Port of Newcastle Operations Pty Limited v Glencore Coal Assets Australia Pty Ltd & Ors [2021] HCATrans 142 (7 September 2021)

Last Updated: 10 September 2021

[2021] HCATrans 142

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S33 of 2021

B e t w e e n -

PORT OF NEWCASTLE OPERATIONS PTY LIMITED (ACN 165 332 990)

Appellant

and

GLENCORE COAL ASSETS AUSTRALIA PTY LTD (ABN 163 821 298)

First Respondent

AUSTRALIAN COMPETITION TRIBUNAL

Second Respondent

AUSTRALIAN COMPETITION & CONSUMER COMMISSION

Third Respondent

KIEFEL CJ
GAGELER J
GORDON J
STEWARD J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

BY VIDEO CONNECTION TO BRISBANE, SYDNEY AND MELBOURNE

ON TUESDAY, 7 SEPTEMBER 2021, AT 10.00 AM

Copyright in the High Court of Australia

____________________

KIEFEL CJ: The record will show that I am sitting in Brisbane, Justices Gageler and Gleeson in Sydney, and Justices Gordon and Steward in Melbourne. In accordance with the protocol for remote hearings, I shall announce the appearances for the parties.

MR C.A. MOORE, SC appears with MR D.J. ROCHE for the appellant. (instructed by Clayton Utz)

MR N.J. YOUNG, QC and MR N.P. DE YOUNG, QC, together with MR M.P. COSTELLO, appear for the first respondent. (instructed by Clifford Chance)

KIEFEL CJ: The second respondent has a submitting appearance.

MR S.B. LLOYD, SC, together with MS C.M. DERMODY, appears for the Australian Competition and Consumer Commission, the third respondent. (instructed by DLA Piper)

KIEFEL CJ: Mr Lloyd, the role of the ACCC in these proceedings may need to be clarified by you at a later point, but we can deal with that when we come to you.

MR LLOYD: Certainly, your Honour.

KIEFEL CJ: Yes, Mr Moore.

MR MOORE: May it please the Court. The first topic of the appeal, and the first three appeal grounds, concern a question of who has a right to negotiate and is entitled to engage the statutory arbitral process against the provider of a declared service and in respect of what. The service in question here, being in essence the shipping channels at the Port of Newcastle, was declared in 2016.

That declaration was revoked in 2019 and a more recent application to have the service redeclared has been unsuccessful, and we have provided the Court separately with last month’s decision of the Competition Tribunal in that regard, Application by New South Wales Mineral Council (No 3) [2021] A CompT 4, in which the Tribunal upheld the decision of the Minister not to redeclare the service – and I will come back to that decision if I might.
This appeal arises out of the only dispute which was notified to the ACCC in the period during which the service was declared. The present case is still on foot because the revocation of a declaration does not affect the arbitration of an access dispute that was notified before the revocation and that arises by virtue of the operation of section 44I(4) of the Competition and Consumer Act. I do not need to go to that section, but it is common ground that that is the effect of it.

The declared service in this case is set out in the judgment of the Full Court at paragraph 88 and I might go to that if I may. It is in the core appeal book at page 197, paragraph 88, and it is defined as:

the provision of the right to access and use the shipping channels (including berths next to the wharves as part of the channels) –

which highlights that the berths are part of the shipping channels, that berths are in effect simply a section of water, a location at which a ship can dock:

at the Port of Newcastle (Port) by virtue which vessels may enter the Port precinct and load and unload at relevant terminals located within the Port precinct and then depart the Port precinct.

But the service, in effect, includes the full shipping channels. The vessel can enter the Port, travel up the channel to the berth, load and unload and then depart. The service is the provision of access to the shipping channels. That involves, we submit, something that has a physical dimension, and shipping channels are accessed by vessels.

Can I turn to the relevant statutory provisions - your Honours should have a joint book of authorities which contains the whole of Part IIIA at the date of the re‑arbitration of the dispute by the Tribunal. Can I start with some definitions, which are found in sections 44B, and the relevant page is at page 18 of volume 1 of the joint book of authorities. The first definition I wanted to go to is the definition of “provider”, and section 44B says that:

provider, in relation to a service, means the entity that is the owner or operator of the facility that is used (or is to be used) to provide the service.

So we are dealing with the use of a facility. The definition of “service”, a little further down the page, is defined as being:

a service provided by means of a facility –

So the definition includes the term being defined, but in its ordinary meaning, a service means the provision of a facility to meet the needs or for the use of a person or thing, and it is:

a service provided by means of a facility and includes:

(a) the use of an infrastructure facility such as a road or railway line –

and, one might add, shipping channel, which is the oceangoing equivalent of a road. So, the present situation falls within the inclusive subparagraph (a). We are concerned here with the use of an infrastructure facility, being the shipping channels at the Port, and that concept, we say, is simple enough.

Another important definition is the definition of “third party”, which is on the next page and “third party” does not have its ordinary meaning, it is really the second party:

third party, in relation to a service, means a person who wants access to the service or wants a change to some aspect of the person’s existing access to the service.

I may from time to time refer to the third party as the “access seeker”, just to avoid confusion with “third party” in its usual meaning, but if I do so I am using it in that sense of the defined term “third party”. But the second limb of the definition sheds some light on the meaning of “access”. It must be meaningful to speak of someone’s existing access, and it must be meaningful to speak of a change to some aspect of that existing access.

GLEESON J: Mr Moore, in what sense is a shipping channel an infrastructure facility?

MR MOORE: Well, the channel has to be excavated in order for it to be a useful channel, so it involves significant infrastructure and work in order to provide the channel. It also has navigational buoys and the like to guide vessels, so that it is not just a natural piece of water at the Port of Newcastle and, indeed, when we come to the grounds 4 to 5, the value of the Port, upon which charges are set, involves to a very significant extent, the very significant costs of excavating the channels in order to provide, in effect, a passageway for vehicles. So it is like a road in the ocean.

STEWARD J: Just before you move on, Mr Moore, could I ask, the shipping channels are the subject of a licence to the Port, from memory.

MR MOORE: Yes, it is a 99‑year lease.

STEWARD J: No, no, I think it is a licence, not a lease, from memory. Was there anything in evidence about what the terms of the licence were - are?

MR MOORE: The licence was not in evidence.

STEWARD J: Did it give the licence‑holder a right to dredge?

MR MOORE: Yes.

STEWARD J: So that is common ground, is it?

MR MOORE: As I understand it.

STEWARD J: All right, thank you.

GAGELER J: Mr Moore, we have in the bundle of authorities, I think, rather than this part of the chronology, the Competition Tribunal decision from 2016 concerning the declaration of the service.

MR MOORE: Yes, your Honour.

GAGELER J: That refers to the existence of a lease rather than a licence of the channels. Are we able to take what is said in that decision under the heading “Background” as setting out uncontroversial facts?

MR MOORE: Your Honour, can I take that question on notice? I understand there is a lease of the Port and there may be a licence of the channels. So I might see if I can provide a reference that adequately summarises the circumstances.

GORDON J: When you do that, Mr Moore, I would be grateful if you could take into account paragraph 228 on core appeal book 235, which sets out that the lease includes a licence to operate the shipping channels. One of the difficulties I have – and I say it upfront – is that we do not actually know what the assets are here, do we? There is no list of them anywhere. We do not have a copy of the lease.

MR MOORE: We do not have a copy of the lease.

GORDON J: Or the licence.

MR MOORE: Or the licence. We do have some information about the nature of the assets in the course of the determination in relation to the cost of, in effect, reconstructing the Port. So one has lots of information about what are the various aspects or parts of the Port that are the subject of the lease to the Port of Newcastle Operations. There was no issue taken at any point to suggest that my client was not the person providing access to the services in a physical sense. That was not the debate. The debate was about whether access in a different sense was sufficient to attract the operation of the provisions.

Now, the term “access” is a term of central importance for the operation of Part IIIA and is used in many provisions of the part but is not the subject of any express definition. It was evidently assumed that its meaning was plain and that may have some significance in a context where it has been suggested that it means “acknowledge access”, and that is not its ordinary meaning and involves a construction, we submit, which is non‑obvious.

At the very end of the joint bundle of authorities in volume 5 or Part E, the very last page, there is an excerpt from the Shorter Oxford English Dictionary as to “access”, which provides in definition 2:

Coming into the presence of or into contact with . . . approach, entrance.

and in definition 3:

Admittance (to the presence or use of) . . . The action or process of obtaining stored documents, data, etc.

In its ordinary meaning, we submit it refers to a physical concept but may also refer to obtaining permission. If I have access to a particular premises then I may have physical access, I might have a key, for example, and I may have permission to enter.

The term has its conventional meaning in the present context. If I am accessing a service where the service is the provision of a right of access to an infrastructure facility, then I am obtaining physical use of the facility and perhaps permission to use the facility. That is appropriate in that the infrastructure used to provide the declared service will invariably be the subject of proprietary rights where compulsory access involves a significant impingement on those rights. Now, notification of an access dispute is dealt with in section ‑ ‑ ‑

GAGELER J: Mr Moore, it has been said in the case law, at least since Sydney Airport in the Full Court of the Federal Court, that access has its ordinary meaning and I understand your submissions to proceed on that basis. It is just a question of which nuance of the ordinary meaning is the appropriate one.

MR MOORE: Yes.

GAGELER J: A modern definition of “access” that you can find from just doing a standard computer search yields this meaning. It is a right or opportunity to use or benefit from something. If I ask you, do you have access to a computer or access to all sorts of things, I could be using it in that broad sense. What is wrong with that broad sense here? What is wrong with at its broadest saying access includes an opportunity to benefit from a service?

MR MOORE: If that broad sense is divorced from the ability to obtain, in some sense, a physical access to something, then we would submit that is too broad. One can have access, for example, to a computer network, but one has to have some mechanism by electronic means or otherwise to actually connect with that network. It is not in, even in that sense, speaking of someone who merely obtains a benefit, and especially not merely an economic benefit, or a commercial benefit, from somebody else who is physically accessing something.

So, I readily accept, your Honour, it is not limited to a classical physical access in the sense that you are talking about computer access, then we might be talking about electronic access, but there is still some notion of obtaining some connection to something or some ability to enter into something by some means, electronic or otherwise, but not just benefit divorced from that notion.

GAGELER J: Mr Moore, let me follow it up with this question. We know that Glencore sells FOB.

MR MOORE: Yes.

GAGELER J: But imagine the situation where Glencore sold CIF.

MR MOORE: Yes.

GAGELER J: Would Glencore be an access seeker, in your submission?

MR MOORE: If it sold CIF? Yes, because ‑ ‑ ‑

GAGELER J: Now, it is not operating the ship that uses the channel.

MR MOORE: No, but it is, in most cases, chartering the ship, or it has some relationship with the ship owner. I perhaps should have answered your Honour’s question with a little more caution. If it were selling CIF in a way that meant it had no commercial control over the ship in any way, the Full Court referred to “commercial disposition”, a ship being at the commercial disposition of someone, then it might not be accessing the service, but if, in effect – a corporation has to act through agents, contractors, and the like, if it is directing, and by contractual means, the ship accessing the channel is responsible in that commercial sense for the ship, then, yes, it would be accessing the service.

KIEFEL CJ: Mr Moore, while you are interrupted, is there an identifiable market to which the service is relevant?

MR MOORE: Well, this – and I was going to come to this, your Honour, if I might, in relation to one of our ‑ ‑ ‑

KIEFEL CJ: I am taking you out of sequence - that is fine, if you are coming to it.

MR MOORE: The answer is quite a number of markets, and one of the – and when one comes to the declaration decision, one sees that. Emphasis has been placed by the Full Court on the coal export market, but that was one of only five markets that were said to be relevant, and one of the points that we make is that if you are then dealing with a question of economic access, or economic interest, one would be looking at people who have economic connections in a whole variety of different markets, including the ones that were subject to the declaration decisions.

KIEFEL CJ: Do you say that Glencore is operating in a different market depending on whether it is selling FOB or CIF?

MR MOORE: It is certainly operating in the coal export market, but yes in the Full Court, for example, it was observed that if one is selling CIF then one may be operating in other markets as well, which one is not if one is simply selling FOB, where one is simply engaged in the commodities market, and that is paragraph 132 of the Full Court’s decision where that observation is made. I am sorry, I think your Honour Justice Gordon has a question.

GORDON J: Can I ask one question about this definition of “access” and your focus on physicality. If one looks at here in this context in this market, in order to get access one has to pay relevantly, for present purposes, the navigation service charge. The PMA Act imposes the obligation or identifies who it is who is to pay that charge and it is, as I understand it, payable by the owner of the vessel concerned. We know that the owner is given an extended definition by 48(4)(b). You do not need the physicality argument to succeed if, for example, Glencore had nominated itself as the owner of the vessel for the FOB contracts and was paying the charge because you would accept then they had access, would you not?

MR MOORE: We would accept that they had access if they had the necessary relationship to the channels - if they were using the channels, accessing the channels in the ordinary meaning of “access”, but we do have ‑ ‑ ‑

GORDON J: They are paying for use of them on my example.

MR MOORE: Yes, but there is an issue, for example, as to whether the full breadth of section 48(4)(b), which seems to be a payment recovery mechanism ‑ ‑ ‑

GORDON J: I am only focusing on payment recovery at the moment; I am not focusing on the broader contention put forward by Glencore. My question is much narrower than that.

MR MOORE: Yes, I understand that, your Honour, but even in that circumstance, if, for example, Glencore was making a representation or undertaking an obligation pursuant to section 48(4)(b), but was not in fact accessing, then there would be a question as to whether Glencore was an access seeker or a third party. The width of the Ports and Maritime Administration Act cannot drive the proper definition of who is an access seeker, or a third party, I should say, within the meaning of the Competition and Consumer Act.

GORDON J: But it certainly does, and it tells you who is both accessing and paying for access to the service. It is a matter of fact.

MR MOORE: It tells you who is liable, who may be liable to pay in a provision that provides a mechanism for recovery in a broad sense and the apparent purpose of that provision is to make sure that recovery is straightforward and is not impeded. We do say that the term “access” has its conventional meaning in the present context and that ‑ ‑ ‑

GAGELER J: I am sorry, Mr Moore. Could you be quite precise about what you mean by “conventional meaning”.

MR MOORE: Yes. The conventional meaning of “access” is to obtain physical access, including in the ‑ ‑ ‑

GAGELER J: Can you actually put it in words that do not use the defined expression, or the expression we are trying to define.

MR MOORE: Yes, I am sorry, your Honour, that is – it is a risk, I understand. It is obtaining physical entry to something, including in the electronic sense that your Honour put to me, and obtaining permission to enter something.

GAGELER J: Can we just test that, please, by looking at the definition of “service” and the definition of the “third party”.

MR MOORE: Yes.

GAGELER J: Now, I think you said that we can relevantly treat the service as, paraphrasing paragraph (a) of that definition, use of the channels, so that is the service, use of the channels. We go to the definition of “third party”. That is someone who wants access to the use of the channels.

MR MOORE: Yes, your Honour.

GAGELER J: And that is, what, physical entry to use? Is that what it is?

MR MOORE: Yes, your Honour, and when one is talking about – and there is some duplication in there, because one looks at the definition of the “service”, for example. It is defined as the provision of a right to access, and then if one reads that back into the definitions, there is a certain duplication involved. There are provisions of rights to access, and the like, but yes, we say it involves a fairly simple concept, when one is dealing with the provision of an infrastructure facility, of using that facility.

GORDON J: I am sorry to be difficult, Mr Moore, but I had understood that the definition you gave to Justice Gageler was also obtaining permission to enter something.

MR MOORE: Yes.

GORDON J: In other words, that one can pay a fee to get in.

MR MOORE: Yes.

GORDON J: Which is the reason why I was asking you before about the arrangements that are provided for under the PMA. I mean, under these arrangements, the shippers pay to enter the Port, to enter the channel. The obligation is imposed upon particular people.

MR MOORE: Yes.

GORDON J: They have a right, on the payment of the fee, to enter the channel, and I might pay the charge in order to ensure that a ship enters. Why am I not then accessing the service, to the extent to which I pay that charge for that purpose?

MR MOORE: Well, it would depend upon the relationship that you have to the vessel that is entering the port. If you are entering the port because of, for example, your control or commercial disposition of the vessel, then I would have to agree with that proposition. If you are only paying the charge through the outermost extremities of the definition in section 48(4)(b) – and I should go to that although this is ground 3 ‑ ‑ ‑

GORDON J: I am happy for you to deal with ground 3, Mr Moore, but all I seek to make sure of is that I understand that this argument about physicality is actually – how it operates in the context of the service we are dealing with here and the way in which people, on the facts which are undisputed, access that service.

MR MOORE: Yes. Just to complete the point at the moment. Subsection (4)(b) includes within its scope representations to the port authority that the person has functions. In other words, it is a cost recovery mechanism whereby you can seek to recover from those who represent them. They might have a function of the owner or accept an obligation to exercise those functions.

GAGELER J: Mr Moore, what about 48(1)? As I understand your submission, although section 48(1) brings within the definition of “owner” a person who owns the cargo, it is your position, as I understand it, that merely by reason of being the owner of the cargo, or some of the cargo that is on a ship is not enough to be somebody who seeks access to the shipping channels.

MR MOORE: Of itself, no, although noting that in an FOB context Glencore does not own the cargo that is on the vessel because title has passed on the ship’s rail and we are dealing primarily here with the extension of this to Glencore in an FOB context.

GAGELER J: On any view, there is not a perfect match between the State‑charging regime and the scope of the permissible arbitration.

MR MOORE: I readily accept that, your Honour, and, indeed, that lies at the heart of our ground 3. To say one does not derive simply from a State provision that provides who is responsible for a payment of a fee the statutory question that one has to address under Part IIIA as to who is accessing the service.

