BHP Billiton Iron Ore Pty Ltd v National Competition Council & Anor [2008] HCATrans 260 (29 July 2008)

Last Updated: 30 July 2008

[2008] HCATrans 260

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M17 of 2008

B e t w e e n -

BHP BILLITON IRON ORE PTY LTD

Appellant

and

THE NATIONAL COMPETITION COUNCIL

First Respondent

FORTESCUE METALS GROUP LIMITED

Second Respondent

Office of the Registry
Perth No P6 of 2008

B e t w e e n -

BHP BILLITON IRON ORE PTY LTD

First Appellant

BHP BILLITON MINERALS PTY LTD

Second Appellant

and

THE NATIONAL COMPETITION COUNCIL

First Respondent

FORTESCUE METALS GROUP LIMITED

Second Respondent

GUMMOW J
KIRBY J
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 29 JULY 2008, AT 10.27 AM

Copyright in the High Court of Australia

__________________

MR A.C. ARCHIBALD, QC: May it please the Court, in these appeals I appear for the appellants with my learned friends, MR M.H. O’BRYAN and MR P.D. CRUTCHFIELD. (instructed by Blake Dawson Lawyers)

MR C.M. SCERRI, QC: Your Honours, in both appeals I appear with MR I.B. STEWART for the National Competition Council. (instructed by Clayton Utz)

MR S.J. GAGELER, SC: If the Court pleases, in each appeal I appear with MR N.J. O’BRYAN, SC and MR J.C. GILES for Fortescue Metals Group Limited. (instructed by DLA Phillips Fox)

GUMMOW J: Thank you. You have an application, Mr Young?

MR N.J. YOUNG, QC: Yes, your Honour. I appear with MR P.W. COLLINSON, SC. We seek to intervene in support of the appellant on behalf of Rio Tinto Limited. (instructed by Allens Arthur Robinson)

GUMMOW J: Is that opposed?

MR YOUNG: No, your Honour.

GUMMOW J: You did not intervene in the Federal Court.

MR YOUNG: No, we did not.

KIRBY J: Does it affect the time estimate that you gave us at the special leave hearing? You said that this would all be over in a day.

MR YOUNG: No, it does not, your Honour. There have been discussions between counsel to that effect.

GUMMOW J: How long would you need for oral submissions if you were to get leave extended to that?

MR YOUNG: No more than about 15 minutes, your Honour.

GUMMOW J: Very well. As between you and Mr Scerri, Mr Gageler, is there any agreement as to who goes first?

MR GAGELER: Yes.

GUMMOW J: We would prefer, actually, to hear from you before we heard from Mr Scerri.

MR GAGELER: We would prefer it that way as well, your Honour. The agreement is that I go first. We were hoping to have half of the time for argument between us.

GUMMOW J: We will see how things are going at lunchtime. It is not imperative that we finish today. If it runs over to some fairly short period tomorrow morning, so be it.

MR GAGELER: If the Court pleases.

GUMMOW J: I should have said, Mr Young, you have that leave. Yes, Mr Archibald.

MR ARCHIBALD: If the Court pleases, Part IIIA of the Trade Practices Act can be engaged in two ways. One is by the undertaking process. The other is by the declaration process. The undertaking process is dealt with under Division 6, which commences with section 44ZZA, and all that need to be noticed for present purposes is that Division 6 is enlivened when a provider of a service or a person who expects to be the provider of a service, proffers an undertaking to the Commission in connection with that service. The undertaking may or may not be accepted. We do not need to address why that may or may not occur, but it is the service that is the subject of the undertaking.

The second way in which Part IIIA may be engaged is by the declaration process. The declaration process is dealt with under Division 2 and it is with that process and the subject matter of that process that these appeals are concerned. Section 44F within Division 2 identifies the enlivening step which is the making of an application to the National Competition Council, the first respondent, seeking a recommendation for declaration. Again, the subject matter of this enlivening step is a service, a particular service and the application will seek that the service be declared.

The Council’s function identified in section 44F(2)(b) is to make a recommendation to the designated Minister, which is the Treasurer, either that the service be declared or not be declared. And the Council under section 44G(2) is precluded from what I’ll call an affirmative recommendation, a recommendation that a service be declared. Such a recommendation cannot be made unless the Council is satisfied of the six matters set out in the subsection. The six matters are commonly and conveniently called the declaration criteria. So if all six are satisfied, it is open to the Council to recommend that a service be declared.

GUMMOW J: The actual declaration is by the Minister, is it not?

MR ARCHIBALD: Yes, there is a two-step process. The Minister cannot declare unless the Minister receives an affirmative recommendation and so the first step is to secure the Council’s recommendation. If the Council does not recommend, the matter goes no further, and the Council cannot recommend unless the declaration criteria are satisfied. Once a declaration is made in favour of declaration, the matter then goes to the Minister. That is dealt with in section 44H.

GUMMOW J: That power of the Minister, does that attract the Administrative Decisions (Judicial Review) Act?

MR ARCHIBALD: I think there are some aspects that can attract the operation of that Act, but the substantive review for which provision is made in section 44H is a review by the Australian Competition Tribunal.

GUMMOW J: The footing in the Federal Court for this present dispute is 39B of the Judiciary Act?

MR ARCHIBALD: Yes, effectively.

GUMMOW J: A matter arising under a Commonwealth statute?

MR ARCHIBALD: Yes. So, just noting again for completeness what it is that the Minister does, the Minister is obliged to decide whether to declare the service or not. Again, under section 44H(4), decision in favour of declaration of a service requires that the Minister be satisfied of the same six matters, the declaration criteria, and a decision is to be made within a stated period. I am sorry, I think I said the review occurred under section 44H. It is in fact dealt with in section 44K and it is a merits review.

GUMMOW J: And from there to the Federal Court on a point of law, I suppose?

MR ARCHIBALD: Yes. So the criterion of declaration, as with the criterion of undertaking, is a service and “service” is dealt with in the definition provision of section 44B. The focus of the Hilmer Report which is frequently mentioned in the materials in these appeals was not a service but the facility and so the focus of the Act is moved somewhat from the facility itself to that which is provided by means of the facility. That is why I was emphasising the criteria for the two ways in which the parties engaged and why we go to the definition of “service”.

HAYNE J: In what sense is the word “service” used when we go to 44B and read:

service means a service provided by means of a facility –

the word “service” where second appearing is used in what sense or with what meaning?

MR ARCHIBALD: It is used with its ordinary denotation, its meaning in common parlance although within, one might say, generally the commercial context, but it simply means that which provides some benefit or advantage, no doubt, for which there is a need, a perceived need.

HAYNE J: The closest meaning I could find in the OED seemed to be meaning 23:

Supply of the needs of (persons, occas. of things) -

The last example given is Stevenson’s Kidnapped:

On the south shore they have built a pier for the service of the Ferry.

Now, is that the sense in which “service” is used? If it is not, despite there being, whatever it is, four or five pages of the OED devoted to the word, I do not quite know how it is used.

MR ARCHIBALD: That is the meaning which it has, as a perceived need, because it is simply the proffering to those who might take advantage of the service of a particular supposed advantage and if does meet the need, then it will be satisfied by the service. It is not a technical meaning. I should draw the Court’s attention to the circumstance that the plural of the noun is defined in section 4 of the Act in a rather more elaborate way. It is not entirely clear that the plural definition reflects the singular use of the noun here, but there is no friction between the two in our contention. The definition again is an inclusive definition. The definition is that:

services includes any rights –

I leave out the parenthetical phrase –

benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce –

and then there are some provisions about what else is included and what is excluded, contract of service, for example.

HAYNE J: In that sense “services”, I would have thought, was used to refer to the section of the economy as the OED has of the “supplies needs of the consumer but produces no tangible goods”.

MR ARCHIBALD: Maybe and the plural definition, of course, is no doubt provoked by the expression “goods or services” which appears elsewhere in the Act. But there is no disharmony between the concepts and advantage responding to need – proffering of advantage responding to need is the essence of the notion of service.

GUMMOW J: There are various provisions in Part IV which would engage this broader definition of “service”.

MR ARCHIBALD: Yes, and in Part V.

GUMMOW J: Yes.

KIRBY J: Given the importance attached by Justice Greenwood to purpose, do we have available to us the relevant parts of the Hilmer Report?

MR ARCHIBALD: Yes. On our list and in our materials we have chapter 11. We have a folder of our materials if the Court wished a separate working bundle, but the Court no doubt, I think I can see, has available some material. We have referred to chapter 11, the title to which is “Access to ‘Essential Facilities’” and the most pertinent passage commences at page 250 and continues to the middle of page 253.

The Hilmer Committee recommended a legislative right of access. As I have noted already, the subject matter of its recommendation was rather the facility than the service. The Committee, as the Court will see from the foot of page 250, contemplated that the matter be dealt with administratively by the Minister by reference to three criteria. Those three criteria are then set out in the ensuing pages and one observes that the Hilmer three criteria are not coincident with the legislated six criteria. There are some common elements or themes, but they are by no means identical and the Hilmer Committee - - -

KIRBY J: Not necessarily now, but at some stage I would be helped by your analysis of what you say was the purpose of the legislation from an economic point of view.

MR ARCHIBALD: Yes, we will certainly deal with that, your Honour. So Hilmer proffered three criteria and as a fourth so-called criterion contemplated that the ministerial discretion be exercisable only upon the recommendation of an independent body; that is criterion four.

GUMMOW J: An answer to Justice Kirby’s inquiry may appear in the Hilmer Report itself at page 240, might it not, under the heading the “‘Essential Facilities’ Problem”?

MR ARCHIBALD: Yes, indeed, as elaborated upon or discussed in the ensuing pages and the discussion on page 251 may have particular significance for the issues here because the discussion at 251 mentions the case of production processes and draws attention to the need to avoid by an access regime the occasioning of undesirable disincentives to investment.

So that unless you protect the production process, you might as economists tend to say chill investment incentives and that will have its own undesirable consequences for the Australian economy.

KIRBY J: Or the undesirable duplication of facilities as they had in Canada with the two great national railway lines.

MR ARCHIBALD: Yes, that certainly can be so. Those are elements we will return to but we accept what your Honour the presiding Judge observes about where one might find in Hilmer the indications of purpose and, generally, while not an exact reflection of the Hilmer concepts, we accept that Part IIIA does pick up themes or elements of the Hilmer Report in this respect, although implemented in somewhat different ways than was the subject of the explicit recommendation of the committee.

GUMMOW J: Does the Hilmer Report deal anywhere with the prospect of just terms or the necessity for just terms? I could not find them in the extracts we have.

MR ARCHIBALD: Not eo nomine at all, I think, but at page 253 and following there is a general discussion of appropriate pricing for access that is afforded.

GUMMOW J: And in Part IIIA is there such a provision?

MR ARCHIBALD: There is the saving provision, the safety net provision which is found in section 44ZZN in the Miscellaneous division at the end of the Part.

GUMMOW J: The payment is by the Commonwealth.

MR ARCHIBALD: Yes, and otherwise in familiar form.

GUMMOW J: Thank you.

KIRBY J: That is because it is the Commonwealth’s imposition by its legislation that affects the acquisition, presumably.

MR ARCHIBALD: Yes, but the Commonwealth accepts the burden of the compensation as well.

KIRBY J: It is very generous of the taxpayer.

MR ARCHIBALD: So “service”, in our submission, has the meaning that has been the subject of discussion. Again, “facility”, has its common or ordinary meaning, albeit in a commercial context, that that which makes something possible or makes what is possible easier. Nebulous in articulation in that form but simply reflecting a variety of subject matters which will yield a service of the kind discussed.

HAYNE J: Is it as general as that or it used in the sense of a physical means for doing something?

MR ARCHIBALD: There are no indicators of physical limitations on the concept and there is no reason, in our submission, to confine the meaning to that kind of facility which has physical connotations.

HAYNE J: That, I think, may take the use of the word “facility”, or its more common use “facilities”, beyond, I think, recognised dictionary meanings, Mr Archibald.

MR ARCHIBALD: The Shorter Oxford certainly is in terms that have as probable limits physical elements, equipment and the like.

HAYNE J: And so does the longer OED.

MR ARCHIBALD: Often the case. There is accuracy in brevity in that work.

CRENNAN J: Certainly “infrastructure facility” as a compound phrase conjures up things like roads and rail tracks - - -

MR ARCHIBALD: Certainly that does, but - - -

CRENNAN J: - - -which have an inertness about them.

MR ARCHIBALD: Infrastructure facility is a species of facility, but the reasons that I am staying with the proposition that it is wider is really grounded in two matters. One, although we do not need, I think, in this case to look at it closely, it is tolerably clear that the essential facilities doctrine in United States jurisprudence does extend to intangible facilities and the second matter is that one probably has something of an internal indicator in the definition of “service” deriving from paragraph (e), “the use of intellectual property”. So that the contemplation would be that an intangible facility may consist, certainly in part of intellectual property and we would say there is no reason why it could not be the entirety, perhaps in conjunction with computer software, in conjunction with hardware, for example. There are those indications, but it probably makes little difference for the purposes of our argument here.

Whether there be or not be physical limitations, the reference to “facility” in the opening words of the definition is entirely general, in our submission. It is not confined to what are called infrastructure facilities in paragraph (a). It is not confined to major facilities. Any facility will do, subject no doubt to a de minimis concept. But it is general and the associated point is that no feature of the definition of “service” requires that the service have features which would conduce to satisfaction of the declaration criteria.

The question whether a service will satisfy the declaration criteria is separate from and independent of the concept of “service” itself. No doubt, therefore, there can be a multitude of applications for services which are competent applications because the subject matter answers the description of a service as defined, but those applications, although competent, have low prospects of yielding an affirmative recommendation for declaration. So that there are strong filtering or screening elements to occur at the stage at which a decision is made as to whether or not to recommend the filter – at least the relevant part of the definition of which I am presently speaking – the filter is not applied or applied strongly at that point.

Of course, if an application is entirely frivolous it may be dealt with peremptorily. One notices that section 44F(3) allows that:

the Council may recommend that the service not be declared if the council thinks that the application was not made in good faith.

I am sorry, section 44F(3). There may be a competent application, but not in good faith, may be dealt with in that way. One does not conflate the question as to what is a service as defined with the question, will the service as defined in fact satisfy or likely satisfy the declaration criteria?

So the opening words – I will call them the prime subject matter of the definition – are broad. One then has words which include particular subject matters, that is (a), (b) and (c) of the definition. I will leave (a) for the moment, if I may, but return to it; (b) and (c), in our submission, with tolerable certainty would be included in the prime subject matter of the definition in any event.

GUMMOW J: Why does not the use of the words “and includes” mean “for example”?

MR ARCHIBALD: It likely does. It is illustrative, as we have put it, providing examples, or confirmatory in case any doubt was entertained by any person as to whether the identified matters were or were not within the general conception. As to (b), we would say it certainly would be and is therefore an example, and so too with (c). There is nothing in the extrinsic materials that we have found that provides any sure guide as to what has stimulated the inclusion of (b) or (c) or, for that matter, (a) in the definition. One does note as to (c) that there were already provisions in separate legislation governing at least telecommunications access and there may have been some concept that because that subject matter was dealt with elsewhere it might be thought that that subject matter or cognate aspects were not dealt with by this - - -

GUMMOW J: Do we have a reference to that anterior legislation in the communications field?

MR ARCHIBALD: I should. No, not with precision. As at 1995 it was contained in the Telecommunications Act 1991. There may have been some other companion legislation.

GUMMOW J: Yes, we have been down that track.

MR ARCHIBALD: Try to leave some things behind us, but it is that kind of provision. I think it is also the case that other particular industries, such as gas or electricity, were also dealt with at the time in other ways but that was largely either through an undertaking or particular State legislation. Handling and transporting, I cannot really offer anything particularly useful as to why it is there. Somebody might have thought that facilities were generally thought to be immobile and therefore you want to capture things that move, I do not know. But they, in our submission, are clearly illustrative and no more, perhaps confirmatory as to (c).

GUMMOW J: But then we reach the word “but”.

MR ARCHIBALD: Can I return to (a) before I go to the “but” because some of the arguments about elements of the “but” feed back to the (a) case. I will not deal with that in great detail at the moment, but we submit that (a) is there again either by way of an example, although perhaps with this matter more likely by way of confirming that the use of, I will call it, the bare infrastructure subject matter, such as the pipeline, the pipeline without the haulage service associated with it, access to the pipeline itself is a service, because making available use of that subject matter can afford advantage or can meet a need in the access seeker.

Now, some may have thought that the pipeline alone was not a service when used, but this section is saying it is. The Rail Access decision, which is referred to in the materials, confirmed that access to the bare subject matter would rightly be regarded as a service. So that decision would rather tell us that this provision was there by way of precaution only, not by way of need, and not in fact effecting a substantive extension of that which was captured by the prime definition.

The expression “infrastructure facility” is identifying a species of facility and focusing on that kind of facility which exemplifies the substructure, the underlying structure, which is commonly required for utilities, for community utility services.

CRENNAN J: Do the tolling arrangements treat the use of the track as falling within (a)?

MR ARCHIBALD: I think, so far as the evidence shows, they do not seek to identify where, if at all, the subject matter would lie within the conception of Part IIIA. In other words, the arrangement between the joint venturers is simply saying, “As a matter of arrangements between us, this is what we are doing”. They do not seek to ascribe for purposes of Part IIIA what is occurring. Those arrangements of course are occurring entirely voluntarily outside Division 6 and outside Division 2.

