March 2021. It is apparent on all the evidence that this was a commercial dispute calling for, and resulting in, a commercial resolution. I am unable to accept that this letter or the allegations contained within it came close to establishing a credible malign and discreditable reason for Mr Dabrowski’s reporting of allegations of anti-competitive conduct to the ACCC, much less that this in any plausible way vitiated or even qualified the veracity of what he reported. Suggestions or allegations to this effect were not shown to be of substance, and I did not find this approach to impeaching his credit persuasive. The strength or otherwise of Mr Dabrowski’s evidence stands or falls on its own terms, unaffected by this commercial dispute, since no impropriety in conduct or motive in reporting the allegations to the ACCC has been established.

125    There was also an attempt to make something of the fact that part of Mr Dabrowski’s employee key performance indicators (KPIs), from his March 2021 KPI plan, related to:

(a)    ensuring Pro-Test’s compliance to achieve a marker from the ACCC in its cartel investigation; and

(b)    avoiding a trial in relation to legal action and ensure compliance with any settlement obligations.

Mr Dabrowski’s evidence was that only a small per cent of his overall bonus was tied to these KPIs. I am not persuaded that this circumstance affected the veracity of his testimony.

126    It is also difficult to find any support in the timeline of events for the respondents’ narrative that Mr Dabrowski was trying to intimidate Qteq out of its claims against Pro-Test. By the time Mr Dabrowski gave his first statement to the ACCC in May 2021, Pro-Test had already settled Qteq’s claims, signing a settlement deed in March of that year. No evidence suggested that Qteq was made aware that Mr Dabrowski had approached the ACCC until it first contacted Qteq in relation to its investigation much later. There is no evidence that any Pro-Test representative had approached Qteq and indicated that they might report the company or Mr Ashton to the ACCC. It therefore rings true that the real motivation for Mr Dabrowski in reporting the conduct of Qteq and Mr Ashton to the ACCC was the conventional one – the wisdom of being the first to report and receiving protection if his or Pro-Test’s conduct was found to be illegal by the ACCC (which it ultimately was not). That accords with the evident enforcement strategy underpinning the ACCC’s immunity policy. Moreover, on Mr Dabrowski’s evidence, this fear only arose because Pro-Test became worried that Qteq would go after it in any way possible.

127    This conclusion does not entail finding that Mr Dabrowski was never frustrated with Qteq, or that he never considered trying to intimidate Qteq out of pressing its allegations. The respondents referred to an email from Mr Dabrowski to Mr Duffy and Mr McDonald in relation to Qteq’s claims, where he proposed trying to settle the claim or:

arming ourselves with additional information to intimidate them (collusion for QGC tender, anti[-]competitive nature of gauge supply, demonstration of QGC requirement to train rig crews, paper copies of SOPs submitted in the tenders showing they differ from Qteq docs, defamatory comments to staff and clients).

128    Mr Dabrowski accepted that he had suggested intimidating Qteq, but “with the truth”, because:

I thought all those things were the truth, and I thought once they heard that they may not be as excited about suing us. … Fortunately, I had Daryl [Stilwell] and we also had Richard Duffy in there. So it was a very short moment, and I didn’t even remember sending that [email], to be honest.

129    In this context, this suggestion by Mr Dabrowski can be fairly characterised as no more than a passing thought, made in what he clearly found to be a frustrating situation. There is no evidence that he had in fact at any time suggested to Qteq that he may report it to the ACCC, so as to implement any plan of intimidation, much less that he had contemplated making any allegation that he knew to be false or did not believe to be true.

Relationship with Mr Ashton and Qteq

130    Mr Ashton and Mr Dabrowski first met when Mr Dabrowski worked at Welldog, between 2011 and 2014, where he was an employee and Mr Ashton a shareholder. Mr Dabrowski’s evidence is that, while he worked at Welldog, they usually met at functions during this period, not one-on-one. In 2014, Mr Dabrowski moved to Pro-Test and the two men apparently kept in contact.

131    Mr Dabrowski gave evidence that, in the period from June 2017 through to December 2017, he spoke semi-regularly with Mr Ashton, in some periods almost daily, largely by text or in person when Mr Ashton was in Brisbane. He did not specify any dates on which this occurred. His evidence was that the two of them got along “really really well”, that he liked Mr Ashton and enjoyed hanging out with him, and that he thought Mr Ashton felt similarly towards him. He gave evidence that Mr Ashton said that he saw a lot of his younger self in Mr Dabrowski.

132    The respondents contend that Mr Dabrowski’s testimony is motivated by animus for Mr Ashton and Qteq, and presumably for that reason should not be accepted or regarded as reliable. The grounds for that are thin. Mr Dabrowski accepted that he had been frustrated with Mr Ashton around the time he gave statements to the ACCC, but gave a more moderate and plausible assessment of their relationship. In response to the suggestion that, when he had made his statement in May 2021, he had not seen Mr Ashton since the previous November because their formerly close relationship had soured, he responded convincingly:

It definitely wasn’t what it was. I mean, I still – I still quite like Simon throughout it all… I – I don’t know about “soured”. I mean, he – it was different. If he – you know what, if he – even last year, if he asked me for a beer, I would have a beer with him. I have no problems with that; all right? Like, it’s a small industry. The truth is, is we can do this now, but we’ve got to go back to our day jobs. It’s a small industry; it’s tough. It’s no point in having long-lasting feuds with people. It just isn’t. Literally, next – tomorrow, I’m meant to be in with Ewan Meldrum in that Safer Together leadership group. And no one in there would know this is happening if they didn’t know. We’re very professional; we have to front up, and we have to do the right thing for the industry. So, you know, I don’t – I don’t believe in grudges; they serve no purpose.

Alleged inconsistencies in Mr Dabrowski’s account

133    The respondents submit that several inconsistencies in Mr Dabrowski’s account undercut his credibility. None were persuasive, and they can be dealt with quickly.

134    First, the respondents submit that Mr Dabrowski had given conflicting accounts as to when he realised that Mr Ashton’s statements might have been anti-competitive and illegal. The two characterisations should not be conflated because the existence of the former does not necessarily result in the latter conclusion, a distinction of some importance. They point to the fact that, in his 20 May 2021 statement, Mr Dabrowski states that he thought proposals made by Mr Ashton in April to October 2017 might be “anti-competitive”, but in a later supplementary statement that “I did not appreciate that what Ashton had said might be against the law until November 2020”. The earlier statement does not state that Mr Dabrowski thought the proposals were anti-competitive in the sense that they could, even if not acted upon, amount to a contravention of the CCA, or indeed the law more generally. In Court, Mr Dabrowski explained that he had thought Mr Ashton’s proposals “didn’t feel right, and it was anticompetitive”, but later in 2020 in discussions with lawyers “thought … this could not be legal, as opposed to not feel right”. Mr Dabrowski drawing this important distinction is credible and has a ring of truth. It just happens to be legally sound as well.

135    Second, the respondents submit that Mr Dabrowski’s statement in cross-examination that he was not familiar with the details of Firetail’s business was false because Pro-Test had been interested in acquiring Firetail in 2020. It is clear on the evidence that Mr Dabrowski did understand key aspects of Firetail’s business. However, he said he did not know its details, and that it is unclear on what basis the respondents assert that due diligence must have been conducted by Pro-Test on Firetail. Mr Dabrowski could not recall Pro-Test being interested in purchasing Firetail, but did not deny it, and said that he had a number of conversations with Firetail’s managing director, Mike Wayne, over the years.

136    Third, the respondents’ attack Mr Dabrowski’s credit based on the fact that he recalled further information over the course of cross-examination. This was a particularly weak ground for impeachment: that a witness recalls further facts over the course of cross-examination is not, in and of itself, remarkable. To the contrary, it is commonplace.

137    Fourth, the respondents also submit that Mr Dabrowski’s evidence in cross-examination that the QGC gauge tender did not specify the gauge required was inconsistent with his prior statements to the ACCC. Mr Dabrowski’s evidence was that the earlier statements reflected his understanding that it was a requirement, given the specifications for the gauge, even though the actual gauge was not specified. His oral evidence clarified that. I do not accept the contention that this is an inconsistency that undercuts his general credibility.

138    The respondents made several other suggestions that Mr Dabrowski’s evidence was internally inconsistent, or inconsistent with other evidence. These are best addressed in discussion of the evidence going to Attempts #1 and #2.

Business dealings

139    Something was also made by the respondents of the fact that Mr Dabrowski had, in his words, told “mistruths” in business dealings with GeoPSI. Mr Dabrowski’s evidence was that he had, on occasion, misled GeoPSI when it made inquiries about Pro-Test’s need for its products, telling them the numbers of gauges required for jobs that he knew would come to fruition even if they had not been formally ordered. His explanation was that he was concerned that GeoPSI would pass on information he provided to Qteq, due to their close relationship. I acknowledge the candour of that admission, and do not think that this rational protection of Pro-Test’s business interests in this way had the effect of undermining his credibility more generally.

Lack of contemporaneous records

140    Finally, the respondents submit that Mr Dabrowski’s credibility is undercut by the lack of contemporaneous records of his conversations with Mr Ashton in 2017. His evidence was that he believed that he had made high level notes of some of his meetings with Mr Ashton at the time, but that he’d been unable to find such notes in the course of the ACCC’s investigation, perhaps because they had been lost in a move from Adelaide to Brisbane. I accept this as a plausible explanation. It did not detract from the quality or reliability of his testimony. The lack of notes meant that the assessment of this aspect of his testimony depends upon the usual means of carrying that out, which turns on not just the way in which it was relayed given the well-known limitations and dangers in reliance on demeanour, but also on supporting documents and the logic and sequence of events.

Conclusion on Mr Dabrowski’s credibility

141    The attempts by the respondents to challenge Mr Dabrowski in cross-examination were largely unsuccessful, including, but not confined to, those aspects addressed above. Contrary to the attack made on him in cross-examination and in closing submissions by the respondents, I found that Mr Dabrowski was an intelligent, impressive and credible witness. He was somewhat garrulous and prone to volunteer information that was not strictly responsive to the question being asked, but that did not detract from his positive attributes to any marked degree. I found him to be candid in that he was willing to admit mistakes and correct errors. He gave detailed and credible explanations for what he had said and done, including aspects which did not reflect well on his conduct. For example, he agreed that an attempt to obtain an internal email from Qteq via one of their former staff now working for Pro-Test was a terrible idea and that he would take it back if he could. I am confident he is a witness of truth upon whom considerable reliance can be placed in most respects.

Mr McDonald

142    Mr McDonald was the founding director of Pro-Test. Unlike Mr Dabrowski, he does not appear to have been close to Mr Ashton. Mr McDonald’s evidence was that he had probably met Mr Ashton at an industry event, and that he had not met with him one-on-one until 2019, when the two met for dinner at the Port Office Hotel in Adelaide. My impression of Mr McDonald was that he was a careful, reserved man, more likely to understate than overstate an event, conversation, or other communication. He was thoughtful and deliberate, with a tendency to be quite literal, which means that his evidence warrants close attention to avoid reading too much or too little into it. The challenge to his evidence directly focused on reliability, and how far it went, rather than any suggestion of dishonesty of any kind. The respondents challenged his testimony predominantly on the basis of the weakness of his recollection in certain respects. As his testimony is the only substantive evidence of Attempt #3 involving Pro-Test, those submissions are addressed in full below. Overall, I was not of the view that Mr McDonald’s reliability was successfully impugned to any substantial degree. The main challenge with his evidence is assessing how far it actually went, in the context of contemporaneous documentary evidence, as well as its impact on how that documentary evidence should be understood.

Attempt #1: The Pro-Test 2017 Customer Allocation Understanding

143    This is an allegation that Qteq attempted to, or attempted to induce Pro-Test to, make an arrangement or arrive at an understanding containing one or both of the following cartel provisions:

(a)    Pro-Test would not compete with Qteq for the supply of gauge works to QGC; and

(b)    Qteq would not compete with Pro-Test for the supply of any of the goods or services that Pro-Test supplied to Santos (including gauge works and drill stem testing).

The ACCC also alleges that Mr Ashton attempted to induce Pro-Test to arrive at that understanding.

144    The attempt is alleged to have taken place through a series of conversations between Mr Dabrowski and Mr Ashton, and by statements made by Mr Ashton at a dinner at Kingsley’s restaurant in Brisbane attended by both men and other representatives from Pro-Test and Qteq on Thursday, 26 October 2017 (the Kingsley’s dinner), two days after the release of the QGC gauge tender on Tuesday, 24 October 2017. The ACCC relies in large part on Mr Dabrowski’s evidence in proving both this attempt and the next attempt.

145    On the respondents’ case, Mr Dabrowski’s evidence is unreliable and inconsistent with contemporaneous evidence that Qteq and Pro-Test were in discussions regarding the supply of GeoPSI gauges from Qteq to Pro-Test, and the supply of a newly developed automatic diverter valve (ADV) system by Pro-Test to Qteq, for use in the QGC gauge tender.

Background

The QGC tender package release – 23 and 24 October 2017 – 23 and 24 October 2017

146    The following is not only relevant to this attempt and the following Pro-Test attempts, but provides important context to the Easternwell Attempts. On 23 October 2017, QGC released to workover rig service providers an invitation to tender for the supply of workover rigs and associated services for its CSG wells in the Surat Basin (the QGC rig tender). The next day, on 24 October 2017, QGC released four invitations to tender for the supply of components and services for the Artificial Lift System (ALS) used in its CSG wells in the Surat Basin. The tenders were for:

(a)    permanent down-hole gauges (PDHGs) for workovers and initial completions (the QGC gauge tender);

(b)    progressive cavity pumps (PCPs);

(c)    sucker rods; and

(d)    ADVs.

147    These and other technical terms are explained at [80] above.

148    The Pro-Test Attempts, and in particular Attempts #1 and #2 are concerned with the QGC gauge tender. Both Qteq and Pro-Test were on the invitation list for this tender.

149    The QGC gauge tender, on the evidence about it considered below, was to say the least unusual. It divided its scope of work into three stages, to be implemented in full over a 12-month period:

(a)    Initial set-up: The winner of the QGC gauge tender (the gauge contractor) would supply PDHG installation services, specifically, two-men crews and handling equipment (including spooler, sheaves and toolboxes package) until the crews had built up enough knowledge in QGC’s operations to move to the second set-up.

(b)    Second set-up: The gauge contractor would provide one-man crews with the assistance of rig crews from the winner of the QGC rig tender (the rig contractor) to run gauge downhole. This stage would require the gauge contractor to implement a strategy to train the rig contractor in gauge installation services, with the gauge contractor still providing handling equipment. QGC hoped this stage would be reached within six months of signing the QGC gauge tender contract.

(c)    Final set-up: The gauge contractor would no longer provide personnel (referred to in some evidence as down-manning to zero person crews), with installation services being taken over by the rig contractor. The gauge contractor would only provide equipment and hold liability of the gauges. The gauge contractor would need to provide the gauges, and a plan would need to be provided to QGC to understand how the competency of the rig contractor’s personnel in installing gauges would be tracked and monitored. QGC hoped that this set up would be reached within 12 months of signing the QGC gauge contract.

This description is drawn from the description of work in the QGC gauge tender, supplemented by further information provided by QGC at a tender briefing session on 30 October 2017, as recorded in notes made by Mr Meldrum.

150    Mr Dabrowski gave evidence that the QGC gauge tender was unique in that the scope of work would initially expand, with more rigs added for which gauge installation services were required, then narrowed, as the gauge installation services work was taken over by the rig contractor’s personnel, as reflected in the summary of the second and final set-ups above. There was no suggestion that his evidence was unreliable in this respect. The overall effect was that the gauge contractor would first be required to maintain the status quo, providing two-men crews and handling equipment for the rigs, then shifting to one-man crews and then, within 12 months of the tender award, transitioning to unmanned crews with the gauge contractor supplying only equipment.

151    That is not to say that this procedure proposed for the gauge contract was set in stone at the time of the tender’s release. A QGC internal tender evaluation document dated 30 May 2018, indicates that while it was set on transitioning the gauge contractor’s crews from two person to one person, the decision to transition to zero-man crews would be based on weighing the cost savings of that step with other factors. The document estimated the cost savings of moving to zero-man crews to be $9 million. This document discloses QGC’s intention, dependent upon feasibility and economics, to transition the two-person gauge contractor crews to zero-man crews, but it must be noted that such an outcome was not certain at that time and thus Qteq remained a likely competitor in relation to gauge installations.

152    Qteq was the incumbent PDHG services provider for QGC, the QGC gauge supply contract with Welldog having been novated to Qteq following Welldog’s insolvency in 2017. Prior to the release of the QGC tender package, Mr Meldrum had emailed Mr Martin Gallagher of Shell, copying in Mr Ashton, to propose for Qteq to retain 85% of the current downhole gauge work with QGC and for tendering to take place for the remaining 15%. The response the next day was that QGC remained committed to the tender, and therefore Qteq’s suggestion was not supported.

153    Qteq had an additional advantage in relation to the QGC gauge tender. On 20 September 2017, just over a month before the release of the tender, Qteq had entered into a memorandum of understanding with GeoPSI whereby it secured exclusive access to GeoPSI’s gauges for use in the QGC tenders. It was not in dispute that GeoPSI gauges were the predominant gauge in this market, as well as the incumbent gauge used by QGC.

154    There were some questions, however, as to whether QGC would accept tenders that included PDHGs that were not from GeoPSI. It was not contentious that the invitation to tender and attendant scope of work did not specify that as a requirement. However, it was Mr Dabrowski’s evidence that the tender’s specifications for PDHGs “read like” the GeoPSI specifications – indeed, he recalled saying at the time that it was almost a carbon copy. Rather than specifying that GeoPSI gauges had to be used per se, what had been specified was a key feature of the GeoPSI gauge (described by Mr Dabrowski in his oral evidence as a criterion). His view was that it would be difficult for bids with alternative gauges, as they would need to be “very compelling” to succeed. This is addressed further in relation to Pro-Test Attempt #2.

155    The significance of the tender for both Qteq and Pro-Test as revealed in the evidence is of some importance, especially in establishing Qteq’s and Mr Ashton’s motive for the alleged attempt. Mr Dabrowski gave uncontradicted and largely unchallenged evidence, repeated several times, that Mr Ashton had said that retaining the QGC gauge contract was crucial for Qteq. Mr Dabrowski’s evidence, in response to a direct question in cross-examination about one iteration of this evidence, was that Mr Ashton had said Qteq were still developing their business lines, and that while Mr Ashton’s ambition was to branch out into a range of other technologies within the industry, most of Qteq’s income derived from its gauge work. As part of his answer, Mr Dabrowski said Mr Ashton implied that, if Qteq lost that work, it would potentially spell the end of Qteq, because most of its income came from the gauge part of their business and in turn most of that work came from QGC. The respondents do not contest the idea that the contract was very important for Qteq. However, although they embraced this obvious fact given Qteq’s status as the incumbent supplier, they effectively said that it stopped there and that this had not compelled them to make the attempts.

156    The immediate problem with this stance is that, in substance, it entailed asking the Court to accept Mr Dabrowski’s evidence on this topic only up to a point, but reject the parts deposing to the conversations with Mr Ashton which contained the substance of the alleged attempt. This approach is problematic in a context where there is no evidence from Mr Ashton to support cutting off or severing the evidence in the way that the respondents contend. I see no logical or otherwise compelling reason for desiccating Mr Dabrowski’s evidence in this way. While part of a witness’s evidence can be accepted and other parts rejected, there needs to be a coherent reason for doing so; yet I was unable to discern any such reason and none was clearly advanced. To the contrary, Mr Dabrowski’s evidence was a coherent and logical whole, readily able to be accepted in that way with, at most, limited reservation or qualification.

157    Mr Dabrowski’s evidence as to the QGC gauge tender’s importance for Qteq is echoed in Mr Ashton’s admissions in an examination conducted under s 155(1)(c) of the CCA (s 155 examination). He described the gauge contract as important for Qteq and it being a significant source of revenue for the company. He estimated that, at the time, more than 50% of the gauge work Qteq undertook was for QGC.

158    This is further supported by internal communications about Qteq’s future business strategy that occurred over email in the lead up to its incorporation. An email regarding plans for the Qteq business (though not yet going by that name), sent on 1 June 2017 by Mr Ashton to Mr Meldrum and others, refers to the existing QGC gauge contract as “a foundation asset that we must guard jealously and protect vigorously.” In an email describing the strategic goals of Qteq (at that point going by the name “Q Serv”), sent on 17 June 2017, Mr Ashton identifies securing the QGC gauge tender as a priority. In a reply sent the same day, Mr Morgan agrees: “To be iron-clad also, we need to win the QGC contract, as to loose [sic] this jeopardises, if not voids, all subsequent aims - the entire edifice collapses as you have made clear below. Securing exclusivity with GeoPSI will greatly help to neutralise/weaken competitive threats for this contract.” Those communications show the states of mind of Mr Ashton and senior figures at Qteq shortly before its incorporation. The email contains plans for how the company would operate after its incorporation, and is consistent with Mr Ashton’s admissions (described above) and an email sent by Mr Meldrum to Mr Ashton and other Qteq staff on 15 February 2018, describing the QGC gauge tender as “key” to several other goals that Qteq had and a “must win!!”. I readily infer that this state of mind continued after Qteq’s incorporation and thereby became part of its state of mind.

159    Further, as to the importance of the QGC gauge tender to Pro-Test, Mr Dabrowski gave evidence that Pro-Test had a reasonable idea of the key contracts in the industry and when they were likely to expire, and specifically knew that the QGC gauge works contract was coming up for tender. He could not recall whether Pro-Test was aware that the ADV contract would be up for tender, noting that at the time they were seen as a trial product which was often not included in a formal tender, a point to which I return. He resisted suggestions in cross-examination that the QGC gauge tender was a key tender for Pro-Test, saying that the bulk of its work, which was in completions, was not won through tender processes. His evidence, which I see no reason to reject is that, at that time, Pro-Test had not won a gauge works tender, and there were no high expectations that it would win this contract.

160    Based upon the foregoing, I find that the QGC tender was critical for Qteq, but not critical for Pro-Test. This is important when it comes to assessing the likelihood that Qteq, especially via Mr Ashton, and Mr Ashton himself, engaged in the illegal cartel conduct alleged. Economic need of this kind, especially if perceived to be existential in nature, is a powerful motivator, and provides contextual support for drawing inferences in favour of a conclusion that such conduct had taken place as Mr Dabrowski deposed to. Correspondingly, due to the contract’s relatively minor commercial significance for Pro-Test, I find it difficult to accept the respondents’ contention that Qteq’s conduct frustrated Mr Dabrowski to an extent that impugned his credibility as a witness.

Relationship between Pro-Test, Santos and Origin

161    Pro-Test’s relationships with the energy companies Santos and, to a lesser extent, Origin Energy Ltd, have some relevance to Pro-Test Attempts #1 and #2. Mr Dabrowski’s evidence, which is unchallenged in this respect, is that in 2017 Pro-Test performed gauge work, completions and DST work for Santos, and DST completions and limited data acquisition gauge work for Origin. A tender for Santos was to be released in late 2017, before the QGC tenders, and in mid-2019. An Origin tender was to be released in 2017 as well.

Conduct

Discussions between Mr Ashton and Mr Dabrowski – June to October 2017– June to October 2017

162    Mr Dabrowski gave evidence that, due to his closeness with Mr Ashton, Mr Ashton spoke “very frankly” with him in the lead up to the QGC tenders’ release. Mr Dabrowski’s evidence was that, in conversations over this period, Mr Ashton discussed:

(a)    the prospects of Pro-Test and Qteq working together;

(b)    the prospects of the “little guys” banding together to take on the “big guys” – referring in that respect to larger companies in the same industry, such as Schlumberger NV and Weatherford International plc – the context to this is that Mr Ashton had previously worked for a bigger company and liked the idea of being able to pull together smaller companies again and potentially do an IPO (initial public offering) one day;

(c)    the possibility of Mr Ashton hiring Mr Dabrowski, which led to Qteq making an offer to Mr Dabrowski for the position of Qteq’s Commercial Manager in late August 2017, which he declined; and

(d)    most significantly for present purposes, the fact that it did not make sense for Pro-Test to go after Qteq’s gauge work and for Qteq to go after Pro-Test’s DST work, as everyone would lose because it would lead to a race to the bottom in prices, and that Qteq would not target Pro-Test’s clients if Pro-Test did not pursue the upcoming QGC gauge tender.

163    I accept Mr Dabrowski’s evidence, as far as it goes given the lack of precision as to timing, that conversations took place between him and Mr Ashton to this effect. This evidence provides context for the key Kingsley’s restaurant conversation on 26 October 2017, to which I now turn.

164    There is also a specific item of contemporaneous documentary evidence which gives a sense of what was taking place and supports Mr Dabrowski’s account to some degree. On 18 October 2017, Mr Ashton sent the following text to Mr Dabrowski:

As we discussed, the QGC tender is imminent and we are organising how we intend to pull together a suitably attractive package of services and products.

Kingsley’s dinner – 26 October 2017 – 26 October 2017

165    Mr Dabrowski gave evidence that he, Mr McDonald, Mr Meldrum, Mr Ashton and Mr Kim Sadler, a director of IOH, a company with a significant shareholding in Pro-Test, had dinner at Kingsley’s restaurant on Eagle Street in Brisbane on 26 October 2017. His evidence was that part of the dinner discussion centred on how Pro-Test and Qteq could work with each other.

166    On Mr Dabrowski’s account, Mr Ashton had given him and Pro-Test a back-handed compliment in front of those at the table, noting the close relationship between Pro-Test and one of its clients, Santos, and saying he did not understand why the two companies had such a good relationship. More significantly, Mr Ashton went on to say that, if Pro-Test did not target Qteq’s work for QGC in the upcoming tender, then he would not target their client, Santos.

167    Mr Dabrowski’s evidence was that there was no feedback from the table. The respondents contend that that component of the account does not have the “ring of truth”, being part of the attempt to desiccate his evidence. I find that it did have a ring of truth in the context of the rest of the evidence and the compelling and logical way in which the events were described by Mr Dabrowski.

168    In cross-examination, part of a conversation reproduced at [66] of Mr Dabrowski’s 20 May 2021 statement, which was objected to and not read, was nonetheless read to him, being his account of the effect of the words Mr Ashton had said to him, as follows:

You guys stick to what you do. We won’t come in and try and reinvigorate this relationship with Santos and this DST equipment that you know we own, because Tim used to run it. We will leave it gathering dust in a box somewhere. We won’t go and pick that up and approach Santos if you don’t come in and compete with us.

169    Mr Dabrowski agreed that he could not recall that conversation at the time he was cross-examined, but stood by his statement, which was made at a point when the events were fresher in his memory. As that paragraph was adopted by Mr Dabrowski in cross-examination, it forms part of his evidence as to the gist of what Mr Ashton had said. Mr Ashton’s reference to Qteq’s ownership and use of DST equipment is of significance when it comes to the assessment of whether the competition condition has been established, considered at [281]ff below.

170    Mr Dabrowski gave evidence that the dinner was “very memorable” for him, as he had been extremely surprised that Mr Ashton had referred to Santos in this way in front of the broader group, and that it was “even pushing it for him”. Mr Dabrowski gave evidence that Mr Ashton’s statements at the Kingsley’s dinner meeting had made him uncomfortable, and he had discussed his concerns with Mr McDonald. Mr Dabrowski said:

Simon had a pretty bad reputation in the industry; they never took him seriously. They – they, you know, “Simon doing Simon things,” through Mr McDonald’s lens, and as long as we don’t cooperate with him, then we don’t have any problems is the – is the attitude and the culture at the time.

171    I find it likely that the Kingsley’s dinner would be more memorable to Mr Dabrowski because Mr Ashton’s conduct was surprising and uncomfortable: see similarly BlueScope (No 5) [701]. In addition to the general findings as to Mr Dabrowski’s credibility already outlined, I am comfortable placing significant reliance on his account of what was said at the dinner.

172    The ACCC submits that, if Mr Dabrowski’s evidence as to the statements by Mr Ashton are accepted, the attempt is proved. I note in this regard that Mr McDonald and Mr Sadler did not give evidence as to this dinner, but that it would be inappropriate to draw a Jones v Dunkel type inference against a regulator in such circumstances: see BlueScope (No 5) [346]-[347] (O’Bryan J). The drawing of such an inference was not suggested by the respondents and in any event, I would decline to do so.

Respondents’ further submissions on the alleged conduct on the alleged conduct

173    In addition to their general attacks on Mr Dabrowski’s credibility, addressed above and rejected, the respondents make three key submissions in response to the evidence outlined above.

174    The respondents’ first submission is that Mr Dabrowski’s account lacks credibility as it is inconsistent with the way in which he first described what had occurred in his initial email to the ACCC. In that email, sent in December 2020, Mr Dabrowski stated that Mr Ashton had suggested Pro-Test should not compete with Qteq on gauge work for QGC or Origin (another client of Pro-Test). However, in Mr Dabrowski’s evidence in chief, he made no mention of Origin.

175    It is hardly surprising, however, that a witness might not include all of the details in an account which was described much closer in time to the events that occurred, especially where the focus of this proceeding is on Qteq’s work for QGC. I do not accept that this detail being left out of Mr Dabrowski’s evidence undermines the credibility of his account.

176    The respondents’ second submission is that the Kingsley’s dinner was in fact organised by Pro-Test because Mr McDonald was interested in selling Pro-Test’s newly developed ADV system to Qteq. The respondents contend that there was therefore an innocent explanation for the dinner, in contrast to the circumstances in Delta (involving a café conversation between competitors for which no legitimate purpose was established). Mr Dabrowski accepted that this was one of the reasons for organising the dinner, and an internal Pro-Test email sent prior to the dinner shows that he was tasked with organising a meeting for Pro-Test with Mr Ashton. In a s 155 examination of Mr Ashton, he stated that the dinner had included discussion of Qteq wanting to include Pro-Test’s ADV in its tender.

177    In cross-examination, Mr Dabrowski said he could not recall whether ADVs were discussed at the dinner, but attributed that to it not being a product that was central to his own work at Pro-Test. He did not deny the possibility that others at the dinner may have discussed ADVs. I do not consider that this amounts to any real inconsistency in Mr Dabrowski’s account, let alone one that damages his credibility. As it is not part of the ACCC’s case that the dinner was organised for the purpose of the alleged attempt, and it is not inconsistent with Mr Dabrowski’s evidence as to Mr Ashton’s statements, I do not consider this argument to be one of substance. Similarly, that a legitimate reason – discussion of the ADV system – was one of the reasons the dinner was organised, does not render it implausible that an attempt occurred there nonetheless.

178    The respondents’ third submission is that the parties had discussed the sale of GeoPSI gauges from Qteq to Pro-Test for use in the QGC gauge tender, which is both inconsistent with Mr Dabrowski’s evidence and makes it implausible that Qteq would, at the same dinner, propose Pro-Test not bid at all for that tender. The premise of this submission is supported by an email from Mr Sadler to a colleague in the early morning after the Kingsley’s dinner. In response to a question about how the dinner went, Mr Sadler provided a short summary, before noting “They are also willing to offer Protest Geopsi gauges for QGC so some other separate upside prospects for Protest to collaborate with them.” (emphasis added). That is further supported by an admission in Mr Ashton’s s 155 examination, where he said that, at the Kingsley’s dinner, “we discussed the fact that we – they would have to come through us to access the GeoPSI gauge.”

179    The ACCC offers three responses, which I accept:

(a)    No part of its pleaded case requires a finding that discussion of GeoPSI gauges did not occur, and it is not inconsistent with their attempt case that Mr Ashton made multiple attempts that are inconsistent with one another, potentially overlapping in time.

(b)    The discussion Mr Dabrowski describes foreshadows, or was the first instance of, the Pro-Test Attempt #2 (which on the ACCC’s case, occurred soon after this attempt, Attempt #1) and that it is plausible that this alleged attempt evolved into that next alleged attempt.

(c)    The fact that this was not mentioned in Mr Dabrowski’s evidence does not, in all the circumstances, undermine his credibility. He says that he does not recall this discussion, not that it did not occur.

180    It is also possible that Mr Dabrowski was not a part of any discussion on this topic at the dinner, which is supported by the fact that emails between Qteq representatives and Mr Dabrowski immediately after the Kingsley’s dinner make no reference to GeoPSI gauges.

181    It is not at all implausible that this attempt (Attempt #1) overlapped to a certain extent with the next one (Attempt #2). To the contrary, it is entirely plausible that more than one way of securing Qteq’s success on the QGC gauge tender was in contemplation and even was attempted. Importantly, the Kingsley’s dinner occurred two days after the release of the QGC tender packages, which (on the ACCC’s case) prompted a change of tactics by Mr Ashton in order to ensure that Qteq retained its gauge work for QGC. Therefore, it is entirely coherent that while he had not abandoned this attempt (Attempt #1), he was considering alternative ways of achieving that objective.

182    Cartel conduct contraventions, it should be emphasised, do not only emerge out of clear and distinct plans. They can and often do emerge from loose talk at social gatherings that blurs the lines of acceptable business practices. This sort of thing was identified by Adam Smith in 1776, almost 350 years ago, in a passage that is famous:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

An Inquiry into the Nature and Causes of the Wealth of Nations (2012, Wordsworth Editions).

183    And as Perram J observed quite a bit more recently in Australian Competition and Consumer Commission v Air New Zealand Ltd [2014] FCA 1157; 319 ALR 388 at [470]:

What may commence as a legitimate meeting procedure may ultimately result in collusion.

184    Both quotes were referred to by senior counsel in closing oral submissions.

185    I do not consider it undercuts Mr Dabrowski’s evidence as to Mr Ashton’s statements at the Kingsley’s dinner that there might have been a fluid transition between this attempt and the next. On the evidence, there was a degree of overlap in time between the two.

Conclusion on Attempt #1

186    The dispute as to this attempt, as for the other Pro-Test Attempts, was at the level of findings. There was no serious suggestion that if the factual dispute were resolved in the ACCC’s favour, then the conclusion should not be that there had been an attempt to arrive at an understanding with Pro-Test, involving the cartel provisions alleged, both of which met the purpose conditions. That is also true for Attempt #2 and Attempt #3.

187    I accept Mr Dabrowski’s evidence as to Mr Ashton’s statement that Qteq would not go after Pro-Test’s work for Santos if Pro-Test did not go after Qteq’s work for QGC at the Kingsley’s dinner, and the statements made prior, to the effect that Qteq would not target Pro-Test’s clients if Pro-Test did not pursue the upcoming QGC gauge tender. That finding is fortified by the clear importance of the bid for Qteq’s business. Mr Ashton’s conduct was sufficiently proximate to amount to an attempt to arrive (or induce the arrival) at an understanding, demonstrated by the fact that the proposal was capable of assent. I am satisfied that the making of the attempt alleged by the ACCC has been proven, leaving the question of the competition condition, addressed in relation to all three Pro-Test Attempts below.

188    The first alleged provision, that Pro-Test would not compete with Qteq for the supply of gauge works to QGC, can be characterised as having each of the following purposes, either one of which would be sufficient to establish the purpose condition:

(a)    preventing Pro-Test from supplying gauge works to QGC, being a purpose within the meaning of s 44ZZRD(3)(a)(iii); and

(b)    allocating QGC as Qteq’s customer in respect of the acquisition of gauge works, being a purpose within the meaning of s 44ZZRD(3)(b)(i).

189    There was no dispute that Pro-Test and Qteq were in competition in relation to the supply or likely supply of gauge works, and therefore the competition condition in s 44ZZRD(4)(c) and (h) was satisfied.

190    The second alleged provision, that Qteq would not compete with Pro-Test for the supply of any of the goods or services that Pro-Test supplied Santos (including gauge works and DST), can be characterised as having each of the following purposes, either one of which would be sufficient to establish the purpose condition:

(a)    preventing Qteq from supplying gauge works and/or DST to Santos, being a purpose within the meaning of s 44ZZRD(3)(a)(iii); and

(b)    allocating Santos as Pro-Test’s customer in respect of the acquisition of gauge works and/or DST, being a purpose within the meaning of s 44ZZRD(3)(b)(i).

191    There is a dispute as to whether Qteq and Pro-Test were in competition in relation to the supply or likely supply of DST, addressed below in relation to all three attempts.

192    I also discuss the attribution of liability to Qteq and Mr Ashton’s intention further below, in relation to all the Pro-Test Attempts. There was no real dispute on this front, if the factual findings alleged by the ACCC were made.

