Home Page / Cases / NT Power Generation v Power and Water Authority

NT Power Generation v Power and Water Authority

[2004] HCA 48; 219 CLR 90

 

In brief

In a rare success for a s 46 claim, NT Power successfully sued Power and Water Authority (PAWA) and Gasgo for refusing it access to its transmission and distribution infrastructure to sell electricity.  The Court held that ‘PAWA denied access to its infrastructure, not because of a lack of capacity or technical difficulty or safety, but simply to protect its electricity sales revenue’ and that this contravened s 46.

 

Facts

NT Power generated electricity.  It wanted to sell this to consumers in NT but to do so needed access to existing infrastructure owned by PAWA.  PAWA was a body corporate (created by legislation) subject to directions of NT Minister for Essential Services and both generated electricity or purchased it from others and then on-sold to customers.  PAWA rejected a request for access despite ‘no safety, technical or other problem’ preventing them providing access.  NT Power brought action claiming breach of s 46. 

Note: at the time access was sought there was no NT access regime in place; by the time of proceedings one had been established (in 2000) but it had yet to be declared an effective access regime under Part IIIA.  The majority was critical of the form of the access regime which it described as ‘staggered and limited’ (para 137).

 

McHugh ACJ, Gummow, Callinan and Heydon JJ

Immunity?

The first key issue was whether PAWA (as an emanation of the NT Government) had immunity from s 46.  PAWA succeeded with this argument at trial and on appeal (by majority).  The majority spent a great deal of time discussing this issue and ultimately concluded that the immunity did not apply – PAWA was carrying on a business within the meaning of s 2B and therefore Part IV applied.  PAWA had argued that they were not in the business of ‘granting access’, so that even though they carried on a substantial business, they were not relevantly carrying on business for purposes of the access request.  This was rejected.  PAWA had power in the markets concerned with ‘transmission and distribution’ and also in the Electricity Supply (and Sale) Market (this was admitted by PAWA).  Much of this power derived from PAWA’s ownership of infrastructure which created substantial barriers to entry.  Even if the markets were restricted to those concerned with transmission and distribution (in which PAWA faced no competition and made no sales) then the refusal to grant access nevertheless ‘involved taking advantage of its market power in [the markets in which it did have power] for the purpose of achieving results in another’ (para 64) and this was conduct involving PAWA carrying on a business – hence, PAWA could not escape the operation of s 46.  They concluded (at para 72) ‘PAWA’s denial of access to its infrastructure to NT Power, for no reason of want of capacity or technical difficulty or safety, but simply in order to protect its revenue position in relation to electricity sales, was conduct designed to secure PAWA’s position as part of its carrying on of a business.’

The majority made clear that ‘the conduct need not itself be the actual business engaged in’ (para 67) and opted for a broad interpretation of carrying on business, noting that it ‘is not appropriate to subject the application of this type of legislation to a process of anatomising, filleting and dissecting in the fashion advocated by PAWA’ (para 68). 

Breach of s 46?

The next question was whether s 46 was contravened by the refusal of access.  The trial judge and a majority of the Full Court had expressed the view that s 46 was breached (if PAWA did not have immunity).

In relation to their 2B argument PAWA had argued that s 46 could not be used to compel the Crown to engage in business activity.  The majority noted, however, that s 46 and other provisions can operate not only to prevent non-governmental traders from doing prohibited things, but also to compel them positively to do things they do not want to do’ (para 76).

It was also argued that s 46 should not be used as an alternate access regime.  The majority rejected this, noting that s 44ZZNA specifically provides that Part IIIA does not effect the operation of Part IV.

On the argument that s 46 should not interfere with property rights, the majority noted that private traders could be obliged to supply goods or services and grant intellectual property rights provided the pre-conditions of s 46 are satisfied, so it should also apply to other property rights, so that s 46 can be used to grant access ‘provided the notoriously difficult task of satisfying the criteria of liability can be carried out’ (para 85).

The first argument on the substantive criteria of s 46 was that there was no relevant market for the supply of transmission services because no transactions had been made in them.  The majority dismissed this argument – first, there had been some transactions in that market, but even if there had not been ‘there was the potential for them’ and, based on Qld Wire, that is sufficient (para 109): “A market can exist if there be the potential for close competition even though none in fact exists” (Qld Wire) – here, ‘there was the potential for dealings in transmission and distribution services.’ (para 110).  There was, therefore, a market and PAWA had substantial power in it.  Even if that was not the case, PAWA did have power in the market for the sale of electricity and could be said to have leveraged that power when refusing access.

The main argument advanced by PAWA was that it was taking advantage of proprietary rights and not of market power when refusing access (relying heavily on Dowling v Dalgetty).  The majority rejected that argument, distinguishing that case.  First, in that case, the barriers to entry were low and the respondents did not have the requisite market power.  Even if they did the conduct there was not such that they might not have engaged in it in a competitive market.  Here, it was ‘only by virtue of its control of the market or markets of the supply of services for the transport of electricity along its infrastructure … and the absence of other suppliers, that PAWA could in a commercial sense withhold access to its infrastructure; if PAWA had been operating in a competitive market for the supply of access services, it would be very unlikely that it would have been able to stand by and allow a competitor to supply access services’ (para 124)

Second, they rejected the argument that taking advantage of proprietary rights could not attract s 46: ‘to suggest that there is a distinction between taking advantage of market power and taking advantage of property rights is to suggest a false dichotomy … property rights can be a source of market power attracting liability under s 46’ (para 125) and Dowling v Dalgetty is ‘not authority for any general proposition that a property owner who declines to permit competitors to use the property is immune from s 46.’ (para 126).

On the issue of purpose PAWA argued it had been given a ministerial direction not to grant access and therefore its purpose was not one proscribed by s 46 but rather merely of compliance with the direction.  The majority found no such direction was given, but that even if it did then the Court should look to the mental state of the Minister and that could be attributed to PAWA in determining whether or not a breach had occurred; and the mental state of the Minister ‘was to deter or prevent NT Power from’ participating in the relevant markets unless/until an access regime was established (para 137).  It was also argued that while the short term purpose might be one prohibited by s 46, the medium to long term goals were pro-competitive.  The Court disagreed, finding this argument to be ‘an impermissible gloss on s 46’ (para 137) – s 46 does not distinguish between short and long term objectives so if the short term objective is anti-competitive then the long-term pro-competitive objective can’t save them.

Section 46 was, therefore, contravened: ‘PAWA’s decision to refuse access to infrastructure had the purpose of excluding NT Power from the market, and that purpose could not have been achieved by its refusal of access to infrastructure had it not been for PAWA’s market power.’ (para 150).

 

Kirby J (dissenting)

Kirby J (dissenting) would have dismissed the appeal, describing (in a brief judgment) the case as ‘comparatively simple’.  He noted the delay in granting access was so that the NT Government could establish an access regime and that ‘this was a governmental decision concerning the use of the infrastructure of a public agency based on governmental reasons’. (para 202) and also that the conduct was not anti-competitive.  He noted that s 46 ‘does not give the would-be competitor the right to demand and use, as its own, the property of another corporation.  It merely prevents that other corporation from misuses of its power to prevent the entry of the other into the market’ (para 203) and our trade practices laws ‘have not been interpreted to impose on an owner of private property a duty to make that owner’s property available to a competitor’.

Kirby J concluded: ‘No doubt others will contrast the energetic deployment of trade practices law in the circumstances of this case, affecting a governmental corporation having governmental obligations to the public welfare, with the repeated refusal of this Court in recent times to do the same thing where the corporation concerned was private, successfully defending its market power against smaller private would-be competitors’ (para 204).

 

Case links