CRENNAN J: I understand that, but from what you say, they may well conflate (a) and (b) in terms of the approach.

MR ARCHIBALD: If one was looking at what they had done, they may, or they may ignore (a) and (b) and simply focus on the general conception of a service. So the burden of our submissions so far is that none of (a), (b) or (c) effect a substantive extension to the primary notion. Each element is there by way of either illustration or out of an abundance of caution. They exemplify elements that constitute a service as defined. Each of them, including (a), is neutral as to ownership. It could be public or private ownership. There are no elements in (a), (b) or (c) conveying that the particular subject matter dealt with must be of a major category or a significant category. Fortescue argue that (a) addresses only major infrastructure facilities. We say there is no indication of that kind in these provisions.

CRENNAN J: I suppose (a) could include privately owned infrastructure in respect of which there had been, say, for argument’s sake, 100 per cent tax deduction.

MR ARCHIBALD: Could be that, and that private infrastructure might be modest in dimension or major in dimension. It could be a private suburban bus operator may have their own terminal and maintenance facilities. That would answer infrastructure facility in the transport context. So then we come to the word “but”.

GUMMOW J: Now, why cannot one read the structure, the geography of the section in a way, means an, for example, (a), (b) and (c), but (d), (e) and (f) are not such examples.

MR ARCHIBALD: One can.

GUMMOW J: But you try to attach, do you not, (d), (e) and (f) to (a), (b) and (c) in some way?

MR ARCHIBALD: No.

GUMMOW J: Not to the introductory phrase “means a service”.

MR ARCHIBALD: No, the contrary. I think it is to the contrary. We understand the argument of Fortescue to be that (a), (b) and (c) are immunised from the (d), (e) and (f) qualifications. We say (d), (e) and (f) qualify everything that precedes the “but”, so it qualifies what I am calling the prime subject matter of the definition. It qualifies (a), (b) and (c) - (a), (b) and (c) probably add nothing to the prime definition.

GUMMOW J: But there has to be some relationship in the draftsperson’s head between saying “includes” and then lower down “not include”, you would think; that they are putting in and taking out in relation to the one subject matter, namely, service.

MR ARCHIBALD: Yes. So that everything that constitutes a service, whether it be by means of the primary subject matter or by reason of (a), (b) and (c), if they were to expand that concept at all, will be subject to the qualifying effect of (d), (e) and (f). No Alsatia is afforded by (a), (b) or (c) to the operation of (d), (e) or (f).

CRENNAN J: There is a sense, is not there, in which it echoes what the distinction you pointed out at 251 of the Hilmer Report.

MR ARCHIBALD: Yes, it does because at 251 of the Hilmer Report, the committee, using their own approach to these matters, identified that for their part certain subject matters would not end up being declared and the certain subject matters which are most germane for us are those at about point 5 on page 251, “products, production processes or most other commercial facilities”. In (d) we have “supply of goods” which resonates with products. In (f) we have the precise phrase used by the Hilmer Committee. One does not find (e) explicitly dealt with by the committee at page 251 or elsewhere so far as we can identify, but other commercial facilities could well capture a facility constituted entirely or substantially by intellectual property.

HAYNE J: Well, that hooks it to facility. Why I began with the understanding of the word “service” is that we begin “a service provided by means of a facility”. If you understand “service” as supply of the needs of by means of a facility, supply of the needs of, let us leave aside whether that is attaching to persons or things, but supply of the needs of including (a), (b), (c), use, handling, (c) stands apart, but does not include supply, use, use. Now, it seemed to me on reading your argument that you had to hook (d), (e), (f) back to an understanding of the word “service” and if you did not hook (d), (e), (f) back to an understanding of the word “service”, I was not quite sure where it was except hanging, waving in the breeze.

MR ARCHIBALD: Well, we accept that. That is plainly - - -

HAYNE J: Waving in the breeze, perhaps not.

MR ARCHIBALD: As a matter of syntax that must be so and really as a matter of common sense that must be so.

CRENNAN J: What Justice Hayne says raises a very interesting point in the hypothetical context of Fortescue getting access on certain terms and so on, the terms providing that Fortescue has access to the railway track in circumstances which do not prejudice anything that BHP is doing; BHP can deliver the same amount of iron ore to the port as they want to or have scheduled to do. In those circumstances, how would you identify the use of the production process which Fortescue would be making?

MR ARCHIBALD: It probably does not matter, to answer your Honour’s question, but there is an assumption in your Honour’s proposition that access would not impact upon the achievement of deliveries of ore to port.

CRENNAN J: Yes. I am saying, for argument’s sake, imagine that the access arrangements are carefully structured so that there is no prejudice to the commercial activities of the builder of the railway track.

MR ARCHIBALD: It may not be possible. There is a lot of evidence about that in the Competition Tribunal but, as I say, I do not - - -

CRENNAN J: But you see what I am saying, Mr Archibald. I am trying to understand what would be the use of the production process in that context, something which is thrown up, I think, by Justice Hayne’s question to you.

MR ARCHIBALD: Yes, and I will need to deal with that in detail a little later, but for the moment what we say by way of response to your Honour is that the production process covers on the factual findings everything from mine to port and the factual findings also conclude that the rail, including but not confined to the rail bed are part of the production process, so at the factual level we have the findings which - - -

CRENNAN J: I understand all of that. I understand the Hematite point step in the process, but what I am saying is access could conceivably be granted on the basis that all that production process from mining to port is not interfered with.

MR ARCHIBALD: Yes, but the question is, is the service use of that process – part of the process - - -

CRENNAN J: That is what I am asking you.

MR ARCHIBALD: The factual findings are that the rail, the rail line, is part of the process. The question then is, does the applied for service constitute use of that process? The answer is yes, because the rail bed is part of that process.

GUMMOW J: Yes, but it depends what you mean by part of. Justice Crennan is very politely pursuing you down that burrow, I think.

MR ARCHIBALD: Yes, but the part reflects the aspect of the overall production process. Whether there is in fact interference, simultaneously, with activity which constitutes that process is not the concern of paragraph (f). Paragraph (f) is concerned with eliminating from the area of service some subject matter. My steel mill operates five days a week. I do not run a seven-day operation. My steel mill is idle on Saturdays and Sundays, but if the access seeker uses my steel mill on Saturdays and Sundays, it is using my production process. It is not dislodging me from my use at a particular point of time when I seek to use it. I am not interfered with in that way. But, the steel mill is my production process and the applied for service constitutes use of it.

In that sense, interference or not, disruption or not, there is use of the process. For purposes of production process one asks whose process is it, not whether the access seeker will use it in the same way as the access provider.

HAYNE J: Well, that then reveals, does it, a tension between understanding “service”, as the supply of the needs of persons, or things, by hypothesis I would have thought supply of the needs of the access seeker and the use of a production process. How do you resolve the tension?

MR ARCHIBALD: If I am a tourist operator and I want to run a tourist train along the Mount Newman line my use of the line will not be for my production process purposes. The use that I wish to make of the line, fastening upon the rail, entails that I use the production process of the provider, notwithstanding that my use is not itself a production process. As it happens here, the Fortescue use would - - -

CRENNAN J: I understand - - -

MR ARCHIBALD: - - - likely be akin to ours, and therefore probably a production process. But it does not matter for these purposes whether it is or it is not; the question is, is the use of the service use of the process and Justice Greenwood in the Full Court rightly posed the question “Whose production process is it?” and the answer is that it is ours. We use it for our production process and the exemption in (f) is not confined to the case in which the access seeker would have as the access seeker’s objective use in the same fashion or of the same quality or character as the access provider’s use.

GUMMOW J: Now, I think we are back to the point Justice Kirby took up with you some time ago. Granted all of that, how does that construction fit in with the subject scope and purpose of this part, bearing in mind Justice Crennan’s point that these particulars get sorted out at the later stage when the terms are settled.

MR ARCHIBALD: Yes, well it is important they do get sorted out at a later stage and not at this stage and the answer is that a number of the purposes lying behind the concepts of the Hilmer Report are dealt with at the declaration criteria stage, but some of them are dealt with in the legislation outside the sphere of administrative discretion and at the definitional stage of what is susceptible of an application. So it is part of the definition of “service”.

Hilmer thought that all of these things would be dealt with in the Hilmer scheme in the course of the Minister making decisions by way of administrative discretion. The passage at page 251 involves the observation by the Hilmer Committee that “products, production processes or most other commercial facilities” would not satisfy the declaration criteria, the Hilmer criteria.

But what the legislature does is not deal with this issue at that point, phase two. It has dealt with it at phase one, the definitional stage, and has embedded the point into the definition of “service”. The purpose behind that insulation of production process and the other items is to ensure that although competition considerations militate in favour of access, the access that is achievable does not dull or deter desirable and advantageous investment incentives, particularly because of these identified areas of endeavour and, for our purposes, productive activity. One sees that in Hilmer. Your Honour the presiding Justice observed that at page 240, in particular within the immediate framework of production processes or most other commercial facilities. One sees it on page 251 of Hilmer where at about point 7 on the page the committee said:

Moreover, when considering the declaration of an access right to facilities, any assessments of the public interest would need to place special emphasis on the need to ensure access rights did not undermine the viability of long-term investment decisions, and hence risk deterring future investment in important infrastructure projects. Accordingly, wherever possible, the likely obligations to provide access should be made clear - - -

GUMMOW J: That is right. That is addressed to the stage of - - -

MR ARCHIBALD: For Hilmer everything was occurring at the administrative discretion stage. Hilmer did not have a concept of a limiting or a definition as to that which could be made the subject of an application, which would itself filter out substantially. Hilmer really had a one-phase process. The legislation has a two-phase process. Part of the filtering is at stage two, but the part with which we are concerned is at stage one. But the theses underlying the production process notion articulated at page 251 are, in our contention, those that have commended themselves to the legislature in a way in which the legislature has said, “We immunise production processes not in the declaration criteria area, but in the service definitional area”.

GUMMOW J: The reference to the Telecommunications Act is at page 245, by the way, of Hilmer.

MR ARCHIBALD: Thank you, your Honour. So in the balance of that passage at 251, the committee said:

due account of the likely impact on incentives to invest should be made in determining whether or not to create a right of access -

That is what the Parliament has done. The right of access in the sense of that which is a service susceptible of application is configured in a way to exclude the production process. In tandem with that, the legislature has taken the same indication in the Hilmer Report as to products. That has become (d), supply of goods. Once the legislature takes “service” as the criterion, rather than “facility,” once that subject matter is fastened on, there is a need to deal with the risk that the supply of goods would be a declarable service. So supply of goods is within the exempted area.

Again, the essential facilities doctrine in the United States cases from time to time addressed the question whether the essential facilities doctrine could be stepped around by claiming the product - not access to the facility but access to the product; the Berkey Case is a little bit in that territory but other cases are of that kind too - and access to product was outside the essential facilities doctrine, whatever it is or was, and that theme was picked up by Hilmer and is confirmed by the legislation.

If I return to the intellectual property, instance (e), it may be through the facility consideration or it may be the general concern of the Commonwealth legislature not to erode intellectual property rights through provisions of the trade practices legislation. For example, section 51(3) immunises intellectual property from Part IV and through (e) here in the same fashion, either by reference to that consideration or some aspect, some possible aspect of facilities, intellectual property is immunised from declaration by this excision in paragraph (e).

CRENNAN J: That is because they are statutory monopolies, in a sense.

MR ARCHIBALD: Yes, statutory monopolies which are preserved, not eroded. But of course if Fortescue’s argument is right, intellectual property rights can be eroded. Anything in (a), (b) or (c) will not attract the operation of (e) on the Fortescue argument. So take (c), take a communication service - take the communication service - which might vitally be operated by or driven by or heavily dependent upon intellectual property, the Fortescue argument would mean that access could be had to that communication service with all of its intellectual property; in other words, no carve-out in that case, and hence an erosion of - - -

GUMMOW J: Part III does not get you out of section 46.

MR ARCHIBALD: No, not at all. It is the shortcomings of section 46 which the committee observed - - -

GUMMOW J: The patent abuse doctrine is a very lively thing in the United States.

MR ARCHIBALD: Yes, it is.

CRENNAN J: Compulsory licensing, I suppose, is the other analogue that Fortescue might point to.

MR ARCHIBALD: Yes. The protection of intellectual property is not absolute, but the Parliament has here signified a determination not further to erode the statutory rights accorded to intellectual property, and of course there are some common law rights or equitable rights that attach to intellectual property in its general connotation beyond the statutory protections – there is know-how and things of that kind.

Those are the considerations which we submit underlie these provisions. The purpose of the exclusion was dealt with by Justice Kenny in the Hamersley decision at paragraph [46], page 218 of the report. I had not proposed to take the Court to the passage but there is a good articulation, in our submission, of these elements, which I think I had hoped to have captured in the oral submissions we are making.

KIRBY J: And within the statement that that was plainly wrong?

MR ARCHIBALD: It is hard to know what is captured by such a statement. No doubt it is the ultimate decision that is said to be plainly wrong, but it must entail some of the reasoning. But certainly I think there is nothing in the reasoning of the primary judge here that would seek to refute with any precision those observations.

GUMMOW J: What is the particular passage in Justice Kenny’s - - -

MR ARCHIBALD: I had mentioned paragraph [46].

GUMMOW J: Thank you; yes, that is right.

MR ARCHIBALD: I think it may spill over into [47] and some of the other surrounding reasoning, particularly the last sentence in paragraph [46] and perhaps all of paragraph [47].

So while competition considerations might suggest that if the declaration criteria were satisfied access was a desirable thing, there are other factors which are present to the mind of the Commonwealth Parliament as to what one does where there are competing considerations and, plainly, Parliament has seen competing considerations in the case of production processes which led the Parliament to put production processes on a line which meant that production processes were beyond susceptibility to access. That is why it is in the service definition. The passages in Hilmer show why that might well be so.

Indeed, in the context of the legislation to which the Court has been drawing the parties attention in the last few days, one can understand why those matters might have been particularly powerful in the deliberations of the Parliament on this matter because one has, over a long period of time, incentives provided by the Commonwealth Parliament, through taxation advantages, encouraging these investment decisions to be made, recognising the difficulties with the Australian economy in a variety of areas, but certainly including the resource area, where stimuli are needed beyond ordinary economic incentives to see projects undertaken and continued and while initial incentives through Division 10 and Division 10AAA had been there for a long time, there was the added impetus from the One Nation statement in 1992 to undertakings particularly in the general infrastructure area.

So added incentives are present, including for railways, through the development of allowance authority provisions. Given all those incentives being provided, including recent incentives of a significant kind by the Parliament, one can well understand why the Parliament would say, “at least in particular areas we will not be subverting or undermining those incentives by embarking upon other considerations driven purely by competition considerations”.

KIRBY J: All of that seems to be against the interpretation you are urging on us.

MR ARCHIBALD: No, because - - -

KIRBY J: I mean, the size of the nation, the remoteness of many of these resources, the fact that there are facilities in place, the efficient use of those facilities, but under conditions which the Constitution requires should be for just terms, all of these seem to be against your propositions; these broad questions.

MR ARCHIBALD: Well, no, quite the contrary, in our submission, because the incentives for endeavours of this kind as found in the legislative provisions I have mentioned are of a general kind. They are across the board, they are not confined to remote areas. They are not confined to projects of particular dimensions and the like. The exemptions that we are speaking of in paragraph (f) are again not specific to particular industries or particular sectors of industries operating in particular geographic areas.

KIRBY J: No, but the bottom line is that the taxpayer has underwritten, if not paid for, these facilities.

MR ARCHIBALD: Some of them.

KIRBY J: Therefore the taxpayer or the citizens, the nation, has an interest in their efficient deployment.

MR ARCHIBALD: Yes, and the learning about access consequences and the materials elsewhere in these disputes point to the inefficiencies that flow from access, not maintenance of efficiency, but inducing inefficiency, and that is the very reason why the Hilmer Committee observed there is disincentive to investment when access is achieved. If one was equally efficient and one got extra revenue, one could use one’s steel mill in the slack weekend hours as well as the daily shift, the facility owner or operator would welcome access. He would say, “Here is extra revenue. I like the extra money. There is no disadvantage to me. I will do it, and indeed I will build another mill next door so I can attract others”.

If efficiency flowed from access, there would be no problem, but that is not the case and that is the very reason why Hilmer is observing that access imposes disincentives can have disadvantage consequences for the economy including the general populous who have otherwise, as your Honour Justice Kirby identifies it, assisted some of the industries that - - -

HEYDON J: Does not section 44W meet that problem?

MR ARCHIBALD: No, because all that does is say that I can still run my 100 tonnes of ore down the line, but whether I can do it as efficiently, flexibly, satisfactory is entirely another matter. So that I might get my 100 tonnes to port, but I might not get them to port when I need to and it might cost me more to get them there. I am paying demurrage for vessels that are waiting or the - - -

HEYDON J: I question that construction of 44W.

MR ARCHIBALD: There may be room for debate but the observation one makes is that those provisions are dealt with beyond the point at which the legislature identified the exemption cuts in. They are phase 2 or even phase 3 because they might be dealt with in the course of an access dispute. Once one has declaration one does not have agreement. One may have the access dispute and matters fall to be considered there, but none of the criteria that fall to be considered in Division 3 access disputes and none of the declaration criteria fasten explicitly upon and provide the assurance and protection of the production process. Different minds coming to the subject might deal with it in different ways but Parliament has taken that subject matter and dealt with it in that fashion.