Now, notification of an access dispute is dealt with in section 44S at page 88 of the bundle of authorities. Section 44S makes provision for the notification of an access dispute and the commencement of a bilateral compulsory arbitration by the ACCC between the facility owner or an operator, the provider, and the access seeker, the third party. The scheme is what might be described as a negotiate/arbitrate model and that is because the provision commences by imposing a precondition:

If a third party is unable to agree with the provider on one or more aspects of access to a declared service –

So there has to be an inability to agree, it is a negotiation. Then:

either the provider or the third party may notify the Commission in writing that an access dispute exists –

In this regard, can I turn briefly to the decision of this Court in BHP v National Competition Council 236 CLR 145, at paragraph 17, and that is in Part C or volume 3 of the joint bundle of authorities and the relevant paragraph is at page 387, being paragraph 17. In that decision, the Court observed that:

The consequence of a declaration of a service is that a “third party” –

being the person who wants access to the service:

is given what may be described as an enforceable right to negotiate access to the service. The right to negotiate may be considered “enforceable” because, subject to constitutional limits . . . if a third party and a provider are unable to agree . . . the third party may notify the ACCC of the dispute . . . The ACCC then has the power to arbitrate such an access dispute -

Certainly what it means is that an access seeker has a right to treat with the access provider. It follows that it is important, we submit, to be able to identify with some clarity who has that enforceable right to negotiate. It is also important that the provider is able to ascertain with some clarity with whom do I have to treat a failure to ‑ ‑ ‑

STEWARD J: Mr Moore, while you are in that territory, can I ask you this question. Just think for the moment that “access” has the broader meaning that found favour below and which was suggested to you by Justice Gageler, so that you assume that Glencore has access to the shipping channels. It is also unquestionably the case where coal is sold FOB that somebody is also seeking the very same access, the very same means, namely whoever is the operator of the vessel.

This is a private arbitration statutorily authorised between Glencore and the provider. Is it your case that where there is somebody else accessing the regime in the same way, that Part IIIA, properly construed, would mandate that in order to deal with that party’s access they would need to be joined to the arbitration pursuant to section 44U and that is the proper way of dealing with their access and in this case their liability to pay the navigation charge?

MR MOORE: Section 44U provides that the parties are the provider, the third party, which is simply the very person we are seeking to ascertain here, the access seeker, and any other person who applies in writing to be made a party and is acceptable as having a sufficient interest, but we would say that the fact that somebody could apply in writing to be made a party does not solve the difficulty that would arise if anyone who had an economic interest or commercial interest in the outcome of the arbitration could say, “I want to arbitrate the terms on which somebody else actively, in a physical sense, accesses this service”.

STEWARD J: Well, that is why I asked. Is.....where you are wanting to determine another person’s access. The proper thing.....Part IIIA is you join them as a party. You get them to come along to the.....

MR MOORE: Yes, yes your Honour, and one of the difficulties we point to - it is one thing to talk about Glencore in this case and, indeed, our learned friends, or Glencore, make much of what they say is Glencore’s close connections with the Port, but if one adopts the definition that has been adopted by the Full Court, then people with different interests, and different economic interests, in various dependent markets, would then have an ability to notify an access dispute and have their own bilateral arbitration.

Your Honour is correct that if parties have an interest in such a bilateral arbitration by the access seeker, as we would say, properly defined, then they could apply to be a party under section 44U(c). Glencore could apply to be a party to such an application, if Glencore had an interest in the terms on which the application was to be determined.

The reason that we are here, in a sense, one cuts to the practical chase, is that Glencore was the only party who notified a dispute during the period within which the service was declared and now that the service is no longer declared, there is no potential for other parties to notify disputes.

GORDON J: Can I ask one other question about the framework, Mr Moore?

MR MOORE: Yes, your Honour.

GORDON J: Under 44S(2), on receiving the notification, the Commission itself makes an assessment of who, in effect, might be interested in the access dispute. You have the provider, you have the access seeker, as you describe them, and then you also have:

any other person whom the Commission thinks might want to become a party to the arbitration.

MR MOORE: Yes, your Honour.

GORDON J: There are two questions. Is it not, at the time of the access dispute, that the Commission itself turns its mind to that question, and, secondly, that might extend to, for example, the shippers of the FOB?

MR MOORE: Well, it might, your Honour. I agree, with respect, but it is also vital, for this scheme to work, that the ACCC is able to determine, with some clarity, who is the access seeker, because although other people can become parties, it is nevertheless a bilateral determination of rights between the access seeker and the access provider. That is made plain by section 44B, which provides that a determination is a determination on access by the third party, in other words, the access seeker to the service.

It is not a determination on access by other people, and so it is necessary for the Commission to be able to identify, with clarity, who is entitled to commence this procedure, and who is entitled to have terms and conditions for their access, no one else’s, their access, determined. One of the matters that we rely upon is that anyone with an economic interest can say, well, I am an access seeker, they can only determine the terms and conditions on their access. They cannot, in effect, as a busybody, determine the terms and conditions of the access by the vessel.

Likewise, the provider has to know who is the person with the enforceable right, who is the person that I have to treat with, whose letter do I have to respond to and engage in the negotiation, or else they will be potentially turning up at the door of the ACCC with a notification of access dispute?

Now, 44B, as I have just noted, provides that it must be determination on access by the third party to the service, and 44B(2) gives a breadth to deal with any matter relating to access, but subject to the important qualification, relating to access by the third party to the service, by the access seeker, including matters that were not the basis for notification on the dispute.

So that subsection does not permit one to deal with matters relating to access by some other person, and the determination may require the provider to provide access to the service by the third party, require the third party to accept and pay for access to the service, and so on. Under section 44V(2)(c).....may, and conventionally would, specify not just price but the terms and conditions of access. An example of a determination by the ACCC is provided by the determination in the present case. Can I just go to that briefly - it is in the core appeal book at page 143.

This was the determination by the ACCC. It was modified in respect, you will see in a moment, by the Tribunal, but most of the terms remained unchanged. So, without going through it or taking much time with it, one can see from the headings the type of matters that are dealt with - “Term”; “Backdating”; “Interest on backdated payment”; the scope of the determination; notification of an intention to use the service under clause 3.1; the “Price terms”; in clause 8, “Five‑yearly review”; what is described as a “True up” in clause 9; and then commencing in clause 10, some “Non‑price terms” such as invoicing, payment terms, and in clause 14, “Dispute resolution”.

So, unsurprisingly, there is not just a price determination, and the Full Court seemed to be very focused on determination of a price, but it is in fact determination of a potentially whole set of terms and conditions, and of course, in a given case, in access to a particular piece of infrastructure, the terms and conditions would include the manner of access. It could provide, for example, priority access or times of access, or matters of that sort.

Indeed, someone might want to pay more for priority access and so the terms and conditions may reflect the particular value and the evidence that is put forward to the ACCC as to what should be the price for particular types of access.

GAGELER J: Could one of the terms be that access is to be provided to the third party through a third party’s agent or special purpose corporate vehicle?

MR MOORE: Pursuant to section 44B, it has to be accessed by the third party. Of course, as I recognised earlier, third parties can act through - corporations may have to accept through agents. So if you are talking about, for example, access to a site, yes that access could include access to an agent who has to in fact drive a car onto the site to take an easy example.

GAGELER J: I am taking a harder example and that is a corporation within Glencore’s group, not Glencore the seller of coal. Would that make a difference?

MR MOORE: It would be permissible provided that it was Glencore that was accessing, by some recognised means, the service. If Glencore, for example, was seeking access to vessels, then it may be that Glencore could provide that access by various means, but it would have to be Glencore accessing those services. Your Honour has asked me could be some nominated person within the Glencore group and perhaps it could but provided it would be access by Glencore to the service.

That is not what is happening in the present case because all that is happening is Glencore is delivering coal to the Port, somebody else, being the customer, is arranging for collection of the coal at the Port. That distinction is a material one for present purposes. If one imagines a merchant who sells products online and offers delivery and sends out a van to deliver the package, that person is in a very different situation from a merchant who says, “I’ll sell you it but you can come and pick up the parcel at my door,” and the customer then drives over in a van to pick it up and it is tolerably clear that in the second situation the merchant is not accessing or using the van.

It is not helpful or accurate to say, as the Full Court effectively says here in paragraph 158, that the merchant is accessing the van when, by its online sale, it causes the van to arrive at its door. One could equally say that delivery of the goods is not possible unless the van comes to the seller’s door. But that is not informative of whether in fact the merchant on that example is using the van, accessing the van.

GLEESON J: Mr Moore, what if the producer, here Glencore, had some elements of control over the ships - for example, it had stipulated rules about quality of ship or safety or turnaround time, would the question of access be kind of an evidentiary matter?

MR MOORE: I think the answer to that question is yes, your Honour, one would have to look at what was the nature of the control over the ship. Certainly, if Glencore is chartering a ship, for example, then Glencore would be accessing the service, and your Honour is putting to me, well, could there be relationships less than a charter, and that would be a factual inquiry. But what it is not an inquiry on is simply saying, well, Glencore has an economic interest, financial interest, in the outcome of the export.

As I will come to, a great many people in the coal supply chain will have an economic interest in access. One has a whole variety of dependent markets. Somebody provides services to coal mines. It is vitally dependent upon access being provided at the port. If that access is not provided, their entire business ceases to exist. They may even have an interest in the terms on which access is provided but that does not make them an access seeker within the statutory meaning. The dispute ‑ where it really here arose because Glencore, of course, contended.....access.....all cases involved in the carriage of coal sold by Glencore.

Now, another provision that shed some light on the meaning of “access” is section 44ZO, which is at page 106 of the joint book of authorities, and that deals with the operation of final determinations and the timing of such operation. In subsection (1), it provides:

If none of the parties to the arbitration applies to the Tribunal under section 44ZP for a review . . . the determination has effect 21 days after the determination is made.

But then provision is made in subsection (3) for backdating, which provides that:

a final determination may be expressed –

to provide – in effect, to operate from an earlier day. Subsection (4) contains some limitations to that:

must not be earlier than –

the specified days in (a) and (b), if negotiation is commenced:

after the service became a declared service—the day on which the negotiations commenced –

and then at the very end of the section, subsection (4), it is provided that:

However, the specified day cannot be a day on which the third party did not have access to the service.

We would say that if one was simply dealing with economic access then it would be very difficult to ascertain what is the day on which a person had access to the service or did not have access to the service.

Now, as has been observed already, access to the shipping channels in the present case attracts a charge payable under the Ports and Maritime Administration Act and section 50 of that Act provides for the imposition of the navigation service charge. If I can go to that briefly, it is at page 217 of the same volume:

A navigation service charge is payable in respect of the general use by a vessel of a designated port and its infrastructure –

apart from certain things, including the use of land‑based facilities or:

port access for cargo at the interface between the vessel and land‑based facilities for the purpose of stevedoring operations.

That is not within the conception of a navigation service charge. The charge:

is payable on each entry by the vessel -

So one has to enter the port for the service to be payable and it is payable on the entry by the vessel and:

is to be calculated by reference to the gross tonnage of the vessel –

not the cargo. The dispute in the present case concerned the quantum of the navigation service charge. There was another charge, the wharfage charge, which is relevant, but importantly there was no dispute about that charge. There was no section 44S notification of any dispute about the wharfage charge, which concerned a different function in the arbitration, and I will come to that.

STEWARD J: Mr Moore, just while you are in this territory, can I ask a very simple question, which may not matter one way or the other. What is the lawful basis for the Commission to determine a statutory State charge? I understand how it might determine as between private parties but is it as simple as section 109 of the Constitution, or what?

MR MOORE: Would your Honour pardon me for one moment? I am just having a section turned up, your Honour, which I think may address that.

STEWARD J: You can answer it later on, if it helps.

MR MOORE: Yes, I might take that on notice, because there is a provision, I understand, that deals with that.

STEWARD J: This might be me being a busybody on this occasion.

MR MOORE: No, not at all, your Honour, it is a relevant question. I think the answer is provided by section 51, I apologise.

GORDON J: It is 51(1), I think, is it not, Mr Moore?

MR MOORE: That is right, your Honour, that:

The relevant port authority may fix navigation service charges.

So it gives, to my client, the discretion and ability to decide what the charge is, but then my client in turn is subject to the imposition of Part IIIA, in the same way that any infrastructure provider that is declared is subject to the operation of Part IIIA, which constrains their ability to set their own charges, including at levels involving monopoly pricing.

STEWARD J: But does that mean that the Commission could not, for example, work out or determine a charge by a means other than by reference to gross tonnage?

MR MOORE: It may have that consequence, yes.

STEWARD J: All right, thank you.

MR MOORE: Now, can I just note, for completeness, something, by going to a paragraph in a decision which is in Part D, volume 4 of the joint book of authorities bundle at page 555. I do not need to say anything about this decision, which was an interlocutory – it was a decision of her Honour Justice Jagot in an interlocutory decision at the commencement of the process, but at paragraph [33], her Honour records the notification under section 44S, and as her Honour there records:

On 4 November 2016 Glencore notified the ACCC of an access dispute under s 44S(1). In the notification Glencore sought arbitration by the ACCC on the “reasonable level of navigation service charges, and access terms, to be imposed by PNO on coal vessel users of the Service –

So it was a dispute about the navigation service charge, not any other charge, and Glencore expressly wanted determination of the charge to be imposed on what is described as:

coal vessel users of the Service ‑ ‑ ‑

GORDON J: Just so that I am clear on the facts, Mr Moore, does that phrase “coal vessel users” include both CIF and FOB?

MR MOORE: Yes. Sorry, your Honour, I may need to clarify that answer. By that I mean vessel carrying coal, whether the coal was sold either on an FOB basis or a CIF basis, yes, your Honour.

GORDON J: That is correct, so when we are talking about coal vessel users, they are coal vessel users which both Glencore has chartered under CIF ‑ ‑ ‑

MR MOORE: Correct.

GORDON J: ‑ ‑ ‑ and FOB, where it has not chartered, but is selling free on board at the berth.

MR MOORE: Yes, and your Honour is correct, with respect. So from the outset, the dispute between the parties was, one, what is the quantum of the – appropriate quantum of the navigation service charge, but also, two, can Glencore through this means arbitrate the terms on which vessels that are not chartered by Glencore and which are simply vessels chartered by Glencore’s customers, or which the customer used to collect the coal when the coal was sold on FOB basis, are the terms on which those people accessed the service.

Now, the ACCC in its determination, and the Tribunal in its re‑determination, included that Glencore could not obtain a determination that simply applied to all shipments of Glencore coal regardless of who was undertaking the shipment, or who chartered the vessel that was accessing the shipping channels. The ACCC, of course, has since changed its position following the decision of the Full Court, but both the ACCC and the Tribunal concluded that the scope of the determination should cover the terms of access when Glencore, either directly or by an agent, charters a vessel to enter the Port precinct and load Glencore coal.

The ACCC’s determination also included an extension to scope derived from the application of section 48(4)(b) of the Ports and Maritime Administration Act. The Tribunal did not accept that extension, and the Full Court reinstated it, and that is the subject of the third appeal ground - I will come to that separately.

The Full Court concluded that the arbitration should have a broader scope than that determined by the ACCC or the Tribunal. Can I go to aspects of the Full Court’s reasons in that regard, and can I start with paragraph 46 on page 185, and there the court observed that:

the statutory authority to make a determination was not confined to the terms upon which the provider may be required to allow the third party to use the service . . . Rather, the language of these and other provisions of Part IIIA is consistently to the effect that the statutory focus is upon “access to the service”. This language reflects the economic character of the legislation which his concerned with facilitating arrangements that will advance economic efficiency rather than simply facilitating the physical use of the facility.

Then, in 47:

a dispute as to commercial terms of access to the declared service sought by a particular third party for the purpose of securing the ability for another party to physically use the facility was within the scope of the statutory provision.

In 48, there was reference to the language of section 44V(2), that:

A determination could deal with “any matter relating to access”.

However, that observation, in the middle of paragraph 48, appeared to overlook the pattern that.....earlier, which is that section 44V(2) was limited to any matter relating to access of the third party, and that the section does not refer to or contemplate dealing with matters relating to access by some other persons.

GAGELER J: Why is that? Why can not one thing relate to another and relate to a third thing as well? I mean, just as a matter of grammar, common usage, there is nothing in the language that makes it exclusive.

MR MOORE: Well, it is not so much that it is exclusive, it is just that the breadth of the matters relating to access are matters relating to access by the third party, not, as the Full Court appeared to contemplate, particularly having regard to 47 and the relevant passage in 48, that it could be someone else’s use of the service. So one still has to address the question of are we dealing with a matter relating to access by the third party.

GAGELER J: If the answer to that is yes, then the fact that it might also relate to access by someone else cannot be determinative, can it?

MR MOORE: I think I would have to accept that, your Honour, but not that it is connected to – the mere fact that one uses the word “relating” does not mean that one can determine access by third parties, and it must relate to access by the actual defined third party to the service, not some other person.

KIEFEL CJ: Mr Moore, does your argument deny that Glencore obtains an economic benefit when it secures the ability of another party to physically use the facility?

MR MOORE: No, our argument is simply that a mere economic benefit does not support a conclusion that Glencore is an access seeker.

KIEFEL CJ: But it would support more generally notions of competition within markets.

MR MOORE: Yes, it would, but it would do that for a potentially very wide range of people who might compete in various upstream markets, and we say the statutory scheme is not that or all of those multifarious people would be access seekers in respect of the vessel that is coming into the port.

KIEFEL CJ: But within the market - I think you have identified that Glencore operates exporting coal - it would give it a benefit, give Glencore a benefit.

MR MOORE: Yes, it could give Glencore a benefit under that market, except that – I will come to this in a moment – the determination decision turned on a particular construction of the criterion (a) and the Tribunal that concluded that the matter should be declared.....declaration would.....competition in any market. That was because criterion (a) at that time required a comparison between access and no access and one could not have regard to the fact that the person was already obtaining access.

Criterion (a) has since been amended so that in fact now it requires consideration to what is the impact of declaration on competition and pursuant to that test the declaration was revoked, and it has not been able to be redeclared, consistently with the.....a declaration would not in fact promote competition in any relevant market.

We do draw attention to that because there is an aspect of the Full Court’s decision that seems to be driven by what is seen as the importance or need to ensure that Glencore has this access in order to promote competition in a downstream market and that was not the basis of the original declaration decision. At paragraph 147 of the decision, just going to the Tribunal’s decision in 147 and 148, and then in 149 in the third sentence there is reference to the Tribunal paying:

little regard to the economic access or use of the channels as a necessary part of the export of coal.

