The Competition watchdog, the Australian Competition and Consumer Commission, has sought leave to intervene in the High Court Case of Mayfield Development Corp vs NSW Ports, and the State of NSW.
Early in August this year, the High Court of Australia (the highest court in the Australian judicial system) granted special leave to Mayfield to appeal an earlier decision of the Full Federal Court.
A long-running saga
The intervention of the ACCC is the latest element in a long-running saga that began in September 2011 when the NSW State Government announced it would privatise Port Botany, later announcing in July 2012 that it would issue a long-term lease for Port Botany and Port Kembla.
In June 2013, the NSW Government subsequently announced its intention to grant a long-term lease of the Port of Newcastle, and the port was later leased to Mayfield.
However, in 2013 a complicated set of compensation provisions were developed and put into Port Commitment Deeds between the various lessees of Botany & Kembla on the one side and on the NSW Government on the other. As part of the Newcastle deal a similar set of Port Commitment Deeds were entered into.
The Deeds contained a complicated compensation mechanism. For every container handled at the Port of Newcastle above a certain limit, NSW Ports would be entitled to a compensatory payment from the State of NSW. That, in turn, triggered a mechanism that required the Port of Newcastle to compensate the State Government.
Mayfield has long argued that this mechanism made the development of a container terminal at Newcastle uneconomic.
In December 2018, the ACCC began legal action against NSW Ports arguing that the Botany and Kembla Port Commitment Deeds were anti-competitive because they were intended, and were likely, to hinder the development of a competing container terminal at the Port of Newcastle. The ACCC sought to have the compensating effect of the deeds nullified.
That claim failed in 2021 when the Federal Court ruled that the competition laws did not apply to NSW Ports. The reason was that NSW Ports had ‘derivative crown immunity’.
The ACCC helpfully explained that “Crown immunity protects state governments from the operation of competition laws when they are not carrying on a business. When this immunity extends to parties that contract with state governments in certain limited circumstances, it is known as ‘derivate crown immunity’.”
An appeal was promptly launched by the ACCC in 2021, but that failed as well.
Since then the NSW Parliament has passed legislation that extinguishes the repayment mechanisms in the Port Commitment Deeds.
If there has been legislation, what’s going on?
Well, back in May 2019, Mayfield began a separate lawsuit all of its own against NSW Ports. This second lawsuit was filed about five-and-a-half months after the ACCC had begun their lawsuit. So NSW Ports applied for, and won, an order suspending Mayfield’s lawsuit. Now jump forward in time to June 2023 and Mayfield gets the stay on its lawsuit against NSW Ports was lifted.
The wheels of the law ground on (slowly) and in May 2024, Mayfield lose their case. In June 2024, Mayfield filed an appeal, but the Full Court of the Federal Court ruled against Mayfield.
That leaves us where we are now: Mayfield have won the right to appeal to the High Court and the ACCC has applied to intervene.
So what’s the lawsuit about?
The freedom to compete
It dates back to that decision to include compensation mechanisms in the Port privatisation. Even though those mechanisms are effectively gone now, for a long period of time Mayfield was effectively hindered from developing the land at Newcastle.
Mayfield claims that it has been hindered by the Deeds which, in Mayfield’s opinion, were void under section 45 of the Competition and Consumer Act 2010 (Cwlth), a corporation must not make an arrangement that has the purpose, or would likely have the effect of substantially lessening competition. Mayfield also argues that section 45DA of the Competition and Consumer Act applies, which rules that corporations must not act in concert to engage in conduct that hinders or prevents another person supplying goods or services to someone else, and where that conduct is for the purpose of – or would likely have the effect of – causing a substantial lessening of competition.
So far the cases have generally been lost on the grounds that the NSW State Government enjoyed Crown Immunity in its interactions and that, accordingly, NSW Ports enjoyed Derivative Crown Immunity.
And the latest developments?
Well, according to the appeal notices filed by lawyers for Mayfield, and also for the ACCC, there are some fairly technical points on the interpretation of law that ought to be considered by the High Court. From an industry perspective, we don’t need to look too closely at the details – it is really more of interest to constitutional and administrative law experts as to exactly how and when Crown Immunity will apply.
The ACCC, as the responsible regulator for the administration and enforcement of the competition law, has an interest in the outcome of the case. It argues, reasonably, that the extent to which private companies that do deals with executive government is a matter of public importance.