KIEFEL J: Mr Archibald, you refer to “the production process”, but the section talks about “a production process”.

MR ARCHIBALD: Yes.

KIEFEL J: I take you to refer to the production process as a cumulative number of steps from mine to port.

MR ARCHIBALD: Not so much a cumulative number of steps but the integrated process, simply fastening on the factual findings, the integrated process whereby there are of course discernibly independent elements but each dovetailed in with the other to respond in a way that conduces to the overall efficiency.

KIEFEL J: Does your reference to “the production process” in this integrated way, however, assume that each element is itself a production process?

MR ARCHIBALD: No, it assumes that each – I am really faithful to the factual findings – is a component in what is held by the primary judge to be an overall production process. His Honour, of course, found a plurality of production processes, but that causes no problem for our argument. The processes, the subject of his Honour’s finding, were product specific processes.

In other words, catering for the slightly different product that met different customer specifications and came from different mines but quite explicitly - and I will the Court the references a little later – each of the processes was a process that started at mine and finished at port so the circumstance that his Honour found more than one process did not mean that his Honour was slicing them to say there is a process at port, there is something in railing and there is another process at mine. It was not a conclusion of that kind at all. My use of the process was really the relevant process being for construction purposes a production process.

KIEFEL J: Why is not the question posed by the definition simply whether or not the railway facility is or is not a production process? Why does one have to go further than that?

MR ARCHIBALD: I am not sure that one does because here no question arises as to whether the production process is a subsidiary part of the service. If that question arose one would need to go further but it is common ground that that question does not arise so we do not need to worry about the qualifying words to (d), (e) and (f). It is enough to see if it is within (f). If is clear, in our submission, that the subject matter of the service is use of the railway lines, Mount Newman and Goldsworthy, and so the only question is whether the service constitutes the use of the production process. The service is not the railway line, the facility, but the use of it, so the question resolves as your Honour formulated it. Really, the answer to that is a factual answer which was given by the primary judge and confirmed by the Full Court.

The reason we lost in the Full Court was not that the use of our railway line was not the use of a production process. The reason we lost in the Full Court was that the Full Court said, “Your railway line is only part of your production process and the protection afforded by paragraph (f) extends only to the case where the service is the whole of your production process”. But for that point, we would not be here.

KIEFEL J: You do not take the Full Court to say that the use of the railway line produces nothing?

MR ARCHIBALD: No. The Full Court accepted the primary judge’s findings that the use of the line was the use of our production process. They rejected the primary judge’s conclusion that that use did not fall within (f) because the railway line was not itself transformative. They positively rejected the primary judge. So the fact that the railway line produced nothing if that were the fact - - -

KIEFEL J: But it is not quite the same thing. Producing nothing and not being transformative is not exactly the same thing. That I think was a distinction that the Full Court might have been making.

MR ARCHIBALD: In our submission, no. None of the parties were contesting, save two irrelevant respects, the findings of the primary judge. There is some evidence about what happens on the rail anyway. Apart from the making up the recipe point, which means that the rails - - -

KIEFEL J: That is an issue of timing, is it not, timing of different ingredients?

MR ARCHIBALD: It is sequencing enforcing. “I need at port today a type 3 body of ore, cargo. To get type 3 instead of getting ore from this mine or this mine, I need to get it from another mine or I need to mix it and I have not got enough of this grade, so I adjust my railings”, all of that - - -

KIEFEL J: But nothing happens to it while it is on the railway line.

MR ARCHIBALD: Well, it is not transformed in the sense of – I mean a few more fines might be generated because of the jostling, but I do not think that is transformative in any relevant sense. That is so, but the further grinding and blending is done by equipment at port. But it is the integral character and a not bare transportation but juggled transportation to yield what is needed at port.

GUMMOW J: At some stage does each joint venturer take its severed portion of production or is the production sold by all joint venturers and the proceeds divided between them?

MR ARCHIBALD: The export product is sold as a cargo and cargoes are dealt with on the basis other than the separate streams to which the joint venturers would be entitled. So everything goes out in the vessel. Of course, depending what the product is - - -

GUMMOW J: So these people have to be very careful they are not partners, do they not?

MR ARCHIBALD: One always has an eye on that point, but some cargoes might reflect Goldsworthy venture. Some cargoes might reflect Mount Newman venture. There may be some refinements within that, but it is not as though at port there is a pile for Mitsui and a pile for BHP and they go their separate ways, nothing of that kind. So while the activities at port involve something of a different quality to what is happening with the rail, the whole on the factual findings is an integral part of an overall process from mine to port, including railing.

It is really no different from the mining cases which are mentioned in the submissions. Nothing happened to the bauxite on its conveyor belt at Worsley when it travelled 50-odd, I think, kilometres along the conveyor belt. Nothing happened to the slurry in the pipeline between Savage River and the shore in the Northwest Iron Case, but, as the court has concluded there what was happening was not mere transportation, what was happening was not transportation independently of the mining operation; what was happening was integral to the mining operation and the process.

Of course, at least in economic terms, location of subject matter can itself be value transformative – is value transformative. In other words, mere moving subject matter in economic terms transforms it because a tonne of ore in the – if I can use a colloquialism – the back of beyond is one thing, but a tonne of ore beside a port with a vessel there is entirely another. So the movement itself has productive significance.

CRENNAN J: It makes it a commodity. I was just saying the movement in itself results in it becoming a commodity, value added in that respect.

MR ARCHIBALD: Yes, something that is valueless out there, out back, is valuable beside the vessel exactly. So, those are features that attend what is happening and what does happen. Where one is considering perhaps the fourth of the Fortescue answers to our case, Fortescue are saying in respect of that answer, “Look there is a production process at mine, there is a production process at port, but in between there is just transportation separate from and discrete from the production processes and you should lose on that score”. I will return to that point a little later, but apart from anything else that proposition is entirely dependent, in our contention, upon the factual findings and is at odds with the factual findings which would deny that there are separate processes with transportation in between.

For the moment I was seeking to address the construction elements of paragraph (f) and I have sought to identify the purpose associated with those. That purpose would and does require that whatever it is that answers the description, whatever subject matter responds to the concept of production process is excised from the reach of a declarable service and that is so whether it is a substantial railway line in a remote region in Western Australia or a modest production process in a bakery in Geelong. Each is the production process and the legislative criterion for purposes of excision from the definition does not seek to differentiate or to fasten upon qualities which might suggest a stronger or weaker case for exclusion, the one to the other.

The tempering element that the definition builds in is in the concluding qualification to (d), (e) and (f). The effect of those words being, in our submission, to modify the exemptions in the case in which the subject matter is integral, but subsidiary to the service.

So if the service that is sought includes a production process but it is subsidiary to that service, then the fact that it is a production process component will not attract the operation of the exemption. That is the mechanism that Parliament has seen as the appropriate way of ensuring that the exemption does not operate in an excessive way. So if my transportation service includes provision of some consumables I am supplying goods, but the supply of goods is auxiliary, though integral, and not accepted and so with the other cases. If my intellectual property is but a minor portion of my communication service, subsidiary only, the exemption (e) is not attracted and likewise with my production process. If my railway facilities include repair shops with rail making or rail repairing elements, rivets and the like, auxiliary although a production process, auxiliary to the service, the exemption will not be attracted.

So in that fashion the legislature may be seen to have arrived at the subject matter of a declarable service which had the configuration meeting the legislative purposes and objectives, very wide in some respects with exemptions in some other respects, but leaving intact a subject matter apt for being scrutinised by reference to the declaration criteria. Now, in those circumstances one then scrutinises the reasons why it is said against our contentions and against the background of the factual findings, one scrutinises why it is said that non constat the application for declaration was a competent application.

GUMMOW J: Just before you get to that, Mr Archibald, am I right in thinking that the statute law in Western Australia produces the results still that there is a peppercorn rent?

MR ARCHIBALD: Yes. So far as the evidence goes, this material was not before the Full Court of the primary judge.

GUMMOW J: I am looking at clause 8(1)(b) of the Mount Newman agreement, which is scheduled to the statute of Western Australia of 1964.

MR ARCHIBALD: Yes. There have been some subsequent agreements which bear upon it.

GUMMOW J: Anyhow, there is no need to answer now.

MR ARCHIBALD: No, I will have it checked, but I think certainly so far as this material is concerned, the conclusion should be that the peppercorn rental provision remains. I do not think any of the later arrangements have interfered with that, but I will have it checked and we can inform the Court if the case is otherwise. This is, as we have said, another example of incentives being provided in one way or another to help investment decisions to be made with some greater comfort than would otherwise exist. That is the whole basis of the manifold State agreements that one sees in Western Australia.

GUMMOW J: Yes, that is right, and I am wondering whether the legislation, as it were, severs the railway from the land notionally in some special regime or whether there are Crown leases over which the railway runs?

MR ARCHIBALD: There were certainly leases. The whole of the railway corridor is the subject of Crown leases. I think we made this point in one of our responding submissions, or perhaps it is found in some of the Rio Tinto material. The way in which these arrangements are made is by way of Crown lease. Of course, the Crown leases cover some of the area at the port, town sites and the railways. The railway is erected, constructed on the Crown lease and if the lease came to an end, then no doubt the railway would go with it, subject possibly to a tenant’s fixtures exception.

GUMMOW J: Yes, that is what I am curious about.

MR ARCHIBALD: I do not think there is any special legislation about it. The general provisions of property Acts, I cannot remember if they pick up Crown leases or whether they are confined to private leases, but that would all be part of the hazard that the enterprise would take into account in making its initial and its ongoing investment decisions. I spoke earlier of Commonwealth incentives through Commonwealth mechanisms. States also provide incentives of which this arrangement is an illustration.

GUMMOW J: In some States, may be in Western Australia, there would have been a State – monopoly might not be the word – over railway construction, might there not?

MR ARCHIBALD: Yes, depending upon the time at which one is looking.

KIRBY J: By the way, I notice that in the Iron Ore (Mount Newman) Agreement Act 1964 the actual terms of the agreement which is scheduled to the Act does not appear to be in the form of a Crown lease but rightly, in my view, in the form of a lease with the State which is a constitutional entity in Australia.

MR ARCHIBALD: Yes. If your Honour the presiding Judge was looking at the Goldsworthy – I am not sure which Act your Honour had – but in the Goldsworthy Agreement in clause 10E - - -

GUMMOW J: That is the First Schedule to the Act?

MR ARCHIBALD: Yes, your Honour, the First Schedule. The effect of a determination of the lease is dealt with and improvements - - -

GUMMOW J: The State gets it without compensation.

MR ARCHIBALD: Yes. So it is positively dealt with.

GUMMOW J: Thank you.

MR ARCHIBALD: The answers suggested to the proposition that in light of the circumstances the application of Fortescue is not a competent application include two construction issues and two issues which are really grounded in the evidence. The two construction issues seem to be the newly ventured immunity of (a) to (c) services from the qualifying effect of (d) to (f) and the other one is part of the production process point.

As to the first of those arguments, Fortescue has placed some store upon the proposition that the infrastructure facility referred to in paragraph (a) is a core or central area of concern for access purposes and one should therefore be inclined to the view that such a service was, I think the adverb is, incontestably part of the service, which is to say, never subject to the production process exception.

That stepping-off point is unsound, in our contention, for the subject matter of paragraph (a) captures any infrastructure facility. The concept of a major or a significant infrastructure facility is an unwarranted gloss. The argument fastened upon observations made at page 251 in the Hilmer Report to the effect that major infrastructure facilities would become the subject of the postulated access regime, but the passage at page 251 is addressing which of the candidate facilities would likely satisfy the Hilmer declaration criteria, not addressing the question which infrastructure facilities could be the subject of a competent application, and of course Hilmer was looking at facilities, not services, in any event. So the argument seeks to feed into paragraph (a) of the definition matters that are germane not at the phase one stage of the legislation but germane at the phase two stage of the legislation.

KIRBY J: Why do you say “facilities” is a wider concept than “services”?

MR ARCHIBALD: I am not sure that I would say it is wider, but it is a different concept. Service looks to the fruits of the facility rather than to the facility itself. Now, there may be a variety of fruits, for one reason or another, but it is - - -

KIRBY J: A facility is not necessarily concrete; it is an opportunity, an availability, and in a sense a service.

MR ARCHIBALD: The facility is there to - - -

KIRBY J: If you say a bank gives you a facility, it is giving you a service.

MR ARCHIBALD: The reason the facility is there is to afford a service, certainly; it is not there for reasons unconnected with a service.

KIRBY J: I am just trying to understand why Parliament chose its word rather than the word of the Hilmer Report.

MR ARCHIBALD: It is focusing more specifically on the significance of the facility, what is the advantage that it affords. Do not just look at the bare facility or the structure, configuration of it; what does it do in economic terms, practical terms? What is its utility? One could have, no doubt, a facility which, if looked at purely structurally, was major and significant but it might be of little use, so that the significance lies in its use, not in its structure. But I speculate. There is nothing again in the extrinsic materials to explain the alteration of focus or the fastening upon a different aspect of the subject matter considered by Hilmer.

At least, so far as the language goes, our submission is that the expression “infrastructure facility” is not confined to the type of infrastructure facility that, if made the subject of an application, would almost certainly satisfy the declaration criteria. The pool of infrastructure facilities designated by paragraph (a) is greater than that and so the supposed reason urged by Fortescue as to why (a) should be immune from qualification does not exist. The work of satisfying the particular objectives of Part IIIA ultimately is done by the declaration criteria, and that which is taken out before that phase is taken out for fundamental reasons identified by Parliament and encapsulated in the exempting parts of the definition.

In the submissions which Fortescue proffered yesterday – paragraph 5, I think – one saw the proposition that the definitional elements of section 93L in the Development Allowance Authority Act reflected the ordinary meaning of “infrastructure facilities”. If that be so, then again there is no foundation afforded by that proposition for the Fortescue contention that paragraph (a) is confined to major or significant infrastructure facilities. The most pertinent part of the definition of “infrastructure facility” in section 93L – there are seven elements identified – the most pertinent one is in subsection (2), the land transport facility, and nothing in that definition conveys that the land transport facilities must be major or significant. They include roads, tunnels, bridges, railway lines or combinations of them and they will capture the major and the minor.

There is one interesting aspect of the definitions in section 93L. All of the seven kinds of infrastructure facility articulated there are facilities giving rise to services provided to members of the public. They are all facilities that are, so to speak, outward looking directed to serving the need of the public rather than the need of a private undertaking. So they have, I will call it, a public element. So the air transport facilities are for aircraft transporting the public or their cargo at a charge. The same with electricity transmission. It is not a private grid for an aluminium smelter, it is serving the public need, and the same with water and sewerage and so on.

So if it were to be the case, if Fortescue were to be correct in the proposition that infrastructure facility in paragraph (a) in section 44B’s definition of “service” has the meaning articulated in section 93L, then our railway would not fall within it at all because our railway, amongst other things, lacks the public service element. Our railway is not a network directed to serving the communities of Western Australia, it is there to carry our ore. Of course our network - - -

GUMMOW J: It is generated for the production of national export income, is it not?

MR ARCHIBALD: Yes. Just as non-exporters generate income which in one way or another benefits the whole community through employment and taxation and all sorts of things. But, of course, our facility is subject to the State Acts which do carry an obligation in respect of passengers or freight but that obligation is subject to the important rider that it is not to interfere unduly with our operations and even if we were to carry passengers or freight, it would not cease to be our production process, it would simply be that some of the things we do on our production process involve activities other than our production process. It does not cease to be the production process on that account, contrary to the assumption or argument of the respondents.

So if this proposition were good, we would be out at the paragraph (a) level without ever getting to paragraph (e). But apart from invoking the Hilmer paragraphs, page 251, no other reason seems to be advanced by Fortescue for the confining of the paragraph (a) facilities to what it contends are the core concerns of competition policy in this area. So we say paragraph (a) is wider and in light of its width, it is entirely natural and to be expected that all of paragraphs (d), (e) and (f) will qualify the subject matter that lies above (d), (e) and (f) structurally in the definition, whether it be the primary subject matter in the opening words or whether it be (a), (b) or (c).

One of the difficulties with the Fortescue argument is that it is dependent upon the core notion and whatever traction might be available for that argument in paragraph (a), it is entirely lacking, in our submission, in (b) and probably in (c). The argument, if good, has to apply equally to (b) and (c) as it does to (a) and yet there seems to be no reason in policy certainly as to why the production process exception should not apply to a handling or transporting of persons or goods service.

GUMMOW J: I think Mr Gageler makes something of looking at Mount Goldsworthy. In the First Schedule it would be clause 9(2)(a), operation of railway. The joint venturers are already obliged to operate the railway:

and to the extent that they can do so without unduly prejudicing or interfering with their operations . . . transport the passengers and carry the freight of the State and of third parties on the railway subject to and in accordance with by-laws –

and the by-laws could be made by the State Executive Government, I think, under a couple of pages over, sub-clause (3) there.

MR ARCHIBALD: So, the first point is that the - - -

GUMMOW J: So this access regime it is not really a bolt from the blue.

MR ARCHIBALD: Well, no.

GUMMOW J: In a sense, it was bargained for at the time the State agreed to give you this special legislation.