Attempt #2: The Pro-Test 2017 QGC Tender Understanding

193    This is an allegation that Qteq attempted to, or attempted to induce Pro-Test to, make an arrangement or arrive at an understanding containing one or both of the following cartel provisions:

(a)    Pro-Test would bid for the QGC gauge tender so as to win only around 15% of the work to be performed under the contract and not seek to win the contract outright using either GeoPSI gauges or any other gauges (the 15% provision); and

(b)    Qteq would not compete with Pro-Test for the supply of goods or services to Santos (including gauge works and DST) (the Santos provision).

194    The ACCC also alleges that Mr Ashton attempted to induce Pro-Test to arrive at the understanding described above.

195    At a high level, the ACCC’s case is that, shortly after the release of the QGC tender package, Mr Ashton stopped suggesting to Mr Dabrowski that Pro-Test should not submit for the QGC gauge tender at all, instead proposing that Pro-Test bid only for the increased scope of work under that tender. Mr Dabrowski’s evidence in cross-examination is that Mr Ashton told him that he (Mr Ashton) would use a “throttling of supply” of GeoPSI equipment to Pro-Test in order to allow Pro-Test to only bid for 15% of the scope of work under the QGC gauge tender. Qteq could do this because, by then, Qteq was the exclusive Australian supplier of GeoPSI equipment for the purpose of the QGC tenders. That is, the substance of the alleged proposal was that Qteq would supply GeoPSI equipment to Pro-Test at a lower price for the first 200 analogue gauges and 10 digital gauges, equivalent to roughly 15% of the scope of work under the QGC gauge tender, after which the price would increase.

196    In addition, on Mr Dabrowski’s evidence, in at least one conversation Mr Meldrum explained details of how this price mechanism would work to allow Pro-Test to bid only for the smaller scope of work. Mr Dabrowski’s evidence was that the higher price point would make it commercially unviable for Pro-Test to bid for a larger scope of work than what Qteq allowed it. Again, the ACCC primarily relies upon Mr Dabrowski’s evidence to prove this allegation.

197    It is useful to explain what I mean by the reference to the increased scope of work two paragraphs above. As noted above, Qteq was the incumbent gauge works provider for QGC prior to release of the QGC gauge tender. Mr Dabrowski’s evidence was, at the time the QGC gauge tender was released, it was understood that the scope of gauge works would increase from existing levels, with two or three additional rigs for which PDHG products and services would be required. His evidence was that Mr Ashton had proposed for Qteq to retain its current level of QGC gauge work, and for Pro-Test to take on this new excess scope, amounting to roughly 15% of the total scope of work under that tender.

198    Apart from attacks on Mr Dabrowski’s credibility, the respondents’ case is that Qteq acted unilaterally to attempt to limit Pro-Test’s bid for the QGC gauge tender by structuring its pricing for GeoPSI gauge equipment so that it would not cut into its existing work. They contend that Qteq had not attempted to enter into an understanding or arrangement with Pro-Test to give effect to this desirable outcome, and Mr Dabrowski’s evidence to the contrary is again unreliable.

Conduct

Conversations between Mr Ashton and Mr Dabrowski after the release of the QGC tenders

199    Mr Dabrowski gave evidence that, some time in the period following the release of the QGC tender package, he and Mr Ashton realised that it would no longer be viable for Pro-Test not to submit a bid for the QGC gauge tender. That was because an ADV product tender – being work that Mr Dabrowski described as “well known to be in the wheelhouse of Pro-Test” – was included in the tender package, which had not been clear earlier. Mr Dabrowski’s evidence was that he and Mr Ashton had a number of conversations in November 2017, at different coffee shops around Eagle Street Pier in Brisbane, and perhaps over the phone as well in the same period.

200    Mr Dabrowski’s evidence is that, in these conversations, Mr Ashton:

(a)    conveyed that it was crucial for Qteq to retain the level of gauge work it was then performing for QGC, being work for 10 rigs;

(b)    offered or requested that Pro-Test bid only for the excess scope of work under the QGC gauge tender;

(c)    said that he would not come after Pro-Test’s work, especially with Santos, if Pro-Test did not go after and impact Qteq’s work for QGC;

(d)    proposed that Qteq would “throttl[e] supply” of GeoPSI gauges to Pro-Test in order for Pro-Test to tender for that limited scope of work.

(e)    told him to speak to Mr Meldrum about the details of his proposal.

201    Mr Dabrowski’s evidence was that Mr Ashton asked him to speak to Mr Meldrum in order to work out the details. To the extent that evidence is accepted, the clear inference is that Mr Ashton had authorised Mr Meldrum to discuss GeoPSI pricing with Pro-Test, and also that it was likely that Mr Meldrum and Mr Ashton stayed in touch about the detail of those plans.

202    The respondents noted that Mr Dabrowski had not referenced Mr Ashton using the term “throttling supply” in his prior witness statements. The suggestion was that he had made this up in oral evidence in order for his account to sound more compelling. In cross-examination, he said he had thought that he communicated the concept, though the precise words used by Mr Ashton did not come to mind at the time:

So you thought the job of this statement was just to convey concepts?---I don’t understand the job of the statement. I would work with the ACCC. When they ask me questions, I answer them. And when I need to sign that something is true and correct, I sign it. But I don’t – I’m not – I didn’t have a lawyer throughout any of that investigative process. I simply rocked up and answered questions and did my best.

203    I am not persuaded by the respondents’ submission, which in substance amounts to saying that Mr Dabrowski lied when giving evidence under cross-examination. As is evidenced by the revised statements that Mr Dabrowski and Mr McDonald provided to the ACCC, the process of compiling statements can be iterative between witnesses and regulators, with witnesses clarifying facts or recalling further ones. Experience reveals that this sort of process is often imperfect and not everything is necessarily recorded. That may be because nothing more has in fact been said, or that something has been later recalled. It is unsurprising for a witness to recall additional details as they revisit their memory in the course of giving oral evidence. I consider the respondents’ submission to be a weak basis for finding that Mr Dabrowski was untruthful in the box. I did not experience the kind of doubt that the respondents effectively contend that I should. To the contrary, Mr Dabrowski’s account rang true, including the evocative expression of throttling supply of GeoPSI gauges, supported by documentary evidence which clearly indicates that Qteq was proposing to offer a reduced price to Pro-Test for a limited number of GeoPSI gauges – that is, a throttling of supply.

204    The respondents also submit that Pro-Test was aware that the ADV tender would be included in the tender package prior to its release. I take this submission to encompass the notion that this was a certain inclusion before the tender release and/or known by Mr Dabrowski to be included in the tender specifications before the Kingsley’s dinner. If the submission does not go that far, then it is a weaker submission. The respondents argue that this undermines the credibility of Mr Dabrowski’s account and provides an innocent explanation for the Kingsley’s dinner (I have already discussed the latter argument at [176] above). For this submission, they rely on an email sent by Mr Ashton to Mr Dabrowski on 18 October 2017, about a week prior to the QGC tender package release on 24 October 2017. Relevantly, that email states:

Good to speak with you last week, with respect to the newly developed Pro-Test ADV system.

As we discussed, the QGC tender is imminent and we are organising how we intend to pull together a suitably attractive package of services and products.

Qteq does not have a competing product, nor interest in developing one, so we are agnostic on the technology space.

Currently, Qteq and Pro-Test do not compete directly on our service portfolios (we are divesting our DST capability) and it might suit both of our companies to work together on this specific product (and others) to get it to market.

Our major concern would be the vexed issue of the IP space, with numerous companies claiming elements of infringements or partial infringements.

Once we are comfortable with that specific issue, (Q [an apparent reference to Quentin Morgan of Qteq] is an expert in that area) we’d certainly be able to include your valve as part of our package submission.

This would certainly give it a greater exposure, if QGC decide to package up the ALS [Air Lift Systems] systems, and might enable us to work more closely together to create a cost competitive, Australian based solution.

Please let me know your thoughts as I’m in Brisbane next and available to meet with you and Ewan [McDonald], if you are available.

205    Mr Dabrowski’s evidence in this respect was that he did not recall whether he was aware that ADVs were likely to be included in the QGC tender package. As noted above, his evidence was that ADVs were a “trial product” that had not been widely adopted, and that such products were often not included in a formal tender. There is some question about whether this was entirely accurate, given internal QGC documentation which predated the tender package release showed that ADVs were already part of its artificial lift system. However, that is not conclusive evidence on the question of whether ADVs were likely to be seen by others in the industry as likely to be included in the tender package.

206    Mr Dabrowski’s evidence in this respect is consistent with the qualified tone of Mr Ashton’s email extracted above, in which Mr Ashton wrote:

This would certainly give it a greater exposure, if QGC decide to package up the ALS [Air Lift Systems] systems, and might enable us to work more closely together to create a cost competitive, Australian based solution

(Emphasis added.)

207    Further, there was no evidence to suggest that the QGC tender documents had been closely read and considered by Mr Dabrowski prior to him attending the Kingsley’s dinner, so as to know that ADVs were in fact included in the QGC tender package. Therefore, I conclude that in the days prior to the QGC tender package release, neither Qteq nor Pro-Test were sure whether ADVs would be included in the QGC tender package.

Meeting at Qteq’s offices – 2 November 2017

208    Mr Dabrowski gave evidence that, following the conversations with Mr Ashton, he and Mr McDonald met with Mr Meldrum, Mr Ramsay (Qteq’s technical sales manager, reporting to Mr Meldrum) and perhaps Mr Adam Fitz-Henry, another Qteq employee, at Qteq’s offices on 2 November 2017. Mr McDonald did not give evidence about the meeting, though again I do not draw an adverse inference against the ACCC because of this fact: BlueScope (No 5) [346]-[347].

209    Mr Dabrowski’s evidence of what had been discussed at this meeting was tentative, and he was unsure of whether certain statements were made by Mr Meldrum there, or in a separate conversation between the two men around the same time. His evidence was that:

Mr Meldrum outlined that – the pricing mechanism to effect the tendering of no more than three crews, which was to provide a staggered pricing, a volume-based pricing but with a – not a discount, the opposite. With a[n] excess, a premium, for over 200 gauges, and thereby that would effect the throttling of gauges, as Mr Ashton said.

210    Mr Dabrowski also gave evidence that, in a conversation with Mr Meldrum around the time of the meeting at Qteq’s offices, Mr Meldrum had outlined the pricing mechanism for the GeoPSI gauges:

I had also spoken to Mr Meldrum, and Mr Meldrum had outlined the pricing mechanism of how it would affect the throttling of the gauges.

He spoke about providing competitive pricing for the first 200 units, and then price increase after that.

211    On 2 November 2017, Mr Ramsay sent an email to Mr Dabrowski, Mr McDonald and Mr Meldrum with the subject line “Pro-Test Qteq Meeting Notes” in which he summarised the meeting that day at Qteq’s offices. He described the notes in his email as “high level for now”. In relation to the discussion of gauges that occurred, he said as follows:

1)    Pro-test and Qteq submit one tender for gauges (Pro-test does not go alone)

2)    Pro-test and Qteq each submit separate tenders, Pro-test to position their tender for no more than 3 crews

3)    Pro-test submit tender for no more than 3 crews and Qteq submit tender with provision to sub-contract Pro-test for 3 crews of the work

Option 1 has the risk of QGC picking another company for a portion of the work so we share a less than 100%

So 2 or 3?

212    The notes at the bottom of the email, following the list of options, indicate that the discussion centred on ways the two companies could ensure that they collectively secured 100% of the QGC gauge tender between them, some of which is directly consistent with Mr Dabrowski’s account, with the balance not displacing that account due to not being preferred. Option two, one of the preferred approaches per this summary, is consistent with Mr Dabrowski’s account, allowing for Pro-Test to submit separate tenders limited to three rig crews. Option three, another preferred option, is less clear: it might contemplate Pro-Test taking on work for six crews, three through a direct tender and three through a sub-contract from Qteq, or it might contemplate that these are alternatives should either of Qteq or Pro-Test’s tenders not succeed. The latter interpretation would be consistent with Mr Dabrowski’s evidence. Option one is inconsistent with Mr Dabrowski’s account but, as noted by Mr Ramsay, was not a preferred option. Overall, the email corroborates Mr Dabrowski’s account in the conventional sense of strengthening it, or making it more probable: Doney v The Queen [1990] HCA 51; 171 CLR 207 at 211.

213    In a supplementary statement provided to the ACCC in 2021, Mr McDonald says that he does not recall this meeting clearly, as gauges were Mr Dabrowski’s area of expertise. He notes however, that his view at the time was that “it would have been difficult for Pro-Test to service the full QGC gauge contract”, estimating that it would have required “approximately $1 million” and sourcing the equipment and personnel would have been difficult. He says that while Pro-Test could probably have secured finance for the full tender, and that “Pro-Test has never turned away work”, it would have been a “significant financial risk” and therefore preferable if Pro-Test could do less than the full scope of work. Mr McDonald was not asked about the meeting in cross-examination.

214    Although Mr Ashton did not attend this meeting, it appears that he was kept in the loop. An iMessage exchange between Mr Dabrowski and Mr Ashton from the same day as the meeting reads as follows:

Mr Dabrowski:    Hi Simon, just a quick note to let you know Ewan [McDonald] and I had a really positive meeting with your Ewan [Meldrum] and Pete [Ramsay] today.

Mr Ashton:    Tim, I believe that if we are open and genuine we can secure a good position for our companies in this tender that makes us competitive. It is all about relationship. Let’s sort out the details. Simon

215    The respondents submit that Mr Dabrowski’s text is inconsistent with his account that Qteq had just “threatened” to throttle its supply of gauges for Pro-Test. The same point is made in relation to some email banter between Mr Ramsay and Mr Dabrowski following the meeting at Qteq’s offices. I note that Mr Dabrowski could not recall whether he had discussed the “throttling” pricing mechanism with Mr Meldrum at that meeting or at a different one around the same time. In any case, that submission fails to take into account the extent to which businesspeople can be friendly to one another in order to keep a relationship workable, even where it is not wholly pleasant or where there is in fact conflict. The evidence of Mr Dabrowski was that he had sought to keep Pro-Test’s relationship with Qteq productive, even as difficulties arose. Internal correspondence within Pro-Test reflects that there was wariness of Qteq and Mr Ashton, but that there was still a perceived upside to working with them. I do not consider this submission to undercut the credibility of Mr Dabrowski or the plausibility of his account.

216    On the same day as the Qteq offices meeting, Qteq and Pro-Test executed a mutual non-disclosure agreement “with a view to a potential business relationship between the parties”. The respondents submit that this is more consistent with an account that the two companies were in discussions to provide complementary products to each other for the purposes of the QGC gauge tender. I do not find that it is any more consistent with that than with the ACCC’s case. In fact, it is more corroborative of that case to the extent that it indicates collaboration of a kind that is at least not inconsistent with Mr Dabrowski’s account of what took place.

Qteq provides pricing for GeoPSI to Pro-Test – 10 November 2017to Pro-Test – 10 November 2017

217    On 10 November 2017, Mr Ramsay sent Mr Dabrowski (copied to Mr Meldrum) a pricing list for GeoPSI equipment for Pro-Test’s use in the QGC gauge tender. The covering email notes: “As we agreed, there is two-tier pricing for the number of gauges purchased per year by Pro-Test.” Products for the first 200 analogue and 10 digital gauges were given a particular price. After this, prices increased by 35%. There was one exception to this pricing structure, being the wellhead for the gauge for reservoir surveillance, which was not a GeoPSI product. In a new list of prices dated 28 November 2017, the price for the downhole instrument cable was also revised upwards. Mr Dabrowski gave evidence that Mr Meldrum had explained this increase in price was necessary due to global steel prices and some other requirements by QGC, though Mr Dabrowski suspected this was not genuine.

218    Mr Dabrowski gave evidence that 200 analogue gauges was enough equipment for two to three rigs, or enough to complete approximately 15 to 20% of the work under the QGC gauge tender (summarised in the table below). He said that the price increase after the first 200 gauges would make it commercially unviable for Pro-Test to complete more than 15 to 20% of the QGC gauge tender work, as Qteq would charge a higher price for the necessary products than what Pro-Test would have been able to charge QGC. There is some dispute over whether this was accurate, discussed at [241] below.

Qteq Geo PSI equipment price list for Pro-Test

219    Further context to the GeoPSI pricing is provided in internal Qteq emails. On 7 November 2017, three days prior to Qteq sending its first pricing list to Pro-Test, Mr Ramsay sent an email to Mr Meldrum explaining the reasoning behind the higher prices kicking in at 200 analogue and 10 digital gauges, an explanation also consistent with throttling supply by price to limit Pro-Test to 15% of the scope of work:

If we use 15 rigs as per EWE RFQ [Eastern Well Energy request for quote] and split 11 for us and 4 for Pro-test, it calculates what % and applies this to how many new gauges will be supplied.

This gives 211 new analogue gauges per year for Pro-test and 13 new digital. Rounded this to be 200 and 10 per year.

220    Another email sent by Mr Ramsay to Mr Meldrum later on the same day notes that “…had a talk with Tim, they are looking at asking for a 4 rig package leaving the other 11 rigs to Qteq.” The email does not specify why Pro-Test had decided to limit its tender to four rigs’ work.

221    On the same day, Mr Meldrum emailed Mr Nick Nazarovs, a GeoPSI sales representative, in response to a request for an “update on current state of play” of the QGC gauge tender. His email reads in part:

For ProTest we now have a signed NDA in place and have reached an agreement with them that they will tender for four packages of the work at QGC and that we will provide them with pricing at the same rate as you give to us for these four packages. This will help QGC in splitting their risk in choosing two contractors should that be their preference.

222    In a later s 155 examination of Mr Meldrum, he clarified that “four packages” was equivalent to four rigs’ worth of work. He also made the following admissions about the meaning of his email:

CLARK:    And, that reflects, doesn’t it, that there was an agreement that both Qteq and Pro-Test would submit separate tenders rather than jointly.

MELDRUM:    Separate tenders. Yes, that’s correct.

CLARK:    And, that Pro-Test would position its tender so that it would only win four packages of the work?

MELDRUM:    That’s what it says there. Yes.

CLARK:    What is a package of work in that context?

MELDRUM:    That’s their – their capability to be able to do four packages of the spooling unit vehicle, service personnel, and the equipment required to run the – the service.

CLARK:    Does a package equate in this context to a rig?

MELDRUM:    Yes. So, four – four rigs worth of work. Yeah.

…

CLARK:    I know you’re saying you don’t recall this, but your email [to Mr Nazarovs, excerpted above] records reaching an agreement with Pro-Test that they will tender for four packages of the work at QGC, which we – we went to before.

MELDRUM:    Yeah. It does – it does say that. Yes.

CLARK:    You’d agree with me that the pricing quotation you provided to Pro-Test would facilitate that agreement by limiting Pro-Test to only being able to provide four packages worth of the work, approximately.

MELDRUM:    Yeah. I can see that. Yes.

223    Later in the examination, Mr Meldrum expressed confusion, as his recollection was that no agreement had been entered into between the companies at the point the email to GeoPSI was sent. Of course, that there was no concluded agreement or understanding is no barrier to the ACCC’s attempt case.

224    In a portion of the s 155 examination of Mr Ashton, admitted into evidence without objection as an admission, he provides the following account:

(a)    the pricing provided to Pro-Test increased for equipment needed for more than three crews’ worth of work because, he suspected, Qteq staff “tried to fashion it around giving them an incentive so that they would have three crews”;

(b)    from Qteq’s perspective, the pricing “was an incentive for them [Pro-Test] to make sure that they would subcontract in three or four crews to get us to the 18” needed for the QGC gauge tender, without needing to enter into an alliance or “an incredibly complicated legal document”;

(c)    Qteq’s goal was to make it attractive for Pro-Test to partner with it in the QGC gauge tender, as opposed to one of its competitors, though there was also an incentive to limit its bid to three or four crews’ worth of work. The message of the pricing structure was “You should support us because that’s the commercial incentive”; and

(d)    the price increase meant that Pro-Test “wouldn’t be as competitive, obviously" if it tendered for more than roughly three or four crews.

The above examination evidence is plainly corroborative of Mr Dabrowski’s evidence in key respects. I do not accept the respondents’ submission that this account, once considered in context, supports their case that this was unilateral conduct, rather than a part of the matrix of evidence in support of the alleged attempt or inducement to reach an understanding.

225    In February 2018, a breakdown in the relationship between Pro-Test and Qteq occurred. An email on 15 February 2018 from Mr Ramsay to another Qteq employee (which is addressed to “Ewan”, and I infer therefore to be a draft of an email to be sent to Mr Meldrum) casts some light on the thinking within Qteq in this period:

As a part our exclusive agreement with GeoPSI for the QGC tender, we supplied pricing to Pro-Test, BHGE, Schlumberger and Weatherford. In the good spirit of the agreement and to show QGC we are willing to work with other service companies, I suggest we offer lower pricing to the above, other than Pro-Test which will be covered later …

Now onto Pro-Test. At the start of this whole process we viewed their [sic, there] was a risk of QGC not awarding all the work to one PDHG company. If that is a risk, it was thought that let’s choose who that might be. We gave Pro-Test essentially the same pricing as the others for the GEOPSI products and let them use their own pricing for other. This was for the first 200 systems per year and for > 200 per year their price was 30% higher. This would limit them to around 15% of the work.

As you know, Pro-Test is not much a friend these days and if my view they can not be trusted anymore. They have lost the Santos work so I see them getting very aggressive for the QGC response. They need the GEOPSI equipment from us, however for the other items including people they can undercut us. If we leave the existing pricing in place for Pro-Test, they may slash the pricing on the other items. For our response to them, it is suggested we pull the pricing for the 0 to 200 systems and only offer the 200+ pricing. Naturally this will not go over well, so I will need to work with Stuart and you on this response.

226    Qteq dispensed with the idea of differential pricing for Pro-Test the next day, on 16 February 2018, providing a quote for the supply of GeoPSI equipment only at the higher price that had previously applied to equipment after the first 200 analogue and 10 digital gauges. The revised quote explains the removal of the pricing discount:

QGC has since asked for revised commercial proposals for their Multi-round tendering 01. QGC has stipulated that API 01 and 02 accreditation is now required. Due to the additional cost burden that Qteq will have to adsorb to achieve this accreditation, we are no longer able to offer the lower pricing structure previous provided.

227    I infer from the email that Mr Ramsay drafted on 15 February 2018 (reproduced two paragraphs above) that the 16 February 2018 revised quote did not provide an accurate description of the reason behind the price revision. Rather, the withdrawal of the pricing discount was due to Pro-Test being “not much a friend these days.”

228    A few days later, on 19 February 2018, Mr Dabrowski texted Mr Ashton:

I’ve spoken to Ewan McDonald in regards to QGC. There’s too much risk in this work for us. We’ll revise pricing up based on your quote and are happy to be used as an expensive back up if QGC desires multiple supply.

229    I infer the quote referred to is a new quote that removed the tiered pricing. Part of Mr Ashton’s response says:

Qteq has not come at your people or your contracts in a race to the bottom. We have not entered the testing business nor DST’s. Instead, we have battled manfully to recruit, train and retain our people, invest in assets, sustain our business etc.

A text sent by Mr Dabrowski to Mr Ashton a year later, on 20 February 2019, also references the “QGC deal being retracted”.

Consideration

Mr Dabrowski’s evidence’s evidence

230    Foundational to the ACCC’s case on this attempt is Mr Dabrowski’s evidence of conversations with Mr Ashton and Mr Meldrum. This is the only direct evidence of the Santos provision, and crucial evidence of the purpose of the tiered pricing. Mr Dabrowski said that Mr Ashton told him of his plan that Qteq would “throttl[e] supply” for GeoPSI equipment in order to limit Pro-Test’s bid. In cross-examination, Mr Dabrowski accepted descriptions of these overtures as “proposals”. Mr Ashton then asked Mr Dabrowski to speak to Mr Meldrum in order to work out the details. For the reasons given above, I found Mr Dabrowski to be a credible witness. Mr Ashton did not give evidence that could provide a contradictory account of these conversations. In those circumstances, I can more comfortably accept Mr Dabrowski’s account.

Corroborating evidence

231    There is then the facilitative and corroborative pool of documentary evidence, largely drawn from Qteq’s internal correspondence, and largely related to the pricing mechanism that Qteq planned to implement in relation to the supply of GeoPSI gauge equipment. This sheds light on the purpose of the tiered pricing that Qteq provided to (and later withdrew from) Pro-Test for the provision of GeoPSI equipment. As established by the evidence, both parties understood that the tiered price structure would allow Pro-Test to bid for only 15% of the work under the QGC gauge tender. The following observations can be made of this evidence:

(a)    Qteq feared that it would not retain the same level of gauge work it performed for QGC after the tender and, in particular, that QGC would be unwilling to award the gauge tender to one bidder exclusively.

(b)    That fear led Qteq to consider which of its competitors were likely to have the strongest alternative bid. Upon concluding that it was Pro-Test, Qteq sought to partner with it, while encouraging it to only bid for a limited scope of work under the QGC gauge tender. That is evocatively expressed in Mr Ramsay’s email dated 15 February 2018 at [225] above, and is further supported by Mr Ashtons’s s 155 examination admissions at [224] above.

(c)    On 2 November 2017, Qteq and Pro-Test representatives met at Qteq’s offices and discussed how the work under the QGC gauge tender could be split. Notes taken from that meeting reflect that the preferred options were those where Pro-Test had a bid for less than the full scope of work under the QGC gauge tender.

(d)    On 10 November 2017, Qteq provided a quote for GeoPSI products which increased after the first 200 analogue gauges and 10 digital gauges, which was equivalent to four rigs’ work or 15% of the scope of work under the QGC gauge tender. No other competitor was provided that discounted pricing. The covering email to the price quote noted that the pricing was tiered “as we agreed”.

(e)    Mr Ramsay’s 7 November 2017 email, and Mr Meldrum’s and Mr Ashton’s s 155 examinations confirm that the intended effect of the tiered pricing was for Pro-Test to only bid for about 15% of the scope of work.

232    The documentary evidence is consistent with, and strongly supports, Mr Dabrowski’s account, especially in the absence of any contrary testimonial account of the conversations between him and Mr Ashton.

The respondents’ arguments

233    The respondents’ case involves two contentions:

(a)    Mr Dabrowski’s evidence as to Mr Ashton’s and Mr Meldrum’s statements is unreliable;

(b)    excluding this evidence, the ACCC’s case fails as:

(i)    The documentary evidence only supports a finding that Qteq had attempted to use its position as the exclusive distributor of GeoPSI equipment to limit Pro-Test’s bid, but unilaterally, noting that there is no evidence that Qteq representatives requested Pro-Test to limit its bid to 15% of the QGC gauge tender in return for the GeoPSI equipment. In fact, it was Pro-Test that had sought to limit its bid to roughly four rigs’ work, and requested a quote for GeoPSI products on that basis.

(ii)    The pricing mechanism would not have functioned to limit Pro-Test’s bid, as the ACCC alleges, because Pro-Test could always have bid using another kind of gauge, and even the higher tier of prices remained competitive.

234    The reasons for my rejection of the bulk of the respondents’ submissions on Mr Dabrowski’s credibility have already been discussed. Their other arguments face further difficulties, however.

235    First, the documentary evidence is difficult to accept as being consistent with a narrative that Qteq was acting unilaterally. In particular, Qteq convened a meeting at its offices on 2 November 2017 where representatives of both companies discussed approaches to coordinating their bidding on the QGC gauge tender, and included a discussion that the preferred options were those where Pro-Test had a limited bid for no more than three crews. This indicates that Qteq was seeking participation by Pro-Test in its plans. A week after that meeting, Qteq issued its first GeoPSI product quote, with an increase in prices after the first 200 analogue and 10 digital gauges. The cover email to that pricing noted that this increase was “as we agreed”. That sequence of events suggests an attempt by Qteq to obtain Pro-Test’s commitment to its proposal – that is to say, a meeting of minds – rather than a unilateral imposition of the pricing mechanism. Properly understood, the proposed tiered pricing for GeoPSI products was part of the understanding sought to be reached, with the overt purpose of ensuring that Pro-Test’s bid would be limited to 15% of the scope of work. It follows that references to an “agreement” in correspondence between Pro-Test and Qteq (such as in Mr Meldrum’s email to Mr Nazarovs quoted at [221], and in the covering email to the GeoPSI pricing list) should be taken to refer to an agreement that Qteq would provide Pro-Test with cheaper but throttled pricing to limit Pro-Test’s bid to 15% of the scope of work under the QGC gauge tender.

236    This evidence of Qteq/Mr Ashton attempting to collaborate with Pro-Test/Mr Dabrowski makes the characterisation of this conduct as unilateral, or even just the provision of information or a statement of future conduct, untenable. Not only was Qteq trying to ensure that Pro-Test would have a limited bid, but also that Pro-Test would win over alternative bidders because of the lower gauge cost advantage being provided to it. It was always going to be difficult for Qteq to get its ideal outcome of a Pro-Test bid limited to 15% of the scope of work, without Pro-Test’s cooperation. That is because it remained open to Pro-Test to bid at a higher price for a larger scope of work, to bid with a different gauge even if that was less likely to win, or even to bid with another prospective contractor (the last being a concern that Mr Ashton expressed – see [224(c)] above). Qteq’s (and Mr Ashton’s) evident concern was to gain an advantage by working with Pro-Test, as there was a worry that QGC would not award all of the QGC gauge tender work to one bidder, while also containing a potential competitive threat.

237    Of course, an attempt to enter into an arrangement or understanding can arise in ways other than overt requests. An attempt must be a “step towards” the formation of an understanding or arrangement: BlueScope (No 5) [1421]. This might arise instead from a proposal, or might be implicit in a party discussing plans with a competitor on how the two might coordinate. The key question is whether Mr Ashton’s proposals to Mr Dabrowski were capable of assent, which may be a critical factor in finding that an attempt to arrive at an understanding has occurred: see BlueScope (No 5) [1466], see also, [1490], [1502], [1512], [1524], [1533] and [1534]. Mr Dabrowksi accepted descriptions of Mr Ashton’s overtures as “proposals”, indicating that they were capable of assent, as opposed to mere expressions of hopes about how Pro-Test might react to Qteq acting unilaterally, or mere informative statements that Qteq would be imposing the pricing mechanism for GeoPSI equipment.

238    Second, there is no strong basis to infer that the tiered pricing system was used only because Pro-Test had identified its maximum capacity as bidding for four rigs’ work. The respondents ask the Court to infer that Pro-Test had reached that conclusion based on Mr Ramsay’s email where he states that Mr Dabrowski had said Pro-Test was “looking at asking” for only for four rigs’ work (see above at [220]), and Mr McDonald’s statement that he thought it would be difficult for Pro-Test to bid for the full scope of work (see above at [213]).

239    I readily accept that Pro-Test would have faced difficulties in bidding for the full scope of work under the QGC gauge tender, owing to Pro-Test’s size as well as the unusual structure of the tender, which would require the successful tenderer to rapidly increase then decrease its capacity. It is not clear from this evidence, however, whether Pro-Test had identified four rigs’ work as its maximum capacity for the tender, or whether Mr Dabrowski had said Pro-Test was “looking at” bidding this amount following suggestions from Mr Ashton and Mr Meldrum. Mr Dabrowski was not asked about this email in cross-examination. It was put to him in cross-examination that he had told Mr Ashton at the Kingsley’s dinner that Pro-Test had limited capacity to supply downhole gauge installation services, which he said he did not think he would have, but possibly could have.

240    More significantly, no evidence indicates that Pro-Test had identified four rigs as its maximum capacity and requested a quote from Qteq on this basis, though I note that Mr Ashton made assertions to this effect in his s 155 examination. This argument faces a further difficulty: Pro-Test identifying four rigs as its maximum capacity and requesting a quote on that basis is inconsistent with the quote Qteq ultimately provided, which included pricing for additional products albeit at a higher price.

241    Third, the respondents’ submissions that the price throttling would not have limited Pro-Test’s bid is not persuasive. They contend that Pro-Test could have bid using another kind of gauge, because the increased price after 200 analogue and 10 digital gauges was not uneconomical. Pro-Test did in fact bid with a different DAS gauge as a backup since, on Mr Dabrowski’s evidence, it was compatible with QGC’s existing systems. The relevant question of what the subjective purpose of the proposed pricing mechanism was remains. If both Pro-Test and Qteq saw the pricing mechanism as having the practical effect of limiting Pro-Test’s bid to 15% of the scope of work, it is easier to conclude that the purpose condition for the proposed understanding was met. For the following reasons, I am satisfied that this is what the evidence establishes once the arguments advanced by the respondents on this point are not accepted.

242    In relation to the first plank of the respondents’ argument concerning the option that Pro-Test had to bid with a different kind of gauge, Mr Dabrowski’s evidence is that GeoPSI products were preferred by QGC, and that while they were not specified in the QGC gauge tender, the gauge specifications were “almost a carbon copy of the GeoPSI spec sheet”, there being “some nuances in those specifications that make it sound like that”.

243    Mr Dabrowski’s view was also the evident view of Mr Ashton, who, in his s 155 examination, described securing the GeoPSI exclusivity agreement and the QGC gauge contract as goals that were “inexorably tied” for Qteq. It was also the view of Mr Meldrum, at least prior to the QGC tender release, expressed in an email sent by Mr Morgan to Mr Ashton and others at Qteq on 17 June 2017: “Securing exclusivity with GeoPSI will greatly help to neutralise/weaken competitive threats for this contract.…while Ewan [Meldrum] believes QGC will not entertain use of another type of 4-20mA analog [sic] gauge, I remain unconvinced.” When asked about this email in his s 155 examination, Mr Ashton explained that that there was a “long track record” of using GeoPSI gauges, with 8,000 already in use by QGC at the time, and that no other system had a comparable record. He said that even if Qteq had been entitled to bid with a different gauge, it would have bid with the GeoPSI gauge because it was QGC’s incumbent gauge and “[p]eople are not gonna change in the oil and gas industry.” For much the same reasons given above at [158], I infer that the view expressed by Mr Morgan in this email, which was sent 10 days prior to Qteq’s incorporation, remained his view at the time of its incorporation. That inference is fortified by the admissions made by Mr Ashton, quoted above.

244    I accept that, at the very least, it was Pro-Test’s understanding, evocatively expressed by Mr Dabrowski’s reference to the tender specification being a carbon copy of the GeoPSI gauge specification, that it would be disadvantageous to tender without the GeoPSI gauge products. More importantly, on the basis of the evidence described above, I find that the respondents held much the same view. On Mr Dabrowski’s evidence, Pro-Test had a reduced need for further GeoPSI products from Qteq as it had amassed stock prior to the entry into the exclusivity agreement between GeoPSI and Qteq, but there is no evidence that Qteq (or Mr Ashton) were aware of this.

245    The ultimate question remaining is what the subjective purpose of the cartel provision was. That both Pro-Test and Qteq held the view that GeoPSI equipment was, as a practical reality, required for them to have a reasonable and predictable prospect of success for the QGC gauge tender supports the conclusion that this availability of supply did affect the scope of Pro-Test’s bid and that the pricing offered therefore had that restrictive purpose.

246    In relation to the second plank of the respondents’ argument about the pricing mechanism’s effect, the respondents contend that the pricing for GeoPSI products after the price hike remained competitive, as it was the pricing that Qteq offered to other competitors anyway, and an internal Qteq email speculated that other competitors might be submitting more competitive bids even with that higher pricing. It does not necessarily follow that a higher price remained competitive because it was the price Qteq provided to other potential tenderers. It is reasonably likely to have been the case that the only, or at least more, competitive GeoPSI prices were those offered for the first 200 manual and 10 digital gauges to Pro-Test. The respondents’ argument is also difficult to square with the admission of Mr Ashton in his s 155 examination, that “obviously” the price increase after 200 gauges would render a bid beyond that limit by Pro-Test less competitive.

247    I have already concluded that Qteq sought to identify the likely secondary bidder, being Pro-Test, to support its bid, but only to the extent where it did not cut into its existing scope of work. In any event, the obvious inference from the evidence described above is that both Pro-Test and Qteq saw the price increase as an impediment to a bid that was larger than 15% of the gauge scope of work. That shared view supports the conclusion that the respondents contemplated using this pricing mechanism as a way to implement the cartel provision. Whether or not that view was correct does not need to be decided, in particular because neither Qteq nor Pro-Test at the time could have known whether it was correct, given the inherent lack of knowledge of the content of alternative bids and QGC’s assessment of them.