Then at paragraph 155, the paragraph commences “Once one recognises” – picking up the reasoning from the earlier paragraphs at 46 to 48:

that the access or use is not limited in the physical way identified by the Tribunal . . . then the notion economic access or use will obtain equally whether by reason of Glencore selling on a CIF basis . . . or by reason of selling on an FOB basis . . . In each case its access and use is economic in that it does not physically control the vessel using the channels. This is, with respect, entirely in accordance with the purpose of the declaration of the Service -

We would disagree with that description of what is occurring in respect of certainly some bases on which Glencore sells coal, but the issue in the present case was what is the scope of the determination insofar as it applies to Glencore selling coal on an FOB basis? On that, it is clearly necessary to rely on some notion of economic access.

We say this approach involves error, firstly because it does not conform to the natural and ordinary meaning of “access”; secondly, is intention with the legislative scheme which creates a bilateral arbitration model for the resolution of access disputes if potentially multiple parties with a mere economic interest could each determine the terms on which another person will use the declared service and you could have potentially multiple determinations in potentially inconsistent terms as to the terms and conditions of such access.

GORDON J: Can I ask one practical question about that submission?

MR MOORE: Yes, your Honour.

GORDON J: Is that that you would have multiple parties applying to seek to determine the terms of other parties ‑ ‑ ‑

MR MOORE: Yes.

GORDON J: ‑ ‑ ‑ and how would the determination be drafted to effect that, and how would it bind the provider and the other party?

MR MOORE: Well, that is the very difficulty, your Honour, that we say the Full Court did not grapple with, because if one has a determination – let us take an easy case of somebody who is controlling a ship and enters the port to collect coal and the determination sets the terms and conditions of that person’s access, and then another person says, well, I have an economic interest in those terms and conditions so I would like a determination in slightly different terms dictating the terms and conditions of that access. There is no mechanism in the statutory scheme as to how one deals with those competing terms and conditions, and what the Full Court said in paragraph 151 at about line 40 was that:

the Port will, in effect, issue a ticket –

where Glencore is setting the terms and conditions:

for such ships to use the Port the cost of which will be borne by Glencore.

At 162 ‑ ‑ ‑

GORDON J: Sorry, I keep interrupting I know, but just before I leave that, in a sense that is the proposition I put to you earlier this morning. It seemed that the ticket idea was that Glencore was, in effect, paying the cost of the navigation service charge for the FOB - and I know you tell me that I am not to use the PMA but – not in a sense to drive the access question but it is a physical fact about how access is gained at this Port. So the ticket idea was actually not a physical access, it was the right of access by the payment of a charge for FOB.

MR MOORE: But as your Honour rightly put to me, even section 48 – we will come to the debate about (4)(b), but even section 48 was limited to circumstances that would not encompass Glencore simply determining the terms and conditions of someone else’s access, so this goes far beyond section 48(4)(b). So what this is is some notion that by terms and conditions Glencore would get a ticket, an extra statutory notion which Glencore could then give to the benefit of the person who is actually navigating the shipping channel. A further notion was set out in paragraph 162 at about lines 9 to 10:

another person who may have a right of access . . . and who may be subject to the NSC, can, through Glencore be given the ability or option of taking up Glencore’s arbitrated price.

The problem with that notion is the determination of terms pursuant to section 44V of the Act is not the comparing of an option, there is a binding arbitration. So if the person who is using the channels as a determination of terms that apply to that use those are terms that are binding on PNO and binding on the user, and that is totally unclear, in our submission, how some other person could arbitrate different terms and then say, well, the person who is using the facility has the option of taking the alternative terms or, indeed, why that person has an option but PNO does not have any form of matching option.

These things are all outside the statutory scheme and underline the difficulties of simply saying that anyone who has an economic interest can.....arbitrate terms and conditions for someone else’s use. Glencore, in its written submissions in this Court, perhaps recognising the width of the concept of economic interests, asserts at paragraph 39 of its written submissions that it is inaccurate to characterise Glencore as having a mere economic interest, and asserts that the need to use a facility will be considered “access” for the purposes of Part IIIA where, and they use this language, that use or access is required for a business to compete effectively in its relevant market.

A similar submission is made at paragraph 31 of the written submissions, and we say that, as well as having no grounding in the statute, that test is extremely difficult for either the access provider or the ACCC, who has to determine who is allowed to arbitrate these matters, is applying to. Working out whether access is required for a business to compete effectively in its relevant market would ordinarily be a factual and analytical inquiry of considerable complexity, including, potentially, with the assistance of expert economists.

Now, if I can go, in that regard, to the Competition Tribunal decision concerning the original declaration of this service - it is at volume 4 of the authorities, at page 504. I am sorry, the technology has gone crazy at my end - can your Honours still hear me?

KIEFEL CJ: Yes, we can, Mr Moore, but this might be an appropriate time for us to take the morning break.

MR MOORE: Thank you. Yes, may it please the Court.

AT 11.15 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.32 AM:

KIEFEL CJ: Yes, Mr Moore.

MR MOORE: Thank you, your Honour. I was dealing just before the break with the argument or the suggested construction that use or access is required for a business to compete effectively in its relevant market and I was going to page 516 of the authorities bundle in volume 4 of Part D, which, at paragraph 37 of the original Tribunal decision declaring the service from 2016 identified five functionally distinct dependent markets relevant to access to the service which included the coal export market but included, for example:

(3) markets for the provision of infrastructure connected with mining operations including rail, road, power and water;

(4) markets for services such as geological and drilling services, construction, operation and maintenance ‑

and shipping services. No doubt the very many participants in those diverse markets might very well say that their ability to compete effectively in their relevant market was dependent upon access. We say that would impose a test of very uncertain content and application as to whether somebody is an access seeker.

While I am dealing with that decision, and I note that in paragraph 157 is the expression of the conclusion that if the criterion was dealing with what is the effect of declaration, then the Tribunal would not have been satisfied that increased access would promote a material increase in competition in the coal export market and it would follow the other four dependent markets.

Without taking the Court to it, can I provide a reference to the recent decision, Application by New South Wales Minerals Council (No 3) [2021]) A Comp T 4, which we provided separately to the Court because it was only decided last month, where the Competition Tribunal discussed the history of criterion (a) and its amendment.

That history included the conclusion of the Full Court in the Sydney Airport Corporation Case that the criterion required comparison between access and no access and thus, in effect, not having regard to whether access was in fact being provided absent declaration and that the criterion did not involve an inquiry about the effect of declaration and the Competition Tribunal discussed that at paragraph 41 of the decision and observed at paragraph 74 and following the conclusions of the original Tribunal decision, observing the Tribunal concluded that criterion (a) would not have been satisfied on the current approach, which is the reformed criterion (a) which now requires consideration being given effect.

The affected declaration is the decision in Sydney Airport which was also adopted by the Full Court in the Port of Newcastle Case. A special leave application in that case was heard by this Court but by that time the legislation had been amended and leave was not granted.

GAGELER J: Mr Moore, in paragraph 46 of that decision, an exposition of what the Tribunal says is now a relevant inquiry, was that controversial before the Tribunal in this matter?

MR MOORE: No.

GAGELER J: Thank you.

MR MOORE: But we draw attention to that matter because we would say the supposed need for Glencore to have access to declared services, as opposed to access under the existing access regime at the Port, is certainly not a reason for construing the provisions in a way that we say goes beyond their ordinary meaning and operation.

That was one of the bases on which the Full Court seemed to give emphasis to the need to have a broad construction. The second was simply a proposition that, because the legislation is a piece of economic legislation, that should lead to a broad construction, but the economic character of the legislation dealing with regulation of potential monopoly infrastructure is, we submit, served by ensuring that those who wish to access a service in the usual sense are able to do so, including by exercising their enforceable right of negotiation and that potential monopoly pricing is the subject of constraint. It certainly does not require that every person who has a mere economic interest in the use by others is able to compel arbitrations on the terms of that use and, indeed, that is not likely to promote efficiency.

Can I turn to ground 2. I can be shorter in relation to this ground. Ground 2 concerned the question of whether, if a person is accessing the service in one respect, they can arbitrate the terms and conditions on which someone else is accessing the service in a different respect and in the present case this concerns the activities for which the wharfage charge was payable.

That charge is a separate charge under the Ports and Maritime Administration Act. It is dealt with at section 61 of that Act, at page 221 of the authorities bundle and it is payable in respect of the availability of a site at which stevedoring operations may be carried out. Of course, I have already observed that section 50, the navigation service charge, carves out from its operation the use of land‑based port facilities and port access for cargo at the interface between the vessel and land facilities.

The wharfage charge received very little attention before the ACCC or the Tribunal for the simple reason that it was not the subject of any dispute between the parties and did not form part of the section 44S notification of a dispute. It was relevant to the arbitration only in the sense that because the parties adopted a DORC approach to the valuation of the port depreciation optimised replacement cost, which was then used to produce some maximum allowable revenue, or MAR, that is, the amount you could charge each year based on the recoverable value of the asset, the amount payable in respect of the undisputed wharfage charge was then deducted which left the amount that was then attributable to the navigation service charge.

GAGELER J: Mr Moore, I am sorry, you took us earlier to the final determination made by the ACCC.

MR MOORE: Yes.

GAGELER J: It purports to determine a wharfage charge.

MR MOORE: It does, and that was in effect not the subject of any dispute, but there is, in fact, a question as to whether it should have done that, because it was not the subject of an application, and it was not the subject of any dispute. But what it needed to do was to deduct the wharfage charge from the allowable revenue to produce the navigation service charge.

GAGELER J: Well, the dispute does not have to be as defined by the piece of paper that started it all off, does it?

MR MOORE: Well, you do have to – because there is a precondition, there is a precondition which was that you failed to.....so that there is a gateway that you have to pass through, and you cannot pass through the gateway if you do not satisfy that precondition, and there was no dispute about wharfage charge.

GAGELER J: But there was a dispute. So, the parties go through the gateway, and then they end up ultimately at 44V(2) where the determination can deal with any matter relating to access to the service, including matters that were not the basis for notification of the dispute.

MR MOORE: Yes, and I perhaps do not need to take the debate, your Honour, any further, because the issue was a slightly different one, given that the wharfage charge was a charge payable for a particular type of activity. Glencore said that it could, in effect, arbitrate the terms and conditions in respect of other people’s access to the shipping channels that were then the subject of the navigation service charge.

That, we would say, does not fall within section 44V(2) in the same way that somebody who, for example, in relation to a declared railway service who accessed a platform to drop some goods off would not be able to arbitrate the terms on which entirely independent persons who wished to access the railway line would have that access determined.

GORDON J: Mr Moore, is not the short answer to the question this, that although the 44S dispute was limited to the navigation service charge in the way you have taken us, one needed to have a calculated amount of the wharfage charge to calculate the navigation service charge as a deduction from MAR?

MR MOORE: Yes, your Honour.

GORDON J: Then, what the determination was, was identifying, as I understand, what was an amount which was common between the parties - there was common agreement that there would be this amount deducted. It was specified as the wharfage charge, amount was fixed, and it was to be deducted from MAR.

MR MOORE: We agree with that characterisation, your Honour, as to what happened. It is identifying the amount that is in respect of the undisputed wharfage charge which then has to be deducted from the MAR to produce the navigation service charge. That was not a basis for Glencore to say that it could determine the terms and conditions for a different person to access the service in respect of which the navigation service charge was charged which, of course, is the navigation of the shipping channels.

Now, the Full Court’s decision in this regard is a little unclear as to whether it is looked at separately from the issue raised at ground 1 as to whether one simply is relying on economic access. At paragraph 160 there appears to be the reasoning:

Glencore itself was the acquirer of the Service and could apply the terms as determined to all instances where ships carrying coal from its mine were using the Port. On the first approach –

which appears to be access to services for which the wharfage charge was charged:

the Service was being used by Glencore at least to the extent of loading from the wharves. On the second approach, Glencore was a party with an economic interest . . . In either case, the terms . . . were not a barrier to Glencore securing a determination of a kind that would require PNO to provide the Service to Glencore. The only issue concerned the precise terms upon which the Service might be declared.

Certainly, to the extent to which the Full Court is not relying on the economic interest rationale but from the application of section 44V, we would say that involves separate error because it ignores the words “to access by the third party to the service”, not someone else’s access.

Can I turn then to ground 3. The third ground relates to section 48(4)(b) which we saw previously. It is at page 216 of the authorities book. The simple point is that the breadth of 48(4)(b), a person representing, not necessarily reflecting the actual position but representing that someone has a function, or accepting an obligation to exercise some functions – again, regardless of whether in fact such functions are being exercised by that person – is within the breadth of the definition of “owner” because of the function of the provision to ensure ready recovery of charges chargeable in respect of the activities conducted at the port.

That cannot, we say, drive the proper consideration of who is a third party for the purposes of the legislation and the Tribunal correctly recognised that that extension went outside of a proper description of who was the third party and asked who was accessing the service in the relevant sense.

GAGELER J: Mr Moore, do I understand that what you are really saying about ground 3 is it just flows from ground 1.....independent argument?

MR MOORE: Precisely. There is no independent argument. It is just an outworking of ground 1, quite.

GAGELER J: Thank you.

MR MOORE: That is apparent from the Full Court’s reasoning - it is apparent from paragraphs 164 and 165 of the Full Court’s decision.

GAGELER J: So far as ground 2 is concerned, if you lose ground 1, do we get to ground 2?

MR MOORE: No.

GAGELER J: So everything turns on ground 1, really.

MR MOORE: Yes.

GAGELER J: Thank you.

MR MOORE: Can I then turn to the second broad topic of the appeal, which is ground 4, proper treatment under the statutory scheme of what I have referred to as “user contributions”, although that term simplifies the true position. In order to calculate the appropriate navigation service charge, it was necessary to consider the recoverable value, or costs, of the infrastructure used by PNO in providing the service. That value was used to calculate the regulated asset base, and in turn to give rise to the maximum allowable revenue.

The parties agreed upon the use of a DORC valuation method for the purposes of calculating the value and the infrastructure, being a depreciated optimised replacement cost methodology. Importantly, that is not an actual cost or an historical cost, it is an entirely hypothetical exercise. It is the cost which would be incurred in duplication today, using the most efficient method and modern technology, of the assets used to provide the service.

It is based on the notion that in a market with potential competition, i.e. not a monopoly, the pricing for the use of an asset could be constrained by the potential for someone else to enter the market and the cost of providing an equivalent facility, and DORC therefore simulates the pricing in a competitive market and avoids pricing involving monopoly profits. DORC is commonly used.....for this purpose in regulatory disputes of this type.

It is frequently less than any measure of historical cost, both because construction is optimised rather than haphazard over time, and because it uses modern, efficient technology, whereas, for example, in the present case, the Port commenced to be formed with the use of picks and shovels in the time of Governor Macquarie. Not only is it a hypothetical exercise, but it is properly described as a forward‑looking valuation methodology. It does not involve the consideration of historical events or costs.

Now, the primary alternative methodology is to use some form of depreciated historical cost which considers which costs were actually incurred by the service provider, and which of those costs were properly recoverable by way of ongoing charges. The two approaches are conceptually distinct.

The issue in the present case was whether it was necessary to deduct from the value of the Port so calculated by the use of the DORC methodology, amounts in respect of historical expenditure, which Glencore characterised as user contributions. The user contributions comprised various historical dredging projects of the Port, some decades in the past, which Glencore said were funded by users. It was not asserted that Glencore had made any such contributions.

Further, Glencore’s description of the contributions as user contributions has the potential to disguise their character. For example, the largest so‑called contribution by users was in fact carried out by the State of New South Wales, PNO’s predecessor.

Glencore asserted that this project was funded by a levy on users. In one sense, that was correct, that a levy was imposed, but it was imposed at a time when the State was not engaged in any form of proper cost recovery for the value of its assets, and therefore users received, in effect, State‑subsidised assets. The Tribunal concluded, in a factual analysis, that there was very significant historical cost under recovery of over $8 billion, even in the more recent period, and was unable to calculate the over‑recovery, or potential over‑recovery in an earlier period, which dwarfed the size of the alleged user contributions which were a ‑ ‑ ‑

STEWARD J: Sorry, Mr Moore, can I ask, there were valuers before the Tribunal that gave evidence. Did they touch upon this issue in their reports?

MR MOORE: Yes, there was expert economic evidence that analysed, in effect, historical costs and the extent of cost recovery over time, and the conclusion was that there was a very significant shortfall between what could be recovered on a – what we would now regard as a cost‑recovery methodology.

STEWARD J: Sorry, I have not put the question very well at all. By “the issue” I meant the issue that you are now addressing more broadly. Did the valuers, for the purposes of performing a DORC calculation, express a view about whether you should assume that some assets would be, under the hypothetical, the subject of user contributions, whilst other assets would not.

MR MOORE: I think it is fair to say that there was debate about that question, and in particular whether a DORC methodology – the DORC methodology itself would not involve the deduction of user contribution. The debate was about whether, in effect, subsequent to the application of that methodology – I am conscious there is an interference noise, but I am not sure how to stop it – I am conscious that the debate was whether there was a subsequent deduction, so the DORC methodology should be made to account for user contributions.

STEWARD J: And did the valuers address that issue?

MR MOORE: Yes.

STEWARD J: And – sorry, go ahead.

MR MOORE: I was going to say, I would have to find whether there were references in the Tribunal’s decision to that question. The Tribunal in itself being an expert body, dealt with this question at some length, over many paragraphs, and concluded that it was not appropriate to deduct any contributions from the calculation of DORC, including because the function of DORC is to provide an appropriate cost measure for the recovery of efficient costs of the asset.

STEWARD J: I suppose what I would be helped with is if there is identification of some principle flowing out of DORC methodology as to when you can assume that some assets, by reason of history, should be taken to be user contributed or user funded.

MR MOORE: The answer is that the ‑ ‑ ‑

KIEFEL CJ: I am sorry to interrupt, but can I suggest that Mr Young and Mr Lloyd check to see that they are muted.

MR YOUNG: I was muted.

MR LLOYD: Likewise, your Honour.

KIEFEL CJ: Thank you.

MR MOORE: I will keep going and hopefully it does not recur. The calculation of DORC, because it is a forward-looking examination, necessarily involves a hypothetical exercise. So there was no credible contention that in calculating DORC you should look at events that have occurred historically. It is not an actual calculation at all. It is a hypothetical exercise that looks at what it would cost to replicate the Port if we were doing it today.

