NEWS

A Tale Of Two Cities – Derivative Crown Immunity And NSW Ports

In 2013, the State of New South Wales decided to privatise Port Botany and Port Kembla (operated by NSW Ports), and the Port of Newcastle. It sought to prioritise Sydney’s container terminal at Botany as the primary container terminal and limit container handling facilities at Newcastle.

50-year Port Commitment Deeds were entered into in 2013, obliging NSW to compensate NSW Ports if container traffic at Newcastle was above a minimal specified cap. In 2014, another 50-year deed required the Port of Newcastle to reimburse NSW for any compensation under the Port Commitment Deeds, which increased the cost of moving containers at Newcastle.

Opinions varied as to the merits. The State of NSW considered its decisions and agreements to be excellent government and infrastructure policy. The Commonwealth competition regulator considered them to be an ill-advised attempt to maximise sale proceeds on privatization by securing and selling a monopoly. It alleged that the deeds had the anticompetitive purpose and effect of preventing the development of competitive container services in Newcastle and preserving NSW Ports’ monopoly for 50 years and, in 2018, sued NSW Ports for injunctions to stop the compensation process and penalties. Mayfield Development Corporation was similarly miffed and sued NSW Ports in 2019, claiming it lost the opportunity to develop a container facility in Newcastle.

In 2021, the Federal Court dismissed the ACCC’s claim in ACCC v NSW Ports [2021] FCA 720 . The ACCC appealed so, in 2022, NSW negated the Port of Newcastle’s obligation to reimburse it in the Port of Newcastle (Extinguishment of Liability) Act 2022 (NSW). Not deterred, the ACCC pursued its appeal to judgment in 2023 in ACCC v NSW Ports [2023] FCAFC 16 .

The primary judge had found the ACCC’s case somewhat far-fetched, being based on a mere hope that Newcastle might compete in container services in future. In any event, NSW was not subject to the competition law in relation to its decision to privatise the ports and enter into the related deeds, as it was not in doing so “carrying on a business”, and NSW Ports was entitled to derivative crown immunity, findings which were upheld in the Full Federal Court.

Still not deterred, Mayfield, which had intervened and made written submissions in support of the ACCC’s Full Federal Court appeal, pressed on, including by announcing its intention to take the matter to the High Court if necessary on the scope of derivative crown immunity. The Court has now ruled on that in Mayfield Development Corporation v NSW Ports (No 4) [2024] FCA 538 , finding that:

  • notwithstanding Mayfield’s involvement in the ACCC appeal, it is not precluded (by principles of res judicata, estoppel, abuse of process or similar) from contending in its proceeding that the competition law was contravened;
  • however, derivative crown immunity is a complete defence to Mayfield’s claims in its proceeding.

Further appeal, including by seeking special leave to appeal to the High Court, appears likely. On the last occasion similar issues were raised, the High Court upheld to a limited extent the ongoing operation of crown immunity in ACCC v Baxter Health Care (2007) 232 CLR 1 (at [62], Gleeson CJ).

In doing so, however, the High Court significantly eroded the prior operation of the then so-called Bradken principle, finding that although the contracting statutory authorities in that case (who sought low bundled pricing) enjoyed immunity, the private entity Baxter which contracted with them (and provided low bundled pricing) did not. Given an ongoing trend towards applying Australian competition and consumer law as broadly as possible (including most recently extra-territorially in Karpik v Carnival plc [ 2023] HCA 39), further whittling down of the scope of the immunity by Australia’s highest court could not be ruled out.

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