248    In concluding, I note that there was some residual dispute between the parties as to whether it was a requirement of the QGC gauge tender for a party to bid for 100% of the scope of work. This goes to the respondents’ suggestion that Pro-Test had requested pricing for GeoPSI products for a limited bid of four rigs’ work under the QGC gauge tender. The ACCC submits that it is implausible that Pro-Test approached Qteq saying it would only tender for 15% of the work given QGC had communicated that bids for all tenders were to be for 100% of the scope of work, with a secondary “back-up” supplier with a higher cost to be chosen as well. The back-up supplier was only to be called on if the primary supplier was unable to complete part of the scope of work. This is evidenced by notes taken by Mr Meldrum from a meeting convened by QGC about the tender package shortly after its release on 30 October 2017. The respondents note, however, that on Mr Dabrowski’s evidence, he was under the impression that there was room to negotiate on this front. While there is some evidence which might support an inference that Pro-Test had approached Qteq, to accept this would require rejecting Mr Dabrowski’s account of events. For the reasons already given, I accept Mr Dabrowski’s evidence.

Conclusion on Attempt #2

249    I accept Mr Dabrowski’s evidence as to the statements made by Mr Ashton in a series of conversations between the two in 2017 and in a conversation with Mr Meldrum on or around 2 November 2017, as described above. That finding is fortified by the significant body of documentary evidence which outlines Qteq’s intentions, as well as admissions made by Mr Ashton and others about that topic. I am satisfied that the conduct alleged by the ACCC has been proven.

250    The purpose of the 15% provision can be characterised as having all of the following purposes, any one of which would be sufficient to establish the purpose condition:

(a)    ensuring that, if both parties bid for the QGC gauge tender, a material component of Pro-Test’s bid (namely, that it be limited to seeking to win only 15% of the work) was worked out in accordance with the understanding, being a purpose within the meaning of s 44ZZRD(3)(c)(v) /s 45AD(3)(c)(v); and

(b)    restricting or limiting Pro-Test from supplying gauge works to QGC, being a purpose within the meaning of s 44ZZRD(3)(a)(iii) /s 45AD(3)(a)(iii).

251    It can readily be inferred from the evidence of Mr Ashton’s conduct, discussed above, that he held the requisite intention for the attempt, and awareness of the material facts.

252    There was no dispute that Qteq and Pro-Test were in competition with each other in relation to the supply, or likely supply, of gauge works, and therefore the competition condition for this purpose in s 44ZRD(3)(c), (h) and (j)/45AD(4)(c), (h) and (j) were met.

253    The purpose of the Santos provision could be characterised as having both of the following purposes, either of which would be sufficient to establish the purpose condition for it:

(a)    preventing Qteq from supplying gauge works and/or DST to Santos, being a purpose within the meaning of s 44ZZRD(3)(a)(iii)/s 45AD(3)(a)(iii); and

(b)    allocating Santos as Pro-Test’s customer in respect of the acquisition of gauge works and/or DST, being a purpose within the meaning of s 44ZZRD(3)(b)(i)/s 45AD(3)(b)(i).

254    Whether Qteq was in competition with Pro-Test for the provision of DST services is in dispute, and is considered in relation to all three attempts, below.

Attempt #3: The Pro-Test 2019 Market Sharing Understandingg

255    The final alleged Pro-Test Attempt is quite separate in time and circumstances to Attempt #1 and Attempt #2 already considered. This is an allegation that Qteq attempted to, or attempted to induce Pro-Test to, make an arrangement or arrive at an understanding containing one or both of the following cartel provisions:

(a)    Pro-Test would not supply gauge works; and

(b)    Qteq would not supply completions and DST.

256    The ACCC also alleges Mr Ashton attempted to induce Pro-Test to arrive at the understanding described above.

257    The attempt is alleged to have taken place through statements made by Mr Ashton to Mr McDonald over the course of a dinner between the two on 24 June 2019 at the Fantauzzo Hotel in Brisbane. That the dinner took place is not contested. The contest is as to what Mr Ashton said and whether it amounted to the alleged attempt.

Conduct

The Fantauzzo Hotel dinner – 24 June 2019

258    The effect of the relevant portions of Mr McDonald’s evidence in chief of the Fantauzzo Hotel dinner was that:

(a)    Mr Ashton arranged the meeting via text message for reasons that were not clear to Mr McDonald prior to them meeting;

(b)    Mr Ashton did most of the talking, as had been his experience with most of their meetings or discussions;

(c)    after some general chit-chat, a world events-type discussion, the conversation moved on to Mr Ashton suggesting that they were hurting each other’s businesses, including a reference to Pro-Test’s gauge works business;

(d)    the topic of competing and the threat of legal action came up, and the topic of whether it made sense for Pro-Test to be involved in the gauge works business;

(e)    they discussed “we [Pro-Test] shouldn’t target the downhole gauge business because they [Qteq] weren’t going to target our – our [Pro-Test] completions and DST business, and that he would consider selling his [Qteq’s] DST tools to us [Pro-Test]”;

(f)    the suggestion that they were hurting each other’s businesses was not mentioned solely in relation to personnel, but was also about Pro-Test encroaching on Qteq’s business;

(g)    Mr McDonald had mentioned that the gauge business was about 20% of Pro-Test’s revenue and was a low margin business;

(h)    the point that Mr Ashton seemed to be making was that if it, that is the gauge business, was low margin and a small part of Pro-Test’s business, why would they be focussing on it, with Mr McDonald responding that it was consistent revenue, and worked well with their business to get utilisation of staff;

(i)    part of the point of the meeting seemed to be that Pro-Test should not target Qteq’s business and Qteq would not target Pro-Test’s business, and as to what was being referred to as the respective businesses:

… Qteq, their main business was the gauge business. So that was the part of the business that I understood he didn’t want us to compete with. And our main business was the completions and drill stem testing. And that was the business that they wouldn’t compete against us. That was what I understood from the discussion.

(j)    Mr Ashton expressed disappointment that Mike Wayne of Firetail was “considering going into gauges” and that Mr McDonald had thought this was mentioned to “further [Mr Ashton’s] suggestion that it didn’t make sense to compete with him”;

(k)    Mr Ashton had mentioned, as he had on at least one previous occasion, that he would consider selling Qteq’s World Oil Tools, a kind of tool used for DST work, to Pro-Test;

(l)    Mr Ashton said that if Pro-Test bought the tools, Qteq would no longer have the capacity to do DST work.

259    Mr McDonald also gave evidence about several emails and text messages sent after the Fantauzzo dinner.

260    Mr McDonald’s evidence is supported to a significant extent by contemporaneous documentary evidence. In an email Mr McDonald sent to Mr Dabrowski two days after the Fantauzzo dinner, he summarised what had occurred:

I caught up with Simon Ashton for about an hour Monday evening. Mostly general chit chat but the key reason was to suggest we were hurting each other’s business. He said they were not chasing other areas of our business and had not intention to (he mentioned about selling the WOT Tools to us again) …

He suggested we were an $8 – $10m (his guess and I did not correct him) business with a low margin segment that would be hurting our overall performance (that is what they see from the outside). I mentioned that we have not been very successful with Tenders …

I said very little although mentioned that the gauge side complimented our business well as it gave us some regular income and improved our utilisation of personnel.

(Emphasis added.)

261    The morning after the Fantauzzo dinner, Mr Ashton sent a text to Mr McDonald. It reads:

As always good to see you last night Ewan, look after that cold!! Our greatest challenge is to determine if a 20% segment, low margin, crowded market place really where ProTest wants to be? Ego’s need to be returned to the cupboard and common business sense applied please. There are a lot of opportunities to work together across the service space. Stay in touch. S

262    Mr McDonald admitted in cross-examination that his recollection of the conversations at the Fantauzzo dinner was quite vague. It is useful to reproduce a portion of that evidence in order to capture the nuance of what he said:

And your recollection of those conversations at this point in time, some years after the event, is quite hazy?---That’s correct…

And would it also be fair to say that the contents of those emails, those notes that you send to yourself and colleagues, are more likely to be reliable than your recollection as we sit here today?---More likely …

So, Mr McDonald, what I want to suggest is that Mr Ashton didn’t say to you in that meeting that he would not target your DST work in return for you not targeting Qteq’s gauge work?---I don’t believe he used the exact words of that, correct.

And what he talked about was “not hurting each other’s businesses,” as you’ve recorded there in your email?---But he did suggest that we’re hurting each other business and that they wouldn’t go after our work, we didn’t go after theirs.

Well - - -?---That’s my recollection of the – of the point of it.

So that’s more – that’s not so much what he said, as how you interpreted?---That’s what I interpreted.

What he said, which – is that correct?---I mean, that’s what I take away because, again, my recollection of the exact words not good enough to - - -

Yes. So the email is the best guide to the words that he actually used?---Correct. It is.

And then you’re offering the court your interpretation - - -?---Interpretation.

- - - of what was said in the conversation, accepting that the email [sent to Mr Dabrowski, quoted above at [260]] is now the best guide to what was actually said?---Correct. Yes.

263    The respondents ask that I read this exchange as Mr McDonald almost entirely walking away from his recollection of the dinner with Mr Ashton. The contention is that Mr McDonald is giving only an interpretation of what was said, and that he cannot recall what Mr Ashton had said at all. The respondents submit that Mr Ashton had only discussed the competition for staff between Qteq and Pro-Test, noting that this was an important component of Qteq’s legal claims against Pro-Test. Re-reading all of Mr McDonald’s evidence in chief, the email and text message reproduced above, and all of Mr McDonald’s evidence in cross-examination, I am unable to accept that the respondents’ approach is the right way to understand or interpret his evidence.

264    Far from Mr McDonald walking away from his evidence in chief, he was being clear about two things. First, that his recollection of precisely what was said by Mr Ashton was not clear; and second, that contemporaneous records were a better guide to precisely what was said than his memory. That did not involve abandoning his recollection of the burden of what was conveyed to him by Mr Ashton, which was not directly challenged. Mr McDonald’s account was only collaterally challenged in cross-examination, rather than directly confronted. Confining cross-examination to a collateral challenge carried the risk that it would not be effective, which is what has happened.

265    The respondents’ submission that there was discussion of competition between Pro-Test and Qteq but only in terms of staff does not accord with Mr McDonald’s contemporaneous notes of the conversation. Nor does it make sense in light of Mr Ashton’s reference to Pro-Test’s position in the gauge works market in his text message sent the next day. I am positively persuaded that the proposal advanced by Mr Ashton was that Pro-Test would not supply gauge works, being the only aspect of Pro-Test’s work that was discussed at the dinner, and that Qteq would not supply completions and DST, being the only aspect of Qteq’s work that was in contemplation. I arrive at this conclusion by the combination of Mr McDonald’s statement in evidence, his evidence in cross-examination, the email, and Mr Ashton’s text message. I am fortified in that conclusion by the absence of any evidence from Mr Ashton.

Conclusion on Attempt #3

266    I am satisfied that, in accordance with the ACCC’s allegation, that Mr Ashton conveyed to Mr McDonald a proposal that:

(a)    Pro-Test would not supply gauge works; and

(b)    Qteq would not supply completions and drill stem testing.

267    The first cartel provision, that Pro-Test would not supply gauge works, can be characterised as having both of the following purposes, either of which would be sufficient to meet the purpose condition:

(a)    preventing Pro-Test from supplying gauge works to acquirers of gauge works, a purpose within the meaning of s 45AD(3)(a)(iii); and

(b)    allocating to Qteq persons who acquire, or are likely to acquire, gauge works, being a purpose within the meaning of s 45AD(3)(b)(i).

268    There was no dispute that Pro-Test and Qteq were in competition with each other in relation to the supply or likely supply of gauge works, and therefore that the competition condition in s 45AD(4)(c) and (h) was met in relation to this provision.

269    The second provision, that Qteq would not supply completions or DST services, can be characterised as having both of the following purposes, either of which would be sufficient to meet the purpose condition:

(a)    preventing Qteq from supplying DST to acquirers of DST, being a purpose within the meaning of s 45AD(3)(a)(iii); and

(b)    allocating to Pro-Test persons who acquire, or are likely to acquire, DST, being a purpose within the meaning of s 45AD(3)(b)(i).

270    The parties dispute whether Qteq and Pro-Test were in competition in relation to the likely supply of DST work, which is considered in relation to all the Pro-Test Attempts below. There was no apparent dispute as to whether Qteq and Pro-Test were in competition in relation to completions.

271    Accordingly, I find that the making of Attempt #3 by being an attempt to arrive at, or induce Pro-Test to arrive at, a market sharing understanding, including the cartel provisions alleged by the ACCC, has been proven. This leaves the question of the competition condition for this and the two prior Pro-Test Attempts to constitute the pleaded contraventions.

Competition condition as to completions and DST for Attempts #1, #2 and #3 as to completions and DST for Attempts #1, #2 and #3

272    As I have concluded that each of the three Pro-Test Attempts, being Attempt #1, Attempt #2 and Attempt #3, has been proven to have been made, subject only to the competition condition being met, I now turn to that issue.

Must the ACCC prove that Qteq was in competition with Pro-Test in relation to drill stem testing?

273    It is common ground, and plainly the case, that Pro-Test and Qteq were in competition, or likely to be in competition, in relation to gauge works. There is a live question as to whether they were in competition in relation to DST.

274    Each Pro-Test Attempt involves one alleged cartel provision related to the provision of gauge works only. Attempt #1 and #2 also allege a cartel provision related to the provision of gauge works and DST; Attempt #3 involves an additional allegation of a cartel provision relating to completions or DST services (completions is discussed in the proceeding section). Whether the ACCC must prove that Qteq and Pro-Test were in competition, or likely to be in competition, in the provision of DST services to make out each attempt requires the disposition of two questions.

275    First, whether both alleged cartel provisions must be proved for each attempt. As I have already found, the ACCC is not bound by its pleadings to prove each of the cartel provisions alleged; it will be sufficient to establish each attempt if only one of the cartel provisions are established, where the purpose and competition conditions are met: The pleading issue section commencing at [87] above.

276    The second question is whether, for those cartel provisions related to the provision of DST and gauge works, satisfaction of the competition condition requires proof of competition in relation to both DST and gauge works. This question really only bites for the establishment of each attempt if my reasoning for the first question is incorrect, and in fact both provisions alleged must be established for the attempt to be made out.

277    The competition condition requires that the parties are, or are likely to be, in competition with each other in relation to the supply of “those goods or services” which meet the purpose condition in s 44ZZRD(2) and (3)/45AD(2) and (3): s 44ZZRD(4)/45AD(4). The ACCC contends that the word “those” appears only as a matter of grammatical necessity because it refers to the plural “goods” and “services” referenced in s 44ZZRD(2) and (3)/45AD(2) and (3). It does not import a requirement that the parties be in competition in relation to all of the goods and services to which sub-ss (2) and (3) apply. The ACCC contends that it would lead to absurd results to hold otherwise, as parties could avoid the cartel conduct provision by simply including, in the terms of a provision, reference to an additional good or service in respect of which the parties are not in competition. The respondents contend that the statutory language makes it clear that competition in relation to only some of the services for which the purpose condition is met will be insufficient to meet the competition condition.

278    The ACCC’s concern as to possible absurd results is not compelling. In the usual course, a cartel provision related to services for which the parties are not in competition would not be subject to a proscription. The fact that a contract, arrangement or understanding included such a provision, of course, would be no shield if it also included a cartel provision in relation to services for which the parties did compete. “Provision” here, is not to be construed in a technical sense; it draws attention to the content of what has been, or is to be, agreed, arranged or understood: Visy [7] (Gleeson CJ, McHugh, Gummow and Hayne JJ). Nonetheless, where a regulator has pleaded that the purpose condition for a provision is a particular way, it must satisfy the Court that the competition condition is met in respect of it. Otherwise, it is no cartel provision at all.

279    The apparent reason why the ACCC has pleaded some of the cartel provisions in relation to DST and gauge works here is because the evidence in relation to those cartel provisions is general and somewhat vague. Consider the detailed evidence of the 15% provision for Attempt #2 compared to the Santos provision in the same attempt, for which the only evidence was a statement by Mr Ashton to Mr Dabrowski that Qteq would not go after Pro-Test’s Santos work. While, in the circumstances, that statement could be interpreted as a reference to going after Pro-Test’s work in DST services and/or gauge works, it could not be specified further. The purpose condition was pleaded to be met in relation to the supply of DST and gauge works. Pleaded and evidenced in this way, it must be established that Qteq and Pro-Test were in competition in relation to gauge works and DST services for the competition condition to be met.

280    It follows that, because of my disposition of the pleading point issue, the ACCC only needed to prove one of the cartel provisions which met the competition and purpose conditions to make out an attempt. However, if that was not correct, the ACCC needed to prove that Qteq and Pro-Test were in competition in relation to gauge works and DST services to make out the cartel provisions that related to the provision of both services, and therefore to establish the contraventions. I now turn to consider the question of competition in relation to DST services.

Was Qteq in competition with Pro-Test in relation to DST services?Was Qteq in competition with Pro-Test in relation to DST services?

281    The parties correctly agree that the applicable test is whether there was a “real chance” of Pro-Test being in competition with Qteq for the provision of DST services. There is no dispute that Pro-Test was a provider of DST services. The question to be determined is whether there was a real chance of Qteq being a supplier of DST services in Australia at the time of the attempts, so as to be a likely competitor in that field. The assessment of the likelihood of Qteq being a supplier of DST services in Australia requires a careful assessment of both Qteq’s capability and its willingness or intention to deploy that capability, by reference to the evidence of what Mr Ashton said about Qteq’s competitive options and intentions.

282    The respondents’ position is that DST is distinct from Qteq’s primary business of PDHG installation, as it occurs at an earlier stage of well exploration. In the period the contraventions are alleged to have taken place, Qteq did not actually perform DST services in Australia, or otherwise hold itself out as having the capability of doing so. To the contrary, when it had been approached about such work in February 2018, it referred the inquiry to Firetail.

283    Contrary evidence going to the existence of Qteq’s capability and willingness to perform DST work can be summarised as follows.

Testimony and statements of Mr Meldrum, Mr Ashton and Mr Dabrowski

284    In his s 155 examination, Mr Meldrum made important admissions that Qteq:

(a)    “had the capability to do drill stem testing” (but not well testing) because it acquired two sets of DST equipment from Welldog;

(b)    from the time of its incorporation on 27 June 2017, had “some limited” personnel with the expertise to perform DST work;

(c)    had recently done some DST work in Mongolia, and could have had the capability to compete with Pro-Test on DST, albeit that it “wasn’t really a focus” for Qteq; and

(d)    was not actively trying to divest its DST capability around the time that the QGC tenders were released, but was not investing in that capability either.

285    The uncontradicted evidence of Mr Dabrowski is that Qteq had staff with expertise and the required tools to perform DST work between 2017 and 2019. This is supported by his evidence, also uncontradicted, that he had a “sound understanding” of Qteq’s capabilities in this area as, in his role as a permeability manager at Welldog, he had familiarity with the tools later acquired from Welldog by Qteq. Mr McDonald also gave evidence that Qteq had a set of World Oil Tools that it had acquired from Welldog, and he knew that Pro-Test staff who had previously worked at Welldog had used those tools.

286    In Mr McDonald’s meeting with Mr Ashton, being the subject of Attempt #3, the proposal advanced by Mr Ashton was in part that Qteq would not provide DST services so as to encroach on Pro-Test’s business. The respondents did not suggest that Mr Ashton did not say something to that effect, but rather sought to characterise it as directed only to the allegations in relation to former staff of Qteq working at Pro-Test, later the subject of the 28 July 2020 letter sent to Pro-Test by Qteq’s solicitors (see [117] above). There was no evidence from Mr Ashton or anyone else to support the notion that the offer not to encroach was anything other than a reflection of what Qteq could do, and otherwise perhaps would do. It conveyed a willingness to deploy the capability that Qteq had in relation to DST.

287    A similar message was conveyed by Mr Ashton to Mr Dabrowski in a text sent in 2019, stating “…We have not entered the testing business nor DST’s. Instead, we have battled manfully to recruit, train and retrain our people, invest in assets, sustain our business etc.” The clear suggestion of the text is that Qteq had taken the high road by not competing for DST work, but could do so if it so chose. Though that text was sent after the attempts, I infer that it referred to Qteq’s approach to DST since its incorporation, covering the attempt periods.

Qteq’s DST work in Mongolia

288    Qteq performed DST services in Mongolia’s Gobi Desert in late 2019, not long after the last of the alleged three Pro-Test Attempts. That is not contested by the respondents, and is evidenced by internal Qteq emails, an article about the work in an internal Qteq newsletter, and a public LinkedIn post from around March 2020 promoting it as a “perfectly executed DST job”. The significance of this is:

(a)    through its LinkedIn post about the Mongolian DST work, Qteq held itself out to its LinkedIn audience as capable of providing DST services; and

(b)    the Mongolian DST work suggested that Qteq could have performed this work in Australia at an earlier time, including the period in which the attempts are alleged to have occurred, as there is no evidence that the Mongolian DST work differed in nature from that performed in Australia, and Mr Meldrum cited it as an example of the DST work that Qteq is able to provide in his s 155 examination.

289    While Qteq had acquired such tools from Welldog’s receivers in 2017, it had attempted to sell them essentially from the time of acquisition, including (on Mr McDonald’s evidence) to Pro-Test, before ultimately shipping them to a client in Mongolia for use in a project there. The respondents contend that the ACCC’s reliance on the Mongolian DST work is misplaced, as under the CCA the competition must have the relevant nexus with Australia: see, CCA s 4 (definition of the phrase “in trade or commerce”). The Mongolian project was in fact a sale of the DST equipment, and showed only that a single Qteq staff member and third-party consultants had assisted a Mongolian company to perform DST work in a different jurisdiction. The respondents further contend that the LinkedIn post relied upon by the ACCC could not be taken as Qteq holding itself out as being capable of performing DST work in Australia. It is plausible that the LinkedIn post would not have been taken to be an advertisement of its capacity in Australia for participants of the CSG industry. Nonetheless, that does not undercut its relevance or weight as proximate evidence of Qteq’s capability to provide DST services extending over the entire period of those attempts.

Consideration

290    The overall picture emerging from the foregoing evidence is that Qteq retained DST capabilities by way of equipment and staff from Welldog and subsequently had been able to deploy that capability successfully in Mongolia. There is no reason to think that this would have been any more challenging to do in Australia. While Qteq did not appear interested in investing in these capabilities or developing this work, it retained an ability to perform that work in Australia until it divested its tools in Mongolia after the three Pro-Test Attempts. As such, the real question is whether the ACCC has established that the proven capability was ever really contemplated for deployment in Australia.

291    An important factor to take into account is the undisputed fact that Qteq and Pro-Test were already openly and obviously in competition with one another in relation to PDHG. Rivalry to that extent was not in dispute; nor was corresponding rivalrous behaviour, and the ability to constrain one another in relation to those services. The active question is whether, as a question of fact, it was likely, rather than probable, that their existing competition in relation to PDHG work, could, in the sense of being a real commercial likelihood, spill over to DST work: Pacific National [246].

292    In relation to each of the three Pro-Test Attempts, the evidence is that Mr Ashton presented Qteq as withholding the exercise of its capability to provide DST services in return for Pro-Test not exercising its capability to provide PDHG services either at all, or to a limited extent, or as part of a market sharing arrangement. Although being used in the sense of offering not to deploy DST capability, it was inherently an expression of a willingness otherwise to do so, in relation to an existing competitor. It was a form of competitive behaviour, expressed as potential rivalrous behaviour of a reasonably immediate kind. There was no evidence from Mr Ashton or anyone else that this was no more than bluffing, or that he was not offering to withhold the provision of a service that could or would not otherwise be provided. Mr Ashton was holding Qteq out as a provider of DST services, and as a real potential competitor to Pro-Test in the provision of DST services. That leads to the compelling inference that Qteq was likely to be in competition with Pro-Test, in the sense that it imposed a competitive constraint on Pro-Test’s conduct.

293    Mr Ashton might have given compelling enough evidence that he made no such offer, or that the offer was barren because it was only an offer not to do something that Qteq had no intention of doing in the first place. But he did not give any evidence at all, let alone compelling evidence to that effect. I therefore take the existing evidence as it is, uncontradicted. There is no evidentiary foundation before me not to take Mr Ashton at his word, and treat the offer he made other than in a literal way as something that Qteq could and would be willing to do. Mr Ashton was holding Qteq out as a potential competitor. As such, taken with the evidence of Qteq’s capability to do this work, the competition condition has been established.

Must the ACCC prove that Qteq was in competition with Pro-Test in relation to completions?

294    One of the alleged cartel provisions in Attempt #3 related to the provision of DST or completions. That cartel provision is described slightly differently in the ACCC’s pleadings:

(a)    In the further amended originating application:

Qteq would not supply drill stem testing or completions work.

(b)    In the further amended concise statement:

…including a provision whereby…Qteq would not supply drill stem testing or completions work.

(c)    In the further amended statement of case:

Qteq would not supply completions and drill stem testing.

(Emphasis added in all quotes above.)

295    Notwithstanding the inconsistent and infelicitous use of “and” rather than “or” in the further amended statement of case, it is clear that the pleadings, taken as a whole, allege that the cartel provision related to the supply of DST or completions work. Accordingly, for this provision, it would be sufficient if the cartel provision was proved in relation to the supply of either service. That reading is supported by the fact that the ACCC only ever pleaded that the purpose and competition conditions were met by establishing competition between Qteq and Pro-Test in DST. While the respondents’ concise statement in response contends that the competition condition was not satisfied because Qteq was not, and was not likely to be, a supplier of either DST or completions work, they did not contend that the purpose and competition conditions needed to be met with respect to completions for Attempt #3 to be made out. Whether Pro-Test and Qteq were likely to be in competition with each other in relation to completions was not part of the parties’ statement of issues either, though the issue of competition in DST was.

296    Unlike Attempts #1 and #2, the evidence as to the content of the cartel provision was specific enough in Attempt #3 to prove that the purpose and/or competition condition was satisfied in relation to both or either cartel provision alleged. It follows that pleaded in this disjunctive way, and with this specific level of evidence, it was sufficient that the ACCC proved that the purpose condition, and thus the competition condition, was established only in relation to the supply of DST.

Conclusion on the competition condition

297    The threshold for establishing the competition condition was not a high one in the circumstances of this case, especially given Mr Ashton’s conduct. There was the requisite rivalry and capacity to constrain in DST services. I conclude that the competition condition has been met for each cartel provision in each Pro-Test Attempt on the evidence adduced by the ACCC, albeit in the sense of having the capacity to compete and to make such competition a reality.

Qteq and Mr Ashton’s liability for the Pro-Test Attempts

298    No real argument was advanced by the respondents that the conduct and state of mind requirements for each of the three Pro-Test Attempts would not be met in relation to Qteq if the factual disputes as to conduct were resolved in the ACCC’s favour. For the reasons given above, I have accepted the accounts of Mr Dabrowski (for Attempts #1 and 2) and Mr McDonald (for Attempt #3). Those findings are supported by a corroborative body of evidence, including (especially for Attempt #2), internal correspondence among senior figures at Qteq that highlighted how Pro-Test was perceived as a threat and the importance of the QGC gauge tender to Qteq, and the purpose of the conduct that occurred in relation to it.

299    Attempts #1 and #3 took place exclusively through the conduct of Mr Ashton. Having accepted the accounts of Mr Dabrowski and Mr McDonald, there is no conclusion available other than that Mr Ashton had the requisite intention to commit each attempt. There is no challenge to the attribution of his intention and conduct for these attempts to Qteq, pursuant to s 84(1) and (2) of the CCA.

300    Attempt #2 took place through the conduct of Mr Ashton, Mr Meldrum and Mr Ramsay. In brief, the attempt took place via proposals made by Mr Ashton in conversations in November 2017, proposals made by Mr Meldrum in at least one conversation with Mr Dabrowski on or around 2 November 2017, and Mr Ramsay’s provision of the GeoPSI pricing list to Pro-Test on 10 November 2017. It can clearly be inferred from those statements that both Mr Meldrum and Mr Ashton held the requisite intention. Mr Ashton’s intention and conduct is attributable to Qteq for this attempt, pursuant to s 84(1) and (2) of the CCA.

301    What Mr Ramsay knew about the surrounding events is somewhat opaque. Mr Dabrowski’s evidence is that the details of the price throttling might have been discussed at the meeting held at Qteq’s offices on 2 November 2017, but he could not be entirely sure, and acknowledged the possibility that he had discussed this with Mr Meldrum in a separate conversation around the same time. It is possible on that evidence that Mr Ramsay was not involved in that conversation. Nonetheless, from the following facts, I infer that Mr Ramsay held the requisite intention: Mr Ramsay reported to Mr Meldrum who had discussed the detail of the price throttling mechanism with Mr Dabrowski, Mr Ramsay provided the GeoPSI price list to Pro-Test on 10 November 2017, he explained the relationship between the pricing mechanism and Pro-Test’s scope of work in a prior email to Mr Meldrum on 7 November 2017 (see above at [219]), and then later evocatively described the purpose of the pricing as limiting Pro-Test to around 15% of the QGC gauge tender work (see above at [225]).

302    There is no challenge to the attribution of Mr Meldrum or Mr Ramsay’s intention and conduct to Mr Ashton and Qteq either, pursuant to s 84(3) and (4). Both were acting as Mr Ashton’s agent within the scope of their actual or apparent authority.

303    Mr Ashton was directly involved in all three attempts. He was directly liable for the attempts to induce Pro-Test to enter into all three understandings.

304    It follows that I am satisfied the attempts alleged against Qteq and Mr Ashton have been comfortably proven on the balance of probabilities, paying due regard to the seriousness of reaching the following conclusions:

(a)    that Qteq attempted to contravene s 44ZZRJ/45AJ, or alternatively if that was needed, that Qteq attempted to induce Pro-Test to contravene s 44ZZRJ/45AJ; and

(b)    that Mr Ashton in his own capacity attempted to induce Pro-Test to contravene s44ZZRJ/45AJ,

in respect of all three of the Pro-Test Attempts.

F. THE EASTERNWELL NON-COMPETE AGREEMENTS (ATTEMPTS #4 AND #5)

Introduction

305    The ACCC alleges that Qteq (through Mr Meldrum and Mr Ashton) made two attempts to enter into a contract with Eastern Well Service No 2 Pty Ltd (Eastern Well No 2) containing a cartel provision, and is therefore liable for civil penalties under s 76(1)(b) of the CCA for attempting to contravene s 45AJ. In the alternative, it alleges two corresponding attempts to induce Eastern Well No 2 to enter into such a contract, rendering it liable to for civil penalties under s 76(1)(d) of the CCA. The ACCC also alleges that Mr Ashton, in his own capacity, attempted to induce Eastern Well No 2 to enter into those contracts.

306    The two sets of contraventions – attempt or attempt to induce – are alleged to have occurred:

(a)    during the period from around 6 to 17 November 2017 (Easternwell 2017 Non-Compete Agreement or Attempt #4); and

(b)    during the period from around 7 December 2018 to 11 February 2019 (Easternwell 2018-2019 Non-Compete Agreement or Attempt #5),

which are collectively referred to in these reasons as the Easternwell Non-Compete Agreements, or simply the Easternwell Attempts.

307    Easternwell as a single word was used as an umbrella term by staff and in business documents to refer to the overall business conducted through corporate entities, including as an email domain (easternwell.com.au), and will be used in that way in these reasons. References to “Easternwell” and “Eastern Well” are somewhat inconsistent in the evidence, the parties’ submissions and the parties’ statement of agreed facts, making it at times unclear what is being referred to. However, nothing turns on this.

308    It is agreed between the parties that:

(a)    the Easternwell business included, at all relevant times, Eastern Well No 2, a procurement entity, and Eastern Well Group Operations Pty Ltd (Eastern Well Operations), which provided drilling and rig workover services to oil and gas well operators;

(b)    Eastern Well No 2 and Eastern Well Operations were, at all times at which the attempts are alleged to have taken place, related bodies corporate within the meaning of s 4A(5)(c) of the CCA; and

(c)    in October of 2017, being a critical time immediately preceding the alleged Easternwell 2017 Non-Compete Agreement, the Easternwell business was the main well drilling contractor and supplier of rig workover services to QGC.

309    The respondents characterise the Easternwell attempt allegations as being in a different category to the Firetail and Pro-Test allegations, as the factual dispute is limited to the question of what to make of limited aspects of the evidence and what inferences should or should not be drawn from it. The real dispute lies in the characterisation of the contractual provisions that the ACCC argues are contravening in nature, and, in particular, whether or not the purpose and competition conditions are met. The two sides rely on the context in which those provisions arose in different ways to advance their competing cases. If the primary argument as to whether there were contraventions is resolved in the ACCC’s favour, there is a dispute as to whether the exclusive dealing exception contained in s 47 of the CCA applies.

310    The relevant context to the Easternwell Attempts overlaps to an extent with that for the Pro-Test Attempts. On 23 October 2017, QGC released a tender for the supply of workover rigs and associated services in the Surat Basin (the QGC rig tender). The next day, QGC released several parallel tender packages, including for the supply and installation of PDHGs for CSG wells in the Surat Basin (the QGC gauge tender). As QGC’s incumbent supplier of PDHGs and related services, Qteq wanted to be reappointed. Easternwell was the incumbent rig services provider, and was looking to tender for the QGC rig tender.

311    Success on the part of Qteq in relation to the QGC gauge tender would have been challenging for Qteq’s business, because QGC’s overall plan was to reduce the role of the gauge contractor over time to being only a supplier of the gauges and related equipment, shifting the gauge installation work over to the successful rig contractor. The gauge contractor would be responsible for training the rig contractor in order to complete this work.

312    The Easternwell 2017 Non-Compete Agreement (Attempt #4) is alleged to have occurred early in the QGC gauge and rig tender processes. Soon after the tenders were released, Easternwell and Qteq entered into discussions about Qteq providing services to Eastern Well No 2 for the purposes of bidding for the QGC tenders. In the course of those discussions, Easternwell and Qteq sought to negotiate a two-way confidentiality and non-disclosure deed, which would allow the parties to protect information exchanged while discussing the terms of that service provision. One draft version of that deed, proposed by Qteq to Easternwell, included a “Non-Circumvention and Non-Compete” clause that would restrict Eastern Well No 2 from supplying gauge services to QGC, or otherwise carrying on any business in competition with Qteq. That clause is the alleged cartel provision. A deed including the proposed clause was never executed.

313    The 2018-19 Easternwell Non-Compete Agreement (Attempt #5) is alleged to have occurred after the QGC tender processes had completed. By 9 October 2018, Qteq had been awarded the QGC gauge tender as the primary supplier, and Eastern Well No 2 and another company had been awarded the QGC rig tender. On 9 October 2018, QGC issued a letter clarifying that after the rig contracts’ “go-live” date of 1 January 2019, QGC intended to transition wired gauge installation services from Qteq to rig contractors, with an expectation that this would be implemented in the second half of 2019.

314    In that context, Easternwell approached Qteq about Qteq providing gauge installation training for its workers. Easternwell initially sent Qteq an ordinary confidentiality and non-disclosure deed to review and sign in order for discussions to proceed. Over the course of negotiations for that deed, Qteq proposed variations on a clause that would restrict Eastern Well No 2, or any of its related bodies corporate, from supplying gauge installation services to QGC or any other person. The variations of that clause proposed by Qteq are the alleged cartel provision for this attempt.

Application of s 45AC to the attempts

315    The ACCC’s case for establishing the purpose and competition conditions for the cartel provisions for both of the alleged Easternwell attempts (Attempts #4 and #5) relies upon the extended meaning of “party” in s 44ZZRC/45AC. That is because Eastern Well No 2, who was to be the party to each impugned proposed contract, was only a procurement company, while its related company, Eastern Well Operations, was the incumbent rig contractor to QGC. It is Eastern Well Operations, rather than Eastern Well No 2, which the ACCC contends was likely to be in competition with Qteq for the supply of gauge installation services. But it was Eastern Well No 2 that was to be the Easternwell contracting party with Qteq in the impugned proposed contracts.

316    Section 44ZZRB/45AB, contained in Div 1 of Pt IV of the CCA, provides that in that Division the word “party” has a meaning “affected by section 45ZZRC/45AC”. Section 44ZZRC/45AC is in the following terms:

Extended meaning of party

For the purposes of this Division, if a body corporate is a party to a contract, arrangement or understanding (otherwise than because of this section), each body corporate related to that body corporate is taken to be a party to that contract, arrangement or understanding.