GORDON J: I accept that as a methodology, Mr Moore, but I have a problem with four areas. If you have DORC and you are looking at optimised replacement value, one takes it as a whole. One identifies what the assets are that are in play and one works out how it is that they are going to be replicated in the most efficient manner.

MR MOORE: Yes.

GORDON J: Why is it then that here there were, on my reading of the reasons, four categories of assets that were taken out of the DORC, but which were recognised to be as necessary for the service? They were pilot’s jetty and pilot’s helicopters, there was a portion of the breakwater, there were the channels which are the subject of this dispute and as I understand the last aspect of these user‑funded contributions, the fourth category, what were described as river walls and revetments. Have I missed something?

MR MOORE: I do not think so, your Honour, but the deduction for user contributions was assessed by reference to were there identified assets and one needs to be careful about this because the identified asset in the case of a channel‑deepening project is the same channel that has just been dug a bit deeper but the question was whether where there were identified assets that had been the subject of contributions by users in the past and then the question is whether those assets should be deducted from the value of the Port because they had been contributed by users.

The point that I was addressing is that, if one is looking at a question of what would be a charge for this asset in the hypothetical competitive market, one would not be engaged in that exercise because ‑ ‑ ‑

GORDON J: I accept that as a concept of the DORC methodology, but what I am not clear about is why it is, even putting aside the years of contribution charges, and it may be a matter of agreement between the parties, there are these deductions from the DORC asset base which, on their face, I think the parties agree, are necessary for the service and yet they are in effect deducted from the DORC analysis. s I understand, there is a heading which says, “Assets neither leased nor owned by Glencore”, which is one aspect of the assets, and then we have these user‑funded contributions. It is an odd thing to do in a DORC methodology, is it not?

MR MOORE: There was one aspect, I understand, of deductions, which was assets that were not leased by PNO and therefore were not assets for which PNO could charge for the provision of those assets. They were assets that remained in the control of the State. Your Honour may be referring to that aspect of it but otherwise the deductions related to user contribution.

GAGELER J: In simple terms, we were just talking about user contributions to dredging.

MR MOORE: Yes. In simple terms, yes, and both by ‑ ‑ ‑

GORDON J: Is that right, or is it also the river walls and revetments? I thought there were two categories making up the 912 million. I might be wrong.

MR MOORE: Yes, can I check that, your Honour. I do not want to give an inaccurate answer, but the program was a dredging program. So we are dealing both with direct contributions by way of users themselves dredging and an indirect contribution by way of the State dredging but with the levy. Before the Tribunal, PNO contended that having calculated a DORC valuation it was inappropriate to make deductions for historical contributions because such approach involved an impermissible blending of valuation methodologies, being a forward‑looking DORC calculation versus an historical cost model.

Now, I do not wish to be misunderstood in relation to that. Dredging costs were not the historical amounts. What had been actually incurred, there was a calculation of what was the current, modern technology value of historical assets, assets that were contributed by users, but it still involves an examination of who paid for what historically, which is suitable for an historical cost analysis but is not something that you would undertake if you were looking for what is an efficient price to be payable in a competitive market.

GORDON J: Is it the position that they did that analysis on an historical cost basis to get a percentage and brought the percentage over in order to deduct it from DORC?

MR MOORE: Exactly, but it was put against us by the ACCC, it is not an historical cost because the ultimate calculation was based on a DORC‑like calculation and that is right, but it does not go very far.

GORDON J: Can I ask a very silly question, which is in a sense something I asked way back at the beginning. In order to determine DORC and what is the service, one of the questions is what are the assets? You accepted, I think, that where Glencore did not either own or lease the assets, they were excluded from DORC because that, commensurate with 44ZZCA, meant you should not get a return on something you did not own. Can I understand then is there any doubt about the status of these assets in terms of the channels and the other things that are the subject of the issues of contributions? Do we know where they sit?

MR MOORE: That was not the subject of dispute in the sense that it was not contested that my client, the Port of Newcastle Operations, would be able to charge for assets that were not the subject of user contributions, and that that was not a properly recoverable amount. In effect, my client is the successor of the State of New South Wales in respect of those assets. It has obtained those assets under a long lease, and would be entitled, in the ordinary course, to charge for access to them, in the same way that one would do in the ordinary world of commerce.

The amount that one would charge for them would reflect, inter alia, their value, and in a competitive market would reflect the fact that if somebody else wanted to provide a competitive service, they would have to construct assets of an equivalent quality or character. So, that was the basis on which DORC produces the response to the question, well, what is a competitive market price, what is a non‑monopoly price for the access to those assets? This debate, in relation to the question of whether there is a ‑ ‑ ‑

STEWARD J: Sorry, Mr Moore, it probably does not matter, and it may not matter to economists, but the DORC that we are looking at is looking at those infrastructure assets owned or leased by the Port. Does it make any difference that the Port does not own or lease the channels that were dredged, but only has a licence?

MR MOORE: My understanding is they have a long‑term lease over the entirety of the Port, including the channels, and an operating licence.

STEWARD J: I suppose this goes back to Justice Gordon’s question earlier, what actual assets are we looking at here, what is in and what is out?

MR MOORE: Yes. Well, I appreciate why the Court is asking me those questions, but that was not really the subject of the debate. The debate was about – there was no debate that there were a set of assets that the Port could charge for, the debate was whether those assets should include the assets which the Port owned – well, in the sense of a long lease, had a long lease of assets, and was entitled to charge for them, but whether what should be excluded from those were assets where, it was said, somebody else had paid for them.

So in the ordinary commercial sense, the Port would be able to charge for them. It could say, well, if you want to use this asset you will have to pay some money. In the ordinary commercial sense, that asset would not be available for free, but the question is whether, by reason of some economic principle or some requirement of the legislation, it was necessary to exclude them from the amount that the Port could properly recover pursuant to Part IIIA.

The Full Court found that the Tribunal had erred in excluding those user contributions for two principal reasons. The first was the court found that section 44X(1)(e) required the Commission to take account of historical user contributions, and the second basis was that:

the concept of efficient costs –

referred to in the pricing principles for access disputes were:

not necessarily met . . . by reference to a measure of costs that would prevail in a competitive market.

Now, both of those matters involved error. In relation to section 44X(1)(e), which is one of the matters that the decision‑maker must take into account, the construction adopted by the Full Court had the peculiar consequence that a subparagraph in a section dealing with a general set of considerations for the Commission to take into account was held to require that any user contribution must be brought to account but the circumstances in which the contribution was made or whether the contributor received any benefit from the contribution was not necessary to take into account. The extremity of the construction may be seen from paragraph 288 of the Full Court’s decision which provided that:

s 44X(1)(e) requires that there be regard to the value to the provider of extensions whose cost is borne by someone else. It is not concerned with whether there were other aspects of the past that might have provided some benefit to the provider. It is concerned only with whether the value of an extension that forms part of the facility used to provide the Service is value that “is borne” by someone other than the provider. It does not invite an accounting of all past benefit to that other person from having met the cost.

To somebody who provided a matching benefit, according to that reasoning the costs would nevertheless still have to be taken into account and potentially deducted from the assets for which the Port of Newcastle could charge.

Now, can I go to section 44V and pick up where the statutory scheme that leads to 44X(1)(e) on our construction occurs. Section 44V is at page 89 of the book, and in 44V(2)(d):

A determination may . . .

(d) require the provider to extend the facility;

(da) require the provider to permit interconnection to the facility by the third party –

and then in (2A):

Without limiting paragraph (2)(d), a requirement referred to in that paragraph may do either or both of the following:

(a) require the provider to expand the capacity of the facility;

(b) require the provider to expand the geographical reach of the facility.

So an order can require the provider to extend the facility in those various ways. Section 44W(1)(d) provided:

(1) The Commission must not make a determination that would have any of the following effects:

. . .

(d) resulting in the third party becoming the owner . . . of any part of the facility, or of extensions of the facility (including expansions of the capacity of the facility and expansions of the geographical reach . . .

(e) requiring the provider to bear some or all of the costs of extending the facility (including expanding the capacity of the facility and expanding the geographical reach of the facility);

(ea) . . . maintaining extensions . . .

(f) requiring the provider to bear some or all of the costs of interconnections –

So the scheme provider can be required to extend, the provider cannot be required to pay for any of this so the cost has to be met by the third party or by someone else, but the third party cannot become the owner of the extension and therefore the provider is the owner where the cost has been met by someone else, and that scheme had the potential to confer a benefit on the provider pursuant to the compulsory terms of an access determination binding on both the provider and other people.

So, section 44X(1)(e) completes the picture, and (ea), and it provides that the Commission must take the following matters into account, (e):

the value to the provider of extensions (including expansions of capacity and expansions of geographical reach) whose cost is borne by someone else –

and (ea):

the value to the provider of interconnections to the facility whose cost is borne by someone else –

We say that, read in context, it is clear that (1)(e) and (1)(ea) are concerned with extensions or interconnections that are ordered pursuant to determinations under the statutory scheme, that it has a function, in that regard. It is not concerned with contributions at large, and that was the constructional conclusion of the Tribunal at paragraph 54 of the Tribunal’s decision. That construction is supported by the legislative history. One of the principles agreed in the competition principles agreement was that the dispute resolution body should take into account:

the economic value to the owner of any additional investment that the person seeking access or the owner has agreed to undertake –

That was in clause 6(4)(iii), which was quoted by the Full Court at paragraph 42. That suggests a concern with additional investments made as part of resolution of an access dispute, not some broader concern with how the facility had been constructed over time. The provisions in 44V, W and X involve the working out of that principle.

Now, notwithstanding those indications in the extrinsic materials, at paragraph 51 of the decision the Full Court justified its broader construction by fastening upon differences in the language between the competition principle agreement and the final statutory provision, which referred to:

the provider of extensions whose cost is borne by someone else.

At paragraph 51 of the decision, the Full Court said that this involved a number of changes to the language. The first was to broaden the language to:

include instances where the cost is borne by someone other than the provider –

That, we say, is an unconvincing distinction, because the provision refers to the value, to the provider of extensions, whose cost is borne by someone else. “Someone else” is just in contradistinction to “the provider”, and in any event, the cost could be borne by someone else pursuant to a determination. The second was that the change of language was to “is borne”, which the Full Court said:

appears to be intended to make clear that the focus of the provision is not confined to extensions agreed or determined as part of the bilateral access process itself.

The third was that the use of “is borne” rather than “is to be borne” or “is agreed to be borne” captures costs already incurred, and we respectfully suggest that those second and third reasons provide a slender basis for concluding that Parliament intended a significant departure from the competition principles agreement that the legislation was intended to enact.

The more natural meaning of the present tense in 44X(1)(e) and one which is consistent with the accompanying statutory context is that the provisions referring to extensions which the Commission has required the provider to be made, usually in the same determination but potentially in an earlier determination, it is much less likely to refer to historical projects which might have been completed decades earlier and the cost of which is also likely to have been borne some time ago.

At paragraph 247 of the decision and in following paragraphs the Full Court found five reasons why a limitation to the application of the scheme, as I have described it, should be rejected and that 44X(1)(e) should have some perfectly general application to any contribution made by any person at any time. Those reasons are set out in the following paragraphs.

We say for the reasons that I have just indicated by reference to the earlier paragraph, that having regard to the statutory scheme and the apparent connection between 44X(1)(e) and (1)(ea) and those earlier sections, the reasons set out in those paragraphs are not a sufficient basis to find that (1)(e) has a general application at large.

If that construction is correct, then the Full Court was wrong to say that the Tribunal failed to require that the value to the provider of extensions made in some sense historically by historical contributions, was required to be taken into account regardless of the surrounding circumstances.

Finally on that ground, the Full Court also relied on section 44ZZCA. That section is set out in paragraph 255. The relevant subparagraph was(a)(ii):

include a return on investment commensurate with the regulatory and commercial risks involved -

That section is normally applied or in analogous situations, sections are normally applied to consider the question of: is the particular entity subject to average market risk or greater than average market risk or less than average market risk, having regard to regulatory and commercial risks that it faces?

In the present case, however, at paragraph 263 and following, the Full Court said it had a role to play in the present case and at 267 it was correctly observed that:

(a)(ii) did not pose the pricing principle to which there must be regard in terms of efficient costs –

That is correct. That was the language from (a)(i), which the Full Court did not rely upon:

Rather, it was directed to ensuring that the return to the access provider was “commensurate with the regulatory and commercial risks involved.

But then their Honours said:

What was required was the formulation of an appropriate conclusion as to the value of the extent of the investment to be used in the assessment of the extent of return. The Tribunal did not undertake that task. It failed to do so because of its view that a capital value determined in accordance with the agreed DORC methodology . . . was a value that would conform to the statutory requirement. That was not necessarily so.

Then in in 268:

The terms in which s 44ZZCA(a)(ii) is expressed require an appropriate return to be determined after evaluating the relevant risks involved in the particular case. No doubt one matter to be brought to account in making that assessment was the concept of economic efficiency –

notwithstanding that in the previous paragraph their Honours had observed that it was not framed in terms of efficient cost, and apart from that, there is, in our respectful submission, just no reasoning that articulates why having regard to the return on investment commensurate with a regulatory or commercial risk requires regard to be had to contributions made, historically, by various people. There is just no reasoning, in our respectful submission, which connects those three matters.

GAGELER J: Mr Moore, could I just ask a high‑level question about the Full Court’s reasoning, both in relation to section 44X(1)(e) and section 44ZZCA(a)(ii). The reasoning appears to equate PNO with the State, and to draw a distinction between costs historically borne by the State and costs historically borne by someone other than the State.

MR MOORE: Yes.

GAGELER J: Is that a legitimate starting point?

MR MOORE: There was economic evidence about this that suggested that in this type of scenario where you have a privately‑owned entity that is a successor in title, in effect, to the State, it would be relevant to consider, if one was undertaking an historical cost analysis, and I emphasise the word “if”, because we said that that is not what was done here, and not what one should be doing, but if one was undertaking that historical cost analysis, one might equate the successor in title to the State as its predecessor in title because you would have to have regard to, if you were looking at what costs were incurred that could be recovered, costs that were incurred over time, and that is where the issue of user contributions was said to come in.

None of that explained why, in undertaking a DORC approach, one would have to have regard to user contributions. That is an entirely different question, but that is the best explanation I can provide for why the PNO was seen to be standing in the shoes, as it were, of the State.

GAGELER J: Does this economic evidence find reflection in reasoning of the Tribunal or Full Court? Was there any hint of it?

MR MOORE: Yes, if it does, there is – can I grab the paragraph number in a moment.

GAGELER J: Of course.

MR MOORE: There is reasoning that discusses, at both the Tribunal level and the Full Court, whether in fact what you should be looking at, for example, is, well, what did the incoming leaseholder pay for the Port. Is there some sort of fresh amount of contribution established at that point - and both the Tribunal and the Full Court said it was proper to regard the Port, PNO, as standing in the shoes of the State for these purposes.

GORDON J: Sorry, can I just clarify that? You mean for historical costs, not for DORC.

MR MOORE: Quite.

GORDON J: So, for historical costs, one can understand, when one is looking at historical costs, and one would assume, taking into account what PNO paid for the bundle of assets or rights it has, but for DORC one - as I had understood the DORC methodology, and I think this is why I keep asking the question, what are the assets because once the assets are defined at the starting point, the initial bundle of assets, and one undertakes an assessment of the optimised replacement costs at the most efficient means possible, there seems to be no basis for any deduction, does there?

MR MOORE: Quite, your Honour, and that was, with respect, exactly our argument to both the Tribunal and the court. We said once you work out what the assets are that are being used to provide the service, we are entitled to charge for access to those assets. We would be in ordinary commerce, we would be in a free enterprise world, if we were not the subject of monopoly restriction, but in a free enterprise world, of course, where there was competition, our pricing would be constrained by that competition, and DORC provides an estimate of what would that constraint be, what would be the prices that somebody else, a competitor, would be able to charge? Having answered that question, that was the end of the – and there was no cause to look at ‑ ‑ ‑

GORDON J: Is that right? I want to just pick up that last proposition, that that was the end of the inquiry, because if you go to 44ZZCA(a), it has the two links. It has not only – the pricing is set by two things. You may have the first inquiry in the way you have described, but then there is this, in effect, a check. It may not be – it may be part of the overall process of the setting of the price, but you set it so that it includes a return on investment commensurate with the regulatory and commercial risks involved. That is not to say that that may bring about an adjustment upwards or downwards on the DORC MAR.

MR MOORE: But on that second aspect, having regard to the regulatory and commercial risks involved, that seems to be directed to what return should you earn? So the way that that normally works is you say, well, what return on capital and what return on debt should you be entitled, on these assets and having regard to what return would be required, having regard to the risk profile of the business, so you would adjust things like the equity premium and the like, having regard to is this a risky business that needs an above‑market return, or is this a safe investment that needs a below‑average market return?

That is that type of adjustment that that particular provision would mandate, not some adjustment for user contributions, and no articulated basis in the Full Court’s reasoning explains why there would be an adjustment for user contributions under that criteria. But because I was running out of time I skipped over in respect of (a)(i), the conclusion of the Full Court at 262, which provides that although they said the Tribunal had made an error in relation to (a)(i), that was of no consequence. So that was not part of the conclusion, for the reasons that the Full Court sets out in 262.

GAGELER J: Could I just ask a question about the terminology in (a)(ii), that is, return on investment.

MR MOORE: Yes.

GAGELER J: I am not exactly sure how that should be read. I can understand it as a compendious expression, a return on investment. Is part of the Full Court’s reasoning to suggest that we are looking over some historical investment by some party?

MR MOORE: Well, that was the difficulty. That has not been teased out by any reasoning here. We are not talking about, when adopting a DORC methodology, some return on historical expenditure. It is not an historical cost model. One is not looking at, when adopting a DORC methodology, one is not looking at how much did you spend on these assets, how much did it cost you to construct them, which will normally be more than the DORC valuation because it would have been constructed more inefficiently,
more expensively, using old technology, and not necessarily less than the DORC valuation but most often more than the DORC valuation.