MR ARCHIBALD: None of that can bear upon the construction of (a) or (f), of course. But so far as the argument goes - - -

KIRBY J: Unless you take the view, which I took Justice Greenwood to be sort of taking, but this is rather obscure drafting and therefore in the end you have to adopt a construction which appears best to further the overall economic purposes of the Parliament and that is what I think you have to confront, given that there is ambiguity and obscurity in this drafting which is going to better achieve the objectives that Parliament seems to be trying to get at, and the background of the arrangements between the parties and the equity of the tax advantages that you have had in the building of the facilities or the services.

MR ARCHIBALD: Well, I do not know whether there were or were not tax advantages, your Honour. The evidence certainly does not - - -

KIRBY J: Well, the inference is that there were.

MR ARCHIBALD: I do not think I have seen anything in any of the judgments to that effect, nor in the Hamersley judgment to that effect. I have not seen any reference to Tax Acts before last Friday I have to say.

KIRBY J: Yes, but you got a little bit of notice.

MR ARCHIBALD: We were at a loose end over the weekend otherwise.

KIRBY J: I thought so.

GUMMOW J: Part of the problem with this litigation is that it is conducted under a microscope and you need to lift your eyes from the microscope sometimes.

MR ARCHIBALD: Yes. Clause 9(2)(a) of the Iron Ore (Mount Goldsworthy) Agreement Act is the microscope and whatever it does do, it does not say anything about haulage. As your Honour says, it did not come like a bolt from the blue, but haulage comes from the blue. What 9(2)(a) speaks of, at best, is transporting passengers and their freight.

GUMMOW J: No, and freight.

MR ARCHIBALD: Or the freight, yes,“the freight of the State and the third parties”.

GUMMOW J: In the context of this agreement we all know what the freight was. It was not dairy products.

MR ARCHIBALD: Yes, not access to the rail line, but we will speak about the unsatisfactory elements of the above rail and below rail dichotomy shortly, but for present purposes, using the generality, nothing here is addressing below rail considerations, entirely above and all subjugated to the need to observe that there be absence of prejudice or interference with the operations of here, Mount Goldsworthy.

HAYNE J: Before we dive under the rails and under the ballast, can I just understand where your argument is at the moment in the rejection of the construction urged by Fortescue. I would understand you to accept that you begin with the proposition that the relevant service is to be identified as the use of a railway line to supply the needs of Fortescue or its mining operations by means of a facility, in this case a railway line, that is, the chapeau plus (a) would be engaged in that fashion, would it not?

MR ARCHIBALD: Yes, but there is an aspect of your Honour’s proposition with which we do disagree. The application is not to satisfy Fortescue’s needs. The application will be successful or unsuccessful according to whether the declaration criteria are satisfied and they are not specific to the applicant. The applicant could be a non-participant in any industry.

HAYNE J: I understand that.

MR ARCHIBALD: And it is all future potential access seekers during the period. So it is not Fortescue specific.

HAYNE J: There are many other criteria that must be met. You would have (d), (e) and (f), notably (f), qualify what? The chapeau or (a), (b) and (c)?

MR ARCHIBALD: Certainly the chapeau. We say as well (a), (b) and (c) and we say (a), (b) and (c), whether they reside within the chapeau in any event or if they were to add anything, (a), (b) and (c) are qualified in their own right.

HAYNE J: But at least (d), (e), (f) qualify the chapeau. It may be that they qualify the chapeau and (a), (b) and (c) according to whether (a), (b) and (c) is purely a set of examples or extends the content of the chapeau. Is that right?

MR ARCHIBALD: Yes.

HAYNE J: Does the question then become whether the supply of the needs of the access seeker or access seekers generally by those means, which is to say, the means of a facility, in this case a railway line, the use of a production process?

MR ARCHIBALD: Looking at (f), yes, your Honour.

HAYNE J: And “the use of a production process”, do you say that the question must be further refined as being whether it is the use of BHP Billiton’s production process?

MR ARCHIBALD: Yes.

HAYNE J: That is a necessary step in your argument, is it?

MR ARCHIBALD: The use that will be made is the use that the service entails. The service is afforded to the parties seeking service and therefore its use by the access seeker.

HAYNE J: But the supply of the needs of either a particular access seeker or access seekers generally is the use of BHP’s production process, is that what the proposition comes to?

MR ARCHIBALD: Yes, it is the use of subject matter which constitutes a production process and one identifies whether it is or is not a production process by identifying the role it plays in the access provider’s activities.

HAYNE J: It directs attention to what has to be understood as the use of a production process and this is an aspect of the argument that I think you are yet to develop as fully as you wish?

MR ARCHIBALD: Yes, but if I have a road as part of my manufacturing plant facilities that runs between two aspects of my plant, within my activities that road may rightly be treated as part of my production process and be used integrally with the two plants. An access seeker may seek access to the road to use it in a way that is entirely unconnected with any activity occurring within those plants or on the road. It may just again be a tourist road they want it for, so it would not have any productive role when used by the access seeker, but the concept of paragraph (f) entails that in concluding whether subject matter is or is not a production process, one looks to the access provider’s employment of the subject matter, not the access seeker’s proposed employment of it. Of course, one perhaps cannot fathom how various access seekers might ultimately want to use the service.

CRENNAN J: I suppose what you are saying throws up the distinction between an access seeker seeking use of bare infrastructure, which I think was a phrase you used earlier, and the attention direction to the use of production process of the access provider.

MR ARCHIBALD: Yes. For a particular subject matter may be susceptible of three kinds of use, two of which are productive, one only of which we employ, but the third use may be entirely non-productive. Whether the access seeker will use the facility in way one, two or three, one may know if the applicant happens to be one who would make use, but the applicant may be one who would never make use and one might not know from the application circumstances, but a variety of uses would be possible over the life of declaration which tends to be of the order of 20 years with facilities of this general kind and so there might be future uses unthought of at the time of the application that could emerge during the life of a declaration and so it would be a very unsafe basis upon which to approach any analysis to speculate as to what might be uses made by access seekers over the life of the declaration if that were the suggested approach.

CRENNAN J: One very tricky point, I think – and I am not sure what the answer is – is that putting together some of the things you have said, a use of bare infrastructure, if it adds value, is, on your view, a productive use, but I imagine Fortescue would say it is not a productive use, even allowing for putting to one side Justice Middleton’s resort to the notion of a transformative step.

MR ARCHIBALD: Yes. Fortescue may concede it is a valuable use, but not a productive use. The reason they would make the distinction would be because they say, with their fourth argument, all you are doing is simply transporting subject matter between two discrete production processes. That is why it is only transportation and it is transportation independent of your production processes, but that is at odds with the findings.

CRENNAN J: Yes, but is your characterisation of the transport from one point at which a process is undertaken and another point dependent on the value added argument associated with the act of transportation?

MR ARCHIBALD: Not specifically, but plainly because it is a critical element of our generating an export cargo that meets our contract requirements it is something we need to undertake. We seek to gain advantage from it and at least in recent years it seems to be a profitable activity, but railing entails a cost but it is a step that is necessary to undertake to achieve the overall advantage of the activity. In that sense, it must be assessed as being of value.

CRENNAN J: But the word “railing” of course conflates the track and the stock that is used on the track, I suppose, does it not?

MR ARCHIBALD: I am intending to get into the fourth argument in more detail, but railing plainly encompasses, as the primary judge said, all elements of the rail, both the bed and the haulage activity that it permits. You cannot just have locomotive power and rolling stock; you need your rail track to have any sensible transporting capability and we supply the entirety of the subject matter to ourselves in order to achieve the step that is involved in getting our ore in the various sequences to port. That is productive but, apart from the production argument, it is clearly, in our submission, using both above rail and below rail elements if that were meaningful at all.

CRENNAN J: I think you introduced the notion of use of bare infrastructure in the context of (a). What would be an example of what you were referring to then?

MR ARCHIBALD: I am sorry, I am not sure if I - - -

CRENNAN J: The use of bare infrastructure.

MR ARCHIBALD: The pipeline without the haulage component, the transmission line without the auxiliary elements that allow the electricity to pass along the line.

CRENNAN J: Well, then, why not the tracks when there is no access sought in relation to stock or whatever is necessary to put on the tracks?

MR ARCHIBALD: That will be and that is what Fortescue say is the subject of their application. Of course, they do ask for more, but the bare infrastructure would be the port without the auxiliary services that assist it to work, the airport without – at least for air-side services – the matters that allow aircraft safely to take off and land and so on. It is a bit like a charter of a boat, either a bare boat charter, dry, or a vessel charter, wet, which has the crew and the fuelling and all the other matters associated that give you a working vessel. It is that kind of distinction.

CRENNAN J: I think the Development Allowance Authority Act distinguishes between what you might call bare infrastructure, a railway line, as a facility and related facilities, which would cover things like the stock and so forth.

MR ARCHIBALD: Yes, but, as I have said, the reason that we say that paragraph (a) was inserted was just to protect against the possibility that it might be concluded that having access to the pipeline alone or, if you like, the rail track alone would not itself constitute a service. We say that was unnecessary but one can see how it is done. But so far as the argument about our use of it is concerned, it is plain that we use all elements above and below and that is what the primary judge found. They are complementary. The one with the other is useless.

So I was seeking to establish why it is that paragraph (f) does qualify the service which is the subject of the application or whether that service is within the chapeau, either because of paragraph (a)’s presence or regardless of it, or if it is beyond the chapeau, paragraph (f) applies to the subject matter of (a). So we have submitted that if this argument is good, it has to be good so far as each of (a), (b) and (c) is concerned. They all need to be immunised from the operation of the exclusions. We have submitted you cannot find the justification for the immunisation of (a), but you certainly cannot find it for the immunisation of (b) and (c).

Moreover, the argument produces incongruities even in respect of the subject service. The Fortescue argument is that the below rail service is within (a) and is immunised, but that the haulage service is within the chapeau and is not immunised. It is hard to see what the logic of that is or what feature of legislative objective and policy could justify the distinction which is the necessary consequence of the argument now advanced. For, if the bare rail is a major, significant, critical, core concern of the competition policy, then a fortiori the concomitant haulage service would likewise be within that category. The Fortescue argument would make one subject to the production process exception and the other not subject to it. That feature of incongruity tells powerfully, in our submission, against the soundness of the contention.

Similarly, if the argument is good for (f), it has to be good for (d) and (e) and there can be no reason, in our contention, why, addressing the objectives of Part IIIA, Parliament would have regarded the protection afforded by the intellectual property exemption in paragraph (e), why one would have made that paragraph apply to items within the chapeau but not to items within (a), (b) and (c). Even if some special circumstance attended (a), no special circumstance could be seen to attend anything in (b) or (c). Likewise (d), it is hard to see the logic as to why the insulation afforded to the supply of goods should be available for chapeau services, but not be available to (a), (b) or (c) services, particularly matters such as the subject of (b) or (c).

Those are arguments partly from policy considerations, partly from textual considerations. So far as structural considerations are concerned the location of the “but does not include” subject matter naturally conveys that it applies to everything that precedes it rather than the chapeau element only and had it been the intention of Parliament to immunise the (a), (b) and (c) components, that would naturally and appropriately be done by locating the (a), (b) and (c) items after rather than before the exempting provisions of (d), (e) and (f).

GUMMOW J: There is reference to (d) as a definition of “supply” is there not, in section 4?

MR ARCHIBALD: Yes, and it is probably because of that definition, if not ordinary usages that I said the supply of goods may constitute a service.

GUMMOW J: Yes, “sale, exchange, lease, hire”, et cetera.

MR ARCHIBALD: Yes. If I promise to deliver a dozen eggs punctually at 10.00 am every Friday for the next three years clearly the service aspect associated with the physical subject matter of the sale. Because of their reference to “use”, (e) and (f) are more explicitly directed to something that would be a service but the supply component of (d) bespeaks the service, or may bespeak a service and achieves immunity for transactions concerning goods.

GUMMOW J: Not transactions concerning. It is a bit more than that, is it not?

MR ARCHIBALD: Yes, it is to..... It is supply. Our contention is that the service, the subject of the Fortescue application, is subject to the operation of paragraph (f) and on the findings of fact – certainly by the primary judge – that element of paragraph (f) is here satisfied. The other construction argument concerns the question as to whether paragraph (f) is confined to the case in which the service uses the entirety of the production process or whether paragraph (f) is engaged where the service constitutes the use of something less than the whole of production service. There will, no doubt, be a de minimus qualification - - -

GUMMOW J: You used the definite article in relation to the production process. This brings us back, does it, to the debate about whose production process?

MR ARCHIBALD: Yes, in part, but if one looks at the BHP Billiton production process the factual findings are that the process starts at line and finishes at port and therefore rail is not the entirety of the process and, hence, the issue as to part is thrown up. We say that in paragraph (f) the expression, “the use of a production process” naturally covers the case where the entirety of the production process is used and the case in which a part of the production process is used.

KIEFEL J: But if it is the latter, it would have to itself be a production process?

MR ARCHIBALD: No. Where one has a part of the whole one necessarily ascribes the characteristic of the whole to the part.

KIEFEL J: Why?

MR ARCHIBALD: Because the very concept of the part is that it is integral with and serves the purposes of the whole.

KIEFEL J: But that is from BHP’s perspective. Is not the correct linkage between a production process and the facility being made available?

MR ARCHIBALD: The linkage is the service.

KIEFEL J: Which is the facility, which is the railway line.

MR ARCHIBALD: Which is that which is provided by the facility, and one considers whether that which is provided by the facility constitutes the use of a production process. One can envisage the case in which the use to be made by the access seeker would be the use of its production process but the use of the access provider is not a use that constitutes its production process. If one had that case there would be no reason why the exemption should operate in favour of the access provider because there would be no circumstance associated with the grant of access that might generate the disincentive to investment which is the concern which we say underlies the provision.

So looking at the opportunity for disincentives to arise, it must be the case, in our contention, that one looks to the access provider’s circumstances to identify whether or not one has a production process. Once one has done that, one has the existence of the production process and it is no less a production process if on occasion the access provider is not itself operating that process. It remains the production process in the absence of particular interference. Deprivation of simultaneous use does not in any way affect the question of construction.

Once one has use to whatever degree one has use there is no reason why partial use is non-use, or should be regarded as non-use for the purposes of paragraph (f). The extent of use goes to the degree to which the advantages of the subject matter are consumed, but partial use, although of lesser degree, is as much use as is full use. The difference is one of degree, not of kind; partial use is not non-use. We say that flows from ordinary concepts associated with the word “use” and ordinary usages.

In the Full Court the reason the majority gave for concluding that partial use did not attract the operation of paragraph (f) was that there were “no words of extension” – to use the words of Justice Greenwood at paragraph 169 – to cover that case.” But words of extension were unnecessary and inappropriate for the greater includes the lesser and the notion of partial use constituting use is embodied in the ordinary meaning of that phrase.

The notion that partial use would not enliven paragraph (f) was rejected in Hamersley. Justice Kenny’s reasons at paragraphs [42], [47] and perhaps especially at [51] deal with that topic. It was rejected by the primary judge, Justice Middleton, in this litigation; paragraphs 50, 51 at page 421 of the appeal book and 153 at page 447, and rejected by Justice Finkelstein in his reasons when a member of the Full Court, paragraph 60 page 503. We say there, their Honours’ rejection of this proposition is sound.

It seems from the argument that some special meaning of the expression “the use of” needs to be accorded to paragraph (f) compared to the meaning of that expression in paragraph (a). At least the first respondent in its submissions proceeds upon that basis and it seems to be right. It is conceded by the Council that for the purposes of paragraph (a), an infrastructure facility such as a road or railway would be used in the event that there was use of part of that infrastructure facility. A road is used if one travels along part of its length rather than the entirety of its length and so on. That is the correct approach in our contention.

HEYDON J: They are not comparable subject matters.

MR ARCHIBALD: We say they are. They are plainly different, but those differences do not require any differences to be accorded to the meaning of the word “use” insofar as we are concerned with whether that phrase applies to part or all of a production process. The reasoning advanced by the Council is that in the case of this production process there were discrete elements of activity and if use were made of one of those discrete elements, there was a need for that particular element itself to be a production process.

But we say two things about that. First, one cannot reach a conclusion about the construction of the phrase in paragraph (f) by reference to particular fact circumstances of this case. If those facts were necessarily present in every case of a production process the position might be different, but that cannot be so. Secondly, so far as the facts of this case are concerned, the findings of the primary judge, not contested in the Full Court, are inconsistent with there being discrete production processes or discrete aspects in the way in which the Council contends for, for the findings of the primary judge endorsed in the Full Court of integral activities between mine and port rather than a discrete process of mine, a discrete process of port and something separate or discrete in between. So that foundation of approach, in our submission, is unsound. Allowing for the difference of subject matter – recognising the difference of subject matter, we submit - - -

KIRBY J: The question is that there being no alteration in the product, that it did not involve any production process relevantly.

MR ARCHIBALD: Yes, but that falls into the transformation fallacy again. If one takes something that the majority in the Full Court would regard, as we would understand it, as a production process - take operations within the four walls of a factory, a flour mill or something of that kind, but observe that what occurs within that flour mill involves movement of ground flour but unprocessed flour from one piece of equipment to another by a conveyor belt or even a short railway line. It must be the case, in our contention, that the conveyor belt, dovetailed in as it is with the grinder and the processor, all the other equipment, is a part of the production process. What occurs when the material moves along that conveyor - - -

KIRBY J: It is the word “process” that I stumble on. It is part of the ultimate distribution of the product, but is it actually part of a process?