317    Section 44ZZRC/45AC is a deeming provision in the sense that it creates a fictional state of affairs, rather than merely being a definition or some kind of clarification. A related body corporate to a body corporate that is a party to a CAU will also be taken to be a party to the CAU, even though they are not in fact a party, for the purposes of the cartel conduct provisions in Div 1 of Pt IV of the CCA. It is a legal fiction that operates upon establishing two facts, namely that a corporation is a party to the CAU, and that another corporation is related to that corporation, in order to “impose upon a state of affairs a consequence that would not otherwise prevail”: Woodlock v Commissioner of Land Tax [1974] 2 NSWLR 411 at 414B (Samuels J). The purpose of the provision is obvious enough, namely to ensure that the reach of the cartel provisions is not constrained by the use of diverse corporate structures.

318    Generally speaking, such a legal fiction does not have a legal operation beyond what is required to achieve the object of its enactment: Wellington Capital Ltd v Australian Securities and Investments Commission [2014] HCA 43; 254 CLR 288 [51] (Gageler J), followed in Queensland v Congoo [2015] HCA 17; 256 CLR 239 [165] (Gageler J), both cases being endorsed in Minister for Immigration and Border Protection v Makasa [2021] HCA 1; 270 CLR 430 [51] (Kiefel CJ, Gageler, Keane, Gordon and Edelman JJ); see also Muller v Dalgety & Co Ltd [1909] HCA 67; 9 CLR 693 at 696 (Griffith CJ) and Commissioner of Taxation v Comber [1986] FCA 92; 10 FCR 88 (FC) at 96 (Fisher J).

319    However, this statement of principle should not be understood to entail any departure from ordinary principles of statutory construction: Jenks v Dickinson [1997] STC 853 (Ch D) at 878 (Neuberger J), quoted with approval in Newcastle Airport Ltd v Chief Commissioner of State Revenue [2014] NSWSC 1501; 99 ATR 748 [56] (White J), which was in turn endorsed in Ellison v Sandini Pty Ltd [2018] FCAFC 44; 263 FCR 460 [210] (Jagot J, with whom Siopis J agreed) and Holdsworth v Commissioner of Police (NSW) [2020] NSWSC 228 [41] (Beech-Jones J).

320    The respondents contend with emphasis that the phrase “is a party to a contract, arrangement or understanding” in s 44ZZRC/45AC means that it does not extend to attempts, but only to an actual CAU. They read the words “for the purposes of this Division” as limiting s 44ZZRC/45AC to actual contraventions of cartel provisions within Pt IV. They contend it does not apply to attempts, because s 76, which empowers the Court to order the payment of a pecuniary penalty where someone has attempted to contravene such a provision, is found in Pt VI, and therefore necessarily not in a Division of Pt IV. They rely upon the observation of Fisher J in Comber at 96 that deeming provisions are to be construed strictly and that it is improper to extend by implication the statutory fiction created. If that means no more than applying the usual processes of statutory construction, including as to purpose, that is uncontroversial. But if it means more than that and purports to provide for a special rule of construction for deeming provisions, that cannot be accepted as representing the correct state of the law in light of the more recent authority cited above.

321    In BlueScope (No 5) [498] and [541], O’Bryan J applied s 44ZZRC to the alleged attempts in that case, although doing so did not appear to be in issue. I consider his Honour was correct to have done so. To do otherwise would be to create an absurd situation whereby entry into a CAU where the competition condition is met through a related party would be proscribed, but an attempt to enter into such a CAU would not. In that way, only a subset of attempted contraventions of substantive provisions would be caught. Corporate structures of this kind would be effective for attempted contraventions in this distinct category, but not for substantive contraventions in the same category.

322    The answer lies in a correct characterisation of the case being brought. The ACCC’s case does not entail applying s 44ZZRC/45AC to the attempt per se, but rather to what was being attempted. As the ACCC submits, the Court is required to look forward and determine whether the alleged CAU would, if made, have included a cartel provision. That must include consideration of how any deeming provisions would affect liability, if the attempt was successful. Put another way, the allegation is that what was attempted was to enter into the two contracts with Eastern Well No 2, in circumstances where its related company, Eastern Well Operations, would be likely to be in competition with Qteq.

323    Finally, the respondents raised that the ACCC had not pleaded its reliance on s 44ZZRC/45AC. While the provision is not cited in its pleadings, the ACCC’s further amended statement of case pleads that the competition condition for each Easternwell Attempt is met as “Eastern Well No 2, through its related body Eastern Well Group Operations, was or was likely to be in competition with Qteq in relation to the supply of gauge installation services.” I am satisfied that the ACCC had adequately identified the relevant material facts on which it would rely in this respect. The respondents were clearly on notice of the case that was being brought, and the absence of any overt reliance on the provision in the pleadings (using that term widely) did not occasion any denial of procedural fairness. The respondents plainly knew the case that they had to meet, and advanced an unsuccessful legal argument in attempting to do so.

324    It follows that I conclude that the ACCC has legitimately invoked the extended meaning of “party” in s 44ZZRC/45AC.

Attempt #4: The Easternwell 2017 Non-Compete Agreement

325    The second Easternwell allegation is that, during the period from approximately 6 to 17 November 2017, Qteq, through Messrs Ashton and Meldrum, engaged in an attempt to make, or induce, a contract with Eastern Well No 2 containing cartel provisions. Those cartel provisions would have prevented Eastern Well No 2 and its related bodies corporate from, other than in concert with Qteq, pursuing or performing gauge installation services work for QGC or any other CSG operators. The ACCC also alleges that Mr Ashton attempted to induce Eastern Well No 2 to enter into such an agreement.

Background: The QGC gauge and rig tenders

326    As described above at [146]ff, on 23 October 2017 QGC issued an invitation to tender for the supply of workover rigs and associated services in the Surat Basin (the QGC rig tender). The next day, on 24 October 2017, QGC released a package of four other invitations to tender, including for the supply of gauge services in the Surat Basin (the QGC gauge tender). Functionally, the structure of the QGC tenders meant that whichever company won the QGC rig tender would eventually be expected to additionally provide gauge installation services to QGC. This work was usually done by companies that performed gauge installation and monitoring, rather than companies which provided workover rig services. It does not appear to be in doubt that the workover rig providers would likely have required training in order to perform the downhole gauge installation services as part of the QGC rig tender scope. It is apparent from the evidence that Qteq had the experience with the relevant services to provide such training (as did Pro-Test).

327    It was QGC’s tender proposal that the gauge contractor would be required to provide gauge installation training to the rig contractor which gave rise to commercial concerns on the part of Qteq. Senior figures at Qteq referred to that training somewhat generically and therefore inaccurately as “intellectual property”. It is convenient to use that phrase as an umbrella term for what is not just strictly intellectual property in the legal sense, but also to encompass such things as knowhow, skills and expertise, not least because that is apparently how it was used in written communications that are in evidence.

328    At the centre of Qteq’s concerns was the scope for Eastern Well Operations, in its capacity as the company delivering rig services to QGC on behalf of Eastern Well No 2, to obtain from Qteq the capability to carry out gauge installation work, and then be able to use that capability to compete against Qteq for that work more generally, not just in relation to QGC. That is, using what had been obtained from Qteq against it. It is clear from the evidence that Qteq was keen to avoid its potential (and later actual) contractual obligation to provide gauge installation training to the rig contractor as it would result in creating a competitor in this core area of its work. Whether that constitutes likely competition will be addressed in the part of these reasons dealing with the competition condition.

Conduct

Discussions between Easternwell and Qteq begin

329    In the week after the issue of the two QGC tenders there were communications between representatives of Qteq, Mr Meldrum and Mr Ramsay, and representatives of Easternwell, Mr Kyle Koziol and Mr David Diete. Mr Koziol was the general manager of the Easternwell Energy business division. Mr David Diete was the Purchasing Team Leader for Easternwell.

330    On 30 October 2017, Mr Meldrum and Mr Ramsay attended a briefing session about the tenders, hosted by QGC (described further above at [149]). During the course of that day and the next day, 31 October 2017, there was an exchange of emails between Mr Meldrum and Mr Koziol on the topic of meeting to discuss the QGC rig tender.

331    During the morning of 31 October 2017, Mr Meldrum and Mr Diete had a telephone conversation. On the same day, Mr Diete sent Mr Meldrum a subcontractor confidentiality agreement, and asked that it be signed and returned so that Easternwell could issue Qteq with a request for quotation (RFQ). Mr Meldrum returned that signed confidentiality agreement, also referred to as a non-disclosure agreement (NDA), later the same day, noting that it only covered Easternwell sharing the content of its QGC rig tender, and that a “2 way NDA” would be required in order for Qteq to share pricing or equipment and services details for inclusion in a bid.

332    The same day, 31 October 2017, Mr Meldrum emailed others at Qteq, including Mr Ashton, summarising the QGC tender briefing he had attended the previous day. In that email, Mr Meldrum stated that “the tender covers PCP Pumps, Rods, Diverter Valves and Downhole Gauges”, and noted that the main point from the meeting was that QGC intended that the primary winner of each tender would have 100% of the work, and that back up contractors would have a low work volume. All contracts would be for three years with an option to extend for two more. In relation to the downhole gauge tender part of the briefing, Mr Meldrum said that QGC intended to transition to zero men crews from two men crews within a year of the contract being awarded, so that the gauge contract would end up being for equipment supply only. Mr Meldrum wrote that bidders were “welcome to just bid on the equipment supply only with no service”.

333    That evening, Mr Meldrum sent an email to Mr Koziol, copied to Mr Ashton, advising that he would meet with “David” (Mr Diete) and Mr Ashton at Easternwell’s Toowoomba offices to review the scope of the QGC rig tender, and then put a proposal to Mr Koziol about how they “might work together to get a successful outcome for both parties”. Mr Meldrum also advised that he had signed what he described as the “one way NDA” with Mr Diete, noting that he had advised Mr Diete that Qteq would require a “two way NDA” before they could quote or give details on their service provision to Easternwell.

334    Two days later, on 2 November 2017, Mr Diete sent by email to Mr Meldrum a request for quotation (First Easternwell RFQ), which included three options for the supply of services and equipment from Qteq to the Easternwell business. This RFQ was for Qteq to supply its items and personnel for the installation, testing and retrieval of permanent downhole gauge cable, providing a crew of two permanent downhole gauge cable technicians as well as all training for personnel involved in the scope of work. There were three proposed options for the structure of the items and services to be provided to Easternwell by Qteq, the core features being that:

(a)    Qteq would supply for the full scope of work, including supply of all equipment and one technician per crew per 24-hour shift;

(b)    Qteq would supply services only, including two technicians to perform the work per 24-hour shift; and

(c)    Qteq would supply equipment and training, but that Easternwell crew members would be used to perform the work.

335    This accords with the summary description Mr Meldrum gave of the three options in an email he sent to Mr Diete (copied to Mr Ramsay at Qteq and to Mr Brad McCotter, Easternwell’s Supply Chain Manager) on 7 November 2017.

336    On the same day, Mr Ramsay sent an email to Messrs McDonald, Meldrum and Dabrowski with the subject line “Pro-Test Qteq Meeting Notes” (referred to at [211] above). The general content of this email suggests that the content of the meeting referred to was one regarding the QGC tenders. Mr Ramsay’s meeting notes include five options under the heading “Rig Tender”, being:

1)    Decline to bid

2)    Price high to make rig tender option uncompetitive

3)    Submit jointly to Easternwell and other rig companies

4)    Insist that Easternwell to sign non competition deed prior to giving them pricing

5)    Pricing to Easternwell is based on they must give 100% of contracted work, no option for carve out

337    That correspondence is relevant context for what followed, and is also relevant in relation to the purpose and competition conditions. Point 4 of Mr Ramsay’s email above is relevant to both Easternwell attempts, as Qteq did seek to enter into two agreements containing non-competition terms. Point 2 also reflects Qteq’s opposition to the transfer of installation services to the rig contractor under the QGC gauge tender. Mr Meldrum, when questioned about this communication in his s 155 examination (which is admissible only against Qteq), stated that his understanding of point 5 of Mr Ramsay’s email was:

What I would be looking for if I was gonna sign a contract with the rig tenderer – the rig contractor, and I’m gonna train their personnel to do my work or I’m gonna subcontract to them to provide services to them, I want them to assure me that based on the price that I’ve given them, they’re gonna give me all the work. They’re not just gonna say, ‘You can only – ‘ they started us off and said, ‘ We’ve got it all’ but then after six months they cut us off or they chop us down or do whatever, So, we’re looking for assurance that they would give us all the work without carving any of it out… So that they didn’t cut us short on the scope of work

338    Mr Meldrum continued in relation to point 4 of Mr Ramsay’s email:

…Easternwell or any of the rig companies, workover rig companies up until the point of this date, none of us were in competition. Right. Qteq wasn’t the competition with Easternwell, Pro-Test wasn’t in competition with Easternwell, Baker Hughes wasn’t in competition with Easternwell. Easternwell’s competition would’ve been … all the other rig companies, but what was happening here with this tender was that our customer wanted us to give our IP to the rig company so that they would then become a competitor, or they could become a competitor if they learned how to do that…. And what we were concerned about or what we were trying to achieve was that if we did agree to give that IP to whoever the successful rig tenderer was, it might not have been Easternwell, it might’ve been somebody else. We… were trying to find ways to protect ourselves so that they then couldn’t take that then go to – because we held contracts for Origin and other- they could’ve taken that model and then, well, they would’ve put us out of business basically.

339    Mr Meldrum additionally confirmed in the course of his s 155 examination that this concern spread beyond the possibility that Easternwell might do gauge work going forward in relation to the workover rig. It also extended to other areas, but he had no concerns their conduct might be illegal because they were not in competition with rig companies. Rather, his concern was to ensure that Qteq was acting in a proper commercial manner to try to protect its business. That assertion was, in context, referring to existing competition at that point in time.

340    This part of the s 155 examination was in relation to an email that is not part of the alleged contravening conduct and indeed preceded it. However, a relevant state of mind can be established prior to corresponding conduct taking place. Indeed, the necessary state of mind will ordinarily need to be in place by no later than the time of the conduct to which it relates: see by analogy R v Campbell [2008] NSWCCA 214; 73 NSWLR 272 [44], [129] (Spigelman CJ), and [137], [180] (Weinberg AJA).

341    On 6 November 2017, Mr Diete sent a draft two-way confidentiality and non-disclosure deed between Qteq and Eastern Well No 2 to Mr Meldrum (the First Easternwell NDA). The stated purpose of that deed was to allow an exchange of information between the parties, and a discussion about the terms under which Qteq might make a proposal to provide services to Eastern Well No 2 to enable it to perform its obligations to QGC.

342    That draft deed also included a special condition that Qteq notify Eastern Well No 2 of proposals by third parties for the provision of competing services, and preventing Qteq from responding to any such proposals. The respondents describe this as an unconventional term which would restrict Qteq from responding to requests for gauge installation services from other workover rig providers, which was commercially unacceptable to Qteq in a context where other bidders for the QGC rig tender were likely to be asking for similar quotes. The ACCC instead describe this as a “normal confidentiality and non-disclosure deed”. It is not necessary to resolve that difference in characterisation, but I accept that this aspect was at least unusual and liable to be of legitimate concern to Qteq and Mr Ashton. It was a motive to take steps to avoid that outcome.

The First Qteq NDA

343    That same day, 6 November 2017, Mr Meldrum replied to Mr Diete’s email attaching a mutual non-disclosure, non-circumvention and non-compete agreement drafted by Qteq’s in-house lawyers (the First Qteq NDA), asking that they use that version instead. The draft included at clause 1.1(b) an agreement that the parties would use confidential information they received only in relation to the QGC rig tender, and not for their own commercial purposes. This draft included the following clause 8, which is alleged by the ACCC to be the unlawful cartel provision:

8. NON-CIRCUMVENTION AND NON-COMPETE

8.1    In order to protect the legitimate business interests of QTEQ and each of its Affiliates, [Eastern Well No 2] undertakes that, other than in concert with QTEQ, it shall not, directly or indirectly:

(a)    itself pursue or perform the Gauge Scope in relation to the Project or any Substitute Project;

(b)    induce, solicit, procure or otherwise encourage any third party to pursue or perform the Gauge Scope in relation to the [QGC gauge tender] or any Substitute Project;

(c)    seek, encourage or respond to any approach from any third party to pursue or perform the Gauge Scope in relation to the [QGC gauge tender] or any Substitute Project; or

(d)    otherwise carry on, be engaged, concerned or interested in, any business concern which is (or intends to be) in competition with the business of QTEQ.

8.2    [Eastern Well No 2] shall procure that its officers, employees, agents, advisers and other representatives, and each of its Affiliates and their respective officers, employees, agents, advisers and other representatives, comply with Clause as if they were [Eastern Well No 2].

8.3    For the purposes of this clause, Substitute Project shall mean any project involving the same customer or the same or substantially similar resources, technology or work product as the Project.

344    The “Project” was defined as the scope of work under the QGC rig tender, which included the provision of gauge installation services. The definition of “Substitute Project” in clause 8.3 seems directed towards protecting Qteq if a similar contract replaced the QGC rig tender, which is a view supported by Mr Meldrum in his s 155 examination. But this definition is not limited to contracts involving QGC, and is broad enough to apply to contracts with other CSG operators involving the same or similar subject matter. On its plain terms, it would restrain Eastern Well No 2 and its related bodies corporate from performing rig workover services or gauge installation services (among other things) to QGC or other CSG operators.

345    Clause 10 specified that parties were bound by the terms of the agreement for three years after signing, but that clause 8 would survive termination of the agreement.

The First Qteq NDA is rejected by Easternwell

346    The following day, 7 November 2017, Mr Diete replied to Mr Meldrum asking that Qteq instead use the First Easternwell NDA. Mr Meldrum replied later that same day, stating that the First Easternwell NDA required Qteq to be exclusive to Easternwell for the services, other than direct to QGC, and Qteq could not agree to it as they already perform those services on other rigs contracted by QGC and would need to do so in the future. He also said that without an NDA in place Qteq could provide a standard quote only for option 2 of the First Easternwell RFQ (supplying services only), but could not provide further technical information or a track record until there was an NDA and non-compete document executed by both companies. The reference by Mr Meldrum to an NDA and non-compete document should be taken to be a reference to the First Qteq NDA, being the most rational way to understand this evidence.

347    The ACCC also relies on Mr Meldrum’s email to Mr Diete as evidence of Qteq’s perception of Easternwell as a competitor. The respondents submit that the email from Mr Meldrum expresses a clear concern about the protection of Qteq’s information, and goes to the purpose of the cartel provisions. In this context, they seek to confine the period in which the attempt was capable of having occurred to the time between when Mr Meldrum sent the First Qteq NDA to Mr Diete at 5.24 pm on 6 November 2017, and when Mr Diete rejected that NDA, the next morning at 10.25 am, with two consequences:

(a)    This was a short, commercial back and forth of a draft from Qteq as a counter-response to the First Easternwell NDA, which was quickly rejected and so is trifling and should not be pursued as a contravention, nor, implicitly at least, should be taken to be able to constitute an attempted contravention.

(b)    This attempt case should be pursued only in relation to Qteq, as Mr Ashton had done nothing in this confined period of time, noting that he was not even copied on the email from Mr Meldrum to Mr Diete by which he provided the First Qteq NDA to Easternwell.

348    I am unable to accept that the time during which the alleged attempt, or attempt to induce, was capable of taking place should be constrained in this way. Rather, the longer time range relied upon by the ACCC within which to prove the attempt remains appropriate. That is so, not least because an attempt does not necessarily end at the point at which a proposal is first refused. That is particularly true, as the evidence reveals that Qteq did not give up upon the first rebuff, with Mr Ashton thereafter having direct involvement in attempting to persuade Mr Koziol to sign. It is therefore appropriate to continue the narrative of events established by the evidence as relied upon by the ACCC.

Mr Ashton contacts Easternwell about the First Qteq NDA

349    On 8 November 2017, Qteq submitted a pricing proposal to Easternwell in accordance with option two of the First Easternwell RFQ, for the provision of downhole gauge installation services for the QGC rig tender, as foreshadowed by Mr Meldrum’s 7 November 2017 email to Mr Diete. That proposal was for a minimum of 11 packages of work (that is, work at 11 separate sites), with a two downhole gauge cable technicians per 24-hour shift and all necessary equipment for the installation services for the11 packages.

350    On the afternoon of 16 November 2017, Mr Ramsay forwarded Mr Ashton the First Qteq NDA, describing it as the “NDA that was given to Easternwell that they refused to sign”. Later that day, Mr Ashton sent the following email to Messrs Meldrum and Morgan, copied to Mr Ramsay:

Gents,

I had an hour on the phone with Kyle Kozoil [Koziol] the CEO at Eastern Well and we had a candid discussion about the QGC workover tender:

1.    He told me that our pricing was very high as we had 2 man crews and equipment. I agreed as we did not trust them.

2.    He asked if we could reduce the crew size. I said only if he was a preferred contractor.

3.    I asked if he was fielding proposals from certain companies to train the rig crew and provide the equipment in competition to us. He said yes.

4.    He said that they were merely responding to the client’s wishes.

5.    I asked if he wanted to create a data acquisition business. He said no.

6.    I also asked if he was pricing up spoolers and installation packages, he said yes.

7.    I told him that our technology staircase predicted that we would be running wireless gauges within 12 months and had already done trials.

8.    Told him that we would sell our spoolers to him as we did not want them in a “spoolers graveyard museum” exhibit.

9.    Told him that the way forward was [for] Eastern well and Qteq to work together to deliver an integrated team where Qteq delivers the equipment & installation package 1 specialist gauge man and Eastern supplied one cross trained rig hand.

10.    Each rig would have a permanent gauge capability.

11.    Told him that we were unable to work up competitive pricing unless we were in a solid alliance under a clear NDA and working agreement.

12.    Told him that we would send through a suitable agreement that would enable us to speak candidly together, not one sided agreements.

Kyle is open to work with us, sign up an agreement and submit better pricing with shared crews. I said that I wanted the alliance issues handled by senior execs initially.

Ewan, can you put together a suitable cover letter and NDA (see attached) so that we can work exclusively with Eastern well as their preferred gauge installer and supplier.

We need to ensure that they realise that the Wireless solution would negate all their capex investment and make it totally unprofitable to supply. Kyle was clearly intimidated by this threat.

Our agreement should mirror their rig contract term.

(Emphasis added.)

351    Point 11 is clearly referring to the First Qteq NDA, or one with the same non-compete restraints, which may be seen to be the purpose of Mr Ashton speaking to Mr Koziol given that Easternwell had refused to sign it. The remaining portions that are emphasised make it clear how important the First Qteq NDA was to Qteq, and were evidently designed to convey to Easternwell the hazards associated with not being in tandem with Qteq. This becomes more apparent with the communications to Easternwell that followed.

352    Mr Meldrum replied to Mr Ashton’s 16 November 2017 email later that same day, attaching his correspondence with Easternwell and summarising the communications regarding the NDA up to that point. Mr Meldrum characterised the NDA from Easternwell as “very one sided and essentially had us exclusive to Easternwell other than dealing direct to QGC”. He also wrote:

Now that you have had the conversation with Kyle and he has stated our pricing was high, this for sure was intentional in our part as we do not want the Easternwell option to be competitive.

The reference to the “Easternwell option” seems to be a reference to the option that Easternwell itself provide gauge installation services to QGC. I return to the significance of Mr Meldrum’s 16 November 2017 email on the topic of the likelihood of competition below.

353    Mr Meldrum’s 16 November 2017 email also included a proposed draft cover email to be sent by Mr Ashton to Mr Koziol (key portions highlighted in bold):

With reference to your recent RFQ for DHPG Gauge supply and services and your call with Simon Ashton we would like to propose that Eastern well and Qteq get together to form an alliance that specifically meets QGC's requirements to reduce crew sizes for DHPG gauge installations. However to do this we need to get in place a tight agreement between our companies where we agree that we are not going to compete with each other. Qteq is well placed to help Eastern well secure future work with QGC as we already have in place the equipment and people to carry out the work and services without the requirement for CAPEX or people investment. Qteq is working diligently to help QGC move away from the need to run wired gauges in their wells and we plan to have a wireless product in the market within 12 months that will not require any personnel on site to install. Based on this it would appear to us that should Eastern well elect to compete with Qteq in the DHPG business and secure workscope from QGC the investment that would be required to meet the scale of operations would be significant and would only deliver a return for a very short time as the wired technology will be replaced with wireless.

Qteq is open and willing to have a tight business relationship with Eastern well and our people and crews have already demonstrated they can work together well in delivering a first class service to QGC.

As you know Kyle we have broached the subject of working together a number of times and I had proposed many months ago that it would make sense for us to do so to ensure that Eastern well's workover rig tender be packed with Qteq's KPI's to demonstrate to QGC that we were working together to reduce their costs. I think the time has now come where we need to make a decision at the senior levels in our companies whether we want to make a commitment to each other or compete.

(Emphasis added.)

354    When asked about this draft email in his s 155 examination, Mr Meldrum clarified that the reference at the end of the proposed email to “compete” meant competition in relation to gauge installation services, not equipment supply. That accords with the ordinary contextual reading that “compete” must be given in the first paragraph of this email, especially given the reference in the preceding sentence to “DHPG gauge installations”.

355    Another internal Qteq communication provides some useful context for understanding how senior Qteq figures viewed Easternwell at the time. On 16 November 2017, Mr Meldrum emailed Mr Ashton and Mr Morgan expressing concern over a threat to Qteq’s business from Welldata, apparently a reference to Subservice Surveillance Systems Ltd. Mr Ashton’s response was that “the biggest medium term threat to our business are the rig providers I suspect…”. In context, this must be a reference to rig providers providing installation services, including Easternwell. When taken to this part of Mr Ashton’s email in the course of his s 155 examination, Mr Meldrum said that there was no doubt that rig providers posed a threat to Qteq’s business if the rig providers were going to get the “installation IP” (see discussion of the term above, at [327]), and Qteq was going to lose a lot of revenue because of that.

356    The next day, 17 November 2017, Mr Ashton sent an email to Mr Koziol in substantially the same terms as Mr Meldrum’s draft. That email referred to an opportunity for Qteq and Easternwell to work together to deliver innovation and cost reductions to QGC, and proposed a service alliance to meet QGC’s requirements for DHPG gauge installations. It included the following paragraphs:

However, to do this we need to get in place a tight contractual agreement between our companies, where we agree that we are going to create a co-operative alliance model and not seek to compete with each other.

The alternative would be that Easternwell elects to compete with Qteq in the DHPG business and secure workscope from QGC. The investment that would be required to meet the scale of operations would be significant, operational safety risk would increase and it would only deliver a return for a very short time, as the wired technology is inevitably replaced with the wireless system. It would be much like buying a video business when the world has moved on-line.

…

I think the time has now come where we need to make a decision, at the most senior levels in our companies, whether we want to make a commitment to each other, and create a life of field solution business.

357    This email was sent after Mr Ashton had been provided with a copy of the prior communications between Mr Diete and Mr Meldrum and constituted him personally joining in the conduct directed to Easternwell, being the conduct that the ACCC relies upon to prove the attempt to procure agreement that it contends had already been underway both by speaking to Mr Koziol on 16 November 2017, or alternatively or additionally by the email to Mr Koziol the next day. This serves to demonstrate why the respondents’ submission that the attempt was concluded earlier could not be accepted.

Epilogue

358    On 4 December 2017, after the events described above, Qteq submitted its initial bid for the QGC gauge tender. The bid’s cover letter emphasised its advantages as the incumbent supplier and the efforts already made to improve its operations and costs, and suggested that choosing a different service provider risked a significant loss of revenue for QGC as it could result in a decrease in gauge installation reliability, repeating what was in the tender document itself. On 20 August 2018, it signed a contract with QGC for the supply of PDHGs and gauge installation services, as contemplated by the QGC gauge tender.

359    Eastern Well No 2 submitted its response to QGC for the QGC rig tender. By 9 October 2018 it had been awarded the QGC rig tender with effect from 1 January 2019. In 2019 it began providing gauge installation services to QGC after training was provided by Pro-Test.

Conclusions on conduct

360    The key conduct alleged by the ACCC and established by the evidence can be summarised as follows:

(a)    Mr Meldrum sending the First Qteq NDA to Mr Diete on 6 November 2017;

(b)    Mr Ashton’s subsequent attempts to persuade Eastern Well No 2 to sign the First Qteq NDA, including:

(i)    the 16 November 2017 phone call with Mr Koziol (summarised in an email sent on the same date); and

(ii)    the 17 November 2017 follow up email he sent Mr Koziol.

The purpose condition

361    The central dispute on this allegation is whether the restraints in cl 8 of the First Qteq NDA were cartel provisions. They must meet the purpose condition within the meaning of s 45AD(3). The ACCC and the respondents advance differing interpretations of the clause, and disagree as to whether the restraints contained within it meets the purpose condition. The ACCC contends that the restraints in cl 8 had the purposes of:

(a)    restricting or limiting the supply, or likely supply, by Eastern Well No 2, or any of its related bodies corporate, of gauge installation services to QGC, being a purpose within the meaning of s 45AD(3)(a)(iii); and

(b)    restricting or limiting the likely supply, by Eastern Well No 2, or any of its related bodies corporate, of gauge installation services to other operators of CSG wells, being a purpose within the meaning of s 45AD(3)(a)(iii).

362    Before turning to cl 8, it is convenient to refer briefly to the legal framework for its interpretation that the ACCC relies upon, especially Gleeson CJ’s observation in News v South Sydney [18] that:

Purpose is to be distinguished from motive. The purpose of conduct is the end sought to be accomplished by the conduct. The motive for conduct is the reason for seeking that end… The manifest effect of a provision in an agreement, in a given case, may be the clearest indication of its purpose.

363    The ACCC also relies upon the decision of Beach J in Olex [494], where his Honour adopted Gleeson CJ’s statement above that manifest effect may be the clearest indication of a provision’s purpose, but went on to state that, though the Court is to identify the subjective purpose of the provision, that subjective purpose:

can be identified using objective considerations and inferred from circumstantial evidence. Moreover, where conduct is part of a wider strategy, the purpose of that strategy can be relevant to determining the purpose of the conduct.

Plain language of cl 8

364    With the distinction between motive and purpose, and the role of strategy in mind, I turn to the text of cl 8. Clause 8.1(a) would have required Eastern Well No 2 not to, other than in concert with Qteq, pursue or perform gauge installation services for QGC or any other CSG operators in competition with Qteq. The definition of the term “Substitute Project” in cl 8.3 makes the restraint particularly broad, capable of applying to gauge installation projects of other Australian CSG operators. Even without that reference to a substitute project, however, or even with a more limited reading of the definition, restraining Eastern Well No 2 and its related entities from competing with Qteq in relation to the QGC gauge tender would be sufficient to meet the purpose condition.

365    Unless the context denies cl 8 its literal meaning, the effect of what was sought to be agreed to describes its purpose, and that purpose would on its face clearly enough satisfy the purpose condition. However, the evidence does not stop there, and more importantly, does not contradict the overt stated purpose, especially in the absence of evidence from Mr Ashton and Mr Meldrum to qualify its express terms.

Admissions as to purpose by Messrs Ashton, Meldrum and Morgan

366    Rather than contradicting the express purpose in cl 8, the statements made by Messrs Ashton, Meldrum and Morgan in their s 155 examinations tend to reinforce it.

367    In Mr Ashton’s examination, he was asked whether he was trying to ensure that Easternwell stayed out of the gauges market, to which Mr Ashton replied that he was not; he said he was trying to ensure that Easternwell used Qteq to install gauges and not try to do it themselves, which he thought was fraught with risk. Mr Ashton also stated that he was concerned that Easternwell might independently compete with Qteq, if it managed to obtain Qteq’s “intellectual property”. Qteq intended to prevent that, so that Easternwell could not build their own gauge business on what Qteq provided to it, and eventually take Qteq’s personnel and systems. He said that he thought it was fairly obvious that Easternwell might want to become a “gauge company” if they were able to do that, which I take to mean becoming a competitor in gauge supply and installation. Mr Ashton stated “that was the threat that we wanted to nullify”. Those comments indicate that Mr Ashton, and thus Qteq, sought to prevent Eastern Well No 2 from providing gauge installation services, addressing the “threat” that Mr Ashton felt Easternwell posed to Qteq. It is compelling evidence that reinforces the plain terms of cl 8, noting again that Mr Ashton was not called to give evidence to the contrary.

368    When asked about cl 8.1 of the First Qteq NDA during his s 155 examination (which is admissible only against Qteq), Mr Meldrum stated:

So, we were proposing to them that we would provide them as a subcontractor, equipment and the service to install, but not to train their people at this stage. And… if we were providing that equipment onto their platform, then we were asking that they don’t then use the information they will gain during that process to then cut us out of other contracts that we may be working on either together or not together...we were looking to be protected, that they wouldn’t use any information that they gained as a substitute into another – substitute us out or- and – or go and compete with us directly in any other…

This is an express admission by a senior Qteq official as to the purpose of cl 8, being the prevention of competition, though is admissible as evidence only in the case against Qteq.

369    Mr Meldrum further stated that Qteq was concerned that the structure of the QGC rig and gauge tenders required Qteq to provide its intellectual property to another company, that would then become a competitor for the provision of gauge installation work. Mr Meldrum stated that Qteq was specifically concerned that Easternwell could do a “lot of damage” to Qteq if it received Qteq’s information, which I infer to mean its knowhow about gauge installation services.

370    Mr Meldrum also stated that Qteq’s preference would have been for Easternwell to subcontract the gauge installation work to Qteq, and Qteq had proposed this idea to Easternwell. That supports a reading of cl 8’s purpose as restricting Eastern Well No 2 from directly providing gauge installation services to QGC. Mr Meldrum stated that if Qteq “signed up” with Easternwell as part of Easternwell’s bid for the QGC rig tender, or a substitute project, it was expected that Qteq would provide that product and service exclusively for the duration of the contract, or the contract for any substitute project. When asked about the “legitimate business interests” that are referred to in the chapeau of cl 8.1, Mr Meldrum stated that:

I get the general idea of what we’re [Qteq] trying to do here which is protect and we’re handing over information of our business. And…we [Qteq] run severe risk that Easternwell with that knowledge could then do – do a lot – lot of damage to Qteq by – by having that information … Our customer is essentially going to hand over all our work that we’ve done.

371    Later in that examination, Mr Meldrum confirmed that Qteq wanted Easternwell to agree not to compete with Qteq in respect of PDHG supply and services.

372    Finally, in Mr Morgan’s s 155 examination (which is admissible only against Qteq), he stated that from the time that the QGC tenders were released, Qteq began to be concerned that Easternwell would become a competitor of Qteq for gauge installation services. That evidence, again only against Qteq, provides further contextual support for the purpose of cl 8 advanced by the ACCC.

Additional surrounding evidence

373    In addition to the above, several pieces of internal Qteq correspondence and correspondence with Easternwell indicate that Qteq considered Easternwell to be a competitive threat which should be restrained:

(a)    The reference in Mr Ramsay’s “Pro-Test Qteq Meeting Notes” of the meeting that took place on 2 November 2017 (see above at [211] and especially at [336]), recording a discussion which included pricing high to make the rig tender option uncompetitive, insisting that Easternwell sign a non-competition deed before providing pricing, and pricing on the basis that Easternwell awarded 100% of the contracted gauge installation work, in context, to Qteq.

(b)    Mr Meldrum’s statement in his 7 November 2017 email reply to Mr Diete (see above at [346]) that Qteq could not provide a complete response to the First Easternwell RFQ until, among other things, there was a non-compete document executed between the parties.

(c)    Mr Ashton’s 16 November 2017 telephone conversation with Mr Koziol where, as he recorded in an email sent the same day (see above at [350]), Mr Ashton told Mr Koziol that Qteq was “unable to work up competitive pricing unless we were in a solid alliance under a clear NDA and working agreement”. The “working agreement”, in context, was a reference to the First Qteq NDA or a substantially similar agreement, and was accompanied by a clear indication that Qteq rather than Easternwell would provide gauge installation equipment.

(d)    Mr Meldrum’s 16 November 2017 email in reply to Mr Ashton’s email mentioned in (c) (see above at [352]), in which Mr Meldrum confirmed Mr Ashton’s statement that the high pricing referred to by Mr Koziol was intentional on the part of Qteq as they did not want the Easternwell option to be competitive.