It is not what one is looking at when conducting a DORC valuation and so to look at return on historical investment is, in effect, sidestepped by the adoption of a DORC methodology. Then the only thing that one is then looking at is, well, what should be your return on equity or your return on debt in respect of the asset that has to be funded by equity funding and debt funding for the purposes of a calculation of using the building block methodology, a return on equity, a return on debt, return on investment, then a depreciation and then other matters such as operating costs and the like which then goes to the user price through the methodology that was employed. There is just no light shed on why a return on investment required an examination of historical contributions.

Now, I am conscious that I have overstayed my time and my learned friend, Mr Young, wants me to finish. I have not addressed ground 5. Ground 5 was, in effect, a complaint about – even if the Full Court was right about the notice we have just been addressing, the Full Court went on to make observations that did not.....a full examination of this historical expenditure, and for the reasons that we have set in writing – and I rely on the written submissions – we say it would not be appropriate to examine user contributions in isolation without looking at the question of, well, for example, was there a compensating benefit for the person who was contributing.

If someone makes a financial contribution and then gets a matching benefit, for example, why would any efficient approach to the calculation of the amount to be recovered exclude those assets from the asset base and require, in effect, that other people who never contributed to them, who had no arrangement with the Port in respect of them, would get them for free, and it is an extremity if everything was contributed on some basis whereby somebody contributed an asset in return for some benefit, then the contention would be that the entire Port now has to be provided for free to all‑comers with no charge being applicable and we say that just cannot possibly be right and does not properly attend to the appropriate approach to the calculation of fees. May it please the Court.

KIEFEL CJ: Yes, thank you, Mr Moore. Yes, Mr Young.

MR YOUNG: Thank you, your Honour. On access and the first three grounds, the Port’s key contention is that access is a physical concept and applied to the service in question here they contend that access is limited to the person in physical control of navigating the vessel through the channels.

That central contention ignores the commercial context and the statutory framework, and it also ignores the declaration of the service. The commercial context is that the export supply chain connecting Hunter Valley coal mines with their export markets necessitates the use of the Port, as the Full Court said at paragraphs 13 and 17.

In that commercial context, the purpose of the declaration was to give Glencore the right, ability or opportunity to turn to account those elements of the export supply chain that make use of the channels in the Port. That is reflected in the service definition, which is at paragraph 88, and it may be helpful if the Court opens that at page 197 of the Full Court’s judgment.

It captures squarely loading and transiting through the Port and of course they are integrated elements that are not severable. There could be no loading of coal without transiting the Port and there would be no point in transiting the Port without loading the coal. That is the context in which the concept of access needs to be considered, in our respectful submission. There is nothing in the text, the purpose or the purpose of Part IIIA, to support a physical conception of access.

Dealing firstly with the definitions and their text, “access” is not defined, there is only a general definition of “third party”, that you have been taken to in section 44B, which refers to:

a person who wants access to the service or wants a change to some aspect –

of the service. There is nothing prescriptive or confining about that definition. It is a broad and flexible usage of a term to allow it to reach a diverse range of potential services or commercial situations.

GLEESON J: Mr Young, there are obviously – there are hundreds of provisions in this Part IIIA, including provisions about hindering access to service and access undertakings and access codes for service. Do you say that all of those provisions are concerned with access in a more general sense, or do you say that in some parts of Part IIIA, in order to make sense of what is going on, you have to be fairly precise about the nature of the access that is involved?

MR YOUNG: Well, the nature of the access will vary, your Honour, with the particular set of facts, but there is no occasion to limit in every case to physical access. That is not consonant with the ordinary meaning of the words, for instance, as Justice Gageler pointed out, but here, and I will come to this, what the Full Court relied upon was a transactional engagement between the exporter and the purchaser that determined how much was to be loaded, what tonnage of coal, at what port, and at what date, or date period, which would require a vessel to transit the Port to undertake the exercise in loading and shipment off to the purchaser’s destination.

Now, those matters were transactionally fixed by the export sales contract, so there is no lack of certainty in the way in which the Full Court analysed the matter, and one does not need to speculate about different situations and how access might be defined, or might be satisfied on the facts of other situations, but there is absolutely no basis for confining it in every case to physical access, and, in this case, direct physical control of the navigation of the vessel.

I will elaborate on those points, your Honour, if I may, shortly. I was going to turn to the definition of “service”, and likewise, in the definition of “service” in the Act, there is nothing to confine it to physical use or control. On the contrary, it is a broad definition. There is an inclusive reference to:

the use of an infrastructure facility –

but that is only one example. That is not a basis for restricting access always to a concept of physical access or control. That wide reading is supported by the objects provision in section 44A. That objects provision is inconsistent, also, with a physical limitation of the kind contended for.

Can I say one thing in answer to a question that arose from the Bench. The channels are not infrastructure. The berths and channels are just water. The infrastructure facility is actually the investment in dredging and the construction through dredging as well of the river walls and revetments. They are effectively piled‑up earth to provide support at the sides of berths or the sides of channels, but what was treated as the infrastructure facility was the investment in the berths, in the river walls and in the dredging and in the revetments.

There is a list of the relevant assets ‑ that is to say the investments of that kind – in the ACCC reasons in the respondent’s further materials at page 172. The other thing I might add is that there was no lease to the channels but as the ACCC reasons stated at page 43 in section 1.1, there was only a licence to the Port to use the channels. Neither that licence nor the lease was put into evidence and we objected to any assertions being made about the content of those documents unless and until the Port put those matters into evidence, which it never did. So that was the position in that regard.

STEWARD J: That is partly why I asked the question, Mr Young, because you can have dredging leases ‑ they are reasonably common in the natural resources world – which do give a port operator or a miner an interest in land which they have exclusive possession of.

MR YOUNG: Yes. On the material, so far as it goes, there was only a licence in this case, as found by the ACCC.

GAGELER J: Mr Young, in the 2016 decision of the Tribunal, there is a reference to these matters, in particular in paragraph 13. I had asked Mr Moore whether we can take these statements as uncontroversial background but, in the light of your submissions, it would be helpful for me to know whether paragraph 13 of that decision – it is at page 511 of the bundle – is common ground or whether you contest it. I am looking in particular at the last sentence.

MR YOUNG: The last sentence is not entirely correct, as we understand it, your Honour. There is in fact a statutory provision in the State Act, the PMAA, that gives that right ‑ it is not the lease – and it gives that right to the Port operator. So if the relevant payments are not made, the Port operator has the statutory right to exclude access. Section 72, if memory serves me – I am not sure it is recounted by the Full Court. It is section 72(1) of the PMAA.

GORDON J: Mr Young, I had understood that you said that there were the assets that were put in play, which were set out in the Tribunal’s decision. Is that right?

MR YOUNG: I said the assets that had been invested in were listed by the ACCC in its reasons. Can I go to the page number, your Honour - page 172 in the bundle of the respondents’ further materials.

GORDON J: Thank you.

MR YOUNG: There is a table at that page, your Honour, and as your Honour rightly said earlier, it includes assets consisting of an investment in dredging and in riverwalls and revetments. I am referring to table 26, page 172, and the two areas where there was, relevantly, in connection with user funding, an adjustment of values, concerned channel assets, measured by reference to the extent of dredging and then riverwalls and revetments. Revetments are substantially just mounds of earth that provide reinforced sides. Now, moving beyond the definitions, if one looks at the other ‑ ‑ ‑

GAGELER J: I am so sorry, Mr Young, I do not want to delay you any longer, really, but I was just looking at section 72 of the PMA. It does not seem to provide an answer to non‑payment of a charge. That does not matter at all, whether it is a lease or a licence, or whether it is proprietary or statutory, but it probably would be useful for us to have it, at least as background, as common ground.

MR YOUNG: Well, your Honour, that is – we are unable to say anything about the provisions of the lease, for the reasons I explained earlier - or the licence, for that matter.

GORDON J: So, can I just understand, does that mean that when you got to do the BBM and you agreed on DORC, there was just an agreement about what the assets were that were in the pool? I mean, how is it you can have an arbitration if you do not have the lease and the licence? There must have been some agreement about some factual foundation from which to leap.

MR YOUNG: Yes, there was an agreement concerning the relevant assets that were used to provide the service and ‑ ‑ ‑

GORDON J: Is that what is set out at page 172?

MR YOUNG: Effectively, yes.

GORDON J: Thank you.

MR YOUNG: If the Court pleases, I was going to make an observation about other provisions, again on the meaning of “access” as used in Part IIIA. Nothing can be drawn from the other provisions to limit the concept of access to direct physical use or control. That is evident, for instance, in section 44V(2) which refers broadly to access. None of the examples given confine to physical use situations. The Full Court made an observation to similar effect at paragraph 46.

The next matter to raise is one that has been canvassed. Contrary to PNO’s submissions, the ordinary meanings of the term “access” and “use” are not limited to physical use or physical control and that has already been discussed and I will not go over it. There is also a line of authority in the Federal Court and in Tribunal cases to the effect that access has a broad meaning, namely, the ability or the opportunity or a way of approaching or using or benefiting from something, and “use” in its ordinary meaning is not confined to physical use. It extends to other ways of making use or turning something to account or employing something, here in connection with an export supply chain.

GAGELER J: Mr Young, does the case law provide any examples of other non‑physical use or non‑physical access?

MR YOUNG: It depends on how one defines “non‑physical”, your Honour. But the case law illustrates situations which my learned friend accepted were commonplace, where an enterprise works through various contractual arrangements to make use of some particular service or infrastructure service, I think of a rail line, a rail haulage situation. That usually occurs via contractual arrangement so there is no physical use. There is taking advantage of a situation by contractual arrangements.

That was illustrated in this case, your Honour, by the evidence, if I can digress to answer your Honour a little bit more fully. There was evidence as to the supply chain here, described as the Hunter Valley supply chain. The ACCC summarises that evidence in its submissions at paragraph 8 and it refers to the progression of steps through rail access, rail haulers, to the Port of Newcastle where there are three coal terminals which operate to load ships under contract.

There was evidence - and it is in the supplementary materials we supplied, the statement by Mr Pitt of Glencore, paragraphs 13 and 16 in particular – I will not take the time to go to it. He explains how Glencore accesses its supply chain by a succession of long‑term take and pay contracts. It has a long‑term take and pay contract with a rail track owner, a utility called ARTC.

Glencore does not physically access the track itself. It has a long‑term contract with rail haulage companies that actually do the hauling of the coal on someone else’s track. Then when it gets to the Port, it has a long‑term take and pay contract with the Port Waratah Coal Terminal and that is the company which physically loads the coal, but Glencore undoubtedly is accessing the service of loading the coal and the berths for that purpose via contractual arrangements.

As my learned friend, Mr Moore, accepted, it is commonplace to work through contractors and he accepts that certain forms of contract satisfy his criteria for physical access, but not other forms of contract, even though they relevantly do much the same sort of thing.

So PNO’S concept of physical access or control is illusive.....because it can be satisfied by various contractual arrangements. However, there is no reason or logic as to why certain contractual arrangements satisfy it, such as a CIF export contract but not an FOB export contract where both of them fix how much is to be loaded, where the loading to is to take place, when the ship is to arrive and the necessity for the ship to transit the Port. That is all dictated by the export sale contract.

Those are the same matters that are set by a charter party. There was evidence about that, that I will come to shortly, but to answer your Honour more fully, that is how we would say the supply chain works but at every step, including the Port, Glencore enters into contractual arrangements in relation to which coal, that amount to it accessing the berths adjacent to wharves in order to undertake loading and the channels in order for the ship to transit so it can be loaded and depart, to the destination nominated by the export purchaser. That is all governed and controlled by a direct contractual arrangement.

Now, let me illustrate that again. The Tribunal’s orders included an acceptance that Glencore will be accessing the service when Glencore, either directly or by an agent, charters a vessel to enter the Port precinct and load Glencore coal, and that is the order that our learned friends seek to have reinstated, so they accept that contractual access satisfies the statutory requirements for access, and there is no reason for treating an export sales contract fixing the very same things as falling into any different categories so far as access is concerned. That, in substance, was the reasoning of the Full Court that your Honours have not yet been taken to. Now, there is one other matter about the commercial – I am sorry, your Honour.

KIEFEL CJ: Is that a convenient time, or do you wish to finish a more general submission and we will come to the details of the Full Court decision after lunch?

MR YOUNG: Yes. Could I make one other point, your Honour, if I may?

KIEFEL CJ: Yes, of course.

MR YOUNG: There was evidence as to the ultimate burden of the Port charges. It was not in dispute. The evidence was that the economic burden of the charges is passed back to Glencore as the coal exporter. The evidence was to the effect that the purchaser of the coal was only interested in the price calculated on a landed cost basis.

If it was an FOB export contract, the Port charges would be passed back by the purchaser by way of reduction in price received by the exporter, producing exactly the same economic result as if it were a CIF contract, because if it were a CIF contract and Glencore arranged the shipping, it would bear those charges itself.

That is found in Mr Pitt’s affidavit in the respondent’s further materials, page 26 at paragraph 12, and it was referred to in the ACCC reasons at page 58. So that is the other aspect of the commercial context within which the question of access to the service is to be considered. Thank you for the extra time, your Honour. I can move to the.....after the adjournment.

KIEFEL CJ: Yes, thank you. The Court will adjourn until 2.15.

AT 12.55 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

KIEFEL CJ: Yes, Mr Young.

MR YOUNG: Thank you. PNO’s arguments about a mere economic interest do not, in our submission, reflect the decisive reasoning of the Full Court. I want to take the Court to the passages. The issue about access was framed at paragraph 9, page 175, subparagraph (1). That addressed the issue of whether the Tribunal made an error in law by accepting that access was limited to circumstances where Glencore had physical control of the ship.

The error by the Tribunal, or the Tribunal’s reasoning in that respect, is then addressed at page 210 in paragraphs 147 and 148. A quote makes it clear that the concept accepted by the Tribunal that only persons in control of the vessel, whether directly or through a charter arrangement, could be regarded as accessing the channels, and so that was the issue that the court was addressing as they make clear in paragraph 141.

Then at paragraph 155, page 213, which my learned friend went to, the way in which the court was using the descriptor “economic” is made clear. It was used, as line 10 clearly indicates, as a descriptor in contradistinction to PNO’s contention that there needed to be physical control of the vessel using the channels for there to be access. So it was not a gloss on the statute, it was simply a descriptor used to separate other cases that they go on to examine from the circumstance where there is physical control of the vessel.

The key reasoning has not been referred to as yet by our learned friends. It was omitted from their written submissions. It was not referred to orally. It appears in paragraph 158, which commences at page 214:

Our fundamental disagreement with the Tribunal –

So, it is a very clear indication that this is the decisive reasoning. I will not attempt to paraphrase the whole passage, but the Court will see, in the middle of the passage, the proposition that:

Access and use can be relevantly economic though connected closely and clearly, indeed immediately, to the physical activity involved. No particular general principle is at play here . . . the exporter is accessing or using the shipping channels when, by its sale arrangement, it causes a vessel to enter the Port. It does so, that is it causes a vessel to enter the Port, when it sells CIF or FOB, irrespective –

and I abbreviate, of the form of the charter. Now, in our submission, that is manifestly correct. The court was focusing upon the transactional engagement, by means of the export contract, that fixed the tonnage of coal to be loaded, the port where it was to be loaded, the date or time period for loading, and the port of destination. Each of those ingredients emanated from the export sales contract, regardless of whether it was FOB or CIF. They could not be fixed unilaterally by the charterer. They were the product of a bilateral sales agreement.

So, the relevant interest, or relevant engagement, was the transactional engagement that brought the ship through the Port to the wharf to load, and then departed, all in pursuance of the transactional engagement constituted by the export sales contract. That was the basis on which the Full Court said that Glencore, when it did those things through an export sales contract with respect to its coal, was accessing those elements of the Port that, of necessity, it must use to carry out those elements of the export sales contract. Clearly, it is not a mere economic interest of some remote party such as a contractor working in a Hunter Valley coal mine or a purchaser of steel in Japan, or whatever it might be.

KIEFEL CJ: Mr Young, is the question of access and use in the sense in which you describe separate from considerations as to whether or not Glencore in fact is affected by the charges made for entering and transiting through the channels, which Mr Pitt refers to, or do questions to which he refers go to whether or not the statutory purpose is achieved?

MR YOUNG: Those two matters are, we would say, intimately connected.

KIEFEL CJ: Bound up, yes.

MR YOUNG: The necessity to use those aspects of the Port arises from the export sales contracts but they attract charges that affect the export transaction in the way I explained before lunch because those charges ultimately trace back to the exporter. So they affect that economic transaction, but they are very relevant, your Honour, to the purpose of these provisions and, indeed, the purpose of the declaration, which was to ensure that Glencore had the ability to access, employ or make use of the critical elements that it needed to use to get its coal through the Port.

So, it is relevant in those three respects. It is relevant because it is the connection with shipping in the manner the Court describes in paragraph 158. It then attracts a charge which has market and economic significance and those two matters interconnect with the purpose of the declaration and, indeed, the whole purpose of Part IIIA.

That really was the critical reasoning of the Full Court on this question of access, but the Full Court engaged in that reasoning conscious of the matters it earlier identified about the purpose of the part, the purpose of the declaration, the integrated nature of the definition of service linking loading with the transiting of the Port and the purpose of making that declaration in the first place. All those matters combine to make this a clear case, in our submission, where Glencore, as exporter under the export sales contract, is employing, making use of the service in both its integrated aspects.

That analysis is missing from all our learned friend’s arguments. I should add in this context that one of the pieces of evidence was a standard charter party contract. It is in Mr Pitt’s affidavit, referred to at paragraphs 26 and 27 to 30. It does not show a lot. It shows effectively that the standard charter party adopts the tonnage to be loaded, the Port, the date or dates for loading and the destination port. Those matters are the matters that are the subject of the bilateral agreement in the export sales contract. We would describe this as a direct transactional engagement in relation to the loading and shipment of Glencore’s coal through the Port, not a mere economic interest.

May I add one other thing to elaborate on the Full Court’s statement that this analysis embraces both sales CIF and FOB. Export sales contract can take an FOB or a CIF form, but all that means is that by the export sales contract the contract itself allocates the task of arranging freight and paying for freight to one or other of the exporter or the purchaser.