MR ARCHIBALD: Yes, in our submission, clearly so in the instance I am speaking of and no different when the conveyor belt, looking at the Reynolds’ Case, is 40 metres long or 40 kilometres long.

KIRBY J: Well, we are in the business of drawing lines. I mean we have to do that. It is a most unpleasant task. We have to do it every day of our lives in this Court and the suggestion is that you just cannot draw an analogy between the conveyor belt and this facility in this context of this legislation for this purpose, high, national, economic goals. That is the suggestion and therefore the line is drawn there, not there.

MR ARCHIBALD: We are not into the declaration criteria, stage two; we are looking at service, which is different. The Court will decide it, of course, but the Court will decide it, in our submission, by reference to function.

GUMMOW J: Wait a minute. The consequence of accepting your submission is that you never get into these balancing criteria because the door never gets open.

MR ARCHIBALD: With a production process, that is so, and that is what the Parliament has chosen, seen as fit. But looking at production process, the answer as to whether it is a production process will be answered by reference to function, not geography or length.

KIRBY J: You get support for your submissions from what Professor Pengilly has written in his comment on the decisions of the Federal Court in the Australia New Zealand Trade Practices Law Bulletin. He says the problem with taking the view that I have been putting to you is that if you take this so-called purposive approach then that depends too much on the responses of judges and their conceptions of the purposes as distinct from the text of the statute. Your anchor is the text; you want to get us focusing only on the text, but - - -

MR ARCHIBALD: No, we get comfort and support from the - - -

KIRBY J: - - - the modern approach to interpretation is to look at the text in the light of the context and the purpose.

MR ARCHIBALD: Your Honour, no.

KIRBY J: You are going to disclaim now, but I am up to these tricks. I have been sitting here for 13 years watching them.

MR ARCHIBALD: We have taken the Court to the statements of purpose, the only statements that anybody has identified, and they provide strong support, in our contention, for the argument we advance.

HAYNE J: Your argument depends, does it not, on saying that any facility that BHP uses as part of its production process is itself within the expression “the use of a production process”?

MR ARCHIBALD: Well, it is a production process, but the use is not our use – we need to be careful which use we are talking about, but the use in paragraph (f) is the access seeker’s use, ie, the service use.

HAYNE J: Now, is a possible approach to the application of (f) this, that the use by an access seeker in satisfaction of its needs – or the question is, is the use by an access seeker in satisfaction of its needs the use of BHP’s production process, that is the question, presented by (a), is it not?

MR ARCHIBALD: Yes.

HAYNE J: Can it be said that use of the railway is not the use of BHP’s production process, it is the use of a facility that BHP uses in its production process, and may a contrast be drawn between the case now under consideration and the case where BHP’s rolling stock or additional cars were added to BHP’s trains by the access seeker, in which case there might be said to be the use of BHP’s production process by using its rolling stock or its trains?

MR ARCHIBALD: No, as a matter of construction and no, as a matter of the findings of fact here. The findings of fact alone would preclude that view here. But as a matter of construction it is plain that the production process referred to in (f) is not confined to the particular activity or the dynamic circumstances and the periods of time during which BHP Billiton so acts. As I was seeking to submit earlier, the production process exists in respect of my steel mill at the weekends when I am shut down. It is no less a production process when I am not using it than it is when I am. It is no less BHP’s production process when no rake of BHP is travelling over a particular section of rail.

That section of rail is and remains BHP’s production process and access by an access seeker to that section of rail, whether it is sought to be achieved simultaneously with the BHP use or it is sought to be achieved at a point of time when that section of track is not being travelled over by BHP Billiton rake is the use of BHP’s production process.

GUMMOW J: How are you progressing with your submissions, Mr Archibald?

MR ARCHIBALD: Not as rapidly as I had hoped, but I will be much quicker on the factual elements than I have been on these construction matters. I will probably do it in about 10 minutes, quarter of an hour, after lunch.

GUMMOW J: We will adjourn until 2.00 pm.

MR ARCHIBALD: Thank you, your Honour.

AT 12.43 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.03 PM:

GUMMOW J: Yes, Mr Archibald.

MR ARCHIBALD: Your Honour the presiding Justice asked me this morning if the Hilmer Report referred to just terms. In fact, it does. Not, I think, in the material we referred to but at page 348 near the foot the report says:

The creation of an access right might constitute an “acquisition of property” in terms of s 51(xxxi) of the Constitution, thus requiring the acquisition to be “on just terms”. However, this requirement should be met by the proposed requirement that the owner of the facility receive a fair and reasonable access fee.

GUMMOW J: Thank you.

MR ARCHIBALD: Might I make a few further submissions in respect of the construction issues and then proceed to the remaining issues. In relation to the part of the production process argument, the way in which paragraph (f) is to be construed is assisted, in our submission, by consideration of the provisions of paragraph (e). Paragraph (e) has the same antecedent language before the reference to “intellectual property” as does (f) before the reference to “a production process”.

We submit that paragraph (e) should be construed so that the use of part of relevant intellectual property would enliven paragraph (e). Not to adopt that approach to paragraph (e) is calculated to cause prejudice and jeopardy to a body of intellectual property which merits protection and insulation from access intrusions. So if that approach to paragraph (e) is warranted, as we submit it is, the like approach should be adopted in relation to paragraph (f).

Similarly, the intellectual property to which paragraph (e) refers, in our submission, may be intellectual property extending beyond the amplitude of the service or perhaps the facility providing the service to which paragraph (e) relates and, in the same fashion, the production process to which paragraph (f) relates may itself extend beyond the amplitude of the service which is the subject of the application for declaration. If the amplitude of the property in (e) and the process in (f) may be broader than the service, then it is natural that the exemption should apply if part of the property or part of the process is used by the service which is the subject of the application.

CRENNAN J: The trouble is that with trademarks and copyright, for argument’s sake, you may not have a use if the use is not use of a substantial part.

MR ARCHIBALD: But we are not concerned with substantiality; that is essentially - - -

CRENNAN J: But I am using that as tantamount to your argument about part of. What I am saying, I suppose, is that certain uses of part of intellectual property, if they are substantial, are use of the intellectual property. There is no distinction made.

MR ARCHIBALD: No, and I have conceded a de minimis factor in any event, but take a patent that claims both a product and process. If the service that is applied for is confined to the service and the product is not the subject of the application, upon the argument advanced by Fortescue and indeed the conclusion reached by the majority in the Full Court, if (e) is to be interpreted in the same way as (f), that circumstance would not attract the operation of (e) and the process which is auxiliary to, say, the communication service would not be protected and in the same way one would analyse a production process that extends more broadly than the service which is the subject of the application, as is the case here.

Indeed, a further anomaly that emerges from the construction urged on this Court by the respondents is that any access seeker could have access to a part of what is indubitably, in totality, a production process without paragraph (e) being enlivened. If I have a process that consists of elements (a), (b), (c) and (d) and access seekers 1, 2, 3 and 4 respectively seek access to (a), (b), (c) and (d), (a), (b), (c) and (d) are each part of my process, paragraph (f) on the Fortescue approach is not enlivened, those access seekers in aggregate secure to themselves subject matter that constitutes the totality of my production process, yet by fragmenting the service, subject matter, those access seekers in unison could avoid the operation of the paragraph or if not acting in unison, could in aggregate in any event achieve a result where the totality of my production process is taken.

For once one starts fragmenting what are the productive operations of the enterprise, one runs into insurmountable difficulties. In our submission, one will never get a result that provides the protection that the legislature has clearly signalled why paragraph (f) should be accorded to productive operations for it will be rare, if ever, that the process of the access provider will coincide in amplitude with the ambit of the service which is the subject of the application. Even if there would be a natural co-extensiveness, the service could be configured adroitly by the access seeker so as to eliminate some component and thereby avoid the operation of paragraph (f). That would frustrate the objective policy considerations behind this exception. They would flout the clear focus on investment incentives which are the subject of the Hilmer Report analysis.

Once one fragments, one runs into the difficulty which the majority in the Full Court identified. They said as a matter of construction that paragraph (f) does not apply to part of a production process, but the reasoning of Justice Greenwood then said, well, you have to qualify that because you may find circumstances in which, his Honour said, an operation within factory confines, you may find circumstances which rather suggest that although it looks as though part is being used, you really have to conclude that the use of a production process.

The unsatisfactory foundation of the qualification really telegraphs the unsustainability of the construction point upon which the majority in the Full Court alighted, a qualification which, as we indicated, was not supported by Justice Finkelstein on the Full Court, Justice Middleton at first instance or Justice Kenny in the Hamersley Case. The illogicality and the unsustainability of the qualification points to the error in the construction approach which the Full Court, in our submission, fell into. So, in our submission, the conclusion of the Full Court as to the inapplicability of the exception in paragraph (f) to the case in which part of a production process is used is demonstrated.

If the exception were to have the operation which the majority concluded was the case, with the exception, there would be no need or occasion for the antecedent words to precede the expression “a productive process”. If the process needs to be co-extensive with the service or no greater in amplitude than the service, then the way in which the draftsperson would reflect that feature would be simply to say, leaving out the inclusive words, a service means a service provided by means of a facility but not a production process.

The inclusion of reference to “use of” conveys, in our submission, that relevant use may not be and need not be co-extensive with the process in question and indeed the indefinite article before the expression “production process” likely conveys similar elements and so for those further reasons we say the construction for which we contend is the correct construction. When one comes to the facts one sees even more clearly, in our submission, why it is that here the elements held to constitute part of our production process do engage paragraph (f).

Part of the argument is the so-called above and below rail point. There are two important features here. The first is that there is no satisfactory or pertinent distinction between the two for the purposes of issues of the kind which are the subject of these appeals. As the primary judge said in paragraph 87 of his reasons at page 430:

Transportation of iron ore by rail from one location to another will necessarily though involve the use of above and below rail services, in the sense they are complementary to each other.

That is a reflection of the allusion I made this morning to the notion that locomotive power without rail makes no sense. The service that is self-provided by BHP Billiton to itself inexorably involves the totality of rail services as much the rail track or bed as all above rail elements. The same thing is the subject of the observations of Justice Greenwood in the Full Court. The relevant paragraph of his Honour’s reasons is paragraph 189 at pages 543 to 544. It is at line 49 on page 543 his Honour said of our use of the rail, that it was:

an essential step in a production process from mine to port and such use comprehends both the above and below rail services.

He then said a little later in that paragraph that –

the distinction between above and below rail services seems ultimately not to the point when the third party seeks not just use of the track but, in addition, a bundle of services to which it needs access in order to make the contended use of rail line infrastructure of any utility –

Then his Honour referred to some of the additional services. So the end of that paragraph leads into the second point which is of importance.

GUMMOW J: I am not sure to what extent these are really findings of fact actually.

MR ARCHIBALD: I think I accept that. They are not primary fact, but, yes, accept that. So, it is Justice Middleton’s findings which are truly the findings of fact and I will give other paragraph references to his Honour’s judgment on cognate points shortly. The end of paragraph 189 at page 544 relates to the second important point which is a matter of fact. It is a reference to what was the service, the critical matter, what was the service in respect of which access was sought by Fortescue. It is not confined to the bare infrastructure if by that expression is to be understood the rail track without more.

Page 13 in volume 1 of the appeal papers shows what it was that access was sought to by Fortescue. At lines 46 and 48, paragraphs 5.1(2)(d) and (f) one sees elements of what are called infrastructure to which access is sought which could not be rightly described as “below rail”. So, access is sought to train control systems, signalling systems, communication systems, maintenance and protection systems, all of which are provided by the operator, BHP Billiton, all of which are above rail and all of which, of course, are critical for any sensible access to the track itself to be had.

So this reveals a factual truth which is of importance and perhaps of increased importance in light of some of the matters canvassed in this Court.

GUMMOW J: What appears at 5.1 then has to read with your application for the negative declaration at page 2, does it not, which cross-references 5.1?

MR ARCHIBALD: Yes, your Honour. Yes, in that our definition of the rail track service picks up the entirety of the subject matter of the application. Some of the matters in 5.2, bridges and the like, might be regarded, in a sense, as the so-called inert elements, but inert elements are incapable of affording any service that meets a need or provides any advantage absent the above rail, call them active, elements that are identified as part of the application. So that really explains why, rightly, in our submission, the above and below rail proposition was comprehensively rejected in the courts below in this litigation and rejected in the Hamersley Case when it was attempted there as well, in our submission, rightly so, for it seeks to fasten on a notion which is inapplicable to the circumstances of the case.

There is, of course, no doubt a usage or there are usages in industry, in this industry, which refer to above and below rail elements or notions, but it is not the case that those notions reflect some bright line delineation of a service which is capable of being provided and affords any sensible advantage to one party who seeks access to it. There needs to be an amalgam of elements which might for one purpose be called “below rail” and for other purposes be called “above rail”. Of course, part of the subject matter that is sought by paragraph 5.2 of the application feeds into the systems which BHP Billiton employ and use as part of their production process which extend well beyond the railing elements into the port and mine features.

In particular, we draw attention to the management system which is referred to in paragraph 55 of the primary judge’s reasons at page 422. This is the system which adjusts, harmonises and integrates various elements of the production process. It is the Continuous Stockpile Management System, the acronym being CSMS, and it is used, as his Honour found:

as a production and grade control system that involves its mining, rail and port operations.

KIEFEL J: But that is not part of the application for access, is it, Mr Archibald?

MR ARCHIBALD: Whether it falls within some of the 5.2 elements might be debatable because scheduling of rail, of rake travel over the track, the train control systems, communications systems and protection systems may be within aspects of that system, but whether they are or whether they are not, if that system lays above, so to speak, or beside these other matters, what it is conveying and demonstrating is that it is unrealistic at the factual level to seek to identify any discrete portion from the functional viewpoint of the overall system as having some independence from the totality. Everything is controlled and everything runs as one system in order to achieve the ultimate outcome.

In those respects, in our submission, to seek to fasten upon rail track alone and say, well, we want access to that, that is not productive itself of anything in the sense of transformation. It sits independently of anything else, therefore, what we are seeking access to is not use of a production process is at odds with the factual realities, as found by the primary judge.

There is a point raised as to whether in our contentions we confined ourselves to what might be called “above rail”. Reference is made to page 74 of the appeal papers and page 86 of the appeal papers. At those pages, paragraph (j), the first reference, line 33 and line 46 at the second reference one sees references to “railing”. It seems that the Fortescue argument is that railing is confined to above track elements, but, in our submission, “railing” as an expression as there used and any other sensible use necessarily conveys the totality of the elements, the whole rail services, the primary judge said at paragraph 87 of his reasons, above and below, and we are not shut out by some, call it, a pleading point in this Court.

The factual findings in any event are clear in that respect and the pleading at page 86 paragraphs 12 and 13, in our submission, makes that position clear. These arguments were addressed, as I have indicated, in the Full Court by Justice Greenwood at paragraph 189. The passage between line 48 on page 543 and lines 13 to 21 on 544, in our submission, contain a correct analysis of the position in this respect.

So, as a matter of our usage, what constitutes our production process it is not confined to some above rail elements and as a matter of that which is the subject of the Fortescue service that is applied for, it is not confined to below rail elements and even which we would not concede there was some basis upon which the rail track would not answer the description that is required to enliven paragraph (f), the remaining elements of the application that I have drawn attention to would clearly fall into a category of part of the production process. The other general area of the arguments - - -

GUMMOW J: It is becoming a long 15 minutes, Mr Archibald.

MR ARCHIBALD: Yes, only two or three here, I apologise. The other matter is what I call the fourth answer propounded by Fortescue. Here the truly findings of fact by the primary judge do exclude this argument in any event. The findings are at paragraph 78 page 428, paragraphs 141 and 144, pages 444 to 445, discussed, in our submission, accurately in the Full Court at paragraph 187 page 543, 192 page 544 to 445 and 197 page 546 to 547 and in the Hamersley Case Justice Middleton said there was no material difference on the facts there. He said that at paragraph 131, page 442. The findings of Justice Kenny on that topic are found in paragraph 41 of the reasons.

HEYDON J: When you say that Mr Gageler’s submission about pages 444 and 445 of the judge there was not making findings of facts, he was applying Hamersley against his better judgment and the whole of the reason there is to be read in that light. In other words, it is an assumed reason.

MR ARCHIBALD: Yes, at 65 the elements of the process were set out, BHPBIO’s contentions as to an integrated and continuous process. In 66 his Honour said:

I proceed on the basis that the actual process and operations are as contented for by BHPBIO.

Paragraph 78 is the paragraph which identifies that his Honour makes the finding to that effect – because it is separated from 65 and 66, it is a little more difficult just to pick up – and then at paragraphs 141, 144, II accept that his Honour is discussing it in the way that your Honour Justice Heydon flags.

The Fortescue argument depends upon the notion of separate processes of transformation linked in a particular way, but the findings are of an integrated process rather than discrete elements or linked elements and the position that obtains in this case, in our submission, is no different from the mining operations cases – I will just give the Court the references – in Reynolds, page 35, the last full paragraph, and page 39, the last full paragraph; in Northwest Iron, page 474, point 9 on a 10-point scale, to 475, point 4; in Robe, page 1079, line 26, to 1080, I think point 4 on the page, 1081, lines 5 to 41; and in Hematite we have given the references, page 622, 634, 639 to 640 and 655.

Those considerations show that where in this type of productive operation transportation occurs, the transportation element is to be understood as an integral part of the overall operation, not itself transformative but integral with and functionally dovetailed with all of the other operations and not to be regarded as a discrete linking step. If the Court pleases.