(e)    The email Mr Ashton sent to Mr Meldrum on 16 November 2017 in which he described the rig providers (necessarily including Easternwell, as the incumbent rig provider) as the “biggest medium term threat to [Qteq’s] business” (see above at [355]), in context, is a reference to a competitive threat, as confirmed by the views expressed by Mr Meldrum about the email in his s 155 examination (see also at [355]).

(f)    Mr Ashton’s 17 November 2017 email to Mr Koziol, based on Mr Meldrum’s draft email (see above at [353] and [356]) referring to a service alliance between Qteq and Eastern Well No 2 requiring a tight agreement where the two businesses committed to not compete with one another, with the alternative being Easternwell electing to compete with Qteq in the gauge business and secure work from QGC. As noted above, Mr Ashton was aware that the First Qteq NDA had been proposed and rejected at this point. Sending the email constituted him personally joining in the attempt to procure what had already been underway through his telephone conversation with Mr Koziol and Mr Meldrum’s emails to Mr Diete.

The respondents’ argumentss

374    The only answer the respondents furnish to the express terms of cl 8 seems to be, in substance, that context denies that clause its literal effect. They contend that Qteq was merely intent upon preventing the information provided in the course of training Easternwell staff from being used against it to obtain gauge installation work, rather than there being any anti-competitive purpose. The respondents make three broad arguments.

375    First, the respondents contend that they were concerned with the possibility that Qteq would “train up” Eastern Well No 2, sharing its own intellectual property and putting Eastern Well No 2 in a position to provide certain services to QGC, and then be “left behind”. They submit that cl 8 was proposed for the purpose of “protecting Qteq’s intellectual property, know-how and confidential information that was to be disclosed to Eastern Well as a consequence of responding to Eastern Well’s RFQ”. They contend that the admissions above are consistent with that purpose.

376    In support of this submission, the respondents rely on Mr Meldrum’s email of 7 November 2017 to Mr Diete, in which Mr Meldrum wrote that he could not provide further technical information to Easternwell until there was an NDA and non-compete agreement in place (extracted above at [346]). The respondents also describe Mr Meldrum as being motivated by a desire to negotiate an NDA that gave Qteq protection in the way it dealt with Easternwell, and he saw two scenarios playing out: Easternwell either being with Qteq, in a co-operative alliance, or against it, as a competitor.

377    The problem with the respondents’ reliance on the 7 November 2017 email is twofold:

(a)    First, the 7 November 2017 email does not in terms support the assertion that the purpose of cl 8 was to protect intellectual property, knowhow and confidential information, as there is no reference in that email to any of those things.

(b)    Second, and more fundamentally, read carefully, that email supports the conclusion that Qteq was seeking to protect the information it was providing from being used to compete against it by restricting competition of a kind that would have enabled that to have taken place. It is an exemplar of conduct directed to a proscribed purpose as a means of advancing a non-proscribed objective (as the motive). That is reinforced by the evident strategy pursued to achieve that objective – that is to say, purpose.

378    The respondents state that any references to not being competitors must be seen in light of the absence of any opportunities to actually compete, since the ACCC did not prove the existence of any such opportunities. While that will be addressed more directly in addressing the competition condition, there are two answers to these arguments on the purpose condition:

(a)    First, while it may be accepted that Qteq had a motive to protect the use of the information it provided in the course of providing gauge services and training Eastern Well No 2 and its associated companies on how to carry out gauge installation services as a rig provider, the means of providing that protection was to prevent what was provided from being used to compete. Such a justification does not answer this element of the proscription. The presence of such a motive, far from defeating the ACCC in seeking to establish the purpose condition, reinforces it. It was a compelling reason for Qteq to be advancing that purpose in order to gain that protection.

(b)    Second, the lack of opportunities to actually compete at that point in time goes no further than going some way to meet a case of extant competition, not its likelihood in the sense of being a real possibility, which is all that is required. Qteq’s proposed cl 8, which sought to fetter Easternwell’s ability to rely on any gauge installation services capability, was a key barrier to Easternwell becoming an effective competitor of Qteq in this area. It is required that the assessment of the possibility of competition ignores such a proscribed provision.

379    The ACCC’s case is reinforced by the absence of evidence from Messrs Meldrum and Ashton, with the inference being readily available that their evidence would not have assisted in determining the subjective purpose of the respondents. The absence of that evidence goes further than that: I do not consider benign inferences can or should be drawn from the unclear statements that are in evidence relating to proposed clauses that, read plainly, would restrict competition. Having regard to the distinction between purpose and motive, while Qteq may have been, and apparently was, motivated by a desire to protect its “intellectual property” in the wider sense in which that phrase was used in the evidence and deployed in these reasons, so that Easternwell would not use it to go and compete, and that may be why the restrictive clauses were inserted, the purpose was not to protect Qteq’s intellectual property because that was not how it would overtly have worked. Rather, it would operate to render the provision to, and thereby possession of that information by, Easternwell inutile by preventing it from offering gauge installation services to any operators at all, so that this use (misuse from the perspective of Qteq) could not take place in the first place. Put another way, the benefit of preventing competition via a restriction in the use of that “intellectual property” was the purpose of the agreement that the ACCC contend was attempted, or attempted to be induced.

380    The respondents’ second broad argument is that while cl 8 was, at worst, clumsy and overzealous in its drafting, its subjective purpose was engaging in legitimate commercial discussions about the supply of gauge installation services and equipment to Easternwell for use in the QGC rig tender. That kind of commercial discussion was effectively required by the structure of the QGC tenders, which contemplated gauge installation work transferring from the winner of the QGC gauge tender to the winner of the QGC rig tender.

381    It is uncontroversial that discussions about the QGC tenders were the legitimate context in which the First Qteq NDA was proposed. However, that was not a licence to achieve that objective by any means. The problem with the respondents’ framing of the purpose of cl 8 is that it provides no more than a commercial justification for what was sought to be agreed to, rather than any answer to the overt purpose disclosed by the plain text of the clause. At most, the respondents explain why this was done in terms of motive when viewed in a commercial way, but do not answer to the cartel proscription on achieving that objective in this way. As discussed above at [182]-[183], legitimate business discussions may be the forum in which a proscribed cartel is proposed. This argument helps to understand the overall outcome sought, but cannot excuse the means by which it was sought to be achieved.

382    The respondents’ third broad argument is that cl 8 was a response to the “special conditions” that had been included in the First Easternwell NDA; essentially, an attempt to “tilt the balance back towards it in the context of a commercial negotiation”. I am unable to accept that any aspect of this argument is a better answer to the purpose condition being proven than those addressed above.

Conclusion on purpose condition on purpose condition

383    I am comfortably satisfied that the purpose condition for each of the cartel provisions contained in cl 8 of the First Qteq NDA has been established.

Competition condition

384    The ACCC alleges that the competition condition is met because Eastern Well No 2, through its related body Eastern Well Operations, was or was likely to be in competition with Qteq in relation to the supply of gauge installation services.

Evidence of Qteq’s perception of Easternwell as a competitive threat

385    Of central consideration on the question of perceptions as an aspect of proof of the competition condition must be cl 8 itself. It is compelling evidence of, at least, a perception by Qteq and Mr Ashton that Easternwell was a competitive threat to Qteq. Such terms and such a perception ordinarily would go at least some way towards establishing the competition condition, and may even be conclusive, unless the terms (in this case, unusually clear and express) and the reasonable perception of them and the need for them is contradicted by other evidence or circumstances.

386    That conclusion is fortified by evidence of Qteq’s perception of the competitive threat posed by Easternwell, summarised at [373] above, in addition to the following admissions in the s 155 examinations of Messrs Ashton, Meldrum and Morgan (the latter two being admissible only against Qteq):

(a)    Mr Ashton’s admission in his s 155 examination that the prospect of Easternwell becoming a gauge company was a threat to Qteq that they wanted to nullify, in context, a competitive threat.

(b)    Mr Meldrum’s admission in his s 155 examination that Qteq had been trying to persuade Easternwell not to enter into the market for gauge installation services.

(c)    Mr Morgan’s admission in his s 155 examination that there was a concern that if Easternwell as a rig provider were going to be installing gauges, they could end up being a competitor if they kept that work.

387    The respondents’ case is that it is not enough for the ACCC to point to references made by Qteq to wishing to avoid competition to establish anti-competitive behaviour, and that any reference to not competing must be seen in light of an absence of evidence about opportunities to compete. Implicit in this argument is that cl 8 and the perceived need for it, or something like it, should be denied their ordinary effect in aid of establishing the competition condition by the reality of the situation as the respondents characterise it.

388    I do not accept that competition can never exist without concrete opportunities to compete existing at the time a contravention is alleged to have occurred. The authorities on this topic do not take such a mechanical approach. The Full Court in Cascade Coal [103] accepted as orthodox that competition can include potential rivalry by potential participants. In this case, the tender process itself created the potential, in the sense of a real risk, of competition by Easternwell. There was a concern that this potential might be realised, apparently in the more immediate future, by the provision to Easternwell of Qteq’s gauge “intellectual property”, to which Qteq and Mr Ashton were overtly responding. As Beach J pointed out in Olex [490], it is sufficient that any two parties are likely competitors. Competition can be fluid and can be likely in the absence of existing concrete opportunities to compete. It remains an evaluative exercise as to whether the overall effect of the evidence goes far enough. For that, I must turn to the commercial context in which the alleged attempt occurred.

Structure of the QGC tenders

389    Qteq and Eastern Well No 2 were strong contenders to win the QGC gauge tender and QGC rig tender, respectively, in circumstances where the tenders’ scopes of work contemplated gauge installation services work being transferred from the gauge contractor to the rig contractor. Eastern Well No 2 (via Eastern Well Operations) acquiring the knowhow to become an active gauge installation services competitor to Qteq was not a speculative possibility, but a very real one. It was one which, as we have seen, Qteq considered to pose a threat to its business.

390    The substance of the respondents’ argument however, is that the very nature of QGC gauge and rig tenders was such that there could not be competition between Qteq and Easternwell, as gauge installation services would be transferred from the winner of the QGC gauge tender to the winner of the QGC rig tender. In effect, the tenders always contemplated that either the gauge contractor or the rig contractor would provide gauge installation services to QGC, not both at once. This is characterised as an extinguishment of a business line for Qteq, with the way the QGC tender was designed precluding competition, and the threat to Qteq’s business in fact being a result of it no longer being a competitor to provide those services to QGC once the work was transitioned to a rig company. The reasoning is that if Qteq was the successful gauge tenderer, it could only provide gauge services for that initial 12-month period and thereafter could not compete with Eastern Well No 2 (or implicitly, Eastern Well Operations as a related company) if it was the successful rig tenderer and providing gauge services. It follows, as the argument goes, that there was never any possibility of competition between Qteq and Eastern Well No 2 in relation to the contracts emerging from the QGC tender process. At most, Qteq could supply gauge installation services as a subcontractor of Easternwell so that Easternwell could meet the requirements of the QGC rig tender. In this respect, the respondents submit that there was never any likelihood of competition.

391    One answer to the respondents’ argument is that, in future, once armed with the training required to be provided by Qteq (or another gauge installation services company) to Eastern Well No 2 (or an associated company such as Eastern Well Operations providing rig services on its behalf), Easternwell would be a competitor provider of gauge installation services to QGC. If both were successful tenderers and either of the non-compete agreements sought by Qteq were entered into, instead of there being a competitive environment in which either Easternwell or Qteq on its behalf would provide gauge services to QGC, only Qteq would be able to do so. That is, Easternwell would be in a position to compete and provide those services itself, but for cl 8. Such a term is to be excluded from the assessment by s 45AD(4)(b) of meeting the competition condition.

392    A second answer is that, even if it were true that the structure of the QGC gauge tender contemplated only either the gauge or rig contractor performing gauge installation services work (which is questionable, as it appears to contemplate a transitional period where both are performing this work), it said nothing about future gauge installation services contracts for QGC.

393    A third answer already explained above is that cl 8 would preclude competition that would otherwise have existed between Qteq and Easternwell beyond the provision of gauge services only to QGC – that is, to the wider CSG industry. Importantly, the likely competition was not limited or tied to gauge installation services being provided to QGC. While this was the mechanism through which Easternwell’s capacity to compete would be realised, competition for CSG operators other than GQC was a key concern for Qteq, and it saw Easternwell as a threat for the provision of gauge installation services to other operators. Either way, there was a real potential for competition but for agreeing not to compete, sufficient to meet the competition condition. It follows that the respondents’ argument as to why the competition condition could not be met cannot be accepted.

394    This reasoning, and in particular the implicit question of when temporally the likely competition must exist, accords with the understanding of competition expressed in the trial judgment in South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; 177 ALR 611. In that decision, Finn J made the following observation at [193] about the former deeming provision in s 4D(2) as to “competitive” which relied upon the concept of competition in a manner that is conceptually similar in its operation to s 45AD(4) in also referring to “likely”, with the assessment to be conducted but for the presence of the provision in question:

What is plain is that while the subsection requires the relevant persons to be “competitive”, it does not require them to be so with each other at the time the contract, arrangement or understanding is entered into: News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410. It is enough that they are likely to be in competition, or but for an actual or proposed contract, etc, they would be or would be likely to be in competition. In other words the time when the parties are “in competition” for s 4D(2) purposes may pre-date or post-date the time of entry into the contract, etc. The subsection on its face, then, envisages a variety of possible times at which the parties can relevantly be competitive.

395    An appeal from Finn J was allowed by majority in South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; 181 ALR 188 (Moore J and Merkel J, Heery J dissenting). Heery J found that Finn J was correct about the timing of competition and Moore J and Merkel J agreed with that conclusion: see [110]-[116], [208] and [234]. The reasoning as to timing remains sound, even though s 4D has been repealed.

396    I am satisfied that the competition condition has been proved by the ACCC for each cartel provision.

Cartel provision conclusion

397    As a result of finding that the purpose and the competition conditions have been satisfied, cl 8 contained restraints that would prevent Eastern Well No 2, or any of its related bodies corporate, other than in concert with Qteq, from pursuing or performing gauge installation services work for QGC or any other CSG operators, each of which was a cartel provision.

Exclusive dealing exception

398    Having found that Attempt #4 has been established, I turn to the respondents’ case for the application of the exclusive dealing exception contained in s 45AR(1) of the CCA, which in turn relies on the exclusive dealing proscription in s 47(1). In short, s 45AR creates an exception to the application of s 45AJ for CAUs that would otherwise constitute a contravention of the exclusive dealing proscription in s 47. As reproduced below, s 45AR(3) imposes upon the respondents an evidentiary onus to establish the application of this exception.

399    The ACCC’s case is that the exclusive dealing exception does not apply to either of the Easternwell Attempts because the cartel conduct engaged in by the respondents could not be seen to amount to exclusive dealing. The ACCC asserts that the respondents have not discharged their evidentiary onus to prove that it does. It is an exacting task to do so as the authority discussed below makes clear.

400    Section 45AR has apparently not been previously considered by this Court in relation to attempted cartel conduct. Its terms are:

45AR Exclusive dealing

(1)    Sections 45AF and 45AJ do not apply in relation to the making of a contract, arrangement or understanding that contains a cartel provision, in so far as giving effect to the cartel provision would, or would but for the operation of subsection 47(10) or section 88 or 93, constitute a contravention of section 47.

Note:    A defendant bears an evidential burden in relation to the matter in subsection (1) (see subsection 13.3(3) of the Criminal Code and subsection (3) of this section).

…

(3)    A person who wishes to rely on subsection (1) or (2) in relation to a contravention of section 45AJ or 45AK bears an evidential burden in relation to that matter.

401    The evident purpose of the exception being applied to what would otherwise be cartel conduct, is to prevent overlapping proscriptions. Section 45AR and similar provisions are often referred to as anti-overlap provisions (see, e.g., in relation to other non-competitive proscriptions, s 45(5A)). To exclude a cartel proscription applying to conduct upon this basis, the person accused of having engaged in that conduct has to prove that the exclusive dealing proscription applied so as to cover the cartel conduct (or would have applied but for the operation of s 47(10), s 88 or s 93, none of which are relied upon here).

402    As was made clear in Visy [30] (Gleeson CJ, McHugh, Gummow and Hayne JJ), if all aspects of the cartel conduct do not also constitute an exclusive dealing proscription, the exception does not apply to provide relief from liability. Their Honours held that the exception operates as a qualification to the proscription, such that the starting point for the analysis is to start with that proscription, and then consider “whether the criterion for engaging the qualification is met, not the extent to which the parties’ agreement can have an operation of the kind which meets that criterion”. Their Honours went on to observe:

(a)    at [31], that if there was a provision that was contravening for more than one reason, and one of those reasons did not attract the exclusive dealing exception, then the exception did not apply; and

(b)    at [32], reinforcing [30], that the answer to the inquiry is “not dictated by the particular drafting adopted by the parties” containing the proscribed provision, here a proposed contract, so that the word “provision” directs “attention to the content of the agreement, arrangement or understanding rather than the manner of its expression”, noting that such provisions are not necessarily reduced to writing, and the writing may not constitute the totality of the provision.

403    Section 47(1) contains a prohibition on exclusive dealing, a practice that is extensively defined by subsection (2), and expanded by additional specific instances of exclusive dealing in sub-ss (3) to (9). The respondents rely upon exclusive dealing as described in:

(a)    s 47(2)(a) and (d), or (2)(a) and (f), as to the conditional supply of services by Qteq to Eastern Well No 2; and/or

(b)    s 47(4)(a) and (c), or (4)(a) and (d), as to the conditional acquisition of services by Eastern Well No 2 from Qteq.

404    Section s 47(2) provides (parts relied upon by the respondents emphasised):

A corporation engages in the practice of exclusive dealing if the corporation:

(a)    supplies, or offers to supply, goods or services;

(b)    supplies, or offers to supply, goods or services at a particular price; or

(c)    gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation;

on the condition that the person to whom the corporation supplies, or offers or proposes to supply, the goods or services or, if that person is a body corporate, a body corporate related to that body corporate:

(d)    will not, or will not except to a limited extent, acquire goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation;

(e)    will not, or will not except to a limited extent, re-supply goods or services, or goods or services of a particular kind or description, acquired directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; or

(f)    in the case where the corporation supplies or would supply goods or services, will not re-supply the goods or services to any person, or will not, or will not except to a limited extent, re-supply the goods or services:

(i)    to particular persons or classes of persons or to persons other than particular persons or classes of persons; or

(ii)    in particular places or classes of places or in places other than particular places or classes of places.

405    The respondents also rely on s 47(4) which states (only (b) is not relevant):

A corporation also engages in the practice of exclusive dealing if the corporation:

(a)    acquires, or offers to acquire, goods or services; or

(b)    acquires, or offers to acquire, goods or services at a particular price;

on the condition that the person from whom the corporation acquires or offers to acquire the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will not supply goods or services, or goods or services of a particular kind or description, to any person, or will not, or will not except to a limited extent, supply goods or services, or goods or services of a particular kind or description:

(c)    to particular persons or classes of persons or to persons other than particular persons or classes of persons; or

(d)    in particular places or classes of places or in places other than particular places or classes of places.

406    In the greater part, the respondents’ case for the application of the exclusive dealing exception is contained in their written closing submissions, with limited additions made in their oral closing submissions. This is to be read in the context of the respondents’ written particulars in a part of their concise statement in response, contained in a document annexed to a letter from their solicitors to the ACCC’s solicitors dated 11 August 2023. It is convenient to reproduce the substantive part of those short submissions rather than endeavour to summarise them:

[264]    The negotiations between Eastern Well and Qteq in relation to Qteq providing gauge installation services to Eastern Well under option 2 of its RFQ for the purposes of the QGC Rig Tender are more accurately understood as an exclusive dealing arrangement. In this instance, Qteq would be the exclusive subcontractor to Eastern Well of gauge services. This can be characterised as either the conditional supply of services by Qteq (s 47(2)), or the conditional acquisition of services by Eastern Well (s 47(4)).

[265]    Eastern Well first proposed exclusivity in its draft non-disclosure agreement on 6 November 2017 [the First Easternwell NDA] containing “Special Conditions” 56 and 57.

[266]    In response to this proposal, and in order to protect Qteq’s intellectual property and know-how, Qteq proposed to supply services to Eastern Well under option 2 of its RFQ on the condition that Eastern Well would only supply downhole gauge services in concert with Qteq in relation to the QGC Gauge Tender.

[267]    Qteq’s intention and purpose in proposing clause 8 was to exclusively supply equipment and services to Eastern Well for Eastern Well to re-supply to QGC. This condition was not sought by Qteq with respect to option 1 or 3 of Eastern Well’s RFQ: the condition applied specifically to option 2 which contemplated the potential supply of goods or services on condition of exclusivity which is conduct contemplated squarely by s 47.

407    As to the emphasised passage immediately above, the ACCC submits that even if a supply agreement between Qteq and Eastern Well No 2 had been put in place as attempted, that would only have covered services, because the QGC gauge tender provided that the gauges would continue to be supplied directly by Qteq to QGC. That is plainly correct.

408    The ACCC further submits that the cartel conduct could not amount to exclusive dealing, essentially understood at a conceptual level, because:

(a)    the restriction sought to be imposed by cl 8 did not form any part of any supply arrangement between Qteq and Eastern Well No 2, but rather were sought to be made a part of a proposed agreement as to confidentiality and non-disclosure, and were to be operational upon execution for a period of three years (being a reference to cl 10.2), irrespective of whether any supply agreement was ever reached;

(b)    the scope of the cl 8 went beyond anything covered by s 47, because it would have prevented Eastern Well No 2 from supplying gauge installation services to QGC or any other CSG operator or even from competing with Qteq at all.

409    For the following reasons advanced by the ACCC, the specific anti-overlap provisions relied upon by the respondents (s 47(2)(a)(d), s 47(2)(a)(f)) would not cover the kinds of restrictions sought to be imposed upon Eastern Well No 2 by cl 8.

410    In relation to s 47(2)(a)(d) and s 47(2)(a)(f), even if a supply agreement was in place by which Qteq were supplying services to Eastern Well No 2, there is no evidence that such supply would be conditional in the necessary sense (“on the condition that”, underlined and in bold in the reproduction of s 47(2) above). Nor could the full scope of the cartel restriction be captured by s 47(2)(d) or (f), because it went beyond limiting Eastern Well No 2’s freedom to acquire goods or services from Qteq’s competitors, or from resupplying services provided to Eastern Well No 2 by Qteq. What was captured by the restraints was the potential supply of gauge installation training and services, and not the provision of the gauges themselves, which were always to be supplied by Qteq directly to QGC. There is also the live question as to whether sub-contracting service work would count as “re-supply” for the purposes of s 47(2)(f). In those circumstances I am not able to be satisfied that the respondents have discharged their onus as to this basis for the application of the exception.

411    The position is no better for s 47(4), as there was no restriction or condition placed on Qteq as the party from whom Eastern Well No 2 acquired the services.

412    In oral closing submissions, the respondents did not seek to meet the ACCC’s contentions. Rather, reliance was placed on the reasoning of Kirby J in Visy, who, while joining in the result, argued that the framework of vertical and horizontal restraint should assist in applying s 47, with the focus of the provision being vertical restrictions between parties at different levels in the supply chain, rather than horizontal restrictions among competitors: [60]-[64], [77]-[78]. To the extent that the restrictions in question in that case were horizontal, not just vertical, in nature, they went beyond s 47: [68] (Kirby J). Use of the concepts of horizontal and vertical restraint in applying the provision was specifically disavowed by the plurality: [27] (Gleeson CJ, McHugh, Gummow and Hayne JJ). In any event, Kirby J’s reasoning in substance reflects the conclusion reached by the plurality as to the inability in that case to characterise the metes and bounds of exclusive dealing as being broad enough to cover the entirety of the impugned conduct. His Honour’s reasoning does not assist the respondents.

413    I find that the qualification by the device of characterising the cartel conduct as being covered by the exclusive dealing proscription has not been established by the respondents. I am not satisfied that the exclusive dealing provisions relied upon were even capable of applying to the cartel restraints sought to be imposed because they were only collateral to the supply or acquisition of gauge installation services respectively by Qteq and to Eastern Well No 2, rather than being part of that supply or acquisition so as to be part of an exclusive dealing arrangement.

414    Even if that problem could be overcome – and there is no suggestion by the respondents as to how it could be – I am not satisfied that the purported exclusive dealing arrangement created by cl 8 would be limited to the scope of s 47, as expressed in Visy. So long as the restraint sought to be imposed was capable of operating more widely than the scope of s 47, it was unable to receive the protection of s 45AR. In this case, the cartel restraint was plainly wider than the exclusive dealing particularised by the respondents, and accordingly the outcome should be the same as that in Visy. Exclusive dealing as applied by s 45AR is not such a broad protective umbrella whereby that class of wrong-doing protects from the wider wrong-doing committed by the respondents by attempting to enter into, or induce entry into, the Eastern 2017 Well Non-Compete Agreement.

Conclusion on Attempt #4

415    It follows from the above that I am satisfied that Qteq attempted to enter into, or induce entry by Eastern Well No 2 into, the Easternwell 2017 Non-Compete Agreement:

(a)    which contained the cartel provisions alleged by the ACCC (relevantly at cl 8 in express terms);

(b)    that had the purpose within the meaning of s 45AD(3)(a)(iii) of restricting or limiting the supply or likely supply by Eastern Well No 2 (relevantly via Eastern Well Operations) of gauge installation services to QGC or other operators of CSG wells; and

(c)    in circumstances in which Qteq and Eastern Well No 2 (relevantly via Eastern Well Operations) were likely to be in competition with each other within the meaning of s 45AD(4)(h) in relation to the supply or likely supply of gauge installation services.

416    It follows that the contraventions by Qteq alleged by the ACCC in respect of the Easternwell 2017 Non-Compete Agreement have been established. The liability of Mr Ashton is addressed separately below in relation to both Easternwell Attempts, along with the attribution of his conduct and intention to Qteq.

Attempt #5: The Easternwell 2018-2019 Non-Compete Agreement

417    The second Easternwell allegation is that, during the period from approximately 7 December 2018 to 11 February 2019, Qteq, through Messrs Ashton and Meldrum, engaged in an attempt to make, or induce, a contract with Eastern Well No 2 that would have contained cartel provisions that had the purposes of:

(a)    restrict or limit the supply, or likely supply of gauge installation services by Eastern Well No 2, or any of its related bodies corporate, to QGC; and

(b)    prevent, restrict or limit Eastern Well No 2, or any of its related bodies corporate, in the likely supply of gauge installation services to other operators of CSG wells.

418    The ACCC also alleges that Mr Ashton attempted to induce Eastern Well No 2 to make the Easternwell 2018-2019 Non-Compete Agreement. The ACCC alleges that Mr Ashton and Mr Meldrum of Qteq knew of the attempts to make the Easternwell 2018-2019 Non-Compete Agreement and that the agreement sought to be made contained a provision that was, in law, a cartel provision, with their knowledge being attributable to Qteq. I address that contention in relation to both Easternwell Attempts below.

419    The ACCC alleges that both the competition and purpose conditions in relation to the Easternwell 2018-2019 Non-Compete Agreement, if entered into, are satisfied for substantially the same reasons as those in relation to the Easternwell 2017 Non-Compete Agreement.

Background: Easternwell wins the QGC rig tender and Qteq wins the QGC gauge tender

420    The conduct that is the subject of this alleged attempt occurred between December 2018 and February 2019, with relevant contextual conduct continuing into April 2019. By 9 October 2018, Qteq had been awarded the QGC gauge tender as the primary supplier in August 2018, with Pro-Test as the back-up contractor. The QGC rig tender had been awarded to Eastern Well No 2 and another company, with “go-live” dates of 1 January 2019. It is in the context of negotiations between Easternwell and Qteq regarding the provision of gauge installation services in relation to the QGC rig contract that the attempt is alleged to have occurred.

421    On 5 October 2018, there was an exchange of emails between Mr Ross Gavin, whose email signature describes him as a Well Engineer at QGC, and Mr Meldrum, about a statement that QGC was proposing to issue about the provision of gauge installation services to QGC. Mr Meldrum was invited to make changes or additions and made some suggestions to its wording. The statement was issued on 9 October 2018 on QGC letterhead, signed by the General Manager of Wells Operations at Shell Australia, Ms Lucy McKee. Addressed to “Dear Colleagues”, the text of the letter was as follows:

QGC has been made aware that following the rig contractor kick off meetings there have been rumours circulating in the field about a change in QGC’s provider of gauge installation services from 2019 onwards.

The following are the facts about QGC's intentions moving forward with wired gauge installation and retrieval services:

•    QGC recently awarded a 3 year call off contract to Qteq for the provision of permanent wired downhole gauges and gauge installation and retrieval services.

•    The new contract with Qteq has already been implemented.

•    Qteq has been transitioning to one-person Qteq crews supported by the rig crew for some time.

•    QGC recently awarded 5-year Workover Rig contracts to SWMS and Easternwell, the go-live date of both these contracts is the 1st of January 2019.

•    The scope of the Workover Rig contracts includes the provision of personnel and equipment for wired gauge installation and retrieval services.

•    QGC’s intention is to transition wired gauge installation services from Qteq to the rig contractors.

•    Given the increased scope of the Workover Rig Contracts, which entails investment in new equipment, resourcing and training, it is not QGC’s expectation that the rig contractors will be able to deliver the full scale of the contract on the 1st of January 2019.

•    Contract implementation plans are currently being developed with both rig contractors and Qteq, which will define specifics of implementation timelines.

•    QGC’s expectation is that this transition will be implemented in the second half of 2019, this timeframe is dependent on the rig contractor's ability to demonstrate they can deliver an acceptable level of service quality.

•    Following the transition of wired gauge installation and retrieval services, Qteq's contract with QGC will continue to be in effect, with Qteq supplying wired gauge equipment to QGC and developing new innovations in wireless technology.

Once contract implementation plans have been formalised, the relevant details and timelines of these plans will be communicated to all stakeholders.

422    Thus, with Qteq’s active input as to expression, QGC clarified that it intended to transition wired gauge installation services from Qteq to rig contractors, and that it expected a gradual implementation from 1 January 2019, with the transition implemented in the second half of 2019 if the rig contractor could demonstrate acceptable service quality. It is in that context that Easternwell sought gauge installation training for its workers from Qteq.

423    The 9 October 2018 statement, in the context of the rest of the evidence, makes it clear that QGC intended that, if Qteq was going to continue to do gauge installation work for QGC from mid-2019, if not earlier that year, it was not going to be doing it directly, but only by subcontracting to do that work with Eastern Well No 2. In that context, finding a means to supply its intellectual property (using that term in the wider sense described earlier in these reasons) in a way that could not be used to compete against it was again of importance to Qteq. Given Qteq’s prior unwillingness to provide that service to Easternwell without that protection, the provision of some kind of assurance was also important to Easternwell. Eastern Well No 2, as the winner of the QGC rig tender, was set to have both the capacity and intention to compete with Qteq for the provision of gauge installation services to QGC, via Eastern Well Operations, and be in likely competition with Qteq: see Cascade Coal [149]-[150], see also [388] above.

Conduct

The Second Qteq NDA

424    On 29 November 2018, Mr Diete of Easternwell sent Mr Meldrum a confidentiality and non-disclosure deed between Eastern Well No 2 and Qteq (the Second Easternwell NDA) and asked that Mr Meldrum review and return it signed “so we can continue with the proposal”. As with the first Easternwell Attempt, the ACCC submits that this was a “normal confidentiality and nondisclosure deed”, while the respondents describe this in substantially the same way as the First Easternwell NDA. As before, this difference in characterisation does not require adjudication. It suffices to observe that the contractual landscape in relation to the provision of gauge installation services to QGC was of legitimate concern to Qteq and Mr Ashton, especially in relation to the potential competitive threat that Easternwell posed to Qteq.

425    On 7 December 2018, Mr Meldrum replied to that email with a redlined confidentiality and disclosure deed containing Qteq’s suggested changes (the Second Qteq NDA). That amended draft inserted paragraphs B to D into cl 4, titled “Confidentiality Acknowledgments”, which had previously provided just the terms of use for confidential information of each counterparty, and an obligation of confidence with regard to that information. Those additions were:

B.    Furthermore, it is acknowledged and agreed that QGC Pty Ltd. is a current customer of both Easternwell and Qteq but in respect of differing product and services lines as between Easternwell and Qteq. Each party therefore agrees and undertakes on its own behalf and on behalf of its Associated Entities, that they shall not do or not take any action to circumvent, bypass, or obviate, directly or indirectly, the other party or otherwise attempt to perform or take away the business of the customer or any other customer from the other party, or otherwise compete directly or indirectly, in respect of these scopes of product and service lines that are currently performed by that other party.

C.    Similarly, without the prior written consent of the other party, neither party shall, during the term of this deed or for 1 year thereafter, either directly or indirectly, hire or otherwise engage, or cause, aid or assist any other person or entity (including its Associated Entities) to hire or otherwise engage, any current or former employee of the other party for a period of 6 months after the termination of such individuals employment relationship with such other party.

D.    For the avoidance of doubt, this clause 4 shall survive termination.

(Emphasis added.)

426    The ACCC has described the bold passage above as constituting “very wide non-compete provisions”. I accept that as a fair characterisation.

427    On 19 December 2018, Mr Diete sent Mr Meldrum an email asking for an update on pricing (which I infer in the circumstances to mean pricing for gauge installation services training) and referring to a conversation between the two the previous week. Mr Meldrum replied on 21 December 2018 that he was unable to provide further details or pricing until they had a joint meeting with Shell and a signed agreement in place between the parties. Mr Meldrum asked Mr Diete to review the proposed agreement and let him know why Eastern Well No 2 would not sign it at that time. I can safely infer from that email that Easternwell had previously indicated it would not sign the Second Qteq NDA, being consistent with its stance in relation to the First Qteq NDA. The reference by Mr Meldrum to a signed agreement between the parties is best understood as a reference to the Second Qteq NDA, or a substantially similar agreement.

428    Mr Diete forwarded this email from Mr Meldrum to others at Easternwell, stating that they had not made any traction with Qteq, and that in a call the previous week he had told Mr Meldrum they would not be agreeing to the extra clauses.

429    On 15 January 2019, Mr Meldrum sent a letter to “Alan”, which I infer to be Alan Ruff of QGC, requesting that QGC reconsider transferring Qteq’s downhole gauge installation services to rig crews, stating that the targeted savings may not be worth the commercial and operational risk. The letter also stated that Qteq was continuing to engage with Easternwell to try to reach an agreement to work on a transition plan to zero-man crews, stating:

Easternwell will be required to sign a non-compete agreement with Qteq, whereby they will not offer gauge installation services to any other operators without prior agreement of Qteq. At present, Easternwell are not willing to sign this agreement and are therefore a competitor.

430    The respondents argue that this conduct demonstrates a lack of intention by Qteq to engage in cartel conduct, as actively involving QGC in the process and (later) providing QGC with copies of the draft agreements between Eastern Well No 2 and Qteq would be informing the subject of the proposed cartel conduct of an intention to engage in that conduct, which would be unusual. I am unable to accept that unusual or even imprudent conduct of this kind necessarily precludes the existence of a cartel attempt, but it is a circumstance that must be taken into account as part of the process of evaluating the evidence.

431    On 18 January 2019, Mr Diete emailed Mr Meldrum an amended version of the Second Easternwell NDA (the revised Second Easternwell NDA), indicating that it had been updated in line with discussions Mr Meldrum had had with Mr Koziol. This version included a carve out to cl 4(B) (renumbered to cl 4(e)): “to the extent that an existing contract or a variation/direction from a customer requires a party to perform the Scope”. The amended clause also limited its operation to the term of the deed, being two years, or six months after its termination. The revised definition of “Scope” was:

Scope means the supply of equipment and personnel for spooling and running 11mm armoured gauge cable down hole (on sand line drum or other means) for workover operations, including all associated tools for installing/removing cable banding and providing a brief installation report.

432    On 21 January 2019, Mr Meldrum forwarded the 18 January 2019 email from Mr Diete to Mr Ashton and referred to a call the previous Friday with Mr Koziol, in which Mr Koziol stated that, after discussions with Shell, Easternwell was now willing to sign the revised Second Easternwell NDA. Mr Meldrum explained that “[e]ssentially they have agreed to non compete and non circumvent with some time limitations.” Mr Ashton replied to the email from Mr Meldrum the same day:

We need to be extremely careful here with this agreement and ensure that any caveats they insert do not damage our IP or our market. How do we defend any breach?

You can imagine how they intend to breach it on every occasion when they bid to other clients.

A monster company at our table.