If the exporter is going to look after freight and pay those charges itself, it is an FOB form, but if the responsibility for doing those things – sorry, I have reversed it. It is the other way around. CIF does that. If it is FOB, then the responsibility for arranging freight falls on the purchaser but that allocation, who is to do that task of arranging freight is fixed by the export sales contract. It does not matter which way the allocation goes. It is fixed by the export sales contract. So whether it is a CIF or an FOB, the export sales contract connects through and dictates how freight is arranged.

KIEFEL CJ: In international carriage of goods in any event, the differences between these contracts is mostly about allocation of risks, is it not? It does not really speak very much to the kind of issue we have here.

MR YOUNG: Exactly, your Honour, but my point was it is an allocation of risk by the export sales contract, and it can go either way but that does not alter the question of access in the way in which that term is used for the purposes of Part IIIA.

Now, we can add to those factors that I have addressed what the Full Court said about loading, which undoubtedly utilises the service. When account is taken of the fact that Glencore is actually loading the coal through its contracting party, Port Waratah Coal Terminal in every instance, when it does that it is not only utilising the service, it is rendering itself liable for one of the determinable charges for the service, namely, the wharfage charge.

So, even before I get to a deeper analysis of that charge, that fortifies the conclusion that this is a case where Glencore is accessing the service in its full dimension. Of course, as I started off, you cannot load without the vessel transiting and there is no point in loading unless it can exit, so loading commands use of the channel.

GAGELER J: Mr Young, you referred to the loading occurring through a contracting party. Where is that best described in the evidence?

MR YOUNG: It is in the statement of Mr Pitt that we added in the supplementary materials. It is found in Mr Pitt’s statement ‑ ‑ ‑

GORDON J: Mr Young, while you are looking for that reference, could you just tell me whether or not that evidence was the subject of challenge? I know that you relied on also the earlier paragraphs in Mr Pitt’s affidavit, or whether there were any findings in the determination by the Tribunal or otherwise.

MR YOUNG: It was not the subject of challenge. The findings – I do not think there were any findings beyond a general description of the supply chain, but in relation to the passing back of the economic burden of the Port charges, that is referred to in the ACCC reasons, and I did give the page reference - let me see if I can find it again - and that was to page 58, point 8 of the ACCC reasons, and that is the page number of the respondent’s further materials. The evidence I was going to ‑ ‑ ‑

STEWARD J: Mr Young, may I ask - I am sorry - on your argument, does that mean that, relevantly, Glencore also accesses the port of destination?

MR YOUNG: Well, of course, that was not in issue, but the – I think the answer is no, your Honour. My argument does not go so far, because it is the way in which the export sales contract connects with the loading shipment out, which is – .....it is a set of things that occur within the scope of the defined service. We are only talking about access to this service, and so it does not reach beyond the Port of Newcastle. So once you are beyond the heads, if there are heads in Newcastle, or a breakwater, we have reached the extremity of the definition of the service.

To answer your Honour Justice Gageler, it is Mr Pitt’s statement, paragraph 13, and your Honour Justice Gordon, the last sentence of that paragraph says that:

We then have long term take or pay contracts for loading coal onto coal vessels berthed at PWCS –

which is the Port Waratah Coal Terminal. The same sort of territory, if I might give this additional reference, about the supply chain and the use of rail haulage providers and loading terminals is canvassed in the Full Court decision on the..... I am sorry, it is the Tribunal decision on the declaration back in 2016. That is paragraph 9, which is – I am not sure I can give the right page reference to it, I am afraid.

GAGELER J: Mr Young, this goes to an earlier question that I asked Mr Moore and that is whether we can take what is said under the heading “Background” in that earlier decision as uncontroversial. I think you told me that you could not accept the last sentence at paragraph 13.

MR YOUNG: Aside from sourcing it in the lease, we think that paragraph 13 is accurate and to answer your Honour’s question about paragraph 9, “Background”, we can accept the balance, your Honour, and the supply chain is described in paragraph 9, which I just referenced, which matches Mr Pitt’s evidence, and I think we can accept the balance, your Honour. It was only that the source of the right to exclude access of a lease I could not confirm, but we do think looking at it again, even that section 72 does confer that right. But otherwise the answer to your Honour’s question is yes.

Just on access, one last point, a very minor one. My learned friend said that the concept of physical access provided greater certainty about fixing the date of operation of a determination under section 44ZZO. That is pure assertion. There is probably more and certainly no less certainty if access is based upon the export sales transaction as the contractual engagement that requires a vessel to transit and load.

There are further difficulties, if I could list them, with our learned friend’s reliance upon the physical access or control as the statutory criterion for access. The first is a purposive observation. It would be incongruous for the declaration to be predicated on the fundamental importance of the use of shipping......Glencore’s business in getting coal from the Hunter Valley to export destinations but then to deny Glencore the status of a third party capable of seeking opportunities for access under Part IIIA.

The second point is this. Our learned friend’s conception of physical control is almost entirely undefined. He accepts that it extends to some contractual arrangements, such as a CIF charter party, whether directly or through an agent, but apparently not other forms of contractual engagements, even though they stipulate the critical elements of tonnage to be loaded, date to be loaded and so on.

Now, there is no logic in that. But even if he were to confine it to a demise charter, which gives some limited power over the vessel, it still remains the case that the master has primary control of navigation, so too does the owner, and the owner is made responsible under section 48 of the PMAA for the vessel, and for the payment of charges.

So even on that narrow view, there are multiple persons accessing the service, in any event, but the apparent simplicity of relying on physical control dissipates even further when you take into account the fact that there are other forms of charter, voyage charters and time charters, which are more common, which do not give any physical control over the navigation of the vessel. All they do is set how much to be carried, from what port and to where, no differently from the export sales contract.

Now, the Tribunal’s order that PNO seeks to reinstate has that very problem, because it extends to accept that Glencore has access whenever it charters, either directly or through an agent. The concept of charter, in the order of the Tribunal our learned friends seek to reinstate, is not limited to charters giving physical control over the vessel, it is any charter. So, the appeal is seeking to reinstate order about charters that is inconsistent with its arguments about physical access being necessary.

The last difficulty I want to turn to concerns a deeper dive into the wharfage charge. Can I deal with that matter. We would say, looking at the definition of “service”, it is indisputable that Glencore is using the service when it loads call at the berths and the wharves. That activity is explicitly within the scope of the service, as the Full Court found at paragraphs 153 and 154. There is no challenge to that finding in the grounds of appeal.

The second point to note is that the wharfage charge was in dispute in the arbitration. The amount of the charge was agreed in the course of the arbitration. The ACCC’s final determination statement of reasons makes it clear in footnote 654, that I will not ask the Court to go to, that the agreement on the wharfage charge was arrived at on 7 May 2018, whereas the arbitration commenced on 4 November 2016. It was arrived at as a result of a direction from the ACCC on 19 March 2018 for the parties to provide a report detailing what aspects of the modelling they could agree upon. That was the history of the wharfage charge.

Under the statute, it is a charge levied in respect of the availability of wharves and berths for loading and according to PNO’s statement of charges, the wharfage charge covers berth-specific dredging and surveying and the costs that underpin that charge. It is levied by reference to the cargo loaded on the owner of the cargo, so it is levied on Glencore.

The next point is the wharfage charge was part of the Tribunal’s determination. It fixed the wharfage charge and it could only do that if the wharfage charge was part of the service or a charge for accessing the service. Not only the quantum was fixed, but the 15‑year term of that charged was fixed. It is paragraph 157 of the Full Court, page 214. The costs of dredging at the berths and building the embankments that are called “revetments”, those capital costs went into the asset base which was used to generate the maximum allowable revenue in calculating prices. So, the wharfage charge was quite central.

The next point is that loading was the central activity that brought the vessel through the Port. Putting those factors together, it is clear in our submission that Glencore was accessing the service by loading the coal and that supplements or is an independent basis for finding that it is accessing the transaction over and above what I have said about the export sales transaction.

There is one point to be made by references to the Full Court’s reasons about the wharfage charge. Could I ask your Honours to go to page 211, paragraph 149. In the middle of that paragraph, the court makes the observation that limiting access to control of the ship or even limiting to a situation where Glencore charters a vessel would not only deprive Glencore of the determination of the NSC in cases where its coal was being carried but would also deprive it of the wharfage charge.

That same point is repeated at the end of that paragraph in the last sentence, and the point is made again about the wharfage charge at 153 and 154. So the short point is our learned friend’s arguments would deny that Glencore is accessing the service when loading unless it also happened to be chartering the vessel at the same time. That would mean that we would not have the benefit of the determination of the wharfage charge unless it also happened to be the charterer. Now, that is, we would say, a perverse result inconsistent with the definition of the service and, in fact, a determination of that charge by the ACCC and the Tribunal.

Now, all of these matters come together in the Full Court’s findings. The Full Court explained that there are two routes of analysis that lead to the same conclusion that Glencore is accessing the service, across the board all aspects of the service. The first route is rope loading. The Full Court deals with that at 154, which I have mentioned, and then further at 157. At 157, the Full Court refers to part of the service as being accessed or used by Glencore, both physically and economically, when Glencore is selling and loading the coal, and then they extend it.....by the next sentence.

In the following paragraphs, 158 to 160, they explain the two routes of analysis. As to the first route, focusing on loading, that brings the navigation of the vessel through the port. Navigation, therefore, falls within section 44V(2) as “any matter relating to access”, so a determination can be made about both aspects of the service springing from loading to include the use of the channels to transit the Port.

Now, that.....the alternative route is the first one concerning the export sales transaction which makes clear that Glencore is using the entire service. It is a little bit hard orally to dissect these two strands of reasoning which are running through paragraphs 157 to 160, but it is the two strands of analysis that leads the court to say at the start of 160 “In either case, Glencore” was accessing.

One final point about Mr Moore’s argument about physical access. He says it is a problem that there is more than one person accessing the service, in the sense that their access overlaps. Well, that is the natural result of his acceptance that access can be via contractual arrangements. It is also the natural result of the export transaction market and the market for freight, that you will have multiple parties whose access is overlapping. That is, in our respectful submission, not a difficulty, for the reasons explained by the Full Court.

Can I turn then to one piece of evidence relevant to access. It concerns the evidence as to the practice of the Port in imposing the NSC on shipping agents. This evidence is in the affidavit of Mr Dowzer, an employee of TNO, which is in the supplementary materials at pages 9 and 10 of those supplementary materials, if the Court could locate them.

Mr Dowzer’s evidence was that PNO levies the NSC on shipping agents representing the vessel without knowing the identity of the shipping owner or the charterer. Of course, the owner and the charterer would have overlapping access, but PNO is not troubled in practice by not knowing the precise..... That is Mr Dowzer, paragraph 16(a) at page 9, and then paragraphs 18 and 21. The statement is PNO does not ordinarily have knowledge of the chartering arrangements of vessels that call at the Port, and at the bottom of paragraph 18, it:

does not usually know the identity of the owner or charterer of any particular vessel that calls at the Port.

Now, for those reasons, the Full Court’s analysis is correct, in our respectful submission. What the Full Court did was to remit the question of refining the precise terms of access to the Tribunal on the basis that, since Glencore was an access seeker, those terms were a matter entirely within section 44V(2). This is explained by the Full Court at paragraph 162, page 216. Its observation was that precise terms could be solved either by Glencore’s contractual arrangements with the buyer or the shipowner, or by making a representation for the purposes of section 48(4)(b). The Full Court recognised that section 48(4)(b) was, in the language of paragraph 167 at page 217:

a mechanism of delivering an equivalent price to another party whose access overlaps or coincides with Glencore’s access, so as to provide terms of access for Glencore.

I want to then turn, if the Court pleases, to the second pair of grounds relating to user funding. It is important to understand a couple of things in overview. What the ACCC and the Full Court did was to find that the provisions of the Act required account to be taken of investment costs that were borne by someone else other than the provider, and both the ACCC and the Full Court said that that followed squarely from section 44X(1)(e) and the pricing principles in 44ZZCA(1).

Quite separately, they said it also followed from other paragraphs of section 44X(1), namely paragraphs (a), (b), (c) and (g), which the Full Court addresses towards the end of its reasons at paragraphs 271 to 274. I mentioned those other paragraphs in particular because the grounds of appeal do not raise any challenge to the correctness of those findings.

Contrasting those findings with the Tribunal, the Tribunal did not arrive at any conclusion about the operation of those provisions. Rather, it concluded that the use of a particular tool of valuation foreclosed any need to consider the provisions of the Act. The Full Court found that that was a misdirection constituting an error of law and what the Full Court did was to remit a question of investments whose cost was borne by someone else back to the Tribunal because the Tribunal was obliged by statute to take that matter into account.

The Full Court did not arrive at a result that it should have taken into account by deducting a particular figure, as the ACCC did. It simply remitted the matter back on the basis that the Tribunal had misdirected itself by failing to give effect to statutory provisions, leaving it to the Tribunal to work out how those matters should be taken into account.

That means that the whole basis of the Tribunal’s decision was that the adoption of DORC as a tool of valuation foreclosed any taking into account of investments funded by someone else where those investments were being used to provide the service.

Now, in our respectful submission, that was rightly identified by the Full Court as an error of law. Can I step through where the Full Court identifies that please in the reasons, commencing at 227 – in fact, if the Court pleases, I just want to start slightly earlier. Could I go to paragraph 196. The Full Court takes issue with the statement by the Tribunal that:

“The ACCC decided that the DORC methodology would meet the requirements of s 44X”.

In paragraph 197, the Full Court said the ACCC did not say any such thing, and the Full Court is right about that. Paragraph 198 is the crux of the Tribunal decision in the first sentence, that excluding assets from DORC, which means effectively adjusting the DORC value, is:

equivalent to deciding that not all the assets are required –

Now, I will go on and explain why that is a misconception. At 200 to 203, the Full Court explains why the Tribunal’s reasoning miscarried, finishing with the statement that:

the Tribunal has held that the criteria in 44X . . . may be satisfied if a DORC methodology is used without further adjustment –

and that was the identified issue. The error is referred to next at 254 at page 243. It is important to note that the finding was:

The Tribunal was obliged to take into account the present value to [Glencore] of extensions being borne by others by reason of past user contributions.

Now, I am going to list the reasons ‑ ‑ ‑

GORDON J: I am sorry, Mr Young, can I just ask you a question about the first sentence of that paragraph?

MR YOUNG: Yes, your Honour.

GORDON J: Do you accept that is right? It seems to be a challenge to the entire methodology.

MR YOUNG: No, your Honour. The critical words are the last phrase, “even if there were user contributions”. DORC is no more than a hypothesis and I will go on and explain that in a moment. But the use of DORC is simply to adopt a particular valuation methodology. It says nothing about what assets are being used and there is no reason why that valuation should not be adjusted if the Act requires it.

Your Honour, I will explain more fully in a moment, but the reasons why we say the Tribunal treatment of DORC was legally erroneous as foreclosing any consideration of the Act are these. First, DORC is a mere valuation tool. Part IIIA does not mandate any particular pricing methodology. It does not mandate a building block method, and it does not mandate any particular valuation method or another. DORC is, in fact, one of many possible valuation methods. It could be actual cost, it could be market value, it could be replacement value or it could be optimised replacement value.

Market value, for instance, involves the Spencer Case hypothesis. DORC involves the hypothesis that the new entrant constructs, using up‑to‑date methodology, all of the same assets that are being used to deliver the service, but it is simply a valuation hypothesis. It was accepted by the Tribunal at paragraph 164 of its reasons, and by the Full Court at 278 and 279 of its reasons, that DORC is merely a tool of valuation. Now, the second proposition concerns the nature of DORC.

STEWARD J: Before you go on, Mr Young, just to assist me, do I take it that it is assumed, for the purposes of a DORC valuation, that the assets that are to be, if you like, built again, the relevant entity must have the right to do that building?

MR YOUNG: Can I step back, your Honour? It certainly assumes that the assets that are to be valued are the assets that are being used to deliver the service, being assets that are either owned or leased by the provider. It is definitely ‑ ‑ ‑

STEWARD J: All right. So is it implicit in that assumption that the, in this case, Port has to have a relevant capacity or right to undertake the exercise?

MR YOUNG: Well, it has to have the right to use those assets to provide the service.

STEWARD J: So, do I take it, it follows from that that you accept that but for the issue of, if you like, funding, that the cost of dredging would be a legitimate cost to take into account?

MR YOUNG: Yes, and that is completely so. I mean, dredging, the deepening of the channels and the building of the side banks and revetments, was assessed on a per cubic metre basis, because there were perfect records of how many cubic metres had been dredged and used to construct revetments and banks, and the parties were almost at one in the total volume dredged.

That total volume was then – it was ascertained what percentage of that total volume had been funded by parties other than the provider of the service. That percentage was then applied to the DORC value of those very same assets. So the valuation of the assets was adjusted to take into account the fact that those investments in those assets had been made, roughly 52 per cent by persons other than the provider providing the service.

So that was the exercise that the ACCC undertook, and there was no challenge to those findings concerning the extent of the dredging, or the methodology that was utilised by the ACCC to make a percentage adjustment to the value of the assets.

Most of the references are given in the ACCC written submissions. Again, shortly I will provide those references and indicate the pages of the ACCC reasons that explain that to the Court, but it might be a bit of a diversion if I do that immediately, your Honour.

STEWARD J: Keep going.

MR YOUNG: The point I was about to make about the nature of DORC is that the assumption that the assets are replaced on an optimised basis involves or may – that assumption does not require the assumption that they are now to be funded 100 per cent by the provider of the service. The assets are the same assets. Their value is to be assessed on an optimised replacement basis, but the funding of those assets remains what it always was. That is.....the DORC valuation tool.

The next element of this is DORC is not, contrary to our learned friend’s assertions, forward looking. It derives the current valuation by asking the question, what would the optimised replacement cost be now as at the current day, which is going to be the first day of a determination? That is all it asks. To say it is forward looking confuses the valuation with the next step which may be to apply a building block model to ascertain a stream of revenue is to be assumed for the purposes of a price calculation.

The Full Court makes this point, that using DORC does not justify a disjunction from the real world by assuming that suddenly the provider of a service has invested 100 per cent in the assets. The Full Court addresses that at page 248 – I have my numbers mixed up. I apologise. What I want to go to is paragraph 258, which I think is page 244.