GUMMOW J: Thank you, Mr Archibald. Yes, Mr Young. I will hold you to that arrangement.

MR YOUNG: It is still in the order of 15 to 20 minutes, your Honour.

GUMMOW J: And the timing arrangement, too.

MR YOUNG: Yes. If the Court pleases, the matter we principally wish to address arises from Fortescue’s reply to our written submissions, in particular the points made in paragraphs 3 to 6 and 17. It suffices for present purposes to go straight to paragraph 17. It is the same point in both places. The argument is put in the last sentence of paragraph 17, that:

Use of the same inert thing –

that is to say the rail track –

by Fortescue to run its own trains to carry its own iron ore does not form part of BHPBIO’s production process.

That argument is advanced in paragraphs 3 to 6 in the same submission and also it appeared in paragraph 46 of Fortescue’s principal submission. In addressing that argument we wish to address the questions raised this morning by the Court, in particular by Justice Hayne and Justice Crennan concerning the characterisation of the service. That argument was not put so baldly, it seems, in the courts below. It was put and rejected in Hamersley. Justice Kenny dealt with the argument in paragraphs [36] and [39] of the judgment in Hamersley.

Her Honour rejected the argument by using, appropriately, we submit, the language and concepts of Part IIIA. I will not read the passages, but it is a very clear exposition of why that argument is unsound. Paragraph [39] takes it further by explaining why the characterisation of the service is not governed by the “operational ends” or needs of the access seeker. The argument advanced by Fortescue and rejected by Justice Kenny is, in essence, the nub of the above rail/below rail argument that was advanced by Fortescue in the lower courts and rejected on both occasions.

GUMMOW J: It is the last sentence of paragraph [39], is it not, that is the problem:

In the present case, the critical question is whether the use by Robe of the railway line (and associated infrastructure) that Hamersley owns and operates would involve the use of a production process, namely, that utilised by Hamersley to manufacture its export product.

MR YOUNG: Yes. Your Honour, in our submission, Justice Kenny approaches the matter correctly in paragraph [36]. The sequence of steps really are to fasten on the distinction between “service” and “facility” that is used in the Act. The findings, essentially, would reduce to these. BHP provides a service to itself that comprises of a use or the making available of the rail track and associated services. The trial judge made such a finding in paragraphs 87 and 150 and Justice Greenwood in paragraph 189.

GUMMOW J: When you say “made a finding” it means that there are uncontested facts and the “finding” is postulated upon a particular construction and the construction of the statute is disputed, so there we are.

MR YOUNG: No, your Honour, it is a fact whether or not BHP makes available to itself its rail track facility in the course of its production operations. That is a fact.

GUMMOW J: No, production process is a highly disputed matter. It depends upon what the definition means.

MR YOUNG: I am not trying to address that aspect of it.

GUMMOW J: We can spend so much time running around in this paddock productively to my mind.

MR YOUNG: Your Honour, in our submission, if one adheres to the distinction between “service” and “facility”, it becomes clear that the character of the service is stamped as at the date of the application by the use which is made of that service at that point of time. It does not depend upon the operational ends or objectives of the access seeker. That must be so, because otherwise you could never give any content to paragraph (f). Now, if it is correct - whether it is a matter of fact or argument, your Honour – as the courts below said, that BHP provides a service to itself comprising the use or making available of the rail track, the next step is that that service that BHP provides to itself was found to be an integral part of its production process.

Now, that being so, when Fortescue seeks access to that service, it is at that point of time of a particular character. It is a service that BHP provides to itself as part of its production process. Because BHP uses that service as part of its production process, the service falls, in our submission, squarely within paragraph (f). It is not to the point, as Justice Kenny found, that Fortescue wants to use the service to carry its own ore and that Fortescue’s operations are distinct from BHP’s production operations.

Justice Hayne raised the question, as we understood it, in something like these terms. As a matter of characterisation, is the access seeker using BHP’s production process or, in the alternative, is it using a facility that BHP uses in its production process to meet the access seeker’s needs. With respect, in our submission, there is a difficulty with a formulation of the second limb of that question.

To speak of the access seeker’s needs diverts attention away from the proper characterisation of the service. As Justice Kenny said, one does not characterise the service according to the operational objectives of the access seeker. The service is to be characterised according to the way in which it is used at the time of the application by the access provider. That is what stamps that service as one whose use may or may not be the use of a production process. To put the point another way, there is a single service. Its character is fixed as at the date of the application, according to the business arrangements, the operations of the access provider. That is the only way, in our submission, in which a sensible meaning is given to paragraph (f). Otherwise (f) would be defeated.

KIEFEL J: Is not service that which is the subject of the application for declaration?

MR YOUNG: Yes.

KIEFEL J: That is not necessarily equated with operational aspirations of the access seeker?

MR YOUNG: Your Honour is correct that the access seeker defines the service, but it must be a real service to get access to. It must be one which exists commercially.

KIEFEL J: But is not the starting point to a consideration of this entire question, what is the service, the subject of the application for declaration and if that is a rail way line, that is what you consider and if that is a facility, that is your starting point?

MR YOUNG: There are essentially three steps, we would say, your Honour. One looks to the application to identify the service that is sought. The next step is to determine whether that is a real commercial service in existence being provided by means of a facility owned or operated by the access provider.

HAYNE J: Why have you got to fix it at that time? Let it be assumed that there is a web of copper wires connecting houses around Australia to particular central points. Let it be assumed further that a new entrant into the market wishes to make use of that web of copper wires, not for the transmission of telephone communication, but for the transmission of data. Nobody hitherto has used it for transmission of data but through whatever means the access seeker says “I can do this, I’ll do it. I want access to your web of copper wires”. Why has the service got to exist?

MR YOUNG: The copper wire has to exist and the service being sought in your Honour’s example is the making available of the copper wire for some commercial purpose. The copper wire has to exist just as the rail track service has to exist before it can be the subject of a viable access application. The fact that the initial seeker of a declaration wants to use it for a particular productive purpose is neither here or there. It is not relevant to the characterisation of the service and that must be so because once it is declared, anyone can get access to the declared service to use it for this end or another end or some other purpose and those purposes can vary over 20 years.

So you do not characterise the service according to the operational ends of the initial seeker or any subsequent seeker of access. It must be characterised according to the real commercial facts on the ground, as to the existence of the service and how it is used by the owner or operator of the facility as at the date of the application and you can only give content to paragraph (f) by identifying whether that service provided as at the date of the application by the owner or operator of the facility is or is not part of its real production process at that point of time, otherwise you can never give content to it.

If we go to rolling stock; if somebody sought access to BHP’s trains for its own purposes to carry materials not being part of some production process, if the operational ends of the seeker determines the characterisation of the service, the rolling stock would never have the protection of paragraph (f). If you go to the next statement and say the crushing plant. If somebody wants access to the crushing plant for their purposes but they are not part of the production process and so on, (f) could never operate. Paragraph (f) can only be given content – and this is consistent with the intention of (f), to protect incentives and investments and viability of existing investments, to say you look at the production process that in fact exists and ask the question, is the service being sought a service that is at the moment being provided in the course of a production process? If it is, it is stamped with that character.

GUMMOW J: Is any light thrown on this by section 44G, which after all we are always being invited to sit here construing definitions without the body in which the definition is placed to do some work. Section 44G(2), for example, “cannot recommend that a service be declared unless . . . the facility is of national significance”. Does that tell you anything?

MR YOUNG: No, your Honour, because G is directed towards services that have already got through the doorway to Part IIIA. That is clear because the definition of “service” does not speak about facilities of national significance. These criteria operate at a different point. The exclusions are important as an aspect of the overall purpose of Part IIIA because they carve out of the entire operation of Part IIIA an area of protected investment and the purpose of protecting investments must be referrable to the existing production processes.

GUMMOW J: Where do we get this notion of protected investment in any extraneous material?

MR YOUNG: Only in the Hilmer Report, your Honour, because it draws a distinction between, on the one hand, facilities providing publicly available services and, on the other hand, production processes, products and other commercial facilities and goes on to speak about the need to protect investments.

GUMMOW J: If you start talking about protected investments you have to start thinking about taxpayer subsidised investments. It could be a slippery slope.

MR YOUNG: No, your Honour. With respect, what Part IIIA does is to say that access should not be available in respect of certain categories of services because of the need to protect the viability of commercial investments. That is the purpose underlying those exclusions and any construction must give effect to that.

GUMMOW J: Protect the viability.

MR YOUNG: That was the language used by Justice Kenny and also to - - -

GUMMOW J: I know it was. Where does it come from?

MR YOUNG: That comes from Hilmer, if anywhere, your Honour, but the other way in which it is expressed is in terms of protecting - - -

GUMMOW J: And it is played out in the later provisions of this scheme, is it not?

MR YOUNG: I am sorry, your Honour?

GUMMOW J: These notions, if they have any part, are played out in the later operation of the scheme, not of this threshold?

MR YOUNG: No, your Honour. The only reason for the existence of the exceptions is because of a legislative concern that certain categories of services should not be the subject of access, the reason being that long-term investment decisions may have been made and there is a need to safeguard the incentive for further such investments and so they are carved out, they are excluded from access. There may be other access regimes under State agreements, but they are carved out from access in the circumstances described in paragraphs (d), (e) and (f) of the definition. Now, that is part of the overall purpose of Part IIIA, to give effect to those exclusions for those purposes.

CRENNAN J: Paragraph (b), for example, suggests that transport might be something quite different from production services.

MR YOUNG: Transport may or may not be different, depending on the facts of the individual production process. The findings in this case are that the transport that does occur is part of making up the recipe of the final product and is an integral and essential part of the production process. So it all depends on the facts. The issues in this case are essentially factual, findings as to the production process, and then a characterisation as to whether the service, which is the service that BHP provides to itself, is a use of a production process. It is a question of characterisation according to the facts found as to the nature of the services used by BHP within its production process. And to go back to Fortescue’s argument, it obscures the analysis - - -

GUMMOW J: This is paragraph 17?

MR YOUNG: It is paragraph 17, your Honour. It obscures the analysis to focus on the inert nature of the facility rather than the service already being provided as part of a production process by means of the facility and, secondly, it diverts attention away from the proper characterisation test by looking to the operational objectives or needs of the access seeker.

In our submission, Justice Kenny’s analysis of the way in which this provision should be approached is the correct one. Can I go to another point. One of your Honours raised the question as to why we have the indefinite article, a production process rather than the production process, in the definition. In our submission, the indefinite article caters for the possibility that the owner or operator of the facility may be providing its plant and the operation of its plant to another, the other being the manufacturer or producer. In other words, a toll manufacturing situation, a toll production. Then you would have a third party, which is the producer, having the production process, but a plant being operated by an owner or operator of the facility on a contractual basis.

That is not this set of facts. The production process on these facts is that of the owner or operator of the facility, but that need not always be the case. The definite article cannot be substituted into paragraph (f) without adding words to go on to identify whose production process is being referred to. But, in our submission, that is why you have the indefinite article used. On the facts of this case it does not alter our arguments in any respect.

Can I then make an observation about the purpose of Part IIIA and the exclusions very briefly by reference to Hilmer? Chapters 10 and 11 of Hilmer focus on facilities which are made available for use by others, mostly government owned but admitting of the possibility of private ownership, hence, electricity grids, gas pipelines and so forth. Hilmer does not address dedicated commercial facilities of one owner where those facilities are used as part of its production process other than to distinguish them and to say that the criteria would not be satisfied in relation to commercial facilities of that kind. That is a pointer to the purpose of the exclusions and the definition of “service”.

The second point concerning Hilmer is that there is some discussion of vertical integration. When Hilmer refers to vertical integration, he is referring to services being provided in distinct markets for distinct types of product, electricity generation versus electricity transmission and so forth. The references in Hilmer to vertical integration are not addressing an integrated production process and its extent, which has only one objective, which is the manufacture of one kind of product, iron ore at a raw level at the mine and with further processing and blending at the port.

The third proposition is this. An integrated production facility is likely to consist of a number of facilities connected together with the objective of producing one particular commodity. Investment decisions will have been made about the totality and perhaps about particular elements within that integrated production process and they may have been upgraded or extended from time to time by distinct investment decisions. If incentives for investment are to be preserved – and that is the objective of paragraph (f) – that objective would have been defeated by allowing parts of a production process consisting of integrated facilities to be accessed, provided the access seeker did not seek access to the totality.

So the Full Court’s conclusion concerning the meaning of paragraph (f), that is, it is only concerned with access to the totality of “a production process” sits unhappily with the objective of protecting investment decisions and maintaining incentives for investment.

The final matter I will mention is in reference to some questions from Justice Kirby. Your Honour referred to the scale of these facilities in Western Australia. In our submission, it is relevant if one takes a macro view of the situation to note that the facilities discussed in the Hamersley Case, the facilities of BHP discussed in this case and Fortescue’s own facilities were all established as integrated mine, rail, port facilities pursuant to the provisions of State agreements. The Hamersley State agreements are referred to in the Hamersley’s Case. The Court has the ones in the BHP Case, Fortescue’s integrated facilities were established pursuant to the Railway and Port (The Pilbara Infrastructure Pty Ltd) Agreement Act (WA).

GUMMOW J: What year?

MR YOUNG: I do not have that in my reference here, I am sorry, your Honour.

GUMMOW J: Mr Gageler will tell us.

MR YOUNG: Yes. The point is simply that each of those projects is a dedicated project, one operator from mine to port through a contiguous piece of land provided under the State agreement. It is conceived of under each State agreement as an integrated production process. The scale of the
activities in each case, in our submission, should not have the consequence that they are treated any differently when one comes to the application of paragraph (f). If the Court pleases, those are our submissions.

GUMMOW J: Thank you, Mr Young. Yes, Mr Gageler.

MR GAGELER: Your Honours, our legislation was 2006. I will get copies provided to your Honours.

GUMMOW J: We had better be supplied with that tomorrow. If we have not been supplied with it we had better be supplied with it.

MR GAGELER: Yes. We are about to do that, your Honour. I want to say something about the primary facts into which neither BHP nor Rio want to descend too deeply. I want to say something about the scheme of Part IIIA, half of which they ignore, and I want to say something at a fairly high level about each of the four arguments that we set out in some detail in our written submissions. Before I do any of those things, and at the risk of perhaps seeming glib, can I go straight to the point that Mr Young sought to address in his first 15 minutes and that is the logical flaw which lies at the heart of BHP’s and Rio’s case and it is a logical flaw which is reflected also in the Hamersley judgment and particularly in the last sentence of paragraph [39].

GUMMOW J: This is your syllogism point?

MR GAGELER: This is the syllogism point. Your Honours, it is the problem that is being pointed out - - -

GUMMOW J: It is paragraph 3 of your submissions.

MR GAGELER: Essentially. But, your Honour, it is that problem that Justice Middleton is seeking to point out at page 440 of the appeal book. It is that problem that Justice Greenwood is trying to point out in slightly different language at pages 535 and 536 of the appeal book and it is a problem that is really highlighted by the questions, particularly from your Honour Justice Crennan and then from your Honour Justice Hayne this morning.

What BHP and Rio are saying when you reduce it to its essence goes pretty much like this. They say when we use our railway lines to run our trains to carry our ore we are using our railway lines in our production process. Well, let that be assumed. We contest that but let that be assumed.

What they then seek to say is that, “When anyone else uses our railway lines to run their trains, to carry their ore or someone else’s ore, or indeed anything else, they must be using our production process”. That simply does not follow. A railway line is a thing, not a process. To use a thing is not to use a process simply because someone else uses that thing in a process. To use a railway line is not to use a production process simply because someone else who uses that railway line happens to be using it in a production process. You put the same thing the other way more positively when you say that what Fortescue is seeking from the declaration of the service, which your Honours see defined in the appeal book, volume 1, at page 13, what it is seeking for itself and for others is limited to use of the railway lines and those systems that allow the railway lines to be used.

Fortescue does not seek for itself or for anyone else use of any part of any process, production or otherwise, in which BHPBIO or anyone else might be engaged when BHPBIO on behalf of the various joint ventures uses the railway lines. That really, your Honours, is to meet the case that is sought to be put against us. As I said, although the answer can be teased out in different ways and we have sought to do that really in the second, third and fourth ways in which we would put our argument, and I will come to those in due course - - -

GUMMOW J: The service in question, you say, is the service being the use of a facility being the railway line. Is that how it works?

MR GAGELER: Exactly, yes. I will come to that a little bit more in a moment. Can I move to the primary facts. Your Honours have not heard very much about the primary facts. Your Honours have heard a bit about a high level characterisation that the trial judge gave to them in the context of talking about the Hamersley construction, which he rejected, but the primary facts at their most basic level emerge from a few documents that your Honours have in volume 1 of the appeal book. They emerge quite starkly when one looks at the map at page 391. That is a map in portrait form. I will come to that in just a moment. Can I point out that the document at page 387 is then an enlarged version of the top third of that map.

HAYNE J: Sorry, Mr Gageler, you are dropping your voice.

MR GAGELER: Yes, your Honour.

HAYNE J: It is my turn to complain, not Justice Kirby’s turn.

KIRBY J: Actually it is a better angle at this angle. I am getting quite used to this chair.