433    Mr Meldrum in reply stated that he understood any agreement had to be tight, and that he “also want[ed] to get to the table to see what we can negotiate and see if there is a route for us to contract to EWE [Eastern Well Energy] instead of Shell.” He additionally attached a letter that Qteq submitted to Shell asking it to reconsider moving to a system of having rig contractors installing gauges, likely the letter of 15 January 2019.

434    Mr Ashton replied to this email on 21 January 2019:

Let’s flush out their real intentions on this, as I do not think that they are honourable.

Trying to take over our business without paying for it.

435    Mr Meldrum replied to that email:

I've said to Kyle [Mr Koziol] the first step in all of this is a three way meeting with Shell.

The way Shell are seeing it, quote from Alan Ruff “you are not going to stop selling us gauges if we push this through” maybe the conversation is more with Shell than EWE [Eastern Well Energy]. EWE in same boat as us they tendered and said yes to anything Shell wanted to get the contract.

I’m really hoping that Lucy [McKee] and Alan [Ruff] [both of Shell] will reconsider the risk of change and opt to stick with what they have got. The sticking issue I see is that EWE want the extra person on the rig for the water cartage work but can only have that person if they are installing the gauge as well.

436    The reference to the “risk of change” in the third paragraph of Mr Meldrum’s email can readily be understood as being a reference to the risks for QGC in changing to another gauge installation services provider. That is especially so given the fact that Mr Meldrum’s earlier email likely made reference to the 15 January 2019 letter to QGC on that topic.

437    Mr Ashton replied that the optimum outcome was “one Qteq person embedded in each rig, managing all data acquisition issues”. Mr Meldrum responded saying that he couldn’t agree more and that this was the outcome they were after. Mr Ashton and Mr Meldrum agreed that Mr Meldrum would set up a meeting with Ms McKee and Mr Ruff.

The revised Second Qteq NDA

438    On 24 January 2019, Mr Meldrum emailed Mr Diete and Mr Koziol, attaching a new proposed NDA (the revised Second Qteq NDA), with differences from the Second Easternwell NDA reflected in mark-up. Mr Meldrum stated “as explained to [Mr Koziol] Qteq is looking to have this agreement tightly aligned to just QGC/Shell contract and to have protection in place for our other business here in QLD”.

439    Clause 4(e), now renumbered cl 4(B), continued to contain a wide non-compete restraint, though now, as senior counsel for the ACCC put it, it was reined in slightly. The difference between the prior cl 4(e) and cl 4(B) in the revised Second Qteq NDA is reflected in the mark-up below:

Furthermore, It is acknowledged and agreed that QGC Pty Ltd. (QGC) is a current customer of both Easternwell and Qteq parties but in respect of differing product and services lines as between Easternwell and Qteq the parties, but QGC has requested that QTEQ transition the Scope which QTEQ currently performs for QGC to Easternwell, and which will require the transfer to Easternwell of certain proprietary and confidential information of QTEQ. As such and in consideration of the potential supply of such information by QTEQ to Easternwell, Easternwell agrees and undertakes on its own behalf and on behalf of its Associated Entities, that they shall not do or not take any action to circumvent, bypass, or obviate, directly or indirectly, the other party or otherwise attempt to perform or take away the business of the customer or any other customer form the other party, or canvass or solicit any customers, or otherwise compete directly or indirectly, in respect of these scopes of product and service lines that are currently performed the Scope for the duration of the Term or six (6) months thereafter, unless specifically agreed otherwise in writing between the parties on a case by case basis as a deviation to this clause.

440    This draft also extended the term of the NDA to five years, and varied the definition of “Scope” in the revised Second Easternwell NDA shown in the following mark-up:

Scope means the supply of equipment and personnel for running 11mm armoured gage cable down hole (on sand line drum or other means) for workover operations the installation and/or retrieval of downhole permanent gauges, including all associated tools for installing/removing cable banding all equipment and personnel required to deliver this service and providing an brief installation report.

441    The draft also included a comment on cl 4(e) provided by “GA1”, which was a reference to Mr Gareth Ashton, Qteq’s inhouse lawyer (not related to Mr Simon Ashton), that states:

Given the intended supply of proprietary information by Qteq to EWE, the non-compete with regard to the supply must be absolute. and with any exceptions thereto being agreed on a case by case basis (as will be the case with QGC), as opposed to a general carve out for any direction given by a customer

442    The revised Second Qteq NDA also included a liquidated damages term, cl 26(B), which specified that Eastern Well No 2 would compensate Qteq $5.5 million if a breach of cl 4(e) related to Origin, $800,000 if it related to “Arrow Energy”, and $250,000 if it related to any other customer. The respondents submit that this was a genuine attempt by Qteq to quantify the losses that might flow from the failure to protect its proprietary and confidential information by Easternwell. Except to the extent that it shows that Qteq clearly contemplated breaches of cl 4(e) occurring not just in relation to QGC, but other customers, the liquidated damages term is largely irrelevant to the question at hand.

443    Later on 24 January 2019, Mr Diete emailed others at Easternwell forwarding the revised Second Qteq NDA. He wrote that there was a lot of risk in Qteq’s proposed draft and he did not think Easternwell needed an NDA with Qteq to deliver the QGC scope. Mr Diete proposed that Easternwell build spooling machines, receive training from Qteq, or if they were unwilling, from Pro-Test, and then perform the task in line with the QGC rig contract.

444    On 11 February 2019, Mr Meldrum emailed Mr Koziol, copying Mr Diete, referring to a meeting they had had that same day and attaching another copy of the revised Second Qteq NDA. Mr Meldrum wrote that Qteq was willing to remove the liquidated damages term, cl 26(B), to enable the parties to sign the NDA and put a commercial proposal to Shell. He asked if the document was otherwise acceptable to Easternwell.

445    In March 2019, Mr Meldrum met with Shell personnel. The discussions as summarised in an email from Mr Gavin of QGC on 20 March 2019 included “lack of resolution on a non-compete agreement between EWE [Eastern Well Energy] and Qteq” which was identified as a roadblock for the transitioning of gauge installation services. The agreed actions following that meeting included determining when to set up a workshop with Qteq, Easternwell and QGC, and for Qteq to provide to QGC the latest communication with Easternwell “about the NCA” (which I infer to mean “non-compete agreement”).

446    In relation to this and other discussions between Qteq and QGC in this period, the respondents submit that Qteq involving QGC in the negotiations about Easternwell in this way – by seeking their assistance to progress the contractual negotiations – would be unusual if it were attempting cartel conduct in relation to QGC work. But that avoids the commercial reality of the position that QGC was in: it had awarded contracts to Qteq and Easternwell, so that the gauge installation services work could be transitioned from the former to the latter on schedule. It was clearly concerned that work would not proceed as planned. On the ACCC’s case, it was cartel conduct not just directed to QGC but to other CSG operators as well. In those circumstances, involvement of QGC, while imprudent, does not make impossible or even unlikely that Qteq was attempting to enter, or induce entry into, an agreement containing a cartel provision.

447    On 28 March 2019, Mr Meldrum forwarded to Mr Ross and others at QGC an email previously sent to Mr Diete on 24 January 2019, with a draft NDA attached, likely the revised Second Qteq NDA. Mr Ross forwarded that email to Ms Andrea Panakova, a Senior Wells Engineer at QGC. She then replied to Mr Meldrum expressing surprise at the removal of the liquidated damages clause. Mr Meldrum replied to Ms Panakova, copied to Mr Gavin:

Thanks for the note back. Keen to have this meeting sooner rather than later as it came as a surprise to me that after our last meeting having put in place the agreed actions on the transition plan we then find out that Shell has decided to order 200 gauge systems from our main competitor. I am struggling to understand the reason for this when going this route will cost Shell more money at a time when we are working with you on a transition plan to help save money. Our competitor Protest [Pro-Test] would need to purchase the GeoPSI equipment from Qteq as we are GeoPSI’s sole and exclusive distributor of GeoPSI equipment in Australia.

On the EWE [Eastern Well Energy] negotiation of the NDD [NDA], the below highlighted in yellow is what we agreed to remove. However there is still some language around non-compete and indemnity, although now if there were to be a breach it would be very difficult for a small company like Qteq to take on EWE [Eastern Well Energy] / Broadspectrum from a legal stand point. However we agreed to take this risk based on us being committed to working with EWE and Shell on this transition. I apologise if I had not explained this or made it understood at our last meeting.

[The balance of this email reproduced the indemnity provision of the draft NDD, with the liquidated damages provision to be removed highlighted].

448    The respondents submit that it is more plausible that Qteq was concerned about obtaining adequate protection for its supply to Easternwell during the transition period and when it became a supplier of Easternwell, and was seeking to explain those legitimate business concerns to QGC and Easternwell, than that Qteq was attempting to engage in cartel conduct while keeping the victim abreast of its progress in doing so. For the same reasons given above, I do not consider that, in the circumstances, it made the attempt unlikely or implausible.

449    On 29 March 2019, Mr Meldrum emailed Mr Koziol, noting that he had tried to call him, and asking whether he had been able to have the revised Second Qteq NDA reviewed.

450    On 30 March 2019, Mr Ashton emailed Ms McKee at Shell regarding the transition plan and the status of the NDA with Easternwell. In that email, Mr Ashton referred to a meeting between them in Perth that week regarding those matters. Mr Ashton stated that he attached Qteq’s correspondence with Easternwell since January 2019 (whether he in fact did so is not clear from the copy of the email in evidence), when Messrs Meldrum and Ashton met with Messrs Koziol and Diete in Brisbane. Mr Ashton wrote further:

I intervened directly at that time to have the Liquidated damages clauses removed (that EWE [Eastern Well Energy] balked at signing), so that we could progress this matter and sign the document.

As you are aware, Qteq is a small Australian owned service company that has spent the past 7 years developing the wired and wireless gauge technology in CSG, with our exclusive partner GEOpsi.

Our corporate IP is contained in our supply chain, components, interfaces, installation techniques, QA/QC, and processes and our service delivery in the field and it is not unreasonable for us to require legal protection in these circumstances.

It is at the very core of our business.

However, as a sign of good faith in Shell, I have placed our company at a position of severe vulnerability to foreign multinational monolith (in EWE [Eastern Well Energy]), so that we can meet our client’s (Shell’s) stated objectives.

I trust that this clarifies some of the mis-understandings and demonstrates just how hard Qteq’s Executive Leadership Team is working on creating a professional, 21st Century, safe, auditable and high-quality solution that does not require Qteq personnel on the well site.

Epilogue

451    On 10 April 2019, Mr Diete sent anther NDA to Mr Meldrum. I can safely infer that this was the original Second Easternwell NDA, as this was the version that was executed by Eastern Well No 2 and Qteq the next day.

452    Mr Meldrum forwarded that email to Mr Ashton and the Qteq legal team stating:

We are back to square one with Easternwell and NDD for commercial discussions with Shell. EWE will not sign the document proposed and have stated they can sign NDD but nothing that covers any non-compete.

Essentially they now want to evaluate our rig crew training options and rental installation kit pricing v’s what they have been offered from ProTest.

Unless there is any concerning language in this document I don’t see we have much option but to sign it and get round the table to see what we can negotiate.

If we can get something from EWE we might get some crew on their rigs and at the same time sell the gauge in a box piece to Shell.

453    Some internal Qteq correspondence back and forth demonstrates that Qteq was concerned about entry into an NDA without the non-compete protections previously proposed. Mr Ashton replied to Mr Meldrum’s email, writing “that is a very dangerous situation for us” and asking whether Shell had blessed this version and whether Qteq was being bullied into a position where its intellectual property was compromised. Mr Meldrum replied on the same day that there were “lots of games at play” but that Shell was not going to referee, and that Qteq needed to find a way forward.

454    Nonetheless, on 11 April 2019, Qteq and Eastern Well No 2 executed an NDA at the request of QGC and Eastern Well No 2, in the form of the original Second Easternwell NDA.

455    On 16 April 2019, Qteq received a further RFQ from Easternwell which sought a bid to provide spooler equipment and the training of rig staff on 11 rigs, but Qteq declined to bid in response to that RFQ (the Second Easternwell RFQ).

456    On 19 September 2019, Mr Ruff of QGC informed Mr Meldrum that Pro-Test was training Easternwell rig crews to perform gauge installation services.

Conclusion on conduct

457    The conduct relied upon in relation to this alleged attempt can be summarised as follows:

(a)    provision of the Second Qteq NDA including cl 4(B) by Mr Meldrum to Mr Diete on 7 December 2018;

(b)    Mr Meldrum’s 21 December 2018 email to Mr Diete indicating that Qteq could not move forward without a signed non-compete;

(c)    provision of the revised Second Qteq NDA including cl 4(e) by Mr Meldrum to Mr Diete on 24 January 2019; and

(d)    Mr Meldrum’s email to Mr Koziol on 11 February 2019, stating that Qteq would be willing to remove the liquidated damages clause (cl 26(B)) from the revised Second Qteq NDA and asking if that would otherwise be acceptable to Easternwell (it is suggested that similar overtures were made at a meeting referenced in that email).

458    It is possible that Mr Meldrum’s subsequent email to Mr Koziol on 29 March 2019, asking whether he had been able to review the revised Second Qteq NDA could be seen as a continuation of the attempt to have Easternwell sign the revised Second Qteq NDA. This is outside the time period pleaded for the attempt in the ACCC’s further amended statement of case. I therefore do not consider it as part of the conduct that could constitute the attempt. Nothing much turns on this in any event.

Purpose condition

459    The ACCC in the final version of its statement of case articulated the purpose of the restraints contained in the Easternwell 2018-2019 Non-Compete Agreement, at cls 4(B) and 4(E), as being one or more of the following:

(a)    restricting or limiting the supply, or likely supply, by Eastern Well No 2, or any of its related bodies corporate, of gauge installation services to QGC, being a purpose within the meaning of s 45AD(3)(a)(iii) of the CCA; and

(b)    preventing, restricting or limiting the likely supply by Eastern Well No 2, or any of its related bodies corporate, of gauge installation services to other operators of CSG wells, being a purpose within the meaning of s 45AD(3)(a)(iii) of the CCA.

460    These articulated purposes are substantially the same as those in relation to the Easternwell 2017 Non-Compete Agreement, except for the addition of “preventing” in relation to the second asserted purpose. That addition is to reflect that cls 4(B) and 4(e) did not allow for Eastern Well No 2 to engage in competitive conduct in concert with Qteq, unlike cl 8 of the Easternwell 2017 Non-Compete Agreement.

461    Similar to their argument as to cl 8 of the Easternwell 2017 Non-Compete Agreement, the respondents argue that, properly understood in their context, the proposed cls 4(B) and 4(e) were no more than “normal jockeying” in the context of vigorous commercial negotiations. The provisions must be seen, in the context of these negotiations, as directed to protecting Qteq’s confidential information.

Language of cls 4(B) and 4(e)

462    The text of the proposed cl 4(B) and its variant, cl 4(e), is a powerful indication of the real purpose of the provisions.

463    Clause 4(B) first notes that QGC is a customer of both Eastern Well No 2 and Qteq, though in respect of different product and service lines for each. It then provides that both Eastern Well No 2 and Qteq would not take any action to:

(a)    “circumvent, bypass or obviate”, directly or indirectly, the other party;

(b)    otherwise “perform or take away the business of the customer or any other customer from the other party”; or

(c)    “otherwise compete”, directly or indirectly,

“in respect of these scopes of product and service lines that are currently performed by that other party.”

464    The term creates a broad restraint on both parties competing for work for the other party’s existing customers. The reference to the “scopes of product and service lines” appears to be a reference to the product and service lines of Qteq and Eastern Well No 2 in respect of QGC, picking up that wording at the beginning of the clause. But, despite that reference to QGC, the restraints contained within it are not on their terms limited to QGC. That is confirmed by the restraint against performing or taking away the business “of any other customer from the other party.”

465    Clause 4(e), which was a variation of cl 4(B) and included in the revised Second Qteq NDA, expanded on the mention of QGC, making reference to the context in which it was proposed (additions underlined):

It is acknowledged and agreed that QGC Pty Ltd. (QGC) is a current customer of both parties but in respect of differing product and services lines as between the parties, but QGC has requested that QTEQ transition the Scope which QTEQ currently performs for QGC to Easternwell, and which will require the transfer to Easternwell of certain proprietary and confidential information of QTEQ.

466    It also included a restraint on “canvass[ing] or solicit[ing] any customers” in addition to not attempting to take away the other party’s work. Reference to “scopes of product and service lines” in cl 4(B) is also replaced with a reference to the defined term “Scope”, meaning the supply of equipment and personnel for the installation and/or retrieval of gauges. The term was not defined as limited to the scope of work under the QGC gauge or rig contracts.

467    Important context is also found in the insertion of a liquidated damages term at cl 26(B). This clause required Eastern Well No 2 to compensate Qteq certain set amounts, if it breached cl 4(e) in relation Origin, Arrow Energy or any other customer. The clause clearly contemplates the restraint operating with respect to CSG operators beyond QGC, as is made abundantly clear by the specific mention of other customers in cl 26(B), and in Mr Meldrum’s covering email to the revised Second Qteq NDA, where he notes Qteq’s requirement to have “protection in place for our other business here in QLD.”

468    The respondents rely on the mention of the transition of QGC gauge installation services from Qteq to Eastern Well No 2 near the top of cl 4(e) as an important indicator that it was in fact directed at the protection of Qteq’s intellectual property in a context where that transition was contemplated. They contend that the comment by Mr Gareth Ashton (see above at [441]) reinforces the point.

469    The difficulty with that argument is much the same as in the Easternwell 2017 Non-Compete Agreement: the purposes of the provisions are conceptually distinct from Qteq’s motivation for proposing them. While the impending transition may have provided the motive for Qteq to seek to restrict Eastern Well No 2 in this way, the express and therefore evident purposes of the provisions were simply to restrain and prevent Easternwell from becoming a competitor for gauge installation services work for Qteq’s clients generally.

470    As for cl 8 in the Easternwell 2017 Non-Compete Agreement, the broad restraints created by cls 4(B) and 4(e) provide compelling evidence that their purpose was to restrict the supply of gauge services by Eastern Well No 2 and its associated entities to QGC or other CSG operators in need of such services. In particular, the restraint on Eastern Well No 2 from even canvassing or soliciting Qteq’s existing customers suggest cl 4(e)’s purpose was to prevent Eastern Well No 2 from becoming a competitive threat to Qteq.

471    I must therefore consider whether context is able to displace that overt purpose.

Evidence of Qteq’s perception of Easternwell as a competitive threat

472    The evidence of Qteq’s perception of Easternwell as a competitive threat, discussed above in relation to the purpose condition for the Easternwell 2017 Non-Compete Agreement, carries through to identifying the purpose of the proposed cls 4(B) and 4(e). I also note that, at the time of this alleged attempt, Attempt #5, the competitive threat posed by Easternwell was even stronger. It was no longer merely a potential rig contractor for QGC, but one of the two successful winners of the QGC rig tender. Qteq had now also won the QGC gauge tender and would be required to work with Eastern Well No 2 to transition the gauge installation services to it.

473    In addition to the evidence described at [366]ff above in relation to Attempt #4, the following pieces of evidence emphasise Qteq’s perceptions of Easternwell as a competitive threat at the time the Second Qteq NDA and revised Second Qteq NDA were proposed:

(a)    the letter from Mr Meldrum to Mr Ruff of QGC dated 15 January 2019 (see [429] above), explaining that Qteq was attempting to reach an agreement on a transition plan with Easternwell, noting: “[a]t present, Easternwell are not willing to sign this agreement and are therefore a competitor”;

(b)    Mr Ashton’s email to Mr Meldrum on 21 January 2019 (see above at [432]), stating that they had to be very careful with their agreement with Eastern Well No 2 to ensure “any caveats do not damage our IP or our market” (emphasis added), going on to describe Easternwell as a “monster company at our table”; and

(c)    a further email from Mr Ashton sent on the same day (see above at [433]), where he described Easternwell as trying to “take over our business without paying for it”.

474    As a whole, this is compelling evidence supporting the conclusions reached about the plain meaning of cls 4(B) and 4(e) outlined above.

The respondents’ arguments

475    The respondents place significant emphasis on the commercial context in which cls 4(B) and 4(e) were proposed in advancing their argument on purpose. They contend that Qteq’s overarching aim in these negotiations with Eastern Well No 2 was to ensure that Qteq was compensated for any intellectual property or confidential information that was used. They characterise the draft clauses proposed by Qteq as being intended to ensure that in the transition to “zero man crews” on rigs, Eastern Well No 2 would not use Qteq’s confidential information to compete with Qteq other than as agreed between the parties, and that this was particularly clear in relation to cl 4(e) in the revised Second Qteq NDA. I take that to be a reference to the additional words inserted into that draft which referenced the transition of gauge installation services.

476    That argument again elides the distinction between motive and purpose, discussed above in relation to the Easternwell 2017 Non-Compete Agreement. I cannot accept that argument, for the same reasons given above in relation to Attempt #4.

477    There is a further submission that it would be contrary to the purpose of the CCA expressed in s 2 of that Act to characterise normal commercial behaviour as attempted cartel conduct. Having regard to the full evidence of the attempt, I cannot accept that characterisation of Qteq’s and Mr Ashton’s behaviour. Further, as sympathetic as one might be to the difficult position in which Qteq was placed by the demands of QGC, there was always latitude for it to choose the terms on which it would engage with Easternwell, if at all. That evidence, if relevant at all, may be relevant to the quantification of appropriate penalty, but it is not relevant to the adjudication of contravention and therefore liability.

Conclusion

478    For the reasons given above, and for much the same reasons as the Easternwell 2017 Non-Compete Agreement, I am comfortably satisfied that the purpose condition has been proven for each of the cartel provisions contained in cls 4(e) and 4(B).

Competition condition

479    The same reasoning and conclusion apply to the Easternwell 2018-2019 Non-Compete Agreement as for the Easternwell 2017 Non-Compete Agreement. The additional evidence of Qteq’s perception of Easternwell as a competitive threat discussed in relation to the purpose condition for this attempt provides additional support for that conclusion. The email by Mr Diete to others at Easternwell on 24 January 2019 (see [443] above) provides further support for the proposition that the only impediment to Easternwell being an active competitor against Qteq in gauge installation services, was its acquisition of some of the necessary equipment (for which there is no suggestion of it being a barrier) and obtaining training from Qteq or another installation services provider. I also repeat the argument that that conclusion is even stronger for this attempt, as Eastern Well No 2 was now one of the companies who had won the QGC rig tender and Qteq had now won the QGC gauge tender. The competition condition is therefore met for each cartel provision.

Cartel provision conclusion

480    As a result of finding that the purpose and competition conditions have been satisfied, I conclude that both cls 4(e) and 4(B) contained restraints that that would restrict or limit Eastern Well No 2 and its related companies in the supply or likely supply of gauge installation services to QGC, and prevent, restrict or limit Eastern Well No 2 and its related companies in the likely supply of such services to other CSG operators, both of which were cartel provisions.

Exclusive dealing exception

481    For the same reasons given above in relation to the Easternwell 2017 Non-Compete Agreement (replacing the references to the First Qteq NDA there with the Second Qteq NDA and revised Second Qteq NDA here), the exclusive dealing exception does not apply.

482    That is, with one small exception, which is that cls 4(B) and 4(e) would, by their terms, apply to Qteq as the party from whom Eastern Well No 2 acquired its services, removing one conceptual difficulty for the availability of s 47(4). However, for the same reasons given above, the restraints in the clauses are not conditional on the supply or acquisition of gauge installation services, meaning the restraints are not caught by either s 47(2) or (4).

Conclusion on Attempt #5

483    It follows from the above that I am satisfied that Qteq attempted to enter into, or induce entry by Eastern Well No 2 into, the Easternwell 2018-2019 Non-Compete Agreement:

(a)    which contained the cartel provisions alleged by the ACCC (relevantly at cls 4(B) and 4(e) in express terms);

(b)    that had the purpose within the meaning of s 45AD(3)(a)(iii) of restricting or limiting the supply or likely supply by Eastern Well No 2 (relevantly via Eastern Well Operations) of gauge installation services to QGC, or preventing, restricting or limiting the supply or likely supply by Eastern Well No 2 (relevantly via Eastern Well Operations) of gauge installation services to other CSG operators; and

(c)    in circumstances in which Qteq and Eastern Well No 2 (relevantly via Eastern Well Operations) were likely to be in competition with each other within the meaning of s 45AD(4)(h) in relation to the supply or likely supply of gauge installation services.

Qteq and Mr Ashton’s liability for the Easternwell Attempts

484    Sensibly, no separate, serious and substantive argument was advanced by the respondents that the conduct and state of mind requirements for each of the alleged attempts had not been met in relation to Qteq if the remaining aspects of the case for the ACCC that were contested succeeded. The conduct in that respect was reasonably clear cut once those contested issues were addressed, and findings made in the ACCC’s favour. Mr Ashton argues that the evidence as to attempt only went far enough to implicate him in Qteq’s conduct and did not go far enough for him to be directly liable. I am unable to accept that is so. Mr Ashton was actively involved in the attempt to induce Eastern Well No 2 to enter into each of the agreements containing the cartel provisions.

485    The evidence clearly established, and it was not disputed, that Qteq provided to Eastern Well No 2 the two draft agreements containing the express non-compete clauses, constituting the Easternwell 2017 Non-Compete Agreement and the Easternwell 2018-2019 Non-Compete Agreement (in two variations), and then sought to have them entered into. Each clause was wide ranging and explicit in stating the legal obligations sought to be imposed on Eastern Well No 2, to not compete. There was no nuance or subtlety involved. Both Qteq, via Mr Ashton and Mr Meldrum, and Mr Ashton simultaneously in his own capacity, took active steps to seek to have Eastern Well No 2 enter into those agreements. The proximity to a concluded agreement being formed is readily demonstrated in that nothing more needed to be done by Eastern Well No 2 other than to execute the proposed agreements to have established an actual contravention of s 45AJ by each party. That is, the only impediment to a successful agreement containing a cartel provision in each instance was Eastern Well No 2’s refusal to enter into either. Of course, had the first attempt succeeded, the second would not have been needed.

486    On all the evidence, I have no doubt that Qteq and Mr Ashton saw Eastern Well No 2, via Eastern Well Operations, as a competitive threat as a result of the training obligations imposed upon Qteq by QGC as part of the transition terms and obligations. That assessment was realistic and understandable. The practical effect of success on the QGC gauge tender would have been an obligation on Qteq to create a viable competitor by the provision of what has been loosely described as its intellectual property. Qteq had little practical option but to seek bid for the QGC gauge contract if this lucrative part of its business was to survive and prosper.

487    As to state of mind, I infer, and infer more readily in the absence of any contradicting evidence from Mr Ashton or Mr Meldrum, that Qteq, via Mr Ashton and Mr Meldrum, intended the natural consequences of their action, namely to make (or in the alternative to induce) Eastern Well No 2 to make each of the two agreements. I also infer that same conclusion to be reached in relation to Mr Ashton in his own capacity, being that he intended to induce Eastern Well No 2 to make each of the two agreements. The knowledge and conduct of Messrs Ashton and Meldrum are attributable to Qteq, and that of Mr Meldrum is attributable to Mr Ashton as his direct superior, in accordance with s 84(1), (3) and (4).

488    It follows that I am satisfied that the attempts alleged against Qteq and Mr Ashton have been comfortably proven on the balance of probabilities, paying due regard to the seriousness in reaching such a conclusion:

(a)    that Qteq attempted to contravene s 45AJ, or alternatively if that was needed, that Qteq attempted to induce Eastern Well No 2 to contravene s 45AJ; and

(b)    that Mr Ashton in his own capacity attempted to induce Eastern Well No 2 to contravene s 45AJ,

in respect of both the Easternwell 2017 Non-Compete Agreement and the Easternwell 2018-2019 Non-Compete Agreement.

489    By way of a final observation, I have no doubt that preventing Qteq’s information and knowhow being used against it was the motive behind seeking the two non-compete agreements. That motive was commercially understandable, but it was not lawful. Competition law requirements can be harsh, but they are generally directed to advancing a greater overall public good. The unpalatable alternative of Qteq proceeding without that protection does not change this. That in substance ended up being what happened: Qteq refused to quote in those circumstances and ultimately Pro-Test provided the training (or at least agreed to do so).

G. ATTEMPT #6: THE FIRETAIL UNDERSTANDING

Overview

490    Firetail Energy Services Pty Ltd was incorporated by Mr Mike Wayne, its managing director, in November 2016. At some point in 2021, after the alleged attempts, it entered into receivership.

491    This alleged attempted arrangement or understanding, the only one involving Firetail, is said to have occurred between about 19 and 20 September 2017. The ACCC alleges that Qteq, through the conduct of Mr Ashton, attempted to make an arrangement or arrive at an understanding with Firetail containing a cartel provision that Firetail would not supply gauge works in competition with Qteq when Firetail was likely to be in competition with Qteq in relation to the supply of gauge works: Firetail Understanding (Attempt #6). In the alternative, the ACCC alleges that Qteq (via Mr Ashton) attempted to induce Firetail to arrive at the Firetail Understanding.

492    The conduct alleged to constitute the attempt was contained in:

(a)    a 19 September 2017 email from Mr Ashton to Mr Wayne, containing the sentence:

We need to talk about FireTail and gauge systems & Fibre systems because I want avoid us being in competition.

and

(b)    part of a telephone conversation between Mr Ashton to Mr Wayne the next day.

493    The 19 September 2017 email, reproduced below, was part of an email conversation by way of a chain of three emails that day, with the sentence quoted above to be understood in that context and in the context of a subsequent telephone conversation between the two men summarised by Mr Ashton in a further email.

494    The ACCC alleges that the Firetail Understanding, if arrived at, would have contained a cartel provision within the meaning of s 44ZZRD(1) of the CCA as to both the purpose and competition conditions in that:

(a)    the provision had the purpose of preventing Firetail from supplying gauge works to acquirers of gauge works, being a purpose within the meaning of s 44ZZRD(3)(a)(iii);

(b)    Qteq and Firetail were likely to be in competition with each other in relation to the supply or likely supply of gauge works, within the meaning of s 44ZZRD(4)(a) and (h).

495    The ACCC alleges that Mr Ashton knew of the above, and that his knowledge is attributable to Qteq. There is no issue as to Mr Ashton’s knowledge being attributed to Qteq. All the legal elements of the Firetail Understanding are denied by the respondents. There was no oral testimony adduced by either side, such that it is an entirely documentary case.

496    By way of convenient reiteration, for the purposes of this proceeding the term “gauge works” refers to subsurface fluid monitoring which includes the supply of permanent downhole gauges (PDHGs) and related installation and maintenance services for PDHGs to coal seam gas (CSG) well operators, but only in the context of unconventional wells.

497    The respondents also contend and have pleaded that even if the attempt is proven, s 44ZZRJ (now s 45AJ) would not apply because the joint venture exception contained in ss 44ZZRP (now s 45AP) applies to their conduct. This only needs to be addressed if the alleged attempt is otherwise established.

Conduct issue and purpose condition

498    It is convenient to deal with the conduct issue and the purpose condition together as they are intertwined in a practical sense. They address what Mr Ashton (and thus Qteq) was trying to achieve, how he was trying to achieve it, and whether what he did was proven to go far enough to constitute the attempt alleged. The competition condition is largely a separate question, and will be addressed separately, although the state of mind aspect of that condition is partially addressed in this section.

499    The ACCC contends that Mr Ashton told Mr Wayne that he did not want Firetail competing with Qteq on gauge systems (by email) and gauge works (by telephone), with there being no substantive difference between the terms of the telephone and email communications. The respondents submit that the ACCC has failed to identify evidence that establishes the conduct it says gave rise to the alleged attempt.

500    The ACCC relies upon a chain of three emails, all sent on 19 September 2017, and constituting an email conversation between Mr Wayne and Mr Ashton, with Ms Astrid Morgan and Mr Quentin Morgan of Qteq (also recorded in the evidence as Q or Q Morgan) copied into at least the last email in the chain. I readily infer that Ms Astrid Morgan and Mr Quentin Morgan were copied into all three emails, although nothing turns on this. The email chain is as follows, isolating each email in the chain for clarity and chronology so that they appear in the order in which they were sent:

(a)    From Mr Wayne to Mr Ashton:

Hi Guys

I’ll be in Perth from Thursday night until Monday morning … do you want to catchup sometime, maybe do something on the weekend?

Regards,

Mike Wayne

(b)    From Mr Ashton to Mr Wayne (key sentence emphasised in bold):

Mike, I’m in SINGAPORE then Bali and back on Tuesday!!

We really do need to get together.

I spoke with Norwest and Triangle at Good Oil and punted an early production system for Xanadu ...

We need to talk about FireTail and gauge systems & Fibre systems because I want avoid us being in competition. Can you chat it through with Q.

I’m on my mobile and e mail.

Simon

(c)    From Mr Wayne to Mr Ashton:

Hi Simon,

Enjoy the humidity then!

I did see they had good shows of Oil today and talked about a long term production test, we obviously have everything required to help out there. Do you have any contacts?

I’ll chat with Q, and happy to work something out where we are helping each other out.

Regards,

Mike Wayne

501    In the email reproduced at (b) above:

(a)    “Good Oil” refers to the name of an industry conference attended by Mr Ashton in Perth in early September 2017; and

(b)    “Xanadu” refers to a prospective conventional oil well in Western Australia.

502    Before turning to consider the dispute between the parties about the meaning to be ascribed to the 19 September 2017 email chain reproduced above, it is convenient to refer to the evidence as to communications that took place the next day, 20 September 2017, as they are largely not in dispute and provide the necessary context for what is in dispute.

503    It is an agreed fact that on the day after the email conversation, 20 September 2017, Mr Ashton called Mr Wayne on his mobile, with the conversation lasting approximately 17 minutes. Mr Ashton was outside of Australia at the time of this conversation. In an email sent later that same day to Mr Meldrum and Mr Morgan, Mr Ashton referred to a “long chat” he had had with Mr Wayne, which in context I infer was referring to the lengthy telephone conversation they had earlier that day.

504    In that 20 September 2017 email, Mr Ashton recounted a number of things he had learnt about Firetail in his conversation with Mr Wayne, and in particular that company’s weaknesses. It is useful to reproduce the entirety of that email, with the numbered points being in the original, and forming a convenient means of identifying each of the points (“Empire” is a reference to Empire Oil Company; “FT” is a reference to Firetail; “MW” is a reference to Mr Wayne; “NN” is a reference to Nick Nazarovs at GeoPSI; “Q” is a reference to Mr Quentin Morgan):

Gents,

Just had a long chat with Mike Wayne, very interesting.

1.    FT have A$180k outstanding invoices to Empire.

2.    FT do not have a PPRS in place and could lose 3 separators, all future income and their preparation costs.

3.    Riggs has a PPRS in place with FT and there are exposed.

4.    I asked MW to let me know if he needs my help financially.

5.    FT asked for gauge prices from NN for Origin after Origin pushed FT to bid. FT have not bid yet.

6.    I gave FT the details of the Xanadu well which has announced a big Oil find in the Perth basin, close to CliffHead.

7.    It is a big Early Production Opportunity. AWE called me today, Norwest are the operators.

8.    I told Mike that I do not want FT competing with us on gauge work. He agreed.

9.    I asked him to speak with Q in Perth this week regarding co-operating on SMART Fibre in Australia.

However, here is a thought for the back of our minds.

I support FT confidentially, we boost them to the position of the second gauge installation company, they get 20% of the QGC work, I take them out?

Just a thought?

505    In relation to that email:

(a)    The parties agree that points 1 to 4 refer to Firetail’s financial position.

(b)    The parties agree in substance on the meaning of points 5 to 7:

(i)    Point 5 is about Firetail asking for gauge prices from Mr Nick Nazarovs, the GeoPSI representative for the Origin Energy bid. At this stage, Firetail had been asked to bid for the Origin wellsite services, but did not submit that bid until November 2017. It is agreed between the parties that Origin Energy had requested Firetail to make a bid for some gauge work.

(ii)    In relation to points 6 and 7, it is accepted that they relate to Mr Ashton providing Mr Wayne with details of the Xanadu opportunity. The ACCC submits that this was done for the purpose of inducement, giving Mr Wayne details of a conventional well opportunity where Firetail might be able to provide well testing services.

(c)    There is disagreement on the meaning of points 8 and 9, discussed further below.