What the Full Court does in those paragraphs is to draw attention to the fact that the real-world circumstances have an unusual factual dimension – that is, speaking about these existing assets, part of their costs were borne by others.

KIEFEL CJ: Mr Young, is the rationale then that in a competitive market a provider does not recover costs paid by others? Is that the basic rationale?

MR YOUNG: That is where you get to in terms of the direction given by section 44X(1).

KIEFEL CJ: So that is why it is pivotal that that is the – that is the key to what it is trying to achieve.....provide for an adjustment?

MR YOUNG: If you have the value on this optimised replacement basis, that does not alter what assets are being used. Those assets have an investment in them. If the investment was partly borne by someone else, then the proposition that emerges is that the Act requires that investment by someone else to be taken into account, otherwise the provider is getting a return on an investment it did not make, which would not be efficient pricing. That is simply following the commands of the Act.

GAGELER J: Mr Young, we do not know here what investment PNO made.

MR YOUNG: Well, that is one of the next points I am coming to, your Honour. It was common ground that the investment made by PNO is irrelevant. PNO is not the relevant provider to be identified in this sense. The relevant question is what investment has been in these assets that have been used to provide value and generate the service, regardless of who is the owner or operator of those assets from time to time. That was common ground below in the Tribunal and in the Full Court.

GAGELER J: If you are looking at historical investments, that is, what money was put into.....how does it matter who paid?

MR YOUNG: It matters because if the cost of the particular investments that have been used to provide the service was borne by others, by someone else, in the language of the statute, that is a relevant matter to be taken into account because if the provider is allowed to charge a price by reference to those investments it did not make, it is going to over‑recover. It is going to get a return on investments it did not make. The focus is on the assets and what investment was made in there.

Your Honour, it may become clearer if I go to – one of the points I was going to make is this, your Honours, that as my learned friend, Mr Moore, accepted, PNO is in the same position as the State. That was common ground at all stages. Can I direct your Honours to paragraph 229 of the Full Court, page 236, and it is the first couple of sentences. Paragraph 230 as well. The same point is revisited by the Full Court at paragraph 273, page 247, and likewise, it was common ground before the Tribunal, as appears in paragraphs 296 and 297 of the Tribunal reasons.

The underlying logic is that the legislation is directed to what are the assets being used to provide value in delivering the service, who invested in those assets, only in this sense, if it was invested in and the cost was borne by someone other than the provider, that is a relevant matter to take into account, because the provider should not be getting a return on assets that have been invested in by someone other than the provider.

Now, the next point I want to make is a very brief one. There is no agreement to use DORC - there was no agreement to use DORC without adjusting the asset base as required by section 44X to take into account user funding. That is the Full Court decision at paragraph 197, page 227. Nor was there any agreement that DORC would meet the requirements of section 44X for pricing principles.

GORDON J: Mr Young, could you answer one question for me. Has that always been the position or is that the position once it hit the Full Court, because when you read the ACCC determination it is apparent from there that there are paragraphs in a number of places which set out the position not to be so. That is, it is set out that DORC was the agreed methodology ‑ ‑ ‑

MR YOUNG: Yes, but there are two separate things, your Honour. DORC was the agreed valuation tool. The next step though is does DORC preclude an adjustment of the value to take into account funding by others. There was no agreement that DORC would foreclose the second inquiry or prevent the application of section 44X, which is the point the Full Court makes.

Indeed, in the ACCC, the ACCC went on to ascertain the DORC value figure, but then looking to 44X and other provisions, it adjusted that figure to take into account the fact that costs of certain assets were borne by someone else. I can give the ACCC reasons to that post‑DORC adjustment. That is at pages 168 to 172 of the ACCC reasons. So, there are two steps. The use of DORC was simply the valuation exercise. The next step is what does the Act require. Does it require some adjustment of that figure in arriving at a determination?

Now, the next point meets one of PNO’s points. One of their arguments is that what the Full Court did involved a blending of forward‑looking assessments of value with historical costs. As I have pointed out, DORC is not forward looking, it is a current replacement value. Secondly, what was done was simply to ascertain the percentage of dredging in cubic metres that was funded by someone other than the provider and adjust the value by that percentage.

So that was simply an adjustment in line with the Act of the valuation figure. There was no blending of that exercise with any kind of historical costs and the Full Court makes that clear at paragraphs 185 and 186. The ACCC’s submissions at paragraph 33 summarise the volumetric percentage adjustment of the DORC value that the ACCC undertook.

Now, the Full Court, as I said, remitted the question of the application under section 44X(1), all paragraphs, and 44ZZCA, the pricing principles, to the Tribunal to properly consider on the basis that it ought not to have treated itself as foreclosed from considering those matters merely because of the adoption of a DORC valuation. In our submission, that remitter was the appropriate course. The question of just what – account is taken of just what adjustment is made is a matter that has been remitted back to the Tribunal.

Can I then turn to section 44X and other provisions which explain why the adoption of a DORC value was something that was open to adjustment as required by the Act. It will assist, I think, if the Court has open section 44X(1). It lists mandatory factors that “The Commission must take” “into account in making a final determination” as to access. Those factors include, for instance:

(a) the legitimate business interests of the provider, and the provider’s investment in the facility;

(b) the public interest . . .

(c) the interests of –

people like Glencore:

(e) the value to the provider of extensions . . . whose cost is borne by someone else –

So that matter is a matter which must be taken into account. Subparagraphs (g) and (h) pick up principles concerning efficient costs and a return commensurate with risks attending the investment. I will elaborate upon so much of that as in issue. What the Full Court did was to say the Tribunal has not directed itself in such a way as to take account of these mandatory matters, it needs to go back to the Tribunal to take these matters into account.

Now, our learned friend’s principal argument is that the word “extensions” in paragraph (1)(e) is confined to extensions that are required by the very determination which is in question, what he described as a self‑contained regime where you read 44X(1)(e) down by reference to what appears in 44V and 44W. For reasons I will explain, that is entirely unsound.

The first observation to make about “extensions” is that that word is directed to the physical assets being utilised to provide a service where two conditions are met. Those physical assets are the extension to providing value, that is, providing ongoing value so they are relevant to the determination relating to the service, and, secondly, whose cost is borne by someone else.

So, if the cost is borne by someone else of utilising those assets and it is someone other than the provider, that is a matter which must be taken into account. The reasons why this cannot be limited to an extension required by a determination are these. First, the language of paragraph (e) is general and unqualified. It embraces any extension where those two explicit requirements are met and there is no mention of saying, but only where the extension is required by the determination in question. That would amount to an artificial gloss on this mandatory factor.

Secondly, the reading advanced by PNO is contradicted by the legislative background, as explained by the Full Federal Court in two passages. They appear at paragraph 51, page 187, which goes to the legislative background of the provision. Several points are made. The words are “whose cost is borne by someone else”. That is not confined to the limited number of parties, it is anyone other than the access provider.

Secondly, it is in more ways speaking format is borne by someone else. It is not referring to costs that are going to be borne for the forthcoming determination because then a future tense would be used. As the Full Court said in paragraph 52:

The focus is upon value that is currently being borne and in the future will be cost that is borne by someone other than the access provider.

Now, the effect of that background is summarised again by the Full Court at paragraph 243, which is at page 240. I will not again attempt to paraphrase what their Honours say. The Court can see it there. Now, at page 242, commencing at paragraph 248 – sorry, 242 – the Full Court summarises five reasons why a limiting gloss on extensions should not be accepted. The second proposition in 249 is the paragraph:

must be taken into account in making any final determination, not just –

one where an extension was ordered. A further reason why no such limit is to be fed into paragraph (e) is......PNO relies upon section 44V and 44W. They have entirely different fields of operation. If the Court would look at the Act for a moment and turn to section 44V, paragraph (2) in particular our learned friend points to. That confers power by a determination to:

deal with any matter relating to access –

and there are a number of examples, including:

(d) require the provider to extend –

and (b):

require the third party to . . . pay for, access –

Now, the mere conferral of a power in those terms is no reason to read down paragraph (e) as express. Similar observation can be made about 44W. It contains a set of limits on the kind of determination which can be made, exercising the powers in 44V. One of them is (d):

resulting in the third party becoming the owner . . . of any part of the facility, or of extensions –

So the access seeker cannot become the owner of an ordered extension, and (e):

requiring the provider to bear . . . costs of –

the extension, so the provider cannot be required to fund. That limitation is a completely different concept and area of operation than what is being considered by paragraph (e) of 44X(1). There is no link between the two other than the use of the same expression “extensions” to refer to enhancements of capacity.

STEWARD J: Mr Young, could I ask another question. In relation to your argument concerning 44X(1)(e), if you are right why did the legislator use the word “extensions” rather than just “assets”, meaning if you are right it would include assets perhaps from inception that were funded by other people.

MR YOUNG: The reason is that there may be assets who have reached the end of their useful life and they are no longer providing value to you. The reference to “extensions” within the context of enhancements of capacity, something which is continuing to add value in supporting the service. The reason is also indicated by the Full Court in paragraph 253, your Honour. So a past extension may have provided some office space or some office equipment or an office, for instance, and there might be a question of whether it is an extension in the relevant sense, because they are talking about an extension of the.....used to provide the service and providing value in that regard.

Now, in those five reasons the Full Court also identifies the rationale of a provision like paragraph (e). The rationale is to direct regard to whether the provider should be able to charge for that part of the.....and value which relates to capacity to provide the service that is being borne by somebody else. That rationale operates regardless of whether an extension funded by others was required by force of the determination or occurred in other circumstances such as pursuant to an earlier private agreement or a State legislative levy. But there was no reason for reading it down ‑ ‑ ‑

GLEESON J: Mr Young, why would that not be clarified by the language of 44X(1)(a) which requires attention to “the provider’s investment in the facility”?

MR YOUNG: Well, those two provisions support a reading of paragraph (e) that we advance, your Honour. The provider’s investment is a sympathetic reference that you are only looking to the provider’s actual investment. The Full Court made that observation later at paragraph 273, page 247.

GLEESON J: But if you are only looking at the provider’s actual investment, then as a matter of logic you are not looking at costs that are borne by someone else.

MR YOUNG: The matter is addressed squarely where costs are borne by someone else. In (e) the presence of (1)(a) is, as I said, sympathetic to it. It is not a reason for reading down paragraph (e). Likewise one might say that (g), “economically efficient operation of the facility”, is sympathetic because why should the provider charge a return on extensions whose cost is borne by someone else? That would not be economically efficient, for the reasons explained by the Full Court.

So these paragraphs do complement each other. That is no reason for reading an artificial limitation into (e). If it were otherwise, that is, it is only extensions ordered by a determination, then there is going to be a windfall in every other case where the provider gets to charge a return on investments it did not make and did not fund, to the detriment of the competitive objectives that this group of sections is trying to advance.

Now, I will not go through all of the Full Court’s five reasons, but they are compelling, in our respectful submission. There has been no attempt to answer them other than by pointing to the use of DORC as a valuation tool and by this argument that “extension” should be read down to extensions ordered by a determination. As to the limits of the words “someone else”, PNO’s submissions in writing accepted that that language is wider than “provider” and “access seeker” and does connote other persons. It then argues that it should be read down to read other persons required by a determination to fund an extension.

Now, there is a problem with that, because there is no power conferred by the Act to impose payment obligations on another person, and to do so could not involve a determination on access. Then can I turn to within.....other words.....:

value to the provider . . . whose cost is borne by someone else –

The words “value to the provider” are directed to capacity increase and extension, which is being used by the service in the proposed determination period. So it is providing value, that is, it currently is providing value and will continue to provide value for the provider.

The question of assets beyond their useful life does not arise here, because at all stages it was found that these assets were perpetual assets. The words “whose cost is borne by someone else” focus on the extensions which are contributing value, and the tense “is borne” is used because it is referring to the current state of affairs concerning the capital base.

Of necessity, the existing asset base is not going to have magically appeared at the date of the determination, it is going to have been constructed in the past. The words “is borne by someone else” are addressing the question of what return, what recovery, or what costs can be taken into account in fixing prices in the current period where those costs are of a capital nature.

So the steps are really these. Is the asset providing ongoing value in delivering the service in the relevant period? If the answer is yes, does it have a capital cost? What is the value we attribute to that piece of capital? If that investment was made by the provider, the provider would be seeking a return on that asset in the current period, but if that cost is borne by someone else it would not be consistent with economic efficiency for a return to be charged on that asset where its cost is borne by someone else.

Now, those are the matters that are addressed. They have to be taken into account as mandatory factors in making a determination because there is a need to consider whether the provider should be able to fix a price by reference to, or recover return on, capital assets where it did not bear the cost of those capital assets and is not bearing them during the determination period.

Now, that was the analysis of the Full Court, especially at these paragraphs: 51, 52 and 251 to 252. The Full Court considered that that interpretation was consistent with the objects of the part and with the surrounding paragraphs which independently led to the same conclusion. That reasoning appears at paragraphs 271, 274 at page 247. I have referred already to 273, the objects are referred to in 271 and 274 refers to one of the factors being the “public interest”.

Looking at that public interest factor in a slightly more expanded way, there is an open access port under the legislation. In that context, as the Full Court indicates.....interest for the provider to extract a return from coal producers.....by demanding a return on assets being used to provide the service when the cost of those assets is borne by someone else. I might add that the ACCC adopted a similar analysis of these provisions in its reasons for its decision at pages 130, 133 and 136 in the respondent’s further materials.

Can I lastly, dealing with these legislative mandates, go to pricing principles which the court deals with from paragraph 267 through to 269. I can be quite short. The pricing principles are twofold. If the Court could look at 44ZZCA, the first pricing principle is a requirement that the prices should be set:

to meet the efficient costs of providing access –

and the second pricing principle looks to:

include a return on investment commensurate with the regulatory and commercial risks involved ‑

Now, as the Full Court said, the Tribunal did not consider either limb of this statutory provision, which is a mandatory factor under paragraph (h) of 44X(1). It treated these pricing principles as answered or as foreclosed by DORC, ignoring the real‑world circumstances that the assets were funded by others.

The Full Court analysed the first limb and said the Tribunal needed to consider whether it was consistent with economic efficiency to charge a price to recover costs “being borne by others”, and they said it may not be consistent and therefore it must be remitted, at paragraphs 259 to 260.

As to the second principle, again it said that the Tribunal did not consider this principle. That concerns a return on investment. The natural meaning of the word “return” is what comes back from the provider’s own investment in the particular asset that is providing value.

Consequently, allowing a return on assets not funded by the provider but funded by someone else would offend this concept of “return on investment commensurate with risk” because if there is no cost borne then to the extent that costs are not borne there is not a risk borne, nor an entitlement to a return, and the Full Court addresses that at paragraph 267. The ACCC took a similar view at page 136 of its reasons. A DORC value, as adjusted, would provide an efficient and sufficient return was the conclusion of the ACCC.

Now, can I deal with one last matter. The burden of the Tribunal’s reasons was to the effect that once you adopted DORC as a tool of valuation, that was tantamount if you adjusted that valuation figure to excluding assets from what was needed to provide the service. That is, with respect, illogical. There is no change to the assets, the assets are the existing assets. They have been used to.....delivering the service. DORC is only providing a current.....value for those assets.

In circumstances where the undisputed fact was that some 52 per cent of the volume of the dredging was a cost borne by someone else, then to adjust the value of the assets is entirely appropriate under these statutory provisions – indeed.....but it does not have the consequence of excluding any assets from the asset base, it simply adjusts on a
proportionate basis the value attributed to the assets, that proportion representing the proportion to be of the costs borne by someone else.

Now, in our respectful submission, for those reasons, the court’s analysis that the Act required certain matters to be taken into account was correct and therefore the remitter was correct.

Can I go back to your Honour Justice Gordon’s question about whether there was an agreement about DORC and how far it went. The ACCC reasons are section 5.5, page 143 and footnote 359 records that it was always Glencore’s position that the DORC value, once arrived at, should be adjusted to remove the value of assets funded by others.

Now, the last ground, which my learned friend hardly touched upon, is essentially this. It is a contention that whilst there was user funding as found by the ACCC, which did not get disputed before the Tribunal or the Full Court, it contended that there were offsetting benefits in that past users when they paid an amount of money towards dredging got some offsetting benefit in some fashion. That was not a matter relied upon by the Tribunal as the basis for its decision but it was, at most, a somewhat contradictory set of observations that were all obiter, as the reasons make clear.

That argument about offsetting benefits was rejected by the ACCC and rejected by the Full Court. The ACCC’s rejection is recorded by the Full Court at paragraph 183 and the Full Court’s rejection is at paragraphs 286 to 288. Alleged offsetting benefits is irrelevant to the mandatory considerations under Part IIIA. They cannot affect the value to the provider of the relevant asset and they do not affect the question whether the cost is borne by someone else, nor can they affect the pricing principles. For those reasons, those alleged offsetting benefits have no relevance.

PNO bore the onus of establishing them if it wanted to. It did not as a matter of fact. For those reasons, in our submission, there is nothing in this last ground of appeal. Unless I cannot assist the members of the Court further, those are Glencore’s submissions.

KIEFEL CJ: Yes, thank you, Mr Young. Yes, Mr Lloyd.

MR LLOYD: Thank you, your Honour. I seek to address three topics: user contributions, scope and the role of the ACCC. I note, your Honour, that ‑ ‑ ‑

KIEFEL CJ: Before you do, Mr Lloyd, can I come back to the question I posed at the outset of the hearing today. Is it correct to say that the Commission is entitled to make submissions in another party’s proceedings?

MR LLOYD: Is your Honour’s question is it correct to say the Commission is entitled to make submissions?

KIEFEL CJ: I think that is the way in which you have put it in your outline of oral submissions, paragraph 16, unless I have misread it. Or are you saying you are not contending you are entitled to?

MR LLOYD: Well, perhaps I should address that. We do say that we were a party in the court below, that we were joined by Glencore in its application, we were required to assist the Tribunal under section 44ZP(5), so we were compelled to provide that assistance. We were then joined as a party in the court below and we are a party here and we say that ‑ ‑ ‑

KIEFEL CJ: Yes, I know that you are a party, but after you have performed your statutory task of arbitration and then assisting the Tribunal, when it comes to the proceedings in the Federal Court are you not really in a position under the Hardiman principle of being akin to a Tribunal which would usually mean in exceptional circumstances the Commission would make a submitting appearance.