MR GAGELER: I am adjusting the microphones and I am projecting my voice. I am about to take you to the map at page 391, but I am just pointing out that the map at page 387 shows you the top third of that map in an enlarged form. The map at page 389 shows you the bottom third in an enlarged form. It is very useful to look at those maps together with the stylised representation of the processes involved that one sees at page 395. It shows you in a fairly systematic way who is doing what, where and what things are being produced that then get taken by rail. Also, significantly, if your Honours look back at page 210 – this, I think, will be in part an answer to one of your Honour Justice Gummow’s questions – what you see at page 210 is the beginning of an exhibit to an affidavit of Mr Hart, who is identified at page 181 of the appeal book as a vice-president of BHPBIO.

What it shows is who is the lessee of each relevant mine, whether or not there is a sale of ore at the mine before it is railed, who then carries the ore and what other transfer of title might occur. I will try to incorporate the information in those documents in what I am about to say. If your Honours look then back at the map at page 391 what you see is Port Hedland. In the top left-hand corner you see the Goldsworthy line running east-west to Port Hedland and terminating at a point to the western side of the harbour at Port Hedland that is known as Finucane Island.

You then see on the same map the Mt Newman line running north-south. The whole line is about 420 kilometres and it crosses the Goldsworthy line and terminates at Nelson Point at the eastern side of the harbour at Port Hedland. So if you look at Port Hedland and you look at the landward side of Port Hedland, you can see that it is completely encircled by these two crossing railway lines.

Now, Fortescue as part of a joint venture has mining tenements at Mindy Mindy. Now, Mindy Mindy on this map, if you look down at the bottom right-hand corner you will see Newman, if you go up along the railway line a bit, about 2 inches, you will see Mindy Mindy in to the left. Now, where these mining tenements are, as his Honour found, are about 17 kilometres south-west of the Newman line, they are about 295 kilometres south-east of Port Hedland and, just to put that in perspective, that is almost exactly the same distance as between Sydney and Canberra.

Now, for Fortescue or one of its subsidiaries to run its own trains to transport ore from a proposed mine at Mindy Mindy to a port facility at or near Port Hedland it has really got two options. One is to get access to the Mount Newman line and possibly to a bit of the Goldsworthy line that intersects with the Mount Newman line just to the south of Port Hedland which is exactly what it seeks in its application to the National Competition Council at page 13, or it constructs its own railway line, it running essentially parallel with the Mount Newman line if it is practicable and if it is economic to do so. Factors, of course, which would need to be explored amongst other things in accordance with the criteria set out in section 44H but they are essentially the two options.

KIRBY J: I suppose there is a third possibility and that is that with the advances in technology that have occurred since the railway line was created that is there, it finds some new different, straighter method of delivering the product to Port Hedland. That is a sort of variation on the theme of a parallel railway line.

MR GAGELER: One can imagine trucking it or flying it, your Honour, but neither of those would seem immediately viable options, but theoretically, yes.

If your Honours then look at the Goldsworthy line, the evidence is that it is constructed on land leased from the State by the Goldsworthy joint venture and your Honours have seen it is pursuant to a State agreement at a peppercorn rent. It is operated by BHPBIO in its capacity as manager of the Goldsworthy joint venture and, according to his Honour’s findings, its continuing use by BHPBIO as manager of the Goldsworthy joint venture will be to run trains to haul what is called run-of-mine ore that is owned by the Goldsworthy joint venture from the Goldsworthy mining area that consists of mines at Yarrie and Nimingarra to the east to the point of intersection of the Goldsworthy line and the Mount Newman line, and then to turn right and to take that ore up to the point known as Nelson Point on the eastern side of the harbour where it will get screened and crushed and blended and become part of Newman high-grade lump and Newman high-grade fines.

Now, all of that is irrelevant to the present application because the service for which access is sought does not involve that part of the Goldsworthy line or that part of the Mount Newman line. If one then looks at the Mount Newman line - - -

KIRBY J: What is the line that is on 391 to the extreme left of the map going through Tom Price?

MR GAGELER: I think that is one of Rio’s lines. Yes. It is the line in the Hamersley Case, I am told. If your Honours then look at the line running north-south - - -

KIRBY J: I suppose that is a third possibility that you could link in with that?

MR GAGELER: Yes that is a third possibility, yes, but not to Port Hedland as pointed out; it would be to another port. So, your Honours, the Mount Newman - - -

KIRBY J: Just trying to think creatively.

MR GAGELER: Yes. Well, we are just exploring one option at the moment, your Honour. The Mount Newman line is then constructed on land again leased from the State, this time by the Mount Newman joint venture, a different entity or different group of entities, again though operated by BHPBIO, but here in its capacity as manager of the Mount Newman joint venture.

It is really quite important to recognise that the way in which this line is used by BHPBIO in its capacity as manager of the Mount Newman joint venture is really quite complex. It is to run trains from a variety of locations to transport a variety of products, most of them requiring further processing, but not all of them requiring further processing.

In some cases the ore is being transported for the Mount Newman joint venture, it being the ore that is then owned by the Mount Newman joint venture. But in other cases the transportation is for the Mount Newman joint venture, but that joint venture providing a service of transportation of ore for other joint ventures and I just need to point this out. It is necessary to point that out by reference to really the three main locations from which the ore is transported. The three main mining areas are Newman, Yandi and Area C. Newman is at the bottom, Yandi is a bit further up and Area C is a little higher up than that.

At Newman, as his Honour found, there exist five mines, four of them are owned by the Mount Newman joint venture. One of them, known as Jimblebar, is owned by what is called the Wheelarra joint venture, which includes significant Chinese interests. Now, at Jimblebar, run-of-mine ore is sold at the mine by the Wheelarra joint venture to the Mount Newman joint venture. That run-of-mine ore, mined from its own four mines or purchased from the Wheelarra joint venture, is then transported by the Mount Newman joint venture, BHPBIO, acting as its manager, straight up the line to Nelson Point where it gets crushed, screened and blended into Newman high-grade lump and Newman high-grade fines.

If you move then up to the Yandi mining area, a little further up and clearer on the map that blows up the bottom third of this map, the Yandi mining area consists of four mines identified by his Honour at paragraphs 60 and 61 of the judgment, none of them owned by the Mount Newman joint venture. Three of the mines are owned by the Yandi joint venture, which comprises the same participants in the same shares as the Goldsworthy joint venture, and one of those mines, known as Western 4 Pit, is owned by what is described as the JW4 joint venture, which includes significant Japanese interests.

Now, ore that is owned by the JW4 joint venture is sold at the mine to the Yandi joint venture and all of the ore that is then owned by the Yandi joint venture, some of which it has dug up itself, some of which it has purchased from JW4, then gets transported under a services agreement between the Mount Newman joint venture and the Yandi joint venture – that is, the Mount Newman joint venture is carrying ore across its own railway line for the Yandi joint venture under a services agreement. You see that mentioned at page 211 in the table to which I have referred. The actual agreement did not make its way into evidence.

It goes up the Mount Newman railway line and either goes wholly along the Mount Newman line to Nelson Point, that is straight up, or it gets to the intersection with the Goldsworthy line, it turns left and then it gets carried along the Goldsworthy line for the last 17 kilometres to Finucane Island. Now, mostly it gets further processed at the port, that is Finucane Island, to produce the finished product, Yandi fines or Yandi lump. But a significant percentage of what goes up the line in fact consists of finished product. That is 20 per cent of the Yandi fines undergo no further processing according to his Honour’s findings.

Then if you go further up the mining area – and I am nearly finished, your Honours – it consists of one mine. That mine is owned by the Posmac joint venture. Ore owned by the Posmac joint venture gets dug up, sold by the Posmac joint venture to the Goldsworthy joint venture. Then the Goldsworthy joint venture gets that all carried for it by the Mount Newman joint venture basically in the same way, up the Mount Newman line, either straight up to Nelson Point or turning left and 25 per cent of the MAC fines, which is the final product, undergo no further processing at the port. So, your Honours, I am sorry to go through that in some detail.

GUMMOW J: Is the idea of this to disparage your opponent’s reliance on the notion of production process?

MR GAGELER: Yes. If you just look at the Mount Newman line, what you do not see is BHPBIO as manager of the Mount Newman joint venture using the Mount Newman joint venture’s line exclusively to transport ore for that joint venture as part of a single integrated production process. What you see is BHPBIO, as manager of the Mount Newman joint venture, using the Mount Newman line to transport ore for the Mount Newman joint venture only in the case of ore from the Mount Newman area. In the case of ore from the other two areas along that line, the ore is actually being transported for the Yandi joint venture and the Goldsworthy joint venture who do not own the line, who do not lease the line, under a transport agreement with the Mount Newman joint venture.

You also see that the situation is really quite complex. Not all of the ore then gets further processed when it gets to the port. Twenty per cent of the Yandi fines and 25 per cent of the MAC fines do not undergo any further processing, and a significant amount of the ore by the time it gets onto the trains has already been the subject of purchase and sale agreements. All of that feeds in different ways into arguments to which I will come.

HEYDON J: It would have been helpful if this had been in your written submissions together with references to the evidence that support your proposition so that your opponents might have been able to feel the power of these points in advance.

MR GAGELER: Yes. I am happy enough to produce a schedule.

HAYNE J: You have taken them by surprise, continue the surprise, is what you are about to tell us, Mr Gageler?

MR GAGELER: No, not at all, your Honour. No, I have not said anything that is factually controversial. What I have said emerges precisely, and I did not want to pepper it with references but what I have said emerges precisely from his Honour’s findings of primary fact and from those pages to which I have referred.

KIEFEL J: Were these points taken up in the Full Court? Justice Greenwood went over some of the findings and contentions but seemed to think that arguments about whether or not the process was integrated or not had been met by his Honour’s conclusion.

MR GAGELER: What his Honour said, and reference has already been made to this is at paragraph 141, dealing with the integrated production process argument, and it has already been pointed out that what his Honour there said was based on an assumption that Hamersley was right, an assumption that he had already rejected, but what he says at the end of paragraph 141 is even if he were to apply Hamersley there would be more than one production process in the present case. That is to say, his Honour did not find a single integrated production process, and all I have sought to do is to point out to your Honours just how complicated the situation was. Your Honours, I am happy enough, if it would assist, to produce a schedule that gives the precise references - - -

GUMMOW J: Yes, that would be helpful. Hand that up in the morning.

MR GAGELER: Yes. I will provide it to our learned friends before then.

GUMMOW J: Are we in notice of contention area?

MR GAGELER: Yes. I wanted to do the facts compendiously but an aspect of what I pointed out certainly goes to the notice of contention, yes, that is the existence of sales of ore before shipment. Your Honours, can I leave the facts, then, for a moment and deal with the statutory scheme.

HAYNE J: Just on your notice of contention, to which paragraph of the present notice of contention to the matters that you have just been advancing go?

MR GAGELER: Paragraphs 2 and 3, page 571, particularly paragraph 2.

HAYNE J: That is less than informative, Mr Gageler?

MR GAGELER: I beg your pardon, your Honour?

HAYNE J: The notice of contention is, in this respect, less than informative.

MR GAGELER: It is fleshed out in the fourth argument we make in our written submissions insofar as we rely upon the existence of transactions at the mine to demonstrate that a marketable commodity came into existence before transportation.

KIEFEL J: Mr Gageler, to revert to the Full Court judgment, is this the point that Justice Greenwood dealt with at paragraphs 191 to 192 where his Honour concluded at about page 545, appeal book line 32 about the trial judge’s finding? Is that the point that his Honour was dealing with there, that there was no production process? Perhaps starting from about line 25?

MR GAGELER: Yes, your Honour, yes.

KIEFEL J: His Honour finds to the contrary of what you are putting forward.

MR GAGELER: Your Honour, it is all matter of characterisation. There are the primary facts to which I have sought to have made reference and then there is what you make of those primary facts. Now, at one level one can describe what BHPBIO does as an integrated production process. Yes, it co-ordinates its various activities for the various joint venture owners in an integrated way, one can fully accept that, but what it is doing when it takes ore along, say, the Mount Newman line, say, from Yandi is not carrying the ore of the Mount Newman joint venture which owns that line. It is acting for the Mount Newman joint venture which has a services agreement with the Yandi joint venture to carry the Yandi joint venture’s ore to the port. It is that level of complexity that I was seeking to point out.

KIEFEL J: In terms of your argument, does this serve any wider purpose than to underscore the fact that the railway line is used as a railway line?

MR GAGELER: That point in the end does not, no, that is, a railway line could be used for a variety of purposes.

KIEFEL J: Are they necessary to the process of construction of the Act?

MR GAGELER: Not to the process of construction, your Honour, but it does really to some extent undermine the appellant’s argument when it is recognised that the appellant, as the manager of the Mount Newman joint venture, is already involved in a transportation service which the Mount Newman joint venture provides to the Yandi joint venture and the Goldsworthy joint venture. That is about as far as I want to take that aspect of the facts. Your Honours, there are findings that his Honour makes at paragraph 76 at page 428, just above the heading “Generally”, there are payments that go backwards and forwards between these joint ventures in respect of the use of the facilities of each other.

GUMMOW J: Is there any preliminary to paragraphs 74 and 75?

MR GAGELER: Yes, the two paragraphs before in an entirely accurate way describe the railing of the products as I have sought to describe them. Everything I have said is there.

GUMMOW J: We have spent half an hour when we could have spent two minutes reading paragraphs 75 to 77.

MR GAGELER: I am sorry, your Honour. I will move on. Can I move on to the statutory scheme. Your Honours, the appellant’s arguments, in our submission, read into one paragraph of the definition of “service”. A generalised legislative policy of protecting the interests of investors in and users of privately funded infrastructure being a policy that is properly seen as one that is recognised and accommodated elsewhere in the statutory scheme. First, in the fairly strict criteria for recommending and making a declaration that one sees in section 44G(2) and then in section 44H(4), especially in paragraph (c) of each of those subsections, but, secondly, in the limitations on the making of an arbitral determination that can occur under Division 3 once a declaration is made and it is important to recognise and we have sought to emphasise in our written submissions that all that a declaration under Division 2 does is open the door for an arbitration to occur under section 44V within Division 3 upon an application being made under section 44S.

There are then significant limitations on the nature of an arbitral determination that can be made that one finds in section 44W(1), particularly paragraphs (a) and (b), that subsection to be read with subsection (5) and then further in section 44X. It is in those provisions that one sees the safeguards that ensure that a service provider or an existing user is not prejudiced by a declaration having been made. It is, in our submission, quite circular and dangerous in construing one paragraph of one part of a definition in one section of the Act to seek to attribute a legislative purpose to that paragraph and then seek to construe it in the light of that legislative purpose.

The proper and orthodox approach, in our submission, is to seek to discern the legislative purpose of the legislative scheme as a whole and then to give the various parts of that legislative scheme a meaning that best fits with the broader legislative purpose. Here one can see a legislative purpose in Part IIIA which is to address the essential facilities problem that was identified in the Hilmer Report at pages 240 to 241 and identified in the Hilmer Report at those pages to be at its most acute in a case of vertical integration, that is to say when the owner of a transport facility is also engaged in an upstream or downstream market activity.

GUMMOW J: Can we just go back to paragraph 76, at the moment, on page 428 when we are talking about upstream, downstream activities. The first sentence in paragraph 76 on 428 says that the three joint ventures “make payments to each other in respect of the use of the facilities”. I think you said to us that there are also sales of product?

MR GAGELER: Yes.

HAYNE J: Where is the finding of fact?

MR GAGELER: The finding of fact as to the sales of product by his Honour is at paragraphs 142 and 143. He does it in a very rolled up way.

GUMMOW J: “The facts establish that iron ore is sold between different joint ventures at the various mine sites”.

MR GAGELER: Yes, but the detail of that, your Honours, is the detail that emerges in that exhibit to the BHPBIO executive’s affidavit that is reproduced at pages 210 through to 212 of volume 1, that is, you will see exactly who is selling what to whom at what point and then after that who is carrying the ore for whom.

GUMMOW J: This is Mr Hart’s affidavit, is it?

MR GAGELER: That is right.

GUMMOW J: Thank you. Yes, I am sorry I interrupted you.

MR GAGELER: No, that is fine, your Honour. Your Honours, that is very clearly the legislative purpose of Part IIIA and the problem with the arguments of BHP and Rio is that they really undermine that legislative purpose because, if accepted, they would permit the owner of the facility use of which would otherwise meet the criteria in sections 44A and 44G, to avoid the operation of Part IIIA entirely by its unilateral choice, to integrate the use of that facility into what would otherwise be a separate upstream or downstream process. It is that undermining of the core purpose of the provisions that is the fundamental legal difficulty with the argument, quite apart from the difficulty of reconciling it with the precise language of the definition.

Your Honours, so far as a specific purpose can be attributed to paragraph (f) of the definition - and, as I have sought to say, we see it really as quite dangerous to attempt to attribute a legislative purpose to one paragraph – the purpose, as we would see it, is that in translating the recommendation in the Hilmer Report, which was a recommendation for access to a facility into a regime for access to a service provided by a means of a facility in a context where, as Mr Archibald frankly acknowledged, there is no reason in terms of language or policy why facility should be limited to physical assets. It is certainly not so limited in the United States in connection with the essential facilities doctrine that has there emerged. In that context, paragraph (f) can be seen to have been inserted to ensure that the notion of allowing access to a service provided by means of a facility should not extend to allowing a third party to be able to appropriate for itself the actual process of producing something, that is - - -

GUMMOW J: What work do you give to (d), (e) and (f) in the definition of “service”?

MR GAGELER: Paragraph (e) is certainly to make sure that intellectual property simply lies outside the scope of this part of the Trade Practices Act, (d) is to make sure that although a service can be seen at one level to encompass the service of supplying goods, the actual supply of goods falls outside that notion for present purposes.