506    The next day there was an email exchange in response to Mr Ashton’s 20 September 2017 email. Although those emails do not form part of the conduct relied upon by the ACCC, they form part of the context, which may be used in aid of interpretation. The text of those 21 September 2017 emails was:

(a)    From Mr Meldrum to Mr Ashton, copying Mr Morgan:

Simon

I like your thinking on that last point.

Best regards

Ewan

(b)    From Mr Morgan to Mr Ashton, and I infer copied to Mr Meldrum:

What’s the risk that QGC then simply award FT work elsewhere – they seem determined to want 2 separate gauge service providers.

(c)    From Mr Ashton to Mr Morgan, copied to Mr Meldrum:

Q, don’t know but it would be better to cultivate a friendly provider, particularly if GEOPSI stick to the arrangement that Qteq is exclusive supplier of their kit for Shell/QGC.

Just a thought.

Mike is unaware of this thought but does want to discuss SMART fibre with you Q. I said that perhaps they bid with us, not against us??

Let’s cultivate FT and reduce our competitive exposure. The Empire [Empire Oil Company] crash will really hurt his cash flow I think and dent his confidence.

Simon

Construction of the 19 September 2017 email chain

507    The main dispute is about the meaning to be given to the email chain on 19 September 2017, reproduced above at [500].

508    The ACCC submits that the email from Mr Ashton to Mr Wayne on 19 September 2017, when read with the nine points in the email on 20 September 2017, is evidence going to the existence of an attempt to make the Firetail Understanding, particularly emphasising the statement by Mr Ashton that he wants to “avoid us being in competition”, which in context is a reference to Qteq and Firetail.

509    The ACCC’s further submissions is that:

(a)    I should interpret Mr Ashton’s statement in his 19 September 2017 email to Mr Wayne that he “spoke to Norwest and Triangle at Good Oil and punted an early production system for Xanadu” as a reference to one potential project; and

(b)    I should interpret the immediately following statement in that email that the two of them needed to “talk about FireTail and gauge systems & Fibre systems because I want avoid us being in competition” as Mr Ashton wanting to avoid them being in competition for projects other than Xanadu, as there is no evidence that Xanadu involved gauge systems.

That is, the ACCC contends that this part of the 19 September 2017 email was directed at competition between Qteq and Firetail in relation to gauge works more generally, not in relation to Xanadu.

510    The ACCC also submits that ultimately whether I accept that the 19 September 2017 email from Mr Ashton to Mr Wayne deals with one subject or two in the consecutive third and fourth paragraphs “I spoke with Norwest and Triangle at Good Oil and punted an early production system for Xanadu …” and “We need to talk about FireTail and gauge systems & Fibre systems because I want avoid us being in competition. Can you chat it through with Q [Mr Quentin Morgan]”, does not matter, and either view permits me to find in its favour. The apparent reason for that is that the fourth paragraph is about avoiding competition with Firetail in relation to gauges either way. On the ACCC’s case, Mr Ashton’s reference to the Xanadu well is a component of the inducement for the Firetail Understanding. The ACCC contends that Mr Ashton was providing Firetail with details of the Xanadu well which, being a conventional oil well, was aligned with Firetail’s business, but not with Qteq’s business which was limited to CSG and mining.

511    The respondents in closing submissions describe the ACCC’s construction of the 19 September 2017 email chain reproduced above as problematic. They point out that there is no evidence to suggest that the Xanadu well project would involve gauge works, so that references in the email to gauge works had to be references to something other than Xanadu, points with which the ACCC would seem to agree and indeed rely upon. The ACCC’s case is that the object of the alleged understanding was gauge works more generally, with explicit references to QGC work in the 20 September 2017 email, being Mr Ashton’s record of his telephone conversation with Mr Wayne that day. Work for QGC was undoubtedly Qteq’s major concern at the time as it was the incumbent gauge supplier wishing to succeed in retaining that work out of the tender process. The respondents also submit that there was no evidence that Qteq could have had any role in the Xanadu opportunity. That is not inconsistent with the ACCC’s case, although it formed no part of it.

512    The respondents contend that the 19 September 2017 email chain should be interpreted as referring to the Xanadu opportunity throughout, with the focus necessarily being on Mr Ashton’s email in that chain. That interpretation is difficult to sustain in light of the express reference to QGC in the 20 September 2017 email, which had nothing to do with Xanadu, and the contextual inference to the contrary available to be drawn, and drawn more readily in the absence of evidence from Mr Ashton. The respondents further submit that Mr Ashton’s reference to having “punted” an early production system for Xanadu should be interpreted as Mr Ashton pitching such a system to Norwest and Triangle, and that this should be read as Mr Ashton proposing something that he would be involved in, and was not, for example, the language of providing a referral or introduction. While Qteq operated in the CSG industry, and Xanadu was a conventional oil well, the respondents submit, without evidentiary support, that conventional oil wells often have gas, presumably to bridge the logical gap between the CSG work that Qteq did, and the conventional oil well work that Qteq apparently did not do.

513    I am prepared to assume that conventional oil wells, at least some of the time, will also have gas, as this accords with common sense and in any event does not appear to be determinative of anything of importance, or perhaps anything at all, especially as the presence of gas as a matter of logic says nothing of it being in any commercially viable quantity. In any event, the additional step of interpreting “punted an early production system for Xanadu” as meaning proposing involvement in the Xanadu project by Qteq is a step further than I am willing to take. In truth, I would be speculating, rather than inferring or interpreting what Mr Ashton was talking about. It just as likely could have been a reference to an early production system for a conventional oil well provided by someone else (for which Firetail could provide gauge services). That is not inherently improbable if this was a part of the inducement the ACCC alleges, but I do not find that meaning either, as that too would be speculation. The “punted” reference therefore cannot assist the respondents in the way that they suggest and rely upon.

514    The respondents also submit that Qteq had experience in pressure testing and fluid sampling, being processes that were required at the Xanadu well according to an ASX release by the operators, albeit in the conventional oil industry rather than CSG industry, and that I should infer that this is what Mr Ashton was referring to in his 19 September 2017 email to Mr Wayne. On the respondents’ submission, Mr Ashton is making a proposition to Mr Wayne that Firetail may be able to provide well testing services for Xanadu. This is a somewhat detailed and specific inference to draw, with no evidence from the most obvious source to support that interpretation, namely Mr Ashton. I do not consider that this rises above speculation either, and accordingly decline to draw that inference.

515    The respondents also submit that the ACCC’s interpretation of these emails would require the first sentence to refer to Xanadu, being an inducement, while the second refers to CSG opportunities, being a commitment sought. They contend that this is an unnatural reading of the email, as opposed to the email referring only to a single opportunity.

516    However, that argument requires ignoring Mr Ashton’s 20 September 2017 email, which recorded him discussing both Xanadu and CSG opportunities with Mr Wayne the same day. There is nothing unnatural about reading the 19 September 2017 email as containing an inducement followed by the seeking of a commitment, especially since one was related to a conventional oil well and the other to CSG. Again, I more comfortably read the email in this way in the absence of contrary evidence from Mr Ashton.

517    In relation to the Xanadu well, the respondents directed me to an email sent by Mr Wayne to the Xanadu well operators on 21 September 2017, the day after his telephone conversation with Mr Ashton. In that email, Mr Wayne offers Firetail’s well test packages for Xanadu and attaches the Firetail product catalogue and well test technical specifications sheets, offering to put together a specific package for Xanadu. Mr Wayne states that he has been following the Xanadu ASX updates and noticed that NorWest Energy had plans for a long-term production test. The ASX update referred to was released on 18 September 2017, and is discussed in more detail elsewhere in these reasons (at [549]).

518    The respondents submit that Mr Wayne is just writing to the email address he got off the website. It is not clear how that conclusion was arrived at, but there is nothing inherently improbable about this being the source of an email address and nothing seems to turn on it. The respondents also point to the product sheets provided by Mr Wayne to NorWest Energy in relation to Xanadu, which include images of GeoPSI gauges and references to data acquisition, as evidence that the Xanadu opportunity included work of a type that Qteq could have been involved in, as it included gauges and data acquisition, both of which Qteq had experience with in relation to CSG.

519    To the extent that the respondents submit that this means that it is therefore wrong to say that Xanadu did not include gauge works, it needs to be remembered that gauge works for the purposes of these proceedings is confined to CSG, not conventional oil wells. It follows that this submission goes nowhere.

520    The respondents submit that while Xanadu would have been a new venture for Qteq, it could use its knowledge about data acquisition and gauges in the CSG industry and apply this in relation to a conventional oil well. This argument, that it would be easy for Qteq to transfer its knowledge of gauge works in relation to CSG to do work in conventional oil wells, appears to contradict some of the respondents’ other submissions in relation to the inability of Firetail to move between the provision of gauge services in the conventional well industry and the provision of gauge services in the CSG industry. Despite this, the respondents rely upon this apparently contradictory reasoning to submit that it is wrong to say that Xanadu did not include gauge works, seemingly overlooking the fact that the term gauge works for the purposes of this proceedings is itself a reference to doing so in relation to CSG. It is difficult to see how this reasoning assists the respondents.

521    In relation to Mr Wayne’s 19 September 2017 email reply to Mr Ashton’s email of the same day, which is relevant to context rather than directly to the existence of an attempt, the ACCC accepts that Mr Wayne’s reference to “good shows of Oil” is a reference to Xanadu, and his statement that “we have everything required to help out there” should be understood as Mr Wayne saying that Firetail can service Xanadu’s conventional oil testing requirements. The ACCC relies upon Firetail’s product catalogue which states that Firetail provides production testing services for reservoir wells, demonstrating its capacity to do the kind of work available at Xanadu.

522    It is important at this juncture to note that the ACCC’s case does not entail any proposition that Firetail would not seek to be involved in Xanadu, but rather that Qteq was endeavouring to ensure that Firetail would not compete on gauge works in CSG, especially for QGC. This aligns with any conclusion able to be reached about Firetail doing Xanadu work, because that is to be contrasted with the alternative of Firetail competing with Qteq.

523    An alternative interpretation of Mr Wayne’s statement advanced by the respondents is that Mr Wayne is stating that he has everything required to help Qteq with the Xanadu well, which the respondents submit is a more natural reading of that statement considering the following paragraph in which Mr Wayne says he is “happy to work something out where we are helping each other out.” The respondents submit that this interpretation is consistent with Mr Wayne’s email having referred only to the Xanadu opportunity, and that the emails read together show that what is being discussed is a possible opportunity for Qteq and Firetail to work together on the Xanadu project. I have difficulty in accepting that this is the more natural reading. I would more readily interpret this as Mr Wayne picking up that Mr Ashton is referring both to Xanadu as an opportunity for Firetail, and collaboration with Qteq separately in its field of work with CSG. In any event, little can turn on how Mr Wayne interpreted Mr Ashton’s email.

524    The respondents point out that during the Good Oil conference, Mr Ashton emailed a number of people at Nu-Energy conveying that he was pleased to meet the recipients, and promoting Qteq as a specialist CSG technology service company that could work with them in the Indonesian gas market. It is not readily apparent how this assists the respondents’ case and has been recorded for completeness, but it tends to assist the ACCC’s case in confirming the CSG focus of Qteq’s work, and Mr Wayne’s knowledge or understanding to that effect.

525    The ACCC submits that read as a whole, the documentary evidence shows that the respondents wanted to avoid Firetail competing for the QGC gauge tender and viewed it as a competitive threat in that respect. That is the context in which the 20 September 2017 telephone call occurred. The ACCC’s case in relation to the Firetail Understanding is not limited to or dependent upon the QGC gauge tender.

526    The respondents seek to contest the overall conclusion that the ACCC urges by giving the key 19 September 2017 email, and thereby all of the documentary evidence read together, a different or otherwise more benign interpretation, which entails revisiting some aspects already addressed above. Before turning to that argument, it bears repeating the Jones v Dunkel point that the respondents, and accordingly the Court, did not have the benefit of hearing evidence from Mr Ashton, who would have been the best source for the meaning of the 19 September 2017 email sent by him to Mr Meldrum and Mr Morgan. His absence from the witness box does not enable that email to carry an interpretation or inference that it does not reasonably bear on its own, but an adverse inference or conclusion may more readily be drawn from the text in context without an evidentiary reason not to draw that inference or conclusion. It is with that in mind that I have assessed the respondents’ proposed interpretation.

Construction of the 20 September 2017 email chain

527    The parties agree on the substance of the meaning of points 1 to 7 in Mr Ashton’s 20 September 2017 email (quoted above at [504]), which followed the lengthy telephone conversation between Mr Ashton and Mr Wayne earlier that day. However, there is some disagreement in their interpretations of points 8 and 9.

528    The respondents contend that point 8 is a reference to Mr Ashton wanting Qteq to collaborate with, rather than compete with, Firetail, specifically in relation to the Xanadu opportunity, which was brought to Mr Wayne’s attention for that purpose, following Mr Wayne’s disclosure of Firetail’s financial difficulties.

529    The ACCC submits that there is no evidence that this statement is directed to Xanadu, which was not a CSG well, and that without any evidence adduced by the respondents to the contrary, I can comfortably draw an inference that it was not a reference to Xanadu. The respondents also submit that Xanadu required some gauge works, albeit not CSG gauge works.

530    I am not prepared to read point 8 in the way that the respondents urge. It requires an unduly contorted and unrealistically benign reading to accept the respondents’ interpretation. First and foremost, point 8 is not on its face talking about competition in relation to work that Qteq is not already performing and may never perform given that was not its existing work area. The natural reading is that Mr Ashton is trying to head off competition in relation to work that Qteq is already performing and, realistically, intends to continue performing via a successful bid for the QGC gauge tender. Rhetorically, if it was not in relation to something known, how and why would Mr Wayne have immediately agreed? The logical temporal interpretation is difficult if not impossible to resist. If that was not what Mr Ashton meant, being the most logical and most probable conclusion to reach, there needed to be evidence from him to that effect.

531    The ACCC’s interpretation of point 8, which refers to “gauge work”, is that it is referring to gauge work within the CSG industry generally, rather than gauge work in relation to Xanadu. Accordingly, this links to the final two paragraphs in the 19 September 2017 email:

I support FT confidentially, we boost them to the position of the second gauge installation company, they get 20% of the QGC work, I take them out?

Just a thought?

532    The ACCC submits that the statement in the penultimate paragraph about “boosting” Firetail confidentially to get 20% of the QGC work is inconsistent with any notion that point 8 is limited to Xanadu, and instead has a clear meaning that Mr Ashton did not want Firetail competing with Qteq on gauge works.

533    The ACCC places particular reliance on point 8: “I told Mike that I do not want [Firetail] competing with us on gauge work. He agreed.” It is important to read that sentence in the context of the last substantive paragraph as a direct indication of Mr Ashton’s, and therefore Qteq’s, state of mind at the time: “I support FT confidentially, we boost them to the position of the second gauge installation company, they get 20% of the QGC work, I take them out?”. There is no evidence from Mr Ashton or any other source to refute or qualify what is being expressly contemplated by him as a strategy, namely to financially support Firetail so that it can become the second gauge installation company, enabling it to get 20% of the work from QGC, and then be taken over. It is evidence that cuts both ways: it proves what Mr Ashton had in mind, but it also proves that he did not view Firetail as being, at that time, in a position to achieve the outcome of being the second gauge installation company without assistance. This is therefore an important reference point for what follows, including the email exchange that took place following Mr Ashton’s 20 September 2017 email.

534    The absence of Mr Ashton’s evidence is even more telling when regard is had to the third and second last paragraphs, reproduced above immediately after point 9, about Qteq’s existing operations.

535    When those paragraphs are read with the preceding point 8 – “I told Mike that I do not want FT competing with us on gauge work. He agreed.” – the position becomes even more clear. In context, it is apparent that this was all about Qteq’s existing gauge work. There is no evidence from Mr Ashton to resist such an interpretation readily available from the text in his email. The thought Mr Ashton was suggesting or floating for Mr Meldrum and Mr Morgan to consider in the “back of our minds” was, in the context of the agreed position that Firetail would not compete with Qteq on gauge work recorded at point 8, that:

(a)    Qteq could provide confidential support for Firetail so that they would be a second gauge installation company and get 20% of the QGC work, in the context of the QGC gauge tender – that is collaboration, rather than competition; and

(b)    once that was done, Qteq could “take them out”, the meaning of which does not need to be ascertained, but is likely to be some kind of take over in light of Firetail’s financial position which had to be propped up.

536    This was not the immediate proposal, but rather the next step, being a collaboration for the additional work that Qteq could not presently perform. Non-competition was the immediate consideration, with Mr Wayne agreeing to that proposition, at least in principle. By way of a general observation, it seems that Mr Ashton was seeing if this was another way for Qteq to solve the problem about not being able or willing to perform the additional gauge work for QGC arising out of the expansion of the number of rigs required for the gauge tender and, considered earlier in these reasons, perhaps as an alternative to seeking to have Pro-Test cover this gap.

537    The respondents argue that, rather than attempting to curtail Firetail’s opportunities for the QGC gauge tender, Mr Ashton was considering “boosting” Firetail, which otherwise would not have been a contender, by making Firetail a viable gauge installation company so that it could be a “friendly” contractor in relation to the QGC gauge tender. The respondents argue that the reference to reducing competitive exposure relates to competitive exposure to companies other than Firetail for the QGC tender, by securing this friendly provider to be awarded the other gauge contract. The respondents submit that Mr Ashton’s statement that he would “support FT confidentially” is referring to financially supporting Firetail to turn it from a non-viable competitor into a viable competitor for the QGC gauge tender. It was therefore not linked to point 8 in Mr Ashton’s 20 September 2017 email in relation to the bid for work with QGC, nor point 5, concerning a potential bid for Origin. Instead, the respondents, adopting an idea I had put in a question in the course of arguments, contend that it came out of the blue.

538    An important ultimate purpose of this argument is to bolster the argument addressed below that the competition condition had not been proven. The respondents rely upon this as evidence that Firetail was not, without that proposed assistance from Qteq, in any position to compete with Qteq. That is, Firetail was not in any position to be in competition with Qteq unless and until a financial boost or cultivation took place. This is advanced in contradiction to the ACCC’s case that the cultivation was to reduce existing competitive exposure from Firetail.

539    In support of that argument, the respondents seek to have an additional part of Mr Ashton’s s 155 examination transcript, at p 209.4 to .29, admitted into evidence as context, and once admitted, treated as evidence of the truth (implicitly pursuant to s 60 of the Evidence Act). The ACCC opposes this additional examination transcript being received into evidence upon the basis that this part of the s 155 examination of Mr Ashton was not an admission about Firetail’s capability to provide gauge works, but rather to the separate topic of what Mr Ashton meant in his 19 September 2017 email to Mr Wayne concerning Xanadu, and especially the passage highlighted above “We need to talk about FireTail and gauge systems & Fibre systems because I want avoid us being in competition”, being the critical passage relied upon for this attempt.

540    Explicit in the ACCC’s objection was the absence of any opportunity to test what amounts to an exculpatory account from Mr Ashton, without him giving evidence, and necessarily not meeting the admissions exception to the hearsay rule. In the alternative, the ACCC seeks a direction under s 136 of the Evidence Act, limiting the use of this additional examination transcript as evidence of the fact it was said by Mr Ashton, not as evidence of the truth.

541    The conclusion I have reached is that the additional examination transcript should be admitted as context for the portion already admitted, because the opening question that has already been admitted “Were you concerned that Firetail more broadly not be involved in gauge system[s] and fibre systems?” is directly and contextually connected to the immediately preceding cross-examination about the email which contained that very passage, as reproduced above. However, it is only context evidence, to assist in understanding the admission transcript evidence that follows. It is neither fair nor appropriate that the additional evidence be admitted as untested evidence of the truth, so I confine its use as evidence of the fact of what was said by Mr Ashton, to give context to the question and answers that followed, which were admissions. I have read and considered that additional contextual evidence and taken it into account, but do not see a need to reproduce it.

542    While the question of whether or not a company is in competition with another is an objective fact, I accept, as the respondents submit citing BlueScope (No 5) [85] and [110], that the purpose condition involves an inquiry into the subjective purpose of the alleged contravener in proposing a cartel provision. Based upon that accepted principle, they submit that the evidence establishes that Mr Ashton did not know that Firetail could be a likely competitor, such that his subjective purpose cannot have been to prevent Firetail from supplying PDHGs. The respondents submit that this interpretation is consistent with Mr Ashton’s email in relation to the Good Oil conference and seeking more work for Qteq. I consider the competition condition, and Mr Ashton’s knowledge of Firetail’s likelihood to be in competition with Qteq as it relates to the intention element, in greater detail later in these reasons.

543    The difficulty for the respondents once again is that Mr Ashton did not give evidence, and it is difficult to conclude that the reference to supporting Firetail financially was directed to a benign purpose, rather than the purpose more naturally apparent on the face of the email dated 19 September 2017 of avoiding competition between Firetail and Qteq. I am fortified in the contrary interpretation I have arrived at by reason of there being no evidentiary contradiction to the best interpretation available on the face of this email, in the context of the surrounding evidence. However, going the other way, while perception is an aspect of rivalry and the evidence indicates that Mr Ashton perceived Firetail to be a competitive threat, this may not be enough to lead to a conclusion that the competition condition was met if the reality did not support the perception. Perceptions may exceed reality, or be precautionary as to a future position that has not yet arisen and may never arise.

544    The respondents further argue that even if the ACCC can prove that the alleged conduct giving rise to the Firetail Understanding did occur, that conduct does not rise to the level of an attempt as neither the conduct nor intention elements of an attempt are satisfied, and the conduct falls short of being even “merely preparatory”. The point being made is that the number of steps that would have needed to occur for Firetail and Qteq to jointly supply services in relation to the Xanadu well means that the conduct was not sufficient to be characterised as a “step” towards a contravention for the purposes of the conduct element of an attempt. The respondents submit that Mr Ashton’s comments were not a proposal capable of being the subject of the necessary intention but rather speculative ideas, incapable of assent.

545    I am unable to accept this submission. An attempt to reach an understanding does not need to be so advanced. It is not an attempt to do an act. The conduct by the respondents in respect of Firetail constituted steps towards an inducement of an understanding between Qteq and Firetail containing a cartel provision, and Mr Ashton’s statement that he did not want Firetail competing on gauge works was one that was capable of assent, and so was more than merely preparatory.

546    Turning to state of mind, in the submission of the respondents, the intention of Mr Ashton, and thus at the same time of Qteq, was not to propose a cartel provision, but instead to discuss potential collaboration on the Xanadu well with a company he did not regard as a likely competitor. While the respondents argue that Firetail was not a potential competitor of Qteq in relation to the supply of PDHGs, they additionally submit that a failure to prove actual knowledge by the respondents that Firetail might be a putative alternative supplier of PDHGs would be fatal to the ACCC’s case regardless of whether Firetail was a potential competitor.

547    The respondents further submit that there is no “quid pro quo” or countervailing benefit in the alleged Firetail attempt, and while not always the case, ordinarily a person in business would not make an arrangement or understanding in the absence of a reciprocal or mutual obligation. They argue that the ACCC has failed to establish why, and it is commercially implausible that, Mr Ashton would seek a commitment from a company he did not perceive to be a threat, or why Firetail would agree to such a demand without a reciprocal commitment as a quid pro quo.

548    While no overt quid pro quo has been identified in relation to the Firetail Understanding, and no such quid pro quo is strictly necessary, the ACCC submits that Mr Ashton was providing Mr Wayne with information about the potential Xanadu project as an opportunity for him to take on conventional oil well testing work, being a commercial inducement held out for the alleged attempted understanding. The ACCC further submits that Mr Ashton intended to use financial support he had provided Firetail, in the nature of a $150,000 investment into the company, as well as his long relationship with Mr Wayne who he had employed in his first job at 19 years old, as leverage. With Firetail, what was proposed was a combination of an inducement and leverage from Mr Ashton’s financial involvement with Firetail by way of the $150,000 loan.

549    The respondents submit that a press release from NorWest Energy dated 18 September 2017 about hydrocarbons encountered at Xanadu and drilling results demonstrates two things. First, that the Xanadu well was no secret at the time of the alleged Firetail Understanding, and so Mr Ashton would not be using its existence as part of the inducement of Firetail in the alleged understanding. Second, that while Xanadu was drilled as a conventional oil well, it did have elements of pressure testing and fluid sampling that Qteq was familiar with, albeit in a CSG environment. I do not find either of those submissions helpful. As to the first point, Xanadu not being a secret did not mean there was no value in drawing it to Mr Wayne’s attention, or causing him to think about it as a prospect. As to the second point, it remained the case that Qteq was an operator in the CSG industry, that QGC was its biggest customer, and it wanted to win the gauge tender. However, Qteq was concerned about not being able to service all of the QGC gauge contract if its bid was successful and was exploring ways to meet that gap by encouraging another provider of gauge services, Firetail, to become involved, but with a restraint on competing with it being in place.

Conclusion on conduct and the purpose condition

550    The competing arguments are spelt out in some detail above, in order to assess them in relation to a documentary case unassisted by any witness evidence. In the end it comes down to the interpretation to be given to documentary evidence both on its face, and in relation to the best, clearest and most probable inferences available to be drawn from that material, without the benefit of any explanation, qualification or contradiction from those involved in the communications, most notably Mr Ashton. In those circumstances, as the above discussion indicates, the ACCC’s interpretation better meets that description and is to be preferred and accepted. I am satisfied on the balance of probabilities that the conduct element has been proven by the evidence and most of the arguments relied upon by the ACCC. I am also satisfied that the purpose condition has been established. That is, I am satisfied on the balance of probabilities, and having regard to the quality of evidence required to sustain such serious allegations, that Qteq, through the conduct of Mr Ashton, attempted to make an arrangement or arrive at an understanding with Firetail containing a cartel provision that Firetail would not supply gauge works in competition with Qteq. This conclusion is, however, incomplete, because it leaves for determination the question of whether, at that time, Firetail was likely to be in competition with Qteq in relation to the supply of gauge works, so as to satisfy the competition condition and prove Attempt #6.

551    Necessarily, the purpose condition is also satisfied in relation to the ACCC’s alternative case that Qteq, through the conduct of Mr Ashton, attempted to induce Firetail to arrive at the Firetail Understanding, and also that Mr Ashton himself attempted to induce Firetail to arrive at the Firetail Understanding, again with the competition condition aspect to be addressed.

552    In making these findings, I am satisfied that Mr Ashton and thus Qteq subjectively believed that Firetail was likely to be in competition with Qteq in relation to CSG gauge works, in the sense of believing that there was a real and not remote possibility that this could transpire. However, it remains for determination whether that subjective belief was sound. If it was not, Mr Ashton and thus Qteq had the necessary intention, but the objective competition condition would not be established, and the ACCC’s case on this attempt must therefore fail.

The competition condition

Framing the debate by reference to the statutory test and the parties’ competing cases

553    It is not contentious that Firetail and Qteq were not actually in competition with one another at the time of the attempts. The companies operated in different parts of the oil and gas industry, with Firetail being a well testing business focusing on exploration stage wells in the conventional oil industry and Qteq being a data acquisition business focussed on the production stage of the CSG industry. There is no evidence that Firetail had supplied gauge works at the time of the alleged attempt. The respondents submit that there were multiple impediments to Firetail becoming a competitor in relation to CSG gauge works because it needed financial capital, a team of specialist personnel, base facilities, operating procedures and materials, field operational capability, and a demonstrated track record.

554    The ACCC submits that Firetail was nonetheless likely to be in competition with Qteq in the supply of gauge works at the relevant time, and had the intention and ability to supply gauge works.

555    The respondents argue that the ACCC has failed to establish that Firetail was a “likely” supplier, as the evidence only shows that Firetail would have liked to be a supplier of PDHGs, and not that it could have realised that ambition.

556    This was an astute way to pose the problem facing this aspect of the ACCC’s case. For the ACCC to prove that the competition condition was met, the ultimate question that needed to be answered was whether the evidence establishes that it was likely that Firetail would be in competition with Qteq in relation to CSG gauge works, or, adopting the respondents’ characterisation, was that shown to be little or no more than something which Firetail would have liked to have been in the position to do in relation to CSG gauge works more generally? Or to use a characterisation that arose during the course of the hearing, was Firetail anything more than a mere pretender? This is not to reverse the onus, as the respondents did not have to prove anything on this point, but rather to characterise neatly the defensive response to the evidence relied upon by the ACCC.

557    The core of the ACCC’s case is that:

(a)    Firetail had expertise in the supply of gauge works for CSG through its wells managing director, Mike Wayne, who acquired it from his prior employment;

(b)    Firetail sought to supply and held itself out as a supplier of gauge works, and Mr Ashton and others within Qteq were aware of this;

(c)    Firetail had some of the equipment necessary for gauge works, including access to equipment under a hire agreement with Farley Riggs (an oilfield equipment supplier) from about December 2016;

(d)    Mr Wayne took steps to obtain gauges and associated equipment, from gauge manufacturers including GeoPSI and DataCan;

(e)    emails between Mr Wayne and Bridgeport Energy Limited in April 2017 also show that Mr Wayne was telling potential customers that Firetail had CanadaTech gauges in stock for rental at that time; and

(f)    all that was holding Firetail back from being an actual competitor was obtaining gauges and associated equipment, which directs attention to the evidence of Mr Wayne’s endeavours to obtain that equipment.

558    The respondents accept that Firetail held itself out as supplying gauge works and wanted to supply those services, but submit that this was insufficient to make it a likely supplier as they were never in a position to actually supply the services, and that there is insufficient evidence to show that it was anything more than an aspiration. The reasons the respondents advance for this are that:

(a)    Firetail and Qteq supplied different equipment and services, to different segments of the oil and gas industry and in different States of Australia. Firetail supplied well testing services to the conventional oil and gas industry, which were services required at the initial testing phase of a well’s lifecycle in South Australia where there are no CSG wells. Qteq supplied subsurface fluid level monitoring systems and services to the unconventional CSG industry in Queensland, which were services required during the production phase. In other words, the companies supplied different services to different parts of the oil and gas industry, at different stages of a well’s life, in geographically distinct areas.

(b)    It is a substantial endeavour to establish a field operation and credibly offer pre-production or production services to the operators of exploration wells, in the conventional or CSG industry. It requires financial capital, specialist personnel and materials and operational capability.

(c)    While Firetail had aspirations to enter the PDHG market, it lacked these necessary requirements to engage in any rivalrous behaviour with Qteq in respect of PDHGs.

(d)    Subsequent events demonstrate that at no time did Firetail in fact supply PDHGs nor did it have a realistic chance of doing so.

559    In light of the granular nature of the dispute as to what the evidence does and does not establish, which is relevant and probative in addressing the question of whether Firetail was likely to be a competitor with Qteq in the area of gauge works, it is necessary to consider the evidence in some detail. This is arranged under the seven subheadings below, being incorporation and intentions, the QGC tender, Firetail’s access to equipment, the gauges issue, Firetail’s customer communications, its financial difficulties and Qteq’s knowledge of its activities. It is the combined effect of all this evidence that matters in determining whether the evidence relied upon by the ACCC is sufficient to establish that the competition is met.

Incorporation and intentions

560    After Firetail was incorporated as a service company in November 2016, Mr Wayne stated to others (specifically at GeoPSI) that Firetail had taken over Farley Riggs’ equipment and contracts. Firetail had obtained some equipment from Farley Riggs under an equipment hire and share subscription agreement dated 8 December 2016. In early 2017, Mr Wayne told potential suppliers that Firetail was looking to expand into other areas, in particular permanent monitoring (inferentially, PDHG monitoring), using GeoPSI products.

561    On 21 December 2016, Mr Wayne emailed Mr Edward Riggs of Farley Riggs requesting that an announcement be approved for distribution on LinkedIn and other sites regarding the launch of Firetail that same day. That announcement referred to Firetail having a “significant inventory of equipment to provide a range of services to the Oil & Gas market in Australasia and around the world”. Although nothing is made of this draft announcement – there is no evidence that it was ever actually made – it also stated:

Initially Firetail will provide solutions for Early Production Facilities, Well Integrity Services, Well Test & Flow Back Services, Frac Tree's, Drill Stem Testing and Permanent Monitoring Gauge Systems along with an extensive range of equipment sales for Production Equipment and Data Acquisition products. It will look to quickly develop new technologies and bring additional services to the market.

562    A weekly shareholder report for Firetail dated 28 December 2016, one week after the company launched, included a reference to “DST & Well Test Package” for Beach Energy, with a second DST anticipated early the next year. The document also says that Firetail has been in talks with DataCan concentrating on the downhole gauge market as DataCan are looking for someone to go to market and compete against Welldog and have developed products that suit what Firetail is looking for. The document mentions that DataCan has extensive permanent monitoring capabilities, and data acquisition products for well testing and wireline logging. The document also mentions under the heading “finance”:

ProX (Simon Ashton) has provided a letter of support (attached) for up to $150k and we are working on the terms for a convertible note. Empire Oil & Gas had requested a bank guarantee and this was the best way to do it to protect all parties. It also allows us to keep ProX up to date with our business activities so that when/if the time comes for a larger capital injection the completely understand who we are and what we’re doing.

563    The letter of support referred to, dated 5 January 2017, demonstrates that ProX (via Mr Ashton) agreed to provide Firetail with financial support of up to $150,000, conditional upon a clause of a deed of novation between Farley Riggs (outgoing party), Firetail (incoming party) and Empire Oil Company (WA) Pty Ltd (continuing party) being enacted for a period of one month from the date of the letter. ProX also agreed to negotiate in good faith an investment in Firetail for $150,000 before that support expired. The evidence of the investment in Firetail by Mr Ashton through ProX is, on the ACCC’s case, relevant to the context and commerciality of the Firetail Understanding, as it demonstrates the leverage that Mr Ashton held over Firetail. It is also relevant to the question of inducement, although that is not a live issue given the findings made on conduct.

564    On 6 January 2017, Mr Wayne sent Mr Jeff Scott, Vice President of GeoPSI, an email that evidently followed a telephone conversation:

As discussed I’ve started my own service company which has taken over the existing FarleyRiggs equipment and contracts, so I have all of FarleyRiggs capabilities and am looking to expand into other sectors. Permanent monitoring is obviously something I love and I’d like to look at closely. I don't want to compromise anything between yourselves and WellDog, but if we can work together it would be great to be able to go to the market with Geopsi products. I already have the installation equipment for tubing deployed and suspended systems so can hit the ground running.

565    Mr Scott responded on the same day to congratulate Mr Wayne, and stated that “John” would get in touch shortly. The next day, 7 January 2017, Mr John Wilson, the business development manager for GeoPSI emailed Mr Wayne advising that he and a colleague would be in Australia in early February and “would like to meet with you to discuss the gauge business and the potential of working together”. Mr Wayne sent the following email response on the same day:

Second week of Feb works with me. Let me know a date that suits and we can work towards that. I'm not sure how much Jeff told you but I’ve worked with Geopsi a fair bit in the past and ran the permanent monitoring business at WellDog. I am very keen to get the permanent gauge side of things going at my new company. We also provide drill stem testing so use the EM tools a fair bit too. It’s been a few years since I've used Geopsi products, do you have any updates your able to send through or even a few product brochures?

This email shows that Mr Wayne had previously been employed by Welldog and had, during that employment, developed expertise in the supply of gauge works in CSG wells, running the permanent monitoring business. As such, it advances the ACCC’s case on the competition condition.

566    All of the above evidence demonstrates Firetail’s preparatory and aspirational activities for the supply of gauge works, and is capable of supporting evidence which goes beyond that, but does not on its own establish the requisite likelihood of competition.

QGC gauge tender

567    The respondents submit that the QGC gauge tender was a critical test of Firetail’s ability to compete as a viable supplier. While it is an agreed fact that Firetail was not on the invitation list for the QGC gauge tender, for the reasons that follow, I am of the view that the respondents overstate the significance of that fact. Their argument suggests that competitors should be confined to final round tenderers, which undervalues the fluid dynamics of rivalry and thus competition. It appears from the evidence that Firetail did intend to supply gauge works under the QGC gauge tender, or at least intended to put itself in a position to be awarded that tender contract to supply gauge works to QGC, even if it did not advance far into the tender process.

568    The ACCC’s case in relation to Firetail is not dependant on whether Firetail was in fact in competition with Qteq in relation to the QGC gauge tender, especially as Firetail was actively seeking to supply gauge works to a number of customers. Nonetheless, Firetail not being on that list does suggest that it was not seen, at least by QGC, as a serious contender for such work.