The position which seems to have been taken here – I will put aside the application made in the Federal Court which was dismissed – but in this Court the approach taken by the Commission seems to be that it is some kind of amicus, but without applying to the Court for leave to assume that role.

MR LLOYD: Well, I mean, the court below accepted that what we said was useful and could have been said in relation to an application under section 87CA, because my client has a standing statutory right to seek leave to intervene so it does not need any special other role than to make submissions to advance the objects of the legislation and that is what it has sought to do in the court below and that is what it seeks to do in this Court.

So even if it is not correct to say that there is an entitlement as a party, then it at least is a party and it has a statutory function of being able to intervene in such proceedings to provide courts with the ACCC’s view as the proper construction of both the legislation and the underlying economic principles that often inform the legislation.

KIEFEL CJ: I will not take up too much time with this given the time that it is, but it must surely be relevant to this question whether or not the proceedings have a public interest question involved or whether they partake mostly of proceedings of a private nature. Now, one can even in such proceedings, of course, have matters which affect the construction of a statute more generally, but it might be thought that the Commission in those circumstances should apply to the court and explain its position but perhaps that could be left for another day.

MR LLOYD: Thank you, your Honour. Well, in relation to the question of user contributions - I should say that we will seek, as far as possible, not to in any way in the limited time we have to overlap with what Mr Young has already covered - in relation to the concept of the DORC, it was, as my friend indicated, a methodology that was chosen. Right from its inception it was accepted by both PNO and Glencore that the DORC of all of the assets required to provide the service was not an appropriate basis to provide the RAB because there were some assets which were neither owned nor leased by PNO.

So, there can be no conception that because it chose a methodology that drives some requirement that matters cannot be excluded. The premise was always that the breakwater which was not leased or owned by PNO and the pilot’s jetties and I think there were maybe some other assets as well, but that they were not leased or owned and that they would be excluded.

Now, where the controversy was, was not that you could not adjust a DORC, but whether or not there was an appropriate adjustment to avoid providing a return to a provider on an investment that was.....the provider, which is, in effect, a return to somebody who did not make the investment, and insofar as the users have already made the investment they might end up having to pay twice – first of all in funding the capital assets in the first place and then in providing a return to the provider.

In relation to.....which arose in argument, my friend, Mr Young, has addressed this but just to make our position clear in relation to it, there is the issue of what is the significance of PNO having come in and replaced the State. At least in the Full Court it ceased to be controversial that because Part IIIA could have applied if – putting it differently – if Glencore had sought a declaration while the Port was owned by the State, the price and the pricing system should be exactly the same, whether it was owned by PNO or the State. The efficient price is not different according to who owns it.

Now, what PNO agreed to lease it for, well, that might have been a different way of doing it. Once you adopt a DORC methodology one is looking at the efficient cost premised upon a depreciated optimised replacement cost. So from that point onwards it ceases to be relevant that it was owned by PNO or what PNO paid for it or the State, but the relevant issue is what assets should be the subject of a return in a regulated asset base when it is created through this system to work out the efficient costs and a return for PNO.

So, we say that the Full Court was correct in (a) appreciating that and (b) appreciating that where the Tribunal erred in relation to the user contributions was that it approached the matter as if the DORC having been selected it could no longer – it closed out, I think was the language of the Full Court, the possibility of having any adjustments to the DORC number. One sees that in the Tribunal’s decision at the appeal book page 73, paragraph 278.

I will not take the Court to that language but what one sees is that the Tribunal is saying once the DORC methodology has been deployed there was no scope for adjusting the resulting asset value because to do otherwise would offend Part IIIA.

It was this finding of the Tribunal that closed out the possible application of section 44X(1)(e) which the Full Court found was in error in paragraph 254 and we say that it was correct in doing so. We also embrace – and I will not develop it, given the time ‑ what we say in our written submissions about the error the Full Court found in relation to 44ZZCA.

So we say the Full Court was correct to construe section 44X(1)(e) broadly, and that is to say to reject the narrow fashion in which the Tribunal saw it, which is they adopted PNO’s original position which was that it applies only to expansions or extensions that were created in the access determination currently being considered before the Tribunal. We say that that is too narrow.

The Full Court revealed, with respect, a nuanced appreciation of the economic inefficiency involved in allowing a service provider to charge fees that provide a return on capital not actually invested by the provider, and one sees that at paragraphs 63 and 64 of the Full Court’s decision. They appreciate that insofar as the provider is denied the ability to charge fees for an asset which it in fact controls but which it did not pay for, that would allow the possibility of a free rider and they addressed that in paragraph 65 in the way with which the ACCC embraces and says is correct.

In relation to 44X(1)(e), which is only really part of the question but is a sufficient part to justify the relief of the Full Court, it is clearly a mandatory consideration. It is set out at page 93 of volume A of the joint bundle of authorities. The mandatory consideration concerns:

the value to the provider of extensions . . . whose cost is borne by someone else ‑

We contend that the user contributed assets fall within just the natural scope of that passage. Their cost is borne by someone else, that is, someone apart from the provider. It seems to be uncontroversial that when this proviso applies, the arbitrator could make an adjustment reflecting the value of the capital extension paid for by the others. Now, the obvious adjustment is to ensure that the provider does not get a return on capital costs that it has not borne.

Now, where the controversy lies is that PNO sees this paragraph as limited to extensions to be constructed pursuant to the.....under consideration by the arbitrator. On that view, PNO would accept that an access seeker should not be charged for extension assets it pays for during the term of the determination. However, on PNO’s original view, that user contribution ceases to be a consideration in any successive access determination.

Now, in their reply in response to our submission they said, well, maybe you could also take into account historical extensions made under earlier determinations, but that is essentially a concession that 44X(1)(e) makes provision for the adjustment of historical user contributions in some contexts.

Now, if making allowance ‑ which we agree with, it does do that, but if you make allowance for historical user contributions in some contexts, then that means that it must serve economic efficiency in those contexts and ask the question, why is it limited given that economic efficiency is the common theme throughout the arrangement, why is it limited just to those contexts? We say it is not so limited and that the Court should adopt and embrace the construction of the Full Court.

In our submissions we respond to a number of PNO’s arguments. I do not have time to address those ‑ ‑ ‑

GAGELER J: Mr Lloyd, can I just ask one question that relates to your argument about economic efficiency. Once costs are sunk, how is it meaningful in an economic context to talk about them being borne by anyone in an ongoing sense?

MR LLOYD: We would say that – if they are paid for, if they are a perpetual cost, a perpetual asset like they are here, they are in effect borne by the person who invested the costs through the life of the asset. Now, if an asset expires then the cost ceases to be borne by the person who paid for the asset at the expiration of the asset.

For costs here, which is the dredging costs which make kind of a negative asset, a sort of a hollow space, which is never really worn out because the costs of the Port covered the maintenance dredging, so that channel is always there, it is a perpetual asset, and in that sense the cost continues to be borne by the person who made it in an economic sense. So, it is in that sense that the cost is borne by someone else.

We say that that is – I mean, the Full Court reflects that in, I think, paragraph 254 when they talk about the costs being borne in the present – or maybe it is 252 when they talk about it sort of being in the present tense, and we say that that is the correct view on the idea of who bears an economic cost. The person who pays for the investment bears that economic cost until the investment is returned to them, which in an ideal sense would be by the end of the asset but may not be in this case.

As I was saying, we addressed a number of arguments which are put against us in the written submissions and I do not have time to develop those here. In relation to the legislative history, we say that the Full Court was correct to think that the changes from the original.....through to the current.....show significant changes of substance that do support the construction that they have.

They make a point in paragraph – well, in paragraph 40 of our submissions we note that PNO provide a coherent economic explanation for its construction of 44X(1)(e). They seem to accept that it is there to remove a windfall profit in that particular situation but then the question is, why is it okay for there to be a windfall profit in every other situation where somebody is getting a return on an asset that they have not done investment in? There is no explanation for why a narrow view serves the purposes of the legislation.

Can I just say two things about scope in the time that I have available. We address in our submissions at paragraph 14......decisions in this Court in BHP Billiton and Pilbara to show that Part IIIA is done to advance the attainment of the economic objectives of Part IIIA.

We say that when one considers section 15AA of the Acts Interpretation Act, insofar as there is a choice between meanings of the word “access”, the one that best achieves the objects of the Act should be favoured. It is clear that the broader view of the Full Court best achieves the objects of the Act because in a situation, which is perhaps the current situation, or at least the current situation in some instances, where the physical access is done by a shipowner or perhaps a master of a ship who has no incentive to negotiate better access terms, if they are just passing on their costs, a meaning of “access” which is broad enough to include, for
example, Glencore in this case who actually bears the costs of the use of the Port, that actually serves to achieve the economic objectives of Part IIIA, whereas a narrow view which would tie the access just to physical access to somebody who maybe has no interest because they are in an economic position that they are able just to pass along the costs, that then undermines the ability of the Act to achieve its end and so we say that is significant.

Insofar as PNO say that one reason why a broader view is problematic is because there could be multiple different determinations and there is nothing in the legislation to identify how it works if there were multiple determinations. We say that that is no different to ‑ if there are multiple pricing deeds where, for example, a shipowner might be able to engage under a pricing deed which has been agreed by a group of shipowners and a pricing deed which has been agreed by Glencore whose coal they are going to carry.

In both of those cases the person who is seeking access and who has a right to seek access under either of those deeds, they could simply rely upon the one that gives them the cheapest access. That is exactly what PNO said in the case that they relied upon, in the New South Wales Minerals Council Case in paragraph 218. That is their position and we say it is obviously right, that if there are multiple determinations, that is not a problem for the legislative scheme at all. If somebody has an ability to access more than one determination then they are access seekers and they can rely upon whatever right they have under – if they have rights – multiple determinations. That does not undermine, we say, the legislation. It would support the.....consistent with the legislative outcomes.

May it please the Court, I see the time so I will not develop anything further.

KIEFEL CJ: Thank you, Mr Lloyd. Mr Moore, do you have anything in reply?

MR MOORE: I do, if it please the Court. Can I deal first with user contributions. The submissions that have been made, principally by my learned friend, Mr Young, do not properly reflect what approach was taken by the Tribunal and, in particular, the suggestion the Tribunal excluded certain matters.

Can I go to the Tribunal decision. The Tribunal was dealing, firstly, with a methodology, the DORC methodology, which is designed to look at efficient pricing. At 278, a paragraph emphasised by my learned friend, Mr Lloyd, the Tribunal concluded that excluding assets:

from the DORC is . . . equivalent to deciding that not all the assets are required to provide the Service.

That aspect of the reasoning was adopted by the Full Court at paragraphs 177 and 178 where their Honours observed:

There is no demonstrated basis for conceptual validity in a measure that uses a DORC approach, but removes some of the cost to reflect the actual circumstances.

Because then you are not conducting a DORC valuation, you are not then looking at what would be an efficient non‑monopoly cost of providing the particular assets. As their Honours observe at 178:

there has not been shown to be any error in that aspect of the Tribunal’s approach which involved a determination of the DORC value without regard to user contributions. Therefore, it is not necessary to consider whether any such error might have been properly characterised as an error of law . . . It is simply not an error in approach.

The debate occurred at what is really the next stage. Having worked out what is the efficient price of calculating for the use of these assets, should there nevertheless be some deduction from that price to reflect on some different basis the fact that there might have been some user contributions. In that respect, the Tribunal in passages commencing at around paragraph 309, observed in an analysis that takes place over a number of pages that one really needs to look at the circumstances in which such contributions would be made.

For example, if somebody, in effect, enters into an arrangement with the State whereby they funded some aspect of an asset but obtained discounted or free access in return, on terms where that asset would then pass back to the State, it would be an extreme proposition to say that the State which then retained the ownership of the asset was unable to charge that asset to any person at any point in the future.

The Tribunal observed in a number of paragraphs that one would need to know what were the circumstances in which those contributions were made. That was particularly relevant in the case of the channel‑deepening project where the State issued a levy but where the Tribunal found that at relevant times there was significant under‑recovery of charges. So if somebody is getting access worth, say, $10 for $1 and then you impose a levy of $2 and then they are getting access worth $10 or $3 how is it relevantly to be said that they are user contributions, or they have funded an asset such that the State cannot recover things forevermore.

That was the debate that the Tribunal was dealing with, and in the conclusion that the Tribunal reached commencing at around 357 and 358. Picking up – and consistent with the question your Honour Justice Gageler asked earlier – what, in effect, does it matter who contributed what? What is the efficient pricing for the provision of an asset? The prices should reflect the costs of assets whether through the DORC or some other approach and the hypothetical entrant would need all the assets to provide the declared service and require a return on the assets.

Then in 360 through to 365 the Tribunal noted that if one was going to make adjustments of the sort contended by the ACCC or Glencore for user contributions one would need to know something about the circumstances in which those were made and at 365 observed that there was no material before the Tribunal from which such adjustments could be made.

The contention of the ACCC in its original determination and Glencore throughout these proceedings has been a different one, which is that the mere fact that.....has been made regardless of the circumstances would require some deduction and some adjustment, and that was put on the basis that that was what was required by section 44X(1)(e) and, ultimately, that that was what was required by the pricing principles.

It was that matter which the Full Court was dealing with, and in the Full Court the conclusions at paragraph 288, which we complain about, the Full Court says that:

s 44X(1)(e) requires that there be regard to the value to the provider of extensions whose cost is borne by someone else. It is not concerned with whether there were other aspects of the past that might have provided some benefit to the provider.

In other words, it appears to be accepting this contention that one simply looks at is there a contribution in fact regardless of the circumstances in which the contribution has been made.

Now, in relation to 44X(1)(e), as your Honour Justice Steward observed, the word used is “extensions”, it is not simply assets or contributions, and one has to understand that term in light of the scheme that applies in section 44V and section 44W and we submit that when the Court reads those sections together one will see that clearly they are dealing with a particular type of thing, being the extension made pursuant to a determination, and that explains the additional words in 44X(1)(e), including:

expansions of capacity and expansions of geographical reach –

picking up precisely the wording used in section 44V(2A). Further it would be a curious thing indeed if the words “is borne” would somehow apply to something that was, in effect, expensed a very long time ago and then that led my learned friend, Mr Lloyd, to talk about, in effect, perpetual costs. This is the first time we have heard of a notion of perpetual costs but it is not a coherent concept and, in fact, it is clear that 44X(1)(e) is not well adapted to dealing with matters of that sort.

So there is no mandatory requirement to take into effect the mere fact of a contribution regardless of the circumstances. The Tribunal was engaged in a more sophisticated and nuanced examination. The Full Court found that 44X(1)(e) mandated that requirement and we submit that 44X(1)(e) has not directed that that type of situation at all.

A submission was made that the DORC methodology was not a forward‑looking methodology. In this regard can I refer to what the Tribunal said at paragraph 185 of its decision which referred to the observations of the – in the decisions of the East Australian Pipeline Cases:

the DORC methodology is a forward‑looking methodology in the sense that it considers the replacement cost of the asset using modern technology under modern conditions.

What it is not doing is looking at who or which costs in the past and in particular whether those costs are properly to be recovered. It sidesteps all of those complex historical questions by simply finding out what is a competitive price for the use of the particular asset, being of course the asset that is now in the hands of PNO and which PNO could properly charge for and would be able to charge for in a competitive market.

By those means, I think I have also addressed the criticism to ground 5. The point that we make is that the direction by the Full Court to not take into account various matters is inconsistent with the proper need to examine, if one was to have regard to the circumstances at all, the way in which the relevant expenses have been incurred.

Can I then turn briefly to the first grounds, grounds 1 to 3. My learned friend, Mr Young, identified a contractual supply chain that included the railway line at the coal terminal. In each case those activities were activities carried out on behalf of Glencore pursuant to a contractual arrangement. However, we submit that.....which was somewhat buried by the analysis between those types of activities and what occurs once the coal passes the ship rail pursuant to an FOB contract.

In the latter case what happens thereafter is not carried out on behalf of Glencore. Glencore has no involvement in it or responsibility for it and it is activity conducted without any ongoing contractual relationship with Glencore. Glencore does not enter into any relevant markets for the supply of shipping services, to pick up a point that your Honour Justice Gordon identified earlier on today, and Glencore does not pay for the service under section 48 either.

Therefore, in what sense pejoratively speaking is Glencore accessing that service? What is the definition of “access” that will operate in all of the provisions of Part IIIA including where determining if access is hindered or identifying the day on which a person obtains access, if one is dealing with a type of access where in effect there is no involvement, no payment, no responsibility?

Your Honour Justice Steward’s question about the destination port highlights this aspect, that what is the dividing line between the activity that ceases at the port rail – at the ship’s rail, sorry, which is Glencore thereafter has no responsibility for the carriage of the freight and any activity from that point onwards out of the Port into the foreign port?

Now, of course, the test cannot just be that Glencore obtains a benefit, because a potentially very long list of people may benefit in a variety of markets. Glencore have pointed to other features such as economic burden, but without specifying if any of those are mandatory criteria for access.

Of course, my learned friend, Mr Young, could not identify any case where access to a service has been provided in a non‑physical sense, let alone in a sense where the access seeker has no involvement whatsoever in the activity the subject of the declaration, and therefore it is analogous to my example of the merchant who sells goods to be picked up, for example, by a customer, using a courier service. No indicia are present that might suggest access, in even the broadest sense. The merchant does not contract for it, they do not pay for it, they are not responsible for it in any way, they cannot direct its activity, it is not part of the transaction, and they do not enter any relevant market for that particular service.

We say, in what sense, again, rhetorically, does therefore the merchant access the service? The present situation is analogous. It is not really an answer, in our respectful submission, to say each case turns on its facts, because it has to be clear who has the enforceable right and what are the indicia that attract that enforceable right and the ability to arbitrate pursuant to section 44S and the subsequent provisions. May it please the Court, those are the submissions for PNO.

KIEFEL CJ: Yes, thank you. The Court reserves its decision in this matter and adjourns to 10.00 am tomorrow.

MR MOORE: May it please the Court.

AT 4.24 PM THE MATTER WAS ADJOURNED