GUMMOW J: I wonder whether (f) is anything more than something that covers the situation of an unpatented production, for instance?

MR GAGELER: Yes, well, you get a little bit of a hint from the Hilmer Report in the one passage that makes reference to production process. I think your Honours have already been taken to it. It is at page 251 of the Hilmer Report. The passage is in the middle of the page, just the one sentence, beginning, “These criteria may be satisfied”.

There is a footnote to the United States case of Berkey Photo which is exactly the scenario that your Honour is referring to. That is where Berkey Photo was, through the essential facilities doctrine albeit unsuccessfully in the event, seeking access to what was essentially an unpatented production process and it is to address that sort of situation that paragraph (f) was inserted.

GUMMOW J: The phrase does appear there “the fruit of risk-taking investment” which your opponent has latched onto I think, on footnote 42.

MR GAGELER: Yes, of course, and one cannot deny that there is an element in that in the existence of paragraph (f), but they seek to elevate that notion and build into paragraph (f) an entire legislative policy that is more properly seen as being worked out in those other sections of Part IIIA in a more general, in some cases, more appropriate, certainly more specific form, sections 44W, 44X and the other sections that I have referred to.

KIRBY J: What is the significance of the Helix Milling Company Case which is provided to us with the Kodak Case?

MR GAGELER: I am not sure we gave you that, your Honour.

KIRBY J: You did not provide that?

MR GAGELER: I do not think so. Sorry, your Honour, I cannot answer that question. Your Honours, can I come to then our four specific construction arguments which are set out fairly comprehensively in our written submissions and I do not want to labour them. The first argument is one that is based upon the structure of the definition and it is an argument that simply says that paragraphs (d), (e) and (f), like paragraphs (a), (b) and (c), are directed to the chapeau. Paragraphs (d), (e) and (f) qualify the words of the chapeau. They are not directed to qualifying paragraphs (a), (b) and (c).

On that construction a service provided by means of a facility that falls within paragraph (a) is automatically included. The word “includes” there meaning simply definitely and certainly covers, it is not then capable of being excluded by paragraph (f). In our submission, that construction best gives effect to the intention expressed in the Hilmer Report as it flowed through into the competition principles agreement, clause 6(1), the text of which we have relevantly set out in paragraph 16 of our written submissions.

GUMMOW J: Now, suppose the railway line was constructed using a method which produced a new and patented product being a particular form of railway sleeper, how would your construction then work? You cannot run a vehicle over the railway line without using, in a sense, the patented product?

MR GAGELER: The product is used to produce the sleeper or the sleeper is patented - - -

GUMMOW J: No, it is a process and product patent.

MR GAGELER: Yes.

GUMMOW J: You are using it, are you not?

MR GAGELER: Yes, you are using the physical product; you are not using the intellectual property to run a train across a patented sleeper.

GUMMOW J: Intellectual property is just a series of monopolies.

MR GAGELER: Yes. That is the answer.

GUMMOW J: No, it is not, I do not think.

MR GAGELER: Similarly with a communications process, your Honour. Your Honour could ask me the same question with that, and certainly you would be using it as - - -

GUMMOW J: Your answer has to be it is an integral but subsidiary part of the service, I would have thought.

MR GAGELER: That was a second answer, but the first I maintain, in which case there is no conflict between paragraph - - -

GUMMOW J: That would be an example of why they had to put those cautionary words in.

MR GAGELER: Possibly, yes.

GUMMOW J: Because all sorts of business activities can involve use of patented products coincidentally.

MR GAGELER: Yes, indeed. Yes, I accept that. Your Honours, the second and third arguments derive pretty directly from, again, the structure, but here the language in particular, of the definition. For the exclusion to apply, the putative service provided by means of the putative facility – they are the introductory words of the definition – must itself be wholly or predominantly the use of a production process. That is the structure and the language of the definition.

One asks here, “What is the putative facility?” It is the railway line. One asks, “What is the service?” It is simply use of the railway line to run a train. One compares that with what is said to be the production process. Now, the production process, according to what is set out in the appeal book at pages 424 and 425, paragraph 65, reflecting the pleading in volume 1 of the appeal book, 86 and 87 - - -

HEYDON J: You accept that contention then, do you?

MR GAGELER: No, your Honour. This was the contended for process - involves each of those elements. The only element of that production process that might be said to be a service provided by means of the railway line, that is the facility, is that denoted by letter (i):

railing different types, grades and quantity of ore to the port –

That is a rolled-up description of the transportation service that is provided by BHPBIO.

Your Honours, the second of our arguments really comes down to this. We do not seek by the declaration access to any transportation service provided by BHPBIO. We seek use of the railway lines to run trains so as to offer another transportation service and a distinction between an above rail service and a below rail service, which is a distinction we here invoke, is a distinction that is really well pointed out by the Full Court of the Federal Court in the Rail Access Corporation Case [1998] FCA 126; 87 FCR 517.

GUMMOW J: While we are scratching for the Rail Access Case, I have a recollection of some litigation about Sydney Airport involving Part IIIA, is that - - -

MR GAGELER: Yes.

GUMMOW J: Do not take us to it now, but is there anything useful to be got from that?

MR GAGELER: Yes. It is Sydney Airport Corporation Limited v Australian Competition Tribunal.

GUMMOW J: I think it came to us and we refused special leave.

MR GAGELER: That is right. It is [2006] FCAFC 146; (2006) 155 FCR 124. The only useful passage, I think, is at paragraph 36 of the joint judgment. Rail Access Corporation [1998] FCA 126; 87 FCR 517 - I will not read it, given the time, but at page 524 - - -

GUMMOW J: On the question of time, how much longer will you need?

MR GAGELER: I can be no more than five minutes.

GUMMOW J: All right.

MR GAGELER: At letter D at page 524 your Honours will see a discussion under the heading “Conclusions”. The totality of what is there said in the second and third paragraphs after that heading we point to and rely upon as an acknowledgement of the fundamental distinction between a transportation service that is provided by means of a rail facility and a service of access to the rail line itself. They are services that exist at different functional levels.

It is only through the transportation service or the combination of the transportation service and the rail service that BHPBIO gets to the point of conducting something that possibly looks like part of its production process, but we are not getting to the point of wanting any part of the transportation service.

GUMMOW J: We are back to your syllogism really. This is another aspect of your syllogism.

MR GAGELER: Yes, another aspect of the syllogism and this is one of our, I hope, positive responses to that syllogistic problem that we have pointed out. The second point, your Honours – this is really our third argument – that emerges from an understanding that the structure of the definition requires that the service provided by means of the facility be itself wholly or predominantly used for the production process is that here the transportation service provided by BHPBIO, as illustrated by the way in which the entire process is described at pages 424 to 425, is not itself the production process, that is, the only element that is set out at pages 424 to 425(i) that might be said to be a service provided by means of the relevant facility is not itself a production process but at its highest arguably only part of a production process. That is really the third argument.

GUMMOW J: Could you say that again, Mr Gageler?

MR GAGELER: Yes. If you look at pages 424 and 425, what you see is a description of what is said to be a production process in paragraph 65. It has each of the elements in paragraphs (a) through to (o). The only element that can be said to be or involve a service provided by means of the railway line is element (i), that is the railing of different types, grade and quantities of ore.

HEYDON J: You would say (a) to (f) is one production process and (k) to (n) would be another?

MR GAGELER: That is what I would say, but that is really coming to my fourth argument, but this argument is really saying, if you then look to the definition in section 44B:

service means a service provided by means of a facility –

The only service provided by means of a facility here being the rail service, arguably, but excluded from that is the use of a production process. The point is that it is not even alleged that that element which is the only thing that can amount to the service provided by the facility, that is the railway lines, that does not amount to use of a production process. At most it is part of the production process. Really, this is another way of explaining Justice Greenwood’s main point.

CRENNAN J: Transportation is part of the production process.

MR GAGELER: At its highest, yes. That is what Justice Greenwood was saying. It is what we are seeking to say in our third response.

HAYNE J: The core operation of (d), (e) and (f) is provided in the circumstance where either there are only a few who produce a particular product or there are a few who use a particular process and an access seeker cannot say, “I want you, one of the few. I want the service of you, one of the few, using your facilities to produce for me that product,” or “I want you, one of the few, to apply the process you apply to my raw material”.

MR GAGELER: Yes. It may also cover the Berkey Photo Case of, “I want to come into your production process and ferret around a bit”, which is a real scenario in the United States.

HAYNE J: How much wider than that is the area for debate, but the heart of the (d), (e), (f) is directed to that, (e) particularly recognising that if there are only a few who do it, it may well be because they have statutory monopolies.

MR GAGELER: Yes. Your Honours, can I then come to the very last argument – that is, what we have put as our fourth argument – that your Honour Justice Heydon has really pretty much articulated by reference to the description at pages 424 to 425. That is, if one applies the test of
commercial substance and common sense that Rio in its written submissions places a great deal of emphasis upon and if one says, as did Justice Kenny, seeking to apply that sort of test in Hammersley, that a production process is complete when a marketable commodity comes into existence, then on the facts here it really should be concluded that there is a production process at the mine which really goes up (a) through to (g). There is a production process at the port, which is really letters (k) through to (n) and the link between those two production processes is purely one of transportation.

One sees another perhaps more useful description of the process – useful and shorter description of the process – at page 422, paragraph 54. In our submission, it is subparagraph (a) that describes one thing that can be described as a production process – so does paragraph (c), paragraph (b), the link between the two is properly characterised as a link of transportation, not part of those two processes. The existence of a marketable commodity at the mine is demonstrated by the fact that sales of run-of-mine ore of lump and of fines actually occur at the mines in quite a number of cases. We have set those out in our written submissions.

GUMMOW J: When you say sales occur, you mean property passes?

MR GAGELER: Yes. Property passes from one joint venture to another joint venture.

GUMMOW J: That is how I have read the primary judge’s finding when he talks about the sale?

MR GAGELER: But at arms-length genuine commercial transactions.

GUMMOW J: Yes.

MR GAGELER: Your Honours, I can provide copies of the - - -

GUMMOW J: That can be handed up after we adjourn.

MR GAGELER: Yes, I will do that if the Court pleases. That leaves producing, if it would assist your Honours, a short document that gives the precise factual references - - -

GUMMOW J: That can be produced overnight, given to your opponents and to the Commission and handed up tomorrow morning. Yes, Mr Scerri. Now, I am not trying to rush you at all, but how long do you think you will need? We have to - - -

MR SCERRI: Five to 10 minutes, your Honours.

GUMMOW J: We will be adjourning at 4.15 and we will sit again at 10 and we will take the next appeal as not before 10.30.

MR SCERRI: Thank you, your Honour. Your Honours, we say that the correct way to approach this is to look first at the use – that is the service – which the access seeker seeks. It is the access seeker’s application which defines the service.

GUMMOW J: Before you launch yourself, are there any points of construction on which you are at issue with Mr Gageler?

MR SCERRI: We do not agree with his first point, your Honour.

GUMMOW J: Now is that part of your function?

MR SCERRI: Yes, your Honour. We say it is a part of the function to assist the Court with submissions, which is what we have done before Justice Middleton and before the Full Court. In relation to use we say it is very important to focus on the particular use to which access is sought. In the present case - - -

GUMMOW J: I should have asked you also, are there any submissions of Mr Archibald with which you agree?

MR SCERRI: Yes.

GUMMOW J: And what are they? We need to know where you are, you see.

MR SCERRI: We agree, your Honour, that you approach it by looking at what the service is to which access is sought and that you then ask, does that involve the use of a production process belonging to BHP. Mr Archibald said that. We disagree with him in how that is applied. Can I just go back to the use. It is very important to focus on the particular use. The particular use that was sought here was not a general use to run trains along these railway lines. It was a use to run trains from a particular point to a particular point.

GUMMOW J: I should hope so. It would be a pretty badly drawn application if it did not - - -

MR SCERRI: Your Honour, Rio made an application to the Full Court to stop the tribunal proceedings on the basis that Fortescue had applied for an all-points service but that the Council, and therefore the Minister, had declared a point-to-point service and the distinction between an all-points service and a point-to-point service demonstrates how important it is to focus on what service is being sought.

We disagree with Mr Young’s submission that there is only one service and he also said that it is defined by what the access provided us. There is not only one service. There are many services provided by a different facility and we agree, with respect, with Justice Hayne’s formulation that what we are talking about here is not access to a facility.

GUMMOW J: I do not think it is for you to agree with it. You might accept it and adopt it.

MR SCERRI: We accept it and adopt it, your Honour, gratefully. Your Honour, Mr Archibald talked about a reference to access to a bakery in Geelong and that point demonstrates that we say the fundamental flaw in the appellant’s submissions is they seek to do too much by the exception. They seek to say that if the production process exception does not apply, then there will be access. In fact, there is a four-stage process. There is an application for declaration, there is a recommendation by the Council, there is a decision by the Minister, there is then a review by the competition tribunal which is where these applications are at present and after that, if it goes through all those hurdles, there is an arbitration about access conditions. So it is a very long way from deciding whether the exception applies to granting access. The appellant’s case is as if the sky will fall in if this paragraph does not exclude access to their facilities. That is simply not the way the scheme works.

KIRBY J: I am sorry to extend you in this, I have been looking through your written submissions again. You are the body which is established by the Parliament with general responsibility for the running and implementation of this legislation in this respect.

MR SCERRI: To make recommendations, your Honour, yes.

KIRBY J: I have no problem with your making your submissions and on the contrary I think your submissions ought to be particularly helpful to the Court because you have responsibility for the statute and you are not, as it were, just trying to win a case. So I want to understand very clearly what it is about the appellant’s submissions that you agree with or disagree with, what it is about Mr Gageler’s submissions that you agree with or disagree with and, similarly, Mr Young’s.

MR SCERRI: In relation to Mr Gageler, your Honour - - -

KIRBY J: I am not entirely clear at the moment as to where you stand in respect of this, nor was I on the return of the special leave hearing, as you may remember.

MR SCERRI: I do remember that very well, your Honour. Your Honour, in relation to Fortescue’s submissions, we disagree with their argument that a service provided by means of a facility is always within the scheme. That paragraph (f), in particular, does not qualify that. We agree with BHP and Rio that paragraphs (d), (e) and (f) are exceptions that are capable of applying to (a), (b) and (c).

We disagree with BHP because we say their argument and Rio’s argument amounts to saying that because they use this piece of railway to produce something, if someone else seeks access to it, that use, that sought-after use, will necessarily involve the use of a production process. We say the indefinite article in that paragraph is really the same as any. It is meaning that you can apply for a use of a facility but you may not apply for the use of a production process.

KIRBY J: Just explain to me how that leads you, as it did at the special leave, to oppose the grant of special leave and to favour the position of Fortescue with whom you line up at that end of the table?

MR SCERRI: Yes, your Honour. It is very straightforward. The use that Fortescue seeks is the use of the railway line from a particular point to a particular point. We say that use of the railway line does not involve any production process of BHP. It involves Fortescue running trains along the railway line. There is no production process involved. It is related to the issue Justice Kiefel raised about what happens on the railway line and what happens on the railway line is nothing except transport. Can I have your Honours just a reference. If your Honours look at the transcript at page 344 - - -

KIRBY J: But with this product transport is at least arguably integral because without the transport it remains in the middle of this vast continent and is not being used. It cannot be used. It cannot be sold.

MR SCERRI: Therefore it is an economic benefit, therefore it is valuable. We accept her Honour Justice Kiefel’s comment that it may be more valuable up at Port Hedland than it is down at Newman. It may become a commodity. That does not mean what Fortescue is seeking access to, which is the guiding light, is the access to a production process and the distinction between a production process and the handling or transporting of things in paragraph (b) is an indicator that Parliament was not concerned with transport. The reference to – and we agree with Mr Archibald – railway issues, as an example, also indicates that Parliament was not contemplating
that access to railways would be precluded because someone uses a railway to produce something.

No one builds these railways except to produce something. The assumption is hundreds of millions of dollars have been spent, or billions of dollars have been spent, because there is some utility in it. To say because BHP gets productive use of the railway means it is exempt from Part IIIA we say would completely nullify the part. This must be the paradigm case, we say, where access would be intended. All the issues about chilling investment are red herrings. They are adequately covered by the following criteria, by the review, by the tribunal, by appeals to the Federal Court. All kinds of protections are there. It is not the work of this exception to protect Australia’s economy or investment in Australia’s economy.

I do not know whether I have answered your Honour’s question about where we agree or disagree. Just one final point; it illustrates the use point. Mr Archibald says well, there is a road and if you use part of the road you are using the road. That is true. If the road is within an industrial complex and it is being used as part of the productive process, the owner is using it as part of the productive process. But if I seek access of the road for sightseeing or tourism, you focus on that and say if I walk along the road or take my dog for a walk along the road, am I using a productive process? Clearly not. It is a bit like is it an elephant or is it not an elephant, as Justice Middleton said.

KIRBY J: But he also said in the same breath – no, I think it was Justice Middleton – that it is a dangerous thing to take that test.

MR SCERRI: He did. It was his Honour Justice Middleton. They are really all the points I wanted to add, your Honours, unless there are any other specific questions.

GUMMOW J: Thank you.

MR SCERRI: If the Court pleases.

GUMMOW J: We will adjourn until 10.00 am tomorrow.

AT 4.16 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 30 JULY 2008