569    On 10 August 2017, Mr Wayne emailed Shell, stating that Firetail would like to be invited to the upcoming QGC gauge tender, and that Firetail believed it had the products and experience to be able to provide Shell with an attractive bid. Mr Wayne detailed his experience starting and managing the permanent monitoring business unit at Welldog in 2011, stating that he designed, procured, installed and managed the entire permanent monitoring business (inferentially, the PDHG monitoring business) and oversaw the installation of over 1,500 gauge systems in CSG wells. He further discussed what Firetail could offer regarding the development of wireless gauges and supplier relationships. A Firetail product catalogue was also attached to that email, which describes Firetail’s offerings, including permanent monitoring of downhole reservoir conditions.

570    On 13 September 2017, Mr Wayne sent a follow-up email to Shell enquiring about when the upcoming gauge tender was expected to be released and whether Firetail would be on the invitee list. Mr Wayne also let Shell know that Firetail was keen to present some recent developments in its wireless capabilities. Shell replied that the expected tender release date would be in early October. In its response, Shell did not dismiss Mr Wayne and thus Firetail out of hand, but nor was any encouragement given.

571    Firetail was not included in the tender invitee list for the QGC tender package released on 24 October 2017, that tender being in respect of the invitation to tender for a contract for the provision of PDHGs. The ACCC submits that there is no evidence as to why Firetail was not on the QGC tender list, but that I should not infer that the absence of Firetail from that tender list means that QGC rejected Firetail because it formed the view that Firetail was incapable of supplying the gauge works. The respondents contend that this is a reversal of the onus, as it is for the ACCC to prove that Firetail was a likely competitor. There is no doubt that the ACCC bears the onus, and I do not think that this was sought to be reversed. It is no more than a debate about what to make of this evidence.

572    The respondents submit that while it is unknown why Firetail was not on the invitee list, the evident reason it was not included was not that it did not seek to be included as it had sent two emails to seek a place on the list, and that I can infer that QGC had an incentive to place all viable candidates on the invitee list to maximise the commerciality of the tender. The respondents contend that I should therefore infer that Shell did not consider Firetail to be a viable competitor.

573    I infer only that Shell did not consider Firetail was likely to be a sufficiently viable competitor relative to other contenders to be included on the invitee list, but do not think this can go so far as supporting an inference that Shell considered Firetail as being unable to compete at all. If Firetail had been on the invitee list, that evidence would have greatly assisted the ACCC, whereas its absence from that list means that this is not a factor that assists the ACCC in that way, because the market view taken of Firetail’s competitive status by Shell/QGC is otherwise unknown. However, nor is this evidence that QGC rejected Firetail because it formed the view that Firetail was incapable of supplying the gauge works. On the whole, it is some evidence in support of the ACCC’s case, but not as significant as it would have been if Firetail had been on the tender invitee list. It is consistent with Firetail being likely to compete, but again not sufficient evidence on its own.

Firetail’s access to equipment

574    There is evidence of discussions between Firetail and two potential suppliers of gauge products in 2017, GeoPSI and DataCan. There is also evidence of Mr Wayne telling a potential customer that Firetail had CanadaTech gauges available for rental, which I discuss in more detail later in these reasons. Additionally, Firetail had access to some equipment through an equipment hire agreement with Farley Riggs entered into in December 2016. However, the scope and nature of that access is unclear and it is not established whether it amounted to Firetail actually having access to equipment that would enable it to compete. That interpretation is borne out by a measure of at least aspiration, if not desperation, in Mr Wayne’s attempts to source this equipment in the email correspondence considered next.

575    As noted above at [564], Mr Wayne had contacted GeoPSI on 6 January 2017, raising his interest in going to market with GeoPSI’s products. In response, Mr Wilson replied on 10 January 2017, supplying some literature on GeoPSI’s gauge systems. That document shows that GeoPSI offered PDHGs for sale, including 4-20mA gauges and associated equipment.

576    On 15 January 2017, Mr Wayne asked GeoPSI for a quote for certain products for a client “who wants to monitor fluid levels in some deep wells.” On 17 January 2017, GeoPSI provided a sales quote to Mr Wayne for equipment, including a quote for four “Tool-4-20ma IECEx 3000psi with WHFT” which is described in the quote as a “cost-effective downhole sensor designed to accurately measure real-time pump intake pressure or fluid level”. The ACCC submits that this quote was for downhole gauges and related equipment, and that 4-20mA gauges were the type being used by Qteq.

577    On 22 January 2017, Mr Wilson again emailed Mr Wayne, providing a quote for products that Firetail had requested earlier that month to help fulfil a client request for Firetail to monitor fluid levels in some deep wells.

578    The GeoPSI sales quote was for gauges with a PSI rating of 3000. There is disagreement as to whether those gauges could have been used in CSG wells, or only conventional wells, discussed below. It is clear from the way in which the ACCC has pleaded its case that the relevant area of competition is the CSG industry, which does not extend to the conventional oil well industry. The ACCC submits that a 4-20 GeoPSI gauge is the type of gauge that would be needed for the QGC tender. I discuss the issue of gauge types in more detail below. What matters here is that Firetail had the supply chain means to access a range of gauges, but the evidence casts doubt on its ability to capitalise on that access. Although the suppliers were apparently keen to supply in relation to viable contracts, the contents of the emails suggest that they were short of being satisfied that any such viable contracts were actually on offer to Firetail.

579    On 18 March 2017, Mr Wayne again emailed Mr Scott of GeoPSI saying that while nothing in particular had come up yet, some things might happen in the second half of the year and Firetail might need help with EM tools (I infer, electromagnetic tools), as the company was still pushing to get some PDHG installations work and DST work was starting to pick up. While this may indicate that Mr Wayne was more aspirational than successful, it also indicates active conduct in seeking to obtain contracts, and thereby to compete.

580    On 12 and 13 April 2017, Mr Wayne emailed Mr Loades at Firetail saying he had spoken to Tim (I infer, Mr Dabrowski) and that it looked like Firetail would be taking on some gauge work soon. Mr Wayne asked about how quickly their red spooler could be ready for field operations and other things about the spooler and associated toolkit, as well as how long it would take to get spoolers built locally if needed. Mr Loades indicated that he had not used the spooler or the associated kits and would need someone who had used the equipment to answer Mr Wayne’s questions, but that 4-6 weeks seemed like an achievable timeframe for building new ones. Mr Loades then offered to start that process, to which Mr Wayne told him to refrain from starting. The ACCC submits that this communication is evidence that Firetail was anticipating supplying gauge works. Again, that anticipation has an aspirational quality to it, when the evidence is read carefully.

581    On 26 April 2017, Mr O’Hare of Emerson Automation Solutions emailed Mr Wayne with the subject line “Downhole Gauging Opportunity”, saying “I am sure you have heard of Welldog going into voluntary administration and I thought this might be the catalyst for Firetail to look into moving in to the down hole gauge market?” and offering Emerson’s “solutions” if that were the case (Emerson provides pressure and temperature sensors). Mr Wayne replied on the same day saying:

I wasn’t [a]ware you guys done this. I’m very interested in permanent downhole gauges. We actually already have some wire and installation spoolers and toolkits kits, so we are essentially ready to start installing…

582    The ACCC submits that this email with Emerson is further proof that the prospects of Firetail in relation to gauge work was not limited to the QGC tender. That is plainly correct, although it remains at the level of an aspiration.

583    The respondents submit that the email of 13 April 2017 referred to above at [580] shows the true position of Firetail, contrary to the email of 26 April 2017, that Firetail is far from being ready to provide services using the spooler, given Firetail’s engineering manager did not know its condition or how to run it. The respondents submit that this paints the true picture of Firetail – a company which was telling potential customers and suppliers that they were a likely competitor, despite not having any real commercial likelihood of being able to compete. The ACCC advances that this is no real impediment to there being a real chance of Firetail providing gauge works. I am unable to accept that submission. It is necessary to establish an underlying reality to Mr Wayne’s and thus Firetail’s aspirations.

584    In July 2017, Mr Wayne emailed Mr Hartwell of DataCan to let him know that there were some larger gauge works contracts coming up at the end of 2017 in Queensland and asked if they could use DataCan spec sheets in Firetail brochures, to which Mr Hartwell agreed.

585    Also in July 2017, Mr Wayne emailed Mr Nazarovs at GeoPSI for a quote and enquired about the lead time for the supply of 1500psi 4-20 Gauges and encapsulated cables, following up on his earlier request on 2 August 2017. On 7 August 2017, Firetail received quotes from Mr Nazarovs regarding the supply of 4-20 mA IECEx downhole sensor systems and other equipment. In Mr Nazarovs’ email, he states that he would like to discuss how GeoPSI can support the Queensland market and Mr Wayne’s business.

586    On 2 August 2017, Mr Wayne emailed Mr Nadeau and Mr Hartwell from DataCan, stating that he had been asked to quote “one of the largest clients here in Qld” for some downhole gauge systems. I infer that this is a reference to QGC. Mr Wayne states that tenders are coming up soon so if Firetail can give them the right pricing, he thinks they will be able to gather some momentum and use that business as a foot in the door for other kinds of work, noting that just a 25% market share would be 250 systems a year. Mr Wayne then lists “4-20mA Analog 1500psi Sensor” and “Wellhead Outlet II” as the equipment he needs, and asks DataCan to let him know if they could do that as he will be able to get a quote in and sort the rest of the system out.

587    In summary, the response from Mr Nadeau (a director at DataCan) was pessimistic. He observed that the economics of that kind of project may not work for them unless the volume was high enough (100 systems, 50 at a time), but offered to keep the discussion going. Mr Wayne replied that the QGC gauge tender is “our only real time to get into the market if we want to do it” but that he believes that they can make it work. The balance of the email chain is cast in optimistic terms, as referred to below, but more so from Mr Wayne. There was no flat rejection of what Mr Wayne was proposing, but nor was there overt acceptance as to viability. The stumbling block was stated in terms of the overall economics of the possible contracts, rather than any expression of reservation about Mr Wayne’s capability to provide the services.

588    On 10 August 2017, after a couple of emails from Mr Wayne to DataCan to which there was evidently no response, Mr Wayne emailed DataCan again asking if they were interested in moving forward with his proposal as Firetail is “now on the Shell gauge tender invite list”, and it is “just a matter of getting the 4-20 [gauge] pricing right”. Firetail was not, at that time or at any time after, on the QGC gauge tender invitee list, although Mr Wayne repeatedly emailed to achieve that. The ACCC submits that it could be inferred that Mr Wayne believed at that time that he was on the tender list or likely to be added to it. That inference, while not impossible to draw, is hard to favour over the more obvious one, namely that Mr Wayne was being somewhat economical with the truth as to the current state of affairs, and was perhaps projecting confidence, in order to persuade DataCan to accept his proposal. Mr Wayne’s willingness to overstate Firetail’s position, which could not have been accidental given his repeated and ultimately unsuccessful attempts at being added to the tender invitee list, indicates that the situation fell more on the aspirational than realistic side of the ledger.

589    In any event, DataCan replied that they were interested and asked for a couple of more days to try and figure out how to make the 4-20 gauge reliable and cost competitive. DataCan and Mr Wayne agree in this email chain that they can likely work out the specifics after they have obtained the order – in context, to be read as if they obtained the order – and after some further exchanges back and forth conclude that they most likely would be in a position to sort out the mechanics of a contract once obtained. The ACCC points to this email as evidence that there was a real chance of Firetail obtaining gauges from DataCan, and not just from GeoPSI, in order to fulfil any downhole gauge work orders that were obtained. The problem with this submission is that it indicates a likelihood of being able to obtain the gauges and thereby being able to compete if the contracts were obtained, which remains a step short of being able to compete. The evidence does not go so far as to establish that Firetail was yet in a position to compete, because it was not able to take concrete steps towards realising the aspirations held for it by Mr Wayne.

590    On 15 November 2017, Mr Wayne submitted a response to a request for a proposal from Origin Energy in relation to service line capability and wellsite services. That response stated that, in the category of “Permanent Downhole Gauges” Firetail had “1x Hydraulic Suspended System Winch & Toolkit” and “1x Pneumatic Tubing Conveyed Gauge Installation Kit”. The Origin opportunity was for a CSG well. The concern I have with this evidence is that it still falls short of showing that Firetail was yet in any position to obtain the gauges themselves.

591    The totality of the evidence as to Firetail’s access to gauges, which were indispensable for it to be able to compete, falls short of establishing that there was in fact any such supply available to it. While there were indications that supply was possible, that was expressed on a highly contingent basis, not just predicated on Firetail being able to get an installation contract, but also on viable contracts being on offer. This is not sufficient evidence to advance the ACCC’s case to any marked degree.

The gauges

592    The parties disagree as to whether the evidence shows that Firetail had access to PDHGs that would be used in CSG wells, or conventional wells. It is clear from the way in which the ACCC has pleaded its case that they must be for use in CSG wells, being the business in which Qteq operated. The respondents submit that the evidence discussed above should be read with care because there are many types of gauges, and regarding this alleged contravention I should only be concerned with PDHGs for CSG and not any other kind. As they put it in their oral opening submissions, this is not “gauge bingo”.

Discussions with and quote from GeoPSI

593    The respondents contend that the GeoPSI sales quote provided to Firetail on 17 January 2017 does not relate to PDHGs for use in CSG wells, and this is indicated by the psi rating of 3000. They contend that CSG well PDHGs operate at 1500 or lower psi (pounds per square inch).

594    While I can accept the general premise that not all gauges are for use in CSG wells, the difficulty I am faced with is the paucity of evidence about the significance of the psi rating. The respondents conceded that there was little evidence on this point, and could only direct me to an observation in one of Mr Dabrowski’s statements that PDHGs in CSG wells do not sit as far below the surface as those in conventional wells. They also noted that the QGC gauge tender specifies that the pressure range for PDHGs was 0 to 1500 psi. This is a limited basis, but not a strong one, from which I might infer that the GeoPSI quote was not in relation to PDHGs for use in CSG wells.

595    The respondents also direct attention to references made by Mr Wayne in an email and a new supplier questionnaire to permanent monitoring in the context of reservoirs, which it says are a feature of conventional oil wells and not CSG. The first of those documents is an email chain between Mr Wayne and Mr Scott of GeoPSI from March 2017. In that email chain, Mr Scott refers to a discussion between himself and Mr Wayne in January about PDHGs and asks whether Firetail still has EM (electromagnetic) tools that need support. Mr Wayne replied that they were still pushing to get some downhole gauge installations and noted that DST was picking up so they may need help with EM tools. The second document is a new supplier questionnaire completed by Mr Wayne in relation to Firetail, apparently for Halliburton. Under the heading “nature of your business”, Mr Wayne listed:

Oil & Gas industry well intervention Services.

RESERVOIR VALIDATION, WELL TESTING

COMPLETIONS – PERMANENT MONITORING

RESERVOIR VALDATION – DRILL STEM TESTING, COMPLETIONS – WELL INTEGRITY, COMPLETIONS – FRAC SUPPORT, COMPLETIONS > FRAC TREES

596    The ACCC refers to several documents that it contends support the view that Firetail had access to the relevant gauges.

597    First, a GeoPSI document which detailed a patented “easy connect advantage” PDHG system and included the kind of gauge used by Qteq, being a PT105 SR0 4-20mA downhole pressure and temperature gauge. The detailed product page for that gauge type shows that it is available in pressure ranges of 500, 1000, 2000 and 3000 psiA. In this document, GeoPSI held itself out as a “one-stop manufacturing” supplier, being able to provide all equipment for downhole gauges and carriers. On this basis, the ACCC submits that Firetail could have obtained all relevant goods from GeoPSI, and, when combined with Mr Wayne’s expertise, be capable of supplying gauge works.

598    Second, a sales quote provided by GeoPSI to Firetail in August 2017. The sales quote was for a 4-20mA IECEx1000psi with WHFT, a 4-20mA IECEx1500psi with WHFT, as well as some other equipment including clamps and seals, described as “downhole sensor systems” in the email which attached the sales quote. The ACCC submits that this sales quote from GeoPSI related to the relevant kind of gauges for the supply of gauge works, and that this is supported by the email from GeoPSI asking to talk with Firetail about the best model to support the Queensland market and Firetail’s business.

599    Third, a 17 June 2017 email chain between Messrs Ashton, Morgan, Meldrum and a Mr Smith of ProXoilfield. This email chain is referred to above at [158] and [243]. In that email chain, Mr Morgan stated that he, unlike Mr Meldrum, was not convinced that QGC will not entertain the use of “another type of 4-20mA analogue gauge”, and that Qteq needed to find a way of cornering or getting preferential pricing for the GeoPSI GE 4-20mA gauge. The ACCC submits, and I accept, that “another type of 4-20mA analogue gauge” was a reference to an equivalent gauge from a supplier other than GeoPSI. The ACCC relies on that email to contend that references to 4-20mA gauges in the documents above can be taken to be references to gauges that could be used for gauge works for QGC.

600    I understand the ACCC’s argument to be that, even if I were to conclude that the sales quote provided to Firetail by GeoPSI referred to above relates to gauges not used in gauge works, since GeoPSI could provide all relevant goods in relation to downhole gauge works, and Firetail was in discussions with GeoPSI regarding supply of equipment, Firetail could have obtained the necessary equipment from GeoPSI if it had obtained a contract for gauge works. Unfortunately for the ACCC, this argument then runs into the difficulty identified in the preceding section dealing with Firetail’s access to equipment.

601    The substance of inference that the ACCC seeks to have drawn is that commercial negotiations in relation to prospective transactions mean that such transactions, for that reason alone, inherently have a real chance to occur, even when there is no evidence that they have ever occurred in the past. While this is part of a matrix of intermediate inferences that the ACCC contends should be drawn as a contribution to the ultimate inference of capacity, the foundation for drawing it at all must be demonstrably sound. However, the general impression I glean from Mr Wayne’s dealings on behalf of Firetail is that he was more of an optimist than a realist, and was really chasing business opportunities at an early stage imbued with an apparent surplus of optimism that was not shared with those to whom he was communicating. I am not able to accept that this evidence provides a sound basis for inferring that this negotiations evidence is sufficient, in Mr Wayne’s particular circumstances, to amount to actual capacity. The gap between initial negotiation and ultimate transaction had to surmount barriers such as supply at a cost that Firetail could accept, an acceptable timeline for supply, and whether Firetail could make the cost work with any contract it was seeking to obtain. There was no real evidence, let alone satisfactory evidence, to that effect.

Discussions with Bridgeport

602    In March and April 2017, Mr Wayne was in email discussions with Mr Barnes, a petroleum engineer at Bridgeport Energy Limited, in relation to equipment that Firetail could supply to Bridgeport. Mr Barnes was initially seeking wireless gauge capabilities, which Firetail could not offer. Mr Wayne told Mr Barnes that Firetail had a full range of wired permanent capabilities, all of the installation kit in Adelaide, as well as gear in Queensland, Moomba and Perth. The ACCC points to that information to support the assertion that Firetail had the necessary equipment to perform gauge work. The reservation I have about this evidence is that it is unclear that Mr Wayne’s assertions in that regard were necessarily reflective of the true position, noting that the evidence shows a willingness on his part to overstate Firetail’s position, in keeping with his aspirational or optimistic approach.

603    Mr Barnes then sought further information about what equipment Firetail had on hand, stating that he was looking for surface test equipment that could handle gas/oil/water for extended production testing. Mr Wayne replied that he could provide a quote for memory gauges if he knew the downhole conditions, and that they also had extensive well test capabilities. Later in that email chain, Mr Wayne says that Firetail have CanadaTech memory gauges in stock, and for permanent systems can offer both GeoPSI and DataCan at 6000 psi. Mr Barnes clarified that he needed a gauge for reservoir testing, and Mr Wayne referred to the CanadaTech gauges as “similar in size to DataCan which are 0.75” O.D.” and “in ranges of 1500, 3000 and 6000 psi”. The respondents submit that memory gauges are used in the exploratory stage and are a different type to those used for lengthier periods, but again that submission was made without evidential support. That said, there was no evidence that these gauges could have been used in CSG gauge works. I am left with a shortage of evidence as to precisely what work these gauges were capable of being used for.

Conclusion on access to gauges

604    Overall, I accept that the evidence establishes that among the gauges that Firetail was able to access through Mr Wayne, to the limited extent that such access was able to be obtained, it was likely to have included gauges suitable for CSG gauge work. However, this conclusion is qualified by the real doubts about any such supply being likely to be obtained in any realistic sense. Overall, the evidence on this aspect does not materially advance the ACCC’s case.

Firetail customer communications

605    There is then the body evidence as to how Firetail held itself out to potential customers.

606    On 15 January 2017, Mr Wayne emailed data books on PDHG systems to another Firetail staff member, saying he wanted to be very careful about the message they send to “them”, which I infer to mean customers. Mr Wayne indicated that he would like for conversations to stay high level regarding suppliers, saying they have a number of suppliers, but that he would like to chat to “them” to find out what their requirements are as there is a lot to getting it right with those systems and he wants to give them confidence that Firetail knows what it is doing.

607    By late January 2017, Firetail had started to reach out to large oil and gas companies to advertise its services and specifically to represent that it had the capabilities to supply gauge works.

608    On 25 January 2017, Mr Wayne emailed a number of Santos staff and referred to a catch-up with them on the previous day. Mr Wayne said he would wait to hear on the direction Santos would like to go regarding a contract, but in the meantime, Firetail would prepare and send through a proposed contract and amendments, as well as product line brochures to recap their core capabilities. Those core capabilities were:

- Well Testing

- Frac Flow Back, including Frac Trees

- Well Integrity and Wellhead Servicing

- Permanent Downhole Gauges

- Drill Stem Testing

609    Santos is a large CSG operator in Australia. Mr Wayne had also contacted Santos in mid-July 2017 for the purpose of offering Santos some of Firetail’s product lines. In those communications, Mr Wayne stated that Firetail has a huge range of equipment and expertise and is beginning to supply more services in the CSG industry, including with innovative products specifically for that industry. It is difficult to read those assertions as being anything more than marketing, rather than concrete or reliable evidence as to the true state of affairs.

610    Mr Wayne also approached Mr Andrew Vigor of Schlumberger NV (SLB). On 14 February 2017, Mr Vigor forwarded to Mr Ashton an email he had received from Mr Wayne informing SLB that he had started Firetail, and attaching a product catalogue. The email from Mr Wayne states that Firetail combined the capability of Farley Riggs and Production Solutions and has been providing equipment rentals to companies like SLB. It also states that Firetail could help out with PDHG Systems. Mr Vigor asks Mr Ashton “just checking that you are aware of this and no funny business is going on?” I interpret that comment as raising questions about what is being communicated by Mr Wayne.

611    On 21 February 2017, Mr Wayne emailed out a weekly shareholder report. The attachment to that email includes summaries about Firetail, including its customers and staff. Under “Corporate Image” and the subheading “What is our strategy?”, the report states “SWT & DST as normal” as well as “Well Integrity, Flowback & PDHG market share”. PDHGs are also listed under “Product lines” and “Downhole Gauges” appear to be listed as one of Mr Wayne’s primary technical skills in the document.

612    As already noted above, by March 2017 Mr Wayne was communicating with Bridgeport about Firetail and its asserted capabilities.

613    On 21 June 2017, Mr Wayne and Mr Pereira of Beach Energy emailed each other about upcoming DST work. Mr Wayne mentioned that Firetail had expanded into PDHG work as well. That seems to overstate what had been achieved by that time – Firetail undoubtedly wanted to expand into PDHG work, but the evidence falls short of establishing that this had been achieved at that time, or indeed at any time subsequently. Mr Wayne attached Firetail’s product catalogue which stated that Firetail had a range of downhole DST tools, experience in CSG, as well as advanced permanent monitoring technology. Again, this needs to be read with caution as the evidence suggests that Firetail’s capabilities and inventory did not necessarily extend to the gauges that were needed to perform this work.

614    In June 2017, Firetail also contacted Westside Corporation to let them know about their services, which included PDHGs. In response, Westside Corporation told Mr Wayne they would at least put Firetail on their tender list. This evidence requires the same level of caution due to the risk of overstating the actual position.

615    On 17 July 2017, Mr Wayne emailed Firetail’s product brochure to Mr Reid of Senex Energy and asked to meet, saying that Firetail is “making a push into CSG” and has been providing services all over Australia including Queensland. Once again, this is consistent with the aspirations that Mr Wayne had for Firetail.

616    On 17 July 2017, Mr Wayne emailed a Mr Mato of BG Group, attaching Firetail’s product catalogue, holding out Firetail’s services as including PDHG systems and permanent downhole fibre optic systems, and stating that Firetail is making a push into CSG. The caution to be taken with this sort of evidence needs to be repeated.

617    On 15 August 2017, Firetail provided a quote for data acquisition services to Westside Corporation in relation to the provision of downhole gauges, specifically 0-3000 psi downhole memory gauges. Again, caution needs to be taken with this sort of evidence.

618    On 15 November 2017, Mr Wayne submitted a response to a request for a proposal from Origin Energy in relation to service line capability and wellsite services. Again, this document is high on aspiration, but the evidence standing behind it as to actual capability is sparse for the reasons already identified.

619    In this period, Firetail had also prepared presentations about its capabilities to Strike Energy and Empire Oil and Gas. This again is aspirational evidence.

620    In December 2017, Firetail provided its product catalogue to Cal Energy. Mr Wayne lists Firetail’s operations as including the supply of downhole gauges and other downhole equipment. The above cautionary observations apply.

621    Overall, I conclude that Firetail’s customer communications do little to advance the ACCC’s case on the competition condition.

Financial difficulty

622    In a Firetail shareholder update provided to Mr Riggs of Farley Riggs and Mr Loades of Firetail on 12 June 2017, Mr Wayne says that “cash is getting tight again with some operations moving further out and some customers on 60 day accounts” and that Firetail needs bigger jobs again to keep in front, and is hoping for an overdraft account shortly. It states that “a number of ongoing rentals are almost keep us above water (sic)” and once some separators go out “we will have a good baseline income stream that will cover most overheads”. Attached to that shareholder update email is a management update slide deck, which attaches a further document, referred to in the management update as a “P&L” (which contains some profit and loss information). That document lists “Qld CSG Market” under the “Market Awareness” heading. The ACCC argues that at most, these documents demonstrate some “cashflow tightness” but they do not establish that Firetail’s financial position would deny it a real chance of providing gauge installation works. The respondents argue that this document shows that Firetail was “on life support financially”.

623    There is little doubt that Firetail was experiencing serious financial difficulties a little over six months after its incorporation. On its own, the ACCC submission could be accepted. However, it is not evidence to be read on its own or in isolation. It provides context and meaning to the remaining evidence, in particular, the evidence and conclusions reached above about Firetail’s access to equipment. Those conclusions are reinforced by Firetail’s financial position as a matter of objective assessment on the likelihood of Firetail competing with Qteq.

624    Firetail later went into external administration, and Mr Wayne was eventually hired by Pro-Test. Not much turns on this, except that it provides some basis for comfort as to the assessment of Firetail’s precarious position as reflected in the June 2017 documents referred to above.

Qteq’s knowledge of Firetail’s activities

625    The respondents’ knowledge of Firetail being a likely competitor is relevant to intention and also to the fact of likely competition, as the views of market participants on whether a company was a likely competitor can be relevant to that fact. The ACCC submits that the respondents had knowledge of the essential facts that would have rendered the Firetail Understanding cartel conduct, being that Firetail was likely to be in competition with Qteq in relation to the supply of gauge works, and Mr Ashton’s statement that he did not want Firetail competing with Qteq on gauge works meant that the respondents knew that the proposed Firetail Understanding contained a provision that had the purpose of preventing Firetail from supplying gauge works. The ACCC submits that Mr Ashton and Qteq viewed Firetail as a likely competitor for the supply of gauge works. The evidence they refer to in support of this position is as follows.

626    Mr Wayne provided Mr Ashton with a business case for Firetail on 21 November 2016 (pre-Qteq’s incorporation in June 2017), indicating that he wanted to start an oilfield services company which provided services including downhole gauge systems. The four attachments to that email related to Firetail’s financial forecast and an oilfield service company opportunity. Mr Wayne said that things were coming together on the “FR deal” and sought to have a chat with Mr Ashton to get business pointers, gauge his interest in providing capital, as well as to outline the plan to introduce other technologies.

627    One attachment to that email stated that Mr Wayne wanted to start an oilfield services company providing various services, apparently a reference to Firetail. The document refers to an offer from Farley Riggs to lease all well test, DST and well integrity equipment, under an arrangement where Firetail would lease the equipment but no loans, employee benefits or debts would transfer over. The document also referred to an offer from “Production Solutions” to lease some other equipment, though does not go into comprehensive detail about what that equipment is. The two company development options put forward are to continue offering a similar suite of services as Farley Riggs, or to additionally expand into other areas, including downhole gauge work, potentially internationally.

628    Mr Ashton was also aware of Mr Wayne’s new business from other industry participants, as on 14 February 2017 Mr Vigor of SLB forwarded Mr Ashton an email he had received from Mr Wayne informing Mr Vigor of the creation of Firetail, referred to above at [610]. That email from Mr Wayne listed PDHG systems among Firetail’s offerings.

629    On 27 July 2017, Mr Fitz-Henry, then at Welldog, emailed Mr Meldrum to let him know that Mr Wayne had told him that a Mr Ryan Phillips had informed him that “‘the Americans’ from Welldog had been into QGC to try and sell them gauges”. Mr Fitz-Henry added that this is what Welldog had suspected but was not sure it had been confirmed, and that Mr Wayne had been speaking to Mr Phillips about flowback testing, frac trees and possibly fibre optic gauges.

630    Mr Meldrum then forwarded this email to Mr Ashton stating, “we need to get the GE gauge removed from GSTC’s (Welldog) reach” and “need to discuss with [Mr Wayne] on non compete”. The ACCC submits that this last statement from Mr Meldrum to Mr Ashton should be interpreted as communicating a need to talk to Firetail about not competing on gauge works, noting that this occurred less than two months prior to the Firetail Understanding.

631    Later that same day, Mr Wayne emailed Mr Ashton that there had been “lots of action for Firetail on the integrated Flowback services and Fibre Optic side of things” and that “a few customers have asked me to provide them with quotes for Permanent Downhole Gauge Systems”. Mr Ashton replied to Mr Wayne stating that they needed to talk about the “fibre issue” as it seemed like an area of potential conflict for the companies and they should find areas of common ground.

632    Mr Meldrum replied to the email from Mr Ashton to Messrs Meldrum and Morgan on 20 September 2017, which is the relevant conduct, stating “I like your thinking on the last point”. The “last point” refers to Mr Ashton supporting Firetail confidentially, boosting them to the position of the second gauge installation company and enabling them to get 20% of the QGC work, after which Mr Ashton would “take them out”. Mr Morgan replied to Mr Meldrum’s email on 21 September 2017 stating, “what’s the risk that QGC then simply award [Firetail] work elsewhere – they seem determined to want 2 separate gauge service providers.” Each of these emails are reproduced earlier in these reasons at [531] and [506(b)].

633    On 24 July 2017, Mr Wayne emailed Mr Ashton with the subject line “Fietail Slides” (sic). That email attached a “Capability Presentation” for Strike Energy, with Mr Wayne telling Mr Ashton that the slides would be of interest to him and that he could “slide” in for Qteq. Mr Wayne also told Mr Ashton in this email that he had been keeping in touch with the drilling team and gave them a presentation recently as they were interested in Firetail’s services. The Firetail slide deck attached to that email includes information about the company on a slide titled “who is Firetail?”. The slide deck states that Firetail supplies permanent monitoring systems to the O&G industry. It also states that Mr Wayne has 12 years of experience, and that his areas of expertise include “well testing, permanent downhole gauge systems, frac tree, downhole completions”. Of the four other employees listed on this slide, none of them have “permanent downhole gauge systems” listed as an area of expertise. Another Firetail slide deck lists Mr Wayne’s “roles & responsibilities” as including “Primary technical – Downhole Gauges” and “Well Testing”. As Mr Ashton received this slide deck, he was likely aware that Mr Wayne intended and aspired for Firetail to provide PDHG services.

634    On 27 July 2017, Mr Wayne emailed Mr Ashton again. This email was referred to above but is repeated for convenience. He stated that there had been “lots of action for Firetail on the integrated Flowback services and Fibre Optic side of things” and that “a few customers have asked me to provide them with quotes for Permanent Downhole Gauge Systems”. Mr Ashton replied “obviously we need to talk about the fibre issue as it seems that is an area of potential conflict for the companies. Let’s find areas of common ground”.

635    The evidence from Mr Ashton’s s 155 examination establishes that he did not regard Mr Wayne as a scientist, but still saw him as a “very capable” operator who had “good knowledge of downhole gauges” and who might have aspirations to provide gauge services.

636    Regarding the knowledge of competition, the ACCC also relies upon the emails between Messrs Ashton, Meldrum and Morgan on 20 and 21 September 2017 to show that Mr Ashton was aware that Firetail had sought quotes for the purpose of bidding for the Origin gauge tender after Origin requested Firetail to make a proposal. The ACCC submits that this goes to Mr Ashton’s state of mind regarding the competitive threat of Firetail at that time, evidenced by his email to Messrs Morgan and Meldrum on 21 September 2017 where he states that they should cultivate Firetail and reduce their competitive exposure.

637    The burden of this evidence supports the conclusion that Mr Ashton was concerned that Firetail might pose a competitive risk to Qteq and was prepared to take steps to reduce the risk of that ever eventuating. Such a precautionary approach falls short of supporting the competition condition.

Conclusion on the competition condition

638    There is no doubt that Mr Wayne wanted to elevate Firetail into the position of being able to supply gauge services. Nor is there any real doubt that Mr Ashton saw this as being a risk that needed to be addressed. But Mr Ashton’s own words in his 20 September 2017 email end up reflecting the limits of the capacity of the evidence to establish that the point of being a viable competitor had been reached: “I support FT confidentially, we boost them to the position of the second gauge installation company, they get 20% of the QGC work, I take them out?”. Properly considered, the evidence does not rise to the level of establishing that, on the balance of probabilities in relation to the competition condition, Firetail had yet reached the position of being able to be the second gauge installation company. This, coupled with the adverse or insufficient intermediate conclusions set out above, leads to the conclusion that I am unable to be satisfied that that the competition condition has been established.

Joint Venture

639    As the ACCC has not proven the competition condition, the respondents’ reliance on the joint venture defence under s 44ZZRP (now s 45AP) does not arise for consideration.

Conclusion on Attempt #6

While the conduct element, including as to intention, and the purpose condition, have been established, the competition condition has not. It follows that the ACCC has failed to prove the Firetail Understanding, being Attempt #6.

H. TENDENCY EVIDENCE

640    For completeness, I should record that the ACCC sought to adduce tendency evidence to the effect that Mr Ashton had a tendency to seek to persuade those that he perceived to be, or likely to be, competitors of Qteq to not compete with Qteq in relation to its supply of downhole gauges and related services. This was advanced as being probative of the allegations in respect of Firetail and Pro-Test. In substance it was an application for the use of evidence already adduced in that way. The application was opposed. I have not found it necessary to determine the application because the Pro-Test Attempts were plainly established without the need to rely upon such reasoning, and the Firetail Attempt failed only on the competition condition.

I. OVERALL CONCLUSION

641    For the reasons above, I have concluded:

(a)    the three attempt contraventions involving Pro-Test (Attempts #1, #2 and #3), as alleged by the ACCC, have been proven with respect to both Mr Ashton and Qteq;

(b)    the two attempt contraventions involving Eastern Well No 2 (Attempts #4 and #5), as alleged by the ACCC, have been proven with respect to both Mr Ashton and Qteq, and the respondents’ reliance on the exclusive dealing exception has failed;

(c)    the attempt contravention involving Firetail (Attempt #6) has not been proven, because the competition condition has not been established.

642    Rather than defer making declarations of contravention so that the relief phase can be heard and determined before any time limit for an appeal against liability runs, I propose to make such declarations, but to extend the start time for commencing any appeal proceeding to the end of the next business day after the relief judgment is delivered. The parties are therefore to confer and by 7 May 2025, or such further time as may be allowed, provide by email to my chambers an agreed draft, or competing drafts, of:

(a)    the terms of the declarations of contravention to be made in accordance with the reasons for judgment;

(b)    an order extending the commencement of the time within which any appeal proceeding is required to be filed in this proceeding to the end of the next business day after a judgment on relief is delivered; and

(c)    procedural orders for the preparation and hearing of the relief phase of this proceeding, including as to evidence, submissions and a joint list of authorities with pinpoint references.

Associate:

Dated:    17 April 2025